[Federal Register Volume 88, Number 83 (Monday, May 1, 2023)]
[Proposed Rules]
[Pages 26658-27309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07389]



[[Page 26657]]

Vol. 88

Monday,

No. 83

May 1, 2023

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 411, 412, 419, et al.





Medicare Program; Proposed Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long Term Care Hospital 
Prospective Payment System and Policy Changes and Fiscal Year 2024 
Rates; Quality Programs and Medicare Promoting Interoperability Program 
Requirements for Eligible Hospitals and Critical Access Hospitals; 
Rural Emergency Hospital and Physician-Owned Hospital Requirements; and 
Provider and Supplier Disclosure of Ownership; Proposed Rule

  Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 411, 412, 419, 488, 489, and 495

[CMS-1785-P]
RIN 0938-AV08


Medicare Program; Proposed Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System and Policy Changes and Fiscal Year 2024 
Rates; Quality Programs and Medicare Promoting Interoperability Program 
Requirements for Eligible Hospitals and Critical Access Hospitals; 
Rural Emergency Hospital and Physician-Owned Hospital Requirements; and 
Provider and Supplier Disclosure of Ownership

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would: 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); and make other 
policy-related changes.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided in the ADDRESSES section, no later than 5 p.m. 
EDT on June 9, 2023.

ADDRESSES: In commenting, please refer to file code CMS-1785-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Comments, including mass comment 
submissions, must be submitted in one of the following three ways 
(please choose only one of the ways listed):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to https://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1785-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.

    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1785-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.

    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, 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 Inpatient 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, [email protected],gov, Rural 
Community Hospital Demonstration Program Issues.
    Jeris Smith, [email protected], Frontier Community Health 
Integration Project (FCHIP) Demonstration Issues.
    Lang Le, [email protected], Hospital Readmissions Reduction 
Program--Administration Issues.
    Ngozi Uzokwe, [email protected], Hospital Readmissions 
Reduction Program--Measures Issues.
    Jennifer Tate, [email protected], Hospital-Acquired 
Condition Reduction Program--Administration Issues.
    Ngozi Uzokwe, [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], Lorraine Wickiser, Lorraine, 
[email protected], Long-Term Care Hospital Quality Reporting 
Program--Data Reporting Issues.
    Jessica Warren, [email protected] and Elizabeth Holland, 
[email protected], Medicare Promoting Interoperability 
Program.
    Jennifer Milby, [email protected] and Sara Brice-Payne, 
[email protected], Special Requirements for Rural Emergency 
Hospitals (REHs).
    Lisa O. Wilson, [email protected], Physician-Owned Hospital 
Issues.
    Frank Whelan, [email protected], Disclosure of Ownership.

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

Tables Available on the CMS Website

    The IPPS tables for this fiscal year (FY) 2024 proposed rule are 
available on the CMS website at https://

[[Page 26659]]

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 2024 IPPS Proposed rule Home Page'' or ``Acute 
Inpatient--Files for Download.'' The LTCH PPS tables for this FY 2024 
proposed rule are available 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-1785-P. For 
further details on the contents of the tables referenced in this 
proposed rule, we refer readers to section VI. of the Addendum to this 
FY 2024 IPPS/LTCH PPS proposed rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites, as previously identified, should 
contact Michael Treitel, [email protected].

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    B. Background Summary
    C. Summary of Provisions of Recent Legislation That Would Be 
Implemented in This Proposed Rule
    D. Summary of the Provisions of This Proposed Rule
    E. Use of the Best Available Data in the FY 2024 IPPS and LTCH 
PPS Ratesetting
II. Proposed 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. Proposed Changes to Specific MS-DRG Classifications
    D. Recalibration of the FY 2024 MS-DRG Relative Weights
    E. Add-On Payments for New Services and Technologies for FY 2024
III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals
    A. Background
    B. Worksheet S-3 Wage Data for the Proposed FY 2022 Wage Index
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the Proposed FY 2024 Unadjusted Wage 
Index
    E. Occupational Mix Adjustment to the FY 2024 Wage Index
    F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2024 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 Proposed Budget Neutrality Adjustment
    H. Proposed FY 2024 Wage Index Tables
    I. Proposed Revisions to the Wage Index Based on Hospital 
Redesignations and Reclassifications
    J. Proposed 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. Proposed Labor-Related Share for the FY 2024 Wage Index
IV. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2024 (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. Supplemental Payment for Indian Health Service (IHS) and 
Tribal Hospitals and Puerto Rico Hospitals
    E. Uncompensated Care Payments
V. Other Decisions and Changes to the IPPS for Operating System
    A. Proposed Changes to MS-DRGs Subject to Postacute Care 
Transfer Policy and MS-DRG Special Payments Policies (Sec.  412.4)
    B. Proposed Changes in the Inpatient Hospital Update for FY 2024 
(Sec.  412.64(d))
    C. Sole Community Hospitals--Effective Date of Status in the 
Case of a Merger (Sec.  412.92)
    D. Rural Referral Centers (RRCs) Proposed Annual Updates (Sec.  
412.96)
    E. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.  
412.101)
    F. Temporary Legislative Extension of Medicare-Dependent, Rural 
Hospital Program
    G. Proposed Payments for Indirect and Direct Graduate Medical 
Education Costs (Sec. Sec.  412.105 and 413.75 Through 413.83)
    H. Reasonable Cost Payment for Nursing and Allied Health 
Education Programs (Sec. Sec.  413.85 and 413.87)
    I. Proposed Payment Adjustment for Certain Clinical Trial and 
Expanded Access Use Immunotherapy Cases (Sec. Sec.  412.85 and 
412.312)
    J. Hospital Readmissions Reduction Program (Sec. Sec.  412.150 
through 412.154)
    K. Hospital Value-Based Purchasing (VBP) Program: Proposed 
Policy Changes (Sec. Sec.  412.160 Through 412.167)
    L. Hospital-Acquired Condition (HAC) Reduction Program
    M. Rural Community Hospital Demonstration Program
VI. Proposed Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    C. Proposed Annual Update for FY 2024
    D. Treatment of Rural Reclassifications for Capital DSH Payments
VII. Proposed Changes for Hospitals Excluded From the IPPS
    A. Proposed Rate-of-Increase in Payments to Excluded Hospitals 
for FY 2024
    B. Critical Access Hospitals (CAHs)
VIII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2024
    A. Background of the LTCH PPS
    B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2024
    C. Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2024
IX. Proposed Quality Data Reporting Requirements for Specific 
Providers and Suppliers
    A. Overview
    B. Crosscutting Quality Program Proposal to Adopt the Up-to-Date 
COVID-19 Vaccination Among Healthcare Personnel Measure
    C. Proposed Changes to the Hospital Inpatient Quality Reporting 
(IQR) Program
    D. Proposed Changes to the PPS-Exempt Cancer Hospital Quality 
Reporting (PCHQR) Program
    E. Proposed Changes to the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)
    F. Proposed Changes to the Medicare Promoting Interoperability 
Program
X. Other Provisions Included in This Proposed Rule
    A. Rural Emergency Hospitals (REHs)
    B. Physician Self-Referral and Physician-Owned Hospitals
    C. Proposed Technical Corrections to 42 CFR 411.353 and 411.357
    D. Safety Net RFI
    E. Disclosures of Ownership and Additional Disclosable Parties 
Information
XI. MedPAC Recommendations and Publicly Available Files
    A. MedPAC Recommendations
    B. Publicly Available Files
XII. Collection of Information Requirements
    A. Statutory Requirements for Solicitation of Comments
    B. Collection of Information Requirements
Addendum--Schedule of Standardized Amounts, Update Factors, and 
Rate-of-Increase Percentages Effective With Cost Reporting Periods 
Beginning on or After October 1, 2022 and Payment Rates for LTCHs 
Effective for Discharges Occurring on or After October 1, 2022
I. Summary and Background
II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2024
    A. Calculation of the Proposed Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. Calculation of the Proposed Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2024
    A. Determination of the Proposed Federal Hospital Inpatient 
Capital-Related Prospective Payment Rate Update for FY 2024
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2024
    C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-
of-Increase Percentages for FY 2024
V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 
2024

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    A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2024
    B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS 
for FY 2024
    C. Proposed Cost-of-Living Adjustment (COLA) for LTCHs Located 
in Alaska and Hawaii
    D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) 
Cases
    E. Proposed Update to the IPPS Comparable Amounts to Reflect the 
Statutory Changes to the IPPS DSH Payment Adjustment Methodology
    F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2024
VI. Tables Referenced in This Proposed Rule Generally Available 
Through the Internet on the CMS Website
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Objectives of the IPPS and the LTCH PPS
    D. Limitations of Our Analysis
    E. Hospitals Included in and Excluded From the IPPS
    F. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs
    G. Effects of Other Policy Changes
    H. Effects on Hospitals and Hospital Units Excluded From the 
IPPS
    I. Effects of Proposed Changes in the Capital IPPS
    J. Effects of Proposed Payment Rate Changes and Policy Changes 
Under the LTCH PPS
    K. Effects of the Proposed Adoption of the Up-to-Date COVID-19 
Vaccination Among Healthcare Personnel Measure Across Quality 
Programs
    L. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program
    M. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program
    N. Effects of Proposed Requirements for the Long-Term Care 
Hospital Quality Reporting Program (LTCH QRP)
    O. Effects of Proposed Requirements Regarding the Promoting 
Interoperability Program
    P. Alternatives Considered
    Q. Overall Conclusion
    R. Regulatory Review Costs
II. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act Analysis
VI. Executive Order 13132
VII. Executive Order 13175
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost 
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2024
    A. Proposed FY 2024 Inpatient Hospital Update
    B. Proposed Update for SCHs for FY 2024
    C. Proposed FY 2024 Puerto Rico Hospital Update
    D. Proposed Update for Hospitals Excluded From the IPPS for FY 
2024
    E. Proposed Update for LTCHs for FY 2024
III. Secretary's Recommendations
IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare
V. Responses to Comments

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2024 IPPS/LTCH PPS proposed rule would make payment and 
policy changes under the Medicare inpatient prospective payment system 
(IPPS) for operating and capital-related costs of acute care hospitals 
as well as for certain hospitals and hospital units excluded from the 
IPPS. In addition, it would make payment and policy changes for 
inpatient hospital services provided by long-term care hospitals 
(LTCHs) under the long-term care hospital prospective payment system 
(LTCH PPS). This proposed rule would also make policy changes to 
programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs. In this FY 2024 proposed rule, we are proposing 
to continue policies to address wage index disparities impacting low 
wage index hospitals. We are also proposing to make changes relating to 
Medicare graduate medical education (GME) for teaching hospitals and 
new technology add-on payments.
    We are proposing to establish new requirements and revise existing 
requirements for eligible hospitals and CAHs participating in the 
Medicare Promoting Interoperability Program.
    In the Hospital VBP Program, we are proposing to add one new 
measure, substantively modify two existing measures, add technical 
changes to the administration of the Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Survey, and change the 
scoring policy to include a health equity scoring adjustment and modify 
the Total Performance Score (TPS) maximum to be 110, resulting in 
numeric score range of 0 to 110. We are also providing estimated and 
newly established performance standards for the FY 2026 through FY 2029 
program years for the Hospital VBP Program. In the HAC Reduction 
Program, we are proposing to establish a validation reconsideration 
process for data validation and to add an additional targeting 
criterion for validation. We are not proposing any changes to the 
Hospital Readmissions Reduction Program.
    In the Hospital IQR Program, we are proposing to add three new 
measures, to update three existing measures, and to remove three 
measures. We are proposing changes to the validation process. 
Additionally, we are seeking public comment on the potential future 
adoption of two measures.
    In the PPS-Exempt Cancer Hospital Quality Reporting Program (PCHQR) 
we are proposing to add four new measures and to modify an existing 
measure.
    In the LTCH QRP we are proposing new measures, modifying an 
existing measure, removing measures and proposing to increase the LTCH 
QRP data completion thresholds for LTCH Continuity Assessment Record 
and Evaluation (CARE) Data Set (LCDS) items. Additionally, we are we 
are seeking information on principles for selecting and prioritizing 
LTCH QRP quality measures and concepts under consideration for future 
years and provide an update on CMS' continued efforts to close the 
health equity gap.
    Under various statutory authorities, we either discuss continued 
program implementation or propose to make changes to the Medicare IPPS, 
the LTCH PPS, other related payment methodologies and programs for FY 
2024 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 Balanced Budget Refinement 
Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) 
of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 
106-554) (as codified under section 1886(m)(1) of the

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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.
     Section 1814(l)(4) of the Act requires downward 
adjustments to the applicable percentage increase, beginning with FY 
2015, for CAHs that do not successfully demonstrate meaningful use of 
certified electronic health record technology (CEHRT) for an EHR 
reporting payment for a payment adjustment year.
     Section 1814(l)(3) of the Act offered incentive payments 
under Medicare for critical access hospitals (CAHs) for certain payment 
years, if they successfully adopted and demonstrated meaningful use of 
CEHRT during an electronic health record (EHR) reporting period.
     Section 1814(l)(4) of the Act authorized downward payment 
adjustments under Medicare, beginning with FY 2015, for CAHs that do 
not successfully demonstrate meaningful use of CEHRT for an EHR 
reporting payment for a payment adjustment year.
     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. Hospitals paid under the 
IPPS with approved GME programs are paid for the indirect costs of 
training residents in accordance with section 1886(d)(5)(B) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase that would 
otherwise apply to the standardized amount applicable to a subsection 
(d) hospital for discharges occurring in a fiscal year if the hospital 
does not submit data on measures in a form and manner, and at a time, 
specified by the Secretary.
     Section 1886(b)(3)(B)(ix) of the Act requires downward 
adjustments to the applicable percentage increase, beginning with FY 
2015 (and beginning with FY 2022 for subsection (d) Puerto Rico 
hospitals), for eligible hospitals that do not successfully demonstrate 
meaningful use of CEHRT for an EHR reporting period for a payment 
adjustment year.
     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(n) of the Act, which requires the Secretary 
to offered incentive payments under Medicare for eligible hospitals for 
certain payment years, if they successfully adopted and demonstrated 
meaningful use of CEHRT during an electronic health record (EHR) 
reporting period.
     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 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 an additional 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. 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(kkk) of the Act requires the Secretary to 
establish the conditions REHs must meet in order to participate in the 
Medicare program and which are considered necessary to ensure the 
health and safety of patients receiving services at these entities.
     Section 1877(i) of the Act, as added by section 6001(a)(3) 
of the Patient Protection and Affordable Care Act of 2010 (Affordable 
Care Act) (Pub. L. 111-148) and amended by section 1106 of the Health 
Care and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-
152), which requires the Secretary to establish and implement a process 
under which a hospital that is an ``applicable hospital'' or a ``high 
Medicaid facility'' may apply for an exception from the prohibition on 
expansion of facility capacity.
2. Summary of the Major Provisions
    The following is a summary of the major provisions in this proposed 
rule. In general, these major provisions are being proposed as part of 
the annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
changes in this proposed rule is presented in section

[[Page 26662]]

I.D. of the preamble of this proposed rule.
a. Proposed Modification to the Rural Wage Index Calculation 
Methodology
    As discussed in section III.G.1 of this proposed rule, CMS has 
taken the opportunity to revisit the case law, prior public comments, 
and the relevant statutory language with regard to its policies 
involving the treatment of hospitals that have reclassified as rural 
under section 1886(d)(8)(E) of the Act, as implemented in the 
regulations under 42 CFR 412.103. After doing so, CMS now agrees that 
the best reading of section 1886(d)(8)(E) is that it instructs CMS to 
treat Sec.  412.103 hospitals the same as geographically rural 
hospitals. Therefore, we believe it is proper to include these 
hospitals in all iterations of the rural wage index calculation 
methodology included in section 1886(d) of the Act, including all hold 
harmless calculations in that provision. Beginning with FY 2024, we are 
proposing to include hospitals with Sec.  412.103 reclassification 
along with geographically rural hospitals in all rural wage index 
calculations, and to exclude ``dual reclass'' hospitals (hospitals with 
simultaneous Sec.  412.103 and Medicare Geographic Classification 
Review Board (MGCRB) reclassifications) implicated by the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act.
b. Proposed Continuation of the Low Wage Index Hospital Policy
    To help mitigate growing 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. As 
discussed in section III.G.4. of the preamble of this proposed rule, as 
we only have 1 year of relevant data at this time that we could use to 
evaluate any potential impacts of this policy, we believe it is 
necessary to wait until we have useable data from additional fiscal 
years before making any decision to modify or discontinue the policy. 
Therefore, for FY 2024, we are proposing to continue the low wage index 
hospital policy and the related budget neutrality adjustment.
c. 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 proposed rule, we are proposing to update our estimates of 
the three factors used to determine uncompensated care payments for FY 
2024. We are also proposing to continue to use uninsured estimates 
produced by CMS' Office of the Actuary (OACT) as part of the 
development of the National Health Expenditure Accounts (NHEA) in 
conjunction with more recently available data in the calculation of 
Factor 2. Consistent with the regulation at Sec.  
412.106(g)(1)(iii)(C)(11), which was adopted in the FY 2023 IPPS/LTCH 
PPS final rule, for FY 2024, we will use the 3 most recent years of 
audited data on uncompensated care costs from Worksheet S-10 of the FY 
2018, FY 2019, and FY 2020 cost reports to calculate Factor 3 in the 
uncompensated care payment methodology for all eligible hospitals.
    Beginning with FY 2023, we established a supplemental payment for 
IHS and Tribal hospitals and hospitals located in Puerto Rico, to help 
prevent undue long-term financial disruption to these hospitals due to 
discontinuing use of the low-income insured days proxy in the 
uncompensated care payment methodology for these providers.
d. 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 proposed rule, we are proposing to adopt modified versions of: (1) 
the Medicare Spending Per Beneficiary (MSPB) Hospital measure beginning 
with the FY 2028 program year; and (2) the Hospital-level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure 
beginning with the FY 2030 program year. We are also proposing to adopt 
the Severe Sepsis and Septic Shock: Management Bundle measure in the 
Safety Domain beginning with the FY 2026 program year. We are also 
proposing to make technical changes to the form and manner of the 
administration of the HCAHPS Survey measure under the Hospital VBP 
Program beginning with the FY 2027 program year in alignment with the 
Hospital IQR Program. Additionally, we are proposing to adopt a health 
equity scoring change for rewarding excellent care in underserved 
populations beginning with the FY 2026 program year. We are also 
proposing to modify the Total Performance Score (TPS) maximum to be 
110, such that the TPS numeric score range would be 0 to 110 in order 
to afford even top-performing hospitals the opportunity to receive the 
additional health equity bonus points under the proposed health equity 
scoring change. We are also requesting feedback on potential additional 
future changes to the Hospital VBP Program scoring methodology that 
would address health equity.
e. Proposed Modification of the COVID-19 Vaccination Coverage Among 
Healthcare Personnel (HCP) Measure in the Hospital IQR Program, PCHQR 
Program, and LTCH QRP
    In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing to 
modify the COVID-19 Vaccination Coverage among Health Care Personnel 
(HCP) measure to replace the term ``complete vaccination course'' with 
the term ``up to date'' with regard to recommended COVID-19 vaccines 
beginning with the Quarter 4 (Q4) calendar year (CY) 2023 reporting 
period/FY 2025 payment determination for the Hospital IQR Program, and 
the FY 2025 program year for the LTCH QRP and the PCHQR Program.
f. 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 2024 IPPS/LTCH PPS proposed rule, we are proposing 
several

[[Page 26663]]

changes to the Hospital IQR Program. We are proposing the adoption of 
three new measures: (1) Hospital Harm--Pressure Injury electronic 
clinical quality measure (eCQM) beginning with the CY 2025 reporting 
period/FY 2027 payment determination; (2) Hospital Harm--Acute Kidney 
Injury eCQM beginning with the CY 2025 reporting period/FY 2027 payment 
determination; and (3) Excessive Radiation Dose or Inadequate Image 
Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital 
Level--Inpatient) eCQM beginning with the CY 2025 reporting period/FY 
2027 payment determination. We are proposing the modification of three 
current measures: (1) Hybrid Hospital-Wide All-Cause Risk Standardized 
Mortality (HWM) measure beginning with the FY 2027 payment 
determination; (2) Hybrid Hospital-Wide All-Cause Readmission (HWR) 
measure beginning with the FY 2027 payment determination; and (3) 
COVID-19 Vaccination among Healthcare Personnel (HCP) measure beginning 
with the Quarter 4 CY 2023 reporting period/FY 2025 payment 
determination. We are proposing the removal of three current measures: 
(1) Hospital-level Risk-standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) measure beginning with the April 1, 2025-March 31, 
2028 reporting period/FY 2030 payment determination; (2) Medicare 
Spending Per Beneficiary (MSPB)--Hospital measure beginning with the CY 
2026 reporting period/FY 2028 payment determination; and (3) Elective 
Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies 
Electively Delivered Prior to 39 Completed Weeks Gestation (PC-01) 
measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination. We are proposing to codify our Measure Removal Factors. 
We are requesting comment on the potential future inclusion of 
geriatric measures and a potential future public-facing geriatric 
hospital designation in the Hospital IQR Program.
    We are proposing two changes to current policies related to data 
submission, reporting, and validation: (1) Modification of the Hospital 
Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey 
Measure beginning with the CY 2025 reporting period/FY 2027 payment 
determination; and (2) Modification of the targeting criteria for 
hospital validation for extraordinary circumstances exceptions (ECEs) 
beginning with the FY 2027 payment determination.
g. 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 2024 IPPS/LTCH PPS proposed rule, we are proposing to 
adopt four new measures for the PCHQR Program: (i) three health equity-
focused measures: the Facility Commitment to Health Equity measure, the 
Screening for Social Drivers of Health measure, and the Screen Positive 
Rate for Social Drivers of Health measure; and (ii) a patient 
preference-focused measure, the Documentation of Goals of Care 
Discussions Among Cancer Patients measure. We are proposing to adopt a 
modified version of the COVID-19 Vaccination Coverage among Health Care 
Personnel (HCP) measure beginning with the FY 2025 program year. We are 
also proposing to publicly report the Surgical Treatment Complications 
for Localized Prostate Cancer (PCH-37) measure beginning with data from 
the FY 2025 program year, and modified data submission and reporting 
requirements for the HCAHPS survey measure beginning with the FY 2027 
program year.
h. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    We are proposing several proposed changes to the LTCH QRP. 
Specifically, we are: (1) proposing to adopt a modified version of the 
COVID-19 Vaccination Coverage among Healthcare Personnel measure 
beginning with the FY 2025 LTCH QRP; (2) proposing to adopt the 
Discharge Function Score measure beginning with the FY 2025 LTCH QRP; 
(3) proposing to remove the Percent of LTCH Patients with an Admission 
and Discharge Functional Assessment and a Care Plan That Addresses 
Function measure beginning with the FY 2025 LTCH QRP; (4) proposing to 
remove the Application of Percent of LTCH Patients with an Admission 
and Discharge Functional Assessment and a Care Plan That Addresses 
Function measure beginning with the FY 2025 LTCH QRP; (5) proposing to 
adopt the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to 
Date measure beginning with the FY 2026 LTCH QRP; (6) proposing to 
increase the LTCH QRP data completion thresholds for the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) 
beginning with the FY 2026 LTCH QRP; and (7) proposing to begin public 
reporting of the Transfer of Health (TOH) Information to the Patient-
Post-Acute Care (PAC) and TOH Information to the Provider-PAC measures 
beginning with the FY 2025 LTCH QRP.
i. Medicare Promoting Interoperability Program
    In this proposed rule, we are proposing several changes to the 
Medicare Promoting Interoperability Program. Specifically, we are 
proposing to: (1) amend the definition of ``EHR reporting period for a 
payment adjustment year'' at 42 CFR 495.4 for eligible hospitals and 
CAHs participating in the Medicare Promoting Interoperability Program, 
to define the electronic health record (EHR) reporting period in CY 
2025 as a minimum of any continuous 180-day period within CY 2025; (2) 
update the definition of ``EHR reporting period for a payment 
adjustment year'' at Sec.  495.4 for eligible hospitals such that, 
beginning in CY 2025, those hospitals that have not successfully 
demonstrated meaningful use in a prior year will not be required to 
attest to meaningful use by October 1st of the year prior to the 
payment adjustment year; (3) modify our requirements for the Safety 
Assurance Factors for EHR Resilience (SAFER) Guides measure beginning 
with the EHR reporting period in CY 2024, to require eligible hospitals 
and CAHs to attest ``yes'' to having conducted an annual self-
assessment of all nine SAFER Guides at any point during the calendar 
year in which the EHR reporting period occurs; (4) modify the way we 
refer to the calculation considerations related to unique patients or 
actions for Medicare Promoting Interoperability Program objectives and 
measures for which there is no numerator and denominator; and (5) adopt 
three new eCQMs beginning with the CY 2025 reporting period for 
eligible hospitals and CAHs to select as one of their three self-
selected eCQMs: the Hospital Harm--Pressure Injury eCQM, the Hospital 
Harm--Acute Kidney Injury eCQM, and the Excessive Radiation Dose or 
Inadequate Image Quality for Diagnostic Computed Tomography (CT) in 
Adults (Hospital Level--Inpatient) eCQM.
j. Hospital Readmissions Reduction Program
    We are not proposing any changes to the Hospital Readmissions 
Reduction Program. We note that all previously

[[Page 26664]]

finalized policies under this program will continue to apply and refer 
readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49081 through 
49094) for information on these policies.
k. Hospital-Acquired Condition Reduction Program
    Section 1886(p) of the Act establishes the HAC Reduction Program 
under which payments to applicable hospitals are adjusted to provide an 
incentive to reduce hospital-acquired conditions. In this proposed 
rule, we are proposing to establish a validation reconsideration 
process for hospitals who fail data validation beginning with the FY 
2025 program year, affecting calendar year 2022 discharges. We are also 
proposing modification of the validation targeting criteria for 
extraordinary circumstances exceptions (ECEs) beginning with the FY 
2027 program year, affecting calendar year 2024 discharges. We are also 
requesting feedback on potential future measures to adopt in the HAC 
Reduction Program that would address patient safety and health equity.
l. Safety Net Hospitals--Request for Information
    As discussed in section X.D. of the preamble of this proposed rule, 
under the Biden-Harris Administration, CMS has made advancing health 
equity the first pillar in its Strategic Plan. Among the goals of CMS's 
health equity pillar is to evaluate policies to determine how CMS can 
support safety-net providers, including acute care hospitals. Safety-
net hospitals play a crucial role in the advancement of health equity 
by making essential services available to the uninsured, underinsured, 
and other populations that face barriers to accessing healthcare. 
Because they serve many low-income and uninsured patients, safety-net 
hospitals may experience greater financial challenges compared to other 
hospitals, and these challenges have been exacerbated by the impacts of 
the COVID-19 pandemic. As MedPAC noted in its June 2022 Report to 
Congress, the limited resources of many safety-net hospitals may make 
it difficult for them to compete with other hospitals for labor and 
technology, and in some cases may even lead to hospital closure.
    We are interested in public feedback on the challenges faced by 
safety-net hospitals, and potential approaches to help safety-net 
hospitals meet those challenges. In section X.C. of the preamble of 
this proposed rule, we discuss the Safety-Net Index (SNI), which was 
developed by MedPAC as a potential measure of the degree to which a 
hospital functions as a safety-net hospital. In addition, we discuss a 
potential alternative to the SNI, in which safety-net hospitals would 
be identified using area-level indices. We seek public feedback and 
comment on whether either of these two approaches would serve as an 
appropriate basis for identifying safety-net hospitals for Medicare 
purposes.
m. Proposed Changes to the Severity Level Designation for Z Codes 
Describing Homelessness
    As discussed in section II.C. of the preamble of this proposed 
rule, we are proposing to change the severity level designation for 
social determinants of health (SDOH) diagnosis codes describing 
homelessness from non-complication or comorbidity (NonCC) to 
complication or comorbidity (CC) for FY 2024. Consistent with our 
annual updates to account for changes in resource consumption, 
treatment patterns, and the clinical characteristics of patients, CMS 
is recognizing homelessness as an indicator of increased resource 
utilization in the acute inpatient hospital setting.
    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,'' \1\ we 
also continue to be 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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    \1\ Available at 86 FR 7009 (January 25, 2021) (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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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 proposed rule.
BILLING CODE 4120-01-P

[[Page 26665]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.000


[[Page 26666]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.001

BILLING CODE 4120-01-C

[[Page 26667]]

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 an 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 2024. For discharges occurring on 
or after October 1, 2007, but before October 1, 2024, an MDH receives 
the higher of the Federal rate or the Federal rate plus 75 percent of 
the amount by which the Federal rate is exceeded by the highest of its 
FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major 
source of care for Medicare beneficiaries in their areas. Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area (or, as amended by the Bipartisan Budget Act of 
2018, a hospital located in a State with no rural area that meets 
certain statutory criteria), has not more than 100 beds, is not an SCH, 
and has a high percentage of Medicare discharges (not less than 60 
percent of its inpatient days or discharges in its cost reporting year 
beginning in FY 1987 or in two of its three most recently settled 
Medicare cost reporting years).
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments for those cases 
that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; extended 
neoplastic disease care hospitals, and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico (that is, hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa). Religious nonmedical health care institutions 
(RNHCIs) are also excluded from the IPPS. Various sections of the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), the Medicare, 
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced 
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs 
for IRF hospitals and units, LTCHs, and

[[Page 26668]]

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. Section 
1886(d)(5)(B) of the Act provides that prospective payment hospitals 
that have residents in an approved GME program receive an additional 
payment for each Medicare discharge to reflect the higher patient care 
costs of teaching hospitals relative to non-teaching hospitals. The 
additional payment is based on the indirect medical education (IME) 
adjustment factor, which is calculated using a hospital's ratio of 
residents to beds and a multiplier, which is set by Congress. 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. The regulations regarding the indirect medical 
education (IME) adjustment are located at 42 CFR 412.105.

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

1. The Consolidated Appropriations Act, 2023 (CAA 2023; Pub. L. 117-
328)
    Section 4101 of the CAA 2023 extended through FY 2024 the modified 
definition of a low-volume hospital and the methodology for calculating 
the payment adjustment for low-volume hospitals in effect for FYs 2019 
through 2022. Specifically, under section 1886(d)(12)(C)(i) of the Act, 
as amended, for FYs 2019 through 2024, 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. Under section 1886(d)(12)(D) of the 
Act, as amended, for discharges occurring in FYs 2019 through 2024, 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.
    Section 4102 of the CAA 2023 amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH 
program through FY 2024.
    Section 4143 of the CAA 2023 amended section 1886(l)(2)(B) of the 
Act to specify that for portions of cost reporting periods occurring in 
each of calendar years (CYs) 2010 through 2019, the $60 million payment 
limit specified in that subparagraph is not to apply to the total 
amount of additional payments for nursing and allied health education 
to be distributed to hospitals that, as of December 29, 2022, were 
operating a school of nursing, a school of allied health, or a school 
of nursing and allied health. In addition, section 4143 of the CAA 2023 
provides that in addition to not applying the $60 million limit for 
each of years 2010 through 2019, the Secretary shall not reduce direct 
GME payments by such additional payment amounts for such nursing and 
allied health education for portions of cost reporting periods 
occurring in the year.

D. Summary of the Provisions of This Proposed Rule

    In this proposed rule, we set forth proposed payment and policy 
changes to the Medicare IPPS for FY 2024 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 2024.
    The following is a general summary of the changes that we are 
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of this proposed rule, we include 
the following:
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2024.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the proposed FY 2024 status of new 
technologies approved for add-on payments for FY 2023, a presentation 
of our evaluation and analysis of the FY 2024 applicants for add-on 
payments for high-cost new medical services and technologies (including 
public input, as directed by

[[Page 26669]]

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 2024 new technology applicants under the 
alternative pathways for certain medical devices and certain 
antimicrobial products.
     Proposed modifications to the new technology add-on 
payment application eligibility requirements for technologies that are 
not already Food and Drug Administration (FDA) market authorized to 
require such applicants to have a complete and active FDA market 
authorization request at the time of new technology add-on payment 
application submission, to provide documentation of FDA acceptance or 
filing, and to move the FDA marketing authorization deadline from July 
1 to May 1, beginning with applications for FY 2025 (as discussed in 
section II.E.8. of the preamble of this proposed rule).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of this proposed rule, we propose 
revisions to the wage index for acute care hospitals and the annual 
update of the wage data. Specific issues addressed include, but are not 
limited to, the following:
     The proposed FY 2024 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 2024 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 labor-related share for the proposed FY 2024 wage 
index.
3. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2024
    In section IV. of the preamble of this proposed rule, we discuss 
the following:
     Proposed calculation of Factor 1 and Factor 2 of the 
uncompensated care payment methodology.
     Proposed methodological approach for determining the 
additional payments for uncompensated care for FY 2024, which is the 
same overall approach as was for FY 2023.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of this proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed inpatient hospital update for FY 2024.
     Proposed change related to the effective date of sole 
community hospital (SCH) classification in cases that involve a merger.
     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 2024.
     Discussion of statutory extension of the MDH program 
through FY 2024.
     Proposed requirements for payment adjustments to hospitals 
under the HAC Reduction Program for FY 2024.
     Proposed changes to the regulations for GME payments when 
training occurs in REHs.
     Discussion of and proposed changes relating to the 
implementation of the Rural Community Hospital Demonstration Program in 
FY 2024.
     Proposed nursing and allied health education program 
Medicare Advantage (MA) add-on rates and direct GME MA percent 
reductions for CY 2022.
     Proposal to implement section 4143 of the CAA 2023 which 
waives the $60 million limit on annual nursing and allied health 
education program MA payments.
     Proposed update to the payment adjustment for certain 
clinical trial and expanded access use immunotherapy cases.
4. Proposed FY 2024 Policy Governing the IPPS for Capital-Related Costs
    In section VI. of the preamble to this proposed rule, we discuss 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2024. In addition, we discuss a 
proposed change to how hospitals with a rural reclassification are 
treated for capital DSH payments.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VII. of the preamble of this proposed rule, we discuss 
the following:
     Proposed changes to payments to certain excluded hospitals 
for FY 2024.
     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 this proposed rule, we set 
forth proposed changes to the LTCH PPS Federal payment rates, factors, 
and other payment rate policies under the LTCH PPS for FY 2024.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of this proposed rule, we address 
the following:
     Proposal to adopt a modified version of the COVID-19 
Vaccination Among Healthcare Personnel Measure in the Hospital IQR 
Program, PCHQR Program, and LTCH QRP
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program.
     Proposed changes to the requirements for the quality 
reporting program for PPS exempt cancer hospitals (PCHQR Program).
     Proposed changes to the requirements for the Long-Term 
Care Hospital Quality Reporting Program (LTCH QRP), and a request for 
information on principles for selecting and prioritizing LTCH QRP 
quality measures and concepts under consideration for future years. We 
also provide an update on health equity.
     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 this proposed rule includes the 
following:
     Proposals to establish requirements for additional 
information that an eligible facility would be required to submit when 
applying for enrollment as an REH.
     Proposed changes pertaining to the process for hospitals 
requesting an exception from the prohibition against facility expansion 
and program integrity restrictions on approved facility expansion.
     Solicitation of comments on potential approaches to 
address the challenges faced by safety-net hospitals, including an 
appropriate mechanism for identifying safety-net hospitals for Medicare 
policy purposes.
     Proposals to apply certain definitions included in the 
Disclosures

[[Page 26670]]

of Ownership and Additional Disclosable Parties Information for Skilled 
Nursing Facilities proposed rule published in the February 15, 2023 
Federal Register (88 FR 9820) to all provider types that complete the 
Form CMS-855-A enrollment application.
9. Other Provisions of the Proposed Rule
    Section XI.A. of the preamble of this proposed rule includes our 
discussion of the MedPAC Recommendations.
    Section XI.B. of the preamble to this proposed rule includes a 
descriptive listing of the public use files associated with this 
proposed rule.
    Section XII. of the preamble to this proposed rule includes the 
collection of information requirements for entities based on our 
proposals.
    Section XIII. of the preamble to this proposed rule includes 
information regarding our responses to public comments.
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 this proposed rule, we 
set forth proposed changes to the amounts and factors for determining 
the proposed FY 2024 prospective payment rates for operating costs and 
capital-related costs for acute care hospitals. We are proposing to 
establish the threshold amounts for outlier cases. In addition, in 
section IV. of the Addendum to this proposed rule, we address the 
proposed update factors for determining the rate-of-increase limits for 
cost reporting periods beginning in FY 2024 for certain hospitals 
excluded from the IPPS.
11. Determining Prospective Payment Rates for LTCHs
    In section V. of the Addendum to this proposed rule, we set forth 
proposed changes to the amounts and factors for determining the 
proposed FY 2024 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 
2024. We are proposing 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 this 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 this proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the 
appropriate percentage changes for FY 2024 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 2023 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We address these recommendations in Appendix B of this proposed rule. 
For further information relating specifically to the MedPAC March 2023 
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. Use of the Best Available Data for the FY 2024 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 Medicare Provider Analysis and Review (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, due to the 
impact of the COVID-19 public health emergency (PHE) on our ordinary 
ratesetting data, we finalized modifications to our usual ratesetting 
procedures in the FY 2022 and FY 2023 IPPS/LTCH PPS final rules.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44789 through 
44793), we discussed that the FY 2020 MedPAR claims file and the FY 
2019 HCRIS dataset (the most recently available data at the time of 
rulemaking) 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. We stated that the most recent vaccination and hospitalization 
data from the Centers for Disease Control and Prevention (CDC) 
available 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.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48795 through 
48798), we discussed that the FY 2021 MedPAR claims file and the FY 
2020 HCRIS dataset (the most recently available data at the time of 
rulemaking) both contain data that was significantly impacted by the 
COVID-19 PHE, 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. Based on review of the most 
recent hospitalization data and information available from the CDC at 
the time of development of that rule, we stated our belief that it was 
reasonable to assume

[[Page 26671]]

that some Medicare beneficiaries would continue to be hospitalized with 
COVID-19 at IPPS hospitals and LTCHs in FY 2023. However, we also 
stated our belief that it would be reasonable to assume based on the 
information available at the time that there would be fewer COVID-19 
hospitalizations in FY 2023 than in FY 2021. Accordingly, because we 
anticipated Medicare inpatient hospitalizations for COVID-19 would 
continue in FY 2023 but at a lower level, we finalized our proposal to 
use FY 2021 data for purposes of the FY 2023 IPPS and LTCH PPS 
ratesetting but with several 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.
    For this FY 2024 IPPS/LTCH PPS rulemaking, we have analyzed the FY 
2022 MedPAR claims file and the FY 2021 HCRIS dataset, which are the 
most recently available data for FY 2024 ratesetting. We observed that 
certain shifts in inpatient utilization and costs that occurred in FY 
2020 continued to persist in FY 2022. Specifically, the share of 
admissions at IPPS hospitals and LTCHs for MS-DRGs and MS-LTC-DRGs that 
are associated with the treatment of COVID-19 continued to remain at 
levels higher than those observed in the pre-pandemic data.
    For example, in FY 2019, the share of IPPS cases grouped to MS-DRG 
177 (Respiratory Infections and Inflammations with major complication 
or comorbidity (MCC)) was approximately 1 percent, while in FY 2022 the 
share of IPPS cases grouped to MS-DRG 177 was approximately 4 percent. 
Similarly, in FY 2019, the share of LTCH PPS standard Federal payment 
rate cases grouped to MS-LTC-DRG 207 (Respiratory System Diagnosis with 
Ventilator Support >96 Hours) was approximately 18 percent, while in FY 
2022 the share of LTCH PPS standard Federal payment rate cases grouped 
to MS-LTC-DRG 207 was approximately 22 percent.
    We have continued to monitor the latest COVID-19 related data and 
information released by the CDC. The CDC graph below illustrates new 
inpatient hospital admissions of patients with confirmed COVID-19 from 
August 1, 2020 through January 20, 2023. (https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/01202023/images/hospitalizations.PNG?_=24630, accessed January 20, 2023)
[GRAPHIC] [TIFF OMITTED] TP01MY23.002

    As seen in the graph, in the United States, patients continue to be 
hospitalized with the virus that causes COVID-19. 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. 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.\2\ Based 
on the information available at this time, we believe there will 
continue to be COVID-19 cases treated at IPPS hospitals and LTCHs in FY 
2024, such that it is appropriate to use the FY 2022 data, as the most 
recent available data, for purposes of the FY 2024 IPPS and LTCH PPS 
ratesetting. However, based on the information available at this time, 
we do not believe there is a reasonable basis for us to assume that 
there will be a meaningful difference in the number of COVID-19 cases 
treated at IPPS hospitals and LTCHs in FY 2024 relative to FY 2022, 
such that modifications to our usual ratesetting methodologies would be 
warranted.
---------------------------------------------------------------------------

    \2\ https://www.cdc.gov/coronavirus/2019-ncov/variants/index.html, accessed January 20, 2023.
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    As such, we believe that FY 2022 data, as the most recent available 
data, is the best available data for approximating the inpatient 
experience at IPPS hospitals and LTCHs in FY 2024. Therefore, we are 
proposing to use the FY 2022 MedPAR claims file and the FY 2021 HCRIS 
dataset (which contains data from many cost reports ending in FY 2022 
based on each hospital's cost reporting period) for purposes of the FY 
2024 IPPS and LTCH PPS ratesetting. For the reasons discussed, we are 
not proposing any modifications to our usual ratesetting methodologies 
to account for the impact of COVID-19 on the ratesetting data.

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
Therefore, under the IPPS, Medicare pays for inpatient hospital 
services on a rate per discharge basis

[[Page 26672]]

that varies according to the DRG to which a beneficiary's stay is 
assigned. The formula used to calculate payment for a specific case 
multiplies an individual hospital's payment rate per case by the weight 
of the DRG to which the case is assigned. Each DRG weight represents 
the average resources required to care for cases in that particular 
DRG, relative to the average resources used to treat cases in all DRGs.
    Section 1886(d)(4)(C) of the Act requires that the Secretary adjust 
the DRG classifications and relative weights at least annually to 
account for changes in resource consumption. These adjustments are made 
to reflect changes in treatment patterns, technology, and any other 
factors that may change the relative use of hospital resources.

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

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).
    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/rate year (RY) 2010 LTCH PPS final rule 
(74 FR 43764 through 43766) and the FYs 2011 through 2023 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; and 87 FR 48800 through 48891, respectively).
    For discussion regarding our previously finalized policies 
(including our historical adjustments to the payment rates) relating to 
the effect of changes in documentation and coding that do not reflect 
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48799 through 48800).

C. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 
2024 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 Proposed FY 2024 MS-DRG Updates
    As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28127) and final rule (87 FR 48800 through 48801), beginning with FY 
2024 MS-DRG classification change requests, we changed 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. We also described the new process for submitting requested 
changes to the MS-DRGs via a new electronic application intake system, 
Medicare Electronic Application Request Information System\TM\ 
(MEARIS\TM\), accessed at https://mearis.cms.gov. We stated that 
beginning with FY 2024 MS-DRG classification change requests, CMS will 
only accept requests submitted via MEARIS\TM\ and will no longer 
consider requests sent via email. Additionally, we noted that within 
MEARIS\TM\, we have built in several resources to support users, 
including a ``Resources'' section available at https://mearis.cms.gov/public/resources with 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'', also at the bottom of the MEARIS\TM\ site.
    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 request for MS-DRG classification changes to CMS. The 
aforementioned burden is subject to the Paperwork Reduction Act (PRA) 
of 1995 and approved under Office of Management and Budget (OMB) 
control number 0938-1431 and has an expiration date of 09/30/2025.
    As noted previously, interested parties had to submit MS-DRG 
classification change requests for FY 2024 by October 20, 2022. 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 2025 by October 20, 2023 via MEARIS\TM\ at: https://mearis.cms.gov/public/home.
    As we did for the FY 2023 IPPS/LTCH PPS proposed rule, for this FY 
2024 IPPS/LTCH PPS proposed rule we are providing a test version of the 
ICD-10 MS-DRG GROUPER Software, Version 41, so that the public can 
better analyze and understand the impact of the proposals included in 
this proposed rule. We note that this test software reflects the 
proposed GROUPER logic for FY 2024. Therefore, it includes the new 
diagnosis and procedure codes that are effective for FY 2024 as 
reflected in Table 6A.--New Diagnosis Codes--FY 2024 and Table 6B.--New 
Procedure Codes--FY 2024 associated with this proposed rule and does 
not include the diagnosis codes that are invalid beginning in FY 2024 
as reflected in Table 6C.--Invalid Diagnosis Codes--FY 2024 associated 
with this proposed rule. We note that at the time of the development of 
this proposed rule there were no procedure codes designated as invalid 
for FY 2024, and therefore, there is no Table 6D--Invalid Procedure 
Codes--FY 2024 associated with this proposed rule. These tables are not 
published in the Addendum to this proposed rule, but are available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section 
VI. of the Addendum to this proposed rule. Because the diagnosis codes 
no longer valid for FY 2024 are not reflected in the test software, we 
are making available a supplemental file in Table 6P.1a that includes 
the mapped Version 41 FY 2024 ICD-10-CM codes and the deleted Version 
40.1 FY 2023 ICD-10-CM codes that should be used for testing purposes 
with users' available claims data. Therefore, users will have access to 
the

[[Page 26673]]

test software allowing them to build case examples that reflect the 
proposals included in this proposed rule. In addition, users will be 
able to view the draft version of the ICD-10 MS-DRG Definitions Manual, 
Version 41.
    The test version of the ICD-10 MS-DRG GROUPER Software, Version 41, 
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 41, 
and the supplemental mapping files in Table 6P.1a of the FY 2023 and FY 
2024 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Following are the changes that we are proposing to the MS-DRGs for 
FY 2024. We are inviting public comments on each of the MS-DRG 
classification proposed changes, as well as our proposals to maintain 
certain existing MS-DRG classifications discussed in this proposed 
rule. In some cases, we are proposing changes to the MS-DRG 
classifications based on our analysis of claims data and clinical 
appropriateness. In other cases, we are proposing to maintain the 
existing MS-DRG classifications based on our analysis of claims data 
and clinical appropriateness. For this FY 2024 IPPS/LTCH PPS proposed 
rule, our initial MS-DRG analysis was based on ICD-10 claims data from 
the September 2022 update of the FY 2022 MedPAR file, which contains 
hospital bills received from October 1, 2021, through September 30, 
2022. In our discussion of the proposed MS-DRG reclassification 
changes, we refer to these claims data as the ``September 2022 update 
of the FY 2022 MedPAR file.'' Separately, where otherwise indicated, 
additional analysis was based on ICD-10 claims data from the December 
2022 update of the FY 2022 MedPAR file, which contains hospital bills 
received by CMS through December 31, 2022, for discharges occurring 
from October 1, 2021 through September 30, 2022. In our discussion of 
the proposed MS-DRG reclassification changes, we refer to these claims 
data as the ``December 2022 update of the FY 2022 MedPAR file.'' 
Specifically, as discussed further in this section, we used the 
additional claims data available in the December 2022 update of the FY 
2022 MedPAR file to assess the application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split, as 
well as to simulate restructuring of any proposed MS-DRGs, to assess 
the case counts and other criteria for determining whether a proposed 
new base MS-DRG would satisfy the criteria to create subgroups.
    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 clinical factors 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 we believed 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), 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. Interested parties 
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 the FY 2023 IPPS/LTCH PPS final rule (87 FR 48803), we also 
finalized a delay in application of the NonCC subgroup criteria to 
existing MS-DRGs with a three-way severity level split in light of the 
ongoing PHE and until such time additional analyses can be performed to 
assess impacts, as discussed in response to public comments in the FY 
2022 and FY 2023 IPPS/LTCH PPS final rules.
    In our analysis of the MS-DRG classification requests for FY 2024 
that we received by October 20, 2022, 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.
BILLING CODE 4120-01-P

[[Page 26674]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.003

    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, we 
stated earlier that for this FY 2024 IPPS/LTCH PPS proposed rule, our 
initial MS-DRG analysis was generally based on ICD-10 claims data from 
the September 2022 update of the FY 2022 MedPAR file, with the 
additional claims data available in the December 2022 update of the FY 
2022 MedPAR file used to assess the case counts and other criteria for 
determining whether a proposed new base MS-DRG would satisfy the 
criteria to create subgroups. 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 two 
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 is satisfied for a three-way split. In applying the criteria 
for a three-way split, a base MS-DRG is initially subdivided into the 
three subgroups: MCC, CC, and NonCC. Each subgroup is then analyzed in 
relation to the other two subgroups using the volume (Criteria 1 and 
2), average cost (Criteria 3 and 4), and reduction in variance 
(Criteria 5). If the criteria fail, the next step is to determine if 
the criteria are satisfied for a two-way split. In applying the 
criteria for a two-way split, a base MS-DRG is initially subdivided 
into two subgroups: ``with MCC'' and ``without MCC'' (1_23) or ``with 
CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then analyzed 
in relation to the other using the volume (Criteria 1 and 2), average 
cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the 
criteria for both of the two-way splits fail, then a split (or CC 
subgroup) would generally not be warranted for that base MS-DRG. If the 
three-way split fails on any one of the five criteria and all five 
criteria for both two-way splits (1_23 and 12_3) are met, we would 
apply the two-way split with the highest R2 value. We note that if the 
request to split (or subdivide) an existing base MS-DRG into severity 
levels specifies the request is for either one of the two-way splits 
(1_23 or 12_3), in response to the specific request, we will evaluate 
the criteria for both of the two-way splits, however we do not also 
evaluate the criteria for a three-way split.
    As previously noted, to validate whether the established severity 
levels within a base MS-DRG are supported, we typically analyze the 
most recent two years of MedPAR claims data. For this FY 2024 IPPS/LTCH 
PPS proposed rule, using the December 2022 update of the FY 2022 MedPAR 
file and the March 2022 update of the FY 2021 MedPAR file, we also 
analyzed how applying the

[[Page 26675]]

NonCC subgroup criteria to all MS-DRGs currently split into three 
severity levels would potentially affect the MS-DRG structure in 
connection with the proposed FY 2024 MS-DRG classification changes. 
While, as previously noted, our MS-DRG analysis for this FY 2024 IPPS/
LTCH PPS proposed rule was otherwise based on ICD-10 claims data from 
the September 2022 update of the FY 2022 MedPAR file, we utilized the 
additional claims data available from the December 2022 update of the 
FY 2022 MedPAR file for purposes of assessing the application of the 
NonCC subgroup criteria to these existing MS-DRGs as well as to 
determine whether a proposed new base MS-DRG satisfies the criteria to 
create subgroups. Findings from our analysis indicated that 
approximately 45 base 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 
potential deletion of 135 MS-DRGs (45 MS-DRGs x 3 severity levels = 
135) and the potential creation of 86 new MS-DRGs. We refer the reader 
to Table 6P.10--Potential MS-DRG Changes with Application of the NonCC 
Subgroup Criteria and Detailed Data Analysis- FY 2024 associated with 
this proposed rule and available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS 
for detailed information, including the criteria to create subgroups in 
Table 6P.10a (as also set forth in the preceding table) and the list of 
the 135 MS-DRGs that would potentially be subject to deletion and the 
list of the 86 MS-DRGs that would potentially be created in Table 
6P.10b. We note that we also identified an additional 12 obstetric MS-
DRGs (4 base MS-DRGs x 3 severity levels=12) that would be subject to 
change based on the application of the three-way severity level split 
criterion, as reflected in our data analysis in Table 6P.10c associated 
with this proposed rule. However, in response to prior public comments 
expressing concern about the historical low volume of the obstetric 
related MS-DRGs being subject to application of the NonCC subgroup 
criteria and consistent with our discussion in prior rulemaking 
regarding this population in our Medicare claims data and the 
development of these MS-DRGs (83 FR 41210), we believe it may be 
appropriate to exclude these MS-DRGs from application of the NonCC 
subgroup criteria. The list of 12 obstetric MS-DRGs is shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.004

BILLING CODE 4120-01-C
    We also refer the reader to Table 6P.10d for the data analysis of 
all 49 base MS-DRGs that would be subject to change based on the 
application of the three-way severity level split criterion and to 
Table 6P.10e for the corresponding data dictionary that describes the 
meaning of the data elements and assists with interpretation of the 
data related to our analysis with application of the NonCC subgroup 
criteria. We note, in our analysis of the claims data and as reflected 
in Table 6P.10d, we identified four base MS-DRGs currently subdivided 
with a three-way severity level split (4 base MS-DRGs x 3 severity 
levels = 12 MS-DRGs) that result in the potential creation of a single, 
base MS-DRG when grouped under the proposed V41 GROUPER software with 
application of the NonCC subgroup criteria. As shown in Table 6P.10d, 
the four current base MS-DRGs (excluding the 4 obstetric related base 
DRGs) are base MS-DRGs 283, 296, 411 and 799. In addition to not 
satisfying the criterion that there be at least 500 cases in the NonCC 
subgroup for a three-way severity level split, these four base MS-DRGs 
also failed one or more of the other criteria to create subgroups. For 
example, our review of base MS-DRGs 283 and 296 showed they failed the 
criterion that there be at least 5% or more of the patient cases in the 
NonCC subgroup. For base MS-DRG 411, we found the criterion that there 
be at least 500 cases in each subgroup for a three-way severity level 
split, as well as in each subgroup for both of the two-way severity 
level splits, was not met. Lastly, for base MS-DRG 799, we found less 
than 500 cases in at least two of three subgroups for a three-way 
severity level split, as well as for at least one of the two subgroups 
for a two-way severity level split, and the R2 value was less than 3.0 
for the two-way severity level split.
    We also refer the reader to Table 6P.10f for the alternate cost 
weight analysis with application of the NonCC subgroup criteria that 
includes transfer-adjusted cases from the December 2022 update of the 
FY 2022 MedPAR file under the proposed V41 ICD-10 MS-

[[Page 26676]]

DRG GROUPER Software, the MS-DRG relative weights calculated under the 
proposed V41 ICD-10 MS-DRG GROUPER Software, the alternate MS-DRG 
relative weights calculated with application of the NonCC subgroup 
criteria using an alternate version of the ICD-10 MS-DRG GROUPER 
Software, Version 41.A (discussed in more detail in this section of 
this proposed rule), and the change in MS-DRG relative weights between 
those calculated under the proposed V41 GROUPER Software and those 
calculated under the alternate V41.A GROUPER Software. We note that to 
facilitate the structural comparison between the proposed V41 GROUPER 
and the alternate V41.A GROUPER, the relative weights calculated using 
the proposed V41 GROUPER Software (column F) do not reflect application 
of the 10-percent cap. We further note that changes in the status for 
transfer adjusted cases are reflected for the relative weights 
calculated using the proposed V41 GROUPER Software only and are not 
reflected for the alternate MS-DRG weights with application of the 
NonCC subgroup criteria. We note, as shown in Table 6P.10f, that we 
found five MS-DRGs for which there appears to be a greater than 
negative 10% change between the relative weight calculated under the 
proposed V41 GROUPER Software and the calculated alternate relative 
weight under the V41.A GROUPER Software with application of the NonCC 
subgroup criteria. As shown in Table 6P.10f, the five MS-DRGs are 
existing MS-DRG 021 (potential new MS-DRG 105), existing MS-DRG 411 
(potential new MS-DRG 426), existing MS-DRG 573 (potential new MS-DRG 
529), existing MS-DRG 574 (potential new MS-DRG 530), and existing MS-
DRG 799 (potential new MS-DRG 649). Of the five existing MS-DRGs, two 
of the MS-DRGs are those for which a new single, base MS-DRG would 
potentially be created from the current three-way split, as previously 
described: MS-DRG 411 (potential new MS-DRG 426) and MS-DRG 799 
(potential new MS-DRG 649). The findings are consistent with what we 
would expect given the low volume of cases in the NonCC subgroups 
compared to the volume of cases in the CC subgroups for these MS-DRGs.
    As noted in prior rulemaking, any potential MS-DRG updates to be 
considered for a future proposal in connection with application of the 
NonCC subgroup criteria would also involve a redistribution of cases, 
which would impact the relative weights, and, thus, the payment rates 
proposed for particular types of cases. As such, and in response to 
prior public comments requesting that further analysis of the 
application of the NonCC subgroup criteria be made available, in 
addition to Table 6P.10f, we are making available additional files 
reflecting application of the NonCC subgroup criteria in connection 
with the proposed FY 2024 MS-DRG changes, using the December 2022 
update of the FY 2022 MedPAR file. These additional files include an 
alternate Table 5--Alternate List of Medicare Severity Diagnosis 
Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and 
Arithmetic Mean Length of Stay, an alternate Length of Stay (LOS) 
Statistics file, an alternate Case Mix Index (CMI) file, and an 
alternate After Outliers Removed and Before Outliers Removed (AOR_BOR) 
file. The files are available in association with this proposed rule on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    For this FY 2024 IPPS/LTCH PPS proposed rule we are also providing 
an alternate test version of the ICD-10 MS-DRG GROUPER Software, 
Version 41.A, so that the public can better analyze and understand the 
impact on the proposals included in this proposed rule if the NonCC 
subgroup criteria were to be applied to existing MS-DRGs with a three-
way severity level split. We note that this alternate test software 
reflects the proposed GROUPER logic for FY 2024 as modified by the 
application of the NonCC subgroup criteria. Therefore, it includes the 
new diagnosis and procedure codes that are effective for FY 2024 as 
reflected in Table 6A.--New Diagnosis Codes--FY 2024 and Table 6B.--New 
Procedure Codes--FY 2024 associated with this proposed rule and does 
not include the diagnosis codes that are invalid beginning in FY 2024 
as reflected in Table 6C.--Invalid Diagnosis Codes--FY 2024 associated 
with this proposed rule. As previously noted, at the time of the 
development of this proposed rule there were no procedure codes 
designated as invalid for FY 2024, and therefore, there is no Table 6D- 
Invalid Procedure Codes--FY 2024 associated with this proposed rule. 
These tables are not published in the Addendum to this proposed rule, 
but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
described in section VI. of the Addendum to this proposed rule. Because 
the diagnosis codes no longer valid for FY 2024 are not reflected in 
the alternate test software, we are making available a supplemental 
file in Table 6P.1a that includes the mapped Version 41 FY 2024 ICD-10-
CM codes and the deleted Version 40.1 FY 2023 ICD-10-CM codes that 
should be used for testing purposes with users' available claims data. 
Therefore, users will have access to the alternate test software 
allowing them to build case examples that reflect the proposals 
included in this proposed rule with application of the NonCC subgroup 
criteria. Because the potential MS-DRG changes with application of the 
NonCC subgroup criteria are available in Table 6P.10b associated with 
this proposed rule, an alternate version of the ICD-10 MS-DRG 
Definitions Manual was not developed.
    The alternate test version of the ICD-10 MS-DRG GROUPER Software, 
Version 41.A, and the supplemental mapping files in Table 6P.1a of the 
FY 2023 and FY 2024 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    After delaying the application of the NonCC subgroup criteria for 
two years, and in response to prior public comments, we are making 
available these additional analyses reflecting application of the 
criteria in connection with the proposed FY 2024 MS-DRG changes for 
public review and comment, to inform application of the NonCC subgroup 
criteria for FY 2025 rulemaking.
    We are proposing to continue to delay application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split for FY 2024. We are interested in hearing feedback regarding the 
experience of large urban hospitals, rural hospitals, and other 
hospital types and will take commenters' feedback into consideration 
for our development of the FY 2025 proposed rule.
2. Major Diagnostic Category (MDC) 01: (Diseases and Disorders of the 
Nervous System): Epilepsy With Neurostimulator
    The Responsive Neurostimulator (RNS[reg]) System is a cranially 
implanted neurostimulator and is a treatment option for persons 
diagnosed with medically intractable epilepsy, a brain disorder 
characterized by persistent seizure activity which despite maximal 
medical treatment, remains sufficiently debilitating. Cases involving 
the use of the RNS[reg] System are identified by the reporting of an 
ICD-10-PCS code combination capturing a neurostimulator generator 
inserted into the skull with the insertion of a

[[Page 26677]]

neurostimulator lead into the brain and the cases are assigned to MS-
DRG 023 (Craniotomy with Major Device Implant or Acute Complex CNS 
Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with 
Neurostimulator) when reported with a principal diagnosis of epilepsy. 
We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 
40.1, which is available 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 023.
    As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 
through 38019), we finalized our proposal to reassign all cases with a 
principal diagnosis of epilepsy and one of the following ICD-10-PCS 
code combinations capturing cases with a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the RNS[reg] 
neurostimulator) to MS-DRG 023 even if there is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also finalized our proposed change to the title of MS-DRG 023 
from ``Craniotomy with Major Device Implant or Acute Complex Central 
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo 
Implant'' to ``Craniotomy with Major Device Implant or Acute Complex 
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or 
Chemotherapy Implant or Epilepsy with Neurostimulator'' to reflect the 
modifications to the MS-DRG structure.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459 through 
58462), we discussed a request to reassign cases describing the 
insertion of a neurostimulator generator into the skull in combination 
with the insertion of a neurostimulator lead into the brain from MS-DRG 
023 to MS-DRG 021 (Intracranial Vascular Procedures with Principal 
Diagnosis Hemorrhage with CC) or to reassign these cases to another MS-
DRG for more appropriate payment. We stated that while the results of 
our claims analysis indicated that the average costs of cases reporting 
a neurostimulator generator inserted into the skull with the insertion 
of a neurostimulator lead into the brain (including cases involving the 
use of the RNS[reg] neurostimulator), and a principal diagnosis of 
epilepsy are higher compared to the average costs for all cases in 
their assigned MS-DRG, we could not ascertain from the claims data the 
resource use specifically attributable to the procedure during a 
hospital stay. We stated that we believed that further analysis of 
cases reporting a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS[reg] neurostimulator), and a 
principal diagnosis of epilepsy was needed prior to proposing any 
further reassignment of these cases to ensure clinical coherence 
between these cases and the other cases with which they may potentially 
be grouped and therefore did not propose to reassign cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS[reg] neurostimulator) from MS-DRG 023 to MS-DRG 021. We 
also did not propose to reassign Responsive Neurostimulator (RNS[reg]) 
System cases to another MS-DRG. We stated we expected that, in future 
years, we would have additional data that could be used to evaluate the 
potential reassignment of cases reporting a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the RNS[reg] 
neurostimulator), and a principal diagnosis of epilepsy.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we received a similar 
request to reassign cases describing the insertion of a neurostimulator 
generator into the skull in combination with the insertion of a 
neurostimulator lead into the brain from MS-DRG 023 to MS-DRG 021 or 
reassign all cases currently assigned to MS-DRG 023 that involve a 
craniectomy or a craniotomy with the insertion of device implant and 
create a new MS-DRG for these cases. The requestor acknowledged both 
the refinements made to MS-DRG 023 effective for FY 2018 and the 
discussion in FY 2021 rulemaking, but stated that cases describing the 
insertion of a neurostimulator generator into the skull in combination 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS[reg] neurostimulator) are negatively 
impacted from a payment perspective in their current MS-DRG assignment 
due to the large number of cases, with a wide range of principal 
diagnoses, procedures, and procedure approaches, also assigned to MS-
DRG 023 and MS-DRG 024 (Craniotomy with Major Device Implant or Acute 
Complex CNS Principal Diagnosis without MCC) and therefore continue to 
be underpaid. The requestor performed its own analysis of Medicare 
claims data and stated that it found that the average costs of cases 
describing the insertion of the RNS[reg] neurostimulator were 
significantly higher than the average costs of all cases in their 
current assignment to MS-DRG 023, and as a result, cases describing the 
insertion of the RNS[reg] neurostimulator are not being adequately 
reimbursed.
    The requestor suggested the following two options for MS-DRG 
assignment updates: (1) reassign cases describing the insertion of a 
neurostimulator generator into the skull in combination with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS[reg] neurostimulator) from MS-DRG 023 to 
MS-DRG 021 with a change in title to ``Intracranial Vascular Procedures 
with PDX Hemorrhage with CC or Craniectomy with Neurostimulator;'' or 
(2) extract all cases from MS-DRG 023 involving a craniectomy/
craniotomy with device implant and create a new MS-DRG for these cases.
    The requestor acknowledged that the relatively low volume of cases 
that only involve the insertion of a neurostimulator generator into the 
skull in combination with the insertion of a neurostimulator lead into 
the brain in the claims data is likely not sufficient to warrant the 
creation of a new MS-DRG. The requestor further stated given the 
limited options within the existing MS-DRG structure that fit from both 
a cost and clinical cohesiveness perspective, they believe that MS-DRG 
021 is the most logical fit in terms of average costs and clinical 
coherence for reassignment of RNS[reg] System cases even though, 
according to the requestor, the insertion of a neurostimulator 
generator into the skull in combination with the insertion of a 
neurostimulator lead into the brain is technically more complex and 
involves a higher level of training, extreme precision and 
sophisticated technology than performing a craniectomy for hemorrhage.
    As another option, the requestor identified procedures involving a 
craniectomy or craniotomy by searching for ICD-10-PCS codes that 
describe the

[[Page 26678]]

root operations ``Destruction'', ``Division'', ``Drainage'', 
``Excision'', Extirpation'', or ``Insertion'' performed related to the 
brain or specific brain anatomy (for example, cerebral ventricle, 
cerebellum) with an ``Open Approach'' in the claims data. The requestor 
also said they identified claims involving a device implant by 
searching for ICD-10-PCS codes that describe the root operation 
``Insertion'' and stated that they found that the claims they 
identified had average costs comparable to the average costs of 
RNS[reg] cases and therefore creating a new MS-DRG for all cases 
involving a craniectomy/craniotomy with device implant was a reasonable 
alternative option.
    To begin our analysis, we identified the ICD-10-CM diagnosis codes 
that describe a diagnosis of epilepsy. We refer the reader to Table 
6P.2a associated with this proposed rule (and available at: https://
www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps) for the list of the ICD-10-CM codes that we 
identified.
    We then examined the claims data from the September 2022 update of 
the FY 2022 MedPAR file for all cases in MS-DRG 023 and compared the 
results to cases reporting a neurostimulator generator inserted into 
the skull with the insertion of a neurostimulator lead into the brain 
(including cases involving the use of the RNS[reg] neurostimulator) 
that had a principal diagnosis of epilepsy in MS-DRG 023. The following 
table shows our findings:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.005

    As shown in the table, for MS-DRG 023, we identified a total of 
11,602 cases, with an average length of stay of 10.4 days and average 
costs of $47,321. Of those 11,602 cases in MS-DRG 023, there were 57 
cases describing a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS[reg] neurostimulator) that had a 
principal diagnosis of epilepsy. We note that the 57 cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS[reg] neurostimulator) and a principal diagnosis of 
epilepsy have an average length of stay of 3.1 days and average costs 
of $58,676, as compared to the average length of stay of 10.4 days and 
average costs of $47,321 for all cases in MS-DRG 023. While these 
neurostimulator cases have average costs that are $11,355 higher than 
the average costs of all cases in MS-DRG 023, there were only a total 
of 57 cases. We reviewed these data, and agreed with the requestor that 
the number of cases continues to be too small to warrant the creation 
of a new MS-DRG for these cases, for the reasons discussed in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019) and the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58459 through 58462).
    We examined the reassignment of cases describing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS[reg] neurostimulator) to MS-DRGs 020, 021, and 022 
(Intracranial Vascular Procedures with PDX Hemorrhage with MCC, with 
CC, and without CC/MCC, respectively). While the request was to 
reassign these cases to MS-DRG 021, MS-DRG 021 is specifically 
differentiated according to the presence of a secondary diagnosis with 
a severity level designation of a complication or comorbidity (CC). 
Cases with a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS[reg] neurostimulator) do not always 
involve the presence of a secondary diagnosis with a severity level 
designation of a complication or comorbidity (CC), and therefore we 
reviewed data for all three MS-DRGs. The following table shows our 
findings:
[GRAPHIC] [TIFF OMITTED] TP01MY23.006

    As shown in the table, for MS-DRG 020, there were a total of 2,016 
cases with an average length of stay of 13.9 days and average costs of 
$72,776. For MS-DRG 021, there were a total of 548 cases with an 
average length of stay of 9.1 days and average costs of $53,973. For 
MS-DRG 022, there were a total of 270 cases with an average length of 
stay of 3.9 days and average costs of $31,248.
    Because all cases describing a neurostimulator generator inserted 
into the skull with the insertion of a neurostimulator lead into the 
brain (including cases involving the use of the RNS[reg] 
neurostimulator) with a principal diagnosis of epilepsy are assigned 
MS-DRG 023 even if there is no MCC reported and there is a three-way 
split within MS-DRGs 020, 021, and 022, we also analyzed the cases 
reporting a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain

[[Page 26679]]

(including cases involving the use of the RNS[reg] neurostimulator) 
with a principal diagnosis of epilepsy for the presence or absence of a 
secondary diagnosis designated as a complication or comorbidity (CC) or 
a major complication or comorbidity (MCC). The following table shows 
our findings:
[GRAPHIC] [TIFF OMITTED] TP01MY23.007

    This data analysis shows that, similar to our findings as 
summarized in the FY 2018 and FY 2021 IPPS/LTCH PPS final rules, on 
average, the cases in MS-DRG 023 describing a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the RNS[reg] 
neurostimulator) and a principal diagnosis of epilepsy have average 
costs that are relatively more similar to the average costs of cases in 
MS-DRG 021 ($58,676 compared to $53,973), while the average length of 
stay is shorter (3.1 days compared to 9.1 days). 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), the 57 cases in MS-DRG 023 reporting 
a principal diagnosis of epilepsy with a neurostimulator generator 
inserted into the skull and insertion of a neurostimulator lead into 
brain have higher average costs and shorter lengths of stay than the 
cases in the FY 2022 MedPAR file for MS-DRGs 021 and 022 while having 
lower average costs and shorter lengths of stay than the cases in MS-
DRG 020. We reviewed the clinical issues and the claims data, and 
continue to not support reassigning the cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS[reg] neurostimulator) and a principal diagnosis of 
epilepsy from MS-DRG 023 to MS-DRGs 020, 021 or 022. As also discussed 
in the FY 2018 and FY 2021 IPPS/LTCH PPS final rules, the cases in MS-
DRGs 020, 021 and 022 have a principal diagnosis of a hemorrhage. The 
RNS[reg] neurostimulator generators are not used to treat patients with 
diagnosis of a hemorrhage. We continue to believe that it is 
inappropriate to reassign cases representing a principal diagnosis of 
epilepsy to a MS-DRG that contains cases that represent the treatment 
of intracranial hemorrhage, as discussed in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38015 through 38019) and the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58459 through 58462). The differences in average 
length of stay and average costs based on the more recent data continue 
to support this recommendation.
    We note, as discussed in section II.C.1.b of this proposed rule, 
using the December 2022 update of the FY 2022 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 2024. Findings from our analysis indicated that MS-DRGs 020, 021, 
and 022 as well as approximately 44 other base MS-DRGs would 
potentially be subject to change based on the three-way severity level 
split criterion finalized in FY 2021. We refer the reader to Table 
6P.10b associated with this proposed rule (which is available on the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the list of the 135 MS-DRGs that would 
be subject to deletion and the list of the 86 new MS-DRGs that would 
potentially be created if the NonCC subgroup criteria were applied.
    We then explored alternative options, as was requested. We do not 
agree that searching for ICD-10-PCS codes that describe the root 
operations ``Destruction'', ``Division'', ``Drainage'', ``Excision'', 
Extirpation'', or ``Insertion'' performed related to the brain or 
specific brain anatomy as suggested by the requestor is a reasonable 
approach to find cases comparable to cases involving the use of the 
RNS[reg] System as these root operations all describe procedures 
performed for distinct and differing objectives. Instead, to review for 
similar utilization of resources, we further analyzed the data to 
identify those cases currently reporting a procedure code combination 
representing neurostimulator generator and lead code combinations that 
are captured under the list referred to as ``Major Device Implant'' in 
the GROUPER logic for MS-DRGs 023 and 024 since the ICD-10-PCS code 
combinations that capture the use of the RNS[reg] neurostimulator 
generator and leads that would determine an assignment of a case to MS-
DRGs 023 are also found on the ``Major Device Implant'' list. The 
neurostimulator generators on this list are inserted into the skull, as 
well as into the subcutaneous areas of the chest, back, or abdomen. The 
leads are all inserted into

[[Page 26680]]

the brain. The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP01MY23.008

    We note that the 90 Major Device Implant list cases involving a 
neurostimulator generator (including cases involving the use of the 
RNS[reg] neurostimulator and a principal diagnosis of epilepsy) have an 
average length of stay of 7.3 days and average costs of $59,733 as 
compared to all 11,602 cases in MS-DRG 023, which have an average 
length of stay of 10.4 days and average costs of $47,321. In MS-DRG 
024, we note that the 395 Major Device Implant list cases involving a 
neurostimulator generator have an average length of stay of 1.6 days 
and average costs of $36,147 as compared to all 4,378 cases in MS-DRG 
024, which have an average length of stay of 5.2 days and average costs 
of $32,613. While these neurostimulator cases have average costs that 
are higher than the average costs of all cases in their respective MS-
DRGs, it is difficult to detect patterns of complexity and resource 
intensity. Moreover, we are unable to identify another MS-DRG in MDC 01 
that would be a more appropriate MS-DRG assignment for these cases 
based on the indication for and complexity of the procedure.
    We note while our data findings demonstrate the average costs are 
higher for the 57 cases with a principal diagnosis of epilepsy with 
neurostimulator generator inserted into the skull and insertion of a 
neurostimulator lead into brain when compared to all cases in MS-DRG 
023, these cases represent a small percentage of the total number of 
cases reported in this MS-DRG. While we appreciate the requestors' 
concerns regarding the differential in average costs for cases 
describing the insertion of a neurostimulator generator into the skull 
in combination with the insertion of a neurostimulator lead into the 
brain when compared to all cases in their

[[Page 26681]]

assigned MS-DRG, we believe additional time is needed to evaluate these 
cases as part of our ongoing examination of the case logic for MS-DRGs 
023 through 027. As discussed in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48808 through 48820), 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.
    As part of this evaluation, we have begun to analyze the ICD-10 
coded claims data from the September 2022 update of the FY 2022 MedPAR 
file to determine if the patients' diagnoses, the objective of the 
procedure performed, the specific anatomical site where the procedure 
is performed or the surgical approach used (for example, open, 
percutaneous, percutaneous endoscopic, among others) demonstrates a 
greater severity of illness and/or increased treatment difficulty as we 
consider restructuring MS-DRGs 023 through 027, including how to better 
align the clinical indications with the performance of specific 
intracranial procedures. We refer the reader to Tables 6P.2b through 
6P.2f associated with this proposed rule (which is available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for data analysis findings of cases assigned 
to MS-DRGs 023 through 027 as we continue to look for patterns of 
complexity and resource intensity.
    In summary, we believe that further analysis of cases reporting a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS[reg] neurostimulator) and a principal diagnosis of 
epilepsy is needed in connection with our analysis of the claims data 
for MS-DRGs 023 through 027 prior to proposing any further reassignment 
of these cases, to ensure clinical coherence between these cases and 
the other cases with which they may potentially be grouped. Therefore, 
we are not proposing to reassign cases describing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS[reg] neurostimulator) from MS-DRG 023 to MS-DRG 021. We are 
also not proposing to create a new MS-DRG for cases involving a 
craniectomy/craniotomy with device implant at this time.
    As we continue this analysis of the claims data with respect to MS-
DRGs 023 through 027, we continue to seek public comments and feedback 
on other factors that should be considered in the potential 
restructuring of these MS-DRGs. As previously described, 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 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 40.1, which is available 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, 
2023, and directed to the new electronic intake system, Medicare 
Electronic Application Request Information SystemTM 
(MEARISTM), discussed in section II.C.1.b of the preamble of 
this proposed rule, at: https://mearis.cms.gov/public/home.
3. MDC 02 (Diseases and Disorders of the Eye): Retinal Artery Occlusion
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48830 through 
48835), 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).
    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 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.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we received a request 
to again review the MS-DRG assignment of cases involving CRAO. 
According to the requestor, CRAO is a form of acute ischemic stroke 
which occurs when a vessel supplying blood to the brain is obstructed 
and there is growing recognition of this diagnosis as a vascular 
neurological problem. The requestor 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. The requestor performed an 
internal analysis of their claims data and found that the average costs 
of cases reporting a procedure code describing the administration of a 
thrombolytic agent with a principal diagnosis of CRAO were 2.5 times 
higher than the average costs of cases with a principal diagnosis of 
CRAO that did not report the administration of a thrombolytic agent. 
The requestor further stated the increased utilization of resources of 
these cases was isolated to be almost entirely due to the cost of the 
tPA itself based on this review of their internal cost level data. 
Consequently, the requestor stated the continued assignment of these 
conditions to MS-DRG 123 does not properly recognize disease complexity 
and understates the resource utilization associated with administering 
critical (potentially vision-saving) treatments for these cases.

[[Page 26682]]

    The requestor suggested that the following three MS-DRGs be created 
to reflect current standard of care for these patients:
     Suggested New MS-DRG XXX--Neurological Eye Disorders with 
Thrombolytic Agent with MCC;
     Suggested New MS-DRG XXX--Neurological Eye Disorders with 
Thrombolytic Agent with CC; and
     Suggested New MS-DRG XXX--Neurological Eye Disorders with 
Thrombolytic Agent without CC/MCC.
    In reviewing this issue, it is unclear why the requestor did not 
include branch retinal artery occlusion (BRAO) in their request for FY 
2024 rulemaking. As discussed in the FY 2023 IPPS/LTCH PPS final rule, 
BRAO is a closely allied condition. Therefore, we identified the ICD-
10-CM codes found in the following table that describe CRAO and BRAO.
[GRAPHIC] [TIFF OMITTED] TP01MY23.009

    Thrombolytic therapy is identified with the following ICD-10-PCS 
procedure codes.
[GRAPHIC] [TIFF OMITTED] TP01MY23.010

    Our analysis of this grouping issue again confirmed that, when a 
procedure code describing the administration of a thrombolytic agent is 
reported with principal diagnosis code describing CRAO or BRAO, these 
cases group to medical MS-DRG 123. We refer the reader to the ICD-10 
MS-DRG Definitions Manual Version 40.1, which is available 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 123.
    To begin our analysis, we examined claims data from the September 
2022 update of the FY 2022 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 and (2) 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 26683]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.011

    As shown in the table, we identified a total of 2,771 cases within 
MS-DRG 123 with an average length of stay of 2.5 days and average costs 
of $6,720. Of these 2,771 cases, there are 839 cases that reported a 
principal diagnosis code describing CRAO or BRAO without a procedure 
code describing the administration of a thrombolytic agent with an 
average length of stay of 2.2 days and average costs of $5,842. There 
are 38 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 3.3 days and 
average costs of $13,302.
    The data analysis shows that the 839 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 have lower 
average costs as compared to all cases in MS-DRG 123 ($5,842 compared 
to $6,720), and a shorter average length of stay (2.2 days compared to 
2.5 days). For the 38 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, however, the average length 
of stay is longer (3.3 days compared to 2.5 days) and the average costs 
are higher ($13,302 compared to $6,720) than the average length of stay 
and average costs compared to all cases in that MS-DRG.
    We reviewed these data, and do not believe that the small subset of 
cases reporting a principal diagnosis code describing CRAO or BRAO with 
a procedure code describing the administration of a thrombolytic agent 
warrants the creation of new MS-DRGs at this time. As stated 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. 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. Moreover, in response to the specific request to 
create new MS-DRGs subdivided into severity levels for the cases 
reporting a principal diagnosis code describing CRAO with a procedure 
code describing the administration of a thrombolytic agent, we only 
identified a total of 38 cases, so the criterion that there are at 
least 500 or more cases in each subgroup cannot be met. Therefore, for 
FY 2024, we are not proposing to create new MS-DRGs subdivided into 
severity levels for cases reporting a principal diagnosis code 
describing CRAO with a procedure code describing the administration of 
a thrombolytic agent.
    We recognize however, that the average costs of the small number of 
cases reporting a principal diagnosis code describing CRAO or BRAO with 
a procedure code describing the administration of a thrombolytic agent 
are greater when compared to the average costs of all cases in MS-DRG 
123. To explore other mechanisms to address this request, we then 
reexamined the MS-DRGs within MDC 02 to consider the possibility of 
reassigning the cases with a principal diagnosis of CRAO or BRAO that 
receive the administration of a thrombolytic agent to other MS-DRGs 
within MDC 02. After further consideration, in reviewing the claims 
data from the September 2022 update of the FY 2022 MedPAR file and 
examining the clinical considerations, we believe that the cases 
reporting a principal diagnosis code describing CRAO or BRAO could more 
suitably group to MS-DRGs 124 and 125 (Other Disorders of the Eye with 
MCC, and without MCC, respectively), which contain diagnoses other than 
neurological conditions that affect the eye, noting the vascular 
involvement inherent to a diagnosis of CRAO or BRAO. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 40.1, which is 
available 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 
124 and 125.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRGs 124 and 125 as a whole, we examined the average costs 
and length of stay for cases in MS-DRGs 124 and 125. Our findings are 
shown in this table.

[[Page 26684]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.012

    For this subset of cases, the average costs of the 38 cases 
reporting a principal diagnosis code describing CRAO or BRAO with a 
procedure code describing the administration of a thrombolytic agent 
are slightly higher ($13,302 compared to $11,922) and the average 
length of stay is shorter (3.3 days compared to 5.4 days) than for all 
cases in MS-DRGs 124. The 839 cases reporting a principal diagnosis 
code describing CRAO or BRAO without a procedure code describing the 
administration of a thrombolytic agent have lower average costs ($5,842 
compared to $7,425) and a shorter average length of stay (2.2 compared 
to 3.3 days) than for cases in MS-DRG 125.
    Our analysis demonstrates that while the volume of cases is small, 
the average costs for the cases reporting a principal diagnosis code 
describing CRAO or BRAO with a procedure code describing the 
administration of a thrombolytic agent currently grouping to MS-DRG 123 
are more aligned with the average costs for the cases currently 
grouping to MS-DRG 124. We reviewed these data and support the addition 
of the eight diagnosis codes listed previously to the GROUPER logic 
list for MS-DRGs 124 and 125. While the cases reporting a principal 
diagnosis code describing CRAO or BRAO without a procedure code 
describing the administration of a thrombolytic agent have lower costs 
and a shorter average length of stay than for cases in MS-DRG 125, we 
believe reassigning these diagnosis codes to MS-DRGs 124 and 125 will 
better account for the subset of patients who are treated with a 
thrombolytic agent, and will more appropriately reflect the resources 
involved in evaluating and treating these patients. We also support the 
assignment of the cases reporting procedure codes describing the 
administration of a thrombolytic agent to the higher (MCC) severity 
level MS-DRG 124 as an enhancement to better reflect the clinical 
severity and resource use involved in these cases.
    Therefore, we are proposing to reassign ICD-10-CM diagnosis codes 
H34.10, H34.11, H34.12, H34.13, H34.231, H34.232, H34.233, and H34.239 
from MDC 02 MS-DRG 123 to MS-DRGs 124 and 125, effective October 1, 
2023 for FY 2024. We are also proposing to add the procedure codes 
describing the administration of a thrombolytic agent listed previously 
to MS-DRG 124. We note that the procedure codes describing the 
administration of a thrombolytic agent are not designated as operating 
room procedures for purposes of MS-DRG assignment (``non-O.R. 
procedures''), therefore, as part of the logic for MS-DRG 124, we are 
also proposing to designate these codes as non-O.R. procedures 
affecting the MS-DRG. Lastly, for consistency, we are also proposing to 
change the titles of MS-DRGs 124 and 125 from ``Other Disorders of the 
Eye, with and without MCC, respectively'' to ``Other Disorders of the 
Eye with MCC or Thrombolytic Agent, and without MCC, respectively'' to 
better reflect the assigned procedures.
4. MDC 04 (Diseases and Disorders of the Respiratory System)
a. Ultrasound Accelerated Thrombolysis for Pulmonary Embolism
    We received a request to reassign cases reporting ultrasound 
accelerated thrombolysis (USAT) with the administration of 
thrombolytic(s) for the treatment of pulmonary embolism (PE) from MS-
DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with 
MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 163, 164, 
and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, 
respectively).
    A pulmonary embolism is an obstruction of pulmonary vasculature 
most commonly caused by a venous thrombus, and less commonly by fat or 
tumor tissue or air bubbles or both. Risk factors for a pulmonary 
embolism include prolonged immobilization from any cause, obesity, 
cancer, fractured hip or leg, use of certain medications such as oral 
contraceptives, presence of certain medical conditions such as heart 
failure, sickle cell anemia, or certain congenital heart defects. 
Common symptoms of pulmonary embolism include shortness of breath with 
or without chest pain, tachycardia, hemoptysis, low grade fever, 
pleural effusion, and depending on the etiology of the embolus, might 
include lower extremity pain or swelling, syncope, jugular venous 
distention. Alternatively, a pulmonary embolus could be asymptomatic.
    Thrombolysis is a type of treatment where the infusion of 
thrombolytics (fibrinolytic or ``clot-busting'' drugs) is used to 
dissolve blood clots that form in the arteries or veins with the goal 
of improving blood flow and preventing long-term damage to tissues and 
organs. When a clot forms in the arteries of the lungs it is known as a 
pulmonary embolism. In addition, clots in the veins of the legs causing 
deep venous thrombosis (DVT) may also result in pulmonary embolism if a 
piece of the clot breaks off and travels to an artery in the lungs. 
Conventional catheter-directed thrombolysis (CDT) procedures generally 
rely on a multi-sidehole catheter placed adjacent to the thrombus 
through which thrombolytics are delivered directly to the thrombus, 
however, the EKOSTM EkoSonic[reg] Endovascular System 
(EKOSTM System) employs ultrasound to assist in 
thrombolysis. The ultrasound does not itself dissolve the thrombus, but 
pulses of ultrasonic energy temporarily make the fibrin in the thrombus 
more porous and increase fluid flow within the thrombus. High 
frequency, low-intensity ultrasonic waves create a pressure gradient 
that drives the thrombolytic into the thrombus and keeps it in close 
proximity to the binding sites. USAT is also referred to as ultrasound-
assisted thrombolysis or ultrasound-enhanced thrombolysis.
    According to the requestor (the manufacturer of the 
EKOSTM device), USAT with the administration of 
thrombolytic(s) for the treatment of PE performed using the 
EKOSTM device utilizes more resources in comparison to other 
procedures that are currently assigned to MS-DRGs 166, 167, and 168 and 
is not clinically coherent with the other procedures assigned to those 
MS-DRGs. The requestor stated that the cases reporting USAT with the 
administration of thrombolytic(s) for PE are more comparable with and 
more clinically aligned with the procedures assigned to MS-DRGs 163, 
164, and 165. The requestor stated they performed an analysis of cases 
reporting USAT for PE with the following ICD-10-PCS procedure codes.

[[Page 26685]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.013

    We note that the requestor did not include a list of diagnosis 
codes describing PE or a list of procedure codes describing the 
administration of thrombolytic(s) in connection with its analysis.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58561 through 
58579), we summarized and responded to public comments expressing 
concern with the proposed MS-DRG assignments for the newly created 
procedure codes describing USAT of several anatomic sites that were 
effective with discharges on and after October 1, 2020 (FY 2021). 
Similar to the current request for FY 2024, for FY 2021, the commenters 
recommended that USAT procedures performed with the EKOSTM 
device for the treatment of pulmonary embolism be assigned to MS-DRGs 
163, 164, and 165 instead of MS-DRGs 166, 167, and 168. We refer the 
reader to the FY 2021 IPPS/LTCH PPS final rule (85 FR 58561 through 
58579), available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, for the detailed 
discussion.
    We analyzed claims data from the September 2022 update of the FY 
2022 MedPAR file for MS-DRGs 166, 167, and 168 for all cases reporting 
a principal diagnosis of PE and USAT procedure with and without the 
administration of thrombolytic(s). We identified claims reporting an 
USAT procedure, the administration of thrombolytic(s), and a diagnosis 
of PE with the listed codes shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TP01MY23.014


[[Page 26686]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.015

[GRAPHIC] [TIFF OMITTED] TP01MY23.016

    We note that the listed procedure codes describing USAT identified 
for our claims analysis differ from the procedure codes identified by 
the requestor for its analysis. Clinically, we did not agree that 
thrombolysis of non-pulmonary anatomic sites (for example, subclavian 
artery, axillary artery, etc.) would be performed for the treatment of 
a PE. We also note that the procedure codes describing thrombolysis of 
non-pulmonary anatomic sites provided by the requestor are assigned to 
MDC 05 (Diseases and Disorders of the Circulatory System) and not to 
MDC 4 (Diseases and Disorders of the Respiratory System) where MS-DRGs 
163, 164, 165, 166, 167, and 168 are assigned. The findings from our 
analysis are shown in the following table.

[[Page 26687]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.017

    As shown in the table, we identified a total of 8,318 cases in MS-
DRG 166 with an average length of stay of 11 days and average costs of 
$31,910. Of the 8,318 cases, we found 826 cases reporting a principal 
diagnosis of PE and USAT with thrombolytic(s) with an average length of 
stay of 5.4 days and average costs of $28,912 and 161 cases reporting a 
principal diagnosis of PE and USAT without thrombolytic(s) with an 
average length of stay of 5.4 days and average costs of $27,897. The 
data demonstrates that the cases reporting a principal diagnosis of PE 
and USAT with or without thrombolytic(s) have a shorter average length 
of stay compared to the average length of stay of all the cases in MS-
DRG 166 (5.4 days and 5.4 days, respectively versus 11 days). 
Similarly, the average costs for the cases reporting a principal 
diagnosis of PE and USAT with or without thrombolytic(s) are lower than 
the average costs of all the cases in MS-DRG 166 ($28,912 and $27,897, 
respectively versus $31,910). The data indicate that the cases 
reporting a principal diagnosis of PE and USAT with or without 
thrombolytic(s) appear to be grouped and paid appropriately, despite 
the fact the logic for case assignment to MS-DRG 166 requires the 
reporting of at least one or more secondary MCC diagnoses, and it would 
not be unreasonable to expect these cases to be more expensive in 
comparison to all the cases in MS-DRG 166. As the average costs for 
these cases are lower than the average costs of all the cases in MS-DRG 
166, the data appear to reflect that the reporting of at least one or 
more secondary MCC diagnoses and use of the EKOSTM device 
technology did not impact consumption of resources for these cases in 
MS-DRG 166.
    For MS-DRG 167, we identified a total of 4,306 cases with an 
average length of stay of 4.7 days and average costs of $16,290. Of the 
4,306 cases, we found 316 cases reporting a principal diagnosis of PE 
and USAT with thrombolytic(s) with an average length of stay of 3.9 
days and average costs of $23,240 and 52 cases reporting a principal 
diagnosis of PE and USAT without thrombolytic(s) with an average length 
of stay of 3.7 days and average costs of $23,608. The data demonstrates 
that the cases reporting a principal diagnosis of PE and USAT with or 
without thrombolytic(s) have a shorter average length of stay compared 
to the average length of stay of all the cases in MS-DRG 167 (3.9 days 
and 3.7 days, respectively versus 4.7 days). Conversely, the average 
costs for the cases reporting a principal diagnosis of PE and USAT with 
or without thrombolytic(s) are higher than the average costs of all the 
cases in MS-DRG 167 ($23,240 and $23,608, respectively versus $16,290) 
with a corresponding difference in average costs of $6,950 and $7,318, 
respectively. The data indicate the cases reporting a principal 
diagnosis of PE and USAT with or without thrombolytic(s) appear to 
consume more resources in comparison to the other cases in MS-DRG 167, 
although it is unclear if the higher resource consumption is a direct 
result of the EKOSTM device technology utilized in the 
performance of the thrombolysis procedure, or the fact that these cases 
also include the reporting of at least one or more secondary CC 
diagnoses, or a combination of both factors.
    For MS-DRG 168, we identified a total of 1,441 cases with an 
average length of stay of 2.3 days and average costs of $12,379. Of the 
1,441 cases, we found 65 cases reporting a principal diagnosis of PE 
and USAT with

[[Page 26688]]

thrombolytic(s) with an average length of stay of 2.8 days and average 
costs of $20,156 and 15 cases reporting a principal diagnosis of PE and 
USAT without thrombolytic(s) with an average length of stay of 2.7 days 
and average costs of $20,112. The data demonstrates that the cases 
reporting a principal diagnosis of PE and USAT with or without 
thrombolytic(s) have a longer average length of stay compared to the 
average length of stay of all the cases in MS-DRG 168 (2.8 days and 2.7 
days, respectively versus 2.3 days). Additionally, the average costs 
for the cases reporting a principal diagnosis of PE and USAT with or 
without thrombolytic(s) are higher than the average costs of all the 
cases in MS-DRG 168 ($20,156 and $20,112, respectively versus $12,379) 
with a corresponding difference in average costs of $7,777 and $7,733, 
respectively. Similar to our findings for MS-DRG 167, the data for MS-
DRG 168 indicate the cases reporting a principal diagnosis of PE and 
USAT with or without thrombolytic(s) appear to consume more resources 
in comparison to the other cases in MS-DRG 168. However, it is unclear 
if the higher resource consumption is a direct result of the 
EKOSTM device technology utilized in the performance of the 
thrombolysis procedure alone, or if there are other contributing 
factors, since cases grouping to MS-DRG 168 do not include the 
reporting of at least one or more secondary CC or MCC diagnoses.
    Based on our review of the data for MS-DRGs 166, 167, and 168 and 
our initial analysis for cases reporting a principal diagnosis of PE 
and USAT procedure with and without the administration of 
thrombolytic(s), the findings also suggest that the administration of 
thrombolytic(s) is not a significant factor in the consumption of 
resources for these cases in MS-DRGs 166, 167, and 168 where USAT is 
performed in the treatment of a PE. For example, in MS-DRG 166, there 
are 826 cases reporting a principal diagnosis of PE and USAT procedure 
with the administration of thrombolytic(s) and 161 cases reporting a 
principal diagnosis of PE and USAT procedure without the administration 
of thrombolytic(s), however, both subsets of cases have an equivalent 
average length of stay of 5.4 days and a difference in average costs of 
$1,015 ($28,912-$27,897 = $1,015). For MS-DRG 167, there are 316 cases 
reporting a principal diagnosis of PE and USAT procedure with the 
administration of thrombolytic(s) and 52 cases reporting a principal 
diagnosis of PE and USAT procedure without the administration of 
thrombolytic(s), however, both subsets of cases have a similar average 
length of stay (3.9 days and 3.7 days, respectively) with a difference 
in average costs of $368 ($23,608-$23,240 = $368). For MS-DRG 168, 
there are 65 cases reporting a principal diagnosis of PE and USAT 
procedure with the administration of thrombolytic(s) and 15 cases 
reporting a principal diagnosis of PE and USAT procedure without the 
administration of thrombolytic(s), however, both subsets of cases have 
a similar average length of stay (2.8 days and 2.7 days, respectively) 
with a difference in average costs of $44 ($20,156-$20,112 = $44) . 
Because the administration of thrombolytic(s) would be expected to 
increase resource consumption, the small difference in average costs 
between these two sets of cases could also suggest that the 
administration of thrombolytic(s) was not consistently reported.
    While the request we received was to reassign cases reporting 
ultrasound accelerated thrombolysis (USAT) with the administration of 
thrombolytic(s) for the treatment of pulmonary embolism (PE) from MS-
DRGs 166, 167, and 168 to MS-DRGs 163, 164, and 165, based on our 
findings that suggest the administration of thrombolytic(s) is not a 
significant factor in the consumption of resources for those cases or 
that a code describing the administration of thrombolytic(s) may not 
have been consistently reported on a subset of claims that also 
reported a code identifying USAT was performed, we then analyzed claims 
data from the September 2022 update of the FY 2022 MedPAR file for all 
cases in MS-DRGs 163, 164, and 165 and compared it to the cases 
reporting a principal diagnosis of PE and USAT procedure with or 
without thrombolytic(s) in MS-DRGs 166, 167, and 168. The findings from 
our analysis are shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TP01MY23.018

[GRAPHIC] [TIFF OMITTED] TP01MY23.019


[[Page 26689]]


    The average costs of the 987 cases reporting a principal diagnosis 
of PE and USAT with or without thrombolytic(s) in MS-DRG 166 are 
$10,380 less than the average costs of all cases in MS-DRG 163 
($39,126-$28,746 = $10,380) and have an average length of stay that is 
approximately half the average length of stay of all cases in MS-DRG 
163 (5.4 days versus 10.3 days). As stated previously, our analysis of 
these cases demonstrate they appear to be grouped and paid 
appropriately in MS-DRG 166. The 368 cases reporting a principal 
diagnosis of PE and USAT with or without thrombolytic(s) in MS-DRG 167 
have a shorter average length of stay (3.9 days versus 4.7 days) in 
comparison to all the cases in MS-DRG 164, however, the average costs 
of the 368 cases reporting a principal diagnosis of PE and USAT with or 
without thrombolytic(s) in MS-DRG 167 are more comparable to the 
average costs of all the cases in MS-DRG 164 ($23,292 versus $22,040). 
Finally, the 80 cases reporting a principal diagnosis of PE and USAT 
with or without thrombolytic(s) in MS-DRG 168 have an average length of 
stay that is more comparable to all the cases in the MS-DRG 165 (2.8 
days versus 2.7 days), however, the average costs for the 80 cases 
continue to be higher in comparison to all the cases in MS-DRG 165 
($20,148 versus $16,404).
    Upon analysis of the claims data and our review of the request, we 
do not agree with reassigning cases reporting an USAT procedure with 
the administration of thrombolytic(s) and a principal diagnosis of PE 
from MS-DRGs 166, 167, and 168 to MS-DRGs 163, 164, and 165. As 
previously noted, the data do not support that cases reporting USAT 
(with or without thrombolytic(s)) for PE utilize similar resources when 
compared to other procedures currently assigned to MS-DRGs 163 and 165. 
Costs were only comparable with procedures currently assigned to MS-DRG 
164. Further, we do not agree that cases reporting USAT (with or 
without thrombolytic(s)) are more comparable with and more clinically 
aligned with the procedures assigned to MS-DRGs 163, 164, and 165. The 
vast majority of procedures in these MS-DRGs describe procedures 
performed on the trachea, bronchus or lungs with either an open 
approach or a percutaneous endoscopic approach in contrast to the USAT 
endovascular (percutaneous) procedure performed on the pulmonary trunk, 
arteries or veins. In addition, the majority of procedures in MS-DRGs 
163, 164, and 165 are performed on patients who are not clinically 
similar to patients who undergo USAT for PE since they describe 
procedures such as destruction (ablation) or excision performed for 
patients with conditions other than a PE, such as malignant neoplasm, 
pneumonia, or pulmonary fibrosis. Lastly, a number of procedures in 
these MS-DRGs also involve the use of a permanently implanted device 
while the procedures utilizing USAT do not. Therefore, we do not 
consider USAT procedures to be major chest procedures, nor do we 
believe the cases reporting USAT with (or without thrombolytic(s)) for 
PE utilize similar resources when compared to other procedures 
currently assigned to MS-DRGs 163, 164, and 165.
    As stated previously, the findings from our analysis suggest that 
the administration of thrombolytic(s) is not a significant factor in 
the consumption of resources for cases in MS-DRGs 166, 167, and 168 
reporting an USAT procedure performed for the treatment of a PE or that 
a code describing the administration of thrombolytic(s) may not have 
been consistently reported on a subset of claims that also reported a 
code t identifying USAT was performed, or a combination of both 
factors. Based on these findings related to the administration of 
thrombolytic(s), we believed it would also be beneficial to examine 
cases reporting standard CDT procedures with or without thrombolytic(s) 
for the treatment of PE in MS-DRGs 166, 167, and 168, and compare the 
findings to the cases reporting USAT with or without thrombolytic(s) 
for the treatment of PE.
    Therefore, we conducted additional analyses to determine if there 
were significant differences in resource utilization for cases 
reporting standard CDT with or without thrombolytic(s) versus USAT 
procedures with or without thrombolytic(s) in the treatment of PE, 
since claims data to compare the two modalities is now available and 
studies have reported similar clinical outcomes in reducing PE 
regardless of which thrombolysis modality is utilized.3 4
---------------------------------------------------------------------------

    \3\ Rothschild DP, Goldstein JA, Ciacci J, Bowers TR. 
Ultrasound-accelerated thrombolysis (USAT) versus standard catheter-
directed thrombolysis (CDT) for treatment of pulmonary embolism: A 
retrospective analysis. Vasc Med. 2019 Jun;24(3):234-240.
    \4\ Sista A, et al. Is it Time to Sunset Ultrasound-Assisted 
Catheter-Directed Thrombolysis for Submassive PE? J Am Coll Cardiol 
Intv. 2021 Jun, 14 (12) 1374-1375.
---------------------------------------------------------------------------

    We analyzed claims data from the September 2022 update of the FY 
2022 MedPAR file for all cases in MS-DRGs 166, 167, and 168 and cases 
reporting a standard CDT procedure with or without the administration 
of thrombolytic(s) and a principal diagnosis of PE. We utilized the 
previously listed procedure codes for the administration of 
thrombolytic(s) and the previously listed diagnosis codes for a 
principal diagnosis of PE. We identified cases describing standard CDT 
procedures performed in the treatment of PE with the following 
procedure codes.
[GRAPHIC] [TIFF OMITTED] TP01MY23.020

    The findings from our analysis are shown in the following table. We 
note that there were no cases found to report a principal diagnosis of 
PE and standard CDT with or without thrombolytic(s) in MS-DRGs 168.

[[Page 26690]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.021

    The data shows that the 7 cases reporting a principal diagnosis of 
PE and standard CDT with or without thrombolytic(s) in MS-DRG 166 have 
a shorter average length of stay compared to all cases in MS-DRG 166 
(3.3 days versus 11 days) and lower average costs ($18,472 versus 
$31,910). For MS-DRG 167, the data shows that the 6 cases reporting a 
principal diagnosis of PE and CDT with or without thrombolytic(s) have 
a shorter average length of stay compared to all cases in MS-DRG 167 
(3.5 days versus 4.7 days), however the average costs are higher 
($30,928 versus $16,290).
    In summary, based on our review and the claims data analysis for 
cases in MS-DRGs 163, 164, and 165, and for MS-DRGs 166, 167, and 168 
and cases reporting standard CDT or USAT with or without 
thrombolytic(s) and a principal diagnosis of PE, we believe that while 
this subset of cases for patients undergoing a thrombolysis (CDT or 
USAT) procedure for PE does not clinically align with patients 
undergoing surgery for malignancy or treatment for infection and does 
not involve the same level of complexity, monitoring or support as 
cases grouping to MS-DRGs 163, 164 and 165, the differences in resource 
consumption warrant proposed reassignment of these cases. Specifically, 
we believe the clinical and data analyses support creating a new base 
MS-DRG to distinguish cases reporting a principal diagnosis of PE and 
USAT or standard CDT procedure with or without thrombolytic(s) from 
other cases currently grouping to MS-DRGs 166, 167, and 168. We believe 
a new MS-DRG would reflect more appropriate payment for USAT and 
standard CDT procedures in the treatment of PE.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 1,534 cases reporting procedure codes describing 
an USAT or CDT procedure with a principal diagnosis of PE.
[GRAPHIC] [TIFF OMITTED] TP01MY23.022

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the base MS-DRG to be split (or subdivided) by a CC 
subgroup. Therefore, we applied the criteria to create subgroups in a 
base MS-DRG. We note that, as shown in the table that follows, a three-
way split of this base MS-DRG failed to meet the criterion that there 
be at least 500 cases in both the CC and the NonCC (without CC/MCC) 
subgroup and it also failed to meet the criterion that there be a 20% 
difference in average costs between the CC and NonCC subgroup.
[GRAPHIC] [TIFF OMITTED] TP01MY23.023

    As discussed in section II.C.1.b. of the preamble of this proposed 
rule, if the criteria for a three-way split fail, the next step is to 
determine if the criteria are satisfied for a two-way split. We 
therefore applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups. We note that, as shown in the table that 
follows, a two-way split of this base MS-DRG failed to meet the 
criterion that there be at least 500 cases in the without MCC 
(CC+NonCC) subgroup. The following table illustrates our findings.

[[Page 26691]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.024

    We then applied the criteria for a two-way split for the ``with CC/
MCC and without CC/MCC'' subgroups. As with the analysis of the three-
way severity split as described previously, and as shown in the table 
that follows, a two-way split of this base MS-DRG failed to meet the 
criterion that there be at least 500 cases in the without CC/MCC 
(NonCC) subgroup.
[GRAPHIC] [TIFF OMITTED] TP01MY23.025

    We note that because the criteria for both of the two-way splits 
failed, a split (or CC subgroup) is not warranted for the proposed new 
base MS-DRG. As a result, for FY 2024, we are proposing to create new 
base MS-DRG 173 (Ultrasound Accelerated and Other Thrombolysis with 
Principal Diagnosis Pulmonary Embolism). The following table reflects a 
simulation of the proposed new base MS-DRG.
[GRAPHIC] [TIFF OMITTED] TP01MY23.026

BILLING CODE 4120-01-C
    We believe the resulting proposed MS-DRG better recognizes the 
consumption of resources and maintains clinical coherence for both USAT 
and CDT procedures performed for the treatment of PE.
    We are proposing to define the logic for the proposed new MS-DRG 
using the previously listed diagnosis codes for PE and the previously 
listed procedure codes for USAT and CDT, as identified and discussed in 
our analysis of the claims data in this section of this proposed rule.
b. Respiratory Infections and Inflammations Logic
    The logic for case assignment to MS-DRGs 177, 178, and 179 
(Respiratory Infections and Inflammations with MCC, with CC, and 
without CC/MCC, respectively) as displayed in the ICD-10 MS-DRG V40.1 
Definitions Manual (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) is comprised of 
two logic lists. The first logic list is entitled ``Principal Diagnosis 
with Secondary Diagnosis'' and is defined by a list of five ICD-10-CM 
diagnosis codes describing influenza due to other or unidentified 
influenza virus with pneumonia in combination with a separate list of 
ten diagnosis codes describing the specific pneumonia infection. When 
any one of the five listed diagnosis codes from the ``Principal 
Diagnosis'' logic list is reported as a principal diagnosis in 
combination with any one of the ten listed diagnosis code from the 
``with Secondary Diagnosis'' logic list as a secondary diagnosis, the 
case results in assignment to MS-DRG 177, 178, or 179 depending on the 
presence of any additional MCC or CC secondary diagnoses. All 15 of the 
diagnosis codes included on the first logic list ``Principal Diagnosis 
with Secondary Diagnosis'' are designated as MCCs.
    The second logic list is entitled ``or Principal Diagnosis'' and is 
defined by a list of 57 diagnosis codes describing various pulmonary 
infections. When any one of the 57 diagnosis codes from this list is 
reported as a principal diagnosis, the case results in assignment to 
MS-DRG 177, 178, or 179 depending on the presence of any additional MCC 
or CC secondary diagnoses.
    Currently, when a diagnosis code from the second logic list ``or 
Principal Diagnosis'' is reported as the principal diagnosis and a 
diagnosis code from the first logic list ``Principal Diagnosis with 
Secondary Diagnosis'' is reported as a secondary diagnosis, the case is 
grouping to MS-DRG 177 (Respiratory Infections and Inflammations with 
MCC). Consistent with how other similar logic lists function in the 
ICD-10 Grouper software for case assignment to the ``with MCC'' MS-DRG, 
the logic for case assignment to MS-DRG 177 is intended to require any 
other diagnosis designated as an MCC and reported as a secondary 
diagnosis for appropriate assignment, and not the diagnoses currently 
listed in the logic for the definition of the MS-DRG.
    Therefore, for FY 2024, we are proposing to correct the logic for 
case assignment to MS-DRG 177 by excluding the 15 diagnosis codes from 
the first logic list ``Principal Diagnosis with Secondary Diagnosis'' 
from acting as an MCC when any one of the listed codes is reported as a 
secondary diagnosis with a diagnosis code from the second logic list 
``or Principal Diagnosis'' reported as the principal diagnosis.
5. MDC 05 (Diseases and Disorders of the Circulatory System)
a. 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

[[Page 26692]]

was to create a new classification of surgical ablation MS-DRGs to 
better accommodate the costs of open concomitant surgical ablations. 
The second part of the request was to reassign cases describing 
standalone percutaneous endoscopic surgical ablation. In the part of 
the request relating to 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 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, 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.
    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, 
with or without PTCA, with or without Cardiac Catheterization or Open 
Ablation, with and without MCC, respectively) 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 the FY 2023 IPPS/LTCH PPS final rule (87 FR 48845 through 
48849), we discussed a request we received 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.
    We stated our analysis using the September 2021 update of the FY 
2021 MedPAR file reflected 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 the 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 appeared to directly correlate with the number of procedures 
performed. For example, cases that describe ``Open MVR + Open surgical 
ablation'' generally demonstrated costs that were lower than cases that 
describe ``Open MVR + Open AVR + Open CABG + Open surgical ablation.'' 
We also noted 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.
    Therefore, we stated we believe that additional time was 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. For the reasons summarized, and after 
consideration of the public comments we received, we did not make any 
MS-DRG changes for cases involving the open concomitant surgical 
ablation procedures for FY 2023.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we again received a 
request to review the MS-DRG assignment of cases involving open 
concomitant surgical ablation procedures. The requestor recommended 
that CMS reassign open concomitant surgical ablation procedures for 
atrial fibrillation (AF) from MS-DRGs 219, 220, and 221 (Cardiac Valve 
and Other Major Cardiothoracic Procedures without Cardiac 
Catheterization with MCC, with CC, and without CC/MCC, respectively) to 
MS-DRGs 216, 217 and 218. The requestor further recommended that if CMS 
does not reassign cases involving open concomitant surgical ablation 
procedures to MS-DRGs 216, 217 and 218, in the alternative, CMS should 
create new MS-DRGs for all open mitral or aortic valve repair or 
replacement procedures with concomitant surgical ablation for AF to 
improve clinical coherence when three to four open heart procedures are 
performed in one setting.
    The requestor suggested that the following three MS-DRGs be created 
to reflect current standard of care for these patients:
     Suggested New MS-DRG XXX--2 procedures;
     Suggested New MS-DRG XXX--3 procedures; and
     Suggested New MS-DRG XXX--4+ procedures.
    The requestor stated that cases reporting open surgical ablation 
procedures for AF performed during open valve repair/replacement 
procedures are typically assigned to MS-DRGs 216, 217, 218, 219, 220 
and

[[Page 26693]]

221, with the majority of the cases being assigned to MS-DRGs 219, 220 
and 221 because of the surgical hierarchy in MDC 05 and because there 
is less of a need for cardiac catheterization in these cases. The 
requestor performed its own data analysis, and stated their analysis 
showed that the data continues to demonstrate that claims with open 
surgical ablation procedures for AF are not clinically similar to the 
remaining cases in MS-DRGs 219, 220 and 221, and there are significant 
differences in resource utilization that reflect those clinical 
differences.
    To explore mechanisms to address this request, we began our 
analysis by examining claims data from the September 2022 update of the 
FY 2022 MedPAR file for cases reporting procedure code combinations 
describing open concomitant surgical ablations assigned to MS-DRGs 216, 
217, 218, 219, 220 and 221. We refer readers to Tables 6P.3a and 6P.3b 
associated with this proposed rule (which are available 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 2022 update of the FY 2022 MedPAR file. 
Table 6P.3a associated with this proposed rule sets forth the list of 
ICD-10-PCS procedure codes reflecting mitral valve repair or 
replacement (MVR), aortic valve repair or replacement (AVR), coronary 
artery bypass grafting (CABG) and surgical ablation procedures that we 
examined in this analysis. Table 6P.3b associated with this proposed 
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 221 from the September 2022 update 
of the FY 2022 MedPAR file.
    As shown in Table 6P.3b associated with this proposed 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 439 cases reporting 
procedure code combinations describing open concomitant surgical 
ablations with the average length of stay ranging from 16.7 days to 
20.3 days and average costs ranging from $78,586 to $111,439 for these 
cases. For MS-DRG 217, we found 92 cases reporting procedure code 
combinations describing open concomitant surgical ablations with the 
average length of stay ranging from 8.5 days to 14 days and average 
costs ranging from $43,221 to $98,001 for these cases. For MS-DRG 218, 
we found 2 cases reporting procedure code combinations describing open 
concomitant surgical ablations with the average length of stay of 6.5 
days and average cost of $38,519 for these cases. For MS-DRG 219, we 
found 1,136 cases reporting procedure code combinations describing open 
concomitant surgical ablations with the average length of stay ranging 
from 9.5 days to 13.6 days and average costs ranging from $60,495 to 
$94,572 for these cases. For MS-DRG 220, we found 770 cases reporting 
procedure code combinations describing open concomitant surgical 
ablations with the average length of stay ranging from 6.7 days to 9.6 
days and average costs ranging from $49,900 to $84,293 for these cases. 
For MS-DRG 221, we found 38 cases reporting procedure code combinations 
describing open concomitant surgical ablations with the average length 
of stay ranging from 4.5 days to 5.8 days and average costs ranging 
from $30,725 to $59,024 for these cases.
    Similar to our analysis of the data as discussed in the FY 2023 
IPPS/LTCH PPS final rule, this data analysis also shows 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. The data analysis reflects that cases that describe ``Open 
MVR + Open AVR'' in addition to other concomitant procedures generally 
demonstrate higher average costs in their respective MS-DRGs. In MS-DRG 
216, we identified a total of 439 cases reporting procedure code 
combinations describing open concomitant surgical ablations with an 
average length of stay of 17.7 days and average costs of $89,877. Of 
those 439 cases, there were 40 cases reporting an aortic valve repair/
replacement procedure, a mitral valve repair/replacement procedure, and 
another concomitant procedure with average costs of $106,301 and an 
average length of stay of 17.9 days. In MS-DRG 217, we identified a 
total of 92 cases reporting procedure code combinations describing open 
concomitant surgical ablations with an average length of stay of 10 
days and average costs of $60,975. Of those 92 cases, there were 9 
cases reporting an aortic valve repair/replacement procedure, a mitral 
valve repair/replacement procedure, and another concomitant procedure 
with average costs of $82,514 and an average length of stay of 12.5 
days. In MS-DRG 219, we identified a total of 1,136 cases reporting 
procedure code combinations describing open concomitant surgical 
ablations with an average length of stay of 11.2 days and average costs 
of $70,693. Of those 1,136 cases, there were 102 cases reporting an 
aortic valve repair/replacement procedure, a mitral valve repair/
replacement procedure, and another concomitant procedure with average 
costs of $85,537 and an average length of stay of 12.8 days. In MS-DRG 
220, we identified a total of 770 cases reporting procedure code 
combinations describing open concomitant surgical ablations with an 
average length of stay of 7.3 days and average costs of $52,456. Of 
those 770 cases, there were 48 cases reporting an aortic valve repair/
replacement procedure, a mitral valve repair/replacement procedure, and 
another concomitant procedure with average costs of $67,344 and an 
average length of stay of 8.4 days. For MS-DRG 218 and MS-DRG 221, we 
did not identify any cases reporting procedure code combinations 
describing open concomitant surgical ablations with an aortic valve 
repair/replacement procedure, a mitral valve repair/replacement 
procedure, and another concomitant procedure.
    In examining this request, we note that the requestor suggested 
that CMS reassign open concomitant surgical ablation procedures for 
atrial fibrillation (AF) from MS-DRGs 219, 220, and 221 (Cardiac Valve 
and Other Major Cardiothoracic Procedures without Cardiac 
Catheterization with MCC, with CC, and without CC/MCC, respectively) to 
MS-DRGs 216, 217 and 218 for FY 2024, however, as discussed in the FY 
2023 IPPS/LTCH PPS final rule, MS-DRGs 216, 217 and 218 are defined by 
the performance of cardiac catheterization. We continue to be concerned 
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 II.C.1.b of this 
proposed rule, using the December 2022 update of the FY 2022 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 2024. Similar to our findings discussed in 
the

[[Page 26694]]

FY 2022 and FY 2023 IPPS/LTCH PPS final rules, findings from our 
analysis indicate that MS-DRGs 216, 217, 218 as well as approximately 
44 other base MS-DRGs would be subject to change based on the three-way 
severity level split criterion finalized in FY 2021. Specifically, we 
note that the total number of cases in MS-DRG 218 is again below 500. 
We refer the reader to Table 6P.10b associated with this proposed rule 
(which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the 
list of the 135 MS-DRGs that would potentially be subject to deletion 
and the list of the 86 new MS-DRGs that would potentially be created 
under this policy if the NonCC subgroup criteria was applied.
    To further analyze the claims data to determine to what extent the 
performance of multiple procedures is 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, 
we analyzed the cases reporting a concomitant procedure code 
combination without reporting a procedure code describing open surgical 
ablation assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. We refer 
readers to Tables 6P.3c associated with this proposed rule (which are 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the data analysis of 
cases reporting a concomitant procedure code combination without 
reporting a procedure code describing open surgical ablation assigned 
to MS-DRGs 216, 217, 218, 219, 220, and 221 from the September 2022 
update of the FY 2022 MedPAR file.
    The data analysis similarly reflects that cases that report ``Open 
MVR + Open AVR'' in addition to other concomitant procedures generally 
demonstrate higher average costs in their respective MS-DRGs, even in 
instances where an open surgical ablation was not reported. In MS-DRG 
216, we identified a total of 2,759 cases reporting a concomitant 
procedure code combination without reporting a procedure code 
describing open surgical ablation with an average length of stay of 
17.5 days and average costs of $89,334. Of those 2,759 cases, there 
were 240 cases reporting an aortic valve repair/replacement procedure, 
a mitral valve repair/replacement procedure, and another concomitant 
procedure with average costs of $116,611 and an average length of stay 
of 22.7 days. In MS-DRG 217, we identified a total of 852 cases 
reporting a concomitant procedure code combination without reporting a 
procedure code describing open surgical ablation with an average length 
of stay of 10.7 days and average costs of $56,208. Of those 852 cases, 
there were 31 cases reporting an aortic valve repair/replacement 
procedure, a mitral valve repair/replacement procedure, and another 
concomitant procedure with average costs of $70,831 and an average 
length of stay of 12.6 days. In MS-DRG 218, we identified a total of 64 
cases reporting a concomitant procedure code combination without 
reporting a procedure code describing open surgical ablation with an 
average length of stay of 6.5 days and average costs of $39,924, none 
of which reported an aortic valve repair/replacement procedure, a 
mitral valve repair/replacement procedure, and another concomitant 
procedure. In MS-DRG 219, we identified a total of 7,604 cases 
reporting a concomitant procedure code combination without reporting a 
procedure code describing open surgical ablation with an average length 
of stay of 11.1 days and average costs of $66,412. Of those 7,604 
cases, there were 579 cases reporting an aortic valve repair/
replacement procedure, a mitral valve repair/replacement procedure, and 
another concomitant procedure with average costs of $85,890 and an 
average length of stay of 13.7 days. In MS-DRG 220, we identified a 
total of 6,430 cases reporting a concomitant procedure code combination 
without reporting a procedure code describing open surgical ablation 
with an average length of stay of 6.5 days and average costs of 
$45,472. Of those 6,430 cases, there were 260 cases reporting an aortic 
valve repair/replacement procedure, a mitral valve repair/replacement 
procedure, and another concomitant procedure with average costs of 
$63,761 and an average length of stay of 7.8 days. In MS-DRG 221, we 
identified a total of 666 cases reporting a concomitant procedure code 
combination without reporting a procedure code describing open surgical 
ablation with an average length of stay of 5.0 days and average costs 
of $39,777. Of those 666 cases, there were 9 cases reporting an aortic 
valve repair/replacement procedure, a mitral valve repair/replacement 
procedure, and another concomitant procedure with average costs of 
$38,156 and an average length of stay of 5.6 days.
    Analysis of the claims data suggests that it is the performance of 
an aortic valve repair or replacement procedure, a mitral valve repair 
or replacement procedure plus another concomitant procedure that is 
associated with increased hospital resource utilization, not solely the 
performance of open surgical ablation as suggested by the requestor, 
when compared to other cases in their respective MS-DRGs. We reviewed 
these data and note, clinically, the management of mixed valve disease 
is challenging because patients with mixed valve disease are often 
frail, elderly, and present with multiple comorbidities. The 
combination of conditions in mixed valve disease, such as aortic 
stenosis and mitral stenosis, can result in a greater reduction of 
cardiac output than in isolated valvular stenosis. Patients requiring 
an aortic valve procedure and a mitral valve procedure in the same 
operative session are more complex cases and can be at significant risk 
for adverse events if there is moderate or severe disease of one or 
more cardiac valves. The data analysis clearly shows that cases 
reporting aortic valve repair or replacement procedure, a mitral valve 
repair or replacement procedure and another concomitant procedure have 
higher average costs and generally longer lengths of stay compared to 
all the cases in their assigned MS-DRG. For these reasons, we are 
proposing to create a new MS-DRG for cases reporting an aortic valve 
repair or replacement procedure, a mitral valve repair or replacement 
procedure, and another concomitant procedure.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 892 cases reporting procedure codes describing an 
aortic valve repair or replacement procedure, a mitral valve repair or 
replacement procedure, and another concomitant procedure. We believe 
the resulting proposed MS-DRG assignment is more clinically 
homogeneous, coherent and better reflects hospital resource use.
BILLING CODE 4120-01-P

[[Page 26695]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.027

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2024 IPPS/LTCH PPS proposed 
rule. As shown in the table that follows, a three-way split of the 
proposed new MS-DRG failed to meet the criterion that there be at least 
500 or more cases in each subgroup.
[GRAPHIC] [TIFF OMITTED] TP01MY23.028

    We then applied the criteria for a two-way split for the ``with CC/
MCC'' and ``without CC/MCC'' subgroups and again found that the 
criterion that there be at least 500 or more cases in each subgroup 
could also not be met. The following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP01MY23.029

    We also applied the criteria for a two-way split for the ``with 
MCC'' and ``without MCC'' subgroups and found that the criterion that 
there be at least 500 or more cases in each subgroup similarly could 
not be met. The following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP01MY23.030

    Therefore, for FY 2024, we are not proposing to subdivide the 
proposed new MS-DRG for cases reporting procedure codes describing an 
aortic valve repair or replacement procedure, a mitral valve repair or 
replacement procedure, and another concomitant procedure into severity 
levels.
    In summary, for FY 2024, taking into consideration that it 
clinically requires greater resources to perform an aortic valve repair 
or replacement procedure, a mitral valve repair or replacement 
procedure, and another concomitant procedure, we are proposing to 
create a new base MS-DRG for cases reporting an aortic valve repair or 
replacement procedure, a mitral valve repair or replacement procedure, 
and another concomitant procedure in MDC 05. The proposed new MS-DRG is 
proposed new MS-DRG 212 (Concomitant Aortic and Mitral Valve 
Procedures). We refer the reader to Table 6P.4a associated with this 
proposed rule (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) for the list of procedure codes we are 
proposing to define in the logic for the proposed new MS-DRG. We note 
that discussion of the surgical hierarchy for the proposed 
modifications is discussed in section II.C.15. of this proposed rule.
b. External Heart Assist Device
    Impella[reg] Ventricular Support Systems are temporary heart assist 
devices intended to support blood pressure and provide increased blood 
flow to critical organs in patients with cardiogenic shock, by drawing 
blood out of the heart and pumping it into the aorta, partially or 
fully bypassing the left ventricle to provide adequate circulation of 
blood (replace or supplement left ventricle pumping) while also 
allowing damaged heart muscle the opportunity to rest and recover in 
patients who need short-term support.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44820 through 
44831), we

[[Page 26696]]

discussed a request to reassign certain cases reporting procedure codes 
describing the insertion of a percutaneous short-term external heart 
assist device from MS-DRG 215 (Other Heart Assist System Implant) to 
MS-DRGs 216, 217, and 218 (Cardiac Valve and Other Major Cardiothoracic 
Procedures with Cardiac Catheterization with MCC, with CC, and without 
CC/MCC, respectively). We stated that our clinical advisors reviewed 
the clinical issues and the claims data and agreed that cases reporting 
a procedure code that describes the intraoperative insertion of a 
short-term external heart assist device are generally less resource 
intensive and are clinically distinct from other cases reporting 
procedure codes describing the insertion of other types of heart assist 
devices currently assigned to MS-DRG 215. We also stated that 
critically ill patients who are experiencing or at risk for cardiogenic 
shock from an emergent event such as heart attack or virus that impacts 
the functioning of the heart and requires longer heart pump support are 
different from those patients who require intraoperative support only. 
Patients receiving a short-term external heart assist device 
intraoperatively during coronary interventions often have an underlying 
disease pathology such as heart failure related to occluded coronary 
vessels that is broadly similar in kind to other patients also 
receiving these interventions without the need for an insertion of a 
short-term external heart assist device. In the post-operative period, 
these patients can recover and can be sufficiently rehabilitated prior 
to discharge. For these reasons, we finalized our proposal to assign 
ICD-10-PCS codes 02HA0RJ, 02HA3RJ or 02HA4RJ that describe the 
intraoperative insertion of a short-term external heart assist device 
to MS-DRGs 216, 217, 218, 219, 220 and 221.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we received a request 
to reassign certain cases reporting procedure codes describing the 
insertion of a short-term external heart assist device using an 
axillary artery conduit from MS-DRG 215 to MS-DRGs 001 and 002 (Heart 
Transplant or Implant of Heart Assist System with MCC and without MCC, 
respectively) and MS-DRG 003 (ECMO or Tracheostomy with MV >96 Hours or 
Principal Diagnosis Except Face, Mouth and Neck with Major O.R. 
Procedures).
    The Impella[reg] 5.5 with SmartAssist[reg] System is designed for 
longer-duration support (up to 14 days) than other femoral access 
percutaneous ventricular assist devices (pVADs) that treat cardiogenic 
shock (up to 4 days) providing full cardiac and hemodynamic support 
with 5.5 liters of blood flow per minute. The Impella[reg] 5.5 with 
SmartAssist[reg] System is considered a hybrid procedure of an open 
vascular exposure and an endovascular procedure. The Impella[reg] 5.5 
with SmartAssist[reg] System surgical pump can be inserted through an 
open chest for direct aortic access or a surgical incision that exposes 
the axillary artery. In the axillary artery approach, a surgical graft 
conduit is anastomosed to the axillary artery by a surgeon in the 
operating room. The device is positioned across the aortic valve, with 
the inlet located in the left ventricle and the outlet in the ascending 
aorta to allow the device to directly unload via the native pathway and 
to support coronary perfusion. According to the requestor, the 
Impella[reg] 5.5 with SmartAssist[reg] System is indicated for more 
complex patients than other femoral artery access pVADs, however the 
insertion of a short-term external heart assist device using an 
axillary artery conduit (such as the Impella[reg] 5.5 with 
SmartAssist[reg] System) is reported with the same ICD-10-PCS code that 
describes insertion of a percutaneous short-term external heart assist 
device and are therefore also assigned to MS-DRG 215. According to the 
requestor, Impella[reg] 5.5 with SmartAssist[reg] System is more 
clinically comparable to implantable heart assist systems, such as left 
ventricular assist devices (LVADs), and like LVADs, the insertion of a 
short-term external heart assist device using an axillary artery 
conduit must be performed by a surgeon in the operating room. The 
requestor performed its own data analysis, and stated their analysis 
showed a significant variation in the resource utilization for patients 
treated with the Impella[reg] 5.5 with SmartAssist[reg] System compared 
to patients treated with other femoral access pVADs assigned to MS-DRG 
215.
    Following the submission of the FY 2024 MS-DRG classification 
change request for certain cases reporting procedure codes describing 
the insertion of a short-term external heart assist device using an 
axillary artery conduit, this same requestor (the manufacturer of the 
Impella[reg] Ventricular Support Systems) submitted a code proposal 
requesting a new ICD-10-PCS procedure code to describe the Impella[reg] 
5.5 with SmartAssist[reg] System for consideration as an agenda topic 
to be discussed at the March 7-8, 2023 ICD-10 Coordination and 
Maintenance Committee meeting. The proposal was presented and discussed 
at the March 7-8, 2023 ICD-10 Coordination and Maintenance Committee 
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 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 7, 2023.
    In reviewing this MS-DRG reclassification request, we note that we 
agree with the requestor that the insertion of a short-term external 
heart assist device using an axillary artery conduit (such as the 
Impella[reg] 5.5 with SmartAssist[reg] System) is not separately 
identifiable in the claims data. Therefore, in this section, we address 
the assignment of the existing procedure codes describing the insertion 
of short-term external heart assist devices, including our proposed 
reassignment of a subset of these cases for FY 2024.
    The following ICD-10-PCS procedure codes describe the insertion of 
a short-term external heart assist device.
[GRAPHIC] [TIFF OMITTED] TP01MY23.031

    In the ICD-10 MS-DRG Definitions Manual Version 40.1, procedure 
codes 02HA0RZ, 02HA3RZ, and 02HA4RZ are currently recognized as 
extensive O.R. procedures assigned to MS-DRG 215 (Other Respiratory 
System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 05.

[[Page 26697]]

    As stated previously, the request for FY 2024 rulemaking was to 
reassign certain cases reporting procedure codes describing the 
insertion of a short-term external heart assist device using an 
axillary artery conduit from MS-DRG 215 to MS-DRGs 001 and 002 (Heart 
Transplant or Implant of Heart Assist System with MCC and without MCC, 
respectively) and MS-DRG 003 (ECMO or Tracheostomy with MV >96 Hours or 
Principal Diagnosis Except Face, Mouth and Neck with Major O.R. 
Procedures). During our review of this request, we note that the 
current GROUPER logic for MS-DRGs 001 and 002 is comprised of two 
lists. The first list includes procedure codes identifying a heart 
transplant procedure, and the second list includes procedure codes 
identifying the implantation of a heart assist system (including short-
term external heart assist systems) and includes code combinations or 
procedure code ``clusters'' that, when reported together, satisfy the 
logic for assignment to MS-DRGs 001 and 002. The code combinations are 
represented by two procedure codes and include either one code for the 
insertion of the device with one code for removal of the device or one 
code for the revision of the device with one code for the removal of 
the device.
    We also note that the GROUPER logic for MS-DRG 003 is defined by a 
(1) procedure code for extracorporeal oxygenation (ECMO) (2) a 
procedure code for tracheostomy, mechanical ventilation and a procedure 
code further classified as extensive or (3) a procedure code for 
tracheostomy with a procedure code further classified as extensive and 
a principal diagnosis not assigned to MS-DRGs 011, 012 or 013 as 
reflected in the logic table:
[GRAPHIC] [TIFF OMITTED] TP01MY23.032

    As procedure codes describing the insertion of a short-term 
external heart assist device are classified as extensive procedures in 
Version 40.1, specific assignment of these procedure codes to MS-DRG 
003 is not required. When the other parameters of the GROUPER logic are 
met and procedure codes describing the insertion of a short-term 
external heart assist device are also reported, MS-DRG 003 will be 
assigned, therefore we did not include MS-DRG 003 in our analysis. We 
refer the reader to the ICD-10 MS-DRG Version 40.1 Definitions Manual 
(which is available 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 and for Appendix E--Operating Room 
Procedures and Procedure Code/MS-DRG Index.
    To begin our analysis, we examined claims data from the September 
2022 update of the FY 2022 MedPAR file for MS-DRG 215 to identify cases 
reporting ICD-10-PCS codes 02HA0RZ, 02HA3RZ, and 02HA4RZ. Our findings 
are shown in the following table:

[[Page 26698]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.033

    As shown in the table, we identified a total of 3,587 cases within 
MS-DRG 215 with an average length of stay of 9 days and average costs 
of $86,774. Of these 3,587 cases, there are 60 cases reporting a 
procedure code describing the open insertion of a short-term external 
heart assist device with an average length of stay of 9.2 days and 
average costs of $130,153. There are 3,424 cases reporting a procedure 
code describing a percutaneous insertion of a short-term external heart 
assist device with an average length of stay of 8.9 days and average 
costs of $86,640. There are 6 cases reporting a procedure code 
describing a percutaneous endoscopic insertion of a short-term external 
heart assist device with an average length of stay of 6.7 days and 
average costs of $63,923. The data analysis shows that the average 
length of stay is longer and the average costs are higher for the cases 
reporting a procedure code describing the open insertion of a short-
term external heart assist device compared to all cases in MS-DRG 215, 
while the average length of stay is shorter and the average costs are 
lower for the cases reporting a procedure code describing the 
percutaneous or percutaneous endoscopic insertion of a short-term 
external heart assist device compared to all cases in that MS-DRG.
    We then examined claims data from the September 2022 update of the 
FY 2022 MedPAR for MS-DRGs 001 and 002. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.034

    While the average costs for all cases in MS-DRG 001 are higher than 
the average costs of the cases reporting a procedure code describing 
the open insertion of a short-term external heart assist device, the 
data suggest that overall, cases reporting a procedure code describing 
the open insertion of a short-term external heart assist device may be 
more appropriately aligned with the average costs of the cases in MS-
DRGs 001 and 002 in comparison to MS-DRG 215, even though the average 
length of stay is shorter.
    We then reviewed the clinical considerations along with this data 
analysis and agreed that cases reporting a procedure code that 
describes the open insertion of a short-term external heart assist 
device are generally more resource intensive and are clinically 
distinct from other cases reporting procedure codes describing the 
insertion of short-term external heart devices by other approaches 
currently assigned to MS-DRG 215. The availability of mechanical 
circulatory support devices to provide acute hemodynamic support for 
cardiogenic shock or to support percutaneous coronary intervention 
(PCI) has expanded over the past decade. There is now a portfolio of 
short-term external heart assist devices available that each have 
different indications for use and techniques for implantation.
    The percutaneous or percutaneous endoscopic insertion of a short-
term external heart assist device involves standard catheterization 
techniques except for the requirement of a large-bore 13 or 14 Fr 
sheath. Short-term external heart assist devices inserted in this 
manner generally provide blood flow up to 2.5 L/min for systemic 
perfusion and are intended for temporary (<= 4 days) use to maintain 
stable heart function. In contrast, the open insertion of a short-term 
external heart assist device or the insertion of short-term external 
heart assist devices using an axillary artery conduit requires a 
surgical cutdown of the axillary artery to place the larger 23 Fr 
sheaths of these devices. Short-term external heart assist devices that 
are inserted via an open approach or using an axillary artery conduit 
can provide blood flow up to 5.5 L/min for systemic perfusion and are 
intended for longer use (<= 14 days). They are indicated for the 
treatment of ongoing cardiogenic shock that occurs less than 48 hours 
following acute myocardial infarction or open-heart surgery or in the 
setting of cardiomyopathy, including peripartum cardiomyopathy, or 
myocarditis as a result of isolated left ventricular failure that is 
not responsive to medical management and conventional treatment 
measures. We note the indications for the open insertion of a short-
term external heart assist device or the insertion of short-term 
external heart assist devices using an axillary artery conduit are more 
closely aligned with MS-DRGs 001 and 002 as compared to MS-DRG 215. For 
these reasons, we believe reassigning ICD-10-PCS code 02HA0RZ that 
describes the open insertion of a short-term external heart assist 
device to Pre-MDC MS-DRGs 001 and 002 would improve clinical coherence 
in these MS-DRGs.
    To compare and analyze the impact of these potential modifications, 
we ran a simulation using the claims data from the September 2022 
update of the FY 2022 MedPAR file. The following table reflects our 
simulation for ICD-10-PCS procedure code 02HA0RZ that describes the 
open insertion of a short-term external heart assist device if it was 
moved to MS-DRGs 001 and 002.

[[Page 26699]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.035

    We believe that this simulation supports that the resulting MS-DRG 
assignments would be more clinically homogeneous, coherent and better 
reflect hospital resource use. A review of this simulation shows that 
this distribution of ICD-10-PCS code 02HA0RZ that describes the open 
insertion of a short-term external heart assist device if moved to MS-
DRGs 001 and 002, slightly decreases the average costs of the cases 
remaining in MS-DRG 215 by about $3,000, while similarly having a 
limited effect on the average costs of MS-DRGS 001 and 002. Therefore, 
for FY 2024, we are proposing to reassign ICD-10-PCS code 02HA0RZ when 
reported as a standalone procedure from MDC 05 in MS-DRG 215 to Pre-MDC 
MS-DRGs 001 and 002. Under this proposal, procedure code 02HA0RZ will 
no longer need to be reported as part of a procedure code combination 
or procedure code ``cluster'' to satisfy the logic for assignment to 
MS-DRGs 001 and 002.
    We will continue to monitor the clinical cohesiveness of the 
procedures assigned to MS-DRGs 001 and 002 to assess whether they 
continue to be aligned on resource use, as well as current shifts in 
treatment practices, to determine if additional refinements may be 
warranted in the future. The increased availability of short-term 
external heart assist devices and their development into low profile, 
high output pumps has shifted the management of cardiogenic shock that 
is unresponsive to other interventions in the years since these MS-DRGs 
were created. These short-term devices can now be used as a bridge to 
provide the time needed for clinical decision making, native heart 
recovery, or until another procedure can be performed, such as the 
insertion of a left ventricular assist device (LVAD) or cardiac 
transplantation.
    As noted previously, this same requestor (the manufacturer of the 
Impella[reg] Ventricular Support Systems) submitted a code proposal to 
be discussed at the March 7-8, 2023 ICD-10 Coordination and Maintenance 
Committee meeting to request a change to how the Impella[reg] 5.5 with 
SmartAssist[reg] System is coded within the ICD-10-PCS classification 
as there are no unique ICD-10-PCS codes to describe the insertion of a 
short-term external heart assist system using an axillary artery 
conduit. Because the decisions on the diagnosis and procedure code 
proposals that were presented at the March 7-8, 2023 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 this FY 2024 IPPS/LTCH PPS proposed rule, as we have 
noted in prior rulemaking (86 FR 44805), 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 any new 
procedure codes describing the Impella[reg] 5.5 with SmartAssist[reg] 
System, if finalized following the March meeting, would be reflected in 
Table 6B.--New Procedure Codes associated with the final rule for FY 
2024. In the event there is not support for the new procedure code as 
presented at the March 7-8, 2023 ICD-10 Coordination and Maintenance 
Committee meeting to describe the insertion of a short-term external 
heart assist system using an axillary artery conduit, the procedure 
will be reported with current coding that is applicable within the 
classification as displayed in the ICD-10 Coordination and Maintenance 
Committee meeting materials (available on the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials). We refer 
the reader to section II.C.14. of the preamble of this proposed rule 
for further information regarding Table 6B.
    As discussed in prior rulemaking, interested parties may use 
current coding information to consider the potential MS-DRG assignments 
for 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 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 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 on our CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software to review

[[Page 26700]]

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.
    In summary, we are proposing to reassign ICD-10-PCS code 02HA0RZ 
(Insertion of short-term external heart assist system into heart, open 
approach) from MDC 05 in MS-DRG 215 to Pre-MDC MS-DRGs 001 and 002 for 
FY 2024. Separately, and as previously discussed, a code proposal was 
discussed at the March 7-8, 2023 ICD-10 Coordination and Maintenance 
Committee meeting to request a change to how the Impella[reg] 5.5 with 
SmartAssist[reg] System is coded within the ICD-10-PCS classification. 
If finalized, the new procedure code would be included in the FY 2024 
code update files that are made available in late May/early June on the 
CMS website at: https://www.cms.gov/medicare/coding/icd10. In addition, 
using our established process, if finalized, the MS-DRG assignment for 
any new procedure codes describing the Impella[reg] 5.5 with 
SmartAssist[reg] System will be displayed in Table 6B.--New Procedure 
Codes in association with the FY 2024 IPPS/LTCH PPS final rule that 
will be made publicly available in association with the final rule on 
the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
c. Ultrasound Accelerated Thrombolysis for Deep Venous Thrombosis
    We received a request to reassign cases reporting ultrasound 
accelerated thrombolysis (USAT) of peripheral vascular structures 
procedures with the administration of thrombolytic(s) for deep venous 
thrombosis from MS-DRGs 252, 253, and 254 (Other Vascular Procedures 
with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 270, 
271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, 
and without CC/MCC, respectively). Deep venous thrombosis (DVT) is 
caused when a blood clot (or thrombus) forms in a vein, primarily in 
large veins of the lower leg and thigh, but may also occur in the deep 
veins of the pelvis and less commonly, in the upper extremities. Risk 
factors for DVT are similar to those of pulmonary embolism as discussed 
in section II.C.4.a. of this proposed rule, and include prolonged 
immobilization from any cause, obesity, cancer, fractured hip or leg, 
use of certain medications such as oral contraceptives, and the 
presence of certain medical conditions such as heart failure. Common 
symptoms of DVT include leg (or arm) swelling, pain, cramping, or 
heaviness, skin discoloration, the feeling of warmth in the affected 
area, or there may not be any noticeable symptoms.
    Thrombolysis is a type of treatment where the infusion of 
thrombolytics, (fibrinolytic or ``clot-busting'' drugs) is used to 
dissolve blood clots that form in the arteries or veins with the goal 
of improving blood flow and preventing long-term damage to tissues and 
organs. Conventional catheter-directed thrombolysis (CDT) procedures 
generally rely on a multi-sidehole catheter placed adjacent to the 
thrombus through which thrombolytics are delivered directly to the 
thrombus, however, the EKOSTM EkoSonic[reg] Endovascular 
System (EKOSTM System) employs ultrasound to assist in 
thrombolysis. The ultrasound does not itself dissolve the thrombus, but 
pulses of ultrasonic energy temporarily make the fibrin in the thrombus 
more porous and increase fluid flow within the thrombus. High 
frequency, low-intensity ultrasonic waves create a pressure gradient 
that drives the thrombolytic into the thrombus and keeps it in close 
proximity to the binding sites. USAT is also referred to as ultrasound-
assisted thrombolysis or ultrasound-enhanced thrombolysis.
    According to the requestor (the manufacturer of the 
EKOSTM device), USAT of peripheral vascular structures with 
the administration of thrombolytic(s) for the treatment of DVT 
performed using the EKOSTM device utilizes more resources in 
comparison to other procedures that are currently assigned to MS-DRGs 
252, 253, and 254 and is not clinically coherent with the other 
procedures assigned to those MS-DRGs. The requestor stated that the 
cases reporting USAT of peripheral vascular structures with the 
administration of thrombolytic(s) for DVT are more comparable with and 
more clinically aligned with the procedures assigned to MS-DRGs 270, 
271, and 272. The requestor stated they performed an analysis of cases 
reporting USAT of peripheral vascular structures for DVT with the 
following ICD-10-PCS procedure codes.

[[Page 26701]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.036

    We note that the requestor did not include a list of diagnosis 
codes describing DVT or a list of procedure codes describing the 
administration of thrombolytic(s) in connection with its analysis.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58561 through 
58579), we summarized and responded to public comments expressing 
concern with the proposed MS-DRG assignments for the newly created 
procedure codes describing USAT of several anatomic sites that were 
effective with discharges on and after October 1, 2020 (FY 2021). 
Similar to the current request for FY 2024, for FY 2021, the commenters 
recommended that USAT procedures performed with the EKOSTM 
device for the treatment of DVT be assigned to MS-DRGs 270, 271, and 
272 instead of MS-DRGs 252, 253, and 254. We refer the reader to the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58561 through 58579), available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, for the detailed discussion.

[[Page 26702]]

    We analyzed claims data from the September 2022 update of the FY 
2022 MedPAR file for MS-DRGs 252, 253, and 254 and cases reporting a 
principal diagnosis of DVT and USAT of peripheral vascular structures 
procedure with and without the administration of thrombolytic(s). We 
identified claims reporting an USAT of peripheral vascular structures 
procedure, the administration of thrombolytic(s), and a diagnosis of 
DVT with the listed codes as shown in Table 6P.5a associated with this 
proposed rule (and available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). The findings from our analysis are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.037

    As shown in the table, we identified a total of 20,939 cases in MS-
DRG 252 with an average length of stay of 8 days and average costs of 
$29,307. Of the 20,939 cases, we found 51 cases reporting a principal 
diagnosis of DVT and USAT with thrombolytic(s) with an average length 
of stay of 6.4 days and average costs of $36,660 and 10 cases reporting 
a principal diagnosis of DVT and USAT without thrombolytic(s) with an 
average length of stay of 6.7 days and average costs of $21,538. The 
data demonstrates that the cases reporting a principal diagnosis of DVT 
and USAT with or without thrombolytic(s) have a shorter average length 
of stay compared to the average length of stay of all the cases in MS-
DRG 252 (6.4 days and 6.7 days, respectively versus 8 days). However, 
the average costs for the cases reporting a principal diagnosis of DVT 
and USAT with thrombolytic(s) are higher than the average costs of all 
the cases in MS-DRG 252 ($36,660 versus $29,307) and the average costs 
for the cases reporting a principal diagnosis of DVT and USAT without 
thrombolytic(s) are lower than the average costs of all the cases in 
MS-DRG 252 ($21,538 versus $29,307). The data indicate that the cases 
reporting a principal diagnosis of DVT and USAT with thrombolytic(s) 
appear to consume more resources in comparison to the other cases in 
MS-DRG 252, although it is unclear if the higher resource consumption 
is a direct result of the EKOSTM device technology utilized 
in the performance of the thrombolysis procedure, or the fact that 
these cases also include the reporting of at least one or more 
secondary MCC diagnoses, or a combination of both factors. Conversely, 
the data indicate that the cases reporting a principal diagnosis of DVT 
and USAT without thrombolytic(s) appear to be less resource intensive 
with a difference in average costs of $7,769 ($29,307-$21,538 = 
$7,769). Accordingly, the data appear to reflect that the cases 
reporting use of the EKOSTM device technology with 
thrombolytic(s) may have an impact on the consumption of resources when 
compared to all the cases in MS-DRG 252.
    For MS-DRG 253, we identified a total of 16,650 cases with an 
average length of stay of 5.2 days and average costs of $22,685. Of the 
16,650 cases, we found 80 cases reporting a principal diagnosis of DVT 
and USAT with thrombolytic(s) with an average length of stay of 5.2 
days and average costs of $26,471 and 11 cases reporting a principal 
diagnosis of DVT and USAT without thrombolytic(s) with an average 
length of stay of 3.8 days and average costs of $20,126. The data 
demonstrates that the average length of stay for cases reporting a 
principal diagnosis of DVT and USAT with thrombolytic(s) is the same as 
the average length of stay for all the cases in MS-DRG 253 (5.2 days). 
Conversely, the average length of stay for the cases reporting a 
principal diagnosis of DVT and USAT without thrombolytic(s) is shorter 
than the average length of stay of all the cases in MS-DRG 253 (3.8 
days versus 5.2 days). Similar to MS-DRG 252, the average costs for the 
cases reporting a principal diagnosis of DVT and USAT with 
thrombolytic(s) are higher than the average costs of all the cases in 
MS-DRG 253 ($26,471 versus $22,685) and the average costs for the cases 
reporting a principal diagnosis of DVT and USAT without thrombolytic(s) 
are lower than the average costs of all the cases in MS-DRG 253 
($20,126 versus $22,685). The data indicate that the cases reporting a 
principal diagnosis of DVT and USAT with thrombolytic(s) appear to 
consume more resources in comparison to the

[[Page 26703]]

other cases in MS-DRG 253, although it is unclear if the higher 
resource consumption is a direct result of the EKOSTM device 
technology utilized in the performance of the thrombolysis procedure, 
or the fact that these cases also include the reporting of at least one 
or more secondary CC diagnoses, or a combination of both factors.
    For MS-DRG 254, we identified a total of 6,707 cases with an 
average length of stay of 2.4 days and average costs of $15,438. Of the 
6,707 cases, we found 22 cases reporting a principal diagnosis of DVT 
and USAT with thrombolytic(s) with an average length of stay of 3 days 
and average costs of $21,867 and 9 cases reporting a principal 
diagnosis of DVT and USAT without thrombolytic(s) with an average 
length of stay of 2 days and average costs of $17,750. The data 
demonstrates that the cases reporting a principal diagnosis of DVT and 
USAT with thrombolytic(s) have a longer average length of stay compared 
to the average length of stay of all the cases in MS-DRG 254 (3 days 
versus 2.4 days), however, the cases reporting a principal diagnosis of 
DVT and USAT without thrombolytic(s) have a shorter but comparable 
average length of stay compared to the average length of stay of all 
the cases in MS-DRG 254 (2 days versus 2.4 days). Additionally, the 
average costs for the cases reporting a principal diagnosis of DVT and 
USAT with or without thrombolytic(s) are higher than the average costs 
of all the cases in MS-DRG 254 ($21,867 and $17,750 respectively versus 
$15,438) with a corresponding difference in average costs of $6,429 and 
$2,312 respectively. Similar to our findings for MS-DRGs 252 and 253, 
the data for MS-DRG 254 indicate the cases reporting a principal 
diagnosis of DVT and USAT with thrombolytic(s) appear to consume more 
resources in comparison to the other cases in their respective MS-DRG. 
In addition, as noted, for MS-DRG 254, the average costs of cases 
reporting a principal diagnosis of DVT and USAT without thrombolytic(s) 
are also higher than the average costs of all the cases in MS-DRG 254. 
However, it is unclear if the higher resource consumption is a direct 
result of the EKOSTM device technology utilized in the 
performance of the thrombolysis procedure alone, or if there are other 
contributing factors, since cases grouping to MS-DRG 254 do not include 
the reporting of at least one or more secondary CC or MCC diagnoses.
    Our review of the data for MS-DRGs 252, 253, and 254 and our 
initial analysis for cases reporting a principal diagnosis of DVT and 
USAT procedure with and without the administration of thrombolytic(s) 
suggests that the administration of thrombolytic(s) may be considered a 
factor in the consumption of resources for these cases in MS-DRGs 252, 
253, and 254 where USAT is performed in the treatment of a DVT. For 
example, in MS-DRG 252, there are 51 cases reporting a principal 
diagnosis of DVT and USAT procedure with the administration of 
thrombolytic(s) and 10 cases reporting a principal diagnosis of DVT and 
USAT procedure without the administration of thrombolytic(s), with both 
subsets of cases showing a comparable average length of stay of 6.4 and 
6.7 days, respectively, however, the difference in average costs for 
cases with and without thrombolytic(s) is $15,122 ($36,660-$21,538 = 
$15,122). For MS-DRG 253, there are 80 cases reporting a principal 
diagnosis of DVT and USAT procedure with the administration of 
thrombolytic(s) and 11 cases reporting a principal diagnosis of DVT and 
USAT procedure without the administration of thrombolytic(s), with both 
subsets of cases showing a difference in the average length of stay 
(5.2 days and 3.8 days, respectively) and a difference in average costs 
of $6,345 ($26,471-$20,126 = $6,345). For MS-DRG 254, there are 22 
cases reporting a principal diagnosis of DVT and USAT procedure with 
the administration of thrombolytic(s) and 9 cases reporting a principal 
diagnosis of DVT and USAT procedure without the administration of 
thrombolytic(s), however, both subsets of cases have a similar average 
length of stay (3 days and 2 days, respectively) with a difference in 
average costs of $4,117 ($21,867-$17,750 = $4,117).
    Since the request we received was to reassign cases reporting 
ultrasound accelerated thrombolysis (USAT) with the administration of 
thrombolytic(s) for the treatment of deep venous thrombosis (DVT) from 
MS-DRGs 252, 253, and 254 to MS-DRGs 270, 271, and 272, based on our 
approach utilized in our initial analysis of claims reporting USAT with 
a principal diagnosis for DVT in MS-DRGs 252, 253, and 254, we then 
analyzed claims data from the September 2022 update of the FY 2022 
MedPAR file for all cases in MS-DRGs 270, 271, and 272 and compared it 
to the cases reporting a principal diagnosis of DVT and USAT procedure 
with or without thrombolytic(s) in MS-DRGs 252, 253, and 254. The 
findings from our analysis are shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TP01MY23.038


[[Page 26704]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.039

    The claims data show that the 61 cases reporting a principal 
diagnosis of DVT and USAT with or without thrombolytic(s) in MS-DRG 252 
have average costs that are lower than the average costs of all cases 
in MS-DRG 270 ($34,181 versus $42,517) and have a shorter average 
length of stay compared to all the cases in MS-DRG 270 (6.4 days versus 
9.5 days). The 91 cases reporting a principal diagnosis of DVT and USAT 
with or without thrombolytic(s) in MS-DRG 253 have a comparable average 
length of stay (5 days versus 5.4 days) in comparison to all the cases 
in MS-DRG 271 and lower average costs in comparison to all the cases in 
MS-DRG 271 ($25,704 versus $30,030) with a difference of $4,326. 
Finally, the 31 cases reporting a principal diagnosis of DVT and USAT 
with or without thrombolytic(s) in MS-DRG 254 have an average length of 
stay that is comparable to all the cases in the MS-DRG 272 (2.7 days 
versus 2.4 days) and comparable average costs ($20,672 versus $21,556) 
with a difference of $884.
    Upon analysis of the claims data and our review of the request, we 
do not agree with reassigning cases reporting an USAT procedure with 
the administration of thrombolytic(s) and a principal diagnosis of DVT 
from MS-DRGs 252, 253, and 254 to MS-DRGs 270, 271, and 272. As 
previously noted, the data do not support that cases reporting USAT 
(with or without thrombolytic(s)) for DVT utilize similar resources 
when compared to other procedures currently assigned to MS-DRGs 270, 
271, and 272. We do not agree that cases reporting USAT (with or 
without thrombolytic(s)) are more comparable with and more clinically 
aligned with the procedures assigned to MS-DRGs 270, 271, and 272 
because the majority of procedures in these MS-DRGs describe procedures 
performed on the heart and great vessels with either an open or an 
endoscopic approach in contrast to the USAT endovascular (percutaneous) 
procedure performed on the peripheral vascular structures. In addition, 
the majority of procedures in MS-DRGs 270, 271, and 272 are performed 
on patients who are not clinically similar to patients who undergo USAT 
for DVT since they describe procedures such as bypass, occlusion, and 
restriction that are typically performed for patients with conditions 
other than a DVT, such as atherosclerosis, aneurysm, and acute 
myocardial infarction (AMI). Lastly, a number of procedures in these 
MS-DRGs also involve the use of a permanently implanted device while 
the procedures utilizing USAT do not. Therefore, we do not consider 
USAT procedures to be major cardiovascular procedures, nor do we 
believe the cases reporting USAT with (or without thrombolytic(s)) for 
DVT demonstrate a similar level of technical complexity when compared 
to other procedures currently assigned to MS-DRGs 270, 271, and 272.
    As noted, while the average costs are higher for cases reporting 
the administration of a thrombolytic, we question whether the higher 
average costs may also reflect other factors, such as the use of the 
EKOSTM device or the performance of other O.R. procedures 
that also group to MS-DRGs 252, 253, and 254. Consistent with the 
analysis discussed in section II.C.4.a. of this proposed rule for a 
similar, but separate request related to thrombolysis procedures, we 
believed it would also be beneficial to examine cases reporting 
standard CDT procedures with or without thrombolytic(s) for the 
treatment of DVT in MS-DRGs 252, 253, and 254, and compare the findings 
to the cases reporting USAT with or without thrombolytic(s) for the 
treatment of DVT.
    Therefore, we conducted additional analyses to determine if there 
were significant differences in resource utilization for cases 
reporting standard CDT with or without thrombolytic(s) versus USAT 
procedures with or without thrombolytic(s) in the treatment of DVT, 
since claims data to compare the two modalities is now available and 
studies have reported similar clinical outcomes in reducing DVT 
regardless of which thrombolysis modality is utilized.\5\ We analyzed 
claims data from the September 2022 update of the FY 2022 MedPAR file 
for all cases in MS-DRGs 252, 253, and 254 and cases reporting a 
standard CDT procedure with or without the administration of 
thrombolytic(s) and a principal diagnosis of DVT. We utilized the 
previously listed procedure codes for the administration of 
thrombolytic(s) and the previously listed diagnosis codes for a 
principal diagnosis of DVT. We identified cases describing standard CDT 
procedures performed in the treatment of DVT with the procedure codes 
listed in Table 6P.5a. associated with this proposed rule and available 
on

[[Page 26705]]

the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. The findings from our analysis are 
shown in the following table. We note there were no cases found to 
report a standard CDT procedure with or without thrombolytic(s) and a 
principal diagnosis of DVT in MS-DRGs 253 or 254.
---------------------------------------------------------------------------

    \5\ Engelberger, Rolf & Stuck, Anna K. & Spirk, David & 
Willenberg, Torsten & Haine, Axel & P[eacute]riard, Daniel & 
Baumgartner, Iris & Kucher, Nils. (2017). Ultrasound-assisted versus 
conventional catheter-directed thrombolysis for acute ilio-femoral 
deep vein thrombosis: one-year follow-up data of a randomized-
controlled trial. Journal of Thrombosis and Haemostasis. 15. 
10.1111/jth.13709.
[GRAPHIC] [TIFF OMITTED] TP01MY23.040

    The data shows that the 3 cases reporting a principal diagnosis of 
DVT and standard CDT with or without thrombolytic(s) in MS-DRG 252 have 
a shorter average length of stay compared to all cases in MS-DRG 252 
(2.3 days versus 8 days) and lower average costs ($10,603 versus 
$29,307).
    Overall, our analysis of the claims data for cases reporting a 
principal diagnosis of DVT and USAT or standard CDT, with or without 
thrombolytic(s), demonstrate a low volume of cases, however, the 
average costs of the cases reporting USAT with thrombolytic(s) reflect 
a significantly higher consumption of resources than all cases in MS-
DRGs 252, 253, and 254. Because it is also possible that a patient may 
be admitted to a hospital and receive thrombolysis (USAT or CDT) with a 
principal diagnosis other than a DVT or the DVT condition may be 
reported as a secondary diagnosis, we believed additional analysis for 
cases reporting either USAT or CDT, regardless of the principal 
diagnosis would provide us with more beneficial information in our 
review of these cases.
    Therefore, using the September 2022 update of the FY 2022 MedPAR 
file, we conducted an analysis of MS-DRGs 252, 253, and 254 for cases 
reporting either USAT or CDT with and without thrombolytic(s) with any 
principal diagnosis from MDC 5. Our findings are shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.041

    The findings from our analysis show a larger volume of cases for 
each respective MS-DRG (252, 253, and 254) for cases reporting USAT or 
CDT procedures with any MDC 05 principal diagnosis versus the findings 
from our earlier analysis involving cases specifically reporting a 
principal diagnosis of DVT. The claims data also show that the 468 
cases reporting any principal diagnosis from MDC 05 and USAT or CDT 
with or without thrombolytic(s) in MS-DRG 252 have average costs that 
are higher than the average costs of all cases in MS-DRG 252 ($39,181 
versus $29,307) and have a comparable average length of stay (8.6 days 
versus 8.0 days). The 722 cases reporting any principal diagnosis from 
MDC 05 and USAT or CDT with or without thrombolytic(s) in MS-DRG 253 
have a shorter average length of stay (4.9 days versus 5.2 days) in 
comparison to all the cases in MS-DRG 253 and higher average costs 
($29,663 versus $22,685) with a difference of $6,978. Finally, the 195 
cases reporting any principal diagnosis from MDC 05 and USAT or CDT 
with or without thrombolytic(s) in MS-DRG 254 have an average length of 
stay that is comparable to all the cases in the MS-DRG 272 (2.6 days 
versus 2.4 days) and higher average costs ($22,487 versus $15,438) with 
a difference of $7,049.
    In summary, based on our review and the claims data analysis for 
cases in MS-DRGs 252, 253, and 254 and MS-DRGs 270, 271, and 272, and 
for cases reporting standard CDT or USAT with or without 
thrombolytic(s) regardless of the principal diagnosis reported from MDC 
05, we believe that while the subset of cases for patients undergoing a 
thrombolysis (CDT or USAT)

[[Page 26706]]

procedure for DVT does not clinically align with patients undergoing 
surgery for acute myocardial infarction (AMI) and does not involve the 
same level of complexity as cases grouping to MS-DRGs 270, 271, and 
272, the differences in resource consumption warrant reassignment of 
these cases. Specifically, we believe the clinical and data analyses 
support creating a new base MS-DRG to distinguish cases reporting USAT 
or standard CDT procedure of peripheral vascular structures with or 
without thrombolytic(s) from other cases currently grouping to MS-DRGs 
252, 253, and 254. We believe a new MS-DRG would reflect more 
appropriate payment for USAT and standard CDT procedures of peripheral 
vascular structures.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 1,487 cases reporting procedure codes describing 
an USAT or CDT procedure with any principal diagnosis from MDC 05.
[GRAPHIC] [TIFF OMITTED] TP01MY23.042

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the base MS-DRG to be split (or subdivided) by a CC 
subgroup. Therefore, we applied the criteria to create subgroups in a 
base MS-DRG. We note that, as shown in the table that follows, a three-
way split of this base MS-DRG failed to meet the criterion that there 
be at least 500 cases in the NonCC (without CC/MCC) subgroup.
[GRAPHIC] [TIFF OMITTED] TP01MY23.043

    As discussed in section II.C.1.b. of the preamble of this proposed 
rule, if the criteria for a three-way split fail, the next step is to 
determine if the criteria are satisfied for a two-way split. We 
therefore applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups. We note that, as shown in the table that 
follows, a two-way split of this base MS-DRG met all five criteria. For 
the proposed MS-DRGs, there is at least (1) 500 or more cases in the 
MCC group and in the without MCC subgroup; (2) 5 percent or more of the 
cases in the MCC group and in the without MCC subgroup; (3) a 20 
percent difference in average costs between the MCC group and the 
without MCC group; (4) a $2,000 difference in average costs between the 
MCC group and the without MCC group; and (5) a 3-percent reduction in 
cost variance, indicating that the proposed severity level splits 
increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the proposed MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system. The following table illustrates our findings 
for the suggested MS-DRGs with a two-way severity level split.
[GRAPHIC] [TIFF OMITTED] TP01MY23.044

    Accordingly, because the criteria for the two-way split were met, 
we believe a split (or CC subgroup) is warranted for the proposed new 
base MS-DRG. As a result, for FY 2024, we are proposing to create new 
MS-DRG 278 (Ultrasound Accelerated and Other Thrombolysis of Peripheral 
Vascular Structures with MCC) and new MS-DRG 279 (Ultrasound 
Accelerated and Other Thrombolysis of Peripheral Vascular Structures 
without MCC).
    We are proposing to define the logic for the proposed new MS-DRGs 
using the previously listed procedure codes for USAT and CDT, as 
identified and discussed in our analysis of the claims data in Table 
6P.5a associated with this proposed rule.
d. Coronary Intravascular Lithotripsy
    We received a request to review the MS-DRG assignment of cases 
describing percutaneous coronary intravascular lithotripsy (IVL) 
involving the insertion of a coronary drug-eluting stent. Coronary IVL 
is utilized in a subset of percutaneous coronary interventions (PCI) 
procedures when the artery is severely calcified. The presence of

[[Page 26707]]

calcium can create various challenges in PCI procedures as it can 
prevent the optimal deployment of coronary stents and can negatively 
impact patient outcomes. To fully optimize the PCI for severely 
calcified arteries, advanced techniques, such as coronary IVL, that 
utilize specialty devices are often required. In coronary IVL, a 
lithotripsy device catheter is delivered from a small incision in the 
patient's arm or leg through to the coronary arterial system of the 
heart to reach the site of a severely calcified lesion. The lithotripsy 
emitters at the end of the catheter create acoustic pressure waves that 
are intended to break up the calcification that is restricting the 
blood flow in the vessels of the heart to help open the blood vessels 
when an angioplasty balloon is inflated. After the lithotripsy is 
performed, the provider can implant an intraluminal device, also called 
a stent, to keep the vessel open.
    According to the requestor, PCIs involving coronary IVL are 
clinically more complex because coronary IVL is a therapy deployed 
exclusively in severely calcified coronary lesions, and these lesion 
types are associated with longer procedure times and increased 
utilization of hospital resources. The requestor performed its own 
analysis of claims data for cases reporting procedure codes describing 
coronary IVL in MS-DRGs 246 and 247 (Percutaneous Cardiovascular 
Procedures with Drug-Eluting Stent with MCC or 4+ Arteries or Stents 
and without MCC, respectively) and stated that their findings showed a 
significant disparity in total standardized costs for cases in MS-DRG 
247. Therefore, according to the requestor, the reassignment of all 
cases reporting procedure codes describing percutaneous coronary IVL 
involving the insertion of a drug-eluting intraluminal device from the 
lower severity level MS-DRG 247 to the higher severity level MS-DRG 246 
would be reasonable. The requestor also asked that CMS analyze the 
cases reporting procedure codes describing percutaneous coronary IVL 
involving the insertion of a non-drug-eluting intraluminal device to 
determine if reclassifying cases from the lower severity level MS-DRG 
249 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent 
without MCC) to the higher severity level MS-DRG 248 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Arteries or Stents) would be warranted.
    The four ICD-10-PCS procedure codes that describe percutaneous 
coronary IVL are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.045

    The Shockwave C2 Intravascular Lithotripsy System, indicated for 
lithotripsy-enabled, low-pressure dilation of calcified, stenotic de 
novo coronary arteries prior to stenting, is identified by the 
reporting of an ICD-10-PCS code that describes percutaneous coronary 
IVL shown in the previous table. The Shockwave C2 Intravascular 
Lithotripsy System was approved for new technology add-on payments for 
FY 2022 (86 FR 45151 through 45153) and FY 2023 (87 FR 48913). We refer 
readers to section II.E.5 of the preamble of this proposed rule for a 
discussion regarding the proposed FY 2024 status of technologies 
approved for FY 2023 new technology add-on payments, including the 
Shockwave C2 Intravascular Lithotripsy System.
    The requestor is correct that cases reporting procedure codes that 
describe percutaneous coronary IVL involving the insertion of a drug-
eluting intraluminal device group to MS-DRGs 246 and 247. The requestor 
is also correct that cases reporting procedure codes that describe 
percutaneous coronary IVL involving the insertion of a non-drug-eluting 
intraluminal device group to MS-DRGs 248 and 249. We refer the reader 
to the ICD-10 MS-DRG Definitions Manual Version 40.1, which is 
available 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 
246, 247, 248, and 249.
    In analyzing this request, we noted that coronary IVL is a vessel 
preparation technique and that there may be instances where an 
intraluminal device is unable to be inserted after the application of 
the IVL pulses. Therefore, in our analysis of cases reporting procedure 
codes describing percutaneous coronary IVL involving the insertion of a 
drug-eluting intraluminal device and non-drug-eluting intraluminal 
device that group to MS-DRGs 246, 247, 248, and 249, we included cases 
reporting percutaneous coronary IVL without procedure codes describing 
the insertion of a intraluminal device that group to MS-DRGs 250 and 
251 (Percutaneous Cardiovascular Procedures without Coronary Artery 
Stent with MCC and without MCC, respectively) in our examination of 
claims data from the September 2022 update of the FY 2022 MedPAR file 
for cases reporting percutaneous coronary IVL and compared the results 
to all cases in their respective MS-DRG.
    The following table shows our findings:

[[Page 26708]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.046

    As shown by the table, in MS-DRG 246, we identified a total of 
40,647 cases, with an average length of stay of 5.2 days and average 
costs of $25,630. Of those 40,647 cases, there were 2,359 cases 
reporting percutaneous coronary IVL, with higher average costs as 
compared to all cases in MS-DRG 246 ($35,503 compared to $25,630), and 
a longer average length of stay (5.7 days compared to 5.2 days). In MS-
DRG 247, we identified a total of 54,671 cases with an average length 
of stay of 2.4 days and average costs of $16,241. Of those 54,671 
cases, there were 1,505 cases reporting percutaneous coronary IVL, with 
higher average costs as compared to all cases in MS-DRG 247 ($24,141 
compared to $16,241), and a longer average length of stay (2.7 days 
compared to 2.4 days). In MS-DRG 248, we identified a total of 555 
cases with an average length of stay of 5.9 days and average costs of 
$25,740. Of those 555 cases, there were 13 cases reporting percutaneous 
coronary IVL, with higher average costs as compared to all cases in MS-
DRG 248 ($34,492 compared to $25,740), and a longer average length of 
stay (7.2 days compared to 5.9 days). In MS-DRG 249, we identified a 
total of 604 cases with an average length of stay of 2.5 days and 
average costs of $14,909. Of those 604 cases, there were 11 cases 
reporting percutaneous coronary IVL, with higher average costs as 
compared to all cases in MS-DRG 249 ($18,648 compared to $14,909), and 
a longer average length of stay (2.8 days compared to 2.5 days). In MS-
DRG 250, we identified a total of 3,483 cases with an average length of 
stay of 4.8 days and average costs of $20,634. Of those 3,483 cases, 
there were 201 cases reporting percutaneous coronary IVL, with higher 
average costs as compared to all cases in MS-DRG 250 ($25,628 compared 
to $20,634), and a shorter average length of stay (4.4 days compared to 
4.8 days). In MS-DRG 251, we identified a total of 3,199 cases with an 
average length of stay of 2.5 days and average costs of $14,273. Of 
those 3,199 cases, there were 185 cases reporting percutaneous coronary 
IVL, with higher average costs as compared to all cases in MS-DRG 251 
($20,289 compared to $14,273), and a shorter average length of stay 
(2.4 days compared to 2.5 days). The data analysis shows that the 
average costs of cases reporting percutaneous coronary IVL, with or 
without involving the insertion of intraluminal device, are higher than 
for all cases in their respective MS-DRG.
    The data analysis also shows that when the insertion of an 
intraluminal device was reported with percutaneous coronary IVL, 
average costs are generally similar without regard as to whether a 
drug-eluting or a non-drug-eluting intraluminal device was placed. In 
MS-DRG 246, there were 2,359 cases reporting percutaneous coronary IVL 
involving the insertion of a drug-eluting intraluminal device with 
average costs of $35,503 compared to 13 cases reporting percutaneous 
coronary IVL involving the insertion of a non-drug-eluting intraluminal 
device with average costs of $34,492 in MS-DRG 248. In MS-DRG 247, 
there were 1,505 cases reporting percutaneous coronary IVL involving 
the insertion of a drug-eluting intraluminal device with average costs 
of $24,141 compared to 11 cases reporting percutaneous coronary IVL 
involving the insertion of a non-drug-eluting intraluminal device with 
average costs of $18,648 in MS-DRG 249.
    We reviewed this data analysis and agree that the performance of 
percutaneous coronary IVL contributes to increased resource consumption 
for these PCI procedures. We also agree that clinically, the presence 
of severe calcification can increase the treatment difficulty and 
complexity of service. The data analysis clearly shows that cases 
reporting percutaneous coronary IVL, with or without involving the 
insertion of intraluminal device, have higher average costs and 
generally longer lengths of stay compared to all the cases in their 
assigned MS-DRG. For these reasons, we are proposing to create new MS-
DRGs for percutaneous coronary IVL involving the insertion of

[[Page 26709]]

an intraluminal device. While there is not a large number of cases 
reporting percutaneous coronary IVL without the insertion of an 
intraluminal device represented in the Medicare data, and we generally 
prefer not to create a new MS-DRG unless it would include a substantial 
number of cases, we believe creating a separate MS-DRG for these cases 
as well would appropriately address the differential in resource 
consumption. Therefore, we are also proposing to create a new MS-DRG 
for cases describing percutaneous coronary IVL without the insertion of 
an intraluminal device.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 4,238 cases reporting procedure codes describing 
percutaneous coronary IVL involving the insertion of an intraluminal 
device.
[GRAPHIC] [TIFF OMITTED] TP01MY23.047

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2024 IPPS/LTCH PPS proposed 
rule. As shown, a three-way split of the proposed new MS-DRG failed to 
meet the criterion that there be at least a 20% difference in average 
costs between the CC and NonCC subgroup and also failed to meet the 
criterion that there be at least a $2,000 difference in average costs 
between the CC and NonCC subgroup.
[GRAPHIC] [TIFF OMITTED] TP01MY23.048

    We then applied the criteria for a two-way split for the ``with 
MCC'' and ``without MCC'' subgroups and found that all five criteria 
were met. The following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP01MY23.049

    For the proposed new MS-DRGs for cases reporting procedure codes 
describing percutaneous coronary IVL involving the insertion of an 
intraluminal device, there is at least (1) 500 cases in the MCC 
subgroup and 500 cases in the without MCC subgroup; (2) 5 percent of 
the cases in the MCC group and 5 percent in the without MCC subgroup; 
(3) a 20 percent difference in average costs between the MCC group and 
the without MCC group; (4) a $2,000 difference in average costs between 
the MCC group and the without MCC group; and (5) a 3-percent reduction 
in cost variance, indicating that the proposed severity level splits 
increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the proposed MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system.
    For the cases describing coronary intravascular lithotripsy without 
the insertion of an intraluminal device, we identified a total of 404 
cases using the most recent claims data from the December 2022 update 
of the FY 2022 MedPAR file, so the criterion that there are at least 
500 or more cases in each subgroup could not be met. Therefore, for FY 
2024, we are not proposing to subdivide the proposed new MS-DRG for 
coronary intravascular lithotripsy without an intraluminal device into 
severity levels.
    In summary, for FY 2024, taking into consideration that it 
clinically requires greater resources to perform coronary intravascular 
lithotripsy, we are proposing to create two new MS-DRGs with a two-way 
severity level split for cases describing coronary intravascular 
lithotripsy involving the insertion of an intraluminal device in MDC 
05. We are also proposing to create a new MS-DRG for cases describing 
coronary intravascular lithotripsy without an intraluminal device. 
These proposed new MS-DRGs are proposed new MS-DRG 323 (Coronary 
Intravascular Lithotripsy with Intraluminal Device

[[Page 26710]]

with MCC), proposed new MS-DRG 324 (Coronary Intravascular Lithotripsy 
with Intraluminal Device without MCC) and proposed new MS-DRG 325 
(Coronary Intravascular Lithotripsy without Intraluminal Device). We 
refer the reader to Table 6P.6a associated with this proposed rule 
(which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) for 
the list of procedure codes we are proposing to define in the logic for 
each of the proposed new MS-DRGs. We note that discussion of the 
surgical hierarchy for the proposed modifications is discussed in 
section II.C.15. of this proposed rule.
    In reviewing this issue, we noted that we received a separate but 
related request in FY 2022 rulemaking. In the FY 2022 IPPS/LTCH PPS 
final rule (86 FR 44848 through 44850), we discussed a request to 
review the MS-DRG assignments of claims involving the insertion of 
coronary stents in PCIs. The requestor suggested that CMS eliminate the 
distinction between drug-eluting and bare-metal coronary stents in the 
MS-DRG classification. According to the requestor, coated stents have a 
clinical performance comparable to drug-eluting stents however they are 
grouped with bare-metal stents because they do not contain a drug. The 
requestor asserted that this comingling muddies the clinical coherence 
of the MS-DRG structure, as one cannot infer distinctions in clinical 
performance or benefits among the groups and potentially creates a 
barrier (based on hospital decision-making) to patient access to modern 
coated stents. In response, we stated that based on a review of the 
procedure codes that are currently assigned to MS-DRGs 246, 247, 248, 
and 249, our clinical advisors agreed that further refinement of these 
MS-DRGs may be warranted. We noted that in the FY 2003 IPPS/LTCH PPS 
final rule (67 FR 50003 through 50005), although the FDA had not yet 
approved the technology for use, we created two new temporary CMS DRGs 
to reflect cases involving the insertion of a drug-eluting coronary 
artery stent as signified by the presence of code ICD-9-CM procedure 
code 36.07 (Insertion of drug-eluting coronary artery stent) in 
recognition of the potentially significant impact this technology may 
conceivably have on the treatment of coronary artery blockages, the 
predictions of its rapid, widespread use, and that the higher costs of 
this technology could create undue financial hardships for hospitals 
due to the high volume of stent cases. In the FY 2022 final rule, we 
noted that the distinction between drug-eluting and non-drug-eluting 
stents is found elsewhere in the ICD-10-PCS procedure code 
classification and stated evaluating this request required a more 
extensive analysis to assess potential impacts across the MS-DRGs. We 
also stated that we believed it would be more appropriate to consider 
this request further in future rulemaking.
    As discussed earlier in this section of this proposed rule, our 
analysis of claims data from the September 2022 update of the FY 2022 
MedPAR file indicates that in cases reporting percutaneous coronary IVL 
involving the insertion of an intraluminal device, average costs are 
generally similar without regard as to whether a drug-eluting or non-
drug-eluting intraluminal device was inserted. Therefore, in 
consideration of the prior request discussed in FY 2022 rulemaking and 
to further explore this current finding, we examined claims data from 
the September 2022 update of the FY 2022 MedPAR file for MS-DRGs 246, 
247, 248, and 249 for ``all other cases'' assigned to MS-DRGs 246, 247, 
248, and 249 that did not report percutaneous coronary IVL as reflected 
in the previous table.
    We again note that the data analysis shows that in percutaneous 
cardiovascular procedures involving the insertion of an intraluminal 
device, the average costs are generally similar without regard as to 
whether a drug-eluting or non-drug-eluting intraluminal device(s) was 
inserted. In MS-DRG 246, there were 38,288 cases reporting percutaneous 
cardiovascular procedures involving the insertion of a drug-eluting 
intraluminal device with an MCC or procedures involving four or more 
arteries or intraluminal devices with average costs of $25,022 compared 
to 542 cases reporting percutaneous cardiovascular procedures involving 
the insertion of a non-drug-eluting intraluminal device with an MCC or 
procedures involving four or more arteries or intraluminal devices with 
average costs of $25,530 in MS-DRG 248. In MS-DRG 247, there were 
53,166 cases reporting percutaneous cardiovascular procedures involving 
the insertion of a drug-eluting intraluminal device without an MCC with 
average costs of $16,017 compared to 593 cases reporting percutaneous 
coronary IVL involving the insertion of a non-drug-eluting intraluminal 
device without an MCC with average costs of $14,840 in MS-DRG 249.
    We reviewed these findings and believe that it may no longer be 
necessary to subdivide the MS-DRGs based on the type of coronary 
intraluminal device inserted. Drug-eluting intraluminal devices consist 
of a standard metallic stent, a polymer coating, and an anti-restenotic 
drug that is mixed within the polymer and released over time. In 
current practice, drug-eluting intraluminal devices are generally 
viewed as the default type of intraluminal device considered for 
patients undergoing PCI, although non-drug-eluting stents such as bare-
metal coronary artery stents can also be used in PCI procedures for a 
range of indications, including stable and unstable angina, acute 
myocardial infarction (MI), and multiple-vessel disease. The related 
data analysis clearly shows that in the years since the MS-DRGs for 
cases involving the insertion of a drug-eluting coronary artery stent 
were created, cases reporting percutaneous cardiovascular procedures 
involving the insertion of a drug-eluting intraluminal device now 
demonstrate average costs and lengths of stays comparable to cases 
reporting percutaneous cardiovascular procedures involving the 
insertion of a non-drug-eluting intraluminal device. For these reasons, 
we are proposing the deletion of MS-DRGs 246, 247, 248, and 249, and 
the creation of new MS-DRGs.
    We note that in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47259 
through 47260) we stated we found that percutaneous transluminal 
coronary angioplasties (PTCAs) with four or more vessels or four or 
more stents were more comparable in average charges to the higher 
weighted DRG in the group and made changes to the GROUPER logic. Claims 
containing ICD-9-CM procedure code 00.66 for PTCA, and code 36.07 
(Insertion of drug-eluting coronary artery stent(s)), and code 00.43 
(Procedure on four or more vessels) or code 00.48 (Insertion of four or 
more vascular stents) were assigned to MS-DRG 246. In addition, claims 
containing ICD-9-CM procedure code 00.66 for PTCA, and code 36.06 
(Insertion of non-drug-eluting coronary artery stent(s)), and code 
00.43 or code 00.48 were assigned to MS-DRG 248. We also made 
conforming changes to the MS-DRG titles as follows: MS-DRG 246 was 
titled ``Percutaneous Cardiovascular Procedures with Drug-Eluting 
Stent(s) with MCC or 4 or more Vessels/Stents''. MS-DRG 248 was titled 
``Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent(s) 
with MCC or 4 or more Vessels/Stents''. In FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38024), we finalized our proposal to revise the title of 
MS-DRG 246 to ``Percutaneous Cardiovascular Procedures with Drug-
Eluting Stent with MCC or 4+ Arteries

[[Page 26711]]

or Stents'' and the title of MS-DRG 248 to ``Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Arteries or Stents'' to better reflect the ICD-10-PCS terminology of 
``arteries'' versus ``vessels'' as used in the procedure code titles 
within the classification.
    Recognizing that the current GROUPER logic for case assignment to 
MS-DRGs 246 or 248 continues to require at least one secondary 
diagnosis designated as an MCC or procedures involving four or more 
arteries or intraluminal devices, we examined claims data from the 
September 2022 update of the FY 2022 MedPAR file for cases reporting 
percutaneous cardiovascular procedures involving four or more arteries 
or intraluminal devices and compared these data to all cases in MS-DRGs 
246 and 248.
[GRAPHIC] [TIFF OMITTED] TP01MY23.050

    In MS-DRG 246, we identified a total of 40,647 cases with an 
average length of stay of 5.2 days and average costs of $25,630. Of 
those 40,647 cases, there were 3,430 cases reporting percutaneous 
cardiovascular procedures involving four or more arteries or 
intraluminal devices, with higher average costs as compared to all 
cases in MS-DRG 246 ($27,397 compared to $25,630), and a shorter 
average length of stay (3.2 days compared to 5.2 days). In MS-DRG 248, 
we identified a total of 555 cases with an average length of stay of 
5.9 days and average costs of $25,740. Of those 555 cases, there were 
21 cases reporting percutaneous cardiovascular procedures involving 
four or more arteries or intraluminal devices, with higher average 
costs as compared to all cases in MS-DRG 248 ($28,251 compared to 
$25,740), and a shorter average length of stay (3.4 days compared to 
5.9 days). This analysis demonstrates that cases reporting percutaneous 
procedures involving four or more arteries or intraluminal devices 
continue to be more comparable in average costs and resource 
consumption to the cases in the higher weighted MS-DRG in the group and 
indicates that maintaining the logic that recognizes the performance of 
percutaneous cardiovascular procedures involving four or more arteries 
or intraluminal devices that exists currently in MS-DRGs 246 and 248 in 
the proposed new MS-DRGs is warranted.
    Presently, MS-DRGs 246 and 248 are defined as base MS-DRGs, each of 
which is split by a two-way severity level subgroup. Our proposal 
includes the creation of one base MS-DRG split also by a two-way 
severity level subgroup. To compare and analyze the impact of our 
suggested modifications, we ran a simulation using the most recent 
claims data from the December 2022 update of the FY 2022 MedPAR file. 
The following table illustrates our findings for all 97,338 cases 
reporting percutaneous cardiovascular procedures involving intraluminal 
devices.
[GRAPHIC] [TIFF OMITTED] TP01MY23.051

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2024 IPPS/LTCH PPS proposed 
rule. As shown in the table that follows, a three-way split of the 
proposed new MS-DRGs failed to meet the criterion that there be at 
least a 20% difference in average costs between the CC and NonCC 
subgroup and also failed to meet the criterion that there be at least a 
$2,000 difference in average costs between the CC and NonCC subgroup.

[[Page 26712]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.052

    We then applied the criteria for a two-way split for the ``with 
MCC'' and ``without MCC'' subgroups for the proposed new MS-DRGs and 
found that all five criteria were met. The following table illustrates 
our findings.
[GRAPHIC] [TIFF OMITTED] TP01MY23.053

    For the proposed new MS-DRGs, there is (1) at least 500 cases in 
the MCC subgroup and in the without MCC subgroup; (2) at least 5 
percent of the cases are in the MCC subgroup and in the without MCC 
subgroup; (3) at least a 20 percent difference in average costs between 
the MCC subgroup and the without MCC subgroup; (4) at least a $2,000 
difference in average costs between the MCC subgroup and the without 
MCC subgroup; and (5) at least a 3-percent reduction in cost variance, 
indicating that the proposed severity level splits increase the 
explanatory power of the base MS-DRG in capturing differences in 
expected cost between the proposed MS-DRG severity level splits by at 
least 3 percent and thus improve the overall accuracy of the IPPS 
payment system.
    The proposed refinements for cases reporting percutaneous 
cardiovascular procedures with intraluminal devices represents the 
first step in investigating how we may evaluate the distinctions 
between drug-eluting and non-drug-eluting intraluminal devices found 
elsewhere in the ICD-10-PCS procedure code classification. We are 
making concerted efforts to continue refining the ICD-10 MS-DRGs and we 
believe the resulting MS-DRG assignments in our current proposal would 
be more clinically homogeneous, coherent and better reflect current 
trends and hospital resource use.
    In summary, for FY 2024, taking into consideration it appears to no 
longer be necessary to subdivide the MS-DRGs for percutaneous 
cardiovascular procedures based on the type of coronary intraluminal 
device inserted, we are proposing to delete MS-DRGs 246, 247, 248, and 
249, and create a new base MS-DRG with a two-way severity level split 
for cases describing percutaneous cardiovascular procedures with 
intraluminal device in MDC 05. These proposed new MS-DRGs are proposed 
new MS-DRG 321 (Percutaneous Cardiovascular Procedures with 
Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices) and 
proposed new MS-DRG 322 (Percutaneous Cardiovascular Procedures with 
Intraluminal Device without MCC). We are proposing to add the procedure 
codes from current MS-DRGs 246, 247, 248, and 249 to the proposed new 
MS-DRGs 321 and 322. We are also proposing to revise the titles for MS-
DRGs 250 and 251 from ``Percutaneous Cardiovascular Procedures without 
Coronary Artery Stent with MCC, and without MCC, respectively'' to 
``Percutaneous Cardiovascular Procedures without Intraluminal Device 
with MCC, and without MCC, respectively'' to better reflect the ICD-10-
PCS terminology of ``intraluminal devices'' versus ``stents'' as used 
in the procedure code titles within the classification.
    We note that discussion of the surgical hierarchy for the proposed 
modifications is discussed in section II.C.15. of this proposed rule.
e. Shock
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44831 through 
44833), we discussed a request we received to review the MS-DRG 
assignment of ICD-10-CM diagnosis code I21.A1 (Myocardial infarction 
type 2). The requestor stated that when a type 2 myocardial infarction 
is documented, per coding guidelines, it is to be coded as a secondary 
diagnosis since it is due to an underlying cause. This requestor also 
noted that when a type 2 myocardial infarction is coded with a 
principal diagnosis in MDC 05 (Diseases and Disorders of the 
Circulatory System), the GROUPER logic assigns MS-DRGs 280 through 282 
(Acute Myocardial Infarction, Discharged Alive with MCC, with CC, and 
without CC/MCC, respectively). The requestor questioned if this GROUPER 
logic was correct or if the logic should be changed so that a type 2 
myocardial infarction, coded as a secondary diagnosis, does not result 
in the assignment of a MS-DRG that describes an acute myocardial 
infarction. During our review of this issue, we also noted that ICD-10-
CM diagnosis code I21.A1 (Myocardial infarction type 2) was one of the 
listed principal diagnoses in the GROUPER logic for MS-DRGs 222 and 223 
(Cardiac Defibrillator Implant with Cardiac Catheterization with Acute 
Myocardial Infarction (AMI), Heart Failure (HF), or Shock with and 
without MCC, respectively). However, code I21.A1 was not recognized in 
these same MS-DRGs when coded as a secondary diagnosis. Acknowledging 
that coding guidelines instruct to code I21.A1 after the diagnosis code 
that describes the underlying cause, we indicated our clinical advisors 
recommended adding special logic in MS-DRGs 222 and 223 to have code 
I21.A1 also qualify when coded as a secondary diagnosis in combination 
with a principal diagnosis in MDC 05 since these diagnosis code 
combinations also describe acute myocardial infarctions. In the FY 2022 
final rule, after consideration of the public comment, we finalized our 
proposal to maintain the structure of MS-DRGs 280 through 285, without

[[Page 26713]]

modification, for FY 2022. We also finalized our proposal to modify the 
GROUPER logic to allow cases reporting diagnosis code I21.A1 
(Myocardial infarction type 2) as a secondary diagnosis to group to MS-
DRGs 222 and 223 when reported with qualifying procedures, effective 
October 1, 2021. Under this finalization, code I21.A1, as a secondary 
diagnosis, is used in the definition of the logic for assignment to MS-
DRGs 222 and 223, and therefore does not act as an MCC in these MS-
DRGs.
    In response to this final policy, for this FY 2024 IPPS/LTCH PPS 
proposed rule, we received a related request to also add ICD-10-CM 
diagnosis code R57.0 (Cardiogenic shock) to the list of ``secondary 
diagnoses'' that group to MS-DRGs 222 and 223. Cardiogenic shock occurs 
when the heart cannot pump enough oxygen-rich blood to the brain and 
other vital organs resulting in inadequate tissue perfusion. The most 
common cause of cardiogenic shock is acute myocardial infarction. Other 
causes include myocarditis, endocarditis, papillary muscle rupture, 
left ventricular free wall rupture, acute ventricular septal defect, 
severe congestive heart failure, end-stage cardiomyopathy, severe 
valvular dysfunction, acute cardiac tamponade, cardiac contusion, 
massive pulmonary embolus, or the overdose of drugs such as beta 
blockers or calcium channel blockers.
    Since the MS-DRG titles contain the word ``shock'', the requestor 
indicated that it seemed reasonable for the GROUPER logic to recognize 
cardiogenic shock when coded as a secondary diagnosis because, 
according to the requestor, the specific underlying cardiac condition 
responsible for causing the cardiogenic shock must always be sequenced 
first. The requestor further asserted that ICD-10-CM coding guidelines 
require codes from Chapter 18 (Symptoms, Signs, and Abnormal Clinical 
and Laboratory Findings) to be sequenced first, therefore when coding 
guidelines are followed, this code can never be an appropriate 
principal diagnosis. The requestor acknowledged that if code R57.0 were 
to be added to the list of ``secondary diagnoses'' that group to MS-
DRGs 222 and 223, and therefore used in the definition of the logic for 
assignment, the code would no longer act as an MCC in MS-DRGs 222 and 
223.
    To begin our analysis, we reviewed the GROUPER logic. We note that 
ICD-10-CM diagnosis code R57.0 (Cardiogenic shock) is currently one of 
the listed principal diagnoses in the GROUPER logic for MS-DRGs 222 and 
223. The requestor is correct that diagnosis code R57.0 is not 
currently recognized in these same MS-DRGs when coded as a secondary 
diagnosis. We refer the reader to the ICD-10 MS-DRG Definitions Manual 
Version 40.1, which is available 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 and 223.
    The requestor is also correct that the diagnosis code R57.0 is 
found in Chapter 18 (Symptoms, Signs and Abnormal Clinical and 
Laboratory Findings) of ICD-10-CM and that diagnosis code R57.0 has a 
current severity designation of MCC when reported as a secondary 
diagnosis. We disagree, however, that this code can never be an 
appropriate principal diagnosis. We note that according to the ICD-10-
CM Official Guidelines for Coding and Reporting, diagnoses described by 
codes from Chapter 18 of ICD-10-CM, such as R57.0, are acceptable for 
reporting when a related definitive diagnosis has not been established 
(confirmed) by the provider. We also point out that a ``code first'' 
note appears at ICD-10-CM diagnosis code I21.A1 (Myocardial infarction 
type 2). The ``code first'' note is an etiology/manifestation coding 
convention (additional detail can be found in the ICD-10-CM Official 
Guidelines for Coding and Reporting), indicating that the condition has 
both an underlying etiology and manifestation due to the underlying 
etiology. No such ``code first'' notes appear at ICD-10-CM diagnosis 
code R57.0 (Cardiogenic shock). If providers have cases involving 
cardiogenic shock which they need ICD-10 coding assistance, we 
encourage them to submit their questions to the American Hospital 
Association's Central Office on ICD-10 at https://www.codingclinicadvisor.com/.
    We then examined claims data from the September 2022 update of the 
FY 2022 MedPAR file for all cases in MS-DRGs 222 and 223 (Cardiac 
Defibrillator Implant with Cardiac Catheterization with AMI, HF or 
Shock, with and without MCC, respectively) and compared the results to 
cases that had a principal diagnosis or a secondary diagnosis of 
cardiogenic shock in these MS-DRGs. We also included MS-DRGs 224 and 
225 (Cardiac Defibrillator Implant with Cardiac Catheterization without 
AMI, HF or Shock with and without MCC, respectively) and MS-DRGs 226 
and 227 (Cardiac Defibrillator Implant without Cardiac Catheterization 
with and without MCC, respectively) in our analysis as the logic for 
these MS-DRGs is similar, differing only in the reporting of a 
diagnosis that describes acute myocardial infarction, heart failure or 
shock, or the performance of cardiac catheterization. The following 
table shows our findings:

[[Page 26714]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.054

    In MS-DRG 222, we identified a total of 1,488 cases with an average 
length of stay of 11 days and average costs of $64,794. Of those 1,488 
cases, there were six cases reporting a principal diagnosis of R57.0, 
with higher average costs as compared to all cases in MS-DRG 222 
($88,486 compared to $64,794), and a longer average length of stay 
(13.5 days compared to 11 days). There were 322 cases reporting a 
secondary diagnosis of R57.0, with higher average costs as compared to 
all cases in MS-DRG 222 ($77,451 compared to $64,794), and a longer 
average length of stay (15.1 days compared to 11 days). In MS-DRG 224, 
we identified a total of 1,606 cases with an average length of stay of 
9.4 days and average costs of $60,583. Of those 1,606 cases, there were 
zero cases reporting a principal diagnosis of R57.0. There were 268 
cases reporting a secondary diagnosis of R57.0, with higher average 
costs as compared to all cases in MS-DRG 224 ($77,334 compared to 
$60,583), and a longer average length of stay (12.9 days compared to 
9.4 days). In MS-DRG 226, we identified a total of 3,595 cases with an 
average length of stay of 8.3 days and average costs of $53,706. Of 
those 3,595 cases, there were four cases reporting a principal 
diagnosis of R57.0, with higher average costs as compared to all cases 
in MS-DRG 226 ($72,349 compared to $53,706), and a longer average 
length of stay (14.3 days compared to 8.3 days). There were 325 cases 
reporting a secondary diagnosis of R57.0, with higher average costs as 
compared to all cases in MS-DRG 226 ($65,266 compared to $53,706), and 
a longer average length of stay (12.5 days compared to 8.3 days). We 
found zero cases across MS-DRGs 223, 225, and 227 reporting R57.0 as 
principal or as a secondary diagnosis. Our analysis clearly shows that 
the cases reporting a secondary diagnosis of cardiogenic shock in MS-
DRGs 222, 224 and 226 had higher average costs and longer average 
length of stay compared to all cases in their respective MS-DRGs.
    We reviewed these data and do not recommend modifying the GROUPER 
logic to allow cases reporting diagnosis code R57.0 (Cardiogenic shock) 
as a secondary diagnosis to group to MS-DRGs 222 and 223 when reported 
with qualifying procedures. As noted by the requestor, and as discussed 
in FY 2022 IPPS/LTCH PPS final rule (86 FR 44831 through 44833), a 
diagnosis code may define the logic for a specific MS-DRG assignment in 
three different ways. Whenever there is a secondary diagnosis component 
to the MS-DRG logic, the diagnosis code can either be used in the logic 
for assignment to the MS-DRG or to act as a CC/MCC.
    We believe that patients with cardiogenic shock as a secondary 
diagnosis tend to be more severely ill and these inpatient admissions 
are associated with greater resource utilization. Cardiogenic shock 
represents a life-threatening emergency that requires urgent treatment 
that focuses on getting blood flowing properly to prevent, and protect 
against, organ failure, brain injury or death. For clinical 
consistency, it is more appropriate for ICD-10-CM diagnosis code R57.0 
to act as an MCC when cardiogenic shock is documented in the medical 
record and coded as a secondary diagnosis. Therefore, we are not 
proposing to modify the GROUPER logic to allow cases reporting 
diagnosis code R57.0 (Cardiogenic shock) as a secondary diagnosis to 
group to MS-DRGs 222 and 223 when reported with qualifying procedures.
    During our review of this issue we noted that the data analysis 
shows that in procedures involving a cardiac defibrillator implant, the 
average costs and length of stay are generally similar

[[Page 26715]]

without regard to the presence of diagnosis codes describing AMI, HF or 
shock. In MS-DRG 222, there were 1,488 cases reporting cardiac 
defibrillator implant with cardiac catheterization with AMI, HF, or 
Shock with an MCC with average costs of $64,794 and an average length 
of stay of 11 days compared to 1,606 cases reporting cardiac 
defibrillator implant with cardiac catheterization without AMI, HF, or 
Shock with an MCC with average costs of $60,583 and an average length 
of stay of 9.4 days in MS-DRG 224. In MS-DRG 223, there were 270 cases 
reporting cardiac defibrillator implant with cardiac catheterization 
with AMI, HF or Shock without an MCC with average costs of $43,500 and 
an average length of stay of 5.7 days compared to 1,167 cases reporting 
cardiac defibrillator implant with cardiac catheterization without AMI, 
HF, or Shock without an MCC with average costs of $42,442 and an 
average length of stay of 4.6 days in MS-DRG 225.
    The analysis of MS-DRGs 222, 223, 224, 225, 226, and 227 further 
demonstrates that the average length of stay and average costs for all 
cases are similar for each of the ``without MCC'' subgroups. As stated 
previously, for all of the cases in MS-DRG 223, we found that the 
average length of stay was 5.7 days with average costs of $43,500, and 
for all of the cases in MS-DRG 225, the average length of stay was 4.6 
days with average costs of $42,442. Likewise, for all of the cases in 
MS-DRG 227, we found that the average length of stay was 3.9 days with 
average costs of $41,636.
    We reviewed these findings and believe that it may no longer be 
necessary to subdivide these MS-DRGs based on the diagnosis codes 
reported. We note that in the FY 2004 IPPS/LTCH PPS final rule (68 FR 
45356 through 45358), we stated we found that patients who are admitted 
with acute myocardial infarction, heart failure, or shock and have a 
cardiac catheterization are generally acute patients who require 
emergency implantation of the defibrillator. Thus, we stated there were 
very high costs associated with these patients. Therefore, we finalized 
the creation of new DRGs for patients receiving a cardiac defibrillator 
implant with cardiac catheterization and with a principal diagnosis of 
acute myocardial infarction, heart failure, or shock.
    Our analysis of claims data from the September 2022 update of the 
FY 2022 MedPAR clearly shows that in the 20 years since the DRGs for 
cases involving a cardiac defibrillator implant with cardiac 
catheterization split based on the presence or absence of diagnosis 
codes describing acute myocardial infarction, heart failure, or shock 
were created, cases reporting a cardiac defibrillator implant with 
cardiac catheterization continue to demonstrate higher average costs 
and longer lengths of stays, however these increased costs appear to be 
more related to the procedures performed than to the diagnoses reported 
on the claim, and therefore we believe it is time to restructure these 
MS-DRGs accordingly.
    We do note that when reviewing consumption of hospital resources 
for the cases reporting cardiac defibrillator implant with cardiac 
catheterization during a hospital stay, the claims data clearly shows 
that the cases reporting secondary diagnoses designated as MCCs are 
more resource intensive as compared to other cases reporting cardiac 
defibrillator implant. As noted previously, in MS-DRG 222, there were 
1,488 cases reporting cardiac defibrillator implant with cardiac 
catheterization with AMI, HF, or Shock with an MCC with average costs 
of $64,794 and an average length of stay of 11 days. Similarly, in MS-
DRG 224, there were 1,606 cases reporting cardiac defibrillator implant 
with cardiac catheterization without AMI, HF, or Shock with an MCC with 
average costs of $60,583 and an average length of stay of 9.4 days in 
MS-DRG 224. In comparison, there were 270 cases reporting cardiac 
defibrillator implant with cardiac catheterization with AMI, HF, or 
Shock without an MCC with average costs of $43,500 and an average 
length of stay of 5.7 days in MS-DRG 223, 1,167 cases reporting cardiac 
defibrillator implant with cardiac catheterization without AMI, HF, or 
Shock without an MCC with average costs of $42,442 and an average 
length of stay of 4.6 days in MS-DRG 225, 3,595 cases reporting cardiac 
defibrillator implant without cardiac catheterization with an MCC with 
average costs of $53,706 and an average length of stay of 8.3 days in 
MS-DRG 226, and 2,522 cases reporting cardiac defibrillator implant 
without cardiac catheterization without an MCC with average costs of 
$41,636 and an average length of stay of 3.9 days in MS-DRG 227.
    Therefore, we support the removal of the special logic defined as 
``Principal Diagnosis AMI/HF/SHOCK'' from the definition for assignment 
to any proposed modifications to the MS-DRGs, noting the cases can be 
appropriately grouped along with cases reporting any MDC 05 diagnosis 
when reported with qualifying procedures, in any restructured proposed 
MS-DRGs. For these reasons, we are proposing the deletion of MS-DRGs 
222, 223, 224, 225, 226, and 227, and the creation of three new MS-
DRGs. Our proposal includes the creation of one base MS-DRG for cases 
reporting a cardiac defibrillator implant with cardiac catheterization 
and a secondary diagnosis designated as an MCC and another base MS-DRG 
split by a two-way severity level subgroup for cases reporting a 
cardiac defibrillator implant without cardiac catheterization.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 3,467 cases reporting a cardiac defibrillator 
implant with cardiac catheterization and a secondary diagnosis 
designated as an MCC. We note that as discussed in prior rulemaking (86 
FR 44831 through 44833), a diagnosis code may define the logic for a 
specific MS-DRG assignment in three different ways. The diagnosis code 
may be listed as principal or as any one of the secondary diagnoses, as 
a secondary diagnosis, or only as a secondary diagnosis. For this 
specific scenario, we propose that secondary diagnosis codes with a 
severity designation of MCC be used in the definition of the logic for 
assignment to the proposed base MS-DRG for cases reporting a cardiac 
defibrillator implant with cardiac catheterization and a secondary 
diagnosis designated as an MCC. Therefore, we did not apply the 
criteria to create further subgroups in a base MS-DRG for cases 
reporting a cardiac defibrillator implant with cardiac catheterization 
and a secondary diagnosis designated as an MCC as discussed in section 
II.C.1.b. of this FY 2024 IPPS/LTCH PPS proposed rule. We believe the 
resulting proposed MS-DRG assignment is more clinically homogeneous, 
coherent and better reflects hospital resource use.

[[Page 26716]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.055

    To further compare and analyze the impact of our suggested 
modifications, we then ran a simulation using the most recent claims 
data from the December 2022 update of the FY 2022 MedPAR file for cases 
reporting a cardiac defibrillator implant without additionally 
reporting both a cardiac catheterization and a secondary diagnosis 
designated as an MCC. The following table illustrates our findings for 
all 7,935 cases.
[GRAPHIC] [TIFF OMITTED] TP01MY23.056

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2024 IPPS/LTCH PPS proposed 
rule. As shown in the table that follows, a three-way split of the 
proposed new MS-DRGs failed the criterion that there be at least 500 
cases for each subgroup due to low volume. Specifically, for the 
``without CC/MCC'' (NonCC) split, there were only 452 cases in the 
subgroup. The criterion that there be at least a 20% difference in 
average costs between the CC and NonCC subgroup also failed to be met.
[GRAPHIC] [TIFF OMITTED] TP01MY23.057

    We then applied the criteria for a two-way split for the ``with 
MCC'' and ``without MCC'' subgroups for the proposed new MS-DRGs and 
found that all five criteria were met. The following table illustrates 
our findings.
[GRAPHIC] [TIFF OMITTED] TP01MY23.058

    For the proposed new MS-DRGs, there is (1) at least 500 cases in 
the MCC subgroup and in the without MCC subgroup; (2) at least 5 
percent of the cases are in the MCC subgroup and in the without MCC 
subgroup; (3) at least a 20 percent difference in average costs between 
the MCC subgroup and the without MCC subgroup; (4) at least a $2,000 
difference in average costs between the MCC subgroup and the without 
MCC subgroup; and (5) at least a 3-percent reduction in cost variance, 
indicating that the proposed severity level splits increase the 
explanatory power of the base MS-DRG in capturing differences in 
expected cost between the proposed MS-DRG severity level splits by at 
least 3 percent and thus improve the overall accuracy of the IPPS 
payment system.
    In summary, for FY 2024, taking into consideration that it appears 
to no longer be necessary to subdivide the MS-DRGs for cases reporting 
a cardiac defibrillator implant based on the diagnosis code reported, 
we are proposing to delete MS-DRGs 222, 223, 224, 225, 226, and 227, 
and create a new MS-DRG for cases reporting a cardiac defibrillator 
implant with cardiac catheterization and a secondary diagnosis 
designated as an MCC in MDC 05. We are also proposing to create two new 
MS-DRGs with a two-way severity level split for cases reporting a 
cardiac defibrillator implant without additionally reporting both a 
cardiac catheterization and a secondary diagnosis designated as an MCC. 
These proposed new MS-DRGs are proposed new MS-DRG 275 (Cardiac 
Defibrillator Implant with Cardiac Catheterization and MCC), proposed 
new MS-DRG 276 (Cardiac Defibrillator Implant with MCC) and proposed 
new MS-DRG 277 (Cardiac Defibrillator Implant without MCC).

[[Page 26717]]

    We note that the procedure codes describing cardiac catheterization 
are designated as non-O.R. procedures, therefore, as part of the logic 
for MS-DRG 275, we are also proposing to designate these codes as non-
O.R. procedures affecting the MS-DRG. We refer the reader to Table 
6P.7a and Table 6P.7b associated with this proposed rule (which is 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) for the list of 
procedure codes we are proposing to define in the logic for each of the 
proposed new MS-DRGs. We note that discussion of the surgical hierarchy 
for the proposed modifications is discussed in section II.C.15. of this 
proposed rule.
6. MDC 06 (Diseases and Disorders of the Digestive System): 
Appendicitis
    In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28163 through 
28165) and final rule (87 FR 48849 through 48850), we discussed a 
request related to the MS-DRG assignment of diagnosis codes describing 
acute appendicitis with generalized peritonitis, with and without 
perforation or abscess when reported with an appendectomy procedure. In 
that discussion, we stated that any future proposed changes to the MS-
DRGs for appendectomy procedures would be dependent on the diagnosis 
code revisions that are finalized by the CDC/National Center for Health 
Statistics (NCHS) since the CDC/NCHS staff presented a proposal for 
further revisions to the diagnosis codes describing acute appendicitis 
with generalized peritonitis at the March 8-9, 2022 ICD-10 Coordination 
and Maintenance Committee meeting. Specifically, the CDC/NCHS staff 
proposed to expand diagnosis codes K35.20 (Acute appendicitis with 
generalized peritonitis, without abscess) and K35.21 (Acute 
appendicitis with generalized peritonitis, with abscess), making them 
sub-categories and creating new diagnosis codes to identify and 
describe acute appendicitis with generalized peritonitis, with 
perforation and without perforation, and unspecified as to perforation. 
We noted 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 were 
being considered for an October 1, 2023 implementation (FY 2024). 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.
    As shown in Appendix B--Diagnosis Code/MDC/MS-DRG Index of the ICD-
10 MS-DRG Definitions Manual V40.1 (available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software), diagnosis codes K35.20 and K35.21 are 
currently assigned to medical MS-DRGs 371, 372, and 373 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, 
and without CC/MCC, respectively) in MDC 06. Diagnosis code K35.21 is 
also assigned to surgical MS-DRGs 338, 339, and 340 (Appendectomy with 
Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06 because diagnosis code K35.21 is defined as a 
complicated diagnosis in the GROUPER logic. Therefore, when a procedure 
code describing an appendectomy is reported with principal diagnosis 
code K35.21, the logic for case assignment to MS-DRGs 338, 339, or 340 
is satisfied.
    As discussed in section II.C.12. of the preamble of this proposed 
rule, Table 6C--Invalid Diagnosis Codes (available on the CMS website 
at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps) lists the diagnosis codes that are no longer 
effective October 1, 2023. Included in this table are diagnosis codes 
K35.20 and K35.21. In addition, as shown in the following table and in 
Table 6A--New Diagnosis Codes associated with this proposed rule 
(available on the CMS website at: https://www.cms.gov/medicare/
medicare-fee-for-service-payment/acuteinpatientpps), six new diagnosis 
codes describing acute appendicitis with generalized peritonitis, with 
and without perforation or abscess were finalized and are effective 
with discharges on and after October 1, 2023. Consistent with our 
established process for assigning new diagnosis and procedure codes, we 
reviewed the predecessor codes (K35.20 and K35.21) to determine the MS-
DRG assignment most closely associated with the new diagnosis codes. In 
addition, the proposed severity level designations for the new 
diagnosis codes are set forth in Table 6A. As shown, the new codes are 
proposed for assignment to medical MS-DRGs 371, 372, and 373 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, 
and without CC/MCC, respectively), in accordance with the assignment of 
predecessor codes K35.20 and K35.21.
[GRAPHIC] [TIFF OMITTED] TP01MY23.059


[[Page 26718]]


    As the acute appendicitis diagnosis code revisions have been 
finalized by the CDC/NCHS, we believe it is now appropriate to address 
the MS-DRG request for diagnosis code K35.20 describing acute 
appendicitis with generalized peritonitis when an appendectomy 
procedure is performed. We refer the reader to the ICD-10 MS-DRG 
Definitions Manual Version 40.1, which is available 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 338, 339, and 340 
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC, 
and without CC/MCC, respectively) and MS-DRGs 341, 342, and 343 
(Appendectomy without Complicated Principal Diagnosis with MCC, with 
CC, and without CC/MCC, respectively) that includes the procedure codes 
defined in the logic for an appendectomy.
    We first analyzed claims data from the September 2022 update of the 
FY 2022 MedPAR file for MS-DRGs 338, 339, and 340 and cases reporting 
any one of the following diagnosis codes currently defined in the logic 
as a complicated principal diagnosis when reported as a principal 
diagnosis.
[GRAPHIC] [TIFF OMITTED] TP01MY23.060

    Our findings are shown in the following table. We note that if a 
diagnosis is not listed it is because there were no cases found.
[GRAPHIC] [TIFF OMITTED] TP01MY23.061

    The data shows that overall, each of the ``complicated'' diagnoses 
appear to have a comparable average length of stay and similar average 
costs when compared to the average length of stay and average costs of 
all the cases in the respective MS-DRG, as well as, to each other.
    Next, we analyzed claims data from the September 2022 update of the 
FY 2022 MedPAR file for MS-DRGs 341, 342, and 343 and cases reporting 
any one of the following diagnosis codes describing acute appendicitis.

[[Page 26719]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.062

    Our findings are shown in the following table.
    [GRAPHIC] [TIFF OMITTED] TP01MY23.063
    
    Similar to the findings for the ``complicated'' diagnoses, the 
``uncomplicated'' diagnoses also have a comparable average length of 
stay and similar average costs when compared to the average length of 
stay and average costs of all the cases in the respective MS-DRG.
    Based on our analysis for both the ``complicated'' and 
``uncomplicated'' diagnoses combined with our review of all the cases 
in the MS-DRGs, we believe the findings support a prior comment, as 
summarized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48849), that 
clinically, both localized and generalized peritonitis in association 
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 identify possible abscess, use 
of intravenous antibiotics, and prolonged monitoring. In addition, 
localized peritonitis progresses to generalized peritonitis. In our 
direct comparison of the ``complicated'' versus

[[Page 26720]]

``uncomplicated'' MS-DRGs, we believe the distinction is no longer 
meaningful with regard to resource consumption. As shown in the 
following table, the ``with MCC'' MS-DRGs, the ``with CC'' MS-DRGs, and 
the ``without CC/MCC'' MS-DRGs all have a comparable average length of 
stay and similar average costs. For example, MS-DRG 338 has an average 
length of stay of 7 days with average costs of $20,311 and MS-DRG 341 
has an average length of stay of 5.8 days and average costs of $19,080. 
The volume of cases for this MS-DRG pair is also similar with 579 cases 
in MS-DRG 338 and 533 cases in MS-DRG 341.
[GRAPHIC] [TIFF OMITTED] TP01MY23.064

    As a result of our analysis and review of this issue, we believe 
the findings support eliminating the logic for ``complicated'' and 
``uncomplicated'' diagnoses and restructuring the six MS-DRGs. We also 
note that in our review of the logic for the appendectomy procedures, 
we identified procedures listed in the current logic that we did not 
agree reflect an actual appendectomy as suggested in the title of the 
current MS-DRGs, rather the logic describes various procedures 
performed on the appendix.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the most recent claims data from the December 
2022 update of the FY 2022 MedPAR file. The following table illustrates 
our findings for all 8,060 cases reporting procedure codes describing a 
procedure performed on the appendix.
[GRAPHIC] [TIFF OMITTED] TP01MY23.065

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, all 
five criteria to create subgroups must be met for the base MS-DRG to be 
split (or subdivided) by a CC subgroup. Therefore, we applied the 
criteria to create subgroups in a base MS-DRG. We note that, as shown 
in the table that follows, a three-way split of this proposed new base 
MS-DRG was met. The following table illustrates our findings.

[[Page 26721]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.066

    For the proposed new MS-DRGs, there is (1) at least 500 cases in 
the MCC subgroup, the CC subgroup, and in the without CC/MCC subgroup; 
(2) at least 5 percent of the cases are in the MCC subgroup, the CC 
subgroup, and in the without CC/MCC subgroup; (3) at least a 20 percent 
difference in average costs between the MCC subgroup and the CC 
subgroup and between the CC group and NonCC subgroup; (4) at least a 
$2,000 difference in average costs between the MCC subgroup and the 
with CC subgroup and between the CC subgroup and NonCC subgroup; and 
(5) at least a 3-percent reduction in cost variance, indicating that 
the proposed severity level splits increase the explanatory power of 
the base MS-DRG in capturing differences in expected cost between the 
proposed MS-DRG severity level splits by at least 3 percent and thus 
improve the overall accuracy of the IPPS payment system.
    Therefore, we are proposing to delete MS-DRGs 338, 339, 340, 341, 
342, and 343 and proposing to create new MS-DRGs 397 Appendix 
Procedures with MCC, MS-DRG 398 Appendix Procedures with CC, and MS-DRG 
399 Appendix Procedures without CC/MCC for FY 2024. These proposed new 
MS-DRGs would no longer require a diagnosis in the definition of the 
logic for case assignment. We are also proposing to include the current 
list of appendectomy procedures in the logic for case assignment of 
appendix procedures for the proposed new MS-DRGs.
7. MDC 07 (Diseases and Disorders of the Hepatobiliary System and 
Pancreas): Alcoholic Hepatitis
    We received a request to create new MS-DRGs with a two-way split 
(with MCC and without MCC) for cases reporting alcoholic hepatitis. 
Alcoholic hepatitis is identified with ICD-10-CM diagnosis codes K70.10 
(Alcoholic hepatitis without ascites) and K70.11 (Alcoholic hepatitis 
with ascites) which are currently assigned to MS-DRGs 432, 433, and 434 
(Cirrhosis and Alcoholic Hepatitis with MCC, with CC, and without CC/
MCC, respectively) when reported as a principal diagnosis.
    Alcoholic hepatitis is characterized as an inflammatory condition 
due to chronic, excessive alcohol use and is considered an acute form 
of alcohol-associated liver disease (ALD). Data suggests that ALD was 
responsible for over 100,000 hospitalizations in 2017 and admissions 
for ALD continued to increase during the COVID-19 public health 
emergency.\6\ Data also suggest that ALD may be one of the leading 
causes of liver transplants in the U.S.
---------------------------------------------------------------------------

    \6\ Gonzalez HC, Zhou Y, Nimri FM, Rupp LB, Trudeau S, Gordon 
SC. Alcohol-related hepatitis admissions increased 50% in the first 
months of the COVID-19 pandemic in the USA. Liver Int. 2022 
Apr;42(4):762-764.
---------------------------------------------------------------------------

    The requestor stated that currently there are no effective 
therapies available to treat alcoholic hepatitis and current treatment 
guidelines suggest corticosteroids, despite increased risk of infection 
and minimal impact on survival beyond 28 days. However, the requestor 
(manufacturer of Larsucosterol) also indicated that epigenetic therapy 
is currently being studied to address various types of acute and 
chronic organ injury and provided information related to its AHFIRM 
(Alcohol-associated Hepatitis to evaluate saFety and effIcacy of 
LaRsucosterol (DUR-928) treatMent) Phase 2b study for patients 
diagnosed with alcoholic hepatitis. The FDA granted Fast Track 
Designation to DUR-928 for the treatment of alcoholic hepatitis in 
2020.
    The requestor stated it performed its own analysis using two years 
of claims data, (calendar years 2018 and 2019), and its findings showed 
that the patients with alcoholic hepatitis are distinct from the 
typical Medicare beneficiary and that the condition disproportionately 
affects younger patients that represent a small proportion of the cases 
currently grouping to MS-DRGs 432, 433, and 434. According to the 
requestor, the low volume of cases reporting alcoholic hepatitis have 
little to no impact on the annual recalibration of the MS-DRG relative 
payment weights for MS-DRGs 432, 433, and 434, resulting in 
underpayments. The requestor stated its analysis of cases reporting 
alcoholic hepatitis showed higher resource utilization and a longer 
length of stay when compared to all cases in MS-DRGs 432, 433, and 434. 
The requestor stated it applied the criteria to create subgroups for 
the cases reporting alcoholic hepatitis currently grouping to MS-DRGs 
432, 433, and 434 and found that the criteria for a two-way split (with 
MCC and without MCC) was met. The requestor further stated that 
splitting out the cases reporting alcoholic hepatitis from MS-DRGs 432, 
433, and 434 would enable more accurate payment of these cases and 
support research that is specific to alcoholic hepatitis distinct from 
cirrhosis.
    The logic for case assignment to MS-DRGs 432, 433, and 434 is 
comprised of the following diagnosis codes.

[[Page 26722]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.067

    We analyzed claims data from the September 2022 update of the FY 
2022 MedPAR file for MS-DRGs 432, 433, and 434 and cases reporting any 
one of the listed diagnoses as a principal diagnosis. We note that if a 
diagnosis code is not listed it is because there were no cases found 
reporting that code in the respective MS-DRG. The findings from our 
analysis are shown in the following table.
BILLING CODE 4120-01-P

[[Page 26723]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.068


[[Page 26724]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.069

BILLING CODE 4120-01-C
    Based on our initial analysis for cases in MS-DRGs 432, 433, and 
434, the data clearly demonstrate that there are several diagnoses, 
other than the two diagnoses identified by the requestor (codes K70.10 
and K70.11) with increased resource utilization when compared to the 
average length of stay and average costs of all cases in MS-DRGs 432, 
433, and 434.
    The data show that the cases in MS-DRG 432 reporting diagnosis 
codes K70.11, K70.31, K70.40, K70.41, K74.3, or K74.5 as a principal 
diagnosis have a longer average length of stay (9.1 days, 7.5 days, 8.1 
days, 8.7 days, 7.3 days, and 8.2 days, respectively versus 6.8 days) 
and higher average costs ($20,727, $17,694, $19,277, $22,530, $18,020, 
and $16,569, respectively versus $16,532) compared to the average 
length of stay and the average costs for all the cases in MS-DRG 432. 
We note that the cases reporting diagnosis codes K70.10, K74.4, or 
K74.69 as a principal diagnosis also have a longer average length of 
stay (7.4 days, 7.5 days, and 6.9 days, respectively versus 6.8 days) 
compared to all the cases in MS-DRG 432, however, the average costs of 
these cases are lower ($14,710, $15,324 and $16,501, respectively 
versus $16,532) compared to the average costs for all the cases.
    For MS-DRG 433, the cases reporting diagnosis codes K70.11, K70.30, 
K70.31, K70.40, or K70.9 as a principal diagnosis have a longer average 
length of stay (5.0 days, 4.5 days, 4.4 days, 4.6 days, and 4.8 days, 
respectively versus 4.3 days) and comparable average costs ($10,085, 
$9,343, $9,548, $9,066, and $11,893, respectively versus $9,007) 
compared to the average length of stay and the average costs for all 
the cases in MS-DRG 433. We note that the cases reporting diagnosis 
code K70.10 as a principal diagnosis also have a longer average length 
of stay (4.8 days versus 4.3 days) compared to all the cases in MS-DRG 
433, however, the average costs of these cases are lower ($8,436 versus 
$9,007) compared to the average costs for all the cases in the MS-DRG.
    Lastly, for MS-DRG 434, the cases reporting diagnosis codes K70.31, 
K74.3, or K74.60 as a principal diagnosis have a longer average length 
of stay (3 days, 4.2 days, and 2.6 days, respectively versus 2.8 days) 
and higher average costs ($6,348, $8,485, and $5,862, respectively 
versus $5,825)

[[Page 26725]]

compared to the average length of stay and the average costs for all 
the cases in MS-DRG 434.
    The data also show that there is significantly more case volume for 
several of the other diagnoses compared to the case volume of the two 
diagnoses (K70.10 and K70.11) associated with the request to create new 
MS-DRGs. We identified diagnosis code K70.31 (Alcoholic cirrhosis of 
liver with ascites) to be the most prevalent diagnosis with respect to 
case volume reported across MS-DRGs 432, 433, and 434. For example, as 
shown in the table, we found 5,687 cases in MS-DRG 432 reporting 
diagnosis code K70.31 as a principal diagnosis compared to 269 cases 
reporting diagnosis code K70.10 and 244 cases reporting diagnosis code 
K70.11. For MS-DRG 433, we found 2,825 cases reporting diagnosis code 
K70.31 as a principal diagnosis compared to 309 cases reporting 
diagnosis code K70.10 and 173 cases reporting diagnosis code K70.11. 
Lastly, for MS-DRG 434, we found 179 cases reporting diagnosis code 
K70.31 as a principal diagnosis compared to 41 cases reporting 
diagnosis code K70.10 and 8 cases reporting diagnosis code K70.11.
    Following our initial review of the claims data for the cases 
reporting any one of the listed diagnoses as a principal diagnosis that 
are included in the logic for case assignment to MS-DRGs 432, 433, and 
434, we performed additional analyses to focus on the cases 
specifically reporting diagnosis code K70.10 or K70.11 as a principal 
diagnosis in response to the request to create new MS-DRGs with a two-
way split (with and without MCC, respectively). The findings from our 
analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.070

    The data show that the 513 cases reporting alcoholic hepatitis 
without or with ascites in MS-DRG 432 have a longer average length of 
stay (8.2 days versus 6.8 days) and higher average costs ($17,572 
versus $16,532). For MS-DRG 433, the data show that the 482 cases 
reporting alcoholic hepatitis without or with ascites have a longer 
average length of stay (4.9 days versus 4.3 days) and a difference in 
average costs of $21 ($9,028 versus $9,007). For MS-DRG 434, the 49 
cases reporting alcoholic hepatitis without or with ascites have a 
shorter length of stay (2.4 days versus 2.8 days) and lower average 
costs ($5,544 versus $5,825).
    Based on the results of our review and our analysis of the claims 
data for cases reporting a principal diagnosis of alcoholic hepatitis 
without or with ascites (codes K70.10 or K70.11), we believe the cases 
demonstrate similar patterns of resource intensity in comparison to the 
other cases in MS-DRGs 432, 433, and 434. We also believe that these 
diagnoses are clinically coherent with the other diagnoses currently 
assigned to MS-DRGs 432, 433, and 434. While we recognize the concerns 
expressed by the requestor for this subset of patients with respect to 
the younger population and the lower volume of cases, we note that the 
logic for case assignment to MS-DRGs 432, 433, and 434 includes 
clinically related diagnoses that differ in severity and resource 
intensity with alcoholic hepatitis being at the lowest end of the 
severity spectrum. Therefore, we are proposing to maintain the 
structure of MS-DRGs 432, 433, and 434 for FY 2024.

[[Page 26726]]

    We note, as discussed in section II.C.1.b. of this proposed rule, 
using the December 2022 update of the FY 2022 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 2024. Findings from our analysis indicate that MS-DRGs 432, 433, 
and 434, as well as approximately 44 other base 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 Table 6P.10b associated 
with this proposed rule (which is available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the list of the 135 MS-DRGs that would 
potentially be subject to deletion and the list of the 86 new MS-DRGs 
that would potentially be created under this policy if the NonCC 
subgroup criteria was applied.
8. MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue): Spinal Fusion
    We received a request to reassign cases reporting spinal fusion 
procedures utilizing an aprevoTM customized interbody fusion 
device from the lower severity MS-DRG 455 (Combined Anterior and 
Posterior Spinal Fusion without CC/MCC) to the higher severity MS-DRG 
453 (Combined Anterior and Posterior Spinal Fusion with MCC), from the 
lower severity MS-DRG 458 (Spinal Fusion Except Cervical with Spinal 
Curvature, Malignancy, Infection or Extensive Fusions without CC/MCC) 
to the higher severity level MS-DRG 456 (Spinal Fusion Except Cervical 
with Spinal Curvature, Malignancy, Infection or Extensive Fusions with 
MCC) when a diagnosis of malalignment is reported, and from MS-DRGs 459 
and 460 (Spinal Fusion Except Cervical with MCC and without MCC, 
respectively) to MS-DRG 456.
    We note that the AprevoTM Intervertebral Body Fusion 
Device technology was discussed in the FY 2022 IPPS/LTCH PPS proposed 
(86 FR 25361 through 25365) and final rules (86 FR 45127 through 45133) 
with respect to a new technology add-on payment application and was 
approved for add-on payments for FY 2022. We also note that, as 
discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49468 through 
49469), CMS finalized the continuation of the new technology add-on 
payments for this technology for FY 2023.
    In support of the new technology add-on payment application that 
was submitted for FY 2022 consideration, we received a request and 
proposal to create new ICD-10-PCS codes to differentiate spinal fusion 
procedures that utilize an aprevoTM customized interbody 
fusion device, which was discussed at the March 9-10, 2021 ICD-10 
Coordination and Maintenance Committee meeting. As a result, effective 
October 1, 2021 (FY 2022), we implemented 12 new ICD-10-PCS procedure 
codes to identify and describe spinal fusion procedures utilizing the 
aprevoTM customized interbody fusion device as shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.071


[[Page 26727]]


    Each of the listed procedure codes are assigned to MDC 01 (Diseases 
and Disorders of the Nervous System) in MS-DRGs 028, 029, and 030 
(Spinal Procedures with MCC, with CC or Spinal Neurostimulators, and 
without CC/MCC, respectively) and to MDC 08 (Diseases and Disorders of 
the Musculoskeletal System and Connective Tissue) in MS-DRGs 453, 454, 
and 455 (Combined Anterior and Posterior Spinal Fusion with MCC, with 
CC, and without CC/MCC, respectively), MS-DRGs 456, 457, and 458 
(Spinal Fusion Except Cervical With Spinal Curvature, Malignancy, 
Infection or Extensive Fusions with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 459 and 460 (Spinal Fusion Except Cervical 
with MCC and without MCC, respectively).
    The requestor (the manufacturer of aprevoTM customized 
interbody spinal fusion devices) expressed concerns that findings from 
its analysis of claims data for spinal fusion MS-DRGs 453, 454, 455, 
456, 457, 458, 459, and 460 from the first half of FY 2022 indicate 
there may be unintentional miscoded claims from providers with whom 
they do not have an explicit relationship. Specifically, the requestor 
stated that a subset of the facilities identified in its analysis are 
not customers to whom the aprevoTM custom-made device was 
provided. The volume of cases initially identified by the requestor in 
its analysis totaled 89 cases, however, upon eliminating the provider 
claims from the facilities that are not a current client, the resulting 
volume was 14 cases. The requestor stated that subsequently, after 
another quarter's data became available from current clients for cases 
reporting the performance of a spinal fusion procedure utilizing an 
aprevoTM customized interbody spinal fusion device, they 
identified an additional 16 cases for a total of 30 cases, all of which 
were assigned to MS-DRGs 453, 454, and 455.
    Upon further review of the data, the requestor stated it found that 
cases reporting the performance of a spinal fusion procedure utilizing 
an aprevoTM customized interbody spinal fusion device had 
higher average costs in comparison to the average costs of all the 
cases in the highest severity level ``with MCC'' MS-DRGs 453 and 456. 
According to the requestor, this finding suggested that the use of the 
device impacts intensity of resources such that the cases reporting the 
performance of a spinal fusion procedure utilizing an 
aprevoTM customized interbody spinal fusion device merit 
reassignment to the highest severity level ``with MCC'' MS-DRGs (MS-
DRGs 453 and 456). The requestor asserted that while spinal disorders 
impact approximately 65 million patients in the U.S., the patients 
undergoing spine surgery with an aprevoTM customized 
interbody spinal fusion device are those with irreversible, 
debilitating conditions. In addition, the requestor stated that since 
the cases reporting the performance of a spinal fusion procedure 
utilizing an aprevoTM customized interbody spinal fusion 
device already appear to map to the most resource intensive MS-DRGs for 
spinal procedures, there is no other alternative assignment for these 
procedures, with the exception of a new MS-DRG. Lastly, the requestor 
maintained that reassigning cases reporting the performance of a spinal 
fusion procedure utilizing an aprevoTM customized interbody 
spinal fusion device to the ``with MCC'' level aligns with CMS's 
factors that are considered in review of MS-DRG classification change 
requests, including treatment difficulty, complexity of service, and 
utilization of resources.
    We analyzed data from the September 2022 update of the FY 2022 
MedPAR file for MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460 and 
cases reporting any one of the previously listed procedure codes 
describing utilization of an aprevoTM customized interbody 
spinal fusion device. Our findings are shown in the following table.

[[Page 26728]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.072

    We found the majority of cases reporting the performance of a 
spinal fusion procedure utilizing an aprevoTM customized 
interbody spinal fusion device in MS-DRGs 453, 454, and 455 with a 
total of 159 cases (17 + 75 + 67 = 159) with an average length of stay 
of 4.1 days and average costs of $66,847. The 17 cases identified in 
MS-DRG 453 appear to have a comparable average length of stay and 
comparable average costs compared to all the cases in MS-DRG 453 with a 
difference of 1 day and a difference in average costs of $1,383 for the 
cases reporting the performance of a spinal fusion procedure utilizing 
an aprevoTM customized interbody spinal fusion device. The 
75 cases found in MS-DRG 454 have an identical average length of stay 
of 4.4 days in comparison to all the cases in MS-DRG 454, however, the 
difference in average costs is $21,067 ($75,294 - $54,227 = $21,067) 
for the cases reporting the performance of a spinal fusion procedure 
utilizing an aprevoTM customized interbody spinal fusion 
device. The 67 cases found in MS-DRG 455 also have an identical average 
length of stay of 2.7 days in comparison to all the cases in MS-DRG 
455, however, the difference in average costs is $13,604 ($54,287 - 
$40,683 = $13,604) for the cases reporting the performance of a spinal 
fusion procedure utilizing an aprevoTM customized interbody 
spinal fusion device. As shown in the table, there were no cases found 
to report utilization of an aprevoTM customized interbody 
spinal fusion device in MS-DRG 456. For MS-DRG 457, the 2 cases found 
to report utilization of an aprevoTM customized interbody 
spinal fusion device appear to be outliers with a difference in average 
costs of $105,032 ($158,782 - $53,750 = $105,032) and a shorter average 
length of stay (3.5 days versus 6.4 days) in comparison to all the 
cases in MS-DRG 457. For MS-DRG 458, we found 1 case reporting 
utilization of an aprevoTM customized interbody spinal 
fusion device with an average length of stay almost three times the 
average length of stay of all the cases in MS-DRG 458 (12 days versus 
3.5 days) and average costs that are twice as high ($91,672 versus 
$40,343) compared to the average costs of all the cases in MS-DRG 458. 
For MS-DRG 459, the 2 cases reporting utilization of an 
aprevoTM customized interbody spinal fusion device had a 
shorter average length of stay (5 days versus 9.8 days) compared to the 
average length of stay of all the cases in MS-DRG 459 with a difference 
in average costs of $3,697 ($57,039 - $53,342 = $3,697). For MS-DRG 
460, the 30 cases reporting utilization of an aprevoTM 
customized interbody spinal fusion device had a longer average length 
of stay (4.5 days versus 3.5 days) compared to the average length of 
stay of all the cases in MS-DRG 460 with a difference in average costs 
of $14,762 ($46,683 - $31,921 = $14,762).
    As previously discussed, the requestor expressed concerns that 
there may be unintentional miscoded claims from providers with whom 
they do not have an explicit relationship. We note that following the 
submission of the request for the FY 2024 MS-DRG

[[Page 26729]]

classification change for cases reporting the performance of a spinal 
fusion procedure utilizing an aprevoTM customized interbody 
spinal fusion device, this same requestor (the manufacturer of 
aprevoTM customized interbody spinal fusion devices) 
submitted a code proposal requesting a revision to the title of the 
current procedure codes that identify and describe a spinal fusion 
procedure utilizing an aprevoTM customized interbody spinal 
fusion device for consideration as an agenda topic to be discussed at 
the March 7-8, 2023 ICD-10 Coordination and Maintenance Committee 
meeting. The requestor stated its belief that the term ``customizable'' 
as currently reflected in each of the 12 procedure code descriptions is 
potentially misunderstood by providers to encompass expandable 
interbody fusion cages that have been available for several years and 
which were not approved for new technology add-on payment as was the 
aprevoTM customized interbody spinal fusion device. 
According to the requestor, these other interbody fusion devices do not 
require the same patient specific surgical plan coordination as the 
aprevoTM customized interbody spinal fusion device and do 
not offer the personalized fit that matches the topography of a 
patient's bone. Therefore, in an effort to encourage appropriate 
reporting for cases where an aprevoTM customized interbody 
spinal fusion device has been utilized in the performance of a spinal 
fusion procedure, the requestor provided alternative terminology for 
consideration.
    The proposal to revise the code title was presented and discussed 
as an Addenda item at the March 7-8, 2023 ICD-10 Coordination and 
Maintenance Committee 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 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 7, 2023.
    We note that 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, Table 6B.--New 
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--Invalid 
Procedure Codes, Table 6E.--Revised Diagnosis Code Titles or Table 
6F.--Revised Procedure Code Titles in association with the proposed 
rule. Accordingly, any update to the title of the procedure codes 
describing utilization of an aprevoTM customized interbody 
spinal fusion device, if finalized following the March meeting, would 
be reflected in Table 6F.--Revised Procedure Code Titles associated 
with the final rule for FY 2024.
    Based on our review of this issue and our analysis of the claims 
data, we agree that the findings appear to indicate that cases 
reporting the performance of a procedure utilizing an 
aprevoTM customized interbody spinal fusion device reflect a 
higher consumption of resources. However, due to the concerns expressed 
with respect to suspected inaccuracies of the coding and therefore, 
reliability of the claims data, we believe further review is warranted. 
In addition, as previously discussed, the proposal to revise the 
current code descriptions was presented at the March 2023 ICD-10 
Coordination and Maintenance Committee meeting and if finalized, the 
revised coding may improve the reporting of procedures where an 
aprevoTM customized interbody spinal fusion device is 
utilized. We also believe that because this technology is currently 
receiving new technology add-on payments, it would be advantageous to 
allow for more claims data to be analyzed under the application of the 
policy in consideration of any future modifications to the MS-DRGs for 
which the technology is utilized in the performance of a spinal fusion 
procedure.
    With regard to possible future action, we will continue to monitor 
the claims data for resolution of the potential coding issues 
identified by the requestor. Because the procedure codes that we 
analyzed and presented findings for in this FY 2024 IPPS/LTCH PPS 
proposed rule may be revised based on the proposal as discussed at the 
March 2023 ICD-10 Coordination and Maintenance Committee meeting, the 
claims data that we examine in the future may change. However, we will 
continue to collaborate with the American Hospital Association (AHA) as 
one of the four Cooperating Parties through the AHA's Coding Clinic for 
ICD-10-CM/PCS and provide further education on spinal fusion procedures 
utilizing an aprevoTM customized interbody spinal fusion 
device and the proper reporting of the ICD-10-PCS spinal fusion 
procedure codes. Until these potential coding inaccuracies are 
addressed and additional, future analysis of the procedures being 
reported in the claims data can occur, we believe it would be premature 
to propose any MS-DRG modifications for spinal fusion procedures 
utilizing an aprevoTM customized interbody spinal fusion 
device at this time. For these reasons, we are proposing to maintain 
the current structure of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 
460 for FY 2024.
9. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract): 
Complications of Arteriovenous Fistulas and Shunts
    We received a request to add eight ICD-10-CM diagnosis codes to the 
list of principal diagnoses assigned to MS-DRGs 673, 674, and 675 
(Other Kidney and Urinary Tract Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the 
Kidney and Urinary Tract) when reported with procedure codes describing 
the insertion of totally implantable vascular access devices (TIVADs) 
and tunneled vascular access devices. The list of eight ICD-10-CM 
diagnosis codes submitted by the requestor, as well as their current 
MDC assignments, are found in the table:

[[Page 26730]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.073

    In order to be treated with dialysis, a procedure that replaces 
kidney function when the organs fail, a connection must be established 
between the dialysis equipment and the patient's bloodstream. To 
establish long-term hemodialysis access, an arteriovenous (AV) fistula 
or an AV shunt can be surgically created. An AV fistula is created by 
suturing an artery directly to a vein, generally in the wrist, forearm, 
inner elbow or upper arm. AV fistulas usually require from 8 to 12 
weeks for maturation prior to initial use. AV shunts, also called AV 
grafts, are created by connecting an artery and a vein using a graft 
made of synthetic material. AV shunts do not require maturation, as AV 
fistulas do, and they can be used for hemodialysis in as little as 24 
hours after creation depending upon the type of graft that is used. The 
requestor noted that diagnosis codes that describe complications of 
dialysis catheters currently are in the list of qualifying principal 
diagnoses in MS-DRGs 673, 674, and 675 when reported with procedure 
codes describing the insertion of TIVADs or tunneled vascular access 
devices; therefore, according to the requestor, diagnosis codes that 
describe complications of arteriovenous fistulas and shunts should 
reasonably be added.
    To begin our analysis, we reviewed the GROUPER logic for MS-DRGs 
673, 674, and 675 including the special logic in MS-DRGs 673, 674, and 
675 for certain MDC 11 diagnoses reported with procedure codes for the 
insertion of tunneled or totally implantable vascular access devices. 
We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 
40.1, which is available 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 673, 674, and 675.
    As discussed in the FY 2003 IPPS/LTCH PPS final rule (67 FR 49993 
through 49994), the procedure code for the insertion of totally 
implantable vascular access devices was added to the GROUPER logic of 
DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the 
predecessor DRG of MS-DRGs 673, 674, and 675, when combined with 
principal diagnoses specifically describing renal failure, recognizing 
that inserting these devices as an inpatient procedure for the purposes 
of hemodialysis can lead to higher average charges and longer lengths 
of stay for those cases. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 
58511 through 58517), we discussed a similar request to add 29 ICD-10-
CM diagnosis codes to the list of principal diagnoses assigned to MS-
DRGs 673, 674, and 675. In the FY 2021 IPPS/LTCH PPS final rule, we 
finalized the assignment of diagnosis codes that describe diabetes 
mellitus with diabetic chronic kidney disease, codes that describe 
complications of kidney transplant and codes that describe mechanical 
complications of vascular dialysis catheters to the list of qualifying 
principal diagnoses in MS-DRGs 673, 674, and 675 and stated that we 
believed the insertion of TIVADs or tunneled vascular access devices 
for the purposes of hemodialysis was clinically related to these 
diagnosis codes. We stated that for clinical coherence, the cases 
reporting these diagnoses should be grouped with the subset of cases 
that report the insertion of totally implantable vascular access 
devices or tunneled vascular access devices as an inpatient procedure 
for the purposes of hemodialysis for renal failure.
    We reviewed the eight diagnosis codes submitted by the requestor. 
Diagnosis codes T82.510A, T82.511A, T82.520A, T82.521A, T82.530A, 
T82.531A, T82.590A and T82.591A describe mechanical complications of 
arteriovenous fistulas and shunts and are currently assigned to MDC 05 
(Diseases and Disorders of the Circulatory System). The eight diagnosis 
codes would require reassignment to MDC 11 in MS-DRGs 673, 674, and 675 
to group with the subset of cases that report the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
as an inpatient procedure for the purposes of hemodialysis for renal 
failure. We examined claims data from the September 2022 update of the 
FY 2022 MedPAR file for all cases reporting procedures describing the 
insertion of TIVADs or tunneled vascular access devices with a 
principal diagnosis describing mechanical complications of 
arteriovenous fistulas and shunts and compared these data to cases in 
MS-DRGs 673, 674 and 675. The following table shows our findings:

[[Page 26731]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.074

    As shown in the table, there were 13,904 cases in MS-DRG 673 with 
an average length of stay of 12.1 days and average costs of $31,946. 
There were 748 cases reporting a principal diagnosis describing 
mechanical complications of arteriovenous fistulas and shunts, with a 
secondary diagnosis of MCC, and a procedure code for the insertion of a 
TIVAD or tunneled vascular access device with an average length of stay 
of 6 days and average costs of $24,467. There were 5,532 cases in MS-
DRG 674 with an average length of stay of 7.8 days and average costs of 
$20,702. There was one case reporting a principal diagnosis describing 
mechanical complications of arteriovenous fistulas and shunts, with a 
secondary diagnosis of CC, and a procedure code for the insertion of a 
TIVAD or tunneled vascular access device with a length of stay of three 
days and costs of $6,418. There were 303 cases in MS-DRG 675 with an 
average length of stay of 3.6 days and average costs of $13,343. There 
were zero cases reporting a principal diagnosis describing mechanical 
complications of arteriovenous fistulas and shunts, without a secondary 
diagnosis of CC or MCC, and a procedure code for the insertion of a 
TIVAD or tunneled vascular access device. We note that the average 
length of stay and average costs of cases reporting a principal 
diagnosis describing mechanical complications of arteriovenous fistulas 
and shunts and the insertion of a TIVAD or a tunneled vascular access 
device are lower than for all cases in MS-DRGs 673 and 674, 
respectively.
    To further examine the impact of moving the eight MDC 05 diagnoses 
into MDC 11, we analyzed claims data for cases reporting an O.R. 
procedure assigned to MDC 05 and a principal diagnosis describing 
mechanical complications of arteriovenous fistulas and shunts. Our 
findings are reflected in the following table:

[[Page 26732]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.075

    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 shown 
in the table, if we were to move the eight diagnosis codes describing 
mechanical complications of arteriovenous fistulas and shunts from MDC 
05 to MDC 11, 1,581 cases would be assigned to the surgical class 
referred to as ``unrelated operating room procedures'' as an unintended 
consequence. The data also indicates that there were more cases that 
reported an O.R. procedure assigned to MDC 05 with a principal 
diagnosis describing mechanical complications of arteriovenous fistulas 
and shunts than there were cases reporting a principal diagnosis 
describing mechanical complications of arteriovenous fistulas and 
shunts and a procedure code for the insertion of a TIVAD or tunneled 
vascular access device (1,581 cases versus 749 cases) demonstrating 
that inpatient admissions for mechanical complications of arteriovenous 
fistulas and shunts more typically have an O.R. procedure assigned to 
MDC 05 performed.
    We also reviewed the cases reporting an O.R. procedure assigned to 
MDC 05 and a principal diagnosis describing mechanical complications of 
arteriovenous fistulas and shunts to identify the top ten O.R. 
procedures assigned to MDC 05 that were reported within the claims data 
for these cases. Our findings are shown in the following table:

[[Page 26733]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.076

    As noted previously, if we were to move the eight diagnosis codes 
describing mechanical complications of arteriovenous fistulas and 
shunts to MDC 11, cases reporting one of the O.R. procedures assigned 
to MDC 05 shown in the table would be assigned to the surgical class 
referred to as ``unrelated operating room procedures'' as an unintended 
consequence.
    Based on the results of our analysis, we do not support adding the 
eight diagnosis codes that describe mechanical complications of 
arteriovenous fistulas and shunts to the special logic in MS-DRGs 673, 
674, and 675. As discussed previously, these diagnosis codes are 
assigned to MDC 05 (Diseases and Disorders of the Circulatory System). 
We note that patients can sometimes require the insertion of tunneled 
or totally implantable vascular access devices for hemodialysis while 
surgically created AV fistulas or AV shunts are unable to be accessed 
due to mechanical complications, however more often these mechanical 
complications related to AV fistulas or AV shunts require inpatient 
admission for vascular surgery to be effectively treated. We believe 
that the eight diagnosis codes describing mechanical complications of 
arteriovenous fistulas and shunts are most clinically aligned with the 
diagnosis codes assigned to MDC 05 (where they are currently assigned). 
We also believe it would not be appropriate to move these diagnoses 
into MDC 11 because it would inadvertently cause cases reporting the 
eight diagnosis codes that describe mechanical complications of 
arteriovenous fistulas and shunts with O.R. procedures assigned to MDC 
05 to be assigned to an unrelated MS-DRG.
    Therefore, for the reasons discussed, we are not proposing to add 
the following eight ICD-10-CM codes to the list of principal diagnosis 
codes for MS-DRGs 673, 674, and 675 when reported with a procedure code 
describing the insertion of a TIVAD or a tunneled vascular access 
device: T82.510A, T82.511A, T82.520A, T82.521A, T82.530A, T82.531A, 
T82.590A and T82.591A.
10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 
Through 989
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move cases reporting these procedure codes out of 
these MS-DRGs into one of the surgical MS-DRGs for the MDC into which 
the principal diagnosis falls. The data are arrayed in two ways for 
comparison purposes. We look at a frequency count of each major 
operative procedure code. We also compare procedures across MDCs by 
volume of procedure codes within each MDC. We use this information to 
determine which procedure codes and diagnosis codes to examine. We 
identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
We also consider whether it would be more appropriate to move the 
principal diagnosis codes into the MDC to which the procedure is 
currently assigned.
    Based on the results of our review of the claims data from the 
September 2022 update of the FY 2022 MedPAR file of cases found to 
group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we are 
proposing to move the cases reporting the procedures and/or principal 
diagnosis codes described in this section of this rule from MS-DRGs 981 
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs 
for the MDC into which the principal diagnosis or procedure is 
assigned.
a. Percutaneous Endoscopic Resection of Colon
    During our review of the cases that group to MS-DRGs 981 through 
983, we

[[Page 26734]]

noted that when ICD-10-PCS procedure code 0DTN4ZZ (Resection of sigmoid 
colon, percutaneous endoscopic approach) is reported with a principal 
diagnosis in MDC 11 (Diseases and Disorders of the Kidney and Urinary 
Tract), the cases group to MS-DRGs 981 through 983. The principal 
diagnosis most frequently reported with ICD-10-PCS procedure code 
0DTN4ZZ in MDC 11 is ICD-10-CM code N32.1 (Vesicointestinal fistula). 
ICD-10-PCS procedure code 0DTN4ZZ currently groups to several MDCs, 
which are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.077

    We examined claims data from the September 2022 update of the FY 
2022 MedPAR file to identify the average length of stay and average 
costs for cases reporting procedure code 0DTN4ZZ with a principal 
diagnosis in MDC 11, which are currently grouping to MS-DRGs 981 
through 983, as well as all cases in MS-DRGs 981 through 983. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.078

    We then examined the MS-DRGs within MDC 11 and determined that the 
cases reporting procedure code 0DTN4ZZ with a principal diagnosis in 
MDC 11 would most suitably group to MS-DRGs 673, 674, and 675 (Other 
Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/
MCC, respectively), which contain procedures performed on structures 
other than kidney and urinary tract anatomy.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRGs 673, 674, and 675 as a whole, we examined the average 
costs and length of stay for cases in MS-DRGs 673, 674, and 675. Our 
findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.079


[[Page 26735]]


    We reviewed the data and noted for this subset of cases, the 
average costs are higher and the average length of stays are shorter 
than for cases in MS-DRGs 673, 674, and 675. However, we believe that 
when ICD-10-PCS procedure code 0DTN4ZZ is reported with a principal 
diagnosis in MDC 11 (typically vesicointestinal fistula), the procedure 
is related to the principal diagnosis. Because vesicointestinal 
fistulas involve both the bladder and the bowel, some procedures in 
both MDC 06 (Diseases and Disorders of the Digestive System) and MDC 11 
(Diseases and Disorders of the Kidney and Urinary Tract) would be 
expected to be related to a principal diagnosis of vesicointestinal 
fistula (ICD-10-CM code N32.1). Therefore, we are proposing to add ICD-
10-PCS procedure code 0DTN4ZZ to MDC 11. Under this proposal, cases 
reporting procedure code 0DTN4ZZ with a principal diagnosis of 
vesicointestinal fistula (diagnosis code N32.1) in MDC 11 would group 
to MS-DRGs 673, 674, and 675.
b. Open Excision of Muscle
    During the review of the cases that group to MS-DRGs 981 through 
983, we noted that when ICD-10-PCS procedure codes describing the open 
excision of muscle are reported in conjunction with ICD-10-CM diagnosis 
codes in MDC 05 (Diseases and Disorders of the Circulatory System), the 
cases group to MS-DRGs 981 through 983. The list of 28 ICD-10-CM 
procedure codes reviewed, as well as their current MDC assignments, are 
found in the table:

[[Page 26736]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.080

    We refer the reader to Appendix E of the ICD-10 MS-DRG Version 40.1 
Definitions Manual (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatientPPS/MS-DRGClassifications-and-Software) for the MS-DRG assignment for each 
procedure code listed and further discussion of how each procedure code 
may be assigned to multiple MDCs and MS-DRGs under the IPPS.
    The principal diagnosis most frequently reported with the 28 ICD-
10-

[[Page 26737]]

PCS procedure codes describing the open excision of muscle in MDC 05 is 
ICD-10-CM code I96 (Gangrene, not elsewhere classified). Gangrene is a 
condition in which body tissue dies from not getting enough blood. It 
can cause changes in skin color, numbness or pain, swelling, and other 
symptoms. The combination of a procedure code describing the open 
excision of muscle and ICD-10-CM diagnosis code I96 indicates open 
debridement of muscle for gangrene was performed.
    We examined claims data from the September 2022 update of the FY 
2022 MedPAR file to identify the average length of stay and average 
costs for cases reporting a procedure code describing the open excision 
of muscle with a principal diagnosis in MDC 05, which are currently 
grouping to MS-DRGs 981 through 983, as well as all cases in MS-DRGs 
981 through 983. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.081

    We then examined the MS-DRGs within MDC 05 and determined that the 
cases reporting procedure codes describing the open excision of muscle 
with a principal diagnosis in MDC 05 would most suitably group to MS-
DRG 264 (Other Circulatory System O.R. Procedures), which contains 
procedures performed on structures other than circulatory anatomy.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRG 264 as a whole, we examined the average costs and 
length of stay for cases in MS-DRG 264. Our findings are shown in this 
table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.082

    We reviewed the data and noted for this subset of cases, in the 
``with MCC'' subgroup the average costs of the cases reporting 
procedure codes describing the open excision of muscle with a principal 
diagnosis in MDC 05 are slightly higher ($27,392 compared to $27,237) 
and the average length of stay is longer (11.7 days compared to 9.9 
days) than for all cases in MS-DRGs 264, while the cases in the ``with 
CC'' and the ``without CC/MCC'' subgroups have lower average costs 
($16,989 and $7,140 respectively compared to $27,237) and a shorter 
average length of stay (7.9 days and 4.7 days respectively compared to 
9.9 days) than for cases in MS-DRG 264. However, we believe that when a 
procedure code describing the open excision of muscle is reported with 
a principal diagnosis in MDC 05 (typically gangrene, not elsewhere 
classified), the procedure is related to the principal diagnosis. 
Because debridement, or the cutting away of dead and dying tissue, can 
be performed to keep gangrene from spreading, a procedure code 
describing the open excision of muscle would be expected to be related 
to a principal diagnosis of gangrene, not elsewhere classified 
(diagnosis code I96), and it is clinically appropriate for the 
procedures to group to the same MS-DRGs as the principal diagnoses. 
Therefore, we are proposing to add the 28 procedure codes listed 
previously to MDC 05. Under this proposal, cases reporting a procedure 
code describing the open excision of muscle with a principal diagnosis 
of gangrene, not elsewhere classified (diagnosis code I96) in MDC 05 
would group to MS-DRG 264.
c. Open Replacement of Skull With Synthetic Substitute
    During our review of the cases that group to MS-DRGs 981 through 
983, we noted that when ICD-10-PCS procedure code 0NR00JZ (Replacement 
of skull with synthetic substitute, open

[[Page 26738]]

approach) is reported with a principal diagnosis in MDC 09 (Diseases 
and Disorders of the Skin, Subcutaneous Tissue and Breast), the cases 
group to MS-DRGs 981 through 983. The principal diagnosis most 
frequently reported with ICD-10-PCS procedure code 0NR00JZ in MDC 09 is 
ICD-10-CM code Z42.8 (Encounter for other plastic and reconstructive 
surgery following medical procedure or healed injury).
    ICD-10-PCS procedure code 0NR00JZ currently groups to several MDCs, 
which are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.083

    We examined claims data from the September 2022 update of the FY 
2022 MedPAR file to identify the average length of stay and average 
costs for cases reporting procedure code 0NR00JZ with a principal 
diagnosis in MDC 09, which are currently grouping to MS-DRGs 981 
through 983, as well as all cases in MS-DRGs 981 through 983. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.084

    We then examined the MS-DRGs within MDC 09 and determined that the 
cases reporting procedure code 0NR00JZ with a principal diagnosis in 
MDC 09 would most suitably group to MS-DRGs 579, 580, and 581 (Other 
Skin, Subcutaneous Tissue and Breast Procedures with MCC, with CC, and 
without CC/MCC, respectively) given the nature of the procedure. MS-
DRGs 579, 580, and 581 contain procedures assigned to MDC 09 that do 
not fit within the specific surgical MS-DRGs in MDC 09, which are: skin 
graft; skin debridement; mastectomy for malignancy; and breast biopsy, 
local excision, and other breast procedures.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRGs 579, 580, and 581 as a whole, we examined the average 
costs and length of stay for cases in MS-DRGs 579, 580, and 581. Our 
findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.085


[[Page 26739]]


    We reviewed the data and noted for this subset of cases, the 
average costs are higher and the average length of stays are shorter 
than for cases in MS-DRGs 579, 580, and 581. However, we believe that 
when ICD-10-PCS procedure code 0NR00JZ is reported with a principal 
diagnosis in MDC 09 (typically encounter for other plastic and 
reconstructive surgery following medical procedure or healed injury), 
the procedure is related to the principal diagnosis.
    Open brain surgeries that require removing a portion of the skull, 
for indications such as brain tumor resection, hydrocephalus shunt 
implantation, cerebral aneurysm clipping, evacuation of a brain 
hemorrhage, microvascular decompression, and lobectomy, can sometimes 
result in a residual cranial defect. We believe that it is clinically 
appropriate for the procedure to group to the same MS-DRGs as the 
principal diagnosis as procedure code 0NR00JZ can be used to describe 
cranial reconstruction procedures that involve applying a cranial 
prosthetic device to address the residual bony void and/or defect to 
restore the natural contours of the skull.
    Therefore, we are proposing to add ICD-10-PCS procedure code 
0NR00JZ to MDC 09. Under this proposal, cases reporting procedure code 
0NR00JZ with a principal diagnosis in MDC 09 (such as encounter for 
other plastic and reconstructive surgery following medical procedure or 
healed injury) would group to MS-DRGs 579, 580, and 581.
d. Endoscopic Dilation of Ureters With Intraluminal Device
    During the review of the cases that group to MS-DRGs 987 through 
989, we noted that when ICD-10-PCS procedure codes describing the 
endoscopic dilation of ureters with an intraluminal device are reported 
in conjunction with ICD-10-CM diagnosis codes in MDC 05 (Diseases and 
Disorders of the Circulatory System), the cases group to MS-DRGs 987 
through 989. The principal diagnosis most frequently reported with ICD-
10-PCS procedure codes describing the endoscopic dilation of ureters 
with an intraluminal device in MDC 05 is ICD-10-CM code I13.0 
(Hypertensive heart and chronic kidney disease with heart failure and 
stage 1 through stage 4 chronic kidney disease, or unspecified chronic 
kidney disease).
    In the following tables, the ICD-10-PCS procedure codes describing 
the endoscopic dilation of ureters with an intraluminal device are 
listed, as well as their MDC and MS-DRG assignments.
[GRAPHIC] [TIFF OMITTED] TP01MY23.086

[GRAPHIC] [TIFF OMITTED] TP01MY23.087

    We examined claims data from the September 2022 update of the FY 
2022 MedPAR file to identify the average length of stay and average 
costs for cases reporting procedure code 0T768DZ, 0T778DZ or 0T788DZ 
with a principal diagnosis in MDC 05, which are currently grouping to 
MS-DRGs 987 through 989, as well as all cases in MS-DRGs 987 through 
989. Our findings are shown in the following table.

[[Page 26740]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.088

    We then examined the MS-DRGs within MDC 05 and determined that the 
cases reporting procedure codes describing the endoscopic dilation of 
ureters with an intraluminal device with a principal diagnosis in MDC 
05 would most suitably group to MS-DRG 264 (Other Circulatory System 
O.R. Procedures), which contains procedures performed on structures 
other than circulatory anatomy.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRG 264 as a whole, we examined the average costs and 
length of stay for cases in MS-DRG 264. Our findings are shown in this 
table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.089

    We reviewed these data and noted that the average costs for this 
subset of cases, most of which group to MS-DRG 987, are lower than the 
average costs than for cases in MS-DRG 264. However, we believe that 
when a procedure code describing the endoscopic dilation of ureters 
with an intraluminal device is reported with a principal diagnosis in 
MDC 05 (typically hypertensive heart and chronic kidney disease with 
heart failure and stage 1 through stage 4 chronic kidney disease, or 
unspecified chronic kidney disease), the procedure is related to the 
principal diagnosis. Ureteral intraluminal devices are used to relieve 
ureteral obstruction by passively dilating the ureter to allow urine to 
drain through the center of the hollow intraluminal device as well as 
around the device. Indications for endoscopic ureteral intraluminal 
device placement include the uncomplicated ureteral obstruction due to 
causes such as nephrolithiasis, tumor, or retroperitoneal fibrosis, or 
obstruction complicated by urinary tract infection, renal 
insufficiency, or renal failure. As the endoscopic dilation of ureters 
with an intraluminal device would be expected to be related to a 
principal diagnosis of hypertensive heart and chronic kidney disease 
with heart failure and stage 1 through stage 4 chronic kidney disease, 
or unspecified chronic kidney disease, not elsewhere classified 
(diagnosis code I13.0), it is clinically appropriate for the procedures 
to group to the same MS-DRGs as the principal diagnoses.
    Therefore, we are proposing to add ICD-10-PCS procedure codes 
0T768DZ, 0T778DZ and 0T788DZ to MDC 05. Under this proposal, cases 
reporting procedure code 0T768DZ, 0T778DZ or 0T788DZ with a principal 
diagnosis of hypertensive heart and chronic kidney disease with heart 
failure and stage 1 through stage 4 chronic kidney disease, or 
unspecified chronic kidney disease (I13.0) in MDC 05 would group to MS-
DRG 264.
e. Occlusion of Splenic Artery
    During our review of the cases currently grouping to MS-DRGs 987 
through 989, we noted that when ICD-10-PCS procedure codes describing 
the occlusion of the splenic artery are reported in conjunction with 
ICD-10-CM diagnosis codes in MDC 16 (Diseases and Disorders of Blood, 
Blood Forming Organs and Immunologic Disorders), the cases group to MS-
DRGs 987 through 989. The principal diagnosis most frequently reported 
with ICD-10-PCS procedure codes describing the occlusion of the splenic 
artery in MDC 16 is ICD-10-CM code S36.032A (Major laceration of 
spleen, initial encounter).
    In the following tables, the ICD-10-PCS procedure codes describing 
the occlusion of the splenic artery are listed, as well as their MDC 
and MS-DRG assignments.

