[Federal Register Volume 88, Number 165 (Monday, August 28, 2023)]
[Rules and Regulations]
[Pages 58640-59438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16252]



[[Page 58639]]

Vol. 88

Monday,

No. 165

August 28, 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; 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; and Medicare Disproportionate Share 
Hospital (DSH) Payments: Counting Certain Days Associated With Section 
1115 Demonstrations in the Medicaid Fraction; Final Rule

  Federal Register / Vol. 88, No. 165 / Monday, August 28, 2023 / Rules 
and Regulations  

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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-F and CMS-1788-F]
RINs 0938-AV08 and 0938-AV17


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Policy Changes and Fiscal Year 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; and Medicare Disproportionate Share 
Hospital (DSH) Payments: Counting Certain Days Associated With Section 
1115 Demonstrations in the Medicaid Fraction

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

ACTION: Final rules.

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SUMMARY: This final rule will: revise the Medicare hospital inpatient 
prospective payment systems (IPPS) for operating and capital-related 
costs of acute care hospitals; make changes relating to Medicare 
graduate medical education (GME) for teaching hospitals; update the 
payment policies and the annual payment rates for the Medicare 
prospective payment system (PPS) for inpatient hospital services 
provided by long-term care hospitals (LTCHs); and make other policy-
related changes. This final rule also revises our regulations on the 
counting of days associated with individuals eligible for certain 
benefits provided by section 1115 demonstrations in the Medicaid 
fraction of a hospital's disproportionate patient percentage (DPP) used 
in the disproportionate share hospital (DSH) calculation.

DATES: This final rule is effective October 1, 2023. The amendments to 
42 CFR 488.18(d), published at 59 FR 32120, June 22, 1994, is effective 
August 1, 2023.

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], 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: 

Tables Available on the CMS Website

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

Table of Contents

    I. Executive Summary and Background
    A. Executive Summary
    B. Background Summary
    C. Summary of Provisions of Recent Legislation That Would Be 
Implemented in This Final Rule
    D. Issuance of a Notice Proposed Rulemaking and Summary of the 
Proposed Provisions
    E. Use of the Best Available Data in the FY 2024 IPPS and LTCH 
PPS Ratesetting
    F. Potential Payment Under the IPPS for Establishing and 
Maintaining Access to Essential Medicines
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) 
Classifications and Relative Weights

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    A. Background
    B. Adoption of the MS-DRGs and MS-DRG Reclassifications
    C. 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. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    B. Worksheet S-3 Wage Data for the FY 2024 Wage Index
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the FY 2024 Unadjusted Wage Index
    E. Occupational Mix Adjustment to the FY 2024 Wage Index
    F. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2024 Occupational Mix Adjusted Wage Index
    G. Application of the Rural Floor, Application of the State 
Frontier Floor, Continuation of the Low Wage Index Hospital Policy, 
and Permanent Transition to Cap Wage Index Losses
    H. FY 2024 Wage Index Tables
    I. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    J. Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    K. Reclassification From Urban to Rural Under Section 
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
    L. Process for Requests for Wage Index Data Corrections
    M. Labor-Related Share for the FY 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
    F. Counting Certain Days Associated With Section 1115 
Demonstration in the Medicaid Fraction
V. Other Decisions and Changes to the IPPS for Operating System
    A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy 
and MS-DRG Special Payments Policies (Sec.  412.4)
    B. Changes in the Inpatient Hospital 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) Annual Updates (Sec.  412.96)
    E. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)
    G. 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. 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.  
[thinsp]412.150 Through 412.154)
    K. Hospital Value-Based Purchasing (VBP) Program: Policy Changes 
(Sec. Sec.  [thinsp]412.160 Through 412.167)
    L. Hospital-Acquired Condition (HAC) Reduction Program
    M. Rural Community Hospital Demonstration Program
VI. Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    C. Annual Update for FY 2024
    D. Treatment of Rural Reclassifications for Capital DSH Payments
VII. Changes for Hospitals Excluded From the IPPS
    A. Rate-of-Increase in Payments to Excluded Hospitals for FY 
2024
    B. Report on Adjustment (Exception) Payments
    C. Critical Access Hospitals (CAHs)
VIII. 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 Changes to 
the LTCH PPS for FY 2024
IX. 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 Coverage Among Healthcare Personnel Measure
    C. Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program
    D. Changes to the PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program
    E. Changes to the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP)
    F. Changes to the Medicare Promoting Interoperability Program
X. Other Provisions Included in This Final Rule
    A. Rural Emergency Hospitals (REHs)
    B. Physician Self-Referral and Physician-Owned Hospitals
    C. Technical Corrections to 42 CFR 411.353 and 411.357
    D. Safety Net Hospitals 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

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2024 IPPS/LTCH PPS final rule makes 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 makes payment and policy changes for inpatient hospital 
services provided by long-term care hospitals (LTCHs) under the long-
term care hospital prospective payment system (LTCH PPS). This final 
rule also makes policy changes to programs associated with Medicare 
IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2024 
final rule, we are finalizing our proposal to continue policies to 
address wage index disparities impacting low wage index hospitals. We 
are also finalizing our proposed changes relating to Medicare graduate 
medical education (GME) for teaching hospitals and new technology add-
on payments.
    In this FY 2024 final rule, we are finalizing our changes to the 
regulation governing the counting of days associated with individuals 
eligible for certain benefits provided by section 1115 demonstrations 
in the Medicaid fraction of a hospital's DPP that were proposed in CMS 
1788-P, Medicare Program; Medicare Disproportionate Share Hospital 
(DSH) Payments: Counting Certain Days Associated With Section 1115 
Demonstrations in the Medicaid Fraction (88 FR 12623).
    We are finalizing our proposals 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 finalizing our proposals 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, change 
the scoring policy to include a health equity scoring adjustment, and 
modify the Total Performance Score (TPS) maximum to be 110, resulting 
in a 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.

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    In the HAC Reduction Program, we are finalizing our proposals to 
establish a validation reconsideration process for data validation and 
to add an additional targeting criterion for validation. We did not 
propose any changes and are not finalizing any changes for the Hospital 
Readmissions Reduction Program.
    In the Hospital IQR Program, we are finalizing our proposals to add 
three new measures, to modify three existing measures, and to remove 
three measures. We are also finalizing our proposed changes to add 
technical changes to the administration of the HCAHPS Survey and to add 
an additional targeting criterion for validation.
    In the PPS-Exempt Cancer Hospital Quality Reporting Program 
(PCHQR), we are finalizing our proposals to add four new measures and 
to modify an existing measure. We are also finalizing our proposed 
changes to add technical changes to the administration of the HCAHPS 
Survey and to begin public reporting of one measure.
    In the LTCH QRP, we are finalizing our proposals to add two new 
measures, modify an existing measure, remove two measures, and increase 
the LTCH QRP data completion thresholds for LTCH Continuity Assessment 
Record and Evaluation (CARE) Data Set (LCDS) items. Additionally, we 
provide a summary of the comments received to our request for 
information on principles for selecting and prioritizing LTCH QRP 
quality measures and concepts under consideration for future years and 
our update on CMS' continued efforts to close the health equity gap.
    Under various statutory authorities, we either discuss continued 
program implementation or make changes to the Medicare IPPS, the LTCH 
PPS, other related payment methodologies and programs for FY 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 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)(4) of the Act, which 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 electronic 
health record (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(d)(5)(F) of the Act provides for additional 
Medicare IPPS payments to subsection (d) hospitals that serve a 
significantly disproportionate number of low-income patients. These 
payments are known as the Medicare disproportionate share hospital 
(DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the 
methods under which a hospital may qualify for the DSH payment 
adjustment.
     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, which 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 establishes the 
requirements for an eligible hospital to be treated as a meaningful EHR 
user of CEHRT for an EHR reporting period for a payment year or, for 
purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal year.
     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

[[Page 58643]]

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 the statutory formula for Medicare 
DSH payments in section 1886(d)(5)(F) of the Act (``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, in the absence of section 1886(r) of the Act; (2) 1 minus the 
percent change in the percent of individuals who are uninsured; and (3) 
the 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 final 
rule. In general, these major provisions are being finalized as part of 
the annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
changes in this final rule is presented in section I.D. of the preamble 
of this final rule.
a. Modification to the Rural Wage Index Calculation Methodology
    As discussed in section III.G.1. of this final 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 will include hospitals with Sec.  
412.103 reclassification along with geographically rural hospitals in 
all rural wage index calculations and only exclude ``dual reclass'' 
hospitals (hospitals with simultaneous Sec.  412.103 and Medicare 
Geographic Classification Review Board (MGCRB) reclassifications) in 
accordance with the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act.
b. 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 final 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 finalizing our proposal 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 final rule, we are finalizing our proposal to update our 
estimates of the three factors used to determine uncompensated care 
payments for FY 2024. We are also finalizing our proposal 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

[[Page 58644]]

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 
the decision to discontinue use of the low-income insured days proxy in 
the uncompensated care payment methodology for these providers.
    In this final rule we are also finalizing our proposal (88 FR 
12623) on counting of days associated with individuals eligible for 
certain benefits provided by section 1115 demonstrations in the 
Medicaid fraction of a hospital's disproportionate patient percentage 
for the purposes of determining Medicare DSH payments to subsection (d) 
hospitals under section 1886(d)(5)(F) of the Act. Specifically, under 
our finalized policy, for purposes of the Medicare DSH calculation in 
section 1886(d)(5)(F)(vi) of the Act we will ``regard as'' ``eligible 
for medical assistance under a State plan approved under title XIX'' 
patients who (1) receive health insurance authorized by a section 1115 
demonstration or (2) buy health insurance with premium assistance 
provided to them under a section 1115 demonstration, where State 
expenditures to provide the health insurance or premium assistance is 
matched with funds from title XIX. Furthermore, of these expansion 
groups we regard as eligible for Medicaid, we include in the 
disproportionate patient percentage (DPP) Medicaid fraction numerator 
only the days of those patients who receive from the demonstration (1) 
health insurance that covers inpatient hospital services or (2) premium 
assistance that covers 100 percent of the premium cost to the patient, 
which the patient uses to buy health insurance that covers inpatient 
hospital services, provided in either case that the patient is not also 
entitled to Medicare Part A. Finally, patients whose inpatient hospital 
costs are paid for with funds from an uncompensated/undercompensated 
care pool authorized by a section 1115 demonstration will not be 
patients ``regarded as'' eligible for Medicaid, and the days of such 
patients may not be included in the DPP Medicaid fraction numerator.
d. Hospital Readmissions Reduction Program
    We did not propose any changes to the Hospital Readmissions 
Reduction Program. We note that all previously 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.
e. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. In 
this final rule, we are finalizing our proposal 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. In addition, we 
are finalizing our proposal to adopt the Severe Sepsis and Septic 
Shock: Management Bundle measure in the Safety Domain beginning with 
the FY 2026 program year.
    We are finalizing our proposal 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 
finalizing our proposal to adopt a health equity scoring change for 
rewarding excellent care in underserved populations beginning with the 
FY 2026 program year, as well as the proposal 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 health equity scoring change.
f. 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 final rule, 
we are finalizing our proposal 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 finalizing modification of the validation 
targeting criteria to include hospitals granted an extraordinary 
circumstances exceptions (ECEs) beginning with the FY 2027 program 
year, affecting calendar year 2024 discharges.
g. Modification of the COVID-19 Vaccination Coverage Among Healthcare 
Personnel (HCP) Measure in the Hospital IQR Program, PCHQR Program, and 
LTCH QRP
    In the FY 2024 IPPS/LTCH PPS final rule, we are finalizing our 
proposal to modify the COVID-19 Vaccination Coverage among 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.
h. 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 the FY 2024 IPPS/LTCH PPS final rule, we are finalizing several 
changes to the Hospital IQR Program. We are finalizing 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 eCQM beginning with the CY 
2025 reporting period/FY 2027 payment determination. We are also 
finalizing 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 Coverage among HCP 
measure beginning with the Q4 CY 2023 reporting period/FY 2025 payment 
determination. We are also finalizing the removal of three current 
measures: (1) Hospital-level Risk-standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty

[[Page 58645]]

(THA) and/or Total Knee Arthroplasty (TKA) measure beginning with the 
April 1, 2025-March 31, 2028 reporting period/FY 2030 payment 
determination pursuant to Removal Factor 8; (2) Medicare Spending Per 
Beneficiary (MSPB) Hospital measure beginning with the CY 2026 
reporting period/FY 2028 payment determination pursuant to Removal 
Factor 8; and (3) Elective Delivery (PC-01) measure beginning with the 
CY 2024 reporting period/FY 2026 payment determination pursuant to 
Removal Factor 1. We are finalizing the codification of our Measure 
Removal Factors.
    We are also finalizing two changes to current policies related to 
data submission, reporting, and validation: (1) Technical changes to 
the form and manner of the administration of the 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.
i. 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 the FY 2024 IPPS/LTCH PPS final rule, we are finalizing our 
proposals 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 also finalizing 
our proposal to adopt a modified version of the COVID-19 Vaccination 
Coverage among HCP measure beginning with the FY 2025 program year. We 
are also finalizing our proposals to publicly report the Surgical 
Treatment Complications for Localized Prostate Cancer (PCH-37) measure 
beginning with data from the FY 2025 program year, and technical 
changes to the form and manner of the administration of the HCAHPS 
survey measure beginning with the FY 2027 program year.
j. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    We are finalizing several changes to the LTCH QRP. Specifically, we 
are: (1) adopting a modified version of the COVID-19 Vaccination 
Coverage among HCP measure beginning with the FY 2025 LTCH QRP; (2) 
adopting the Discharge Function Score measure beginning with the FY 
2025 LTCH QRP; (3) removing 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) 
removing 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) adopting the 
COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date 
measure beginning with the FY 2026 LTCH QRP; (6) increasing the LTCH 
QRP data completion thresholds for the LCDS beginning with the FY 2026 
LTCH QRP; and (7) beginning public reporting of the Transfer of Health 
(TOH) Information to the Patient-Post-Acute Care (PAC) and TOH 
Information to the Provider-PAC measures.
k. Medicare Promoting Interoperability Program
    In this final rule, we are finalizing several changes to the 
Medicare Promoting Interoperability Program. Specifically, we are 
finalizing our proposals 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.
l. Changes to the Severity Level Designation for Z Codes Describing 
Homelessness
    As discussed in section II.C. of the preamble of this final rule, 
we are finalizing the proposed 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

[[Page 58646]]

provisions described in section I.A.2. of the preamble of this final 
rule.
[GRAPHIC] [TIFF OMITTED] TR28AU23.000


[[Page 58647]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.001


[[Page 58648]]



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 58649]]

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 (DGME) 
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 Will Be Implemented 
in This Final 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. Issuance of the Notices of Proposed Rulemaking and Summary of the 
Proposed Provisions

1. FY 2024 IPPS/LTCH PPS Proposed Rule
    In the proposed rule that appeared in the Federal Register on May 
1, 2023 (88 FR 26658), 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 proposed 
to make.
a. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included 
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

[[Page 58650]]

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 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 deadline for FDA marketing authorization from 
July 1 to May 1 of the year before the fiscal year for which the 
applicant applied for new technology add-on payments, beginning with 
applications for FY 2025 (as discussed in section II.E.9. of the 
preamble of the proposed rule).
b. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of the proposed rule, we proposed 
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 2024 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.
c. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2024
    In section IV. of the preamble of the 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.
d. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of the proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed inpatient hospital update for FY 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 to establish a validation reconsideration process 
and update the data validation targeting criteria under the HAC 
Reduction Program for FY 2024.
     Proposed to update the MSPB Hospital and THA/TKA 
Complications measures, to adopt the new Severe Sepsis and Septic 
Shock: Management Bundle measure, to update the changes to the data 
collection and submission requirements for the HCAHPS Survey measure, 
to revise the scoring methodology to include a health equity scoring 
adjustment, to modify the Total Performance Score numeric score range 
to be 0-110, and to codify the measure removal factors, the revised 
scoring methodology and TPS numeric score range, and the minimum 
numbers of cases.
     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.
e. Proposed FY 2024 Policy Governing the IPPS for Capital-Related Costs
    In section VI. of the preamble of the 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.
f. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VII. of the preamble of the proposed rule, we 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.
g. Proposed Changes to the LTCH PPS
    In section VIII. of the preamble of the proposed rule, we set forth 
proposed changes to the LTCH PPS Federal payment rates, factors, and 
other payment rate policies under the LTCH PPS for FY 2024.
h. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of the proposed rule, we addressed 
the following:
     Proposed adoption of a modified version of the COVID-19 
Vaccination Coverage 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 PPS-Exempt 
Cancer Hospital Quality Reporting Program (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

[[Page 58651]]

CAHs participating in the Medicare Promoting Interoperability Program.
i. Other Proposals and Comment Solicitations Included in the Proposed 
Rule
    Section X. of the preamble of the proposed rule included 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 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.
j. Other Provisions of the Proposed Rule
    Section XI.A. of the preamble of the proposed rule includes our 
discussion of the MedPAC Recommendations.
    Section XI.B. of the preamble of the proposed rule includes a 
descriptive listing of the public use files associated with the 
proposed rule.
    Section XII. of the preamble of the proposed rule includes the 
collection of information requirements for entities based on our 
proposals.
    Section XIII. of the preamble of the proposed rule includes 
information regarding our responses to public comments.
k. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In sections II. and III. of the Addendum of the 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 proposed to 
establish the threshold amounts for outlier cases. In addition, in 
section IV. of the Addendum of the 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.
l. Determining Prospective Payment Rates for LTCHs
    In section V. of the Addendum of the 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.
m. Impact Analysis
    In appendix A of the proposed rule, we set forth an analysis of the 
impact the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs and other entities.
n. Recommendation of Update Factors for Operating Cost Rates of Payment 
for Hospital Inpatient Services
    In appendix B of the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we 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.
o. 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 the 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.
2. Section 1115 Demonstration Disproportionate Share Hospital Proposed 
Rule
    In addition, in the proposed rule that appeared in the Federal 
Register on February 28, 2023 (88 FR 12623), we set forth proposed 
revisions to the regulations on the counting of days associated with 
individuals eligible for certain benefits provided by section 1115 
demonstrations in the Medicaid fraction of a hospital's 
disproportionate patient percentage for the purposes of determining 
Medicare DSH payments to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act. Specifically, we proposed for purposes of the 
Medicare DSH calculation in section 1886(d)(5)(F)(vi) of the Act to 
``regard as'' ``eligible for medical assistance under a State plan 
approved under title XIX'' patients who (1) receive health insurance 
authorized by a section 1115 demonstration or (2) buy health insurance 
with premium assistance provided to them under a section 1115 
demonstration, where State expenditures to provide the health insurance 
or premium assistance is matched with funds from title XIX. 
Furthermore, of these expansion groups we proposed to regard as 
eligible for Medicaid, we proposed to include in the disproportionate 
patient percentage (DPP) Medicaid fraction numerator only the days of 
those patients who receive from the demonstration (1) health insurance 
that covers inpatient hospital services or (2) premium assistance that 
covers 100 percent of the premium cost to the patient, which the 
patient uses to buy health insurance that covers inpatient hospital 
services, provided in either case that the patient is not also entitled 
to Medicare Part A. Finally, we proposed specifically that patients 
whose inpatient hospital costs are paid for with funds from an 
uncompensated/undercompensated care pool authorized by a section 1115 
demonstration would not be patients ``regarded as'' eligible for 
Medicaid, and the days of such patients may not be included in the DPP 
Medicaid fraction numerator.

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

[[Page 58652]]

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.
    As discussed 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 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26671), we 
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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26671), we also 
reviewed the most recent COVID-19 related data and information released 
by the CDC. We presented this CDC graph which 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).

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[GRAPHIC] [TIFF OMITTED] TR28AU23.002

    We stated that the graph shows that in the United States, patients 
continue to be hospitalized with the virus that causes COVID-19. We 
also noted that the CDC has stated that new variants will continue to 
emerge. Viruses constantly change through mutation and sometimes these 
mutations result in a new variant of the virus. 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\ In the proposed rule, we concluded 
that based on the information available at the 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. We also stated that based on the information available 
at the 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 to the extent 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.
---------------------------------------------------------------------------

    As such, we stated our belief 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 proposed 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 did 
not propose any modifications to our usual ratesetting methodologies to 
account for the impact of COVID-19 on the ratesetting data.
    The comments we received on our proposal to use FY 2022 data for 
purposes of the FY 2024 IPPS and LTCH PPS ratesetting were focused on 
the specific use of FY 2022 data when determining the FY 2024 outlier 
fixed-loss amounts. Therefore, we refer the reader to section II.A.4. 
of the addendum to this final rule for our summary and response to 
comments received on our proposal to use FY 2022 data and our usual 
methodology when determining the FY 2024 outlier fixed-loss amounts for 
IPPS cases. We refer the reader to section V.D.3. of the Addendum to 
this final rule for our summary and response to comments received on 
our proposal to use FY 2022 data and our usual methodology when 
determining the FY 2024 outlier fixed-loss amounts for LTCH PPS 
standard Federal payment rate cases.
    For the reasons discussed in those sections, we are finalizing our 
proposal to use FY 2022 data for purposes of the FY 2024 IPPS and LTCH 
PPS ratesetting. (That is, 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).) We also 
are finalizing, with modification, our proposal to use our usual 
ratesetting methodologies for purposes of the FY 2024 IPPS and LTCH PPS 
ratesetting. As discussed in section V.D.3. of the addendum to this 
final rule, after consideration of the comments received, we are 
modifying our proposed methodology for establishing the FY 2024 outlier 
fixed-loss amount for LTCH PPS standard Federal payment rate cases.

F. Potential Payment Under the IPPS for Establishing and Maintaining 
Access to Essential Medicines

    In the CY 2024 Medicare Hospital Outpatient Prospective Payment 
System and Ambulatory Surgical Center Payment System Proposed Rule (CMS 
1786-P) issued on July 13, 2023, we included a request for public 
comments on potential payment under the IPPS for establishing and 
maintaining access to essential medicines. As discussed in that rule, 
we are seeking comment on, and may consider finalizing based on the 
review of comments received, as early as for cost reporting periods 
beginning on or after January 1, 2024, separate payment under IPPS, for 
establishing and maintaining access to a buffer stock of essential 
medicines to foster a more reliable, resilient supply of these 
medicines. Public comments are being accepted through September 11, 
2023.

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
Therefore, under the IPPS, Medicare pays for inpatient hospital 
services on a rate per discharge basis that varies according to the DRG 
to which a beneficiary's stay is assigned. The formula used to 
calculate payment for a specific case multiplies an

[[Page 58654]]

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).
    Comment: Several commenters requested that CMS make a positive 
adjustment to restore the full amount of the documentation and coding 
recoupment adjustments in the FY 2024 IPPS final rule which they 
asserted is required under section (7)(B)(2) and (4) of the TMA 
[Transitional Medical Assistance], Abstinence Education, and QI 
[Qualifying Individuals] Programs Extension Act of 2007 (Pub. L. 110-
90). Commenters stated that the statute is explicit that CMS may not 
carry forward any documentation and coding adjustments applied in 
fiscal years 2010 through 2017 into IPPS rates after FY 2023. 
Commenters contended that CMS, by its own admission, has restored only 
2.9588 percentage points of a total 3.9 percentage point reduction. By 
not fully restoring the total reductions, commenters believe that CMS 
is improperly extending payment adjustments beyond the FY 2023 
statutory limit. A commenter stated that, even if CMS disputes it is 
required to make such an adjustment, CMS should use its special 
exceptions and adjustments authority to address the shortfall.
    Response: As of FY 2023, CMS completed the statutory requirements 
of section 7(b)(1)(B) of Pub. L. 110-90 as amended by section 631 of 
the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112- 240), 
section 404 of the Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA), and section 15005 of the 21st Century Cures Act (Pub. L. 114-
255). As we discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 
44794 through 44795), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58444 
through 58445) and in prior rules, we believe section 414 of the MACRA 
and section 15005 of the 21st Century Cures Act set forth the levels of 
positive adjustments for FYs 2018 through 2023. We are not convinced 
that the adjustments prescribed by MACRA were predicated on a specific 
adjustment level estimated or implemented by CMS in previous 
rulemaking. We see no evidence that Congress enacted these adjustments 
with the intent that CMS would make an additional +0.7 percentage point 
adjustment in FY 2018 to compensate for the higher than expected final 
ATRA adjustment made in FY 2017, nor are we persuaded that it would be 
appropriate to use the Secretary's exceptions and adjustments authority 
under section 1886(d)(5)(I) of the Act to adjust payments in FY 2024 
restore any additional amount of the original 3.9 percentage point 
reduction, given Congress' directive regarding prescriptive adjustment 
levels under section 414 of the MACRA and section 15005 of the 21st 
Century Cures Act. Accordingly, in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38009), we implemented the required +0.4588 percentage point 
adjustment to the standardized amount for FY 2018. In the FY 2019 IPPS/
LTCH PPS final rule (FY 2019 final rule) (83 FR 41157), the FY 2020 
IPPS/LTCH PPS final rule (FY 2020 final rule) (84 FR 42057), the FY 
2021 IPPS/LTCH PPS final rule (FY 2021 final rule) (85 FR 58444 and 
58445), the FY 2022 IPPS/LTCH PPS final rule (FY 2022 final rule) (86 
FR 44794 and 44795), and the FY 2023 IPPS/LTCH PPS final rule (FY 2023 
final rule) (87 FR 48800), consistent with the requirements of section 
414 of the MACRA, we implemented 0.5 percentage point positive 
adjustments to the standardized amount for FY 2019, FY 2020, FY 2021, 
FY 2022 and FY 2023, respectively. As discussed in the FY 2023 final 
rule, the finalized 0.5 percentage point positive adjustment for FY 
2023 is the final adjustment prescribed by section 414 of the MACRA.

C. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for 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 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

[[Page 58655]]

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 MEARISTM at: 
https://mearis.cms.gov/public/home.
    As we did for the FY 2023 IPPS/LTCH PPS proposed rule, for the FY 
2024 IPPS/LTCH PPS proposed rule we provided 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 the 
proposed rule. We noted that this test software reflected the proposed 
GROUPER logic for FY 2024. Therefore, it included 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 that were associated with the 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 the proposed rule. We noted that at the time of the development of 
the proposed rule there were no procedure codes designated as invalid 
for FY 2024, and therefore, there was no Table 6D- Invalid Procedure 
Codes--FY 2024 associated with the proposed rule. Those tables were not 
published in the Addendum to the 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 the proposed rule. Because the diagnosis codes 
no longer valid for FY 2024 are not reflected in the test software, we 
made 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 had access to the test 
software allowing them to build case examples that reflect the 
proposals that were included in the proposed rule. In addition, users 
were able to view the draft version of the ICD-10 MS-DRG Definitions 
Manual, Version 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 proposed to the MS-DRGs for FY 
2024. We invited public comments on each of the MS-DRG classification 
proposed changes, as well as our proposals to maintain certain existing 
MS-DRG classifications discussed in the proposed rule. In some cases, 
we proposed changes to the MS-DRG classifications based on our analysis 
of claims data and clinical appropriateness. In other cases, we 
proposed to maintain the existing MS-DRG classifications based on our 
analysis of claims data and clinical appropriateness. As discussed in 
the 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 referred to those 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 referred to those claims data as the 
``December 2022 update of the FY 2022 MedPAR file.'' Specifically, as 
discussed further in the proposed rule and 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.
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modifications to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients represented in the MS-DRG. We evaluate patient care 
costs using average costs and lengths of stay and rely on 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

[[Page 58656]]

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.--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
[GRAPHIC] [TIFF OMITTED] TR28AU23.003

    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 the 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

[[Page 58657]]

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 the 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 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 the 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. In the FY 2024 IPPS/
LTCH PPS proposed rule, we noted that 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 referred 
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 the 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 noted 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 the 
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 stated we believed 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] TR28AU23.004


[[Page 58658]]


BILLING CODE 4120-01-C
    We also referred 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 noted, 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 referred 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-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 the 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 noted 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) did not reflect application of 
the 10-percent cap. We further noted that changes in the status for 
transfer adjusted cases were reflected for the relative weights 
calculated using the proposed V41 GROUPER Software only and were not 
reflected for the alternate MS-DRG weights with application of the 
NonCC subgroup criteria. We noted, 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). In the proposed rule, we stated that the 
findings were 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 made 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 included 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 the proposed rule on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    For the FY 2024 IPPS/LTCH PPS proposed rule we also provided 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 the proposed rule if the NonCC subgroup 
criteria were to be applied to existing MS-DRGs with a three-way 
severity level split. We noted that this alternate test software 
reflected the proposed GROUPER logic for FY 2024 as modified by the 
application of the NonCC subgroup criteria. Therefore, it included 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 the proposed rule and did not 
include the diagnosis codes that are invalid beginning in FY 2024 as 
reflected in Table 6C.--Invalid Diagnosis Codes--FY 2024 associated 
with the proposed rule. As previously noted, at the time of the 
development of the proposed rule there were no procedure codes 
designated as invalid for FY 2024, and therefore, there was no Table 
6D- Invalid Procedure Codes--FY 2024 associated with the proposed rule. 
These tables were not published in the Addendum to the 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 the proposed rule. Because 
the diagnosis codes no longer valid for FY 2024 are not reflected in 
the alternate test software, we made 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 had access to the alternate test software allowing them to build 
case examples that reflect the proposals included in the proposed rule

[[Page 58659]]

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 the 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 made 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 proposed 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 stated that we were 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.
    Comment: Commenters expressed appreciation that CMS provided 
additional files for review and consideration that reflect application 
of the NonCC subgroup criteria in connection with the FY 2024 proposed 
MS-DRG changes.
    Response: We thank the commenters for their feedback.
    Comment: Commenters supported the proposal to delay application of 
the NonCC subgroup criteria to existing MS-DRGs with a three-way 
severity level split for FY 2024 and to maintain the current structure 
of the 45 MS-DRGs that currently have a three-way split (total of 135 
MS-DRGs). The commenters also expressed support for the proposal to 
exclude the 12 obstetric related MS-DRGs from application of the NonCC 
subgroup criteria in the future. Some commenters stated they agreed 
with the methodology for creating subgroups and viewed the 
consolidation as a positive change, however, the commenters also 
recommended that CMS continue to collect data and identify any 
unintended impacts to the MS-DRG relative weights because of the 
redistribution of cases from application of the NonCC subgroup 
criteria. Other commenters stated that although the COVID-19 PHE has 
ended, several hospitals are still recovering and further assessment of 
the impacts for low volume procedures in connection with the potential 
MS-DRG changes with application of the NonCC subgroup criteria is 
needed.
    A couple commenters specifically requested that CMS provide data 
analysis by hospital type for FY 2025 rulemaking to afford 
organizations additional time to review and forecast impacts, as well 
as to facilitate more informed comments in response to the CMS request 
for comments related to experiences of large urban hospitals, rural 
hospitals, and other hospital types.
    Response: We appreciate the commenters' support. We will continue 
to review and consider the feedback we have received for our 
development of the FY 2025 proposed rule.
    Comment: A couple commenters who expressed support for the proposed 
delay in application of the NonCC subgroup criteria for FY 2024 and 
appreciation for the additional analysis files that were made available 
stated that deleting and adding a large volume of MS-DRGs may create 
additional administrative burden. The commenters stated providers will 
need more time than is typically provided for implementation of 
finalized policies under the IPPS. The commenters urged CMS to work 
with interested parties in developing an appropriate implementation 
timeline. A commenter suggested that CMS consider implementing 
application of the NonCC subgroup criteria using a phased approach, 
over several years, to assist in the transition. This commenter 
encouraged CMS to continue to provide additional analysis files as was 
done with the proposed rule and to include the potential effects of a 
multi-year implementation plan.
    Response: We thank the commenters for their support and feedback. 
We will continue to review and consider the feedback we have received 
for our development of the FY 2025 proposed rule.
    Comment: A commenter who agreed it is appropriate to defer 
implementation of MS-DRG consolidation based on the three-way severity 
criteria specifically expressed concern that the policy may result in 
additional reductions to relative weights for important procedures, 
including intracranial vascular procedures. According to the commenter, 
intracranial vascular procedures have already experienced significant 
cuts in recent years. The commenter stated that based on the data that 
was made available in connection with the proposed rule, the estimates 
show that consolidation for five MS-DRGs, including potential new MS-
DRG 105 (Intracranial Vascular Procedures with Principal Diagnosis 
Hemorrhage without MCC) would result in a more than 10 percent relative 
weight reduction (prior to the application of the current 10-percent 
cap). To the extent that CMS does adopt such MS-DRG consolidation in 
the future, the commenter recommended that CMS limit the single-year 
relative weight reductions resulting from cumulative policy changes to 
5 percent.
    The commenter also suggested that CMS consider building more 
flexibility into its assessment of severity level subdivisions for both 
new and existing MS-DRGs. According to the commenter, the requirement 
to meet multiple, rigid cost and volume cut-offs may detract from the 
assessment of important clinical and resource distinctions in patient 
populations within the MS-DRGs.
    A few commenters expressed concern that the criterion of a 500-case 
volume may be too high, particularly for low volume services and MS-
DRGs. The commenters stated that there has been tremendous growth in 
Medicare Advantage claims with a decrease in fee-for-service (FFS) 
claims flowing into rate-setting. The commenters stated additional 
analysis of this criterion is warranted and requested that CMS provide 
further information about the benefits.
    Response: We appreciate the commenters' feedback. We acknowledge 
the growth in Medicare Advantage claims and will continue to review and 
consider the feedback we have received for our development of the FY 
2025 proposed rule.
    In response to the commenter's recommendation that CMS limit the 
single-year relative weight reductions to 5 percent, we note that there 
was extensive discussion in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
48897 through 48900) regarding the cap for relative weight reductions 
and refer the reader to that discussion for detailed information. We 
also refer the reader to the additional discussion in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26774 through 26775) and in section 
II.D.2.c. of the preamble of this final rule.
    With regard to the commenter's suggestion that more flexibility 
should be built into CMS' assessment of severity level subdivisions for 
both new

[[Page 58660]]

and existing MS-DRGs, we note that currently, the minimum case volume 
requirements were established to avoid overly fragmenting the MS-DRG 
classification system. With smaller volumes they will be subject to 
stochastic (unpredictable) effects that may indicate a cost difference 
within the data sample. Reevaluation in subsequent years may result in 
those cost differences being insufficient to support the split.
    We do not believe it is in the interest of the Medicare program or 
providers to establish and then remove MS-DRG splits. We believe that 
stability of MS-DRG payment is an important objective and therefore, 
that a volume requirement is a necessary adjunct to cost 
differentiation. We established a 500-case limit to meet this stability 
requirement. With this case limit, an MS-DRG split not meeting this 
minimum volume threshold will have fewer than 0.007% cases from which 
the MS-DRG RW is constructed. Under application of the NonCC subgroup 
criteria, hospitals would receive a payment weight that averages the 
two comorbidity split levels (CC and NonCC) and will thus only 
experience any potential negative impact to the extent that their case 
mix is comprised of cases with the (potentially) higher weight. We 
note, as discussed in prior rulemaking (86 FR 44878), the MS-DRG system 
is a system of averages and it is expected that within the diagnostic 
related groups, some cases may demonstrate higher than average costs, 
while other cases may demonstrate lower than average costs. We also 
provide outlier payments to mitigate extreme loss on individual cases.
    Comment: A couple commenters requested clarification on how the 
policy to cap the reductions for MS-DRG relative weights to 10-percent 
would apply as CMS considers implementation of the NonCC subgroup 
criteria.
    Response: As stated in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
48900), the 10- percent cap on reductions to an MS-DRG's relative 
weight applies to new or modified MS-DRGs after the first fiscal year 
that the new or modified MS-DRGs take effect. Therefore, the 10-percent 
cap would not apply to the relative weight for any new or renumbered 
MS-DRGs for the first fiscal year. However, we recognize that 
application of the NonCC subgroup criteria may warrant special 
consideration with respect to the 10-percent cap on reductions to an 
MS-DRG's relative weight and will continue to consider this issue in 
connection with our efforts to promote predictability and mitigate 
financial impacts resulting from significant fluctuations in the 
relative weights.
    Comment: A couple commenters expressed concern that the additional 
files made available in connection with the proposed rule did not 
demonstrate how the explanatory power of the potential new MS-DRGs with 
application of the NonCC subgroup criteria is an improvement over the 
current MS-DRGs. The commenters expressed concern that the impact of 
the presence of a CC for MS-DRG assignment appears to be declining 
because the application of the NonCC subgroup criteria is resulting in 
fewer MS-DRGs split by the presence of a CC. Specifically, the 
commenters stated that when the NonCC subgroup criteria were applied to 
existing MS-DRGs currently split into three severity levels, as well as 
when the criteria were applied to proposed new MS-DRG classification 
requests, none of the proposed new MS-DRGs with a two-way severity 
level split involved a ``with CC/MCC'' and ``without CC/MCC'' split.
    Response: As discussed in the FY 2024 IPPS/LTCH proposed rule, we 
provided both a test version of the ICD-10 MS-DRG GROUPER Software, 
Version 41 and an alternate version of the ICD-10 MS-DRG GROUPER 
Software, Version 41.A so that the public could better analyze and 
understand the impact on the proposals included in the proposed rule if 
the NonCC subgroup criteria were to be applied to existing MS-DRGs with 
a three-way severity level split. We noted that this alternate test 
software reflected the proposed GROUPER logic for FY 2024 as modified 
by the application of the NonCC subgroup criteria. Overall, we believe 
the explanatory power (R2) for the V41.A alternate GROUPER yields 
similar results to the proposed V41 GROUPER. Based on our review, the 
explanatory power (R2) goes down by 0.04 percent with the V41.A 
alternate GROUPER, explaining less variation when compared to the V41 
notice of proposed rulemaking (NPRM) GROUPER, however this result is as 
we would expect since the MS-DRGs subject to the NonCC subgroup 
criteria considered for potential adjustment are low volume to begin 
with.
[GRAPHIC] [TIFF OMITTED] TR28AU23.005

    In response to the concerns expressed that application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split appears to result in fewer MS-DRGs split by the presence of a CC, 
we note that the criteria for the two-way split of ``with CC/MCC'' and 
``without CC/MCC'' requires that there be at least 500 cases in the 
NonCC group, and as discussed in the proposed rule, in applying the 
criteria for proposed new MS-DRGs, that volume requirement was not met. 
Alternatively, the criteria for the two-way split of ``with MCC'' and 
``without MCC'' was met for specific proposals, and therefore, 
proposed.
    We recognize and acknowledge the concerns raised by the commenters 
regarding the impact the application of the NonCC subgroup criteria to 
existing MS-DRGs with a three-way split appears to have on the presence 
of a CC for MS-DRG assignment. We will continue to examine this issue 
with respect to the criteria and how it also relates to the 
comprehensive CC/MCC analysis. We refer the reader to section 
II.C.12.b. of the preamble of this final rule for additional discussion 
related to the comprehensive CC/MCC analysis.
    Comment: Some commenters requested additional insight and rationale 
as to why CMS applied the NonCC subgroup criteria to the proposed MS-
DRG changes for FY 2024 if the intent is to delay application of the 
NonCC subgroup criteria until future rulemaking.
    Response: As discussed in prior rulemaking, in general, 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 must be 
met for the base MS-DRG to be split (or subdivided) by a CC subgroup. 
We note that we have applied the criteria to create subgroups, 
including application of the NonCC subgroup criteria, in our annual 
analysis of the MS-DRG classification requests

[[Page 58661]]

effective FY 2021 (85 FR 58446 through 58448). For example, we applied 
the criteria to create subgroups, including application of the NonCC 
subgroup criteria, for a proposed new base MS-DRG as discussed in our 
finalization of new base MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-
cell Immunotherapy), new base MS-DRG 019 (Simultaneous Pancreas and 
Kidney Transplant with Hemodialysis), new base MS-DRG 140 (Major Head 
and Neck Procedures), new base MS-DRG 143 (Other Ear, Nose, Mouth and 
Throat O.R. Procedures), new base MS-DRG 521 (Hip Replacement with 
Principal Diagnosis of Hip Fracture) and new base MS-DRG 650 (Kidney 
Transplant with Hemodialysis) for FY 2021. 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 CC or 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.
    Similarly, we applied the criteria to create subgroups including 
application of the NonCC subgroup criteria for MS-DRG classification 
requests for FY 2022 that we received by November 1, 2020 (86 FR 44796 
through 44798), for MS-DRG classification requests for FY 2023 that we 
received by November 1, 2021 (87 FR 48801 through 48804), and for MS-
DRG classification requests for FY 2024 that we received by October 20, 
2022 (88 FR 26673 through 26676), as well as any additional analyses 
that were conducted in connection with those requests.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798) and FY 2023 
IPPS/LTCH PPS final rule (87 FR 48803), we finalized a delay in 
applying this technical criterion to existing MS-DRGs in light of the 
PHE. We take this opportunity to clarify that the delay referenced was 
in applying this technical criterion to existing MS-DRGs with a three-
way severity level split. Therefore, while we have made analyses for 
potential MS-DRG changes with application of the NonCC subgroup 
criteria publicly available, we have not yet proposed application of 
the NonCC subgroup criteria to existing MS-DRGs with a three-way 
severity level split. We note that we will continue to apply the 
criteria to create subgroups, including application of the NonCC 
subgroup criteria, in our annual analysis of MS-DRG classification 
requests, consistent with our approach since FY 2021 when we finalized 
the expansion of the criteria to include the NonCC subgroup for a 
three-way severity level split.
    Comment: A few commenters expressed concerns about the fluctuations 
in potential MS-DRG restructuring with application of the NonCC 
subgroup criteria from FY 2021 through FY 2024 based on different sets 
of claims data.
    Response: We note that we addressed similar comments in detail in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48803 through 48804) and 
refer the reader to that discussion.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to delay the 
application of the NonCC subgroup criteria to existing MS-DRGs with a 
three-way severity level split until FY 2025 or later, and are 
finalizing for FY 2024 our proposal to maintain the current structure 
of the 45 MS-DRGs that currently have a three-way severity level split.
    We are making the FY 2024 ICD-10 MS-DRG GROUPER and Medicare Code 
Editor (MCE) Software Version 41, the ICD-10 MS-DRG Definitions Manual 
files Version 41 and the Definitions of Medicare Code Edits Manual 
Version 41 available to the public on our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.

2. Major Diagnostic Category (MDC) 01: (Diseases and Disorders of the 
Nervous System): Epilepsy With Neurostimulator

    The Responsive Neurostimulator (RNS[supreg]) 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. In the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 26676 through 26681), we stated that 
cases involving the use of the RNS[supreg] 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 
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 referred 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[supreg] 
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[supreg] 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

[[Page 58662]]

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[supreg] 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[supreg] neurostimulator) from MS-DRG 023 to MS-DRG 021. 
We also did not propose to reassign Responsive Neurostimulator 
(RNS[supreg]) 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[supreg] neurostimulator), and a principal diagnosis of 
epilepsy.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we stated 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[supreg] 
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. We stated in the FY 2024 
IPPS/LTCH PPS proposed rule that 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[supreg] 
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[supreg] 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[supreg] 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[supreg] 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 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[supreg] cases and therefore creating a new MS-DRG for all cases 
involving a craniectomy/craniotomy with device implant was a reasonable 
alternative option.
    We stated in the proposed rule that to begin our analysis, we 
identified the ICD-10-CM diagnosis codes that describe a diagnosis of 
epilepsy. We referred the reader to Table 6P.2a associated with the 
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 stated in the proposed rule that 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[supreg] 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] TR28AU23.006


[[Page 58663]]


    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[supreg] neurostimulator) that had a 
principal diagnosis of epilepsy. We noted 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[supreg] neurostimulator) and a principal diagnosis of 
epilepsy had 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. We stated that 
while these neurostimulator cases had average costs that were $11,355 
higher than the average costs of all cases in MS-DRG 023, there were 
only a total of 57 cases. We stated we reviewed these data, and agreed 
with the requestor that the number of cases continued 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).
    As stated in the proposed rule, 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[supreg] 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, we noted that 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[supreg] 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] TR28AU23.007

    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[supreg] 
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, in the proposed rule we stated 
we also analyzed the 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[supreg] 
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] TR28AU23.008


[[Page 58664]]


    As noted in the proposed rule, 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[supreg] 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 CC or an 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 stated we reviewed the clinical 
issues and the claims data and continued 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[supreg] neurostimulator) and a 
principal diagnosis of epilepsy from MS-DRG 023 to MS-DRGs 020, 021, or 
022. We noted in the proposed rule that 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[supreg] neurostimulator generators are not used to treat patients 
with diagnosis of a hemorrhage. We stated we continued 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). We noted that the 
differences in average length of stay and average costs based on the 
more recent data continued to support this recommendation.
    We noted, as discussed in section II.C.1.b of the 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. As stated in the proposed rule, 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 
referred the reader to Table 6P.10b associated with the 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 stated that we then explored alternative options, as was 
requested. As stated in the proposed rule, we did 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 was a reasonable 
approach to find cases comparable to cases involving the use of the 
RNS[supreg] System as these root operations all describe procedures 
performed for distinct and differing objectives. Instead, to review for 
similar utilization of resources, we stated 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[supreg] 
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 the brain. The following table 
shows our findings:

[[Page 58665]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.009

BILLING CODE 4120-01-C
    We noted that the 90 Major Device Implant list cases involving a 
neurostimulator generator (including cases involving the use of the 
RNS[supreg] 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 noted 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. In the proposed rule, we stated that while these 
neurostimulator cases have average costs that are higher than the 
average costs of all cases in their respective MS-DRGs, it was 
difficult to detect patterns of complexity and resource intensity. 
Moreover, we stated we were 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 noted that while our data findings demonstrated 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. We stated that while we 
appreciated the requestor's 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 
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. In the proposed rule, we stated 
that 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

[[Page 58666]]

of these patient populations in the MS-DRGs.
    As part of this evaluation, as discussed in the proposed rule, 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 the 
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, in the proposed rule, we stated 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[supreg] 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 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[supreg] neurostimulator) from MS-DRG 023 
to MS-DRG 021. We also did not propose to create a new MS-DRG for cases 
involving a craniectomy/craniotomy with device implant at this time.
    Comment: Some commenters expressed support for CMS' proposal to 
maintain the assignment of cases reporting procedure codes that 
describe 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[supreg] neurostimulator) in MS-DRG 023 and 
to not propose to create a new MS-DRG for cases involving a 
craniectomy/craniotomy with device implant. A commenter stated they 
agreed that it was inappropriate to reassign cases that involve 
craniectomy or craniotomy with the insertion of neurostimulator into 
the skull in combination with the insertion of a neurostimulator lead 
into the brain from MS-DRG 023 (Craniotomy with Major Device Implant or 
Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial Vascular 
Procedures with Principal Diagnosis Hemorrhage with CC). This commenter 
also stated that due to the low volume of total cases, they agreed that 
creation of a new MS-DRG was not warranted.
    Response: We appreciate the commenters' support.
    Comment: Another commenter opposed CMS' proposal. The commenter 
stated CMS' data analysis demonstrated that the average costs of 
RNS[supreg] System cases continue to be substantially higher than the 
average costs of all cases in their assigned MS-DRG 023. This commenter 
further stated that they believed the data analysis supports extracting 
cases reporting procedure codes that describe 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[supreg] neurostimulator) (e.g., Major Device Implant list 
cases) from MS-DRGs 023 and 024 and creating two new MS-DRGs with logic 
maintained for cases with a principal diagnosis of epilepsy with 
neurostimulator generator inserted into the skull and insertion of a 
neurostimulator lead into brain. The commenter stated this refinement 
would result in a much better alignment of the average costs of these 
cases compared to their current MS-DRG assignment.
    Response: We thank the commenter for their feedback. We continue to 
be receptive to concerns about payment for cases reporting procedure 
codes that describe 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[supreg] neurostimulator). While we 
agree these neurostimulator cases can have average costs that are 
higher than the average costs of all cases in their respective MS-DRGs, 
in our analysis of this issue, it was difficult to detect patterns of 
complexity and resource intensity. As discussed in the proposed rule 
and earlier in this section, to review for similar utilization of 
resources, we 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[supreg] 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. In our analysis in MS-DRG 023, we 
found 90 cases reporting a procedure code combination representing 
neurostimulator generator and lead code combination captured under the 
list referred to as ``Major Device Implant'' with the average length of 
stay ranging from 1 day to 249 days and average costs ranging from 
$22,717 to $250,272 for these cases. In MS-DRG 024, we found 395 cases 
reporting a procedure code combination representing neurostimulator 
generator and lead code combination captured under the list referred to 
as ``Major Device Implant'' with the average length of stay ranging 
from 1 day to 12 days and average costs ranging from $16,359 to $70,949 
for these cases. We continue to believe that 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 part of our ongoing, 
comprehensive analysis of the MS-DRGs under ICD-10, we will continue to 
explore mechanisms to ensure clinical coherence between these cases and 
the other cases with which they may potentially be grouped.
    Therefore, after consideration of the public comments we received, 
and for the reasons stated earlier, we are finalizing our proposal to 
maintain the current assignment of cases describing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS[supreg] neurostimulator), without modification, for FY 2024.
    As noted in the proposed rule, 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

[[Page 58667]]

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 the proposed rule and this final rule at: https://mearis.cms.gov/public/home.
    Comment: In response to CMS' request for public comment and 
feedback on the potential restructuring of the craniotomy MS-DRGs for 
future consideration, a commenter stated they do not believe there is a 
need for CMS to re-evaluate the assignment of neurosurgical procedures 
within the craniotomy MS-DRGs 023 through 027. This commenter stated 
that the procedures in these MS-DRGs have been well established from a 
clinical homogeneity perspective, as well as a resource utilization 
perspective, and the procedures costs have been stable. Another 
commenter stated they appreciate CMS' willingness to review the 
craniotomy/craniectomy MS-DRGs to ensure proper alignment of 
procedures, indications, technical complexity, and resource 
utilization. This commenter further noted there are a wide array of 
diagnoses and procedures that fall within this range of MS-DRG and 
stated they believe there are a variety of ways these MS-DRGs can be 
classified.
    A commenter mentioned that CMS referred the reader to Tables 6P.2b 
through 6P.2f associated with the 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 findings of 
cases assigned to MS-DRGs 023 through 027 and expressed concern that 
there was no discussion of these findings or their significance in the 
proposed rule. This commenter suggested that CMS comment on the 
following:
     How is CMS defining technical complexity and what factors 
are being considered in the analysis?
     Are there other data not included in Tables 6P.2b through 
6P.2f that CMS is analyzing?
     What is the timing for completion of the full analysis of 
MS-DRGs 023-027?
    Response: We thank the commenters for their feedback and will take 
these recommendations into consideration as we further examine the 
logic for case assignment. The data analysis as displayed in Tables 
6P.2b through 6P.2f associated with the proposed rule was displayed to 
provide the public an opportunity to review our examination of the 
procedures by their approach (open versus percutaneous), clinical 
indications, and procedures that involve the insertion or implantation 
of a device and to reflect on what factors should be considered in the 
potential restructuring of these MS-DRGs. We welcome further feedback 
on how CMS should define technical complexity, what factors should be 
considered in the analysis, and whether there are other data not 
included in Tables 6P.2b through 6P.2f that CMS should analyze.
    As discussed in the proposed rule, and earlier in this section, as 
we continue the analysis of the claims data with respect to MS-DRGs 023 
through 027, we are interested in receiving feedback on 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 these MS-DRGs. 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) at 
https://mearis.cms.gov/public/home. We note that we would address any 
proposed modifications to the existing logic in future rulemaking.
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.
    In response to this final policy, as discussed in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26681 through 26684), 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. We stated in the proposed 
rule that the requestor stated they 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.
    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.