[[Page 26741]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.090

[GRAPHIC] [TIFF OMITTED] TP01MY23.091

    We examined claims data from the September 2022 update of the FY 
2022 MedPAR file to identify the average length of stay and average 
costs for cases reporting procedure codes describing the occlusion of 
the splenic artery with a principal diagnosis in MDC 16, which are 
currently grouping to MS-DRGs 987 through 989, as well as all cases in 
MS-DRGs 987 through 989. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.092


[[Page 26742]]


    We then examined the MS-DRGs within MDC 16 and determined that the 
cases reporting a procedure code describing the occlusion of the 
splenic artery with a principal diagnosis in MDC 16 would most suitably 
group to MS-DRGs 799, 800, and 801 (Splenectomy with MCC, with CC, and 
without CC/MCC, respectively) given the nature of the procedure.
    We note, as discussed in section II.C.1.b of this proposed rule, 
using the December 2022 update of the FY 2022 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 2024. Findings from our analysis indicate that MS-DRGs 799, 800, 
and 801 as well as approximately 44 other base 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 Table 6P.10b associated 
with this proposed rule (which is available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the list of the 135 MS-DRGs that would 
potentially be subject to deletion and the list of the 86 new MS-DRGs 
that would potentially be created if the NonCC subgroup criteria was 
applied.
    To determine how the resources for this subset of cases compared to 
cases in MS-DRGs 799, 800, and 801 as a whole, we examined the average 
costs and length of stay for cases in MS-DRGs 799, 800, and 801. Our 
findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.093

BILLING CODE 4120-01-C
    We reviewed these data and noted that the average length of stay 
and average costs of the subset of cases reporting a procedure code 
describing the occlusion of the splenic artery with a principal 
diagnosis in MDC 16 are more similar to those of cases in MS-DRGs 799, 
800, and 801. We also note that in cases of splenic injury, the 
diagnosis and prompt management of potentially life-threatening 
hemorrhage is the primary goal. Procedures to occlude the splenic 
artery, such as splenic embolization, can be performed for spleen 
injuries, such as lacerations, in order to manage bleeding prior to or 
instead of more invasive splenic procedures. A procedure code 
describing the occlusion of the splenic artery would be expected to be 
related to a principal diagnosis of a major laceration of spleen, 
initial encounter (diagnosis code S36.032A) and it is clinically 
appropriate for the procedures to group to the same MS-DRGs as the 
principal diagnoses.
    Given the similarity in resource use between this subset of cases 
and cases in MS-DRGs 799, 800, and 801, and that we believe that 
procedure codes describing the occlusion of the splenic artery are 
related to principal diagnoses in MDC 16 (typically major laceration of 
spleen, initial encounter), these cases would be more appropriately 
assigned to MS-DRGs 799, 800, and 801 in MDC 16 than their current 
assignment in MS-DRGs 987 through 989. Therefore, we are proposing to 
add the nine procedure codes listed in the previous table that describe 
the occlusion of the splenic artery to MDC 16 (Diseases and Disorders 
of Blood, Blood Forming Organs and Immunologic Disorders) in MS-DRGs 
799, 800, and 801. Under this proposal, cases reporting a principal 
diagnosis of a major laceration of spleen, initial encounter (S36.032A) 
with a procedure describing the occlusion of the splenic artery would 
group to MS-DRGs 799, 800, and 801.
    During the review of this issue, we noted that a splenectomy is a 
surgical operation involving removal of the spleen, however the GROUPER 
logic list for MS-DRGs 799, 800, and 801 does not exclusively contain 
procedure codes that describe the removal of the spleen. We refer the 
reader to the ICD-10 MS-DRG Version 40.1 Definitions Manual (which is 
available 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 MS-DRGs 
799, 800, and 801. Therefore, we are also proposing to revise the 
titles of MDC 16 MS-DRGs 799, 800, and 801 from ``Splenectomy with MCC, 
with CC, and without CC/MCC, respectively'' to ``Splenic Procedures 
with MCC, with CC, and without CC/MCC, respectively'' to better reflect 
the assigned procedures.
    In addition to the internal review of procedures producing 
assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, 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. We did not receive any requests suggesting 
reassignment.
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether 
any of those procedures should be reassigned from one of those two 
groups of MS-DRGs to the other group of MS-DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS-DRG assignment illogical. If we find these shifts, we 
would propose to move cases to keep the MS-DRGs clinically similar or 
to provide payment for the cases in a similar manner.
    Additionally, 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 for the cases to be 
reassigned from one of the MS-DRG groups to the other. Based on the 
results of our review of the claims data from the September 2022 update 
of the FY 2022 MedPAR file we did not identify any cases for 
reassignment. We also did not receive any requests suggesting 
reassignment. Therefore, for FY 2024 we are not proposing to move any 
cases

[[Page 26743]]

reporting procedure codes from MS-DRGs 981 through 983 to MS-DRGs 987 
through 989 or vice versa.
11. Operating Room (O.R.) and Non-O.R. Procedures
a. Background
    Under the IPPS MS-DRGs (and former CMS 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, we 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.C.13 of the preamble of this proposed rule, we are making 
Table 6B.--New Procedure Codes--FY 2024 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 40.1 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 (84 FR 19158), 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 multiyear 
project during which we will also review the process for determining 
when a procedure is considered an operating room procedure. For 
example, we may restructure the current O.R. and non-O.R. designations 
for procedures by leveraging the detail that is now available in the 
ICD-10 claims data. We refer readers to the discussion regarding the 
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38066) where we stated that the determination of when a 
procedure code should be designated as an O.R. procedure has become a 
much more complex task. This is, in part, due to the number of various 
approaches available in the ICD-10-PCS classification, as well as 
changes in medical practice. While we have typically evaluated 
procedures on the basis of whether or not they would be performed in an 
operating room, we believe that there may be other factors to consider 
with regard to resource utilization, particularly with the 
implementation of ICD-10.
    We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a 
result of this planned review and potential restructuring, procedures 
that are currently designated as O.R. procedures may no longer warrant 
that designation, and conversely, procedures that are currently 
designated as non-O.R. procedures may warrant an O.R. type of 
designation. We intend to consider the resources used and how a 
procedure should affect the MS-DRG assignment. We may also consider the 
effect of specific surgical approaches to evaluate whether to subdivide 
specific MS-DRGs based on a specific surgical approach. We stated 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. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25158) 
and final rule (86 FR 44891), and FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28174) and final rule (87 FR 48862), we stated that in 
consideration of the ongoing PHE, we believed it may be appropriate to 
allow additional time for the claims data to stabilize prior to 
selecting the timeframe to analyze for this review.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we continue to 
believe additional time is necessary as we continue to develop our 
process and methodology. Therefore, we will provide more detail on this 
analysis and the methodology for conducting this review in future 
rulemaking.
    We received the following requests regarding changing the 
designation of specific ICD-10-PCS procedure codes from non-O.R. to 
O.R. procedures. We summarize these requests in this section of this 
rule and address why we are not considering a change to the designation 
of these codes at this time.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48863), we discussed 
a request we received to change the

[[Page 26744]]

designation of all ICD-10-PCS codes that describe diagnostic and 
therapeutic percutaneous endoscopic procedures performed on thoracic 
and abdominal organs, from non-O.R. to O.R. In the FY 2023 final rule, 
we stated that 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. We stated 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. We also stated that 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 this FY 2024 IPPS/LTCH PPS proposed rule, we again 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 from the same requestor. According to the requestor, diagnostic and 
therapeutic thoracoscopic and laparoscopic procedures on thoracic and 
abdominal organs are always performed in the operating room under 
complex general anesthesia. The requestor did not provide a specific 
list of the procedure codes that describe diagnostic and therapeutic 
percutaneous endoscopic procedures performed on thoracic and abdominal 
organs and are currently designated as non-O.R. for CMS for review, to 
narrow the scope of this repeat request.
    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; in other words, the 
performance of a procedure in an operating room is not the sole 
determining factor we consider as we examine the designation of a 
procedure in the ICD-10-PCS classification system. 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. 
As also stated in prior rulemaking, we plan to conduct a comprehensive, 
systematic review of the ICD-10-PCS procedure codes. Rather than 
evaluating this subset of procedure codes in isolation, as any 
potential change to the designation of these codes requires significant 
review, we continue to believe that analysis of the designation of the 
procedure codes describing diagnostic and therapeutic percutaneous 
endoscopic procedures performed on thoracic and abdominal organs should 
be performed across the MS-DRGs, as part of the comprehensive procedure 
code review. Therefore, for the reasons discussed, we are not proposing 
any changes 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. for 
FY 2024. As diagnostic and therapeutic percutaneous endoscopic 
procedures performed on thoracic and abdominal organs differ greatly in 
terms of clinical factors such as procedure complexity and resource 
utilization, we invite 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 when evaluating this 
subset of procedure codes as part of the comprehensive procedure code 
review. Feedback and other suggestions may be submitted by October 20, 
2023, and directed to the new electronic intake system, Medicare 
Electronic Application Request Information SystemTM 
(MEARISTM), discussed in section II.C.1.b of the preamble of 
this proposed rule at: https://mearis.cms.gov/public/home.
    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 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.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP01MY23.094

BILLING CODE 4120-01-C
    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.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48863 through 
48865), we discussed a request we received to re-examine this change in 
designation. In the FY 2023 final rule, we did not make changes to the 
designation of these codes and stated 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. We stated that 
our analysis of the September 2021 update of the FY 2021 MedPAR file 
reflected that 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 
indicated at least one procedure code designated as an O.R. procedure 
was also reported in these cases. We also 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.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we again received a 
request to re-examine the designation of the 22 procedure codes that 
describe the open drainage of subcutaneous tissue and fascia as non-
O.R. procedures from the same requestor. The requestor stated that CMS 
should return the designation of these procedure codes to O.R. 
procedures to reflect the operating room resources utilized in the 
performance of these procedures and suggested that CMS analyze claims 
containing the 22 ICD-10-PCS codes to determine the percentage that 
contained timed O.R. charges billed under revenue code 360. The 
requestor also indicated there was confusion about the coded claims 
data as presented in the FY 2023 final rule. The requestor noted that 
the 22 procedure codes that describe the open drainage of subcutaneous 
tissue and fascia were designated as O.R. procedures in FY 2021 so it 
was unclear to the requestor why the table displayed by CMS associated 
with the FY 2023 final rule contained assignment to medical MS-DRGs.
    First, in response to the question about the coded claims data as 
presented in the FY 2023 final rule, we note as generally stated in the 
preamble

[[Page 26746]]

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. The FY 2021 MedPAR claims data 
presented in the FY 2023 final rule were regrouped using the proposed 
FY 2023 MS-DRG classifications. In the proposed FY 2023 GROUPER, the 
procedure codes that describe the open drainage of subcutaneous tissue 
and fascia no longer impacted MS-DRG assignment and that is the reason 
why assignments to medical DRGs were displayed in Table 6P.1f 
associated with the FY 2023 final rule.
    Next, we refer the reader to Table 6P.8a associated with this 
proposed rule (which is available 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 2022 update of the FY 2022 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.8a associated 
with this proposed rule, column B displays the category of each MS-DRG 
in MS-DRG GROUPER Version 40.1. The letter M is used to designate a 
medical MS-DRG and the letter P is used to designate a surgical MS-DRG. 
Overall, the data continues to indicate that the open drainage of 
subcutaneous tissue and fascia was not the underlying reason for, or 
main driver of, resource utilization for those cases. As shown in the 
table, when the procedure codes that describe the open drainage of the 
subcutaneous tissue and fascia are reported, approximately 55% 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 40.1 Definitions Manual (which is available 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.
    We reviewed these data and continue to believe 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. 
As stated in prior rulemaking, 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 also note that, as stated in prior rulemaking (84 FR 42069), in 
deciding whether to propose to make further modifications to the MS-
DRGs for particular circumstances brought to our attention, we do not 
consider the reported revenue codes. Rather, as stated previously, 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 do 
this by evaluating the ICD-10-CM diagnosis and/or ICD-10-PCS procedure 
codes that identify the patient conditions, procedures, and the 
relevant MS-DRG(s) that are the subject of a request. Specifically, for 
this request, we analyzed the cases reporting the ICD-10-PCS procedure 
codes that describe the open drainage of subcutaneous tissue and 
fascia. We then evaluated patient care costs using average costs and 
average lengths of stay (based on the MedPAR data) to detect if, and in 
what way, the performance of these procedures 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 continue to believe 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, for the reasons discussed, we are not proposing 
changes to the designation of the 22 codes that describe the open 
drainage of subcutaneous tissue and fascia listed in the previous table 
for FY 2024.
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2024
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

[[Page 26747]]

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 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 final rule (87 FR 48866), 
we stated that as the new unspecified edit became effective beginning 
with discharges on and after April 1, 2022, we 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.
    In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181), 
we also requested public comments on how the reporting of diagnosis 
codes in categories Z55-Z65 might improve our ability to recognize 
severity of illness, complexity of illness, and/or utilization of 
resources under the MS-DRGs. 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,'' \7\ we stated we were also interested in 
receiving feedback on how we might otherwise foster the documentation 
and reporting of the

[[Page 26748]]

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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    \7\ Available at: https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
---------------------------------------------------------------------------

    We noted that 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.\8\ 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.
---------------------------------------------------------------------------

    \8\ Available at: https://health.gov/healthypeople/objectives-and-data/social-determinants-health.
---------------------------------------------------------------------------

    We received numerous public comments that expressed a variety of 
views on our comment solicitation, including many comments that were 
supportive, and others that offered specific suggestions for our 
consideration in future rulemaking. 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 recognize the impact SDOH 
have on the health of their patients. Many commenters also 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. In the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49202 through 49220), CMS finalized the ``Screening 
for Social Drivers of Health'' and ``Screen Positive Rate for Social 
Drivers of Health'' measures in the Hospital Inpatient Quality 
Reporting (IQR) Program. We refer readers to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48867 through 48872) for the complete discussion of 
the public comments received regarding the request for information on 
SDOH diagnosis codes as well as the following section of this proposed 
rule for our proposed changes to the severity level designation for 
certain diagnosis codes that describe homelessness for FY 2024.
    In this FY 2024 IPPS/LTCH PPS proposed rule, 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 through 
the FY 2022 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.
    For new diagnosis codes approved for FY 2024, 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 note 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.C.13 of this proposed rule for the discussion of 
the proposed changes to the ICD-10-CM and ICD-10-PCS coding systems for 
FY 2024.
c. Proposed Changes to Severity Levels
    As discussed earlier in this section, in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28177 through 28181), we requested public comments 
on how the reporting of diagnosis codes in categories Z55-Z65 might 
improve our ability to recognize severity of illness, complexity of 
illness, and/or utilization of resources under the MS-DRGs. 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 FY 2023 proposed 
rule, we stated CMS believed a potential starting point for discussion 
was consideration of the SDOH Z diagnosis codes describing homelessness 
as homelessness can be reasonably expected to have an impact on 
hospital utilization.
    To further examine the diagnosis codes that describe SDOH, in the 
FY 2023 proposed rule, we stated 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 included codes Z59.00 (Homelessness, 
unspecified), Z59.01 (Sheltered homelessness), and code Z59.02 
(Unsheltered homelessness).
    We also displayed 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 was no data for codes Z59.01 
(Sheltered homelessness) and code Z59.02 (Unsheltered homelessness) as 
these codes became effective on October 1, 2021. We stated that when 
examining diagnosis code Z59.0 (Homelessness) in FY 2019 and FY 2020, 
the data suggested 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. However, in FY 2021, the data 
suggested that 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 stated we were uncertain if the 
data from FY 2021, in particular, reflected 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

[[Page 26749]]

available field on the claim when other diagnoses are reported instead.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we again reviewed the 
data on the impact on resource use for the ICD-10-CM SDOH Z codes that 
describe homelessness, currently designated as NonCC, when reported as 
a secondary diagnosis. The following table reflects the impact on 
resource use data generated using claims from the September 2022 update 
of the FY 2022 MedPAR file. 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-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] TP01MY23.095

    The table shows that the C1 finding is 1.75 for ICD-10-CM diagnosis 
code Z59.00, 2.00 for ICD-10-CM diagnosis code Z59.01, and 2.12 for 
ICD-10-CM diagnosis code Z59.02. A value close to 2.0 in column C1 
suggests that the secondary diagnosis is more aligned with a CC than a 
NonCC. Because the C1 values in the table are generally close to 2, the 
data suggest that when these three SDOH Z codes are reported as a 
secondary diagnosis, the resources involved in caring for a patient 
experiencing homelessness support increasing the severity level from a 
NonCC to a CC. The table also shows that the C2 finding was 2.19 for 
ICD-10-CM diagnosis code Z59.00, 2.24 for ICD-10-CM diagnosis code 
Z59.01, and 2.35 for ICD-10-CM diagnosis code Z59.02. A C2 value close 
to 2.0 suggests the condition is more like a CC than a NonCC, but not 
as significant in resource usage as an MCC when there is at least one 
other secondary diagnosis that is a CC but none that is an MCC. Because 
the C2 values in the table are generally close to 2, the data again 
suggests that when these three SDOH Z codes are reported as a secondary 
diagnosis, the resources involved in caring for a patient experiencing 
homelessness support increasing the severity level from a NonCC to a 
CC.
    As discussed in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 
through 58554), following the listening session on October 8, 2019, we 
reconvened an internal workgroup comprised of clinicians, consultants, 
coding specialists and other policy analysts to identify guiding 
principles to apply in evaluating whether changes to the severity level 
designations of diagnoses are needed and to ensure the severity 
designations appropriately reflect resource use based on review of the 
claims data, as well as consideration of relevant clinical factors (for 
example, the clinical nature of each of the secondary diagnoses and the 
severity level of clinically similar diagnoses) and improve the overall 
accuracy of the IPPS payments. In considering the nine guiding 
principles identified by the workgroup, as summarized previously, to 
illustrate how they might be applied in evaluating changes to the 
severity designations of diagnosis codes, we note that homelessness is 
a circumstance that can impede patient cooperation or management of 
care or both. In addition, patients experiencing homelessness can 
require a higher level of care by needing an extended length of stay. 
As discussed in the FY 2023 proposed rule, healthcare needs for 
patients experiencing homelessness (sheltered,\9\ unsheltered,\10\ or 
unspecified) may be associated with increased resource utilization.\11\ 
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.\12\ Longer hospital stays 
for these patients \13\ 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. 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,\14\ 
and studies have shown difficulties adhering to medication regimens 
among persons experiencing homelessness.\15\
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    \9\ ``Sheltered homelessness'' refers to people experiencing 
homelessness who were found in emergency shelters, safe havens, 
transitional housing, or other temporary settings. HUD Press Release 
No. 22-022, https://www.hud.gov/press/
press_releases_media_advisories/
hud_no_22_022#:~:text=HUD%20Releases%202021%20Annual%20Homeless%20Ass
essment%20Report%20Part%201,-
Report%20Suggests%20that&text=%E2%80%9CSheltered%20homelessness%E2%80
%9D%20refers%20to%20people,housing%2C%20or%20other%20temporary%20sett
ings. (accessed October 2022).
    \10\ Unsheltered homelessness refers to ``a primary nighttime 
residence that is a public or private place not designed for or 
ordinarily used as a regularly sleeping accommodation for human 
beings, including a car, park, abandoned building, bus or train 
station, airport, or camping ground.'' HUD. 2011. HEARTH Homeless 
Definition final rule, 24 CFR 578.3, https://www.govinfo.gov/content/pkg/FR-2011-12-05/pdf/2011-30942.pdf (accessed October 
2022).
    \11\ Koh HK, O'Connell JJ. Improving Health Care for Homeless 
People. JAMA. 2016;316(24):2586-2587. doi:10.1001/jama.2016.18760.
    \12\ 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/.
    \13\ 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.
    \14\ 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.
    \15\ 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.
---------------------------------------------------------------------------

    Therefore, after considering the C1 and C2 ratings of the three 
ICD-10-CM diagnosis codes that describe homelessness and consideration 
of the nine guiding principles, we are proposing to change the severity 
level designation for diagnosis codes Z59.00

[[Page 26750]]

(Homelessness, unspecified), Z59.01 (Sheltered homelessness), and 
Z59.02 (Unsheltered homelessness) from NonCC to CC for FY 2024. As 
discussed in the FY 2023 IPPS/LTCH PPS final rule, 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. We also expect that SDOH Z code 
reporting may continue to increase for a number of reasons, for 
example, newer SDOH screening performed as a result of new quality 
measures in the Hospital Inpatient Quality Reporting program. We may 
consider proposed changes for other SDOH codes in the future based on 
our analysis of the impact on resource use, per our methodology, as 
previously described, and consideration of the guiding principles. We 
also continue to be 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.
    Feedback and other suggestions may be submitted by October 20, 2023 
and directed to the electronic intake system, Medicare Electronic 
Application Request Information SystemTM 
(MEARISTM) at: https://mearis.cms.gov/public/home.
    Additionally, for this FY 2024 IPPS/LTCH PPS proposed rule, we 
received a request to change the severity level designations of three 
ICD-10-CM diagnosis codes. The requestor suggested the severity level 
of ICD-10-CM diagnosis code K76.72 (Hepatic encephalopathy) be changed 
from NonCC to CC or MCC; N14.11 (Contrast-induced nephropathy) be 
changed from NonCC to CC; and S06.2XAA (Diffuse traumatic brain injury 
with loss of consciousness status unknown, initial encounter) be 
changed from CC to MCC.
    We note that these three diagnosis codes became effective with 
discharges on and after October 1, 2022 (FY 2023) and the current 
claims data from the September 2022 update of the FY 2022 MedPAR file 
do not yet reflect these new diagnosis codes. The proposed and 
finalized severity level designations for these ICD-10-CM diagnosis 
codes were displayed in Table 6A- New Diagnosis Codes (associated with 
the FY 2023 proposed rule and final rule and available on the CMS 
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). As discussed earlier in this section, for 
new diagnosis codes approved for each fiscal year, consistent with our 
annual process for designating a severity level (MCC, CC or NonCC) for 
new diagnosis codes, in establishing the severity level of these codes, 
we first reviewed 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.
    Specifically, the predecessor code for K76.72 (Hepatic 
encephalopathy) was diagnosis code K72.90 (Hepatic failure, unspecified 
without coma) which is designated as a NonCC. When we reviewed and 
considered the factors as described previously, we did not believe that 
the resources required for hepatic encephalopathy exceeded the 
resources required for patients with hepatic failure, unspecified 
without coma as both conditions require treatment to rid the body of 
toxins. Therefore, our proposed and finalized severity level 
designation for hepatic encephalopathy was also a NonCC for FY 2023. 
Similarly, the predecessor code for N14.11 (Contrast-induced 
nephropathy) was diagnosis code N14.1 (Nephropathy induced by other 
drugs, medicaments and biological substances) which was designated as a 
NonCC. After review and consideration of the factors as described 
previously, we did not believe that the resources required for 
contrast-induced nephropathy exceeded the resources required for 
patients with nephropathy induced by other drugs, medicaments and 
biological substances, as code N14.11 was created as an expansion of 
the subcategory to identify contrast dyes as the substance causing 
nephropathy. Before the implementation of N14.11, the diagnosis was 
coded with N14.1. Therefore, our proposed and finalized severity level 
designation for contrast-induced nephropathy was also a NonCC. Lastly, 
the predecessor code for S06.2XAA (Diffuse traumatic brain injury with 
loss of consciousness status unknown, initial encounter) was diagnosis 
code S06.2X9A (Diffuse traumatic brain injury with loss of 
consciousness of unspecified duration, initial encounter) which is 
designated as a CC. When we reviewed and considered the factors as 
described previously, we did not believe that the resources required 
for diffuse traumatic brain injury with loss of consciousness status 
unknown, initial encounter exceeded the resources required for diffuse 
traumatic brain injury with loss of consciousness of unspecified 
duration, initial encounter, therefore our proposed and finalized 
severity level designation for diffuse traumatic brain injury with loss 
of consciousness status unknown, initial encounter was also a CC.
    As stated in prior rulemaking (85 FR 58560), generally, the 
proposed severity level ultimately depends on clinical judgement and, 
where the data is available, the empirical analysis of the additional 
resources associated with the secondary diagnosis. The impact of the 
secondary diagnosis is dependent on the principal diagnosis reported, 
with which it is associated. If the secondary diagnosis is reported 
primarily with a principal diagnosis that reflects serious illness with 
treatment complexity, then the marginal contribution of the secondary 
diagnosis to the overall resource use may actually be relatively small. 
We continue to believe that in the absence of claims data, the severity 
designation of these three codes as established in FY 2023 rulemaking 
is appropriate.
    We believe that claims data reflecting the reporting of these new 
diagnosis codes are needed for analysis prior to proposing changes to 
these three diagnosis codes. As stated 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 believe it is appropriate to consider these 
requests in connection with our continued comprehensive CC/MCC analysis 
in future rulemaking, using the available claims data, rather than 
proposing to change the designation of these individual ICD-10-CM 
diagnosis codes in the absence of such data at this time. 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. Proposed Additions and Deletions to the Diagnosis Code Severity 
Levels for FY 2024
    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

[[Page 26751]]

severity levels list for FY 2024 and are available 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 2024;
Table 6I.2--Proposed Deletions to the MCC List--FY 2024;
Table 6J.1--Proposed Additions to the CC List--FY 2024; and
Table 6J.2--Proposed Deletions to the CC List--FY 2024
e. Proposed CC Exclusions List for FY 2024
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) to preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    The ICD-10 MS-DRGs Version 40.1 CC Exclusion List is included as 
Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available 
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 an MCC only 
for patients discharged alive; otherwise, they are assigned as a NonCC.
    We are proposing additional changes to the ICD-10 MS-DRGs Version 
41 CC Exclusion List based on the diagnosis and procedure code updates 
as discussed in section II.C.13. of this FY 2024 IPPS/LTCH PPS proposed 
rule. Therefore, we have developed Table 6G.1.--Proposed Secondary 
Diagnosis Order Additions to the CC Exclusions List--FY 2024; Table 
6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2024; Table 6H.1.--Proposed Secondary Diagnosis 
Order Deletions to the CC Exclusions List--FY 2024; and Table 6H.2.--
Proposed Principal Diagnosis Order Deletions to the CC Exclusions 
List--FY 2024. For Table 6G.1, each secondary diagnosis code proposed 
for addition to the CC Exclusion List is shown with an asterisk and the 
principal diagnoses proposed to exclude the secondary diagnosis code 
are provided in the indented column immediately following it. For Table 
6G.2, each of the principal diagnosis codes for which there is a CC 
exclusion is shown with an asterisk and the conditions proposed for 
addition to the CC Exclusion List that will not count as a CC are 
provided in an indented column immediately following the affected 
principal diagnosis. For Table 6H.1, each secondary diagnosis code 
proposed for deletion from the CC Exclusion List is shown with an 
asterisk followed by the principal diagnosis codes that currently 
exclude it. For Table 6H.2, each of the principal diagnosis codes is 
shown with an asterisk and the proposed deletions to the CC Exclusions 
List are provided in an indented column immediately following the 
affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. 
associated with this proposed rule are available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    We also note that in our review of the CC Exclusion List, we 
identified a total of 668 diagnosis codes currently listed on various 
principal diagnosis collection lists that are not able to be reported 
as a principal diagnosis based on the ICD-10-CM Official Guidelines for 
Coding and Reporting. In addition, these codes are listed on the 
Medicare Code Editor (MCE) code edit lists for Unacceptable Principal 
Diagnosis or Manifestations not allowed as Principal Diagnosis. 
Therefore, we believe it is appropriate to remove these codes from the 
affected principal diagnosis collection lists for V41 of the GROUPER. 
Because we were unable to reflect these changes in Table 6G.1., 6G.2., 
6H.1., or 6H.2 at the time of the development of this proposed rule, we 
are providing a supplementary table, Table 6H.3--Principal Diagnosis 
Codes for Removal from CC Exclusion List--FY 2024 listing each of these 
668 diagnosis codes, including the code descriptions, the applicable 
MCE edit, and the current principal diagnosis collection list(s) where 
each code is currently listed and from which the code would be removed 
for the final FY 2024 V41 GROUPER. Table 6H.3 associated with this 
proposed rule is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
13. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2024, we have developed Table 6A.--New Diagnosis Codes, Table 
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 
6E.--Revised Diagnosis Code Titles for this proposed rule.
    These tables are not published in the Addendum to this proposed 
rule, but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
as described in section VI. of the Addendum to this proposed rule. As 
discussed in section II.C.16. of the preamble of this proposed rule, 
the code titles are adopted as part of the ICD-10 (previously ICD-9-CM) 
Coordination and Maintenance Committee meeting process. Therefore, 
although we publish the code titles in the IPPS proposed and final 
rules, they are not subject to comment in the proposed or final rules.

[[Page 26752]]

    We are proposing the MDC and MS-DRG assignments for the new 
diagnosis codes and procedure codes as set forth in Table 6A.--New 
Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, the 
proposed severity level designations for the new diagnosis codes are 
set forth in Table 6A. and the proposed O.R. status for the new 
procedure codes are set forth in Table 6B. 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 proposed 
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 and/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 proposed rule:

 Table 6A.--New Diagnosis Codes--FY 2024;
 Table 6B.--New Procedure Codes--FY 2024;
 Table 6C.--Invalid Diagnosis Codes--FY 2024;
 Table 6E.--Revised Diagnosis Code Titles--FY 2024;
 Table 6G.1.--Proposed Secondary Diagnosis Order Additions to 
the CC Exclusions List--FY 2024;
 Table 6G.2.--Proposed Principal Diagnosis Order Additions to 
the CC Exclusions List--FY 2024;
 Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to 
the CC Exclusions List--FY 2024;
 Table 6H.2.--Proposed Principal Diagnosis Order Deletions to 
the CC Exclusions List--FY 2024;
 Table 6I.1.--Proposed Additions to the MCC List--FY 2024;
 Table 6I.2.-Proposed Deletions to the MCC List--FY 2024;
 Table 6J.1.--Proposed Additions to the CC List--FY 2024; and
 Table 6J.2.--Proposed Deletions to the CC List--FY 2024.
14. Proposed Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48874), 
we made available the FY 2023 ICD-10 MCE Version 40 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 40 
(and ICD-10 MS-DRGs) are posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    For this FY 2024 IPPS/LTCH PPS proposed rule, we received one MCE 
request related to the Sex Conflict edit by the October 20, 2022 
deadline, as discussed further in this section of the preamble of this 
proposed rule. Additionally, we discuss the proposals we are making 
based on our internal review and analysis.
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.C.12. of the preamble of this proposed rule, Table 6A.--New 
Diagnosis Codes, lists the diagnosis codes that have been approved to 
date which will be effective with discharges on and after October 1, 
2023. We are proposing to add the ICD-10-CM diagnosis codes shown in 
Table 6P.9a associated with this proposed rule and available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS to the edit code list for the External causes 
of morbidity codes as principal diagnosis edit.
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-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) Perinatal/Newborn Diagnosis Category
    Under the ICD-10 MCE, the Perinatal/Newborn diagnoses category for 
the Age conflict edit considers the age range of 0 years only. For that 
reason, the diagnosis codes on this Age conflict edit list would be 
expected to apply to conditions or disorders which will only occur 
during the perinatal or newborn period of age 0.
    As discussed in section II.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2023. We are proposing to add new ICD-10-CM 
diagnosis codes Z05.81 (Observation and evaluation of newborn for 
suspected condition related to home physiologic monitoring device ruled 
out) and Z05.89 (Observation and evaluation of newborn for other 
specified suspected condition ruled out) to the edit code list for the 
Perinatal/Newborn diagnoses category under the Age conflict edit.
    In addition, as discussed in section II.C.12. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2023. Included 
in this table is ICD-10-CM diagnosis code Z05.8 (Observation and 
evaluation of newborn for other specified suspected condition ruled 
out) that is currently listed on the edit code list for the Perinatal/
Newborn diagnoses

[[Page 26753]]

category under the Age conflict edit. We are proposing to delete this 
code from the Perinatal/Newborn diagnoses edit code list.
(2) 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.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2023. We are proposing to add new ICD-10-CM 
diagnosis codes to the edit code list for the Maternity diagnoses 
category under the Age conflict edit.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.096

    In addition, as discussed in section II.C.12. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2023. Included 
in this table is ICD-10-CM diagnosis code O90.4 (Postpartum acute 
kidney failure) that is currently listed on the edit code list for the 
Maternity diagnoses category under the Age conflict edit. We are 
proposing to delete this code from the Maternity diagnoses edit code 
list.
(3) 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.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2023. We are proposing 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 26754]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.097


[[Page 26755]]


c. Sex Conflict Edit
    We received a request to reconsider sex conflict edits in 
connection with concerns related to claims processing for transgender 
individuals. The requestor raised concerns that the current edit is not 
clinically accurate and is inconsistent with equitable documentation of 
gender at the time of service. The requestor expressed concerns that 
automated systems are contributing to administrative burden for 
obstetrician-gynecologists because the sex conflict edit requires 
physicians to choose the sex assigned at birth only and that hospitals 
must include condition code 45 to override the edit for appropriate 
payment for certain surgeries or procedures. The requestor described 
that claims are inappropriately denied due to the edit singling out 
transgender individuals, contributing to continued alienation of 
transgender patients. The requestor further shared that obstetrician-
gynecologists have indicated that to provide high-quality, patient-
centered care, they need to be able to document a patient's gender 
identity along with their sex.\16\ We note that the requester raises a 
number of issues that are related to multiple prospective payment 
systems and broader aspects of health care, such as the electronic 
health record.
---------------------------------------------------------------------------

    \16\ We note that the requester used the phrase ``gender 
identity along with their sex''. We believe the requester was 
referring to ``sex assigned at birth'' in this context.
---------------------------------------------------------------------------

    We share the requester's concern that the original design of the 
sex conflict edits is descriptive of a patient's sex assigned at birth 
as submitted on a claim, which may not be fully reflective of the 
practice of medicine and patient-doctor interactions, as well that CMS 
policy and communications about the use of condition code 45 for 
institutional claims has not been re-examined in some time. As we state 
in the CMS Framework for Health Equity, 2022-2032,\17\ we strive to 
identify and remedy systemic barriers to equity so that every one of 
the people we serve has a fair and just opportunity to attain their 
optimal health regardless of race, ethnicity, disability, sexual 
orientation, gender identity, socioeconomic status, geography, 
preferred language, or other factors that affect access to care and 
health outcomes. CMS is committed to looking holistically at the 
concerns raised by the commenter across settings of care and will 
consider how to address for future rulemaking or guidance, and we thank 
the commenter for continuing to share firsthand experiences.
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    \17\ https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
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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.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2023. Included in this table are the following 
new ICD-10-CM diagnosis codes that we are proposing 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] TP01MY23.098

    In addition, as discussed in section II.C.12. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2023. Included 
in this table is ICD-10-CM diagnosis code H36 (Retinal disorders in 
diseases classified elsewhere) that is currently listed on the edit 
code list for the Manifestation code as principal diagnosis edit. We 
are proposing to delete this code from the Manifestation code as 
principal diagnosis edit code list.
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.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2023. We are proposing to add the following new 
ICD-10-CM diagnosis codes to the Unacceptable Principal Diagnosis edit 
code list.
BILLING CODE 4120-01-P

[[Page 26756]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.099

    In addition, as discussed in section II.C.12. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2023. Included 
in this table are the following

[[Page 26757]]

ICD-10-CM diagnosis codes that are currently listed on the Unacceptable 
Principal Diagnosis edit code list. We are proposing to delete these 
codes from the Unacceptable Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TP01MY23.100

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.C.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2023. We are proposing to add the following new 
ICD-10-CM diagnosis codes to the Unspecified code edit list.
[GRAPHIC] [TIFF OMITTED] TP01MY23.101


[[Page 26758]]


    In addition, we identified four diagnosis codes that were 
inadvertently omitted from the Unspecified code edit list effective 
with discharges on and after April 1, 2022. We therefore are proposing 
to also add the following ICD-10-CM diagnosis codes to the Unspecified 
code edit list effective with discharges on and after October 1, 2023.
[GRAPHIC] [TIFF OMITTED] TP01MY23.102

g. Future Enhancement
    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 System (MEARISTM), discussed in section 
II.C.1.b. of the preamble of this proposed rule at: https://mearis.cms.gov/public/home, by October 20, 2023.
15. Proposed Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
    Consequently, in many cases, the surgical hierarchy has an impact 
on more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this proposed rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we are proposing to make for FY 2024, as 
discussed in section II.C. of the preamble of this proposed rule, we 
are proposing to modify the existing surgical hierarchy for FY 2024 as 
follows.
    We are proposing to revise the surgical hierarchy for the MDC 04 
(Diseases and Disorders of the Respiratory System) MS-DRGs as follows: 
In the MDC 04 MS-DRGs, we are proposing to sequence proposed new MS-DRG 
173 (Ultrasound Accelerated and Other Thrombolysis with Principal 
Diagnosis Pulmonary Embolism) above MDC 04 MS-DRGs 166, 167, and 168 
(Other Respiratory System O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) and below MS-DRGs 163, 164, and 165 
(Major Chest Procedures with MCC, with CC, and without CC/MCC, 
respectively).
    As discussed in section II.C.2.b. of the preamble of this proposed 
rule, we are

[[Page 26759]]

proposing to revise the surgical hierarchy for the MDC 05 (Diseases and 
Disorders of the Circulatory System) MS-DRGs as follows: In the MDC 05 
MS-DRGs, we are proposing to sequence proposed new MS-DRG 212 
(Concomitant Aortic and Mitral Valve Procedures) above MS-DRGs 216, 
217, 218, 219, 220, and 221 (Cardiac Valve & Other Major Cardiothoracic 
Procedure with and without Cardiac Catheterization, with MCC, with CC, 
without CC/MCC, respectively) and below MS-DRG 215 (Other Heart Assist 
System Implant). As discussed in section II.C.4. of the preamble of 
this proposed rule, we are proposing to delete 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). Based on the changes we are proposing to make for 
those MS-DRGs in MDC 05, we are proposing to sequence proposed new MS-
DRG 275 (Cardiac Defibrillator Implant with Cardiac Catheterization and 
MCC) above proposed new MS-DRG 276 (Cardiac Defibrillator Implant with 
MCC) and below MS-DRGs 231, 232, 233, 234, 235 and 236 (Coronary Bypass 
with or without PTCA, with or without Cardiac Catheterization or Open 
Ablation, with and without MCC, respectively). We are proposing to 
sequence proposed new MS-DRG 276 (Cardiac Defibrillator Implant with 
MCC) above proposed new MS-DRG 277 (Cardiac Defibrillator Implant 
without MCC) and below proposed new MS-DRG 275 (Cardiac Defibrillator 
Implant with Cardiac Catheterization and MCC). We are proposing to 
sequence proposed new MS-DRG 277 (Cardiac Defibrillator Implant without 
MCC) above MS-DRGs 266 and 267 (Endovascular Cardiac Valve Replacement 
and Supplement Procedures with MCC and without MCC, respectively) and 
below proposed new MS-DRG 276 (Cardiac Defibrillator Implant with MCC).
    As discussed in section II.C.4. of the preamble of this proposed 
rule, we are proposing to delete MDC 05 MS-DRGs 246 and 247 
(Percutaneous Cardiovascular Procedures with Drug-Eluting Stent with 
MCC or 4+ Arteries or Stents and without MCC, respectively). We are 
also proposing to delete MDC 05 MS-DRGs 248 and 249 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Arteries or Stents and without MCC, respectively). We are proposing to 
revise the titles for MS-DRGs 250 and 251 from ``Percutaneous 
Cardiovascular Procedures without Coronary Artery Stent with MCC and 
without MCC, respectively'' to ``Percutaneous Cardiovascular Procedures 
without Intraluminal Device with MCC and without MCC, respectively.'' 
Based on the changes we are proposing to make for those MS-DRGs in MDC 
05, we are proposing to sequence proposed new MS-DRGs 323 and 324 
(Coronary Intravascular Lithotripsy with Intraluminal Device with MCC 
and without MCC, respectively) above proposed new MS-DRG 325 (Coronary 
Intravascular Lithotripsy without Intraluminal Device) and below MS-
DRGs 273 and 274 (Percutaneous and Other Intracardiac Procedures with 
MCC and without MCC, respectively). We are proposing to sequence 
proposed new MS-DRG 325 (Coronary Intravascular Lithotripsy without 
Intraluminal Device) above proposed new MS-DRGs 321 and 322 
(Percutaneous Cardiovascular Procedures with Intraluminal Device, with 
MCC or 4+ Arteries/Intraluminal Devices and without MCC, respectively) 
and below proposed new MS-DRGs 323 and 324 (Coronary Intravascular 
Lithotripsy with Intraluminal Device with MCC and without MCC, 
respectively). We are proposing to sequence proposed new MS-DRGs 321 
and 322 (Percutaneous Cardiovascular Procedures with Intraluminal 
Device with MCC or 4+ Arteries/Intraluminal Devices and without MCC, 
respectively), above MS-DRGs 250 and 251 (Percutaneous Cardiovascular 
Procedures without Intraluminal Device with MCC and without MCC, 
respectively) and below proposed new MS-DRG 325 (Coronary Intravascular 
Lithotripsy without Intraluminal Device).
    In addition, based on the changes that we are proposing to make as 
discussed in section II.C.8.a. of the preamble of this proposed rule, 
we are also proposing to sequence proposed new MDC 05 MS-DRGs 278 and 
279 (Ultrasound Accelerated and Other Thrombolysis of Peripheral 
Vascular Structures with MCC and without MCC, respectively) above MDC 
05 MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with 
CC, and without CC/MCC, respectively) and below MS-DRGs 250 and 251 
(Percutaneous Cardiovascular Procedures without Intraluminal Device 
with and without MCC, respectively).
    As discussed in section II.C.4. of the preamble of this proposed 
rule, we are proposing to delete MS-DRGs 338, 339, and 340 
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC, 
and without CC/MCC, respectively) and MS-DRGs 341, 342, and 343 
(Appendectomy without Complicated Principal Diagnosis with MCC, with 
CC, and without CC/MCC, respectively). Based on the changes we are 
proposing to make for those MS-DRGs in MDC 06 (Diseases and Disorders 
of the Digestive System), we are proposing to revise the surgical 
hierarchy for MDC 06 as follows: In MDC 06, we are proposing to 
sequence proposed new MS-DRGs 397, 398, and 399 (Appendix Procedures 
with MCC, with CC, and without CC/MCC, respectively) above MS-DRGs 344, 
345, and 346 (Minor Small and Large Bowel Procedures with MCC, with CC, 
and without CC/MCC, respectively) and below MS-DRGs 335, 336, and 337 
(Peritoneal Adhesiolysis with MCC, with CC, and without CC/MCC, 
respectively).
    Lastly, as discussed in section II.C.2.b. of the preamble of this 
proposed rule, we are proposing to revise the title for MDC 16 
(Diseases and Disorders of Blood, Blood Forming Organs and Immunologic 
Disorders) MS-DRGs 799, 800, and 801 from ``Splenectomy with MCC, with 
CC, and without CC/MCC, respectively'' to ``Splenic Procedures with 
MCC, with CC, and without CC/MCC, respectively.''
    Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and 
MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 41 is 
illustrated in the following tables.
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16. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the Centers for Disease Control and Prevention's (CDC) 
National Center for Health Statistics (NCHS) and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the 
Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with the March 19-20, 2014 meeting. The ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible 
for approving coding changes, and developing errata, addenda, and other 
modifications to the coding systems to reflect newly developed 
procedures and technologies and newly identified diseases. The 
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a 
view toward standardizing coding applications and upgrading the quality 
of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS website at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official 
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website 
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the previously mentioned 
process by health-related organizations 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.
    The Committee presented proposals for coding changes for 
implementation in FY 2024 at a public meeting held on September 13-14, 
2022, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 14, 2022.
    The Committee held its 2023 meeting on March 7-8, 2023. The 
deadline for submitting comments on these code proposals was April 7, 
2023. 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 2023 
would be included in the October 1, 2023 update to the ICD-10-CM 
diagnosis and ICD-10-PCS procedure code sets.
    As discussed in earlier sections of the preamble of this proposed 
rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and 
ICD-10-PCS procedure codes that are captured in Table 6A.--New 
Diagnosis Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid 
Diagnosis Codes, and Table 6E.--Revised Diagnosis Code Titles for this 
proposed rule, which are available 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 in these tables for the IPPS proposed 
rule, they are not subject to comment in the proposed rule. Because of 
the length of these tables, they are not published in the Addendum to 
the proposed rule. Rather, they are available via the internet as 
discussed in section VI. of the Addendum to the proposed rule.
    Recordings for the virtual meeting discussions of the procedure 
codes at the Committee's September 13-14, 2022 meeting and the March 7-
8, 2023 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 13-14, 2022 meeting and March 7-8, 2023 meeting can be found 
at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These 
websites also provide detailed information about the Committee, 
including information on requesting a new code, 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].
    In an effort to better enable the collection of health-related 
social needs (HRSNs), defined as individual-level, adverse social 
conditions that negatively impact a person's health or healthcare, are 
significant risk factors associated with worse health outcomes as well 
as increased healthcare utilization, the Centers for Disease Control 
and Prevention's (CDC) National Center for Health Statistics (NCHS) is 
implementing 42 new diagnosis codes into the ICD-10-CM classification, 
for reporting effective April 1, 2023. The diagnosis codes are as 
follows:

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    We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/Comprehensive-Listing-of-ICD-10-CM-Files.htm for additional 
details regarding the implementation of these new diagnosis codes.
    We provided the MS-DRG assignments for the 42 diagnosis codes 
effective with discharges on and after April 1, 2023, 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 (which is available 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 this proposed 
rule, we are soliciting public comments on the most appropriate MDC, 
MS-DRG, and severity level assignments for these codes for FY 2024, as 
well as any other options for the GROUPER logic.
    In addition, CMS implemented 34 new procedure codes including laser 
interstitial thermal therapy (LITT) of various vertebral body sites, 
bone marrow transfusions, and the introduction or infusion of 
therapeutics, into the ICD-10-PCS classification effective with 
discharges on and after April 01, 2023. The procedure codes are as 
follows:

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BILLING CODE 4120-01-C
    The 34 procedure codes are also reflected in Table 6B--New 
Procedure Codes (which is available 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 this proposed 
rule, we are soliciting public comments on the most appropriate MDC, 
MS-DRG, and operating room status assignments for these codes for FY 
2024, as well as any other options for the GROUPER logic.

[[Page 26767]]

    We note that Change Request (CR) 13034, Transmittal 11746, titled 
``April 2023 Update to the Medicare Severity--Diagnosis Related Group 
(MS-DRG) Grouper and Medicare Code Editor (MCE) Version 40.1 for the 
International Classification of Diseases, Tenth Revision (ICD-10) 
Diagnosis Codes for Collection of Health-Related Social Needs (HRSNs) 
and New ICD-10 Procedure Coding System (PCS) Codes,'' was issued on 
December 15, 2022 (available on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r11746cp), regarding the release of an updated version of 
the ICD-10 MS-DRG GROUPER and Medicare Code Editor software, Version 
40.1, effective with discharges on and after April 1, 2023, reflecting 
the new diagnosis and procedure codes. The updated software, along with 
the updated ICD-10 MS-DRG V40.1 Definitions Manual and the Definitions 
of Medicare Code Edits V40.1 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 
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 these 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 proposed rule, there were code proposals presented for 
an April 1, 2023 implementation at the September 13-14, 2022 Committee 
meetings. Following the receipt of public comments, the code proposals 
were approved and finalized, therefore, there were new codes 
implemented April 1, 2023.
    Consistent with the process we outlined for the April 1 
implementation date, we announced the new codes in November 2022 and 
provided the updated code files and ICD-10-CM Official Guidelines for 
Coding and Reporting in January 2023. On January 30, 2023, the Federal 
Register (88 FR 5882) notice for the March 7-8, 2023 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, 2023, we 
made available the updated V40.1 ICD-10 MS-DRG Grouper software and 
related materials on the CMS web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    ICD-9-CM addendum and code title information is published on the 
CMS website at 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/Comprehensive-Listing-of-ICD-10-CM-Files.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.

[[Page 26768]]

    For FY 2023, there are currently 73,674 diagnosis codes and 78,530 
procedure codes. As displayed in Table 6A.--New Diagnosis Codes and in 
Table 6B.--New Procedure Codes associated with this proposed rule 
(available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS), there are 395 new diagnosis 
codes and 10 new procedure codes that have been finalized for FY 2024 
at the time of the development of this proposed rule. 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. We will continue to provide the October 
updates in this manner in the IPPS proposed and final rules.
17. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Proposed Changes for FY 2024
    As discussed in section II.C.5. of the preamble of this proposed 
rule, for FY 2024, we are proposing to delete MS-DRGs 222, 223, 224, 
225, 226, and 227, add new MS-DRG 275 (Cardiac Defibrillator Implant 
with Cardiac Catheterization and MCC) and new MS-DRGs 276 and 277 
(Cardiac Defibrillator Implant with MCC, and without MCC, 
respectively), and to reassign a subset of the procedures currently 
assigned to MS-DRGs 222 through 227 to proposed new MS-DRGs 275, 276, 
and 277.
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), 
we generally map new MS-DRGs onto the list when they are formed from 
procedures previously assigned to MS-DRGs that are already on the list. 
Currently, MS-DRGs 222 through 227 are on the list of MS-DRGs subject 
to the policy for payment under the IPPS for replaced devices offered 
without cost or with a credit as shown in the following table. A subset 
of the procedures currently assigned to MS-DRGs 222 through 227 is 
being proposed for assignment to proposed new MS-DRGs 275, 276, and 
277. Therefore, we are proposing that if the applicable proposed MS-DRG 
changes are finalized, we also would add proposed new MS-DRGs 275, 276, 
and 277 to the list of MS-DRGs subject to the policy for payment under 
the IPPS for replaced devices offered without cost or with a credit and 
make conforming changes to delete MS-DRGs 222 through 227 from the list 
of MS-DRGs subject to the policy. We are also proposing to continue to 
include the existing MS-DRGs currently subject to the policy as 
displayed in the following table.
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[GRAPHIC] [TIFF OMITTED] TP01MY23.113

BILLING CODE 4120-01-C

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    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be included in the 
FY 2024 IPPS/LTCH PPS final rule and also will be issued to providers 
in the form of a Change Request (CR).

D. Recalibration of the FY 2024 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 2024, we propose 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 2022 MedPAR data used in this 
proposed rule include discharges occurring on October 1, 2021, through 
September 30, 2022, based on bills received by CMS through December 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 2022 MedPAR file used in calculating the relative weights 
includes data for approximately 6,959,895 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the December 2022 update of 
the FY 2022 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
proposed relative weights for FY 2024 also excludes claims with claim 
type values not equal to ``60.'' The data exclude CAHs, including 
hospitals that subsequently became CAHs after the period from which the 
data were taken. We note that the proposed FY 2024 relative weights are 
based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
from the FY 2022 MedPAR claims data, grouped through the ICD-10 version 
of the proposed FY 2024 GROUPER (Version 41).
    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 proposed rule, we used the December 
2022 update of the FY 2021 HCRIS for calculating the FY 2024 cost-based 
relative weights. Consistent with our historical practice, for this FY 
2024 proposed 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 2024 IPPS Proposed Rule Home Page'' or ``Acute Inpatient 
Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
    We calculated the proposed FY 2024 relative weights based on 19 
CCRs. The methodology we are proposing to use to calculate the FY 2024 
MS-DRG cost-based relative weights based on claims data in the FY 2022 
MedPAR file and data from the FY 2021 Medicare cost reports is as 
follows:
     To the extent possible, all the claims were regrouped 
using the proposed FY 2024 MS-DRG classifications discussed in sections 
II.B. and II.C. of the preamble of this proposed 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 2022 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, computed tomography (CT) scan charges, and 
magnetic resonance imaging (MRI) charges were also deleted.
     At least 92.7 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

[[Page 26772]]

present on the claim, only for purposes of relative weight-setting, the 
POA indicator field was reset to ``Y'' for ``Yes'' for all claims that 
otherwise have an ``N'' (No) or a ``U'' (documentation insufficient to 
determine if the condition was present at the time of inpatient 
admission) in the POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (77 FR 53341 through 53343). 
Specifically, because acute care hospitals participating in the BPCI 
initiative still receive IPPS payments under section 1886(d) of the 
Act, we include all applicable data from these subsection (d) hospitals 
in our IPPS payment modeling and ratesetting calculations as if the 
hospitals were not participating in those models under the BPCI 
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's 
website at 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 2023, and consistent with how we have treated hospitals 
that participated in the BPCI Initiative, for FY 2024, 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 2023 IPPS/LTCH 
PPS final rule, we are also proposing to include all applicable data 
from subsection (d) hospitals participating in the Comprehensive Care 
for Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations. The charges for each of the 19 cost groups 
for each claim were standardized to remove the effects of differences 
in area wage levels, IME, and DSH payments, and for hospitals located 
in Alaska and Hawaii, the applicable cost-of-living adjustment. Because 
hospital charges include charges for both operating and capital costs, 
we standardized total charges to remove the effects of differences in 
geographic adjustment factors, cost-of-living adjustments, and DSH 
payments under the capital IPPS as well. Charges were then summed by 
MS-DRG for each of the 19 cost groups so that each MS-DRG had 19 
standardized charge totals. Statistical outliers were then removed. 
These charges were then adjusted to cost by applying the proposed 
national average CCRs developed from the FY 2021 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 proposed 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 proposed19 national cost 
center CCRs. If we receive comments about the groupings in this 
supplemental data file, we may consider these comments as we finalize 
our policy.
    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

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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 2024 proposed rule, this 
calculation was applied to address non-monotonicity for cases that 
grouped to MS-DRG 016 and MS-DRG 017. In the supplemental file titled 
AOR/BOR File, we include statistics for the affected MS-DRGs both 
separately and with cases combined.
    We are inviting public comments on our proposals related to 
recalibration of the proposed FY 2024 relative weights and the changes 
in relative weights from FY 2023.
b. Relative Weight Calculation for MS-DRG 018
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58451 through 
58453), we created MS-DRG 018 for cases that include procedures 
describing Chimeric Antigen Receptor (CAR) T-cell therapies. We also 
finalized our proposal to modify 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 therapy outside of a clinical trial, while still accounting 
for the clinical trial cases in the overall average cost for all MS-
DRGs (85 FR 58599 through 58600). Specifically, we stated that clinical 
trial claims that group to new MS-DRG 018 would not be included when 
calculating the average cost for MS-DRG 018 that is used to calculate 
the relative weight for this MS-DRG, so that the relative weight 
reflects the costs of the CAR T-cell therapy drug. We stated that we 
identified clinical trial claims as claims that contain ICD-10-CM 
diagnosis code Z00.6 or contain standardized drug charges of less than 
$373,000, which was the average sales price of KYMRIAH and YESCARTA, 
the two CAR T-cell biological products licensed to treat relapsed/
refractory large B-cell lymphoma as of the time of the development of 
the FY 2021 final rule. In addition, we stated that (a) when the CAR T-
cell therapy product is purchased in the usual manner, but the case 
involves a clinical trial of a different product, the claim will be 
included when calculating the average cost for new MS-DRG 018 to the 
extent such cases can be identified in the historical data, and (b) 
when there is expanded access use of immunotherapy, these cases will 
not be included when calculating the average cost for new MS-DRG 018 to 
the extent such cases can be identified in the historical data.
    We also finalized our proposal to calculate 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 and for 
purposes of budget neutrality and outlier simulations. We calculate 
this adjustor by dividing the average cost for cases that we identify 
as clinical trial cases by the average cost for cases that we identify 
as non-clinical trial cases, 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 cases not 
determined to be clinical trial cases to the extent such cases can be 
identified in the historical data, and (b) when there is expanded 
access use of immunotherapy, these cases will be included when 
calculating the average cost for cases determined to be clinical trial 
cases to the extent such cases can be identified in the historical 
data. We stated that to the best of our knowledge, there were no claims 
in the historical data used in the calculation of this 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.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58842), we also 
finalized an adjustment to the payment amount for applicable clinical 
trial and expanded access use immunotherapy cases that group to MS-DRG 
018, and indicated that we would provide instructions for identifying 
these claims in separate guidance. Following the issuance of the FY 
2021 IPPS/LTCH PPS final rule, we issued guidance \18\ stating that 
providers may enter a Billing Note NTE02 ``Expand Acc Use'' on the 
electronic claim 837I or a remark ``Expand Acc Use'' on a paper claim 
to notify the Medicare administrative contractor (MAC) of expanded 
access use of CAR T-cell therapy. In this case, the MAC would add 
payer-only condition code ``ZB'' so that Pricer will apply the payment 
adjustment in calculating payment for the case. In cases 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 provider may 
enter a Billing Note NTE02 ``Diff Prod Clin Trial'' on the electronic 
claim 837I or a remark ``Diff Prod Clin Trial'' on a paper claim. In 
this case, the MAC would add payer-only condition code ``ZC'' so that 
the Pricer will not apply the payment adjustment in calculating payment 
for the case.
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    \18\ https://www.cms.gov/files/document/r10571cp.pdf.
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    In the FY 2022 IPPS/LTCH PPS final rule, 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 
44806). We also finalized our proposal to continue to use the proxy of 
standardized drug charges of less than $373,000 (86 FR 44965) to 
identify clinical trial claims.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48894), we once 
again finalized our policy to use a proxy of standardized drug charges 
of less than $373,000. We also stated that we would continue to monitor 
the data with respect to the clinical trial threshold. As in prior 
years, we stated that we continue to believe to the best of our 
knowledge there were 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. We also stated, in response to comments, that we agreed 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. We 
stated that 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, and that 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 (87 FR 48896). We also noted that we were in the process of 
making modifications to the MedPAR files to include information for 
claims with the payer-only condition code ``ZC'' in the future, which 
is used by the IPPS Pricer to identify a case 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 so that the payment adjustment is not applied in calculating 
the payment for the case (87 FR 49080).
    Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we 
issued

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guidance \19\ stating where there is expanded access use of 
immunotherapy, the provider may submit condition code ``90'' on the 
claim so that Pricer will apply the payment adjustment in calculating 
payment for the case. We stated that MACs would no longer append 
Condition Code `ZB' to inpatient claims reporting Billing Note NTE02 
``Expand Acc Use'' on the electronic claim 837I or a remark ``Expand 
Acc Use'' on a paper claim, effective for claims for discharges that 
occur on or after October 1, 2022.
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    \19\ https://www.cms.gov/files/document/r11727cp.pdf.
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    While we have applied a proxy of standardized drug charges of less 
than $373,000 to identify clinical trial claims and expanded access use 
cases under our special methodology for the calculation of the relative 
weight for MS-DRG 018 to date, we believe that because of changes that 
have occurred since CMS initially adopted this policy, it may no longer 
be necessary to apply this proxy to identify these claims. In the FY 
2021 IPPS/LTCH PPS final rule, we stated that because ICD-10-CM 
diagnosis code Z00.6 is required to be included with clinical trial 
cases, we expect hospitals to include this code for such cases grouping 
to MS-DRG 018 for FY 2021 and all subsequent years, and we believe that 
providers have continued to gain experience with the use of ICD-10-CM 
diagnosis code Z00.6 to report cases involving a clinical trial of CAR 
T-cell therapy. This is supported by our observation that the 
percentage of claims reporting standardized drug charges of less than 
$373,000 that do not report ICD-10-CM code Z00.6 relative to all claims 
that group to MS-DRG 018 fell significantly from the FY 2019 data (used 
in the FY 2021 ratesetting) to the FY 2022 data (used in the FY 2024 
ratesetting). For example, in the FY 2019 MedPAR data used for the FY 
2021 IPPS/LTCH PPS final rule, cases that we identified as clinical 
trial cases (using our proxy of standardized drug charges of less than 
$373,000) that did not contain ICD-10-CM diagnosis code Z00.6 comprised 
18% of all cases that grouped to MS-DRG 018. In the FY 2022 MedPAR data 
used for this FY 2024 IPPS/LTCH PPS proposed rule, cases that we 
identified as clinical trial cases using our proxy that did not contain 
ICD-10-CM diagnosis code Z00.6 comprised 4% of all cases that grouped 
to MS-DRG 018. In addition, prior to FY 2022, we were unable to 
identify cases in the MedPAR claims data that were provided as part of 
expanded access use in developing the relative weights. The December 
update of the FY 2022 MedPAR claims data now includes a field that 
identifies whether or not the claim includes expanded access use of 
immunotherapy. For the FY 2022 MedPAR claims data, this field 
identifies whether or not the claim includes condition code ZB. For the 
FY 2023 MedPAR data and for subsequent years, this field will identify 
whether or not the claim includes condition code 90. This allows us to 
exclude these claims, similar to our methodology for clinical trial 
cases, in the calculation of the relative weight for MS-DRG 018, 
without relying on a proxy. (We note that because the expanded access 
indicator was not available prior to the FY 2022 MedPAR, the comparison 
of cases identified using the proxy, as described previously, does not 
include the 10 cases in the FY 2022 MedPAR data with an expanded access 
indicator on the claim, as including these cases would mean we were not 
comparing the same group of cases). We further note that the MedPAR 
files now also include a variable that indicates whether the claim 
includes the payer-only condition code ``ZC'', which identifies a case 
involving the clinical trial of a different product where the CAR T-
cell, non-CAR T-cell, or other immunotherapy product is purchased in 
the usual manner.
    Therefore, in this FY 2024 IPPS/LTCH PPS proposed rule, we are 
proposing two changes to our methodology for identifying clinical trial 
claims and expanded access use claims in MS-DRG 018. First, we are 
proposing to exclude claims with the presence of condition code ``90'' 
(or, for FY 2024 ratesetting, which is based on the FY 2022 MedPAR 
data, the presence of condition code ``ZB'') and claims that contain 
ICD-10-CM diagnosis code Z00.6 without payer-only code ``ZC'' that 
group to MS-DRG 018 when calculating the average cost for MS-DRG 018. 
Second, for the reasons described previously, we are proposing to no 
longer use the proxy of standardized drug charges of less than $373,000 
to identify clinical trial claims and expanded access use cases when 
calculating the average cost for MS-DRG 018. Accordingly, we are 
proposing that in calculating the relative weight for MS-DRG 018 for FY 
2024, only those claims that group to MS-DRG 018 that (1) contain ICD-
10-CM diagnosis code Z00.6 and do not include payer-only code ``ZC'' or 
(2) contain condition code ``ZB'' (or, for subsequent fiscal years, 
condition code ``90'') would be excluded from the calculation of the 
average cost for MS-DRG 018.
    Consistent with this proposal, we are also proposing to modify our 
calculation of the 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 assigned to MS-DRG 
018 that either (a) contain ICD-10-CM diagnosis code Z00.6 and do not 
contain condition code ``ZC'' or (b) contain condition code 90 (or, for 
FY 2024 ratesetting, condition code ``ZB'').
     Calculate the average cost for all other cases 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 applicable clinical trial or expanded access 
use cases, then add this adjusted case count to the non-clinical trial 
case count prior to calculating the average cost across all MS-DRGs.
    Applying this proposed methodology, based on the December 2022 
update of the FY 2022 MedPAR file used for this proposed rule, we 
estimated that the average costs of cases assigned to MS-DRG 018 that 
are identified as clinical trial cases ($89,379) were 28 percent of the 
average costs of the cases assigned to MS-DRG 018 that are identified 
as non-clinical trial cases ($323,903). Accordingly, as we did for FY 
2023, we are proposing to adjust the transfer-adjusted case count for 
MS-DRG 018 by applying the proposed adjustor of 0.28 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 proposed rule, each case identified as an 
applicable clinical trial or expanded access use immunotherapy case was 
adjusted by 0.28. As we did for FY 2023, we are applying this same 
adjustor for the applicable cases that group to MS-DRG 018 for purposes 
of budget neutrality and outlier simulations. We are also proposing to 
update the value of the adjustor based on more recent data for the 
final rule.
d. Cap for Relative Weight Reductions
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 
10-percent cap on the reduction in an MS-DRG's relative weight in a 
given fiscal year, beginning in FY 2023. We also finalized a budget 
neutrality adjustment to the standardized amount for all hospitals to 
ensure that application of the permanent 10-percent cap does not

[[Page 26775]]

result in an increase or decrease of estimated aggregate payments. We 
refer the reader to the FY 2023 IPPS/LTCH PPS final rule for further 
discussion of this policy. In the Addendum to this IPPS/LTCH PPS 
proposed rule, we present the proposed budget neutrality adjustment for 
reclassification and recalibration of the FY 2024 MS-DRG relative 
weights with application of this cap. We are also making available on 
the CMS website a supplemental file demonstrating the application of 
the permanent 10 percent cap for FY 2024. For a further discussion of 
the proposed budget neutrality adjustment for FY 2024, we refer readers 
to the Addendum of this proposed rule.
3. Development of Proposed National Average CCRs
    We developed the proposed national average CCRs as follows:
    Using the FY 2021 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. Then we created CCRs for each provider for each cost 
center (see the supplemental data file for line items used in the 
calculations) and removed any CCRs that were greater than 10 or less 
than 0.01. We normalized the departmental CCRs by dividing the CCR for 
each department by the total CCR for the hospital for the purpose of 
trimming the data. Then we took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the proposed relative weight. 
We then applied the permanent 10-percent cap on the reduction in a MS-
DRG's relative weight in a given fiscal year; specifically for those 
MS-DRGs for which the relative weight otherwise would have declined by 
more than 10 percent from the FY 2023 relative weight, we set the 
proposed FY 2024 relative weight equal to 90 percent of the FY 2023 
relative weight. The proposed relative weights for FY 2024 as set forth 
in Table 5 associated with this 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 cap.
    The proposed 19 national average CCRs for FY 2024 are as follows:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.114

    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

[[Page 26776]]

number of cases required to compute a reasonable weight. We are 
proposing to use that same case threshold in recalibrating the proposed 
MS-DRG relative weights for FY 2024. Using data from the FY 2022 MedPAR 
file, there were 7 MS-DRGs that contain fewer than 10 cases. For FY 
2024, because we do not have sufficient MedPAR data to set accurate and 
stable cost relative weights for these low-volume MS-DRGs, we are 
proposing to compute relative weights for the low-volume MS-DRGs by 
adjusting their final FY 2023 relative weights by the percentage change 
in the average weight of the cases in other MS-DRGs from FY 2023 to FY 
2024. The crosswalk table is as follows.
[GRAPHIC] [TIFF OMITTED] TP01MY23.115

BILLING CODE 4120-01-C

E. Add-On Payments for New Services and Technologies for FY 2024

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

[[Page 26777]]

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 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 2024 are 
presented in a data file that is available, along with the other data 
files associated with the FY 2023 IPPS/LTCH PPS final rule and 
correction notification, 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 2025 are 
presented in a data file that is available on the CMS website, along 
with the other data files associated with the FY 2024 proposed rule, by 
clicking on the FY 2024 IPPS Proposed Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We note that, for the reasons discussed in 
section I.F. of the preamble of this proposed rule, we are proposing to 
use the FY 2022 MedPAR claims data for FY 2024 ratesetting. Consistent 
with this proposal, for the FY 2025 proposed threshold values, we are 
proposing to use the FY 2022 claims data to set the proposed thresholds 
for applications for new technology add-on payments for FY 2025.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed that 
applicants should submit a significant sample of data to demonstrate 
that the medical service or technology meets the high-cost threshold. 
Specifically, applicants should submit a sample of sufficient size to 
enable us to undertake an initial validation and analysis of the data. 
We also discussed in the September 7, 2001 final rule (66 FR 46917) the 
issue of whether the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims 
information that providers submit with applications for new medical 
service or technology add-on payments. We refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51573) for 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

[[Page 26778]]

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 (84 FR 
42288 through 42292) 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 
services and 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 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, a medical device designated under 
FDA's Breakthrough Devices Program that has 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, and will not need to meet the requirement under Sec.  
412.87(b)(1) that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. 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) as a Breakthrough Device, for the indication 
covered by the Breakthrough Device designation, 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 that, 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 FDA 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.

[[Page 26779]]

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.
    We note that, consistent with the prospective nature of the IPPS, 
we finalize the new technology add on payment amount for approved or 
conditionally approved technologies in the final rule for each fiscal 
year and do not make mid-year changes to new technology add-on payment 
amounts. Updated cost information may be submitted and included in 
rulemaking for the following fiscal year.
    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 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.
    As discussed in more detail in section II.E.8. of the preamble of 
this proposed rule, beginning with the new technology add-on payment 
applications for FY 2025, we are proposing, for technologies that are 
not already FDA market authorized, to require applicants to have a 
complete and active FDA market authorization request at the time of new 
technology add-on payment application

[[Page 26780]]

submission, and to provide documentation of FDA acceptance or filing to 
CMS at the time of application submission. We are also proposing that, 
beginning with FY 2025 applications, in order to be eligible for 
consideration for the new technology add-on payment for the upcoming 
fiscal year, an applicant for new technology add-on payments must have 
received FDA approval or clearance by May 1 rather than July 1 of the 
year prior to the beginning of the fiscal year for which the 
application is being considered (except for an application that is 
submitted under the alternative pathway for certain antimicrobial 
products). Please refer to section II.E.8. of the preamble of this 
proposed rule for a full discussion of these proposals.
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 parties interested in 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 2025 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 proposed rule 
for FY 2025, once the application deadline has closed, CMS will post on 
its website a list of the applications submitted, along with a brief 
description of each technology as provided by the applicant.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 
through 48990), we finalized our proposal to publicly post online new 
technology add-on payment applications, including the completed 
application forms, certain related materials, 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 also finalized that 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, and 
that we will not post applications that are withdrawn prior to 
publication of the proposed rule. We refer the reader to the FY 2023 
IPPS/LTCH PPS final rule (87 FR 48986 through 48990) for further 
information regarding this policy.
    We note that the burden associated with this information collection 
requirement is the time and effort required to collect and submit the 
data in the formal request for add-on payments for new medical services 
and technologies to CMS. The aforementioned burden is subject to the 
PRA and approved under OMB control number 0938-1347, and has an 
expiration date of November 30, 2023.
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 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 2024 prior 
to publication of the FY 2024 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on October 3, 2022 (87 FR 59793), and 
held a virtual town hall meeting on December 14, 2022. In the 
announcement notice for the meeting, we stated that the opinions and 
presentations provided during the

[[Page 26781]]

meeting would assist us in our evaluations of applications by allowing 
public discussion of the substantial clinical improvement criterion for 
the FY 2024 new medical service and technology add-on payment 
applications before the publication of the FY 2024 IPPS/LTCH IPPS 
proposed rule.
    Approximately 180 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 22, 2022 
deadline, in our evaluation of the new technology add-on payment 
applications for FY 2024 in the development of this FY 2024 IPPS/LTCH 
PPS proposed rule. In response to the published notice and the December 
14, 2022 New Technology Town Hall meeting, we received written comments 
regarding the applications for FY 2024 new technology add on payments. 
As explained earlier and in the Federal Register notice announcing the 
New Technology Town Hall meeting (87 FR 59793 through 59795), 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 2024. Therefore, we are not 
summarizing any written comments in this proposed rule that are 
unrelated to the substantial clinical improvement criterion. In section 
II.E.6. of the preamble of this proposed rule, we are summarizing 
comments regarding individual applications, or, if applicable, 
indicating that there were no comments received in response to the New 
Technology Town Hall meeting notice or New Technology Town Hall 
meeting, at the end of each discussion of the individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), 
the ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
website at: https://www.cms.gov/Medicare/Coding/ICD10, including 
guidelines for ICD-10-PCS Section ``X'' codes. We encourage providers 
to view the material provided on ICD-10-PCS Section ``X'' codes.
4. 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 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 (86 FR 45162). If the PHE ends 
in May of 2023, as planned by the Department of Health and Human 
Services (HHS),20 21 discharges involving eligible products 
would continue to be eligible for the NCTAP through September 30, 2023 
(that is, through the end of FY 2023). The NCTAP will expire at the end 
of FY 2023 and no NCTAP would be made beginning in FY 2024 (that is, 
for discharges on or after October 1, 2023).
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    \20\ https://www.hhs.gov/about/news/2023/02/09/letter-us-governors-hhs-secretary-xavier-becerra-renewing-covid-19-public-health-emergency.html.
    \21\ https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-roadmap.html.
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    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. Proposed FY 2024 Status of Technologies Receiving New Technology 
Add-On Payments for FY 2023
    In this section of the proposed rule, we discuss the proposed FY 
2024 status of 24 technologies approved for FY 2023 new technology add-
on payments, as set forth in the tables that follow. Specifically, we 
present our proposals to continue the new technology add-on payment for 
FY 2024 for those technologies that were approved for the new 
technology add-on payment for FY 2023 and which would still be 
considered ``new'' for purposes of new technology add-on payments for 
FY 2024. We also present our proposals to discontinue new technology 
add-on payments for FY 2024 for those technologies that were approved 
for the new technology add-on payment for FY 2023 and which would no 
longer be considered ``new'' for purposes of new technology add-on 
payments for FY 2024.
    Additionally, we note that we conditionally approved 
DefenCathTM (a formulation of taurolidine/heparin) for FY 
2023 new technology add-on payments under the alternative pathway for 
certain antimicrobial products, subject to the technology receiving FDA 
marketing authorization by July 1, 2023. As of the time of the 
development of this proposed rule, DefenCathTM has not yet 
received FDA approval. 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

[[Page 26782]]

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 would be made 
for cases involving the use of DefenCathTM for FY 2023. If 
DefenCathTM receives FDA marketing authorization prior to 
July 1, 2023, we are proposing to continue making new technology add-on 
payments for DefenCathTM for FY 2024. If 
DefenCathTM does not receive FDA marketing authorization by 
July 1, 2023, then it would not be eligible for new technology add-on 
payments for FY 2023, and therefore would not be eligible for the 
continuation of new technology add-on payments for FY 2024. We note 
that the applicant for DefenCathTM also submitted an 
application for new technology add-on payments for FY 2024 under the 
name taurolidine/heparin, in the event that FDA market authorization is 
not received by July 1, 2023. We refer the reader to section 
II.E.7.b.(1). of the preamble of this proposed rule for discussion of 
the FY 2024 application for taurolidine/heparin.
    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).
    Table II.P.-01 lists the technologies for which we are proposing to 
continue making new technology add-on payments for FY 2024 because they 
are still considered ``new'' for purposes of new technology add-on 
payments. This 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, proposed maximum add-on payment amount, and 
coding assignments for each technology. We refer readers to the cited 
final rules 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.
    We are inviting public comments on our proposals to continue new 
technology add-on payments for FY 2024 for the technologies listed in 
the following table.
BILLING CODE 4120-01-P

[[Page 26783]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.116

    Table II.P.-02 lists the technologies for which we are proposing to 
discontinue making new technology add-on payments for FY 2024 because 
they are no longer ``new'' for purposes of new technology add-on 
payments.

[[Page 26784]]

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 refer readers to the cited final rules 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.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48939) 
and 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 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 emergency use authorization (EUA) 
could become available as soon as the date of the EUA issuance and 
prior to receiving FDA approval or clearance (86 FR 45159). With 
respect to the Hemolung RAS, which received an EUA on April 22, 2020, 
when used for patients with COVID-19, we discussed whether the newness 
period for the use of the Hemolung RAS for patients with COVID-19 
should begin on the date of its EUA (April 22, 2020), when the product 
became available on the market for this indication. We described a 
public comment submitted by the applicant for Hemolung RAS which 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. In our 
response, we noted that, 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.
    For this FY 2024 IPPS/LTCH PPS proposed rule, in the absence of 
additional information to support a conclusion that data reflecting the 
cost of the Hemolung RAS when used for patients with COVID-19 did not 
begin to become available as of the issuance of the EUA on April 22, 
2020, we are proposing to discontinue new technology add-on payments 
for FY 2024 for Hemolung RAS patients with hypercapnic respiratory 
failure related to COVID-19, as the technology will no longer be 
considered new for this indication. As discussed in the FY 2023 IPPS/
LTCH PPS final rule, we continue to welcome 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. We further note, as set forth 
in Table II.P.-01 of this section, that we are proposing to continue 
the new technology add-on payment in FY 2024 for the use of the 
Hemolung RAS for patients with other causes of hypercapnic respiratory 
failure unrelated to COVID-19, for which we consider the beginning of 
the newness period to commence on the date of commercial availability 
of the De Novo classified device (November 15, 2021), as discussed in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48939). In order to 
identify use of Hemolung RAS unrelated to COVID-19, we are proposing to 
identify cases eligible for new technology add-on payment with ICD-10-
PCS code 5A0920Z without ICD-10-CM diagnosis code U07.1 (COVID-19).
    We are inviting public comments on our proposals to discontinue new 
technology add-on payments for FY 2024 for the technologies listed in 
the Table II.P.-02.

[[Page 26785]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.117


[[Page 26786]]


6. FY 2024 Applications for New Technology Add-On Payments (Traditional 
Pathway)
    As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, 
we finalized our policy to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this proposed rule. 
However, while we are continuing to provide discussion of the concerns 
or issues we identified with respect to applications submitted under 
the traditional pathway, we are providing 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. 
We refer readers to https://mearis.cms.gov/public/publications/ntap for 
the publicly posted FY 2024 new technology add-on payment applications 
and supporting information (with the exception of certain cost and 
volume information, and information or materials identified by the 
applicant as confidential or copyrighted). In addition, we note that we 
are making available separate tables listing the ICD-10-CM codes, ICD-
10-PCS codes, and/or MS-DRGs related to the analyses of the cost 
criterion for certain technologies for the FY 2024 new technology add-
on payment applications in Table 10 associated with this proposed rule, 
available via the internet 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 2024 IPPS Proposed 
Rule Home Page'' or ``Acute Inpatient--Files for Download''. Please see 
section VI of the Addendum for additional information regarding tables 
associated with the proposed rule.
    We received 27 applications for new technology add-on payments for 
FY 2024 under the traditional new technology add-on payment pathway. In 
accordance with the regulations under Sec.  412.87(e), applicants for 
FY 2024 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. Eight applicants 
withdrew their applications prior to the issuance of this proposed 
rule. We are addressing the remaining 19 applications.
a. CYTALUX[reg] (Pafolacianine), First Indication
    On Target Laboratories submitted an application for new technology 
add-on payments for CYTALUX[reg] for use in ovarian cancer for FY 2024. 
The applicant stated that CYTALUX[reg] is the first targeted 
intraoperative molecular imaging agent that illuminates ovarian cancer 
in real time, enabling the detection of more cancer for resection. 
CYTALUX[reg] is an optical imaging agent comprised of a folic acid 
analog conjugated with a fluorescent dye which binds to folate receptor 
positive cancer cells and illuminates malignant lesions during surgery. 
Per the applicant, CYTALUX[reg] is used in adult patients with ovarian 
cancer as an adjunct for intraoperative identification of malignant 
lesions. CYTALUX[reg] is to be used with a near-infrared imaging system 
(NIR) cleared by the FDA for specific use with CYTALUX[reg]. We note 
that On Target Laboratories also submitted a second application for new 
technology add-on payments for CYTALUX[reg] for FY 2024 for use in lung 
cancer, as discussed separately in this section.
    Please refer to the online application posting for CYTALUX[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017X8NAN, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated that a 
new drug application (NDA) for CYTALUX[reg] was approved by FDA on 
November 29, 2021, as an optical imaging agent indicated in adult 
patients with ovarian cancer as an adjunct for intraoperative 
identification of malignant lesions. According to the applicant, 
CYTALUX[reg] had market availability delayed until April 15, 2022, due 
to supply/product availability. The recommended dose of CYTALUX[reg] is 
a single intravenous infusion of 0.025 mg/kg diluted in 250 mL of 5% 
Dextrose Injection, administered prior to surgery over 60 minutes using 
a dedicated infusion line.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify CYTALUX[reg]. The applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for CYTALUX[reg] beginning in FY 2024. The applicant provided a list of 
diagnosis codes that may be used to currently identify this indication 
for CYTALUX[reg], and differentiate it from the lung cancer indication, 
under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
believes that CYTALUX[reg] is not substantially similar to other 
currently available technologies because there are no other optical 
imaging agents with the same active ingredient, nor the same mechanism 
of action for the same indication of ovarian cancer, and that 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
CYTALUX[reg] for the applicant's complete statements in support of its 
assertion that CYTALUX[reg] is not substantially similar to other 
currently available technologies.

[[Page 26787]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.118

    We are inviting public comments on whether CYTALUX[reg] is 
substantially similar to existing technologies and whether CYTALUX[reg] 
meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for CYTALUX[reg], the 
applicant searched the FY 2021 Inpatient Standard Analytic File (IPSAF) 
for cases reporting a combination of ICD-10-CM/PCS codes for ovarian 
cancer that may require an adjunct for intraoperative identification of 
malignant lesions. Using the inclusion/exclusion criteria described in 
the following table, the applicant identified 3,281 claims mapping to 
five MS-DRGs. The applicant noted that it limited its search to these 
five MS-DRGs as 99% of cases map to these MS-DRGs. Please see Table 
10.8.A.--CYTALUX[reg] (ovarian) Codes--FY 2024 associated with this 
proposed rule for the complete list of codes that the applicant 
indicated were included in its cost analysis. The applicant followed 
the order of operations described in the following table and calculated 
a final inflated average case-weighted standardized charge per case of 
$133,657, which exceeded the average case-weighted threshold amount of 
$93,649. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that CYTALUX[reg] meets the cost criterion.

[[Page 26788]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.119

    We are inviting public comments on whether CYTALUX[reg] meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that CYTALUX[reg] represents a substantial clinical 
improvement over existing technologies because CYTALUX[reg] enables the 
surgeon to identify cancer intraoperatively in real time that otherwise 
would have been missed, enabling the surgeon to achieve more complete 
resection in cytoreductive surgery for ovarian cancer. Per the 
applicant, the results of the Phase 3 study confirm that CYTALUX[reg] 
serves as an adjunct to the surgeon, helping them to identify 
additional cancer which otherwise would not have been identified, 
enabling the surgeon to achieve more complete resection, which is the 
goal of cytoreductive surgery. The applicant provided two studies to 
support these claims as well as eleven background articles. The 
background articles included studies to demonstrate the importance of 
removing all residual disease (lesions) to improve patients' survival; 
studies that showed that lesions can be diffuse and numerous, of 
various sizes, and often not readily visible in the surgical field; a 
study that showed, when CYTALUX[reg] was used in a murine tumor model 
and in early clinical studies, that it enabled identifying occult tumor 
nodules and showed potential to eliminate positive tumor margins; a 
study demonstrating that the folate receptor was expressed in most 
ovarian cancers; and a study and a review supporting the use of 
fluorescence in real-time to improve cancer surgery.\22\ The following 
table summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
CYTALUX[reg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
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    \22\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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[[Page 26789]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.120

    After review of the information provided by the applicant, we have 
the following concerns regarding whether CYTALUX[reg] meets the 
substantial clinical improvement criterion. We note that CYTALUX[reg] 
showed a false

[[Page 26790]]

positive rate of 24.8% that led to resections in the Phase 3, 
randomized, multicenter, single dose, open-label study of this 
technology.\23\ While the applicant submitted a separate comment 
stating there was no worsening in the safety profile for patients with 
false positive results, we continue to question the impact on patient 
outcomes when taking additional tissues that were false positives. In 
addition, while the applicant provided background citations to support 
the assertion that optimal or improved cytoreduction of tumor results 
in improved survival in ovarian adenocarcinoma, the Phase 3 study of 
CYTALUX[reg] appears to have been designed to assess the efficacy of 
the technology rather than clinical outcomes such as survival, 
recurrence, or rate of additional procedures. We would be interested in 
additional or longer-term data demonstrating that CYTALUX[reg] results 
in improved outcomes such as improved survival or a reduced rate of 
recurrence to support an assessment of whether CYTALUX[reg] represents 
a substantial clinical improvement.
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    \23\ Tanyi JL, Randall LM, Chambers SK, Butler KA, Winer IS, 
Langstraat CL, Han ES, Vahrmeijer AL, Chon HS, Morgan MA, Powell MA, 
Tseng JH, Lopez A, Wenham RM. A Randomized Phase 3 Study of 
Pafolacianine Injection (OTL38) for Intraoperative Imaging of Folate 
Receptor Positive Ovarian Cancer. J Clin Oncol. 2022. doi:10.1200/
JCO.22.00291.
---------------------------------------------------------------------------

    We are inviting public comments on whether CYTALUX[reg] meets the 
substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for CYTALUX[reg].
    Comment: In response to a question regarding the impact of taking 
additional tissues that were false positive on patient outcomes, the 
applicant provided evidence based on results for the 27 patients in the 
full analysis set (FAS) from the central laboratory, for whom all NIR 
fluorescent lesions were false positive. The significant adverse event 
(SAE) rate (two of the 27 patients [7.4%]) and the severe AE rate (four 
of the 27 patients [14.8%]) demonstrated that there was no worsening in 
the safety profile for this false positive group, in comparison to the 
overall rates for this study (see the following table).
[GRAPHIC] [TIFF OMITTED] TP01MY23.121

    Response: We thank the applicant for its comments and will take 
this information into consideration when deciding whether to approve 
new technology add-on payments for CYTALUX[reg].
    Comment: In response to a question regarding how many patients in 
the study had a complete resection without CYTALUX[reg], the applicant 
stated that if subjects did not receive CYTALUX[reg], they were not in 
the clinical study, and no data was collected for these subjects. The 
applicant asserted that in a post-procedural questionnaire in the 
CYTALUX[reg] Phase 3 study for ovarian cancer, investigators self-
reported achieving complete R0 (no gross residual disease) resection in 
62.4% (68 of 109) of patients. The applicant added that the post-
procedural questionnaire was only completed for those procedures in 
which the patient was randomized to receive NIR imaging with 
CYTALUX[reg]. The applicant presented that, in the literature, data for 
achieving R0 (no visible disease after surgery) is subjective given 
that surgeons self-report results. The literature suggests achievement 
of R1 (<1cm residual disease) is between 17-65%. The high recurrence 
rate of 70% of women diagnosed with ovarian cancer suggests the 
percentage of ovarian cancer surgeries where R0 is achieved is likely 
over-estimated. The applicant stated that in the Phase 3 study 
conducted for ovarian cancer, 36/109 (33%) of subjects with folate 
receptor positive ovarian cancer had one or more cancerous lesions 
found with CYTALUX[reg] that were not identified by standard white 
light and palpation on tissue that was not planned for resection; 
therefore, this data indicates R0 would not have been achieved in any 
of these patients without the use of CYTALUX[reg].
    Response: We thank the applicant for its comments. We would 
appreciate if the applicant could provide references for the cited 
literature regarding the achievement of R1 (<1cm residual disease) in 
the comment. We will take this information into consideration when 
deciding whether to approve new technology add-on payments for 
CYTALUX[reg].
b. CYTALUX[reg] (Pafolacianine), Second Indication
    On Target Laboratories submitted an application for new technology 
add-on payments for CYTALUX[reg] for use in lung cancer for FY 2024. 
The applicant stated that CYTALUX[reg] is the first targeted 
intraoperative molecular imaging agent that illuminates lung cancer in 
real time, enabling the detection of more cancer for resection. 
CYTALUX[reg] is an optical imaging agent comprised of a folic acid 
analog conjugated with a fluorescent dye which binds to folate receptor 
positive cancer cells and illuminates malignant lesions during surgery. 
Per the applicant, CYTALUX[reg] is used in adult patients with known or 
suspected cancer in the lung as an adjunct for intraoperative 
identification of pulmonary lesions.

[[Page 26791]]

CYTALUX[reg] is to be used with a near-infrared imaging system (NIR) 
cleared by the FDA for specific use with CYTALUX[reg]. CYTALUX[reg] is 
used by surgeons to illuminate cancer in real time during surgery. We 
note that On Target Laboratories also submitted a separate application 
for new technology add-on payments for CYTALUX[reg] for FY 2024 for use 
in ovarian cancer, as discussed previously in this section.
    Please refer to the online application posting for CYTALUX[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017ED6BY, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated that 
CYTALUX[reg] has received FDA approval in a supplemental new drug 
application (sNDA), effective December 16, 2022, to include an 
additional indication for lung cancer, following approval of the 
original NDA for use in ovarian cancer. CYTALUX[reg] is indicated as an 
adjunct for intraoperative identification of malignant and non-
malignant pulmonary lesions in adult patients with known or suspected 
cancer in the lung. According to the applicant, CYTALUX[reg] will have 
market availability delayed until approximately middle of 2023 due to 
supply/product availability. The recommended dose of CYTALUX[reg] is a 
single intravenous infusion of 0.025 mg/kg diluted in 250 mL of 5% 
Dextrose Injection, administered prior to surgery over 60 minutes using 
a dedicated infusion line. We note that, as discussed previously, the 
applicant stated that CYTALUX[reg] for ovarian cancer became 
commercially available on April 15, 2022. We are interested in 
additional information regarding whether the versions or formulations 
for CYTALUX[reg] for use in lung cancer and ovarian cancer are 
different, or further explanation regarding the longer delay for the 
market availability for CYTALUX[reg] for lung cancer.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify CYTALUX[reg]. The applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for CYTALUX[reg] beginning in FY 2024. The applicant provided a list of 
diagnosis codes that may be used to currently identify this indication 
for CYTALUX[reg], and differentiate it from the ovarian cancer 
indication, under the ICD-10-CM coding system. Please refer to the 
online application posting for the complete list of ICD-10-CM codes 
provided by the applicant.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
believes that CYTALUX[reg] is not substantially similar to other 
currently available technologies because there are no other optical 
imaging agents with the same active ingredient, nor same mechanism of 
action, for the same indication, and that therefore, the technology 
meets the newness criterion. The following table summarizes the 
applicant's assertions regarding the substantial similarity criteria. 
Please see the online application posting for CYTALUX[reg] for the 
applicant's complete statements in support of its assertion that 
CYTALUX[reg] is not substantially similar to other currently available 
technologies.
[GRAPHIC] [TIFF OMITTED] TP01MY23.122

    We are inviting public comments on whether CYTALUX[reg] is 
substantially similar to existing technologies and whether CYTALUX[reg] 
meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for CYTALUX[reg], the 
applicant searched the FY 2021 Inpatient Standard Analytic File (SAF) 
for cases reporting a combination of ICD-10-CM/PCS codes for malignant 
or suspected lung lesions. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 15,033 
claims mapping to three MS-DRGs. The applicant noted that it limited 
its search to these three MS-DRGs as 99% of cases map to these MS-DRGs. 
Please see Table 10.9.A.--CYTALUX[reg] (lung) Codes--FY 2024 associated 
with this proposed rule for the complete list of codes that the 
applicant included in its cost analysis. The applicant followed the 
order of operations described in the following table and calculated a 
final inflated average case-weighted standardized charge per case of 
$122,700, which exceeded the average case-weighted threshold amount of 
$101,584. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that CYTALUX[reg] meets the cost criterion.

[[Page 26792]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.123

    We are inviting public comments on whether CYTALUX[reg] meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that CYTALUX[reg] represents a substantial clinical 
improvement over existing technologies because CYTALUX[reg] enables the 
surgeon to visualize cancer intraoperatively, in real time, that 
otherwise may have gone undetected. Per the applicant, the use of the 
CYTALUX[reg] during pulmonary resection for lung cancer represents a 
significant potential advancement over current standards of surgery by 
enhancing the intraoperative localization of pulmonary nodules, 
improving the ability to remove them with clean margins, and reducing 
the probability of leaving otherwise undetected malignant synchronous 
lesions behind. The applicant provided six studies to support these 
claims and nine background articles. The background articles included 
studies about the importance of complete cancer tissue resection to 
overall survival, the limitations of thoracoscopic surgery by 
localizing the exact location of a pulmonary nodule for resection, the 
low 5-year survival for lung cancer patients, and the high rates of 
local recurrence after lung cancer surgery; one study demonstrating 
that contrasted chest computed tomography (CT) scan is not sufficient 
to identify pulmonary nodules that need resection; one study supporting 
the need for cleaner margins during resection to reduce local 
recurrence of lung cancer; one study supporting the use of the folate 
receptor as an appropriate tumor specific marker; one study indicating 
that folate-targeted agents may have a place in cancer treatment 
before, as well as, after chemotherapy; and a study showing that the 
folate receptor is expressed in the majority of lung cancers and that 
CYTALUX[reg] targets and binds to folate receptors and thus the 
mechanism of action is a viable target for lung cancer.\24\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for CYTALUX[reg] for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \24\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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[[Page 26795]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.126

    After review of the information provided by the applicant, we have 
the following concerns regarding whether CYTALUX[reg] meets the 
substantial clinical improvement criterion. We note that CYTALUX[reg] 
showed false positive rate of 25.8% that led to resections in the Phase 
3, multicenter study of this technology.\25\ While the applicant 
submitted a separate comment stating there was no worsening in the 
safety profile for patients with false positive results, we continue to 
question the impact on patient outcomes when taking additional tissues 
that were false positive. We note that the authors discussed in the 
results of the phase 3 trial that there was a decreased rate of 
subsequent diagnostic intervention. We question if they are referring 
to fewer resections in future surgical procedure, and/or if this also 
implies a subsequent positive outcome of reduced mortality. While the 
studies provided in support of CYTALUX[reg] measure identification of 
lesions and changes in the scope of the surgical procedure, the 
applicant did not provide data indicating that these endpoints directly 
lead to improved clinical outcomes (for example, reduction in 
mortality, hospitalizations, subsequent procedures, and/or rate of 
recurrence) based on use of CYTALUX[reg]. Rather, improved outcomes 
were inferred by relying on the assumption that increased or decreased 
scope of resection results in better outcomes. We are interested in 
additional information or long-term data measuring the impact of the 
technology on treatment outcomes or the management of the patient to 
support that CYTALUX[reg] results in an improvement over the standard 
of care.
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    \25\ Singhal S, Sarkaria I., Martin L, Rice D, Blackmon S, Slade 
H. Pafolacianine for Intraoperative Molecular Imaging for Cancer in 
the Lung--The ELUCIDATE Trial. (Manuscript in preparation). 2022.
---------------------------------------------------------------------------

    We are inviting public comments on whether CYTALUX[reg] meets the 
substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for CYTALUX[reg].
    Comment: In response to a question regarding the impact of taking 
additional tissues that were false positive on patient outcomes, the 
applicant stated that in the CYTALUX[reg] Phase 3 ELUCIDATE lung cancer 
trial, participants who had false positive synchronous lesions removed 
showed no associated increase in respiratory or pulmonary adverse 
events based on the tissue removed. A total of 134 specimens were 
excised from the 100 intraoperative molecular imaging (IMI) 
participants, with each participant contributing one or more specimens. 
All were sent for local histopathology, with 104 specimens found to be 
positive for cancer in 89 participants. Among all 134 specimens from 
participants with suspected or confirmed cancer, 108 (81%) had 
fluoresced under IMI in 78 participants. The estimated sensitivity for 
detecting a cancerous tissue was 80/104 or 76.9% (model estimate 76.5% 
(95% CI [66.7, 84.2])). There were 28/108 (25.9%) false positives (10 
primary nodules, 18 synchronous lesions). Histology on the false 
positive tissues was mostly benign or normal lung parenchyma. Where 
pathology was identified, it was most often granulomatous disease, with 
one fibrous tumor, one meningothelial-like nodule, one anthracotic 
nodule and one lipoid pneumonia.
    Response: We thank the applicant for its comments and will take 
this information into consideration when deciding whether to approve 
new technology add-on payments for CYTALUX[reg].
c. DuraGraft[reg]
    Marizyme, Inc. submitted an application for new technology add-on 
payment for DuraGraft[reg] for FY 2024. According to the applicant, 
DuraGraft[reg] is an intraoperative vein-graft preservation solution 
used during the harvesting and grafting interval during coronary artery 
bypass graft surgery (CABG). The applicant stated that use of 
DuraGraft[reg] does not change clinical/surgical practice; it replaces 
solutions currently used for flushing and storage of the saphenous vein 
grafts (SVG) from harvesting through grafting, including tests for 
graft leakage. We note that Somahlution, Inc., acquired by Marizyme in 
2020,\26\ submitted and withdrew applications for new technology add-on 
payment for DuraGraft[reg] for FY 2018 and FY 2019, as well as 
submitted an application again in FY 2020, as summarized in the FY

[[Page 26796]]

2020 IPPS/LTCH PPS proposed rule (84 FR 19305 through 19312). The 
applicant withdrew its application again prior to the issuance of the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42180).
---------------------------------------------------------------------------

    \26\ NASDAQ. Marizyme, Inc. Completes Acquisition of 
Somahlution, Inc. and Raises $7.0 Million in Private Placement 
[verbar] Nasdaq (accessed 1/23/2023).
---------------------------------------------------------------------------

    Please refer to the online application posting for DuraGraft[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP221013TEMTR, for additional detail describing the technology and 
intraoperative ischemic injury.
    With respect to the newness criterion, the applicant stated that it 
is has submitted a De Novo classification request to FDA for 
DuraGraft.[reg] Per the applicant, the proposed indication for 
DuraGraft[reg] is for flushing and storage of vascular grafts during 
CABG surgery. The applicant stated that, effective October 1, 2017, the 
following ICD-10-PCS code may be used to uniquely describe procedures 
involving the use of DuraGraft[reg]: XY0VX83 (Extracorporeal 
introduction of endothelial damage inhibitor to vein graft, new 
technology group 3).
    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 purpose of new technology add-on 
payment.
    With respect to the substantial similarity criteria, the applicant 
asserted that DuraGraft[reg] is not substantially similar to other 
currently available technologies because DuraGraft[reg] is a first-in-
class product to address vein graft disease (post-CABG) and its 
complications. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for DuraGraft[reg] for the applicant's 
complete statements in support of its assertion that DuraGraft[reg] is 
not substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP01MY23.127

    However, we note the following concern with regard to the newness 
criterion. As noted in the FY 2020 IPPS/LTCH PPS proposed rule, it 
seems that the mechanism of action of DuraGraft[reg] may be the same or 
similar to other vein graft storage solutions. Specifically, we 
continue to question whether the current solutions used in vein graft 
surgical procedures may be the same or similar to DuraGraft[reg] in 
composition and treatment indication and, therefore, have the same or 
similar mechanism of action.\27\ We are inviting public comments on 
whether DuraGraft[reg] is substantially similar to existing 
technologies and whether DuraGraft[reg] meets the newness criterion.
---------------------------------------------------------------------------

    \27\ 84 FR 19307.
---------------------------------------------------------------------------

    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for DuraGraft[reg], the 
applicant searched the FY 2021 MedPAR file for cases reporting an ICD-
10-PCS code describing common CABG procedures. Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 54,636 cases mapping to 82 MS-DRGs. Please see Table 
10.11.A.--DuraGraft[reg] Codes--FY 2024 associated with this proposed 
rule for the complete list of MS-DRGs and ICD-10-CM PCS codes that the 
applicant indicated were included in its cost analysis. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $299,445, which exceeded the average case-weighted 
threshold amount of $218,294. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that DuraGraft[reg] 
meets the cost criterion.

[[Page 26797]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.128

    We are inviting public comments on whether DuraGraft[reg] meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that DuraGraft[reg] represents a substantial 
clinical improvement over existing technologies because there is no 
other product or technology that reduces the incidence of peri-
operative myocardial infarction. The applicant provided three studies 
to support its assertions and 44 background articles about reducing 
major adverse cardiac events (MACE).\28\ The following table summarizes 
the applicant's assertions regarding the substantial clinical 
improvement criterion. Please see the online posting for DuraGraft[reg] 
for the applicant's complete statements regarding the substantial 
clinical improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \28\ Sources that provide background information are not 
included in the table below but can be accessed via the online 
application.

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[[Page 26799]]


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[[Page 26800]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.131

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether DuraGraft[reg] meets the 
substantial clinical improvement criterion. First, we note that the 
Szalkiewicz and Perrault studies both used a relatively small sample 
size (166 and 125 patients respectively) as compared to the number of 
potentially eligible patients for this technology and relatively short 
follow-up periods (4 days and 12 months respectively).29 30 
According to the applicant, about 400,000 CABG procedures were 
performed annually in the U.S. for which DuraGraft[reg] can be 
used.\31\ The applicant estimated that approximately 60% of these 
procedures (or 240,000 procedures annually or 20,000 procedures 
monthly) will be performed on Medicare beneficiaries. We are unsure if 
the sample was representative of the number of Medicare beneficiaries 
potentially eligible for DuraGraft[reg]. Moreover, the sample size in 
the Perrault study was further reduced by SVG occlusion, from 125 
grafts at the beginning of the study to 118 at 3-month follow up, a 6% 
decrease, and to 97 at 12-month follow up, a further reduction of 18%. 
We also note that Perrault et al. mentioned that a larger cohort and 
longer-term evaluation are needed to validate their findings. 
Similarly, Szalkiewicz et al. cautioned that the study was not powered 
for clinical outcome events. We are interested in whether similar 
results in reduced incidence of peri-operative myocardial infarction 
and associated clinical benefits would have been achieved with a larger 
patient sample and over a longer follow up period for clinical 
outcomes.
---------------------------------------------------------------------------

    \29\ Szalkiewicz, P., M.Y. Emmert, and P.P. Heinisch, et al. 
(2022). Graft Preservation confers myocardial protection during 
coronary artery bypass grafting. Frontiers in Cardiovascular 
Medicine, July 2022, pp 1-10. DOI 10.3389/fcvm.2022.922357.
    \30\ Perrault, L.P., M. Carrier, and P. Voisine, et al. (2021). 
Sequential multidetector computed tomography assessments after 
venous graft treatment solution in coronary artery bypass grafting. 
Journal of Thoracis and Cardiovascular Surgery. Jan. 2021, Vol. 161, 
Number 1, 96-106. https://doi.org/10.1016/j.jtcvs.2019.10.115.
    \31\ The applicant's estimates were based on Healthcare Cost and 
Utilization Project (HCUP) National Inpatient Sample (NIS) data.
---------------------------------------------------------------------------

    Second, we are concerned that there may be mixed evidence as to 
whether there is an association between exposure to DuraGraft[reg] and 
clinical outcome improvement. For instance, the Haime study 
demonstrated that patients whose SVG was exposed to DuraGraft[reg] and 
those whose SVG was exposed to saline had comparable risk for all-cause 
mortality.\32\ We further note that in the Perrault study, patients 
whose SVGs were stored in DuraGraft[reg] were just as likely to 
experience MACE, angina, and arrhythmias as those whose SVGs were 
stored in saline (MACE: 0 out of the 125 patients whose SVGs were 
stored in saline, 1 out of the 125 patients whose SVGs were stored in 
DuraGraft[reg], p = 0.32; angina: 0 out of the 125 patients whose SVGs 
were stored in saline, 1 out of the 125 patients whose SVGs were 
storied in DuraGraft[reg], p = 0.32; arrhythmia: 0 out of the 125 
patients whose SVGs were stored in saline, 1 out of the 125 patients 
whose SVGs were storied in DuraGraft[reg], p = 0.32).\33\ The study 
also found no significant differences between SVGs stored in 
DuraGraft[reg] versus those in saline in maximum graft narrowing or 
mean lumen diameter at 1, 3, and 12 months. Similarly, the Szalkielwicz 
study did not identify any significant differences between patients 
whose SVG was exposed to DuraGraft[reg] and those to saline in median 
length of hospital stay, all-cause mortality, and cardiac-related 
mortality.
---------------------------------------------------------------------------

    \32\ Haime, M., R.R. McLean, and K.E. Kurgansky, et al. (2018). 
Relationship between intra-operative vein graft treatment with 
DuraGraft[reg] or saline and clinical outcomes after coronary artery 
bypass grafting, Expert Review of Cardiovascular Therapy, 16:12, 
963-970, DOI: 10.1080/14779072.2018.1532289.
    \33\ Perrault et al. (2021), op.cit., Table 6, p. 103.
---------------------------------------------------------------------------

    Third, the Haime study was conducted among patients of the Veterans 
Administration (VA) medical system who were predominantly white (95%) 
and male (99%). We questioned whether the results from that study could 
be generalized to other patient groups, including nonveterans, women, 
or those from other racial or ethnic groups. We continue to question 
whether the demographic profiles in some of the studies that the 
applicant submitted for FY 2024 were comparable with those of the U.S. 
Medicare patients who underwent CABG surgery. For instance, in terms of 
patients' gender, the Perrault, Szalkiewica, and Haime studies were all 
conducted among CABG patients who were predominantly male (99% in the 
Haime study; 91% in the Perrault study; 83% in the Szalkiewicz study). 
However, among the

[[Page 26801]]

Medicare fee-for-service beneficiaries who underwent CABG surgery, male 
patients accounted for only two-thirds (66%) of this 
population.34 35 We are interested in whether the results 
from the Haime, Perrault, and Szalkiewicz studies can be replicated 
among the Medicare population. The Haime study also noted that because 
they used VA data only, information about service utilization outside 
the VA system was not available to them. We question whether their 
findings would be replicable among the Medicare population.
---------------------------------------------------------------------------

    \34\ Angraal, S., K. Khera, and Y. Wang, et al. (2018) Sex and 
race differences in the utilization and outcome of coronary artery 
bypass grafting among Medicare beneficiaries, 2009-2014. Journal of 
the American Heart Association. 7:e009014. DOI: 10.1161/
JAHA.118.009014.)
    \35\ McNeely, Markwell, Vassileva (2016). Trends in patient 
characteristics and outcomes of coronary artery bypass grafting in 
2000-2012 Medicare population. Annals of Thoracic Surgery. 102:132-9 
(http://dx.doi.org/10.1016/j.athoracsur.2016.01.016).
---------------------------------------------------------------------------

    In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19311), we noted 
our concern that some of the studies provided by the applicant as 
supporting materials do not account for other variables that may have 
confounded the association between exposure to DuraGraft[reg] and 
clinical outcomes. We continue to question whether potential 
confounding factors have been taken into account in assessing the 
association between exposure to DuraGraft[reg] and clinical outcome 
improvement. Specifically, both the Szalkiewicz and Haime studies were 
single-center studies and we question whether site-specific 
characteristics could have contributed to differences in clinical 
outcomes between patients exposed to DuraGraft[reg] versus those 
exposed to saline. Also, Szalkiewicz and his team conducted their study 
among patients for on-pump CABG surgery, which accounts for the 
majority of CABG surgeries conducted in the U.S.\36\ We are interested 
to know whether the study results can be generalized for patients who 
undergo off-pump CABG surgery. In addition, Haime and his team 
conducted their study in two consecutive phases, during which they 
exposed patients' SVGs to heparinized saline from 1996 to 1999, and to 
DuraGraft[reg] from 2001 to 2004. Haime and his team stated that 
surgical and post-operative protocols did not change substantially 
during these periods. However, their study did not mention whether the 
team has accounted for changes in generalized surgical techniques or 
operating room practices, either of which could have contributed to the 
observed outcomes. The Haime team also used propensity score weighting 
to minimize differences in age and several clinical characteristics 
between patients from the two periods. Theoretically, doing so would 
reduce the likelihood that these differences confound the association 
between exposure to DuraGraft[reg] and clinical outcomes. However, 
propensity scoring can only control for confounding factors that are 
measured, that is, captured in the data. Unmeasured confounding factors 
could still impact the association between exposure to DuraGraft[reg] 
(or heparinized saline) and clinical outcomes. This may be the reason 
the research team stated that they would not be able to rule out the 
possibility that other changes between these two periods, including 
patient selection criteria and intraoperative and post-operative 
protocols, might still have confounded the differences in clinical 
outcomes. Additionally, according to the VA, only 49% of veterans had 
used at least one VA benefit or service.\37\ Veterans may use services 
outside of the VA for repeat revascularization to address further 
progress of coronary artery disease. Repeat vascularization may be a 
confounding factor that impacts the clinical outcomes for patients 
exposed to DuraGraft[reg] or heparinized saline. As previously stated, 
the Haime study noted that because they used VA data only, information 
about service utilization outside the VA system was not available to 
them. As a result, it remains unclear whether we can reliably attribute 
any changes in clinical outcomes to exposure to DuraGraft[reg].
---------------------------------------------------------------------------

    \36\ E. Blackstone, and J.F. Sabik, III (August 2017). Changing 
the discussion on on-pump versus off-pump CABG. New England Journal 
of Medicine. 377: 692-693. DOI: 10.1056/NEJMe1706220.
    \37\ United States Department of Veterans Affairs (May 2020). VA 
Utilization Profile: FY 2017. National Center for Veterans Analysis 
and Statistics (VA_Utilization_Profile_2017.pdf, accessed 12/7/
2022).
---------------------------------------------------------------------------

    With regard to the Perrault study (2021), where two SVGs from each 
patient were randomly assigned to be stored in either DuraGraft[reg] or 
saline, and the surgeons and operating room staff were blinded, we are 
interested in whether the SVGs in each arm were comparable in wall 
thickness or lumen diameter at the baseline. While the Perrault study 
(2021) was multi-center and drew patients from 7 sites, a sizable 
minority of patients (42%) came from one specific site. We wonder if 
the impact of DuraGraft[reg] on clinical outcomes at 12-month follow-up 
is confounded by unique characteristics of that specific site. In 
addition, the Perrault team noted that the association between 
DuraGraft[reg] and clinical outcome improvement may be confounded by 
precision of different modalities of MDCT angiography. We agree with 
Perrault and his team that further studies on the effects of 
confounding factors, like chronic conditions (for example, left main 
coronary artery disease,\38\ diabetes control or hypercholesterolemia), 
medication use (for example, antiplatelet therapy or lipid-lowering 
drugs), graft and anastomosis characteristics (for example, quality, 
size, and diameter of target vessel), type of graft use, or surgical 
technique (for example, open vs endoscopic harvest) \39\ may provide 
further insight.
---------------------------------------------------------------------------

    \38\ Caliskan, E., M. Misfeld, and S. Sandner, et al. (August 
2022) Clinical event rate in patients with and without left main 
disease undergoing isolated coronary artery bypass grafting: results 
from the European DuraGraft[reg] Registry. European Journal of 
Cardiao-Thoracic Surgery. 62(4): ezac 403: https://doi.org/10.1093/ejcts/ezac403.
    \39\ Perrault et al. (2021), See prior study described.
---------------------------------------------------------------------------

    We are inviting public comments on whether DuraGraft[reg] meets the 
substantial clinical improvement criterion. In this section, we 
summarize and respond to written public comments received in response 
to the New Technology Town Hall meeting notice published in the Federal 
Register regarding the substantial clinical improvement criterion for 
DuraGraft[reg].
    Comment: The applicant submitted a public comment in response to 
two questions posed at the Town Hall meeting and provided additional 
information. With regard to the first question asking for clarification 
with respect to any differences between GALA and DuraGraft[reg] and 
whether any of the studies cited by the applicant used GALA rather than 
DuraGraft[reg], the applicant stated that GALA is a pharmacy-compounded 
product that has been used by hospitals for graft storage and is a 
precursor product to DuraGraft[reg]. According to the applicant, 
DuraGraft[reg] has the same intended composition and product 
characteristics (pH, isotonicity, osmolarity, and ionic balance) as 
GALA at the time of manufacture. The applicant stated that GALA was 
developed by scientists at Harvard University and the West Roxbury 
Veterans Administration (VA) Medical Center, and had been used at the 
latter as a pharmacy-compounded product. In 2012, the applicant 
acquired a license from the VA to exclusively commercialize GALA, but 
the product was never sold commercially. With a shelf-life of about a 
week, GALA `as is' is rendered not suitable for distribution

[[Page 26802]]

and commercialization.\40\ According to the applicant, GALA's shelf-
life was primarily driven by chemical instability of L-glutathione and 
ascorbic acid, which were observed to be rapidly and substantially lost 
to oxidation within a few days of GALA compounding. L-glutathione and 
ascorbic acid are antioxidant components that play key roles in 
protecting vein grafts against ischemic injury and in particular 
oxidative damage, which is a primary driver of ischemic injury. The 
applicant noted that after obtaining the license for GALA, it addressed 
the product's instability issues without changing the composition of 
the product at its point of use by separating and configuring GALA's 
components into two (versus one) solutions. It observed that GALA's 
organic components, in particular L-glutathione and ascorbic acid, 
required a different environment for stability compared to the 
inorganic salts. The applicant formulated the organic components into 
Solution B, a pH 3 solution (optimal pH for chemical stability of the 
organic components including L-glutathione and ascorbic acid) 
concentrated 20-fold into 13.5 mls. Solution A is a pH 8 solution that 
includes all the inorganic salts (237.5 mls). At the point of use in 
the operating room, the two solutions are mixed to create a physiologic 
pH final solution to preserve vascular grafts. Per the applicant, this 
process enables DuraGraft[reg] to achieve chemical stability while 
maintaining the same intended composition as GALA. As a result, while 
DuraGraft[reg] is provided as a kit containing two separate solutions, 
Solution A and B, GALA was instead made as a single solution product. 
The applicant mentioned other changes in DuraGraft[reg] (with respect 
to GALA), which are limited to manufacturing controls, most notably the 
incorporation of oxygen control processes during the manufacturing of 
Solution B to prevent loss of components to oxidation, aseptic 
processing controls used during the manufacture of both Solutions A and 
B, manufacturing of DuraGraft[reg] according to Current Good 
Manufacturing Practice (CGMP) regulations \41\ and inclusion of release 
specifications for DuraGraft[reg]. The applicant remarked that combined 
changes in the manufacturing process and product configuration resulted 
in substantial differences in stability between GALA and 
DuraGraft[reg]. In particular, L-ascorbic acid and L-glutathione have 
half-lives of several days in GALA versus over three years in 
DuraGraft[reg]. The applicant confirmed that the GALA was used in the 
Haime study (2018).\42\ The applicant did not conduct any studies that 
compared the impact of DuraGraft[reg] and GALA on clinical outcomes.
---------------------------------------------------------------------------

    \40\ The applicant observed that shelf-life did not pose an 
issue with use of compounded GALA within the West Roxbury VA Medical 
Center, as the product was cycled off the shelves weekly.
    \41\ Food and Drug Administration (November 16, 2022) Current 
Good Manufacturing Practice (CGMP) Regulations (Current Good 
Manufacturing Practice (CGMP) Regulations [verbar] FDA, accessed 1/
4/2023).
    \42\ Haime et al. (2018) op.cit.
---------------------------------------------------------------------------

    With regard to the second question asking whether DuraGraft[reg] 
was studied in Medicare patients, the applicant responded that 
DuraGraft[reg] has not been studied in U.S. or U.S. Medicare patients. 
The applicant further stated that DuraGraft[reg] has been studied in 
many European patients aged 65 or greater, which were the prospective 
randomized controlled trial published by Perrault et al. (2021) \43\ 
and the retrospective study measuring postoperative Troponin levels 
published by Dr. Szalkiewicz et al. (2022).\44\ The applicant stated 
that the ``European Multi-Center Registry To Assess Outcomes In 
Patients Undergoing CABG Surgery: Treatment Of Vascular Conduits With 
DuraGraft[reg], A Novel Endothelial Damage Inhibitor'' trial is an 
ongoing post-market study designed to support a European 
(International) CABG registry database used to assess the clinical 
outcomes of patients receiving DuraGraft[reg] during CABG surgery and 
whose free vascular grafts (both venous and arterial) have been treated 
with DuraGraft[reg]. According to the applicant, a total of 2,964 
patients were enrolled in the trial, which completed enrollment on 
August 31, 2019. There were 45 enrolling centers in the trial in eight 
countries: Austria, Germany, Ireland, Italy, Spain, Switzerland, 
Turkey, and the United Kingdom. The applicant noted that follow-up data 
has been completed out to 30 days and one year, and that data will 
continue to be collected annually for up to five years. The applicant 
stated that as of August 2022, all patients have completed two full 
years of follow-up.
---------------------------------------------------------------------------

    \43\ Perrault et al. (2021) op.cit.
    \44\ Szakielwicz et al. (2022) op.cit.
---------------------------------------------------------------------------

    The applicant mentioned that the trial enrolled patients undergoing 
isolated CABG surgery or combined CABG plus mitral or aortic valve 
repair were aged 18 or older, with at least one SVG or radial artery 
graft used as a bypass conduit. Of the 2,532 isolated CABG patients, 
1,617 patients were aged 65 or older. The applicant asserted that these 
patients were relevant to the Medicare population. The applicant also 
provided clinical outcomes at 1-year estimated by Kaplan-Meier method 
for the isolated CABG patients aged at least 65 and under age 65 
according to Cox regression. The applicant stated that the trial is a 
single-arm registry, and therefore without a comparator arm. The 
applicant identified that adverse event rates in the aged 65 or older 
group were higher, as expected based on higher rates of comorbidities. 
The European System for Cardiac Operative Risk Evaluation (Version 2; 
EuroScore II) values for the aged 65 or older, compared to those under 
65, were 2.7  3.6 (1,617) vs. 1.5  2.7 (915), p 
< 0.001. The applicant stated that this reflects the near double 
expected operative mortality in the Medicare aged patients.
    The applicant stated that to compare outcomes with a U.S. 
population, it compared isolated CABG patients from the DuraGraft[reg] 
Registry in Europe to a propensity-matched control group from the 
Society of Thoracic Surgeons (STS) Registry Adult Cardiac Surgery 
Database, a clinical outcomes registry with cardiac surgery procedure 
records submitted by cardiothoracic surgeons and anesthesiologists 
across the U.S. and Canada.\45\ Altogether, 2,400 out of 2,532 patients 
were matched in the primary analysis cohort of isolated CABG patients. 
The two groups were matched on 35 prespecified variables reflecting 
mortality risk in the operative, peri-operative, and follow-up periods, 
out to one year. These variables included demographics, cardiac risk 
factors, pre-operative cardiac status, coronary anatomy, and surgical 
characteristics. According to the applicant, the propensity matched 
groups were well balanced on all important demographic, procedural and 
anatomic characteristics. The applicant stated that there were no 
significant differences in mortality rates between these two groups. 
The Hazard Ratio (HR) for DuraGraft[reg] vs. standard of care was 0.88 
(95% CI 0.67-1.15), p = 0.347; the estimated cumulative mortality at 1 
year was 4.2% (95% CI 3.4-5.0) in the DuraGraft[reg] cohort, compared 
to 4.8% (95% CI 3.9-5.7) in the STS Registry. The applicant also 
indicated that no difference was observed between mean survival times: 
DuraGraft[reg] cohort: 353.25 days, SE = 1.29 (95% CI: 350.72-356.79) 
and STS cohort 353.30, SE = 1.25 (95% CI: 350.85-355.75). According to 
the applicant, no significant difference was found between the matched 
cohorts in the distribution of the selected outcome,

[[Page 26803]]

(that is, all-cause mortality rates through 1-year of follow up 
demonstrating the safety of the use of DuraGraft[reg] in European and 
U.S. patients in propensity matched cohorts).
---------------------------------------------------------------------------

    \45\ The Society of Thoracic Surgeons. What is the Adult Cardiac 
Surgery Database? (Frequently Asked Questions and Answers About the 
STS National Database and Public Reporting [verbar] STS, accessed 3/
8/2023).
---------------------------------------------------------------------------

    The applicant stated that it is currently in discussion with the 
STS Registry to perform a match of the DuraGraft[reg] and STS cohorts 
to compare subsets of these cohorts matched with data from the Medicare 
database to compare rates of MI and repeat revascularization amongst 
the two-third of patients from the analysis cohorts that have data 
available in the Medicare Database. According to the applicant, this 
data will be available in mid-2023.
    Response: We thank the applicant for its comment and will take this 
information into consideration when deciding whether to approve new 
technology add-on payment for the DuraGraft[reg].
d. Elranatamab
    Pfizer, Inc. submitted an application for new technology add-on 
payments for elranatamab for FY 2024. Per the applicant, elranatamab is 
a heterodimeric humanized full-length bispecific antibody against B-
cell maturation antigen (BCMA) and cluster of differentiation (CD)3 
which, if FDA approved, will potentially be used for the treatment of 
adult patients with relapsed or refractory multiple myeloma (RRMM) who 
have received at least three prior therapies, including a proteasome 
inhibitor, an immunomodulatory agent, and an anti-CD38 monoclonal 
antibody. According to the applicant, elranatamab is proposed to act 
through direct bridging of the BCMA cell-surface antigen and the 
extracellular CD3 subunit expressed on T-cells.
    Please refer to the online application posting for elranatamab, 
available at https://mearis.cms.gov/public/publications/ntap/NTP221014RF1AA, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for elranatamab. According 
to the applicant, it is seeking biologics license application (BLA) 
approval from FDA for the treatment of adult patients with relapsed or 
refractory multiple myeloma who have received at least three prior 
therapies, including a proteasome inhibitor (PI), an immunomodulatory 
agent (IMiD), and an anti-cluster of differentiation 38 (anti-CD38) 
monoclonal antibody before July 1, 2023. According to the applicant, 
elranatamab is provided as a solution in a histidine buffer at pH 5.8, 
in 40 mg/mL single-dose vials for subcutaneous injection. Elranatamab 
therapy begins with priming regimen for the first two injections with 
12 mg given on day one and 32 mg on day four of the first cycle. Dosing 
thereafter is 76 mg once weekly. Dosing is reassessed after six cycles. 
The applicant anticipates that patients could be admitted to receive 
the first two step-up doses of elranatamab in the inpatient setting.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify elranatamab. The applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for elranatamab beginning in FY 2024. The applicant stated that 
diagnosis codes C90.00 (Multiple myeloma not having achieved 
remission), C90.01 (Multiple myeloma in remission), and C90.02 
(Multiple myeloma in relapse) may be used to currently identify the 
indication for elranatamab under the ICD-10-CM coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that elranatamab is not substantially similar to currently 
available technologies (XPOVIO[reg], BLENREP, ABECMA[reg], 
CARVYKTITM, and traditional chemotherapy agents) because it 
does not use the same or similar mechanism of action when compared to 
these technologies to achieve a therapeutic outcome in patients with 
multiple myeloma (MM). Elranatamab will be a bispecific antibody 
therapy indicated for the treatment of RRMM in patients who have 
received at least three prior therapies. Other bispecific antibodies, 
excluding TECVAYLITM, that are currently approved by the FDA 
are not approved for the treatment of RRMM, and none of them target 
BCMA. The applicant further stated that those therapies that are 
currently indicated for treatment of RRMM, excluding 
TECVAYLITM, use entirely different mechanisms of action. The 
applicant also asserted that, for the purposes of the newness 
criterion, elranatamab is substantially similar to 
TECVAYLITM, which is also the subject of a new technology 
add-on payment application for FY 2024, as discussed separately later 
in this section, and which received BLA approval from FDA after 
submission of the application for new technology add-on payment. The 
applicant stated that because TECVAYLITM and elranatamab are 
substantially similar for newness purposes, the applicant believes that 
a new technology add-on payment should apply to the BCMA-directed 
bispecific antibody class for the treatment of RRMM, which would be 
TECVAYLITM and elranatamab (if approved). The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
elranatamab for the applicant's complete statements in support of its 
assertion that elranatamab is substantially similar to 
TECVAYLITM, but not to other currently available 
technologies. Please also see our discussion of TECVAYLITM's 
application for new technology add on payments in section II.E.6.o of 
this proposed rule.
BILLING CODE 4120-01-P

[[Page 26804]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.132

    With regard to the newness criterion, as stated by the applicant, 
elranatamab has a similar mechanism of action to that of 
TECVAYLITM, for which we received an application for new 
technology add-on payments for FY 2024 for the treatment of adult 
patients with relapsed or refractory multiple myeloma after four or 
more prior lines of therapy, including an immunomodulatory agent, a 
proteasome inhibitor, and an anti-CD38 monoclonal antibody. 
TECVAYLITM was approved by FDA for this indication on 
October 25, 2022, and became commercially available on November 9, 
2022. Per the new technology add on payment application for 
TECVAYLITM, the technology's mechanism of action is 
described as a bispecific antibody, with distinct binding domains that 
simultaneously bind the BCMA target on tumor cells and the CD3 T cell 
receptor. Because of the apparent similarity with the bispecific 
antibody for elranatamab that uses binding domains that simultaneously 
bind the BCMA target on tumor cells and the CD3 T cell receptor, we 
believe that the mechanism of action for elranatamab may be the same or 
similar to that of TECVAYLITM. We further believe that 
elranatamab and TECVAYLITM may treat the same or similar 
disease (RRMM) in the same or similar patient population (patients who 
have previously received a proteasome inhibitor (PI), an 
immunomodulatory agent (IMiD) and an anti-CD38 antibody). Accordingly, 
as it appears that elranatamab and TECVAYLITM are purposed 
to achieve the same therapeutic outcome using the same or similar 
mechanism of action and would be assigned to the same MS-DRG, we 
believe that these technologies may be substantially similar to each 
other such that they should be considered as a single application for 
purposes of new technology add-on payments. We note that if this 
technology is substantially similar to TECVAYLITM, we 
believe the newness period for this technology would begin on November 
9, 2022, the date TECVAYLITM became commercially available. 
We are interested in information on how these two technologies may 
differ from each other with respect to the substantial similarity 
criteria and newness criterion, to inform our analysis of whether 
elranatamab and TECVAYLITM are substantially similar to each 
other

[[Page 26805]]

and therefore should be considered as a single application for purposes 
of new technology add-on payments.
    We are inviting public comment on whether elranatamab meets the 
newness criterion, including whether elranatamab is substantially 
similar to TECVAYLITM and whether these technologies should 
be evaluated as a single technology for purposes of new technology add-
on payments.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for treatment with 
elranatamab, the applicant searched the FY 2021 MedPAR file for cases 
reporting a diagnosis of Multiple Myeloma (in any position) and are 
assigned to MS-DRG 846, 847, or 848 (Chemotherapy without Acute 
Leukemia as Secondary Diagnosis family). The applicant noted that these 
case selection criteria were chosen as it is anticipated that patients 
could be admitted to receive the first two, step-up doses of 
elranatamab in the inpatient setting. Using the inclusion/exclusion 
criteria described in the following table, the applicant identified 674 
claims mapping to two MS-DRGs, 846 (Chemotherapy without Acute Leukemia 
as Secondary Diagnosis with Major Complication or Comorbidity) (MCC)) 
and 847 (Chemotherapy without Acute Leukemia as Secondary Diagnosis 
with Complication or Comorbidity (CC)). The applicant followed the 
order of operations described in the following table and calculated a 
final inflated average case-weighted standardized charge per case of 
$60,579, which exceeded the average case-weighted threshold amount of 
$59,054. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that elranatamab meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.133

    We are inviting public comments on whether elranatamab meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that elranatamab represents a substantial clinical 
improvement over existing technologies because it is a new therapy for 
patients with RRMM who are unresponsive or unable to receive current 
therapies as demonstrated by low overall response rates (ORR) and 
access issues. The applicant stated that in clinical trials examining 
patients with RRMM, the ORR with elranatamab is higher than what is 
seen with available therapies based on empirical comparisons of 
individual trials. The applicant further stated that elranatamab also 
has a manageable safety profile. The applicant provided two studies to 
support these claims, as well as 13 background articles about RRMM.\46\ 
The following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for elranatamab for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \46\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 26806]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.134


[[Page 26807]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.135


[[Page 26808]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.136

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether elranatamab meets the 
substantial clinical improvement criterion. To support that the 
treatment offers an option for a patient population unresponsive to, or 
ineligible for, currently available treatment options, the applicant 
asserts that BCMA-directed bispecific antibodies will be a new 
treatment option for late-line patients with RRMM who are refractory to 
or otherwise ineligible or unable to access existing therapies. In 
particular, the applicant states the nature of the disease is such that 
patients often become refractory to all or some treatment options for 
late-line RRMM. The applicant further states that those patients who 
are not refractory to these treatment options may be ineligible for 
treatment due to renal insufficiency in the case of CAR T-cell therapy 
or unable to access therapy for other reasons. To support that 
elranatamab would offer a new treatment option for this patient 
population, the applicant references the eligibility criteria for 
MagnetisMM-3, a phase 2 study to evaluate the safety and efficacy of 
elranatamab monotherapy in patients with RRMM. The applicant states 
that 65% of patients were 65 years or older, patients with moderate 
renal impairment were not excluded, and patients must have been 
refractory to at least one PI, one IMiD drug, and one anti-CD38 mAb. 
The applicant states that these eligibility criteria indicate 
elranatamab was studied in a Medicare eligible population, may be 
appropriate for patients with renal impairment, and provides a new 
mechanism of action for patients with RRMM who have exhausted all other 
viable treatment options. However, to the extent late-line patients 
with RRMM who are refractory to or otherwise ineligible or unable to 
access CAR T-cell therapies may instead be eligible for XPOVIO[reg], 
which is also indicated for RRMM, it is unclear that this is a patient 
population unresponsive to, or ineligible for, all other currently 
available treatments. We note that this drug was studied in patients 65 
years and older, is not contraindicated in renal impairment, and is 
also indicated for RRMM and, therefore, may also be a treatment option 
for patients with RRMM ineligible or unable to access CAR T-cell 
therapies.
    The applicant also asserts CAR T-cell therapies are largely 
unavailable to Medicare beneficiaries with late-line RRMM due to long 
wait times with a median of 6 months.\47\ However, as noted, to the 
extent these patients could also be eligible for XPOVIO[reg], which may 
be an option for patients unable to access CAR T-cell therapy, it is 
unclear that this supports the assertion that elranatamab offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments, or that longer wait 
times would mean that a patient is ineligible for or unresponsive to 
CAR T-cell therapy. The applicant further asserts CAR T-cell therapies 
are not well-studied in the Medicare population with only 35% and 36% 
of patients being 65 years or older in the registrational studies for 
ABECMA[reg] and

[[Page 26809]]

CARVYKTITM, respectively.48 49 However, these 
percentages do indicate CAR T-cell therapies were studied in late-line 
RMMM patients 65 years and older and the studies included patients up 
to 78 years old. The applicant also asserts that ``renal impairment is 
one of the most common complications of MM,'' and that as a result, a 
large portion of RRMM patients may be ineligible for CAR T-cell therapy 
because they are ineligible for lymphodepleting chemotherapy, which is 
required for administration of CAR T-cell therapy.\50\ However, Hunter 
et al. describe two patients with end stage renal disease who were 
successfully treated with CAR T-cell therapy; therefore, we question 
whether this is an accurate conclusion.\51\
---------------------------------------------------------------------------

    \47\ Kourelis T, Bansal R, Patel KK, Berdeja JG, Raje NS, Alsina 
M, et al. Ethical challenges with CAR T slot allocation with 
idecabtagene vicleucel manufacturing access. Journal of Clinical 
Oncology. 2022;40(16_suppl):e20021-e.
    \48\ ABECMA (idecabtagene vicleucel), suspension for intravenous 
infusion (prescribing information); Celgene corporation and Bristol 
Myers Squibb company, Summit, New Jersey 2021.
    \49\ CARVYKTITM (ciltacabtagene autoleucel) 
suspension for intravenous infusion (prescribing information); 
Janssen Biotech, Inc., Horsham, PA. 2022.
    \50\ Korbet SM, Schwartz MM. Disease of the Month: Multiple 
Myeloma. Journal of the American Society of Nephrology. 
2006;17(9):2533-45.
    \51\ Hunter, B.D., Hoda, D., Nguyen, A. et al. Successful 
administration of chimeric antigen receptor (CAR) T-cell therapy in 
patients requiring hemodialysis. Exp Hematol Oncol 11, 10 (2022).
---------------------------------------------------------------------------

    To further support that elranatamab offers a treatment option for a 
patient population unresponsive to, or ineligible for, currently 
available treatments, the applicant asserts that MM is an incurable 
malignancy and with each relapse, the ability of a patient to respond 
to therapy and the amount of time spent in response shortens and 
patients run out of therapy options. The applicant states that almost 
all patients with MM eventually relapse and that the treatment of 
patients who have received two or more prior lines of therapy is 
becoming particularly challenging. The applicant also provides the ORRs 
of 26% for XPOVIO[reg] with dexamethasone in patients with triple class 
refractory RRMM, 31% for BLENREP in patients with triple class 
refractory RRMM, and 29.8% with conventional 
chemotherapy.52 53 54 However, the claim is based on the 
definition of the disease, RRMM, being relapsed or refractory disease. 
XPOVIO[reg], BLENREP, conventional chemotherapy, and elranatamab, if 
approved, would all be options for patients with RRMM. We question 
which patient population would benefit from elranatamab due to being 
ineligible for or unresponsive to all other options indicated for RRMM 
without data regarding the benefit of elranatamab in patients 
ineligible for or unresponsive to these other therapies.
---------------------------------------------------------------------------

    \52\ A. Chari, D.T. Vogl, M. Gavriatopoulou, A.K. Nooka, et al., 
Oral Selinexor-Dexamethasone for Triple-Class Refractory Multiple 
Myeloma, N Engl J Med 2019;381:727-38.
    \53\ Sagar Lonial, Hans C Lee, Ashraf Badros, et al; Belantamab 
mafodotin for relapsed or refractory multiple myeloma (DREAMM-2): a 
two-arm, randomised, open-label, phase 2 study Lancet Oncol 2020: 
21: 207-21.
    \54\ Maria-Victoria Mateos, Katja Weisel, Valerio De Stefano et 
al., LocoMMotion: a prospective, non-interventional, multinational 
study of real-life current standards of care in patients with 
relapsed and/or refractory multiple myeloma. Leukemia (2022) 
36:1371-1376.
---------------------------------------------------------------------------

    The applicant also asserts that elranatamab significantly improves 
outcomes compared to existing therapies for RRMM. The supporting 
evidence is based on the ORRs for elranatamab, XPOVIO[reg] with 
dexamethasone, BLENREP, and conventional chemotherapy, but does not 
consider the ORRs for CAR-T-cell therapies. Therefore, we question 
whether elranamatab provides improved outcomes compared to previously 
available therapy. Furthermore, the applicant asserts elranatamab has a 
manageable safety profile. However, having a manageable safety profile 
without a comparison to other therapies for RRMM does not provide 
evidence for an improved outcome compared to the other therapy options 
for RRMM.
    We are inviting public comments on whether elranatamab meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
elranatamab.
e. epcoritamab
    Genmab US, Inc. submitted an application for new technology add-on 
payments for epcoritamab for FY 2024. Per the applicant, epcoritamab is 
an investigational immunoglobulin G1 (IgG1) bispecific antibody which 
directly binds cluster of differentiation (CD)3 expressing T-cells and 
CD20 expressing B-cells to potently induce activation and cytotoxic 
activity of the T-cells against the malignant B-cells in a process that 
is strictly dependent on epcoritamab binding to both targets. According 
to the applicant, epcoritamab may be an effective treatment for 
patients with relapsed/refractory (R/R) Non-Hodgkin's Lymphoma (NHL), 
and more specifically R/R Large B-Cell Lymphoma (LBCL) by co-opting the 
patient's own immune system to target the disease.
    Please refer to the online application posting for epcoritamab 
available at https://mearis.cms.gov/public/publications/ntap/NTP221012JQM0G, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for epcoritamab. According 
to the applicant, it anticipates BLA approval from FDA for the 
indication of treatment of adult patients with R/R LBCL after two or 
more lines of systemic therapy before July 1, 2023. The applicant 
stated that epcoritamab is intended for subcutaneous administration 
with patients receiving 0.16 milligram (mg) priming and 0.87 mg 
intermediate dose before the first full dose of 48 mg. This is 
administered weekly in cycle 1-3, every 2 weeks in cycle 4-9, and every 
four weeks in cycle 10 and onward until disease progression. According 
to the applicant, in the EPCORE NHL-1 study, all patients were required 
per protocol to be hospitalized for 24 hours on the third dose, which 
was the first full dose of 48 mg. According to the applicant, the mean 
per patient dose, including when provided during or related to 
inpatient stays across all 28 injection visits, is 44.61 mg.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify administration of epcoritamab. 
The applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for epcoritamab beginning in FY 2024. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify the indication for epcoritamab under the ICD-10-CM coding 
system. Please refer to the online application posting for the complete 
list of ICD-10-CM codes provided by the applicant.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that epcoritamab is not substantially similar to other 
currently available technologies because epcoritamab is an anti-
CD3xCD20 bispecific antibody with a unique mechanism of action that 
will be the first of its kind for the treatment of R/R LBCL, and that 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
epcoritamab for the applicant's

[[Page 26810]]

complete statements in support of its assertion that epcoritamab is not 
substantially similar to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.137


[[Page 26811]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.138

    However, we note that epcoritamab may have a similar mechanism of 
action to that of glofitimab, for which we received an application for 
new technology add-on payments for FY 2024, for the treatment of adult 
patients with R/R LBCL/DLBCL after three or more prior lines of 
therapy. Glofitimab's mechanism of action is described as bivalent 
binding of CD20 on malignant B-cells and CD3 on T-cells, bringing them 
into close proximity inducing proliferation and targeted killing of B-
cells. According to glofitamab's application, the 2:1 structure of 
glofitimab enables high-avidity, bivalent binding to CD20 that can 
result in activity against malignant B-cells even under low effector-
to-target cells. Because of the potential similarity with the mechanism 
of binding of the CD3xCD20 bispecific antibody and other actions, we 
believe that the mechanism of action for epcoritamab may be the same or 
similar to that of glofitimab.
    We further believe that epcoritamab and glofitimab may treat the 
same or similar disease (LBCL/DLBCL) in the same or similar patient 
population (R/R patients who have previously received two or more lines 
of therapy), which is also the same disease and population as existing 
treatments for R/R LBCL. Accordingly, as it appears that epcoritamab 
and glofitimab are purposed to achieve the same therapeutic outcome 
using the same or similar mechanism of action and would be assigned to 
the same MS-DRG, we believe that these technologies may be 
substantially similar to each other such that they should be considered 
as a single application for purposes of new technology add-on payments. 
We are interested in information on how these two technologies may 
differ from each other with respect to the substantial similarity 
criteria and newness criterion, to inform our analysis of whether 
epcoritamab and glofitimab are substantially similar to each other and 
therefore should be considered as a single application for purposes of 
new technology add-on payments.
    We are inviting public comment on whether epcoritamab meets the 
newness criterion, including whether epcoritamab is substantially 
similar to glofitimab and whether these technologies should be 
evaluated as a single technology for purposes of new technology add-on 
payments.

[[Page 26812]]

    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2021 MedPAR file using 
different ICD-10-CM codes to identify potential cases representing 
patients who may be eligible for epcoritamab. Each analysis followed 
the order of operations described in the following table.
    For the first analysis, the applicant searched for cases that 
represent potential patients who are being treated for CRS arising from 
the administration of epcoritamab with a diagnosis code for DLBCL. The 
applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 33 
claims mapping to two MS-DRGs. The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$114,027, which exceeded the average case-weighted threshold amount of 
$59,550.
    For the second analysis, the applicant searched for cases reporting 
diagnosis codes for CRS. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 101 claims mapping to three MS-DRGs. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $88,482, which exceeded the average case-weighted threshold 
amount of $56,682. Because the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount in both scenarios, the applicant maintained that 
epcoritamab meets the cost criterion.

[[Page 26813]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.139

    We are inviting public comments on whether epcoritamab meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that epcoritamab represents a substantial clinical 
improvement over existing technologies because it offers a treatment 
option with improved efficacy and safety for R/R LBCL patients 
unresponsive to currently available treatments (for example, CAR T-cell 
therapies such as KYMRIAH[reg], YESCARTA[reg], and Breyanzi[reg] and 
non-CAR T-cell therapies such as POLIVY[reg], ADCETRIS[reg], 
XPOVIO[reg], and ZYNLONTA[reg]); and it significantly improves clinical 
outcomes among R/R

[[Page 26814]]

LBCL patients as they progress through lines of therapy. The applicant 
provided two studies to support these claims, and nine background 
articles about other treatments available for R/R DLBCL patients and 
clinical outcomes for patients treated with other therapies such as 
Breyanzi[reg], ZYNLONTA[reg], YESCARTA[reg], XPOVIO[reg], KYMRIAH[reg], 
and POLIVY[reg].\55\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for epcoritamab for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \55\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 26815]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.140


[[Page 26816]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.141

    After review of the information provided by the applicant, we have 
the following concerns regarding whether epcoritamab meets the 
substantial clinical improvement criterion. With respect to whether the 
technology offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments, the 
applicant described epcoritamab as having stronger efficacy data in 
comparison to other 3L+ treatment options available. We note that the 
applicant provided many background studies regarding R/R DLBCL 
treatment options. However, they were unable to provide the complete 
study of epcoritamab (EPCORE NHL-1) in support of its claim of 
epcoritamab's stronger efficacy data in comparison to other 3L+ 
treatment options, providing only the presentation of partial results 
used for the European Hematology Association meeting of 2022. 
Therefore, we are limited in our ability to fully evaluate and assess 
the supporting evidence for this claim. Furthermore, we note that there 
may be other available treatments for this specific population, 
including CAR T-cell therapies. We also note that it is unclear which 
patient population is ineligible for these available treatment options. 
With respect to whether the technology improves clinical outcomes 
relative to services or technologies previously available, the 
applicant described epcoritamab as having better safety profiles and 
efficacy than existing treatments. However, the comparisons are not 
matched cases within a comparative study, and we question whether there 
are differences between the trials, such as differences in the patient 
populations included and the way outcomes are defined, that should be 
considered in assessing the comparison of clinical outcomes across 
these studies. We would be interested in additional information to 
demonstrate that epcoritamab has significantly better efficacy and 
safety profiles than other available treatments.
    We are inviting public comments on whether epcoritamab meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
epcoritamab.
f. Glofitamab
    Genentech, Inc. submitted an application for new technology add-on 
payments for glofitamab for FY 2024. According to the applicant, 
glofitamab is a novel full-length, fully humanized, T-cell engaging 
bispecific antibody with a novel 2:1 structure (two CD20 binding 
domains, one CD3 binding domain [2:1 structure]) for the treatment of 
adults with relapsed or refractory (R/R) diffuse large B-cell lymphoma 
(DLBCL) after two or more prior therapies. Per the applicant, 
glofitamab activates the patient's own immune system to eradicate 
malignant B-cells by simultaneously binding CD20 on malignant B-cells 
and CD3 on T-cells, bringing them into close proximity inducing 
proliferation and targeted killing of B-cells. The applicant stated 
that the novel 2:1 structure of glofitamab enables high-avidity, 
bivalent binding to CD20 that can result in activity against malignant 
B-cells even under low effector-to-target cells.
    Please refer to the online application posting for glofitamab 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017RK2RD, for additional detail describing the

[[Page 26817]]

technology and the disease treated by the technology.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for glofitamab but is 
seeking accelerated approval of a BLA from the FDA for the treatment of 
adults with R/R DLBCL after two or more prior therapies. According to 
the applicant, glofitamab is administered as an intravenous infusion 
through a dedicated infusion line according to a dose step-up schedule 
leading to the recommended dosage of 30 mg, after completion of pre-
treatment with obinutuzumab on cycle day 1, where each cycle is 21 
days. The applicant recommends treatment for a maximum of 12 cycles or 
until the disease progresses to unmanageable toxicity. According to the 
applicant, the administration of glofitamab will be treated as part of 
an inpatient stay and reimbursed through the DRG when a patient is 
admitted within 72 hours of the outpatient administration to treat a 
condition that results from the administration such as developing grade 
two or higher cytokine release syndrome (CRS). The applicant stated 
that, in clinical trials, when Grade 2, 3, or 4 CRS developed, 69% of 
the time it occurred after a 2.5 mg dose, 27% of the time it developed 
after a 10 mg dose, and 4% after a 30 mg dose. Therefore, according to 
the applicant, the expected average dose of glofitamab associated with 
an inpatient hospital stay is ((2.5 mg * 0.69) + (10 mg * 0.27) + (30mg 
* 0.04)) = 5.625 mg.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify administration of glofitamab. 
The applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for glofitamab beginning in FY 2024. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify the indication for glofitamab under the ICD-10-CM coding 
system. Please refer to the online application posting for the complete 
list of ICD-10-CM codes provided by the applicant.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that glofitamab is not substantially similar to other 
currently available technologies because the mechanism of action of 
glofitamab is distinct from other available DLBCL therapies and because 
glofitamab does not treat the same or similar type of disease or 
patient population, and that therefore, the technology meets the 
newness criterion. The applicant's assertions regarding substantial 
similarity are summarized briefly in the following table. Please see 
the online application posting for glofitamab for the applicant's 
complete statements in support of its assertion that glofitamab is not 
substantially similar to other currently available technologies.

[[Page 26818]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.142

    However, we note that glofitamab may have a similar mechanism of 
action to that of epcoritamab, for which we received an application for 
new technology add-on payments for FY 2024 for the treatment of adult 
patients with R/R LBCL after three or more prior lines of therapy. 
According to the new technology add-on payment application for 
glofitamab, the technology's mechanism of action is described as 
bivalent binding of CD20 on malignant B-cells and CD3 on T-cells, 
bringing them into close proximity inducing proliferation and targeted 
killing of B-

[[Page 26819]]

cells. The applicant stated that the 2:1 structure of glofitamab 
enables high-avidity, bivalent binding to CD20 that can result in 
activity against malignant B-cells even under low effector-to-target 
cells. The immunoglobulin G1 bispecific antibody of epcoritamab 
directly binds CD3 expressing T-cells and CD20 expressing B-cells to 
potently induce activation and cytotoxic activity of the T-cells 
against the malignant B-cells. Because of the potential similarity with 
the mechanism of binding and other actions, we believe that the 
mechanism of action for glofitamab may be the same or similar to that 
of epcoritamab.
    While the applicant stated that the use of glofitamab does not 
involve treatment of the same or similar patient population when 
compared to existing technology, there are existing therapies approved 
for LBCL/DLBCL patients with three or more lines of therapy including 
CAR-T-cell therapies and others such as POLIVY[reg], XPOVIO[reg], and 
ZYNLONTA. We therefore believe that glofitamab may treat the same or 
similar patient population as these existing FDA-approved treatments. 
We also believe that glofitamab and epcoritamab may treat the same or 
similar disease (LBCL/DLBCL) in the same or similar patient population 
(R/R patients who have previously received two or more lines of 
therapy).
    Accordingly, as it appears that glofitamab and epcoritamab are 
purposed to achieve the same therapeutic outcome using the same or 
similar mechanism of action and would be assigned to the same MS-DRG, 
we believe that these technologies may be substantially similar to each 
other such that they should be considered as a single application for 
purposes of new technology add-on payments. We are interested in 
information on how these two technologies may differ from each other 
with respect to the substantial similarity criteria and newness 
criterion, to inform our analysis of whether glofitamab and epcoritamab 
are substantially similar to each other and therefore should be 
considered as a single application for purposes of new technology add-
on payments.
    We are inviting public comment on whether glofitamab meets the 
newness criterion, including whether glofitamab is substantially 
similar to epcoritamab and whether these technologies should be 
evaluated as a single technology for purposes of new technology add-on 
payments.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for glofitamab, defining two cohorts of patients who may be 
eligible for treatment and merging the cases for the cost criterion 
analysis.
    For the first cohort, the applicant searched for cases representing 
potential patients who, as a result of developing CRS following 
outpatient administration of glofitamab, require an inpatient admission 
within the 3-day payment window following the outpatient 
administration. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 101 claims mapping to 3 MS-
DRGs.
    For the second cohort, the applicant searched for cases 
representing a potential subset of patients who are admitted as 
inpatients for the purposes of being administered glofitamab based on 
the clinical judgment of their provider. Using the inclusion/exclusion 
criteria described in the following table, the applicant identified 
4,705 claims mapping to 9 MS-DRGs.
    The applicant combined these two cohorts as there was no overlap 
between the MS-DRGs of the two cohorts (see the table that follows for 
a list of MS-DRGs for each cohort). The applicant followed the order of 
operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of $134,690 
which exceeded the average case-weighted threshold amount of $96,417. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that glofitamab meets the cost criterion.

[[Page 26820]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.143

    We are inviting public comments on whether glofitamab meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that glofitamab represents a substantial clinical 
improvement over existing technologies because it offers a treatment 
option for R/R DLBCL patients who have progressed after three or more 
lines of therapy that engages T-cells in its mechanism of action with 
off-the-shelf access and a fixed-treatment duration; and it 
significantly improves clinical outcomes among R/R DLBCL patients with 
three or more lines of therapy as compared to placebo. The applicant 
provided two studies to support these claims, as well as 41 background 
articles about current therapies for R/R DLBCL patients including 
access and clinical outcomes for this patient population.\56\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement. Please see the online posting for 
glofitamab for

[[Page 26821]]

the applicant's complete statements regarding the substantial clinical 
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \56\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.144


[[Page 26822]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.145


[[Page 26823]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.146

    After review of the information provided by the applicant, we have 
the following concerns regarding whether glofitamab meets the 
substantial clinical improvement criterion. To support its assertion 
that glofitamab offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments, the 
applicant asserts that glofitamab expands treatment options for R/R 
DLBCL patients who have progressed after other 2L or 3L+ therapies. 
However, we note that there are other technologies and treatments 
approved for this specific population, as mentioned earlier, such that 
it is not clear that this would represent a patient population 
unresponsive to, or ineligible for, currently available treatments. 
With respect to the applicant's claim that glofitamab reduces mortality 
of patients who had progressed after ASCT or CAR T-cell therapy, we 
note that the applicant provided several background studies 
57 58 59 60 regarding other existing treatments for R/R 
DLBCL as well as the main glofitamab study, however, as this conclusion 
is based on the comparison of results across these independent studies, 
we would be interested in additional information regarding the 
comparability of these findings regarding mortality reduction for each 
respective technology. With respect to the applicant's claims that 
glofitamab is an off-the-shelf therapy without any delay due to 
personalized manufacturing, such as CAR T-cell therapy, and that 
glofitamab can be made available across various geographies for 
patients with DLBCL, we question whether other available therapies, 
such as POLIVY[reg], XPOVIO[reg], and ZYNLONTA[reg], that may be used 
to treat patients with multiple relapses or who are refractory to other 
therapies, also would not have those limitations.
---------------------------------------------------------------------------

    \57\ Gisselbrecht C, et al. J Clin Oncol 2010; 28(27):4184-90.
    \58\ Schuster SJ, et al. Lancet Oncol 2021;21:1403-15.
    \59\ Abramson JS, et al. The Lancet. 2020;396(10254):839-52.
    \60\ Locke FL, et al. Lancet Oncol 2019;20:31-42.
---------------------------------------------------------------------------

    With respect to the applicant's claims that glofitamab improves 
outcomes as compared to existing treatments, including safety and rate 
of treatment discontinuations, we note that only one single arm trial 
with no comparators was provided in support of this claim. We further 
note that the comparisons of the supporting evidence 61 62 
provided for other existing technologies to the main glofitamab study 
are not matched cases; for example, the studies do not adjust for type 
and severity of AEs. Therefore, we question whether these comparisons 
can be used to demonstrate a significant difference in safety or 
efficacy.
---------------------------------------------------------------------------

    \61\ Salles G, et al. Lancet Oncol 2020;21(7):978-88.
    \62\ MONJUVI[reg] (tafasitamab) [prescribing information]. 
Boston, MA: Morphosys US Inc; June 2021.
---------------------------------------------------------------------------

    With respect to the applicant's claim that glofitamab is a fixed-
treatment duration therapy, providing patients with time off treatment 
and the potential to improve patient quality of life, we note that this 
appears to be an inference, as the applicant did not provide any 
evidence that a fixed-treatment improves quality of life. According to 
the applicant, during the first cycle (each cycle is 21 days), the 
patient is required to receive the drug infusion once a week. After 
cycle 1, the frequency of infusion is reduced to once a month. While 
glofitamab provides a fixed-treatment, it requires weekly up to monthly 
infusions in comparison to CAR-T cell therapy, which is a one-time 
treatment. We would be interested in additional information regarding 
the association between treatment type and duration and quality of 
life, particularly how glofitamab's treatment type and duration results 
in higher quality of life as compared to the treatment type and 
duration of existing technologies.
    We are inviting public comments on whether glofitamab meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
glofitamab.
g. LunsumioTM (Mosunetuzumab)
    Genentech, Inc. submitted an application for new technology add-on 
payments for LunsumioTM for FY 2024. Per the applicant, 
LunsumioTM is a novel, full-length, humanized, 
immunoglobulin G1 (IgG1) bispecific antibody that is designed to 
concomitantly bind CD3 on T cells and CD20 on B cells, in the treatment 
of adults with relapsed/refractory (R/R) follicular lymphoma (FL) who 
have received at least 2 (>=2) prior systemic therapies (also referred 
to herein as 3L+FL). The applicant further stated that target B cell 
killing occurs only upon simultaneous binding to both targets, as it is 
a conditional agonist. We note that Genentech, Inc submitted an 
application for new technology add-on payments for 
LunsumioTM for FY 2023 under the name mosunetuzumab, as 
summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28261 
through 28274), that it withdrew prior to the issuance of the FY 2023 
IPPS/LTCH PPS final rule (87 FR 48920).
    Please refer to the online application posting for 
LunsumioTM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017LJLDM, for additional detail describing the 
drug and the disease treated by the technology.
    With respect to the newness criterion, LunsumioTM was 
granted accelerated approval of its BLA on December 22, 2022 for the 
treatment of adult patients with relapsed or refractory follicular 
lymphoma after two or more lines of systemic therapy. According to the

[[Page 26824]]

applicant, LunsumioTM was not commercially available 
immediately after FDA approval. The applicant stated that 
LunsumioTM was made available for sale after the new year 
with the first order occurring on January 6, 2023 due to a companywide 
holiday shutdown and to provide manufacturing time. We note that, for 
the purposes of new technology add-on payments, we do not consider the 
date of first sale as an indicator of the entry of a product onto the 
U.S. market. According to the applicant, LunsumioTM is sold 
in a 1 mg and 30 mg single dose vial and is administered for eight 
cycles according to the dosage schedule in the following table unless 
patients experience unacceptable toxicity or disease progression. Per 
the applicant, most of the inpatient usage of mosunetuzumab will occur 
as the result of adverse events, mainly CRS, that develop after 
outpatient administration of the drug. The applicant stated that 
clinical protocols require that inpatient hospitalization occur for 
most Grade 2 CRS patients, and for all patients with Grade 3 or 4 CRS. 
In clinical trials, when Grade 2, 3, or 4 CRS developed, 75% of the 
time it occurred after a 60 mg dose, 20% of the time it developed after 
a 1 mg dose, and 5% after a 2 mg dose. Based on this information, it 
seems that the weighted average inpatient dose would be 45.3 mg.
[GRAPHIC] [TIFF OMITTED] TP01MY23.147

    According to the applicant, effective October 1, 2022, the 
following ICD-10-PCS procedure codes may be used to distinctly identify 
administration of LunsumioTM: XW03358 (Introduction of 
mosunetuzumab antineoplastic into peripheral vein, percutaneous 
approach, new technology group 8), and XW04358 (Introduction of 
mosunetuzumab antineoplastic into central vein, percutaneous approach, 
new technology group 8). The applicant stated that diagnosis code C82 
(Follicular lymphoma) may be used to currently identify the indication 
for LunsumioTM under the ICD-10-CM coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that LunsumioTM is not substantially similar to 
other currently available technologies because it does not use the same 
or a similar mechanism of action compared to any existing technology 
approved for treatment of 3L+ FL and because the use of 
LunsumioTM in 3L+ FL does not involve the treatment of the 
same or a similar type of disease or the same or similar patient 
population when compared to an existing technology. The following table 
summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
LunsumioTM for the applicant's complete statements in 
support of its assertion that LunsumioTM is not 
substantially similar to other currently available technologies.

[[Page 26825]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.148

    While the applicant indicated that the technology does not involve 
the treatment of the same or similar patient population as compared to 
existing technology, we note that FL in 3L+ settings is not a new 
population because there are FDA approved therapies indicated in the 
treatment of patients with r/r FL after two or more lines of systemic 
therapy. We believe that LunsumioTM would be used for the 
same disease and patient population when compared to other therapies 
approved to treat FL in 3L+ settings.
    We are inviting public comments on whether LunsumioTM is 
substantially similar to existing technologies and whether 
LunsumioTM meets the newness criterion.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2021 MedPAR file using 
different ICD-10-CM codes to identify potential cases representing 
patients who may be eligible for LunsumioTM. The applicant 
explained that it used different codes to identify different cohorts 
that may be eligible for the technology. Each analysis followed the 
order of

[[Page 26826]]

operations described in the following table.
    For the first analysis, the applicant searched for cases reporting 
ICD-10-CM diagnosis codes for follicular lymphoma without a 
corresponding chemotherapy administration code. The applicant used the 
inclusion/exclusion criteria described in the following table. Under 
this analysis, the applicant identified 704 claims mapping to 12 MS-
DRGs. The applicant followed the order of operations described in the 
following table and calculated a final inflated average case-weighted 
standardized charge per case of $104,824, which exceeded the average 
case-weighted threshold amount of $96,820.
    For the second analysis, the applicant searched for cases reporting 
ICD-10-CM diagnosis codes for follicular lymphoma excluding follicular 
lymphoma grade 3B (FL3B) without a corresponding chemotherapy 
administration code. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 687 claims mapping to 12 MS-DRGs. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $103,171, which exceeded the average case-weighted 
threshold amount of $96,578.
    For the third analysis, the applicant searched for cases reporting 
ICD-10-CM diagnosis codes for follicular lymphoma with accompanying 
chemotherapy administration codes. The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 844 claims mapping to 13 MS-DRGs. 
The applicant followed the order of operations described in the 
following table and calculated a final inflated average case-weighted 
standardized charge per case of $101,992, which exceeded the average 
case-weighted threshold amount of $98,198.
    For the fourth analysis, the applicant searched for cases reporting 
ICD-10-CM diagnosis codes for follicular lymphoma excluding FL3B with 
accompanying chemotherapy administration codes. The applicant used the 
inclusion/exclusion criteria described in the following table. Under 
this analysis, the applicant identified 813 claims mapping to 13 MS-
DRGs. The applicant followed the order of operations described in the 
following table and calculated a final inflated average case-weighted 
standardized charge per case of $99,322, which exceeded the average 
case-weighted threshold amount of $97,505.

[[Page 26827]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.149

    We are inviting public comments on whether LunsumioTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that LunsumioTM represents a substantial 
clinical improvement over existing technologies because it will expand 
access to patients for whom existing therapies are not adequate and 
because it offers patients with 3L+ FL multiple substantial clinical 
benefits, including high efficacy with significant tolerability; broad 
efficacy across patients with 3L+; and the opportunity to achieve 
sustained remission without continuous treatment. The applicant 
provided 13 studies to support these claims as well as 34 background 
articles. The following table summarizes the applicant's assertions 
regarding the substantial clinical improvement criterion. Please see 
the online posting for LunsumioTM for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.

[[Page 26828]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.150


[[Page 26829]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.151


[[Page 26830]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.152

    After review of the information provided by the applicant, we have 
the following concerns regarding whether LunsumioTM meets 
the substantial clinical improvement criterion. We note that the 
applicant provided a single-arm, phase II trial of 90 patients, sub-
study analysis, and another single-arm phase I/II trial of 15 patients 
to support its claims of substantial clinical improvement. As noted in 
the previous table, the studies evaluated complete response rates or 
indicators of safety, but did not evaluate survival as a primary 
outcome. They were also single-arm, without comparison to other 
existing treatments for the patient population. The applicant compared 
outcomes of the phase II trial with LunsumioTM to outcomes, 
including QOL and AE from background studies of other 
technologies.63 64 65 However, we note limitations in 
comparing to rates found in other clinical trials that were conducted 
in earlier time periods and under different circumstances of patient 
enrollment and treatment options. Additionally, the historical rates 
were compared directly to those from LunsumioTM, without 
more detailed adjustment for patient characteristics. Without a direct 
comparison of outcomes between these therapies, we are concerned as to 
whether the differences in outcomes identified by the applicant 
translate to clinically meaningful differences or improvements for 
patients treated with LunsumioTM as compared to historical 
rates for other treatments.
---------------------------------------------------------------------------

    \63\ Cheah, Y.C. et al. (2022), op.cit.
    \64\ Morschhauser, F., H. Tilly, A. Chaidos, et al. (2020) 
Tazemetostat for patients with relapsed or refractory follicular 
lymphoma: an open-label, single-arm, multicenter, phase 2 trial. 
Lancet Oncology. 21(11):1433-1442 . doi:10.1016/S1470-2045(20)30441-
1.
    \65\ Budde, L. et al. (2022), op.cit.
---------------------------------------------------------------------------

    We are inviting public comments on whether LunsumioTM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
LunsumioTM.
h. NexoBridTM (Anacaulase-bcdb)
    Vericel Corporation submitted an application for new technology 
add-on payments for NexoBridTM for FY 2024. According to the 
applicant, NexoBridTM is a novel, non-surgical option for 
eschar removal (debridement) in adult patients with deep partial 
thickness (DPT) and/or full thickness (FT) thermal burns. Per the 
applicant, NexoBridTM is a botanical and biologic product 
for topical use consisting of a concentrate of proteolytic enzymes 
enriched in bromelain extracted from pineapple stems. We note that 
Vericel Corporation submitted an application for new technology add-on 
payments for NexoBridTM for FY 2022, as summarized in the FY 
2022 IPPS/LTCH PPS proposed rule (86 FR 25286 through 25291), that it 
withdrew prior to the issuance of the FY 2022 IPPS/LTCH PPS final rule 
(86 FR 44774).
    Please refer to the online application posting for 
NexoBridTM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017WGWTP, for additional detail describing the 
technology and the condition treated by the technology.
    With respect to the newness criterion, according to the applicant, 
NexoBridTM was granted BLA approval from FDA on December 28, 
2022 for eschar removal (debridement) in adults with DPT and/or FT 
thermal burns. According to the applicant, NexoBridTM is 
expected to be commercially available in Q2 2023 in the U.S. market as 
manufacturing preparations are currently underway. 
NexoBridTM is applied topically to the wound at 2-gram 
lyophilized powder with 20-gram gel vehicle per 1% total body surface 
area (TBSA), or 5-gram lyophilized powder with 50-gram gel vehicle per 
2.5% TBSA, up to an area of up to 15% TBSA in one application. The 
applicant estimated that the average U.S. patient will receive 
approximately 2.8 5-gram packs of NexoBridTM per inpatient 
stay, based upon the average NexoBridTM-treated area of 
6.28% TBSA in the DETECT clinical trial with an expected wastage 
assumption of approximately 10%, as well as commercial use of the 
technology in Europe.
    The applicant stated that effective October 1, 2021, the following 
ICD-10-PCS codes may be used to uniquely describe procedures involving 
the use of NexoBridTM: XW00X27 (Introduction of Bromelain-
enriched Proteolytic Enzyme into Skin, External Approach, New 
Technology Group 7) and XW01X27 (Introduction of Bromelain-enriched 
Proteolytic Enzyme into Subcutaneous Tissue, External Approach, New 
Technology Group 7).
    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

[[Page 26831]]

existing technology and would not be considered ``new'' for the purpose 
of new technology add-on payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that NexoBridTM is not substantially similar to 
other currently available technologies because NexoBridTM 
has a novel mechanism of action and is the first enzymatic technology 
to achieve rapid, consistent eschar removal; the applicant further 
asserted that the active ingredient in NexoBridTM has never 
been approved in any application under section 505(b)(1) of the Federal 
Food, Drug, and Cosmetic Act (FD&C Act) of 1938 or section 351(a) of 
the Public Health Service (PHS) Act; and no existing technology under 
the existing burn DRGs is similar to NexoBridTM, and that 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
NexoBridTM for the applicant's complete statements in 
support of its assertion that NexoBridTM is not 
substantially similar to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.153

    However, we have the following concerns with regard to the newness 
criterion. As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 
FR 25288), while the applicant discussed the differences between 
NexoBridTM and collagenase-based products, we note we did 
not receive enough information regarding the specific composition of 
the proteolytic enzymes used within the NexoBridTM active 
pharmaceutical ingredient and its mechanism of action. Specifically, it 
is unclear whether the proteolytic enzymes act similar to existing 
collagenase-based enzymatic debridement products since the applicant 
claimed that NexoBridTM debrides denatured collagen in the 
wound. In addition, the applicant asserted that NexoBridTM 
is not assigned to the same MS-DRGs as existing technologies used for 
burns, although it seems that NexoBridTM would be assigned 
to the same burn MS-DRGs as other enzymatic and surgical debridement 
technologies.
    We are inviting public comments on whether NexoBridTM is 
substantially similar to existing technologies and whether 
NexoBridTM meets the newness criterion.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2021 MedPAR file using 
different combinations of ICD-10-CM codes and ICD-10-PCS codes to 
identify potential cases representing patients who may be eligible for 
NexoBridTM. The applicant explained that it used different 
codes to demonstrate two different cohorts that may be eligible for 
this technology

[[Page 26832]]

based on the presence of skin replacement. The applicant removed a 
different percentage of operating room charges for each cohort and 
followed the order of operations described in the following table.
    For the first analysis, the applicant searched for claims using a 
combination of ICD-10-CM diagnosis codes for second- or third-degree 
burns as a primary diagnosis and ICD-10-PCS code(s) for excision or 
extraction of skin or subcutaneous tissue and fascia absent of a 
replacement procedure. Please see Table 10.15.A.--NexoBridTM 
Codes--FY 2024 associated with this proposed rule for the complete list 
of codes that the applicant indicated were included in its cost 
analysis. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 274 claims mapping to three 
MS-DRGs: 935 (Non-Extensive Burns), 934 (Full Thickness Burn without 
Skin Graft or Inhalation Injury), and 928 (Full Thickness Burn with 
Skin Graft or Inhalation Injury with CC/MCC). The applicant calculated 
a final inflated average case-weighted standardized charge per case of 
$109,545, which exceeded the average case-weighted threshold amount of 
$59,487.
    For the second analysis, the applicant searched for claims using a 
combination of ICD-10-CM diagnosis codes for second- or third-degree 
burns as a primary diagnosis and ICD-10-PCS code(s) for excision or 
extraction of skin or subcutaneous tissue and fascia including the 
presence of a replacement procedure. Please see Table 10.15.A.--
NexoBridTM Codes--FY 2024 associated with this proposed rule 
for the complete list of codes that the applicant indicated were 
included in its cost analysis. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 1,084 claims 
mapping to four MS-DRGs: 928 (Full Thickness Burn with Skin Graft or 
Inhalation Injury with CC/MCC), 929 (Full Thickness Burn with Skin 
Graft or Inhalation Injury without CC/MCC), 935 (Non-Extensive Burns), 
and 927 (Extensive Burns or Full Thickness Burns with MV >96 Hours with 
Skin Graft). The applicant calculated a final inflated average case-
weighted standardized charge per case of $273,666, which exceeded the 
average case-weighted threshold amount of $154,855.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
both scenarios, the applicant maintained that NexoBridTM 
meets the cost criterion.

[[Page 26833]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.154

    We are inviting public comments on whether NexoBridTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that NexoBridTM represents a substantial 
clinical improvement over existing technologies because it is 
associated with reduced time to complete eschar removal, prevented burn 
depth conversion, reduced overall surgical burden, reduced blood loss, 
and reduced incidence of autografting. The applicant asserted that for 
these reasons NexoBridTM is a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
enzymatic and surgical eschar removal treatments; also, it offers the 
ability to diagnose burn wound depth earlier than allowed by currently 
available methods and significantly improves clinical outcomes relative 
to traditional surgical debridement. The applicant provided 10 studies 
to support these claims, as well as one background article about the

[[Page 26834]]

importance of donor site morbidity.\66\ The following table summarizes 
the applicant's assertions regarding substantial clinical improvement. 
Please see the online posting for NexoBridTM for the 
applicant's complete statements regarding the substantial clinical 
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \66\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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[[Page 26835]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.155


[[Page 26836]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.156


[[Page 26837]]


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[GRAPHIC] [TIFF OMITTED] TP01MY23.158


[[Page 26839]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.159


[[Page 26840]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.160

    After review of the information provided by the applicant, we have 
the following concerns regarding whether NexoBridTM meets 
the substantial clinical improvement criterion. As discussed in the FY 
2022 IPPS/LTCH PPS proposed rule, we note the applicant's claims of 
superiority of NexoBridTM to standard of care debridement 
methods are non-specific because the studies cited were not designed to 
compare NexoBridTM to a specific non-surgical method or an 
enzymatic debridement product. In addition, we are unclear whether 
comparing NexoBridTM to a surgical treatment modality is the 
most appropriate comparator since mechanical means of debridement have 
different clinical indications, risks, and benefits compared to 
enzymatic debridement. As discussed in the FY 2022 IPPS/LTCH PPS 
proposed rule, we also note studies did not demonstrate that 
NexoBridTM selectively debrides eschar and does not injure 
viable skin. In addition, it may be difficult to generalize across 
studies of NexoBridTM because the wound care and timing of 
the debridement and subsequent autografting varies across different 
burn centers and studies. Finally, we note that a review of the 
provided NexoBridTM studies observed that when compared to 
the standard of care, there were variable reports of the cosmetic 
outcome of NexoBridTM,67 68 prolonged wound 
closure, longer lengths of stay,\69\ and significant pain associated 
with NexoBridTM eschar debridement.\70\
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    \67\ Schulz, A., Shoham, Y., Rosenberg, L., Rothermund, I., 
Perbix, W., Christian Fuchs, P., Lipensky, A., & Schiefer, J. L. 
(2016). Enzymatic Versus Traditional Surgical Debridement of 
Severely Burned Hands: A Comparison of Selectivity, Efficacy, 
Healing Time, and Three-Month Scar Quality. Journal of Burn Care & 
Research, 38(4), e745-e755.
    \68\ Schulz, A., Fuchs, P.C., Rothermundt, I., Hoffmann, A., 
Rosenberg, L., Shoham, Y., Oberl[auml]nder, H., & Schiefer, J. 
(2017). Enzymatic debridement of deeply burned faces: Healing and 
early scarring based on tissue preservation compared to traditional 
surgical debridement. Burns, 43(6), 1233-1243.
    \69\ Rosenberg, L., Krieger, Y., Bogdanov-Berezovski, A., 
Silberstein, E., Shoham, Y., & Singer, A. J. (2014). A novel rapid 
and selective enzymatic debridement agent for burn wound management: 
a multi-center RCT. Burns, 40(3), 466-474. https://doi.org/10.1016/j.burns.2013.08.013.
    \70\ Palao, R., Aguilera-S[aacute]ez, J., Serracanta, J., 
Collado, J.M., Santos, B.P., & Barret, J.P. (2017). Use of a 
selective enzymatic debridement agent (Nexobrid[reg]) for wound 
management: Learning curve. World Journal of Dermatology, 6(2), 32-
41.
---------------------------------------------------------------------------

    We are inviting public comments on whether NexoBridTM 
meets the substantial clinical improvement criterion. In this section, 
we summarize and respond to written public comments received in 
response to the New Technology Town Hall meeting notice published in 
the Federal Register regarding the substantial clinical improvement 
criterion for NexoBridTM.
    Comment: The applicant submitted a comment responding to questions 
raised at the Town Hall meeting. In response to a question regarding 
that availability of studies comparing NexoBridTM to 
collagenase ointment (Santyl[reg]), the applicant stated that no study 
currently exists comparing the two. The DETECT NexoBridTM 
clinical trial included collagenase ointment in its standard of care 
treatment arm, but the data were not stratified in publications since 
the study was not powered to conduct this analysis. The applicant 
further stated that NexoBridTM and collagenase ointment have 
different usage cases. Specifically, collagenase ointment is used 
primarily for wound care and is typically applied once or more daily 
for several days and requires days to weeks to effectively treat 
thermal burns. The applicant stated, in contrast, that 
NexoBridTM is intended to be used only once to completely 
remove eschar from deep partial and/or full thickness thermal burn 
wounds. According to the applicant, in burn patient treatment, it is 
not advisable to compare NexoBridTM and collagenase 
ointment. The applicant also asserted that NexoBridTM has a 
novel mechanism of action and is the first enzymatic agent to have 
demonstrated rapid, consistent eschar removal. Currently, there is no 
technology or product similar to NexoBridTM for eschar 
removal.
    The applicant provided an additional study that leveraged a porcine 
burn wound model to compare NexoBridTM and collagenase 
ointment. In the study, all FT burns that randomly received 
NexoBridTM experienced complete eschar removal after a 
single application, while none of the collagenase-treated FT wounds 
experienced complete eschar removal after 14 days with one daily 
treatment. During the study, all NexoBridTM-treated DPT 
wounds also experienced complete eschar removal after a single

[[Page 26841]]

application. None of the collagenase-treated DPT wounds experienced 
complete removal of eschar after 10 days of treatment; on day 14, 35% 
had complete eschar removal, 30% had >50% eschar removed, and 35% had 
<50% eschar removed.
    Response: We thank the applicant for its comments and will take 
this information into consideration when deciding whether to approve 
new technology add-on payments for NexoBridTM.
i. Omidubicel
    Gamida Cell, Inc. submitted an application for new technology add-
on payments for omidubicel for FY 2024. Per the applicant, omidubicel 
is a one-time, patient-specific, cryopreserved allogeneic advanced 
cellular therapy consisting of two cell fractions: a cultured fraction 
(CF) and a non-cultured fraction (NF) which are both derived from the 
same patient-specific cord blood unit. According to the applicant, the 
CF consists of allogeneic, hematopoietic CD34+ progenitor cells that 
are expanded and enhanced through a proprietary process in the presence 
of cytokines and nicotinamide (NAM) technology used to inhibit 
differentiation of the hematopoietic progenitor cells, CD34+ cells and 
to increase the migration, bone marrow homing and engraftment 
efficiency of the hematopoietic progenitor cells (HPCs). The NF 
consists of allogeneic, hematopoietic mature myeloid and lymphoid cells 
that are washed, formulated into a suspension, and cryopreserved in a 
patient specific infusion bag. The resulting number of CD34+ HPCs in 
omidubicel and their functional fitness may lead to the long-term 
engraftment efficacy and rapid and broad immune reconstitution post-
transplant. According to the applicant, NAM preserves the function and 
long-term engraftment ability of cord blood-derived stem cells and may 
lead to favorable engraftment and patient outcomes.
    Please refer to the online application posting for omidubicel 
available at https://mearis.cms.gov/public/publications/ntap/NTP2210100TN9R, for additional detail describing the technology and its 
proposed uses.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for omidubicel. According 
to the applicant, it anticipates BLA approval from FDA for the 
treatment of patients with hematologic malignancies in need of a 
hematopoietic stem cell transplant before July 1, 2023. The applicant 
noted that a single dose of omidubicel consists of two separate 
components: the CF and the NF suspended in Dimethyl sulfoxide (DMSO) 
and supplied separately in two cryopreserved bags. CF must be 
administered first and contains a minimum of 8.0x10\8\ total viable 
cells with a minimum of 8.7% CD34+ cells and a minimum of 9.2x10\7\ 
CD34+ cells. NF contains a minimum of 4.0x10\8\ total viable cells with 
a minimum of 2.4x10\7\ CD3+ cells.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS codes may be used to uniquely describe the transfusion of 
omidubicel: XW143C8 (Transfuse omidubicel in central vein, perc, new 
tech 8) and XW133C8 (Transfuse omidubicel in periph vein, perc, new 
tech 8). The applicant provided a list of diagnosis codes that may be 
used to currently identify the indication for omidubicel under the ICD-
10-CM coding system. Please refer to the online application posting for 
the complete list of ICD-10-CM codes provided by the applicant.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that omidubicel is not substantially similar to other 
currently available technologies because it does not use the same or 
similar mechanism of action as existing technology and when approved, 
it will be the first and only patient-specific advanced cell therapy 
for use as an allogeneic stem cell donor source, and that therefore, 
the technology meets the newness criterion. The following table 
summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
omidubicel for the applicant's complete statements in support of its 
assertion that omidubicel is not substantially similar to other 
currently available technologies.

[[Page 26842]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.161

BILLING CODE 4120-01-C
    However, we have the following concerns with regard to the newness 
criterion. While the applicant has discussed how omidubicel is 
produced, we are unclear how the mechanism of action for omidubicel is 
different than standard HSCT. Although the applicant noted that 
omidubicel increases the CD34+ content compared to what is reported by 
the cord blood bank before cryopreservation and expansion, we question 
whether this relates to mechanism of action and not just development of 
the technology. We would appreciate additional information regarding 
how the mechanism of action for omidubicel differs from that of 
standard of care HSCT. In addition, we note that the applicant asserted 
that omidubicel is not assigned to the same MS-DRG as existing 
technologies, but also stated that it is assigned to the same MS-DRG as 
all allogeneic HCT procedures. We are inviting public comments on 
whether omidubicel is substantially

[[Page 26843]]

similar to existing technologies and whether omidubicel meets the 
newness criterion.
    With respect to the cost criterion, the applicant provided a 
primary analysis and two sensitivity analyses to demonstrate that it 
meets the cost criterion. For each analysis, the applicant searched the 
FY 2021 MedPAR file using the same ICD-10-CM codes, with or without the 
addition of ICD-10-PCS codes, to identify potential cases representing 
patients who may be eligible for omidubicel. The applicant noted that 
it used the pharmacy cost center cost-to-charge ratio (CCR) to 
determine the potential charges for the technology in all three 
analyses and duplicated each analysis using a CAR T-cell CCR to 
determine the potential charges for the technology. See the following 
table for an explanation of how the CAR T-cell CCR was calculated.
    We note that the applicant used the MS-DRG 018 [Chimeric Antigen 
Receptor (CAR) T-cell and other Immunotherapies] threshold for the cost 
criterion analyses rather than the threshold for MS-DRG 014 in its 
analyses. However, we note that the technology maps to MS-DRG 014 and 
the applicant has not made a formal request to map to a different MS-
DRG. Therefore, we are substituting the threshold of MS-DRG 014 for all 
the analyses that follow rather than using the threshold of MS-DRG 018. 
Each analysis followed the order of operations described in the 
following table.
    For the first analysis, in identifying the primary cohort, the 
applicant identified cases reporting a principal or secondary ICD-10-CM 
diagnosis code for blood cancer in MS-DRG 014. The applicant used the 
inclusion/exclusion criteria described in the following table. Under 
this analysis, the applicant identified 587 claims mapping to MS-DRG 
014. The applicant used the pharmacy cost center CCR of 0.184 to 
determine the charges for the technology. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$2,133,899 which exceeded the MS-DRG 014 threshold of $296,086. The 
applicant duplicated this analysis using the same steps noted 
previously but instead used a CAR T-cell CCR of 0.2788. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $1,533,304 which exceeded the MS-DRG 014 threshold of 
$296,086.
    For the second analysis, the applicant identified cases reporting a 
principal or secondary ICD-10-CM diagnosis code for blood cancer in MS-
DRG 014 in combination with ICD-10-PCS codes for patients treated using 
an unrelated blood donor source. The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 314 claims mapping to MS-DRG 014. 
The applicant calculated a final inflated average case-weighted 
standardized charge per case of $2,111,904 which exceeded the MS-DRG 
014 threshold of $296,086. The applicant duplicated this analysis using 
the same steps noted previously but instead used a CAR T-cell CCR of 
0.2788. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $1,511,309 which exceeded the MS-DRG 
014 threshold of $296,086.
    For the third analysis, the applicant identified cases reporting a 
principal or secondary ICD-10-CM diagnosis code for blood cancer in MS-
DRG 014 in combination with ICD-10-PCS codes for patients using a cord 
blood donor source. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 17 claims mapping to MS-DRG 014. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$2,384,695 which exceeded the MS-DRG 014 threshold of $296,086. The 
applicant duplicated this analysis using the same steps noted 
previously but instead used a CAR T-cell CCR of 0.2788. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $1,784,100 which exceeded the MS-DRG 014 threshold of 
$296,086.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the MS-DRG 014 threshold in all scenarios, the 
applicant asserted that omidubicel meets the cost criterion.

[[Page 26844]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.162


[[Page 26845]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.163

    We are inviting public comments on whether omidubicel meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that omidubicel represents a substantial clinical 
improvement over existing technologies because the totality of the data 
(up to 10-year follow-up) powers the evidence that omidubicel, which 
would be the first patient-specific advanced cellular therapy donor 
source, meets a high unmet treatment need for a diverse group of 
patients with serious, life-threatening hematologic malignancies and 
provides high quality stem cells, clinically meaningful and highly 
statistically significant clinical improvement, lower healthcare 
resource utilization, with an overall favorable benefit/risk profile. 
The applicant provided 13 data submissions to support these claims, as 
well as 16 background articles about omidubicel.\71\ The following 
table summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
omidubicel for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
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    \71\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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[[Page 26846]]

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[[Page 26847]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.165


[[Page 26848]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.166


[[Page 26849]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.167


[[Page 26850]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.168


[[Page 26851]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.169

BILLING CODE 4120-01-C

[[Page 26852]]

    After review of the information provided by the applicant, we have 
the following concerns regarding whether omidubicel meets the 
substantial clinical improvement criterion.
    With respect to the applicant's claim that Omidubicel as an 
allogeneic donor source addresses key barriers to the widespread use of 
UCB as a donor source, including limited or inadequate cell dose for 
adults and adolescents, we note that the Horwitz et al., 2019 \72\ 
phase \1/2\ trial of 36 patients compared results to historical 
controls. Despite best efforts at matching, this type of comparison 
does not account for unobserved differences between participants and 
historical controls. The trial authors noted that some study 
participants became ineligible during the pre-transplantation work-up 
and five withdrew because of logistical issues, but it is unclear if 
the historical controls would have been excluded for the same reasons. 
Furthermore, the study compared health and socioeconomic status but did 
not report social support received by omidubicel recipients compared to 
historical controls. These differences could affect non-relapse 
mortality. Additionally, the time frames of patient involvement are 
different and there may have been advances in supportive care or other 
therapies since the timeframe for historical controls (2010-2013). 
Finally, we note that in Table 2 of the study, overall survival and 
disease-free survival were not statistically significantly different 
for omidubicel recipients versus The Center for International Blood and 
Marrow Transplant Research (CIBMTR) control at 2 years.
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    \72\ Horwitz ME, et al. Phase I/II study of stem-cell 
transplantation using a single cord blood unit expanded ex vivo with 
nicotinamide. J Clin Oncol 2019;37:367-74.
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    Finally, with respect to the applicant's claim that by allowing a 
higher degree of donor-recipient mismatch, omidubicel addresses health 
disparities in the racial and ethnic minority population, we note that 
no substantiating data was presented. The applicant submitted 
background articles outlining disparities in utilization as well as 
some biologic differences.73 74 75 However, we did not 
receive data on improvements in access or outcomes for this patient 
population with the use of this technology.
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    \73\ Dahlberg A and Milano F. Cord blood transplantation: rewind 
to fast forward. Bone Marrow Transplantation (2016), 1-4.
    \74\ Be The Match: Five Year Strategic Plan. 2019-2023; adopted 
May 2018.
    \75\ Joshua TV, et al. Access to hematopoietic stem cell 
transplantation: effect of race and sex. Cancer. 2010;116 (14): 
3469-3476.
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    The Horwitz et al., 2021 \76\ phase 3 study serves as the 
applicant's primary reference in support of the assertion that 
omidubicel significantly improves clinical outcomes relative to current 
available treatments. We note that the baseline characteristics of the 
patients were not entirely matched as more patients receiving 
omidubicel had myelodysplastic syndrome (MDS) and chronic myeloid 
leukemia (CML) rather than other leukemias, such as acute myeloid 
leukemia (AML) and acute lymphoblastic leukemia (ALL). This may affect 
prognosis and response to therapy. We also note that the trial seems to 
be unblinded, which could introduce bias. We also question the utility 
of the primary endpoints. While the study demonstrated faster rates of 
neutrophil engraftment and platelet recovery, it is unclear whether 
this translates to clinical outcomes. The study was not powered to 
detect significance in progression-free survival (PFS) and overall 
survival (OS). The researchers compared the primary end point of 
infectious complications using intent-to-treat (ITT) analysis, but used 
cumulative incidence rates for secondary endpoints. It is unclear why 
cumulative incidence rates were used for secondary endpoints and not 
ITT analysis, and we question if this is because they were 
statistically significant. We are unclear of the reason that bacterial 
and fungal infections were combined while only grade three viral 
infections were reported. We note that the cumulative incidence of all 
GvHD trended higher for omidubicel at one year, but was not 
statistically significant. The supplementary tables 3 and 4 detailed 
emergent adverse events in the two treatment groups and it would be 
helpful to know if any of the incidence differences were statistically 
significant. We also note that patients in the prospective phase \1/2\ 
and 3 omidubicel trials 77 78 79 80 were under 65 and that 
there is currently no data available for the ages above 65, and we 
therefore question the generalizability of the therapy for the Medicare 
population.
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    \76\ Horwitz ME, et al. Omidubicel vs standard myeloablative 
umbilical cord blood transplantation: results of a phase 3 
randomized study. Blood. 21 October, 2021;138(16):1429-1440.
    \77\ Horwitz ME, et al. Umbilical cord blood expansion with 
nicotinamide provides long-term multilineage engraftment. J Clin 
Invest 2014;124:3121-8.
    \78\ Horwitz ME, et al. Phase I/II study of stem-cell 
transplantation using a single cord blood unit expanded ex vivo with 
nicotinamide. J Clin Oncol 2019;37:367-74.
    \79\ Horwitz ME, et al. Omidubicel vs standard myeloablative 
umbilical cord blood transplantation: results of a phase 3 
randomized study. Blood. 21 October, 2021;138(16):1429-1440.
    \80\ Lin C, et al. Multicenter long-term follow up of allogeneic 
hematopoietic stem cell transplantation (allo-HCT) with omidubicel: 
a pooled analysis of five prospective clinical trials. Abstract 
presented at Society for Hematologic Oncology (SOHO), Fall 2022.
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    Noting these potential limitations, while the primary endpoint data 
in the phase 3 study demonstrates that patients with high-risk 
hematologic malignancies have statistically significant faster recovery 
of neutrophils with omidubicel versus unmanipulated UCB transplants, it 
is not known whether this will translate to significantly improved 
clinical outcomes.
    With regard to the applicant's other data sources, we note that the 
applicant provided materials demonstrating a steady increase in the 
number of haplo-identical donor (haplo) transplants, with a slight 
decline in cord blood (CB) transplants \81\ and note that the 
comparison of haplo-HCT versus UCB transplant is an area of study \82\ 
with planned evaluation of progression-free survival, non-relapse 
mortality, and overall survival. As such, we are interested in evidence 
that demonstrates more clinical data on substantial clinical 
improvement over current therapies. We note that the Lin et al., 2022 
HRQL study \83\ was a secondary exploratory analysis and that primary 
or secondary endpoints were not reported. We further note that 
differences in social, family, and emotional scores were not 
statistically significant. In addition, the mean age of participants 
was 36, and we question the generalizability of these results to the 
Medicare population.
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    \81\ CIBMTR. Current uses and outcomes of hematopoietic cell 
transplantation (HCT) in US, 2021 summary slides, https://www.cibmtr.org/ReferenceCenter/SlidesReports/SummarySlides/Pages/index.aspx.
    \82\ Clinicaltrials.gov: NCT 01597778.
    \83\ Lin C, et al. Health-related quality of life following 
allogeneic hematopoietic stem cell transplantation with omidubicel 
versus standard umbilical cord blood. Transplantation and Cellular 
Therapy 2022. Doi: https://doi:org/10.101/j.jtct.2022.09.018 Sep 
2022.
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    We note that the Lin et al., SOHO 2022 study \84\ is a multi-
institutional pooled analysis of long-term outcomes of omidubicel 
transplantation from five prospective clinical trials. Although the 
individual clinical trials had controls, the pooled analysis had no 
control group and therefore no comparisons against standard UCB are 
made. Finally, the Majhail et al. 2022 study on resource
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    \84\ Lin C, et al. Multicenter long-term follow up of allogeneic 
hematopoietic stem cell transplantation (allo-HCT) with omidubicel: 
a pooled analysis of five prospective clinical trials. Abstract 
presented at Society for Hematologic Oncology (SOHO), Fall 2022.

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[[Page 26853]]

use \85\ for the Horwitz et al. phase 3 trial \86\ stated that the 
patients transplanted with omidubicel had significantly shorter 
hospital length of stay, reduced stays in the ICU, and reduced 
healthcare resource use compared with standard UCB. We are interested 
in additional information regarding how the data on resource use was 
collected across the various sites.
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    \85\ Majhail NS, et al. Hospitalization and healthcare resource 
use of omidubicel vs umbilical cord blood (UCB) for hematologic 
malignancies in a global randomized Phase III clinical trial. Poster 
presented at TCT Meetings of the ASTCT and CIBMTR, April 2022.
    \86\ Majhail NS, et al. Hospitalization and healthcare resource 
use of omidubicel vs umbilical cord blood (UCB) for hematologic 
malignancies in a global randomized Phase III clinical trial. Poster 
presented at TCT Meetings of the ASTCT and CIBMTR, April 2022.
---------------------------------------------------------------------------

    We are inviting public comments on whether omidubicel meets the 
substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for omidubicel.
    Comment: We received two written comments in response to the New 
Technology Town Hall meeting, both related to reimbursement of 
omidubicel. Since we only summarize Town Hall comments related to 
substantial clinical improvement, these comments are therefore not 
summarized.
j. REBYOTATM (Fecal Microbiota, Live-jslm)
    Ferring Pharmaceuticals, Inc., an affiliate of the manufacturer, 
Rebiotix Inc., submitted an application for new technology add-on 
payments for REBYOTATM for FY 2024. Per the applicant, 
REBYOTATM is a broad consortium microbiota-based live 
biotherapeutic suspension indicated for the prevention of recurrence of 
Clostridioides difficile infection (CDI) in individuals 18 years of age 
and older, following antibiotic treatment for recurrent CDI.
    Please refer to the online application posting for 
REBYOTATM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017WUDXM, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, the applicant stated that 
REBYOTATM received BLA approval from FDA on November 30, 
2022 for the prevention of rCDI in individuals 18 years of age and 
older, following antibiotic treatment for rCDI. According to the 
applicant, REBYOTATM first became commercially available on 
January 23, 2023 as the process to create packaging components and then 
start the packaging process could not start until FDA approval was 
received. Per the applicant, REBYOTATM is administered 
rectally 24 to approximately 72 hours after the last dose of 
antibiotics for CDI. The applicant stated that each 150mL dose of 
REBYOTATM contains between 1x10\8\ and 5x10\10\ colony 
forming units (CFU) per mL of fecal microbes including more than 
1x10\5\ CFU/mL of Bacteroides, and contains not greater than 5.97 grams 
of PEG3350 in saline.
    The applicant stated that, effective October 1, 2022, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of REBYOTA: XW0H7X8 (Introduction of broad consortium 
microbiota-based live biotherapeutic suspension into lower GI, via 
natural or artificial opening, new tech. group 8). The applicant stated 
that ICD-10-CM diagnosis codes A04.71 (Enterocolitis due to Clostridium 
difficile, recurrent) and A04.72 (Enterocolitis due to Clostridium 
difficile, not specified as recurrent) may be used to currently 
identify the indication for REBYOTATM under the ICD-10-CM 
coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
stated that REBYOTATM is not substantially similar to other 
currently available technologies to reduce rCDI because 
REBYOTATM has a new mechanism of action and is approved to 
treat a broader patient population than existing therapies (including 
standard of care antibiotics (for example, DIFICID[reg], FIRVANQ[reg]), 
Fecal Microbiota Transplantation (FMT), and ZINPLAVATM), and 
that therefore, the technology meets the newness criterion. The 
following table summarizes the applicant's assertions regarding the 
substantial similarity criteria. Please see the online application 
posting for REBYOTATM for the applicant's complete 
statements in support of its assertion that REBYOTATM is not 
substantially similar to other currently available technologies.
BILLING CODE 4120-01-P

[[Page 26854]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.170

    We note the following concerns with regard to the newness 
criterion. We note that the applicant stated that ZINPLAVATM 
is restricted to high-risk patients, and we question whether these 
high-risk patients are the same or a similar patient population as that 
treated with REBYOTATM, which is indicated for patients who 
have already had at least one recurrence of rCDI. In addition, we note 
that the indication for ZINPLAVATM does not exclude patients 
with a history of CHF and the labeling has no listed contraindications. 
Therefore, we seek clarification from the applicant regarding the 
differences in patient populations for ZINPLAVATM and 
REBYOTATM.
    In addition, we note that REBYOTATM may have a similar 
mechanism of action to SER-109, another microbiome therapeutic agent 
for which we received an application for new technology add-on payments 
for FY 2024 to reduce the recurrence of rCDI in adults following 
antibiotic treatment for rCDI, inclusive of the first recurrence, as 
discussed later in this section. Notably, the exact mechanism of action 
for each biologic is not known; however, both appear to act on the gut 
microbiome to suppress C. difficile (C.diff.) and thereby prevent rCDI. 
Both REBYOTATM and SER-109 appear to lead to compositional 
changes in the gastrointestinal microbiome that restore the diversity 
of gut flora which enable it to suppress outgrowth of C.diff. and rCDI, 
following standard-of-care treatment with antibiotics for rCDI. 
Further, both technologies appear to map to the same MS-DRGs as each 
other and as existing technologies, and to treat the same or similar 
disease (rCDI) in the same or similar patient population (patients who 
have previously received standard-of-care antibiotics for CDI or rCDI). 
Accordingly, since it appears that REBYOTATM and SER-109 are 
purposed to achieve the same therapeutic outcome using a similar 
mechanism of action and would be assigned to the same MS-DRG, we 
believe that these technologies may be

[[Page 26855]]

substantially similar to each other such that they should be considered 
as a single application for purposes of new technology add-on payments, 
if SER-109 receives FDA approval by July 1, 2023. We are interested in 
information on how these two technologies may differ from each other 
with respect to the newness criterion to inform our analysis of whether 
REBYOTATM and SER-109 are substantially similar to each 
other.
    We believe that if these technologies are substantially similar to 
each other, it is appropriate to use the earliest market availability 
date submitted as the beginning of the newness period for both 
technologies (83 FR 41286 through 41287). Therefore, with regard to 
both technologies, if the technologies are approved for new technology 
add-on payments, we believe that the beginning of the newness period 
would be the date on which REBYOTATM became commercially 
available, January 23, 2023. 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 (87 FR 48977 and 77 
FR 53348).
    We are inviting public comment on whether REBYOTATM is 
substantially similar to existing technologies and meets the newness 
criterion, including whether REBYOTATM is substantially 
similar to SER-109, and whether these technologies should be evaluated 
as a single technology for purposes of new technology add-on payments.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for REBYOTATM using ICD-10-CM code A04.71 
(Enterocolitis due to Clostridium difficile, recurrent). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 14,653 claims mapping to 398 MS-DRGs. Please see 
Table 10.17.A.--REBYOTATM Codes--FY 2024 associated with 
this proposed rule for the complete list of MS-DRGs that the applicant 
indicated were included in its cost analysis. The applicant followed 
the order of operations described in the following table and calculated 
a final inflated average case-weighted standardized charge per case of 
$156,292, which exceeded the average case-weighted threshold amount of 
$71,397. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that REBYOTATM meets the cost 
criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.171

    We are inviting public comments on whether REBYOTATM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that REBYOTATM 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, and because the use of 
REBYOTATM significantly improves clinical outcomes relative 
to the treatment options previously available. The applicant provided 
eight studies to support these claims, as well as background articles 
about occurrence and treatment of CDI and rCDI.\87\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
REBYOTATM for the applicant's

[[Page 26856]]

complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \87\ Background articles are not included in the table in this 
section but can be accessed via the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TP01MY23.172


[[Page 26857]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.173


[[Page 26858]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.174


[[Page 26859]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.175

    After review of the information provided by the applicant, we have 
the following concerns regarding whether REBYOTATM meets the 
substantial clinical improvement criterion. Regarding the assertion 
that

[[Page 26860]]

REBYOTATM is an FDA-approved therapeutic option for some 
patients who may not be eligible for treatment with 
ZINPLAVATM due to patient population restrictions (for 
example, high-risk patients) or contraindications (for example, history 
of congestive heart failure [CHF]), and that there is no evidence that 
REBYOTATM poses an increased risk of serious AEs in patients 
with a history of CHF, the applicant cited a retrospective study of 
REBYOTATM reported by Feuerstadt et al.\88\ in which 94 
participants with comorbid conditions commonly found in people with 
rCDI were treated with REBYOTATM. The analysis showed a 
treatment success rate of 82.8%, with no observable difference between 
participants who received one dose (83.3%) vs. two doses (82.5%). We 
note that the comorbid conditions represented in this population 
included: gastroesophageal reflux disease (47.9%); irritable bowel 
syndrome (17%); gastritis (11.7%); constipation (8.5%); microscopic 
colitis (7.4%); diverticulitis (6.4%); Crohn's disease (5.3%); and 
ulcerative colitis (4.3%) but did not include patients with CHF as a 
comorbidity. We believe additional information regarding whether 
REBYOTATM was tested in patients with CHF to determine 
clinical outcomes would be helpful in our evaluation of the applicant's 
assertion. The applicant also referenced a poster presentation by Braun 
et al.\89\ that presents the safety data from five prospective studies 
in which 749 pooled participants received at least one dose of 
REBYOTATM, and 83 participants received placebo only to 
support its assertion. Additional information demonstrating whether 
REBYOTATM is safe for the patient population with CHF would 
help to inform an assessment of whether REBYOTATM 
demonstrates substantial clinical improvement over existing 
technologies.
---------------------------------------------------------------------------

    \88\ Feuerstadt P, Harvey A, Bancke L. RBX2660, an 
investigational live microbiota-based biotherapeutic, improves 
outcomes of Clostridioides difficile infection in a real-world 
population: a retrospective study of use under an FDA enforcement 
discretion. Abstract for ACG2021.
    \89\ Braun T, Guthmueller B, Harvey A. Safety of investigational 
microbiota-based live biotherapeutic RBX2660 in individuals with 
recurrent Clostridioides difficile infection: data from five 
prospective clinical studies. Abstract presented at: 10th Annual 
IDWeek; September 29, 2021.
---------------------------------------------------------------------------

    Regarding the claim of sustained clinical response, the applicant 
referenced an abstract of an open-label trial of REBYOTATM 
by Orenstein et al. This trial was a Phase 2 open-label trial where 
participants with multiple rCDI received two doses of 
REBYOTATM administered 7 + 2 days apart. Researchers 
conducted a 2-year analysis of the clinical safety, efficacy, and 
durability of REBYOTATM. The absence of rCDI was compared 
between the REBYOTATM and a historical control cohort that 
received standard-of-care antibiotic therapy. Durability was defined as 
continued absence of CDI episodes beyond 8 weeks, and was assessed at 
3, 6, 12, and 24 months by assessing changes in stool samples. While 
the applicant submitted results from both a phase 2 trial of 
REBYOTATM \90\ and the PUNCH CD3 phase 3 trial \91\ to 
demonstrate the superiority of REBYOTATM over placebo, we 
question whether other treatment options indicated to prevent rCDI, 
such as ZINPLAVATM, would be a more appropriate comparator. 
Additional information regarding clinical outcomes as a result of 
treatment with REBYOTATM compared to ZINPLAVATM, 
instead of placebo, would be helpful in our assessment of the 
substantial clinical improvement criterion. In summary, while we 
understand that there are no head-to-head trials comparing 
REBYOTATM to ZINPLAVATM, additional information 
would help inform our assessment of whether REBYOTATM 
demonstrates a substantial clinical improvement over existing 
technologies.
---------------------------------------------------------------------------

    \90\ Blount KF, Shannon WD, Deych E, Jones C. Restoration of 
bacterial microbiome composition and diversity among treatment 
responders in a phase 2 trial of REBYOTA: an investigational 
microbiome restoration therapeutic. Open Forum Infect Dis. 
2019;6(4):ofz095.
    \91\ Blount K, Walsh D, Gonzalez C, et al. Treatment success in 
reducing recurrent Clostridioides difficile infection with 
investigational live biotherapeutic REBYOTATM is 
associated with microbiota restoration: consistent evidence from a 
phase 3 clinical trial. Abstract presented at: 10th Annual IDWeek; 
September29, 2021.
---------------------------------------------------------------------------

    We are inviting public comments on whether REBYOTATM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
REBYOTATM.
k. Sabizabulin
    Veru, Inc. submitted an application for new technology add-on 
payments for sabizabulin for FY 2024. Per the applicant, sabizabulin is 
a novel oral microtubule disruptor that will be indicated, upon FDA 
approval, for treatment of severe SARS-CoV-2 infection in hospitalized 
patients with moderate to severe COVID-19 at high risk for Acute 
Respiratory Distress Syndrome (ARDS) and death. According to the 
applicant, preclinical studies demonstrate that sabizabulin has both 
significant antiviral and anti-inflammatory activities by disrupting 
microtubule dynamics.
    Please refer to the online application posting for sabizabulin, 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017FTANY, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated it 
anticipates Emergency Use Authorization (EUA) and/or NDA approval for 
treatment of SARS-CoV-2 infection in hospitalized patients with 
moderate to severe COVID-19 infection who are at high risk for ARDS 
before July 1, 2023. We note that, as discussed in prior rulemaking, a 
product available only through an EUA would not be eligible for new 
technology add-on payments. 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 (86 FR 45159 through 45160). The applicant stated that the 
recommended dosing of sabizabulin will be a 9 mg capsule administered 
orally daily for a maximum of 21 days or until the patient is 
discharged from the hospital. The applicant estimated the average 
number of treatment days for sabizabulin to be 11.4 days, based on the 
results of the phase 3 trial (Barnette et al., 2022). From this 
estimation, the applicant anticipates an average dose per inpatient 
stay of one 9 mg capsule (per day) x 11 days.
    According to the applicant, there were no ICD-10-PCS procedure 
codes to distinctly identify sabizabulin at the time of application. We 
note that, effective April 1, 2023, the following ICD-10-PCS codes can 
be used to uniquely describe procedures involving the use of 
sabizabulin: XW0DXK8 (Introduction of sabizabulin into mouth and 
pharynx, external approach, new technology group 8), XW0G7K8 
(Introduction of sabizabulin into upper GI, via natural or artificial 
opening, new technology group 8), and XW0H7K8 (Introduction of 
sabizabulin into lower GI, via natural or artificial opening, new 
technology group 8). The applicant stated that diagnosis code U07.1 
(COVID-19) may be used to currently identify the indication for 
sabizabulin under the ICD-10-CM coding system.

[[Page 26861]]

    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that sabizabulin is not substantially similar to other 
currently available technologies because sabizabulin has a unique 
mechanism of action, and that therefore, the technology meets the 
newness criterion. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for sabizabulin for the applicant's 
complete statements in support of its assertion that sabizabulin is not 
substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP01MY23.176

    We are inviting public comments on whether sabizabulin is 
substantially similar to existing technologies and whether sabizabulin 
meets the newness criterion.
    With respect to the cost criterion, the applicant provided three 
analyses to demonstrate that it meets the cost criterion. The applicant 
searched the FY 2021 MedPAR file using the ICD-10-PCS codes described 
in the following table, to identify potential cases representing 
patients who may be eligible for sabizabulin and then further divided 
the potential cases based on existence or absence of intensive care 
days. The applicant based the three cost analyses on three cohorts from 
a randomized, multicenter placebo-controlled phase 3 clinical trial 
demonstrating the efficacy of sabizabulin (Barnette et al., 2022), 
including: (1) Cases without mechanical ventilation or intensive care 
days; (2) Cases with intensive care days and without mechanical 
ventilation; and (3) Cases with mechanical ventilation. Each analysis 
followed the order of operations described in the following table.
    For the first analysis, the applicant searched for cases reporting 
the ICD-10-CM diagnosis of COVID-19 (U07.1) in any position and a high/
low flow oxygen ICD-10-PCS code, without the presence of mechanical 
ventilation ICD-10-PCS codes, and without intensive care days. Please 
see Table 10.19.A.--Sabizabulin Codes--FY 2024 associated with this 
proposed rule for the complete list of ICD-10-PCS codes and MS-DRGs 
that the applicant indicated were included in its cost analysis. The 
applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 16,664 
claims mapping to 29 MS-DRGs. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $115,916, which 
exceeded the average case-weighted threshold amount of $64,866.
    For the second analysis, the applicant searched for the same 
criteria used for the first analysis, but instead with the presence of 
intensive care days. Please see Table 10.19.A.--Sabizabulin Codes--FY 
2024 associated with this proposed rule for the complete list of ICD-
10-PCS codes and MS-DRGs that the applicant indicated were included in 
its cost analysis. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 36,438 claims mapping to 46 MS-DRGs. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $163,327, which exceeded the average case-weighted 
threshold amount of $66,501.
    For the third analysis, the applicant searched for cases reporting 
the ICD-10-CM diagnosis of COVID-19 (U07.1) in any position, with a 
mechanical ventilation ICD-10-PCS code and/or

[[Page 26862]]

intensive care day(s). Please see Table 10.19.A.--Sabizabulin Codes--FY 
2024 associated with this proposed rule for the complete list of ICD-
10-PCS codes and MS-DRGs that the applicant indicated were included in 
its cost analysis. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 79,237 claims mapping to 100 MS-DRGs. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $259,462, which exceeded the average case-weighted 
threshold amount of $171,026. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount in all analyses, the applicant asserted that 
sabizabulin meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.177

    We note that the applicant's inclusion/exclusion criteria and 
reasoning for the third analysis are unclear. For the third analysis, 
the applicant searched for cases reporting the ICD-10-CM diagnosis of 
COVID-19 (U07.1) in any position, with a mechanical ventilation ICD-10-
PCS code and/or intensive care day(s). The inclusion of a mechanical 
ventilation ICD-10-PCS code or intensive care days would allow 
inclusion of cases without

[[Page 26863]]

mechanical ventilation (but with intensive care days) in the cohort. 
However, the study (Barnette et al., 2022) which the analysis is 
intended to mirror appears to require mechanical ventilation for all 
cases in the third cohort. We would be interested in confirmation or 
clarification of the inclusion criteria for the third analysis, 
including which cases it is intended to capture. Additionally, we would 
be interested in information explaining what ``inhalation charges'' 
were removed in the third analysis. It is unclear if ``inhalation 
charges'' were intended to mean ventilation charges (during the 
associated 49% reduction in ventilation days), or otherwise. We are 
inviting public comments on whether sabizabulin meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that sabizabulin represents a substantial clinical 
improvement over existing technologies because sabizabulin has been 
shown to significantly improve clinical outcomes relative to other 
COVID-19 treatments because in a randomized, multicenter placebo-
controlled phase 3 clinical trial, sabizabulin was associated with: 
reduction of least one clinically significant adverse event (SAE); 
fewer days in intensive care unit (ICU) on mechanical ventilation and 
in hospital; fewer adverse events (AEs); decreased rate of at least one 
subsequent diagnostic or therapeutic intervention; a reduced length of 
stay; and reduced recovery time. The following table summarizes the 
applicant's assertions regarding substantial clinical improvement. 
Please see the online posting for sabizabulin for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.

[[Page 26864]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.178


[[Page 26865]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.179

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether sabizabulin meets the 
substantial

[[Page 26866]]

clinical improvement criterion. We note the applicant cites one study 
for all six claims, a randomized clinical trial that has a sample size 
of 130 patients treated, across five countries (United States, Brazil, 
Bulgaria, Argentina, and Mexico), with 204 patients randomly assigned 
to either treatment or placebo group. It is unclear whether the same 
results can be repeated since other studies were not provided. We 
question whether the findings from this study are directly applicable 
to the Medicare population, particularly if there were significant 
differences between the standards of care in the countries included in 
the study and standards of care in the U.S. The study's description of 
concurrent COVID-19 therapies does not appear to be consistent with 
guidelines in effect in the US \92\ throughout the enrollment period. 
For example, only 83.7% of patients in the placebo group received 
dexamethasone, the volume of patients who received immunomodulators 
appears to be much less than recommended by National Institutes of 
Health guidelines, and antiviral therapy was uncommon (as noted by 
Peltan and Brown in a NEJM editorial).\93\ A break-out in mortality 
rate was provided for the U.S. subgroup within the study, and while the 
U.S. subgroup would be expected to have greater consistency with 
standards of care for Medicare patients, we question whether the U.S. 
subgroup of the original sample was powered to show a statistically 
significant difference in outcome. No confidence interval or power 
calculations were provided for the U.S. subgroup results, which stated 
a 34.4% absolute reduction in mortality at day 60. Further, secondary 
outcomes were not provided for the U.S. subgroup. We question whether 
the different standards of care contributed to the high rate of 
mortality (35% at day 29; 45% at day 60) in the placebo group, and 
whether it is appropriate to compare against the results of the placebo 
group. The patients in the study underwent random assignment between 
May 18, 2021 and January 31, 2022. CDC's reporting for in-hospital 
mortality among patients hospitalized primarily for COVID-19 was 15.1% 
during the Delta period (July-October 2021), and 13.1% during the early 
Omicron period (January-March 2022).\94\ While these may not be direct 
comparison groups, it is unclear why there would be a remarkable 
difference in the CDC published mortality rates among patients 
hospitalized primarily for COVID-19 and the mortality rates of the 
placebo group in this study. Rajesh T. Gandhi, MD also noted the 
mortality rate to be higher in the study referenced by the applicant 
(Barnette KG et al. NEJM Evid 2022 Jul 6) than in other recent trials 
\95\ and he asserted that this high rate of mortality may have affected 
the results of the study. Dr. Gandhi goes on to say that while the high 
rate of mortality may be related to the severity of illness and 
underlying risk, it may also be due to chance because of the small 
number of participants, and that a larger, more definitive study of 
this drug may be warranted.\96\ We further note that the study provided 
by the applicant shows a difference in outcomes with remdesivir usage 
at 34.7% among the sabizabulin group and 28.8% among the placebo group, 
and we question whether higher remdesivir usage rates in the 
sabizabulin group may have contributed to greater anti-viral effects.
---------------------------------------------------------------------------

    \92\ DOI: https://files.covid19treatmentguidelines.nih.gov/guidelines/archive/covid19treatmentguidelines-04-08-2022.pdf.
    \93\ Ithan D. Peltan, M.D., M.Sc. and Samuel M. Brown, M.D., 
M.S. ``What Next? New Drugs, Old Drugs, and New Challenges in 
Choosing Treatments for Covid-19,'' August 23, 2022 DOI: https://evidence.nejm.org/doi/full/10.1056/EVIDe2200189.
    \94\ Adjei S, Hong K, Molinari NM, et al. Mortality Risk Among 
Patients Hospitalized Primarily for COVID-19 During the Omicron and 
Delta Variant Pandemic Periods--United States, April 2020-June 2022. 
MMWR Morb Mortal Wkly Rep 2022;71:1182-1189. DOI: http://dx.doi.org/10.15585/mmwr.mm7137a4.
    \95\ Dr. Gandhi referenced other recent studies with lower 
mortality rates. One reference was a review that he wrote on the of 
the National Institutes of Health-sponsored Adaptive COVID-19 
Treatment Trial (ACTT-1); doi: https://www.jwatch.org/na52072; 
another reference was to a study on Remdesivir for the Treatment of 
Covid-19; doi: https://www.nejm.org/doi/full/10.1056/nejmoa2007764.
    \96\ Rajesh T. Gandhi, MD, NEJM Journal Watch, ``A Possible New 
Drug for Treatment of Hospitalized Patients with COVID-19,'' July 
21, 2022 DOI: https://www.jwatch.org/na55130/2022/07/21/possible-new-drug-treatment-hospitalized-patients-with.
---------------------------------------------------------------------------

    Finally, with regard to the claim about medication adherence, we 
note that the study provided was not designed to measure medication 
compliance/adherence results, and no data was provided to directly 
support greater medication compliance/adherence for sabizabulin, or a 
comparison with self-administered medications. We therefore question 
how the results in this study support the assertion that sabizabulin 
utilization demonstrates greater medication adherence and compliance. 
We also note that patients who withdrew consent or refused the protocol 
were removed from the study, and we question the impact that may have 
had on analyses of medication compliance/adherence.
    We are inviting public comments on whether sabizabulin meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
sabizabulin.
l. SeptiCyte[reg] RAPID
    Immunexpress, Inc. submitted an application for new technology add-
on payments for SeptiCyte[reg] RAPID for FY 2024. Per the applicant, 
SeptiCyte[reg] RAPID is a gene expression assay used in conjunction 
with clinical assessments and other laboratory findings as an aid to 
differentiate infection-positive (sepsis) from infection-negative 
systemic inflammatory response syndrome (SIRS) in patients suspected of 
sepsis on their first day of intensive care unit (ICU) admission. 
According to the applicant, the test is performed in a fully integrated 
cartridge, which runs on the Biocartis Idylla system, with sample to 
answer turnaround time of approximately 60 minutes. The applicant 
stated that SeptiCyte[reg] RAPID generates a score (SeptiScore[reg]) 
ranging from 0 to 15 that falls within one of four discrete 
interpretation bands based on the increasing likelihood of infection-
positive systemic inflammation, also known as sepsis.
    Please refer to the online application posting for SeptiCyte[reg] 
RAPID, available at https://mearis.cms.gov/public/publications/ntap/NTP2210170WWBT, for additional detail describing the technology and 
diagnostic indications.
    With respect to the newness criterion, according to the applicant, 
SeptiCyte[reg] RAPID received 510(k) clearance (K203748) from FDA on 
November 29, 2021 for the following indication: SeptiCyte[reg] RAPID is 
indicated as a gene expression assay using reverse transcription 
polymerase chain reaction to quantify the relative expression levels of 
host response genes isolated from whole blood collected in the 
PAXgene[reg] Blood RNA Tube. The SeptiCyte[reg] RAPID test is used in 
conjunction with clinical assessments and other laboratory findings as 
an aid to differentiate infection-positive (sepsis) from infection-
negative systemic inflammation in patients suspected of sepsis on their 
first day of ICU admission. The SeptiCyte[reg] RAPID test generates a 
score (SeptiScore[reg]) that falls within one of four discrete 
Interpretation Bands based on the increasing likelihood of infection-
positive systematic inflammation. SeptiCyte[reg] RAPID is intended for 
in-

[[Page 26867]]

vitro diagnostic use on the Biocartis IdyllaTM System. The 
applicant stated the SeptiCyte[reg] RAPID was commercially available 
immediately after FDA clearance. Per the applicant, Septicyte[reg] 
RAPID was cleared based on substantial equivalency to the predicate 
device SeptiCyte[reg] LAB (K163260), which received 510(k) clearance 
\97\ from the FDA on April 6, 2017. The applicant described differences 
between the two versions of the technology including: the automatic 
extraction of material from SeptiCyte[reg] RAPID versus the manual 
extraction for SeptiCyte[reg] LAB; reverse transcription polymerase 
chain reaction (RT-PCR) and dry format for SeptiCyte[reg] RAPID versus 
reverse transcription-quantitative polymerase chain reaction (RT-qPCR) 
and wet format for SeptiCyte[reg] LAB; use of the Biocartis 
IdyllaTM System for SeptiCyte[reg] RAPID versus ABI 7500 
Fast Dx for SeptiCyte[reg] LAB; different fluorescent probes and 
quenchers between SeptiCyte RAPID and SeptiCyte LAB; and use of MS2 
phage internal sample processing control for SeptiCyte RAPID versus 
three external controls for SeptiCyte LAB.
---------------------------------------------------------------------------

    \97\ https://www.accessdata.fda.gov/cdrh_docs/reviews/K163260.pdf.
---------------------------------------------------------------------------

    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of SeptiCyte[reg] RAPID: XXE5X38 (Measurement of Infection, 
Whole Blood Nucleic Acid-base Microbial Detection, New Technology Group 
5).
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that SeptiCyte[reg] RAPID is not substantially similar to 
other currently available technologies because SeptiCyte[reg] RAPID 
differs in mechanism, performance, and turnaround time from all current 
sepsis diagnostic tools by leveraging the host's immune response to 
systemic inflammation of infectious origin via measurement of the gene 
expression ratio between upregulated and downregulated genes, and 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
SeptiCyte[reg] RAPID for the applicant's complete statements in support 
of its assertion that SeptiCyte[reg] RAPID is not substantially similar 
to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.180

    We have the following concerns with regard to the newness 
criterion. We note that the applicant did not include SeptiCyte[reg] 
LAB, the predicate device for SeptiCyte[reg] RAPID which was cleared by 
FDA on April 6, 2017, in its discussion of existing technologies. While 
the applicant described differences between the two versions of the 
technology, it does not appear that these differences materially affect 
the mechanism of action of the technology. We note that both devices 
utilize a gene expression assay using reverse transcription polymerase 
chain reaction to quantify the relative expression levels of host 
response genes.\98\ We further note that the applicant also appears to

[[Page 26868]]

consider the devices as similar, as they rely on studies conducted 
using the SeptiCyte[reg] LAB to demonstrate substantial clinical 
improvement.
---------------------------------------------------------------------------

    \98\ https://www.accessdata.fda.gov/cdrh_docs/reviews/K163260.pdf.
---------------------------------------------------------------------------

    We also note that the applicant did not explain how SeptiCyte[reg] 
RAPID targets a different disease or patient population compared to 
existing sepsis diagnostic testing. Instead, the applicant stated that 
SeptiCyte[reg] RAPID does not diagnose the same patient population 
compared to existing technology, because it allows for early diagnosis, 
guides treatment decisions, and has high accuracy. While this may be 
relevant to the assessment of substantial clinical improvement, it does 
not appear to be related to newness and we are unclear how the patient 
population tested with Septicyte[reg] RAPID differs from other patients 
tested for sepsis, including those tested with Septicyte[reg] LAB. As 
the applicant states that Septicyte[reg] RAPID maps to the same MS-DRG 
as existing technologies, and it appears to have a similar mechanism of 
action and is used in the same patient population as SeptiCyte[reg] 
LAB, we believe these technologies may be substantially similar to each 
other. We note that if Septicyte[reg] RAPID is substantially similar to 
SeptiCyte[reg] LAB, we believe the newness period for this technology 
would begin on April 6, 2017 with the 510(k) approval date for 
SeptiCyte[reg] LAB and, therefore, because the 3-year anniversary date 
of the technology's entry onto the U.S. market (April 6, 2020) occurred 
in FY 2020, the technology would no longer be considered new and would 
not be eligible for new technology add-on payments for FY 2024.
    We are inviting public comments on whether SeptiCyte[reg] RAPID is 
substantially similar to existing technologies and whether 
SeptiCyte[reg] RAPID meets the newness criterion.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for SeptiCyte[reg] RAPID. The applicant identified three 
different types of patient cases where SeptiCyte[reg] RAPID could be 
used: patients with sepsis as an admission diagnosis; patients who 
develop sepsis after hospital admission; and patients with symptoms 
similar to sepsis patients. To identify these patients, the applicant 
used MS-DRGs and ICD-10-CM codes. These three groups were combined into 
one analysis with no overlap in cases between the three groups. Please 
see Table 10.21.A.--SeptiCyte[reg] RAPID Codes--FY 2024 associated with 
this proposed rule for the complete list of MS-DRGs and codes provided 
by the applicant. Using the inclusion/exclusion criteria described in 
the following table, the applicant identified 3,460,256 claims mapping 
to 691 MS-DRGs. The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $88,326, which 
exceeded the average case-weighted threshold amount of $72,992. Because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
maintained that SeptiCyte[reg] RAPID meets the cost criterion.

[[Page 26869]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.181

    We are inviting public comments on whether SeptiCyte[reg] RAPID 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SeptiCyte[reg] RAPID represents a substantial 
clinical improvement over existing technologies because SeptiCyte[reg] 
RAPID is the only technology to accurately differentiate sepsis versus 
non-infectious systemic inflammation in 1 hour, allowing for early, 
appropriate intervention in suspected sepsis patients and driving 
prompt source control investigation, while outperforming currently used 
sepsis diagnostic tools. The applicant asserted that for these reasons 
SeptiCyte[reg] RAPID offers the ability to diagnose sepsis earlier than 
allowed by currently available diagnostic methods and significantly 
improves clinical outcomes relative to current technologies. The 
applicant provided eight studies to support these claims, as well as 12 
background articles about sepsis clinical guidelines, screening 
criteria, and treatment.\99\ The following table summarizes the 
applicant's assertions regarding the substantial clinical improvement 
criterion. Please see the online posting for SeptiCyte[reg] RAPID for 
the applicant's complete statements regarding the substantial clinical 
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \99\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 26870]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.182


[[Page 26871]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.183


[[Page 26872]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.184


[[Page 26873]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.185

    After review of the information provided by the applicant, we have 
the following concerns regarding whether SeptiCyte[reg] RAPID meets the 
substantial clinical improvement criterion. First, we note that the 
applicant submitted two studies 100 101 of SeptiCyte[reg] 
LAB, the predicate device, to support its assertions as to why 
SeptiCyte[reg] RAPID represents a substantial clinical improvement. The 
applicant did not present any clinical data to compare SeptiCyte[reg] 
RAPID to SeptiCyte[reg] LAB. Second, the studies provided showed that 
SeptiCyte[reg] RAPID is not a definitive test and that resulting 
SeptiScores[reg] in Bands 2 and 3 are inconclusive. We note that the 
applicant stated that SeptiCyte[reg] RAPID should be used in 
conjunction with clinical assessments and other laboratory findings. If 
additional diagnostic tests are needed in conjunction with 
SeptiCyte[reg] RAPID to determine a diagnosis of sepsis or SIRS, we 
question whether SeptiCyte[reg] RAPID can provide an earlier diagnosis 
and affects the management of the patient. In addition, the applicant 
did not provide evidence for this claim other than the one-hour 
turnaround time for SeptiCyte[reg] RAPID to provide test results. 
Additionally, we note that the applicant did not provide any clinical 
data demonstrating that the SeptiCyte[reg] RAPID affects the management 
of the patient, or that it improves clinical outcomes.
---------------------------------------------------------------------------

    \100\ Balk, R, Esper AM, Martin GS, et al. Validation of 
SeptiCyte[reg] RAPID to discriminate sepsis from non-infectious 
systemic inflammation. Submitted for review and publication 
September 2022. Available as pre-print at https://doi.org/10.1101/2022.07.20.22277648.
    \101\ McHugh, L.C. (2018). Modeling Improved Patient Management 
and Hospital Savings with SeptiCyte[reg] LAB in the Diagnosis of 
Sepsis at ICU admission. Abstract at IDWeek 2018.
---------------------------------------------------------------------------

    We are inviting public comments on whether SeptiCyte[reg] RAPID 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
SeptiCyte[reg] RAPID.

[[Page 26874]]

m. SER-109
    Seres Therapeutics, Inc. submitted an application for new 
technology add-on payments for SER-109 for FY 2024. Per the applicant, 
SER-109 is an investigational oral microbiome therapeutic administered 
to reduce Clostridioides difficile (C. diff) infection (CDI) recurrence 
as part of a two-pronged treatment approach of (1) antibiotics to kill 
vegetative C. diff bacteria, followed by (2) SER-109 to repair the 
microbiome to manage CDI and prevent its recurrence. According to the 
applicant, SER-109 is a consortium of purified Firmicutes bacteria 
spores collected from healthy stool donors. The applicant stated that 
engraftment of spore-producing Firmicutes bacteria is a necessary first 
step in microbiome repair, as Firmicutes bacteria produce metabolites, 
such as secondary bile acids, which inhibit C. diff spore germination 
and vegetative growth.
    Please refer to the online application posting for SER-109, 
available at https://mearis.cms.gov/public/publications/ntap/NTP221016VHL8B, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for SER-109 but that it 
anticipates BLA approval before July 1, 2023 for the proposed 
indication to prevent the recurrence of CDI in adults with rCDI. 
According to the applicant, SER-109 will be commercially available 
after it receives FDA approval. The applicant stated that the proposed 
dose is four capsules taken orally once daily on an empty stomach 
before the first meal of the day for 3 consecutive days; recommended 
dosage and administration are subject to final FDA approval.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify SER-109. We note that the 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for SER-109 beginning in FY 2024. The applicant stated 
that diagnosis codes A04.71 (Enterocolitis due to Clostridium 
difficile, recurrent) and A04.72 (Enterocolitis due to Clostridium 
difficile, not otherwise specified as recurrent) may be used to 
currently identify the indication for SER-109 under the ICD-10-CM 
coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
stated that SER-109 is not substantially similar to other currently 
available technologies because SER-109 does not have the same or 
similar mechanism of action as any currently FDA-approved CDI treatment 
and does not involve treatment of the same or similar type of disease 
or patient population as there are currently no approved therapies 
indicated to repair a disrupted microbiome as a treatment intervention 
to prevent recurrence in patients with rCDI. Therefore, the applicant 
asserted that SER-109 meets the newness criterion. The following table 
summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for SER-
109 for the applicant's complete statements in support of its assertion 
that SER-109 is not substantially similar to other currently available 
technologies.

[[Page 26875]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.186

    We note the following concerns with regard to the newness 
criterion. The applicant asserted that SER-109 can be administered to 
patients with CHF and stated that the use of ZINPLAVATM 
(bezlotoxumab) should be reserved in this patient population. We note 
that the indication for ZINPLAVATM does not exclude patients 
with a history of CHF and the labeling has no listed contraindications. 
Therefore, we seek clarification from the applicant regarding the 
differences in patient populations for ZINPLAVATM and SER-
109.
    In addition, we note that SER-109 may have a substantially similar 
mechanism of action as REBYOTATM, another microbiome 
therapeutic for which we received an application for new technology 
add-on payments for FY 2024 to reduce the recurrence of rCDI in adults 
following antibiotic treatment for rCDI, inclusive of the first 
recurrence. Notably, the exact mechanism of action for each therapeutic 
is not known; however, both appear to act on the gut microbiome to 
prevent the increased germination of C. difficile (C. diff) and thereby 
prevent rCDI. Both SER-109 and REBYOTATM appear to lead to 
compositional changes in the gastrointestinal microbiome that restore 
the diversity of gut flora which enable it to suppress outgrowth of C. 
diff. and rCDI, following standard-of-care treatment with antibiotics 
for rCDI. Further, both technologies appear to map to the same MS-DRGs 
as each other and as existing technologies, and to treat the same or 
similar disease (rCDI) in the same or similar patient population 
(patients who have previously received standard-of-care antibiotics for 
CDI or rCDI).
    Accordingly, since it appears that SER-109 and REBYOTATM 
are

[[Page 26876]]

purposed to achieve the same therapeutic outcome using a similar 
mechanism of action and would be assigned to the same MS-DRG, we 
believe that these technologies may be substantially similar to each 
other such that they should be considered as a single application for 
purposes of new technology add-on payments. We note that if this 
technology is substantially similar to REBYOTATM, it is 
appropriate to use the earliest market availability date submitted as 
the beginning of the newness period for both technologies (83 FR 41286 
through 41287). Therefore, we believe the newness period for this 
technology would begin on January 23, 2023, the date 
REBYOTATM became commercially available. We are interested 
in information on how these two technologies may differ from each other 
with respect to the substantial similarity criteria and newness 
criterion to inform our analysis of whether SER-109 and 
REBYOTATM are substantially similar to each other and 
therefore should be considered as a single application for purposes of 
new technology add-on payments.
    We are inviting public comment on whether SER-109 is substantially 
similar to existing technologies and meets the newness criterion, 
including whether SER-109 is substantially similar to 
REBYOTATM, and whether these technologies should be 
evaluated as a single technology for purposes of new technology add-on 
payments.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for SER-109, the applicant 
searched the FY 2021 MedPAR file for cases reporting ICD-10-CM code 
A04.71 (Enterocolitis due to Clostridium difficile, recurrent). Using 
the inclusion/exclusion criteria described in the following table, the 
applicant identified 14,497 claims mapping to 392 MS-DRGs. Please see 
Table 10.22.A.--SER-109 Codes--FY 2024 associated with this proposed 
rule for the complete list of MS-DRGs that the applicant indicated were 
included in its cost analysis. The applicant followed the order of 
operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of 
$175,157, which exceeded the average case-weighted threshold amount of 
$69,830. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant maintained that SER-109 meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.187

    We are inviting public comments on whether SER-109 meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SER-109 represents a substantial clinical 
improvement over existing technologies because SER-109 treats patients 
unresponsive to antibiotic treatment for rCDI and can be used in 
patients ineligible for ZINPLAVATM due to CHF. The applicant 
also asserts that it improves clinical outcomes by reducing CDI 
recurrence, increasing resolution of the disease process by expediting 
microbiome repair, and reducing carriage of antimicrobial resistance 
genes. The applicant provided 5 studies to support these claims, as 
well as 11 background articles about CDI recurrence and risks of 
increased exposure to antibiotic therapies in a hospital setting for 
rCDI and cardiac risk of prescribing existing treatments, such as 
ZINPLAVATM, to patients with pre-existing heart 
failure.\102\ The following table summarizes the applicant's assertions 
regarding the substantial clinical improvement criterion. Please see 
the online posting for SER-109 for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \102\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 26877]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.188


[[Page 26878]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.189


[[Page 26879]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.190


[[Page 26880]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.191


[[Page 26881]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.192

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether SER-109 meets the substantial 
clinical improvement criterion. To demonstrate that SER-109 reduces 
rates of CDI recurrence compared to standard of care therapies, the 
application primarily cites to the ECOSPOR phase II trial and ECOSPOR 
III phase III trial. The application also cites a recently-presented 
abstract of the open-label single-arm ECOSPOR IV trial which does not 
appear to provide a comparison against currently available therapies. 
The major limitation of these data is that patients who received 
ZINPLAVATM in the prior 3 months were excluded. While the 
study provides data comparing the

[[Page 26882]]

effectiveness of SER-109 to antibiotics alone, no data comparing the 
treatment of rCDI utilizing antibiotics plus ZINPLAVATM, as 
is currently recommended for rCDI, against antibiotics plus SER-109 
(with or without ZINPLAVATM) was provided. Without a 
comparison against such currently available therapies, we question 
whether the information provided by the applicant is sufficient to 
support the applicant's statements that SER-109 is well-tolerated and 
mitigates the safety concerns of other alternative therapies, and that 
SER-109 can be used in patients ineligible for ZINPLAVATM 
due to diagnosis of CHF.
    With regard to the claim that SER-109 can be used safely in 
patients with CHF, the cited trials either did not identify or document 
effects on participants with comorbid CHF to support this conclusion. 
The ECOSPOR trial specifically excluded patients with poor concurrent 
medical risks or clinically significant co-morbid disease such that, in 
the opinion of the investigator, the subject should not be enrolled. It 
is not clear whether this criterion necessarily excluded individuals 
with known pre-existing CHF from the study group; however, it is also 
not clear how many individuals diagnosed with CHF prior to or during 
the study were identified in the study populations. A lack of 
participants with CHF could potentially account for the low incidence 
of adverse effects, rather than being attributable to the safety of 
SER-109 relative to ZINPLAVATM for patients with CHF. Absent 
additional information, it is therefore difficult to confirm that SER-
109 offers a treatment option for patients ineligible for 
ZINPLAVATM due to CHF.
    According to the applicant, there is an increased resolution of the 
disease process because SER-109 expedites microbiome repair during the 
window of vulnerability, identified as 1-4 weeks after antibiotic 
discontinuation, by ensuring more rapid engraftment of beneficial 
Firmicutes bacteria needed to decrease germination of C. diff. spores 
and prevent recurrence. For this claim, the applicant cites three 
articles: two randomized controlled trials and one unpublished 
abstract. While the results of the Phase III randomized controlled 
trial \103\ demonstrates the superiority of SER-109 over placebo, we 
question whether other treatment options indicated to prevent rCDI, 
such as ZINPLAVATM, would be a more appropriate comparator. 
Additional information regarding clinical outcomes as a result of 
treatment with SER-109 compared to such treatment options, instead of 
placebo, would be helpful in our assessment of the substantial clinical 
improvement criterion.
---------------------------------------------------------------------------

    \103\ Feuerstadt P, Louie TJ, Lashner B, et al., SER-109, an 
oral microbiome therapy for recurrent Clostridioides difficile 
infection. N Engl J Med 2022;386:220-9. DOI: 10.1056/NEJMoa2106516.
---------------------------------------------------------------------------

    With respect to the applicant's claim that SER-109 may reduce the 
number of future hospitalizations or physician visits for patients 
diagnosed with rCDI, the applicant cites the Feurstadt study to suggest 
that reduced rates of rCDI shown in Phase III clinical trials would 
likely lead to fewer days in hospital. However, the study does not 
address this measure directly; rather, this is an inference by the 
applicant. We welcome additional data to support the claim SER-109 may 
reduce the number of future hospitalizations or physician visits for 
patients with rCDI.
    With respect to the claim that SER-109 reduces the abundance of 
antimicrobial resistance genes (ARGs) and associated taxa compared to 
placebo, which accelerates microbiome recovery from antibiotics, the 
applicant cited one unpublished study showing treatment with SER-109 
led to a significant decrease in ARG abundance versus placebo, which 
was both rapid and sustained through week eight. However, the authors 
stated that further studies were needed to determine if the significant 
reduction of ARGs is associated with prevention of subsequent 
infections with drug resistant bacteria in CDI patients.
    We are inviting public comments on whether SER-109 meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for SER-109.
n. SPEVIGO[reg] (Spesolimab)
    Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI), submitted an 
application for new technology add-on payments for SPEVIGO[reg] for FY 
2024. SPEVIGO[reg] is a humanized antagonistic monoclonal 
immunoglobulin G1 antibody blocking human IL36R signaling currently 
under investigation for the treatment of flares in adult patients with 
generalized pustular psoriasis (GPP). We note that the applicant 
submitted an application for new technology add-on payments for 
SPEVIGO[reg] for FY 2023, under the name spesolimab, as summarized in 
the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28108 through 28746), 
but the technology did not meet the deadline of July 1, 2022 for FDA 
approval or clearance of the technology and, therefore, was not 
eligible for consideration for new technology add-on payments for FY 
2023 (87 FR 48920).
    Please refer to the online application posting for SPEVIGO[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP2210146275W, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
the BLA for SPEVIGO[reg] was approved by FDA on September 1, 2022 for 
the treatment of generalized pustular psoriasis (GPP) flares in adults. 
According to the applicant, SPEVIGO[reg] is administered as a single 
900 mg (2 x 450 mg/7.5 mL vials) intravenous infusion over 90 minutes, 
and an additional intravenous 900 mg dose may be administered 1 week 
after the initial dose if flare symptoms persist. The applicant 
indicated that, while there may be cases where a second dose is needed, 
there is insufficient frequency to impact the reported weighted average 
of one dose per patient.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of SPEVIGO[reg]: XW03308 (Introduction of spesolimab monoclonal 
antibody into peripheral vein, percutaneous approach, new technology 
group 8). The applicant stated that L40.1 (Generalized pustular 
psoriasis) may be used to currently identify the indication for 
SPEVIGO[reg] under the ICD-10-CM coding system.
    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 substantial similarity criteria, the applicant 
asserted that SPEVIGO[reg] is not substantially similar to other 
currently available technologies because, in the absence of an FDA-
approved therapy specifically indicated for GPP, immunomodulatory 
therapies, including biologics, are used in the treatment of GPP 
despite these medications being approved for plaque psoriasis, which is 
a different subtype of psoriasis. Additionally, there is limited 
evidence on the efficacy and safety of these therapies in the treatment 
of GPP. Due to the rarity of the disease, there are no high-quality 
clinical trials providing evidence for treatment options in GPP. 
Therefore, the applicant asserts that the technology meets the newness 
criterion. The following table summarizes the

[[Page 26883]]

applicant's assertions regarding the substantial similarity criteria. 
Please see the online application posting for SPEVIGO[reg] for the 
applicant's complete statements in support of its assertion that 
SPEVIGO[reg] is not substantially similar to other currently available 
technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.193

    We have the following concerns with regard to the newness 
criterion, similar to concerns raised in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28280). First, we note that, when describing 
current treatments for the disease, the applicant stated that there are 
no FDA-approved therapies specifically indicated for GPP. However, we 
question whether there are any treatments that may be indicated for 
psoriasis generally that may therefore be considered an on-label use 
for subtypes of psoriasis such as GPP, and request additional 
information on any such treatments and how they compare to SPEVIGO[reg] 
with regard to substantial similarity. We also note that while the 
applicant stated that SPEVIGO[reg] has no DRG to which it maps, the 
applicant also provided a list of four MS-DRGs that cases eligible for 
the use of the technology would map to, and we believe these are the 
same MS-DRGs to which other treatments for GPP would map.
    We are inviting public comments on whether SPEVIGO[reg] is 
substantially similar to existing technologies and whether SPEVIGO[reg] 
meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for SPEVIGO[reg], the 
applicant searched the FY 2021 MedPAR file for cases reporting ICD-10-
CM diagnosis code L40.1 (Generalized pustular psoriasis). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 64 cases mapping to 4 MS-DRGs listed in the table 
in this section. The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $387,414, which 
exceeded the average case-weighted threshold amount of $46,244. Because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
asserted that SPEVIGO[reg] meets the cost criterion.

[[Page 26884]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.194

    We note the applicant stated that removing charges for prior 
technology was not applicable to SPEVIGO[reg]; however, to the extent 
patients were treated with other treatments before SPEVIGO[reg], we 
question whether it may be appropriate to remove some portion of these 
charges to avoid inappropriately inflating the average charge per case. 
We are inviting public comments on whether it may be appropriate to 
remove charges for the prior technology and whether SPEVIGO[reg] meets 
the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SPEVIGO[reg] represents a substantial clinical 
improvement over existing technologies by being the first FDA approved 
drug for GPP, and existing treatments were associated with slow 
resolution of GPP flares and complete clearance of pustules and skin 
was not always achieved.
    The applicant further stated that in clinical trials, SPEVIGO[reg] 
was associated with clinically significant improvements in patient-
reported psoriasis symptoms, including fatigue, and significant 
decreases in markers of systemic inflammation. The applicant provided 
one study to support these claims. The following table summarizes the 
applicant's assertions regarding the substantial clinical improvement 
criterion. Please see the online posting for SPEVIGO[reg] for the 
applicant's complete statements regarding the substantial clinical 
improvement criterion and the supporting evidence provided.

[[Page 26885]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.195

    After review of the information provided by the applicant, we have 
the following concerns regarding whether SPEVIGO[reg] meets the 
substantial clinical improvement criterion. With regard to the 
Effisayil-1 study, we note that it is not designed to compare 
SPEVIGO[reg] to current treatment options. While the applicant states 
that SPEVIGO[reg] will be the first GPP treatment targeting the IL-36 
pathway, we note that per the applicant, other treatments are available 
and we therefore question whether placebo is the most appropriate 
comparator. In particular, we note that the Effisayil-1 trial primarily 
assessed clearance of skin manifestations, not systemic symptoms which 
the applicant notes differentiates GPP from other forms of psoriasis. 
We note the applicant has stated in its application that existing 
treatments for GPP are not specifically indicated for GPP and that it 
would not be appropriate to consider these treatments on-label for GPP. 
However, we note that there are treatments that are indicated for 
psoriasis generally, such as methotrexate \104\ or retinoids,\105\ 
which may be considered an on-label use for subtypes of psoriasis such 
as GPP.

[[Page 26886]]

Therefore, it is unclear whether there is a patient population 
ineligible for or unresponsive to existing technologies that could be 
treated with SPEVIGO[reg]. In addition, although the applicant stated 
that SPEVIGO[reg] represents a substantial clinical improvement over 
existing technologies where complete clearances were not always 
achieved, it seems that complete clearance is also not always achieved 
with SPEVIGO[reg]. As demonstrated in the Effisayil-1 study cited by 
the applicant, 54.3 percent of the patients achieved complete pustular 
clearance in the SPEVIGO[reg] arm.
---------------------------------------------------------------------------

    \104\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/008085Orig1s071lbl.pdf.
    \105\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/019821s028lbl.pdf.
---------------------------------------------------------------------------

    We note that GPP occurs most frequently between the ages of 15-20 
years with a smaller peak occurring at 55-60 years.\106\ The mean age 
in the Effisayil-1 study was 43.2 years for the SPEVIGO[reg] arm and 
42.6 years for the placebo group. Given the age range of patients, we 
question the generalizability of the outcomes demonstrated in a study 
of otherwise generally healthy patients with GPP to patients with GPP 
in the Medicare population who would likely be eligible for Medicare 
based on disabilities that could potentially present comorbidities for 
which SPEVIGO[reg] would not be appropriate or effective. In addition, 
the study administered SPEVIGO[reg] to the placebo group after one 
week, after which only outcomes with SPEVIGO[reg] were assessed, and 
the study concluded at 12 weeks. Given that the applicant did not 
provide any comparative data on existing technologies to demonstrate 
improved outcomes with SPEVIGO[reg], in addition to the short duration 
of the single study provided and the often variable, remitting, and 
intermittent course of the disease in which most flares last between 2 
and 5 weeks, we question whether the information we have supports a 
finding of substantial clinical improvement. Additional information to 
support the applicant's assertion of superiority over existing 
technologies would be helpful in better informing our assessment of 
this criterion.107 108
---------------------------------------------------------------------------

    \106\ \20\ Samotij et al. Generalized pustular psoriasis: 
divergence of innate and adaptive immunity. Int J Mol Sci 
2021;22(16):9048.
    \107\ Krueger et al. Treatment options and goals for patients 
with generalized pustular psoriasis. Am J Clin Dermatol 
2022:23(suppl 1):51-64.
    \108\ Choon et al. Clinical course and characteristics of 
generalized pustular psoriasis. Am J Clin Dermatol 2022;23(suppl 
1):21-9.
---------------------------------------------------------------------------

    We are inviting public comments on whether SPEVIGO[reg] meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
SPEVIGO[reg].
o. TECVAYLI TM (Teclistamab-cqyv)
    Johnson & Johnson Health Care Systems, Inc. submitted an 
application for new technology add-on payments for TECVAYLI 
TM for FY 2024. According to the applicant, TECVAYLI 
TM is the only bispecific antibody approved for the 
treatment of multiple myeloma (MM), specifically adult patients with 
relapsed or refractory multiple myeloma (RRMM) who have received at 
least four prior lines of therapy, including a proteasome inhibitor, an 
immunomodulatory agent, and an anti-cluster of differentiation (CD)38 
monoclonal antibody. The applicant stated that the structure of 
TECVAYLI TM is advantageous versus other bispecific 
platforms since its full size is designed to mimic naturally-occurring 
immunoglobulin G (IgG) antibodies. We note that Johnson & Johnson 
Health Care Systems, Inc. submitted an application for new technology 
add-on payments for TECVAYLI TM for FY 2023 under the name 
teclistamab, as summarized in the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28283 through 28287), and withdrew it prior to the issuance of 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48920).
    Please refer to the online application posting for TECVAYLI 
TM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017MFYGL, for additional detail describing the technology 
and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
TECVAYLI TM was granted BLA approval from FDA on October 25, 
2022 for the treatment of adult patients with RRMM who have received at 
least four prior lines of therapy, including a proteasome inhibitor, an 
immunomodulatory agent, and an anti-CD38 monoclonal antibody. According 
to the applicant, the product became commercially available on November 
9, 2022. Commercial availability was delayed because of the need to 
complete final supply chain readiness activities. Per the applicant, 
patients in the hospital for their initial TECVAYLI TM 
treatment will receive three doses subcutaneously--a 0.06 mg/kg loading 
dose, a 0.30 mg/kg loading dose, and the first 1.5 mg/kg treatment 
dose--during the hospital stay. The applicant stated that patients who 
are under 102 kgs will use two 30 mg and one 153 mg vials during their 
hospitalization. Patients over 102 kg will use three 30 mg and two 153 
mg vials during their hospitalization. According to real world evidence 
and clinical studies, 89% of TECVAYLI TM patients will be 
less than 102 kg. Due to the risk of CRS and neurologic toxicity, 
patients should be hospitalized for 48 hours after administration of 
all doses within the step-up dosing schedule. Therefore, according to 
the applicant, all three doses will be administered in a single 
inpatient hospitalization.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of TECVAYLI TM: XW01348 (Introduction of teclistamab 
antineoplastic into subcutaneous tissue, 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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that TECVAYLI TM is not substantially similar to 
other currently available technologies because it has a distinct 
mechanism of action, with a novel approach to engage a patient's own T-
cells to generate a myeloma-specific immune response, and is the first 
therapy of its type for the treatment of RRMM, and therefore meets the 
newness criterion. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for TECVAYLI TM for the 
applicant's complete statements in support of its assertion that 
TECVAYLI TM is not substantially similar to other currently 
available technologies.

[[Page 26887]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.196

    We note that TECVAYLI TM may have a similar mechanism of 
action to that of elranatamab, for which we received an application for 
new technology add-on payments for FY 2024 for the treatment of adult 
patients with relapsed or refractory multiple myeloma after three or 
more prior therapies, including an immunomodulatory agent, a proteasome 
inhibitor, and an anti-CD38 monoclonal antibody. Per the application 
for elranatamab, elranatamab is substantially similar to TECVAYLI 
TM. Elranatamab's mechanism of action is described as a 
bispecific antibody, meaning it has two parts, one that recognizes the 
cancer cell and one that recognizes and engages the T-cell, and brings 
them together to facilitate T-cell killing of the MM cell. For 
elranatamab, the two targets are BCMA (which has high specific 
expression on normal plasma cells and on MM cells) and CD3 (which is 
expressed on T-cells). Elranatamab binds to the CD3 on the T-cells and 
binds to the BCMA on the MM cells thereby bringing the cells in close 
proximity. The engagement of the CD3 on the T-cell activates the T-
cell, leading to the T-cells releasing cytokines that result in the 
killing of the close-proximity MM cell. Because of the apparent 
similarity with the bispecific antibody that uses binding domains that 
simultaneously bind the BCMA target on tumor cells and the CD3 T cell 
receptor, we believe that the mechanism of action for TECVAYLI 
TM may be the same or similar to that of elranatamab.
    We believe that TECVAYLI TM and elranatamab may also 
treat the same or similar disease (RRMM) in the same or similar patient 
population (patients who have previously received a proteasome 
inhibitor (PI), an immunomodulatory agent (IMiD) and an anti-CD38 
antibody). Accordingly, as it appears that TECVAYLI TM and 
elranatamab are purposed to achieve the same therapeutic outcome using 
the same or similar mechanism of action and would be assigned to the 
same MS-DRG, we believe that these technologies may be substantially 
similar to each other such that they should be considered as a single 
application for purposes of new technology add-on payments if 
elranatamab receives FDA approval by July 1, 2023. We are interested in 
information on how these two technologies may differ from each other 
with respect to the substantial similarity criteria and newness 
criterion, to inform our analysis of whether TECVAYLI TM and 
elranatamab are substantially similar to each other and therefore 
should be considered as a single application for purposes of new 
technology add-on payments.
    We are inviting public comment on whether TECVAYLI TM 
meets the newness criterion, including whether TECVAYLI TM 
is substantially similar to elranatamab and whether these technologies 
should be evaluated as a single technology for purposes of new 
technology add-on payments.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for TECVAYLI TM, 
the applicant searched the FY 2021 MedPAR file for cases reporting one 
of the following ICD-10-

[[Page 26888]]

CM codes in one of the first five diagnosis code positions: C90.00 
(Multiple myeloma not having achieved remission), C90.01 (Multiple 
myeloma in remission), or C90.02 (Multiple myeloma in relapse). The 
applicant provided calculations for 2 cohorts. Based on the clinical 
advice of experts, for the first cohort, the applicant limited the 
analysis to cases assigned to MS DRGs 846 (Chemotherapy Without Acute 
Leukemia as Secondary Diagnosis with MCC), 847 (Chemotherapy Without 
Acute Leukemia as Secondary Diagnosis with CC) and 848 (Chemotherapy 
Without Acute Leukemia as Secondary Diagnosis without CC/MCC), because 
the experts believed that TECVAYLI TM would mostly likely be 
administered in cases assigned to these MS DRGs. This analysis was 
completed prior to the drug being available. Based on additional 
information gathered since TECVAYLI TM was FDA approved, the 
applicant included in the second cohort the following MS DRGs in 
addition to the MS DRGs included in the first cohort: 840 (Lymphoma and 
Non-Acute Leukemia with MCC), 841 (Lymphoma and Non-Acute Leukemia with 
CC), and 842 (Lymphoma and Non-Acute Leukemia without CC/MCC). For both 
cohorts, no cases were identified for MS DRG 848 (Chemotherapy Without 
Acute Leukemia as Secondary Diagnosis without CC/MCC). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 600 claims for cohort 1 and 4,335 claims for 
cohort 2. The applicant followed the order of operations described in 
the following table and calculated a final inflated average case-
weighted standardized charge per case of $119,279 for cohort 1 and 
$145,374 for cohort 2, both of which exceeded the average case-weighted 
threshold amount of $58,291 and $73,551, respectively. Because the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount in both scenarios, 
the applicant asserted that TECVAYLI TM meets the cost 
criterion.

[[Page 26889]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.197

    We are inviting public comments on whether TECVAYLI TM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that TECVAYLI TM represents a substantial 
clinical improvement over existing technologies because its indication 
is less restrictive than some other treatments, making it available to 
patients who do not qualify for the other drugs that treat RRMM. In 
addition, the applicant stated that TECVAYLI TM may be more 
immediately accessible than the BCMA CAR T-cell therapies due to 
restrictions in site of care, manufacturing complexities, and other 
concerns with respect to the BCMA CAR T-cell therapies. Finally, the 
applicant stated that TECVAYLI TM improves clinical outcomes 
and results in less serious side effects than other off the shelf RRMM 
therapies. The applicant provided one study to support these claims, as 
well as 11 background articles about other available treatments for 
RRMM.\109\ The following table

[[Page 26890]]

summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
TECVAYLI TM for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \109\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
[GRAPHIC] [TIFF OMITTED] TP01MY23.198

    After review of the information provided by the applicant, we have 
the following concerns regarding whether TECVALI TM meets 
the substantial clinical improvement criterion. The applicant claims 
that other therapies have indications and side effects that restrict 
the treatment population and TECVAYLI TM is available to 
some of these restricted patient populations. Regarding this claim, the 
applicant discusses restrictions for two other treatment options for 
RRMM in its application, XPOVIO [reg] (selinexor) and BLENREP 
(belantamab mafodotin-blmf). However, there are two other therapies for 
RRMM, ciltacabtagene autoleucel and idecabtagene vicleucel, that the 
applicant did not discuss that have a similar indication to TECVAYLI 
TM and appear to target a similar population. Therefore, we 
question the basis for the applicant's assertion that TECVAYLI 
TM will fill a gap for patients unresponsive to or 
ineligible for current treatments.
    With regard to the claim that TECVAYLI TM may be a 
preferred treatment for patients unable to access CAR T-cell therapy, 
the applicant provided data on the number of patients who received CAR 
T-cell therapy from studies for CD19 CAR T-cell therapies used for B-
cell lymphomas. For example, the applicant provided data from a survey 
of CAR T-cell treatment centers across the United States indicating 
only 25% of potential patients were reported to receive CD19 CAR T-cell 
therapy, with a median wait time of 6 months.\110\ The applicant noted 
that the data was for CAR T-cell therapy used to treat B-cell lymphoma, 
because these treatments were approved prior to approvals for CAR T-
cell therapies for MM, so there is more accumulated evidence for the 
former. However, given that B-cell lymphoma is a different disease than 
MM and the T-cell therapies used to treat these two diseases are 
different, we question whether the evidence related to B-cell

[[Page 26891]]

lymphoma is applicable to T-cell therapies used to treat MM.
---------------------------------------------------------------------------

    \110\ Kourelis T, Bansal R, Patel KK, et al. Ethical challenges 
with CAR T slot allocation with idecabtagene vicleucel manufacturing 
access. Journal of Clinical Oncology. 2022;40(16_suppl):e20021-
e20021.
---------------------------------------------------------------------------

    The applicant claims that CRS is less serious and less frequent for 
patients treated with TECVAYLI TM than with BCMA CAR T-cell 
therapies. Notably, the applicant compares data from separate, single-
arm, open-label studies of these technologies.111 112 113 In 
review, CRS occurrence rates were 72.1%, 95% and 84% for TECVAYLI 
TM, ciltacabtagene autoleucel, and idecabtagene vicleucel, 
respectively. In addition, only 0.6% of the CRS events for TECVAYLI 
TM were of grade 3 or higher, compared to 4% for 
ciltacabtagene autoleucel and 5% for idecabtagene vicleucel. This 
improved safety claim, however, focuses on only a single metric in the 
studies' overall assessment of the safety and efficacy of these three 
drugs. The overall response rates reported in the studies were 63%, 97% 
and 73% for TECVAYLI TM, ciltacabtagene autoleucel, and 
idecabtagene vicleucel respectively. When comparing across studies, 
other metrics of efficacy noted in these studies also appear to support 
a superiority of the CAR T-cell therapies compared to TECVAYLI 
TM in the treatment of patients with RRMM. However, we also 
note these comparisons are not matched cases within a comparative 
study. Therefore, we question the conclusions drawn by the applicant 
regarding the relative efficacy and safety profiles across these 
studies.
---------------------------------------------------------------------------

    \111\ Moreau P, Garfall AL, van de Donk NWCJ, et al. Teclistamab 
in relapsed or refractory multiple myeloma. NEJM. 2022; 387(6): 495-
505.
    \112\ Berdeja JG, Madduri D, Usmani SZ, Jakubowiak A, Agha M et 
al. (2021) Ciltacabtagene autoleucel, a B-cell maturation antigen-
directed chimeric antigen receptor T-cell therapy in patients with 
relapsed or refractory multiple myeloma (CARTITUDE-1): a phase 1b/2 
open-label study. Lancet 398 (10297): 314-324.
    \113\ Munshi NC, Anderson LD, Jr., Shah N, Madduri D, Berdeja J 
et al. (2021) Idecabtagene Vicleucel in Relapsed and Refractory 
Multiple Myeloma. N Engl J Med 384 (8): 705-716.
---------------------------------------------------------------------------

    The applicant claims that TECVAYLI TM improves clinical 
outcomes relative to other off-the-shelf therapies. The applicant 
states the overall response rate (ORR) for XPOVIO [reg] and BLENREP 
were 25% and 31%, while the ORR for TECVAYLI TM was 63%. 
However, this claim does not consider the higher ORR for CAR T-cell 
therapies compared to TECVAYLI TM when comparing across 
studies, as previously mentioned. While this claim compares TECVAYLI 
TM only to other off-the-shelf therapies, which would not 
include CAR T-cell therapies, we question whether there is significant 
clinical improvement compared to existing therapies, which include CAR 
T-cell therapies.
    We are inviting public comments on whether TECVAYLI TM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for TECVAYLI 
TM.
p. TERLIVAZ[reg] (Terlipressin)
    Mallinckrodt Hospital Products, Inc. submitted an application for 
new technology add-on payments for TERLIVAZ[reg] for FY 2024. Per the 
applicant, TERLIVAZ[reg] is a pharmacologic therapy administered via IV 
bolus for the treatment of hepatorenal syndrome (HRS) with rapid 
reduction in kidney function. The applicant stated that TERLIVAZ[reg] 
is a V1-receptor synthetic vasopressin analogue that acts as a pro-drug 
of lysine-vasopressin and has pharmacologic activity on its own. 
According to the applicant, TERLIVAZ[reg] is the first and only FDA-
approved treatment indicated to improve kidney function in adults with 
hepatorenal syndrome with rapid reduction in kidney function. We note 
that Mallinckrodt Hospital Products, Inc. submitted an application for 
new technology add-on payments for TERLIVAZ[reg] for FY 2022 under the 
name Mallinckrodt Pharmaceuticals, as summarized in the FY 2022 IPPS/
LTCH PPS proposed rule (86 FR 25339 through 25344), that it withdrew 
prior to the issuance of the FY 2022 IPPS/LTCH PPS final rule (86 FR 
44979). We note that the applicant also submitted an application for 
new technology add-on payments for FY 2023 under the name Mallinckrodt 
Pharmaceuticals, as summarized in the FY 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28287 through 28296), that it withdrew prior to the 
issuance of the FY 2023 IPPS/LTCH PPS final rule (87 FR 48920).
    Please refer to the online application posting for TERLIVAZ[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP221014UR3R2, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
TERLIVAZ[reg] was granted NDA 505(b) approval from FDA on September 14, 
2022 for the improvement of kidney function in adults with hepatorenal 
syndrome with rapid reduction in kidney function. According to the 
applicant, TERLIVAZ[reg] became commercially available on October 14, 
2022. Per the applicant, there was a delay in market availability 
because TERLIVAZ[reg] received FDA approval three months earlier than 
expected, and the company needed additional time to conduct market 
commercialization, including labeling and packaging. Per the applicant, 
TERLIVAZ[reg] is administered as an IV bolus injection. The applicant 
stated that for the first 3 days, the recommended dosage is 0.85 mg (1 
vial) TERLIVAZ[reg] every 6 hours by slow IV bolus injection. The 
applicant stated that on day 4, the serum creatinine level is assessed 
against the baseline level obtained prior to initiating the treatment. 
The applicant noted that if the serum creatinine has decreased by 30% 
or more from the baseline, then 0.85 mg TERLIVAZ[reg] can continue to 
be administered every 6 hours. The applicant stated that if the serum 
creatinine has decreased by less than 30% from the baseline, then 
TERLIVAZ[reg] may be increased to 1.7 mg (2 vials) every 6 hours. 
According to the applicant, TERLIVAZ[reg] can continue to be 
administered until 24 hours after the patient achieves a second 
consecutive serum creatinine value of <=1.5mg/dL at least 2 hours apart 
or for a maximum of 14 days. The applicant also stated that if, on day 
4, serum creatine is at or above the baseline serum creatinine level, 
then TERLIVAZ[reg] should be discontinued. According to the applicant, 
the mean treatment duration with TERLIVAZ[reg] in the CONFIRM trial was 
6.2 days, using 27 vials.
    The applicant stated that, effective October 1, 2021, the following 
ICD-10-PCS codes may be used to uniquely describe procedures involving 
the administration of TERLIVAZ[reg]: XW03367 (Introduction of 
terlipressin into peripheral vein, percutaneous approach, new 
technology group 7), and XW04367 (Introduction of terlipressin into 
central vein, percutaneous approach, new technology group 7). The 
applicant stated that diagnosis code K76.7 (Hepatorenal syndrome) may 
be used to currently identify the indication for TERLIVAZ[reg] under 
the ICD-10-CM coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that TERLIVAZ[reg] is not substantially similar to other 
currently available

[[Page 26892]]

technologies because it offers a novel mechanism of action that allows 
for selective vasoconstrictive effects on the splanchnic vasculature 
via activation of V1 vasopressin receptors. The applicant also stated 
that TERLIVAZ[reg] is the first and only FDA-approved pharmacologic 
therapy to satisfactorily treat patients with HRS and offers efficacy 
among patients who fail previous treatment. Therefore, the applicant 
asserted that the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criteria. Please see the online application posting for 
TERLIVAZ[reg] for the applicant's complete statements in support of its 
assertion that TERLIVAZ[reg] is not substantially similar to other 
currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP01MY23.199

    Similar to our discussion in the FY 2022 IPPS/LTCH PPS proposed 
rule (86 FR 25340), and the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28290), we note that while TERLIVAZ[reg] may address an unmet need 
because it is the first treatment indicated specifically for the 
treatment of HRS, the applicant's assertion that TERLIVAZ[reg] does not 
involve the treatment of the same/similar type of disease and the same/
similar patient population when compared to an existing technology, on 
the basis that there is a subset of patients for whom current 
treatments are ineffective and for whom TERLIVAZ[reg] will offer a new 
treatment option, does not necessarily speak to the treatment of a new 
patient population for HRS.
    We are inviting public comments on whether TERLIVAZ[reg] is 
substantially similar to existing technologies and whether 
TERLIVAZ[reg] meets the newness criterion.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. To identify 
potential cases representing patients who may be eligible for 
TERLIVAZ[reg], the applicant searched the FY 2021 MedPAR file for cases 
reporting ICD-10-CM code K76.7 (Hepatorenal syndrome). The applicant 
used the inclusion/exclusion criteria described in the following table. 
Each analysis differed with respect to the position of the ICD-10-CM 
code on the

[[Page 26893]]

claim (that is, whether the ICD-10-CM code was the primary and/or 
admitting diagnosis code, or was in any position on the claim). Each 
analysis also differed with respect to requirements for the presence or 
absence of ICU-related charges (identified with the ICU indicator in 
the MedPAR with each analysis either including claims with ICU charges 
or claims without ICU charges), or whether ICU usage was not a 
consideration (the analysis included both claims with and without ICU 
charges). The applicant then presented six defined cohort analyses, and 
used the factors in the following table to define the cohorts. Please 
see Table 10.24.A.--TERLIVAZ[reg] Codes (Analyses 1-6)--FY 2024 
associated with this proposed rule for the complete list of MS-DRGs 
that the applicant included in its cost analysis for each cohort. The 
applicant followed the order of operations described in the following 
table.
    For the first cohort analysis, the applicant identified 471 claims 
mapping to nine MS-DRGs. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $279,135, which 
exceeded the average case-weighted threshold amount of $77,358.
    For the second cohort analysis, the applicant identified 7,273 
claims mapping to 183 MS-DRGs. The applicant then calculated a final 
inflated average case-weighted standardized charge per case of 
$319,685, which exceeded the average case-weighted threshold amount of 
$90,714.
    For the third cohort analysis, the applicant identified 480 claims 
mapping to five MS-DRGs. The applicant then calculated a final inflated 
average case-weighted standardized charge per case of $189,783, which 
exceeded the average case-weighted threshold amount of $66,195.
    For the fourth cohort analysis, the applicant identified 6,497 
claims mapping to 173 MS-DRGs. The applicant then calculated a final 
inflated average case-weighted standardized charge per case of 
$211,960, which exceeded the average case-weighted threshold amount of 
$76,483.
    For the fifth cohort analysis, the applicant identified 918 claims 
mapping to nine MS-DRGs. The applicant then calculated a final inflated 
average case-weighted standardized charge per case of $233,361, which 
exceeded the average case-weighted threshold amount of $69,919.
    For the sixth cohort analysis, the applicant identified 12,801 
claims mapping to 217 MS-DRGs. The applicant then calculated a final 
inflated average case-weighted standardized charge per case of 
$265,448, which exceeded the average case-weighted threshold amount of 
$81,949.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount for 
all scenarios, the applicant asserted that TERLIVAZ[reg] meets the cost 
criterion.

[[Page 26894]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.200

    We are inviting public comments on whether TERLIVAZ[reg] meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that TERLIVAZ[reg] represents a substantial clinical 
improvement over existing technologies because among HRS patients who 
failed previous therapy with available off-label treatments, 
TERLIVAZ[reg] has been shown to significantly improve renal function. 
Additionally, the applicant stated that TERLIVAZ[reg] remains the 
preferred treatment for HRS-acute kidney injury (AKI) according to 
several guidelines and guidance based on its significant efficacy, as 
shown by randomized clinical trials. The applicant asserted that for 
these reasons TERLIVAZ[reg] offers a treatment option for HRS patients 
unresponsive to currently available treatments (for example, 
norepinephrine, midodrine,

[[Page 26895]]

and octreotide), and it significantly improves clinical outcomes among 
HRS patients as compared to placebo as well as currently available 
treatments (for example, norepinephrine, midodrine and octreotide). The 
applicant provided 14 studies to support these claims. The following 
table summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
TERLIVAZ[reg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.

[[Page 26896]]

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[GRAPHIC] [TIFF OMITTED] TP01MY23.208

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether TERLIVAZ[reg] meets the 
substantial clinical improvement criterion. With respect to the 
applicant's assertion that TERLIVAZ[reg] offers a treatment option for 
a patient population unresponsive to currently available treatments 
because among patients in the CONFIRM trial, patients that had failed 
prior therapy with available options achieved a statistically 
significant improvement in renal function with TERLIVAZ[reg], we note 
that the applicant provided evidence from data on file for the clinical 
study report of the CONFIRM trial. We note that this data on file 
appears to be a post-hoc analysis of the trial. As this was a post-hoc 
analysis, we are cautious about drawing conclusions from this analysis 
alone without additional outcome data.
    We also note that the applicant asserts that the primary endpoint 
of the CONFIRM trial, verified HRS reversal, is a clinically 
significant and appropriate measure of improvement in renal function. 
However, as we noted in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25344) and FY 2023 IPPS/LTCH proposed rule (87 FR 28295), in the 
CONFIRM trial, while the proportion of patients with verified HRS 
reversal without HRS recurrence by Day 30 was numerically greater in 
the TERLIVAZ[reg] group than placebo, the difference between groups was 
not statistically significant (26% vs 17%, p=0.08).\114\ We also noted 
that the potential for HRS recurrence among patients treated with 
TERLIVAZ[reg] after 30 days is unclear. We question whether a 
statistically significant difference in verified HRS reversal in the 
TERLIVAZ[reg] group at 14 days is sufficient to provide evidence of the 
durability of improvement in renal function.
---------------------------------------------------------------------------

    \114\ Wong F, Pappas, S.C, Curry M.P, et al. Terlipressin plus 
Albumin for the Treatment of Type 1 Hepatorenal Syndrome. New 
England Journal of Medicine. 2021;384(9):818-828. doi: 10.1056/
NEJMoa2008290.
---------------------------------------------------------------------------

    With respect to the applicant's assertion that TERLIVAZ[reg] 
significantly improves clinical outcomes, we note that the applicant 
provided evidence from data on file for the clinical study report of 
the CONFIRM trial that appear to consist of post-hoc analyses of 
patient subgroups, for example, improvement in renal function for 
patients with alcoholic hepatitis at baseline, and reduction in RTT 
requirements in patients who received a liver transplant. Similar to 
our earlier concern, we question if we are able to draw conclusions 
from these post-hoc analyses alone without additional outcome data.
    We also note that the poster presentation for Mujtaba et al. is a 
post-hoc analysis of a subpopulation of patients aged >=65 years from 
the CONFIRM trial, which was not powered to assess differences in 
clinical outcomes between the TERLIVAZ[reg] and placebo groups in this 
subpopulation. As such, we note that differences between the 
TERLIVAZ[reg] and placebo groups in verified HRS reversal, HRS 
reversal, durability of HRS reversal, verified HRS reversal without HRS 
recurrence by Day 30, and length of study site hospital stay in days 
were not statistically significant. We also note that the difference in 
RRT requirements through 90 days in the CONFIRM study among surviving 
patients aged >=65 years

[[Page 26904]]

was not statistically significant. Although the results numerically 
favored the TERLIVAZ[reg] group, for those reasons, we question whether 
this analysis provides sufficient evidence of improved clinical 
outcomes in the Medicare population.
    Finally, regarding the study conducted by Arora et al., we noted in 
the FY 2022 IPPS/LTCH PPS (86 FR 25344) and FY 2023 IPPS/LTCH PPS (87 
FR 28296) proposed rules that this study included patients with a 
diagnosis of ACLF as well as HRS-AKI, which may have contributed to the 
differences observed between the TERLIVAZ[reg] arm and the 
norepinephrine arm in this study.\115\
---------------------------------------------------------------------------

    \115\ Arora V, Maiwall R, Rajan V, et al. Terlipressin Is 
Superior to Noradrenaline in the Management of Acute Kidney Injury 
in Acute on Chronic Liver Failure. Hepatology. 2020;71(2):600-610.
---------------------------------------------------------------------------

    We are inviting public comments on whether TERLIVAZ[reg] meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
TERLIVAZ[reg].
q. VANFLYTA[reg] (Quizartinib)
    Daiichi Sankyo, Inc. submitted an application for new technology 
add-on payments for VANFLYTA[reg] for FY 2024. Per the applicant, 
VANFLYTA[reg] is a kinase inhibitor intended to be indicated for use in 
combination with standard cytarabine and anthracycline induction 
chemotherapy and standard cytarabine consolidation chemotherapy, and as 
continuation monotherapy following consolidation, for the treatment of 
adult patients with newly diagnosed acute myeloid leukemia (AML) that 
is Feline McDonough Sarcoma (FMS)-like tyrosine kinase 3 internal 
tandem duplication (FLT3-ITD) positive as detected by an FDA-authorized 
test. The applicant asserted that, while other treatments for FLT3 AML 
are available, VANFLYTA[reg] is the only treatment to exclusively 
target the FLT3-ITD mutation, thereby inhibiting further downstream 
FLT3 receptor signaling and blocking FLT3-ITD-dependent cell 
proliferation. According to the applicant, VANFLYTA[reg] also does not 
target other kinases; this may mean that patients experience fewer off-
target effects when undergoing therapy with VANFLYTA[reg].
    Please refer to the online application posting for VANFLYTA[reg], 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017FK1AQ, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated it has 
not yet received FDA marketing authorization for VANFLYTA[reg]. 
According to the applicant, it anticipates NDA approval from FDA before 
July 1, 2023 for the following proposed indication: a kinase inhibitor 
indicated in combination with standard cytarabine and anthracycline 
induction and standard cytarabine consolidation chemotherapy, and as 
continuation monotherapy following consolidation, for the treatment of 
adult patients with newly diagnosed AML that is FLT3-ITD positive as 
detected by an FDA-authorized test. According to the applicant, 
VANFLYTA[reg] will be available on the market immediately after FDA 
approval. The applicant stated that VANFLYTA[reg] should be 
administered in combination with standard chemotherapy at a dose of 
35.4 mg once daily for two weeks in each cycle of induction. For 
patients who achieved complete remission (CR) or complete remission 
with incomplete hematologic recovery (CRi), VANFLYTA[reg] should be 
administered at 35.4 mg once daily for two weeks in each cycle of 
consolidation chemotherapy followed by VANFLYTA[reg] continuation 
monotherapy initiated at 26.5 mg once daily. After two weeks, the 
continuation dose should be increased to 53 mg once daily if the QT 
interval \116\ corrected by Fridericia's formula (QTcF) is less than or 
equal to 450 ms. Continuation monotherapy may be continued for up to 36 
cycles.
---------------------------------------------------------------------------

    \116\ The QT interval is the time between specific points in a 
heartbeat, as seen on an electrocardiogram (EKG).
---------------------------------------------------------------------------

    The applicant provided an estimated average inpatient cost per stay 
for VANFLYTA[reg]. The applicant did not have data to provide relative 
frequencies for induction versus consolidation inpatient treatments so 
provided the following cost calculation. The daily VANFLYTA[reg] dose 
used was based on 80% of patients receiving the full daily dose and 20% 
of patients receiving the reduced dose. An average weighted induction 
cycle cost was calculated based on trial data that indicated 75% of 
patients would receive one cycle of induction inpatient and 25% of 
patients would receive two cycles of induction inpatient. The average 
consolidation cycle cost was calculated separately from induction and 
assumed a 9-day inpatient stay. The cost was adjusted based on 65% of 
consolidation cycles being administered inpatient and 35% of 
consolidation cycles being administered outpatient (the inpatient cost 
for outpatient therapy was $0). The adjusted number was multiplied by 
two since the average patient receives 2 cycles of consolidation. This 
was multiplied by 0.75 due to 75% of patients continuing with treatment 
to receive consolidation therapy after induction. This final 
consolidation therapy cost was added to the induction cycle cost to 
come up with the applicant's weighted average inpatient cost per stay.
    Since the estimated average inpatient cost per stay would be used 
to determine the new technology add-on payment amount for 
VANFLYTA[reg], if approved, we note the following concerns with regards 
to the applicant's average cost calculation. We believe the final costs 
for induction and consolidation should be averaged rather than summed 
since induction and consolidation cycles would likely be separate 
hospitalizations. We are inviting public comments on whether the 
applicant's average cost calculation is appropriate for calculating the 
new technology add-on payment amount if VANFLYTA[reg] is approved.
    According to the applicant, there are currently no ICD-10-PCS codes 
to distinctly identify VANFLYTA[reg]. We note that the applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for VANFLYTA[reg] beginning in FY 2024. The applicant stated that ICD-
10-CM diagnosis codes C92.00 (Acute myeloblastic leukemia not having 
achieved remission), C92.50 (Acute myelomonocytic leukemia not having 
achieved remission), C92.60 (Acute myeloid leukemia with 11q23-
abnormality not having achieved remission), C92.A0 (Acute myeloid 
leukemia with multilineage dysplasia not having achieved remission), 
and C93.00 (Acute monoblastic-monocytic leukemia not having achieved 
remission) may be used to currently identify the indication for 
VANFLYTA[reg] under the ICD-10-CM coding system.
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that VANFLYTA[reg] is not substantially similar to other 
currently available technologies because VANFLYTA[reg] is the first 
drug to be expressly developed

[[Page 26905]]

as a FLT3 inhibitor, not a multi-kinase inhibitor, and specifically 
optimized to inhibit the FLT3-ITD AML, thereby targeting the 
subpopulation of newly diagnosed patients with the worst prognosis 
(higher risk of relapse and worse overall survival). Additionally, the 
applicant stated that VANFLYTA[reg], if approved, would be the only AML 
drug indicated for continuation monotherapy following consolidation 
chemotherapy (for up to 3 years), based on showing activity as a single 
agent for that use, and that therefore, the technology meets the 
newness criterion. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for VANFLYTA[reg] for the applicant's 
complete statements in support of its assertion that VANFLYTA[reg] is 
not substantially similar to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.209

    We have the following concerns regarding the newness criterion. 
While the applicant stated that VANFLYTA[reg] is more selective than 
existing technology since it targets only FLT3-ITD, we note that, as 
stated by the applicant, RYDAPT[reg] also targets this same mutation 
and we therefore question whether the mechanisms of action for 
VANFLYTA[reg] and RYDAPT[reg] are the same or similar. We also note 
that while the applicant stated that VANFLYTA[reg] is not assigned to 
the same MS-DRG as existing technology, per the applicant, 
VANFLYTA[reg] would likely be mapped to three existing MS-DRGs for AML 
and therefore it appears that use of VANFLYTA[reg] is not

[[Page 26906]]

expected to change the MS-DRG assignment from that of existing 
technologies.
    The applicant asserted that the technology would not involve the 
treatment of the same or similar type of disease and patient population 
when compared to existing technology. However, VANFLYTA[reg], if 
approved, would appear to be indicated for a patient population 
included within the patient population indicated for RYDAPT[reg]. 
RYDAPT[reg] is indicated for adult patients with newly diagnosed AML 
who are FLT3 mutation-positive, which would be similar to 
VANFLYTA[reg]'s proposed patient population of adult patients with 
newly diagnosed AML that is FLT3-ITD positive. In addition, the patient 
population for XOSPATA[reg], adult patients with relapsed or refractory 
AML with the FLT3 mutation, may be considered similar to that for 
VANFLYTA[reg] since both patient populations are adults with AML that 
have a FLT3 mutation. While the applicant notes a potential unique 
patient population with regard to the proposed continuation monotherapy 
indication, this would not relate to the new technology add-on payment 
given this treatment would occur on an outpatient basis.
    We are inviting public comments on whether VANFLYTA[reg] is 
substantially similar to existing technologies and whether 
VANFLYTA[reg] meets the newness criterion.
    With respect to the cost criterion, the applicant submitted 
analyses based on two cohorts, a consolidation dosing scenario and an 
induction dosing scenario, to demonstrate that VANFLYTA[reg] meets the 
cost criterion. To identify potential cases representing patients who 
may be eligible for VANFLYTA[reg], the applicant searched the CY 2021 
Limited Data Set (LDS) Standard Analytic File (SAF) for cases reporting 
one of the ICD-10-CM diagnosis codes listed in the table that follows 
in the primary or secondary location of the discharge claim. Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 6,084 claims mapping to six MS-DRGs. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $168,129 using consolidation dosing and $171,567 using 
induction dosing, both of which exceeded the average case-weighted 
threshold amount of $105,003. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that VANFLYTA[reg] 
meets the cost criterion.

[[Page 26907]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.210


[[Page 26908]]


    We are inviting public comments on whether VANFLYTA[reg] meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that VANFLYTA[reg] represents a substantial clinical 
improvement for Medicare beneficiaries and offers a treatment option 
for newly diagnosed patients with FLT3-ITD+ AML, the most treatment-
resistant AML subtype, and patients receiving VANFLYTA[reg] plus 
standard induction and consolidation therapy, and then continuation 
monotherapy for up to three years, had significantly reduced rates of 
relapse and overall improved survival, regardless of whether they 
received a hematopoietic stem cell transplantation (HSCT) when compared 
to the placebo group. The applicant referenced multiple sources 
regarding one study to support these claims, as well as five background 
articles about AML and RYDAPT[reg], a drug indicated for adult patients 
with newly diagnosed AML who are FLT3 mutation-positive.\117\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for VANFLYTA[reg] for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \117\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 26909]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.211

    After review of the information provided by the applicant, we have 
the following concerns regarding whether VANFLYTA[reg] meets the 
substantial clinical improvement criterion. We note the applicant 
provided only the results

[[Page 26910]]

of a single phase 3 trial testing VANFLYTA[reg] in the form of 
presentation slides and an abstract. We further note that the visual 
abstract reference \118\ provided by the applicant does not appear to 
include all data that the applicant cited as outcomes to support the 
claims for a reduced rate of relapse and reduced mortality rate with 
VANFLYTA[reg] and we are therefore unable to fully evaluate the 
supporting evidence for these assertions. While TEAEs, grade 3 or 
higher TEAEs, TEAEs associated with fatal outcome, and serious adverse 
events (SAEs) appeared similar to placebo, there was a higher rate of 
drug discontinuation (20.4% versus 8.6%), dose interruption (34.0% 
versus 20.1%), and dose reduction (18.9% versus 6.3%) due to TEAEs for 
VANFLYTA[reg] compared to placebo and we would appreciate additional 
information regarding these differences.
---------------------------------------------------------------------------

    \118\ Erba H, et al. Abstract S100. EHA 2022; June 9-17, 2022; 
Vienna, AT NCT02668653 (Visual Abstract, https://aml-hub.com/medical-information/va).
---------------------------------------------------------------------------

    With regard to the claim that clinical trial participants are more 
representative of the Medicare population compared to the competitor 
drug (RYDAPT[reg]), we note the QUANTUM First trial allowed inclusion 
of patients age 18 years to 75 years, while the Cancer and Leukemia 
Group B (CALGB) 10603 (RATIFY) trial, which compared RYDAPT[reg] to 
placebo, included patients aged 18 years to 59 years. The applicant 
stated that in the QUANTUM First trial, 39.9% of the subjects were 60 
years of age or older. This claim was provided in support of the 
assertion that the use of the new technology significantly improves 
clinical outcomes relative to technologies previously available. 
However, we question this assertion because age eligibility in a trial 
is not a clinical outcome, and eligibility may not correlate with 
improved outcomes.
    With regard to the claim of a reduced rate of relapse compared to 
RYDAPT[reg], the applicant stated that a phase 3 trial demonstrated 
that the cumulative incidence of relapse (CIR) at 2 years was 40% for 
RYDAPT[reg] \119\ and in the QUANTUM First trial, the CIR at 2 years 
was 31.2% for VANFLYTA[reg] and 43.3% with placebo. However, we note 
that this was based on comparing two separate phase 3 trials, which can 
involve numerous confounding variables, and the applicant did not 
provide support related to clinical trial design or statistical 
analysis to explain why the potential effect of confounding variables 
should not be a concern for purposes of this comparison. Additional 
data was also provided to indicate reduced rate of relapse of patients 
receiving VANFLYTA[reg] compared to placebo in the QUANTUM First trial. 
However, the applicant did not provide these outcomes for the 
comparator drug, RYDAPT[reg]. Therefore, we question whether the 
evidence presented is sufficient to show a reduced rate of relapse with 
VANFLYTA[reg] compared to RYDAPT[reg].
---------------------------------------------------------------------------

    \119\ Leukemia. 2021 September. 35(9)2539-2551.
---------------------------------------------------------------------------

    With regard to the claim that VANFLYTA[reg] reduced mortality rate 
regardless of receiving an allo-HSCT or not, we note that the evidence 
provided in support was based on data from the QUANTUM First trial, 
which compared VANFLYTA[reg] to placebo rather than to RYDAPT[reg] and 
we question whether this type of comparison can provide evidence to 
support a finding of improved outcomes compared to previously available 
therapy. Additionally, the overall survival data analyzed separately 
based on allo-HSCT status, as well as relapse rate data from QUANTUM 
First were both based on post-hoc analyses. We are cautious about 
drawing conclusions from these post-hoc analyses alone without 
additional outcome data.
    We are inviting public comments on whether VANFLYTA[reg] meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
VANFLYTA[reg].
r. VEST
    Vascular Graft Solutions, Ltd. (VGS) submitted an application for 
new technology add-on payment for VEST for FY 2024. Per the applicant, 
VEST is an external support device which can be fitted over the 
saphenous vein when used as a bypass conduit in coronary artery bypass 
grafting (CABG) surgery. The applicant stated that VEST is the only 
technology that has been proven to prevent common vein graft failures 
as a result of graft kinking and vein graft disease (intimal 
hyperplasia). According to the applicant, VEST is designed to improve 
the long-term clinical outcome of CABG by reducing clinical events that 
are associated with graft failure.
    Please refer to the online application posting for VEST, available 
at https://mearis.cms.gov/public/publications/ntap/NTP221017VRFLQ, for 
additional detail describing the technology and the disease treated by 
the technology.
    With respect to the newness criterion, the applicant stated that it 
is seeking premarket approval from FDA for the indication to prevent 
vein graft intimal hyperplasia (IH) by providing permanent support to 
saphenous vein grafts which are being used as conduits in patients who 
undergo coronary artery bypass graft procedures, and anticipates 
receiving FDA marketing authorization before July 1, 2023. According to 
the applicant, VEST is expected to be commercially available once 
approved.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify VEST. The applicant submitted a 
request for approval for a unique ICD-10-PCS procedure code for VEST 
beginning in FY 2024.
    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 purpose of new technology add-on 
payment.
    With respect to the substantial similarity criteria, the applicant 
asserted that VEST is not substantially similar to other currently 
available technologies because there is no other technology with a 
similar mechanism of action with which VEST can be compared, and that 
therefore, the technology meets the newness criterion. The following 
table summarizes the applicant's assertions regarding the substantial 
similarity criterion. Please see the online application posting for 
VEST for the applicant's complete statements in support of its 
assertion that VEST is not substantially similar to other currently 
available technologies.

[[Page 26911]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.212

    We are inviting public comments on whether VEST is substantially 
similar to existing technologies and whether VEST meets the newness 
criterion.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that VEST meets the cost criterion, the first 
using 100 percent of all identified cases, and the second using 78 
percent of all identified cases, based on the four MS-DRGs with the 
highest number of claims. The applicant searched the FY 2021 MedPAR 
file for potential cases representing patients who may be eligible for 
VEST using a list of ICD-10-PCS codes (cases representing any CABG 
procedure that involves a saphenous vein graft (SVG)). Please see Table 
10.27.A.--VEST Codes--FY 2024 associated with this proposed rule for 
the complete list of codes that the applicant included in its cost 
analysis. The applicant used the inclusion/exclusion criteria described 
in the following table.
    For the first analysis, the applicant used 100% of all cases 
identified. The applicant followed the order of operations described in 
the following table. The applicant identified 54,217 claims mapping to 
82 MS-DRGs listed in Table 10.27.A.--VEST Codes--FY 2024 associated 
with this proposed rule. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $293,241, which 
exceeded the average case-weighted threshold amount of $218,560.
    For the second analysis, the applicant used 78% of all cases 
identified, limited to the four MS-DRGs with the highest number of 
claims. The applicant followed the order of operations described in the 
following table. The applicant identified 42,550 claims mapping to the 
four MS-DRGs listed in the following table. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$256,817, which exceeded the average case-weighted threshold amount of 
$202,357.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
both scenarios, the applicant asserted that VEST meets the cost 
criterion.

[[Page 26912]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.213

    We are inviting public comments on whether VEST meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that VEST represents a substantial clinical 
improvement over existing technologies because the strong clinical 
evidence showing the effect of VEST on the clinical outcome of CABG 
(multiple studies of different types with different, follow-up 
durations and with substantial endpoints) confirms the effect of VEST 
on (1) reducing incidence of cardiac events and the need for further 
interventions as a result of vein graft disease; (2) reducing graft 
failure rates as a result of kinking; and (3) mitigating vein graft 
disease. The applicant provided five studies to support these claims. 
The following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for VEST for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.

[[Page 26913]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.214


[[Page 26914]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.215

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether VEST meets the substantial 
clinical improvement criterion. Firstly, we question whether the 
evidence provided demonstrates that use of VEST results in clinical 
improvement or if any outcomes are only inferred. For example, the 
Taggart study (2022) \122\ examined the differences in Fitzgibbon 
patency scale and IH between patients randomized to have their SVG 
stented with VEST (treatment group) and those with their SVG unstented 
(control group). The team found statistically significant differences 
between the two groups in IH, but not in patency, pulsatility, 
interoperative pulse rates, or occlusion rates. While the team found a 
difference in need for re-vascularization in the hypothesized 
direction, that is, a higher need for the non-stented (control) group, 
it is unclear whether the difference reached statistical significance. 
The Goldstein study (2022) \123\ measured the association between 
indicators of graft health, like IH, lumen uniformity, graft stenosis, 
and graft perfusion, on MACCE at three-year follow up. Although the 
team demonstrated significant association between graft health and 
MACCE, they did not examine the impact of VEST on MACCE. As a result, 
we are unclear about the strength of direct association between VEST 
and clinical outcome improvement, or whether any outcomes are inferred 
from surrogate endpoints.
---------------------------------------------------------------------------

    \120\ Mohr, F.W.M. Morice, A.P. Kappetein, et al. (2013), 
Coronary artery bypass graft surgery versus percutaneous coronary 
intervention in patients with three-vessel disease and left main 
coronary disease: 5-year follow-up of the randomized, clinical 
SYNTAX trial.The Lancet.
    \121\ Head, S.J. P.M. Davierwala, P.W. Serruys, et al. (2014) 
Coronary artery by pass grafting vs. percutaneous coronary 
intervention for patients with three-vessel disease: final five-year 
follow-up of the SYNTAX trial. European Heart Journal. 35:2821-2830.
    \122\ Taggart et al. (2022), op.cit.
    \123\ Goldstein, D.J., Chang, H.L., Mack, M. J (2022). Intimal 
Hyperplasia, Saphenous Vein Graft Disease and Clinical Outcomes: 
Insights from the CTSN VEST Randomized Trial, The Journal of 
Thoracic and Cardiovascular Surgery. https://doi.org/10.1016/j.jtcvs.2022.10.034.
---------------------------------------------------------------------------

    Secondly, we question whether the impact of VEST on clinical 
outcomes shown in the cited studies may have been confounded by 
demographic, clinical, or surgical factors (such as endoscopic 
harvesting methods,\124\ graft harvesting techniques, on- versus off-
pump,125 126 or use of no-touch procedures,\127\ etc.). For 
example, in the Dushaj study \128\ we note that differences remained 
between the treatment (stented with VEST) and control (non-stented) 
groups in terms of demographic and clinical baseline characteristics 
post-randomization. In particular, compared to patients in the control 
group, those stented with VEST tended to be younger, were more likely 
to be male, current smokers, to have diabetes, chronic obstructive 
pulmonary disease (COPD), diffuse peripheral vascular disease (PVD), 
have a history of MI, lower left ventricular systolic dysfunction 
(LVEF), and have undergone PCI previously. There also remained 
significant differences between the two groups in terms of SVG patency 
and number of arterial grafts undergoing stenting at baseline. We 
question whether these differences in baseline characteristics may have 
confounded the association between exposure to VEST and clinical 
improvement. The Dushaj study may also be limited by potential bias due 
to single site design, making it difficult to account for confounding 
variables that

[[Page 26915]]

may impact post-surgery outcomes such as cardiac rehabilitation 
referral rates \129\ or clinical staff expertise.\130\ The Goldstein 
study (2022) \131\ was a two-arm, within-subject trial in which CABG 
patients with at least two SVGs were randomized to have one externally-
stented with VEST and the other not stented. It is unclear whether the 
randomization technique has achieved balance of SVG attributes (for 
example, lumen diameter uniformity, graft stenosis, thrombolysis in 
myocardial infarction flow) between SVGs assigned to the stented group 
versus those to the non-stented group at the baseline. We are therefore 
uncertain whether the randomization technique minimized imbalance 
between the stented and non-stented groups, which could confound any 
association between VEST and clinical outcomes. We further note that 
the De-Toit study (2021) \132\ used a historical control to compare the 
impact of VEST on need for revascularization. The study used SYNTAX, a 
clinical trial conducted by a different research team and completed 
before 2014,\133\ as the historical control to which the effects of 
VEST were compared. The study reported that their CABG patients were 
less likely than those in the SYNTAX trial to need revascularization at 
12, 24, 36, and 48 months. However, we note the following differences 
between the study and the historical control which may confound any 
comparisons. For example, 28 percent of the CABG patients in the Du-
Toit study had undergone prior cardiac surgeries, while patients with 
prior CABG or PCI were excluded from the SYNTAX trial \134\ and the 
SYNTAX trial included patients with de novo 3-vessel disease, left main 
(LM), or both, unlike the Du-Toit study. Also, since the Du-Toit study 
was conducted in South Africa and Namibia, while the SYNTAX trial was 
conducted in North America and Europe, the patient populations in the 
two studies were likely to have different racial demographics. The 
baseline clinical characteristics of patients in the Du-Toit study also 
differed from those in the SYNTAX trial with respect to diabetes (Du-
Toit study: 27.9%; SYNTAX trial: 30.4%), any history of stroke (Du-Toit 
study: 1.8%; SYNTAX trial: 5.3%), MI (Du-Toit study: 36.5%; SYNTAX 
trial: 39%), and hypertension (Du-Toit study: 80%; SYNTAX trial: 65%). 
We question whether these differences between the two studies could 
confound any association between VEST and clinical outcomes, reducing 
the external validity of study findings.\135\ For studies that did not 
conduct randomization on either patients or SVGs, confounders could 
further undermine external validity of the findings. For example, in 
the Weltert study (2021),\136\ all patients underwent CABG with the 
internal mammary artery to the left anterior descending artery and 
additional artery and/or venous grafts. Half of the patients underwent 
off-pump CABG surgery. In addition to CABG, 13 percent also underwent 
concomitant valve or aortic surgery. Also, in addition to having at 
least one SVG supported by VEST, 23 percent also had their bilateral 
internal mammary artery grafted. Patients varied in terms of cross 
clamp, pump, and overall surgery time. Re-vascularization strategy was 
determined by the surgeon. While each of these surgical decisions could 
confound the impact of VEST on clinical outcomes, they were not 
accounted for in the result analysis.
---------------------------------------------------------------------------

    \124\ Goldstein et al., 2022, op.cit.
    \125\ Hattler B, Messenger JC, and Shroyer AL, et al. (Jun 
2012). Off-Pump coronary artery bypass surgery is associated with 
worse arterial and saphenous vein graft patency and less effective 
revascularization: Results from the Veterans Affairs Randomized On/
Off Bypass (ROOBY) trial. Circulation. 12;125(23):2827-35.
    \126\ Shroyer AL, Hattler B, Wagner TH, et al. (Aug 2017). Five-
Year Outcomes after On-Pump and Off-Pump Coronary-Artery Bypass. N 
Engl J Med. 17;377(7):623-632.
    \127\ Samano N, Dashwood M, Souza D. (Sep 2018) No-touch vein 
grafts and the destiny of venous revascularization in coronary 
artery bypass grafting-a 25th anniversary perspective. Ann 
Cardiothorac Surg.;7(5):681-685.
    \128\ Dushaj et al., unpublished, op.cit.
    \129\ Aragam, K.G., D. Dai, M. L. Neely (2015). Gaps in referral 
to cardiac rehabilitation of patients undergoing percutaneous 
coronary intervention in the United States. Journal of the American 
College of Cardiology. 65(19), 2079-2088.
    \130\ Elbardissi, A.W., A. Duclos, J.D. Rawn, et al. (2013). 
Cumulative team experience matters more than individual surgeon 
experience in cardiac surgery. Journal of Thoracic and 
Cardiovascular Surgery. 145(2): 328-33.
    \131\ Goldstein et al. (2022), op. cit.
    \132\ Du-Toit et al. (2021), op.cit.
    \133\ Mohr et al. (2013), op.cit., Head et al. (2014), op.cit.
    \134\ Mohr et al. (2013), op.cit.
    \135\ Ghadessi, M., R. Tang, J. Zhou, et al. (2020) A roadmap to 
using historical controls in clinical trials--by Drug Information 
Association Adaptive Design Scientific Working Group (DIA-ADSWG). 
Orphanet Journal of Rare Diseases. 15:69.
    \136\ Weltert et al. (2021), op.cit.
---------------------------------------------------------------------------

    Thirdly, we question to what extent the findings from the cited 
studies can be replicated among Medicare beneficiaries who undergo CABG 
surgery. Specifically, the studies cited in the application were 
conducted among patient populations that were predominantly male.\137\ 
Among Medicare fee-for-service beneficiaries who underwent CABG 
surgery, only two-thirds (66%) were male.138 139 Because 
female CABG patients tended to have poorer outcomes than their male 
counterparts,140 141 we are interested in whether the impact 
of VEST on clinical outcomes is comparable between male and female CABG 
patients.
---------------------------------------------------------------------------

    \137\ For example, 81% in Sandner et al. (2022), 82% in 
Goldstein et al. (2022), 84% in Taggart et al. (2022), 85% in Du-
Toit (2021), 87% in Weltert et al. (2021), 86-92% in Dishaj et al. 
(unpublished manuscript).
    \138\ Angraal, S., K. Khera, and Y. Wang, et al. (2018) Sex and 
race differences in the utilization and outcome of coronary artery 
bypass grafting among Medicare beneficiaries, 2009-2014. Journal of 
American Heart Association.
    \139\ McNeely, Markwell, Vassileva (2016). Trends in patient 
characteristics and outcomes of coronary artery bypass grafting in 
2000-2012 Medicare population. Annals of Thoracic Surgery. 102:132-
9.
    \140\ Gaudino, M., D. Chadow, M. Rahouma, et al. (2023). 
Operative outcomes of women undergoing coronary artery bypass 
surgery in the US, 2011 to 2020. JAMA Surgery. doi:10.1001/
jamasurg.2022.8156.
    \141\ Sandner, S., A. Kastrati, A. Niessner, et al. (2023). Sex 
diffeences among patients receiving tricagrelor monotherapy onr 
aspirin after coronary bypass surgery: A prespecified subgroup 
analysis of the TiCAB trial. International Journal of Cardiology. 
Vol. 370: 129-135. https://doi.org/10.1016/j.ijcard.2022.10.166.
---------------------------------------------------------------------------

    We are inviting public comments on whether VEST meets the 
substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for VEST.
    Comment: In response to a question regarding whether other aspects 
of the CABG procedure were tested, such as ``no touch'' procedures, the 
applicant stated that the surgical technique in Goldstein et al. 
(2022), the VEST US pivotal study, did not include patients with ``no 
touch'' vein harvesting technique. The VEST external support device 
cannot be applied over veins with excessive surrounding tissue 
included, due to the limitation of the external stent diameter. The 
applicant also stated the ``no touch'' technique is rarely used in 
clinical practice due to the increased risk of postoperative leg wound 
complications and the trend toward minimal surgical incisions; however, 
similarly to VEST, this technique supports the assertion that having an 
external support to vein grafts results in improved clinical outcome 
and vein graft longevity.
    The applicant also stated, in response to a question on whether any 
adjustments to the p-value were made for multiple comparisons, that no 
adjustments were made to the p-values for multiple comparisons. The 
applicant noted that the Goldstein study (2022) was a prospective, 
multi-center, randomized, within-subject-controlled, pivotal clinical 
trial that enrolled 224 patients with multi vessel atherosclerotic 
coronary artery disease who were scheduled to undergo CABG procedure. 
The study design included a within-patient randomization in which one 
SVG was randomized to be supported by VEST and another SVG served as a 
control. Seventeen sites in the United States and Canada participated 
in the study, and the study was managed by the Cardiothoracic Surgery 
Clinical Trials Network (CTSN).
    The applicant explained that the primary endpoint evaluated the 
degree

[[Page 26916]]

of graft disease (that is, IH) known to be associated with worse 
clinical outcomes and increased rates of revascularization procedures. 
Graft disease was assessed at 1 year post-CABG using angiogram and 
intravenous ultrasound (IVUS). Thereafter, additional clinical follow-
ups were conducted on a yearly basis for up to 5 years post-CABG. The 
applicant stated that to date, clinical follow-up on repeat 
revascularization procedures at 4 years post-CABG is available. The 
statistical analysis plan pre-specified multiple analysis-sets for the 
primary endpoint, which included both the actual observed data and data 
sets of all study subjects (including missing data using different pre-
specified imputation methods). Per the applicant, pre-specified 
subgroup analysis, based on evidence from the literature regarding risk 
factors for accelerated vein graft disease and clinical outcomes 
(Goldstein et al. 2022), has shown that VEST was effective in 
mitigating vein graft disease proliferation 12 months post-CABG in all 
subgroups, with more pronounced effects in diabetic patients, who had 
higher risk for vein graft disease and MACCE. All analysis sets yielded 
consistent favorable effect for the VEST grafts results (with different 
p-values ranging between 0.006-0.072).
    The applicant further stated that the results of the Goldstein 
study (2022) confirmed the following: VEST reduced vein graft disease 
at 1-year post-CABG. There was a direct correlation between degree of 
vein graft disease and clinical outcomes. Less vein graft disease was 
associated with less MACCE, which, in turn, was associated with fewer 
revascularization procedures. The clinical outcomes in the study, in 
which each CABG patient had one vein graft randomized to be supported 
by VEST and another not supported, were markedly better in performance 
at 1 year (7.1%) compared with the literature-based safety performance 
goal approved by FDA, which was total MACCE rate of up to 19 percent. 
Territories with vein grafts supported with VEST had much fewer 
repeated ischemic-driven revascularization procedures compared to 
standard-of-care grafts, and the difference between the two groups 
increased as follow up duration became longer; and the effectiveness of 
VEST in preventing vein graft disease 12 months post-CABG was better in 
all subgroups, compared to the control group. In certain groups, the 
effect of VEST was profoundly better than the control, especially in 
diabetic patients (50% of the patient population in the Goldstein study 
of 2022).
    Response: We thank the applicant for its comments and will take 
this information into consideration when deciding whether to approve 
new technology add-on payment for VEST.
s. XENOVIEW TM (Xenon Xe 129 Hyperpolarized)
    Polarean, Inc. and The Institute for Quality Resource Management 
(collectively referred to as ``applicant'') submitted an application 
for new technology add-on payments for XENOVIEW TM (xenon Xe 
129 hyperpolarized) for FY 2024. Per the applicant, XENOVIEW 
TM is prepared using an FDA approved hyperpolarization 
process from a dose of Xenon \129\Xe Gas Blend. The applicant stated 
that the imaging signal is specifically created to address the unmet 
needs to quantitively diagnose early pulmonary oxygen deficiency, at 
the level of the alveoli oxygen exchange, without exposing the patient 
to ionizing radiation to inform management of patients with diseases 
manifested by diminished lung function. The applicant explained that 
after inhalation, HP \129\Xe freely diffuses from the airspaces through 
alveolar-capillary barrier (comprised of alveolar epithelial cells, 
interstitial tissues, and capillary endothelial cells) and subsequently 
into the red blood cells (RBCs). The applicant noted that HP \129\Xe 
exhibits distinct magnetic resonance (MR) frequency shifts in the 
airspace, barrier, and RBCs, allowing separate imaging of its 
distribution in all three compartments, and that such imaging has been 
used to spatially characterize disease burden across a range of 
pulmonary disorders (for example, chronic obstructive pulmonary disease 
(COPD) and asthma). We note that the applicant submitted an application 
for new technology add-on payments for XENOVIEW TM for FY 
2023, as summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28307 through 28317), that it withdrew prior to the issuance of the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48920).
    Please refer to the online application posting for XENOVIEW 
TM available at https://mearis.cms.gov/public/publications/ntap/NTP221017PBF9L, for additional detail describing the technology 
and the diseases diagnosed by the technology.
    With respect to the newness criterion, according to the applicant, 
XENOVIEW TM was granted NDA approval from FDA on December 
23, 2022 for the use of XENOVIEW TM (xenon Xe 129 
hyperpolarized) with magnetic resonance imaging (MRI) for evaluation of 
lung ventilation in adults and pediatric patients aged 12 years and 
older. According to the applicant, XENOVIEW TM was 
commercially available immediately following the NDA approval. The 
applicant stated that the dose for patients 12 years and older is 75 mL 
to 100 mL dose equivalent (DE, where DE = [total volume Xe gas] x 
[\129\Xe isotopic enrichment] x [polarized percent]) of HP \129\Xe by 
oral inhalation of the entire contents of one XENOVIEW TM 
Dose Delivery Bag. The applicant explained that each bag contains at 
least 75 mL DE with a recommended target DE range of 75 mL to 100 mL in 
a volume of 250 mL to 750 mL total xenon with additional nitrogen, 
National Formulary (NF) (99.999% purity) added to reach a total volume 
of 1,000 mL measured 5 minutes before inhalation.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS procedure code may be used to uniquely describe procedures 
involving the use of XENOVIEW TM: BB34Z3Z (Magnetic 
resonance imaging (MRI) of bilateral lungs using hyperpolarized xenon 
129 (Xe-129)).
    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 purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that XENOVIEW TM is not substantially similar to 
other currently available technologies because HP \129\Xe, a new 
chemical entity, and new lung MRI signaling agent, is created on-site 
following an FDA approved method, for oral inhalation. The applicant 
explained that, absent ionizing radiation, XENOVIEW TM 
identifies lung abnormalities reporting ventilation defect percent 
(VDP) diagnosing early and deteriorating lung function to inform, guide 
and monitor therapy. The applicant explained that XENOVIEW 
TM's properties cause diffusion through the lung and distal 
alveoli, and that novelty mechanistically lies in the gas preparation, 
where HP creates a quantitative distinct volume DE for the patient's 
anatomy. Therefore, the applicant asserted that the technology meets 
the newness criterion. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for XENOVIEW TM for the 
applicant's complete statements in support of its assertion that 
XENOVIEW TM is not

[[Page 26917]]

substantially similar to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP01MY23.216

    Similar to our discussion in the FY 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28308), we note that although the applicant states that 
XENOVIEW TM has not been assigned to an MS-DRG and cannot be 
compared to an existing technology, we believe that based on its FDA 
indication, cases involving the use of XENOVIEW TM would be 
assigned to the same MS-DRGs as cases involving the use of other MRIs 
and imaging modalities for pulmonary function and imaging of the lungs.

[[Page 26918]]

    We are inviting public comments on whether XENOVIEW TM 
is substantially similar to existing technologies and whether XENOVIEW 
TM meets the newness criterion.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for XENOVIEW TM. The applicant limited its analysis 
to eight MS-DRGs, listed in the following table, as it believes these 
MS-DRGs represent patients most likely eligible for treatment with 
XENOVIEW TM (that is, patients with lung and pulmonary 
challenges, confirmed pulmonary disease, asthma and COPD). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 87,801 claims mapping to these eight MS-DRGs. The 
applicant followed the order of operations described in the following 
table and calculated a final inflated average case-weighted 
standardized charge per case of $55,652, which exceeded the average 
case-weighted threshold amount of $46,624. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that XENOVIEW 
TM meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.217

    We note that the applicant limited its analysis to eight MS-DRGs. 
We are interested in information as to whether the technology would map 
to other MS-DRGs, such as other MS-DRGs under Major Diagnostic Category 
004--Diseases & Disorders of the Respiratory System, as the indication 
for the technology regarding lung ventilation seems very broad. We are 
inviting public comments on whether XENOVIEW TM meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that XENOVIEW TM represents a substantial 
clinical improvement over existing technologies because HP \129\Xe gas 
for oral inhalation with MRI offers an effective option for patients 
with pulmonary challenges to obtain quantitative information regarding 
their lung ventilation as it relates to their progression of disease 
without subjecting the patient to ionizing radiation or the half-life 
of nuclear imaging agents. The applicant further stated that HP \129\Xe 
MRI images are sharp and discreet providing visual evidence of oxygen 
impairment across the barrier tissues leading to a quantifiable metric 
to follow patients' treatment. The applicant asserted that XENOVIEW 
TM 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. The applicant provided 10 studies to support these claims. The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for XENOVIEW TM for additional details on the 
applicant's statements regarding the substantial clinical improvement

[[Page 26919]]

criterion and the supporting evidence provided.
[GRAPHIC] [TIFF OMITTED] TP01MY23.218


[[Page 26920]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.219


[[Page 26921]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.220


[[Page 26922]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.221


[[Page 26923]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.222

BILLING CODE 4120-01-C
    After review of the information the applicant provided, we have the 
following concerns regarding whether XENOVIEW TM meets the 
substantial clinical improvement criterion. We note that, similar to 
our discussion in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28312), with respect to the evidence provided by the applicant to 
support its assertion that XENOVIEW TM is able to diagnose a 
medical condition in a patient population where the medical condition 
is currently undetectable and diagnose a medical condition earlier than 
currently available methods, the studies do not appear to provide 
evidence showing that use of the technology to make a diagnosis 
affected the management of the patients, as under Sec.  
412.87(b)(1)(ii)(B). Although the applicant provided studies 
demonstrating that XENOVIEW TM can detect gas diffusion 
abnormalities in patients that traditional imaging such as CT cannot, 
or can detect these abnormalities earlier than currently available 
methods, these studies do not appear to demonstrate that subsequently, 
treatment planning or disease management was affected.
---------------------------------------------------------------------------

    \142\ Hahn, AD, Carey KJ, Barton GP, Torres, LA, Kammerman J, et 
al. Hyperpolarized 129Xe MR Spectroscopy in the Lung Shows 1-year 
Reduced Function in Idiopathic Pulmonary Fibrosis. Radiology 2022; 
000:1-9.
    \143\ Grist JT, Collier GJ, Walters H, Kim M, Chen M, et al. 
Lung abnormalities depicted with hyperpolarized xenon MRI in 
patients with long COVID. Radiology 2022; inpress:1-26.
---------------------------------------------------------------------------

    For example, we note that studies were designed to assess the 
ability of XENOVIEW TM to detect changes in lung function 
before and after treatment in comparison to other technologies, rather 
than a change in patient management. For example, in the Mummy et al. 
(2021) study,\144\ HP \129\Xe MRI was used to observe treatment effects 
in COPD patients before and after receiving biologic therapy. Even 
though the study demonstrated that XENOVIEW TM may have more 
sensitivity in providing measurements of lung functioning in 
structurally normal areas of the lung, there were no additional follow-
ups on patients who appeared to be non-responsive to therapy based on 
HP \129\Xe MRI imaging. Without this information, it is difficult to 
determine whether using XENOVIEW TM to observe the effects 
of treatment has an impact on clinical decision-making for patients 
with COPD. Similarly, although the study abstract for McIntosh et al. 
(2020) \145\ noted that clinically relevant VDP improvements were 
observed 14-days post-benralizumab in patients with minimal response 
detected using spirometry, it is not clear from the study abstract if 
the use of XENOVIEW TM to observe the effects of treatment 
impacted the clinical decision-making for these patients. In addition, 
we question the clinical significance of the findings in the Hahn et 
al. (2022) study \146\ to support the applicant's statement that in 
patients with IPF, HP \129\Xe MRI can predict disease progression in 
patient population where fibrosis is not detectable by traditional CT, 
as the study authors suggested that findings need to be verified in a 
longitudinal multicenter study with more rigorous testing of the 
repeatability of the MRI-based measurements of gas exchange and 
ventilation in a larger sample of participants with IPF.
---------------------------------------------------------------------------

    \144\ Mummy DG, Coleman M, Wang Z, Bier EA, Lu J, Driehuys D, 
Huang YC. J. Regional Gas Exchange Measured by 129Xe Magnetic 
Resonance Imaging Before and After Combination Bronchodilators 
Treatment in Chronic Obstructive Pulmonary Disease. J Magn Reson 
Imaging 54(3): 964-974. DOI: 10.1002/jmri.27662.
    \145\ McIntosh M, Eddy RL, Knipping D, Barker AL, Lindenmaier 
TJ, Yamashita C, et al. Response to benralizumab in severe asthma: 
129Xe MRI, oscillometry and clinical measurements. Am J Respir Crit 
Care Med 2020;201:A6244.
    \146\ Hahn, AD, Carey KJ, Barton GP, Torres, LA, Kammerman J, et 
al. Hyperpolarized 129Xe MR Spectroscopy in the Lung Shows 1-year 
Reduced Function in Idiopathic Pulmonary Fibrosis. Radiology 2022; 
000:1-9.
---------------------------------------------------------------------------

    Furthermore, although the applicant states that HP \129\Xe MRI can 
be used to quantify abnormalities across three compartments of alveolar 
gas-exchange (in the airspaces (ventilation), barrier tissue of the 
lung parenchyma, and transfer to red blood cells (RBCs)), we question 
whether the detection of such abnormalities allows for a specific 
diagnosis of disease. For example, in the Grist et al. (2022) 
study,\147\ a follow-up to the Grist et al. (2021) study,\148\ the 
authors noted that the relationship of the HP \129\Xe MRI abnormalities 
detected and the breathlessness experienced by the wider population of 
post-COVID-19 condition participants was unclear. The authors stated 
that caution is necessary in the use of HP \129\Xe MRI for the 
detection of disease, as it was unknown whether participants with other 
respiratory tract infections, such as flu, had abnormal HP \129\Xe MRI 
gas transfer months after infection. The authors also stated that it 
was not known whether the abnormalities detected were of clinical 
importance. The authors of the Mummy et. al. (2021) \149\ study also 
indicated that HP

[[Page 26924]]

\129\Xe MRI ventilation measurements in COPD had not been well 
characterized, which limited the authors' ability to determine a 
clinically meaningful change in ventilation metrics. In addition, we 
note that the Thomen et al. (2016) \150\ study provided by the 
applicant consists of a pediatric population, and we question whether 
such detection of ventilation abnormalities by XENOVIEW TM 
would be generalizable to a Medicare population.
---------------------------------------------------------------------------

    \147\ Grist JT, Collier GJ, Walters H, Kim M, Chen M, et al. 
Lung abnormalities depicted with hyperpolarized xenon MRI in 
patients with long COVID. Radiology 2022;in press:1-26.
    \148\ Grist JT, Chen M, Collier GJ, Raman B, Abueid G, et al. 
Hyperpolarized 129XE MRI abnormalities in dyspneic patients 3 months 
after COVID-19 pneumonia: Preliminary results. Radiology 
2021;301:E353-E360.
    \149\ Mummy DG, Coleman M, Wang Z, Bier EA, Lu J, Driehuys D, 
Huang YC. J. Regional Gas Exchange Measured by 129Xe Magnetic 
Resonance Imaging Before and After Combination Bronchodilators 
Treatment in Chronic Obstructive Pulmonary Disease. J Magn Reson 
Imaging 54(3): 964-974. DOI: 10.1002/jmri.27662.
    \150\ Thomen RP, Walkup LL, Roach DJ, Cleveland ZI, Clancy JP, 
Woods JC. Hyperpolarized \129\Xe for investigation of mild cystic 
fibrosis lung disease in pediatric patients. J Cyst Fibros 
2016;16(2):275-282.
---------------------------------------------------------------------------

    In summary, we question whether the evidence provided demonstrates 
that earlier detection of alveolar gas-exchange defects using XENOVIEW 
TM results in earlier diagnosis and subsequent changes to 
clinical decision-making following an earlier diagnosis. As such, we 
would be interested in additional evidence to support the applicant's 
assertion that use of XENOVIEW TM to make a diagnosis 
affects the management of the patient.
    We are inviting public comments on whether XENOVIEW TM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for XENOVIEW 
TM.
7. Proposed FY 2024 Applications for New Technology Add-On Payments 
(Alternative Pathways)
    As discussed previously, beginning with applications for FY 2021, a 
medical device designated under FDA's Breakthrough Devices Program that 
has received marketing authorization as a Breakthrough Device, 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, a medical product that is 
designated by the FDA as a Qualified Infectious Disease Product (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 Limited Population 
Pathway for Antibacterial and Antifungal Drugs (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 
to 3 year newness period to be considered ``new,'' and must also still 
meet the cost criterion.
    As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, 
we finalized our proposal to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this proposed rule. 
However, while we are continuing to provide discussion of the concerns 
or issues we identified with respect to applications submitted under 
the alternative pathway, we are providing 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 applicable new technology add-on payment criteria. We refer 
readers to https://mearis.cms.gov/public/publications/ntap for the 
publicly posted FY 2024 new technology add-on payment applications and 
supporting information (with the exception of certain cost and volume 
information, and information or materials identified by the applicant 
as confidential or copyrighted). In addition, we note that we are 
making available separate tables listing the ICD-10-CM codes, ICD-10-
PCS codes, and/or MS-DRGs related to the analyses of the cost criterion 
for certain technologies for the FY 2024 new technology add-on payment 
applications in Table 10 associated with this proposed rule, available 
via the internet 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 2024 IPPS Proposed Rule Home 
Page'' or ``Acute Inpatient--Files for Download''. Please see section 
VI of the Addendum for additional information regarding tables 
associated with the proposed rule.
    We received 27 applications for new technology add-on payments for 
FY 2024 under the new technology add-on payment alternative pathway. 
Seven applicants withdrew applications prior to the issuance of this 
proposed rule. Of the remaining 20 applications, 16 of the technologies 
received a Breakthrough Device designation from FDA and 1 has a pending 
Breakthrough Device designation from FDA. The remaining three 
applications were designated as a QIDP by FDA. We did not receive any 
applications for technologies approved through the LPAD pathway.
    In accordance with the regulations under Sec.  412.87(e)(2), 
applicants for new technology add-on payments for FY 2024, including 
Breakthrough Devices, must have FDA marketing authorization by July 1 
of the 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 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 final rule for a complete discussion of 
this policy (85 FR 58737 through 58742).
    As we did in the FY 2023 IPPS/LTCH PPS proposed rule, for 
applications under the alternative new technology add-on payment 
pathway, in this proposed rule we are making a proposal to approve or 
disapprove each of these 20 applications for FY 2024 new technology 
add-on payments. Therefore, in this section of the preamble of this 
proposed rule, we provide background information on each alternative 
pathway application and propose whether or not each technology would be 
eligible for the new technology add-on payment for FY 2024. 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 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.
a. Alternative Pathway for Breakthrough Devices
(1) 4WEB Medical Ankle Truss System
    4WEB Medical Inc., submitted an application for new technology add-
on

[[Page 26925]]

payments for the 4WEB Medical Ankle Truss System (ATS). According to 
the applicant, the ATS is a tibiotalocalcaneal (TTC) fusion system with 
a premarket authorized TTC nail to manage ankle bone defects that occur 
after a failed ankle arthrodesis or arthroplasty.
    Please refer to the online application posting for ATS, available 
at https://mearis.cms.gov/public/publications/ntap/NTP221014QPJ43, for 
additional detail describing the technology.
    According to the applicant, the ATS received Breakthrough Device 
designation from FDA on October 4, 2022 for use with a premarket 
authorized tibiotalocalcaneal (TTC) nail as part of a TTC fusion system 
to manage ankle bone defects that may be associated with the following 
indications: failed ankle arthrodesis, failed ankle arthroplasty. The 
anatomical landmarks necessary for the design and creation of ATS Power 
Mobility Devices (PMDs) must be present and identifiable on appropriate 
radiography scans. The ATS is intended for use with autograft and/or 
allogenic bone graft comprised of cancellous and/or corticocancellous 
bone graft. The applicant stated that it is seeking 510(k) clearance 
from FDA for the same indication.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the ATS. The applicant submitted 
a request for approval for a unique ICD-10-PCS procedure code for the 
ATS beginning in FY 2024.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the ATS, the applicant 
searched the FY 2021 MedPAR file for cases reporting the ICD-10-PCS 
codes listed in the following table, which describe open fusion of the 
ankle joint with any device but autologous tissue substitute. The 
applicant used the inclusion/exclusion criteria described in the 
following table. The applicant provided two analyses to demonstrate 
that the technology meets the cost criterion, the first using 100 
percent of all identified cases, and the second using 75 percent of all 
identified cases. The applicant followed the order of operations 
described in the following table.
    Under the first analysis (100 percent of all cases), the applicant 
identified 1,278 cases mapping to 49 MS-DRGs (see Table 10.1.A.--4WEB 
Medical Ankle Truss System Codes--FY 2024 associated with this proposed 
rule for a complete list of MS-DRGs provided by the applicant). The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $212,292, which exceeded the average 
case-weighted threshold amount of $100,961.
    Under the second analysis (75 percent of all cases) the applicant 
identified 959 claims mapping to 20 MS-DRGs (see Table 10.1.A.--4WEB 
Medical Ankle Truss System Codes--FY 2024 associated with this proposed 
rule for a complete list of MS-DRGs provided by the applicant), and 
calculated a final inflated average case-weighted standardized charge 
per case of $205,198, which exceeded the average case-weighted 
threshold amount of $101,243.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
both scenarios, the applicant asserted that the ATS meets the cost 
criterion.
BILLING CODE 4120-01-P

[[Page 26926]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.223

    We note the following concern regarding the cost criterion. To 
identify potentially eligible cases, the applicant searched the FY 2021 
MedPAR file using only the listed ankle fusion procedure codes, but we 
note that that the proposed indication for this device is for use in 
failed ankle fusions and failed arthroplasties. We therefore question 
whether searching for the ankle fusion procedure codes in combination 
with diagnosis complication codes reported to identify the previous 
failure such as category T84, M97.21, or M97.22 would more accurately 
identify eligible cases.
    Subject to the applicant adequately addressing this concern, we 
would agree that the technology meets the cost criterion and are 
proposing to approve the ATS for new technology add-on payments for FY 
2024, subject to the technology receiving FDA marketing authorization 
as a Breakthrough Device for the indication corresponding to the 
Breakthrough Device designation by July 1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the estimated cost of this technology to the 
hospital on a per-patient basis is $19,500, which is the cost of a 
single implant. We note that the cost information for this technology 
may be updated in the final rule based on revised or additional 
information CMS receives prior to the final rule. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving the use of the ATS would be $12,675 for FY 2024 (that is, 65 
percent of the average cost of the technology).
    We are inviting public comments on whether the 4WEB Medical Ankle 
Truss System meets the cost criterion and our proposal to approve new 
technology add-on payments for the 4WEB Medical Ankle Truss System for 
FY 2024 subject to the technology receiving FDA marketing authorization 
as a Breakthrough Device for the indication corresponding to the 
Breakthrough Device designation by July 1, 2023.
(2) AveirTM AR Leadless Pacemaker
    Abbott Cardiac Rhythm Management submitted an application for new 
technology add-on payments for the AveirTM AR Leadless 
Pacemaker for FY 2024. Per the applicant, the AveirTM AR 
Leadless Pacemaker is a programmable system comprised of a single 
leadless pacemaker implanted into the right atrium that provides 
single-chamber pacing therapy without the need for traditional 
``wired'' leads. According to the applicant, this technology contains 
both the generator and electrodes within the device and is anticipated 
to be indicated for one or more of the following permanent conditions: 
syncope, presyncope, fatigue, disorientation due to arrhythmia/

[[Page 26927]]

bradycardia, or any combination of those symptoms. We note that the 
applicant also submitted an application for new technology add-on 
payments for FY 2024 for the AveirTM Leadless Pacemaker 
(herein referred to as the AveirTM Dual-Chamber Leadless 
Pacemaker), discussed separately in the following section.
    Please refer to the online application posting for 
AveirTM AR Leadless Pacemaker, available at https://mearis.cms.gov/public/publications/ntap/NTP221017AH7JC, for additional 
detail describing the technology and the disease treated by the 
technology.
    According to the applicant, AveirTM AR Leadless 
Pacemaker received Breakthrough Device designation from FDA on March 
27, 2020, under the Breakthrough Device designation for the Leadless 
Dual Chamber System for the following proposed indication: Pacemaker 
implantation is indicated in one or more of the following permanent 
conditions: syncope, presyncope, fatigue, disorientation due to 
arrhythmia/bradycardia, or any combination of those symptoms. The 
proposed indications for use of the Leadless Dual Chamber System 
include all four of the following: (1) Rate-Modulated Pacing is 
indicated for patients with chronotropic incompetence, and for those 
who would benefit from increased stimulation rates concurrent with 
physical activity. Chronotropic incompetence has not been rigorously 
defined. A conservative approach, supported by the literature, defines 
chronotropic incompetence as the failure to achieve an intrinsic heart 
rate of 70 percent of the age-predicted maximum heart rate or 120 bpm 
during exercise testing, whichever is less, where the age-predicted 
heart rate is calculated as 197-(0.56 x age). (2) Dual-Chamber Pacing 
is indicated for those patients exhibiting: sick sinus syndrome; 
chronic, symptomatic second- and third-degree AV block; recurrent 
Adams-Stokes syndrome; symptomatic bilateral bundle branch block when 
tachyarrhythmia and other causes have been ruled out. (3) Atrial Pacing 
is indicated for patients with: sinus node dysfunction and normal AV 
and intraventricular conduction systems. (4) Ventricular Pacing is 
indicated for patients with: significant bradycardia and normal sinus 
rhythm with only rare episodes of AV block or sinus arrest; chronic 
atrial fibrillation; severe physical disability.
    According to the applicant, the relevant indications for single-
chamber atrial leadless pacing are the first and third indications, 
Rate-Modulated Pacing and Atrial Pacing. The applicant further stated 
that the Breakthrough Device designation applies to two clinical 
scenarios: a de novo system where a patient receives the 
AveirTM Dual-Chamber Leadless Pacemaker, or an upgrade 
system where a patient already has a ventricular leadless pacemaker and 
is upgraded to the AveirTM Dual-Chamber Leadless Pacemaker 
by receiving the AveirTM AR Leadless Pacemaker. The 
applicant stated that it is seeking FDA approval for both the atrial 
leadless pacemaker (AveirTM AR Leadless Pacemaker) and the 
dual chamber leadless pacemaker (AveirTM Dual-Chamber 
Leadless Pacemaker) for the same indications. We note that, while the 
intended indications for the AveirTM AR Leadless Pacemaker 
would appear to match sections of the Breakthrough Device designation, 
the Breakthrough Device designation provided by the applicant is for 
the Leadless Dual Chamber System, rather than the AveirTM 
Dual-Chamber Leadless Pacemaker. Therefore, although the 
AveirTM AR Leadless Pacemaker may be one component of the 
system, it appears that the AveirTM AR Leadless Pacemaker on 
its own is not the subject of the Breakthrough Device designation, and 
would not be considered a Breakthrough Device once FDA approved. As 
discussed, a device must be designated under FDA's Breakthrough Devices 
Program to be eligible under the alternative pathway. Accordingly, 
because the AveirTM AR Leadless Pacemaker appears to only be 
eligible under the alternative pathway for procedures involving the 
full dual-chamber system (that is, where patients are upgraded to the 
AveirTM Dual-Chamber Leadless Pacemaker by receiving the 
AveirTM AR Leadless Pacemaker), we believe any eligible use 
of the AveirTM AR Leadless Pacemaker would be included under 
the new technology add-on payment application for the 
AveirTM Dual-Chamber Leadless Pacemaker. We invite public 
comment on the eligibility of the AveirTM AR Leadless 
Pacemaker under the alternative pathway.
    The applicant stated that the following ICD-10-PCS code may be used 
to uniquely describe procedures involving the use of AveirTM 
AR Leadless Pacemaker effective beginning FY 2017: 02H63NZ (Insertion 
of intracardiac pacemaker into right atrium, percutaneous approach). We 
note that the applicant also submitted a request for approval for a 
unique ICD-10-PCS procedure code for AveirTM AR Leadless 
Pacemaker beginning in FY 2024. The applicant stated that I49.9 
(Cardiac arrythmia, unspecified) may be used to currently identify the 
proposed indication for AveirTM AR Leadless Pacemaker under 
the ICD-10-CM coding system.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the AveirTM AR 
Leadless Pacemaker, the applicant searched the FY 2021 MedPAR file for 
cases reporting ICD-10-PCS code 02H63NZ (Insertion of intracardiac 
pacemaker into right atrium, percutaneous approach). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 1,186 claims mapping to 43 MS-DRGs. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $207,890, which exceeded the average case-weighted 
threshold amount of $158,574. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that the 
AveirTM AR Leadless Pacemaker meets the cost criterion.

[[Page 26928]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.224

    We have the following concerns regarding the cost criterion. As 
summarized in the following section, the applicant stated that the 
AveirTM Dual-Chamber Leadless Pacemaker is identified using 
both ICD-10-PCS code 02H63NZ (used for the cost analysis for the 
AveirTM AR Leadless Pacemaker) and ICD-10-PCS code 02HK3NZ 
(Insertion of Intracardiac Pacemaker into Right Ventricle, Percutaneous 
Approach). We question whether, by not excluding cases reporting ICD-
10-PCS code 02HK3NZ as part of the case selection for the cost analysis 
for the AveirTM AR Leadless Pacemaker, cases involving use 
of the dual chamber system could have been included as part of this 
analysis. Also, while it is our understanding that procedure code 
02H63NZ was approved to describe procedures involving the use of 
intracardiac atrial pacemakers effective beginning FY 2017, the 
applicant stated that there are no technologies on the market eligible 
to be coded with procedure code 02H63NZ as the AveirTM AR 
Leadless Pacemaker will be the first atrial leadless pacemaker, if 
approved. Therefore, we are unsure why the applicant searched for cases 
reporting procedure code 02H63NZ within the FY 2021 MedPAR file if 
there should not be any technologies coded with procedure code 02H63NZ 
until FY 2022 (when the applicant stated clinical trials for the 
AveirTM AR Leadless Pacemaker began). We further question 
which technology the cases identified in the MedPAR data represent. We 
question whether searching for cases utilizing standard pacemakers 
instead of leadless pacemakers (with relevant adjustments to remove/add 
charges as necessary) would better reflect the technology that the 
applicant anticipates AveirTM AR Leadless Pacemaker will be 
replacing.
    Subject to the applicant adequately addressing these concerns, we 
would agree that the technology meets the cost criterion and are 
proposing to approve the AveirTM AR Leadless Pacemaker for 
new technology add-on payments for FY 2024, subject to the technology 
receiving Breakthrough Device designation and FDA marketing 
authorization as a Breakthrough Device for the indication corresponding 
to the Breakthrough Device designation by July 1, 2023.
    The applicant has not provided an estimate for the cost of the 
AveirTM AR Leadless Pacemaker at the time of this proposed 
rule. We expect the applicant to submit cost information prior to the 
final rule, and we will provide an update regarding the new technology 
add-on payment amount for the technology, if approved, in the final 
rule. Any new technology add-on payment for the AveirTM AR 
Leadless Pacemaker would be subject to our policy under Sec.  
412.88(a)(2) where we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case.
    We invite public comments on whether the AveirTM AR 
Leadless Pacemaker meets the cost criterion and our proposal to approve 
new technology add-on payments for the AveirTM AR Leadless 
Pacemaker for FY 2024 subject to the technology receiving Breakthrough 
Device designation and FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by July 1, 2023.
(3) AveirTM Leadless Pacemaker (Dual-Chamber)
    Abbott Cardiac Rhythm Management submitted an application for new 
technology add-on payments for the AveirTM Leadless 
Pacemaker (herein referred to as the AveirTM Dual-Chamber 
Leadless Pacemaker) for FY 2024. According to the applicant, the 
AveirTM Dual-Chamber Leadless Pacemaker is a modular 
programmable system comprised of two implanted leadless pacemakers that 
provide dual-chamber pacing therapy: a ventricular leadless pacemaker 
intended for direct implantation into the right ventricle, and an 
atrial leadless pacemaker intended for direct implantation into the 
right atrium. The applicant stated that the AveirTM Dual-
Chamber Leadless Pacemaker has built-in power supply and electrodes, is 
designed to be retrievable by a dedicated retrieval catheter, and 
enables two separate pacemakers to function as one dual-chamber pacing 
system. The applicant stated that pacemaker implantation is generally 
indicated in one or more of the following permanent conditions: 
syncope, presyncope, fatigue, disorientation due to arrhythmia/
bradycardia, or any combination of those symptoms. As discussed 
separately in the previous section, the applicant also submitted an 
application for FY 2024 new technology add-on payments for the 
AveirTM AR Leadless Pacemaker, which provides atrial pacing.
    Please refer to the online application posting for the 
AveirTM Dual-Chamber Leadless Pacemaker, available at 
https://mearis.cms.gov/public/publications/ntap/NTP221017AJNQH, for 
additional detail describing the technology and the disease treated by 
the technology.

[[Page 26929]]

    According to the applicant, the AveirTM Dual-Chamber 
Leadless Pacemaker was granted Breakthrough Device designation from FDA 
on March 27, 2020 under the Breakthrough Device designation for the 
Leadless Dual Chamber System for the following proposed indication: 
Pacemaker implantation is indicated in one or more of the following 
permanent conditions: syncope, presyncope, fatigue, disorientation due 
to arrhythmia/bradycardia, or any combination of those symptoms. The 
proposed indications for use of the Leadless Dual Chamber System 
include all four of the following: (1) Rate-Modulated Pacing is 
indicated for patients with chronotropic incompetence, and for those 
who would benefit from increased stimulation rates concurrent with 
physical activity. Chronotropic incompetence has not been rigorously 
defined. A conservative approach, supported by the literature, defines 
chronotropic incompetence as the failure to achieve an intrinsic heart 
rate of 70 percent of the age-predicted maximum heart rate or 120 bpm 
during exercise testing, whichever is less, where the age-predicted 
heart rate is calculated as 197-(0.56 x age); (2) Dual-Chamber Pacing 
is indicated for those patients exhibiting: sick sinus syndrome; 
chronic, symptomatic second- and third-degree AV block; recurrent 
Adams-Stokes syndrome; symptomatic bilateral bundle branch block when 
tachyarrhythmia and other causes have been ruled out; (3) Atrial Pacing 
is indicated for patients with: sinus node dysfunction and normal AV 
and intraventricular conduction systems; (4) Ventricular Pacing is 
indicated for patients with: significant bradycardia and normal sinus 
rhythm with only rare episodes of AV block or sinus arrest; chronic 
atrial fibrillation; severe physical disability.
    The applicant further stated that the Breakthrough Device 
designation applies to two clinical scenarios: a de novo system where a 
patient receives the AveirTM Dual-Chamber Leadless 
Pacemaker, or an upgrade system where a patient already has a 
ventricular leadless pacemaker and is upgraded to the 
AveirTM Dual-Chamber Leadless Pacemaker by receiving the 
AveirTM AR Leadless Pacemaker. The applicant stated that it 
is seeking FDA approval for the AveirTM Dual-Chamber 
Leadless Pacemaker for the same indications listed on the Breakthrough 
Device designation.
    According to the applicant, the following ICD-10-PCS procedure 
codes can currently be used to distinctly identify the 
AveirTM Dual-Chamber Leadless Pacemaker effective beginning 
FY 2017: 02H63NZ (Insertion of intracardiac pacemaker into right 
atrium, percutaneous approach) and 02HK3NZ (Insertion of intracardiac 
pacemaker into right ventricle, percutaneous approach). The applicant 
stated that there are other systems also in development that will use 
this combination of ICD-10-PCS codes but that the AveirTM 
Dual-Chamber Leadless Pacemaker will be the first dual chamber leadless 
pacemaker system on the market. We note that the applicant also 
submitted a request for approval for a unique ICD-10-PCS code for the 
Aveir Dual-Chamber Leadless Pacemaker beginning in FY 2024. The 
applicant stated that diagnosis code I49.9 (Cardiac arrythmia, 
unspecified) may be used to currently identify the proposed indication 
for Aveir\TM\ Dual-Chamber Leadless Pacemaker under the ICD-10-CM 
coding system.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the AveirTM 
Dual-Chamber Leadless Pacemaker, the applicant searched the FY 2021 
MedPAR file for cases reporting ICD-10-PCS code 02H63NZ (Insertion of 
intracardiac pacemaker into right atrium, percutaneous approach) in 
combination with ICD-10-PCS code 02HK3NZ (Insertion of intracardiac 
pacemaker into right ventricle, percutaneous approach). Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 991 claims mapping to 38 MS-DRGs. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $206,636, which exceeded the average case-weighted 
threshold amount of $159,357. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that the 
AveirTM Dual-Chamber Leadless Pacemaker meets the cost 
criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.225


[[Page 26930]]


    We have the following concern regarding the cost criterion. It is 
our understanding that procedure codes 02H63NZ and 02HK3NZ were 
approved for use in describing procedures involving intracardiac 
pacemakers effective beginning FY 2017. The applicant stated that there 
are no technologies on the market eligible to be coded with procedure 
code 02H63NZ as the AveirTM AR Leadless Pacemaker will be 
the first atrial leadless pacemaker, if approved, and there are no 
dual-chamber leadless pacemakers currently available. Therefore, we are 
unsure why the applicant searched for cases reporting procedure code 
02H63NZ within the FY 2021 MedPAR file if there should not be any 
technologies coded with 02H63NZ until FY 2022 (when the applicant 
stated clinical trials for the AveirTM AR and Dual-Chamber 
Leadless Pacemaker began). We further question which technology the 
cases identified in the MedPAR data represent. We question whether 
searching for cases utilizing standard pacemakers instead of leadless 
pacemakers (with relevant adjustments to remove/add charges as 
necessary) would better reflect the technology that the applicant 
anticipates AveirTM Dual-Chamber Leadless Pacemaker will be 
replacing.
    Subject to the applicant adequately addressing this concern, we 
would agree with the applicant that the technology meets the cost 
criterion and are therefore proposing to approve the AveirTM 
Dual-Chamber Leadless Pacemaker for new technology add-on payments for 
FY 2024, subject to the technology receiving FDA marketing 
authorization as a Breakthrough Device for the indication corresponding 
to the Breakthrough Device designation by July 1, 2023.
    The applicant has not provided an estimate for the cost of the 
AveirTM Dual-Chamber Leadless Pacemaker at the time of this 
proposed rule. We expect the applicant to submit cost information prior 
to the final rule, and we will provide an update regarding the new 
technology add-on payment amount for the technology, if approved, in 
the final rule. Any new technology add-on payment for the Aveir\TM\ 
Dual-Chamber Leadless Pacemaker would be subject to our policy under 
Sec.  412.88(a)(2) where we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case.
    We invite public comments on whether the AveirTM Dual-
Chamber Leadless Pacemaker meets the cost criterion and our proposal to 
approve new technology add-on payments for the AveirTM Dual-
Chamber Leadless Pacemaker for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
(4) Canary Tibial Extension (CTE) With Canary Health Implanted 
Reporting Processor (CHIRP) System
    Zimmer Biomet submitted an application for new technology add-on 
payments for the Canary Tibial Extension (CTE) with Canary Health 
Implanted Reporting Processor (CHIRP) System for FY 2024. Per the 
applicant, the CTE with CHIRP System is a tibial extension implant 
containing electronics and software, used with the Zimmer Persona 
Personalized Knee System. According to the applicant, the CTE with 
CHIRP System collects kinematic data pertaining to a patient's gait and 
activity level following total knee arthroplasty (TKA) surgery using 
internal motion sensors (3-D accelerometers and 3-D gyroscopes).
    Please refer to the online application posting for the CTE with 
CHIRP System, available at https://mearis.cms.gov/public/publications/ntap/NTP221014KYAL1, for additional detail describing the technology 
and its intended use.
    According to the applicant, the CTE with CHIRP System received 
Breakthrough Device designation from FDA on October 24, 2019 for the 
following proposed indication: for use with the Zimmer Persona 
Personalized Knee System (K113369) for TKA. The CTE with CHIRP System 
is intended to provide objective kinematic data from the implanted 
medical device to assist the patient and clinician during a patient's 
TKA post-surgical care. The kinematic data is intended as an adjunct to 
standard of care and physiological parameter measurement tools applied 
or utilized by the physician during the course of patient monitoring 
and treatment post-surgery. FDA granted De Novo classification to the 
CTE with CHIRP System on August 27, 2021 for the following indication: 
to provide objective kinematic data from the implanted medical device 
during a patient's TKA post-surgical care. The kinematic data is an 
adjunct to other physiological parameter measurement tools applied or 
utilized by the physician during the course of patient monitoring and 
treatment post-surgery. The device is indicated for use in patients 
undergoing a cemented TKA procedure that are normally indicated for at 
least a 58 mm sized tibial stem extension. The applicant stated that 
the technology was not immediately available for sale due to production 
delays related to COVID-19 and because of the need to negotiate data 
agreements with customer hospitals, but it became commercially 
available on October 4, 2021.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the CTE with CHIRP System. The 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the CTE with CHIRP System beginning in FY 2024.
    With respect to the cost criterion, the applicant provided the 
following analysis to demonstrate that it meets the cost criterion. To 
identify potential cases representing patients who may be eligible for 
the CTE with CHIRP System, the applicant searched the FY 2021 MedPAR 
file for cases reporting the ICD-10-PCS codes describing cemented 
replacement of the knee joint with a synthetic device via an open 
approach, as listed in the following table. Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 74,654 claims mapping to 60 MS-DRGs. See Table 10.5.A.--CTE 
with CHIRP System Codes--FY 2024 associated with this proposed rule for 
the complete list of MS-DRGs provided by the applicant. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $90,599, which exceeded the average case-weighted threshold 
amount of $84,613. Because the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount, the applicant asserted that the CTE with CHIRP System 
meets the cost criterion.

[[Page 26931]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.226

    We agree with the applicant that the technology meets the cost 
criterion and are therefore proposing to approve the CTE with CHIRP 
System for new technology add-on payments for FY 2024 for the 
indication to provide objective kinematic data from the implanted 
medical device during a patient's TKA post-surgical care. The kinematic 
data is an adjunct to other physiological parameter measurement tools 
applied or utilized by the physician during the course of patient 
monitoring and treatment post-surgery. The device is indicated for use 
in patients undergoing a cemented TKA procedure that are normally 
indicated for at least a 58 mm sized tibial stem extension.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the total cost of the CTE with CHIRP System to the 
hospital is approximately $1,654 per knee. This includes $1,309 for the 
CTE and $345 for the Canary Medical Home Base Station. We note that per 
the applicant, the Home Base Station System is intended for use in the 
patient's home environment and is used to query the CTE while the 
patient is asleep. We further note that the Home Base Station is 
provided to the patient to set up and connect to their home Wi-Fi prior 
to surgery. We therefore believe the relevant inpatient costs for the 
add-on payment would include only the cost of the CTE.\151\ We note 
that the cost information for this technology may be updated in the 
final rule based on revised or additional information CMS receives 
prior to the final rule. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 65 percent of the average 
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the CTE with CHIRP System would be $850.85 for one knee (or $1,701.70 
for two knees) for FY 2024 (that is, 65 percent of the average cost of 
the technology).
---------------------------------------------------------------------------

    \151\ https://canarymedical.com/clinicians/additional-information-for-clinicians/.
---------------------------------------------------------------------------

    We invite public comments on whether the CTE with CHIRP System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the CTE with CHIRP System for the indication to 
provide objective kinematic data from the implanted medical device 
during a patient's TKA post-surgical care.
(5) Ceribell Delirium Monitor
    Ceribell, Inc. submitted an application for new technology add-on 
payments for the Ceribell Delirium Monitor for FY 2024. Per the 
applicant, the Ceribell Delirium Monitor is a medical device system 
comprised of proprietary software and two cleared, proprietary 
products, a single use signal acquisition headband (the Ceribell EEG 
Headband) and a recorder (the Ceribell Pocket EEG). According to the 
applicant, the software utilizes a machine learning model to analyze 
EEG signals to detect features indicative of delirium in order to 
provide more effective diagnosis of delirium.
    Please refer to the online application posting for the Ceribell 
Delirium Monitor, available at https://mearis.cms.gov/public/publications/ntap/NTP221014R4HKQ, for additional detail describing the 
technology.
    According to the applicant, the Ceribell Delirium Monitor received 
Breakthrough Device designation from FDA on August 11, 2022 for the 
following proposed indication: The Ceribell Delirium Monitor software 
is intended to analyze features associated with diffuse slowing 
electroencephalogram (EEG) patterns that may be indicative of delirium. 
The Ceribell Delirium Monitor software is intended to aid in the 
screening and monitoring of delirium with clinical assessments in adult 
patients aged 65 and older in critical care settings within hospitals. 
The applicant stated that it is seeking market authorization from FDA 
under the De Novo pathway for the same indication. We note that the 
Ceribell EEG Headband and Ceribell Pocket EEG are not included on the 
Breakthrough Device designation and it therefore appears that only the 
software would be designated as the Breakthrough Device once market 
authorized, such that only the software would be eligible for new 
technology add-on payments under the alternative pathway.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Ceribell Delirium Monitor. 
The applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the Ceribell Delirium Monitor beginning in FY 2024. 
The applicant provided a list of diagnosis codes that may be used to 
currently identify the indication for

[[Page 26932]]

the Ceribell Delirium Monitor under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM codes provided by the applicant.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the Ceribell Delirium 
Monitor, the applicant searched the FY 2021 MedPAR file for claims with 
charges in the revenue codes 020X (Intensive Care Unit) and 021X 
(Coronary Care Unit) for patients age 65 or older, based on the 
expected FDA label and because the technology can be utilized for any 
patient in intensive or critical care units. The applicant used the 
inclusion/exclusion criteria described in the following table and 
provided two analyses to demonstrate that it meets the cost criterion, 
the first using 100 percent of all cases identified, and the second 
using 75 percent of all cases identified. The applicant followed the 
order of operations described in the following table for each scenario.
    Under the first analysis (100 percent of all identified cases), the 
applicant identified 2,538,587 claims mapping to 731 MS-DRGs (see Table 
10.6.A.--Ceribell Delirium Monitor Codes--FY 2024 associated with this 
proposed rule for a complete list of MS-DRGs provided by the applicant) 
and calculated a final inflated average case-weighted standardized 
charge per case of $105,176, which exceeded the average case-weighted 
threshold amount of $85,580.
    Under the second analysis (75 percent of all identified cases) the 
applicant identified 1,904,914 claims mapping to 89 MS-DRGs (see Table 
10.6.A.--Ceribell Delirium Monitor Codes--FY 2024 associated with this 
proposed rule for a complete list of MS-DRGs provided by the applicant) 
and calculated a final inflated average case-weighted standardized 
charge of $102,354, which exceeded the average case-weighted threshold 
amount of $85,363.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
both analyses, the applicant asserted that Ceribell Delirium Monitor 
meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.227

    We agree that the technology meets the cost criterion and therefore 
are proposing to approve the Ceribell Delirium Monitor for new 
technology add-on payments for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
    The applicant has not provided an estimate for the cost of the 
Ceribell Delirium Monitor at the time of this proposed rule. We expect 
the applicant to submit cost information prior to the final rule, and 
we will provide an update regarding the new technology add-on payment 
amount for the technology, if approved, in the final rule. The 
applicant stated that the operating costs of the technology will be 
comprised of the Ceribell Delirium Monitor software, which is the 
subject of the Breakthrough Device designation, and the Ceribell EEG 
headband, which is required for each patient to utilize the Ceribell 
Delirium Monitor software. However, as discussed previously, it seems 
that only the software would be eligible for the new technology add-on 
payment under the alternative pathway as it is the subject of the 
Breakthrough Device designation. Moreover, we note that the Ceribell 
EEG headband appears to have been 510(k)-cleared by FDA on August 21, 
2017,\152\ and is therefore no longer new. Therefore, it appears any 
add-on payment for the Ceribell Delirium Monitor would include only the 
cost of the software. We welcome comment on including only the cost of 
the software in determining the add-on payment amount for the Ceribell 
Delirium Monitor. Any new technology add-on payment for the Ceribell 
Delirium Monitor would be subject to our policy under Sec.  
412.88(a)(2) where we limit new technology add-on payment to the lesser 
of 65 percent of

[[Page 26933]]

the average cost of the technology, or 65 percent of the costs in 
excess of the MS-DRG payment for the case.
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    We invite public comments on whether the Ceribell Delirium Monitor 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the Ceribell Delirium Monitor for FY 2024 subject 
to the technology receiving FDA marketing authorization as a 
Breakthrough Device for the indication corresponding to the 
Breakthrough Device designation by July 1, 2023.
(6) Ceribell Status Epilepticus Monitor
    Ceribell, Inc. submitted an application for new technology add-on 
payments for the Ceribell Status Epilepticus Monitor for FY 2024. 
According to the applicant, the Ceribell Status Epilepticus Monitor is 
a medical device system comprised of proprietary software and two 
cleared, proprietary products: a single-use signal acquisition headband 
(the Ceribell EEG Headband) and a recorder (the Ceribell Pocket EEG). 
Per the applicant, the software utilizes a machine learning model to 
analyze EEG signals to detect features indicative of electrographic 
status epilepticus (ESE) in order to provide more effective diagnosis 
of ESE.
    Please refer to the online application posting for the Ceribell 
Status Epilepticus Monitor, available at https://mearis.cms.gov/public/publications/ntap/NTP22101439A1J, for additional detail describing the 
technology.
    The applicant stated that the Ceribell Status Epilepticus Monitor 
received Breakthrough Device designation from FDA on October 25, 2022 
for the following proposed indication: the Ceribell Status Epilepticus 
Monitor software is intended for the diagnosis of ESE in adult patients 
at risk for seizure. The Ceribell Status Epilepticus Monitor software 
analyzes EEG waveforms and identifies patterns consistent with ESE as 
defined in the American Clinical Neurophysiology Society's Guideline 
14. The applicant stated that it is seeking 510(k) clearance from FDA 
for the same indication. We note that the Ceribell EEG Headband and 
Ceribell Pocket EEG are not included on the Breakthrough Device 
designation and it therefore appears that only the software would be 
designated as the Breakthrough Device once market authorized, such that 
only the software would be eligible for new technology add-on payments 
under the alternative pathway.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Ceribell Status Epilepticus 
Monitor. The applicant submitted a request for approval for a unique 
ICD-10-PCS procedure code for the Ceribell Status Epilepticus Monitor 
beginning in FY 2024. The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the Ceribell 
Status Epilepticus Monitor under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM codes provided by the applicant.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For the first 
two analyses, to identify potential cases representing patients who may 
be eligible for treatment involving the Ceribell Status Epilepticus 
Monitor, the applicant searched the FY 2021 MedPAR file for cases 
reporting charges in the revenue codes 020X (Intensive Care Unit) and 
021X (Coronary Care Unit) as this is where the technology is expected 
to be utilized based on the expected FDA label of the technology. The 
first analysis used 100 percent of all cases reporting charges in the 
two revenue code categories because these cases could be monitored for 
Status Epilepticus, and the second analysis used 75 percent of all such 
cases. The applicant also provided sensitivity analyses limited to 
cases reporting the diagnosis codes that were believed to identify 
cases with the highest risk of Status Epilepticus. The third analysis 
used 100 percent of these cases and the fourth analysis used 75 percent 
of these cases. The applicant followed the order of operations 
described in the following table.
    Under the first analysis (100 percent of all cases within the 
revenue code categories), the applicant identified 2,985,030 claims 
mapping to 754 MS-DRGs (see Table 10.7.A.--Ceribell Status Epilepticus 
Monitor Codes (Analyses 1-2)--FY 2024 associated with this proposed 
rule for a complete list of MS-DRGs provided by the applicant) and 
calculated a final inflated average case-weighted standardized charge 
per case of $114,238, which exceeded the average case-weighted 
threshold amount of $85,765.
    Under the second analysis (75 percent of all cases within the 
revenue code categories) the applicant identified 2,243,140 claims 
mapping to 92 MS-DRGs (see Table 10.7.B.--Ceribell Status Epilepticus 
Monitor Codes (Analyses 1-2)--FY 2024 associated with this proposed 
rule for a complete list of MS-DRGs provided by the applicant) and 
calculated a final inflated average case-weighted standardized charge 
per case of $110,949, which exceeded the average case-weighted 
threshold amount of $85,280.
    Under the third analysis, in addition to searching for cases 
reporting charges in the two revenue code categories listed previously, 
the applicant limited the cases by selecting claims reporting diagnosis 
codes that it believed reflected the cases for patients age 65 or older 
with the highest risk of Status Epilepticus (see Table 10.7.B.--
Ceribell Status Epilepticus Monitor Codes (Analyses 3-4)--FY 2024 
associated with this proposed rule for a complete list of the diagnosis 
codes provided by the applicant). According to the applicant, the 
diagnosis codes identified fall into four categories: Neurological 
Disorders, Infection/Toxicity, Respiratory Failure and Cardiac Arrest. 
The applicant identified 981,013 claims mapping to 672 MS-DRGs (see 
Table 10.7.B.--Ceribell Status Epilepticus Monitor Codes (Analyses 3-
4)--FY 2024 associated with this proposed rule for a complete list of 
MS-DRGs provided by the applicant), and calculated a final inflated 
average case-weighted standardized charge per case of $127,942, which 
exceeded the average case-weighted threshold amount of $89,219.
    Under the fourth analysis, using 75 percent of all cases reporting 
the diagnosis codes used in scenario 3, the applicant identified 
734,908 claims mapping to 59 MS-DRGs (see Table 10.7.B.--Ceribell 
Status Epilepticus Monitor Codes (Analyses 3-4)--FY 2024 associated 
with this proposed rule for a complete list of MS-DRGs provided by the 
applicant), and calculated a final inflated average case-weighted 
standardized charge per case of $123,446, which exceeded the average 
case-weighted threshold amount of $88,063.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the Ceribell Status 
Epilepticus Monitor meets the cost criterion.

[[Page 26934]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.228

BILLING CODE 4120-01-C
    We agree that the technology meets the cost criterion and therefore 
are proposing to approve the Ceribell Status Epilepticus Monitor for 
new technology add-on payments for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
Ceribell Status Epilepticus Monitor to the hospital to be $2,600 per 
patient (comprised of $1,800 for the software and $800 for the required 
headband). However, as discussed previously, it seems that only the 
software would be eligible for the new technology add-on payment under 
the alternative pathway as it is the subject of the Breakthrough Device 
designation. We further note, as discussed with regard to the Ceribell 
Delirium Monitor, that the Ceribell EEG headband appears to have been 
510(k)-cleared by FDA since August 2017 \153\ and is therefore no 
longer new. Therefore, it appears any add-on payment for the Ceribell 
Status Epilepticus Monitor would include only the cost of the software 
($1,800). We welcome comment on including only the cost of the software 
in determining the add-on payment amount for the Ceribell Status 
Epilepticus Monitor. We note that the cost information for this 
technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the use of the Ceribell Status Epilepticus Monitor 
would be $1,170 ($1,800 x 0.65) for FY 2024 (that is, 65 percent of the 
average cost of the technology for the software).
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    \153\ https://www.accessdata.fda.gov/cdrh_docs/pdf17/K171459.pdf.
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    We invite public comments on whether the Ceribell Status 
Epilepticus Monitor meets the cost criterion and our proposal to 
approve new technology add-on payments for the Ceribell Status 
Epilepticus Monitor for FY 2024 for the diagnosis of ESE in adult 
patients at risk for status epilepticus subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
same indication by July 1, 2023.
(7) EchoGo Heart Failure 1.0
    Ultromics Limited submitted an application for EchoGo Heart Failure 
1.0 for FY 2024. According to the applicant, EchoGo Heart Failure 1.0 
is an automated machine learning-based decision support system, 
indicated as a diagnostic aid for patients undergoing routine 
functional cardiovascular assessment using echocardiography. Per the 
applicant, when utilized by an interpreting physician, this device 
provides information that may be useful in detecting heart failure with 
preserved ejection fraction (HFpEF).
    Please refer to the online application posting for EchoGo Heart 
Failure 1.0, available at https://mearis.cms.gov/public/publications/ntap/NTP2210172L1HN, for additional detail describing the technology 
and the medical condition the technology is intended for.
    According to the applicant, EchoGo Heart Failure 1.0 received 
Breakthrough Device designation from FDA on February 24, 2022, as an 
automated machine learning-based decision support system, indicated as 
a diagnostic aid for patients undergoing routine functional 
cardiovascular

[[Page 26935]]

assessment using echocardiography. When utilized by an interpreting 
clinician, this device provides information that may be useful in 
detecting heart failure with preserved ejection fraction (HFpEF). 
EchoGo Heart Failure 1.0 is indicated in adult populations over 25 
years of age. Patient management decisions should not be made solely on 
the results of the EchoGo Heart Failure 1.0 analysis. EchoGo Heart 
Failure 1.0 takes as input an apical 4-chamber view of the heart that 
has been captured and assessed to have an ejection fraction >=50 
percent. The applicant received FDA 510(k) clearance on November 23, 
2022 for the same indication.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes that can be used to uniquely identify EchoGo Heart 
Failure 1.0. The applicant submitted a request for approval for a 
unique ICD-10-PCS procedure code for EchoGo Heart Failure 1.0 beginning 
in FY 2024. The applicant provided a list of diagnosis codes that may 
be used to currently identify the indication for EchoGo Heart Failure 
1.0 under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2021 MedPAR file using a 
combination of MS-DRGs and ICD-10-CM codes to identify potential cases 
representing patients who may be eligible for EchoGo Heart Failure 1.0. 
The applicant explained that it ran eight additional simulations as a 
sensitivity analysis, in which the applicant used combinations of MS-
DRGs and/or ICD-10-CM codes to identify potential cases. Each analysis 
followed the order of operations described in the following table.
    For the first analysis, the applicant searched for specific ICD-10-
CM codes in the primary diagnosis position mapped to specific MS-DRGs 
representing patients likely to undergo routine functional 
cardiovascular assessment using echocardiography and likely to use 
EchoGo Heart Failure 1.0 to detect HFpEF. Please see Table 10.12.A.--
EchoGo Heart Failure 1.0 Codes (Analyses 1-5)--FY 2024 associated with 
this proposed rule for the complete list of ICD-10-CM codes and MS-DRGs 
that the applicant indicated were included in its cost analysis 1. 
Using the inclusion/exclusion criteria described in the following 
table, the applicant identified 407,813 claims mapping to 17 MS-DRGs. 
The applicant calculated a final inflated average case-weighted 
standardized charge per case of $66,144, which exceeded the average 
case-weighted threshold amount of $52,548.
    For the second analysis, the applicant searched for cases that had 
a primary diagnosis from the applicant's ICD-10-CM list, in any MS-DRG. 
Please see Table 10.12.A.--EchoGo Heart Failure 1.0 Codes (Analyses 1-
5)--FY 2024 associated with this proposed rule for the complete lists 
of ICD-10-CM codes and MS-DRGs that the applicant indicated were 
included in its cost analysis 2. The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 496,879 claims mapping to 92 MS-
DRGs. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $88,203, which exceeded the average 
case-weighted threshold amount of $66,971.
    For the third analysis, the applicant used all cases (without the 
use of any ICD-10-CM or ICD-10-PCS codes) in any of the MS-DRGs 
included on the applicant's list of specific MS-DRGs representing 
patients likely to undergo routine functional cardiovascular assessment 
using echocardiography and likely to use the EchoGo Heart Failure 1.0 
to detect HFpEF. Please see Table 10.12.A.--EchoGo Heart Failure 1.0 
Codes (Analyses 1-5)--FY 2024 associated with this proposed rule for 
the complete list of MS-DRGs that the applicant indicated were included 
in its cost analysis 3. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 572,720 claims mapping to 20 MS-DRGs. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $69,126, which exceeded the average 
case-weighted threshold amount of $54,038.
    For the fourth analysis, the applicant searched for any Medicare 
fee-for-service (FFS) case with an admitting diagnosis from the 
applicant's ICD-10-CM codes list, in any MS-DRG. Please see Table 
10.12.A.--EchoGo Heart Failure 1.0 Codes (Analyses 1-5)--FY 2024 
associated with this proposed rule for the complete lists of ICD-10-CM 
codes and MS-DRGs that the applicant indicated were included in its 
cost analysis 4. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 267,378 claims mapping to 493 MS-DRGs. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $97,027, which exceeded the average case-weighted threshold 
amount of $72,813.
    For the fifth analysis, the applicant searched for any case with a 
primary or secondary diagnosis from the applicant's ICD-10-CM codes 
list, in any MS-DRG. Please see Table 10.12.A.--EchoGo Heart Failure 
1.0 Codes (Analyses 1-5)--FY 2024 associated with this proposed rule 
for the complete list of ICD-10-CM codes and MS-DRGs that the applicant 
indicated were included in its cost analysis 5. The applicant used the 
inclusion/exclusion criteria described in the following table. Under 
this analysis, the applicant identified 2,277,736 claims mapping to 746 
MS-DRGs, with none exceeding more than 15% of the total identified 
cases. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $107,796, which exceeded the average 
case-weighted threshold amount of $76,632.
    According to the applicant, the ICD-10-CM codes for systolic HF 
were included in the initial cost criterion analysis as the provider 
may not know if the patient has either systolic or diastolic HF unless 
the provider has ordered an echo and subsequently EchoGo Heart Failure 
1.0. Symptoms are often identical, and systolic HF is defined by low 
ejection fraction which the applicant stated is an incredibly variable 
measurement. In addition, in acute decompensated HF, these patients can 
present as HFpEF and transition to systolic HF or vice versa within a 
single inpatient stay. As such, the applicant asserted that ordering 
EchoGo Heart Failure 1.0 would be appropriate. To understand the impact 
of removing the cases where the only inclusion criteria met was one of 
the ICD-10-CM codes for systolic HF, the applicant conducted additional 
analyses six through nine, removing ICD-10-CM codes for systolic heart 
failure: I50.20 (Unspecified systolic (congestive) heart failure), 
I50.21 (Acute systolic (congestive) heart failure), I50.22 (Chronic 
systolic (congestive) heart failure), and I50.23 (Acute on chronic 
systolic (congestive) heart failure). Please see Table 10.12.B.--EchoGo 
Heart Failure 1.0 Codes (Analyses 6-9)--FY 2024 associated with this 
proposed rule for the complete list of ICD-10-CM codes and MS-DRGs that 
the applicant indicated were included in its cost analyses 6-9. 
Inclusion/exclusion criteria for analyses six through nine are detailed 
in the table that follows.
    The sixth analysis mirrored the first analysis, except that cases 
with ICD-10-CM systolic heart failure codes were

[[Page 26936]]

excluded. Under this analysis, the applicant identified 398,398 claims 
mapping to 17 MS-DRGs. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $66,245, which 
exceeded the average case-weighted threshold amount of $52,651.
    The seventh analysis mirrored the second analysis, except that 
cases with systolic heart failure ICD-10-CM codes were excluded. Under 
this analysis, the applicant identified 485,027 claims mapping to 92 
MS-DRGs. The applicant calculated a final inflated average case-
weighted standardized charge per case of $88,149, which exceeded the 
average case-weighted threshold amount of $66,991.
    The eighth analysis mirrored the fourth analysis, except that cases 
with ICD-10-CM systolic heart failure codes were excluded. Under this 
analysis, the applicant identified 244,399 claims mapping to 491 MS-
DRGs. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $97,453, which exceeded the average 
case-weighted threshold amount of $72,735.
    The ninth analysis mirrored the fifth analysis, except that cases 
with ICD-10-CM systolic heart failure codes were excluded. Under this 
analysis, the applicant identified 2,214,393 claims mapping to 746 MS-
DRGs. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $107,201, which exceeded the average 
case-weighted threshold amount of $76,389.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the EchoGo Heart Failure 1.0 
meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 26937]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.229

    We agree with the applicant that EchoGo Heart Failure 1.0 meets the 
cost criterion and are therefore proposing to approve EchoGo Heart 
Failure 1.0 for new technology add-on payments for FY 2024.

[[Page 26938]]

    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant's anticipated cost per patient for 
EchoGo Heart Failure 1.0 is $1,575. According to the applicant, the 
EchoGo Heart Failure 1.0 is charged on a per patient basis with no 
monthly subscription to the hospital. We note that the cost information 
for this technology may be updated in the final rule based on revised 
or additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the use of EchoGo Heart Failure 1.0 would be 
$1,023.75 for FY 2024 (that is, 65 percent of the average cost of the 
technology).
    We invite public comments on whether EchoGo Heart Failure 1.0 meets 
the cost criterion and our proposal to approve new technology add-on 
payments for EchoGo Heart Failure 1.0 for FY 2024 for the indication as 
an automated machine learning-based decision support system, indicated 
as a diagnostic aid for patients undergoing routine functional 
cardiovascular assessment using echocardiography that corresponds to 
the Breakthrough Device designation.
(8) LimFlow System
    LimFlow submitted an application for new technology add-on payments 
for the LimFlow System for FY 2024. According to the applicant, the 
LimFlow System is a single-use, medical device system intended for 
patients with no-option chronic limb-threatening ischemia (CLTI) of the 
lower extremities and who are at risk of major amputation. The LimFlow 
System consists of LimFlow's Straight and Conical Stent Grafts that are 
used in conjunction with a LimFlow Arterial Catheter, a LimFlow Venous 
Catheter, and a LimFlow Valvulotome. Per the applicant, the LimFlow 
System is used for transcatheter arterialization of the deep veins 
(TADV), a minimally invasive procedure that aims to restore blood flow 
by diverting a stream of oxygenated blood around diseased arteries 
through tibial veins and into the ischemic foot.
    Please refer to the online application posting for the LimFlow 
System, available at https://mearis.cms.gov/public/publications/ntap/NTP221012C5JB7, for additional detail describing the technology and the 
condition treated by the technology.
    According to the applicant, the LimFlow System received 
Breakthrough Device designation from FDA on October 3, 2017 for use in 
patients who have chronic limb-threatening ischemia (CLTI) with no 
suitable endovascular or surgical revascularization options and are at 
risk of major amputation. The applicant is seeking premarket 
authorization from FDA for the same indication. According to the 
applicant, the device will be available on the market immediately upon 
FDA approval.
    The applicant provided a list of ICD-10-PCS codes that, effective 
October 1, 2018, can be used to uniquely describe procedures involving 
the use of the LimFlow System under the ICD-10-PCS coding system. 
Please refer to the online application posting for the complete list of 
ICD-10-PCS codes provided by the applicant. The applicant stated that 
the following ICD-10-CM codes may be used to currently identify the 
indication for LimFlow System under the ICD-10-CM coding system: I70.92 
(Chronic total occlusion of artery of the extremities) and I70.231-
I70.239 (Atherosclerosis of native arteries of right leg with 
ulceration), I70.241-I70.249 (Atherosclerosis of native arteries of 
left leg with ulceration), or I70.261-I70.263 (Atherosclerosis of 
native arteries of legs with gangrene).
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used the same ICD-10-PCS codes to identify potential cases representing 
patients who may be eligible for the LimFlow System, but utilized 
different years of MedPAR data. According to the applicant, it 
conducted a second analysis using the FY 2020 MedPAR data because of 
the small number of claims identified in the FY 2021 data.
    For the first analysis, the applicant searched the FY 2021 MedPAR 
file for claims reporting at least one of the ICD-10-PCS codes listed 
in the following table to identify cases that may be eligible for the 
LimFlow System. The applicant used the inclusion/exclusion criteria 
described in the following table. The applicant noted that it imputed 
11 cases for all MS-DRGs where the case count was fewer than 11. As a 
result, all MS-DRGs were imputed to 11 cases except for one MS-DRG 
which had 12 cases. Under this analysis, the applicant identified 111 
claims mapping to 10 MS-DRGs and calculated a final inflated average 
case-weighted standardized charge per case of $265,409, which exceeded 
the average case-weighted threshold amount of $110,688.
    For the second analysis, the applicant searched the FY 2020 MedPAR 
file for claims reporting at least one of the ICD-10-PCS codes listed 
in the following table to identify cases that may be eligible for the 
LimFlow System. The applicant used the inclusion/exclusion criteria 
described in the following table. The applicant noted that it imputed 
11 cases for all MS-DRGs where the case count was fewer than 11. As a 
result, all MS-DRGs were imputed to 11 cases. Under this analysis, the 
applicant identified 99 claims mapping to the nine MS-DRGs listed in 
the following table and calculated a final inflated average case-
weighted standardized charge per case of $262,842, which exceeded the 
average case-weighted threshold amount of $118,692.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case weighted threshold amount in 
both cohorts, the applicant asserted that the LimFlow System meets the 
cost criterion.

[[Page 26939]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.230

    We agree with the applicant that the LimFlow System meets the cost 
criterion and are therefore proposing to approve the LimFlow System for 
new technology add-on payments for FY 2024, subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
LimFlow System to be $25,000 per patient. The applicant stated that all 
components of the LimFlow System are single-use and the entire system 
is an operating cost. According to the applicant, the LimFlow System is 
sold as a system, as such, the components of the LimFlow System are not 
priced or sold to hospitals independently. We note that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we are proposing that the maximum new technology add-on 
payment for a case involving the use of the LimFlow System would be 
$16,250 for FY 2024 (that is, 65 percent of the average cost of the 
technology).
    We invite public comments on whether the LimFlow System meets the

[[Page 26940]]

cost criterion and our proposal to approve new technology add-on 
payments for the LimFlow System for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
(9) Nelli[reg] Seizure Monitoring System
    Neuro Event Labs, Inc. submitted an application for new technology 
add-on payments for the Nelli[reg] Seizure Monitoring System for FY 
2024. Per the applicant, the Nelli[reg] Seizure Monitoring System is a 
prescription-only device that is designed to be used as an adjunct to 
seizure monitoring in a hospital inpatient or home setting for adults 
and children 6 years of age and older. The applicant stated that data 
is collected while the patient is `observed' using the system hardware 
(Personal Recording Unit [PRU]), and the software provides objective 
summaries of semiological components of identified events (including 
velocity and acceleration of movements, seizure frequency, seizure 
duration, heart rate, and respiratory rate) to enable the detection and 
classification of epileptic events using pretrained artificial 
intelligence (AI). We note that Neuro Event Labs, Inc. submitted an 
application for new technology add-on payments for the Nelli[reg] 
Seizure Monitoring System for FY 2023, as summarized in the FY 2023 
IPPS/LTCH PPS proposed rule (87 FR 28341 through 28342), but the 
technology did not meet the deadline of July 1, 2022, for FDA approval 
or clearance of the technology and, therefore, was not eligible for 
consideration for new technology add-on payments for FY 2023 (87 FR 
48960).
    Please refer to the online application posting for the Nelli[reg] 
Seizure Monitoring System, available at https://mearis.cms.gov/public/publications/ntap/NTP2210147LTUM, for additional detail describing the 
technology.
    According to the applicant, the Nelli[reg] Seizure Monitoring 
System received Breakthrough Device designation from FDA on October 9, 
2020 for the automated analysis of audio and video data to identify 
seizure events with a positive motor component in children and adults. 
The applicant stated that it is seeking 510(k) clearance from FDA with 
a proposed indication for use as an adjunct to seizure monitoring of 
adults in healthcare facilities during periods of rest. The device 
utilizes automated analysis of audio and video (media) data collected 
via the Personal Recording Unit (PRU) hardware accessory to identify 
epileptic and non-epileptic seizure events with a positive motor 
component. Since the indication for which the applicant anticipates 
receiving 510(k) clearance is included within the scope of the 
Breakthrough Device designation, it appears that the proposed 510(k) 
indication is appropriate for consideration for new technology add-on 
payment under the alternative pathway criteria.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of the Nelli[reg] Seizure Monitoring System: XXE0X48 
(Measurement of brain electrical activity, computer-aided semiologic 
analysis, new technology group 8). The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for the Nelli[reg] Seizure Monitoring System under the ICD-10-CM coding 
system, as set forth in the Nelli[reg] Seizure Monitoring System Cost 
Analysis table that follows.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that it meets the cost criterion, with the 
primary analysis excluding claims from hospitals with 11 or fewer 
cases, and the second analysis based on all identified claims within 
the same MS-DRGs identified in the primary analysis, as described in 
further detail in the following table.
    The applicant stated that since the inpatient patient population 
that the Nelli[reg] Seizure Monitoring System would be used for would 
also undergo standard video EEG monitoring, the applicant searched the 
FY 2021 MedPAR file for potential cases representing patients who may 
be eligible for the Nelli[reg] Seizure Monitoring System using ICD-10-
PCS code 4A10X4Z (Monitoring of central nervous electrical activity, 
external approach) in combination with a list of seizure-related ICD-
10-CM codes, as set forth in the table that follows. The applicant 
stated this approach to identifying cases is similar to the methodology 
used in a study that assessed the ability of using code-based queries 
to identify inpatient epilepsy monitoring unit (EMU) admissions from 
billing records in a large academic medical center over a four-year 
period, 2016-2019.\154\
---------------------------------------------------------------------------

    \154\ Kamitaki BK, Rishty S, Mani R, et al. Using ICD-10 codes 
to identify elective epilepsy monitoring unit admissions from 
administrative billing data: A validation study. Epilepsy Behav. 
2020;111:107194. doi:10.1016/j.yebeh.2020.107194.
---------------------------------------------------------------------------

    The applicant used the inclusion/exclusion criteria and followed 
the order of operations described in the following table. Under the 
first analysis, the applicant identified 7,758 claims mapping to the 15 
MS-DRGs listed in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $76,098, which 
exceeded the average case-weighted threshold amount of $54,698. Under 
the second analysis, the applicant identified 15,612 claims mapping to 
the same 15 MS-DRGs and calculated a final inflated average case-
weighted standardized charge per case of $104,912, which exceeded the 
average case-weighted threshold amount of $64,913. Because the final 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount for both scenarios, the 
applicant asserted that the Nelli[reg] Seizure Monitoring System meets 
the cost criterion.

[[Page 26941]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.231

BILLING CODE 4120-01-C
    We agree with the applicant that the Nelli[reg] Seizure Monitoring 
System meets the cost criterion and are therefore proposing to approve 
the Nelli[reg] Seizure Monitoring System for new technology add-on 
payments for FY 2024, subject to the technology receiving FDA marketing 
authorization as a Breakthrough Device for the indication corresponding 
to the Breakthrough Device designation by July 1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
Nelli[reg] Seizure Monitoring System to the hospital to be $1,000 per 
patient for the cost of the analysis (real time AI analysis during 
hospital visit) and seminological report produced following patient 
assessment. We note that the cost information for this technology may 
be updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. The applicant based the cost per 
case of its technology on two pricing

[[Page 26942]]

models that it currently uses in Europe. The applicant stated the first 
pricing model consists of a 300 [euro] (approximately $330 USD) per day 
charge for the technology. The applicant stated that this results in a 
typical cost to the hospital of around $1,000 USD (excluding capital 
costs) for an average patient stay of 3 days in an EMU. The applicant 
stated that the second pricing model is a single 1,000 [euro] per-
patient fee for measurement of readings and producing the report, 
regardless of the number of days the system is used. Therefore, based 
on the information provided by the applicant, it appears that the 
average cost per case for the use of the Nelli[reg] Seizure Monitoring 
System is $1,000 USD. Under Sec.  412.88(a)(2), we limit new technology 
add-on payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we are proposing that the maximum new 
technology add-on payment for a case involving the use of the 
Nelli[reg] Seizure Monitoring System would be $650 for FY 2024 (that 
is, 65 percent of the average cost of the technology).
    We invite public comments on whether the Nelli[reg] Seizure 
Monitoring System meets the cost criterion and our proposal to approve 
new technology add-on payments for the Nelli[reg] Seizure Monitoring 
System for FY 2024 subject to the technology receiving FDA marketing 
authorization as a Breakthrough Device for the indication corresponding 
to the Breakthrough Device designation by July 1, 2023.
(10) NUsurface[reg] Meniscus Implant
    Active Implants, LLC. submitted an application for new technology 
add-on payments for the NUsurface[reg] Meniscus Implant for FY 2024. 
According to the applicant, the NUsurface[reg] Meniscus Implant is a 
flexible, discoid anatomic-shaped medial meniscus replacement implant 
intended for patients with persistent medial knee compartment pain 
following medial meniscus surgery. Per the applicant, the implant 
design mimics that of the native meniscus, replacing the biomechanical 
characteristics and distributing load (that is, weight) across the 
medial compartment to protect the articular cartilage of the knee, 
alleviating knee pain and restoring normal knee kinematics.
    Please refer to the online application posting for the 
NUsurface[reg] Meniscus Implant, available at https://mearis.cms.gov/public/publications/ntap/NTP221014466YN, for additional detail 
describing the NUsurface[reg] Meniscus Implant and knee meniscus 
disorders.
    According to the applicant, the NUsurface[reg] Meniscus Implant 
received Breakthrough Device designation from FDA on September 13, 
2019, for middle-aged patients for whom nonsurgical care and partial 
medial meniscectomy surgery failed to relieve knee pain, especially in 
patients with more than one meniscectomy. A patient indicated for use 
of the device has a debilitated knee pain condition that impacts day-to 
day functioning and quality of life. The applicant stated that it is 
seeking De Novo classification from FDA for the same indication.
    The applicant stated that, effective October 1, 2022, the following 
ICD-10-PCS codes can be used to uniquely describe procedures involving 
the use of the NUsurface[reg] Meniscus Implant for the indication that 
is the subject of this application: XRRG0M8 (Replacement of right knee 
joint with synthetic substitute, medial meniscus, open approach, new 
technology group 8) and XRRH0M8 (Replacement of left knee joint with 
synthetic substitute, medial meniscus, open approach, new technology 
group 8).
    With respect to the cost criterion, the applicant did not provide a 
complete cost analysis. According to the applicant, it determined the 
cases eligible mapped to MS-DRG 489 (Knee Procedures without Principal 
Diagnosis of Infection without CC/MCC). However, to determine the 
average charge per case for the technology, instead of using charges 
per case from a claims database such as the MedPAR file for cases 
assigned to MS-DRG 489, the applicant used the costs of the technology 
converted to charges, and then doubled rather than standardized the 
charges. The applicant then inflated the charges based on the inflation 
factor used to calculate outlier threshold charges in the FY 2023 IPPS/
LTCH PPS final rule. The applicant then added more charges for the 
technology to the inflated charges. In essence, the applicant presented 
the charges per case based on the cost of the technology as converted 
to charges, and then almost tripled these charges. We further note that 
the charges for the technology as presented by the applicant are lower 
than the threshold for MS-DRG 489. Because the applicant did not 
present an analysis based on the average charge per case, we are unable 
to assess whether the average charge per case exceeds the threshold for 
MS-DRG 489. In addition, it seems cases eligible for the use of the 
technology (medial meniscus replacement) may map to additional MS-DRGs 
for other knee procedures, such that those cases should also be 
considered in the cost analysis. CMS requested a revised cost analysis 
utilizing data to identify potential cases eligible for the technology 
and to demonstrate that it meets the cost criterion. However, we did 
not receive a revised analysis in time for the development of this 
proposed rule. Therefore, because the applicant has not provided 
sufficient information to demonstrate that the NUsurface[reg] Meniscus 
Implant meets the cost criterion, we are proposing to disapprove new 
technology add-on payments for the NUsurface[reg] Meniscus Implant for 
FY 2024. However, in the event we receive updated information to 
establish that the NUsurface[reg] Meniscus Implant meets the cost 
criterion, we are providing the following information regarding the new 
technology add-on payment amount.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total device costs of 
the NUsurface[reg] Meniscus Implant to the hospital to be $9,795 per 
patient, which is the cost of the NUsurface[reg] definitive implant 
($7,295), and the NUsurface[reg] trial implants ($2,500) which are 
disposable and used to determine the definitive implant size. We note 
that the applicant also included $2,026 in related costs for O.R. time 
and procedure-related costs. As we have discussed in prior rulemaking, 
when determining a new technology add-on payment, we provide payment 
based on the cost of the actual technology (such as the drug or device 
itself) and not for additional costs related to the use of the device 
(86 FR 45146). Therefore, we are not including these costs in the 
relevant costs for purposes of determining the new technology add-on 
payment amount. We note that the cost information for this technology 
may be updated in the final rule based on revised or additional 
information CMS receives prior to the final rule. Under Sec.  
412.88(a)(2), we would limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. In 
the event we receive supplemental information to establish that the 
technology meets the cost criterion, and we were to approve new 
technology add-on payments for the NUsurface[reg] Meniscus Implant in 
the final rule, the maximum new technology add-on payment for a case 
involving the use of the NUsurface[reg] Meniscus Implant would be 
$6,366.75 ($9,795 x 0.65) for FY 2024 (that is, 65

[[Page 26943]]

percent of the average cost of the NUsurface[reg] Meniscus Implant).
    We invite public comments on whether the NUsurface[reg] Meniscus 
Implant meets the cost criterion and our proposal to disapprove new 
technology add-on payments for the NUsurface[reg] Meniscus Implant for 
FY 2024. In the event we receive updated information to establish that 
the NUsurface[reg] Meniscus Implant meets the cost criterion, any 
approval for new technology add on payments would be subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by July 1, 2023.
(11) Phagenyx[reg] System
    Phagenesis Ltd. submitted an application for new technology add-on 
payments for the Phagenyx[reg] System for FY 2024. The Phagenyx[reg] 
System treats neurogenic dysphagia using electrical pulses to stimulate 
sensory nerves in the oropharynx. We note that Phagenesis Ltd. 
submitted an application for new technology add-on payments for the 
Phagenyx[reg] System for FY 2022 and 2023, as summarized in the FY 2022 
and 2023 IPPS/LTCH PPS proposed rules (86 FR 25382 through 25384, and 
87 FR 28342 through 28344), but the technology did not meet the 
deadline of July 1, 2021/2022 for FDA approval or clearance of the 
technology and, therefore, was not eligible for consideration for new 
technology add-on payments for the FY 2022 or 2023 IPPS/LTCH PPS final 
rules (86 FR 45126 through 45127 and 87 FR 48780).
    Please refer to the online application posting for the 
Phagenyx[reg] System, available at https://mearis.cms.gov/public/publications/ntap/NTP221013D2MDC, for additional detail describing the 
technology and the disorder treated by the technology.
    According to the applicant, the Phagenyx[reg] System received 
Breakthrough Device designation from FDA on January 29, 2021, for the 
treatment of non-progressive neurogenic dysphagia in adult patients. 
Non-progressive neurogenic dysphagia is defined as all neurogenic 
dysphagia excluding that arising solely as a result of a progressive 
neurodegenerative disease or condition. The Phagenyx[reg] System was 
granted De Novo Classification from FDA on September 16, 2022 as a 
neurostimulation device delivering electrical stimulation to the 
oropharynx, to be used in addition to standard dysphagia care, as an 
aid to improve swallowing in patients with severe dysphagia post 
stroke. Since the indication for which the applicant received 510(k) 
clearance is included within the scope of the Breakthrough Device 
designation, and FDA considers this marketing authorization to be the 
Breakthrough Device,\155\ it appears that the 510(k) indication is 
appropriate for consideration for new technology add-on payment under 
the alternative pathway criteria.
---------------------------------------------------------------------------

    \155\ List of Breakthrough Devices with Marketing Authorization: 
https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------

    According to the applicant, Phagenesis Ltd is based in Manchester, 
United Kingdom and currently setting up business operations 
infrastructure to commercially market and sell Phagenyx. This includes 
but is not limited to establishing an importing agent, third party 
warehousing and logistics, tax IDs in all states, a corporate office, 
and hiring staff. The applicant stated that for these reasons, April 1, 
2023 is the expected date when the Phagenyx[reg] System will be 
commercially available.
    The applicant stated that, effective October 1, 2021, the ICD-10-
PCS code XWHD7Q7 (Insertion of neurostimulator lead into mouth and 
pharynx, via natural or artificial opening, new technology group 7) may 
be used to uniquely describe procedures involving the use of the 
Phagenyx[reg] System. The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the 
Phagenyx[reg] System under the ICD-10-CM coding system. Please refer to 
the online application posting for the complete list of ICD-10-CM codes 
provided by the applicant.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for the Phagenyx[reg] System to demonstrate that it meets the 
cost criterion. The applicant searched for cases reporting a 
combination of the ICD-10-CM codes that may be used to currently 
identify the indication for the Phagenyx[reg] System under the ICD-10-
CM coding systems. Please see the following table, for the complete 
list of ICD-10-CM codes provided by the applicant. Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 79,056 claims mapping to 551 MS-DRGs (see Table 10.16.A.--
Phagenyx[reg] System Codes--FY 2024 associated with this proposed rule 
for a list of MS-DRGs that the applicant indicated were included in its 
cost analysis). The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $130,440, which 
exceeded the average case-weighted threshold amount of $82,183. Because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
asserted that the Phagenyx[reg] System meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 26944]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.232

    We agree with the applicant that the Phagenyx[reg] System meets the 
cost criterion and are therefore proposing to approve the Phagenyx[reg] 
System for new technology add-on payments for FY 2024.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the cost to the hospital 
for the Phagenyx[reg] System to be $5,000, which is the price of the 
single use, per patient catheter. We note that the cost information for 
this technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the use of the Phagenyx[reg] System would be 
$3,250 for FY 2024 (that is, 65 percent of the average cost of the 
technology).
    We invite public comments on whether the Phagenyx[reg] System meets 
the cost criterion and our proposal to approve new technology add-on 
payments for the Phagenyx[reg] System for FY 2024 as a neurostimulation 
device delivering electrical stimulation to the oropharynx, to be used 
in addition to standard dysphagia care, as an aid to improve swallowing 
in patients with severe dysphagia post stroke, which corresponds to the 
Breakthrough Device designation.
(12) SAINT Neuromodulation System
    Magnus Medical, Inc. submitted an application for new technology 
add-on payments for the SAINT Neuromodulation System for FY 2024. The 
SAINT Neuromodulation System is a non-invasive repetitive transcranial 
magnetic stimulation (rTMS) system that identifies an individualized 
target and delivers navigationally directed repetitive magnetic pulses 
to that individualized target located within the left dorsolateral 
prefrontal cortex (L-DLPFC) to treat Major Depressive Disorder (MDD) in 
adult patients who have failed to achieve satisfactory improvement from 
prior antidepressant medication in the current episode. The SAINT 
Neuromodulation System consists of hardware devices (for example, 
stimulator with treatment coil

[[Page 26945]]

and neuro-navigation) designed to deliver SAINT Therapy to a targeted 
area within the L-DLPFC, as well as cloud software that identifies the 
personalized target. We note that Magnus Medical, Inc. submitted an 
application for new technology add-on payments for the SAINT 
Neuromodulation System for FY 2023 under the name Magnus 
Neuromodulation System with SAINT Technology, as summarized in the FY 
2023 IPPS/LTCH PPS proposed rule (87 FR 28339 through 28341), that it 
withdrew prior to the issuance of the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48960).
    Please refer to the online application posting for the SAINT 
Neuromodulation System, available at https://mearis.cms.gov/public/publications/ntap/NTP2210157HBCW, for additional detail describing the 
technology and the disorder treated by the technology.
    According to the applicant, the SAINT Neuromodulation System 
received Breakthrough Device designation from FDA on July 2, 2021 for 
the treatment of MDD in adult patients who have failed to receive 
satisfactory improvement from prior antidepressant medication in the 
current episode. According to the applicant, the Magnus Neuromodulation 
System (SAINT Neuromodulation System) received 510(k) clearance from 
FDA on September 1, 2022 for the same indication. According to the 
applicant, the technology is not anticipated to become available for 
sale until March 29, 2024 as several components of the SAINT 
Neuromodulation System are currently being integrated into a single 
unit to simplify and improve ease of use, and the applicant is bringing 
up scalable manufacturing of production systems to optimize commercial 
adoption of the technology. We note that the applicant has submitted 
the application for new technology add-on payments for FY 2024 with a 
Breakthrough Device designation that corresponds to the SAINT 
Neuromodulation System, as it was assessed by FDA. Changes to the 
system to integrate components may require a reassessment by FDA to 
determine if the integrated, single unit system still meets the current 
Breakthrough Device designation, or if a new application for 
Breakthrough Device designation and additional 510(k) clearance is 
required. We note that a device must be designated under FDA's 
Breakthrough Devices Program to be eligible under the alternative 
pathway. We would be interested in additional information regarding the 
Breakthrough Device status of the integrated, single unit system as it 
becomes available.
    The applicant stated that ICD-10-PCS code X0Z0X18 (Computer-
assisted transcranial magnetic stimulation of prefrontal cortex, new 
technology group 8) may be used to uniquely describe procedures 
involving the use of the SAINT Neuromodulation System, effective 
October 1, 2022. The applicant stated that ICD-10-CM codes F32.2 (Major 
depressive disorder, single episode, severe without psychotic features) 
and F33.2 (Major depressive disorder, recurrent severe without 
psychotic features) may be used to currently identify the indication 
for the SAINT Neuromodulation System under the ICD-10-CM coding system.
    With respect to the cost criterion, the applicant provided the 
following analysis to demonstrate that it meets the cost criterion. To 
identify potential cases representing patients who may be eligible for 
the SAINT Neuromodulation System, the applicant searched the FY 2021 
MedPAR file for cases reporting one of the following ICD-10-CM codes: 
F32.2 (Major depressive disorder, single episode, severe without 
psychotic features) and F33.2 (Major depressive disorder, recurrent 
severe without psychotic features). Only MS-DRG 885 (Psychoses) had 
significant volume; all other MS-DRGs accounted for 1 percent or less 
of cases by volume. Using the inclusion/exclusion criteria described in 
the following table, the applicant identified 19,181 claims mapping to 
MS-DRG 885 (Psychoses). The applicant followed the order of operations 
described in the following table and calculated a final inflated 
average case-weighted standardized charge per case of $94,697, which 
exceeded the average case-weighted threshold amount of $39,071. Because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
asserted that the SAINT Neuromodulation System meets the cost 
criterion.

[[Page 26946]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.233

    We agree with the applicant that SAINT Neuromodulation System meets 
the cost criterion and are therefore proposing to approve SAINT 
Neuromodulation System for new technology add-on payments for FY 2024 
for the treatment of MDD in adult patients who have failed to receive 
satisfactory improvement from prior antidepressant medication in the 
current episode.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
SAINT Neuromodulation System to the hospital to be $19,500.00 per 
patient, including personalized target identification using the SAINT 
software, neuro-navigation, and treatment for 50 sessions over 5 days. 
We note that the cost information for this technology may be updated in 
the final rule based on revised or additional information CMS receives 
prior to the final rule. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 65 percent of the average 
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the SAINT Neuromodulation System would be $12,675.00 for FY 2024 (that 
is, 65 percent of the average cost of the technology).
    We invite public comments on whether the SAINT Neuromodulation 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the SAINT Neuromodulation System for FY 
2024 for the treatment of MDD in adult patients who have failed to 
receive satisfactory improvement from prior antidepressant medication 
in the current episode, which corresponds to the Breakthrough Device 
designation.
(13) Selux NGP System
    Selux Diagnostics, Inc. submitted an application for new technology 
add-on payments for the Selux Next-Generation Phenotyping (NGP) System 
for FY 2024. Per the applicant, the Selux NGP System is a phenotypic 
antimicrobial susceptibility testing (AST) system, intended to assist 
medical professionals in the identification of in vitro susceptibility 
or resistance to specific antimicrobial agents. According to the 
applicant, the technology is intended for use with bacteria separated 
from monomicrobial positive blood cultures and sterile body fluid 
culture samples from non-charcoal-containing types of BACTEC, BacT/
ALERT, VIRTUO and VersaTREK blood culture bottles. Per the applicant, 
the Selux NGP System supports antimicrobial susceptibility testing on a 
subset of aerobic and facultative anaerobic gram-negative and gram-
positive species. The Selux NGP System consists of an automated sample 
preparation instrument, the Positive Blood Culture (PBC) Separator; 
automated instruments for preparing and processing AST panels, the 
Inoculator and Analyzer; a computer workstation running Selux Site 
Software that integrates the instruments; and reagents and consumables 
required to perform AST testing. The Selux Site Software includes 
algorithmic models based on machine learning that enables the system to 
determine the susceptibilities of an organism to the variety of 
antimicrobials under test.
    Please refer to the online application posting for the Selux NGP 
System, available at https://mearis.cms.gov/public/publications/ntap/NTP221017CVJ8C, for additional detail describing the technology and how 
it is used.
    According to the applicant, the Selux NGP System received 
Breakthrough Device designation from FDA on September 21, 2021, with 
the indication that the Selux Positive Blood Culture Separator and 
Selux System is intended for use with bacteria separated from 
monomicrobial positive blood cultures and sterile body fluid culture 
samples from non-charcoal-containing types of BACTEC, BacT/ALERT, 
VIRTUO and VersaTREK blood culture bottles. Per the applicant, the 
Selux NGP System is seeking FDA premarket approval from FDA for the 
same indication. The applicant noted that it is concurrently seeking 
FDA authorization for in vitro diagnostic (IVD) use in the clinical 
microbiology laboratory for automated quantitative AST by minimal 
inhibitory concentration (MIC) of isolated colonies

[[Page 26947]]

for aerobic and facultative anaerobic gram-negative Enterobacterales 
and non-Enterobacterales. We note that, the applicant used ``the Selux 
NGP System'' as the name of technology, which is different from 
``Direct-from-Positive Blood Culture Rapid AST System'' as in the FDA 
Breakthrough Device designation letter. We would appreciate additional 
clarification on whether the Selux NGP System is the same as ``Direct-
from-Positive Blood Culture Rapid AST System''. As previously stated, 
under the eligibility criteria for approval under the alternative 
pathway for certain transformative devices, only the use of the 
technology for the indication that corresponds to the technology's 
Breakthrough Device designation would be eligible for the new 
technology add-on payment for FY 2024.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Selux NGP System. The 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the Selux NGP System beginning in FY 2024. The 
applicant provided a list of ICD-10-CM codes that may be used to 
currently identify the indication for the Selux NGP System under the 
ICD-10-CM coding system. Please refer to the online application posting 
for the complete list of ICD-10-CM codes provided by the applicant.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that the technology meets the cost criterion. 
The applicant searched the FY 2021 MedPAR file to identify eligible 
cases, with the first analysis using all cases assigned to a list of 
MS-DRGs to which the technology would most commonly map, the second 
analysis identifying potential cases using ICD-10-CM diagnosis codes 
representing patients who may be eligible for the Selux NGP System, and 
the third analysis combining the results of the first 2 analyses. Each 
analysis followed the order of operations described in the following 
table.
    For the first analysis, the applicant limited the analysis to all 
cases in a subset of MS-DRGs to which the vast majority of cases are 
projected to map. Please see Table 10.20.A.--Selux NGP System Codes--FY 
2024 associated with this proposed rule for a complete list of MS-DRGs 
provided by the applicant. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 1,543,757 claims mapping to 34 MS-DRGs and 
calculated a final inflated average case-weighted standardized charge 
per case of $86,399, which exceeded the average case-weighted threshold 
amount of $69,947.
    For the second analysis, the applicant searched for cases using a 
list of bacteremia or sepsis ICD-10-CM diagnosis codes in any position 
(primary or secondary) that may be eligible for the technology. Please 
see Table 10.20.A.--Selux NGP System Codes--FY 2024 associated with 
this proposed rule for a complete list of ICD-10-CM diagnosis codes 
provided by the applicant. Under this analysis, the applicant 
identified 446,137 claims mapping to 593 MS-DRGs, with the highest 
percentage of cases (43 percent) mapping to MS-DRG 871, and calculated 
a final inflated average case-weighted standardized charge per case of 
$146,538, which exceeded the average case-weighted threshold amount of 
$90,279.
    For the third analysis, the applicant combined the results from the 
first and second analyses. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 1,679,957 claims mapping to 595 MS-DRGs, with the 
highest percentage of cases mapping to MS-DRG 871 (32 percent) and MS-
DRG 177 (25 percent), and calculated a final inflated average case-
weighted standardized charge per case of $95,625, which exceeded the 
average case-weighted threshold amount of $72,865.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that the Selux NGP System meets 
the cost criterion.

[[Page 26948]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.234

    We agree with the applicant that the Selux NGP System meets the 
cost criterion and are therefore proposing to approve the Selux NGP 
System for new technology add-on payments for FY 2024, subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by July 1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
Selux NGP System to the hospital to be $149.87 per patient per test, 
including the capital component (Positive Blood Culture Separator, 
Inoculator, and Analyzer ($14.83)) and the operating components (Selux 
AST Gram Negative and Selux AST Gram Positive Kit ($80.00), Selux AST 
Positive Blood Culture Kit ($50.00), Selux ASTAnalyzer Reagent Kit 
($4.79), and Selux AST Waste Kit ($0.25)). Because section 
1886(d)(5)(K)(i) of the Act requires that the Secretary establish a 
mechanism to recognize the costs of new medical services or 
technologies under the payment system established under that 
subsection, which establishes the system for payment of the operating 
costs of inpatient hospital services, 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 
(86 FR 45145). Based on the information from the applicant, it appears 
that the costs of the Positive Blood Culture Separator, Inoculator, and 
Analyzer are capital costs. Therefore, these components are not 
eligible for new technology add-on payment because, as discussed in 
prior rulemaking and noted previously, we only make new technology add-
on payments for operating costs (72 FR 47307 through 47308). Based on 
the operating costs from the applicant at the time of this proposed 
rule, the total operating cost of the Selux NGP System to the hospital 
is $135.04 per patient per test.
    The applicant stated that total cost per patient will vary 
depending on the estimated number of tests that the hospital expects 
that it will perform. To account for the variability of institution and 
patient status and calculate the average usage of the Selux NGP System 
during a patient stay, the applicant analyzed the Premier Healthcare 
Database (Ph.D.-AC) Linked to Closed Claims (Ph.D.-CC), Microbiology 
data (available for a subset from 2009 to current). The database 
includes information on over 490,000 patient journeys. The applicant 
applied the following criteria to optimize the data: removing negative 
blood cultures; removing unclear results (incomplete information); 
including only inpatient stays; excluding patients who have more than 
one organism identified; excluding patients with organisms that not 
non-fastidious; and filtering out results of anything besides 
susceptible, intermediate and resistant (S, I, and R). Per the 
applicant, the output of the calculation illustrated that on average, 
each patient with a positive blood culture result would receive 1.2 AST 
tests using the Selux NGP System per

[[Page 26949]]

stay. The average cost per patient would therefore be $162.05 (the cost 
per test of $135.04 x 1.2 tests on average, per patient).
    We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the Selux NGP System would be $105.33 for FY 2024 (that is, 65 percent 
of the average cost of the technology, $162.05).
    We invite public comments on whether the Selux NGP System meets the 
cost criterion and our proposal to approve new technology add-on 
payments for the Selux NGP System for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
(14) DETOUR System
    Endologix, Inc., submitted an application for new technology add-on 
payments for the DETOUR System for fiscal year (FY) 2024. According to 
the applicant, the DETOUR System is a fully percutaneous approach to 
femoral-popliteal bypass. Per the applicant, under fluoroscopic 
guidance, a proprietary TORUS Stent Graft System is deployed from the 
popliteal artery into the femoral vein, and from the femoral vein into 
the superficial femoral artery (SFA) in a continuous, overlapping 
fashion through two independent anastomoses. The applicant stated that 
the intended result is a large lumen endograft bypass, that delivers 
unobstructed, pulsatile flow from the SFA ostium to the popliteal 
artery.
    Please refer to the online application posting for the DETOUR 
System, available at https://mearis.cms.gov/public/publications/ntap/NTP2210149Y5M6, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, the DETOUR System received Breakthrough 
Device designation from FDA on September 2, 2020 for percutaneous 
revascularization of symptomatic femoropopliteal lesions 200mm to 460mm 
with a chronic total occlusion 100mm to 425mm, and/or moderate-to-
severe calcification, and/or in-stent-restenosis in patients with 
severe peripheral arterial disease. The applicant stated that it is 
seeking premarket approval from FDA for the same indication. According 
to the applicant, the device will be available on the market 
immediately upon FDA approval.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the DETOUR System. The applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for the DETOUR System beginning in FY 2024. Per the applicant, 
diagnosis codes 170.92 (Chronic total occlusion of artery of the 
extremities), 170.2XX (Atherosclerosis of native arteries of the 
extremities), and 173.9 (Peripheral vascular disease, unspecified) may 
be used to currently identify the indication for the DETOUR System 
under the ICD-10-CM system.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that it meets the cost criterion. For both 
analyses, the applicant searched the FY 2021 MedPAR file for potential 
cases representing patients who may be eligible for the DETOUR System 
femoral-popliteal bypass procedures using either a synthetic substitute 
or an autologous venous tissue graft.
    Under the first analysis, the applicant searched the FY 2021 MedPAR 
file for cases reporting one of the ICD-10-PCS codes listed in the 
following table and included 100 percent of the cases identified. Using 
the inclusion/exclusion criteria described in the following table, the 
applicant identified 3,110 cases mapping to 63 MS-DRGs. Please see 
Table 10.25.A.--The DETOUR System Codes--FY 2024 associated with this 
proposed rule for the complete list of MS-DRGs that the applicant 
indicated were included in its cost analysis. The applicant followed 
the order of operations described in the following table and calculated 
a final inflated average case-weighted standardized charge per case of 
$146,323, which exceeded the average case-weighted threshold amount of 
$106,123.
    Under the second analysis, the applicant searched the FY 2021 
MedPAR file for cases reporting one of the ICD-10-PCS codes listed in 
the table that follows and included 67.3 percent of the cases 
identified. Using the inclusion/exclusion criteria described in the 
following table, the applicant limited the search to the top three MS-
DRGs as listed in the table and identified 2,094 cases. The applicant 
followed the order of operations described in the following table and 
calculated a final inflated average case-weighted standardized charge 
per case of $111,332, which exceeded the average case-weighted 
threshold amount of $96,526. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount in both analyses, the applicant asserted that 
the DETOUR System meets the cost criterion.

[[Page 26950]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.235

    We agree with the applicant that the DETOUR System meets the cost 
criterion and propose to approve the DETOUR System for new technology 
add-on payments for FY 2024, subject to the technology receiving FDA 
marketing authorization as a Breakthrough Device for the indication 
corresponding to the Breakthrough Device designation by July 1, 2023.
    The applicant has not provided an estimate for the cost of the 
DETOUR System at the time of this proposed rule. We expect the 
applicant to submit cost information prior to the final rule, and we 
will provide an update regarding the new technology add-on payment 
amount for the technology, if approved, in the final rule. Any new 
technology add-on payment for the DETOUR System would be subject to our 
policy under Sec.  412.88(a)(2) where we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case.
    We invite public comments on whether the DETOUR System meets the 
cost criterion and our proposal to approve new technology add-on 
payments for the DETOUR System for FY 2024 subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
(15) TOPSTM System
    Premia Spine, Inc submitted an application for new technology add-
on payments for the TOPSTM System for FY 2024. According to 
the applicant, the TOPSTM System is a motion preserving 
device inserted and affixed during spinal surgery after open posterior 
decompression to preserve normal spinal motion and provide 
stabilization of the lumbar intervertebral segment. The applicant 
stated that the TOPSTM System replaces anatomical 
structures, such as the lamina and the facet joints, which are removed 
during spinal decompression treatment to alleviate pain. We note that 
Premia Spine, Inc submitted an application for new technology add-on 
payments for the TOPSTM System for FY 2023, as summarized in 
the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28346), that it withdrew 
prior to the issuance of the FY 2023 IPPS/LTCH PPS final rule (87 FR 
48960).
    Please refer to the online application posting for the 
TOPSTM System, available at https://mearis.cms.gov/public/publications/ntap/NTP2210146W0H2, for additional detail describing the 
technology and the disease treated by the technology.
    According to the applicant, the TOPSTM System received 
Breakthrough Device designation from FDA on October 26, 2020 for 
patients between 35 and 80 years of age suffering from neurogenic 
claudication resulting from degenerative spondylolisthesis up to Grade 
I with moderate to severe lumbar spinal stenosis and either the 
thickening of the ligamentum flavum or scaring facet joint capsule at 
one level from L2 to L5. The applicant stated that it is seeking 
premarket approval from FDA for the following indication: for patients 
between the ages 35 and 80 years suffering from degenerative 
spondylolisthesis up to Grade I with moderate to severe lumbar spinal 
stenosis and either the thickening of the ligamentum flavum or scarring 
facet joint capsule at one level from L2 to L5. We note that the 
premarket approval indication does not include limitation to neurogenic 
claudication as noted in the Breakthrough Device designation. We note 
that, as previously stated, under the eligibility criteria for approval 
under the alternative pathway for certain transformative devices, only 
the use of the technology for the indication that corresponds to the 
technology's Breakthrough Device designation would be eligible for the 
new technology add-on payment for FY 2024.
    The applicant stated that effective October 1, 2021, the following 
ICD-10-

[[Page 26951]]

PCS procedure codes may be used to uniquely describe procedures 
involving the use of TOPSTM System: XRHB018 (Insertion of 
Posterior Spinal Motion Preservation Device into Lumbar Vertebral 
Joint, Open Approach, New Technology Group 8) and XRHD018 (Insertion of 
Posterior Spinal Motion Preservation Device into Lumbosacral Joint, 
Open Approach, New Technology Group 8). The applicant stated that ICD-
10-CM codes M43.16 (Spondylolisthesis, lumbar region), M48.061 (Spinal 
stenosis, lumbar region, without neurogenic claudication) and M48.062 
(Spinal stenosis, lumbar region, with neurogenic claudication) may be 
used to currently identify the indication for the TOPSTM 
System under the ICD-10-CM coding system. We note that ICD-10-CM code 
M48.061 is not relevant for identification of the indication under 
Breakthrough Device designation.
    With respect to the cost criterion, the applicant provided the 
following analysis to demonstrate that it meets the cost criterion. To 
identify potential cases representing patients who may be eligible for 
the TOPSTM System, the applicant searched the FY 2021 MedPAR 
file for cases reporting one of the ICD-10-PCS codes listed in table 
10.2.A.--TOPSTM System Codes--FY 2024 associated with this 
proposed rule. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 669 claims mapping to MS-DRG 
518. The applicant followed the order of operations described in the 
following table and calculated a final inflated average case-weighted 
standardized charge per case of $175,574, which exceeded the average 
case-weighted threshold amount of $123,029. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that the 
TOPSTM System meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.236

    We agree with the applicant that the TOPSTM System meets 
the cost criterion and are therefore proposing to approve the 
TOPSTM System for new technology add-on payments for FY 
2024, subject to the technology receiving FDA marketing authorization 
as a Breakthrough Device for the indication corresponding to the 
Breakthrough Device designation by July 1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
TOPSTM System to the hospital to be $17,500 for a single 
level construct. Per the applicant, as the TOPSTM System is 
anticipated to only be implanted at one level, the per-patient 
anticipated cost to the hospital is $17,500. We note that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we are proposing that the maximum new technology add-on 
payment for a case involving the use of the TOPSTM System 
would be $11,375 for FY 2024 (that is, 65 percent of the average cost 
of the technology).
    We invite public comments on whether the TOPSTM System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the TOPSTM System for FY 2024 subject to 
the technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by July 1, 2023.

[[Page 26952]]

(16) Total Ankle Talar Replacement
    4WEB Medical, Inc. submitted an application for new technology add-
on payments for the Total Ankle Talar Replacement for FY 2024. Per the 
applicant, the Total Ankle Talar Replacement is a patient specific, 
metallic spacer that is a solid, polished replica of a patient's 
physiologic talus and intended to articulate to the surrounding native 
bone anatomy (that is, calcaneus and navicular). However, the dome is 
mapped so that it matches that of a third-party ankle system. The 
applicant stated that the device is intended to allow for restoration 
of function due to losses attributed to talar dysfunction.
    Please refer to the online application posting for the Total Ankle 
Talar Replacement, available at https://mearis.cms.gov/public/publications/ntap/NTP221014C88U0, for additional details describing the 
technology.
    According to the applicant, the Total Ankle Talar Replacement has 
not yet received Breakthrough Device designation from FDA, but the 
applicant is seeking the designation for use with a premarket 
authorized total ankle arthroplasty system as part of an ankle 
arthroplasty system to manage talar dysfunction that may be associated 
with the following indications: failed ankle arthroplasties, talar 
trauma, tumors or lesions, ankle arthritis/degenerative joint disease, 
ankle arthrodesis or malunion, talar osteomyelitis/infection or ankle/
foot deformities. The applicant stated that it is seeking 510(k) 
clearance from FDA for the same indication and anticipates receiving 
FDA marketing authorization before July 1, 2023.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the use of the Total Ankle Talar 
Replacement. The applicant submitted an application for a unique ICD-
10-PCS code for FY 2024.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the Total Ankle Talar 
Replacement, the applicant searched the FY 2021 MedPAR file for cases 
reporting one of the ICD-10-PCS codes listed in the table in this 
section. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 187 claims mapping to 17 MS-
DRGs as listed in the table in this section. The applicant followed the 
order of operations described in the following table and calculated a 
final inflated average case-weighted standardized charge per case of 
$199,539, which exceeded the average case-weighted threshold amount of 
$98,577. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the Total Ankle Talar Replacement meets the 
cost criterion.

[[Page 26953]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.237

    We note the following concerns regarding the cost criterion. The 
applicant stated that the technology is a replica of the patient's 
physiologic talus and mapped to fit a third-party ankle system. 
However, the applicant included tarsal joint replacement procedure 
codes (for example, 0SRH0JZ, 0SRJ0JZ, 0SRH0KZ, 0SRJ0KZ) in addition to 
talar replacement codes, when searching for eligible cases, and we 
question whether these tarsal joint replacement procedure codes are 
applicable since this joint is in the foot (and not the ankle). We 
question whether only cases for talar replacement should be included.
    Subject to the applicant adequately addressing these concerns, we 
would agree that the technology meets the cost criterion and are 
proposing to approve the Total Ankle Talar Replacement for new 
technology add-on payments for FY 2024 subject to the technology 
receiving Breakthrough Device designation and FDA marketing 
authorization as a Breakthrough Device for the same indication by July 
1, 2023.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
Total Ankle Talar Replacement to the hospital to be $19,500 per 
patient, which represents one implant. We note that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the average cost of the technology, or 
65 percent of the costs in excess of the MS-DRG payment for the case. 
As a result, we are proposing that

[[Page 26954]]

the maximum new technology add-on payment for a case involving the use 
of the Total Ankle Talar Replacement would be $12,675 for FY 2024 (that 
is, 65 percent of the average cost of the technology).
    We are inviting public comments on whether the Total Ankle Talar 
Replacement meets the cost criterion and our proposal to approve new 
technology add-on payments for the Total Ankle Talar Replacement for FY 
2024, subject to the technology receiving Breakthrough Device 
Designation and FDA marketing authorization as a Breakthrough Device 
for the same indication by July 1, 2023.
(17) Transdermal GFR Measurement System Utilizing Lumitrace
    MediBeacon, Inc. submitted an application for new technology add-on 
payments for Transdermal Glomerular Filtration Rate (GFR) Measurement 
System utilizing Lumitrace for FY 2024. According to the applicant, the 
Transdermal GFR Measurement System utilizing Lumitrace is a three-
component system consisting of (1) an optical skin sensor, (2) a 
monitor and (3) MB-102 (also known as relmapirazin/Lumitrace), which is 
a proprietary fluorescent tracer agent that glows in the presence of 
light and is removed from the blood exclusively by the GFR mechanism of 
the kidney. The technology is intended to measure Glomerular Filtration 
Rate (GFR) in patients with impaired or normal renal function during 
clinical conditions where the real time measurement of GFR (versus 
estimated measures) is clinically useful to patient management.
    Please refer to the online application posting for Transdermal GFR 
Measurement System utilizing Lumitrace, available at https://mearis.cms.gov/public/publications/ntap/NTP221013VQ6RT, for additional 
detail describing the technology.
    According to the applicant, the Transdermal GFR Measurement System 
utilizing Lumitrace received Breakthrough Device designation from FDA 
on October 16, 2018 for measuring GFR in patients with impaired or 
normal renal function, and the applicant is seeking premarket approval 
from FDA for the same indication. According to the applicant, the 
Transdermal GFR Measurement System will be available on the market 
immediately after FDA approval.
    The applicant stated that, effective October 1, 2019, the following 
ICD-10-PCS code may be used to uniquely identify procedures involving 
the Transdermal GFR Measurement System utilizing Lumitrace: XT25XE5 
(Monitoring of kidney using fluorescent pyrazine, external approach, 
new technology group 5).
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for Transdermal GFR Measurement System utilizing Lumitrace 
using a combination of ICD-10-CM/PCS codes representing the clinical 
scenarios in the inpatient hospital setting involving the potential for 
or presence of acute or chronic kidney injury where measurement of the 
GFR in patients with impaired or normal renal function may facilitate 
clinical management, as listed in the following table. Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 497,297 claims mapping to 687 MS-DRGs. Please see 
Table 10.26.A.--Transdermal GFR Measurement System utilizing Lumitrace 
Codes--FY 2024 associated with this proposed rule for a complete list 
of codes provided by the applicant. The applicant followed the order of 
operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of $230,414 
which exceeded the average case-weighted threshold amount of $130,279. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that the Transdermal GFR Measurement System 
utilizing Lumitrace meets the cost criterion.

[[Page 26955]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.238

    We agree with the applicant that the Transdermal GFR Measurement 
System utilizing Lumitrace meets the cost criterion and propose to 
approve Transdermal GFR Measurement System utilizing Lumitrace for new 
technology add-on payments for FY 2024, subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by July 
1, 2023.
    The applicant has not provided an estimate for the cost of 
Transdermal GFR Measurement System utilizing Lumitrace at the time of 
this proposed rule. The applicant stated that there would be three 
components for the cost of the technology: the operating cost of the 
optical skin sensor, the operating cost of the relmapirazin 
(fluorescent tracer) that glows in the presence of light and is removed 
from the blood exclusively by the GFR mechanism of the kidney, and the 
capital cost of the monitor that converts the measured fluorescence 
time dependent curve to a measured GFR (mGFR). Because section 
1886(d)(5)(K)(i) of the Act requires that the Secretary establish a 
mechanism to recognize the costs of new medical services or 
technologies under the payment system established under that 
subsection, which establishes the system for payment of the operating 
costs of inpatient hospital services, 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 
(86 FR 45145). As noted, the applicant stated that the cost of the 
monitor that converts the measured fluorescence time dependent curve to 
a mGFR is a capital cost. We expect the applicant to submit cost 
information prior to the final rule, and we will provide an update 
regarding the new technology add-on payment amount for the technology, 
if approved, in the final rule. Any new technology add-on payment for 
Transdermal GFR Measurement System utilizing Lumitrace would be subject 
to our policy under Sec.  [thinsp]412.88(a)(2), where we limit new 
technology add-on payments to the lesser of 65 percent of the average 
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case.
    We invite public comments on whether the Transdermal GFR 
Measurement System utilizing Lumitrace meets the cost criterion and our 
proposal to approve new technology add-on payments for Transdermal GFR 
Measurement System utilizing Lumitrace for FY 2024 subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by July 1, 2023.
b. Alternative Pathways for Qualified Infectious Disease Products 
(QIDPs)
(1) Taurolidine/Heparin
    CorMedix Inc. submitted an application for new technology add-on 
payments for taurolidine/heparin for FY 2024. Per the applicant, 
taurolidine/heparin 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 (CRBSI) 
from in-dwelling catheters in patients undergoing hemodialysis (HD) 
through a central venous catheter (CVC). We note that CorMedix Inc. 
submitted an application for new technology add-on payments for 
taurolidine/heparin for FY 2023 under the name DefenCathTM 
and received conditional approval for new

[[Page 26956]]

technology add-on payments for FY 2023, subject to 
DefenCathTM receiving FDA marketing authorization before 
July 1, 2023 (87 FR 48978 through 48982). 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 the 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. We note that the applicant stated 
that it submitted this second new technology add-on payment application 
for FY 2024 in the event it does not obtain FDA approval prior to July 
1, 2023. We note that in the event DefenCathTM does receive 
FDA marketing authorization before July 1, 2023, evaluation of this FY 
2024 application would no longer be necessary, and we would propose to 
instead continue the new technology add-on payment for 
DefenCathTM for FY 2024.
    Please refer to the online application posting for taurolidine/
heparin, available at https://mearis.cms.gov/public/publications/ntap/NTP221014UJ89G, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, taurolidine/heparin received QIDP 
designation from FDA in 2015 for the prevention of CRBSI in patients 
with end-stage renal disease (ESRD) receiving HD through a CVC, 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. The applicant 
noted that FDA issued a Complete Response Letter and the NDA is pending 
resubmission.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS codes may be used to uniquely describe procedures involving 
the use of taurolidine/heparin: XY0YX28 (Extracorporeal introduction of 
taurolidine anti-infective and heparin anticoagulant, new technology 
group 8).
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2021 MedPAR file using a 
different combination of codes to identify potential cases representing 
patients who may be eligible for taurolidine/heparin.
    Per the applicant, taurolidine/heparin 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. 
Analysis A searched for claims with presence of a diagnosis code for 
ESRD, chronic kidney disease (CKD), AKI, or ATN in combination with 
diagnosis and procedure codes for HD. Analysis B searched for claims 
with presence of a diagnosis code for ESRD, CKD, AKI, or ATN with codes 
for both HD (diagnosis and procedure codes) and CVC (procedure codes). 
The applicant explained that Analysis A overstates the population of 
patients eligible for taurolidine/heparin because it includes any 
patient receiving HD, regardless of whether a central venous catheter 
is used. The applicant further explained that Analysis B undercounts 
the potential cases because CVC codes are not always available on 
inpatient claims. Please see Table 10.10.A Taurolidine/Heparin Codes--
FY 2024 associated with this proposed rule for a complete list of ICD-
10-CM and ICD-10-PCS codes provided by the applicant.
    Under Analysis A, using the inclusion/exclusion criteria described 
in the following table, the applicant identified 412,436 claims mapping 
to 494 MS-DRGs. Please see Table 10.10.A.--Taurolidine/Heparin Codes--
FY 2024 associated with this proposed rule for a complete list of MS-
DRGs provided by the applicant. The applicant followed the order of 
operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of 
$230,720, which exceeded the average case-weighted threshold amount of 
$141,035.
    Under Analysis B, using the inclusion/exclusion criteria described 
in the following table, the applicant identified 66,861 claims mapping 
to 410 MS-DRGs. Please see Table 10.10.A.--Taurolidine/Heparin Codes--
FY 2024 associated with this proposed rule for a complete list of MS-
DRGs provided by the applicant. The applicant followed the order of 
operations described in the following table and calculated a final 
inflated average case-weighted standardized charge per case of 
$313,587, which exceeded the average case-weighted threshold amount of 
$201,755.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant asserted that taurolidine/heparin meets 
the cost criterion.

[[Page 26957]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.239

    We agree with the applicant that taurolidine/heparin meets the cost 
criterion based on the analysis presented. We also welcome additional 
information on using additional codes and/or criteria to better target 
cases of taurolidine/heparin for the cost criterion.
    Therefore, if taurolidine/heparin does not receive FDA approval by 
July 1, 2023 to receive new technology add-on payments beginning with 
FY 2023, per Sec.  412.87(e)(3), we are proposing to conditionally 
approve taurolidine/heparin for new technology add-on payments for FY 
2024, subject to the technology receiving FDA marketing authorization 
by July 1, 2024. If taurolidine/heparin receives FDA marketing 
authorization before July 1, 2024, 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, 2024, no new technology add-on payments will be made 
for cases involving the use of taurolidine/heparin for FY 2024. If 
taurolidine/heparin receives FDA marketing authorization prior to July 
1, 2023, we are proposing to continue making new technology add-on 
payments for taurolidine/heparin in FY 2024.
    Based on preliminary information from the applicant at the time of 
this proposed rule, according to the applicant, the Wholesale 
Acquisition Cost of taurolidine/heparin is $1,170 per three milliliter 
vial taurolidine/heparin. The applicant notes that two vials of 
taurolidine/heparin (one vial for each lumen) will be used for each HD 
session and that while HD typically occurs three times/week for 
patients in the outpatient setting, inpatients may receive HD daily or 
every other day, depending on the severity of their disease. According 
to the applicant, on average, patients will receive 9.75 HD treatments 
per inpatient stay based upon the average length of stay of 13.3 days, 
which would require 19.5 vials of taurolidine/heparin. Thus, the 
applicant anticipates the cost of taurolidine/heparin to the hospital 
per patient to be $22,815. We would be interested in additional 
information as to how the length of stay for patients on HD and the 
estimation of daily or every other day dialysis were determined for 
purposes of estimating the anticipated average cost. We also note that 
the cost information for this technology may be updated in the final 
rule based on revised or additional information CMS receives prior to 
the final rule. Under Sec.  412.88(a)(2), we limit new technology add-
on payments for QIDPs to the lesser of 75 percent of the average cost 
of the technology, or 75 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, we are proposing that the maximum 
new technology add-on payment for a case involving the use of 
taurolidine/heparin would be $17,111.25 for FY 2024 (that is, 75 
percent of the average cost of the technology).
    We invite public comments on whether taurolidine/heparin meets the 
cost criterion and our proposal to approve new technology add-on 
payments for taurolidine/heparin for FY 2024 for the prevention of 
CRBSI in patients with ESRD receiving HD through a CVC.

[[Page 26958]]

(2) REZZAYOTM (Rezafungin for Injection)
    Cidara Therapeutics submitted an application for new technology 
add-on payments for REZZAYOTM (rezafungin for injection) for 
FY 2024. According to the applicant, REZZAYOTM is an 
echinocandin antifungal drug for the treatment of candidemia and 
invasive candidiasis in patients 18 years of age or older.
    Please refer to the online application posting for 
REZZAYOTM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017057WN, for additional detail describing the 
technology and the disease treated by the technology.
    According to the applicant, REZZAYOTM received QIDP 
designation from FDA on June 27, 2017 for treatment of candidemia and/
or invasive candidiasis. The applicant stated that the NDA for 
REZZAYOTM was approved on March 22, 2023, for use in 
patients 18 years of age or older who have limited or no alternative 
options for the treatment of candidemia and invasive candidiasis. 
Approval of this indication is based on limited clinical safety and 
efficacy data for REZZAYOTM. Due to the timing of receipt of 
FDA approval, we are interested in additional information on whether 
the technology is considered a QIDP under this NDA.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes that distinctly identify the administration of 
REZZAYOTM. The applicant submitted a request for approval 
for a unique ICD-10-PCS procedure code for REZZAYOTM 
beginning in FY 2024.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for REZZAYOTM, the 
applicant searched the FY 2021 MedPAR file for cases reporting one of 
the ICD-10-CM diagnosis codes for candidemia or invasive candidiasis 
(in any position) listed in the table in this section. Using the 
inclusion/exclusion criteria described in the following table, the 
applicant identified 50,939 claims mapping to 540 MS-DRGs. The 
applicant followed the order of operations described in the following 
table and calculated a final inflated average case-weighted 
standardized charge per case of $177,099.74, which exceeded the average 
case-weighted threshold amount of $97,375.67. Because the final 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount, the applicant asserted that 
REZZAYOTM meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.240

    We agree with the applicant that REZZAYOTM meets the 
cost criterion and are therefore proposing to approve 
REZZAYOTM for new technology add-on payments for FY 2024 for 
use in patients 18 years of age or older who have limited or no 
alternative options for the treatment of candidemia and invasive 
candidiasis.

[[Page 26959]]

    The applicant has not provided an estimate for the cost of 
REZZAYOTM at the time of this proposed rule. According to 
the applicant, REZZAYOTM is to be administered once weekly 
by intravenous infusion, with an initial loading dose of 400 mg and 
followed by a 200 mg dose once weekly thereafter. According to the 
applicant, in the pivotal trial, on average patients received 14 days 
of IV treatment and that data also showed that patients stay in the 
hospital after being diagnosed with invasive candidiasis for 14 days. 
Therefore, the applicant estimates the average dose of medication 
during an inpatient stay to be 600 mg, given the initial 400 mg dose 
plus one 200 mg maintenance dose prior to discharge from the hospital. 
We expect the applicant to submit cost information prior to the final 
rule, and we will provide an update regarding the new technology add-on 
payment amount for the technology, if approved, in the final rule. Any 
new technology add-on payment for REZZAYOTM 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 percent of the average 
cost of the technology, or 75 percent of the costs in excess of the MS-
DRG payment for the case.
    We invite public comments on whether REZZAYOTM meets the 
cost criterion and our proposal to approve new technology add-on 
payments for REZZAYOTM for FY 2024 for use in patients 18 
years of age or older who have limited or no alternative options for 
the treatment of candidemia and invasive candidiasis.
(3) SUL-DUR (Sulbactam/Durlobactam)
    Entasis Therapeutics, Inc. submitted an application for new 
technology add-on payments for SUL-DUR for FY 2024. According to the 
applicant, SUL-DUR is a penicillin derivative and classified as a 
[beta]-lactamase inhibitor but also has intrinsic antibacterial 
activity against Acinetobacter baumannii and other members of the 
Acinetobacter baumannii-calcoaceticus complex (ABC). According to the 
applicant, sulbactam, in combination with durlobactam, will be used for 
the treatment of hospital-acquired and ventilator-associated bacterial 
pneumonia (HABP/VABP) and bloodstream infections (BSI) due to 
Acinetobacter baumannii.
    Please refer to the online application posting for SUL-DUR, 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017F5WKE, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, SUL-DUR received QIDP designation for 
the treatment of HABP/VABP and bloodstream infections due to 
Acinetobacter baumannii. The applicant stated that it is seeking 
approval of a broader NDA from FDA for the treatment of adults with 
infections due to Acinetobacter baumannii-calcoaceticus complex 
organisms, including multidrug-resistant and carbapenem-resistant 
strains. According to the applicant, patients are expected to receive 1 
to 1.5 grams sulbactam and 1 to 1.5 grams durlobactam every 6 hours for 
an average of 10 days. We note that, under the eligibility criteria for 
approval under the alternative pathway for certain antimicrobial 
products, only the use of SUL-DUR for the treatment of HABP/VABP and 
bloodstream infections due to Acinetobacter baumannii, and the FDA QIDP 
designation it received for that use, are relevant for purposes of the 
new technology add-on payment application for FY 2024. We also note 
that, as an application submitted under the alternative pathway for 
certain antimicrobial products at Sec.  412.87(d), SUL-DUR 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, 2024).
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify SUL-DUR. The applicant submitted 
a request for a new unique ICD-10-PCS procedure code for SUL-DUR to be 
considered at the March 2023 ICD-10 Coordination and Maintenance 
Committee meeting. The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for SUL-DUR under 
the ICD-10-CM coding system. Please refer to the online application 
posting for the complete list of ICD-10-CM codes provided by the 
applicant. We note that the applicant included ICD-10-CM codes that 
correspond to the broader anticipated NDA indication. As previously 
noted, only use of the technology for the indications corresponding to 
the QIDP designation would be relevant for new technology add-on 
payment purposes. We believe the relevant ICD-10-CM codes to identify 
the QIDP-designated indications are: Y95 and J15.6 (describing HABP due 
to Acinetobacter baumannii); or J95.851 and B96.89 (describing VABP due 
to Acinetobacter baumannii); or A41.59 (Other Gram-negative sepsis) for 
bloodstream infection due to Acinetobacter baumannii.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the application searched the FY 2021 MedPAR file using a 
different combination of codes to identify potential cases representing 
patients who may be eligible for SUL-DUR. The applicant explained that 
it used different codes to demonstrate different cohorts that may be 
eligible for the technology. Each analysis followed the order of 
operations described in the following table.
    According to the applicant, SUL-DUR is anticipated to be indicated 
in adults for the treatment of infections due to ABC complex including 
multi-drug resistant and carbapenem-resistant strains upon FDA 
approval. Therefore, in the first analysis, the applicant identified 
ICD-10-CM codes that reflect the anticipated FDA indication. According 
to the QIDP designation, SUL-DUR was designated for the treatment of 
HABP/VABP and bloodstream infections due to Acinetobacter baumannii. 
Therefore, in the second analysis, the applicant identified ICD-10-CM 
codes that reflect the QIDP-designated indications. Please see Table 
10.23.A.--SUL-DUR Codes--FY 2024 associated with this proposed rule for 
the complete list of codes provided by the applicant.
    For Analysis 1, using the inclusion/exclusion criteria described in 
the following table, the applicant identified 440,756 cases mapping to 
452 MS-DRGs. The applicant followed the order of operations described 
in the following table and calculated a final inflated average case-
weighted standardized charge per case of $182,553, which exceeded the 
average case-weighted threshold amount of $76,364.
    For Analysis 2, using the inclusion/exclusion criteria described in 
the following table, the applicant identified 214,694 claims mapping to 
330 MS-DRGs. The applicant followed the order of operations described 
in the following table and calculated a final inflated average case-
weighted standardized charge per case of $202,171, which exceeded the 
average case-weighted threshold amount of $85,665.
    Because the final inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount in 
both analyses, the

[[Page 26960]]

applicant asserted that SUL-DUR meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.241

    We agree with the applicant that SUL-DUR meets the cost criterion 
and are therefore proposing to approve SUL-DUR for new technology add-
on payments for FY 2024 for the treatment of HABP/VABP and bloodstream 
infections due to Acinetobacter baumannii, subject to the technology 
receiving FDA marketing authorization for the indication corresponding 
to the QIDP designation by July 1, 2023. As an application submitted 
under the alternative pathway for certain antimicrobial products at 
Sec.  412.87(d), SUL-DUR 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, 2024). If SUL-DUR 
receives FDA marketing authorization before July 1, 2024, 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, 2024, no new 
technology add-on payments would be made for cases involving the use of 
SUL-DUR for FY 2024.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant stated that the anticipated cost of 
SUL-DUR is $15,000 per stay based upon the expectation that patients 
would receive 1 to 1.5 grams sulbactam and 1 to 1.5 grams durlobactam 
every 6 hours for an average of 10 days. The applicant did not provide 
the cost per vial and did not supply supporting information with regard 
to the average of 10 days. Therefore, we are interested in information 
regarding the cost per vial and the average of 10 days to support the 
anticipated average cost of $15,000 provided by the applicant. We note 
that the cost information for this technology may be updated in the 
final rule based on revised or additional information CMS receives 
prior to the final rule. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments for QIDPs to the lesser of 75 percent of the 
average cost of the technology, or 75 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we propose that the 
maximum new technology add-on payment for a case involving the use of 
SUL-DUR when used for the treatment of HABP/VABP and bloodstream 
infections due to Acinetobacter baumannii would be $11,250 for FY 2024 
(that is, 75 percent of the average cost of the technology).
    We invite public comments on whether SUL-DUR meets the cost 
criterion and our proposal to approve new technology add-on payments 
for SUL-DUR for FY 2024 for the treatment of HABP/VABP and bloodstream 
infections due to Acinetobacter baumannii subject to the technology 
receiving marketing authorization consistent with its QIDP designation 
by July 1, 2023.

[[Page 26961]]

8. Proposal To Modify New Technology Add-On Payment Application 
Eligibility Requirements Related to FDA Application Status and To Move 
FDA Marketing Authorization Deadline From July 1 to May 1 for 
Technologies That Are Not Already FDA Market Authorized
    As noted in section II.E.1.f. of this proposed rule, applicants for 
new technology add-on payments for new medical services or technologies 
must submit to CMS 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). In 
addition, as reflected in the application, applicants must submit 
information about the technology's FDA market authorization status and 
the status of any relevant required designations.
    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 any supplemental information obtained from the applicant, 
information provided at the Town Hall meeting, and comments received in 
response to the Town Hall meeting. As part of the new technology add-on 
payment application process, CMS summarizes in the IPPS/LTCH PPS 
proposed rule the information submitted as part of each new technology 
add-on payment application. This generally includes summarizing and/or 
providing the public with information on the applicant's explanation of 
what the technology does, background on the disease process, status of 
FDA approval or 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. As discussed in prior rulemaking, 
our goal is to ensure that the public has sufficient information to 
facilitate public comment on whether the medical service or technology 
meets the new technology add-on payment criteria.
    In the FY 2023 IPPS/LTCH PPS final rule, to increase transparency, 
enable increased stakeholder engagement, and improve and streamline our 
new technology add-on payment review process, we finalized a policy 
that, beginning with FY 2024, new technology add-on payment 
applications and certain related materials would be publicly posted 
online (87 FR 48986 through 48990). We noted that we believed making 
this information publicly available may help to further engage the 
public and foster greater input and insights through public comments on 
the new medical services and technologies presented annually for 
consideration for new technology add-on payments. Consistent with this 
finalized policy, the FY 2024 applications for new technology add-on 
payments are available at https://mearis.cms.gov/public/publications/ntap.
    Building on our efforts to further increase transparency, 
facilitate public input, and improve the review process, we are 
proposing modifications to both the new technology add-on payment 
eligibility requirements and the date by which applicants must receive 
FDA marketing authorization in order to be eligible for consideration. 
Specifically, we are proposing to modify the new technology add-on 
payment application eligibility requirements for technologies that are 
not already FDA market authorized to require such applicants to have a 
complete and active FDA market authorization request at the time of new 
technology add-on payment application submission, and to move the FDA 
marketing authorization deadline from July 1 to May 1, beginning with 
applications for FY 2025. As we discuss in further detail later in this 
section, we believe these changes would significantly improve our 
ability to evaluate whether a technology is eligible for new technology 
add-on payment.
    We accept new technology add-on payment applications annually, each 
fall. As previously discussed, CMS considers whether the technology 
meets the criteria for the new technology add-on payment and announces 
the results as part of the annual IPPS rulemaking. To provide maximum 
flexibility for applicants for new technology add-on payments, we have 
not historically specified how complete an application must be at the 
time of its submission. This has resulted in a significant number of 
applicants submitting new technology add-on payment applications that 
lack critical information that is needed to evaluate whether the 
technology meets the eligibility criteria at Sec.  412.87(b), (c), or 
(d), particularly with regard to having information available for the 
proposed rule and during the comment period. Specifically, many 
applicants submit new technology add-on payment applications prior to 
submitting a request to FDA for the necessary marketing authorization, 
and applicants have stated that information missing from their 
applications, which is needed to evaluate the technology for the add-on 
payment, will not become available until after submission to FDA. With 
regard to the alternative pathways, such applications may also be 
missing information that would help inform understanding of the details 
and interrelationship between the intended indication and FDA 
Breakthrough Device or QIDP designation, which is the basis for a 
product's eligibility for the alternative pathway.
    Ultimately, it is difficult for CMS to review and for interested 
parties to comment on a product that has not yet been submitted to FDA, 
as multiple sections of the new technology add-on payment applications 
lack preliminary information that is more likely to be available after 
an FDA submission. Public input is an important part of our assessment 
of whether a technology meets the new technology add-on payment 
criteria, particularly as technology becomes more complex and 
specialized.
    Thus, we believe that requiring applicants to have already 
submitted a market authorization request to FDA at the time of 
submission of the new technology add-on payment application would 
further increase transparency and improve the 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. By requiring applicants to submit their 
FDA marketing authorization requests prior to submitting an application 
for new technology add-on payments, the public and the agency would be 
able to more knowledgeably analyze the new technology add-on payment 
applications and supporting data and evidence to inform an assessment 
of the technology's eligibility for the add-on payment.

[[Page 26962]]

    Therefore, we are proposing that beginning with the new technology 
add-on payment applications for FY 2025, to be eligible for 
consideration for the new technology add-on payment, an applicant must 
have already submitted an FDA market authorization request before 
submitting an application for new technology add-on payments. We 
propose that, for the purposes of this policy, submission of a request 
for marketing authorization by the FDA would mean that the applicant 
has submitted a complete application to FDA, and that the application 
has an active status with FDA (such as not in a Hold status or having 
received a Complete Response Letter). An applicant must provide 
documentation of the market authorization request at the time of 
submission of its new technology add-on payment application to CMS. We 
believe that requiring an FDA acceptance or filing letter would provide 
the clearest and most effective means of documenting that the applicant 
has submitted a complete request to FDA and are therefore proposing to 
require this approach to documentation. Under this proposal, the 
applicant would also indicate on the new technology add-on payment 
application whether the FDA request has an active status with FDA. We 
note that applicants for technologies that have already received FDA 
market authorization for the indication for which they are applying for 
new technology add-on payments would not be required to submit an FDA 
acceptance or filing letter and would continue to be eligible for 
consideration for new technology add-on payments. We are proposing to 
amend 42 CFR 412.87 to reflect this proposal by redesignating current 
paragraph (e) as paragraph (f) and adding a new provision at 42 CFR 
412.87(e) to state that CMS will only consider, for add-on payments for 
a particular fiscal year, an application for which the medical service 
or technology is either FDA market authorized for the indication that 
is the subject of the new technology add-on payment application or for 
which the medical service or technology is the subject of a complete 
and active FDA marketing authorization request and documentation of FDA 
acceptance or filing is provided to CMS at the time of new technology 
add-on payment application submission.
    In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48562 through 
48563), we finalized our proposal to set July 1 of each year as the 
deadline by which IPPS new technology add-on payment applications must 
receive FDA marketing authorization. We noted that while we prefer that 
technologies have FDA approval or clearance at the time of application, 
this may not always be feasible. At that time, we believed that the 
July 1 deadline would provide an appropriate balance between the 
necessity for adequate time to fully evaluate the applications, the 
requirement to publish the IPPS final rule by August 1 of each year, 
and addressing commenters' concerns that potential new technology 
applicants have some flexibility with respect to when their technology 
receives FDA approval or clearance.
    However, with the increased complexity and volume of applications 
for new technology add-on payments since finalization of this policy in 
the FY 2009 IPPS/LTCH PPS final rule, we believe the July 1 deadline 
may no longer provide sufficient time to fully evaluate the new 
technology applications in advance of the issuance of the final rule, 
including information that does not become available until FDA approval 
or clearance. The technologies that are the subject of new technology 
add-on payment applications are increasingly complex, such as fourth 
and fifth line therapies and devices utilizing artificial intelligence 
algorithms. The volume of new technology add-on payment applications 
has also risen substantially. In the first 20 years of the new 
technology add-on payment program, CMS received on average 2-10 
applications per year. Applications have risen by 200 percent from FY 
2020 to FY 2024.
    The increased volume and complexity of applications makes it more 
challenging to mitigate information gaps in advance of the final rule, 
particularly with regard to analysis and validation of information 
necessary to make determinations regarding whether technologies meet 
the add-on payment criteria. For traditional pathway applications, this 
may involve submission of new clinical studies and/or a different final 
indication, which can change the relevant comparators for 
consideration. For alternative pathway applications, CMS must assess 
the relevant designations in connection with the applicable indications 
and how the necessary market authorization relates to the designated 
technology, which often necessitates coordination with FDA and other 
components of HHS. As new technology continues to be developed, we 
expect both the complexity and the number of applications to increase, 
further increasing the need for additional time to fully evaluate the 
applications in advance of the final rule. We also believe that 
providing the opportunity for interested parties to review the FDA 
approved clinical indications and the clinical data that often only 
becomes available after receiving FDA market authorization would 
strengthen the quality of the public comments and allow for more 
informed decision-making in the final rule.
    Accordingly, to allow adequate time to fully evaluate the new 
technology add-on payment criteria for FDA-authorized technologies in 
advance of the final rule, and to further facilitate and inform public 
comment, we are proposing to require that applicants receive FDA 
approval or clearance by May 1 in order to be eligible for 
consideration for the new technology add-on payment for the upcoming 
fiscal year. We believe this May 1 deadline would strike a balance 
between providing adequate time to fully evaluate the applications 
while also continuing to preserve flexibility for manufacturers. We are 
proposing to amend proposed redesignated Sec.  412.87(f)(2) to reflect 
this proposed change by revising the date by which new medical services 
or technologies must receive FDA marketing authorization from July 1 to 
May 1 and making other conforming changes to the regulatory text.
    Consistent with our current approach, under this proposal, we would 
not include in the final rule the description and discussion of new 
technology add-on payment applications which were included in the 
proposed rule that were withdrawn or that were ineligible for 
consideration for the upcoming fiscal year due to not meeting the 
proposed May 1 deadline. We would also neither summarize nor respond to 
public comments received regarding these withdrawn or ineligible 
applications in the final rule.
    We note that we are not proposing to change the July 1 deadline for 
technologies for which an application is submitted under the 
alternative pathway for certain antimicrobial products because they 
would continue to be eligible for conditional approval under Sec.  
412.87(e)(3) (proposed to be redesignated as Sec.  412.87(f)(3)), as 
finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58740). 
However, we are proposing to amend proposed redesignated Sec.  
412.87(f)(3) to revise the current cross-reference to Sec.  
412.87(e)(2) in light of the previously discussed proposed amendments.
    We are seeking public comment on our proposals to modify the new 
technology add-on payment application eligibility requirements for 
technologies

[[Page 26963]]

that are not already FDA market authorized to require such applicants 
to have a complete and active FDA market authorization request at the 
time of new technology add-on payment application submission, to 
provide documentation of FDA acceptance or filing to CMS at the time of 
application submission, and to move the FDA marketing authorization 
deadline from July 1 to May 1, beginning with applications for FY 2025.

III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the proposed FY 2024 hospital wage index based 
on the statistical areas appears under section III.A.2. of the preamble 
of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, IV. The OMB control number for this information 
collection request is 0938-0050, which expires on September 30, 2025. 
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 proposed adjustment for FY 2024 is discussed in section 
II.B. of the Addendum to this proposed rule.
    As discussed in section III.I. of the preamble of this proposed 
rule, we also take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act when calculating IPPS payment amounts. Under section 
1886(d)(8)(D) of the Act, the Secretary is required to adjust the 
standardized amounts so as to ensure that aggregate payments under the 
IPPS after implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The proposed budget neutrality adjustment for FY 2024 is discussed in 
section II.A.4.b. of the Addendum to this proposed rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. 
(The OMB control number for approved collection of this information is 
0938-0907, which expires on January 31, 2026.) A discussion of the 
occupational mix adjustment that we are proposing to apply to the FY 
2024 wage index appears under sections III.E. and F. of the preamble of 
this proposed rule.
2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2024 
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 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

[[Page 26964]]

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 2024, we would continue 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.
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 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. Per the schedule published 
in a July 16, 2021 OMB Notice of Decision, we expect revised 
delineations based on the 2020 decennial census data to be available in 
July 2023 (86 FR 37775). We intend to address these revisions in future 
rulemaking.
    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.
    For FY 2024, we are continuing to use only the FIPS county codes 
for purposes of crosswalking counties to CBSAs. For FY 2024, Tables 2 
and 3 associated with this proposed rule and the County to CBSA 
Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care 
Hospitals File posted on the CMS website reflect the latest FIPS code 
updates.

B. Worksheet S-3 Wage Data for the Proposed FY 2024 Wage Index

    The proposed FY 2024 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2020 (the FY 2023 wage indexes 
were based on data from cost reporting periods beginning during FY 
2019).
1. Included Categories of Costs
    The proposed FY 2024 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 2023, the 
proposed wage index for FY 2024 also excludes the direct and overhead 
salaries and hours for services not subject to IPPS payment, such as 
skilled nursing facility (SNF) services, home health services, costs 
related to GME (teaching physicians and residents) and certified 
registered nurse anesthetists (CRNAs), and other subprovider components 
that are not paid under the IPPS. The proposed FY 2024 wage index also 
excludes the salaries, hours, and wage-

[[Page 26965]]

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.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2024 wage index were obtained from 
Worksheet S-3, Parts II, III and IV of the Medicare cost report, CMS 
Form 2552-10 (OMB Control Number 0938-0050 with an expiration date 
September 30, 2025) for cost reporting periods beginning on or after 
October 1, 2019, and before October 1, 2020. For wage index purposes, 
we refer to cost reports beginning on or after October 1, 2019, and 
before October 1, 2020, as the ``FY 2020 cost report,'' the ``FY 2020 
wage data,'' or the ``FY 2020 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 proposed FY 
2024 wage index includes FY 2020 data submitted to us as of January 30, 
2023. 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). We stated in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48994) that we will be looking at the differential effects of 
the COVID-19 PHE on the audited wage data in future fiscal years. We 
also stated 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. For the FY 2024 wage index, the best available data 
typically would be from the FY 2020 wage data.
    Based on pre reclassified wage data, the changes in the wage data 
from FY 2019 to FY 2020 show the following compared to the annual 
changes for the most recent 3 year periods (that is, FY 2016 to FY 
2017, FY 2017 to FY 2018 and FY 2018 to FY 2019):
     Approximately 85 percent of hospitals have an increase in 
their average hourly wage (AHW) from FY 2019 to FY 2020 compared to a 
range of 76-77 percent of hospitals for the most recent 3 year periods.
     Approximately 81 percent of all CBSA AHWs increased from 
FY 2019 to FY 2020 compared to a range of 73-75 percent of all CBSAs 
for the most recent 3 year periods.
     Approximately 36 percent of all urban areas have an 
increase in their area wage index from FY 2019 to FY 2020 compared to a 
range of 41-43 percent of all urban areas for the most recent 3 year 
periods.
     Approximately 2.8 percent of all rural areas have an 
increase in their area wage index from FY 2019 to FY 2020 compared to a 
range of 4-6 percent of all rural areas for the most recent 3 year 
periods.
     The unadjusted national average hourly wage increased by a 
range of 2.4-2.8 percent per year from FY 2016-FY 2019. For FY 2020, 
the unadjusted national average hourly increased by 5.3 percent from FY 
2019.
    Even if the comparison with the historical trends had indicated 
greater differences at a national level in this context, it is not 
apparent whether any changes due to the COVID-19 PHE differentially 
impacted the wages paid by individual hospitals. Furthermore, even if 
hypothetically changes due the COVID-19 PHE did differentially impact 
the wages paid by individual hospitals over time, it is not clear how 
those changes could be isolated from changes due to other reasons and 
what an appropriate potential methodology might be to adjust the data.
    Lastly, we also note that we have not identified any significant 
issues with the FY 2020 wage data itself in terms of our audits of this 
data. As usual, the data was audited by the MACs, and there were no 
significant issues reported across the data for all hospitals.
    Taking all of these factors into account, we believe the FY 2020 
wage data is the best available wage data to use for FY 2024 and are 
proposing to use the FY 2020 wage data for FY 2024.
    We welcome comment from the public with regard to the FY 2020 wage 
data. We note, AHW data by provider and CBSA, including the data upon 
which the comparisons, as previously described are based, is available 
in our Public Use Files released with each proposed and final rule each 
fiscal year. The Public Use Files for the respective FY Wage Index Home 
Page can be found on the Wage Index Files web page at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.
    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. In response to public comments, 
as previously stated in past final rules (FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49490 through 49491), the FY 2022 IPPS/LTCH PPS final rule 
(86 FR 45168 through 45169) and the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 48996 through 48997), we believe that, under this section of the 
Act, we have discretion to exclude aberrant hospital data from the wage 
index public use files (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 the reader to our previous responses to comments at the Federal 
Register pages cited earlier with regard to the exclusion of hospitals' 
wage data from the wage index. We requested that our MACs revise or 
verify data elements that result in specific edit failures. For the 
proposed FY 2024 wage index, we identified and excluded 88 providers 
with aberrant data that should not be included in the wage index. If 
data elements for some of these providers are corrected, we intend to 
include data from those providers in the final FY

[[Page 26966]]

2024 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 20, 2023.
    In constructing the proposed FY 2024 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2020, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe 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 rule, we removed 1 
hospital that converted to CAH status on or after January 22, 2022, the 
cut-off date for CAH exclusion from the FY 2023 wage index, and through 
and including January 23, 2023, the cut-off date for CAH exclusion from 
the FY 2024 wage index. In summary, we calculated the FY 2024 wage 
index using the Worksheet S-3, Parts II and III wage data of 3,103 
hospitals.
    For the proposed FY 2024 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 2024 wage 
index associated with this proposed rule (available via the internet on 
the CMS website), includes separate wage data for the campuses of 28 
multicampus hospitals. The following chart lists the multicampus 
hospitals by core service area (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

[[Page 26967]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.242

    We note that, in past years, in Table 2, we have placed a ``B'' to 
designate the subordinate campus in the fourth position of the hospital 
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules 
and subsequent rules, we have moved the ``B'' to the third position of 
the CCN. Because all IPPS hospitals have a ``0'' in the third position 
of the CCN, we believe that placement of the ``B'' in this third 
position, instead of the ``0'' for the subordinate campus, is the most 
efficient method of identification and interferes the least with the 
other, variable, digits in the CCN.

D. Method for Computing the Proposed FY 2024 Unadjusted Wage Index

    The method used to compute the proposed FY 2024 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 are not proposing any changes to this 
methodology. We have restated our methodology in this section of this 
rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the wage index (in this case, for FY 2024, 
these were data from cost reports for cost reporting periods beginning 
on or after October 1, 2019, and before October 1, 2020). In addition, 
we included data from some hospitals that had cost reporting periods

[[Page 26968]]

beginning before October 2019 and reported a cost reporting period 
covering all of FY 2020. 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 2020 data. We note that, if a 
hospital had more than one cost reporting period beginning during FY 
2020 (for example, a hospital had two short cost reporting periods 
beginning on or after October 1, 2019, and before October 1, 2020), we 
include wage data from only one of the cost reporting periods, the 
longer, in the wage index calculation. If there was more than one cost 
reporting period and the periods were equal in length, we included the 
wage data from the later period in the wage index calculation.
    Step 2.--Salaries.--The method used to compute a hospital's average 
hourly wage excludes certain costs that are not paid under the IPPS. 
(We note that, beginning with FY 2008 (72 FR 47315), we included what 
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of 
CMS Form 2552-96 for overhead services in the wage index. Currently, 
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we 
note that the wages and hours on these lines are not incorporated into 
Line 101, Column 1 of Worksheet A, which, through the electronic cost 
reporting software, flows directly to Line 1 of Worksheet S-3, Part II. 
Therefore, the first step in the wage index calculation is to compute a 
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II 
(for wages and hours respectively) the amounts on Lines 28, 33, and 
35.) In calculating a hospital's Net Salaries (we note that we 
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries) 
plus wage-related costs, we first compute the following: Subtract from 
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form 
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on 
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude 
salaries reported on Lines 9 and 10 (that is, direct salaries 
attributable to SNF services, home health services, and other 
subprovider components not subject to the IPPS). We also subtract from 
Line 1 the salaries for which no hours were reported. Therefore, the 
formula for Net Salaries (from Worksheet S-3, Part II) is the 
following:

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

    To determine Total Salaries plus Wage-Related Costs, we add to the 
Net Salaries the costs of contract labor for direct patient care, 
certain top management, pharmacy, laboratory, and nonteaching physician 
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15, 
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51, 
and 25.52). We note that contract labor and home office salaries for 
which no corresponding hours are reported are not included. In 
addition, wage-related costs for nonteaching physician Part A employees 
(Line 22) are excluded if no corresponding salaries are reported for 
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + 
(Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 
+ Line 22 + 25.50 + 25.51 + 25.52).

    Step 3.--Hours.--With the exception of wage-related costs, for 
which there are no associated hours, we compute total hours using the 
same methods as described for salaries in Step 2. The formula for Total 
Hours (from Worksheet S-3, Part II) is the following:

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

    Step 4.--For each hospital reporting both total overhead salaries 
and total overhead hours greater than zero, we then allocate overhead 
costs to areas of the hospital excluded from the wage index 
calculation. First, we determine the ``excluded rate'', which is the 
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula:

(Line 9 + Line 10)/(Line 1 + Line 28 + Line 33 + Line 35)-(Lines 2, 3, 
4.01, 5, 6, 7, 7.01, and 8 and Lines 26 through 43).

    We then compute the amounts of overhead salaries and hours to be 
allocated to 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, 2019, through April 15, 
2021, for private industry hospital workers from the Bureau of Labor 
Statistics' (BLS') National Compensation Survey. We use the ECI because 
it reflects the price increase associated with total compensation 
(salaries plus fringes)

[[Page 26969]]

rather than just the increase in salaries. In addition, the ECI 
includes managers as well as other hospital workers. This methodology 
to compute the monthly update factors uses actual quarterly ECI data 
and assures that the update factors match the actual quarterly and 
annual percent changes. We also note that, since April 2006 with the 
publication of March 2006 data, the BLS' ECI uses a different 
classification system, the North American Industrial Classification 
System (NAICS), instead of the Standard Industrial Codes (SICs), which 
no longer exist. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we are not proposing to make any changes to the usage of 
the ECI for FY 2024. The factors used to adjust the hospital's data are 
based on the midpoint of the cost reporting period, as indicated in 
this rule.
    Step 6.--Each hospital is assigned to its appropriate urban or 
rural labor market area before any reclassifications under section 
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each 
urban or rural labor market area, we add the total adjusted salaries 
plus wage-related costs obtained in Step 5 for all hospitals in that 
area to determine the total adjusted salaries plus wage-related costs 
for the labor market area.
    Step 7.--We divide the total adjusted salaries plus wage-related 
costs obtained under Step 6 by the sum of the corresponding total hours 
(from Step 4) for all hospitals in each labor market area to determine 
an average hourly wage for the area.
    Step 8.--We add the total adjusted salaries plus wage-related costs 
obtained in Step 5 for all hospitals in the nation and then divide the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage.
    Step 9.--For each urban or rural labor market area, we calculate 
the hospital wage index value, unadjusted for occupational mix, by 
dividing the area average hourly wage obtained in Step 7 by the 
national average hourly wage computed in Step 8.
    Step 10.--For each urban labor market area for which we do not have 
any hospital wage data (either because there are no IPPS hospitals in 
that labor market area, or there are IPPS hospitals in that area but 
their data are either too new to be reflected in the current year's 
wage index calculation, or their data are aberrant and are deleted from 
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42305) that, for FY 2020 and subsequent years' wage index 
calculations, such CBSA's wage index would be equal to total urban 
salaries plus wage-related costs (from Step 5) in the State, divided by 
the total urban hours (from Step 4) in the State, divided by the 
national average hourly wage from Step 8 (see 84 FR 42305 and 42306, 
August 16, 2019). We stated that we believe that, in the absence of 
wage data for an urban labor market area, it is reasonable to use a 
statewide urban average, which is based on actual, acceptable wage data 
of hospitals in that State, rather than impute some other type of value 
using a different methodology. For calculation of the proposed FY 2024 
wage index, we note there is one urban CBSAs 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 Appendix A of this proposed rule 
for the policy regarding rural areas that do not have IPPS hospitals.
    Step 11.--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area of a State may not be 
less than the area wage index applicable to hospitals located in rural 
areas in that State. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
proposed rule and available via the internet on the CMS website.
    The 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, 2019, through April 15, 
2021, for private industry hospital workers from the BLS' National 
Compensation Survey. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we are not proposing any changes to the usage of the 
ECI for FY 2024. The factors used to adjust the hospital's data are 
based on the midpoint of the cost reporting period, as indicated in the 
following table.

[[Page 26970]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.243

    For example, the midpoint of a cost reporting period beginning 
January 1, 2020, and ending December 31, 2020, is June 30, 2020. An 
adjustment factor of 1.01923 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 2024, there is no Puerto Rico-
specific overall average hourly wage or wage index.
    Based on the previously discussed methodology, the proposed FY 2024 
unadjusted national average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP01MY23.244

E. Proposed Occupational Mix Adjustment to the FY 2024 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 
2024 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

[[Page 26971]]

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 2024 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 January 31, 2026) to their MACs by September 3, 2021. 
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 2022 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 2024
    For FY 2024, we are proposing to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2024 wage index. 
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our 
methodology with regard to how dollar amounts, hours, and other 
numerical values in the unadjusted and adjusted wage index calculation 
are rounded, in order to ensure consistency in the calculation. 
According to the policy finalized in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42308 and 42309), for data that we consider to be ``raw 
data,'' such as the cost report data on Worksheets S-3, Parts II and 
III, and the occupational mix survey data, we continue to use these 
data ``as is'', and not round any of the individual line items or 
fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round such dollar amounts to 2 
decimals. We round any hour amounts within the wage index calculations 
to the nearest whole number. We round any numbers not expressed as 
dollars or hours in the wage index calculations, which could include 
ratios, percentages, or inflation factors, to 5 decimals. However, we 
continue rounding the actual unadjusted and adjusted wage indexes to 4 
decimals, as we have done historically.
    Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this proposed rule (which is 
available via the internet on the CMS website), which contains the 
proposed FY 2024 occupational mix adjusted wage index, includes 
separate wage data for the campuses of multicampus hospitals. We refer 
readers to section III.C. of the preamble of this proposed rule for a 
chart listing the multicampus hospitals and the FTE percentages used to 
allot their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the proposed FY 2024 wage index. For the proposed FY 2024 wage 
index, we are using the Worksheet S-3, Parts II and III wage data of 
3,103 hospitals, and we used the occupational mix surveys of 3,007 
hospitals for which we also had Worksheet S-3 wage data, which 
represented a ``response'' rate of 97 percent (3,007/3,103). For the 
proposed FY 2024 wage index, we are applying proxy data for 
noncompliant hospitals, new hospitals, or hospitals that submitted 
erroneous or aberrant data in the same manner that we applied proxy 
data for such hospitals in the FY 2012 wage index occupational mix 
adjustment (76 FR 51586). As a result of applying this methodology, the 
proposed FY 2024 occupational mix adjusted national average hourly wage 
is the following:
[GRAPHIC] [TIFF OMITTED] TP01MY23.245

3. Deadline for Submitting the 2022 Medicare Wage Index Occupational 
Mix Survey for Use Beginning With the FY 2025 Wage Index
    A new measurement of occupational mix is required for FY 2025. The 
FY 2025 occupational mix adjustment will be based on a new calendar 
year (CY) 2022 survey. The CY 2022 survey (Form CMS-10079, OMB Number 
0938-0907, expiration date January 31, 2026) received OMB approval on 
January 3, 2023. The final CY 2022 Occupational Mix Survey Hospital 
Reporting Form is available on the CMS website at: https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/2022-occupational-mix-survey-hospital. Hospitals are required to 
submit their completed 2022 surveys to their MACs by June 30 2023. The 
preliminary, unaudited CY 2022 survey data will be posted on the CMS 
website in mid-July 2023. As with the Worksheet S-3, Parts II and III 
cost report wage data, as part of the FY 2025 desk review process, the 
MACs will revise or verify data elements in hospitals' occupational mix 
surveys that result in certain edit failures.

F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2024 Occupational Mix Adjusted Wage 
Index

    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2024, we are applying the occupational mix adjustment to 
100 percent of the FY 2024 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 proposed FY 2024 national average hourly wages for each 
occupational mix nursing subcategory as calculated in Step 2 of the 
occupational mix calculation are as follows:

[[Page 26972]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.246

    The proposed national average hourly wage for the entire nurse 
category is computed in Step 5 of the occupational mix calculation. 
Hospitals with a nurse category average hourly wage (as calculated in 
Step 4) of greater than the national nurse category average hourly wage 
receive an occupational mix adjustment factor (as calculated in Step 6) 
of less than 1.0. Hospitals with a nurse category average hourly wage 
(as calculated in Step 4) of less than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2019 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) the following:
[GRAPHIC] [TIFF OMITTED] TP01MY23.247

    We compared the FY 2024 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] TP01MY23.248

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 Permanent Cap on Wage Index Decreases

1. Proposed Application of the 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.
    Based on the FY 2024 wage index associated with this proposed rule 
(which is available via the internet on the CMS website), and based on 
the calculation of the rural floor including the wage data of hospitals 
that have reclassified as rural under Sec.  412.103 (as discussed in 
section III.K. of the preamble of this proposed rule), we

[[Page 26973]]

estimate that 596 hospitals would receive the rural floor in FY 2024. 
The budget neutrality impact of the proposed application of the rural 
floor is discussed in section II.A.4.e. of the Addendum of this 
proposed rule.
a. Treatment of Hospitals Reclassified as Rural Under Sec.  412.103 for 
the Rural Wage Index and Rural Floor Calculation
    Section 1886(d)(8)(E)(i) of the Act, implemented at 42 CFR 412.103, 
requires 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.
    In recent years, CMS's wage index and floor policies involving the 
treatment of Sec.  412.103 hospitals have been the subject of frequent 
litigation. Courts have repeatedly held unlawful CMS wage index and 
floor policies that do not treat Sec.  412.103 hospitals the same as 
geographically rural hospitals based on section 1886(d)(8)(E)(i) of the 
Act, which requires that ``the Secretary shall treat the [Sec.  
412.103] hospital as being located in the rural area.''
    For example, on July 23, 2015, the U.S. Court of Appeals for the 
Third Circuit issued a decision in Geisinger Community Medical Center 
v. Secretary, United States Department of Health and Human Services, 
794 F.3d 383 (3d Cir. 2015). Geisinger challenged as unlawful a CMS 
regulation prohibiting hospitals with an active Sec.  412.103 rural 
reclassification from applying for an additional reclassification for 
wage index purposes through the MGCRB. A divided panel of the Court of 
Appeals for the Third Circuit held that section 1886(d)(8)(E)(i) of the 
Act required the Secretary to treat Sec.  412.103 hospitals the same as 
geographically rural hospitals for the purposes of MGCRB 
reclassification. Because geographically rural hospitals were eligible 
for MGCRB reclassification, the court held CMS's regulation prohibiting 
Sec.  412.103 hospitals from seeking MGCRB reclassification was 
unlawful.
    On February 4, 2016, the U.S. Court of Appeals for the Second 
Circuit issued its decision in Lawrence + Memorial Hospital v. Burwell, 
812 F.3d 257 (2d Cir. 2016), agreeing with the Third Circuit's 
conclusion in Geisinger. The Second Circuit disagreed with CMS's 
argument that the impact of these decisions--allowing Sec.  412.103 
hospitals to be urban for wage index purposes and rural for others--was 
``anomalous'': ``[T]his is simply a function of the many different 
roles that hospitals play and the many different contexts in which they 
operate . . . Section 401 simply increases the number of situations in 
which hospitals can be treated as rural for some purposes and urban for 
others, but there is nothing `absurd' about such a measured approach.'' 
Id. at 267.
    As a consequence of the Geisinger and Lawrence + Memorial 
decisions, CMS published an interim final rule with comment period 
(IFC) on April 21, 2016 (81 FR 23428 through 23438) revising the 
regulations to allow hospitals to hold simultaneous Sec.  412.103 and 
MGCRB reclassifications, consistent with the courts' decisions. But 
commenters have since argued that CMS continued to treat Sec.  412.103 
hospitals differently from geographically rural hospitals in two 
respects. First, CMS only allowed MGCRB reclassifications for Sec.  
412.103 hospitals when the hospital's wages are at least 106 percent of 
the urban area in which it was geographically located, rather than the 
rural area to which it was reclassified under Sec.  412.103 (see 81 FR 
56925). Additionally, CMS would not include data from Sec.  412.103 
hospitals that are reclassified to an urban area by the MGCRB for wage 
index purposes when calculating the rural wage index for that state (81 
FR 23434).
    The first policy was held unlawful on May 14, 2020, when the United 
States District Court for the District of Columbia issued a decision in 
Bates County Memorial Hospital v. Azar, 464 F. Supp. 3d 43 (D.D.C. 
2020) (Bates). There, Bates County Memorial Hospital and five other 
geographically urban hospitals were reclassified to rural under Sec.  
412.103. They also applied for reclassification under the MGCRB, but 
were denied because their wages were not at least 106 percent of the 
geographic urban area in which the hospitals were located. Each of the 
hospitals' average hourly wages were at least 106 percent of the 3-year 
average hourly wage of all other hospitals in the rural area of the 
state in which the hospitals were located. The Court agreed with the 
Plaintiffs that section 1886(d)(8)(E)(i) of Act requires that CMS 
consider the rural area to be the area in which a Sec.  412.103 
hospital is located for the wage comparisons required for MGCRB 
reclassifications.
    CMS did not appeal this decision, and in the May 10, 2021 Federal 
Register (86 FR 24735), concurrent with the FY 2022 IPPS/LTCH PPS 
proposed rule, we published an interim final rule with comment period 
that amended our regulations to allow hospitals with a rural 
reclassification under the Act to reclassify through the MGCRB using 
the rural reclassified area as the geographic area in which the 
hospital is located. We stated that these changes implemented the Bates 
Court's interpretation of the requirement at section 1886(d)(8)(E)(i) 
of the Act that ``the Secretary shall treat the hospital as being 
located in the rural area,'' for all purposes of MGCRB 
reclassification, including the average hourly wage comparisons 
required by Sec.  412.230(a)(5)(i) and (d)(1)(iii)(C).
    The second policy was recently challenged in Deaconess Hospital 
Inc. v. Becerra, No. 1:22-cv-03136 (D.D.C. Oct. 14, 2022) and Robert 
Packer v. Becerra, No. 1:22-cv-03196 (D.D.C. Oct. 19, 2022). 
Specifically, plaintiffs in Deaconess and Robert Packer contend that 
CMS must include Sec.  412.103 hospitals reclassified to another wage 
area under the MGCRB in the rural wage index and rural wage floor under 
the ``hold harmless'' provision in section 1886(d)(8)(C)(ii) of Act. 
That provision provides that if an MGCRB decision ``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 treatment of Sec.  412.103 hospitals was again the subject of 
litigation in a recent case contesting our FY 2020 rural floor policy, 
under which we calculated the rural floor and the related budget 
neutrality adjustment without including data from hospitals that 
reclassified from urban to rural (84 FR 42332 through 42336). On April 
8, 2022, the district court in Citrus HMA, LLC, d/b/a Seven Rivers 
Regional Medical Center v. Becerra, No. 1:20-cv-00707 (D.D.C.) (Citrus) 
found that the Secretary did not have authority under section 4410(a) 
of the Balanced Budget Act of 1997 to establish a rural floor different 
from the rural wage index for a state.
    Following our review of the Citrus decision (which we did not 
appeal) and the comments we received on the FY 2023 IPPS/LTCH PPS 
proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002 
through 49004), we finalized a policy that calculates the rural floor 
as it was calculated before FY 2020. We stated that we understand that 
our policy of setting a rural floor lower than the rural wage index for 
a state was inconsistent with the district court's decision in Citrus. 
For FY 2023 and subsequent years, our policy is 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 MGCRB

[[Page 26974]]

reclassification 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.\156\ We stated 
that 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.
---------------------------------------------------------------------------

    \156\ We note in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49004), we stated that 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. ``Lugar'' hospitals are 
geographically rural and would be included in the rural wage index 
calculation, unless excluded per the hold harmless provision at 
section 1886(d)(8)(C)(ii). The parenthetical reference to ``Lugar'' 
hospitals in the rule was included in error, and was not implemented 
in our rate setting methodology in FY 2023.
---------------------------------------------------------------------------

    In addition to the litigation, as previously described, CMS has 
received numerous public comments in recent years urging CMS to treat 
Sec.  412.103 hospitals the same as geographically rural hospitals for 
the rural wage index and rural floor calculations. For example, we 
received many comments in response to our FY 2020 policy of excluding 
the wage data of Sec.  412.103 hospitals from the calculation of the 
rural floor stating that excluding reclassified hospitals from the 
rural floor is inconsistent with the statutory language of section 
1886(d)(8)(E) of the Act and section 4410(a) of the Balanced Budget Act 
of 1997. As summarized in greater detail in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42334), commenters stated that the statute does not 
draw any distinction between the ``rural areas'' used to calculate the 
rural floor under section 4410(a) of the Balanced Budget Act of 1997 
and the ``rural areas'' that reclassified hospitals are to be treated 
as located in under section 1886(d)(8)(E) of the Act, and that under 
the Geisinger and Lawrence & Memorial Hospital cases, a Sec.  412.103 
hospital should be treated as a rural hospital for wage 
reclassification.
    Also, in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45181), a 
commenter disagreed with CMS' treatment of hospitals with dual Sec.  
412.103 and MGCRB reclassifications. The commenter stated that CMS' 
policy of considering the hospital's geographic CBSA and the urban CBSA 
to which the hospital is reclassified under the MGCRB for the wage 
index calculation violates the statutory requirement to treat Sec.  
412.103 hospitals the same as geographically rural hospitals. The 
commenter specifically requested that CMS include the wages of Sec.  
412.103 hospitals that also have an active MGCRB reclassification in 
calculating the rural wage of the state if not doing so would reduce 
the wage index for that area, in the same manner that geographically 
rural hospitals with a MGCRB reclassification are treated according to 
section 1886(d)(8)(C)(ii) of Act.
    Again in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002), 
commenters urged CMS to discontinue the policy of excluding the wage 
data of Sec.  412.103 hospitals from the rural floor calculation. 
Spurred by the aforementioned district court's decision in Citrus, 
commenters urged CMS to acquiesce, stating their belief that the 
court's analysis was thorough and emphasizing that continuing the rural 
floor policy would 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.
    As previously enumerated, CMS has made policy changes as a result 
of the courts' decisions and related public comments. Because these 
policy changes were implemented piecemeal in reaction to litigation, 
and many through IFCs rather than the usual proposed rule process, CMS 
has not had the opportunity to systematically revisit this statutory 
framework.
    In this proposed rule, CMS has taken the opportunity to revisit the 
case law, prior public comments, and the relevant statutory language. 
After doing so, CMS now agrees--for the reasons expressed by the U.S. 
Courts of Appeals for the Second and Third Circuit, as well as the U.S. 
District Court for the District of Columbia--that the best reading of 
section 1886(d)(8)(E)'s text that CMS ``shall treat the [Sec.  412.103] 
hospital as being located in the rural area'' is that it instructs CMS 
to treat Sec.  412.103 hospitals the same as geographically rural 
hospitals for the wage index calculation. While CMS has previously 
treated section 1886(d)(8)(E) reclassifications as one among many 
reclassifications provided for under section 1886(d) and so limited its 
scope in several ways, we now read it to provide that a Sec.  412.103 
reclassification functions the same as if the reclassifying hospital 
had physically relocated into a geographically rural area. We are 
influenced by the fact that courts have largely adopted this 
interpretation of section 1886(d)(8)(E), and that it requires 
considerable resources to unwind a wage index policy after adverse 
judicial decisions--often requiring an IFC outside the usual IPPS 
rulemaking schedule and also may have budget neutrality implications. 
Cf. Amgen, Inc. v. Smith, 357 F.3d 103, 112 (D.C. Cir. 2004) 
(collecting cases ``not[ing] the havoc that piecemeal review of OPPS 
payments could bring about'' in light of statutory budget neutrality 
requirements).
    We acknowledge that this interpretation of section 1886(d)(8)(E) 
can lead to significant financial consequences. Many hospitals eligible 
for Sec.  412.103 reclassifications have paired that reclassification 
with a MGCRB wage index reclassification to escalate their wage index 
beyond what would be otherwise available to them under the law. Section 
1886(d)(3)(E)(i) of the Act states that any adjustments or updates made 
under subparagraph (E) for a fiscal year shall be made in a manner that 
assures that the aggregate payments under section 1886(d) in the fiscal 
year are not greater or less than those that would have been made 
without such adjustment, and therefore any increases to these 
hospitals' wage index inevitably decrease the payments Medicare makes 
to other hospitals. But, as the Second Circuit explained (Lawrence + 
Memorial Hospital, 812 F.3d at 267), these payment consequences are ``a 
function of the many different roles that hospitals play and the many 
different contexts in which they operate.'' We solicit comments on our 
proposed interpretation of section 1886(d)(8)(E) and section 
1886(d)(3)(E)(i).
    As additionally, previously discussed, pending litigation and 
public comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45181 
and 45182) have raised concerns that there is an additional wage index 
policy under which CMS does not treat Sec.  412.103 hospitals the same 
as geographically rural hospitals: its policy of CMS excluding data 
from Sec.  412.103 hospitals that are reclassified to an urban area by 
the MGCRB for wage index purposes when calculating the rural wage index 
for that state. We propose to change that policy, consistent with our 
new proposed interpretation of section 1886(d)(8)(E), as described in 
this section of this rule. Under the policy changes adopted in the FY 
2023 IPPS/LTCH PPS final rule under which the rural floor is the same 
as the rural wage index (87 FR 49002 through 49004), we believe that 
this change to the wage index policy would also resolve the concerns 
about the rural floor raised in comments discussed previously. As far

[[Page 26975]]

as we are aware, these are the only policies that our reinterpretation 
of section 1886(d)(8)(E) of the Act requires us to change, but we 
solicit comments on whether there are any remaining policies that CMS 
should reexamine in light of our proposed reinterpretation of section 
1886(d)(8)(E) of the Act.
b. Current Calculation of the Rural Wage Index and Application of 
Various Hold Harmless Policies
    Sections 1886(d)(8)(C)(ii) and (iii) of the Act are ``hold 
harmless'' provisions that may affect the wage index calculation when 
hospitals reclassify out of a state's rural area into another area. 
Section 1886(d)(8)(C)(ii) of the Act provides that if the application 
of section 1886(d)(8)(B) of the Act (``Lugar'' status) or a decision of 
the MGCRB or the Secretary under section 1886(d)(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, 
the Secretary shall calculate and apply such wage index as if the 
hospitals so treated had not been excluded from calculation of the wage 
index for that rural area. Section 1886(d)(8)(C)(iii) provides that the 
application of section 1886(d)(8)(B) of the Act (``Lugar'' status) or a 
decision of the MGCRB or the Secretary under section 1886(d)(10) of the 
Act may not result in the reduction of any county's wage index to a 
level below the wage index for rural areas in the state in which the 
county is located.
    In the FY 2006 IPPS final rule (70 FR 47378 and 47379), we adopted 
a regulatory hold harmless policy for situations where hospitals 
reclassify into a state's rural area under section 1886(d)(8)(E) of the 
Act. We stated that the wage data of an urban hospital reclassifying 
into the rural area are included in the rural area's wage index, if 
including the urban hospital's data increase the wage index of the 
rural area. Otherwise, the wage data are excluded. It has been CMS's 
policy since then to include hospitals with state-to-state MGCRB 
reclassifications to a nearby state's rural area along with hospitals 
reclassified under section 1886(d)(8)(E) of the Act in this regulatory 
hold harmless policy.
    In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43837 and 43838), as 
part of a summary of reclassification policies we had adopted, we 
stated that in cases where hospitals have reclassified to rural areas, 
such as urban hospitals reclassifying to rural areas under 42 CFR 
412.103, the hospital's wage data are: (a) included in the rural wage 
index calculation, unless doing so would reduce the rural wage index; 
and (b) included in the urban area where the hospital is physically 
located. We further stated that the effect of this policy, in 
combination with the statutory requirement at section 1886(d)(8)(C)(ii) 
of the Act, is that rural areas may receive a wage index based upon the 
highest of: (1) wage data from hospitals geographically located in the 
rural area (calculation 1 in the table in this section of this rule); 
(2) wage data from hospitals geographically located in the rural area, 
but excluding all data associated with hospitals reclassifying out of 
the rural area under section 1886(d)(8)(B) or section 1886(d)(10) of 
the Act (calculation 2 in the table in this section of this rule); or 
(3) wage data associated with hospitals geographically located in the 
area plus all hospitals reclassified into the rural area (calculation 3 
in the table in this section of this rule).
    In the April 21, 2016 IFC (81 FR 23428 through 23438), referenced 
earlier in section III.G.1.a. of the preamble of this proposed rule, as 
a result of the Geisinger decision, we adopted a policy allowing 
hospitals to hold simultaneous Sec.  412.103 and MGCRB 
reclassifications. In our wage index development process, we refer to 
these hospitals as having ``dual reclass'' status. We further stated in 
the IFC that we will exclude hospitals with Sec.  412.103 
reclassifications from the calculation of the reclassified rural wage 
index if they also have an active MGCRB reclassification to another 
area (81 FR 23434).
    We also clarified in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 
25070) that if a hospital qualified for ``Lugar'' status and obtained 
Sec.  412.103 rural status, we would apply the urban ``Lugar'' status 
for wage index purposes only. These geographically rural hospitals 
would be included in the rural wage index calculation in accordance 
with the previously described hold harmless policy.
    The following chart summarizes the current calculation of the rural 
wage index algebraically and in accordance with the statutes and 
policies previously described:
[GRAPHIC] [TIFF OMITTED] TP01MY23.249

[GRAPHIC] [TIFF OMITTED] TP01MY23.250


[[Page 26976]]


c. Proposed Modification to the Rural Wage Index Calculation 
Methodology
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45181 and 45182), we 
responded to a comment disagreeing with our treatment of ``dual 
reclass'' hospitals when calculating the rural floor. The commenter 
stated that CMS's policy of considering the hospital's geographic CBSA 
and the urban CBSA to which the hospital is reclassified under the 
MGCRB for the wage index calculation violates the statutory requirement 
to treat Sec.  412.103 hospitals the same as hospitals geographically 
located in the rural area of the state. The commenter requested that 
CMS include the wages of Sec.  412.103 hospitals that also have an 
active MGCRB reclassification in calculating the rural wage of the 
state if not doing so would reduce the wage index for that area, in the 
same manner that geographically rural hospitals with a MGCRB 
reclassification are treated according to section 1886(d)(8)(C)(ii) of 
the Act.
    We responded that we did not propose the policy the commenter 
suggested, and noted that it would constitute a significant change with 
numerous and potentially negative effects on the IPPS wage index. We 
stated that we did not believe it would be appropriate to adopt such a 
policy without describing it in a proposed rule and obtaining public 
comments. Therefore, we did not adopt the policy the commenter 
suggested, but we stated that we will consider further addressing the 
issue in future rulemaking. We also received and responded to a similar 
comment in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49003). After 
further consideration of these comments and our proposed 
reinterpretation of section 1886(d)(8)(E) of the Act discussed earlier 
in this section, we propose changing the rural wage index calculation 
methodology consistent with that proposed reinterpretation. We 
acknowledge the ongoing risk of the pending lawsuits cited previously, 
and recognize the challenge should we need to implement any future 
remedy in a budget neutral manner.
    Beginning with FY 2024, we are proposing to include hospitals with 
Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations, and to exclude ``dual 
reclass'' hospitals (hospitals with simultaneous Sec.  412.103 and 
MGCRB reclassifications) implicated by the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act. The following chart summarizes 
the current (as described in the table earlier in this section) and 
proposed rural wage index calculation algebraically:
[GRAPHIC] [TIFF OMITTED] TP01MY23.251

[GRAPHIC] [TIFF OMITTED] TP01MY23.252

BILLING CODE 4120-01-C
    As shown in the current calculation policy, as previously 
described, Sec.  412.103 hospitals enter the rural wage index 
calculation in calculation 3, which reflects the regulatory hold 
harmless policy described in the FY 2006 IPPS final rule (70 FR 47378 
and 47379) and previously referenced, preventing reclassification into 
a state's rural area from reducing the rural wage index. That is, we 
determine the effects for outbound reclassification (from the rural 
area to another area) and inbound reclassification (from another area 
into the rural area) separately when determining the highest rural wage 
index value. Under our proposal, as shown in the proposed calculation 
policy, as previously described, Sec.  412.103 hospitals would no 
longer be treated as an inbound reclassification (calculation 3 of the 
current policy), but would instead be included in all calculations in 
which geographically rural hospitals are included (calculations 1-3 of 
the proposed policy). ``Dual reclass'' hospitals would be excluded 
(calculation 2 of the proposed policy) in accordance with the hold 
harmless provision at section 1886(d)(8)(C)(ii) of the Act, along with 
other geographically rural hospitals with MGCRB or ``Lugar'' 
reclassification status.
    As discussed earlier in section III.G.1.a. of the preamble of this 
proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004), 
we stated that we will apply the same policy as prior to the FY 2020 
IPPS/LTCH PPS final rule for calculating the rural floor, in which the 
rural wage index sets the rural floor. For FY 2023 and subsequent 
years, our current policy is to include the wage data of Sec.  412.103 
hospitals that have no MGCRB reclassification 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. Consistent with the previously discussed proposal, beginning 
with FY 2024 we are proposing to include the data of all Sec.  412.103 
hospitals (including those that have an MGCRB reclassification) in the 
calculation of the rural floor and the

[[Page 26977]]

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 acknowledge that these proposals would have significant effects 
on wage index values. As discussed in prior rulemaking (72 FR 47371 
through 47373, 84 FR 42332, 85 FR 58788) and in this rule, CMS has 
expressed concern with hospitals' use of Sec.  412.103 reclassification 
to increase the rural wage index and rural floor. However, as already 
mentioned, ``this is simply a function of the many different roles that 
hospitals play and the many different contexts in which they operate,'' 
Lawrence + Mem'l Hosp., 812 F.3d at 267, and follows from our proposed 
interpretation of section 1886(d)(8)(E)--which encompasses the 
calculation of the State's rural wage index. We discuss the overall 
impact of these proposed changes on the rural wage index calculation 
methodology in detail in section II.A.4. of Appendix A of this proposed 
rule.
    As discussed in the previous section, in the FY 2006 IPPS final 
rule (70 FR 47378 and 47379), we adopted a regulatory hold harmless 
policy for situations where hospitals reclassify into a state's rural 
area. Hospitals reclassified under Sec.  412.103 would no longer be 
affected by this policy, as we are proposing to include them in the 
rural wage index calculation in the same manner as geographically rural 
hospitals. Therefore, only the effects of hospitals with state-to-state 
MGCRB reclassifications to a nearby state's rural area would be 
addressed by this policy. It has been CMS's longstanding policy that 
hospitals with state-to-state MGCRB reclassifications to a nearby 
state's rural area receive a ``combined'' wage index (calculation 3 of 
the current rural wage index calculation, as previously detailed in the 
chart) that includes the wage data for geographically rural hospitals 
and all hospitals reclassified into that rural area. Given our 
longstanding goal to mitigate potential negative impacts on rural 
hospitals, we are proposing to continue the part of our hold harmless 
policy that excludes the data of hospitals reclassifying into a state's 
rural area if doing so would reduce that state's rural wage index. We 
are proposing that these reclassified hospitals be assigned the 
``combined'' wage index (calculation 3 of the proposed rural wage index 
calculation as previously detailed in the chart) that includes the wage 
data for geographically rural hospitals and all hospitals reclassified 
into that rural area (subject to any additional wage index adjustment 
policies for which those reclassified hospitals may be eligible).
    Finally, we are proposing to continue the policy to apply the 
deemed urban wage index value for Sec.  412.103 hospitals that also 
qualify as ``Lugar'' under section 1886(d)(8)(B) of the Act. Prior to 
Geisinger, since section 1886(d)(8)(E) requires CMS to treat a 
reclassified hospital as being located in the rural area of the state, 
and section 1886(d)(8)(B) requires CMS to treat a rural hospital as 
being located in an urban area, our policy was that obtaining Sec.  
412.103 status would effectively waive a hospital's deemed urban 
``Lugar'' status. We discussed in the FY 2017 IPPS/LTCH PPS proposed 
rule (81 FR 25070) that if a hospital qualified for ``Lugar'' status 
and obtained Sec.  412.103 rural status, our policy is to apply the 
urban ``Lugar'' status for wage index purposes only.
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.
    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 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 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. 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. 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.
    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. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45176 through 45178) for further discussion of the original imputed 
floor calculation methodology implemented in FY 2005 and the 
alternative methodology implemented in FY 2013.
    Based on data available for this proposed rule, States that 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 2024 are identified in Table 3 associated with this proposed 
rule. States with a value in the column titled ``State Imputed Floor'' 
are eligible for the imputed floor.
    The regulations at Sec.  412.64(e)(1) and (4) and (h)(4) and (5) 
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 would continue to be applied for FY 2024 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).

[[Page 26978]]

3. State Frontier Floor for FY 2024
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000. 
(We refer readers to the regulations at 42 CFR 412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In this FY 2024 IPPS/
LTCH PPS proposed rule, we are not proposing any changes to the 
frontier floor policy for FY 2024. In this proposed rule, 43 hospitals 
would receive the frontier floor value of 1.0000 for their FY 2024 
proposed 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 are projected to receive a wage index 
value greater than 1.0000 prior to the application of the frontier 
floor policy for FY 2024.
    The areas affected by the rural and frontier floor policies for the 
proposed FY 2024 wage index are identified in Table 2 associated with 
this proposed rule, which is available via the internet on the CMS 
website.
4. Proposed Continuation of the Low Wage Index Hospital Policy and 
Budget Neutrality Adjustment
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to address the artificial magnification 
of wage index disparities, based in part on comments we received in 
response to our request for information included in our FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20372 through 20377). In the FY 2020 
IPPS/LTCH final rule, based on those public comments and the growing 
disparities between wage index values for high- and low-wage-index 
hospitals, we explained that those growing disparities are likely 
caused by the use of historical wage data being used to prospectively 
set hospitals' wage indexes. That lag creates barriers to hospitals 
with low wage index values from being able to increase employee 
compensation because those hospitals will not receive corresponding 
increases in their Medicare payment for several years (84 FR 42327). 
Accordingly, we finalized a policy that provided certain low wage index 
hospitals with an opportunity to increase employee compensation without 
the usual lag in those increases being reflected in the calculation of 
the wage index.\157\ We accomplished this by temporarily 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. As explained in the FY 2020 IPPS/LTCH 
proposed rule (84 FR 19396) and final rule (84 FR 42329), we indicated 
that the Secretary has authority to implement the lowest quartile wage 
index proposal under both section 1886(d)(3)(E) of the Act and under 
his exceptions and adjustments authority under section 1886(d)(5)(I) of 
the Act.
---------------------------------------------------------------------------

    \157\ In the FY 2020 IPPS/LTCH proposed rule, we agreed with 
respondents to a request for information who indicated that some 
current wage index policies create barriers to hospitals with low 
wage index values from being able to increase employee compensation 
due to the lag between when hospitals increase the compensation and 
when those increases are reflected in the calculation of the wage 
index. (We noted that this lag results from the fact that the wage 
index calculations rely on historical data.) We also agreed that 
addressing this systemic issue did not need to wait for 
comprehensive wage index reform given the growing disparities 
between low and high wage index hospitals, including rural hospitals 
that may be in financial distress and facing potential closure (84 
FR 19394 and 19395).
---------------------------------------------------------------------------

    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 is 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 note 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). The 
district court in Bridgeport 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 for FY 2020 and remanded the 
policy to the agency without vacatur. We have appealed the court's 
decision.
    At the time the policy was originally promulgated, we stated in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328) our 
intention that it would be in effect for at least 4 fiscal years 
beginning October 1, 2019. We stated we intended to revisit the issue 
of the duration of this policy in future rulemaking as we gained 
experience under the policy. At this time, we only have one year of 
relevant data (from FY 2020) that we could use to evaluate any 
potential impacts of this policy. As discussed in section III.B. of the 
preamble of this proposed rule, 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 2023 wage index we used cost report data from FY 2019). Given our 
current lack of sufficient data with which to evaluate the low wage 
index hospital policy, we believe it is necessary to wait until we have 
useable data from additional fiscal years before making any decision to 
modify or discontinue the policy. Therefore, for FY 2024, we are 
proposing to continue the low wage index hospital policy and the 
related budget neutrality adjustment (discussed in this section of this 
rule). 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 2024 and for subsequent fiscal years during which the low 
wage index hospital policy is in effect, we are proposing to apply a 
budget neutrality adjustment in the same manner as we applied it since 
FY 2020 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 proposed rule for further discussion of the budget 
neutrality adjustment for FY 2024. For purposes of the low wage index 
hospital policy, based on the data for this proposed rule, the table 
displays the 25th percentile wage index value across all hospitals for 
FY 2024.

[[Page 26979]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.253

5. Permanent Cap on Wage Index Decreases and Budget Neutrality 
Adjustment
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 
49021), we finalized a wage index cap policy and associated budget 
neutrality adjustment for FY 2023 and subsequent fiscal years. Under 
this policy, we 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 will not be 
less than 95 percent of its final wage index for the prior FY. 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 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 will be paid the wage index for the 
area in which it is geographically located for its first full or 
partial fiscal year, and it will not receive a cap for that first year 
because it would not have been assigned a wage index in the prior year. 
The wage index cap policy is reflected at 42 CFR 412.64(h)(7). We apply 
the cap in a budget neutral manner through a national adjustment to the 
standardized amount each fiscal year. For more information about the 
wage index cap policy and associated budget neutrality adjustment, we 
refer readers to the discussion in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49018 through 49021).
    For FY 2024, we would apply the wage index cap and associated 
budget neutrality adjustment in accordance with the policies adopted in 
the FY 2023 IPPS/LTCH PPS final rule. We note that the budget 
neutrality adjustment would be updated, as appropriate, based on the 
final rule data. We refer readers to the Addendum of this proposed rule 
for further information regarding the budget neutrality calculations.

H. FY 2023 Wage Index Tables

    In this FY 2024 IPPS/LTCH PPS proposed rule, we have included the 
following wage index tables: Table 2 titled ``Case-Mix Index and Wage 
Index Table by CCN''; Table 3 titled ``Wage Index Table by CBSA''; 
Table 4A 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 
proposed rule for a discussion of the wage index tables for FY 2024.

I. Proposed Revisions to the Wage Index Based on Hospital 
Redesignations and Reclassifications

1. General Policies and Effects of Reclassification and Redesignation
    Under section 1886(d)(10) of the Act, the Medicare Geographic 
Classification Review Board (MGCRB) considers applications by hospitals 
for geographic reclassification for purposes of payment under the IPPS. 
Hospitals must apply to the MGCRB to reclassify not later than 13 
months prior to the start of the fiscal year for which reclassification 
is sought (usually by September 1). Generally, hospitals must be 
proximate to the labor market area to which they are seeking 
reclassification and must demonstrate characteristics similar to 
hospitals located in that area. The MGCRB issues its decisions by the 
end of February for reclassifications that become effective for the 
following fiscal year (beginning October 1). The regulations applicable 
to reclassifications by the MGCRB are located in 42 CFR 412.230 through 
412.280. (We refer readers to a discussion in the FY 2002 IPPS final 
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage 
for purposes of the proximity requirements.) The general policies for 
reclassifications and redesignations and the policies for the effects 
of hospitals' reclassifications and redesignations on the wage index 
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 
final wage index (76 FR 51595 and 51596). We note that rural hospitals 
reclassifying under the MGCRB to another State's rural area are not 
eligible for the rural floor, because the rural floor may apply 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, but we reverted back to the 
pre-FY 2020 policy in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002 
through 49004). 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. Prior to FY 2024, we 
excluded 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 FY 2024 and subsequent years, we refer 
readers

[[Page 26980]]

to section III.G.1 of the preamble of this proposed rule for discussion 
of our proposal to include hospitals with a Sec.  412.103 redesignation 
that also have an active MGCRB reclassification to another area in the 
calculation of the reclassified rural wage index.
    On May 10, 2021, we published an interim final rule with comment 
period (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 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 pre-reclassified 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 2024
a. FY 2024 Reclassification Application Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280. At the time this proposed rule was drafted, the MGCRB had 
completed its review of FY 2024 reclassification requests. Based on 
such reviews, there are 621 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2024. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2024, 
hospitals reclassified beginning in FY 2022 or FY 2023 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 262 hospitals approved for wage index reclassifications in 
FY 2022 that will continue for FY 2024, and 266 hospitals approved for 
wage index reclassifications in FY 2023 that will continue for FY 2024. 
Of all the hospitals approved for reclassification for FY 2022, FY 2023 
and FY 2024, based upon the review at the time of the proposed rule, 
1,149 (approximately 35 percent) hospitals are in a MGCRB 
reclassification status for FY 2024 (with 196 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 2024, the CBSAs assigned in the FY 2021 
IPPS/LTCH final rule continue to be in effect.
    Applications for FY 2025 reclassifications are due to the MGCRB by 
September 1, 2023. 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 2023 via the 
internet on the CMS website at https://www.cms.gov/Regulations-andGuidance/Review-Boards/MGCRB/index.html. 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.
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 PPS final rule (82 FR 38147 through

[[Page 26981]]

38148), we finalized a policy revision to require a Lugar hospital that 
qualifies for and accepts the out-migration adjustment, or that no 
longer wishes to accept the out-migration adjustment and instead elects 
to return to its deemed urban status, to notify CMS within 45 days from 
the date of public display of the proposed rule at the Office of the 
Federal Register. These revised notification timeframes were effective 
beginning October 1, 2017. In addition, in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38148), we clarified that both requests to waive and 
to reinstate ``Lugar'' status may be sent to [email protected]. To 
ensure proper accounting, we request hospitals to include their CCN, 
and either ``waive Lugar'' or ``reinstate Lugar'', in the subject line 
of these requests.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we 
clarified that in circumstances where an eligible hospital elects to 
receive the outmigration adjustment within 45 days of the public 
display date of the proposed rule at the Office of the Federal Register 
in lieu of its Lugar wage index reclassification, and the county in 
which the hospital is located would no longer qualify for an out-
migration adjustment when the final rule (or a subsequent correction 
notice) wage index calculations are completed, the hospital's request 
to accept the outmigration adjustment would be denied, and the hospital 
would be automatically assigned to its deemed urban status under 
section 1886(d)(8)(B) of the Act. We stated that final rule wage index 
values would be recalculated to reflect this reclassification, and in 
some instances, after taking into account this reclassification, the 
out-migration adjustment for the county in question could be restored 
in the final rule. However, as the hospital is assigned a Lugar 
reclassification under section 1886(d)(8)(B) of the Act, it would be 
ineligible to receive the county outmigration adjustment under section 
1886(d)(13)(G) of the Act.

J. Proposed Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section 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 2023 IPPS/LTCH PPS final rule (87 FR 
49012), we have applied the same policies, procedures, and computations 
since FY 2012. We are proposing to use them again for FY 2024, 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 2024, 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 2024, we 
are not proposing any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).)
    Table 2 associated with this proposed rule (which is available via 
the CMS website) includes the proposed out-migration adjustments for 
the FY 2024 wage index. In addition, Table 4A associated with this 
proposed 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 2024 
identified by FIPS county code, the proposed FY 2024 out-migration 
adjustment, and the number of years the adjustment will be in effect. 
We refer readers to section V.I. of the Addendum of this proposed rule 
for instructions on accessing IPPS tables that are posted on the CMS 
websites identified in this proposed rule.

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 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 2023 IPPS/LTCH PPS 
final rule (87 FR 49004) for a discussion of our current policy to 
calculate the rural floor with the wage

[[Page 26982]]

data of urban hospitals reclassifying to rural areas under 412.103. We 
also refer readers to section III.G.1. of the preamble of this proposed 
rule with regard to our proposal to modify how we calculate the rural 
wage index and its implications for the rural floor.
    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. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49012 
and 49013), we added 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. 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 3rd position of the CCN. These remote locations 
of hospitals with 412.103 rural reclassification status in a different 
CBSA are identified in Table 2, and hospitals should evaluate potential 
wage index outcomes for its remote location(s) when withdrawing or 
terminating MGCRB reclassification, or canceling Sec.  412.103 rural 
reclassification status.
    Finally, in section V.C.2. of the preamble of this proposed rule, 
we are proposing to change the effective date of rural reclassification 
for a hospital qualifying for rural reclassification under Sec.  
412.103(a)(3) by meeting the criteria for SCH status (other than being 
located in a rural area), and also applying to obtain SCH status under 
Sec.  412.92, where eligibility for SCH classification depends on a 
hospital merger. Specifically, we are proposing that in these 
circumstances, and subject to the requirements set forth at proposed 
new Sec.  412.92(b)(2)(vi), the effective date for rural 
reclassification would be as of the effective date set forth in 
proposed new Sec.  412.92(b)(2)(vi).
    We are also proposing in section V.C.2 of the preamble of this 
proposed rule to make a conforming change to the regulations at Sec.  
412.103(d) to modify the effective date of rural reclassification for a 
hospital qualifying for rural reclassification under Sec.  
412.103(a)(3) by meeting the criteria for SCH status (other than being 
located in a rural area), and also applying to obtain SCH status under 
Sec.  412.92 where eligibility for SCH classification depends on a 
hospital merger. We are proposing to amend Sec.  412.103(d)(1) and to 
add new paragraph Sec.  412.103(d)(3) to provide that, subject to the 
hospital meeting the requirements set forth at proposed Sec.  
412.92(b)(2)(vi), the effective date for rural reclassification for 
such hospital would be as of the effective date determined under Sec.  
412.92(b)(2)(vi).
    We refer the reader to section V.C.2 of the preamble of this 
proposed rule for complete details on these proposals.

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 2024 wage index 
were made available on May 23, 2022, through the internet on the CMS 
website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2024-wage-index-home-page.
    On January 30, 2023, we posted a public use file (PUF) at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2024-wage-index-home-page containing FY 2024 wage index 
data available as of January 30, 2023. 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, 
2019 through September 30, 2020; that is, FY 2020 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 30, 2023 
wage data PUF, and a tab containing the CY 2019 occupational mix data 
of the hospitals deleted from the January 30, 2023 occupational mix 
PUF. In a memorandum dated January 31, 2023, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
January 30, 2023 wage index data PUFs, and the process and timeframe 
for requesting revisions in accordance with the FY 2024 Hospital Wage 
Index Development Time Table available at https://www.cms.gov/files/document/fy-2024-hospital-wage-index-development-time-table.pdf.
    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 3, 2022, 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 23, 2022, and the process and timeframe 
for requesting revisions.
    If a hospital wished to request a change to its data as shown in 
the May 23, 2022, 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, 2022. 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.
    November 4, 2022, 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 2023. CMS published the wage 
index PUFs that included hospitals' revised wage index data on January 
30, 2023. Hospitals had until February 15, 2023, to submit requests to 
the MACs to correct errors in

[[Page 26983]]

the January 30, 2023 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 30, 2023, 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, 2023, for 
the FY 2024 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 20, 2023. 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) is April 3, 
2023. Data that were incorrect in the preliminary or January 30, 2023 
wage index data PUFs, but for which no correction request was received 
by the February 15, 2023 deadline, are not considered for correction at 
this stage. In addition, April 3, 2023, is the deadline for hospitals 
to dispute data corrections made by CMS of which the hospital was 
notified after the January 30, 2023, PUF and at least 14 calendar days 
prior to April 3, 2023 (that is, March 20, 2023), 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 3, 2023, for the 
FY 2024 wage index). We refer readers to the FY 2024 Hospital Wage 
Index Development Time Table for complete details.
    Hospitals are given the opportunity to examine Table 2 associated 
with this proposed rule, which is listed in section VI. of the Addendum 
to the proposed rule and available via the internet on the CMS website 
at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2024-wage-index-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 2024 wage index 
which was constructed from FY 2020 data. We note 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 2023.
    We plan to post the final wage index data PUFs on April 28, 2023, 
on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2024-wage-index-home-page. 
The April 2023 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 
(the process for disputing revisions submitted to CMS by the MACs by 
March 20, 2023, 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), as previously described.
    After the release of the April 2023 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 20, 2023.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 30, 
2023, 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 2023 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 is given the opportunity to notify both its MAC and CMS 
regarding why the hospital believes an error exists and provide all 
supporting information, including relevant dates (for example, when it 
first became aware of the error). The hospital is required to send its 
request to CMS and to the MAC so that it was received no later than May 
26, 2023. May 26, 2023, is also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital is notified on or 
after 13 calendar days prior to April 1, 2023 (that is, March 19, 
2023), and at least 14 calendar days prior to May 26, 2023 (that is, 
May 12, 2023), 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 26, 2023 (that is, 
May 13, 2023), may be appealed to the Provider Reimbursement Review 
Board (PRRB)). In accordance with the FY 2024 Hospital Wage Index 
Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy-2024-hospital-wage-index-development-time-table.pdf, the May appeals are required to be sent via mail and 
email to CMS and the MACs. We refer readers to the FY 2024 Hospital 
Wage Index Development Time Table for complete details.
    Verified corrections to the wage index data received timely (that 
is, by May 26, 2023) by CMS and the MACs will be incorporated into the 
final FY 2024 wage index, which will be effective October 1, 2023.
    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 2024 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

[[Page 26984]]

attention. Moreover, because hospitals will have access to the final 
wage index data PUFs by late April 2023, 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 2024 wage index 
by August 2023, and the implementation of the FY 2024 wage index on 
October 1, 2023. 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 26, 
2023, 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 26, 2023, for the FY 2024 
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 26, 2023, deadline for the 
FY 2024 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 26, 2023 deadline for the FY 2024 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 30 Public Use 
File (PUF)
    The process set forth with the wage index time table discussed in 
section III.L.1. of the preamble of this proposed rule allows hospitals 
to request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data in order 
to ensure the accuracy of the wage index. As we explained in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of 
the Act requires the Secretary to adjust the proportion of hospitals' 
costs attributable to wages and wage-related costs for area differences 
reflecting the relative hospital wage level in the geographic areas of 
the hospital compared to the national average hospital wage level. We 
believe that, under section 1886(d)(3)(E) of the Act, we have 
discretion to make corrections to hospitals' data to help ensure that 
the costs attributable to wages and wage-related costs in fact 
accurately reflect the relative hospital wage level in the hospitals' 
geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. Since the origin of the 
IPPS, the wage index has been subject to its own annual review process, 
first by the MACs, and then by CMS. As a standard practice, after each 
annual desk review, CMS reviews the results of the MACs' desk reviews 
and focuses on items flagged during the desk review, requiring that, if 
necessary, hospitals provide additional documentation, adjustments, or 
corrections to the data. This ongoing communication with hospitals 
about their wage data may result in the discovery by CMS of additional 
items that were reported incorrectly or other data errors, even after 
the posting of the January 30 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

[[Page 26985]]

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 30 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 30 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 2024 Hospital Wage Index Development Time Table, 
as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 
38156).

M. Proposed 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 FY 
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 45193 and 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.
    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 this proposed rule, 
for FY 2024, we are not proposing to make any further changes to the 
labor-related share. For FY 2024, we are proposing to continue to use a 
labor-related share of 67.6 percent for discharges occurring on or 
after October 1, 2023.
    As discussed in section V.B. of the preamble of this proposed rule, 
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 
percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2024, we are 
not proposing a Puerto Rico-specific labor-related share percentage or 
a nonlabor-related share percentage.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2024 IPPS/LTCH PPS proposed rule and available via 
the internet on the CMS website, reflect the proposed national labor-
related share. Table 1C, in section VI. of the Addendum to this FY 2024 
IPPS/LTCH PPS proposed rule and available via the internet on the CMS 
website, reflects the proposed national labor-related share for 
hospitals located in Puerto Rico. For FY 2024, for all IPPS hospitals 
(including Puerto Rico hospitals) whose wage indexes are less than or 
equal to 1.0000, we are proposing to apply the wage index to a labor-
related share of 62 percent of the national standardized amount. For 
all IPPS hospitals

[[Page 26986]]

(including Puerto Rico hospitals) whose wage indexes are greater than 
1.000, for FY 2024, we are proposing to apply the wage index to a 
proposed labor-related share of 67.6 percent of the national 
standardized amount.

IV. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2024 (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 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] TP01MY23.254

    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 
(Pub. L. 111-148), 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. 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] TP01MY23.255

    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

[[Page 26987]]

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.\158\ We refer to this payment as the ``empirically 
justified Medicare DSH payment.''
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    \158\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/Mar07_EntireReport.pdf.
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    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] TP01MY23.256

    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 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

[[Page 26988]]

that are available). For this 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 
note that FY 2020 SSI ratios available on the CMS website were the most 
recent available SSI ratios at the time of developing this proposed 
rule.\159\ If more recent data on DSH eligibility become available 
before the final rule, we would use such data in the final rule.
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    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 2024.
    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.
    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. Legislation has extended the MDH program into FY 2024. The 
MDH program was initially extended through December 17, 2022, by 
section 102 of the Continuing Appropriations and Ukraine Supplemental 
Appropriations Act, 2023 (Pub. L. 117-180), and through December 24, 
2022, by section 102 of the Further Continuing Appropriations and 
Extensions Act, 2023 (Pub. L. 117-229). Section 4102 of the Continuing 
Appropriations Act, 2023 (Pub. L. 117-328), enacted on December 29, 
2022, amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of 
the Act to provide for an extension of the MDH program through October 
1, 2024 (that is, for discharges occurring on or before September 30, 
2024). We refer readers to section V.F. of the preamble of this 
proposed rule for further discussion of the MDH program. We continue to 
make determinations 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, 
which started 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. On October 13, 2022, CMS 
announced that the BPCI Advanced Model would be extended for two years. 
Accordingly, the Model's final performance year will end on December 
31, 2025. For further information regarding the BPCI Advanced model, we 
refer readers to the CMS website at https://innovation.cms.gov/innovation-models/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, 
which concludes on December 31, 2026, Maryland hospitals are not paid 
under the IPPS and are 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 
and uncompensated care payments. (78 FR 50623 and 50624).
     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. 111-
148). The period of performance for this 5-year extension period ended 
December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L. 
114-255), enacted December 13, 2016, again amended section 410A of 
Public Law 108-173 to require a 10-year extension period (in place of 
the 5-year extension required by the Affordable Care Act), therefore 
requiring an additional 5-year participation period for the 
demonstration program. Section 15003 of Public Law 114-255 also 
required a

[[Page 26989]]

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. 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 proposed rule, we believe 26 
hospitals may participate in the demonstration program at the start of 
FY 2024.

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.

D. Supplemental Payment for Indian Health Service (IHS) and Tribal 
Hospitals and Puerto Rico Hospitals

    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 
49051), we established a new supplemental payment for IHS/Tribal 
hospitals and hospitals located in Puerto Rico for FY 2023 and 
subsequent fiscal years. This payment was established to help to 
mitigate the impact of the decision to discontinue the use of low-
income insured days as proxy for uncompensated care costs for these 
hospitals and to prevent undue long-term financial disruption for these 
providers. The regulations located at 42 CFR 412.106(h) govern the 
supplemental payment. In brief, the supplemental payment for a fiscal 
year is 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)(1). The base year amount is 
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 (that is, FY 2024 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. If the base year amount is equal to or lower than the hospital's 
uncompensated care payment for the current fiscal year, then 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.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048 
and 49049), the eligibility and payment processes for the supplemental 
payment are consistent with the processes for determining eligibility 
to receive interim and final uncompensated care payments adopted in FY 
2014 IPPS/LTCH final rule. We note that the MAC will 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.

E. Uncompensated Care Payments

    As we discussed earlier, section 1886(r)(2) of the Act provides 
that, for each eligible hospital in FY 2014 and subsequent years, the 
uncompensated care payment is the product of three factors. These three 
factors represent our estimate of 75 percent of the amount of Medicare 
DSH payments that would otherwise have been paid, an adjustment to this 
amount for the percent change in the national rate of uninsurance 
compared to the rate of uninsurance in 2013, and each eligible 
hospital's estimated uncompensated care amount relative to the 
estimated uncompensated care amount for all eligible hospitals. In this 
section of this proposed rule, we discuss the data sources and 
methodologies for computing each of these factors, our final policies 
for FYs 2014 through 2023, and our proposed policies for FY 2024.
1. Proposed Calculation of Factor 1 for FY 2024
    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

[[Page 26990]]

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 this FY 2024 IPPS/LTCH PPS proposed rule, in order to determine 
Factor 1 in the uncompensated care payment formula for FY 2024, we are 
proposing to continue the policy established in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS 
interim final rule with comment period (78 FR 61194) of determining 
Factor 1 by developing estimates of both the aggregate amount of 
Medicare DSH payments that would be made for FY 2024 in the absence of 
section 1886(r)(1) of the Act and the aggregate amount of empirically 
justified Medicare DSH payments to hospitals under section 1886(r)(1) 
of the Act. Consistent with the policy that has applied in previous 
years, these estimates will not be revised or updated subsequent to the 
publication of our final projections in the FY 2024 IPPS/LTCH PPS final 
rule.
    Therefore, in order to determine the two elements of proposed 
Factor 1 for FY 2024 (Medicare DSH payments prior to the application of 
section 1886(r)(1) of the Act, and empirically justified Medicare DSH 
payments after application of section 1886(r)(1) of the Act), for this 
proposed rule, we used the most recently available projections of 
Medicare DSH payments for the fiscal year, as calculated by CMS' Office 
of the Actuary (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 
2021 through FY 2024 are discussed in the table titled ``Factors 
Applied for FY 2021 through FY 2024 to Estimate Medicare DSH 
Expenditures Using FY 2020 Baseline''.
    For purposes of calculating Factor 1 and modeling the impact of 
this FY 2024 IPPS/LTCH PPS proposed rule, we used the Office of the 
Actuary's January 2023 Medicare DSH estimates, which were based on data 
from the September 2022 update of the Medicare Hospital Cost Report 
Information System (HCRIS) and the FY 2023 IPPS/LTCH PPS final rule 
IPPS Impact File, published in conjunction with the publication of the 
FY 2023 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 2023 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 2023 Medicare DSH estimates. The 26 hospitals 
that are anticipated to participate in the Rural Community Hospital 
Demonstration Program in FY 2024 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 this proposed rule, using the data sources as previously 
discussed, the Office of the Actuary's January 2023 estimate of 
Medicare DSH payments for FY 2024 without regard to the application of 
section 1886(r)(1) of the Act, is approximately $13.621 billion. 
Therefore, also based on the January 2023 estimate, the estimate of 
empirically justified Medicare DSH payments for FY 2024, with the 
application of section 1886(r)(1) of the Act, is approximately $3.405 
billion (or 25 percent of the total amount of estimated Medicare DSH 
payments for FY 2024). Under Sec.  412.106(g)(1)(i) of the regulations, 
Factor 1 is the difference between these two OACT estimates. Therefore, 
we are proposing that Factor 1 for FY 2024 would be $10,216,040,319.50, 
which is equal to 75 percent of the total amount of estimated Medicare 
DSH payments for FY 2024 ($13.621 billion minus $3.405 billion). We 
note that consistent with our approach in previous rulemakings, OACT 
intends to use more recent data that may become available for purposes 
of projecting the final Factor 1 estimates for the FY 2024 IPPS/LTCH 
PPS final rule.
    We note that 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 expect that the 
Midsession Review will have updated economic assumptions and actuarial 
analysis, which will 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 ``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 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).
    In this proposed rule, we include information regarding the data 
sources, methods, and assumptions employed by the actuaries in 
determining the OACT's estimate of Factor 1. In summary, we indicate 
the historical HCRIS data

[[Page 26991]]

update OACT used to identify Medicare DSH payments, we explain that the 
most recent Medicare DSH payment adjustments provided in the IPPS 
Impact File were used, and we provide the components of all the update 
factors that were applied to the historical data to estimate the 
Medicare DSH payments for the upcoming fiscal year, along with the 
associated rationale and assumptions. This discussion also includes a 
description of the ``Other'' and ``Discharges'' assumptions, and also 
provides additional information regarding how we address the Medicaid 
and CHIP expansion.
    The Office of the Actuary's estimates for FY 2024 for this proposed 
rule began with a baseline of $13.257 billion in Medicare DSH 
expenditures for FY 2020. The following table shows the factors applied 
to update this baseline through the current estimate for FY 2024:
[GRAPHIC] [TIFF OMITTED] TP01MY23.257

    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 2021 and FY 2022 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 2023 is based on 
preliminary data. The discharge figure for FY 2024 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 2021 to FY 
2024 incorporate the actual impact and estimated future impact from the 
COVID-19 pandemic. The case-mix column shows the estimated change in 
case-mix for IPPS hospitals. The case-mix figures for FY 2021 and FY 
2022 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 2023 is based on preliminary data and the case-
mix figure for FY 2024 is an assumption based on recent trends 
recovering back to the long-term trend. The case-mix factor figures for 
FY 2021 to FY 2024 incorporate the actual impact and estimated future 
impact from 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 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 and the end of the PHE declaration. On 
January 30, 2023, the Biden Administration announced its plan to end 
the national emergency declaration and PHE declaration on May 11, 2023. 
Based on the most recent available data, Medicaid enrollment is 
estimated to change as follows: 12.3 percent in FY 2021, 8.1 percent in 
FY 2022, 2.0 percent in FY 2023, and -11.1 percent in FY 2024. 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 expansion on Medicare DSH 
expenditures, our actuaries have assumed that the new Medicaid 
enrollees are healthier than the average Medicaid recipient and, 
therefore, use fewer hospital services. Specifically, based on the most 
recent available data at the time of developing this proposed rule, the 
OACT assumed per capita spending for Medicaid beneficiaries who 
enrolled due to the expansion to be approximately 80 percent of the 
average per capita expenditures for a pre-expansion Medicaid 
beneficiary due to the better health of these beneficiaries. The same 
assumption was used for the new Medicaid beneficiaries who enrolled in 
2020 and thereafter due to the COVID-19 pandemic. This assumption is 
consistent with recent internal estimates of Medicaid per capita 
spending pre-expansion and post-expansion. In the future, the 
assumption about the average per-capita expenditures of Medicaid 
beneficiaries who enrolled due to the COVID-19 pandemic may change.
    The following table shows the factors that are included in the 
``Update'' column of the previous table:

[[Page 26992]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.258

2. Calculation of Proposed Factor 2 for FY 2024
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 are proposing to continue to use a 
methodology similar to the one that was used in FY 2018 through FY 2023 
to determine Factor 2 for FY 2024.
    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 2021, 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 2021. 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

[[Page 26993]]

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). Because the 2020 
ACS data were not available, the ACS data were not used for purposes of 
estimating the number of uninsured individuals for 2020.\160\ Rather, 
the 2020 estimate was extrapolated using the 2020/2018 trend from the 
CPS as published by the Census Bureau. The 2021 estimate was based on 
the population share of the uninsured from the NHIS. 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/.
---------------------------------------------------------------------------

    \160\ 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.
---------------------------------------------------------------------------

    The next metrics needed to compute Factor 2 for FY 2024 are 
projections of the rate of uninsurance in both CY 2023 and CY 2024. 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 used the latest NHEA historical data that were 
available at the time of their construction (that is, through 2020). 
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,\161\ 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 and Health Insurance Enrollment: 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.
---------------------------------------------------------------------------

    \161\ https://www.cms.gov/files/document/2022-medicare-trustees-report.pdf.
---------------------------------------------------------------------------

b. Proposed Factor 2 for FY 2024
    Using these data sources and the previously described 
methodologies, at the time of developing this proposed rule, OACT has 
estimated that the uninsured rate for the historical, baseline year of 
2013 was 14 percent and for CYs 2023 and 2024 is 9.3 percent and 9.2 
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 this FY 2024 IPPS/LTCH PPS proposed rule for further 
details on the methodology and assumptions that were used in the 
projection of these rates of uninsurance.\162\
---------------------------------------------------------------------------

    \162\ OACT Memorandum on Certification of Rates of Uninsured. 
March 3, 2023. 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 are proposing to continue to apply the 
weighted average approach used in past fiscal years in order to 
estimate the rate of uninsurance for FY 2024.
    The OACT certified the estimate of the rate of uninsurance for FY 
2024 determined using this weighted average approach to be reasonable 
and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. 
We note that we may also consider the use of more recent data that may 
become available for purposes of estimating the rates of uninsurance 
used in the calculation of the final Factor 2 for FY 2024. For example, 
(1) more recent data may become available regarding the impacts of the 
expiration of the Families First Coronavirus Response Act's continuous 
enrollment provision for Medicaid (which, once no longer in effect, 
will permit states to actively begin disenrolling beneficiaries no 
longer eligible for the program starting on April 1, 2023); (2) the 
Inflation Reduction Act's extension of enhanced Marketplace premium tax 
credits through 2025; and (3) the impacts associated with the Internal 
Revenue Services' amended regulations that expanded eligibility for 
Marketplace subsidies by revising the affordability test of employer 
coverage for family members of employees (87 FR 61979 and 62003). The 
calculation of the proposed Factor 2 for FY 2024 is as follows:

Percent of individuals without insurance for CY 2013: 14 percent.

Percent of individuals without insurance for CY 2023: 9.3 percent.

Percent of individuals without insurance for CY 2024: 9.2 percent.

Percent of individuals without insurance for FY 2024 (0.25 times 0.093) 
+ (0.75 times 0.092): 9.2 percent. 1- [bond]((0.14-0.092)/0.14)[bond] = 
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 are proposing that Factor 
2 for FY 2024 would be 65.71 percent.
    The proposed FY 2024 uncompensated care amount is equivalent to 
proposed Factor 1 multiplied by proposed Factor 2, which is 
$10,216,040,319.50 * 0.6571 = $6,712,960,093.94.
    We are inviting public comments on our proposed Factor 2 for FY 
2024.
3. Calculation of Proposed Factor 3 for FY 2024
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

[[Page 26994]]

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. 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. 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 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. We refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38208 through 38212) for a further 
discussion of the methodology used to determine Factor 3 for FY 2018.
    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

[[Page 26995]]

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, would more accurately reflect a hospital's uncompensated 
care costs, as opposed to averaging multiple years of unaudited and 
audited 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(85 FR 58825).
    In the FY 2021 IPPS/LTCH PPS final rule, we also 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 
final rule (85 FR 58825 through 58828) for a discussion of additional 
topics related to the definition of uncompensated care.
    In the FY 2022 IPPS/LTCH PPS final rule, consistent with the policy 
adopted in the FY 2021 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 (86 FR 45236 through 45243). We continued to use the low-income 
insured days proxy to calculate Factor 3 for these IHS and Tribal 
hospitals and Puerto Rico hospitals for FY 2022.
b. Background on the Methodology Used To Calculate Factor 3 for FY 2023 
and Subsequent Years
    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.
    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 had been 
audited for more than 1 fiscal year under the revised reporting 
instructions. Audited FY 2019 cost reports were available for the 
development of the FY 2023 IPPS/LTCH PPS proposed and final 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 final rule (87 FR 49036 
through 49047), we finalized a policy of using a multi-year average of 
audited Worksheet S-10 data to determine Factor 3 for FY 2023 and 
subsequent fiscal years. We explained our belief that this approach 
would be 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. Under this policy, we used a 2-year 
average of audited FY 2018 and FY 2019 Worksheet S-10 data to calculate 
Factor 3 for FY 2023. However, we also indicated that we expected FY 
2024 would be the first year that 3 years of audited data would be 
available at the time of rulemaking. Accordingly, for FY 2024 and 
subsequent fiscal years, we finalized a policy of using 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. 
Consistent with the approach that we followed when multiple years of 
data were previously used in the Factor 3 methodology, if a hospital 
does not have data for all 3 years used in the Factor 3 calculation, we 
will determine Factor 3 based on an average of the hospital's available 
data. We also discontinued the use of the low-income days proxy to 
determine Factor 3 for IHS and Tribal hospitals and Puerto Rico 
hospitals and instead finalized use of the same multi-year average of 
Worksheet S-10 data to determine Factor 3 for FY 2023 and subsequent 
fiscal years as is used to determine Factor 3 for all other DSH-
eligible hospitals.
    Because we finalized our proposal 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

[[Page 26996]]

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 finalized our proposal 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 did not 
use the same cost report to determine the hospital's uncompensated care 
costs for both FY 2018 and FY 2019. Rather, we used the cost report 
that spans the entirety of FY 2019 to determine uncompensated care 
costs for FY 2019 and we used the hospital's most recent prior cost 
report to determine its uncompensated care costs for FY 2018, provided 
that cost report spans some portion of Federal fiscal year 2018.
(1) Scaling Factor
    To address the effects of calculating Factor 3 using data from 
multiple fiscal years, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49042) we finalized a policy under which we 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 adopted 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. 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.
(2) New Hospital Policy for Purposes of Factor 3
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), we modified 
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 final policy of using multiple years of cost reports to 
determine Factor 3, we defined 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. Under this definition, the cut-off date for 
the new hospital policy is 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 were the 
most recent year of cost reports for which audits of Worksheet S-10 
data had been conducted. Thus, hospitals with CCNs established on or 
after October 1, 2019, were subject to the new hospital policy for FY 
2023.
    Under this modification to the new hospital policy, we continued 
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 will not receive interim 
uncompensated care payments because we would have no 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.We 
also modified the methodology used to calculate Factor 3 for new 
hospitals. Specifically, while we continued to determine the numerator 
of the Factor 3 calculation using the new hospital's uncompensated care 
costs reported on Worksheet S-10 of the hospital's cost report for the 
current fiscal year, we adopted an approach under which we 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. In addition, we applied a 
scaling factor to the Factor 3 calculation for a new hospital. We 
explained 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.
(3) Newly Merged Hospital Policy
    In the FY 2023 IPPS/LTCH PPS final rule, we stated that we would 
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, in the FY 2023 IPPS/LTCH PPS final rule, we stated that we would 
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 modification to the methodology used to determine Factor 3 for new 
hospitals described previously, we finalized a policy for determining 
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 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.
(4) 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). In the FY

[[Page 26997]]

2023 IPPS/LTCH PPS final rule (87 FR 49043), we adopted a process for 
trimming CCRs under which we apply the following steps to determine the 
applicable CCR separately for each fiscal year that is included as part 
of the multi-year average used to determine Factor 3:
    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'').
    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)).
(5) 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, 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 any fiscal year that is included as a part of the multi-
year average 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. For example, if a hospital's FY 2018 
cost report is determined to include potentially aberrant data, data 
from its FY 2019 cost report would be used for the ratio calculation.
    However, we note that we have audited the Worksheet S-10 data that 
will be used in the Factor 3 calculation for a number of hospitals. 
Because the UCC data for these hospitals have been subject to audit, we 
believe 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, it is unnecessary to apply the trim 
methodology for a fiscal year for which a hospital's UCC data have been 
audited.
    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). Accordingly, in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49044), we stated that in addition to the UCC trim 
methodology, we will continue to apply a trim specific to certain 
hospitals that do not have audited Worksheet S-10 data for one or more 
of the fiscal years that are used in the Factor 3 calculation. For FY 
2023 and subsequent fiscal years, in the rare case that a hospital's 
insured patients' charity care costs for a fiscal year 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 will exclude the hospital from the 
prospective Factor 3 calculation. This trim will 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 will apply this trim in 
place of the existing UCC trim methodology. 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.
    Similar to the approach initially adopted in the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 45245 and 45246), in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49044), we also stated that we would continue to use 
a threshold of 3 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 are 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 modified the 
calculation to include Worksheet S-10 data from IHS/Tribal hospitals 
and Puerto Rico hospitals consistent with our final policy decision to 
begin using Worksheet S-10 data to determine Factor 3 for these 
hospitals. In addition, we finalized a policy of applying the same 
threshold amounts originally calculated for the FY 2018 reports to 
identify potentially aberrant data for FY 2023 and subsequent fiscal 
years in order to facilitate transparency and predictability. If a 
hospital subject to this trim is determined to be DSH-eligible at cost 
report settlement, the MAC will calculate the hospital's Factor 3 using 
the same methodology used to calculate Factor 3 for new hospitals.
c. Methodology for Calculating Factor 3 for FY 2024
    For FY 2024, we are proposing to follow the same methodology as 
applied in FY 2023 and that is described in the

[[Page 26998]]

previous section of this proposed rule to determine Factor 3 using the 
most recent 3 years of audited cost reports from FY 2018, FY 2019, and 
2020. For purposes of this FY 2024 IPPS/LTCH PPS proposed rule, we are 
using reports from the December 2022 HCRIS extract to calculate Factor 
3. We intend to use the March 2023 update of HCRIS to calculate the 
final Factor 3 for the FY 2024 IPPS/LTCH PPS final rule.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized our proposal 
to determine Factor 3 for IHS and Tribal hospitals and Puerto Rico 
hospitals based on uncompensated care data reported on Worksheet S-10, 
and discontinued the use of low-income insured days as a proxy for the 
uncompensated care costs of these hospitals. Beginning in FY 2023, we 
established a new supplemental payment for IHS/Tribal hospitals and 
Puerto Rico hospitals, because we recognized that discontinuing the use 
of the low-income insured days proxy and relying 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 significant financial disruption for these hospitals. We 
refer readers to section IV.D of this proposed rule for a further 
discussion of these payments. We note that we are not proposing any 
changes to the methodology for determining supplemental payments, and 
we will calculate the supplemental payments to eligible IHS/Tribal and 
Puerto Rico hospitals consistent with the methodology described in the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051) and in the 
regulation at Sec.  412.106(h).
    Consistent with the policy adopted in the FY 2023 IPPS/LTCH PPS 
final rule and codified in the regulations at Sec.  
412.106(g)(1)(iii)(C)(11) for FY 2024 and subsequent fiscal years, we 
will use 3 years of audited Worksheet S-10 data to calculate Factor 3 
for all eligible hospitals, including IHS and Tribal hospitals and 
Puerto Rico hospitals that have a cost report for 2013.
    Step 1: Select the hospital's longest cost report for each of the 
most recent 3 years of Federal fiscal year (FY) audited cost reports 
(FY 2018, FY 2019, and FY 2020). (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 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 
cost report data from the most recent 3 years of audited cost reports 
(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, 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 purposes of identifying new hospitals, for FY 2024, the FY 2020 
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, 2020, will be subject to the new 
hospital policy in FY 2024. If a new hospital is ultimately determined 
to be eligible for Medicare DSH payments for FY 2024, 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 2024 cost report, and the 
denominator is the sum of the uncompensated care costs reported on 
Worksheet S-10 of the FY 2020 cost reports for all DSH-eligible 
hospitals. In addition, we will apply a scaling factor, as discussed 
previously, to the Factor 3 calculation for a new hospital. As we 
explained in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), 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.
    For FY 2024, the eligibility of a newly merged hospital to receive 
interim uncompensated care payments and the amount of any interim 
uncompensated care payments, will be based on the uncompensated care 
costs from the FY 2018, FY 2019, and FY 2020 cost reports available for 
the surviving CCN at the time the final rule is developed. 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 FY 2024 cost report. That is, we will 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 
2024 cost report. The denominator will be the sum of the uncompensated 
care costs reported on Worksheet S-10 of the FY 2020 cost reports for 
all DSH-eligible hospitals, which is the most recent fiscal year for 
which audits have been conducted. We will also apply a scaling factor, 
as described previously.
    Under the CCR trim methodology, for purposes of this FY 2024 
proposed rule, the statewide average CCR was applied to 7 hospitals' FY 
2018 reports, of which 3 hospitals had FY 2018 Worksheet S-10 data. The 
statewide average CCR was applied to 13 hospitals' FY 2019 reports, of 
which 6 hospitals had FY 2019 Worksheet S-10 data. The statewide 
average CCR was applied to 10 hospitals' FY 2020 reports, of which 3 
hospitals had FY 2020 Worksheet S-10 data.
    For a hospital that is subject to the trim for potentially aberrant 
data and are ultimately determined to be DSH-eligible at cost report 
settlement, its uncompensated care payment will be calculated only 
after the hospital's reporting of insured charity care costs on its FY 
2024 Worksheet S-10 has been reviewed. Accordingly, the MAC will 
calculate a Factor 3 for the hospital only after reviewing the 
uncompensated care information reported on Worksheet S-10 of the 
hospital's FY 2024 cost report. Then we will calculate Factor 3 for a 
hospital subject to this alternative trim using the same methodology 
used to determine Factor 3 for new hospitals.

[[Page 26999]]

Specifically, the numerator will reflect the uncompensated care costs 
reported on the hospital's FY 2024 cost report, while the denominator 
will reflect the sum of the uncompensated care costs reported on 
Worksheet S-10 of the FY 2020 cost reports of all DSH-eligible 
hospitals. In addition, we will apply a scaling factor, as discussed 
previously, to the Factor 3 calculation for the hospital. We continue 
to 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.
    For purposes of the FY 2024 IPPS/LTCH PPS final rule, we intend to 
use data from the March 2023 HCRIS extract for this calculation, which 
will be the latest quarterly HCRIS extract that is publicly available 
at the time of the development of that final rule.
    Regarding requests from providers to amend and/or reopen previously 
audited Worksheet S-10 data for the most recent 3 cost reporting years 
that are used in the methodology for calculating Factor 3, we note that 
MACs follow normal timelines and procedures. For purposes of the Factor 
3 calculation for FY 2024, any amended reports and/or reopened reports 
would need to have completed the amended report and/or reopened report 
submission processes by the end of March 2023. In other words, if the 
amended report and/or reopened report is not available for the March 
HCRIS extract, then that amended and/or reopened report data will not 
be part of the FY 2024 IPPS/LTCH PPS final rule's Factor 3 calculation. 
We note that the March HCRIS data extract will be available during the 
comment period for this proposed rule if providers want to verify that 
their amended and/or reopened data is reflected in the March HCRIS 
extract.
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. Typically, we use 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. In the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49045), we calculated interim uncompensated care 
payments based on the 3-year average of discharges from FY 2018, FY 
2019, and FY 2021.
    Consistent with the approach adopted in the FY 2023 IPPS/LTCH PPS 
final rule, for FY 2024, we are proposing to calculatethe average of FY 
2019, FY 2021, and FY 2022 historical discharge data, rather than a 3-
year average of the most recent 3 years of discharge data from FY 2020, 
FY 2021, and FY 2022. We continue to believe that computing a 3-year 
average using the most recent 3 years of discharge data would 
potentially underestimate the number of discharges for FY 2024, due to 
the effects of the COVID-19 pandemic during FY 2020, which was the 
first year of the COVID-19 pandemic. Therefore, we believe that our 
proposed approach may result in a better estimate of the number of 
discharges during FY 2024, for purposes of the interim uncompensated 
care payment calculation. In addition, we note that including discharge 
data from FY 2022 to compute this 3-year average is consistent with the 
proposed use of FY 2022 Medicare claims in the IPPS ratesetting, as 
discussed in section I.E. of the preamble of this FY 2024 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 2024. 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 2024.
    We are requesting comments on our proposal to use data from FY 
2019, FY 2021, and FY 2022 to compute a 3-year average of the number of 
discharges in order to calculate the per discharge amount for purposes 
of making interim uncompensated care payments to projected DSH eligible 
hospitals during FY 2024. 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 will 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 in the FY 2023 IPPS/LTCH final rule for a more detailed 
discussion of the steps for

[[Page 27000]]

determining the operating and capital Federal payment rate and the 
outlier payment calculation (87 FR 49431 through 49432). 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.
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 proposed rule, we will publish on the 
CMS website a table listing Factor 3 for hospitals that we estimate 
will receive empirically justified Medicare DSH payments in FY 2024 
(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 11 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 have 60 days from the date of public display of this FY 
2024 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 this proposed rule and to notify CMS in writing of 
issues related to mergers and/or to report potential upload 
discrepancies due to MAC mishandling of Worksheet S-10 data during the 
report submission process (for example, report not reflecting audit 
results due to MAC mishandling or most recent report differs from 
previously accepted amended report due to MAC mishandling). Comments 
raising issues or concerns that are specific to the information 
included in the table and supplemental data file should be submitted by 
email to the CMS inbox at [email protected]. We will address 
comments related to mergers and/or reporting upload discrepancies 
submitted to the CMS DSH inbox as appropriate in the table and the 
supplemental data file that we publish on the CMS website in 
conjunction with the publication of the FY 2024 IPPS/LTCH PPS final 
rule. All other comments submitted in response to our proposals for FY 
2024 must be 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.
    Hospitals had 15 business days from the date of public display of 
the FY 2023 IPPS/LTCH PPS final rule to review and submit via email any 
updated information on mergers and/or to report upload discrepancies 
(87 FR 49047). We did not receive comments during this notification 
period regarding mergers or data upload issues. In the FY 2023 IPPS/
LTCH PPS final rule, we also noted that the historical 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 the annual final rule.
    As we have stated in previous rulemaking (see, for example, 87 FR 
49046 and 86 FR 45249), we believe 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. 
Therefore, for FY 2024 and subsequent fiscal years, we are proposing to 
no longer have the 15 business day time period after display of the 
final rule for hospitals to submit any updated information on mergers 
and/or to report upload discrepancies, because there will have been 
sufficient opportunity for hospitals to provide information on these 
issues during the comment period for the proposed rule. We are inviting 
public comments on this proposal.