[[Page 58668]]

     Suggested New MS-DRG XXX--Neurological Eye Disorders with 
Thrombolytic Agent without CC/MCC.
    We stated in the proposed rule that in reviewing this issue, it was 
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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.010

    We stated in the proposed rule that thrombolytic therapy is 
identified with the following ICD-10-PCS procedure codes.
[GRAPHIC] [TIFF OMITTED] TR28AU23.011

    In this final rule, we would like to correct the statement in the 
proposed rule and add that thrombolytic therapy is also identified with 
the following two ICD-10-PCS procedure codes.
[GRAPHIC] [TIFF OMITTED] TR28AU23.012

    We stated in the proposed rule that 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-DRG 123.
    To begin our analysis, as discussed in the proposed rule, 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 58669]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.013

    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.
    We stated in the proposed rule that the data analysis showed 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 stated in the proposed rule that we reviewed these data and did 
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 warranted 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 did not propose 
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 noted in the proposed rule that we recognized 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. As discussed in 
the proposed rule, 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 stated that 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 stated 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 58670]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.014

    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.
    We stated in the proposed rule that our analysis demonstrated 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 of the cases currently grouping to MS-DRG 124. We stated we 
reviewed these data and supported the addition of the ten 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 stated we believed reassigning 
these diagnosis codes to MS-DRGs 124 and 125 would better account for 
the subset of patients who are treated with a thrombolytic agent, and 
would more appropriately reflect the resources involved in evaluating 
and treating these patients. We also stated we supported 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 proposed 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 also proposed to add the procedure codes 
describing the administration of a thrombolytic agent listed previously 
to MS-DRG 124. In the proposed rule, we noted 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 also proposed to designate these codes as non-O.R. 
procedures affecting the MS-DRG. Lastly, for consistency, we also 
proposed 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.
    Comment: Commenters agreed with our proposal 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. A 
commenter stated that this proposal better aligns with the resource 
consumption of these cases. Another commenter stated that the proposed 
MS-DRG assignment of cases reporting a principal diagnosis code 
describing CRAO or BRAO with a procedure code describing the 
administration of a thrombolytic agent would more accurately capture 
the complexity of the condition and the necessary resources associated 
with administering critical treatments.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal 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, without modification, effective 
October 1, 2023, for FY 2024. In addition, we are finalizing our 
proposal to add the procedure codes describing the administration of a 
thrombolytic agent listed previously to MS-DRG 124. As part of the 
logic for MS-DRG 124, we are also finalizing our proposal to designate 
the 10 ICD-10-PCS procedure codes describing the administration of a 
thrombolytic agent listed previously as non-O.R. procedures affecting 
the MS-DRG. Lastly, we are finalizing our proposal 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 for FY 2024.
4. MDC 04 (Diseases and Disorders of the Respiratory System)
a. Ultrasound Accelerated Thrombolysis for Pulmonary Embolism
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26684 through 26691), 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

[[Page 58671]]

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[supreg] 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.
    As discussed in the proposed rule, 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.015

    We noted in the proposed rule 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 85 FR 
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). We 
noted in the proposed rule that 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 85 FR 58579), available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS for the detailed discussion.
    As discussed in the proposed rule, 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.

[[Page 58672]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.016

[GRAPHIC] [TIFF OMITTED] TR28AU23.017

[GRAPHIC] [TIFF OMITTED] TR28AU23.018

    We noted 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 noted 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 04 (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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.019

    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

[[Page 58673]]

average costs of $27,897. The data demonstrate 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 demonstrate 
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 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 demonstrate 
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.
    We stated in the proposed rule that 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.
    We noted in the proposed rule that 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.

[[Page 58674]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.020

[GRAPHIC] [TIFF OMITTED] TR28AU23.021

    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).
    We stated in the proposed rule that 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 stated 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 stated in the proposed 
rule that 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 in the proposed rule, 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 identifying USAT was performed, or a combination of 
both factors. Based on these findings related to the administration of 
thrombolytic(s), we stated 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, as discussed in the proposed rule, 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.

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

[[Page 58675]]

    In the proposed rule, we stated that 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] TR28AU23.022

    The findings from our analysis are shown in the following table. We 
noted 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.023

    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).
    As discussed in the proposed rule, 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.
    We stated in the proposed rule that 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] TR28AU23.024

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of the proposed rule and this final 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 noted that, as shown 
in the table that follows, a three-way split of this base MS-DRG failed 
to meet the criterion that there be at least 500 cases in both the CC 
and the NonCC (without CC/MCC) subgroup and it also failed to

[[Page 58676]]

meet the criterion that there be a 20% difference in average costs 
between the CC and NonCC subgroup.
[GRAPHIC] [TIFF OMITTED] TR28AU23.025

    As also discussed in section II.C.1.b. of the preamble of the 
proposed rule and this final 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 noted 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.026

    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] TR28AU23.027

    We noted 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 proposed 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] TR28AU23.028

BILLING CODE 4120-01-C
    We stated we believed 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 proposed 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 the proposed rule and in this final 
rule.
    Comment: Commenters supported the proposal to create new MS-DRG 173 
(Ultrasound Accelerated and Other Thrombolysis with Principal Diagnosis 
Pulmonary Embolism) given the data and information provided. A 
commenter expressed appreciation that CMS has acted to correct payment 
disparities for these procedures and recommended that CMS also utilize 
this approach to address other, similar MS-DRG reassignment requests 
that may involve a component with a lower volume of cases. Another 
commenter stated the proposal aligns more closely with the resources 
used, as opposed to the current MS-DRGs 166, 167, and 168. The 
commenter requested that CMS continue to analyze the data for these 
cases and consider creating an additional MS-DRG to reflect major 
complications and comorbidities, if warranted by further analysis. 
Other commenters who supported the proposal to reassign the cases from 
their current MS-DRG assignment expressed concern about the proposed 
single base MS-DRG. Specifically, the commenters stated the proposal 
does not acknowledge the secondary diagnosis

[[Page 58677]]

impact that the CMS analysis recognized may or may not be a 
contributing factor for the higher average costs of the cases reporting 
USAT procedures. The commenters also stated that the proposal 
demonstrates that application of the NonCC Subgroup may not be 
appropriate for some MS-DRGs since the result in this instance is for a 
base MS-DRG with a lower relative weight because severity of illness is 
unable to be recognized.
    Response: We thank the commenters for their support. In response to 
the concerns raised by the commenters regarding the impact application 
of the NonCC subgroup criteria has on proposed new MS-DRG 173, we note 
that, as discussed in the proposed rule and in this final rule, we 
apply the NonCC subgroup criteria once the decision is made to propose 
to make further modifications to the MS-DRGs. While application of the 
criteria did not support a severity level split for proposed MS-DRG 173 
for FY 2024, we intend to reevaluate for future rulemaking whether the 
criteria for a potential ``with MCC'' and ``without MCC'' two-way split 
would be met.
    Comment: A couple commenters suggested that the proposal to create 
new MS-DRG 173 should be delayed until more data can be collected. The 
commenters stated their belief that it is premature to create this new 
MS-DRG at this time and that in developing this proposed MS-DRG, CMS 
relied on recently implemented ICD-10-PCS data. According to the 
commenters, due to the lengthy processes for hospitals to adopt and 
accurately implement new coding, and conflicting coding advice for 
utilization of the ICD-10-PCS procedure codes for CDT and USAT, the 
number of cases is currently insufficient to support development of a 
new MS-DRG. The commenters stated that the low volume of cases and 
related data selected by CMS for analysis, CDT for the treatment of PE, 
cannot adequately compare to the costs, complexity, and utilization of 
USAT with a high confidence interval.
    Response: We appreciate the commenters' feedback. We disagree with 
the commenters that it is premature to propose the creation of new MS-
DRG 173 based on our review and claims data analysis as discussed in 
the proposed rule. In response to the commenters' statement that CMS 
relied on recently implemented ICD-10-PCS data, it is not clear to us 
what specific ICD-10-PCS data the commenters are referring to since a 
specific list was not provided, however, we believe the commenters may 
be suggesting the codes for USAT that were finalized October 1, 2020 
(FY 2021), and listed previously in connection with the analysis 
discussed in the proposed rule. As discussed in the proposed rule and 
prior rulemaking, our goal is always to use the best available data. We 
noted in the proposed rule that 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, and 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. Therefore, we believe 
our analysis of claims data in consideration of the MS-DRG request to 
reassign cases reporting USAT procedures for PE is consistent with our 
standard process, regardless of the effective date of the coded claims 
data. We also do not agree with the commenters' assertion that it is a 
lengthy process for hospitals to adopt and accurately implement new 
coding. We note that procedure code proposals discussed at the 
September ICD-10 Coordination and Maintenance Committee meeting and 
subsequently finalized are typically included in Table 6B.--New 
Procedure Codes in association with the proposed rule that is made 
publicly available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. This table (Table 
6B) lists the new procedure codes that have been approved to date that 
will be effective with discharges on and after October 1 of the 
upcoming fiscal year. Therefore, information regarding the finalized 
codes from the September meeting is made publicly available 
approximately 4-5 months in advance of the implementation date, 
affording the ability for users of the code set to gain familiarity 
with the updates. In addition, there are extensive industry-sponsored 
educational opportunities through various professional associations 
that introduce and discuss the annual code updates. For example, the 
American Hospital Association (AHA), American Health Information 
Management Association (AHIMA), and the American Academy of 
Professional Coders (AAPC) generally take lead roles in developing 
detailed technical training materials for coders and other users of the 
ICD-10 code set. The AHA also includes updates to ICD-10 in its Coding 
Clinic[supreg] for ICD-10-CM/ICD-10-PCS publication. Because the codes 
describing USAT were finalized for implementation October 1, 2020 (FY 
2021), we believe sufficient time has elapsed and that providers are 
successfully coding and reporting the procedure as demonstrated in our 
claims analysis.
    It is also not clear what conflicting coding advice for utilization 
of the ICD-10-PCS procedure codes for CDT and USAT the commenters are 
referring to since the commenters did not provide examples or 
supplemental information for what they believed to be conflicting 
advice to enable further evaluation.
    Comment: A few commenters expressed concern that the inclusion of 
both conventional CDT, also known as ``standard infusion catheters,'' 
and USAT in the proposed new MS-DRG disregards fundamental clinical 
differences between the procedures. According to the commenters, CDT 
generally relies on a multi-sidehole infusion catheter placed adjacent 
to the thrombus through which thrombolytics are delivered, typically 
over the course of 24 hours with the catheter in-dwelling, whereas USAT 
employs ultrasound to assist in thrombolysis, and the pulses of 
ultrasonic energy temporarily make the fibrin in the thrombus more 
porous and increase fluid flow within the thrombus. The commenters 
stated standard CDT is the simple infusion of liquids into the vessel 
and should not map to the same root operation fragmentation codes as 
does USAT. The commenters also stated CDT procedures are generally less 
complex clinically and consume significantly lower level of hospital 
resources as a result. The commenters recommended CMS should delay 
implementation, not finalize the proposed MS-DRG at this time and 
reconsider at a later date when utilization volumes reach a threshold 
of significance.
    A commenter also indicated that an analysis of cost data was being 
submitted to CMS to demonstrate that USAT PE cases have total costs 
that are more than three times the cost of CDT procedures for the 
sickest patients.
    Response: We disagree with the commenters that inclusion of both 
conventional CDT and USAT in the proposed new MS-DRG disregards 
fundamental clinical differences between the procedures. We note that 
while USAT procedures performed utilizing the EKOSTM device 
employ ultrasound, the objective of both CDT and USAT procedures is to 
effectuate thrombolysis and reduce clot burden. In response to the 
commenters' statement that standard CDT is the simple infusion

[[Page 58678]]

of liquids into the vessel and should not map to the same root 
operation fragmentation codes as does USAT, we note that under ICD-10-
PCS, both USAT and CDT are reported with the root operation 
fragmentation, defined as breaking solid matter in a body part into 
pieces. The procedure may be accomplished by physical force (e.g., 
manual, ultrasonic) applied directly or indirectly that is used to 
break the solid matter into pieces. The solid matter may be an abnormal 
byproduct of a biological function or a foreign body. The pieces of 
solid matter are not taken out. With respect to the commenters' 
statement that CDT procedures are generally less complex clinically and 
consume significantly lower level of hospital resources, we note that 
any procedure that places a catheter inside a blood vessel carries 
certain risks, including damage to the blood vessel, bruising or 
bleeding at the puncture site, and infection. In the treatment of a 
significant pulmonary embolism, both procedures (USAT and CDT) require 
a right heart catheterization by either an interventional cardiologist 
or an interventional radiologist, utilizing the same level of facility 
resources. In response to the commenters' recommendation that CMS 
should delay finalization for the proposed MS-DRG and reconsider in the 
future when utilization volumes reach a threshold of significance, as 
discussed in the proposed rule, once the decision was made to propose a 
new base MS-DRG, we applied the criteria to create subgroups and the 
criteria for both a three-way split and for a two-way split failed, 
however, we believe the simulated volume of 1,534 cases is sufficient 
for creation of the proposed new MS-DRG for these procedures.
    Finally, in response to the cost data that was submitted by a 
commenter, we note that it was the same data analysis as reflected and 
discussed in the proposed rule, and therefore we refer readers to that 
prior discussion.
    Comment: A commenter stated they agreed that fragmentation 
procedures with or without USAT do not belong in the requested MS-DRGs 
163, 164, and 165, and suggested they remain in their current MS-DRGs 
166, 167, and 168 based on clinical coherence and resource utilization.
    Response: We appreciate the commenter's feedback and agree that 
fragmentation procedures with or without USAT do not belong in the 
requested MS-DRGs 163, 164, and 165. However, for reasons discussed in 
the proposed rule, we believe our review of these procedures and data 
analysis findings support the proposal to create new MS-DRG 173 for 
grouping cases reporting the performance of USAT or CDT with a 
principal diagnosis of pulmonary embolism.
    Comment: A couple commenters disagreed with the proposal to create 
new MS-DRG 173. A commenter stated USAT procedures have been receiving 
appropriate payment since FY 2021 and the proposed new MS-DRG would 
create unnecessary administrative burden for established procedure 
codes that already have appropriate payment. Another commenter stated 
that fragmentation procedures, with or without ultrasonic assistance to 
break up blood clots, should stay assigned to the current MS-DRGs 166, 
167, and 168 respectively. The commenter stated that the costs and 
resources for these procedures are consistent with current payment 
levels when compared to the rest of the procedures assigned to the 
current MS-DRGs, that the change is not needed or necessary, and that 
over time may result in overall reduced payment, given that such a low 
number of procedures would be assigned to their own MS-DRGs.
    Response: We appreciate the commenters' feedback, however, based on 
our review of the procedures and claims data analysis as discussed in 
the proposed rule, we believe that USAT and CDT procedures performed 
for PE are clinically distinct and utilize a different pattern of 
resources than the other procedures in MS-DRGs 166, 167, and 168. We 
stated in the proposed rule that while we did not agree with the 
request to reassign cases reporting USAT or CDT for PE from MS-DRGs 
166, 167, and 168 to MS-DRGs 163, 164, and 165, we believed the 
findings from our analysis warranted proposed reassignment of these 
cases. While we described the findings from our review of the 
procedures currently assigned to MS-DRGs 163, 164, and 165 to 
specifically address the MS-DRG request (88 FR 26689), we note that in 
our review of cases assigned to MS-DRGs 166, 167, and 168, we 
identified similar findings; the majority of procedures reported are 
for malignant neoplasms of the trachea, bronchus, and lung, as well as 
for pneumonia and respiratory failure with either an open or 
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 166, 167, and 
168 are performed on patients who are not clinically similar to 
patients who undergo USAT or CDT 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 or CDT do not.
    As we have also stated in prior rulemaking (86 FR 44808), the 
``other'' surgical category contains surgical procedures which, while 
infrequent, could still reasonably be expected to be performed for a 
patient in the particular MDC. We note that because MS-DRGs 166, 167, 
and 168 are classified as an ``other'' surgical category, they are not 
as precisely defined from a clinical perspective and contain surgical 
procedures that are not based on any particular organizing principle 
(e.g. anatomy, surgical approach, diagnostic approach, pathology, 
etiology, or treatment process). However, we also note that the 
classification of patient cases into the MS-DRGs is a constantly 
evolving process, therefore, as coding, medical technologies or 
treatments change and more comprehensive data is collected, the MS-DRG 
definitions are reviewed, and revisions are proposed. As discussed in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44820), we stated we 
believed further analysis of the procedures assigned to MS-DRGs 163, 
164, 165, 166, 167, and 168 was warranted based on the creation of new 
procedure codes that have been assigned to these MS-DRGs in recent 
years for which claims data were not yet available and the need for 
additional time to examine the procedures currently assigned to those 
MS-DRGs by clinical intensity, complexity of service and resource 
utilization. We stated we would continue to evaluate the procedures 
assigned to these MS-DRGs as additional claims data became available.
    We also do not agree that the proposed new MS-DRG would create an 
unnecessary administrative burden for the established procedure codes 
since providers are accustomed to proposed and finalized changes to the 
MS-DRG classifications each fiscal year and software vendors 
incorporate the finalized changes into their products. With respect to 
the commenter's assertion that a low volume of procedures would be 
assigned to their own MS-DRG based on the proposal, as previously 
discussed, once the decision was made to propose a new base MS-DRG, we 
applied the criteria to create subgroups and the criteria for both a 
three-way split and for a two-way split failed, however, we believe the 
simulated volume of 1,534 cases is

[[Page 58679]]

sufficient for creation of the proposed new MS-DRG.
    Comment: A commenter stated they could not fully understand or 
evaluate CMS' proposal for proposed new MS-DRG 173 or determine how the 
data presented in the preamble of the proposed rule related to the 
proposed reassignment of cases because of inconsistencies in the 
materials supporting the proposed rule. According to the commenter, CMS 
referred to one set of ICD-10-PCS codes in the proposed rule and cited 
a different set of ICD-10-PCS codes mapping to proposed MS-DRG 173 in 
the proposed ICD-10 MS-DRG V41 Definitions Manual. The commenter stated 
interested parties are unable to evaluate and comment on proposals 
complicated by such an important inconsistency.
    Response: We appreciate the commenter's feedback, however, it is 
not clear what inconsistencies in the materials the commenter is 
specifically referring to since the commenter did not provide a list of 
codes for evaluation. Upon review of the proposed rule and the proposed 
ICD-10 MS-DRG V41 Definitions Manual, we did not find discrepancies.
    After consideration of the public comments we received, we are 
finalizing our proposal to create new MS-DRG 173 (Ultrasound 
Accelerated and Other Thrombolysis with Principal Diagnosis Pulmonary 
Embolism), without modification, for FY 2024. We are also finalizing 
our proposal to define the logic for the 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 association with the proposed rule. We 
will continue to monitor the claims data for this new MS-DRG after 
implementation to determine if additional refinements are warranted.
b. Respiratory Infections and Inflammations Logic
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26691), we stated 
that 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.
    We noted in the proposed rule that 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 proposed 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.
    Comment: Several commenters expressed support for the proposal to 
correct the logic for case assignment to MS-DRG 177. However, some 
commenters stated it was not specifically clear what was changing and 
requested that CMS provide more transparency with examples.
    A couple commenters recommended that when any one of the five 
influenza codes (J10.00, J10.01, J10.08, J11.00, or J11.08) from the 
first logic list entitled ``Principal Diagnosis'' in MS-DRGs 177, 178, 
and 179 is reported as a secondary diagnosis with a principal diagnosis 
from the second logic list (``or Principal Diagnosis''), that the 
influenza diagnosis code continue to be allowed to act as an MCC for 
assignment to MS-DRG 177. According to the commenters, influenza is not 
inherently related to the principal diagnoses on the second logic list, 
and, in combination, they have the potential to be more complicated and 
resource intensive to treat than any of the diagnoses occurring alone. 
The commenters supported excluding the 10 secondary diagnoses from the 
first logic list entitled ``with Secondary Diagnosis'' from acting as 
an MCC when any one of the codes is reported as a secondary diagnosis 
with a principal diagnosis code from the second logic list.
    Response: We thank the commenters for their support. In response to 
the commenters who requested additional clarification for the proposed 
changes, we are providing the following case example to demonstrate the 
intent of the proposed logic changes with application of the V41 ICD-10 
MS-DRG test GROUPER that was made publicly available in association 
with the proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Case Example: A patient who is admitted with COVID-19 develops 
influenza due to an unidentified flu virus along with an unspecified 
type of pneumonia. The principal diagnosis in this case is reported as 
the COVID-19 (diagnosis code U07.1) and the secondary diagnosis in this 
case is reported as influenza due to an unidentified flu virus with 
unspecified type of pneumonia (diagnosis code J11.00). The diagnosis 
code for COVID-19 (U07.1) is listed as one of the 58 diagnoses in the 
second logic list entitled ``or Principal Diagnosis'' and the diagnosis 
code for influenza due to an unidentified flu virus with unspecified 
type of pneumonia (J11.00) is listed as one of the five diagnoses in 
the first logic list entitled ``Principal Diagnosis''. When these 
diagnoses are entered in the V41 ICD-10 MS-DRG test GROUPER, the 
resulting MS-DRG is 177 (Respiratory infections and inflammations with 
MCC).


[[Page 58680]]


Principal Diagnosis: U07.1 COVID-19 (DRG)
Secondary Diagnoses: J11.00 Flu due to unidentified flu virus w unsp 
type of pneumonia (MCC)

    Additionally, when any one of the other four influenza diagnosis 
codes (J10.00, J10.01, J10.08, or J11.08) in that first logic list is 
reported as a secondary diagnosis with a principal diagnosis of U07.1, 
the resulting MS-DRG is also MS-DRG 177. Therefore, we agree with the 
commenters that the five influenza codes (J10.00, J10.01, J10.08, 
J11.00, or J11.08) should continue to be allowed to act as a MCC with a 
principal diagnosis from the second logic list in specific clinical 
scenarios.
    The following tables illustrate additional examples when the 
reporting of any one of the five influenza codes (J10.00, J10.01, 
J10.08, J11.00, or J11.08) from the first logic list entitled 
``Principal Diagnosis'' in MS-DRGs 177, 178, and 179 continues to act 
as an MCC when reported as a secondary diagnosis with certain principal 
diagnoses from the second logic list (``or Principal Diagnosis'') and 
to illustrate when any one of the five influenza diagnosis codes is 
excluded from acting as an MCC when reported as a secondary diagnosis 
with certain principal diagnoses from the second logic list.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.029

[GRAPHIC] [TIFF OMITTED] TR28AU23.030

    We note that in the preamble of the proposed rule we stated that we 
were proposing to exclude 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, however, the 
proposal was intended to exclude the 11 secondary diagnoses from the 
first logic list entitled ``with Secondary Diagnosis'' when one of the 
codes is reported as a secondary diagnosis with a principal diagnosis 
code from the second logic list, (as reflected in the case example when 
a diagnosis from each logic list is entered in the V41 ICD-10 MS-DRG 
test GROUPER).
    After consideration of the public comments we received, we are 
finalizing our proposal to correct the logic for case assignment to MS-
DRG 177, with modification, for FY 2024. We are finalizing the 
exclusion of the following 11 diagnosis codes listed in the first logic 
list entitled ``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 entitled ``or Principal 
Diagnosis'' when reported as the principal diagnosis.

[[Page 58681]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.031

BILLING CODE 4120-01-C
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 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, and 218 (Cardiac 
Valve and Other Major Cardiothoracic Procedures with Cardiac 
Catheterization with MCC, with CC, and without CC/MCC, respectively) as 
well as approximately 31 other MS-DRGs would be subject to change based 
on the three-way severity level split criterion finalized in FY 2021.
    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

[[Page 58682]]

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.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26691 through 26695), 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 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. We 
stated in the proposed rule that 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 stated in the 
proposed rule 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 
referred readers to Tables 6P.3a and 6P.3b associated with the 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 the 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 the 
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 the 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.
    We stated in the proposed rule that 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. We stated 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/

[[Page 58683]]

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 noted in the proposed rule 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 
stated 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 catheterization procedure reported to MS-DRGs that are defined 
by the performance of that procedure. We also noted, as discussed in 
section II.C.1.b of the 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 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 noted that the total number of cases in 
MS-DRG 218 is again below 500. We refer the reader to Table 6P.10b 
associated with the 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.
    As discussed in the proposed rule, 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 the 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.
    We stated that the data analysis as shown in Table 6P.3c associated 
with the proposed rule, 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.

[[Page 58684]]

    We noted in the proposed rule that analysis of the claims data 
suggested 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 stated we reviewed these data and 
noted, 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. In the 
proposed rule, we stated that the data analysis clearly showed 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 
proposed 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.
    As discussed in the proposed rule, 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 stated we believed that the 
resulting proposed MS-DRG assignment is more clinically homogeneous, 
coherent and better reflects hospital resource use.
[GRAPHIC] [TIFF OMITTED] TR28AU23.032

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of the 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] TR28AU23.033

    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] TR28AU23.034

    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] TR28AU23.035


[[Page 58685]]


    Therefore, for FY 2024, we did not propose 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 proposed 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 referred the reader to Table 6P.4a associated with the 
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 proposed to 
define in the logic for the proposed new MS-DRG. We refer the reader to 
section II.C.15. of the preamble of this final rule for the discussion 
of the surgical hierarchy and the complete list of our proposed 
modifications to the surgical hierarchy as well as our finalization of 
those proposals.
    Comment: Commenters expressed support for the proposal to create 
new base MS-DRG 212 (Concomitant Aortic and Mitral Valve Procedures) 
for cases reporting an aortic valve repair or replacement procedure, a 
mitral valve repair or replacement procedure, and another concomitant 
procedure in MDC 05. Many commenters stated finalization of this 
proposal would provide the resources necessary to continue offering 
these concomitant procedures to Medicare patients with extremely 
serious, complicated heart conditions, which avoids a future additional 
surgery down the line. Other commenters stated they agreed with CMS 
that this proposal would result in more clinically homogenous 
assignments that better reflect hospital resources. A commenter stated 
they thank CMS for recognizing the importance of adequate payment for 
multiple concomitant open valvular procedures. Another commenter stated 
that without an MS-DRG reflecting the additional costs of performing 
concomitant procedures, hospitals will continue to be incentivized for 
multiple admissions for separate cardiac procedures in order to cover 
the cost of care.
    Response: We appreciate the commenters' support.
    Comment: Many commenters stated that the proposal to create MS-DRG 
212 is a good first step, but urged CMS go a step further and also 
assign cases reporting a single AVR or MVR procedure and another 
concomitant procedure in MDC 05 to the proposed new MS-DRG. Commenters 
stated that this modification to the proposal would better align with 
the clinical literature and the clinical needs of Medicare 
beneficiaries by allowing patients to receive lifesaving therapies in 
one visit, while not incentivizing hospitals to send patients with AF 
home to return for future procedures. Some commenters stated, based on 
their analysis, more patients require an open concomitant single AVR or 
MVR procedure than multiple open valvular procedures with open surgical 
ablation. These commenters stated that new MS-DRG 212 would only apply 
to roughly 10 percent of Medicare beneficiaries, while excluding the 
majority of Medicare beneficiaries who require open heart valve 
procedures in combination with open surgical ablation treatment for AF. 
A commenter stated that AF is a complex arrythmia that is present in 
more than 40 percent of patients undergoing open single or multiple 
valve procedures and stated that these patients have a two to three 
times greater risk for hospitalizations and multiple admissions if 
their AF goes untreated. Commenters stated that treating atrial 
fibrillation during the same surgical session as a single open valve 
procedure requires significant device costs, additional operating room 
time, and specialized staff. Some commenters expressed concern that 
given the added costs of performing multiple procedures at the same 
time, hospitals may more likely schedule the patient for separate 
procedures even though guidelines of the Society for Thoracic Surgeons 
and the Heart Rhythm Society recommend performing surgical ablation for 
atrial fibrillation at the time of open-heart procedures when 
indicated. These commenters further stated a delay in addressing the 
biggest patient segment with single open valve replacement (MVR or AVR) 
and other concomitant procedures risks limiting lifesaving access to 
therapies for CMS beneficiaries. Many commenters stated the proposal 
would be even more impactful for patients if cases reporting single 
open valve procedures were included.
    Some commenters urged CMS to either (1) assign all cases reporting 
a single AVR or MVR procedure and another concomitant procedure for the 
treatment of atrial fibrillation to new proposed MS-DRG 212, (2) create 
a new MS-DRG for cases reporting a single AVR or MVR procedure for the 
treatment of atrial fibrillation, or (3) assign cases reporting a 
single AVR or MVR procedure and a concomitant surgical ablation 
procedure for the treatment of atrial fibrillation 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) and change the title of the MS-DRGs, while maintaining 
the relative weight, and then monitor the claims data for two years.
    However, other commenters were not supportive of assigning cases 
reporting a single AVR or MVR procedure and another concomitant 
procedure to the proposed new MS-DRG 212. These commenters noted that 
the focus and clinical rationale for CMS' proposal was based on the 
complex, multiple valve procedures. Commenters stated that assigning 
cases reporting a single AVR or MVR procedure and another concomitant 
procedure to new MS-DRG 212 would have a significant negative impact on 
the remaining MS-DRGs, notably MS-DRG 216. The commenters recommended 
that CMS continue to carefully review the impacts on the relative 
weights in these MS-DRGs if CMS finalizes the proposal to move 
approximately 900 cases out of MS-DRGs 216, 217, 218, 219, 220, and 
221. Another commenter requested that CMS delay implementation of 
proposed new MS-DRG 212 for a year to allow interested parties to fully 
assess the impact of the proposed changes to MS-DRGs 216, 217, 218, 
219, 220, and 221 and to analyze other options to address payment 
adequacy more broadly across concomitant procedures, particularly given 
that findings from CMS' analysis indicate that MS-DRGs 216, 217, and 
218 as well as approximately 44 other base MS-DRGs would be subject to 
change based on the NonCC subgroup criteria finalized in FY 2021. This 
commenter further stated given the relatively small number of cases 
impacted by the newly proposed MS-DRG 212, additional time would give 
CMS an opportunity to work with interested parties to consider other 
concomitant procedures that have similar clinical and cost coherence as 
the procedures currently proposed for MS-DRG 212, such as concomitant 
procedures involving the tricuspid and pulmonary valves.
    Response: We appreciate the commenters sharing their concerns and

[[Page 58686]]

feedback on this proposal. To examine the recommendation that CMS 
expand MS-DRG 212 to allow cases reporting a single aortic valve repair 
or replacement procedure or a mitral valve repair or replacement 
procedure with an open concomitant surgical ablation to be grouped into 
the proposed new MS-DRG, we further analyzed the September 2022 update 
of the FY 2022 MedPAR file for cases reporting procedure code 
combinations describing a single AVR or MVR procedure and a concomitant 
procedure assigned to MS-DRGs 216, 217, 218, 219, 220 and 221. We also 
analyzed the September 2022 update of the FY 2022 MedPAR file for cases 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure and a diagnosis of AF. We 
identified cases reporting AF as a principal or secondary diagnosis 
with the following ICD-10-CM codes.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.036

[GRAPHIC] [TIFF OMITTED] TR28AU23.037


[[Page 58687]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.038

BILLING CODE 4120-01-C
    As shown in the table, in MS-DRG 216, we identified a total of 
2,590 cases reporting procedure code combinations describing a single 
AVR or MVR procedure and a concomitant procedure with an average length 
of stay of 17.1 days and average costs of $87,374. Of those 2,590 
cases, there were 1,511 cases reporting procedure code combinations 
describing a single AVR or MVR procedure and a concomitant procedure, 
with a diagnosis of AF with average costs of $85,840 and an average 
length of stay of 17 days. The data analysis performed indicates that 
the 1,511 cases in MS-DRG 216 reporting procedure code combinations 
describing a single AVR or MVR procedure and a concomitant procedure 
with a diagnosis of AF have an average length of stay that is longer 
than the average length of stay for all the cases in MS-DRG 216 (17.1 
days versus 14.9 days) and slightly higher average costs when compared 
to all the cases in MS-DRG 216 ($85,840 versus $84,327).
    In MS-DRG 217, we identified a total of 808 cases reporting 
procedure code combinations describing a single AVR or MVR procedure 
and a concomitant procedure with an average length of stay of 9.4 days 
and average costs of $55,593. Of those 808 cases, there were 462 cases 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure, with a diagnosis of AF with 
average costs of $56,104 and an average length of stay of 9.8 days. The 
data analysis performed indicates that the 462 cases in MS-DRG 217 
reporting procedure code combinations describing a single

[[Page 58688]]

AVR or MVR procedure and a concomitant procedure with a diagnosis of AF 
have an average length of stay that is longer than the average length 
of stay for all the cases in MS-DRG 217 (9.8 days versus 7.3 days) and 
similar average costs when compared to all the cases in MS-DRG 217 
($56,104 versus $56,143).
    In MS-DRG 218, we identified a total of 62 cases reporting 
procedure code combinations describing a single AVR or MVR procedure 
and a concomitant procedure with an average length of stay of 6.6 days 
and average costs of $38,013. Of those 62 cases, there were 18 cases 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure, with a diagnosis of AF with 
average costs of $37,053 and an average length of stay of 6.2 days. The 
data analysis performed indicates that the 18 cases in MS-DRG 218 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure with a diagnosis of AF have an 
average length of stay that is longer than the average length of stay 
for all the cases in MS-DRG 218 (6.2 days versus 3.1 days) and lower 
average costs when compared to all the cases in MS-DRG 218 ($37,053 
versus $50,208).
    In MS-DRG 219, we identified a total of 7,400 cases reporting 
procedure code combinations describing a single AVR or MVR procedure 
and a concomitant procedure with an average length of stay of 10.9 days 
and average costs of $65,489. Of those 7,400 cases, there were 4,485 
cases reporting procedure code combinations describing a single AVR or 
MVR procedure and a concomitant procedure, with a diagnosis of AF with 
average costs of $66,912 and an average length of stay of 11.1 days. 
The data analysis performed indicates that the 4,485 cases in MS-DRG 
219 reporting procedure code combinations describing a single AVR or 
MVR procedure and a concomitant procedure with a diagnosis of AF have 
an average length of stay that is slightly longer than the average 
length of stay for all the cases in MS-DRG 219 (11.1 days versus 10.8 
days) and slightly higher average costs when compared to all the cases 
in MS-DRG 219 ($66,912 versus $65,911).
    In MS-DRG 220, we identified a total of 6,496 cases reporting 
procedure code combinations describing a single AVR or MVR procedure 
and a concomitant procedure with an average length of stay of 6.5 days 
and average costs of $45,455. Of those 6,496 cases, there were 3,645 
cases reporting procedure code combinations describing a single AVR or 
MVR procedure and a concomitant procedure, with a diagnosis of AF with 
average costs of $47,560 and an average length of stay of 7 days. The 
data analysis performed indicates that the 3,645 cases in MS-DRG 220 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure with a diagnosis of AF have an 
average length of stay that is slightly longer than the average length 
of stay for all the cases in MS-DRG 220 (7 days versus 6.4 days) and 
slightly higher average costs when compared to all the cases in MS-DRG 
220 ($47,560 versus $45,839).
    In MS-DRG 221, we identified a total of 650 cases reporting 
procedure code combinations describing a single AVR or MVR procedure 
and a concomitant procedure with an average length of stay of 5 days 
and average costs of $39,688. Of those 650 cases, there were 239 cases 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure, with a diagnosis of AF with 
average costs of $41,903 and an average length of stay of 5.6 days. The 
data analysis performed indicates that the 239 cases in MS-DRG 221 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure with a diagnosis of AF have an 
average length of stay that is longer than the average length of stay 
for all the cases in MS-DRG 221 (5.6 days versus 4 days) and slightly 
higher average costs when compared to all the cases in MS-DRG 221 
($41,903 versus $40,694).
    The data analysis performed also indicates that the cases in MS-
DRGs 219, 220, and 221 reporting procedure code combinations describing 
a single AVR or MVR procedure and a concomitant procedure have a 
similar average length of stay and generally lower average costs when 
compared to all cases in MS-DRGs 216, 217, and 218. As discussed in the 
proposed rule, 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. We stated we 
found 892 cases reporting procedure codes describing an aortic valve 
repair or replacement procedure, a mitral valve repair or replacement 
procedure, and another concomitant procedure with an average length of 
stay of 15.7 days and average costs of $93,764. Our additional analysis 
performed in response to public comments also indicates that the cases 
reporting procedure code combinations describing a single AVR or MVR 
procedure and a concomitant procedure have a much shorter average 
length of stay and much lower average costs when compared to these 892 
cases.
    Upon analysis of the claims data using our current analytical 
framework, review of the original request, and review of the public 
comments, while we agree that there are more cases reporting a single 
AVR or MVR procedure and another concomitant procedure than cases 
reporting concomitant aortic and mitral valve procedures, we do not 
agree with assigning cases reporting a single AVR or MVR procedure and 
another concomitant procedure for the treatment of atrial fibrillation 
to new proposed MS-DRG 212. As previously noted, the data do not 
indicate cases reporting a single AVR or MVR procedure and another 
concomitant procedure (with or without a diagnosis of AF) utilize 
similar resources when compared to the cases proposed to be assigned to 
new MS-DRG 212. The cases are not clinically coherent with regard to 
resource utilization as reflected in the differences in average costs. 
Further, the data do not support creating a new MS-DRG for cases 
reporting a single AVR or MVR procedure for the treatment of atrial 
fibrillation and instead suggest that cases reporting a single AVR or 
MVR procedure for the treatment of atrial fibrillation are suitably 
grouped to MS-DRGs 216, 217, 218, 219, 220, and 221 where they are 
currently assigned based on the similarities in resource utilization 
compared to all the cases in their respective MS-DRG.
    In response to comments that urged CMS to assign cases reporting 
procedure code combinations describing open concomitant surgical 
ablations currently assigned to MS-DRGs 216, 217, 218, 219, 220, and 
221 to MS-DRGs 216, 217, and 218, as noted in prior rulemaking, MS-DRGs 
216, 217, and 218 are defined by the performance of cardiac 
catheterization. We continue to express concern about the effect on 
clinical coherence of assigning cases reporting procedure code 
combinations describing open concomitant surgical ablations that do not 
also have a cardiac catheterization procedure reported to MS-DRGs that 
are defined by the performance of that procedure.
    In response to the suggestion that CMS delay implementation of 
proposed new MS-DRG 212 for a year to allow interested parties to fully 
assess the impact of the proposed changes to MS-DRGs 216, 217, 218, 
219, 220, and 221 and to analyze other options to address payment 
adequacy more broadly across concomitant procedures, we reviewed the 
commenters' concern and do not agree that a delay would be prudent. We 
believe that the data we currently have

[[Page 58689]]

available is sufficient 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. As discussed 
in the proposed rule, and earlier in this section, the data demonstrate 
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.
    We appreciate the public comments we received and will continue to 
monitor for impacts in MDC 05 and across the MS-DRGs to avoid 
unintended consequences or missed opportunities in most appropriately 
capturing the resource utilization and clinical coherence for this 
subset of procedures.
    Comment: Some commenters stated the title of proposed new MS-DRG 
212 (Concomitant Aortic and Mitral Valve Procedures) is not clear. 
These commenters stated it was not clear if the logic intent is for 
cases reporting both a mitral and aortic valve procedure with a 
concomitant procedure to be assigned to new MS-DRG 212 or if the logic 
intent is to have cases reporting a mitral valve or an aortic valve 
procedure with a concomitant procedure to be assigned to new MS-DRG 
212. A few commenters suggested that consideration be given to revising 
the title of the proposed new MS-DRG as it is not intuitive that the 
list of concomitant procedures in the GROUPER logic list for MS-DRG 212 
includes both surgical ablation and CABG procedures. Another commenter 
stated that the display in the draft Definition Manual, Version 41, for 
MS-DRG 212 is unclear and observed there are no instructional notes 
included in the draft Definition Manual to explain the intent of the 
various lists of procedures.
    Response: We appreciate the commenters' feedback. As discussed in 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26691 through 26695), 
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 (88 FR 26694). 
For these reasons, we proposed 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.
    In response to commenters who stated that it was not clear if the 
logic intent is for cases reporting both a mitral and aortic valve 
procedure with a concomitant procedure to be assigned to new MS-DRG 212 
or if the logic intent is to have cases reporting a mitral valve or an 
aortic valve procedure with a concomitant procedure to be assigned to 
new MS-DRG 212, we wish to clarify cases reporting: (1) an aortic valve 
repair or replacement procedure; (2) a mitral valve repair or 
replacement procedure; and (3) at least one other concomitant 
procedure, as defined in the GROUPER logic, would be assigned to 
proposed new MS-DRG 212 (Concomitant Aortic and Mitral Valve 
Procedures).
    In response to the suggestion that the title of MS-DRG 212 be 
revised, we reviewed the commenters' concerns and do not believe a 
modification is warranted. As our 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, we believe the proposed title of the new MS-DRG 
appropriately characterizes these findings.
    In reviewing the comment regarding the draft version of the ICD-10 
MS-DRG Definitions Manual, Version 41, (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software), that was 
provided so the public can better analyze and understand the impact of 
the proposals included in the FY 2024 IPPS/LTCH PPS proposed rule, we 
agree refinements to the display would be helpful to clarify the 
GROUPER logic for MS-DRG 212. In the final ICD-10 MS-DRG Definitions 
Manual, Version 41, we will refine the display by adding headers above 
each of the respective logic lists as follows:
 Select ONE procedure from aortic valve procedures
 Select ONE procedure from mitral valve procedures
 Select at least ONE procedure from concomitant procedures

    Comment: Some commenters noted that the list of procedure codes we 
proposed to define aortic valve procedures and mitral valve procedures 
in the logic for the proposed new MS-DRG is limited to the root 
operations ``Repair'' and ``Replacement,'' however there are other 
valve procedures listed under the ``Concomitant Procedure'' logic list. 
These commenters suggested that CMS consider moving the aortic and 
mitral valve procedure codes with the root operations of ``Creation'', 
``Release'', ``Restriction'', and ``Supplement,'' that are currently 
listed under the Concomitant Procedures list in Table 6P.4a and in the 
draft version of the ICD-10 MS-DRG Definitions Manual to the 
appropriate logic list of aortic valve or mitral valve procedures. The 
commenters stated that procedure codes with these other root operations 
also represent types of valvular repairs and should be included on the 
aortic valve procedures and mitral valve procedures logic lists rather 
than the ``Concomitant Procedure'' logic list. A commenter stated that 
this change would ensure that all of the aortic valve and mitral valve 
procedures codes are captured as valve procedures instead of 
concomitant procedures when performed.
    Response: We appreciate the feedback and will take these 
suggestions under consideration. We note that the requestor originally 
requested that CMS review the MS-DRG assignments for cases involving 
open surgical ablation performed during another open heart surgical 
procedure such as mitral valve repair or replacement (MVR), aortic 
valve repair or replacement (AVR), or coronary artery bypass grafting 
(CABG). Table 6P.3a associated with the proposed rule sets forth the 
list of ICD-10-PCS procedure codes reflecting MVR, AVR, CABG, and 
surgical ablation procedures that we examined in our analysis. We agree 
with the commenters that there are other valve procedures listed under 
the ``Concomitant Procedure'' logic list in Table 6P.3a, however, each 
of these procedures are defined by clinically distinct definitions and 
objectives, which is why there are separate and unique ICD-10-PCS 
procedure codes within the classification for reporting purposes. 
Additional claims analysis is needed to determine if the technical 
complexity and resource utilization of all, or a subset, of the aortic 
and mitral valve procedure codes with the root operations of 
``Creation'', ``Release'', ``Restriction'', and ``Supplement'' in the 
``Concomitant Procedures'' logic list warrant any modifications to the 
GROUPER logic of proposed new MS-DRGs 212. We believe there may be an 
opportunity to further refine this MS-DRG as we continue to monitor the 
claims data and perform additional analysis. We note that we would 
address any proposed modifications to the logic in future rulemaking.
    Comment: Commenters stated they appreciated CMS' willingness to 
examine how the performance of multiple procedures during the same

[[Page 58690]]

operative session contributes to higher hospital costs and patient 
length of stay. Commenters encouraged CMS to continue to consider 
options in the MS-DRGs for concomitant procedures with higher hospital 
resource utilization, given the important patient care benefits and 
efficiencies associated with performing certain procedures 
concomitantly in a single encounter rather than staging separate 
procedures. A commenter stated they recognize that clinical services 
across many medical specialties may be performed concomitantly to 
optimize patient outcomes and noted, for example, studies indicate when 
left atrial appendage closure (LAAC) is performed concomitantly with 
ablation, the outcomes are at least as comparable as for patients who 
have undergone these procedures separately. This commenter suggested 
that CMS conduct comprehensive analysis of all concomitant procedures, 
similar to the analysis of concomitant aortic and mitral valve 
procedures, to inform whether CMS should establish a more holistic 
policy to provide adequate payment for clinical practices that lead to 
better efficiency and patient outcomes. Another commenter recommended 
that CMS devise a broader, more inclusive, supplemental mechanism to 
facilitate incremental payment when two major procedures are performed 
during the same hospital admission and urged CMS to ensure that the 
incurred costs are adequately addressed so as to not disincentivize 
concomitant procedures which can be more cost efficient, more 
convenient, and provide a better prognosis for the patient than the 
procedures being performed during different hospital stays.
    Response: We appreciate the commenters' support. We also thank the 
commenters for their recommendations to conduct comprehensive analysis 
of all concomitant procedures as we agree that the performance of 
``concomitant procedures'' may affect the consumption of resources in 
other clinical scenarios, especially when the use of devices is 
involved. We continue to be interested in receiving feedback on 
possible mechanisms through which we can address concomitant 
procedures. We are also interested in receiving feedback on how CMS can 
mitigate any unintended negative payment impacts to providers providing 
concomitant procedures. Commenters can continue to submit their 
recommendations via the Medicare Electronic Application Request 
Information SystemTM (MEARISTM) at: https://mearis.cms.gov/public/home. We will consider these public comments for 
possible proposals in future rulemaking as part of our annual review 
process.
    Comment: While supporting the proposal, a commenter suggested that 
proposed new MS-DRG 212 be split into two severity levels (with and 
without MCC). The commenter stated they believe it is mathematically 
impossible for the proposed new MS-DRG to ever be more than a base MS-
DRG, however in their opinion, a base MS-DRG does not take into account 
the variation in the average costs between cases reporting a secondary 
diagnosis designated as a MCC compared to cases reporting a secondary 
diagnosis designated as a CC.
    Response: We thank the commenter for their feedback. In response to 
the suggestion that proposed new MS-DRG 212 for cases describing 
concomitant aortic and mitral valve procedures be subdivided with a 
two-way severity level split, we note as discussed in the proposed rule 
and earlier in this section, in the analysis of the cases describing 
concomitant aortic and mitral valve procedures, we 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 could not be met and therefore did not propose to 
subdivide the proposed new MS-DRG for concomitant aortic and mitral 
valve procedures into severity levels for FY 2024. In response to the 
concern about variation of costs between cases reporting a secondary 
diagnosis designated as a MCC compared to cases reporting a secondary 
diagnosis designated as a CC in a base MS-DRG, we note the MS-DRG 
system is a system of averages, and it is expected that within the 
diagnostic related groups, some cases may demonstrate higher than 
average costs, while other cases may demonstrate lower than average 
costs.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to create 
a new MS-DRG 212 (Concomitant Aortic and Mitral Valve Procedures) in 
MDC 05, without modification, effective October 1, 2023, for FY 2024. 
We are also finalizing the list of procedure codes to define the logic 
for the new MS-DRGs as displayed in Table 6P.4a associated with the 
proposed rule (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index).
b. External Heart Assist Device
    Impella[supreg] 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 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.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26695

[[Page 58691]]

through 26700), 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).
    We noted in the proposed rule that the Impella 5.5[supreg] with 
SmartAssist[supreg] 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 5.5[supreg] with SmartAssist[supreg] System is 
considered a hybrid procedure of an open vascular exposure and an 
endovascular procedure. The Impella 5.5[supreg] with 
SmartAssist[supreg] 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 
5.5[supreg] with SmartAssist[supreg] 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 5.5[supreg] with 
SmartAssist[supreg] 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 5.5[supreg] with SmartAssist[supreg] 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. We stated in the proposed rule that 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 5.5[supreg] with SmartAssist[supreg] System compared to 
patients treated with other femoral access pVADs assigned to MS-DRG 
215.
    In the proposed rule, we also noted that 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[supreg] Ventricular 
Support Systems) submitted a code proposal requesting a new ICD-10-PCS 
procedure code to describe the Impella 5.5[supreg] with 
SmartAssist[supreg] 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, in the proposed 
rule we noted that we agreed with the requestor that the insertion of a 
short-term external heart assist device using an axillary artery 
conduit (such as the Impella 5.5[supreg] with SmartAssist[supreg] 
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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.039

    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.
    As stated previously and discussed in the proposed rule, 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 noted in the proposed rule 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 noted in the proposed rule that the GROUPER logic for MS-
DRG 003 is defined by (1) a 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:

[[Page 58692]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.040

    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 in the proposed rule we stated 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.
    In the proposed rule, we stated that 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.041

    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

[[Page 58693]]

external heart assist device compared to all cases in that MS-DRG.
    We stated in the proposed rule that 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] TR28AU23.042

    We stated that 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 suggested 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.
    In the proposed rule, we stated that 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. We noted 
that there is now a portfolio of short-term external heart assist 
devices available that each have different indications for use and 
techniques for implantation.
    We also noted that 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 noted in the proposed rule that 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 stated we believed 
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.
    As discussed in the proposed rule, 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.043

    We stated in the proposed rule that we believed 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

[[Page 58694]]

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 proposed 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. We noted that under this 
proposal, procedure code 02HA0RZ would 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.
    As discussed in the proposed rule, 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[supreg] 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 
5.5[supreg] with SmartAssist[supreg] 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. In the proposed rule, we noted that 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 the 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.
    We noted in the proposed rule that under this established process, 
the MS-DRG assignment for any new procedure codes describing the 
Impella 5.5[supreg] with SmartAssist[supreg] 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.13. of the preamble of the proposed rule and this final 
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 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 proposed 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 5.5[supreg] 
with SmartAssist[supreg] System is coded within the ICD-10-PCS 
classification. In the proposed rule, we noted that 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 5.5[supreg] with 
SmartAssist[supreg] System will be displayed in Table 6B.--New 
Procedure Codes in association with this FY 2024 IPPS/LTCH PPS final 
rule that will be made publicly available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    Comment: Many commenters expressed support for CMS' proposal to 
reassign ICD-10-PCS code 02HA0RZ from MDC 05 in MS-DRG 215 to Pre-MDC 
MS-DRGs 001 and 002 when reported as a standalone procedure. These 
commenters stated they agreed with the proposal and believed 
reassigning this procedure to MS-DRGs 001 and 002 aligns more 
accurately with, and reflects resources used for, these more complex 
patients and more complex procedures. Commenters stated that they 
appreciate CMS' continued efforts to ensure appropriate code 
assignments of surgical approaches for

[[Page 58695]]

short-term heart assist devices and to improve clinical consistency and 
predictability for providers as short-term heart assist devices have 
evolved with different access procedures to treat hemodynamically 
compromised patients. Some commenters also stated that streamlining the 
GROUPER logic so that ICD-10-PCS 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 
will ensure that the cases in these MS-DRGs are more clinically 
homogeneous and better reflect hospital resource use.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 when reported 
as a standalone procedure, without modification, effective October 1, 
2023, for FY 2024. Under this finalization, 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.
    Comment: Many commenters stated that if new ICD-10-PCS procedure 
codes describing the Impella 5.5[supreg] with SmartAssist[supreg] 
System were finalized following the March 7-8, 2023 ICD-10 Coordination 
and Maintenance Committee meeting, they recommend CMS assign the new 
codes to MS-DRGs 001 and 002. Some commenters stated that patients 
treated with the Impella 5.5[supreg] with SmartAssist[supreg] System 
have a very similar clinical presentation as patients treated with 
short-term external heart assist systems inserted via the open approach 
and utilize approximately the same resources. These commenters stated 
that they believed that both procedures are clinically coherent with 
cases currently assigned to MS-DRGs 001 and 002, so it is reasonable 
that cases reporting the insertion of the Impella 5.5[supreg] with 
SmartAssist[supreg] System group to the same MS-DRG as ICD-10-PCS code 
02HA0RZ. A commenter further stated that this adjustment would help 
ensure adequate payment for the resources invested, allowing 
institutions to maintain high-quality care, and would incentivize the 
advancement of innovative interventions in the field of cardiovascular 
medicine.
    Response: We thank the commenters for their feedback.
    We note that the proposal to change how the Impella[supreg] 5.5 
with SmartAssist[supreg] System is coded within the ICD-10-PCS 
classification that was discussed at the March 7-8 2023 ICD-10 
Coordination and Maintenance Committee meeting was approved and new 
procedure codes to identify the insertion of a short-term external 
heart assist system using a conduit attached to the right axillary 
artery or to the ascending aorta were finalized as reflected in the FY 
2024 ICD-10-PCS Code Update files that were made publicly available on 
the CMS website at https://www.cms.gov/Medicare/Coding/ICD10 on June 6, 
2023. In addition to the new procedure codes describing the Impella 
5.5[supreg] with SmartAssist[supreg] System being made publicly 
available in the FY 2024 ICD-10-PCS Code Update files on the CMS 
website, we note that the new procedure codes are also reflected in 
Table 6B.--New Procedure Codes, in association with this final rule and 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, including the MS-DRG 
assignments for these new codes for FY 2024. We refer the reader to 
section II.C.13. of the preamble of this final rule for further 
information regarding the table.
    Specifically, using our established process, we examined the MS-DRG 
assignment for the predecessor code to determine the most appropriate 
MS-DRG assignment. We reviewed the predecessor code and MS-DRG 
assignment most closely associated with the new procedure codes, and in 
the absence of claims data, we considered 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. ICD-10-PCS 
procedure code 03HY0YZ (Insertion of other device into upper artery, 
open approach) is the predecessor code that we utilized to inform this 
analysis.
    The MS-DRG assignment for the predecessor code 03HY0YZ and the new 
procedure codes describing the insertion of a short-term external heart 
assist system using a conduit attached to the right axillary artery or 
to the ascending aorta under MDC 05 are identified as follows.
[GRAPHIC] [TIFF OMITTED] TR28AU23.044

    While the new procedure codes are being assigned to the same MS-DRG 
as the predecessor code in this instance, as we have noted in prior 
rulemaking, and earlier in this section, 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.
    We also note that the finalized procedure codes describing the 
Impella 5.5[supreg] with SmartAssist[supreg] System identify the 
insertion of short-term external heart assist system using a conduit 
attached to the right axillary artery or to the ascending aorta. To 
fully describe the procedure, a separate code will continue to be 
reported for the insertion of the external heart assist system. In 
addition to the MDC and MS-DRG assignments as reflected in the previous 
table and in Table 6B.--New Procedure Codes, in association with this 
final rule, we note the procedure code combinations reflected in the 
table that follows are assigned to MS-DRGs 001 and 002, for FY 2024. 
This assignment is also reflected in the final Version 41 ICD-10 MS-DRG 
GROUPER logic.

[[Page 58696]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.045

    The public may provide feedback on these MS-DRG assignments for FY 
2024, which will then be taken into consideration for the following 
fiscal year.
c. Ultrasound Accelerated Thrombolysis for Deep Venous Thrombosis
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27000 through 26706), 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 the 
proposed rule and this final 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[supreg] 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.
    We stated in the proposed rule that, 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

[[Page 58697]]

for DVT with the following ICD-10-PCS procedure codes.
[GRAPHIC] [TIFF OMITTED] TR28AU23.046

    We noted in the proposed rule 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 85 FR 
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

[[Page 58698]]

58561 through 85 FR 58579), available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS 
for the detailed discussion.
    In the proposed rule, we stated that 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 noted that 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 the 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] TR28AU23.047

    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 demonstrate 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 
demonstrate 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 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 
demonstrate 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

[[Page 58699]]

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.
    We stated in the proposed rule that 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).
    In the proposed rule, we noted that 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] TR28AU23.048

[GRAPHIC] [TIFF OMITTED] TR28AU23.049

    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

[[Page 58700]]

MS-DRG 272 (2.7 days versus 2.4 days) and comparable average costs 
($20,672 versus $21,556) with a difference of $884.
    We stated in the proposed rule that 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 stated in the proposed rule, 
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 in the proposed rule, while the average costs are higher 
for cases reporting the administration of a thrombolytic, we questioned 
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 the 
proposed rule and this final 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, as discussed in the proposed rule, 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 the 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. 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.050

    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).
    We noted in the proposed rule that, 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. We further noted 
that 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.

[[Page 58701]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.051

    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.
    As discussed in the proposed rule, 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) 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 believed 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 stated 
we believe a new MS-DRG would reflect more appropriate payment for USAT 
and standard CDT procedures of peripheral vascular structures.
    In the proposed rule, we also noted that 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] TR28AU23.052

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of the proposed rule and this final 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 noted in the proposed 
rule 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] TR28AU23.053

    As discussed in section II.C.1.b. of the preamble of the proposed 
rule and this final 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 applied the criteria for a two-way split for the ``with 
MCC and without MCC'' subgroups. We noted 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

[[Page 58702]]

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] TR28AU23.054

    Accordingly, because the criteria for the two-way split were met, 
we stated we believed a split (or CC subgroup) is warranted for the 
proposed new base MS-DRG. As a result, for FY 2024, we proposed 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 proposed 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 the proposed rule.
    Comment: Commenters supported the proposal to create new MS-DRGs 
278 and 279 (Ultrasound Accelerated and Other Thrombolysis of 
Peripheral Vascular Structures with and without MCC, respectively) 
given the data and information provided. A commenter stated the new MS-
DRGs will generate more appropriate payment for cases reporting these 
procedures.
    Response: We thank the commenters for their support.
    Comment: A couple commenters suggested that the proposal to create 
the two new MS-DRGs should be delayed until more data can be collected. 
The commenters stated their belief that it is premature to create these 
new MS-DRGs at this time and that in developing these proposed MS-DRGs, 
CMS relied on recently implemented ICD-10-PCS data. According to the 
commenters, due to the lengthy processes for hospitals to adopt and 
accurately implement new coding, and conflicting coding advice for 
utilization of the ICD-10-PCS procedure codes for CDT and USAT, the 
number of cases is currently insufficient to support development of new 
MS-DRGs. The commenter stated that the low volume of cases and related 
data selected by CMS for analysis, CDT for the treatment of DVT, cannot 
adequately compare to the costs, complexity, and utilization of USAT 
with a high confidence interval.
    Response: We appreciate the commenters' feedback. We disagree with 
the commenters that it is premature to propose the creation of new MS-
DRGs 278 and 279 based on our review and claims data analysis as 
discussed in the proposed rule. In response to the commenters' 
statement that CMS relied on recently implemented ICD-10-PCS data, it 
is not clear to us what specific ICD-10-PCS data the commenters are 
referring to since a specific list was not provided, however, we 
believe the commenters may be suggesting the codes for USAT that were 
finalized October 1, 2020 (FY 2021), and listed previously in 
connection with the analysis discussed in the proposed rule. As 
discussed in the proposed rule and prior rulemaking, our goal is always 
to use the best available data. We noted in the proposed rule that 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, and 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. Therefore, we believe our analysis of claims data 
in consideration of the MS-DRG request to reassign cases reporting USAT 
of peripheral vascular structures procedures with the administration of 
thrombolytic(s) for DVT is consistent with our standard process, 
regardless of the effective date of the coded claims data. We also do 
not agree with the commenters' assertion that it is a lengthy process 
for hospitals to adopt and accurately implement new coding. We note 
that procedure code proposals discussed at the September ICD-10 
Coordination and Maintenance Committee meeting and subsequently 
finalized are typically included in Table 6B.--New Procedure Codes in 
association with the proposed rule that is made publicly available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. This table (Table 6B) lists the new 
procedure codes that have been approved to date that will be effective 
with discharges on and after October 1 of the upcoming fiscal year. 
Therefore, information regarding the finalized codes from the September 
meeting is made publicly available approximately 4-5 months in advance 
of the implementation date, affording the ability for users of the code 
set to gain familiarity with the updates. In addition, there are 
extensive industry-sponsored educational opportunities through various 
professional associations that introduce and discuss the annual code 
updates. For example, the American Hospital Association (AHA), American 
Health Information Management Association (AHIMA), and the American 
Academy of Professional Coders (AAPC) generally take lead roles in 
developing detailed technical training materials for coders and other 
users of the ICD-10 code set. The AHA also includes updates to ICD-10 
in its Coding Clinic[supreg] for ICD-10-CM/ICD-10-PCS publication. 
Because the codes describing USAT were finalized for implementation 
October 1, 2020 (FY 2021), we believe sufficient time has elapsed and 
that providers are successfully coding and reporting the procedure as 
demonstrated in our claims analysis.
    It is also not clear what conflicting coding advice for utilization 
of the ICD-10-PCS procedure codes for CDT and USAT the commenters are 
referring to since the commenters did not provide examples or 
supplemental information for what they believed to be conflicting 
advice to enable further evaluation.
    Comment: A couple commenters expressed concern that the inclusion 
of both conventional CDT, also known as

[[Page 58703]]

``standard infusion catheters,'' and USAT in the proposed new MS-DRGs 
disregards fundamental clinical differences between the procedures. 
According to the commenters, CDT generally relies on a multi-sidehole 
infusion catheter placed adjacent to the thrombus through which 
thrombolytics are delivered, typically over the course of 24 hours with 
the catheter in-dwelling, whereas USAT employs ultrasound to assist in 
thrombolysis, and the pulses of ultrasonic energy temporarily make the 
fibrin in the thrombus more porous and increase fluid flow within the 
thrombus. The commenters stated standard CDT is the simple infusion of 
liquids into the vessel and should not map to the same root operation 
fragmentation codes as does USAT. The commenters also stated CDT 
procedures are generally less complex clinically and consume 
significantly lower level of hospital resources as a result. The 
commenters recommended CMS should delay implementation, not finalize 
the proposed MS-DRGs at this time and reconsider at a later date when 
utilization volumes reach a threshold of significance.
    A commenter also indicated that an analysis of cost data was being 
submitted to CMS to demonstrate that USAT DVT cases have total costs 
that are more than three times the cost of CDT procedures for the 
sickest patients.
    Response: We disagree with the commenters that inclusion of both 
conventional CDT and USAT in the proposed new MS-DRGs disregards 
fundamental clinical differences between the procedures. We note that 
while USAT procedures performed utilizing the EKOSTM device 
employ ultrasound, the objective of both CDT and USAT procedures is to 
effectuate thrombolysis and reduce clot burden. In response to the 
commenters' statement that standard CDT is the simple infusion of 
liquids into the vessel and should not map to the same root operation 
fragmentation codes as does USAT, we note that under ICD-10-PCS, both 
USAT and CDT are reported with the root operation fragmentation, 
defined as breaking solid matter in a body part into pieces. The 
procedure may be accomplished by physical force (e.g., manual, 
ultrasonic) applied directly or indirectly that is used to break the 
solid matter into pieces. The solid matter may be an abnormal byproduct 
of a biological function or a foreign body. The pieces of solid matter 
are not taken out. With respect to the commenters' statement that CDT 
procedures are generally less complex clinically and consume 
significantly lower level of hospital resources, we note that any 
procedure that places a catheter inside a blood vessel carries certain 
risks, including damage to the blood vessel, bruising or bleeding at 
the puncture site, and infection. In response to the commenters' 
recommendation that CMS should delay finalization for the proposed MS-
DRGs and reconsider in the future when utilization volumes reach a 
threshold of significance, as discussed in the proposed rule, once the 
decision was made to propose a new base MS-DRG, we applied the criteria 
to create subgroups and the criteria for a two-way split was met, 
therefore, we believe sufficient volume does exist for the proposed new 
MS-DRGs.
    Finally, in response to the cost data that was submitted by a 
commenter, we note that it was the same data analysis as reflected and 
discussed in the proposed rule, therefore we refer readers to that 
prior discussion.
    Comment: A commenter stated they agreed that fragmentation 
procedures with or without USAT do not belong in the requested MS-DRGs 
270, 271, and 272, and suggested they remain in their current MS-DRGs 
252, 253, and 254 based on clinical coherence and resource utilization.
    Response: We appreciate the commenter's feedback and agree that 
fragmentation procedures with or without USAT do not belong in the 
requested MS-DRGs 270, 271, and 272. However, for reasons discussed in 
the proposed rule, we believe our review of these procedures and data 
analysis findings support the proposal to create new MS-DRGs 278 and 
279 for grouping cases reporting the performance of USAT or CDT with 
any principal diagnosis from MDC 05.
    Comment: A couple commenters disagreed with the proposal to create 
new MS-DRGs 278 and 279. A commenter stated USAT procedures have been 
receiving appropriate payment since FY 2021 and the proposed new MS-
DRGs would create unnecessary administrative burden for established 
procedure codes that already have appropriate payment. Another 
commenter stated that fragmentation procedures, with or without 
ultrasonic assistance to break up blood clots in the peripheral 
vasculature, should stay assigned to the current MS-DRGs 252, 253, and 
254, respectively. The commenter stated that the costs and resources 
for these procedures are consistent with current payment levels when 
compared to the rest of the procedures assigned to the current MS-DRGs, 
that the change is not needed or necessary, and that over time may 
result in overall reduced payment, given that such a low number of 
procedures would be assigned to their own MS-DRGs.
    Response: We appreciate the commenters' feedback, however, based on 
our review of the procedures and claims data analysis as discussed in 
the proposed rule, we believe that USAT and CDT procedures performed on 
peripheral vascular structures are clinically distinct and utilize a 
different pattern of resources than other procedures in MS-DRGs 252, 
253, and 254. We stated in the proposed rule that while we did not 
agree with the request to reassign cases reporting USAT or CDT for 
peripheral vascular structures from MS-DRGs 252, 253, and 254 to MS-
DRGs 270, 271, and 272, we believed the findings from our analysis 
warranted proposed reassignment of these cases. While we described the 
findings from our review of the procedures currently assigned to MS-
DRGs 270, 271, and 272 to specifically address the MS-DRG request (88 
FR 26704), we note that in our review of cases assigned to MS-DRGs 252, 
253, and 254 we identified the majority of procedures reported are for 
procedures that involve a bypass or dilation procedure that alters the 
diameter or route of a tubular body part with either an open or 
percutaneous endoscopic approach in contrast to the USAT endovascular 
(percutaneous) procedure performed on the peripheral vascular 
structures. In addition, a number of procedures in these MS-DRGs also 
involve the use of a permanently implanted device while the procedures 
utilizing USAT or CDT do not. We also do not agree that the proposed 
new MS-DRGs would create an unnecessary administrative burden for the 
established procedure codes since providers are accustomed to proposed 
and finalized changes to the MS-DRG classifications each fiscal year 
and software vendors incorporate the finalized changes into their 
products. With respect to the commenter's assertion that a low volume 
of procedures would be assigned to their own MS-DRGs based on the 
proposal, as previously discussed, once the decision was made to 
propose a new base MS-DRG, we applied the criteria to create subgroups 
and the criteria for a two-way split was met, therefore, we believe 
sufficient volume does exist for the proposed new MS-DRGs.
    After consideration of the public comments we received, we are 
finalizing our proposal to create new MS-DRG 278 (Ultrasound 
Accelerated and Other Thrombolysis of Peripheral Vascular Structures 
with MCC) and new MS-DRG 279 (Ultrasound Accelerated

[[Page 58704]]

and Other Thrombolysis of Peripheral Vascular Structures without MCC), 
without modification, for FY 2024. We are also finalizing our proposal 
to define the logic for the 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 the proposed 
rule. We will continue to monitor the claims data for these new MS-DRGs 
after implementation to determine if additional refinements are 
warranted.
d. Coronary Intravascular Lithotripsy
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26706 through 
26712), we discussed a request we received 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 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] TR28AU23.055

    We stated in the proposed rule that 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 the proposed rule and this final rule for a discussion 
regarding the FY 2024 status of technologies approved for FY 2023 new 
technology add-on payments, including the Shockwave C2 Intravascular 
Lithotripsy System.
    We stated in the proposed rule that 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. We also stated the requestor is 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 referred 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 in the proposed rule 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 stated that 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

[[Page 58705]]

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:
    [GRAPHIC] [TIFF OMITTED] TR28AU23.056
    
    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). We stated in the proposed rule that 
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.
    We also stated that 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.
    In the proposed rule, we stated we reviewed this data analysis and 
agreed

[[Page 58706]]

that the performance of percutaneous coronary IVL contributes to 
increased resource consumption for these PCI procedures. We also stated 
that we agreed 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 
proposed to create new MS-DRGs for percutaneous coronary IVL involving 
the insertion of 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 stated in the proposed rule 
that we believed creating a separate MS-DRG for these cases as well 
would appropriately address the differential in resource consumption. 
Therefore, we also proposed 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 noted that 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] TR28AU23.057

    We stated we applied the criteria to create subgroups in a base MS-
DRG as discussed in section II.C.1.b. of the proposed rule and this FY 
2024 IPPS/LTCH PPS final 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] TR28AU23.058

    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] TR28AU23.059

BILLING CODE 4120-01-C
    As discussed in the proposed rule, 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 did not propose to subdivide the proposed new MS-DRG for 
coronary intravascular lithotripsy

[[Page 58707]]

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 proposed 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 also proposed 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 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 the 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 
proposed to define in the logic for each of the proposed new MS-DRGs. 
We refer the reader to section II.C.15. of the preamble of this final 
rule for the discussion of the surgical hierarchy and the complete list 
of our proposed modifications to the surgical hierarchy as well as our 
finalization of those proposals.
    Comment: Many commenters expressed support for CMS' proposal to 
create new MS-DRGs for cases describing coronary intravascular 
lithotripsy. A commenter stated that CMS' proposal highlights the 
resources consumed when performing the procedure with or without the 
insertion of an intraluminal device. This commenter further stated the 
proposal also takes into consideration the challenges associated with 
coronary arteries that are severely calcified while simultaneously 
providing better outcomes with the optimal deployment of intraluminal 
devices, when necessary. A commenter stated they appreciate CMS' 
willingness to periodically review hospital resources associated with 
the MS-DRGs for percutaneous coronary intervention procedures. Another 
commenter applauded CMS' proposal and stated this adjustment should 
provide for greater access to this new technology and should contribute 
to better outcomes for Medicare patients with severely calcified 
arteries.
    Response: We appreciate the commenters' support.
    Comment: While supporting the proposal, some commenters suggested 
that proposed new MS-DRG 325 (Coronary Intravascular Lithotripsy 
without Intraluminal Device) be split into two severity levels (with 
and without MCC) to recognize the increased resource utilization when a 
secondary diagnosis designated as an MCC is present. Another commenter 
stated that CMS proposed to delay application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2024 and questioned CMS' application of the methodology to the 
proposed new MS-DRGs. This commenter stated that the presence of a 
secondary diagnosis designated as CC and a MCC impacts the length of 
stay and costs and therefore distinct tiers within these proposed MS-
DRGs are necessary to reflect the differences in resource utilization.
    Response: We thank the commenters for their feedback.
    In response to the suggestion that proposed new MS-DRG 325 for 
cases describing coronary intravascular lithotripsy without 
intraluminal device be subdivided with a two-way severity level split, 
as discussed in the proposed rule and earlier in this section, in the 
analysis of the cases describing coronary intravascular lithotripsy 
without the insertion of an intraluminal device, we note we identified 
a total of 404 cases using the most recent claims data from the 
December 2022 update of the FY 2022 MedPAR file. Therefore, the 
criterion that there are at least 500 or more cases in each subgroup 
could not be met so we did not propose to subdivide the proposed new 
MS-DRG for coronary intravascular lithotripsy without an intraluminal 
device into severity levels for FY 2024.
    In response to the concern regarding the application of the NonCC 
subgroup criteria to the proposed new MS-DRGs, we note 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 CC or 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. In 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798) and FY 2023 IPPS/
LTCH PPS final rule (87 FR 48803), we finalized a delay in applying 
this technical criterion to existing MS-DRGs in light of the PHE. We 
note that this delay relates to applying this technical criterion to 
existing MS-DRGs with a three-way severity level split. As discussed in 
prior rulemaking, in general, 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 must be met for the base MS-DRG to 
be split (or subdivided) by a CC subgroup. We note that we have applied 
the criteria to create subgroups, including application of the NonCC 
subgroup criteria, in our annual analysis of the MS-DRG classification 
requests effective FY 2021 (85 FR 58446 through 58448). For example, we 
applied the criteria to create subgroups, including application of the 
NonCC subgroup criteria, for a proposed new base MS-DRG as discussed in 
our finalization of new base MS-DRG 018 (Chimeric Antigen Receptor 
(CAR) T-cell Immunotherapy), new base MS-DRG 019 (Simultaneous Pancreas 
and Kidney Transplant with Hemodialysis), new base MS-DRG 140 (Major 
Head and Neck Procedures), new base MS-DRG 143 (Other Ear, Nose, Mouth 
and Throat O.R. Procedures), new base MS-DRG 521 (Hip Replacement with 
Principal Diagnosis of Hip Fracture) and new base MS-DRG 650 (Kidney 
Transplant with Hemodialysis) for FY 2021. Similarly, we applied the 
criteria to create subgroups including application of the NonCC 
subgroup criteria for MS-DRG classification requests for FY 2022 that 
we received by November 1, 2020 (86 FR 44796 through 44798), for MS-DRG 
classification requests for FY 2023 that we received by November 1, 
2021 (87 FR 48801 through 48804), and for MS-DRG classification 
requests for FY 2024 that we received by October 20, 2022 (88 FR 26673 
through 26676), as well as any additional analyses that were conducted 
in connection with those requests. We refer the reader to section 
II.C.1.b. of the preamble of this final rule for related discussion 
regarding our finalization of the expansion of the criteria to include 
the NonCC subgroup in the FY 2021 final rule and our finalization of 
the proposal to continue to delay application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2024.
    Comment: Some commenters expressed concern with CMS' proposal and 
stated that the proposed MS-DRGs may not reflect the full range of 
treatment options for severely calcified coronary lesions that may 
demonstrate similar increased costs and acuity. These commenters stated 
that the presence of severe calcification can increase treatment 
difficulty and complexity of service, which lead to higher average 
costs and generally longer lengths of stay. These commenters stated 
that CMS should

[[Page 58708]]

consider other well-established advanced vessel preparation techniques, 
such as percutaneous coronary rotational and orbital atherectomy, that 
also use specialty devices to fully optimize PCI for severely calcified 
arteries. A commenter stated that they agreed that there is a subset of 
clinically complex PCI cases with higher average costs however, they do 
not believe it serves the integrity of the IPPS to create new MS-DRGs 
for a single technology serving a relatively low volume of patient 
cases and suggested that CMS refine the proposed new MS-DRGs 323, 324 
and 325 to include coronary atherectomy procedures. Another commenter 
stated that its own analysis demonstrated that resource requirements 
for orbital atherectomy are virtually the same as those for coronary 
IVL. This commenter noted CMS proposed to create MS-DRG 325 for cases 
describing coronary intravascular lithotripsy without intraluminal 
device and stated that this is inconsistent with the labeled 
indications for use of these high-resource devices. The commenter 
stated that coronary IVL and other complex vessel preparation 
technologies focus on treating severe calcium to facilitate placement 
and technical success of intraluminal devices and expressed concern 
with the precedent of establishing a device-specific MS-DRG that is 
inconsistent with a technology's indications for use.
    Other commenters opposed these recommendations and stated they 
believed that CMS' proposal correctly differentiates coronary IVL from 
other PCI procedures, given the significant resource variance when IVL 
is utilized, and the more clinically complex patients being treated. A 
commenter stated that atherectomy is distinct from coronary IVL in 
terms of mechanism of action and technique, and further noted that, the 
clinical utilization is different in that atherectomy is not a therapy 
that is exclusively utilized in heavily calcified lesions. This 
commenter stated that in its own analysis of the claims data, the costs 
of atherectomy cases are half the costs of coronary IVL cases.
    These commenters all encouraged CMS to evaluate these and any other 
PCI-related procedures in future rulemaking to allow for all options to 
be considered appropriately.
    Response: We thank the commenters for their feedback. Although we 
note that the initial request was to review the MS-DRG assignment of 
cases describing percutaneous coronary intravascular lithotripsy, and 
not cases describing other PCI techniques, the commenters are correct 
in that there are different types of treatment options available in the 
treatment of calcified coronary lesions. Under the ICD-10-PCS procedure 
classification system there are two root operations, Extirpation and 
Fragmentation, specifically defined as:
    Extirpation: Taking or cutting out solid matter from a body part; 
and
    Fragmentation: Breaking solid matter in a body part into pieces 
that are reported to describe the respective procedure that was 
performed.
    In coronary IVL, 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. Because 
the technique fragments matter, procedures performed utilizing devices 
such as the Shockwave C2 Intravascular Lithotripsy System are 
identified and described by the root operation Fragmentation. In 
contrast, procedures such as rotational and orbital atherectomy are 
reported with the root operation Extirpation because both techniques 
cut up the calcified material into small particles that are removed 
from the blood stream by the normal hemofiltration process.
    In response to the commenter's statement that both coronary IVL and 
coronary atherectomy are procedures intended to treat calcified 
coronary arteries, we agree, however, as shown, each of these 
procedures are defined by clinically distinct definitions and 
objectives, and there are separate and unique ICD-10-PCS procedure 
codes within the classification for reporting purposes. We do not 
believe it is appropriate to specifically compare the devices being 
utilized in the performance of these distinct procedures in 
consideration of MS-DRG assignment, rather, the emphasis is on the 
fragmentation and extirpation procedures performed and evaluating the 
treatment difficulty, resource utilization, and complexity of service.
    In response to the commenter's statement regarding the labeled 
indications for coronary IVL, as discussed in the proposed rule, there 
may be instances where an intraluminal device is unable to be inserted 
after the application of the IVL pulses. Accordingly, we identified a 
total of 386 cases describing coronary intravascular lithotripsy 
without the insertion of an intraluminal device using the September 
2022 update of the FY 2022 MedPAR file and 404 cases describing 
coronary intravascular lithotripsy without the insertion of an 
intraluminal device using the more recent claims data from the December 
2022 update of the FY 2022 MedPAR file. We continue to we believe 
creating a MS-DRG for these cases as well would appropriately address 
the differential in resource consumption.
    As discussed in the proposed rule, 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. We appreciate the commenters' feedback and 
suggestions, however, we believe that continued monitoring of the data 
and further analysis is needed prior to proposing any modifications to 
the proposed new MS-DRGs for percutaneous coronary IVL. We will 
continue to evaluate the claims data to determine if further 
modifications to the MS-DRG assignment of cases reporting percutaneous 
coronary intervention procedures are warranted and address any proposed 
modifications to the existing logic in future rulemaking.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to create 
new MS-DRG 323 (Coronary Intravascular Lithotripsy with Intraluminal 
Device with MCC), new MS-DRG 324 (Coronary Intravascular Lithotripsy 
with Intraluminal Device without MCC) and new MS-DRG 325 (Coronary 
Intravascular Lithotripsy without Intraluminal Device) in MDC 05, 
without modification, effective October 1, 2023 for FY 2024. We are 
also finalizing the list of procedure codes to define the logic for 
each of the new MS-DRGs as displayed in Table 6P.6a associated with the 
proposed rule (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
    In reviewing this issue, we noted in the FY 2024 proposed rule 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

[[Page 58709]]

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 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 in the proposed rule and this section of the final 
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 stated 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.
    In the proposed rule, we again noted 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 stated we reviewed these findings and believed 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. We noted the 
related data analysis clearly showed 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 proposed the deletion of MS-DRGs 246, 247, 248, and 249, and the 
creation of new MS-DRGs.
    We noted 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 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.

[[Page 58710]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.060

    As discussed in the proposed rule, 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). We stated 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 was warranted.
    We noted 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 stated 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] TR28AU23.061

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of the proposed rule and this FY 2024 
IPPS/LTCH PPS final 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.062

    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.

[[Page 58711]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.063

    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.
    We noted in that proposed rule that proposed refinements for cases 
reporting percutaneous cardiovascular procedures with intraluminal 
devices represented 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 stated we are making concerted efforts to continue 
refining the ICD-10 MS-DRGs and we believed 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 proposed 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 proposed to add the procedure 
codes from current MS-DRGs 246, 247, 248, and 249 to the proposed new 
MS-DRGs 321 and 322. We also proposed 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 refer the reader to section II.C.15. of the preamble of this 
final rule for the discussion of the surgical hierarchy and the 
complete list of our proposed modifications to the surgical hierarchy 
as well as our finalization of those proposals.
    Comment: Commenters supported CMS' proposals. These commenters 
stated that they agreed with CMS that the distinction between drug-
eluting and bare metal stents is no longer required given the evolution 
of these technologies. A commenter stated they appreciated the 
simplification of MS-DRGs involving percutaneous intraluminal devices 
by omitting the distinction between drug-eluting versus non-drug-
eluting devices with the proposed creation of MS-DRGs 321 and 322. 
Another commenter stated that they appreciate CMS periodically 
reviewing the MS-DRGs for percutaneous coronary interventions to ensure 
they appropriately reflect current clinical practice and appropriately 
reflect the hospital resources associated with these procedures. A 
commenter supported the proposal, but suggested that there be 
consideration to split the new base MS-DRG for cases describing 
percutaneous cardiovascular procedures with intraluminal device with a 
three-way severity level split, instead of a two-way severity level 
split as proposed.
    Response: We appreciate the commenters' support. In response to the 
suggestion to split the new base MS-DRG for cases describing 
percutaneous cardiovascular procedures with intraluminal device with a 
three-way severity level split, as discussed in the proposed rule and 
earlier in this section, we note we applied the criteria to create 
subgroups in a base MS-DRG as discussed in section II.C.1.b. of the 
proposed rule and this FY 2024 IPPS/LTCH PPS final rule. We note that 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.
    Comment: Other commenters stated that while they agreed with CMS' 
rationale that it is no longer necessary to subdivide the MS-DRGs based 
on the type of coronary intraluminal device inserted and supported the 
proposal 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, they did not agree with the proposed relative weights for these new 
MS-DRGs and requested that CMS review the proposed weights for these 
MS-DRGs with the weight decline to ensure it adequately captures the 
resources for the complex treatment of these patients. These commenters 
stated a decrease in the relative weight for the proposed new MS-DRGs 
would cause inadequate payment for the medical care and treatment 
provided to the patient.
    Response: We appreciate the commenters' feedback and concern. We 
note that each year, we calculate the relative weights by dividing the 
average cost for cases within each MS-DRG by the average cost for cases 
across all MS-DRGs. It is to be expected that when MS-DRGs are 
restructured, such as when procedure codes are reassigned or the 
hierarchy within an MDC is revised, resulting in a different case-mix 
within the MS-DRGs, the relative weights of the MS-DRGs will change as 
a result. As discussed in the FY 2024 IPPS/LTCH PPS proposed rule, and 
earlier in this section, upon application of the criteria to create 
subgroups, we proposed to create a base MS-DRG split by a two-way 
severity level subgroup for cases describing coronary intravascular 
lithotripsy involving the insertion of an intraluminal device in MDC 05 
for FY

[[Page 58712]]

2024. Therefore, the data appear to reflect that the difference in the 
relative weights reflected in Table 5.--List of Medicare Severity 
Diagnosis-Related Groups (MS-DRGs), Relative Weighting Factors, and 
Geometric and Arithmetic Mean Length of Stay--FY 2024, associated with 
the proposed rule, can be attributed to the fact that these proposals 
resulted in a different case-mix within the MS-DRGs which is then being 
reflected in the relative weights. We refer the reader to section II.D. 
of the preamble of this FY 2024 IPPS/LTCH PPS final rule for a complete 
discussion of the relative weight calculations.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal, without 
modification, to delete MS-DRGs 246, 247, 248, and 249 for FY 2024. We 
are also finalizing our proposal to create new MS-DRG 321 (Percutaneous 
Cardiovascular Procedures with Intraluminal Device with MCC or 4+ 
Arteries/Intraluminal Devices) and new MS-DRG 322 (Percutaneous 
Cardiovascular Procedures with Intraluminal Device without MCC). 
Accordingly, we are finalizing our proposal to reassign the procedure 
codes from current MS-DRGs 246, 247, 248, and 249 to the new MS-DRGs 
321 and 322. Lastly, we are also finalizing our proposal to revise the 
titles of 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'' effective 
October 1, 2023 for FY 2024.
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 comments, we finalized 
our proposal to maintain the structure of MS-DRGs 280 through 285, 
without 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, in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 26712 through 26717), we discussed a related 
request we received 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.
    As discussed in the proposed rule, 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 stated we reviewed the GROUPER logic. In 
the proposed rule, we noted 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. We stated that requestor 
was 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.
    We also stated that the requestor was 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 disagreed, however, that this 
code can never be an appropriate principal diagnosis. We noted 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 
pointed out that a

[[Page 58713]]

``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/.
    As discussed in the proposed rule, 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.064

    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

[[Page 58714]]

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 stated in the proposed rule that we reviewed these data and did 
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 stated we believed 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, we stated it was 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 did not propose 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.
    Comment: Commenters expressed support for CMS' proposal to not 
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.
    Response: We thank the commenters for their support.
    During our review of this issue, we noted in the proposed rule that 
the data analysis showed that in procedures involving a cardiac 
defibrillator implant, the average costs and length of stay are 
generally similar 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.
    We stated that the analysis of MS-DRGs 222, 223, 224, 225, 226, and 
227 further demonstrated 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 stated we believed that it may no 
longer be necessary to subdivide these MS-DRGs based on the diagnosis 
codes reported. We noted 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.
    As discussed in the proposed rule, our analysis of claims data from 
the September 2022 update of the FY 2022 MedPAR file 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 
stated that we believed it was time to restructure these MS-DRGs 
accordingly.
    In the proposed rule, we did 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 stated we supported 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 proposed the 
deletion of MS-DRGs 222, 223, 224, 225, 226, and 227, and the creation 
of three new MS-DRGs. Our proposal

[[Page 58715]]

included the creation of one new base MS-DRG for cases reporting a 
cardiac defibrillator implant with cardiac catheterization and a 
secondary diagnosis designated as an MCC and another new base MS-DRG 
split by a two-way severity level subgroup for cases reporting a 
cardiac defibrillator implant without cardiac catheterization.
    We stated in the proposed rule that 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 proposed 
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 the FY 2024 IPPS/LTCH PPS proposed 
rule. We stated that we believed the resulting proposed MS-DRG 
assignment is more clinically homogeneous, coherent and better reflects 
hospital resource use.
[GRAPHIC] [TIFF OMITTED] TR28AU23.065

    To further compare and analyze the impact of our suggested 
modifications, we stated 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] TR28AU23.066

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of the 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] TR28AU23.067

    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] TR28AU23.068


[[Page 58716]]


    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 proposed 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 also proposed 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).
    In the proposed rule, we noted 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 also proposed to 
designate these codes as non-O.R. procedures affecting the MS-DRG. We 
referred the reader to Table 6P.7a and Table 6P.7b associated with the 
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 proposed to 
define in the logic for each of the proposed new MS-DRGs. We refer the 
reader to section II.C.15. of the preamble of this final rule for the 
discussion of the surgical hierarchy and the complete list of our 
proposed modifications to the surgical hierarchy as well as our 
finalization of those proposals.
    Comment: Most commenters supported the proposal to delete MS-DRGs 
222, 223, 224, 225, 226, and 227, and to create three new MS-DRGs in 
MDC 05. These commenters stated that they agreed with CMS that it is no 
longer necessary to subdivide the MS-DRGs for cases reporting a cardiac 
defibrillator implant based on the diagnosis code reported. A few 
commenters stated that while they found the proposal reasonable based 
on the data and rationale provided, they urged CMS to monitor for any 
unintended consequences. However, a commenter opposed the proposal. 
This commenter stated that the proposed change will have a notable 
negative impact based on its own analysis of claims data at its 
organization. The commenter further noted claims at its organization 
demonstrate significant length of stay and cost variations across the 
current MS-DRGs which they asserted further supports that revising the 
MS-DRGs is not appropriate from a resource utilization perspective.
    Response: We appreciate the commenters' support and appreciate the 
additional feedback. With regard to the commenter's concern that the 
proposal might have a negative impact based on its own analysis of 
claims data at its organization, the examination of claims data from 
the September 2022 update of the FY 2022 MedPAR file for MS-DRGs 222, 
223, 224, 225, 226, and 227 showed that in procedures involving a 
cardiac defibrillator implant, the average costs and length of stay are 
generally similar without regard to the presence of diagnosis codes 
describing AMI, HF or shock. We note that the commenter did not provide 
any clinical rationale as to why the distinction based on the presence 
of diagnosis codes should be maintained in these MS-DRGs. As noted in 
prior rulemaking, the goals of reviewing the MS-DRG assignments of 
particular procedures are to better clinically represent the resources 
involved in caring for these patients and to enhance the overall 
accuracy of the system. Our analysis of the claims data demonstrated 
that for cases involving a cardiac defibrillator implant the increased 
costs appear to be more related to the procedures performed than to the 
diagnoses reported on the claim, and we continue to believe it is time 
to restructure these MS-DRGs accordingly, noting that cases reporting 
any MDC 05 diagnosis when reported with qualifying procedures will 
group to the proposed new MS-DRGs. CMS will continue to monitor the 
claims data for these procedures for unintended consequences as a 
result of the deletion of the six MS-DRGs from the GROUPER logic as we 
continue our comprehensive analysis in future rulemaking.
    Comment: While supporting the proposal, other commenters noted that 
CMS proposed to create new MS-DRG 275 (Cardiac Defibrillator Implant 
with Cardiac Catheterization and MCC) for cases reporting a cardiac 
defibrillator implant with cardiac catheterization and a secondary 
diagnosis designated as an MCC in MDC 05. These commenters recommended 
that an additional MS-DRG be created for cardiac defibrillator implant 
with cardiac catheterization without MCC. A few commenters stated that 
it was not clear where cases reporting a cardiac defibrillator implant 
with a cardiac catheterization without MCC would be assigned. A 
commenter noted that the draft HTML version of the ICD-10 MS-DRG 
Definitions Manual for Version 41 available on the CMS website does not 
show ``MCC'' as part of the logic for MS-DRGs 275 and 276. Another 
commenter noted that CMS proposed to delay application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split for FY 2024 and questioned CMS' application of the methodology to 
the proposed new MS-DRGs.
    Response: We thank the commenters for their feedback. We note to 
commenters that when reviewing consumption of hospital resources for 
the cases reporting cardiac defibrillator implant with cardiac 
catheterization during a hospital stay, as discussed earlier in this 
section, the claims data clearly showed that the cases reporting 
secondary diagnoses designated as MCCs are more resource intensive as 
compared to other cases reporting cardiac defibrillator implant. 
Accordingly, our proposal included 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.
    As discussed in the proposed rule, we examined claims data from the 
September 2022 update of the FY 2022 MedPAR file for all cases in MS-
DRGs 222, 223, 224, 225, 226, and 227. In MS-DRGs 222 and 224, there 
were 3,094 cases reporting cardiac defibrillator implant with cardiac 
catheterization, with or without a diagnosis of AMI, HF, or Shock, and 
a secondary diagnosis designated as an MCC with average costs of 
$62,608 and an average length of stay of 10.2 days. In comparison, 
there were 3,959 cases reporting cardiac

[[Page 58717]]

defibrillator implant, with or without cardiac catheterization, with or 
without a diagnosis of AMI, HF, or Shock, without an MCC with average 
costs of $42,001 and an average length of stay of 4.2 days in MS-DRG 
223, 225 and 227. We did not propose to subdivide the proposed new base 
MS-DRG 275 for cases reporting a cardiac defibrillator implant with 
cardiac catheterization and a secondary diagnosis designated as an MCC 
into severity levels as the cases reporting a cardiac defibrillator 
implant with cardiac catheterization without a secondary diagnosis 
designated as an MCC (that are currently assigned to MS-DRGs 223 and 
225) have average costs and an average lengths of stay comparable to 
other cases reporting cardiac defibrillator implant, without cardiac 
catheterization, with or without a diagnosis of AMI, HF, or Shock, also 
without a secondary diagnosis designated as an MCC. Instead, for this 
specific scenario, we proposed 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. We continue to believe the resulting 
proposed MS-DRG assignment is more clinically homogeneous, coherent and 
better reflects hospital resource use.
    In response to commenters who stated that it was not clear where 
cases reporting a cardiac defibrillator implant with a cardiac 
catheterization without a secondary diagnosis designated as an MCC 
would be assigned, we note that these cases would be assigned to 
proposed new MS-DRG 277 (Cardiac Defibrillator Implant without MCC), as 
reflected in the test version of the ICD-10 MS-DRG GROUPER Software, 
Version 41.
    In response to the comment regarding the draft version of the ICD-
10 MS-DRG Definitions Manual, Version 41, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software, we agree there 
was an inadvertent error in the logic table for MS-DRGs 275, 276 and 
277. We are correcting the display as reflected in the following logic 
table:
[GRAPHIC] [TIFF OMITTED] TR28AU23.069

    This correction will also be reflected in the final ICD-10 MS-DRG 
Definitions Manual, Version 41.
    In response to the concern regarding the application of the NonCC 
subgroup criteria to the proposed new MS-DRGs, we note that 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. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798) and FY 
2023 IPPS/LTCH PPS final rule (87 FR 48803), we finalized a delay in 
applying this technical criterion to existing MS-DRGs in light of the 
PHE. We note that this delay relates to applying this technical 
criterion to existing MS-DRGs with a three-way severity level split. As 
discussed in prior rulemaking, in general, 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 must be met for the base 
MS-DRG to be split (or subdivided) by a CC subgroup. We note that we 
have applied the criteria to create subgroups, including application of 
the NonCC subgroup criteria, in our annual analysis of the MS-DRG 
classification requests effective FY 2021 (85 FR 58446 through 58448). 
For example, we applied the criteria to create subgroups, including 
application of the NonCC subgroup criteria, for a proposed new base MS-
DRG as discussed in our finalization of new base MS-DRG 018 (Chimeric 
Antigen Receptor (CAR) T-cell Immunotherapy), new base MS-DRG 019 
(Simultaneous Pancreas and Kidney Transplant with Hemodialysis), new 
base MS-DRG 140 (Major Head and Neck Procedures), new base MS-DRG 143 
(Other Ear, Nose, Mouth and Throat O.R. Procedures), new base MS-DRG 
521 (Hip Replacement with Principal Diagnosis of Hip Fracture), and new 
base MS-DRG 650 (Kidney Transplant with Hemodialysis) for FY 2021. 
Similarly, we applied the criteria to create subgroups including 
application of the NonCC subgroup criteria for MS-DRG classification 
requests for FY 2022 that we received by November 1, 2020 (86 FR 44796 
through 44798), for MS-DRG classification requests for FY 2023 (87 FR 
48801 through 48804) that we received by November 1, 2021, and for MS-
DRG classification requests for FY 2024 that we received by October 20, 
2022 (88 FR 26673 through 26676), as well as any additional analyses 
that were conducted in connection with those requests. We refer the 
reader to section II.C.1.b. of the preamble of this final rule for 
related discussion regarding our finalization of the expansion of the 
criteria to include the NonCC subgroup in the FY 2021 final rule and 
our finalization of the proposal to continue to delay application of 
the NonCC subgroup criteria to existing MS-DRGs with a three-way 
severity level split for FY 2024.
    Comment: A commenter stated that while they agreed 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, 
they did not think it was necessary to delete MS-DRGs 226 and 227 
(Cardiac Defibrillator Implant without Cardiac Catheterization with and 
without MCC, respectively) and create new MS-DRGs 276 and 277 (Cardiac 
Defibrillator Implant with and without MCC, respectively). This 
commenter stated that the proposed new MS-DRG 276 has the same GROUPER 
logic as the existing MS-DRG 226 and therefore will capture the same 
cases. This commenter further stated they believed that the current 
title of MS-DRG 226 better identifies the cases assigned. This 
commenter also suggested keeping existing MS-DRG 227 and revising the 
title to ``Cardiac Defibrillator Implant with or without Cardiac 
Catheterization without MCC'' instead of creating new MS-DRG 277.
    Response: We appreciate the commenter's feedback. The commenter is 
correct that proposed new MS-DRG 276 has the same GROUPER logic as 
current MS-DRG 226. In response to the

[[Page 58718]]

commenter's concern regarding why new MS-DRG numbers would be 
considered, as discussed in prior rulemaking (87 FR 48804), we note 
that new MS-DRG numbers are preferred because we anticipate that 
individuals, payers, and organizations conducting analysis would need 
to be aware if proposed changes to base DRG concepts are made to allow 
them time to adjust their programs, analyses, or queries that may have 
hard coded the DRG numbers. To minimize confusion for those who rely on 
MS-DRG concepts year to year and to avoid unintended consequences from 
maintaining the existing MS-DRG number, we believe it is appropriate to 
finalize the revision to both the MS-DRG number and corresponding 
description for cases reporting a cardiac defibrillator implant without 
cardiac catheterization with a secondary diagnosis designated as an 
MCC.
    Therefore, after consideration of the public comments received, and 
for the reasons previously stated, we are finalizing our proposal to 
delete MS-DRGs 222, 223, 224, 225, 226, and 227. We are also finalizing 
our proposal to create new MS-DRG 275 (Cardiac Defibrillator Implant 
with Cardiac Catheterization and MCC), new MS-DRG 276 (Cardiac 
Defibrillator Implant with MCC), and new MS-DRG 277 (Cardiac 
Defibrillator Implant without MCC) in MDC 05, without modification, 
effective October 1, 2023, for FY 2024. Accordingly, we are also 
finalizing our proposal to designate the procedure codes describing 
cardiac catheterization as non-O.R. procedures affecting the MS-DRG.
    Comment: Another commenter stated that a code proposal requesting 
new procedure codes to describe the implantation, removal and revision 
of extravascular implantable defibrillator (EV ICD) leads was presented 
and discussed at the March 7-8, 2023 ICD-10 Coordination and 
Maintenance Committee meeting. The commenter further stated that CMS 
has proposed to create new MS-DRGs 275, 276, and 277 for cases 
reporting cardiac defibrillator implant procedures, which includes 
procedures describing the insertion of implantable cardioverter-
defibrillators (ICDs) for FY 2024, while cases reporting cardiac 
defibrillator lead removal and revision procedures are assigned to MS-
DRG 265 (AICD Lead Procedures). This commenter suggested that any new 
procedure codes finalized after the March 7-8, 2023 ICD-10 Coordination 
and Maintenance Committee meeting that describe EV ICD procedures 
should be assigned to MS-DRG 265 and MS-DRGs 275-277 as well and stated 
that alignment of these new ICD-10-PCS codes with existing 
defibrillator procedure codes in terms of MS-DRG assignment will ensure 
clinical coherence and facilitate patient access and provider choice 
among ICD technologies.
    Response: We thank the commenter for their feedback. We note that 
the proposal requesting new procedure codes to identify procedures 
involving extravascular implantable defibrillator leads that was 
discussed at the March 7-8, 2023 ICD-10 Coordination and Maintenance 
Committee meeting was approved and 11 new procedure codes to identify 
procedures involving EV ICD leads were finalized as reflected in the FY 
2024 ICD-10-PCS Code Update files that were made publicly available on 
the CMS website at https://www.cms.gov/Medicare/Coding/ICD10 on June 6, 
2023. We also note that the new procedure codes are also reflected in 
Table 6B.--New Procedure Codes, in association with this final rule and 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, including the MS-DRG 
assignments for these new codes for FY 2024. We refer the reader to 
section II.C.13. of the preamble of this final rule for further 
information regarding the table.
    As we have noted in prior rulemaking (86 FR 44805), we used our 
established process to determine the most appropriate MS-DRG assignment 
for the new procedure codes approved after March 7-8, 2023 ICD-10 
Coordination and Maintenance Committee meeting to identify procedures 
involving EV ICD leads. Specifically, we reviewed the predecessor codes 
and MS-DRG assignments most closely associated with the new procedure 
codes, and in the absence of claims data, we considered 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. 
The MS-DRG assignments for the predecessor codes that we utilized to 
inform this analysis and the new procedure codes to identify procedures 
involving extravascular implantable defibrillator leads under MDC 05 
are identified as follows.
BILLING CODE 4120-01-P

[[Page 58719]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.070

    While the new procedure codes are being assigned to the same MS-DRG 
as the predecessor codes in this instance, as we have noted in prior 
rulemaking, and earlier in this section, 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.
    In addition to the MDC and MS-DRG assignments as reflected in Table 
6B.--

[[Page 58720]]

New Procedure Codes, in association with this final rule, we note that 
the procedure code combinations describing the insertion of an EV ICD 
lead with the insertion of a defibrillator generator, are assigned to 
new MS-DRGs 275, 276, and 277 for FY 2024. This assignment is reflected 
in the final V41 GROUPER logic. The public may provide feedback on the 
MS-DRG assignments for FY 2024, which will then be taken into 
consideration for the following fiscal year.
6. MDC 06 (Diseases and Disorders of the Digestive System): 
Appendicitis
    In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28163 through 87 
FR 28165) and final rule (87 FR 48849 through 87 FR 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26717), we stated 
that, 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.13. of the preamble of the 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 starting October 1, 2023. Included in this table are 
diagnosis codes K35.20 and K35.21. In addition, we noted that as shown 
in the following table and in Table 6A--New Diagnosis Codes associated 
with the proposed rule (and 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. We stated in the proposed rule that 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, we noted that 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] TR28AU23.071

    We stated in the proposed rule that because the acute appendicitis 
diagnosis code revisions have been finalized by the CDC/NCHS, we 
believed 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 referred 
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.
    As stated in the proposed rule, 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

[[Page 58721]]

the following diagnosis codes currently defined in the logic as a 
complicated principal diagnosis when reported as a principal diagnosis.
[GRAPHIC] [TIFF OMITTED] TR28AU23.072

    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] TR28AU23.073

    The data shows that overall, each of the ``complicated'' diagnoses 
appears 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 58722]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.074

    Our findings are shown in the following table.
    [GRAPHIC] [TIFF OMITTED] TR28AU23.075
    
    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.
    We stated in the proposed rule that based on our analysis for both 
the ``complicated'' and ``uncomplicated'' diagnoses combined with our 
review of all the cases in the MS-DRGs, we believed 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 ``uncomplicated'' MS-DRGs, we believe the 
distinction is no longer meaningful with regard to resource 
consumption. As shown in the following table, we

[[Page 58723]]

found 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] TR28AU23.076

    As a result of our analysis and review of this issue, we stated in 
the proposed rule that we believed the findings support eliminating the 
logic for ``complicated'' and ``uncomplicated'' diagnoses and 
restructuring the six MS-DRGs. We also noted 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] TR28AU23.077

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of the 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 noted 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.078

    For the proposed new MS-DRGs, there is (1) at least 500 cases in 
the MCC subgroup, the CC subgroup, and the without CC/MCC subgroup; (2) 
at least 5 percent of the cases are in the MCC subgroup, the CC 
subgroup, and 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 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

[[Page 58724]]

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 proposed to delete MS-DRGs 338, 339, 340, 341, 342, 
and 343 and proposed to create new MS-DRG 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 also proposed to include the current list of 
appendectomy procedures in the logic for case assignment of appendix 
procedures for the proposed new MS-DRGs.
    Comment: Several commenters expressed support for the proposed 
changes to the MS-DRGs for appendectomy with and without a complicated 
principal diagnosis. A commenter who agreed with CMS that the average 
length of stay and average costs were comparable among the appendectomy 
MS-DRGs with and without a complicated principal diagnosis stated that 
the data for diagnosis code K35.21 (Acute appendicitis with generalized 
peritonitis, with abscess) specifically reflected a longer length of 
stay and higher average costs among all the MS-DRGs for appendectomy 
with complicated principal diagnosis (MS-DRGs 338, 339, and 340). The 
commenter requested that CMS continue to monitor this diagnosis code.
    Response: We appreciate the commenters' support and feedback. CMS 
will continue to monitor and analyze the claims data for diagnosis code 
K35.21.
    Comment: A commenter expressed concerns about the proposed new MS-
DRGs 397, 398, and 399 no longer reflecting the differences in 
complexity and costs associated with treating appendicitis, including 
concerns about the potential decrease in case weight. The commenter 
stated tertiary care centers may have up to 30% of patients with 
complicated appendicitis and that the treatment of appendicitis with a 
complicated principal diagnosis utilizes substantially more resources. 
This commenter also stated specifically, patients with more complicated 
disease frequently have perforated disease which contaminates the 
peritoneal cavity and wounds. According to the commenter, as a result, 
these patients face significantly higher risk of surgical site 
infections and require longer hospitalizations in order to a receive 
longer duration IV antibiotics. Finally, the commenter stated that 
operations on complex patients take much longer and suggested there is 
little parity with regard to these populations between major referral 
centers and smaller centers of care.
    Another commenter stated their belief that CMS failed to recognize 
clinical best practice for treatment of patients with complicated 
disease including perforation. The commenter stated that the proposed 
MS-DRG changes demonstrated a lack of understanding about the 
complexities of appendectomy procedures and urged CMS to maintain the 
existing MS-DRGs and reassign code K35.20 to MS-DRGs 338, 339, and 340, 
due to the risk of postoperative abscess formation and extended length 
of hospital stay, thereby warranting classification as a complicated 
diagnosis.
    Another commenter who disagreed with CMS' proposal agreed that 
clinically, both localized and generalized peritonitis in association 
with an appendectomy requires increased levels of care, inclusive of 
extensive intraoperative irrigation at the surgical site, direct 
inspection or imaging of the abdomen, use of antibiotics and prolonged 
monitoring, however, the commenter stated both localized and general 
peritonitis are complicated appendicitis diagnoses and are clinically 
different than uncomplicated appendicitis, therefore, complicated 
appendicitis diagnoses should group to a complicated appendicitis MS-
DRG. The commenter recommended retaining MS-DRGs 338, 339, and 340. 
Additionally, the commenter suggested CMS add four diagnoses currently 
considered uncomplicated principal diagnoses: K35.20 (Acute 
appendicitis with generalized peritonitis, without abscess); K35.30 
(Acute appendicitis with localized peritonitis, without perforation or 
gangrene); K35.31 (Acute appendicitis with localized peritonitis and 
gangrene, without perforation); and K35.891 (Other acute appendicitis 
without perforation, with gangrene) to MS-DRGs 338, 339, and 340 to 
reflect the complicated appendectomy. The commenter further suggested 
that MS-DRGs 341, 342, and 343 (Appendectomy without Complicated 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) only reflect the principal diagnoses of K35.80 
(Unspecified acute appendicitis), K35.890 (Other acute appendicitis 
without perforation or gangrene), and K36 (Other appendicitis) as they 
would clinically be considered an uncomplicated appendectomy.
    Response: We thank the commenters for their feedback. In response 
to the commenter who expressed concerns about the potential decrease in 
case weight for the proposed new MS-DRGs, we note that the relative 
weights (RW) and geometric mean length of stay (GMLOS) for existing MS-
DRGs 338, 339, 340, 341, 342, and 343 have been trending downward over 
the past few years as shown in the following table.