V. Other Decisions and Changes to the IPPS for Operating System

A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer 
Policy and MS-DRG Special Payments Policies (Sec.  412.4)

1. Background
    Existing regulations at 42 CFR 412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to

[[Page 27001]]

postacute care equals or exceeds the 55th percentile for all MS-DRGs 
and the proportion of short-stay discharges to postacute care to total 
discharges in the MS-DRG exceeds the 55th percentile for all MS-DRGs, 
CMS will apply the postacute care transfer policy to that MS-DRG and to 
any other MS-DRG that shares the same base MS-DRG. The statute directs 
us to identify MS-DRGs based on a high volume of discharges to 
postacute care facilities and a disproportionate use of postacute care 
services. As discussed in the FY 2006 IPPS final rule (70 FR 47416), we 
determined that the 55th percentile is an appropriate level at which to 
establish these thresholds. In that same final rule (70 FR 47419), we 
stated that we will not revise the list of DRGs subject to the 
postacute care transfer policy annually unless we are making a change 
to a specific MS-DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6)). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was 
deemed a ``qualified discharge'' if the individual was discharged to 
one of the following postacute care settings:
     A hospital or hospital unit that is not a subsection (d) 
hospital.
     A skilled nursing facility.
     Related home health services provided by a home health 
agency provided within a timeframe established by the Secretary 
(beginning within 3 days after the date of discharge).
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
provided by a hospice program as a qualified discharge, effective for 
discharges occurring on or after October 1, 2018. In the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41394), we made conforming amendments to 
Sec.  412.4(c) of the regulation to include discharges to hospice care 
occurring on or after October 1, 2018 as qualified discharges. We 
specified that hospital bills with a Patient Discharge Status code of 
50 (Discharged/Transferred to Hospice--Routine or Continuous Home Care) 
or 51 (Discharged/Transferred to Hospice, General Inpatient Care or 
Inpatient Respite) are subject to the postacute care transfer policy in 
accordance with this statutory amendment.
2. Proposed Changes for FY 2024
    As discussed in section II.C. of the preamble of this proposed 
rule, based on our analysis of FY 2022 MedPAR claims data, we are 
proposing to make changes to a number of MS-DRGs, effective for FY 
2024. Specifically, we are proposing to do the following:
     Reassign procedures describing thrombolysis when performed 
for pulmonary embolism from MS-DRGs 166, 167, and 168 (Other 
Respiratory System O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively) to proposed new MS-DRG 173 (Ultrasound Accelerated 
and Other Thrombolysis for Pulmonary Embolism).
     Create proposed new base MS-DRG 212 (Concomitant Aortic 
and Mitral Valve Procedures) for cases reporting an aortic valve repair 
or replacement procedure and a mitral valve repair or replacement 
procedure in addition to another concomitant cardiovascular procedure.
     Reassign the procedures involving cardiac defibrillator 
implants by deleting MS-DRGs 222 through 227 (Cardiac Defibrillator 
Implant, with and without Cardiac Catheterization, with and without 
AMI/HF/shock, with and without MCC, respectively) and create proposed 
new MS-DRG 275 (Cardiac Defibrillator Implant with Cardiac 
Catheterization and MCC) for cases reporting cardiac defibrillator 
implant with cardiac catheterization with MCC, and proposed new MS-DRGs 
276 and 277 (Cardiac Defibrillator Implant with MCC and without MCC, 
respectively) for cases reporting cardiac defibrillator implant.
     Reassign procedures describing thrombolysis performed on 
peripheral vascular structures from MS-DRGs 252, 253, and 254 (Other 
Vascular Procedures with MCC, with CC, and without CC/MCC, 
respectively) to proposed new MS-DRG 278 (Ultrasound Accelerated and 
Other Thrombolysis of Peripheral Vascular Structures with MCC) and 
proposed new MS-DRG 279 (Ultrasound Accelerated and Other Thrombolysis 
of Peripheral Vascular Structures without MCC).
     Create proposed new MS-DRGs 323 and 324 (Coronary 
Intravascular Lithotripsy with Intraluminal Device with MCC and without 
MCC, respectively) for cases reporting C-IVL with placement of an 
intraluminal device, create proposed new base MS-DRG 325 (Coronary 
Intravascular Lithotripsy without Intraluminal Device) for cases 
reporting C-IVL without the placement of an intraluminal device, delete 
MS-DRG 246 (Percutaneous Cardiovascular Procedures with Drug-Eluting 
Stent with MCC or 4+ Arteries or Stents), MS-DRG 247 (Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent without MCC), MS-DRG 
248 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent 
with MCC or 4+ Arteries or Stents) and MS-DRG 249 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent without MCC) and 
create proposed new MS-DRG 321(Percutaneous Cardiovascular Procedures 
with Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices) 
and proposed new MS-DRG 322 (Percutaneous Cardiovascular Procedures 
with Intraluminal Device without MCC).
     Delete MS-DRGs 338 through 340 (Appendectomy with 
Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 341 through 343 (Appendectomy without 
Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) describing appendectomy with and without a complicated 
principal diagnosis and create proposed new MS-DRGs 397, 398, and 399 
(Appendix Procedures with MCC, with CC, without CC/MCC, respectively).
    In light of the proposed changes to the MS-DRGs for FY 2024, 
according to the regulations under Sec.  412.4(d), we have evaluated 
the MS-DRGs using the general postacute care transfer policy criteria 
and data from the FY 2022 MedPAR file. If an MS-DRG qualified for the 
postacute care transfer policy, we also evaluated that MS-DRG under the 
special payment methodology criteria according to regulations at Sec.  
412.4(f)(6). We continue to believe it is appropriate to assess new MS-
DRGs and reassess revised MS-DRGs when proposing reassignment of 
procedure codes or diagnosis codes that would result in material 
changes to an MS-DRG. We note that while CMS is proposing the

[[Page 27002]]

reassignment of procedure codes from MS-DRGs 252, 253, and 254 to 
proposed new MS-DRGs 278 and 279, we do not consider this proposed 
revision to constitute a material change that would warrant 
reevaluation of the postacute care status of MS-DRGs 252, 253, and 254. 
We note this base MS-DRG (MS-DRG 252) does not currently qualify for 
postacute care transfer status. CMS may further evaluate what degree of 
shifts in cases for existing MS-DRGs warrant consideration for the 
review of postacute care transfer and special payment policy status in 
future rulemaking.
    Proposed new MS-DRG 276 would qualify to be included on the list of 
MS-DRGs that are subject to the postacute care transfer policy. As 
described in the regulations at Sec.  412.4(d)(3)(ii)(D), MS-DRGs that 
share the same base MS DRG will all qualify under the postacute care 
transfer policy if any one of the MS-DRGs that share that same base MS-
DRG qualifies. We therefore propose to add proposed new MS-DRGs 276 and 
277 to the list of MS-DRGs that are subject to the postacute care 
transfer policy. MS-DRGs 166, 167, and 168 are currently subject to the 
postacute care transfer policy. As a result of our review, these MS-
DRGs, as proposed to be revised, would continue to qualify to be 
included on the list of MS-DRGs that are subject to the postacute care 
transfer policy.
    Using the December 2022 update of the FY 2022 MedPAR file, we have 
developed the following chart which sets forth the most recent analysis 
of the postacute care transfer policy criteria completed for this 
proposed rule with respect to each of these proposed new or revised MS-
DRGs. For the FY 2024 final rule, we intend to update this analysis 
using the most recent available data at that time.
BILLING CODE 4120-01-P

[[Page 27003]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.259

BILLING CODE 4120-01-C
    During our annual review of proposed new or revised MS-DRGs and 
analysis of the December 2022 update of the FY 2022 MedPAR file, we 
reviewed the list

[[Page 27004]]

of proposed revised or new MS-DRGs that qualify to be included on the 
list of MS-DRGs subject to the postacute care transfer policy for FY 
2024 to determine if any of these MS-DRGs would also be subject to the 
special payment methodology policy for FY 2024. Based on our analysis 
of proposed changes to MS-DRGs included in this proposed rule, we 
determined that proposed new MS-DRG 276 meets the criteria for the MS-
DRG special payment methodology. As described in the regulations at 
Sec.  412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all 
qualify under the MS-DRG special payment policy if any one of the MS-
DRGs that share that same base MS-DRG qualifies. Therefore, we are 
proposing that proposed new MS-DRG 277 also would be subject to the MS-
DRG special payment methodology, effective for FY 2024. For the FY 2024 
final rule, we intend to update this analysis using the most recent 
available data at that time.
[GRAPHIC] [TIFF OMITTED] TP01MY23.260

    The proposed postacute care transfer and special payment policy 
status of these MS-DRGs is reflected in Table 5 associated with this 
proposed rule, which is listed in section VI. of the Addendum to this 
proposed rule and available on the CMS website.

B. Proposed Changes in the Inpatient Hospital Update for FY 2024 (Sec.  
412.64(d))

1. Proposed FY 2024 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 2024, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2023. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.) Specifically, consistent with 
section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act, we are setting the applicable 
percentage increase by applying the following adjustments in the 
following sequence. The applicable percentage increase under the IPPS 
for FY 2024 is equal to the rate-of-increase in the hospital market 
basket for IPPS hospitals in all areas, subject to all of the 
following:
     A reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act.
     A reduction of three-quarters of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful EHR users 
in accordance with section 1886(b)(3)(B)(ix) of the Act.
     An adjustment based on changes in economy-wide 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 are proposing to base the FY 2024 market basket update used to 
determine the applicable percentage increase for the IPPS on IHS Global 
Inc.'s (IGI's) fourth quarter 2022 forecast of the 2018-based IPPS 
market basket rate-of-increase with historical data through third 
quarter 2022, which is estimated to be 3.0 percent. We also are 
proposing that if more recent data subsequently become available (for 
example, a more recent estimate of the market basket update), we would 
use such data, if appropriate, to determine the FY 2024 market basket 
update in the final rule. We also refer commenters to the discussion at 
Appendix B to this proposed rule.
    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

[[Page 27005]]

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 2024, we are proposing a productivity adjustment of 0.2 
percent. Similar to the proposed market basket update, for this 
proposed rule, the estimate of the proposed FY 2024 productivity 
adjustment is based on IGI's fourth quarter 2022 forecast. As noted 
previously, we are proposing that if more recent data subsequently 
become available, we would use such data, if appropriate, to determine 
the FY 2024 productivity adjustment for the final rule.
    Based on these data, we have determined four proposed applicable 
percentage increases to the standardized amount for FY 2024, as 
specified in the following table:
[GRAPHIC] [TIFF OMITTED] TP01MY23.261

    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 and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Therefore, the update to the 
hospital-specific rates for SCHs and MDHs also is subject to section 
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act. As discussed in section V.F. of 
the preamble of this proposed rule, section 4102 of the Consolidated 
Appropriations Act, 2023 (Pub. L. 117-328), enacted on December 29, 
2022, extended the MDH program through FY 2024 (that is, for discharges 
occurring on or before September 30, 2024). We refer readers to section 
V.F. of the preamble of this proposed rule for further discussion of 
the MDH program.
    For FY 2024, we are proposing the following updates to the 
hospital-specific rates applicable to SCHs and MDHs: A proposed update 
of 2.8 percent for a hospital that submits quality data and is a 
meaningful EHR user; a proposed update of 0.55 percent for a hospital 
that submits quality data and is not a meaningful EHR user; a proposed 
update of 2.05 percent for a hospital that fails to submit quality data 
and is a meaningful EHR user; and a proposed update of -0.2 percent for 
a hospital that fails to submit quality data

[[Page 27006]]

and is not an meaningful EHR user. As previously discussed, we are 
proposing that if more recent data subsequently become 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.
2. Proposed FY 2024 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 2024, 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 reduction of three-quarters 
of the applicable percentage increase (prior to the application of 
other statutory adjustments; also referred to as the market basket 
update or rate-of-increase (with no adjustments)) for 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.
[GRAPHIC] [TIFF OMITTED] TP01MY23.262

    Based on IGI's fourth quarter 2022 forecast of the 2018-based IPPS 
market basket update with historical data through third quarter 2022, 
for this FY 2024 proposed rule, in accordance with section 
1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico 
hospitals we are proposing a market basket update of 3.0 percent less a 
productivity adjustment of 0.2 percentage point. Therefore, for FY 
2024, depending on whether a Puerto Rico hospital is a meaningful EHR 
user, there are two possible applicable percentage increases that could 
be applied to the standardized amount. Based on these data, we have 
determined the following proposed applicable percentage increases to 
the standardized amount for FY 2024 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
we are proposing a FY 2024 applicable percentage increase to the 
operating standardized amount of 2.8 percent (that is, the FY 2024 
estimate of the proposed market basket rate-of-increase of 3.0 percent 
less 0.2 percentage point for the proposed productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we are proposing a FY 2024 applicable percentage increase to the 
operating standardized amount of 0.55 percent (that is, the FY 2024 
estimate of the proposed market basket rate-of-increase of 3.0 percent, 
less an adjustment of 2.25 percentage point (the proposed market basket 
rate-of-increase of 3.0 percent x 0.75 for failure to be a meaningful 
EHR user), and less 0.2 percentage point for the proposed productivity 
adjustment).
    As noted previously, we are proposing that if more recent data 
subsequently become available, we would use such data, if appropriate, 
to determine the FY 2024 market basket update and the productivity 
adjustment for the FY 2024 IPPS/LTCH PPS final rule.

[[Page 27007]]

C. Sole Community Hospitals (SCHs) (Sec.  412.92)

1. Background
    Section 1886(d)(5)(D) of the Act provides special payment 
protections under the IPPS to sole community hospitals (SCHs). Section 
1886(d)(5)(D)(iii) of the Act defines an SCH in part as a hospital that 
the Secretary determines is located more than 35 road miles from 
another hospital or that, by reason of factors such as isolated 
location, weather conditions, travel conditions, or absence of other 
like hospitals (as determined by the Secretary), is the sole source of 
inpatient hospital services reasonably available to Medicare 
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria 
that a hospital must meet to be classified as a SCH. For more 
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS 
final rule (74 FR 43894 through 43897).
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41430), effective 
for SCH applications received on or after October 1, 2018, we modified 
the effective date of SCH classification from 30 days after the date of 
CMS's written notification of approval to the date that the MAC 
receives the complete SCH application. As we explained in that final 
rule, section 401 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act (BBRA) of 1999 (Pub. L. 106-113, Appendix F) amended 
section 1886(d)(8) of the Act to add paragraph (E) which authorizes 
reclassification of certain urban hospitals as rural if the hospital 
applies for such status and meets certain criteria. The effective date 
for rural reclassification status under section 1886(d)(8)(E) of the 
Act is set forth at 42 CFR 412.103(d)(1) as the filing date, which is 
the date CMS receives the reclassification application (Sec.  
412.103(b)(5)). One way that an urban hospital can reclassify as rural 
under Sec.  412.103 (specifically, Sec.  412.103(a)(3)) is if the 
hospital would qualify as a rural referral center (RRC) as set forth in 
Sec.  412.96, or as an SCH as set forth in Sec.  412.92, if the 
hospital were located in a rural area. A geographically urban hospital 
may simultaneously apply for reclassification as rural under Sec.  
412.103(a)(3) by meeting the criteria for SCH status (other than being 
located in a rural area), and apply to obtain SCH status under Sec.  
412.92 based on that acquired rural reclassification. However, as we 
explained in the FY 2019 final rule, the rural reclassification is 
effective as of the filing date, whereas under our policy at that time, 
the SCH status was effective 30 days after approval. In addition, while 
Sec.  412.103(c) states that the CMS Regional Office will review the 
application and notify the hospital of its approval or disapproval of 
the request within 60 days of the filing date, the regulations do not 
set a timeframe by which CMS must decide on an SCH request. We stated 
that therefore, geographically urban hospitals that obtain rural 
reclassification under Sec.  412.103 for the purposes of obtaining SCH 
status may face a payment disadvantage because, under the policy at 
that time, they are paid as rural until the SCH application is approved 
and the SCH classification and payment adjustment become effective 30 
days after approval.
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41430), to minimize 
the lag between the effective date of rural reclassification under 
Sec.  412.103 and the effective date for SCH status, we revised our 
policy so that the effective date for SCH classification and for the 
payment adjustment would be the date that the MAC receives the complete 
SCH application, effective for SCH applications received on or after 
October 1, 2018, as reflected in Sec.  412.92(b)(2)(i) and (iv). We 
stated that a complete application includes a request and all 
supporting documentation needed to demonstrate that the hospital meets 
criteria for SCH status as of the date of application. We also stated 
that for an application to be complete, all criteria must be met as of 
the date the MAC receives the SCH application. We further stated that a 
hospital applying for SCH status on the basis of a Sec.  412.103 rural 
reclassification must submit its Sec.  412.103 application no later 
than its SCH application in order to be considered rural as of the date 
the MAC receives the SCH application.
    As we explained in the FY 2019 IPPS/LTCH PPS final rule, we 
believed that updating the regulations at Sec.  412.92 to provide an 
effective date for SCH status that is consistent with the effective 
date for rural reclassification under Sec.  412.103 would benefit 
hospitals by minimizing any payment disadvantage caused by the lag 
between the effective date of rural reclassification and the effective 
date of SCH status. We also stated that we believe that aligning the 
SCH effective date with the Sec.  412.103 effective date supports 
agency efforts to reduce regulatory burden because it would provide for 
a more uniform policy.
    In addition, we made parallel changes to the effective date for a 
Medicare dependent hospital (MDH) status determination under Sec.  
412.108(b)(4) such that for applications received on or after October 
1, 2018, a determination of MDH status would be effective as of the 
date that the MAC receives the complete application, rather than the 
prior effective date of 30 days after the date the MAC provides written 
notification to the hospital. Similar to applications for SCH status, 
we stated that a complete application includes a request and all 
supporting documentation needed to demonstrate that the hospital meets 
criteria for MDH status as of the date of application. We further 
stated that for an application to be complete, all criteria must be met 
as of the date the MAC receives the MDH application. For example, a 
cost report must be settled at the time of application for a hospital 
to use that cost report as one of the cost reports required in Sec.  
412.108(a)(1)(iv)(C).
    We refer the reader to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41430) for further discussion of these changes to the effective dates 
of SCH and MDH status beginning with applications received on or after 
October 1, 2018.
    As explained in the FY 2019 IPPS/LTCH PPS final rule, we 
specifically modified the effective date for SCH status for consistency 
with the effective date for rural reclassification in order to minimize 
any payment disadvantage caused by the lag between the effective date 
of rural reclassification and the effective date of SCH status for 
hospitals applying for both rural reclassification under Sec.  
412.103(a)(3) by meeting the criteria for SCH status (other than being 
located in a rural area), and applying to obtain SCH status under Sec.  
412.92 based on that acquired rural reclassification. As previously 
discussed, by meeting the criteria for SCH status (other than being 
located in a rural area), a hospital can qualify for rural 
reclassification per the regulations at Sec.  412.103(a)(3), which then 
allows it to meet all the criteria for SCH status--including the rural 
requirement at Sec.  412.92(a).
2. Proposed Change of Effective Date for SCH Status in the Case of a 
Merger
    For some hospitals, eligibility for SCH classification may depend 
on the hospital's merger with a nearby ``like hospital'' as defined in 
Sec.  412.92(c)(2) \163\ and meeting other criteria at Sec.  412.92(a).

[[Page 27008]]

The merger allows the two hospitals involved to operate under a single 
provider agreement. The regulations at Sec.  412.92(c)(2) define a like 
hospital as a nearby hospital that furnishes short-term acute care and 
whose total inpatient days attributable to units of the nearby hospital 
that provide a level of care characteristic of the level of care 
payable under the acute care hospital inpatient prospective payment 
system are greater than 8 percent of the similarly calculated total 
inpatient days of the hospital seeking SCH designation. In this 
scenario, prior to the merger, the applicant hospital was not eligible 
for SCH classification due to its proximity to a nearby like hospital. 
When the applicant hospital subsequently merges with the nearby like 
hospital, it is potentially eligible for SCH classification.
---------------------------------------------------------------------------

    \163\ 42 CFR 412.92(c)(2): Like hospital means a hospital 
furnishing short-term, acute care. Effective with cost reporting 
periods beginning on or after October 1, 2002, for purposes of a 
hospital seeking sole community hospital designation, CMS will not 
consider the nearby hospital to be a like hospital if the total 
inpatient days attributable to units of the nearby hospital that 
provides a level of care characteristic of the level of care payable 
under the acute care hospital inpatient prospective payment system 
are less than or equal to 8 percent of the similarly calculated 
total inpatient days of the hospital seeking sole community hospital 
designation.
---------------------------------------------------------------------------

    If an SCH application is approved, under current policy, the 
effective date of the SCH classification is the date the MAC receives 
the complete application. In situations where SCH classification is 
contingent on a merger, a hospital is not considered to have submitted 
a complete application to the MAC unless the application contains the 
notification that the merger was approved. We have heard concerns that 
in these situations the time difference between the effective date of 
the hospital merger, which may be retroactive, and the effective date 
of the SCH status, which is based on the date the complete application 
is received by the MAC, including the merger approval, may be 
problematic for hospitals because they cannot benefit from the special 
payment protections that are afforded to SCHs until the effective date 
of the SCH classification. We have also heard concerns that different 
merger requirements across states could potentially introduce an uneven 
playing field for providers seeking SCH classification because the 
timeframe for a merger approval could vary from one state or region to 
another.
    Therefore, in an effort to address these concerns and in light of 
our continuing experience in applying these policies, we are proposing 
to revise Sec.  412.92(b)(2) so that for SCH applications received on 
or after October 1, 2023, where (1) a hospital's SCH approval is 
dependent on its merger with another nearby hospital, and (2) the 
hospital meets the other SCH classification requirements, the SCH 
classification and payment adjustment would be effective as of the 
effective date of the approved merger if the MAC receives the complete 
application within 90 days of CMS' written notification to the hospital 
of the approval of the merger. This 90-day timeframe will provide 
sufficient time for a hospital to submit a complete SCH application, 
while addressing the concerns, as previously discussed, that merger 
approval may be delayed for reasons beyond a hospital's control. If the 
MAC does not receive the complete application within 90 days of CMS' 
notification of the merger approval, SCH classification would be 
effective as of the date the MAC receives the complete application, 
including documentation of the merger approval, and in accordance with 
the regulations at Sec.  412.92(b)(2)(i).
    In connection with this proposal, we are also proposing to change 
the effective date of rural reclassification for a hospital qualifying 
for rural reclassification under Sec.  412.103(a)(3) by meeting the 
criteria for SCH status (other than being located in a rural area), and 
also applying to obtain SCH status under Sec.  412.92, where 
eligibility for SCH classification depends on a hospital merger. 
Specifically, we are proposing that in these circumstances, and subject 
to the requirements set forth at proposed new Sec.  412.92(b)(2)(vi), 
the effective date for rural reclassification would be as of the 
effective date set forth in proposed new Sec.  412.92(b)(2)(vi).
    We note that we are not proposing to modify any SCH classification 
requirements or what constitutes a ``complete application''. The SCH 
application must, therefore, include all required documentation that 
would constitute a ``complete application'' including documentation of 
the hospital's merger approval. We also note that we are not proposing 
any change to the effective date for an SCH application that does not 
involve a merger.
    We continue to believe that our current approach in determining the 
effective date for SCH classification where the SCH application is 
contingent on a hospital merger is reasonable. However, in light of our 
experience in applying these policies and the concerns we have heard 
about the timeframes involved, we believe that our proposed revision to 
the effective date for hospitals applying for SCH classification where 
that classification is dependent on a merger is also reasonable and 
appropriate and would benefit hospitals by minimizing the time 
difference between the effective date of the merger and the effective 
date of SCH status. We note that we are not proposing a parallel change 
to the effective date policy for MDH classification because eligibility 
for MDH classification is not dependent on proximity to nearby 
providers and, therefore, MDH classification would generally not be 
contingent on a merger taking place. However, we seek comment on the 
need for such a proposal, which we may consider for future rulemaking 
as appropriate.
    Therefore, we are proposing to revise Sec.  412.92 by adding a new 
proposed paragraph (b)(2)(vi) to specify that for applications received 
on or after October 1, 2023, where eligibility for SCH classification 
is dependent on a merger, the effective date of the SCH classification 
would be as of the effective date of the approved merger if the MAC 
receives the complete application within 90 days of CMS' written 
notification to the hospital of the approval of the merger. If the MAC 
does not receive the complete application within 90 days of CMS' 
written notification of the merger approval, SCH classification would 
be effective as of the date the MAC receives the complete application 
in accordance with the regulations at Sec.  412.92(b)(2)(i). We are 
also proposing to make conforming changes to the existing regulations 
at Sec.  412.92(b) by adding an exception referencing proposed 
paragraph Sec.  412.92(b)(2)(vi) to the language describing the 
effective date for applications received on or after October 1, 2018 at 
Sec.  412.92(b)(2)(i), and by revising and streamlining the language at 
Sec.  412.92(b)(2)(ii)(C) and (b)(2)(iv) to reference Sec.  
412.92(b)(2)(i) as the effective date policy in effect for applications 
received on or after October 1, 2018. In addition, we are proposing a 
technical correction to paragraph (b)(1)(v) by revising the word 
``forward'' to ``forwards''.
    As discussed, we are also proposing to make a conforming change to 
the regulations at Sec.  412.103(d) to modify the effective date of 
rural reclassification for a hospital qualifying for rural 
reclassification under Sec.  412.103(a)(3) by meeting the criteria for 
SCH status (other than being located in a rural area), and also 
applying to obtain SCH status under Sec.  412.92 where eligibility for 
SCH classification depends on a hospital merger. We are proposing to 
amend Sec.  412.103(d)(1) and to add new Sec.  412.103(d)(3) to provide 
that, subject to the hospital meeting the requirements set forth at 
proposed Sec.  412.92(b)(2)(vi), the effective date for rural 
reclassification for such hospital would be as of the effective date 
determined under Sec.  412.92(b)(2)(vi).

D. Rural Referral Centers (RRCs) Proposed 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

[[Page 27009]]

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
     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 regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The proposed national 
median CMI value for FY 2024 is based on the CMI values of all urban 
hospitals nationwide, and the proposed regional median CMI values for 
FY 2024 are based on the CMI values of all urban hospitals within each 
census region, excluding those hospitals with approved teaching 
programs (that is, those hospitals that train residents in an approved 
GME program as provided in Sec.  413.75). These proposed values are 
based on discharges occurring during FY 2022 (October 1, 2021 through 
September 30, 2022), and include bills posted to CMS' records through 
December 2022. We believe that this is the best available data for use 
in calculating the proposed national and regional median CMI values and 
is consistent with our proposal to use the FY 2022 MedPAR claims data 
for FY 2024 ratesetting.
    In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing that, 
in addition to meeting other criteria, if rural hospitals with fewer 
than 275 beds are to qualify for initial RRC status for cost reporting 
periods beginning on or after October 1, 2023, they must have a CMI 
value for FY 2022 that is at least--
     1.8067 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The proposed median CMI values by region are set forth in the table 
in this section of this rule. We intend to update the proposed CMI 
values in the FY 2024 final rule to reflect the updated FY 2022 MedPAR 
file, which will contain data from additional bills received through 
March 2023.

[[Page 27010]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.263

    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. For FY 2024, we are 
proposing to update the regional standards based on discharges for 
urban hospitals' cost reporting periods that began during FY 2021 (that 
is, October 1, 2020 through September 30, 2021), which are the latest 
cost report data available at the time this proposed rule was 
developed. We believe that this is the best available data for use in 
calculating the proposed median number of discharges by region and is 
consistent with our data proposal to use cost report data from cost 
reporting periods beginning during FY 2021 for FY 2024 ratesetting. 
Therefore, we are proposing that, in addition to meeting other 
criteria, a hospital, if it is to qualify for initial RRC status for 
cost reporting periods beginning on or after October 1, 2023, must 
have, as the number of discharges for its cost reporting period that 
began during FY 2021, 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 proposed number of discharges as set forth in the 
table in this section of this rule. We intend to update these numbers 
in the FY 2024 final rule based on the latest available cost report 
data.
[GRAPHIC] [TIFF OMITTED] TP01MY23.264

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, under this proposed rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.

E. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)

    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 low-volume hospital payment adjustment is implemented in the 
regulations at 42 CFR 412.101. 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

[[Page 27011]]

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.
1. Recent Legislation
    As discussed in the FY 2023 IPPS/LTCH PPS final rule, beginning 
with FY 2023, the low-volume hospital qualifying criteria and payment 
adjustment were set to revert to the statutory requirements that were 
in effect prior to FY 2011 (87 FR 49060). Subsequent legislation 
extended, for FYs 2023 and 2024, the temporary changes to the low-
volume hospital qualifying criteria and payment adjustment originally 
provided for by section 50204 of the Bipartisan Budget Act of 2018 for 
FYs 2019 through 2022 as follows:
     Section 101 of the Continuing Appropriations and Ukraine 
Supplemental Appropriations Act, 2023 (Pub. L. 117-180), enacted on 
September 30, 2022, through December 16, 2022.
     Section 101 of the Further Continuing Appropriations and 
Extensions Act, 2023 (Pub. L. 117-229), enacted on December 16, 2022, 
through December 23, 2022.
     Section 4101 of the Consolidated Appropriations Act, 2023 
(CAA 2023) (Pub. L. 117-328), enacted on December 29, 2022, through 
September 30, 2024.
    We discuss the extension of these temporary changes for FY 2023 and 
FY 2024 in greater detail in this section of this rule. Beginning in FY 
2025, 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, which 
were extended and modified through subsequent legislation.
2. Extension of the Temporary Changes to the Low-Volume Hospital 
Definition and Payment Adjustment Methodology for FYs 2023 and 2024
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 
through 41399), section 50204 of the Bipartisan Budget Act of 2018 
(Pub. L. 115-123) modified the definition of a low-volume hospital and 
the methodology for calculating the payment adjustment for low-volume 
hospitals for FYs 2019 through 2022. 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).
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), to implement 
this requirement, we specified a continuous, linear sliding scale 
formula to determine the low-volume hospital payment adjustment for FYs 
2019 through FY 2022 that is similar to the continuous, linear sliding 
scale formula used to determine the low-volume hospital payment 
adjustment originally established by the Affordable Care Act and 
implemented in the regulations at Sec.  412.101(c)(2)(ii) in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241). Consistent 
with the statute, we provided that qualifying hospitals with 500 or 
fewer total discharges will receive a low-volume hospital payment 
adjustment of 25 percent. For qualifying hospitals with fewer than 
3,800 discharges but more than 500 discharges, the low-volume payment 
adjustment is calculated by subtracting from 25 percent the proportion 
of payments associated with the discharges in excess of 500. As such, 
for qualifying hospitals with fewer than 3,800 total discharges but 
more than 500 total discharges, the low volume hospital payment 
adjustment for FYs 2019 through FY 2022 was calculated using the 
following formula:

Low-Volume Hospital Payment Adjustment =
0.25-[0.25/3300] x (number of total discharges-500) =
(95/330)-(number of total discharges/13,200)

    For this purpose, we specified that the ``number of total 
discharges'' is determined as total discharges, which includes Medicare 
and non-Medicare discharges during the fiscal year, based on the 
hospital's most recently submitted cost report. The low-volume hospital 
payment adjustment for FYs 2019 through 2022 is set forth in the 
regulations at Sec.  412.101(c)(3).
    As described previously, recent legislation extended through FY 
2024 the definition of a low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals in effect 
for FYs 2019 through FY 2022 pursuant to the Bipartisan Budget Act of 
2018. Specifically, under sections 1886(d)(12)(C)(i) and 
1886(d)(12)(C)(i)(III) of the Act, as amended, for FY 2023 and FY 2024, 
a low-volume hospital must be more than 15 road miles from another 
subsection (d) hospital and have less than 3,800 discharges during the 
fiscal year. In addition, under section 1886(d)(12)(D)(ii) of the Act, 
as amended, for FY 2023 and FY 2024, the low-volume hospital payment 
adjustment is determined using a continuous linear sliding scale 
ranging from 25 percent for low-volume hospitals with 500 or fewer 
discharges to 0 percent for low-volume hospitals with greater than 
3,800 discharges.

[[Page 27012]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.265

    Based on the current law, beginning with FY 2025, 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, as amended, defines a low-volume 
hospital, for FYs 2005 through 2010 and FY 2025 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. As previously 
noted, 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). Furthermore, as 
amended, section 1886(d)(12)(B) of the Act requires, for discharges 
occurring in FYs 2005 through 2010 and FY 2025 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. Therefore, in order for a hospital to continue to qualify as a 
low-volume hospital on or after October 1, 2024, 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)). We refer readers to the FY 2023 IPPS/LTCH PPS 
final rule for further discussion.
    As discussed in section V.E.4. of the preamble of this proposed 
rule, we are proposing to make conforming changes to the regulation 
text in Sec.  412.101 to reflect the extension of the changes to the 
qualifying criteria and the payment adjustment methodology for low-
volume hospitals through FY 2024.
3. Extension of the Temporary Changes to the Low-Volume Hospital 
Definition and Payment Adjustment Methodology for FY 2023
    Prior to the enactment of Public Law 117-180, the temporary changes 
to the low-volume hospital qualifying criteria and payment adjustment 
originally provided by section 50204 of the Bipartisan Budget Act of 
2018 were set to expire October 1, 2022. As previously discussed, these 
temporary changes to the low-volume hospital payment policy were 
extended through December 16, 2022 by section 101 of Public Law 117-
180, through December 23, 2022 by section 101 of Public Law 117-229, 
and through September 30, 2024 by section 4102 of Public Law 117-328. 
In accordance with section 1886(d)(12)(C)(i) of the Act, as amended, 
for FY 2023 a low-volume hospital must be more than 15 road miles from 
another subsection (d) hospital and must have less than 3,800 
discharges during the fiscal year.
    We addressed the extension provided by section 101 of the 
Continuing Appropriations and Ukraine Supplemental Appropriations Act, 
2023 (Pub. L. 117-180) for the portion of FY 2023 beginning on October 
1, 2022, and ending on December 16, 2022 (in other words, occurring 
before December 17, 2022) in Change Request 12970 (Transmittal 117400), 
issued December 9, 2022. For additional information on this extension, 
please refer to the transmittal https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r11740otn.
    We subsequently addressed the additional extensions of these 
provisions through December 23, 2022 as provided by section 101 of the 
Further Continuing Appropriations and Extensions Act, 2023 (Pub. L. 
117-229) and through September 30, 2023 as provided by section 4101 of 
the CAA 2023 (Pub. L. 117-328) in Change Request 13103 (Transmittal 
11878), issued February 23, 2023. For additional information, please 
refer to the transmittal https://www.cms.gov/files/document/r11878otn.pdf.
    We are proposing to make conforming changes to the regulations text 
in Sec.  412.101 to codify these extensions for FY 2023 as discussed in 
section V.E.4. of the preamble of this proposed rule.
4. Proposed Payment Adjustment for FY 2024 and Proposed Conforming 
Changes to Regulations
    As discussed earlier, section 4101 of the CAA 2023 extended through 
FY 2024 the modified definition of a low-volume hospital and the 
methodology for calculating the payment adjustment for low-volume 
hospitals in effect for FYs 2019 through 2022. Specifically, under 
section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 
2024, 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

[[Page 27013]]

year. Under section 1886(d)(12)(D) of the Act, as amended, for 
discharges occurring in FYs 2019 through 2024, 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).
    As previously discussed, in the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41399), we specified a continuous, linear sliding scale formula 
to determine the low volume payment adjustment, as reflected in the 
regulations at Sec.  412.101(c)(3)(ii). Consistent with the statute, we 
provided that qualifying hospitals with 500 or fewer total discharges 
will receive a low-volume hospital payment adjustment of 25 percent. 
For qualifying hospitals with fewer than 3,800 discharges but more than 
500 discharges, the low-volume payment adjustment is calculated by 
subtracting from 25 percent the proportion of payments associated with 
the discharges in excess of 500. As such, for qualifying hospitals with 
fewer than 3,800 total discharges but more than 500 total discharges, 
the low-volume hospital payment adjustment at Sec.  412.101(c)(3)(ii) 
is calculated using the following formula:

Low-Volume Hospital Payment Adjustment =
0.25-[0.25/3300] x (number of total discharges-500) =
(95/330)-(number of total discharges/13,200)

    For this purpose, the ``number of total discharges'' is determined 
as total discharges, which includes Medicare and non-Medicare 
discharges during the fiscal year, based on the hospital's most 
recently submitted cost report, as explained previously.
    Consistent with the extension of the methodology for calculating 
the payment adjustment for low-volume hospitals through FY 2024, we are 
proposing to continue using the previously specified continuous, linear 
sliding scale formula to determine the low-volume hospital payment 
adjustment for FY 2024. We are also proposing to make conforming 
changes to the regulation text in Sec.  412.101 to reflect the 
extensions of the changes to the qualifying criteria and the payment 
adjustment methodology for low-volume hospitals in accordance with 
provisions of the Continuing Appropriations and Ukraine Supplemental 
Appropriations Act, 2023, the Further Continuing Appropriations and 
Extensions Act, 2023, and the CAA 2023. Specifically, we are proposing 
to make conforming changes to paragraphs (b)(2)(iii) and (c)(3) 
introductory text of Sec.  412.101 to reflect that the low-volume 
hospital payment adjustment policy in effect for FY 2023 and FY 2024 is 
the same low-volume hospital payment adjustment policy in effect for 
FYs 2019 through 2022 (as described in the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41398 through 41399)). In addition, in accordance with the 
provisions of the Continuing Appropriations and Ukraine Supplemental 
Appropriations Act, 2023, the Further Continuing Appropriations and 
Extensions Act, 2023, and the CAA 2023, for FY 2025 and subsequent 
fiscal years, we are proposing to make conforming changes to paragraphs 
(b)(2)(i) and (c)(1) of Sec.  412.101 to reflect that the low-volume 
hospital payment adjustment policy in effect for those years is the 
same as the low-volume hospital payment adjustment policy in effect for 
FYs 2005 through 2010, as described previously.
5. Process for Requesting and Obtaining the Low-Volume Hospital Payment 
Adjustment for FY 2024
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking, most recently in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49062 through 49063), we discussed the 
process for requesting and obtaining the low-volume hospital payment 
adjustment. Under this previously established process, a hospital makes 
a written request for the low-volume payment adjustment under Sec.  
412.101 to its MAC. This request must contain sufficient documentation 
to establish that the hospital meets the applicable mileage and 
discharge criteria. The MAC will determine if the hospital qualifies as 
a low-volume hospital by reviewing the data the hospital submits with 
its request for low-volume hospital status in addition to other 
available data. Under this approach, a hospital will know in advance 
whether or not it will receive a payment adjustment under the low-
volume hospital policy. The MAC and CMS may review available data such 
as the number of discharges, in addition to the data the hospital 
submits with its request for low-volume hospital status, 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 proposed revised 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 earlier, in addition to the discharge criterion, 
for FY 2019 and subsequent fiscal years, eligibility for the low-volume 
hospital payment adjustment is also dependent upon the hospital meeting 
the applicable mileage criterion specified in proposed revised Sec.  
412.101(b)(2)(i) or (iii) for the fiscal year. Specifically, to meet 
the mileage criterion for FY 2024, as noted earlier, a hospital must be 
located more than 15 road miles from the nearest subsection (d) 
hospital, as was the case for FYs 2019 through 2023. (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

[[Page 27014]]

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 our previously established process, for FY 2024, we 
are proposing that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria (as described earlier). Specifically, we 
are proposing that for FY 2024, a hospital must make a written request 
for low-volume hospital status that is received by its MAC no later 
than September 1, 2023, in order for the low-volume, add-on payment 
adjustment to be applied to payments for its discharges beginning on or 
after October 1, 2023. If a hospital's written request for low-volume 
hospital status for FY 2024 is received after September 1, 2023, 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 2024 
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 2023 may continue to receive a low-
volume hospital payment adjustment for FY 2024 without reapplying if it 
continues to meet both the discharge and the mileage criteria (which, 
as discussed previously, are the same qualifying criteria that apply 
for FY 2023). In this case, a hospital's request can include a 
verification statement that it continues to meet the mileage criterion 
applicable for FY 2023. (Determination of meeting the discharge 
criterion is discussed earlier in this section.) We note that a 
hospital must continue to meet the applicable qualifying criteria as a 
low-volume hospital (that is, the hospital must meet the applicable 
discharge criterion and mileage criterion for the fiscal year) in order 
to receive the payment adjustment in that fiscal year; that is, low-
volume hospital status is not based on a ``one-time'' qualification (75 
FR 50238 through 50275). Consistent with historical policy, a hospital 
must submit its request, including this written verification, for each 
fiscal year for which it seeks to receive the low-volume hospital 
payment adjustment, and in accordance with the timeline described 
earlier.

F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)

1. Background
    Section 1886(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to a Medicare-dependent, small rural 
hospital (MDH). Section 1886(d)(5)(G)(iv) of the Act defines a MDH as a 
hospital that is located in a rural area, or is located in an all-urban 
State but meets one of the specified statutory criteria for rural 
reclassification (as added by section 50205 of the Bipartisan Budget 
Act of 2018, Pub. L. 115-123), has not more than 100 beds, is not an 
sole community hospital (SCH), and has a high percentage of Medicare 
discharges (that is, not less than 60 percent of its inpatient days or 
discharges during the cost reporting period beginning in FY 1987 or two 
of the three most recently audited cost reporting periods for which the 
Secretary has a settled cost report were attributable to inpatients 
entitled to benefits under Part A). The regulations at 42 CFR 412.108 
set forth the criteria that a hospital must meet to be classified as an 
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).)
2. Implementation of Legislative Extension of MDH Program
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program has been 
extended multiple times by subsequent legislation, most recently for 
FYs 2023 through 2024, as discussed further in this section (that is, 
for discharges occurring before October 1, 2024.) (Additional 
information on the extensions of the MDH program after FY 2012 and 
through FY 2022 can be found in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49064).) As discussed in the FY 2023 IPPS/LTCH PPS final rule, 
the MDH program provisions at section 1886(d)(5)(G) of the Act were set 
to expire at the end of FY 2022 (87 FR 49064). Subsequently, the MDH 
program was extended by additional legislation as follows:
     Section 102 of the Continuing Appropriations and Ukraine 
Supplemental Appropriations Act, 2023 (Pub. L. 117-180), enacted on 
September 30, 2022, amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH 
program through December 16, 2022.
     Section 102 of the Further Continuing Appropriations and 
Extensions Act, 2023 (Pub. L. 117-229), enacted on December 16, 2022, 
amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act 
to provide for an extension of the MDH program through December 23, 
2022.
     Section 4102 of the Consolidated Appropriations Act, 2023 
(Pub. L. 117-328), enacted on December 29, 2022, amended sections 
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an 
extension of the MDH program through FY 2024 (that is, for discharges 
occurring on or before September 30, 2024).
    Therefore, we are proposing to 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 
the extension of the MDH program through FY 2024.
    We note that the legislative extensions of the MDH program provided 
by section 102 of Pub. L. 117-180 and section 102 of Pub. L. 117-229, 
which collectively extended the program through December 23, 2022, were 
signed into law prior to a statutory expiration of the MDH program. 
Generally, as a result of these extensions, a provider that was 
classified as an MDH as of September 30, 2022 continued to be 
classified as an MDH as of October 1, 2022, with no need to reapply for 
MDH classification. (For more information on the MDH extensions through 
December 23, 2022, see Change Request 12970 and Change Request 13103, 
which are available online at https://www.cms.gov/files/document/R11740OTN.pdf and https://www.cms.gov/files/document/r11878otn.pdf, 
respectively.) In contrast, the legislative extension provided by 
section 4102 of Public Law 117-328 was

[[Page 27015]]

signed into law on December 29, 2022, after the December 24, 2022 
expiration of the MDH program. Generally, as a result of this extension 
and consistent with previous extensions of the MDH program, a provider 
that was classified as an MDH as of December 23, 2022, was reinstated 
as a MDH effective December 24, 2022, with no need to reapply for MDH 
classification.
    The regulations at Sec.  412.92(b)(2)(v) allow MDHs to apply for 
classification as a SCH 30 days prior to the anticipated expiration of 
the MDH program, and if approved, to be granted such status effective 
with the expiration of the MDH program. As discussed in Change Requests 
12970 and 13103, because the MDH program did not, in fact, expire as of 
the anticipated October 1, 2022 or December 17, 2022 expiration dates, 
any MDH that applied for SCH classification per the regulations at 
Sec.  412.92(b)(2)(v) in anticipation of either of those expiration 
dates would not have been classified as a SCH as of October 1, 2022, or 
December 17, 2022, as applicable. Furthermore, we are not aware of any 
hospitals that applied for SCH classification in this manner in advance 
of the December 24, 2022 expiration of the MDH program. However, as 
discussed in Change Request 13103, if there are any such hospitals and 
those hospitals are unsure about their MDH status, those hospitals 
should contact their MACs. We note that in accordance with Change 
Request 13103, a provider affected by the MDH program extension that 
also applied for SCH classification per the regulations at Sec.  
412.92(b)(2)(v) or cancelled its rural reclassification under Sec.  
412.103 in anticipation of the expiration of the MDH program will 
receive a notice from its MAC detailing its status in light of the MDH 
program extension.
    Therefore, as collectively provided by section 102 of the 
Continuing Appropriations and Ukraine Supplemental Appropriations Act, 
2023, section 102 of the Further Continuing Appropriations and 
Extensions Act, 2023, and section 4102 of the Consolidated 
Appropriations and Extensions Act, 2023, providers that were classified 
as MDHs as of September 30, 2022 generally continue to be classified as 
MDHs as of October 1, 2022, with no need to reapply for MDH 
classification. However, as discussed in Change Requests 12970 and 
13103, if a MDH cancelled its rural classification under Sec.  
412.103(g) effective on or after October 1, 2022, its MDH status may 
not be applied continuously or automatically reinstated, as applicable 
(and as described previously). In order to meet the criteria to become 
an MDH, generally a hospital must be located in a rural area. To 
qualify for MDH status, some MDHs may have reclassified as rural under 
the regulations at Sec.  412.103. With the anticipated expiration of 
the MDH provision, some of these providers may have requested a 
cancellation of their rural classification. Therefore, in order to 
qualify for MDH status, these providers must request to be reclassified 
as rural under 42 CFR 412.103(b) and reapply for MDH classification in 
accordance with the regulations at 42 CFR 412.108(b). As discussed, all 
other hospitals with MDH status as of September 30, 2022 continue to be 
classified as MDHs effective October 1, 2022. We refer readers to 
Change Requests 12970 and 13103 for further discussion on the 
extensions of the MDH program through FY 2023.

G. 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 
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 same 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.
2. Calculation of Prior Year IME Resident to Bed Ratio When There is a 
Medicare GME Affiliation Agreement
    Section 1886(d)(5)(B) of the Act provides that IPPS hospitals that 
have residents in an approved graduate medical education (GME) program 
receive an additional payment to reflect the higher indirect patient 
care costs of teaching hospitals relative to nonteaching hospitals. The 
regulations regarding the calculation of this additional payment, known 
as the indirect medical education (IME) adjustment, are located at 
Sec.  412.105. The IME adjustment factor is calculated using a 
hospital's ratio of residents to beds, which is represented as r, and a 
statutorily set multiplier, which is represented as c, in the following 
equation: c x [(1 + r)\.405\-1]. Section

[[Page 27016]]

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. Thus, for FY 2024, the IME multiplier is 1.35. The 
formula is traditionally described in terms of a certain percentage 
increase in payment for every 10-percent increase in the resident-to-
bed ratio. 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 4621(b)(1) of the Balanced Budget Act of 1997 (Pub. L. 105-
33) amended section 1886(d)(5)(B) of the Act by adding a clause (vi) to 
provide that, effective for cost reporting periods beginning on or 
after October 1, 1997, the resident-to-bed ratio may not exceed the 
ratio calculated during the prior cost reporting period (after 
accounting for the cap on the hospital's number of full-time equivalent 
(FTE) residents). We implemented this policy in the August 29, 1997 
final rule with comment period (62 FR 46003) and the May 12, 1998 final 
rule (63 FR 26323) under regulations at Sec.  412.105(a)(1). In 
general, the resident-to-bed ratio from the prior cost reporting 
period, which is to be used as the cap on the resident-to-bed ratio for 
the current cost reporting period, should reflect the prior year FTE 
count subject to the FTE cap on the number of allopathic and 
osteopathic residents, but not subject to the three-year rolling 
average. We note that the resident-to-bed ratio cap is a cap on the 
resident-to-bed ratio calculated for all residents, including 
allopathic, osteopathic, dental, and podiatry residents (63 FR 26324, 
May 12, 1998). However, as described in existing Sec.  
412.105(a)(1)(i), the numerator of the resident-to bed ratio cap may be 
adjusted to reflect an increase in the current cost reporting period's 
resident-to-bed ratio due to residents in a new GME program or new 
Rural Track Program, a Medicare GME affiliation agreement, or due to 
residents displaced by the closure of a hospital or a residency 
program. Under other circumstances where the exception does not apply, 
such as an increase in the number of podiatry or dentistry residents or 
a decrease in the number of beds (that is, the denominator of the 
resident-to-bed ratio), the ratio can increase after a 1-year delay. 
The law requires a hospital's IME payment to be determined based on the 
lower of the two ratios (see section 1886(d)(5)(B)(vi)(I) of the Act 
and regulations at 42 CFR 412.105(a)(1)(i)). An increase in the current 
cost reporting period's ratio (subject to the FTE cap on the overall 
number of allopathic and osteopathic residents) thereby establishes a 
higher cap for the following cost reporting period.
    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 regulations for 
``Medicare GME affiliation agreements'' are at 42 CFR 413.75(b) and 
(f). In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49075, August 10, 
2022), we expanded the regulations regarding Medicare GME affiliation 
agreements to permit urban and rural hospitals that participate in the 
same separately accredited family medicine Rural Track Program (RTP) 
and have rural track FTE limitations to enter into ``Rural Track 
Medicare GME Affiliation Agreements''.
    As previously mentioned, as described in existing Sec.  
412.105(a)(1)(i), the numerator of the prior year resident-to bed ratio 
may be adjusted to reflect an increase in the current cost reporting 
period's resident-to-bed ratio due to residents in a Medicare GME 
affiliation agreement (among other limited reasons). We have 
occasionally received inquiries related to adjusting the prior year 
numerator when the hospital is training more residents in the current 
year as a result of an IME FTE cap increase under the terms of a 
Medicare GME affiliation agreement. A hospital can train more residents 
in the current year versus the prior year under the terms of a Medicare 
GME affiliation agreement as a result of several scenarios. As an 
example, Hospital A and Hospital B participate in a Medicare GME 
affiliation agreement over a period of several years, and generally, 
under the terms of the agreement, Hospital A is giving IME FTE cap 
slots to Hospital B:
[GRAPHIC] [TIFF OMITTED] TP01MY23.266

    In this example, we see that Hospital B's IME cap increases from 
2019 to 2020 and again from 2020 to 2021 because it receives cap slots 
from Hospital A. However, we also see that Hospital A experiences a net 
increase in its FTE cap from 2021 to 2022, even though it continues to 
loan IME slots to Hospital B. This is because, under the terms of

[[Page 27017]]

the Medicare GME affiliation agreement, Hospital A loans one less IME 
FTE to Hospital B in 2022 than it did in 2021. In this proposed rule, 
we are clarifying how to determine the net increase in FTEs in the 
current year numerator as compared to the prior year numerator as a 
result of the terms of a Medicare GME affiliation agreement. To 
determine this change accurately, we need to isolate only changes 
resulting from the Medicare GME affiliation agreement, and not, for 
example, an increase in the resident-bed-ratio due to participation in 
new programs, or due to a change in the number of beds in the 
denominator. Under the current cost report instructions (Transmittal 
18) on Form CMS-2552-10, Worksheet E, Part A line 20, regarding the 
determination the prior year IRB ratio, states:
    Line 20--In general, enter from the prior year cost report the 
intern and resident to bed ratio by dividing line 12 by line 4 (divide 
line 3.14 by line 3 if the prior year cost report was the Form CMS-
2552-96). However, if the provider is participating in training 
residents in a new medical residency training program(s) under 42 CFR 
413.79(e) for a new program started prior to October 1, 2012, add to 
the numerator of the prior year intern and resident to bed ratio (that 
is, line 12 of the prior cost report, which might be zero), if 
applicable, the number of FTE residents in the current cost reporting 
period that are in the initial period of years of a new program (line 
16) (that is, the period of years is the minimum accredited length of 
the program). For a new program started prior to October 1, 2012, 
contact your contractor for instructions on how to complete this line 
if you have a new program for which the period of years is less than or 
more than three years. For urban hospitals that began participating in 
training residents in a new program for the first time on or after 
October 1, 2012, under 42 CFR 413.79(e)(1), if this cost reporting 
period is prior to the cost reporting period that coincides with or 
follows the start of the sixth program year of the first new program 
started, then divide line 16 of this cost report by line 4 of the prior 
year cost report (see 79 FR 50110 (August 22, 2014)). For rural 
hospitals participating in a new program on or after October 1, 2012, 
under 42 CFR 413.79(e)(3), for each new program started, if this cost 
reporting period is prior to the cost reporting period that coincides 
with or follows the start of the sixth program year of each particular 
new program, then add the amount from line 12 of the prior year (if 
greater than zero) and line 16 of this cost report, and divide the sum 
by line 4 of the prior year's cost report (see 79 FR 50110 (August 22, 
2014)). If the provider is participating in a Medicare GME affiliation 
agreement or rural track Medicare GME affiliation agreement under 42 
CFR 413.79(f), and the provider increased its current year FTE cap and 
current year FTE count due to this affiliation agreement, identify the 
lower of: (a) the difference between the current year numerator and the 
prior year numerator, and (b) the number by which the FTE cap increased 
per the affiliation agreement, and add the lower of these two numbers 
to the prior year's numerator (see 42 CFR 412.105(a)(1)(i)). If the 
hospital is participating in a valid emergency Medicare GME affiliation 
agreement under a Sec.  1135 waiver, and a portion of this cost report 
falls within the time frame covered by that emergency affiliation 
agreement, then, effective on and after October 1, 2008, enter the 
current year resident-to-bed ratio from line 19 (see 73 FR 48649 
(August 19, 2008) and 42 CFR 412.105(f)(1)(vi)). Effective for cost 
reporting periods beginning on or after October 1, 2002, if the 
hospital is training FTE residents in the current year that were 
displaced by the closure of another hospital or program, also adjust 
the numerator of the prior year ratio for the number of current year 
FTE residents that were displaced by hospital or program closure (see 
42 CFR 412.105(a)(1)(iii)). The amount added to the prior year's 
numerator is the displaced resident FTE amount that you would not be 
able to count without a temporary cap adjustment. This is the same 
amount of displaced resident FTEs entered on line 17. For cost 
reporting periods beginning on or after October 1, 2022, for urban and 
rural hospitals participating in a rural track program(s), adjust the 
numerator by adding to the amount on Worksheet E, Part A, line 12, of 
the prior year cost report (if greater than zero) the FTEs in the rural 
track program(s) on line 16 of this worksheet, if this cost report is 
still prior to the cost reporting period that coincides with or follows 
the start of the sixth program year of that rural track program 
(italics emphasis added).
    Our clarification focuses on the italicized text as previously 
detailed: ``If the provider is participating in a Medicare GME 
affiliation agreement or rural track Medicare GME affiliation agreement 
under 42 CFR 413.79(f), and the provider increased its current year FTE 
cap and current year FTE count due to this affiliation agreement, 
identify the lower of: (a) the difference between the current year 
numerator and the prior year numerator, and (b) the number by which the 
FTE cap increased per the affiliation agreement, and add the lower of 
these two numbers to the prior year's numerator'' (emphasis added).
    We have been asked by teaching hospitals to clarify what lines on 
the cost report to use to determine that the provider ``increased its 
current year FTE cap,'' and that the provider increased its ``current 
year FTE count'' due to the affiliation agreement. We have also been 
asked to clarify what line on the cost report represents the ``current 
year numerator,'' specifically, whether this value refers to current 
year line 12, or line 15, or line 18.
    Line 8 states: Enter the adjustment (increase or decrease) to the 
FTE count for allopathic and osteopathic programs for affiliated 
programs in accordance with 42 CFR 413.75(b), 413.79(c)(2)(iv) and 63 
FR 26340 (May 12, 1998), and 67 FR 50069 (August 1, 2002).
    Line 10 states: Enter the FTE count for allopathic and osteopathic 
programs in the current year from your records. Do not include 
residents in the initial years of the new program.
    Line 12 states: Enter the result of the lesser of line 9, or line 
10 added to line 11.
    Line 15 states: Enter the sum of lines 12 through 14 divided by 
three.
    Line 18 states: Enter the sum of lines 15, 16 and 17.
    Line 19 states: Enter the current year resident to bed ratio by 
dividing line 18 by line 4 [beds].
    If the provider is participating in a Medicare GME affiliation 
agreement (or rural track Medicare GME affiliation agreement under 42 
CFR 413.75(b)), the provider first has to make sure that in fact, it 
increased its current year FTE cap, and second, that it increased its 
current year allowable FTE count. To determine if there is an increase 
in the current year FTE cap ``due to this affiliation agreement,'' the 
provider would check if the difference of current year line 8 minus 
prior year line 8 is positive. If yes, next the provider would 
determine if the difference of current year allowable allopathic and 
osteopathic FTE count line 12 minus prior year allowable allopathic and 
osteopathic FTE count line 12 is positive. The provider would determine 
the difference between current year line 12 and prior year line 12 by 
first excluding any dental and podiatry FTEs on line 11 of both years, 
if applicable. If negative, then the provider did not increase its 
current year allowable allopathic and osteopathic FTE count due to the 
affiliation agreement, and there is no adjustment made to the prior

[[Page 27018]]

year IRB ratio. If positive, the provider would proceed with the next 
part of the determination to ``identify the lower of: (a) the 
difference between the current year numerator and the prior year 
numerator, and (b) the number by which the FTE cap increased per the 
affiliation agreement, and add the lower of these two numbers to the 
prior year's numerator.''
    The ``current year numerator'' referred to in the excerpt from 
Worksheet E, Part A line 20 is line 15; that is, the current year 
numerator before making any adjustments for new programs, new RTPs, or 
displaced residents, but including residents counted under the terms of 
a Medicare GME affiliation agreement, and subject to the three-year 
rolling average. We explain the reasons in detail in this section of 
this rule. However, first, we are acknowledging that the phrase 
``current year numerator'' in the context of line 20 must refer to a 
different value than the numerator of the ``current year resident to 
bed ratio'' in line 19, which states, ``Enter the current year resident 
to bed ratio by dividing line 18 by line 4.'' In the context of 
Medicare GME affiliation agreements in line 20, the current year 
numerator cannot refer to line 18, as line 18 represents the current 
year IRB ratio with various adjustments, including the FTEs in new 
programs from line 16, and FTEs displaced by hospital or program 
closure on line 17. As previously stated, we need to isolate only 
changes associated with the Medicare GME affiliation agreement, and 
including FTEs associated with new programs or closed programs on line 
18 would introduce extraneous variables into the equation.
    Next, we note that the ``current year numerator'' is not line 12. 
Line 12 is the current year allowable FTE count; that is, the lower of 
the current year FTE count or the adjusted FTE cap, which reflects the 
FTE adjustment under the terms of the Medicare GME affiliation 
agreement. The current year allowable FTE count on line 12 is used in 
the 3-year rolling average calculation on line 15, which sums the 
current year allowable FTE count, the prior year allowable FTE count, 
and the penultimate year FTE count, and divides the result by 3. While 
it may seem that averaging the current year FTEs with FTEs from prior 
years interferes with determining only changes to the current year FTEs 
under an affiliation agreement, the law and regulations require that 
additional FTEs added due to a Medicare GME affiliation agreement are 
subject to the 3-year rolling average (see section 1886(d)(5)(B)(viii) 
of the Act and 42 CFR 413.79(f), regarding a Medicare GME affiliated 
group, which provides that a hospital may receive a temporary 
adjustment to its FTE cap, which is subject to the averaging rules 
under Sec.  413.79(d), to reflect residents added or subtracted because 
the hospital is participating in a Medicare GME affiliated group (as 
defined under Sec.  413.75(b)). Because any additional FTEs due to 
participation in a Medicare GME affiliation agreement must be included 
in the rolling average on line 15, we believe that the ``current year 
numerator'' referred to on Worksheet E, Part A line 20 is line 15, not 
line 12. This is in contrast to the ``prior year numerator,'' which we 
note is line 12, as the instructions for line 20 state: ``In general, 
enter from the prior year cost report the intern and resident to bed 
ratio by dividing line 12 by line 4.'' (See 42 CFR 412.105(a)(1)(i), 
which states ``this ratio may not exceed the ratio for the hospital's 
most recent prior cost reporting period after accounting for the cap on 
the number of allopathic and osteopathic full-time equivalent residents 
as described in paragraph (f)(1)(iv) of this section.'' This regulation 
does not require accounting for the 3-year rolling average.) Therefore, 
we propose to clarify the instructions on Worksheet E, Part A line 20 
as follows, in italics:
    If the provider is participating in a Medicare GME affiliation 
agreement or rural track Medicare GME affiliation agreement under 42 
CFR 413.79(f), and the provider increased its current year FTE cap 
(difference of current year line 8 and prior year line 8 is positive) 
and increased its current year allowable FTE count (difference of 
current year line 12 (excluding current year dental and podiatry from 
line 11) and prior year line 12 (excluding prior year dental and 
podiatry from line 11) is positive) due to this affiliation agreement, 
identify the lower of: (a) the difference between the current year 
numerator line 15 and the prior year numerator line 12 of the prior 
year cost report, and (b) the number by which the FTE cap increased per 
the affiliation agreement (difference of current year line 8 and prior 
year line 8), and add the lower of these two numbers to the prior 
year's numerator line 12 of the prior year cost report.
    We are not proposing any changes to the regulation text at 42 CFR 
412.105, as we believe the appropriate regulations text already exists 
at 42 CFR 412.105(a)(1)(i) and 413.79(f), indicating that an adjustment 
may be made to the prior year numerator due to an increase in the 
Medicare GME affiliated cap, that the lower of the current or prior 
year IRB ratio is used for payment, and that FTE residents added under 
a Medicare GME affiliation agreement are subject to the rolling 
average. Rather, as we stated, we intend to clarify the Medicare cost 
report instructions Form CMS-2552-10 Worksheet E, Part A, line 20 to 
more clearly indicate how these calculations are performed.
3. Training in New REH Facility Type
    In the Hospital Outpatient Prospective Payment System CY 2023 final 
rule with comment (87 FR 71748) CMS finalized certain payment policies 
and conditions of participation (CoPs) with respect to rural emergency 
hospitals (REHs). Section 125 of Division CC of the Consolidated 
Appropriations Act, 2021 (CAA) added a new section 1861(kkk) of the Act 
to establish REHs as a new Medicare provider type, effective January 1, 
2023. REHs are facilities that convert from either a critical access 
hospital (CAH) or a rural hospital (or one treated as such under 
section 1886(d)(8)(E) of the Act) with not more than 50 beds, and that 
do not provide acute care inpatient services with the exception of 
post-hospital extended care services furnished in a unit of the 
facility that is a distinct part licensed as a skilled nursing 
facility. By statute, REH services include emergency department 
services and observation care and, at the election of the REH, other 
outpatient medical and health services furnished on an outpatient 
basis, as specified by the Secretary through rulemaking. REHs are a new 
provider type established by the CAA to address the growing concern 
over closures of rural hospitals. Similar to CAHs, REHs are intended to 
provide much needed healthcare services, often times as the initial and 
only accessible point of care for individuals living in rural 
underserved areas.
    As part of the comments received in response to the CY 2023 
Outpatient Prospective Payment System (OPPS) proposed rule (87 FR 
44502) and the proposed rule establishing REH CoPs (87 FR 40350), CMS 
received the request to designate REHs as graduate medical education 
(GME) eligible facilities similar to the GME designation for CAHs (87 
FR 72164). CMS' current policy with respect to CAHs and GME is 
discussed in the August 16, 2019 Federal Register (84 FR 42411). In 
that rule we finalized the policy that effective with portions of cost 
reporting periods beginning on or after October 1, 2019, a hospital may 
include FTE residents training at a CAH in its direct GME and IME FTE 
counts as long as it meets the nonprovider setting requirements 
currently included at 42 CFR 412.105(f)(1)(ii)(E) and 413.78(g).

[[Page 27019]]

We stated that while a CAH is considered a ``provider of services'' 
under section 1861(u) of the Act, the term ``nonprovider'' is not 
explicitly defined in the statute. Furthermore, section 1861(e) of the 
Act, which states in part that the term ``hospital'' does not include, 
unless the context otherwise requires, a critical access hospital (as 
defined in section 1861(mm)(1) of the Act), underscores the sometimes 
ambiguous status of CAHs. We stated that we believe that the lack of 
both an explicit statutory definition of ``nonprovider'' and a 
definitive determination as to whether a CAH is considered a hospital 
along with the fact that a CAH is a facility primarily engaged in 
patient care (we referred readers to section 1886(h)(5)(K) of the Act 
which states that the term ``nonprovider setting that is primarily 
engaged in furnishing patient care'' means a nonprovider setting in 
which the primary activity is the care and treatment of patients, as 
defined by the Secretary), provides flexibility within the current 
statutory language to consider a CAH as a ``nonprovider'' setting for 
direct GME and IME payment purposes.
    Section 125(a)(1)(A) of the CAA, 2021, amended section 1861(e) of 
the Social Security Act by inserting the phrase ``or a rural emergency 
hospital (as defined in subsection (kkk)(2))'', such that the language 
now states that the term ``hospital'' does not include, unless the 
context otherwise requires, a critical access hospital (as defined in 
section 1861(mm)(1) of the Act) or a rural emergency hospital (as 
defined in subsection (kkk)(2)). Given the inclusion of REHs in the 
last sentence of section 1861(e) and the fact that an REH is a facility 
primarily engaged in patient care (see the previous discussion of 
1886(h)(5)(K)), we believe that statutory flexibility also exists for 
REHs to be considered nonprovider settings for GME payment purposes. In 
addition, facilities currently designated as CAHs, which serve as 
nonprovider sites, may choose to convert to REH status in order to be 
able to continue to provide healthcare services within their 
communities. We believe that increasing access to physicians in rural 
areas can be supported by a flexible policy which would allow for 
residency training to continue at these former CAHs and begin at other 
newly designated REHs, which may have not previously trained residents. 
Therefore, we are proposing to add a new paragraph (d) at 42 CFR 419.92 
to state that effective for portions of cost reporting periods 
beginning on or after October 1, 2023, a hospital may include FTE 
residents training at an REH in its direct GME and IME FTE counts as 
long as it meets the nonprovider setting requirements included at 42 
CFR 412.105(f)(1)(ii)(E) and 413.78(g) and any succeeding regulations. 
Consistent with our policy regarding residency training at CAHs during 
a hospital's cap building period (84 FR 42415), if a hospital is at 
some point in its 5-year cap-building period as of October 1, 2023, and 
as of that date is sending residents in a new program to train at a 
REH, assuming the regulations governing nonprovider site training are 
met, the time spent by FTE residents training at the REH on or after 
October 1, 2023 will be included in the hospital's FTE cap calculation.
    As an alternative to being considered a nonprovider site, we stated 
in the August 16, 2019 Federal Register (84 FR 42415), that a CAH may 
decide to continue to incur the costs of training residents in an 
approved residency training program(s) and receive payment based on 101 
percent of the reasonable costs for those training costs. In this 
situation no hospital can include the residents training at the CAH in 
its direct GME and IME FTE counts. We believe REHs may make a similar 
decision to incur residency training costs directly consistent with the 
statutory language at section 1886(k)(2)(D) of the Act, which refers to 
nonhospital providers, and the aforementioned flexibility provided 
under 1861(e) of the Act. Specifically, we are proposing under the 
authority of section 1886(k)(2)(D) of the Act to add a new paragraph 
(d) at 42 CFR 419.92 indicating that effective for portions of cost 
reporting periods beginning on or after October 1, 2023, REHs may 
decide to incur the costs of training residents in an approved 
residency training program(s) and receive payment based on 100 percent 
of the reasonable costs for those training costs, consistent with the 
reasonable cost principles at section 1861(v)(1)(A) of the Act. As is 
the case when CAHs incur GME costs directly, no hospital can include 
the residents training at the REH in its direct GME and IME FTE counts 
when the REH chooses to be paid for direct GME costs instead of 
functioning as a nonprovider site and as such, residency training in 
this instance is not limited by FTE resident caps.
    In summary, we are proposing that effective for portions of cost 
reporting periods beginning on or after October 1, 2023, an REH may 
decide to be a nonprovider site such that if the requirements at 42 CFR 
412.105(f)(1)(ii)(E) and 413.78(g) are met, a hospital can include the 
FTE residents training at the REH in its direct GME and IME FTE counts 
for Medicare payment purposes, or, the REH may decide to incur direct 
GME costs and be paid based on reasonable costs for those training 
costs. We are proposing to add a new paragraph (d) at 42 CFR 419.92 to 
implement these provisions.
4. Notice of Closure of Teaching Hospital and Opportunity To Apply for 
Available Slots
a. Background
    Section 5506 of the Affordable Care Act (Pub. L. 111-148), as 
amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111- 152) (collectively, the Affordable Care Act), authorizes 
the Secretary to redistribute residency slots after a hospital that 
trained residents in an approved medical residency program closes. 
Specifically, section 5506 of the Affordable Care Act amended the Act 
by adding subsection (vi) to section 1886(h)(4)(H) of the Act and 
modifying language at section 1886(d)(5)(B)(v) of the Act, to instruct 
the Secretary to establish a process to increase the FTE resident caps 
for other hospitals based upon the FTE resident caps in teaching 
hospitals that closed on or after a date that is 2 years before the 
date of enactment (that is, March 23, 2008). In the CY 2011 Outpatient 
Prospective Payment System (OPPS) final rule with comment period (75 FR 
72212), we established regulations at 42 CFR 413.79(o) and an 
application process for qualifying hospitals to apply to CMS to receive 
direct GME and IME FTE resident cap slots from the hospital that 
closed. We made certain modifications to those regulations in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to the 
section 5506 application process in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50122 through 50134). The procedures we established apply 
both to teaching hospitals that closed on or after March 23, 2008, and 
on or before August 3, 2010, and to teaching hospitals that close after 
August 3, 2010.
b. Notice of Closure of St. Vincent Charity Medical Center Located in 
Cleveland, OH and the Application Process--Round 20
    CMS has learned of the closure of St. Vincent Charity Medical 
Center, located in Cleveland, OH (CCN 360037).
    Accordingly, this notice serves to notify the public of the closure 
of this teaching hospital and initiate another round of the section 
5506 application and selection process. This round will

[[Page 27020]]

be the 20th round (``Round 20'') of the application and selection 
process. The table in this section of this rule contains the 
identifying information and IME and direct GME FTE resident caps for 
the closed teaching hospital, which are part of the Round 20 
application process under section 5506 of the Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TP01MY23.267

c. Application Process for Available Resident Slots
    The application period for hospitals to apply for slots under 
section 5506 of the Affordable Care Act is 90 days following notice to 
the public of a hospital closure (77 FR 53436). Therefore, hospitals 
that wish to apply for and receive slots from the FTE resident caps of 
closed St. Vincent Charity Medical Center, located in Cleveland, OH, 
must submit applications using the electronic application intake 
system, Medicare Electronic Application Request Information 
SystemTM (MEARISTM), with application submissions 
for Round 20 due no later than July 10, 2023. The Section 5506 
application can be accessed at: https://mearis.cms.gov/public/home.
    CMS will only accept Round 20 applications submitted via 
MEARISTM. Applications submitted through any other method 
will not be considered. Within MEARISTM, we have built in 
several resources to support applicants:
     Please refer to the ``Resources'' section for guidance 
regarding the application submission process at: https://mearis.cms.gov/public/resources.
     Technical support is available under ``Useful Links'' at 
the bottom of the MEARISTM web page.
     Application related questions can be submitted to CMS 
using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources.
    Application submission through MEARISTM will not only 
help CMS track applications and streamline the review process, but it 
will also create efficiencies for applicants when compared to a paper 
submission process.
    We have not established a deadline by when CMS will issue the final 
determinations to hospitals that receive slots under section 5506 of 
the Affordable Care Act. However, we review all applications received 
by the deadline and notify applicants of our determinations as soon as 
possible.
    We refer readers to the CMS Direct Graduate Medical Education 
(DGME) website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.html. Hospitals should access 
this website for a list of additional section 5506 guidelines for the 
policy and procedures for applying for slots, and the redistribution of 
the slots under sections 1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the 
Act.

H. Reasonable Cost Payment for Nursing and Allied Health Education 
Programs (Sec. Sec.  413.85 and 413.87)

1. 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 42 CFR 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 Advantage 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

[[Page 27021]]

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 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 
section 1886(h)(3) of the Act. Accordingly, we stated in the August 1, 
2000 IFC (65 FR 47038) that each year, we would determine and publish 
in a final rule the total amount of nursing and allied health education 
payments made across all hospitals during the fiscal year 2 years prior 
to the current calendar year 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-U) 
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 CY 2021, we 
proposed and finalized the NAH MA add-on rates in the FY 2023 IPPS/LTCH 
PPS proposed and final rules. We stated that for CYs 2022 and after, we 
would similarly propose and finalize their respective NAH MA rates and 
direct GME percent reductions in subsequent IPPS/LTCH PPS rulemakings 
(see 87 FR 49073 August 10, 2022).
    In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing the 
rates for CY 2022. Consistent with the use of HCRIS data for past 
calendar years, we are proposing to use data from cost reports ending 
in FY 2020 HCRIS (the fiscal year that is 2 years prior to CY 2022) to 
compile these national amounts: NAH pass-through payment, Part A 
Inpatient Days, MA Inpatient Days.
    For this proposed rule, we accessed the FY 2020 HCRIS data from the 
fourth 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 
year, which in this final rule, is CY 2022, 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 2022, the 
direct GME projections are based on the fourth quarterly update of CY 
2020 HCRIS, adjusted for the CPI-U and for increasing MA enrollment.
    For CY 2022, the proposed national rates and percentages, and their 
data sources are set forth in this table. We intend to update these 
numbers in the FY 2024 final rule based on the latest available cost 
report data.

[[Page 27022]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.268

    Section 4143 of the CAA 2023 (enacted December 29, 2022), called 
``Waiver of Cap on Annual Payments for Nursing and Allied Health 
Education Payments,'' amends section 1886(l)(2)(B) of the Act to state 
that for portions of cost reporting periods occurring in each of CYs 
2010 through 2019, the $60 million payment limit, or payment ``pool,'' 
shall not apply to the total amount of additional payments for nursing 
and allied health education to be distributed to hospitals that, as of 
the date of enactment of this clause, are operating a school of 
nursing, a school of allied health, or a school of nursing and allied 
health. As noted previously, section 541 of the BBRA limited total 
spending under the NAH MA provision to no more than $60 million in any 
calendar year. Under CR 11642 issued on November 19, 2020, CMS 
instructed MACs to recalculate historical payments to hospitals 
consistent with the $60 million limit per calendar year, and make 
applicable adjustments to NAH MA payments. In this section, we propose 
a method for the MACs to implement section 4143 in the absence of the 
$60 million limit on the pool.
    In addition, section 541 of the BBRA 1999 also provides that direct 
GME payments for MA utilization will be reduced to the extent that 
these additional payments are made for nursing and allied health 
education programs. However, section 4143 of the CAA 2023 also provides 
that in not applying the $60 million limit for each of 2010 through 
2019, the Secretary shall not take into account any increase in the 
total amount of such additional payment amounts for such nursing and 
allied health education for portions of cost reporting periods 
occurring in the year. We propose to interpret this to mean that, 
pursuant to the requirement set out at section 4143(b) of CAA 2023, 
MACs shall not change the DGME MA percent reduction amounts specified 
in CR 11642 for CYs 2010 through 2018, and CR 12407 for CY 2019 (and CR 
12596 which corrected the DGME MA percent reduction related to CY 2018 
specified in CR 11642).
    The following table shows the recalculated pool amounts for CYs 
2010 through 2019. We propose that MACs would first determine whether 
hospitals that received revised payments under CR 11642 were still 
receiving NAH MA payments on an interim basis as of December 29, 2022. 
For example, if a hospital's payments for a NAH program(s) were 
adjusted under CR 11642, but that hospital since closed all of its NAH 
programs, that hospital would not be eligible under section 4143 to 
receive adjusted payments for CYs 2010 through 2019, even if the 
hospital itself has remained operational.
    Second, we propose that MACs would use the table in this section of 
this rule to recalculate an eligible hospital's NAH MA payment for 
portions of cost reporting periods occurring in CY 2010 through CY 2019 
that are still within the 3-year reopening period. The formula is 
specified previously in this section.
    Third, we propose that the MACs would subtract the payment amount 
determined under CR 11642 (or CR 12596 or CR 12407 as applicable) for a 
CY from the recalculated amount in the second step, as previously 
detailed.
    Fourth, we propose that the MACs would determine the amount owed to 
a hospital in a CY as the amount calculated in the third step plus the 
difference, if any, between that amount and the amount previously 
recouped under CR 11642 (or CR 12596 or CR 12407 as applicable) or the 
amount that would have been recouped under CR 11642 (or CR 12596 or CR 
12407 as applicable) if not for the enactment of Section 4143 of the 
CAA 2023, if such difference for a CY is greater than $0. We note that 
by adding this difference to the amount calculated in the third step, 
the amounts previously recouped under CR 11642 (or CR 12596 or CR 12407 
as applicable) will be returned to hospitals, and recoupments that 
would have occurred under CR 11642 (or CR 12596 or CR 12407 as 
applicable) if not for the enactment of Section 4143 of the CAA 2023 
will not occur.
[GRAPHIC] [TIFF OMITTED] TP01MY23.269


[[Page 27023]]


    We are not proposing any changes to the regulations text at 42 CFR 
413.87.

I. Proposed 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).
    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 a serious or immediately life-threatening disease or 
condition to gain access to an investigational medical product (drug, 
biologic, or medical device) for treatment outside of clinical trials 
when, among other criteria, there is no comparable or satisfactory 
alternative therapy to diagnose, monitor, or treat the disease or 
condition (21 CFR 312.305).\164\
---------------------------------------------------------------------------

    \164\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
---------------------------------------------------------------------------

    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 2024, we are proposing 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, as 
calculated using the same proposed modifications to our existing 
methodology, as adopted in the FY 2021 IPPS/LTCH PPS final rule (85 FR 
58842), that we are proposing to use to adjust the case count for 
purposes of the relative weight calculations, as described in section 
II.D. of the preamble of this proposed rule. As discussed in that 
section, the December update of the FY 2022 MedPAR claims data now 
includes a field that identifies whether or not the claim includes 
expanded access use of immunotherapy. For the FY 2022 MedPAR claims 
data, this field identifies whether or not the claim includes condition 
code ZB. For the FY 2023 MedPAR data and for subsequent years, this 
field will identify whether or not the claim includes condition code 
90. The MedPAR files now also include information for claims with the 
payer-only condition code ``ZC'', which is used by the IPPS Pricer to 
identify a case 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 so that the payment 
adjustment is not applied in calculating the payment for the case (for 
example, see Change Request 11879, available at https://www.cms.gov/files/document/r10571cp.pdf). We refer the readers to section II.D. of 
the preamble of this proposed rule for further discussion of our 
proposed changes to our methodology for identifying clinical trial 
claims and expanded access use claims in MS-DRG 018 and our proposed 
modifications to the methodology used to adjust the case count for 
purposes of the relative weight calculations.
    Consistent with these proposals, and using the same methodology 
that we are proposing to use to adjust the case count for purposes of 
the relative weight calculations, we are proposing to calculate the 
adjustment to the payment amount for expanded access use of 
immunotherapy and applicable clinical trial cases as follows:
     Calculate the average cost for cases assigned to MS-DRG 
018 that either (a) contain ICD-10-CM diagnosis code Z00.6 and do not 
contain condition code ``ZC'' or (b) contain condition code 90 (or, for 
FY 2024 ratesetting, which is based on the FY 2022 MedPAR data, 
condition code ``ZB'').
     Calculate the average cost for all other cases 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 this adjustor when calculating payments for expanded 
access use of immunotherapy and applicable clinical trial cases that 
group to MS-DRG 018 by multiplying the relative weight for MS-DRG 018 
by the adjustor.
    We refer the readers to section II.D. of the preamble of this 
proposed rule for further discussion of these proposed methodology 
changes.
    Consistent with our calculation of the proposed adjustor for the 
relative weight

[[Page 27024]]

calculations, for this proposed rule we propose to calculate this 
adjustor based on the December 2022 update of the FY 2022 MedPAR file 
for purposes of establishing the FY 2024 payment amount. Specifically, 
in accordance with 42 CFR 412.85 (for operating IPPS payments) and 42 
CFR 412.312 (for capital IPPS payments), we propose to multiply the FY 
2024 relative weight for MS-DRG 018 by a proposed adjustor of 0.28 as 
part of the calculation of the payment for claims determined to be 
applicable clinical trial or expanded use access immunotherapy claims 
that group to MS-DRG 018, which includes CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies. We also propose to update the 
value of the adjustor based on more recent data for the final rule.

J. Hospital Readmissions Reduction Program

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 1886(q) of the Act establishes the Hospital Readmissions 
Reduction Program. We refer readers to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49530 through 49531) and the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38221 through 38240) for a detailed discussion of and 
additional information on the statutory history of the Hospital 
Readmissions Reduction Program.
2. Regulatory Background
    We refer readers to the following final rules for detailed 
discussions of the regulatory background and descriptions of the 
current policies for the Hospital Readmissions Reduction Program:
     FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 
51676);
     FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401);
     FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 
50676);
     FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 
50048);
     FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 
49543);
     FY 2017 IPPS/LTCH PPS final rule (81 FR 56973 through 
56979);
     FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 
38240);
     FY 2019 IPPS/LTCH PPS final rule (83 FR 41431 through 
41439);
     FY 2020 IPPS/LTCH PPS final rule (84 FR 42380 through 
42390);
     FY 2021 IPPS/LTCH PPS final rule (85 FR 58844 through 
58847);
     FY 2022 IPPS/LTCH PPS final rule (86 FR 45249 through 
45266); and
     FY 2023 IPPS/LTCH PPS final rule (87 FR 49081 through 
49094).
    We have also codified certain requirements of the Hospital 
Readmissions Reduction Program at 42 CFR 412.152 through 412.154.
3. Current Measures
    The Hospital Readmissions Reduction Program currently includes six 
applicable conditions/procedures: Acute myocardial infarction (AMI); 
heart failure (HF); pneumonia (PN); elective primary total hip 
arthroplasty/total knee arthroplasty (THA/TKA); chronic obstructive 
pulmonary disease (COPD); and coronary artery bypass graft (CABG) 
surgery.
    There are no proposals or updates in this proposed rule for the 
Hospital Readmissions Reduction Program. We refer readers to section 
I.G.5 of the proposed rule for an updated estimate of the financial 
impact of using the proportion of dually-eligible beneficiaries, ERRs, 
and aggregate payments for each condition/procedure and all discharges 
for applicable hospitals from the FY 2024 Hospital Readmissions 
Reduction Program applicable period (that is, July 1, 2019, through 
June 30, 2022).

K. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy 
Changes

1. Background
a. Overview
    Section 1886(o) of the Act requires the Secretary to establish a 
hospital value-based purchasing program (the Hospital VBP Program) 
under which value-based incentive payments are made in a fiscal year 
(FY) to hospitals that meet performance standards established for a 
performance period for such fiscal year. Both the performance standards 
and the performance period for a fiscal year are to be established by 
the Secretary.
    For descriptions of our current policies for the Hospital VBP 
Program, we refer readers to our codified requirements for the Hospital 
VBP Program at 42 CFR 412.160 through 412.168.
b. FY 2024 Program Year Payment Details
    Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce 
the base operating DRG payment amount for a hospital for each discharge 
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) 
of the Act, the sum of these reductions in a fiscal year must equal the 
total amount available for value-based incentive payments for all 
eligible hospitals for the fiscal year, as estimated by the Secretary. 
We finalized details on how we would implement these provisions in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), and we 
refer readers to that rule for further details.
    Under section 1886(o)(7)(C)(v) of the Act, the applicable percent 
for the FY 2024 program year is 2.00 percent. Using the methodology we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), we estimate that the total amount available for value-based 
incentive payments for FY 2024 is approximately $1.7 billion, based on 
the December 2022 update of the FY 2022 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 
through 53576), we will utilize a linear exchange function to translate 
this estimated amount available into a value-based incentive payment 
percentage for each hospital, based on its Total Performance Score 
(TPS). We are publishing proxy value-based incentive payment adjustment 
factors in Table 16 associated with this proposed rule (which is 
available via the internet on the CMS website). We note that these 
proposed proxy adjustment factors will not be used to adjust hospital 
payments. These proposed proxy value-based incentive payment adjustment 
factors were calculated using the historical baseline and performance 
periods for the FY 2023 Hospital VBP Program. These proxy factors were 
calculated using the December 2022 update to the FY 2022 MedPAR file. 
The slope of the linear exchange function used to calculate these proxy 
factors was 2.6516107025, and the estimated amount available for value-
based incentive payments to hospitals for FY 2024 is approximately $1.7 
billion. We intend to include an update to this table, as Table 16A, 
with the FY 2024 IPPS/LTCH PPS final rule, to reflect changes based on 
the March 2023 update to the FY 2022 MedPAR file. We will add Table 16B 
to display the actual value-based incentive payment adjustment factors, 
exchange function slope, and estimated amount available for the FY 2024 
Hospital VBP Program. We expect that Table 16B will be posted in Fall 
2023.
2. Retention and Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and 
Relationship Between the Hospital IQR and Hospital VBP Program Measure 
Sets
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized 
a policy to retain measures from prior program years for each 
successive program year, unless otherwise proposed and finalized. In 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440 through

[[Page 27025]]

41441), we finalized a revision to our regulations at 42 CFR 412.164(a) 
to clarify that once we have complied with the statutory prerequisites 
for adopting a measure for the Hospital VBP Program (that is, we have 
selected the measure from the Hospital IQR Program measure set and 
included data on that measure on Hospital Compare for at least one year 
prior to its inclusion in a Hospital VBP Program performance period), 
the Hospital VBP Program statute does not require that the measure 
continue to remain in the Hospital IQR Program.
    We are not proposing any changes to these policies in this proposed 
rule.
b. Proposal to Codify the Current Hospital VBP Program Measure Removal 
Factors
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41441 through 
41446), we finalized eight measure removal factors for the Hospital VBP 
Program, and we refer readers to that final rule for details. We are 
proposing in this proposed rule to codify at 42 CFR 412.164(c) of our 
regulations these eight measure removal factors as well as the policies 
for updating measure specifications and retaining measures. We believe 
this proposal will make it easier for interested parties to find these 
policies and will further align the Hospital VBP Program regulations 
with the regulations we have codified for other quality reporting 
programs. We invite public comment on this proposal.
c. Proposed Substantive Measure Modifications
(1) Proposed Substantive Measure Updates to the Medicare Spending per 
Beneficiary (MSPB)--Hospital Measure (CBE #2158) Beginning With the FY 
2028 Program Year
    We are proposing to adopt substantial measure updates to the MSPB 
Hospital measure (CBE #2158) in the Hospital VBP Program beginning with 
the FY 2028 program year. We adopted the MSPB Hospital measure in the 
Hospital VBP Program in the FY 2012 IPPS/LTCH PPS final rule beginning 
with the FY 2014 program year (76 FR 51654 through 51658). We continue 
to believe the MSPB Hospital measure provides important data on 
resource use (addressing the Meaningful Measures Framework priority of 
making care affordable), which is why we are proposing substantive 
updates to the MSPB Hospital measure in the Hospital VBP Program under 
the Efficiency/Cost Domain. We refer readers to the FY 2019 IPPS/LTCH 
PPS final rule for a broader discussion of the Meaningful Measures 
Framework (83 FR 41147).
    We previously adopted the same substantive updates to the MSPB 
Hospital measure for use in the Hospital IQR Program in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49257 through 49263). The substantive 
updates to the MSPB Hospital measure are three refinements which ensure 
a more comprehensive and consistent assessment of hospital performance 
by capturing more episodes and adjusting the measure calculation:
     An update to allow readmissions to trigger new episodes to 
account for episodes and costs that are currently not included in the 
measure but that could be within the hospital's reasonable influence;
     A new indicator variable in the risk adjustment model for 
whether there was an inpatient stay in the 30 days prior to episode 
start date; and
     An updated MSPB amount calculation methodology to change 
one step in the measure calculation from the sum of observed costs 
divided by the sum of expected costs (ratio of sums) to the mean of 
observed costs divided by expected costs (mean of ratios).
    These refinements also appear in a summary of the measure re-
evaluation on the CMS QualityNet website posted in July 2020.\165\
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    \165\ Medicare Spending Per Beneficiary (MSPB) Measure 
Methodology. Available at: https://qualitynet.cms.gov/inpatient/measures/mspb/methodology.
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    We presented the three substantive updates to the MSPB Hospital 
measure (CBE #2158) to the consensus-based entity (CBE) \166\ in the 
Fall 2020 cycle for measure re-endorsement. During the Fall 2020 11-
month endorsement cycle, the re-evaluated MSPB Hospital measure was 
reviewed by the Scientific Methods Panel (SMP), Cost and Efficiency 
Standing Committee, and Consensus Standards Approval Committee 
(CSAC).\167\ The re-evaluated measure passed on the reliability and 
validity criteria when reviewed by the SMP. The Cost and Efficiency 
Standing Committee reviewed each aspect of the re-evaluated measure in 
detail across three meetings. The CSAC approved the Standing 
Committee's endorsement recommendation unanimously and re-endorsed the 
MSPB Hospital measure (CBE #2158) in June 2021 with the three 
refinements.\168\ Following re-endorsement, we included the updated 
measure in CMS's ``List of Measures Under Consideration (MUC) for 
December 1, 2021.'' \169\ The re-evaluated MSPB Hospital measure 
(MUC2021-131) underwent Measure Applications Partnership (MAP) review 
during the 2021-2022 cycle. On December 15, 2021, the MAP Hospital 
Workgroup supported the re-evaluated measure for rulemaking. On January 
19, 2022, the MAP Coordinating Committee upheld the MAP Hospital 
Workgroup's preliminary recommendation to support the re-evaluated 
measure for rulemaking. More detail on the discussion is available in 
the MAP's final report.\170\
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    \166\ In previous years, we referred to the consensus-based 
entity by corporate name. We have updated this language to refer to 
the consensus-based entity more generally.
    \167\ The submission materials, including the testing results, 
are available at: https://www.qualityforum.org/ProjectMeasures.aspx?projectID=86056&cycleNo=2&cycleYear=2020.
    \168\ Centers for Medicare & Medicaid Services. (2020). Cost and 
Efficiency Final Report--Fall 2020 Cycle. Available at: https://mmshub.cms.gov/sites/default/files/cost-and-efficiency-final-report-fall-2020.pdf.
    \169\ Centers for Medicare & Medicaid Services. (2021). List of 
Measures Under Consideration for December 1, 2021. Available at: 
https://mmshub.cms.gov/sites/default/files/Overview-of-the-2021-MUC-List-20220308-508.pdf.
    \170\ Centers for Medicare & Medicaid Services. (2022). Measure 
Applications Partnership 2021-2022 Considerations for Implementing 
Measures in Federal Programs: Clinician, Hospital, and Post-Acute 
Care Long-Term Care. Available at: https://mmshub.cms.gov/sites/default/files/map_2021-2022_considerations_for_implementing_measures_in_federal_programs_final_report.pdf.
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    For the purpose of continuing to assess hospitals' efficiency and 
resource use and to meet statutory requirements under section 
1886(o)(2)(B)(ii) of the Act, we are proposing to adopt the substantive 
updates to the MSPB Hospital measure in the Hospital VBP Program under 
the Efficiency and Cost Reduction Domain. As previously stated, we 
previously adopted the same substantive updates to the measure in the 
Hospital IQR Program (87 FR 49257 through 49263), and we intend to 
begin posting the updated measure data on Care Compare beginning in 
January 2024, which will enable us to post data on the substantive 
updates to the measure for at least one year before the proposed 
beginning of the performance period for the FY 2028 program year 
(discharges beginning January 1, 2026).
    We are proposing to adopt the substantive updates to the MSPB 
Hospital measure (CBE #2158) in the Hospital VBP Program beginning with 
the FY 2028 program year. We refer readers to section V.K.4.c of the 
preamble of this proposed rule where we discuss our defined baseline 
and performance periods for this updated measure under the Hospital VBP 
Program. We are also proposing that the performance standards 
calculation methodology for the updated MSPB Hospital measure would be 
the same as that which we currently use for the measure. The 
performance standards for

[[Page 27026]]

the updated measure for the FY 2028 program year are not yet available.
    We invite public comment on this proposal.
(2) Proposed Substantive Measure Updates to the Hospital-Level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (CBE #1550) 
Measure Beginning With the FY 2030 Program Year
    We are proposing to adopt substantive measure updates to the 
Hospital-level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (CBE #1550) (hereinafter referred to as the THA/TKA 
Complication measure), beginning with the FY 2030 program year. We 
adopted the THA/TKA Complication measure in the FY 2015 IPPS/LTCH PPS 
final rule beginning with the FY 2019 program year for use in the 
Hospital VBP Program (79 FR 50062 through 50063). We continue to 
consider the clinical outcomes of the THA/TKA Complication measure a 
high priority, and we believe this measure provides important data on 
resource use (addressing the Meaningful Measures Framework priority of 
making care affordable), which is why we are proposing to adopt 
substantive updates to the THA/TKA Complication measure in the Hospital 
VBP Program under the Clinical Outcomes Domain.
    We previously adopted the same substantive updates to the THA/TKA 
Complication measure for use in the Hospital IQR Program as a re-
evaluated measure in the FY 2023 IPPS/LTCH PPS final rule (87 49257 
through 49263). We also listed the re-evaluated THA/TKA Complication 
measure in the publicly available document entitled ``List of Measures 
Under Consideration for December 1, 2021'' \171\ with identification 
number MUC2021-118. The MAP reviewed the re-evaluated measure and voted 
to conditionally support the measure for rulemaking for use pending CBE 
review and endorsement of the measure update. The MAP Rural Health 
Advisory Group reviewed this re-evaluated measure on December 8, 2021, 
and agreed that the measure was suitable for use with rural providers 
given that there would be no undue consequences for rural 
hospitals.\172\ The CBE re-endorsed the original measure in July of 
2021,\173\ and we intend to submit the re-evaluated measure to the CBE 
for endorsement in Fall 2024.
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    \171\ Centers for Medicare & Medicaid Services. (2021) List of 
measures under consideration for December 1, 2021. Available at: 
https://www.cms.gov/files/document/measures-under-consideration-list-2021-report.pdf.
    \172\ Centers for Medicare & Medicaid Services. (2022) MAP 2021-
2022 Considerations for Implementing Measures Final Report--
Clinicians, Hospitals, and PAC-LTC. Available at: https://mmshub.cms.gov/sites/default/files/map_2021-2022_considerations_for_implementing_measures_in_federal_programs_final_report.pdf.
    \173\ CMS Measure Inventory Tool. (2023) Hospital-level risk-
standardized complication rate (RSCR) following elective primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) 
Measure Specifications. Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=11547&sectionNumber=1.
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    The substantive updates to the THA/TKA Complication measure are the 
inclusion of index admission diagnoses and in-hospital comorbidity data 
from Medicare Part A claims. Additional comorbidities prior to the 
index admission are assessed using Part A inpatient, outpatient, and 
Part B office visit Medicare claims in the 12 months prior to index 
(initial) admission. As a claims-based measure, hospitals would not be 
required to submit additional data for calculating the updated measure. 
We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49263 
through 49267), which describe the same updates we are proposing to 
apply to the THA/TKA Complication measure in the Hospital VBP Program, 
including updates to the risk adjustment and measure calculations.
    Adopting these substantive measure updates into the Hospital VBP 
Program would expand the measure outcome to include 26 additional 
mechanical complication ICD-10 codes. The additional ICD-10 codes 
capture the following diagnoses: fracture following insertion of 
orthopedic implant, joint prosthesis, or bone plate of the pelvis, 
femur, tibia or fibula, and periprosthetic fracture around internal 
prosthetic hip, hip joint, knee, knee joint, and other or unspecified 
internal prosthetic joint. We refer readers to FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49264) for further information on these additional 
included ICD-10 codes that are included in the updated measure as 
adopted for the Hospital IQR Program.
    Section 1886(o)(2)(A) of the Act requires the Hospital VBP Program 
to select measures that have been specified for the Hospital IQR 
Program. We note that although section 1886(b)(3)(B)(viii)(IX)(aa) of 
the Act generally requires measures specified by the Secretary in the 
Hospital IQR Program be endorsed by the entity with a contract under 
section 1890(a) of the Act, section 1886(b)(3)(B)(viii)(IX)(bb) of the 
Act states that in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not endorsed as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary. We reviewed CBE-endorsed measures and were 
unable to identify any other CBE-endorsed measures on this topic, and, 
therefore, we believe the exception in section 1886 
6(b)(3)(B)(viii)(IX)(bb) of the Act applies. We note that we intend to 
submit the re-evaluated measure to the CBE for endorsement in Fall 
2024.
    For the purpose of continuing to assess clinical outcomes, we are 
proposing to adopt the substantive measure updates to the THA/TKA 
Complication measure (CBE #1550) in the Hospital VBP Program under the 
Clinical Domain beginning with the FY 2030 program year. As previously 
stated, we previously adopted the same substantive updates to the 
measure in the Hospital IQR Program (87 49257 through 49263), and we 
intend to begin posting the updated measure data on Care Compare 
beginning in July 2023, which will enable us to post data on the 
substantive updates to the measure for at least one year before the 
proposed beginning of the FY 2030 performance period, April 1, 2025, 
through March 31, 2028.
    We are proposing to adopt the substantive updates to THA/TKA 
Complications measure (CBE #1550) in the Hospital VBP Program beginning 
with the FY 2030 program year. We refer readers to section V.K.4.c of 
the preamble of this proposed rule where we discuss our defined 
baseline and performance periods for this updated measure under the 
Hospital VBP Program. We are also proposing that the performance 
standards calculation methodology for the updated THA/TKA Complications 
measure would be the same as that which we currently use for the 
measure. The performance standards for the updated measure for FY 2030 
are not yet available.
    We invite public comment on this proposal.
3. Proposed New Measure for the Hospital VBP Program Set
    We consider measures for adoption based on the statutory 
requirements, including specification under the Hospital IQR Program, 
posting dates on the Care Compare website, and our priorities for 
quality improvement as

[[Page 27027]]

outlined in the CMS National Quality Strategy, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy. We also refer 
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41147 through 
41148), in which we describe the Meaningful Measures Framework, our 
objectives under this Framework for quality measurement, and the 
quality topics that we have identified as high-impact measurement areas 
that are relevant and meaningful to both patients and providers. Due to 
the time necessary to adopt measures, we often adopt policies for the 
Hospital VBP Program well in advance of the program year for which they 
will be applicable.
a. Proposed New Measure Beginning With the FY 2026 Program Year: Severe 
Sepsis and Septic Shock: Management Bundle (CBE #0500)
(1) Background
    Sepsis, severe sepsis, and septic shock can arise from simple 
infections, such as a pneumonia or urinary tract infection. Although it 
can affect anyone at any age, sepsis is more common in infants, the 
elderly, and patients with chronic health conditions such as diabetes 
and immunosuppressive disorders patients.\174\ A 2021 report by the 
Healthcare Cost and Utilization Project on the most frequent principal 
diagnoses among non-maternal, non-neonatal inpatient stays using the 
2018 National Inpatient Sample revealed septicemia as the most frequent 
principal diagnosis with over 2.2 million hospital stays.\175\ The CDC 
estimates there are approximately 1.7 million adults diagnosed with 
sepsis annually with approximately 270,000 resulting deaths. An 
analysis of over 2.5 million patients with sepsis discharged from 
January 1, 2010, to September 30, 2016, revealed average mortality 
rates of 14.9 percent for patients with severe sepsis and 34.3 percent 
for patients with septic shock.\176\ Another analysis using CMS claims 
data for services provided to approximately 6.9 million patients 
admitted to inpatient with sepsis from January 1, 2012 to December 31, 
2018 showed that while the number of patients admitted to the hospital 
with sepsis increased over this time period, mortality rates decreased, 
however they remained high with mortality rates at one week post 
discharge of approximately 15 percent for severe sepsis and 
approximately 40 percent for patients with septic shock. For this same 
population mortality rates increased at six months post discharge to 
approximately 36 percent for severe sepsis and 60 percent for septic 
shock.\177\
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    \174\ National Institute of General Medical Sciences. (2021). 
Bethesda, MD: U.S. Department of Health and Human Services. 
Available at: https://nigms.nih.gov/education/fact-sheets/Pages/sepsis.aspx.
    \175\ McDermott KW, Roemer M. (2021) Most Frequent Principal 
Diagnoses for Inpatient Stays in U.S. Hospitals, 2018. Healthcare 
Cost and Utilization Project (HCUP) Statistical Brief #277. 
Available at: https://www.hcup-us.ahrq.gov/reports/statbriefs/sb277-Top-Reasons-Hospital-Stays-2018.pdf.
    \176\ Paoli CJ, Reynolds MA, Sinha M, Gitlin M, Crouser E. 
(2018). Epidemiology and Costs of Sepsis in the United States--An 
Analysis Based on Timing of Diagnosis and Severity Level. Critical 
Care Medicine.46(12):1889-1897. doi: 10.1097/CCM.0000000000003342.
    \177\ Buchman TG, Simpson SQ, Sciarretta KL, et al. (2020). 
Sepsis Among Medicare Beneficiaries: 1. The Burdens of Sepsis, 2012-
2018. Crit Care Med. 48(3):276-288. doi: 10.1097/
CCM.0000000000004224. PMID: 32058366; PMCID: PMC7017943.
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    In a 2001 study by Rivers et al.,\178\ it was shown that an 
absolute and relative reduction in mortality from sepsis can be reduced 
16 percent and 30 percent, respectively, when aggressive care is 
provided within six hours of hospital arrival. In a more recent study 
that utilized chart-abstracted data for the Severe Sepsis and Septic 
Shock: Management Bundle measure (CBE #0500) from October 1, 2015, to 
March 31, 2017, submitted to CMS for over 1.3 million patients, 
Townsend et al. found that compliance with the measure was associated 
with a reduction in 30-day mortality.\179\
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    \178\ Rivers E, Nguyen B, Havstad S et al. (2001) Early goal 
directed therapy in the treatment of severe sepsis and septic shock. 
N Engl J Med. 345: 1368-77.
    \179\ Townsend SR, Phillips GS, Duseja R, et al. (2021) Effects 
of compliance with the early management bundle (SEP-1) on mortality 
changes among Medicare beneficiaries with sepsis: a propensity score 
matched cohort study. Chest. doi:10.1016/j.chest.2021.07.2167.
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(2) Overview of Measure and MAP Feedback
    We previously adopted the Severe Sepsis and Septic Shock: 
Management Bundle measure (CBE #0500) into the Hospital IQR Program 
beginning with the FY 2017 payment determination in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50236 through 50241). Hospital submission of 
patient level data for reporting on the measure began with qualifying 
patient discharges starting October 1, 2015. We began public reporting 
of the Severe Sepsis and Septic Shock: Management Bundle measure (CBE 
#0500) performance results on the Care Compare website with the July 
2018 refresh at which time the national average performance for the 
measure was 49 percent. Performance rates have increased with each 
subsequent Care Compare refresh reaching 60 percent for results 
reported from October 1, 2019, through September 30, 2020. During the 
COVID-19 public health emergency (PHE), performance rates decreased 
slightly to 57 percent for the results reported from January 1, 2021, 
through December 31, 2021. Performance rates for the top 10 percent of 
hospitals have averaged 80 percent since we began public reporting with 
performance data from October 1, 2017, through September 30, 2018. We 
believe that additional incentives will support continued improvement 
in measure performance. The Severe Sepsis and Septic Shock: Management 
Bundle measure (CBE #0500) was initially endorsed by the CBE in 2008 
for the hospital/acute care facility setting, and underwent maintenance 
review and endorsement renewal in June 2013, November 2014, July 2017, 
and December 2021.
    The Severe Sepsis and Septic Shock: Management Bundle measure 
supports the efficient, effective, and timely delivery of high-quality 
sepsis care. The Severe Sepsis and Septic Shock: Management Bundle 
provides a standard operating procedure for the early risk 
stratification and management of a patient with severe infection. When 
the care interventions in the Severe Sepsis and Septic Shock: 
Management Bundle measure are provided as a composite significant 
reductions in hospital length of stay, re-admission rates and mortality 
have been observed.180 181 Additional information about this 
measure is available on the CMS Measures Inventory Tool (CMIT) 
website.\182\
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    \180\ Levy MM, Gesten FC, Phillips GS, et al. (2018). Mortality 
Changes Associated with Mandated Public Reporting for Sepsis. The 
Results of the New York State Initiative. Am J Respir Crit Care Med. 
198(11):1406-1412. doi: 10.1164/rccm.201712-2545OC. PMID: 30189749; 
PMCID: PMC6290949.
    \181\ Bauer SR, Han X, Wang XF, Blonsky H, Reddy AJ. (2020) 
Association Between Compliance With the Sepsis Quality Measure (SEP-
1) and Hospital Readmission. Chest. 158(2):608-611. doi: 10.1016/
j.chest.2020.02.042. Epub 2020 Mar 10. PMID: 32169628.
    \182\ Severe Sepsis and Septic Shock: Management Bundle 
(Composite Measure) https://cmit.cms.gov/cmit/#/MeasureView?variantId=778&sectionNumber=1.
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    We believe the adoption of this measure aligns with the Core 
Principles outlined in the HHS National Healthcare System Action 
Alliance To Advance Patient Safety, including the focus on 
demonstrating and fostering commitments to safety as a core value and 
the promotion of the development

[[Page 27028]]

of safety cultures.\183\ We also believe the adoption of the Sepsis and 
Septic Shock: Management Bundle measure will contribute toward CMS' 
goal of advancing health equity, as outlined in the CMS National 
Quality Strategy.\184\ Research on in-hospital sepsis mortality between 
2004-2013 showed that there is a higher rate of sepsis mortality for 
Black and Hispanic patients, compared with White patients.\185\ 
Further, this research showed that disparities in outcomes disappeared 
when results were adjusted for hospital characteristics which 
highlights the need for improved septic management in hospitals that 
are treating a high proportion of Black and Hispanic patients.\186\ 
Another study of 249 academic medical centers found that for patients 
with a diagnosis of sepsis, Black patients exhibited lower adjusted 
sepsis mortality than White patients.\187\ While the results of 
research in the field are varied, we believe that this measure, which 
outlines standardized protocols, could mitigate potential biases held 
by individuals and systems that lead to such variation in outcomes.
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    \183\ The National Healthcare System Action Alliance To Advance 
Patient Safety. HHS. Available at: ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \184\ Centers for Medicare & Medicaid Services. (2022) CMS 
National Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \185\ Jones JM, Fingar KR, Miller MA, et al. (2017). Racial 
Disparities in Sepsis-Related In-Hospital Mortality: Using a Broad 
Case Capture Method and Multivariate Controls for Clinical and 
Hospital Variables, 2004-2013. Crit Care Med. 45(12):e1209-e1217. 
doi: 10.1097/CCM.0000000000002699. PMID: 28906287.
    \186\ Ibid.
    \187\ Chaudhary N, Donnelly, J, Wang H (2018). Critical Care 
Medicine 46(6):p 878-883, June 2018. [bond] DOI: 10.1097/
CCM.0000000000003020.
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    The measure was submitted to the MAP for the Hospital VBP Program 
for the 2022-2023 pre-rulemaking cycle and received conditional support 
for rulemaking pending the measure developer providing clarity about 
the differences between the measure specifications submitted to the MUC 
list in May 2022 and reviewed by MAP and the current measure 
specifications published in December 2022 which include abstraction 
guidance updates related to crystalloid fluid administration volumes. 
During the public comment period for the MUC list, we received comments 
that were both supportive and not supportive of the inclusion of the 
measure in the Hospital VBP Program. Public comments supportive of 
including the measure in the Hospital VBP Program noted the measure is 
CBE endorsed and that it encourages hospitals to follow published 
international guidelines for the early identification and management of 
severe sepsis and septic shock.
    Public comments not supportive of including the measure in the 
Hospital VBP Program centered around two main themes. The first group 
of commenters were concerned that the adoption of the Severe Sepsis and 
Septic Shock: Management Bundle measure could result in the overuse of 
antibiotics, more specifically, that adherence to the Severe Sepsis and 
Septic Shock: Management Bundle measure includes administering 
antibiotic therapy to all patients with possible sepsis, regardless of 
severity-of-illness, which commenters believe could risk excessive and 
unwarranted antibiotic administration. The antibiotic requirements and 
timing for the measure are consistent with antimicrobial 
recommendations Surviving Sepsis Campaign: International Guidelines for 
Management of Severe Sepsis and Septic Shock: 2021.\188\ We believe 
there is enough flexibility to incorporate clinician judgment in the 
measure as there are several opportunities for abstractors to disregard 
Systemic Inflammatory Response Syndrome (SIRS) criteria or signs of 
organ dysfunction if there is physician, advance practice nurse, or 
physician assistant documentation that SIRS criteria or signs of organ 
dysfunction are due to a chronic condition, medication, or a non-
infectious source.
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    \188\ Evans L, Rhodes A, Alhazzani W, et al. (2021) Surviving 
Sepsis Campaign: International Guidelines for Management of Sepsis 
and Septic Shock 2021. Crit Care Med. 49(11):e1063-e1143. doi: 
10.1097/CCM.0000000000005337. PMID: 34605781.
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    Second, some commenters had concerns around the burden associated 
with the data abstraction of the measure and staying up to date with 
changes to the data abstraction. We note that adding the measure to the 
Hospital VBP Program would not create a new burden for hospitals 
because they are already required to report data on the measure under 
the Hospital IQR Program. With regard to concerns about the overall 
burden of collecting these data in the Hospital IQR Program, we note 
that we are currently developing a sepsis outcome electronic clinical 
quality measure (eCQM) that, if adopted for that program, would not be 
as burdensome for hospitals to report. However, in light of our high 
priority to address patient safety, we are proceeding with the proposal 
to adopt the Severe Sepsis and Septic Shock: Management Bundle measure 
at this time. The specifications for the proposed measure are listed in 
v5.14 of the CMS Specifications Manual for National Hospital Inpatient 
Quality Measures, and those specifications apply to patients discharged 
from July 1, 2023, through December 31, 2023.\189\ The proposed measure 
specifications for v5.14 include minor technical updates to the data 
abstraction guidance and review for consistency with recent published 
literature. The minor technical updates were made to address hospital 
abstractor and clinician feedback received via the QualityNet Question 
and Answer Tool from hospital medical record abstractors and clinicians 
about the documentation required for fluid resuscitation within three 
hours of tissue hypoperfusion presentation. We routinely make these 
minor, technical updates based on feedback we receive from abstractors 
and clinicians in order to improve the data abstraction of the measure. 
The measure is in alignment with the Surviving Sepsis Campaign: 
International Guidelines for Management of Severe Sepsis and Septic 
Shock: 2021 which suggest administering at least 30 mL/kg of 
intravenous (IV) crystalloid fluids within the first three hours of 
resuscitation noting that timely effective fluid resuscitation is 
critical to stabilize patients with sepsis-induced tissue 
hypoperfusion. The guidelines noted that there are no prospective 
interventional studies comparing various crystalloid fluid volumes for 
initial resuscitation but reference observational studies and a 
retrospective study that demonstrated not administering 30 mL/kg of 
crystalloid fluids within three hours of sepsis identification was 
associated with higher mortality regardless of comorbidities such as 
end-stage renal disease and heart failure. With this in mind, the 
guidelines suggest that fluid administration should be guided by 
careful assessment of responsiveness to avoid over- and under-
resuscitation. The measure requires starting crystalloid fluids within 
three hours of recognition of tissue hypoperfusion but does not require 
fluids for resuscitation be completely infused within three hours. This 
is in part due to recognition of various factors that can contribute to 
complete fluid infusion potentially taking longer. The measure 
establishes 30 mL/kg of crystalloid fluids as the default volume for 
fluid resuscitation but does allow for lesser volumes ordered by a 
clinician and accompanied

[[Page 27029]]

by documentation of a reason for administering a lesser volume in 
recognition that some patients may not tolerate 30 mL/kg and that 
others may respond adequately to a lesser volume.
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    \189\ Hospital IQR Program, Inpatient Specifications Manual 
v5.14. https://qualitynet.cms.gov/files/6391eabf76962e0016ad91ba?filename=HIQR_SpecsMan_v5.14.zip.
---------------------------------------------------------------------------

    We have made technical updates to the measure specifications since 
we adopted this measure in the Hospital IQR Program, and we are 
proposing to adopt the measure, as updated, for the Hospital VBP 
Program. The data submission requirements, Specifications Manual, and 
submission deadlines are posted on the QualityNet website at: https://qualitynet.cms.gov (or other successor CMS designated websites).
(3) Overview of the Measure Specifications
a. Numerator
    Patients who received all of the following interventions for which 
they qualify:
[GRAPHIC] [TIFF OMITTED] TP01MY23.270

b. Denominator
    The denominator is patients 18 years of age and older with an ICD-
10-CM Principal or Other Diagnosis Code for sepsis, severe sepsis 
without septic shock, or severe sepsis with septic shock, and without 
an ICD-10-CM Principal or Other Diagnosis Code of U07.1 (COVID-19).
    Patients who are admitted as a transfer from an inpatient, 
outpatient, or emergency/observation department of another hospital or 
an ambulatory surgical center, or who are enrolled in a clinical trial 
associated with treatment of patients with sepsis, are excluded from 
the denominator. The denominator is further refined as the number of 
patients confirmed with severe sepsis or septic shock through medical 
record review for the presence of a suspected infection, two or more 
SIRS criteria, and a sign of organ dysfunction that are all documented 
within 6 hours of each other. Additional exclusions are for patients:
     With advanced directives for comfort care or palliative 
care;
     Who or for whom a surrogate decision maker declines or is 
unwilling to consent to interventions required to meet the numerator;
     With severe sepsis or septic shock who are discharged 
within six hours of presentation; or
     Who received IV antibiotics for more than 24 hours prior 
to severe sepsis presentation.
    We are proposing to adopt the Severe Sepsis and Septic Shock: 
Management Bundle measure in the Hospital VBP Program under the Safety 
Domain beginning with the FY 2026 program year. The proposed measure 
fulfills all the statutory requirements for the Hospital VBP Program 
based on our adoption of the measure in the Hospital IQR Program. We 
refer readers to section V.K.4.c of the preamble of this proposed rule 
where we discussed our proposed baseline periods and performance 
periods for this measure if adopted for the Hospital VBP Program.
    We invite public comment on this proposal.
b. Summary of Previously Adopted Measures for the FY 2024 and FY 2025 
Program Years, and Previously Adopted Measures and Newly Proposed 
Measures Beginning with the FY 2026 Program Year
    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45281 through 45284) for summaries of previously adopted measures for 
the FY 2024 and FY 2025 program years, and to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49110 through 49111) for summaries of previously 
adopted measures for the FY 2024, FY 2025, and FY 2026 program years. 
We are not proposing any changes to the FY 2024 and FY 2025 measure 
sets. The Hospital VBP Program measure set for the FY 2024 and FY 2025 
years would contain the following measures:

[[Page 27030]]

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    We are proposing substantive measure updates to the MSPB and THA/
TKA Complication measures. We are also proposing to adopt the Severe 
Sepsis and Septic Shock: Management Bundle. Table V.K.-02 summarizes 
the previously adopted and newly proposed Hospital VBP Program measures 
for the FY 2026 through FY 2030 program years:

[[Page 27031]]

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c. Proposed Updates to the Data Collection and Submission Requirements 
for the HCAHPS Survey Measure (CBE #0166) Beginning With the FY 2027 
Program Year
    We refer readers to section IX.C.10.h of this proposed rule where 
the Hospital IQR Program is proposing to make updates to the 
administration and submission requirements of the HCAHPS Survey measure 
beginning with the FY 2027 payment determination. We are also proposing 
to make the same updates to the form and manner of the administration 
of the HCAHPS Survey measure under the Hospital VBP Program. These 
changes are--
     Adding three new modes of survey administration (Web-Mail 
mode, Web-Phone mode, and Web-Mail-Phone mode) in addition to the 
current Mail Only, Telephone Only, and Mail-Phone modes, beginning with 
January 2025 discharges, because in the 2021 HCAHPS mode experiment, 
adding an initial web component to the three current HCAHPS modes of 
survey administration resulted in increased response rates;
     Removing the requirement that only the patient may respond 
to the survey to thus allow a patient's proxy to

[[Page 27032]]

respond to the survey, beginning with January 2025 discharges;
     Extending the data collection period for the HCAHPS Survey 
from 42 to 49 days, beginning with January 2025 discharges;
     Limiting the number of supplemental items to 12 in order 
to align with other CMS CAHPS surveys;
     Requiring hospitals to collect information about the 
language that the patient speaks while in the hospital (whether 
English, Spanish, or another language) and requiring the official CMS 
Spanish translation of the HCAHPS Survey be administered to all 
patients who prefer Spanish, beginning with January 2025 discharges; 
and
     Removing two currently available options for 
administration of the HCAHPS Survey that are not used by participating 
hospitals, beginning in January 2025:
    ++ The Active Interactive Voice Response (IVR) survey mode, also 
known as touch-tone IVR, which has not been employed by any hospital 
since 2016 and has never been widely used for the HCAHPS Survey, and
    ++ The ``Hospitals Administering HCAHPS for Multiple Sites'' option 
for HCAHPS Survey administration which has not been utilized by any 
hospitals since 2019 and has never been widely used.
    Data collection and administration of the HCAHPS Survey measure 
would remain the same, except for the proposed changes described in 
section V.K.3.c of this proposed rule. There would be no changes to the 
HCAHPS Survey measure patient eligibility or exclusion criteria. We 
note that adopting these changes in the Hospital VBP Program would not 
create a new burden for hospitals because they are already required to 
report the measure under the Hospital VBP Program. Therefore, this 
proposal to adopt technical changes does not require hospitals to 
submit any additional information.
    Detailed information on the HCAHPS Survey measure data collection 
protocols can be found in the current HCAHPS Quality Assurance 
Guidelines, located at: https://www.hcahpsonline.org/en/quality-assurance/.
    We invite public comment on this proposal.
4. Previously Adopted and Newly Proposed Baseline and Performance 
Periods
a. Background
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program that begins and ends 
prior to the beginning of such fiscal year. We refer readers to the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for a 
previously finalized schedule for all future baseline and performance 
periods for previously adopted measures. We refer readers to the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38256 through 38261), the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41466 through 41469), the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42393 through 42395), the FY 2021 IPPS/LTCH 
PPS final rule (85 FR 58850 through 58854), FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45284 through 45290), and FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49111 through 49115) for additional previously adopted baseline 
and performance periods for the FY 2025 and subsequent program years.
b. Proposed Baseline and Performance Period for the Severe Sepsis and 
Septic Shock: Management Bundle Beginning With the FY 2026 Program Year
    As discussed in section V.K.3.a of this proposed rule, we are 
proposing the Severe and Septic Shock: Management Bundle measure 
beginning with the FY 2026 program year. We are proposing to adopt a 
12-month baseline period and a 12-month performance period for that 
measure. Therefore, for the FY 2026 program year, we are proposing to 
adopt a 12-month performance period that runs from January 1, 2024 to 
December 31, 2024 and a baseline period that runs from January 1, 2022 
to December 31, 2022. We also propose to use 12-month baseline and 
performance periods in subsequent program years, beginning with January 
1st and ending with December 31st of a given year. We display these 
proposed baseline and performance periods in Table V.K.-04.
c. Summary of Previously Adopted Baseline and Performance Periods for 
the FY 2025 Program Year and Previously Adopted and Newly Proposed 
Baseline and Performance Periods Beginning With the FY 2026 Program 
Year
    Tables V.K.-03, V.K.-04, V.K.-05, V.K.-06, and V.K.-07 summarize 
the baseline and performance periods that we have previously adopted 
and those that we are proposing to adopt.

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[[Page 27034]]


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BILLING CODE 4120-01-C

[[Page 27035]]

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5. Performance Standards for the Hospital VBP Program
a. Background
    We refer readers to sections 1886(o)(3)(A) through 1886(o)(3)(D) of 
the Act for the statutory provisions governing performance standards 
under the Hospital VBP Program. We refer readers to the Hospital 
Inpatient VBP Program final rule (76 FR 26511 through 26513) for 
further discussion of achievement and improvement standards under the 
Hospital VBP Program. We refer readers to the FY 2013 IPPS/LTCH PPS 
final rule, FY 2014 IPPS/LTCH PPS final rule, and FY 2015 IPPS/LTCH PPS 
final rule (77 FR 53599 through 53605; 78 FR 50694 through 50699; and 
79 FR 50077 through 50081, respectively) for a more detailed discussion 
of the general scoring methodology used in the Hospital VBP Program.
    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45290 through 45292) for previously established performance standards 
for the FY 2024 program year. We also refer readers to the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49115 through 49118) for the previously 
established performance standards for the FY 2025 program year. We 
refer readers to the FY 2021 IPPS/LTCH PPS final rule for further 
discussion on performance standards for which the measures are 
calculated with lower values representing better performance (85 FR 
58855).
b. Technical Corrections
(1) Background
    After publication of the FY 2023 IPPS/LTCH PPS final rule, we 
determined there was a display error in the performance standards for 
the FY 2025 program year and an incorrectly labeled title for the FY 
2028 program year. We are issuing technical corrections in accordance 
with 42 CFR 412.160 of our regulations that allows for updates to a 
performance standard if making a single correction for calculation 
errors or other problems that would significantly change the 
performance standards. Technical corrections are being issued for these 
performance standards tables to ensure that hospitals have the correct 
performance standards for the applicable performance periods. The 
corrected performance standards are displayed in sections V.K.5.b.(2) 
and V.K.5.b.(3) of this proposed rule.
(2) Technical Correction to the Previously Established and Estimated 
Performance Standards for the FY 2025 Program Year
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49115 through 
49116), we established performance standards for the measures in the FY 
2025 program year in Table V.I.-09. Although the asterisk in this table 
denotes that the performance standards for the Safety domain measures 
were calculated using CY 2019 data, the numbers for the five hospital-
associated infection (HAI) measures incorrectly displayed performance 
standards using CY 2021 data. We are therefore issuing a correction to 
display the correct performance standards using CY 2019 data for the FY 
2025 program year. The previously established and newly corrected 
performance standards for the measures in the FY 2025 program year have 
been updated and are set out in Table V.K-08. All other performance 
standards for the FY 2025 program year, including the HCAHPS 
Performance Standards for the Person and Community Engagement domain, 
were correctly displayed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49115 through 49117).

[[Page 27036]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.278

(3) Technical Correction to the Newly Established Performance Standards 
for Certain Measures for the FY 2028 Program Year
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49118), we 
established the performance standards for certain measures for the FY 
2028 program in Table V.I.-13. The title of Table V.I.-13 incorrectly 
labeled the program year as FY 2027. We are therefore issuing a 
correction to display the title of the table as, Newly Established 
Performance Standards for the FY 2028 Program Year. The performance 
standards for the measures in the FY 2028 program year were correctly 
displayed and remain as finalized in the FY 2023 IPPS/LTCH PPS final 
rule and are set out in section V.K.5.e of this proposed rule.
c. Previously Established and Estimated Performance Standards for the 
FY 2026 Program Year
    In the FY 2021 IPPS/LTCH PPS final rule (84 FR 42398 through 
42399), we established performance standards for the FY 2026 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and for the Efficiency and Cost Reduction domain measure 
(MSPB Hospital). We note that the performance standards for the MSPB 
Hospital measure are based on performance period data. Therefore, we 
are unable to provide numerical equivalents for the standards at this 
time. The previously established and estimated performance standards 
for the measures in the FY 2026 program year have been updated and are 
set out in Tables V.K.-09, V.K.-10, V.K.-11, and V.K.-12.

[[Page 27037]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.279

    The HCAHPS Base Score is calculated using the eight dimensions of 
the HCAHPS measure. For each of the eight dimensions, Achievement 
Points (0-10 points) and Improvement Points (0-9 points) are 
calculated, the larger of which is then summed across the eight 
dimensions to create the HCAHPS Base Score (0-80 points). Each of the 
eight dimensions is of equal weight; therefore, the HCAHPS Base Score 
ranges from 0 to 80 points. HCAHPS Consistency Points are then 
calculated, which range from 0 to 20 points. The Consistency Points 
take into consideration the scores of all eight Person and Community 
Engagement dimensions. The final element of the scoring formula is the 
summation of the HCAHPS Base Score and the HCAHPS Consistency Points, 
which results in the Person and Community Engagement domain score that 
ranges from 0 to 100 points.
[GRAPHIC] [TIFF OMITTED] TP01MY23.280


[[Page 27038]]


d. Previously Established Performance Standards for Certain Measures 
for the FY 2027 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years in order to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45294 through 
45295), we established performance standards for the FY 2027 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30- CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB). 
We note that the performance standards for the MSPB measure are based 
on performance period data. Therefore, we are unable to provide 
numerical equivalents for the standards at this time. We also note that 
the performance standard calculation methodology for the proposed 
substantive updates to the MSPB measure would not change if the 
substantive measure updates are adopted. The updated performance 
standards for the substantive measure updates to the MSPB measure are 
not yet available for FY 2028. The previously established performance 
standards for these measures are set out in Table V.K.-11.
[GRAPHIC] [TIFF OMITTED] TP01MY23.281

e. Previously Established Performance Standards for Certain Measures 
for the FY 2028 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years in order to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2023 IPPS/LTCH PPS final rule (86 FR 49118), we 
established performance standards for the FY 2028 program year for the 
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN 
(updated cohort), MORT-30-COPD, MORT-30- CABG, and COMP-HIP-KNEE) and 
the Efficiency and Cost Reduction domain measure (MSPB Hospital). We 
refer readers to section V.K.5.b.(3) of this proposed rule where we 
announce that we are issuing a technical correction with respect to the 
title of Table V.I.-13 in the FY 2023 IPPS/LTCH PPS final rule. We note 
that the performance standards for the MSPB Hospital measure are based 
on performance period data. Therefore, we are unable to provide 
numerical equivalents for the standards at this time. The previously 
established performance standards for these measures are set out in 
Table V.K.-12.

[[Page 27039]]

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6. Proposed Change to the Scoring Methodology
a. Background
    In the Hospital Inpatient VBP Program final rule, we adopted a 
methodology for scoring clinical process of care, patient experience of 
care, and outcome measures (76 FR 26513 through 26531). We also refer 
readers to our codified requirements for performance scoring under the 
Hospital VBP Program at 42 CFR 412.165. We are proposing modifications 
to the existing scoring methodology to reward excellent care in 
underserved populations.
b. Proposal To Revise the Hospital VBP Program Scoring Methodology To 
Add a New Adjustment That Rewards Hospitals Based on Their Performance 
and the Proportion of Their Patients Who Are Dually Eligible for 
Medicare and Medicaid
(1) Background and Overview
    Healthcare disparities exist among patients throughout the United 
States, and certain patient characteristics such as socioeconomic 
status are associated with worse health outcomes.190 191 
Research shows that patients experiencing worse health outcomes often 
face barriers to accessing health care services and have access to 
fewer healthcare providers.192 193 In leveraging our VBP 
programs to improve the quality of care and access to that care, we are 
interested in utilizing health equity-focused scoring modifications to 
create better health outcomes for all populations in these programs. 
The Office of the Assistant Secretary for Planning and Education's 
(ASPE) March 2020 Report to Congress: Social Risk Factors and 
Performance in Medicare's Value-Based Purchasing Program, provides 
insight into whether and how value-based programs should account for 
social risk factors such as income, housing, transportation, and 
nutrition, that might adversely affect access to health care services 
or health outcomes.\194\ A key finding was that dual enrollment status 
(that is, enrollment in both Medicare and Medicaid) is a strong 
predictor of poorer healthcare outcomes in Medicare's VBP programs, 
even when accounting for other social and functional risk factors. Dual 
enrollment status, an indicator at the individual level, also 
represents one way to capture common socioeconomic challenges that 
could affect an individual's ability to access care.
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    \190\ Hill, L., Artiga, S., and Haldar, S. (2022) Key Facts on 
Health and Health Care by Race and Ethnicity. Kaiser Family 
Foundation. Available at: https://www.kff.org/report-section/key-
facts-on-health-and-health-care-by-race-and-ethnicity-health-status-
outcomes-and-behaviors/
#:~:text=Health%20Status%2C%20Outcomes%2C%20and%20Behaviors%20Black%2
0people%20fared,than%20White%20people%20for%20most%20examined%20healt
h%20measures.
    \191\ National Academies of Sciences, Engineering, and Medicine. 
(2017) Accounting for Social Risk Factors in Medicare Payment, 
Washington, DC: National Academies Press. 47-84. Available at: 
http://nap.nationalacademies.org/21858.
    \192\ Kaiser Family Foundation. (2020) Disparities in Health and 
Health Care: Five Key Questions and Answers. Available at: https://files.kff.org/attachment/Issue-Brief-Disparities-in-Health-and-Health-Care-Five-Key-Questions-and-Answers.
    \193\ Thompson, T., McQueen, A., Croston, M., Luke, A., Caito, 
N., Quinn, K., Funaro, J., & Kreuter, M.W. (2019). Social needs and 
health-related outcomes among Medicaid beneficiaries. Health 
Education & Behavior: The Official Publication of the Society for 
Public Health Education, 46(3), 436-444. https://doi.org/10.1177/1090198118822724.
    \194\ U.S. Department of Health & Human Services. (2020) 
Executive Summary Report to Congress: Social Risk Factors and 
Performance in Medicare's Value-Based Purchasing Program. Office of 
the Assistant Secretary for Planning and Evaluation. Available at: 
https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
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    In the 2016 report to Congress on Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs, ASPE 
reported that beneficiaries with social risk factors, including dual 
enrollment in Medicare and Medicaid as a marker for low income, 
residence in a low-income area, Black race, Hispanic ethnicity, 
disability, and residence in a rural area, had worse outcomes and were 
more likely to be cared for by lower quality providers.\195\ Patients 
with dual eligibility status (DES), those who qualify for both Medicare 
and Medicaid coverage, are particularly vulnerable and experience 
significant disparities. Patients with DES are more likely to be 
disabled or functionally impaired, more

[[Page 27040]]

likely to be medically complex, and have greater social needs compared 
to other beneficiaries.\196\ Patients with DES are one of the most 
vulnerable populations.197 198 Despite the multitude of 
indicators available for assessing vulnerability and health risks, dual 
eligibility remains the strongest predictor of negative health 
outcomes.\199\
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    \195\ Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services. First Report 
to Congress on Social Risk Factors and Performance in Medicare's 
Value-Based Purchasing Program. 2016. Available at: https://aspe.hhs.gov/sites/default/files/migrated_legacy_files/171041/ASPESESRTCfull.pdf.
    \196\ Johnston, K.J., & Joynt Maddox, K.E. (2019). The Role of 
Social, Cognitive, And Functional Risk Factors In Medicare Spending 
For Dual And Nondual Enrollees. Health Affairs (Project Hope), 
38(4), 569-576. https://doi.org/10.1377/hlthaff.2018.05032.
    \197\ Johnston, K.J., & Joynt Maddox, K.E. (2019). The Role of 
Social, Cognitive, and Functional Risk Factors in Medicare Spending 
for Dual and Nondual Enrollees. Health Affairs (Project Hope), 
38(4), 569-576. https://doi.org/10.1377/hlthaff.2018.05032.
    \198\ Wadhera, R.K., Wang, Y., Figueroa, J.F., Dominici, F., 
Yeh, R.W., & Joynt Maddox, K.E. (2020). Mortality and 
Hospitalizations for Dually Enrolled and Nondually Enrolled Medicare 
Beneficiaries Aged 65 Years or Older, 2004 to 2017. JAMA, 323(10), 
961-969. https://doi.org/10.1001/jama.2020.1021.
    \199\ Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services. Second 
Report to Congress on Social Risk Factors and Performance in 
Medicare's Value-Based Purchasing Program. 2020. Available at: 
https://aspe.hhs.gov/reports/second-report-congress-social-risk-medicares-value-based-purchasing-programs.
---------------------------------------------------------------------------

    Executive Order 13985 of January 20, 2021 on Advancing Racial 
Equity and Support for Underserved Communities Through the Federal 
Government, defines ``equity'' as ``the consistent and systematic fair, 
just, and impartial treatment of all individuals, including individuals 
who belong to underserved communities that have been denied such 
treatment, such as Black, Latino, and Indigenous and Native American 
persons, Asian Americans and Pacific Islanders and other persons of 
color; members of religious minorities; lesbian, gay, bisexual, 
transgender, and queer (LGBTQ[I] \200\+) persons; persons with 
disabilities; persons who live in rural areas; and persons otherwise 
adversely affected by persistent poverty or inequality)'' (86 FR 7009).
---------------------------------------------------------------------------

    \200\ We note that the original, cited definition only 
stipulates, ``LGBTQ+'', however, HHS and the White House now 
recognize individuals who are intersex/have intersex traits. 
Therefore, we have updated the term to reflect these changes.
---------------------------------------------------------------------------

    CMS defines ``health equity'' as the attainment of the highest 
level of health for all people, where everyone has a fair and just 
opportunity to attain their optimal health regardless of race, 
ethnicity, disability, sexual orientation, gender identity, 
socioeconomic status, geography, preferred language, or other factors 
that affect access to care and health outcomes.\201\ To achieve this 
vision, we are working to advance health equity by designing, 
implementing, and operationalizing policies and programs that support 
health for all individuals served by our programs, reducing avoidable 
differences in health outcomes experienced by people who are 
disadvantaged or underserved, and providing the care and support that 
our enrollees need to thrive.
---------------------------------------------------------------------------

    \201\ Health Equity Strategic Pillar. Centers for Medicare & 
Medicaid Services. https://www.cms.gov/pillar/health-equity.
---------------------------------------------------------------------------

    Achieving health equity, addressing health disparities, and closing 
the performance gap in the quality of care provided to populations that 
have been disadvantaged, marginalized, and/or underserved by the 
healthcare system continue to be priorities for CMS as outlined in the 
CMS National Quality Strategy.\202\ The Hospital IQR Program adopted 
three new health-equity focused quality measures in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49191 through 49220). To further align with 
our goals to achieve health equity, address health disparities, and 
close the performance gap on the quality of care, we are proposing to 
add Health Equity Adjustment bonus points to a hospital's Total 
Performance Score (TPS) that would be calculated using a methodology 
that incorporates a hospital's performance across all four domains for 
the program year and its proportion of patients with DES.
---------------------------------------------------------------------------

    \202\ Centers for Medicare & Medicaid Services. (2022) CMS 
National Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
---------------------------------------------------------------------------

    We propose to define the points that a hospital can earn based on 
its performance and proportion of patients with DES as the Health 
Equity Adjustment (HEA) bonus points. We believe the awarding of these 
HEA bonus points is consistent with our strategy to advance health 
equity and will incentivize high-quality care across all 
hospitals.\203\
---------------------------------------------------------------------------

    \203\ Centers for Medicare & Medicaid Services. (2022) CMS 
Outlines Strategy to Advance Health Equity, Challenges Industry 
Leaders to Address Systemic Inequities. Available at: https://
www.cms.gov/newsroom/press-releases/cms-outlines-strategy-advance-
health-equity-challenges-industry-leaders-address-systemic-
inequities#:~:text=In%20effort%20to%20address%20systemic%20inequities
%20across%20the,Medicare%2C%20Medicaid%20or%20Marketplace%20coverage%
2C%20need%20to%20thrive.
---------------------------------------------------------------------------

    We propose to define the term ``measure performance scaler'' as the 
sum of the points awarded to a hospital for each domain based on the 
hospital's performance on the measures in that domain. The number of 
points that we would award to a hospital for each domain would be 4, 2, 
or 0, based on whether the hospital's performance is in the top third, 
middle third, and bottom third of performance, respectively, of all 
hospitals for the domain. Specifically, a hospital would receive 4 
points if its performance falls in the top third, 2 points if its 
performance falls in the middle third, or 0 points if its performance 
falls in the bottom third of performance of all hospitals for the 
domain. Hospitals could thus receive a maximum of 16 measure 
performance scaler points for being a top performer across all four 
domains.
    We propose to define the term ``underserved multiplier'' as the 
number of inpatient stays for patients with DES out of the total number 
of inpatient Medicare stays during the calendar year two years before 
the start of the respective program year. For example, for the FY 2026 
program year, we would use the total number of inpatient stays from 
January 1, 2024 through December 31, 2024. A logistic exchange function 
would be then applied to the number of patients with DES. Data on DES 
is sourced from the State Medicare Modernization Act (MMA) file of dual 
eligible beneficiaries, which each of the 50 States and the District of 
Columbia submit to CMS at least monthly. This file is utilized to deem 
individuals with DES automatically eligible for the Medicare Part D Low 
Income Subsidy, as well as other CMS program needs and thus can be 
considered the gold standard for determining DES. We note that this is 
the same file used for determining DES in the Hospital Readmissions 
Reduction Program. More detail on this file can be found on the CMS 
website at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/DataStatisticalResources/StateMMAFile and at the Research Data 
Assistance Center website at https://resdac.org/cms-data/variables/monthly-medicare-medicaid-dual-eligibility-code-january.
    We propose that the HEA bonus points would be calculated as the 
product of the measure performance scaler and the underserved 
multiplier. The HEA bonus points are designed to award higher points 
for hospitals that (1) serve greater percentages of underserved 
populations, which are defined here for the purpose of this proposal as 
hospital patients with DES who receive inpatient services, and (2) have 
higher quality performance.
    The proposed methodology for the calculation of the HEA bonus 
points is

[[Page 27041]]

described in sections V.K.6.b.(3) and V.K.6.b.(4) of this proposed 
rule. By providing HEA bonus points to hospitals that serve higher 
proportions of patients with DES and perform well on quality measures, 
we believe we can begin to bridge performance gaps and better address 
the social needs of patients, in alignment with our National Quality 
Strategy.\204\ We are committed to achieving health equity for 
hospitalized patients by supporting hospitals in quality improvement 
activities to reduce health disparities, enabling patients and their 
family members and caregivers to make more informed decisions, and 
promoting provider accountability for health care disparities. We 
believe this proposal would continue encouraging high quality 
performance and provide an incentive for hospitals to provide high 
quality care to all of the populations they serve. We also believe this 
proposal aligns with the broader CMS health equity goals to close gaps 
in health care quality and promote the highest quality outcomes for all 
people.\205\
---------------------------------------------------------------------------

    \204\ Centers for Medicare & Medicaid Services. (2022) What is 
the CMS National Quality Strategy? Available at: https://
www.cms.gov/medicare/quality-initiatives-patient-assessment-
instruments/value-based-programs/cms-quality-strategy.
    \205\ Centers for Medicare & Medicaid Services. (2022) CMS 
Outlines Strategy to Advance Health Equity, Challenges Industry 
Leaders to Address Systemic Inequities. Available at: https://
www.cms.gov/newsroom/press-releases/cms-outlines-strategy-advance-
health-equity-challenges-industry-leaders-address-systemic-
inequities#:~:text=CMS%20Health%20Equity%20Strategy%3A%20CMS%20Admini
strator%20Chiquita%20Brooks-
LaSure,access%20to%20care.%20They%20include%20the%20following%20actio
ns%3A.
---------------------------------------------------------------------------

    We are proposing to adopt this adjustment to the Hospital VBP 
Program scoring methodology beginning with the FY 2026 program year.
    We note that the Shared Savings Program recently adopted a health 
equity adjustment for Accountable Care Organizations that report all-
payer electronic clinical quality measures (eCQMs)/Merit-based 
Incentive Payment System CQMs, are high-performing on quality, and 
serve a large proportion of underserved beneficiaries, as defined by 
dual-eligibility, enrollment in the Medicare Part D low income subsidy 
(LIS) (meaning the individual is enrolled in a Part D plan and receives 
LIS) and an Area Deprivation Index (ADI) score of 85 or above, as 
detailed in the CY 2023 Physician Fee Schedule final rule (87 FR 69838 
through 69857). The proposed definitions and calculations in this 
proposed rule are similar to the health equity adjustment finalized in 
the Shared Savings Program. Additionally, a similar health equity 
adjustment is being proposed in the FY 2024 Skilled Nursing Facility 
Value-Based Purchasing (SNF VBP) Program's Prospective Payment System 
(PPS) proposed rule.
(2) Determining the Underserved Multiplier and Measure Performance 
Scaler
    At this time, for purposes of the Hospital VBP Program's proposed 
health equity adjustment, we are unable to obtain patients' 
neighborhood-level data necessary to incorporate the ADI under all of 
the Hospital VBP Program measures as currently specified. We note that 
the use of both the LIS designation and DES could be preferable to 
using DES alone, as doing so reduces variability because of the 
differences in Medicaid eligibility across States; however, given that 
the DES data are readily available and already used in the Hospital 
Readmissions Reduction Program, we are proposing to only use DES data 
at this time. As DES is a strong indicator of poorer healthcare 
outcomes in Medicare's VBP programs,\206\ we believe it can serve as an 
appropriate underserved multiplier on its own in the Hospital VBP 
Program. If adopted as proposed, we would continue to consider whether 
to incorporate the LIS, ADI, and other indicators for underserved 
populations in future health equity adjustment proposals for the 
Hospital VBP Program. We are seeking comment on the use of these 
additional indicators in section V.K.6.b.(7) of this proposed rule.
---------------------------------------------------------------------------

    \206\ Assistant Secretary for Planning and Evaluation. (2020) 
Social Risk and Performance in Medicare's Value-Based Purchasing 
Programs. Available at: https://aspe.hhs.gov/sites/default/files/
migrated_legacy_files//195036/Social-Risk-in-Medicare%E2%80%99s-VBP-
2nd-Report-3-
Pager.pdf#:~:text=After%20accounting%20for%20additional%20social%20an
d%20functional%20risk,and%20resource%20use%20measures%20in%20Medicare
%E2%80%99s%20VBP%20programs.
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    The measure performance scaler points would be available to all 
hospitals that exhibit high quality care across the entire patient 
population. Each domain would be assessed independently such that a 
hospital that performs in the top or middle third of performance for 
one domain would be eligible for measure performance scaler points even 
if it does not perform in the top or middle third of performance for 
any other domain. Similarly, if a hospital performs in the top third of 
performance for all domains, they would receive measure performance 
scaler points for all domains. Alternatively, a hospital which is in 
the bottom third of performance for all four domains would not receive 
any performance scaler points. A hospital's performance is relative to 
the performance of all other hospitals in the Hospital VBP Program, and 
this measure performance scaler methodology is further defined in 
section V.K.6.b.(3). of this proposal.
    The underserved multiplier would be calculated using a similar 
approach as the Hospital Readmissions Reduction Program's dual 
proportion calculation, which identifies patients with DES based on the 
dual-eligibility codes in the Medicare Beneficiary Summary File.\207\ 
These data would provide us with the number of inpatient stays for 
patients with DES out of the total number of inpatient Medicare stays, 
which is all Medicare FFS and Medicare Advantage stays. A stay is 
identified as being dually eligible if it is for a patient with 
Medicare and full Medicaid benefits for the month the patient was 
discharged from the hospital, unless the patient died in the month of 
discharge, in which case DES is determined using the previous month. We 
are proposing that the dual proportion is calculated with stays that 
occurred during the calendar year two years before the start of the 
respective program year. A logistic exchange function would then be 
applied to this dual proportion. We would then multiply this 
underserved multiplier by the aforementioned measure performance scaler 
to determine the hospital's HEA bonus points. This methodology is 
described further in section V.K.6.b.(3) of this proposed rule. Unlike 
the Shared Savings Program's policy, we note that we are not proposing 
a minimum percent of patients with DES that a hospital must treat, such 
that a hospital serving one percent of patients with DES and a hospital 
serving 80 percent of patients with DES are both eligible for HEA bonus 
points in order to give every hospital an opportunity to participate in 
this proposed scoring change.
---------------------------------------------------------------------------

    \207\ Research Data Assistance Center. (2023) Medicare-Medicaid 
Dual Eligibility Code--January. Available at: https://resdac.org/cms-data/variables/medicare-medicaid-dual-eligibility-code-january.
---------------------------------------------------------------------------

    Through the proposed HEA bonus points, we seek to improve outcomes 
by providing incentives to hospitals to strive for high performance 
across the domains as well as to care for a high proportion of 
underserved populations, as defined by dual eligibility status for the 
purposes of this proposal. While we recognize and discuss in this 
proposed rule that there are many different indicators that could be 
used to measure underserved populations, we note that we are referring 
to patients with DES when we use the term ``underserved

[[Page 27042]]

population'' throughout this proposal. As noted in section V.K.6.b.(1), 
DES is a good indicator of socioeconomic disadvantage, as dual 
eligibility is associated with a patient's inability to access 
care.\208\
---------------------------------------------------------------------------

    \208\ U.S. Department of Health & Human Services. (2020) 
Executive Summary: Report to Congress: Social Risk Factors and 
Performance in Medicare's Value-Based Purchasing Program. Available 
at: https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
---------------------------------------------------------------------------

    The HEA bonus point calculation is purposefully designed to not 
reward poor quality. Likewise, if the underserved population represents 
only a small proportion of a hospital's total population, such as a 
hospital only serving five percent of patients with DES, then the 
health equity adjustment would be lower because the bonus points are 
not designed to reward hospitals that serve a low number of underserved 
patients. Instead, the health equity adjustment is intended to 
incentivize hospitals to improve their overall quality of care across 
the entire hospital's population by bridging performance gaps and 
improving overall health outcomes for patients while reducing the 
unintended risk of decreased access to care for underserved patients. 
As described more fully in this section of this proposed rule, the 
combination of the measure performance scaler and the underserved 
multiplier would result in a range of possible HEA bonus points that is 
designed to give the highest rewards to hospitals caring for a larger 
percentage of underserved individuals and delivering high quality care.
    We are also proposing to codify at 42 CFR 412.160 of our 
regulations the definitions of these new scoring methodology terms, and 
we are proposing to codify at 42 CFR 412.165(b) of our regulations the 
updates to the steps for performance scoring with the incorporated 
health equity scoring adjustments.
(3) Proposed Application of Health Equity Adjustment
    After considering how to modify the existing quality performance 
scoring in the Hospital VBP Program to more fully assess the quality of 
care provided by hospitals that serve a high proportion of underserved 
patients, we are proposing to adjust the sum of an individual 
hospital's domain scores based on their overall performance within each 
domain, with a maximum potential of 16 measure performance scaler 
points across the four domains. For hospitals that only get three 
domain scores because they do not meet measure minimums for all four 
domains, the maximum number of measure performance scaler points that a 
hospital could earn would be 12.
    We propose to calculate a hospital's HEA bonus points by 
multiplying the measure performance scaler by the hospital's 
underserved multiplier. As explained more fully in this section, we are 
also proposing that the number of HEA bonus points that could then be 
added to a hospital's TPS for a program year would be capped at 10. We 
believe that capping the total number of potential HEA bonus points at 
10 recognizes the effort hospitals put forth to serve large populations 
of patients with DES, while not overly inflating TPSs. We believe that 
limiting the number of HEA bonus points that a hospital is eligible to 
receive to a maximum of 10 points creates a balanced incentive that 
increases a hospital's TPS without dominating the score and creating 
unintended incentives. Additionally, the proposed maximum of 10 HEA 
bonus points aligns with the magnitude of points we award for a given 
measure in the existing Hospital VBP Program's scoring methodology. 
Therefore, we propose that the maximum number of HEA bonus points that 
could be added to the TPS would be 10 points. Under this proposal, no 
hospital could earn more than a 110 maximum final TPS that includes the 
HEA bonus points. We refer readers to section V.K.6.b.(6) of this 
proposal and to our proposed regulations at 42 CFR 412.160 where we 
propose to modify the TPS maximum to 110. This proposed maximum at 110 
would ensure that the application of the health equity adjustment 
allows for a hospital that receives the maximum number of points in 
weighted domain scores to still have the opportunity to receive the 
additional 10 HEA bonus points.
(4) Proposed Calculation Steps and Examples
    In this section, we outline the calculation steps and provide 
examples of the determination of health equity adjustment bonus points 
and the application of these bonus points to a hospital's TPS. These 
example calculations illustrate possible health equity adjustment bonus 
points resulting from the proposed approach, which accounts for both a 
hospital's quality performance and a logistic exchange function applied 
to its proportion of patients with DES. For each hospital, the bonus 
will be calculated according to the following formula:

Health Equity Adjustment (HEA) bonus points = measure performance 
scaler x underserved multiplier

    The proposed calculation of the HEA bonus points would be as 
follows:
Step One--Calculate the Number of Measure Performance Scaler Points for 
Each Hospital
    We propose to first assign a measure performance scaler to each 
domain based on a hospital's domain level scores. We would assign point 
values to hospitals for each domain based on their performance on the 
measures in that domain. A hospital would receive 4, 2, or 0 points for 
top third, middle third, or bottom third of performance, respectively, 
on each domain such that a hospital could receive a maximum of 16 
measure performance scaler points for being in the top third of 
performance for all of the four domains, as depicted in this sample 
equation and in Table V.K.-13. We note that if a hospital performs in 
the bottom third of performance in all four domains, that hospital 
would receive a total of 0 out of 16 measure performance scaler points. 
Additionally, hospitals that can be scored in only three domains could 
receive a maximum of 12 measure performance scaler points for being in 
the top third of performance for each domain.
    Hospital 1 (High Performance):

4 pts in Clinical Domain + 4 pts in Cost & Efficiency Domain + 4 pts 
Safety Domain + 4 pts in Person and Community Engagement = 16 total 
performance scaler points for Hospital 1

    Hospital 2 (Medium Performance):

4 pts in Clinical Domain + 2 pts in Cost & Efficiency Domain + 2 pts in 
Safety Domain + 0 in Person & Community Engagement Domain = 8 total 
performance scaler points for Hospital 2

    Hospital 3 (Low Performance):

0 pts in Clinical Domain + 0 pts in Cost & Efficiency Domain + 2 pts in 
Safety Domain + 0 pts in Person & Community Engagement Domain = 2 total 
performance scaler points for Hospital 3

    Table V.K.-13 displays the measure performance scaler that three 
example hospitals would receive for each domain based on their 
performance.

[[Page 27043]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.283

Step Two--Calculate the Underserved Multiplier
    Second, we propose to calculate an underserved multiplier for each 
hospital, which we propose to define as the logistic function applied 
to the proportion of inpatient stays for patients with DES during the 
calendar year two years before the applicable program year divided by 
the total number of inpatient Medicare stays, which is all Medicare FFS 
and Medicare Advantage stays, at each hospital. For example, for the FY 
2026 program year, we would use the total number of inpatient stays 
from January 1, 2024, through December 31, 2024. The primary goal of 
the underserved multiplier is to appropriately reward hospitals that 
are able to overcome the challenges of caring for high proportions of 
patients with DES. By utilizing a logistic exchange function to 
calculate the underserved multiplier, hospitals who care for the 
highest proportions of patients with DES would have the opportunity for 
the most HEA bonus points. Thus, we are proposing to utilize a logistic 
exchange function to calculate the underserved multiplier for scoring 
hospitals such that there would be a lower rate of increase at the 
beginning and the end of the curve.
    The underserved multiplier calculation would thus be:

Underserved Multiplier = Logistic Function (Number of Inpatient Stays 
for Patients with DES/Total Medicare Inpatient Stays)

    To determine the proportion of the number of inpatient stays for 
patients with DES, we propose to use patient level data on the 
proportion of all Medicare FFS and Medicare Advantage inpatient stays 
in a hospital in which the patient was dually eligible for Medicare and 
full Medicaid benefits. For the HEA adjustment, the dual proportion is 
calculated with stays that occurred during the calendar year two years 
before the applicable the program year, and then a logistic exchange 
function is applied to that proportion. For example, for the FY 2026 
program year, the dual proportion data would be calculated using stays 
from January 1, 2024, through December 31, 2024. In alignment with the 
Hospital Readmissions Reduction Program approach to determine the dual 
proportion, a stay is identified as being dually eligible if it is for 
a patient with Medicare and full Medicaid benefits for the month the 
patient was discharged from the hospital, unless the patient died in 
the month of discharge, in which case DES is determined using the 
previous month. Using the proportion of DES patients calculated among 
both Medicare FFS and Medicare Advantage patients more accurately 
represents the proportion of patients with DES served by the hospital 
compared to only using the proportion of Medicare FFS stays as well as 
that DES data for Medicare Advantage patients are readily available. 
This is the approach finalized by the Hospital Readmissions Reduction 
Program to determine the dual proportion in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38228 through 38229).
    We are proposing to utilize a logistic exchange function to 
calculate the underserved multiplier for scoring hospitals such that 
there would be a lower rate of increase at the beginning and the end of 
the curve. A logistic exchange function assumes a large difference 
between hospitals treating the most and fewest patients with DES and 
produces a large score difference between the groups, but less 
difference within the groups. This would ensure that there would be 
very few differences in the points awarded between hospitals with 
similar proportions of patients served. For example, there would be 
little difference in the points awarded to a hospital serving 59 
percent of individuals with DES and a hospital serving 61 percent of 
individuals with DES. Utilizing a logistic function allows for 
hospitals in the middle third of performance to have a strong 
association between an increase in HEA bonus points based on proportion 
of patients with DES served. We note that there is no minimum or 
maximum threshold on the percentage of individuals with DES that a 
hospital serves for the calculation of HEA bonus points. We believe 
this gives all hospitals an opportunity and incentive to serve a 
percentage of patients with DES. We also considered linear and actual 
scoring alternatives to calculate the underserved multiplier, as 
displayed in Figure V.K.-01, but we believe logistic function scoring 
applied to the proportion of patients with DES (dotted line in Figure 
V.K.-01) provides the best opportunity for hospitals serving large 
proportions of patients with DES to receive HEA bonus points. We note 
that a scoring approach using actual proportion of patients with DES, 
as depicted by the dashed line in Figure V.K.-01, assumes that the 
hospitals' treatment of patients with DES is reflected simply in their 
actual share in the patient population. A linear scoring approach, as 
depicted by the solid line in Figure V.K.-01, assumes that a hospital's 
treatment of patients with DES is correlated by rank.

[[Page 27044]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.284

Step Three--Calculate the Health Equity Adjustment Bonus Points
    We are proposing to calculate the HEA bonus points that apply to a 
hospital for a program year by multiplying the measure performance 
scaler total by the underserved multiplier. We believe that combining 
the measure performance scaler and the underserved multiplier to 
calculate the HEA bonus points allows for us to reward those hospitals 
with high quality performance across the four domains that are also 
serving high populations of patients with DES. This approach also 
incentivizes other hospitals to improve their performance (by a higher 
measure performance scaler) and serve more patients with DES (by a 
higher underserved multiplier) in order to earn greater HEA bonus 
points. The product of the measure performance scaler points and the 
underserved multiplier proportion results is the HEA bonus point total 
capped at 10 points. Table V.K.-14 displays the HEA bonus points that 
six example hospitals would receive based on their measure performance 
scaler and underserved multiplier, with the cap of 10 total possible 
HEA bonus points. For example, Hospital 1 in Table V.K.-14 that has 
performed in the top third of performance in all four of the domains 
and whose population of patients with DES is 80 percent after applying 
the logistic function would earn 16 measure performance scaler points, 
which would then be multiplied by an underserved multiplier of 0.8, 
resulting in 12.8 HEA bonus points that would then be reduced to 10 HEA 
bonus points per the 10 HEA bonus point cap.

Health Equity Adjustment (HEA) bonus points = Performance Scaler x 
Underserved Multiplier
[GRAPHIC] [TIFF OMITTED] TP01MY23.285


[[Page 27045]]


Step Four--Add Health Equity Adjustment Bonus Points to the Total of 
the Weighted Domain Scores To Calculate the TPS
    Finally, we are proposing that we would add a hospital's HEA bonus 
points as calculated in Step Three of this section to the total of the 
four weighted domain scores that we sum to calculate the hospital's 
TPS. The sum of the weighted domain scores, which would remain as 
outlined in our regulations at 42 CFR 412.165(b)(4), and the HEA bonus 
points would be the hospital's TPS for the program year. We are not 
proposing to revise the process for converting the TPS into the 
incentive payment adjustment percentage. As established in our 
regulations at 42 CFR 412.162(b)(3), the value-based incentive payment 
percentage is calculated as the product of: the applicable percent as 
defined in 42 CFR 412.160, the hospital's TPS, and the linear exchange 
function slope. We note that we are proposing to modify the definition 
of TPS in our regulations at 42 CFR 412.160 to align with the proposal 
to modify the TPS range to be 0-110 beginning with the FY 2026 program 
year as discussed in section V.K.6.b.5 of this proposed rule. Table 
V.K.-15 displays the HEA bonus points and TPSs awarded to the six 
example hospitals from Table V.K.-14.

Health equity adjustment bonus points + Total of Weighted Domain Scores 
= Total Performance Score
[GRAPHIC] [TIFF OMITTED] TP01MY23.286

    By adding these HEA bonus points to the total of each hospital's 
weighted domain scores, hospitals can be rewarded for delivering 
excellent care to large proportions of underserved populations. We 
believe a scoring adjustment designed to advance health equity through 
the Hospital VBP Program is consistent with CMS's goal to advance 
health equity by providing an incentive for hospitals to care for 
underserved populations and to provide high quality care to all of the 
populations they serve.
    We invite public comment on this proposed scoring change which we 
are also proposing to codify in our regulations at 42 CFR 412.160 and 
412.165(b).
(5) Impact Analysis of Proposed Scoring Methodology Change
    We conducted analyses to simulate the proposed scoring methodology 
change for HEA bonus points in the Hospital VBP Program to assess the 
potential impact on hospitals and payments using FY 2023 program year 
data. We also compared these impacts to the impacts of the existing 
scoring methodology, as well as a similar alternative that simulates 
only awarding 4 measure performance scaler points to the hospitals in 
the top third of performance for each domain, while hospitals in the 
middle and bottom third of performance received 0 measure performance 
scaler points. We modeled this alternative methodology in order to 
contextualize the request for additional information in section 
V.K.6.b.(7) of this proposal. The proposal and alternative method both 
included HEA bonus points comprised of the measure performance scaler 
and the underserved multiplier based on the hospital's proportion of 
patients who are dually eligible and their performance on existing 
Hospital VBP Program measures. For purposes of this simulation, we used 
the dual proportion data that were calculated using Medicare inpatient 
stays for the Hospital Readmissions Reduction Program FY 2023 
performance period which included stays between June 1, 2018, to 
December 1, 2019, and July 1, 2020, to June 30, 2021.\209\ A logistic 
exchange function was then applied to the dual proportion. This 
analysis also used one-year base operating DRG payments for FY 2021 
from October 1, 2020, to September 30, 2021, to calculate the bonus 
payments and penalties. Additionally, the TPS and quality domain scores 
data used in this analysis were calculated for the FY 2023 Hospital VBP 
Program. The proposal and alternative method both include a cap of 10 
possible HEA bonus points. We note that while this simulation uses 
multi-year Hospital Readmissions Reduction Program data for the 
calculation of the dual proportion, we are proposing to use dual 
proportion data from the calendar year two years ahead of the program 
year, as discussed in section V.K.6.b(2) of this proposed rule. The 
results of these analyses are outlined in this section and described 
further in Tables V.K.-16 and V.K.-17. Based on this initial modeling, 
the average TPS would increase with the addition of the HEA bonus 
points.
---------------------------------------------------------------------------

    \209\ We note that this calculation excludes Q1 and Q2 2020 data 
based on the ECE granted in response to the COVID-19 PHE and the 
policies finalized in the September 2, 2020 interim final rule with 
comment titled ``Medicare and Medicaid Programs, Clinical Laboratory 
Improvement Amendments (CLIA), and Patient Protection and Affordable 
Care Act; Additional Policy and Regulatory Revisions in Response to 
the COVID-19 Public Health Emergency'' (85 FR 54820), we will 
exclude qualifying claims data from measure calculations for the 
following quarters: January 1, 2020, through March 31, 2020 (Q1 
2020), and April 1, 2020, through June 30, 2020 (Q2 2020) that was 
voluntarily submitted for scoring purposes under the Hospital VBP 
Program.
---------------------------------------------------------------------------

    Our analysis finds that both the proposed and alternative HEA 
scoring

[[Page 27046]]

options increase the number of hospitals getting a bonus compared to 
the existing scoring methodology. We note that these analyses show the 
percentage of hospitals gaining from the proposed health equity scoring 
change. Through these analyses, we found that the hospital-weighted 
average payment adjustment is positive even though the Hospital VBP 
Program remains budget neutral. The increase in the number of hospitals 
receiving a bonus occurs primarily among safety net hospitals compared 
to non-safety net. A hospital was considered a safety net hospital if 
it was in the top Disproportionate Share Hospital (DSH) quintile.
    Table V.K.-16 provides the number of hospitals that received a 
bonus or penalty, respectively, along with the size of these bonuses 
and penalties. The third column in Table V.K.-16 shows the estimated 
impact of our proposed scoring methodology changes. Based on the 
analyses, the proposed methodology resulted in the greatest gains among 
safety net hospitals and rural hospitals, on average. The proposed 
methodology resulted in the largest percent of hospitals gaining from 
the HEA bonus overall, where gains are indicated by both greater bonus 
payments and smaller penalty payments, compared to the existing 
methodology. The mean payment adjustment was 0.20 percent compared to 
0.18 percent.
    The fourth column in Table V.K.-16 shows the estimated impact of an 
alternative method in which we only award 4 measure performance scaler 
points to the hospitals in the top third of performance for each 
domain, while hospitals in the middle and bottom third of performance 
received 0 measure performance scaler points. This produced the 
smallest number of hospitals gaining from the alternative health equity 
scoring adjustment among rural hospitals and among safety net 
hospitals. This produced a smaller number of hospitals gaining from the 
alternative health equity scoring adjustment among rural hospitals, 
among large hospitals, and among safety net hospitals relative to the 
proposed approach. This alternative method resulted in a similar mean 
payment adjustment of 0.20 percent as the proposed approach, while the 
program remains revenue neutral. For both the proposed and alternative 
approaches, the mean payment adjustment, as shown in Table V.K.-16, is 
larger than the mean payment adjustment for the existing scoring 
methodology.
    Table V.K.-17 shows the percentage of hospitals who gained under 
the proposed and alternative methodologies. For purposes of discussion 
in this proposal and Table V.K.-17, ``Gaining'' is defined as receiving 
a larger bonus or smaller penalty under the proposed health equity 
adjustment compared to their bonus or penalty under the original 
methodology. In Table V.K.-17, we note that the percentage of hospitals 
that gain may be different than the percentage of hospitals that 
receive a bonus. This is because hospitals, even if they receive a 
penalty, can still gain from the health equity adjustment, if the 
penalty is smaller after the health equity adjustment.
    We are seeking feedback on the alternative scoring method in 
section V.K.6.b.(7) of this proposed rule for future consideration.

[[Page 27047]]

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[[Page 27048]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.288

    Based on the results of these analyses, we are proposing to change 
the scoring methodology to award HEA bonus points (with a measure 
performance scaler of 0, 2, and 4 points) because this option allows 
more hospitals treating a large share of patients with DES to gain from 
the HEA bonus, particularly safety net hospitals. We believe these 
bonuses offer an important first step in addressing health equity 
within the Hospital VBP Program. Safety net hospitals serve large 
proportions of patients with DES, and patients living in rural areas 
tend to experience worse health outcomes.210 211 Therefore, 
we believe our proposal ensures that we are addressing performance gaps 
and incentivizing high-quality care in underserved populations compared 
to the existing scoring methodology.
---------------------------------------------------------------------------

    \210\ Sarkar, R.R., Courtney, P.T., Bachand, K., et al. (2020) 
Quality of care at safety-net hospitals and the impact on pay-for-
performance reimbursement. Cancer. 126(20):4584-4592. doi: 10.1002/
cncr.33137. PMID: 32780469.
    \211\ Health Resources and Services Administration. (2020) Rural 
Health Disparities. Available at: https://www.hrsa.gov/sites/default/files/hrsa/advisory-committees/graduate-medical-edu/publications/cogme-rural-health-policy-brief.pdf.
---------------------------------------------------------------------------

    In developing this scoring methodology change, we also explored 
alternative indicators for the underserved variable, such as an Area 
Deprivation Index (ADI) of 85 or greater, and enrollment in LIS. 
Identifying and prioritizing social risk or demographic variables to 
consider for measuring equity can be challenging. This is due to the 
high number of variables that have been identified in the literature as 
risk factors for poorer health outcomes and the limited availability of 
much of this data. Each source of data has advantages and disadvantages 
for identifying the most vulnerable populations to assess disparities. 
Income-based indicators are the most frequently used measures of 
vulnerability, but other indicators such as neighborhood level 
indicators can also provide important insights and are becoming more 
common in quality programs. There is research to support that 
geographic, neighborhood-level factors are associated with worse health 
outcomes for affected residents. The ADI is a demonstrated tool for 
assessing socioeconomic conditions based on geographic, neighborhood-
level disadvantage.212 213 Specifically, living in an area 
with an ADI score of 85 or above is shown to be a predictor of 30-day 
readmission rates, lower rates of cancer survival, poor end-of-life 
care for patients with heart failure, and longer lengths of stay and 
fewer home discharges post-knee surgery even after accounting for 
individual social and economic risk 
factors.214 215 216 217 218

[[Page 27049]]

Many rural areas also have relatively high levels of neighborhood 
disadvantage and high ADI levels. We believe dual Medicare and Medicaid 
eligibility and ADI scores are both good indicators of patients with 
high needs. Dual eligibility, an indicator at the beneficiary level, is 
intended to capture socioeconomic challenges that could affect a 
patient's ability to access care, while ADI, a neighborhood-level 
indicator, is intended to capture local socioeconomic factors 
correlated with medical disparities and underservice. However, the ADI 
data are updated infrequently.\219\ Additionally, to date, the ADI has 
not been extensively studied or widely used in value-based purchasing 
programs, and we do not collect patient level demographic level data 
for all measures that would allow us to use a neighborhood-level 
factors such as ADI in the Hospital VBP Program. However, we hope to 
utilize the ADI in the Hospital VBP Program in future years as data 
becomes more readily available through new measures in the Program in 
order to better align with other CMS programs such as the Shared 
Savings Program. ASPE recently conducted an environmental scan and 
concluded that while area-level indices can be beneficial, none of the 
existing area-level indices are ideal and should only be implemented in 
very specific circumstances.\220\ Finally, as compared to DES, use of 
the proportion of patients that receive LIS under the Medicare Part D 
prescription drug program may capture a more consistent group of low-
income patients as the eligibility criteria for LIS does not vary by 
state. However, we note that the Part D LIS has certain limitations as 
well. For example, individuals with DES or who receive Supplemental 
Security Income (SSI) automatically receive the LIS designation in CMS 
data systems. LIS designation means that the individual is enrolled in 
a Medicare Part D plan and receives the low-income subsidy. Individuals 
without DES or SSI status, but whose income is lower than 150 percent 
of the Federal poverty level and whose resources are limited, can 
qualify for LIS, but must apply. Additionally, LIS is not available in 
the U.S. territories. Most Medicare beneficiaries with the LIS 
designation are those who automatically receive this designation, 
rather than those who applied for the benefit and were approved. 
Nonetheless, despite this limitation, we agree that the use of the LIS 
designation, in addition to DES, is preferable to using DES alone, as 
doing so reduces variability across States. However, LIS is not 
available in the U.S. territories. Ultimately, we believe using DES 
data is an important first step to introducing health equity adjustment 
bonus points in the Hospital VBP Program and will consider other 
indicators for the underserved multiplier in the future.
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    \212\ Center for Health Disparities Research University of 
Wisconsin. (2022). Neighborhood Atlas. Available at: https://www.neighborhoodatlas.medicine.wisc.edu/.
    \213\ Maroko, A.R., Doan, T.M., Arno, P.S., Hubel, M., Yi, S., 
Viola, D. Integrating Social Determinants of Health With Treatment 
and Prevention: A New Tool to Assess Local Area Deprivation. Prev 
Chronic Dis 2016;13:160221. DOI: http://dx.doi.org/10.5888/pcd13.160221.
    \214\ Kind, A.J., Jenks, S., Brock, J., et al. (2014). 
Neighborhood socioeconomic disadvantage and 30-day 
rehospitalization: a retrospective cohort study. Annals of Internal 
Medicine. No. 161(11), pp 765-74, doi: 10.7326/M13-2946. Available 
at: https://www.acpjournals.org/doi/epdf/10.7326/M13-2946.
    \215\ Jencks, S.F., Schuster, A., Dougherty, G.B., et al. (2019) 
Safety-Net Hospitals, Neighborhood Disadvantage, and Readmissions 
Under Maryland's All-Payer Program. Annals of Internal Medicine. No. 
171, pp 91-98, doi:10.7326/M16-2671. Available at: https://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \216\ Cheng, E., Soulos, P.R., Irwin, M.L., et al. (2021). 
Neighborhood and Individual Socioeconomic Disadvantage and Survival 
Among Patients With Nonmetastatic Common Cancers.JAMA Network Open 
Oncology. No. 4(12), pp 1-17, doi: 10.1001/
jamanetworkopen.2021.39593 Available at: https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2787244.
    \217\ Hutchinson, R.N., Han, P.K.J, Lucas, F.L., Black, A., 
Sawyer, D., and Fairfield, K. (2022) Rural disparities in end-of-
life care for patients with heart failure: Are they due to geography 
or socioeconomic disparity? The Journal of Rural Health. No. 38, pp 
457-463, doi: 10.1111/jrh.12597 Available at: https://onlinelibrary.wiley.com/doi/epdf/10.1111/jrh.12597.
    \218\ Khlopas, A., Grits, D., Sax, O., et al. (2022). 
Neighborhood Socioeconomic Disadvantages Associated With Prolonged 
Lengths of Stay, Nonhome Discharges, and 90-Day Readmissions After 
Total Knee Arthroplasty. The Journal of Arthroplasty. No. 37(6), pp 
S37-S43, doi: 10.1016/j.arth.2022.01.032 Available at: https://www.sciencedirect.com/science/article/pii/S0883540322000493.
    \219\ Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services. First Report 
to Congress on Social Risk Factors and Performance in Medicare's 
Value-Based Purchasing Program. 2016. https://aspe.hhs.gov/sites/default/files/migrated_legacy_files/171041/ASPESESRTCfull.pdf.
    \220\ ASPE. (2022) Addressing Social Drivers of Health: 
Evaluating Area-level indices. Available at: https://aspe.hhs.gov/sites/default/files/documents/474a62378abf941f20b3eaa74ca5721c/Area-level-Indices-ASPE-Reflections.pdf.
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(6) Proposal To Modify the Total Performance Score (TPS) Maximum
    The Hospital Inpatient VBP Program final rule finalized a 
methodology for assessing the total performance of each hospital based 
on its performance under the Hospital VBP Program with respect to a 
fiscal year (76 FR 26493 through 26494). Additionally, section 
1886(o)(5)(A) of the Act provides the Secretary with the discretion to 
adopt a performance scoring methodology. Currently, the TPS is defined 
in our regulations as a numeric score ranging from 0 to 100. We are 
proposing to modify the Total Performance Score (TPS) maximum to be 
110, resulting in numeric score range of 0 to 110, beginning with the 
FY 2026 program year. A TPS maximum of 110 would allow for hospitals 
that have achieved top performance across all four domains to still be 
eligible to earn HEA bonus points. For example, if a hospital obtains a 
summed total of 100 weighted domain score points, that hospital could 
still receive up to 10 HEA bonus points, resulting in a maximum TPS of 
110. We believe that proposing to modify the TPS range will afford even 
top-performing hospitals the opportunity to receive up to an additional 
10 HEA bonus points.
    We are also proposing to codify at 42 CFR 412.160, 412.162(b)(3), 
and 412.165(b)(6) of our regulations the new TPS numeric score range of 
0 to 110. We believe this proposal will make it easier for interested 
parties to find these updated policies.
    We invite public comment on this proposal.
(7) Request for Information on Potential Additional Changes to the 
Hospital VBP Program That Would Address Health Equity
    As noted in the CMS National Quality Strategy, we are committed to 
addressing the disparities that underlie our health system, both within 
and across settings, to ensure equitable access and care for all.\221\ 
We believe the proposed scoring methodology embodies this commitment, 
but recognize it is only a first step.
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    \221\ Centers for Medicare & Medicaid Services. (2022) CMS 
National Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
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    Therefore, we invite public comment on the following:
     Should we consider using any of the previously detailed 
variables, ADI of greater than or equal to 85 and Medicare Part D LIS, 
in combination with or instead of DES? For example, should we use the 
higher of a few selected factors based on a hospital's inpatient 
population in a given program year, including: (1) the proportion of 
the hospital's patient population residing in a census block group with 
an ADI national percentile rank of at least 85 (or another threshold); 
(2) the proportion of the hospital's patients that are dually eligible 
for Medicare and Medicaid; or (3) the proportion of the hospital's 
patients receiving LIS? Should we consider patients with partial-dual 
eligibility in addition to full-dual eligibility? Are there additional 
variables we should consider using to identify populations that have 
been disadvantaged, marginalized, and/or underserved by the healthcare 
system?
     Should we consider other thresholds for scoring, such as 
using a quintile-based scoring approach whereby hospitals are awarded 
measure performance scaler points based on 5 levels of performance 
rather than 3? This would include awarding 0, 1, 2, 3, and 4, measure 
performance scaler points across the 5 levels from bottom to top 
performance, respectively, to allow for more nuance in the distribution 
of performance across each of the current four domains.

[[Page 27050]]

     In the future, we are considering further refining this 
scoring methodology change to only look at a hospital's quality 
performance on patients in the focus population (for example, patients 
with DES). We believe this future potential refinement would more 
specifically address disparities in performance, and in turn, close 
equity gaps which would ultimately result in greater overall 
improvement for the entire hospital patient population. At this time, 
we collect patient-level data on the claims measures in the clinical 
domain and the MSPB measure, but not on all other measures in the 
Hospital VBP Program. Because we do not collect patient level 
demographic level data for all measures, it is difficult to use 
neighborhood-level indicators, such as the ADI, the measure level at 
this time. Therefore, we are instead proposing to use performance on 
existing measures for all eligible patients and thus welcome 
stakeholder feedback on for the Hospital VBP Program to assess patient-
level data in the future.
     Should we use a linear scoring function or actual scoring 
for calculating the underserved multiplier instead of the proposed 
logistic exchange function as depicted in Figure V.K.-01 instead?
     Are there other approaches that the Hospital VBP Program 
could propose to adopt in order to effectively address healthcare 
disparities and advance health equity, such as the alternative 
methodology simulated in the analysis displayed in Tables V.K.-16 and 
V.K.-17? For example, should we only award measure performance scaler 
points to the top third of performance whereby a hospital in the middle 
and bottom thirds of performance would receive 0 performance scaler 
points, as simulated in the analysis? Alternatively, should we only 
provide measure performance scaler points to the Clinical, Safety, and 
Patient and Community Engagement Domains, excluding the Cost and 
Effectiveness Domain from performance scaler points?
b. Domain Weighting for Hospitals That Receive a Score on All Domains
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38265 through 
38266), we finalized our proposal to retain the equal weight of 25 
percent for each of the four domains in the Hospital VBP Program for 
the FY 2020 program year and subsequent years for hospitals that 
receive a score in all domains.
    We are not proposing any changes to these domain weights.
c. Domain Weighting for Hospitals Receiving Scores on Fewer Than Four 
Domains
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through 
50085), we adopted a policy that hospitals must receive domain scores 
on at least three of four quality domains in order to receive a TPS, 
for the FY 2017 program year and subsequent years. Hospitals with 
sufficient data on only three domains will have their TPSs 
proportionately reweighted (79 FR 50084 through 50085).
    We are not proposing any changes to these domain weights.
d. Minimum Numbers of Measures for Hospital VBP Program Domains
    We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38266) for our previously finalized requirements for the minimum 
numbers of measures for hospitals to receive domain scores.
    We are not proposing any changes to these policies.
e. Minimum Numbers of Cases for Hospital VBP Program Measures
(1) Background
    Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to 
exclude for the fiscal year hospitals that do not report a minimum 
number (as determined by the Secretary) of cases for the measures that 
apply to the hospital for the performance period for the fiscal year. 
For additional discussion of the previously finalized minimum numbers 
of cases for measures under the Hospital VBP Program, we refer readers 
to the Hospital Inpatient VBP Program final rule (76 FR 26527 through 
26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 through 74534); 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53610); the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50085 through 50086); the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49570); and the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38266 through 38267).
(2) Summary of Previously Adopted and Newly Proposed Minimum Numbers of 
Cases
    The previously adopted minimum numbers of cases for the Hospital 
VBP measures are set forth in Table V.K.-18. Table V.K.-18 also sets 
forth the proposed minimum number of cases for the proposed Severe 
Sepsis and Septic Shock: Management Bundle measure beginning with the 
FY 2026 program year. For the proposed updates to MSPB Hospital measure 
and the proposed THA/TKA Complications measure, we are proposing to 
maintain the same minimum number of cases as the current measures.
    We are proposing to codify at 42 CFR 412.165(a)(1)(i) these minimum 
numbers of cases. We believe this proposal will make it easier for 
interested parties to find these policies.

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    We invite comment on these proposals.
7. Extraordinary Circumstance Exception (ECE) Policy for the Hospital 
VBP Program
    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45298 through 45299) and 42 CFR 412.165(c) for additional details 
related to the Hospital VBP Program ECE policy.
    We are not proposing any changes to the Hospital VBP Program ECE 
policy.

L. Hospital-Acquired Condition (HAC) Reduction Program

1. Regulatory Background
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50707 through 50708) for a general overview of the HAC Reduction 
Program and to the same final rule (78 FR 50708 through 50709) for a 
detailed discussion of the statutory basis for the Program. For 
additional descriptions of our previously finalized policies for the 
HAC Reduction Program, we also refer readers to the following final 
rules:
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 
50729).
     The FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 through 
50104).
     The FY 2016 IPPS/LTCH PPS final rule (80 FR 49570 through 
49581).
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57011 through 
57026).
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through 
38278).
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41472 through 
41492).
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42402 through 
42411).
     The FY 2021 IPPS/LTCH PPS final rule (85 FR 58860 through 
58865).
     The FY 2022 IPPS/LTCH PPS final rule (86 FR 45300 through 
45310).
     The FY 2023 IPPS/LTCH PPS final rule (87 FR 49120 through 
49138).
    We have also codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
2. Measures for FY 2024 and Subsequent Years in the HAC Reduction 
Program
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41472 through 41474) for more information about how the HAC Reduction 
Program supports our goal of bringing quality measurement, 
transparency, and improvement together with value-based purchasing to 
the hospital inpatient care setting through the Meaningful Measures 
Framework and Meaningful Measures 2.0.\222\
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    \222\ Centers for Medicare & Medicaid Services. (2022). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
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a. Current Measures
    The HAC Reduction Program has adopted six measures to date. In the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the use of 
five Centers for Disease Control and Prevention (CDC) National 
Healthcare Safety Network (NHSN) hospital-associated infection (HAI) 
measures: (1) Catheter-associated Urinary Tract Infection (CAUTI) 
Outcome Measure; (2) Facility-wide Inpatient Hospital-onset Clostridium 
difficile Infection (CDI) Outcome Measure; (3) Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure; (4) Colon and Abdominal 
Hysterectomy Surgical Site Infection (SSI) Outcome Measure; and (5) 
Facility-wide Inpatient Hospital-onset Methicillin-resistant 
Staphylococcus aureus (MRSA) bacteremia Outcome Measure. In the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57014), we finalized the use of the CMS 
PSI 90 measure. These previously finalized measures are shown in table 
IX.L.-01.

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[GRAPHIC] [TIFF OMITTED] TP01MY23.290

    Technical specifications for the CMS PSI 90 measure can be found on 
the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/psi/resources. Technical specifications for the CDC 
NHSN HAI measures can be found at the CDC's NHSN website at https://www.cdc.gov/nhsn/acute-care-hospital/index.html and on the QualityNet 
website available at: https://qualitynet.cms.gov/inpatient/measures/hai/resources. These three web pages provide measure updates and other 
information necessary to guide hospitals participating in the 
collection of HAC Reduction Program data.
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    \223\ In previous years, we referred to the consensus-based 
entity by corporate name. We have updated this language to refer to 
the consensus-based entity more generally.
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    We are not proposing to add or remove any measures from the HAC 
Reduction Program.
b. Measure Removal Factors Policy
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42404 through 42406) for information about our measure removal and 
retention factors for the HAC Reduction Program. We are not proposing 
any measure removal and retention factor policy changes.
3. Maintenance of Technical Specifications for Quality Measures in the 
HAC Reduction Program
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50100 through 
50101), we adopted a process that allows us to expeditiously 
incorporate technical measure specification updates while preserving 
the public's ability to comment upon updates that fundamentally change 
a measure. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49133 through 
49134), we adjusted the minimum threshold criteria for the CMS PSI 90 
measure beginning in the FY 2023 program year, requiring hospitals to 
have one or more component PSI measures with at least 25 eligible 
discharges and seven or more component PSI measures with at least three 
eligible discharges to receive a CMS PSI 90 Composite score. We also 
announced a technical measure specification update to the CMS PSI 90 
software to include COVID-19 diagnosis as a risk adjustment parameter 
beginning with the FY 2024 program year, to address the impact of the 
COVID-19 on hospitalized individuals on the CMS PSI 90 measure, 
although the Public Health Emergency is scheduled to end in CY 
2023.\224\
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    \224\ The White House. (2023). Notice of the Continuation of the 
National Emergency Concerning the Coronavirus Disease 2019 (COVID-
19) Pandemic. Available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2023/02/10/notice-on-the-continuation-of-the-national-emergency-concerning-the-coronavirus-disease-2019-covid-19-pandemic-3/.
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    We are not proposing any changes in this proposed rule.
4. Advancing Patient Safety in the HAC Reduction Program--Request for 
Comment
    As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50708), 
the intent of the HAC Reduction Program is to encourage all hospitals 
to reduce the incidence of hospital-acquired conditions. According to 
the CDC 2021 National and State Healthcare-Associated Infection 
Progress Report, rates of CLABSI, CAUTI, and MRSA bacteremia increased 
between 2020 and 2021, by 7 percent, 5 percent, and 14 percent 
respectively.\225\ HAI standard infection ratios for these three 
measures were notably higher than pre-COVID-19 pandemic levels, 
indicating continued room for improvement to reduce the incidence of 
hospital-acquired conditions nationwide.\226\ The HAC Reduction 
Program's efforts to reduce hospital-acquired conditions are vital to 
improving patients' quality of care and reducing complications and 
mortality, while simultaneously decreasing costs. The reduction of 
hospital-acquired conditions is an important marker of quality of care 
and has a positive impact on both patient outcomes and cost of care. 
Moreover, the HAC Reduction Program has an opportunity to advance both 
healthcare safety and equity by encouraging participating hospitals to 
further focus their improvement efforts on eliminating disparities that 
exist in the rate and severity of hospital-acquired conditions among 
different patient populations. According to a

[[Page 27053]]

2021 study conducted by the Urban Institute, Black patients experienced 
worse quality of care in 6 out of 11 patient safety indicators relative 
to White patients in 2017 across 26 states.\227\ We aim to have the HAC 
Reduction Program advance the CMS National Quality Strategy goals of 
improving health equity by addressing underlying disparities in our 
health system and promoting safety by preventing harm or death from 
health care errors.\228\ Further, we also seek to align with the HHS-
led National Healthcare System Action Alliance to Advance Patient 
Safety and its priority of establishing and sustaining a strong culture 
of safety in a way that is equitable and engaging of patients, 
families, care partners, and the health care 
workforce.229 230
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    \225\ Centers for Disease Control and Prevention. (2022). 
Current HAI Progress Report. Available at: https://www.cdc.gov/hai/data/portal/progress-report.html#2018.
    \226\ Lastinger, L., Alvarez, C., Kofman, A., Konnor, R., Kuhar, 
D., Nkwata, A., . . . Dudeck, M. (2022). Continued increases in the 
incidence of healthcare-associated infection (HAI) during the second 
year of the coronavirus disease 2019 (COVID-19) pandemic. Infection 
Control & Hospital Epidemiology, 1-5. doi:10.1017/ice.2022.116
    \227\ Gangopadhyaya, Anuj. (2021). Black patients are more 
likely than white patients to be in hospitals with worse patient 
safety conditions. Urban Institute. Available at: https://www.urban.org/sites/default/files/publication/103925/black-patients-are-more-likely-than-white-patients-to-be-in-hospitals-with-worse-patient-safety-conditions.pdf.
    \228\ Centers for Medicare & Medicaid Services. (2022). What is 
the CMS National Quality Strategy?. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \229\ Agency for healthcare Research and Quality. (2022). The 
National Healthcare System Action Alliance to Advance Patient 
Safety. Available at: https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \230\ National Steering Committee for Patient Safety. (2020). 
Safer Together: A National Action Plan to Advance Patient Safety. 
Boston, Massachusetts: Institute for Healthcare Improvement. 
Available at: www.ihi.org/SafetyActionPlan.
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    We are conducting a review of the patient safety and healthcare-
associated infection measures and the scoring and weighting 
methodology, as part of our ongoing efforts to evaluate and strengthen 
the HAC Reduction Program. As we did in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19986 through 19990), the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20437), and in the FY 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28452) we are seeking input from interested parties on the 
addition of new program measures. We seek to adopt patient safety 
focused electronic clinical quality measures (eCQMs) to strengthen the 
growing portfolio of eCQMs and promote further alignment across quality 
reporting and value-based purchasing programs.
    Adoption of eCQMs in the HAC Reduction Program supports the CMS 
Meaningful Measures 2.0 priority to move fully to digital quality 
measurement. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49136), we 
described the Request for Comment (RFC) on the potential future 
adoption of the digital NHSN Healthcare-associated Clostridioides 
difficile Infection Outcome measure and the digital NHSN Hospital-Onset 
Bacteremia & Fungemia Outcome measure. We received public input in 
support of the adoption of these two eCQMs. However, a few commenters 
stated concern regarding baseline data testing, measure definitions, 
and the risk adjustment methodology for both eCQMs. We would appreciate 
feedback on potentially adopting patient safety related eCQMs which are 
currently used in the Hospital Inpatient Quality Reporting (IQR) 
Program, including: Hospital Harm--Opioid-Related Adverse Events eCQM, 
Hospital Harm-Severe Hypoglycemia eCQM, and Hospital Harm-Severe 
Hyperglycemia eCQM. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49233), the Hospital IQR Program adopted the Hospital Harm--Opioid-
Related Adverse Events eCQM and in the FY 2022 IPPS/LTCH PPS final rule 
(86 FR 45382), the Hospital IQR Program adopted the Hospital Harm-
Severe Hypoglycemia eCQM and Hospital Harm-Severe Hyperglycemia eCQM. 
In sections IX.C.5.a and IX.C.5.b of this proposed rule, the Hospital 
IQR Program is proposing to adopt three additional eCQMs, which we seek 
input on for inclusion in the HAC Reduction Program, including: 
Hospital Harm-Acute Kidney Injury eCQM, Hospital Harm-Pressure Injury 
eCQM, and Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computer Tomography in Adults eCQM. We believe adoption of 
hospital harm eCQMs would address two high priority areas including 
safety and adopting outcome eCQMs. In addition, as part of our 
commitment to patient safety, we are developing new digital quality 
measures that use data from hospital electronic health records that 
would assess various aspects of patient safety in the inpatient care 
setting. We invite public comment on the adoption of these six eCQMs in 
the HAC Reduction Program.
    To the extent practicable, HAC Reduction Program measures should be 
nationally endorsed by a multi-stakeholder organization. Measures 
should be aligned with best practices among other payers and the needs 
of the end users of the measures. Measures should consider widely 
accepted criteria established in medical literature.
    We invite public comment on potential future measures as well as on 
how the HAC Reduction Program can further promote patient safety. 
Specifically, we invite comment on:
     What measures should be introduced in the HAC Reduction 
Program to address emerging high priority patient harm events and 
healthcare-associated infections?
     What measures should be introduced in the HAC Reduction 
Program to address equity gaps in the rate and severity of patient harm 
events and healthcare-associated infections?
     How can weighting and scoring methods be improved to 
better assess hospital performance and promote equity in the HAC 
Reduction Program payment assessments?
     How can the HAC Reduction Program be strengthened to 
encourage patient safety best practices, which also prioritize the 
delivery of equitable care, in inpatient facilities?
5. HAC Reduction Program Scoring Methodology and Scoring Review and 
Corrections Period
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41484), we clarified 
the Scoring Calculations Review and Correction Period for the HAC 
Reduction Program. Hospitals must register and submit quality data 
through the Hospital Quality Reporting (HQR) System (previously 
referred to as the QualityNet Secure Portal) in order to access their 
annual hospital-specific reports. The HQR System is safeguarded in 
accordance with the HIPAA Privacy and Security Rules to protect 
submitted patient information. See 45 CFR parts 160 and 164, subparts 
A, C, and E.
    We are not proposing any changes to the Scoring Calculations Review 
and Correction Period process.
6. Validation of HAC Reduction Program Data
    We previously adopted data validation policies for the CDC NHSN HAI 
measures in the HAC Reduction Program in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41478 through 41484). Since then, we have continued 
to update the validation policies. We refer readers to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42406 through 42410), the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58862 through 58865), and the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49137 through 49138) for detailed 
information on the HAC Reduction Program data validation processes.
a. Validation Reconsideration Beginning With the FY 2025 Program Year
(1) Background
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41480) and FY 2020 
IPPS/LTCH final rule (84 FR 42407), we finalized annual random 
selection of up to 200 hospitals for inpatient validation,

[[Page 27054]]

and the annual targeted selection of up to 200 hospitals using the 
following targeting criteria:
     Any hospital that failed validation the previous year;
     Any hospital that submits data to NHSN after the HAC 
Reduction Program data submission deadline has passed;
     Any hospital that has not been randomly selected for 
validation in the past 3 years;
     Any hospital that passed validation in the previous year, 
but had a two-tailed confidence interval that included 75 percent; and
     Any hospital which failed to report to NHSN at least half 
of actual HAI events detected as determined during the previous year's 
validation effort.
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41480), 
under the current policies, once we validate all quarters of the 
relevant fiscal year, we calculate a total score reflecting a 
hospital's reporting accuracy for the HAI measures used within the HAC 
Reduction Program. The calculated total score is then utilized to 
compute a confidence interval with the consideration of the results 
from the educational review process. If the estimated reliability upper 
bound (ERUB) of the confidence interval is 75 percent or higher, the 
hospital will pass the HAC Reduction Program validation requirement; if 
the ERUB is below 75 percent, the hospital will fail the HAC Reduction 
Program validation requirement.
    As described in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41481 
through 41482), a hospital that fails validation (that is, their ERUB 
is below the 75 percent threshold) is assigned the maximum Winsorized 
z-scores only for the set of measures validated. For example, if a 
hospital were selected on CLABSI, CAUTI, and SSI, and failed 
validation, that hospital would receive the maximum Winsorized z-scores 
(that is, the worst score) for CLABSI, CAUTI, and SSI. We are not 
proposing any changes to these processes.
(2) Proposal To Adopt a Validation Reconsideration Process
    In this proposed rule, we are proposing to add a validation 
reconsideration process to the HAC Reduction Program, giving hospitals 
the opportunity to request reconsideration of their final validation 
scores. Prior to establishing administrative policies for the HAC 
Reduction Program to collect, validate, and publicly report quality 
measure data independently instead of conducting these activities 
through the Hospital IQR Program, as finalized in FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41475 through 41484), hospitals that failed their 
Annual Payment Update (APU) requirement related to validation of 
certain Hospital IQR Program measures, which included but was not 
limited to HAI measures, had the opportunity to request reconsideration 
of their final validation scores for the HAI measures. We intend for 
the HAC Reduction Program's proposed reconsideration processes to be 
similar to the current validation reconsideration processes of the 
Hospital IQR Program, which hospitals are familiar with. We refer 
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650 through 
51651) for further detail on the Hospital IQR Program validation 
reconsideration process. Beginning with the FY 2025 program year 
(affecting calendar year 2022 discharges), we are proposing to allow 
hospitals that fail validation to request reconsideration of their 
validation results before use in HAC Reduction Program scoring 
calculations. The validation reconsideration process would be conducted 
once per program fiscal year after the validation of HAIs for all four 
quarters of the relevant fiscal year's data period and after the 
confidence interval has been calculated.
    The process, if finalized, would complement the quarterly 
educational reviews that are currently available to hospitals. The 
adoption of a reconsideration process for the HAC Reduction Program 
aligns data validation processes with the Hospital IQR Program 
reconsideration process, which hospitals are familiar with. We refer 
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41480 through 
41481) for more details on the HAC Reduction Program educational review 
process.
(a) Notification of Validation Results and Request for Reconsideration 
Process
    Once we calculate the confidence intervals for validation total 
scores, we are proposing to notify hospitals that failed the HAC 
Reduction Program validation requirement for the CDC NHSN HAI measures 
via a notification letter sent by certified mail. The letter would 
instruct hospitals on how to submit a request for reconsideration to 
CMS. A hospital requesting validation reconsideration must submit a 
reconsideration request form within 30 days from the date stated on the 
notification letter. The form for submitting a reconsideration request 
and a detailed description of the reconsideration process would be 
available on the QualityNet website.
    A hospital's request for validation reconsideration must include, 
among other things:
     Basis for requesting reconsideration--identifying specific 
reason(s) for why the hospital believes it met the HAC Reduction 
Program validation requirements.
     All documentation and evidence that supports the 
hospital's request for reconsideration.
    We would provide hospitals an email acknowledgement, following 
receipt of a request for validation reconsideration, using the contact 
information provided in the validation reconsideration request. We 
would also provide written notification of the formal decision 
regarding the reconsideration request to the hospital contact(s) listed 
on the validation reconsideration form. We anticipate that the 
reconsideration process may take approximately 90 days from the receipt 
of the reconsideration request.
    Only hospitals that fail to meet the passing threshold for the end-
of-year confidence interval calculation would receive an opportunity to 
request reconsideration of their validation results. The scope of the 
proposed reconsideration parallels the scope used within the Hospital 
IQR Program reconsideration process:
     If the hospital requests reconsideration for CMS 
contractor-abstracted data elements classified as mismatches affecting 
validation scores, hospitals must submit a copy of the entire requested 
medical record to CMS during the initial validation process (not during 
reconsideration) by the 30-day deadline date indicated on the 
notification letter for the requested case to be eligible to be 
reconsidered on the basis of mismatched data elements.
     On occasion, a hospital requests reconsideration for 
medical record copies submitted during the initial validation process 
and classified as invalid record selections. Such invalid record 
selections are defined as medical records submitted by hospitals during 
the initial validation process that do not match the patient's episode 
of care information as determined by CMS (in other words, CMS 
determines that the hospital returned a medical record that is 
different from that which was requested). For more information about 
inpatient validation case statuses, we refer readers to the CMS 
Inpatient Data Validation Case Status Details for Validated Results on 
the QualityNet website available at https://qualitynet.cms.gov/inpatient/data-management/data-validation/resources. If we determine 
that the hospital has submitted an invalid record selection case, it 
will be awarded a zero validation score for the case because the 
hospital did not submit the entire copy

[[Page 27055]]

of the medical record for that requested case. During the 
reconsideration process, our review of invalid record selections would 
be limited to determining whether the record submitted was actually an 
entire copy of the requested medical record. If we determine during 
reconsideration that the hospital did submit the entire copy of the 
requested medical record, then we would re-abstract data elements from 
the medical record submitted by the hospital.
     If the hospital requests reconsideration for medical 
records not submitted within the 30-day deadline of the initial 
validation process, our review would initially be limited to 
determining whether we received the requested record within 30 calendar 
days of the initial validation process. If we determined during 
reconsideration that we did receive a copy of the requested medical 
record within 30 calendar days, then we would abstract data elements 
from the medical record submitted by the hospital. This proposed policy 
is also designed to address those instances where the hospital's 
request is based on invalid record selections, which are defined as 
medical records submitted during the initial validation process that do 
not match the patient's episode of care information as determined by 
CMS, as previously discussed.
    In summary, similar to the validation reconsideration process under 
the Hospital IQR Program, we are proposing to limit the scope of our 
HAC Reduction Program data validation reconsideration reviews to 
information already submitted by the hospital during the initial 
validation process, and we would not abstract medical records that were 
not submitted during the initial validation process. We would expand 
the scope of our review only if we found during the review that the 
hospital correctly and timely submitted the requested medical records. 
In that case, we would abstract data elements from the medical record 
submitted by the hospital as part of our review of its reconsideration 
request. After the reconsideration process was complete, we would re-
calculate a hospital's confidence interval based on the results of the 
reconsideration of the hospital's cases and determine whether the 
hospital passed or failed validation requirements for the HAC Reduction 
Program. Those results would then be used for HAC Reduction Program 
scoring, as detailed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41485 through 41489). The updated validation results could impact a 
hospital's payment adjustments. If a hospital still fails validation 
after receiving updated validation results, we will assign the maximum 
Winsorized z-score for the three measures CMS validated. If a hospital 
passes validation after the reconsideration process, their SIRs for the 
measures validated will be their measure results in the HAC Reduction 
Program scoring calculations process. As described in Sec.  412.172(b) 
and (e)(2), hospitals in the worst performing quartile, that is the 25 
percent of hospitals with the highest Total HAC Scores, are subject to 
a 1-percent payment reduction under the HAC Reduction Program. We note 
that the proposed HAC Reduction Program reconsideration process is 
limited to reconsideration as to the data validation requirements of 
the program. We are not proposing a reconsideration process as to any 
other program requirements, including measure calculations, scoring, or 
determination of payment reductions not related to data validation. We 
refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41484) 
where we discuss our policies related to the Scoring Review and 
Corrections Period for hospitals that may have questions about their 
Total HAC Score calculations.
    We invite public comment on this proposal.
(3) Proposal To Update the Targeting Criteria for Hospitals Granted an 
Extraordinary Circumstances Exception (ECE)
    As proposed in the Hospital IQR program in section IX.C.11.b of 
this proposed rule, we are proposing to update our targeting criteria 
for validation of hospitals granted an extraordinary circumstances 
exception (ECE) in the HAC Reduction Program. Specifically, we are 
proposing to modify the validation targeting criteria to include any 
hospital with a ERUB of the two-tailed confidence interval that is less 
than 75 percent and received an extraordinary circumstances exception 
(ECE) for one or more quarters beginning with the FY 2027 program year, 
affecting validation of calendar year 2024 discharges.
    We propose to add a new criterion to the five established targeting 
criteria used to select the up to 200 additional hospitals. We propose 
that a hospital subject to validation who received an extraordinary 
circumstance exception (ECE) for one or more quarters for the data 
period validated and has a ERUB of the two-tailed confidence interval 
that is less than 75 percent would be targeted for validation in the 
subsequent validation year and would not fail data validation in the 
HAC Reduction Program. The hospital would not receive the penalty of 
the maximum Winsorized z-scores, the worst scores, for measures 
validated. This exception would not except a hospital from 
participation in the HAC Reduction Program, and the hospital would 
still receive a Total HAC Score. We refer readers to the previously 
established program scoring methodology in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41485). We believe adopting this additional criterion 
would promote alignment with what is being proposed in Hospital IQR 
Program. Hospitals that meet this criterion would be required to submit 
medical records to CMS within 30 days of the date identified on the 
written request as finalized in the Hospital IQR Program in FY 2017 
IPPS/LTCH PPS final rule (81 FR 57179 and 57180) and in the HAC 
Reduction Program in FY 2019 Rule IPPS/LTCH PPS final rule (83 FR 
41482).
    It is important to clarify that, consistent with our previously 
finalized policy, a hospital is subject to both the maximum Winsorized 
z-scores penalty and targeting for validation in the subsequent year if 
it does not have an ECE for one more or more quarters and does not meet 
the 75 percent threshold.
    Specifically, we propose to add the following criterion for 
targeting up to 200 additional hospitals for validation: any hospital 
with a two-tailed confidence interval that is less than 75 percent, and 
received an ECE for one or more quarters for the data period validated.
    This proposal would align targeting criteria across the HAC 
Reduction, Hospital IQR and Hospital OQR Programs. In the CY 2023 OPPS/
ASC final rule, we finalized the addition of this criterion to the 
Hospital OQR Program's targeting criteria for validation selection 
beginning with validations affecting the CY 2023 reporting period/CY 
2025 payment determination (87 FR 72115 and 72116). Our proposal would 
also allow us to appropriately address instances in which hospitals, 
with an ECE for one or more quarters for the data period validated, 
would receive the maximum Winsorized z-scores penalty and thus be more 
likely to be subject to the payment reduction under the current 
validation policies.
    We invite public comment on this proposal.

M. Rural Community Hospital Demonstration Program

1. Introduction
    The Rural Community Hospital Demonstration was originally

[[Page 27056]]

authorized by section 410A of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). The 
demonstration has been extended three times since the original 5-year 
period mandated by the MMA, each time for an additional 5 years. These 
extensions were authorized by sections 3123 and 10313 of the Affordable 
Care Act (Pub. L. 111-148), section 15003 of the 21st Century Cures Act 
(Pub. L. 114-255) (Cures Act) enacted in 2016, and most recently, by 
section 128 of the Consolidated Appropriations Act of 2021 (Pub. L. 
116-260). In this proposed rule, we summarize the status of the 
demonstration program, and the current methodologies for implementation 
and calculating budget neutrality.
    We are also proposing the amount to be applied to the national IPPS 
payment rates to account for the costs of the demonstration in FY 2024, 
and, in addition, we are proposing to include the reconciled amount of 
demonstration costs for FY 2018 in the FY 2024 IPPS/LTCH final rule. We 
expect all finalized cost reports for this earlier year to be available 
by that time.
2. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing rural community hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1) of Public Law 108-
173, is a hospital that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Our policy for implementing the 5-year extension period authorized 
by Public Law 116-260 (the Consolidated Appropriations Act of 2021) 
follows upon the previous extensions under the Affordable Care Act 
(Pub. L. 111-148) and the Cures Act (Pub. L. 114-255). Section 410A of 
Public Law 108-173 (MMA) initially required a 5-year period of 
performance. Subsequently, sections 3123 and 10313 of Public Law 111-
148 required the Secretary to conduct the demonstration program for an 
additional 5-year period, to begin on the date immediately following 
the last day of the initial 5-year period. In addition, Public Law 111-
148 limited the number of hospitals participating to no more than 30. 
Section 15003 of the Cures Act required a 10-year extension period in 
place of the 5-year extension period under the Affordable Care Act, 
thereby extending the demonstration for another 5 years. Section 128 of 
Public Law 116-260, in turn, revised the statute to indicate a 15-year 
extension period, instead of the 10-year extension period mandated by 
the Public Law 114-159 (Cures Act). Please refer to the FY 2023 IPPS 
proposed and final rules (87 FR 28454 through 28458 and 87 FR 49138 
through 49142, respectively) for an account of hospitals entering into 
and withdrawing from the demonstration with these re-authorizations. 
There are currently 26 hospitals participating in the demonstration.
3. Budget Neutrality
a. Statutory Budget Neutrality Requirement
    Section 410A(c)(2) of Public Law 108-173 requires that, in 
conducting the demonstration program under this section, the Secretary 
shall ensure that the aggregate payments made by the Secretary do not 
exceed the amount that the Secretary would have paid if the 
demonstration program under this section was not implemented. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when we implement a demonstration program on a budget 
neutral basis, the demonstration program is budget neutral on its own 
terms; in other words, the aggregate payments to the participating 
hospitals do not exceed the amount that would be paid to those same 
hospitals in the absence of the demonstration program. We note that the 
payment methodology for this demonstration, that is, cost-based 
payments to participating small rural hospitals, makes it unlikely that 
increased Medicare outlays will produce an offsetting reduction to 
Medicare expenditures elsewhere. Therefore, in the IPPS final rules 
spanning the period from FY 2005 through FY 2016, we adjusted the 
national inpatient PPS rates by an amount sufficient to account for the 
added costs of this demonstration program, thus applying budget 
neutrality across the payment system as a whole rather than merely 
across the participants in the demonstration program. (We applied a 
different methodology for FY 2017, with the demonstration expected to 
end prior to the Cures Act extension). As we discussed in the FYs 2005 
through 2017 IPPS/LTCH PPS final rules (69 FR 49183; 70 FR 47462; 71 FR 
48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 
77 FR 53449, 78 FR 50740, 77 FR 50145; 80 FR 49585; and 81 FR 57034, 
respectively), we believe that the statutory language of the budget 
neutrality requirements permits the agency to implement the budget 
neutrality provision in this manner.
    We resumed this methodology of offsetting demonstration costs 
against the national payment rates in the IPPS final rules from FY 2018 
through FY 2023. Please see the FY 2023 IPPS final rule for an account 
of how we applied the budget neutrality requirement for these fiscal 
years (87 FR 49140 through 49142).
b. General Budget Neutrality Methodology
    We have generally incorporated two components into the budget 
neutrality offset amounts identified in the final IPPS rules in 
previous years. First, we have estimated the costs of the demonstration 
for the upcoming fiscal year, generally determined from historical, 
``as submitted'' cost reports for the hospitals participating in that 
year. Update factors representing nationwide trends in cost and volume 
increases have been incorporated into these estimates, as specified in 
the methodology described in the final rule for each fiscal year. 
Second, as finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an earlier, 
given year differed from the estimated costs for the demonstration set 
forth in the final IPPS rule for the corresponding fiscal year, and 
incorporated that amount into the budget neutrality offset amount for 
the upcoming fiscal year. If the actual costs for the demonstration for 
the earlier fiscal year exceeded the estimated costs of the 
demonstration identified in the final rule for that year, this 
difference was added to the estimated costs of the demonstration for 
the upcoming fiscal year when determining the budget neutrality 
adjustment for the upcoming fiscal year. Conversely, if the estimated 
costs of the demonstration set forth in the final rule for a prior 
fiscal year exceeded the actual costs of the demonstration for that 
year, this difference was subtracted from the estimated cost of the 
demonstration for

[[Page 27057]]

the upcoming fiscal year when determining the budget neutrality 
adjustment for the upcoming fiscal year.
    We note that we have calculated this difference for FYs 2005 
through 2017 between the actual costs of the demonstration as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
c. Budget Neutrality Methodology for the Extension Period Authorized by 
Public Law 116-159
    For the most-recently enacted extension period, under the 
Consolidated Appropriations Act of 2021, we have continued upon the 
general budget neutrality methodology used in previous years, as 
previously described in the citations to earlier IPPS final rules. In 
this proposed rule, we outline the methodology to be used for 
determining the offset to the national IPPS payment rates for FY 2024.
(1) Methodology for Estimating Demonstration Costs for FY 2024
    Consistent with the general methodology from previous years, we are 
estimating the costs of the demonstration for the upcoming fiscal year, 
and proposing to incorporate this estimate into the budget neutrality 
offset amount to be applied to the national IPPS rates for the upcoming 
fiscal year, that is, FY 2024. We are conducting this estimate for FY 
2024 based on the 26 currently participating hospitals. The methodology 
for calculating this amount for FY 2024 proceeds according to the 
following steps:
    Step 1: For each of these 26 hospitals, we identify the reasonable 
cost amount calculated under the reasonable cost-based methodology for 
covered inpatient hospital services, including swing beds, as indicated 
on the ``as submitted'' cost report for the most recent cost reporting 
period available. For each of these hospitals, the ``as submitted'' 
cost report is that with cost report period end date in CY 2021. We sum 
these hospital-specific amounts to arrive at a total general amount 
representing the costs for covered inpatient hospital services, 
including swing beds, across the total 26 hospitals eligible to 
participate during FY 2024.
    Then, we multiply this amount by the FYs 2022, 2023, and 2024 IPPS 
market basket percentage increases, which are calculated by the CMS 
Office of the Actuary. (We are using the proposed market basket 
percentage increase for FY 2024, which can be found at section V.B.1 of 
the preamble to this proposed rule.) The result for the 26 hospitals is 
the general estimated reasonable cost amount for covered inpatient 
hospital services for FY 2024.
    Consistent with our methods in previous years for formulating this 
estimate, we are applying the IPPS market basket percentage increases 
for FYs 2022 through 2024 to the applicable estimated reasonable cost 
amount (previously described) in order to model the estimated FY 2024 
reasonable cost amount under the demonstration. We believe that the 
IPPS market basket percentage increases appropriately indicate the 
trend of increase in inpatient hospital operating costs under the 
reasonable cost methodology for the years involved.
    Step 2: For each of the participating hospitals, we identify the 
estimated amount that would otherwise be paid in FY 2024 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services, including swing beds (as indicated on the same set 
of ``as submitted'' cost reports as in Step 1), if the demonstration 
were not implemented. We sum these hospital-specific amounts, and, in 
turn, multiply this sum by the FYs 2022, 2023, and 2024 IPPS applicable 
percentage increases. (For FY 2024, we are using the proposed 
applicable percentage increase, per section V.B.1 of the preamble of 
this proposed rule.) This methodology differs from Step 1, in which we 
apply the market basket percentage increases to the hospitals' 
applicable estimated reasonable cost amount for covered inpatient 
hospital services. We believe that the IPPS applicable percentage 
increases are appropriate factors to update the estimated amounts that 
generally would otherwise be paid without the demonstration. This is 
because IPPS payments constitute the majority of payments that would 
otherwise be made without the demonstration and the applicable 
percentage increase is the factor used under the IPPS to update the 
inpatient hospital payment rates.
    Step 3: We subtract the amount derived in Step 2 from the amount 
derived in Step 1. According to our methodology, the resulting amount 
indicates the total difference for the 26 hospitals (for covered 
inpatient hospital services, including swing beds), which will be the 
general estimated amount of the costs of the demonstration for FY 2024.
    For this proposed rule, the resulting amount is $37,658,408, to be 
incorporated into the budget neutrality offset adjustment for FY 2024. 
This estimated amount is based on the specific assumptions regarding 
the data sources used, that is, recently available ``as submitted'' 
cost reports and historical update factors for cost and payment. If 
updated data become available prior to the final rule, we will use them 
as appropriate to estimate the costs for the demonstration program for 
FY 2024 in accordance with our methodology for determining the budget 
neutrality estimate. We will also incorporate any statutory change that 
might affect the methodology for determining hospital costs either with 
or without the demonstration.
(2) Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years
    As described earlier, we have calculated the difference for FYs 
2005 through 2017 between the actual costs of the demonstration, as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
    At this time, for the FY 2024 proposed rule, not all of the 
finalized cost reports are available for the 29 hospitals that 
completed cost report periods beginning in FY 2018 under the 
demonstration payment methodology. We expect all of these finalized 
cost reports to be available by the time of the final rule, and thus we 
are proposing to include the difference between the actual cost of the 
demonstration for FY 2018 as determined from finalized cost reports 
within the budget neutrality offset amount in the FY 2024 final rule.
(3) Total Proposed Budget Neutrality Offset Amount for FY 2024
    Therefore, for this FY 2024 IPPS/LTCH PPS proposed rule, the 
proposed budget neutrality offset amount for FY 2024 is the amount 
determined under section V.M.3.c.(1). of the preamble of this proposed 
rule, representing the difference applicable to FY 2023 between the sum 
of the estimated reasonable cost amounts that would be paid under the 
demonstration for covered inpatient services to the 26 hospitals 
eligible to participate in the fiscal year and the sum of the estimated 
amounts that would generally be paid if the demonstration had not been 
implemented. This estimated amount is $37,658,408.
    However, we note, that the overall amount might change if there are 
any revisions prior to the final rule to the data used to formulate 
this estimate. We also expect to revise the budget neutrality offset 
amount upon calculating the actual costs of the demonstration for FY 
2018, after

[[Page 27058]]

receiving all of the finalized cost reports for that fiscal year.

VI. Proposed Changes to the IPPS for Capital Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. We initially implemented the IPPS for 
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In 
that final rule, we established a 10-year transition period to change 
the payment methodology for Medicare hospital inpatient capital-related 
costs from a reasonable cost-based payment methodology to a prospective 
payment methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period that was 
established to phase in the IPPS for hospital inpatient capital-related 
costs. For cost reporting periods beginning in FY 2002, capital IPPS 
payments are based solely on the Federal rate for almost all acute care 
hospitals (other than hospitals receiving certain exception payments 
and certain new hospitals). (We refer readers to the FY 2002 IPPS final 
rule (66 FR 39910 through 39914) for additional information on the 
methodology used to determine capital IPPS payments to hospitals both 
during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in the regulations at 42 CFR 
412.312. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows:

(Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor 
(GAF) x (COLA for hospitals located in Alaska and Hawaii) x (1 + 
Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if 
applicable).

    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, the regulations at 42 CFR 412.300(b) define 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS, a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised 
the regulations at 42 CFR 412.374 relating to the calculation of 
capital IPPS payments to hospitals located in Puerto Rico beginning in 
FY 2017 to parallel the change in the statutory calculation of 
operating IPPS payments to hospitals located in Puerto Rico, for 
discharges occurring on or after January 1, 2016, made by section 601 
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 
601 of Public Law 114-113 increased the applicable Federal percentage 
of the operating IPPS payment for hospitals located in Puerto Rico from 
75 percent to 100 percent and decreased the applicable Puerto Rico 
percentage of the operating IPPS payments for hospitals located in 
Puerto Rico from 25 percent to zero percent, applicable to discharges 
occurring on or after January 1, 2016. As such, under revised Sec.  
412.374, for discharges occurring on or after October 1, 2016, capital 
IPPS payments to hospitals located in Puerto Rico are based on 100 
percent of the capital Federal rate.

C. Proposed Annual Update for FY 2024

    The proposed annual update to the national capital Federal rate, as 
provided for in 42 CFR 412.308(c), for FY 2024 is discussed in section 
III. of the Addendum to this FY 2024 IPPS/LTCH PPS proposed rule.

D. Treatment of Rural Reclassifications for Capital DSH Payments

    Section 1886(d)(8)(E)(i) of the Act, implemented at Sec.  412.103, 
specifies for a hospital that meets certain requirements and criteria, 
the Secretary shall treat the hospital as being located in the rural 
area of the State in which the hospital is located for purposes of 
section 1886(d) of the Act. In the FY 2007 IPPS/LTCH PPS final rule (71 
FR 48104), we codified at Sec.  412.320(a)(1)(iii) that hospitals 
reclassified as rural under Sec.  412.103 also are considered rural 
under the capital IPPS for purposes of determining eligibility for 
capital DSH payments. Under the capital IPPS, as set forth in Sec.  
412.320(a), only urban hospitals with 100 or more beds are eligible for 
capital DSH payments. Therefore, under the current regulations, 
hospitals reclassified as rural under Sec.  412.103 are not eligible to 
receive capital DSH payments. On September 30, 2021, in Toledo Hospital 
v. Becerra, the U.S. District Court for the District of Columbia issued 
a decision that the FY 2007 final rule codifying CMS's policy of not 
providing capital DSH payments to urban hospitals that are reclassified 
as rural under Sec.  412.103 was arbitrary and capricious because, the 
court concluded, the record did not demonstrate that CMS took relative 
costs into account when considering the rule and the policy at issue.
    We do not necessarily agree with the court's conclusions but 
nevertheless in light of the decision we propose to revise the capital 
DSH regulations in response to this court ruling. Specifically, we are 
proposing that effective for discharges occurring on or after October 
1, 2023, hospitals reclassified as rural under Sec.  412.103 will no 
longer be considered rural for

[[Page 27059]]

purposes of determining eligibility for capital DSH payments. We 
propose to codify this change by amending existing Sec.  
412.320(a)(1)(iii) to specify that the exception for an urban hospital 
that is reclassified as rural as set forth in Sec.  412.103 is 
effective for discharges occurring on or after October 1, 2006, and 
before October 1, 2023. That is, for discharges occurring on or after 
October 1, 2023, for purposes of Sec.  412.320, the geographic 
classifications specified under Sec.  412.64 would apply with no 
exceptions.

VII. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 
2024

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling. A per discharge limit 
(the target amount, as defined in Sec.  413.40(a) of the regulations) 
is set for each hospital based on the hospital's own cost experience in 
its base year, and updated annually by a rate-of-increase percentage. 
For each cost reporting period, the updated target amount is multiplied 
by total Medicare discharges during that period and applied as an 
aggregate upper limit (the ceiling as defined in Sec.  413.40(a)) of 
Medicare reimbursement for total inpatient operating costs for a 
hospital's cost reporting period. In accordance with Sec.  403.752(a) 
of the regulations, religious nonmedical health care institutions 
(RNHCIs) also are subject to the rate-of-increase limits established 
under Sec.  413.40 of the regulations discussed previously. 
Furthermore, in accordance with Sec.  412.526(c)(3) of the regulations, 
extended neoplastic disease care hospitals also are subject to the 
rate-of-increase limits established under Sec.  413.40 of the 
regulations discussed previously.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, the 11 cancer hospitals, and RNHCIs. Consistent 
with the regulations at Sec. Sec.  412.23(g) and 413.40(a)(2)(ii)(A) 
and (c)(3)(viii), we also have used the percentage increase in the IPPS 
operating market basket to update target amounts for short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa. In the FY 2018 IPPS/LTCH PPS final 
rule, we rebased and revised the IPPS operating market basket to a 2014 
base year, effective for FY 2018 and subsequent fiscal years (82 FR 
38158 through 38175), and finalized the use of the percentage increase 
in the 2014-based IPPS operating market basket to update the target 
amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa for FY 2018 and 
subsequent fiscal years. As discussed in section IV. of the preamble of 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we 
rebased and revised the IPPS operating market basket to a 2018 base 
year. Therefore, we used the percentage increase in the 2018-based IPPS 
operating market basket to update the target amounts for children's 
hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal 
years.
    For this FY 2024 IPPS/LTCH PPS proposed rule, based on IGI's 2022 
fourth quarter forecast, we estimate that the 2018-based IPPS operating 
market basket percentage increase for FY 2024 is 3.0 percent (that is, 
the estimate of the market basket rate-of-increase). Based on this 
estimate, the FY 2024 rate-of-increase percentage that will be applied 
to the FY 2023 target amounts in order to calculate the FY 2024 target 
amounts for children's hospitals, the 11 cancer hospitals, RNCHIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa is 3.0 percent, 
in accordance with the applicable regulations at 42 CFR 413.40. 
However, we are proposing that if more recent data becomes available 
for the FY 2024 IPPS/LTCH PPS final rule, we would use such data, if 
appropriate, to calculate the final IPPS operating market basket update 
for FY 2024.
    In addition, payment for inpatient operating costs for hospitals 
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer 
to as ``extended neoplastic disease care hospitals'') for cost 
reporting periods beginning on or after January 1, 2015, is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs for 
these hospitals is to be made as described in 42 CFR 412.526(c)(4). 
(For additional information on these payment regulations, we refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 
38322).) Section 412.526(c)(3) provides that the hospital's Medicare 
allowable net inpatient operating costs for that period are paid on a 
reasonable cost basis, subject to that hospital's ceiling, as 
determined under Sec.  412.526(c)(1), for that period. Under Sec.  
412.526(c)(1), for each cost reporting period, the ceiling was 
determined by multiplying the updated target amount, as defined in 
Sec.  412.526(c)(2), for that period by the number of Medicare 
discharges paid during that period. Section 412.526(c)(2)(i) describes 
the method for determining the target amount for cost reporting periods 
beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for 
cost reporting periods beginning during fiscal years after FY 2015, the 
target amount will equal the hospital's target amount for the previous 
cost reporting period updated by the applicable annual rate-of-increase 
percentage specified in Sec.  413.40(c)(3) for the subject cost 
reporting period (79 FR 50197).
    For FY 2024, in accordance with Sec. Sec.  412.22(i) and 
412.526(c)(2)(ii) of the regulations, for cost reporting periods 
beginning during FY 2024, the proposed update to the target amount for 
extended neoplastic disease care hospitals (that is, hospitals 
described under Sec.  412.22(i)) is the applicable annual rate-of-
increase percentage specified in Sec.  413.40(c)(3), which is estimated 
to be the percentage increase in the 2018-based IPPS operating market 
basket (that is, the estimate of the market basket rate-of-increase). 
Accordingly, the proposed update to an extended neoplastic disease care 
hospital's target amount for FY 2024 is 3.0 percent, which is based on 
IGI's fourth quarter 2022 forecast. Furthermore, we are proposing that 
if more recent data becomes available for the FY 2024 IPPS/LTCH PPS 
final rule, we would use such data, if appropriate, to calculate the 
IPPS operating market basket rate of increase for FY 2024.

B. Critical Access Hospitals (CAHs)

1. Background
    Section 1820 of the Act provides for the establishment of Medicare 
Rural Hospital Flexibility Programs (MRHFPs), under which individual 
States may designate certain facilities as critical access hospitals 
(CAHs). Facilities that are so designated and

[[Page 27060]]

meet the CAH conditions of participation under 42 CFR part 485, subpart 
F, will be certified as CAHs by CMS. Regulations governing payments to 
CAHs for services to Medicare beneficiaries are located in 42 CFR part 
413.
2. Frontier Community Health Integration Project Demonstration
a. Introduction
    The Frontier Community Health Integration Project Demonstration was 
originally authorized by section 123 of the Medicare Improvements for 
Patients and Providers Act of 2008 (Pub. L. 110-275). The demonstration 
has been extended by section 129 of the Consolidated Appropriations 
Act, 2021 (Pub. L. 116-260) for an additional 5 years. In this proposed 
rule, we are summarizing the status of the demonstration program, and 
the ongoing methodologies for implementation and budget neutrality for 
the demonstration extension period.
b. Background and Overview
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), section 123 of the Medicare Improvements for Patients 
and Providers Act of 2008, as amended by section 3126 of the Affordable 
Care Act, authorized a demonstration project to allow eligible entities 
to develop and test new models for the delivery of health care services 
in eligible counties in order to improve access to and better integrate 
the delivery of acute care, extended care and other health care 
services to Medicare beneficiaries. The demonstration was titled 
``Demonstration Project on Community Health Integration Models in 
Certain Rural Counties,'' and commonly known as the Frontier Community 
Health Integration Project (FCHIP) Demonstration.
    The authorizing statute stated the eligibility criteria for 
entities to be able to participate in the demonstration. An eligible 
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as 
amended, is a Medicare Rural Hospital Flexibility Program (MRHFP) 
grantee under section 1820(g) of the Act (that is, a CAH); and is 
located in a state in which at least 65 percent of the counties in the 
state are counties that have 6 or less residents per square mile.
    The authorizing statute stipulated several other requirements for 
the demonstration. In addition, section 123(g)(1)(B) of Public Law 110-
275 required that the demonstration be budget neutral. Specifically, 
this provision stated that, in conducting the demonstration project, 
the Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary estimates would 
have been paid if the demonstration project under the section were not 
implemented. Furthermore, section 123(i) of Public Law 110-275 stated 
that the Secretary may waive such requirements of titles XVIII and XIX 
of the Act as may be necessary and appropriate for the purpose of 
carrying out the demonstration project, thus allowing the waiver of 
Medicare payment rules encompassed in the demonstration. CMS selected 
CAHs to participate in four interventions, under which specific waivers 
of Medicare payment rules would allow for enhanced payment for 
telehealth, skilled nursing facility/nursing facility beds, ambulance 
services, and home health services. These waivers were formulated with 
the goal of increasing access to care with no net increase in costs.
    Section 123 of Public Law 110-275 initially required a 3-year 
period of performance. The FCHIP Demonstration began on August 1, 2016, 
and concluded on July 31, 2019 (referred to in this section of the 
proposed rule as the ``initial period''). Subsequently, section 129 of 
the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended 
the demonstration by 5 years (referred to in this section of the 
proposed rule as the ``extension period''). The Secretary is required 
to conduct the demonstration for an additional 5-year period. CAHs 
participating in the demonstration project during the extension period 
began such participation in their cost reporting year that began on or 
after January 1, 2022.
    As described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), 10 CAHs were selected for participation in the 
demonstration initial period. The selected CAHs were located in three 
states--Montana, Nevada, and North Dakota--and participated in three of 
the four interventions identified in the FY 2023 IPPS/LTCH PPS final 
rule. Each CAH was allowed to participate in more than one of the 
interventions. None of the selected CAHs were participants in the home 
health intervention, which was the fourth intervention.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), CMS concluded that the initial period of the FCHIP 
Demonstration (covering the performance period of August 1, 2016, to 
July 31, 2019) had satisfied the budget neutrality requirement 
described in section 123(g)(1)(B) of Public Law 110-275. Therefore, CMS 
did not apply a budget neutrality payment offset policy for the initial 
period of the demonstration.
    Section 129 of Public Law 116-260, stipulates that only the 10 CAHs 
that participated in the initial period of the FCHIP Demonstration are 
eligible to participate during the extension period. Among the eligible 
CAHs, five have elected to participate in the extension period. The 
selected CAHs are located in two states--Montana and North Dakota--and 
are implementing three of the four interventions. The eligible CAH 
participants elected to change the number of interventions and payment 
waivers they would participate in during the extension period. CMS 
accepted and approved the CAHs intervention and payment waiver updates. 
For the extension period, four CAHs are participants in the telehealth 
intervention, three CAHs are participants in the skilled nursing 
facility/nursing facility bed intervention, and three CAHs are 
participants in the ambulance services intervention. As with the 
initial period, each CAH was allowed to participate in more than one of 
the interventions during the extension period. None of the selected 
CAHs are participants in the home health intervention, which was the 
fourth intervention.
c. Intervention Payment and Payment Waivers
    As described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), CMS waived certain Medicare rules for CAHs 
participating in the demonstration initial period to allow for 
alternative reasonable cost-based payment methods in the three distinct 
intervention service areas: telehealth services, ambulance services, 
and skilled nursing facility/nursing facility (SNF/NF) beds expansion. 
The payments and payment waiver provisions only apply if the CAH is a 
participant in the associated intervention. CMS Intervention Payment 
and Payment Waivers for the demonstration extension period consist of 
the following:
(1) Telehealth Services Intervention Payments
    CMS waives section 1834(m)(2)(B) of the Act, which specifies the 
facility fee to the originating site for Medicare telehealth services. 
CMS modifies the facility fee payment specified under section 
1834(m)(2)(B) of the Act to make reasonable cost-based reimbursement to 
the participating CAH where the participating CAH serves as the 
originating site for a telehealth service furnished to an eligible 
telehealth

[[Page 27061]]

individual, as defined in section 1834(m)(4)(B) of the Act. CMS 
reimburses the participating CAH serving as the originating site at 101 
percent of its reasonable costs for overhead, salaries and fringe 
benefits associated with telehealth services at the participating CAH. 
CMS does not fund or provide reimbursement to the participating CAH for 
the purchase of new telehealth equipment.
    CMS waives section 1834(m)(2)(A) of the Act, which specifies that 
the payment for a telehealth service furnished by a distant site 
practitioner is the same as it would be if the service had been 
furnished in-person. CMS modifies the payment amount specified for 
telehealth services under section 1834(m)(2)(A) of the Act to make 
reasonable cost-based reimbursement to the participating CAH for 
telehealth services furnished by a physician or practitioner located at 
distant site that is a participating CAH that is billing for the 
physician or practitioner professional services. Whether the 
participating CAH has or has not elected Optional Payment Method II for 
outpatient services, CMS would pay the participating CAH 101 percent of 
reasonable costs for telehealth services when a physician or 
practitioner has reassigned their billing rights to the participating 
CAH and furnishes telehealth services from the participating CAH as a 
distant site practitioner. This means that participating CAHs that are 
billing under the Standard Method on behalf of employees who are 
physicians or practitioners (as defined in section 1834(m)(4)(D) and 
(E) of the Act, respectively) would be eligible to bill for distant 
site telehealth services furnished by these physicians and 
practitioners. Additionally, CAHs billing under the Optional Method 
would be reimbursed based on 101 percent of reasonable costs, rather 
than paid based on the Medicare physician fee schedule, for the distant 
site telehealth services furnished by physicians and practitioners who 
have reassigned their billing rights to the CAH. For distant site 
telehealth services furnished by physicians or practitioners who have 
not reassigned billing rights to a participating CAH, payment to the 
distant site physician or practitioner would continue to be made as 
usual under the Medicare physician fee schedule. Except as described 
herein, CMS does not waive any other provisions of section 1834(m) of 
the Act for purposes of the telehealth services intervention payments, 
including the scope of Medicare telehealth services as established 
under section 1834(m)(4)(F) of the Act.
(2) Ambulance Services Intervention Payments
    CMS waives 42 CFR 413.70(b)(5)(i)(D) and section 1834(l)(8) of the 
Act, which provides that payment for ambulance services furnished by a 
CAH, or an entity owned and operated by a CAH, is 101 percent of the 
reasonable costs of the CAH or the entity in furnishing the ambulance 
services, but only if the CAH or the entity is the only provider or 
supplier of ambulance services located within a 35-mile drive of the 
CAH, excluding ambulance providers or suppliers that are not legally 
authorized to furnish ambulance services to transport individuals to or 
from the CAH. The participating CAH would be paid 101 percent of 
reasonable costs for its ambulance services regardless of whether there 
is any provider or supplier of ambulance services located within a 35-
mile drive of the participating CAH or participating CAH-owned and 
operated entity. CMS would not make cost-based payment to the 
participating CAH for any new capital (for example, vehicles) 
associated with ambulance services. This waiver does not modify any 
other Medicare rules regarding or affecting the provision of ambulance 
services.
(3) SNF/NF Beds Expansion Intervention Payments
    CMS waives 42 CFR 485.620(a), 42 CFR 485.645(a)(2), and section 
1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more 
than 25 inpatient beds, including beds available for acute inpatient or 
swing bed services. CMS waives 1820(f) of the Act permitting 
designating or certifying a facility as a critical access hospital for 
which the facility at any time is furnishing inpatient beds which 
exceed more than 25 beds. Under this waiver, if the participating CAH 
has received swing bed approval from CMS, the participating CAH may 
maintain up to ten additional beds (for a total of 35 beds) available 
for acute inpatient or swing bed services; however, the participating 
CAH may only use these 10 additional beds for nursing facility or 
skilled nursing facility level of care. CMS would pay the participating 
CAH 101 percent of reasonable costs for its SNF/NF services furnished 
in the 10 additional beds.
d. Budget Neutrality
(1) Budget Neutrality Requirement
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), we finalized a policy to address the budget neutrality 
requirement for the demonstration initial period. As explained in the 
FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for 
participation in the demonstration with the goal of maintaining the 
budget neutrality of the demonstration on its own terms meaning that 
the demonstration would produce savings from reduced transfers and 
admissions to other health care providers, offsetting any increase in 
Medicare payments as a result of the demonstration. However, because of 
the small size of the demonstration and uncertainty associated with the 
projected Medicare utilization and costs, the policy we finalized for 
the demonstration initial period of performance in the FY 2022 IPPS/
LTCH PPS final rule provides a contingency plan to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 is 
met.
    In the FY 2023 IPPS/LTCH PPS final rule, we adopted the same budget 
neutrality policy contingency plan used during the demonstration 
initial period to ensure that the budget neutrality requirement in 
section 123 of Public Law 110-275 is met during the demonstration 
extension period. If analysis of claims data for Medicare beneficiaries 
receiving services at each of the participating CAHs, as well as from 
other data sources, including cost reports for the participating CAHs, 
shows that increases in Medicare payments under the demonstration 
during the 5-year extension period are not sufficiently offset by 
reductions elsewhere, we would recoup the additional expenditures 
attributable to the demonstration through a reduction in payments to 
all CAHs nationwide.
    As explained in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147, because of the small scale of the demonstration, we 
indicated that we did not believe it would be feasible to implement 
budget neutrality for the demonstration extension period by reducing 
payments to only the participating CAHs. Therefore, in the event that 
this demonstration extension period is found to result in aggregate 
payments in excess of the amount that would have been paid if this 
demonstration extension period were not implemented, CMS policy is to 
comply with the budget neutrality requirement finalized in the FY 2023 
IPPS/LTCH PPS final rule, by reducing payments to all CAHs, not just 
those participating in the demonstration extension period.
    In the FY 2023 IPPS/LTCH PPS final rule, we stated that we believe 
it is appropriate to make any payment

[[Page 27062]]

reductions across all CAHs because the FCHIP Demonstration was 
specifically designed to test innovations that affect delivery of 
services by the CAH provider category. We explained our belief that the 
language of the statutory budget neutrality requirement at section 
123(g)(1)(B) of Public Law 110-275 permits the agency to implement the 
budget neutrality provision in this manner. The statutory language 
merely refers to ensuring that aggregate payments made by the Secretary 
do not exceed the amount which the Secretary estimates would have been 
paid if the demonstration project was not implemented, and does not 
identify the range across which aggregate payments must be held equal.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy that 
in the event the demonstration extension period is found not to have 
been budget neutral, any excess costs would be recouped within one 
fiscal year. We explained our belief that this policy is a more 
efficient timeframe for the government to conclude the demonstration 
operational requirements (such as analyzing claims data, cost report 
data and/or other data sources) to adjudicate the budget neutrality 
payment recoupment process due to any excess cost that occurred as 
result of the demonstration extension period.
(2) FCHIP Budget Neutrality Methodology and Analytical Approach
    As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized 
a policy to address the demonstration budget neutrality methodology and 
analytical approach for the initial period of the demonstration. In the 
FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to adopt the 
budget neutrality methodology and analytical approach used during the 
demonstration initial period to ensure budget neutrality for the 
extension period. The analysis of budget neutrality during the initial 
period of the demonstration identified both the costs related to 
providing the intervention services under the FCHIP Demonstration and 
any potential downstream effects of the intervention-related services, 
including any savings that may have accrued.
    The budget neutrality analytical approach for the demonstration 
initial period incorporated two major data components: (1) Medicare 
cost reports; and (2) Medicare administrative claims. As described in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS 
computed the cost of the demonstration for each fiscal year of the 
demonstration initial period using Medicare cost reports for the 
participating CAHs, and Medicare administrative claims and enrollment 
data for beneficiaries who received demonstration intervention 
services.
    In addition, in order to capture the full impact of the 
interventions, CMS developed a statistical modeling, Difference-in-
Difference (DiD) regression analysis to estimate demonstration 
expenditures and compute the impact of expenditures on the intervention 
services by comparing cost data for the demonstration and non-
demonstration groups using Medicare administrative claims across the 
demonstration period of performance under the initial period of the 
demonstration. The DiD regression analysis would compare the direct 
cost and potential downstream effects of intervention services, 
including any savings that may have accrued, during the baseline and 
performance period for both the demonstration and comparison groups.
    Second, the Medicare administrative claims analysis would be 
reconciled using data obtained from auditing the participating CAHs' 
Medicare cost reports. We would estimate the costs of the demonstration 
using ``as submitted'' cost reports for each hospital's financial 
fiscal year participation within each of the demonstration extension 
period performance years. Each CAH has its own Medicare cost report end 
date applicable to the 5-year period of performance for the 
demonstration extension period. The cost report is structured to gather 
costs, revenues and statistical data on the provider's financial fiscal 
period. As a result, we finalized a policy in the FY 2023 IPPS/LTCH PPS 
final rule that we would determine the final budget neutrality results 
for the demonstration extension once complete data is available for 
each CAH for the demonstration extension period.
e. Policies for Implementing the 5-year Extension and Provisions 
Authorized by Section 129 of the Consolidated Appropriations Act, 2021 
(Pub. L. 116-260)
    As stated in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), our policy for implementing the 5-year extension period 
for section 129 of Public Law 116-260 follows same budget neutrality 
methodology and analytical approach as the demonstration initial period 
methodology. While we expect to use the same methodology that was used 
to assess the budget neutrality of the FCHIP Demonstration during 
initial period of the demonstration to assess the financial impact of 
the demonstration during this extension period, upon receiving data for 
the extension period, we may update and/or modify the FCHIP budget 
neutrality methodology and analytical approach to ensure that the full 
impact of the demonstration is appropriately captured.
f. Total Budget Neutrality Offset Amount for FY 2024
    At this time, for the FY 2024 IPPS/LTCH PPS proposed rule, while 
this discussion represents our anticipated approach to assessing the 
financial impact of the demonstration extension period based on upon 
receiving data for the full demonstration extension period, we may 
update and/or modify the FCHIP Demonstration budget neutrality 
methodology and analytical approach to ensure that the full impact of 
the demonstration is appropriately captured.
    Therefore, we propose not to apply a budget neutrality payment 
offset to payments to CAHs in FY 2024. This policy will have no impact 
for any national payment system for FY 2024.

VIII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2024

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554), provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH 
as a hospital that has an average inpatient length of stay (as 
determined by the Secretary) of greater than 25 days. Section 
1886(d)(1)(B)(iv)(II) of the Act also provided an alternative 
definition of LTCHs (``subclause II'' LTCHs). However, section 15008 of 
the 21st Century Cures Act (Pub. L. 114-255) amended section 1886 of 
the Act to exclude former ``subclause II'' LTCHs

[[Page 27063]]

from being paid under the LTCH PPS and created a new category of IPPS-
excluded hospitals, which we refer to as ``extended neoplastic disease 
care hospitals,'' to be paid as hospitals that were formally classified 
as ``subclause (II)'' LTCHs (82 FR 38298).
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient resource 
use and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 
55954). For the initial implementation of the LTCH PPS (FYs 2003 
through 2007), the system used information from LTCH patient records to 
classify patients into distinct long-term care-diagnosis-related groups 
(LTCDRGs) based on clinical characteristics and expected resource 
needs. Beginning in FY 2008, we adopted the Medicare severity-long-term 
care-diagnosis related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97248) for payments for inpatient services provided by an LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA reasonable-cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this section of the preamble of this 
proposed rule, when we refer to discharges, we describe Medicare 
discharges.) The August 30, 2002 final rule further details the payment 
policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS. (For more information on these 
provisions, we refer readers to 82 FR 38299.)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years. We refer readers to 
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule 
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under 
42 CFR 412.538, which was a payment adjustment that was applied to 
payments for Medicare patient LTCH discharges when the number of such 
patients originating from any single referring hospital was in excess 
of the applicable threshold for given cost reporting period.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further 
revised our regulations to implement the provisions of the Pathway for 
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment 
adjustment for discharges from LTCHs that do not maintain the requisite 
discharge payment percentage and the process by which such LTCHs may 
have the payment adjustment discontinued.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average 
Medicare inpatient length of stay of greater than 25 days to be paid 
under the LTCH PPS. In accordance with section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by 
section 15007 of Public Law 114-255, we amended our regulations to 
specify that Medicare Advantage plans' and site neutral payment rate 
discharges are

[[Page 27064]]

excluded from the calculation of the average length of stay for all 
LTCHs, for discharges occurring in cost reporting period beginning on 
or after October 1, 2015.
b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1), 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b1 (note)) (Statewide-all payer systems, subject to 
the rate-of increase test at section 1814(b) of the Act), or section 
3201 of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) (42 U.S.C. 1315a).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87, and for items 
and services specified under Sec.  489.30(a). However, under the LTCH 
PPS, Medicare will only pay for services furnished during the days for 
which the beneficiary has coverage until the short-stay outlier (SSO) 
threshold is exceeded. If the Medicare payment was for a SSO case (in 
accordance with Sec.  412.529), and that payment was less than the full 
LTC-DRG payment amount because the beneficiary had insufficient 
coverage as a result of the remaining Medicare days, the LTCH also is 
currently permitted to charge the beneficiary for services delivered on 
those uncovered days (in accordance with Sec.  412.507). In the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to 
expressly limit the charges that may be imposed upon beneficiaries 
whose LTCHs' discharges are paid at the site neutral payment rate under 
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we 
amended the regulations under Sec.  412.507 to clarify our existing 
policy that blended payments made to an LTCH during its transitional 
period (that is, an LTCH's payment for discharges occurring in cost 
reporting periods beginning in FYs 2016 through 2019) are considered to 
be site neutral payment rate payments.
4. Best Available Data
    We refer readers to section I.E. of the preamble of this proposed 
rule for our discussion on our proposal to use the most recent data 
available for the FY 2024 LTCH PPS ratesetting, including the FY 2022 
MedPAR claims and FY 2021 cost report data.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2024

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients.
    Under both the IPPS and the LTCH PPS, the DRG-based classification 
system uses information on the claims for inpatient discharges to 
classify patients into distinct groups (for example, DRGs) based on 
clinical characteristics and expected resource needs. When the LTCH PPS 
was implemented for cost reporting periods beginning on or after 
October 1, 2002, we adopted the same DRG patient classification system 
utilized at that time under the IPPS. We referred to this patient 
classification system as the ``long-term care diagnosis-related groups 
(LTC-DRGs).'' As part of our efforts to better recognize severity of 
illness among patients, in the FY 2008 IPPS final rule with comment 
period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS 
and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O, applicable to LTCHs for 
policy descriptions and payment calculations, all references to LTC-
DRGs would be considered a reference to MS-LTC-DRGs. For the remainder 
of this section, we present the discussion in terms of the current MS-
LTC-DRG patient classification system unless specifically referring to 
the previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    Consistent with section 123 of the BBRA, as amended by section 
307(b)(1) of the BIPA, and Sec.  412.515 of the regulations, we use 
information derived from LTCH PPS patient records to classify LTCH 
discharges into distinct MS-LTC-DRGs based on clinical characteristics 
and estimated resource needs. As noted previously, we adopted the same 
DRG patient classification system utilized at that time under the IPPS. 
The MS-DRG classifications are updated annually, which has resulted in 
the number of MS-DRGs changing over time. For FY 2024, there would be 
766 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the 
proposed changes, as discussed in section II.E. of the preamble of this 
proposed rule.
    Although the patient classification system used under both the LTCH 
PPS and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect the 
differences in patient resource use of LTCH patients, consistent with 
section 123(a)(1) of the BBRA. That is, we assign an appropriate weight 
to the MS-LTC-DRGs to account for the differences in resource use by 
patients exhibiting the case complexity and multiple medical problems 
characteristic of LTCH patients.
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although

[[Page 27065]]

they are structurally identical to the MS-DRGs used under the IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-10-PCS procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs) or are minor surgical procedures (for example, a biopsy of skin 
and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-
LTC-DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis.
     Additional or secondary diagnoses.
     Surgical procedures.
     Age.
     Sex.
     Discharge status of the patient.
    Currently, for claims submitted using the version ASC X12 5010 
format, up to 25 diagnosis codes and 25 procedure codes are considered 
for an MS-DRG assignment. This includes one principal diagnosis and up 
to 24 secondary diagnoses for severity of illness determinations. (For 
additional information on the processing of up to 25 diagnosis codes 
and 25 procedure codes on hospital inpatient claims, we refer readers 
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50127).)
    Under the HIPAA transactions and code sets regulations at 45 CFR 
parts 160 and 162, covered entities must comply with the adopted 
transaction standards and operating rules specified in subparts I 
through S of part 162. Among other requirements, on or after January 1, 
2012, covered entities are required to use the ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata 
to Health Care Claim: Institutional (837) ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3, October 2007, ASC 
X12N/005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102(c)).
    HIPAA requires covered entities to use the applicable medical data 
code sets when conducting HIPAA transactions (45 CFR 162.1000). 
Currently, upon the discharge of the patient, the LTCH must assign 
appropriate diagnosis and procedure codes from the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for diagnosis coding and the International Classification of 
Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for 
inpatient hospital procedure coding, both of which were required to be 
implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For 
additional information on the implementation of the ICD-10 coding 
system, we refer readers to section II.F.1. of the preamble of the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section 
II.E.1. of the preamble of this proposed rule. Additional coding 
instructions and examples are published in the AHA's Coding Clinic for 
ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to a series of automated screening processes called the Medicare Code 
Editor (MCE). These screens are designed to identify cases that require 
further review before assignment into a MS-LTC-DRG can be made. During 
this process, certain types of cases are selected for further 
explanation (74 FR 43949).
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the 
prospective payment amount by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. Under the LTCH PPS, we 
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments 
made by the MAC and to submit additional information within a specified 
timeframe as provided in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2024
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG 
classifications effective October 1, 2023 through September 30, 2024 
(FY 2024) consistent with the proposed changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2024 are 
the same as the MS-DRGs being proposed for use under the IPPS for FY 
2024. In addition, because the proposed MS-LTC-DRGs for FY 2024 are the 
same as the proposed MS-DRGs for FY 2024, the other proposed changes 
that affect MS-DRG (and by extension MS-LTC-DRG) assignments under 
proposed GROUPER Version 41, as discussed in section II.E. of the 
preamble of this proposed rule, including the proposed changes to the 
MCE software and the ICD-10-CM/PCS coding system, are also applicable 
under the LTCH PPS for FY 2024.

[[Page 27066]]

3. Proposed Development of the FY 2024 MS-LTC-DRG Relative Weights
a. General Overview of the MS-LTC-DRG Relative Weights
    One of the primary goals for the implementation of the LTCH PPS is 
to pay each LTCH an appropriate amount for the efficient delivery of 
medical care to Medicare patients. The system must be able to account 
adequately for each LTCH's case-mix to ensure both fair distribution of 
Medicare payments and access to adequate care for those Medicare 
patients whose care is costlier (67 FR 55984). To accomplish these 
goals, we have annually adjusted the LTCH PPS standard Federal 
prospective payment rate by the applicable relative weight in 
determining payment to LTCHs for each case. Under the LTCH PPS, 
relative weights for each MS-LTC-DRG are a primary element used to 
account for the variations in cost per discharge and resource 
utilization among the payment groups (Sec.  412.515). To ensure that 
Medicare patients classified to each MS-LTC-DRG have access to an 
appropriate level of services and to encourage efficiency, we calculate 
a relative weight for each MS-LTC-DRG that represents the resources 
needed by an average inpatient LTCH case in that MS-LTC-DRG. For 
example, cases in an MS-LTC-DRG with a relative weight of 2 would, on 
average, cost twice as much to treat as cases in an MS-LTC-DRG with a 
relative weight of 1.
    The established methodology to develop the MS-LTC-DRG relative 
weights is generally consistent with the methodology established when 
the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule 
(67 FR 55989 through 55991). However, there have been some 
modifications of our historical procedures for assigning relative 
weights in cases of zero volume or nonmonotonicity or both resulting 
from the adoption of the MS-LTC-DRGs. We also made a modification in 
conjunction with the implementation of the dual rate LTCH PPS payment 
structure beginning in FY 2016 to use LTCH claims data from only LTCH 
PPS standard Federal payment rate cases (or LTCH PPS cases that would 
have qualified for payment under the LTCH PPS standard Federal payment 
rate if the dual rate LTCH PPS payment structure had been in effect at 
the time of the discharge). We also adopted, beginning in FY 2023, a 
10-percent cap policy on the reduction in a MS-LTC-DRG's relative 
weight in a given year. (For details on the modifications to our 
historical procedures for assigning relative weights in cases of zero 
volume and nonmonotonicity or both, we refer readers to the FY 2008 
IPPS final rule with comment period (72 FR 47289 through 47295) and the 
FY 2009 IPPS final rule (73 FR 48542 through 48550). For details on the 
change in our historical methodology to use LTCH claims data only from 
LTCH PPS standard Federal payment rate cases (or cases that would have 
qualified for such payment had the LTCH PPS dual payment rate structure 
been in effect at the time) to determine the MS-LTC-DRG relative 
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49614 through 49617). For details on our adoption of the 10-percent 
cap policy, we refer readers to the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49152 through 49154).)
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-
LTC-DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described later in this section in Step 3 of our proposed 
methodology) and assigned the relative weight of the quintile); and (3) 
no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based 
on the clinical similarities and assigned the relative weight of the 
cross-walked MS-LTC-DRG (as described later in this section in Step 8 
of our proposed methodology). For FY 2024, we are proposing to continue 
to use applicable LTCH cases to establish the same volume-based 
categories to calculate the FY 2024 MS-LTC-DRG relative weights.
b. Proposed Development of the MS-LTC-DRG Relative Weights for FY 2024
    In this section, we present our proposed methodology for 
determining the MS-LTC-DRG relative weights for FY 2024. We first list 
and provide a brief description of our proposed steps for determining 
the FY 2024 MS-LTC-DRG relative weights. We then, later in this 
section, discuss in greater detail each proposed step. (We note for FY 
2023, to account for the impact of COVID-19 on the ratesetting data, we 
finalized a temporary modification to our relative weights methodology 
that established the FY 2023 MS-LTC-DRG relative weights as an average 
of the relative weights calculated both including and excluding COVID-
19 cases. For FY 2024, we are proposing to return to our historical 
relative weight methodology as described in the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58898 through 58907), subject to a ten percent cap as 
described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49162). Our 
historical LTCH ratesetting methodologies do not separately account for 
the impact of COVID-19 on the ratesetting data, which we believe is 
appropriate for FY 2024 as discussed in further detail in section I.E. 
of the preamble of this proposed rule. For this reason, the steps 
presented in this section differ from those presented in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49155 through 49162).
     Step 1--Prepare data for MS-LTC-DRG relative weight 
calculation. In this step, we select and group the applicable claims 
data used in the development of the proposed MS-LTC-DRG relative 
weights.
     Step 2--Remove cases with a length of stay of 7 days or 
less. In this step, we trim the applicable claims data to remove cases 
with a length of stay of 7 days or less.
     Step 3--Establish low-volume MS-LTC-DRG quintiles. In this 
step, we employ our established quintile methodology for low-volume MS-
LTC-DRGs (that is, MS-LTC-DRGs with less than 25 cases).
     Step 4--Remove statistical outliers. In this step, we trim 
the applicable claims data to remove statistical outlier cases.
     Step 5--Adjust charges for the effects of Short Stay 
Outliers (SSOs). In this step, we adjust the number of applicable cases 
in each MS-LTC-DRG (or low-volume quintile) for the effect of SSO 
cases.
     Step 6--Calculate the relative weights on an iterative 
basis using the hospital-specific relative weights methodology. In this 
step, we use our established hospital-specific relative value (HSRV) 
methodology, which is an iterative process, to calculate the relative 
weights.
     Step 7--Adjust the relative weights to account for 
nonmonotonically increasing relative weights. In this step, we make 
adjustments that ensure that within each base MS-LTC-DRG, the relative 
weights increase by MS-LTC-DRG severity.
     Step 8--Determine a relative weight for MS-LTC-DRGs with 
no applicable LTCH cases. In this step, we cross-walk each no-volume 
MS-LTC-DRG to another MS-LTC-DRG for which we calculated a relative 
weight.
     Step 9--Budget neutralize the uncapped relative weights. 
In this step, to ensure budget neutrality in the annual update to the 
MS-LTC-DRG

[[Page 27067]]

classifications and relative weights, we adjust the relative weights by 
a normalization factor and a budget neutrality factor that ensures 
estimated aggregate LTCH PPS payments will be unaffected by the updates 
to the MS-LTC-DRG classifications and relative weights.
     Step 10--Apply the 10-percent cap to decreases in MS-LTC-
DRG relative weights. In this step we limit the reduction of the 
relative weight for a MS-LTC-DRG to 10 percent of its prior year value. 
This 10-percent cap does not apply to zero-volume MS-LTC-DRGs or low-
volume MS-LTC-DRGs.
     Step 11--Budget neutralize the application of the 10-
percent cap policy. In this step, to ensure budget neutrality in the 
application of the MS-LTC-DRG cap policy, we adjust the relative 
weights by a budget neutrality factor that ensures estimated aggregate 
LTCH PPS payments will be unaffected by our application of the cap to 
the MS-LTC-DRG relative weights.
    We next describe each of the 11 proposed steps for calculating the 
proposed FY 2024 MS-LTC-DRG relative weights in greater detail.
Step 1--Prepare Data for MS-LTC-DRG Relative Weight Calculation
    For this FY 2024 IPPS/LTCH PPS proposed rule, consistent with our 
proposal in section I.E. of the preamble of this proposed rule to use 
FY 2022 data in the FY 2024 LTCH PPS ratesetting, we obtained total 
charges from FY 2022 Medicare LTCH claims data from the December 2022 
update of the FY 2022 MedPAR file and used proposed Version 41 of the 
GROUPER to classify LTCH cases. Consistent with our historical 
practice, we are proposing that if better data become available, we 
would use those data and the finalized Version 41 of the GROUPER in 
establishing the FY 2024 MS-LTC-DRG relative weights in the final rule.
    To calculate the FY 2024 MS-LTC-DRG relative weights under the dual 
rate LTCH PPS payment structure, we are proposing to continue to use 
applicable LTCH data, which includes our policy of only using cases 
that meet the criteria for exclusion from the site neutral payment rate 
(or would have met the criteria had they been in effect at the time of 
the discharge) (80 FR 49624). Specifically, we began by first 
evaluating the LTCH claims data in the December 2022 update of the FY 
2022 MedPAR file to determine which LTCH cases would meet the criteria 
for exclusion from the site neutral payment rate under Sec.  412.522(b) 
or had the dual rate LTCH PPS payment structure applied to those cases 
at the time of discharge. We identified the FY 2022 LTCH cases that 
were not assigned to MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 
886, 887, 894, 895, 896, 897, 945, and 946, which identify LTCH cases 
that do not have a principal diagnosis relating to a psychiatric 
diagnosis or to rehabilitation; and that either--
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the immediately preceding 
stay in that subsection (d) hospital included at least 3 days in an 
ICU, as we define under the ICU criterion; or
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the claim for the LTCH 
discharge includes the applicable procedure code that indicates at 
least 96 hours of ventilator services were provided during the LTCH 
stay, as we define under the ventilator criterion. Claims data from the 
FY 2022 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z 
were used to identify cases involving at least 96 hours of ventilator 
services in accordance with the ventilator criterion. (We note that 
section 3711(b)(2) of the CARES Act, which provided a waiver of the 
application of the site neutral payment rate for LTCH cases admitted 
during the COVID-19 PHE period, was in effect for the entirety of FY 
2022. Therefore, all LTCH PPS cases in FY 2022 were paid the LTCH PPS 
standard Federal rate regardless of whether the discharge met the 
statutory patient criteria. However, for purposes of setting rates for 
LTCH PPS standard Federal rate cases for FY 2024 (including MS-LTC-DRG 
relative weights), we used FY 2022 cases that meet the statutory 
patient criteria without consideration to how those cases were paid in 
FY 2022.)
    Furthermore, consistent with our historical methodology, we 
excluded any claims in the resulting data set that were submitted by 
LTCHs that were all-inclusive rate providers and LTCHs that are paid in 
accordance with demonstration projects authorized under section 402(a) 
of Public Law 90-248 or section 222(a) of Public Law 92-603. In 
addition, consistent with our historical practice and our policies, we 
excluded any Medicare Advantage (Part C) claims in the resulting data. 
Such claims were identified based on the presence of a GHO Paid 
indicator value of ``1'' in the MedPAR files.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
an LTCH (CCN 312024) whose abnormal charging practices in FY 2021 led 
to the LTCH receiving an excessive amount of high cost outlier 
payments. In that rule, we stated our belief, based on information we 
received from the provider, that these abnormal charging practices 
would not persist into FY 2023. Therefore, we did not include their 
cases in our model for determining the FY 2023 outlier fixed-loss 
amount. The FY 2022 MedPAR claims also reflect the abnormal charging 
practices of this LTCH. In the FY 2022 MedPAR file, we identified 164 
LTCH PPS standard Federal payment rate cases for this LTCH. Of these 
164 cases, 116 of the cases had charges that were exactly or within ten 
dollars of $10 million. Since the majority of this LTCH's FY 2022 
claims reflect very little variation in charges, we do not believe they 
are an accurate reflection of relative resources used and therefore it 
would not be appropriate to use these claims in determining the FY 2024 
MS-LTC-DRG relative weights. Therefore, we are proposing to remove 
claims from CCN 312024 when determining the FY 2024 MS-LTC-DRG relative 
weights. We note, as discussed in section V of the addendum to this 
proposed rule, we also are proposing to remove this LTCH from all other 
FY 2024 ratesetting calculations, including the calculation of the area 
wage level adjustment budget neutrality factor and the fixed-loss 
amount for LTCH PPS standard Federal payment rate cases.
    In summary, in general, we identified the claims data used in the 
development of the FY 2024 MS-LTC-DRG relative weights in this proposed 
rule by trimming claims data that would have been paid the site neutral 
payment rate had the provisions of the CARES Act not been in effect. We 
trimmed the claims data of all-inclusive rate providers reported in the 
December 2022 update of the FY 2022 MedPAR file and any Medicare 
Advantage claims data. There were no data from any LTCHs that are paid 
in accordance with a demonstration project reported in the December 
2022 update of the FY 2022 MedPAR file, but, had there been any, we 
would have trimmed the claims data from those LTCHs as well, in 
accordance with our established policy. We also removed all claims from 
CCN 312024.
    We used the remaining data (that is, the applicable LTCH data) in 
the subsequent proposed steps to calculate the proposed MS-LTC-DRG 
relative weights for FY 2024.
Step 2--Remove Cases With a Length of Stay of 7 Days or Less
    The next step in our proposed calculation of the proposed FY 2024 
MS-LTC-DRG relative weights is to

[[Page 27068]]

remove cases with a length of stay of 7 days or less. The MS-LTC-DRG 
relative weights reflect the average of resources used on 
representative cases of a specific type. Generally, cases with a length 
of stay of 7 days or less do not belong in an LTCH because these stays 
do not fully receive or benefit from treatment that is typical in an 
LTCH stay, and full resources are often not used in the earlier stages 
of admission to an LTCH. If we were to include stays of 7 days or less 
in the computation of the proposed FY 2024 MS-LTC-DRG relative weights, 
the value of many relative weights would decrease and, therefore, 
payments would decrease to a level that may no longer be appropriate. 
We do not believe that it would be appropriate to compromise the 
integrity of the payment determination for those LTCH cases that 
actually benefit from and receive a full course of treatment at an LTCH 
by including data from these very short stays. Therefore, consistent 
with our existing relative weight methodology, in determining the 
proposed FY 2024 MS-LTC-DRG relative weights, we are proposing to 
remove LTCH cases with a length of stay of 7 days or less from 
applicable LTCH cases. (For additional information on what is removed 
in this step of the relative weight methodology, we refer readers to 67 
FR 55989 and 74 FR 43959.)
Step 3--Establish Low-Volume MS-LTC-DRG Quintiles
    To account for MS-LTC-DRGs with low-volume (that is, with fewer 
than 25 applicable LTCH cases), consistent with our existing 
methodology, we are proposing to continue to employ the quintile 
methodology for low-volume MS-LTC-DRGs, such that we grouped the ``low-
volume MS-LTC-DRGs'' (that is, MS-LTC-DRGs that contain between 1 and 
24 applicable LTCH cases into one of five categories (quintiles) based 
on average charges (67 FR 55984 through 55995; 72 FR 47283 through 
47288; and 81 FR 25148)).
    In this proposed rule, based on the best available data (that is, 
the December 2022 update of the FY 2022 MedPAR file), we identified 235 
MS-LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This 
list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume 
quintiles. We assigned the low-volume MS-LTC-DRGs to specific low-
volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending 
order by average charge in accordance with our established methodology. 
Based on the data available for this proposed rule, the number of MS-
LTC-DRGs with less than 25 applicable LTCH cases was evenly divisible 
by 5. Therefore, each quintile contained 47 MS-LTC-DRGs (235/5 = 47). 
We are proposing that in the final rule, if the number of MS-LTC-DRGs 
with less than 25 applicable LTCH cases in the best available data is 
not evenly divisible by 5, we would employ our historical methodology 
of assigning each remainder low-volume MS-LTC-DRG to the low-volume 
quintile that contains an MS-LTC-DRG with an average charge closest to 
that of the remainder low-volume MS-LTC-DRG. In cases where these 
initial assignments of low-volume MS-LTC-DRGs to quintiles results in 
nonmonotonicity within a base-DRG, we are proposing to make adjustments 
to the resulting low-volume MS-LTC-DRGs to preserve monotonicity, as 
discussed in Step 7 of our proposed methodology.
    To determine the FY 2024 relative weights for the low-volume MS-
LTC-DRGs, consistent with our historical practice, we are proposing to 
use the five low-volume quintiles described previously. We determined a 
relative weight and (geometric) average length of stay for each of the 
five low-volume quintiles using the methodology described in Step 6 of 
our proposed methodology. We assigned the same relative weight and 
average length of stay to each of the low-volume MS-LTC-DRGs that make 
up an individual low-volume quintile. We note that, as this system is 
dynamic, it is possible that the number and specific type of MS-LTC-
DRGs with a low-volume of applicable LTCH cases would vary in the 
future. Furthermore, we note that we continue to monitor the volume 
(that is, the number of applicable LTCH cases) in the low-volume 
quintiles to ensure that our quintile assignments used in determining 
the MS-LTC-DRG relative weights result in appropriate payment for LTCH 
cases grouped to low-volume MS-LTC-DRGs and do not result in an 
unintended financial incentive for LTCHs to inappropriately admit these 
types of cases.
    For this proposed rule, we are providing the list of the 
composition of the proposed low-volume quintiles for low-volume MS-LTC-
DRGs in a supplemental data file for public use posted via the internet 
on the CMS website for this proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
to streamline the information made available to the public that is used 
in the annual development of Table 11.
Step 4--Remove Statistical Outliers
    The next step in our proposed calculation of the proposed FY 2024 
MS-LTC-DRG relative weights is to remove statistical outlier cases from 
the LTCH cases with a length of stay of at least 8 days. Consistent 
with our existing relative weight methodology, we are proposing to 
continue to define statistical outliers as cases that are outside of 
3.0 standard deviations from the mean of the log distribution of both 
charges per case and the charges per day for each MS-LTC-DRG. These 
statistical outliers are removed prior to calculating the relative 
weights because we believe that they may represent aberrations in the 
data that distort the measure of average resource use. Including those 
LTCH cases in the calculation of the relative weights could result in 
an inaccurate relative weight that does not truly reflect relative 
resource use among those MS-LTC-DRGs. (For additional information on 
what is removed in this step of the relative weight methodology, we 
refer readers to 67 FR 55989 and 74 FR 43959.) After removing cases 
with a length of stay of 7 days or less and statistical outliers, in 
each set of claims, we were left with applicable LTCH cases that have a 
length of stay greater than or equal to 8 days. In this proposed rule, 
we refer to these cases as ``trimmed applicable LTCH cases.''
Step 5--Adjust Charges for the Effects of Short Stay Outliers (SSOs)
    As the next step in the proposed calculation of the proposed FY 
2024 MS-LTC-DRG relative weights, consistent with our historical 
approach, we are proposing to adjust each LTCH's charges per discharge 
for those remaining cases (that is, trimmed applicable LTCH cases) for 
the effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we are proposing to make this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay of all 
cases grouped to the MS-LTC-DRG. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the proposed FY 2024 MS-

[[Page 27069]]

LTC-DRG relative weights would lower the relative weight for affected 
MS-LTC-DRGs because the relatively lower charges of the SSO cases would 
bring down the average charge for all cases within a MS-LTC-DRG. This 
would result in an ``underpayment'' for non-SSO cases and an 
``overpayment'' for SSO cases. Therefore, we propose to continue to 
adjust for SSO cases under Sec.  412.529 in this manner because it 
would result in more appropriate payments for all LTCH PPS standard 
Federal payment rate cases. (For additional information on this step of 
the relative weight methodology, we refer readers to 67 FR 55989 and 74 
FR 43959.)
Step 6--Calculate the Relative Weights on an Iterative Basis Using the 
Hospital-Specific Relative Value Methodology
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH PPS, in this FY 2024 IPPS/LTCH PPS 
proposed rule, we are proposing to continue to use a hospital-specific 
relative value (HSRV) methodology to calculate the MS-LTC-DRG relative 
weights for FY 2024. We believe that this method removes this hospital-
specific source of bias in measuring LTCH average charges (67 FR 
55985). Specifically, under this methodology, we reduced the impact of 
the variation in charges across providers on any particular MS-LTC-DRG 
relative weight by converting each LTCH's charge for an applicable LTCH 
case to a relative value based on that LTCH's average charge for such 
cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for an LTCH is its 
case-mix; therefore, it is reasonable to scale each LTCH's average 
relative charge value by its case-mix. In this way, each LTCH's 
relative charge value is adjusted by its case-mix to an average that 
reflects the complexity of the applicable LTCH cases it treats relative 
to the complexity of the applicable LTCH cases treated by all other 
LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases 
across all LTCHs). In other words, by multiplying an LTCH's relative 
charge values by the LTCH's case-mix index, we account for the fact 
that the same relative charges are given greater weight at an LTCH with 
higher average costs than they would at an LTCH with low average costs, 
which is needed to adjust each LTCH's relative charge value to reflect 
its case-mix relative to the average case-mix for all LTCHs. By 
standardizing charges in this manner, we count charges for a Medicare 
patient at an LTCH with high average charges as less resource-intensive 
than they would be at an LTCH with low average charges. For example, a 
$10,000 charge for a case at an LTCH with an average adjusted charge of 
$17,500 reflects a higher level of relative resource use than a $10,000 
charge for a case at an LTCH with the same case-mix, but an average 
adjusted charge of $35,000. We believe that the adjusted charge of an 
individual case more accurately reflects actual resource use for an 
individual LTCH because the variation in charges due to systematic 
differences in the markup of charges among LTCHs is taken into account.
    Consistent with our historical relative weight methodology, we 
propose to calculate the proposed FY 2024 MS-LTC-DRG relative weights 
using the HSRV methodology, which is an iterative process. Therefore, 
in accordance with our established methodology, for FY 2024, we are 
proposing to continue to standardize charges for each applicable LTCH 
case by first dividing the adjusted charge for the case (adjusted for 
SSOs under Sec.  412.529 as described in Step 5 of our proposed 
methodology) by the average adjusted charge for all applicable LTCH 
cases at the LTCH in which the case was treated. The average adjusted 
charge reflects the average intensity of the health care services 
delivered by a particular LTCH and the average cost level of that LTCH. 
The average adjusted charge is then multiplied by the LTCH's case-mix 
index to produce an adjusted hospital-specific relative charge value 
for the case. We used an initial case-mix index value of 1.0 for each 
LTCH.
    For each proposed MS-LTC-DRG, we calculated the FY 2024 relative 
weight by dividing the SSO-adjusted average of the hospital-specific 
relative charge values for applicable LTCH cases for the MS-LTC-DRG 
(that is, the sum of the hospital-specific relative charge value, as 
previously stated, divided by the sum of equivalent cases from Step 5 
for each MS-LTC-DRG) by the overall SSO-adjusted average hospital-
specific relative charge value across all applicable LTCH cases for all 
LTCHs (that is, the sum of the hospital-specific relative charge value, 
as previously stated, divided by the sum of equivalent applicable LTCH 
cases from Step 5 for each MS-LTC-DRG). Using these recalculated MS-
LTC-DRG relative weights, each LTCH's average relative weight for all 
of its SSO-adjusted trimmed applicable LTCH cases (that is, its case-
mix) was calculated by dividing the sum of all the LTCH's MS-LTC-DRG 
relative weights by its total number of SSO-adjusted trimmed applicable 
LTCH cases. The LTCHs' hospital-specific relative charge values (from 
previous) are then multiplied by the hospital-specific case-mix 
indexes. The hospital-specific case-mix adjusted relative charge values 
are then used to calculate a new set of MS-LTC-DRG relative weights 
across all LTCHs. This iterative process continued until there was 
convergence between the relative weights produced at adjacent steps, 
for example, when the maximum difference was less than 0.0001.
Step 7--Adjust the Relative Weights to Account for Nonmonotonically 
Increasing Relative Weights
    The MS-DRGs contain base DRGs that have been subdivided into one, 
two, or three severity of illness levels. Where there are three 
severity levels, the most severe level has at least one secondary 
diagnosis code that is referred to as an MCC (that is, major 
complication or comorbidity). The next lower severity level contains 
cases with at least one secondary diagnosis code that is a CC (that is, 
complication or comorbidity). Those cases without an MCC or a CC are 
referred to as ``without CC/MCC.'' When data do not support the 
creation of three severity levels, the base MS-DRG is subdivided into 
either two levels or the base MS-DRG is not subdivided. The two-level 
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG 
without CC/MCC. Alternatively, the other type of two-level subdivision 
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the

[[Page 27070]]

``with MCC'' MS-LTC-DRGs (in the case of a three-level split). That is, 
theoretically, cases that are more severe typically require greater 
expenditure of medical care resources and would result in higher 
average charges. Therefore, in the three severity levels, relative 
weights should increase by severity, from lowest to highest. If the 
relative weights decrease as severity increases (that is, if within a 
base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher relative weight 
than one with MCC, or the MS-LTC-DRG ``without CC/MCC'' has a higher 
relative weight than either of the others), they are nonmonotonic. We 
continue to believe that utilizing nonmonotonic relative weights to 
adjust Medicare payments would result in inappropriate payments because 
the payment for the cases in the higher severity level in a base MS-
LTC-DRG (which are generally expected to have higher resource use and 
costs) would be lower than the payment for cases in a lower severity 
level within the same base MS-LTC-DRG (which are generally expected to 
have lower resource use and costs). Therefore, in determining the FY 
2024 proposed MS-LTC-DRG relative weights, consistent with our 
historical methodology, we are proposing to continue to combine MS-LTC-
DRG severity levels within a base MS-LTC-DRG for the purpose of 
computing a relative weight when necessary to ensure that monotonicity 
is maintained. For a comprehensive description of our existing 
methodology to adjust for nonmonotonicity, we refer readers to the FY 
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any 
adjustments for nonmonotonicity that were made in determining the 
proposed FY 2024 MS-LTC-DRG relative weights by applying this 
methodology are denoted in Table 11, which is listed in section VI. of 
the Addendum to this proposed rule and is available via the internet on 
the CMS website.
Step 8--Determine a Relative Weight for MS-LTC-DRGs With no Applicable 
LTCH Cases
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the MS-LTC-DRGs for which there 
were no claims in the December 2022 update of the FY 2022 MedPAR file 
and, therefore, for which no charge data was available for these MS-
LTC-DRGs. Because patients with a number of the diagnoses under these 
MS-LTC-DRGs may be treated at LTCHs, consistent with our historical 
methodology, we generally assign a relative weight to each of the no-
volume MS-LTC-DRGs based on clinical similarity and relative costliness 
(with the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-
DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later in 
this section of this proposed rule). (For additional information on 
this step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    Consistent with our existing methodology, we are proposing to 
cross-walk each no-volume proposed MS-LTC-DRG to another proposed MS-
LTC-DRG for which we calculated a relative weight (determined in 
accordance with the methodology as previously described). Then, the 
``no-volume'' proposed MS-LTC-DRG is assigned the same relative weight 
(and average length of stay) of the proposed MS-LTC-DRG to which it was 
cross-walked (as described in greater detail in this section of this 
proposed rule).
    Of the 766 proposed MS-LTC-DRGs for FY 2024, we identified 430 MS-
LTC-DRGs for which there were no trimmed applicable LTCH cases. The 430 
MS LTC DRGs for which there were no trimmed applicable LTCH cases 
includes the 11 ``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-LTC-
DRGs, and the 15 ``psychiatric or rehabilitation'' MS-LTC-DRGs, which 
are discussed in this section of this rule, such that we identified 402 
MS-LTC-DRGs that for which, we are proposing to assign a relative 
weight using our existing ``no-volume'' MS-LTC-DRG methodology (that 
is, 430-11-2-15 = 402). We are proposing to assign relative weights to 
each of the 402 no-volume MS-LTC-DRGs based on clinical similarity and 
relative costliness to 1 of the remaining 336 (766-430 = 336) MS-LTC-
DRGs for which we calculated relative weights based on the trimmed 
applicable LTCH cases in the FY 2022 MedPAR file data using the steps 
described previously. (For the remainder of this discussion, we refer 
to the ``cross-walked'' MS-LTC-DRGs as one of the 336 MS-LTC-DRGs to 
which we cross-walked each of the 402 ``no-volume'' MS-LTC-DRGs.) Then, 
in general, we are proposing to assign the 402 no-volume MS-LTC-DRGs 
the relative weight of the cross-walked MS-LTC-DRG (when necessary, we 
made adjustments to account for nonmonotonicity).
    We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which 
we calculated relative weights based on the December 2022 update of the 
FY 2022 MedPAR file, and to which it is similar clinically in intensity 
of use of resources and relative costliness as determined by criteria 
such as care provided during the period of time surrounding surgery, 
surgical approach (if applicable), length of time of surgical 
procedure, postoperative care, and length of stay. (For more details on 
our process for evaluating relative costliness, we refer readers to the 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in 
the rare event that there would be a few LTCH cases grouped to one of 
the no-volume MS-LTC-DRGs in FY 2024, the relative weights assigned 
based on the cross-walked MS-LTC-DRGs would result in an appropriate 
LTCH PPS payment because the crosswalks, which are based on clinical 
similarity and relative costliness, would be expected to generally 
require equivalent relative resource use.
    Then we assigned the proposed relative weight of the cross-walked 
MS-LTC-DRG as the relative weight for the no-volume MS-LTC-DRG such 
that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and 
the cross-walked MS-LTC-DRG) have the same relative weight (and average 
length of stay) for FY 2024. We note that, if the cross-walked MS-LTC-
DRG had 25 applicable LTCH cases or more, its relative weight 
(calculated using the methodology as previously described in Steps 1 
through 4) is assigned to the no-volume MS-LTC-DRG as well. Similarly, 
if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was cross-walked 
had 24 or less cases and, therefore, was designated to 1 of the low-
volume quintiles for purposes of determining the relative weights, we 
assigned the relative weight of the applicable low-volume quintile to 
the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, 
the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same 
relative weight for FY 2024. (As we noted previously, in the infrequent 
case where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, 
additional adjustments are required to maintain monotonically 
increasing relative weights.)
    For this proposed rule, we are providing the list of the no-volume 
MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that 
is, the cross-walked MS-LTC-DRGs) for FY 2024 in a supplemental data 
file for public use posted via the internet on the CMS website for this 
proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html to streamline the information made

[[Page 27071]]

available to the public that is used in the annual development of Table 
11.
    To illustrate this methodology for determining the proposed 
relative weights for the FY 2024 MS-LTC-DRGs with no applicable LTCH 
cases, we are providing the following example.
    Example: There were no trimmed applicable LTCH cases in the FY 2022 
MedPAR file that we are using for this proposed rule for proposed MS-
LTC-DRG 061 (Ischemic stroke, precerebral occlusion or transient 
ischemia with thrombolytic agent with MCC). We determined that proposed 
MS-LTC-DRG 064 (Intracranial hemorrhage or cerebral infarction with 
MCC) is similar clinically and based on resource use to proposed MS-
LTC-DRG 061. Therefore, we are proposing to assign the same relative 
weight (and average length of stay) of proposed MS-LTC-DRG 064 of 
1.4526 for FY 2024 to MS-LTC-DRG 061 (we refer readers to Table 11, 
which is listed in section VI. of the Addendum to this proposed rule 
and is available via the internet on the CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume would vary in 
the future. Consistent with our historical practice, we are proposing 
to use the best available claims data to identify the trimmed 
applicable LTCH cases from which we determined the relative weights in 
the final rule.
    For FY 2024, consistent with our historical relative weight 
methodology, we are proposing to establish a relative weight of 0.0000 
for the following transplant MS-LTC-DRGs: Heart Transplant or Implant 
of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver 
Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 
007); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 008); 
Simultaneous Pancreas/Kidney Transplant with Hemodialysis (MS-LTC-DRG 
019); Pancreas Transplant (MS-LTC-DRG 010); Kidney Transplant (MS-LTC-
DRG 652); Kidney Transplant with Hemodialysis with MCC (MS-LTC-DRG 
650), and Kidney Transplant with Hemodialysis without MCC (MS LTC DRG 
651). This is because Medicare only covers these procedures if they are 
performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these 11 transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS, removing 
these MS-LTC-DRGs would be administratively burdensome. (For additional 
information regarding our treatment of transplant MS-LTC-DRGs, we refer 
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, 
consistent with our historical policy, we are proposing to established 
a relative weight of 0.0000 for the 2 ``error'' MS-LTC-DRGs (that is, 
MS-LTC-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis) and 
MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH cases grouped to 
these MS-LTC-DRGs cannot be properly assigned to an MS-LTC-DRG 
according to the grouping logic.
    Additionally, we are proposing to establish a relative weight of 
0.0000 for the following ``psychiatric or rehabilitation'' MS-LTC-DRGs: 
MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental 
Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 
(Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality 
& Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or 
Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). We are proposing to establish 
a relative weight of 0.0000 for these 15 ``psychiatric or 
rehabilitation'' MS-LTC-DRGs because the blended payment rate and 
temporary exceptions to the site neutral payment rate would not be 
applicable for any LTCH discharges occurring in FY 2024, and as such 
payment under the LTCH PPS would be no longer be made in part based on 
the LTCH PPS standard Federal payment rate for any discharges assigned 
to those MS-LTC-DRGs.
Step 9--Budget Neutralize the Uncapped Relative Weights
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).
    To achieve budget neutrality under the requirement at Sec.  
412.517(b), under our established methodology, for each annual update 
the MS-LTC-DRG relative weights are uniformly adjusted to ensure that 
estimated aggregate payments under the LTCH PPS would not be affected 
(that is, decreased or increased). Consistent with that provision, we 
are proposing to continue to apply budget neutrality adjustments in 
determining the proposed FY 2024 MS-LTC-DRG relative weights so that 
our proposed update of the MS-LTC-DRG classifications and relative 
weights for FY 2024 are made in a budget neutral manner. For FY 2024, 
we are proposing to apply two budget neutrality factors to determine 
the MS-LTC-DRG relative weights. In this step, we describe the 
determination of the budget neutrality adjustment that accounts for the 
proposed update of the MS-LTC-DRG classifications and relative weights 
prior to the application of the ten-percent cap. In steps 10 and 11, we 
describe the application of the 10-percent cap policy (step 10) and the 
determination of the proposed budget neutrality factor that accounts 
for the application of the 10-percent cap policy (step 11).
    In this proposed rule, to ensure budget neutrality for the proposed 
update to the MS-LTC-DRG classifications and relative weights prior to 
the application of the 10-percent cap (that is, uncapped relative 
weights), under Sec.  412.517(b), we are proposing to continue to use 
our established two-step budget neutrality methodology. Therefore, in 
the first step of our MS-LTC-DRG update budget neutrality methodology, 
for FY 2024, we calculated and applied a proposed normalization factor 
to the recalibrated relative weights (the result of Steps 1 through 8 
discussed previously) to ensure that estimated payments are not 
affected by changes in the composition of case types or the changes to 
the classification system. That is, the

[[Page 27072]]

normalization adjustment is intended to ensure that the recalibration 
of the MS-LTC-DRG relative weights (that is, the process itself) 
neither increases nor decreases the average case-mix index.
    To calculate the proposed normalization factor for FY 2024, we 
propose to use the following three steps: (1.a.) use the applicable 
LTCH cases from the best available data (that is, LTCH discharges from 
the FY 2022 MedPAR file) and group them using the proposed FY 2024 
GROUPER (that is, Version 41 for FY 2024) and the proposed recalibrated 
FY 2024 MS-LTC-DRG uncapped relative weights (determined in Steps 1 
through 8 discussed previously) to calculate the average case-mix 
index; (1.b.) group the same applicable LTCH cases (as are used in Step 
1.a.) using the FY 2023 GROUPER (Version 40) and FY 2023 MS-LTC-DRG 
relative weights and calculate the average case-mix index; and (1.c.) 
compute the ratio of these average case-mix indexes by dividing the 
average case-mix index for FY 2023 (determined in Step 1.b.) by the 
average case-mix index for FY 2024 (determined in Step 1.a.). As a 
result, in determining the proposed MS-LTC-DRG relative weights for FY 
2024, each recalibrated MS-LTC-DRG uncapped relative weight is 
multiplied by the proposed normalization factor of 1.30980 (determined 
in Step 1.c.) in the first step of the budget neutrality methodology, 
which produces ``normalized relative weights.''
    In the second step of our MS-LTC-DRG update budget neutrality 
methodology, we calculated a proposed budget neutrality adjustment 
factor consisting of the ratio of estimated aggregate FY 2024 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases before 
reclassification and recalibration to estimated aggregate payments for 
FY 2024 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases after reclassification and recalibration. That is, for this 
proposed rule, for FY 2024, we propose to determine the budget 
neutrality adjustment factor using the following three steps: (2.a.) 
simulate estimated total FY 2024 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases using the uncapped normalized 
relative weights for FY 2024 and proposed GROUPER Version 41; (2.b.) 
simulate estimated total FY 2024 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases using the FY 2023 GROUPER (Version 
40) and the FY 2023 MS-LTC-DRG relative weights in Table 11 of the FY 
2023 IPPS/LTCH PPS final rule; and (2.c.) calculate the ratio of these 
estimated total payments by dividing the value determined in Step 2.b. 
by the value determined in Step 2.a. In determining the proposed FY 
2024 MS-LTC-DRG relative weights, each uncapped normalized relative 
weight is then multiplied by a proposed budget neutrality factor of 
0.9962866 (the value determined in Step 2.c.) in the second step of the 
budget neutrality methodology.
Step 10--Apply the 10-Percent Cap to Decreases in MS-LTC-DRG Relative 
Weights
    To mitigate the financial impacts of significant year-to-year 
reductions in MS-LTC-DRGs relative weights, beginning in FY 2023, we 
adopted a policy that applies, in a budget neutral manner, a 10-percent 
cap on annual relative weight decreases for MS-LTC-DRGs with at least 
25 applicable LTCH cases (Sec.  412.515(b)). Under this policy, in 
cases where CMS creates new MS-LTC-DRGs or modifies the MS-LTC-DRGs as 
part of its annual reclassifications resulting in renumbering of one or 
more MS-LTC-DRGs, the 10-percent cap does not apply to the relative 
weight for any new or renumbered MS-LTC-DRGs for the fiscal year. We 
refer readers to section VIII.B.3.b. of the preamble of the FY 2023 
IPPS/LTCH PPS final rule with comment period for a detailed discussion 
on the adoption of the 10-percent cap policy (87 FR 49152 through 
49154).
    Applying the 10-percent cap to MS-LTC-DRGs with 25 or more cases 
results in more predictable and stable MS-LTC-DRG relative weights from 
year to year, especially for high-volume MS-LTC-DRGs that generally 
have the largest financial impact on an LTCH's operations. For this 
proposed rule, in cases where the relative weight for a MS-LTC-DRG with 
25 or more applicable LTCH cases would decrease by more than 10-percent 
in FY 2024 relative to FY 2023, we are proposing to limit the reduction 
to 10-percent. Under this policy, we do not apply the 10 percent cap to 
the proposed low-volume MS-LTC-DRGs identified in Step 3 or the 
proposed no-volume MS-LTC-DRGs identified in Step 8.
    Therefore, in this step, for each proposed FY 2024 MS-LTC-DRG with 
25 or more applicable LTCH cases (excludes low-volume and zero-volume 
MS-LTC-DRGs) we compared its FY 2024 relative weight (after application 
of the proposed normalization and proposed budget neutrality factors 
determined in Step 9), to its FY 2023 MS-LTC-DRG relative weight. For 
any MS-LTC-DRG where the FY 2024 relative weight would otherwise have 
declined more than 10 percent, we established a proposed capped FY 2024 
MS-LTC-DRG relative weight that would be equal to 90 percent of that 
MS-LTC-DRG's FY 2023 relative weight (that is, we set the proposed FY 
2024 relative weight equal to the FY 2023 weight x 0.90).
    In section II.E. of the preamble of this proposed rule, we discuss 
our proposed changes to the MS-DRGs, and by extension the MS-LTC-DRGs, 
for FY 2024. As discussed previously, under our current policy, the 10-
percent cap does not apply to the relative weight for any new or 
renumbered MS-LTC-DRGs. We are not proposing any changes to this policy 
for FY 2024, and as such any proposed new or renumbered MS-LTC-DRGs for 
FY 2024 would not be eligible for the 10-percent cap, if finalized.
Step 11--Budget Neutralize Application of the 10-Percent Cap Policy
    Under the requirement at existing Sec.  412.517(b) that aggregate 
LTCH PPS payments will be unaffected by annual changes to the MS-LTC-
DRG classifications and relative weights, consistent with our 
established methodology, we are proposing to continue to apply a budget 
neutrality adjustment to the MS-LTC-DRG relative weights so that the 
proposed 10-percent cap on relative weight reductions (step 10) is 
implemented in a budget neutral manner. Therefore, we are proposing to 
determine the proposed budget neutrality adjustment factor for the 10-
percent cap on relative weight reductions using the following three 
steps: (a) simulate estimated total FY 2024 LTCH PPS standard Federal 
payment rate payments for applicable LTCH cases using the proposed 
capped relative weights for FY 2024 (determined in Step 10) and 
proposed GROUPER Version 41; (b) simulate estimated total FY 2024 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the proposed uncapped relative weights for FY 2024 (determined in 
Step 9) and proposed GROUPER Version 41; and (c) calculate the ratio of 
these estimated total payments by dividing the value determined in step 
(b) by the value determined in step (a). In determining the proposed FY 
2024 MS-LTC-DRG relative weights, each capped relative weight is then 
multiplied by a proposed budget neutrality factor of 0.9984223 (the 
value determined in step (c)) to achieve the budget neutrality 
requirement.
    Table 11, which is listed in section VI. of the Addendum to this 
proposed rule

[[Page 27073]]

and is available via the internet on the CMS website, lists the 
proposed MS-LTC-DRGs and their respective proposed relative weights, 
proposed geometric mean length of stay, and proposed five-sixths of the 
geometric mean length of stay (used to identify SSO cases under Sec.  
412.529(a)) for FY 2024. We also are making available on the website 
the proposed MS-LTC-DRG relative weights prior to the application of 
the proposed 10 percent cap on MS-LTC-DRG relative weight reductions 
and corresponding proposed cap budget neutrality factor.

C. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2024

1. Overview of Development of the Proposed LTCH PPS Standard Federal 
Payment Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.533 
and 412.535. In this section, we discuss the factors that we are 
proposing to use to update the LTCH PPS standard Federal payment rate 
for FY 2024, that is, effective for LTCH discharges occurring on or 
after October 1, 2023 through September 30, 2024. Under the dual rate 
LTCH PPS payment structure required by statute, beginning with 
discharges in cost reporting periods beginning in FY 2016, only LTCH 
discharges that meet the criteria for exclusion from the site neutral 
payment rate are paid based on the LTCH PPS standard Federal payment 
rate specified at 42 CFR 412.523. (For additional details on our 
finalized policies related to the dual rate LTCH PPS payment structure 
required by statute, we refer readers to the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49601 through 49623).)
    Prior to the implementation of the dual payment rate system in FY 
2016, all LTCH discharges were paid similarly to those now exempt from 
the site neutral payment rate. That legacy payment rate was called the 
standard Federal rate. For details on the development of the initial 
standard Federal rate for FY 2003, we refer readers to the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent 
updates to the standard Federal rate from FYs 2003 through 2015, and 
LTCH PPS standard Federal payment rate from FY 2016 through present, as 
implemented under 42 CFR 412.523(c)(3), we refer readers to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42445 through 42446).
    In this FY 2024 IPPS/LTCH PPS proposed rule, we present our 
proposed policies related to the annual update to the LTCH PPS standard 
Federal payment rate for FY 2024.
    The proposed update to the LTCH PPS standard Federal payment rate 
for FY 2024 is presented in section V.A. of the Addendum to this 
proposed rule. The components of the proposed annual update to the LTCH 
PPS standard Federal payment rate for FY 2024 are discussed in this 
section, including the statutory reduction to the annual update for 
LTCHs that fail to submit quality reporting data for FY 2024 as 
required by the statute (as discussed in section VIII.C.2.c. of the 
preamble of this proposed rule). We are proposing to make an adjustment 
to the LTCH PPS standard Federal payment rate to account for the 
estimated effect of the changes to the area wage level for FY 2024 on 
estimated aggregate LTCH PPS payments, in accordance with 42 CFR 
412.523(d)(4) (as discussed in section V.B. of the Addendum to this 
proposed rule).
2. Proposed FY 2024 LTCH PPS Standard Federal Payment Rate Annual 
Market Basket Update
a. Overview
    Historically, the Medicare program has used a market basket to 
account for input price increases in the services furnished by 
providers. The market basket used for the LTCH PPS includes both 
operating and capital-related costs of LTCHs because the LTCH PPS uses 
a single payment rate for both operating and capital-related costs. We 
adopted the 2017-based LTCH market basket for use under the LTCH PPS 
beginning in FY 2021 (85 FR 58907 through 58909). For additional 
details on the historical development of the market basket used under 
the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53467 through 53476), and for a complete discussion of the LTCH 
market basket and a description of the methodologies used to determine 
the operating and capital-related portions of the 2017-based LTCH 
market basket, we refer readers to the FY 2021 IPPS/LTCH PPS final rule 
(85 FR 58909 through 58926).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year.'' We note that, because the annual update 
to the LTCH PPS policies, rates, and factors now occurs on October 1, 
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY) 
under the LTCH PPS beginning October 1, 2010, to conform with the 
standard definition of the Federal fiscal year (October 1 through 
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 
50397). Although the language of sections 3004(a), 3401(c), 10319, and 
1105(b) of the Affordable Care Act refers to years 2010 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for purposes of clarity, when discussing the annual update for 
the LTCH PPS standard Federal payment rate, including the provisions of 
the Affordable Care Act, we use ``fiscal year'' rather than ``rate 
year'' for 2011 and subsequent years.
b. Proposed Annual Update to the LTCH PPS Standard Federal Payment Rate 
for FY 2024
    As previously noted, we adopted the 2017-based LTCH market basket 
for use under the LTCH PPS beginning in FY 2021. The 2017-based LTCH 
market basket is primarily based on the Medicare cost report data 
submitted by LTCHs and, therefore, specifically reflects the cost 
structures of only LTCHs. (For additional details on the development of 
the 2017-based LTCH market basket, we refer readers to the FY 2021 
IPPS/LTCH PPS final rule (85 FR 58909 through 58926).) We continue to 
believe that the 2017-based LTCH market basket appropriately reflects 
the cost structure of LTCHs for the reasons discussed when we adopted 
its use in the FY 2021 IPPS/LTCH PPS final rule. Therefore, in this 
proposed rule, we are proposing to use the 2017-based LTCH market 
basket to update the LTCH PPS standard Federal payment rate for FY 
2024.
    Section 1886(m)(3)(A) of the Act provides that, beginning in FY 
2010, any annual update to the LTCH PPS standard Federal payment rate 
is reduced by the adjustments specified in clauses (i) and (ii) of 
subparagraph (A), as applicable. Clause (i) of section 1886(m)(3)(A) of 
the Act provides for a reduction, for FY 2012 and each subsequent rate 
year, by ``the productivity adjustment'' described in section 
1886(b)(3)(B)(xi)(II) of the Act. Clause (ii) of section 1886(m)(3)(A) 
of the Act provided for a reduction, for each of FYs 2010 through 2019, 
by the ``other adjustment'' described in section 1886(m)(4)(F) of the 
Act; therefore, it is not applicable for FY 2024.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate

[[Page 27074]]

year being less than such payment rates for the preceding rate year.
c. Proposed Adjustment to the LTCH PPS Standard Federal Payment Rate 
Under the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, applies a 2.0 
percentage points reduction to any update under 42 CFR 412.523(c)(3) 
for an LTCH that does not submit quality reporting data to the 
Secretary in accordance with section 1886(m)(5)(C) of the Act with 
respect to such a year (that is, in the form and manner and at the time 
specified by the Secretary under the LTCH QRP) (42 CFR 
412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of the Act provides that 
the application of the 2.0 percentage points reduction may result in an 
annual update that is less than 0.0 for a year, and may result in LTCH 
PPS payment rates for a year being less than such LTCH PPS payment 
rates for the preceding year. Furthermore, section 1886(m)(5)(B) of the 
Act specifies that the 2.0 percentage points reduction is applied in a 
noncumulative manner, such that any reduction made under section 
1886(m)(5)(A) of the Act shall apply only with respect to the year 
involved, and shall not be taken into account in computing the LTCH PPS 
payment amount for a subsequent year. These requirements are codified 
in the regulations at 42 CFR 412.523(c)(4). (For additional information 
on the history of the LTCH QRP, including the statutory authority and 
the selected measures, we refer readers to section VIII.C. of the 
preamble of this proposed rule.)
d. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2024
    Consistent with our historical practice, we estimate the market 
basket increase and the productivity adjustment based on IGI's forecast 
using the most recent available data. Based on IGI's fourth quarter 
2022 forecast, the proposed FY 2024 market basket update for the LTCH 
PPS using the 2017-based LTCH market basket is 3.1 percent. The 
proposed productivity adjustment for FY 2024 based on IGI's fourth 
quarter 2022 forecast is 0.2 percentage point.
    For FY 2024, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment, described in section 
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are 
proposing to reduce the FY 2024 market basket increase by the FY 2024 
productivity adjustment. To determine the proposed market basket 
increase for LTCHs for FY 2024, as reduced by the proposed productivity 
adjustment, consistent with our established methodology, we subtracted 
the proposed FY 2024 productivity adjustment from the proposed FY 2024 
market basket increase. (For additional details on our established 
methodology for adjusting the market basket increase by the 
productivity adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51771).)
    For FY 2024, section 1886(m)(5) of the Act requires that, for LTCHs 
that do not submit quality reporting data as required under the LTCH 
QRP, any annual update to an LTCH PPS standard Federal payment rate, 
after application of the adjustments required by section 1886(m)(3) of 
the Act, shall be further reduced by 2.0 percentage points. Therefore, 
for LTCHs that fail to submit quality reporting data under the LTCH 
QRP, the proposed 3.1 percent market basket increase to the LTCH PPS 
standard Federal payment rate for FY 2024 would be reduced by the 
proposed 0.2 percentage point productivity adjustment as required under 
section 1886(m)(3)(A)(i) of the Act and by the additional 2.0 
percentage points reduction required by section 1886(m)(5) of the Act.
    In this FY 2024 IPPS/LTCH PPS proposed rule, in accordance with the 
statute, we are proposing to reduce the proposed FY 2024 market basket 
increase of 3.1 percent (based on IGI's fourth quarter 2022 forecast of 
the 2017-based LTCH market basket) by the proposed FY 2024 productivity 
adjustment of 0.2 percentage point (based on IGI's fourth quarter 2022 
forecast). Therefore, under the authority of section 123 of the BBRA as 
amended by section 307(b) of the BIPA, consistent with 42 CFR 
412.523(c)(3)(xvii), we are proposing to establish an annual market 
basket update to the LTCH PPS standard Federal payment rate for FY 2024 
of 2.9 percent (that is, the most recent estimate of the LTCH PPS 
market basket increase of 3.1 percent less the productivity adjustment 
of 0.2 percentage point). For LTCHs that fail to submit quality 
reporting data under the LTCH QRP, under 42 CFR 412.523(c)(3)(xvii) in 
conjunction with 42 CFR 412.523(c)(4), we are proposing to further 
reduce the annual update to the LTCH PPS standard Federal payment rate 
by 2.0 percentage points, in accordance with section 1886(m)(5) of the 
Act. Accordingly, we are proposing to establish an annual update to the 
LTCH PPS standard Federal payment rate of 0.9 percent (that is, 2.9 
percent minus 2.0 percentage points) for FY 2024 for LTCHs that fail to 
submit quality reporting data as required under the LTCH QRP. 
Consistent with our historical practice, we are proposing to use a more 
recent estimate of the market basket and the productivity adjustment, 
if appropriate, in the final rule to establish an annual update to the 
LTCH PPS standard Federal payment rate for FY 2024. We note that, 
consistent with historical practice, we are also proposing to adjust 
the FY 2024 LTCH PPS standard Federal payment rate by an area wage 
level budget neutrality factor in accordance with 42 CFR 412.523(d)(4) 
(as discussed in section V.B.5. of the Addendum to this proposed rule).

IX. Proposed Quality Data Reporting Requirements for Specific Providers

A. Overview

    In section IX. of the preamble of this proposed rule, we are 
seeking comment on and proposing changes to the following Medicare 
quality reporting programs:
     In section IX.B., Proposal to Modify the COVID-19 
Vaccination Coverage Among Healthcare Personnel Measure in the Hospital 
IQR Program, PCHQR Program, and LTCH QRP.
     In section IX.C., the Hospital IQR Program.
     In section IX.F., the PCHQR Program.
     In section IX.G., the LTCH QRP.
     In section IX.H. the Medicare Promoting Interoperability 
Program for Eligible Hospitals and Critical Access Hospitals (CAHs) 
(previously known as the Medicare EHR Incentive Program).

B. Proposed Modification of the COVID-19 Vaccination Coverage Among 
Healthcare Personnel Measure for the Hospital Inpatient Quality 
Reporting, Long-Term Care Hospital Quality Reporting, and PPS-Exempt 
Cancer Hospital Quality Reporting Programs

(1) Background
    On January 31, 2020, the Secretary of the Department of Health and 
Human Services declared a public health emergency (PHE) for the United 
States in response to the global outbreak of SARS-COV-2, a novel (new) 
coronavirus that causes a disease named

[[Page 27075]]

``coronavirus disease 2019'' (COVID-19).\231\ Subsequently, the measure 
was adopted across multiple quality reporting programs including the 
Hospital Inpatient Quality Reporting Program (86 FR 45374), the 
Inpatient Psychiatric Facility Quality Reporting Program (86 FR 42633 
through 42640), the Hospital Outpatient Quality Reporting Program (86 
FR 63824 through 63833), the PPS-Exempt Cancer Hospital Quality 
Reporting Program (86 FR 45428 through 45434), the Ambulatory Surgical 
Center Quality Reporting Program (86 FR 63875 through 63883), the Long-
Term Care Hospital Quality Reporting Program (86 FR 45438 through 
45446), the Skilled Nursing Facility Quality Reporting Program (86 FR 
42480 through 42489), the End-Stage Renal Disease Quality Incentive 
Program (87 FR 67244 through 67248), and the Inpatient Rehabilitation 
Facility Quality Reporting Program (86 FR 42385 through 42396). COVID-
19 has continued to spread domestically and around the world with more 
than 103.9 million cases and 1.1 million deaths in the United States as 
of March 27, 2023.\232\ In recognition of the ongoing significance and 
complexity of COVID-19, the Secretary has renewed the PHE on April 21, 
2020, July 23, 2020, October 2, 2020, January 7, 2021, April 15, 2021, 
July 19, 2021, October 15, 2021, January 14, 2022, April 12, 2022, July 
15, 2022, October 13, 2022, January 11, 2023, and February 9, 
2023.\233\ HHS announced plans to let the PHE expire on May 11, 2023 
and stated that the public health response to COVID-19 remains a public 
health priority with a whole of government approach to combatting the 
virus, including through vaccination efforts.\234\
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    \231\ U.S. Dept of Health and Human Services, Office of the 
Assistant Secretary for Preparedness and Response. (2020). 
Determination that a Public Health Emergency Exists. Available at: 
https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \232\ Centers for Disease Control and Prevention. COVID Data 
Tracker. Accessed March 27, 2023. Available at: https://covid.cdc.gov/covid-data-tracker/#datatracker-home.
    \233\ U.S. Dept. of Health and Human Services. Office of the 
Assistant Secretary for Preparedness and Response. (2023). Renewal 
of Determination that a Public Health Emergency Exists. Available 
at: https://aspr.hhs.gov/legal/PHE/Pages/COVID19-9Feb2023.aspx.
    \234\ U.S. Dept. of Health and Human Services. Fact Sheet: 
COVID-19 Public Health Emergency Transition Roadmap. February 9, 
2023. Available at: https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-roadmap.html.
---------------------------------------------------------------------------

    As we stated in the FY 2022 IPPS/LTCH PPS final rule (Hospital IQR 
Program (86 FR 45375), PCHQR Program (86 FR 45428), and LTCH QRP (86 FR 
45438)) and in our Revised Guidance for Staff Vaccination 
Requirements,\235\ vaccination is a critical part of the nation's 
strategy to effectively counter the spread of COVID-19. We continue to 
believe it is important to incentivize and track HCP vaccination 
through quality measurement across care settings, including the 
inpatient, long-term care, and cancer hospital settings in order to 
protect healthcare workers, patients, and caregivers, and to help 
sustain the ability of HCP in each of these care settings to continue 
serving their communities throughout the PHE and beyond. At the time we 
issued the FY 2022 IPPS/LTCH PPS final rule, the Food and Drug 
Administration (FDA) had issued emergency use authorizations (EUAs) 
COVID-19 vaccines for adults manufactured by Pfizer-BioNTech,\236\ 
Moderna,\237\ and Janssen.\238\ The populations for which all three 
vaccines were authorized at that time included individuals 18 years of 
age and older, and the Pfizer-BioNTech vaccine was authorized for ages 
12 and older. Shortly following the publication of that final rule, on 
August 23, 2021, the FDA issued an approval for the Pfizer-BioNTech 
vaccine, marketed as Comirnaty.\239\ The FDA issued approval for the 
Moderna vaccine, marketed as Spikevax, on January 31, 2022 \240\ and an 
EUA for the Novavax adjuvanted vaccine on July 13, 2022.\241\ The FDA 
also issued EUAs for single booster doses of the then authorized COVID-
19 vaccines. As of November 19, 2021,242 243 244 a single 
booster dose of each COVID-19 vaccine was authorized for all eligible 
individuals 18 years of age and older. EUAs were subsequently issued 
for a second booster dose of the Pfizer-BioNTech and Moderna vaccines 
in certain populations in March 2022.\245\ FDA first authorized the use 
of a booster dose of bivalent or ``updated'' COVID-19 vaccines from 
Pfizer-BioNTech and Moderna in August 2022.\246\
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    \235\ Centers for Medicare & Medicaid Services. Revised Guidance 
for Staff Vaccination Requirements QSO-23-02-ALL. October 26, 2022. 
Available at: https://www.cms.gov/files/document/qs0-23-02-all.pdf.
    \236\ Food and Drug Administration. (December 2020). FDA Takes 
Key Action in Fight Against COVID-19 By Issuing Emergency Use 
Authorization for First COVID-19 Vaccine. Available at: https://www.fda.gov/news-events/press-announcements/fda-takes-key-action-fight-against-covid-19-issuing-emergency-use-authorization-first-covid-19.
    \237\ Food and Drug Administration. (December 2020). FDA Takes 
Additional Action in Fight Against COVID-19 By Issuing Emergency Use 
Authorization for Second COVID-19 Vaccine. Available at: https://www.fda.gov/news-events/press-announcements/fda-takes-additional-action-fight-against-covid-19-issuing-emergency-use-authorization-second-covid.
    \238\ Food and Drug Administration. (February 2021). FDA Issues 
Emergency Use Authorization for Third COVID-19 Vaccine. Available 
at: https://www.fda.gov/news-events/press-announcements/fda-issues-emergency-use-authorization-third-covid-19-vaccine.
    \239\ Food and Drug Administration. (August 2021). FDA Approves 
First COVID-19 Vaccine. Available at: https://www.fda.gov/news-events/press-announcements/fda-approves-first-covid-19-vaccine.
    \240\ Food and Drug Administration. (January 2022). Coronavirus 
(COVID-19) Update: FDA Takes Key Action by Approving Second COVID-19 
Vaccine. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-takes-key-action-approving-second-covid-19-vaccine.
    \241\ Food and Drug Administration. (July 2022). Coronavirus 
(COVID-19) Update: FDA Authorizes Emergency Use of Novavax COVID-19 
Vaccine, Adjuvanted. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-emergency-use-novavax-covid-19-vaccine-adjuvanted.
    \242\ Food and Drug Administration. (September 2021). FDA 
Authorizes Booster Dose of Pfizer-BioNTech COVID-19 Vaccine for 
Certain Populations. Available at: https://www.fda.gov/news-events/press-announcements/fda-authorizes-booster-dose-pfizer-biontech-covid-19-vaccine-certain-populations.
    \243\ Food and Drug Administration. (October 2021). Coronavirus 
(COVID-19) Update: FDA Takes Additional Actions on the Use of a 
Booster Dose for COVID-19 Vaccines. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-takes-additional-actions-use-booster-dose-covid-19-vaccines.
    \244\ Food and Drug Administration. (November 2021). Coronavirus 
(COVID-19) Update: FDA Expands Eligibility for COVID-19 Vaccine 
Boosters. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-expands-eligibility-covid-19-vaccine-boosters.
    \245\ Food and Drug Administration. (March 2022). Coronavirus 
(COVID-19) Update: FDA Authorizes Second Booster Dose of Two COVID-
19 Vaccines for Older and Immunocompromised Individuals. Available 
at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-second-booster-dose-two-covid-19-vaccines-older-and.
    \246\ Food and Drug Administration. (August 2022). Coronavirus 
(COVID-19) Update: FDA Authorizes Moderna, Pfizer-BioNTech Bivalent 
COVID-19 Vaccines for Use as a Booster Dose. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-moderna-pfizer-biontech-bivalent-covid-19-vaccines-use.
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    We stated at the time of publication of the FY 2022 IPPS/LTCH PPS 
final rule that data on the effectiveness of COVID-19 vaccines to 
prevent asymptomatic infection or transmission of SARS-COV-2 were 
limited (Hospital IQR Program (86 FR 45375) and PCHQR Program (86 FR 
45430)). While the impact of COVID-19 vaccines on asymptomatic 
infection and transmission is not yet fully known, there is now robust 
data available on COVID-19 vaccine effectiveness across multiple 
populations against symptomatic infection, hospitalization, and death. 
Two-dose COVID-19 vaccines from Pfizer-BioNTech and

[[Page 27076]]

Moderna were found to be 88 percent and 93 percent effective against 
hospitalization for COVID-19, respectively, over six months for adults 
over age 18 without immunocompromising conditions.\247\ During a SARS-
COV-2 surge in the spring and summer of 2021, 92 percent of COVID-19 
hospitalizations and 91 percent of COVID-19-associated deaths were 
reported among persons not fully vaccinated.\248\ Real-world studies of 
population-level vaccine effectiveness indicated similarly high rates 
of effectiveness in preventing SARS-COV-2 infection among frontline 
workers in multiple industries, with a 90 percent effectiveness in 
preventing symptomatic and asymptomatic infection from December 2020 
through August 2021.\249\ Vaccines have also been highly effective in 
real-world conditions preventing COVID-19 in HCP with up to 96 percent 
effectiveness for fully vaccinated HCP, including those at risk for 
severe infection and those in racial and ethnic groups 
disproportionately affected by COVID-19.\250\ In the presence of high 
community prevalence of COVID-19, residents of nursing homes with low 
staff vaccination coverage had cases of COVID-19 related deaths 195 
percent higher than those among residents of nursing homes with high 
staff vaccination coverage.\251\ Overall, data demonstrate that COVID-
19 vaccines are effective and prevent severe disease, including 
hospitalization and death.
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    \247\ Centers for Disease Control and Prevention. (September 24, 
2021). Morbidity and Mortality Weekly Report (MMWR). Comparative 
Effectiveness of Moderna, Pfizer-BioNTech, and Janssen (Johnson & 
Johnson) Vaccines in Preventing COVID-19 Hospitalizations Among 
Adults Without Immunocompromising Conditions--United States, March-
August 2021. Available at: https://cdc.gov/mmwr/volumes/70/wr/mm7038e1.htm?s_cid=mm7038e1_w.
    \248\ Centers for Disease Control and Prevention. (September 10, 
2021). Morbidity and Mortality Weekly Report (MMWR). Monitoring 
Incidence of COVID-19 Cases, Hospitalizations, and Deaths, by 
Vaccination Status--13 U.S. Jurisdictions, April 4-July 17, 2021. 
Available at: https://cdc.gov.mmwr/volumes/70/wr/mm7037e1.htm?s_cid=mm7037e1_w.
    \249\ Centers for Disease Control and Prevention. (August 27, 
2021). Morbidity and Mortality Weekly Report (MMWR). Effectiveness 
of COVID-19 Vaccines in Preventing SARS-COV-2 Infection Among 
Frontline Workers Before and During B.1.617.2 (Delta) Variant 
Predominance--Eight U.S. Locations, December 2020-August 2021. 
Available at: https://www.cdc.gov/mmwr/volumes/70/wr/mm7034e4.htm.
    \250\ Pilishivi, T. et al. (December 2022). Effectiveness of 
mRNA Covid-19 Vaccine among U.S. Health Care Personnel. New England 
Journal of Medicine. 2021 Dec 16;385(25):e90. Available online at: 
https://pubmed.ncbi.nlm.nih.gov/34551224/.
    \251\ McGarry BE et al. (January 2022). Nursing Home Staff 
Vaccination and Covid-19 Outcomes. New England Journal of Medicine. 
2022 Jan 27;386(4):397-398. Available online at: https://pubmed.ncbi.nlm.nih.gov/34879189/.
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    As SARS-COV-2 persists and evolves, our COVID-19 vaccination 
strategy must remain responsive. When we finalized adoption of the 
COVID-19 Vaccination Coverage among HCP measure in the FY 2022 IPPS/
LTCH PPS final rule, we stated that the need for booster doses of 
COVID-19 vaccines had not been established and no additional doses had 
been recommended (Hospital IQR Program (86 FR 45378), PCHQR Program (86 
FR 45432), and LTCH QRP (86 FR 45444)). We also stated that we believed 
the numerator was sufficiently broad to include potential future 
boosters as part of a ``complete vaccination course'' and that the 
measure was sufficiently specified to address boosters (Hospital IQR 
Program (86 FR 45378), PCHQR Program (86 FR 45432), and LTCH QRP (86 FR 
45444)). Since we finalized the COVID-19 Vaccination Coverage among HCP 
measure in the FY 2022 IPPS/LTCH PPS final rule, new variants of SARS-
COV-2 have emerged around the world and within the United States. 
Specifically, the Omicron variant (and its related subvariants) is 
listed as a variant of concern by the CDC because it spreads more 
easily than earlier variants.\252\ Vaccine manufacturers have responded 
to the Omicron variant by developing bivalent COVID-19 vaccines, which 
include a component of the original virus strain to provide broad 
protection against COVID-19 and a component of the Omicron variant to 
provide better protection against COVID-19 caused by the Omicron 
variant.\253\ These booster doses of the bivalent COVID-19 vaccines 
have been shown to increase immune response to SARS-COV-2 variants, 
including Omicron, particularly in individuals who are more than six 
months removed from receipt of their primary series.\254\ The FDA 
issued EUAs for booster doses of two bivalent COVID-19 vaccines, one 
from Pfizer-BioNTech \255\ and one from Moderna,\256\ and strongly 
encourages anyone who is eligible to consider receiving a booster dose 
with a bivalent COVID-19 vaccine to provide better protection against 
currently circulating variants.\257\ COVID-19 booster doses are 
associated with a greater reduction in infections among HCP and their 
patients relative to those who only received primary series 
vaccination, with a rate of breakthrough infections among HCP who 
received only a two-dose regimen of 21.4 percent compared to a rate of 
0.7 percent among boosted HCP.258 259 Data from the existing 
COVID-19 Vaccination Coverage among HCP measure demonstrate significant 
variation in booster dose vaccination rates across facilities. During 
the first quarter of 2022, acute care hospitals reported a median 
coverage rate of booster/additional doses of 22.5 percent, with an 
interquartile range of 9.1 percent to 38.7 percent, a difference of 
29.6 percentage points.\260\ LTCHs reported a median coverage rate of 
booster/additional dose of 22.6 percent, with an interquartile range of 
10.8 percent to 36.9 percent, a difference of 26.1 percentage points 
which is indicative of a substantial variation among LTCHs.\261\
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    \252\ Centers for Disease Control and Prevention. (August 2021). 
Variants of the Virus. Available at: https://www.cdc.gov/coronavirus/2019-ncov/variants/index.html.
    \253\ Food and Drug Administration. (November 2022). COVID-19 
Bivalent Vaccine Boosters.
    \254\ Chalkias, S et al. (October 2022). A Bivalent Omicron-
Containing Booster Vaccine against Covid-19. N Engl J Med 2022; 
387:1279-1291. Available online at: https://www.nejm.org/doi/full/10.1056/NEJMoa2208343.
    \255\ Food and Drug Administration. (November 2022). Pfizer-
BioNTech COVID-19 Vaccines. Available at: https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/pfizer-biontech-covid-19-vaccines.
    \256\ Food and Drug Administration. (November 2022). Moderna 
COVID-19 Vaccines. Available at: https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/moderna-covid-19-vaccines.
    \257\ Food and Drug Administration. (August 2022). Coronavirus 
(COVID-19) Update: FDA Authorizes Moderna, Pfizer-BioNTech Bivalent 
COVID-19 Vaccines for Use as a Booster Dose. Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-moderna-pfizer-biontech-bivalent-covid-19-vaccines-use.
    \258\ Prasad N et al. (May 2022). Effectiveness of a COVID-19 
Additional Primary or Booster Vaccine Dose in Preventing SARS-CoV-2 
Infection Among Nursing Home Residents During Widespread Circulation 
of the Omicron Variant--United States, February 14-March 27, 2022. 
Morbidity and Mortality Weekly Report (MMWR). 2022 May 6;71(18):633-
637. Available online at: https://pubmed.ncbi.nlm.nih.gov/35511708/.
    \259\ Oster Y et al. (May 2022). The effect of a third BNT162b2 
vaccine on breakthrough infections in health care workers: a cohort 
analysis. Clin Microbiol Infect. 2022 May;28(5):735.e1-735.e3. 
Available online at: https://pubmed.ncbi.nlm.nih.gov/35143997/.
    \260\ Centers for Medicare & Medicaid Services. (December 2022). 
Measure Applications Partnership (MAP) Hospital Workgroup 
Preliminary Analyses. Available at: https://mmshub.cms.gov/sites/default/files/2022-preliminary-analysis-hospital-workgroup.pdf.
    \261\ Centers for Medicare & Medicaid Services. (December 2022). 
Measure Applications Partnership (MAP) PAC/LTC workgroup Preliminary 
Analyses. Available at: https://mmshub.cms.gov/sites/default/files/2022-preliminary-analysis-pacltc-workgroup.pdf.
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    We believe that vaccination remains the most effective means to 
prevent the worst consequences of COVID-19, including severe illness, 
hospitalization, and death. Given the availability of vaccine efficacy 
data, EUAs issued by

[[Page 27077]]

the FDA for bivalent boosters, the continued presence of SARS-COV-2 in 
the United States, and variance among rates of booster dose 
vaccination, it is important to modify the COVID-19 Vaccination 
Coverage among HCP measure to reflect recent updates that explicitly 
specify for HCP to receive primary series and booster vaccine doses in 
a timely manner. As the COVID-19 pandemic persists, we continue to 
believe that monitoring and surveillance is important and provides 
patients, beneficiaries, and their caregivers with information to 
support informed decision making. We propose to modify the COVID-19 
Vaccination Coverage among HCP measure to replace the term ``complete 
vaccination course'' with the term ``up to date'' in the HCP 
vaccination definition. We also propose to update the numerator to 
specify the time frames within which an HCP is considered up to date 
with recommended COVID-19 vaccines, including booster doses, beginning 
with the quarter 4 2023 reporting period/FY 2025 payment determination 
for the Hospital IQR Program and the FY 2025 program year for both the 
LTCH QRP and the PCHQR Program. As we stated in the FY 2022 IPPS/LTCH 
PPS final rule (Hospital IQR Program (86 FR 45378), PCHQR Program (86 
FR 45432), and LTCH QRP (86 FR 45445)) the COVID-19 Vaccination 
Coverage among HCP measure is a process measure that assesses HCP 
vaccination coverage rates. Unlike outcome measures, process measures 
do not assess a particular outcome.
(2) Overview of Measure
    The COVID-19 Vaccination Coverage among HCP measure is a process 
measure developed by the CDC to track COVID-19 vaccination coverage 
among HCP in settings such as acute care and post-acute care (PAC) 
facilities and is reported via the CDC's National Healthcare Safety 
Network (NHSN).
    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (Hospital 
IQR Program (86 FR 45376 through 45377), PCHQR Program (86 FR 45430 
through 45431), and LTCH QRP (86 FR 45440 through 45441)) for more 
information on the initial review of the measure by the Measure 
Applications Partnership (MAP). We included an updated version of the 
measure on the Measures Under Consideration (MUC) list for the 2022-
2023 pre-rulemaking cycle for consideration by the MAP.\262\ In 
December 2022, the MAP's Hospital Workgroup and Post-Acute Care/Long-
Term Care (PAC/LTC) Workgroup discussed the modified measure. The 
Hospital Workgroup stated that the revision of the current measure 
captures up-to-date vaccination information in accordance with CDC 
recommendations updated since its initial development. Additionally, 
the Hospital Workgroup appreciated that the respecified measure of the 
target population is broader and simplified from seven categories of 
healthcare personnel to four.\263\ The PAC/LTC Workgroup voted to 
support the staff recommendation of conditional support for rulemaking. 
During review, the Health Equity Advisory Group highlighted the 
importance of COVID-19 measures and asked whether the measure excludes 
individuals with contraindications to Food and Drug Administration 
(FDA) authorized or approved COVID-19 vaccines, and whether the measure 
will be stratified by demographic factors. The measure developer 
confirmed that HCP with contraindications to the vaccines are excluded 
from the measure denominator, but the measure would not be stratified 
since the data are submitted at an aggregate rather than an individual 
level. The Rural Health Advisory Group expressed concerns about data 
collection burden, citing that collection is performed manually and 
that small rural hospitals may not have employee health software.\264\ 
The measure developer acknowledged the challenge of getting adequate 
documentation and emphasized the goal to ensure the measure does not 
present a burden on the provider. The developer also noted that the 
model used for this measure is based on the Influenza Vaccination 
Coverage among HCP measure (CBE #0431), and it intends to utilize a 
similar approach to the modified COVID-19 Vaccination Coverage among 
HCP measure if vaccination strategy becomes seasonal. The revised 
measure received conditional support for rulemaking from both MAP 
workgroups pending testing indicating the measure is reliable and 
valid, and endorsement by the consensus-based entity (CBE). The MAP 
noted that the previous version of the measure received endorsement 
from the CBE (CBE #3636) \265\ and that the CDC intends to submit the 
updated measure for endorsement.
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    \262\ Centers for Medicare & Medicaid Services. (2023) Pre-
Rulemaking MUC Lists and MAP Reports. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \263\ Centers for Medicare & Medicaid Services. MAP 2022-2023 
Preliminary Analysis Worksheet. 2022. Available at: https://mmshub.cms.gov/sites/default/files/map-preliminary-recommendations-2022-2023.xlsx.
    \264\ Centers for Medicare & Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \265\ Centers for Medicare & Medicaid Services. Measure 
Specifications for Hospital Workgroup for the 2022 MUC List. 
Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
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(a) Measure Specifications
    This measure includes at least one week of data collection a month 
for each of the three months in a quarter. The denominator would be the 
number of HCP eligible to work in the facility for at least one day 
during the reporting period, excluding persons with contraindications 
to COVID-19 vaccination that are described by the CDC. Facilities 
report the following four categories of HCP to NHSN: \266\
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    \266\ Centers for Disease Control and Prevention. (2023). 
Measure Specification: NHSN COVID-19 Vaccination Coverage among 
Healthcare Personnel. Available at: https://www.cdc.gov/nhsn/pdfs/nqf/covid-vax-hcpcoverage-rev-2023-508.pdf.
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    1. Employees: includes all persons who receive a direct paycheck 
from the reporting facility (that is, on the facility's payroll), 
regardless of clinical responsibility or patient contact.
    2. Licensed independent practitioners (LIPs): This includes 
physicians (MD, DO), advanced practice nurses, and physician assistants 
only who are affiliated with the reporting facility, but are not 
directly employed by it (that is, they do not receive a direct paycheck 
from the reporting facility), regardless of clinical responsibility or 
patient contact. Post-residency fellows are also included in this 
category if they are not on the facility's payroll.
    3. Adult students/trainees and volunteers: This includes all 
medical, nursing, or other health professional students, interns, 
medical residents, and volunteers aged 18 or over who are affiliated 
with the healthcare facility, but are not directly employed by it (that 
is, they do not receive a direct paycheck from the facility), 
regardless of clinical responsibility or patient contact.
    4. Other contract personnel: Contract personnel are defined as 
persons providing care, treatment, or services at the facility through 
contract who do not fall into any of the previously discussed 
denominator categories. This also includes vendors providing care, 
treatment, or services at the facility who may or may not be paid 
through a contract. Facilities are required to enter data on other 
contract personnel for submission in the NHSN application, but data for 
this category are not included in the COVID-19 Vaccination Coverage 
among HCP measure.
    The denominator excludes denominator-eligible individuals with

[[Page 27078]]

contraindications as defined by the CDC.\267\ There are no changes to 
the denominator exclusions.
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    \267\ Centers for Disease Control and Prevention. (2022). 
Contraindications and precautions. Available at: https://www.cdc.gov/vaccines/covid-19/clinical-considerations/interim-considerations-us.html#contraindications.
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    The numerator would be the cumulative number of HCP in the 
denominator population who are considered up to date with CDC 
recommended COVID-19 vaccines. Providers should refer to the definition 
of up to date as of the first day of the applicable reporting quarter, 
which can be found at https://www.cdc.gov/nhsn/pdfs/hps/covidvax/UpToDateGuidance-508.pdf. For example, for the proposed updated 
measure, HCP would be considered up to date during the quarter 4 CY 
2022 reporting period for the Hospital IQR Program, PCHQR Program, and 
the LTCH QRP if they meet one of the following criteria:
    1. Individuals who received an updated bivalent \268\ booster dose, 
or
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    \268\ The updated (bivalent) Moderna and Pfizer-BioNTech 
boosters target the most recent Omicron subvariants. The updated 
(bivalent) boosters were recommended by the CDC on 9/2/2022. As of 
this date, the original, monovalent mRNA vaccines are no longer 
authorized as a booster dose for people ages 12 years and older.
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    2a. Individuals who received their last booster dose less than 2 
months ago, or
    2b. Individuals who completed their primary series \269\ less than 
2 months ago.
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    \269\ Completing a primary series means receiving a two-dose 
series of a COVID-19 vaccine or a single dose of Janssen/J&J COVID-
19 vaccine.
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    We note that for purposes of NHSN surveillance, the CDC used this 
definition of up to date during quarter 4 2022 surveillance period 
(September 26, 2022-December 25, 2022).
    We refer readers to https://www.cdc.gov/nhsn/nqf/index.html for 
more details on the measure specifications.
    We are proposing that public reporting of the modified version of 
the COVID-19 Vaccination Coverage among HCP measure would begin with 
the October 2024 Care Compare refresh, or as soon as technically 
feasible after then, for the Hospital IQR Program, PCHQR Program, and 
LTCH QRP.
(b) CBE Endorsement
    The current version of the measure in the Hospital IQR Program, 
PCHQR Program, and LTCH QRP received CBE endorsement (CBE #3636, 
``Quarterly Reporting of COVID-19 Vaccination Coverage among Healthcare 
Personnel'') on July 26, 2022.\270\ The applicable authorities of the 
Hospital IQR Program,\271\ PCHQR Program,\272\ and LTCH QRP \273\ 
generally require that measures specified by the Secretary for use in 
these programs be endorsed by the CBE with a contract under section 
1890(a) of the Act. However, in the case of a specified area or medical 
topic determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.\274\ We adopted this measure during the FY 
2022 IPPS/LTCH PPS rule cycle, we reviewed CBE-endorsed measures and 
were unable to identify any other CBE-endorsed measures on this topic; 
therefore, we believe the exception for non CBE-endorsed measures 
applies. The CDC, as the measure developer, is pursuing endorsement for 
the modified version of the measure.
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    \270\ Centers for Medicare & Medicaid Services. Measure 
Specifications for Hospital Workgroup for the 2022 MUC List. 
Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
    \271\ Sec. 1886(b)(3)(B)(viii)(IX)(aa) of the Act.
    \272\ Sec. 1866(k)(3)(A) of the Act.
    \273\ Sec. 1886(m)(5)(D)(i) of the Act.
    \274\ See sec. 1886(b)(3)(B)(viii)(IX)(bb) of the Act for the 
Hospital IQR Program; sec. 1866(k)(3)(B) of the Act for the PCHQR 
Program; sec. 1886(m)(5)(D)(ii) of the Act for the LTCH QRP.
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(3) Data Submission and Reporting
    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (Hospital 
IQR Program (86 FR 45377), PCHQR Program (86 FR 45431), and LTCH QRP 
(86 FR 45441 through 45442)) for information on data submission and 
reporting of the measure. While we are not proposing any changes to the 
data submission or reporting process, we are proposing that reporting 
of the updated measure would begin with the Quarter 4 CY 2023 reporting 
period for the Hospital IQR Program, PCHQR Program, and LTCH QRP. Under 
the data submission and reporting process, providers would collect the 
numerator and denominator for the COVID-19 Vaccine Coverage among HCP 
measure for at least one self-selected week during each month of the 
reporting quarter and submit the data to the NHSN Healthcare Personal 
Safety (HPS) Component before the quarterly deadline. If a provider 
submits more than one week of data in a month, the most recent week's 
data would be used to calculate the measure. Each quarter, the CDC 
would calculate a single quarterly COVID-19 HCP vaccination coverage 
rate for each provider, which would be calculated by taking the average 
of the data from the three weekly rates submitted by the provider for 
that quarter. CMS would publicly report each quarterly COVID-19 HCP 
vaccination coverage rate as calculated by the CDC (Hospital IQR 
Program (86 FR 45377), PCHQR Program (86 FR 45431), and LTCH QRP (86 FR 
45441 through 45442)). We note that while the measure requires 
reporting for a minimum of one week each month, the current hospital 
Conditions of Participation (CoP) require more frequent reporting. With 
the announcement that the PHE will be ending on May 11, 2023,\275\ 
reporting under the Hospital CoP may be reduced to a lesser frequency. 
CMS plans to communicate any future changes to CoP through a Quality 
Safety & Oversight memoranda and other communications materials when 
new policies are finalized.
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    \275\ Office of Management and Budget. (2023). Statement of 
Administration Policy H.R. 382 and H.J. Res. 7. Available at: 
https://www.whitehouse.gov/wp-content/uploads/2023/01/SAP-H.R.-382-H.J.-Res.-7.pdf.
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    We invite public comment on this proposal.

C. Proposed Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program

1. Background and History of the Hospital IQR Program
    Through the Hospital IQR Program, we strive to ensure that 
patients, along with their clinicians, can use information from 
meaningful quality measures to make better decisions about their health 
care. We support technology that reduces burden and allows clinicians 
to focus on providing high-quality healthcare for their patients. We 
also support innovative approaches to improve quality, accessibility, 
affordability, and equity of care while paying particular attention to 
improving clinicians' and beneficiaries' experiences when interacting 
with CMS programs. In combination with other efforts across HHS, we 
believe the Hospital IQR Program incentivizes hospitals to improve 
healthcare quality and value, while giving patients the tools and 
information needed to make the best decisions for themselves.
    We seek to promote higher quality, equitable, and more efficient 
healthcare for Medicare beneficiaries. The adoption of widely agreed 
upon quality and cost measures supports this effort. We work with 
relevant interested parties to define measures in almost every care 
setting and currently measure many aspects of care for almost all 
Medicare

[[Page 27079]]

beneficiaries. These measures assess clinical processes and outcomes, 
patient safety and adverse events, patient experiences with care, care 
coordination, and cost of care. We have implemented quality measure 
reporting programs for multiple settings of care. To measure the 
quality of hospital inpatient services, we implemented the Hospital IQR 
Program. We refer readers to the following final rules for detailed 
discussions of the history of the Hospital IQR Program, including 
statutory history, and for the measures we have previously adopted for 
the Hospital IQR Program measure set:
     The FY 2010 IPPS/LTCH PPS final rule (74 FR 43860 through 
43861);
     The FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through 
50181);
     The FY 2012 IPPS/LTCH PPS final rule (76 FR 51605 through 
61653);
     The FY 2013 IPPS/LTCH PPS final rule (77 FR 53503 through 
53555);
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50775 through 
50837);
     The FY 2015 IPPS/LTCH PPS final rule (79 FR 50217 through 
50249);
     The FY 2016 IPPS/LTCH PPS final rule (80 FR 49660 through 
49692);
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57148 through 
57150);
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38326 through 
38328 and 82 FR 38348);
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 
41609);
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42448 through 
42509);
     The FY 2021 IPPS/LTCH PPS final rule (85 FR 58926 through 
58959);
     The FY 2022 IPPS/LTCH PPS final rule (86 FR 45360 through 
45426); and
     The FY 2023 IPPS/LTCH PPS final rule (87 FR 49190 through 
49310).
    We also refer readers to 42 CFR 412.140 for Hospital IQR Program 
regulations.
2. Retention of Previously Adopted Hospital IQR Program Measures for 
Subsequent Payment Determinations
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53512 and 53513) for our finalized measure retention policy. Pursuant 
to this policy, when we adopt measures for the Hospital IQR Program 
beginning with a particular payment determination, we automatically 
readopt these measures for all subsequent payment determinations unless 
a different or more limited period is proposed and finalized. Measures 
are also retained unless we propose to remove, suspend, or replace the 
measures. We are not proposing any changes to these policies in this 
proposed rule.
3. Removal Factors for Hospital IQR Program Measures
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41540 through 41544) for a summary of the Hospital IQR Program's 
removal factors. We are not proposing any changes to these policies in 
this proposed rule. However, as discussed in subsection 7.d. of this 
section of the proposed rule, we are proposing to codify our measure 
retention and removal policies in our regulations.
4. Considerations in Expanding and Updating Quality Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53510 through 53512) for a discussion of the previous considerations we 
have used to expand and update quality measures under the Hospital IQR 
Program. We also refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41147 and 41148), in which we describe the Meaningful Measures 
Framework. In 2021, we launched Meaningful Measures 2.0 to promote 
innovation and modernization of all aspects of quality, and to address 
a wide variety of settings, interested parties, and measure 
requirements.\276\ We also refer readers to the CMS National Quality 
Strategy that we launched on April 12, 2022, with the aims of promoting 
the highest quality outcomes and safest care for all individuals.\277\
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    \276\ Centers for Medicare & Medicaid Services. (2021). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization.
    \277\ Centers for Medicare & Medicaid Services. (2022). What is 
the National Quality Strategy? Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
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    We are not proposing any changes to these policies in this proposed 
rule.
5. Proposed New Measures for the Hospital IQR Program Measure Set
    We are proposing to adopt three new measures, all of which are 
electronic clinical quality measures (eCQMs): (1) Hospital Harm--
Pressure Injury eCQM, with inclusion in the eCQM measure set beginning 
with the CY 2025 reporting period/FY 2027 payment determination and for 
subsequent years; (2) Hospital Harm--Acute Kidney Injury eCQM, with 
inclusion in the eCQM measure set beginning with the CY 2025 reporting 
period/FY 2027 payment determination and for subsequent years; and 3) 
Excessive Radiation Dose or Inadequate Image Quality for Diagnostic 
Computed Tomography (CT) in Adults (Hospital Level--Inpatient) eCQM, 
with inclusion in the eCQM measure set beginning with the CY 2025 
reporting period/FY 2027 payment determination and for subsequent 
years.
a. Proposed Adoption of Hospital Harm--Pressure Injury eCQM, Beginning 
With the CY 2025 Reporting Period/FY 2027 Payment Determination and for 
Subsequent Years
(1) Background
    Hospital-acquired pressure injuries are serious events and one of 
the most common patient harms. The incidence of pressure injuries in 
hospitalized patients has been estimated at 5.4 per 10,000 patient-days 
and the rate of hospital-acquired pressure injuries has been estimated 
at 8.4 percent for inpatients.\278\ Pressure injuries commonly lead to 
further patient harm, including local infection, osteomyelitis, anemia, 
and sepsis,\279\ in addition to causing pain and discomfort to 
patients.\280\ Development of a pressure injury can increase the length 
of a patient's hospital stay by an average of four days.\281\ Hospital-
acquired pressure injuries are associated with 1.5 to 2.0 times greater 
risk of 30, 60, and 90-day readmissions.\282\ Any stage 3, stage 4, or 
unstageable pressure ulcer acquired after admission/presentation to a 
healthcare setting is considered a serious reportable event by the 
Agency for Healthcare Research and Quality (AHRQ).\283\
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    \278\ Li, Z., Lin, F., Thalib, L., & Chaboyer, W. (2020). Global 
prevalence and incidence of pressure injuries in hospitalised adult 
patients: A systematic review and meta-analysis. International 
Journal of Nursing Studies, Vol. 105. https://doi.org/10.1016/j.ijnurstu.2020.103546.
    \279\ Brem, H., Maggi, J., Nierman, D., Rolnitzky, L., Bell, D., 
Rennert, R., Golinko, M., Yan, A., Lyder, C., Vladeck, B. (2010). 
High cost of stage IV pressure ulcers. The American Journal of 
Surgery, 200: 473-477.
    \280\ Gunningberg, L., Donaldson, N., Aydin, C., Idvall, E. 
(2011). Exploring variation in pressure ulcer prevalence in Sweden 
and the USA: Benchmarking in action. 18. Journal of evaluation in 
clinical practice., 904-910.
    \281\ Bauer K, Rock K, Nazzal M, Jones O, Qu W. Pressure Ulcers 
in the United States' Inpatient Population From 2008 to 2012: 
Results of a Retrospective Nationwide Study. Ostomy Wound Manage. 
2016;62(11):30-38.
    \282\ Wassel, C.L., Delhougne, G., Gayle, J.A., Dreyfus, J., & 
Larson, B. (2020) Risk of readmissions, mortality, and hospital-
acquired conditions across hospital-acquired pressure injury (HAPI) 
stages in a US National Hospital Discharge database. Int Wound J., 
17, 1924-1934. https://doi.org/10.1111/iwj.13482.
    \283\ AHRQ. (2019). Never Events. https://psnet.ahrq.gov/primer/never-events.
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    The risk of developing a pressure injury can be reduced through 
best practices including risk assessment, assessment of skin and 
tissue, preventive skin care, and reducing progression through 
treatment of

[[Page 27080]]

pressure injuries, including nutrition.\284\ Prior studies also confirm 
that significant variation in rates of hospital-acquired pressure 
injuries exists between hospitals and show a higher prevalence of 
pressure injuries in patients with darker skin tones.285 286 
These findings suggest that current skin assessment protocols could be 
less effective at assessing lower stage pressure injuries for people 
with darker skin tones and indicate an opportunity for improvement.
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    \284\ Berlowitz, D. VanDeusen Lukas, C.; Parker, V.; 
Niederhauser, A.;, & Silver, J.L., C.; Ayello, E.; Zulkowski, K. 
(2012). Preventing Pressure Ulcers in Hospitals- A Toolkit for 
Improving Quality of Care.
    \285\ Rondinelli, J., Zuniga, S., Kipnis, P., Kawar, L. N., Liu, 
V., & Escobar, G.J. (2018). Hospital-Acquired Pressure Injury: Risk-
Adjusted Comparisons in an Integrated Healthcare Delivery System. 
Nurs Res, 67(1), 16-25.
    \286\ Oozageer Gunowa, N, Hutchinson, M, Brooke, J, Jackson, D. 
Pressure injuries in people with darker skin tones: A literature 
review. J Clin Nurs. 2018; 27: 3266-3275. https://doi.org/10.1111/jocn.14062.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hospital Harm--Pressure Injury measure is an outcome eCQM that 
assesses the proportion of inpatient hospitalizations for patients 18 
years and older who suffer the harm of developing a new stage 2, stage 
3, stage 4, deep tissue, or unstageable pressure injury. The intent of 
this measure is to incentivize greater achievements in reducing harms 
and to enhance hospital performance on patient safety outcomes. 
Systematically assessing patients who develop new pressure injuries 
while in the hospital setting would provide hospitals with a reliable 
and timely measurement of harm reduction efforts and the ability to 
modify their improvement efforts in near real-time.
    This measure was previously described in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19489 through 19491) to solicit public comment on 
potential future inclusion in the Hospital IQR Program. The measure 
developer has since revised the measure specifications in response to 
public comments and feedback. Specifically, the measure developer:
     Expanded the value set to improve capture of pressure 
injuries;
     Incorporated a present on admission indicator for ICD-10-
CM diagnoses;
     Incorporated a denominator exclusion for pressure injuries 
present on admission;
     Incorporated a 24-hour time window for accurate and timely 
identification of stage 2, 3, 4, or unstageable pressure injury present 
on admission; and
     Incorporated a 72-hour time window for accurate and timely 
identification of deep tissue pressure injury (DTPI) because early 
diagnosis of DTPI allows prompt identification of possible causes, 
initiation of treatment, and implementation of preventive strategies. 
Up to 72 hours can lapse between the precipitating pressure event and 
the onset of purple or maroon skin, so a longer time window is needed 
to exclude cases when the precipitating event occurred before the 
patient's admission.\287\
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    \287\ Wound Management & Prevention: Volume 64--Issue 11--
November 2018 ISSN 1943-2720 Index: Ostomy Wound Manage. 
2018;64(11):30-41' Definition Inpatient hospitalizations.
---------------------------------------------------------------------------

    The measure was re-tested in 18 hospitals (test sites) with two 
different electronic health record (EHR) vendors (Epic and Cerner) with 
varying bed size, geographic location, teaching status, and urban/rural 
status. Test results indicated strong measure reliability (0.97 signal-
to-noise ratio and 0.916 intra-class correlation coefficient using the 
split-half sample) and validity (strong concordance and inter-rater 
agreement between data exported from the EHR and data in the patient 
chart).\288\
---------------------------------------------------------------------------

    \288\ Centers for Medicare & Medicaid Services. 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications. 
Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

    An older version of this measure was reviewed by the consensus-
based entity (CBE) convened Measure Applications Partnership (MAP) for 
the Hospital IQR Program and Medicare Promoting Interoperability 
Program during the 2017-2018 pre-rulemaking cycle. The measure received 
a recommendation of conditional support for rulemaking pending review 
and endorsement by the CBE once the measure was fully tested. This 
measure was subsequently reviewed by the CBE during the Spring 2019 
cycle but withdrawn due to anticipated substantive changes in measure 
specifications, described in the Measure Overview section of this 
proposal. The revised measure was re-submitted to the MAP for the 2022-
2023 pre-rulemaking cycle and received conditional support for 
rulemaking pending endorsement by the CBE.\289\ During its review, the 
MAP expressed concern about the measure specifications and cautioned 
about potential bias against facilities that do not have the expertise 
needed to accurately stage pressure injuries (for example, certified 
wound care nurses). The MAP noted that risk adjustment may be necessary 
to ensure the measure does not disproportionately penalize facilities 
who may treat more complex patients (for example, academic medical 
centers or safety net providers). The MAP stated that the measure has 
several benefits as an eCQM in the Hospital IQR Program, including that 
hospitals can receive reliable and timely information on pressure 
injury rates and noted that hospital-acquired pressure injuries are one 
of the most common patient harms. Weighing these factors, the MAP 
ultimately offered its conditional support for rulemaking.\290\
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    \289\ Centers for Medicare and Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \290\ Ibid.
---------------------------------------------------------------------------

    The Hospital Harm--Pressure Injury measure was submitted to the 
CBE, for endorsement review in the Fall 2022 cycle (CBE #3498e). 
Although section 1886(b)(3)(B)(viii)(IX)(aa) of the Act generally 
requires that measures specified by the Secretary for use in the 
Hospital IQR Program be endorsed by the entity with a contract under 
section 1890(a) of the Act, section 1886(b)(3)(B)(viii)(IX)(bb) of the 
Act states that in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary. We reviewed CBE-endorsed measures and were 
unable to identify any other CBE-endorsed measures on this topic, and, 
therefore, we believe the exception in section 
1886(b)(3)(B)(viii)(IX)(bb) of the Act applies.
(3) Measure Specifications
    The numerator is inpatient hospitalizations for patients with a new 
DTPI or stage 2, 3, 4, or unstageable pressure injury, as evidenced by 
any of the following: (1) a diagnosis of DTPI with the DTPI not present 
on admission, (2) a diagnosis of stage 2, 3, 4 or unstageable pressure 
injury with the pressure injury diagnosis not present on admission, (3) 
a DTPI found on exam greater than 72 hours after the start of the 
encounter, (4) a stage 2, 3, 4 or unstageable pressure injury found on 
exam greater than 24 hours after the start of the encounter. The 
denominator is inpatient hospitalizations for patients 18 years and 
older. The following are excluded from the denominator: (1) Inpatient 
hospitalizations for patients with a DTPI or stage 2, 3, 4 or 
unstageable pressure injury diagnosis

[[Page 27081]]

present on admission, (2) inpatient hospitalizations for patients with 
a DTPI found on exam within 72 hours of the encounter start, (3) 
inpatient hospitalizations for patients with a stage 2, 3, 4, or 
unstageable pressure injury found on exam within 24 hours of the 
encounter start, or (4) inpatient hospitalizations for patients with 
diagnosis of a COVID-19 infection during the encounter. Importantly, at 
the time of development and testing, the literature highlights a wide 
variety of skin manifestations of COVID-19 which hospitals have been 
confusing with pressure injury and sometimes report as pressure injury 
in the absence of clear coding guidance and clear evidence regarding 
the pathophysiology of COVID-19-related 
lesions.291 292 293 294 295 Based on recommendations from 
the Technical Expert Panel (TEP), the exclusion for COVID-19 is 
included as transitional with the intention to be removed in the future 
(during the routine eCQM Annual Update process) when the field develops 
a better consensus about what is COVID-19-related tissue breakdown 
versus what is pressure injury. We refer readers to the eCQI Resource 
Center (https://ecqi.healthit.gov/pre-rulemaking-eh-cah-ecqms) for more 
details on the measure specifications.
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    \291\ Unavoidable Pressure Injury during COVID-19 Pandemic: A 
Position Paper from the National Pressure Injury Advisory Panel 
(2020). Available at: https://npiap.com/page/COVID-19Resources.
    \292\ Genovese, G., Moltrasio, C., Berti, E., Marzano, A.V. 
(2020) Skin Manifestations Associated with COVID-19: Current 
Knowledge and Future Perspectives, Dermatology. U.S. National 
Library of Medicine. Available at: https://pubmed.ncbi.nlm.nih.gov/33232965/.
    \293\ Perrillat, A., Foletti, J.M., Lacagne, A.S., Guyot, L., & 
Graillon, N. (2020). Facial pressure ulcers in COVID-19 patients 
undergoing prone positioning: How to prevent an underestimated 
epidemic? Journal of Stomatology, Oral and Maxillofacial Surgery, 
121(4), 442-444.
    \294\ Jiang, S.T., Fang, C.H., Chen, J. T., & Smith, R. V. 
(2020). The Face of COVID-19: Facial Pressure Wounds Related to 
Prone Positioning in Patients Undergoing Ventilation in the 
Intensive Care Unit. Otolaryngology--Head and Neck Surgery, 164(2), 
300-301.
    \295\ Johnson, C., Giordano, N.A., Patel, L., Book, K.A., Mac, 
J., Viscomi, J., Em, A., Westrick, A., Koganti, M., Tanpiengco, M., 
Sylvester, K., & Mastro, K. A. (2022). Pressure Injury Outcomes of a 
Prone-Positioning Protocol in Patients With COVID and ARDS. American 
Journal of Critical Care, 31(1), 34-41.
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(4) Data Source and Reporting
    This eCQM uses data collected through hospitals' EHRs. The measure 
is designed to be calculated by the hospitals' certified electronic 
health record technology (CEHRT) using the patient-level data and then 
submitted by hospitals to CMS. As with all quality measures we develop, 
testing was performed to confirm the feasibility of the measure, data 
elements, and validity of the numerator, using clinical adjudicators 
who validated the EHR data compared with medical chart-abstracted data. 
Testing demonstrated that all critical data elements were reliably and 
consistently captured in patient EHRs and measure implementation is 
feasible.
    We are proposing the adoption of the Hospital-Harm--Pressure Injury 
eCQM as part of the eCQM measure set, from which hospitals can self-
select measures to report to meet the eCQM requirement, beginning with 
the CY 2025 reporting period/FY 2027 payment determination and for 
subsequent years. We refer readers to section IX.C.10.e. of the 
preamble of this proposed rule for a discussion of our previously 
finalized eCQM reporting and submission policies. Additionally, we 
refer readers to section IX.F. of the preamble of this proposed rule 
for a discussion of a similar proposal to adopt this measure in the 
Medicare Promoting Interoperability Program.
    We invite public comment on this proposal.
b. Proposed Adoption of Hospital Harm--Acute Kidney Injury eCQM, 
Beginning With the CY 2025 Reporting Period/FY 2027 Payment 
Determination and for Subsequent Years
(1) Background
    Acute kidney injury (AKI) is a group of conditions characterized by 
a sudden decrease in glomerular filtration rate, as evidenced by an 
increase in serum creatinine concentration or oliguria, and classified 
by stage and cause.\296\ Published literature suggests that the 
incidence of AKI is 10-20 percent in general hospitalized patients and 
up to 45-50 percent among critically ill patients.\297\ Up to two 
thirds of intensive care patients will develop AKI, which may result in 
the need for dialysis and is associated with an increased risk of 
mortality.298 299 Both worsening renal function and injury 
requiring dialysis have lasting negative impacts including loss of 
kidney function, uremic complications, and symptoms associated with 
drug toxicity and volume overload.300 301 302 AKI has also 
been associated with longer term harmful outcomes, such as increased 
odds of death, increased length of hospital stay, and an average of 
approximately $7,500 in excess hospital costs.\303\ Several studies 
have demonstrated the association of chronic kidney disease (CKD) 
development following AKI, and development of ESRD, which increase 
hospital admissions and long-term mortality while reducing patient 
quality of life.\304\ About 30 percent of patients with AKI may require 
ongoing dialysis in the outpatient setting after hospital 
discharge.\305\ Survivors of AKI also have significantly lower health-
related quality of life (HRQOL) compared to the general 
population.\306\ HRQOL is a predictor of mortality among AKI survivors 
after adjusting for clinical risk variables.\307\
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    \296\ Levey, A.S., & James, M.T. (2017). Acute Kidney Injury. 
Annals of internal medicine, 167(9), ITC66-ITC80.
    \297\ Thongprayoon, C., Hansrivijit, P., Kovvuru, K., Kanduri, 
S.R., Torres-Ortiz, A., Acharya, P., Gonzalez-Suarez, M.L., Kaewput, 
W., Bathini, T., & Cheungpasitporn, W. (2020). Diagnostics, Risk 
Factors, Treatment and Outcomes of Acute Kidney Injury in a New 
Paradigm. Journal of clinical medicine, 9(4), 1104.
    \298\ Hoste, E.A., & Schurgers, M. (2008). Epidemiology of acute 
kidney injury: how big is the problem? Critical care medicine, 36(4 
Suppl), S146-S151.
    \299\ Wilson, F.P., Yang, W., & Feldman, H.I. (2013). Predictors 
of death and dialysis in severe AKI: the UPHS-AKI cohort. Clinical 
journal of the American Society of Nephrology: CJASN, 8(4), 527-537.
    \300\ Hoste, E., & De Corte, W. (2011). Clinical consequences of 
acute kidney injury. Contributions to nephrology, 174, 56-64.
    \301\ Levey, A.S., & James, M.T. (2017). Acute Kidney Injury. 
Annals of internal medicine, 167(9), ITC66-ITC80.
    \302\ Lib[oacute]rio, A.B., Leite, T.T., Neves, F.M., Teles, F., 
& Bezerra, C.T. (2015). AKI complications in critically ill 
patients: association with mortality rates and RRT. Clinical journal 
of the American Society of Nephrology: CJASN, 10(1), 21-28.
    \303\ Chertow, G.M., Burdick, E., Honour, M., Bonventre, J.V., & 
Bates, D.W. (2005). Acute kidney injury, mortality, length of stay, 
and costs in hospitalized patients. Journal of the American Society 
of Nephrology: JASN, 16(11), 3365-3370.
    \304\ Gameiro, J., Marques, F., Lopes, J.A. (2021). Long-term 
consequences of acute kidney injury: a narrative review, Clinical 
Kidney Journal, 14(3) 789-804.
    \305\ Dahlerus, C., Segal, J.H., He K, et al. (2021). Acute 
Kidney Injury Requiring Dialysis and Incident Dialysis Patient 
Outcomes in US Outpatient Dialysis Facilities. Clin J Am Soc 
Nephrol, 16(6), 853-861.
    \306\ Wang AY, Bellomo R, Cass A, Finfer S, Gattas D, Myburgh J, 
Chadban S, Hirakawa Y, Ninomiya T, Li Q, Lo S, Barzi F, Sukkar L, 
Jardine M, Gallagher MP; POST-RENAL Study Investigators and the 
ANZICS Clinical Trials Group. Health-related quality of life in 
survivors of acute kidney injury: The Prolonged Outcomes Study of 
the Randomized Evaluation of Normal versus Augmented Level 
Replacement Therapy study outcomes. Nephrology (Carlton). 2015 
Jul;20(7):492-8. doi: 10.1111/nep.12488. PMID: 25891297.
    \307\ Joyce VR, Smith MW, Johansen KL, Unruh ML, Siroka AM, 
O'Connor TZ, Palevsky PM; Veteran Affairs/National Institutes of 
Health Acute Renal Failure Trial Network. Health-related quality of 
life as a predictor of mortality among survivors of AKI. Clin J Am 
Soc Nephrol. 2012 Jul;7(7):1063-70. doi: 10.2215/CJN.00450112. Epub 
2012 May 17. PMID: 22595826; PMCID: PMC3386668.
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    Not all AKI is avoidable, but a substantial proportion of AKI cases 
are preventable and/or treatable at an early stage to improve outcomes. 
The Kidney

[[Page 27082]]

Disease: Improving Global Outcomes (KDIGO) guidelines suggest careful 
management of hemodynamic status, fluids, and vasoactive medications 
for the prevention of AKI.\308\ Literature suggests early AKI treatment 
such as nephrotoxic avoidance, drug dose adjustment, and attention to 
fluid balance are also effective preventive measures.309 310 
Using electronic health record (EHR) data from 20 hospitals in 2020, 
the measure developer found that hospital-level measure performance 
rates ranged from 0.76 percent to 4.43 percent, with a system-wide, 
weighted average rate equal to 1.52 percent.\311\ The wide variability 
indicates room for quality improvement in hospital inpatient settings, 
with several hospitals' performance rates consistently below the 
overall mean.
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    \308\ Kidney Disease: Improving Global Outcomes (KDIGO). (2012). 
KDIGO 2012 Clinical Practice Guideline for the Evaluation and 
Management of Chronic Kidney Disease. Kidney international, Suppl. 
2, 1-138.
    \309\ Perazella M. A. (2012). Drug use and nephrotoxicity in the 
intensive care unit. Kidney international, 81(12), 1172-1178.
    \310\ Onuigbo, M.A., Samuel, E., & Agbasi, N. (2017). Hospital-
acquired nephrotoxic exposures in the precipitation of acute kidney 
injury--A case series analysis and a call for more preventative 
nephrology practices. J Nephropharmacol, 6(2), 90-97.
    \311\ CMS. 2022-2023 Measures Under Consideration (MUC) Cycle 
Measure Specifications. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hospital Harm--Acute Kidney Injury measure is an outcome eCQM 
that assesses the proportion of inpatient hospitalizations for patients 
18 years and older who have an AKI (stage 2 or greater) that occurred 
during the encounter. An AKI stage 2 or greater is defined as a 
substantial increase in serum creatinine value, or by the initiation of 
kidney dialysis (continuous renal replacement therapy (CRRT), 
hemodialysis or peritoneal dialysis). The goal of this measure is to 
improve patient safety and prevent patients from developing moderate-
to-severe AKI (that is, stage 2 or greater) during their 
hospitalization. Early identification and management of at-risk 
patients is critical, as there is no specific treatment to reverse 
AKI.\312\ Accurately monitoring the rate at which AKI occurs in the 
hospital setting would allow hospitals to improve quality and reduce 
AKI harm rates.
---------------------------------------------------------------------------

    \312\ Kidney Disease: Improving Global Outcomes (KDIGO). (2012). 
KDIGO 2012 Clinical Practice Guideline for the Evaluation and 
Management of Chronic Kidney Disease. Kidney international, Suppl. 
2, 1-138.
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    This measure was tested in 20 hospitals (test sites) with two 
different EHR vendors (Meditech and Cerner) with varying bed size, 
geographic location, teaching status, and urban/rural status. Testing 
results indicated strong measure reliability (0.91 for the signal-to-
noise ratio and 0.79 for intra-class correlation coefficient using the 
split-half sample) and validity (strong concordance and inter-rater 
agreement between data exported from the EHR and data in the patient 
chart).\313\
---------------------------------------------------------------------------

    \313\ Centers for Medicare & Medicaid Services. 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications. 
Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

    The Hospital Harm--Acute Kidney Injury measure was submitted to the 
CBE-convened MAP for the 2022-2023 pre-rulemaking cycle and received 
conditional support for rulemaking pending endorsement by the CBE.\314\ 
During its review, MAP noted that the measure fills a gap in quality 
measurement and provides incentives for improvement since there is 
currently no AKI measure in the Hospital IQR Program. The MAP also 
acknowledged that the measure aligns with CMS's goals for high-impact 
and outcome-based measures, as well as two high-priority areas for the 
Hospital IQR Program in safety and outcome eCQMs.
---------------------------------------------------------------------------

    \314\ Centers for Medicare and Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
---------------------------------------------------------------------------

    This measure was submitted to the CBE for endorsement review in the 
Fall 2022 cycle (CBE #3713e). Although section 
1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that measures specified 
by the Secretary for use in the Hospital IQR Program be endorsed by the 
entity with a contract under section 1890(a) of the Act, section 
1886(b)(3)(B)(viii)(IX)(bb) of the Act states that in the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) of the Act, the Secretary 
may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary. We reviewed 
CBE-endorsed measures and were unable to identify any other CBE-
endorsed measures on this topic, and, therefore, we believe the 
exception in section 1886(b)(3)(B)(viii)(IX)(bb) of the Act applies.
(3) Measure Specifications
    The numerator is inpatient hospitalizations for patients 18 years 
and older who develop AKI (stage 2 or greater) during the encounter, as 
evidenced by: (1) a subsequent increase in the serum creatinine value 
at least 2 times higher than the lowest serum creatinine value, and the 
increased value is greater than the highest sex-specific normal value 
for serum creatinine or (2) kidney dialysis (hemodialysis or peritoneal 
dialysis) initiated 48 hours or more after the start of the encounter. 
The denominator is inpatient hospitalizations for patients 18 years and 
older without a diagnosis of obstetrics, with a length of stay of 48 
hours or longer, and who had at least one serum creatinine value after 
48 hours from the start of the encounter. The denominator excludes 
inpatient hospitalizations for patients who (1) are already in AKI at 
the start of the encounter, (2) have CKD stage 3A or greater, (3) have 
less than two serum creatinine results within 48 hours of the encounter 
start, (4) have kidney dialysis initiated within 48 hours of the 
encounter start, (5) have at least one specified diagnosis present on 
admission that puts them at extremely high risk for AKI, or (6) have at 
least one specified procedure during the encounter that puts them at 
extremely high risk for AKI. We refer readers to the eCQI Resource 
Center (https://ecqi.healthit.gov/pre-rulemaking-eh-cah-ecqms) for more 
details on the measure specifications.
(4) Data Source and Reporting
    The Hospital Harm--Acute Kidney Injury eCQM uses data collected 
through hospitals' EHRs. The measure is designed to be calculated by 
the hospitals' CEHRT using the patient-level data and then submitted by 
hospitals to CMS. With patient data available from hospitals' EHRs, we 
believe that hospitals could use confidential feedback reports for this 
measure to identify disparities in outcomes across different patient 
demographics, and potentially use that information to inform targeted 
quality improvement efforts. As with all quality measures we develop, 
testing was performed to confirm the feasibility of the measure, data 
elements, and validity of the numerator, using clinical adjudicators 
who validated the EHR data compared with medical chart-abstracted data. 
Feasibility testing in 34 inpatient acute care facilities showed that 
all critical data elements for this measure are defined in electronic 
fields.

[[Page 27083]]

    We are proposing the adoption of the Hospital-Harm--Acute Kidney 
Injury eCQM as part of the eCQM measure set, from which hospitals can 
self-select measures to report to meet the eCQM requirement, beginning 
with the CY 2025 reporting period/FY 2027 payment determination and for 
subsequent years. We refer readers to section IX.C.10.e. of the 
preamble of this proposed rule for a discussion of our previously 
finalized eCQM reporting and submission policies. Additionally, we 
refer readers to section IX.F. of the preamble of this proposed rule 
for a discussion of a similar proposal to adopt this measure in the 
Medicare Promoting Interoperability Program.
    We invite public comment on this proposal.
c. Proposed Adoption of Excessive Radiation Dose or Inadequate Image 
Quality for Diagnostic Computed Tomography in Adults (Hospital Level--
Inpatient) eCQM Beginning With the CY 2025 Reporting Period/FY 2027 
Payment Determination and for Subsequent Years
(1) Background
    Over 80 million computed tomography (CT) scans are performed each 
year in the United States, compared to only three million in 1980.\315\ 
The increased use of CT scans has also increased patients' exposure to 
x-rays, a type of ionizing radiation that contributes to the 
development of cancer.\316\ The use of CT scans accounts for 24 percent 
of all radiation exposure for people in the U.S., but has greatly 
improved the diagnosis and treatment of many conditions.\317\
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    \315\ Harvard Health Publishing. (2021). Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
    \316\ Ibid.
    \317\ Ibid.
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    CT scans deliver higher doses of radiation than conventional x-
rays, with a chest x-ray emitting about 0.1 millisieverts (mSv) of 
radiation, while a regular-dose CT chest scan exposes a patient to 
seven mSv.\318\ In comparison, on average a person in the U.S. is 
exposed to three mSv of radiation per year from naturally occurring 
radioactive materials, making a regular-dose CT chest scan equivalent 
to receiving about two years of background radiation.\319\
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    \318\ Ibid.
    \319\ National Cancer Institute. (2019). Computed Tomography 
(CT) Scans and Cancer. Available at: https://www.cancer.gov/about-cancer/diagnosis-staging/ct-scans-fact-sheet#is-the-radiation-from-ct-harmful.
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    A large body of research links CT scans to a higher risk of 
developing cancer.320 321 322 323 324 One study found that 
patients who received CT scans had a 0.7 percent higher risk of 
developing cancer in their lifetime compared to the general U.S. 
population. The risk increased for patients who underwent multiple CT 
scans, ranging from 2.7 to 12 percent higher.\325\ While the likelihood 
of developing cancer from a CT scan is small on an individual level, on 
a population level it can lead to many more cancer cases given the 
number of CT scans performed every year.\326\ One study estimated that 
the percentage of cancers in the U.S. attributable to CT scans may be 
as high as two percent.\327\ Therefore, it is critically important to 
ensure that patients are exposed to the lowest possible level of 
radiation while preserving image quality.
---------------------------------------------------------------------------

    \320\ Berrington de Gonz[aacute]lez, A., Mahesh, M., Kim, K.P., 
Bhargavan, M., Lewis, R., Mettler, F., & Land, C. (2009). Projected 
cancer risks from computed tomographic scans performed in the United 
States in 2007. Archives of Internal Medicine, 169(22), 2071-2077. 
https://doi.org/10.1001/archinternmed.2009.440.
    \321\ Pearce MS, Salotti JA, Little MP, McHugh K, Lee C, Kim KP, 
Howe NL, Ronckers CM, Rajaraman P, Sir Craft AW, Parker L, 
Berrington de Gonz[aacute]lez A. Radiation exposure from CT scans in 
childhood and subsequent risk of leukaemia and brain tumours: a 
retrospective cohort study. Lancet. 2012 Aug 4;380(9840):499-505. 
Doi: 10.1016/S0140-6736(12)60815-0. Epub 2012 Jun 7. PMID: 22681860; 
PMCID: PMC3418594.
    \322\ Mathews JD, Forsythe AV, Brady Z, Butler MW, Goergen SK, 
Byrnes GB, Giles GG, Wallace AB, Anderson PR, Guiver TA, McGale P, 
Cain TM, Dowty JG, Bickerstaffe AC, Darby SC. Cancer risk in 680,000 
people exposed to computed tomography scans in childhood or 
adolescence: data linkage study of 11 million Australians. BMJ. 2013 
May 21;346:f2360. Doi: 10.1136/bmj.f2360. PMID: 23694687; PMCID: 
PMC3660619.
    \323\ Albert JM. Radiation risk from CT: implications for cancer 
screening. AJR Am J Roentgenol. 2013 Jul;201(1):W81-7. Doi: 10.2214/
AJR.12.9226. PMID: 23789701.
    \324\ Hong JY, Han K, Jung JH, Kim JS. Association of Exposure 
to Diagnostic Low-Dose Ionizing Radiation With Risk of Cancer Among 
Youths in South Korea. JAMA Netw Open. 2019 Sep 4;2(9):e1910584. 
Doi: 10.1001/jamanetworkopen.2019.10584. PMID: 31483470; PMCID: 
PMC6727680.
    \325\ Harvard Health Publishing. (2021). Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
    \326\ Berrington de Gonz[aacute]lez, A., Mahesh, M., Kim, K.P., 
Bhargavan, M., Lewis, R., Mettler, F., & Land, C. (2009). Projected 
cancer risks from computed tomographic scans performed in the United 
States in 2007. Archives of Internal Medicine, 169(22), 2071-2077. 
https://doi.org/10.1001/archinternmed.2009.440.
    \327\ Ibid.
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(2) Overview of Measure
    The Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computed Tomography (CT) in Adults (Hospital Level--
Inpatient) eCQM (hereinafter referred to as the Excessive Radiation 
eCQM) provides a standardized method for monitoring the performance of 
diagnostic CT to discourage unnecessarily high radiation doses while 
preserving image quality. It is expressed as a percentage of eligible 
CT scans that are out-of-range based on having either excessive 
radiation dose or inadequate image quality, relative to evidence-based 
thresholds based on the clinical indication for the exam.\328\ This 
measure is not currently risk-adjusted. The purpose of this measure is 
to reduce unintentional harm to patients. Setting a standard for 
diagnostic CT scans to prevent unnecessarily high radiation doses while 
preserving image quality would provide hospitals with a reliable method 
to assess harm reduction efforts and modify their improvement efforts. 
This measure also addresses high priority areas as stated in our 
Meaningful Measures Framework, including the transition to digital 
quality measures and the adoption of high-quality measures that improve 
patient outcomes and safety.\329\ We are also proposing to adopt the 
Excessive Radiation eCQM to support the National Quality Strategy goal 
of promoting safety by reducing preventable harm to patients.\330\ The 
measure was developed according to evidence and consensus-based 
clinical guidelines for optimizing CT radiation doses. These include 
guidelines created by the American College of Radiology,\331\ The 
Society of Interventional Radiology,\332\ The Society of Cardiovascular 
CT,\333\

[[Page 27084]]

cardiovascular imaging societies,\334\ Image Wisely 2020,\335\ and the 
FDA.\336\
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    \328\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \329\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \330\ CMS Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \331\ American College of Radiology. (2015). Development and 
Revision Handbook. https://www.acr.org/-/media/ACR/Files/Practice-Parameters/DevelopmentHandbook.pdf.
    \332\ Stecker, Michael S. et al. Guidelines for Patient 
Radiation Dose Management. Journal of Vascular and Interventional 
Radiology. 2009. Volume 20, Issue 7, S263-S273.
    \333\ Halliburton SS, Abbara S, Chen MY, Gentry R, Mahesh M, 
Raff GL, Shaw LJ, Hausleiter J; Society of Cardiovascular Computed 
Tomography. SCCT guidelines on radiation dose and dose-optimization 
strategies in cardiovascular CT. J Cardiovasc Comput Tomogr. 2011 
Jul-Aug;5(4):198-224. doi: 10.1016/j.jcct.2011.06.001. PMID: 
21723512; PMCID: PMC3391026.
    \334\ Hirshfeld, JW, Ferrari, VA, Bengel, FM, et al. 2018 ACC/
HRS/NASCI/SCAI/SCCT Expert Consensus Document on Optimal Use of 
Ionizing Radiation in Cardiovascular Imaging: Best Practices for 
Safety and Effectiveness. Catheter Cardiovasc Interv. 2018; 92: E35-
E97. https://doi.org/10.1002/ccd.27659.
    \335\ Image Wisely 2020. Available at: https://www.imagewisely.org/.
    \336\ FDA. (2019). Computed Tomography (CT). https://www.fda.gov/radiation-emitting-products/medical-x-ray-imaging/computed-tomography-ct#6.
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    The measure was tested across 16 inpatient and outpatient hospitals 
and a large system of outpatient radiology practices. Measure testing 
revealed that availability, accuracy, validity and reproducibility were 
high for all of the measure's required data elements and the variables 
that were calculated by the translation software. The measure developer 
further assessed the reporting burden by administering surveys to each 
of the participating hospitals and outpatient groups. They found that 
the burden was small to moderate, comparable to the burden of measure 
reporting for other measures and fell to information technology (IT) 
personnel rather than physicians.
    Measure testing found that assessing radiation doses and providing 
audit feedback to radiologists resulted in significant reductions in 
excessive and unsafe dose levels. The testing sites also noted that the 
assessment of their doses as specified in the measure was helpful for 
identifying areas for quality improvement. Over 40 letters were 
submitted in support of the measure, including several from 
radiologists and medical physicists who serve as leaders of the testing 
sites, that confirmed it was feasible and data assembly would not pose 
a large burden.
    The measure was submitted to the CBE for endorsement review in the 
Fall 2021 cycle (CBE #3663e) and was endorsed on August 2, 2022. The 
Excessive Radiation eCQM (MUC2022-018) was submitted to the CBE-
convened MAP for the 2022-2023 pre-rulemaking cycle and received 
support for rulemaking.\337\ The MAP noted that the Hospital IQR 
Program currently does not have any measures assessing the risk of 
radiation exposure from CT scans, and this measure would encourage 
shared decision-making between providers and patients.\338\
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    \337\ Centers for Medicare & Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \338\ Ibid.
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(3) Data Sources
    The Excessive Radiation eCQM uses hospitals' EHR data and radiology 
electronic clinical data systems, including the Radiology Information 
System (RIS) and the Picture Archiving and Communication System (PACS). 
Medical imaging information such as Radiation Dose Structured Reports 
and image pixel data are stored according to the universally adopted 
Digital Imaging and Communications in Medicine (DICOM) standard. 
Currently, eCQMs cannot access and process data elements in their 
original DICOM formats. The measure developer has created software, 
called the Alara Imaging Software for CMS Measure Compliance, to 
address this gap. This software links primary data elements, assesses 
CT scans for eligibility for inclusion in the measure, and generates 
three data elements mapped to a clinical terminology for eCQM 
consumption: CT Dose and Image Quality Category, Calculated CT Size-
Adjusted Dose, and Calculated CT Global Noise.
    The translation software would be available to all reporting 
entities free of charge and would be accessible by creating a secure 
account through the measure developer's website. Education materials 
would provide step-by-step instructions on how hospitals can create an 
account and then link their EHR and PACS data to the translation 
software. Reporting entities and their vendors would be able to use the 
data elements created by this software to calculate the eCQM and to 
submit results to the Hospital IQR Program as they do for all other 
eCQMs.
(4) Measure Specifications
    The measure numerator is the number of diagnostic CT scans that 
have a size-adjusted radiation dose greater than the threshold defined 
for the specific CT category. The threshold is determined by the body 
region being imaged and the reason for the exam, which affects the 
radiation dose and image quality required for that exam. The numerator 
also includes CT scans with a noise value greater than a threshold 
specific to the CT category.\339\
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    \339\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    The measure denominator is the number of all diagnostic CT scans 
performed on patients 18 years and older during the one-year 
measurement period which have an assigned CT category, a size-adjusted 
radiation dose value, and a global noise value.\340\
---------------------------------------------------------------------------

    \340\ Ibid.
---------------------------------------------------------------------------

    The measure excludes CT scans that cannot be categorized by the 
area of the body being imaged or reason for imaging. These include 
scans that are simultaneous exams of multiple body regions outside of 
four commonly performed multiple region exams defined by the measure, 
or scans that cannot be classified based on diagnosis and procedure 
codes. Exams that cannot be classified are specified as Logical 
Observation Identifiers Names and Code (LOINC) 96914-7, CT Dose and 
Image Quality Category, Full Body. The measure also has technical 
exclusions for CT scans missing information on the patient's age, 
Calculated CT Size-Adjusted Dose, or Calculated CT Global Noise. We 
refer readers to the eCQI Resource Center (https://ecqi.healthit.gov/pre-rulemaking-eh-cah-ecqms) for more details on the measure 
specifications.
(5) Data Submission and Reporting
    We are proposing the adoption of the Excessive Radiation eCQM as 
part of the Hospital IQR Program measure set, from which hospitals can 
self-select to report it to meet the eCQM requirement, beginning with 
the CY 2025 reporting period/FY 2027 payment determination. We refer 
readers to section IX.C.10.e. of the preamble of this proposed rule for 
a discussion of our previously finalized eCQM reporting and submission 
policies. We also refer readers to section IX.F. of the preamble of 
this proposed rule for more information on our proposal to adopt the 
Excessive Radiation eCQM in the Medicare Promoting Interoperability 
Program.
    We invite public comment on this proposal.
6. Refinements to Current Measures in the Hospital IQR Program Measure 
Set
    We are proposing to modify three measures within the Hospital IQR 
Program measure set: (1) Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality (HWM) measure beginning with the FY 2027 payment 
determination; (2) Hybrid Hospital-Wide All-Cause Readmission (HWR) 
measure beginning with the FY 2027 payment determination; and (3) 
COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure 
beginning with the Quarter 4 CY 2023 reporting period/FY 2025 payment 
determination. We provide more details on these proposals in the 
subsequent sections and for the modification of the COVID-19 
Vaccination Coverage among HCP measure, as previously discussed in 
section IX.B. of this proposed rule.

[[Page 27085]]

a. Proposed Modification of Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality (HWM) Measure Beginning With the FY 2027 Payment 
Determination
(1) Background
    Estimates suggest that more than 400,000 patients die each year 
from preventable harm in hospitals.\341\ Existing condition-specific 
mortality measures support targeted quality improvement work and may 
have contributed to national declines in hospital mortality rates for 
measured conditions and/or procedures.\342\ They do not, however, allow 
for measurement of a hospital's broader performance, nor do they 
meaningfully capture performance for smaller volume hospitals. While we 
do not ever expect mortality rates to be zero, studies have shown that, 
for selected conditions and diagnoses, mortality within 30 days of 
hospital admission is related to quality of care.\343\
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    \341\ James JT. A new, evidence-based estimate of patient harms 
associated with hospital care. Journal of patient safety. 
2013;9(3):122-128. Accessed December 9, 2022. Available at: https://psnet.ahrq.gov/issue/new-evidence-based-estimate-patient-harms-associated-hospital-care.
    \342\ Suter LG, Li SX, Grady JN, et al. National patterns of 
risk-standardized mortality and readmission after hospitalization 
for acute myocardial infarction, heart failure, and pneumonia: 
update on publicly reported outcomes measures based on the 2013 
release. Journal of general internal medicine. 2014;29(10):1333-
1340. Accessed December 9, 2022. Available at: https://pubmed.ncbi.nlm.nih.gov/24825244/.
    \343\ Peterson ED, Roe MT, Mulgund J, et al. Association between 
hospital process performance and outcomes among patients with acute 
coronary syndromes. Jama. 2006;295(16):1912-1920. Accessed December 
9, 2022. Available at: https://jamanetwork.com/journals/jama/fullarticle/202753.
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45365 through 
45374), we adopted the Hybrid HWM measure into the Hospital IQR Program 
starting with one voluntary confidential reporting period beginning 
with performance data from July 1, 2022, through June 30, 2023, 
followed by mandatory data submission and public reporting in 
subsequent years. Specifically, hospitals are required to report the 
Hybrid HWM measure beginning with the performance data from July 1, 
2023, through June 30, 2024, impacting the FY 2026 payment 
determination and subsequent years.\344\
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    \344\ Subsequent reporting periods for the Hybrid HWM measure 
are from July 1, three years prior to the fiscal year in which the 
payment determination is applied and end on June 30, two years prior 
to the fiscal year in which the payment determination is applied.
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    In this proposed rule, we are proposing to modify the measure to 
expand the cohort of the Hybrid HWM measure from only Medicare fee-for-
service (FFS) patients to a cohort which includes both FFS and Medicare 
Advantage (MA) patients 65 to 94 years old for the FY 2027 for the FY 
2027 payment determination and subsequent years. The FY 2027 payment 
determination is associated with discharge data from July 1, 2024, 
through June 30, 2025. We are proposing to expand the measure cohort to 
include MA patients because MA beneficiary enrollment has been rapidly 
increasing as a share of overall beneficiaries. In 2022, nearly half of 
Medicare beneficiaries--or over 28 million people--were enrolled in MA 
plans, and it is projected that enrollment will continue to grow.\345\ 
The Congressional Budget Office estimates that by 2030, 62 percent of 
beneficiaries will be covered by MA plans.\346\ MA coverage also varies 
across counties and states (ranging between one to 59 percent) with 
lower enrollment in rural states.\347\ Including MA beneficiaries in 
hospital outcome measures would help ensure that hospital quality is 
measured across all Medicare beneficiaries. We further believe that the 
addition of MA beneficiaries to FFS would significantly increase the 
size of the measure's cohort, enhance the reliability of the measure 
scores, lead to more hospitals receiving results, and increase the 
chance of identifying meaningful differences in quality for some low-
volume hospitals. Moreover, this update would address interested 
parties' concerns about differences in quality for MA and FFS 
beneficiaries by ensuring hospital outcomes are measured across all 
Medicare beneficiaries.348 349
---------------------------------------------------------------------------

    \345\ Freed M, Biniek JF, Damico A, Neuman T. Medicare Advantage 
in 2022: Enrollment Update and Key Trends. Kaiser Family Foundation. 
Accessed December 5, 2022. Available at: https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/.
    \346\ Ibid.
    \347\ Ibid.
    \348\ Ochieng N and Biniek JF. Beneficiary Experience, 
Affordability, Utilization, and Quality in Medicare Advantage and 
Traditional Medicare: A Review of the Literature. Accessed December 
8, 2022. Available at: https://www.kff.org/medicare/report/beneficiary-experience-affordability-utilization-and-quality-in-medicare-advantage-and-traditional-medicare-a-review-of-the-literature/.
    \349\ Medicare Payment Advisory Commission. The Medicare 
Advantage program: Status Report and mandated report on dual-
eligible special needs plans. Accessed December 8, 2022. Available 
at: https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_Ch12_SEC.pdf.
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(2) Overview of Measure
    The Hybrid HWM measure is an outcome measure developed to capture 
the hospital-level, risk-standardized mortality within 30 days of 
hospital admission for most conditions or procedures. Hospitalizations 
are eligible for inclusion in the measure if the patient was 
hospitalized at a non-Federal, short-term acute care hospital. The 
measure is reported as a single summary score, derived from the results 
of risk-adjustment models for 15 mutually exclusive service-line 
divisions (categories of admissions grouped based on similar discharge 
diagnoses or procedures), with a separate risk model for each of the 15 
service-line divisions. The 15 service-line divisions include nine non-
surgical divisions and six surgical divisions. The non-surgical 
divisions are: cancer; cardiac; gastrointestinal; infectious disease; 
neurology; orthopedics; pulmonary; renal; and other. The surgical 
divisions are: cancer; cardiothoracic; general; neurosurgery; 
orthopedics; and other. The focus population is Medicare FFS and 
proposed MA beneficiaries who are 65 to 94 years old and hospitalized 
in non-Federal hospitals.
    To compare mortality performance across hospitals, the measure 
accounts for differences in patient characteristics (patient case mix), 
as well as differences in the medical services provided and procedures 
performed by hospitals (hospital service mix). In addition, the Hybrid 
HWM measure employs a combination of administrative claims data and 
clinical EHR data to enhance clinical case mix adjustment with 
additional clinical data. As described previously, the measure is 
reported as a single summary score, derived from the results of risk-
adjustment models for 15 mutually exclusive service-line divisions.
(3) Measure Calculation
    The current Hybrid HWM measure cohort consists of Medicare FFS 
beneficiaries, between 65 and 94 years old, discharged from a non-
Federal, short-term acute care hospital, within the one-year 
measurement period (July 1 to June 30). The cohort definition attempts 
to capture as many admissions as possible for which survival would be a 
reasonable indicator of quality and for which adequate risk adjustment 
is possible. The outcome for this measure is all-cause 30-day 
mortality. We define all-cause mortality as death from any cause within 
30 days of the index hospital admission date. The Hybrid HWM measure 
uses three main sources of data for the calculation of the measure: (1) 
Medicare Part A claims data; (2) a set of core clinical data elements 
from a hospital's EHR; and (3)

[[Page 27086]]

mortality status obtained from the Medicare Enrollment Database.
    The proposed inclusion of MA beneficiaries has several important 
benefits for the reliability and validity of this hospital outcome 
measure. Using data from July 1, 2018 through June 30, 2019, we 
calculated results from the MA claims to compare to the FFS-only 
results. We assessed 6,883,980 unique admissions (2,466,453 MA and 
4,417,527 FFS) extracted from the CMS Integrated Data Repository for 
FFS claims, hospital-submitted MA claims, and Medicare Advantage 
Organization (MAO)-submitted MA inpatient encounter claims. Due to the 
lack of available EHR data, we conducted testing of the combined cohort 
(MA and FFS) in a claims-only version of the HWM measure. The Hybrid 
HWM measure is identical to the claims-only version of the measure 
except for the addition of the core clinical data elements. When the 
Hybrid HWM measure was initially developed, results using the Medicare 
Claims Re-Specification Dataset were compared with the hybrid measure 
results. The measure scores based on the claims-only model in the 
hybrid data are highly correlated to the measure scores based on the 
hybrid model (correlation coefficient = 0.96). C-statistics from 
logistic regression models comparing the hybrid and claims-only models 
were very similar, with improvement in the C-statistics with the 
addition of the core clinical data elements found in the EHR.\350\
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    \350\ Hybrid Hospital-Wide (All-Condition, All-Procedure) Risk-
Standardized Mortality Measure with Electronic Health Record 
Extracted Risk Factors Methodology Report--Version 2.0. Accessed 
December 9, 2022. Available at: https://qualitynet.cms.gov/files/627d12f67c89c50016b442bd?filename=Hybrid_HWMort_Msr_Meth_032020.pdf.
---------------------------------------------------------------------------

    With the inclusion of MA claims, 84 additional hospitals and 
2,466,453 additional admissions were included in the Hybrid HWM measure 
cohort. When considering only hospitals with 25 or more eligible 
admissions, the cutoff used for public reporting of the HWM measure, 
the inclusion of MA data resulted in 62 additional hospitals in the 
measure. The observed (unadjusted) mortality rate was lower among MA 
admissions compared to FFS admissions (6.20 versus 6.36 percent). 
Additionally, the prevalence of comorbidities was generally lower among 
MA beneficiaries as compared to FFS. The mean hospital risk-
standardized mortality rate was lower for the FFS and MA cohort 
compared to the FFS-only cohort (6.35 versus 6.39 percent for hospitals 
with 25 or more admissions). After the addition of MA admissions to the 
FFS-only HWM cohort and among hospitals with 25 or more FFS admissions, 
70 percent of hospitals remained in the same risk standardized 
mortality rate (RSMR) quintile and 98 percent remained within one 
quintile. The correlation between hospital RSMRs was 0.90. Test-retest 
reliability for the combined FFS and MA cohort was higher than for the 
FFS-only cohort (0.736 versus 0.620 for hospitals with 25 or more 
admissions). The only change to the current Hybrid HWM measure that we 
are proposing is the addition of MA admissions into the cohort; all 
other specifications would remain the same.
    We refer readers to the Hybrid Hospital-Wide (All-Condition, All-
Procedure) Risk-Standardized Mortality Measure with Electronic Health 
Record Extracted Risk Factors Methodology Report (Version 2.1) revised 
March 2023 available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The modified Hybrid HWM measure was re-submitted to the MAP for the 
2022-2023 pre-rulemaking cycle and received conditional support for 
rulemaking, pending CBE endorsement.
    The Hybrid HWM measure received endorsement by the CBE on October 
23, 2019.\351\ The modified measure with expanded cohort is expected to 
be submitted for CBE re-endorsement in Fall 2024.
---------------------------------------------------------------------------

    \351\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool (CMIT). Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality Measure with Claims and Electronic Health 
Record Data. Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5040&sectionNumber=3.
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(4) Data Submission and Reporting
    Under this proposal, hospitals would use Quality Reporting Data 
Architecture (QRDA) Category I files to report core clinical data 
elements for each Medicare FFS and MA beneficiary who is 65 to 94 years 
old for data submission (86 FR 45370 and 45371). Submission of data to 
CMS using QRDA I files is the current EHR data and measure reporting 
standard adopted for eCQMs implemented in the Hospital IQR Program (84 
FR 42506, 85 FR 58940 through 58942). These core clinical data elements 
are data that hospitals routinely collect, that can be feasibly 
extracted from hospital EHRs, and that can be utilized as part of 
specific quality outcome measures.\352\ The data elements are the 
values for a set of vital signs and common laboratory tests collected 
at the time the patient initially presents to the hospital. They are 
used, in addition to claims data, for risk adjustment of patients' 
severity of illness (for Medicare FFS beneficiaries who are between 65 
and 94 years old).
---------------------------------------------------------------------------

    \352\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1). 2015. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.
---------------------------------------------------------------------------

    To successfully submit the Hybrid HWM measure, hospitals would need 
to submit the core clinical data elements included in the Hybrid HWM 
measure, as described for measure calculation,\353\ for all Medicare 
FFS and MA beneficiaries between 65 to 94 years old discharged from an 
acute care hospitalization in the one-year measurement period. 
Hospitals would also be required to successfully submit six linking 
variables that are necessary to merge the core clinical data elements 
with the CMS claims data to calculate the measure. For more details on 
Hybrid HWM measure data submission requirements, we refer readers to 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45368 through 45374).
---------------------------------------------------------------------------

    \353\ Centers for Medicare & Medicaid Services. Hybrid Hospital-
Wide (All-Condition, All-Procedure) Risk-Standardized Mortality 
Measure with Electronic Health Record Extracted Risk Factors 
Methodology Report Version 2.0. Available at: https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology.
---------------------------------------------------------------------------

    The cohort expansion of the Hybrid HWM measure to include MA 
admissions is the only change to the Hybrid HWM measure being proposed. 
We are proposing to include MA admissions in the Hybrid HWM beginning 
with the admissions data from July 1, 2024 through June 30, 2025, which 
affects the FY 2027 payment determination, and for subsequent years.
    We invite public comment on this proposal.
b. Proposed Modification of Hybrid Hospital-Wide All-Cause Readmission 
(HWR) Measure Beginning With the FY 2027 Payment Determination
(1) Background
    Hospital readmission rates are affected by complex and critical 
aspects of care such as communication between providers or between 
providers and patients; prevention of, and response to, complications; 
patient safety; and coordinated transitions to the outpatient 
environment.\354\ Some readmissions are unavoidable, for example, those 
that

[[Page 27087]]

result from the inevitable progression of disease or worsening of 
chronic conditions. However, readmissions may also result from poor 
quality of care or inadequate transitional 
care.355 356 357 358 For the July 1, 2020, through June 30, 
2021 measurement period, the risk-standardized readmission rate from 
the hospital-wide population ranged from 9.9 to 22.5 percent, showing a 
performance gap across hospitals with wide variation and an opportunity 
to improve quality.\359\
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    \354\ Jencks SF, Williams MV, Coleman EA. Rehospitalizations 
among patients in the Medicare fee-for-service program. N Engl J 
Med. Apr 2, 2009;360(14):1418-1428. Accessed December 8, 2022. 
Available at: https://www.nejm.org/doi/full/10.1056/nejmsa0803563.
    \355\ Jack BW, Chetty VK, Anthony D, Greenwald JL, Sanchez GM, 
Johnson AE, et al. A reengineered hospital discharge program to 
decrease rehospitalization: a randomized trial. Ann Intern Med. 
2009;150(3):178-87. Accessed December 8, 2022. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2738592/.
    \356\ Courtney M, Edwards H, Chang A, Parker A, Finlayson K, 
Hamilton K. Fewer emergency readmissions and better quality of life 
for older adults at risk of hospital readmission: a randomized 
controlled trial to determine the effectiveness of a 24-week 
exercise and telephone follow-up program. J Am Geriatr Soc. 
2009;57(3):395-402. Accessed December 8, 2022. Available at: https://pubmed.ncbi.nlm.nih.gov/19245413/.
    \357\ Garasen H, Windspoll R, Johnsen R. Intermediate care at a 
community hospital as an alternative to prolonged general hospital 
care for elderly patients: a randomized controlled trial. BMCPublic 
Health. 2007;7:68. Accessed December 8, 2022. Available at: https://bmcpublichealth.biomedcentral.com/articles/10.1186/1471-2458-7-68.
    \358\ Koehler BE, Richter KM, Youngblood L, Cohen BA, Prengler 
ID, Cheng D, et al. Reduction of 30-day post discharge hospital 
readmission or emergency department (ED) visit rates in high-risk 
elderly medical patients through delivery of a targeted care bundle. 
J Hosp Med. 2009;4(4):211-218. Accessed December 8, 2022. Available 
at: https://pubmed.ncbi.nlm.nih.gov/19388074/.
    \359\ DeBuhr J, Maffry C, Grady J, et al. 2022 Hospital-Wide 
Readmission Measure Updates and Specifications Report--Version 11.0. 
https://qualitynet.cms.gov/files/6273c39a7c89c50016b44156?filename=2022_HWR_AUS_Report.pdf.
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    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42465 through 
42479), we adopted the Hybrid HWR measure into the Hospital IQR Program 
in a stepwise implementation timeline starting with two voluntary 
reporting periods, followed by mandatory data submission and public 
reporting. The first voluntary reporting period used performance period 
data from July 1, 2021, through June 30, 2022, and the second voluntary 
reporting period is July 1, 2022, through June 30, 2023. Hospitals are 
required to report the Hybrid HWR measure beginning with performance 
period data from July 1, 2023, through June 30, 2024, impacting the FY 
2026 payment determination, and for subsequent years.\360\
---------------------------------------------------------------------------

    \360\ Subsequent reporting periods for the Hybrid HWR measure 
are from July 1, three years prior to the fiscal year in which the 
payment determination is applied and end on June 30, two years prior 
to the fiscal year in which the payment determination is applied.
---------------------------------------------------------------------------

    In this proposed rule, similar to our proposal for the Hybrid HWM 
measure, we are proposing to expand the cohort of the Hybrid HWR 
measure from only Medicare FFS patients to a cohort which includes FFS 
and MA patients 65 years and older beginning with the FY 2027 payment 
determination.
    We are proposing to expand the measure cohort to include MA 
patients because MA beneficiary enrollment has been rapidly expanding 
as a share of Medicare beneficiaries. In 2022, nearly half of Medicare 
beneficiaries--or over 28 million people--were enrolled in MA plans, 
and it is projected that enrollment will continue to grow.\361\ The 
Congressional Budget Office projects that by 2030, 62 percent of 
beneficiaries will be covered by MA plans.\362\ MA coverage also varies 
across counties and states (ranging between one to 59 percent) with 
lower enrollment in rural states.\363\ Including MA beneficiaries in 
CMS hospital outcome measures would help ensure that hospital quality 
is measured across all Medicare beneficiaries and not just the FFS 
population. We also believe that the addition of MA beneficiaries to 
FFS would significantly increase the size of the measure's cohort, 
enhance the reliability of the measure scores, lead to more hospitals 
receiving results, and increase the chance of identifying meaningful 
differences in quality for some low-volume hospitals. Moreover, this 
update would address stakeholder concerns about differences in quality 
for MA and FFS beneficiaries by ensuring hospital outcomes are measured 
across all Medicare beneficiaries.364 365
---------------------------------------------------------------------------

    \361\ Freed M, Biniek JF, Damico A, Neuman T. Medicare Advantage 
in 2022: Enrollment Update and Key Trends. Kaiser Family Foundation. 
Accessed December 5, 2022. Available at: https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/.
    \362\ Ibid.
    \363\ Ibid.
    \364\ Ochieng N and Biniek JF. Beneficiary Experience, 
Affordability, Utilization, and Quality in Medicare Advantage and 
Traditional Medicare: A Review of the Literature. Accessed December 
8, 2022. Available at: https://www.kff.org/medicare/report/beneficiary-experience-affordability-utilization-and-quality-in-medicare-advantage-and-traditional-medicare-a-review-of-the-literature/.
    \365\ Medicare Payment Advisory Commission. The Medicare 
Advantage program: Status Report and mandated report on dual-
eligible special needs plans. Accessed December 8, 2022. Available 
at: https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_Ch12_SEC.pdf.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hybrid HWR measure is an outcome measure that captures the 
hospital-level, risk-standardized readmission rate (RSRR) of unplanned, 
all-cause readmissions within 30 days of hospital discharge for any 
eligible condition. The measure reports a single summary RSRR, derived 
from the volume-weighted results of five different models, one for each 
of the following specialty cohorts based on groups of discharge 
condition categories or procedure categories: (1) Surgery/gynecology; 
(2) general medicine; (3) cardiorespiratory; (4) cardiovascular; and 
(5) neurology. The measure also indicates the hospital-level 
standardized readmission ratios (SRR) for each of these five specialty 
cohorts. The outcome is defined as unplanned readmission for any cause 
within 30 days of the discharge date for the index admission (the 
admission included in the measure cohort). A specified set of 
readmissions are planned and do not count in the readmission outcome. 
The focus population is Medicare FFS and proposed MA beneficiaries who 
are 65 years or older and hospitalized in non-Federal hospitals.
(3) Measure Calculation
    The outcome of this measure is 30-day unplanned readmissions. For 
this measure, we define readmission as an inpatient admission for any 
cause, except for certain planned readmissions, within 30 days from the 
date of discharge from an eligible index admission. If a patient has 
more than one unplanned admission (for any reason) within 30 days after 
discharge from the index admission, only one is counted as a 
readmission. The current measure includes admissions for beneficiaries 
enrolled in Medicare FFS for the 12 months prior to the date of index 
admission, on the date of the index admission, and the 30 days 
following discharge of the index admission; 65 years old or over; 
discharged alive from a non-Federal short-term acute care hospital; and 
not transferred to another acute care facility.
    We propose to add MA beneficiaries 65 years and older to the 
existing cohort of Medicare FFS beneficiaries for the Hybrid HWR 
measure. Using HWR claims-only data from July 1, 2018-June 30, 2019, we 
calculated measure results for the combined FFS and MA admissions and 
compared them to the results for FFS-only admissions. We assessed 
11,029,470 unique admissions (4,077,633 MA and 6,951,837 FFS) extracted 
from the CMS Integrated Data Repository for FFS claims, hospital-
submitted MA claims, and Medicare Advantage Organization (MAO)-
submitted MA inpatient encounter claims. Based on the lack of 
availability of EHR data, we conducted testing of the combined cohort 
(MA and FFS) in the

[[Page 27088]]

claims-only version of the HWR measure. The Hybrid HWR measure is 
identical to the claims-only measure except for the addition of the 
clinical data elements. When the Hybrid HWR measure was initially 
developed, the original claims-only HWR measure was compared with the 
hybrid measure results. The measure scores based on the claims-only 
model in the hybrid data were highly correlated to the measure scores 
based on the hybrid model (correlation coefficient = 0.99). C-
statistics from logistic regression models comparing the hybrid and 
claims-only models were very similar, with some improvements in the C-
statistics with the addition of the core clinical data elements found 
in the EHR.\366\
---------------------------------------------------------------------------

    \366\ Dorsey K, Wang Y, et al. Hybrid Hospital-Wide Readmission 
Measure with Electronic Health Record Extracted Risk Factors--
Version 1.1. Accessed December 9, 2022. Available at: https://qualitynet.cms.gov/files/5d0d36fc764be766b0100e6a?filename=Hybrd_HWRdmsn_Msr_Mth_020115.pdf.
---------------------------------------------------------------------------

    Inclusion of MA beneficiaries has several important benefits for 
the reliability and validity of the Hybrid HWR measure. The inclusion 
of MA admissions added 127 hospitals and more than four million 
admissions to the HWR cohort during the data period tested. When 
considering only hospitals with 25 or more eligible admissions, the 
cutoff used for public reporting of the HWR measure, the inclusion of 
MA data resulted in 63 additional hospitals in the measure. Observed 
(unadjusted) readmission within 30 days was higher for MA-only 
admissions than for FFS-only admissions (15.72 versus 15.35 percent), 
with comorbidities generally lower among MA beneficiaries. The mean 
risk-standardized readmission rate was slightly higher for the combined 
FFS and MA cohort compared to the FFS-only cohort (15.48 versus 15.35 
percent for hospitals with 25 or more admissions in each cohort). This 
trend was seen across all specialty cohorts. After the addition of MA 
admissions to the FFS-only HWR measure and among hospitals with 25 or 
more FFS admissions, about two thirds (67 percent) of hospitals 
remained in their same performance quintile, and 95 percent remained 
within one quintile. The correlation between hospital RSRRs was 0.92. 
Test-retest reliability for the combined FFS and MA cohort was higher 
than for the FFS-only cohort (0.780 versus 0.725 among hospitals with 
25 or more admissions). The only change to the current Hybrid HWR 
measure is the addition of MA admissions into the cohort; all other 
specifications remain the same. We refer readers to the Hybrid 
Hospital-Wide Readmission Measure with Electronic Health Record 
Extracted Risk Factors (Version 1.2) revised March 2023 available at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The modified 
Hybrid HWR measure was re-submitted to the MAP for the 2022-2023 pre-
rulemaking cycle and received conditional support for rulemaking, 
pending CBE endorsement.
    The currently implemented version of the Hybrid HWR measure was 
initially endorsed by the CBE on December 9, 2016, then endorsed again 
on September 1, 2020.\367\ We intend to submit the modified measure 
with expanded cohort for CBE re-endorsement in Spring 2024. We note 
that section 1886(b)(3)(B)(viii)(IX)(aa) of the Act generally requires 
that measures specified by the Secretary for use in the Hospital IQR 
Program be endorsed by the entity with a contract under section 1890(a) 
of the Act. Under section 1886(b)(3)(B)(viii)(IX)(bb) of the Act, in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. We 
reviewed CBE-endorsed measures and were unable to identify any other 
CBE-endorsed measures on this topic, and, therefore, we believe the 
exception in section 1886(b)(3)(B)(viii)(IX)(bb) of the Act applies.
---------------------------------------------------------------------------

    \367\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool (CMIT). Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=4597&sectionNumber=3.
---------------------------------------------------------------------------

(4) Data Submission and Reporting
    Hospitals would use Quality Reporting Data Architecture (QRDA) 
Category I files for each Medicare FFS and MA beneficiary who is 65 
years and older for data submission. Submission of data to CMS using 
QRDA I files is the current EHR data and measure reporting standard 
adopted for eCQMs implemented in the Hospital IQR Program (84 FR 42469 
and 42470, 85 FR 58940).
    To successfully submit the Hybrid HWR measure, hospitals would need 
to submit the core clinical data elements included in the Hybrid HWR 
measure, as described for measure calculation,\368\ for all Medicare 
FFS and MA beneficiaries 65 years and older discharged from an acute 
care hospitalization in the one-year measurement period. These core 
clinical data elements are data that hospitals routinely collect, that 
can be feasibly extracted from hospital EHRs, and that can be utilized 
as part of specific quality outcome measures.\369\ The data elements 
are the values for a set of vital signs and common laboratory tests 
collected at the time the patient initially presents to the hospital. 
They are used, in addition to claims data, for risk adjustment of 
patients' severity of illness (for Medicare FFS beneficiaries who are 
65 years and older). Hospitals would also be required to successfully 
submit the six linking variables that are necessary to merge the core 
clinical data elements with the CMS claims data to calculate the 
measure. For more details on Hybrid HWR measure data submission 
requirements, we refer readers to the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42467 through 42470).
---------------------------------------------------------------------------

    \368\ Centers for Medicare & Medicaid Services. (2018). 2018 
All-Cause Hospital-Wide Measure Updates and Specifications Report: 
Hospital-Wide Readmission. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.
    \369\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1). 2015. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.
---------------------------------------------------------------------------

    The cohort expansion of the Hybrid HWR measure to include MA 
admissions is the only proposed change to the Hybrid HWR measure. We 
are proposing to include MA admissions in the Hybrid HWR cohort 
beginning with the discharge data from July 1, 2024 through June 30, 
2025, which affects the FY 2027 payment determination, and for 
subsequent years.
    We invite public comment on this proposal.
7. Proposed Measure Removals for the Hospital IQR Program Measure Set 
and Proposed Codification of Measure Removal Factors
    We are proposing to remove three measures: (1) Hospital-Level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure 
beginning with the April 1, 2025 through March 31, 2028 reporting 
period/FY 2030 payment determination; (2) Medicare Spending Per 
Beneficiary (MSPB)--Hospital measure beginning with the CY 2026 
reporting period/FY 2028 payment determination; and (3) Elective 
Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies 
Electively Delivered Prior to 39 Completed Weeks

[[Page 27089]]

Gestation (PC-01) measure beginning with the CY 2024 reporting period/
FY 2026 payment determination.
    We are also proposing to codify the Measure Removal Factors that we 
have previously adopted for the Hospital IQR Program.
    We provide more details on each of these proposals in the 
subsequent sections.
a. Proposed Removal of Hospital-Level Risk-Standardized Complication 
Rate Following Elective Primary Total Hip Arthroplasty and/or Total 
Knee Arthroplasty Measure Beginning With the FY 2030 Payment 
Determination
    We adopted the original Hospital-Level Risk-Standardized 
Complication Rate Following Elective Primary Total Hip Arthroplasty 
and/or Total Knee Arthroplasty measure (hereinafter referred to as the 
THA/TKA Complication measure) for use in the Hospital IQR Program in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53516 through 53518). In 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50062 and 50063), we 
adopted the same measure for use in the Hospital Value-Based Purchasing 
(VBP) Program. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41558 and 
41559), we finalized the removal of the measure from the Hospital IQR 
Program under measure removal factor 8, the costs associated with a 
measure outweigh the benefit of its continued use in the program. The 
measure's removal was part of agency-wide efforts to reduce provider 
burden since the measure is also being reported under the Hospital VBP 
Program.
    After the measure was removed from the Hospital IQR Program, it was 
revised by the measure steward to include 26 additional mechanical 
complication ICD-10 codes, which were identified during measure 
maintenance. Our analyses showed the addition of these clinically 
relevant codes contributed to an increase in the THA/TKA national 
observed complication rate. Findings demonstrated an increase of 
approximately 0.5 percent (from 2.42 percent to 2.93 percent) in the 
THA/TKA national observed complication rate when evaluated for the FY 
2021 performance period. These findings suggested that the expanded 
outcome would allow the updated THA/TKA Complication measure to capture 
a more complete outcome.
    Therefore, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49263 
through 49267), we adopted the re-evaluated THA/TKA Complication 
measure with an expanded measure outcome, beginning with claims data 
with admission dates from April 1, 2019 through March 31, 2022 
(excluding data from the period covered by the extraordinary 
circumstances exception (ECE) granted by CMS related to the COVID-19 
Public Health Emergency (PHE)) that is associated with the FY 2024 
payment determination. For measure specification details on the updated 
measure, we refer readers to the Hip and Knee Arthroplasty Complication 
(ZIP) folder on the CMS.gov Measure Methodology website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.
    As stated in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49263), we 
adopted this measure into the Hospital IQR Program with the intention 
to propose the updated measure into the Hospital VBP Program after the 
required year of public reporting in Hospital IQR Program. As noted at 
42 CFR 412.164(b), measures in the Hospital VBP Program must be 
publicly reported for one year prior to the beginning of the 
performance period.
    In this proposed rule, we are proposing to remove the measure 
beginning with the April 1, 2025, through March 31, 2028 reporting 
period associated with the FY 2030 payment determination under measure 
removal factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program. Concurrent to this 
proposal to remove the measure, the Hospital VBP Program is proposing 
to adopt the re-evaluated measure to replace the original version of 
the measure that is in the Hospital VBP Program. Therefore, we are 
proposing its removal from the Hospital IQR Program to prevent 
duplicative reporting of the measure in a quality reporting program and 
value-based program, and to simplify administration of both programs. 
This proposed removal is contingent on finalizing our proposal to adopt 
the re-evaluated measure in the Hospital VBP Program beginning with the 
FY 2030 program year. For example, we may modify the date on which we 
would remove the measure from the Hospital IQR Program to align with 
the date on which the Hospital VBP Program adopts the re-evaluated 
measure. We refer readers to section V.K. of this proposed rule for 
more information on the proposal to adopt the re-evaluated THA/TKA 
Complication measure in the Hospital VBP Program.
    We believe that removing this measure from the Hospital IQR Program 
would eliminate the costs associated with implementing and maintaining 
the measure for the program if and when the re-evaluated THA/TKA 
Complication measure with an expanded measure outcome begins to be used 
in the Hospital VBP Program. In particular, this would avoid the 
development and release of duplicative and potentially confusing 
confidential feedback reports to hospitals across multiple hospital 
quality and value-based purchasing programs. For example, it may be 
costly for health care providers to track the confidential feedback, 
preview reports, and publicly reported information on this measure 
across the Hospital IQR Program, Hospital VBP Program, and the 
Comprehensive Care for Joint Replacement (CJR) Model. We expect that 
health care providers would incur additional costs to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes. Individuals may also find it confusing to 
see public reporting on the same measure in different programs. In 
addition, maintaining the specifications for the measure, as well as 
the tools we need to analyze and publicly report the measure data, 
results in costs to CMS. We believe the cost of maintaining the same 
measure in multiple programs, as previously discussed, outweigh the 
associated benefit to individuals of receiving the same information 
from multiple programs, because that information could be captured 
through inclusion of the re-evaluated version of this measure solely in 
the Hospital VBP Program if the re-evaluated form of the THA/TKA 
Complication measure is adopted in that program.
    We seek to advance the Hospital IQR Program by maintaining a set of 
the most meaningful quality measures and recognizing the associated 
burden of reporting those measures. We believe the Hospital IQR Program 
continues to incentivize improvement in the quality of care provided to 
patients. We further believe that removing this measure from the 
Hospital IQR Program would help achieve that goal. We believe keeping 
this measure in both programs would be inconsistent with our goal of 
avoiding unnecessary complexity and cost with duplicative measures 
across programs. We continue to believe that this measure provides 
important data on patient outcomes following inpatient hospitalization 
(addressing Meaningful Measures 2.0's priority of driving outcome 
improvement),\370\ which is

[[Page 27090]]

why we are proposing to adopt the updated measure in the Hospital VBP 
Program. Unlike the Hospital IQR Program, performance data on measures 
maintained in the Hospital VBP Program are used both to assess the 
quality and value of care provided at a hospital and to calculate 
incentive payment adjustments for a given year of the program based on 
performance. The Hospital VBP Program's incentive payment structure 
ties hospitals' payment adjustments on claims paid under the IPPS to 
their performance on selected quality measures, including the THA/TKA 
Complication measure, sufficiently incentivizing performance 
improvement on this measure among participating hospitals.
---------------------------------------------------------------------------

    \370\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
---------------------------------------------------------------------------

    We are proposing to remove the THA/TKA Complication measure from 
the Hospital IQR Program beginning with the FY 2030 payment 
determination. This proposal is contingent on finalizing our proposal 
to adopt the measure in the Hospital VBP Program beginning with the FY 
2030 program year.
    We invite public comment on this proposal.
b. Proposed Removal of Medicare Spending Per Beneficiary (MSPB)--
Hospital Measure Beginning With the CY 2026 Reporting Period/FY 2028 
Payment Determination
    We adopted the original Medicare Spending Per Beneficiary (MSPB)--
Hospital measure (CBE# 2158) (hereinafter referred to as the MSPB 
Hospital measure) for use in the Hospital IQR Program in the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51618 through 51627). In the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51654 through 51658) we adopted the 
same measure for use in the Hospital Value-Based Purchasing (VBP) 
Program. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41559 and 
41560), we removed the MSPB Hospital measure from the Hospital IQR 
Program beginning with the FY 2022 payment determination under measure 
removal factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program. We believed that removing 
the measure from the Hospital IQR Program would eliminate costs 
associated with implementing and maintaining the measure, and in 
particular, development and release of duplicative and potentially 
confusing confidential feedback reports provided to hospitals across 
multiple hospital quality and value-based purchasing programs. The 
original version of the MSPB Hospital measure that was removed from the 
Hospital IQR Program was identical to the version that was concurrently 
and continues to be used in the Hospital VBP Program.
    To continue assessing hospitals' efficiency and resource use and to 
meet statutory requirements under section 1886(o)(2)(B)(ii) of the Act, 
in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49257 through 49263), we 
adopted the re-evaluated version of the MSPB Hospital measure in the 
Hospital IQR Program. We noted our plans to subsequently propose this 
version of the measure for the Hospital VBP Program measure set after 
the required year of public reporting in Hospital IQR Program. As 
required by 42 CFR 412.164(b), measures in the Hospital VBP Program 
must be publicly reported for at least one year prior to the beginning 
of the performance period.
    In this proposed rule, we are proposing to remove this measure 
beginning with the FY 2028 payment determination under measure removal 
factor 8, the costs associated with a measure outweigh the benefit of 
its continued use in the program. This measure is being proposed for 
adoption by the Hospital VBP Program in section V.K. of this proposed 
rule, and we are proposing its removal from the Hospital IQR Program to 
reduce the burden that would arise from duplicative reporting of the 
measure in a quality reporting program and value-based program, and to 
simplify administration of both programs. This proposed removal is 
contingent on finalizing our proposal to adopt the re-evaluated measure 
in the Hospital VBP Program beginning with the FY 2028 program year. 
For example, we may modify the date on which we would remove the 
measure from the Hospital IQR Program to align with the date on which 
the Hospital VBP Program adopts the re-evaluated measure. We refer 
readers to section V.K. of the preamble of this proposed rule for more 
information on the proposal to adopt the re-evaluated version of the 
MSPB Hospital measure in the Hospital VBP Program.

[[Page 27091]]

    We believe that removing this measure from the Hospital IQR Program 
would eliminate the costs associated with implementing and maintaining 
the measure, and in particular, development and release of duplicative 
and potentially confusing confidential feedback reports provided to 
hospitals across multiple hospital quality and value-based purchasing 
programs. For example, it may be costly for health care providers to 
track confidential feedback, preview reports, and publicly reported 
information on this measure in both the Hospital IQR Program and in the 
Hospital VBP Program. We expect that health care providers would incur 
additional costs to monitor measure performance in multiple programs 
for internal quality improvement and financial planning purposes when 
measures are used across value-based purchasing programs. Individuals 
may also find it confusing to see public reporting on the same measure 
in different programs. In addition, maintaining the specifications for 
the measure, as well as the tools we need to analyze and publicly 
report the measure data, result in costs to CMS. We believe the cost of 
maintaining the same measure in multiple programs, as previously 
discussed, outweigh the associated benefit to individuals of receiving 
the same information from multiple programs, because that information 
could be captured through inclusion of the updated version of this 
measure solely in the Hospital VBP Program if the re-evaluated version 
of the MSPB Hospital measure is adopted in that program.
    We seek to advance the Hospital IQR Program by maintaining a set of 
the most meaningful quality measures and recognizing the associated 
burden of reporting those measures. We believe the Hospital IQR Program 
continues to incentivize improvement in the quality of care provided to 
patients. We further believe that removing this measure from the 
Hospital IQR Program would help achieve that goal. As discussed in 
section V.K. of the preamble of this proposed rule, we believe keeping 
this measure in both programs would be inconsistent with our goal of 
avoiding unnecessary complexity or cost with duplicative measures 
across programs. We continue to believe this measure provides important 
data on resource use (addressing the Meaningful Measures Framework 
priority of making care affordable), which is why we are proposing to 
adopt the updated measure in the Hospital VBP Program. Unlike the 
Hospital IQR Program, performance data on measures maintained in the 
Hospital VBP Program are used both to assess the quality and value of 
care provided at a hospital and to calculate incentive payment 
adjustments for a given year of the program based on performance. The 
Hospital VBP Program's incentive payment structure ties hospitals' 
payment adjustments on claims paid under the IPPS to their performance 
on selected quality measures, including the MSPB Hospital measure, 
sufficiently incentivizing performance improvement on this measure 
among participating hospitals.
    We are proposing removal of the updated MSPB Hospital measure (CBE 
#2158) from the Hospital IQR Program beginning with the FY 2028 payment 
determination and for subsequent years, which is contingent on 
finalizing our proposal to adopt the updated MSPB Hospital measure in 
the Hospital VBP Program.
    We invite public comment on this proposal.
c. Proposed Removal of Elective Delivery Prior to 39 Completed Weeks 
Gestation: Percentage of Babies Electively Delivered Prior to 39 
Completed Weeks Gestation (PC-01) Measure Beginning With the CY 2024 
Reporting Period/FY 2026 Payment Determination
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 
53530), we adopted the Elective Delivery Prior to 39 Completed Weeks 
Gestation: Percentage of Babies Electively Delivered Prior to 39 
Completed Weeks Gestation measure (PC-01) (hereinafter referred to as 
the Elective Delivery measure) as a chart-abstracted measure beginning 
with the FY 2015 payment determination and subsequent years.
    Over the six most recent reporting periods, hospital performance on 
PC-01 has met the criteria for removal under measure removal factor 1: 
Measure performance is so high and unvarying that meaningful 
distinctions and improvements in performance can no longer be made 
(that is, ``topped out'') with statistically indistinguishable 
performance at the 75th and 90th percentiles; and truncated coefficient 
of variation <=0.10 (83 FR 41540 through 41544).

[[Page 27092]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.291

    To address the ongoing maternal health crisis and reduce maternal 
morbidity and mortality, the Hospital IQR Program has continued to 
prioritize maternal health through quality measurement. In the FY 2022 
IPPS/LTCH PPS final rule, we adopted the Maternal Morbidity Structural 
Measure beginning with the FY 2023 payment determination and for 
subsequent years (86 FR 45361 through 45365). In the FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49220 through 49233), we adopted the Severe 
Obstetric Complications eCQM and the Cesarean Birth eCQM as two of the 
eCQMs in the Hospital IQR Program measure set that hospitals can self-
select to report for the CY 2023 reporting period/FY 2025 payment 
determination. We also finalized mandatory reporting of these two eCQMs 
beginning with the CY 2024 reporting period/FY 2026 payment 
determination and for subsequent years. Additionally, in the FY 2023 
IPPS/LTCH PPS final rule, we adopted a Birthing-Friendly Hospital 
designation to capture the quality and safety of maternal health care 
(87 FR 49282 through 49288). In December 2022, HHS convened maternal 
health leaders across government and industry to unveil the logo for 
the Birthing-Friendly Hospital designation, which will be posted on 
CMS' Care Compare website and on the websites of participating health 
plans, to indicate which facilities have received the Birthing-Friendly 
Hospital designation.\371\ HHS further announced that more than 25 
health plans have committed to displaying the ``Birthing-Friendly 
Hospital'' designation on their provider directories when the 
designation goes live in Fall 2023, providing more than 150 million 
Americans with the opportunity to make informed decisions about their 
birth options for care.\372\
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    \371\ U.S. Department of Health and Human Services. Readout: CMS 
Hosts Maternal Health Convening with Leaders Across Government, 
Industry. December 13, 2022. Available at: https://www.hhs.gov/about/news/2022/12/13/readout-cms-hosts-maternal-health-convening-with-leaders-across-government-industry.html.
    \372\ Centers for Medicare & Medicaid Services. Health Plans 
Committed to Using the Birthing-Friendly Designation. December 2022. 
Available at: https://www.cms.gov/files/document/plans-using-birthing-friendly-designation.pdf.
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    We believe that the recent adoption of these measures highlights 
the importance of maternal health and provides hospitals with robust 
data to improve maternity care quality, safety, and equity, including 
through the reduction of early elective deliveries. Specifically, the 
Cesarean Birth eCQM is intended to facilitate safer patient care by 
assessing the rate of low-risk nulliparous, term, or singleton vertex 
(NTSV) C-sections to ultimately reduce the occurrence of non-medically 
indicated C-sections, promoting adherence to recommended clinical 
guidelines, and encouraging hospitals to track and improve their 
practices of appropriate monitoring and care management for pregnant 
and postpartum patients (87 FR 49222). While hospital performance on 
PC-01 no longer provides meaningful distinctions and improvements to 
support its retention in the Hospital IQR Program measure set, we 
believe the prior adoption of the Cesarean Birth eCQM, along with the 
Maternal Morbidity Structural Measure, the Severe Obstetric 
Complications eCQM, and the Birthing-Friendly Hospital designation will 
provide hospitals with meaningful and actionable data to address rates 
of early elective delivery, among other factors that contribute to 
maternal morbidity and mortality as well as disparities in maternity 
care quality. We know that the Elective Delivery (PC-01) measure was 
used widely in the quality measurement outside of CMS quality programs, 
and therefore we reached out to various other parts of the Department, 
including the Health Resources and Services Administration, National 
Institutes for Health, and the Centers for Disease Control and 
Prevention (CDC) in the development of this proposal. We reached 
consensus across these groups that while the measure is important, 
given the topped-out status and the availability of the two new eCQMs, 
it was appropriate to propose for removal at this time. We also refer 
readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49282 through 
49288) in which we announced the Birthing-Friendly Hospital designation 
and remind readers that, while we are proposing to remove PC-01, we 
continue to assess whether the Cesarean Birth and Severe Obstetric 
Complications eCQMs are appropriate for inclusion in the Birthing-
Friendly Hospital designation as part of our continued commitment to 
improve maternity care quality, safety and equity.

[[Page 27093]]

    Therefore, we are proposing to remove the Elective Delivery (PC-01) 
measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination.
    We invite public comment on this proposal.
d. Proposed Codification of Measure Retention and Removal Policies
    Under our current policies, when we adopt a measure for the 
Hospital IQR Program beginning with a particular payment determination, 
we automatically readopt the measure for all subsequent payment 
determinations unless we propose to remove, suspend, or replace the 
measure (77 FR 53512 and 53513).
    We have also adopted Measure Removal Factors as considerations when 
evaluating measures for removal from the Hospital IQR Program measure 
set. We most recently updated our measure removal factors in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41540 through 41544). In that 
final rule, we adopted measure removal factor 8, the costs associated 
with a measure outweigh the benefit of its continued use in the 
program.\373\ The current list of Measure Removal Factors for the 
Hospital IQR Program is:
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    \373\ In addition to the discussion in the FY 2019 IPPS/LTCH PPS 
final rule, we previously described the basis for the adoption of 
the other Measure Removal Factors in the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49641 through 49643), the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50203 through 50204), and the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50185). In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50203 through 50204), we clarified the criteria for 
determining when a measure is ``topped-out.'' We also adopted an 
immediate measure removal policy in cases where we believe that the 
continued use of a measure raises specific patient safety concerns 
in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43864 and 43865) and 
referenced this policy in the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50185) and FY 2012 IPPS/LTCH PPS final rule (76 FR 51609 through 
51610). We incorporate these rationales by reference.
---------------------------------------------------------------------------

     Factor 1. Measure performance among hospitals is so high 
and unvarying that meaningful distinctions and improvements in 
performance can no longer be made (``topped out'' measure). For the 
purpose of this paragraph, a measure is topped out when the performance 
of subsection (d) hospitals on the measure is statistically 
indistinguishable performance at the 75th and 90th percentiles and the 
measure's truncated coefficient of variation is less than or equal to 
0.10;
     Factor 2. A measure does not align with current clinical 
guidelines or practice;
     Factor 3. The availability of a more broadly applicable 
measure (across settings or populations), or the availability of a 
measure that is more proximal in time to desired patient outcomes for 
the particular topic;
     Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes;
     Factor 5. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic;
     Factor 6. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm;
     Factor 7. It is not feasible to implement the measure 
specifications; and
     Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
    We are proposing to codify our existing measure retention and 
removal policies in our regulations at 42 CFR 412.140(g)(1) through 
(3).
    We invite public comment on this proposal.
8. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures
a. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2025 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2025 payment determination.
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b. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2026 Payment Determinations
    This table summarizes the previously finalized and proposed 
Hospital IQR Program measure set for the FY 2026 payment determination, 
including the proposed removal of the Elective Delivery (PC-01) measure 
beginning with the FY 2026 payment determination:

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c. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2027 Payment Determination
    This table summarizes the previously finalized and proposed 
Hospital IQR Program measure set for the FY 2027 payment determination 
including the proposed adoption of three new eCQMs beginning with the 
CY 2025 reporting period/FY 2027 payment determination:

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d. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2028 Payment Determination and Subsequent Years
    This table summarizes the previously finalized and proposed 
Hospital IQR Program measure set for the FY 2028 payment determination, 
including the proposed removal of the re-evaluated MSPB Hospital 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination.

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BILLING CODE 4120-01-C
9. Future Considerations
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
and cost improvements focused on the inpatient hospital setting. We 
have identified potential future measures, which we believe address 
areas that are important to interested parties, but which are not 
currently included in the Hospital IQR Program's measure set. 
Therefore, we seek public feedback on these measures as we consider how 
best to develop the Hospital IQR Program's measure set.
a. Potential Future Inclusion of Two Geriatric Care Measures
(1) Background
    The U.S. population is aging rapidly, with one in five Americans 
estimated to be over 65 years old in the next 10 years. By the year 
2030, all baby boomers will be older than 65.\374\ The 65 and older 
population is expected to double in the U.S. by 2060, from an estimated 
49 million in 2016 to an estimated 95 million people in 2060.\375\ 
Similarly, the number of people 85 years and older is expected to grow 
from 6.5 million to 11.8 million in 2035, and to triple by 2060 to an 
estimated 19 million people.\376\
---------------------------------------------------------------------------

    \374\ Vespa, J., Armstrong, D. M., & Medina, L. (Rev Feb 2020). 
Demographic turning points for the United States: Population 
projections for 2020 to 2060. Washington, DC: U.S. Department of 
Commerce, Economics and Statistics Administration, U.S. Census 
Bureau.
    \375\ Ibid.
    \376\ Ibid.
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    As the population ages, care can become more complex,\377\ with 
patients often developing multiple chronic conditions. The CDC 
estimates that 68.4 percent of Medicare beneficiaries have two or more 
chronic conditions.\378\ Research on Medicare fee-for-service 
beneficiaries with 15 prevalent chronic conditions showed that 62 
percent for those between 65-74 years old and 81.5 percent for those 85 
years and older experience multiple chronic conditions.\379\
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    \377\ Qui[ntilde]ones, A.R., Markwardt, S., & Botoseneanu, A. 
(2016). Multimorbidity combinations and disability in older adults. 
Journals of Gerontology Series A: Biomedical Sciences and Medical 
Sciences, 71(6), 823-830.
    \378\ Lochner KA, Cox CS. Prevalence of Multiple Chronic 
Conditions Among Medicare Beneficiaries, United States, 2010. Prev 
Chronic Dis 2013;10:120137. DOI: http://dx.doi.org/10.5888/pcd10.120137.
    \379\ Salive, M.E. (2013). Multimorbidity in older adults. 
Epidemiologic reviews, 35(1), 75-83.
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    Hospitals are increasingly faced with treating older patients who 
have complex medical, behavioral, and psychosocial needs that are often 
inadequately addressed by the current healthcare infrastructure.\380\ 
Although existing Hospital IQR Program quality measures include 
patients who are 65 years and older, some of these measures may be 
narrow in scope and may not capture the full spectrum of geriatric care 
needs. Rather than addressing individual clinical issues in isolation, 
optimizing care for older patients with multiple co-morbidities will 
require a holistic approach that reimagines the entire care pathway to 
better serve the needs of this unique population. We believe an 
important part of what is needed in redesigning care for the older 
adult population is programmatic, facility-level geriatric assessment 
and management efforts.
---------------------------------------------------------------------------

    \380\ Boyd, C., Smith, C.D., Masoudi, F.A., Blaum, C.S., Dodson, 
J.A., Green, A.R., . . . &Tinetti, M. E. (2019). Decision making for 
older adults with multiple chronic conditions: executive summary for 
the American Geriatrics Society guiding principles on the care of 
older adults with multimorbidity. Journal of the American Geriatrics 
Society, 67(4), 665-673.
---------------------------------------------------------------------------

    Given these challenges, the American Geriatrics Society (AGS) 
developed guiding principles on the care of older adults with multiple 
chronic conditions using structured literature searches and consensus 
among clinicians.\381\ To translate these principles into action steps, 
the AGS convened a workgroup of geriatricians, cardiologists, and 
generalists to identify a framework for decision-making for clinicians 
who provide care to older adults with multiple chronic conditions.\382\ 
This workgroup recommended three actions: (1) identify and communicate 
patients' health priorities and health trajectory; (2) stop, start, or 
continue care based on health priorities, potential risks versus 
benefits, and health trajectory; and (3) align decisions and care among 
patients, caregivers, and other clinicians with patients' health 
priorities and trajectories.\383\
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    \381\ American Geriatrics Society Expert Panel on the Care of 
Older Adults with Multimorbidity. (2012). Guiding principles for the 
care of older adults with multimorbidity: an approach for 
clinicians. Journal of the American Geriatrics Society, 60(10), E1-
E25.
    \382\ Boyd, C., Smith, C.D., Masoudi, F.A., Blaum, C.S., Dodson, 
J.A., Green, A.R., . . . & Tinetti, M. E. (2019). Decision making 
for older adults with multiple chronic conditions: executive summary 
for the American Geriatrics Society guiding principles on the care 
of older adults with multimorbidity. Journal of the American 
Geriatrics Society, 67(4), 665-673.
    \383\ Ibid.
---------------------------------------------------------------------------

    To address the challenges of delivering care to older adults with 
multiple chronic conditions from a health system perspective, multiple 
organizations including the American College of Surgeons (ACS), the 
Institute for Healthcare Improvement (IHI), and the American College of 
Emergency Physicians (ACEP) collaborated to identify clinical 
frameworks based on evidence-based best practices that provide goal-
centered, clinically effective care for older patients. Together, these 
organizations have established an Age-Friendly Health System 
initiative. Age-friendly care is defined as: (1) following an essential 
set of evidence-based practices; (2) causing no harm; and (3) aligning 
with What Matters \384\ to the older adult and their family or other 
caregivers.\385\ The Age-Friendly Health System initiative has 
identified a framework comprised of a set of four evidence-based 
elements of high-quality care to older adults, called the ``4 Ms'': 
What Matters, Medication, Mentation, and Mobility.\386\ These elements 
organize care for older adult wellness and apply regardless of the 
number of chronic conditions, a person's culture, or their racial, 
ethnic, or religious background.\387\
---------------------------------------------------------------------------

    \384\ Tinetti, M. (January 2019). [Blog] How focusing on What 
Matters simplifies complex care for older adults. Institute for 
Healthcare Improvement. Available at: https://www.ihi.org/communities/blogs/how-focusing-on-what-matters-simplifies-complex-care-for-older-adult.
    \385\ Institute for Healthcare Improvement. (2020). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults. 
Available at: https://241684.fs1.hubspotusercontent-na1.net/hubfs/241684/AgeFriendlyHealthSystems_GuidetoUsing4MsCare_FINAL_July2020.pdf.
    \386\ Ibid.
    \387\ Ibid.
---------------------------------------------------------------------------

    The collective evidence provided by these research efforts 
demonstrates that patient-centered care for aging patient populations 
with multiple chronic conditions should be prioritized by hospitals. 
Therefore, we are considering two attestation-based structural 
measures, the Geriatric Hospital measure and the Geriatric Surgical 
measure, for the Hospital IQR Program. We are also requesting public 
comment on the potential future proposal for a hospital designation 
focused on hospitals that participate in patient-centered geriatric 
care health system improvement initiatives.
    These attestation-based structural measures apply evidence-based, 
concrete, actionable steps to improve patient-centered care in the 
hospital inpatient setting for older adults. The measures incentivize 
team-based care organized around the geriatric patient to meet their 
unique needs.\388\ A major

[[Page 27104]]

challenge presented in the geriatric population is that care is not a 
single structural element or process.\389\ Within clinical domains of 
care such as geriatric care, there are crucial structures and processes 
of care to support high-quality patient-centered care, that reach 
across multiple interactions and link the care team's efforts 
together.390 391  Orchestrating all these elements results 
in better outcomes, and improving their implementation would be an 
essential first step to improve geriatric outcomes.\392\
---------------------------------------------------------------------------

    \388\ American Geriatrics Society Expert Panel on the Care of 
Older Adults with Multimorbidity. (2012). Guiding principles for the 
care of older adults with multimorbidity: an approach for 
clinicians. Journal of the American Geriatrics Society, 60(10), E1-
E25. Available at: https://pubmed.ncbi.nlm.nih.gov/22994865/.
    \389\ Ibid.
    \390\ Institute for Healthcare Improvement. (2022). Age-Friendly 
Health Systems: Guide to Recognition for
    Geriatric Surgery Verification Hospitals. Available at: https://forms.ihi.org/hubfs/Guide%20To%20Recognition%20for%20GSV%20Sites_FINAL.pdf.
    \391\ Boyd, C., Smith, C.D., Masoudi, F.A., Blaum, C.S., Dodson, 
J.A., Green, A.R., . . . & Tinetti, M. E. (2019). Decision making 
for older adults with multiple chronic conditions: executive summary 
for the American Geriatrics Society guiding principles on the care 
of older adults with multimorbidity. Journal of the American 
Geriatrics Society, 67(4), 665-673.
    \392\ Ibid.
---------------------------------------------------------------------------

    Both structural measures are a collection of coordinated, team-
based components across the continuum of care. Together, these 
represent patient-centered programs of care designed to improve 
surgical and general health outcomes for geriatric patients. When the 
components are properly tied together, complex care for this population 
is better coordinated and more reliably delivered, with harms minimized 
and outcomes optimized. The elements in these geriatric structural 
measures are focused on care delivery, coordination, data, and data-
driven improvement activities.
    The measure developer, ACS, designed these structural measures to 
assess geriatric care across various domains (see Table IX.C-06 and 
Table IX.C-07) using a suite of organizational competencies aimed at 
achieving patient-centered care for aging populations with multiple 
chronic conditions. We believe these measures would complement the 
current patient safety reporting, support hospitals in improving the 
quality of care for a complex patient population and could further our 
commitment to advancing health equity among the diverse communities 
served by participants in CMS programs.
    These measures also align with our efforts under the Meaningful 
Measures Framework, which identifies high priority areas for quality 
measurement and improvement to assess core issues most critical to 
high-quality healthcare and improving patient outcomes.\393\ More 
specifically, the measures align with the Meaningful Measures Framework 
priority focus on patient-centered care.\394\ In 2021, we launched 
Meaningful Measures 2.0 to promote innovation and modernization of all 
aspects of quality and address a wide variety of settings, interested 
parties, and measure requirements. The Geriatric Hospital and Geriatric 
Surgical structural measures support the goal of ``leverage[ing] 
quality measures to promote health equity and close gaps in care.'' 
\395\ In addition, these measures align with CMS's National Quality 
Strategy goal to ``embed quality into the care journey,'' by taking a 
person-centered approach to ensure a smoother care journey for a 
patient population that often has complex needs.\396\
---------------------------------------------------------------------------

    \393\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \394\ Ibid.
    \395\ Centers for Medicare & Medicaid Services. (2022). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
    \396\ Centers for Medicare & Medicaid Services. (2022). What is 
the National Quality Strategy? Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
---------------------------------------------------------------------------

    The Geriatric Hospital (MUC2022-112) and Geriatric Surgical 
(MUC2022-032) measures were included in the publicly available ``2022 
Measures Under Consideration Spreadsheet'' (MUC List), the list of 
measures under consideration for use in various Medicare programs.\397\ 
The MAP Rural Health Advisory Group reviewed the MUC List and the 
Geriatric Hospital (MUC2022-112) and Geriatric Surgical (MUC2022-032) 
measures in detail on December 8-9, 2022.\398\ The Rural Health 
Advisory Group agreed that both measures are important but had concerns 
regarding the limited resources that rural health providers face, 
including fewer clinicians and social services availability.\399\ The 
Rural Health Advisory Workgroup also had concerns related to the 
potential for public trust to be negatively impacted if these measures 
are publicly reported.\400\
---------------------------------------------------------------------------

    \397\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \398\ Centers for Medicare & Medicaid Services. MAP 2022-2023 
Final Recommendations. Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \399\ Ibid.
    \400\ Ibid.
---------------------------------------------------------------------------

    On December 6-7, 2022, the MAP Health Equity Advisory Group met to 
review the 2022 MUC list and Geriatric Hospital (MUC2022-112) and 
Geriatric Surgical (MUC2022-032) measures.\401\ The MAP Health Equity 
Advisory Group was convened to provide input on the MUC list with the 
goal of reducing health disparities closely linked with social, 
economic, environmental and other systemic disadvantages. The Health 
Equity Advisory Group also requested that participants provide input on 
potential unintended consequences or measurement gap areas related to 
health disparities. The Health Equity Advisory Group agreed the 
geriatric measures are important measures, noting that geriatric 
patients are often more fragile and emphasized the importance of 
assessing their needs. The Health Equity Advisory Group had concerns 
related to implementation and to the limited evidence that attestation 
measures lead to improved health outcomes that further health 
equity.\402\
---------------------------------------------------------------------------

    \401\ Ibid.
    \402\ Ibid.
---------------------------------------------------------------------------

    The MUC List, including Geriatric Hospital (MUC2022-112) and 
Geriatric Surgical (MUC2022-032) measures, were also reviewed by the 
MAP Hospital Workgroup on December 13-14, 2022.\403\ The MAP Hospital 
Workgroup discussed the overlap between the Geriatric Hospital measure 
(MUC2022-112) and Geriatric Surgical measure (MUC2022-032), noting that 
hospitals, particularly ones in rural settings, may find it burdensome 
to report both measures. The MAP Hospital Workgroup did not support the 
Geriatric Hospital measure (MUC2022-112) for rulemaking, with the 
potential for mitigation. The potential mitigation for this measure 
(MUC2022-112) is consideration for combining the two geriatric care 
measures (MUC2022-112 and MUC2022-032) into a single measure that is 
less burdensome, or focusing on one of the two measures.\404\ The MAP 
Hospital Workgroup conditionally supported the Geriatric Surgical 
measure (MUC2022-032) for rulemaking pending additional revisions to 
reduce the number of elements included in the attestation and present 
information about gaps for the components.
---------------------------------------------------------------------------

    \403\ Ibid.
    \404\ Ibid.

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[[Page 27105]]

    The MAP Coordinating Committee convened on January 23-24, 2023 to 
review the MUC List, including Geriatric Hospital (MUC2022-112) and 
Geriatric Surgical (MUC2022-032) measures.\405\ The MAP Coordinating 
Committee similarly discussed the overlap between the Geriatric 
Hospital measure (MUC2022-112) and Geriatric Surgical measure (MUC2022-
032), and agreed with the concerns noted by the MAP Hospital Workgroup 
that hospitals may find it burdensome to report both measures, 
particularly in rural settings. The MAP Coordinating Committee agreed 
with the decision to conditionally support the Geriatric Hospital 
measure (MUC2022-112) for rulemaking, pending CBE endorsement. The MAP 
Coordinating Committee agreed the potential for mitigation for this 
measure should be to consider combining the two geriatric care measures 
(MUC2022-112 and MUC2022-032) into a single measure that is less 
burdensome, or focus on one measure.\406\ The MAP Coordinating 
Committee agreed with the MAP Hospital Workgroup's decision to 
conditionally support the Geriatric Surgical measure (MUC2022-032) for 
rulemaking, pending CBE endorsement, further paring down elements 
included in the attestations, and providing further information on the 
gaps in the measure components.\407\ The MAP Coordinating Committee had 
concerns related to the subjectiveness of attestation based measures, 
noting a preference for outcome or process measures.\408\ The MAP 
Coordinating Committee supported the focus of the measure and noted 
that attestation measures can help build infrastructure for important 
topics such as this and that these measures fill a gap in care 
management among a vulnerable population.\409\
---------------------------------------------------------------------------

    \405\ Ibid.
    \406\ Ibid.
    \407\ Ibid.
    \408\ Ibid.
    \409\ Ibid.
---------------------------------------------------------------------------

(2) Potential Future Inclusion of a Geriatric Hospital Structural 
Measure
(i) Measure Overview
    The Geriatric Hospital structural measure assesses hospital 
commitment to improving outcomes for patients 65 years or older through 
patient-centered competencies aimed at achieving quality of care and 
safety for all older patients. The measure includes 14 attestation-
based questions across eight domains representing a comprehensive 
framework required for optimal care of older patients admitted to the 
hospital or being evaluated in the emergency department. Table IX.C-06. 
includes the eight attestation domains and 14 attestation statements 
which would be required to qualify for this measure.
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BILLING CODE 4120-01-C
(ii) Measure Calculation
    The Geriatric Hospital measure consists of eight domains, each 
representing a separate domain commitment. Hospitals would need to 
evaluate and determine whether they can affirmatively attest to each 
domain, some of which have multiple statements to which a hospital must 
attest.
    To report on this measure, hospitals would respond to the eight 
domain attestations that encompass 14 corresponding statements (see 
Table IX.C-06.). A hospital would receive one point for each domain 
where they attest to each of the corresponding statements (for a total 
of zero to eight points). For domain questions with multiple 
statements, positive attestation to each statement would be required to 
qualify for the corresponding domain attestation.
    The numerator is the number of complete domain attestations. 
Attestation of each statement within a domain would be required to 
qualify for the measure numerator. The denominator for each hospital is 
eight, which represents the total number of domain attestations. The 
measure would be calculated as the number of complete attestations 
divided by the total number of questions.
    A hospital would not be able to receive partial credit for a 
domain. For example, for Domain 1 (``Identifying Goals of Care''), a 
hospital would evaluate and determine whether their hospital processes 
meet each of the attestation statements described in (1) and (2) (see 
Table IX.C-06.). If the hospital's processes meet both of these 
statements, the hospital would affirmatively attest to Domain 1 and 
would receive a point for that attestation domain.
    We invite public comment on the potential future use of this 
measure in the Hospital IQR Program.
(3) Potential Future Inclusion of the Geriatric Surgical Structural 
Measure
(i) Measure Overview
    The Geriatric Surgical structural measure assesses hospital 
commitment to improving surgical outcomes for patients 65 years or 
older through patient-centered competencies aimed at achieving quality 
of care and safety for all older patients. The measure includes 11 
attestation-based questions across seven domains (see Table IX.C-07.), 
representing a comprehensive framework required for optimal care of the 
older surgical patient.
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(ii) Measure Calculation
    The Geriatric Surgical structural measure consists of seven 
domains. Each domain represents a separate domain commitment. A 
hospital would need to evaluate and determine whether it can 
affirmatively attest to each domain, some of which have multiple 
statements to which a hospital must attest.
    To report on this measure, hospitals would respond to the seven 
domain attestations that encompass 11 corresponding statements. A 
hospital would receive one point for each domain where they attest to 
each of the corresponding statements (for a total of zero to seven 
points). For domain questions with multiple statements, positive 
attestation to each statement would be required to qualify for the 
corresponding domain attestation.
    The numerator is the number of complete domain attestations. 
Attestation of each statement within a domain would be required to 
qualify for the measure numerator. The denominator for each hospital is 
seven, which represents the total number of domain attestations. The 
measure would be calculated as the number of complete attestation 
questions divided by the total number of domains.
    A hospital would not be able to receive partial credit for a 
domain. For example, for Domain 1 (``Identifying Goals of Care''), a 
hospital would evaluate and determine whether their hospital processes 
meet each of the attestation statements described in (1) and (2) (see 
Table IX.C-07.). If the hospital's processes meet both of these 
statements, the hospital would affirmatively attest to Domain 1 and 
would receive a point for that attestation domain.
    We invite public comment on the potential use of this measure in 
the Hospital IQR Program.
b. Potential Establishment of a Publicly Reported Hospital Designation 
To Capture the Quality and Safety of Patient-Centered Geriatric Care
    In alignment with the Geriatric Hospital and Geriatric Surgical 
structural measures discussed in section IX.C.9.a., we are considering 
a geriatric care hospital designation to be publicly reported on a CMS 
website. This designation could initially be based on data from 
hospitals reporting on both Geriatric Hospital and Geriatric Surgical 
structural measures if they are proposed and finalized in the future. 
If proposed for future rulemaking, we could develop a scoring 
methodology for granting the designation, such as recognizing those 
hospitals that affirmatively attest to all domains in the Geriatric 
Hospital and Geriatric Surgical structural measures. This designation 
could be similar to the Birthing-Friendly designation that was 
finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49282 through 
49292).
    We are considering whether to propose in future notice-and-comment 
rulemaking a more robust set of metrics for awarding the designation 
that may include other geriatric care-related measures that may be 
finalized for the Hospital IQR Program measure set in the future. We 
believe adding this designation to a consumer-facing CMS website would 
allow patients and families to choose hospitals that have demonstrated 
a commitment to improving patient-centered geriatric care through their 
implementation of best practices that support delivery of safe, high-
quality, patient-centered geriatric care. Therefore, we are also 
soliciting comment on additional measures to consider for incorporation 
in the designation for future years.
    We invite public comment on the potential future hospital 
designation for geriatric care in addition to the following questions:
     What are some of the key barriers and challenges faced by 
rural providers in reporting the attestation measures discussed in 
section IX.C.9.a. of this proposed rule?
     What are the best practices for hospitals to actively 
engage with post-acute care facilities? What barriers do providers 
face, especially rural providers, in establishing protocols for bi-
directional communication?
     What are the best practices that hospitals are 
implementing to provide education for and conduct outreach to patients 
in underserved communities in order to increase access to timely 
geriatric care?
     Among rural providers, do hospitals face barriers when 
identifying care goals between patients and providers, establishing 
protocols for ensuring patients' goals are met, and documenting the 
decision making process? Are there specific barriers to providing 
education regarding the coordination of care to meet the patient's 
goals?
     Are there barriers to implementing protocols for delirium 
and cognition screenings to flag high risk patients among geriatric 
populations? What challenges do providers face when implementing care 
management plans for high-risk patients?
     What barriers do hospitals face when implementing 
multidisciplinary evaluations of older adults? Are there challenges 
hospitals face with the early utilization of palliative care 
consultations for older populations with serious illness?
     Are any of the proposed elements of these measures 
potentially duplicative of existing measures in the Hospital IQR 
Program?
     Family caregivers play an important role in providing 
informal, often unpaid, care to help loved ones, including aging family 
members on Medicare. It is critical, particularly during care 
transitions, that hospital procedures focus on the patient's goals and 
preferences, and include family caregivers as active partners. How 
should the potential future hospital designation for geriatric care 
capture the role of family caregivers in hospital care delivery, care 
transitions and/or discharge planning?
10. Form, Manner, and Timing of Quality Data Submission
a. Background
    Section 1886(b)(3)(B)(viii)(I) and (II) of the Act states that the 
applicable percentage increase for FY 2015 and each subsequent year 
shall be reduced by one-quarter of such applicable percentage increase 
(determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) 
of the Act) for any subsection (d) hospital that does not submit data 
required to be submitted on measures specified by the Secretary in a 
form and manner, and at a time, specified by the Secretary. To 
successfully participate in the Hospital IQR Program, hospitals must 
meet specific procedural, data collection, submission, and validation 
requirements.
b. Maintenance of Technical Specifications for Quality Measures
    For each Hospital IQR Program payment determination, we require 
that hospitals submit data on each specified measure in accordance with 
the measure's specifications for a particular period. We refer readers 
to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41538), in which we 
summarized how the Hospital IQR Program maintains the technical measure 
specifications for quality measures and the subregulatory process for 
incorporation of nonsubstantive updates to the measure specifications 
to ensure that measures remain up to date.
    We are not proposing any changes to these policies in this proposed 
rule.
    The data submission requirements, specifications manual, measure 
methodology reports, and submission deadlines are posted on the 
QualityNet

[[Page 27110]]

website at: https://qualitynet.cms.gov (or other successor CMS 
designated websites). The CMS Annual Update for the Hospital Quality 
Reporting Programs (Annual Update) contains the technical 
specifications for eCQMs. The Annual Update contains updated measure 
specifications for the year prior to the reporting period. For example, 
for the CY 2023 reporting period/FY 2025 payment determination, 
hospitals are collecting and will submit eCQM data using the May 2022 
Annual Update and any applicable addenda. The Annual Update and 
implementation guidance documents are available on the Electronic 
Clinical Quality Improvement (eCQI) Resource Center website at: https://ecqi.healthit.gov/.
    Hospitals must register and submit quality data through the 
Hospital Quality Reporting (HQR) System (previously referred to as the 
QualityNet Secure Portal) (86 FR 45520). The HQR System is safeguarded 
in accordance with the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy and Security Rules to protect submitted patient 
information. See 45 CFR parts 160 and 164, subparts A, C, and E.
c. Procedural Requirements
    The Hospital IQR Program's procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to these codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57168). The previously finalized 
requirements, including setting up a HCQIS Access Roles and Profile 
(HARP) account and the associated timelines, are described at 42 CFR 
412.140(a)(2) and (e)(2)(iii) and in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51639 through 51640).
    CMS may grant an exception with respect to quality data reporting 
requirements, including related validation requirements, in the event 
of extraordinary circumstances beyond the control of the hospital (42 
CFR 412.140(c)(2)).
    We are not proposing any changes to these policies in this proposed 
rule.
d. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures.
    We are not proposing any changes to these policies in this proposed 
rule.
e. Data Submission and Reporting Requirements for eCQMs
    For a discussion of our previously finalized eCQMs and policies, we 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 
through 50810; 50811 through 50819), the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50241 through 50253; 50256 through 50259; and 50273 through 
50276), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49692 through 
49698; and 49704 through 49709), the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57150 through 57161; and 57169 through 57172), the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38355 through 38361; 38386 through 38394; 
38474 through 38485; and 38487 through 38493), the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41567 through 41575; 83 FR 41602 through 41607), 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42501 through 42506), the 
FY 2021 IPPS/LTCH PPS final rule (85 FR 58932 through 58940), the FY 
2022 IPPS/LTCH PPS final rule (86 FR 45417 through 45421), and the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49298 through 49304).
    In the FY 2018 IPPS/LTCH PPS final rule, we finalized eCQM 
reporting and submission requirements such that hospitals were required 
to report only one, self-selected, calendar quarter of data for four 
self-selected eCQMs for the CY 2018 reporting period/FY 2020 payment 
determination (82 FR 38358 through 38361). Those reporting requirements 
were extended to the CY 2019 reporting period/FY 2021 payment 
determination through the CY 2021 reporting period/FY 2023 payment 
determination (83 FR 41603 through 41604; 84 FR 42501 through 42503). 
In the FY 2020 IPPS/LTCH PPS final rule, we finalized that for the CY 
2022 reporting period/FY 2024 payment determination, hospitals were 
required to report one, self-selected calendar quarter of data for: (a) 
Three self-selected eCQMs; and (b) the Safe Use of Opioids--Concurrent 
Prescribing eCQM, for a total of four eCQMs (84 FR 42503 through 
42505).
    In the FY 2021 IPPS/LTCH PPS final rule, we finalized a progressive 
increase in the number of required reported quarters of eCQM data, from 
one self-selected quarter of data to four quarters of data over a 
three-year period (85 FR 58932 through 58939). Specifically, for the CY 
2021 reporting period/FY 2023 payment determination, hospitals were 
required to report two self-selected calendar quarters of data for each 
of the four self-selected eCQMs (85 FR 58939). For the CY 2022 
reporting period/FY 2024 payment determination, hospitals were required 
to report three self-selected calendar quarters of data for each eCQM: 
(a) Three self-selected eCQMs, and (b) the Safe Use of Opioids--
Concurrent Prescribing eCQM (85 FR 58939). We clarified in the FY 2021 
IPPS/LTCH PPS final rule that until hospitals are required to report 
all four quarters of data beginning with the CY 2023 reporting period/
FY 2025 payment determination, they may submit consecutive or non-
consecutive self-selected quarters of data (85 FR 58939). In the FY 
2022 IPPS/LTCH PPS final rule, we clarified that the self-selected 
eCQMs must be the same eCQMs across quarters in a given reporting year 
(86 FR 45418).
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49299 through 
49302), we finalized a policy to increase eCQM reporting requirements 
from four to six eCQMs beginning with the CY 2024 reporting period/FY 
2026 payment determination and for subsequent years. Specifically, 
hospitals will be required to report four calendar quarters of data for 
each required eCQM: (1) Three self-selected eCQMs; (2) the Safe Use of 
Opioids--Concurrent Prescribing eCQM; (3) the Cesarean Birth eCQM; and 
(4) the Severe Obstetric Complications eCQM; for a total of six eCQMs. 
We are not proposing any changes to these policies in this proposed 
rule.
    The following Table IX.C-08 summarizes our finalized policies.

[[Page 27111]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.303

(1) Continuation of Certification Requirements for eCQM Reporting
(a) Requiring Use of the 2015 Edition Cures Update Certification 
Criteria
    In the FY 2022 IPPS/LTCH PPS final rule, beginning with the CY 2023 
reporting period/FY 2025 payment determination and subsequent years, we 
finalized the requirement for hospitals to use only certified 
technology updated consistent with the 2015 Edition Cures Update to 
submit data for the Hospital IQR Program (86 FR 45418). We refer 
readers to the ONC 21st Century Cures Act final rule for additional 
information about the updates included in the 2015 Edition Cures Update 
(85 FR 25665).
    We are not proposing any changes to this policy in this proposed 
rule.
(b) Requiring EHR Technology To Be Certified to All Available eCQMs
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42505 through 
42506), we finalized the requirement that EHRs be certified to all 
available eCQMs used in the Hospital IQR Program for the CY 2020 
reporting period/FY 2022 payment determination and subsequent years. In 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45418), we finalized the 
requirement for hospitals to use the 2015 Edition Cures Update 
beginning with the CY 2023 reporting period/FY 2025 payment 
determination; then all available eCQMs used in the Hospital IQR 
Program for the CY 2023 reporting period/FY 2025 payment determination 
and subsequent years would need to be reported using certified 
technology updated to the 2015 Edition Cures Update.
    We are not proposing any changes to this policy in this proposed 
rule.
(2) File Format for EHR Data, Zero Denominator Declarations, and Case 
Threshold Exemptions
    We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49705 through 49708) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57170) for our previously adopted eCQM file format requirements. Under 
these requirements, hospitals: (1) Must submit eCQM data via the 
Quality Reporting Document Architecture Category I (QRDA I) file 
format, (2) may use third parties to submit QRDA I files on their 
behalf, and (3) may either use abstraction or pull the data from non-
certified sources to then input these data into certified EHR 
technology (CEHRT) for capture and reporting QRDA I. Hospitals can 
continue to meet the reporting requirements by submitting data via QRDA 
I files, zero denominator declaration, or case threshold exemption (82 
FR 38387).
    More specifically regarding the use of QRDA I files, we refer 
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 and 57170) 
and the FY 2020 IPPS/LTCH PPS final rule (85 FR 58940), in which we 
specified QRDA I file requirements. We also refer readers to the CMS 
Implementation Guide for the data and file requirements, which is 
published on the eCQI Resource Center website at: https://ecqi.healthit.gov/QRDA.
    We are not proposing any changes to this policy in this proposed 
rule.
(3) Submission Deadlines for eCQM Data
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 
through 49709), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 
through 57172) for our previously adopted policies to align eCQM data 
reporting periods and submission deadlines for both the Hospital IQR 
Program and the Medicare Promoting Interoperability Program. In the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57172), we finalized the alignment 
of the Hospital IQR Program eCQM submission deadline with that of the 
Medicare Promoting Interoperability Program--the end of two months 
following the close of the calendar year--for the CY 2017 reporting 
period/FY 2019 payment determination and subsequent years. We

[[Page 27112]]

note the submission deadline will be moved to the next business day if 
it falls on a weekend or Federal holiday.
    We are not proposing any changes to this policy in this proposed 
rule.
f. Data Submission and Reporting Requirements for Hybrid Measures
    In the FY 2020 IPPS/LTCH PPS final rule, we finalized the adoption 
of the Hybrid HWR measure for the Hospital IQR Program (84 FR 42465 
through 42481) such that, beginning with the FY 2026 payment 
determination, hospitals are required to report on the Hybrid HWR 
measure (84 FR 42479). In the FY 2022 IPPS/LTCH PPS final rule, we also 
finalized the adoption of the Hybrid HWM measure in a stepwise fashion, 
beginning with a voluntary reporting period from July 1, 2022, through 
June 30, 2023, and followed by mandatory reporting from July 1, 2023 
through June 30, 2024, affecting the FY 2026 payment determination, and 
for subsequent years (86 FR 45365). We also finalized several 
requirements related to data submission and reporting requirements for 
hybrid measures under the Hospital IQR Program (84 FR 42506 through 
42508).
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
19498 and 19499), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58941), 
the CY 2021 PFS final rule (85 FR 84472), and the FY 2022 IPPS/LTCH PPS 
final rule (86 FR 45421) for our previously adopted policies regarding 
certification and file format requirements for hybrid measures in the 
Hospital IQR Program.
    We refer readers to sections IX.C.6.a. and IX.C.6.b. of this 
proposed rule where we propose to modify two hybrid measures in the 
Hospital IQR Program--the Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality measure and the Hybrid Hospital-Wide All-Cause 
Risk Standardized Readmission measure.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49304), we finalized 
our proposal to remove zero denominator declarations and case threshold 
exemptions as an option for the reporting of hybrid measures beginning 
with the FY 2026 payment determination because we do not believe that 
these policies are applicable to hybrid measures due to the process of 
reporting the measure data since hybrid measures do not require that 
hospitals report a traditional denominator as is required for the 
submission of eCQMs (Id.). Instead, hybrid measures utilize the Initial 
Patient Population (IPP), as per their measure specifications, that 
identifies the patients for which hospitals need to extract the EHR 
data and annual claims data (Id.). We note that the FY 2026 payment 
determination is the first year for which hybrid measures, finalized as 
part of the Hospital IQR Program measure set, will become mandatory for 
reporting.
    We are not proposing any changes to these policies in this proposed 
rule.
g. Sampling and Case Thresholds for Chart-Abstracted Measures
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53537), the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49709) for details on our sampling and case thresholds for the FY 2016 
payment determination and subsequent years.
    We are not proposing any changes to these policies in this proposed 
rule.
h. Data Submission and Reporting Requirements for the Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Survey Measure
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 and 53538), 
and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 and 50820) for 
details on previously adopted HCAHPS submission requirements. We also 
refer hospitals and HCAHPS Survey vendors to the official HCAHPS 
website at https://www.hcahpsonline.org for new information and program 
updates regarding the HCAHPS Survey, its administration, oversight, and 
data adjustments.
(1) Proposed Updates to the HCAHPS Survey Measure (CBE #0166) Beginning 
With the FY 2027 Payment Determination
(a) Background
    We partnered with the Agency for Healthcare Research and Quality 
(AHRQ) to develop the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) patient experience of care survey (CBE 
#0166) (hereinafter referred to as the HCAHPS Survey). We adopted the 
HCAHPS Survey in the Hospital IQR Program in the CY 2007 OPPS/ASC final 
rule with comment period (71 FR 68202 through 68204) beginning with the 
FY 2008 payment determination. We refer readers to the FY 2010 IPPS/
LTCH PPS final rule (74 FY 43882), the FY 2011 IPPS/LTCH PPS final rule 
(75 FR 50220 through 50222), the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51641 through 51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53537 and 53538), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 and 
50820), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38328 through 
38342), and the CY 2019 OPPS/ASC final rule (83 FR 59140 through 59149) 
for details on previously adopted HCAHPS Survey requirements.
    The HCAHPS Survey (OMB control number 0938-0981) is the first 
national, standardized, publicly reported survey of patients' 
experience of hospital care and asks eligible discharged patients 29 
questions about their recent hospital stay. The HCAHPS Survey is 
administered to a random sample of adult patients who receive medical, 
surgical, or maternity care between 48 hours and six weeks (42 calendar 
days) after discharge and is not restricted to Medicare 
beneficiaries.\410\ Hospitals must survey patients throughout each 
month of the year.\411\ The HCAHPS Survey is available in official 
English, Spanish, Chinese, Russian, Vietnamese, Portuguese, German, 
Tagalog, and Arabic versions.
---------------------------------------------------------------------------

    \410\ We refer readers to the CY 2019 OPPS/ASC final rule (83 FR 
59140 through 59149), the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38328 through 38342, 38398), and to the official HCAHPS website at: 
https://www.hcahpsonline.org for details on HCAHPS requirements.
    \411\ Ibid.
---------------------------------------------------------------------------

    The HCAHPS Survey and its protocols for sampling, data collection 
and coding, and file submission can be found in the current HCAHPS 
Quality Assurance Guidelines, which is available on the official HCAHPS 
website at: https://www.hcahpsonline.org/en/quality-assurance/. AHRQ 
carried out a rigorous scientific process to develop and test the 
HCAHPS Survey instrument. This process entailed multiple steps, 
including: a public call for measures; literature reviews; cognitive 
interviews; consumer focus groups; multiple opportunities for 
additional stakeholder input; a three-state pilot test; small-scale 
field tests; and notice-and-comment rulemaking. The CBE first endorsed 
the HCAHPS Survey in 2005,\412\ and re-endorsed the measure in 2010, 
2015, and 2019.\413\
---------------------------------------------------------------------------

    \412\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \413\ CMS. Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (HCAHPS). Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=91&sectionNumber=1.
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    In 2021, we conducted a large-scale mode experiment to test adding 
the web mode and other updates to the form, manner, and timing of 
HCAHPS Survey data collection and reporting. The 2021

[[Page 27113]]

mode experiment employed a nationwide random sample of short-term acute 
care hospitals that participate in the HCAHPS Survey, including those 
from each of CMS's 10 geographic regions. Participating hospitals 
contributed patients discharged from April through September 2021. 
Within each hospital, patients were randomly assigned to each mode of 
survey administration. In total, we received responses to a revised 
version of the HCAHPS Survey from 36,001 patients in 46 hospitals. The 
design of the experiment was of sufficient scale to test survey items 
on new topics, revisions to existing survey items, and new and revised 
composite measures. It also enabled precise estimation of mode 
adjustments for current and new HCAHPS items for three currently 
approved HCAHPS Survey mode protocols and an additional three web-based 
protocols. This mode experiment was designed to have the power and 
precision of adjustment estimates comparable to those that are used and 
have proven necessary for adjustment of previous HCAHPS data.
    The 2021 HCAHPS mode experiment had four main goals: (1) test the 
large-scale feasibility of web-first sequential multimode survey 
administrations in an inpatient setting; (2) investigate whether mode 
effects significantly differ between individuals with email addresses 
available to the data collection vendor compared to individuals without 
email addresses available to the vendor; (3) develop mode adjustments 
to be used in future national implementation; and (4) test potential 
new survey items. This experiment included three currently approved 
mode protocols most commonly used by hospitals participating in HCAHPS: 
Mail Only, Phone Only, and Mail-Phone (mail with phone follow-up of 
non-responders). In this experiment, three additional mode protocols 
that added an initial Web phase to these current modes were considered: 
Web-Mail, Web-Phone, and Web-Mail-Phone. In addition, the mode 
experiment employed a 49-day data collection period for all six modes, 
which extended the standard HCAHPS data collection period by seven 
days. Doing so preserved the survey response period of the current 
survey while adding time for the Web phase. Unlike the current HCAHPS 
Survey, proxy respondents were not prohibited from completing the 
survey.
    Another goal of the 2021 HCAHPS mode experiment was to test new 
survey content related to care coordination, discharge experience, 
communication with patients' families, emotional support, sleep, and 
summoning help. We are using the mode experiment results to inform 
decisions about potential changes to administration protocols and 
survey content. Potential measure changes will be submitted to the MUC 
List in 2023 and may be proposed in future rulemaking. We are not 
proposing changes to the HCAHPS Survey's content in this proposed rule.
(b) Proposed Addition of Three New Modes of Survey Implementation
    In this proposed rule, we are proposing to add three new modes of 
survey administration (Web-Mail mode, Web-Phone mode, and Web-Mail-
Phone mode) in addition to the current Mail Only, Phone Only, and Mail-
Phone modes, beginning with January 2025 discharges. We are proposing 
this update because in the 2021 HCAHPS mode experiment, adding an 
initial web component to three current HCAHPS modes of survey 
administration resulted in increased response rates. Overall, 9,642 
patients completed a survey, resulting in a 28 percent response rate. 
The response rate for Mail Only mode was 22 percent, compared to 29 
percent for Web-Mail mode. The response rate for Phone Only mode was 23 
percent, compared to 30 percent for Web-Phone mode. The response rate 
for Mail-Phone was 31 percent compared to 36 percent for Web-Mail-Phone 
mode.
    Analysis of 2021 mode experiment data also revealed that patients 
who supplied an email address had a statistically significant higher 
response rate (31 percent) than patients without an email address (22 
percent). The percentage of sampled patients with an email address 
varied by hospital, ranging from 11 percent to 94 percent. Overall 63 
percent of patients supplied an email address. Evidence from this and 
previous HCAHPS mode experiments indicate that sequential mixed modes 
of survey administration (for example, mail followed by phone mode; web 
followed by mail, or phone, or both) result in overall higher response 
rates and better representation of younger, Spanish language-
preferring, racial and ethnic minority, and maternity care patients.
    We invite public comment on this proposed update.
(c) Proposed Removal of Prohibition of Proxy Respondents to the HCAHPS 
Survey
    In response to stakeholder feedback, and evidence that proxy 
response does occur in mail administration despite the current protocol 
that asks that only the patient complete the survey, the mode 
experiment assessed the impact of not excluding proxy respondents. We 
found that not excluding proxies did not impact HCAHPS measure scores 
and as such it is not necessary to control for completion of the survey 
by a proxy in patient-mix adjustment. Consequently, we are proposing to 
remove the requirement that only the patient may respond to the survey 
and thus allow a patient's proxy to respond to the survey, beginning 
with January 2025 discharges. We would, however, still encourage 
patients to respond to the survey rather than proxies.
    We invite public comment on this proposed update.
(d) Proposed Extension of the Data Collection Period
    The 2021 mode experiment showed that extending the data collection 
period from 42 to 49 days allows time for respondents in the web-first 
modes to respond by email before contacting non-responders with the 
secondary mode of administration while still preserving adequate time 
for the secondary mode (either mail, phone, or mail followed by phone). 
Nearly 13 percent of respondents in the mode experiment completed the 
survey between days 43 and 49. Compared to the first 42 days, during 
days 43 to 49 there was a statistically significant increase in 
responses from patients who are typically under-represented in HCAHPS, 
including patients who speak Spanish at home, are Black, 25 to 34 years 
old, and with an 8th grade education or less. We are therefore 
proposing to extend the data collection period for the HCAHPS Survey 
from 42 to 49 days, beginning with January 2025 discharges.
    We invite public comment on the proposed change in the length of 
the data collection period.
(e) Proposed Limit on the Number of Supplemental HCAHPS Survey Items
    Currently, we do not place a limit on the number of supplemental 
items that may be added to the HCAHPS Survey for quality improvement 
purposes. We are concerned that this policy has contributed to decline 
in the survey's response rate. Other CMS CAHPS surveys limit the number 
of supplemental items that may be added in order to prevent the survey 
from becoming so long that the response rate is negatively impacted. 
For example, the Medicare Advantage and Prescription Drug Plan (MA & 
PDP) CAHPS Survey limits the number of supplemental items to a maximum 
of 12. Evidence from the 2016 HCAHPS mode experiment, as well as from 
the MA &

[[Page 27114]]

PDP CAHPS Survey, strongly indicates that survey response rates 
decrease as the number of supplemental items increases. Analysis of the 
2016 HCAHPS mode experiment data revealed that in the Mixed Mode (mail 
survey with phone follow-up of non-responders), 12 supplemental items 
would be expected to reduce HCAHPS response rates by 2.7 percentage 
points. An analysis of data from the MA & PDP CAHPS project found a 2.5 
percentage point reduction in response rate associated with 12 
supplemental items in Mixed Mode.\414\ This is particularly relevant 
because it includes both mail and phone, the two most commonly used 
survey modes for HCAHPS. Declines of this magnitude represent a 
substantial loss in response rate. The proposed limit of 12 
supplemental items aligns with other CMS CAHPS surveys.
---------------------------------------------------------------------------

    \414\ Beckett MK, Elliott MN, Gaillot S, Haas A, Dembosky JW, 
Giordano LA, Brown J. (2016) ``Establishing limits for supplemental 
items on a standardized national survey.'' Public Opinion Quarterly 
80(4): 964-976 DOI: https://doi.org/10.1093/poq/nfw028.
---------------------------------------------------------------------------

    We invite public comment on our proposal to limit the number of 
supplemental items. We welcome suggestions for alternative limits below 
12 supplemental items.
(f) Proposed Requirement To Use Official Spanish Translation for 
Spanish Language-Preferring Patients
    We have created official translations of the HCAHPS Survey in eight 
languages in addition to English order to accommodate patient 
populations.\415\ Hospitals' use of these translations, however, is 
voluntary. To ensure that all Spanish language-preferring patients, who 
constitute about four percent of HCAHPS respondents, have the 
opportunity to receive the Spanish translation of the HCAHPS Survey, we 
propose that hospitals be required to collect information about the 
language that the patient speaks while in the hospital (whether 
English, Spanish, or another language), and that the official CMS 
Spanish translation of the HCAHPS Survey be administered to all 
patients who prefer Spanish, beginning with January 2025 discharges.
---------------------------------------------------------------------------

    \415\ HCAHPS Quality Assurance Guidelines V18.0. https://www.hcahpsonline.org/en/quality-assurance/.
---------------------------------------------------------------------------

    We invite public comment on the proposed requirement to administer 
the survey in Spanish. We also welcome suggestions for additional 
translations beyond the existing translations in Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic.
(g) Proposed Removal of Two Administration Methods
    In this proposed rule, we are proposing to remove two currently 
available options for administration of the HCAHPS Survey that are not 
used by participating hospitals. The Active Interactive Voice Response 
(IVR) survey mode, also known as touch-tone IVR, has not been employed 
by any hospital since 2016 and has never been widely used for the 
HCAHPS Survey. In order to streamline HCAHPS oversight and training, we 
propose to discontinue IVR as an approved mode of survey administration 
beginning in January 2025. With the proposed addition of three new web-
based modes in January 2025, hospitals would have the option to choose 
among six modes of survey administration: Mail Only, Phone Only, Mixed 
Mode (mail followed by phone), Web-Mail mode, Web-Phone mode, and Web-
Mail-Phone mode (web followed by mail, followed by phone).
    In order to streamline HCAHPS oversight and training, we are also 
proposing to discontinue ``Hospitals Administering HCAHPS for Multiple 
Sites'' as an option for HCAHPS Survey administration beginning in 
January 2025. The option for a hospital to administer the HCAHPS Survey 
for other hospitals, known as ``Hospitals Administering HCAHPS for 
Multiple Sites'', has not been utilized by any hospitals since 2019 and 
has never been widely used. Hospitals would continue to have two 
options for HCAHPS Survey administration: either contracting with an 
approved HCAHPS survey vendor, currently utilized by about 3,112 
hospitals (99 percent of IPPS hospitals); or self-administration of the 
HCAHPS Survey, currently utilized by fewer than 20 IPPS hospitals (less 
than one percent of IPPS hospitals).
    In addition to the previous proposals, we encourage participating 
hospitals to carefully consider the impact of mode of survey 
administration on response rates and the representativeness of survey 
respondents. High response rates for all patient groups promote our 
health equity goals. Our research on the HCAHPS Survey indicates that 
there are pronounced differences in response rates by mode of survey 
administration for some patient characteristics. In particular, Black, 
Hispanic, Spanish language-preferring, younger, and maternity patients 
are more likely to respond to a telephone survey, while older patients 
are more likely to respond to a mail survey. Choosing a mode that is 
easily accessible to the diversity of a hospital's patient population 
provides a more complete representation of patients' care experiences. 
For more information, we refer hospitals to the podcast ``Improving 
Representativeness of the HCAHPS Survey'' on the HCAHPS website: 
https://hcahpsonline.org/en/podcasts/#ImprovingRepresentativeness.
(h) Data Collection
    The HCAHPS Survey would be administered and data collected in 
exactly the same manner as the current HCAHPS Survey, except for the 
proposed changes described in this section of this proposed rule. There 
would be no changes to HCAHPS patient eligibility or exclusion criteria 
(we note the immediately following section includes a request for 
information regarding patient eligibility). Detailed information on 
HCAHPS data collection protocols can be found in the current HCAHPS 
Quality Assurance Guidelines, located at: https://www.hcahpsonline.org/en/quality-assurance/.
    We invite public comments on these proposals.
i. Request for Information on Potential Addition of Patients With a 
Primary Psychiatric Diagnosis to the HCAHPS Survey Measure
    We are soliciting comments about the inclusion of patients with a 
primary psychiatric diagnosis in the HCAHPS Survey. The HCAHPS Survey 
was designed, tested, and validated for patients in the medical, 
surgical, and maternity service lines of short-term, acute care 
hospitals. Patients with a primary psychiatric diagnosis are currently 
not eligible for this survey; patients with a secondary psychiatric 
diagnosis are currently eligible for the HCAHPS Survey.
    We seek public input on the potential inclusion of patients with a 
primary psychiatric diagnosis who are admitted to short-term, acute 
care hospitals for the HCAHPS Survey. Specifically, we request public 
comment on whether all patients in the psychiatric service line (that 
is, MS-DRG codes of 876, 880-887, 894-897) or particular sub-groups 
thereof should be included in the HCAHPS Survey; whether the current 
content of the HCAHPS Survey is appropriate for these patients; and 
whether the current HCAHPS Survey measure implementation procedures 
might face legal barriers or pose legal risks when applied to patients 
with primary psychiatric diagnoses. The HCAHPS Survey measure 
instrument can be found at https://hcahpsonline.org/en/survey-instruments/. HCAHPS Survey measure implementation procedures can be

[[Page 27115]]

found in the HCAHPS Quality Assurance Guidelines, V18.0 at https://hcahpsonline.org/en/quality-assurance/ assurance/.
j. Data Submission and Reporting Requirements for Structural Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51643 and 51644) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53538 
and 53539) for details on the data submission requirements for 
structural measures. Hospitals are required to submit information for 
structural measures once annually using a CMS-approved web-based data 
collection tool available within the HQR System. The data submission 
period for structural measures begins in April and has the same 
submission deadline as the fourth calendar quarter chart-abstracted 
measure deadline. For example, for the FY 2025 payment determination, 
hospitals would be required to submit the required information between 
April 1, 2024 and May 15, 2024, with respect to the measure reporting 
period of January 1, 2023 through December 31, 2023.
    We are not proposing any changes to these policies in this proposed 
rule.
k. Data Submission and Reporting Requirements for CDC NHSN Measures
    For details on the data submission and reporting requirements for 
measures reported via the CDC's National Healthcare Safety Network 
(NHSN), we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51629 through 51633; 51644 and 51645), the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53539), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 
and 50822), and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50259 
through 50262). The data submission deadlines are posted on the 
QualityNet website at: https://qualitynet.cms.gov (or other successor 
CMS designated websites).
    We are not proposing any changes to these policies in this proposed 
rule.
l. Data Submission and Reporting Requirements for Patient-Reported 
Outcome-Based Performance Measures (PRO-PMs)
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49246 through 
49257), we finalized the adoption of the hospital-level THA/TKA PRO-PM 
into the Hospital IQR Program measure set. In the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49305), we further finalized the reporting and 
submission requirements for PRO-PM measures as a new type of measure to 
the Hospital IQR Program (87 FR 49305 through 49308).
    We are not proposing any changes to these policies in this proposed 
rule.
11. Validation of Hospital IQR Program Data
    In this proposed rule, we are proposing to update our targeting 
criteria for validation of hospitals granted an extraordinary 
circumstances exception (ECE). Specifically, we are proposing to modify 
the validation targeting criteria to include any hospital with a two-
tailed confidence interval that is less than 75 percent and which 
submitted less than four quarters of data due to receiving an 
extraordinary circumstances exception (ECE) for one or more quarters, 
beginning with the FY 2027 payment determination.
a. Background
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53539 through 53553), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 
through 50835), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 
through 50273), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49710 
through 49712), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 
through 57181), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 
through 38403), the FY 2019 IPPS/LTCH PPS final rule (83 FR 41607 and 
41608), the FY 2020 IPPS/LTCH PPS final rule (84 FR 42509), the FY 2021 
IPPS/LTCH PPS final rule (85 FR 58942 through 58953), the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45423 through 45426), and the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49308) for detailed information on and 
previous changes to chart-abstracted and eCQM data validation 
requirements for the Hospital IQR Program.
    In the FY 2021 IPPS/LTCH PPS final rule, we combined the validation 
processes for eCQMs and chart-abstracted measures. In that rule, we 
adopted a policy to remove the separate process for eCQM validation, 
beginning with the validation affecting the FY 2024 payment 
determination (for validation commencing in CY 2022 using data from the 
CY 2021 reporting period) (85 FR 58942 through 58953). Beginning with 
validation affecting the FY 2024 payment determination and subsequent 
years, we finalized a policy to incorporate eCQMs into the existing 
validation process for chart-abstracted measures such that there would 
be one pool of hospitals selected through random selection and one pool 
of hospitals selected using targeting criteria, for both chart-
abstracted measures and eCQMs (85 FR 58942 through 58953). Under the 
aligned validation process, a single hospital could be selected for 
validation of both eCQMs and chart-abstracted measures and is expected 
to submit data for both chart-abstracted measures and eCQMs (85 FR 
58942 through 58953). We refer readers to the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57179 and 57180) for details on the Hospital IQR 
Program data submission requirements for chart-abstracted measures.
    We select a random sample of up to 200 hospitals for validation 
purposes, and select up to 200 additional hospitals for validation 
purposes based on the following targeting criteria:
     Any hospital with abnormal or conflicting data patterns. 
One example of an abnormal data pattern would be if a hospital has 
extremely high or extremely low values for a particular measure. As 
described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552), we 
define an extremely high or low value as one that falls more than three 
standard deviations from the mean which is consistent with the Hospital 
Outpatient Quality Reporting (OQR) Program (76 FR 74485). An example of 
a conflicting data pattern would be if two records were identified for 
the same patient episode of care but the data elements were mismatched 
for primary diagnosis. Primary diagnosis is just one of many fields 
that should remain constant across measure sets for an episode of care. 
Other examples of fields that should remain constant across measure 
sets are patient age and sex. Any hospital not included in the base 
validation annual sample and with statistically significantly more 
abnormal or conflicting data patterns per record than would be expected 
based on chance alone (p < .05), would be included in the population of 
hospitals targeted in the supplemental sample.
     Any hospital with rapidly changing data patterns. For this 
targeting criterion, we define a rapidly changing data pattern as a 
hospital which improves its quality for one or more measure sets by 
more than two standard deviations from one year to the next and has a 
statistically significant difference in improvement (one-tailed p < 
.05) (77 FR 53553).
     Any hospital that submits data to NHSN after the Hospital 
IQR Program data submission deadline has passed.
     Any hospital that joined the Hospital IQR Program within 
the previous three years, and which has not been previously validated.
     Any hospital that has not been randomly selected for 
validation in any of the previous three years.
     Any hospital that passed validation in the previous year, 
but had a two-

[[Page 27116]]

tailed confidence interval that included 75 percent.
     Any hospital which failed to report to NHSN at least half 
of actual HAI events detected as determined during the previous year's 
validation effort.
b. Proposed Addition of Targeting Criterion for Validation
    In this proposed rule, beginning with validations of CY 2024 
reporting period data for the FY 2027 payment determination, we propose 
to add a new criterion to the six established targeting criteria used 
to select up to 200 additional hospitals for validation. We propose 
that a hospital with less than four quarters of data subject to 
validation due to receiving an extraordinary circumstance exception 
(ECE) for one or more quarters and with a two-tailed confidence 
interval that is less than 75 percent would be targeted for validation 
in the subsequent validation year. These hospitals would not fail the 
validation-related requirements for the Annual Payment Update (APU) 
determination for the payment year for which an ECE provides hospitals 
with an exception from data reporting or validation requirements. These 
hospitals could be selected for validation in the following year. We 
are proposing this additional criterion because such a hospital would 
have less than four quarters of data available for validation and its 
validation results could be considered inconclusive for a payment 
determination. Hospitals that meet this criterion would be required to 
submit medical records to the CDAC contractor within 30 days of the 
date identified on the written request as finalized in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57179 and 57180).
    It is important to clarify that, consistent with our previously 
finalized policy, a hospital is subject to both payment reduction and 
targeting for validation in the subsequent year if it either: (a) has 
less than four quarters of data, but does not have an ECE for one more 
or more quarters and does not meet the 75 percent threshold; or (b) has 
four quarters of data subject to validation and does not meet the 75 
percent threshold (77 FR 53539 through 53553).
    Specifically, we propose to add the following criterion for 
targeting up to 200 additional hospitals for validation:
     Any hospital with a two-tailed confidence interval that is 
less than 75 percent, and that had less than four quarters of data due 
to receiving an ECE for one or more quarters.
    This proposal would align targeting criteria across the Hospital 
IQR and Hospital OQR Programs. In the CY 2023 OPPS/ASC final rule, we 
finalized the addition of this criterion to the Hospital OQR Program's 
targeting criteria for validation selection beginning with validations 
affecting the CY 2023 reporting period/CY 2025 payment determination 
(87 FR 72115 and 72116). Our proposal would also allow us to 
appropriately address instances in which hospitals that submit fewer 
than four quarters of data due to receiving an ECE for one or more 
quarters might face payment reduction under the current validation 
policies.
    We invite public comment on our proposal.
12. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously adopted details on DACA requirements.
    We are not proposing any changes to this policy in this proposed 
rule.
13. Public Display Requirements
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
services furnished in inpatient settings in hospitals on the internet 
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also 
requires that the Secretary establish procedures for making information 
regarding measures available to the public after ensuring that a 
hospital has the opportunity to review its data before they are made 
public. Our current policy is to report data from the Hospital IQR 
Program as soon as it is feasible on CMS websites such as the Compare 
tool hosted by HHS, currently available at: https://www.medicare.gov/care-compare, or its successor website, after a 30-day preview period 
(78 FR 50776 through 50778). We refer readers to the FY 2008 IPPS/LTCH 
PPS final rule (72 FR 47364), the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53554), the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50836), the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50277), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49712 and 49713), 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57181), the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409), the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41538 and 41539), the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42509), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58953), 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45426), and the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49310) for details on public display 
requirements.
    We are not proposing any changes to these policies in this proposed 
rule.
a. Public Reporting of eCQM Data
    We refer readers to the FY 2021 IPPS/LTCH PPS final rule (85 FR 
58953 through 58959) where we finalized public reporting requirements 
of eCQM data reported by hospitals for the CY 2021 reporting period/FY 
2023 payment determination and for subsequent years.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized policies that 
further incrementally increases eCQM data that is publicly reported 
from four to six eCQMs for the CY 2024 reporting period/FY 2026 payment 
determination and subsequent years (87 FR 49298 through 49302). We 
refer readers to section IX.C.10.e. of this proposed rule for a 
discussion of our previously finalized eCQM reporting and submission 
policies.
    We are not proposing any changes to these policies in this proposed 
rule.
b. Overall Hospital Star Ratings
    In the CY 2021 OPPS/ASC final rule with comment period and interim 
final rule with comment period (85 FR 86193 through 86236), we 
finalized a methodology to calculate the Overall Hospital Quality Star 
Rating (Overall Star Ratings). The Overall Star Ratings utilizes data 
collected on hospital inpatient and outpatient measures that are 
publicly reported on a CMS website, including data from the Hospital 
IQR Program. We refer readers to section XVI. of the CY 2021 OPPS/ASC 
final rule with comment period for details (85 FR 86193 through 86236).
    We are not proposing any changes to these policies in this proposed 
rule.
14. Reconsideration and Appeal Procedures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51650 and 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), 
and 42 CFR 412.140(e) for details on reconsideration and appeal 
procedures for the FY 2017 payment determination and subsequent years.
    We are not proposing any changes to these policies in this proposed 
rule.

[[Page 27117]]

15. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651 and 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 and 
50837), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57181 and 57182), the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38409 through 38411), and 42 CFR 412.140(c)(2) for details on the 
current Hospital IQR Program ECE policy. We also refer readers to the 
QualityNet website at: https://qualitynet.cms.gov for our current 
requirements for submission of a request for an exception.
    We are not proposing any changes to these policies in this proposed 
rule.

D. Updates to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program

1. Background
    The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program is 
authorized by section 1866(k) of the Act and applies to hospitals 
described in section 1886(d)(1)(B)(v) (referred to as ``PPS-Exempt 
Cancer Hospitals'' or ``PCHs''). For additional background information, 
including previously finalized measures and other policies for the 
PCHQR Program, we refer readers to the following final rules:
     The FY 2013 IPPS/LTCH PPS final rule (77 FR 53555 through 
53567);
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50837 through 
50853);
     The FY 2015 IPPS/LTCH PPS final rule (79 FR 50277 through 
50286);
     The FY 2016 IPPS/LTCH PPS final rule (80 FR 49713 through 
49723);
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 through 
57193);
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38411 through 
38425);
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41609 through 
41624);
     The CY 2019 OPPS/ASC final rule with comment period (83 FR 
59149 through 59154);
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42509 through 
42524);
     The FY 2021 IPPS/LTCH PPS final rule (85 FR 58959 through 
58966);
     The FY 2022 IPPS/LTCH PPS final rule (86 FR 45426 through 
45437); and
     The FY 2023 IPPS/LTCH PPS final rule (87 FR 49311 through 
49314).
    We also refer readers to 42 CFR 412.23(f) and 412.24 for the PCHQR 
Program regulations.
2. Measure Retention and Removal Factors for the PCHQR Program
    For a detailed discussion regarding our retention and removal 
factors, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57182 through 57183), where we adopted policies for measure 
retention and removal, the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41609 through 41611), where we updated our measure removal factors, and 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49311), where we updated 
our measure removal policy. We are not proposing any changes to our 
measure removal or retention policies.
    In this proposed rule, we are proposing to adopt four new measures 
for the PCHQR Program: (i) three health equity-focused measures: the 
Facility Commitment to Health Equity measure, the Screening for Social 
Drivers of Health measure, and the Screen Positive Rate for Social 
Drivers of Health measure; and (ii) a patient preference-focused 
measure, the Documentation of Goals of Care Discussions Among Cancer 
Patients measure. We also refer readers to section IX.B. of the 
preamble of this proposed rule where we are proposing modifications of 
the COVID-19 Vaccination Among Healthcare Personnel (HCP) measure in 
the PCHQR, Hospital Inpatient Quality Reporting, and Long-Term Care 
Hospital Quality Reporting Programs.
3. Proposal To Adopt the Facility Commitment to Health Equity Measure 
Beginning With the FY 2026 Program Year
a. Background
    Significant and persistent disparities in healthcare outcomes exist 
in the U.S. For example, belonging to a racial or ethnic minority 
group, being a member of the lesbian, gay, bisexual, transgender, and 
queer (LGBTQ+) community, being a member of a religious minority, 
living in a rural area, being a person with a disability or 
disabilities, or being near or below the poverty level, is often 
associated with worse health 
outcomes.416 417 418 419 420 421 422 423 424 425 Numerous 
studies have shown that among Medicare beneficiaries, individuals who 
are racial and ethnic minorities often receive lower quality hospital 
care, report lower experiences of care, and experience more frequent 
hospital readmissions and procedural 
complications.426 427 428 429 430 431

[[Page 27118]]

Readmission rates in the Hospital Readmissions Reduction Program have 
shown to be higher among Black and Hispanic Medicare beneficiaries with 
common conditions, including congestive heart failure and acute 
myocardial infarction.432 433 434 435 436 Data indicate 
that, even after accounting for factors such as socioeconomic 
conditions, members of racial and ethnic minority groups reported 
experiencing lower quality healthcare.\437\ Evidence of differences in 
quality of care received by people from racial and ethnic minority 
groups show worse health outcomes, including a higher incidence of 
diabetes complications such as retinopathy.\438\ Additionally, 
inequities in the drivers of health affecting these groups, such as 
poverty and healthcare access, are interrelated and influence a wide 
range of health and quality-of-life outcomes and risks.\439\
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    \416\ Joynt KE, Orav E, Jha AK. (2011). Thirty-Day Readmission 
Rates for Medicare Beneficiaries by Race and Site of Care. JAMA, 
305(7), 675-681. Available at: doi:10.1001/jama.2011.123.
    \417\ Lindenauer PK, Lagu T, Rothberg MB, et al. (2013). Income 
Inequality and thirty-Day Outcomes After Acute Myocardial 
Infarction, Heart Failure, and Pneumonia: Retrospective Cohort 
Study. BMJ, 346. Available at: https://doi.org/10.1136/bmj.f521.
    \418\ Trivedi AN, Nsa W, Hausmann LRM, et al. (2014). Quality 
and Equity of Care in U.S. Hospitals. N Engl J Med, 371(24), 2298-
2308. Available at: doi: 10.1056/NEJMsa1405003.
    \419\ Polyakova, M, Udalova V, Kocks, G, Genadek K, Finlay K, 
Finkelstein AN. (2021). Racial Disparities In Excess All-Cause 
Mortality During The Early COVID-19 Pandemic Varied Substantially 
Across States. Health Affairs, 40(2), 307-316. Available at: https://doi.org/10.1377/hlthaff.2020.02142.
    \420\ Rural Health Research Gateway. (2018). Rural Communities: 
Age, Income, and Health Status. Rural Health Research Recap. 
Available at: https://www.ruralhealthresearch.org/assets/2200-8536/rural-communities-age-income-health-status-recap.pdf.
    \421\ HHS Office of Minority Health. (2020). Progress Report to 
Congress, 2020 Update on the Action Plan to Reduce Racial and Ethnic 
Health Disparities. Department of Health and Human Services. 
Available at: https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf.
    \422\ Heslin KC, Hall JE. (2021). Sexual Orientation Disparities 
in Risk Factors for Adverse COVID-19-Related Outcomes, by Race/
Ethnicity--Behavioral Risk Factor Surveillance System, United 
States, 2017-2019. MMWR Morb Mortal Wkly Rep, 70(5), 149. doi: 
10.15585/mmwr.mm7005a1.
    \423\ Poteat TC, Reisner SL, Miller M, Wirtz AL. (2020). COVID-
19 Vulnerability of Transgender Women With and Without HIV Infection 
in the Eastern and Southern U.S. medRxiv. doi: 10.1101/
2020.07.21.20159327.
    \424\ Vu M, Azmat A, Radejko T, Padela AI. (2016). Predictors of 
Delayed Healthcare Seeking Among American Muslim Women. Journal of 
Women's Health, 25(6), 586-593. doi: 10.1089/jwh.2015.5517.
    \425\ Nadimpalli SB, Cleland CM, Hutchinson MK, Islam N, Barnes 
LL, Van Devanter N. (2016). The Association Between Discrimination 
and the Health of Sikh Asian Indians. Health Psychology, 35(4), 351-
355. https://doi.org/10.1037/hea0000268.
    \426\ CMS Office of Minority Health. (2020). Racial, Ethnic, and 
Gender Disparities in Healthcare in Medicare Advantage. Baltimore, 
MD: Centers for Medicare & Medicaid Services. Available at: https://www.cms.gov/files/document/2020-national-level-results-race-ethnicity-and-gender-pdf.pdf.
    \427\ CMS Office of Minority Health. (Updated August 2018). 
Guide to Reducing Disparities in Readmissions. Baltimore, MD: 
Centers for Medicare & Medicaid Services. Available at: https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/OMH_Readmissions_Guide.pdf.
    \428\ Singh JA, Lu X, Rosenthal GE, Ibrahim S, Cram P. (2014). 
Racial Disparities in Knee and Hip Total Joint Arthroplasty: An 18-
year analysis of national Medicare data. Ann Rheum Dis., 73(12), 
2107-15. Available at: doi:10.1136/annrheumdis-2013-203494.
    \429\ Rivera-Hernandez M, Rahman M, Mor V, Trivedi AN. (2019). 
Racial Disparities in Readmission Rates among Patients Discharged to 
Skilled Nursing Facilities. J Am Geriatr Soc., 67(8), 1672-1679. 
Available at: https://doi.org/10.1111/jgs.15960.
    \430\ Joynt KE, Orav E, Jha AK. (2011). Thirty-Day Readmission 
Rates for Medicare Beneficiaries by Race and Site of Care. JAMA, 
305(7), 675-681. Available at: doi:10.1001/jama.2011.123.
    \431\ Tsai TC, Orav EJ, Joynt KE. (2014). Disparities in 
Surgical 30-day Readmission Rates for Medicare Beneficiaries by Race 
and Site of Care. Ann Surg., 259(6), 1086-1090. Available at: doi: 
10.1097/SLA.0000000000000326.
    \432\ Rodriguez F, Joynt KE, Lopez L, Saldana F, Jha AK. (2011). 
Readmission Rates for Hispanic Medicare Beneficiaries with Heart 
Failure and Acute Myocardial Infarction. Am Heart J., 162(2), 254-
261 e253. Available at: https://doi.org/10.1016/j.ahj.2011.05.009.
    \433\ Centers for Medicare & Medicaid Services. (2014). Medicare 
Hospital Quality Chartbook: Performance Report on Outcome Measures. 
Available at: https://www.hhs.gov/guidance/document/medicare-hospital-quality-chartbook-performance-report-outcome-measures.
    \434\ CMS Office of Minority Health. (Updated August 2018). 
Guide to Reducing Disparities in Readmissions. Baltimore, MD: 
Centers for Medicare & Medicaid Services. Available at: https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/OMH_Readmissions_Guide.pdf.
    \435\ Prieto-Centurion V, Gussin HA, Rolle AJ, Krishnan JA. 
(2013). Chronic Obstructive Pulmonary Disease Readmissions at 
Minority Serving Institutions. Ann Am Thorac Soc., 10(6), 680-684. 
Available at: https://doi.org/10.1513/AnnalsATS.201307-223OT.
    \436\ Joynt KE, Orav E, Jha AK. (2011). Thirty-Day Readmission 
Rates for Medicare Beneficiaries by Race and Site of Care. JAMA, 
305(7), 675-681. Available at: doi:10.1001/jama.2011.123.
    \437\ Nelson AR. (2003). Unequal Treatment: Report of the 
Institute of Medicine on Racial and Ethnic Disparities in 
Healthcare. The Annals of thoracic surgery, 76(4), S1377-S1381. doi: 
10.1016/s0003-4975(03)01205-0.
    \438\ Peek, ME, Odoms-Young, A, Quinn, MT, Gorawara-Bhat, R, 
Wilson, SC, & Chin, MH. (2010). Race and Shared Decision-Making: 
Perspectives of African-Americans with diabetes. Social Science & 
Medicine, 71(1), 1-9. Available at: doi:10.1016/
j.socscimed.2010.03.014.
    \439\ Department of Health and Human Services. (2021). Healthy 
People 2020: Disparities. Available at: www.healthypeople.gov/2020/about/foundation-health-measures/Disparities.
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    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25601), the PCHQR 
Program requested information on our Equity Plan for Improving Quality 
in Medicare, which outlines our commitment to improved data collection 
to better measure and analyze disparities across programs and policies 
in order to close equity gaps. The request for information asked for 
public comment regarding the potential stratification of quality 
measure results by race and ethnicity and the potential creation of a 
hospital equity score in CMS quality reporting and value-based 
purchasing programs, including the PCHQR Program.
    Additionally, we note that the Agency for Healthcare Research and 
Quality (AHRQ) and The Joint Commission identified that hospital 
leadership plays an important role in promoting a culture of quality 
and safety.440 441 442 AHRQ research shows that hospital 
boards can influence quality and safety in a variety of ways; not only 
through strategic initiatives, but also through more direct 
interactions with frontline workers.\443\ Because we are working toward 
the goal of all patients receiving high-quality healthcare, regardless 
of individual characteristics, we are committed to supporting 
healthcare organizations in building a culture of safety and equity 
that focuses on educating and empowering their workforce to recognize 
and eliminate health disparities. This includes patients receiving the 
right care, at the right time, in the right setting for their 
condition(s), regardless of those characteristics.
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    \440\ Agency for Healthcare Research and Quality. Leadership 
Role in Improving Patient Safety. Patient Safety Primer, September 
2019. Available at: https://psnet.ahrq.gov/primer/leadership-role-improving-safety.
    \441\ Joint Commission on Accreditation of Healthcare 
Organizations, USA. The essential role of leadership in developing a 
safety culture. Sentinel Event Alert. 2017 (Revised June 2021). 
Available at: https://www.jointcommission.org/-/media/tjc/documents/resources/patient-safety-topics/sentinel-event/sea-57-safety-culture-and-leadership-final2.pdf.
    \442\ See information on launch of new ``Health Care Equity 
Certification'' in July 2023 from Joint Commission on Accreditation 
of Healthcare Organizations, USA, available at: https://www.jointcommission.org/our-priorities/health-care-equity/health-care-equity-prepublication/.
    \443\ Agency for Healthcare Research and Quality. Leadership 
Role in Improving Patient Safety. Patient Safety Primer, September 
2019: Available at: https://psnet.ahrq.gov/primer/leadership-role-improving-safety.
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    In alignment with the same measures adopted for the Hospital IQR 
Program, we believe that strong and committed leadership from PCH 
executives and board members is essential and can play a role in 
shifting organizational culture and advancing equity goals for PCHs. 
Studies demonstrate that hospital leadership can positively influence 
culture for better quality, patient outcomes, and experience of 
care.444 445 446 A systematic review of 122 published 
studies showed that strong leadership that prioritized safety, quality, 
and the setting of clear guidance with measurable goals for improvement 
resulted in a high-performing hospital with better patient 
outcomes.\447\ We believe leadership commitment to health equity will 
have a parallel effect in contributing to a reduction in health 
disparities.
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    \444\ Bradley EH, Brewster AL, McNatt Z, et al. (2018) How 
Guiding Coalitions Promote Positive Culture Change in Hospitals: A 
Longitudinal Mixed Methods Interventional Study. BMJ Qual Saf., 
27(3), 218-225. doi:10.1136/bmjqs-2017-006574.
    \445\ Smith SA, Yount N, Sorra J. (2017). Exploring 
Relationships Between Hospital Patient Safety Culture and Consumer 
Reports Safety Scores. BMC Health Services Research, 17(1), 143. 
doi:10.1186/s12913-017-2078-6.
    \446\ Keroack MA, Youngberg BJ, Cerese JL, Krsek C, Prellwitz 
LW, Trevelyan EW. (2007). Organizational Factors Associated with 
High Performance in Quality and Safety in Academic Medical Centers. 
Acad Med., 82(12), 1178-86. doi: 10.1097/ACM.0b013e318159e1ff.
    \447\ Millar R, Mannion R, Freeman T, et al. (2013). Hospital 
Board Oversight of Quality and Patient Safety: A Narrative Review 
and Synthesis of Recent Empirical Research. The Milbank quarterly, 
91(4), 738-70. doi:10.1111/1468-0009.12032.
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    The Institute for Healthcare Improvement's (IHI's) research of 23 
health systems throughout the U.S. and Canada also shows that health 
equity must be a priority championed by leadership teams to improve 
both patient access to needed healthcare services and outcomes among 
populations that have been disadvantaged by the healthcare system.\448\ 
This IHI study specifically identified concrete actions to make 
advancing health equity a core strategy, including establishing this 
goal as a leader-driven priority alongside organizational development 
structures and processes.\449\ Based upon these findings, we believe 
that PCH leadership can be instrumental in setting specific, 
measurable, attainable, realistic, and time-based (SMART) goals to 
assess progress towards achieving equity goals and ensuring high-
quality care is accessible to all. Therefore, we are proposing to adopt 
an attestation-based structural measure, Facility Commitment to Health 
Equity, beginning with the FY 2026 program year.
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    \448\ Mate KS and Wyatt R. (2017). Health Equity Must Be a 
Strategic Priority. NEJM Catalyst. Available at: https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0556.
    \449\ Mate KS and Wyatt R. (2017). Health Equity Must Be a 
Strategic Priority. NEJM Catalyst. Available at: https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0556.
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    The first pillar of our strategic priorities \450\ reflects our 
deep

[[Page 27119]]

commitment to improvements in health equity by addressing the health 
disparities that underly our health system. In line with this strategic 
pillar, we developed this structural measure to assess facility 
commitment to health equity across five domains (see Table IX.D-01) 
using a suite of organizational competencies aimed at achieving health 
equity for racial and ethnic minority groups, people with disabilities, 
members of the LGBTQ+ community, individuals with limited English 
proficiency, rural populations, religious minorities, and people facing 
socioeconomic challenges. We believe these elements are actionable 
focus areas, and assessment of PCH leadership commitment to them is 
foundational.
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    \450\ Brooks-LaSure, C. (2021). My First 100 Days and Where We 
Go From Here: A Strategic Vision for CMS. Centers for Medicare & 
Medicaid. Available at: https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
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    We also believe this measure will incentivize hospitals to collect 
and utilize data to identify critical equity gaps, implement plans to 
address said gaps, and ensure that resources are dedicated toward 
addressing health equity initiatives. While many factors contribute to 
achieving health equity, we believe this measure is an important step 
toward assessing hospital leadership commitment, and a fundamental step 
toward closing the gap in equitable care for all populations. We note 
that this measure is not intended to encourage hospitals to act on any 
one data element or domain, but instead encourages hospitals to analyze 
their own findings to understand if there are any demographic factors 
(for example, race, national origin, primary language, and ethnicity), 
as well as social determinant of health information (for example, 
housing status and food security) associated with underlying 
inequities; and, in turn, develop solutions to deliver more equitable 
care. Thus, the measure aims to support hospitals in leveraging 
available data, pursuing focused quality improvement activities, and 
promoting efficient and effective use of resources.
    The five questions of the proposed structural measure are adapted 
from the CMS Office of Minority Health's Building an Organizational 
Response to Health Disparities framework, which focuses on data 
collection, data analysis, culture of equity, and quality 
improvement.\451\ The proposed measure aligns with the measure 
previously adopted in the Hospital IQR Program, and we refer readers to 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49191 through 49201). This 
measure also aligns with our efforts under the Meaningful Measures 
Framework, which identifies high-priority areas for quality measurement 
and improvement to assess core issues most critical to high-quality 
healthcare and improving patient outcomes.\452\ In 2021, we launched 
Meaningful Measures 2.0 to promote innovation and modernization of all 
aspects of quality, and to address a wide variety of settings, 
stakeholders, and measure requirements.\453\ We are addressing 
healthcare priorities and gaps with Meaningful Measures 2.0 by 
leveraging quality measures to promote equity and close gaps in care. 
The Facility Commitment to Health Equity measure supports these efforts 
and is aligned with the Meaningful Measures Area of ``Equity of Care'' 
and the Meaningful Measures 2.0 goal to ``Leverage Quality Measures to 
Promote Equity and Close Gaps in Care.'' This measure also supports the 
Meaningful Measures 2.0 objective to ``Commit to a patient-centered 
approach in quality measure and value-based incentives programs to 
ensure that quality and safety measures address healthcare equity.''
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    \451\ Centers for Medicare & Medicaid Services. (2021). Building 
an Organizational Response to Health Disparities [Fact Sheet]. U.S. 
Department of Health and Human Services. Available at: https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Health-Disparities-Guide.pdf.
    \452\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \453\ Centers for Medicare & Medicaid Services. (2021). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization. We note that 
Meaningful Measures 2.0 is still under development.
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b. Overview of Measure
    The Facility Commitment to Health Equity measure would assess PCH 
commitment to health equity using a suite of equity-focused 
organizational competencies aimed at achieving health equity for 
populations that have been disadvantaged, marginalized, and underserved 
by the healthcare system. As previously noted, this includes, but is 
not limited to: racial and ethnic minority groups, people with 
disabilities, members of the LGBTQ+ community, individuals with limited 
English proficiency, rural populations, religious minorities, and 
people facing socioeconomic challenges. Table IX.D-01 includes the five 
attestation domains and the elements within each of those domains to 
which a PCH would affirmatively attest for the PCH to receive credit 
for that domain.
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c. Measure Calculation
    The Facility Commitment to Health Equity measure consists of five 
attestation-based questions, each representing a separate domain of 
commitment. Some of the domains have multiple elements to which a PCH 
would be required to attest. For a PCH to affirmatively attest ``yes'' 
to a domain, and receive credit for that domain, the PCH would evaluate 
and determine whether it engages in each of the sub-elements that 
comprise the domain. PCHs would only receive a point for each domain if 
they attest ``yes'' to all related sub-elements. There is no ``partial 
credit'' for sub-elements. Each of the domains would be represented in 
the denominator as a point, for a total of 5 points (one per domain).
    For example, for Domain 1 (``Hospital commitment to reducing 
healthcare disparities is strengthened when equity is a key 
organizational priority''), a PCH would evaluate and determine whether 
its strategic plan meets each of the elements described in (A) through 
(D) (see Table IX.D.-01). If the PCH's plan meets all four of these 
elements, the PCH would affirmatively attest to Domain 1 and receive 
one (1) point for that attestation. A PCH would not be able to receive 
partial credit for a domain. In other words, if a PCH's strategic plan 
meets elements (A) and (B) but not (C) and (D), the PCH would not be 
able to affirmatively attest to Domain 1 and would not receive a point 
for that attestation.
    The numerator would capture the total number of domain attestations 
to which the PCH is able to affirm. For example, a PCH that 
affirmatively attests each element of the 5 domains would receive the 
maximum 5 points.
    Specifications for the measure are available on the CMS Measure 
Methodology page with the file name ``Facility Commitment to Health 
Equity Measure Specifications'' at: https://cmit.cms.gov/cmit/#/.
d. Data Submission and Reporting
    We are proposing that PCHs would be required to submit information 
for the Facility Commitment to Health Equity measure once on an annual 
basis using a CMS-approved web-based data collection tool available 
within the Hospital Quality Reporting (HQR) System beginning with the 
FY 2026 program year. PCHs would follow the submission and reporting 
requirements for web-based measures for the PCHQR Program posted on the 
QualityNet website. We also refer readers to section IX.D.10.a. of the 
preamble of this proposed rule for details on our previously finalized 
data submission requirements and deadlines.
e. Review by the Measure Applications Partnership
    The Facility Commitment to Health Equity measure was included for 
consideration in the PCHQR Program on the publicly available ``List of 
Measures Under Consideration for December 1, 2022'' (MUC List), a list 
of measures under consideration for use in various Medicare quality 
programs.\454\ The CBE-convened Measure Applications Partnership (MAP) 
Health Equity Advisory Group reviewed the MUC List and the Facility 
Commitment to Health Equity measure (MUC2022-027) in detail on December 
6-7, 2022.\455\ The Health Equity Advisory Group expressed concern that 
this is more of a ``checklist'' measure that may not directly address 
health inequities at a systemic level, but the advisory group generally 
agreed that a structural measure such as this one represents progress 
toward improving equitable care.\456\ In addition, on December 8-9, 
2022, the MAP Rural Health Advisory Group reviewed the 2022 MUC List, 
and the MAP Hospital Workgroup reviewed the 2022 MUC list on December 
13-14, 2022.\457\ The MAP recognized that reducing health care 
disparities would represent a substantial benefit to overall quality of 
care, but expressed reservations about the measure's link to clinical 
outcomes; the MAP Workgroup members voted to conditionally support the 
measure for rulemaking pending: (1) endorsement by a consensus-based 
entity (CBE); (2) committing to look at outcomes in the future; (3) 
providing more clarity on the measure and supplementing interpretations 
with results; and (4) verifying attestation provided by the accountable 
entities.\458\ Thereafter, the MAP Coordinating Committee deliberated 
on January 24-25, 2023 and ultimately voted to conditionally support 
the Facility Commitment to Health Equity measure for rulemaking with 
the same conditions.\459\
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    \454\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \455\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \456\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \457\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \458\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \459\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    We believe this measure establishes an important foundation to 
prioritize the achievement of health equity among PCHs. Our approach to 
developing equity-focused measures has been incremental to date, but we 
see inclusion of such measures in the PCHQR Program as informing 
efforts to advance and achieve health equity among PCHs by allowing for 
the recognition and tracking of disparities for the population served 
by PCHs. We additionally believe this measure to be a building block 
that lays the groundwork for a future meaningful suite of measures that 
would assess PCH progress in providing high-quality healthcare for all 
patients, regardless of social risk factors or demographic 
characteristics.
f. Consensus-Based Entity Endorsement
    We have not submitted this measure for consensus-based entity (CBE) 
\460\ endorsement at this time. Although section 1866(k)(3)(A) of the 
Act generally requires that measures specified by the Secretary for use 
in the PCHQR Program be endorsed by the entity with a contract under 
section 1890(a) of the Act, section 1866(k)(3)(B) of the Act states 
that in the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) of the Act, the Secretary may specify a measure that is not so 
endorsed as long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary. We reviewed CBE-endorsed measures and were unable to 
identify any other CBE-endorsed measures on this topic, and, therefore, 
we believe the exception in section 1866(k)(3)(B) of the Act applies.
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    \460\ In previous years, we referred to the consensus-based 
entity by corporate name. We have updated this language to refer to 
the consensus-based entity more generally.
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g. Public Display
    We are proposing to publicly display the PCH-specific results for 
the Facility Commitment to Health Equity measure and refer readers to 
Table IX.D.-02 in section IX.D.9. of the preamble for the proposed 
public display requirements.
    We invite public comment on this proposal.

[[Page 27122]]

4. Proposal To Adopt the Screening for Social Drivers of Health Measure 
Beginning With Voluntary Reporting in the FY 2026 Program Year and 
Mandatory Reporting in the FY 2027 Program Year
    Health-related social needs (HRSNs), which we define as individual-
level, adverse social conditions that negatively impact a person's 
health or healthcare, are significant risk factors associated with 
worse health outcomes as well as increased healthcare utilization.\461\ 
We believe that consistently pursuing identification of HRSNs will have 
two significant benefits. First, these social risk factors 
disproportionately impact populations that have historically been 
underserved by the healthcare system and screening helps identify 
individuals who may have HRSNs.\462\ Second, screening for social risk 
factors could support ongoing PCH quality improvement initiatives by 
providing data with which to stratify patient risk and organizational 
performance. Further, we believe collecting patient-level HRSN data 
through screening is essential for the long-term in encouraging 
meaningful collaboration between healthcare providers and community-
based organizations, and in implementing and evaluating related 
innovations in health and social care delivery.
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    \461\ Centers for Medicare & Medicaid Services. (2021). A Guide 
to Using the Accountable Health Communities Health-Related Social 
Needs Screening Tool: Promising Practices and Key Insights. June 
2021. Available at: https://innovation.cms.gov/media/document/ahcm-screeningtool-companion. Accessed: November 23, 2021.
    \462\ American Hospital Association. (2020). Health Equity, 
Diversity & Inclusion Measures for Hospitals and Health System 
Dashboards. December 2020. Accessed: January 18, 2022. Available at: 
https://ifdhe.aha.org/system/files/media/file/2020/12/ifdhe_inclusion_dashboard.pdf.
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    As a first step towards leveraging the opportunity to close equity 
gaps by identifying patients' HRSNs, we finalized the adoption of two 
evidence-based measures in the Hospital IQR Program, the Screening for 
Social Drivers of Health measure and the Screen Positive Rate for 
Social Drivers of Health measure in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49201 through 49220). These two social drivers of health 
measures support identification of specific risk factors for inadequate 
healthcare access and adverse health outcomes among patients. These 
measures also enable systematic collection of HRSN data. This activity 
aligns with our other efforts beyond the acute care setting, including 
the CY 2023 Medicare Advantage and Part D final rule in which we 
finalized the policy requiring that all Special Needs Plans (SNPs) 
include one or more questions on housing stability, food security, and 
access to transportation in their Health Risk Assessment (HRA) using 
questions from a list of screening instruments specified in sub-
regulatory guidance (87 FR 27726 through 27740), as well as the CY 2023 
PFS final rule in which we adopted the Screening for Social Drivers of 
Health Measure in the Merit-based Incentive Payment System Program (87 
FR 70054 through 70055).
    These measures would allow PCHs to identify patients with HRSNs, 
who are known to experience the greatest risk of poor health outcomes, 
thereby improving the accuracy of high-risk prediction calculations. 
Improvement in risk prediction has the potential to reduce healthcare 
access barriers, address the disproportionate expenditures attributed 
to populations with greatest risk, and improve the PCH's quality of 
care.463 464 465 466 Further, these data could guide future 
public and private resource allocation to promote focused collaboration 
between PCHs, health systems, community-based organizations, and others 
in support of improving patient outcomes.
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    \463\ Baker, M.C., Alberti, P.M., Tsao, T.Y., Fluegge, K., 
Howland, R.E., & Haberman, M. (2021). Social Determinants Matter for 
Hospital Readmission Policy: Insights From New York City. Health 
Affairs, 40(4), 645-654. Available at: https://doi.org/10.1377/hlthaff.2020.01742.
    \464\ Hammond, G., Johnston, K., Huang, K., Joynt Maddox, K. 
(2020). Social Determinants of Health Improve Predictive Accuracy of 
Clinical Risk Models for Cardiovascular Hospitalization, Annual 
Cost, and Death. Circulation: Cardiovascular Quality and Outcomes, 
13 (6) 290-299. Available at: https://doi.org/10.1161/CIRCOUTCOMES.120.006752.
    \465\ Hill-Briggs, F. (2021, January 1). Social Determinants of 
Health and Diabetes: A Scientific Review. Diabetes Care. Available 
at: https://pubmed.ncbi.nlm.nih.gov/33139407/.
    \466\ Jaffrey, J.B., Safran, G.B., Addressing Social Risk 
Factors in Value-Based Payment: Adjusting Payment Not Performance to 
Optimize Outcomes and Fairness. Health Affairs Blog, April 19, 2021. 
Available at: https://www.healthaffairs.org/do/10.1377/forefront.20210414.379479/full/.
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    We provide further details on each measure in the subsequent 
discussion and section IX.D.5. of the preamble of this proposed rule.
a. Background
    Health disparities manifest primarily as worse health outcomes in 
population groups where access to care is 
inequitable.467 468 469 470 471 Such differences persist 
across geography and healthcare settings irrespective of improvements 
in quality of care over time.472 473 474 Assessment of HRSNs 
is an essential mechanism for capturing the interaction between social, 
community, and environmental factors associated with health status and 
health outcomes.475 476 477 Growing evidence demonstrates 
that specific social risk factors are directly associated with patient 
health outcomes as well as healthcare utilization, costs, and 
performance in quality reporting and payment 
programs.478 479 While

[[Page 27123]]

widespread interest in addressing HRSNs exists, action is inconsistent, 
with 92 percent of hospitals screening for one or more of the five 
HRSNs--food insecurity, housing instability, transportation needs, 
utility difficulties, and interpersonal safety--specified in the 
proposed measures, but only 24 percent of hospitals screening for all 
five HRSNs.\480\
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    \467\ Seligman, H.K., & Berkowitz, S.A. (2019). Aligning 
Programs and Policies to Support Food Security and Public Health 
Goals in the United States. Annual Review of Public Health, 40(1), 
319-337. Available at: https://pubmed.ncbi.nlm.nih.gov/30444684/.
    \468\ The Physicians Foundation. (2020). Survey of America's 
Patients, Part Three. Available at: https://physiciansfoundation.org/wp-content/uploads/2020/10/2020-Physicians-Foundation-Survey-Part3.pdf.
    \469\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) (2020). Report to Congress: Social Risk Factors 
and Performance Under Medicare's Value-Based Purchasing Program 
(Second of Two Reports). Available at: https://aspe.hhs.gov/pdf-report/second-impact-report-to-congress.
    \470\ Trivedi AN, Nsa W, Hausmann LRM, et al. Quality and Equity 
of Care in U.S. Hospitals. New England Journal of Medicine. 2014; 
371(24):2298-2308.
    \471\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
    \472\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) (2020). Report to Congress: Social Risk Factors 
and Performance Under Medicare's Value-Based Purchasing Program 
(Second of Two Reports). Available at: https://aspe.hhs.gov/pdf-report/second-impact-report-to-congress.
    \473\ Hill-Briggs, F. (2021, January 1). Social Determinants of 
Health and Diabetes: A Scientific Review. Diabetes Care. Available 
at: https://pubmed.ncbi.nlm.nih.gov/33139407/.
    \474\ Khullar, D., MD. (2020, September 8). Association Between 
Patient Social Risk and Physician Performance American academy of 
Family Physicians. Addressing Social Determinants of Health in 
Primary Care team-based approach for advancing health equity. 
Available at: https://www.aafp.org/dam/AAFP/documents/patient_care/everyone_project/team-based-approach.pdf.
    \475\ Institute of Medicine. (2014). Capturing Social and 
Behavioral Domains and Measures in Electronic Health Records: Phase 
2. Washington, DC: The National Academies Press. Available at: 
https://doi.org/10.17226/18951.
    \476\ Alley, D.E., C.N. Asomugha, P.H. Conway, and D.M. 
Sanghavi. (2016). Accountable Health Communities-Addressing Social 
Needs through Medicare and Medicaid. The New England Journal of 
Medicine 374(1):8-11. Available at: https://doi.org/10.1056/NEJMp1512532.
    \477\ Centers for Disease Control and Prevention. CDC COVID-19 
Response Health Equity Strategy: Accelerating Progress Towards 
Reducing COVID-19 Disparities and Achieving Health Equity. July 
2020. Available at: https://www.cdc.gov/coronavirus/2019-ncov/community/health-equity/cdc-strategy.html. Accessed November 17, 
2021.
    \478\ Zhang Y, Li J, Yu J, Braun RT, Casalino LP. (2021). Social 
Determinants of Health and Geographic Variation in Medicare per 
Beneficiary Spending. JAMA Network Open. 2021;4(6):e2113212. 
doi:10.1001/jamanetworkopen.2021.13212.
    \479\ Khullar, D., Schpero, W.L., Bond, A.M., Qian, Y., & 
Casalino, L.P. (2020). Association Between Patient Social Risk and 
Physician Performance Scores in the First Year of the Merit-based 
Incentive Payment System. JAMA, 324(10), 975-983. https://doi.org/10.1001/jama.2020.13129.
    \480\ TK Fraze, AL Brewster, VA Lewis, LB Beidler, GF Murray, CH 
Colla. Prevalence of screening for food insecurity, housing 
instability, utility needs, transportation needs, and interpersonal 
violence by US physician practices and hospitals. JAMA Network Open 
2019; 2:e1911514.10.1001/jamanetworkopen.2019.11514.31532515.
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    In 2017, CMS's Center for Medicare and Medicaid Innovation launched 
the Accountable Health Communities (AHC) Model to test the impact of 
systematically identifying and addressing the HRSNs of community-
dwelling Medicare and Medicaid beneficiaries (through screening, 
referral, and community navigation on their health outcomes and related 
healthcare utilization and costs).481 482 483 484 The AHC 
Model is one of the first Federal pilots to systematically test whether 
identifying and addressing core HRSNs improves healthcare costs, 
utilization, and outcomes with 29 participating bridge 
organizations.485 486 The AHC Model had a 5-year period of 
performance that began in May 2017 and ended in April 2022, with 
beneficiary screening beginning in the summer of 
2018.487 488 Evaluation of the AHC Model data is still 
underway.
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    \481\ Centers for Medicare & Medicaid Services. (2021). A Guide 
to Using the Accountable Health Communities Health-Related Social 
Needs Screening Tool: Promising Practices and Key Insights. June 
2021. Accessed: November 23, 2021. Available at: https://innovation.cms.gov/media/document/ahcm-screeningtool-companion.
    \482\ Alley, D.E., C.N. Asomugha, P.H. Conway, and D.M. 
Sanghavi. 2016. Accountable Health Communities-Addressing Social 
Needs through Medicare and Medicaid. The New England Journal of 
Medicine 374(1):8-11. Available at: https://doi.org/10.1056/NEJMp1512532.
    \483\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
    \484\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Accessed November 23, 2021. 
Available at: https://innovation.cms.gov/innovation-models/ahcm.
    \485\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \486\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \487\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \488\ We note that the model officially concluded in April 2022 
but many awardees are continuing with no-cost extensions to continue 
utilizing unspent cooperative agreement funding and all awardees 
will conclude by April 2023.
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    While social risk factors account for 50 to 70 percent of health 
outcomes, the mechanisms by which this connection emerges are complex 
and multifaceted.489 490 491 492 The persistent interactions 
between individuals' HRSNs, medical providers' practices/behaviors, and 
community resources significantly impact healthcare access, quality, 
and ultimately costs, as described in the CMS Equity Plan for Improving 
Quality in Medicare.493 494 In their 2018 survey of 8,500 
physicians, the Physicians Foundation found almost 90 percent of 
physician respondents reported their patients had a serious health 
problem linked to poverty or other social conditions.\495\ 
Additionally, associations between disproportionate health risk, 
hospitalization, and adverse health outcomes have been highlighted and 
magnified by the COVID-19 pandemic.496 497
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    \489\ Kaiser Family Foundation. (2021). Racial and Ethnic Health 
Inequities and Medicare. Available at: https://www.kff.org/medicare/report/racial-and-ethnic-health-inequities-and-medicare/. Accessed 
November 23, 2021.
    \490\ Khullar, D., MD. (2020, September 8). Association Between 
Patient Social Risk and Physician Performance American academy of 
Family Physicians. (2020). Addressing Social Determinants of Health 
in Primary Care team-based approach for advancing health equity.
    \491\ Hammond, G., Johnston, K., Huang, K., Joynt Maddox, K. 
(2020). Social Determinants of Health Improve Predictive Accuracy of 
Clinical Risk Models for Cardiovascular Hospitalization, Annual 
Cost, and Death. Circulation: Cardiovascular Quality and Outcomes, 
13 (6) 290-299. Available at: https://doi.org/10.1161/CIRCOUTCOMES.120.006752.
    \492\ The Physicians Foundation. (2021). Viewpoints: Social 
Determinants of Health. Available at: https://physiciansfoundation.org/wp-content/uploads/2019/08/The-Physicians-Foundation-SDOH-Viewpoints.pdf. Accessed December 8, 2021.
    \493\ Centers for Medicare & Medicaid Services. (2021). Paving 
the Way to Equity: A Progress Report. Accessed January 18, 2022. 
Available at: https://www.cms.gov/files/document/paving-way-equity-cms-omh-progress-report.pdf.
    \494\ Centers for Medicare & Medicaid Services Office of 
Minority Health. (2021). The CMS Equity Plan for Improving Quality 
in Medicare. 2015-2021. Available at: https://www.cms.gov/About-CMS/Agency-Information/OMH/OMH_Dwnld-CMS_EquityPlanforMedicare_090615.pdf.
    \495\ The Physicians Foundation. (2019). Viewpoints: Social 
Determinants of Health. Available at: https://physiciansfoundation.org/wp-content/uploads/2019/08/The-Physicians-Foundation-SDOH-Viewpoints.pdf. Accessed December 8, 2021.
    \496\ Centers for Disease Control and Prevention. (2020). CDC 
COVID-19 Response Health Equity Strategy: Accelerating Progress 
Towards Reducing COVID-19 Disparities and Achieving Health Equity. 
July 2020. Available at: https://www.cdc.gov/coronavirus/2019-ncov/community/health-equity/cdc-strategy.html. Accessed November 17, 
2021.
    \497\ Kaiser Family Foundation. (2021). Racial and Ethnic Health 
Inequities and Medicare. Available at: https://www.kff.org/medicare/report/racial-and-ethnic-health-inequities-and-medicare/. Accessed 
November 23, 2021.
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    The following five core domains were selected to screen for HRSNs 
among Medicare and Medicaid beneficiaries under the AHC Model: (1) food 
insecurity; (2) housing instability; (3) transportation needs; (4) 
utility difficulties; and (5) interpersonal safety. These domains were 
chosen based upon literature review and expert consensus utilizing the 
following criteria: (1) availability of high-quality scientific 
evidence linking a given HRSN to adverse health outcomes and increased 
healthcare utilization, including hospitalizations and associated 
costs; (2) ability for a given HRSN to be screened and identified in 
the inpatient setting prior to hospital discharge, addressed by 
community-based services, and potentially improve health care outcomes, 
including reduced hospital re-admissions; and (3) evidence that a given 
HRSN is not systematically addressed by healthcare providers.\498\ In 
addition to established evidence of their association with health 
status, risk, and outcomes, these five domains were also selected 
because they can be assessed across the broadest spectrum of 
individuals in a variety of settings.499 500 501
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    \498\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
    \499\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
    \500\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Accessed November 23, 2021. 
Available at: https://innovation.cms.gov/innovation-models/ahcm.
    \501\ Kamyck, D., Senior Director of Marketing. (2019). CMS 
releases standardized screening tool for health-related social 
needs. Activate Care. Available at: https://blog.activatecare.com/standardized-screening-for-health-related-social-needs-in-clinical-settings-the-accountable-health-communities-screening-tool/.
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    These five evidence-based HRSN domains, which informed development 
of the two social drivers of health

[[Page 27124]]

measures, are described in Table IX.D.-02.
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    Utilization of screening tools to identify the burden of unmet 
HRSNs can be a helpful first step for PCHs identifying necessary 
community partners and connecting individuals to resources in their 
communities. We believe collecting data on the same five HRSN domains 
under the PCHQR Program that were screened under the AHC Model will 
illuminate their impact on health outcomes, their contribution to 
related disparities, and the associated care-cost burden for PCHs, 
particularly for PCHs that serve patients experiencing 
disproportionately high levels of social risk. In addition, data 
collection in this care setting could inform more meaningful and 
sustainable solutions for provider-types participating in other quality 
reporting

[[Page 27126]]

programs to close equity gaps among the communities they 
serve.524 525 526 527 528
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    \524\ The Physicians Foundation: 2020 Survey of America's 
Patients, Part Three. Available at: https://physiciansfoundation.org/wp-content/uploads/2020/10/2020-Physicians-Foundation-Survey-Part3.pdf.
    \525\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) (2020). Report to Congress: Social Risk Factors 
and Performance Under Medicare's Value-Based Purchasing Program 
(Second of Two Reports). Available at: https://aspe.hhs.gov/pdf-report/second-impact-report-to-congress.
    \526\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
    \527\ Baker, M.C., Alberti, P.M., Tsao, T.Y., Fluegge, K., 
Howland, R.E., & Haberman, M. (2021). Social Determinants Matter for 
Hospital Readmission Policy: Insights From New York City. Health 
Affairs, 40(4), 645-654. Available at: https://doi.org/10.1377/hlthaff.2020.01742.
    \528\ De Marchis, E., Knox, M., Hessler, D., Willard-Grace, R., 
Oliyawola, JN, et al. (2019). Physician Burnout and Higher Clinic 
Capacity to Address Patients' Social Needs. The Journal of the 
American Board of Family Medicine, 32 (1), 69-78.
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    For data collection of this measure, PCHs could use a self-selected 
screening tool and collect these data in multiple ways, which can vary 
to accommodate the population they serve and their individual 
needs.529 530 For example, the AHC Model employed a 10-item 
AHC Health-Related Social Needs Screening Tool to enable providers to 
identify HRSNs in the five core domains (described in Table IX.D.-02) 
among community-dwelling Medicare, Medicaid, and dually eligible 
beneficiaries.\531\ The AHC Model was tested across varied care-
delivery sites in diverse geographic locations across the U.S.\532\ We 
reviewed literature that shows that the Tool was evaluated 
psychometrically and demonstrated evidence of both reliability and 
validity, including inter-rater reliability and concurrent and 
predictive validity.\533\ Moreover, the screening instrument can be 
implemented in a variety of places where patients seek healthcare, 
including cancer hospitals.\534\
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    \529\ Social Interventions Research & Evaluation Network. 
(2019). Social Needs Screening Tool Comparison Table. Available at: 
https://sirenetwork.ucsf.edu/tools-resources/resources/screening-tools-comparison. Accessed January 18, 2021.
    \530\ Centers for Medicare & Medicaid Services. (2021). A Guide 
to Using the Accountable Health Communities Health-Related Social 
Needs Screening Tool: Promising Practices and Key Insights (June 
2021). Available at: https://innovation.cms.gov/media/document/ahcm-screeningtool-companion. Accessed January 18, 2021.
    \531\ More information on the HRSN Screening Tool is available 
at: https://innovation.cms.gov/files/worksheets/ahcm-screeningtool.pdf.
    \532\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \533\ Lewis C., Wellman R., Jones S., Walsh-Bailey C., Thompson 
E., Derus A., Paolino A., Steiner J., De Marchis E., Gottlieb L., 
and Sharp A. (2020). Comparing the Performance of Two Social Risk 
Screening Tools in a Vulnerable Subpopulation. J Family Med Prim 
Care. 2020 Sep; 9(9): 5026-5034. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7652127/.
    \534\ CMS. A Guide to Using the Accountable Health Communities 
Health-Related Social Needs Screening Tool: Promising Practices and 
Key Insights. June 2021. Accessed: November 23, 2021. Available at: 
https://innovation.cms.gov/media/document/ahcm-screeningtool-companion.
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    The intent of this measure is to promote adoption of HRSN screening 
by PCHs. We encourage PCHs to use the screening as a basis for 
developing their own individual action plans (which could include 
navigation services and subsequent referral), as well as an opportunity 
to initiate and/or improve partnerships with community-based service 
providers. This effort will yield actionable information to close 
equity gaps by encouraging PCHs to identify HRSNs; with a reciprocal 
goal of strengthening linkages between PCHs and community-based 
partners so as to promptly connect patients and families to the support 
they need.
    Under our Meaningful Measures Framework,\535\ the Screening for 
Social Drivers of Health measure, in addition to the Screen Positive 
Rate for Social Drivers of Health measure discussed in section IX.D.5. 
of the preamble of this proposed rule, address the quality priority of 
``Work with Communities to Promote Best Practices of Healthy Living'' 
through the Meaningful Measures Area of ``Equity of Care.'' 
Additionally, pursuant to Meaningful Measures 2.0, this measure 
addresses the ``healthcare equity'' priority area and aligns with our 
commitment to introduce plans to close health equity gaps and promote 
equity through quality measures, including to ``develop and implement 
measures that reflect social and economic determinants.'' \536\ 
Development and proposal of this measure also align with our strategic 
pillar to advance health equity by addressing the health disparities 
that underlie our health system.\537\
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    \535\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \536\ Centers for Medicare & Medicaid Services. Meaningful 
Measures 2.0: Moving from Measure Reduction to Modernization. 
Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization. We note that Meaningful Measures 
2.0 is still under development.
    \537\ Brooks-LaSure, C. (2021). My First 100 Days and Where We 
Go From Here: A Strategic Vision for CMS. Available at: https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
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    In alignment with the measure's adoption in the Hospital IQR 
Program in the FY 2023 IPPS/LTCH final rule (87 FR 49202 through 
49215), the Screening for Social Drivers of Health measure (alongside 
the Screen Positive Rate for Social Drivers of Health measure described 
in section IX.D.5. of the preamble of this proposed rule) would be the 
first patient-level measurement of social drivers of health in the 
PCHQR Program. We believe this measure is appropriate for the 
measurement of the quality of care furnished by PCHs. Screening would 
allow healthcare providers to identify and potentially help address 
HRSNs as part of discharge planning and contribute to long-term 
improvements in patient outcomes. This would have a direct and positive 
impact on cancer hospital quality performance. Moreover, collecting 
baseline data via this measure is crucial in informing design of future 
measures that could enable us to set appropriate performance targets 
for PCHs.
b. Overview of Measure
    The Screening for Social Drivers of Health measure would assess 
whether a PCH implements screening for all patients who are 18 years or 
older at time of admission for food insecurity, housing instability, 
transportation needs, utility difficulties, and interpersonal safety. 
To report on this measure, PCHs would provide: (1) The number of 
patients admitted to the PCH who are 18 years or older at time of 
admission and who are screened for all of the five HRSNs: Food 
insecurity, housing instability, transportation needs, utility 
difficulties, and interpersonal safety; and (2) the total number of 
patients who are admitted to the PCH who are 18 years or older on the 
date they are admitted.
    Measure specifications for this measure are currently available at: 
https://cmit.cms.gov/cmit/#/.
(1) Cohort
    The Screening for Social Drivers of Health measure would assess the 
total number of patients, aged 18 years and older, screened for food 
insecurity, housing instability, transportation needs, utility 
difficulties, and interpersonal safety.
(2) Numerator
    The numerator consists of the number of patients who are 18 years 
or older on the date of their PCH admission and are screened for all of 
the following five HRSNs: Food insecurity, housing

[[Page 27127]]

instability, transportation needs, utility difficulties, and 
interpersonal safety.
(3) Denominator
    The denominator consists of the number of patients who are admitted 
to a PCH and who are 18 years or older on the date of admission. The 
following patients would be excluded from the denominator: (1) Patients 
who opt-out of screening; and (2) patients who are themselves unable to 
complete the screening during their PCH stay and have no legal guardian 
or caregiver able to do so on the patient's behalf during their PCH 
stay.
c. Measure Calculation
    The Screening for Social Drivers of Health measure would be 
calculated as the number of patients admitted to a PCH stay who are 18 
years or older on the date of admission screened for all five HRSNs 
(food insecurity, housing instability, transportation needs, utility 
difficulties, and interpersonal safety) divided by the total number of 
patients 18 years or older on the date of admission admitted to the 
PCH.
d. Data Submission and Reporting
    We are proposing that PCHs would report this measure on an annual 
basis beginning with voluntary reporting in the FY 2026 program year 
and mandatory reporting in the FY 2027 program year. In alignment with 
the Hospital IQR Program, we would allow PCHs flexibility to select a 
tool or tools to screen patients for food insecurity, housing 
instability, transportation needs, utility difficulties, and 
interpersonal safety. Potential sources of these data for incorporation 
in a tool could include, for example, administrative claims data, 
electronic clinical data, standardized patient assessments, or patient-
reported data and surveys. Additionally, multiple screening tools exist 
and are publicly available. PCHs could refer to evidence-based 
resources like the Social Interventions Research and Evaluation Network 
(SIREN) website, for example, for comprehensive information about the 
most widely used HRSN screening tools.538 539 SIREN contains 
descriptions of the content and characteristics of various tools, 
including information about intended populations, completion time, and 
number of questions. We would encourage PCHs to consider digital 
standardized screening tools and refer readers to the FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49207) where we noted that use of certified 
health IT can support capture of HRSN information in an interoperable 
fashion so that these data can be shared across the care continuum to 
support coordinated care.
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    \538\ Social Interventions Research & Evaluation Network. 
(2019). Social Needs Screening Tool Comparison Table. Available at: 
https://sirenetwork.ucsf.edu/tools-resources/resources/screening-tools-comparison. Accessed January 18, 2021.
    \539\ The Social Interventions Research and Evaluation Network 
(SIREN) at University of California San Francisco was launched in 
the spring of 2016 to synthesize, disseminate, and catalyze research 
on the social determinants of health and healthcare delivery.
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    We are proposing that PCHs would be required to submit information 
for the Screening for Social Drivers of Health measure once annually 
using a CMS-approved web-based data collection tool available within 
the Hospital Quality Reporting (HQR) System. PCHs would follow the 
established submission and reporting requirements for web-based 
measures for the PCHQR Program posted on the QualityNet website. We 
also refer readers to section IX.10.a. of the preamble of this proposed 
rule for details on our previously finalized data submission, deadline 
and sampling requirements across measure types.
e. Review by the Measure Applications Partnership
    The Screening for Social Drivers of Health measure was included for 
consideration in the PCHQR Program on the publicly available MUC List, 
a list of measures under consideration for use in various Medicare 
programs.\540\ The CBE-convened MAP Health Equity Advisory Group 
reviewed the MUC List and the Screening for Social Drivers of Health 
measure (MUC 2022-053) in detail and at the same time as the Screening 
Positive Rate for Social Drivers of Health measure on December 6-7, 
2022.\541\ The Health Equity Advisory Group expressed support for the 
data collection related to social drivers of health, but raised 
concerns about public reporting of the data and redundancy in asking 
for the same information of patients. In addition, on December 8-9, 
2022, the MAP Rural Health Advisory Group reviewed the 2022 MUC List 
and the MAP Hospital Workgroup did so on December 13-14, 2022.\542\ The 
Rural Health Advisory Group noted some potential reporting challenges 
including the potential masking of health disparities that are 
underrepresented in some areas and that sample size and populations 
served may be an issue, but expressed that the measure serves as a 
starting point to determine where screening is occurring. The MAP 
Hospital Workgroup expressed strong support for the measure but noted 
that interoperability will be important and cautioned about survey 
fatigue. The MAP Hospital Workgroup members conditionally supported the 
measure pending: (1) testing of the measure's reliability and validity; 
(2) endorsement by a consensus-based entity (CBE); (3) additional 
details on how potential tools map to the individual drivers, as well 
as best practices; (4) what resources may be available to assist 
patients; and (5) alignment with data standards, particularly the 
GRAVITY project.\543\ Thereafter, the MAP Coordinating Committee 
deliberated on January 24-25, 2023, and ultimately voted to 
conditionally support the Screening for Social Drivers of Health 
measure for rulemaking with the same conditions.\544\
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    \540\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \541\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \542\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \543\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \544\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    We believe this measure establishes an important foundation to 
prioritizing the achievement of health equity among PCHs. Our approach 
to developing health equity-focused measures is incremental, and we 
believe that health care equity outcomes in the PCHQR Program will 
inform future efforts to advance and achieve health care equity by 
PCHs. We additionally believe this measure to be a building block that 
lays the groundwork for a future meaningful suite of measures that 
would assess PCH progress in providing high-quality healthcare for all 
patients, regardless of social risk factors or demographic 
characteristics.
f. CBE Endorsement
    We have not submitted this measure for CBE endorsement at this 
time. Although section 1866(k)(3)(A) of the Act generally requires that 
measures specified by the Secretary for use in the PCHQR Program be 
endorsed by the entity with a contract under section 1890(a) of the 
Act, section 1866(k)(3)(B) of the Act states that in the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) of the Act, the Secretary 
may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been

[[Page 27128]]

endorsed or adopted by a consensus organization identified by the 
Secretary. We reviewed CBE-endorsed measures and were unable to 
identify any other CBE-endorsed measures on this topic, and, therefore, 
we believe the exception in section 1866(k)(3)(B) of the Act applies.
g. Public Display
    We are proposing to publicly display the PCH-specific results for 
the Screening for the Social Drivers of Health measure and refer 
readers to Table IX.D.-04 in section IX.D.9. of the preamble for the 
proposed public display requirements.
    We invite public comment on this proposal.
5. Proposal To Adopt the Screen Positive Rate for Social Drivers of 
Health Beginning With Voluntary Reporting in the FY 2026 Program Year 
and Mandatory Reporting in the FY 2027 Program Year
a. Background
    The impact of social risk factors on health outcomes has been well-
established in the literature.545 546 547 548 549 The 
Physicians Foundation reported that 73 percent of the physician 
respondents to their annual survey agreed that social risk factors such 
as housing instability and food insecurity would drive health services 
demand in 2021.\550\ Recognizing the need for a more comprehensive 
approach to closing equity gaps, we have prioritized quality measures 
that identify drivers of health among patients served in various care 
settings and, in turn, support providers in addressing the impact of 
these drivers on disparities in patient outcomes, healthcare 
utilization, and costs.551 552 553 Specifically, in the 
inpatient setting, we aim to encourage systematic identification of 
patients' HRSNs as part of discharge planning, with the intention of 
promoting linkages with relevant community-based services that address 
those needs and support sustainable improvements in health outcomes 
following discharge from the PCH.
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    \545\ Institute of Medicine 2014. Capturing Social and 
Behavioral Domains and Measures in Electronic Health Records: Phase 
2. Washington, DC: The National Academies Press. Available at: 
https://doi.org/10.17226/18951.
    \546\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Available at: https://innovation.cms.gov/innovation-models/ahcm. Accessed November 23, 
2021.
    \547\ Kaiser Family Foundation. (2021). Racial and Ethnic Health 
Inequities and Medicare. Available at: https://www.kff.org/medicare/report/racial-and-ethnic-health-inequities-and-medicare/. Accessed 
November 23, 2021.
    \548\ Milkie Vu et al. Predictors of Delayed Healthcare Seeking 
Among American Muslim Women, Journal of Women's Health 26(6) (2016) 
at 58; Nadimpalli SB, Cleland CM, Hutchinson MK, Islam N, Barnes LL, 
Van Devanter N. (2016) The Association between Discrimination and 
the Health of Sikh Asian Indians. Health Psychology, 35(4), 351-355. 
https://doi.org/10.1037/hea0000268.
    \549\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE). (2020). Report to Congress: Social Risk Factors 
and Performance Under Medicare's Value-Based Purchasing Program 
(Second of Two Reports). Available at: https://aspe.hhs.gov/pdf-report/second-impact-report-to-congress.
    \550\ The Physicians Foundation. (2020) 2020 Survey of America's 
Patients, Part Three. Available at: https://physiciansfoundation.org/wp-content/uploads/2020/10/2020-Physicians-Foundation-Survey-Part3.pdf.
    \551\ Alley, D.E., C.N. Asomugha, P.H. Conway, and D.M. 
Sanghavi. 2016. Accountable Health Communities--Addressing Social 
Needs through Medicare and Medicaid. The New England Journal of 
Medicine 374(1):8-11. Available at: https://doi.org/10.1056/NEJMp1512532.
    \552\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Available at: https://innovation.cms.gov/innovation-models/ahcm. Accessed November 23, 
2021.
    \553\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
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    While the Screening for Social Drivers of Health measure (discussed 
previously in section IX.D.4. of the preamble of this proposed rule) 
enables identification of individuals with HRSNs, the Screen Positive 
Rate for Social Drivers of Health measure would allow providers to 
capture the magnitude of these needs and even estimate the impact of 
individual-level HRSNs on healthcare utilization when evaluating 
quality of care.554 555 556 The Screen Positive Rate for 
Social Drivers of Health measure would require the reporting of the 
resulting screen positive rates for each domain. Reporting the screen 
positive rate for social drivers of health for each domain could inform 
actionable planning by PCHs towards closing equity gaps unique to the 
populations they serve and enable the development of individual patient 
action plans (including navigation and referral).
---------------------------------------------------------------------------

    \554\ Baker, M.C., Alberti, P.M., Tsao, T.Y., Fluegge, K., 
Howland, R.E., & Haberman, M. (2021). Social Determinants Matter for 
Hospital Readmission Policy: Insights From New York City. Health 
Affairs, 40(4), 645-654. Available at: https://doi.org/10.1377/hlthaff.2020.01742.
    \555\ CMS. Accountable Health Communities Model. Accountable 
Health Communities Model [verbar] CMS Innovation Center. Available 
at: https://innovation.cms.gov/innovation-models/ahcm. Accessed 
November 23, 2021.
    \556\ Hammond, G., Johnston, K., Huang, K., Joynt Maddox, K. 
(2020). Social Determinants of Health Improve Predictive Accuracy of 
Clinical Risk Models for Cardiovascular Hospitalization, Annual 
Cost, and Death. Circulation: Cardiovascular Quality and Outcomes, 
13 (6) 290-299. Available at: https://doi.org/10.1161/CIRCOUTCOMES.120.006752.
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    The Screen Positive Rate for Social Drivers of Health measure would 
assess the percent of patients admitted to the PCH who are 18 years or 
older at time of admission who were screened for HRSN and who screen 
positive for one or more of the core HRSNs, including food insecurity, 
housing instability, transportation needs, utility difficulties, or 
interpersonal safety (reported as five separate rates).\557\ We refer 
readers to section IX.D.4. of the preamble of this proposed rule where 
we previously discussed the identification process resulting in the 
selection of these five domains.
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    \557\ Billioux, A., Verlander, K., Anthony, S., & Alley, D. 
(2017). Standardized Screening for Health-Related Social Needs in 
Clinical Settings: The Accountable Health Communities Screening 
Tool. NAM Perspectives, 7(5). Available at: https://doi.org/10.31478/201705b.
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    The COVID-19 pandemic underscored the overwhelming impact that 
these five core domains have on disparities, health risk, healthcare 
access, and health outcomes, including premature 
mortality.558 559 Adoption of the Screen Positive Rate for 
Social Drivers of Health measure seeks to encourage PCHs to track the 
prevalence of specific HRSNs among patients over time and use the data 
to stratify risk as part of quality improvement efforts. This measure 
may also prove useful to patients by providing data transparency and 
signifying PCHs' familiarity, expertise, and commitment regarding these 
issues. For example, evaluation of AHC Model participation demonstrated 
positive feedback and enhanced trust among patients.\560\ This measure 
also has the potential to reduce healthcare provider burden and burnout 
by both acknowledging patients' non-clinical needs that nevertheless 
greatly contribute to adverse clinical outcomes and linking providers 
with community-based organizations to enhance patient-centered 
treatment and discharge

[[Page 27129]]

planning.561 562 563 Finally, we believe this measure has 
the potential to facilitate data-informed collaboration with community-
based services and focused community investments, including the 
development of pathways and infrastructure to more seamlessly connect 
patients to local community resources.
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    \558\ Kaiser Family Foundation. (2021). Racial and Ethnic Health 
Inequities and Medicare. Available at: https://www.kff.org/medicare/report/racial-and-ethnic-health-inequities-and-medicare/. Accessed 
November 23, 2021.
    \559\ Centers for Disease Control and Prevention. (2019). CDC 
COVID-19 Response Health Equity Strategy: Accelerating Progress 
Towards Reducing COVID-19 Disparities and Achieving Health Equity. 
July 2020. Available at: https://www.cdc.gov/coronavirus/2019-ncov/community/health-equity/cdc-strategy.html. Accessed November 17, 
2021.
    \560\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \561\ The Physicians Foundation. (2020). Survey of America's 
Patients, Part Three. Available at: https://physiciansfoundation.org/wp-content/uploads/2020/10/2020-Physicians-Foundation-Survey-Part3.pdf.
    \562\ De Marchis, E., Knox, M., Hessler, D., WillardGrace, R., 
Oliyawola, JN, et al. (2019). Physician Burnout and Higher Clinic 
Capacity to Address Patients' Social Needs. The Journal of the 
American Board of Family Medicine, 32 (1), 69-78.
    \563\ Kung, A., Cheung, T., Knox, M., Willard-Grace, R., 
Halpern, J., et.al, (2019). Capacity to Address Social Needs Affect 
Primary Care Clinician Burnout. Annals of Family Medicine. 17 (6), 
487- 494. Available at: https://doi.org/10.1370/afm.2470.
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    Ultimately, we are focused on supporting effective and sustainable 
collaboration between healthcare delivery and community-based providers 
to meet the unmet needs of people they serve. Reporting data from both 
the Screening for Social Drivers of Health and Screen Positive Rate for 
Social Drivers of Health measures would enable both identification and 
quantification of HRSNs among communities served by PCHs. These 
measures harmonize, as it is important to know both if screening 
occurred and the results from the screening in order to develop 
sustainable solutions. As with the theory of change for the AHC Model, 
we also expect resultant clinical-community collaborations, and an 
associated increase in system capacity and community investments, to 
yield a net reduction in costly healthcare utilization by promoting 
more appropriate healthcare service consumption.\564\
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    \564\ Centers for Medicare & Medicaid Services. (2021). 
Accountable Health Communities Model. Accountable Health Communities 
Model [verbar] CMS Innovation Center. Available at: https://innovation.cms.gov/innovation-models/ahcm. Accessed November 23, 
2021.
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    Pursuant to the Meaningful Measures 2.0 Framework and in alignment 
with the measures previously adopted for hospitals participating in the 
Hospital IQR Program, this measure would address the ``healthcare 
equity'' priority area and align with our commitment to introduce plans 
to close health equity gaps and promote equity through quality 
measures, including to ``develop and implement measures that reflect 
social and economic determinants.'' \565\ Under CMS' Meaningful 
Measures Framework, the Screen Positive Rate for Social Drivers of 
Health measure would address the quality priority of ``Work with 
Communities to Promote Best Practices of Healthy Living'' through the 
Meaningful Measures Area of ``Equity of Care.'' \566\ Development of 
this measure also aligns with our strategic pillar to advance health 
equity by addressing the health disparities that underlie our health 
system.\567\
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    \565\ Centers for Medicare & Medicaid Services. Meaningful 
Measures 2.0: Moving from Measure Reduction to Modernization. 
Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization.
    \566\ Centers for Medicare & Medicaid Services. (2021). CMS 
Measures Management System Blueprint (Blueprint v 17.0). Available 
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MMS-Blueprint.
    \567\ Brooks-LaSure, C. (2021). My First 100 Days and Where We 
Go From Here: A Strategic Vision for CMS. Available at: https://www.cms.gov/blog/my-first-100-days-and-where-we-go-here-strategic-vision-cms.
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b. Overview of Measure
    The Screen Positive Rate for Social Drivers of Health measure is 
intended to enhance standardized data collection that can identify 
people who are at higher risk for poor health outcomes related to HRSNs 
who would benefit from connection via the PCH to targeted community-
based services.\568\ The measure would identify the proportion of 
patients who screened positive for one or more of the following five 
HRSNs on the date of admission to the PCH: Food insecurity, housing 
instability, transportation needs, utility difficulties, and 
interpersonal safety. PCHs would report this measure as five separate 
rates. We note that this measure is intended to provide information to 
PCHs on the level of unmet social needs among patients served, and not 
for comparison between PCHs.
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    \568\ Centers for Medicare & Medicaid Services. (2021). A Guide 
to Using the Accountable Health Communities Health-Related Social 
Needs Screening Tool: Promising Practices and Key Insights (June 
2021). Available at: https://innovation.cms.gov/media/document/ahcm-screeningtool-companion. Accessed November 23, 2021.
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    Measure specifications for this measure are currently available at: 
https://cmit.cms.gov/cmit/#/.
(1) Cohort
    The Screen Positive Rate for Social Drivers of Health is a process 
measure that would provide information on the percent of patients, 18 
years or older on the date of admission for a PCH stay, who were 
screened for an HRSN, during their inpatient stay and who screened 
positive for one or more of the following five HRSNs: Food insecurity, 
housing instability, transportation needs, utility difficulties, or 
interpersonal safety.
(2) Numerator
    The numerator would consist of the number of patients admitted for 
an PCH stay who are 18 years or older on the date of admission, who 
were screened for an HRSN, and who screen positive for having a need in 
one or more of the following five HRSNs (calculated separately): food 
insecurity, housing instability, transportation needs, utility 
difficulties or interpersonal safety.
(3) Denominator
    The denominator would consist of the number of patients admitted 
for a PCH stay who are 18 years or older on the date of admission and 
are screened for an HRSN (food insecurity, housing instability, 
transportation needs, utility difficulties and interpersonal safety) 
during their PCH stay. The following patients would be excluded from 
the denominator: (1) Patients who opt-out of screening; and (2) 
patients who are themselves unable to complete the screening during 
their inpatient stay and have no caregiver able to do so on the 
patient's behalf during their inpatient stay.
c. Measure Calculation
    The result of this measure would be calculated as five separate 
rates. Each rate is derived from the number of patients admitted for a 
PCH stay and who are 18 years or older on the date of admission, 
screened for an HRSN, and who screen positive for each of the five 
HRSNs--food insecurity, housing instability, transportation needs, 
utility difficulties, or interpersonal safety--divided by the number of 
patients 18 years or older on the date of admission screened for each 
of the five HRSNs.
d. Data Collection, Submission and Reporting
    We are proposing that PCHs would be required to submit information 
for this measure once annually using a CMS-approved web-based data 
collection tool available within the Hospital Quality Reporting (HQR) 
System beginning with voluntary reporting in the FY 2026 program year 
and mandatory reporting in the FY 2027 program year. PCHs would follow 
the established submission and reporting requirements for web-based 
measures for the PCHQR Program posted on the QualityNet website. We 
also refer readers to section IX.D.10.a. of the preamble of this 
proposed rule for details on our previously finalized data submission 
requirements and deadlines.