[[Page 58725]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.079

    In association with the proposed rule, we made available the 
proposed FY 2024 relative weights and GMLOS for proposed new MS-DRGs 
397, 398, and 399 as reflected in Table 5--List of Medicare Severity 
Diagnosis-Related Groups (MS-DRGs), Relative Weighting Factors, and 
Geometric and Arithmetic Mean Length of Stay--FY 2024 Proposed Rule 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
[GRAPHIC] [TIFF OMITTED] TR28AU23.080

    We believe the proposed relative weight and GMLOS for the proposed 
new MS-DRGs appear to be appropriately driven by the underlying data.
    While we recognize the commenter's statement that tertiary care 
centers may provide treatment for up to 30% of patients with 
complicated appendicitis, we note that we do not propose MS-DRG 
modifications based on provider type. We also do not agree with the 
commenter's statement that complicated appendicitis utilizes 
substantially more resources since, as discussed in the proposed rule, 
our findings reflect that cases in the complicated appendectomy MS-DRGs 
are comparable to cases in the uncomplicated MS-DRGs with regard to 
volume, average length of stay, and average costs.
    In response to the commenter who indicated that CMS failed to 
recognize clinical best practice for treatment of patients with 
complicated disease including perforation, we note that our proposed 
MS-DRG classification changes are not a reflection of, nor intended to 
define, how providers render care for patients diagnosed with acute 
appendicitis, rather, our proposals are based on a combination of data 
analysis and clinical judgement. With respect to the commenter's 
request that CMS reassign diagnosis code K35.20 (Acute appendicitis 
with generalized peritonitis, without abscess), we note that, as 
discussed in the preamble of the proposed rule and this final rule, 
diagnosis code K35.20 has been expanded and is no longer valid 
effective October 1, 2023, as reflected in Table 6C.--Invalid Diagnosis 
Codes.
    In response to the commenter who disagreed with CMS' proposal but 
agreed that clinically, both localized and generalized peritonitis in 
association with an appendectomy are complicated appendicitis diagnoses 
and should group to a complicated appendicitis MS-DRG, we note that our 
proposal reflects that both localized and generalized peritonitis in 
association with an appendectomy are comparable, clinically coherent 
diagnoses and should be grouped together. The MS-DRGs are a 
classification system intended to group together those diagnoses and 
procedures with similar

[[Page 58726]]

clinical characteristics and utilization of resources. Our proposal 
also essentially reflects the commenter's suggestion to group the four 
diagnoses (K35.20, K35.30, K35.31, and K35.891) that are currently 
assigned to the appendectomy without complicated principal diagnosis 
MS-DRGs (MS-DRGs 341, 342, and 342) together with the diagnoses that 
are currently assigned to the appendectomy with complicated principal 
diagnosis MS-DRGs (MS-DRGs 338, 338, and 340). Additionally, as 
previously discussed, we believe our data findings and clinical review 
no longer support the distinction of complicated versus uncomplicated 
MS-DRGs with respect to resource utilization for acute appendicitis and 
therefore, disagree with the commenter's suggestion to retain the 
existing MS-DRGs and to only reflect diagnosis codes K35.80, K35.890, 
and K36 in an uncomplicated MS-DRG. We note that diagnosis code K36 
(Other appendicitis) is currently assigned to MS-DRGs 393, 394, and 395 
(Other Digestive System Diagnoses with MCC, with CC, and without CC/
MCC, respectively), and was not specifically included or addressed in 
our analysis, nor our proposal.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to delete MS-DRGs 
338, 339, 340, 341, 342, and 343 and to create MS-DRGs 397, 398, and 
399 (Appendix Procedures with MCC, with CC, and without CC/MCCC, 
respectively), without modification, for FY 2024. These finalized new 
MS-DRGs no longer require a diagnosis in the definition of the logic 
for case assignment. We are also finalizing our proposal to include the 
current list of appendectomy procedures in the logic for case 
assignment of appendix procedures for the finalized new MS-DRGs.
7. MDC 07 (Diseases and Disorders of the Hepatobiliary System and 
Pancreas): Alcoholic Hepatitis
    As stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26721 
through 26726), 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.
---------------------------------------------------------------------------

    As discussed in the proposed rule, 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 2 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 58727]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.081

    As stated in the proposed rule, 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 noted 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.082


[[Page 58728]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.083


[[Page 58729]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.084

    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.
    We stated in the proposed rule that the data show 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 noted 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 noted 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) 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.
    As discussed in the proposed rule, 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.

[[Page 58730]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.085

    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).
    We stated in the proposed rule that, 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 stated we believed that these diagnoses 
are clinically coherent with the other diagnoses currently assigned to 
MS-DRGs 432, 433, and 434. In addition, we stated that 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 noted 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 proposed to maintain the 
structure of MS-DRGs 432, 433, and 434 for FY 2024.
    Comment: The majority of commenters agreed with the proposal to 
maintain the structure of MS-DRGs 432, 433, and 434 for FY 2024 given 
the data and information provided.
    Response: We thank the commenters for their support.
    Comment: A commenter (the requestor) who disagreed with the 
proposal stated that alcoholic hepatitis (AH) is a distinct clinical 
pathological entity that is different from common forms of 
alcoholic[hyphen]liver disease (ALD) and that liver failure in severe 
AH is driven by loss of hepatocyte nuclear factor 4 alpha (HNF4[alpha]) 
function and liver[hyphen]specific changes distinct from those seen in 
other forms of ALD. The commenter expressed concerns regarding both the 
analysis conducted by CMS and the interpretation of the findings. 
Specifically, the commenter stated that analyses by principal diagnoses 
comparing average length of stay and average costs should not be used 
as the primary determinant in assessing resource use differences, 
although the commenter acknowledged some principal diagnoses findings 
will be above, and some will be below, when compared to an average. 
According to the commenter, the CMS analyses also did not account for 
the differences between AH and non-AH cases and masked resource use 
differences. Using data from calendar years 2018 through 2022, the 
commenter provided an updated analysis for MS-DRG 432 while combining 
its analyses for MS-DRGs 433 and 434, separating AH cases from non-AH 
and comparing average length of stay among the cases.
    Response: The MS-DRGs were developed as a patient classification 
scheme consisting of patients who are similar clinically and with 
regard to their consumption of hospital resources. The concept of 
clinical coherence requires that the patient characteristics included 
in the definition of each MS-DRG relate to a common organ system or 
etiology and that a specific medical specialty should typically provide 
care to the patients in the MS-DRG. While all patients are unique, 
groups of patients have diagnostic and therapeutic attributes in common 
that determine their level of resource intensity. Similar resource 
intensity means that the resources used are relatively consistent 
across the patients in each MS-DRG. However, some variation in resource 
intensity will remain among the patients in each MS-DRG. In other 
words, the definition of a MS-DRG will not be so specific that every 
patient is identical, rather the level of variation is relatively 
understood and predictable. We continue to believe, as stated 
previously, that AH diagnoses are clinically coherent with the other 
diagnoses currently assigned to MS-DRGs 432, 433, and 434.
    With respect to the updated analyses that was submitted, we 
appreciate the commenter's feedback. However, we note that the 
commenter did not uniquely identify and distinguish the AH cases from 
non-AH cases with specific ICD-10-CM codes that it was considering 
under its analyses, nor did the analysis include any case counts. As 
such, it was not clear specifically what diagnoses were included in the 
commenter's data analysis.
    With respect to the commenter's assertion that the CMS analyses by 
principal diagnoses comparing average length of stay and average costs 
was used as the primary determinant in assessing resource use 
differences, we note that while the logic for case assignment to MS-
DRGs 432, 433, and 434 is driven by the reporting of any one of the 
listed diagnoses as a principal diagnosis, we also consider other 
factors in deciding whether to propose to make further modifications to 
the MS-DRGs for particular circumstances brought to

[[Page 58731]]

our attention, as described in the preamble of the proposed rule (88 FR 
26673) and discussed in prior rulemaking (for example, severity of 
illness, treatment difficulty, complexity of service, etc.).
    In response to the commenter's statement that the CMS analyses did 
not account for the differences between AH and non-AH cases masking 
resource use differences, we note that the analysis we performed and 
made available in the proposed rule to address the MS-DRG request 
listed the number of cases (volume), average length of stay and average 
costs of all cases, as well as detailed data for each diagnosis code 
defined in the logic for case assignment to MS-DRGs 432, 433, and 434 
when reported as the principal diagnosis. Therefore, the data findings 
for what we believe the commenter is referring to as non-AH cases were 
reflected and the ability to perform a comparison between AH and non-AH 
was made available. Specifically, in review of the findings for MS-DRG 
432, as displayed in the proposed rule and this final rule, the number 
of non-AH cases (e.g., cases reporting a principal diagnosis other than 
diagnosis code K70.10 or K70.11) can be calculated by subtracting the 
total number of cases reporting AH from the total number of all cases 
in the MS-DRG. For example, the total number of cases found in MS-DRG 
432 is 16,836 and the total number of cases reporting AH is 513, 
therefore, the number of non-AH cases is 16,323 (16,836-513 = 16,323), 
with an average length of stay of 6.8 days and average costs of 
$16,499, resulting in a difference of 1.4 days for the average length 
of stay and a difference in average costs of $1,073 for AH and non-AH 
cases. For MS-DRG 433, the number of non-AH cases can be calculated as 
7,954 (8,436-482 = 7,954) with an average length of stay of 4.3 days 
and average costs of $9,006, resulting in a difference of .6 days for 
the average length of stay and a difference in average costs of $22 for 
AH and non-AH cases. Lastly, for MS-DRG 434, the number of non-AH cases 
can be calculated as 309 (358-49 = 309) with an average length of stay 
of 2.9 days and average costs of $5,870, resulting in a difference of 
.5 days for the average length of stay and a difference in average 
costs of $326 for AH and non-AH cases. We illustrate these findings in 
the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.086

    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to maintain the 
structure of MS-DRGs 432, 433, and 434, without modification, for FY 
2024.
    We also note, as discussed in section II.C.1.b. of the preamble of 
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 432, 433, and 434, 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 referred the 
reader to Table 6P.10b associated with the 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.
    Comment: A commenter expressed support for the analysis CMS 
performed to determine how applying the NonCC subgroup criteria would 
potentially impact MS-DRGs currently split into three severity levels. 
Specifically, the commenter stated application of the NonCC subgroup 
criteria for MS-DRGs 432, 433, and 434 is reflective of the MS-DRG 
structure that was requested for AH.
    Response: We thank the commenter for their support. We refer the 
reader to section II.C.1.b. of the preamble of this final rule for 
related discussion regarding our finalization of the expansion of the 
criteria to include the NonCC subgroup and our finalization of the 
proposal to continue to delay application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2024.
8. MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue): Spinal Fusion
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26726 through 26729), we received a request to

[[Page 58732]]

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 noted 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 noted 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] TR28AU23.087

    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).
    As stated in the proposed rule, 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

[[Page 58733]]

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.
    As discussed in the proposed rule, 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.088

    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 1.0 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

[[Page 58734]]

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 discussed in the proposed rule, the requestor expressed concerns 
that there may be unintentional miscoded claims from providers with 
whom they do not have an explicit relationship. In the proposed rule, 
we noted that following the submission of the request for the FY 2024 
MS-DRG 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.
    We stated in the proposed rule that 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 referred 
the reader to the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for additional detailed information 
regarding the request, including a recording of the discussion and the 
related meeting materials. Public comments in response to the code 
proposal were due by April 7, 2023.
    We noted in the proposed rule 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, we stated that 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.
    As discussed in the proposed rule, based on our review of this 
issue and our analysis of the claims data, we agreed 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 stated we believed 
further review is warranted. In addition, as previously discussed in 
the proposed rule and this final rule, 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. In the proposed rule, we also stated we believed 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.
    In the proposed rule, we noted that 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. We also noted 
that because the procedure codes that we analyzed and presented 
findings for in the 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. Additionally, we stated that we will 
continue to collaborate with the 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 stated we believed 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 proposed to maintain the current structure 
of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460 for FY 2024.
    Comment: Commenters supported our proposal to maintain the current 
structure of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460 for FY 
2024.
    Response: We thank the commenters for their support.
    Comment: Several commenters (orthopedic surgeons) who expressed 
support for the requested reassignment of cases reporting the 
utilization of an aprevoTM customized interbody spinal 
fusion device stated how important these devices are for their patients 
because it optimizes patient alignment, is patient-specific, and 
therefore, beneficial for situations where a patient's normal anatomy 
does not allow for traditional implants. These commenters stated that 
without reassignment to the higher severity MS-DRGs their facilities 
would not allow use of the technology on the population of Medicare 
patients they serve.
    Response: We appreciate the commenters' feedback. As discussed in 
the proposed rule, based on our review

[[Page 58735]]

and analysis of the claims data, we agreed 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. We also note that the 
proposal to revise the current code descriptions that was presented at 
the March 2023 ICD-10 Coordination and Maintenance Committee meeting 
was finalized, as reflected in the FY 2024 ICD-10-PCS Code Update files 
available via the CMS website at: https://www.cms.gov/medicare/icd-10/2024-icd-10-pcs as well as in Table 6F.--Revised Procedure Code 
Titles--FY 2024 associated with this final rule and available via the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    As also previously discussed, because of the concerns with respect 
to suspected inaccuracies of the current coding, we continue to believe 
additional review of claims data is warranted and would be informative 
as we continue to consider this technology for future rulemaking. 
Accurate and complete documentation within the medical record is 
important for patient management, outcome measurement, and quality 
improvement, as well as payment accuracy. We anticipate that the 
revisions to the code title for the aprevoTM customized 
interbody spinal fusion device will encourage more accurate reporting 
of procedures and improve the quality and reliability of the data. We 
also continue to believe that because this technology is currently 
receiving new technology add-on payments and will continue to receive 
new technology add-on payments, additional claims data analysis of the 
cases 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 would be 
beneficial.
    As we have stated in prior rulemaking, we rely on providers to 
assess the needs of their patients and provide the most appropriate 
treatment. It is not appropriate for facilities to deny treatment to 
beneficiaries needing a specific type of therapy or treatment that 
potentially involves increased costs (86 FR 44847). It would also not 
be appropriate to consider modifications to the MS-DRG assignment of 
cases reporting the performance of a procedure that identifies and 
describes a specific technology solely as an incentive for providers to 
purchase and utilize one technology over another.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal to maintain the 
structure of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460, 
without modification, for FY 2024.
9. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract): 
Complications of Arteriovenous Fistulas and Shunts
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26729 through 
26733), we discussed a request we received 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.089

    As noted in the proposed rule, 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.
    We stated in the proposed rule that 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

[[Page 58736]]

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.
    As discussed in the FY 2024 IPPS/LTCH proposed rule, 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.090

    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 3 
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

[[Page 58737]]

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, in the proposed rule, we stated 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.091

    We noted in the proposed rule that 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. We stated 
that 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 further stated 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 10 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 58738]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.092

    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 stated we did 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). 
In the proposed rule, we noted 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 stated we believed 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 stated we believed 
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 did not propose 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.
    Comment: Commenters supported the proposal to maintain the current 
assignment of the eight diagnosis codes in MDC 05 and expressed 
appreciation for CMS' analysis of clinical best practice and claims 
data. A commenter stated that while they recognize that the insertion 
of TIVADS and tunneled vascular access devices may be performed to 
treat renal failure, the resources used for such treatment--including 
surgical equipment, interventional radiology services, clinical staff, 
among others--are more consistent with vascular disease than the 
primary diagnosis (that is, kidney disease) that led to the procedure.
    Response: We thank the commenters for their support and appreciate 
the feedback. After consideration of the public comments we received, 
we are finalizing for FY 2024, without modification, our proposal to 
not 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 
proposed to move the cases reporting the procedures and/or principal 
diagnosis codes described in

[[Page 58739]]

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
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26733 through 26735), during our review of the cases that group to MS-
DRGs 981 through 983, we 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. We stated in the proposed rule that 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] TR28AU23.093

    As noted in the proposed rule, 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] TR28AU23.094

    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 stated in the 
proposed rule 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.

[[Page 58740]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.095

    We reviewed the data and noted in the proposed rule that 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 stated we believed 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, we stated 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 proposed 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.
    Comment: Commenters supported the proposal to add ICD-10-PCS 
procedure code 0DTN4ZZ (Resection of sigmoid colon, percutaneous 
endoscopic approach) to MDC 11 (Diseases and Disorders of the Kidney 
and Urinary Tract).
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-PCS procedure code 0DTN4ZZ to MDC 
11 (Diseases and Disorders of the Kidney and Urinary Tract), without 
modification, effective October 1, 2023 for FY 2024.
b. Open Excision of Muscle
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26735 through 26737), 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 58741]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.096

    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.
    As discussed in the proposed rule, the principal diagnosis most 
frequently reported with the 28 ICD-10-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 stated 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.

[[Page 58742]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.097

    We then examined the MS-DRGs within MDC 05 and stated we 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] TR28AU23.098

    As discussed in the proposed rule, 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 stated we believed 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, we stated 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 would be clinically appropriate for the procedures to group to 
the same MS-DRGs as the principal diagnoses. Therefore, we proposed 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.
    Comment: Commenters supported the proposal to add the 28 ICD-10-PCS 
codes that describe the open excision of muscle to MDC 05 (Diseases and 
Disorders of the Circulatory System).
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the 28 ICD-10-PCS codes that describe 
the open excision of muscle listed previously to MDC 05 (Diseases and 
Disorders of the Circulatory System), without modification, effective 
October 1, 2023, for FY 2024.
c. Open Replacement of Skull With Synthetic Substitute
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26737 through 26739), 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 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

[[Page 58743]]

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] TR28AU23.099

    As discussed in the proposed rule, 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] TR28AU23.100

    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 stated 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] TR28AU23.101

    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 stated we 
believed 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

[[Page 58744]]

procedure is related to the principal diagnosis.
    We noted in the proposed rule that 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 stated we believed that would be 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 proposed 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.
    Comment: Most commenters supported the proposal to add ICD-10-PCS 
procedure code 0NR00JZ to MDC 09 (Diseases and Disorders of the Skin, 
Subcutaneous Tissue and Breast). However, a commenter opposed CMS' 
proposal. The commenter stated they did not agree and stated MS-DRGs 
579, 580, and 581 are not reflective of the clinical nature of skull 
procedures which are more in line with cranial procedures in MDC 01 
(Diseases and Disorders of the Nervous System). This commenter further 
requested the creation of new MS-DRGs in MDC 01 to reflect the 
resources utilized in the performance of these procedures.
    Response: We thank the commenters for their support and feedback.
    In response to the commenter that opposed the proposal, we note 
that ICD-10-PCS procedure code 0NR00JZ currently groups to several 
MDCs, which are listed in the previous table. In MDC 01 specifically, 
ICD-10-PCS procedure code 0NR00JZ is 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), MS-DRG 
024 (Craniotomy with Major Device Implant or Acute Complex CNS 
Principal Diagnosis without MCC), and MS-DRGs 025, 026, and 027 
(Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, 
and without CC/MCC, respectively). When ICD-10-PCS procedure code 
0NR00JZ is reported with an ICD-10-CM diagnosis code assigned to MDC 
01, the cases group MS-DRGs 023 through 027 depending on the 
circumstances of the admission. ICD-10-CM diagnosis code Z42.8 
(Encounter for other plastic and reconstructive surgery following 
medical procedure or healed injury), however, is currently assigned to 
MDC 09 and would require reassignment to MDC 01 in order for these 
cases to group to MS-DRGs in MDC 01 as suggested by the commenter. We 
believe that diagnosis code Z42.8 is appropriately assigned to MDC 09 
(Diseases and Disorders of the Circulatory System) as it describes 
encounters for other plastic and reconstructive surgery following 
medical procedure or healed injury. In reviewing the commenter's 
concerns, we note that diagnosis code Z42.8 does not describe a 
diagnosis or circumstance limited to affecting the nervous system. It 
would not be appropriate to move this diagnosis code into another MDC 
because it could inadvertently cause cases reporting this MDC 09 
diagnosis with reconstructive procedures to be assigned to an unrelated 
MS-DRG. We note that whenever there is a surgical procedure reported on 
the claim that is unrelated to the MDC to which the case was assigned 
based on the principal diagnosis, it results in a MS-DRG assignment to 
a surgical class referred to as ``unrelated operating room 
procedures''.
    As discussed in the proposed rule, we note that 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. We continue to 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 and that it would 
be clinically appropriate for the procedure to group to the same MS-
DRGs as the principal diagnosis. We also continue to believe that 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.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to add 
ICD-10-PCS procedure code 0NR00JZ to MDC 09 (Diseases and Disorders of 
the Circulatory System), without modification, effective October 1, 
2023 for FY 2024.
d. Endoscopic Dilation of Ureters With Intraluminal Device
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26739 through 26740), 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] TR28AU23.102


[[Page 58745]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.103

    As discussed in the proposed rule, 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.104

    We stated 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 stated 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] TR28AU23.105

    As discussed in the proposed rule, 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 stated we believed 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. 
We noted in the proposed rule that 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

[[Page 58746]]

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), we stated it would be clinically 
appropriate for the procedures to group to the same MS-DRGs as the 
principal diagnoses.
    Therefore, we proposed 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.
    Comment: Most commenters supported the proposal to add ICD-10-PCS 
procedure codes 0T768DZ, 0T778DZ and 0T788DZ to MDC 05 (Diseases and 
Disorders of the Circulatory System). However, a commenter opposed CMS' 
proposal. The commenter stated they did not agree and stated these 
cases would most appropriately group to MDC 11 (Diseases and Disorders 
of the Kidney and Urinary Tract).
    Response: We thank the commenters for their support and feedback. 
In response to the commenter that opposed the proposal, we note that 
ICD-10-CM diagnosis 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) is currently assigned 
to MDC 05 and would require reassignment to MDC 11 in order for these 
cases to group to MDC 11 as suggested by the commenter. As discussed in 
prior rulemaking (85 FR 58504), we believe that this diagnosis code is 
appropriately assigned to MDC 05 (Diseases and Disorders of the 
Circulatory System) as it describes heart failure. We continue to 
believe it would not be appropriate to move this diagnosis into another 
MDC because it could inadvertently cause cases reporting this MDC 05 
diagnosis with a circulatory system procedure to be assigned to an 
unrelated MS-DRG. We note that whenever there is a surgical procedure 
reported on the claim that is unrelated to the MDC to which the case 
was assigned based on the principal diagnosis, it results in a MS-DRG 
assignment to a surgical class referred to as ``unrelated operating 
room procedures''.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are finalizing our proposal to add 
ICD-10-PCS procedure codes 0T768DZ, 0T778DZ, and 0T788DZ to MDC 05 
(Diseases and Disorders of the Circulatory System), without 
modification, effective October 1, 2023, for FY 2024.
e. Occlusion of Splenic Artery
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26740 through 26742), 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.106

[GRAPHIC] [TIFF OMITTED] TR28AU23.107


[[Page 58747]]


    As discussed in the proposed rule, 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] TR28AU23.108

    We stated 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 the proposed rule and 
this final 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 the 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 stated 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] TR28AU23.109

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. In the proposed rule, we also noted 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. We stated 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

[[Page 58748]]

(diagnosis code S36.032A) and would be 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 believed 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), we stated 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 
proposed 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.
    As discussed in the proposed rule, 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 also proposed 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.
    Comment: Commenters supported the proposal to add the nine ICD-10-
PCS codes that describe the occlusion of the splenic artery to MDC 16 
(Diseases and Disorders of Blood, Blood Forming Organs and Immunologic 
Disorders) and to revise the titles of MDC 16 MS-DRGs 799, 800, and 
801. A commenter stated they appreciated CMS' analysis and requested 
that CMS provide ongoing analysis of other splenic diseases and 
disorders that group to MS-DRGs 987, 988, and 989 when reported with 
ICD-10-PCS procedure codes.
    Response: We appreciate the commenters' support. We note that 
consistent with our process as described previously in this section, we 
do conduct an annual 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.
    After consideration of the public comments we received, we are 
finalizing our proposal 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, without 
modification, effective October 1, 2023, for FY 2024. We are also 
finalizing our proposal 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 for FY 
2024.
    In addition to the internal review of procedures producing 
assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, as 
discussed in the proposed rule, 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 stated 
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. In the proposed 
rule, we stated that 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 stated we did not 
receive any requests suggesting reassignment. Therefore, for FY 2024 we 
did not propose to move any cases reporting procedure codes from MS-
DRGs 981 through 983 to MS-DRGs 987 through 989 or vice versa.
    Comment: Commenters expressed support for CMS' proposal to not move 
any cases reporting procedure codes from MS-DRGs 981 through 983 to MS-
DRGs 987 through 989 or vice versa.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to not move any cases 
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

[[Page 58749]]

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 final 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, 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.
    We stated in the 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 stated we will provide more 
detail on this analysis and the methodology for conducting this review 
in future rulemaking.
    Comment: Commenters supported CMS' plan to continue to conduct the 
comprehensive, systematic review of the ICD-10-PCS codes and to 
evaluate their current O.R. and non-O.R. designations. These commenters 
expressed that they were supportive of CMS' decision to continue to 
develop the processes and methodology over the upcoming years and to 
allow the claims data to become more stable. Other commenters stated 
they agreed that a restructuring of these designations may be warranted 
as a result of the expanded detail in the ICD-10-PCS classification and 
changes in medical practice and that they look forward to commenting on 
CMS' data analysis and methodology in the future.
    Response: We thank the commenters for their support.
    Comment: Other commenters stated that designation of O.R. versus 
non-O.R. may no longer be the most critical differentiator between 
resource-intensive procedures for MS-DRG purposes. These commenters 
stated presently, there are increasingly complex and resource-intensive 
procedures performed by hospitals that do not involve the use of an 
operating room. A commenter stated that the administration of certain 
complex biologics or radiotherapies are not surgical procedures at all, 
yet these procedures represent significant resource utilization by 
hospitals. Another commenter stated that biplane radiology 
interventional suites and cardiac catheterization labs used for 
procedures such as mechanical thrombectomy or endovascular coiling for 
aneurysms can utilize more advanced equipment and supplies than a basic 
operating room with minimal installed equipment. This commenter

[[Page 58750]]

encouraged CMS to recognize that the revolution in medical procedures 
in recent years may render O.R. vs. non-O.R. a less critical 
distinction in driving payment policy.
    As part of the broader and continuing conversation about future MS-
DRG assignments and designations for these procedures and therapies, a 
commenter encouraged CMS to consider how other factors influence 
resource utilization, and recommended CMS consider questions such as 
whether:
     Certain types of procedures and therapies make up a 
substantial percentage of the costs within a particular MS-DRG?
     There is an average amount of cost within the relative 
weight of a MS-DRG that represents significant resource utilization and 
complexity?
     Certain types of interventions, such as the administration 
of certain complex drugs/biologics or therapies (for example, radiation 
therapy), that demonstrate higher costs and resource utilization, 
warrant consideration of a designation as an O.R. procedure or another 
equivalent designation? Should these therapies be considered for 
another type of distinction apart from medical and surgical MS-DRGs--
for example, a third category, or be treated like CCs/MCCs?
     What percentage of cases within an MS-DRG receive outlier 
payment?
    Response: CMS appreciates the commenters' feedback and 
recommendations as to what factors to consider in evaluating O.R. 
versus non-O.R. designations. As stated previously, we have typically 
evaluated procedures on the basis of whether or not they would be 
performed in an operating room. We agree with commenters and believe 
that there may be other factors to consider with regard to resource 
utilization, particularly with the implementation of ICD-10. As 
discussed in the proposed rule, we are exploring alternatives on how we 
may restructure the current O.R. and non-O.R. designations for 
procedures by leveraging the detail that is available in the ICD-10 
claims data. As we continue to consider the feedback we have received 
to help inform the development of our process and methodology, we will 
provide more detail in future rulemaking. We encourage the public to 
continue to submit comments on any other factors to consider in our 
refinement efforts to recognize and differentiate consumption of 
resources for the ICD-10 MS-DRGs for consideration.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26744 through 26746), we received the following requests regarding 
changing the designation of specific ICD-10-PCS procedure codes from 
non-O.R. to O.R. procedures. In this section of this rule, as we did in 
the proposed rule, we summarize these requests and address why we are 
not considering a change to the designation of these codes at this time 
and, further, respond to the public comments we received regarding 
these requests.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48863), we discussed 
a request we received to change the 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.
    As discussed in the 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. We stated in the 
proposed rule that 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 did not propose 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 invited 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 the 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.
    Comment: Most commenters agreed with CMS' proposal to maintain the 
designation of all ICD-10-PCS procedure codes that describe

[[Page 58751]]

diagnostic and therapeutic percutaneous endoscopic procedures performed 
on thoracic and abdominal organs for FY 2024.
    Response: We appreciate the commenters' support.
    Comment: A commenter stated that while they did not dispute that 
there may be numerous ICD-10-PCS codes that describe procedures 
performed using a percutaneous endoscopic approach, they believed that 
this list could be narrowed down substantially by considering only 
codes describing procedures performed on thoracic and abdominal organs. 
This commenter stated that even with a smaller list utilizing the 
criteria they suggested, they were unable to envision a thoracoscopic 
or laparoscopic procedure that would not require general anesthesia and 
be performed in an operating room and urged CMS to designate any ICD-
10-PCS procedure code that describes a thoracic or abdominal procedure 
using a percutaneous endoscopic approach as an operating room 
procedure.
    Response: We thank the commenter for their feedback. We also 
appreciate the commenter's suggestion, however, as stated in the 
proposed rule, and in prior rulemaking, we plan to conduct a 
comprehensive, systematic review of the ICD-10-PCS procedure codes. We 
continue to believe that rather than evaluating the procedure codes 
describing diagnostic and therapeutic percutaneous endoscopic 
procedures performed on thoracic and abdominal organs in isolation, 
analysis should be performed for this subset of procedure codes across 
the MS-DRGs, as part of the comprehensive procedure code review. As a 
component of our broader comprehensive procedure code review, we are 
also reviewing the process for determining when a procedure is 
considered an operating room procedure. For example, we may restructure 
the current O.R. and non-O.R. designations for procedures by leveraging 
the detail that is available in the ICD-10 claims data. Therefore, 
after consideration of the public comments we received, and for the 
reasons discussed, we are not making changes in this final rule to the 
designation of all ICD-10-PCS procedure codes that describe diagnostic 
and therapeutic percutaneous endoscopic procedures performed on 
thoracic and abdominal organs, from non-O.R. to O.R.
    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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.110

    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

[[Page 58752]]

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.
    As discussed in the 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, in the proposed rule we noted as 
generally stated in the preamble of the proposed rule each year, the 
diagnosis and procedure codes from the specified FY MedPAR claims data 
are grouped through the applicable version of the proposed FY GROUPER. 
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 referred the reader to Table 6P.8a associated with the 
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 
noted 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 the 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. 
In the proposed rule, we stated that 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 
referred 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-DRGClassifications-and-Software) for complete documentation of the 
GROUPER logic for the listed MS-DRGs.
    We stated we reviewed these data and continued 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 noted 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 
stated 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 stated in the proposed rule, 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 did not propose changes to the designation of the 22

[[Page 58753]]

codes that describe the open drainage of subcutaneous tissue and fascia 
listed in the previous table for FY 2024.
    Comment: Most commenters agreed with CMS' proposal to maintain the 
designation of the 22 codes that describe the open drainage of 
subcutaneous tissue and fascia for FY 2024.
    Response: We appreciate the commenters' support.
    Comment: A commenter opposed the non-O.R. designation of the 22 
procedure codes that describe the open drainage of subcutaneous tissue 
and fascia as finalized in the FY 2022 final rule. This commenter 
stated that they disagree that these 22 ICD-10-PCS procedures do not 
typically require the resources of an O.R. when occurring in the 
inpatient setting and stated they do not believe these procedures can 
be safely performed in a non-O.R. setting. The commenter stated in the 
FY 2018 IPPS proposed rule, these same 22 ICD-10-PCS codes were 
identified, and a commenter opposed the proposal to re-designate these 
codes at that time. In response to the issues raised by this commenter, 
CMS determined in the FY 2018 IPPS final rule that it was appropriate 
to maintain the designation of the 22 procedure codes. This commenter 
further stated they find CMS' rulemaking on this issue between FY 2018 
and FY 2024 to be contradictory and believe that the rationale to 
maintain these 22 codes as O.R. procedures remains the same and that 
there is no safe way to effectively drain an infection involving the 
subfascial plane without the resources of an operating room.
    Response: We thank the commenter for their feedback. We reviewed 
the commenters' concerns and continue to state that treatment practices 
have continued to shift since FY 2018 rulemaking. As stated in the 
proposed rule, and in prior rulemaking, in response to similar 
comments, we believe 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. As shown in Table 
6P.8a associated with the proposed rule (which is available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS), 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.
    As discussed in the proposed rule and earlier in this section, we 
have signaled in prior rulemaking that the designation of an O.R. 
procedure encompasses more than the physical location of the hospital 
room 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 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. The non-O.R. designation of the 22 
procedure codes that describe the open drainage of subcutaneous tissue 
and fascia as finalized in the FY 2022 final rule better reflects the 
associated technical complexity and hospital resource use of these 
procedures.
    Therefore, after consideration of the public comments we received, 
and for the reasons discussed, we are not making changes in this final 
rule to the designation of the 22 codes that describe the open drainage 
of subcutaneous tissue and fascia listed in the previous table for FY 
2024.
12. 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 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

[[Page 58754]]

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/Medicare-Fee-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 code 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 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.
---------------------------------------------------------------------------

    \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.
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    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

[[Page 58755]]

exposure to toxic agents, dust, or radiation.
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    \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 final 
rule for our proposed changes to the severity level designation for 
certain diagnosis codes that describe homelessness for FY 2024, as well 
as our finalization of that proposal.
    As discussed in the 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.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26748), 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 noted that this process does not automatically result in the new 
diagnosis code having the same designation as the predecessor code. We 
refer the reader to section II.C.13 of this final rule for the 
discussion of the finalized changes to the ICD-10-CM and ICD-10-PCS 
coding systems for FY 2024.
c. 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 available field on the claim 
when other diagnoses are reported instead.
    As discussed in the 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.

[[Page 58756]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.111

    The table shows that the C1 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. In the proposed rule, we noted 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, we 
stated that the data again suggested 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, in the FY 2024 IPPS/LTCH PPS 
proposed rule we noted 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. Department of 
Housing and Urban Development (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 (Agency for Healthcare Research and Quality (AHRQ)), 
Karaca Z (AHRQ), Wong HS (AHRQ). Characteristics of Homeless 
Individuals Using Emergency Department Services in 2014. Healthcare 
Cost and Utilization Project (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.
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    Therefore, after considering the C1 and C2 ratings of the three 
ICD-10-CM diagnosis codes that describe

[[Page 58757]]

homelessness and consideration of the nine guiding principles, we 
proposed to change the severity level designation for diagnosis codes 
Z59.00 (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. In the proposed rule, we stated 
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 further stated 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.
    Comment: Commenters expressed overwhelming support for our proposal 
to change the severity level designation for diagnosis codes Z59.00 
(Homelessness, unspecified), Z59.01 (Sheltered homelessness), and 
Z59.02 (Unsheltered homelessness) from NonCC to CC for FY 2024. These 
commenters stated this proposal acknowledges the impact of homelessness 
as a social determinant of health, its implications for resource 
utilization, and its costs to healthcare providers in effectively 
addressing the healthcare needs of Medicare beneficiaries experiencing 
homelessness. A commenter stated they especially appreciate thoughtful 
policies that are data-driven and intended to bridge the gap of 
compensation for providers who have been tirelessly caring for 
underserved populations. Another commenter stated that this change will 
confer enhanced financial resources to safety net hospitals, which care 
for a disproportionate number of patients impacted by health-related 
social risk factors. A commenter specifically stated that they see this 
proposal as a watershed moment as it is the first time CMS will be 
linking social determinants of health to payment in traditional 
Medicare. Commenters stated that a change to the severity level 
designation of the three diagnosis codes that describe homelessness 
from NonCC to CC may increase voluntary reporting of these 
circumstances, incentivize treating the whole patient, while enabling 
CMS to assess homelessness-related impacts on illness severity, care 
complexity, and hospital utilization to drive meaningful evaluation of 
the association between these Z codes and outcomes. A few commenters 
stated that based on their own analysis, homelessness has an effect on 
resource utilization on par with other diagnoses currently designated 
as MCCs but stated changing the designation to a CC is a logical and 
necessary step.
    Response: We thank the commenters for their support.
    Comment: While commending CMS' efforts, many commenters noted an 
operational concern in that currently only 25 diagnoses are captured on 
the institutional claim form. Commenters stated that documenting and 
reporting the social and economic circumstances patients may be 
experiencing may require a substantial number of SDOH Z codes and 
stated that this could lead to the crowding out of other diagnosis 
codes that also need to be captured on the institutional claim form for 
both payment and quality measures. A commenter stated that 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, finalized in the FY 2023 IPPS/LTCH 
final rule, will result in the need to include additional Z codes on 
the claim to represent the findings of the SDOH screenings, further 
limiting the space available. Commenters stated that given the number 
of fields available to report diagnosis codes, it would be helpful if 
CMS would instruct hospitals on how to prioritize the use of SDOH 
diagnosis codes to ensure that all the medical diagnoses that govern 
mortality and readmission rates are also captured. A few commenters 
suggested that CMS evaluate the potential to expand the number of 
diagnosis codes that can be submitted, or alternatively, design a 
separate way to report the Z codes on the claim form, separate and 
distinct from the fields for the diagnosis codes.
    Response: We thank the commenters for their feedback. We note that 
any proposed changes to the institutional claim form would need to be 
submitted to the National Uniform Billing Committee (NUBC) for 
consideration as the NUBC develops and maintains the Uniform Billing 
(UB) 04 data set and form. The NUBC is a Data Content Committee named 
in the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) and is composed of a diverse group of interested parties 
representing providers, health plans, designated standards maintenance 
organizations, public health organizations, and vendors.
    Comment: Some commenters requested that CMS further explore other 
SDOH diagnosis codes that could impact hospital resource use. These 
commenters encouraged CMS to examine other SDOH Z codes that describe 
circumstances such as food insecurity, lack of adequate food and 
drinking water, extreme poverty, lack of transportation, inadequate 
housing environmental temperature, and problems related to employment, 
physical environment, social environment, upbringing, primary support 
group, literacy, economic circumstances, and psychosocial circumstances 
to determine the hospital resource utilization related to addressing 
these factors and to analyze whether these SDOH Z codes should be 
considered for severity designation changes in future rulemaking as 
well. Other commenters also pointed to conditions outside of the SDOH Z 
codes in categories Z55-Z65 such as: medical debt, malnutrition, 
delirium due to a known physiological condition, elder abuse and 
neglect, contact with and (suspected) exposure to hazards in the 
physical environment, personal history of falling, personal history of 
adult physical and sexual abuse, awaiting organ transplant status, and 
underdosing of medication regimens as examples of other areas where 
fostering better documentation and reporting, and considering severity 
designation changes in future rulemaking, could improve health 
outcomes.
    Response: We appreciate the feedback. We will examine these 
suggestions and determine if there are other diagnoses codes, including 
diagnosis codes that describe SDOH, that should also be considered 
further. We will consider these diagnosis codes

[[Page 58758]]

for changes to severity level designations, using a combination of 
mathematical analysis of claims data and the application of nine 
guiding principles, as we continue our comprehensive CC/MCC analysis 
and will provide more detail in future rulemaking.
    Comment: While supporting the proposal to designate the three ICD-
10-CM diagnosis codes describing homelessness as CCs, some commenters 
expressed concern with the perceived diminished value that designating 
homelessness as a CC when reported as a secondary diagnosis may have, 
due to the expansion of the criteria for subdividing a base MS-DRG into 
a three-way split. These commenters stated the application of the NonCC 
subgroup criteria as demonstrated by the MS-DRG changes associated with 
Table 6P.10--Potential MS-DRG Changes with Application of the NonCC 
Subgroup Criteria and Detailed Data Analysis--FY 2024, associated with 
the proposed rule, appears to frequently not recognize the need for a 
severity level of CC by eliminating many ``with CC'' and ``without CC/
MCC'' MS-DRGs, meaning there is a potential for fewer MS-DRGs to be 
impacted by the presence of homelessness as a CC. The commenters 
further stated that if there are a limited number of MS-DRGs impacted 
by the presence of a CC, the change of the severity designation of 
these three diagnosis codes will not accomplish the desired 
documentation and reporting goals.
    Response: We appreciate the commenters' feedback and concern. We 
concur with commenters that the application of the NonCC subgroup 
criteria to existing MS-DRGs currently subdivided by a three-way 
severity level split going forward may result in modifications to 
certain MS-DRGs that are currently split into three severity levels and 
potentially result in MS-DRGs that are proposed to be split into two 
severity levels. As discussed in section II.C.1.b of the proposed rule, 
we identified four base MS-DRGs currently subdivided with a three-way 
severity level split that result in the potential creation of a single, 
base MS-DRG. We refer the reader to Table 6P.10b associated with the 
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.
    In response to the commenters who expressed concern that changes to 
the underlying MS-DRG structure would have the greatest impacts with 
respect to particular MS-DRGs, as noted in prior rulemaking, we note 
that generally, changes to the MS-DRG classifications and related 
policies under the IPPS that are implemented on an annual basis, 
including any potential MS-DRG updates to be considered for a future 
proposal in connection with application of the NonCC subgroup criteria 
to existing MS-DRGs with a three-way severity level split, 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 discussed in the FY 2021 final rule (85 FR 58446), we believe 
that applying these criteria to the NonCC subgroup of existing MS-DRGs 
with a three-way severity level split would better reflect resource 
stratification and also promote stability in the relative weights by 
avoiding low volume counts for the NonCC level MS-DRGs. We refer the 
reader to section II.C.1.b. of the preamble of this final rule for 
related discussion regarding our finalization of the expansion of the 
criteria to include the NonCC subgroup and our finalization of the 
proposal to continue to delay application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split.
    Comment: A commenter stated that even though they applaud CMS' 
efforts to recognize the underreporting of SDOH, they recommended only 
changing the designation of diagnosis codes Z59.01 (Sheltered 
homelessness) and Z59.02 (Unsheltered homelessness) from NonCC to CC. 
This commenter stated that if the proposed change to the severity 
designation of diagnosis code Z59.00 (Homelessness, unspecified) is 
finalized, they envisioned payment oversight agencies would question 
its significance and effect on resource utilization due to the 
``unspecified'' code description, especially if code Z59.00 is the only 
secondary diagnosis code designated as a CC on the claim.
    Response: We thank the commenter for their feedback. We reviewed 
the commenter's concern and note that whether the patient is 
experiencing sheltered, unsheltered, or unspecified homelessness, the 
patient may still 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, and have difficulties adhering 
to medication regimens. We continue to believe that patients 
experiencing homelessness (regardless of type) may be 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. If SDOH Z codes are 
consistently reported in inpatient claims data, our methodology 
utilized to mathematically measure the impact on resource use may more 
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 and we can reexamine these severity designations in future 
rulemaking.
    Comment: Some commenters thanked CMS for its continued interest in 
receiving feedback on documentation and reporting of the ICD-10-CM 
diagnosis SDOH Z codes, yet stated there continue to be many challenges 
for clinicians in documenting SDOH, such as the lack of knowledge 
surrounding these codes, the time and burden associated with adding 
them to a patient's problem list, and the perceived inability to do 
anything with the information. Other commenters stated assigning codes 
for SDOH can be a time-consuming and labor-intensive process, as many 
electronic health records (EHRs) do not have pathways to add a Z code 
to the problem or diagnosis list. These commenters stated prioritizing 
provider education on the reporting of Z codes and offering support 
mechanisms, including the use of incentives, would significantly 
improve the acquisition of SDOH data, as such data is essential in 
helping health systems better anticipate needs and help vulnerable 
patients receive support at both the individual and population levels. 
Another commenter stated that given the administrative and operational 
challenges for providers associated with capturing SDOH data, they 
recommended CMS delay implementation of the change in severity level 
designation of diagnosis codes Z59.00, Z59.01, and Z59.02 by one year 
so that providers may continue to adapt their processes and workflows 
to properly capture the homelessness Z codes. This commenter stated 
that although the proposed change would not require additional work for 
providers beyond reporting the codes, the act of reporting itself is 
still a broad change to hospital coding practices and electronic health 
record (EHR) use that

[[Page 58759]]

they believe deserves additional time for provider adoption.
    Response: We appreciate the feedback. We note that the ICD-10-CM 
Official Guidelines for Coding and Reporting have been regularly 
revised to provide additional guidance as it relates to diagnosis codes 
describing social determinants of health diagnosis. Specifically, 
Section I.C.21.c.17 of the ICD-10-CM Official Guidelines for Coding and 
Reporting were updated:
     Effective October 1, 2021, to clarify that code assignment 
may be based on medical record documentation from clinicians involved 
in the care of the patient who are not the patient's provider and that 
patient self-reported documentation may be used to assign codes for 
social determinants of health, as long as the patient self-reported 
information is signed-off by and incorporated into the medical record 
by either a clinician or provider;
     Effective October 1, 2022, to clarify that SDOH codes 
should be assigned only when the documentation specifies that the 
patient has an associated problem or risk factor; and
     Effective April 1, 2023, to provide more guidance on 
reporting SDOH and to provide more examples to facilitate the capture 
of these data.
    We encourage the commenters to review the Official ICD-10-CM Coding 
Guidelines, which can be found on the CDC website at: https://www.cdc.gov/nchs/icd/icd10.htm. The American Hospital Association 
(AHA)'s Coding Clinic for ICD-10-CM/PCS publication has provided 
further clarification on the appropriate documentation and use of Z 
codes to enable hospitals to incorporate them into their processes. The 
AHA also offers a range of tools and resources for hospitals, health 
systems and clinicians to address the social needs of their patients. 
We believe these updates and resources will help alleviate the concerns 
expressed by these commenters. As one of the four Cooperating Parties 
for ICD-10, we will continue to collaborate with the AHA to provide 
guidance for coding problems or risk factors related to SDOH through 
the AHA's Coding Clinic for ICD-10-CM/PCS publication and to review the 
ICD-10-CM Coding Guidelines to determine where further clarifications 
may be made.
    In response to commenters that state there continue to be many 
challenges for clinicians in documenting SDOH, such as the time and 
burden associated with adding them to a patient's problem list, and 
state that many electronic health records (EHRs) do not have pathways 
to add a Z code to the problem or diagnosis list, the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), the principal 
advisor to the Secretary of the U.S. Department of Health and Human 
Services, conducted interviews with six electronic health records 
(EHRs) vendors with large market shares in both ambulatory and 
inpatient settings to investigate the development of software products 
that allow health care providers to identify and address patients SDOH 
in health care settings. The findings of the study indicate commercial 
vendors appear to be ready to collaboratively discuss policy solutions, 
such as standards or guidelines with each other, health care systems, 
and government agencies in order to further promote integration of SDOH 
data into the standard of care for all health systems.\16\ We further 
note that on April 18, 2023, the Office of the National Coordinator 
proposed updated certification standards (USCDI v3) that would, if 
finalized, require certified EHR vendors to include four SDOH data 
elements: SDOH Assessment, Goals, Interventions, Problems/Health 
Concerns.\17\
---------------------------------------------------------------------------

    \16\ Freij M, Dullabh P, Lewis S, Smith SR, Hovey L, 
Dhopeshwarkar R. Incorporating Social Determinants of Health in 
Electronic Health Records: Qualitative Study of Current Practices 
Among Top Vendors. JMIR Med Inform. 2019 Jun 7;7(2):e13849. doi: 
10.2196/13849. PMID: 31199345; PMCID: PMC6592390. https://aspe.hhs.gov/sites/default/files/migrated_legacy_files/185561/NORCSDH.pdf.
    \17\ 88 FR 23746 (https://www.federalregister.gov/d/2023-07229/p-318).
---------------------------------------------------------------------------

    In response to the suggestion that CMS delay implementation of the 
change to the severity level designation of diagnosis codes Z59.00, 
Z59.01, and Z59.02 by one year so that providers may continue to adapt 
their processes and workflows to properly capture the diagnosis codes 
describing homelessness, we reviewed the commenters' concern and do not 
agree that a delay is necessary or appropriate. As discussed in the 
proposed rule, and previously in this section, when examining the data 
on the impact on resource use for the ICD-10-CM SDOH Z codes that 
describe homelessness from the FY 2019, FY 2020, and FY 2022 MedPAR 
files, 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. 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 
believe changing the severity level designation for diagnosis codes 
Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), 
and Z59.02 (Unsheltered homelessness) from NonCC to CC at this time to 
be prudent, without the need for further delay.
    Therefore, after consideration of the public comments received, we 
are finalizing changes to the severity levels for diagnosis codes 
Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), 
and Z59.02 (Unsheltered homelessness), from NonCC to CC for FY 2024, 
without modification. In addition, these diagnosis codes are reflected 
in Table 6J.1--Additions to the CC List--FY 2024 associated with this 
final rule and available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. We refer the reader to section 
II.C.13 of the preamble of the proposed rule and this final rule for 
further information regarding Table 6J.1.
    We again thank commenters for sharing their views and their 
willingness to support CMS in these efforts. We will take the 
commenters' feedback into consideration in future policy development. 
We hope and expect that this finalization will foster the increased 
documentation and reporting of the diagnosis codes describing social 
and economic circumstances and serve as an example for providers that 
when they document and report Z codes, CMS can further examine the 
claims data and consider future changes to the designation of these 
codes when reported as a secondary diagnoses. CMS will continue to 
monitor and evaluate the reporting of the diagnosis codes describing 
social and economic circumstances, including diagnosis codes Z59.00 
(Homelessness, unspecified), Z59.01 (Sheltered homelessness), and 
Z59.02 (Unsheltered homelessness).
    Additionally, as discussed in the 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.
    In the proposed rule, we noted 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 did not yet reflect these new diagnosis codes. 
The proposed and finalized severity level designations for

[[Page 58760]]

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 are 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. We stated 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 
identified with code 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 stated in the proposed rule 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 further stated we believed 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 stated we believed it was 
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.
    Comment: Commenters stated that they support CMS' decision not to 
propose to change the severity level designation of diagnosis codes 
K76.72 (Hepatic encephalopathy), N14.11 (Contrast-induced nephropathy) 
and S06.2XAA (Diffuse traumatic brain injury with loss of consciousness 
status unknown, initial encounter) at this time and to consider these 
requests in connection with our continued comprehensive CC/MCC analysis 
in future rulemaking. A commenter specifically stated they appreciate 
CMS moving cautiously with changes that could cause considerable 
upheaval during this time of unprecedented stress on hospitals and 
encouraged CMS to continue careful assessment of significant changes in 
the future. However, another commenter expressed concern that CMS 
continues to not be able to undertake a comprehensive analysis of the 
severity designation of the diagnosis codes in the ICD-10-CM 
classification. The commenter stated they believed that the nation is 
being negatively impacted since, in their opinion, some diagnoses 
currently designated as an MCC (for example severe malnutrition) do not 
require the resources inherent to a MCC whereas others that do (for 
example cardiac tamponade) are not designated as such. This commenter 
further stated it would be helpful if CMS made a proposed list of 
severity level designation changes available along with the impact on 
resource use files generated using claims from the FY 2019 through the 
FY 2022 MedPAR files that have been made publicly available on the CMS 
website.
    Response: We thank the commenters for their support and appreciate 
the feedback. With respect to CMS not being able to undertake a 
comprehensive analysis, we note that in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19235 through 19246) we stated that with the 
transition to ICD-10-CM and the significant changes that have occurred 
to diagnosis codes since the FY 2008 review, we believed it was 
necessary to conduct a comprehensive analysis once again and therefore 
proposed changes to the severity level designations for 1,492 ICD-10-CM 
diagnosis codes. As summarized in the FY 2020 IPPS/LTCH PPS final rule, 
after careful consideration of the public comments we received in 
response, 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

[[Page 58761]]

rationale applied across diagnostic categories to assist the public in 
its review.
    Since that time, CMS has taken interval steps to continue a 
comprehensive CC/MCC analysis. First, CMS hosted a listening session on 
October 8, 2019, to review the methodology utilized to mathematically 
measure the impact on resource use. 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 and the application of 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. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 
44940 through 44943), instead of changing the severity level 
designations of the ``unspecified'' ICD-10-CM diagnosis codes 
identified, 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 believed finalizing this new edit would provide 
additional time for providers to be educated while not affecting the 
payment the provider is eligible to receive. As discussed in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48866), 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, 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 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. In addition, we have provided 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 2018, FY 
2019, FY 2020, FY 2021 and the FY 2022 MedPAR files, respectively at 
https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html.
    Considering the potential impact of implementing a significant 
number of severity designation changes, and in light of the public 
health emergency (PHE) that was occurring concurrently during much of 
this timeframe, we believe these interval steps were appropriate as we 
plan to continue a comprehensive CC/MCC analysis, using a combination 
of mathematical analysis of claims data and the application of nine 
guiding principles. We continue to solicit comments regarding the nine 
guiding principles, as well as other possible ways we can incorporate 
meaningful indicators of clinical severity. We encourage commenters to 
provide a detailed explanation of how applying a suggested concept or 
principle would ensure that the severity designation appropriately 
reflects resource use for ICD-10-CM codes when reported as secondary 
diagnoses. Commenters should submit their recommendations by October 
20, 2023 via the electronic intake system, Medicare Electronic 
Application Request Information SystemTM 
(MEARISTM) at: https://mearis.cms.gov/public/home. With 
respect to the suggestion that CMS make a proposed list of severity 
level designation changes available along with the impact on resource 
use files generated using claims from the fiscal year MedPAR files, we 
appreciate the feedback and will take this suggestion under 
consideration.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal, without 
modification, to maintain the current severity level designation of 
diagnosis codes K76.72 (Hepatic encephalopathy), N14.11 (Contrast-
induced nephropathy), and S06.2XAA (Diffuse traumatic brain injury with 
loss of consciousness status unknown, initial encounter) for FY 2024.
d. Additions and Deletions to the Diagnosis Code Severity Levels for FY 
2024
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26750), we noted 
the following tables identify the proposed additions and deletions to 
the diagnosis code MCC severity levels list and the proposed additions 
and deletions to the diagnosis code CC severity levels list for FY 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.
    Comment: Commenters agreed with the proposed additions and 
deletions to the MCC and CC lists as shown in tables 6I.1, 6I.2, 6J.1, 
and 6J.2 associated with the proposed rule.
    Response: We appreciate the commenters' support.
    The following tables associated with this final rule reflect the 
finalized severity levels under Version 41 of the ICD-10 MS-DRGs for FY 
2024 and are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS; Table 6I. 
--Complete MCC List--FY 2024; Table 6I.1--Additions to the MCC List--FY 
2024; Table 6I.2--Deletions to the MCC List--FY 2024; Table 6J.--
Complete CC List--FY 2024; Table 6J.1--Additions to the CC List--FY 
2024; and Table 6J.2--Deletions to the CC List--FY 2024.
e. 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;

[[Page 58762]]

     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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 the proposed rule and set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 
associated with the proposed rule and available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    As discussed in section II.C.13 of the preamble of this final rule, 
we are finalizing, without modification, the proposed assignments and 
designations for the diagnosis codes after consideration of the public 
comments received. Therefore, the finalized CC Exclusions List as 
displayed in Tables 6G.1, 6G.2, 6H.1, 6H.2, and 6K, associated with 
this final rule reflect the severity levels under V41 of the ICD-10 MS-
DRGs. We have developed Table 6G.1.--Secondary Diagnosis Order 
Additions to the CC Exclusions List--FY 2024; Table 6G.2.--Principal 
Diagnosis Order Additions to the CC Exclusions List--FY 2024; Table 
6H.1.--Secondary Diagnosis Order Deletions to the CC Exclusions List--
FY 2024; and Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024; and Table 6K. Complete List of CC 
Exclusions--FY 2024.
    For Table 6G.1, each secondary diagnosis code finalized for 
addition to the CC Exclusion List is shown with an asterisk and the 
principal diagnoses finalized to exclude the secondary diagnosis code 
are provided in the indented column immediately following it. For Table 
6G.2, each of the principal diagnosis codes for which there is a CC 
exclusion is shown with an asterisk and the conditions finalized for 
addition to the CC Exclusion List that will not count as a CC are 
provided in an indented column immediately following the affected 
principal diagnosis. For Table 6H.1, each secondary diagnosis code 
finalized for deletion from the CC Exclusion List is shown with an 
asterisk followed by the principal diagnosis codes that currently 
exclude it. For Table 6H.2, each of the principal diagnosis codes is 
shown with an asterisk and the finalized deletions to the CC Exclusions 
List are provided in an indented column immediately following the 
affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. 
associated with this final rule are available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    As discussed in the proposed rule, we also noted that in our review 
of the CC Exclusion List that 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 stated we believed it was 
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 the proposed rule, we provided 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 the proposed rule is 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    The ICD-10 MS-DRGs Version 41 CC Exclusion List is included as 
Appendix C of the Definitions Manual (available in two formats; text 
and HTML). The manuals are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software and each format 
includes two lists identified as Part 1 and Part 2. Part 1 is the list 
of all diagnosis codes that are defined as a CC or MCC when reported as 
a secondary diagnosis. For all diagnosis codes on the list, a link 
(HTML version) is provided to a collection of diagnosis codes which, 
when used as the principal diagnosis, would cause the CC or MCC 
diagnosis to be considered as a NonCC. Part 2 is the list of diagnosis 
codes designated as a MCC only for patients discharged alive; 
otherwise, they are assigned as a NonCC.
13. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2024, we have developed 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 
and Table 6F.--Revised Procedure Code Titles for this final rule.
    These tables are not published in the Addendum to the proposed rule 
or final 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 final rule. As discussed in section II.C.16. of the 
preamble of the proposed rule and this final rule, the code titles are 
adopted as part of the ICD-10 Coordination and Maintenance Committee 
meeting process. Therefore, although we publish the code titles in the 
IPPS proposed and final rules, they are not subject to comment in the 
proposed or final rules.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26752), we 
proposed the MDC and MS-DRG assignments for the new diagnosis codes and 
procedure codes as set forth in Table 6A.--New Diagnosis Codes and 
Table 6B.--New Procedure Codes. We also stated that the proposed 
severity level designations for the new diagnosis codes are set forth 
in Table 6A. and the proposed O.R. status for the new

[[Page 58763]]

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 reviewed 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 considered 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 noted 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.
    In this section of this rule, we summarize the public comments 
received for Table 6A and Table 6B and provide our responses.
    Comment: A commenter applauded the addition of diagnosis code 
Z29.81 (Encounter for HIV pre-exposure prophylaxis) (PrEP) and 
encouraged ongoing monitoring of the code to ensure appropriate 
billing. The commenter stated a diagnostic code for PrEP has the 
opportunity to improve HIV prevention efforts for patients at the point 
of care. According to the commenter, HIV remains an issue in every 
region of the United States (U.S.) and significant gaps persist in 
ongoing HIV preventive care in clinical practice, including early 
detection of HIV and linking patients to appropriate prevention 
services, such as PrEP.
    Response: We thank the commenter for their feedback.
    Comment: A commenter stated that CMS proposed the severity level 
designation for diagnosis code O90.41 (Hepatorenal syndrome following 
labor and delivery) to the MCC list, proposed the removal of diagnosis 
code O90.4 (Postpartum acute kidney failure) from the MCC list (since 
the code will no longer be valid), and proposed to add several 
diagnosis codes describing osteoporosis and intrahepatic cholestasis of 
pregnancy codes to the CC list. However, according to the commenter, 
CMS did not include a proposal to add diagnosis code O26.649 
(Intrahepatic cholestasis of pregnancy, unspecified trimester) to the 
CC list. The commenter stated that in FY 2022, CMS finalized 
maintaining the severity level designation of ``unspecified'' diagnosis 
codes as CC or MCC where there are other codes available in the code 
subcategory that further specify the anatomic site for purposes of a 
new Medicare Code Editor (MCE) ``Unspecified code edit'' effective with 
discharges on or after April 1, 2022. As such, the commenter requested 
consideration for the addition of diagnosis code O26.649 (Intrahepatic 
cholestasis of pregnancy, unspecified trimester) to the CC list to be 
in alignment with the other diagnosis codes describing intrahepatic 
cholestasis of pregnancy first trimester, second trimester, and third 
trimester (codes O26.641, O26.642, and O26.643, respectively) or to 
consider adding as a diagnosis subject to the ``unspecified'' code 
edit.
    Response: We appreciate the commenters' feedback. We are providing 
clarification that the Unspecified code edit is only applicable to 
diagnosis codes that are (1) defined as an unspecified code in the 
classification by the title description, (2) currently designated as a 
CC or MCC, and (3) able to be further specified by laterality (right, 
left, or bilateral) for the anatomic site by other codes in the code 
subcategory. Because the other intrahepatic cholestasis of pregnancy 
codes do not include laterality in their code title descriptions, and 
code O26.649 is not a CC or MCC, the intrahepatic cholestasis of 
pregnancy, unspecified trimester code (O26.649) is unable to be 
considered for addition to the Unspecified code edit. We also note that 
consistent with our established process, we examined the severity level 
for the predecessor code to determine the most appropriate severity 
level designation. The predecessor code for code O26.649 is diagnosis 
code O26.619 (Liver and biliary tract disorders in pregnancy, 
unspecified trimester), as reflected in the FY 2024 ICD-10-CM 
Conversion Table (available on the CMS web page at: https://www.cms.gov/medicare/icd-10/2024-icd-10-cm) and is designated as a 
NonCC. Therefore, consistent with the designation of that predecessor 
code, we proposed to designate code O26.649 as a NonCC.
    Comment: A couple commenters requested that CMS change the MS-DRG 
assignment for new procedure codes X2H03R9 (Insertion of intraluminal 
device, bioprosthetic valve into inferior vena cava, percutaneous 
approach, new technology group (9) and X2H13R9 (Insertion of 
intraluminal device, bioprosthetic valve into superior vena cava, 
percutaneous approach, new technology group 9) that describe insertion 
of the TricValve[supreg] Bicaval Valve System from MS-DRGs 252, 253, 
and 254 (Other Vascular Procedures with MCC, with CC, and without CC/
MCC, respectively) to MS-DRGs 266 and 267 (Endovascular Cardiac Valve 
Replacement and Supplement Procedures with and without MCC, 
respectively). According to the commenters, these procedures describe 
bioprostheses that replace the function of the diseased tricuspid valve 
while leaving the native valve in place. A commenter stated that while 
the ICD-10-PCS codes are new and do not yet have cost data associated 
with them, cases reporting use of the devices will require resources 
and work similar to other endovascular cardiac valve replacement 
procedures, such as placement within the major vessels and heart to 
treat valve disease. The commenter urged CMS to consider moving 
procedure codes X2H03R9 and X2H13R9 to MS-DRGs 266 and 267 and to 
monitor the costs of these procedures going forward to ensure 
appropriate assignment. Another commenter stated the TricValve[supreg] 
replaces the function of the tricuspid valve and should be described as 
a replacement procedure with assignment to MS-DRGs 266 and 267.
    Response: We appreciate the commenters' feedback. We note that as 
reflected in Table 6B.--New Procedure Codes, associated with the FY 
2024 IPPS/LTCH PPS proposed rule, we finalized the two procedure codes 
(X2H03R9 and X2H13R9) after consideration of public comments from the 
September 13, 2022 ICD-10 Coordination and Maintenance (C&M) Committee 
meeting. We note that under the ICD-10-PCS classification, the root 
operation Replacement is defined as: Putting in or on biological or 
synthetic material that physically takes the place and/or function of 
all or a portion of a body part. As such, the TricValve[supreg] 
technology is not literally replacing the tricuspid valve as defined 
under ICD-10-PCS and the body part is not the tricuspid valve, rather, 
the site of the procedure is the superior vena cava (SVC) and inferior 
vena cava (IVC). Therefore, while the intent of the technology is to 
replace the function of the tricuspid valve, the procedure to place the 
bicaval valve system is not literally doing that and the native 
tricuspid valve is left in place. Using our established process, we 
proposed the Operating Room (O.R.) designations, MDC and MS-DRG 
assignments based on the predecessor code assignments. The predecessor 
code for procedure code X2H03R9 is procedure code 06H03DZ (Insertion of 
intraluminal device into inferior vena cava, percutaneous approach) and 
the

[[Page 58764]]

predecessor code for procedure code X2H13R9 is procedure code 02HV3DZ 
(Insertion of intraluminal device into superior vena cava, percutaneous 
approach), as reflected in the FY 2024 ICD-10-PCS Conversion Table 
(available on the CMS web page at: https://www.cms.gov/medicare/icd-10/2024-icd-10-pcs). The predecessor code 06H03DZ is designated as non-
O.R. while the predecessor code 02HV3DZ is designated as an O.R. 
procedure and is assigned to MS-DRGs 252, 253, and 254. Therefore, we 
proposed that code X2H03R9 also be designated as non-O.R. and code 
02HV3DZ be designated as O.R. and assigned to MS-DRGs 252, 253, and 
254. Because the TricValve[supreg] technology requires the reporting of 
both procedure codes (X2H03R9 and X2H13R9) as a ``pair'', cases 
reporting the procedure were proposed for assignment to MS-DRGs 252, 
253, and 254.
    For the reasons discussed, we are maintaining the severity level 
assignment for diagnosis code O26.649 as NonCC and finalizing the MS-
DRG assignment for procedure codes X2H03R9 and X2H13R9 to MS-DRGs 252, 
253, and 254. We will continue to monitor the claims data when it 
becomes available to determine if additional modifications are 
warranted.
    After consideration of the public comments received, we are 
finalizing the MDC and MS-DRG assignments for the new diagnosis codes 
and procedure codes as set forth in Table 6A.--New Diagnosis Codes and 
Table 6B.--New Procedure Codes associated with this final rule. In 
addition, the finalized severity level designations for the new 
diagnosis codes are set forth in Table 6A. and the finalized O.R. 
status for the new procedure codes are set forth in Table 6B associated 
with this final rule.
    We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
the following tables associated with this final rule:
     Table 6A.--New Diagnosis Codes--FY 2024.
     Table 6B.--New Procedure Codes--FY 2024.
     Table 6C.--Invalid Diagnosis Codes--FY 2024.
     Table 6D.--Invalid Procedure Codes--FY 2024;
     Table 6E.--Revised Diagnosis Code Titles--FY 2024.
     Table 6F.--Revised Procedure Code Titles--FY 2024.
     Table 6G.1.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2024.
     Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2024.
     Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024.
     Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024.
     Table 6 I. --Complete MCC List--FY 2024.
     Table 6I.1.--Additions to the MCC List--FY 2024.
     Table 6I.2.-Deletions to the MCC List--FY 2024.
     Table 6J.--Complete CC List--FY 2024.
     Table 6J.1.--Additions to the CC List--FY 2024.
     Table 6J.2.--Deletions to the CC List--FY 2024.
     Table 6K.--Complete List of CC Exclusions--FY 2024.
14. Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in the FY 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26755), we 
discussed an MCE request we received related to the Sex Conflict edit 
by the October 20, 2022, deadline, as discussed further in this section 
of the preamble of this final rule. Additionally, we discussed the 
proposals we were making based on our internal review and analysis. In 
this FY 2024 IPPS/LTCH PPS final rule, we present a summation of the 
comments we received in response to the MCE proposals presented based 
on internal review and analyses in the proposed rule, our responses to 
those comments, and our finalized policies.
    In addition, as a result of new and modified code updates approved 
after the annual spring ICD-10 Coordination and Maintenance Committee 
meeting, we routinely make changes to the MCE. In the past, in both the 
IPPS proposed and final rules, we have only provided the list of 
changes to the MCE that were brought to our attention after the prior 
year's final rule. We historically have not listed the changes we have 
made to the MCE as a result of the new and modified codes approved 
after the annual spring ICD-10 Coordination and Maintenance Committee 
meeting. These changes are approved too late in the rulemaking schedule 
for inclusion in the proposed rule. Furthermore, although our MCE 
policies have been described in our proposed and final rules, we have 
not provided the detail of each new or modified diagnosis and procedure 
code edit in the final rule. However, we make available the finalized 
Definitions of Medicare Code Edits (MCE) file. Therefore, we are making 
available the FY 2024 ICD-10 MCE Version 41 Manual file, along with the 
link to the mainframe and computer software for the MCE Version 41 (and 
ICD-10 MS-DRGs), on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    We also note that, as discussed in the CY 2024 Outpatient 
Prospective Payment System and Ambulatory Surgical Center (OPPS/ASC) 
proposed rule (CY 2024 OPPS/ASC proposed rule) (88 FR 49552, July 31, 
2023), consistent with the process that is used for updates to the 
``Integrated'' Outpatient Code Editor (I/OCE) and other Medicare claims 
editing systems, we proposed to address any future revisions to the 
IPPS MCE, including any additions or deletions of claims edits, as well 
as the addition or deletion of ICD-10 diagnosis and procedure codes to 
the applicable MCE edit code lists, outside of the annual IPPS 
rulemakings. As discussed in the CY 2024 OPPS/ASC proposed rule, we 
proposed to remove discussion of the IPPS MCE from the annual IPPS 
rulemakings, beginning with the FY 2025 rulemaking, and to generally 
address future changes or updates to the MCE through instruction to the 
Medicare administrative contractors (MACs). We encourage readers to 
review the discussion in the CY 2024 OPPS/ASC proposed rule and submit 
comments in response to the proposal by the applicable deadline by 
following

[[Page 58765]]

the instructions provided in that proposed rule.
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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. We proposed to add the 
ICD-10-CM diagnosis codes shown in Table 6P.9a associated with the 
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.
    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in Table 6P.9a to the External causes of morbidity codes 
as principal diagnosis edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in Table 
6P.9a associated with the proposed rule to the External causes of 
morbidity codes as principal diagnosis edit code list under the ICD-10 
MCE Version 41, effective October 1, 2023.
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).
    Comment: A commenter requested that we provide clarification 
regarding the overlapping age ranges (0 to 17 years and 15 to 124 
years) in the Pediatric and Adult categories under the Age Conflict 
edit.
    Response: As stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38045), the age ranges defined within the Age Conflict edits were 
established with the implementation of the IPPS. The adult age range 
includes the minimum age of 15 years to account for those patients who 
are declared emancipated minors.
(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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. We proposed 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.
    Comment: Commenters agreed with CMS' proposal to add diagnosis 
codes Z05.81and Z05.89 to the edit code list for the Perinatal/Newborn 
diagnoses category under the Age conflict edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add diagnosis codes Z05.81and Z05.89 to the 
edit code list for the Perinatal/Newborn diagnoses category under the 
Age conflict edit for the ICD-10 MCE Version 41, effective October 1, 
2023.
    In addition, as discussed in section II.C.13. of the preamble of 
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis 
Codes, lists the diagnosis codes that are no longer effective 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 category under the Age conflict edit. 
We proposed to delete this code from the Perinatal/Newborn diagnoses 
edit code list.
    Comment: Commenters agreed with CMS' proposal to delete diagnosis 
code Z05.8 from the edit code list for the Perinatal/Newborn diagnoses 
category since it is no longer valid.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to delete diagnosis code Z05.8 from the edit 
code list for the Perinatal/Newborn diagnoses category under the Age 
conflict edit for the ICD-10 MCE Version 41, effective October 1, 2023.
(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.13. of the preamble of the 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 proposed 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

[[Page 58766]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.120

    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in the previous table to the Maternity diagnoses edit code 
list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Maternity diagnoses edit code list under the Age 
conflict edit for the ICD-10 MCE Version 41, effective October 1, 2023.
    In addition, as discussed in section II.C.13. of the preamble of 
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis 
Codes, lists the diagnosis codes that are no longer effective 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 proposed to delete this code from the Maternity diagnoses edit 
code list.
    Comment: Commenters agreed with CMS' proposal to remove diagnosis 
code O90.4 from the Maternity diagnoses edit code list since it is no 
longer valid.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove diagnosis code O90.4 from the 
Maternity diagnoses edit code list under the Age conflict edit for the 
ICD-10 MCE Version 41, effective October 1, 2023.
(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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. We proposed to add the 
following new ICD-10-CM diagnosis codes to the edit code list for the 
Adult diagnoses category under the Age conflict edit.

[[Page 58767]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.112

    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in the previous table to the Adult diagnoses edit code 
list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Adult diagnoses edit code list under the ICD-10 
MCE Version 41, effective October 1, 2023.
c. Sex Conflict Edit
    As discussed in the proposed rule, 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

[[Page 58768]]

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.\18\ We note that the requestor 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.
---------------------------------------------------------------------------

    \18\ 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 requestor'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 as 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,\19\ 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.
---------------------------------------------------------------------------

    \19\ https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
---------------------------------------------------------------------------

    Comment: Commenters expressed their appreciation that CMS stated it 
is committed to looking holistically at the concerns raised with 
respect to the sex conflict edit and claims processing of transgender 
individuals across settings of care. A commenter who expressed support 
for the continued application of the sex conflict edit stated that 
while the edit plays an important role in coding error detection and 
condition code 45 is intended to ensure claims submission accuracy, 
coding and MS-DRG assignment remain challenging as a result of the 
edit.
    Response: We appreciate the commenters' feedback. We also note that 
following publication of the FY 2024 IPPS/LTCH PPS proposed rule, in 
further consideration of the concerns expressed by the requestor and 
recognizing that communication about the use of condition code 45 for 
institutional claims had not been re-examined in some time, we issued 
guidance via a Medicare Learning Network[supreg] (MLN Connects) article 
on June 8, 2023 that is intended to provide clarification on the proper 
billing and usage of condition code 45 and modifier KX. This guidance 
also informed providers that effective July 1, 2023, the National 
Uniform Billing Committee (NUBC) revised the terminology and definition 
for Condition Code 45 to Gender Incongruence, defined as 
``characterized by a marked and persistent incongruence between an 
individual's experienced gender and sex at birth.'' We refer the reader 
to the CMS website at: https://www.cms.gov/outreach-and-education/outreach/ffsprovpartprog/provider-partnership-email-archive/2023-06-08-mlnc for additional information regarding this guidance.
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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. Included in this table 
are the following new ICD-10-CM diagnosis codes that we proposed to add 
to the edit code list for the Manifestation code as principal diagnosis 
edit, because the disease itself would be required to be reported 
first.
[GRAPHIC] [TIFF OMITTED] TR28AU23.113

    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in the previous table to the Manifestation code as 
principal diagnosis edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Manifestation code as principal diagnosis edit 
code list under the ICD-10 MCE Version 41, effective October 1, 2023.
    In addition, as discussed in section II.C.13. of the preamble of 
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis 
Codes, lists the diagnosis codes that are no longer effective 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 proposed to delete this code from the Manifestation 
code as principal diagnosis edit code list.
    Comment: Commenters agreed with CMS' proposal to remove diagnosis 
code H36 from the Manifestation code as principal diagnosis edit code 
list since it is no longer valid.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove diagnosis code H36 from the 
Manifestation code as principal diagnosis edit code list under the ICD- 
10 MCE Version 41, effective October 1, 2023.
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

[[Page 58769]]

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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. We proposed to add the 
following new ICD-10-CM diagnosis codes to the Unacceptable Principal 
Diagnosis edit code list.

[[Page 58770]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.114

    Comment: Commenters agreed with our proposal to add the diagnosis 
codes listed in the previous table to the Unacceptable Principal 
Diagnosis edit code list.

[[Page 58771]]

    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Unacceptable Principal Diagnosis edit code list 
under the ICD-10 MCE Version 41, effective October 1, 2023.
    In addition, as discussed in section II.C.13. of the preamble of 
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis 
Codes, lists the diagnosis codes that are no longer effective October 
1, 2023. Included in this table are the following ICD-10-CM diagnosis 
codes that are currently listed on the Unacceptable Principal Diagnosis 
edit code list. We proposed to delete these codes from the Unacceptable 
Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TR28AU23.115

    Comment: Commenters agreed with CMS' proposal to remove the 
diagnosis codes listed in the previous table from the Unacceptable 
principal diagnosis edit code list since they are no longer valid.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the diagnosis codes listed in the 
previous table from the Unacceptable Principal Diagnosis edit code list 
under the ICD-10 MCE Version 41, effective October 1, 2023.
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.13. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new 
diagnosis codes that have been approved to date which will be effective 
with discharges on and after October 1, 2023. We proposed to add the 
following new ICD-10-CM diagnosis codes to the Unspecified code edit 
list.

[[Page 58772]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.116

    Comment: Commenters agreed with our proposal to add the diagnosis 
codes listed in the previous table to the Unspecified code edit code 
list.
    Response: We thank the commenters for their support. We also note 
that we erroneously included the following diagnosis codes in our 
proposal that are not designated as a CC or MCC, and are therefore 
excluded from being subject to the Unspecified code edit. Specifically, 
Table 6A. associated with the proposed rule and this final rule lists 
the severity level designation for these six new diagnosis codes as 
NonCC.
[GRAPHIC] [TIFF OMITTED] TR28AU23.117


[[Page 58773]]


    After consideration of the public comments we received, we are 
finalizing our proposal to add the following diagnosis codes that are 
designated as CC to the Unspecified code edit code list under the ICD-
10 MCE Version 41, effective October 1, 2023.
[GRAPHIC] [TIFF OMITTED] TR28AU23.118

    In addition, as stated in the proposed rule, 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 proposed 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] TR28AU23.119

    Comment: Commenters agreed with our proposal to add the diagnosis 
codes listed in the previous table to the Unspecified code edit code 
list.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the previously listed diagnosis codes 
that are designated as MCC to the Unspecified code edit code list under 
the ICD-10 MCE Version 41, effective October 1, 2023.
g. Future Enhancement
    As discussed previously in this section of this final rule, we have 
continued to evaluate the purpose and function of the MCE with respect 
to ICD-10, and encouraged public input for future discussion. As we 
have also discussed in prior rulemaking, we recognize a need to further 
examine the current list of edits and the definitions of those edits. 
We refer the reader to our discussion in the CY 2024 Outpatient 
Prospective Payment System and Ambulatory Surgical Center (OPPS/ASC) 
proposed rule (88 FR 49552, July 31, 2023), where we proposed to 
address any future revisions to the IPPS MCE, including any additions 
or deletions of claims edits, as well as the addition or deletion of 
ICD-10 diagnosis and procedure codes to the applicable MCE edit code 
lists, outside of the annual IPPS rulemakings.
    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 the proposed rule and this final rule, at: 
https://mearis.cms.gov/public/home by October 20, 2023.
15. Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.

[[Page 58774]]

    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
    Consequently, in many cases, the surgical hierarchy has an impact 
on more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this final rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we proposed to make for FY 2024, as 
discussed in section II.C. of the preamble of the proposed rule and 
this final rule, we proposed to modify the existing surgical hierarchy 
for FY 2024 as follows.
    We proposed 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 proposed 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 the proposed 
rule and this final rule, we proposed 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 proposed 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 the proposed rule and this final 
rule, we proposed 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 proposed to make for those MS-DRGs in MDC 05, 
we proposed 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 proposed 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 proposed 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 the proposed 
rule and this final rule, we proposed 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 
also proposed 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 proposed 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 proposed to make for those MS-DRGs in MDC 05, 
we proposed 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 proposed 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

[[Page 58775]]

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 proposed 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 proposed to make as 
discussed in section II.C.8.a. of the preamble of the proposed rule and 
this final rule, we also proposed 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 the proposed 
rule and this final rule, we proposed 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 proposed 
to make for those MS-DRGs in MDC 06 (Diseases and Disorders of the 
Digestive System), we proposed to revise the surgical hierarchy for MDC 
06 as follows: In MDC 06, we proposed 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 the 
proposed rule and this final rule, we proposed 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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[GRAPHIC] [TIFF OMITTED] TR28AU23.122


[[Page 58776]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.123

[GRAPHIC] [TIFF OMITTED] TR28AU23.124

[GRAPHIC] [TIFF OMITTED] TR28AU23.125

    Comment: Commenters supported the proposed additions, deletions, 
and sequencing for the surgical hierarchy under MDCs 04, 05, 06, and 
16. In response to the changes we proposed to make for MS-DRGs in MDC 
05, a commenter stated this hierarchy is the most logical order given 
the clinical complexity associated with cases

[[Page 58777]]

requiring coronary intravascular lithotripsy followed by the MS-DRGs 
for percutaneous cardiovascular procedures with or without intraluminal 
device.
    We received a few public comments recommending that CMS consider an 
alternate option for the surgical hierarchy in MDC 05. Specifically, 
these commenters requested CMS consider switching--
     MS-DRGs 270, 271, and 272 and MS-DRG 319 and 320 in the 
surgical hierarchy so that MS-DRGs 270, 271, and 272 are sequenced 
before MS-DRGs 319 and 320;
     MS-DRG 245 with MS-DRGs 266 and 267 so that MS-DRG 245 is 
sequenced before MS-DRGs 266 and 267; and
     MS-DRGs 323, 324, and 325 to be sequenced after MS-DRGs 
319 and 320 after these MS-DRGs are sequenced after MS-DRGs 270, 271, 
and 272 as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.126

    A commenter displayed the proposed relative weights of MS-DRGs 245, 
MS-DRGs 266-267, MS-DRGs 270-272, MS-DRGs 319-320, proposed new MS-DRGs 
323-324 and proposed new MS-DRG 325 from Table 5.--List of Medicare 
Severity Diagnosis-Related Groups (MS-DRGs), Relative Weighting 
Factors, and Geometric and Arithmetic Mean Length of Stay--FY 2024, 
associated with the proposed rule, in listing this alternative option. 
However, these commenters did not provide any rationale for their 
alternate recommendations.
    Response: We appreciate the commenters' support of our proposal. We 
also thank the commenters for their feedback. In response to the 
commenters that provided an alternate recommendation for the surgical 
hierarchy for MDC 05, we reviewed the suggestions from the commenters. 
In the absence of additional information to support the suggested 
modifications to our proposal, we continue to believe our proposed 
revisions to the surgical hierarchy account for the resources expended 
to address these complex procedures and do not believe any 
modifications are warranted at this time. We believe sequencing as 
discussed in the proposed rule more appropriately reflects resource 
utilization when the assigned cardiac procedures are performed and will 
result in the most suitable MS-DRG assignments. We will continue to 
review the surgical hierarchy, consistent with our annual rulemaking, 
to determine if other modifications are warranted in the future.
    Therefore, after consideration of the public comments we received, 
and based on the changes that we are finalizing for FY 2024, as 
discussed in section II.C. of the preamble of the proposed rule and 
this final rule, we are finalizing our proposals to modify the existing 
surgical hierarchy, effective with the ICD-10 MS-DRGs Version 41, 
without modification.
    For issues pertaining to the surgical hierarchy, as with other MS-
DRG related requests, we encourage interested parties to submit 
comments no later than October 20, 2023 via the new electronic intake 
system, Medicare Electronic Application Request Information 
SystemTM (MEARISTM) at https://mearis.cms.gov/public/home so that they can be considered for possible inclusion in 
the annual proposed rule. We will consider these public comments for 
possible proposals in future rulemaking as part of our annual review 
process.
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: https://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: https://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The ICD-10 Coordination and Maintenance Committee holds its 
meetings in the spring and fall to update the codes and the applicable 
payment and reporting systems by October 1 or April 1 of each year. 
Items are placed on the agenda for the Committee meeting if the request 
is received at least 3 months prior to the meeting. This requirement 
allows time for staff to review and research the coding issues and 
prepare material for discussion at the meeting. It also allows time for 
the topic to be publicized in meeting announcements in the Federal 
Register as well as on the CMS website.
    The Committee encourages participation in the previously mentioned 
process by health-related organizations and other interested parties. 
In this regard, the Committee holds public meetings for discussion of 
educational issues and proposed coding changes. These meetings provide 
an opportunity for representatives of recognized organizations in the 
coding field, such as the American Health Information Management 
Association (AHIMA), the American Hospital Association (AHA), and 
various

[[Page 58778]]

physician specialty groups, as well as individual physicians, health 
information management professionals, and other members of the public, 
to contribute ideas on coding matters. After considering the opinions 
expressed during the public meetings and in writing, the Committee 
formulates recommendations, which then must be approved by the 
agencies. A complete addendum describing details of all diagnosis and 
procedure coding changes, both tabular and index, is published on the 
CMS and NCHS websites in June of each year. Publishers of coding books 
and software use this information to modify their products that are 
used by health care providers.
    The Committee presented proposals for coding changes for 
implementation in FY 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 final 
rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and 
ICD-10-PCS procedure codes that are captured in Table 6A.--New 
Diagnosis Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid 
Diagnosis Codes, Table 6D.--Invalid Procedure Codes, Table 6E.--Revised 
Diagnosis Code Titles and Table 6F.-Revised Procedure Code Titles for 
this final 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 
and final rules, they are not subject to comment in the proposed or 
final rule. Because of the length of these tables, they are not 
published in the Addendum to the proposed or final rule. Rather, they 
are available via the CMS website as discussed in section VI. of the 
Addendum to the proposed rule and this final rule.
    Recordings for the virtual meeting discussions of the procedure 
codes at the Committee's September 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: cdc.gov">nchsicd10cm@cdc.gov.
    Questions and comments concerning the procedure codes should be 
submitted via Email to: [email protected].
    We stated in the proposed rule that 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) implemented 42 new diagnosis codes into 
the ICD-10-CM classification, for reporting effective April 1, 2023. 
The diagnosis codes are as follows:

[[Page 58779]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.127

    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.
    As discussed in the proposed rule, we provided the MS-DRG 
assignments for the 42 diagnosis codes effective with

[[Page 58780]]

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 
associated with the proposed rule and 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 the proposed rule, 
we solicited 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.
    We did not receive any comments opposing the MDC, MS-DRG, and 
severity level assignments for the listed codes and are therefore, 
finalizing, without modification, the assignments as reflected in Table 
6A.--New Diagnosis Codes in association with this final rule.
    In addition, we noted in the proposed rule that CMS implemented 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 1, 2023. 
The procedure codes are as follows:

[[Page 58781]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.128


[[Page 58782]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.129

    The 34 procedure codes are also reflected in Table 6B--New 
Procedure Codes in association with the proposed rule and available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/

[[Page 58783]]

AcuteInpatientPPS. As with the other new procedure codes and MS-DRG 
assignments included in Table 6B in association with the proposed rule, 
we solicited public comments on the most appropriate MDC, MS-DRG, and 
operating room status assignments for these codes for FY 2024, as well 
as any other options for the GROUPER logic.
    We did not receive any comments opposing the MDC, MS-DRG, and 
operating room status assignments for the listed codes and are 
therefore, finalizing, without modification, the assignments as 
reflected in Table 6B.--New Procedure Codes in association with this 
final rule.
    In the proposed rule, we also noted that Change Request (CR) 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 final 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.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule, 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

[[Page 58784]]

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.
    In the proposed rule, we noted that for FY 2023, there are 
currently 73,674 diagnosis codes and 78,530 procedure codes. We also 
noted that as displayed in Table 6A.--New Diagnosis Codes and in Table 
6B.--New Procedure Codes associated with the proposed rule (and 
available 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 had been finalized for FY 2024 at 
the time of the development of the proposed rule. As discussed in 
section II.C.13 of the preamble of this final rule, we are making 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 and Table 6F.--Revised Procedure 
Code Titles available on the CMS website at: https://www.cms.gov/
medicare/medicare-fee-for-service-payment/acuteinpatientpps in 
association with this final rule. As shown in Table 6B.--New Procedure 
Codes, there were procedure codes discussed at the March 7-8, 2023 ICD-
10 Coordination and Maintenance Committee meeting that were not 
finalized in time to include in the proposed rule and are identified 
with an asterisk. We refer the reader to Table 6B.--New Procedure Codes 
associated with this final rule and available on the CMS website at: 
https://www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps for the detailed list of these additional 68 new 
procedure codes. The addition of these 68 new procedure codes to the 10 
procedure codes that had been finalized at the time of the development 
of the proposed rule results in a total of 78 (10 + 68 = 78) new 
procedure codes for FY 2024.
    We also note, as reflected in Table 6C.--Invalid Diagnosis Codes 
and in Table 6D.--Invalid Procedure Codes, there are a total of 25 
diagnosis codes and 5 procedure codes that will become invalid 
effective October 1, 2023. Based on these code updates, effective 
October 1, 2023, there are a total of 74,044 ICD-10-CM diagnosis codes 
and 78,603 ICD-10-PCS procedure codes for FY 2024 as shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.130

    As stated previously, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting. The code 
titles are adopted as part of the ICD-10 Coordination and Maintenance 
Committee process. Thus, although we publish the code titles in the 
IPPS proposed and final rules, they are not subject to comment in the 
proposed or final rules.
17. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Changes for FY 2024
    As discussed in section II.C.5. of the preamble of the proposed 
rule and this final rule, for FY 2024, we proposed 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 was 
proposed for assignment to proposed new MS-DRGs 275, 276, and 277. 
Therefore, we proposed 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 also proposed to continue to include 
the existing MS-DRGs currently subject to the policy.
    As discussed in section II.C.5. of the preamble of this final rule, 
we are finalizing our proposal to delete MS-DRGs 222, 223, 224, 225, 
226, and 227. Additionally, we are finalizing our proposal to create 
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

[[Page 58785]]

through 227 to proposed new MS-DRGs 275, 276, and 277. We did not 
receive any public comments opposing our proposal to delete MS-DRGs 
222, 223, 224, 225, 226, and 227 from the list of MS-DRGs that will be 
subject to the replaced devices offered without cost or with a credit 
policy effective October 1, 2023. Additionally, we did not receive any 
public comments opposing our proposal to add MS-DRGs 275, 276, and 277 
to the list of MS-DRGs that will be subject to the policy for replaced 
devices offered without cost or with credit or to continue to include 
the existing MS-DRGs currently subject to the policy. Therefore, we are 
finalizing the list of MS-DRGs in the following table that will be 
subject to the replaced devices offered without cost or with a credit 
policy effective October 1, 2023.
[GRAPHIC] [TIFF OMITTED] TR28AU23.131


[[Page 58786]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.132

BILLING CODE 4120-01-C
    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be issued to 
providers in the form of a Change Request (CR).
18. Out of Scope Public Comments Received
    We received public comments on MS-DRG related issues that were 
outside the scope of the proposals included in the FY 2024 IPPS/LTCH 
PPS proposed rule.
    Because we consider these public comments to be outside the scope 
of the proposed rule, we are not addressing them in this final rule. As 
stated in

[[Page 58787]]

section II.D.1.b. of the preamble of this final rule, we encourage 
individuals with comments about MS-DRG classifications to submit these 
comments no later than October 20, 2023, via the new electronic intake 
system, Medicare Electronic Application Request Information 
SystemTM (MEARISTM) at: https://mearis.cms.gov/public/home, so that they can be considered for possible inclusion in 
the annual proposed rule. We will consider these public comments for 
possible proposals in future rulemaking as part of our annual review 
process.

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 proposed to use two data sources: 
claims data and cost report data. The claims data source is the MedPAR 
file, which includes fully coded diagnostic and procedure data for all 
Medicare inpatient hospital bills. The FY 2022 MedPAR data used in this 
final rule include discharges occurring on October 1, 2021, through 
September 30, 2022, based on bills received by CMS through March 31, 
2023, 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 6,991,373 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 
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 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 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 final rule, we used the March 2023 
update of the FY 2021 HCRIS for calculating the FY 2024 cost-based 
relative weights. Consistent with our historical practice, for this FY 
2024 final rule, we are providing the version of the HCRIS from which 
we calculated these 19 CCRs on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. Click on 
the link on the left side of the screen titled ``FY 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 FY 2024 relative weights based on 19 CCRs. The 
methodology we proposed 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 FY 2024 MS-DRG classifications discussed in sections II.B. 
and II.C. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 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 92.6 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

[[Page 58788]]

geometric mean of the log distribution of both the total charges per 
case and the total charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a POA indicator field for each diagnosis present on the 
claim, only for purposes of relative weight-setting, the POA indicator 
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have 
an ``N'' (No) or a ``U'' (documentation insufficient to determine if 
the condition was present at the time of inpatient admission) in the 
POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (77 FR 53341 through 53343). 
Specifically, because acute care hospitals participating in the BPCI 
initiative still receive IPPS payments under section 1886(d) of the 
Act, we include all applicable data from these subsection (d) hospitals 
in our IPPS payment modeling and ratesetting calculations as if the 
hospitals were not participating in those models under the BPCI 
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's 
website at 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 also proposed to include all applicable data from 
subsection (d) hospitals participating in the Comprehensive Care for 
Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations.
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME, and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the 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 final rule and available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental data file 
shows the lines on the cost report and the corresponding revenue codes 
that we used to create the 19 national cost center CCRs. We stated in 
the proposed rule that if we receive comments about the groupings in 
this supplemental data file, we may consider these comments as we 
finalize our policy. However, we did not receive any comments on the 
groupings in this table, and therefore, we are finalizing the groupings 
as proposed.
    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

[[Page 58789]]

mean cost in the lower severity level, in determining the relative 
weights for the different severity levels. If there are initially non-
monotonic relative weights in the same base DRG and its severity 
levels, then we combine the cases that group to the specific non-
monotonic MS-DRGs for purposes of relative weight calculations. For 
example, if there are two non-monotonic MS-DRGs, combining the cases 
across those two MS-DRGs results in the same relative weight for both 
MS-DRGs. The relative weight calculated using the combined cases for 
those severity levels is monotonic, effectively removing any non-
monotonicity with the base DRG and its severity levels. For the 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 associated with the proposed 
rule, we included statistics for the affected MS-DRGs both separately 
and with cases combined.
    We invited public comments on our proposals related to 
recalibration of the proposed FY 2024 relative weights and the changes 
in relative weights from FY 2023.
    Comment: A commenter stated that CMS erred in calculating the 
relative weights for MS-DRG 016 and MS-DRG 017. The commenter stated 
that if the relative weight is going to be kept the same, the MS-DRGs 
should be combined, as they are for allogenic bone marrow transplants.
    Response: As discussed in the proposed rule, we intentionally 
combined the cases across the two MS-DRGs because the mean cost in the 
higher severity level is less than the mean cost in the lower severity 
level, consistent with our historical practice for accounting for 
situations of non-monotonicity in a base MS-DRG and its severity 
levels. We may consider the suggestion to combine these two MS-DRGs for 
future rulemaking.
    Accordingly, for this FY 2024 final 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 
associated with this final rule, we include statistics for the affected 
MS-DRGs both separately and with cases combined.
    Comment: A commenter requested that CMS implement an edit for 
claims that group to MS-DRG 014, that would reject claims when an 
inpatient type of bill 11X claim is received without charges mapped to 
revenue code 0815. The commenter stated that this edit would help 
ensure accurate claims reporting, ensure the accuracy of CMS' budget 
neutrality calculations, and help ensure that CMS does not 
inappropriately generate outlier payment on MS-DRG 014 claims (given 
that CMS removes costs associated with revenue code 0815 from its 
outlier calculation).
    Response: We expect providers to appropriately report charges 
associated with revenue code 0815 and do not believe that a novel 
claims processing edit such as this is necessary at this time. We may 
consider provider education materials regarding reporting Allogeneic 
Stem Cell Acquisition/Donor Services in the future.
    After consideration of the comments received, we are finalizing our 
proposals related to the recalibration of the FY 2024 relative weights. 
We summarize and respond to comments relating to the methodology for 
calculating the relative weight for MS-DRG 018 in the next section of 
this final rule.
b. Relative Weight Calculation for MS-DRG 018
    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 will 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 \20\ 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

[[Page 58790]]

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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    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 will 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 guidance \21\ 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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    We stated in the proposed rule that 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 percent of all cases that 
grouped to MS-DRG 018. In the FY 2022 MedPAR data used for the 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 percent 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 
noted 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, did not include the cases in the FY 
2022 MedPAR data used for the FY 2024 IPPS/LTCH PPS proposed rule 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 the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 
two changes to our methodology for identifying clinical trial claims 
and expanded access use claims in MS-DRG 018. First, we proposed 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 proposed 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 proposed 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

[[Page 58791]]

``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 also proposed 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 the 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 nonclinical trial cases ($323,903). Accordingly, as we did for FY 
2023, we proposed 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 the 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 applied this same 
adjustor for the applicable cases that group to MS-DRG 018 for purposes 
of budget neutrality and outlier simulations. We also proposed to 
update the value of the adjustor based on more recent data for the 
final rule.
    Comment: Some commenters supported our proposal to remove the use 
of the proxy of excluding cases with standardized drug charges of less 
than $373,000, stating that it is consistent with existing hospital 
billing practices and would simplify the reimbursement for chimeric 
antigen receptor therapy (CAR-T) services. Many commenters opposed our 
proposal, stating that it was premature to remove this trim. While 
these commenters stated that provider charging practices are improving, 
they expressed concern that some providers have limited experience 
properly reporting claims for clinical trial and expanded access use 
cases and some providers do not appear to have fully complied with CMS 
guidance. A commenter requested that CMS maintain this trim for at 
least one additional fiscal year.
    A commenter also requested that CMS publish information on cases 
included in the rate-setting methodology that are below the $373,000 
threshold in the interest of transparency given the likely impact of 
those cases on the base DRG payment. A commenter expressed concern that 
4 percent of cases are still reporting standardized drug charges of 
less than $373,000, given the relatively low volume of cases assigned 
to MS-DRG 018. A commenter stated that the inclusion of the 4 percent 
of cases would result in a potentially meaningful reduction in the base 
DRG payment for CAR-T cases. Another commenter modeled the inclusion of 
the 4 percent of cases and indicated that excluding them resulted in a 
$3,100 reduction in the base payment for MS-DRG 018. Commenters 
recommended that CMS monitor the impact of including these cases in 
ratesetting to ensure base payments for DRG 018 remain stable prior to 
removing the $373,000 low-cost threshold.
    Response: We agree that removing the trim of excluding cases with 
standardized drug charges of less than $373,000 would be consistent 
with existing hospital billing practices. As discussed in the proposed 
rule, we believe 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, as well as coding of expanded 
access use immunotherapy cases. 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). While there continue to be a small percentage of 
claims that report standardized drug charges of less than $373,000 and 
do not report ICD-10-CM code Z00.6, we do not believe it is necessary 
to continue to use the proxy until the number of these claims reaches 
zero. We note that there is now only a very small percentage variation 
in the relative weight with and without this proxy, unlike in prior 
years. The $3,100 reduction referenced by the commenter in the range of 
1 percent of the base DRG payment. With respect to the commenter who 
requested that CMS publish the details regarding specific cases, we 
note that information on obtaining the MedPAR Limited Data Set is 
available on the CMS website, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/MEDPARLDSHospitalNational.
    After consideration of the public comments we received, we are 
finalizing our proposals regarding the calculation of the relative 
weight for MS-DRG 018. Applying this finalized methodology, based on 
the March 2023 update of the FY 2022 MedPAR file used for this final 
rule, we estimated that the average costs of cases assigned to MS-DRG 
018 that are identified as clinical trial cases ($84,883) were 27 
percent of the average costs of the cases assigned to MS-DRG 018 that 
are identified as non-clinical trial cases ($314,862). Accordingly, as 
we did for FY 2023, we are finalizing our proposal to adjust the 
transfer-adjusted case count for MS-DRG 018 by applying the adjustor of 
0.27 to the applicable clinical trial and expanded access use 
immunotherapy cases, and to use this adjusted case count for MS-DRG 018 
in calculating the national average cost per case, which is used in the 
calculation of the relative weights. Therefore, in calculating the 
national average cost per case for purposes of this final rule, each 
case identified as an applicable clinical trial or expanded access use 
immunotherapy case was adjusted by 0.27. 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.
c. 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 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 final 
rule, we present

[[Page 58792]]

the budget neutrality adjustment for reclassification and recalibration 
of the FY 2024 MS-DRG relative weights with application of this cap. 
Table 5 contains the FY 2024 MS-DRG relative weights with and without 
the application of this cap. For a further discussion of the budget 
neutrality adjustment for FY 2024, we refer readers to the Addendum of 
this final rule.
3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 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 relative weight. The FY 
2024 cost-based relative weights were then normalized by an adjustment 
factor of 1.941198 so that the average case weight after recalibration 
was equal to the average case weight before recalibration. The 
normalization adjustment is intended to ensure that recalibration by 
itself neither increases nor decreases total payments under the IPPS, 
as required by section 1886(d)(4)(C)(iii) of the Act. 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 FY 2024 relative 
weight equal to 90 percent of the FY 2023 relative weight. The relative 
weights for FY 2024 as set forth in Table 5 associated with this final 
rule and available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS reflect the 
application of this cap.
    The 19 national average CCRs for FY 2024 are as follows:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.133

    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

[[Page 58793]]

threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We proposed to use that same case 
threshold in recalibrating the 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 proposed 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] TR28AU23.134

BILLING CODE 4120-01-C
    Comment: A commenter requested that CMS utilize the ``other'' CCR 
for CAR-T product charges associated with revenue code 0891 to mitigate 
charge compression problems until CMS data is available for cost center 
0078. The commenter stated that this would result in a more appropriate 
case cost and a higher relative weight for MS-DRG 018.
    Response: We do not believe it would be appropriate to utilize the 
``other'' CCR for CART product charges associated with revenue code 
0891. The categories assigned to the ``other'' cost center are 
categorically not described by another cost center. This is not the 
case for CAR-T product charges, as the drug cost center describes the 
same type of product. Therefore, we do not believe it is necessary to 
make changes to the CCR used for CAR T-cell product charges.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification.