[[Page 27130]]

e. Review by the Measure Applications Partnership
    The Screen Positive Rate for Social Drivers of Health measure was 
included for consideration in the PCHQR Program on the publicly 
available MUC list, a list of measures under consideration for use in 
various Medicare programs.\569\ The CBE-convened MAP Health Equity 
Advisory Group reviewed the MUC List and the Screen Positive Rate for 
Social Drivers of Health measure (MUC 2022-050) in detail and at the 
same time as the Screening for Social Drivers of Health measure on 
December 6-7, 2022.\570\ The Health Equity Advisory Group expressed 
support for the collection of data related to social health drivers, 
but raised concerns regarding public reporting and the repetition of 
asking patients the same questions. In addition, on December 8-9, 2022, 
the MAP Rural Health Advisory Group reviewed the 2022 MUC List and was 
also reviewed by the MAP Hospital Workgroup on December 13-14, 
2022.\571\ The Rural Health Advisory Group noted potential reporting 
challenges including the potential masking of health disparities that 
are underrepresented in some areas and that sample size and populations 
served may be an issue, but also expressed support that the measure 
seeks to advance the drivers of health and serves as a starting point 
to determine where screening is occurring. The MAP Hospital Workgroup 
recommended conditional support for the measure for rulemaking pending 
endorsement by a CBE to address reliability and validity concerns, 
attentiveness to how results are shared and contextualized for public 
reporting, and encouragement for CMS to examine any differences in 
reported rates by reporting process (to assess whether they are the 
same or different across PCHs).\572\ Thereafter, the MAP Coordinating 
Committee deliberated on January 24-25, 2023, and ultimately voted to 
conditionally support the Screen Positive Rate for Social Drivers of 
Health measure for rulemaking with the same conditions.\573\
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    \569\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \570\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \571\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \572\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \573\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    We agree with the MAP Coordinating Committee's support for the 
Screen Positive Rate for Social Drivers of Health measure. We believe 
this measure establishes an important foundation to prioritizing the 
achievement of health equity among providers participating in a 
comprehensive quality reporting program. Our approach to developing 
health equity-focused measures is incremental, and we believe that 
health care equity outcomes in the PCHQR Program will inform future 
efforts to advance and achieve health care equity by PCHs. We 
additionally believe this measure to be a building block that lays the 
groundwork for a future meaningful suite of measures that would assess 
PCH progress in providing high-quality healthcare for all patients, 
regardless of social risk factors or demographic characteristics.
f. CBE Endorsement
    We have not submitted this measure for CBE endorsement at this 
time. Although section 1866(k)(3)(A) of the Act generally requires that 
measures specified by the Secretary for use in the PCHQR Program be 
endorsed by the entity with a contract under section 1890(a) of the 
Act, section 1866(k)(3)(B) of the Act states that in the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed by the 
entity with a contract under section 1890(a) of the Act, the Secretary 
may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary. We reviewed 
CBE-endorsed measures and were unable to identify any other CBE-
endorsed measures on this topic, and, therefore, we believe the 
exception in section 1866(k)(3)(B) of the Act applies.
g. Public Display
    We are proposing to publicly display the PCH-specific results for 
the Screen Positive Rate for Social Drivers of Health measure and refer 
readers to Table IX.D.-04 in section IX.D.9. of the preamble for the 
proposed public display requirements.
    We invite public comment on this proposal.
6. Proposal To Adopt the Documentation of Goals of Care Discussions 
Among Cancer Patients Measure Beginning With the FY 2026 Program Year
a. Background
    Goals of care discussions are intended to inform future treatment 
decisions that account for and are responsive to the interests 
expressed by patients with advanced cancer and can also impact 
referrals to palliative care and end-of-life treatments. Goal of care 
discussions are discussions between the patient and the oncology team 
and the primary oncologist is responsible for ensuring documentation of 
these discussions.
    While 99 percent of clinicians believe that serious illness 
conversations are important, only 29 percent of clinicians report 
having received serious illness communication training.\574\ One study 
found that Americans report having a serious illness conversation with 
their clinician only 11 percent of the time.\575\ In the 2017 
publication, Patient-Clinician Communication: American Society of 
Clinical Oncology Consensus Guideline, the American Society of Clinical 
Oncology (ASCO) recommended clinician training in communication skills 
and discussion of goals of care and prognosis, treatment selection, 
end-of-life care, and facilitating family involvement in care.\576\
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    \574\ Fulmer T, Escobedo M, Berman A, Koren MJ, Hern[aacute]ndez 
S, Hult A. Physicians' Views on Advance Care Planning and End-of-
Life Conversations. Journal of the American Geriatrics Society. 
208;66(6):1201-1205.
    \575\ Hamel, Liz, et al. Views and Experiences with End-of-Life 
Medical Care in the U.S. 2017.
    \576\ Gilligan T, Coyle N, Frankel RM, et al. Patient-Clinician 
Communication: American Society of Clinical Oncology Consensus 
Guideline. Journal of Clinical Oncology, 2017; 35(31), 3618-3632. 
https://doi.org/10.1200/JCO.2017.75.2311.

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[[Page 27131]]

    We believe the lack of these conversations creates a gap in the 
care delivered when the oncology team, including the oncologist, does 
not know their patients' goals of care. While 92 percent of Americans 
say that they would be comfortable having these discussions with their 
clinicians, among seriously ill patients who prefer comfort care, only 
41 percent report care consistent with their wishes.\577\ Care 
inconsistent with preferences is associated with a lower quality of 
care and higher medical costs.\578\
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    \577\ Teno JM, Fisher ES, Hamel MB, Coppola K, Dawson NV. 
Medical Care Inconsistent with Patients' Treatment Goals: 
Association with 1-Year Medicare Resources Use and Survival. Journal 
of the American Geriatrics Society. 2002;50(3):496-500.
    \578\ Khandelwal N, Curtis JR, Freedman VA, et al. How Often is 
End-of-Life Care in the United States Inconsistent with Patients' 
Goals of Care? Journal of Palliative Medicine. 2017;20(12): 1400-
1404.
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    Guidelines suggest that goal of care discussions should be 
conducted early for patients with metastatic cancer who have a life 
expectancy of less than one year.\579\ However, most oncology settings 
do not adequately support documentation that is most relevant to goals 
of cancer care. In 2020, the Alliance of Dedicated Cancer Centers 
(ADCC) initiated the Improving Goal Concordant Care (IGCC) to address 
system gaps and to establish new expectations for when and how goals-
of-care conversations occur. The initiative places responsibility on 
the primary oncology team with the oncologist responsible for ensuring 
documentation of these discussions, for timely initiation and ongoing 
conversations regarding goals of care with their patients and 
recommends a structured goals-of-care documentation in electronic 
health records, including a minimum set of structured fields and 
functionality to promote access and retrieval across providers and 
settings.
---------------------------------------------------------------------------

    \579\ American Society of Clinical Oncology Quality Oncology 
Practice Initiative: Quality Clinical Data Registry Measures. 2014. 
http://www.instituteforquality.org/quality-oncology-practice-initiative-qopi; see also, Berger MJ, Ettinger DS, Aston J, et al: 
NCCN guidelines insights: Antiemesis, version 2.2017. J Natl Compr 
Canc Netw 15:883-893, 2017.
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    Goals of care documentation should be discrete and structured 
whenever possible to both ease entry and to facilitate retrieval. We 
note that the oncology team, including the oncologist, is responsible 
for the goals of care discussion and the oncologist is responsible for 
ensuring documentation of these discussions. The ADCC made the 
following structure and functionality recommendations: \580\
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    \580\ Alliance of Dedicated Cancer Centers. Improving Goal 
Concordant Care Initiative Implementation Planning Guide. September 
2020.
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     Minimizing documentation burden is critical to support 
clinician workflow and promote efficiencies.
     Core documentation should be in a `single source of truth' 
in one location in the EHR, reflecting conversations across time, 
settings, and providers.
     Designated, authorized members of the care team (which 
might include advanced practice providers, oncology nurses and social 
workers, as designated by the center) should be able to document 
appropriate fields related to goals of care communications.
    We believe documentation of goals in structured fields prompts 
meaningful patient-centered discussions, enhances care quality and 
efficiency, promotes accessibility, and supports concordant care.
b. Overview of Measure
    This measure would assess goals of care discussion documentation 
among patients with cancer who die while receiving care at the 
reporting PCH. We are proposing that on an annual basis, PCHs would 
report the percent of cancer patients who died during the reporting 
period and had patients' goals of care documented prior to death, 
beginning with the FY 2026 program year.
    The Documentation of Goals of Care Discussions Among Cancer 
Patients measure is a process measure which would focus on the 
essential process of documenting goals of care conversations in the EHR 
by assessing the presence of this documentation in the medical record. 
The intent of this measure is for PCHs to track and improve this 
documentation to ensure that that such conversations have taken place, 
have been properly documented in a manner that is retrievable by all 
members of the PCH healthcare team, and to facilitate the delivery of 
care that aligns with patients' and families' values and unique 
priorities.
    This measure would require the use of both hospital administrative 
data (non-claims) for clinical information and discrete documentation 
in the EHR documenting the goals of care discussion. Measure 
specifications can be found here: https://cmit.cms.gov/cmit/#/.
(1) Measure Population
    The population is the number of patients who died in the 
measurement period, including patients participating in clinical 
trials, as long as these patients meet the criteria for the measure's 
population. This population is defined using PCH administrative data 
(non-claims) and discrete documentation in the electronic health record 
as follows:
     Patients who died at the PCH in the measurement period; 
and
     Who had a diagnosis of cancer; and
     Who had a least two eligible contacts at the PCH within 
the six months prior to their date of death. Eligible contacts are 
inpatient admissions and hematology or oncology ambulatory visits at 
the reporting hospital.
(2) Denominator
    The denominator would be the number of patients meeting the 
criteria for inclusion in the measure's population in the reporting 
period.
(3) Numerator
    The numerator would be the number of patients who were included in 
the denominator for whom a Goals of Care conversation was documented in 
a structured field in the medical record. The measure would require any 
documentation in one or more patient goals fields. To meet the 
requirements for inclusion in the numerator, the documentation in the 
EHR would be required to include either of the following:
     Any documentation in one or more patient goals fields in 
the electronic medical record, or
     Documentation that the patient opted not to have a goals 
of care discussion.
    Documentation may originate from any visit type or provider as 
permitted by the PCH. Any member of the PCH health care team could 
perform such documentation for purposes of the measure, but we strongly 
encourage a patient's oncologist to ensure appropriate discussions of 
goals of care occur and to oversee the documentation of the goals of 
care discussion.
c. Calculation of Performance Score
    Performance is reported as a proportion (percentage) determined by 
calculating [(Numerator / Denominator)] x 100. A higher score is 
better.
d. Data Submission and Reporting
    We are proposing that PCHs would be required to submit information 
for this measure once annually using a CMS-approved web-based data 
collection tool available within the Hospital Quality Reporting (HQR) 
System (previously referred to as the QualityNet Secure Portal) 
beginning with the FY 2026 program year. PCHs would follow the 
submission and reporting requirements for web-based measures for the 
PCHQR Program posted on the QualityNet website. We also refer readers 
to section IX.D.10.a. of the preamble of this

[[Page 27132]]

proposed rule for details on our previously finalized data submission, 
deadline and sampling requirements across measure types.
e. Review by the Measure Applications Partnership
    The Documentation of Goals of Care Discussions Among Cancer 
Patients measure was included in the publicly available MUC List, a 
list of measures under consideration for use in various Medicare 
quality programs.\581\ The CBE-convened MAP reviewed the MUC List and 
the Documentation of Goals of Care Discussions Among Cancer Patients 
measure (MUC 2022-120) in detail on December 6-7, 2022.\582\ In 
addition, on December 8-9, 2022, the MAP Rural Health Advisory Group 
reviewed the 2022 MUC List and the MAP Hospital Workgroup reviewed the 
measure on December 13-14, 2022. The Rural Health Advisory Group 
expressed strong support for the measure. The MAP Hospital Workgroup 
recommended conditional support for rulemaking pending testing 
indicating the measure is reliable and valid, and endorsement by a 
consensus-based entity (CBE).\583\ Thereafter, the MAP Coordinating 
Committee deliberated on January 24-25, 2023, and ultimately voted to 
conditionally support the Documentation of Goals of Care Discussions 
Among Cancer Patients measure for rulemaking with the same 
conditions.\584\
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    \581\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \582\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \583\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \584\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    We agree with the MAP that measuring documentation of goals of care 
discussions is an important step toward achieving the outcome of goal-
concordant care and that documentation of goals in structured fields 
prompts discussions, enhances their quality and efficiency, and 
promotes accessibility. We also believe goals of care discussions with 
patients are associated with better patient and family outcomes.
f. CBE Endorsement
    The measure has not been submitted by its steward, ADCC, for CBE 
endorsement at this time. Although section 1866(k)(3)(A) of the Act 
generally requires that measures specified by the Secretary for use in 
the PCHQR Program be endorsed by the entity with a contract under 
section 1890(a) of the Act, section 1866(k)(3)(B) of the Act states 
that in the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) of the Act, the Secretary may specify a measure that is not so 
endorsed as long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary. We reviewed CBE-endorsed measures and were unable to 
identify any other CBE-endorsed measures on this topic, and, therefore, 
we believe the exception in section 1866(k)(3)(B) of the Act applies.
g. Public Display
    We are proposing to publicly display the PCH-specific results for 
the Documentation of Goals of Care Discussion Among Cancer Patients 
measure and refer readers to Table IX.D.-04 in section IX.D.9. of the 
proposed preamble for the public display requirements.
    We invite public comment on this proposal.
7. Summary of Previously Adopted and Newly Proposed PCHQR Program 
Measures for the FY 2026 Program Year and Subsequent Years
    As previously discussed in sections IX.D.3, IX.D.4., and IX.D.5. of 
the preamble of this proposed rule, we are proposing to adopt one 
health equity-focused measure beginning with the FY 2026 program year, 
the Facility Commitment to Health Equity measure, and two health 
equity-focused measures beginning with voluntary reporting in the FY 
2026 program year and mandatory reporting in the FY 2027 program year, 
the Screening for Social Drivers of Health measure and the Screen 
Positive Rate for Social Drivers of Health measure. We are also 
proposing to adopt the Documentation of Goals of Care Discussions Among 
Cancer Patients measure beginning with the FY 2026 program year and 
refer readers to section IX.D.6. of the preamble of this proposed rule. 
For ease of reference, Table IX.D.-03 summarizes the previously adopted 
and the newly proposed measures for the PCHQR Program measures for the 
FY 2026 program year and subsequent years.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP01MY23.307

BILLING CODE 4120-01-C
8. Maintenance of Technical Specifications for Quality Measures
    We maintain and periodically update technical specifications for 
the PCHQR Program measures. The specifications may be found on the 
QualityNet website at https://qualitynet.cms.gov/pch. We also refer 
readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), where we 
adopted a policy to use a subregulatory process to make nonsubstantive 
updates to measures used for the PCHQR Program. We are not proposing 
any changes to our processes for maintaining technical specifications 
for PCHQR Program measures.
9. Public Display Requirements
a. Background
    Section 1866(k)(4) of the Act requires us to establish procedures 
for making

[[Page 27134]]

the data submitted under the PCHQR Program available to the public. We 
refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 
through 57192) for a detailed discussion of our public display 
procedures. We are not proposing any changes to our previously 
finalized public display requirements.
b. Proposal To Begin Public Display of the Surgical Treatment 
Complications for Localized Prostate Cancer Measure Beginning With the 
FY 2025 Program Year
    In the FY 2020 IPPS/LTCH PPS final rule, we adopted the Surgical 
Treatment Complications for Localized Prostate Cancer Measure (PCH-37) 
for the PCHQR measure set beginning with the FY 2022 program year (84 
FR 42514 through 42517). We also finalized that we would confidentially 
report PCH performance on this measure to individual PCHs and that we 
would propose to publicly display PCH performance on this measure in 
the future (84 FR 42517).
    Under our current policy, the PCH-37 measure is calculated on an 
annual basis using a one-year reporting period that is based on data 
collected from July 1 of the year that is three years prior to the 
program year to June 30 of the year that is two years prior to the 
program year (84 FR 42515). For the FY 2023 program year data, we 
confidentially reported to PCHs their data and measure calculations on 
the PCH-37 measure in July of 2022 reflecting the July 1, 2019 to June 
30, 2020 reporting period. Additionally, we will confidentially report 
this measure for the FY 2024 program year data in the summer of 2023, 
reflecting the July 1, 2020 to June 30, 2021 reporting period.
    We believe that providing PCHs confidential facility specific 
reports for 2 years will allow us to assess and confirm the feasibility 
of PCHs providing statistically robust, reliable, and valid measure 
results for the PCH-37 measure. Therefore, we are proposing to publicly 
display the PCH-specific results for the PCH-37 measure beginning with 
the FY 2025 program year data in the summer of 2024, which would 
reflect PCH performance for the July 1, 2021 through June 30, 2022 
reporting period. We would make these data publicly available following 
a 30-day period in which PCHs would have an opportunity to review the 
data. We would announce the exact timeframe on a CMS website and our 
applicable listservs.
    We invite public comment on the proposal.
c. Summary of Previously Finalized and Proposed Public Display 
Requirements for the PCHQR Program
    Our previously finalized and proposed public display requirements 
for the PCHQR Program measures are shown in the following Table IX.D.-
04:

[[Page 27135]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.308

10. Form, Manner, and Timing of Data Submissions
a. Background
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53563 through 53567); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848 
through 50853); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50282 
through 50286); the FY 2016 IPPS/LTCH PPS final rule (80 FR 49722 
through 49723); the FY 2017 IPPS/LTCH PPS final rule (FR); FY 2018 
IPPS/LTCH PPS final rule (82 FR 38424); the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41623); FY 2020 IPPS/LTCH PPS final rule (84 FR 42523 
through 42524); and the FY 2022 IPPS/LTCH PPS final rule (86 FR 45436) 
for our previously finalized procedural requirements for the PCHQR 
Program. Data submission requirements and deadlines for the PCHQR 
Program are posted on the QualityNet website.
b. Proposed Updates to the Data Submission and Reporting Requirements 
for the Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey Measure (CBE #0166) Beginning With the FY 2027 
Program Year
(1) Background
    We partnered with the Agency for Healthcare Research and Quality 
(AHRQ) to develop the HCAHPS patient experience of care survey (CBE

[[Page 27136]]

#0166)[thinsp](hereinafter referred to as the HCAHPS Survey). We 
adopted the HCAHPS Survey in the PCHQR Program in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50852 through 50853) and refer readers to the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49720 through 49722) and the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42510 through 42512) for details 
on previously adopted HCAHPS Survey measure submission and reporting 
requirements. We also refer PCHs and HCAHPS Survey vendors to the 
official HCAHPS website at https://www.hcahpsonline.org for new 
information and program updates regarding the HCAHPS Survey, its 
administration, oversight, and data adjustments.
    The HCAHPS Survey (OMB control number 0938-0981) is the first 
national, standardized, publicly reported survey of patients' 
experience of hospital care and asks discharged patients 29 questions 
about their recent hospital stay. The HCAHPS Survey is administered to 
a random sample of adult patients who receive medical, surgical, or 
maternity care between 48 hours and six weeks (42 calendar days) after 
discharge and is not restricted to Medicare beneficiaries.\585\ 
Hospitals must survey patients throughout each month of the year.\586\ 
The HCAHPS Survey is available in official English, Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic versions.
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    \585\ HHS: HCAHPS: Patients' Perspectives of Care Survey, 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \586\ Ibid.
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    The HCAHPS Survey and its protocols for sampling, data collection 
and coding, and file submission can be found in the current HCAHPS 
Quality Assurance Guidelines, which is available on the official HCAHPS 
website at: https://www.hcahpsonline.org/en/quality-assurance/. AHRQ 
carried out a rigorous scientific process to develop and test the 
HCAHPS Survey instrument. This process entailed multiple steps, 
including: a public call for measures; literature reviews; cognitive 
interviews; consumer focus groups; multiple opportunities for 
additional stakeholder input; a three-State pilot test; small-scale 
field tests; and notice-and-comment rulemaking. A CBE first endorsed 
the HCAHPS Survey in 2005,\587\ and re-endorsed the measure in 2010, 
2015, and 2019.\588\
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    \587\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \588\ HCAHPS (Hospital Consumer Assessment of Healthcare 
Providers and Systems) Survey. Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=91&sectionNumber=1.
---------------------------------------------------------------------------

    In 2021, we conducted a large-scale mode experiment to test adding 
the web mode and other updates to the form, manner, and timing of 
HCAHPS Survey data collection and reporting. The 2021 mode experiment 
employed a nationwide random sample of short-term acute care hospitals 
that participate in the HCAHPS Survey, including those from each of 
CMS's 10 geographic regions. Participating hospitals contributed 
patients discharged from April through September 2021. Within each 
hospital, the patients were randomly assigned to each mode of survey 
administration. In total, we received responses to a revised version of 
the HCAHPS Survey from 36,001 patients in 46 hospitals.
    The design of the experiment was of sufficient scale to test survey 
items on new topics, revisions to existing survey items, and new and 
revised composite measures. It also enabled precise estimation of mode 
adjustments for current and new HCAHPS items for three currently 
approved HCAHPS Survey mode protocols and an additional three web-based 
protocols. This mode experiment was designed to have the power and 
precision of adjustment estimates comparable to those that are used and 
have proven necessary for adjustment of previous HCAHPS data.
    The 2021 HCAHPS mode experiment had four main goals: (1) test the 
large-scale feasibility of web-first sequential multimode survey 
administrations in an inpatient setting; (2) investigate whether mode 
effects significantly differ between individuals with email addresses 
available to the data collection vendor compared to individuals without 
email addresses available to the vendor; (3) develop mode adjustments 
to be used in future national implementation; and, (4) test potential 
new survey items. This experiment included three currently approved 
mode protocols most commonly used by hospitals participating in HCAHPS: 
Mail Only, Phone Only, and Mail-Phone (mail with phone follow-up of 
non-responders). In this experiment, three additional mode protocols 
that added an initial Web phase to these current modes were considered: 
Web-Mail, Web-Phone, and Web-Mail-Phone. In addition, the mode 
experiment employed a 49-day data collection period for all six modes, 
which extended the standard HCAHPS data collection period by seven 
days. Doing so preserved the survey response period of the current 
survey while adding time for the Web phase. Unlike the current HCAHPS 
Survey, proxy respondents were not prohibited from completing the 
survey.
    Another goal of the 2021 HCAHPS mode experiment was to test new 
survey content related to care coordination, discharge experience, 
communication with patient families, emotional support, sleep, and 
summoning help. We are using the mode experiment results to inform 
decisions about potential changes to administration protocols and 
survey content. Potential measure changes will be submitted to the MUC 
List in 2023 and may be proposed in future rulemaking. We are not 
proposing changes to the HCAHPS Survey's content in this proposed rule.
(2) Proposed Addition of Three New Modes of Survey Implementation
    In this proposed rule, we are proposing to add three new modes of 
survey administration (Web-Mail mode, Web-Phone mode, and Web-Mail-
Phone mode) in addition to the current Mail Only, Phone Only and Mail-
Phone modes, beginning with January 2025 discharges. We are proposing 
this update because in the 2021 HCAHPS mode experiment, adding an 
initial web component to three current HCAHPS modes of survey 
administration resulted in increased response rates. Overall, 9,642 
patients completed a survey, resulting in a 28 percent response rate. 
The response rate for Mail Only mode was 22 percent, compared to 29 
percent for Web-Mail mode. The response rate for Phone Only mode was 23 
percent compared to 30 percent through Web-Phone mode. The response 
rate for Mail-Phone was 31 percent compared to 36 percent for Web-Mail-
Phone mode.
    Analysis of 2021 mode experiment data also revealed that patients 
who supplied an email address had a statistically significant higher 
response rate (31 percent) than patients without an email address (22 
percent). The percentage of sampled patients with an email address 
varied by hospital, ranging from 11 percent to 94 percent. Overall, 63 
percent of patients supplied an email address. Evidence from this and 
previous HCAHPS mode experiments indicate that sequential mixed modes 
of survey administration (for example, mail followed by phone mode; web 
followed by mail, or phone, or both) result in overall higher response 
rates and better representation

[[Page 27137]]

of younger, Spanish language-preferring, racial and ethnic minority, 
and maternity care patients.
    We invite public comment on this proposed update.
(3) Proposed Removal of Prohibition of Proxy Respondents to the HCAHPS 
Survey
    In response to stakeholder feedback, and evidence that proxy 
response does occur in mail administration despite the current protocol 
that asks that only the patient complete the survey, the mode 
experiment assessed the impact of not excluding proxy respondents. We 
found that not excluding proxies did not impact HCAHPS measure scores 
and, as such, it is not necessary to control for completion of the 
survey by a proxy in patient-mix adjustment. Consequently, we are 
proposing to remove the requirement that only the patient may respond 
to the survey and allow a patient's proxy to respond to the survey, 
beginning with January 2025 discharges. We would, however, still 
encourage patients to respond to the survey rather than proxies.
    We invite public comment on this proposed update.
(4) Proposed Extension of the Data Collection Period
    The 2021 mode experiment showed that extending the data collection 
period from 42 to 49 days allows time for respondents in the web-first 
modes to respond by email before contacting non-responders with the 
secondary mode of administration while also preserving adequate time 
for the secondary mode (either mail, phone, or mail followed by phone). 
Nearly 13 percent of respondents in the mode experiment completed the 
survey between days 43 and 49. Compared to the first 42 days, during 
days 43 to 49 there was a statistically significant increase in 
responses from patients typically under-represented in HCAHPS, 
including patients who speak Spanish at home, are Black, ages 25 to 34 
years old, and with an 8th grade education or less. We are therefore 
proposing to extend the data collection period for the HCAHPS Survey 
from 42 to 49 days, beginning with January 2025 discharge.
    We invite public comment on the proposed change in the length of 
the data collection period.
(5) Proposed Limit on the Number of Supplemental HCAHPS Survey Items
    Currently, we do not place a limit on the number of supplemental 
items that may be added to the HCAHPS survey for quality improvement 
purposes. We are concerned that this policy has contributed to decline 
in the survey's response rate. Other CMS CAHPS surveys limit the number 
of supplemental items that may be added in order to prevent the survey 
from becoming so long that the response rate is negatively impacted. 
For example, the Medicare Advantage and Prescription Drug Plan (MA & 
PDP) CAHPS survey limits the number of supplemental items to a maximum 
of 12. Evidence from the 2016 HCAHPS mode experiment, as well as from 
the MA & PDP CAHPS Survey, strongly indicates that survey response 
rates decrease as the number of supplemental items increases. Analysis 
of the 2016 HCAHPS mode experiment data revealed that in the Mixed Mode 
(mail survey with phone follow-up of non-responders) 12 supplemental 
items would be expected to reduce HCAHPS response rates by 2.7 
percentage points. An analysis of data from the MA & PDP CAHPS project 
found a 2.5 percentage point reduction in response rate associated with 
12 supplemental items in Mixed Mode.\589\ This is particularly relevant 
because it includes both mail and phone, the two most commonly used 
survey modes for HCAHPS. Declines of this magnitude represent a 
substantial loss in response rate. The proposed limit of 12 
supplemental items aligns with other CMS CAHPS surveys.
---------------------------------------------------------------------------

    \589\ Beckett MK, Elliott MN, Gaillot S, Haas A, Dembosky JW, 
Giordano LA, Brown J. (2016) ``Establishing limits for supplemental 
items on a standardized national survey.'' Public Opinion Quarterly 
80(4): 964-976 DOI: https://doi.org/10.1093/poq/nfw028.
---------------------------------------------------------------------------

    We invite public comment on our proposal to limit the number of 
supplemental items. We welcome suggestions for alternative limits below 
12 supplemental items.
(6) Proposed Requirement To Use Official Spanish Translation for 
Spanish Language-Preferring Patients
    We have created official translations of the HCAHPS Survey in eight 
languages in addition to English in order to accommodate patient 
populations.\590\ PCHs' use of these translations, however, is 
voluntary. To ensure that all Spanish language-preferring patients, who 
constitute about four percent of HCAHPS respondents, have the 
opportunity to receive the Spanish translation of the HCAHPS Survey, we 
propose that PCHs be required to collect information about the language 
that the patient speaks while in the PCH (whether English, Spanish, or 
another language), and that the official CMS Spanish translation of the 
HCAHPS Survey be administered to all patients who prefer Spanish, 
beginning with January 2025 discharges.
---------------------------------------------------------------------------

    \590\ HCAHPS Quality Assurance Guidelines V18.0. https://www.hcahpsonline.org/en/quality-assurance/.
---------------------------------------------------------------------------

    We invite public comment on the proposed requirement to administer 
the survey in Spanish. We also welcome suggestions for additional 
translations beyond the existing translations in Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic.
(7) Proposed Removal of an Administration Method
    In this proposed rule, we are proposing to remove one of the 
currently available options for administration of the HCAHPS Survey 
that are not used by participating PCHs. The Active Interactive Voice 
Response (IVR) survey mode, also known as touch-tone IVR, has not been 
employed by any hospital since 2016 and has never been widely used for 
the HCAHPS Survey. In order to streamline HCAHPS oversight and 
training, we propose to discontinue IVR as an approved mode of survey 
administration beginning in January 2025. With the proposed addition of 
three new web-based modes in January 2025, PCHs would have the option 
to choose among six modes of survey administration: Mail Only, Phone 
Only, Mixed Mode (mail followed by phone), Web-Mail mode, Web-Phone 
mode, and Web-Mail-Phone mode (web followed by mail, followed by 
Phone).
    In addition to the previously discussed proposals, we encourage 
participating PCHs to carefully consider the impact of mode of survey 
administration on response rates and the representativeness of survey 
respondents. High response rates for all patient groups promote our 
health equity goals. Our research on the HCAHPS Survey indicates that 
there are pronounced differences in response rates by mode of survey 
administration for some patient characteristics. In particular, Black, 
Hispanic, Spanish language-preferring, younger, and maternity patients 
are more likely to respond to a phone survey, while older patients are 
more likely to respond to a mail survey. Choosing a mode that is easily 
accessible to the diversity of a PCH's patient population provides a 
more complete representation of patients' care experiences. For more 
information, we refer PCHs to the podcast, ``Improving 
Representativeness of the HCAHPS Survey'' on the HCAHPS website: 
https://hcahpsonline.org/en/podcasts/#ImprovingRepresentativeness.

[[Page 27138]]

(8) Data Collection
    The HCAHPS Survey would be administered and data collected in 
exactly the same manner as the current HCAHPS Survey, except for the 
proposed changes described in this section of the proposed rule. There 
would be no changes to HCAHPS patient eligibility or exclusion 
criteria. Detailed information on HCAHPS data collection protocols can 
be found in the current HCAHPS Quality Assurance Guidelines, located 
at: https://www.hcahpsonline.org/en/quality-assurance/.
    We invite public comments on these proposals.
(9) Public Reporting
    The scoring of the proposed updated HCAHPS Survey would be the same 
as the current HCAHPS Survey. Detailed information on how the measure 
would be scored for purposes of public reporting can be found on the 
HCAHPS website at: https://hcahpsonline.org/en/hcahps-star-ratings/.
    We invite public comments on these proposals.
11. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR 
Program
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41623 through 41624), for a discussion of the Extraordinary 
Circumstances Exceptions (ECE) policy under the PCHQR Program. We are 
not proposing any changes to this policy.

E. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background and Statutory Authority
    The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) is 
authorized by section 1886(m)(5) of the Act, and it applies to all 
hospitals certified by Medicare as Long-Term Care Hospitals (LTCHs). 
Section 1886(m)(5)(C) of the Act requires LTCHs to submit to the 
Secretary quality measure data specified under section 1886(m)(5)(D) in 
a form and manner, and at a time, specified by the Secretary. In 
addition, section 1886(m)(5)(F) of the Act requires LTCHs to submit 
data on quality measures under section 1899B(c)(1) of the Act, resource 
use or other measures under section 1899B(d)(1) of the Act, and 
standardized patient assessment data required under section 1899B(b)(1) 
of the Act. LTCHs must submit the data required under section 
1886(m)(5)(F) of the Act in the form and manner, and at the time, 
specified by the Secretary. Under the LTCH QRP, the Secretary must 
reduce by 2 percentage points the annual update to the LTCH PPS 
standard Federal rate for discharges for an LTCH during a fiscal year 
(FY) if the LTCH has not complied with the LTCH QRP requirements 
specified for that FY. Section 1890A of the Act requires that the 
Secretary establish and follow a pre-rulemaking process, in 
coordination with the consensus-based entity (CBE) with a contract 
under section 1890(a) of the Act, to solicit input from certain groups 
regarding the selection of quality and efficiency measures for the LTCH 
QRP. We have codified our program requirements in our regulations at 42 
CFR 412.560.
    In this proposed rule, we are proposing to modify one measure in 
the LTCH QRP as described in section IX.E. of the preamble of this 
proposed rule. Second, we are proposing to adopt two new measures, and 
remove two existing measures. Third, we are seeking information on 
principles CMS could use to select and prioritize LTCH QRP quality 
measures in future years. Fourth, we are providing an update on our 
efforts to close the health equity gap. Fifth, we are proposing to 
change the LTCH QRP data completion thresholds. Finally, we are 
proposing to begin public reporting of four measures. These proposals 
are further specified in this section of this rule.
2. General Considerations Used for the Selection of Quality Measures 
for the LTCH QRP
    For a detailed discussion of the considerations we historically use 
for the selection of LTCH QRP quality, resource use, and other 
measures, we refer readers to the FY 2016 Inpatient Prospective Payment 
System (IPPS)/LTCH PPS final rule (80 FR 49728).
3. Quality Measures Currently Adopted for the FY 2024 LTCH QRP
    The LTCH QRP currently has 18 measures for the FY 2024 LTCH QRP, 
which are set out in Table IX.E.-01. For a discussion of the factors 
used to evaluate whether a measure should be removed from the LTCH QRP, 
we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41624 
through 41634) and to the regulations at 42 CFR 412.560(b)(3).

[[Page 27139]]

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[[Page 27140]]


4. Overview of LTCH QRP Quality Measures Proposals
    In this proposed rule, we include LTCH QRP proposals for FY 2025 
and FY 2026 program years. Beginning with the FY 2025 LTCH QRP, we are 
proposing to (1) modify the COVID-19 Vaccination Coverage among 
Healthcare Personnel (HCP) measure; (2) adopt the Discharge Function 
Score,\591\ which we are specifying under section 1886(m)(5)(F)(i) of 
the Act; and (3) remove two current measures: (i) the Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function measure and (ii) the 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function measure.
---------------------------------------------------------------------------

    \591\ This measure was submitted to the Measures Under 
Consideration (MUC) List as the Cross-Setting Discharge Function 
Score. Subsequent to the MAP Workgroup meetings, the measure 
developer modified the name. Discharge Function Score for Long-Term 
Care Hospitals (LTCHs) Technical Report. https://www.cms.gov/files/document/ltch-discharge-function-score-technical-report-february-2023.pdf.
---------------------------------------------------------------------------

    Beginning with the FY 2026 LTCH QRP, we are proposing to adopt the 
COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date 
measure, which we are specifying under section 1899B(d)(1) of the Act.
a. Proposed Modification of the COVID-19 Vaccination Coverage Among 
Healthcare Personnel (HCP) Measure Beginning With the FY 2025 LTCH QRP
    As we stated in the FY 2022 LTCH PPS final rule (86 FR 45375) and 
in the Guidance for Staff Vaccination Requirements,\592\ vaccination is 
a critical part of the Nation's strategy to effectively counter the 
spread of COVID-19. We continue to believe it is important to 
incentivize and track HCP vaccination in LTCHs through quality 
measurement in order to protect healthcare workers, patients, and 
caregivers, and to help sustain the ability of LTCHs to continue 
serving their communities throughout the public health emergency (PHE) 
and beyond. We propose to modify the COVID-19 Vaccination Coverage 
among HCP (HCP COVID-19 Vaccine) measure to utilize the term ``up to 
date'' in the HCP vaccination definition and update the numerator to 
specify the time frames within which an HCP is considered up to date 
with recommended COVID-19 vaccines, including booster doses, beginning 
with the FY 2025 LTCH QRP.
---------------------------------------------------------------------------

    \592\ Centers for Medicare & Medicaid Services. Revised Guidance 
for Staff Vaccination Requirements QSO-23-02-ALL. October 26, 2022. 
https://www.cms.gov/files/document/qs0-23-02-all.pdf.
---------------------------------------------------------------------------

    The full proposal can be found in section IX.B. of this proposed 
rule. We invite public comment on our proposal to modify the HCP COVID-
19 Vaccine measure, beginning with the FY 2025 LTCH QRP.
b. Proposed Discharge Function Score Measure Beginning With the FY 2025 
LTCH QRP
(1) Background
    LTCHs provide medical care for clinically complex patients with 
multiple acute or chronic conditions, including patients requiring 
mechanical ventilation, and who require care for a relatively extended 
period of time. Many LTCH patients are at a high risk for profound 
debilitation due to functional limitations arising from their highly 
complex conditions and treatment requirements.\593\ Patients frequently 
have respiratory conditions, including pulmonary edema and respiratory 
failure and respiratory system diagnoses with ventilator support, 
septicemia, renal failure, heart failure, skin ulcers, infectious and 
parasitic disease, or diabetes.\594\ As a result of the COVID-19 PHE, 
post-COVID patients who required or still require ventilator support 
are often treated at LTCHs. For these patients, research has shown that 
addressing their functional deficits can improve patients' mobility, 
their capabilities in daily life activities, and their participation in 
society, all of which can lead to an improved quality of 
life.595 596
---------------------------------------------------------------------------

    \593\ Medicare Payment Advisory Commission. Report to the 
Congress: Medicare Payment Policy. March 2021. https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf.
    \594\ Medicare Payment Advisory Commission. Report to the 
Congress: Medicare and the Health Care Delivery System. June 2021. 
https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun21_medpac_report_to_congress_sec.pdf.
    \595\ Matsushima S, Kasahara Y, Aikawa S, Fuzimura T, Yokoyama 
H, Katata H. Impairment in Physical Function and Mental Status in a 
Survivor of Severe COVID-19 at Discharge from an Acute Care a 
Hospital: A Case Report. Phys Ther Res. 2021 Jun 11;24(3):285-290. 
doi: 10.1298/ptr.E10083. PMID: 35036264; PMCID: PMC8752843.
    \596\ Khan F, Amatya B. Medical Rehabilitation in Pandemics: 
Towards a New Perspective. J Rehabil Med. 2020 Apr 
14;52(4):jrm00043. doi: 10.2340/16501977-2676. PMID: 32271393.
---------------------------------------------------------------------------

    Section 1886(m)(5)(F)(i) of the Act, cross-referencing subsections 
(b), (c), and (d) of section 1899B of the Act, requires CMS to develop 
and implement standardized quality measures from five quality measure 
domains, including the domain of functional status, cognitive function, 
and changes in function and cognitive function, across the post-acute 
care (PAC) settings, including LTCHs. To satisfy this requirement, CMS 
adopted the Application of Percent of Long-Term Care Hospital Patients 
with an Admission and Discharge Functional Assessment and a Care Plan 
That Addresses Function (Application of Functional Assessment/Care 
Plan) measure, for the LTCH QRP in the FY 2015 IPPS/LTCH PPS final rule 
(80 FR 49739 through 49747). While that process measure allowed for the 
standardization of functional assessments across assessment instruments 
and facilitated cross-setting data collection, quality measurement, and 
interoperable data exchange, we believe it is now topped out and are 
proposing to remove it in section IX.E.4.c of this proposed rule. While 
there is an additional outcome measure addressing functional status 
\597\ that can reliably distinguish performance among providers in the 
LTCH QRP, that outcome measure only captures patients requiring 
ventilator support at admission. In contrast, a cross-setting 
functional outcome measure would include the LTCH population regardless 
of ventilation status. Moreover, the proposed measure specifications 
would be aligned across settings, including the use of a common set of 
standardized functional assessment data elements.
---------------------------------------------------------------------------

    \597\ The measure is Change in Mobility Among Long-Term Care 
Hospital Patients Requiring Ventilator Support.
---------------------------------------------------------------------------

(a) Measure Importance
    Maintenance or improvement of physical function among older adults 
is increasingly an important focus of health care. Adults age 65 years 
and older constitute the most rapidly growing population in the United 
States, and functional capacity in physical (non-psychological) domains 
has been shown to decline with age.\598\ Moreover, impaired functional 
capacity is associated with poorer quality of life and an increased 
risk of all-cause mortality, postoperative complications, and cognitive 
impairment, the latter of which can complicate the return of a patient 
to the community from post-acute care.599 600 601 
Nonetheless,

[[Page 27141]]

evidence suggests that physical functional abilities, including 
mobility and self-care, are modifiable predictors of patient outcomes 
across PAC settings, including functional recovery or decline after 
post-acute care,602 603 604 605 rehospitalization 
rates,606 607 608 discharge to community,609 610 
and falls.\611\
---------------------------------------------------------------------------

    \598\ High KP, Zieman S, Gurwitz J, Hill C, Lai J, Robinson T, 
Schonberg M, Whitson H. Use of Functional Assessment to Define 
Therapeutic Goals and Treatment. J Am Geriatr Soc. 2019 
Sep;67(9):1782-1790. doi: 10.1111/jgs.15975. Epub 2019 May 13. PMID: 
31081938; PMCID: PMC6955596.
    \599\ Clouston SA, Brewster P, Kuh D, Richards M, Cooper R, 
Hardy R, Rubin MS, Hofer SM. The dynamic relationship between 
physical function and cognition in longitudinal aging cohorts. 
Epidemiol Rev. 2013;35(1):33-50. doi: 10.1093/epirev/mxs004. Epub 
2013 Jan 24. PMID: 23349427; PMCID: PMC3578448.
    \600\ Michael YL, Colditz GA, Coakley E, Kawachi I. Health 
Behaviors, Social Networks, and Healthy Aging: Cross-Sectional 
Evidence from the Nurses' Health Study. Qual Life Res. 1999 
Dec;8(8):711-22. doi: 10.1023/a:1008949428041. PMID: 10855345.
    \601\ High KP, Zieman S, Gurwitz J, Hill C, Lai J, Robinson T, 
Schonberg M, Whitson H. Use of Functional Assessment to Define 
Therapeutic Goals and Treatment. J Am Geriatr Soc. 2019 
Sep;67(9):1782-1790. doi: 10.1111/jgs.15975. Epub 2019 May 13. PMID: 
31081938; PMCID: PMC6955596.
    \602\ Deutsch A, Palmer L, Vaughan M, Schwartz C, McMullen T. 
Inpatient Rehabilitation Facility Patients' Functional Abilities and 
Validity Evaluation of the Standardized Self-Care and Mobility Data 
Elements. Arch Phys Med Rehabil. 2022 Feb 11:S0003-9993(22)00205-2. 
doi: 10.1016/j.apmr.2022.01.147. Epub ahead of print. PMID: 
35157893.
    \603\ Hong I, Goodwin JS, Reistetter TA, Kuo YF, Mallinson T, 
Karmarkar A, Lin YL, Ottenbacher KJ. Comparison of Functional Status 
Improvements Among Patients With Stroke Receiving Postacute Care in 
Inpatient Rehabilitation vs Skilled Nursing Facilities. JAMA Netw 
Open. 2019 Dec 2;2(12):e1916646. doi: 10.1001/
jamanetworkopen.2019.16646. PMID: 31800069; PMCID: PMC6902754.
    \604\ Alcusky M, Ulbricht CM, Lapane KL. Postacute Care Setting, 
Facility Characteristics, and Poststroke Outcomes: A Systematic 
Review. Arch Phys Med Rehabil. 2018;99(6):1124-1140.e9. doi: 
10.1016/j.apmr.2017.09.005. PMID: 28965738; PMCID: PMC5874162.
    \605\ Chu CH, Quan AML, McGilton KS. Depression and Functional 
Mobility Decline in Long Term Care Home Residents with Dementia: a 
Prospective Cohort Study. Can Geriatr J. 2021;24(4):325-331. 
doi:10.5770/cgj.24.511. PMID: 34912487; PMCID: PMC8629506.
    \606\ Li CY, Haas A, Pritchard KT, Karmarkar A, Kuo YF, Hreha K, 
Ottenbacher KJ. Functional Status Across Post-Acute Settings is 
Associated With 30-Day and 90-Day Hospital Readmissions. J Am Med 
Dir Assoc. 2021 Dec;22(12):2447-2453.e5. doi: 10.1016/
j.jamda.2021.07.039. Epub 2021 Aug 30. PMID: 34473961; PMCID: 
PMC8627458.
    \607\ Middleton A, Graham JE, Lin YL, Goodwin JS, Bettger JP, 
Deutsch A, Ottenbacher KJ. Motor and Cognitive Functional Status Are 
Associated with 30-day Unplanned Rehospitalization Following Post-
Acute Care in Medicare Fee-for-Service Beneficiaries. J Gen Intern 
Med. 2016 Dec;31(12):1427-1434. doi: 10.1007/s11606-016-3704-4. Epub 
2016 Jul 20. PMID: 27439979; PMCID: PMC5130938.
    \608\ Gustavson AM, Malone DJ, Boxer RS, Forster JE, Stevens-
Lapsley JE. Application of High-Intensity Functional Resistance 
Training in a Skilled Nursing Facility: An Implementation Study. 
Phys Ther. 2020;100(10):1746-1758. doi: 10.1093/ptj/pzaa126. PMID: 
32750132; PMCID: PMC7530575.
    \609\ Minor M, Jaywant A, Toglia J, Campo M, O'Dell MW. 
Discharge Rehabilitation Measures Predict Activity Limitations in 
Patients with Stroke Six Months after Inpatient Rehabilitation. Am J 
Phys Med Rehabil. 2021 Oct 20. doi: 10.1097/PHM.0000000000001908. 
Epub ahead of print. PMID: 34686630.
    \610\ Dubin R, Veith JM, Grippi MA, McPeake J, Harhay MO, 
Mikkelsen ME. Functional Outcomes, Goals, and Goal Attainment among 
Chronically Critically Ill Long-Term Acute Care Hospital Patients. 
Ann Am Thorac Soc. 2021;18(12):2041-2048. doi: 10.1513/
AnnalsATS.202011-1412OC. PMID: 33984248; PMCID: PMC8641806.
    \611\ Hoffman GJ, Liu H, Alexander NB, Tinetti M, Braun TM, Min 
LC. Posthospital Fall Injuries and 30-Day Readmissions in Adults 65 
Years and Older. JAMA Netw Open. 2019 May 3;2(5):e194276. doi: 
10.1001/jamanetworkopen.2019.4276. PMID: 31125100; PMCID: 
PMC6632136.
---------------------------------------------------------------------------

    The implementation of interventions that improve patients' 
functional outcomes and reduce the risks of associated undesirable 
outcomes as a part of a patient-centered care plan is essential to 
maximizing functional improvement. For many people, the overall goals 
of LTCH care may include optimizing functional improvement, returning 
to a previous level of independence, maintaining functional abilities, 
or avoiding institutionalization. Studies have suggested that 
rehabilitation services provided in LTCHs can improve patients' motor 
function at discharge for geriatric patients and patients with various 
diagnoses, including dementia.612 613 614 615 616 Moreover, 
assessing functional status as a health outcome in LTCHs may provide 
valuable information in determining treatment decisions throughout the 
care continuum, such as the need for rehabilitation service and 
discharge planning,617 618 619 as well as provide 
information to consumers about the effectiveness of skilled nursing 
services and rehabilitation services delivered. Because evidence shows 
that older adults experience aging heterogeneously and require 
individualized and comprehensive health care, functional status can 
serve as a vital component in informing the provision of health care 
and thus indicate an LTCH's quality of care.620 621
---------------------------------------------------------------------------

    \612\ Dubin R, Veith JM, Grippi MA, McPeake J, Harhay MO, 
Mikkelsen ME. Functional Outcomes, Goals, and Goal Attainment among 
Chronically Critically Ill Long-Term Acute Care Hospital Patients. 
Ann Am Thorac Soc. 2021;18(12):2041-2048. doi:10.1513/
AnnalsATS.202011-1412OC. PMID: 33984248; PMCID: PMC8641806.
    \613\ Lane NE, Stukel TA, Boyd CM, Wodchis WP. Long-Term Care 
Residents' Geriatric Syndromes at Admission and Disablement Over 
Time: An Observational Cohort Study. J Gerontol A Biol Sci Med Sci. 
2019;74(6):917-923. doi: 10.1093/gerona/gly151. PMID: 29955879; 
PMCID: PMC6521919.
    \614\ Kowalski RG, Hammond FM, Weintraub AH, Nakase-Richardson 
R, Zafonte RD, Whyte J, Giacino JT. Recovery of Consciousness and 
Functional Outcome in Moderate and Severe Traumatic Brain Injury. 
JAMA Neurol. 2021;78(5):548-557. doi: 10.1001/jamaneurol.2021.0084. 
PMID: 33646273; PMCID: PMC7922241.
    \615\ Chu CH, Quan AML, McGilton KS. Depression and Functional 
Mobility Decline in Long Term Care Home Residents with Dementia: a 
Prospective Cohort Study. Can Geriatr J. 2021;24(4):325-331. 
doi:10.5770/cgj.24.511. PMID: 34912487; PMCID: PMC8629506.
    \616\ Khan F, Amatya B. Medical Rehabilitation in Pandemics: 
Towards a New Perspective. J Rehabil Med. 2020 April 
14;52(4):jrm00043. doi: 10.2340/16501977-2676. PMID: 32271393.
    \617\ Dubin R, Veith JM, Grippi MA, McPeake J, Harhay MO, 
Mikkelsen ME. Functional Outcomes, Goals, and Goal Attainment among 
Chronically Critically Ill Long-Term Acute Care Hospital Patients. 
Ann Am Thorac Soc. 2021;18(12):2041-2048. doi:10.1513/
AnnalsATS.202011-1412OC. PMID: 33984248; PMCID: PMC8641806.
    \618\ Warren M, Knecht J, Verheijde J, Tompkins J. Association 
of AM-PAC ``6-Clicks'' Basic Mobility and Daily Activity Scores With 
Discharge Destination. Phys Ther. 2021 Apr 4;101(4):pzab043. doi: 
10.1093/ptj/pzab043. PMID: 33517463.
    \619\ Cogan AM, Weaver JA, McHarg M, Leland NE, Davidson L, 
Mallinson T. Association of Length of Stay, Recovery Rate, and 
Therapy Time per Day With Functional Outcomes After Hip Fracture 
Surgery. JAMA Netw Open. 2020 Jan 3;3(1):e1919672. doi: 10.1001/
jamanetworkopen.2019.19672. PMID: 31977059; PMCID: PMC6991278.
    \620\ Criss MG, Wingood M, Staples WH, Southard V, Miller KL, 
Norris TL, Avers D, Ciolek CH, Lewis CB, Strunk ER. APTA Geriatrics' 
Guiding Principles for Best Practices in Geriatric Physical Therapy: 
An Executive Summary. J Geriatr Phys Ther. 2022 Apr-June;45(2):70-
75. doi: 10.1519/JPT.0000000000000342. PMID: 35384940.
    \621\ Cogan AM, Weaver JA, McHarg M, Leland NE, Davidson L, 
Mallinson T. Association of Length of Stay, Recovery Rate, and 
Therapy Time per Day With Functional Outcomes After Hip Fracture 
Surgery. JAMA Netw Open. 2020 Jan 3;3(1):e1919672. doi: 10.1001/
jamanetworkopen.2019.19672. PMID: 31977059; PMCID: PMC6991278.
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    We are proposing to adopt the Discharge Function Score (DC 
Function) measure \622\ in the LTCH QRP beginning with the FY 2025 LTCH 
QRP. This assessment-based outcome measure evaluates functional status 
by calculating the percentage of LTCH patients who meet or exceed an 
expected discharge function score. If finalized, this measure would 
replace the topped-out Application of Functional Assessment/Care Plan 
process measure. Like the cross-setting process measure we are 
proposing to remove in section IX.E.4.c. of the preamble of this 
proposed rule the proposed measure would be calculated using 
standardized patient assessment

[[Page 27142]]

data from the current LTCH assessment tool, the Long-Term Care Hospital 
(LTCH) Continuity Assessment Record and Evaluation (CARE) Data Set 
(LCDS).
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    \622\ This measure was submitted to the Measures Under 
Consideration (MUC) List as the Cross-Setting Discharge Function 
Score. Subsequent to the MAP workgroup meetings, CMS modified the 
name. For more information, refer to the Discharge Function Score 
for Long Term Care Hospital (LTCHs) Technical Report, which is 
available on the LTCH Quality Reporting Program Measures and 
Technical Information web page at https://www.cms.gov/files/document/ltch-discharge-function-score-technical-report-february-2023.pdf.
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    The proposed DC Function measure supports current CMS priorities. 
Specifically, the measure aligns with the Streamline Quality 
Measurement domain in CMS's Meaningful Measures 2.0 framework in two 
ways.\623\ First, the proposed outcome measure could further CMS's 
objective to prioritize outcome measures by replacing the current 
cross-setting process measure (see section IX.E.4.c. of the preamble of 
this proposed rule). Unlike the existing functional outcomes measures, 
this proposed DC Function measure uses a set of cross-setting 
assessment items which would facilitate data collection, quality 
measurement, outcome comparison, and interoperable data exchange among 
PAC settings. Second, this measure adds no additional provider burden 
since it would be calculated using data from the LCDS that are already 
reported to the Medicare program for payment and quality reporting 
purposes.
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    \623\ Meaningful Measures 2.0 can be found at https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
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    The proposed DC Function measure would also follow a calculation 
approach similar to the existing functional outcome measures, which are 
CBE endorsed, with some modifications.\624\ Specifically, the measure 
(1) considers two dimensions of function \625\ (self-care and mobility 
activities) and (2) accounts for missing data by using statistical 
imputation to improve the validity of measure performance. The 
statistical imputation approach recodes missing functional status data 
to the most likely value had the status been assessed, whereas the 
current imputation approach implemented in existing functional outcome 
measures recodes missing data to the lowest functional status. A 
benefit of statistical imputation is that it uses patient 
characteristics to produce an unbiased estimate of the score on each 
item with a missing value. In contrast, the current approach treats 
patients with missing values and patients who were coded to the lowest 
functional status similarly, despite evidence suggesting varying 
measure performance between the two groups, which can to lead less 
accurate measure performances.
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    \624\ The existing measures are the IRF Functional Outcome 
Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients measure (Discharge Self-Care Score) and the IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients measure (Discharge Mobility Score).
    \625\ RTI International. Post-Acute Care Payment Reform 
Demonstration Report to Congress Supplement--Interim Report. May 
2011. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/GAGE_PACPRD_RTC_Supp_Materials_May_2011.pdf.
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(a) Measure Testing
    Measure testing using FY 2019 data was conducted on the DC Function 
measure to assess validity, reliability, and reportability, all of 
which informed interested parties' feedback and Technical Expert Panel 
(TEP) input (see section IX.E.4.b.(3). of the preamble of this proposed 
rule). Validity was assessed for the measure performance, the risk 
adjustment model, face validity, and statistical imputation models. 
Validity testing of measure performance entailed determining Spearman's 
rank correlations between the proposed measure's performance for 
providers with 20 or more stays and the performance of other publicly 
reported LTCH quality measures. Results indicated that the measure 
captures the intended outcome based on the directionalities and 
strengths of correlation coefficients and are further detailed in Table 
IX.E.-02.
[GRAPHIC] [TIFF OMITTED] TP01MY23.310

    Validity testing of the risk adjustment model showed good model 
discrimination as the measure model has the predictive ability to 
distinguish patients with low expected functional capabilities from 
those with high expected functional capabilities.\626\ The ratios of 
observed-to-predicted discharge function score across eligible stays, 
by deciles of expected functional capabilities, ranged from 0.96 to 
1.06. Both the Cross-Setting Discharge Function TEPs and patient-family 
feedback showed strong support for the face validity and importance of 
the proposed measure as an indicator of quality of care (see section 
IX.G.4.b.(3) of this proposed rule). Lastly, validity testing of the 
measure's statistical imputation models indicated that the models 
demonstrate good discrimination and produce more precise and accurate 
estimates of function scores for items with missing scores when 
compared to the current imputation approach implemented in the LTCH QRP 
functional outcome measure, Change in Mobility Among LTCH Patients 
Requiring Ventilator Support.
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    \626\ ``Expected functional capabilities'' is defined as the 
predicted discharge function score.
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    Reliability and reportability testing also yielded results that 
support the measure's scientific acceptability. Split-half testing 
revealed the proposed measure's excellent reliability, indicated by an 
intraclass correlation coefficient value of 0.94. Reportability testing 
indicated high reportability (97 percent) of providers meeting the 
public

[[Page 27143]]

reporting threshold of 20 eligible stays. For additional measure 
testing details, we refer readers to the document titled Discharge 
Function Score for Long-Term Care Hospital (LTCHs) Technical 
Report.\627\
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    \627\ Discharge Function Score for Long-Term Care Hospital 
(LTCHs) Technical Report. https://www.cms.gov/files/document/ltch-discharge-function-score-technical-report-february-2023.pdf.
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(2) Competing and Related Measures
    Section 1899B(e)(2)(A) of the Act requires that, absent an 
exception under section 1899B(e)(2)(B) of the Act, measures specified 
under section 1899B of the Act be endorsed by the consensus-based 
entity (CBE) with a contract under section 1890(a). In the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible and practical measure has not been endorsed, 
section 1899B(e)(2)(B) permits the Secretary to specify a measure that 
is not so endorsed, as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
    The proposed DC Function measure is not CBE endorsed, so we 
considered whether there are other available measures that (1) assess 
both functional domains of self-care and mobility in LTCHs and (2) 
satisfy the requirement of the Act to specify standardized quality 
measures with respect to functional status, cognitive function, and 
changes in function and cognitive function. While the Application of 
Functional Assessment/Care Plan measure assesses both functional 
domains and satisfies the Act's requirement, this cross-setting process 
measure is not CBE endorsed and the performance on this measure among 
LTCHs is so high and unvarying across most LTCHs that the measure does 
not offer meaningful distinctions in performance. Additionally, after 
review of CBE-endorsed measures, we were unable to identify any CBE-
endorsed measures for LTCHs that meet the aforementioned requirements. 
While the LTCH QRP includes a CBE endorsed outcome measure addressing 
functional status, the Change in Mobility measure, this measure 
assesses a single domain of function and captures only a subset of the 
assessed LTCH population.
    Therefore, after consideration of other available measures, we find 
that the exception under section 1899B(e)(2)(B) of the Act applies and 
are proposing the DC Function measure beginning with the FY 2025 LTCH 
QRP. We intend to submit the proposed measure to the CBE for 
consideration of endorsement when feasible.
(3) Interested Parties and Technical Expert Panel (TEP) Input
    In our development and specification of this measure, we employed a 
transparent process in which we sought input from interested parties 
and national experts and engaged in a process that allowed for pre-
rulemaking input, in accordance with section 1890A of the Act. To meet 
this requirement, we provided the following opportunities for 
interested parties' input: a Patient and Family Engagement Listening 
Session, two TEPs, and public comments through a request for 
information (RFI).
    First, the measure development contractor convened a Patient and 
Family Engagement Listening Session, during which patients and 
caregivers provided support for the proposed measure concept. 
Participants emphasized the importance of measuring functional outcomes 
and found self-care and mobility to be critical aspects of care. 
Additionally, they expressed a strong interest in metrics assessing the 
number of patients discharged from particular facilities with 
improvements in self-care and mobility, and their views of self-care 
and mobility aligned with the functional domains captured by the 
proposed measure. All feedback was used to inform measure development 
efforts.
    The measure development contractor subsequently convened TEPs on 
July 14-15, 2021, and January 26-27, 2022, to obtain expert input on 
the development of a cross-setting function measure for use in the LTCH 
QRP. The TEPs consisted of interested parties with a diverse range of 
expertise, including LTCH and PAC subject matter knowledge, clinical 
expertise, patient and family perspectives, and measure development 
experience. The TEPs supported the proposed measure concept and 
provided the following substantive feedback regarding the measure's 
specifications and measure testing data.
    First, the TEP was asked whether they prefer a cross-setting 
measure that is modeled after measures currently adopted in the 
Inpatient Rehabilitation Facility (IRF) QRP and the Skilled Nursing 
Facility (SNF) QRP, the IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (Discharge Mobility 
Score) and IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients (Discharge Self-Care Score) 
measures, or one that is modeled after the currently adopted IRF 
Functional Outcome Measure: Change in Mobility for Medical 
Rehabilitation Patients (Change in Mobility Score) and IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (Change in Self-Care Score). With the Discharge Mobility Score 
and Change in Mobility Score measures and the Discharge Self-Care Score 
and Change in Self-Care Score measures being both highly correlated and 
not appearing to measure unique concepts, the TEP favored the Discharge 
Mobility Score and Discharge Self-Care Score measures over the Change 
in Mobility Score and Change in Self-Care Score measures and 
recommended moving forward with utilizing the Discharge Mobility Score 
and Discharge Self-Care Score measures for the development of a cross-
setting measure.
    Second, in deciding the standardized functional assessment data 
elements to include in the cross-setting measure, the TEP recommended 
removing redundant data elements. Strong correlations between scores of 
functional items within the same functional domain suggested that 
certain items may be redundant in eliciting information about patient 
function and inclusion of these items could lead to overrepresentation 
of a particular functional area. Subsequently, our measure development 
contractor focused on the Discharge Mobility Score measure as a 
starting point for cross-setting development due to the greater number 
of cross-setting standardized functional assessment data elements for 
mobility while also identifying redundant functional items that could 
be removed from a cross-setting functional measure.
    Third, the TEP supported including the cross-setting self-care 
items such that the cross-setting function measure would capture both 
self-care and mobility. Panelists agreed that self-care items added 
value to the measure and are clinically important to function. The TEP 
provided refinements to imputation strategies to more accurately 
represent function performance across all PAC settings, including the 
support of using statistical imputation over the current imputation 
approach implemented in existing functional outcome measures in the PAC 
QRPs. We considered all the TEP's recommendations for developing a 
cross-setting function measure, and applied those recommendations where 
technically feasible and appropriate. Summaries of the TEP proceedings 
titled Technical Expert Panel (TEP) for the Refinement of Long-Term 
Care Hospital (LTCH), Inpatient Rehabilitation Facility (IRF), Skilled 
Nursing Facility (SNF)/Nursing Facility (NF), and Home Health (HH) 
Function Measures Summary Report (July 2021

[[Page 27144]]

TEP) \628\ and Technical Expert Panel (TEP) for Cross-Setting Function 
Measure Development Summary Report (January 2022 TEP) \629\ are 
available on the CMS Measures Management System (MMS) Hub.
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    \628\ Technical Expert Panel (TEP) for the Refinement of Long-
Term Care Hospital (LTCH), Inpatient Rehabilitation Facility (IRF), 
Skilled Nursing Facility (SNF)/Nursing Facility (NF), and Home 
Health (HH) Function Measures Summary Report (July 2021 TEP). 
https://mmshub.cms.gov/sites/default/files/TEP-Summary-Report-PAC-Function.pdf.
    \629\ Technical Expert Panel (TEP) for Cross-Setting Function 
Measure Development Summary Report (January 2022 TEP). https://mmshub.cms.gov/sites/default/files/PAC-Function-TEP-Summary-Report-Jan2022-508.pdf.
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    Finally, we solicited feedback from interested parties on the 
importance, relevance, and applicability of a cross-setting functional 
outcome measure for LTCHs through an RFI in the FY 2023 LTCH PPS 
proposed rule (87 FR 28568). Commenters were supportive of a cross-
setting functional outcome measure that is inclusive of both self-care 
and mobility items, but also provided information related to potential 
risk adjustment methodologies as well as other measures that could be 
used to capture functional outcomes across PAC settings (87 FR 49316).
(4) Measure Application Partnership (MAP) Review
    In accordance with section 1890A of the Act, our pre-rulemaking 
process includes making publicly available a list of quality and 
efficiency measures, called the Measures Under Consideration (MUC) 
List, that the Secretary is considering adopting for use in Medicare 
programs. This allows interested parties to provide recommendations to 
the Secretary on the measures included on the MUC list.
    We included the DC Function measure under the LTCH QRP on the 
publicly available MUC List for December 1, 2022.\630\ After the MUC 
List was published, the CBE convened Measure Applications Partnership 
(MAP) received one comment supporting the DC Function measure for 
rulemaking. Shortly after, several CBE convened MAP workgroups who met 
virtually to provide input on the measure. First, the MAP Health Equity 
Advisory Group convened on December 6-7, 2022. The Health Equity 
Advisory Group did not share any health equity concerns related to the 
implementation of the measure, and only asked for clarification 
regarding measure specifications from measure developers. The MAP Rural 
Health Advisory Group met on December 8-9, 2022, during which two 
members provided support for the DC Function measure and other Rural 
Health Advisory Group members did not express rural health concerns 
regarding the measure.
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    \630\ Centers for Medicare & Medicaid Services. Overview of the 
List of Measures Under Consideration for December 1, 2022. https://mmshub.cms.gov/sites/default/files/2022-MUC-List-Overview.pdf.
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    The MAP Post-Acute Care/Long-Term Care (PAC/LTC) workgroup met on 
December 12, 2022 and provided input on the DC Function measure. During 
this meeting, we were able to address several concerns raised by 
interested parties after the publication of the MUC List. Specifically, 
we clarified that the expected discharge scores are not calculated 
using self-reported functional goals, and are simply calculated by 
risk-adjusting the observed discharge scores (see section IV.E.4.b.(5). 
of the preamble of this proposed rule). Therefore, we believe that 
these scores cannot be ``gamed'' by reporting less-ambitious functional 
goals. We also pointed out that the measure is highly usable as it is 
similar in design and complexity to existing function measures and that 
the data elements used in this measure are already in use. Lastly, we 
clarified that the DC Function measure is intended to supplement, 
rather than replace the existing LTCH QRP measure for mobility, and 
implements improvements on the existing Application of Functional 
Assessment/Care Plan and Functional Assessment/Care Plan measures that 
make the measure more valid and harder to game.
    The MAP PAC/LTC workgroup went on to discuss several concerns with 
the measure, including (1) whether the measure is truly cross-setting 
due to varying denominator populations across settings, (2) whether the 
measure would adequately represent the full picture of function, 
especially for patients who may have a limited potential for functional 
gain, and (3) that the range of expected scores was too large to offer 
a valid facility-level score. We clarified that the denominator 
population in each measure setting represents the assessed population 
within the setting and that the measure satisfies the requirement at 
section 1886(m)(5) of the Act for a cross-setting measure in the 
functional status domain specified under section 1899B(c)(1) of the 
Act. Additionally, we noted that the TEP had reviewed the item set and 
determined that all the self-care and mobility items were suitable for 
all settings. Further, we clarified that, because the DC Function 
measure would assess whether a patient met or exceeded their expected 
discharge score, it accounts for patients who are not expected to 
improve. Lastly, we noted that the DC Function measure has a high 
degree of correlation with the existing function measures and that the 
range of expected scores is consistent with the range of observed 
scores. The PAC/LTC workgroup voted to support the staff recommendation 
of conditional support for rulemaking, with the condition that we seek 
CBE endorsement.
    In response to the PAC/LTC workgroup's preliminary recommendation, 
the CBE received two additional comments from interested parties 
supporting the PAC-LTC workgroup's preliminary recommendation of 
conditional support for rulemaking. One commenter recommended the DC 
Function measure under the condition that it be reviewed and refined 
such that implementation would support patient autonomy and result in 
care that aligns with patients' personal functional goals. The second 
commenter provided support for the measure under the condition that it 
produces statistically meaningful information that can inform 
improvements in care processes, while also expressing concern that the 
measure is not truly cross-setting because it utilizes different 
resident populations and risk-adjustment models with setting-specific 
covariates across settings. Additionally, this commenter noted that 
using a single set of cross-setting section GG items is not appropriate 
since the items may not be relevant across varying resident-setting 
populations.
    Finally, the MAP Coordinating Committee convened on January 24-25, 
2023. CMS noted again that the TEP had reviewed the item set and 
determined that all the self-care and mobility items were suitable for 
all settings. Coordinating Committee members expressed support for 
reviewing existing measures for removal as well as support for the DC 
Function measure, favoring the implementation of a single, standardized 
function measure across PAC settings. The Coordinating Committee 
unanimously upheld the PAC/LTC workgroup recommendation of conditional 
support for rulemaking. We refer readers to the final MAP 
recommendations, titled 2022-2023 MAP Final Recommendations,\631\ for 
more information.
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    \631\ 2022-2023 MAP Final Recommendations. https://mmshub.cms.gov/sites/default/files/2022-2023-MAP-Final-Recommendations-508.xlsx.
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(5) Quality Measure Calculation
    The proposed outcome measure estimates the percentage of LTCH 
patients who meet or exceed an expected discharge score during the

[[Page 27145]]

reporting period. The proposed measure's numerator is the number of 
LTCH stays with an observed discharge function score that is equal to 
or greater than the calculated expected discharge function score. The 
observed discharge function score is the sum of individual function 
item values at discharge. The expected discharge function score is 
computed by risk-adjusting the observed discharge function score for 
each LTCH stay. Risk adjustment controls for patient characteristics 
such as admission function score, age, and clinical conditions. The 
denominator is the total number of LTCH stays with an LCDS record in 
the measure target period (four rolling quarters) that do not meet the 
measure exclusion criteria. For additional details regarding the 
numerator, denominator, risk adjustment, and exclusion criteria, refer 
to the Discharge Function Score for Long Term Care Hospitals (LTCHs) 
Technical Report.\632\
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    \632\ Discharge Function Score for Long Term Care Hospitals 
(LTCHs) Technical Report. https://www.cms.gov/files/document/ltch-discharge-function-score-technical-report-february-2023.pdf.
---------------------------------------------------------------------------

    The proposed measure implements a statistical imputation approach 
for handling ``missing'' standardized functional assessment data 
elements. The coding guidance for standardized functional assessment 
data elements allows for using ``Activity Not Attempted'' (ANA) codes, 
resulting in ``missing'' information about a patient's functional 
ability on at least some items, at admission and/or discharge, for a 
substantive portion of LTCH patients. Currently, the functional outcome 
measures in the LTCH QRP use a simple imputation method whereby all ANA 
codes or otherwise missing scores, on both admission and discharge 
records, are recoded to ``1'' or ``most dependent.'' Statistical 
imputation, on the other hand, replaces these missing values with a 
variable based on the values of other, non-missing variables in the 
assessment and on the values of other assessments which are otherwise 
similar to the assessment with a missing value. Specifically, in this 
proposed measure statistical imputation allows missing values (for 
example, the ANA codes) to be replaced with any value from 1 to 6, 
based on a patient's clinical characteristics and codes assigned on 
other standardized functional assessment data elements. The measure 
implements separate imputation models for each standardized functional 
assessment data element used in construction of the admission score and 
the discharge score. Relative to the current simple imputation method, 
this statistical imputation approach increases precision and accuracy 
and reduces the bias in estimates of missing item scores. We refer 
readers to the Discharge Function Score for Long Term Care Hospitals 
(LTCHs) Technical Report \633\ for measure specifications and 
additional details.
---------------------------------------------------------------------------

    \633\ Discharge Function Score for Long Term Care Hospitals 
(LTCHs) Technical Report. https://www.cms.gov/files/document/ltch-discharge-function-score-technical-report-february-2023.pdf.
---------------------------------------------------------------------------

    We invite public comment on our proposal to adopt the DC Function 
measure, beginning with the FY 2025 LTCH QRP.
c. Proposed Removal of the Application of Percent of Long-Term Care 
Hospital Patients With an Admission and Discharge Functional Assessment 
and a Care Plan That Addresses Function Measure Beginning With the FY 
2025 LTCH QRP
    We are proposing to remove the process measure, Application of 
Percent of Long-Term Care Hospital Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(Application of Functional Assessment/Care Plan), from the LTCH QRP 
beginning with the FY 2025 LTCH QRP. Section 412.560 of our regulations 
describes eight factors we consider for measure removal from the LTCH 
QRP. We believe this measure should be removed because it satisfies two 
of these factors. First, the Application of Functional Assessment/Care 
Plan measure meets the conditions for measure removal factor one: 
measure performance among LTCHs is so high and unvarying that 
meaningful distinctions in improvements in performance can no longer be 
made.\634\ Second, this measure meets the conditions for measure 
removal factor six: there is an available measure that is more strongly 
associated with desired patient functional outcomes. We believe the 
proposed DC Function measure discussed in section IX.E.4.b. of the 
preamble of this proposed rule better measures functional outcomes than 
the current Application of Functional Assessment/Care Plan measure. We 
discuss each of these reasons in more detail in this section of this 
rule.
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    \634\ For more information on the factors CMS uses to base 
decisions for measure removal, we refer readers to the Code of 
Federal Regulations, Sec.  412.560(b)(3). https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-412/subpart-O/section-412.560.
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    In regard to removal factor one, the Application of Functional 
Assessment/Care Plan measure has become topped out,\635\ with average 
performance rates reaching nearly 100 percent over the past three years 
(ranging from 99.4 percent to 99.6 percent during calendar years [CYs] 
2019-2021).636 637 638 For the 12-month period of Q3 2020 
through Q2 2021 (7/1/2020 through 6/30/2021), LTCHs had an average 
score for this measure of 99.4 percent, with nearly 70 percent of LTCHs 
scoring 100 percent,\639\ and for CY 2021, LTCHs had an average score 
of 99.4 percent, with nearly 63 percent of LTCHs scoring 100 
percent.\640\ The proximity of these mean rates to the maximum score of 
100 percent suggests a ceiling effect and a lack of variation that 
restricts distinction between facilities.
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    \635\ Centers for Medicare & Medicaid Services. 2023 Annual Call 
for Quality Measures Fact Sheet, p. 10 https://www.cms.gov/files/document/mips-call-quality-measures-overview-fact-sheet-2022.pdf.
    \636\ Centers for Medicare & Medicaid Services. Long-term Care 
Hospitals Data Archive, 2020, Annual File National Data 12-2020. 
PDC, https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \637\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive, 2022, Annual Files National Data 04-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \638\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive, 2022, Annual Files National Data 09-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \639\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive, 2022, Annual Files Provider Data 04-22.'' 
PDC, https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \640\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive, 2022, Annual Files Provider Data 09-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
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    In regard to measure removal factor six, the proposed DC Function 
measure is more strongly associated with desired patient functional 
outcomes than the current Application of Functional Assessment/Care 
Plan measure. As described in section IX.E.4.b.(1).(b). of the preamble 
of this proposed rule, the proposed DC Function measure has the 
predictive ability to distinguish patients with low expected functional 
capabilities from those with high expected functional 
capabilities.\641\ CMS has been collecting standardized functional 
assessment elements across PAC settings since 2016, which has allowed 
for the development of the proposed DC Function measure and meets the 
requirements of the IMPACT Act to submit standardized patient 
assessment data and other necessary data with respect to the domain of 
functional status, cognitive function, and changes in function and 
cognitive function. In light of this development, the process measure 
Application of Functional Assessment/Care Plan,

[[Page 27146]]

which measures only whether a functional assessment is completed and a 
functional goal is included in the care plan, is no longer necessary, 
and can be replaced with a measure that evaluates the LTCH's outcome of 
care on a patient's function.
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    \641\ ``Expected functional capabilities'' is defined as the 
predicted discharge function score.
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    Because the Application of Functional Assessment/Care Plan measure 
meets measure removal factors one and six, we are proposing to remove 
it from the LTCH QRP beginning with the FY 2025 LTCH QRP. We are also 
proposing that public reporting of the Application of Functional 
Assessment/Care Plan measure would end by the September 2024 Care 
Compare refresh or as soon as technically feasible when public 
reporting of the DC Function measure is proposed to begin (see section 
IX.E.9.b. of the preamble of this proposed rule).
    Under our proposal, LTCHs would no longer be required to report a 
Self-Care Discharge Goal (that is, GG0130, Column 2) or a Mobility 
Discharge Goal (that is, GG0170, Column 2) for the purposes of the 
Application of Functional Assessment/Care Plan measure beginning with 
patients admitted on October 1, 2023. We would remove the items for 
Self-Care Discharge Goal (that is, GG0130, Column 2) and Mobility 
Discharge Goal (that is, GG0170, Column 2) with the next release of the 
LCDS.
    We invite public comment on our proposal to remove the Application 
of Functional Assessment/Care Plan measure from the LTCH QRP beginning 
with the FY 2025 LTCH QRP.
d. Proposed Removal of the Percent of LTCH Patients With an Admission 
and Discharge Functional Assessment and a Care Plan Measure Beginning 
With the FY 2025 LTCH QRP
    We are proposing to remove the process measure, Percent of Long-
Term Care Hospital Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (Functional 
Assessment/Care Plan) measure from the LTCH QRP beginning with the FY 
2025 LTCH QRP. We propose this measure's removal because the Functional 
Assessment/Care Plan measure satisfies factor one of our measure 
removal factors, as described at 42 CFR 412.530(b)(3)(i), measure 
performance among LTCHs is so high and unvarying that meaningful 
distinctions in improvements in performance can no longer be made.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50291 through 
50298), we adopted the Functional Assessment/Care Plan measure. This 
quality measure reports the percent of LTCH patients with both an 
admission and a discharge functional assessment and a care plan that 
addresses function. This process measure requires the collection of 
admission and discharge functional status data which assess specific 
functional activities such as self-care and mobility. The treatment 
goal provides documentation that a care plan with a goal has been 
established for the patient.
    Since its adoption into the LTCH QRP, the Functional Assessment/
Care Plan measure has become topped out,\642\ with average performance 
rates reaching nearly 100 percent over the past three years (ranging 
from 99.3 percent to 99.5 percent during CYs 2019-
2021).643 644 645 The proximity of these mean rates to the 
maximum score of 100 percent suggests a ceiling effect and a lack of 
variation that restricts distinction between facilities. Additionally, 
for the 12-month period of Q3 2020 through Q2 2021 (7/1/2020 through 6/
30/2021), 67 percent of LTCHs scored 100 percent,\646\ and for CY 2021, 
61 percent of LTCHs scored 100 percent.\647\
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    \642\ Centers for Medicare & Medicaid Services. 2023 Annual Call 
for Quality Measures Fact Sheet, p. 10. https://www.cms.gov/files/document/mips-call-quality-measures-overview-fact-sheet-2022.pdf.
    \643\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive. 2021, Annual Files National Data 09-21. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \644\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive. 2022, Annual Files National Data 04-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \645\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive. 2022, Annual Files National Data 10-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \646\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive. 2022, Annual Files Provider Data 07-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals; Long-Term Care Hospitals Data Archive. 2022, Annual Files 
09-22. PDC, https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
    \647\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospitals Data Archive. 2022, Annual Files Provider Data 09-22. PDC, 
https://data.cms.gov/provider-data/archived-data/long-term-care-hospitals.
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    Our proposal to remove this measure does not mean that CMS no 
longer considers functional assessment and functional outcomes in LTCH 
settings important. The functional status and outcomes of LTCH patients 
are represented in the LTCH QRP through the Functional Outcome Measure: 
Change in Mobility Among Long-Term Care Hospital Patients Requiring 
Ventilator Support. In addition, the proposed DC Function measure would 
assess whether the LTCH has achieved expected discharge scores for all 
patients admitted to an LTCH. Therefore, we are proposing to remove the 
Functional Assessment/Care Plan measure from the LTCH QRP beginning 
with the FY 2025 LTCH. If finalized as proposed, public reporting of 
the Functional Assessment/Care Plan measure would end by September 2024 
or as soon as technically feasible.
    If finalized as proposed, LTCHs would no longer be required to 
submit Admission Performance for Wash Upper Body, a Self-Care Discharge 
Goal, and a Mobility Discharge Goal for purposes of the Functional 
Assessment/Care Plan measure beginning with patients admitted on or 
after October 1, 2023. We will remove the items for Wash Upper Body, 
the Self-Care Discharge Goals, and the Mobility Discharge Goals with 
the next release of the LCDS.
    We invite public comment on our proposal to remove the Functional 
Assessment/Care Plan That Addresses Function measure from the LTCH QRP 
beginning with the FY 2025 LTCH QRP.
e. Proposed COVID-19 Vaccine: Percent of Patients/Residents Who Are Up 
to Date Beginning With the FY 2026 LTCH QRP
(1) Background
    COVID-19 has been and continues to be a major challenge for PAC 
facilities, including LTCHs. The Secretary first declared COVID-19 a 
PHE on January 31, 2020. As of March 15, 2023, the U.S. has reported 
103,801,821 cumulative cases of COVID-19, and 1,121,512 total deaths 
due to COVID-19.\648\ Although all age groups are at risk of 
contracting COVID-19, older persons are at a significantly higher risk 
of mortality and severe disease following infection, with those over 
age 80 dying at five times the average rate.\649\ Older adults, in 
general, are prone to both acute and chronic infections owing to 
reduced immunity, and are a high-risk population.\650\ Adults age 65 
and older comprise over 75 percent of total COVID-19 deaths despite 
representing 13.2 percent of reported cases.\651\ COVID-19 has

[[Page 27147]]

impacted older adults' access to care, leading to poorer clinical 
outcomes, as well as taking a serious toll on their mental health and 
well-being due to social distancing.\652\
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    \648\ Centers for Disease Control and Prevention. COVID Data 
Tracker. 2023. https://covid.cdc.gov/covid-data-tracker.
    \649\ United Nations. Policy Brief: The Impact of COVID-19 on 
Older Persons. May 2020. https://unsdg.un.org/sites/default/files/2020-05/Policy-Brief-The-Impact-of-COVID-19-on-Older-Persons.pdf.
    \650\ Lekamwasam R, Lekamwasam S. Effects of COVID-19 Pandemic 
on Health and Wellbeing of Older People: a Comprehensive Review. Ann 
Geriatr Med Res. 2020;24(3):166-172. doi: 10.4235/agmr.20.0027. 
PMID: 32752587; PMCID: PMC7533189.
    \651\ Centers for Disease Control and Prevention. Demographic 
Trends of COVID-19 Cases and Deaths in the US Reported to CDC. COVID 
Data Tracker. 2023. https://covid.cdc.gov/covid-data-tracker/#demographics.
    \652\ United Nations. Policy Brief: The Impact of COVID-19 on 
Older Persons. May 2020. https://unsdg.un.org/sites/default/files/2020-05/Policy-Brief-The-Impact-of-COVID-19-on-Older-Persons.pdf.
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    Since the development of the vaccines to combat COVID-19, studies 
have shown they continue to provide strong protection against severe 
disease, hospitalization, and death in adults, including during the 
predominance of Omicron BA.4 and BA.5 variants.\653\ Initial studies 
showed the efficacy of FDA-approved or authorized COVID-19 vaccines 
preventing COVID-19. Prior to the emergence of the Delta variant of the 
virus, vaccine effectiveness against COVID-19-associated 
hospitalization among adults age 65 and older was 91 percent for those 
who were fully vaccinated with a mRNA vaccine \654\ (Pfizer-BioNTech or 
Moderna), and 84 percent for those receiving a viral vector vaccine 
\655\ (Janssen). Adults age 65 and older who were fully vaccinated with 
an mRNA COVID-19 vaccine had a 94 percent reduction in risk of COVID-19 
hospitalization; those who were partially vaccinated had a 64 percent 
reduction in risk.\656\ Further, after the emergence of the Delta 
variant, vaccine effectiveness against COVID-19-associated 
hospitalization for adults who were fully vaccinated was 76 percent 
among adults age 75 and older.\657\
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    \653\ Chalkias S, Harper C, Vrbicky K, et al. A Bivalent 
Omicron-Containing Booster Vaccine Against COVID-19. N Engl J Med. 
2022;387(14):1279-1291. doi: 10.0156/NEJMoa2208343. PMID: 36112399; 
PMCID: PMC9511634.
    \654\ A person is fully vaccinated with an mRNA vaccine when 
they receive two doses of a primary series.
    \655\ A person is fully vaccinated with a viral vector vaccine 
after receiving one dose of a primary series.
    \656\ 1 Centers for Disease Control and Prevention. Fully 
Vaccinated Adults 65 and Older Are 94% Less Likely to Be 
Hospitalized with COVID-19. April 28, 2021. https://www.cdc.gov/media/releases/2021/p0428-vaccinated-adults-less-hospitalized.html
    \657\ Interim Estimates of COVID-19 Vaccine Effectiveness 
Against COVID-19-Associated Emergency Department or Urgent Care 
Clinic Encounters and Hospitalizations Among Adults During SARS-CoV-
2 B.1.617.2 (Delta) Variant Predominance--Nine States, June-August 
2021 (Grannis SJ, et al. MMWR Morb Mortal Wkly Rep. 
2021;70(37):1291-1293. doi: 10.15585/mmwr.mm7037e2).
---------------------------------------------------------------------------

    More recently, since the emergence of the Omicron variant and 
availability of booster doses, multiple studies have shown that while 
vaccine effectiveness has waned, protection is higher among those 
receiving booster doses than among those only receiving the primary 
series.658 659 660 Centers for Disease Control and 
Prevention (CDC) data show that, among people age 50 and older, those 
who have received both a primary vaccination series and booster dose 
have a lower risk of hospitalization and dying from COVID-19 than their 
non-vaccinated counterparts.\661\ Additionally, a second vaccine 
booster dose has been shown to reduce risk of severe outcomes related 
to COVID-19, such as hospitalization or death.\662\ Early evidence also 
demonstrates that the bivalent boosters, specifically aimed to provide 
better protection against disease caused by the prevalent BA.4/BA.5 
Omicron subvariants, have been quite effective, and underscores the 
role of up-to-date vaccination protocols in effectively countering the 
spread of COVID-19.663 664
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    \658\ Surie D, Bonnell L, Adams K, et al. Effectiveness of 
Monovalent mRNA Vaccines Against COVID-19-Associated Hospitalization 
Among Immunocompetent Adults During BA.1/BA.2 and BA.4/BA.5 
Predominant Periods of SARS-CoV-2 Omicron Variant in the United 
States--IVY Network, 18 States, December 26, 2021-August 31, 2022. 
MMWR Morb Mortal Wkly Rep. 2022;71(42):1327-1334. doi: 10.15585/
mmwr.mm7142a3.
    \659\ Andrews N, Stowe J, Kirsebom F, et al. Covid-19 Vaccine 
Effectiveness Against the Omicron (B.1.1.529) Variant. N Engl J Med. 
2022;386(16):1532-1546. doi: 10.1056/NEJMoa2119451. PMID: 35249272; 
PMCID: PMC8908811.
    \660\ Buchan SA, Chung H, Brown KA, et al. Estimated 
Effectiveness of COVID-19 Vaccines Against Omicron or Delta 
Symptomatic Infection and Severe Outcomes. JAMA Netw Open. 
2022;5(9):e2232760. doi: 10.1001/jamanetworkopen.2022.32760. PMID: 
36136332; PMCID: PMC9500552.
    \661\ Centers for Disease Control and Prevention. Rates of 
laboratory-confirmed COVID-19 hospitalizations by vaccination 
status. COVID Data Tracker. 2023, February 9. Last accessed March 
22, 2023. https://covid.cdc.gov/covid-data-tracker/#covidnet-hospitalizations-vaccination.
    \662\ Centers for Disease Control and Prevention. COVID-19 
Vaccine Effectiveness Monthly Update. COVID Data Tracker. November 
10, 2022. https://covid.cdc.gov/covid-data-tracker/#vaccine-effectiveness.
    \663\ Chalkias S, Harper C, Vrbicky K, et al. A Bivalent 
Omicron-Containing Booster Vaccine Against COVID-19. N Engl J Med. 
2022;387(14):1279-1291. doi: 10.0156/NEJMoa2208343. PMID: 36112399; 
PMCID: PMC9511634.
    \664\ Tan ST, Kwan AT, Rodriguez-Barraquer I, et al. 
Infectiousness of SARS-CoV-2 Breakthrough Infections and 
Reinfections During the Omicron Wave. Nat Med 29, 358-365 (2023). 
Preprint at medRxiv: doi: 10.1101/2022.08.08.22278547.
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(a) Measure Importance
    Despite the availability and demonstrated effectiveness of COVID-19 
vaccinations, significant gaps continue to exist in vaccination 
rates.\665\ As of March 15, 2023, vaccination rates among people age 65 
and older are generally high for the primary vaccination series (94.3 
percent) but lower for the first booster (73.6 percent among those who 
received a primary series) and even lower for the second booster (59.9 
percent among those who received a first booster).\666\ Additionally, 
though the uptake in boosters among people age 65 and older has been 
much higher than among people of other ages, booster uptake still 
remains relatively low compared to primary vaccination among older 
adults.\667\ Variations are also present when examining vaccination 
rates by race, gender, and geographic location.\668\ For example, 66.2 
percent of the Asian, non-Hispanic population have completed the 
primary series and 21.2 percent have received a bivalent booster dose, 
whereas 44.9 percent of the Black, non-Hispanic population have 
completed the primary series and only 8.9 percent have received a 
bivalent booster dose. Among Hispanic populations, 57.1 percent of the 
population have completed the primary series and 8.5 percent have 
received a bivalent booster dose, while in White, non-Hispanic 
populations, 51.9 percent have completed the primary series and 16.2 
percent have received a bivalent booster dose.\669\ Disparities have 
been found in vaccination rates between rural and urban areas, with 
lower vaccination rates found in rural areas.670 671 Data

[[Page 27148]]

show that 55.2 percent of the eligible population in rural areas have 
completed the primary vaccination series, as compared to 66.5 percent 
of the eligible population in urban areas.\672\ Receipt of bivalent 
booster doses among those eligible has been lower, with 18 percent of 
urban population having received a booster dose, and 11.5 percent of 
the rural population having received the booster dose.\673\
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    \665\ Centers for Disease Control and Prevention. COVID-19 
Vaccinations in the United States. COVID Data Tracker. January 5, 
2023. https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-people-booster-percent-pop5.
    \666\ Centers for Disease Control and Prevention. COVID-19 
Vaccination Age and sex Trends in the United States, National and 
Jurisdictional. https://data.cdc.gov/Vaccinations/COVID-19-Vaccination-Age-and-Sex-Trends-in-the-Uni/5i5k-6cmh.
    \667\ Freed M, Neuman T, Kates J, Cubanski J. Deaths Among Older 
Adults Due to COVID-19 Jumped During the Summer of 2022 Before 
Falling Somewhat in September. Kaiser Family Foundation. October 6, 
2022. https://www.kff.org/coronavirus-covid-19/issue-brief/deaths-among-older-adults-due-to-covid-19-jumped-during-the-summer-of-2022-before-falling-somewhat-in-september/.
    \668\ Saelee R, Zell E, Murthy BP, et al. Disparities in COVID-
19 Vaccination Coverage Between Urban and Rural Counties--United 
States, December 14, 2020-January 31, 2022. MMWR Morb Mortal Wkly 
Rep. 2022;71:335-340. doi: 10.15585/mmwr.mm7109a2. PMID: 35239636; 
PMCID: PMC8893338.
    \669\ Centers for Disease Control and Prevention. Trends in 
Demographic Characteristics of People Receiving COVID-19 
Vaccinations in the United States. COVID Data Tracker. 2023. https://covid.cdc.gov/covid-data-tracker/#vaccination-demographics-trends.
    \670\ Saelee R, Zell E, Murthy BP, et al. Disparities in COVID-
19 Vaccination Coverage Between Urban and Rural Counties--United 
States, December 14, 2020-January 31, 2022. MMWR Morb Mortal Wkly 
Rep. 2022;71:335-340. doi: 10.15585/mmwr.mm7109a2. PMID: 35239636; 
PMCID: PMC8893338.
    \671\ Sun Y, Monnat SM. Rural-Urban and Within-Rural Differences 
in COVID-19 Vaccination Rates. J Rural Health. 2022;38(4):916-922. 
doi: 10.1111/jrh.12625. PMID: 34555222; PMCID: PMC8661570.
    \672\ Centers for Disease Control and Prevention. Vaccination 
Equity. COVID Data Tracker; 2023. https://covid.cdc.gov/covid-data-tracker/#vaccination-equity.
    \673\ Centers for Disease Control and Prevention. Vaccination 
Equity. COVID Data Tracker; 2023. https://covid.cdc.gov/covid-data-tracker/#vaccination-equity.
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    We are proposing to adopt the COVID-19 Vaccine: Percent of 
Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 
Vaccine) measure for the LTCH QRP beginning with the FY 2026 LTCH QRP. 
This proposed measure has the potential to increase COVID-19 
vaccination coverage of patients in LTCHs, as well as prevent the 
spread of COVID-19 within the LTCH patient population. This measure 
would also support the goal of the CMS Meaningful Measure Initiative 
2.0 to ``Empower consumers to make good health care choices through 
patient-directed quality measures and public transparency objectives.'' 
The proposed Patient/Resident COVID-19 Vaccine measure would be 
reported on Care Compare and would provide patients and caregivers, 
including those who are at high risk for developing serious 
complications from COVID-19, with valuable information they can 
consider when choosing an LTCH. The proposed Patient/Resident COVID-19 
Vaccine measure would facilitate patient care and care coordination 
during the hospital discharge planning process. Because this measure 
would be reported on Care Compare, a discharging acute care hospital, 
in collaboration with the patient and family, could use the information 
on Care Compare, to coordinate care and ensure patient preferences are 
considered in the discharge plan. Additionally, the measure would be an 
indirect measure of provider action. Since the patient's vaccination 
status would be reported at discharge from the LTCH, if a patient is 
not up to date with their vaccine at the time of LTCH admission, the 
LTCH has the opportunity to educate the patient and provide information 
on why that patient should become up to date. LTCHs may also choose to 
administer the vaccine to the patient prior to discharge from the LTCH 
or coordinate a follow-up visit for the patient to obtain the vaccine 
at a physician's office or local pharmacy.
(b) Item Testing
    The measure development contractor conducted testing with LTCHs on 
the proposed standardized patient/resident COVID-19 vaccination 
coverage assessment item using patient scenarios and cognitive 
interviews to assess their comprehension of the item and the associated 
guidance. A team of clinical experts, assembled by CMS's measure 
development contractor, developed patient scenarios to represent the 
most common scenarios LTCH providers would encounter. The results of 
the item testing demonstrated that LTCHs that used the guidance had a 
high percentage of accurate responses, supporting its reliability. The 
testing also provided information to improve the item itself, as well 
as the accompanying guidance.
(2) Competing and Related Measures
    Section 1899B(e)(2)(A) of the Act requires that, absent an 
exception under section 1899B(e)(2)(B) of the Act, each measure 
specified under section 1899B of the Act be endorsed by a CBE with a 
contract under section 1890(a) of the Act. In the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a feasible and practical measure has not been endorsed, section 
1899B(e)(2)(B) of the Act permits the Secretary to specify a measure 
that is not so endorsed, as long as due consideration is given to the 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary. The proposed Patient/Resident COVID-19 
Vaccine measure is not CBE endorsed, and after review of other CBE-
endorsed measures, we were unable to identify any CBE-endorsed measures 
for LTCHs focused on capturing COVID-19 vaccination coverage of LTCH 
patients. We found only one related measure addressing COVID-19 
vaccination, the COVID-19 Vaccination Coverage among Healthcare 
Personnel (HCP) measure, adopted for the FY 2023 LTCH QRP (87 FR 45438 
through 45446), which captures the percentage of HCPs who receive a 
complete COVID-19 vaccination course.
    Therefore, after consideration of other available measures that 
assess COVID-19 vaccination rates, we believe the exception under 
section 1899B(e)(2)(B) of the Act applies. We intend to submit the 
proposed measure to the CBE for consideration of endorsement when 
feasible.
(3) Interested Parties and Technical Expert Panel (TEP) Input
    First, the measure development contactor convened a focus group of 
patient and family/caregiver advocates (PFAs) to solicit input. The 
PFAs felt a measure capturing raw vaccination rate, irrespective of 
provider action, would be most helpful in decision making. Next, a TEP 
was held on November 19, 2021 and December 15, 2021 to solicit feedback 
on the development of patient/resident COVID-19 vaccination measures 
and assessment items for the PAC settings. The TEP panelists voiced 
their support for PAC patient/resident COVID-19 vaccination measures 
and agreed that developing a measure to report the rate of vaccination 
in an LTCH setting without denominator exclusions was an important 
goal. We considered all the TEP's recommendations for developing 
vaccination-related measures, and applied those recommendations where 
technically feasible and appropriate. A summary of the TEP proceedings 
titled Technical Expert Panel (TEP) for the Development of Long-Term 
Care Hospital (LTCH), Inpatient Rehabilitation Facility (IRF), Skilled 
Nursing Facility (SNF)/Nursing Facility (NF), and Home Health (HH) 
COVID-19 Vaccination-Related Items and Measures Summary Report is 
available on the CMS Measures Management System (MMS) web page.\674\
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    \674\ Technical Expert Panel (TEP) for the Development of Long-
Term Care Hospital (LTCH), Inpatient Rehabilitation Facility (IRF), 
Skilled Nursing Facility (SNF)/Nursing Facility (NF), and Home 
Health (HH) COVID-19 Vaccination-Related Items and Measures Summary 
Report is available at https://mmshub.cms.gov/sites/default/files/COVID19-Patient-Level-Vaccination-TEP-Summary-Report-NovDec2021.pdf.
---------------------------------------------------------------------------

    To seek input on the importance, relevance, and applicability of a 
patient/resident COVID-19 vaccination coverage measure, we solicited 
public comments in an RFI for publication in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 47553).\675\ Commenters stated they understood why 
CMS was considering a measure addressing COVID-19 vaccination coverage 
among patients, but noted CMS should postpone considering this measure 
since the definition of ``fully vaccinated'' is evolving.
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    \675\ 87 FR 25070.

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[[Page 27149]]

(4) Measure Applications Partnership (MAP) Review
    We included the Patient/Resident COVID-19 Vaccine measure under the 
LTCH QRP on the publicly available ``List of Measures Under 
Consideration for December 1, 2022'' (MUC List),\676\ a list of quality 
and efficiency measures the Secretary is considering adopting for use 
in Medicare programs. The MUC List allows interested parties to provide 
recommendations to the Secretary on measures included on the MUC List.
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    \676\ Centers for Medicare & Medicaid Services. Overview of the 
List of Measures Under Consideration for December 1, 2022. https://mmshub.cms.gov/sites/default/files/2022-MUC-List-Overview.pdf.
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    After the MUC List was published, the MAP received three comments 
from interested parties on the Patient/Resident COVID-19 Vaccine 
measure. Commenters were mostly supportive of the measure and 
recognized the importance of patient COVID-19 vaccination, and that 
measurement and reporting is one important method to help healthcare 
organizations assess their performance in achieving high rates of up-
to-date vaccination. One commenter noted the benefit of less-specific 
criteria for inclusion in the numerator and denominator, which would 
provide flexibility for the measure to remain relevant to current 
circumstances, while others raised concerns over measure 
specifications, including using the concept of ``up to date'' given the 
evolving definition of the term, the fact that patient refusals are not 
excluded, and the frequency of data submission. Two interested parties 
noted there could be unintended consequences to patient access if the 
measure was adopted.
    Subsequently, several MAP workgroups met to provide input on the 
measure. First, the MAP Health Equity Advisory Group convened on 
December 6, 2022. One MAP member noted that the percentage of true 
contraindications for the COVID-19 vaccine is low, and the lack of 
exclusions on the measure makes sense to avoid varying interpretations 
of valid contraindications.\677\ Similarly, the MAP Rural Health 
Advisory Group met on December 8, 2022 and expressed that the measure 
is important for rural communities.\678\
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    \677\ CMS Measures Management System (MMS). Measure 
Implementation: Pre-rulemaking MUC Lists and MAP reports. Last 
accessed March 22, 2023. https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \678\ CMS Measures Management System (MMS). Measure 
Implementation: Pre-rulemaking MUC Lists and MAP reports. Last 
accessed March 22, 2023. https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    Next, the MAP Post-Acute Care/Long-Term Care (PAC/LTC) workgroup 
met on December 12, 2022, where the PAC/LTC workgroup members discussed 
their concerns about: (1) the evolving vaccine recommendations, (2) the 
lack of denominator exclusions, and (3) the reporting frequency for 
this measure. CMS noted that the Patient/Resident COVID-19 Vaccine 
measure does not have exclusions for patient refusals because the 
measure was intended to report raw rates of vaccination. CMS explained 
that raw rates of vaccination collected by the Patient/Resident COVID-
19 vaccine measure are important for consumer choice and PAC providers, 
including LTCHs, are in a unique position to leverage their care 
processes to increase vaccination coverage in their settings to protect 
patients and prevent negative outcomes. CMS also clarified that the 
measure defines ``up to date'' in a manner that provides flexibility to 
reflect future changes in CDC guidance. Finally, CMS clarified that, 
like the existing COVID-19 HCP Vaccine measure, this measure would 
continue to be reported quarterly because the CDC has not yet 
determined that COVID-19 is seasonal. Ultimately, the PAC/LTC workgroup 
reached consensus on the vote, ``Do not support for rulemaking,'' for 
the Patient/Resident COVID-19 Vaccine measure.\679\
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    \679\ CMS Measures Management System (MMS). Measure 
Implementation: Pre-rulemaking MUC Lists and MAP reports. Last 
accessed March 22, 2023. https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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    The MAP received four comments by industry commenters in response 
to the PAC/LTC workgroup recommendations. The commenters generally 
understood the importance of COVID-19 vaccinations' role in preventing 
the spread of COVID-19; however, most commenters did not recommend the 
inclusion of this measure for the LTCH QRP. Specifically, commenters 
were concerned about providers' inability to influence results based on 
factors outside of their control, including COVID-19 vaccine hesitancy. 
Commenters also noted that the measure has not been fully tested and 
questioned whether the measure would produce meaningful results. 
Commenters also encouraged CMS to monitor the measure for unintended 
consequences. Another commenter supported the measure and recommended 
that CMS consider an exclusion for medical contraindications, and also 
seek CBE endorsement.
    Finally, the MAP Coordinating Committee convened on January 24, 
2023, and noted concerns previously discussed in the PAC/LTC workgroup, 
such as the lack of exclusions for medical contraindications and 
potential for patient selection bias based on patients' vaccination 
status. CMS was able to clarify that this measure does not have 
exclusions for patient refusals since this is a process measure 
intended to report raw rates of vaccination, and is not intended to be 
a measure of LTCHs' actions. CMS acknowledged that a measure accounting 
for variables, such as LTCHs' actions to vaccinate patients, could be 
important, but CMS is focused on a measure which would provide and 
publicly report vaccination rates for consumers given the importance of 
this information to patients and their caregivers.
    The MAP Coordinating Committee recommended three mitigation 
strategies for the Patient/Resident COVID-19 Vaccine measure: (1) 
reconsider exclusions for medical contraindications; (2) complete 
reliability and validity measure testing; and (3) seek CBE endorsement. 
The Coordinating Committee ultimately reached 90 percent consensus on 
the vote of ``Do not support with potential for mitigation.'' \680\ 
Despite the MAP Coordinating Committee's vote, we believe it is still 
important to propose the Patient/Resident COVID-19 Vaccine measure for 
the LTCH QRP. As we stated in section VI.C.2.b.(3) of this proposed 
rule, we did not include exclusions for medical contraindications 
because the PFAs we met with told us that a measure capturing raw 
vaccination rate, irrespective of any medical contraindications, would 
be most helpful in patient and family/caregiver decision-making. We do 
plan to conduct reliability and validity measure testing once we have 
collected enough data, and we intend to submit the proposed measure to 
the CBE for consideration of endorsement when feasible. We refer 
readers to the final MAP recommendations, titled 2022-2023 MAP Final 
Recommendations.\681\
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    \680\ National Quality Forum Measure Applications Partnership. 
2022-2023 MAP Final Recommendations. https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=98102.
    \681\ 2022-2023 MAP Final Recommendations. https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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(5) Quality Measure Calculation
    The proposed Patient/Resident COVID-19 Vaccine measure is a process

[[Page 27150]]

measure that reports the percent of stays in which patients in an LTCH 
are up to date on their COVID-19 vaccinations per CDC's latest 
guidance.\682\ This measure has no exclusions and is not risk adjusted.
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    \682\ The definition of ``up to date'' may change based on CDC's 
latest guidelines and can be found on the CDC web page, ``Stay Up to 
Date with COVID-19 Vaccines Including Boosters,'' at https://www.cdc.gov/coronavirus/2019-ncov/vaccines/stay-up-to-date.html 
(updated January 9, 2023).
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    The numerator for the measure would be the total number of LTCH 
stays in the denominator in which patients are up to date with the 
COVID-19 vaccine during the reporting period. The denominator for the 
measure would be the total number of LTCH stays discharged during the 
reporting period.
    The data source for the proposed quality measure is the LCDS 
assessment instrument. For more information about the proposed data 
submission requirements, we refer readers to section VI.8.d. of the 
preamble of this proposed rule. For additional technical information 
about this proposed measure, we refer readers to the draft measure 
specifications document titled Patient-Resident-COVID-Vaccine-Draft-
Specs.pdf \683\ on the LTCH QRP Measures Information web page.
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    \683\ Patient-Resident-COVID-Vaccine-Draft-Specs.pdf. https://www.cms.gov/files/document/patient-resident-covid-vaccine-draft-specs.pdf.
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    We invite public comments on the proposal to adopt the Patient/
Resident COVID-19 Vaccine measure beginning with the FY 2026 LTCH QRP.
5. Principles for Selecting and Prioritizing LTCH QRP Quality Measures 
and Concepts Under Consideration for Future Years: Request for 
Information (RFI)
a. Background
    We have established a National Quality Strategy (NQS) \684\ for 
quality programs which supports a resilient, high-value healthcare 
system promoting quality outcomes, safety, equity, and accessibility 
for all individuals. The CMS NQS is foundational for contributing to 
improvements in health care, enhancing patient outcomes, and informing 
consumer choice. To advance these goals, leaders from across CMS have 
come together to move toward a building-block approach to streamline 
quality measures across our quality programs for the adult and 
pediatric populations. This ``Universal Foundation'' \685\ of quality 
measures will focus provider attention and reduce provider burden, as 
well as identify disparities in care, prioritize development of 
interoperable, digital quality measures, allow for cross-comparisons 
across programs, and help identify measurement gaps. The development 
and implementation of the Preliminary Adult and Pediatric Universal 
Foundation Measures will promote the best, safest, and most equitable 
care for individuals as we all come together on these critical quality 
areas.
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    \684\ Schreiber M, Richards AC, Moody-Williams J, Fleisher LA. 
The CMS National Quality Strategy: A Person-centered Approach to 
Improving Quality. Centers for Medicare & Medicaid ServicesBblog. 
June 6, 2022. https://www.cms.gov/blog/cms-national-quality-strategy-person-centered-approach-improving-quality.
    \685\ Jacobs DB, Schreiber M, Seshamani M, Tsai D, Fowler E, 
Fleisher LA. Aligning Quality Measures across CMS--The Universal 
Foundation. N Engl J Med. 2023 Mar 2; 338:776-779. doi: 10.1056/
NEJMp2215539. PMID: 36724323.
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    In alignment with the CMS NQS, the LTCH QRP endeavors to move 
toward a more parsimonious set of measures while continually improving 
the quality of health care for beneficiaries. The purpose of this RFI 
is to gather input on existing gaps in LTCH QRP measures and to solicit 
public comment on fully developed LTCH measures that are not part of 
the LTCH QRP, fully developed quality measures in other programs that 
may be appropriate for the LTCH QRP, and measurement concepts that 
could be developed into LTCH QRP measures, to fill these measurement 
gaps in the LTCH QRP. While we will not be responding to specific 
comments submitted in response to this RFI in the FY 2024 IPPS/LTCH PPS 
final rule, we intend to use this input to inform future policies.
    This RFI consists of three sections. The first section discusses a 
general framework or set of principles that CMS could use to identify 
future LTCH QRP measures. The second section draws from an 
environmental scan conducted to identify measurement gaps in the 
current LTCH QRP, and measures or measure concepts that could be used 
to fill these gaps. The final section solicits public comment on (1) 
the set of principles for selecting measures for the LTCH QRP, (2) 
identified measurement gaps, and (3) measures that are available for 
immediate use, or that may be adapted or developed for use in the LTCH 
QRP.
b. Guiding Principles for Selecting and Prioritizing Measures
    CMS has identified a set of principles to guide future LTCH QRP 
measure set development and maintenance. These principles are intended 
to ensure that measures resonate with beneficiaries and caregivers, do 
not impose undue burden on providers, comply with CMS statutory 
requirements and PAC program goals, and can be readily operationalized. 
Specifically, measures incorporated into the LTCH QRP should meet the 
following four objectives:
     Actionability--Optimally, LTCH QRP measures should focus 
on structural elements, healthcare processes, and outcomes of care that 
have been demonstrated through clinical evidence or other best 
practices to be amenable to improvement and feasible for LTCHs to 
implement.
     Comprehensiveness and Conciseness--QRP measures should 
assess performance of all LTCH core services using the smallest number 
of measures that comprehensively assess the value of care provided in 
LTCH settings. Parsimony in the QRP measure set minimizes provider 
burden resulting from data collection and submission.
     Focus on Provider Responses to Payment--The LTCH PPS 
shapes incentives for care delivery. LTCH performance measures should 
neither exacerbate nor induce unwanted responses to the payment 
systems. As feasible, measures should mitigate adverse incentives of 
the payment system.
     Compliance with CMS Statutory Requirements and Key Program 
Goals--Measures must comply with the governing statutory authorities 
and our policy to align measures with our policy initiatives, such as 
the Meaningful Measures Framework.
c. Gaps in LTCH QRP Measure Set and Potential New Measures
    CMS conducted an environmental scan that utilized the previously 
listed principles and identified measurement gaps in the domains of 
cognitive function, behavioral and mental health, patient experience 
and patient satisfaction, and chronic conditions and pain management. 
We discuss each of these in more detail in this section of this rule.
(1) Cognitive Function
    Illnesses associated with limitations in cognitive function, which 
may include stroke, traumatic brain injuries, dementia, and Alzheimer's 
disease, affect an individual's ability to think, reason, remember, 
problem-solve, and make decisions. Section 1886(m)(5)(F) of the Act 
requires LTCHs to submit data on quality measures under section 
1899B(c)(1) of the Act, and cognitive function and changes in cognitive 
function are key dimensions of clinical care that are not currently 
represented in the LTCH QRP.
    Two sources of information on cognitive function currently 
collected in LTCHs include the Brief Interview for

[[Page 27151]]

Mental Status (BIMS) and Confusion Assessment Method 
(CAM(copyright)).\686\ Both the BIMS and CAM have been 
incorporated into the LCDS as standardized patient assessment data 
elements. Scored by providers via direct observation, the BIMS is used 
to determine orientation and the ability to register and recall new 
information. The CAM assesses the presence of delirium and inattention, 
and level of consciousness.
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    \686\ Centers for Medicare & Medicaid Services. Long-Term Care 
Hospital Continuity Assessment Record and Evaluation (CARE) Data Set 
Version 5.0. Effective October 1, 2022. https://www.cms.gov/files/document/ltch-care-data-set-version-50-planned-discharge-final.pdf.
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    Alternative sources of information on cognitive function include 
the Patient-Reported Outcomes Measurement Information Set (PROMIS) 
Cognitive Function forms and the PROMIS Neuro-Quality of Life (QoL) 
measures.687 688 Developed and tested with a broad range of 
patient populations, PROMIS Cognitive Function assesses cognitive 
functioning using items related to patient perceptions regarding 
performance of cognitive tasks, such as memory and concentration, and 
perceptions of changes in these activities. The Neuro-QoL, which was 
specifically designed for use in patients with neurological conditions, 
assesses patient perceptions regarding oral expression, memory, 
attention, decision-making, planning, and organization.
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    \687\ HealthMeasures. List of Adult Measures: Available Neuro-
QoLTM Measures for Adult Self-Report. https://www.healthmeasures.net/explore-measurement-systems/neuro-qol/intro-to-neuro-qol/list-of-adult-measures.
    \688\ HealthMeasures. List of Adult Measures: Available 
PROMIS[reg] Measures for Adults. https://www.healthmeasures.net/explore-measurement-systems/promis/intro-to-promis/list-of-adult-measures.
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    The BIMS, CAM, PROMIS Cognitive Function short forms, and PROMIS 
Neuro-QoL include items representing different aspects of cognitive 
function, from which quality measures may be constructed. Although 
these instruments have been subjected to feasibility, reliability, and 
validity testing, additional development and testing would be required 
prior to transforming the concepts reflected in the BIMS and CAM (for 
example, temporal orientation, recall) into fully specified measures 
for implementation in the LTCH QRP.
    This RFI is requesting comment on the availability of cognitive 
functioning measures outside of the LTCH QRP that may be available for 
immediate use in the LTCH QRP, or that may be adapted or developed for 
use in the LTCH QRP, using the BIMS, CAM, PROMIS Cognitive Function 
short forms, and PROMIS Neuro-QoL, or other instruments. In addition to 
comment on specific measures and instruments, CMS seeks input on the 
feasibility of measuring improvement in cognitive functioning during an 
LTCH stay, which typically averages between 25 and 30 days; \689\ the 
cognitive skills (for example, executive functions) that are more 
likely to improve during an LTCH stay; conditions for which measures of 
maintenance--rather than improvement in cognitive functioning--are more 
practical; and the types of interventions that have been demonstrated 
to assist in improving or maintaining cognitive functioning.
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    \689\ Medicare Payment Advisory Commission. March 2022 Report to 
the Congress; Chapter 10. https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_Ch10_SEC.pdf.
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(2) Behavioral and Mental Health
    Estimates suggest that one in five Medicare beneficiaries has a 
serious mental illness and nearly 8 percent have a ``common mental 
health disorder.'' \690\ Substance use disorders (SUDs) are also not 
uncommon among Medicare beneficiaries. Research estimates that 
approximately 1.7 million Medicare beneficiaries (8 percent) reported a 
SUD in the past year, with 77 percent attributed to alcohol use and 16 
percent to prescription drug use.\691\ In some instances, such as 
following a traumatic injury that requires ventilator support, patients 
may develop depression, anxiety, and/or SUDs. In other instances, 
patients may have been dealing with mental or behavioral health or SUD 
issues long before their post-acute admission. Left unmanaged, however, 
these conditions could make it difficult for affected patients to 
actively participate in their rehabilitation and treatment regimen, 
thereby contributing to poor health outcomes.
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    \690\ Figueroa JF, Phelan J, Orav EJ, Patel V, Jha AK. 
Association of Mental Health Disorders with Health Care Spending in 
the Medicare Population. JAMA Netw Open. 2020;3(3):e201210. doi: 
10.1001/jamanetworkopen.2020.1210. PMID: 32191329; PMCID: 
PMC7082719.
    \691\ Parish W, Mark T, Weber E, Steinberg D. Substance Use 
Disorders Among Medicare Beneficiaries: Prevalence, Mental and 
Physical Comorbidities, and Treatment Barriers. Am J Prev Med. 2022 
Aug;63(2):225-232. doi: 10.1016/j.amepre.2022.01.021. PMID: 
35331570.
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    Information on the availability and appropriateness of behavioral 
health measures in PAC is limited, and the 2021 National Impact 
Assessment of the CMS Quality Measures Report \692\ identified PAC 
program measurement gaps in the areas of behavioral and mental health. 
Among the mental health quality measures in current use, the Home 
Health QRP assesses the extent to which patients have been screened for 
depression and, if positive, a follow-up plan is documented.\693\ 
Although it may be possible to adapt this depression screening measure 
for use in other PAC settings, this process measure does not directly 
assess performance in the management of depression and related mental 
health concerns.
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    \692\ Centers for Medicare & Medicaid Services. 2021 National 
Impact Assessment of the Centers for Medicare & Medicaid Services 
(CMS) Quality Measures Report. June 2021. https://www.cms.gov/files/document/2021-national-impact-assessment-report.pdf.
    \693\ Centers for Medicare & Medicaid Services. Depression 
Screening Conducted and Follow-Up Plan Documented. January 29, 2021. 
https://cmit.cms.gov/cmit/#/MeasureView?variantId=3102&sectionNumber=1.
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    Other instruments that may be adapted to assess management of 
mental or behavioral health in PAC settings include the Consumer 
Assessment of Healthcare Providers and Systems (CAHPS) Experience of 
Care and Health Outcomes Survey (ECHO), which consists of a series of 
questions that may be used to understand patients' perspectives 
concerning mental health services received; \694\ the PROMIS \695\ 
suite of instruments that may be used to monitor and evaluate mental 
health and quality of life; the National Institutes of Health (NIH) 
Toolbox for the Assessment of Neurological and Behavioral Health 
Function,\696\ which was commissioned by the NIH Blueprint for 
Neuroscience Research and includes both stand-alone measures and 
batteries of measures to assess emotional function and psychological 
well-being.
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    \694\ Agency for Healthcare Research and Quality. CAHPS Mental 
Health Care Surveys. May 2022. https://www.ahrq.gov/cahps/surveys-guidance/echo/index.html.
    \695\ HealthMeasures. Intro to PROMIS[reg]. August 5, 2022. 
https://www.healthmeasures.net/explore-measurement-systems/promis/intro-to-promis.
    \696\ HealthMeasures. NIH Toolbox[reg]. https://www.healthmeasures.net/explore-measurement-systems/nih-toolbox.
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    Like mental health issues, SUDs have been under-studied in the 
LTCH/PAC settings, even though they are among the fastest-growing 
disorders in the community-dwelling older adult 
population.697 698 Left untreated, SUDs can lead to overdose 
deaths, emergency department visits, and hospitalizations. The 
Substance Abuse and Mental Health Services Administration

[[Page 27152]]

(SAMHSA) was established by Congress in 1992 to make substance use and 
mental disorder information, services, and research more accessible. As 
part of its work, SAMHSA developed the Screening, Brief Intervention, 
and Referral to Treatment (SBIRT) approach to support providers in 
using early intervention with at-risk substance users before more 
severe consequences occur, and has a number of resources 
available.\699\
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    \697\ Desai A, Grossberg G. Substance Use Disorders in Postacute 
and Long-Term Care Settings. Psychiatr Clin North Am. 2022 
Sep;45(3):467-482. doi: 10.1016/j.psc.2022.05.005. PMID: 36055733.
    \698\ Sorrell JM. Substance Use Disorders in Long-Term Care 
Settings: A Crisis of Care for Older Adults. J Psychosoc Nurs Ment 
Health Serv. 2017 Jan 1;55(1):24-27. doi: 10.3928/02793695-20170119-
08. PMID: 28135388.
    \699\ Substance Abuse and Mental Health Services Administration. 
Resources for Screening, Brief Intervention, and Referral to 
Treatment (SBIRT). April 14, 2022. https://www.samhsa.gov/sbirt/resources.
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    CMS seeks feedback on these and other measures or instruments that 
may be directly applied, adapted, or developed for use in the LTCH QRP. 
Further, CMS seeks comments on the degree to which measures have been 
or will require validation and testing prior to application in the LTCH 
QRP. We seek input on the availability of data, the manner in which 
data could be collected and reported to CMS, and the burden imposed on 
LTCHs.
(3) Patient Experience and Patient Satisfaction
    Patient experience measures focus on how patients experienced or 
perceived selected aspects of their care, whereas patient satisfaction 
measures focus on whether a patient's expectations were met. 
Information on patient experience of care is typically collected via a 
number of instruments that rely on patient self-reported data. The most 
prominent among these is the CAHPS suite of surveys, although CAHPS 
instruments have not been developed for use in LTCHs. However, CMS 
developed the LTCH Experience of Care Survey,\700\ which measures 
patient experience in terms of goal setting, interaction and 
communication with staff, respect and privacy received, cleanliness of 
the facility, and other domains.
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    \700\ Centers for Medicare & Medicaid Services. Long-term Care 
Hospital (LTCH) Experience of Care. Updated October 12, 2022. 
https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/ltch-quality-reporting/ltch-experience-of-care-.
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    One patient satisfaction measure that has been developed for use by 
SNFs and could potentially be adapted for use by LTCHs is the CoreQ: 
Short Stay Discharge Measure (CoreQ: SS DC). The CoreQ: SS DC, which 
underwent 2017-2018 pre-rulemaking for the SNF QRP \701\ and 2021-2022 
pre-rulemaking for the SNF Value-Based Purchasing (VBP) program,\702\ 
assesses the level of satisfaction among SNF short-stay (less than 100 
days) patients.
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    \701\ Centers for Medicare & Medicaid Services. List of Measures 
under Consideration for December 1, 2017. https://www.cms.gov/files/document/2017amuc-listclearancerpt.pdf.
    \702\ Centers for Medicare & Medicaid Services. List of Measures 
under Consideration for December 1, 2021. https://www.cms.gov/files/document/measures-under-consideration-list-2021-report.pdf.
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    CMS seeks comment on the feasibility and challenges of adapting 
existing patient experience and patient satisfaction measures and 
instruments, such as the LTCH Experience of Care Survey and the CoreQ, 
for use in the LTCH QRP. CMS seeks input on the extent to which patient 
experience measures offer LTCHs sufficient information to assist in 
quality improvement, and the challenges of collecting and reporting 
patient experience and patient satisfaction data.
(4) Chronic Conditions and Pain Management
    Despite the availability of measures focused on clinical care and, 
specifically, on ventilator support for patients with respiratory 
conditions, LTCH QRP measures do not directly address aspects of care 
rendered to populations with chronic conditions, such as chronic kidney 
disease or cardiovascular disease. Existing measures also fail to 
capture LTCH actions concisely for pain management even though pain has 
been demonstrated to contribute to falls with major injury and 
restrictions in mobility and daily activity. However, a host of other 
factors also contribute to these measure domains, making it difficult 
to directly link provider actions to performance. Instead, a measure of 
provider actions in reducing pain interference in daily activities, 
including the ability to sleep, would be a more concise measure of pain 
management. Beginning October 1, 2022, LTCHs began collecting new 
standardized patient assessment data elements under the LTCH QRP, 
including items that assess pain interference with: (1) daily 
activities; (2) sleep; and (3) participation in therapy, providing an 
opportunity to develop more concise measures of provider performance 
(84 FR 42536 through 42588).
    Through this RFI CMS is seeking input on measures of chronic 
condition and pain management for patients that may be used to assess 
LTCH performance. Additionally, CMS seeks general comment on the 
feasibility and challenges of measuring and reporting LTCH performance 
on existing QRP measures, such as Discharge to the Community and 
Potentially Preventable 30-day post-discharge readmissions, for 
subgroups of patients defined by type of chronic condition. As 
examples, measures could assess rates of discharge to community or 30-
day post-discharge readmissions among patients admitted to an LTCH with 
chronic obstructive pulmonary disease (COPD) or chronic renal failure.
d. Solicitation of Comments
    We invite general comments on the principles for identifying LTCH 
QRP measures, as well as additional comments about measurement gaps, 
and suitable measures for filling these gaps. Specifically, we solicit 
comment on the following questions:
     Principles for Selecting and Prioritizing LTCH QRP 
Measures
    ++ To what extent do you agree with the principles for selecting 
and prioritizing measures?
    ++ Are there principles that you believe CMS should eliminate from 
the measure selection criteria?
    ++ Are there principles that you believe CMS should add to the 
measure selection criteria?
     LTCH QRP Measurement Gaps
    ++ CMS requests input on the identified measurement gaps, including 
in the areas of cognitive function, behavioral and mental health, 
patient experience and patient satisfaction, and chronic conditions and 
pain management.
    ++ Are there gaps in the LTCH QRP measures that have not been 
identified in this RFI?
     Measures and Measure Concepts Recommended for Use in the 
LTCH QRP
    ++ Are there measures that you believe are either currently 
available for use, or that could be adapted or developed for use in the 
LTCH QRP program to assess performance in the areas of: (1) cognitive 
functioning; (2) behavioral and mental health; (3) patient experience 
and patient satisfaction; (4) chronic conditions; (5) pain management; 
or (6) other areas not mentioned in this RFI?
    CMS also seeks input on data available to develop measures, 
approaches for data collection, perceived challenges or barriers, and 
approaches for addressing challenges.
6. Health Equity Update
a. Background
    In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28570 through 
28576), we included an RFI entitled ``Overarching Principles for 
Measuring Equity and Healthcare Quality Disparities Across CMS Quality 
Programs'' We define health equity as ``the attainment of the highest 
level of

[[Page 27153]]

health for all people, where everyone has a fair and just opportunity 
to attain their optimal health regardless of race, ethnicity, 
disability, sexual orientation, gender identity, socioeconomic status, 
geography, preferred language, or other factors that affect access to 
care and health outcomes.'' \703\ We are working to advance health 
equity by designing, implementing, and operationalizing policies and 
programs that support health for all the people served by our programs 
and models, eliminating avoidable differences in health outcomes 
experienced by people who are disadvantaged or underserved, and 
providing the care and support that our enrollees need to thrive. Our 
goals outlined in the CMS Framework for Health Equity 2022-2023 \704\ 
are in line with Executive Order 13985, ``Advancing Racial Equity and 
Support for Underserved Communities Through the Federal Government.'' 
\705\ The goals included in the CMS Framework for Health Equity serve 
to further advance health equity, expand coverage, and improve health 
outcomes for the more than 170 million individuals supported by our 
programs, and set a foundation and priorities for our work, including: 
strengthening our infrastructure for assessment, creating synergies 
across the health care system to drive structural change, and 
identifying and working to eliminate barriers to CMS-supported 
benefits, services, and coverage.
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    \703\ Centers for Medicare and Medicaid Services. Health Equity. 
https://www.cms.gov/pillar/health-equity. October 3, 2022.
    \704\ Centers for Medicare & Medicaid Services. CMS Framework 
for Health Equity 2022-2032. https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
    \705\ The White House. Executive Order on Advancing Racial 
Equity and Support for Underserved Communities Through the Federal 
Government. Executive Order 13985, January 20, 2021. 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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    In addition to the CMS Framework for Health Equity, we seek to 
advance health equity and whole-person care as one of eight goals 
comprising the CMS National Quality Strategy (NQS).\706\ The NQS 
identifies a wide range of potential quality levers that can support 
our advancement of equity, including: (1) establishing a standardized 
approach for patient-reported data and stratification; (2) employing 
quality and value-based programs to address closing equity gaps; and 
(3) developing equity-focused data collections, analysis, regulations, 
oversight strategies, and quality improvement initiatives.
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    \706\ Centers for Medicare & Medicaid Services. What Is the CMS 
Quality Strategy? https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
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    A goal of this NQS is to address persistent disparities that 
underlie our healthcare system. Racial disparities in health, in 
particular, are estimated to cost the U.S. $93 billion in excess 
medical costs and $42 billion in lost productivity per year, in 
addition to economic losses due to premature deaths.\707\ At the same 
time, racial and ethnic diversity has increased in recent years with an 
increase in the percentage of people who identify as two or more races 
accounting for most of the change, rising from 2.9 percent to 10.2 
percent between 2010 and 2020.\708\ Therefore, we need to consider ways 
to reduce disparities, achieve equity, and support our diverse 
beneficiary population through the way we measure quality and display 
the data.
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    \707\ Turner A. The Business Case for Racial Equity: A Strategy 
for Growth. April 24, 2018. W.K. Kellogg Foundation and Altarum. 
https://altarum.org/RacialEquity2018.
    \708\ Agency for Healthcare Research and Quality. 2022 National 
Healthcare Quality and Disparities Report. Content last reviewed 
November 2022. https://www.ahrq.gov/research/findings/nhqrdr/nhqdr22/index.html.
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    We solicited public comments via the aforementioned RFI on changes 
that we should consider in order to advance health equity. We refer 
readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49317 through 
49319) for a summary of the public comments and suggestions we received 
in response to the health equity RFI. We will take these comments into 
account as we continue to work to develop policies, quality measures, 
and measurement strategies on this important topic.
b. Anticipated Future State
    We are committed to developing approaches to meaningfully 
incorporate the advancement of health equity into the LTCH QRP. One 
option we are considering is including social determinants of health 
(SDOH) as part of new quality measures.
    Social determinants of health 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. They may have a stronger influence on the 
population's health and well-being than services delivered by 
practitioners and healthcare delivery organizations.\709\ Measure 
stratification is important for understanding differences in outcomes 
across different groups. For example, when ``pediatric measures over 
the past two decades are stratified by race, ethnicity, and income, 
they show that outcomes for children in the lowest income households 
and for Black and Hispanic children have improved faster than outcomes 
for children in the highest income households or for White children, 
thus narrowing an important health disparity.'' \710\ This analysis and 
comparison of the SDOH items in the assessment instruments support our 
desire to understand the benefits of measure stratification. Hospital 
providers receive such information in their confidential feedback 
reports and we think this learning opportunity would benefit post-acute 
care providers. The goals of the confidential reporting are to provide 
LTCHs with their results; educate LTCHs and offer the opportunity to 
ask questions; and solicit feedback from LTCHs for future enhancements 
to the methods.
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    \709\ Agency for Healthcare Research and Quality. 2022 National 
Healthcare Quality and Disparities Report. November 2022. https://www.ahrq.gov/research/findings/nhqrdr/nhqdr22/index.html.
    \710\ Agency for Healthcare Research and Quality. 2022 National 
Healthcare Quality and Disparities Report. Content last reviewed 
November 2022. https://www.ahrq.gov/research/findings/nhqrdr/nhqdr22/index.html.
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    We are considering whether health equity measures we have adopted 
for other settings, such as hospitals, could be adopted in post-acute 
care settings. We are exploring ways to incorporate SDOH elements into 
the measure specifications. For example, we could consider a future 
health equity measure like screening for social needs and 
interventions. With 30 percent to 55 percent of health outcomes 
attributed to SDOH,\711\ a measure capturing and addressing SDOH could 
encourage SNFs to identify patients' specific needs and connect them 
with the community resources necessary to overcome social barriers to 
their wellness. We could specify a health equity measure using the same 
SDOH data items that we currently collect as standardized patient 
assessment data elements under the LTCH. These SDOH data items assess 
health literacy, social isolation, transportation problems, and 
preferred language (including need or want of an interpreter). We also 
see value in aligning SDOH data items across all care settings as we 
develop future health equity quality measures under our LTCH QRP 
statutory authority. This would further the NQS to align quality 
measures across our programs as part of the Universal Foundation.\712\
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    \711\ World Health Organization. Social Determinants of Health. 
https://www.who.int/westernpacific/healthtopics/social-determinants-of-health.
    \712\ Jacobs DB, Schreiber M, Seshamani M, Tsai D, Fowler E, 
Fleisher LA. Aligning Quality Measures across CMS--The Universal 
Foundation. N Engl J Med. 2023 Mar 2;338:776-779. doi: 10.1056/
NEJMp2215539. PMID: 36724323.

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[[Page 27154]]

    As we move this important work forward, we will continue to take 
input from interested parties.
7. Form, Manner, and Timing of Data Submission Under the LTCH QRP
a. Background
    We refer readers to the regulatory text at 42 CFR 412.560(b) for 
information regarding the current policies for reporting LTCH QRP data.
b. Proposed Reporting Schedule for the LCDS Assessment Data for the 
Discharge Function Score Measure Beginning With the FY 2025 LTCH QRP
    As discussed in section IX.E.4.b. of the preamble of this proposed 
rule, we are proposing to adopt the DC Function measure beginning with 
the FY 2025 LTCH QRP. We are proposing that LTCHs would be required to 
report these LCDS assessment data beginning with patients admitted or 
discharged on October 1, 2023 for purposes of the FY 2025 LTCH QRP. 
Starting in CY 2024, LTCHs would be required to submit data for the 
entire calendar year beginning with the FY 2026 LTCH QRP. Because the 
DC Function quality measure is calculated based on data that are 
currently submitted to the Medicare program, there would be no new 
burden associated with data collection for this measure.
    We invite public comments on this proposal.
c. Proposed Reporting Schedule for the LCDS Assessment Data for the 
COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date 
Measure Beginning With the FY 2026 LTCH QRP
    As discussed in section IX.E.4.e. of the proposed rule, we are 
proposing to adopt the COVID-19 Vaccine: Percent of Patients/Residents 
Who Are Up to Date quality measure beginning with the FY 2026 LTCH QRP. 
We are proposing that LTCHs would be required to report these LCDS 
assessment data beginning with patients discharged on October 1, 2024 
for purposes of the FY 2026 LTCH QRP. Starting in CY 2025, LTCHs would 
be required to submit data for the entire calendar year beginning with 
the FY 2027 LTCH QRP.
    We are also proposing to add a new item to the LCDS in order for 
LTCHs to report this measure. A new item would be added to the 
discharge item sets to collect information on whether a patient is up 
to date with their COVID-19 vaccine at the time of discharge. A draft 
of the new item is available in the COVID-19 Vaccine: Percent of 
Patients/Residents Who Are Up to Date Draft Measure 
Specifications.\713\
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    \713\ COVID-19 Vaccine: Percent of Patients/Residents Who Are Up 
to Date Draft Measure Specifications is available at https://www.cms.gov/files/document/patient-resident-covid-vaccine-draft-specs.pdf.
---------------------------------------------------------------------------

    We invite public comments on this proposal.
d. Proposal to Increase the LTCH QRP Data Completion Thresholds for 
LCDS Data Items Beginning With the FY 2026 Payment Determination
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50312 through 
50315), we finalized that LTCHs would need to complete 100 percent of 
the data collected using the LCDS on at least 80 percent of the LCDS 
assessments they submit through the CMS-designated submission system in 
order to be considered in compliance with the LTCH QRP reporting 
requirements for the applicable program year. We established this data 
completion threshold in order to give LTCHs time to become familiar 
with quality reporting, and that their experience and understanding 
with respect to reporting quality data using a standardized data 
collection instrument, and thus their compliance, would increase over 
time. We also noted at that time our intent to raise the proposed 80 
percent threshold in subsequent program years.\714\
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    \714\ 79 FR 50312 through 50313.
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    We are now proposing that, beginning with the FY 2026 program year, 
LTCHs would be required to report 100 percent of the required quality 
measures data and standardized patient assessment data collected using 
the LCDS on at least 90 percent of the assessments they submit through 
the CMS-designated submission system.
    Complete data are needed to help ensure the validity and 
reliability of quality data items, including risk-adjustment models. 
The proposed threshold of 90 percent is based on the need for 
substantially complete records, which allows appropriate analysis of 
quality measure data for the purposes of updating quality measure 
specifications as they undergo yearly and triennial measure maintenance 
reviews with the CBE. CMS wants to ensure complete quality data from 
LTCHs, which will ultimately be reported to the public, allowing our 
beneficiaries to gain a more complete understanding of LTCH performance 
related to these quality metrics, and helping them to make informed 
healthcare choices. Finally, this proposal would contribute to further 
alignment of data completion thresholds across the PAC settings.
    We believe LTCHs should be able to meet this proposed requirement 
for the LTCH QRP because our data shows that LTCHs are already in 
compliance with, or exceeding, this proposed threshold. The complete 
list of items required under the LTCH QRP is updated annually and 
posted on the LTCH QRP Measures Information page.\715\
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    \715\ The LTCH QRP Measures Information page is available at 
https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/ltch-quality-reporting/ltch-quality-reporting-measures-information.
---------------------------------------------------------------------------

    We are proposing that LTCHs would be required to comply with the 
proposed new completion threshold beginning with the FY 2026 LTCH QRP 
program year. Starting in CY 2024, LTCHs would be required to report 
100 percent of the required quality measures data and standardized 
patient assessment data collected using the LCDS on at least 90 percent 
of all assessments submitted January 1 through December 31 for that 
calendar year's payment determination. We are also proposing to update 
Sec.  412.560(f)(1) of our regulations to reflect this new policy (see 
the regulation text in this proposed rule).
    We invite public comment on the proposed schedule for the increase 
of LTCH QRP data completion thresholds for the LCDS Data Items 
beginning with the FY 2026 program year.
9. Policies Regarding Public Display of Measure Data for the LTCH QRP
a. Background
    Section 1886(m)(5)(E) of the Act requires the Secretary to 
establish procedures for making the LTCH QRP data available to the 
public after ensuring that LTCHs have the opportunity to review their 
data prior to public display.
b. Proposed Public Reporting of the Transfer of Health Information to 
the Patient Post-Acute Care and Transfer of Health Information to the 
Provider Post-Acute Care Measures Beginning With the FY 2025 LTCH QRP
    We are proposing to begin publicly displaying data for the 
measures: (1) Transfer of Health (TOH) Information to the Provider--
Post-Acute Care (PAC) Measure (TOH-Provider) and (2) TOH Information to 
the Patient--PAC Measure (TOH-Patient) beginning with the September 
2024 Care Compare refresh or as soon as technically feasible. We 
adopted these measures in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42525 through 42535). In response to the COVID-19 PHE, we released an 
interim final rule (85 FR

[[Page 27155]]

27595 through 27597) which delayed the compliance date for the 
collection and reporting of the TOH-Provider and TOH-Patient measures 
to October 1 of the year that is at least one full FY after the end of 
the COVID-19 PHE. Subsequently, in the CY 2022 Home Health PPS Rate 
Update final rule (86 FR 62386 through 62390), the compliance date for 
the collection and reporting of the TOH-Provider and TOH-Patient 
measures was revised to October 1, 2022. Data collection for these two 
assessment-based measures began with patients admitted and discharged 
on or after October 1, 2022.
    We are proposing to publicly display data for these two assessment-
based measures based on four rolling quarters, initially using 
discharges from January 1, 2023 through December 31, 2023 (Quarter 1 
2023 through Quarter 4 2023), and to begin publicly reporting these 
measures with the September 2024 refresh of Care Compare, or as soon as 
technically feasible. To ensure the statistical reliability of the 
data, we are proposing that we would not publicly report an LTCH's 
performance on a measure if the LTCH had fewer than 20 eligible cases 
in any four consecutive rolling quarters for that measure. LTCHs that 
have fewer than 20 eligible cases would be distinguished with a 
footnote that states: ``The number of cases/patient stays is too small 
to publicly report.''
    We invite public comment on our proposal for the public display of 
the (1) Transfer of Health (TOH) Information to the Provider--Post-
Acute Care (PAC) Measure (TOH-Provider) and (2) Transfer of Health 
(TOH) Information to the Patient--Post-Acute Care (PAC) Measure (TOH-
Patient) assessment-based measures.
c. Proposed Public Reporting of the Discharge Function Score Measure 
Beginning With the FY 2025 LTCH QRP
    We are proposing to begin publicly displaying data for the DC 
Function measure beginning with the September 2024 refresh of Care 
Compare, or as soon as technically feasible, using data collected from 
January 1, 2023, through December 31, 2023 (Quarter 1 2023 through 
Quarter 4 2023). If finalized as proposed, an LTCH's DC Function score 
would be displayed based on four quarters of data. Provider preview 
reports would be distributed in June 2024, or as soon as technically 
feasible. Thereafter, an LTCH's DC Function score would be publicly 
displayed based on four quarters of data and updated quarterly. To 
ensure the statistical reliability of the data, we are proposing that 
we would not publicly report an LTCH's performance on the measure if 
the LTCH had fewer than 20 eligible cases in any quarter. LTCHs that 
have fewer than 20 eligible cases would be distinguished with a 
footnote that states: ``The number of cases/patient stays is too small 
to publicly report.''
    We invite public comment on the proposal for the public display of 
the Discharge Function Score measure beginning with the September 2024 
refresh of Care Compare, or as soon as technically feasible.
d. Proposed Public Reporting of the COVID-19 Vaccine: Percent of 
Patients/Residents Who Are Up to Date Measure Beginning With the FY 
2026 LTCH QRP
    We are proposing to begin publicly displaying data for the COVID-19 
Vaccine: Percent of Patients/Residents Who Are Up to Date measure 
beginning with the September 2025 refresh of Care Compare or as soon as 
technically feasible using data collected for Q4 2024 (October 1, 2024, 
through December 31, 2024). If finalized as proposed, an LTCH's 
Patient/Resident level COVID-19 Vaccine percent of patients who are up 
to date would be displayed based on one quarter of data. Provider 
preview reports would be distributed in June 2025 for data collected in 
Q4 2024, or as soon as technically feasible. Thereafter, the percent of 
LTCH patients who are up to date with their COVID-19 vaccinations would 
be publicly displayed based on one quarter of data and updated 
quarterly. To ensure the statistical reliability of the data, we are 
proposing that we would not publicly report an LTCH's performance on 
the measure if the LTCH had fewer than 20 eligible cases in any 
quarter. LTCHs that have fewer than 20 eligible cases would be 
distinguished with a footnote that states: ``The number of cases/
patient stays is too small to publicly report.''
    We invite public comment on the proposal for the public display of 
the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date 
measure beginning with the September 2025 refresh of Care Compare, or 
as soon as technically feasible.

F. Proposed Changes to the Medicare Promoting Interoperability Program

1. Statutory Authority for the Medicare Promoting Interoperability 
Program for Eligible Hospitals and CAHs
    The Health Information Technology for Economic and Clinical Health 
Act (HITECH Act) (Title IV of Division B of the American Recovery and 
Reinvestment Act of 2009 (ARRA), together with Title XIII of Division A 
of the ARRA) authorized incentive payments under Medicare and Medicaid, 
as well as downward payment adjustments under Medicare, for the 
adoption and meaningful use of certified electronic health record 
technology (CEHRT). Incentive payments under Medicare were available to 
eligible hospitals and critical access hospitals (CAHs) for certain 
payment years (as authorized under sections 1886(n) and 1814(l)(3) of 
the Act, respectively) if they successfully demonstrated meaningful use 
of CEHRT for an electronic health record (EHR) reporting period. In 
accordance with the timeframe set forth in the statute, these incentive 
payments under Medicare are no longer available. Sections 
1886(b)(3)(B)(ix) and 1814(l)(4) of the Act authorize downward payment 
adjustments under Medicare, beginning with Federal fiscal year (FY) 
2015 (and beginning with FY 2022 for subsection (d) Puerto Rico 
hospitals), for eligible hospitals and CAHs that do not successfully 
demonstrate meaningful use of CEHRT for an EHR reporting period for a 
payment adjustment year. For more information, we refer readers to the 
regulations at 42 CFR 412.64(d)(3) and (4), 413.70(a)(5) and (6), and 
part 495.
2. EHR Reporting Periods
a. Proposed EHR Reporting Period in CY 2025 for Eligible Hospitals and 
CAHs
    Under the definition of EHR reporting period for a payment 
adjustment year at 42 CFR 495.4, for eligible hospitals and CAHs that 
are new or returning participants in the Medicare Promoting 
Interoperability Program, the EHR reporting period in calendar year 
(CY) 2024 is a minimum of any continuous 180-day period within CY 2024, 
as finalized in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45460 
through 45462). We believe that maintaining a 180-day EHR reporting 
period for an additional year would provide consistency with the prior 
years' EHR reporting period, and afford eligible hospitals and CAHs the 
flexibility they may need to work with their chosen vendors on 
continuing to develop and update their CEHRT, as required. For eligible 
hospitals and CAHs that are new or returning participants in the 
Medicare Promoting Interoperability Program, we are proposing that the 
EHR reporting period in CY 2025 would be a minimum of any continuous 
180-day period within CY 2025. A 180-day EHR reporting period would be 
the minimum length, and eligible hospitals and CAHs would be encouraged 
to use longer periods, up to and including the full CY 2025. We are 
proposing corresponding

[[Page 27156]]

revisions to the definition of EHR reporting period for a payment 
adjustment year at 42 CFR 495.4.
    We invite public comment on this proposal.
    The continued efforts toward promoting interoperability and health 
information exchange are key goals of the Medicare Promoting 
Interoperability Program, therefore we are considering increasing the 
length of the EHR reporting period in CY 2026 for eligible hospitals 
and CAHs to report. We believe that increasing the length of the EHR 
reporting period in future rulemaking would encourage eligible 
hospitals and CAHs to prepare to produce more comprehensive and 
reliable data on the quality measures they are required to report, 
especially given that, beginning with the CY 2023 EHR reporting period, 
eligible hospitals and CAHs are required to submit four calendar 
quarters of data for each of the required eCQMs (87 FR 49365). We 
believe a longer EHR reporting period in future years would provide 
eligible hospitals and CAHs increased opportunities to identify areas 
that may require investigation and corrective action that are important 
for the continued improvement of interoperability and health 
information exchange. This information would also help CMS identify 
gaps in reporting to provide additional support to eligible hospitals 
and CAHs in demonstrating effective use of CEHRT in furtherance of 
meaningful use. Although we are not making any proposals for the EHR 
reporting period in CY 2026 at this time, we will continue to monitor 
CEHRT utilization by eligible hospitals and CAHs to determine if a 
longer EHR reporting period would be feasible.
b. Proposed Changes to the EHR Reporting Period for a Payment 
Adjustment Year for Eligible Hospitals
    In the definition of EHR reporting period for a payment adjustment 
year under 42 CFR 495.4, paragraphs (2)(vii) and (viii), we specify the 
EHR reporting periods in CYs 2023 and 2024 that apply for purposes of 
determining whether an eligible hospital may be subject to a downward 
payment adjustment in a later year, as follows:
    For CY 2023: (A) If an eligible hospital has not successfully 
demonstrated it is a meaningful EHR user in a prior year, the EHR 
reporting period is any continuous 90-day period within CY 2023 and 
applies for the FY 2024 and 2025 payment adjustment years. For the FY 
2024 payment adjustment year, the EHR reporting period must end before 
and the eligible hospital must successfully register for and attest to 
meaningful use no later than October 1, 2023. (B) If in a prior year an 
eligible hospital has successfully demonstrated it is a meaningful EHR 
user, the EHR reporting period is any continuous 90-day period within 
CY 2023 and applies for the FY 2025 payment adjustment year.
    For CY 2024: (A) If an eligible hospital has not successfully 
demonstrated it is a meaningful EHR user in a prior year, the EHR 
reporting period is any continuous 180-day period within CY 2024 and 
applies for the FY 2025 and 2026 payment adjustment years. For the FY 
2025 payment adjustment year, the EHR reporting period must end before 
and the eligible hospital must successfully register for and attest to 
meaningful use no later than October 1, 2024. (B) If in a prior year an 
eligible hospital has successfully demonstrated it is a meaningful EHR 
user, the EHR reporting period is any continuous 180-day period within 
CY 2024 and applies for the FY 2026 payment adjustment year.
    Stated generally, these rules provide that the EHR reporting period 
occurs 2 years before the payment adjustment year, unless an eligible 
hospital is demonstrating meaningful use for the first time, in which 
case the EHR reporting period occurs 1 year before the payment 
adjustment year subject to an October 1 deadline for registration and 
attestation. Beginning with the EHR reporting period in CY 2025, we are 
proposing to change the rule for eligible hospitals that have not 
successfully demonstrated they are a meaningful EHR user in a prior 
year. CMS has made technological modifications to the data submission 
process for the Medicare Promoting Interoperability Program, including 
registration and attestation. As a result of these modifications, an 
October 1 deadline is no longer feasible, as the submission period is 
only open during the 2 months following the close of the CY in which 
the EHR reporting period occurs (or a later date specified by CMS), 
annually. Eligible hospitals that have not successfully demonstrated 
meaningful use in a prior year and seek to attest by October 1 of CY 
2023 or CY 2024 should contact CMS through the QualityNet help desk at 
[email protected] or 1-866-288-8912 for instructions.
    According to the Office of the National Coordinator for Health 
Information Technology (ONC) ``National Trends in Hospital and 
Physician Adoption of Electronic Health Records,'' Health IT Quickstat 
#61, a majority (96%) of non-Federal acute care hospitals, most of 
which are eligible hospitals or CAHs but which include pediatric and 
specialty cancer hospitals, have adopted CEHRT. We therefore believe 
that few eligible hospitals or CAHs will be new participants in the 
Medicare Promoting Interoperability Program, and that few eligible 
hospitals or CAHs are likely to be affected by this change.\716\ In the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42591), we removed the October 
1, 2019 deadline for eligible hospitals for the FY 2020 payment 
adjustment year. This policy was finalized in response to public 
comments that supported CMS eliminating the October 1, 2019 deadline 
for eligible hospitals that had not successfully demonstrated 
meaningful EHR use in a prior year. When we removed the October 1 
deadline for the FY 2020 payment adjustment year, we did so with public 
support, and did not experience operational concerns related to its 
removal, so we believe this proposal is feasible. Therefore, beginning 
with the EHR reporting period in CY 2025, we are proposing to no longer 
differentiate between those eligible hospitals that have successfully 
demonstrated they are meaningful EHR users in a prior year and those 
that have not, with regard to the EHR reporting period that applies for 
purposes of a payment adjustment year.
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    \716\ Office of the National Coordinator for Health Information 
Technology. (2023). National Trends in Hospital and Physician 
Adoption of Electronic Health Records. Available at: https://www.healthit.gov/data/quickstats/national-trends-hospital-and-physician-adoption-electronic-health-records.
---------------------------------------------------------------------------

    We are proposing that for all eligible hospitals (new and returning 
participants), the EHR reporting period in CY 2025 would apply for 
purposes of the FY 2027 payment adjustment year. Eligible hospitals and 
CAHs would submit data during the 2 months following the close of the 
CY in which the EHR reporting period occurs, or by a later date 
specified by CMS. This would mean that for eligible hospitals that have 
not successfully demonstrated they are meaningful EHR users in a prior 
year, there would be a 2-year period between the EHR reporting period 
in CY 2025 and the FY 2027 payment adjustment year, which is the same 
submission timeframe that eligible hospitals that have previously 
demonstrated they are meaningful EHR users are currently required to 
meet. Therefore, beginning with the EHR reporting period in CY 2025, 
eligible hospitals that have not demonstrated they are meaningful EHR 
users in a prior year would not have to attest to meaningful use no 
later than October 1, 2025. Instead, similar to eligible

[[Page 27157]]

hospitals that have demonstrated meaningful use, these eligible 
hospitals would attest during the submission period that occurs during 
the 2 months following the close of the CY in which the EHR reporting 
period occurs, or by a later date specified by CMS, and, if applicable, 
a payment adjustment would be applied for the FY 2027 payment 
adjustment year. We are proposing corresponding revisions to the 
definition of EHR reporting period for a payment adjustment year at 42 
CFR 495.4.
    We invite comment on this proposal.
3. Safety Assurance Factors for EHR Resilience Guides (SAFER Guides)
a. Background
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45479 through 
45481), we adopted the SAFER Guides measure under the Protect Patient 
Health Information Objective beginning with the EHR reporting period in 
CY 2022. Eligible hospitals and CAHs are required to attest to whether 
they have conducted an annual self-assessment using all nine SAFER 
Guides (https://www.healthit.gov/topic/safety/safer-guides), at any 
point during the calendar year in which the EHR reporting period 
occurs, with one ``yes/no'' attestation statement. Beginning in CY 
2022, the attestation of this measure was required, but eligible 
hospitals and CAHs were not scored, and an attestation of ``yes'' or 
``no'' were both acceptable answers without penalty. For additional 
information, please refer to the discussion of the SAFER Guides measure 
in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45479 through 45481).
b. Proposed Change to the SAFER Guides Measure
    The SAFER Guides measure is intended to incentivize eligible 
hospitals and CAHs to use all nine SAFER Guides to annually assess EHR 
implementation, safety and effectiveness; identify vulnerabilities; and 
develop a ``culture of safety'' within their organization. By 
implementing the SAFER Guides' recommended practices, eligible 
hospitals and CAHs may be better positioned to operate CEHRT 
responsibly in care delivery, and able to make improvements to the 
safety and safe use of EHRs as necessary over time. The intent of the 
measure is for eligible hospitals and CAHs to regularly assess their 
progress and status on important facets of patient safety. Given our 
interest in more strongly promoting safety and the safe use of EHRs, we 
are proposing to require eligible hospitals and CAHs to conduct the 
annual SAFER Guides self-assessments and attest a ``yes'' response 
accounting for a completion of the self-assessment for all nine guides. 
We believe this is feasible for eligible hospitals and CAHs, as they 
have had time to grow familiar with the use of the SAFER Guides by 
attesting either ``yes'' or ``no'' to conducting the self-assessment. 
We also note the availability of resources to assist eligible hospitals 
and CAHs with completing the self-assessment as required by the SAFER 
Guides measure. One example of such resources is the SAFER Guides 
authors' paper titled ``Guidelines for US Hospitals and Clinicians on 
Assessment of Electronic Health Record Safety Using SAFER Guides,'' 
available without charge to download or use at https://jamanetwork.com/journals/jama/fullarticle/2788984.
    Therefore, we are proposing to modify our requirements for the 
SAFER Guides measure beginning with the EHR reporting period in CY 2024 
and continuing in subsequent years, to require eligible hospitals and 
CAHs to attest ``yes'' to having conducted an annual self-assessment 
using all nine SAFER Guides (available at https://www.healthit.gov/topic/safety/safer-guides), at any point during the calendar year in 
which the EHR reporting period occurs. Under this proposal, an 
attestation of ``no'' would result in the eligible hospital or CAH not 
meeting the measure and not satisfying the definition of a meaningful 
EHR user under 42 CFR 495.4, which would subject the eligible hospital 
or CAH to a downward payment adjustment. We refer readers to Table 
IX.H.-03. in this proposed rule for a description of the measure.
    We invite public comment on this proposal.
4. Scoring Methodology for the EHR Reporting Period in CY 2024
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41636 through 
41645), we adopted a new performance-based scoring methodology for 
eligible hospitals and CAHs attesting under the Medicare Promoting 
Interoperability Program beginning with the EHR reporting period in CY 
2019, which included a minimum scoring threshold of a total score of 50 
points or more, which eligible hospitals and CAHs must meet to satisfy 
the requirement to report on the objectives and measures of meaningful 
use under 42 CFR 495.24. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45491 through 45492), we increased the minimum scoring threshold from 
50 to 60 points beginning with the EHR reporting period in CY 2022. As 
shown in Table IX.H.-01., the points associated with the required 
measures sum to 100 points, and the optional measures may add 
additional bonus points. The scores for each of the measures are added 
together to calculate a total score of up to 100 possible points for 
each eligible hospital or CAH (83 FR 41636 through 41645).
    In this proposed rule, we are not proposing any changes to the 
scoring methodology for the EHR reporting period in CY 2024. We refer 
readers to Table IX.F.-01. in this proposed rule, which reflects the 
objectives, measures, maximum points available, and whether a measure 
is required or optional for the EHR reporting period in CY 2024 based 
on our previously adopted policies.

[[Page 27158]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.311

    The maximum points available in Table IX.F.-01. in this proposed 
rule do not include the points that would be redistributed in the event 
an exclusion is claimed for a given measure. We are not proposing any 
changes to our policy for point redistribution in the event an 
exclusion is claimed for the EHR reporting period in CY 2024. We refer 
readers to Table IX.F.-02. in this proposed rule, which shows how 
points would be redistributed among the objectives and measures for the 
EHR reporting period in CY 2024, in the event an eligible hospital or 
CAH claims an exclusion.

[[Page 27159]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.312

5. Proposed Changes to Calculation Considerations Related to Counting 
Unique Patients or Actions
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49349 through 
49357), we included Table IX.F.-07. for ease of reference, which lists 
the objectives and measures for the EHR reporting period in CY 2023 as 
revised to reflect the final policies established in that final rule. 
Table IX.F.-07. includes a column titled Calculation Considerations 
Related to Counting Unique Patients or Actions (referred to as 
``calculation considerations''), and the information in that column was 
previously codified at 42 CFR 495.24(e)(3). For more information 
regarding the previous codification of the objectives, measures, and 
other policies under 42 CFR 495.24(e), we refer readers to the 
discussion in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49347 through 
49350). The calculation considerations column of Table IX.F.-07. 
indicates whether the measures that count unique patients or actions 
may be calculated by reviewing only the actions for patients whose 
records are maintained using CEHRT or must be calculated by reviewing 
all patient records.
    We have reviewed the descriptions of the calculation considerations 
in Table IX.F.-07. and believe some are not applicable to certain 
measures. We believe the term calculation considerations is not 
applicable to all measures, as there are measures that require a ``Yes/
No'' response instead of requiring numerators and denominators. We 
believe the inclusion of the calculation considerations for these 
measures has the potential to cause confusion for eligible hospitals 
and CAHs attempting to report on the measures for the Medicare 
Promoting Interoperability Program.
    Therefore, beginning with the EHR reporting period in CY 2024, we 
are proposing to modify the way we refer to calculation considerations 
related to unique patients or actions for measures for which there is 
no numerator and denominator, and for which unique patients or actions 
are not counted, to read ``N/A (measure is Yes/No)''. The following 
measures would be affected by this proposal because they do not have a 
numerator and denominator and they require a ``Yes/No'' response: Query 
of PDMP measure; HIE Bi-Directional Exchange measure; Enabling Exchange 
under TEFCA measure; Immunization Registry Reporting measure; Syndromic 
Surveillance Reporting measure; Electronic Case Reporting measure; 
Electronic Reportable Laboratory (ELR) Result

[[Page 27160]]

Reporting measure; Public Health Registry Reporting measure; Clinical 
Data Registry Reporting measure; Antimicrobial Use and Resistance (AUR) 
Surveillance measure; Security Risk Analysis measure; and the SAFER 
Guides measure. We believe this proposal would reduce potential 
confusion regarding which measures require calculations related to 
unique patients or actions. We have included the proposed changes in 
Table IX.F.-03.
    We invite public comment on this proposal.
6. Overview of Objectives and Measures for the Medicare Promoting 
Interoperability Program for the EHR Reporting Period in CY 2024
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49347 through 
49349), we added a new paragraph at 42 CFR 495.24(f), regarding the 
Stage 3 objectives and measures for eligible hospitals and CAHs 
attesting to CMS for 2023 and subsequent years, which did not include 
the objectives and measures text for the Medicare Promoting 
Interoperability Program, such as that text found at 42 CFR 495.24(e). 
We inadvertently neglected to make the associated changes to the 
demonstration of meaningful use criteria requirements at Sec.  
495.40(b)(2)(i), stating that for CY 2024 and subsequent years, an 
eligible hospital or CAH attesting to CMS would satisfy the required 
objectives and associated measures for meaningful use as defined by 
CMS. We are proposing to update the regulatory text at Sec.  495.40 to 
make it consistent with 42 CFR 495.24(f).
    We invite public comment on this proposal.
    For ease of reference, Table IX.F.-03. lists the objectives and 
measures for the Medicare Promoting Interoperability Program for the 
EHR reporting period in CY 2024 as revised to reflect the proposals 
made in this proposed rule. Table IX.F.-04. lists the 2015 Edition 
certification criteria required to meet the objectives and measures.
BILLING CODE 4120-01-P

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7. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare Promoting Interoperability Program
a. Proposed Changes to Clinical Quality Measures in Alignment With the 
Hospital IQR Program
(1) Background
    Under sections 1814(l)(3)(A) and 1886(n)(3)(A)(iii) of the Act and 
the definition of ``meaningful EHR user'' under 42 CFR 495.4, eligible 
hospitals and CAHs must report on clinical quality measures selected by 
CMS using CEHRT (also referred to as electronic clinical quality 
measures, or eCQMs), as part of being a meaningful EHR user under the 
Medicare Promoting Interoperability Program.
    Tables IX.F.-05. and IX.F.-06. in this proposed rule summarize the 
previously finalized eCQMs available for eligible hospitals and CAHs to 
report under the Medicare Promoting Interoperability Program for the CY 
2023 reporting period and the CY 2024 reporting period and subsequent 
years (87 FR 45360).
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(2) Proposed eCQM Adoptions
    As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38479), 
we intend to continue to align the eCQM reporting requirements for the 
Medicare Promoting Interoperability Program with similar requirements 
under the Hospital IQR Program to the extent feasible. Section 
1886(n)(3)(B)(i)(I) of the Act provides, in part, that in selecting 
clinical quality measures for the Medicare Promoting Interoperability 
Program, the Secretary shall provide preference to such measures that 
have been selected for purposes of the Hospital IQR Program (section 
1886(b)(3)(B)(viii) of the Act). In addition, section 
1886(n)(3)(B)(iii) of the Act provides that in selecting clinical 
quality measures for the Medicare Promoting Interoperability Program, 
and in establishing the form and manner for reporting, the Secretary 
shall seek to avoid redundant or duplicative reporting with reporting 
otherwise required, including reporting under the Hospital IQR Program. 
To minimize redundant or duplicative reporting, while maintaining a set 
of meaningful clinical quality measures that continue to incentivize 
improvement in the quality of care provided to patients, and in 
alignment with proposals for the Hospital IQR Program eCQM measure set 
as discussed in section IX.C. of this proposed rule, we are proposing 
to adopt three new eCQMs for the Medicare Promoting Interoperability 
Program, beginning with the CY 2025 reporting period. Specifically, we 
propose to add the following two eCQMs that address factors 
contributing to hospital harm to the Medicare Promoting 
Interoperability Program eCQM measure set on which hospitals can self-
select to report, beginning with the CY 2025 reporting period: (1) the 
Hospital Harm--Pressure Injury eCQM (CBE #3498e); and (2) the Hospital 
Harm--Acute Kidney Injury eCQM (CBE #3713e). In addition, we propose to 
add the Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computed Tomography (CT) in Adults (Hospital Level--
Inpatient) eCQM (CBE #3663e) to the Medicare Promoting Interoperability 
Program eCQM measure set on which hospitals can self-select to report, 
beginning with CY 2025 reporting period. We refer readers to the 
discussion of the proposals for the Hospital IQR Program in sections 
IX.C.5.a, IX.C.5.b., and IX.C.5.c. of the preamble of this proposed 
rule for more information about these three measures and our policy 
reasons for proposing them. Table IX.F.-07. in this proposed rule 
summarizes previously finalized, and newly proposed, eCQMs in the 
Medicare Promoting Interoperability Program for the CY 2025 reporting 
period and subsequent years.

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    We invite public comment on these proposals.
b. Proposed eCQM Reporting and Submission Requirements for the CY 2025 
Reporting Period and Subsequent Years
    Consistent with our goal to align the eCQM reporting periods and 
criteria in the Medicare Promoting Interoperability Program with the 
Hospital IQR Program, in the FY 2023 IPPS/LTCH PPS final rule, we 
finalized our policy to modify the eCQM reporting and submission 
requirements under the Medicare Promoting Interoperability Program for 
eligible hospitals and CAHs beginning with the CY 2024 reporting period 
(87 FR 49365 through 49367). Specifically, eligible hospitals and CAHs 
will be required to report four calendar quarters of data for each 
required eCQM: (1) Three self-selected eCQMs; (2) the Safe Use of 
Opioids--Concurrent Prescribing eCQM; (3) the Severe Obstetric 
Complications eCQM; and (4) the Cesarean Birth eCQM, for a total of six 
eCQMs, beginning with the CY 2024 reporting period and for subsequent 
years (87 FR 49365). Additionally, as finalized in the FY 2023 IPPS/
LTCH PPS final rule, the Severe Obstetric Complications eCQM and the 
Cesarean Birth eCQM are available for eligible hospitals and CAHs to 
select as one of their three self-selected eCQMs for the CY 2023 
reporting period, and then beginning with the CY 2024 reporting period 
and for subsequent years, all eligible hospitals and CAHs are required 
to report these two eCQMs.
    We previously finalized our policy to eliminate attestation as a 
method for reporting CQMs for the Medicare Promoting Interoperability 
Program, and instead require all eligible hospitals and CAHS to submit 
their CQM data electronically through the reporting methods available 
for the Hospital IQR Program beginning with the reporting period in CY 
2023. We are not proposing any changes to the policy for CY 2024. For 
more information, we refer readers to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42601 through 42602).
    We are proposing that, if our proposals to adopt the Hospital 
Harm--Pressure Injury eCQM, the Hospital Harm--Acute Kidney Injury 
eCQM, and the Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computed Tomography (CT) in Adults (Hospital Level--
Inpatient) eCQM as detailed in section IX.C. of the preamble of this 
proposed rule are finalized, these measures would be available for 
eligible hospitals and CAHs to select as one of their three self-
selected eCQMs for the CY 2025 reporting period and subsequent years.
    We invite public comment on this proposal.

X. Other Provisions Included in This Proposed Rule

A. Medicare Program--Special Requirements for Rural Emergency Hospitals 
(REHs)

1. Background
    This proposed rule would codify requirements for additional 
information that an eligible facility would be required to submit when 
applying for enrollment as a Rural Emergency Hospital (REH), as 
specified in the Consolidated Appropriations Act (CAA), 2021. Section 
125 of Division CC of the CAA was signed into law on December 27, 2020 
and establishes REHs as a new Medicare provider that will receive 
Medicare payment for services furnished on or after January 1, 2023. 
Section 125 of the CAA added section 1861(kkk) to the Act, which sets 
forth the requirements for REHs. The establishment of REHs as a 
Medicare provider is intended to promote equity in health care for 
those living in rural communities by facilitating access to needed 
services, such as emergency, urgent, and observation care services, as 
well as other additional outpatient

[[Page 27174]]

medical and health services that an REH might elect to provide.
    In the November 23, 2022 Federal Register (87 FR 71748), we 
published a final rule with comment period titled ``Medicare Program: 
Hospital Outpatient Prospective Payment and Ambulatory Surgical Center 
Payment Systems and Quality Reporting Programs; Organ Acquisition; 
Rural Emergency Hospitals: Payment Policies, Conditions of 
Participation, Provider Enrollment, Physician Self-Referral; New 
Service Category for Hospital Outpatient Department Prior Authorization 
Process; Overall Hospital Quality Star Rating; COVID-19'' (https://www.federalregister.gov/d/2022-23918). Included as part of this rule 
were the provider enrollment procedures for REHs, including that REHs: 
(1) must comply with all applicable provider enrollment provisions in 
42 CFR part 424, subpart P, in order to enroll in Medicare; and (2) 
must submit a Form CMS-855A change of information application (rather 
than an initial enrollment application) to convert to an REH. These 
enrollment requirements became effective on January 1, 2023.
    On January 26, 2023, CMS released QSO-23-07-REH (https://www.cms.gov/files/document/qso-23-07-reh.pdf), which provided the 
additional information requirements specified by section 
1861(kkk)(4)(A)(i)-(iv) of the Act as well as guidance regarding the 
process by which eligible facilities must submit the additional 
information detailed here. We are proposing to codify these additional 
information requirements in this rule, and we have included a proposed 
Information Collection Requirement (ICR) in Section B. 10. of this rule 
for solicitation of public comments and for OMB approval of this ICR. 
We note that the processing of the REH enrollment applications (as 
those requirements were finalized in the November 23, 2022 rule) is not 
dependent on the finalization of the provisions of this proposed rule.
    We also are proposing to update certain definitions in the survey 
and certification regulations to address REHs. Specifically, we are 
proposing the definition of a ``Provider of services or provider'' at 
42 CFR 488.1 to include REHs as well as add REHs to the other 
applicable provisions contained in 42 CFR parts 488 and 489: Sec. Sec.  
488.2, ``Statutory basis''; 488.18, ``Documentation of findings''; and 
489.102, ``Requirements for providers.''
2. Proposed Revision to the Definition of ``Provider of Services or 
Provider'' (Sec.  488.1)
    We propose to revise the definition of ``Provider of services or 
provider'' at Sec.  488.1. The proposed new definition of ``provider of 
services or provider'' would state that it refers to a hospital, 
critical access hospital, rural emergency hospital, skilled nursing 
facility, nursing facility, home health agency, hospice, comprehensive 
outpatient rehabilitation facility, or a clinic, rehabilitation agency 
or public health agency that furnishes outpatient physical therapy or 
speech pathology services.
3. Proposed Addition to the Statutory Basis for Part 488 (Sec.  488.2)
    We propose to add the statutory basis for REHs to the Statutory 
Basis section of part 488 at Sec.  488.2. The proposed revision would 
add section 1861(kkk) of the Act, which sets forth the statutory basis 
for REHs.
4. Proposed Addition to the section ``Documentation of Findings'' 
(Sec.  488.18(d))
    We propose to add REHs to the provider-types subject to the 
requirement at Sec.  488.18(d). The proposed revision at Sec.  
488.18(d) would specify that if the State agency receives information 
to the effect that a hospital, critical access hospital (as defined in 
section 1861(mm)(1) of the Act) or a rural emergency hospital (as 
defined in section 1861(kkk)(2) of the Act) has violated Sec.  489.24 
(regarding compliance with EMTALA provisions), the State agency must 
report the information to CMS promptly.
5. Proposed Special Requirements for REHs (Sec.  488.70)
    We propose to add new regulation text at Sec.  488.70, so that an 
eligible facility that submits an application for enrollment as an REH 
under section 1866(j) of the Act must also submit additional 
information as specified in this proposed rule. In accordance with 
section 1861(kkk)(4)(A)(i) through (iv) of the Act, we specifically 
propose to add Sec.  488.70(a) through (d), so that the provider must 
include an action plan containing: (1) A plan for initiating REH 
services (as those services are defined in 42 CFR 485.502, including 
mandatory provision of emergency department services and observation 
care); (2) a detailed transition plan that lists the specific services 
that the provider will retain, modify, add, and discontinue as an REH; 
(3) a detailed description of other outpatient medical and health 
services that it intends to furnish on an outpatient basis as an REH; 
and (4) information regarding how the provider intends to use the 
additional facility payment provided under section 1834(x)(2) of the 
Act, including a description of the services that the additional 
facility payment would be supporting, such as the operation and 
maintenance of the facility and the furnishing of covered services (for 
example, telehealth services and ambulance services). Although section 
1861(kkk)(4)(A)(iv) of the Act gives us the authority to require such 
additional information as the Secretary may deem necessary, we are not 
proposing any additional information submissions at this time.
6. Proposed Requirements for Providers (Sec.  489.102) (Advance 
Directives)
    We propose to add REHs to the applicable provisions at Sec.  
489.102(a) and add a new Sec.  489.102(b)(5).

B. Physician Self-Referral Law: Physician-Owned Hospitals

1. Background
a. Statutory and Regulatory History: General
    Section 1877 of the Act, also known as the physician self-referral 
law: (1) prohibits a physician from making referrals for certain 
designated health services payable by Medicare to an entity with which 
he or she (or an immediate family member) has a financial relationship, 
unless the requirements of an applicable exception are satisfied; and 
(2) prohibits the entity from filing claims with Medicare (or billing 
another individual, entity, or third-party payer) for any improperly 
referred designated health services. A financial relationship may be an 
ownership or investment interest in the entity or a compensation 
arrangement with the entity. The statute establishes a number of 
specific exceptions and grants the Secretary of the Department of 
Health and Human Services (the Secretary) the authority to create 
regulatory exceptions for financial relationships that do not pose a 
risk of program or patient abuse. Section 1903(s) of the Act extends 
aspects of the physician self-referral law's prohibitions to Medicaid. 
(For additional information about section 1903(s) of the Act, see 66 FR 
857 through 858.)
    The following discussion provides a chronology of our more 
significant and comprehensive rulemakings; it is not an exhaustive list 
of all rulemakings related to the physician self-referral law. After 
the passage of section 1877 of the Act, we proposed rulemakings in 1992 
(related only to referrals for clinical

[[Page 27175]]

laboratory services) (57 FR 8588) (the 1992 proposed rule) and 1998 
(addressing referrals for all designated health services) (63 FR 1659) 
(the 1998 proposed rule). We finalized the proposals from the 1992 
proposed rule in 1995 (60 FR 41914) (the 1995 final rule), and issued 
final rules following the 1998 proposed rule in three stages. The first 
final rulemaking (Phase I) was a final rule with comment period that 
appeared in the January 4, 2001 Federal Register (66 FR 856). The 
second final rulemaking (Phase II) was an interim final rule with 
comment period that appeared in the March 26, 2004 Federal Register (69 
FR 16054). Due to a printing error, a portion of the Phase II preamble 
was omitted from the March 26, 2004 Federal Register publication. That 
portion of the preamble, which addressed reporting requirements and 
sanctions, appeared in the April 6, 2004 Federal Register (69 FR 
17933). The third final rulemaking (Phase III) was a final rule that 
appeared in the September 5, 2007 Federal Register (72 FR 51012).
    After passage of the Patient Protection and Affordable Care Act of 
2010 (Pub. L. 111-148) (the Affordable Care Act), we issued final 
regulations in the CY 2011 PFS final rule with comment period that 
codified a disclosure requirement established by the Affordable Care 
Act for the in-office ancillary services exception (75 FR 73443). In 
the CY 2016 PFS final rule, we issued regulations to reduce burden and 
facilitate compliance (80 FR 71300 through 71341). In that rulemaking, 
we established two new exceptions to the physician self-referral law, 
clarified certain provisions of the physician self-referral 
regulations, updated regulations to reflect changes in terminology, and 
revised definitions related to physician-owned hospitals. A final rule 
entitled ``Modernizing and Clarifying the Physician Self-Referral 
Regulations'' (the MCR final rule) appeared in the December 2, 2020 
Federal Register (85 FR 77492) and established three new exceptions to 
the physician self-referral law applicable to compensation arrangements 
that qualify as ``value-based arrangements,'' established exceptions 
for limited remuneration to a physician and the donation of 
cybersecurity technology and services, and revised or clarified several 
existing exceptions. The MCR final rule also provided guidance and 
updated or established regulations related to the fundamental 
terminology used in many provisions of the physician self-referral law. 
Most notably, we defined the term ``commercially reasonable'' in 
regulation, established an objective test for evaluating whether 
compensation varies with the volume or value of referrals or other 
business generated between the parties, and revised the definitions of 
``fair market value'' and ``general market value.'' The MCR final rule 
also revised the definition of ``indirect compensation arrangement,'' 
which was further revised in the CY 2022 PFS final rule (86 FR 65343).
b. Statutory and Regulatory Background: Physician-Owned Hospitals
(1) Exceptions to the Physician Self-Referral Law for Ownership or 
Investment in a Hospital
    Section 1877(d) of the Act sets forth exceptions related to 
ownership or investment interests held by a physician (or an immediate 
family member of a physician) in an entity that furnishes designated 
health services. Section 1877(d)(2) of the Act provides an exception 
for ownership or investment interests in rural providers (the ``rural 
provider exception''). To use the rural provider exception, an entity 
must furnish substantially all of the designated health services that 
it furnishes to residents of a rural area (as defined in section 
1886(d)(2) of the Act). To satisfy the requirements of the rural 
provider exception, the designated health services must be furnished in 
a rural area and, in the case where the entity is a hospital, the 
hospital must meet the requirements of section 1877(i)(1) of the Act no 
later than September 23, 2011. Section 1877(d)(3) of the Act provides 
an exception for ownership or investment interests in a hospital 
located outside of Puerto Rico (the ``whole hospital exception''). To 
satisfy the requirements of the whole hospital exception, the referring 
physician must be authorized to perform services at the hospital, the 
ownership or investment interest must be in the hospital itself (and 
not merely in a subdivision of the hospital), and the hospital must 
meet the requirements of section 1877(i)(1) of the Act no later than 
September 23, 2011. These exceptions are codified in our regulations at 
Sec.  411.356(c)(1) and (3), respectively.
    In a series of reports reviewing the growth in specialty hospitals 
that are largely for-profit and owned, in part, by physicians, the 
United States Government Accountability Office (GAO) (formerly known as 
the United States General Accounting Office) found that these hospitals 
were much less likely to have emergency departments, treat smaller 
percentages of Medicaid patients, and derive a smaller share of their 
revenues from inpatient services.\717\ Following the issuance of these 
reports, the Congress held hearings and began to consider policies to 
limit the growth of these facilities.\718\ Section 6001(a) of the 
Affordable Care Act effectively eliminated the exceptions for physician 
ownership in hospitals, although hospitals with physician ownership and 
a Medicare provider agreement on December 31, 2010, are 
``grandfathered'' to continue using the rural provider exception, if 
applicable, and whole hospital exception.
---------------------------------------------------------------------------

    \717\ For example, GAO, Geographic Location, Services Provided, 
and Financial Performance; https://www.gao.gov/assets/gao-04-167-highlights.pdf and GAO Operational and Clinical Changes Largely 
Unaffected by Presence of Competing Specialty Hospitals, https://www.gao.gov/assets/gao-06-520-highlights.pdf.
    \718\ For example, Grassley, Baucus Introduce Bill to Rein In 
Physician-owned Specialty Hospitals (https://www.finance.senate.gov/release/grassley-baucus-introduce-bill-to-rein-in-physician-owned-specialty-hospitals) and Bristol N. US Congress scrutinises 
hospitals owned by doctors after patient's death. BMJ. 2006 Feb 
25;332(7539):442. doi: 10.1136/bmj.332.7539.442-c. PMID: 16497744; 
PMCID: PMC1382571.
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(2) Prohibition on Facility Expansion
    Section 6001(a)(3) of the Affordable Care Act amended the rural 
provider and whole hospital exceptions to provide that a hospital may 
not increase the number of operating rooms, procedure rooms, and beds 
beyond that for which the hospital was licensed on March 23, 2010 (or, 
in the case of a hospital that did not have a Medicare provider 
agreement in effect as of this date, but did have a provider agreement 
in effect on December 31, 2010, the effective date of such provider 
agreement). However, the Secretary may grant an exception from the 
prohibition on facility expansion.
    Section 6001(a)(3) of the Affordable Care Act added new section 
1877(i)(3)(A)(i) of the Act, which required the Secretary to establish 
and implement a process under which a hospital that is an ``applicable 
hospital'' may apply for an exception from the prohibition on expansion 
of facility capacity. Section 1106 of the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) (HCERA) amended section 
1877(i)(3)(A)(i) of the Act to require the Secretary to establish and 
implement such a process for hospitals that meet the criteria for 
either an applicable hospital or a ``high Medicaid facility.'' (We 
refer herein to the Affordable Care Act and HCERA together as the 
Affordable Care Act.) These terms are defined at sections 1877(i)(3)(E) 
and (F) of the Act, respectively. The requirements for an

[[Page 27176]]

applicable hospital are set forth at Sec.  411.362(c)(2) and the 
requirements for a high Medicaid facility are set forth at Sec.  
411.362(c)(3). In the CY 2012 OPPS/ASC final rule, we issued 
regulations setting forth the process for a hospital to request an 
exception from the prohibition on facility expansion (the expansion 
exception process) and related definitions at Sec.  411.362(c) and (a), 
respectively (76 FR 74517 through 74527). We revised these regulations 
in the CY 2015 OPPS/ASC final rule to permit a requesting hospital to 
use additional data sources to show that it meets the criteria for an 
applicable hospital or high Medicaid facility and clarify certain 
aspects of the process for requesting an exception from the prohibition 
on facility expansion (79 FR 66987 through 66997).
    Section 1877(i)(3)(B) of the Act provides that the expansion 
exception process shall permit an applicable hospital to apply for an 
exception to the prohibition on expansion of facility capacity up to 
once every 2 years. In the CY 2012 OPPS/ASC final rule, we extended 
this provision to high Medicaid facilities using our rulemaking 
authority under sections 1871 and 1877(i)(3)(A)(1) of the Act (76 FR 
74525). We stated that, although the statute provides that an 
applicable hospital may request an exception up to once every 2 years, 
we believe that providing a high Medicaid facility the opportunity to 
request an exception once every 2 years (while also limiting its total 
growth) balances the Congress' intent to prohibit expansion of 
physician-owned hospitals with the purpose of the exception to the 
prohibition on expansion of facility capacity (76 FR 74524). Citing 
alignment with the Patients over Paperwork initiative--a former 
initiative launched by CMS in 2017 to evaluate and streamline 
regulations with a goal to reduce unnecessary burden, increase 
efficiencies, and improve the beneficiary experience--in the CY 2021 
OPPS/ASC final rule, we reversed this temporal program integrity 
requirement for high Medicaid facilities, noting that the plain 
language of the statute does not impose the same limitations on the 
expansion of high Medicaid facilities as it does on the expansion of 
applicable hospitals (85 FR 86257).
    Section 1877(i)(3)(C)(ii) of the Act provides that the Secretary 
shall not permit an increase in the number of operating rooms, 
procedure rooms, and beds for which an applicable hospital is licensed 
to the extent such increase would result in the number of operating 
rooms, procedure rooms, and beds for which the applicable hospital is 
licensed exceeding 200 percent of the baseline number of operating 
rooms, procedure rooms, and beds of the applicable hospital. In the CY 
2012 OPPS/ASC final rule, using our rulemaking authority under sections 
1871 and 1877(i)(3)(A)(i) of the Act, we adopted a parallel limit in 
the increase in the number of operating rooms, procedure rooms, and 
beds for which a high Medicaid facility may request an exception to the 
prohibition on expansion of facility capacity (76 FR 74524). Citing 
alignment with the Patients over Paperwork initiative, in the CY 2021 
OPPS/ASC final rule, we reversed this program integrity requirement for 
high Medicaid facilities, noting that the plain language of the statute 
does not impose the same limitations on the expansion of high Medicaid 
facilities as it does the expansion of applicable hospitals (85 FR 
86257).
    Section 1877(i)(3)(D) of the Act provides that any increase in the 
number of operating rooms, procedure rooms, and beds for which an 
applicable hospital is licensed may occur only in facilities on the 
main campus of the applicable hospital. In the CY 2012 OPPS/ASC final 
rule, using our rulemaking authority under sections 1871 and 
1877(i)(3)(A)(i) of the Act, we extended this limitation on the 
location of expansion facility capacity to high Medicaid facilities, 
explaining that we believe that applying the same limitation to 
applicable hospitals and high Medicaid facilities will result in an 
efficient and consistent process (76 FR 74524). Citing alignment with 
the Patients over Paperwork initiative, in the CY 2021 OPPS/ASC final 
rule, we reversed this program integrity requirement for high Medicaid 
facilities, noting that the plain language of the statute does not 
impose the same limitations on the expansion of high Medicaid 
facilities as it does the expansion of applicable hospitals (85 FR 
86257).
2. Proposals
a. Process for Requesting an Exception From the Prohibition on 
Expansion of Facility Capacity
    As described in section X.B.1.b.(1). of the preamble of this 
proposed rule, in order to satisfy the requirements of the rural 
provider or whole hospital exception, a hospital must comply with the 
requirements of section 1877(i) of the Act and existing Sec.  411.362 
of our regulations no later than September 23, 2011. Thus, the 
physician self-referral law would prohibit a referral made on or after 
September 23, 2011, by a physician who has (or whose immediate family 
member has) an ownership or investment interest in the hospital if the 
number of operating rooms, procedure rooms, and beds for which the 
hospital is licensed (referred to in this proposed rule as ``facility 
capacity'') at the time of the referral is greater than its baseline 
number of operating rooms, procedure rooms, and beds (as defined at 
existing Sec.  411.362(a) and referred to in this proposed rule as 
``baseline facility capacity''), unless the hospital has been granted 
an exception from the prohibition on expansion of facility capacity 
(referred to in this proposed rule as an ``expansion exception''). The 
regulations at existing Sec.  411.362(c) set forth the expansion 
exception process.
    We recently reviewed the expansion exception process, including a 
fresh examination of the statutory language and certain legislative 
history of the Affordable Care Act. Section 1877(i)(3)(A)(i) of the Act 
requires the establishment of a process under which an applicable 
hospital or high Medicaid facility may apply for an exception from the 
prohibition on expansion of facility capacity, and section 
1877(i)(3)(C)(i) of the Act imposes certain program integrity 
restrictions on a hospital granted an exception under the process 
(emphasis added). The Secretary's authority to grant an expansion 
exception is limited by section 1877(i)(3)(C)(ii) of the Act, which 
states that the Secretary shall not permit an increase in the number of 
operating rooms, procedure rooms, and beds for which the hospital is 
licensed that results in a hospital's facility capacity exceeding 200 
percent of its baseline facility capacity (emphasis added). In 
addition, section 1877(i)(3)(H) of the Act requires the Secretary to 
publish in the Federal Register the final decision with respect to a 
hospital's application (emphasis added). We interpret this statutory 
language to mean that, in order to request an expansion exception with 
respect to which CMS may issue a decision, a hospital must first 
establish that it meets the criteria for an applicable hospital or high 
Medicaid facility. We further interpret this statutory language to mean 
that CMS has discretion to approve or deny a request for an expansion 
exception even if the requesting hospital meets the criteria for an 
applicable hospital or high Medicaid facility. Put another way, it is 
our position that, under section 1877(i)(3)(A)(i) of the Act and 
existing Sec.  411.362(c)(1), meeting the criteria for an applicable 
hospital or high Medicaid facility merely makes a hospital eligible to 
request an expansion exception, but

[[Page 27177]]

it does not guarantee approval of such a request. We note that, for 
purposes of interpreting the statutory provisions, codification in our 
regulations, and discussion in our rulemakings, we use the term 
``request'' in the same way as ``apply'' and ``application,'' and use 
the term ``approve'' in the same way as ``grant.'' (See 76 FR 74517 
(when the statute refers to an ``application,'' we use the term 
``request'') and 79 FR 64801 and 64802 (``II. Exception Approval 
Process'' and ``decision to approve'' a request, respectively).) We 
note also that section 1877(i)(3)(A)(ii) of the Act requires that the 
expansion exception process shall provide for community input with 
respect to an expansion exception request. We interpret the requirement 
to provide for community input ``with respect to [an] application'' to 
require CMS to permit any input related to the expansion exception 
request--not just input related to whether the requesting hospital 
meets the criteria for an applicable hospital or high Medicaid 
facility. In the CY 2012 OPPS/ASC proposed and final rules, we noted 
examples of community input, such as documentation demonstrating that 
the requesting hospital does not satisfy one or more of the data 
criteria or that the requesting hospital discriminates against 
beneficiaries of Federal health programs; however, we stated that these 
are examples only and that we do not restrict the type of community 
input that may be submitted (76 FR 42352 and 74522). We believe that, 
if the Congress did not intend for the Secretary to have discretion to 
approve or deny an expansion exception request from a hospital that 
meets the criteria for an applicable hospital or high Medicaid 
facility, the statutorily-required community input would be limited to 
whether the hospital met such criteria. The plain language of the 
statute is not so limited.
    To clarify our interpretation of the Secretary's authority, ensure 
that approval of a request to expand a hospital's facility capacity 
occurs only in appropriate circumstances, and facilitate compliance 
with the process for requesting an expansion exception, we believe that 
modification and clarification of our regulations at existing Sec.  
411.362(c) is warranted. Therefore, we are proposing to revise the 
regulations that set forth the expansion exception process and separate 
them from the requirements that a hospital must satisfy under the rural 
provider and whole hospital exceptions. Under our proposals, existing 
Sec.  411.362(c), as well as certain related definitions in existing 
Sec.  411.362(a), would be renumbered at Sec.  411.363. We believe that 
having a separate regulation dedicated to the expansion exception 
process could provide greater transparency and facilitate compliance 
with the expansion exception process. To provide clarity and 
transparency for hospitals that wish to request an expansion exception 
and other interested parties, we are proposing to revise our 
regulations to clarify that CMS will only consider expansion exception 
requests from eligible hospitals, clarify the data and information that 
must be included in an expansion exception request, identify factors 
that CMS will consider when making a decision on an expansion exception 
request, and revise certain aspects of the process for requesting an 
expansion exception.
(1) Relevant Definitions
    We are proposing at new Sec.  411.363(a) to include definitions for 
the terms ``baseline number of operating rooms, procedure rooms, and 
beds,'' ``external data source,'' ``main campus of the hospital,'' and 
``procedure room'' for purposes of the expansion exception process set 
forth in proposed Sec.  411.363. These definitions are currently 
included in existing Sec.  411.362(a). Because the terms ``baseline 
number of operating rooms, procedure rooms, and beds,'' ``external data 
source,'' and ``main campus of the hospital'' are not used in Sec.  
411.362 as it would be revised, we are proposing to remove their 
definitions from Sec.  411.362(a). Because the term ``procedure room'' 
is used in both existing Sec.  411.362 and proposed Sec.  411.363, we 
are proposing to define the term ``procedure room,'' for purposes of 
new Sec.  411.363(a) to have the meaning set forth at existing Sec.  
411.362(a).
(2) Eligibility To Request an Expansion Exception and Publication in 
the Federal Register
    We are proposing to revise Sec.  411.362(c)(1) and renumber it at 
Sec.  411.363(b) to clarify that CMS will not consider an expansion 
exception request from a hospital that is not eligible to request an 
expansion exception. To be eligible to request an expansion exception, 
a hospital must first meet the criteria as either an applicable 
hospital or high Medicaid facility, which are renumbered at Sec.  
411.363(c) and (d), respectively. We are proposing certain clarifying 
and other revisions to these regulations, which are discussed in 
sections X.B.2.a.(4). and (6). of the preamble in this proposed rule.
    As explained in section X.B.2.b. of the preamble of this proposed 
rule, we are proposing to reinstate the program integrity restrictions 
regarding the frequency of expansion exception requests, maximum 
aggregate expansion of a hospital, and location of expansion facility 
capacity for hospitals that meet the criteria for a high Medicaid 
facility. The regulation at proposed Sec.  411.363(b)(2)(i) would 
implement the statutory restriction on the Secretary's ability to 
permit an expansion that would result in a hospital's facility capacity 
exceeding 200 percent of its baseline facility capacity and apply the 
restriction to any hospital requesting an expansion exception. (See 
section 1877(i)(C)(ii) of the Act.) Therefore, even if the hospital 
meets the criteria for an applicable hospital or high Medicaid 
facility, it would not be eligible to request another expansion 
exception if CMS has previously approved a request from the hospital 
that would allow the hospital's facility capacity to reach 200 percent 
of its baseline facility capacity if the full expansion is utilized. 
Any prior expansion exception approval(s) must be considered when 
determining the maximum facility capacity of the hospital if the 
request is approved. To illustrate, a hospital with a baseline facility 
capacity of 100 that was granted an expansion exception for 100 
additional operating rooms, procedure rooms, and beds would have a 
potential facility capacity of 200, or 200 percent of its baseline 
number of operating rooms, procedure rooms, and beds. Consequently, the 
hospital would not be eligible to request another expansion exception. 
A hospital with a baseline facility capacity of 100 that was granted an 
expansion exception for 75 additional operating rooms, procedure rooms, 
and beds could request to further expand its facility capacity by no 
more than another 25 operating rooms, procedure rooms, and beds, 
because CMS would be prohibited under section 1877(i)(3)(C)(ii) of the 
Act from approving the subsequent expansion exception request if it 
would allow the hospital's aggregate facility capacity to exceed 200 
percent of its baseline facility capacity.
    The regulation at proposed Sec.  411.363(b)(2)(ii) would implement 
section 1877(i)(3)(B) of the Act, which permits an applicable hospital 
to request an expansion exception up to once every 2 years, and apply 
the limitation to any hospital requesting an expansion exception. In 
the CY 2012 OPPS/ASC final rule, after receiving no comments on our 
proposals to allow an

[[Page 27178]]

applicable hospital or high Medicaid facility to request an expansion 
exception up to once every 2 years from the date of a CMS decision on 
the hospital's most recent request, using our authority in sections 
1871 and 1877 of the Act, we implemented section 1877(i)(3)(B) of the 
Act at existing Sec.  411.362(c)(1) (76 FR 74525). We stated that we 
would consider the date of a CMS decision to be the date of the 
decision letter sent to the requesting party (Id.). As discussed in 
section X.B.2.b of this proposed rule, in the CY 2021 OPPS/ASC final 
rule, we reversed the regulatory extension of statutory program 
integrity restrictions--including the restriction on frequency of 
expansion exception requests--for hospitals that meet the criteria for 
a high Medicaid facility (85 FR 86256). Therefore, as of January 1, 
2021, a high Medicaid facility is permitted to request an expansion 
exception at any time, provided that it has not submitted another 
request for an expansion exception for which CMS has not issued a 
decision. Even though we reversed the regulatory extension of the 
restriction on frequency of expansion exception requests for hospitals 
that meet the criteria for a high Medicaid facility, in CY 2021 OPPS/
ASC final rule, we nonetheless limited a high Medicaid facility to 
applying for expansion exception only when it does not have another 
expansion exception request pending with CMS. We did so to preserve CMS 
resources and continue to maintain an orderly and efficient expansion 
exception process (85 FR 86256). Historically, CMS has worked with 
requesting hospitals for several weeks or months following the initial 
submission in order to complete the request so that CMS can publish 
notice of the request in the Federal Register. Depending on the amount 
of time from submission to publication of the notice of the request in 
the Federal Register, and given the timeframes under the expansion 
exception process for deeming a request complete, reviewing the 
request, and publishing CMS's decision regarding a request, it could 
take well over a year to receive a CMS decision on an expansion 
exception request. We continue to believe that permitting a hospital to 
submit a subsequent request before CMS has made a decision on an 
earlier request would be an improper use of agency resources, could 
result in confusion to interested parties that wish to provide 
community input, and would unnecessarily complicate the expansion 
exception process. Therefore, we are proposing at Sec.  
411.363(b)(2)(ii) that a hospital--whether it otherwise meets the 
criteria for an applicable hospital or high Medicaid facility--would 
not be eligible to request an expansion exception if it has been less 
than 2 years from the date of the most recent decision by CMS approving 
or denying the hospital's most recent (prior) request for an expansion 
exception.
    Under the proposed regulation, CMS would not consider an expansion 
exception request submitted by a hospital that is not eligible to 
request the expansion exception. CMS would consider an expansion 
exception request submitted by a hospital that is eligible to request 
the expansion exception, provided that the request includes all 
information required under proposed Sec.  411.363. In processing an 
expansion exception request, we would first determine whether the 
requesting hospital is eligible to request the expansion exception. 
This would include providing an opportunity for community input 
regarding whether the requesting hospital meets the criteria for an 
applicable hospital or high Medicaid facility (depending on the 
specific request). If the hospital meets the criteria for an applicable 
hospital or high Medicaid facility, and is not otherwise precluded from 
making an expansion exception request under proposed Sec.  411.363(b), 
we would then decide whether to approve or deny the request. This would 
include providing an opportunity for community input regarding, among 
other things, the factors that CMS will consider in deciding whether to 
approve or deny the hospital's expansion exception request. (See 
section X.B.2.a.(3). of the preamble of this proposed rule for a 
discussion of the factors that CMS considers.) Because community input 
would be relevant to both the determination that a requesting hospital 
meets the criteria for an applicable hospital or high Medicaid facility 
(depending on the specific request) and our decision whether to approve 
or deny the expansion exception request, we anticipate publication in 
the Federal Register of any expansion exception request that a 
requesting hospital has not elected to withdraw following its initial 
submission, provided that the hospital is otherwise eligible to request 
an expansion exception. In the Federal Register notice, we would seek 
community input on both whether the requesting hospital meets the 
criteria for an applicable hospital or high Medicaid facility 
(depending on the specific request) and whether CMS should approve or 
deny the request. We believe this approach would be the most efficient 
use of CMS and governmental resources, as well as eliminate the 
duplication of efforts by individuals and entities in the community 
that wish to provide input on a hospital's expansion exception request.
    Following publication of the notice of the expansion exception 
request in the Federal Register, receipt of community input, and 
receipt of the requesting hospital's rebuttal notice, if any, CMS would 
first determine whether the hospital meets the criteria for an 
applicable hospital or high Medicaid facility (depending on the 
specific request). We are proposing to codify this part of the process 
at proposed Sec.  411.363(h). If CMS determines that the requesting 
hospital meets the criteria for an applicable hospital or high Medicaid 
facility, CMS would then decide whether to approve or deny the 
expansion exception request. As previously explained, it is our 
position that the authority granted to the Secretary in section 1877(i) 
of the Act provides CMS discretion to approve or deny an expansion 
exception request. In making its decision whether to approve or deny an 
expansion exception request, CMS would consider data and information 
provided by the hospital in its request, included in the community 
input, if any, and provided by the hospital in its rebuttal statement, 
if any. CMS may also consider any other data and information relevant 
to the basis for its decision. We are proposing to codify this part of 
the process at proposed Sec.  411.363(i)(1). Other data and information 
relevant to the basis for CMS' decision may include, but is not limited 
to, data and information that is publicly available, provided to CMS by 
the requesting hospital or interested parties in other contexts, or 
provided by CMS' law enforcement partners and other government agencies 
(whether publicly available or not). For example, CMS may use the 
internet or other sources to perform an environmental scan of the 
geographic area of the country in which the requesting hospital is 
located or intends to expand, identify trends, recent events, or 
planned events (such as expected population growth or new employers 
entering the local market), or review information related to the 
quality of care at the requesting hospital and other hospitals in its 
community.
    We are also proposing a nonsubstantive revision to the introductory 
language at existing Sec.  411.362(c)(2) and (3). Currently, these 
regulations state the criteria that an applicable hospital or high 
Medicaid facility, respectively, must satisfy. To more closely conform 
to our regulations

[[Page 27179]]

in 42 CFR part 411, subpart J, we are proposing to use the word 
``meets'' in place of ``satisfies'' in the introductory language of 
these regulations, which would be renumbered at Sec.  411.363(c) and 
(d) under our proposal.
(3) CMS Decision To Approve or Deny an Expansion Exception Request
    Proposed Sec.  411.363(i)(2) identifies factors that CMS would 
always consider when deciding whether to approve or deny an expansion 
exception request. These factors include: (1) the specialty (for 
example, maternity, psychiatric, or substance use disorder care) of the 
hospital or the services furnished by or to be furnished by the 
hospital if CMS approves the request; (2) program integrity or quality 
of care concerns related to the hospital; (3) whether the hospital has 
a need for additional operating rooms, procedure rooms, or beds; and 
(4) whether there is a need for additional operating rooms, procedure 
rooms, or beds in the county in which the main campus of the hospital 
is located, any county in which the hospital provides inpatient or 
outpatient hospital services as of the date the hospital submits the 
expansion exception request, or any county in which the hospital plans 
to provide inpatient or outpatient hospital services if CMS approves 
the request. We believe these factors are especially relevant to CMS' 
decision whether to approve or deny an expansion exception request; 
however, proposed Sec.  411.363(i)(2) does not limit CMS to the 
enumerated factors in making its decision. For example, CMS may also 
consider any other factors it deems relevant to its decision to approve 
or deny an expansion exception request, such as program integrity or 
quality concerns related to other hospitals in the requesting 
hospital's community or their ability to serve a growing patient 
population in the community. Expansion exception requests are now and 
would continue to be assessed on a case-by-case basis, and CMS would 
base its decision to approve or deny an expansion exception request on 
the totality of the information available to the agency. Thus, 
decisions to approve or deny requests from hospitals that appear 
similar with respect to overall capacity to serve Medicaid and other 
underserved populations could differ based on factors such as planned 
expansion of needed psychiatric services instead of general acute care 
services or whether the requesting hospital seeks an expansion 
exception to replace operating rooms, procedure rooms, or beds that it 
has relocated (or intends to relocate) from its main campus to other 
areas in need of services. (See section X.B.2.a.(4). of this proposed 
rule for a discussion of the relevance of the specialty of a hospital 
or the services it provides, and section X.B.2.b. of the preamble of 
this proposed rule for a discussion of a hospital's ability to relocate 
``original'' operating rooms, procedure rooms, and beds from its main 
campus without triggering the physician self-referral law's referral 
and billing prohibitions.)
    As required in section 1877(i)(3)(H) of the Act, no later than 60 
days after receiving a complete request, CMS will publish in the 
Federal Register notice of its final decision with respect to a 
hospital's expansion exception request. This requirement is codified in 
our regulations at existing Sec.  411.362(c)(7), which we are proposing 
to revise for clarity and renumber at Sec.  411.363(k). If CMS 
determines that the requesting hospital does not meet the criteria for 
an applicable hospital or high Medicaid facility (depending on the 
specific request), under proposed Sec.  411.363(b)(1), the hospital 
would not be eligible to request the expansion exception and CMS would 
not further consider the request. In that case, the required Federal 
Register notice would address only the determination that the 
requesting hospital does not meet the criteria for an applicable 
hospital or high Medicaid facility. If CMS determines that the 
requesting hospital meets the criteria for an applicable hospital or 
high Medicaid facility (depending on the specific request), as required 
by statute, CMS must decide whether to approve or deny the expansion 
exception request and publish its decision in the Federal Register. In 
that case, the required Federal Register notice would address both CMS' 
determination that the requesting hospital meets the criteria for an 
applicable hospital or high Medicaid facility (depending on the 
specific request) and its decision to approve or deny the request.
    Section 1877(i)(3)(I) of the Act and our regulation at existing 
Sec.  411.362(c)(8) state that there shall be no administrative or 
judicial review under section 1869 of the Act, section 1878 of the Act, 
or otherwise of the expansion exception process (including the 
establishment of such process). We interpret the statute to mean that 
neither the process itself nor CMS' decision whether to approve or deny 
an expansion exception request are subject to administrative or 
judicial review. We are proposing to revise the regulation to expressly 
state that the limitation on review of the expansion exception process 
under Sec.  411.363 includes any CMS determination or decision under 
the process. This would include determinations regarding whether a 
hospital meets the criteria for an applicable hospital or high Medicaid 
facility and decisions regarding whether to approve or deny a 
hospital's request. The regulation, if finalized, would be renumbered 
at Sec.  411.363(l).
(4) Required Information From a Requesting Hospital
    Existing Sec.  411.362(c)(4)(ii) sets forth information that must 
be included in an expansion exception request in order for CMS to 
consider the request. We are proposing to revise the introductory 
language of this regulation and renumber it at Sec.  411.363(e)(2) to 
clarify that inclusion of the required information is a prerequisite to 
consideration of the request by CMS. We are not proposing any revisions 
to existing Sec.  411.362(c)(4)(ii)(A), which requires that an 
expansion exception request must include the name, address, National 
Provider Identification number(s) (NPI), Tax Identification Number(s) 
(TIN), and CMS Certification Number(s) (CCN) of the hospital requesting 
the expansion exception; however, we are proposing to renumber this 
regulation at Sec.  411.363(e)(2)(i). We are proposing to revise 
existing Sec.  411.362(c)(4)(ii)(C), which requires that an expansion 
exception request must include the name, title, address, and daytime 
telephone number of a contact person who will be available to discuss 
the request with CMS on behalf of the requesting hospital, to also 
require an electronic mail address for correspondence with the contact 
person. We are also proposing to clarify that the request must include 
an address for receipt of hard copy mail by the contact person. 
Finally, we are proposing to renumber this regulation at Sec.  
411.363(e)(2)(iii).
    We are proposing to revise existing Sec.  411.362(c)(4)(ii)(B) and 
renumber this regulation at Sec.  411.363(e)(2)(ii). As proposed, the 
request must include the name of the county in which the main campus of 
the requesting hospital is located and the names of any counties in 
which the hospital provides inpatient or outpatient hospital services 
or plans to provide inpatient or outpatient hospital services if CMS 
approves the request. It is important to our ability to thoroughly 
consider an expansion exception request to understand where the 
expansion facility capacity would be located--which would be the main 
campus of the hospital in all instances if we finalize our proposals to 
reinstate certain program integrity restrictions as described in 
section X.B.2.b. of the

[[Page 27180]]

preamble of this proposed rule--as well as other counties where the 
hospital may be relocating ``original'' operating rooms, procedure 
rooms, and beds from its main campus to expand its inpatient and 
outpatient services.
    Under existing Sec.  411.362(c)(4)(ii)(D), an expansion exception 
request must include a statement identifying the hospital as an 
applicable hospital or high Medicaid facility and a detailed 
explanation with supporting documentation regarding whether and how the 
hospital satisfies each of the criteria for an applicable hospital or 
high Medicaid facility. In addition, the request must state that the 
requesting hospital does not discriminate against beneficiaries of 
Federal health care programs and does not permit physicians practicing 
at the hospital to discriminate against such beneficiaries. We are 
proposing that the first element of existing Sec.  411.362(c)(4)(ii)(D) 
(identification as an applicable hospital or high Medicaid facility and 
supporting document regarding satisfaction of the criteria for such) 
would apply only to the calculations and comparisons required to show 
that a hospital is an applicable hospital or high Medicaid facility. We 
are also proposing to renumber this regulation at Sec.  
411.363(e)(2)(iv) and replace the word ``satisfies'' with the word 
``meets'' to conform to the conventions in our regulations as explained 
in section X.B.2.a.(2). of the preamble of this proposed rule. We are 
proposing to move the requirement regarding nondiscrimination to a 
separate regulation at proposed Sec.  411.363(e)(2)(v) and revise this 
requirement to state that the expansion exception request must include 
a statement and, if available, supporting documentation regarding the 
hospital's compliance with the requirement that it does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries. The existing regulation requires only that 
the expansion exception request must state that the hospital does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries. Although we believe that most parties would 
understand that we require the requesting hospital to show that it 
meets this criterion for applicable hospitals (proposed Sec.  
411.363(c)(3)) and high Medicaid facilities (proposed Sec.  
411.363(d)(3)), for clarity, we are proposing to revise the regulation 
to expressly require a statement that explains how the hospital meets 
the criterion (as opposed to merely stating that it meets the 
criterion).
    The needs of all patients, but especially Medicaid beneficiaries 
and other underinsured or underserved populations, for specialty care--
such as maternity, psychiatric, and substance use disorder care--often 
go unaddressed. Both the Department and CMS have prioritized improving 
access to maternal health services, psychiatric care, and substance use 
disorder treatment. (See, for example, the White House Blueprint for 
Addressing the Maternal Health Crisis, https://www.whitehouse.gov/wp-content/uploads/2022/06/Maternal-Health-Blueprint.pdf, and CMS 
Behavioral Health Strategy, https://www.cms.gov/cms-behavioral-health-strategy.) We believe it is important to understand whether and how a 
hospital requesting an expansion exception could improve access for 
underserved populations to these critically necessary services if the 
request is approved. Therefore, we are proposing to require that, in 
addition to the documentation supporting the hospital's calculations of 
its baseline facility capacity, the hospital's current facility 
capacity, and the number of operating rooms, procedure rooms, and beds 
by which the hospital is requesting to expand that is currently 
required at existing Sec.  411.362(c)(4)(ii)(E), the expansion 
exception request must include information regarding whether and how 
the hospital has used any previously-approved expansion facility 
capacity and whether it plans to use expansion facility capacity to 
provide specialty services if the request is approved. We are proposing 
to include this revised requirement at Sec.  411.363(e)(2)(vi) 
(renumbered from existing Sec.  411.362(c)(4)(ii)(E)).
    Finally, we are proposing to require at new Sec.  
411.363(e)(2)(vii) that an expansion exception request must include 
information regarding the requesting hospital's need for additional 
operating rooms, procedure rooms, or beds to serve Medicaid, uninsured, 
and underserved populations. Under proposed Sec.  411.363(e)(2)(vii), 
the request must also include information regarding the need 
(generally) for additional operating rooms, procedure rooms, or beds in 
the county in which the main campus of the hospital is located, any 
county in which the hospital provides inpatient or outpatient hospital 
services as of the date the hospital submits the request, and any 
county in which the hospital plans to provide inpatient or outpatient 
hospital services if CMS approves the request. We are not prescribing 
the data points or other criteria the requesting hospital should or may 
use to support its assertion of need for expansion facility capacity. 
We believe that an important purpose of authorizing the Secretary to 
approve expansion of a hospital's facility capacity is to allow limited 
growth of grandfathered hospitals in circumstances of clear community 
need. (See, for example, Conference Committee report, H. Rept. No. 443, 
111th Cong., 2nd Sess. 357 (2010) and 76 FR 42353 and 74524.) And, 
because the criteria to qualify to request an expansion exception (that 
is, to meet the criteria for an applicable hospital or high Medicaid 
facility) focus on inpatient admissions under Medicaid, we believe that 
approved expansion facility capacity should be used, at least in part, 
to address the need for services to Medicaid and other underserved 
populations in the community where the hospital's main campus is 
located. Knowing whether a requesting hospital has used or failed to 
use previously-approved expansion facility capacity in this way, as 
well as whether the requesting hospital has previously-approved but 
unused expansion facility capacity available to it, is pertinent to our 
decision to approve or deny the current request.
    Finally, we are proposing to revise existing Sec.  411.362(c)(4)(i) 
and renumber it at Sec.  411.363(e)(1) to eliminate the requirement 
that an original and one copy of a written expansion exception request 
must be mailed to CMS. Instead, all expansion exception requests would 
be submitted electronically to CMS according to the instructions 
specified on the CMS website. This is consistent with current agency 
practice with respect to other submissions, such as advisory opinion 
requests and submissions under the CMS Voluntary Self-Referral 
Disclosure Protocol (SRDP). Similarly, we are proposing at Sec.  
411.363(e)(1) to require that the signed certification required under 
existing Sec.  411.362(c)(4)(iii) and proposed Sec.  411.363(e)(3) must 
be submitted only in electronic form and according to the instructions 
specified on the CMS website. For consistency with the SRDP, which also 
requires specific certifications related to submissions to CMS, we are 
proposing to revise the definition of ``authorized representative'' at 
proposed Sec.  411.363(e)(3) to mean the chief executive officer, chief 
financial officer, or other individual who is authorized by the 
hospital to make the request.

[[Page 27181]]

(5) Community Input
    Existing Sec.  411.362(c)(5) implements the mandate at section 
1877(i)(3)(A)(ii) of the Act that the expansion exception process 
provides individuals and entities in the community in which the 
requesting hospital is located with the opportunity to provide input 
with respect to the request. We believe that the Congress intended for 
hospitals, patients, and others that are most likely to be affected by 
the expansion of the requesting hospital to have input in CMS' decision 
whether to approve or deny the request, as well as to provide 
information that may confirm or refute the requesting hospital's claim 
that it meets the criteria for an applicable hospital or high Medicaid 
facility. Our current regulations do not define the ``community'' in 
which the requesting hospital is located. To eliminate uncertainty, we 
are proposing to define the requesting hospital's ``community'' at 
proposed Sec.  411.363(f)(3)(ii) to include the geographic area served 
by the hospital, as defined at Sec.  411.357(e)(2) of our regulations, 
and the counties in which the requesting hospital's main campus is 
located, the requesting hospital provides inpatient or outpatient 
hospital services as of the date the hospital submits the expansion 
exception request, and the requesting hospital plans to provide 
inpatient or outpatient hospital services if CMS approves the request. 
Certain exceptions to the physician self-referral law's prohibitions 
identify the geographic area served by a hospital to define the 
location where certain activity may occur (for example, the location of 
a recruited physician's medical practice). We believe it is desirable 
to employ a consistent approach to identifying a hospital's service 
area for purposes of our exceptions and identifying which individuals 
and entities are eligible to provide input related to an expansion 
exception request. Under proposed Sec.  411.363(f)(2), the requesting 
hospital must provide actual notification that it is requesting an 
expansion exception directly to hospitals whose data are part of the 
comparisons required to determine whether the hospital meets the 
criteria for an applicable hospital or high Medicaid facility 
(depending on the specific request) and to hospitals located in the 
requesting hospital's community. Thus, individuals and entities in the 
requesting hospital's community that wish to provide input related to 
the expansion exception request would be aware of the request. We 
recognize that, by defining the requesting hospital's ``community,'' 
input from individuals and entities that are not located in the defined 
areas could be excluded from consideration by CMS when reviewing a 
hospital's expansion exception request. If we finalize this proposal, 
we would encourage parties that wish to have their input considered to 
address how they are part of the requesting hospital's community in 
their submissions.
    The type of community input that we will accept is not restricted 
in any way (76 FR 74522). However, to support the two-step process for 
first determining whether a requesting hospital is eligible to request 
an expansion exception and, if so, deciding whether to approve or deny 
the request, we are proposing to revise existing Sec.  411.362(c)(5) 
and renumber it at Sec.  411.363(f)(3) to state that individuals and 
entities in the requesting hospital's community may provide input 
regarding, but not limited to: (i) whether the hospital is eligible to 
request the expansion exception; and (ii) the factors that CMS will 
consider in deciding whether to approve or deny an expansion exception 
request. (See section X.B.2.a.(3). of the preamble of this proposed 
rule for a discussion of the factors.) We believe that this regulatory 
language would encourage individuals and entities submitting input with 
respect to an expansion exception request to provide data and 
information that confirms or refutes the requesting hospital's 
eligibility to request an expansion exception, as well as information 
pertinent to CMS' decision whether to approve or deny the request.
    It is our experience that the volume of community input with 
respect to an expansion exception request can vary greatly. We have not 
received any community input on some requests and received hundreds of 
pages of community input on others. If we finalize our proposals to 
revise the expansion exception process, we believe that the community 
input would be more robust than what interested parties have 
historically submitted because language in prior approval notices may 
have implied that we would not consider input unrelated to whether a 
requesting hospital met the criteria for an applicable hospital or high 
Medicaid facility (80 FR 55852). Therefore, to provide adequate time 
for interested parties to develop and submit community input, we are 
proposing to revise existing Sec.  411.362(c)(5) and renumber it at 
Sec.  411.363(f)(3)(iii) to provide a 60-day period following the 
publication of the notice of the expansion exception request in the 
Federal Register for the submission of community input. We do not 
believe that an extension of the 30-day period for the requesting 
hospital to submit a rebuttal statement is necessary, but seek comment 
regarding whether we should extend this timeframe to 60 days to provide 
the requesting hospital additional time to review any community input 
in light of our proposals in this proposed rule.
(6) Permissible Data Sources
    When we first established the expansion exception process, we 
required the use of data from the Healthcare Cost Report Information 
System (HCRIS) to perform the calculations necessary to show that a 
hospital meets the criteria for an applicable hospital or high Medicaid 
facility (76 FR 74518 through 74521). Following the implementation of 
the expansion exception process in 2012, hospitals and their 
representatives informed us of certain limitations regarding the 
required use of HCRIS data, and our own review confirmed that HCRIS was 
not sufficiently complete for all hospitals that wished to request an 
expansion exception to have access to the process because, at that 
time, HCRIS did not capture Medicaid managed care admissions or 
discharge data. We also recognized that, if all hospitals in the county 
in which the requesting hospital is located did not have Medicare 
provider agreements during each of the years for which comparisons are 
required, the requesting hospital would be unable to show that it met 
the statutory and regulatory criteria as an applicable hospital or high 
Medicaid facility (depending on the specific request) because HCRIS 
contains only the data of hospitals that participate in Medicare (79 FR 
66988). To address the limitations regarding the required use of HCRIS 
data, in the CY 2015 OPPS/ASC final rule, we modified the expansion 
exception process to permit the use of external data sources for the 
calculations necessary to estimate inpatient Medicaid admissions (79 FR 
66988 through 66993). Around the same time, CMS revised the hospital 
cost report to require reporting of Medicaid managed care discharges in 
addition to Medicaid fee-for-service discharges (79 FR 66990). We 
stated that, as a result of this revision, a correctly completed 
hospital cost report will include Medicaid managed care discharges; at 
some point in the future, HCRIS should be sufficiently complete to 
estimate the percentages of Medicaid inpatient admissions required 
under the statute and our regulations; and the limitations that led to 
permitting the use of external data sources will be resolved. 
Therefore, we modified our regulations at existing

[[Page 27182]]

Sec.  411.362(c)(2)(ii) and (c)(3)(ii) to permit the use of external 
data sources only until such time that the Secretary determines that 
HCRIS contains sufficiently complete inpatient Medicaid discharge data.
    HCRIS now contains sufficiently complete inpatient Medicaid 
discharge data to complete the calculations to estimate Medicaid 
inpatient admissions, both as currently required and as would be 
required if we finalize our proposals to revise the expansion exception 
process. Although the regulations at existing Sec.  411.362(c)(2)(ii) 
and (c)(3)(ii) do not require that the Secretary announce his 
determination that HCRIS contains sufficiently complete inpatient 
Medicaid discharge data through notice-and-comment rulemaking, we are 
nonetheless proposing at Sec.  411.363(c)(2) and (d)(2) to eliminate 
the use of external data sources for purposes of the expansion 
exception process with respect to requests submitted on or after 
October 1, 2023 (the anticipated effective date of the revised 
regulations if our proposals are finalized). As we stated in the CY 
2012 OPPS/ASC final rule, we believe that requiring the use of HCRIS 
data for all expansion exception requests will result in the use of 
uniform and consistent data, which will minimize inconsistent 
application of the criteria for applicable hospitals and high Medicaid 
facilities (76 FR 74518).
    We recognize that requiring the use of HCRIS data for all expansion 
exception requests would not resolve every issue identified in the CY 
2015 OPPS/ASC proposed and final rules (79 FR 66988). For example, all 
the hospitals to which the requesting hospital must compare itself (the 
comparison hospitals) may not have participated in Medicare in all 
years for which comparisons are required. And, as commenters pointed 
out in response to our proposals in the CY 2015 OPPS/ASC proposed rule, 
in some states, external data sources may not contain data sufficient 
for requesting hospitals to make the comparisons required under the 
statute and our existing regulations because those states do not 
require all hospitals to report their Medicaid inpatient admission data 
(79 FR 66991). Even so, we do not believe that it is necessary to 
continue to permit the use of external data sources for purposes of the 
expansion exception process. We anticipate that requiring the use of 
HCRIS data for all comparison calculations would have little practical 
impact on whether a requesting hospital meets the criteria for an 
applicable hospital or high Medicaid facility, and do not believe that 
a requesting hospital would be prejudiced by this requirement. It is 
unlikely that a hospital that elects not to participate in Medicare 
would nonetheless participate in its state Medicaid program, and a 
hospital that participates in Medicaid (which an applicable hospital or 
high Medicaid facility almost certainly would) should have a higher 
percentage of Medicaid inpatient admissions than a comparison hospital 
that does not participate in Medicaid. Therefore, even though sections 
1877(i)(3)(E)(ii) and (F)(ii) of the Act necessitate the use of data 
regarding Medicaid inpatient admissions for each hospital in the county 
in which the requesting hospital is located, using our authority at 
sections 1871 and 1877 of the Act, we are proposing that the 
comparisons required to show that a hospital meets the Medicaid 
inpatient admissions criteria for an applicable hospital at proposed 
Sec.  411.363(c)(2) or high Medicaid facility at proposed Sec.  
411.363(d)(2) must be made using only data from those hospitals that 
have a Medicare participation agreement with CMS.
    Based on our understanding of congressional intent with respect to 
the expansion exception process, we do not believe that the Congress 
anticipated, much less intended, that a hospital willing to expand its 
number of operating rooms, procedure rooms, and beds in a community in 
which there is a clear need for additional capacity would be foreclosed 
from doing so if one or more of the other hospitals in that community 
did not participate in Medicare or if Medicaid inpatient admissions 
data was otherwise unavailable for all hospitals in the county in which 
the requesting hospital is located. We consider our proposal to align 
with the intent of the Congress in establishing the criteria for 
applicable hospitals and high Medicaid facilities, and are confident 
that it would provide a robust comparison that allows CMS to be sure 
the requesting hospital has a history of and commitment to serving 
Medicaid beneficiaries, uninsured patients, and other underserved 
populations. We believe that our proposal to permit only the use of 
HCRIS data for purposes of the calculations required at proposed Sec.  
411.363(c)(2) and (d)(2) while requiring comparisons only to hospitals 
that have a Medicare provider agreement with CMS strikes the 
appropriate balance between effectuating the intent of the statute and 
requiring strict compliance with the exact standards set forth in 
sections 1877(i)(3)(E)(ii) and (F)(ii) of the Act.
    We are also proposing to revise the terminology used in our 
regulations to describe the comparisons that a hospital requesting an 
expansion exception must make in order to show that it is an applicable 
hospital or high Medicaid facility. We are doing so solely for 
consistency in the terminology; we do not view this as a change to our 
interpretation of the statutory requirements for the comparisons. 
Section 1877(i)(3)(E) of the Act defines the term ``applicable 
hospital'' and section 1877(i)(3)(F) of the Act defines the term ``high 
Medicaid facility.'' With respect to Medicaid inpatient admissions, an 
applicable hospital is a hospital whose annual percent of Medicaid 
inpatient admissions is equal to or greater than the average percent 
with respect to such admissions for ``all'' hospitals located in the 
county where the hospital is located, and a high Medicaid facility is a 
hospital that, with respect to each of the 3 most recent years for 
which data are available, has an annual percent of Medicaid inpatient 
admissions that is greater than the percent of Medicaid inpatient 
admissions for ``any other'' hospital in the county. Our regulations 
use the terms ``all'' hospitals (with respect to applicable hospitals) 
and ``every'' hospital (with respect to high Medicaid facilities). In 
setting forth the permissible data sources to be used for making the 
required comparisons, our regulations use the term ``all'' hospitals 
(with respect to applicable hospitals) and ``every other'' hospital 
(with respect to high Medicaid facilities). We interpret the statute to 
mean that a hospital requesting an expansion exception as an applicable 
hospital must use data for itself and each of the other hospitals in 
the county in which it is located to determine the county average for 
Medicaid inpatient admissions, and a hospital requesting an expansion 
exception as a high Medicaid facility must compare itself to each of 
the other hospitals in the county in which it is located. We do not 
view the term ``any other''--as used in section 1877(i)(3)(F) of the 
Act--and the terms ``each,'' ``every,'' and ``every other''--as used in 
our regulations--to have disparate meanings or refer to different 
subsets of comparison hospitals. However, for consistency and to 
eliminate any misinterpretation of the comparison requirements, we are 
proposing to revise the references in our regulations to refer to 
``each'' or ``each other'' hospital (where appropriate). We are not 
proposing to revise the reference in existing Sec.  411.362(c)(2)(ii) 
(with respect to applicable hospitals) to the average percent of 
Medicaid inpatient admissions for ``all'' hospitals located in

[[Page 27183]]

the county where the requesting hospital is located, as the existing 
language is consistent with the required comparison. However, for 
clarity, we are proposing at renumbered Sec.  411.363(c)(2) to 
expressly state that the requesting hospital's percent of Medicaid 
inpatient admissions must be included with the percent of Medicaid 
inpatient admissions for each of the other hospitals in the county when 
determining the average percent of Medicaid inpatient admissions for 
``all'' hospitals in the county in which the requesting hospital is 
located.
    Under proposed Sec.  411.363(c)(2), to meet the Medicaid inpatient 
admissions criterion for an applicable hospital, the requesting 
hospital must have an annual percent of total inpatient admissions 
under Medicaid that is equal to or greater than the average percent 
with respect to such admissions for all hospitals (including the 
requesting hospital) that have Medicare participation agreements with 
CMS and are located in the county in which the requesting hospital is 
located during the most recent 12-month period for which data are 
available as of the date that the hospital submits its request. For 
purposes of this proposed regulation, the most recent 12-month period 
for which data are available means the most recent 12-month period for 
which the data source used contains all data from the requesting 
hospital and each other hospital that has a Medicare participation 
agreement with CMS and is located in the county in which the requesting 
hospital is located. With respect to requests submitted on or after 
October 1, 2023 (the anticipated effective date of the revised 
regulations if our proposals are finalized), a hospital may use only 
filed Medicare hospital cost report data from HCRIS to estimate its 
annual percent of total inpatient admissions under Medicaid and the 
average percent with respect to such admissions for all hospitals 
(including the requesting hospital) in the county in which the hospital 
is located. Under proposed Sec.  411.363(d)(2), to meet the Medicaid 
inpatient admissions criterion for a high Medicaid facility, with 
respect to each of the three most recent 12-month periods for which 
data are available as of the date the hospital submits its request, the 
requesting hospital has an annual percent of total inpatient admissions 
under Medicaid that is estimated to be greater than such percent with 
respect to such admissions for each other hospital that has a Medicare 
participation agreement with CMS and is located in the county in which 
the requesting hospital is located. For purposes of this proposed 
regulation, the most recent 12-month period for which data are 
available means the most recent 12-month period for which the data 
source used contains all data from the requesting hospital and each 
other hospital that has a Medicare participation agreement with CMS and 
is located in the county in which the requesting hospital is located. 
With respect to requests submitted on or after October 1, 2023 (the 
anticipated effective date of the revised regulations if our proposals 
are finalized), a hospital may use only filed Medicare hospital cost 
report data from HCRIS to estimate its annual percent of total 
inpatient admissions under Medicaid and the average percent with 
respect to such admissions for each other hospital that has a Medicare 
participation agreement with CMS and is located in the county in which 
the hospital is located.
    It is possible that a facility that is provider-based to a hospital 
is located in a county other than the county in which the main campus 
of the hospital is located. To provide clarity for purposes of 
completing the necessary calculations to demonstrate that a hospital 
meets the criteria for an applicable hospital or high Medicaid 
facility, we are proposing at Sec.  411.363(c)(6) and (d)(4), 
respectively, to consider the location of a hospital to be the county 
or State, as applicable, in which the main campus of the hospital is 
located. This would apply to the requesting hospital and any hospital 
to which the requesting hospital must compare itself for purposes of 
the calculations related to percentage increase in population, Medicaid 
inpatient admissions, average bed capacity, and average bed occupancy 
rate.
(7) Timing of a Complete Request
    In the CY 2015 OPPS/Ambulatory Surgical Center (ASC) final rule, in 
addition to expanding the permissible data sources a hospital may use 
to show that it meets the criteria for either an applicable hospital or 
high Medicaid facility, we also amended the expansion exception process 
to increase the period of time after which an exception request will be 
deemed complete when an external data source is used by a requesting 
hospital or in the public comments to determine whether a hospital 
meets the criteria for either an applicable hospital or high Medicaid 
facility, reasoning that it is possible (if not likely) that, when 
reviewing an expansion exception request, CMS would need to verify the 
data (and other information, if any) provided by the requesting 
hospital and any commenters, as well as consider the data in light of 
the information otherwise available to CMS (79 FR 66995). Because we 
are proposing that only filed Medicare hospital cost report data from 
HCRIS may be used to show that the requesting hospital meets the 
criteria for either an applicable hospital or high Medicaid facility, 
we do not believe that we would need the full 180 days currently 
provided for at existing Sec.  411.362(c)(5)(ii) to deem an expansion 
exception request complete. Therefore, we are proposing to revise and 
renumber this regulation to deem an expansion exception request 
complete no later than 90 days after the end of the 60-day comment 
period if CMS does not receive written comments from the community, or 
no later than 90 days after the end of the 30-day rebuttal period, 
regardless of whether the requesting hospital submits a rebuttal 
statement, if CMS receives written comments from the community. The 
proposed regulation would be renumbered at Sec.  411.363(g), which 
would also include our other existing regulations related to the timing 
of a complete expansion exception request, amended to recognize the 
proposed increase to a 60-day period for community input. Because the 
data used for the Medicaid inpatient admissions comparisons, as well as 
the data for the other calculations required under the expansion 
exception process, would be maintained by CMS, we believe that 90 days 
would be sufficient to review the data and information in the expansion 
exception request, community input (if any), and rebuttal statement (if 
any) regarding whether the requesting hospital is eligible to request 
the expansion exception under proposed Sec.  411.363(b) and whether CMS 
should approve or deny the request. We note that our proposals would 
not affect expansion exception requests submitted before the effective 
date of the revised regulations, if finalized.
(8) Summary of the Expansion Exception Process as Proposed
    To facilitate comments on the proposals set forth in this section 
X.B.2.a., we believe it is helpful to provide a brief, high-level 
summary of the expansion exception process as proposed. We note that, 
in many respects, the existing expansion exception process includes the 
same steps. Under our proposals, a hospital would submit its expansion 
exception request to CMS. CMS would confirm that the request includes 
all required information and that the hospital is not precluded from 
requesting the expansion exception under proposed

[[Page 27184]]

Sec.  411.363(b)(2). CMS would confirm the accuracy of the required 
calculations (as we do currently). If the requesting hospital has 
performed the required calculations incorrectly, it is CMS' practice to 
inform the hospital of the error(s) and work with the hospital to 
ensure the required calculations are performed correctly. We would 
continue this practice under the proposed expansion exception process. 
After these steps are completed, if the hospital does not withdraw the 
expansion exception request, CMS would publish notice of the expansion 
exception request in the Federal Register. Community input could be 
submitted during the stated comment period. If CMS receives community 
input on the expansion exception request, it would be provided to the 
requesting hospital. The hospital would have 30 days to submit a 
rebuttal statement if it chooses to do so. CMS would then consider the 
information included in the expansion exception request, community 
input (if any), and rebuttal statement (if any), as well as other 
information available to CMS that may be relevant to: (1) its 
determination whether the hospital meets the criteria for an applicable 
hospital or high Medicaid facility and (2) its decision whether to 
approve or deny the expansion exception request. CMS would publish 
notice of its determination whether the requesting hospital meets the 
criteria for an applicable hospital or high Medicaid facility in the 
Federal Register. If CMS determines that the requesting hospital meets 
the criteria for an applicable hospital or high Medicaid facility, CMS 
would also publish notice of its decision to approve or deny the 
expansion exception request in the same Federal Register notice.
b. Program Integrity Restrictions on Approved Facility Expansion
    As discussed in sections X.B.1.b. and X.B.2.a. of the preamble of 
this proposed rule, in the CY 2012 OPPS/ASC final rule, we issued 
regulations setting forth the expansion exception process at Sec.  
411.362(c) and related definitions at Sec.  411.362(a) (76 FR 74122). 
Using our rulemaking authority in sections 1871 and 1877(i)(3) of the 
Act, we extended to high Medicaid facilities certain statutory program 
integrity restrictions related to the expansion exception process that 
applied expressly by statute to applicable hospitals. In the CY 2021 
OPPS/ASC final rule, we removed the regulatory program integrity 
restrictions on high Medicaid facilities as noted in sections X.B.1.b. 
and X.B.2.a. of the preamble of this proposed rule. There, we stated 
that we continue to believe that our then-current regulations, for 
which the Secretary appropriately used his authority and which treat 
high Medicaid facilities the same as applicable hospitals, are 
consistent with the Congress' intent to prohibit expansion of 
physician-owned hospitals generally (85 FR 86256). Nevertheless, 
because the statute does not expressly apply to high Medicaid 
facilities the program integrity restrictions related to the frequency 
of permitted requests for exceptions to the prohibition on expansion of 
facility capacity, the total amount of permitted expansion of facility 
capacity, or the location of permitted expansion facility capacity, 
citing the former Patients over Paperwork initiative, we removed these 
restrictions from our regulations as they applied to high Medicaid 
facilities (Id.).
    Section 1877(i)(3)(B) of the Act provides that the expansion 
exception process shall permit an applicable hospital to apply for an 
exception to the prohibition on expansion of facility capacity up to 
once every 2 years. In extending this provision to high Medicaid 
facilities, we stated that, although the statute provides that an 
applicable hospital may request an exception up to once every 2 years, 
we believe that providing a high Medicaid facility the opportunity to 
request an exception once every 2 years (while also limiting its total 
growth) balances the Congress' intent to prohibit expansion of 
physician-owned hospitals with the purpose of the exception to the 
prohibition on expansion of facility capacity (76 FR 74524). We did not 
receive any public comments regarding the frequency of exception 
requests. Until January 1, 2021, under our regulations, both applicable 
hospitals and high Medicaid facilities could request an exception to 
the prohibition on expansion of facility capacity up to once every 2 
years from the date of a CMS decision on the hospital's most recent 
request.
    Section 1877(i)(3)(C)(ii) of the Act provides that the Secretary 
shall not permit an increase in an applicable hospital's facility 
capacity to the extent such increase would result in the number of 
operating rooms, procedure rooms, and beds for which the applicable 
hospital is licensed exceeding 200 percent of the applicable hospital's 
baseline facility capacity. In adopting a parallel limit on the 
increase in facility capacity that a high Medicaid facility may 
request, we noted that, in response to our request for comment on 
whether the 200 percent limit would be sufficient to balance the intent 
of the general prohibition on facility expansion with the purpose of 
the exception process--which is to provide the opportunity to expand in 
areas where a sufficient need for access to high Medicaid facilities is 
demonstrated--commenters supported our proposal regarding the amount of 
permitted increase and at least one commenter specifically supported 
the parallel treatment of high Medicaid facilities (76 FR 74524). Until 
January 1, 2021, under our regulations, a 200 percent limitation 
applied to both applicable hospitals and high Medicaid facilities.
    Section 1877(i)(3)(D) of the Act provides that any increase in the 
number of operating rooms, procedure rooms, and beds for which an 
applicable hospital is licensed may occur only in facilities on the 
main campus of the applicable hospital. In extending this limitation on 
the location of expansion facility capacity to high Medicaid 
facilities, we explained that we believe that applying the same 
limitation to applicable hospitals and high Medicaid facilities will 
result in an efficient and consistent process (76 FR 74524). We did not 
receive any public comments regarding the location of the permitted 
increase. Until January 1, 2021, under our regulations, expansion 
facility capacity could occur only in facilities on the hospital's main 
campus.
    In the CY 2021 OPPS/ASC final rule, we revised the regulations that 
set forth the expansion exception process with respect to high Medicaid 
facilities to remove certain regulatory restrictions that are not 
included in section 1877(i) of the Act (85 FR 86256). As of January 1, 
2021, a high Medicaid facility may request an exception to the 
prohibition on expansion of facility capacity more frequently than once 
every 2 years; may request to expand its facility capacity beyond 200 
percent of the hospital's baseline number of operating rooms, procedure 
rooms, and beds; and, if its request is granted, is not restricted to 
locating approved expansion facility capacity on the hospital's main 
campus. Under our existing regulations, an applicable hospital remains 
subject to the statutory limitation on the frequency of requests for an 
expansion exception (no more than once every 2 years); may not request 
to expand its facility capacity beyond 200 percent of the hospital's 
baseline facility capacity; and, if its request is granted, is 
restricted to locating approved expansion facility capacity on the 
hospital's main campus. We remain steadfast in our belief that the 
Secretary appropriately used his authority in the CY 2012 OPPS/ASC 
final rule in establishing an expansion

[[Page 27185]]

exception process that treated high Medicaid facilities the same as 
applicable hospitals, and that such treatment is consistent with the 
Congress' intent to prohibit expansion of physician-owned hospitals 
generally. As previously noted, the removal of the program integrity 
restrictions as they apply to high Medicaid facilities was not the 
result of a determination that they were unnecessary. Rather, the 
purpose of the regulatory change was to streamline regulations in order 
to eliminate burden under the former Patients over Paperwork 
initiative. Commenters opposed to our proposal to remove the program 
integrity restrictions on high Medicaid facilities highlighted their 
concern that a hospital that meets the criteria for a high Medicaid 
facility could expand into markets without large Medicaid patient 
populations, creating additional campuses far away from the patients 
the expansion is intended to serve. In addition, commenters asserted 
that physician-owned hospitals present a risk of program or patient 
abuse--through cherry-picking patients, avoiding Medicaid and uninsured 
patients, and treating fewer medically complex patients--and 
unrestricted expansion of such hospitals could exacerbate the risk (85 
FR 86256 through 86257). Despite the program integrity concerns 
identified by commenters on the CY 2021 OPPS/ASC proposals, the 
regulations were revised to remove a perceived burden on high Medicaid 
facilities because the program integrity restrictions are not expressly 
required in section 1877(i) of the Act.
    We recently reviewed the CY 2021 OPPS/ASC regulatory revisions, 
including the comments on our then-proposals, and considered whether 
those revisions currently pose a risk of the types of program or 
patient abuse that the physician self-referral law is intended to 
thwart. We also reviewed community input related to the expansion of 
physician-owned hospitals generally that we received in conjunction 
with an expansion exception request decided after the effective date of 
the CY 2021 OPPS/ASC final rule. One of the comments included in the 
community input asserted that the removal of the program integrity 
restrictions on high Medicaid facilities posed grave risk to the 
stability and integrity of patient care, and another asserted that 
removal of the restrictions contravenes and undermines the Congress' 
intent to strictly limit physician-owned hospital expansion. Following 
this recent review, we believe that not applying the program integrity 
restrictions regarding the frequency of expansion exception requests, 
maximum aggregate expansion of a hospital, and location of expansion 
facility capacity to high Medicaid facilities poses a significant risk 
of program or patient abuse. Although we are cognizant that the plain 
language of section 1877(i) of the Act does not expressly apply these 
program integrity restrictions to high Medicaid facilities in the same 
way that they are applied to applicable hospitals, we must balance the 
risk to patients and the Medicare program against any burden that the 
program integrity restrictions may impose on high Medicaid facilities. 
It is our position that protecting the Medicare program and its 
beneficiaries, as well as Medicaid beneficiaries, uninsured patients, 
and other underserved populations, from harms such as overutilization, 
patient steering, cherry-picking, and lemon-dropping outweighs any 
perceived burden on high Medicaid facilities. In addition, we believe 
that treating all hospitals the same under the expansion exception 
process by applying the program integrity restrictions to both 
applicable hospitals and high Medicaid facilities will promote 
consistency among decisions to approve or deny expansion exception 
requests. For these reasons, we are proposing to reinstate the program 
integrity restrictions regarding the frequency of expansion exception 
requests, maximum aggregate expansion of a hospital, and location of 
expansion facility capacity as they apply to high Medicaid facilities.
    We are proposing to revise existing Sec.  411.362(c)(6) to 
reinstate, with respect to high Medicaid facilities, the program 
integrity restrictions on the maximum aggregate expansion of a hospital 
and location of expansion facility capacity. We are also proposing to 
renumber this regulation at Sec.  411.363(j). We note that these 
program integrity restrictions would not apply to an increase in 
facility capacity approved by CMS with respect to an expansion 
exception request submitted by a high Medicaid facility between January 
1, 2021 and September 30, 2023 (the day before the anticipated 
effective date of the revised regulations if our proposals are 
finalized). We are not proposing any change to these program integrity 
restrictions with respect to applicable hospitals, which have 
consistently applied to such hospitals under our regulations since 
January 1, 2012. In addition to the regulation at proposed Sec.  
411.363(j), the program integrity restriction on the maximum aggregate 
expansion of a hospital is also implemented at proposed Sec.  
411.363(b)(2)(i), which provides that a hospital is not eligible to 
request an expansion exception if CMS has previously approved a request 
from the hospital that would allow the hospital's facility capacity to 
reach 200 percent of its baseline facility capacity if the full 
expansion is utilized. We note that all but two of the expansion 
exception requests approved to date have permitted an increase in 
facility capacity that, if fully utilized, would allow the requesting 
hospital to reach 200 percent of its baseline number of operating 
rooms, procedure rooms, and beds. (See https://www.cms.gov/medicare/fraud-and-abuse/physicianselfreferral/physician_owned_hospitals.) 
Therefore, those hospitals would be ineligible to submit a future 
expansion exception request on or after the effective date of the 
revised regulations if our proposal is finalized. The two hospitals 
that were approved for expansion facility capacity less than their 
baseline number of operating rooms, procedure rooms, and beds would not 
be precluded from submitting a future expansion exception request if 
they meet the eligibility requirements for making an expansion 
exception request at proposed Sec.  411.363(b) at the time of the 
request.
    The program integrity restriction on the location of expansion 
facility capacity at proposed Sec.  411.363(j) would require that any 
approved expansion occur only on the main campus of the hospital. 
However, nothing in our existing physician self-referral regulations or 
our proposals in this section X.B.2.b. would affect a hospital's 
ability to relocate some or all of the ``original'' operating rooms, 
procedure rooms, or beds that are part of its baseline facility 
capacity. On April 18, 2019, we published on the CMS website a 
Frequently Asked Question (FAQ) regarding this issue (https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf). The FAQ states:
    Question: Where the Secretary has granted a physician-owned 
hospital (``POH'') an exception to the prohibition on facility 
expansion under section 1877(i) of the Social Security Act (the 
``Act'') and existing 42 CFR 411.362(c), does the physician self-
referral law prohibit the POH from relocating operating rooms, 
procedure rooms, or beds that were licensed on March 23, 2010, from its 
main campus to a remote location of the POH before implementing the 
approved facility expansion on the POH's main campus?

[[Page 27186]]

    Answer: The physician self-referral law does not prohibit the 
relocation of operating rooms, procedure rooms, or beds that were 
licensed on March 23, 2010,\719\ from a POH's main campus to a remote 
location. However, because the regulation at existing 42 CFR 
411.362(c)(6) provides that any increase in the number of operating 
rooms, procedure rooms, or beds permitted by the Secretary through an 
exception may occur only in facilities on the POH's main campus, any 
operating rooms, procedure rooms, or beds added as a result of the 
Secretary's approval can be located only on the main campus of the POH 
and may not subsequently be relocated from the main campus. We note 
that all hospitals must comply with applicable Federal and state laws 
and regulations regarding, among other things, the licensure, location, 
construction, and use of operating rooms, procedure rooms, and beds. 
These laws and regulations may impose additional requirements or 
limitations on a POH that wishes to relocate operating rooms, procedure 
rooms, or beds from its main campus.
---------------------------------------------------------------------------

    \719\ In the case of a POH that did not have a provider 
agreement in effect as of March 23, 2010, but had a provider 
agreement in effect on December 31, 2010, the response provided in 
this FAQ would apply to beds, procedure rooms and operating rooms 
that were licensed on the effective date of such agreement.
---------------------------------------------------------------------------

    Our policy has not changed since the publication of the FAQ. We 
reiterate that the physician self-referral law does not prohibit the 
relocation of ``original'' operating rooms, procedure rooms, or beds 
from a hospital's main campus to a remote location, but note that a 
hospital that wishes to expand its service area by locating operating 
rooms, procedure rooms, or beds in a location beyond its main campus 
must comply with other Medicare, Federal, and State laws and 
regulations related to such expansion, which may require that actions 
occur in a particular sequential order. We also caution that, to avoid 
the physician self-referral law's referral and billing prohibitions 
under the rural provider or whole hospital exception, an ownership or 
investment interest must satisfy the requirements of the applicable 
exception at the time of the physician's referral, and the hospital 
must meet the requirements of section 1877(i) of the Act and existing 
Sec.  411.362 no later than September 23, 2011. Section 1877(i)(1)(A) 
of the Act and existing Sec.  411.362(b)(1) require that the hospital 
had physician ownership or investment on December 31, 2010, and a 
provider agreement under section 1866 of the Act on that date (emphasis 
added). Put another way, for a hospital to bill Medicare (or another 
individual, entity, or third-party payer) for a designated health 
service furnished as a result of a physician owner's referral following 
the relocation of ``original'' operating rooms, procedure rooms, or 
beds to a location other than the main campus of a hospital, the 
hospital (including all of its provider-based locations) must remain 
the same hospital that had both physician ownership or investment and a 
Medicare provider agreement on December 31, 2010. (See 87 FR 44798 for 
a complete discussion of this requirement.) Parties may request an 
advisory opinion from CMS regarding whether a hospital is (or would be) 
``the same hospital'' following the relocation of ``original'' 
operating rooms, procedure rooms, or beds to a location other than the 
main campus of a hospital.
    Finally, as discussed in section X.B.2.a.(2). of the preamble of 
this proposed rule, to ensure consistency in the application of the 
expansion exception process, as well as preserve CMS resources and 
maintain an orderly and efficient expansion exception process, we are 
also proposing, with respect to high Medicaid facilities, to reinstate 
the program integrity restriction on the frequency of expansion 
exception requests at proposed Sec.  411.363(b)(2)(ii). The proposed 
regulation provides that a hospital is not eligible to request an 
expansion exception unless it has been at least 2 calendar years from 
the date of the most recent decision by CMS approving or denying the 
hospital's most recent request for an exception from the prohibition on 
facility expansion. Applicable hospitals have been subject to this 
limitation under our regulations since the effective date of our CY 
2012 OPPS/ASC final rule, and we are not proposing any substantive 
change to the application of the limitation on applicable hospitals. 
However, we are proposing to slightly revise the language of existing 
Sec.  411.362(c)(1) and renumber it at Sec.  411.363(b)(2)(ii) as 
described in this section X.B.2.b. As noted, the limitation would apply 
uniformly to all hospitals requesting an expansion exception.
c. Technical and Grammatical Revisions
    We are proposing certain technical and grammatical revisions to the 
existing regulations in Sec.  411.362 and the proposed regulations in 
Sec.  411.363. First, we are proposing to revise the reference at Sec.  
411.362(b)(2) to the expansion exception process by substituting 
``Sec.  411.363'' (the proposed location of the regulations setting 
forth the expansion exception process) for the current reference to 
``paragraph (c) of this section.'' In addition, to conform the 
terminology regarding approval of a request to that used throughout our 
proposals in this section X.B.2. of the preamble of this proposed rule, 
we are also proposing to substitute the word ``approved'' for the 
current reference to ``granted'' at Sec.  411.362(b)(2). We are 
proposing to use the same phrasing of ``exception from the prohibition 
on facility expansion'' wherever that language appears in the 
regulation. We are proposing to use defined acronyms, such as HCRIS, 
where those terms appear following the initial designation of the 
acronym. In addition, we are specifying at proposed Sec.  411.363(l) 
that the references to section 1869 and 1878 in existing Sec.  
411.362(c)(8) are references to the Social Security Act. For 
consistency with our regulations in this subpart J, we are proposing to 
revise the term ``Web site'' to ``website'' wherever the term appears 
in existing Sec.  411.362. We are also proposing to change numbers to 
words and vice versa where those conventions are correct in the Code of 
Federal Regulations. Finally, we are proposing minor changes to correct 
grammatically the wording of certain regulations. For example, we are 
proposing to restate the regulation at existing Sec.  
411.362(c)(2)(iii) and renumber it at Sec.  411.363(b)(3) to read ``The 
hospital does not discriminate against beneficiaries of Federal health 
programs and does not permit physicians practicing at the hospital to 
discriminate against beneficiaries.'' Currently, the regulation does 
not include the words ``The hospital.''

C. Proposed Technical Corrections to 42 CFR 411.353 and 411.357

    On November 16, 2020, the Department issued a final rule titled 
``Regulatory Clean-up Initiative'' (85 FR 72899) that contained 
multiple technical corrections to various regulations. Among the 
changes finalized in that rule was an amendment to 42 CFR 411.353(d) to 
reflect an updated cross-reference to the definition of ``timely 
basis'' at 42 CFR 1003.110 (previously Sec.  1003.101), as updated by 
81 FR 88334 on December 7, 2016. However, in our December 2, 2020 (85 
FR 77492) final rule entitled ``Medicare Program; Modernizing and 
Clarifying the Physician Self-Referral Regulations'' (hereinafter 
referred to as the ``MCR final rule''), we inadvertently reverted to 
the prior regulatory text. There were also additional typographical 
errors in the text of 42 CFR 411.357(s) introduced in the MCR final 
rule. We are proposing to correct these technical errors.

[[Page 27187]]

Specifically, in Sec.  411.353(d) we are proposing to amend paragraph 
(d) by removing the parenthetical phrase ``Sec.  1003.101 of this 
title.'' and adding in its place ``Sec.  1003.110 of this title.'' 
Also, we are also proposing to amend Sec.  411.357 as follows:
     In paragraph (s)(3) by removing the parenthetical phrase 
``governing body;'' and adding in its place ``governing body; and''.
     In paragraph (s)(4) by removing the parenthetical phrase 
``financial need; and'' and adding in its place ``financial need.''.