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 58794]]

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 percent of the standardized 
amount (increased to reflect the difference between cost and charges) 
or 75 percent 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 were 
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 noted that, for the reasons discussed in 
section I.F. of the preamble of the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 26777) and this final rule, we proposed to use the FY 2022 
MedPAR claims data for FY 2024 ratesetting. Consistent with this 
proposal, for the FY 2025 proposed threshold values, we proposed to use 
the FY 2022 claims data to set the proposed thresholds for applications 
for new technology add-on payments for FY 2025.
    As discussed in section I.E. of the preamble of this final rule, we 
are finalizing our proposal to use the FY 2022 MedPAR claims data for 
FY 2024 ratesetting. Accordingly, in this final rule, we are finalizing 
that we will use FY 2022 claims data to set the thresholds for 
applications for new technology add-on payments for FY 2025. The 
finalized 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 this 
FY 2024 final rule, by clicking on the FY 2024 IPPS Final Rule Home 
Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed that 
applicants should submit a significant sample of data to demonstrate 
that the medical service or technology meets the high-cost threshold. 
Specifically, applicants should submit a sample of sufficient size to 
enable us to undertake an initial 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;

[[Page 58795]]

    ++ The new medical service or technology offers the ability to 
diagnose a medical condition in a patient population where that medical 
condition is currently undetectable, or offers the ability to diagnose 
a medical condition earlier in a patient population than allowed by 
currently available methods, and there must also be evidence that use 
of the new medical service or technology to make a diagnosis affects 
the management of the patient;
    ++ The use of the new medical service or technology significantly 
improves clinical outcomes relative to services or technologies 
previously available as demonstrated by one or more of the following: a 
reduction in at least one clinically significant adverse event, 
including a reduction in mortality or a clinically significant 
complication; a decreased rate of at least one subsequent diagnostic or 
therapeutic intervention; a decreased number of future hospitalizations 
or physician visits; a more rapid beneficial resolution of the disease 
process treatment including, but not limited to, a reduced length of 
stay or recovery time; an improvement in one or more activities of 
daily living; an improved quality of life; or, a demonstrated greater 
medication adherence or compliance; or
    ++ The totality of the circumstances otherwise demonstrates that 
the new medical service or technology substantially improves, relative 
to technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     Evidence from the following published or unpublished 
information sources from within the United States or elsewhere may be 
sufficient to establish that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries: clinical trials, peer reviewed journal 
articles; study results; meta-analyses; consensus statements; white 
papers; patient surveys; case studies; reports; systematic literature 
reviews; letters from major healthcare associations; editorials and 
letters to the editor; and public comments. Other appropriate 
information sources may be considered.
     The medical condition diagnosed or treated by the new 
medical service or technology may have a low prevalence among Medicare 
beneficiaries.
     The new medical service or technology may represent an 
advance that substantially improves, relative to services or 
technologies previously available, the diagnosis or treatment of a 
subpopulation of patients with the medical condition diagnosed or 
treated by the new medical service or technology.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (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

[[Page 58796]]

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.
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 percent of the costs of the new medical service or technology; 
or (2) 50 percent of the amount by which the costs of the case exceed 
the standard DRG payment.
    Beginning with discharges on or after October 1, 2019, for the 
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 
through 42300), we finalized an increase in the new technology add-on 
payment percentage, as reflected at Sec.  412.88(a)(2)(ii). 
Specifically, for a new technology other than a medical product 
designated by FDA as a QIDP, beginning with discharges on or after 
October 1, 2019, if the costs of a discharge involving a new technology 
(determined by applying CCRs as described in Sec.  412.84(h)) exceed 
the full DRG payment (including payments for IME and DSH, but excluding 
outlier payments), Medicare will make an add-on payment equal to the 
lesser of: (1) 65 percent of the costs of the new medical service or 
technology; or (2) 65 percent of the amount by which the costs of the 
case exceed the standard DRG payment. For a new technology that is a 
medical product designated by FDA as a QIDP, beginning with discharges 
on or after October 1, 2019, if the costs of a discharge involving a 
new technology (determined by applying CCRs as described in Sec.  
412.84(h)) exceed the full DRG payment (including payments for IME and 
DSH, but excluding outlier payments), Medicare will make an add-on 
payment equal to the lesser of: (1) 75 percent of the costs of the new 
medical service or technology; or (2) 75 percent of the amount by which 
the costs of the case exceed the standard DRG payment. 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 percent of 
the costs of the new medical service or technology; or (2) 75 percent 
of the amount by which the costs of the case exceed the standard DRG 
payment. As set forth in Sec.  412.88(b)(2), unless the discharge 
qualifies for an outlier payment, the additional Medicare payment will 
be limited to the full MS-DRG payment plus 65 percent (or 75 percent 
for 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 technologies 
approved or conditionally approved for new technology add-on payments 
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

[[Page 58797]]

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.9. of the preamble of 
this final rule, in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26779 through 26780), beginning with the new technology add-on payment 
applications for FY 2025, we proposed, 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 submission, and to provide 
documentation of FDA acceptance or filing to CMS at the time of 
application submission. We also proposed 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.9. of the preamble of this final rule for a full 
discussion of these proposals, the comments we received on these 
proposals, and our final policies.
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 receive 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

[[Page 58798]]

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 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 the 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 did not 
summarize any written comments in the proposed rule that were unrelated 
to the substantial clinical improvement criterion. In section II.E.6. 
of the preamble of the proposed rule, we summarized 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 percent of 
the operating outlier threshold for the claim or (2) 65 percent 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). As the PHE ended 
on May 11, 2023, as planned by the Department of Health and Human 
Services (HHS),\22\ discharges involving eligible products will 
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 will be made beginning in FY 2024 (that is, for 
discharges on or after October 1, 2023).
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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.
    Comment: We received public comments related to NCTAP. A commenter 
expressed appreciation for continued NCTAP through Sept. 30, 2023. A 
few commenters recommended that CMS continue NCTAP, including a 
commenter who recommended that CMS continue NCTAP through December 31, 
2023, in order to provide financial assistance for COVID-19 treatments 
as hospitals navigate the public health emergency (PHE) unwinding. A 
commenter also recommended that when NCTAP does end, that CMS 
automatically add any newly developed COVID-19 treatments to the new 
technology add-on payment list without application. Some

[[Page 58799]]

commenters recommended that CMS monitor Medicare beneficiaries' access 
to COVID-19 treatments in the hospital inpatient setting after NCTAP 
expires to determine whether there is a reduction in beneficiaries' 
access to treatment, with a commenter further recommending that CMS 
take steps to minimize any barriers that could restrict the ability of 
Medicare beneficiaries to receive lifesaving treatments after the 
sunsetting of the NCTAP and other COVID-19 payment adjustments.
    Response: We thank the commenters for their input. 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 did not make any proposals to extend or modify NCTAP in 
this year's proposed rule, and NCTAP will end on September 30, 2023, as 
previously finalized in the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45160 through 45162). Further information about NCTAP, including 
updates and a list of currently eligible drugs and biologicals, is 
available on the CMS website at https://www.cms.gov/medicare/covid-19/new-covid-19-treatments-add-payment-nctap.
5. FY 2024 Status of Technologies Receiving New Technology Add-On 
Payments for FY 2023
    In this section of the final rule, we discuss the FY 2024 status of 
24 technologies approved for FY 2023 new technology add-on payments, as 
set forth in the tables that follow. In the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 26781 through 26785) we presented our proposals to 
continue the 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 still be considered ``new'' for purposes of 
new technology add-on payments for FY 2024. We also presented 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 noted 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 (87 FR 26955 through 26957), subject to 
the technology receiving FDA marketing authorization by July 1, 2023. 
In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed that if 
DefenCathTM receives FDA marketing authorization before July 
1, 2023, we would continue making new technology add-on payments for 
DefenCathTM for FY 2024. We proposed that 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. Because 
DefenCathTM did not receive FDA approval by July 1, 2023, no 
new technology add-on payments will be made for cases involving the use 
of DefenCathTM for FY 2023, and DefenCathTM is 
therefore not 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, and we 
refer the reader to section II.E.7.b.(1). of the preamble of this final 
rule for discussion of our conditional approval of the FY 2024 
application for new technology add on payments 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).
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26783), we 
provided a table listing the technologies for which we proposed 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 presented the newness start date, new 
technology add-on payment start date, 3-year anniversary date of the 
product's entry onto the U.S. market, relevant final rule citations 
from prior fiscal years, proposed maximum add-on payment amount, and 
coding assignments for each technology. We referred readers to the 
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 invited public comments on our proposals to continue new 
technology add-on payments for FY 2024 for the technologies listed in 
the table in the proposed rule.
    Comment: We received multiple comments in support of our proposed 
continuation of 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 still be considered ``new'' for purposes of 
new technology add-on payments for FY 2024.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposals to continue new technology add-on payments for 
FY 2024 for the technologies that were approved for new technology add-
on payment for FY 2023 and would still be considered ``new'' for 
purposes of new technology add-on payments for FY 2024, as listed in 
the proposed rule and in the following Table II.F.-01 in this section 
of this final rule.
    Table II.F.-01 in this final rule presents the newness start date, 
new technology add-on payment start date, 3-year anniversary date of 
the product's entry onto the U.S. market, relevant final rule citations 
from prior fiscal years, maximum add-on payment amount, and coding 
assignments. We refer readers to the final rules cited in the following 
table for a complete discussion of the new technology add-on payment 
application, coding and payment amount for these technologies, 
including the applicable indications and discussion of the newness 
start date.
BILLING CODE 4120-01-P

[[Page 58800]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.135

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26785), we 
provided Table II.P.-02 listing the technologies for which we proposed 
to discontinue making new technology add-on payments for FY 2024 
because

[[Page 58801]]

they are no longer ``new'' for purposes of new technology add-on 
payments. This table also presented the newness start date, new 
technology add-on payment start date, the 3-year anniversary date of 
the product's entry onto the U.S. market, and relevant final rule 
citations from prior fiscal years. We referred readers to the cited 
final rules in the table for a complete discussion of each new 
technology add-on payment application and the coding and payment amount 
for these technologies, including the applicable indications and 
discussion of the newness start date.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26784), we noted, 
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.
    We stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26784), 
that 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 were 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. We 
further stated that, as discussed in the FY 2023 IPPS/LTCH PPS final 
rule, we continued 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 noted, as set forth in Table 
II.P.-01 of the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26783), that 
we were 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 
considered 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 proposed 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 invited public comments on our proposals to discontinue new 
technology add-on payments for FY 2024 for the technologies listed in 
Table II.P.-02 in the proposed rule.
    Comment: A commenter disagreed with defining the newness start date 
as the date of commercial availability/FDA approval date for cell and 
gene therapies, and requested that CMS extend new technology add-on 
payments into FY 2024 for both ABECMA[supreg] and CARVYKTITM 
as the newness start date being utilized is extremely close to the mid-
year benchmark and also likely to be functionally inaccurate. The 
commenter stated that while it does not have sales or ordering 
information for ABECMA[supreg] and CARVYKTITM, it believes 
that it is likely that the first commercial shipment of ABECMA[supreg] 
took place weeks after FDA approval (which occurred March 26, 2021) and 
would have crossed the April 1 threshold date, enabling these 
technologies to be eligible for a third year of add-on payments. The 
commenter explained that this delay is due to the fact that CAR T-cell 
products take weeks to manufacture, in addition to the certification of 
treatment sites as required under a product's REMS. The commenter 
stated that it is far more logical to use the definition of ``market 
date'' described in the May 2023 Medicaid proposed rule with regard to 
covered outpatient drugs, which is the date on which the drug was first 
sold (88 FR 34257), for cell and gene therapies due to their unique 
manufacturing parameters. The commenter also requested that CMS 
consider a standard third-year extension of new technology add-on 
payments for cell and gene therapies in general, due to the unique 
manufacturing process and low volume nature of the diseases treated.
    Response: We thank the commenter for its input. We note that the 
timeframe that a new technology can be eligible to receive new 
technology add-on payments begins when data become available (69 FR 
49003, 85 FR 58610). Consistent with the statute, a technology no 
longer qualifies as ``new'' once it is more than 2 to 3 years old, 
irrespective of how frequently it has been used in the Medicare 
population. Therefore, if a product is more than 2 to 3 years old, we 
consider its costs to be included in the MS-DRG relative weights 
whether its use in the Medicare population has been frequent or 
infrequent. In addition, while CMS may consider a documented delay in 
the technology's market availability in our determination of newness, 
our policy for determining

[[Page 58802]]

whether to extend new technology add-on payments for an additional year 
generally applies regardless of the volume of claims for the technology 
after the beginning of the newness period (83 FR 41280). We do not 
consider the date of first sale of a product, or first shipment of a 
product, as an indicator of the entry of a product onto the U.S. 
market; neither of these dates indicate when a technology in fact 
became available for sale. Similarly, our policy for determining 
whether to extend new technology add-on payments for a third year 
generally applies regardless of the claims volume for the technology 
after the start of the newness period (85 FR 58610). We further note 
that, as discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
48911), in response to a comment from the applicant for Abecma[supreg] 
stating that the date of first sale for this technology was May 10, 
2021, and that add-on payments for Abecma[supreg] should therefore 
extend past FY 2023, we requested additional information from the 
applicant for Abecma[supreg] on when the technology first became 
available for sale. We stated that, absent such additional information 
from the applicant, we cannot determine a newness date based on a 
documented delay in the technology's availability on the U.S. market. 
The applicant did not submit further information related to the 
availability of Abecma[supreg] for this final rule, nor did the 
commenter provide such information. Accordingly, we are finalizing that 
we consider March 26, 2021, to be the date the technology became 
available on the market and the beginning of its newness period. As 
discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48925), 
because we determined that CARVYKTITM is substantially 
similar to ABECMA[supreg], we consider the beginning of the newness 
period for CARVYKTITM to be March 26, 2021 as well.
    Comment: A commenter requested that CMS consider at least another 
year of new technology add-on payments for aprevoTM, which 
has a newness start date of December 3, 2020 for its ALIF and LLIF 
indications, as many surgeries were not performed in 2020 due to the 
COVID-19 pandemic. The commenter stated that with hospital revenue 
trending negatively, this is an opportunity for hospitals to provide 
exceptional care with appropriate reimbursement due to the clinical 
benefits of this technology.
    Response: We thank the commenter for its input. Consistent with the 
statute and our implementing regulations, a technology is no longer 
considered as ``new'' once it is more than 2 to 3 years old, 
irrespective of how frequently the medical service or technology has 
been used in the Medicare population (70 FR 47349, 85 FR 58610). As 
such, once a technology has been available on the U.S. market for more 
than 2 to 3 years, we consider the costs to be included in the MS-DRG 
relative weights regardless of whether the technology's use in the 
Medicare population has been frequent or infrequent. We further note 
that we are renewing the TLIF indication for aprevoTM, which 
has a newness start date of June 30, 2021, for FY 2024 as noted in the 
previous table, as this indication will still be considered ``new''.
    After consideration of the public comments we received, we are 
finalizing our proposal to discontinue new technology add-on payments 
for the technologies as listed in the proposed rule and in the 
following Table II.F.-02 of this final rule for FY 2024 because they 
are no longer ``new'' for purposes of new technology add-on payments. 
This table also presents the newness start date, new technology add-on 
payment start date, the 3-year anniversary date of the product's entry 
onto the U.S. market, and relevant final rule citations from prior 
fiscal years. We also refer readers to the final rules cited in the 
following table for a complete discussion of the new technology add-on 
payment application, coding and payment amount for these technologies, 
including the applicable indications and discussion of the newness 
start dates.

[[Page 58803]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.136


[[Page 58804]]


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 stated in the proposed rule that we are continuing to summarize each 
application in the proposed rule. However, we stated that 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 noted that we made 
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 the FY 2024 IPPS/LTCH PPS 
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 of the 
proposed rule 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 
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 the proposed rule. 
Subsequently, four applicants withdrew their respective applications 
for sabizabulin, DuraGraft, VEST, and omidubicel prior to the issuance 
of this FY 2024 IPPS/LTCH PPS final rule. In addition, two applicants, 
Daiichi Sankyo and Pfizer, for Vanflyta and elranatamab respectively, 
did not receive FDA approval for their technologies by July 1, 2023. 
Therefore, Vanflyta and elranatamab are not eligible for consideration 
for new technology add-on payments for FY 2024. Consistent with our 
standard approach, we are not including in this final rule the 
description and discussion of applications that were withdrawn or that 
are ineligible for consideration for FY 2024 due to not meeting the 
July 1 deadline, described previously, which were included in the FY 
2024 IPPS/LTCH PPS proposed rule. We are also not summarizing nor 
responding to public comments received regarding these withdrawn or 
ineligible applications in this final rule. Of the remaining 13 
applications, we are not approving the applications for 
NexoBridTM, SeptiCyte[supreg] RAPID, and 
XENOVIEWTM for the reasons discussed in the following 
sections. We are approving the remaining 10 applications, with 4 of the 
applications considered as 2 technologies due to substantial 
similarity, for a total of 8 new approvals for new technology add-on 
payments for FY 2024. A discussion of these 13 applications is 
presented in the following sections.
a. CYTALUX[supreg] (Pafolacianine), First Indication
    On Target Laboratories submitted an application for new technology 
add-on payments for CYTALUX[supreg] for use in ovarian cancer for FY 
2024. The applicant stated that CYTALUX[supreg] is the first targeted 
intraoperative molecular imaging agent that illuminates ovarian cancer 
in real time, enabling the detection of more cancer for resection. 
CYTALUX[supreg] 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[supreg] is used in adult patients with 
ovarian cancer as an adjunct for intraoperative identification of 
malignant lesions. CYTALUX[supreg] is to be used with a near-infrared 
imaging system (NIR) cleared by the FDA for specific use with 
CYTALUX[supreg]. We note that On Target Laboratories also submitted a 
second application for new technology add-on payments for 
CYTALUX[supreg] for FY 2024 for use in lung cancer, as discussed 
separately in this section.
    Please refer to the online application posting for CYTALUX[supreg], 
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[supreg] 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[supreg] had market availability delayed until April 15, 2022, 
due to supply/product availability. The recommended dose of 
CYTALUX[supreg] 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.
    The applicant submitted a request for a unique ICD-10-PCS procedure 
codes for CYTALUX[supreg] and was granted approval to use the following 
procedure codes effective October 1, 2023: 8E0U0EN (Fluorescence guided 
procedure of female reproductive system using pafolacianine, open 
approach), 8E0U3EN (Fluorescence guided procedure of female 
reproductive system using pafolacianine, percutaneous approach), 
8E0U4EN (Fluorescence guided procedure of female reproductive system 
using pafolacianine, percutaneous endoscopic approach), 8E0U7EN 
(Fluorescence guided procedure of female reproductive system using 
pafolacianine, via natural or artificial opening), and 8E0U8EN 
(Fluorescence guided procedure of female reproductive system using 
pafolacianine, via natural or artificial opening endoscopic). The 
applicant provided a list of diagnosis codes that may be used to 
currently identify this indication for CYTALUX[supreg], 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 
believed that CYTALUX[supreg] is not substantially similar to other 
currently

[[Page 58805]]

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[supreg] for the applicant's complete statements in support of 
its assertion that CYTALUX[supreg] is not substantially similar to 
other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.137

    We invited public comments on whether CYTALUX[supreg] is 
substantially similar to existing technologies and whether 
CYTALUX[supreg] meets the newness criterion.
    Comment: The applicant reiterated that there are no existing FDA-
approved drugs/biological products that are used as an adjunct for 
intraoperative identification of malignant lesions in adults with 
ovarian cancer other than CYTALUX[supreg]. The applicant also 
reiterated that there is no other drug marketed under the same active 
ingredient category or generic name, nor which has the same mechanism 
of action to target the folate receptor to illuminate cancerous 
lesions. In terms of newness, the applicant asserted that the 
appropriate newness date for CYTALUX[supreg] for ovarian cancer is 
April 15, 2022, the date on which a supply of CYTALUX[supreg] was first 
made available for sale. The applicant stated that CYTALUX[supreg] 
experienced a documented and verifiable delay in market entry, as 
CYTALUX[supreg] was approved for ovarian cancer in November 2021 but 
experienced a delay in commercialization primarily due to external 
circumstances. The applicant further explained that as CYTALUX[supreg] 
was not available before April 15, 2022, and there were no clinical 
uses of CYTALUX[supreg] between the date of FDA approval and its market 
entry, the newness period for the technology should begin on April 15, 
2022.
    In addition, the applicant noted that initial clinical use of 
CYTALUX[supreg] involved 20 cases that were performed at only three 
select centers between May and June 2022 during a small commercial 
pilot with remaining product lots manufactured specifically to support 
planned clinical development. The applicant explained that the batch of 
CYTALUX[supreg] expired at the end of June 2022, thereby rendering it 
impossible to perform additional cases. The applicant further explained 
that due to the removal of the FDA cleared imaging system for use with 
CYTALUX[supreg] from the market, a commercial lot was not initiated 
again until there was strong confidence that the FDA would approve 
CYTALUX[supreg] for lung cancer, and that therefore, the first full 
commercial lot was released in June 2023, coinciding with the newness 
date for CYTALUX[supreg] for lung cancer, as discussed separately in 
this section.
    Response: We thank the applicant for its comment. Based on our 
review of comments received and information submitted by the applicant 
as part of its FY 2024 new technology add-on payment application for 
CYTALUX[supreg], we agree with the applicant that CYTALUX[supreg] is 
the only adjunct for intraoperative identification of malignant lesions 
in adults with ovarian cancer with a mechanism of action to target the 
folate receptor to illuminate cancerous lesions. Therefore, we believe 
that CYTALUX[supreg] is not substantially similar to existing treatment 
options and meets the newness criterion. We consider the beginning of 
the newness period to commence when CYTALUX[supreg] became commercially 
available on April 15, 2022.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for CYTALUX[supreg], 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 percent of cases map to these MS-DRGs. Please see 
Table 10.8.A.--CYTALUX[supreg] (ovarian) Codes--FY 2024 associated with 
the 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

[[Page 58806]]

applicant asserted that CYTALUX[supreg] meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TR28AU23.138

    We invited public comments on whether CYTALUX[supreg] meets the 
cost criterion.
    Comment: The applicant submitted a public comment reiterating that 
because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, 
CYTALUX[supreg] meets the cost criterion.
    Response: We thank the applicant for its comment. We agree that the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
CYTALUX[supreg] meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that CYTALUX[supreg] represents a substantial 
clinical improvement over existing technologies because CYTALUX[supreg] 
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[supreg] 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 11 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[supreg] 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.\23\ The following 
table summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
CYTALUX[supreg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
---------------------------------------------------------------------------

    \23\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 58807]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.139


[[Page 58808]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.140

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH proposed rule (88 FR 26789 through 26790), 
after review of the information provided by the applicant, we stated we 
had the following concerns regarding whether CYTALUX[supreg] meets the 
substantial clinical improvement criterion. We noted that 
CYTALUX[supreg] showed a false positive rate of 24.8 percent that led 
to resections in the Phase 3, randomized, multicenter, single-dose, 
open-label study of this technology.\24\ While the applicant submitted 
a separate comment stating there was no worsening in the safety profile 
for patients with false positive results, we continued 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, we noted that the Phase 3 study of CYTALUX[supreg] 
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 noted that we would be interested in 
additional or longer-term data demonstrating that CYTALUX[supreg] 
results in improved outcomes such as improved survival or a reduced 
rate of recurrence to support an assessment of whether CYTALUX[supreg] 
represents a substantial clinical improvement.
---------------------------------------------------------------------------

    \24\ 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 invited public comments on whether CYTALUX[supreg] meets the 
substantial clinical improvement criterion.
    Comment: Several commenters supported the application for 
CYTALUX[supreg]. A commenter explained that ovarian cancer remains the 
most lethal gynecologic cancer, and that complete surgical 
cytoreduction is the single most important prognostic indicator for 
survival. The commenter explained that although bulky disease can be 
easily recognized, sub-centimeter implants are often difficult to 
discriminate from adjacent normal tissue and may not be recognized and

[[Page 58809]]

resected. The commenter further noted that intraoperatively, a surgeon 
has only two tools to improve the outcome of the tumor resections: 
visual inspection and palpation, and thus, surgeons need tools to 
augment these approaches. The commenter explained that the Phase 3 
study of CYTALUX[supreg] demonstrates that the technology provides an 
important real-time adjunct to current surgical approaches for ovarian 
cancer, identifying malignant lesions that would not have been resected 
without CYTALUX[supreg].
    Another commenter stated that CYTALUX[supreg] allowed discovery of 
more lesions which were not seen with the naked eye and these lesions 
were removed safely to achieve the surgical goal of removal of all 
visible tumor. The commenter asserted that during interval debulking 
surgery after chemotherapy, as CYTALUX[supreg] improved detection of 
viable tumor from scar tissue, lesions were removed and sent for quick 
pathology evaluation, leading to efficiency of the surgical procedure, 
reducing operative time and less surgical morbidity. The commenter 
stated that additional removal of lesions discovered by CYTALUX[supreg] 
use did not lead to an increase of surgical morbidities.
    Response: We thank the commenters for their input and have taken it 
into consideration in determining whether CYTALUX[supreg] meets the 
substantial clinical improvement criterion, discussed later in this 
section.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion, and provided responses to 
concerns raised by CMS in the proposed rule. In response to concerns on 
how CYTALUX[supreg] improves health outcomes and changes patient 
management, the applicant asserted that CYTALUX[supreg] helps surgeons 
detect ovarian cancer that is currently undetectable during surgery, 
allowing them to diagnose and treat additional cancer lesions earlier. 
The applicant stated that in the CYTALUX[supreg] Phase 3 trial, the use 
of CYTALUX[supreg] identified additional ovarian cancer on tissue that 
was not part of the preoperative surgical plan and not otherwise 
planned for resection in 27 percent of imaged patients.\25\ The 
applicant stated that the surgeons involved in the Phase 3 study 
responded that use of CYTALUX[supreg] led to a revision in their 
surgical plan for 56 percent of patients and more complete debulking 
was achieved in 51 percent of patients.\26\ The applicant stated that 
identifying additional cancer on tissue not planned for resection in 
the preoperative plan led to a change in the management of the patient, 
allowing the surgeon to treat additional cancer which otherwise would 
have been left behind and may not have been discovered and treated 
until the patient presented with a recurrence. Therefore, the applicant 
believes that CYTALUX[supreg] not only allowed identification of 
cancerous lesions that would have otherwise remained undetected, but 
that it also may potentially shorten the amount of treatment time for a 
given patient by potentially reducing the risk of recurrence of ovarian 
cancer. The applicant asserted that CYTALUX[supreg] improves health 
outcomes through the more complete resection of residual disease. The 
applicant added that, consistent with the goal of achieving R0 (no 
remaining visible disease after surgery), following what surgeons 
deemed to be complete (R0) resection with conventional methods of 
identifying cancer during surgery, the surgeons indicated that 
intraoperative imaging with CYTALUX[supreg] enabled them to achieve 
``R(-1),'' having found additional disease that they otherwise would 
not have found.
---------------------------------------------------------------------------

    \25\ 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.
    \26\ 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.
---------------------------------------------------------------------------

    In addition, the applicant asserted that CYTALUX[supreg] improves 
health outcomes through the more complete resections of residual 
disease, which is supported by a wealth of peer-reviewed literature and 
longstanding bedrock principles relating to the treatment of cancer. 
The applicant stated that in the CYTALUX[supreg] Phase 3 trial, in 70 
percent of patients in which additional ovarian cancer was detected by 
CYTALUX[supreg] and not by white light palpation, the specimen size of 
malignant lesions plus the tissue margin was greater than 1cm. The 
applicant stated that in its Phase 3 trial, CYTALUX[supreg] 
demonstrated the ability to aid surgeons by identifying additional 
cancer intraoperatively otherwise unknown to the surgeon and on tissue 
not planned for resection, in real time, enabling the surgeon to 
achieve a more complete resection in cytoreductive surgery for ovarian 
cancer and therefore improving clinical outcomes for these patients. 
According to the applicant, substantial clinical literature 
demonstrates that complete resections are associated with improved 
survival in ovarian cancer, with a steep drop in survival with residual 
tumors greater than 1 cm remaining following cytoreductive surgery. The 
applicant asserted that CYTALUX[supreg] is not a therapeutic agent, and 
stated that it therefore believes that long-term survival studies are 
not necessary to prove the clinical improvement CYTALUX[supreg] can add 
to help surgeons identify and diagnose additional cancer they may have 
otherwise missed, thus supporting them in achieving the surgical goal.
    With regard to the false positive rates, the applicant asserted 
that CYTALUX[supreg]'s false positive rates do not meaningfully alter 
CYTALUX[supreg]'s significant clinical improvement analysis. The 
applicant conducted an analysis to compare false positives under white 
light palpation and CYTALUX[supreg] with NIR imaging. The applicant 
stated that rates and specimen size of false positives are comparable 
between those identified and removed by the surgeon under standard 
methods of white light and palpation and those identified and removed 
by the surgeon under NIR imaging with CYTALUX[supreg]. The applicant 
stated that, for CYTALUX[supreg] the presence of false positive results 
did not cause negative patient outcomes or additional unnecessary 
treatments as the removal of benign tissue is often a consequence of 
standard surgical resection. Additionally, the applicant stated that 
the false positive results after use of CYTALUX[supreg] were comparable 
to those following standard treatment; and the false positive results 
from use of CYTALUX[supreg] led to only a small amount of noncancerous 
tissue being removed.
    Response: We thank the applicant for its comment and the additional 
information provided regarding the substantial clinical improvement 
criterion.
    Based on the additional information received, we agree with the 
applicant and commenters that CYTALUX[supreg] represents a substantial 
clinical improvement over existing technology because CYTALUX[supreg] 
can detect ovarian cancer that is currently undetectable during 
surgery, which enables the surgeon to diagnose and treat additional 
cancer earlier, and affects the management of the patient by 
identifying additional ovarian cancer not otherwise planned for 
resection, leading to revisions in the surgical plan that result in 
more complete resection of the cancer.
    After consideration of the information included in the applicant's 
new technology add-on payment application

[[Page 58810]]

and the comments received, we have determined that CYTALUX[supreg] 
meets the criteria for approval for new technology add-on payment. 
Therefore, we are approving new technology add-on payments for this 
technology for FY 2024. Cases involving the use of CYTALUX[supreg] that 
are eligible for new technology add-on payments will be identified by 
ICD-10-PCS codes: 8E0U0EN (Fluorescence guided procedure of female 
reproductive system using pafolacianine, open approach), 8E0U3EN 
(Fluorescence guided procedure of female reproductive system using 
pafolacianine, percutaneous approach), 8E0U4EN (Fluorescence guided 
procedure of female reproductive system using pafolacianine, 
percutaneous endoscopic approach), 8E0U7EN (Fluorescence guided 
procedure of female reproductive system using pafolacianine, via 
natural or artificial opening), or 8E0U8EN (Fluorescence guided 
procedure of female reproductive system using pafolacianine, via 
natural or artificial opening endoscopic).
    In its application, the applicant estimated that the cost of 
CYTALUX[supreg] is $4,250 per single-use vial (one vial is used per 
patient). Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum new technology add-on payment 
for a case involving the use of CYTALUX[supreg] is $2,762.50 for FY 
2024.
b. CYTALUX[supreg] (Pafolacianine), Second Indication
    On Target Laboratories submitted an application for new technology 
add-on payments for CYTALUX[supreg] for use in lung cancer for FY 2024. 
The applicant stated that CYTALUX[supreg] is the first targeted 
intraoperative molecular imaging agent that illuminates lung cancer in 
real time, enabling the detection of more cancer for resection. 
CYTALUX[supreg] 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[supreg] is used in adult patients with known 
or suspected cancer in the lung as an adjunct for intraoperative 
identification of pulmonary lesions. CYTALUX[supreg] is to be used with 
a NIR cleared by the FDA for specific use with CYTALUX[supreg]. 
CYTALUX[supreg] 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[supreg] for FY 2024 for use in ovarian cancer, as discussed 
previously in this section.
    Please refer to the online application posting for CYTALUX[supreg], 
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[supreg] 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[supreg] 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[supreg] will 
have market availability delayed until approximately the middle of 2023 
due to supply/product availability. The recommended dose of 
CYTALUX[supreg] 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 noted that, as discussed 
previously, the applicant stated that CYTALUX[supreg] for ovarian 
cancer became commercially available on April 15, 2022. We were 
interested in additional information regarding whether the versions or 
formulations for CYTALUX[supreg] for use in lung cancer and ovarian 
cancer are different, or further explanation regarding the longer delay 
for the market availability for CYTALUX[supreg] for lung cancer.
    The applicant submitted a request for unique ICD-10-PCS procedure 
codes for CYTALUX[supreg] and was granted approval to use the following 
procedure codes effective October 1, 2023: 8E0W0EN (Fluorescence guided 
procedure of trunk region using pafolacianine, open approach), 8E0W3EN 
(Fluorescence guided procedure of trunk region using pafolacianine, 
percutaneous approach), 8E0W4EN (Fluorescence guided procedure of trunk 
region using pafolacianine, percutaneous endoscopic approach), 8E0W7EN 
(Fluorescence guided procedure of trunk region using pafolacianine, via 
natural or artificial opening), and 8E0W8EN (Fluorescence guided 
procedure of trunk region using pafolacianine, via natural or 
artificial opening endoscopic). The applicant provided a list of 
diagnosis codes that may be used to currently identify this indication 
for CYTALUX[supreg], 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 
believed that CYTALUX[supreg] 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[supreg] for the 
applicant's complete statements in support of its assertion that 
CYTALUX[supreg] is not substantially similar to other currently 
available technologies.
BILLING CODE 4120-01-P

[[Page 58811]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.141

    We invited public comments on whether CYTALUX[supreg] is 
substantially similar to existing technologies and whether 
CYTALUX[supreg] meets the newness criterion.
    Comment: The applicant submitted a public comment regarding the 
newness criterion. The applicant reiterated that there are no existing 
FDA approved drugs/biological products that are used as an adjunct for 
intraoperative identification of malignant and non-malignant pulmonary 
lesions in adult patients with known or suspected cancer in the lung 
other than CYTALUX[supreg]. The applicant also reiterated that there is 
no other drug marketed under the same active ingredient category or 
generic name, nor which has the same mechanism of action to target the 
folate receptor to illuminate cancerous lesions in the lung. In terms 
of newness, the applicant asserted that the appropriate newness date 
for CYTALUX[supreg] for lung cancer is June 5, 2023, the date 
CYTALUX[supreg] became available for purchase. The applicant explained 
that while CYTALUX[supreg] was approved in December 2022 to assist 
surgeons in identifying lung lesions in adult patients with known or 
suspected lung cancer, the product has never been sold or made 
available to the market after its approval for use in lung cancer. As 
discussed previously in this section, the applicant explained that 
although the use of CYTALUX[supreg] for ovarian cancer was briefly 
available on the market for a small limited pilot of 20 cases from 
April through June 2022 at three select centers, the technology was 
subsequently taken off the market due to the market withdrawal of the 
necessary imaging system, and therefore a commercial lot of 
CYTALUX[supreg] was not initiated again until there was strong 
confidence that the FDA would approve CYTALUX[supreg] for use in lung 
cancer. The applicant further stated that on June 5, 2023, the first 
commercial lot of CYTALUX[supreg] became available for use in lung 
cancer. The applicant asserted that therefore, because CYTALUX[supreg] 
was not available on the market following FDA approval of 
CYTALUX[supreg] for lung cancer, the appropriate newness date for 
CYTALUX[supreg] for lung cancer would be June 5, 2023, the market 
availability of the product.
    Response: We thank the applicant for its comments. Based on our 
review of comments received and information submitted by the applicant 
as part of its FY 2024 new technology add-on payment application for 
CYTALUX[supreg], we agree with the applicant that CYTALUX[supreg] is 
the only adjunct for intraoperative identification of malignant and 
non-malignant pulmonary lesions in adult patients with known or 
suspected cancer in the lung with a mechanism of action to target the 
folate receptor to illuminate cancerous lesions in the lung. Therefore, 
we believe that CYTALUX[supreg] is not substantially similar to 
existing treatment options and meets the newness criterion. We consider 
the beginning of the newness period to commence when CYTALUX[supreg] 
became commercially available on June 5, 2023.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for CYTALUX[supreg], the 
applicant searched the FY 2021 IPSAF 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 
percent of cases map to these MS-DRGs. Please see Table 10.9.A.--
CYTALUX[supreg] (lung) Codes--FY 2024 associated with the 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[supreg] meets the cost criterion.

[[Page 58812]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.142

    We invited public comments on whether CYTALUX[supreg] meets the 
cost criterion.
    Comment: The applicant submitted a comment reiterating that because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, CYTALUX[supreg] 
meets the cost criterion.
    Response: We thank the applicant for its comment. We agree that the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
CYTALUX[supreg] meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that CYTALUX[supreg] represents a substantial 
clinical improvement over existing technologies because CYTALUX[supreg] 
enables the surgeon to visualize cancer intraoperatively, in real time, 
that otherwise may have gone undetected. Per the applicant, the use of 
the CYTALUX[supreg] 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[supreg] targets and binds to folate receptors and thus 
the mechanism of action is a viable target for lung cancer.\27\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for CYTALUX[supreg] for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \27\ 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 58813]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.143


[[Page 58814]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.144


[[Page 58815]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.145

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH proposed rule (88 FR 26795), after review 
of the information provided by the applicant, we stated we had the 
following concerns regarding whether CYTALUX[supreg] meets the 
substantial clinical improvement criterion. We noted that 
CYTALUX[supreg] showed a false positive rate

[[Page 58816]]

of 25.8 percent that led to resections in the Phase 3, multicenter 
study of this technology.\28\ While the applicant submitted a separate 
comment stating there was no worsening in the safety profile for 
patients with false positive results, we continued to question the 
impact on patient outcomes when taking additional tissues that were 
false positive. We noted that the authors discussed in the results of 
the Phase 3 trial that there was a decreased rate of subsequent 
diagnostic intervention. We questioned if they were referring to fewer 
resections in future surgical procedure, and/or if this also implied a 
subsequent positive outcome of reduced mortality. While the studies 
provided in support of CYTALUX[supreg] measure identification of 
lesions and changes in the scope of the surgical procedure, we noted 
that 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[supreg]. Rather, we stated that 
improved outcomes were inferred by relying on the assumption that 
increased or decreased scope of resection results in better outcomes. 
We noted that we were 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[supreg] results 
in an improvement over the standard of care.
---------------------------------------------------------------------------

    \28\ 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 invited public comments on whether CYTALUX[supreg] meets the 
substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion and provided responses to 
CMS's concerns from the proposed rule. With regard to improvement of 
patient management, the applicant asserted that CYTALUX[supreg] 
objectively improves surgeons' management of the patient through 
enabling use of tissue-sparing procedures and by helping surgeons to 
identify and more completely resect undetected cancerous lesions during 
surgery. The applicant stated that as demonstrated in the Phase 3 
ELUCIDATE trial, use of CYTALUX[supreg] allowed surgeons to localize 
the primary lesion in 19 percent of patients whose lesion could not be 
seen by white light and otherwise localized by the surgeon using 
standard techniques and a positive/close margin (<10mm from the 
resection line) in 38 percent of patients.\29\
---------------------------------------------------------------------------

    \29\ Sarkaria IS, Martin LW, Rice DC, Blackmon SH, Slade HB, 
Singhal S; ELUCIDATE Study Group. Pafolacianine for intraoperative 
molecular imaging of cancer in the lung: The ELUCIDATE trial. J 
Thorac Cardiovasc Surg. 2023 Mar 3:S0022-5223(23)00185-X. doi: 
10.1016/j.jtcvs.2023.02.025. Epub ahead of print. PMID: 37019717.
---------------------------------------------------------------------------

    In addition, the applicant asserted that the surgeon was able to 
identify the lesion more quickly with CYTALUX[supreg] as compared to 
preoperative localization techniques, thus improving the management of 
the patient through reducing the amount of time the patient is under 
anesthesia. The applicant stated that in the Phase 3 ELUCIDATE trial, 
the median time to localize the primary nodule was 1 minute (range <1-
23), compared with another study showing that the mean procedural time 
for robotic navigational bronchoscopy, which is a preferred method for 
preoperative localization, was 67 minutes (range 37-97).\30\
---------------------------------------------------------------------------

    \30\ Value of Robotic Navigational Bronchoscopy to Enhance 
Diagnostic Yield and Guide Oncological Strategy in Treatment of 
Pulmonary Nodules. Abstract presented at the 2023 American 
Association of Thoracic Surgeons Annual Meeting.
---------------------------------------------------------------------------

    Moreover, the applicant asserted that CYTALUX[supreg] aids 
surgeons' ability to perform tissue-sparing procedures by providing 
visualization of the precise location and borders of the tumor, which 
helps surgeons determine where to resect tissue while ensuring a proper 
margin. The applicant stated that results from the Phase 3 ELUCIDATE 
trial indicated the maximum depth of lesions detected by 
CYTALUX[supreg] alone was 27.9mm increasing to 37.7mm with both 
CYTALUX[supreg] and white light while the minimum size of lesions 
identified by CYTALUX[supreg] and not by standard white light was as 
small as 2mm for synchronous lesions and 5mm for primary lesions.\31\ 
The applicant stated that Phase 2 and Phase 2 clinical trial date 
showed CYTALUX[supreg] increased the surgeon's ability to detect the 
primary lesion intraoperatively from 72 percent to 94 percent of 
patients. The applicant stated that across all lesions in the Phase 2 
and Phase 3 trials, 94 percent were folate receptor alpha or beta 
positive, demonstrating the efficacy of CYTALUX[supreg]'s mechanism of 
action across a multitude of cancer histologies in both primary lung 
cancer and metastatic disease.
---------------------------------------------------------------------------

    \31\ Abbas A, Kadakia S, Ambur V, Muro K, Kaiser L. 
Intraoperative electromagnetic navigational bronchoscopic 
localization of small, deep, or subsolid pulmonary nodules. J Thorac 
Cardiovasc Surg. 2017 Jun;153(6):1581-1590. doi: 10.1016/
j.jtcvs.2016.12.044. Epub 2017 Feb 7. PMID: 28314525.
---------------------------------------------------------------------------

    Additionally, the applicant asserted that appropriate staging is a 
critical area to guide long-term treatment plans adjuvant to surgery, 
since correct staging ensures improved patient care, enabling earlier 
notification of the extent of disease and faster time to optimal 
treatment. According to the applicant, in clinical trials, 
CYTALUX[supreg] detected additional synchronous malignant lesions which 
were not identified on preoperative imaging. The applicant stated that 
one trial, the detection of 9 synchronous lesions in 8 percent of 
patients (n = 7 out of 92) resulted in each of the 7 patients being 
upstaged, enabling alterations to adjuvant treatment plans to reflect 
the greater extent of disease.\32\ The applicant stated that in the 
Phase 3 ELUCIDATE trial, CYTALUX[supreg] allowed the surgeon to 
identify one more or additional synchronous malignant lesions that were 
previously unidentified on preoperative scans nor intraoperatively in 8 
percent of patients, with the majority outside the planned field of 
resection.\33\
---------------------------------------------------------------------------

    \32\ Gangadharan S, Sarkaria IN, Rice D, Murthy S, Braun J, 
Kucharczuk J, Predina J, Singhal S. Multiinstitutional Phase 2 
Clinical Trial of Intraoperative Molecular Imaging of Lung Cancer. 
Ann Thorac Surg. 2021 Oct;112(4):1150-1159. doi: 10.1016/
j.athoracsur.2020.09.037. Epub 2020 Nov 19. PMID: 33221195.
    \33\ Sarkaria IS, Martin LW, Rice DC, Blackmon SH, Slade HB, 
Singhal S; ELUCIDATE Study Group. Pafolacianine for intraoperative 
molecular imaging of cancer in the lung: The ELUCIDATE trial. J 
Thorac Cardiovasc Surg. 2023 Mar 3:S0022-5223(23)00185-X. doi: 
10.1016/j.jtcvs.2023.02.025. Epub ahead of print. PMID: 37019717.
---------------------------------------------------------------------------

    In response to concerns on improvement of patient outcomes, the 
applicant claimed that CYTALUX[supreg] improves health outcomes through 
the more complete resection of otherwise undetected cancer, which is 
supported by substantial peer-reviewed literature and longstanding 
bedrock principles relating to the treatment of cancer. According to 
the applicant, CYTALUX[supreg] improves surgeons' ability to treat the 
disease more completely via resection, which thereby may reduce the 
risk of recurrence and has the potential to increase the likelihood of 
patient survival by assisting the surgeon to overcome each of these 
established surgical challenges. The applicant stated that among the 
Phase 3 ELUCIDATE participants, 53 percent had a clinically significant 
event from use of CYTALUX[supreg]: in 19 percent of patients, 
CYTALUX[supreg] was able to localize the primary lesion otherwise not 
found by the surgeon using standard techniques; in 8 percent of 
patients, CYTALUX[supreg] identified an unknown occult synchronous 
lesions; and in 38 percent

[[Page 58817]]

of patients, CYTALUX[supreg] was able to identify a close resection 
margin less than or equal to 10 mm.\34\ The applicant stated that use 
of CYTALUX[supreg] led to a change in the overall scope of surgical 
procedure for 29 percent of patients.\35\
---------------------------------------------------------------------------

    \34\ Singhal S, Martin L, Rice D, Blackmon S, Murthy S, 
Gangadharan S, Reddy R, Sarkaria I. Randomized, Multi Center Phase 3 
Trial of Pafolacianine during Intraoperative Molecular Imaging of 
Cancer in the Lung: Results of the ELUCIDATE Trial. AATS 102nd 
Annual Meeting. Boston MA. May 2022.
    \35\ Singhal S, Martin L, Rice D, Blackmon S, Murthy S, 
Gangadharan S, Reddy R, Sarkaria I. Randomized, Multi Center Phase 3 
Trial of Pafolacianine during Intraoperative Molecular Imaging of 
Cancer in the Lung: Results of the ELUCIDATE Trial. AATS 102nd 
Annual Meeting. Boston MA. May 2022.
---------------------------------------------------------------------------