D. Safety Net Hospitals--Request for Information

1. Background
    Consistent with President Biden's Executive Order 13985 on 
``Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government,'' \720\ and Executive Order 14091 on 
``Further Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government,'' \721\ CMS has made 
advancing health equity the first pillar in its Strategic Plan. We 
define health equity as the attainment of the highest level of health 
for all people, where everyone has a fair and just opportunity to 
attain their optimal health regardless of race, ethnicity, disability, 
sexual orientation, gender identity, socioeconomic status, geography, 
preferred language, and other factors that affect access to care and 
health outcomes. CMS is working to advance health equity by designing, 
implementing, and operationalizing policies and programs that support 
health for all the people served by our programs, eliminating avoidable 
differences in health outcomes experienced by people who are 
disadvantaged or underserved, and providing the care and support that 
our beneficiaries need to thrive.\722\
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    \720\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \721\ 88 FR 10825 (February 22, 2023) (https://www.federalregister.gov/documents/2023/02/22/2023-03779/further-advancing-racial-equity-and-support-for-underserved-communities-through-the-federal).
    \722\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
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    Among the goals of CMS's health equity pillar is to evaluate 
policies to determine how CMS can support safety-net providers, partner 
with providers in underserved communities, and ensure care is 
accessible to those who need it.\723\ Although various approaches exist 
to identifying ``safety-net providers,'' this term is commonly used to 
refer to health care providers that furnish a substantial share of 
services to uninsured and low-income patients.\724\ As such, safety-net 
providers, including acute care hospitals, play a crucial role in the 
advancement of health equity by making essential services available to 
the uninsured, underinsured, and other populations that face barriers 
to accessing healthcare, including people from racial and ethnic 
minority groups, the LGBTQ+ community, rural communities, and members 
of other historically disadvantaged groups. Whether located in urban 
centers or geographically isolated rural areas, safety-net hospitals 
are often the sole providers in their communities of specialized 
services such as burn and trauma units, neonatal care and inpatient 
psychiatric facilities.\725\ They also frequently partner with local 
health departments and other institutions to sponsor programs that 
address homelessness, food insecurity and other social determinants of 
health, and offer culturally and linguistically appropriate care to 
their patients. During the COVID-19 pandemic, safety-net hospitals have 
provided emergency care to many of the country's most at-risk patients 
and have leveraged their position as trusted providers to drive vaccine 
uptake in their communities.\726\
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    \723\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
    \724\ https://www.ncbi.nlm.nih.gov/books/NBK224519/.
    \725\ https://www.ncbi.nlm.nih.gov/books/NBK224521/.
    \726\ https://www.nejm.org/doi/full/10.1056/NEJMp2114010.
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    Because they serve many low-income and uninsured patients, safety-
net hospitals may experience greater financial challenges compared to 
other hospitals. Among the factors that negatively impact safety-net 
hospital finances, MedPAC has pointed specifically to the greater share 
of patients insured by public programs, which it stated typically pay 
lower rates for the same services than commercial payers; the increased 
costs associated with treating low-income patients, whose conditions 
may be complicated by social determinants of health, such as 
homelessness and food insecurity; and the provision of higher levels of 
uncompensated care.\727\ Moreover, the financial pressures on many 
safety-net hospitals have been further exacerbated by the impacts of 
the COVID-19 pandemic.\728\ In response to the challenges posed by 
COVID-19, HHS has authorized several targeted distributions from the 
Provider Relief Fund to safety-net hospitals and other hospitals that 
serve vulnerable populations.\729\
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    \727\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \728\ https://www.nejm.org/doi/full/10.1056/NEJMp2114010.
    \729\ https://www.hrsa.gov/provider-relief/payments-and-data/targeted-distribution.
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    In its June 2022 Report to Congress, MedPAC expressed concern over 
the financial position of safety-net hospitals.\730\ The Commission 
noted that the limited resources of many safety-net hospitals may make 
it difficult for them to compete with other hospitals for labor and 
technology, and observed that ``[t]his disadvantage, in turn, could 
lead to difficulty maintaining quality of care and even to hospital 
closure.'' \731\ During the earlier phases of the COVID-19 pandemic, 
for example, studies showed higher rates of mortality among patients 
who received treatment at certain safety-net hospitals, with 
researchers citing understaffing and lack of access to advanced 
therapies as some of the factors that may have contributed to negative 
health outcomes.\732\ Other research shows that the closure of a 
safety-net hospital can have ripple effects within the community, 
making it more difficult for disadvantaged patients to access care and 
shifting uncompensated care costs onto neighboring 
facilities.733 734
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    \730\ The June 2022 Report sets forth a conceptual framework for 
identifying safety-net hospitals and a rationale for better-targeted 
Medicare funding for such hospitals through a new Medicare Safety-
Net Index (MSNI), as discussed in more detail later in this request 
for information. In its March 2023 Report to Congress, MedPAC 
discusses its recommendation to Congress to redistribute 
disproportionate share hospital and uncompensated care payments 
through the MSNI: https://www.medpac.gov/wp-content/uploads/2023/03/Mar23_MedPAC_Report_To_Congress_SEC.pdf.
    \731\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \732\ https://www.nytimes.com/2020/07/01/nyregion/Coronavirus-hospitals.html; https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2768602.
    \733\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3272769/.
    \734\ https://www.healthaffairs.org/do/10.1377/forefront.20180503.138516/full/.
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    Two of the ways the Medicare statute currently recognizes the 
additional costs of safety-net hospitals are through disproportionate 
share hospital (DSH) payments and uncompensated care payments. In its 
June 2022 Report, however, MedPAC raised concerns about whether these 
payments appropriately target safety-net

[[Page 27188]]

hospitals.\735\ The Medicare statute also includes special payment 
provisions for other hospitals in underserved communities, including 
sole community hospitals, which are the sole source of care in their 
areas, as well as Critical Access Hospitals and Rural Emergency 
Hospitals.
---------------------------------------------------------------------------

    \735\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
---------------------------------------------------------------------------

    Given the critical importance of safety-net hospitals to the 
communities they serve, it is important to be able to identify these 
hospitals for policy purposes. In the next two sections, we discuss two 
potential approaches: the Safety-Net Index, which MedPAC has developed 
as a measure of the degree to which a hospital functions as a safety-
net hospital; and area-level indices, which are intended to capture 
local socioeconomic factors correlated with medical disparities and 
underservice.
2. Methodological Considerations When Identifying Safety Net Hospitals 
Using the SNI
    The Safety-Net Index (SNI) developed by MedPAC is calculated as the 
sum of--(1) the share of the hospital's Medicare volume associated with 
low-income beneficiaries; (2) the share of its revenue spent on 
uncompensated care; and (3) an indicator of how dependent the hospital 
is on Medicare.
a. Medicare Low-Income Subsidy (LIS) Enrollment Ratio
    For the share of the hospital's Medicare volume associated with 
low-income beneficiaries, MedPAC's definition of low-income 
beneficiaries includes all those who are dually eligible for full or 
partial Medicaid benefits, and those who do not qualify for Medicaid 
benefits in their states but who receive the Part D low-income subsidy 
(LIS) because they have limited assets and an income below 150 percent 
of the Federal poverty level. Collectively, MedPAC refers to this 
population as ``LIS beneficiaries'' because those who receive full or 
partial Medicaid benefits are automatically eligible to receive the 
LIS. MedPAC states that its intent in defining low-income beneficiaries 
in this manner is to reduce the effect of variation in states' Medicaid 
policies on the share of beneficiaries whom MedPAC considers low-
income, but to allow for appropriate variation across states based on 
the share of beneficiaries who are at or near the Federal poverty 
level.
    To calculate the LIS ratio for a hospital for a fiscal year, we 
could use the number of inpatient discharges of Medicare beneficiaries 
who are also LIS beneficiaries during the month of discharge, divided 
by the total number of inpatient discharges of Medicare beneficiaries. 
In a similar manner to how we currently use the most recent fiscal year 
MedPAR claims for ratesetting purposes,\736\ we could use the most 
recent MedPAR claims for the discharge information needed to calculate 
the LIS ratio. We could merge onto this MedPAR data the LIS beneficiary 
information needed to calculate the LIS ratio.
---------------------------------------------------------------------------

    \736\ The most recent fiscal year MedPAR data lag two years 
behind the rulemaking year (for example, FY 2022 MedPAR data are 
available for this FY 2024 proposed rule).
---------------------------------------------------------------------------

b. Uncompensated Care Costs to Total Operating Revenue Ratio
    For the share of a hospital's revenue spent on uncompensated care, 
we could use the ratio of uncompensated care costs to total operating 
hospital revenue from the most recent available audited cost report 
data.\737\ Specifically, the ratio could be calculated as Worksheet S-
10 column 1, line 30 (Total cost of uncompensated care) divided by 
Worksheet G-3 column 1, line 3 (Net patient revenues) using these 
existing lines from the most recent available audited cost report data.
---------------------------------------------------------------------------

    \737\ The most recent available cost report data for this 
purpose generally lags four years behind the rulemaking year (for 
example, FY 2020 cost report data are available for this FY 2024 
proposed rule.)
---------------------------------------------------------------------------

c. Medicare Share of Total Inpatient Days
    For the indicator of how dependent a hospital is on Medicare, 
MedPAC's recommendation is to use one-half of the Medicare share of 
total inpatient days.
    In calculating the Medicare share of total inpatient days for a 
hospital, the most recent available audited cost report data could be 
used. The numerator could be calculated from existing lines on the cost 
report as follows: the sum of Worksheet S-3 Part I, column 6, line 2 
(MA days and days for individuals enrolled in Medicare cost plans); 
Worksheet S-3 Part I, column 6, line 14 (Medicare adult and pediatric 
hospital days excluding SNF and NF swing-bed, observation bed, and 
hospice days); Worksheet S-3 Part I, column 6, line 32 (total Medicare 
labor and delivery days); and subtracting Worksheet S-3 Part I, column 
6, line 5 (total Medicare adult and pediatric SNF swing bed days) and 
Worksheet S-3 Part I, column 6, line 6 (total Medicare adult and 
pediatric NF swing bed days).
    The denominator could be calculated from existing lines on the cost 
report as follows: the sum of Worksheet S-3 Part I, column 8, line 14 
(total all patients' adult and pediatric hospital days excluding SNF 
and NF swing-bed, observation bed, and hospice days); Worksheet S-3 
Part I, column 8, line 30 (total all patients' employee discount days); 
Worksheet S-3 Part I, column 8, line 32 (total all patients' labor room 
days); and subtracting Worksheet S-3 Part I, column 8, line 5 (total 
swing-bed SNF patient days) and Worksheet S-3 Part I, column 8, line 6 
(total swing-bed NF patient days).
    When calculating the SNI, the following circumstances may be 
encountered: new hospitals (for example, hospitals that begin 
participation in Medicare program after the available audited cost 
report data), hospital mergers, hospitals with multiple cost reports 
and/or cost reporting periods that are shorter or longer than 365 days, 
cost reporting periods that span fiscal years, and potentially aberrant 
data. We are soliciting comments on how MedPAC's SNI calculation should 
address these circumstances and whether the approaches used in the 
uncompensated care payment methodology might be appropriate. We refer 
readers to section IV.E.3. of the preamble this proposed rule for a 
discussion of how these circumstances are addressed in the 
uncompensated care payment methodology.
    For MedPAC's SNI calculation, we are also soliciting comments on 
whether a multi-year approach using the three most recently available 
years of data may be appropriate to increase the stability of the 
index, similar to the approach used in the uncompensated care payment 
methodology.
3. An Alternative Approach to Identifying Safety Net Hospitals--Area-
Level Indices
    An alternative to using an SNI approach could be to identify 
safety-net hospitals using area-level indices. This approach could 
potentially better target policies to address the social determinants 
of health as well as address the lack of community resources that may 
increase risk of poor health outcomes and risk of disease in the 
population. Recently, the Office of the Assistant Secretary for 
Planning and Evaluation (ASPE) commissioned three environmental scans 
of: (1) area-level indices of social risk; (2) measures used in 
government programs that target areas, providers, or populations with 
social risk; and (3) existing payment models that incorporate measures 
of social risk. ASPE suggested that an area-level index could be used 
to prioritize

[[Page 27189]]

communities for funding and other assistance to improve social 
determinants of health (SDOH)--such as affordable housing, availability 
of food stores, and transportation infrastructure. Although ASPE 
concluded that none of the existing area-level indices are ideal, they 
concluded that the area deprivation index (ADI) or the Social 
Deprivation Index (SDI) were the best available choices when selecting 
an index for addressing health related social needs or social 
determinants of health.\738\
---------------------------------------------------------------------------

    \738\ Report: ``Landscape of Area-Level Deprivation Measures and 
Other Approaches to Account for Social Risk and Social Determinants 
of Health in Health Care Payments.'' Accessed at https://aspe.hhs.gov/reports/area-level-measures-account-sdoh on September 
27, 2022.
---------------------------------------------------------------------------

    The ADI was developed by researchers at the National Institutes of 
Health with the goal of quantifying and comparing social disadvantage 
across geographic neighborhoods. It is a composite measure derived 
through a combination of 17 input variables from census data. The ADI 
measure is intended to capture local socioeconomic factors correlated 
with medical disparities and underservice. Several peer reviewed 
research studies demonstrate that neighborhood-level factors for those 
residing in disadvantaged neighborhoods also have a relationship to 
worse health outcomes for these residents. Living in an area with an 
ADI score of 85 or above, a validated measure of neighborhood 
disadvantage, is shown to be a predictor of 30-day readmission rates, 
lower rates of cancer survival, poor end-of-life care for patients with 
heart failure, and longer lengths of stay and fewer home discharges 
post-knee surgery even after accounting for individual social and 
economic risk factors.739 740 741 742 743 Many rural areas 
also have relatively high levels of neighborhood disadvantage and high 
ADI levels.
---------------------------------------------------------------------------

    \739\ Kind AJ, et al., ``Neighborhood socioeconomic disadvantage 
and 30-day rehospitalization: a retrospective cohort study.'' Annals 
of Internal Medicine. No. 161(11), pp 765-74, doi: 10.7326/M13-2946 
(December 2, 2014), available at https://www.acpjournals.org/doi/epdf/10.7326/M13-2946.
    \740\ Jencks SF, et al., ``Safety-Net Hospitals, Neighborhood 
Disadvantage, and Readmissions Under Maryland's All-Payer Program.'' 
Annals of Internal Medicine. No. 171, pp 91-98, doi:10.7326/M16-2671 
(July 16, 2019), available at https://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \741\ Cheng E, et al., ``Neighborhood and Individual 
Socioeconomic Disadvantage and Survival Among Patients With 
Nonmetastatic Common Cancers.'' JAMA Network Open Oncology. No. 
4(12), pp 1-17, doi: 10.1001/jamanetworkopen.2021.39593 (December 
17, 2021), available at https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2787244.
    \742\ Hutchinson RN, et al., ``Rural disparities in end-of-life 
care for patients with heart failure: Are they due to geography or 
socioeconomic disparity?'' The Journal of Rural Health. No. 38, pp 
457-463, doi: 10.1111/jrh.12597 (2022), available at https://onlinelibrary.wiley.com/doi/epdf/10.1111/jrh.12597.
    \743\ Khlopas A, et al., ``Neighborhood Socioeconomic 
Disadvantages Associated With Prolonged Lengths of Stay, Nonhome 
Discharges, and 90-Day Readmissions After Total Knee Arthroplasty.'' 
The Journal of Arthroplasty. No. 37(6), pp S37-S43, doi: 10.1016/
j.arth.2022.01.032 (June 2022), available at https://www.sciencedirect.com/science/article/pii/S0883540322000493.
---------------------------------------------------------------------------

    Medicare already uses ADI to assess underserved beneficiary 
populations in the Shared Savings Program. In the CY 2023 PFS final 
rule, CMS adopted a policy to provide eligible Accountable Care 
Organizations (ACOs) with an option to receive advanced investment 
payments (87 FR 69778). Advance investment payments are intended to 
encourage low-revenue ACOs that are inexperienced with risk to 
participate in the Shared Savings Program and to provide additional 
resources to such ACOs in order to support care improvement for 
underserved beneficiaries (87 FR 69845 through 69849).\744\
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    \744\ Under 42 CFR 425.630(g)(1), CMS will recoup advance 
investment payments made to an ACO from any shared savings the ACO 
earns until CMS has recouped in full the amount of advance 
investment payments made to the ACO.
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    Medicare uses ADI to calculate the amount of advance investment 
payments it will make on a quarterly basis to an ACO. There are two 
types of advance investment payments: a one-time payment of $250,000 
and quarterly payments. When calculating the quarterly payments, CMS 
first determines the ACO's assigned beneficiary population. CMS then 
assigns each beneficiary a risk factors-based score as follows: (A) the 
risk factors-based score will be set to 100 if the beneficiary is 
enrolled in the Medicare Part D LIS or is dually eligible for Medicare 
and Medicaid; (B) the risk factors-based score will be set to the ADI 
national percentile rank matched to the beneficiary's mailing address 
if the beneficiary is not enrolled in the LIS or is not dually eligible 
for Medicare and Medicaid and sufficient data is available to match the 
beneficiary to an ADI national percentile rank; and (C) the risk 
factors-based score will be set to 50 if the beneficiary is not 
enrolled in the LIS or is not dually eligible for Medicare and Medicaid 
and sufficient data is not available to match the beneficiary to an ADI 
national percentile rank.
    The risk-factors based scores assigned to the beneficiaries 
assigned to the ACO form the basis for determining the quarterly 
advanced investment payment to the ACO. For additional detail, please 
see the quarterly payment amount calculation methodology at 42 CFR 
425.630(f)(2).
4. Request for Information
    We are interested in public feedback on the challenges faced by 
safety-net hospitals, and potential approaches to help safety-net 
hospitals meet those challenges. We welcome all feedback on this issue, 
and ask the following questions to help facilitate that feedback.
     How should safety-net hospitals be identified or defined?
     What factors should not be considered when identifying or 
defining a safety-net hospital and why?
     What are the different types of safety-net hospitals?
     What are the main challenges facing safety-net hospitals?
     What are particular challenges facing rural safety-net 
hospitals?
     What new approaches or modifications to existing 
approaches should be implemented or considered to address these 
challenges, either for safety-net hospitals in general, or for specific 
types of safety-net hospitals, including rural safety-net hospitals?
     How helpful is it to have multiple types or definitions of 
safety-net hospitals that may be used for different purposes or to help 
address specific challenges?
     For Medicare purposes, would these new or modified 
approaches require new statutory authority, or could they be 
accomplished using existing statutory authority? If existing statutory 
authority, please identify the existing statutory authority.
     Are there specific payment approaches either as previously 
described or otherwise to consider for rural safety-net hospitals, 
including acute care hospitals and CAHs, to address challenges?
     For any new or modified approaches, how can specific 
hospitals be identified as safety-net hospitals, or a type of safety-
net hospital, using existing data sources? Are there new data sources 
that should be developed to better identify these hospitals?
     Is MedPAC's SNI an appropriate basis for identifying 
safety-net hospitals for Medicare purposes?
    ++ How might it be improved?
    ++ Should there be a threshold for identifying safety net hospitals 
using the SNI?
     Should an area-level index, such as the ADI, be part of an 
appropriate basis for identifying safety-net hospitals?
    ++ Would it be appropriate to adapt the risk-factors based scores 
used in the Shared Savings Program to the identification of safety-net 
hospitals?

[[Page 27190]]

    ++ How might it be adapted?
     Are there social determinants data collected by hospitals 
that could be used to inform an approach to identify safety net 
hospitals? Are there HHS or CMS policies that could support that data 
collection?
     What challenges do safety-net hospitals face around 
investments in information technology infrastructure?
    ++ What are ways that HHS policy could advance more robust 
investments in infrastructure for safety net hospitals?
    ++ How could any potential payment adjustments be determined?
     Should safety-net hospitals' reporting burden and 
compensation be different than other hospitals? If so, how?
     What are the patient demographics at safety-net hospitals? 
What challenges do patients of safety net hospitals face before and 
after receiving care at the hospital?
     Given Administration efforts to reduce the patient burden 
of medical debt, are there ways to develop payment approaches for 
safety net hospitals that would also support hospital patients that 
need financial assistance?

E. Disclosures of Ownership and Additional Disclosable Parties 
Information for Skilled Nursing Facilities and Nursing Facilities--
Applicability to Other Providers and Suppliers

    In the February 15, 2023 Federal Register (88 FR 9820), we 
published a proposed rule titled ``Disclosures of Ownership and 
Additional Disclosable Parties Information for Skilled Nursing 
Facilities and Nursing Facilities'' (hereinafter referred to as the 
Disclosures proposed rule). The Disclosures proposed rule would 
implement portions of section 6101 of the Affordable Care Act, which 
require the disclosure of certain ownership, managerial, and other 
information regarding Medicare skilled nursing facilities (SNFs) and 
Medicaid nursing facilities. The Disclosures proposed rule also 
proposed definitions of the terms ``private equity company'' (PEC) and 
``real estate investment trust'' (REIT) (88 FR 9829). Specifically, a 
private equity company would be defined in 42 CFR 424.502 as a 
publicly-traded or non-publicly traded company that collects capital 
investments from individuals or entities (that is, investors) and 
purchases an ownership share of a provider (for example, SNF, home 
health agency, etc.). A REIT would be defined in the same regulation as 
a publicly-traded or non-publicly traded company that owns part or all 
of the buildings or real estate in or on which the provider operates. 
The purpose of these definitions was to assist SNFs that complete the 
Form CMS-855A enrollment application (Medicare Enrollment Application--
Institutional Providers; OMB Control No. 0938-0685) in determining 
whether an owning or managing entity reported in Section 5 of the 
application must be identified therein as a PEC and REIT.
    We outlined in the Disclosures proposed rule our concerns about the 
quality of care furnished by PEC-owned and REIT-owned SNFs and the 
consequent need for transparency regarding such owners (88 FR 9822 and 
9823). However, these concerns about PEC and REIT are not limited to 
SNFs but extend to other provider and supplier types. Given the linkage 
discussed in the Disclosure proposed rule between PEC and REIT 
ownership and a decline in nursing home quality, we believe it is very 
important for us to collect this information from all providers and 
suppliers that complete the Form CMS-855A so as to: (1) determine 
whether a similar connection exists with respect to non-SNF providers 
and suppliers; and (2) help us take measures to improve beneficiary 
quality of care to the extent such connections exist. Indeed, it was 
with this in mind that we proposed on December 15, 2022 to revise the 
Form CMS-855A application in a Paperwork Reduction Act submission (87 
FR 76626) to require all owning and managing entities listed on any 
provider's or supplier's Form CMS-855A submission to disclose whether 
they are a PEC or a REIT.\745\
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    \745\ https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing/cms-855a.
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    For the foregoing reasons and to assist these entities in 
completing the Form CMS-855A, we propose in this FY 2024 IPPS/LTCH PPS 
proposed rule that the aforementioned definitions of PEC and REIT would 
apply to all providers and suppliers completing the Form CMS-855A 
enrollment application. The definitions would not be limited to SNFs; 
however, as we stated in the Disclosures proposed rule, these 
definitions may be modestly different from definitions of the same 
terms used in other settings. Accordingly, we seek comment from all 
provider and supplier types that complete the Form CMS-855A on the 
propriety of the PEC and REIT definitions first proposed in the 
Disclosures proposed rule. We welcome any suggested revisions thereto 
and particularly seek comment on whether our proposed definition of PEC 
should include publicly-traded private equity companies. Moreover, we 
would appreciate public feedback regarding any other types of private 
ownership besides PECs and REITs about which CMS should consider 
collecting information from providers and suppliers as part of the 
enrollment process.
    We note that there are two principal categories of legal 
authorities for this proposal:
     Section 1866(j) of the Act furnishes specific authority 
regarding the enrollment process for providers and suppliers.
     Sections 1102 and 1871 of the Act provide general 
authority for the Secretary to prescribe regulations for the efficient 
administration of the Medicare program.

XI. MedPAC Recommendations and Publicly Available Files

A. MedPAC Recommendations

    Under section 1886(e)(4)(B) of the Act, the Secretary must consider 
MedPAC's recommendations regarding hospital inpatient payments. Under 
section 1886(e)(5) of the Act, the Secretary must publish in the annual 
proposed and final IPPS rules the Secretary's recommendations regarding 
MedPAC's recommendations. We have reviewed MedPAC's March 2023 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
policies set forth in this proposed rule. MedPAC recommendations for 
the IPPS for FY 2024 are addressed in Appendix B to this proposed rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at https://www.medpac.gov.

B. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. Following is 
a listing of the IPPS-related data files that are available.
    Commenters interested in discussing any data files used in 
construction of this proposed rule should contact Michael Treitel at 
(410) 786-4552.
1. CMS Wage Data Public Use File
    This file contains the hospital hours and salaries from Worksheet 
S-3, parts II and III from FY 2020 Medicare cost reports used to create 
the proposed FY

[[Page 27191]]

2024 IPPS wage index. Multiple versions of this file are created each 
year. For a discussion of the release of different versions of this 
file, we refer readers to section III.L. of the preamble of this 
proposed rule.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html. Periods 
Available: FY 2007 through FY 2024 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2019 occupational mix survey data to be 
used to compute the occupational mix adjusted wage indexes. Multiple 
versions of this file are created each year. For a discussion of the 
release of different versions of this file, we refer readers to section 
III.L. of the preamble of this proposed rule.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html. Period 
Available: FY 2024 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational 
Category Public Use File
    This file contains each hospital's occupational mix adjustment 
factors by occupational category. Two versions of these files are 
created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2024 IPPS Update.
4. Other Wage Index Files
    CMS releases other wage index analysis files after each proposed 
and final rule. Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html. Periods Available: FY 2005 through FY 2024.
5. FY 2024 IPPS FIPS CBSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Federal Information Processing Standards (FIPS), county name, and a 
list of Core Based Statistical Areas (CBSAs).
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2024 proposed rule home 
page or the FY 2024 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2024 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on or after September 30, 1996. These data files contain 
the highest level of cost report status.
    Media: internet at https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.
    (We note that data are no longer offered on a CD. All of the data 
collected are now available free for download from the cited website.)
7. Provider-Specific File
    This file is a component of the PRICER program used in the MAC's 
system to compute DRG/MS-DRG payments for individual bills. The file 
contains records for all prospective payment system eligible hospitals, 
including hospitals in waiver States, and data elements used in the 
prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.
    Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
based on the MS-DRGs assigned to the hospital's discharges using the 
GROUPER version in effect on the date of the discharge. The case-mix 
index is a measure of the costliness of cases treated by a hospital 
relative to the cost of the national average of all Medicare hospital 
cases, using DRG/MS-DRG weights as a measure of relative costliness of 
cases. Two versions of this file are created each year to support the 
rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 1985 through FY 2024.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    This file contains a listing of MS- DRGs, MS-DRG narrative 
descriptions, relative weights, and geometric and arithmetic mean 
lengths of stay for each fiscal year. Two versions of this file are 
created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or the fiscal year final 
rule home page desired).
    Periods Available: FY 2005 through FY 2024 IPPS Update.
10. IPPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR 
Limited Data Sets, and prior impact files. The data set is abstracted 
from an internal file used for the impact analysis of the changes to 
the prospective payment systems published in the Federal Register. Two 
versions of this file are created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Historical-Impact-Files-for-FY-1994-through-Present, or for the more recent data files, https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/Index.html (on the navigation panel on the left side 
of page, click on the specific fiscal year proposed rule home page or 
fiscal year final rule home page desired).
    Periods Available: FY 1994 through FY 2024 IPPS Update.
11. AOR/BOR File
    This file contains data used to develop the MS-DRG relative 
weights. It contains mean, maximum, minimum, standard deviation, and 
coefficient of variation statistics by MS-DRG for length of stay and 
standardized charges. The BOR file are ``Before Outliers

[[Page 27192]]

Removed'' and the AOR file is ``After Outliers Removed.'' (Outliers 
refer to statistical outliers, not payment outliers.) Two versions of 
this file are created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 2005 through FY 2024 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
    This file contains information that standardizes the charges used 
to calculate relative weights to determine payments under the hospital 
inpatient operating and capital prospective payment systems. Variables 
include wage index, cost-of-living adjustment (COLA), case-mix index, 
indirect medical education (IME) adjustment, disproportionate share, 
and the Core-Based Statistical Area (CBSA). The file supports the 
rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2024 proposed rule home 
page or the FY 2024 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2024 IPPS Update.
13. MS-DRG Relative Weights Cost Centers File
    This file provides the lines on the cost report and the 
corresponding revenue codes that we used to create the 19 national cost 
center cost-to-charge ratios (CCRs) that we used in the relative weight 
calculation.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2024 proposed rule home 
page or the FY 2024 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2024 IPPS Update
14. Hospital Readmissions Reduction Program Supplemental File
    The Hospital Readmissions Reduction Program Supplemental File is 
only available and updated for the final rule, when the most recent 
data is available. Therefore, we refer readers to the FY 2023 IPPS/LTCH 
PPS final rule supplemental file, which has the most recent finalized 
payment adjustment factor components and is the same data as would have 
been used to create the FY 2024 IPPS/LTCH PPS proposed rule 
supplemental file.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2024 proposed rule home 
page or the FY 2024 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2024 IPPS Update.
15. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for DSH eligible hospitals as well as the 
supplemental payments for eligible IHS and Tribal hospitals and 
hospitals located in Puerto Rico for FY 2024. Variables include the 
data used to determine a hospital's share of uncompensated care 
payments, total uncompensated care payments, estimated per claim 
uncompensated care payment amounts, and if applicable, supplemental 
payment amounts. The file supports the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2024 proposed rule home 
page or the FY 2024 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2024 IPPS Update.
16. New Technology Thresholds File
    This file contains the cost thresholds by MS-DRG that are generally 
used to evaluate applications for new technology add-on payments for 
the fiscal year that follows the fiscal year that is otherwise the 
subject of the rulemaking. (As discussed in section II.G. of this 
proposed rule, we use the proposed threshold values associated with the 
proposed rule for that fiscal year to evaluate the cost criterion for 
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.) Two versions of this file are created 
each year to support rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the applicable fiscal year's 
proposed rule or final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: For FY 2024 and FY 2025 applications.

XII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comment on each of 
these issues for the following sections of this document that contain 
information collection requirements (ICRs). The following ICRs are 
listed in the order of appearance within the preamble (see sections II. 
through X. of the preamble of this proposed rule).

[[Page 27193]]

B. Collection of Information Requirements

1. ICRs for the Hospital Wage Index for Acute Care Hospitals
    Section III.I.2.a. of the preamble of this proposed rule, FY 2023 
Reclassification Application Requirements and Approvals, references the 
information collection request 0938-0573 which expired on January 31, 
2021. A reinstatement of the information collection request (ICR) is 
currently being developed. The public will have an opportunity to 
review and submit comments regarding the reinstatement of this ICR 
through a public notice and comment period separate from this 
rulemaking.
2. ICRs for Payments for Low-Volume Hospitals
    As discussed in section V.E. of the preamble of this proposed rule, 
under section 1886(d)(12) of the Act, as amended, the low-volume 
hospital definition and payment adjustment methodology in effect for 
FYs 2019 through 2022 under section 50204 of the Bipartisan Budget Act 
of 2018 are extended through FY 2024. Therefore, for FYs 2019 through 
2024, in order to qualify as a low-volume hospital, a subsection (d) 
hospital must be more than 15 road miles from another subsection (d) 
hospital and have less than 3,800 total discharges during the fiscal 
year. In that section we also discuss the process for requesting and 
obtaining the low-volume hospital payment adjustment under Sec.  
412.101. Under this previously established process, a hospital makes a 
written request 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. 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. The burden 
associated with this requirement is estimated to be 1 hour per 
hospital. The burden associated with these requests is the time and 
effort for the hospital to provide the MAC with evidence that it meets 
the specified mileage and discharge requirements. The burden associated 
with this requirement is estimated to be 1 hour per hospital. An 
accountant and auditor would perform this at the wage rate of $40.37. 
The wage would be doubled to include overhead. We estimate it would 
take 650 annual hours (1 hour x 650 hospitals seeking the low-volume 
payment adjustment). Therefore, the cost is $52,481 (650 hours x 
$80.74). The information collection request under OMB control number 
0938-NEW will be submitted to OMB for approval.
3. ICRs Relating to the Hospital Readmissions Reduction Program
    In section V.J. of the preamble of this proposed rule, we discuss 
proposed policies for the Hospital Readmissions Reduction Program. In 
this proposed rule, we are not proposing any changes to the Hospital 
Readmissions Reduction Program for FY 2024. All six of the current 
Hospital Readmissions Reduction Program's measures are claims-based 
measures. We believe that continuing to use these claims-based measures 
would not create or reduce any information collection burden for 
hospitals because they will continue to be collected using Medicare FFS 
claims that hospitals are already submitting to the Medicare program 
for payment purposes.
4. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section V.K. of the preamble of this proposed rule, we discuss 
updates to the Hospital VBP Program. Specifically, in this proposed 
rule, we are proposing to adopt substantial measure updates to the 
Medicare Spending per Beneficiary (MSPB) measure beginning with the FY 
2028 program year and to the Hospital-Level Risk-Standardized 
Complication Rate (RSCR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure 
beginning with the FY 2030 program year. We are also proposing to adopt 
the Severe Sepsis and Septic Shock measure beginning with the FY 2026 
program year. Additionally, we are proposing to adopt technical changes 
to the to the form and manner of the administration of the HCAHPS 
Survey measure. We are also proposing a scoring methodology change that 
adjusts for treating a high proportion of underserved patients, defined 
by dual eligibility, and rewards hospitals for providing excellent care 
to this population beginning with the FY 2026 program year. We are also 
requesting feedback on potential Additional Changes to the Hospital VBP 
Program that would address health equity. Lastly, we are proposing to 
modify the Total Performance Score (TPS) maximum to be 110, resulting 
in numeric score range of 0 to 110.
    Data collections for the Hospital VBP Program are associated with 
the Hospital Inpatient Quality Reporting Program under OMB control 
number 0938-1022, the National Healthcare Safety Network under OMB 
control number 0920-0666, and the Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) survey under OMB control 
number 0938-0981. The Hospital VBP Program will use data that are also 
used to calculate quality measures in other programs and Medicare FFS 
claims data that hospitals are already submitting to CMS for payment 
purposes, so therefore the program does not anticipate any change in 
burden associated with these proposed measures. There is also no change 
in burden due to the proposed scoring methodology change because the 
proposal does not require hospitals to submit any additional 
information but instead changes how hospitals are scored based on the 
information already being submitted.
5. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    OMB has currently approved 28,800 hours of burden and approximately 
$1.2 million under OMB control number 0938-1352 (expiration date 
November 30, 2025), accounting for information collection burden 
experienced by 400 subsection (d) hospitals selected for validation 
each year in the HAC Reduction Program. In this proposed rule, we are 
not proposing to add or remove any measures from the HAC Reduction 
Program.
    In section V.L.6.a.(2). of the preamble of this proposed rule, we 
are proposing to provide hospitals the opportunity to request 
reconsideration of their final validation score prior to HAC Reduction 
Program scoring beginning with the FY 2025 program year and future 
years. This reconsideration process would be conducted once per program 
fiscal year after validation of HAIs for all four quarters of the given 
fiscal year's data period and after the confidence interval has been 
calculated. A hospital requesting HAC Reduction Program reconsideration 
must submit a reconsideration request form. As we previously finalized 
for purposes of the Hospital IQR Program, information collection 
requirements imposed subsequent to an administrative action are not 
subject to the PRA under 5 CFR 1320.4(a)(2) (75 FR 50411). Therefore, 
there is no change in burden associated with this proposal.
    In section V.L.6.a.(3). of the preamble of this proposed rule, we 
are proposing to modify the validation targeting

[[Page 27194]]

criteria to include any hospital with a ERUB of the two-tailed 
confidence interval that is less than 75 percent and received an 
extraordinary circumstances exception (ECE) for one or more quarters 
beginning with the FY 2027 program year. Because we are neither 
proposing to modify the number of hospitals that will be selected for 
validation nor the number of records each selected hospital will be 
required to submit, we are not proposing any changes to our currently 
approved burden estimates as a result of this proposal.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
    Data collections for the Hospital IQR Program are associated with 
OMB control number 0938-1022. OMB has currently approved 1,772,318 
hours of burden and approximately $72 million under OMB control number 
0938-1022 (expiration date January 31, 2026), accounting for 
information collection burden experienced by approximately 3,150 IPPS 
hospitals and 1,350 non-IPPS hospitals for the FY 2025 payment 
determination. In this proposed rule, we describe the burden changes 
regarding collection of information under OMB control number 0938-1022, 
for IPPS hospitals.
    For more detailed information on our proposals for the Hospital IQR 
Program, we refer readers to section IX.C. of the preamble of this 
proposed rule. We are proposing to adopt three electronic clinical 
quality measures (eCQMs) beginning with the CY 2025 reporting period/FY 
2027 payment determination: (1) Hospital Harm--Pressure Injury eCQM, 
(2) Hospital Harm--Acute Kidney Injury eCQM, and (3) Excessive 
Radiation Dose or Inadequate Image Quality for Diagnostic Computed 
Tomography (CT) in Adults (Hospital Level--Inpatient) eCQM. We are 
proposing to modify two measures within the Hospital IQR Program 
measure set beginning with the performance data from July 1, 2024 
through June 30, 2025, impacting the FY 2027 payment determination: the 
(1) Hybrid Hospital-Wide All-Cause Risk Standardized Mortality measure 
and (2) the Hybrid Hospital-Wide All-Cause Risk Standardized 
Readmission measure. We are proposing to modify the COVID-19 
Vaccination Coverage among Healthcare Personnel measure beginning with 
the Q4 2023 reporting period/FY 2025 payment determination. We are 
proposing to remove the Elective Delivery measure beginning with the CY 
2024 reporting period/FY 2026 payment determination. We are proposing 
to remove two Medicare FFS claims-based measures: the Risk-Standardized 
Complication Rate (RSCR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure 
beginning with the April 1, 2025 through March 31, 2028 reporting 
period impacting the FY 2030 payment determination, and the Medicare 
Spending Per Beneficiary (MSPB)--Hospital measure beginning with the CY 
2026 reporting period/FY 2028 payment determination. We are proposing 
to modify the validation targeting criteria to include any hospital 
with a two-tailed confidence interval that is less than 75 percent and 
which submitted less than four quarters of data due to receiving an 
extraordinary circumstances exception (ECE) for one or more quarters 
beginning with the FY 2027 payment determination. Lastly, we are 
proposing to modify data collection and reporting requirements for the 
Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) survey measure beginning with the FY 2027 payment 
determination.
    Our proposal to remove the Elective Delivery measure beginning with 
the CY 2024 reporting period/FY 2026 payment determination will result 
in a change of collection of information burden as detailed in this 
section. The remaining policies being proposed would not affect the 
information collection burden associated with the Hospital IQR Program.
    The most recent data from the Bureau of Labor Statistics reflects a 
median hourly wage of $22.43 per hour for medical records 
specialists.\746\ We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the median hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead costs vary significantly by employer and 
methods of estimating these costs vary widely in the literature. 
Nonetheless, we believe that doubling the hourly wage rate ($22.43 x 2 
= $44.86) to estimate total cost is a reasonably accurate estimation 
method. Accordingly, unless otherwise specified, we will calculate cost 
burden to hospitals using a wage plus benefits estimate of $44.86 per 
hour throughout the discussion in this section of this rule for the 
Hospital IQR Program.
---------------------------------------------------------------------------

    \746\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 13, 2023. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

    In the FY 2023 IPPS/LTCH PPS final rule (86 FR 45507), our burden 
estimates were based on an assumption of approximately 3,150 IPPS 
hospitals. For this proposed rule, based on data from the FY 2023 
Hospital IQR Program payment determination, which supports this 
assumption, we will continue to estimate that 3,150 IPPS hospitals will 
report data to the Hospital IQR Program.
b. Information Collection Burden Estimate for the Proposed Removal of 
the Elective Delivery Measure Beginning With the CY 2024 Reporting 
Period/FY 2026 Payment Determination
    In section IX.C.7.c of this proposed rule, we discuss the proposal 
to remove the Elective Delivery measure beginning with the CY 2024 
reporting period/FY 2026 payment determination. In the FY 2013 IPPS/
LTCH PPS final rule, we finalized a burden of 10 minutes, or 0.167 
hours, per record to report this measure (77 FR 53666). The currently 
approved burden estimate for this measure assumes each IPPS hospital 
will report 76 records quarterly for this measure. We estimate a total 
reduction in burden of 51 hours (0.167 hours/record x 76 records x 4 
quarters) at a cost of $2,288 (51 hours x $44.86) per IPPS hospital 
associated with the removal of this measure. For the CY 2024 reporting 
period and subsequent years, we estimate a total burden decrease of 
160,650 hours (51 hours x 3,150 hospitals) at a cost of $7,206,759 
(160,650 hours x $44.86) related to this proposal.
c. Information Collection Burden Estimate for the Proposed Adoption of 
Three eCQMs
    Beginning with the CY 2025 Reporting Period/FY 2027 Payment 
Determination: (1) Hospital Harm--Pressure Injury eCQM; (2) Hospital 
Harm--Acute Kidney Injury eCQM; and (3) Excessive Radiation Dose or 
Inadequate Image Quality for Diagnostic Computed Tomography (CT) in 
Adults (Hospital Level--Inpatient) eCQM.
    In sections IX.C.5.a., b., and c. of the preamble of this proposed 
rule, we are proposing to adopt three new eCQMs: (1) Hospital Harm--
Pressure Injury eCQM; (2) Hospital Harm--Acute Kidney Injury eCQM; and 
(3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic 
Computed Tomography (CT) in Adults (Hospital Level--Inpatient) eCQM--
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. Current Hospital IQR Program policy requires hospitals 
to select three eCQMs from the eCQM measure set on which to report in 
addition to reporting three mandatory eCQMs for a total of six eCQMs 
(87 FR 49299 through 49302). In other words, although these new eCQMs 
are being

[[Page 27195]]

added to the eCQM measure set, hospitals are not required to report 
more than a total of six eCQMs. Under OMB control number 0938-1022 
(expiration date January 31, 2026) and as finalized in the FY 2023 
IPPS/LTCH PPS final rule, the currently approved burden estimate for 
reporting and submission of eCQM measures is 1 hour per IPPS hospital 
for all six required eCQM measures (87 FR 49387). The addition of these 
three eCQMs does not affect the information collection burden of 
submitting eCQMs under the Hospital IQR Program. As finalized in the FY 
2023 IPPS/LTCH PPS final rule, current Hospital IQR Program policy 
requires hospitals to select six eCQMs from the eCQM measure set on 
which to report (87 FR 49299 through 49302). In other words, although 
these new eCQMs are being added to the eCQM measure set, hospitals are 
not required to report more than a total of six eCQMs.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.L. of 
Appendix A of this proposed rule).
d. Information Collection Burden Estimate for the Two Hybrid Measure 
Refinement Proposals
    In sections IX.C.6.a. and b. of this proposed rule, we are 
proposing to modify the: (1) Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality measure; and (2) Hybrid Hospital-Wide All-Cause 
Risk Standardized Readmission measure beginning with the performance 
data from July 1, 2024 through June 30, 2025, impacting the FY 2027 
payment determination.
    Although the proposed modifications of both measures would expand 
the measure cohort to include MA patients, the burden associated with 
submission of claims data continues to be accounted for under OMB 
control number 0938-1197 (expiration date October 31, 2023) and the 
burden associated with submission of eCQM data under OMB control number 
0938-1022 (expiration date March 31, 2026) remains unchanged as 
hospitals will not be required to submit any additional data. 
Therefore, we are not proposing any changes in burden associated with 
the proposed modifications of these measures.
e. Information Collection Burden for the Refinement of the COVID-19 
Vaccination Coverage Among Healthcare Personnel (HCP) Measure Beginning 
With the Quarter 4 CY 2023 Reporting Period/FY 2025 Payment 
Determination
    In the FY 2022 IPPS/LTCH PPS final rule, we finalized adoption of 
the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) 
measure for the Hospital IQR Program (86 FR 45374 through 45382). In 
section IX.B. of this proposed rule, we are proposing to replace the 
term ``complete vaccination course'' with the term ``up to date'' in 
the HCP vaccination definition and update the numerator to specify the 
time frames within which an HCP is considered up to date with 
recommended COVID-19 vaccines, including booster doses, beginning with 
the quarter 4 2023 reporting period/FY 2025 payment determination. We 
previously discussed information collection burden associated with this 
measure in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45509).
    We do not believe that the use of the term ``up to date'' or the 
update to the numerator will impact information collection or reporting 
burden because the modification changes neither the amount of data 
being submitted nor the frequency of data submission. Additionally, 
because we are not proposing any updates to the form, manner, and 
timing of data submission for this measure, there would be no increase 
in burden associated with the proposal. Furthermore, the modified 
COVID-19 Vaccination Coverage among HCP measure would continue to be 
calculated using data submitted to the CDC under a separate OMB control 
number (0920-1317; expiration date March 31, 2026). However, the CDC 
currently has a PRA waiver for the collection and reporting of 
vaccination data under section 321 of the National Childhood Vaccine 
Injury Act of 1986 (Pub. L. 99-660, enacted on November 14, 1986) 
(NCVIA).
f. Information Collection Burden for the Proposed Removal of Two 
Claims-Based Measures
    In sections IX.C.7.a. and b. of the preamble of this proposed rule, 
we are proposing to remove two claims-based measures: the Hospital-
Level RSCR Following Elective Primary THA/TKA and the MSPB Hospital 
measures. Because these measures are calculated using Medicare FFS 
claims that are already reported to the Medicare program for payment 
purposes, removing these measures would not result in a change to the 
burden estimates provided in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49384 through 49392).
g. Information Collection Burden for the Proposed Modification of 
Validation Targeting Criteria Beginning With the FY 2027 Payment 
Determination
    In section IX.C.11.b. of the preamble of this proposed rule, we are 
proposing to modify the validation targeting criteria to include any 
hospital with a two-tailed confidence interval that is less than 75 
percent and which submitted less than four quarters of data due to 
receiving an ECE for one or more quarters beginning with the FY 2027 
payment determination.
    Because we are neither proposing to modify the number of IPPS 
hospitals that will be selected for validation nor the number of 
records each selected IPPS hospital will be required to submit, we are 
not proposing any changes to our currently approved burden estimates as 
a result of this proposal.
h. Information Collection Burden for the Proposed Modification of Data 
Collection and Reporting Requirements for the HCAHPS Survey Beginning 
With the CY 2025 Reporting Period/FY 2027 Payment Determination
    In section IX.C.10.h. of the preamble of this proposed rule, we are 
proposing updates to the data collection and reporting for the HCAHPS 
survey measure beginning with the CY 2025 reporting period/FY 2027 
program year. Specifically, we are proposing to: (1) add three new 
modes of survey administration (Web-Mail mode, Web-Phone mode, and Web-
Mail-Phone mode) in addition to the current Mail Only, Telephone Only 
and Mail-Phone modes; (2) remove the rule that only the patient may 
respond to the survey and allow a patient's proxy to respond to the 
survey; (3) extend the data collection period for the HCAHPS Survey 
from 42 to 49 days; (4) limit the number of supplemental items that may 
be added to the HCAHPS survey for quality improvement purposes to 12 
items; (5) require hospitals to collect information about the language 
that the patient speaks while in the hospital (whether English, 
Spanish, or another language), and that the official Spanish 
translation of the HCAHPS Survey be administered to all patients who 
prefer Spanish; and (6) remove two currently available options for 
administration of the HCAHPS survey that are not used by participating 
hospitals (Active Interactive Voice Response and Hospitals 
Administering HCAHPS for Multiple Sites).

[[Page 27196]]

    With the exception of the proposal to remove two currently 
available options for administering the survey that are not in use, 
which CMS estimates to have no effect on the information collections, 
the remaining proposals are estimated to result in a five percent 
increase from the 2,313,192 respondents who completed and submitted the 
HCAHPS survey as part of the Hospital IQR Program, which equates to 
115,660 additional respondents (2,313,192 x .05). We do not believe any 
of these proposals will affect the time required to complete the 
survey, which is estimated to be 7.25 minutes (0.120833 hours) per 
respondent, as currently approved under OMB control number 0938-0981 
(expiration date September 30, 2024).
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$20.71/hr. The Valuing Time in U.S. Department of Health and Human 
Services Regulatory Impact Analyses: Conceptual Framework and Best 
Practices identifies the approach for valuing time when individuals 
undertake activities on their own time.\747\ To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers of $998, divided by 40 hours to calculate an hourly pre-
tax wage rate of $24.95/hr. This rate is adjusted downwards by an 
estimate of the effective tax rate for median income households of 
about 17 percent, resulting in the post-tax hourly wage rate of $20.71/
hr. Unlike our State and private sector wage adjustments, we are not 
adjusting beneficiary wages for fringe benefits and other indirect 
costs since the individuals' activities, if any, would occur outside 
the scope of their employment. We therefore estimate a burden increase 
of 13,976 hours (115,660 respondents x 0.120833 hours) at a cost of 
$289,443 (13,976 hours x $20.71).
---------------------------------------------------------------------------

    \747\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
---------------------------------------------------------------------------

    We will submit the revised information collection estimates to OMB 
for approval under OMB control number 0938-0981.
i. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022 (expiration date 
January 31, 2026), we estimate that the policies promulgated in this 
proposed rule will result in a total decrease of 160,650 hours at a 
savings of $7,206,759 annually for 3,150 IPPS hospitals from the CY 
2024 reporting period/FY 2026 payment determination through the CY 2028 
reporting period/FY 2030 payment determination. Under OMB control 
number 0938-0981 (expiration date September 30, 2024), we estimate that 
the policies promulgated in this proposed rule will result in a total 
increase of 13,976 hours at a cost of $289,443 annually for 3,150 
hospitals beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We will submit the revised information collection 
estimates to OMB for approval under OMB control numbers 0938-1022 and 
0938-0981.
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7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    OMB has currently approved 0 hours of burden under OMB control 
number 0938-1175 (expiration date January 31, 2025), accounting for the 
annual information collection requirements for 11 PCHs for the PCHQR 
Program. In this proposed rule, we describe the collection of 
information impact under the same OMB control number for PPS-exempt 
cancer hospitals (PCHs).
    In the proposed rule, we are proposing to adopt four new measures 
that we expect to affect our collection of information burden 
estimates: (1) the Documentation of Goals of Care Discussions Among 
Cancer Patients measure beginning with the FY 2026 program year; (2) 
the Facility Commitment to Health Equity measure beginning with the FY 
2026 program year; (3) the Screening for Social Drivers of Health 
measure with voluntary reporting for the FY 2026 program year and 
mandatory reporting beginning with the FY 2027 program year; and (4) 
the Screen Positive Rate for Social Drivers of Health measure with 
voluntary reporting in the FY 2026 program year and mandatory reporting 
beginning with the FY 2027 program year. We are also proposing updates 
to the data collection and reporting for the HCAHPS survey measure (NQF 
#0166) beginning with the FY 2027 program year. Our burden estimates 
associated with these proposed policies are described later in this 
section.
    We are also proposing policies which will not affect the 
information collection burden associated with the PCHQR Program. As 
discussed in section IX.B. of the preamble of this proposed rule, we 
are proposing to modify the COVID-19 Vaccination Coverage Among 
Healthcare Personnel (HCP) measure beginning with the FY 2025 program 
year. In addition, as discussed in section IX.D.9.b. of the preamble of 
this proposed rule, we are proposing to begin public reporting of the 
Surgical Treatment Complications for Localized Prostate Cancer (PCH-37) 
measure with the FY 2025 Program Year.
    The most recent data from the Bureau of Labor Statistics reflects a 
median hourly wage of $22.43 per hour for a medical records 
specialist.\748\ We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the median hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead costs vary significantly by employer and 
methods of estimating these costs vary widely in publicly available 
literature. Nonetheless, we believe that doubling the hourly wage rate 
($22.43 x 2 = $44.86) to estimate total cost is a reasonably accurate 
estimation method and is consistent with OMB guidance. Accordingly, we 
will calculate cost burden to PCHs using a wage plus benefits estimate 
of $44.86 per hour throughout the discussion in this section of this 
proposed rule for the PCHQR Program.
---------------------------------------------------------------------------

    \748\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 13, 2023. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

a. Information Collection Burden Estimate for the Proposed Adoption of 
the Documentation of Goals of Care Discussions Among Cancer Patients 
Measure Beginning With the FY 2026 Program Year
    In section IX.D.6. of the preamble of this proposed rule, we are 
proposing to adopt the Documentation of Goals of Care Discussions Among 
Cancer Patients measure beginning with the FY 2026 program year. PCHs 
would report data through the Hospital Quality Reporting (HQR) System 
on annual basis during the submission period.
    Similar to other measures reported via the HQR System for the PCHQR 
program, we estimate a burden of no more than 10 minutes per hospital 
per year, as each hospital would only be required to report one 
aggregate numerator and denominator for all patients. Using the 
estimate of 10 minutes (or 0.167 hours) per PCH per year, and the 
updated wage estimate as described previously, we estimate that this 
policy will result in a total annual burden of approximately 2 hours 
across all PCHs (0.167 hours x 11 PCHs) at a cost of $90 (2 hours x 
$44.86). With respect to any costs/burdens unrelated to data 
submission, we refer readers to the Regulatory Impact Analysis (section 
I.M. of Appendix A of this proposed rule).
b. Information Collection Burden Estimate for the Proposed Facility 
Commitment to Health Equity Structural Measure Beginning With the FY 
2026 Program Year
    In section IX.D.3. of the preamble of this proposed rule, we are 
proposing to adopt the Facility Commitment to Health Equity Structural 
Measure beginning with the FY 2026 program year. This measure was 
previously adopted for the Hospital IQR Program in the FY 2023 IPPS/
LTCH PPS final rule with an estimated burden of no more than 10 minutes 
per hospital per year, as it involves attesting to as many as five 
questions one time per year for a given reporting period (87 FR 49385). 
We believe the estimated burden would be the same for PCHs.
    PCHs would report data through the HQR System on an annual basis 
during the submission period. Using the estimate of 10 minutes (or 
0.167 hours) per PCH per year, and the updated wage estimate as 
described previously, we estimate that this policy will result in a 
total annual burden of approximately 2 hours across all PCHs (0.167 
hours x 11 PCHs) at a cost of $90 (2 hours x $44.86). With respect to 
any costs/burdens unrelated to data submission, we refer readers to the 
Regulatory Impact Analysis (section I.M. of Appendix A of this proposed 
rule).
c. Information Collection Burden for the Proposed Screening for Social 
Drivers of Health Measure Beginning With the FY 2026 Program Year
    In section IX.D.4. of the preamble of this proposed rule, we are 
proposing to adopt the Screening for Social Drivers of Health measure 
beginning with voluntary reporting in the FY 2026 program year followed 
by mandatory reporting on an annual basis beginning with the FY 2027 
program year. This measure was previously adopted for the Hospital IQR 
Program in the FY 2023 IPPS/LTCH PPS final rule with an estimated 
burden of 2 minutes (0.033 hours) per patient to conduct this screening 
and 10 minutes (0.167 hours) per hospital response to transmit the 
measure data (87 FR 49385 through 49386). We believe the estimated 
burden for both patient screening and data submission would be the same 
for PCHs. As discussed in the preamble of this proposed rule, PCHs 
would be able to collect data and report the measure via multiple 
methods. We believe that most PCHs will likely collect data through a 
screening tool incorporated into their electronic health record (EHR) 
or other patient intake process. For data submission, PCHs would report 
measure data through the HQR System annually.
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$20.71/hr. The Valuing Time in U.S. Department of Health and Human 
Services Regulatory Impact Analyses: Conceptual Framework and Best 
Practices identifies the approach for valuing time when individuals 
undertake activities on their own time. To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers of $998, divided by 40 hours to calculate an hourly pre-
tax wage rate of $24.95/hr. This rate is adjusted downwards by an 
estimate of the effective tax rate for

[[Page 27198]]

median income households of about 17 percent, resulting in the post-tax 
hourly wage rate of $20.71/hr. Unlike our State and private sector wage 
adjustments, we are not adjusting beneficiary wages for fringe benefits 
and other indirect costs since the individuals' activities, if any, 
would occur outside the scope of their employment. Based on the most 
recent patient data from PCHs, approximately 275 patients will be 
screened annually in each PCH, for a total of 3,025 patients across all 
11 PCHs. Similar to our assumptions for the Hospital IQR Program, for 
the purposes of calculating burden for voluntary reporting in the FY 
2026 program year, we assume 50 percent of PCHs would screen 50 percent 
of patients. For the FY 2027 program year, we assume 100 percent of 
PCHs would screen 100 percent of patients. For the FY 2026 program 
year, we estimate that 828 total patients would be screened (6 PCHs x 
138 patients) for a total annual burden for patient screening of 28 
hours (828 respondents x 0.033 hours) at a cost of $580 (28 hours x 
$20.71). For data submission for the FY 2026 program year, we estimate 
a burden of 1 hour (0.167 hours x 6 PCHs) at a cost of $45 (1 hour x 
$44.86). For the FY 2027 program year, we estimate a total annual 
burden for patient screening of 101 hours (3,025 respondents x 0.033 
hours) at a cost of $2,092 (101 hours x $20.71) across all PCHs. For 
data submission for the FY 2027 program year, we estimate a total 
annual burden of approximately 2 hours across all PCHs (0.167 hours x 
11 PCHs) at a cost of $90 (2 hours x $44.86/hour).
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.M. of 
Appendix A of this proposed rule).
d. Information Collection Burden for the Proposed Screen Positive Rate 
for Social Drivers of Health Measure Beginning With the FY 2026 Program 
Year
    In section IX.D.5. of the preamble of this proposed rule, we are 
proposing to adopt the Screen Positive Rate for Social Drivers of 
Health measure with voluntary reporting in the FY 2026 program year 
followed by mandatory reporting on an annual basis beginning with the 
FY 2027 program year. This measure was previously adopted for the 
Hospital IQR Program in the FY 2023 IPPS/LTCH PPS final rule with an 
estimated burden of 10 minutes (0.167 hours) per hospital response to 
transmit the measure data as we estimate only the additional burden for 
a hospital reporting via the HQR System since patients would not need 
to provide any additional information for this measure (87 FR 49386). 
We believe the estimated burden would be the same for PCHs. Similar to 
our assumptions for the Hospital IQR Program, for the purposes of 
calculating burden for voluntary reporting in the FY 2026 program year, 
we assume 50 percent of PCHs would transmit measure data. For the FY 
2027 program year, we assume 100 percent of PCHs would transmit measure 
data.
    We estimate a total burden in the FY 2026 program year of 1 hour 
(0.167 hours x 6 PCHs) at a cost of $45 (1 hour x $44.86/hour). We 
estimate a total annual burden beginning with the FY 2027 program year 
of 2 hours across all PCHs (0.167 hours x 11 PCHs) at a cost of $90 (2 
hours x $44.86).
e. Information Collection Burden Estimate for the Proposed Updates to 
the Data Collection and Reporting for the HCAHPS Survey Measure (NQF 
#0166) Beginning With the FY 2027 Program Year
    In section IX.D.10. of the preamble of this proposed rule, we are 
proposing updates to the data collection and reporting for the HCAHPS 
survey measure beginning with the FY 2027 program year. Specifically, 
we are proposing to: (1) add three new modes of survey administration 
(Web-Mail mode, Web-Phone mode, and Web-Mail-Phone mode) in addition to 
the current Mail Only, Telephone Only and Mail-Phone modes; (2) remove 
the rule that only the patient may respond to the survey and allow a 
patient's proxy to respond to the survey; (3) extend the data 
collection period for the HCAHPS Survey from 42 to 49 days; (4) limit 
the number of supplemental items that may be added to the HCAHPS survey 
for quality improvement purposes to 12 items; (5) require hospitals to 
collect information about the language that the patient speaks while in 
the hospital (whether English, Spanish, or another language), and that 
the official Spanish translation of the HCAHPS Survey be administered 
to all patients who prefer Spanish; and (6) remove two currently 
available options for administration of the HCAHPS Survey that are not 
used by participating hospitals (Active Interactive Voice Response and 
Hospitals Administering HCAHPS for Multiple Sites).
    With the exception of the proposal to remove two currently 
available options for administering the survey that are not in use, the 
remaining proposals are estimated to result in a 5 percent increase 
from the 13,064 respondents who completed and submitted the HCAHPS 
survey as part of the PCHQR program, which equates to 653 additional 
respondents (13,064 x 5 percent). We do not believe any of these 
proposals will affect the time required to complete the survey, which 
is estimated to be 7.25 minutes (0.120833 hours) per respondent, as 
currently approved under OMB control number 0938-0981 (expiration date 
September 30, 2024). We therefore estimate a burden increase of 79 
hours (653 respondents x 0.120833 hours/respondent) at a cost of $1,636 
(79 hours x $20.71).
    We will submit the revised information collection estimates to OMB 
for approval under OMB control number 0938-0981.
f. Information Collection Burden Estimate for the Proposal To Modify 
the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) 
Measure Beginning With the FY 2025 Program Year
    In the FY 2022 IPPS/LTCH PPS final rule, we finalized to adopt the 
COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) Measure 
for the PCHQR Program (86 FR 45428 through 45434). In section IX.B. of 
the preamble of this proposed rule, we are proposing to modify the 
COVID-19 Vaccination Coverage Among HCP Measure to replace the term 
``complete vaccination course'' with the term ``up to date'' in the HCP 
vaccination definition and update the numerator to specify the time 
frames within which an HCP is considered up to date with recommended 
COVID-19 vaccines, including booster doses, beginning with the FY 2025 
program year. We previously discussed information collection burden 
associated with this measure in the FY 2022 IPPS/LTCH PPS final rule 
(86 FR 45513).
    We do not believe that the change in terminology to refer to ``up 
to date'' instead of ``complete vaccination course'' will impact 
information collection or reporting burden because the modification 
changes neither the amount of data being submitted nor the frequency of 
data submission. Furthermore, the COVID-19 HCP measure will be 
calculated using data submitted to the CDC under a separate OMB control 
number (0920-1317; expiration date January 31, 2024).
g. Information Collection Burden Estimate for the Proposal To Begin 
Public Reporting of the Surgical Treatment Complications for Localized 
Prostate Cancer (PCH-37) Measure Beginning With the FY 2025 Program 
Year Data
    In section IX.D.9.b. of the preamble of this proposed rule, we are 
proposing to

[[Page 27199]]

begin public reporting of the Surgical Treatment Complications for 
Localized Prostate Cancer (PCH-37) measure beginning with the FY 2025 
program year data. Because this measure was previously finalized for 
inclusion in the PCHQR Program and we are not requiring PCHs to collect 
or submit any additional data, we do not estimate any change in 
information collection burden associated with this proposal.
h. Summary of Information Collection Burden Estimates for the PCHQR 
Program
    In summary, under OMB control number 0938-1175 (expiration date 
January 31, 2025), we estimate that the policies promulgated in this 
proposed rule will result in a total increase of 109 hours at a cost of 
$2,452 annually for 11 PCHs from the FY 2026 program year through the 
FY 2027 program year. The subsequent tables summarize the total burden 
changes for each respective FY program year compared to our currently 
approved information collection burden estimates (the table for the FY 
2027 program year reflects the total burden change associated with all 
proposals). Under OMB control number 0938-0981 (expiration date 
September 30, 2024), we estimate that the policies promulgated in this 
proposed rule will result in a total increase of 79 hours at a cost of 
$1,636 annually for 11 PCHs beginning with the FY 2027 program year. 
The total increase in burden associated with this information 
collection is approximately 188 hours at a cost of $4,088. We will 
submit the revised information collection estimates to OMB for approval 
under OMB control numbers 0938-1175 and 0938-0981.
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8. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    An LTCH that does not meet the requirements of the LTCH QRP for a 
fiscal year will receive a 2-percentage point reduction to its 
otherwise applicable annual update for that fiscal year.
    We believe that the burden associated with the LTCH QRP is the time 
and effort associated with complying with the requirements of the LTCH 
QRP. In sections IX.C. and IX.E. of the preamble of this proposed rule, 
we are proposing to modify one measure, adopt two measures and remove 
two measures from the LTCH QRP, and increase the LTCH QRP data 
completion thresholds for the LCDS items. The following is a discussion 
of these information collections, some of which have already received 
OMB approval.
    As stated in section IX.E. of the preamble of this proposed rule, 
we are proposing that LTCHs submit data on one modified quality 
measure, the HCP COVID-19 Vaccine measure beginning with the FY 2025 
LTCH QRP. LTCHs would be required to report the modified measure data 
to the CDC's NHSN. The burden associated with the HCP COVID-19 Vaccine 
measure is accounted for under the CDC PRA package currently approved 
under OMB control number 0920-1317 (expiration 1/31/2024). Because we 
are not proposing any updates to the form, manner, and timing of data 
submission for this measure, there would be no increase in burden 
associated with the proposal. We refer readers to the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 45448 through 45449) for these proposed policies.
    In section IX.E.4.a. of the preamble of this proposed rule, we 
propose the DC Function measure beginning with the FY 2025 LTCH QRP. 
This assessment-based quality measure would be calculated using data 
from the LCDS that are already reported to the Medicare program for 
payment and other quality reporting purposes. There would be no 
additional burden for LTCHs because the proposal would not require 
LTCHs to report new data elements.
    In section IX.E.4.b and IX.E.4.c. of the preamble of this proposed 
rule, we propose to remove the Application of Functional Assessment/
Care Plan and Functional Assessment/Care Plan measures beginning with 
the FY 2025 LTCH QRP. We estimate that the proposed removal of these 
two measures would result in a decrease of 0.1 hour (0.6 minutes/60 
minutes) minutes of clinical staff time at admission and a decrease of 
0.005 hour (0.3 minutes/60 minutes) of clinical staff time at the time 
of planned discharge beginning with the FY 2025 LTCH QRP. We believe 
the LCDS items affected by the proposed removal of these two measures 
are completed by Registered Nurses (RN), Licensed Practical and 
Licensed Vocational Nurses (LVN), Speech-Language Pathologists (SLP), 
Occupational Therapists (OT), and/or Physical Therapists (PT) depending 
on the item. We identified the staff type per item based on past LTCH 
burden calculations. Our assumptions for staff type were based on the 
categories generally necessary to perform an assessment. Individual 
providers determine the staffing resources necessary; therefore, we 
averaged the national average for these labor types and established a 
composite cost estimate. This composite estimate was calculated by 
weighting each salary based on the following breakdown regarding 
provider types most likely to collect this data: OT 50 percent; PT 40 
percent; RN 5 percent; LVN 2.5 percent; SLP 2.5 percent. For the 
purposes of calculating the costs associated with the collection of 
information requirements, we obtained mean hourly wages for these staff 
from the U.S. Bureau of Labor Statistics' May 2021 National 
Occupational Employment and Wage Estimates.\749\ To account for 
overhead and fringe benefits, we have doubled the hourly wage. These 
amounts are detailed in Table XII.B.-05.
---------------------------------------------------------------------------

    \749\ https://www.bls.gov/oes/current/oes_nat.htm.

     Table XII.B-05: U.S. Bureau of Labor and Statistics' May 2021 National Occupational Employment and Wage
                                                    Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                   Overhead and      Adjusted
                Occupation title                    Occupation      Mean hourly   fringe benefit    hourly wage
                                                       code        wage  ($/hr)        ($/hr)         ($/hr)
----------------------------------------------------------------------------------------------------------------
Registered Nurse (RN)...........................         29-1141          $39.78          $39.78          $79.56
Licensed Vocational Nurse (LVN).................         29-2061           24.93           24.93           49.86
Speech Language Pathologist (SLP)...............         29-1127           41.26           41.26           82.52
Physical Therapist (PT).........................         29-1123           44.67           44.67           89.34
Occupational Therapist (OT).....................         29-1122           43.02           43.02           86.04
----------------------------------------------------------------------------------------------------------------

    As a result of these two measure removal proposals, the estimated 
burden and cost for LTCHs for complying with requirements of the FY 
2025 LTCH QRP will decrease. We believe that the removal of the measure 
would result in a decrease of 18 seconds (0.3 min or 0.005 hr) of 
clinical staff time at admission beginning with the FY 2025 LTCH QRP. 
We believe that the LCDS item affected by the proposed removal of the 
Application of Functional Assessment/Care Plan measure is completed by 
Occupational Therapists (OT), Physical Therapists (PT), Registered 
Nurses (RN), Licensed Practical and Licensed Vocational Nurses (LVN), 
and/or Speech-Language Pathologists (SLP) depending on the functional 
goal selected. We identified the staff type per LCDS item based on past 
LCDS burden calculations. Our assumptions for staff type were based on 
the categories generally necessary to perform an assessment, however, 
individual LTCHs determine the staffing resources necessary. Therefore, 
we averaged BLS' National Occupational Employment and Wage Estimates 
(See Table XII.B-05) for these labor types and established a composite 
cost estimate using our adjusted wage estimates. The composite estimate 
of $86.2085/hr was calculated by weighting each hourly wage based on 
the following breakdown regarding provider types most likely to collect 
this data: OT 45 percent at $86.04/hr; PT 45 percent at $89.34/hr; RN 5 
percent at $79.56/hr; LVN 2.5 percent at $49.86/hr; and SLP 2.5 percent 
at $82.52/hr.
    Specifically, we believe that there will be a 0.01 hour decrease in 
clinical staff time to report data for each LCDS completed at admission 
and a 0.005 hour decrease in clinical staff time to report data for 
each LCDS completed for planned discharges. Using data

[[Page 27204]]

collected for CY 2021, we estimate 148,088 admissions and 111,251 
planned discharges from 330 LTCHs annually. This equates to a decrease 
of 1,480.88 hours in burden at admission for all LTCHs (0.01 hour x 
148,088 admissions), and a decrease of 556.255 hours in burden for 
planned discharges for all LTCHs (0.005 hour x 111,251 planned 
discharges).
    Given 0.3 minutes of occupational therapist time at $86.04 per 
hour, 0.24 minutes of physical therapist time at $89.34 per hour, 0.03 
minutes registered nurse time at $79.56 per hour, 0.015 minutes of 
licensed vocational nurse time at $49.86 per hour, and 0.015 minutes of 
speech language pathologist time at $82.52 per hour to complete an 
average of 449 LCDS admission assessments and 337 LCDS planned 
discharge assessments per provider per year, we estimated the total 
cost will be decreased by $175,610 for all LTCHs annually (1,481 hours 
at admission + 556 hours at discharge = 2,037 total hours; 2,037 hours 
x $86.21 composite wage = $175,618.35) or $532.18 per LTCH annually 
($175,618.35/330 LTCHs).
    In section IX.E.8.a. of the preamble of this proposed rule, we 
propose that beginning with the FY 2026 payment determination, LTCHs 
must report 100 percent of the required quality measures data and 
standardized patient assessment data collected using the LCDS on at 
least 90 percent of the assessments they submit through the CMS 
designated submission system. Because LTCHs have been required to 
submit LCDS assessments in this manner since October 1, 2012, there 
would be no increase in burden to LTCH providers associated with the 
proposal.
    In section IX.E.4.d. of the preamble of this proposed rule, we 
propose to adopt the Patient/Resident COVID-19 Vaccine measure 
beginning with the FY 2026 LTCH QRP. The proposed measure would be 
collected using the LCDS. The LCDS V5.0 has been approved under OMB 
control number 0938-1163 (Expiration date: 08/31/2025). One data 
element would be added to the LCDS in order to allow for collection of 
this measure and would result in an increase of 0.005 hours (0.3 
minutes/60) of clinical staff time at discharge. Using data collected 
for CY 2021, we estimate a 148,965 total discharges (that is planned, 
unplanned, and expired) from 330 LTCHs annually. This equates to an 
increase of 744.825 hours for all LTCHs (148,965 x 0.005 hrs) and 2.26 
hours per LTCH.
    We believe that the additional COVID-19 vaccine data element will 
be completed equally by RNs and LVNs. Individual LTCHs determine the 
staffing resources necessary. We averaged BLS' National Occupational 
Employment and Wage Estimates (See Table XII.B-05) for these labor 
types and established a composite cost estimate using our adjusted wage 
estimates. The composite estimate of $64.71/hr was calculated by 
weighting each hourly wage equally ([(148,965 assessments x 0.50 = 
372.42 hours) x $79.56/hr] + [(148,965 assessments*0.50 = 372.42 hours) 
x $49.86/hr] = $48,199); ($48,199/744.825 total hours). We estimated 
the total cost will be increased by $146.05 per LTCH annually, or 
$48,197.63 for all LTCHs annually.
    As described in following table, under OMB control number 0938-
1163, we estimate that the policies proposed in this proposed rule for 
the LTCH QRP will result in an overall decrease of 1,292.31 hours 
annually for 330 LTCHs. The total cost decrease related to this 
information collection is approximately $127,420.728. The decrease in 
burden will be accounted for in a revised information collection 
request under OMB control number (0938-1163).
[GRAPHIC] [TIFF OMITTED] TP01MY23.331

9. ICRs for the Medicare Promoting Interoperability Program
a. Historical Background
    In section IX.F. of the preamble of this proposed rule, we discuss 
several proposed policies for the Medicare Promoting Interoperability 
Program. OMB has currently approved 29,588 hours of burden and 
approximately $1.3 million under OMB control number 0938-1278 
(expiration date August 31, 2025), accounting for information 
collection burden experienced by approximately 3,150 eligible hospitals 
and 1,350 CAHs for the EHR reporting period in CY 2023. In this 
proposed rule, we describe the burden changes regarding collection of 
information under OMB control number 0938-1278 for eligible hospitals 
and CAHs. The collection of information burden analysis in this 
proposed rule focuses on all eligible hospitals and CAHs that could 
participate in the Medicare Promoting Interoperability Program and 
attest to the objectives and measures, and report eCQMs, under the 
Medicare Promoting Interoperability Program for the EHR reporting 
periods in CY 2024 and CY 2025.
    For more detailed information on our proposed policies for the 
Medicare Promoting Interoperability Program, we refer readers to 
section IX.F. of the preamble of this proposed rule. We are proposing 
several policies which will not affect the information collection 
burden associated with the Medicare Promoting Interoperability Program. 
We are proposing to adopt three electronic clinical quality measures 
(eCQMs) beginning with the CY 2025 reporting period: (1) Hospital 
Harm--Pressure Injury eCQM; (2) Hospital Harm--Acute Kidney Injury 
eCQM; and (3) Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computed Tomography (CMT) in Adults eCQM. We are also 
proposing to modify the SAFER Guides measure to require eligible 
hospitals and CAHs to submit a ``yes'' attestation to fulfill the 
measure beginning with the EHR reporting period in CY 2024. Lastly, we 
are proposing to establish an EHR reporting period of a minimum of any 
continuous 180-day period in CY 2025.

[[Page 27205]]

    The most recent data from the Bureau of Labor Statistics reflects a 
median hourly wage of $22.43 per hour for a medical records 
specialist.\750\ We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the median hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead costs vary significantly by employer and 
methods of estimating these costs vary widely in publicly available 
literature. Nonetheless, we believe that doubling the hourly wage rate 
($22.43 x 2 = $44.86) to estimate total cost is a reasonably accurate 
estimation method and is consistent with OMB guidance. Accordingly, we 
will calculate cost burden to hospitals using a wage plus benefits 
estimate of $44.86 per hour throughout the discussion in this section 
of this rule for the Medicare Promoting Interoperability Program.
---------------------------------------------------------------------------

    \750\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records and Health Information Technicians. 
Accessed on January 13, 2023. Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49392), our burden 
estimates were based on an assumption of 4,500 eligible hospitals and 
CAHs. For this proposed rule, based on data from the EHR reporting 
period in CY 2021, we continue to estimate 3,150 eligible hospitals and 
1,350 CAHs will report data to the Medicare Promoting Interoperability 
Program, for a total number of 4,500 respondents.
b. Information Collection Burden Estimate for the Proposed Adoption of 
Three eCQMs Beginning With the CY 2025 Reporting Period: (1) Hospital 
Harm--Pressure Injury eCQM; (2) Hospital Harm--Acute Kidney Injury 
eCQM; and (3) Excessive Radiation Dose or Inadequate Image Quality for 
Diagnostic Computed Tomography (CT) in Adults eCQM
    In sections IX.F.7.a.(2). of the preamble of this proposed rule, we 
are proposing adoption of three new eCQMs beginning with the CY 2025 
reporting period: (1) Hospital Harm--Pressure Injury eCQM; (2) Hospital 
Harm--Acute Kidney Injury eCQM; and (3) Excessive Radiation Dose or 
Inadequate Image Quality for Diagnostic Computed Tomography (CT) in 
Adults eCQM.
    The addition of these three eCQMs does not affect the information 
collection burden of submitting eCQMs under the Medicare Promoting 
Interoperability Program. Current policy requires eligible hospitals 
and CAHs to select three eCQMs from the eCQM measure set on which to 
report in addition to reporting three mandatory eCQMs for a total of 
six eCQMs (87 FR 49365 through 49367). In other words, although these 
new eCQMs are being added to the eCQM measure set, eligible hospitals 
and CAHs are not required to report more than a total of six eCQMs.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.O of 
Appendix A of this proposed rule).
c. Information Collection Burden Estimate for the Proposed Modification 
to the SAFER Guides Measure
    In section IX.F.3. of the preamble of this proposed rule, we are 
proposing to modify the SAFER Guides measure to require eligible 
hospitals and CAHs to submit a ``yes'' attestation to fulfill the 
measure beginning with the EHR reporting period in CY 2024. In the CY 
2022 IPPS/LTCH PPS final rule, we adopted the SAFER Guides measure and 
required eligible hospitals and CAHs to attest ``yes'' or ``no'' as to 
whether they completed an annual self-assessment on each of the nine 
SAFER Guides at any point during the calendar year in which their EHR 
reporting period occurs (86 FR 45479 through 45481).
    Because we are not proposing to modify the information that 
eligible hospitals and CAHs will be required to submit but are instead 
requiring an attestation of ``yes'', we are not proposing any changes 
to our currently approved burden estimates as a result of this 
proposal.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.O. of 
Appendix A of this proposed rule).
d. Information Collection Burden for the Proposal To Establish an EHR 
Reporting Period of a Minimum of Any Continuous 180-Day Period in CY 
2025
    In section IX.F.2.a. of the preamble of this proposed rule, we are 
proposing to establish an EHR reporting period of a minimum of any 
continuous 180-day period in CY 2025. Because we are not proposing to 
modify the type or amount of data each eligible hospital and CAH will 
be required to submit, we are not proposing any changes to our 
currently approved burden estimates as a result of this proposal.
e. Summary of Estimates Used To Calculate the Collection of Information 
Burden
    In summary, under OMB control number 0938-1278 (expiration date 
August 31, 2025), we estimate that the policies in this proposed rule 
will not result in a change in burden. We continue to estimate an 
annual burden of 6.6 hours per eligible hospital and CAH as well as an 
additional 4 hours annually for CAHs to report eCQMs.
10. ICRs Regarding Special Requirements for Rural Emergency Hospitals 
(REHs) (Sec.  488.70)
    The proposed special requirements for REHs would require an 
eligible facility (a CAH or a small rural hospital with not more than 
50 beds) to submit additional information that must include an action 
plan containing four specific elements when the facility submits an 
application for enrollment as an REH. The estimated burden related to 
this proposed regulation is discussed below.
a. Sources of Data Used in Estimates of Burden Hours and Cost Estimates
    For the estimated costs contained in the analysis below, we used 
data from the U.S. Bureau of Labor Statistics (BLS) to determine the 
mean hourly wage for the positions used in this analysis.\751\ For the 
total hourly cost, we doubled the mean hourly wage for a 100 percent 
increase to cover overhead and fringe benefits, according to standard 
HHS estimating procedures. If the total cost after doubling resulted in 
0.50 or more, the cost was rounded up to the next dollar. If it was 
0.49 or below, the total cost was rounded down to the next dollar. The 
total costs used in this analysis are indicated in Table 1.
---------------------------------------------------------------------------

    \751\ BLS. May 2020 National Occupational Employment and Wage 
Estimates United States. United States Department of Labor. Accessed 
at https://www.bls.gov/oes/current/naics4_551100.htm. Accessed on 
February 8, 2023.
---------------------------------------------------------------------------

b. Burden Associated With Submission of Additional Information on the 
Action and Transition Plans for Enrollment as an REH
    We are proposing that an eligible facility that submits an 
application for enrollment as an REH under section 1866(j) of the Act 
must also submit additional information as specified in this proposed 
rule. In accordance with section 1861(kkk)(4)(A)(i) through (iv) of the 
Act, we specifically propose to require an eligible facility to submit 
additional information that must include an action plan containing: (1) 
a plan for initiating REH services (as those services are defined in 42 
CFR 485.502, and which must include the provision of emergency 
department services and observation care); (2) a detailed transition 
plan that lists the specific services that the provider will retain, 
modify, add, and discontinue as an

[[Page 27206]]

REH; (3) a detailed description of other outpatient medical and health 
services that it intends to furnish on an outpatient basis as an REH; 
and (4) information regarding how the provider intends to use the 
additional facility payment provided under section 1834(x)(2) of the 
Act, including a description of the services that the additional 
facility payment would be supporting, such as the operation and 
maintenance of the facility and the furnishing of covered services (for 
example, telehealth services and ambulance services).
    We estimate that approximately 68 eligible facilities (that is, 
CAHs and small rural hospitals with not more than 50 beds) would elect 
to convert to REHs. This is the same estimate used in the final rule 
titled ``Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Organ Acquisition; Rural Emergency Hospitals: Payment 
Policies, Conditions of Participation, Provider Enrollment, Physician 
Self-Referral; New Service Category for Hospital Outpatient Department 
Prior Authorization Process; Overall Hospital Quality Star Rating; 
COVID-19,'' which was published in the November 23, 2022 Federal 
Register (87 FR 71748).\752\
---------------------------------------------------------------------------

    \752\ https://www.federalregister.gov/d/2022-23918/p-4515.
---------------------------------------------------------------------------

    We estimate that it would take each CAH or small rural hospital 4 
hours to prepare this action plan containing the four required elements 
specified above. We further estimate that the annual time burden across 
all 68 facilities would be 272 hours (4 hours x 68 facilities).
    We believe that the person at the facility who would perform this 
task would be the hospital administrator or CEO. This person would fall 
under the U.S. Bureau of Labor Statistics job category of Medical and 
Health Services Manager. According the U.S. Bureau of Labor Statistics, 
the mean hourly wage for a Medical and Health Services Manager is 
$57.61 \753\ This wage, adjusted for the employer's fringe benefits and 
overhead would be $115.
---------------------------------------------------------------------------

    \753\ https://www.bls.gov/oes/current/oes119111.htm.
---------------------------------------------------------------------------

    We estimate that the cost burden to each facility for preparing the 
action plan containing the four required elements would be $460 (4 
hours x $115). We further estimate that the cost burden across all CAHs 
and small rural hospitals converting to REHs would be $31,280 (272 
hours x $115 per hour).
    It is important to note that this is a one-time burden to the 
facility. After this task has been completed, this burden will be non-
recurring. The information collection request under the OMB control 
number 0938-NEW will be sent to OMB for approval.
11. ICRs for Physician-Owned Hospitals
    As discussed in section X.B. of the preamble of this proposed rule, 
we are proposing to make changes pertaining to the process for 
physician-owned hospitals requesting an exception from the prohibition 
against facility expansion and program integrity restrictions on 
approved facility expansion.
    Specifically, we are proposing to make certain technical and 
clarifying changes to the information that must be submitted for an 
expansion exception request. These changes include: (1) providing an 
email address as well as a hardcopy mailing address for the contact 
person for the hospital; (2) providing the names of any counties in 
which the hospital provides inpatient or outpatient hospital services 
or plans to provide inpatient or outpatient hospital services if CMS 
approves the request, in addition to the name of the county in which 
the main campus of the requesting hospital is located; (3) providing a 
statement and, if available, supporting documentation regarding the 
hospital's compliance with the requirement that it does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries (as opposed to merely stating that it 
complies with this criterion); (4) providing information regarding 
whether and how the hospital has used any expansion facility capacity 
approved in a prior request and whether it plans to use expansion 
facility capacity to provide specialty services if the request is 
approved; (5) providing information regarding the requesting hospital's 
need for additional operating rooms, procedure rooms, or beds to serve 
Medicaid, uninsured, and underserved populations; and (6) providing 
information regarding the need for additional operating rooms, 
procedure rooms, or beds in the county in which the main campus of the 
hospital is located, any county in which the hospital provides 
inpatient or outpatient hospital services as of the date the hospital 
submits the request, and any county in which the hospital plans to 
provide inpatient or outpatient hospital services if CMS approves the 
request. In addition, we are proposing to require electronic submission 
of requests following instructions posted on the CMS website and 
eliminate the option to mail hard copy requests and the requirement to 
mail an original hard copy of the signed certification statement to 
CMS. We are also proposing to eliminate the use of external data 
sources for determining whether a hospital meets the criteria for an 
applicable hospital or high Medicaid facility. Finally, we are 
proposing to reinstate, with respect to high Medicaid facilities, the 
program integrity restrictions on the frequency of expansion exception 
requests at proposed Sec.  411.362(c)(1)(ii)(B), which provides that a 
hospital is not eligible to make an expansion exception request unless 
it has been at least 2 calendar years from the date of the most recent 
decision by CMS approving or denying the hospital's most recent request 
for an exception from the prohibition on facility expansion.
    We do not believe any of these proposals would result in any 
changes in burden under the PRA. The proposed changes to the 
information being submitted are technical or clarifying in nature, and 
we do not anticipate that they will meaningfully affect the time needed 
to prepare and submit a request. In addition, we do not anticipate that 
the proposed changes will affect the annual number of respondents. We 
are not proposing any changes to the definitions of an applicable 
hospital or a high Medicaid facility, and we anticipate that requiring 
the use of HCRIS data for all comparison calculations would have little 
practical impact on whether a requesting hospital meets the criteria 
for an applicable hospital or high Medicaid facility. Also, although 
our regulations have permitted high Medicaid facilities to request an 
exception to the prohibition on expansion of facility capacity more 
frequently than once every 2 years since January 1, 2021, no high 
Medicaid facility has made a request more frequently than every 2 
years.
    While the proposed information collection would normally be subject 
to the PRA, we believe in this instance it is exempt. The universe of 
potential respondents is extremely small and represents a tiny fraction 
of the hospital industry. The expansion exception process is available 
only to ``grandfathered'' hospitals with physician ownership and a 
Medicare provider agreement on December 31, 2010 that also meet the 
criteria for an applicable hospital or high Medicaid facility. As 
stated in the CY 2021 OPPS final rule (85 FR 86255), an applicable 
hospital means a hospital: (1) that is located in a county in which the 
percentage increase in the population during the most recent 5-year 
period (as of the date that the hospital submits its

[[Page 27207]]

request for an exception to the prohibition on expansion of facility 
capacity) is at least 150 percent of the percentage increase in the 
population growth of the State in which the hospital is located during 
that period, as estimated by the Bureau of the Census; (2) whose annual 
percent of total inpatient admissions under Medicaid is equal to or 
greater than the average percent with respect to such admissions for 
all hospitals in the county in which the hospital is located during the 
most recent 12-month period for which data are available (as of the 
date that the hospital submits its request for an exception to the 
prohibition on expansion of facility capacity); (3) that does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries; (4) that is located in a state in which the 
average bed capacity in the state is less than the national average bed 
capacity; and (5) that has an average bed occupancy rate that is 
greater than the average bed occupancy rate in the State in which the 
hospital is located. In the same final rule we explained a high 
Medicaid facility means a hospital that: (1) is not the sole hospital 
in a county; (2) with respect to each of the three most recent 12-month 
periods for which data are available, has an annual percent of total 
inpatient admissions under Medicaid that is estimated to be greater 
than such percent with respect to such admissions for any other 
hospital located in the county in which the hospital is located; and 
(3) does not discriminate against beneficiaries of Federal health care 
programs and does not permit physicians practicing at the hospital to 
discriminate against such beneficiaries. These criteria greatly limit 
the universe of potential respondents. For example, hospitals that 
provide only specialized services often do not have the same or a 
higher percentage of Medicaid inpatient admissions as general acute 
care hospitals in the counties in which they are located and, thus, 
could not meet the threshold criteria to use the expansion exception 
process. The number of potential respondents is further reduced to 
include only those hospitals with the desire and resources to expand 
their facility capacity, and then limited to those that can meet 
applicable state or local requirements for expansion (such as 
certificate of need). Given all of these factors, we estimate that we 
would receive one expansion exception request per year. This estimate 
is consistent with our experience with the expansion exception process 
to date. Since January 1, 2012 (the effective date of the regulations 
setting forth the expansion exception process), on average, we have 
received approximately one expansion exception request per year. 
Therefore, in accordance with the implementing regulations of the PRA 
at 5 CFR 1320.3(c)(4), the proposed collection would be exempt as it 
affects less than 10 entities in a 12-month period. Although we believe 
the proposed information collection would be exempt, we note that we 
estimate that it takes approximately 6 hours and 45 minutes to prepare 
an expansion exception request and that a request is prepared by a 
lawyer. To estimate the cost to prepare a request, we use a 2021 wage 
rate of $71.17 for lawyers from the Bureau of Labor Statistics,\754\ 
and we double that wage to account for overhead and benefits. The total 
estimated annual cost is $960.79.
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    \754\ U.S. Department of Labor, Bureau of Labor Statistics, May 
2021 National Occupational Employment and Wage Estimates United 
States, https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

12. ICRs for Disclosures of Ownership and Additional Disclosable 
Parties Information
    As explained in section X.E. of the preamble of this proposed rule, 
we propose that the private equity company (PEC) and real estate 
investment trust (REIT) definitions that we proposed in the Disclosures 
proposed rule (published on February 15, 2023) \755\ and referenced in 
section X.E. of the preamble of this proposed rule apply to all 
providers and suppliers completing the Form CMS-855A enrollment 
application (OMB Control No. 0938-0685)), not merely skilled nursing 
facilities. This is consistent with our proposal on December 15, 2022 
to revise the Form CMS-855A application in a Paperwork Reduction Act 
submission (87 FR 76626) to require all owning and managing entities 
listed on any provider's or supplier's Form CMS-855A submission to 
disclose whether they are a PEC or a REIT.\756\
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    \755\ Medicare and Medicaid Programs; Disclosures of Ownership 
and Additional Disclosable Parties Information for Skilled Nursing 
Facilities and Nursing Facilities (88 FR 9820).
    \756\ https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing/cms-855a.
---------------------------------------------------------------------------

    There would be five types of Form CMS-855A transactions via which 
we believe providers and suppliers would report PEC and REIT data: (1) 
initial enrollment applications; (2) change of ownership applications; 
(3) revalidation applications; (4) reactivation applications; and (5) 
change of information applications.
    Form CMS-855A applications are typically completed by the 
provider's or supplier's office staff. Consequently, we will use the 
following categories and hourly wage rates from the U.S. Bureau of 
Labor Statistics' (BLS) May 2021 National Occupational Employment and 
Wage Estimates for all salary estimates (http://www.bls.gov/oes/current/oes_nat.htm):
[GRAPHIC] [TIFF OMITTED] TP01MY23.332

    Based on our internal data, we estimate that the following number 
of Form CMS-855A applications would be submitted reporting PEC or REIT 
data: (1) 6,462 initial applications; (2) 3,105 changes of ownership; 
(3) 3,133 revalidations; (4) 610 reactivations; and (5) 27,000 changes 
of information. Furthermore, we project that it would take an average 
of 12 minutes to furnish the PEC and REIT data, though we recognize 
that this will vary by Form

[[Page 27208]]

CMS-855A transaction type and the amount of the data the particular 
provider or supplier must disclose.
    We note that while the 12-minute estimate is consistent with our 
time-per-response projection in the aforementioned Form CMS-855A PRA 
package, the (1) number of affected providers and suppliers and (2) 
total hour and cost projections are not. After further consideration, 
we believe these two estimates we made in the PRA package are 
significantly too low. In the final PRA package associated with our 
Form CMS-855A revision, we will revise these numbers to reflect the 
figures outlined in the previous paragraph, which we believe are more 
accurate. The reinstated information collection request under the OMB 
control number 0938-0685 will be sent to OMB for approval.
[GRAPHIC] [TIFF OMITTED] TP01MY23.333

Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning on 
or After October 1, 2023, and Payment Rates for LTCHs Effective for 
Discharges Occurring On or After October 1, 2023

I. Summary and Background

    In this Addendum, we are setting forth a description of the methods 
and data we used to determine the proposed prospective payment rates 
for Medicare hospital inpatient operating costs and Medicare hospital 
inpatient capital-related costs for FY 2024 for acute care hospitals. 
We also are setting forth the rate-of-increase percentage for updating 
the target amounts for certain hospitals excluded from the IPPS for FY 
2024. We note that, because certain hospitals excluded from the IPPS 
are paid on a reasonable cost basis subject to a rate-of-increase 
ceiling (and not by the IPPS), these hospitals are not affected by the 
proposed figures for the standardized amounts, offsets, and budget 
neutrality factors. Therefore, in this proposed rule, we are setting 
forth the rate-of-increase percentage for updating the target amounts 
for certain hospitals excluded from the IPPS that would be effective 
for cost reporting periods beginning on or after October 1, 2023. In 
addition, we are setting forth a description of the methods and data we 
used to determine the proposed LTCH PPS standard Federal payment rate 
that would be applicable to Medicare LTCHs for FY 2024.
    In general, except for SCHs and MDHs, for FY 2024, each hospital's 
payment per discharge under the IPPS is based on 100 percent of the 
Federal national rate, also known as the national adjusted standardized 
amount. This amount reflects the national average hospital cost per 
case from a base year, updated for inflation.
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment: the Federal national rate (including, as 
discussed in section IV.G. of the preamble of this proposed rule, 
uncompensated care payments under section 1886(r)(2) of the Act); the 
updated hospital-specific rate based on FY 1982 costs per discharge; 
the updated hospital-specific rate based on FY 1987 costs per 
discharge; the updated hospital-specific rate based on FY 1996 costs 
per discharge; or the updated hospital-specific rate based on FY 2006 
costs per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were paid 
based on the Federal national rate or, if higher, the Federal national 
rate plus 50 percent of the difference between the Federal national 
rate and the updated hospital-specific rate based on FY 1982 or FY 1987 
costs per discharge, whichever was higher. However, section 5003(a)(1) 
of Public Law 109-171 extended and modified the MDH special payment 
provision that was previously set to expire on October 1, 2006, to 
include discharges occurring on or after October 1, 2006, but before 
October 1, 2011. Under section 5003(b) of Public Law 109-171, if the 
change results in an increase to an MDH's target amount, we must rebase 
an MDH's hospital specific rates based on its FY 2002 cost report. 
Section 5003(c) of Public Law 109-171 further required that MDHs be 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 75 percent of the difference between the Federal 
national rate and the updated hospital specific rate. Further, based on 
the provisions of section 5003(d) of Public Law 109-171, MDHs are no 
longer subject to the 12-percent cap on their DSH payment adjustment 
factor. Under current law, the Medicare-dependent, small rural hospital 
(MDH) program is effective through FY 2024.
    As discussed in section V.A.2. of the preamble of this proposed 
rule, 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. In general, Puerto Rico hospitals are paid 100 percent of the 
national standardized amount and are subject to the same national 
standardized amount as subsection (d) hospitals that receive the full 
update. Accordingly, our discussion later in this section does not 
include references to the Puerto Rico standardized amount or the Puerto 
Rico-specific wage index.
    As discussed in section II. of this Addendum, we are proposing to 
make changes in the determination of the prospective payment rates for 
Medicare inpatient operating costs for acute care hospitals for FY 
2024. In section III. of this Addendum, we discuss our proposed policy 
changes for determining the prospective payment rates for Medicare 
inpatient capital-related costs for FY 2024. In section IV.

[[Page 27209]]

of this Addendum, we are setting forth the rate-of-increase percentage 
for determining the rate-of-increase limits for certain hospitals 
excluded from the IPPS for FY 2024. In section V. of this Addendum, we 
discuss proposed policy changes for determining the LTCH PPS standard 
Federal rate for LTCHs paid under the LTCH PPS for FY 2024. The tables 
to which we refer in the preamble of this proposed rule are listed in 
section VI. of this Addendum and are available on the CMS website.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2024

    The basic methodology for determining prospective payment rates for 
hospital inpatient operating costs for acute care hospitals for FY 2005 
and subsequent fiscal years is set forth under Sec.  412.64. The basic 
methodology for determining the prospective payment rates for hospital 
inpatient operating costs for hospitals located in Puerto Rico for FY 
2005 and subsequent fiscal years is set forth under Sec. Sec.  412.211 
and 412.212. In this section, we discuss the factors we are proposing 
to use for determining the proposed prospective payment rates for FY 
2024.
    In summary, the proposed standardized amounts set forth in Tables 
1A, 1B, and 1C that are listed and published in section VI. of this 
Addendum (and available via the CMS website) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during FY 
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of 
the Act.
     The labor-related share that is applied to the 
standardized amounts to give the hospital the highest payment, as 
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the 
Act. For FY 2024, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), there are four possible applicable 
percentage increases that can be applied to the national standardized 
amount.
    We refer readers to section V.B. of the preamble of this proposed 
rule for a complete discussion on the FY 2024 inpatient hospital 
update. The table that follows shows these four scenarios:
[GRAPHIC] [TIFF OMITTED] TP01MY23.334

    We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under the 
rules established by the Secretary, is not applicable to hospitals 
located in Puerto Rico. In addition, section 602 of Public Law 114-113 
amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico 
hospitals are eligible for incentive payments for the meaningful use of 
certified EHR technology, effective beginning FY 2016, and also to 
apply the adjustments to the applicable percentage increase under 
section 1886(b)(3)(B)(ix) of the Act to subsection (d) Puerto Rico 
hospitals that are not meaningful EHR users, effective beginning FY 
2022. Accordingly, the applicable percentage increase for subsection 
(d) Puerto Rico hospitals that are not meaningful EHR users for FY 2024 
and subsequent fiscal years is adjusted by the proposed adjustment for 
failure to be a meaningful EHR user under section 1886(b)(3)(B)(ix) of 
the Act. 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.
     An adjustment to the standardized amount to ensure budget 
neutrality for DRG recalibration and reclassification, as provided for 
under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to the standardized amount to ensure budget 
neutrality for the permanent 10 percent cap on the reduction in a MS-
DRG's relative weight in a given fiscal year, as discussed in section 
II.E.2.d. of the preamble of this proposed rule and consistent with our 
current methodology for implementing DRG recalibration and 
reclassification budget neutrality under section 1886(d)(4)(C)(iii) of 
the Act.
     An adjustment to ensure the wage index and labor-related 
share changes (depending on the fiscal year) are budget neutral, as 
provided for under section 1886(d)(3)(E)(i) of the Act (as discussed in 
the FY 2006 IPPS final rule (70 FR 47395) and the FY 2010 IPPS final 
rule (74 FR 44005)). We note that section 1886(d)(3)(E)(i) of the Act 
requires that when we compute such budget neutrality, we assume that 
the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62-
percent labor-related share in certain circumstances) had not been 
enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing

[[Page 27210]]

the FY 2023 budget neutrality factor and applying a revised factor.
     An adjustment to the standardized amount to implement in a 
budget neutral manner the increase in the wage index values for 
hospitals with a wage index value below the 25th percentile wage index 
value across all hospitals (as described in section III.G. of the 
preamble of this proposed rule).
     An adjustment to the standardized amount to implement in a 
budget neutral manner the wage index cap policy (as described in 
section III.G.5. of the preamble of this proposed rule).
     An adjustment to ensure the effects of the Rural Community 
Hospital Demonstration program required under section 410A of Public 
Law 108-173 (as amended by sections 3123 and 10313 of Pub. L. 111-148, 
which extended the demonstration program for an additional 5 years and 
section 15003 of Pub. L. 114-255), are budget neutral as required under 
section 410A(c)(2) of Public Law 108-173.
     An adjustment to remove the FY 2023 outlier offset and 
apply an offset for FY 2024, as provided for in section 1886(d)(3)(B) 
of the Act.
    For FY 2024, consistent with current law, we are proposing to apply 
the rural floor budget neutrality adjustment to hospital wage indexes. 
Also, consistent with section 3141 of the Affordable Care Act, instead 
of applying a State-level rural floor budget neutrality adjustment to 
the wage index, we are proposing to apply a uniform, national budget 
neutrality adjustment to the FY 2024 wage index for the rural floor.
    For FY 2024, we are proposing to continue to not remove the Stem 
Cell Acquisition Budget Neutrality Factor from the prior year's 
standardized amount and to not apply a new factor. If we removed the 
prior year's adjustment, we would not satisfy budget neutrality. We 
believe this approach ensures the effects of the reasonable cost-based 
payment for allogeneic hematopoietic stem cell acquisition costs under 
section 108 of the Further Consolidated Appropriations Act, 2020 (Pub. 
L. 116-94) are budget neutral as required under section 108 of Public 
Law 116-94. For a discussion of Stem Cell Acquisition Budget Neutrality 
Factor, we refer the reader to the FY 2021 IPPS/LTCH PPS final rule (85 
FR 59032 and 59033).

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts
    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in 
accordance with the provisions of section 1886(d) of the Act. The 
September 1, 1983 interim final rule (48 FR 39763) contained a detailed 
explanation of how base-year cost data (from cost reporting periods 
ending during FY 1981) were established for urban and rural hospitals 
in the initial development of standardized amounts for the IPPS.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to 
update base-year per discharge costs for FY 1984 and then standardize 
the cost data in order to remove the effects of certain sources of cost 
variations among hospitals. These effects include case-mix, differences 
in area wage levels, cost-of-living adjustments for Alaska and Hawaii, 
IME costs, and costs to hospitals serving a disproportionate share of 
low-income patients.
    For FY 2024, we are proposing to continue to use the national 
labor-related and nonlabor-related shares (which are based on the 2018-
based hospital market basket) that were used in FY 2023. Specifically, 
under section 1886(d)(3)(E) of the Act, the Secretary estimates, from 
time to time, the proportion of payments that are labor-related and 
adjusts the proportion (as estimated by the Secretary from time to 
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates. We refer to the 
proportion of hospitals' costs that are attributable to wages and wage-
related costs as the ``labor-related share.'' For FY 2024, as discussed 
in section III.M. of the preamble of this proposed rule, we are 
proposing to continue to use a labor-related share of 67.6 percent for 
the national standardized amounts for all IPPS hospitals (including 
hospitals in Puerto Rico) that have a wage index value that is greater 
than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are 
proposing to apply the wage index to a labor-related share of 62 
percent of the national standardized amount for all IPPS hospitals 
(including hospitals in Puerto Rico) whose wage index values are less 
than or equal to 1.0000.
    The proposed standardized amounts for operating costs appear in 
Tables 1A, 1B, and 1C that are listed and published in section VI. of 
the Addendum to this proposed rule and are available on the CMS 
website.
2. Computing the National Average Standardized Amount
    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning 
with FY 2004 and thereafter, an equal standardized amount be computed 
for all hospitals at the level computed for large urban hospitals 
during FY 2003, updated by the applicable percentage update. 
Accordingly, we are proposing to calculate the FY 2024 national average 
standardized amount irrespective of whether a hospital is located in an 
urban or rural location.
3. Updating the National Average Standardized Amount
    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for payment 
for inpatient hospital operating costs. We note that, in compliance 
with section 404 of the MMA, we are proposing to use the 2018-based 
IPPS operating and capital market baskets for FY 2024. As discussed in 
section IV.B. of the preamble of this proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the 
Affordable Care Act, we are proposing to reduce the FY 2024 market 
basket percentage increase (which for this proposed rule is based on 
IGI's fourth quarter 2022 forecast of the 2018-based IPPS market 
basket) by the productivity adjustment, as discussed elsewhere in this 
proposed rule.
    Based on IGI's fourth quarter 2022 forecast of the hospital market 
basket percentage increase (as discussed in Appendix B of this proposed 
rule), the forecast of the hospital market basket percentage increase 
for FY 2024 for this proposed rule is 3.0 percent. As discussed 
earlier, for FY 2024, depending on whether a hospital submits quality 
data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, there are four possible 
applicable percentage increases that can be applied to the standardized 
amount. We refer readers to section V.B. of the preamble of this 
proposed rule for a complete discussion on the FY 2024 inpatient 
hospital update to the standardized amount. We also refer readers to 
the previous table for the four possible applicable percentage 
increases that would be applied to update the national standardized 
amount. The proposed standardized amounts shown in Tables 1A through 1C 
that are published in section VI. of this Addendum and that are 
available via the internet on the

[[Page 27211]]

CMS website reflect these differential amounts.
    Although the update factors for FY 2024 are set by law, we are 
required by section 1886(e)(4) of the Act to recommend, taking into 
account MedPAC's recommendations, appropriate update factors for FY 
2024 for both IPPS hospitals and hospitals and hospital units excluded 
from the IPPS. Section 1886(e)(5)(A) of the Act requires that we 
publish our recommendations in the Federal Register for public comment. 
Our recommendation on the proposed FY 2024 update factors is set forth 
in Appendix B of this proposed rule.
4. Methodology for Calculation of the Average Standardized Amount
    The methodology we used to calculate the proposed FY 2024 
standardized amount is as follows:
     To ensure we are only including hospitals paid under the 
IPPS in the calculation of the standardized amount, we applied the 
following inclusion and exclusion criteria: include hospitals whose 
last four digits fall between 0001 and 0879 (section 2779A1 of Chapter 
2 of the State Operations Manual on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this proposed rule; exclude 
hospitals in Maryland (because these hospitals are paid under an all 
payer model under section 1115A of the Act); and remove PPS excluded- 
cancer hospitals that have a ``V'' in the fifth position of their 
provider number or a ``E'' or ``F'' in the sixth position.
     As in the past, we are proposing to adjust the FY 2024 
standardized amount to remove the effects of the FY 2023 geographic 
reclassifications and outlier payments before applying the FY 2024 
updates. We then applied budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 
proposed FY 2024 payment policies.
     We do not remove the prior year's budget neutrality 
adjustments for reclassification and recalibration of the DRG relative 
weights and for updated wage data because, in accordance with sections 
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate 
payments after updates in the DRG relative weights and wage index 
should equal estimated aggregate payments prior to the changes. If we 
removed the prior year's adjustment, we would not satisfy these 
conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be budget 
neutral (for example, changes to MS-DRG classifications, recalibration 
of the MS-DRG relative weights, updates to the wage index, and 
different geographic reclassifications). We include outlier payments in 
the simulations because they may be affected by changes in these 
parameters.
     Consistent with our methodology established in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME 
Medicare Advantage payments are made to IPPS hospitals under section 
1886(d) of the Act, we believe these payments must be part of these 
budget neutrality calculations. However, we note that it is not 
necessary to include Medicare Advantage IME payments in the outlier 
threshold calculation or the outlier offset to the standardized amount 
because the statute requires that outlier payments be not less than 5 
percent nor more than 6 percent of total ``operating DRG payments,'' 
which does not include IME and DSH payments. We refer readers to the FY 
2011 IPPS/LTCH PPS final rule for a complete discussion on our 
methodology of identifying and adding the total Medicare Advantage IME 
payment amount to the budget neutrality adjustments.
     Consistent with the methodology in the FY 2012 IPPS/LTCH 
PPS final rule, in order to ensure that we capture only fee-for-service 
claims, we are only including claims with a ``Claim Type'' of 60 (which 
is a field on the MedPAR file that indicates a claim is an FFS claim).
     Consistent with our methodology established in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57277), in order to further ensure that 
we capture only FFS claims, we are excluding claims with a ``GHOPAID'' 
indicator of 1 (which is a field on the MedPAR file that indicates a 
claim is not an FFS claim and is paid by a Group Health Organization).
     Consistent with our methodology established in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examine the 
MedPAR file and remove pharmacy charges for anti-hemophilic blood 
factor (which are paid separately under the IPPS) with an indicator of 
``3'' for blood clotting with a revenue code of ``0636'' from the 
covered charge field for the budget neutrality adjustments. We are 
proposing to remove organ acquisition charges, except for cases that 
group to MS-DRG 018, from the covered charge field for the budget 
neutrality adjustments because organ acquisition is a pass-through 
payment not paid under the IPPS. Revenue centers 081X-089X are 
typically excluded from ratesetting, however, we are proposing to not 
remove revenue center 891 charges from MS-DRG 018 claims during 
ratesetting because those revenue 891 charges were included in the 
relative weight calculation for MS-DRG 018, which is consistent with 
the policy finalized in FY 2021 final rule (85 FR 58600). We note that 
a new MedPAR variable for revenue code 891 charges was introduced in 
April 2020.
     For FY 2024, we are continuing to remove allogeneic 
hematopoietic stem cell acquisition charges from the covered charge 
field for budget neutrality adjustments. As discussed in the FY 2021 
IPPS/LTCH PPS final rule, payment for allogeneic hematopoietic stem 
cell acquisition costs is made on a reasonable cost basis for cost 
reporting periods beginning on or after October 1, 2020 (85 FR 58835 
through 58842).
     The participation of hospitals under the BPCI (Bundled 
Payments for Care Improvement) Advanced model started on October 1, 
2018. The BPCI Advanced model, tested under the authority of section 
3021 of the Affordable Care Act (codified at section 1115A of the Act), 
is comprised of a single payment and risk track, which bundles payments 
for multiple services beneficiaries receive during a Clinical Episode. 
Acute care hospitals may participate in the BPCI Advanced model in one 
of two capacities: as a model Participant or as a downstream Episode 
Initiator. Regardless of the capacity in which they participate in the 
BPCI Advanced model, participating acute care hospitals would continue 
to receive IPPS payments under section 1886(d) of the Act. Acute care 
hospitals that are Participants also assume financial and quality 
performance accountability for Clinical Episodes in the form of a 
reconciliation payment. For additional information on the BPCI Advanced 
model, we refer readers to the BPCI Advanced web page on the CMS Center 
for Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/.
    For FY 2024, consistent with how we treated hospitals that 
participated in the BPCI Advanced Model in the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 59029 and 59030), we are proposing to include all 
applicable data from subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still

[[Page 27212]]

receiving IPPS payments under section 1886(d) of the Act. For the same 
reasons, we also are proposing to include all applicable data from 
subsection (d) hospitals participating in the Comprehensive Care for 
Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations.
     Consistent with our methodology established in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that 
it is appropriate to include adjustments for the Hospital Readmissions 
Reduction Program and the Hospital VBP Program (established under the 
Affordable Care Act) within our budget neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) and 
the hospital VBP payment adjustment (redistribution) are applied on a 
claim-by-claim basis by adjusting, as applicable, the base-operating 
DRG payment amount for individual subsection (d) hospitals, which 
affects the overall sum of aggregate payments on each side of the 
comparison within the budget neutrality calculations.
    In order to properly determine aggregate payments on each side of 
the comparison, consistent with the approach we have taken in prior 
years, for FY 2024, we are proposing to continue to apply a proposed 
proxy based on the prior fiscal year hospital readmissions payment 
adjustment (for FY 2024 this would be FY 2023 final adjustment factors 
from Table 15 of the FY 2023 IPPS/LTCH PPS final rule) and hospital VBP 
payment adjustment (for FY 2024, this proposed proxy would be an 
adjustment factor of 1 to reflect our policy for the FY 2023 program 
year to suppress measures and award each hospital a value-based payment 
amount that matches the reduction to the base operating DRG payment 
amount) on each side of the comparison, consistent with the methodology 
that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 
through 53688). That is, we are proposing to apply a proxy readmissions 
payment adjustment factor from the prior final rule and a proxy 
hospital VBP payment adjustment factor on both sides of our comparison 
of aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum. We refer the reader to 
section V.H. of the preamble of this proposed rule for a complete 
discussion on the Hospital Readmissions Reduction Program and section 
V.G. of the preamble of this proposed rule for a complete discussion on 
the Hospital VBP Program.
     The Affordable Care Act also established section 1886(r) 
of the Act, which modifies the methodology for computing the Medicare 
DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS 
hospitals receiving Medicare DSH payment adjustments receive an 
empirically justified Medicare DSH payment equal to 25 percent of the 
amount that would previously have been received under the statutory 
formula set forth under section 1886(d)(5)(F) of the Act governing the 
Medicare DSH payment adjustment. In accordance with section 1886(r)(2) 
of the Act, the remaining amount, equal to an estimate of 75 percent of 
what otherwise would have been paid as Medicare DSH payments, reduced 
to reflect changes in the percentage of individuals who are uninsured 
and any additional statutory adjustment, is available to make 
additional payments to Medicare DSH hospitals based on their share of 
the total amount of uncompensated care reported by Medicare DSH 
hospitals for a given time period. In order to properly determine 
aggregate payments on each side of the comparison for budget 
neutrality, prior to FY 2014, we included estimated Medicare DSH 
payments on both sides of our comparison of aggregate payments when 
determining all budget neutrality factors described in section II.A.4. 
of this Addendum.
    To do this for FY 2024 (as we did for the last 10 fiscal years), we 
are proposing to include estimated empirically justified Medicare DSH 
payments that would be paid in accordance with section 1886(r)(1) of 
the Act and estimates of the additional uncompensated care payments 
made to hospitals receiving Medicare DSH payment adjustments as 
described by section 1886(r)(2) of the Act. That is, we are proposing 
to consider estimated empirically justified Medicare DSH payments at 25 
percent of what would otherwise have been paid, and also the estimated 
additional uncompensated care payments for hospitals receiving Medicare 
DSH payment adjustments on both sides of our comparison of aggregate 
payments when determining all budget neutrality factors described in 
section II.A.4. of this Addendum.
    We also are proposing to include the estimated supplemental 
payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals on 
both sides of our comparison of aggregate payments when determining all 
budget neutrality factors described in section II.A.4. of this 
Addendum.
     When calculating total payments for budget neutrality, to 
determine total payments for SCHs, we model total hospital-specific 
rate payments and total Federal rate payments and then include 
whichever one of the total payments is greater. As discussed in section 
IV.G. of the preamble to this proposed rule and later in this section, 
we are proposing to continue to use the FY 2014 finalized methodology 
under which we take into consideration uncompensated care payments in 
the comparison of payments under the Federal rate and the hospital-
specific rate for SCHs. Therefore, we are proposing to include 
estimated uncompensated care payments in this comparison.
    Similarly, for MDHs, as discussed in section IV.G. of the preamble 
of this proposed rule, when computing payments under the Federal 
national rate plus 75 percent of the difference between the payments 
under the Federal national rate and the payments under the updated 
hospital-specific rate, we are proposing to continue to take into 
consideration uncompensated care payments in the computation of 
payments under the Federal rate and the hospital-specific rate for 
MDHs.
     We are proposing to include an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality for 
FY 2024. Similar to FY 2023, we are including this adjustment based on 
data on the prior year's performance. Payments for hospitals would be 
estimated based on the proposed applicable standardized amount in 
Tables 1A and 1B for discharges occurring in FY 2024.
     In our determination of all budget neutrality factors 
described in section II.A.4. of this Addendum, we used transfer-
adjusted discharges.
    We note, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49414 
through 49415), we finalized a change to the ordering of the budget 
neutrality factors in the calculation so that the RCH Demonstration 
budget neutrality factor is applied after all wage index and other 
budget neutrality factors. We refer the reader to the FY 2023 IPPS/LTCH 
PPS final rule for further discussion.
a. Proposed Reclassification and Recalibration of MS-DRG Relative 
Weights Before Proposed Cap
    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in 
FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that aggregate 
payments to hospitals are not affected. As discussed in section II.E. 
of the preamble of this proposed rule, we normalized the recalibrated 
MS-DRG relative weights by an adjustment factor so that the average 
case relative weight after recalibration is

[[Page 27213]]

equal to the average case relative weight prior to recalibration. 
However, equating the average case relative weight after recalibration 
to the average case relative weight before recalibration does not 
necessarily achieve budget neutrality with respect to aggregate 
payments to hospitals because payments to hospitals are affected by 
factors other than average case relative weight. Therefore, as we have 
done in past years, we are proposing to make a budget neutrality 
adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) 
of the Act is met.
    For this FY 2024 proposed rule, to comply with the requirement that 
MS-DRG reclassification and recalibration of the relative weights be 
budget neutral for the standardized amount and the hospital-specific 
rates, we used FY 2022 discharge data to simulate payments and compared 
the following:
     Aggregate payments using the FY 2023 labor-related share 
percentages, the FY 2023 relative weights, and the FY 2023 pre-
reclassified wage data, and applied the proposed proxy FY 2024 hospital 
readmissions payment adjustments and proposed proxy FY 2024 hospital 
VBP payment adjustments; and
     Aggregate payments using the FY 2023 labor-related share 
percentages, the proposed FY 2024 relative weights before applying the 
10 percent cap, and the FY 2023 pre-reclassified wage data, and applied 
the same proposed proxy FY 2024 hospital readmissions payment 
adjustments and proposed proxy FY 2024 hospital VBP payment adjustments 
applied previously.
    Because this payment simulation uses the proposed FY 2024 relative 
weights (before applying the 10 percent cap), consistent with our 
proposal in section IV.I. of the preamble to this proposed rule, we 
applied the proposed adjustor for certain cases that group to MS-DRG 
018 in our simulation of these payments. We note that because the 
simulations of payments for all of the budget neutrality factors 
discussed in this section also use the FY 2024 relative weights, we are 
proposing to apply the adjustor for certain MS-DRG 018 (Chimeric 
Antigen Receptor (CAR) T-cell and other immunotherapies) cases in all 
simulations of payments for the budget neutrality factors discussed 
later in this section. We refer the reader to section IV.I. of the 
preamble of this proposed rule for a complete discussion on the 
proposed adjustor for certain cases that group to MS-DRG 018 and to 
section II.E.2.b. of the preamble of this proposed rule, for a complete 
discussion of the proposed adjustment to the FY 2024 relative weights 
to account for certain cases that group to MS-DRG 018.
    Based on this comparison, we computed a proposed budget neutrality 
adjustment factor and applied this factor to the standardized amount. 
As discussed in section IV. of this Addendum, we are proposing to apply 
the MS-DRG reclassification and recalibration budget neutrality factor 
to the hospital-specific rates that are effective for cost reporting 
periods beginning on or after October 1, 2023. Please see the table 
later in this section setting forth each of the proposed FY 2024 budget 
neutrality factors.
b. Proposed Budget Neutrality Adjustment for Reclassification and 
Recalibration of MS-DRG Relative Weights With Cap
    As discussed in section II.E.2.d of this proposed rule, in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48897 through 48900), we finalized 
a permanent 10-percent cap on the reduction in an MS-DRG's relative 
weight in a given fiscal year, beginning in FY 2023. As also discussed 
in section II.E.2.d of the preamble of this proposed rule, and 
consistent with our current methodology for implementing budget 
neutrality for MS-DRG reclassification and recalibration of the 
relative weights under section 1886(d)(4)(C)(iii) of the Act, we apply 
a budget neutrality adjustment to the standardized amount for all 
hospitals so that this 10-percent cap on relative weight reductions 
does not increase estimated aggregate Medicare payments beyond the 
payments that would be made had we never applied this cap. We refer the 
reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion.
    To calculate this proposed budget neutrality adjustment factor for 
FY 2024, we used FY 2022 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2023 labor-related share 
percentages, the FY 2024 relative weights before applying the 10-
percent cap, and the FY 2023 pre-reclassified wage data, and applied 
the proposed proxy FY 2024 hospital readmissions payment adjustments 
and the proposed proxy FY 2024 hospital VBP payment adjustments; and
     Aggregate payments using the FY 2023 labor-related share 
percentages, the proposed FY 2024 relative weights after applying the 
10-percent cap, and the FY 2023 pre-reclassified wage data, and applied 
the same proposed proxy FY 2024 hospital readmissions payment 
adjustments and proposed proxy FY 2024 hospital VBP payment adjustments 
applied previously.
    Because this payment simulation uses the FY 2024 relative weights, 
consistent with our proposal in section IV.I. of the preamble to this 
proposed rule and our historical policy, and as discussed in the 
preceding section, we applied the proposed adjustor for certain cases 
that group to MS-DRG 018 in our simulation of these payments.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the cap 
(derived in the first step) to the payment rates that were used to 
simulate payments for this comparison of aggregate payments from FY 
2023 to FY 2024. Based on this comparison, we computed a proposed 
budget neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, we 
are proposing to apply this budget neutrality factor to the hospital-
specific rates that are effective for cost reporting periods beginning 
on or after October 1, 2023. Please see the table later in this section 
setting forth each of the proposed FY 2024 budget neutrality factors.
c. Updated Wage Index--Proposed Budget Neutrality Adjustment
    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. This 
provision also requires us to make any updates or adjustments to the 
wage index in a manner that ensures that aggregate payments to 
hospitals are not affected by the change in the wage index. Section 
1886(d)(3)(E)(i) of the Act requires that we implement the wage index 
adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent 
for hospitals with a wage index less than or equal to 1.0000, and 
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall 
calculate the budget neutrality adjustment for the adjustments or 
updates made under that provision as if section 1886(d)(3)(E)(ii) of 
the Act had not been enacted. In other words, this section of the 
statute requires that we implement the updates to the wage index in a 
budget neutral manner, but that our budget neutrality adjustment should 
not take into account the requirement that we set the labor-related 
share for hospitals with wage indexes less than or equal to 1.0000 at 
the more advantageous level of 62 percent. Therefore, for purposes of 
this budget neutrality adjustment, section

[[Page 27214]]

1886(d)(3)(E)(i) of the Act prohibits us from taking into account the 
fact that hospitals with a wage index less than or equal to 1.0000 are 
paid using a labor-related share of 62 percent. Consistent with current 
policy, for FY 2024, we are proposing to adjust 100 percent of the wage 
index factor for occupational mix. We describe the occupational mix 
adjustment in section III.E. of the preamble of this proposed rule.
    To compute a proposed budget neutrality adjustment factor for wage 
index and labor-related share percentage changes, we used FY 2022 
discharge data to simulate payments and compared the following:
     Aggregate payments using the proposed FY 2024 relative 
weights and the FY 2023 pre-reclassified wage indexes, applied the FY 
2023 labor-related share of 67.6 percent to all hospitals (regardless 
of whether the hospital's wage index was above or below 1.0000), and 
applied the proposed proxy FY 2024 hospital readmissions payment 
adjustment and the proposed proxy FY 2024 hospital VBP payment 
adjustment.
     Aggregate payments using the proposed FY 2024 relative 
weights and the proposed FY 2024 pre-reclassified wage indexes, applied 
the proposed labor-related share for FY 2024 of 67.6 percent to all 
hospitals (regardless of whether the hospital's wage index was above or 
below 1.0000), and applied the same proposed proxy FY 2024 hospital 
readmissions payment adjustments and proposed proxy FY 2024 hospital 
VBP payment adjustments applied previously.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the proposed 
cap (derived in the first step) and the 10 percent cap on relative 
weight reductions adjustment factor (derived from the second step) to 
the payment rates that were used to simulate payments for this 
comparison of aggregate payments from FY 2023 to FY 2024. Based on this 
comparison, we computed a proposed budget neutrality adjustment factor 
and applied this factor to the standardized amount for changes to the 
wage index. Please see the table later in this section for a summary of 
the FY 2024 proposed budget neutrality factors.
d. Reclassified Hospitals--Proposed Budget Neutrality Adjustment
    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act 
provides for the reclassification of hospitals based on determinations 
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be 
reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the standardized amount to ensure that aggregate payments 
under the IPPS after implementation of the provisions of sections 
1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the 
aggregate prospective payments that would have been made absent these 
provisions. We note, as discussed in section III.G.1. of the preamble 
of this proposed rule, beginning with FY 2024 we are proposing to 
include hospitals with Sec.  412.103 reclassification along with 
geographically rural hospitals in all rural wage index calculations, 
and only to exclude ``dual reclass'' hospitals (hospitals with 
simultaneous Sec.  412.103 and MGCRB reclassifications) when implicated 
by the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. 
Consistent with the previous proposal, beginning with FY 2024 we are 
proposing to include the data of all Sec.  412.103 hospitals (including 
those that have an MGCRB reclassification) 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. As 
discussed in section III.G.1. of the preamble of this proposed rule, we 
acknowledge that these proposals would have significant effects on wage 
index values. In addition, as a result of this proposed change, the 
geographic reclassification budget neutrality adjustment is 
significantly larger than in prior years.
    We refer the reader to the FY 2015 IPPS final rule (79 FR 50371 and 
50372) for a complete discussion regarding the requirement of section 
1886(d)(8)(C)(iii) of the Act. We further note that the wage index 
adjustments provided for under section 1886(d)(13) of the Act are not 
budget neutral. Section 1886(d)(13)(H) of the Act provides that any 
increase in a wage index under section 1886(d)(13) of the Act shall not 
be taken into account in applying any budget neutrality adjustment with 
respect to such index under section 1886(d)(8)(D) of the Act. To 
calculate the proposed budget neutrality adjustment factor for FY 2024, 
we used FY 2022 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the proposed FY 2024 labor-
related share percentage, the proposed FY 2024 relative weights, and 
the proposed FY 2024 wage data prior to any reclassifications under 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied 
the proposed proxy FY 2024 hospital readmissions payment adjustments 
and the proposed proxy FY 2024 hospital VBP payment adjustments.
     Aggregate payments using the proposed FY 2024 labor-
related share percentage, the proposed FY 2024 relative weights, and 
the proposed FY 2024 wage data after such reclassifications, and 
applied the same proposed proxy FY 2024 hospital readmissions payment 
adjustments and the proposed proxy FY 2024 hospital VBP payment 
adjustments applied previously.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated with 
this proposed rule, which is available via the internet on the CMS 
website. This table reflects reclassification crosswalks proposed for 
FY 2024, and applies the proposed policies explained in section III. of 
the preamble of this proposed rule. Based on this comparison, we 
computed a proposed budget neutrality adjustment factor and applied 
this factor to the standardized amount to ensure that the effects of 
these provisions are budget neutral, consistent with the statute. 
Please see the table later in this section for a summary of the 
proposed FY 2024 budget neutrality factors.
    The proposed FY 2024 budget neutrality adjustment factor was 
applied to the proposed standardized amount after removing the effects 
of the FY 2023 budget neutrality adjustment factor. We note that the 
proposed FY 2024 budget neutrality adjustment reflects FY 2024 wage 
index reclassifications approved by the MGCRB or the Administrator at 
the time of development of this proposed rule. We finally note, in the 
absence of the proposed policies discussed in section III.G.1 of this 
proposed rule (to include hospitals with Sec.  412.103 reclassification 
along with geographically rural hospitals in all rural wage index 
calculations, and to only exclude ``dual reclass'' hospitals (hospitals 
with simultaneous Sec.  412.103 and MGCRB reclassifications) when 
implicated by the hold harmless provision at section 1886(d)(8)(C)(ii) 
of the Act), the reclassification budget neutrality factor would be 
0.985756.
e. Proposed Rural Floor Proposed Budget Neutrality Adjustment
    Under Sec.  412.64(e)(4), we make an adjustment to the wage index 
to ensure that aggregate payments after implementation of the rural 
floor under section 4410 of the BBA (Pub. L. 105-33) is equal to the 
aggregate prospective payments that would have been made in

[[Page 27215]]

the absence of this provision. Consistent with section 3141 of the 
Affordable Care Act and as discussed in section III.G. of the preamble 
of this proposed rule and codified at Sec.  412.64(e)(4)(ii), the 
budget neutrality adjustment for the rural floor is a national 
adjustment to the wage index.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50369 through 50370), for FY 2024, we are proposing to calculate 
a national rural Puerto Rico wage index. Because there are no rural 
Puerto Rico hospitals with established wage data, our calculation of 
the FY 2024 rural Puerto Rico wage index is based on the policy adopted 
in the FY 2008 IPPS final rule with comment period (72 FR 47323). That 
is, we use the unweighted average of the wage indexes from all CBSAs 
(urban areas) that are contiguous (share a border with) to the rural 
counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under 
the OMB labor market area delineations, except for Arecibo, Puerto Rico 
(CBSA 11640), all other Puerto Rico urban areas are contiguous to a 
rural area. Therefore, based on our existing policy, the proposed FY 
2024 rural Puerto Rico wage index is calculated based on the average of 
the proposed FY 2024 wage indexes for the following urban areas: 
Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, 
PR (CBSA 32420); Ponce, PR (CBSA 38660); San German, PR (CBSA 41900); 
and San Juan-Carolina-Caguas, PR (CBSA 41980).
    We note, as discussed in section III.G.1 of the preamble of this 
proposed rule, we are proposing to include hospitals with Sec.  412.103 
reclassification along with geographically rural hospitals in all rural 
wage index calculations, and to only exclude ``dual reclass'' hospitals 
(hospitals with simultaneous Sec.  412.103 and MGCRB reclassifications) 
when implicated by the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act. Consistent with the previous proposal, 
beginning with FY 2024 we are proposing to include the data of all 
Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) in the calculation of the rural floor. As discussed 
in section III.G.1 of this proposed rule, we acknowledge that these 
proposals would have significant effects on wage index values. In 
addition, as a result of this proposed change, the rural floor budget 
neutrality adjustment is significantly larger than in prior years.
    To calculate the national rural floor budget neutrality adjustment 
factor, we used FY 2022 discharge data to simulate payments, and the 
post-reclassified national wage indexes and compared the following:
     National simulated payments without the rural floor.
     National simulated payments with the rural floor.
    Based on this comparison, we determined a proposed national rural 
floor budget neutrality adjustment factor. The national adjustment was 
applied to the national wage indexes to produce proposed rural floor 
budget neutral wage indexes. Please see the table later in this section 
for a summary of the proposed FY 2024 budget neutrality factors. We 
note, in the absence of the proposed policies discussed in section 
III.G.1. of this proposed rule (to include hospitals with Sec.  412.103 
reclassification along with geographically rural hospitals in all rural 
wage index calculations, and to only exclude ``dual reclass'' hospitals 
(hospitals with simultaneous Sec.  412.103 and MGCRB reclassifications) 
when implicated by the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act), the rural floor budget neutrality factor 
would be 0.992537.
    As further discussed in section III.G.2. of this proposed rule, we 
note that 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 (or 
imputed floor) for hospitals in all-urban States for discharges 
occurring on or after October 1, 2022. Unlike the imputed floor that 
was in effect from FY 2005 through FY 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 the past, we 
budget neutralized the estimated increase in payments each year 
resulting from the imputed floor that was in effect from FY 2005 
through FY 2018. For FY 2022 and subsequent years, in applying the 
imputed floor required under section 1886(d)(3)(E)(iv) of the Act, we 
are applying the imputed floor after the application of the rural floor 
and would 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. We refer the 
reader to section III.G.2. of the preamble of this proposed rule for a 
complete discussion regarding the imputed floor.
f. Proposed Continuation of the Low Wage index Hospital Policy--
Proposed Budget Neutrality Adjustment
    As discussed in section III.G.3. of the preamble of this proposed 
rule, we are proposing to continue for FY 2024 the wage index policy 
finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage index 
disparities by increasing the wage index values for hospitals with a 
wage index value below the 25th percentile wage index value across all 
hospitals (the low wage index hospital policy). As discussed in section 
III.G.3. of this proposed rule, consistent with our current methodology 
for implementing wage index budget neutrality under section 
1886(d)(3)(E) of the Act, we are proposing to make a budget neutrality 
adjustment to the national standardized amount for all hospitals so 
that the increase in the wage index for hospitals with a wage index 
below the 25th percentile wage index, is implemented in a budget 
neutral manner.
    To calculate this proposed budget neutrality adjustment factor for 
FY 2024, we used FY 2022 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2024 labor-related share 
percentage, the proposed FY 2024 relative weights, and the proposed FY 
2024 wage index for each hospital before adjusting the wage indexes 
under the low wage index hospital policy, and applied the proposed 
proxy FY 2024 hospital readmissions payment adjustments and the 
proposed proxy FY 2024 hospital VBP payment adjustments; and
     Aggregate payments using the FY 2024 labor-related share 
percentage, the proposed FY 2024 relative weights, and the proposed FY 
2024 wage index for each hospital after adjusting the wage indexes 
under the low wage index hospital policy, and applied the same proposed 
proxy FY 2024 hospital readmissions payment adjustments and the 
proposed proxy FY 2024 hospital VBP payment adjustments applied 
previously.
    This proposed FY 2024 budget neutrality adjustment factor was 
applied to the standardized amount.
g. Permanent Cap Policy for Wage Index Budget Neutrality Adjustment--
Proposed Budget Neutrality Adjustment
    As noted previously, in section III.N. of the preamble to this 
proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021) we finalized a policy to apply a 5-percent

[[Page 27216]]

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, a hospital's wage index would not be less than 95 percent of its 
final wage index for the prior FY. We also finalized the application of 
this permanent cap policy in a budget neutral manner through an 
adjustment to the standardized amount to ensure that estimated 
aggregate payments under our wage index cap policy for hospitals that 
will have a decrease in their wage indexes for the upcoming fiscal year 
of more than 5 percent will equal what estimated aggregate payments 
would have been without the permanent cap policy.
    To calculate a wage index cap budget neutrality adjustment factor 
for FY 2024, we used FY 2022 discharge data to simulate payments and 
compared the following:
     Aggregate payments without the 5-percent cap using the 
proposed FY 2024 labor-related share percentages, the proposed FY 2024 
relative weights, the proposed FY 2024 wage index for each hospital 
after adjusting the wage indexes under the low wage index hospital 
policy, and applied the proposed proxy FY 2024 hospital readmissions 
payment adjustments and the proposed proxy FY 2024 hospital VBP payment 
adjustments.
     Aggregate payments with the 5-percent cap using the 
proposed FY 2024 labor-related share percentages, the proposed FY 2024 
relative weights, the proposed FY 2024 wage index for each hospital 
after adjusting the wage indexes under the low wage index hospital 
policy, and applied the same proposed proxy FY 2024 hospital 
readmissions payment adjustments and the proposed proxy FY 2024 
hospital VBP payment adjustments applied previously.
    We note, Table 2 associated with this proposed rule contains the 
wage index by provider before and after applying the low wage index 
hospital policy and the proposed cap.
h. Proposed Rural Community Hospital Demonstration Program Adjustment
    In section V.L. of the preamble of this proposed rule, we discuss 
the Rural Community Hospital (RCH) Demonstration program, which was 
originally authorized for a 5-year period by section 410A of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), and extended for another 5-year period by 
sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). 
Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-
255), enacted December 13, 2016, amended section 410A of Public Law 
108-173 to require a 10-year extension period (in place of the 5-year 
extension required by the Affordable Care Act, as further discussed 
later in this section). Finally, Division CC, section 128(a) of the 
Consolidated Appropriations Act of 2021 (Pub. L. 116-260) again amended 
section 410A to require a 15-year extension period in place of the 10-
year period. We make an adjustment to the standardized amount to ensure 
the effects of the RCH Demonstration program are budget neutral as 
required under section 410A(c)(2) of Public Law 108-173. We refer 
readers to section V.M. of the preamble of this proposed rule for 
complete details regarding the Rural Community Hospital Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make an 
adjustment to the standardized amount to ensure the effects of the 
Rural Community Hospital Demonstration are budget neutral, as required 
under section 410A(c)(2) of Public Law 108-173. For FY 2024, based on 
the latest data for this proposed rule, the total amount that we are 
applying to make an adjustment to the standardized amounts to ensure 
the effects of the Rural Community Hospital Demonstration program are 
budget neutral is $37,658,408. Accordingly, using the most recent data 
available to account for the estimated costs of the demonstration 
program, for FY 2024, we computed a factor for the Rural Community 
Hospital Demonstration budget neutrality adjustment that would be 
applied to the standardized amount. Please see the table later in this 
section for a summary of the FY 2024 budget neutrality factors. We 
refer readers to section V.L. of the preamble of this proposed rule on 
complete details regarding the calculation of the amount we are 
applying to make an adjustment to the standardized amounts.
    The following table is a summary of the proposed FY 2024 budget 
neutrality factors, as discussed in the previous sections.
[GRAPHIC] [TIFF OMITTED] TP01MY23.335

i. Proposed Outlier Payments
    Section 1886(d)(5)(A) of the Act provides for payments in addition 
to the basic prospective payments for ``outlier'' cases involving 
extraordinarily high costs. To qualify for outlier payments, a case 
must have costs greater than the sum of the prospective payment rate 
for the MS-DRG, any IME and DSH payments, uncompensated care payments, 
supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico 
hospitals, any new technology add-on payments, and the ``outlier 
threshold'' or ``fixed-loss'' amount (a dollar amount by which the 
costs of a case must exceed payments in order to qualify for an outlier 
payment). We refer to the sum of the prospective payment rate for the 
MS-DRG, any IME and DSH payments, uncompensated care payments, 
supplemental payment for eligible IHS/Tribal hospitals and Puerto

[[Page 27217]]

Rico hospitals, any new technology add-on payments, and the outlier 
threshold as the outlier ``fixed-loss cost threshold.'' To determine 
whether the costs of a case exceed the fixed-loss cost threshold, a 
hospital's CCR is applied to the total covered charges for the case to 
convert the charges to estimated costs. Payments for eligible cases are 
then made based on a marginal cost factor, which is a percentage of the 
estimated costs above the fixed-loss cost threshold. The marginal cost 
factor for FY 2024 is 80 percent, or 90 percent for burn MS-DRGs 927, 
928, 929, 933, 934 and 935. We have used a marginal cost factor of 90 
percent since FY 1989 (54 FR 36479 through 36480) for designated burn 
DRGs as well as a marginal cost factor of 80 percent for all other DRGs 
since FY 1995 (59 FR 45367).
    In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year are projected to be not less than 5 percent nor 
more than 6 percent of total operating DRG payments (which does not 
include IME and DSH payments) plus outlier payments. When setting the 
outlier threshold, we compute the percent target by dividing the total 
operating outlier payments by the total operating DRG payments plus 
outlier payments. As discussed in the next section, for FY 2024, we are 
proposing to incorporate an estimate of outlier reconciliation when 
setting the outlier threshold. We do not include any other payments 
such as IME and DSH within the outlier target amount. Therefore, it is 
not necessary to include Medicare Advantage IME payments in the outlier 
threshold calculation. Section 1886(d)(3)(B) of the Act requires the 
Secretary to reduce the average standardized amount by a factor to 
account for the estimated proportion of total DRG payments made to 
outlier cases. More information on outlier payments may be found on the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.htm.
(1) Proposed Methodology To Incorporate an Estimate of Outlier 
Reconciliation in the FY 2024 Outlier Fixed-Loss Cost Threshold
    The regulations in 42 CFR 412.84(i)(4) state that any outlier 
reconciliation at cost report settlement will be based on operating and 
capital cost-to-charge ratios (CCRs) calculated based on a ratio of 
costs to charges computed from the relevant cost report and charge data 
determined at the time the cost report coinciding with the discharge is 
settled. We have instructed MACs to identify for CMS any instances 
where: (1) A hospital's actual CCR for the cost reporting period 
fluctuates plus or minus 10 percentage points compared to the interim 
CCR used to calculate outlier payments when a bill is processed; and 
(2) the total outlier payments for the hospital exceeded $500,000.00 
for that cost reporting period. If we determine that a hospital's 
outlier payments should be reconciled, we reconcile both operating and 
capital outlier payments. We refer readers to section 20.1.2.5 of 
Chapter 3 of the Medicare Claims Processing Manual (available on the 
CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) for complete details regarding outlier 
reconciliation. The regulation at Sec.  412.84(m) further states that 
at the time of any outlier reconciliation under Sec.  412.84(i)(4), 
outlier payments may be adjusted to account for the time value of any 
underpayments or overpayments. Section 20.1.2.6 of Chapter 3 of the 
Medicare Claims Processing Manual contains instructions on how to 
assess the time value of money for reconciled outlier amounts.
    If the operating CCR of a hospital subject to outlier 
reconciliation is lower at cost report settlement compared to the 
operating CCR used for payment, the hospital would owe CMS money 
because it received an outlier overpayment at the time of claim 
payment. Conversely, if the operating CCR increases at cost report 
settlement compared to the operating CCR used for payment, CMS would 
owe the hospital money because the hospital outlier payments were 
underpaid.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42635), we finalized a methodology to incorporate outlier 
reconciliation in the FY 2020 outlier fixed loss cost threshold. As 
discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19592), we 
stated that rather than trying to predict which claims and/or hospitals 
may be subject to outlier reconciliation, we believe a methodology that 
incorporates an estimate of outlier reconciliation dollars based on 
actual outlier reconciliation amounts reported in historical cost 
reports would be a more feasible approach and provide a better estimate 
and predictor of outlier reconciliation for the upcoming fiscal year. 
We also stated that we believe the methodology addresses stakeholder's 
concerns on the impact of outlier reconciliation on the modeling of the 
outlier threshold. For a detailed discussion of additional background 
regarding outlier reconciliation, we refer the reader to the FY 2020 
IPPS/LTCH PPS final rule.
(a) Incorporating a Proposed Projection of Outlier Payment 
Reconciliations for the FY 2024 Outlier Threshold Calculation
    Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42623 through 42625), we are proposing to continue to 
incorporate outlier reconciliation in the FY 2024 outlier fixed loss 
cost threshold.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule, for FY 2020, 
we used the historical outlier reconciliation amounts from the FY 2014 
cost reports (cost reports with a begin date on or after October 1, 
2013, and on or before September 30, 2014), which we believed would 
provide the most recent and complete available data to project the 
estimate of outlier reconciliation. We refer the reader to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42623 through 42625) for a discussion 
on the use of the FY 2014 cost report data for purposes of projecting 
outlier payment reconciliations for the FY 2020 outlier threshold 
calculation. For FY 2023, we applied the same methodology finalized in 
FY 2020, using the historical outlier reconciliation amounts from the 
FY 2017 cost reports (cost reports with a begin date on or after 
October 1, 2016, and on or before September 30, 2017).
    Similar to the FY 2023 methodology, in this proposed rule, we are 
proposing to determine a projection of outlier payment reconciliations 
for the FY 2024 outlier threshold calculation, by advancing the 
methodology by 1 year. Specifically, we are proposing to use FY 2018 
cost reports (cost reports with a begin date on or after October 1, 
2017, and on or before September 30, 2018).
    For FY 2024, we are proposing to use the same methodology from FY 
2020 to incorporate a projection of operating outlier payment 
reconciliations for the FY 2024 outlier threshold calculation.
    For this FY 2024 proposed rule, we used the December 2022 HCRIS 
extract of the cost report data to calculate the proposed percentage 
adjustment for outlier reconciliation. For the FY 2024 final rule, we 
propose to use the latest quarterly HCRIS extract that is publicly 
available at the time of the development of that rule which, for FY 
2024, would be the March 2023 extract. While in the past we have 
considered the use of more recent data that may become available for 
purposes of projecting the estimate of operating outlier reconciliation 
used in the calculation of the final outlier threshold, we have also 
noted that we generally expect historical cost reports for the 
applicable fiscal year to be

[[Page 27218]]

available by March (84 FR 53609). Since the FY 2020 final rule we have 
worked with our Medicare Administrator Contractors (MACs) so that 
historical cost reports for the applicable fiscal year can be made 
available with the March HCRIS update for the final rule, which, as 
noted, would be the March 2023 HCRIS extract for purposes of projecting 
the estimate of operating outlier reconciliation used in the 
calculation of the FY 2024 outlier threshold for the final rule. 
Information on availability of the HCRIS cost report data can be found 
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports.
    The following steps are the same as those finalized in the FY 2020 
final rule but with updated data for FY 2024:
    Step 1.--Use the Federal FY 2018 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly HCRIS 
extract available at the time of development of the proposed and final 
rules, and exclude sole community hospitals (SCHs) that were paid under 
their hospital-specific rate (that is, if Worksheet E, Part A, Line 48 
is greater than Line 47). We note that when there are multiple columns 
available for the lines of the cost report described in the following 
steps and the provider was paid under the IPPS for that period(s) of 
the cost report, then we believe it is appropriate to use multiple 
columns to fully represent the relevant IPPS payment amounts, 
consistent with our methodology for the FY 2020 final rule.
    Step 2.--Calculate the aggregate amount of historical total of 
operating outlier reconciliation dollars (Worksheet E, Part A, Line 
2.01) using the Federal FY 2018 cost reports from Step 1. For this FY 
2024 proposed rule, based on the December 2022 HCRIS, 5 hospitals had 
an outlier reconciliation amount recorded on Worksheet E, Part A, Line 
2.01 for total operating outlier reconciliation dollars of negative 
$6,925,967. We note that a negative amount on Worksheet E, Part A, Line 
2.01 for outlier reconciliation indicates an amount that was owed by 
the hospital, and a positive amount indicates this amount was paid to 
the hospital.
    Step 3.--Calculate the aggregate amount of total Federal operating 
payments using the Federal FY 2018 cost reports from Step 1. The total 
Federal operating payments consist of the Federal payments (Worksheet 
E, Part A, Line 1.01 and Line 1.02, plus Line 1.03 and Line 1.04), 
outlier payments (Worksheet E, Part A, Line 2 and Line 2.02), and the 
outlier reconciliation payments (Worksheet E, Part A, Line 2.01). The 
total Federal operating payments based on the December 2022 HCRIS was 
$88,729,603,026.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage of 
total operating outlier reconciliation dollars to total Federal 
operating payments for FY 2018. For FY 2024, the proposed ratio is a 
negative 0.007806 percent ((-$6,925,967/$88,729,603,026) x 100), which, 
when rounded to the second digit, is -0.01 percent. This percentage 
amount would be used to adjust the outlier target for FY 2024 as 
described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the Medicare claims data in 
the MedPAR file used to model the outlier threshold, we are proposing 
to target 5.1 percent minus the percentage determined in Step 4 in 
determining the outlier threshold. Using the FY 2018 cost reports based 
on the December 2022 HCRIS extract, because the aggregate outlier 
reconciliation dollars from Step 2 are negative, we are targeting an 
amount higher than 5.1 percent for outlier payments for FY 2024 under 
our proposed methodology. Therefore, for FY 2024, we are proposing to 
incorporate a projection of outlier reconciliation dollars by targeting 
an outlier threshold at 5.11 percent [5.1 percent-(-.01 percent)].
    When the percentage of operating outlier reconciliation dollars to 
total Federal operating payments rounds to a negative value (that is, 
when the aggregate amount of outlier reconciliation as a percent of 
total operating payments rounds to a negative percent), the effect is a 
decrease to the outlier threshold compared to an outlier threshold that 
is calculated without including this estimate of operating outlier 
reconciliation dollars. In section II.A.4.i.(2). of the Addendum to 
this proposed rule, we provide the FY 2024 outlier threshold as 
calculated for this proposed rule both with and without including this 
proposed percentage estimate of operating outlier reconciliation.
    As explained in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19593), we would continue to use a 5.1 percent target (or an outlier 
offset factor of 0.949) in calculating the outlier offset to the 
standardized amount. Therefore, the proposed operating outlier offset 
to the standardized amount is 0.949 (1-0.051).
    We are inviting public comment on our proposed methodology for 
projecting an estimate of outlier reconciliation and incorporating that 
estimate into the modeling for the fixed-loss cost outlier threshold 
for FY 2024.
(b) Proposed Reduction to the FY 2024 Capital Standard Federal Rate by 
an Adjustment Factor To Account for the Projected Proportion of Capital 
IPPS Payments Paid as Outliers
    We establish an outlier threshold that is applicable to both 
hospital inpatient operating costs and hospital inpatient capital 
related costs (58 FR 46348). Similar to the calculation of the 
adjustment to the standardized amount to account for the projected 
proportion of operating payments paid as outlier payments, as discussed 
in greater detail in section III.A.2. of this Addendum, we are 
proposing to reduce the FY 2024 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers. The regulations in 42 CFR 412.84(i)(4) 
state that any outlier reconciliation at cost report settlement would 
be based on operating and capital CCRs calculated based on a ratio of 
costs to charges computed from the relevant cost report and charge data 
determined at the time the cost report coinciding with the discharge is 
settled. As such, any reconciliation also applies to capital outlier 
payments.
    For FY 2024, we are proposing to use the same methodology from FY 
2020 to adjust the FY 2024 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers.
    For this FY 2024 proposed rule, we used the December 2022 HCRIS 
extract of the cost report data to calculate the proposed percentage 
adjustment for outlier reconciliation. For the FY 2024 final rule, we 
are proposing to use the latest quarterly HCRIS extract that is 
publicly available at the time of the development of that rule which, 
for FY 2024, would be the March 2023 extract. While in the past we have 
considered the use of more recent data that may become available for 
purposes of projecting the estimate of capital outlier reconciliation 
used in the calculation of the adjustment to the capital standard 
Federal rate for the final rule, we have also noted that we generally 
expect historical cost reports for the applicable fiscal year to be 
available by March (84 FR 53609). As noted previously, since the FY 
2020 final rule we have worked with our Medicare Administrator 
Contractors (MACs) so that historical cost reports for the applicable 
fiscal year can be made available with the March HCRIS update for the 
final rule, which,

[[Page 27219]]

as noted, would be the March 2023 HCRIS extract for purposes of 
projecting the estimate of capital outlier reconciliation used in the 
calculation of the FY 2024 adjustment to the FY 2024 capital standard 
Federal rate for the final rule.
    Similar to FY 2020, as part of our proposal for FY 2024 to 
incorporate into the outlier model the total outlier reconciliation 
dollars from the most recent and most complete fiscal year cost report 
data, we also are proposing to adjust our estimate of FY 2024 capital 
outlier payments to incorporate a projection of capital outlier 
reconciliation payments when determining the adjustment factor to be 
applied to the capital standard Federal rate to account for the 
projected proportion of capital IPPS payments paid as outliers. To do 
so, we are proposing to use the following methodology, which generally 
parallels the proposed methodology to incorporate a projection of 
operating outlier reconciliation payments for the FY 2024 outlier 
threshold calculation.
    Step 1.--Use the Federal FY 2018 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly HCRIS 
extract available at the time of development of the proposed and final 
rules, and exclude SCHs that were paid under their hospital-specific 
rate (that is, if Worksheet E, Part A, Line 48 is greater than Line 
47). We note that when there are multiple columns available for the 
lines of the cost report described in the following steps and the 
provider was paid under the IPPS for that period(s) of the cost report, 
then we believe it is appropriate to use multiple columns to fully 
represent the relevant IPPS payment amounts, consistent with our 
methodology for the FY 2020 final rule.
    Step 2.--Calculate the aggregate amount of the historical total of 
capital outlier reconciliation dollars (Worksheet E, Part A, Line 93, 
Column 1) using the Federal FY 2018 cost reports from Step 1. Based on 
the December 2022 HCRIS, 5 hospitals had an outlier reconciliation 
amount recorded on Worksheet E, Part A, Line 93 for total capital 
outlier reconciliation dollars of negative $383,169. We note that a 
negative amount on Worksheet E, Part A, Line 93 for capital outlier 
reconciliation indicates an amount that was owed by the hospital, and a 
positive amount indicates this amount was paid to the hospital.
    Step 3.--Calculate the aggregate amount of total capital Federal 
payments using the Federal FY 2018 cost reports from Step 1. The total 
capital Federal payments consist of the capital DRG payments, including 
capital indirect medical education (IME) and capital disproportionate 
share hospital (DSH) payments (Worksheet E, Part A, Line 50, Column 1) 
and the capital outlier reconciliation payments (Worksheet E, Part A, 
Line 93, Column 1). The total Federal capital payments based on the 
December 2022 HCRIS was $8,027,006,104.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage of 
total capital outlier reconciliation dollars to total capital Federal 
payments for FY 2018. For FY 2024, the proposed ratio is a negative 
.00477 percent ((-$383,169/$8,027,006,104) x 100), which, when rounded 
to the second digit, is 0.00 percent. This percentage amount would be 
used to adjust the estimate of capital outlier payments for FY 2024 as 
described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the specific Medicare claims 
data in the MedPAR file used to estimate outlier payments, we are 
proposing that the estimate of capital outlier payments for FY 2024 
would be determined by adding the percentage in Step 4 to the estimated 
percentage of capital outlier payments otherwise determined using the 
shared outlier threshold that is applicable to both hospital inpatient 
operating costs and hospital inpatient capital-related costs. (We note 
that this percentage is added for capital outlier payments but 
subtracted in the analogous step for operating outlier payments. We 
have a unified outlier payment methodology that uses a shared threshold 
to identify outlier cases for both operating and capital payments. The 
difference stems from the fact that operating outlier payments are 
determined by first setting a ``target'' percentage of operating 
outlier payments relative to aggregate operating payments which 
produces the outlier threshold. Once the shared threshold is set, it is 
used to estimate the percentage of capital outlier payments to total 
capital payments based on that threshold. Because the threshold is 
already set based on the operating target, rather than adjusting the 
threshold (or operating target), we adjust the percentage of capital 
outlier to total capital payments to account for the estimated effect 
of capital outlier reconciliation payments. This percentage is adjusted 
by adding the capital outlier reconciliation percentage from Step 4 to 
the estimate of the percentage of capital outlier payments to total 
capital payments based on the shared threshold.) We note, when the 
aggregate capital outlier reconciliation dollars from Step 2 are 
negative, the estimate of capital outlier payments for FY 2024 under 
our proposed methodology would be lower than the percentage of capital 
outlier payments otherwise determined using the shared outlier 
threshold.
    For this FY 2024 proposed rule, the estimated percentage of FY 2024 
capital outlier payments otherwise determined using the shared outlier 
threshold is 4.16 percent (estimated capital outlier payments of 
$280,666,342 divided by (estimated capital outlier payments of 
$280,666,342 plus the estimated total capital Federal payment of 
$6,470,989,911)). The proposed ratio in step 4 above is a negative 
0.00477 percent ((-$383,169/$8,027,006,104) x 100), which, when rounded 
to the second digit, is 0.00 percent. Therefore, for FY 2024, taking 
into account projected capital outlier reconciliation payments under 
our proposed methodology, there would be no decrease to the estimated 
percentage of FY 2024 aggregate capital outlier payments.
    As discussed in section III.A.2. of this Addendum, we are proposing 
to incorporate the capital outlier reconciliation dollars from Step 5 
when applying the outlier adjustment factor in determining the capital 
Federal rate based on the estimated percentage of capital outlier 
payments to total capital Federal rate payments for FY 2024.
    We are inviting public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2024 capital outlier payments for purposes of determining the capital 
outlier adjustment factor.
(2) Proposed FY 2024 Outlier Fixed-Loss Cost Threshold
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to the 
FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of the 
changes.
    As we have done in the past, to calculate the proposed FY 2024 
outlier threshold, we simulated payments by applying proposed FY 2024 
payment rates and policies using cases from the FY 2022 MedPAR file. As 
noted in section II.C. of this Addendum, we specify the formula used 
for actual claim payment which is also used by

[[Page 27220]]

CMS to project the outlier threshold for the upcoming fiscal year. The 
difference is the source of some of the variables in the formula. For 
example, operating and capital CCRs for actual claim payment are from 
the PSF while CMS uses an adjusted CCR (as described later in this 
section) to project the threshold for the upcoming fiscal year. In 
addition, charges for a claim payment are from the bill while charges 
to project the threshold are from the MedPAR data with an inflation 
factor applied to the charges (as described earlier).
    In order to determine the proposed FY 2024 outlier threshold, we 
inflated the charges on the MedPAR claims by 2 years, from FY 2022 to 
FY 2024. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42626 and 42627), we are proposing to use the following methodology to 
calculate the charge inflation factor for FY 2024:
     Include hospitals whose last four digits fall between 0001 
and 0899 (section 2779A1 of Chapter 2 of the State Operations Manual on 
the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); include CAHs that were IPPS 
hospitals for the time period of the MedPAR data being used to 
calculate the charge inflation factor; include hospitals in Maryland; 
and remove PPS-excluded cancer hospitals that have a ``V'' in the fifth 
position of their provider number or a ``E'' or ``F'' in the sixth 
position.
     Include providers that are in both periods of charge data 
that are used to calculate the 1-year average annual rate of-change in 
charges per case. We note this is consistent with the methodology used 
since FY 2014.
     We excluded Medicare Advantage IME claims for the reasons 
described in section I.A.4. of this Addendum. We refer readers to the 
FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our 
methodology of identifying and adding the total Medicare Advantage IME 
payment amount to the budget neutrality adjustments.
     In order to ensure that we capture only FFS claims, we 
included claims with a ``Claim Type'' of 60 (which is a field on the 
MedPAR file that indicates a claim is an FFS claim).
     In order to further ensure that we capture only FFS 
claims, we excluded claims with a ``GHOPAID'' indicator of 1 (which is 
a field on the MedPAR file that indicates a claim is not an FFS claim 
and is paid by a Group Health Organization).
     We examined the MedPAR file and removed pharmacy charges 
for anti-hemophilic blood factor (which are paid separately under the 
IPPS) with an indicator of ``3'' for blood clotting with a revenue code 
of ``0636'' from the covered charge field. We also removed organ 
acquisition charges from the covered charge field because organ 
acquisition is a pass-through payment not paid under the IPPS. As noted 
previously, we are proposing to remove allogeneic hematopoietic stem 
cell acquisition charges from the covered charge field for budget 
neutrality adjustments. As discussed in the FY 2021 IPPS/LTCH PPS final 
rule, payment for allogeneic hematopoietic stem cell acquisition costs 
is made on a reasonable cost basis for cost reporting periods beginning 
on or after October 1, 2020 (85 FR 58835 through 58842).
     Because this payment simulation uses the proposed FY 2024 
relative weights, consistent with our proposal discussed in section 
IV.I. of the preamble to this proposed rule, we applied the proposed 
adjustor for certain cases that group to MS-DRG 018 in our simulation 
of these payments.
    In the FY 2023 IPPS/LTCH PPS final rule, due to the impact of the 
COVID-19 PHE on our ordinary ratesetting data, we finalized 
modifications to our usual ratesetting methodologies for FY 2023, 
including the methodology for calculating the FY 2023 outlier 
threshold. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49422 through 49428) for a discussion of the FY 2023 outlier 
threshold and the modifications made to our usual methodologies for 
calculating the outlier threshold. As discussed in section I.E. of the 
preamble to this proposed rule, based on the information available at 
this time, we do not believe there is a reasonable basis for us to 
assume that there will be a meaningful difference in the number of 
COVID-19 cases treated at IPPS hospitals and LTCHs in FY 2024 relative 
to FY 2022, such that modifications to our usual ratesetting 
methodologies (including the methodology for calculating the outlier 
threshold) would be warranted. Therefore, we are proposing to calculate 
the FY 2024 outlier threshold consistent with our historic 
methodologies, as described further in this section, without 
modifications.
    Our general methodology to inflate the charges computes the 1-year 
average annual rate-of-change in charges per case which is then applied 
twice to inflate the charges on the MedPAR claims by 2 years since we 
typically use claims data for the fiscal year that is 2 years prior to 
the upcoming fiscal year.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we modified 
our charge inflation methodology. We stated that we believe balancing 
our preference to use the latest available data from the MedPAR files 
and stakeholders' concerns about being able to use publicly available 
MedPAR files to review the charge inflation factor can be achieved by 
modifying our methodology to use the publicly available Federal fiscal 
year period (that is, for FY 2020, we used the charge data from Federal 
fiscal years 2017 and 2018), rather than the most recent data available 
to CMS which, under our prior methodology, was based on calendar year 
data. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for a 
complete discussion regarding this change.
    For the same reasons discussed in that rulemaking, for FY 2024, we 
are proposing to use the same methodology as FY 2020 to determine the 
charge inflation factor. That is, for FY 2023, we are proposing to use 
the MedPAR files for the two most recent available Federal fiscal year 
time periods to calculate the charge inflation factor, as we did for FY 
2020. Specifically, for this proposed rule we are proposing to use the 
December 2021 MedPAR file of FY 2021 (October 1, 2020 to September 30, 
2021) charge data (released for the FY 2023 IPPS/LTCH PPS proposed 
rule) and the December 2022 MedPAR file of FY 2022 (October 1, 2021 to 
September 30, 2022) charge data (released for this FY 2024 IPPS/LTCH 
PPS proposed rule) to compute the proposed charge inflation factor. We 
are proposing that for the FY 2024 final rule, we would use more 
recently updated data, that is the MedPAR files from March 2022 for the 
FY 2021 time period and March 2023 for the FY 2022 time period.
    For FY 2024, under this proposed methodology, to compute the 1-year 
average annual rate-of-change in charges per case, we compared the 
average covered charge per case of $78,089.49 ($579,065,304,520/
7,415,406) from October 1, 2020 through September 30, 2021, to the 
average covered charge per case of $ 82,583.83 ($574,783,177,187/
6,959,997) from October 1, 2021 through September 30, 2022. This rate-
of-change was 5.755 percent (1.05755) or 11.8412 percent (1.118412) 
over 2 years. The billed charges are obtained from the claims from the 
MedPAR file and inflated by the inflation factor specified previously.
    In this proposed rule, we are proposing to establish the FY 2024 
outlier threshold using hospital CCRs from the December 2022 update to 
the Provider-Specific File (PSF), the most recent available data at the 
time of the development of this proposed rule. We are proposing to 
apply the following edits to providers' CCRs in the PSF. We believe 
these edits are appropriate in

[[Page 27221]]

order to accurately model the outlier threshold. We first search for 
Indian Health Service providers and those providers assigned the 
statewide average CCR from the current fiscal year. We then replace 
these CCRs with the statewide average CCR for the upcoming fiscal year. 
We also assign the statewide average CCR (for the upcoming fiscal year) 
to those providers that have no value in the CCR field in the PSF or 
whose CCRs exceed the ceilings described later in this section (3.0 
standard deviations from the mean of the log distribution of CCRs for 
all hospitals). We do not apply the adjustment factors described later 
in this section to hospitals assigned the statewide average CCR. For FY 
2024, we are also proposing to continue to apply an adjustment factor 
to the CCRs to account for cost and charge inflation (as explained 
later in this section). We also are proposing that, if more recent data 
become available, we would use that data to calculate the final FY 2024 
outlier threshold.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a 
new methodology to adjust the CCRs. Specifically, we finalized a policy 
to compare the national average case-weighted operating and capital CCR 
from the most recent update of the PSF to the national average case-
weighted operating and capital CCR from the same period of the prior 
year.
    Therefore, we are proposing to adjust the CCRs from the December 
2022 update of the PSF by comparing the percentage change in the 
national average case weighted operating CCR and capital CCR from the 
December 2021 update of the PSF to the national average case weighted 
operating CCR and capital CCR from the December 2022 update of the PSF. 
We note that we used total transfer-adjusted cases from FY 2022 to 
determine the national average case weighted CCRs for both sides of the 
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50979), we believe that it is appropriate to use the same case count on 
both sides of the comparison because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from one year to the next without any effect from a change in case 
count on different sides of the comparison.
    Using the proposed methodology, for this proposed rule, we 
calculated a December 2021 operating national average case-weighted CCR 
of 0.253006 and a December 2022 operating national average case-
weighted CCR of 0.247389. We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the December 2021 operating national average case-weighted CCR from the 
December 2022 operating national average case-weighted CCR and then 
dividing the result by the December 2021 national operating average 
case-weighted CCR. This resulted in a proposed one-year national 
operating CCR adjustment factor of 0.977799.
    We used this same proposed methodology to adjust the capital CCRs. 
Specifically, we calculated a December 2021 capital national average 
case-weighted CCR of 0.0202 and a December 2022 capital national 
average case-weighted CCR of 0.018054. We then calculated the 
percentage change between the two national capital case-weighted CCRs 
by subtracting the December 2021 capital national average case-weighted 
CCR from the December 2022 capital national average case-weighted CCR 
and then dividing the result by the December 2021 capital national 
average case-weighted CCR. This resulted in a proposed one-year 
national capital CCR adjustment factor of 0.893762.
    For purposes of estimating the proposed outlier threshold for FY 
2024, we used a wage index that reflects the policies discussed in the 
proposed rule. This includes the following:
     The proposed frontier State floor adjustments in 
accordance with section 10324(a) of the Affordable Care Act,
     The proposed out-migration adjustment as added by section 
505 of Public Law 108-173,
     Incorporating the proposed FY 2024 low wage index hospital 
policy (described in section III.G.4 of the preamble of this proposed 
rule) for hospitals with a wage index value below the 25th percentile, 
where the increase in the wage index value for these hospitals would be 
equal to half the difference between the otherwise applicable final 
wage index value for a year for that hospital and the 25th percentile 
wage index value for that year across all hospitals.
     Incorporating our policy (described in section III.N. of 
the preamble of this proposed rule) 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.
    If we did not take the aforementioned into account, our estimate of 
total FY 2024 payments would be too low, and, as a result, our proposed 
outlier threshold would be too high, such that estimated outlier 
payments would be less than our projected 5.1 percent of total payments 
(which includes outlier reconciliation).
    As described in sections V.K. and V.L., respectively, of the 
preamble of this proposed rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the Hospital 
VBP Program, respectively. We do not believe that it is appropriate to 
include the proposed hospital VBP payment adjustments and the hospital 
readmissions payment adjustments in the proposed outlier threshold 
calculation or the proposed outlier offset to the standardized amount. 
Specifically, consistent with our definition of the base operating DRG 
payment amount for the Hospital Readmissions Reduction Program under 
Sec.  412.152 and the Hospital VBP Program under Sec.  412.160, outlier 
payments under section 1886(d)(5)(A) of the Act are not affected by 
these payment adjustments. Therefore, outlier payments would continue 
to be calculated based on the unadjusted base DRG payment amount (as 
opposed to using the base-operating DRG payment amount adjusted by the 
hospital readmissions payment adjustment and the hospital VBP payment 
adjustment). Consequently, we are proposing to exclude the estimated 
hospital VBP payment adjustments and the estimated hospital 
readmissions payment adjustments from the calculation of the proposed 
outlier fixed-loss cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies the 
DSH payment methodology under section 1886(d)(5)(F) of the Act, the 
uncompensated care payment under section 1886(r)(2) of the Act, like 
the empirically justified Medicare DSH payment under section 1886(r)(1) 
of the Act, may be considered an amount payable under section 
1886(d)(5)(F) of the Act such that it would be reasonable to include 
the payment in the outlier determination under section 1886(d)(5)(A) of 
the Act. As we have done since the implementation of uncompensated care 
payments in FY 2014, for FY 2024, we are proposing to allocate an 
estimated per-discharge uncompensated care payment amount to all cases 
for the hospitals eligible to receive the uncompensated care payment 
amount in the calculation of the outlier fixed-loss cost threshold 
methodology. We continue to believe that allocating an eligible 
hospital's estimated uncompensated care payment to all cases equally in 
the calculation of the outlier fixed-loss cost threshold would best 
approximate the amount we would pay in uncompensated care payments 
during the year because, when we make claim payments to a

[[Page 27222]]

hospital eligible for such payments, we would be making estimated per-
discharge uncompensated care payments to all cases equally.
    Furthermore, we continue to believe that using the estimated per-
claim uncompensated care payment amount to determine outlier estimates 
provides predictability as to the amount of uncompensated care payments 
included in the calculation of outlier payments. Therefore, consistent 
with the methodology used since FY 2014 to calculate the outlier fixed-
loss cost threshold, for FY 2024, we are proposing to include estimated 
FY 2024 uncompensated care payments in the computation of the proposed 
outlier fixed-loss cost threshold. Specifically, we are proposing to 
use the estimated per-discharge uncompensated care payments to 
hospitals eligible for the uncompensated care payment for all cases in 
the calculation of the proposed outlier fixed-loss cost threshold 
methodology.
    In addition, consistent with the methodology finalized in the FY 
2023 final rule, we are proposing to include the estimated supplemental 
payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals in 
the computation of the FY 2024 proposed outlier fixed-loss cost 
threshold. Specifically, we are proposing to use the estimated per-
discharge supplemental payments to hospitals eligible for the 
supplemental payment for all cases in the calculation of the proposed 
outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described in 
the earlier section to this Addendum, we are proposing to incorporate 
an estimate of FY 2024 outlier reconciliation in the methodology for 
determining the outlier threshold. As noted previously, for this FY 
2024 proposed rule, the ratio of outlier reconciliation dollars to 
total Federal Payments (Step 4) is a negative 0.007806 percent, which, 
when rounded to the second digit, is -0.01 percent. Therefore, for FY 
2024, we are proposing to incorporate a projection of outlier 
reconciliation dollars by targeting an outlier threshold at 5.11 
percent [5.1 percent-(-.01 percent)]. Under this proposed approach, we 
determined a threshold of $40,732 and calculated total outlier payments 
of $4,259,029,890 and total operating Federal payments of 
$79,087,551,441. We then divided total outlier payments by total 
operating Federal payments plus total outlier payments and determined 
that this threshold matched with the 5.11 percent target, which 
reflects our proposal to incorporate an estimate of outlier 
reconciliation in the determination of the outlier threshold (as 
discussed in more detail in the previous section of this Addendum). We 
note that, if calculated without applying our proposed methodology for 
incorporating an estimate of outlier reconciliation in the 
determination of the outlier threshold, the proposed threshold would be 
$40,808. We are proposing an outlier fixed-loss cost threshold for FY 
2024 equal to the prospective payment rate for the MS-DRG, plus any 
IME, empirically justified Medicare DSH payments, estimated 
uncompensated care payment, estimated supplemental payment for eligible 
IHS/Tribal hospitals and Puerto Rico hospitals, and any add-on payments 
for new technology, plus $40,732.
(3) Other Proposed Changes Concerning Outliers
    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related costs. 
When we modeled the combined operating and capital outlier payments, we 
found that using a common threshold resulted in a higher percentage of 
outlier payments for capital-related costs than for operating costs. We 
project that the threshold for FY 2024 (which reflects our methodology 
to incorporate an estimate of operating outlier reconciliation) would 
result in outlier payments that would equal 5.1 percent of operating 
DRG payments and we estimate that capital outlier payments would equal 
4.16 percent of capital payments based on the Federal rate (which 
reflects our methodology discussed previously to incorporate an 
estimate of capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we are proposing to reduce the FY 2024 
standardized amount by 5.1 percent to account for the projected 
proportion of payments paid as outliers.
    The proposed outlier adjustment factors that would be applied to 
the operating standardized amount and capital Federal rate based on the 
proposed FY 2024 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TP01MY23.336

    We are proposing to apply the outlier adjustment factors to the FY 
2024 payment rates after removing the effects of the FY 2023 outlier 
adjustment factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
currently apply hospital-specific CCRs to the total covered charges for 
the case. Estimated operating and capital costs for the case are 
calculated separately by applying separate operating and capital CCRs. 
These costs are then combined and compared with the outlier fixed-loss 
cost threshold.
    Under our current policy at Sec.  412.84, we calculate operating 
and capital CCR ceilings and assign a statewide average CCR for 
hospitals whose CCRs exceed 3.0 standard deviations from the mean of 
the log distribution of CCRs for all hospitals. Based on this 
calculation, for hospitals for which the MAC computes operating CCRs 
greater than 1.205 or capital CCRs greater than 0.124 or hospitals for 
which the MAC is unable to calculate a CCR (as described under Sec.  
412.84(i)(3) of our regulations), statewide average CCRs are used to 
determine whether a hospital qualifies for outlier payments. Table 8A 
listed in section VI. of this Addendum (and available via the internet 
on the CMS website) contains the proposed statewide average operating 
CCRs for urban hospitals and for rural hospitals for which the MAC is 
unable to compute a hospital-specific CCR within the range previously 
specified. These statewide average ratios would be effective for 
discharges occurring on or after October 1, 2023 and would replace the 
statewide average ratios from the prior fiscal year. Table 8B listed in 
section VI. of this Addendum (and

[[Page 27223]]

available via the internet on the CMS website) contains the comparable 
proposed statewide average capital CCRs. As previously stated, the 
proposed CCRs in Tables 8A and 8B would be used during FY 2024 when 
hospital-specific CCRs based on the latest settled cost report either 
are not available or are outside the range noted previously. Table 8C 
listed in section VI. of this Addendum (and available via the internet 
on the CMS website) contains the proposed statewide average total CCRs 
used under the LTCH PPS as discussed in section V. of this Addendum.
    We finally note that section 20.1.2 of chapter three of the 
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers an array of topics, including CCRs, 
reconciliation, and the time value of money. We encourage hospitals 
that are assigned the statewide average operating and/or capital CCRs 
to work with their MAC on a possible alternative operating and/or 
capital CCR as explained in the manual. Use of an alternative CCR 
developed by the hospital in conjunction with the MAC can avoid 
possible overpayments or underpayments at cost report settlement, 
thereby ensuring better accuracy when making outlier payments and 
negating the need for outlier reconciliation. We also note that a 
hospital may request an alternative operating or capital CCR at any 
time as long as the guidelines of the manual are followed. In addition, 
the manual outlines the outlier reconciliation process for hospitals 
and Medicare contractors. We refer hospitals to the manual instructions 
for complete details on outlier reconciliation.
(4) FY 2022 Outlier Payments
    Our current estimate, using available FY 2022 claims data, is that 
actual outlier payments for FY 2022 were approximately 6.73 percent of 
actual total MS-DRG payments. Therefore, the data indicate that, for FY 
2022, the percentage of actual outlier payments relative to actual 
total payments is higher than we projected for FY 2022. Consistent with 
the policy and statutory interpretation we have maintained since the 
inception of the IPPS, we do not make retroactive adjustments to 
outlier payments to ensure that total outlier payments for FY 2022 are 
equal to 5.1 percent of total MS-DRG payments. As explained in the FY 
2003 Outlier final rule (68 FR 34502), if we were to make retroactive 
adjustments to all outlier payments to ensure total payments are 5.1 
percent of MS-DRG payments (by retroactively adjusting outlier 
payments), we would be removing the important aspect of the prospective 
nature of the IPPS. Because such an across-the-board adjustment would 
either lead to more or less outlier payments for all hospitals, 
hospitals would no longer be able to reliably approximate their payment 
for a patient while the patient is still hospitalized. We believe it 
would be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment. Furthermore, we believe it is consistent with 
the statutory language at section 1886(d)(5)(A)(iv) of the Act not to 
make retroactive adjustments to outlier payments. This section states 
that outlier payments be equal to or greater than 5 percent and less 
than or equal to 6 percent of projected or estimated (not actual) MS-
DRG payments. We believe that an important goal of a PPS is 
predictability. Therefore, we believe that the fixed-loss outlier 
threshold should be projected based on the best available historical 
data and should not be adjusted retroactively. A retroactive change to 
the fixed-loss outlier threshold would affect all hospitals subject to 
the IPPS, thereby undercutting the predictability of the system as a 
whole.
    We note that, because the MedPAR claims data for the entire FY 2023 
period would not be available until after September 30, 2023, we are 
unable to provide an estimate of actual outlier payments for FY 2023 
based on FY 2023 claims data in this proposed rule. We will provide an 
estimate of actual FY 2023 outlier payments in the FY 2025 IPPS/LTCH 
PPS proposed rule.
5. Proposed FY 2024 Standardized Amount
    The adjusted standardized amount is divided into labor-related and 
nonlabor-related portions. Tables 1A and 1B listed and published in 
section VI. of this Addendum (and available via the internet on the CMS 
website) contain the national standardized amounts that we are 
proposing to apply to all hospitals, except hospitals located in Puerto 
Rico, for FY 2024. The proposed standardized amount for hospitals in 
Puerto Rico is shown in Table 1C listed and published in section VI. of 
this Addendum (and available via the internet on the CMS website). The 
proposed amounts shown in Tables 1A and 1B differ only in that the 
labor-related share applied to the standardized amounts in Table 1A is 
67.6 percent, and the labor-related share applied to the standardized 
amounts in Table 1B is 62 percent. In accordance with sections 
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are proposing to 
apply a labor-related share of 62 percent, unless application of that 
percentage would result in lower payments to a hospital than would 
otherwise be made. In effect, the statutory provision means that we 
would apply a labor-related share of 62 percent for all hospitals whose 
wage indexes are less than or equal to 1.0000.
    In addition, Tables 1A and 1B include the proposed standardized 
amounts reflecting the proposed applicable percentage increases for FY 
2024.
    The proposed labor-related and nonlabor-related portions of the 
national average standardized amounts for Puerto Rico hospitals for FY 
2024 are set forth in Table 1C listed and published in section VI. of 
this Addendum (and available via the internet on the CMS website). 
Similarly, section 1886(d)(9)(C)(iv) of the Act, as amended by section 
403(b) of Public Law 108-173, provides that the labor-related share for 
hospitals located in Puerto Rico be 62 percent, unless the application 
of that percentage would result in lower payments to the hospital.
    The following table illustrates the changes from the FY 2023 
national standardized amounts to the proposed FY 2024 national 
standardized amounts. The second through fifth columns display the 
changes from the FY 2023 standardized amounts for each proposed 
applicable FY 2024 standardized amount. The first row of the table 
shows the updated (through FY 2023) average standardized amount after 
restoring the FY 2023 offsets for outlier payments, geographic 
reclassification, rural demonstration, lowest quartile, and wage index 
cap policy budget neutrality. The MS-DRG reclassification and 
recalibration wage index, and stem cell acquisition budget neutrality 
factors are cumulative (that is, we have not restored the offsets). 
Accordingly, those FY 2023 adjustment factors have not been removed 
from the base rate in the following table. Additionally, for FY 2024 we 
have applied the budget neutrality factors for the lowest quartile 
hospital policy, described previously.
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B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this Addendum 
(and available via the internet on the CMS website), contain the 
proposed labor-related and nonlabor-related shares that we are 
proposing to use to calculate the prospective payment rates for 
hospitals located in the 50 States, the District of Columbia, and 
Puerto Rico for FY 2024. This section addresses two types of 
adjustments to the standardized amounts that are made in determining 
the prospective payment rates as described in this Addendum.
1. Proposed Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the national 
prospective payment rate to account for area differences in hospital 
wage levels. This adjustment is made by multiplying the labor-related 
portion of the adjusted standardized amounts by the appropriate wage 
index for the area in which the hospital is located. For FY 2024, as 
discussed in section IV.B.3. of the preamble of this proposed rule, we 
are proposing to apply a labor-related share of 67.6 percent for the 
national standardized amounts for all IPPS hospitals (including 
hospitals in Puerto Rico) that have a wage index value that is greater 
than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are 
proposing to apply the wage index to a labor-related share of 62 
percent of the national standardized amount for all IPPS hospitals 
(including hospitals in Puerto Rico) whose wage index values are less 
than or equal to 1.0000. In section III. of the preamble of this 
proposed rule, we discuss the data and methodology for the FY 2024 wage 
index.
2. Adjustment for Cost-of-Living in Alaska and Hawaii
    Section 1886(d)(5)(H) of the Act provides discretionary authority 
to the Secretary to make adjustments as the Secretary deems appropriate 
to take into account the unique circumstances of hospitals located in 
Alaska and Hawaii. Higher labor-related costs for these two States are 
taken into account in the adjustment for area wages described 
previously. To account for higher non-labor-related costs for these two 
States, we multiply the nonlabor-related portion of the standardized 
amount for hospitals in Alaska and Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that were 
published by the U.S. Office of Personnel Management (OPM) every 4 
years (coinciding with the update to the labor related share of the 
IPPS market basket), beginning in FY 2014. We refer readers to the FY 
2013 IPPS/LTCH PPS proposed and final rules for additional background 
and a detailed description of this methodology (77 FR 28145 through 
28146 and 77 FR 53700 through 53701, respectively). For FY 2022, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45546 through 45547), we 
updated the COLA factors published by OPM for 2009 (as these are the 
last COLA factors OPM published prior to transitioning from COLAs to 
locality pay) using the methodology that we finalized in the FY 2013 
IPPS/LTCH PPS final rule. Based on the policy finalized in the FY 2013 
IPPS/LTCH PPS final rule, we are continuing to use the same COLA 
factors in FY 2024 that were used in FY 2023 to adjust the nonlabor-
related portion of the standardized amount for hospitals located in 
Alaska and Hawaii. The following table lists the COLA factors for FY 
2024.
[GRAPHIC] [TIFF OMITTED] TP01MY23.338

    Lastly, as we finalized in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53700 and 53701), we intend to update the COLA factors based on our 
methodology every 4 years, at the same time as the update to the labor-
related share of the IPPS market basket.

C. Calculation of the Proposed Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for 
FY 2024
    In general, the operating prospective payment rate for all 
hospitals (including hospitals in Puerto Rico) paid under the IPPS, 
except SCHs and MDHs, for FY 2024 equals the Federal rate (which 
includes uncompensated care payments). Under current law, the MDH 
program is effective for discharges on or before September 30, 2024.
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment: the Federal national

[[Page 27226]]

rate (which, as discussed in section VI.G. of the preamble of this 
proposed rule, includes uncompensated care payments); the updated 
hospital-specific rate based on FY 1982 costs per discharge; the 
updated hospital-specific rate based on FY 1987 costs per discharge; 
the updated hospital-specific rate based on FY 1996 costs per 
discharge; or the updated hospital-specific rate based on FY 2006 costs 
per discharge to determine the rate that yields the greatest aggregate 
payment.
    The prospective payment rate for SCHs for FY 2024 equals the higher 
of the applicable Federal rate, or the hospital-specific rate as 
described later in this section. The prospective payment rate for MDHs 
for FY 2024 equals the higher of the Federal rate, or the Federal rate 
plus 75 percent of the difference between the Federal rate and the 
hospital-specific rate as described in this section. For MDHs, the 
updated hospital-specific rate is based on FY 1982, FY 1987, or FY 2002 
costs per discharge, whichever yields the greatest aggregate payment.
2. Operating and Capital Federal Payment Rate and Outlier Payment 
Calculation
    Note: The formula specified in this section is used for actual 
claim payment and is also used by CMS to project the outlier threshold 
for the upcoming fiscal year. The difference is the source of some of 
the variables in the formula. For example, operating and capital CCRs 
for actual claim payment are from the PSF while CMS uses an adjusted 
CCR (as described previously) to project the threshold for the upcoming 
fiscal year. In addition, charges for a claim payment are from the bill 
while charges to project the threshold are from the MedPAR data with an 
inflation factor applied to the charges (as described earlier).
    Step 1--Determine the MS-DRG and MS-DRG relative weight (from Table 
5) for each claim primarily based on the ICD-10-CM diagnosis and ICD-
10-PCS procedure codes on the claim.
    Step 2--Select the applicable average standardized amount depending 
on whether the hospital submitted qualifying quality data and is a 
meaningful EHR user, as described previously.
    Step 3--Compute the operating and capital Federal payment rate:

--Federal Payment Rate for Operating Costs = MS-DRG Relative Weight x 
[(Labor-Related Applicable Standardized Amount x Applicable CBSA Wage 
Index) + (Nonlabor-Related Applicable Standardized Amount x Cost-of-
Living Adjustment)] x (1 + IME + (DSH * 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x Federal 
Capital Rate x Geographic Adjustment Fact x (l + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + Capital 
CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-Related 
Portion x CBSA Wage Index) + Nonlabor-Related portion)] x Operating CCR 
to Total CCR + Federal Payment with IME, DSH + Uncompensated Care 
Payment + supplemental payment for eligible IHS/Tribal hospitals and 
Puerto Rico hospitals + New Technology Add-On Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital 
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic 
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with 
IME and DSH

    Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs-Operating Outlier 
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs-Capital Outlier Threshold) x 
Marginal Cost Factor

    The payment rate may then be further adjusted for hospitals that 
qualify for a low-volume payment adjustment under section 1886(d)(12) 
of the Act and 42 CFR 412.101(b). The base-operating DRG payment amount 
may be further adjusted by the hospital readmissions payment adjustment 
and the hospital VBP payment adjustment as described under sections 
1886(q) and 1886(o) of the Act, respectively. Payments also may be 
reduced by the 1-percent adjustment under the HAC Reduction Program as 
described in section 1886(p) of the Act. We also make new technology 
add-on payments in accordance with section 1886(d)(5)(K) and (L) of the 
Act. Finally, we add the uncompensated care payment and supplemental 
payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals to 
the total claim payment amount. As noted in the previous formula, we 
take uncompensated care payments, supplemental payments for eligible 
IHS/Tribal hospitals and Puerto Rico hospitals, and new technology add-
on payments into consideration when calculating outlier payments.
3. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
    Section 1886(b)(3)(C) of the Act provides that SCHs are paid based 
on whichever of the following rates yields the greatest aggregate 
payment: the Federal rate; the updated hospital-specific rate based on 
FY 1982 costs per discharge; the updated hospital-specific rate based 
on FY 1987 costs per discharge; the updated hospital-specific rate 
based on FY 1996 costs per discharge; or the updated hospital-specific 
rate based on FY 2006 costs per discharge to determine the rate that 
yields the greatest aggregate payment. Under current law, the MDH 
program has been extended for discharges occurring through September 
30, 2024.
    For a more detailed discussion of the calculation of the hospital-
specific rates, we refer readers to the FY 1984 IPPS interim final rule 
(48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 
15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS 
final rule (65 FR 47082).
b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006 
Hospital-Specific Rate for FY 2024
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase applicable to the hospital-specific rates for SCHs 
and MDHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Because the Act sets the update 
factor for SCHs and MDHs equal to the update factor for all other IPPS 
hospitals, the update to the hospital-specific rates for SCHs and MDHs 
is subject to the amendments to section 1886(b)(3)(B) of the Act made 
by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, the proposed applicable percentage increases to the 
hospital-specific rates applicable to SCHs and MDHs are the following:

[[Page 27227]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.339

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section V.B. of the preamble of this proposed rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the hospital-
specific rate, the hospital-specific rate is adjusted by a budget 
neutrality factor to ensure that changes to the MS-DRG classifications 
and the recalibration of the MS-DRG relative weights are made in a 
manner so that aggregate IPPS payments are unaffected. Therefore, the 
hospital specific-rate for an SCH or an MDH is adjusted by the proposed 
MS-DRG reclassification and recalibration budget neutrality factor, as 
discussed in section III. of this Addendum and listed in the table in 
section II. of this Addendum. In addition, as discussed in section 
II.E.2.d. of the preamble this proposed rule and previously, we are 
applying a permanent 10-percent cap on the reduction in a MS-DRG's 
relative weight in a given fiscal year, as finalized in the FY 2023 
IPPS/LTCH PPS final rule. Because SCHs and MDHs use the same MS-DRGs as 
other hospitals when they are paid based in whole or in part on the 
hospital-specific rate, consistent with the policy adopted in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48897 through 48900 and 49432 
through 49433), the hospital specific-rate for an SCH or MDH would be 
adjusted by the proposed MS-DRG 10-percent cap budget neutrality 
factor. The resulting rate is used in determining the payment rate that 
an SCH or MDH would receive for its discharges beginning on or after 
October 1, 2023.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2024

    The PPS for acute care hospital inpatient capital-related costs was 
implemented for cost reporting periods beginning on or after October 1, 
1991. The basic methodology for determining Federal capital prospective 
rates is set forth in the regulations at 42 CFR 412.308 through 
412.352. In this section of this Addendum, we discuss the factors that 
we are proposing to use to determine the capital Federal rate for FY 
2024, which would be effective for discharges occurring on or after 
October 1, 2023.
    All hospitals (except ``new'' hospitals under Sec.  412.304(c)(2)) 
are paid based on the capital Federal rate. We annually update the 
capital standard Federal rate, as provided in Sec.  412.308(c)(1), to 
account for capital input price increases and other factors. The 
regulations at Sec.  412.308(c)(2) also provide that the capital 
Federal rate be adjusted annually by a factor equal to the estimated 
proportion of outlier payments under the capital Federal rate to total 
capital payments under the capital Federal rate. In addition, Sec.  
412.308(c)(3) requires that the capital Federal rate be reduced by an 
adjustment factor equal to the estimated proportion of payments for 
exceptions under Sec.  412.348. (We note that, as discussed in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no 
longer a need for an exceptions payment adjustment factor.) However, in 
limited circumstances, an additional payment exception for 
extraordinary circumstances is provided for under Sec.  412.348(f) for 
qualifying hospitals.
    Therefore, in accordance with Sec.  412.308(c)(3), an exceptions 
payment adjustment factor may need to be applied if such payments are 
made. Section 412.308(c)(4)(ii) requires that the capital standard 
Federal rate be adjusted so that the effects of the annual DRG 
reclassification and the recalibration of DRG weights and changes in 
the geographic adjustment factor (GAF) are budget neutral.
    Section 412.374 provides for payments to hospitals located in 
Puerto Rico under the IPPS for acute care hospital inpatient capital-
related costs, which currently specifies capital IPPS payments to 
hospitals located in Puerto Rico are based on 100 percent of the 
Federal rate.

A. Determination of the Proposed Federal Hospital Inpatient Capital-
Related Prospective Payment Rate Update for FY 2024

    In the discussion that follows, we explain the factors that we are 
proposing to use to determine the capital Federal rate for FY 2024. In 
particular, we explain why the proposed FY 2024 capital Federal rate 
would increase approximately 4.50 percent, compared to the FY 2023 
capital Federal rate. As discussed in the impact analysis in Appendix A 
to this proposed rule, we estimate that capital payments per discharge 
would increase approximately 6.3 percent during that same period. 
Because capital payments constitute approximately 10 percent of 
hospital payments, a 1-percent change in the capital Federal rate 
yields only approximately a 0.1 percent change in actual payments to 
hospitals.
1. Projected Capital Standard Federal Rate Update
    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into account 
changes in a capital input price index (CIPI) and several other policy 
adjustment factors. Specifically, we adjust the projected CIPI rate of 
change, as appropriate, each year for case-mix index-related changes, 
for intensity, and for errors in previous

[[Page 27228]]

CIPI forecasts. The proposed update factor for FY 2024 under that 
framework is 3.5 percent based on a projected 2.6 percent increase in 
the 2018-based CIPI, a proposed 0.0 percentage point adjustment for 
intensity, a proposed 0.0 percentage point adjustment for case-mix, a 
proposed 0.0 percentage point adjustment for the DRG reclassification 
and recalibration, and a proposed forecast error correction of 0.9 
percentage point. As discussed in section III.C. of this Addendum, we 
continue to believe that the CIPI is the most appropriate input price 
index for capital costs to measure capital price changes in a given 
year. We also explain the basis for the FY 2024 CIPI projection in that 
same section of this Addendum. In this proposed rule, we describe the 
policy adjustments that we are proposing to apply in the update 
framework for FY 2024.
    The case-mix index is the measure of the average DRG weight for 
cases paid under the IPPS. Because the DRG weight determines the 
prospective payment for each case, any percentage increase in the case-
mix index corresponds to an equal percentage increase in hospital 
payments.
    The case-mix index can change for any of several reasons--
     The average resource use of Medicare patient changes 
(``real'' case-mix change);
     Changes in hospital documentation and coding of patient 
records result in higher-weighted DRG assignments (``coding effects''); 
or
     The annual DRG reclassification and recalibration changes 
may not be budget neutral (``reclassification effect'').
    We define real case-mix change as actual changes in the mix (and 
resource requirements) of Medicare patients, as opposed to changes in 
documentation and coding behavior that result in assignment of cases to 
higher-weighted DRGs, but do not reflect higher resource requirements. 
The capital update framework includes the same case-mix index 
adjustment used in the former operating IPPS update framework (as 
discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 
28816)). (We no longer use an update framework to make a recommendation 
for updating the operating IPPS standardized amounts, as discussed in 
section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 
47707).)
    For FY 2024, we are projecting a 0.5 percent total increase in the 
case-mix index. We estimated that the real case-mix increase would 
equal 0.5 percent for FY 2024. The net adjustment for change in case-
mix is the difference between the projected real increases in case mix 
and the projected total increase in case mix. Therefore, the proposed 
net adjustment for case-mix change in FY 2024 is 0.0 percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment is 
intended to remove the effect on total payments of prior year's changes 
to the DRG classifications and relative weights, to retain budget 
neutrality for all case-mix index-related changes other than those due 
to patient severity of illness. Due to the lag time in the availability 
of data, there is a 2-year lag in data used to determine the adjustment 
for the effects of DRG reclassification and recalibration. For example, 
for this proposed rule, we have the FY 2022 MedPAR claims data 
available to evaluate the effects of the FY 2022 DRG reclassification 
and recalibration as part of our update for FY 2024. We assume for 
purposes of this adjustment, that the estimate of FY 2022 DRG 
reclassification and recalibration would result in no change in the 
case-mix when compared with the case mix index that would have resulted 
if we had not made the reclassification and recalibration changes to 
the DRGs. Therefore, we are proposing to make a 0.0 percentage point 
adjustment for reclassification and recalibration in the update 
framework for FY 2024.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on historical 
trends and relationships ascertainable at the time the update factor is 
established for the upcoming year. In any given year, there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices and the forecast used in calculating the 
update factors. In setting a prospective payment rate under the 
framework, we make an adjustment for forecast error only if our 
estimate of the change in the capital input price index for any year is 
greater than 0.25 percentage point in absolute terms. There is a 2-year 
lag between the forecast and the availability of data to develop a 
measurement of the forecast error. Historically, when a forecast error 
of the CIPI is greater than 0.25 percentage point in absolute terms, it 
is reflected in the update recommended under this framework. A forecast 
error of 0.9 percentage point was calculated for the FY 2022 update, 
for which there are historical data. That is, current historical data 
indicate that the forecasted FY 2022 CIPI increase (1.1 percent) used 
in calculating the FY 2022 update factor is 0.9 percentage point lower 
than actual realized price increases (2.0 percent). As this exceeds the 
0.25 percentage point threshold, we are proposing an adjustment of 0.9 
percentage point for the FY 2022 forecast error in the update for FY 
2024.
    Under the capital IPPS update framework, we also make an adjustment 
for changes in intensity. Historically, we calculate this adjustment 
using the same methodology and data that were used in the past under 
the framework for operating IPPS. The intensity factor for the 
operating update framework reflects how hospital services are utilized 
to produce the final product, that is, the discharge. This component 
accounts for changes in the use of quality-enhancing services, for 
changes within DRG severity, and for expected modification of practice 
patterns to remove noncost-effective services. Our intensity measure is 
based on a 5-year average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual intensity 
changes that are due, respectively, to ineffective practice patterns 
and the combination of quality-enhancing new technologies and 
complexity within the DRG system, we assume that one-half of the annual 
change is due to each of these factors. Thus, the capital update 
framework provides an add-on to the input price index rate of increase 
of one-half of the estimated annual increase in intensity, to allow for 
increases within DRG severity and the adoption of quality-enhancing 
technology.
    In this proposed rule, we are proposing to continue to use a 
Medicare-specific intensity measure that is based on a 5-year adjusted 
average of cost per discharge for FY 2024 (we refer readers to the FY 
2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full description of 
our Medicare-specific intensity measure). Specifically, for FY 2024, we 
are proposing to use an intensity measure that is based on an average 
of cost-per-discharge data from the 5-year period beginning with FY 
2017 and extending through FY 2021. Based on these data, we estimated 
that case-mix constant intensity declined during FYs 2017 through 2021. 
In the past, when we found intensity to be declining, we believed a 
zero (rather than a negative) intensity adjustment was appropriate. 
Consistent with this approach, because we estimated that intensity 
would decline during that 5-year period, we believe it is appropriate 
to continue to apply a zero-intensity

[[Page 27229]]

adjustment for FY 2024. Therefore, we are proposing to make a 0.0 
percentage point adjustment for intensity in the update for FY 2024.
    Earlier, we described the basis of the components we used to 
develop the proposed 3.5 percent capital update factor under the 
capital update framework for FY 2024, as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.340

2. Outlier Payment Adjustment Factor
    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A shared threshold is used to identify outlier cases for both 
inpatient operating and inpatient capital-related payments. Section 
412.308(c)(2) provides that the standard Federal rate for inpatient 
capital-related costs be reduced by an adjustment factor equal to the 
estimated proportion of capital-related outlier payments to total 
inpatient capital-related PPS payments. The outlier threshold is set so 
that operating outlier payments are projected to be 5.1 percent of 
total operating IPPS DRG payments. For FY 2024, we are proposing to 
incorporate the estimated outlier reconciliation payment amounts into 
the outlier threshold model, as we did for FY 2023. (For more details 
on our proposal to incorporate outlier reconciliation payment amounts 
into the outlier threshold model, please see section II.A. of this 
Addendum to this proposed rule.)
    For FY 2023, we estimated that outlier payments for capital-related 
PPS payments would equal 5.51 percent of inpatient capital-related 
payments based on the capital Federal rate. Based on the threshold 
discussed in section II.A. of this Addendum, we estimate that prior to 
taking into account projected capital outlier reconciliation payments, 
outlier payments for capital-related costs would equal 4.16 percent of 
inpatient capital-related payments based on the proposed capital 
Federal rate in FY 2024. Using the methodology outlined in section 
II.A. of this Addendum, we estimate that taking into account projected 
capital outlier reconciliation payments would not change the estimated 
percentage of FY 2024 capital outlier payments. Therefore, accounting 
for estimated capital outlier reconciliation, the estimated outlier 
payments for capital-related PPS payments would equal 4.16 percent 
(4.16 percent - 0.00 percent) of inpatient capital-related payments 
based on the proposed capital Federal rate in FY 2024. Accordingly, we 
are proposing to apply an outlier adjustment factor of 0.9584 in 
determining the capital Federal rate for FY 2024. Thus, we estimate 
that the percentage of capital outlier payments to total capital 
Federal rate payments for FY 2024 would be lower than the percentage 
for FY 2023.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The proposed FY 2024 outlier 
adjustment of 0.9584 is a 1.43 percent change from the FY 2023 outlier 
adjustment of 0.9449. Therefore, the proposed net change in the outlier 
adjustment to the capital Federal rate for FY 2024 is 1.0143 (0.9584/
0.9449) so that the proposed outlier adjustment would increase the FY 
2024 capital Federal rate by approximately 1.43 percent compared to the 
FY 2023 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF
    Section 412.308(c)(4)(ii) requires that the capital Federal rate be 
adjusted so that aggregate payments for the fiscal year based on the 
capital Federal rate, after any changes resulting from the annual DRG 
reclassification and recalibration and changes in the GAF, are 
projected to equal aggregate payments that would have been made on the 
basis of the capital Federal rate without such changes.
    As discussed in section III.G.3. of the preamble of this proposed 
rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to help reduce wage index disparities 
between high and low wage index hospitals by increasing the wage index 
values for hospitals with a wage index value below the 25th percentile 
wage index. We stated that this policy will be effective for at least 4 
years, beginning in FY 2020. Therefore, as discussed in section 
III.G.3. of the preamble of this proposed rule, this policy was applied 
in FYs 2020 through 2023, and we are proposing to continue to apply 
this policy in FY 2024. In addition, beginning in FY 2023, we finalized 
a permanent 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, under this policy, a hospital's wage 
index value would not be less than 95 percent of its prior year value 
(87 FR 49018 through 49021).
    We have established a 2-step methodology for computing the budget 
neutrality factor for changes in the GAFs in light of the effect of 
those wage index changes on the GAFs. In the first step, we first 
calculate a factor to ensure budget neutrality for changes to the GAFs 
due to the update to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy, consistent 
with our historical GAF budget neutrality factor methodology. In the 
second step, we calculate a factor to ensure budget neutrality for 
changes to the GAFs due to our policy to increase the wage index for 
hospitals with a wage index value below the 25th percentile wage index,

[[Page 27230]]

which we are proposing to continue in FY 2024, and our policy to place 
a 5-percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index in the prior fiscal year. In this section, 
we refer to the policy that we applied in FYs 2020 through FY 2023 and 
are proposing to continue to apply in FY 2024, of increasing the wage 
index for hospitals with a wage index value below the 25th percentile 
wage index, as the lowest quartile hospital wage index adjustment. We 
refer to our policy to place a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index in the prior 
fiscal year as the 5-percent cap on wage index decreases policy.
    The budget neutrality factors applied for changes to the GAFs due 
to the update to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy are built 
permanently into the capital Federal rate; that is, they are applied 
cumulatively in determining the capital Federal rate. However, the 
budget neutrality factor for the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy is not 
permanently built into the capital Federal rate. This is because the 
GAFs with the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy applied from the previous 
year are not used in the budget neutrality factor calculations for the 
current year. Accordingly, and consistent with this approach, prior to 
calculating the proposed GAF budget neutrality factors for FY 2024, we 
removed from the capital Federal rate the budget neutrality factor 
applied in FY 2023 for the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy. 
Specifically, we divided the capital Federal rate by the FY 2023 budget 
neutrality factor of 0.9972 (87 FR 49463). We refer the reader to the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45552) for additional 
discussion on our policy of removing the prior year budget neutrality 
factor for the lowest quartile hospital wage index adjustment and the 
5-percent cap on wage index decreases from the capital Federal rate.
    In light of the proposed changes to the wage index and other 
proposed wage index policies for FY 2024 discussed previously, which 
directly affect the GAF, we are proposing to continue to compute a 
budget neutrality adjustment for changes in the GAFs in two steps. We 
discuss our proposed 2-step calculation of the proposed GAF budget 
neutrality factors for FY 2024 as follows.
    To determine the GAF budget neutrality factors for FY 2024, we 
first compared estimated aggregate capital Federal rate payments based 
on the FY 2023 MS-DRG classifications and relative weights and the FY 
2023 GAFs to estimated aggregate capital Federal rate payments based on 
the FY 2023 MS-DRG classifications and relative weights and the 
proposed FY 2024 GAFs without incorporating the proposed continuation 
of the lowest quartile hospital wage index adjustment and the 5-percent 
cap on wage index decreases policy. To achieve budget neutrality for 
these proposed changes in the GAFs, we calculated an incremental GAF 
budget neutrality adjustment factor of 0.9977 for FY 2024. Next, we 
compared estimated aggregate capital Federal rate payments based on the 
proposed FY 2024 GAFs with and without the proposed continuation of the 
lowest quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases policy. For this calculation, estimated aggregate 
capital Federal rate payments were calculated using the proposed FY 
2024 MS-DRG classifications and relative weights (after application of 
the 10-percent cap discussed later in this section) and the proposed FY 
2024 GAFs (both with and without the proposed continuation of the 
lowest quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases policy). (We note, for this calculation the 
proposed GAFs included the imputed floor, out-migration and Frontier 
state adjustments.) To achieve budget neutrality for the effects of the 
proposed continuation of the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy on the 
proposed FY 2024 GAFs, we calculated an incremental GAF budget 
neutrality adjustment factor of 0.9934. As discussed earlier in this 
section, the budget neutrality factor for the lowest quartile hospital 
wage index adjustment factor and the 5-percent cap on wage index 
decreases policy is not permanently built into the capital Federal 
rate. Consistent with this, we present the proposed budget neutrality 
factor for the proposed continuation of the lowest quartile hospital 
wage index adjustment and the 5-percent cap on wage index decreases 
policy calculated under the second step of this 2-step methodology 
separately from the other proposed budget neutrality factors in the 
discussion that follows, and this proposed factor is not included in 
the calculation of the proposed combined GAF/DRG adjustment factor 
described later in this section. (We note that the proposed FY 2024 
GAFs reflect the proposed changes to the rural wage index methodology 
discussed in section III.G.1. of the preamble to this proposed rule. As 
discussed, beginning in FY 2024, we are proposing to include hospitals 
with Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations, and to only exclude 
``dual reclass'' hospitals (hospitals with simultaneous Sec.  412.103 
and MGCRB reclassifications) when implicated by the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. We are also 
proposing to include the data of all Sec.  412.103 hospitals (including 
those that have an MGCRB reclassification) in the calculation of the 
rural floor and 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).
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 
10-percent cap on the reduction in an MS-DRG's relative weight in a 
given fiscal year, beginning in FY 2023. Consistent with our historical 
methodology for adjusting the capital standard Federal rate to ensure 
that the effects of the annual DRG reclassification and the 
recalibration of DRG weights are budget neutral under Sec.  
412.308(c)(4)(ii), we finalized to apply an additional budget 
neutrality factor to the capital standard Federal rate so that the 10-
percent cap on decreases in an MS-DRG's relative weight is implemented 
in a budget neutral manner (87 FR 49436). Specifically, we augmented 
our historical methodology for computing the budget neutrality factor 
for the annual DRG reclassification and recalibration by computing a 
budget neutrality adjustment for the annual DRG reclassification and 
recalibration in two steps. We first calculate a budget neutrality 
factor to account for the annual DRG reclassification and recalibration 
prior to the application of the 10-percent cap on MS-DRG relative 
weight decreases. Then we calculate an additional budget neutrality 
factor to account for the application of the 10-percent cap on MS-DRG 
relative weight decreases.
    To determine the proposed DRG budget neutrality factors for FY 
2024, we first compared estimated aggregate capital Federal rate 
payments based on the FY 2023 MS-DRG classifications and relative 
weights to estimated aggregate capital Federal rate payments based on 
the proposed FY 2024 MS-DRG classifications and relative weights prior 
to the application of the 10-percent cap. For these calculations, 
estimated aggregate capital Federal rate

[[Page 27231]]

payments were calculated using the proposed FY 2024 GAFs without the 
proposed continuation of the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy. The 
proposed incremental adjustment factor for DRG classifications and 
changes in relative weights prior to the application of the 10-percent 
cap is 1.0016. Next, we compared estimated aggregate capital Federal 
rate payments based on the proposed FY 2024 MS-DRG classifications and 
relative weights prior to the application of the 10-percent cap to 
estimated aggregate capital Federal rate payments based on the proposed 
FY 2024 MS-DRG classifications and relative weights after the 
application of the 10-percent cap. For these calculations, estimated 
aggregate capital Federal rate payments were also calculated using the 
proposed FY 2024 GAFs without the proposed continuation of the lowest 
quartile hospital wage index adjustment and the 5-percent cap on wage 
index decreases policy. The proposed incremental adjustment factor for 
the application of the 10-percent cap on relative weight decreases is 
0.9999. Therefore, to achieve budget neutrality for the proposed FY 
2024 MS-DRG reclassification and recalibration (including the 10-
percent cap), based on the calculations described previously, we are 
proposing to apply an incremental budget neutrality adjustment factor 
of 1.0015 (1.0016 x 0.9999) for FY 2024 to the capital Federal rate. We 
note that all the values are calculated with unrounded numbers.
    The proposed incremental adjustment factor for the proposed FY 2024 
MS-DRG reclassification and recalibration (1.0015) and for proposed 
changes in the FY 2024 GAFs due to the proposed update to the wage 
data, wage index reclassifications and redesignations, and application 
of the rural floor policy (0.9977) is 0.9992 (1.0015 x 0.9977). This 
incremental adjustment factor is built permanently into the capital 
Federal rates. To achieve budget neutrality for the effects of the 
proposal to continue the lowest quartile hospital wage index adjustment 
and the 5-percent cap on wage index decreases policy on the FY 2024 
GAFs, as described previously, we calculated a proposed budget 
neutrality adjustment factor of 0.9934 for FY 2024. We refer to this 
budget neutrality factor for the remainder of this section as the 
lowest quartile/cap adjustment factor.
    We applied the budget neutrality adjustment factors described 
previously to the capital Federal rate. This follows the requirement 
under Sec.  412.308(c)(4)(ii) that estimated aggregate payments each 
year be no more or less than they would have been in the absence of the 
annual DRG reclassification and recalibration and changes in the GAFs.
    The methodology used to determine the recalibration and geographic 
adjustment factor (GAF/DRG) budget neutrality adjustment is similar to 
the methodology used in establishing budget neutrality adjustments 
under the IPPS for operating costs. One difference is that, under the 
operating IPPS, the budget neutrality adjustments for the effect of 
updates to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy are 
determined separately. Under the capital IPPS, there is a single budget 
neutrality adjustment factor for changes in the GAF that result from 
updates to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy. In addition, 
there is no adjustment for the effects that geographic 
reclassification, the proposed continuation of the lowest quartile 
hospital wage index adjustment, or the 5-percent cap on wage index 
decreases policy described previously have on the other payment 
parameters, such as the payments for DSH or IME.
    The proposed incremental GAF/DRG adjustment factor of 0.9992 
accounts for the proposed MS-DRG reclassifications and recalibration 
(including application of the 10-percent cap on relative weight 
decreases) and for proposed changes in the GAFs that result from 
proposed updates to the wage data, the effects on the GAFs of FY 2024 
geographic reclassification decisions made by the MGCRB compared to FY 
2023 decisions, and the application of the rural floor policy. The 
proposed lowest quartile/cap adjustment factor of 0.9934 accounts for 
changes in the GAFs that result from our proposal to continue the 
policy to increase the wage index values for hospitals with a wage 
index value below the 25th percentile wage index and the 5-percent cap 
on wage index decreases policy. However, these factors do not account 
for changes in payments due to changes in the DSH and IME adjustment 
factors.
4. Proposed Capital Federal Rate for FY 2024
    For FY 2023, we established a capital Federal rate of $483.79 (87 
FR 49436, as corrected in 87 FR 66563). We are proposing to establish 
an update of 3.5 percent in determining the FY 2024 capital Federal 
rate for all hospitals. As a result of this proposed update and the 
proposed budget neutrality factors discussed earlier, we are proposing 
to establish a national capital Federal rate of $505.54 for FY 2024. 
The proposed national capital Federal rate for FY 2024 was calculated 
as follows:
     The proposed FY 2024 update factor is 1.0350; that is, the 
proposed update is 3.5 percent.
     The proposed FY 2024 GAF/DRG budget neutrality adjustment 
factor that is applied to the capital Federal rate for proposed changes 
in the MS-DRG classifications and relative weights (including 
application of the 10-percent cap on relative weight decreases) and 
proposed changes in the GAFs that result from updates to the wage data, 
wage index reclassifications and redesignations, and application of the 
rural floor policy is 0.9992.
     The proposed FY 2024 lowest quartile/cap budget neutrality 
adjustment factor that is applied to the capital Federal rate for 
changes in the GAFs that result from our proposal to continue to 
increase the wage index values for hospitals with a wage index value 
below the 25th percentile wage index and the 5-percent cap on wage 
index decreases policy is 0.9934.
     The proposed FY 2024 outlier adjustment factor is 0.9584.
    We are providing the following chart that shows how each of the 
proposed factors and adjustments for FY 2024 affects the computation of 
the proposed FY 2024 national capital Federal rate in comparison to the 
FY 2023 national capital Federal rate. The proposed FY 2024 update 
factor has the effect of increasing the capital Federal rate by 3.5 
percent compared to the FY 2023 capital Federal rate. The proposed GAF/
DRG budget neutrality adjustment factor has the effect of decreasing 
the capital Federal rate by 0.08 percent. The proposed FY 2024 lowest 
quartile/cap budget neutrality adjustment factor has the effect of 
decreasing the capital Federal rate by 0.38 percent compared to the FY 
2023 capital Federal rate. The proposed FY 2024 outlier adjustment 
factor has the effect of increasing the capital Federal rate by 1.43 
percent compared to the FY 2023 capital Federal rate. The combined 
effect of all the proposed changes would increase the national capital 
Federal rate by approximately 4.50 percent, compared to the FY 2023 
national capital Federal rate.

[[Page 27232]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.341

B. Calculation of the Proposed Inpatient Capital-Related Prospective 
Payments for FY 2024

    For purposes of calculating payments for each discharge during FY 
2024, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located in 
Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the threshold established for each fiscal year. Section 
412.312(c) provides for a shared threshold to identify outlier cases 
for both inpatient operating and inpatient capital-related payments. 
The proposed outlier threshold for FY 2024 is in section II.A. of this 
Addendum. For FY 2024, a case will qualify as a cost outlier if the 
cost for the case is greater than the prospective payment rates for the 
MS-DRG plus IME and DSH payments (including the empirically justified 
Medicare DSH payment and the estimated uncompensated care payment), 
estimated supplemental payment for eligible IHS/Tribal hospitals and 
Puerto Rico hospitals, and any add-on payments for new technology, plus 
the proposed fixed-loss amount of $40,732.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years of 
operation, unless it elects to receive payment based on 100 percent of 
the capital Federal rate. Effective with the third year of operation, 
we pay the hospital based on 100 percent of the capital Federal rate 
(that is, the same methodology used to pay all other hospitals subject 
to the capital PPS).

C. Capital Input Price Index

1. Background
    Like the operating input price index, the capital input price index 
(CIPI) is a fixed-weight price index that measures the price changes 
associated with capital costs during a given year. The CIPI differs 
from the operating input price index in one important aspect--the CIPI 
reflects the vintage nature of capital, which is the acquisition and 
use of capital over time. Capital expenses in any given year are 
determined by the stock of capital in that year (that is, capital that 
remains on hand from all current and prior capital acquisitions). An 
index measuring capital price changes needs to reflect this vintage 
nature of capital. Therefore, the CIPI was developed to capture the 
vintage nature of capital by using a weighted-average of past capital 
purchase prices up to and including the current year.
    We periodically update the base year for the operating and capital 
input price indexes to reflect the changing composition of inputs for 
operating and capital expenses. For this proposed rule, we are 
proposing to use the IPPS operating and capital market baskets that 
reflect a 2018 base year. For a complete discussion of this rebasing, 
we refer readers to section IV. of the preamble of the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45194 through 45213).
2. Forecast of the CIPI for FY 2024
    Based on IHS Global Inc.'s fourth quarter 2022 forecast, for this 
proposed rule, we are forecasting the 2018-based CIPI to increase 2.6 
percent in FY 2024. This reflects a projected 3.1 percent increase in 
vintage-weighted depreciation prices (building and fixed equipment, and 
movable equipment), and a projected 4.2 percent increase in other 
capital expense prices in FY 2024, partially offset by a projected 1.1 
percent decrease in vintage-weighted interest expense prices in FY 
2024. The weighted average of these three factors produces the 
forecasted 2.6 percent increase for the 2018-based CIPI in FY 2024.
    We are also proposing that if more recent data become available 
(for example, a more recent estimate of the percentage increase in the 
2018-based CIPI), we would use such data, if appropriate, to determine 
the FY 2024 percentage increase in the 2018-based CIPI for the final 
rule.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2024

    Payments for services furnished in children's hospitals, 11 cancer 
hospitals, and hospitals located outside the 50 States, the District of 
Columbia and Puerto Rico (that is, short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa) that are excluded from the IPPS are paid on the 
basis of reasonable costs based on the hospital's own historical cost 
experience, subject to a rate-of-increase ceiling. A per discharge 
limit (the target amount, as defined in Sec.  413.40(a) of the 
regulations) is set for each hospital, based on the hospital's own cost 
experience in its base year, and updated annually by a rate-of-increase 
percentage specified in Sec.  413.40(c)(3). In addition, as specified 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR

[[Page 27233]]

38536), effective for cost reporting periods beginning during FY 2018, 
the annual update to the target amount for extended neoplastic disease 
care hospitals (hospitals described in Sec.  412.22(i) of the 
regulations) also is the rate-of-increase percentage specified in Sec.  
413.40(c)(3). (We note that, in accordance with Sec.  403.752(a), 
religious nonmedical health care institutions (RNHCIs) are also subject 
to the rate-of-increase limits established under Sec.  413.40 of the 
regulations.)
    For this FY 2024 IPPS/LTCH PPS proposed rule, based on IGI's 2022 
fourth quarter forecast, we estimate that the 2018-based IPPS operating 
market basket rate-of-increase for FY 2024 is 3.0 percent. Based on 
this estimate, the proposed FY 2024 rate-of-increase percentage that 
will be applied to the FY 2023 target amounts in order to calculate the 
proposed FY 2024 target amounts for children's hospitals, the 11 cancer 
hospitals, RNCHIs, short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, 
and extended neoplastic disease care hospitals will be 3.0 percent, in 
accordance with the applicable regulations at 42 CFR 413.40. We are 
also proposing that if more recent data subsequently become available 
(for example, a more recent estimate of the market basket rate-of-
increase), we would use such data, if appropriate, to calculate the 
final IPPS operating market basket rate-of-increase for FY 2024.
    IRFs and rehabilitation distinct part units, IPFs and psychiatric 
units, and LTCHs are excluded from the IPPS and paid under their 
respective PPSs. The IRF PPS, the IPF PPS, and the LTCH PPS are updated 
annually. We refer readers to section VIII. of the preamble and section 
V. of the Addendum of this proposed rule for the changes to the Federal 
payment rates for LTCHs under the LTCH PPS for FY 2024. The annual 
updates for the IRF PPS and the IPF PPS are issued by the agency in 
separate Federal Register documents.

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2024

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2024

1. Overview
    In section VIII. of the preamble of this proposed rule, we discuss 
our annual updates to the payment rates, factors, and specific policies 
under the LTCH PPS for FY 2024. Under Sec.  412.523(c)(3) of the 
regulations, for FY 2012 and subsequent years, we updated the standard 
Federal payment rate by the most recent estimate of the LTCH PPS market 
basket at that time, including additional statutory adjustments 
required by sections 1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II) 
and 1886(m)(4) of the Act as set forth in the regulations at Sec.  
412.523(c)(3)(viii) through (xvii)). (For a summary of the payment rate 
development prior to FY 2012, we refer readers to the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38310 through 38312) and references therein.)
    Section 1886(m)(3)(A) of the Act specifies that, for rate year 2012 
and each subsequent rate year, any annual update to the standard 
Federal payment rate shall be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act as discussed in 
section VIII.C.2. of the preamble of this proposed rule. This section 
of the Act further provides that the application of section 
1886(m)(3)(B) of the Act may result in the annual update being less 
than zero for a rate year, and may result in payment rates for a rate 
year being less than such payment rates for the preceding rate year. 
(As noted in section VIII.C.2. of the preamble of this proposed rule, 
the annual update to the LTCH PPS occurs on October 1 and we have 
adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY) 
under the LTCH PPS beginning October 1, 2010. Therefore, for purposes 
of clarity, when discussing the annual update for the LTCH PPS, 
including the provisions of the Affordable Care Act, we use the term 
``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.)
    For LTCHs that fail to submit the required quality reporting data 
in accordance with the LTCH QRP, the annual update is reduced by 2.0 
percentage points as required by section 1886(m)(5) of the Act.
2. Development of the Proposed FY 2024 LTCH PPS Standard Federal 
Payment Rate
    Consistent with our historical practice and Sec.  
412.523(c)(3)(xvii), for FY 2024 we are proposing to apply the annual 
update to the LTCH PPS standard Federal payment rate from the previous 
year. Furthermore, in determining the proposed LTCH PPS standard 
Federal payment rate for FY 2024, we also are proposing to make certain 
regulatory adjustments, consistent with past practices. Specifically, 
in determining the proposed FY 2024 LTCH PPS standard Federal payment 
rate, we are proposing to apply a budget neutrality adjustment factor 
for the changes related to the area wage level adjustment (that is, 
changes to the wage data and labor-related share) as discussed in 
section V.B.6.of this Addendum to this proposed rule.
    In this proposed rule, we are proposing to establish an annual 
update to the LTCH PPS standard Federal payment rate of 2.9 percent 
(that is, the most recent estimate of the LTCH PPS market basket 
increase of 3.1 percent less the proposed productivity adjustment of 
0.2 percentage point). Therefore, in accordance with Sec.  
412.523(c)(3)(xvii), we are proposing to apply an update factor of 
1.029 to the FY 2023 LTCH PPS standard Federal payment rate of 
$46,432.77 to determine the proposed FY 2024 LTCH PPS standard Federal 
payment rate. Also, in accordance with Sec.  412.523(c)(3)(xvii) and 
(c)(4), we are required to reduce the annual update to the LTCH PPS 
standard Federal payment rate by 2.0 percentage points for LTCHs that 
fail to submit the required quality reporting data for FY 2024 as 
required under the LTCH QRP. Therefore, for LTCHs that fail to submit 
quality reporting data under the LTCH QRP, the proposed 3.1 percent 
update to the LTCH PPS standard Federal payment rate for FY 2024 would 
be reduced by the proposed 0.2 percentage point productivity adjustment 
as required under section 1886(m)(3)(A)(i) of the Act and the 
additional 2.0 percentage points reduction required by section 
1886(m)(5) of the Act. Accordingly, we are proposing to establish an 
annual update to the LTCH PPS standard Federal payment rate of 0.9 
percent (that is, 2.9 percent minus 2.0 percentage points for an update 
factor of 1.009) for FY 2024 for LTCHs that fail to submit the required 
quality reporting data for FY 2024 as required under the LTCH QRP. 
Consistent with Sec.  412.523(d)(4), we are proposing to apply an area 
wage level budget neutrality factor to the FY 2024 LTCH PPS standard 
Federal payment rate of 1.0035335, based on the best available data at 
this time, to ensure that any proposed changes to the area wage level 
adjustment (that is, the proposed annual update of the wage index 
(including application of the 5-percent cap on wage index decreases, 
discussed later in this section), and labor-related share) would not 
result in any change (increase or decrease) in estimated aggregate LTCH 
PPS standard Federal payment rate payments. Accordingly, we are 
proposing to establish an LTCH PPS standard Federal payment rate of 
$47,948.15 (calculated as $46,432.77 x 1.029 x 1.0035335) for FY 2024. 
For LTCHs that fail to submit quality reporting data for FY 2024, in 
accordance with the requirements of the LTCH QRP under section 
1866(m)(5) of

[[Page 27234]]

the Act, we are proposing to establish an LTCH PPS standard Federal 
payment rate of $47,016.21 (calculated as $46,432.77 x 1.009 x 
1.0035335) for FY 2024.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 
2024

1. Background
    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal payment rate to account for differences in LTCH 
area wage levels under Sec.  412.525(c). The labor-related share of the 
LTCH PPS standard Federal payment rate is adjusted to account for 
geographic differences in area wage levels by applying the applicable 
LTCH PPS wage index. The applicable LTCH PPS wage index is computed 
using wage data from inpatient acute care hospitals without regard to 
reclassification under section 1886(d)(8) or section 1886(d)(10) of the 
Act.
    The proposed FY 2024 LTCH PPS standard Federal payment rate wage 
index values that would be applicable for LTCH PPS standard Federal 
payment rate discharges occurring on or after October 1, 2023, through 
September 30, 2024, are presented in Table 12A (for urban areas) and 
Table 12B (for rural areas), which are listed in section VI. of the 
Addendum to this proposed rule and available via the internet on the 
CMS website.
2. Proposed Geographic Classifications (Labor Market Areas) for the 
LTCH PPS Standard Federal Payment Rate
    In adjusting for the differences in area wage levels under the LTCH 
PPS, the labor-related portion of an LTCH's Federal prospective payment 
is adjusted by using an appropriate area wage index based on the 
geographic classification (labor market area) in which the LTCH is 
located. Specifically, the application of the LTCH PPS area wage level 
adjustment under existing Sec.  412.525(c) is made based on the 
location of the LTCH--either in an ``urban area,'' or a ``rural area,'' 
as defined in Sec.  412.503. Under Sec.  412.503, an ``urban area'' is 
defined as a Metropolitan Statistical Area (MSA) (which includes a 
Metropolitan division, where applicable), as defined by the Executive 
OMB, and a ``rural area'' is defined as any area outside of an urban 
area (75 FR 37246).
    The geographic classifications (labor market area definitions) 
currently used under the LTCH PPS, effective for discharges occurring 
on or after October 1, 2014, are based on the Core Based Statistical 
Areas (CBSAs) established by OMB, which are based on the 2010 decennial 
census data. In general, the current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013 in OMB Bulletin No. 13-01. (We 
note we have adopted minor revisions and updates in the years between 
the decennial censuses.) We adopted these labor market area 
delineations because they were at that time based on the best available 
data that reflect the local economies and area wage levels of the 
hospitals that are currently located in these geographic areas. We also 
believed that these OMB delineations would ensure that the LTCH PPS 
area wage level adjustment most appropriately accounted for and 
reflected the relative hospital wage levels in the geographic area of 
the hospital as compared to the national average hospital wage level. 
We noted that this policy was consistent with the IPPS policy adopted 
in FY 2015 under Sec.  412.64(b)(1)(ii)(D) (79 FR 49951 through 49963). 
(For additional information on the CBSA-based labor market area 
(geographic classification) delineations currently used under the LTCH 
PPS and the history of the labor market area definitions used under the 
LTCH PPS, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50180 through 50185).)
    In general, it is our historical practice to update the CBSA-based 
labor market area delineations annually based on the most recent 
updates issued by OMB. Generally, OMB issues major revisions to 
statistical areas every 10 years, based on the results of the decennial 
census. However, OMB occasionally issues minor updates and revisions to 
statistical areas in the years between the decennial censuses. OMB 
Bulletin No. 17-01, issued August 15, 2017, established the 
delineations for the Nation's statistical areas, and the corresponding 
changes to the CBSA-based labor market areas were adopted in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41731). A copy of this bulletin 
may be obtained on the website at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf.
    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 Standards 
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. We adopted the updates set forth in OMB Bulletin 
No. 18-04 in the FY 2021 IPPS/LTCH PPS final rule (85 FR 59050 through 
59051). A copy of the September 14, 2018 OMB Bulletin No. 18-04, may be 
obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf.
    On March 6, 2020, OMB issued Bulletin No. 20-01, which provided 
updates to and superseded OMB Bulletin No. 18-04, which 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. (For a copy of this bulletin, we refer readers to the 
following website: https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf.) In OMB Bulletin No. 20-01, OMB announced one 
new Micropolitan Statistical Area and one new component of an existing 
Combined Statistical Area. After reviewing OMB Bulletin No. 20-01, we 
determined that the changes in Bulletin 20-01 encompassed delineation 
changes that would not affect the CBSA-based labor market area 
delineations used under the LTCH PPS. Therefore, we adopted the updates 
set forth in OMB Bulletin No. 20-01 in the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45556 through 45557) consistent with our general policy of 
adopting OMB delineation updates; however, the LTCH PPS area wage level 
adjustment was not altered as a result of adopting the updates because 
the CBSA-based labor market area delineations were the same as the 
CBSA-based labor market area delineations adopted in the FY 2021 IPPS/
LTCH PPS final rule based on OMB Bulletin No. 18-04 (85 FR59050 through 
59051).
    We believe the CBSA-based labor market area delineations, as 
established in OMB Bulletin 20-01, ensure that the LTCH PPS area wage 
level adjustment most appropriately accounts for and reflects the 
relative hospital wage levels in the geographic area of the hospital as 
compared to the national average hospital wage level based on the best 
available data that reflect the local economies and area wage levels of 
the hospitals that are currently located in these geographic areas (81 
FR 57298).

[[Page 27235]]

Therefore, for FY 2024, we are not proposing any changes to the CBSA-
based labor market area delineations as established in OMB Bulletin 20-
01 and adopted in the FY 2022 IPPS/LTCH final rule.
    CBSAs are made up of one or more constituent counties. For FY 2024, 
we are continuing to use the Federal Information Processing Standard 
(FIPS) county codes, maintained by the U.S. Census Bureau, for purposes 
of crosswalking counties to CBSAs. The current county-to-CBSA crosswalk 
was adopted under the LTCH PPS in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49439) and is located on the CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/longtermcarehospitalpps/download.
3. Proposed Labor-Related Share for the LTCH PPS Standard Federal 
Payment Rate
    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
standard Federal payment rate is adjusted by the applicable wage index 
for the labor market area in which the LTCH is located. The LTCH PPS 
labor-related share currently represents the sum of the labor-related 
portion of operating costs and a labor-related portion of capital costs 
using the applicable LTCH market basket. Additional background 
information on the historical development of the labor-related share 
under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 
FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51766 through 51769 and 51808).
    For FY 2013, we rebased and revised the market basket used under 
the LTCH PPS by adopting a 2009-based LTCH market basket. In addition, 
for FY 2013 through FY 2016, we determined the labor-related share 
annually as the sum of the relative importance of each labor-related 
cost category of the 2009-based LTCH market basket for the respective 
fiscal year based on the best available data. (For more details, we 
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 
through 53479).) For FY 2017, we rebased and revised the 2009-based 
LTCH market basket to reflect a 2013 base year. In addition, for FY 
2017 through FY 2020, we determined the labor-related share annually as 
the sum of the relative importance of each labor-related cost category 
of the 2013-based LTCH market basket for the respective fiscal year 
based on the best available data. (For more details, we refer readers 
to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57085 through 57096).) 
Then, effective for FY 2021, we rebased and revised the 2013-based LTCH 
market basket to reflect a 2017 base year and determined the labor-
related share annually as the sum of the relative importance of each 
labor-related cost category in the 2017-based LTCH market basket using 
the most recent available data. (For more details, we refer readers to 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 58926).)
    In this proposed rule, consistent with our historical practice, we 
are proposing that the LTCH PPS labor-related share for FY 2024 is the 
sum of the FY 2024 relative importance of each labor-related cost 
category in the LTCH market basket using the most recent available 
data. Specifically, we are proposing that the labor-related share for 
FY 2024 would continue to include the sum of the labor-related portion 
of operating costs from the 2017-based LTCH market basket (that is, the 
sum of the FY 2024 relative importance shares of Wages and Salaries; 
Employee Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-related Services) and a portion of the 
relative importance of Capital-Related cost weight from the 2017-based 
LTCH market basket. The relative importance reflects the different 
rates of price change for these cost categories between the base year 
(2017) and FY 2024. Based on IHS Global Inc.'s fourth quarter 2022 
forecast of the 2017-based LTCH market basket, the sum of the FY 2024 
relative importance for Wages and Salaries; Employee Benefits; 
Professional Fees: Labor-Related; Administrative and Facilities Support 
Services; Installation, Maintenance, & Repair Services; and All Other: 
Labor-Related Services is 64.2 percent. The portion of capital-related 
costs that is influenced by the local labor market is estimated to be 
46 percent (that is, the same percentage applied to the 2009-based and 
2013-based LTCH market baskets). Since the FY 2024 relative importance 
for capital-related costs is 9.2 percent based on IHS Global Inc.'s 
fourth quarter 2022 forecast of the 2017-based LTCH market basket, we 
took 46 percent of 9.2 percent to determine the labor-related share of 
capital-related costs for FY 2024 of 4.2 percent. Therefore, we are 
proposing a total labor-related share for FY 2024 of 68.4 percent (the 
sum of 64.2 percent for the labor-related share of operating costs and 
4.2 percent for the labor-related share of capital-related costs). We 
are also proposing that if more recent data become available after the 
publication of this proposed rule and before the publication of the 
final rule (for example, a more recent estimate of the relative 
importance of each labor-related cost category of the 2017-based LTCH 
market basket), we would use such data, if appropriate, to determine 
the FY 2024 LTCH PPS labor-related share.
4. Proposed Wage Index for FY 2024 for the LTCH PPS Standard Federal 
Payment Rate
    Historically, we have established LTCH PPS area wage index values 
calculated from acute care IPPS hospital wage data without taking into 
account geographic reclassification under sections 1886(d)(8) and 
1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment 
established under the LTCH PPS is based on an LTCH's actual location 
without regard to the ``urban'' or ``rural'' designation of any related 
or affiliated provider. As with the IPPS wage index, wage data for 
multicampus hospitals with campuses located in different labor market 
areas (CBSAs) are apportioned to each CBSA where the campus (or 
campuses) are located. We also employ a policy for determining area 
wage index values for areas where there are no IPPS wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2024 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of the 
BBRA, as amended by section 307(b) of the BIPA, we are proposing to 
continue to employ our historical practice of using the same data we 
are proposing to use to compute the proposed FY 2024 acute care 
hospital inpatient wage index, as discussed in section III. of the 
preamble of this proposed rule (that is, wage data collected from cost 
reports submitted by IPPS hospitals for cost reporting periods 
beginning during FY 2020) because these data are the most recent 
complete data available.
    In addition, we are proposing to compute the FY 2024 LTCH PPS 
standard Federal payment rate area wage index values consistent with 
the ``urban'' and ``rural'' geographic classifications (that is, the 
proposed labor market area delineations as previously discussed in 
section V.B. of this Addendum) and our historical policy of not taking 
into account IPPS geographic reclassifications under sections 
1886(d)(8) and 1886(d)(10) of the Act in determining payments under the 
LTCH PPS. We are also proposing to continue to apportion the wage data 
for multicampus hospitals with campuses

[[Page 27236]]

located in different labor market areas to each CBSA where the campus 
or campuses are located, consistent with the IPPS policy. Lastly, 
consistent with our existing methodology for determining the LTCH PPS 
wage index values, for FY 2024 we are proposing to continue to use our 
existing policy for determining area wage index values for areas where 
there are no IPPS wage data. Under our existing methodology, the LTCH 
PPS wage index value for urban CBSAs with no IPPS wage data is 
determined by using an average of all of the urban areas within the 
State, and the LTCH PPS wage index value for rural areas with no IPPS 
wage data is determined by using the unweighted average of the wage 
indices from all of the CBSAs that are contiguous to the rural counties 
of the State.
    Based on the FY 2020 IPPS wage data that we are proposing to use to 
determine the proposed FY 2024 LTCH PPS area wage index values in this 
final rule, there are no IPPS wage data for the urban area of 
Hinesville, GA (CBSA 25980). Consistent with our existing methodology, 
we calculated the proposed FY 2024 wage index value for CBSA 25980 as 
the average of the wage index values for all of the other urban areas 
within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 
15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 
47580), as shown in Table 12A, which is listed in section VI. of the 
Addendum to this proposed rule.
    Based on the FY 2020 IPPS wage data that we are proposing to use to 
determine the proposed FY 2024 LTCH PPS standard Federal payment rate 
area wage index values in this proposed rule, there are no rural areas 
without IPPS hospital wage data. Therefore, it is not necessary to use 
our established methodology to calculate a proposed LTCH PPS wage index 
value for rural areas with no IPPS wage data for FY 2024. We note that, 
as IPPS wage data are dynamic, it is possible that the number of rural 
areas without IPPS wage data will vary in the future.
5. Permanent Cap on Wage Index Decreases
a. Permanent Cap on LTCH PPS Wage Index Decreases
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49440 through 
49442), we finalized a policy that applies a permanent 5-percent cap on 
any decrease to an LTCH's wage index from its wage index in the prior 
year. Consistent with the requirement at Sec.  412.525(c)(2) that 
changes to area wage level adjustments are made in a budget neutral 
manner, we include the application of this policy in the determination 
of the area wage level budget neutrality factor that is applied to the 
standard Federal payment rate, as is discussed later in section V.B.6. 
of the Addendum to this proposed rule.
    Under this policy, an LTCH's wage index will not be less than 95 
percent of its wage index for the prior fiscal year. An LTCH's wage 
index cap adjustment is determined based on the wage index value 
applicable to the LTCH on the last day of the prior Federal fiscal 
year. LTCHs that became operational during the prior Federal fiscal 
year are subject to the LTCH PPS wage index cap. However, for newly 
opened LTCHs that become operational on or after the first day of the 
fiscal year to which this proposed rule would apply, these LTCHs are 
not subject to the LTCH PPS wage index cap since they were not paid 
under the LTCH PPS in the prior year. These LTCHs would receive the 
calculated wage index for the area in which they are geographically 
located, even if other LTCHs in the same geographic area are receiving 
a wage index cap. The cap on wage index decreases policy is reflected 
at Sec.  412.525(c)(1).
    For each LTCH we identify in our rulemaking data, we are including 
in a supplemental data file the wage index values from both fiscal 
years used in determining its capped wage index. This includes the 
LTCH's final prior year wage index value, the LTCH's uncapped current 
year wage index value, and the LTCH's capped current year wage index 
value. Due to the lag in rulemaking data, a new LTCH may not be listed 
in this supplemental file for a few years. For this reason, a newly 
opened LTCH could contact their MAC to ensure that its wage index value 
is not less than 95 percent of the value paid to it for the prior 
Federal fiscal year. This supplemental data file for public use will be 
posted on the CMS website for this proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
b. Permanent Cap on IPPS Comparable Wage Index Decreases
    Determining LTCH PPS payments for short-stay-outlier cases 
(reflected in Sec.  412.529) and site neutral payment rate cases 
(reflected in Sec.  412.522(c)) requires calculating an ``IPPS 
comparable amount.'' For information on this ``IPPS comparable amount'' 
calculation, we refer the reader to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49608 through 49610). Determining LTCH PPS payments for 
LTCHs that do not meet the applicable discharge payment percentage 
(reflected in Sec.  412.522(d)) requires calculating an ``IPPS 
equivalent amount.'' For information on this ``IPPS equivalent amount'' 
calculation, we refer the reader to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42439 through 42445).
    Calculating both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' requires adjusting the IPPS operating and capital 
standardized amounts by the applicable IPPS wage index for 
nonreclassified IPPS hospitals. That is, the standardized amounts are 
adjusted by the IPPS wage index for nonreclassified IPPS hospitals 
located in the same geographic area as the LTCH. In the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49442 through 49443), we finalized a policy 
that applies a permanent 5-percent cap on decreases in an LTCH's 
applicable IPPS comparable wage index from its applicable IPPS 
comparable wage index in the prior year. Historically, we have not 
budget neutralized changes to LTCH PPS payments that result from the 
annual update of the IPPS wage index for nonreclassified IPPS 
hospitals. Consistent with this approach, the cap on decreases in an 
LTCH's applicable IPPS comparable wage index is not applied in a budget 
neutral manner.
    Under this policy, an LTCH's applicable IPPS comparable wage index 
will not be less than 95 percent of its applicable IPPS comparable wage 
index for the prior fiscal year. An LTCH's applicable IPPS comparable 
wage index cap adjustment is determined based on the wage index value 
applicable to the LTCH on the last day of the prior Federal fiscal 
year. LTCHs that became operational during the prior Federal fiscal 
year are subject to the applicable IPPS comparable wage index cap. 
However, for newly opened LTCHs that become operational on or after the 
first day of the fiscal year to which this proposed rule would apply, 
these LTCHs are not subject to the applicable IPPS comparable wage 
index cap since they were not paid under the LTCH PPS in the prior 
year. This means that these LTCHs would receive the calculated 
applicable IPPS comparable wage index for the area in which they are 
geographically located, even if other LTCHs in the same geographic area 
are receiving a wage cap. The cap on IPPS comparable wage index 
decreases policy is reflected at Sec.  412.529(d)(4)(ii)(B) and 
(d)(4)(iii)(B).
    Similar to the information we are making available for the cap on 
the LTCH PPS wage index values (described previously), for each LTCH we 
identify in our rulemaking data, we are

[[Page 27237]]

including in a supplemental data file the wage index values from both 
fiscal years used in determining its capped applicable IPPS comparable 
wage index. Due to the lag in rulemaking data, a new LTCH may not be 
listed in this supplemental file for a few years. For this reason, a 
newly opened LTCH could contact its MAC to ensure that its applicable 
IPPS comparable wage index value is not less than 95 percent of the 
value paid to them for the prior Federal fiscal year. This supplemental 
data file for public use will be posted on the CMS website for this 
proposed rule at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
6. Proposed Budget Neutrality Adjustments for Changes to the LTCH PPS 
Standard Federal Payment Rate Area Wage Level Adjustment
    Historically, the LTCH PPS wage index and labor-related share are 
updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will be 
neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. Under 
this policy, we determine an area wage level adjustment budget 
neutrality factor that is applied to the standard Federal payment rate 
to ensure that any changes to the area wage level adjustments are 
budget neutral such that any changes to the area wage index values or 
labor-related share would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS payments. Accordingly, under 
Sec.  412.523(d)(4), we have applied an area wage level adjustment 
budget neutrality factor in determining the standard Federal payment 
rate, and we also established a methodology for calculating an area 
wage level adjustment budget neutrality factor. (For additional 
information on the establishment of our budget neutrality policy for 
changes to the area wage level adjustment, we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
    For FY 2024, in accordance with Sec.  412.523(d)(4), we are 
applying a proposed area wage level budget neutrality factor to adjust 
the LTCH PPS standard Federal payment rate to account for the estimated 
effect of the adjustments or updates to the area wage level adjustment 
under Sec.  412.525(c)(1) on estimated aggregate LTCH PPS payments, 
consistent with the methodology we established in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51773). As discussed in section V.B.6. of this 
Addendum to this proposed rule, consistent with, Sec.  412.525(c)(2), 
we include the application of the 5-percent cap on wage index decreases 
in the determination of the proposed area wage level budget neutrality 
factor. Specifically, we are proposing to determine an area wage level 
adjustment budget neutrality factor that is applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(4) for FY 2024 
using the following methodology:
    Step 1--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2023 wage index values and the FY 
2023 labor-related share of 68.0 percent.
    Step 2--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the proposed FY 2024 wage index values 
(including application of the 5 percent cap on wage index decreases) 
and the proposed FY 2024 labor-related share of 68.4 percent. (As noted 
previously, the changes to the wage index values based on updated 
hospital wage data are discussed in section V.B.4. of this Addendum to 
this proposed rule and the labor-related share is discussed in section 
V.B.3. of this Addendum to this proposed rule.)
    Step 3--Calculate the ratio of these estimated total LTCH PPS 
standard Federal payment rate payments by dividing the estimated total 
LTCH PPS standard Federal payment rate payments using the FY 2023 area 
wage level adjustments (calculated in Step 1) by the estimated total 
LTCH PPS standard Federal payment rate payments using the proposed FY 
2024 updates to the area wage level adjustment (calculated in Step 2) 
to determine the proposed budget neutrality factor for updates to the 
area wage level adjustment for FY 2024 LTCH PPS standard Federal 
payment rate payments.
    Step 4--Apply the proposed FY 2024 updates to the area wage level 
adjustment budget neutrality factor from Step 3 to determine the 
proposed FY 2024 LTCH PPS standard Federal payment rate after the 
application of the proposed FY 2024 annual update.
    In section I.E. of the preamble of this proposed rule, we discuss 
our proposal to use the most recent data available for the FY 2024 LTCH 
PPS ratesetting, including the FY 2022 MedPAR file. Consistent with 
this proposal, we used claims from the FY 2022 MedPAR file in 
calculating the proposed FY 2024 LTCH PPS standard Federal payment rate 
area wage level adjustment budget neutrality factor. We note that, 
because the area wage level adjustment under Sec.  412.525(c) is an 
adjustment to the LTCH PPS standard Federal payment rate, consistent 
with historical practice, we only used data from claims that qualified 
for payment at the LTCH PPS standard Federal payment rate under the 
dual rate LTCH PPS to calculate the proposed FY 2024 LTCH PPS standard 
Federal payment rate area wage level adjustment budget neutrality 
factor.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
an LTCH (CCN 312024) whose abnormal charging practices in FY 2021 led 
to the LTCH receiving an excessive amount of high cost outlier 
payments. In that rule, we stated our belief, based on information we 
received from the provider, that these abnormal charging practices 
would not persist into FY 2023. Therefore, we did not include its cases 
in our model for determining the FY 2023 outlier fixed-loss amount. The 
FY 2022 MedPAR claims also reflect the abnormal charging practices of 
this LTCH. In the FY 2022 MedPAR file, we identified 164 LTCH PPS 
standard Federal payment rate cases for this LTCH. Of these 164 cases, 
116 of the cases had charges that were exactly or within ten dollars of 
$10 million. We do not believe these abnormal charging practices will 
persist into FY 2024. As such, simulating FY 2023 and FY 2024 payments 
for this LTCH based on their FY 2022 claims results in simulated 
payment amounts that we do not believe are reasonable approximations of 
the payment amounts this LTCH will actually receive in FY 2023 and FY 
2024. For this reason, we do not believe it would be appropriate to use 
these claims in determining the FY 2024 LTCH PPS standard Federal 
payment rate area wage level adjustment budget neutrality factor. 
Therefore, we are proposing to remove claims from CCN 312024 when 
determining the FY 2024 LTCH PPS standard Federal payment rate area 
wage level adjustment budget neutrality factor.
    For this proposed rule, using the steps in the methodology 
previously described, we determined a proposed FY 2024 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor of 1.0035335. Accordingly, in section V.A. of the 
Addendum to this proposed rule, we applied the proposed area wage level 
adjustment budget neutrality factor of 1.0035335 to determine the 
proposed FY 2024 LTCH PPS standard Federal payment rate, in accordance 
with Sec.  412.523(d)(4).

[[Page 27238]]

C. Proposed Cost-of-Living Adjustment (COLA) for LTCHs Located in 
Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA to 
payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii is based on a comparison of the growth in the Consumer Price 
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative to 
the growth in the CPI for the average U.S. city as published by the 
Bureau of Labor Statistics (BLS). It also includes a 25-percent cap on 
the CPI-updated COLA factors. Under our current policy, we update the 
COLA factors using the methodology as previously described every 4 
years (at the same time as the update to the labor-related share of the 
IPPS market basket) and we last updated the COLA factors for Alaska and 
Hawaii published by OPM for 2009 in FY 2022 (86 FR 45559 through 
45560).
    We continue to believe that determining updated COLA factors using 
this methodology would appropriately adjust the nonlabor-related 
portion of the LTCH PPS standard Federal payment rate for LTCHs located 
in Alaska and Hawaii. Therefore, in this proposed rule, for FY 2024, 
under the broad authority conferred upon the Secretary by section 123 
of the BBRA, as amended by section 307(b) of the BIPA, to determine 
appropriate payment adjustments under the LTCH PPS, we are proposing to 
continue to use the COLA factors based on the 2009 OPM COLA factors 
updated through 2020 by the comparison of the growth in the CPIs for 
Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the 
CPI for the average U.S. city as established in the FY 2022 IPPS/LTCH 
PPS final rule. (For additional details on our current methodology for 
updating the COLA factors for Alaska and Hawaii and for a discussion on 
the FY 2022 COLA factors, we refer readers to the FY 2022 IPPS/LTCH PPS 
final rule (86 FR 45559 through 45560).)
[GRAPHIC] [TIFF OMITTED] TP01MY23.342

D. Proposed Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background
    From the beginning of the LTCH PPS, we have included an adjustment 
to account for cases in which there are extraordinarily high costs 
relative to the costs of most discharges. Under this policy, additional 
payments are made based on the degree to which the estimated cost of a 
case (which is calculated by multiplying the Medicare allowable covered 
charge by the hospital's overall hospital CCR) exceeds a fixed-loss 
amount. This policy results in greater payment accuracy under the LTCH 
PPS and the Medicare program, and the LTCH sharing the financial risk 
for the treatment of extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when we 
implemented the dual rate LTCH PPS payment structure under section 1206 
of Public Law 113-67. LTCH discharges that meet the criteria for 
exclusion from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases) are paid at the LTCH PPS standard 
Federal payment rate, which includes, as applicable, HCO payments under 
Sec.  412.523(e). LTCH discharges that do not meet the criteria for 
exclusion are paid at the site neutral payment rate, which includes, as 
applicable, HCO payments under Sec.  412.522(c)(2)(i). In the FY 2016 
IPPS/LTCH PPS final rule, we established separate fixed-loss amounts 
and targets for the two different LTCH PPS payment rates. Under this 
bifurcated policy, the historic 8-percent HCO target was retained for 
LTCH PPS standard Federal payment rate cases, with the fixed-loss 
amount calculated using only data from LTCH cases that would have been 
paid at the LTCH PPS standard Federal payment rate if that rate had 
been in effect at the time of those discharges. For site neutral 
payment rate cases, we adopted the operating IPPS HCO target (currently 
5.1 percent) and set the fixed-loss amount for site neutral payment 
rate cases at the value of the IPPS fixed-loss amount. Under the HCO 
policy for both payment rates, an LTCH receives 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold, which is the sum of the LTCH PPS payment for the case 
and the applicable fixed-loss amount for such case.
    To maintain budget neutrality, consistent with the budget 
neutrality requirement at Sec.  412.523(d)(1) for HCO payments to LTCH 
PPS standard Federal rate payment cases, we also adopted a budget 
neutrality requirement for HCO payments to site neutral payment rate 
cases by applying a budget neutrality factor to the LTCH PPS payment 
for those site neutral payment rate cases. (We refer readers to Sec.  
412.522(c)(2)(i) of the regulations for further details.) We note that, 
during the 4-year transitional period, the site neutral payment rate 
HCO budget neutrality factor did not apply to the LTCH PPS standard 
Federal payment rate portion of the blended payment rate at Sec.  
412.522(c)(3) payable to site neutral payment rate cases. (For 
additional details on the HCO policy adopted for site neutral payment 
rate cases under the dual rate LTCH PPS payment structure, including 
the budget neutrality adjustment for HCO payments to site neutral 
payment rate cases, we refer readers to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49617 through 49623).)

[[Page 27239]]

2. Determining LTCH CCRs Under the LTCH PPS
a. Background
    As noted previously, CCRs are used to determine payments for HCO 
adjustments for both payment rates under the LTCH PPS and also are used 
to determine payments for site neutral payment rate cases. As noted 
earlier, in determining HCO and the site neutral payment rate payments 
(regardless of whether the case is also an HCO), we generally calculate 
the estimated cost of the case by multiplying the LTCH's overall CCR by 
the Medicare allowable charges for the case. An overall CCR is used 
because the LTCH PPS uses a single prospective payment per discharge 
that covers both inpatient operating and capital-related costs. The 
LTCH's overall CCR is generally computed based on the sum of LTCH 
operating and capital costs (as described in Section 150.24, Chapter 3, 
of the Medicare Claims Processing Manual (Pub. 100-4)) as compared to 
total Medicare charges (that is, the sum of its operating and capital 
inpatient routine and ancillary charges), with those values determined 
from either the most recently settled cost report or the most recent 
tentatively settled cost report, whichever is from the latest cost 
reporting period. However, in certain instances, we use an alternative 
CCR, such as the statewide average CCR, a CCR that is specified by CMS, 
or one that is requested by the hospital. (We refer readers to Sec.  
412.525(a)(4)(iv) of the regulations for further details regarding CCRs 
and HCO adjustments for either LTCH PPS payment rate and Sec.  
412.522(c)(1)(ii) for the site neutral payment rate.)
    The LTCH's calculated CCR is then compared to the LTCH total CCR 
ceiling. Under our established policy, an LTCH with a calculated CCR in 
excess of the applicable maximum CCR threshold (that is, the LTCH total 
CCR ceiling, which is calculated as 3 standard deviations from the 
national geometric average CCR) is generally assigned the applicable 
statewide CCR. This policy is premised on a belief that calculated CCRs 
in excess of the LTCH total CCR ceiling are most likely due to faulty 
data reporting or entry, and CCRs based on erroneous data should not be 
used to identify and make payments for outlier cases.
b. Proposed LTCH Total CCR Ceiling
    Consistent with our historical practice, we are proposing to use 
the best available data to determine the LTCH total CCR ceiling for FY 
2024 in this proposed rule. Specifically, in this proposed rule, we are 
proposing to use our established methodology for determining the LTCH 
total CCR ceiling based on IPPS total CCR data from the December 2022 
update of the Provider Specific File (PSF), which is the most recent 
data available. Accordingly, we are proposing an LTCH total CCR ceiling 
of 1.287 under the LTCH PPS for FY 2024 in accordance with Sec.  
412.525(a)(4)(iv)(C)(2) for HCO cases under either payment rate and 
Sec.  412.522(c)(1)(ii) for the site neutral payment rate. Consistent 
with our historical practice, we are proposing to use the best 
available data, if applicable, to determine the LTCH total CCR ceiling 
for FY 2024 in the final rule. (For additional information on our 
methodology for determining the LTCH total CCR ceiling, we refer 
readers to the FY 2007 IPPS final rule (71 FR 48117 through 48119).)
c. Proposed LTCH Statewide Average CCRs
    Our general methodology for determining the statewide average CCRs 
used under the LTCH PPS is similar to our established methodology for 
determining the LTCH total CCR ceiling because it is based on ``total'' 
IPPS CCR data. (For additional information on our methodology for 
determining statewide average CCRs under the LTCH PPS, we refer readers 
to the FY 2007 IPPS final rule (71 FR 48119 through 48120).) Under the 
LTCH PPS HCO policy at Sec.  412.525(a)(4)(iv)(C), the SSO policy at 
Sec.  412.529(f)(4)(iii), and the site neutral payment rate at Sec.  
412.522(c)(1)(ii), the MAC may use a statewide average CCR, which is 
established annually by CMS, if it is unable to determine an accurate 
CCR for an LTCH in one of the following circumstances: (1) New LTCHs 
that have not yet submitted their first Medicare cost report (a new 
LTCH is defined as an entity that has not accepted assignment of an 
existing hospital's provider agreement in accordance with Sec.  
489.18); (2) LTCHs whose calculated CCR is in excess of the LTCH total 
CCR ceiling; and (3) other LTCHs for whom data with which to calculate 
a CCR are not available (for example, missing or faulty data). (Other 
sources of data that the MAC may consider in determining an LTCH's CCR 
include data from a different cost reporting period for the LTCH, data 
from the cost reporting period preceding the period in which the 
hospital began to be paid as an LTCH (that is, the period of at least 6 
months that it was paid as a short-term, acute care hospital), or data 
from other comparable LTCHs, such as LTCHs in the same chain or in the 
same region.)
    Consistent with our historical practice of using the best available 
data, in this proposed rule, we are proposing to use our established 
methodology for determining the LTCH statewide average CCRs, based on 
the most recent complete IPPS ``total CCR'' data from the December 2022 
update of the PSF. We are proposing LTCH PPS statewide average total 
CCRs for urban and rural hospitals that would be effective for 
discharges occurring on or after October 1, 2023, through September 30, 
2024, in Table 8C listed in section VI. of the Addendum to this 
proposed rule (and available via the internet on the CMS website). 
Consistent with our historical practice, we also are proposing to use 
the best available data, if applicable, to determine the LTCH PPS 
statewide average total CCRs for FY 2024 in the final rule.
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy is 
consistent with the policy that we established when we revised our 
methodology for determining the applicable LTCH statewide average CCRs 
in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the 
same as the policy applied under the IPPS. In addition, although 
Connecticut and Nevada have areas that are designated as rural, in our 
calculation of the LTCH statewide average CCRs, there were no short-
term, acute care IPPS hospitals classified as rural or LTCHs located in 
these rural areas as of December 2022. Therefore, consistent with our 
existing methodology, we are proposing to use the national average 
total CCR for rural IPPS hospitals for rural Connecticut and Nevada in 
Table 8C. While Massachusetts also has rural areas, the statewide 
average CCR for rural areas in Massachusetts is based on one IPPS 
provider whose CCR is an atypical 1.105. Because this is much higher 
than the statewide urban average (0.455) and furthermore implies costs 
greater than charges, as with Connecticut and Nevada, we are proposing 
to use the national average total CCR for rural IPPS hospitals for 
rural Massachusetts in Table 8C. Furthermore, consistent with our 
existing methodology, in determining the urban and rural statewide 
average total CCRs for Maryland LTCHs paid under the LTCH PPS, we are 
proposing to continue to use, as a proxy, the national average total 
CCR for urban IPPS hospitals and the national average

[[Page 27240]]

total CCR for rural IPPS hospitals, respectively. We are proposing to 
use this proxy because we believe that the CCR data in the PSF for 
Maryland hospitals may not be entirely accurate (as discussed in 
greater detail in the FY 2007 IPPS final rule (71 FR 48120)).
d. Reconciliation of HCO Payments
    Under the HCO policy at Sec.  412.525(a)(4)(iv)(D), the payments 
for HCO cases are subject to reconciliation (regardless of whether 
payment is based on the LTCH standard Federal payment rate or the site 
neutral payment rate). Specifically, any such payments are reconciled 
at settlement based on the CCR that was calculated based on the cost 
report coinciding with the discharge. For additional information on the 
reconciliation policy, we refer readers to sections 150.26 through 
150.28 of the Medicare Claims Processing Manual (Pub. 100-4), as added 
by Change Request 7192 (Transmittal 2111; December 3, 2010), and the RY 
2009 LTCH PPS final rule (73 FR 26820 through 26821).
3. Proposed High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases
a. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases
    Under the regulations at Sec.  412.525(a)(2)(ii) and as required by 
section 1886(m)(7) of the Act, the fixed-loss amount for HCO payments 
is set each year so that the estimated aggregate HCO payments for LTCH 
PPS standard Federal payment rate cases are 99.6875 percent of 8 
percent (that is, 7.975 percent) of estimated aggregate LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases. (For more 
details on the requirements for high-cost outlier payments in FY 2018 
and subsequent years under section 1886(m)(7) of the Act and additional 
information regarding high-cost outlier payments prior to FY 2018, we 
refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38542 
through 38544).)
b. Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2024
    In this section of this Addendum, we discuss our proposed 
methodology for determining the proposed fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2024. As we state later in 
this section, the proposed fixed-loss amount we determined for FY 2024 
is significantly higher than the fixed-loss amount we finalized for FY 
2023 (87 FR 49449). As we explain later in this section, we are 
soliciting comments on our proposed methodology and the assumptions 
underlying it, and will consider these comments when finalizing our 
methodology in the final rule.
    When we implemented the LTCH PPS, we established a fixed-loss 
amount so that total estimated outlier payments are projected to equal 
8 percent of total estimated payments (that is, the target percentage) 
under the LTCH PPS (67 FR 56022 through 56026). When we implemented the 
dual rate LTCH PPS payment structure beginning in FY 2016, we 
established that, in general, the historical LTCH PPS HCO policy would 
continue to apply to LTCH PPS standard Federal payment rate cases. That 
is, the fixed-loss amount for LTCH PPS standard Federal payment rate 
cases would be determined using the LTCH PPS HCO policy adopted when 
the LTCH PPS was first implemented, but we limited the data used under 
that policy to LTCH cases that would have been LTCH PPS standard 
Federal payment rate cases if the statutory changes had been in effect 
at the time of those discharges.
    To determine the applicable fixed-loss amount for LTCH PPS standard 
Federal payment rate cases, we estimate outlier payments and total LTCH 
PPS payments for each LTCH PPS standard Federal payment rate case (or 
for each case that would have been an LTCH PPS standard Federal payment 
rate case if the statutory changes had been in effect at the time of 
the discharge) using claims data from the MedPAR files. In accordance 
with Sec.  412.525(a)(2)(ii), the applicable fixed-loss amount for LTCH 
PPS standard Federal payment rate cases results in estimated total 
outlier payments being projected to be equal to 7.975 percent of 
projected total LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49448), we discussed 
an LTCH (CCN 312024) whose abnormal charging practices in FY 2021 led 
to the LTCH receiving an excessive amount of high cost outlier 
payments. In that rule, we stated our belief, based on information we 
received from the provider, that these abnormal charging practices 
would not persist into FY 2023. Therefore, we did not include their 
cases in our model for determining the FY 2023 outlier fixed-loss 
amount. The FY 2022 MedPAR claims also reflect the abnormal charging 
practices of this LTCH. In the FY 2022 MedPAR file, we identified 164 
LTCH PPS standard Federal payment rate cases for this LTCH. Of these 
164 cases, 116 of the cases had charges that were exactly or within ten 
dollars of $10 million. Due to the abnormal charges reflected in this 
LTCH's FY 2022 claims, we do not believe it would be appropriate to use 
these claims in determining the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2024. Therefore, we are proposing to 
remove claims from CCN 312024 when determining the fixed-loss amount 
for LTCH PPS standard Federal payment rate cases for FY 2024.
(1) Proposed Charge Inflation Factor for Use in Determining the 
Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate 
Cases for FY 2024
    Under the LTCH PPS, the cost of each claim is estimated by 
multiplying the charges on the claim by the provider's CCR. Due to the 
lag time in the availability of claims data, when estimating costs for 
the upcoming payment year we typically inflate the charges from the 
claims data by a uniform factor.
    For greater accuracy in calculating the fixed-loss amount, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45562 through 45566), we 
finalized a technical change to our methodology for determining the 
charge inflation factor. Similar to the method used under the IPPS 
hospital payment methodology (as discussed in section II.A.4.i.(2). of 
the Addendum to this proposed rule), our methodology determines the 
LTCH charge inflation factor based on the historical growth in charges 
for LTCH PPS standard Federal payment rate cases, calculated using 
historical MedPAR claims data. In this section of this Addendum, we 
describe our charge inflation factor methodology.
Step 1--Identify LTCH PPS Standard Federal Payment Rate Cases
    The first step in our methodology is to identify LTCH PPS standard 
Federal payment rate cases from the MedPAR claim files for the two most 
recently available Federal fiscal year time periods. For both fiscal 
years, consistent with our historical methodology for determining 
payment rates for the LTCH PPS, we remove any claims submitted by LTCHs 
that were all-inclusive rate providers as well as any Medicare 
Advantage claims. For both fiscal years, we also remove claims from 
providers that only had claims in one of the fiscal years.
Step 2--Remove Statistical Outliers
    The next step in our methodology is to remove all claims from 
providers whose growth in average charges was a statistical outlier. We 
remove these statistical outliers prior to calculating the charge 
inflation factor because we

[[Page 27241]]

believe they may represent aberrations in the data that would distort 
the measure of average charge growth. To perform this statistical trim, 
we first calculate each provider's average charge in both fiscal years. 
Then, we calculate a charge growth factor for each provider by dividing 
its average charge in the most recent fiscal year by its average charge 
in the prior fiscal year. Then we remove all claims for providers whose 
calculated charge growth factor was outside 3 standard deviations from 
the mean provider charge growth factor.
Step 3--Calculate the Charge Inflation Factor
    The final step in our methodology is to use the remaining claims to 
calculate a national charge inflation factor. We first calculate the 
average charge for those remaining claims in both fiscal years. Then we 
calculate the national charge inflation factor by dividing the average 
charge in the more recent fiscal year by the average charge in the 
prior fiscal year.
    Following the methodology described previously, we computed a 
proposed charge inflation factor based on the most recently available 
data. Specifically, we used the December 2022 update of the FY 2022 
MedPAR file and the December 2021 update of the FY 2021 MedPAR as the 
basis of the LTCH PPS standard Federal payment rate cases for the two 
most recently available Federal fiscal year time periods, as described 
previously in our methodology. Therefore, we trimmed the December 2022 
update of the FY 2022 MedPAR file and the December 2021 update of the 
FY 2021 MedPAR file as described in steps 1 and 2 of our methodology. 
To compute the 1-year average annual rate-of-change in charges per 
case, we compared the average covered charge per case of $247,014 
($12,380,602,491/50,121 cases) from FY 2021 to the average covered 
charge per case of $280,522 ($11,570,133,996/41,245 cases) from FY 
2022. This rate-of-change was 13.5651 percent, which results in a 1-
year charge inflation factor of 1.135651, and a 2-year charge inflation 
factor of 1.289703 (calculated by squaring the 1-year factor). We 
propose to inflate the billed charges obtained from the FY 2022 MedPAR 
file by this 2-year charge inflation factor of 1.289703 when 
determining the proposed fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2024.
(2) Proposed CCRs for Use in Determining the Proposed Fixed-Loss Amount 
for LTCH PPS Standard Federal Payment Rate Cases for FY 2024
    For greater accuracy in calculating the fixed-loss amount, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45562 through 45566), we 
finalized a technical change to our methodology for determining the 
CCRs used to calculate the fixed-loss amount. Similar to the 
methodology used for IPPS hospitals (as discussed in section 
II.A.4.i.(2). of the Addendum to this proposed rule), our methodology 
adjusts CCRs obtained from the best available PSF data by an adjustment 
factor that is calculated based on historical changes in the average 
case-weighted CCR for LTCHs. We believe these adjusted CCRs more 
accurately reflect CCR levels in the upcoming payment year because they 
account for historical changes in the relationship between costs and 
charges for LTCHs. In this section of this Addendum, we describe our 
CCR adjustment factor methodology.
Step 1--Assign Providers Their Historical CCRs
    The first step in our methodology is to identify providers with 
LTCH PPS standard Federal payment rate cases in the most recent MedPAR 
claims file (excluding all-inclusive rate providers and providers with 
only Medicare Advantage claims). For each of these providers, we then 
identify the CCR from the most recently available PSF. For each of 
these providers we also identify the CCR from the PSF that was made 
available one year prior to the most recently available PSF.
Step 2--Trim Providers With Insufficient CCR Data
    The next step in our methodology is to remove from the CCR 
adjustment factor calculation any providers for which we cannot 
accurately measure changes to their CCR using the PSF data. We first 
remove any provider whose CCR was missing in the most recent PSF or 
prior year PSF. We next remove any provider assigned the statewide 
average CCR for their State in either the most recent PSF or prior year 
PSF. We lastly remove any provider whose CCR was not updated between 
the most recent PSF and prior year PSF (determined by comparing the 
effective date of the records).
Step 3--Remove Statistical Outliers
    The next step in our methodology is to remove providers whose 
change in their CCR is a statistical outlier. To perform this 
statistical trim, for those providers remaining after application of 
Step 2, we calculate a provider-level CCR growth factor by dividing the 
provider's CCR from the most recent PSF by its CCR in the prior year's 
PSF. We then remove any provider whose CCR growth factor was outside 3 
standard deviations from the mean provider CCR growth factor. These 
statistical outliers are removed prior to calculating the CCR 
adjustment factor because we believe that they may represent 
aberrations in the data that would distort the measure of average 
annual CCR change.
Step 4--Calculate a CCR Adjustment Factor
    The final step in our methodology is to calculate, across all 
remaining providers after application of Step 3, an average case-
weighted CCR from both the most recent PSF and prior year PSF. The 
provider case counts that we use to calculate the case-weighted average 
are determined from claims for LTCH standard Federal rate cases from 
the most recent MedPAR claims file. We note when determining these case 
counts, consistent with our historical methodology for determining the 
MS-LTC-DRG relative weights, we do not count short-stay outlier claims 
as full cases but instead as a fraction of a case based on the ratio of 
covered days to the geometric mean length of stay for the MS-LTC-DRG 
grouped to the case. We calculate the national CCR adjustment factor by 
dividing the case-weighted CCR from the most recent PSF by the case-
weighted CCR from the prior year PSF.
    Following the methodology described previously, we computed a CCR 
adjustment factor based on the most recently available data. 
Specifically, we used the December 2022 PSF as the most recently 
available PSF and the December 2021 PSF as the PSF that was made 
available one year prior to the most recently available PSF, as 
described in our methodology. In addition, we used claims from the 
December 2022 update of the FY 2022 MedPAR file in our calculation of 
average case-weighted CCRs described in Step 4 of our methodology. 
Specifically, following the methodology described previously and, for 
providers with LTCH PPS standard Federal payment rate cases in the 
December 2022 update of the FY 2022 MedPAR file, we identified their 
CCRs from both the December 2021 PSF and December 2022 PSF. After 
performing the trims outlined in our methodology, we used the LTCH PPS 
standard Federal payment rate case counts from the FY 2022 MedPAR file 
(classified using proposed Version 41 of the GROUPER)

[[Page 27242]]

to calculate case-weighted average CCRs. Based on this data, we 
calculated a December 2021 national average case-weighted CCR of 
0.235395 and a December 2022 national average case-weighted CCR of 
0.229631. We then calculated the proposed national CCR adjustment 
factor by dividing the December 2022 national average case-weighted CCR 
by the December 2021 national average case-weighted CCR. This results 
in a proposed 1-year national CCR adjustment factor of 0.975513. When 
calculating the proposed fixed-loss amount for FY 2024, we assigned the 
statewide average CCR for the upcoming fiscal year to all providers who 
were assigned the statewide average in the December 2022 PSF or whose 
CCR was missing in the December 2022 PSF. For all other providers, we 
multiplied their CCR from the December 2022 PSF by the proposed 1-year 
national CCR adjustment factor of 0.975513.
(3) Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2024
    In this proposed rule, for FY 2024, using the best available data 
and the steps described previously, we calculated a proposed fixed-loss 
amount that would maintain estimated HCO payments at the projected 
7.975 percent of total estimated LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases as required by section 1886(m)(7) 
of the Act and in accordance with Sec.  412.525(a)(2)(ii) (based on the 
proposed payment rates and policies for these cases presented in this 
proposed rule). Consistent with our historical practice, we are 
proposing to use the best available LTCH claims data and CCR data, if 
applicable, when determining the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2024 in the final rule. 
Therefore, based on LTCH claims data from the December 2022 update of 
the FY 2022 MedPAR file adjusted for charge inflation and adjusted CCRs 
from the December 2022 update of the PSF, under the broad authority of 
section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are 
proposing a fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2024 of $94,378 that would result in estimated 
outlier payments projected to be equal to 7.975 percent of estimated FY 
2024 payments for such cases. We also are proposing to continue to make 
an additional HCO payment for the cost of an LTCH PPS standard Federal 
payment rate case that exceeds the HCO threshold amount that is equal 
to 80 percent of the difference between the estimated cost of the case 
and the outlier threshold (the sum of the proposed adjusted LTCH PPS 
standard Federal payment rate payment and the proposed fixed-loss 
amount for LTCH PPS standard Federal payment rate cases of $94,378).
    The proposed fixed-loss amount for FY 2024 ($94,378) is 
significantly higher than the fixed-loss amount for FY 2023 ($38,518). 
Each year the fixed-loss amount is determined prospectively based on 
the best available data at the time. There is typically a 2-year lag 
between the ratesetting year and the claims data available for 
ratesetting. For example, as described previously, we used standard 
Federal payment rate cases from the FY 2022 MedPAR file to compute the 
proposed fixed-loss amount for FY 2024. The average estimated cost per 
discharge for LTCH PPS standard Federal payment rate cases has risen 
considerably in recent years, primarily due to a significant increase 
in billed charges. The average charge per standard Federal payment rate 
case increased approximately 11 percent and 14 percent in FY 2021 and 
FY 2022, respectively. Using the FY 2021 and FY 2022 MedPAR files, we 
estimate that actual high cost outlier payments accounted for 11.1 and 
11.7 percent of total LTCH PPS standard Federal payment rate payments 
in FY 2021 and FY 2022, respectively. These percentages are much higher 
than the budget neutral target of 7.975 percent that we modelled, using 
the best available data at the time, when determining the FY 2021 
fixed-loss amount of $27,195 (85 FR 59056) and the FY 2022 fixed-loss 
amount of $33,015 (86 FR 45566). Using the FY 2021 and FY 2022 MedPAR 
files, we currently estimate that for actual high cost outlier payments 
to have accounted for 7.975 percent of total LTCH PPS standard Federal 
payment rate payments in FY 2021 and FY 2022, the fixed-loss amounts 
would have needed to been set at approximately $47,550 and $60,650, 
respectively. Furthermore, as discussed in Appendix A to this proposed 
rule, we currently model that high cost outlier payments in FY 2023 
will account for 12.7 of total LTCH PPS standard Federal payment rate 
payments. Based on this model, we estimate that the FY 2023 fixed-loss 
amount would have needed to have been set at approximately $75,000 to 
meet the requirement that high cost outlier payments account for 7.975 
percent of total LTCH PPS standard Federal payment rate payments in FY 
2023.
    For the reasons discussed previously, we believe a large increase 
to the fixed-loss amount is warranted to ensure that estimated outlier 
payments in FY 2024 return to our statutorily required budget neutral 
target of 7.975 percent. However, we acknowledge that the proposed 
increase is substantial. Therefore, we are soliciting comments on our 
proposed methodology for determining the fixed-loss amount for FY 2024. 
As described previously, our methodology for modelling the fixed-loss 
amount requires certain assumptions. For example, through our charge 
inflation factor, we assume that billed charges will continue to 
increase, in general, at the rate observed in the most recently 
available data. Similarly, through our CCR adjustment factor, we assume 
that CCRs for LTCHs will continue to change, in general, at the rate 
observed in the most recently available data. We are seeking comments 
on all aspects of our proposed methodology, including the assumptions 
underlying the methodology for modelling the fixed-loss amount, and 
whether there are any modifications to the methodology or the 
assumptions underlying it that may result in more accurate estimations 
of the total outlier payments and/or the total LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases. We remind the reader that 
we are required by section 1886(m)(7) of the Act to establish a fixed-
loss amount for LTCH PPS standard Federal payment rate cases for FY 
2024 that would result in total estimated outlier payments being equal 
to 7.975 percent of projected total LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases. We will consider comments received 
when finalizing our methodology for determining the fixed-loss amount 
for LTCH PPS standard Federal payment rate cases for FY 2024 in the 
final rule.
4. Proposed High-Cost Outlier Payments for Site Neutral Payment Rate 
Cases
    When we implemented the application of the site neutral payment 
rate in FY 2016, in examining the appropriate fixed-loss amount for 
site neutral payment rate cases issue, we considered how LTCH 
discharges based on historical claims data would have been classified 
under the dual rate LTCH PPS payment structure and the CMS' Office of 
the Actuary projections regarding how LTCHs will likely respond to our 
implementation of policies resulting from the statutory payment 
changes. We again relied on these considerations and actuarial 
projections in FY 2017 and FY 2018 because the historical claims data 
available in each of these years were not all subject to the LTCH PPS 
dual rate

[[Page 27243]]

payment system. Similarly, for FYs 2019 through 2023, we continued to 
rely on these considerations and actuarial projections because, due to 
the transitional blended payment policy for site neutral payment rate 
cases and the provisions of section 3711(b)(2) of the CARES Act, the 
historical claims data available in each of these years were not 
subject to the full effect of the site neutral payment rate.
    For FYs 2016 through 2023, our actuaries projected that the 
proportion of cases that would qualify as LTCH PPS standard Federal 
payment rate cases versus site neutral payment rate cases under the 
statutory provisions would remain consistent with what is reflected in 
the historical LTCH PPS claims data. Although our actuaries did not 
project an immediate change in the proportions found in the historical 
data, they did project cost and resource changes to account for the 
lower payment rates. Our actuaries also projected that the costs and 
resource use for cases paid at the site neutral payment rate would 
likely be lower, on average, than the costs and resource use for cases 
paid at the LTCH PPS standard Federal payment rate and would likely 
mirror the costs and resource use for IPPS cases assigned to the same 
MS-DRG, regardless of whether the proportion of site neutral payment 
rate cases in the future remains similar to what is found based on the 
historical data. As discussed in the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49619), this actuarial assumption is based on our expectation 
that site neutral payment rate cases would generally be paid based on 
an IPPS comparable per diem amount under the statutory LTCH PPS payment 
changes that began in FY 2016, which, in the majority of cases, is much 
lower than the payment that would have been paid if these statutory 
changes were not enacted. In light of these projections and 
expectations, we discussed that we believed that the use of a single 
fixed-loss amount and HCO target for all LTCH PPS cases would be 
problematic. In addition, we discussed that we did not believe that it 
would be appropriate for comparable LTCH PPS site neutral payment rate 
cases to receive dramatically different HCO payments from those cases 
that would be paid under the IPPS (80 FR 49617 through 49619 and 81 FR 
57305 through 57307). For those reasons, we stated that we believed 
that the most appropriate fixed-loss amount for site neutral payment 
rate cases for FYs 2016 through 2023 would be equal to the IPPS fixed-
loss amount for that particular fiscal year. Therefore, we established 
the fixed-loss amount for site neutral payment rate cases as the 
corresponding IPPS fixed-loss amounts for FYs 2016 through 2023. In 
particular, in FY 2023, we established the fixed-loss amount for site 
neutral payment rate cases as the FY 2023 IPPS fixed-loss amount of 
$38,788 (87 FR 49450, as corrected in 87 FR 66564).
    As discussed in section I.E. of the preamble of this proposed rule, 
we are proposing to use FY 2022 data in the FY 2024 LTCH PPS 
ratesetting. Section 3711(b)(2) of the CARES Act, which provided a 
waiver of the application of the site neutral payment rate for LTCH 
cases admitted during the COVID-19 PHE period, was in effect for the 
entirety of FY 2022. Therefore, all LTCH PPS cases in FY 2022 were paid 
the LTCH PPS standard Federal rate regardless of whether the discharge 
met the statutory patient criteria. Because not all FY 2022 claims in 
the data used for this proposed rule were subject to the site neutral 
payment rate, we continue to rely on the same considerations and 
actuarial projections used in FYs 2016 through 2023 when developing a 
fixed-loss amount for site neutral payment rate cases for FY 2024. Our 
actuaries continue to project that the costs and resource use for FY 
2024 cases paid at the site neutral payment rate would likely be lower, 
on average, than the costs and resource use for cases paid at the LTCH 
PPS standard Federal payment rate and will likely mirror the costs and 
resource use for IPPS cases assigned to the same MS-DRG, regardless of 
whether the proportion of site neutral payment rate cases in the future 
remains similar to what was found based on the historical data. (Based 
on the FY 2022 LTCH claims data used in the development of this 
proposed rule, if the provisions of the CARES Act had not been in 
effect, approximately 68 percent of LTCH cases would have been paid the 
LTCH PPS standard Federal payment rate and approximately 32 percent of 
LTCH cases would have been paid the site neutral payment rate for 
discharges occurring in FY 2022.)
    For these reasons, we continue to believe that the most appropriate 
fixed-loss amount for site neutral payment rate cases for FY 2024 is 
the IPPS fixed-loss amount for FY 2024. Therefore, consistent with past 
practice, we are proposing that the applicable HCO threshold for site 
neutral payment rate cases is the sum of the site neutral payment rate 
for the case and the proposed IPPS fixed-loss amount. That is, we are 
proposing a fixed-loss amount for site neutral payment rate cases of 
$40,732, which is the same proposed FY 2024 IPPS fixed-loss amount 
discussed in section II.A.4.i.(2). of the Addendum to this proposed 
rule. Accordingly, for FY 2024, we are proposing to calculate a HCO 
payment for site neutral payment rate cases with costs that exceed the 
HCO threshold amount that is equal to 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the site neutral payment rate payment and the proposed fixed-
loss amount for site neutral payment rate cases of $40,732).
    In establishing a HCO policy for site neutral payment rate cases, 
we established a budget neutrality adjustment under Sec.  
412.522(c)(2)(i). We established this requirement because we believed, 
and continue to believe, that the HCO policy for site neutral payment 
rate cases should be budget neutral, just as the HCO policy for LTCH 
PPS standard Federal payment rate cases is budget neutral, meaning that 
estimated site neutral payment rate HCO payments should not result in 
any change in estimated aggregate LTCH PPS payments.
    To ensure that estimated HCO payments payable to site neutral 
payment rate cases in FY 2024 would not result in any increase in 
estimated aggregate FY 2024 LTCH PPS payments, under the budget 
neutrality requirement at Sec.  412.522(c)(2)(i), it is necessary to 
reduce site neutral payment rate payments by 5.1 percent to account for 
the estimated additional HCO payments payable to those cases in FY 
2024. Consistent with our historical practice, we are proposing to 
continue this policy.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate the proposed fixed-loss threshold would result 
in FY 2024 HCO payments for site neutral payment rate cases to equal 
5.1 percent of the site neutral payment rate payments that are based on 
the IPPS comparable per diem amount. As such, to ensure estimated HCO 
payments payable for site neutral payment rate cases in FY 2024 would 
not result in any increase in estimated aggregate FY 2024 LTCH PPS 
payments, under the budget neutrality requirement at Sec.  
412.522(c)(2)(i), it is necessary to reduce the site neutral payment 
rate amount paid under Sec.  412.522(c)(1)(i) by 5.1 percent to account 
for the estimated additional HCO payments payable for site neutral 
payment rate cases in FY 2024. To achieve this, for FY 2024, we are 
proposing to apply a budget neutrality factor of 0.949 (that is, the 
decimal equivalent of a 5.1 percent reduction, determined as 1.0-5.1/
100 = 0.949) to the site neutral payment rate for those site neutral 
payment rate cases

[[Page 27244]]

paid under Sec.  412.522(c)(1)(i). We note that, consistent with our 
current policy, this proposed HCO budget neutrality adjustment would 
not be applied to the HCO portion of the site neutral payment rate 
amount (81 FR 57309).