    In response to CMS's questioning if the noted CYTALUX[supreg] 
``decreased rate of subsequent diagnostic intervention'' refers to 
``fewer resections in future surgical procedure, and/or if this also 
implies a subsequent positive outcome of reduced mortality'', the 
applicant stated that the ELUCIDATE trial was not designed to follow 
patients long term to determine reduction in additional procedures, 
oncologic outcomes, nor mortality rates. According to the applicant, 
considering existing preoperative procedures commonly utilized today to 
provide localization aides to surgeons, CYTALUX[supreg] has the 
potential to reduce preoperative localization procedures, including 
endobrochial dye marking, microcoil placement, fiducial marker 
placement, and transthoracic percutaneous hook wire placement. The 
applicant stated that the ELUCIDATE phase 3 trial demonstrated that, 
without the use of CYTALUX, synchronous malignant lesions would have 
been left behind in 8 percent of patients, confirming similar findings 
from the phase 2 trial. The applicant stated that as the synchronous 
lesions increased in size, they would have been identified on follow up 
scans, and additional surgeries are likely to have been required to 
remove these lesions increasing the risk of complications and mortality 
in these patients. The applicant stated that the ability to perform a 
more complete resection during the initial procedure using a targeted 
imaging agent has the potential to reduce the need for future 
intervention (for example, additional surgery) and the associated 
morbidity risks thus addressing the goal of the surgeon and 
patients.\36\
---------------------------------------------------------------------------

    \36\ Mohiuddin K, Haneuse S, Sofer T, et al. Relationship 
between margin distance and local recurrence among patients 
undergoing wedge resection for small (<=2 cm) non-small cell lung 
cancer. J Thorac Cardiovasc Surg. 2014 Apr;147(4):1169-75; 
discussion 1175-7. doi: 10.1016/j.jtcvs.2013.11.056. Epub 2014 Jan 
2. PMID: 24507406.
---------------------------------------------------------------------------

    With regards to CMS's concerns about false positives, the applicant 
stated that false positive rates for CYTALUX[supreg] do not 
meaningfully alter the substantial clinical improvement analysis 
presented in the application. The applicant stated that in the Phase 3 
trial, the false positive rate for primary lesions in patients with 
confirmed cancer was low, at 1.4 percent, demonstrating the ability of 
CYTALUX[supreg] to correctly identify malignant lesions with multiple 
histologies in the lung, and that in patients with suspected or 
confirmed cancer in the lung, the false positive rate was 12.7 percent. 
Per the applicant, the difference between 1.4 percent and the 12.7 
percent accounts for situations in which the patient did not have a 
confirmed diagnosis prior to surgery. Additionally, the applicant 
stated that clinical trial results across 769 patients from multiple 
clinical trials with CYTALUX[supreg] showed there were no drug-related 
serious adverse events among participants. The applicant stated that 
patients who had false positive lesions removed showed no associated 
increase in respiratory or pulmonary adverse events as compared to 
events occurring during standard of care resections. The applicant also 
asserted that the presence of false positive results did not cause 
negative patient outcomes. The applicant stated that additionally, the 
false-positive results after use of CYTALUX[supreg] were comparable to 
those following standard treatment without CYTALUX[supreg].
    We also received several additional comments in support of the 
application for CYTALUX[supreg], stating that the technology represents 
a substantial clinical improvement over existing technologies. These 
commenters stated that the Phase 3 trial presented in the application 
for CYTALUX[supreg] highlighted key challenges in the operative 
landscape namely localization of lesions, margin control and occult 
synchronous lesions. Commenters stated that CYTALUX[supreg] facilitates 
minimally invasive lung cancer surgery, improves the ability to detect 
smaller than 1 cm tumors and otherwise undetectable lesions without 
unreliable procedurally placed surrogates (for example, percutaneous 
wires, dye-marking, or coils) or larger procedures to locate lesions. 
Commenters asserted that CYTALUX[supreg] is easy for patients because 
they just undergo intravenous safe infusion of a medication 
preoperatively. Commenters asserted that CYTALUX[supreg] demonstrated a 
better option to visualize occult disease compared to advanced imaging 
or standard visualization techniques that fail to reveal occult lesions 
during initial operative intervention. Commenters stated that 
CYTALUX[supreg] allowed the discovery of synchronous adenocarcinomas 
that were not identified by standard CT scan procedures, aided in 
confirming the location of a metastatic renal cell carcinoma lesion in 
the lung of a patient and allowed more precise detection and 
localization of lesions both for primary lung cancer and metastatic 
disease to the lung (pancreatic adenocarcinoma and pleomorphic 
liposarcoma). Commenters stated that CYTALUX[supreg] provided surgeons 
the ability to visually assess margin distance to ensure an adequate 
margin was obtained in real time. A commenter asserted that 
CYTALUX[supreg] allows the surgeon to see the tumor during stapler 
firing to visualize the margin prior to a point that could leave an 
inadequate margin or require moving to a full lobectomy procedure. 
Commenters believed that CYTALUX[supreg] can transform surgical 
techniques, increase operative efficiency, and decrease risk for local 
recurrence or inaccurate staging. Commenters believed that 
CYTALUX[supreg] offers the possibility to improve cancer surgery 
outcomes by enabling surgeons to better identify primary tumors, detect 
occult synchronous lesions, ensure adequate margins of resection, and 
ensure resection of a related lesion that will upstage the cancer and 
likely necessitate adjuvant systemic therapy. A commenter stated that 
CYTALUX[supreg] will impact patient outcomes now that more sublobar 
resections are occurring as a result of earlier diagnosis of lung 
lesions. Another commenter encouraged CMS to assign new technology add-
on payment status for new technologies like CYTALUX[supreg] supporting 
personalized medicine; stating this will remove barriers to accessing 
innovative tools that advance this approach to care. Another commenter 
believed that false positives are not significantly impactful, as very 
little tissue is removed to determine histology, and added that as more 
experience is gained with CYTALUX[supreg], surgeons will learn how to 
better interpret the intraoperative imaging.
    Response: We thank the applicant and other commenters for their 
comments regarding the substantial clinical improvement criterion.
    Based on the additional information received, we agree with the 
applicant that CYTALUX[supreg] represents a substantial clinical 
improvement over existing technology because CYTALUX[supreg] can 
identify lung cancer that is otherwise undetectable using standard 
methods, which enables more precise removal of

[[Page 58818]]

the cancer by the surgeon and affects patient management, as the 
detection of synchronous lesions using CYTALUX[supreg] results in the 
upstaging of patient care, enabling alterations to adjuvant treatment 
plans to reflect the greater extent of disease.
    After consideration of the information included in the applicant's 
new technology add-on payment application, we have determined that 
CYTALUX[supreg] meets the criteria for approval for new technology add-
on payment. Therefore, we are approving new technology add-on payments 
for this technology for FY 2024. Cases involving the use of 
CYTALUX[supreg] that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS codes: 8E0W0EN (Fluorescence guided 
procedure of trunk region using pafolacianine, open approach), 8E0W3EN 
(Fluorescence guided procedure of trunk region using pafolacianine, 
percutaneous approach), 8E0W4EN (Fluorescence guided procedure of trunk 
region using pafolacianine, percutaneous endoscopic approach), 8E0W7EN 
(Fluorescence guided procedure of trunk region using pafolacianine, via 
natural or artificial opening), or 8E0W8EN (Fluorescence guided 
procedure of trunk region using pafolacianine, via natural or 
artificial opening endoscopic).
    In its application, the applicant estimated that the cost of 
CYTALUX[supreg] is $4,250 per single-use vial (one vial is used per 
patient). Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum new technology add-on payment 
for a case involving the use of CYTALUX[supreg] is $2,762.50 for FY 
2024.
c. EPKINLYTM (Epcoritamab-bysp) and COLUMVITM 
(Glofitamab-gxbm)
    Two manufacturers, Genmab US and Genentech, Inc., submitted 
separate applications for new technology add-on payments for FY 2024 
for EPKINLYTM (epcoritamab-bysp) and COLUMVITM 
(glofitamab-gxbm), respectively. We note that we discussed both of 
these technologies in the proposed rule at 88 FR 26809 and 26816 using 
their generic names, epcoritamab and glofitamab, respectively, which 
received FDA Marketing Authorization after the proposed rule and are 
updated to EPKINLYTM (epcoritamab-bysp) and 
COLUMVITM (glofitamab-gxbm), respectively in this final 
rule. Both of these technologies are bispecific antibodies used for the 
treatment of patients with relapsed/refractory (R/R) large B-cell 
lymphoma (LBCL) after two or more prior therapies, with 
COLUMVITM specifically targeting the largest subset of LBCL, 
diffuse LBCL (DLBCL). The bispecific antibodies directly bind two types 
of clusters of differentiation CD simultaneously, CD20 expressing B-
cells and CD3 expressing T-cells, to induce activation, proliferation 
and cytotoxic activity of the T-cells against the malignant B-cells. In 
the FY 2024 IPPS/LTCH PPS proposed rule we discussed these applications 
as two separate technologies. After further consideration and as 
discussed later in this section, we believe EPKINLYTM and 
COLUMVITM are substantially similar to each other and that 
it is appropriate to evaluate both technologies as one application for 
new technology add-on payments under the IPPS. We refer the reader 
below for a complete discussion regarding our analysis of the 
substantial similarity of EPKINLYTM and 
COLUMVITM.
    Please refer to the online application postings for 
EPKINLYTM available at https://mearis.cms.gov/public/publications/ntap/NTP221012JQM0G, and for COLUMVITM 
available at https://mearis.cms.gov/public/publications/ntap/NTP221017RK2RD, for additional detail describing the technologies and 
the disease treated by the technologies.
    With respect to the newness criterion, the applicant for 
EPKINLYTM stated that it was seeking Biologic License 
Application (BLA) approval from FDA for the indication of treatment of 
adult patients with R/R LBCL after two or more lines of systemic 
therapy. The applicant for EPKINLYTM stated that 
EPKINLYTM 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 cycles one through three, every 2 weeks in cycles four through nine, 
and every 4 weeks in cycles 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. 
The applicant subsequently received BLA approval from FDA for 
EPKINLYTM on May 19, 2023, for the indication of treatment 
of adult patients with relapsed or refractory diffuse large B-cell 
lymphoma (DLBCL), not otherwise specified, including DLBCL arising from 
indolent lymphoma, and high-grade B-cell lymphoma after two or more 
lines of systemic therapy.
    With regard to COLUMVITM, the applicant received BLA 
approval from FDA on June 15, 2023, for the indication of treatment of 
adult patients with relapsed or refractory diffuse large B-cell 
lymphoma (DLBCL), not otherwise specified, including DLBCL arising from 
follicular lymphoma after two or more lines of systemic therapy. The 
applicant for COLUMVITM stated that COLUMVITM 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 COLUMVITM 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 percent of the time it 
occurred after a 2.5 mg dose, 27 percent of the time it developed after 
a 10 mg dose, and 4 percent after a 30 mg dose. Therefore, according to 
the applicant, the expected average dose of COLUMVITM 
associated with an inpatient hospital stay is ((2.5 mg * 0.69) + (10 mg 
* 0.27) + (30mg * 0.04)) = 5.625 mg.
    The applicant for EPKINLYTM submitted a request for a 
unique ICD-10-PCS code for EPKINLYTM beginning in FY 2024 
and was granted approval for the following procedure code effective 
October 1, 2023: XW013S9 (Introduction of epcoritamab monoclonal 
antibody into subcutaneous tissue, percutaneous approach, new 
technology group 9). The applicant for COLUMVITM submitted a 
request for a unique ICD-10-PCS code for COLUMVITM beginning 
in FY 2024 and was granted approval for the following procedure codes 
effective October 1, 2023: XW033P9 (Introduction of glofitamab 
antineoplastic into peripheral vein, percutaneous approach, new 
technology group 9 and XW043P9 (Introduction of glofitamab 
antineoplastic into central vein, percutaneous approach, new technology 
group 9). The applicants provided lists of diagnosis codes that may be 
used to

[[Page 58819]]

currently identify the indication for EPKINLYTM and 
COLUMVITM under the ICD-10-CM coding system. Please refer to 
the online application postings for the complete list of ICD-10-CM 
codes provided by each applicant.
    As stated earlier and for the reasons discussed further later in 
this section, we believe that EPKINLYTM and 
COLUMVITM are substantially similar to each other such that 
it is appropriate to analyze these two applications as one technology 
for purposes of new technology add-on payments, in accordance with our 
policy. We discuss the information provided by the applicants, as 
summarized in the proposed rule, regarding whether EPKINLYTM 
and COLUMVITM are substantially similar to existing 
technologies prior to their approval by the FDA and their release onto 
the U.S. market. As discussed earlier, if a technology meets all three 
of the substantial similarity criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments.
    With respect to the substantial similarity criteria, whether a 
product uses the same or a similar mechanism of action to achieve a 
therapeutic outcome, the applicant for EPKINLYTM asserted 
that the mechanism of action of EPKINLYTM is not the same as 
or similar to an existing technology. The applicant described 
EPKINLYTM as 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. The following table summarizes the applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for EPKINLYTM for the 
applicant's complete statements in support of its assertion that 
EPKINLYTM is not substantially similar to other currently 
available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.146


[[Page 58820]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.147


[[Page 58821]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.148

    The applicant for COLUMVITM asserted that 
COLUMVITM offers a novel mechanism of action for the 
treatment of R/R DLBCL with two or more prior lines of therapy patients 
and is not substantially similar to other currently available 
technologies because the mechanism of action of COLUMVITM is 
distinct from other available DLBCL therapies because 
COLUMVITM 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 COLUMVITM for the 
applicant's complete statements in support of its assertion that 
COLUMVITM is not substantially similar to other currently 
available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.149


[[Page 58822]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.150

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26811 and 88 FR 
26817), we noted that EPKINLYTM and COLUMVITM may 
have a similar mechanism of action, for the treatment of adult patients 
with R/R LBCL/DLBCL after three or more prior lines of therapy. We 
noted that COLUMVITM'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 COLUMVITM's application, 
the 2:1 structure of COLUMVITM 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 stated our belief that the 
mechanism of action for EPKINLYTM may be the same or similar 
to that of COLUMVITM. While the applicant for 
COLUMVITM stated that the use of COLUMVITM 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[supreg], XPOVIO[supreg], 
and ZYNLONTA[supreg]. We therefore stated our belief that 
COLUMVITM may treat the same or similar patient population 
as these existing FDA-approved treatments.
    We further stated our belief that EPKINLYTM and 
COLUMVITM 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, we stated that as it appears that EPKINLYTM and 
COLUMVITM 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 believed 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 were interested in information on how these two technologies may 
differ from each other with respect to the substantial similarity 
criteria and newness criterion, to inform our analysis of whether 
EPKINLYTM and COLUMVITM are substantially similar 
to each other and therefore should be considered as a single 
application for purposes of new technology add-on payments.
    We invited public comment on whether EPKINLYTM and 
COLUMVITM meet the newness criterion, including whether 
EPKINLYTM and COLUMVITM are substantially similar 
to each other and therefore should be evaluated as a single technology 
for purposes of new technology add-on payments.
    Comment: The applicant for EPKINLYTM submitted a letter 
maintaining that EPKINLYTM meets the newness criterion. The 
applicant stated that EPKINLYTM is an IgG1-bispecific 
antibody created using Genmab's proprietary DuoBody[supreg] technology 
platform and is administered subcutaneously, designed to simultaneously 
bind to CD3 on T-cells and CD20 on B-cells to induce T-cell mediated 
killing of CD20+ B-cells. The applicant stated that the DuoBody[supreg] 
platform enables controlled Fab-arm exchange to generate whole IgG1 
monoclonal antibodies employing specific point mutations while 
preserving the natural architecture. The applicant stated that 
EPKINLYTM's mechanism of action differs from CAR T-cell 
therapy as well as chemotherapy or conventional CD20-targeting 
monoclonal antibodies as these

[[Page 58823]]

therapies primarily affect either cellular processes or functions of 
rapidly dividing cells through interference with DNA, RNA, or protein 
synthesis. We note that the applicant did not discuss whether it 
believed EPKINLYTM is substantially similar to 
COLUMVITM in its comment.
    The applicant for COLUMVITM submitted a letter 
maintaining that COLUMVITM meets the newness criterion. With 
respect to whether COLUMVITM uses the same or a similar 
mechanism or action when compared to an existing technology, the 
applicant commented that COLUMVITM is a novel bispecific 
antibody that binds to the target B-cell antigen CD20 bivalently, 
eliciting a complete response in heavily pre-treated patients with R/R 
DLBCL in the third line setting.
    With respect to the request for comment on whether 
COLUMVITM is substantially similar to EPKINLYTM 
and whether these technologies should be evaluated as a single 
technology for the purposes of new technology add-on payments, the 
applicant for COLUMVITM, while recognizing the 
COLUMVITM and EPKINLYTM have similarities, stated 
that there are key distinctions between the two bispecific antibodies 
and compared the two CD20 binding domains in COLUMVITM as 
substantially different than a single CD20 binding domain in 
EPKINLYTM. Specifically, the applicant for 
COLUMVITM stated that COLUMVITM is a bispecific 
antibody with a unique 2:1 configuration, which enables bivalent 
binding of CD20 on B cells and monovalent binding of CD3 on T cells, 
making COLUMVITM the only bivalent bispecific antibody 
available for patients with R/R DLBCL, whereas EPKINLYTM 
includes a 1:1 configuration with monovalent binding of CD20 and CD3, a 
configuration common to other bispecific antibodies. Furthermore, the 
applicant for COLUMVITM stated that COLUMVITM 
elicits complete responses (CRs) faster than EPKINLYTM 
(citing a median of 1.4 months to CR versus 2.7 months) and is 
administered with a dosing schedule that requires fewer total treatment 
visits for patients compared with EPKINLYTM. The applicant 
for COLUMVITM also stated that COLUMVITM is 
administered as a fixed-duration treatment, allowing patients the 
benefit of time off therapy while EPKINLYTM requires 
continuous administration until disease progression or intolerability.
    With respect to CMS's concern regarding existing FDA-approved 
therapies that are used to treat R/R DLBCL patients with 3 or more 
lines of therapy including CAR T-cell therapies, POLIVY[supreg], 
XPOVIO[supreg], and ZYNLONTA[supreg], the applicant stated that there 
are significant limitations that render patients ineligible for or 
unable to benefit from these therapies. For CAR T-cell therapy, the 
applicant stated that despite promising response rates, they have 
adverse effect profiles that may not be manageable for some patients 
with R/R DLBCL, especially those with comorbidities and who are older. 
For POLIVY[supreg], the applicant stated that limitations include 
serious adverse effects, such as peripheral neuropathy (40% all grades 
and 2.3% grades 3 or higher), which is reflected in the 31 percent 
discontinuation rate reported in the U.S. prescribing information. For 
XPOVIO[supreg], the applicant stated that XPOVIO[supreg] has shown low 
responses (29% ORR and 13% CR) and high toxicity rates, including 80 
percent patients that experienced any-grade gastrointestinal events 
(13% grade 3 or higher). Lastly, for ZYNLONTA[supreg], the applicant 
stated that challenges with ZYNLONTA[supreg] include a low CR rate in 
patients (24%) and limited durability in responses (median duration of 
response was 10.3 months). Additionally, the applicant stated that the 
CD19-targeting MOA of ZYNLONTA[supreg] may impact how the treatment is 
sequenced for patients considering CAR T-cell therapy or who have 
relapsed after treatment. Lastly, the applicant stated that 
ZYNLONTA[supreg] has adverse effects of edema and skin reactions 
(including grade 3 or higher).
    Response: We thank the applicants for their comments. After 
consideration of the public comments we received, although we recognize 
that there may be slight molecular differences, we believe 
EPKINLYTM and COLUMVITM both fall into the same 
class of IG1 bispecific antibodies and are therefore substantially 
similar to one another. While COLUMVITM has bivalent binding 
domains as opposed to monovalent binding domains for 
EPKINLYTM, we do not believe number of domains meaningfully 
differentiate the mechanism of action, as discussed in prior rulemaking 
(87 FR 48924), and we instead believe that the technologies are 
purposed to achieve the same therapeutic outcome using the same or 
similar mechanism of action using bispecific CD20 and CD3 binding 
antibodies. Further, while COLUMVITM may have a different 
administration schedule, we do not believe the administration schedule 
affects or substantiates a new mechanism of action. In addition, while 
COLUMVITM may elicit a faster time to CR in comparison to 
EPKINLYTM, we believe that these differences relate to an 
assessment of whether the technologies meet the substantial clinical 
improvement criterion, rather than the newness criterion. For these 
reasons, while the applicant for COLUMVITM highlighted 
differences between COLUMVITM and EPKINLYTM, we 
are not convinced that these differences result in the use of a 
different mechanism of action, therefore, we believe that the two 
technologies' mechanisms of action are the same. Furthermore, we 
believe that EPKINLYTM and COLUMVITM are 
substantially similar to one another because the technologies are 
intended to treat the same or similar disease in the same or similar 
patient population--patients with R/R LBCL/DLBCL with two or more prior 
lines of therapy, and that potential cases representing patients who 
may be eligible for treatment would be assigned to the same MS-DRGs.
    We also believe EPKINLYTM and COLUMVITM are 
not substantially similar to any other existing technologies because, 
as both applicants asserted in their FY 2024 new technology add-on 
payment applications and in their comments that they are anti-CD3xCD20 
bispecific antibodies with a unique mechanism of action that will be 
the first of its kind for the treatment of R/R DLBCL after two or more 
lines of prior therapy, the technologies do not use the same or similar 
mechanism of action to achieve a therapeutic outcome as any other 
existing drug or therapy assigned to the same or different MS-DRG. 
Based on the information described in this section, we believe 
EPKINLYTM and COLUMVITM meet the newness 
criterion.
    Based on the previous discussion, we are making one determination 
regarding approval for new technology add-on payments that will apply 
to both applications, and in accordance with our policy, we use the 
earliest market availability date submitted as the beginning of the 
newness period for both EPKINLYTM and COLUMVITM.
    We believe our current policy for evaluating new technology payment 
applications for two technologies that are substantially similar to 
each other is consistent with the authority and criteria in section 
1886(d)(5)(K) of the Act. We note that CMS is authorized by the Act to 
develop criteria for the purposes of evaluating new technology add-on 
payment applications. For the purposes of new technology add-on 
payments, when technologies are substantially similar to each other, we 
believe it is appropriate to evaluate both technologies as one 
application for new

[[Page 58824]]

technology add-on payments under the IPPS, for the reasons we discussed 
earlier and consistent with our evaluation of substantially similar 
technologies in prior rulemaking (82 FR 38120).
    With respect to the newness criterion, as previously stated, 
EPKINLYTM received FDA approval on May 19, 2023, and 
COLUMVITM received FDA approval on June 15, 2023. In 
accordance with our policy, because these technologies are 
substantially similar to each other, we use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies. Therefore, based on our policy, with regard to both 
technologies, if the technologies are approved for new technology add-
on payments, we believe that the beginning of the newness period would 
be the date on which EPKINLYTM received FDA approval, which 
is May 19, 2023.
    The applicants submitted separate cost and clinical data, and in 
the proposed rule, we reviewed and discussed each set of data 
separately. However, as stated previously, for this final rule, we will 
make one determination regarding new technology add-on payments that 
will apply to both applications. We believe that this is consistent 
with our policy statements in the past regarding substantial similarity 
(85 FR 58679).
    If substantially similar technologies are submitted for review in 
different (and subsequent) years, rather than the same year, we 
evaluate and make a determination on the first application and apply 
that same determination to the second application. However, because the 
technologies have been submitted for review in the same year, and 
because we believe they are substantially similar to each other, we 
consider both sets of cost data and clinical data in making a 
determination, and we do not believe that it is possible to choose one 
set of data over another set of data in an objective manner.
    As we discussed in the proposed rule and as stated previously, each 
applicant submitted separate analyses regarding the cost criterion for 
each of their products, and both applicants maintained that their 
product meets the cost criterion. We summarize each analysis in this 
section.
    With respect to the cost criterion, the applicant for 
EPKINLYTM 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 
EPKINLYTM. 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 EPKINLYTM 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 
EPKINLYTM meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 58825]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.151

    With respect to the cost criterion, the COLUMVITM 
applicant searched the FY 2021 MedPAR file for potential cases 
representing patients who may be eligible for COLUMVITM, 
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 COLUMVITM, require an inpatient 
admission within the 3-day payment window following the outpatient

[[Page 58826]]

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 COLUMVITM 
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 COLUMVITM meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TR28AU23.152


[[Page 58827]]


    We invited public comment on whether EPKINLYTM or 
COLUMVITM meet the cost criterion.
    Comment: The applicant for EPKINLYTM submitted a comment 
referring to the two cost analyses submitted with the application; one 
scenario using DLBCL diagnosis codes for patients who are being treated 
for cytokine release syndrome arising from the outpatient 
administration of EPKINLYTM that would require inpatient 
admission within the 3-day payment window and the other scenario of 
cases reporting diagnosis codes for cytokine release syndrome. Given 
the availability of the wholesale acquisition cost (WAC) of EPINKLY, 
the applicant re-calculated the cost threshold analyses using the cost 
of $11,463.61 ($317.20/mg * 36.14 mg) for EPKINLYTM per 
patient to the hospital. The applicant reiterated that 
EPKINLYTM meets the cost criterion under both scenarios 
where the final inflated case weighted standardized charge per case of 
$176,329 exceeds the case weighted threshold of $59,550 by $116,779 in 
the first scenario and where the final inflated case weighted 
standardized charge per case of $150,780 exceeds the case weighted 
threshold of $56,682 by $94,103 in the second scenario.
    The applicant for COLUMVITM submitted a comment 
reiterating that COLUMVITM meets the cost criterion because 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount in the cost 
criterion analysis submitted in its new technology add-on payment 
application.
    Response: We thank the applicants for their comments. We agree that 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount for both 
technologies. Therefore, both EPKINLYTM and 
COLUMVITM meet the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that EPKINLYTM 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[supreg], YESCARTA[supreg], and 
Breyanzi[supreg], and non-CAR T-cell therapies such as POLIVY[supreg], 
ADCETRIS[supreg], XPOVIO[supreg], and ZYNLONTA[supreg]); and it 
significantly improves clinical outcomes among R/R 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[supreg], 
ZYNLONTA[supreg], YESCARTA[supreg], XPOVIO[supreg], KYMRIAH[supreg], 
and POLIVY[supreg].\37\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion.
---------------------------------------------------------------------------

    \37\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 58828]]

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[[Page 58829]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.154

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26816), after 
review of the information provided by the applicant, we had the 
following concerns regarding whether EPKINLYTM 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 EPKINLYTM as having stronger efficacy 
data in comparison to other 3L+ treatment options available. We noted 
that the applicant provided many background studies regarding R/R DLBCL 
treatment options. However, they were unable to provide the complete 
study of EPKINLYTM (EPCORE NHL-1) in support of its claim of 
EPKINLYTM'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 stated we were limited in our ability to fully evaluate 
and assess the supporting evidence for this claim. Furthermore, we 
noted that there may be other available treatments for this specific 
population, including CAR T-cell therapies. We also noted 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 EPKINLYTM as having 
better safety profiles and efficacy than existing treatments. However, 
the comparisons are not matched cases within a comparative study, and 
we questioned 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 were interested in 
additional information to demonstrate that EPKINLYTM has 
significantly better efficacy and safety profiles than other available 
treatments.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that COLUMVITM 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.\38\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement. Please see the online posting for 
COLUMVITM for the applicant's complete statements regarding 
the substantial clinical improvement criterion and the supporting 
evidence provided.
---------------------------------------------------------------------------

    \38\ 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 58830]]

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[[Page 58831]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.156


[[Page 58832]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.157

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26823), after 
review of the information provided by the applicant, we stated we had 
the following concerns regarding whether COLUMVITM meets the 
substantial clinical improvement criterion. To support its assertion 
that COLUMVITM offers a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
treatments, the applicant asserted that COLUMVITM expands 
treatment options for R/R DLBCL patients who have progressed after 
other 2L or 3L+ therapies. However, we noted 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 
COLUMVITM reduces mortality of patients who had progressed 
after ASCT or CAR T-cell therapy, we noted that the applicant provided 
several background studies 39 40 41 42 regarding other 
existing treatments for R/R DLBCL as well as the main 
COLUMVITM study, however, as this conclusion was based on 
the comparison of results across these independent studies, we stated 
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 
COLUMVITM is an off-the-shelf therapy without any delay due 
to personalized manufacturing, such as CAR T-cell therapy, and that 
COLUMVITM can be made available across various geographies 
for patients with DLBCL, we questioned whether other available 
therapies, such as POLIVY[supreg], XPOVIO[supreg], and 
ZYNLONTA[supreg], that may be used to treat patients with multiple 
relapses or who are refractory to other therapies, also would not have 
those limitations.
---------------------------------------------------------------------------

    \39\ Gisselbrecht C, et al. J Clin Oncol 2010; 28(27):4184-90.
    \40\ Schuster SJ, et al. Lancet Oncol 2021;21:1403-15.
    \41\ Abramson JS, et al. The Lancet. 2020;396(10254):839-52.
    \42\ Locke FL, et al. Lancet Oncol 2019;20:31-42.
---------------------------------------------------------------------------

    With respect to the applicant's claims that COLUMVITM 
improves outcomes as compared to existing treatments, including safety 
and rate of treatment discontinuations, we noted that only one single 
arm trial with no comparators was provided in support of this claim. We 
further noted that the comparisons of the supporting evidence 
43 44 provided for other existing technologies to the main 
COLUMVITM study are not matched cases; for example, the 
studies do not adjust for type and severity of AEs. Therefore, we 
questioned whether these comparisons can be used to demonstrate a 
significant difference in safety or efficacy.
---------------------------------------------------------------------------

    \43\ Salles G, et al. Lancet Oncol 2020;21(7):978-88.
    \44\ MONJUVI[supreg] (tafasitamab) [prescribing information]. 
Boston, MA: Morphosys US Inc.; June 2021.
---------------------------------------------------------------------------

    With respect to the applicant's claim that COLUMVITM is 
a fixed-treatment duration therapy, providing patients with time off 
treatment and the potential to improve patient quality of life, we 
noted 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 COLUMVITM 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 were interested in 
additional information regarding the association between treatment type 
and duration and quality of life, particularly how 
COLUMVITM's treatment type and duration results in higher 
quality of life as compared to the treatment type and duration of 
existing technologies.
    We invited public comments on whether EPKINLYTM or 
COLUMVITM meet the substantial clinical improvement 
criterion.
    Comment: The applicant for EPKINLYTM submitted a comment 
regarding the substantial improvement criterion and provided responses 
to concerns raised by CMS in the proposed rule. In response to CMS's 
request for additional support of the claim that EPKINLYTM 
has stronger efficacy in comparison to other 3L+ treatment options 
available, the applicant for EPKINLYTM stated 
EPKINLYTM was shown to have significantly better clinical 
outcomes compared to chemoimmunotherapy in two indirect treatment 
comparisons. The applicant stated that R/R DLBCL patients face 
significant disease burden and poor clinical outcomes. The applicant 
further stated that for patients who have failed two or more prior 
lines of therapy (LOT), there is no standard of care; although 
chemoimmunotherapy (CIT) regimens are commonly used, they do not 
provide optimal outcomes. The applicant also stated that while direct

[[Page 58833]]

treatment comparisons have not yet been made, real world indirect 
comparisons have shown that compared to chemoimmunotherapy, 
EPKINLYTM offers a substantially higher chance of response 
and significantly lower risks of progression and 
mortality.45 46 The applicant also stated that 
EPKINLYTM demonstrated clinically meaningful outcomes 
compared to polatuzumab vedotin and tafasitamab plus lenalidomide in a 
matched cohort comparative analysis. Furthermore, the applicant stated 
that two indirect treatment comparison studies have been conducted 
comparing EPKINLYTM and CAR T-cell therapy in patients with 
R/R LBCL, and that in both studies, EPKINLYTM was shown to 
have no statistically significant difference in efficacy compared to 
CAR T-cell therapy. The applicant stated that EPKINLYTM is 
an off-the-shelf therapy that may be effective for patients who cannot 
easily access CAR T-cell therapy, who are ineligible for CAR T-cell 
therapy, or who have progressed from CAR T-cell therapy. The applicant 
indicated that access to CAR T-cell therapy is limited due to its 
availability only at approximately 200 centers in specialized medical 
centers to which older adults may be unable to travel to. In addition, 
the applicant indicated that an estimated 35 percent to 50 percent of 
patients would not be eligible for second line CAR T-cell therapy and 
that this number likely increases in third and subsequent lines of 
therapy.\47\ The applicant stated that in a real-world analysis of 
patients who received CAR T-cell therapy, ~60 percent of patients never 
respond to treatment with a median failure at only 49 days. For these 
patients, who relapse or who are refractory to CAR T-cell therapy, a 
standard of care has not been established.\48\ The applicant concluded 
that EPKINLYTM would be effective for those patients who are 
either ineligible or have progressed from CAR T-cell therapy, and that 
because EPKINLY is an off-the-shelf therapy, it is not constrained by 
the same individualized manufacturing timelines and associated 
challenges that can delay patient starts on CAR T-cell therapy.
---------------------------------------------------------------------------

    \45\ Ip, A., et al. Comparison of Real-World Clinical Outcomes 
in Patients With Relapsed/Refractory Large B-cell Lymphoma Treated 
With Epcoritamab vs Chemoimmunotherapy. The European Hematology 
Association Abstract Library. 2023.
    \46\ Ip, A., et al. Comparison of Real-World Clinical Outcomes 
in Patients With Relapsed/Refractory Large B-cell Lymphoma Treated 
With Epcoritamab vs Chemoimmunotherapy. The European Hematology 
Association Abstract Library. 2023.
    \47\ Puckrin R., et al. Real-World Eligibility for Second-Line 
Chimeric Antigen Receptor T Cell Therapy in Large B Cell Lymphoma: A 
Population-Based Analysis. Transplant Cell Ther. 2022 
Apr;28(4):218.e1-218.
    \48\ Dodero, A., et al. Patients Outcome after Chimeric Antigen 
Receptor (CAR) T-Cells Failure in Aggressive B-Cell Lymphomas: Role 
of Immunotherapy and Prognostic Factors. Blood 2022; 140 (Supplement 
1): 9468-9469.
---------------------------------------------------------------------------

    Another commenter submitted a comment in support of the approval of 
the new technology add-on payment application for EPKINLYTM, 
citing its efficacy in the third line setting in patients with R/R LBCL 
with an overall response rate of 63.1 percent and a complete response 
rate of 39 percent based on Lugano criteria and a manageable safety 
profile.\49\ Furthermore, the commenter stated that despite recent 
approval and expanded utilization of CAR T-cell therapy, there remains 
no clear standard of care for treatment of many patients with R/R LBCL 
due to issues surrounding access. The commenter stated that CAR T-cell 
therapy is offered at only ~210 centers in the U.S, often concentrated 
in major metropolitan areas, creating significant barriers for patients 
living in remote or rural areas.\50\ The commenter further stated that 
even when CAR T-cell therapy is accessible, CAR T-cell therapy poses 
several challenges for patients, starting with the potentially lengthy 
manufacturing process that includes pre-treatment procedures like 
leukapheresis, to collect T-cells, and then genetically modifying T-
cells to express CARs, which can take up to several weeks.\51\ Lastly, 
the commenter stated that approximately 40 percent of DLBCL patients 
were ineligible for CAR T-cell therapy due to factors such as organ 
dysfunction, active infections or prior stem cell transplantation, 
while around 18-20 percent of those that were eligible underwent 
leukapheresis but did not receive CAR T-cells due to disease 
progression, adverse events, or clinical deterioration.52 53 
The commenter concluded that, in summary, the significant challenges 
associated with CAR T-cell therapy including limited access, lengthy 
manufacturing processes, eligibility restrictions, and risk of 
treatment failure, underscore the need for effective treatments with 
comparable clinical benefits and broader patient reach.
---------------------------------------------------------------------------

    \49\ Thieblemont C., et al. Epcoritamab, a Novel, Subcutaneous 
CD3xCD20 Bispecific T-Cell-Engaging Antibody, in Relapsed or 
Refractory Large B-Cell Lymphoma: Dose Expansion in a Phase I/II 
Trial. J Clin Oncol. 2023 Apr 20;41(12):2238-2247.
    \50\ Snyder S., et al. Access to Chimeric Antigen Receptor T 
Cell Therapy for Diffuse Large B Cell Lymphoma. Adv Ther. 2021 
Sep;38(9):4659-4674.
    \51\ Bishop M., et al. Second-Line Tisagenlecleucel or Standard 
Care in Aggressive B-Cell Lymphoma. N Engl J Med. 2022; 386: 629-39.
    \52\ Schuster S., et al. Tisagenlecleucel in Adult Relapsed or 
Refractory Diffuse Large B-Cell Lymphoma. N Engl J Med. 
2019;380(1):45-5.
    \53\ Jacobson C., et al. Axicabtagene Ciloleucel in the Non-
Trial Setting: Outcomes and Correlates of Response, Resistance, and 
Toxicity. J Clin Oncol. 2020;38(27):3095-3106.
---------------------------------------------------------------------------

    The applicant for COLUMVITM submitted comments in 
response to CMS's concerns in the FY 2024 IPPS/LTCH PPS proposed rule 
regarding whether COLUMVITM meets the substantial clinical 
improvement criterion. The applicant reiterated its support for 
COLUMVITM stating that COLUMVITM significantly 
improves clinical outcomes of patients with R/R DLBCL after at least 
two prior systemic therapies.
    With respect to CMS's concern that the existence of other 
technologies and treatments approved for the R/R DLBCL patients with 
two or more lines of therapy made it unclear that this would represent 
a patient population unresponsive to or ineligible for currently 
available treatments, the applicant stated that COLUMVITM 
expands treatment options for three key subsets of patients in the R/R/
DLBCL setting receiving and inadequately treated by existing therapies, 
including: patients who are ineligible for or who cannot access ASCT or 
CAR T-cell therapy, patients who have progressed after ASCT or CAR T-
cell therapy, and patients who have progressed after two or more other 
lines of approved therapies. The applicant stated that 
COLUMVITM is a treatment option for patients who are 
ineligible for or cannot access ASCT or CAR T-cell therapy, indicating 
that about half of patients with R/R DLBCL with three or more lines of 
therapies are ineligible for ASCT or CAR T-cell therapies because of 
treatment-related toxicities. The applicant stated that this patient 
population is further vulnerable to accessing ASCT or CAR T-cell 
therapy as there are limited treatment sites and manufacturing delays. 
The applicant cited a retrospective study which showed that in patients 
with R/R DLBCL receiving three or more lines of treatment (3L) post CAR 
T-cell therapy approval, less than 20 percent of patients received CAR 
T-cell therapy in 3L between October 2017 and March 2020.\54\ The 
applicant further stated COLUMVITM is a new option for 
patients who have progressed after ASCT or CAR T-cell therapy, stating 
that about two-thirds of patients with R/R DLBCL relapse after ASCT, 
and about half of patients receiving CAR T-cell therapies experience 
disease

[[Page 58834]]

progression.55 56 The applicant stated that many patients in 
the 3L+ setting have low response rates to available therapies, and 
that tolerability of approved treatments can be poor with a range of 
potential adverse events (AEs) associated with these therapies. The 
applicant stated that tolerability of COLUMVITM was 
demonstrated by low rates of treatment discontinuation and an overall 
favorable safety profile with AEs that are more tolerable than those 
associated with other treatment options in the 3L+ setting.
---------------------------------------------------------------------------

    \54\ Xie, J., et al. 2021. ``Characteristics and Treatment 
Patterns of Relapsed/Refractory Diffuse Large B-Cell Lymphoma in 
Patients Receiving >=3 Therapy Lines in Post-CAR-T Era.'' Curr Med 
Res Opin 37, no. 10 (Oct): 1789-1798.
    \55\ Dickinson, M. J., et al. 2022. ``Glofitamab for Relapsed or 
Refractory Diffuse Large B-Cell Lymphoma.'' N Engl J Med 387, no. 24 
(Dec 15): 2220-2231.
    \56\ Sehn, L. H., et al. 2021. ``Diffuse Large B-Cell 
Lymphoma.'' N Engl J Med 384, no. 9 (Mar 4): 842-858.
---------------------------------------------------------------------------

    With respect to CMS's concern that the applicant provided several 
background studies regarding other existing treatments for R/R DLBCL as 
well as the main COLUMVITM study to support the applicant's 
claim that COLUMVITM reduces mortality of patients who had 
progressed after ASCT or CAR T-cell therapy, the applicant for 
COLUMVITM stated that while ASCT can produce long-term 
remissions in about one-third of patients who undergo the procedure, 
the remaining patients who experience disease progression have poor 
outcomes. The applicant stated that effective treatments for patients 
who progress after ASCT is an unmet need in R/R DLBCL and cited the 
CORAL \57\ study where patients who relapsed after ASCT had a median 
overall survival (OS) of 10 months and an estimated 1-year OS of 39 
percent whereas for patients who relapse within 6 months the median OS 
was 5.7 months. The applicant further stated that about half of 
patients receiving CAR T-cell therapy experience disease progression 
with 48 percent of patients who receive CAR T-cell therapy in 3L began 
a 4L treatment within 4 months. The applicant stated there is limited 
data on how patients progress after CAR T-cell therapy progression and 
patient response to salvage treatment given the recent introduction of 
commercial CAR T-cell therapy. The applicant indicated the outcomes 
from limited data are poor and cited a recent analysis of 298 patients 
who received CAR T-cells in the United Kingdom, 54 percent experienced 
disease with a median of 2.4 months to progression and had a median OS 
of 4.4 months.\58\ The applicant further stated that patients who went 
on to additional therapies had a median OS of 8.8 months with only 22 
percent achieving a CR whereas patients who did not receive further 
treatment had a median OS of 1.7 months.\59\ The applicant stated that 
among currently approved 3L+ options, there is either no data or a lack 
of efficacy for patients after CAR T-cell therapy, indicating that in a 
trial of one therapy, enrolled patients with prior ASCT and CAR T-cell 
therapy 29 percent and 15 percent respectively achieved CRs.\60\ The 
applicant indicated that COLUMVITM study patients with prior 
ASCT and CAR T-cell therapy achieved CRs at rates of 67 percent and 35 
percent respectively indicating that this is a substantial clinical 
improvement for a patient population with an unmet need.
---------------------------------------------------------------------------

    \57\ Van Den Neste, E., et al. 2016. ``Outcome of Patients with 
Relapsed Diffuse Large B-Cell Lymphoma Who Fail Second-Line Salvage 
Regimens in the International CORAL Study.'' Bone Marrow Transplant 
51, no. 1 (Jan): 51-7.
    \58\ Xie, J., et al. 2021. ``Characteristics and Treatment 
Patterns of Relapsed/Refractory Diffuse Large B-Cell Lymphoma in 
Patients Receiving >/=3 Therapy Lines in Post-CAR-T Era.'' Curr Med 
Res Opin 37, no. 10 (Oct): 1789-1798.
    \59\ Kuhnl, A., et al. 2021. ``Outcome of Large B-Cell Lymphoma 
Patients Failing CD19 Targeted CAR T Therapy.'' ICML Oral 087.
    \60\ Caimi, P. F., et al. 2021. ``Loncastuximab Tesirine in 
Relapsed or Refractory Diffuse Large B-Cell Lymphoma (LOTIS-2): A 
Multicentre, Open-Label, Single-Arm, Phase 2 Trial.'' The Lancet 
Oncol 22, no. 6: 790-800.
---------------------------------------------------------------------------

    With respect to CMS's concerns as to whether other available 
therapies, such as POLIVY[supreg], XPOVIO[supreg], and 
ZYNLONTA[supreg], may be used to treat patients with multiple relapses 
and do not require personalized manufacturing such as CAR T-cell 
therapy, the applicant for COLUMVITM stated that although 
these therapies are available off the shelf, COLUMVITM is an 
off-the-shelf therapy that provides a substantial clinical improvement 
via efficacy, durability, and low toxicity in a heavily pretreated, 
highly refractory patient population.
    With respect to CMS's concerns as to whether COLUMVITM 
improves outcomes as compared to existing treatments, including safety 
and rate of treatment discontinuations, the applicant for 
COLUMVITM stated that head-to-head data of therapies in 3L+ 
are not available and that while direct comparisons across different 
trials are subject to confounding and bias because of systematic 
differences, consideration of outcomes in clinical trials for currently 
approved therapies indicate the outcomes are in line with historical 
rates of response in the 3L+ setting where typically less than half of 
patients respond to conventional 3L therapies and the median OS of 
patients in the 3L setting is 4-10 months.61 62 63 The 
applicant further stated that single-arm studies are an important 
mechanism to facilitate faster access to novel therapies, particularly 
for patients who have exhausted other approved options.
---------------------------------------------------------------------------

    \61\ Gisselbrecht, C., et al. 2010. ``Salvage Regimens with 
Autologous Transplantation for Relapsed Large B-Cell Lymphoma in the 
Rituximab Era.'' J Clin Oncol 28, no. 27 (Sep 20): 4184-90.
    \62\ Van Den Neste, E., et al. 2017. ``Outcomes of Diffuse Large 
B-Cell Lymphoma Patients Relapsing after Autologous Stem Cell 
Transplantation: An Analysis of Patients Included in the CORAL 
Study.'' Bone Marrow Transplant 52, no. 2 (Feb): 216-221.
    \63\ Crump, M., et al. 2017. ``Outcomes in Refractory Diffuse 
Large B=Cell Lymphoma: Results from the International SCHOLAR-1 
Study.'' Blood 130: 1800-1809.
---------------------------------------------------------------------------

    With respect to our request for additional information regarding 
the association between treatment type and the applicant for 
COLUMVITM's claim that COLUMVITM is a fixed-
treatment duration therapy that provides patients with time off 
treatment and the potential to improve patient quality of life, the 
applicant responded that while there is no data available on this 
subject in 3L+ DLBCLs yet, fixed-duration versus continuous therapy 
have been studied in other therapeutic areas and a range of benefits 
have been associated with fixed-duration therapies. The applicant 
indicated that the time off treatment may be associated with 
improvement in quality of life based on a nonrandomized study of 
patients with chronic myeloid leukemia whose patient-reported outcomes 
included improvement in treatment-related adverse effects when 
discontinuing a tyrosine kinase inhibitor treatment.\64\ The applicant 
indicated that patients prefer fixed-duration therapies to continuous 
therapies citing surveys of patients with chronic lymphocytic leukemia 
and Waldenstrom's macroglobulinemia identified fixed duration therapy 
as a positive attribute when compared to continuous 
therapy.65 66 The applicant for COLUMVITM further 
stated that fixed-duration therapy can reduce costs as compared to 
continuous treatment options.
---------------------------------------------------------------------------

    \64\ Atallah, E., et al. 2021. ``Assessment of Outcomes after 
Stopping Tyrosine Kinase Inhibitors among Patients with Chronic 
Myeloid Leukemia: A Nonrandomized Clinical Trial.'' JAMA Oncol 7, 
no. 1 (Jan 1): 42-50.
    \65\ Ravelo, A, et al. 2022. ``Understanding Patient Preferences 
for Chronic Lymphocytic Leukemia Treatments.'' Blood 140, no. 
Supplement 1: 10803-10805.
    \66\ Amaador, K., et al. 2023. ``Patient Preferences Regarding 
Treatment Options for Waldenstrom's Macroglobulinemia: A Discrete 
Choice Experiment.'' Cancer Med 12, no. 3 (Feb): 3376-3386.
---------------------------------------------------------------------------

    Response: We thank the commenters for their comments regarding the

[[Page 58835]]

substantial clinical improvement criterion. Based on the additional 
information received, we agree that EPKINLYTM and 
COLUMVITM represent a substantial clinical improvement over 
existing technologies because these technologies offer treatment 
options for patients with R/R DLBCL after two or more prior therapies 
who are unresponsive to, or ineligible for, currently available 
treatments, who are ineligible due to factors such as organ 
dysfunction, active infection, or prior stem cell transplantation, or 
for whom CAR T-cell therapy is not an available treatment option.
    After consideration of the public comments we received, and the 
information included in both the applicants' new technology add-on 
payment applications, we have determined that EPKINLYTM and 
COLUMVITM meet all of the criteria for approval of new 
technology add-on payments. Therefore, we are approving new technology 
add-on payments for EPKINLYTM and COLUMVITM for 
FY 2024. As previously stated, cases involving EPKINLYTM 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS procedure code XW013S9 (Introduction of epcoritamab 
monoclonal antibody into subcutaneous tissue, percutaneous approach, 
new technology group 9). Cases involving COLUMVITM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS procedure code XW033P9 (Introduction of glofitamab 
antineoplastic into peripheral vein, percutaneous approach, new 
technology group 9) or XW043P9 (Introduction of glofitamab 
antineoplastic into central vein, percutaneous approach, new technology 
group 9).
    Each of the applicants submitted cost information for its 
application. The manufacturer of EPKINLYTM stated that the 
cost of its technology is $11,463.61 per patient. The applicant 
projected that 117 cases will involve the use of EPKINLYTM 
in FY 2024. The manufacturer of COLUMVITM stated that the 
cost of its technology is $5,748.53. The applicant projected that 40 
cases will involve the use of COLUMVITM in FY 2024. Because 
the technologies are substantially similar to each other, we believe 
using a single cost for purposes of determining the new technology add-
on payment amount is appropriate for EPKINLYTM and 
COLUMVITM even though each applicant has its own set of 
codes. We also believe using a single cost provides predictability 
regarding the add on payment when using EPKINLYTM or 
COLUMVITM for the treatment of patients with R/R DLBCL. As 
such, consistent with prior rulemaking (85 FR 58684), we believe that 
the use of a weighted average of the cost of EPKINLYTM and 
COLUMVITM based on the projected number of cases involving 
each technology to determine the maximum new technology add-on payment 
would be most appropriate. To compute the weighted cost average, we 
summed the total number of projected cases for each of the applicants, 
which equaled 157 cases (117 plus 40). We then divided the number of 
projected cases for each of the applicants by the total number of 
cases, which resulted in the following case-weighted percentages: 74.5 
percent for EPKINLYTM and 25.5 percent for 
COLUMVITM. We then multiplied the cost per case for the 
manufacturer specific drug by the case-weighted percentage (0.745 * 
$11,463.61 = $8,540.39 for EPKINLYTM and 0.255 * $5,748.53 = 
$1,465.87 for COLUMVITM). This resulted in a case-weighted 
average cost of $10,006.26 for the technology. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the use of 
EPKINLYTM or COLUMVITM is $6,504.07 for FY 2024.
d. 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 from FDA 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 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 noted in the FY 
2024 IPPS/LTCH PPS proposed rule (88 FR 26824), 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 LunsumioTM 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 percent of 
the time it occurred after a 60 mg dose, 20 percent of the time it 
developed after a 1 mg dose, and 5 percent after a 2 mg dose. Based on 
this information, it seems that the weighted average inpatient dose 
would be 45.3 mg.
BILLING CODE 4120-01-P

[[Page 58836]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.158

    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) or 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 58837]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.159

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26825), we stated 
that 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 noted 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 stated our belief 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 invited public comments on whether LunsumioTM is 
substantially similar to existing technologies and whether 
LunsumioTM meets the newness criterion.