E. Proposed Update to the IPPS Comparable Amount To Reflect the 
Statutory Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made by section 3133 of the Affordable 
Care Act in the calculation of the ``IPPS comparable amount'' under the 
SSO policy at Sec.  412.529 and the ``IPPS equivalent amount'' under 
the site neutral payment rate at Sec.  412.522. Historically, the 
determination of both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' includes an amount for inpatient operating costs 
``for the costs of serving a disproportionate share of low-income 
patients.'' Under the statutory changes to the Medicare DSH payment 
adjustment methodology that began in FY 2014, in general, eligible IPPS 
hospitals receive an empirically justified Medicare DSH payment equal 
to 25 percent of the amount they otherwise would have received under 
the statutory formula for Medicare DSH payments prior to the amendments 
made by the Affordable Care Act. The remaining amount, equal to an 
estimate of 75 percent of the amount that otherwise would have been 
paid as Medicare DSH payments, reduced to reflect changes in the 
percentage of individuals who are uninsured and any additional 
statutory adjustment, is made available to make additional payments to 
each hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. The additional uncompensated care payments are 
based on the hospital's amount of uncompensated care for a given time 
period relative to the total amount of uncompensated care for that same 
time period reported by all IPPS hospitals that receive Medicare DSH 
payments.
    To reflect the statutory changes to the Medicare DSH payment 
adjustment methodology in the calculation of the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we 
stated that we will include a reduced Medicare DSH payment amount that 
reflects the projected percentage of the payment amount calculated 
based on the statutory Medicare DSH payment formula prior to the 
amendments made by the Affordable Care Act that will be paid to 
eligible IPPS hospitals as empirically justified Medicare DSH payments 
and uncompensated care payments in that year (that is, a percentage of 
the operating Medicare DSH payment amount that has historically been 
reflected in the LTCH PPS payments that are based on IPPS rates). We 
also stated that the projected percentage will be updated annually, 
consistent with the annual determination of the amount of uncompensated 
care payments that will be made to eligible IPPS hospitals. We believe 
that this approach results in appropriate payments under the LTCH PPS 
and is consistent with our intention that the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS closely 
resemble what an IPPS payment would have been for the same episode of 
care, while recognizing that some features of the IPPS cannot be 
translated directly into the LTCH PPS (79 FR 50766 through 50767).
    For FY 2024, as discussed in greater detail in section IV.E.2.b. of 
the preamble of this proposed rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted to 
65.71 percent of that amount to reflect the change in the percentage of 
individuals who are uninsured. The resulting amount is then used to 
determine the amount available to make uncompensated care payments to 
eligible IPPS hospitals in FY 2024. In other words, the amount of the 
Medicare DSH payments that would have been made prior to the amendments 
made by the Affordable Care Act is adjusted to 49.28 percent (the 
product of 75 percent and 65.71 percent) and the resulting amount is 
used to calculate the uncompensated care payments to eligible 
hospitals. As a result, for FY 2024, we project that the reduction in 
the amount of Medicare DSH payments pursuant to section 1886(r)(1) of 
the Act, along with the payments for uncompensated care under section 
1886(r)(2) of the Act, will result in overall Medicare DSH payments of 
74.28 percent of the amount of Medicare DSH payments that would 
otherwise have been made in the absence of the amendments made by the 
Affordable Care Act (that is, 25 percent + 49.28 percent = 74.28 
percent).
    Therefore, for FY 2024, we are proposing to establish that the 
calculation of the ``IPPS comparable amount'' under Sec.  412.529 would 
include an applicable operating Medicare DSH payment amount that is 
equal to 74.28 percent of the operating Medicare DSH payment amount 
that would have been paid based on the statutory Medicare DSH payment 
formula absent the amendments made by the Affordable Care Act. 
Furthermore, consistent with our historical practice, we are proposing 
that, if more recent data became available, we would use that data to 
determine this factor in the final rule.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2024

    Section 412.525 sets forth the adjustments to the LTCH PPS standard 
Federal payment rate. Under the dual rate LTCH PPS payment structure, 
only LTCH PPS cases that meet the statutory criteria to be excluded 
from the site neutral payment rate are paid based on the LTCH PPS 
standard Federal payment rate. Under Sec.  412.525(c), the LTCH PPS 
standard Federal payment rate is adjusted to account for differences in 
area wages by multiplying the labor-related share of the LTCH PPS 
standard Federal payment rate for a case by the applicable LTCH PPS 
wage index (the proposed FY 2024 values are shown in Tables 12A through 
12B listed in section VI. of the Addendum to this proposed rule and are 
available via the internet on the CMS website). The LTCH PPS standard 
Federal payment rate is also adjusted to account for the higher costs 
of LTCHs located in Alaska and Hawaii by the applicable COLA factors 
(the proposed FY 2024 factors are shown in the chart in section V.C. of 
this Addendum) in accordance with Sec.  412.525(b). In this proposed 
rule, we are proposing to establish an LTCH PPS standard Federal 
payment rate for FY 2024 of $47,948.15, as discussed in section V.A. of 
the Addendum to this proposed rule. We illustrate the methodology to 
adjust the proposed LTCH PPS standard Federal payment rate for FY 2024, 
applying our proposed LTCH PPS amounts for the standard Federal payment 
rate, MS-LTC-DRG relative weights, and wage index in the following 
example:
    Example: During FY 2024, a Medicare discharge that meets the 
criteria to be excluded from the site neutral payment rate, that is, an 
LTCH PPS standard Federal payment rate case, is from an LTCH that is 
located in CBSA 16984, which has a proposed FY 2024 LTCH PPS wage index 
value of 1.0431 (as shown in Table 12A listed in section VI. of the 
Addendum to this proposed rule). The Medicare patient case is 
classified into proposed MS-LTC-DRG 189 (Pulmonary Edema & Respiratory 
Failure), which has a proposed relative

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weight for FY 2024 of 0.9410 (as shown in Table 11 listed in section 
VI. of the Addendum to this proposed rule). The LTCH submitted quality 
reporting data for FY 2024 in accordance with the LTCH QRP under 
section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted proposed Federal prospective 
payment for this Medicare patient case in FY 2024, we computed the 
wage-adjusted Federal prospective payment amount by multiplying the 
unadjusted proposed FY 2024 LTCH PPS standard Federal payment rate 
($47,948.15) by the proposed labor-related share (68.4 percent) and the 
proposed wage index value (1.0431). This wage-adjusted amount was then 
added to the proposed nonlabor-related portion of the unadjusted 
proposed LTCH PPS standard Federal payment rate (31.6 percent; adjusted 
for cost of living, if applicable) to determine the adjusted proposed 
LTCH PPS standard Federal payment rate, which is then multiplied by the 
proposed MS-LTC-DRG relative weight (0.9410) to calculate the total 
adjusted proposed LTCH PPS standard Federal prospective payment for FY 
2024 ($46,449.34). The table illustrates the components of the 
calculations in this example.
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VI. Tables Referenced in This Proposed Rule Generally Available on the 
CMS Website

    This section lists the tables referred to throughout the preamble 
of this proposed rule and in the Addendum. In the past, a majority of 
these tables were published in the Federal Register as part of the 
annual proposed and final rules. However, similar to FYs 2012 through 
2023, for the FY 2024 rulemaking cycle, the IPPS and LTCH PPS tables 
will not be published in the Federal Register in the annual IPPS/LTCH 
PPS proposed and final rules and will be on the CMS website. 
Specifically, all IPPS tables listed in the proposed rule, with the 
exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E, 
will generally be available on the CMS website. IPPS Tables 1A, 1B, 1C, 
and 1D, and LTCH PPS Table 1E are displayed at the end of this section 
and will continue to be published in the Federal Register as part of 
the annual proposed and final rules. For additional discussion of the 
information included in the IPPS and LTCH PPS tables associated with 
the IPPS/LTCH PPS proposed and final rules, as well as prior changes to 
the information included in these tables, we refer readers to the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49451 through 49453).
    Tables 7A and 7B historically contained the Medicare prospective 
payment system selected percentile lengths of stay for the MS-DRGs for 
the prior year and upcoming fiscal year. We note, in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49452), we finalized beginning with FY 2023, 
to provide the percentile length of stay information previously 
included in Tables 7A and 7B in the supplemental AOR/BOR data file. The 
AOR/BOR files can be found on the FY 2024 IPPS proposed rule home page 
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    As discussed in section II.E. of the preamble to this proposed 
rule, we are making available separate tables listing the ICD-10-CM 
codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the 
cost criterion for the FY 2024 new technology add-on payment 
applications in Table 10 associated with this proposed rule.
    After hospitals have been given an opportunity to review and 
correct their calculations for FY 2024, we will post Table 15 (which 
will be available via the CMS website) to display the final FY 2024 
readmissions payment adjustment factors that will be applicable to 
discharges occurring on or after October 1, 2023. We expect Table 15 
will be posted on the CMS website in the Fall 2023.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites identified in this proposed rule 
should contact Michael Treitel at (410) 786-4552.
    The following IPPS tables for this proposed rule are generally 
available 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 2024 IPPS Proposed Rule Home 
Page'' or ``Acute Inpatient-Files-for Download.''

Table 2.--Case-Mix Index and Wage Index Table by CCN--FY 2024 Proposed 
Rule
Table 3.--Proposed Wage Index Table by CBSA--FY 2024 Proposed Rule
Table 4A.--Proposed List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2024 Proposed Rule
Table 4B.--Proposed Counties Redesignated Under Section 1886(d)(8)(B) 
of the Act (LUGAR Counties)--FY 2024 Proposed Rule
Table 5.--Proposed List of Medicare Severity Diagnosis-Related Groups 
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic 
Mean Length of Stay--FY 2024
Table 6A.--New Diagnosis Codes--FY 2024
Table 6B.--New Procedure Codes--FY 2024
Table 6C.--Invalid Diagnosis Codes--FY 2024
Table 6E.--Revised Diagnosis Code Titles--FY 2024
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2024
Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2024
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024
Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024
Table 6I.1.--Proposed Additions to the MCC List--FY 2024
Table 6I.2.--Proposed Deletions to the MCC List--FY 2024
Table 6J.1.--Proposed Additions to the CC List--FY 2024

[[Page 27246]]

Table 6J.2.--Proposed Deletions to the CC List--FY 2024
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG and MCE 
Changes--FY 2024 (Table 6P contains multiple tables, 6P.1a. through 
6P.9a that include the ICD-10-CM and ICD-10-PCS code lists relating to 
specific proposed MS-DRG and MCE changes or other analyses). In 
addition, Table 6P.10--Potential MS-DRG Changes With Application of the 
NonCC Subgroup Criteria and Detailed Data Analysis--FY 2024 (Table 
6P.10 contains multiple tables, 6P.10a through 6P.10f that include the 
list of MS-DRGs and data analyses relating to application of the NonCC 
subgroup criteria). These tables are referred to throughout section 
II.C. of the preamble of this proposed rule.
Table 8A.--Proposed FY 2024 Statewide Average Operating Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2024 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 10.--Codes Provided by FY 2024 New Technology Add-On Payment 
Applicants for Their Cost Analyses
Table 16.--Proxy Hospital Value-Based Purchasing (VBP) Program 
Adjustment Factors for FY 2024
Table 18.--Proposed FY 2024 Medicare DSH Uncompensated Care Payment 
Factor 3
    The following LTCH PPS tables for this FY 2024 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-1785-P:

Table 8C.--Proposed FY 2024 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring From October 1, 2023, Through September 30, 2024
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring From October 1, 2023, Through September 30, 2024
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for Discharges 
Occurring From October 1, 2023, Through September 30, 2024
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Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule is necessary in order to make payment and policy 
changes under the IPPS for Medicare acute care hospital inpatient 
services for operating and capital-related costs as well as for certain 
hospitals and hospital units excluded from the IPPS. This proposed rule 
also is necessary to make payment and policy changes for Medicare 
hospitals under the LTCH PPS. Also, as we note later in this Appendix, 
the primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their legitimate 
costs in delivering necessary care to Medicare beneficiaries. In 
addition, we share national goals of preserving the Medicare Hospital 
Insurance Trust Fund.
    We believe that the proposed changes in this proposed rule, such as 
the proposed updates to the IPPS and LTCH PPS rates, and the proposals 
and discussions relating to applications for new technology add-on 
payments, are needed to further each of these goals while maintaining 
the financial viability of the hospital industry and ensuring access to 
high quality health care for Medicare beneficiaries.
    We expect that these proposed changes would ensure that the 
outcomes of the prospective payment systems are reasonable and provide 
equitable payments, while avoiding or minimizing unintended adverse 
consequences.
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
a. Proposed Update to the IPPS Payment Rates
    In accordance with section 1886(b)(3)(B) of the Act and as 
described in section V.B. of the preamble to this proposed rule, we are 
proposing to update the national standardized amount for inpatient 
hospital operating costs by the proposed applicable percentage increase 
of 2.8 percent (that is, a 3.0 percent market basket update with a 
proposed reduction of 0.2 percentage point for the productivity 
adjustment). We are also proposing to apply the proposed applicable 
percentage increase (including the market basket update and the 
proposed productivity adjustment) to the hospital-specific rates.
    Subsection (d) hospitals that do not submit quality information 
under rules established by the Secretary and that are meaningful EHR 
users under section 1886(b)(3)(B)(ix) of the Act would receive a 
proposed applicable percentage increase of 2.05 percent. Hospitals that 
are identified as not meaningful EHR users and do submit quality 
information under section 1886(b)(3)(B)(viii) of the Act would receive 
a proposed applicable percentage increase of 0.55 percent.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive a 
proposed applicable percentage increase of -0.2 percent, which reflects 
a one-quarter percent reduction of the market basket update for failure 
to submit quality data and a three-quarter percent reduction of the 
market basket update for being identified as not a meaningful EHR user.
b. Proposed Changes for the Add-On Payments for New Services and 
Technologies
    Consistent with sections 1886(d)(5)(K) and (L) of the Act, we 
review applications for new technology add-on payments based on the 
eligibility criteria at 42 CFR 412.87. As set forth in 42 CFR 
412.87(e)(1), we consider whether a technology meets the criteria for 
the new technology add-on payment and announce the results as part of 
the annual updates and changes to the IPPS.
    As discussed in section II.E.8. of this proposed rule, beginning 
with new technology add-on payment applications for FY 2025, we are 
proposing, for technologies that are not already market authorized, to 
require applicants to have a complete and active FDA market 
authorization request at the time of new technology add-on payment 
application submission and to provide documentation of FDA acceptance 
or filing to CMS at the time of application submission. We are also 
proposing that, beginning with FY 2025 applications, in order to be 
eligible for consideration for the new technology add-on payment for 
the upcoming fiscal year, an applicant for new technology add-on 
payments must have FDA marketing authorization by May 1 rather than 
July 1 of the year prior to the beginning of the fiscal year for which 
the application is being considered.
c. Proposed 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

[[Page 27248]]

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. As discussed in section 
III.G.4. of the preamble of this proposed rule, as we only have one 
year of relevant data at this time that we could use to evaluate any 
potential impacts of this policy, we believe it is necessary to wait 
until we have useable data from additional fiscal years before making 
any decision to modify or discontinue the policy. Therefore, for FY 
2024, we are proposing to continue the low wage index hospital policy 
and the related budget neutrality adjustment.
d. Proposed Modification to the Rural Wage Index Calculation 
Methodology
    As discussed in section III.G.1 of the preamble of this proposed 
rule, CMS has taken the opportunity to revisit the case law, prior 
public comments, and the relevant statutory language with regard to its 
policies involving the treatment of hospitals that have reclassified as 
rural under section 1886(d)(8)(E) of the Act, as implemented in the 
regulations under 42 CFR 412.103. After doing so, CMS now agrees that 
the best reading of section 1886(d)(8)(E) of the Act is that it 
instructs CMS to treat Sec.  412.103 hospitals the same as 
geographically rural hospitals for the wage index calculation. 
Therefore, we believe it is proper to include these hospitals in all 
iterations of the rural wage index calculation methodology included in 
section 1886(d) of the Act, including all hold harmless calculations in 
that provision. Beginning with FY 2024, we are proposing to include 
hospitals with Sec.  412.103 reclassification along with geographically 
rural hospitals in all rural wage index calculations, and to exclude 
``dual reclass'' hospitals (hospitals with simultaneous Sec.  412.103 
and MGCRB reclassifications) implicated by the hold harmless provision 
at section 1886(d)(8)(C)(ii) of the Act. Changes to the rural wage 
index which affect the rural floor would be implemented in a budget 
neutral manner.
e. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs)
    In this proposed rule, as required by section 1886(r)(2) of the 
Act, we are proposing to update our estimates of the three factors used 
to determine uncompensated care payments for FY 2024. Beginning with FY 
2023, we adopted a multiyear averaging methodology to determine Factor 
3 of the uncompensated care payment methodology, which will help to 
mitigate against large fluctuations in uncompensated care payments from 
year to year. Under this methodology, for FY 2024 and subsequent fiscal 
years, we will determine Factor 3 for all eligible hospitals 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. Specifically, we will use a 3-year average of audited data 
on uncompensated care costs from Worksheet S-10 from the FY 2018, FY 
2019 and FY 2020 cost reports to calculate Factor 3 for FY 2024 for all 
eligible hospitals.
    Beginning with FY 2023, we established a supplemental payment for 
IHS and Tribal hospitals and hospitals located in Puerto Rico to help 
prevent undue long-term financial disruption to these hospitals due to 
discontinuing use of the low-income insured days proxy in the 
uncompensated care payment methodology for these providers.
f. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2024
    The Rural Community Hospital Demonstration (RCHD) was authorized 
originally 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 it was extended for another 5-year period by 
section 3123 and 10313 of the Affordable Care Act (Pub. L 111-148). 
Section 15003 of the 21st Century Cures Act (Cures Act) (Pub. L. 114-
255) extended the demonstration for an additional 5-year period, and 
section 128 of the Consolidated Appropriations Act of 2021 (Pub. L. 
116-159) included an additional 5-year re-authorization. CMS has 
conducted the demonstration since 2004, which allows enhanced, cost-
based payment for Medicare inpatient services for up to 30 small rural 
hospitals.
    The authorizing legislation imposes a strict budget neutrality 
requirement. In this proposed rule, we summarize the status of the 
demonstration program, and the ongoing methodologies for implementation 
and budget neutrality.
2. Frontier Community Health Integration Project (FCHIP) Demonstration
    The Frontier Community Health Integration Project (FCHIP) 
demonstration was authorized under section 123 of the Medicare 
Improvements for Patients and Providers Act of 2008 (Pub. L 110-275), 
as amended by section 3126 of the Affordable Care Act of 2010 (Pub. L 
114-158), and most recently re-authorized and extended by the 
Consolidated Appropriations Act of 2021 (Pub. L 116-159). The 
legislation authorized a demonstration project to allow eligible 
entities to develop and test new models for the delivery of health care 
in order to improve access to and better integrate the delivery of 
acute care, extended care and other health care services to Medicare 
beneficiaries in certain rural areas. The FCHIP demonstration initial 
period was conducted in 10 critical access hospitals (CAHs) from August 
1, 2016, to July 31, 2019, and the demonstration ``extension period'' 
began on January 1, 2022, to run through June 30, 2027.
    The authorizing legislation requires the FCHIP demonstration to be 
budget neutral. In this proposed rule, we propose to continue with the 
budget neutrality approach used in the demonstration initial period for 
the demonstration extension period--to offset payments across CAHs 
nationally--should the demonstration incur costs to Medicare.
3. Proposed Update to the LTCH PPS Payment Rates
    As described in section VIII.C.2. of the preamble of this proposed 
rule, in order to update payments to LTCHs using the best available 
data, we are proposing to update the LTCH PPS standard Federal payment 
rate by 2.9 percent (that is, a 3.1 percent market basket update with a 
proposed reduction of 0.2 percentage point for the productivity 
adjustment, as required by section 1886(m)(3)(A)(i) of the Act). LTCHs 
that failed to submit quality data, as required by 1886(m)(5)(A)(i) of 
the Act and described in section VIII.C.2. of the preamble of this 
proposed rule, would receive a proposed update of 0.9 percent, which 
reflects a 2.0 percentage point reduction for failure to submit quality 
data.
4. Hospital Quality Programs
    Section 1886(b)(3)(B)(viii) of the Act requires subsection (d) 
hospitals to report data in accordance with the requirements of the 
Hospital IQR Program for purposes of measuring and making publicly 
available information on health care quality, and links the quality 
data submission to the annual applicable percentage increase. Sections 
1886(b)(3)(B)(ix), 1886(n), and 1814(l) of the Act require eligible 
hospitals and CAHs to demonstrate they are meaningful users of 
certified EHR

[[Page 27249]]

technology for purposes of electronic exchange of health information to 
improve the quality of health care, and links the submission of 
information demonstrating meaningful use to the annual applicable 
percentage increase for eligible hospitals and the applicable percent 
for CAHs. Section 1886(m)(5) of the Act requires each LTCH to submit 
quality measure data in accordance with the requirements of the LTCH 
QRP for purposes of measuring and making publicly available information 
on health care quality, and in order to avoid a 2-percentage point 
reduction in their annual payment. Section 1886(o) of the Act requires 
the Secretary to establish a value-based purchasing program under which 
value-based incentive payments are made in a fiscal year to hospitals 
that meet the performance standards established on an announced set of 
quality and efficiency measures for the fiscal year. The purposes of 
the Hospital VBP Program include measuring the quality of hospital 
inpatient care, linking hospital measure performance to payment, and 
making publicly available information on hospital quality of care. 
Section 1886(p) of the Act requires a reduction in payment for 
subsection (d) hospitals that rank in the worst-performing 25 percent 
with respect to measures of hospital-acquired conditions under the HAC 
Reduction Program for the purpose of measuring HACs linking measure 
performance to payment, and making publicly available information on 
health care quality. Section 1886(q) of the Act requires a reduction in 
payment for subsection (d) hospitals for excess readmissions based on 
measures for applicable conditions under the Hospital Readmissions 
Reduction Program for the purpose of measuring readmissions, linking 
measure performance to payment, and making publicly available 
information on health care quality. Section 1866(k) of the Act applies 
to hospitals described in section 1886(d)(1)(B)(v) of the Act (referred 
to as ``PPS-Exempt Cancer Hospitals'' or ``PCHs'') and requires PCHs to 
report data in accordance with the requirements of the PCHQR Program 
for purposes of measuring and making publicly available information on 
the quality of care furnished by PCHs, however, there is no reduction 
in payment to a PCH that does not report data.
5. Other Proposed Provisions
a. Rural Emergency Hospitals
    Section 125 of Division CC of the CAA was signed into law on 
December 27, 2020, and establishes REHs as a new Medicare provider-type 
that receives Medicare payment for services furnished on or after 
January 1, 2023. Section 125 of the CAA added section 1861(kkk) to the 
Act, which sets forth the requirements for REHs.
    Sections 1861(kkk)(4)(A)(i) through (iv) of the Act requires that 
an eligible facility that submits an application for enrollment as an 
REH under section 1866(j) of the Act, must also submit additional 
information that must include an action plan containing: (1) a plan for 
initiating REH services (which must include the provision of emergency 
department services and observation care); (2) a detailed transition 
plan that lists the specific services that the provider will retain, 
modify, add, and discontinue as an REH; (3) a detailed description of 
other outpatient medical and health services that it intends to furnish 
on an outpatient basis as an REH; and (4) information regarding how the 
provider intends to use the additional facility payment provided under 
section 1834(x)(2) of the Act, including a description of the services 
that the additional facility payment would be supporting, such as the 
operation and maintenance of the facility and the furnishing of covered 
services (for example, telehealth services and ambulance services).
    On January 26, 2023, CMS issued QSO-23-07-REH (https://www.cms.gov/files/document/qso-23-07-reh.pdf) that provided the additional 
information requirements specified by section 1861(kkk)(4)(A)(i) 
through (iv) of the Act as well as guidance regarding the REH 
enrollment and conversion process for eligible facilities. We are 
proposing to codify those requirements at 42 CFR 488.70. We are also 
proposing to update the definition of a ``participating hospital'' to 
include REHs, and to add REHs to the other applicable provisions 
contained in 42 CFR parts 488 and 489: Sec. Sec.  488.1, 
``Definitions''; 488.2, ``Statutory basis''; 488.18, ``Documentation of 
findings''; and 489.102, ``Requirements for providers.''
b. Physician-Owned Hospitals
    As discussed in section X.B. of the preamble of this proposed rule, 
we recently reviewed the expansion exception process for hospitals that 
wish to expand beyond the number of operating rooms, procedure rooms, 
and beds for which they were licensed at the time of enactment of the 
Affordable Care Act. To clarify our interpretation of the statutory 
authority, ensure that approval of a request to expand a hospital's 
facility capacity occurs only in appropriate circumstances, and 
facilitate compliance with the process for requesting an expansion 
exception, we are proposing to revise the regulations to clarify that 
CMS will only consider expansion exception requests from eligible 
hospitals, clarify the data and information that must be included in an 
expansion exception request, identify factors that CMS will consider 
when making a decision on an expansion exception request, and revise 
certain aspects of the process for requesting an expansion exception.
    Also, we recently reconsidered whether CY 2021 OPPS/ASC regulatory 
revisions that removed program integrity restrictions regarding the 
frequency of expansion exception requests, maximum aggregate expansion 
of a hospital, and location of expansion facility capacity for high 
Medicaid facilities currently present a risk of the types of program or 
patient abuse that the physician self-referral law is intended to 
thwart. Following this review, we believe that not applying these 
program integrity restrictions poses a significant risk of program or 
patient abuse. Therefore, we are proposing to reinstate, with respect 
to high Medicaid facilities, the program integrity restrictions on the 
frequency of expansion exception requests, maximum aggregate expansion 
of a hospital, and location of expansion facility capacity that were 
removed in the CY 2021 OPPS/ASC final rule.

B. Overall Impact

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and

[[Page 27250]]

materially affecting a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or state, 
local or tribal governments or communities ; (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive order.
    A regulatory impact analysis (RIA) must be prepared for rules with 
significant regulatory action/s and/or with significant effects as per 
section 3(f)(1)) greater than $100 million or more in any one year. 
Based on our estimates, OMB's Office of Information and Regulatory 
Affairs has determined this rulemaking exceeds the $100 million 
threshold under section 3(f)(1). Accordingly, we have prepared a 
Regulatory Impact Analysis that to the best of our ability presents the 
costs and benefits of the rulemaking. OMB has reviewed these proposed 
regulations, and the Departments have provided the following assessment 
of their impact.
    We estimate that the proposed changes for FY 2023 acute care 
hospital operating and capital payments would redistribute amounts in 
excess of $100 million to acute care hospitals. The proposed applicable 
percentage increase to the IPPS rates required by the statute, in 
conjunction with other proposed payment changes in this proposed rule, 
would result in an estimated $2.7 billion increase in FY 2024 payments, 
primarily driven by: (a) a combined $3.2 billion increase in FY 2024 
operating payments, including uncompensated care payments, low volume 
hospital payments, and FY 2024 capital payments and (b) a decrease of $ 
0.466 million resulting from estimated changes in new technology add-on 
payments. These proposed changes are relative to payments made in FY 
2023. The impact analysis of the capital payments can be found in 
section I.I. of this Appendix. In addition, as described in section 
I.J. of this Appendix, LTCHs are expected to experience a decrease in 
payments by approximately $24 million in FY 2024 relative to FY 2023.
    Our operating payment impact estimate includes the proposed 2.8 
percent hospital update to the standardized amount (which includes the 
proposed 3.0 percent market basket update reduced by the proposed 0.2 
percentage point for the productivity adjustment). The estimates of 
IPPS operating payments to acute care hospitals do not reflect any 
changes in hospital admissions or real case-mix intensity, which will 
also affect overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder of 
this document, demonstrates that this proposed rule is consistent with 
the regulatory philosophy and principles identified in Executive Orders 
12866 and 13563, the RFA, and section 1102(b) of the Act. This proposed 
rule would affect payments to a substantial number of small rural 
hospitals, as well as other classes of hospitals, and the effects on 
some hospitals may be significant. Finally, in accordance with the 
provisions of Executive Order 12866, the Office of Management and 
Budget has reviewed this proposed rule.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the proposed changes in this proposed rule would 
further each of these goals while maintaining the financial viability 
of the hospital industry and ensuring access to high quality health 
care for Medicare beneficiaries. We expect that these proposed changes 
would ensure that the outcomes of the prospective payment systems are 
reasonable and equitable, while avoiding or minimizing unintended 
adverse consequences.
    Because this proposed rule contains a range of policies, we refer 
readers to the section of the proposed rule where each policy is 
discussed. These sections include the rationale for our decisions, 
including the need for the proposed policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected effects 
of our proposed policy changes, as well as statutory changes effective 
for FY 2024, on various hospital groups. We estimate the effects of 
individual proposed policy changes by estimating payments per case, 
while holding all other payment policies constant. We use the best data 
available, but, generally unless specifically indicated, we do not 
attempt to make adjustments for future changes in such variables as 
admissions, lengths of stay, case mix, changes to the Medicare 
population, or incentives. In addition, we discuss limitations of our 
analysis for specific proposed policies in the discussion of those 
proposed policies as needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital related- costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 25 Indian Health Service hospitals in our 
database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short term, acute care hospitals, hospitals in 
Maryland are paid in accordance with the Maryland Total Cost of Care 
Model, and hospitals located outside the 50 States, the District of 
Columbia, and Puerto Rico (that is, 6 short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa) receive payment for inpatient hospital services 
they furnish on the basis of reasonable costs, subject to a rate-of-
increase ceiling.
    As of March 2023, there were 3,130 IPPS acute care hospitals 
included in our analysis. This represents approximately 53 percent of 
all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are approximately 
1,426 CAHs. These small, limited service hospitals are paid on the 
basis of reasonable costs, rather than under the IPPS. IPPS-excluded 
hospitals and units, which are paid under separate payment systems, 
include IPFs, IRFs, LTCHs, RNHCIs, children's hospitals, cancer 
hospitals, extended neoplastic disease care hospital, and short-term 
acute care hospitals located in the Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa. Changes in the prospective payment 
systems for IPFs and IRFs are made through separate rulemaking. Payment 
impacts of proposed changes to the prospective payment systems for 
these IPPS-excluded hospitals and units are not included in this 
proposed rule. The impact of the proposed update and policy changes to 
the LTCH PPS for FY 2024 is discussed in section I.J. of this Appendix.

[[Page 27251]]

F. Quantitative Effects of the Proposed Policy Changes Under the IPPS 
for Operating Costs

1. Basis and Methodology of Estimates
    In this proposed rule, we are announcing proposed policy changes 
and payment rate updates for the IPPS for FY 2024 for operating costs 
of acute care hospitals. The proposed FY 2024 updates to the capital 
payments to acute care hospitals are discussed in section I.I. of this 
Appendix.
    Based on the overall proposed percentage change in payments per 
case estimated using our payment simulation model, we estimate that 
total FY 2024 operating payments would increase by 2.8 percent, 
compared to FY 2023. The impacts do not reflect changes in the number 
of hospital admissions or real case-mix intensity, which would also 
affect overall payment changes.
    We have prepared separate impact analyses of the proposed changes 
to each system. This section deals with the proposed changes to the 
operating inpatient prospective payment system for acute care 
hospitals. Our payment simulation model relies on the best available 
claims data to enable us to estimate the impacts on payments per case 
of certain proposed changes in this proposed rule. As discussed in 
section I.E. of the preamble to this proposed rule, we believe that the 
FY 2022 claims data is the best available data for purposes of the 
proposed FY 2024 ratesetting and this impact analysis reflects the use 
of that data. However, there are other proposed changes for which we do 
not have data available that would allow us to estimate the payment 
impacts using this model. For those proposed changes, we have attempted 
to predict the payment impacts based upon our experience and other more 
limited data.
    The data used in developing the quantitative analyses of proposed 
changes in payments per case presented in this section are taken from 
the FY 2022 MedPAR file, as discussed previously in this proposed rule, 
and the most current Provider-Specific File (PSF) that is used for 
payment purposes. Although the analyses of the proposed changes to the 
operating PPS do not incorporate cost data, data from the best 
available hospital cost reports were used to categorize hospitals, as 
also discussed previously in this proposed rule. Our analysis has 
several qualifications. First, in this analysis, we do not adjust for 
future changes in such variables as admissions, lengths of stay, or 
underlying growth in real case-mix. Second, due to the interdependent 
nature of the IPPS payment components, it is very difficult to 
precisely quantify the impact associated with each proposed change. 
Third, we use various data sources to categorize hospitals in the 
tables. In some cases, particularly the number of beds, there is a fair 
degree of variation in the data from the different sources. We have 
attempted to construct these variables with the best available source 
overall. However, for individual hospitals, some miscategorizations are 
possible.
    Using cases from the FY 2022 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
impact of proposed payments under the capital IPPS, and the impact of 
proposed payments for costs other than inpatient operating costs, are 
not analyzed in this section. Estimated payment impacts of the capital 
IPPS for FY 2024 are discussed in section I.I. of this Appendix.
    We discuss the following proposed changes:
     The effects of the application of the proposed applicable 
percentage increase of 2.8 percent (that is, a proposed 3.0 percent 
market basket update with a proposed reduction of 0.2 percentage point 
for the productivity adjustment), and the proposed applicable 
percentage increase (including the proposed market basket update and 
the proposed productivity adjustment) to the hospital-specific rates.
     The effects of the proposed changes to the relative 
weights and MS-DRG GROUPER.
     The effects of the proposed changes in hospitals' wage 
index values reflecting updated wage data from hospitals' cost 
reporting periods beginning during FY 2020, compared to the FY 2019 
wage data, to calculate the proposed FY 2024 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that will be effective 
for FY 2024.
     The effects of the proposed rural floor with the 
application of the national budget neutrality factor to the wage index 
and the proposed change to the rural wage index and rural floor 
methodology.
     The effects of the proposed imputed floor wage index 
adjustment. This provision is not budget neutral.
     The effects of the proposed frontier State wage index 
adjustment under the statutory provision that requires hospitals 
located in States that qualify as frontier States to not have a wage 
index less than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 1886(d)(13) 
of the Act, which provides for an increase in a hospital's wage index 
if a threshold percentage of residents of the county where the hospital 
is located commute to work at hospitals in counties with higher wage 
indexes for FY 2024. This provision is not budget neutral.
     The total estimated change in payments based on the 
proposed FY 2024 policies relative to payments based on FY 2023 
policies.
    To illustrate the impact of the proposed FY 2024 changes, our 
analysis begins with a FY 2023 baseline simulation model using: the FY 
2023 applicable percentage increase of 3.8 percent; the 0.5 percentage 
point adjustment required under section 414 of the MACRA applied to the 
IPPS standardized amount; the FY 2023 MS-DRG GROUPER (Version 40); the 
FY 2023 CBSA designations for hospitals based on the OMB definitions 
from the 2010 Census; the FY 2023 wage index; and no MGCRB 
reclassifications. Outlier payments are set at 5.1 percent of total 
operating MS-DRG and outlier payments for modeling purposes.
    Section 1886(b)(3)(B)(viii) of the Act provides that, for FY 2007 
and each subsequent year through FY 2014, the update factor will 
include a reduction of 2.0 percentage points for any subsection (d) 
hospital that does not submit data on measures in a form and manner, 
and at a time specified by the Secretary. Beginning in FY 2015, the 
reduction is one-quarter of such applicable percentage increase 
determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) 
of the Act, or one-quarter of the market basket update. Therefore, we 
are proposing that, hospitals that do not submit quality information 
under rules established by the Secretary and that are meaningful EHR 
users under section 1886(b)(3)(B)(ix) of the Act would receive an 
applicable percentage increase of 2.05 percent. At the time this impact 
was prepared, 63 hospitals are estimated to not receive the full market 
basket rate-of-increase for FY 2024 because they failed the quality 
data submission process or did not choose to participate, but are 
meaningful EHR users. For purposes of the simulations shown later in 
this section, we modeled the proposed payment changes for FY 2024 using 
a reduced update for these hospitals.
    For FY 2024, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not a meaningful EHR user 
will be subject to a reduction of three-quarters of such

[[Page 27252]]

applicable percentage increase determined without regard to section 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, we are 
proposing that hospitals that are identified as not meaningful EHR 
users and do submit quality information under section 
1886(b)(3)(B)(viii) of the Act would receive an applicable percentage 
increase of 0.55 percent. At the time this impact analysis was 
prepared, 132 hospitals are estimated to not receive the full market 
basket rate-of-increase for FY 2024 because they are identified as not 
meaningful EHR users that do submit quality information under section 
1886(b)(3)(B)(viii) of the Act. For purposes of the simulations shown 
in this section, we modeled the proposed payment changes for FY 2024 
using a reduced update for these hospitals.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive a 
proposed applicable percentage increase of -0.2 percent, which reflects 
a one-quarter reduction of the market basket update for failure to 
submit quality data and a three-quarter reduction of the market basket 
update for being identified as not a meaningful EHR user. At the time 
this impact was prepared, 32 hospitals are estimated to not receive the 
full market basket rate-of-increase for FY 2023 because they are 
identified as not meaningful EHR users that do not submit quality data 
under section 1886(b)(3)(B)(viii) of the Act.
    Each proposed policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2024 model 
incorporating all of the proposed changes. This simulation allows us to 
isolate the effects of each change.
    Our comparison illustrates the proposed percent change in payments 
per case from FY 2023 to FY 2024. Two factors not discussed separately 
have significant impacts here. The first factor is the update to the 
standardized amount. In accordance with section 1886(b)(3)(B)(i) of the 
Act, we are proposing to update the standardized amounts for FY 2024 
using a proposed applicable percentage increase of 2.8 percent. This 
includes the FY 2024 proposed IPPS operating hospital market basket 
increase of 3.0 percent with a proposed 0.2 percentage point reduction 
for the productivity adjustment. Hospitals that fail to comply with the 
quality data submission requirements and are meaningful EHR users would 
receive a proposed update of 2.05 percent.
    This update includes a reduction of one-quarter of the market 
basket update for failure to submit these data. Hospitals that do 
comply with the quality data submission requirements but are not 
meaningful EHR users would receive a proposed update of 0.55 percent, 
which includes a reduction of three-quarters of the market basket 
update. Furthermore, hospitals that do not comply with the quality data 
submission requirements and also are not meaningful EHR users would 
receive a proposed update of -0.2 percent. Under section 
1886(b)(3)(B)(iv) of the Act, the update to the hospital-specific 
amounts for SCHs and MDHs is also equal to the applicable percentage 
increase, or 2.8 percent, if the hospital submits quality data and is a 
meaningful EHR user.
    A second significant factor that affects the proposed changes in 
hospitals' payments per case from FY 2023 to FY 2024 is the change in 
hospitals' geographic reclassification status from one year to the 
next. That is, payments may be reduced for hospitals reclassified in FY 
2023 that are no longer reclassified in FY 2024. Conversely, payments 
may increase for hospitals not reclassified in FY 2023 that are 
reclassified in FY 2024.
2. Analysis of Table I
    Table I displays the results of our analysis of the proposed 
changes for FY 2024. The table categorizes hospitals by various 
geographic and special payment consideration groups to illustrate the 
varying impacts on different types of hospitals. The top row of the 
table shows the overall impact on the 3,130 acute care hospitals 
included in the analysis.
    The next two rows of Table I contain hospitals categorized 
according to their geographic location: urban and rural. There are 
2,414 hospitals located in urban areas and 716 hospitals in rural areas 
included in our analysis. The next two groupings are by bed-size 
categories, shown separately for urban and rural hospitals. The last 
groupings by geographic location are by census divisions, also shown 
separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 2024 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban and rural show that the numbers of hospitals 
paid based on these categorizations after consideration of geographic 
reclassifications (including reclassifications under sections 
1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have implications for 
capital payments) are 1,811, and 1,319, respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have GME residency 
programs (teaching hospitals that receive an IME adjustment) or receive 
Medicare DSH payments, or some combination of these two adjustments. 
There are 1,903 nonteaching hospitals in our analysis, 949 teaching 
hospitals with fewer than 100 residents, and 278 teaching hospitals 
with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their DSH 
payment status, and whether they are considered urban or rural for DSH 
purposes. The next category groups together hospitals considered urban 
or rural, in terms of whether they receive the IME adjustment, the DSH 
adjustment, both, or neither.
    The next six rows examine the impacts of the proposed changes on 
rural hospitals by special payment groups (SCHs, MDHs, and RRCs) and 
reclassification status from urban to rural in accordance with section 
1886(d)(8)(E) of the Act. Of the hospitals that are not reclassified 
from urban to rural, there are 127 RRCs, 256 SCHs, 115 MDHs, 120 
hospitals that are both SCHs and RRCs, and 20 hospitals that are both 
MDHs and RRCs. Of the hospitals that are reclassified from urban to 
rural, there are 492 RRCs, 45 SCHs, 30 MDHs, 41 hospitals that are both 
SCHs and RRCs, and 12 hospitals that are both MDHs and RRCs.
    The next series of groupings are based on the type of ownership and 
the hospital's Medicare and Medicaid utilization expressed as a percent 
of total inpatient days. These data were taken from the most recent 
available Medicare cost reports.
    The next grouping concerns the geographic reclassification status 
of hospitals. The first subgrouping is based on whether a hospital is 
reclassified or not. The second and third subgroupings are based on 
whether urban and rural hospitals were reclassified by the MGCRB for FY 
2024 or not, respectively. The fourth subgrouping displays hospitals 
that reclassified from urban to rural in accordance with section 
1886(d)(8)(E) of the Act. The fifth subgrouping displays hospitals 
deemed urban in accordance with section 1886(d)(8)(B) of the Act.
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a. Effects of the Proposed Hospital Update (Column 1)
    As discussed in section V.A. of the preamble of this proposed rule, 
this column includes the proposed hospital update, including the 
proposed 3.0 percent market basket update reduced by the proposed 0.2 
percentage point for the productivity adjustment. As a result, we are 
proposing to make a 2.8 percent update to the national standardized 
amount. This column also includes the proposed update to the hospital-
specific rates which includes the proposed 3.0 percent market basket 
update reduced by the proposed 0.2 percentage point for the 
productivity adjustment. As a result, we are proposing to make a 2.8 
percent update to the hospital-specific rates.
    Overall, hospitals would experience a 2.8 percent increase in 
payments primarily due to the combined effects of the proposed hospital 
update to the national standardized amount and the proposed hospital 
update to the hospital-specific rate.
b. Effects of the Proposed Changes to the MS-DRG Reclassifications and 
Relative Cost-Based Weights With Recalibration Budget Neutrality 
(Column 2)
    Column 2 shows the effects of the proposed changes to the MS-DRGs 
and relative weights with the application of the proposed recalibration 
budget neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we calculated a proposed recalibration 
budget neutrality factor to account for the changes in MS-DRGs and 
relative weights to ensure that the overall payment impact is budget 
neutral. We also applied the permanent 10-percent cap on the reduction 
in a MS-DRG's relative weight in a given year and an associated 
recalibration cap budget neutrality factor to account for the 10-
percent cap on relative weight reductions to ensure that the overall 
payment impact is budget neutral.
    As discussed in section II.E. of the preamble of this proposed 
rule, for FY 2024, we calculated the proposed MS-DRG relative weights 
using the FY 2022 MedPAR data grouped to the proposed Version 41 (FY 
2024) MS-DRGs. The proposed reclassification changes to the GROUPER are 
described in more detail in section II.G. of the preamble of this 
proposed rule.
    The ``All Hospitals'' line in Column 2 indicates that proposed 
changes due to the MS-DRGs and relative weights would result in a 0.0 
percent change in payments with the application of the proposed 
recalibration budget neutrality factor of 1.001376 and the proposed 
recalibration cap budget neutrality factor of 0.999925 to the 
standardized amount.
c. Effects of the Proposed Wage Index Changes (Column 3)
    Column 3 shows the impact of the proposed updated wage data, with 
the application of the proposed wage budget neutrality factor. The wage 
index is calculated and assigned to hospitals on the basis of the labor 
market area in which the hospital is located. Under section 
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital 
labor market areas based on the Core Based Statistical Areas (CBSAs) 
established by OMB. The current statistical standards (based on OMB 
standards) used in FY 2024 are discussed in section III.A.2. of the 
preamble of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires that, beginning October 
1, 1993, we annually update the wage data used to calculate the wage 
index. In accordance with this requirement, the proposed wage index for 
acute care hospitals for FY 2024 is based on data submitted for 
hospital cost reporting periods, beginning on or after October 1, 2019 
and before October 1, 2020. The estimated impact of the updated wage 
data and the OMB labor market area delineations on hospital payments is 
isolated in Column 3 by holding the other proposed payment parameters 
constant in this simulation. That is, Column 3 shows the proposed 
percentage change in payments when going from a model using the FY 2023 
wage index, the labor-related share of 67.6 percent, under the OMB 
delineations and having a 100-percent occupational mix adjustment 
applied, to a model using the proposed FY 2024 pre-reclassification 
wage index with the proposed labor-related share of 67.6 percent, under 
the OMB delineations, also having a 100-percent occupational mix 
adjustment applied, while holding other payment parameters, such as use 
of the proposed Version 41 MS-DRG GROUPER constant. The FY 2024 
occupational mix adjustment is based on the CY 2019 occupational mix 
survey.
    In addition, the column shows the impact of the application of the 
proposed wage budget neutrality to the national standardized amount. In 
FY 2010, we began calculating separate wage budget neutrality and 
recalibration budget neutrality factors, in accordance with section 
1886(d)(3)(E) of the Act, which specifies that budget neutrality to 
account for wage index changes or updates made under that subparagraph 
must be made without regard to the 62 percent labor-related share 
guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for 
FY 2023, we are proposing to calculate the proposed wage budget 
neutrality factor to ensure that payments under updated wage data and 
the proposed labor-related share of 67.6 percent are budget neutral, 
without regard to the lower labor-related share of 62 percent applied 
to hospitals with a wage index less than or equal to 1.0. In other 
words, the wage budget neutrality is calculated under the assumption 
that all hospitals receive the higher labor-related share of the 
standardized amount. The proposed FY 2023 wage budget neutrality factor 
is 1.000943 and the overall proposed payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data. Overall, the 
new wage data and the proposed labor-related share, combined with the 
proposed wage budget neutrality adjustment, would lead to no change for 
all hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 5.3 percent compared to FY 2023. Therefore, the 
only manner in which to maintain or exceed the previous year's wage 
index was to match or exceed the proposed 5.3 percent increase in the 
national average hourly wage. Of the 3,071 hospitals with wage data for 
both FYs 2023 and 2024, 1,337 or 43.5 percent would experience an 
average hourly wage increase of 5.3 percent or more.
    The following chart compares the shifts in wage index values for 
hospitals due to proposed changes in the average hourly wage data for 
FY 2024 relative to FY 2023. These figures reflect proposed changes in 
the ``pre-reclassified, occupational mix-adjusted wage index,'' that 
is, the wage index before the application of geographic 
reclassification, the rural floor, the out-migration adjustment, and 
other wage index exceptions and adjustments. We note that the ``post-
reclassified wage index'' or ``payment wage index,'' which is the wage 
index that includes all such exceptions and adjustments (as reflected 
in Tables 2 and 3 associated with this proposed rule) is used to adjust 
the labor-related share of a hospital's standardized amount, either 
67.6 percent (as proposed) or 62 percent, depending upon whether a 
hospital's wage index is greater than 1.0

[[Page 27257]]

or less than or equal to 1.0. Therefore, the proposed pre-reclassified 
wage index figures in the following chart may illustrate a somewhat 
larger or smaller proposed change than would occur in a hospital's 
payment wage index and total payment.
    The following chart shows the projected impact of proposed changes 
in the area wage index values for urban and rural hospitals.
[GRAPHIC] [TIFF OMITTED] TP01MY23.352

d. Effects of MGCRB Reclassifications (Column 4)
    Our impact analysis to this point has assumed acute care hospitals 
are paid on the basis of their actual geographic location (with the 
exception of ongoing policies that provide that certain hospitals 
receive payments on bases other than where they are geographically 
located). The proposed changes in Column 4 reflect the per case payment 
impact of moving from this baseline to a simulation incorporating the 
MGCRB decisions for FY 2024.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, which 
begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's wage 
index value. Hospitals may appeal denials by the MGCRB of 
reclassification requests to the CMS Administrator. Further, hospitals 
have 45 days from the date the IPPS proposed rule is issued in the 
Federal Register to decide whether to withdraw or terminate an approved 
geographic reclassification for the following year.
    As discussed in section III.G.1. of this proposed rule, this column 
also reflects the proposed change to include hospitals with Sec.  
412.103 reclassification along with geographically rural hospitals in 
all rural wage index calculations, and to only exclude ``dual reclass'' 
hospitals (hospitals with simultaneous Sec.  412.103 and MGCRB 
reclassifications) when implicated by the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act. Consistent with this proposal, 
beginning with FY 2024 we are also proposing to include the data of all 
Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) 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.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, for 
purposes of this impact analysis, we are proposing to apply an 
adjustment of 0.980959 to ensure that the effects of the 
reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) 
of the Act are budget neutral (section II.A. of the Addendum to this 
proposed rule).
    Geographic reclassification generally benefits hospitals in rural 
areas. We estimate that the geographic reclassification would increase 
payments to rural hospitals by an average of 2.2 percent. By region, 
rural hospital categories would experience increases in payments due to 
MGCRB reclassifications.
    Table 2 listed in section VI. of the Addendum to this proposed rule 
and available via the internet on the CMS website reflects the 
reclassifications for FY 2024.
e. Effects of the Proposed Rural Floor, Including Application of 
National Budget Neutrality (Column 5)
    As discussed in section III.G.1. of the preamble of this FY 2024 
IPPS/LTCH PPS proposed rule, section 4410 of Public Law 105-33 
established the rural floor by requiring that the wage index for a 
hospital in any urban area cannot be less than the wage index 
applicable to hospitals located in rural areas in the same state. We 
apply a uniform budget neutrality adjustment to the wage index. Column 
5 shows the effects of the proposed rural floor.
    As discussed in section III.G.1 of this proposed rule, this column 
also reflects the proposed change to include hospitals with Sec.  
412.103 reclassification along with geographically rural hospitals in 
all rural wage index calculations, and to only exclude ``dual reclass'' 
hospitals (hospitals with simultaneous Sec.  412.103 and MGCRB 
reclassifications) when implicated by the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act. Consistent with this proposal, 
beginning with FY 2024 we are also proposing to include the data of all 
Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) in the calculation of the rural floor. The Affordable 
Care Act requires that we apply one rural floor budget neutrality 
factor to the wage index nationally. We have calculated a proposed FY 
2024 rural floor budget neutrality factor to be applied to the wage 
index of 0.981145, which would reduce wage indexes by -1.9 percent 
compared to the rural floor provision not being in effect.
    Column 5 shows the projected impact of the proposed rural floor 
with the national rural floor budget neutrality factor applied to the 
wage index based on the OMB labor market area delineations and the 
projected impact of the proposed change to the rural floor and rural 
wage index methodology. The column compares the proposed post-
reclassification FY 2024 wage index of providers before the rural floor 
adjustment and the proposed post-reclassification FY 2024 wage index of 
providers with the rural floor adjustment based on the OMB labor market 
area delineations and with the proposed change to the rural floor and 
the rural wage index methodology applied.
    We estimate that 596 hospitals would receive the rural floor in FY 
2024. All IPPS hospitals in our model would have their wage indexes 
reduced by the proposed rural floor budget neutrality adjustment of 
0.981145. We project that, in aggregate, rural hospitals would 
experience a 0.5 percent decrease in payments as a result of the 
application

[[Page 27258]]

of the proposed rural floor budget neutrality because the rural 
hospitals do not benefit from the rural floor, but have their wage 
indexes downwardly adjusted to ensure that the application of the rural 
floor is budget neutral overall. We project that, in the aggregate, 
hospitals located in urban areas would experience no change in payments 
because increases in payments to hospitals benefitting from the rural 
floor offset decreases in payments to nonrural floor urban hospitals 
whose wage index is downwardly adjusted by the rural floor budget 
neutrality factor. Urban hospitals in the Pacific region would 
experience a 3.2 percent increase in payments primarily due to the 
application of the rural floor in California.
f. Effects of the Application of the Proposed Imputed Floor, Proposed 
Frontier State Wage Index and Proposed Out-Migration Adjustment (Column 
6)
    This column shows the combined effects of the application of the 
following: (1) the imputed floor under section 1886(d)(3)(E)(iv)(I) and 
(II) of the Act, which provides that for discharges occurring on or 
after October 1, 2021, the area wage index applicable to any hospital 
in 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; (2) section 10324(a) of the Affordable Care Act, which requires 
that we establish a minimum post-reclassified wage index of 1.00 for 
all hospitals located in ``frontier States;'' and (3) the effects of 
section 1886(d)(13) of the Act, which provides for an increase in the 
wage index for hospitals located in certain counties that have a 
relatively high percentage of hospital employees who reside in the 
county, but work in a different area with a higher wage index.
    These three wage index provisions are not budget neutral and would 
increase payments overall by 0.4 percent compared to the provisions not 
being in effect.
    Section 1886(d)(3)(E)(iv)(III) of the Act provides that the imputed 
floor wage index for all-urban States shall not be applied in a budget 
neutral manner. Therefore, the imputed floor adjustment is estimated to 
increase IPPS operating payments by approximately $249 million. There 
are an estimated 81 providers in Connecticut, Delaware, Washington DC, 
New Jersey, and Rhode Island that will receive the imputed floor wage 
index.
    The term ``frontier States'' is defined in the statute as States in 
which at least 50 percent of counties have a population density less 
than 6 persons per square mile. Based on these criteria, 5 States 
(Montana, Nevada, North Dakota, South Dakota, and Wyoming) are 
considered frontier States and an estimated 43 hospitals located in 
Montana, North Dakota, South Dakota, and Wyoming would receive a 
frontier wage index of 1.0000. We note, the rural floor for Nevada 
exceeds the frontier state wage index of 1.000 and therefore no 
hospitals in Nevada receive the frontier state wage index. Overall, 
this provision is not budget neutral and is estimated to increase IPPS 
operating payments by approximately $58 million.
    In addition, section 1886(d)(13) of the Act provides for an 
increase in the wage index for hospitals located in certain counties 
that have a relatively high percentage of hospital employees who reside 
in the county, but work in a different area with a higher wage index. 
Hospitals located in counties that qualify for the payment adjustment 
would receive an increase in the wage index that is equal to a weighted 
average of the difference between the wage index of the resident 
county, post-reclassification and the higher wage index work area(s), 
weighted by the overall percentage of workers who are employed in an 
area with a higher wage index. There are an estimated 159 providers 
that would receive the out-migration wage adjustment in FY 2024. This 
out-migration wage adjustment is not budget neutral, and we estimate 
the impact of these providers receiving the out-migration increase 
would be approximately $46 million.
g. Effects of All FY 2024 Proposed Changes (Column 7)
    Column 7 shows our estimate of the proposed changes in payments per 
discharge from FY 2023 and FY 2024, resulting from all changes 
reflected in this proposed rule for FY 2024. It includes combined 
effects of the year-to-year change of the previous columns in the 
table.
    The proposed average increase in payments under the IPPS for all 
hospitals is approximately 2.8 percent for FY 2024 relative to FY 2023 
and for this row is primarily driven by the proposed changes reflected 
in Column 1. Column 7 includes the proposed annual hospital update of 
2.8 percent to the national standardized amount. This proposed annual 
hospital update includes the proposed 3.0 percent market basket update 
reduced by the proposed 0.2 percentage point productivity adjustment. 
Hospitals paid under the hospital-specific rate would receive a 2.8 
percent hospital update. As described in Column 1, the proposed annual 
hospital update for hospitals paid under the national standardized 
amount, combined with the proposed annual hospital update for hospitals 
paid under the hospital-specific rates, combined with the other 
adjustments described previously and shown in Table I, would result in 
a 2.8 percent increase in payments in FY 2024 relative to FY 2023.
    This column also reflects the estimated effect of outlier payments 
returning to their targeted levels in FY 2024 as compared to the 
estimated outlier payments for FY 2023 produced from our payment 
simulation model. As discussed in section II.A.4.j. of the Addendum to 
this proposed rule, the statute requires that outlier payments for any 
year are projected to be not less than 5 percent nor more than 6 
percent of total operating DRG payments plus outlier payments, and also 
requires that the average standardized amount be reduced by a factor to 
account for the estimated proportion of total DRG payments made to 
outlier cases. We are proposing to continue to use a 5.1 percent target 
(or an outlier offset factor of 0.949) in calculating the outlier 
offset to the standardized amount, just as we did for FY 2023. 
Therefore, our estimate of payments per discharge for FY 2024 from our 
payment simulation model reflects this 5.1 percent outlier payment 
target. Our payment simulation model shows that estimated outlier 
payments for FY 2023 exceed that target by approximately 0.2 percent. 
Therefore, our estimate of the proposed changes in payments per 
discharge from FY 2023 and FY 2024 in Column 7 reflects the estimated -
0.2 percent change in outlier payments produced by our payment 
simulation model when returning to the 5.1 percent outlier target for 
FY 2024. There are also interactive effects among the various factors 
comprising the payment system that we are not able to isolate, which 
may contribute to our estimate of the proposed changes in payments per 
discharge from FY 2023 and FY 2024 in Column 7.
    Overall payments to hospitals paid under the IPPS due to the 
proposed applicable percentage increase and proposed changes to 
policies related to MS-DRGs, geographic adjustments, and outliers are 
estimated to increase by 2.8 percent for FY 2024. Hospitals in urban 
areas would experience a 2.8 percent increase in payments per discharge 
in FY 2024 compared to FY 2023. Hospital payments per discharge in 
rural areas are estimated to increase by 3.3 percent in FY 2024.

[[Page 27259]]

3. Impact Analysis of Table II
    Table II presents the projected impact of the changes for FY 2024 
for urban and rural hospitals and for the different categories of 
hospitals shown in Table I. It compares the estimated average payments 
per discharge for FY 2023 with the estimated average payments per 
discharge for FY 2024, as calculated under our models. Therefore, this 
table presents, in terms of the average dollar amounts paid per 
discharge, the combined effects of the changes presented in Table I. 
The estimated percentage changes shown in the last column of Table II 
equal the estimated percentage changes in average payments per 
discharge from Column 7 of Table I.
BILLING CODE 4120-01-P

[[Page 27260]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.353


[[Page 27261]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.354

BILLING CODE 4120-01-C
4. Impact Analysis of Table III: Provider Deciles by Beneficiary 
Characteristics
    Advancing health equity is the first pillar of CMS's 2022 Strategic 
Framework.\757\ To gain insight into how the IPPS policies could affect 
health equity, we have added Table III, Provider Deciles by Beneficiary 
Characteristics, for informational purposes. Table III details 
providers in terms of the beneficiaries they serve, and shows 
differences in estimated average payments per case and changes in 
estimated average payments per case relative to other providers.
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    \757\ Available at: https://www.cms.gov/files/document/2022-cms-strategic-framework.pdf.
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    As noted in section I.C. of this Appendix, this proposed rule 
contains a range of policies and there is a section of the proposed 
rule where each policy is discussed. Each section includes the 
rationale for our decisions, including the need for the proposed 
policy. The information contained in Table III is provided solely to 
demonstrate the quantitative effects of our proposed policies across a 
number of health equity dimensions and does not form the basis or 
rationale for the proposed policies.
    Patient populations that have been disadvantaged or underserved by 
the healthcare system may include patients with the following 
characteristics, among others: members of racial and ethnic minorities; 
members of federally recognized Tribes, people with disabilities; 
members of the lesbian, gay, bisexual, transgender, and queer (LGBTQ+) 
community; individuals with limited English proficiency, members of 
rural communities, and persons otherwise adversely affected by 
persistent poverty or inequality. The CMS Framework for Health Equity 
was developed with particular attention to disparities in chronic and 
infectious diseases; as an example of a chronic disease associated with 
significant disparities, we therefore also detail providers in terms of 
the percentage of their claims for beneficiaries receiving ESRD 
Medicare coverage.
    Because we do not have data for all characteristics that may 
identify disadvantaged or underserved patient

[[Page 27262]]

populations, we use several proxies to capture these characteristics, 
based on claims data from the FY 2022 MedPAR file and Medicare 
enrollment data from Medicare's Enrollment Database (EDB), including: 
race/ethnicity, dual eligibility for Medicaid and Medicare, Medicare 
low income subsidy (LIS) enrollment, a joint indicator for dual or LIS 
enrollment, presence of an ICD-10-CM Z code indicating a ``social 
determinant of health'' (SDOH), presence of a behavioral health 
diagnosis code, receiving ESRD Medicare coverage, qualifying for 
Medicare due to disability, living in a rural area, and living in an 
area with an area deprivation index (ADI) greater than or equal to 85. 
We refer to each of these proxies as characteristics in Table III and 
the discussion that follows.
    For each of these characteristics, the hospitals were classified 
into groups as follows. First, all discharges at IPPS hospitals 
(excluding Maryland and IHS hospitals) in the FY 2022 MedPAR file were 
flagged for the presence of the characteristic, with the exception of 
race/ethnicity, for which probabilities were assigned instead of binary 
flags, as described further in this section. Second, the percentage of 
discharges at each hospital for the characteristic was calculated. 
Finally, the hospitals were divided into four groups based on the 
percentage of discharges for each characteristic: decile group 1 
contains the 10% of hospitals with the lowest rate of discharges for 
that characteristic; decile group 2 to 5 contains the hospitals with 
less than or equal to the median rate of discharges for that 
characteristic, excluding those in decile group 1; decile group 6 to 9 
contains the hospitals with greater than the median rate of discharges 
for that characteristic, excluding those in decile group 10; and decile 
group 10 contains the 10% of hospitals with the highest rate of 
discharges for that characteristic. We note that a supplementary 
provider-level dataset containing the percentage of discharges at each 
hospital for each of the characteristics in Table III is available on 
our website. Column 1 of Table III specifies the beneficiary 
characteristic; Column 2 specifies the decile group; Column 3 specifies 
the percentiles covered by the decile group; and Column 4 specifies the 
percentage range of discharges for each decile group specified in the 
first column. Columns 5 and 6 present the average estimated payments 
per discharge for FY 2023 and average estimated payments per discharge 
for FY 2024, respectively. Column 7 shows the percentage difference 
between these averages.
a. Race
    The first health equity-relevant grouping presented in Table III is 
race/ethnicity. To assign the race/ethnicity variables used in Table 
III, we utilized the Medicare Bayesian Improved Surname Geocoding 
(MBISG) data in conjunction with the MedPAR data. The method used to 
develop the MBISG data involves estimating a set of six racial and 
ethnic probabilities (White, Black, Hispanic, American Indian or 
Alaskan Native, Asian or Pacific Islander, and multiracial) from the 
surname and address of beneficiaries by using previous self-reported 
data from a national survey of Medicare beneficiaries, post-stratified 
to CMS enrollment files. The MBISG method is used by the CMS Office of 
Minority Health in its reports analyzing Medicare Advantage plan 
performance on Healthcare Effectiveness Data and Information Set 
(HEDIS) measures, and is being considered by CMS for use in other CMS 
programs. To estimate the percentage of discharges for each specified 
racial/ethnic category for each hospital, the sum of the probabilities 
for that category for that hospital was divided by the hospital's total 
number of discharges.
b. Income
    The two main proxies for income available in the Medicare claims 
and enrollment data are dual eligibility for Medicare and Medicaid and 
Medicare LIS status. Dual-enrollment status is a powerful predictor of 
poor outcomes on some quality and resource use measures even after 
accounting for additional social and functional risk factors.\758\ 
Medicare LIS enrollment refers to a beneficiary's enrollment in the 
low-income subsidy program for the Part D prescription drug benefit. 
This program covers all or part of the Part D premium for qualifying 
Medicare beneficiaries and gives them access to reduced copays for Part 
D drugs. (We note that beginning on January 1, 2024, eligibility for 
the full low-income subsidy will be expanded to include individuals 
currently eligible for the partial low-income subsidy.) Because 
Medicaid eligibility rules and benefits vary by state/territory, 
Medicare LIS enrollment identifies beneficiaries who are likely to have 
low income but may not be eligible for Medicaid. Not all beneficiaries 
who qualify for the duals or LIS programs actually enroll. Due to 
differences in the dual eligibility and LIS qualification criteria and 
less than complete participation in these programs, sometimes 
beneficiaries were flagged as dual but not LIS or vice versa. Hence 
this analysis also used a ``dual or LIS'' flag as a third proxy for low 
income. The dual and LIS flags were constructed based on enrollment/
eligibility status in the EDB during the month of the hospital 
discharge.
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    \758\ https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
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c. Social Determinants of Health (SDOH)
    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.\759\ These circumstances or determinants 
influence an individual's health status and can contribute to wide 
health disparities and inequities. ICD-10-CM contains Z-codes that 
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. The presence of ICD-10-CM Z-codes in the range Z55-
Z65 identifies beneficiaries with these SDOH characteristics. The SDOH 
flag used for this analysis was turned on if one of these Z-codes was 
recorded on the claim for the hospital stay itself (that is, the 
beneficiary's prior claims were not examined for additional Z-codes). 
Since these codes are not required for Medicare FFS patients and do not 
currently impact payment under the IPPS, we believe they may be 
underreported in current claims data and not reflect the actual rates 
of SDOH. In 2019, 0.11% of all Medicare FFS claims were Z code claims 
and 1.59% of continuously enrolled Medicare FFS beneficiaries had 
claims with Z codes.\760\ However, we expect the reporting of Z codes 
on claims may increase over time, because of newer quality measures in 
the Hospital Inpatient Quality Reporting (IQR) Program that capture 
screening and identification of patient-level, health-related social 
needs (MUC21-134 and MUC21-136) (see 87 FR 49201 through 49220). We 
also refer the reader to section II.C.12.c. of the preamble of this

[[Page 27263]]

proposed rule, where we discuss our proposal to change the severity 
level designation for ICD-10-CM diagnosis codes Z59.00 (Homelessness, 
unspecified), Z59.01 (Sheltered homelessness) and Z59.02 (Unsheltered 
homelessness) from a non-CC to a CC for FY 2024.
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    \759\ Available at: https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \760\ See ``Utilization of Z Codes for Social Determinants of 
Health among Medicare Fee-for-Service Beneficiaries, 2019,'' 
available at https://www.cms.gov/files/document/z-codes-data-highlight.pdf.
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d. Behavioral Health
    Beneficiaries with behavioral health diagnoses often face co-
occurring physical illnesses, but often experience difficulty accessing 
care.\761\ The combination of physical and behavioral health conditions 
can exacerbate both conditions and result in poorer outcomes than one 
condition alone.\762\ Additionally, the intersection of behavioral 
health and health inequities is a core aspect of CMS' Behavioral Health 
Strategy.\763\ We used the presence of one or more ICD-10-CM codes in 
the range of F01-F99 to identify beneficiaries with a behavioral health 
diagnosis.
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    \761\ Viron M, Zioto K, Schweitzer J, Levine G. Behavioral 
Health Homes: an opportunity to address healthcare inequities in 
people with serious mental illness. Asian J Psychiatr. 2014 Aug; 
10:10-6. doi: 10.1016/j.ajp.2014.03.009.
    \762\ Cully, J.A., Breland, J.Y., Robertson, S. et al. 
Behavioral health coaching for rural veterans with diabetes and 
depression: a patient randomized effectiveness implementation trial. 
BMC Health Serv Res 14, 191 (2014). https://doi.org/10.1186/1472-6963-14-191.
    \763\ https://www.cms.gov/cms-behavioral-health-strategy.
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e. Disability
    Beneficiaries are categorized as disabled because of medically 
determinable physical or mental impairment(s) that has lasted or is 
expected to last for a continuous period of at least 12 months or is 
expected to result in death.\764\ Disabled beneficiaries often have 
complex healthcare needs and difficulty accessing care. Compared to 
people without disabilities, people with disabilities generally have 
less access to health care, have more depression and anxiety, engage 
more often in risky health behaviors such as smoking, and are less 
physically active.\765\ Beneficiaries were classified as disabled for 
the purposes of this analysis if their original reason for qualifying 
for Medicare was disability; this information was obtained from 
Medicare's EDB. We note that this is likely an underestimation of 
disability, because it does not account for beneficiaries who became 
disabled after becoming entitled to Medicare. This metric also does not 
capture all individuals who would be considered to have a disability 
under 29 U.S.C. 705(9)(B).
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    \764\ https://www.ssa.gov/disability/professionals/bluebook/general-info.htm.
    \765\ https://www.cdc.gov/ncbddd/humandevelopment/health-equity.html#ref.
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f. ESRD
    Beneficiaries with ESRD have high healthcare needs and high medical 
spending, and often experience comorbid conditions and poor mental 
health. Beneficiaries with ESRD also experience significant 
disparities, such as a limited life expectancy.\766\ Beneficiaries were 
classified as ESRD for the purposes of this analysis if they were 
receiving Medicare ESRD coverage during the month of the discharge; 
this information was obtained from Medicare's EDB.
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    \766\ Smart NA, Titus TT. Outcomes of early versus late 
nephrology referral in chronic kidney disease: a systematic review. 
Am J Med. 2011 Nov;124(11):1073-80.e2. doi: 10.1016/
j.amjmed.2011.04.026. PMID: 22017785.
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g. Geography
    Beneficiaries in some geographic areas--particularly rural areas or 
areas with concentrated poverty--often have difficulty accessing 
care.767 768 For this impact analysis, beneficiaries were 
classified on two dimensions: from a rural area and from an area with 
an area deprivation index (ADI) greater than or equal to 85.
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    \767\ National Healthcare Quality and Disparities Report 
chartbook on rural health care. Rockville, MD: Agency for Healthcare 
Research and Quality; October 2017. AHRQ Pub. No. 17(18)-0001-2-EF 
available at https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/nhqrdr/chartbooks/qdr-ruralhealthchartbook-update.pdf.
    \768\ Muluk, S, Sabik, L, Chen, Q, Jacobs, B, Sun, Z, Drake, C. 
Disparities in geographic access to medical oncologists. Health Serv 
Res. 2022; 57(5): 1035-1044. doi:10.1111/1475-6773.13991.
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    Rural status is defined for purposes of this analysis using the 
primary Rural-Urban Commuting Area (RUCA) codes 4-10 (including 
micropolitan, small town, and rural areas) corresponding to each 
beneficiary's zip code. RUCA codes are defined at the census tract 
level based on measures of population density, urbanization, and daily 
commuting. The ADI is obtained from a publicly available dataset 
designed to capture socioeconomic disadvantage at the neighborhood 
level.\769\ It utilizes data on income, education, employment, housing 
quality, and 13 other factors from the American Community Survey and 
combines them into a single raw score, which is then used to rank 
neighborhoods (defined at various levels), with higher scores 
reflecting greater deprivation. The version of the ADI used for this 
analysis is at the Census Block Group level and the ADI corresponds to 
the Census Block Group's percentile nationally. Living in an area with 
an ADI score of 85 or above, a validated measure of neighborhood 
disadvantage, is shown to be a predictor of 30-day readmission rates, 
lower rates of cancer survival, poor end of life care for patients with 
heart failure, and longer lengths of stay and fewer home discharges 
post-knee surgery even after accounting for individual social and 
economic risk factors.770 771 772 773 774 The MedPAR 
discharge data was linked to the RUCA using beneficiaries' five-digit 
zip code and to the ADI data using beneficiaries' 9-digit zip codes, 
both of which were derived from Common Medicare Enrollment (CME) files. 
Beneficiaries with no recorded zip code were treated as being from an 
urban area and as having an ADI less than 85.
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    \769\ https://www.neighborhoodatlas.medicine.wisc.edu/.
    \770\ 7 U.S. Department of Health & Human Services, ``Executive 
Summary: Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-Based Purchasing Program,'' Office of the Assistant 
Secretary for Planning and Evaluation, March 2020. Available at 
https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//195046/Social-Risk-inMedicare%E2%80%99s-VBP-2nd-Report-Executive-Summary.pdf.
    \771\ Kind AJ, et al., ``Neighborhood socioeconomic disadvantage 
and 30-day rehospitalization: a retrospective cohort study.'' Annals 
of Internal Medicine. No. 161(11), pp 765-74, doi: 10.7326/M13-2946 
(December 2, 2014), available at https://www.acpjournals.org/doi/epdf/10.7326/M13-2946.
    \772\ Jencks SF, et al., ``Safety-Net Hospitals, Neighborhood 
Disadvantage, and Readmissions Under Maryland's All-Payer Program.'' 
Annals of Internal Medicine. No. 171, pp 91-98, doi:10.7326/M16-2671 
(July 16, 2019), available at https://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \773\ Cheng E, et al., ``Neighborhood and Individual 
Socioeconomic Disadvantage and Survival Among Patients With 
Nonmetastatic Common Cancers.'' JAMA Network Open Oncology. No. 
4(12), pp 1-17, doi: 10.1001/jamanetworkopen.2021.39593 (December 
17, 2021), available at https://onlinelibrary.wiley.com/doi/epdf/10.1111/jrh.12597.
    \774\ Khlopas A, et al., ``Neighborhood Socioeconomic 
Disadvantages Associated With Prolonged Lengths of Stay, Nonhome 
Discharges, and 90-Day Readmissions After Total Knee Arthroplasty.'' 
The Journal of Arthroplasty. No. 37(6), pp S37-S43, doi: 10.1016/
j.arth.2022.01.032 (June 2022), available at https://www.sciencedirect.com/science/article/pii/S0883540322000493.
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G. Effects of Other Policy Changes

    In addition to those proposed policy changes discussed previously 
that we are able to model using our IPPS payment simulation model, we 
are proposing to make various other changes in this proposed rule. As 
noted in section I.D. of this Appendix A, our payment simulation model 
uses the most recent available claims data to estimate the impacts on 
payments per case of certain proposed changes in this proposed rule. 
Generally, we have limited or no specific data available with which to 
estimate the impacts of these proposed changes using that payment 
simulation model. For those proposed changes, we have attempted to 
predict the payment impacts based upon our experience and other more 
limited data. Our estimates of the likely impacts associated with these 
other proposed changes are discussed in this section.
1. Effects of Policy Changes Relating to New Medical Service and 
Technology Add-On Payments
a. Proposed FY 2024 Status of Technologies Approved for FY 2023 New 
Technology Add-On Payments
    In section II.E.5. of the preamble of this proposed rule, we are 
proposing to continue to make new technology add-on payments for the 11 
technologies listed in the following table in FY 2024 because these 
technologies would still be considered new for purposes of new 
technology add-on payments. Under Sec.  412.88(a)(2), the new 
technology add-on payment for each case would be limited to the lesser 
of: (1) 65 percent of the costs of the new technology (or 75 percent of 
the costs for technologies designated as Qualified Infectious Disease 
Products (QIDPs) or approved under the Limited Population Pathway for 
Antibacterial and Antifungal Drugs (LPAD) pathway); or (2) 65 percent 
of the amount by which the costs of the case exceed the standard MS-DRG 
payment for the case (or 75 percent of the amount for technologies 
designated as QIDPs or approved under the LPAD pathway). Because it is 
difficult to predict the actual new technology add-on payment for each 
case, our estimates in this proposed rule are based on the applicant's 
estimate at the time they submitted their original application and the 
increase in new technology add-on payments for FY 2024 as if every 
claim that would qualify for a new technology add-on payment would 
receive the maximum add-on payment. In the following table are 
estimates for the 11 technologies for which we are proposing to 
continue to make new technology add-on payments in FY 2024:
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b. Proposed FY 2024 Applications for New Technology Add-On Payments
    In sections II.E.6. and 7. of the preamble to this proposed rule, 
we discuss 39 technologies for which we received applications for add-
on payments for new medical services and technologies for FY 2024. We 
note that of the 54 applications (27 alternative and 27 traditional) we 
received, 15 applicants withdrew their application (7 alternative and 8 
traditional) prior to the issuance of this proposed rule. As explained 
in the preamble to this proposed rule, add-on payments for new medical 
services and technologies under section 1886(d)(5)(K) of the Act are 
not required to be budget neutral. As discussed in section II.E.7. of 
the preamble of this proposed rule, under the alternative pathway for 
new technology add-on payments, new technologies that are medical 
products with a QIDP designation, approved through the FDA LPAD 
pathway, or are designated under the Breakthrough Device program 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 demonstrate that the technology represents a substantial 
clinical improvement. These technologies must still be within the 2 to 
3-year newness period, as discussed in section II.E.1.a.(1). of the 
preamble this proposed rule, and must also still meet the cost 
criterion.
    As also discussed in section II.E.7. of the preamble of this 
proposed rule, we are proposing to approve 19 alternative pathway 
applications submitted for FY 2024 new technology add-on payments. We 
note, the one technology we are not proposing to approve has not 
provided an adequate cost analysis and we are therefore unable to 
determine eligibility for new technology add-on payments.
    Based on preliminary information from the applicants at the time of 
this proposed rule, we estimate that total payments for the 20 
technologies that applied under the alternative pathway, if approved, 
would be in excess of approximately $263 million for FY 2024. Total 
estimated FY 2024 payments for new technologies that are designated as 
a QIDP are approximately $213 million, and the total estimated FY 2024 
payments for new technologies that are part of the Breakthrough Device 
program are approximately $50.5 million. Because cost or volume 
information has not yet been provided for 7 of the 20 technologies 
under the alternative pathway, including 1 of the

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QIDP applicants, we have not included those technologies in the 
estimate. We did not receive any LPAD applications for add-on payments 
for new technologies for FY 2024. We note that the estimated payments 
may be updated in the final rule based on revised or additional 
information CMS receives prior to the final rule.
    We have not yet determined whether any of the 19 technologies that 
applied under the traditional pathway discussed in section II.E.6. of 
the preamble of this proposed rule will meet the criteria for new 
technology add-on payments for FY 2024. Consequently, it is premature 
to estimate the potential payment impact of these 19 technologies for 
any potential new technology add-on payments for FY 2024. We note that, 
as in past years, if any of the technologies that applied under the 
traditional pathway are found to be eligible for new technology add-on 
payments for FY 2024, we would discuss the estimated payment impact for 
FY 2024 in the FY 2024 IPPS/LTCH PPS final rule.
2. Effects of the Proposed Changes to Medicare DSH Uncompensated Care 
Payments and Supplemental Payments for Indian Health Service Hospitals 
and Tribal Hospitals and Hospitals Located in Puerto Rico for FY 2024
    As discussed in section IV.E. of the preamble of this proposed 
rule, under section 3133 of the Affordable Care Act, hospitals that are 
eligible to receive Medicare DSH payments will receive 25 percent of 
the amount they previously would have received under the statutory 
formula for Medicare DSH payments under section 1886(d)(5)(F) of the 
Act. The remainder, equal to an estimate of 75 percent of what formerly 
would have been paid as Medicare DSH payments (Factor 1), reduced to 
reflect changes in the percentage of uninsured individuals and any 
additional statutory adjustment (Factor 2), is available to make 
additional payments to each hospital that qualifies for Medicare DSH 
payments and that has uncompensated care. Each hospital eligible for 
Medicare DSH payments will receive an additional payment based on its 
estimated share of the total amount of uncompensated care for all 
hospitals eligible for Medicare DSH payments. The uncompensated care 
payment methodology has redistributive effects based on the proportion 
of a hospital's amount of uncompensated care relative to the aggregate 
amount of uncompensated care of all hospitals eligible for Medicare DSH 
payments (Factor 3). The change to Medicare DSH payments under section 
3133 of the Affordable Care Act is not budget neutral.
    In this proposed rule, we are proposing to establish the amount to 
be distributed as uncompensated care payments (UCP) to DSH eligible 
hospitals, which is $6,712,960,093.94. This figure represents 75 
percent of the amount that otherwise would have been paid for Medicare 
DSH payment adjustments adjusted by a proposed Factor 2 of 65.71 
percent. For FY 2023, the amount available to be distributed for 
uncompensated care was $6,874,403,459.42 or 75 percent of the amount 
that otherwise would have been paid for Medicare DSH payment 
adjustments adjusted by a Factor 2 of 65.71 percent. In addition, 
eligible IHS/Tribal hospitals and hospitals located in Puerto Rico, are 
estimated to receive approximately $90.3 million in supplemental 
payments in FY 2024, as determined based on the difference between each 
hospital's FY 2022 UCP (reduced by negative 6.70 percent, which is the 
projected change between the proposed FY 2024 total uncompensated care 
payment amount and the total uncompensated care payment amount for FY 
2022) and its FY 2024 UCP as calculated using the methodology for FY 
2024. If this difference is less than or equal to zero, the hospital 
will not receive a supplemental payment. For this proposed rule, the 
total uncompensated care payments and supplemental payments equal 
approximately $6.803 billion. For FY 2024, we are using three years of 
data on uncompensated care costs from Worksheet S-10 of the FYs 2018, 
2019, and 2020 cost reports to calculate Factor 3 for all DSH-eligible 
hospitals, including IHS/Tribal hospitals and Puerto Rico hospitals. 
For a complete discussion regarding the methodology for calculating 
Factor 3 for FY 2024, we refer readers to section IV.E. of the preamble 
of this proposed rule. For a discussion regarding the methodology for 
calculating the supplemental payments, we refer readers to section 
IV.D. of the preamble of this proposed rule.
    To estimate the impact of the combined effect of the proposed 
changes in Factors 1 and 2, as well as the changes to the data used in 
determining Factor 3, on the calculation of Medicare uncompensated care 
payments along with changes to supplemental payments for IHS/Tribal 
hospitals and hospitals located in Puerto Rico, we compared total 
uncompensated care payments and supplemental payments estimated in the 
FY 2023 IPPS/LTCH PPS final rule to the combined total of the proposed 
uncompensated care payments and the proposed supplemental payments 
estimated in this FY 2024 IPPS/LTCH PPS proposed rule. For FY 2023, we 
calculated 75 percent of the estimated amount that would be paid as 
Medicare DSH payments absent section 3133 of the Affordable Care Act, 
adjusted by a Factor 2 of 65.71 percent and multiplied by a Factor 3 
calculated using the methodology described in the FY 2023 IPPS/LTCH PPS 
final rule. For FY 2024, we calculated 75 percent of the estimated 
amount that would be paid as Medicare DSH payments during FY 2024 
absent section 3133 of the Affordable Care Act, adjusted by a proposed 
Factor 2 of 65.71 percent and multiplied by a Factor 3 calculated using 
the methodology described previously. For this proposed rule, the 
supplemental payments for IHS/Tribal hospitals and Puerto Rico 
hospitals, are calculated as the difference between the hospital's 
adjusted base year amount (as determined based on the hospital's FY 
2022 uncompensated care payment) and the hospital's FY 2024 
uncompensated care payment.
    Our analysis included 2,395 hospitals that are projected to be 
eligible for DSH in FY 2024. It did not include hospitals that had 
terminated their participation in the Medicare program as of February 
3, 2023, Maryland hospitals, new hospitals, and SCHs that are expected 
to be paid based on their hospital-specific rates. The 26 hospitals 
that are anticipated to be participating in the Rural Community 
Hospital Demonstration Program were also excluded from this analysis, 
as participating hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments. In 
addition, the data from merged or acquired hospitals were combined 
under the surviving hospital's CMS certification number (CCN), and the 
non-surviving CCN was excluded from the analysis. The estimated impact 
of the proposed changes in Factors 1, 2, and 3 on uncompensated care 
payments and supplemental payments for eligible IHS/Tribal hospitals 
and Puerto Rico hospitals across all hospitals projected to be eligible 
for DSH payments in FY 2024, by hospital characteristic, is presented 
in the following table:
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    The changes in projected FY 2024 uncompensated care payments and 
supplemental payments compared to the total of uncompensated care 
payments and supplemental payments in FY 2023 are driven by a proposed 
decrease in Factor 1. The proposed Factor 1 has decreased from the FY 
2023 final rule's Factor 1 of $10.461 billion to this proposed rule's 
Factor 1 of $10.216 billion. The proposed Factor 2 is 65.71 percent, 
which is the same as the FY 2023 IPPS/LTCH PPS final rule's Factor 2. 
In addition, we note that there is a slight increase in the number of 
projected DSH eligible hospitals to 2,395 at the time of the 
development for this proposed rule compared to the projected 2,368 DSHs 
in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49472). Based on the 
proposed changes, the impact analysis found that, across all projected 
DSH eligible hospitals, proposed FY 2024 uncompensated care payments 
and proposed supplemental payments are estimated at approximately 
$6.803 billion, or a proposed decrease of approximately 2.40 percent 
from FY 2023 uncompensated care payments and supplemental payments 
(approximately $6.971 billion). While the proposed changes would result 
in a net decrease in the total amount available to be distributed in 
uncompensated care payments and supplemental payments, the projected 
payment decreases vary by hospital type. This redistribution of 
payments is caused by proposed changes in Factor 3 and the amount of 
the supplemental payment for DSH-eligible IHS/Tribal hospitals and 
Puerto Rico hospitals. As seen in the previous table, a percent change 
of less than negative 2.40 percent indicates that hospitals within the 
specified category are projected to experience a larger decrease in 
payments, on average, compared to the universe of projected FY 2024 DSH 
hospitals. Conversely, a percentage change greater than negative 2.40 
percent indicates that a hospital type is projected to have a smaller 
decrease or an increase compared to the overall average. The variation 
in the distribution of overall payments by hospital characteristic is 
largely dependent on a given hospital's uncompensated care costs as 
reported on the Worksheet S-10 and used in the

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Factor 3 computation and whether the hospital is eligible to receive 
the supplemental payment.
    Rural hospitals, in general, are projected to experience an 
increase in uncompensated care payments compared to the decrease their 
urban counterparts are projected to experience. Overall, rural 
hospitals are projected to receive a 1.17 percent increase in payments, 
while urban hospitals are projected to receive a 2.61 percent decrease 
in payments, which is a slightly larger decrease than the overall 
hospital average.
    By bed size, rural hospitals with 250+ beds are projected to 
receive a 7.34 percent payment increase, smaller rural hospitals with 
0-99 beds are projected to receive a 2.07 percent payment increase 
while rural hospitals with 100-249 beds are projected to receive a 
slightly larger than average decrease of 2.47 percent. Among urban 
hospitals, the largest urban hospitals, those with 250+ beds, are 
projected to receive a decrease in payments that is greater than the 
overall hospital average, at 2.97 percent. In contrast, smaller urban 
hospitals with 0-99 beds and urban hospitals with 100-249 beds are 
projected to receive a 0.76 and 1.76 percent decrease in payments, 
respectively.
    By region, rural hospitals are projected to receive a varied range 
of payment changes. Rural hospitals in the New England, East North 
Central, West North Central, Mountain, and Pacific regions are 
projected to receive larger than average decreases in payments. Rural 
hospitals in the Middle Atlantic, South Atlantic, East South Central, 
and West South Central regions are projected to receive increases in 
payments. Regionally, urban hospitals are projected to receive larger 
than average decreases in uncompensated care payments and supplemental 
payments in most regions. Urban hospitals in the Middle Atlantic, South 
Atlantic, East North Central, East South Central, West North Central, 
and Pacific regions, as well as hospitals located in Puerto Rico are 
projected to receive larger than average decreases in payments, while 
urban hospitals in the West South Central and Mountain regions are 
projected to receive smaller than average decreases in payments. Urban 
hospitals in New England are projected to receive an increase in 
payments.
    By payment classification, although hospitals in urban payment 
areas overall are expected to receive a 2.69 percent decrease in 
uncompensated care payments and supplemental payments, hospitals in 
large urban payment areas are projected to receive a decrease in 
payments of 2.60 percent. In contrast, hospitals in rural areas are 
projected to receive a decrease in payments of 2.00 percent.
    Teaching hospitals with fewer than 100 residents are projected to 
receive a larger than average payment decrease of 3.39 percent. 
Nonteaching hospitals and teaching hospitals with 100+ residents are 
projected to receive smaller than average payment decreases of 1.36 
percent and 2.20 percent respectively. Proprietary and government 
hospitals are projected to receive smaller than average decreases of 
1.10 and 2.24 percent respectively, while voluntary hospitals are 
expected to receive a larger than average payment decrease of 2.79 
percent. Hospitals with less than 25 percent Medicare utilization and 
hospitals with 25 to 50 percent Medicare utilization are projected to 
receive decreases of 3.03 and 1.70 percent, respectively, while 
hospitals with 50-65 percent and hospitals with greater than 65 percent 
Medicare utilization are projected to receive increases of 10.54 
percent and 1.88 percent, respectively. Hospitals with greater than 65 
percent Medicaid utilization are projected to receive increases in 
uncompensated care payments and supplemental payments of 0.21 percent. 
Hospitals with less than 25 percent Medicaid utilization and those with 
50-65 percent Medicaid utilization are projected to receive lower than 
average decreases in payments of 1.69 and 0.04 percent respectively, 
while hospitals with 25-50 percent Medicaid utilization are projected 
to receive a larger than average decrease of 3.71 percent.
    The impact table reflects the modeled FY 2024 uncompensated care 
payments and supplemental payments for IHS/Tribal and Puerto Rico 
hospitals. We note that the supplemental payments to IHS/Tribal 
hospitals and Puerto Rico hospitals are estimated to be approximately 
$90.3 million in FY 2024.
3. Effects of the Proposed Changes to Indirect Medical Education and 
Direct Graduate Medical Education Payments
    Under section V.G.2. of the preamble of this proposed rule, we are 
proposing to clarify policy on the Medicare cost report, CMS-Form-2552-
10, Worksheet E, Part A, line 20, with regard to the IME calculation. 
As described in existing Sec.  412.105(a)(1)(i), the numerator of the 
prior year resident-to bed ratio may be adjusted to reflect an increase 
in the current cost reporting period's resident-to-bed ratio due to 
residents in a Medicare GME affiliation agreement (among other limited 
reasons). We explain how to measure the net increase in FTEs in the 
``current year numerator'' as compared to the prior year's numerator 
when there is a Medicare GME affiliation agreement. We propose to 
clarify how to determine if the hospital increased its current year 
allowable FTE count, and to clarify that the phrase ``current year 
numerator'' on Worksheet E, Part A line 20 refers to line 15 from 
Worksheet E, Part A. See section II.F.2. of the preamble of this 
proposed rule for more details on this policy. An increase to one 
hospital's FTE cap is offset by a decrease to another hospital's FTE 
cap under the terms of a Medicare GME affiliation agreement. We 
estimate that there is no impact for this policy clarification, as 
there continues to be no net change in the overall number of FTEs under 
the combined caps of the hospitals participating in the affiliation 
agreement.
4. Effects of Proposed Changes for Reasonable Cost Payments for Nursing 
and Allied Health Programs
a. Waiver of Cap
    Under section V.H. of the preamble of this proposed rule, we 
propose to implement section 4143 of the CAA 2023 (enacted December 29, 
2022), called ``Waiver of Cap on Annual Payments for Nursing and Allied 
Health Education Payments,'' to state that for portions of cost 
reporting periods occurring in each of CYs 2010 through 2019, the $60 
million payment limit, or payment ``pool,'' shall not apply to the 
``total amount of additional payments for nursing and allied health 
education to be distributed to hospitals'' that, ``as of the date of 
enactment of this clause, are operating a school of nursing, a school 
of allied health, or a school of nursing and allied health.'' Section 
4143 of the CAA 2023 also provides that in not applying the $60 million 
limit ``for each of 2010 through 2019, the Secretary shall not take 
into account any increase in the total amount of such additional 
payment amounts for such nursing and allied health education for 
portions of cost reporting periods occurring in the year. . . .'' We 
have estimated that the impact of this provision for FY 2024 to be 
approximately $1.8 billion.
b. Training in New REH Facility Type
    As discussed in section V.G.3. of the preamble of this proposed 
rule, section 125 of Division CC of the Consolidated Appropriations 
Act, 2021 (CAA) added a new section 1861(kkk) of the Act to establish 
REHs as a new Medicare

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provider type, effective January 1, 2023. As part of the comments 
received in response to the CY 2023 OPPS proposed rule (87 FR 44502) 
and the proposed rule establishing REH CoPs (87 FR 40350), CMS received 
the request to designate REHs as graduate medical education (GME) 
eligible facilities similar to the GME designation for critical access 
hospitals (CAHs) (87 FR 72164).
    As we note in this proposed rule, given the flexibility provided 
under section 1861(e) of the Act and the fact that an REH is a facility 
primarily engaged in patient care (see the definition of ``nonprovider 
setting that is primarily engaged in furnishing patient care'' at 
section 1886(h)(5)(K) of the Act), we believe that similarly to CAHs, 
statutory flexibility also exists for REHs to be considered nonprovider 
settings for GME payment purposes. We believe that increasing access to 
physicians in rural areas can be supported by a flexible policy which 
would allow for residency training to continue at CAHs that convert to 
REHs and begin at other newly designated REHs, which may have not 
previously trained residents. Therefore, we are proposing that 
effective for portions of cost reporting periods beginning on or after 
October 1, 2023, an REH may be considered a nonprovider site and a 
hospital may include FTE residents training at an REH in its direct GME 
and IME FTE counts as long as it meets the nonprovider setting 
requirements included at 42 CFR 412.105(f)(1)(ii)(E) and 413.78(g) and 
any succeeding regulations. As an alternative to being considered a 
nonprovider site, we are proposing under the authority of section 
1886(k)(2)(D) of the Act, that REHs may decide to incur the costs of 
training residents in an approved residency training program(s) and 
receive payment at 100 percent of the reasonable costs for those 
training costs consistent with section 1861(v)(1)(A) of the Act. If a 
hospital converts to an REH, Medicare would continue paying for 
residency training occurring at the REH as long as the residents 
continue to train in an approved program. GME payments would be made 
either directly to the REH or to a hospital if the REH is functioning 
as a nonprovider setting consistent with the regulations at 42 CFR 
412.105(f)(1)(ii)(E) and 413.78(g) and any succeeding regulations. To 
the extent that a CAH that converts to an REH was receiving direct GME 
payments at 101 percent of reasonable costs, or a new REH would have 
received those payments had it become a CAH instead, we estimate the 
impact of this proposal to be negligible.
5. Effects of Requirements Under the Hospital Readmissions Reduction 
Program for FY 2024
    In section V.J. of the preamble of this proposed rule, we note that 
we are not proposing to add, modify, or remove any policies for the FY 
2024 Hospital Readmissions Reduction Program; the policies finalized in 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49081 through 49094) continue 
to apply. This program requires a reduction to a hospital's base 
operating DRG payment to account for excess readmissions of selected 
applicable conditions and procedures. Table I.G.-01 and the analysis in 
this proposed rule illustrate the estimated financial impact of the 
Hospital Readmissions Reduction Program payment adjustment methodology 
by hospital characteristic. Hospitals are sorted into quintiles based 
on the proportion of dual-eligible stays among Medicare fee-for-service 
(FFS) and managed care stays between July 1, 2018, and June 30, 2021 
(that is, the FY 2023 Hospital Readmissions Reduction Program's 
applicable period).\776\ Hospitals' excess readmission ratios (ERRs) 
are assessed relative to their peer group median and a neutrality 
modifier is applied in the payment adjustment factor calculation to 
maintain budget neutrality. In the FY 2024 IPPS/LTCH PPS final rule, we 
will provide an updated estimate of the financial impact using the 
proportion of dually-eligible beneficiaries, ERRs, and aggregate 
payments for each condition/procedure and all discharges for applicable 
hospitals from the FY 2024 Hospital Readmissions Reduction Program 
applicable period (that is, July 1, 2019, through June 30, 2022).
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    \776\ Although the FY 2023 performance period is July 1, 2018, 
through June 30, 2021, we note that first and second quarter data 
from CY 2020 is excluded from program calculations due to the 
nationwide ECE that was granted in response to the COVID-19 PHE. 
Taking into consideration the 30-day window to identify 
readmissions, the period for calculating DRG payments will be 
adjusted to July 1, 2018, through December 1, 2019, and July 1, 
2020, through June 30, 2021.
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    The results in Table I.G.-01 include 2,910 non-Maryland hospitals 
estimated as eligible to receive a penalty during the performance 
period. Hospitals are eligible to receive a penalty if they have 25 or 
more eligible discharges for at least one measure between July 1, 2018, 
and June 30, 2021. The second column in Table I.G.-01 indicates the 
total number of non-Maryland hospitals with available data for each 
characteristic that have an estimated payment adjustment factor less 
than 1 (that is, penalized hospitals).
    The third column in Table I.G.-01 indicates the percentage of 
penalized hospitals among those eligible to receive a penalty by 
hospital characteristic. For example, 80.79 percent of eligible 
hospitals characterized as non-teaching hospitals are expected to be 
penalized. Among teaching hospitals, 88.65 percent of eligible 
hospitals with fewer than 100 residents and 91.18 percent of eligible 
hospitals with 100 or more residents are expected to be penalized. The 
fourth column in Table I.G.-01 estimates the financial impact on 
hospitals by hospital characteristic. Table I.G.-01 shows the share of 
penalties as a percentage of all base operating DRG payments for 
hospitals with each characteristic. This is calculated as the sum of 
penalties for all hospitals with that characteristic over the sum of 
all base operating DRG payments for those hospitals between October 1, 
2020, through September 30, 2021 (FY 2021). For example, the penalty as 
a share of payments for non-teaching hospitals is 0.60 percent. This 
means that total penalties for all non-teaching hospitals are 0.60 
percent of total payments for non-teaching hospitals. Measuring the 
financial impact on hospitals as a percentage of total base operating 
DRG payments accounts for differences in the amount of base operating 
DRG payments for hospitals with the characteristic when comparing the 
financial impact of the program on different groups of hospitals.
    In the FY 2022 IPPS/LTCH PPS final rule, we finalized suppression 
of the CMS 30-Day Pneumonia Readmissions measure for the FY 2023 
program year (86 FR 45254 through 45256) due to significant impacts of 
the COVID-19 PHE on the measure. In the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49083 through 49086), we finalized that beginning with the 
FY 2024 program year, the Pneumonia Readmission measure will no longer 
be suppressed under the Hospital Readmissions Reduction Program and we 
will resume the use of the measure for FY 2024. Therefore, the CMS 30-
Day Pneumonia Readmission measure is included in the data in Table 
I.G.-01.

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6. Effects of Proposed Changes Under the Hospital Value-Based 
Purchasing (VBP) Program
a. Effects for the FY 2024 Program Year
    In section V.K. of the preamble of this proposed rule, we discuss 
the Hospital VBP Program under which the Secretary makes value-based 
incentive payments to hospitals based on their performance on measures 
during the performance period with respect to a fiscal year. These 
incentive payments will be funded for FY 2024 through a reduction to 
the FY 2024 base operating DRG payment amount for hospital discharges 
for such fiscal year, as required by section 1886(o)(7)(B) of the Act. 
The applicable percentage for FY 2024 and subsequent years is 2 
percent. The total amount available for value-based incentive payments 
must be equal to the total amount of reduced payments for all hospitals 
for the fiscal year, as estimated by the Secretary. In section V.K.1.b. 
of the preamble of this proposed rule, we estimate the available pool 
of funds for value-based incentive payments in the FY 2024 program 
year, which, in accordance with section 1886(o)(7)(C)(v) of the Act, 
will be 2.00 percent of base operating DRG payments, or a total of 
approximately $1.7 billion. This estimated available pool for FY 2024 
is based on the historical pool of hospitals that were eligible to 
participate in the FY 2023 program year and the payment information 
from the December 2022 update to the FY 2022 MedPAR file.
    The proposed estimated impacts of the FY 2024 program year by 
hospital characteristic, found in Table V.G.-05, are based on 
historical TPSs. We used the FY 2021 program year's TPSs to calculate 
the proxy adjustment factors used for this impact analysis. These are 
the most recently available scores that hospitals were given an 
opportunity to review and correct. The proxy adjustment factors use 
estimated annual base operating DRG payment amounts derived from the 
December 2022 update to the FY 2022 MedPAR file. The proxy adjustment 
factors can be found in Table 16 associated with this proposed rule 
(available via the internet on the CMS website).

[[Page 27275]]

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[[Page 27276]]


[GRAPHIC] [TIFF OMITTED] TP01MY23.364

    The actual FY 2024 program year's TPSs would not be reviewed and 
corrected by hospitals until after the FY 2024 IPPS/LTCH PPS final rule 
has been published. Therefore, the same historical universe of eligible 
hospitals and corresponding TPSs from the FY 2023 program year would be 
used for the updated impact analysis in the final rule, if the 
proposals, as previously described, for FY 2024 are not finalized.
b. Estimated Effects for the FY 2026 Program Year Applying Proposed 
Scoring Methodology Change
    The estimated effects of the proposed Health Equity Adjustment 
(HEA) bonus points include larger mean changes in payments for both 
hospitals that receive bonus payments and for those that incur 
penalties. In a simulated analysis of the impacts of HEA bonus points 
in the Hospital VBP Program using FY 2023 program year data, the 
average bonus payment with the HEA bonus points would be $3,724 and the 
average penalty would be -$4,246. Our analysis finds that the proposed 
HEA scoring option increases the number of hospitals gaining compared 
to the existing scoring methodology. ``Gaining'' means both those who 
are receiving a larger bonus and those who are receiving a smaller 
penalty under the proposed health equity scoring change than they would 
receive in the existing scoring methodology. Through these analyses, we 
found that the hospital-weighted average payment adjustment is positive 
even though the Program remains revenue neutral. The increase in the 
number of hospitals gaining occurs primarily among safety net hospitals 
compared to non-safety net. Additionally, the distribution of Total 
Performance Scores would be higher after the HEA bonus points are 
incorporated. These impacts are described further in section V.K.6.b. 
of the preamble of this proposed rule.
7. Effects of Requirements Under the HAC Reduction Program for FY 2024
    We are presenting the estimated impact of the FY 2024 Hospital-
Acquired Condition (HAC) Reduction Program on hospitals by hospital 
characteristic based on previously adopted policies for the program. In 
this proposed rule, we are not proposing to

[[Page 27277]]

add or remove any measures from the HAC Reduction Program, nor are we 
proposing any changes to reporting or submission requirements which 
would have any economic impact for the FY 2024 program year or future 
years. The table in this section presents the estimated proportion of 
hospitals in the worst-performing quartile of Total HAC Scores by 
hospital characteristic. Hospitals' CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) measure results are based on Medicare 
fee-for-service (FFS) discharges from July 1, 2019 through December 31, 
2019 and January 1, 2021 through June 30, 2021 and version 12.0 of the 
PSI software. Hospitals' measure results for Centers for Disease 
Control and Prevention (CDC) Central Line-Associated Bloodstream 
Infection (CLABSI), Catheter-Associated Urinary Tract Infection 
(CAUTI), Colon and Abdominal Hysterectomy Surgical Site Infection 
(SSI), Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia, 
and Clostridium difficile Infection (CDI) are derived from standardized 
infection ratios (SIRs) calculated with hospital surveillance data 
reported to the CDC's National Healthcare Safety Network (NHSN) for 
infections occurring between January 1, 2021 and December 31, 2021. To 
analyze the results by hospital characteristic, we used the FY 2023 
Final Rule Impact File. We do not believe the proposals to establish a 
reconsideration process for data validation as discussed in section 
V.L.6.a.(2) of the preamble of this proposed rule will result in any 
significant economic impacts because the reconsideration request form 
would not be filled out by hospitals on a regular basis and information 
collection requirements imposed subsequent to an administrative action 
are not subject to the PRA under 5 CFR 1320.4(a)(2) (75 FR 50411). This 
form is intended to be submitted by a hospital only in the event a 
hospital did not meet the HAC Reduction Program data validation 
requirement and seeks reconsideration from CMS on their data validation 
results for chart-abstracted measures. We anticipate receiving a small 
number of reconsideration requests annually as we expect very few, if 
any, hospitals selected for validation will not have their data 
successfully validated.
    This table includes 2,946 non-Maryland hospitals with a FY 2024 
Total HAC Score. Maryland hospitals and hospitals without a Total HAC 
Score are excluded from the table. The first column presents a 
breakdown of each characteristic and the second column indicates the 
number of hospitals for the respective characteristic.
    The third column in the table indicates the number of hospitals for 
each characteristic that would be in the worst-performing quartile of 
Total HAC Scores. These hospitals would receive a payment reduction 
under the FY 2024 HAC Reduction Program. For example, with regard to 
teaching status, 531 hospitals out of 1,756 hospitals characterized as 
non-teaching hospitals would be subject to a payment reduction. Among 
teaching hospitals, 152 out of 909 hospitals with fewer than 100 
residents and 46 out of 272 hospitals with 100 or more residents would 
be subject to a payment reduction.
    The fourth column in the table indicates the proportion of 
hospitals for each characteristic that would be in the worst performing 
quartile of Total HAC Scores and thus receive a payment reduction under 
the FY 2024 HAC Reduction Program. For example, 30.2 percent of the 
1,756 hospitals characterized as non-teaching hospitals, 16.7 percent 
of the 909 teaching hospitals with fewer than 100 residents, and 16.9 
percent of the 272 teaching hospitals with 100 or more residents would 
be subject to a payment reduction.

[[Page 27278]]

[GRAPHIC] [TIFF OMITTED] TP01MY23.365

BILLING CODE 4120-01-C
    In section V.L.6.a.(3) of the preamble of this proposed rule, we 
are proposing to update our targeting criteria for validation of 
hospitals granted an

[[Page 27279]]

extraordinary circumstances exception (ECE) in the HAC Reduction 
Program. Specifically, we are proposing to modify the validation 
targeting criteria to include any hospital with a two-tailed confidence 
interval that is less than 75 percent and received an ECE for one or 
more quarters beginning with the FY 2027 program year. We do not 
believe the proposal to modify targeting criteria will have any 
economic impact on the hospitals selected for validation, but will only 
increase the number of hospitals which are subject to being targeted 
for validation. Any increase would not exceed the total maximum number 
of hospitals that would be selected for targeted validation as 
previously finalized.
8. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2024
    In section V.K. of the preamble of this proposed rule for FY 2024, 
we discussed our budget neutrality methodology for section 410A of 
Public Law 108-173, as amended by sections 3123 and 10313 of Public Law 
111-148, by section 15003 of Public Law 114-255, and most recently, by 
section 128 of Public Law 116-260, which requires the Secretary to 
conduct a demonstration that would modify payments for inpatient 
services for up to 30 rural hospitals.
    Section 128 of Public Law 116-260 requires the Secretary to conduct 
the Rural Community Hospital Demonstration for a 15-year extension 
period (that is, for an additional 5 years beyond the previous 
extension period). In addition, the statute provides for continued 
participation for all hospitals participating in the demonstration 
program as of December 30, 2019.
    Section 410A(c)(2) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the Secretary 
shall ensure that the aggregate payments made by the Secretary do not 
exceed the amount which the Secretary would have paid if the 
demonstration program under this section was not implemented (budget 
neutrality). We propose to adopt the general methodology used in 
previous years, whereby we estimated the additional payments made by 
the program for each of the participating hospitals as a result of the 
demonstration, and then adjusted the national IPPS rates by an amount 
sufficient to account for the added costs of this demonstration. In 
other words, we have applied budget neutrality across the payment 
system as a whole rather than across the participants of this 
demonstration. The language of the statutory budget neutrality 
requirement permits the agency to implement the budget neutrality 
provision in this manner. The statutory language requires that 
aggregate payments made by the Secretary do not exceed the amount which 
the Secretary would have paid if the demonstration was not implemented, 
but does not identify the range across which aggregate payments must be 
held equal.
    For this proposed rule, the resulting amount applicable to FY 2024 
is $37,658,408, which we are proposing as the budget neutrality offset 
adjustment for FY 2024. This estimated amount is based on the specific 
assumptions regarding the data sources used, that is, recently 
available ``as submitted'' cost reports and historical and currently 
finalized update factors for cost and payment.
    In previous years, we have incorporated a second component into the 
budget neutrality offset amounts identified in the final IPPS rules. As 
finalized cost reports became available, we determined the amount by 
which the actual costs of the demonstration for an earlier, given year 
differed from the estimated costs for the demonstration set forth in 
the final IPPS rule for the corresponding fiscal year, and we 
incorporated that amount into the budget neutrality offset amount for 
the upcoming fiscal year. We have calculated this difference for FYs 
2005 through 2017 between the actual costs of the demonstration as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
    With the extension of the demonstration for another 5-year period, 
as authorized by section 128 of Public Law 116-260, we will continue 
this general procedure. At this time, for the FY 2024 proposed rule, 
not all of the finalized cost reports are available for the 29 
hospitals that completed cost report periods beginning in FY 2018 under 
the demonstration payment methodology. If all of these cost reports are 
available, we will include in the budget neutrality offset amount in 
the FY 2024 final rule the amount by which the actual costs of the 
demonstration, as determined from these cost reports, differed from the 
estimated costs identified in the FY 2018 final rule.
9. Effects of Continued Implementation of the Frontier Community Health 
Integration Project (FCHIP) Demonstration
    In section VII.B.2. of the preamble of this proposed rule we 
discuss the implementation of the FCHIP Demonstration, which allows 
eligible entities to develop and test new models for the delivery of 
health care services in eligible counties in order to improve access to 
and better integrate the delivery of acute care, extended care, and 
other health care services to Medicare beneficiaries in no more than 
four States. Section 123 of Public Law 110-275 initially required a 3-
year period of performance. The FCHIP Demonstration began on August 1, 
2016, and concluded on July 31, 2019 (referred to in this section as 
the ``initial period''). Section 129 of the Consolidated Appropriations 
Act (Pub. L. 116-159) extended the FCHIP Demonstration by 5 years 
(referred to in this section as the ``extension period'' of the 
demonstration). CAHs participating in the demonstration project during 
the extension period began such participation in their cost reporting 
year that began on or after January 1, 2022. Budget neutrality 
estimates for the demonstration described in the preamble of this 
proposed rule are based on the demonstration extension period.
    As described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), CMS waived certain Medicare rules for CAHs 
participating in the demonstration extension period to allow for 
alternative reasonable cost-based payment methods in the three distinct 
intervention service areas: telehealth services, ambulance services, 
and skilled nursing facility/nursing facility services. These waivers 
were implemented with the goal of increasing access to care with no net 
increase in costs. As we explained in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49144 through 49147), section 129 of Public Law 116-159 
stipulates that only the 10 CAHs that participated in the initial 
period of the FCHIP Demonstration are eligible to participate during 
the extension period. Among the eligible CAHs, five elected to 
participate in the extension period. The selected CAHs are located in 
two states--Montana and North Dakota--and are implementing the three 
intervention services.
    As explained in the FY 2023 IPPS/LTCH PPS final rule, we based our 
selection of CAHs for participation in the demonstration with the goal 
of maintaining the budget neutrality of the demonstration on its own 
terms meaning that the demonstration would produce savings from reduced 
transfers and admissions to other health care providers, offsetting any 
increase in Medicare payments as a result of the demonstration. 
However, because of the small size of the demonstration and uncertainty 
associated with the

[[Page 27280]]

projected Medicare utilization and costs, the policy we finalized for 
the demonstration extension period of performance in the FY 2023 IPPS/
LTCH PPS final rule provides a contingency plan to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 is 
met.
    In the FY 2023 IPPS/LTCH PPS final rule, we adopted the same budget 
neutrality policy contingency plan used during the demonstration 
initial period to ensure that the budget neutrality requirement in 
section 123 of Public Law 110-275 is met during the demonstration 
extension period. If analysis of claims data for Medicare beneficiaries 
receiving services at each of the participating CAHs, as well as from 
other data sources, including cost reports for the participating CAHs, 
shows that increases in Medicare payments under the demonstration 
during the 5-year extension period is not sufficiently offset by 
reductions elsewhere, we will recoup the additional expenditures 
attributable to the demonstration through a reduction in payments to 
all CAHs nationwide.
    As explained in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 
through 49147), because of the small scale of the demonstration, we 
indicated that we did not believe it would be feasible to implement 
budget neutrality for the demonstration extension period by reducing 
payments to only the participating CAHs. Therefore, in the event that 
this demonstration extension period is found to result in aggregate 
payments in excess of the amount that would have been paid if this 
demonstration extension period were not implemented, CMS policy is to 
comply with the budget neutrality requirement finalized in the FY 2023 
IPPS/LTCH PPS final rule, by reducing payments to all CAHs, not just 
those participating in the demonstration extension period.
    In the FY 2023 IPPS/LTCH PPS final rule, we stated that we believe 
it is appropriate to make any payment reductions across all CAHs 
because the FCHIP Demonstration was specifically designed to test 
innovations that affect delivery of services by the CAH provider 
category. As we explained in the FY 2023 IPPS/LTCH PPS final rule, we 
believe that the language of the statutory budget neutrality 
requirement at section 123(g)(1)(B) of Public Law 110-275 permits the 
agency to implement the budget neutrality provision in this manner. The 
statutory language merely refers to ensuring that aggregate payments 
made by the Secretary do not exceed the amount which the Secretary 
estimates would have been paid if the demonstration project was not 
implemented, and does not identify the range across which aggregate 
payments must be held equal.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), CMS concluded that the initial period of the FCHIP 
Demonstration had satisfied the budget neutrality requirement described 
in section 123(g)(1)(B) of Public Law 110-275. Therefore, CMS did not 
apply a budget neutrality payment offset policy for the initial period 
of the demonstration. As explained in the FY 2022 IPPS/LTCH PPS final 
rule, we finalized a policy to address the demonstration budget 
neutrality methodology and analytical approach for the initial period 
of the demonstration. As stated in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49144 through 49147), our policy for implementing the 5-year 
extension period for section 129 of Public Law 116-260 follows same 
budget neutrality methodology and analytical approach as the 
demonstration initial period methodology. While we expect to use the 
same methodology that was used to assess the budget neutrality of the 
FCHIP Demonstration during initial period of the demonstration to 
assess the financial impact of the demonstration during this extension 
period, upon receiving data for the extension period, we may update 
and/or modify the FCHIP budget neutrality methodology and analytical 
approach to ensure that the full impact of the demonstration is 
appropriately captured. Therefore, we are not proposing to apply a 
budget neutrality payment offset to payments to CAHs in FY 2024. This 
policy will have no impact for any national payment system for FY 2024.
10. Effects of Proposed Changes for Rural Emergency Hospitals
    Section X.A. of the preamble of this proposed rule would address 
the special requirements for REHs that would require an eligible 
facility (a CAH or a small rural hospital with not more than 50 beds) 
to submit additional information that must include an action plan 
containing four specific elements when the facility submits an 
application for enrollment as an REH. An eligible facility that submits 
an application for enrollment as an REH under section 1866(j) of the 
Act must also submit additional information as specified in this 
proposed rule. In accordance with section 1861(kkk)(4)(A)(i) through 
(iv) of the Act, we specifically propose to require an eligible 
facility to submit additional information that must include an action 
plan containing: (1) a plan for initiating REH services (as those 
services are defined in 42 CFR 485.502, and which must include the 
provision of emergency department services and observation care); (2) a 
detailed transition plan that lists the specific services that the 
provider will retain, modify, add, and discontinue as an REH; (3) a 
detailed description of other outpatient medical and health services 
that it intends to furnish on an outpatient basis as an REH; and (4) 
information regarding how the provider intends to use the additional 
facility payment provided under section 1834(x)(2) of the Act, 
including a description of the services that the additional facility 
payment would be supporting, such as the operation and maintenance of 
the facility and the furnishing of covered services (for example, 
telehealth services and ambulance services).
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other healthcare 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of less than $8.0 million to $41.5 million in any 
1 year. Individuals and states are not included in the definition of a 
small entity. We estimate that almost all of the new REH facilities are 
or would be small entities on the basis of legal status, revenues, or 
both. The North American Industry Classification System Code for the 
converting hospitals is 622110 (General Medical and Surgical 
Hospitals), and for the REHs to which they convert the closest Code is 
621493 (Freestanding Ambulatory Surgical and Emergency Centers). HHS 
uses an increase in costs or decrease in revenues of more than 3 
percent as its threshold for ``significant economic impact''. Our 
collection of information estimate is that the 68 facilities converting 
to REH status would face a one-time cost of about $460 each (68 x 460 = 
$31,280 (COI burden estimate)). The North Carolina Rural Health 
Research Program estimated that the 68 hospitals it thought most likely 
to convert to REH status had average patient revenues of $7.3 
million.\777\ For these facilities, the 3 percent threshold would be 
about $219,000, nearly 500 times our

[[Page 27281]]

estimated cost of information collection. These relationships between 
revenues and costs would not be substantially different if the number 
of conversions was substantially fewer or substantially greater in 
number. More importantly, these facilities would be converting 
voluntarily to the new program. We expect that the costs any facility 
faces would be less than the anticipated gains of conversion, or it 
would not convert. For these reasons, an Initial Regulatory Flexibility 
Analysis is not required for the proposed Special Requirements for 
REHs.
---------------------------------------------------------------------------

    \777\ ``How Many Hospitals Might Convert to a Rural Emergency 
Hospital (REH)?'' July 2021. Pink, GH et al. Findings Brief--NC 
Rural Health Research Program.
---------------------------------------------------------------------------

11. Effects of Proposed Changes for Physician-Owned Hospitals
    The physician-owned hospital provisions are discussed in section 
X.B. of the preamble of this proposed rule. Section X.B.2.a. of the 
preamble of this proposed rule describes our proposals to revise the 
regulations to clarify that CMS will only consider expansion exception 
requests from eligible hospitals, clarify the data and information that 
must be included in an expansion exception request, identify factors 
that CMS will consider when making a decision on an expansion exception 
request, and revise certain aspects of the process for requesting an 
expansion exception. We expect that our proposed clarifications and 
technical revisions along with the proposed factors we will consider 
when making a decision on an expansion exception request would increase 
transparency, allow for greater community input, ensure that approval 
of a request to expand a hospital's facility capacity occurs only in 
appropriate circumstances, and facilitate compliance with the process 
for requesting an expansion exception. We anticipate that requiring the 
use of HCRIS data for all comparison calculations would have little 
practical impact on whether a requesting hospital meets the criteria 
for an applicable hospital or high Medicaid facility, nor would a 
requesting hospital be prejudiced by this requirement.
    Section X.B.2.b. of the preamble of this proposed rule describes 
our proposal to reinstate, with respect to high Medicaid facilities, 
the program integrity restrictions on the frequency of expansion 
exception requests, maximum aggregate expansion of a hospital, and 
location of expansion capacity that were removed in the CY 2021 OPPS/
ASC final rule. We believe that not applying these program integrity 
restrictions poses a significant risk of program or patient abuse that 
must be addressed despite any potential perceived burden on high 
Medicaid facilities. We anticipate that treating both applicable and 
high Medicaid hospitals the same will create consistency and protect 
the Medicare program and its beneficiaries, as well as Medicaid 
beneficiaries, uninsured patients, and other underserved populations, 
from harms such as overutilization, patient steering, cherry-picking, 
and lemon-dropping.

H. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As discussed in section II.A.4. of the Addendum to this proposed 
rule, consistent with our proposed use of the PSF, there were 96 
children's hospitals, 11 cancer hospitals, 6 short term-acute care 
hospitals located in the Virgin Islands, Guam, the Northern Mariana 
Islands and American Samoa, 1 extended neoplastic disease care 
hospital, and 10 RNHCIs being paid on a reasonable cost basis subject 
to the rate-of-increase ceiling under Sec.  413.40. (In accordance with 
Sec.  403.752(a) of the regulation, RNHCIs are paid under Sec.  
413.40.) Among the remaining providers, the rehabilitation hospitals 
and units, and the LTCHs, are paid the Federal prospective per 
discharge rate under the IRF PPS and the LTCH PPS, respectively, and 
the psychiatric hospitals and units are paid the Federal per diem 
amount under the IPF PPS. As stated previously, IRFs and IPFs are not 
affected by the proposed rate updates discussed in this proposed rule. 
The impacts of the proposed changes on LTCHs are discussed in section 
I.J. of this Appendix.
    For the children's hospitals, cancer hospitals, short-term acute 
care hospitals located in the Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa, the extended neoplastic disease 
care hospital, and RNHCIs, the proposed update of the rate-of-increase 
limit (or target amount) is the estimated FY 2024 percentage increase 
in the 2018-based IPPS operating market basket, consistent with section 
1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  403.752(a) and 413.40 of 
the regulations. Consistent with current law, based on IGI's fourth 
quarter 2022 forecast of the 2018-based IPPS market basket increase, we 
are estimating the proposed FY 2024 update to be 3.0 percent (that is, 
the estimate of the market basket rate-of-increase), as discussed in 
section V.A. of the preamble of this proposed rule. We are proposing 
that if more recent data become available for the final rule, we would 
use such data, if appropriate, to calculate the final IPPS operating 
market basket update for FY 2024. The Affordable Care Act requires a 
productivity adjustment (proposed 0.2 percentage point reduction for FY 
2024), resulting in a proposed 2.8 percent applicable percentage 
increase for IPPS hospitals that submit quality data and are meaningful 
EHR users, as discussed in section V.A. of the preamble of this 
proposed rule. Children's hospitals, cancer hospitals, short term acute 
care hospitals located in the Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa, the extended neoplastic disease 
care hospital, and RNHCIs that continue to be paid based on reasonable 
costs subject to rate-of-increase limits under Sec.  413.40 of the 
regulations are not subject to the reductions in the applicable 
percentage increase required under the Affordable Care Act. Therefore, 
for those hospitals paid under Sec.  413.40 of the regulations, the 
proposed update is the percentage increase in the 2018-based IPPS 
operating market basket for FY 2024, estimated at 3.0 percent.
    The impact of the proposed update in the rate-of-increase limit on 
those excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base period. 
For excluded hospitals that have maintained their cost increases at a 
level below the rate-of-increase limits since their base period, the 
major effect is on the level of incentive payments these excluded 
hospitals receive. Conversely, for excluded hospitals with cost 
increases above the cumulative update in their rate-of-increase limits, 
the major effect is the amount of excess costs that would not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital that 
continues to be paid under the TEFRA system and whose costs exceed 110 
percent of its rate-of-increase limit receives its rate-of-increase 
limit plus the lesser of: (1) 50 percent of its reasonable costs in 
excess of 110 percent of the limit; or (2) 10 percent of its limit. In 
addition, under the various provisions set forth in Sec.  413.40, 
hospitals can obtain payment adjustments for justifiable increases in 
operating costs that exceed the limit.

I. Effects of Changes in the Capital IPPS

1. General Considerations
    For the impact analysis presented in this section of this proposed 
rule, we used data from the December 2022 update of the FY 2022 MedPAR 
file and the December 2022 update of the Provider-Specific File (PSF) 
that was used for payment purposes. Although the analyses of the 
proposed changes to the capital prospective payment system do not 
incorporate cost data, we used

[[Page 27282]]

the December 2022 update of the most recently available hospital cost 
report data to categorize hospitals. Our analysis has several 
qualifications and uses the best data available, as described later in 
this section of this proposed rule.
    Due to the interdependent nature of the IPPS, it is very difficult 
to precisely quantify the impact associated with each proposed change. 
In addition, we draw upon various sources for the data used to 
categorize hospitals in the tables. In some cases (for instance, the 
number of beds), there is a fair degree of variation in the data from 
different sources. We have attempted to construct these variables with 
the best available sources overall. However, it is possible that some 
individual hospitals are placed in the wrong category.
    Using cases from the December 2022 update of the FY 2022 MedPAR 
file, we simulated payments under the capital IPPS for FY 2023 and the 
proposed payments for FY 2024 for a comparison of total payments per 
case. Short-term, acute care hospitals not paid under the general IPPS 
(for example, hospitals in Maryland) are excluded from the simulations. 
The methodology for determining a capital IPPS payment is set forth at 
Sec.  412.312. The basic methodology for calculating the capital IPPS 
payments in FY 2024 is as follows: (Standard Federal rate) x (DRG 
weight) x (GAF) x (COLA for hospitals located in Alaska and Hawaii) x 
(1 + DSH adjustment factor + IME adjustment factor, if applicable).
    In addition to the other adjustments, hospitals may receive outlier 
payments for those cases that qualify under the threshold established 
for each fiscal year. We modeled payments for each hospital by 
multiplying the capital Federal rate by the geographic adjustment 
factor (GAF) and the hospital's case-mix. Then we added estimated 
payments for indirect medical education, disproportionate share, and 
outliers, if applicable. For purposes of this impact analysis, the 
model includes the following assumptions:
     The capital Federal rate was updated, beginning in FY 
1996, by an analytical framework that considers changes in the prices 
associated with capital-related costs and adjustments to account for 
forecast error, changes in the case-mix index, allowable changes in 
intensity, and other factors. As discussed in section III.A.1. of the 
Addendum to this proposed rule, the proposed update to the capital 
Federal rate is 3.5 percent for FY 2024.
     In addition to the proposed FY 2024 update factor, the 
proposed FY 2024 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality adjustment factor of 0.9992, a 
proposed budget neutrality factor for the proposed continuation of the 
lowest quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases policy of 0.9934, and a proposed outlier 
adjustment factor of 0.9584.
2. Results
    We used the payment simulation model previously described in 
section I.I. of Appendix A of this proposed rule to estimate the 
potential impact of the proposed changes for FY 2024 on total capital 
payments per case, using a universe of 3,130 hospitals. As previously 
described, the individual hospital payment parameters are taken from 
the best available data, including the December 2022 update of the FY 
2022 MedPAR file, the December 2022 update to the PSF, and the most 
recent available cost report data from the December 2022 update of the 
FY 2021 HCRIS. In Table III, we present a comparison of estimated total 
payments per case for FY 2023 and estimated proposed total payments per 
case for FY 2024 based on the proposed FY 2024 payment policies. Column 
2 shows estimates of payments per case under our model for FY 2023. 
Column 3 shows estimates of proposed payments per case under our model 
for FY 2024. Column 4 shows the total proposed percentage change in 
payments from FY 2023 to FY 2024. The change represented in Column 4 
includes the proposed 3.50 percent update to the capital Federal rate 
and other proposed changes in the adjustments to the capital Federal 
rate. The comparisons are provided by: (1) geographic location; (2) 
region; and (3) payment classification.
    The simulation results show that, on average, capital payments per 
case in FY 2024 are expected to increase 6.3 percent compared to 
capital payments per case in FY 2023. This expected increase is 
primarily due to the 3.50 percent update to the capital Federal rate 
and an estimated increase in capital DSH payments. As discussed in 
section VI.D of the preamble to this proposed rule, we are proposing 
that beginning in FY 2024, hospitals reclassified as rural under Sec.  
412.103 will no longer be considered rural for purposes of determining 
eligibility for capital DSH payments. As such, under this proposal, 
geographically urban hospitals with 100 or more beds reclassified as 
rural under Sec.  412.103 would be eligible for capital DSH payments 
beginning in FY 2024. The CMS' Office of the Actuary estimates this 
proposed change in policy would increase capital payments $170 million 
in FY 2024.
    In general, regional variations in estimated capital payments per 
case in FY 2024 as compared to capital payments per case in FY 2023 are 
primarily due to the proposed changes in GAFs, and are generally 
consistent with the projected changes in payments due to proposed 
changes in the wage index (and proposed policies affecting the wage 
index), as shown in Table I in section I.F. of Appendix A of this 
proposed rule. We note that the proposed FY 2024 GAFs reflect the 
proposed changes to the rural wage index methodology. As discussed in 
section III.G.1. of the preamble to this proposed rule, beginning in FY 
2024, we are proposing to include hospitals with Sec.  412.103 
reclassification along with geographically rural hospitals in all rural 
wage index calculations, and to only exclude ``dual reclass'' hospitals 
(hospitals with simultaneous Sec.  412.103 and MGCRB reclassifications) 
when implicated by the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act. We are also proposing to include the data 
of all Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) in the calculation of the rural floor and 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.
    The net impact of these changes is an estimated 6.3 percent 
increase in capital payments per case from FY 2023 to FY 2024 for all 
hospitals (as shown in Table III).
    The geographic comparison shows that, on average, hospitals in both 
urban and rural classifications would experience an increase in capital 
IPPS payments per case in FY 2024 as compared to FY 2023. Capital IPPS 
payments per case would increase by an estimated 6.3 percent for 
hospitals in urban areas while payments to hospitals in rural areas 
would increase by 5.9 percent in FY 2023 to FY 2024.
    The comparisons by region show that the change in capital payments 
per case from FY 2023 to FY 2024 for urban areas range from a 3.3 
percent increase for the Mountain region to a 9.7 percent increase for 
the Pacific region. Meanwhile, the change in capital payments per case 
from FY 2023 to FY 2024 for rural areas range from a 2.0 percent 
increase for the Mountain rural region to a 16.8 percent increase for 
the Middle Atlantic region. These regional differences are primarily 
due to the proposed changes in the GAFs, which reflect the proposed 
changes to the rural wage index methodology, and estimated

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changes in capital DSH payments. We note that the proposed changes to 
the rural wage index methodology are significantly contributing to the 
larger than average increase in capital payments per case for the rural 
Middle Atlantic region. The comparison by hospital type of ownership 
(Voluntary, Proprietary, and Government) shows that voluntary and 
government hospitals are expected to experience the highest increase in 
capital payments per case from FY 2023 to FY 2024 of 6.4 percent. 
Meanwhile, proprietary hospitals are expected to experience an increase 
in capital payments per case from FY 2023 to FY 2024 of 5.3 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals may 
apply for reclassification for purposes of the wage index for FY 2024. 
Reclassification for wage index purposes also affects the GAFs because 
that factor is constructed from the hospital wage index. To present the 
effects of the hospitals being reclassified as of the publication of 
this proposed rule for FY 2024, we show the proposed average capital 
payments per case for reclassified hospitals for FY 2024. Urban 
reclassified hospitals are expected to experience an increase in 
capital payments of 7.8 percent; urban nonreclassified hospitals are 
expected to experience an increase in capital payments of 4.4 percent. 
The higher expected increase in payments for urban reclassified 
hospitals compared to urban nonreclassified hospitals is primarily due 
to an estimated increase in capital DSH payments to urban reclassified 
hospitals. As discussed previously, we are proposing a change to our 
capital DSH policy under which geographically urban hospitals with 100 
or more beds reclassified as rural under Sec.  412.103 would be 
eligible for capital DSH payments beginning in FY 2024. Rural 
reclassified hospitals are expected to experience an increase in 
capital payments of 5.7 percent; rural nonreclassified hospitals are 
expected to experience an increase in capital payments of 6.2 percent.
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J. Effects of Proposed Payment Rate Changes and Policy Changes Under 
the LTCH PPS

1. Introduction and General Considerations
    In section VII. of the preamble of this proposed rule and section 
V. of the Addendum to this proposed rule, we set forth the proposed 
annual update to the payment rates for the LTCH PPS for FY 2024. In the 
preamble of this proposed rule, we specify the statutory authority for 
the proposals that are presented, identify the proposed policies for FY 
2024, and present rationales for our proposals as well as alternatives 
that were considered. In this section of Appendix A to this proposed 
rule, we discuss the impact of the proposed changes to the payment 
rate, factors, and other payment rate policies related to the LTCH PPS 
that are presented in the preamble of this proposed rule in terms of 
their estimated fiscal impact on the Medicare budget and on LTCHs.
    There are 333 LTCHs included in this impact analysis. We note that, 
although there are currently approximately 341 LTCHs, for purposes of 
this impact analysis, we excluded the data of all-inclusive rate 
providers consistent with the development of the FY 2024 MS-LTC-DRG 
relative weights (discussed in section VII.B.3. of the preamble of this 
proposed rule). We have also excluded data for CCN 312024 from this 
impact analysis due to their abnormal charging practices. We note this 
is consistent with our proposals to remove this LTCH from the 
calculation of the FY 2024 MS-LTC-DRG relative weights, the area wage 
level adjustment budget neutrality factor, and the fixed-loss amount 
for LTCH PPS standard Federal payment rate cases (discussed in section 
VII.B.3. of the preamble of this proposed rule). Moreover, in the 
claims data used for this proposed rule, one of these 333 LTCHs only 
have claims for site neutral payment rate cases and, therefore, do not 
affect our impact analysis for LTCH PPS standard Federal payment rate 
cases.
    In the impact analysis, we used the proposed payment rate, factors, 
and policies presented in this proposed rule, the proposed 2.9 percent 
annual update to the LTCH PPS standard Federal payment rate, the 
proposed update to the MS-LTC-DRG classifications and relative weights, 
the proposed update to the wage index values and labor-related share, 
and the best available claims and CCR data to estimate the change in 
payments for FY 2024.
    Under the dual rate LTCH PPS payment structure, payment for LTCH 
discharges that meet the criteria for exclusion from the site neutral 
payment rate (that is, LTCH PPS standard Federal payment rate cases) is 
based on the LTCH PPS standard Federal payment rate. Consistent with 
the statute, the site neutral payment rate is the lower of the IPPS 
comparable per diem amount as determined under Sec.  412.529(d)(4), 
including any applicable outlier payments as specified in Sec.  
412.525(a), reduced by 4.6 percent for FYs 2018 through 2026; or 100 
percent of the estimated cost of the case as determined under Sec.  
412.529(d)(2). In addition, there are two separate high cost outlier 
targets--one for LTCH PPS standard Federal payment rate cases and one 
for site neutral payment rate cases. We note that section 3711(b)(2) of 
the CARES Act has provided a waiver of the application of the site 
neutral payment rate for LTCH cases admitted during the COVID-19 PHE 
period. At the time of development of this proposed rule, the COVID-19 
PHE is set to expire on May 11, 2023. As a result, all FY 2023 cases 
with admission dates on or before the PHE expiration date will be paid 
the LTCH PPS standard Federal rate regardless of whether the discharge 
met the statutory patient criteria. However, all FY 2023 and FY 2024 
cases with admission dates after the PHE expiration date (that is, 
admissions occurring on or after May 12, 2023) that do not meet the 
criteria for exclusion from the site neutral payment rate will be paid 
the site neutral payment rate determined under Sec.  412.522(c). For 
purposes of this impact analysis, estimates of total LTCH PPS payments 
for site neutral payment rate cases in FYs 2023 and 2024 were 
calculated using the site neutral payment rate determined under Sec.  
412.522(c) for all cases and the provisions of the CARES Act were not 
considered.
    Based on the best available data for the 333 LTCHs in our database 
that were considered in the analyses used for this proposed rule, we 
estimate that overall LTCH PPS payments in FY 2024 would decrease by 
approximately 0.9 percent (or approximately $24 million) based on the 
proposed rates and factors presented in section VII. of the preamble 
and section V. of the Addendum to this proposed rule.
    Based on the FY 2022 LTCH cases that were used for the analysis in 
this proposed rule, approximately 32 percent of those cases were 
classified as site neutral payment rate cases (that is, 32 percent of 
LTCH cases would not meet the statutory patient-level criteria for 
exclusion from the site neutral payment rate). Our Office of the 
Actuary currently estimates that the percent of LTCH PPS cases that 
will be classified as site neutral payment rate cases in FY 2024 will 
not change significantly from the most recent historical data. We 
estimate IPPS comparable per diem amounts using the prior year's IPPS 
rates and factors, updated to reflect estimated changes to the IPPS 
rates and payments proposed for FY 2024. Taking this into account along 
with other changes that would apply to the site neutral payment rate 
cases in FY 2024, we estimate that aggregate LTCH PPS payments for 
these site neutral payment rate cases would increase by approximately 
10.8 percent (or approximately $35 million). This projected increase in 
payments to LTCH PPS site neutral payment rate cases is primarily due 
to the proposed updates to the IPPS rates and payments reflected in our 
estimate of the IPPS comparable per diem amount, as well as an 
estimated increase in costs for these cases determined using the charge 
and CCR adjustment factors described in section V.D.3.b. of the 
Addendum to this proposed rule. We note that we estimate payments to 
site neutral payment rate cases in FY 2024 will represent approximately 
14 percent of estimated aggregate FY 2024 LTCH PPS payments.
    Based on the FY 2022 LTCH cases that were used for the analysis in 
this proposed rule, approximately 68 percent of LTCH cases will meet 
the patient-level criteria for exclusion from the site neutral payment 
rate in FY 2024, and will be paid based on the LTCH PPS standard 
Federal payment rate for the full year. We estimate that total LTCH PPS 
payments for these LTCH PPS standard Federal payment rate cases in FY 
2024 will decrease approximately 2.5 percent (or approximately $59 
million). This estimated decrease in LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases in FY 2024 is primarily due to the 
projected 4.7 percent decrease in high cost outlier payments as a 
percentage of total LTCH PPS standard Federal payment rate payments, 
which is discussed later in this section of the proposed rule.
    Based on the 333 LTCHs that were represented in the FY 2022 LTCH 
cases that were used for the analyses in this proposed rule presented 
in this Appendix, we estimate that aggregate FY 2023 LTCH PPS payments 
will be approximately $2.645 billion, as compared to estimated 
aggregate FY 2024 LTCH PPS payments of approximately $2.622 billion, 
resulting in an estimated overall decrease in LTCH PPS payments of 
approximately $24 million. We note that the estimated $24 million 
decrease in LTCH PPS

[[Page 27286]]

payments in FY 2024 does not reflect changes in LTCH admissions or 
case-mix intensity, which will also affect the overall payment effects 
of the proposed policies in this proposed rule.
    The LTCH PPS standard Federal payment rate for FY 2023 is 
$46,432.77. For FY 2024, we are proposing to establish an LTCH PPS 
standard Federal payment rate of $47,948.15 which reflects the proposed 
2.9 percent annual update to the LTCH PPS standard Federal payment rate 
and the budget neutrality factor for updates to the area wage level 
adjustment of 1.0035335 (discussed in section V.B.6. of the Addendum to 
this proposed rule). For LTCHs that fail to submit data for the LTCH 
QRP, in accordance with section 1886(m)(5)(C) of the Act, we are 
proposing to establish an LTCH PPS standard Federal payment rate of 
$47,016.21. This proposed LTCH PPS standard Federal payment rate 
reflects the updates and factors previously described, as well as the 
required 2.0 percentage point reduction to the annual update for 
failure to submit data under the LTCH QRP.
    Table IV shows the estimated impact for LTCH PPS standard Federal 
payment rate cases. The estimated change attributable solely to the 
proposed annual update of 2.9 percent to the LTCH PPS standard Federal 
payment rate is projected to result in an increase of 2.8 percent in 
payments per discharge for LTCH PPS standard Federal payment rate cases 
from FY 2023 to FY 2024, on average, for all LTCHs (Column 6). The 
estimated increase of 2.8 percent shown in Column 6 of Table IV also 
includes estimated payments for short-stay outlier (SSO) cases, a 
portion of which are not affected by the annual update to the LTCH PPS 
standard Federal payment rate, as well as the reduction that is applied 
to the annual update for LTCHs that do not submit the required LTCH QRP 
data. For most hospital categories, the projected increase in payments 
based on the LTCH PPS standard Federal payment rate to LTCH PPS 
standard Federal payment rate cases also rounds to approximately 2.8 
percent.
    For FY 2024, we are proposing to update the wage index values based 
on the most recent available data (data from cost reporting periods 
beginning during FY 2020 which is the same data used for the FY 2024 
IPPS wage index). In addition, we are proposing to establish a labor-
related share of 68.4 percent for FY 2024, based on the most recent 
available data (IGI's fourth quarter 2022 forecast) of the relative 
importance of the labor-related share of operating and capital costs of 
the 2017-based LTCH market basket. We also are proposing to apply an 
area wage level budget neutrality factor of 1.0035335 to ensure that 
the proposed changes to the area wage level adjustment would not result 
in any change in estimated aggregate LTCH PPS payments to LTCH PPS 
standard Federal payment rate cases.
    For LTCH PPS standard Federal payment rate cases, we currently 
estimate high cost outlier payments as a percentage of total LTCH PPS 
standard Federal payment rate payments will decrease from FY 2023 to FY 
2024. Based on the FY 2022 LTCH cases that were used for the analyses 
in this proposed rule, we estimate that the FY 2023 high cost outlier 
threshold of $38,518 (as established in the FY 2023 IPPS/LTCH PPS final 
rule) will result in estimated high cost outlier payments for LTCH PPS 
standard Federal payment rate cases in FY 2023 that are projected to 
exceed the 7.975 percent target. Specifically, we currently estimate 
that high cost outlier payments for LTCH PPS standard Federal payment 
rate cases will be approximately 12.7 percent of the estimated total 
LTCH PPS standard Federal payment rate payments in FY 2023. Combined 
with our estimate that FY 2024 high cost outlier payments for LTCH PPS 
standard Federal payment rate cases will be 7.975 percent of estimated 
total LTCH PPS standard Federal payment rate payments in FY 2024, this 
will result in an estimated decrease in high cost outlier payments as a 
percentage of total LTCH PPS standard Federal payment rate payments of 
approximately 4.7 percent between FY 2023 and FY 2024. We note that, in 
calculating these estimated high cost outlier payments, we inflated 
charges reported on the FY 2022 claims by the charge inflation factor 
in section V.D.3.b. of the Addendum to this proposed rule. We also note 
that, in calculating these estimated high cost outlier payments, we 
estimated the cost of each case by multiplying the inflated charges by 
the adjusted CCRs that we determined using our proposed methodology 
described in section V.D.3.b. of the Addendum to this proposed rule. We 
lastly note, as discussed in section V.D.3.b. of the Addendum to this 
proposed rule, we are soliciting comments on our proposed methodology 
for determining the fixed-loss amount for FY 2024 and will consider 
these comments when finalizing our methodology in the final rule.
    Table IV shows the estimated impact of the payment rate and policy 
changes on LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases for FY 2024 by comparing estimated FY 2023 LTCH PPS payments to 
estimated FY 2024 LTCH PPS payments. (As noted earlier, our analysis 
does not reflect changes in LTCH admissions or case-mix intensity.) We 
note that these impacts do not include LTCH PPS site neutral payment 
rate cases as discussed in section I.J.3. of this Appendix.
    As we discuss in detail throughout this proposed rule, based on the 
best available data, we believe that the provisions of this proposed 
rule relating to the LTCH PPS, which are projected to result in an 
overall decrease in estimated aggregate LTCH PPS payments, and the 
resulting LTCH PPS payment amounts will result in appropriate Medicare 
payments that are consistent with the statute.
2. Impact on Rural Hospitals
    For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an urban area and has 
fewer than 100 beds. As shown in Table IV, we are projecting a 1.5 
percent decrease in estimated payments for LTCH PPS standard Federal 
payment rate cases for LTCHs located in a rural area, primarily due to 
a projected decrease in high cost outlier payments. This estimated 
impact is based on the FY 2022 data for the 18 rural LTCHs (out of 333 
LTCHs) that were used for the impact analyses shown in Table IV.
3. Anticipated Effects of the Proposed LTCH PPS Payment Rate Changes 
and Policy Changes
a. Proposed Budgetary Impact
    Section 123(a)(1) of the BBRA requires that the PPS developed for 
LTCHs ``maintain budget neutrality.'' We believe that the statute's 
mandate for budget neutrality applies only to the first year of the 
implementation of the LTCH PPS (that is, FY 2003). Therefore, in 
calculating the FY 2003 standard Federal payment rate under Sec.  
412.523(d)(2), we set total estimated payments for FY 2003 under the 
LTCH PPS so that estimated aggregate payments under the LTCH PPS were 
estimated to equal the amount that would have been paid if the LTCH PPS 
had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH PPS 
payment structure with two distinct payment rates for LTCH discharges 
beginning in FY 2016. Under this statutory change, LTCH discharges that 
meet the patient-level criteria for exclusion from the site neutral 
payment rate (that is, LTCH PPS standard Federal payment rate cases) 
are paid based on

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the LTCH PPS standard Federal payment rate. LTCH discharges paid at the 
site neutral payment rate are generally paid the lower of the IPPS 
comparable per diem amount, reduced by 4.6 percent for FYs 2018 through 
2026, including any applicable high cost outlier (HCO) payments, or 100 
percent of the estimated cost of the case, reduced by 4.6 percent.
    As discussed in section I.J.1. of this Appendix, we project a 
decrease in aggregate LTCH PPS payments in FY 2024 of approximately $24 
million. This estimated decrease in payments reflects the projected 
decrease in payments to LTCH PPS standard Federal payment rate cases of 
approximately $59 million and the projected increase in payments to 
site neutral payment rate cases of approximately $35 million under the 
dual rate LTCH PPS payment rate structure required by the statute 
beginning in FY 2016.
    As discussed in section V.D. of the Addendum to this proposed rule, 
our actuaries project cost and resource changes for site neutral 
payment rate cases due to the site neutral payment rates required under 
the statute. Specifically, our actuaries project that the costs and 
resource use for cases paid at the site neutral payment rate will 
likely be lower, on average, than the costs and resource use for cases 
paid at the LTCH PPS standard Federal payment rate, and will likely 
mirror the costs and resource use for IPPS cases assigned to the same 
MS-DRG. While we are able to incorporate this projection at an 
aggregate level into our payment modeling, because the historical 
claims data that we are using in this proposed rule to project 
estimated FY 2024 LTCH PPS payments (that is, FY 2022 LTCH claims data) 
do not reflect this actuarial projection, we are unable to model the 
impact of the change in LTCH PPS payments for site neutral payment rate 
cases at the same level of detail with which we are able to model the 
impacts of the changes to LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases. Therefore, Table IV only reflects proposed 
changes in LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases and, unless otherwise noted, the remaining discussion in section 
I.J.3. of this Appendix refers only to the impact on LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases. In the following 
section, we present our proposed provider impact analysis for the 
changes that affect LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.
b. Proposed Impact on Providers
    The basic methodology for determining a per discharge payment for 
LTCH PPS standard Federal payment rate cases is currently set forth 
under Sec. Sec.  412.515 through 412.533 and 412.535. In addition to 
adjusting the LTCH PPS standard Federal payment rate by the MS-LTC-DRG 
relative weight, we make adjustments to account for area wage levels 
and SSOs. LTCHs located in Alaska and Hawaii also have their payments 
adjusted by a COLA. Under our application of the dual rate LTCH PPS 
payment structure, the LTCH PPS standard Federal payment rate is 
generally only used to determine payments for LTCH PPS standard Federal 
payment rate cases (that is, those LTCH PPS cases that meet the 
statutory criteria to be excluded from the site neutral payment rate). 
LTCH discharges that do not meet the patient-level criteria for 
exclusion are paid the site neutral payment rate, which we are 
calculating as the lower of the IPPS comparable per diem amount as 
determined under Sec.  412.529(d)(4), reduced by 4.6 percent for FYs 
2018 through 2026, including any applicable outlier payments, or 100 
percent of the estimated cost of the case as determined under existing 
Sec.  412.529(d)(2). In addition, when certain thresholds are met, 
LTCHs also receive HCO payments for both LTCH PPS standard Federal 
payment rate cases and site neutral payment rate cases that are paid at 
the IPPS comparable per diem amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
proposed rule on different categories of LTCHs for FY 2024, it is 
necessary to estimate payments per discharge for FY 2023 using the 
rates, factors, and the policies established in the FY 2023 IPPS/LTCH 
PPS final rule and estimate payments per discharge for FY 2024 using 
the proposed rates, factors, and the policies in this proposed rule (as 
discussed in section VII. of the preamble of this proposed rule and 
section V. of the Addendum to this proposed rule). As discussed 
elsewhere in this proposed rule, these estimates are based on the best 
available LTCH claims data and other factors, such as the application 
of inflation factors to estimate costs for HCO cases in each year. The 
resulting analyses can then be used to compare how our proposed 
policies applicable to LTCH PPS standard Federal payment rate cases 
affect different groups of LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in HCRIS, 
and PSF data. Hospital groups included the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.
c. Proposed Calculation of LTCH PPS Payments for LTCH PPS Standard 
Federal Payment Rate Cases
    For purposes of this impact analysis, to estimate the per discharge 
payment effects of our policies on payments for LTCH PPS standard 
Federal payment rate cases, we simulated FY 2023 and proposed FY 2024 
payments on a case-by-case basis using historical LTCH claims from the 
FY 2022 MedPAR files that met or would have met the criteria to be paid 
at the LTCH PPS standard Federal payment rate if the statutory patient-
level criteria had been in effect at the time of discharge for all 
cases in the FY 2022 MedPAR files. For modeling FY 2023 LTCH PPS 
payments, we used the FY 2023 standard Federal payment rate of 
$46,432.77 (or $45,538.11 for LTCHs that failed to submit quality data 
as required under the requirements of the LTCH QRP). Similarly, for 
modeling payments based on the proposed FY 2024 LTCH PPS standard 
Federal payment rate, we used the proposed FY 2024 standard Federal 
payment rate of $47,948.15 (or $47,016.21 for LTCHs that failed to 
submit quality data as required under the requirements of the LTCH 
QRP). In each case, we applied the applicable proposed adjustments for 
area wage levels and the COLA for LTCHs located in Alaska and Hawaii. 
Specifically, for modeling FY 2023 LTCH PPS payments, we used the 
current FY 2023 labor-related share (68.0 percent), the wage index 
values established in the Tables 12A and 12B listed in the Addendum to 
the FY 2023 IPPS/LTCH PPS final rule (which are available via the 
internet on the CMS website), the FY 2023 HCO fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $38,518 (as reflected 
in the FY 2023 IPPS/LTCH PPS final rule), and the FY 2023 COLA factors 
(shown in the table in section V.C. of the Addendum to that final rule) 
to adjust the FY 2023 nonlabor-related share (32.0 percent) for LTCHs 
located in Alaska and Hawaii. Similarly, for modeling proposed FY 2024 
LTCH PPS payments, we used the proposed FY 2024 LTCH PPS labor-related 
share (68.4 percent), the proposed FY 2024 wage index values from 
Tables 12A and 12B listed in section VI. of the Addendum to this

[[Page 27288]]

proposed rule (which are available via the internet on the CMS 
website), the proposed FY 2024 HCO fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $94,378 (as discussed in section 
V.D.3. of the Addendum to this proposed rule), and the proposed FY 2024 
COLA factors (shown in the table in section V.C. of the Addendum to 
this proposed rule) to adjust the proposed FY 2024 nonlabor-related 
share (31.6 percent) for LTCHs located in Alaska and Hawaii. We noted 
that in modeling payments for HCO cases for LTCH PPS standard Federal 
payment rate cases, we inflated charges reported on the FY 2022 claims 
by the charge inflation factors in section V.D.3.b. of the Addendum to 
this proposed rule. We also noted that in modeling payments for HCO 
cases for LTCH PPS standard Federal payment rate cases, we estimated 
the cost of each case by multiplying the inflated charges by the 
adjusted CCRs that we determined using our proposed methodology 
described in section V.D.3.b. of the Addendum to this proposed rule.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2023 to FY 
2024 based on the payment rates and policy changes applicable to LTCH 
PPS standard Federal payment rate cases presented in this proposed 
rule. Table IV illustrates the estimated aggregate impact of the change 
in LTCH PPS payments for LTCH PPS standard Federal payment rate cases 
among various classifications of LTCHs. (As discussed previously, these 
impacts do not include LTCH PPS site neutral payment rate cases.)
     The first column, LTCH Classification, identifies the type 
of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate criteria.
     The fourth column shows the estimated FY 2023 payment per 
discharge for LTCH cases expected to meet the LTCH PPS standard Federal 
payment rate criteria (as described previously).
     The fifth column shows the estimated proposed FY 2024 
payment per discharge for LTCH cases expected to meet the LTCH PPS 
standard Federal payment rate criteria (as described previously).
     The sixth column shows the percentage change in estimated 
payments per discharge for LTCH cases expected to meet the LTCH PPS 
standard Federal payment rate criteria from FY 2023 to FY 2024 due to 
the proposed annual update to the standard Federal rate (as discussed 
in section V.A.2. of the Addendum to this proposed rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal payment 
rate cases from FY 2023 to FY 2024 for proposed changes to the area 
wage level adjustment (that is, the updated hospital wage data and 
labor-related share) and the application of the corresponding proposed 
budget neutrality factor (as discussed in section V.B.6. of the 
Addendum to this proposed rule).
     The eighth column shows the percentage change in estimated 
payments per discharge for LTCH PPS standard Federal payment rate cases 
from FY 2023 (Column 4) to FY 2024 (Column 5) for all proposed changes.
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d. Results
    Based on the FY 2022 LTCH cases (from 333 LTCHs) that were used for 
the analyses in this proposed rule, we have prepared the following 
summary of the impact (as shown in Table IV) of the LTCH PPS payment 
rate and proposed policy changes for LTCH PPS standard Federal payment 
rate cases presented in this proposed rule. The impact analysis in 
Table IV shows that estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases are

[[Page 27291]]

projected to decrease 2.5 percent, on average, for all LTCHs from FY 
2023 to FY 2024 as a result of the proposed payment rate and policy 
changes applicable to LTCH PPS standard Federal payment rate cases 
presented in this proposed rule. This estimated 2.5 percent decrease in 
LTCH PPS payments per discharge was determined by comparing estimated 
FY 2024 LTCH PPS payments (using the proposed payment rates and factors 
discussed in this proposed rule) to estimated FY 2023 LTCH PPS payments 
for LTCH discharges which will be LTCH PPS standard Federal payment 
rate cases if the dual rate LTCH PPS payment structure was or had been 
in effect at the time of the discharge (as described in section I.J.3. 
of this Appendix).
    As stated previously, we are proposing an annual update to the LTCH 
PPS standard Federal payment rate for FY 2024 of 2.9 percent. For LTCHs 
that fail to submit quality data under the requirements of the LTCH 
QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 percentage 
point reduction is applied to the annual update to the LTCH PPS 
standard Federal payment rate. Consistent with Sec.  412.523(d)(4), we 
also are applying a proposed budget neutrality factor for changes to 
the area wage level adjustment of 1.0035335 (discussed in section 
V.B.6. of the Addendum to this proposed rule), based on the best 
available data at this time, to ensure that any proposed changes to the 
area wage level adjustment would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS standard Federal payment rate 
payments. As we also explained earlier in this section of the proposed 
rule, for most categories of LTCHs (as shown in Table IV, Column 6), 
the estimated payment increase due to the proposed 2.9 percent annual 
update to the LTCH PPS standard Federal payment rate is projected to 
result in approximately a 2.8 percent increase in estimated payments 
per discharge for LTCH PPS standard Federal payment rate cases for all 
LTCHs from FY 2023 to FY 2024. We note our estimate of the changes in 
payments due to the proposed update to the LTCH PPS standard Federal 
payment rate also includes estimated payments for short-stay outlier 
(SSO) cases, a portion of which are not affected by the annual update 
to the LTCH PPS standard Federal payment rate, as well as the reduction 
that is applied to the annual update for LTCHs that do not submit data 
under the requirements of the LTCH QRP.
(1) Location
    Based on the most recent available data, the vast majority of LTCHs 
are located in urban areas. Only approximately 5 percent of the LTCHs 
are identified as being located in a rural area, and approximately 4 
percent of all LTCH PPS standard Federal payment rate cases are 
expected to be treated in these rural hospitals. The impact analysis 
presented in Table IV shows that the overall average percent decrease 
in estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2023 to FY 2024 for all hospitals is 2.5 
percent. The projected decrease for rural and urban hospitals, 
respectively, is 1.5 and 2.6.
(2) Participation Date
    LTCHs are grouped by participation date into four categories: (1) 
before October 1983; (2) between October 1983 and September 1993; (3) 
between October 1993 and September 2002; and (4) October 2002 and 
after. Based on the best available data, the categories of LTCHs with 
the largest expected percentage of LTCH PPS standard Federal payment 
rate cases (approximately 41 percent and 45 percent, respectively) are 
in LTCHs that began participating in the Medicare program between 
October 1993 and September 2002 and after October 2002. These LTCHs are 
expected to experience a decrease in estimated payments per discharge 
for LTCH PPS standard Federal payment rate cases from FY 2023 to FY 
2024 of 2.4 percent and 2.7 percent, respectively. LTCHs that began 
participating in the Medicare program between October 1983 and 
September 1993 are projected to experience a decrease in estimated 
payments per discharge for LTCH PPS standard Federal payment rate cases 
from FY 2023 to FY 2024 of 2.2 percent, as shown in Table IV. 
Approximately 3 percent of LTCHs began participating in the Medicare 
program before October 1983, and these LTCHs are projected to 
experience a decrease in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2023 to FY 2024 of 4.7 
percent.
(3) Ownership Control
    LTCHs are grouped into three categories based on ownership control 
type: voluntary, proprietary, and government. Based on the best 
available data, approximately 16 percent of LTCHs are identified as 
voluntary (Table IV). The majority (approximately 81 percent) of LTCHs 
are identified as proprietary, while government owned and operated 
LTCHs represent approximately 3 percent of LTCHs. Based on ownership 
type, proprietary LTCHs are expected to experience a decrease in 
payments to LTCH PPS standard Federal payment rate cases of 2.2 
percent. Voluntary LTCHs are expected to experience a decrease in 
payments to LTCH PPS standard Federal payment rate cases from FY 2023 
to FY 2024 of 4.7 percent. Meanwhile, government owned and operated 
LTCHs are expected to experience a decrease in payments to LTCH PPS 
standard Federal payment rate cases from FY 2023 to FY 2024 of 3.9 
percent.
(4) Census Region
    The comparisons by region show that the changes in estimated 
payments per discharge for LTCH PPS standard Federal payment rate cases 
from FY 2023 to FY 2024 are projected to range from a decrease of 6.4 
percent in the West North Central region to a decrease of 0.2 percent 
in the Mountain region. These regional variations are primarily due to 
the proposed changes to the area wage adjustment and estimated changes 
in outlier payments.
(5) Bed Size
    LTCHs are grouped into six categories based on bed size: 0-24 beds; 
25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater than 200 
beds. We project that LTCHs with 125-199 beds would experience the 
largest decrease in payments for LTCH PPS standard Federal payment rate 
cases, 3.7 percent. LTCHs with greater than 200 beds are projected to 
experience the smallest decrease in payments of 0.4 percent. The 
remaining bed size categories are projected to experience a decrease in 
payments in the range of 1.9 to 2.9 percent.
4. Effect on the Medicare Program
    As stated previously, we project that the provisions of this 
proposed rule would result in a decrease in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 2024 
relative to FY 2023 of approximately $59 million (or approximately 2.5 
percent) for the 333 LTCHs in our database. Although, as stated 
previously, the hospital-level impacts do not include LTCH PPS site 
neutral payment rate cases, we estimate that the provisions of this 
proposed rule would result in an increase in estimated aggregate LTCH 
PPS payments to site neutral payment rate cases in FY 2024 relative to 
FY 2023 of approximately $35 million (or approximately 10.8 percent) 
for the 333 LTCHs in our database. (As noted previously, we

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estimate payments to site neutral payment rate cases in FY 2024 
represent approximately 14 percent of total estimated FY 2024 LTCH PPS 
payments.) Therefore, we project that the provisions of this proposed 
rule would result in a decrease in estimated aggregate LTCH PPS 
payments for all LTCH cases in FY 2024 relative to FY 2023 of 
approximately 24 million (or approximately 0.9 percent) for the 333 
LTCHs in our database.
5. Effect on Medicare Beneficiaries
    Under the LTCH PPS, hospitals receive payment based on the average 
resources consumed by patients for each diagnosis. We do not expect any 
changes in the quality of care or access to services for Medicare 
beneficiaries as a result of this proposed rule, but we continue to 
expect that paying prospectively for LTCH services will enhance the 
efficiency of the Medicare program. As discussed previously, we do not 
expect the continued implementation of the site neutral payment system 
to have a negative impact on access to or quality of care, as 
demonstrated in areas where there is little or no LTCH presence, 
general short-term acute care hospitals are effectively providing 
treatment for the same types of patients that are treated in LTCHs.
L. Effects of Requirements for the Hospital Inpatient Quality Reporting 
(IQR) Program
    In section IX.C. of the preamble of this proposed rule, we discuss 
our current requirements and proposed requirements for hospitals 
reporting quality data under the Hospital IQR Program to receive the 
full annual percentage increase for the FY 2024 payment determination 
and subsequent years.
    In this proposed rule, we are proposing: (1) removal of the 
Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of 
Babies Electively Delivered Prior to 39 Completed Weeks Gestation (PC-
01) measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination; (2) adoption of the Hospital Harm--Pressure Injury 
electronic clinical quality measure (eCQM) beginning with the CY 2025 
reporting period/FY 2027 payment determination; (3) adoption of the 
Hospital Harm--Acute Kidney Injury eCQM beginning with the CY 2025 
reporting period/FY 2027 payment determination; (4) adoption of the 
Excessive Radiation Dose or Inadequate Image Quality for Diagnostic 
Computed Tomography (CT) in Adults (Hospital Level--Inpatient) eCQM 
beginning with CY 2025 reporting period/FY 2027 payment determination; 
(5) modification of the Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality measure beginning with the performance data from 
July 1, 2024 through June 30, 2025, impacting the FY 2027 payment 
determination; (6) modification of the Hybrid Hospital-Wide All-Cause 
Risk Standardized Readmission measure beginning with the performance 
data from July 1, 2024 through June 30, 2025, impacting the FY 2027 
payment determination; (7) modification of the COVID-19 Vaccination 
Coverage among Healthcare Personnel (HCP) measure beginning with the Q4 
CY 2023 reporting period/FY 2025 payment determination; (8) removal of 
the Risk-Standardized Complication Rate (RSCR) Following Elective 
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty 
(TKA) measure beginning with the April 1, 2025 through March 31, 2028 
reporting period impacting the FY 2030 payment determination; (9) 
removal of the Medicare Spending Per Beneficiary (MSPB)--Hospital 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (10) modification of the validation targeting criteria 
to include any hospital with a two-tailed confidence interval that is 
less than 75 percent and which submitted less than four quarters of 
data due to receiving an extraordinary circumstances exception (ECE) 
for one or more quarters beginning with the FY 2027 payment 
determination; and (11) modification of data collecting and reporting 
requirements for the Hospital Consumer Assessment of Healthcare 
providers and Systems (HCAHPS) survey beginning with the FY 2027 
payment determination.
    As shown in the summary table in section XII.B.6. of the preamble 
of this proposed rule, we estimate a total information collection 
burden decrease for 3,150 IPPS hospitals of 146,674 hours at a savings 
of $6,917,315 annually associated with our proposed policies across a 
4-year period from the CY 2024 reporting period/FY 2026 payment 
determination through the CY 2028 reporting period/FY 2030 payment 
determination, compared to our currently approved information 
collection burden estimates.
    We note that in sections IX.C.5.a., b., and c. of the preamble of 
this proposed rule, we are proposing adoption of three new eCQMs. 
Similar to the FY 2019 IPPS/LTCH PPS final rule regarding removal of 
eCQMs, while there is no change in information collection burden 
related to those proposed provisions, we believe that costs are 
multifaceted and include not only the burden associated with reporting, 
but also the costs associated with implementing and maintaining 
Hospital IQR Program measures in hospitals' EHR systems for all of the 
eCQMs available for use in the Hospital IQR Program (83 FR 41771).
    In section IX.B. of this proposed rule, we are proposing to modify 
the COVID-19 Vaccination Coverage among HCP measure to utilize the term 
``up to date'' in the HCP vaccination definition and update the 
numerator to specify the time frames within which an HCP is considered 
up to date with recommended COVID-19 vaccines, including booster doses. 
Although we anticipate this modification may require some facilities to 
update IT systems or workflow related to maintaining accurate 
vaccination records for HCP, we assume most facilities are currently 
recording all necessary information for HCP such that this modification 
would not require additional information to be collected, therefore, 
the financial impact of any required updates would be minimal. Finally, 
we do not estimate any changes to the effects previously discussed in 
the FY 2022 IPPS/LTCH PPS final rule for the Hospital IQR Program (86 
FR 45607 and 45608).
    Regarding the remaining proposals to remove or modify existing 
measures, we do not believe any of these proposals will result in any 
additional economic impact beyond those discussed in section XII.B.6. 
(Collection of Information). Similarly, we do not believe the proposal 
to modify targeting criteria will have any economic impact on the IPPS 
hospitals selected for validation, but will only increase the number of 
IPPS hospitals which are subject to being targeted for validation. Any 
increase would not exceed the total maximum number of hospitals that 
would be selected for targeted validation as previously finalized.
    Historically, 100 hospitals, on average, that participate in the 
Hospital IQR Program do not receive the full annual percentage increase 
in any fiscal year due to the failure to meet all requirements of the 
Hospital IQR Program. We anticipate that the number of hospitals not 
receiving the full annual percentage increase will be approximately the 
same as in past years based on review of previous performance.

M. Effects of Requirements for the PPS-Exempt Cancer Hospital Quality 
Reporting (PCHQR) Program

    In section IX.D of the preamble of this proposed rule, we discuss 
our policies for the quality data reporting program

[[Page 27293]]

for PPS-exempt cancer hospitals (PCHs), which we refer to as the PPS-
Exempt Cancer Hospital Quality Reporting (PCHQR) Program. The PCHQR 
Program is authorized under section 1866(k) of the Act. There is no 
financial impact to PCH Medicare reimbursement if a PCH does not submit 
data.
    In section IX.D of the preamble of this proposed rule, we are 
proposing: (1) adoption of the Documentation of Goals of Care 
Discussions Among Cancer Patients measure beginning with the FY 2026 
program year, (2) adoption of the Facility Commitment to Health Equity 
measure beginning with the FY 2026 program year; (3) adoption of the 
Screening for Social Drivers of Health measure with voluntary reporting 
in the FY 2026 program year and mandatory reporting beginning in the FY 
2027 program year; (4) adoption of the Screen Positive Rate for Social 
Drivers of Health measure with voluntary reporting in the FY 2026 
program year and mandatory reporting beginning in the FY 2027 program 
year; (5) updates to the data collection and reporting for the HCAHPS 
Survey Measure (NQF #0166) beginning with the FY 2027 program year; (6) 
modification of the COVID-19 Vaccination Coverage Among Healthcare 
Personnel (HCP) measure beginning with the FY 2025 program year; and 
(7) to begin public reporting of the Surgical Treatment Complications 
for Localized Prostate Cancer (PCH-37) measure. As shown in the summary 
table in section XII.B.7 of the preamble of this proposed rule, we 
estimate a total information collection burden increase for 11 PCHs of 
188 hours at a cost of $4,088 annually associated with our proposed 
policies and updated burden estimates beginning with the FY 2027 
program year compared to our currently approved information collection 
burden estimates. We refer readers to section XII.B.7 of the preamble 
of this proposed rule (Collection of Information) for a detailed 
discussion of the calculations estimating the changes to the 
information collection burden for submitting data to the PCHQR Program.
    In section IX.D.6 of the preamble of this proposed rule, we are 
proposing to adopt the Documentation of Goals of Care Discussions Among 
Cancer Patients measure beginning with the FY 2026 program year. This 
measure would focus on the essential process of documenting goals of 
care conversations in the EHR. The intent of this measure is for PCHs 
to track and improve this documentation to ensure that that such 
conversations have taken place, have been properly documented in a 
manner that is retrievable by all members of the healthcare team, and 
to facilitate the delivery of care that aligns with patients' and 
families' values and unique priorities. Ideally, these conversations 
would occur with patients with serious illness, however, definitions of 
and the means of identifying serious illness may vary widely. This 
measure is intended to focus on cancer patients who died in the 
reporting PCH in the measurement period, had a diagnosis of cancer, and 
had at least 2 eligible contacts at the reporting hospital in the 6 
months prior to death. Since we are unable to determine either an exact 
number of patients who meet these criteria or the extent to which the 
conversations currently take place, as a maximum, we estimate an 
average of 275 patients for each of the 11 PCHs, for a total of 3,025 
patients for all PCHs. We estimate the time required for this 
discussion to be approximately 30 minutes (0.5 hours).
    To estimate the cost per patient, we use the same methodology as in 
the Collection of Information section (section XII.B.7.c) and estimate 
a post-tax hourly wage rate of $20.71/hour. The most recent data from 
the Bureau of Labor Statistics reflects a median hourly wage of $121.38 
per hour for a Physician. We calculate the cost of overhead, including 
fringe benefits, at 100 percent of the median hourly wage, consistent 
with previous years. This is necessarily a rough adjustment, both 
because fringe benefits and overhead costs vary significantly by 
employer and methods of estimating these costs vary widely in publicly 
available literature. Nonetheless, we believe that doubling the hourly 
wage rate ($121.38 x 2 = $242.76) to estimate total cost is a 
reasonably accurate estimation method and is consistent with OMB 
guidance. We therefore estimate the total cost associated with a 
patient and physician discussing goals of care to be $131.74 per 
patient (0.5 hours x ($20.71/hour + $242.76/hour)). For all 3,025 
patients, we estimate a total cost of $398,514 (3,025 patients x 
$131.74/patient). In section IX.D.3 of the preamble of this proposed 
rule, we are proposing to adopt the Facility Commitment to Health 
Equity measure. In order for PCHs to receive a point for each of the 
five domains in the measure, affirmative attestations are required for 
each of the elements within a domain. For PCHs that are unable to 
attest affirmatively for an element, there are likely to be additional 
costs associated with activities such as updating hospital policies, 
engaging senior leadership, participating in new quality improvement 
activities, performing additional data analysis, and training staff. 
The extent of these costs would vary from PCH to PCH depending on what 
activities the PCH is already performing, size, and the individual 
choices each PCH makes in order to meet the criteria necessary to 
attest affirmatively.
    In section IX.D.4 of the preamble of this proposed rule, we are 
proposing to adopt the Screening for Social Drivers of Health measure 
with voluntary reporting in the FY 2026 program year and mandatory 
reporting beginning in the FY 2027 program year. For PCHs that are not 
currently administering some screening mechanism and elect to begin 
doing so as a result of this policy, there would be some non-recurring 
costs associated with changes in workflow and information systems to 
collect the data. The extent of these costs is difficult to quantify as 
different PCHs may utilize different modes of data collection (for 
example, paper-based, electronically patient-directed, clinician-
facilitated, etc.). In addition, depending on the method of data 
collection utilized, the time required to complete the survey may add a 
negligible amount of time to patient visits.
    In section IX.B. of the preamble of this proposed rule, we are 
proposing to modify the COVID-19 Vaccination Coverage Among HCP Measure 
to utilize the term ``up to date'' in the HCP vaccination definition 
and update the numerator to specify the time frames within which an HCP 
is considered up to date with recommended COVID-19 vaccines, including 
booster doses, beginning with the FY 2025 program year. Although we 
anticipate this modification may require some facilities to update IT 
systems or workflow related to maintaining accurate vaccination records 
for HCP, we assume most facilities are currently recording all 
necessary information for HCP such that this modification would not 
require additional information to be collected, therefore the financial 
impact of any required updates would be minimal. However, due to the 
unique nature of each PCH, we are unable to estimate the financial 
impact for each PCH. We do not estimate any changes to the effects 
previously discussed in the FY 2022 IPPS/LTCH PPS final rule for the 
PCHQR Program (86 FR 45608).
    We do not believe the remaining proposals will result in any 
additional economic impact.

[[Page 27294]]

N. Effects of Proposed Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)

    In section IX.G. of the preamble of this proposed rule, we are 
proposing to modify one measure, adopt two measures and remove two 
measures from the LTCH QRP. Specifically, we propose to modify the HCP 
COVID-19 Vaccine measure and adopt the DC Function measure beginning 
with the FY 2025 LTCH QRP, as well as the Patient/Resident COVID-19 
Vaccine measure beginning with the FY 2026 LTCH QRP. We also propose to 
remove two measures, the Application of Functional Assessment/Care Plan 
and the Functional Assessment/Care Plan measures beginning with the FY 
2025 LTCH QRP. We propose to begin publicly displaying data for the 
quality measures TOH-Patient, TOH-Provider, DC Function, and Patient/
Resident COVID-19 Vaccine measures. We propose to increase the LTCH QRP 
data completion thresholds for the LCDS items beginning with the FY 
2026 LTCH QRP. Finally, we are seeking information on principles for 
selecting and prioritizing LTCH QRP quality measures and concepts for 
measure development and provide an update on CMS continued efforts to 
close the health equity gap.
    We note that the CDC would account for the burden associated with 
the COVID-19 Vaccination Coverage among HCP measure collection under 
OMB control number 0920-1317 (expiration January 31, 2024). 
Additionally, because we are not proposing any updates to the form, 
manner, and timing of data submission for this measure, there would be 
no increase in burden associated with the proposal.
    The effect of the remaining proposals for the LTCH QRP would be an 
overall decrease in burden for LTCHs participating in the LTCH QRP. As 
shown in summary table XII.B.8-1 in section XII.B.8. of the preamble of 
this proposed rule, we estimate a total information collection burden 
decrease for 330 eligible LTCHs of 1,301 hours for a total cost 
reduction of $127,048 annually associated with our finalized policies 
and updated burden estimates across the FY 2025 and FY 2026 program 
years compared to our currently approved information collection burden 
estimates. We refer readers to section XII.B.8. of the preamble of this 
proposed rule, where CMS has provided an estimate of the burden and 
cost to LTCHs, and note that it will be included in a revised 
information collection request for 0938-1163.

O. Effects of Requirements Regarding the Medicare Promoting 
Interoperability Program

    In section IX.F. of the preamble of this proposed rule, we are 
proposing the following changes for eligible hospitals and critical 
access hospitals (CAHs) that attest to CMS under the Medicare Promoting 
Interoperability Program: (1) adoption of the Hospital Harm--Pressure 
Injury electronic clinical quality measure (eCQM) beginning with the CY 
2025 reporting period; (2) adoption of the Hospital Harm--Acute Kidney 
Injury eCQM Hospital Harm--Pressure Injury eCQM beginning with the CY 
2025 reporting period; (3) adoption of the Excessive Radiation Dose or 
Inadequate Image Quality for Diagnostic Computed Tomography (CT) in 
Adults eCQM beginning with the CY 2025 reporting period; (4) 
modification of the SAFER Guides measure to require eligible hospitals 
and CAHs to submit a ``yes'' attestation to fulfill the measure 
beginning with the EHR reporting period in CY 2024; and (5) 
establishing an EHR reporting period of a minimum of any continuous 
180-day period in CY 2025. As discussed in section XII. of the preamble 
of this proposed rule, we do not estimate a change in total information 
collection burden associated with our proposed policies.
    In section IX.F.7.a.(2). of the preamble of this proposed rule, we 
are proposing to adopt three new eCQMs. Similar to the FY 2019 IPPS/
LTCH PPS final rule regarding removal of eCQM measures, while there is 
no change in information collection burden related to those proposed 
provisions, we believe that costs are multifaceted and include not only 
the burden associated with reporting but also the costs associated with 
implementing and maintaining program measures in hospitals' EHR systems 
for all of the eCQMs available for use in the Medicare Promoting 
Interoperability Program (83 FR 41771).
    In section IX.F.3. of the preamble of this proposed rule, we are 
proposing to modify the SAFER Guides measure to require eligible 
hospitals and CAHs to submit a ``yes'' attestation to fulfill the 
measure beginning with the EHR reporting period in CY 2024. In the CY 
2022 IPPS/LTCH PPS final rule, we adopted the SAFER Guides measure and 
required eligible hospitals and CAHs to attest ``yes'' or ``no'' as to 
whether they completed an annual self-assessment on each of the nine 
SAFER Guides during the calendar year in which their EHR reporting 
period occurs (86 FR 45479 through 45481). If this proposal is 
finalized, eligible hospitals and CAHs would be required to complete an 
annual self-assessment on each of the nine SAFER Guides. Because each 
eligible hospital and CAH is unique and may conduct these self-
assessments with varying degrees of rigor, we are unable to accurately 
estimate the time each eligible hospital or CAH would spend performing 
each self-assessment or the staff they would utilize. Therefore, we 
estimate the time required to conduct each self-assessment would range 
from approximately 30 minutes per guide to approximately 20 minutes per 
recommendation.\778\ Across the nine SAFER Guides and 165 
recommendations within them, the estimated time to complete all nine 
self-assessments would range from a minimum of 4.5 hours to a maximum 
of 55 hours. Based on the suggested sources of input provided in the 
SAFER Guides, we assume that eligible hospitals and CAHs will form 
multi-disciplinary teams composed of 1.0 FTE of a clinical 
administrator and 0.75 FTE each of a clinician, support staff, EHR 
developer, and health IT support staff to conduct the self-assessments. 
Table I.O.-01 provides the detail of our calculated cost to conduct 
SAFER Guide self-assessments.
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    \778\ Toward More Proactive Approaches to Safety in the 
Electronic Health Record Era. Available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8136246/. Accessed December 14, 
2022.
    \779\ http://www.bls.gov/oes/current/oes_nat.htm. Accessed 
December 14, 2022.

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[GRAPHIC] [TIFF OMITTED] TP01MY23.370

    Using the cost to complete all nine self-assessments from Table 
I.O.-01, we estimate all 4,500 eligible hospitals and CAHs would 
require between 20,250 hours (4.5 hours per hospital/CAHs x 4,500 
hospitals/CAHs) and 247,500 hours (55 hours per hospital/CAHs x 4,500 
hospitals/CAHs) at a cost between $8,916,278 (20,250 hours x $440.31/
hour) and $108,976,725 (247,500 hours x $440.31/hour) in order to 
attest ``yes'' to the measure. We invite comment on our assumptions 
regarding the economic impact of the proposed modification to the SAFER 
Guides measure.
    While the cost to conduct a SAFER Guides self-assessment can be 
high, we believe the cost is outweighed by the potential for improved 
healthcare outcomes, increased efficiency, reduced risk of data 
breaches and ransomware attacks, and decreased malpractice 
premiums.\780\
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    \780\ https://www.eisneramper.com/safer-guides-healthcare-organizations-0822/. Accessed December 14, 2022.
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P. Alternatives Considered

    This proposed rule contains a range of policies. It also provides 
descriptions of the statutory provisions that are addressed, identifies 
the proposed policies, and presents rationales for our decisions and, 
where relevant, alternatives that were considered.
1. Alternatives Considered to the Proposed Hospital Wage Index 
Calculations
    As discussed in section III.G.1. of the preamble of this proposed 
rule, we are proposing to include hospitals with Sec.  412.103 
reclassification along with geographically rural hospitals in all rural 
wage index calculations, and to only exclude ``dual reclass'' hospitals 
(hospitals with simultaneous Sec.  412.103 and MGCRB reclassifications) 
when implicated by the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act. Consistent with the previous proposal, 
beginning with FY 2024 we are proposing to include the data of all 
Sec.  412.103 hospitals (including those that have an MGCRB 
reclassification) in the calculation of the rural floor and the 
calculation of ``the wage index for rural areas in the State in which 
the county is located'' as referred to in section 1886(d)(8)(C)(iii) of 
the Act. As also discussed in section III.G.1 of the preamble of this 
proposed rule, we acknowledge that these proposals would have 
significant effects on wage index values. In addition, as a result of 
this proposed change, both the geographic reclassification budget 
neutrality adjustment and the rural floor budget neutrality adjustment 
are significantly larger than in prior years.
    In the past, such as in response to the FY 2020 IPPS/LTCH PPS 
proposed rule, commenters have strongly supported policies that ``curb 
. . . the manipulative practice of some hospitals abusing the rural 
floor provision to inappropriately influence the rural floor wage index 
value, which many commenters stated exacerbates the wage index 
disparity between urban and rural hospitals'' (84 FR 42333). Commenters 
stated that ``the use of urban to rural reclassifications to 
artificially inflate the rural floor has stretched the rural floor 
provision beyond its original intent . . . hospitals should not be 
penalized and bear the burden of declining reimbursement due to other 
hospitals manipulating their state wage index (84 FR 42334).
    Considering the commenters' support for policies that limited the 
extent to which hospitals could manipulate the rural floor wage index 
value, as well as the significant redistributive effects, we therefore 
considered maintaining our current methodology for calculating the 
rural wage index, which would not require any modification to the rural 
floor or 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''. However, given that the Courts have 
repeatedly held unlawful CMS policies that do not treat Sec.  412.103 
hospitals the same as geographically rural hospitals based on section 
1886(d)(8)(E)(i) of the Act, the ongoing risk of the pending lawsuits 
cited previously, and the recognition of the challenge should we need 
to implement any future remedy in a budget neutral manner, we 
determined that it was necessary to propose to include hospitals with 
Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations, and to exclude ``dual 
reclass'' hospitals (hospitals with simultaneous Sec.  412.103 and 
MGCRB reclassifications) implicated by the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act, with the resulting changes to the 
rural floor and 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.
2. Alternatives Considered to the Proposed HCP COVID-19 Vaccine Measure
    With regard to the proposal to modify the HCP COVID-19 Vaccine 
measure and to add the Patient/Resident COVID-19 Vaccine measure to the 
LTCH QRP Program, the COVID-19 pandemic has exposed the importance of 
implementing infection prevention strategies, including the promotion 
of

[[Page 27296]]

COVID-19 vaccination for healthcare personnel and patients. We believe 
this measure will encourage healthcare personnel to get up to date with 
the COVID-19 vaccine and increase vaccine uptake in patients/residents 
resulting in fewer cases, less hospitalizations, and lower mortality 
associated with the SARS-CoV-2 virus, but we were unable to identify 
any alternative methods for collecting the data. An overwhelming public 
need exists to target quality improvement among LTCHs, as well as 
provide data to patients and caregivers through transparency of data. 
Therefore, these proposed measures have the potential to generate 
actionable data on COVID-19 vaccination rates.
3. Alternatives Considered to the Proposed LTCH QRP Reporting 
Requirements
    With regard to the proposal to increase the data completion 
threshold for LCDS data submitted to meet the LTCH QRP reporting 
requirements, the proposed threshold of 90 percent is based on the need 
for substantially complete records, which allows appropriate analysis 
of quality measure data for the purposes of updating quality measure 
specifications. This data is ultimately reported to the public, 
allowing our beneficiaries to gain a more complete understanding of 
LTCH performance related to these quality metrics, and helping them to 
make informed healthcare choices. We considered the alternative of not 
increasing the data completion threshold, but our data suggest that 
LTCHs are already in compliance with, or exceeding this proposed 
threshold.
4. Alternatives Considered for the Proposed Replacement of the 
Application of Functional Assessment/Care Plan Process Measure
    The proposal to replace the topped-out Application of Functional 
Assessment/Care Plan process measure with the proposed DC Function 
measure, which has strong scientific acceptability, satisfies the 
requirement that there be at least one cross-setting function measure 
in the Post-Acute Care (PAC) QRPs, including the IRF QRP, that uses 
standardized functional assessment data elements from standardized 
patient assessment instruments. We considered the alternative of 
delaying the proposal of adopting the DC function measure. However, 
given the proposed dc Function measure's strong scientific 
acceptability, the fact that it provides an opportunity to replace the 
current Application of Functional Assessment/Care Plan process measure, 
and uses standardized functional assessment data elements that are 
already collected, we believe further delay of the dc Function measure 
is unwarranted. Further, the proposed removal of the Application of 
Functional Assessment/Care Plan and Functional Assessment measures 
meets measure removal factors one and six,\781\ and no longer provide 
meaningful distinctions in improvements in performance. Therefore, no 
alternatives were considered.
---------------------------------------------------------------------------

    \781\ Code of Federal Regulations, Sec.  412.560(b)(3). 
Available at: https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-412/subpart-O/section-412.560.
---------------------------------------------------------------------------

    As discussed previously, these proposals for the LTCH QRP will 
result in an overall decrease in burden for LTCHs, and we believe the 
importance of the information necessitates these provisions.

Q. Overall Conclusion

1. Acute Care Hospitals
    Acute care hospitals are estimated to experience an increase of 
approximately $2.7 billion in FY 2024, including operating, capital, 
low-volume hospital payments, and new technology changes. The estimated 
change in operating payments is approximately $2.7 billion (discussed 
in section I.F. and I.G. of this Appendix). The estimated change in 
capital payments is approximately $0.446 billion (discussed in section 
I.I. of this Appendix). The estimated change in new technology add-on 
payments is approximately -$0.466 billion as discussed in section I.G. 
of this Appendix. The change in new technology add-on payments reflects 
the net impact of new applications under the alternative pathways and 
continuing new technology add-on payments. Total may differ from the 
sum of the components due to rounding.
    Table I. of section I.F. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the proposed MS-DRG and wage index changes, and for 
the wage index reclassifications under the MGCRB.
    We estimate that hospitals would experience a 6.2 percent increase 
in capital payments per case, as shown in Table III. of section I.I. of 
this Appendix. We project that there would be a $446 million increase 
in capital payments in FY 2024 compared to FY 2023.
    The discussions presented in the previous pages, in combination 
with the remainder of this proposed rule, constitute a regulatory 
impact analysis.
2. LTCHs
    Overall, LTCHs are projected to experience a decrease in estimated 
payments in FY 2024. In the impact analysis, we are using the proposed 
rates, factors, and policies presented in this proposed rule based on 
the best available claims and CCR data to estimate the change in 
payments under the LTCH PPS for FY 2024. Accordingly, based on the best 
available data for the 333 LTCHs included in our analysis, we estimate 
that overall FY 2024 LTCH PPS payments would decrease approximately $24 
million relative to FY 2023 primarily due to the annual update to the 
LTCH PPS standard Federal rate offset by an estimated decrease in high 
cost outlier payments.

R. Regulatory Review Cost Estimation

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on last year's proposed rule will be the number of reviewers 
of this proposed rule. We acknowledge that this assumption may 
understate or overstate the costs of reviewing the rule. It is possible 
that not all commenters reviewed last year's rule in detail, and it is 
also possible that some reviewers chose not to comment on the proposed 
rule. For these reasons, we believe that the number of past commenters 
would be a fair estimate of the number of reviewers of this rule. We 
welcome any comments on the approach in estimating the number of 
entities which will review this proposed rule.
    We recognize that different types of entities are in many cases 
affected by mutually exclusive sections of the rule. Thus, for the 
purposes of our estimate we assume that each reviewer read 
approximately 50 percent of the proposed rule. Finally, in our 
estimates, we have used the 1,631 number of timely pieces of 
correspondence on the FY 2023 IPPS/LTCH proposed rule as our estimate 
for the number of reviewers of this rule. We continue to acknowledge 
the uncertainty involved with using this number, but we believe it is a 
fair estimate due to the variety of entities affected and the 
likelihood that some of them choose to rely (in full or in part) on 
press releases, newsletters, fact sheets, or other sources rather than 
the comprehensive review of preamble

[[Page 27297]]

and regulatory text. We seek comments on this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
the proposed rule is $115.22 per hour, including overhead and fringe 
benefits (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an 
average reading speed, we estimate that it would take approximately 
22.14 hours for the staff to review half of this proposed rule. For 
each IPPS hospital or LTCH that reviews this proposed rule, the 
estimated cost is $2,550.97 (22.14 hours x $115.22). Therefore, we 
estimate that the total cost of reviewing this proposed rule is 
$4,160,663.37 ($2,550.97 x 1,631 reviewers).

II. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table V. of this Appendix, we have prepared 
an accounting statement showing the classification of the expenditures 
associated with the provisions of this proposed rule as they relate to 
acute care hospitals. This table provides our best estimate of the 
change in Medicare payments to providers as a result of the proposed 
changes to the IPPS presented in this proposed rule. All expenditures 
are classified as transfers to Medicare providers.
    As shown in Table V. of this Appendix, the net costs to the Federal 
Government associated with the policies in this proposed rule are 
estimated at $2.7 billion.
[GRAPHIC] [TIFF OMITTED] TP01MY23.371

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact analysis 
of the payment rates and factors presented in this proposed rule under 
the LTCH PPS is projected to result in a decrease in estimated 
aggregate LTCH PPS payments in FY 2024 relative to FY 2023 of 
approximately $24 million based on the data for 333 LTCHs in our 
database that are subject to payment under the LTCH PPS. Therefore, as 
required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in 
Table VI. of this Appendix, we have prepared an accounting statement 
showing the classification of the expenditures associated with the 
provisions of this proposed rule as they relate to the changes to the 
LTCH PPS. Table VI. of this Appendix provides our best estimate of the 
estimated change in Medicare payments under the LTCH PPS as a result of 
the payment rates and factors and other provisions presented in this 
proposed rule based on the data for the 333 LTCHs in our database. All 
expenditures are classified as transfers to Medicare providers (that 
is, LTCHs).
    As shown in Table VI. of this Appendix, the savings to the Federal 
Government associated with the policies for LTCHs in this proposed rule 
are estimated at $24 million.
[GRAPHIC] [TIFF OMITTED] TP01MY23.372

III. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small government 
jurisdictions. We estimate that most hospitals and most other providers 
and suppliers are small entities as that term is used in the RFA. The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business (having revenues 
of less than $8.0 million to $41.5 million in any 1 year). (For details 
on the latest standards for health care providers, we refer readers to 
page 38 of the Table of Small Business Size Standards for NAIC 622 
found on the SBA website at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Because all hospitals 
are considered to be small entities for purposes of the RFA, the 
hospital impacts described in this proposed rule are impacts on small 
entities. Individuals and States are not included in the definition of 
a small entity. MACs are not considered to be small entities because 
they do not meet the SBA definition of a small business.
    HHS's practice in interpreting the RFA is to consider effects 
economically ``significant'' if greater than 5 percent of providers 
reach a threshold of 3 to 5 percent or more of total revenue or total 
costs. We believe that the provisions of this proposed rule relating to 
IPPS hospitals would have an economically significant impact on small 
entities as explained in this Appendix. Therefore, the Secretary has 
certified that this

[[Page 27298]]

proposed rule would have a significant economic impact on a substantial 
number of small entities. For example, the majority of the 3,130 IPPS 
hospitals included in the impact analysis shown in ``Table I.--Impact 
Analysis of Proposed Changes to the IPPS for Operating Costs for FY 
2024,'' on average are expected to see increases in the range of 2.8 
percent, primarily due to the proposed hospital rate update, as 
discussed in section I.G. of this Appendix. On average, the proposed 
rate update for these hospitals is estimated to be 2.8 percent.
    The 333 LTCH PPS hospitals included in the impact analysis shown in 
``Table IV: Impact of Proposed Payment Rate and Policy Changes to LTCH 
PPS Payments for LTCH PPS Standard Federal Payment Rate Cases for FY 
2024 (Estimated FY 2023 Payments Compared to Estimated FY 2024 
Payments)'' on average are expected to see a decrease of approximately 
2.5 percent, primarily due to the 4.7 percent decrease in high cost 
outlier payments as a percentage of total LTCH PPS standard Federal 
payment rate payments, as discussed in section I.J. of this Appendix.
    This proposed rule contains a range of proposed policies. It 
provides descriptions of the statutory provisions that are addressed, 
identifies the proposed policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered. The 
analyses discussed in this Appendix and throughout the preamble of this 
proposed rule constitutes our regulatory flexibility analysis. We are 
soliciting public comments on our estimates and analysis of the impact 
of our proposals on small entities. Public comments that we receive and 
our responses will be presented in the final rule.

IV. Impact on Small Rural Hospitals

    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed or final rule that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. With the exception of hospitals located in 
certain New England counties, for purposes of section 1102(b) of the 
Act, we define a small rural hospital as a hospital that is located 
outside of an urban area and has fewer than 100 beds. Section 601(g) of 
the Social Security Amendments of 1983 (Pub. L. 98-21) designated 
hospitals in certain New England counties as belonging to the adjacent 
urban area. Thus, for purposes of the IPPS and the LTCH PPS, we 
continue to classify these hospitals as urban hospitals.
    As shown in Table I. in section I.G. of this Appendix, rural IPPS 
hospitals with 0-49 beds (362 hospitals) and 50-99 beds (190 hospitals) 
are expected to experience an increase in payments from FY 2023 to FY 
2024 of 2.9 percent and 3.6 percent, respectively, primarily driven by 
the proposed hospital rate update and the proposed change to the 
calculation of the rural wage index, as discussed in section I.G of 
this Appendix. We refer readers to Table I. in section I.G. of this 
Appendix for additional information on the quantitative effects of the 
proposed policy changes under the IPPS for operating costs.
    All rural LTCHs (18 hospitals) shown in Table IV. in section I.J. 
of this Appendix have less than 100 beds. These hospitals are expected 
to experience a decrease in payments from FY 2023 to FY 2024 of 1.5 
percent, primarily due to the projected 4.7 percent decrease in high 
cost outlier payments as a percentage of total LTCH PPS standard 
Federal payment rate payments, as discussed in section I.J. of this 
Appendix.

V. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in any 
1 year of $100 million in 1995 dollars, updated annually for inflation. 
In 2023, that threshold level is approximately $177 million. This 
proposed rule would not mandate any requirements that meet the 
threshold for State, local, or tribal governments, nor would it affect 
private sector costs.

VI. Executive Order 13132

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has federalism 
implications. This proposed rule would not have a substantial direct 
effect on state or local governments, preempt states, or otherwise have 
a federalism implication.

VII. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having tribal 
implications. Section 1880(a) of the Act states that a hospital of the 
Indian Health Service, whether operated by such Service or by an Indian 
tribe or tribal organization, is eligible for Medicare payments so long 
as it meets all of the conditions and requirements for such payments 
which are applicable generally to hospitals. Consistent with section 
1880(a) of the Act, this proposed rule contains general provisions also 
applicable to hospitals and facilities operated by the Indian Health 
Service or Tribes or Tribal organizations under the Indian Self-
Determination and Education Assistance Act. We continue to engage in 
consultations with Tribal officials on IPPS issues of interest. We will 
use input received from these consultations, as well as the comments on 
this proposed rule, to inform this rulemaking.

VIII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Office of Management and Budget reviewed this proposed rule.

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

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of high 
quality. Under section 1886(e)(5) of the Act, we are required to 
publish update factors recommended by the Secretary in the proposed and 
final IPPS rules. Accordingly, this Appendix provides the 
recommendations for the update factors for the IPPS national 
standardized amount, the hospital-specific rate for SCHs and MDHs, and 
the rate-of-increase limits for certain hospitals excluded from the 
IPPS, as well as LTCHs. In prior years, we made a recommendation in the 
IPPS proposed rule and final rule for the update factors for the 
payment rates for IRFs and IPFs. However, for FY 2024, consistent with 
our approach for FY 2023, we are including the Secretary's 
recommendation for the update factors for IRFs and IPFs in separate 
Federal Register documents at the time that we announce the annual 
updates for IRFs and IPFs. We also discuss our response

[[Page 27299]]

to MedPAC's recommended update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2024

A. Proposed FY 2024 Inpatient Hospital Update

    As discussed in section IV.A. of the preamble to this proposed 
rule, for FY 2024, consistent with section 1886(b)(3)(B) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we 
are setting the applicable percentage increase by applying the 
following adjustments in the following sequence. Specifically, the 
applicable percentage increase under the IPPS is equal to the rate-of-
increase in the hospital market basket for IPPS hospitals in all areas, 
subject to a reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act and a reduction of three-quarters of the 
applicable percentage increase (prior to the application of other 
statutory adjustments; also referred to as the market basket update or 
rate-of-increase (with no adjustments)) for hospitals not considered to 
be meaningful electronic health record (EHR) users in accordance with 
section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the 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 that, 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.
    In this FY 2024 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we are proposing to base the proposed 
FY 2024 market basket update used to determine the applicable 
percentage increase for the IPPS on IGI's fourth quarter 2022 forecast 
of the 2018-based IPPS market basket rate-of-increase with historical 
data through third quarter 2022, which is estimated to be 3.0 percent. 
In accordance with section 1886(b)(3)(B) of the Act, as amended by 
section 3401(a) of the Affordable Care Act, in section IV.B. of the 
preamble of this FY 2024 IPPS/LTCH PPS proposed rule, based on IGI's 
fourth quarter 2022 forecast, we are proposing a productivity 
adjustment of 0.2 percentage point for FY 2024. We are also proposing 
that if more recent data subsequently become available, we would use 
such data, if appropriate, to determine the FY 2024 market basket 
update and productivity adjustment for the FY 2024 IPPS/LTCH PPS final 
rule.
    Therefore, based on IGI's fourth quarter 2022 forecast of the 2018-
based IPPS market basket update and the productivity adjustment, 
depending on whether a hospital submits quality data under the rules 
established in accordance with section 1886(b)(3)(B)(viii) of the Act 
(hereafter referred to as a hospital that submits quality data) and is 
a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act 
(hereafter referred to as a hospital that is a meaningful EHR user), we 
are proposing four possible applicable percentage increases that could 
be applied to the standardized amount, as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP01MY23.373

B. Proposed FY 2024 SCH and MDH Update

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2024 
applicable percentage increase in the hospital-specific rate for SCHs 
and MDHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS).
    Section 4102 of the Consolidated Appropriations Act, 2023 (Public 
Law 117-328), enacted on December 29, 2022, extended the MDH program 
through FY 2024 (that is, for discharges occurring on or before 
September 30, 2024). We refer readers to section V.F. of the preamble 
of this proposed rule for further discussion of the MDH program.
    As previously stated, the update to the hospital specific rate for 
SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, depending on whether a hospital submits quality data and 
is a meaningful EHR user, we are proposing the same four possible 
applicable percentage increases in the previous table for the hospital-
specific rate applicable to SCHs and MDHs.

C. Proposed FY 2024 Puerto Rico Hospital Update

    Because Puerto Rico hospitals are no longer paid with a Puerto 
Rico-specific standardized amount under the amendments to section 
1886(d)(9)(E) of the Act, there is no longer a need for us to make an 
update to the Puerto Rico standardized amount. Hospitals in Puerto Rico 
are now paid 100 percent of the national standardized amount and, 
therefore, are subject to the same update to the national standardized 
amount

[[Page 27300]]

discussed under section IV.A.1. of the preamble of this proposed rule.
    In addition, as discussed in section IV.A.2. of the preamble of 
this proposed rule, 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.
    Section 1886(b)(3)(B)(ix) of the Act in conjunction with section 
602(d) of Public Law 114-113 requires that for FY 2024 and subsequent 
fiscal years, 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 a reduction of three-quarters of the applicable percentage 
increase (prior to the application of other statutory adjustments).
    Based on IGI's fourth quarter 2022 forecast of the 2018-based IPPS 
market basket update with historical data through third quarter 2022, 
for this FY 2024 proposed rule, in accordance with section 
1886(b)(3)(B) of the Act, as previously discussed, for Puerto Rico 
hospitals, we are proposing a market basket update of 3.0 percent and a 
productivity adjustment of 0.2 percentage point. Therefore, for FY 
2024, depending on whether a Puerto Rico hospital is a meaningful EHR 
user, there are two possible applicable percentage increases that can 
be applied to the standardized amount. Based on these data, we are 
proposing the following applicable percentage increases to the 
standardized amount for FY 2024 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
we are proposing an applicable percentage increase to the FY 2024 
operating standardized amount of 2.8 percent (that is, the FY 2024 
estimate of the proposed market basket rate-of-increase of 3.0 percent 
less an adjustment of 0.2 percentage point for the proposed 
productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we are proposing an applicable percentage increase to the 
operating standardized amount of 0.55 percent (that is, the FY 2024 
estimate of the proposed market basket rate-of-increase of 3.0 percent, 
less an adjustment of 2.25 percentage point (the proposed market basket 
rate-of-increase of 3.0 percent x 0.75 for failure to be a meaningful 
EHR user), and less an adjustment of 0.2 percentage point for the 
proposed productivity adjustment).
    As noted previously, we are proposing that if more recent data 
subsequently become available, we would use such data, if appropriate, 
to determine the FY 2024 market basket update and the productivity 
adjustment for the FY 2024 IPPS/LTCH PPS final rule.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2024

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits for 
children's hospitals, cancer hospitals, and hospitals located outside 
the 50 States, the District of Columbia, and Puerto Rico (that is, 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and America Samoa). Section 
1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-
of-increase limits equal to the market basket percentage increase. In 
accordance with Sec.  403.752(a) of the regulations, religious 
nonmedical health care institutions (RNHCIs) are paid under the 
provisions of Sec.  413.40, which also use section 1886(b)(3)(B)(ii) of 
the Act to update the percentage increase in the rate-of-increase 
limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa are 
among the remaining types of hospitals still paid under the reasonable 
cost methodology, subject to the rate-of-increase limits. In addition, 
in accordance with Sec.  412.526(c)(3) of the regulations, extended 
neoplastic disease care hospitals (described in Sec.  412.22(i) of the 
regulations) also are subject to the rate-of-increase limits. As 
discussed in section VI. of the preamble of this proposed rule, we are 
proposing to use the percentage increase in the 2018-based IPPS 
operating market basket to update the target amounts for children's 
hospitals, PPS-excluded cancer hospitals, RNHCIs, short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa, and extended neoplastic disease 
care hospitals for FY 2024 and subsequent fiscal years. Accordingly, 
for FY 2024, the rate-of-increase percentage to be applied to the 
target amount for these children's hospitals, cancer hospitals, RNHCIs, 
extended neoplastic disease care hospitals, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa is the FY 2024 percentage increase 
in the 2018-based IPPS operating market basket. For this proposed rule, 
the current estimate of the IPPS operating market basket percentage 
increase for FY 2024 is 3.0 percent. We are proposing that if more 
recent data subsequently become available, we would use such data, if 
appropriate, to determine the FY 2024 market basket update for the FY 
2024 IPPS/LTCH PPS final rule.

E. Proposed Update for LTCHs for FY 2024

    Section 123 of Public Law 106-113, as amended by section 307(b) of 
Public Law 106-554 (and codified at section 1886(m)(1) of the Act), 
provides the statutory authority for updating payment rates under the 
LTCH PPS.
    As discussed in section V.A. of the Addendum to this proposed rule, 
we are proposing to update the LTCH PPS standard Federal payment rate 
for FY 2024 by 2.9 percent, consistent with section 1886(m)(3) of the 
Act which provides that any annual update be reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act (that is, the productivity adjustment). Furthermore, in 
accordance with the LTCH QR Program under section 1886(m)(5) of the 
Act, we are proposing to reduce the annual update to the LTCH PPS 
standard Federal rate by 2.0 percentage points for failure of a LTCH to 
submit the required quality data.
    Accordingly, we are proposing to establish an update factor of 
1.029 in determining the LTCH PPS standard Federal rate for FY 2024. 
For LTCHs that fail to submit quality data for FY 2024, we are 
proposing to establish an annual update to the LTCH PPS standard 
Federal rate of 0.9 percent (that is, the proposed annual update for FY 
2024 of 2.9 percent less 2.0 percentage points for failure to submit 
the required quality data in accordance with section 1886(m)(5)(C) of 
the Act and our rules) by applying a proposed update factor of 1.009 in 
determining the LTCH PPS standard Federal rate for FY 2024. (We note 
that, as discussed in section VII.D. of the preamble of this proposed 
rule, the proposed update to the LTCH PPS standard Federal payment rate 
of 2.9 percent for FY 2024 does not reflect any budget neutrality 
factors.)

III. Secretary's Recommendations

    MedPAC is recommending inpatient hospital rates be updated by the 
amount specified in current law plus one

[[Page 27301]]

percent. MedPAC's rationale for this update recommendation is described 
in more detail in this section. As previously stated, section 
1886(e)(4)(A) of the Act requires that the Secretary, taking into 
consideration the recommendations of MedPAC, recommend update factors 
for inpatient hospital services for each fiscal year that take into 
account the amounts necessary for the efficient and effective delivery 
of medically appropriate and necessary care of high quality. Consistent 
with current law, depending on whether a hospital submits quality data 
and is a meaningful EHR user, we are recommending the four applicable 
percentage increases to the standardized amount listed in the table 
under section II. of this Appendix B. We are recommending that the same 
applicable percentage increases apply to SCHs and MDHs.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are recommending 
update factors for certain other types of hospitals excluded from the 
IPPS. Consistent with our policies for these facilities, we are 
recommending an update to the target amounts for children's hospitals, 
cancer hospitals, RNHCIs, short-term acute care hospitals located in 
the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa and extended neoplastic disease care hospitals of 3.0 
percent.
    For FY 2024, consistent with policy set forth in section VII. of 
the preamble of this proposed rule, for LTCHs that submit quality data, 
we are recommending an update of 2.9 percent to the LTCH PPS standard 
Federal rate. For LTCHs that fail to submit quality data for FY 2024, 
we are recommending an annual update to the LTCH PPS standard Federal 
rate of 0.9 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2023 Report to Congress, MedPAC assessed the adequacy 
of current payments and costs, and the relationship between payments 
and an appropriate cost base. MedPAC recommended an update to the 
hospital inpatient rates by the amount specified in current law plus 1 
percent. MedPAC anticipates that their recommendation to update the 
IPPS payment rate by the amount specified under current law plus 1 
percent in 2024 would generally be adequate to maintain beneficiaries' 
access to hospital inpatient and outpatient care and keep IPPS payment 
rates close to, if somewhat below, the cost of delivering high-quality 
care efficiently.
    MedPAC stated that their recommended update to IPPS and OPPS 
payment rates of current law plus 1 percent may not be sufficient to 
ensure the financial viability of some Medicare safety-net hospitals 
with a poor payer mix. MedPAC recommends redistributing the current 
Medicare safety-net payments (disproportionate share hospital and 
uncompensated care payments) using the MedPAC-developed Medicare 
Safety-Net Index (MSNI) for hospitals. In addition, MedPAC recommends 
adding $2 billion to this MSNI pool of funds to help maintain the 
financial viability of Medicare safety-net hospitals and recommended to 
Congress transitional approaches for a MSNI policy.
    We refer readers to the March 2023 MedPAC report, which is 
available for download at www.medpac.gov, for a complete discussion on 
these recommendations.
    In light of these recommendations, and in particular those 
concerning safety net hospitals, we look forward to working with 
Congress and we seek comments on approaches CMS could take. We are 
proposing an applicable percentage increase for FY 2024 of 2.8 percent 
as described in section 1886(b)(3)(B) of the Act, provided the hospital 
submits quality data and is a meaningful EHR user consistent with these 
statutory requirements. We note that, because the operating and capital 
payments in the IPPS remain separate, we are continuing to use separate 
updates for operating and capital payments in the IPPS. The proposed 
update to the capital rate is discussed in section III. of the Addendum 
to this proposed rule.
    With regard to MedPAC's recommendation for a MSNI policy, we note 
that a discussion is in section X.C. of the preamble of this proposed 
rule. We note that section 1886(d)(5)(F) of the Act provides for 
additional Medicare payments, called Medicare disproportionate share 
hospital (DSH) payments, to subsection (d) hospitals that serve a 
significantly disproportionate number of low-income patients. Section 
1886(r) of the Act provides that, for FY 2014 and each subsequent 
fiscal year, the Secretary shall pay each such subsection (d) hospital 
that is eligible for DSH an empirically justified DSH payment equal to 
25 percent of the Medicare DSH adjustment they otherwise would have 
received. 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 has uncompensated care. We 
refer readers to section IV. of this proposed rule for a further 
discussion of Medicare DSH and uncompensated care payments.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this proposed 
rule, and, when we proceed with a subsequent document(s), we will 
respond to those comments in the preamble to that document.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on March 22, 2023.

List of Subjects

42 CFR Part 411

    Diseases, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 488

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 495

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Health records, 
Medicaid, Medicare, Penalties, Privacy, and Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

[[Page 27302]]

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
1. The authority citation for part 411 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, 
and 1395nn.


Sec.  411.353  [Amended]

0
2. Section 411.353 is amended in paragraph (d) by removing the text 
``Sec.  1003.101 of this title'' and adding in its place ``Sec.  
1003.110 of this title''.


Sec.  411.357  [Amended]

0
3. Section 411.357 is amended by--
0
a. In paragraph (s)(3), adding the word ``and'' at the end of the 
paragraph; and
0
b. In paragraph (s)(4), removing ``; and'' and adding in its place a 
period.


Sec.  411.362  [Amended]

0
4. Section 411.362 is amended by--
0
a. In paragraph (a), removing the definitions of ``Baseline number of 
operating rooms, procedure rooms, and beds,'' ``External data source,'' 
and ``Main campus of the hospital'';
0
b. In paragraph (b)(2), removing the phrase ``is granted pursuant to 
paragraph (c) of this section'' and adding in its place the phrase ``is 
approved under Sec.  411.363''; and
0
c. Removing paragraph (c).
0
5. Section 411.363 is added to read as follows:


Sec.  411.363  Process for requesting an exception from the prohibition 
on facility expansion.

    (a) Definitions. For purposes of this section--
    Baseline number of operating rooms, procedure rooms, and beds means 
the number of operating rooms, procedure rooms, and beds for which the 
applicable hospital or high Medicaid facility is licensed as of March 
23, 2010 (or, in the case of a hospital that did not have a provider 
agreement in effect as of March 23, 2010, but does have a provider 
agreement in effect on December 31, 2010, the date of effect of such 
agreement). For purposes of determining the number of beds in a 
hospital's baseline number of operating rooms, procedure rooms, and 
beds, a bed is included if the bed is considered licensed for purposes 
of State licensure, regardless of the specific number of beds 
identified on the physical license issued to the hospital by the State.
    External data source means a data source that meets all of 
following:
    (i) Is generated, maintained, or under the control of a State 
Medicaid agency.
    (ii) Is reliable and transparent.
    (iii) Maintains data that, for purposes of the process described in 
paragraph (c) of this section, are readily available and accessible to 
the requesting hospital, comparison hospitals, and CMS.
    (iv) Maintains or generates data that, for purposes of the process 
described in paragraph (c) of this section, are accurate, complete, and 
objectively verifiable.
    Main campus of the hospital means ``campus'' as defined at Sec.  
413.65(a)(2) of this chapter.
    Procedure room has the meaning set forth at Sec.  411.362(a).
    (b) Eligibility to request an exception from the prohibition on 
facility expansion. (1) CMS will not consider a request for an 
exception from the prohibition on facility expansion from a hospital 
that is not eligible to request the exception.
    (2) A hospital that meets the criteria for an applicable hospital 
or a high Medicaid facility is eligible to request an exception from 
the prohibition on facility expansion for consideration by CMS, 
provided that--
    (i) CMS has not previously approved a request for an exception from 
the prohibition on facility expansion that would allow the hospital's 
number of operating rooms, procedure rooms, and beds for which the 
hospital is licensed to reach 200 percent of the hospital's baseline 
number of operating rooms, procedure rooms, and beds if the full 
expansion is utilized; or
    (ii) It has been at least 2 calendar years from the date of the 
most recent decision by CMS approving or denying the hospital's most 
recent request for an exception from the prohibition on facility 
expansion.
    (c) Criteria for applicable hospital. An applicable hospital is a 
hospital that meets the following criteria:
    (1) Population increase. The hospital is located in a county that 
has a percentage increase in population that is at least 150 percent of 
the percentage increase in population of the State in which the 
hospital is located during the most recent 5-year period for which data 
are available as of the date that the hospital submits its request. To 
calculate State and county population growth, a hospital must use 
Bureau of the Census estimates.
    (2) Medicaid inpatient admissions. The hospital has an annual 
percent of total inpatient admissions under Medicaid that is equal to 
or greater than the average percent with respect to such admissions for 
all hospitals (including the requesting hospital) that have Medicare 
participation agreements with CMS and are located in the county in 
which the hospital is located during the most recent 12-month period 
for which data are available as of the date that the hospital submits 
its request. For purposes of this paragraph (c)(2), the most recent 12-
month period for which data are available means the most recent 12-
month period for which the data source used contains all data from the 
requesting hospital and each other hospital that has a Medicare 
participation agreement with CMS and is located in the county in which 
the requesting hospital is located.
    (i) With respect to requests submitted before October 1, 2023, a 
hospital may use filed Medicare hospital cost report data from the 
Healthcare Cost Report Information System (HCRIS) or data from an 
external data source (as defined in paragraph (a) of this section) to 
estimate its annual percent of total inpatient admissions under 
Medicaid and the average percent with respect to such admissions for 
all hospitals (including the requesting hospital) that have Medicare 
participation agreements with CMS and are located in the county in 
which the hospital is located.
    (ii) With respect to requests submitted on or after October 1, 
2023, a hospital may use only filed Medicare hospital cost report data 
from HCRIS to estimate its annual percent of total inpatient admissions 
under Medicaid and the average percent with respect to such admissions 
for all hospitals (including the requesting hospital) that have 
Medicare participation agreements with CMS and are located in the 
county in which the hospital is located.
    (3) Nondiscrimination. The hospital does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (4) Average bed capacity. The hospital is located in a State in 
which the average bed capacity in the State is less than the national 
average bed capacity during the most recent fiscal year for which 
HCRIS, as of the date that the hospital submits its request, contains 
data from a sufficient number of hospitals to determine a State's 
average bed capacity and the national average bed capacity.
    (i) CMS will provide on its website State average bed capacities 
and the national average bed capacity.
    (ii) For purposes of this paragraph (c)(4), sufficient number means 
the number of hospitals, as determined by CMS that would ensure that 
the determination under this paragraph (c)(4) would not materially 
change after additional hospital data are reported.
    (5) Average bed occupancy. The hospital has an average bed 
occupancy rate that is greater than the average bed occupancy rate in 
the State in which the

[[Page 27303]]

hospital is located during the most recent fiscal year for which HCRIS, 
as of the date that the hospital submits its request, contains data 
from a sufficient number of hospitals to determine the requesting 
hospital's average bed occupancy rate and the relevant State's average 
bed occupancy rate.
    (i) A hospital must use filed hospital cost report data from HCRIS 
to determine its average bed occupancy rate.
    (ii) CMS will provide on its website State average bed occupancy 
rates. For purposes of this paragraph (c)(5), ``sufficient number'' 
means the number of hospitals, as determined by CMS that would ensure 
that the determination under this paragraph (c)(5) would not materially 
change after additional hospital data are reported.
    (6) Hospital location. For purposes of paragraph (c) of this 
section, a hospital is located in the county and State in which the 
main campus of the hospital is located.
    (d) Criteria for high Medicaid facility. A high Medicaid facility 
is a hospital that meets all of the following criteria:
    (1) Sole hospital. The hospital is not the sole hospital in the 
county in which the hospital is located.
    (2) Medicaid inpatient admissions. With respect to each of the 
three most recent 12-month periods for which data are available as of 
the date the hospital submits its request, the hospital has an annual 
percent of total inpatient admissions under Medicaid that is estimated 
to be greater than such percent with respect to such admissions for 
each other hospital that has a Medicare participation agreement with 
CMS and is located in the county in which the hospital is located. For 
purposes of this paragraph (d)(2), the most recent 12-month period for 
which data are available means the most recent 12-month period for 
which the data source used contains all data from the requesting 
hospital and each other hospital that has a Medicare participation 
agreement with CMS and is located in the county in which the requesting 
hospital is located.
    (i) With respect to requests submitted before October 1, 2023, a 
hospital may use filed Medicare hospital cost report data from HCRIS or 
data from an external data source (as defined in paragraph (a) of this 
section) to estimate its annual percentage of total inpatient 
admissions under Medicaid and the annual percentages of total inpatient 
admissions under Medicaid for each other hospital that has a Medicare 
participation agreement with CMS and is located in the county in which 
the hospital is located.
    (ii) With respect to requests submitted on or after October 1, 
2023, a hospital may use only filed Medicare hospital cost report data 
from HCRIS to estimate its annual percentage of total inpatient 
admissions under Medicaid and the annual percentages of total inpatient 
admissions under Medicaid for each other hospital that has a Medicare 
participation agreement with CMS and is located in the county in which 
the hospital is located.
    (3) Nondiscrimination. The hospital does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (4) Hospital location. For purposes of paragraph (d) of this 
section, a hospital is located in the county in which the main campus 
of the hospital is located.
    (e) Procedure for submitting a request for an exception from the 
prohibition on facility expansion. (1) A hospital must submit the 
request for an exception from the prohibition on facility expansion and 
the signed certification set forth in paragraph (e)(3) of this section 
electronically to CMS according to the instructions specified on the 
CMS website.
    (2) For a request for an exception from the prohibition on facility 
expansion to be considered by CMS, the request must include all of the 
following information:
    (i) All of the following information for the hospital requesting an 
exception:
    (A) Name.
    (B) Address.
    (C) National Provider Identification number(s) (NPI).
    (D) Tax Identification Number(s) (TIN).
    (E) CMS Certification Number(s) (CCN).
    (ii)(A) The name of the county in which the main campus of the 
hospital requesting an exception is located; and
    (B) The names of any counties in which the hospital provides 
inpatient or outpatient hospital services or plans to provide inpatient 
or outpatient hospital services if CMS approves the request.
    (iii) The following information for the contact person who will be 
available to discuss the request with CMS on behalf of the hospital:
    (A) Name.
    (B) Title.
    (C) Address to receive hard copy mail.
    (D) Electronic mail address.
    (E) Daytime telephone number.
    (iv)(A) A statement identifying the hospital as an applicable 
hospital or high Medicaid facility; and
    (B) A detailed explanation with supporting documentation regarding 
whether and how the hospital meets each of the criteria for an 
applicable hospital or high Medicaid facility.
    (v) A statement and, if available, supporting documentation 
explaining how the hospital satisfies the criterion in paragraph (c)(3) 
or (d)(3) of this section that it does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (vi) Documentation supporting all of the following:
    (A) The hospital's calculations of its baseline number of operating 
rooms, procedure rooms, and beds.
    (B) The hospital's number of operating rooms, procedure rooms, and 
beds for which the hospital is licensed as of the date that the 
hospital submits a request for an exception.
    (C) Whether and how the hospital has used any expansion facility 
capacity approved in a prior request.
    (D) The additional number of operating rooms, procedure rooms, and 
beds by which the hospital requests to expand.
    (E) Whether the hospital plans to use expansion facility capacity 
to provide specialty services (for example, maternity or psychiatric 
services) if the request is approved.
    (vii) Information regarding the need for additional operating 
rooms, procedure rooms, and beds--
    (A) For the hospital to serve Medicaid, uninsured, and underserved 
populations;
    (B) In the county in which the main campus of the hospital is 
located;
    (C) In any county in which the hospital provides inpatient or 
outpatient hospital services as of the date the hospital submits the 
request; and
    (D) In any county in which the hospital plans to provide inpatient 
or outpatient hospital services if CMS approves the request.
    (3) A request for an exception from the prohibition on facility 
expansion must include the following certification signed by an 
authorized representative of the hospital: ``With knowledge of the 
penalties for false statements provided by 18 U.S.C. 1001, I certify 
that all of the information provided in the request and all of the 
documentation provided with the request is true and correct to the best 
of my knowledge and belief.'' An authorized representative is the chief 
executive officer, chief financial officer, or other individual who is 
authorized by the hospital to make the request.
    (f) Community input. (1) Upon submitting a request for an exception 
from the prohibition on facility expansion and until the hospital 
receives a CMS decision on the request,

[[Page 27304]]

the hospital must disclose on any public website for the hospital that 
it is requesting an exception from the prohibition on facility 
expansion.
    (2) A hospital submitting a request for an exception from the 
prohibition on facility expansion must provide actual notification that 
it is requesting an exception, in either electronic or hard copy form, 
directly to hospitals whose data are part of the comparisons in 
paragraphs (c)(2) and (d)(2) of this section and hospitals located in 
the requesting hospital's community as defined in paragraph (f)(3) of 
this section.
    (3)(i) Individuals and entities in the hospital's community may 
provide input with respect to the hospital's request for an exception 
from the prohibition on facility expansion, including, but not limited 
to, input regarding whether the hospital is eligible to request the 
expansion exception under paragraph (b) of this section and the factors 
listed in paragraph (i)(2) of this section that CMS will consider in 
deciding whether to approve or deny a hospital's request.
    (ii) The hospital's community includes the geographic area served 
by the hospital (as defined at Sec.  411.357(e)(2)) and all of the 
following:
    (A) The county in which the hospital's main campus is located.
    (B) The counties in which the hospital provides inpatient or 
outpatient hospital services as of the date the hospital submits the 
request.
    (C) The counties in which the hospital plans to provide inpatient 
or outpatient hospital services if CMS approves the request.
    (iii) Community input must be received no later than 60 days after 
CMS publishes notice of the hospital's request in the Federal Register.
    (A) Such input must take the form of written comments.
    (B) The written comments must be submitted according to the 
instructions in the Federal Register notice of the hospital's request.
    (C) If CMS receives written comments from the community, the 
hospital has 30 days after CMS notifies the hospital of the written 
comments to submit a rebuttal statement.
    (g) Timing of complete request. (1) If only filed Medicare hospital 
cost report data from HCRIS are used in the hospital's request for an 
exception from the prohibition on facility expansion, the written 
comments, and the hospital's rebuttal statement, a request will be 
deemed complete no later than 90 days after--
    (i) The end of the 60-day comment period if CMS does not receive 
written comments from the community.
    (ii) The end of the 30-day rebuttal period, regardless of whether 
the hospital submits a rebuttal statement, if CMS receives written 
comments from the community.
    (2) If data from an external data source are used in the hospital's 
request for an exception from the prohibition on facility expansion, 
the written comments, or the hospital's rebuttal statement a request 
will be deemed complete no later than 180 days after the end of--
    (i) The 60-day comment period if CMS does not receive written 
comments from the community.
    (ii) The 30-day rebuttal period, regardless of whether the hospital 
submits a rebuttal statement, if CMS receives written comments from the 
community.
    (h) Eligibility determination. Based on the information described 
in paragraph (e) of this section, CMS will first determine whether the 
hospital is eligible to make the request for an exception from the 
prohibition on facility expansion under paragraph (b) of this section.
    (i) CMS decision to approve or deny a request for an exception from 
the prohibition on facility expansion--(1) Data and information for 
consideration by CMS. In reviewing a request for an exception from the 
prohibition on facility expansion, CMS--
    (i) Will consider data and information provided by the hospital in 
its request, included in the community input, if any, and provided by 
the hospital in its rebuttal statement, if any; and
    (ii) May also consider any other data and information relevant to 
the basis for its decision.
    (2) Basis for decision. Factors that CMS will consider in deciding 
whether to approve or deny a hospital's request for an exception from 
the prohibition on facility expansion include but are not limited to 
the following:
    (i) The specialty (for example, maternity, psychiatric, or 
substance use disorder care) of the hospital or the services furnished 
by or to be furnished by the hospital if CMS approves the request.
    (ii) Program integrity or quality of care concerns related to the 
hospital.
    (iii) Whether the hospital has a need for additional operating 
rooms, procedure rooms, or beds.
    (iv) Whether there is a need for additional operating rooms, 
procedure rooms, or beds in the following:
    (A) The county in which the main campus of the hospital is located.
    (B) Any county in which the hospital provides inpatient or 
outpatient hospital services as of the date the hospital submits the 
request.
    (C) Any county in which the hospital plans to provide inpatient or 
outpatient hospital services if CMS approves the request.
    (j) Permitted increase in facility capacity. (1) Except as provided 
in paragraph (j)(2) of this section, a permitted increase under this 
section--
    (i) May not result in the number of operating rooms, procedure 
rooms, and beds for which the hospital is licensed exceeding 200 
percent of the hospital's baseline number of operating rooms, procedure 
rooms, and beds; and
    (ii) May occur only in facilities on the hospital's main campus.
    (2) The limitations of paragraph (j)(1) of this section do not 
apply to an increase in facility capacity approved by CMS with respect 
to a request for an exception from the prohibition on facility 
expansion submitted by a high Medicaid facility between January 1, 
2021, and September 30, 2023.
    (k) Publication of final decisions. Not later than 60 days after 
receiving a complete request--
    (1) If CMS determines that the hospital is not eligible to make the 
request for an exception from the prohibition on facility expansion 
under paragraph (b) of this section, CMS will publish in the Federal 
Register notice of such determination; or
    (2) If CMS determines that the hospital is eligible to make the 
request for an exception from the prohibition on facility expansion 
under paragraph (b) of this section, CMS will publish in the Federal 
Register notice of such determination and its decision regarding the 
hospital's request for an exception from the prohibition on facility 
expansion.
    (l) Limitation on review. There shall be no administrative or 
judicial review under section 1869 of the Act, section 1878 of the Act, 
or otherwise of the process under this section (including the 
establishment of such process and any CMS determination or decision 
under such process).

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
6. The authority citation for part 412 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.

0
7. Section 412.87 is amended by--
0
a. Redesignating paragraph (e) as paragraph (f);
0
b. Adding a new paragraph (e);

[[Page 27305]]

0
c. In newly redesignated paragraph (f)(2)--
0
i. Removing the reference ``paragraph (e)(3)'' and adding in its place 
the reference ``paragraph (f)(3)''; and
0
ii. Removing the phrase ``authorization by July 1 prior'' and adding in 
its place the phrase ``authorization by May 1 prior''; and
0
d. In newly redesignated paragraph (f)(3), removing the phrase ``by the 
July 1 deadline specified in paragraph (e)(2) of this section may be 
conditionally approved for the new technology add-on payment for a 
particular fiscal year'' and adding in its place the phrase ``by July 1 
prior to the particular fiscal year for which the applicant applied for 
new technology add-on payments may be conditionally approved for the 
new technology add-on payment for that fiscal year''.
    The addition reads as follows:


Sec.  412.87  Additional payment for new medical services and 
technologies: General provisions.

* * * * *
    (e) FDA status requirement. CMS only considers, for add-on payments 
for a particular fiscal year, an application for which one of the 
following conditions are met at the time of new technology add-on 
payment application submission:
    (1) The new medical service or technology is FDA market authorized 
for the indication that is the subject of the new technology add-on 
payment application.
    (2) The new medical service or technology is the subject of a 
complete and active FDA marketing authorization request and 
documentation of FDA acceptance or filing of the request is provided to 
CMS.
* * * * *


Sec.  412.90  [Amended]

0
8. Section 412.90 is amended in paragraph (j) by removing the date 
``October 1, 2022'' and adding in its place the date ``October 1, 
2024''.
0
9. Section 412.92 is amended by--
0
a. In paragraph (b)(1)(v), removing the term ``forward'' and adding the 
term ``forwards'' in its place;
0
b. In paragraph (b)(2)(i), removing the second reference to ``paragraph 
(b)(2)(v) of this section'' and adding in its place the reference 
``paragraphs (b)(2)(v) and (vi) of this section''.
0
c. Revising paragraphs (b)(2)(ii)(C) and (b)(2)(iv); and
0
d. Adding paragraph (b)(2)(vi).
    The revisions and addition read as follows:


Sec.  412.92  Special treatment: Sole community hospitals.

* * * * *
    (b) * * *
    (2) * * *
    (ii) * * *
    (C) If the hospital's application for sole community hospital 
status was received on or after October 1, 2018, the effective date is 
as provided in paragraph (b)(2)(i) of this section.
* * * * *
    (iv) For applications received on or before September 30, 2018, a 
hospital classified as a sole community hospital receives a payment 
adjustment, as described in paragraph (d) of this section, effective 
with discharges occurring on or after 30 days after the date of CMS' 
approval of the classification. For applications received on or after 
October 1, 2018, a hospital classified as a sole community hospital 
receives a payment adjustment, as described in paragraph (d) of this 
section, effective with discharges occurring on or after the effective 
date as provided in paragraph (b)(2)(i) of this section.
* * * * *
    (vi) For applications received on or after October 1, 2023, where 
eligibility for sole community hospital classification is dependent on 
the hospital's merger with another hospital, sole community hospital 
status is effective as of the effective date of the approved merger if, 
and only if, the date that the Medicare administrative contractor (MAC) 
receives the complete application is within 90 days of CMS' written 
notification to the hospital of the approval of the merger.
* * * * *


Sec.  412.101  [Amended]

0
10. Section 412.101 is amended by--
0
a. In paragraph (b)(2)(i), removing the phrase ``FY 2010 and FY 2023 
and subsequent'' and adding in its place the phrase ``FY 2010 and FY 
2025 and subsequent'';
0
b. In paragraph (b)(2)(iii), removing the phrase ``For FY 2019 through 
FY 2022'' and adding in its place the phrase ``For FY 2019 through FY 
2024'';
0
c. In paragraph (c)(1), removing the phrase ``FY 2010 and FY 2023 and 
subsequent'' and adding in its place the phrase ``FY 2010 and FY 2025 
and subsequent''; and
0
d. In paragraph (c)(3) introductory text, removing the phrase ``For FY 
2019 through FY 2022'' and adding in its place the phrase ``For FY 2019 
through FY 2024''.
0
11. Section 412.103 is amended by-
0
a. In paragraph (d)(1), removing the reference ``paragraph (d)(2) of 
this section'' and adding in its place the reference ``paragraphs 
(d)(2) and (3) of this section''; and
0
b. Adding paragraph (d)(3).
    The addition reads as follows:


Sec.  412.103  Special treatment: Hospitals located in urban areas and 
that apply for reclassification as rural.

* * * * *
    (d) * * *
    (3) CMS will consider a hospital that satisfies the criteria set 
forth in paragraph (a)(3) of this section and which qualifies for sole 
community hospital status in accordance with the requirements of Sec.  
412.92(b)(2)(vi) as being located in the rural area of the State in 
which the hospital is located as of the effective date set forth in 
Sec.  412.92(b)(2)(vi).
* * * * *


Sec.  412.108  [Amended]

0
12. Section 412.108 is amended by--
0
a. In paragraph (a)(1) introductory text, removing the date ``October 
1, 2022'' and adding in its place the date ``October 1, 2024''; and
0
b. In paragraph (c)(2)(iii) introductory text, removing the date 
``October 1, 2022'' and adding in its place the date ``October 1, 
2024''.
0
13. Section 412.140 is amended by adding paragraph (g) to read as 
follows:


Sec.  412.140  Participation, data submission, and validation 
requirements under the Hospital Inpatient Quality Reporting (IQR) 
Program.

* * * * *
    (g) Retention and removal of quality measures under the Hospital 
IQR Program--(1) General rule for the retention of quality measures. 
Quality measures adopted for the Hospital IQR Program measure set for a 
previous payment determination year are retained for use in subsequent 
payment determination years, except when they are removed, suspended, 
or replaced as set forth in paragraphs (g)(2) and (3) of this section.
    (2) Immediate measure removal. For cases in which CMS believes that 
the continued use of a measure raises specific patient safety concerns, 
CMS will immediately remove a quality measure from the Hospital IQR 
Program and will promptly notify hospitals and the public of the 
removal of the measure and the reasons for its removal through the 
Hospital IQR Program ListServ and the QualityNet website, as 
applicable.
    (3) Measure removal, suspension, or replacement through the 
rulemaking process. Unless a measure raises specific safety concerns as 
set forth in paragraph (g)(2) of this section, CMS will use the regular 
rulemaking process

[[Page 27306]]

to remove, suspend, or replace quality measures in the Hospital IQR 
Program to allow for public comment.
    (i) Factors for consideration of removal of quality measures. CMS 
will weigh whether to remove a measure based on the following factors:
    (A) Factor 1. Measure performance among hospitals is so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made (``topped out'' measure).
    (B) Factor 2. A measure does not align with current clinical 
guidelines or practice.
    (C) Factor 3. The availability of a more broadly applicable measure 
(across settings or populations), or the availability of a measure that 
is more proximal in time to desired patient outcomes for the particular 
topic.
    (D) Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes.
    (E) Factor 5. The availability of a measure that is more strongly 
associated with desired patient outcomes for the particular topic.
    (F) Factor 6. Collection or public reporting of a measure leads to 
negative unintended consequences other than patient harm.
    (G) Factor 7. It is not feasible to implement the measure 
specifications.
    (H) Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
    (ii) Criteria to determine topped-out measures. For the purposes of 
the Hospital IQR Program, a measure is considered to be topped-out 
under paragraph (g)(3)(i)(A) of this section when it meets both of the 
following criteria:
    (A) Statistically indistinguishable performance at the 75th and 
90th percentiles (defined as when the difference between the 75th and 
90th percentiles for a hospital's measure is within 2 times the 
standard error of the full data set).
    (B) A truncated coefficient of variation less than or equal to 
0.10.
    (iii) Application of measure removal factors. The benefits of 
removing a measure from the Hospital IQR Program will be assessed on a 
case-by-case basis. Under this case-by-case approach, a measure will 
not be removed solely on the basis of meeting any specific factor.
0
14. Section 412.160 is amended by--
0
a. Adding the definitions of ``Health equity adjustment bonus points'' 
and ``Measure performance scaler'' in alphabetical order;
0
b. Revising the definition of ``Total Performance Score''; and
0
c. Adding the definition of ``Underserved multiplier'' in alphabetical 
order.
    The additions and revision read as follows:


Sec.  412.160  Definitions for the Hospital Value-Based Purchasing 
(VBP) Program.

* * * * *
    Health equity adjustment bonus points means the product of the 
measure performance scaler and the underserved multiplier.
* * * * *
    Measure performance scaler means the sum of the points awarded to a 
hospital for each domain based on its unweighted domain score for the 
domain for the applicable fiscal year as calculated under Sec.  
412.165(b)(3).
* * * * *
    Total Performance Score means the numeric scores awarded to each 
hospital based on its performance under the Hospital VBP Program with 
respect to a fiscal year as follows:
    (1) For performance years before FY 2026, ranging from 0 to 100 for 
program years before FY 2026.
    (2) For performance years on or after 2026, ranging from 0 to 110 
for program years on or after FY 2026.
    Underserved multiplier means a logistic function applied to the 
proportion of the hospital's patients with dual eligibility status out 
of the hospital's total Medicare inpatient population during the 
calendar year that is 2 years prior to the applicable fiscal year.
* * * * *
0
15. Section 412.162 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  412.162  Process for reducing the base operating DRG payment 
amount and applying the value-based incentive payment amount adjustment 
under the Hospital Value-Based Purchasing (VBP) Program.

* * * * *
    (b) * * *
    (3) Calculation of the value-based incentive payment percentage. 
The value-based incentive payment percentage is calculated as the 
product of all of the following:
    (i) The applicable percent as defined in Sec.  412.160.
    (ii)(A) For program years before FY 2026, the hospital's Total 
Performance Score divided by 100; or
    (B) For program years on or after FY 2026, the hospital's Total 
Performance Score divided by 110.
    (iii) The linear exchange function slope.
* * * * *
0
16. Section 412.164 is amended by adding paragraph (c) to read as 
follows:


Sec.  412.164  Measure selection under the Hospital Value-Based 
Purchasing (VBP) Program.

* * * * *
    (c)(1) Updating of measure specifications. CMS uses rulemaking to 
make substantive updates to the specifications of measures used in the 
Hospital VBP Program. CMS announces technical measure specification 
updates through the QualityNet website (https://qualitynet.cms.gov) and 
listserv announcements.
    (2) Measure retention. All quality measures specified under section 
1866(o)(2) of the Act for the Hospital VBP Program measure set remain 
in the measure set unless CMS, through rulemaking, removes or replaces 
them.
    (3) Measure removal factors--(i) General rule. CMS may remove or 
replace a measure based on one of the following factors:
    (A) Factor 1. Measure performance among hospitals is so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made (``topped out'' measures), defined as: 
statistically indistinguishable performance at the 75th and 90th 
percentiles; and truncated coefficient of variation <=0.10.
    (B) Factor 2. A measure does not align with current clinical 
guidelines or practice.
    (C) Factor 3. The availability of a more broadly applicable measure 
(across settings or populations), or the availability of a measure that 
is more proximal in time to desired patient outcomes for the particular 
topic.
    (D) Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes.
    (E) Factor 5. The availability of a measure that is more strongly 
associated with desired patient outcomes for the particular topic.
    (F) Factor 6. Collection or public reporting of a measure leads to 
negative unintended consequences other than patient harm.
    (G) Factor 7. It is not feasible to implement the measure 
specifications.
    (H) Factor 8. The costs associated with a measure outweigh the 
benefit of its continued use in the program.
    (ii) Application of measure removal factors. The benefits of 
removing a measure from the Hospital VBP Program will be assessed on a 
case-by-case basis. Under this case-by-case approach, a measure will 
not be removed solely on the basis of meeting any specific factor.
    (iii) Patient safety exception. Upon a determination by CMS that 
the continued requirement for hospitals to submit data on a measure 
raises specific patient safety concerns, CMS may elect

[[Page 27307]]

to immediately remove the measure from the Hospital VBP measure set. 
CMS will, upon removal of the measure--
    (A) Provide notice to hospitals and the public at the time CMS 
removes the measure, along with a statement of the specific patient 
safety concerns that would be raised if hospitals continued to submit 
data on the measure; and
    (B) Provide notice of the removal in the Federal Register.
0
17. Section 412.165 is amended by--
0
a. In paragraph (a)(1), adding a sentence at the end of the paragraph 
followed by a table;
0
b. Redesignating paragraph (b)(5) as paragraph (b)(6);
0
c. Adding a new paragraph (b)(5); and
0
d. Revising newly redesignated paragraph (b)(6).
    The additions and revision read as follows:


Sec.  412.165  Performance scoring under the Hospital Value-Based 
Purchasing (VBP) Program.

* * * * *
    (a) * * *
    (1) * * * The applicable minimum number of cases are set forth as 
follows:

    Table 1 to Paragraph (a)(1)--Minimum Case Number Requirements for
                          Hospital VBP Program
------------------------------------------------------------------------
           Measure short name                Minimum number of cases
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.................................  Hospitals must report a minimum
                                          number of 100 completed
                                          Hospital Consumer Assessment
                                          of Healthcare providers and
                                          Systems (HCAHPS) surveys.
------------------------------------------------------------------------
                        Clinical Outcomes Domain
------------------------------------------------------------------------
MORT-30-AMI............................  Hospitals must report a minimum
                                          number of 25 cases.
MORT-30-HF.............................  Hospitals must report a minimum
                                          number of 25 cases.
MORT-30-PN (updated cohort)............  Hospitals must report a minimum
                                          number of 25 cases.
MORT-30-COPD...........................  Hospitals must report a minimum
                                          number of 25 cases.
MORT-30-CABG...........................  Hospitals must report a minimum
                                          number of 25 cases.
COMP-HIP-KNEE..........................  Hospitals must report a minimum
                                          number of 25 cases.
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
CAUTI..................................  Hospitals have a minimum of
                                          1.000 predicted infections as
                                          calculated by the Centers for
                                          Disease Control and Prevention
                                          (CDC).
CLABSI.................................  Hospitals have a minimum of
                                          1.000 predicted infections as
                                          calculated by the CDC.
Colon and Abdominal Hysterectomy SSI...  Hospitals have a minimum of
                                          1.000 predicted infections as
                                          calculated by the CDC.
MRSA Bacteremia........................  Hospitals have a minimum of
                                          1.000 predicted infections as
                                          calculated by the CDC.
CDI....................................  Hospitals have a minimum of
                                          1.000 predicted infections as
                                          calculated by the CDC.
SEP-1..................................  Hospitals must report a minimum
                                          number of 25 cases.
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB...................................  Hospitals must report a minimum
                                          number of 25 cases.
------------------------------------------------------------------------

* * * * *
    (b) * * *
    (5) For program years on or after FY 2026, CMS will determine the 
health equity adjustment bonus points the hospital has earned for the 
fiscal year as follows:
    (i) CMS will calculate the measure performance scaler by:
    (A) Awarding 4 points where the hospital's performance on the 
domain for the fiscal year meets or exceeds the top third of 
performance of all hospitals on the domain for the same fiscal year.
    (B) Awarding 2 points where the hospital's performance on the 
domain for the fiscal year meets or exceeds the middle third of 
performance, but is less than the top third of performance, of all 
hospitals on the domain for the same fiscal year.
    (C) Awarding 0 points where the hospital's performance on the 
domain is less than the middle third of performance of all hospitals on 
the domain for the fiscal year.
    (D) Sum the points awarded under paragraph (b)(5)(i) of this 
section.
    (ii) CMS will calculate the underserved multiplier for the hospital 
for the fiscal year.
    (iii) CMS will calculate the health equity adjustment bonus points 
by multiplying the measure performance scaler calculated under 
paragraph (b)(5)(i) of this section and the underserved multiplier 
calculated under paragraph (b)(5)(ii) of this section.
    (iv) CMS will cap the total number of health equity adjustment 
bonus points that could be added to a hospital's Total Performance 
Score for a program year at 10.
    (6) After the domain scores are weighted:
    (i) For program years before FY 2026, the sum of the weighted 
domain scores is the hospital's Total Performance Score for the fiscal 
year.
    (ii) For program years on or after FY 2026, the sum of the weighted 
domain scores and the health equity adjustment bonus points is the 
hospital's Total Performance Score for the fiscal year.
* * * * *


Sec.  412.320  [Amended]

0
18. Section 412.320 is amended in paragraph (a)(1)(iii) by adding the 
phrase ``and before October 1, 2023,'' after ``October 1, 2006,''.
0
19. Section 412.560 is amended by revising paragraph (f)(1) to read as 
follows:

[[Page 27308]]

Sec.  412.560  Requirements under the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP).

* * * * *
    (f) * * *
    (1) Long-term care hospitals must meet or exceed the following data 
completeness thresholds with respect to a fiscal year:
    (i)(A) The threshold set at 100 percent completion of measures data 
and standardized patient assessment data collected using the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) on 
at least 80 percent of the assessments LTCHs submit through the CMS 
designated data submission system for the FY 2014 through the FY 2025 
program year.
    (B) The threshold set at 100 percent completion of measures data 
and standardized patient assessment data collected using the LCDS on at 
least 90 percent of the assessments LTCHs submit through the CMS 
designated data submission system beginning with the FY 2026 program 
year.
    (ii) The threshold set at 100 percent for measures data collected 
and submitted using the Centers for Disease Control and Prevention's 
(CDC) National Healthcare Safety Network (NHSN) for FY 2014 and all 
subsequent payment updates.
* * * * *

PART 419--PROSECTIVE PAYMENT SYSTEMS FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES

0
20. The authority citation for part 419 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395l(t), and 1395hh.

0
21. Section 419.92 is amended by adding paragraph (d) to read as 
follows:


Sec.  419.92  Payment to rural emergency hospitals.

* * * * *
    (d) REH payment for the costs of graduate medical education. (1) 
For portions of cost reporting periods beginning on or after October 1, 
2023, an REH that incurs costs of training full-time equivalent (FTE) 
residents that rotate to the REH may receive direct graduate medical 
education payments for those costs.
    (2) Payment is equal to the Medicare reasonable costs that the REH 
incurs to train the FTE residents that rotate to the REH, as determined 
in accordance with section 1861(v)(1)(A) of the Act and the applicable 
principles of cost reimbursement in part 413 of this chapter, except 
that the following payment principles are excluded:
    (i) Lesser of cost or charges.
    (ii) Ceilings on hospital operating costs.
    (3) An REH that does not incur costs of training FTE residents that 
rotate to the REH is considered a nonprovider setting for purposes of 
graduate medical education payments, consistent with Sec. Sec.  
412.105(f)(1)(ii)(E) and 413.78(g) of this chapter.
    (4) Direct graduate medical education payments to REHs made under 
this section are made from the Federal Hospital Insurance Trust Fund.

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
22. The authority citation for part 488 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.


Sec.  488.1  [Amended]

0
23. Section 488.1 is amended in the definition of ``Provider of 
services or provider'' by adding the phrase ``rural emergency 
hospital,'' after ``critical access hospital,''.
0
 24. Section 488.2 is revised to read as follows:


Sec.  488.2  Statutory basis.

    This part is based on the indicated provisions of the following 
sections of the Act:

                         Table 1 to Sec.   488.2
------------------------------------------------------------------------
                Section                              Subject
------------------------------------------------------------------------
1128..................................  Exclusion of entities from
                                         participation in Medicare.
1128A.................................  Civil money penalties.
1138(b)...............................  Requirements for organ
                                         procurement organizations and
                                         organ procurement agencies.
1814..................................  Conditions for, and limitations
                                         on, payment for Part A
                                         services.
1819..................................  Requirements for skilled nursing
                                         facilities (SNFs).
1820..................................  Requirements for critical access
                                         hospitals (CAHs).
1822..................................  Hospice Program survey and
                                         enforcement procedures.
1832(a)(2)(C).........................  Requirements for Organizations
                                         that provide outpatient
                                         physical therapy and speech
                                         language pathology services.
1832(a)(2)(F).........................  Requirements for ambulatory
                                         surgical centers (ASCs).
1832(a)(2)(J).........................  Requirements for partial
                                         hospitalization services
                                         provided by community mental
                                         health centers (CMHCs).
1861(e)...............................  Requirements for hospitals.
1861(f)...............................  Requirements for psychiatric
                                         hospitals.
1861(m)...............................  Requirements for Home Health
                                         Services.
1861(o)...............................  Requirements for Home Health
                                         Agencies.
1861(p)(4)............................  Requirements for rehabilitation
                                         agencies.
1861(z)...............................  Institutional planning standards
                                         that hospitals and SNFs must
                                         meet.
1861(aa)..............................  Requirements for rural health
                                         clinics (RHCs) and federally
                                         qualified health centers
                                         (FQHCs).
1861(cc)(2)...........................  Requirements for comprehensive
                                         outpatient rehabilitation
                                         facilities (CORFs).
1861(dd)..............................  Requirements for hospices.
1861(ee)..............................  Discharge planning guidelines
                                         for hospitals.
1861(ff)(3)(A)........................  Requirements for CMHCs.
1861(ss)(2)...........................  Accreditation of religious
                                         nonmedical health care
                                         institutions.
1861(kkk).............................  Requirements for rural emergency
                                         hospitals (REHs).
1863..................................  Consultation with state
                                         agencies, accrediting bodies,
                                         and other organizations to
                                         develop conditions of
                                         participation, conditions for
                                         coverage, conditions for
                                         certification, and requirements
                                         for providers or suppliers.
1864..................................  Use of State survey agencies.
1865..................................  Effect of accreditation.
1875(b)...............................  Requirements for performance
                                         review of CMS-approved
                                         accreditation programs.
1880..................................  Requirements for hospitals and
                                         SNFs of the Indian Health
                                         Service.
1881..................................  Requirements for end stage renal
                                         disease (ESRD) facilities.
1883..................................  Requirements for hospitals that
                                         furnish extended care services.
1891..................................  Conditions of participation for
                                         home health agencies; home
                                         health quality.
1902..................................  Requirements for participation
                                         in the Medicaid program.

[[Page 27309]]

 
1913..................................  Medicaid requirements for
                                         hospitals that provide nursing
                                         facility (NF) care.
1919..................................  Medicaid requirements for NFs.
------------------------------------------------------------------------

Sec.  488.18  [Amended]

0
25. Section 488.18 is amended in paragraph (d) by adding the phrase 
``or a rural emergency hospital (as defined in section 1861(kkk)(2) of 
the Act)'' after the parenthetical phrase ``(as defined in section 
1861(mm)(1) of the Act)''.
0
26. Section 488.70 is added to read as follows:


Sec.  488.70  Special requirements for rural emergency hospitals 
(REHs).

    An eligible facility submitting an application for enrollment under 
section 1866(j) of the Act to become a rural emergency hospital (REH) 
(as defined in Sec.  485.502 of this chapter) must also submit an 
action plan containing the following additional information:
    (a) Plan for provision of services. The provider must submit an 
action plan for initiating rural emergency hospital (REH) services (as 
defined in Sec.  485.502 of this chapter, and which must include the 
provision of emergency department services and observation care).
    (b) Transition plan. The provider must submit a detailed transition 
plan that lists the specific services that the provider will retain, 
modify, add, and discontinue as an REH.
    (c) Other outpatient medical and health services. The provider must 
submit a detailed description of the other medical and health services 
that it intends to furnish on an outpatient basis as an REH.
    (d) Use of additional facility payment. The provider must submit 
information regarding how the provider intends to use the additional 
facility payment provided in accordance with section 1834(x)(2) of the 
Act, including a description of the services that the additional 
facility payment would be supporting, such as the operation and 
maintenance of the facility and the furnishing of covered services (for 
example, telehealth services and ambulance services).

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
27. The authority citation for part 489 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 1395cc, 
1395ff, and 1395hh.

0
28. Section 489.102 is amended by--
0
a. In paragraph (a) introductory text, adding the phrase ``rural 
emergency hospitals,'' after ``critical access hospitals,''; and
0
b. Adding paragraph (b)(5).
    The addition reads as follows:


Sec.  489.102  Requirements for providers.

* * * * *
    (b) * * *
    (5) In the case of a rural emergency hospital, at the time of the 
individual's registration as a patient.
* * * * *

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
29. The authority citation for part 495 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.

0
30. Section 495.4 is amended in the definition of ``EHR reporting 
period for a payment adjustment year'' by adding paragraphs (2)(ix) and 
(3)(ix) to read as follows:


Sec.  495.4  Definitions.

* * * * *
    EHR reporting period for a payment adjustment year. * * *
    (2) * * *
    (ix) For an eligible hospital in CY 2025, the EHR reporting period 
is any continuous 180-day period within CY 2025 and applies for the FY 
2027 payment adjustment year.
    (3) * * *
    (ix) For a CAH in CY 2025, the EHR reporting period is any 
continuous 180-day period within CY 2025 and applies for the FY 2025 
payment adjustment year.
* * * * *
0
31. Section 495.40 is amended by--
0
a. Redesignating paragraphs (b)(2)(i)(H) through (J) as paragraphs 
(b)(2)(i)(I) through (K); and
0
b. Adding a new paragraph (b)(2)(i)(H).
    The addition reads as follows:


Sec.  495.40  Demonstration of meaningful use criteria.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (H) For CY 2024 and subsequent years, for an eligible hospital or 
CAH attesting to CMS, satisfied the required objectives and associated 
measures for meaningful use as defined by CMS.
* * * * *

    Dated: April 4, 2023.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2023-07389 Filed 4-10-23; 4:15 pm]
BILLING CODE 4120-01-P