[[Page 58838]]

    Comment: The applicant submitted a public comment regarding the 
newness criterion. In response to CMS's questions related to newness, 
the applicant stated that although several treatment regimens have been 
developed and approved for R/R FL in the U.S., there are no preferred 
treatment options for patients in the 3L+ setting. The applicant 
further stated that although currently available therapies for patients 
with R/R FL who have had two or more prior therapies may be appropriate 
for certain patients, substantial clinical factors impact whether a 
patient can benefit from these 3L+ treatment options (for example, 
copanlisib, tazemetostat, axicabtagene ciloleucel, and 
tisagenlecleucel). The applicant noted these include high-risk features 
such as refractoriness to prior therapy, double refractoriness to prior 
alkylator and anti-CD20 monoclonal antibody therapy, POD24 of 1L 
chemoimmunotherapy, FLIPI score of 3-5, or older age. The applicant 
further stated that certain treatment options for patients with R/R FL 
who have had two or more prior therapies have their own limitations 
that may restrict the eligible patient population. The applicant used 
copanlisib, tazemetosib, and CAR T-cell therapy as examples. According 
to the applicant, copanlisib is associated with severe toxicities and 
suboptimal responses that limit its use in patients with R/R FL who 
have received 2+ prior systemic therapies. With regard to tazemetostat, 
the applicant stated that it offers limited efficacy to patients with 
R/R FL who have received >=2 prior systemic therapies and do not have 
an EZH2 mutation. The applicant stated that while tazemetostat is still 
approved for patients with wildtype EZH2, the label includes language 
that tazemetostat is indicated for the treatment of ``Adult patients 
with relapsed or refractory follicular lymphoma who have no 
satisfactory alternative treatment options,'' and that because EZH2 
mutations are found in less than 30 percent of FL cases, 70 percent of 
the patients who progress after 2+ prior systemic treatments can 
benefit from additional options. With regard to CAR T-cell therapy, the 
applicant maintained that benefits of this treatment in patients with 
R/R FL who have received 2+ prior systemic therapies are limited by 
tolerability and accessibility. The applicant stated that patients aged 
65 years or older make up about 35 percent of CAR T-cell recipients 
(25%-41%) and may experience higher rates of CRS and neurological AEs 
than patients under 65 years of age, and that unlike treatment-emergent 
AEs with other therapies, CAR T cells cannot be dose-reduced or delayed 
managing these AEs, nor can treatment be discontinued once 
administered.
    According to the applicant, additional treatment options are needed 
for patients who may not be candidates for CAR T-cell therapies or who 
cannot access the therapy. The applicant argued that even for patients 
who are fit enough to tolerate CAR T-cell therapy toxicities, access to 
treatment remains a significant barrier. The applicant noted that 
twelve states currently have no available CAR T-cell therapy sites. The 
applicant stated that even for those with access to a treatment center, 
additional barriers limit the number of patients who can receive CAR T-
cell therapy, such as with ensuring that a manufacturing slot is 
available when a patient's cells are collected (if frozen cells are not 
an option), or obtaining necessary reagents.
    The applicant asserted that LunsumioTM is efficacious in 
patients with R/R FL who have received 2+ lines of systemic therapy. 
According to the applicant, LunsumioTM is efficacious across 
all subgroups, including those who are heavily pretreated and highly 
refractory, and those who aged 65 years or older, and has a generally 
manageable safety profile. In addition, the applicant maintained that 
the tolerability of LunsumioTM compared with currently 
approved 3L+ treatment options is a substantial clinical improvement. 
Per the applicant, LunsumioTM is anticipated to be a 
reasonable treatment option for patients who have progressed after CAR 
T-cell therapy, substantially improving access to 3L+ treatment for 
these patients. According to the applicant, as an off-the-shelf therapy 
that does not require patient-specific manufacturing, 
LunsumioTM will be widely available at hospitals and clinics 
across the country, substantially improving access to treatment 
compared with CAR T-cell therapies. The applicant expected that 
LunsumioTM will fill an unmet need left by other approved 
3L+ therapies and therefore does not treat the same or similar type of 
disease in the same or similar patient population when compared with 
existing technologies.
    Another commenter submitted a public comment supporting the newness 
of LunsumioTM in the treatment of multiply relapsed FL, as 
the first approved CD20xCD3 bispecific antibody. According to the 
commenter, while there are other agents approved for the treatment of 
multiply relapsed FL, they have clinical limitations that significantly 
constrain their utility, such as lower response rates, inferior 
durability of response, treatment schedules that limit routine use, and 
key toxicities. The commenter also explained that the use of CAR-T cell 
therapies for FL are limited by toxicity and by access to centers of 
excellence with the resources to administer such treatment. The 
commenter asserted that LunsumioTM represents a critical 
innovation for patients with multiply relapsed FL, offers a potent 
immunotherapy appropriate for outpatient and community-based use, and 
has a new and unique mechanism of action.
    Response: We thank the applicant and commenter for their comments. 
We disagree with the commenter and continue to believe that 
LunsumioTM would be used for the same disease in a similar 
patient population when compared to other therapies approved to treat 
FL in 3L+ settings. We note that according to the applicant, treatment 
options are available for R/R FL patients, though limitations impact 
which patients can benefit from these available 3L+ treatment options. 
However, we believe that these limitations relate to an assessment of 
whether the technology meets the substantial clinical improvement 
criterion rather than the newness criterion. As a result, we believe 
that LunsumioTM treats the same or similar disease in the 
same or similar patient population when compared to existing treatments 
for FL in 3L+ settings. Based on our review of the comments received 
and information submitted by the applicant as part of its FY 2024 new 
technology add-on payment application for LunsumioTM, we 
agree with the applicant that LunsumioTM has a unique 
mechanism of action as a CD20xCD3 bispecific monoclonal antibody for 
the treatment of 3L+ FL. Therefore, we believe that 
LunsumioTM is not substantially similar to existing 
treatment options and meets the newness criterion. As we have discussed 
in prior rulemaking (77 FR 53348), generally, our policy is to begin 
the newness period on the date of FDA approval or clearance or, if 
later, the date of availability of the product on the U.S. market. The 
applicant stated that LunsumioTM was FDA approved for 3L+ 
treatment of adult patients with R/R FL on December 22, 2022, and 
became available for sale after the new year with a date of first sale 
on January 6, 2023. However, it is unclear from the information 
provided whether the technology would have been available for sale 
prior to January 6, 2023. Nonetheless, we note that using either

[[Page 58839]]

the FDA approval date of December 22, 2022, or the date suggested by 
manufacturer of January 6, 2023, LunsumioTM is still new for 
FY 2024 because the 3-year anniversary date (December 22, 2025, or 
January 6, 2026, respectively) would occur after FY 2024. Because we 
did not receive any additional information about whether the technology 
was available for sale before January 6, 2023, we therefore consider 
the beginning of the newness period to commence on December 22, 2022.
    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 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 58840]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.160

    We invited public comments on whether LunsumioTM meets 
the cost criterion.
    Comment: The applicant submitted a comment that summarized the 
results of the four analyses discussed in the proposed rule, and 
reiterated that regardless of the criteria for selecting the cases for 
the analysis, the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount.
    Response: We thank the applicant for their comment. We agree that 
the final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
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 58841]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.161


[[Page 58842]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.162


[[Page 58843]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.163

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26830), after 
review of the information provided by the applicant, we stated that we 
had the following concerns regarding whether LunsumioTM 
meets the substantial clinical improvement criterion. We noted 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.67 68 69 However, we noted 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 were 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.
---------------------------------------------------------------------------

    \67\ Cheah, Y.C. et al. (2022), op.cit.
    \68\ 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.
    \69\ Budde, L. et al. (2022), op.cit.
---------------------------------------------------------------------------

    We invited public comments on whether LunsumioTM meets 
the substantial clinical improvement criterion.
    Comment: The applicant submitted a public comment in response to 
CMS's concerns regarding substantial clinical improvement. In response 
to the issue of study design, the applicant responded that there are 
benefits and limitations to single-arm studies in the 3L+ FL setting. 
The applicant noted that single-arm studies are an important mechanism 
to facilitate faster access to novel therapies, especially for patients 
who have exhausted other approved options. According to the applicant, 
investigating LunsumioTM for patients in the 3L+ FL setting 
is an example of using a single-arm clinical trial strategy to bring a 
novel treatment to patients who have an unmet need. Other benefits of 
single-arm trials are smaller sample size requirements, shorter 
completion time, and the ability to identify signs of efficacy early in 
drug development.70 71 At the same time, the applicant 
acknowledged that single-arm studies are most appropriate for assessing 
response rates and since they lack a comparator arm, time-to-event 
endpoints, such as progression-free survival and overall survival, can 
only be understood in the context of a historical control. The 
applicant also noted that evaluation of safety outcomes is likewise 
limited by a lack of a comparator arm.72 73 Nonetheless, the 
applicant maintained that despite these limitations, single-arm trials 
are a valuable tool for drug discovery.
---------------------------------------------------------------------------

    \70\ Nierengarten, M.B. 2023. ``Single-Arm Trials for US Food 
and Drug Administration Cancer Drug Approvals.'' Cancer 129, no. 11 
(Jun 1): 1626.
    \71\ Agrawal, S., et al. 2023. ``Use of Single-Arm Trials for US 
Food and Drug Administration Drug Approval in Oncology, 2002-2021.'' 
JAMA Oncol 9, no. 2 (Feb 1): 266-272.
    \72\ Budde, L.E., et al. 2022. ``Safety and Efficacy of 
Mosunetuzumab, a Bispecific Antibody, in Patients with Relapsed or 
Refractory Follicular Lymphoma: A Single-Arm, Multicentre, Phase 2 
Study.'' Lancet Oncol 23, no. 8: 1055-1065.
    \73\ Salles, G.A., et al. 2022. ``Efficacy Comparison of 
Tisagenlecleucel vs Usual Care in Patients with Relapsed or 
Refractory Follicular Lymphoma.'' Blood Adv (Aug 16).
---------------------------------------------------------------------------

    With regard to the use of historical control without adjusting for 
potential confounders, the applicant stated that

[[Page 58844]]

head-to-head data comparing LunsumioTM to other approved 3L+ 
treatments are not available. The applicant acknowledged that direct 
comparisons across different trials are subject to confounding and bias 
because of systematic differences including study population, 
comparators, and outcomes between or among trials being compared. 
Nonetheless, the applicant argued that information regarding how 
pivotal studies of other therapies were carried out may still be useful 
when considering clinical trial outcomes.
    With regard to the absence of endpoints related to survival, the 
applicant asserted that the response criteria used to assess responses 
in LunsumioTM were similar to those in pivotal clinical 
trials for other currently available therapies. The applicant noted 
that for instance, the response rates for LunsumioTM in 
patients with R/R FL who have received 2+ prior therapies were assessed 
using the International Working Group Revised Response Criteria for 
Malignant Lymphoma, for which a response was defined as a CR (that is, 
positron emission tomography [PET]-negative response) even if a mass of 
any size is persistent, and a PR was defined as a regression of 
measurable disease via at least a 50 percent decrease in sum of the 
product of the diameters (SPD) of up to six of the largest dominant 
nodes or nodal masses and no new sites.\74\ The applicant also argued 
that the response rates for copanlisib and tazemetostat in patients 
with R/R indolent lymphoma and patients with mutated or wild type EZH2 
R/R FL, respectively, were assessed using the same International 
Working Group Revised Response Criteria for Malignant Lymphoma. The 
applicant added that the response rates for axicabtagene ciloleucel in 
adult patients with indolent NHL after 2+ lines of prior therapy and 
tisagenlecleucel in adult patients with R/R FL after 2+ lines of prior 
therapy were assessed using the 2014 Lugano classification, which 
defines CR as a complete metabolic response even with a persistent 
mass, and defines PR as a decrease by more than 50 percent in the SPD 
of up to six representative nodes or extranodal lesions, which are 
consistent with the definitions from the International Working Group 
Revised Response Criteria for Malignant Lymphoma.75 76 The 
applicant asserted that therefore, the criteria used to assess response 
in patients with R/R FL who had 2+ prior systemic therapies across all 
pivotal trials reflects a similar approach to assessing antitumor 
activity for each therapeutic option.
---------------------------------------------------------------------------

    \74\ Cheson, B.D., et al. 2007. ``Revised Response Criteria for 
Malignant Lymphoma.'' J Clin Oncol 25, no. 5 (Feb 10): 579-86.
    \75\ Cheson, B.D., et al. 2014. ``Recommendations for Initial 
Evaluation, Staging, and Response Assessment of Hodgkin and Non-
Hodgkin Lymphoma: The Lugano Classification.'' J Clin Oncol 32, no. 
27 (Sep 20): 3059-68.
    \76\ Cheson et al., 2007, op.cit.
---------------------------------------------------------------------------

    In addition, the applicant included results of an updated analysis 
of the pivotal LunsumioTM study (that is, Budde et al. 2022) 
in their comments. According to the applicant, the median duration of 
complete response (DOCR) was not reached (median time on study was 28.6 
months). The 24-month DOCR rate after first CR was 65 percent (95% CI, 
39-90). Also, the applicant stated that median Physician Fee Schedule 
(PFS) was not reached; 24-month PFS rate was 77 percent (95% CI, 63-
91). Per the applicant, two years after the end of fixed-duration 
treatment, 67 percent of these 49 patients remained free of progressive 
disease or death.\77\ The applicant maintained that these outcomes 
approached the best ORRs and CRs reported with axicabtagene ciloleucel 
and tisagenlecleucel (ORRs of 91% and 86% and CRs of 60% and 68%, 
respectively)78 79 and were substantially better than the 
best outcomes with copanlisib (ORR of 59% and CR 14%) and tazemetostat 
(mutant EZH2 was 69% ORR and 12% CR; wild-type EZH2 was 34% ORR and 4% 
CR).80 81 The applicant stated that in addition, at 22.8 
months, the median DOR with LunsumioTM was longer than both 
copanlisib (DOR: 12.2 months) and tazemetostat (mutant EZH2 DOR of 10.9 
months, wild-type EZH2 was 10.9 months).82 83 84
---------------------------------------------------------------------------

    \77\ Sehn, L., et al. 2023. ``Mosunetuzumab Demonstrates Durable 
Responses in Patients with Relapsed and/or Refractory Follicular 
Lymphoma Who Have Received >=2 Prior Therapies: Updated Analysis of 
a Pivotal Phase II Study.'' EHA Annual Meeting Abstract P1078.
    \78\ Kymriah (Tisagenlecleucel) [Prescribing information]. East 
Hanover, NJ: Novartis Pharmaceuticals Corporation; 2022.
    \79\ Yescarta (Axicabtagene Ciloleucel) [Prescribing 
information]. Santa Monica, CA: Kite Pharma Inc.; 2017.
    \80\ Aliqopa (Copanlisib) [Prescribing information]. Whippany, 
NJ: Bayer Healthcare Pharmaceuticals In; 2017.
    \81\ Tazverik (Tazemetostat) [Prescribing information]. 
Cambridge, MA: Epizyme, Inc.; 2020.
    \82\ LunsumioTM (mosunetuzumab-axgb). 1 DNA Way South 
San Francisco, CA. Genentech, Inc.; 2022.
    \83\ Tazverik (Tazemetostat) [Prescribing information]. 
Cambridge, MA: Epizyme, Inc.; 2020.
    \84\ Aliqopa (Copanlisib) [Prescribing information]. Whippany, 
NJ: Bayer Healthcare Pharmaceuticals Inc.; 2017.
---------------------------------------------------------------------------

    Response: We thank the applicant for their comment regarding the 
substantial clinical improvement criterion. Based on the additional 
information received, we agree that LunsumioTM represents a 
substantial clinical improvement over existing technologies for the 
treatment of patients with 3L+FL because LunsumioTM offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments, in particular: R/R FL 
patients who have undergone 2+ prior treatments, but cannot access any 
of the four PI3K inhibitors or EZH2 inhibitor approved by FDA for 3L+ 
treatment of R/R FL; patients with EZH2 mutation, who are contra-
indicated for tazemetostat, an EZH2 inhibitor approved for R/R FL; and 
patients who were unable to tolerate CAR T-cell therapy.
    After consideration of the public comments received and the 
information included in the applicant's new technology add-on payment 
application, we have determined that LunsumioTM meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for FY 
2024. Cases involving the use of LunsumioTM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS codes: XW03358 (Introduction of mosunetuzumab antineoplastic 
into peripheral vein, percutaneous approach, new technology group 8), 
or XW04358 (Introduction of mosunetuzumab antineoplastic into central 
vein, percutaneous approach, new technology group 8).
    Per the applicant, the WAC of LunsumioTM is $594.06 for 
a 1 mg single dose vial. As stated previously, according to the 
applicant, LunsumioTM is sold in a 1 mg and 30 mg single 
dose vial (we note, a 30 mg single dose vial is priced at the 1 mg 
single dose vial x 30 = $17,821.80). According to the applicant, most 
of the inpatient usage would occur as the result of adverse events, 
mainly CRS, that develop after outpatient administration of the drug, 
and that in clinical trials, when Grade 2, 3, or 4 CRS developed, 75 
percent of the time it occurred after a 60 mg dose, 20 percent of the 
time it developed after a 1 mg dose, and 5 percent after a 2 mg dose. 
Based on this information, we determined a weighted average inpatient 
dose of 45.3 mg. Therefore, the average cost per patient for 
LunsumioTM is $26,910.92 (45.3 mg * $594.06 per 1 mg vial). 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, the maximum new technology add-on payment for a

[[Page 58845]]

case involving the use of LunsumioTM is $17,492.10 for FY 
2024.
e. NexoBrid\TM\ (Anacaulase-bcdb)
    Vericel Corporation submitted an application for new technology 
add-on payments for NexoBrid\TM\ for FY 2024. According to the 
applicant, NexoBrid\TM\ 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, 
NexoBrid\TM\ 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 NexoBrid\TM\ 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 NexoBrid\TM\, 
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, 
NexoBrid\TM\ 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, NexoBrid\TM\ is expected to be 
commercially available the end of June or beginning of July 2023 in the 
U.S. market as manufacturing preparations are currently underway. 
NexoBrid\TM\ 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 NexoBrid\TM\ per inpatient stay, based upon the average 
NexoBrid\TM\-treated area of 6.28% TBSA in the DETECT clinical trial 
with an expected wastage assumption of approximately 10 percent, 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 NexoBrid\TM\: 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 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 NexoBrid\TM\ is not substantially similar to other 
currently available technologies because NexoBrid\TM\ 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 NexoBrid\TM\ 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 NexoBrid\TM\, 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 NexoBrid\TM\ for the 
applicant's complete statements in support of its assertion that 
NexoBrid\TM\ is not substantially similar to other currently available 
technologies.
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[[Page 58846]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.164

BILLING CODE 4120-01-C
    However, we had the following concerns with regard to the newness 
criterion. We noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26831) that as discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 
FR 25288), while the applicant discussed the differences between 
NexoBrid\TM\ and collagenase-based products, we did not receive enough 
information regarding the specific composition of the proteolytic 
enzymes used within the NexoBrid\TM\ active pharmaceutical ingredient 
and its mechanism of action. Specifically, it was unclear whether the 
proteolytic enzymes act similarly to existing collagenase-based 
enzymatic debridement products since the applicant claimed that 
NexoBrid\TM\ debrides denatured collagen in the wound. We also noted 
that the applicant asserted that NexoBrid\TM\ is not assigned to the 
same MS-DRGs as existing technologies used for burns, although it 
seemed that NexoBrid\TM\ would be assigned to the same burn MS-DRGs as 
other enzymatic and surgical debridement technologies.
    We invited public comments on whether NexoBrid\TM\ is substantially 
similar to existing technologies and whether NexoBrid\TM\ meets the 
newness criterion.
    Comment: A commenter stated that NexoBrid\TM\ does not meet the 
newness criterion because it has been commercially available in the 
European Union for a decade. Additionally, the commenter noted fruit-
based enzymatic debridement products have been utilized for decades and 
marketed under various trade names, including Accuzyme[supreg], 
Allanzyme, Ethezyme, GladaseTM, Kovia, and Panafil. The 
commenter explained that these enzymatic debridement products utilize 
papain extract from papaya fruit (Carica papaya) and exhibit identical 
activation catalytic mechanisms as NexoBrid\TM\'s pineapple-derived 
enzymes. The commenter further explained that papain and bromelain are 
fruit-derived cysteine proteases, also known as thiol proteases, with 
non-specific degradation profiles and proteolytic mechanisms of action. 
The commenter added that in addition to the fruit-based enzymatic 
debridement products mentioned, SANTYL[supreg] Collagenase Ointment is 
an enzymatic debridement product that has been commercially available 
since its approval in 1965 and is utilized to treat chronic dermal 
ulcers and severe burns.
    Response: We thank the commenter and have taken it into 
consideration in determining whether NexoBrid\TM\ meets the newness 
criterion, discussed later in this section.

[[Page 58847]]

    Comment: The applicant submitted a comment reiterating its 
assertion that NexoBrid\TM\ has a novel mechanism of action that 
satisfies the newness criterion. The applicant stated that the active 
pharmaceutical ingredient in NexoBrid\TM\, anacaulase-bcbd, is a 
mixture of proteolytic enzymes extracted from the stems of pineapple 
plants and is composed mainly (80% to 95% weight by weight [w/w]) of 
stem bromelain, ananain, jacalin-like lectin, bromelain inhibitors, 
phytocystatin inhibitor, small molecule metabolites, and saccharides, 
as both free monosaccharides and the N-linked glycan of stem 
bromelain.\85\ The applicant further explained that bromelain is a 
combination of thiol endopeptidases and other components, such as 
phosphatases, glucosidases, peroxidases, cellulases, glycoproteins, 
carbohydrates, and several protease inhibitors.\86\
---------------------------------------------------------------------------

    \85\ NexoBrid[supreg] Prescribing Information. Vericel 
Corporation. Cambridge, MA. 20222. Page 9.
    \86\ Pavan R, Jain S, Kumar A. Properties and therapeutic 
application of bromelain: a review. Biotechnology research 
international. 2012. Page 2
---------------------------------------------------------------------------

    In response to CMS's concern regarding NexoBrid\TM\'s mechanism of 
action, the applicant stated that NexoBrid\TM\ degrades collagen by 
bromelain via a combination of endopeptidases and other enzymes. The 
applicant further explained that this degradation by bromelain results 
in a wide range of reactions beyond hydrolysis, such as peroxidases 
catalyze oxidation reactions,\87\ and acts on a group of substrates, 
including gelatin, chromogenic tripeptides, and casein.\88\ 
Additionally, the applicant noted, in the context of eschar removal, it 
has been hypothesized that the presence of multiple proteolytic enzymes 
likely results in the degradation of multiple substrates contained 
within the eschar in addition to denatured collagen.\89\ The applicant 
stated that NexoBrid\TM\'s combination of enzymes is unique and 
distinct from collagenase-based debridement agents, which are primarily 
composed of collagenase derived from Clostridium histolyticum in 
petrolatum USP.\90\ The applicant explained that clostridial 
collagenase-based debridement agents are based on proteolysis of a 
collagen substrate through hydrolysis reactions \91\ and result in 
cleavage of necrotic tissue at seven specific sites along the denatured 
collagen strand.\92\
---------------------------------------------------------------------------

    \87\ Pavan R, Jain S, Kumar A. Properties and therapeutic 
application of bromelain: a review. Biotechnology research 
international. 2012. Page 2.
    \88\ Chakraborty AJ, Mitra S, Tallei TE, Tareq AM, Nainu F, 
Cicia D, Dhama K, Emran TB, Simal-Gandara J, Capasso R. Bromelain a 
Potential Bioactive Compound: A Comprehensive Overview from a 
Pharmacological Perspective. Life. 2021; 11(4):317.
    \89\ Singer AJ, Goradia EN, Grandfield S, Zhang N, Shah K, 
McClain SA, et al. A Comparison of Topical Agents for Eschar Removal 
in a Porcine Model: Bromelain-enriched vs Traditional Collagenase 
Agents. Journal of Burn Care & Research. 2023;44(2):408-13. Page 
408, ``The bromelain-enriched enzymatic debridement agent is derived 
from the stems of pineapples and contains a mixture of other 
proteolytic enzymes including at least four distinct cysteine 
proteinases: ananain1, ananain2, stem bromelain, and comosain. The 
presence of multiple proteolytic enzymes likely results in the 
degradation of multiple substrates contained within the eschar in 
addition to denatured collagen.''
    \90\ SANTYL[supreg] Prescribing Information. Smith & Nephew, 
Inc. Fort Worth, TX. 2016. Page 1.
    \91\ Eckhard U, Sch[ouml]nauer E, Brandstetter H. Structural 
Basis for Activity Regulation and Substrate Preference of 
Clostridial Collagenases G, H, and T*. Journal of Biological 
Chemistry. 2013; 288(28): 20184.
    \92\ Shi L, Ermis R, Garcia A, Telgenhoff D, Aust D. Degradation 
of human collagen isoforms by Clostridium collagenase and the 
effects of degradation products on cell migration. International 
Wound Journal. 2010;7(2): 94.
---------------------------------------------------------------------------

    The applicant also asserted that since the mechanism of action of 
NexoBridTM differs significantly from collagenase-based 
debridement agents, the dosage and administration, as well as resulting 
clinical outcome, is also different. The applicant explained that 
NexoBridTM is applied to the burn wound once (in some cases 
twice, for a four-hour period) and was shown in clinical studies to 
achieve complete eschar removal (>=95% eschar removal) in 93 percent of 
patients, while on the other hand, collagenase-based debridement agents 
are typically used daily, as a continuous application for multiple days 
with varying results.
    In response to CMS's concern regarding the MS-DRG assignment for 
procedures in which NexoBrid\TM\ is administered, the applicant stated 
that it may be appropriate for NexoBrid\TM\ administration to be 
assigned to existing burn MS-DRGs (for example, 927, 928, 929, 933, 
934, 935); however, the payment associated with these MS-DRGs would not 
adequately account for NexoBrid\TM\'s cost.
    Response: We appreciate the additional information from the 
applicant and commenters with respect to whether NexoBridTM 
is substantially similar to existing technologies.
    As stated in the preamble of this section, a specific medical 
service or technology will no longer be considered ``new'' for purposes 
of new medical service or technology add-on payments after CMS has 
recalibrated the MS-DRGs, based on available data, to reflect the cost 
of the technology. Therefore, we disagree with the commenter that 
NexoBridTM would not be considered new because it was 
launched a decade ago in the European Union, as the available data to 
reflect the cost of the technology would not have been available for 
CMS to recalibrate the MS-DRGs for those administrations.
    We also disagree with the commenter that fruit-based enzymatic 
debridement products that have not received FDA marketing authorization 
are appropriate existing technology comparators for evaluating whether 
a new technology is substantially similar to an existing technology. As 
stated in the preamble of this section, 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. We believe that technologies that receive FDA marketing 
authorization have met regulatory standards that provide a reasonable 
assurance of safety and efficacy. We maintain that our intent in 
requiring applicants to receive FDA marketing authorization was to 
exclude technologies that lack FDA marketing authorization. Therefore, 
we do not believe that medical products that have not received FDA 
marketing authorization are appropriate comparators for evaluating if a 
new technology 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 regard to the first criterion, whether a technology uses the 
same or similar mechanism of action to achieve a therapeutic outcome, 
we agree with the commenter that there is an existing enzymatic 
debrider, the SANTYL Collagenase Ointment, that is commercially 
available for the treatment of burn and chronic wounds. We note that 
the applicant asserted that NexoBridTM has a novel 
composition because it contains a unique pharmaceutical ingredient 
derived from pineapple and therefore has a unique combination of 
proteolytic enzymes as compared to collagenase-based debridement agents 
that are derived from Clostridium histolyticum. However, we note that 
the composition/ingredients of a technology does not represent the 
mechanism of action. Further, while the applicant asserted that 
NexoBridTM degrades collagen via multiple reactions beyond 
hydrolysis, while clostridial collagenase degradation is based on 
hydrolysis reactions, we note that the applicant hypothesizes, but does 
not demonstrate that the presence of multiple proteolytic

[[Page 58848]]

enzymes by NexoBridTM results in the degradation of multiple 
substrates contained within the eschar in addition to denatured 
collagen. In addition, although we recognize that NexoBridTM 
has a different use case than collagenase-based debridement agents with 
respect to the dosage and administration, these differences do not 
result in a substantially different therapeutic mechanism of action, 
and in our view, any differences in the resulting clinical outcome 
relate to an assessment of whether NexoBridTM meets the 
substantial clinical improvement criterion. Therefore, even though 
there may be differences in composition between bromelain and 
clostridial collagenase, resulting in collagen degradation through 
hydrolysis and other reactions, these two technologies use a similar 
mechanism of action to achieve the same therapeutic outcome: the 
enzymatic degradation of collagen to debride eschar for the treatment 
of burns.
    In regard to the second criterion, whether a technology is assigned 
to the same or a different MS-DRG, we note that the applicant 
acknowledged that the use of NexoBridTM may be assigned 
under the existing MS-DRGs (for example, 927, 928, 929, 933, 934, 935), 
but stated the payment associated with these MS-DRGs does not 
adequately account for the cost of NexoBridTM. We agree with 
the applicant that NexoBridTM would be assigned to these 
same burn MS-DRGs as other enzymatic and surgical debridement 
technologies used in the treatment of burns. However, we believe that 
inadequate payment for the technology associated with these MS-DRGs 
relates to an assessment of whether NexoBridTM meets the 
cost criterion, rather than an assessment of substantial similarity.
    In regard to the third criterion, whether a technology treats the 
same or similar type of disease and patient populations, we agree with 
the applicant's assertion in its application that use of the technology 
would involve the treatment of a similar type of disease and a similar 
patient population when compared to existing approaches for eschar 
removal.
    Because NexoBridTM meets all three of the substantial 
similarity criteria, we believe the NexoBridTM is 
substantially similar to an existing collagenase-based debridement 
agent, SANTYL Collagenase Ointment. Therefore, we consider the 
beginning of the newness period for NexoBridTM to begin on 
the date on which SANTYL Collagenase Ointment received FDA approval for 
the treatment of burns. Since SANTYL Collagenase Ointment has been on 
the U.S. market for many years, the 3-year anniversary date of its 
entry onto the market occurred prior to FY 2024,\93\ and therefore, 
NexoBridTM does not meet the newness criterion and is not 
eligible for new technology add-on payments for FY 2024. We note that 
we received public comments with regard to the cost and substantial 
clinical improvement criteria for this technology, but because we have 
determined that the technology does not meet the newness criterion and 
therefore is not eligible for approval for new technology add-on 
payments for FY 2024, we are not summarizing comments received or 
making a determination on those criteria in this final rule.
---------------------------------------------------------------------------

    \93\ CDER Therapeutic Biologic Products, https://www.fda.gov/media/76650/download.
---------------------------------------------------------------------------

f. REBYOTATM (Fecal Microbiota, Live-jslm) and 
VOWSTTM (Fecal Microbiota Spores, Live-brpk)
    Two manufacturers, Ferring Pharmaceuticals, Inc., an affiliate of 
the manufacturer, Rebiotix Inc., and Seres Therapeutics, Inc., 
submitted separate applications for new technology add-on payments for 
FY 2024 for REBYOTATM (fecal microbiota, live-jslm, referred 
to as `RBX2660' in the proposed rule) and VOWSTTM (fecal 
microbiota spores, live-brpk, referred to as `SER-109' in the proposed 
rule), respectively. Both of these technologies are microbiota-based 
treatments indicated for the reduction or prevention of recurrence of 
Clostridioides difficile infection (CDI) in individuals 18 years of age 
and older, following antibiotic treatment for recurrent CDI (rCDI). In 
the FY 2024 IPPS/LTCH PPS proposed rule, we discussed these 
applications as two separate technologies. After further consideration, 
and as discussed elsewhere, we believe REBYOTATM and 
VOWSTTM are substantially similar to each other and that it 
is appropriate to evaluate both technologies as one application for new 
technology add-on payments under the IPPS. We refer the reader 
elsewhere for a complete discussion regarding our analysis of the 
substantial similarly of REBYOTATM and VOWSTTM.
    Please refer to the online application posting for 
REBYOTATM, available at https://mearis.cms.gov/public/publications/ntap/NTP221017WUDXM, and the online application posting 
for VOWSTTM, available at https://mearis.cms.gov/public/publications/ntap/NTP221016VHL8B, for additional detail describing the 
technologies and the disease treated by the technologies.
    With respect to the newness criterion, the applicant for 
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 is a broad consortium microbiota-based 
live biotherapeutic suspension indicated for the prevention of 
recurrence of CDI in individuals 18 years of age and older, following 
antibiotic treatment for rCDI. 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. Per 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.
    The applicant for VOWSTTM stated that it received BLA 
approval from FDA on April 26, 2023, for the prevention of the 
recurrence of CDI in individuals 18 years of age and older following 
antibacterial treatment for rCDI. The applicant stated that the dose is 
four capsules taken orally once daily on an empty stomach before the 
first meal of the day for 3 consecutive days. The applicant stated that 
VOWSTTM is an oral microbiome therapeutic administered to 
reduce CDI recurrence as part of a two-pronged treatment approach of 
(1) antibiotics to kill vegetative C. diff bacteria, followed by (2) 
VOWSTTM to repair the microbiome to manage CDI and prevent 
its recurrence. According to the applicant, VOWSTTM 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.
    The applicant for REBYOTATM stated that, effective 
October 1, 2022, the following ICD-10-PCS code may be used to uniquely 
describe procedures involving the use of REBYOTATM: XW0H7X8 
(Introduction of broad consortium microbiota-based live biotherapeutic 
suspension into lower GI, via natural or artificial opening, new tech. 
group 8). The applicant for VOWSTTM submitted a request for 
approval for a unique ICD-10-PCS code for VOWSTTM beginning 
in FY 2024 and

[[Page 58849]]

was granted approval for the following ICD-10-PCS procedure code, 
effective October 1, 2023: XW0DXN9 (Introduction of SER-109 into mouth 
and pharynx, external approach, new technology group 9). Both 
applicants 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 their technologies under 
the ICD-10-CM coding system.
    As stated earlier and for the reasons discussed later in this 
section, we believe that REBYOTATM and VOWSTTM 
are substantially similar to each other such that it is appropriate to 
analyze these two applications as one technology for the purposes of 
new technology add-on payments, in accordance with our policy. We 
discuss the information provided by the applicants, as summarized in 
the FY 2024 IPPS/LTCH PPS proposed rule, regarding whether 
REBYOTATM and VOWSTTM are substantially similar 
to existing technologies. As discussed earlier, if a technology meets 
all three of the substantial similarity criteria, it would be 
considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments.
    With respect to the substantial similarity criteria, whether a 
product uses the same or a similar mechanism of action to achieve a 
therapeutic outcome, in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26853 through 26854), the applicant for REBYOTATM 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[supreg], 
FIRVANQ[supreg]), 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.
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[[Page 58850]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.165

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26854), we noted 
the following concern with regard to the newness criterion for 
REBYOTA\TM\. We noted that the applicant stated that 
ZINPLAVATM is restricted to high-risk patients, and we 
questioned whether these high-risk patients were 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 noted that the indication for 
ZINPLAVATM does not exclude patients with a history of CHF 
and the labeling has no listed contraindications. Therefore, we sought 
clarification from the applicant regarding the differences in patient 
populations for ZINPLAVATM and REBYOTATM.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26874 through 
26875), according to the applicant for VOWSTTM, 
VOWSTTM is not substantially similar to other currently 
available technologies because VOWSTTM does not have the 
same or a 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 VOWSTTM meets the newness 
criterion. The following table summarizes the applicant's assertions 
regarding the substantial similarity criteria. Please see the online 
application posting for

[[Page 58851]]

VOWSTTM for the applicant's complete statements in support 
of its assertion that VOWSTTM is not substantially similar 
to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.166

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26875 through 
26876), we noted the following concern with regard to the newness 
criterion for VOWST\TM\. The applicant asserted that VOWSTTM 
can be administered to patients with CHF and stated that the use of 
ZINPLAVA\TM\ (bezlotoxumab) should be reserved in this patient 
population. We noted that the indication for ZINPLAVATM does 
not exclude patients with a history of CHF

[[Page 58852]]

and the labeling has no listed contraindications. We sought 
clarification from the applicant regarding the differences in patient 
populations for ZINPLAVATM and VOWSTTM.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26854 through 
26855 and 26875 through 26876), we noted that REBYOTA\TM\ and 
VOWSTTM may have similar mechanism of actions, and both are 
microbiome therapeutic agents 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. We stated that notably, the exact mechanism of 
action for each biological product was not yet known; however, both 
appeared to act on the gut microbiome to suppress C.diff. and thereby 
prevent rCDI. Both REBYOTA\TM\ and VOWSTTM appeared to lead 
to compositional changes in the gastrointestinal microbiome that 
restore the diversity of gut flora which enabled each of these 
therapeutics to suppress outgrowth of C.diff. and rCDI, following 
standard-of-care treatment with antibiotics for rCDI. Further, we 
stated that both technologies appeared 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 appeared that REBYOTA\TM\ and 
VOWSTTM were purposed to achieve the same therapeutic 
outcome using a similar mechanism of action and would be assigned to 
the same MS-DRG, we stated we believed 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 stated that 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, we believed that the 
beginning of the newness period would be the date on which 
REBYOTATM became commercially available, January 23, 2023. 
We noted that although our policy is generally 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 invited public comment on whether REBYOTA\TM\ or 
VOWSTTM is substantially similar to existing technologies 
and whether it meets the newness criterion, including whether 
REBYOTA\TM\ and VOWSTTM are substantially similar to each 
other and therefore should be evaluated as a single technology for 
purposes of new technology add-on payments.
    Comment: The applicant for REBYOTATM submitted a comment 
in response to our question as to whether REBYOTATM is 
substantially similar to VOWSTTM. The applicant stated that 
VOWSTTM is an oral microbiome therapeutic consisting of 
gram-positive Firmicutes, and that administration of VOWSTTM 
cannot begin until at least 8 hours after bowel prep and after 2 to 4 
days of completing antibacterial treatment for rCDI. The applicant also 
noted that administration requirements may be burdensome on both 
patients and hospitals since patients must take 4 capsules daily on an 
empty stomach prior to the first meal of the day for 3 consecutive 
days, and that oral administration issues should be a consideration in 
older patients. The applicant stated that in comparison, 
REBYOTATM is a microbiota suspension that is delivered via 
rectal administration, contains both gram-positive and gram-negative 
bacteria, can be administered 24 to 72 hours following the last dose of 
antibiotics for recurrent CDI, and does not have pretreatment 
requirements. The applicant also noted that REBYOTATM 
studies reported safety and efficacy in older adult (age >=65 years) 
patients with comorbid conditions, such as CHF, and that therefore, 
REBYOTATM is safe and effective for a broader population of 
patients.
    The applicant for REBYOTATM also stated that 
REBYOTATM is not substantially similar to 
ZINPLAVATM because it is available to a broader patient 
population than those considered high risk for recurrence of CDI, as 
unlike ZINPLAVATM, REBYOTATM use is not 
restricted to high-risk patients and can be administered after the 
first recurrence of CDI. The applicant noted the different mechanism of 
action of ZINPLAVATM, which is a human monoclonal antibody 
that is administered through intravenous infusion and that neutralizes 
the effect of the C.diff toxin by binding to it. The applicant also 
acknowledged that although the mechanism of action of 
REBYOTATM has not been established, in comparison, 
REBYOTATM consists of live fecal microbes, including 
Bacteroidia and Clostridia classes, which in studies, results in 
clinically significant changes in patients' gut microbiome associated 
with restorative microbiome changes that may help resist C. diff 
colonization and recurrence.
    The applicant for VOWSTTM also submitted a comment 
maintaining that CMS should not evaluate VOWSTTM and 
REBYOTA\TM\ as a single applicant because the technologies are not 
substantially similar, arguing that since the mechanism of action for 
both therapies is unknown, it is not possible to state that the 
mechanism for both products is the same. The applicant for 
VOWSTTM argued that there is reason to believe its mechanism 
of action differs from REBYOTA\TM\'s in terms of therapeutic 
composition, manufacturing process, route of administration, dosage, 
and storage, stating that in contrast to REBYOTA\TM\, 
VOWSTTM has a low pill burden, containing ~1 percent 
residual mass comprised of defined consortia of Firmicutes bacterial 
spores recovered from healthy donor stool. The applicant further stated 
that the manufacturing process mitigates risk of transmission of agents 
of infection by including ethanolic inactivation of potential pathogens 
and removal of non-spore biomass. The applicant also provided an 
overview of the clinical and scientific evidence for 
VOWSTTM, noting differences in effectiveness, safety, and 
patient care in contrast to REBYOTATM.
    The applicant for VOWSTTM also stated that 
VOWSTTM is not substantially similar to 
ZINPLAVATM because the FDA labeling for VOWSTTM 
does not include a warning or precaution for heart failure, nor a 
contraindication for any patient population; and that in contrast, the 
FDA-approved labeling for ZINPLAVATM concludes that, in 
patients with a history of CHF, ZINPLAVATM ``should be 
reserved for use when the benefit outweighs the risk.''
    Response: We appreciate the additional information from both 
applicants with respect to whether their products are substantially 
similar to one another or to existing technologies. After consideration 
of the public comments we received, although we recognize that the 
exact mechanism of action for each technology is not fully defined, and 
that the technologies may not be completely the same in terms of their 
manufacturing process, route of administration, dosage, and storage, we 
are not convinced that these differences result in a substantially 
different therapeutic mechanism of action. Both applicants provide 
sufficient data to

[[Page 58853]]

suggest that their mechanisms of action relate to repopulation of the 
gastrointestinal microbiome. We believe that differences in the 
clinical and scientific evidence on effectiveness, safety, 
tolerability, and patient care between REBYOTATM and 
VOWSTTM relate to an assessment of whether the technologies 
meet the substantial clinical improvement criterion rather than the 
newness criterion.
    With regard to the commenters noting differences in therapeutic 
composition, as both technologies are derived from donor human stool, 
where REBYOTATM contains both gram-positive and gram-
negative bacteria including Bacteroidia and Clostridia classes, and 
VOWSTTM consists of a defined consortia of gram-positive 
Firmicutes bacteria, we also believe that there is, in fact, an 
overlap, and that the Firmicutes contained in VOWSTTM would 
also exist in the broad consortium of microorganisms contained in the 
REBYOTATM suspension. Although there might be slight 
differences in their proportional contributions to specific downstream 
molecular pathways, we believe that these two technologies achieve the 
same therapeutic outcome and overall clinical mechanism of action, as 
each restores the gut microbiome and resolves dysbiosis to prevent the 
recurrence of CDI in patients following antibacterial treatment for 
rCDI by restoring the diversity and composition to one that resembles a 
healthy microbiome. Furthermore, we believe REBYOTA\TM\ and 
VOWSTTM are substantially similar to one another because the 
technologies are intended to treat the same or similar disease in the 
same or similar patient population--indicated for individuals 18 years 
of age and older, for the prevention of recurrence of CDI, following 
antibiotic treatment for rCDI, and that potential cases representing 
patients who may be eligible for treatment would be assigned to the 
same MS-DRGs.
    We also believe REBYOTA\TM\ and VOWSTTM are not 
substantially similar to any other existing technologies because, as 
both applicants asserted in their FY 2024 new technology add-on payment 
applications and in their comments, the technologies do not use the 
same or similar mechanism of action to achieve a therapeutic outcome as 
any other existing drug or therapy assigned to the same or different 
MS-DRG. Based on the information described in this section, we believe 
REBYOTA\TM\ and VOWSTTM meet the newness criterion.
    Based on the previous discussion, we are making one determination 
regarding approval for new technology add-on payments that will apply 
to both applications, and in accordance with our policy, we use the 
earliest market availability date submitted as the beginning of the 
newness period for both REBYOTA\TM\ and VOWSTTM.
    We believe our current policy for evaluating new technology payment 
applications for two technologies that are substantially similar to 
each other is consistent with the authority and criteria in section 
1886(d)(5)(K) of the Act. We note that CMS is authorized by the Act to 
develop criteria for the purposes of evaluating new technology add-on 
payment applications. For the purposes of new technology add-on 
payments, when technologies are substantially similar to each other, we 
believe it is appropriate to evaluate both technologies as one 
application for new technology add-on payments under the IPPS, for the 
reasons we discussed previously and consistent with our evaluation of 
substantially similar technologies in prior rulemaking (85 FR 58679 and 
82 FR 38120).
    With respect to the newness criterion, as previously stated, 
REBYOTA\TM\ received BLA approval from FDA on November 30, 2022, and 
became commercially available on January 23, 2023. VOWSTTM 
received BLA approval from FDA on April 26, 2023. In accordance with 
our policy, because these technologies are substantially similar to 
each other, we use the earliest market availability date submitted as 
the beginning of the newness period for both technologies. Therefore, 
with regard to both technologies, 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 although our 
policy is generally 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).
    The applicants submitted separate cost and clinical data, and in 
the proposed rule, we reviewed and discussed each set of data 
separately. However, as stated previously, for this final rule, we will 
make one determination regarding new technology add-on payments that 
will apply to both applications. We believe that this is consistent 
with our policy statements in the past regarding substantial similarity 
(85 FR 58679).
    If substantially similar technologies are submitted for review in 
different (and subsequent) years, rather than the same year, we 
evaluate and make a determination on the first application and apply 
that same determination to the second application. However, because 
these technologies have been submitted for review in the same year, and 
because we believe they are substantially similar to each other, we 
consider both sets of cost data and clinical data in making a 
determination, and we do not believe that it is possible to choose one 
set of data over another set of data in an objective manner. As we 
discussed in the proposed rule and as stated previously, each applicant 
submitted separate analyses regarding the cost criterion for each of 
their products, and both applicants maintained that their product meets 
the cost criterion.
    With respect to the cost criterion, to identify cases that may be 
eligible for REBYOTATM, the applicant searched the FY 2021 
MedPAR file for claims 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 the 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.

[[Page 58854]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.167

    With respect to the cost criterion, the applicant for 
VOWSTTM conducted the following analysis to demonstrate that 
VOWSTTM meets the cost criterion. To identify cases that may 
be eligible for the use of VOWSTTM, 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 the proposed 
rule for the complete list of MS-DRGs 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 VOWSTTM meets the cost 
criterion.

[[Page 58855]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.168

    We invited public comment on whether VOWSTTM or 
REBYOTATM meet the cost criterion.
    Comment: The applicant for REBYOTATM submitted a comment 
regarding an updated cost analysis utilizing its updated final 
wholesale acquisition cost (WAC). The applicant stated that in the new 
cost analysis, the final inflated case-weighted average standardized 
charge per case of $153,574 exceeded the case-weighted threshold of 
$71,397, demonstrating that the applicant continued to meet the cost 
criterion.
    The applicant for VOWSTTM submitted a comment regarding 
an updated cost analysis utilizing its updated final WAC to confirm 
their belief that VOWSTTM meets the cost criterion because 
cost threshold analysis demonstrated the final inflated case-weighted 
standardized charge per case of $329,947 exceeded the case weighted 
threshold of $95,859, therefore the applicant met the cost criterion.
    Response: We thank the applicants for their comments and appreciate 
the updated cost analyses. We agree that the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount for both REBYOTATM and 
VOWSTTM. Therefore, both REBYOTATM and 
VOWSTTM meet the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant for REBYOTATM 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 REBYOTA\TM\ 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.\94\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for REBYOTA\TM\ for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \94\ Background articles are not included in the table in this 
section but can be accessed via the online posting for the 
technology.

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    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26859 through 
26860), we stated that we had the following concerns regarding whether 
REBYOTATM meets the substantial clinical improvement 
criterion. Regarding the assertion that REBYOTATM is an FDA-
approved therapeutic option for some patients who may not be eligible 
for treatment with ZINPLAVA\TM\ 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.\95\ 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 percent, with no 
observable difference between participants who received one dose 
(83.3%) vs. two doses (82.5%). We noted 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 believed additional 
information regarding whether REBYOTATM was tested in 
patients with CHF to determine clinical outcomes would be helpful to 
evaluate the applicant's assertion. The applicant also referenced a 
poster presentation by Braun et al.\96\ 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. We stated that additional 
information demonstrating whether REBYOTATM is safe for the 
patient population with CHF would help inform our assessment of whether 
REBYOTATM demonstrates substantial clinical improvement over 
existing technologies.
---------------------------------------------------------------------------

    \95\ Feuerstadt P, Harvey A, Bancke L. REBYOTATM, 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.
    \96\ Braun T, Guthmueller B, Harvey A. Safety of investigational 
microbiota-based live biotherapeutic REBYOTA\TM\ 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,\97\ and the PUNCH CD3 phase 3 trial \98\ to 
demonstrate the superiority of REBYOTATM over placebo, we 
questioned whether other treatment options indicated to prevent rCDI, 
such as ZINPLAVATM, would be a more appropriate comparator. 
We noted that additional information regarding clinical outcomes as a 
result of treatment with REBYOTATM compared to 
ZINPLAVATM would be helpful to assess the substantial 
clinical improvement criterion. In summary, while we understood that 
there were no head-to-head trials comparing REBYOTATM to 
ZINPLAVATM, we indicated that additional information would 
help inform our assessment of whether REBYOTATM demonstrated 
a substantial clinical improvement over existing technologies.
---------------------------------------------------------------------------

    \97\ Blount KF, Shannon WD, Deych E, Jones C. Restoration of 
bacterial microbiome composition and diversity among treatment 
responders in a phase 2 trial of REBYOTATM: an 
investigational microbiome restoration therapeutic. Open Forum 
Infect Dis. 2019;6(4):ofz095.
    \98\ 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; 
September 29, 2021.
---------------------------------------------------------------------------

    With regard to the substantial clinical improvement criterion, the 
applicant for VOWSTTM asserted that VOWSTTM 
represents a substantial clinical improvement over existing 
technologies because VOWSTTM treats patients unresponsive to 
antibiotic treatment for rCDI and can be used in patients ineligible 
for ZINPLAVATM due to CHF. The applicant also asserted that 
it improves clinical outcomes by reducing rCDI, increasing resolution 
of the disease process by expediting microbiome repair, and reducing 
carriage of antimicrobial resistance genes. The applicant provided five 
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.\99\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
VOWSTTM 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.

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

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[GRAPHIC] [TIFF OMITTED] TR28AU23.179

    In the FY 2024 IPPS/LTCH proposed rule (88 FR 26881 through 26882), 
after reviewing the information provided by the applicant, we noted 
that we had the following concerns regarding whether VOWSTTM 
meets the substantial clinical improvement criterion. We stated that to 
demonstrate that VOWSTTM reduces rates of CDI recurrence 
compared to standard of care therapies, the application primarily cited 
to the ECOSPOR phase II trial and ECOSPOR III phase III trial. The 
application also cited an abstract of the open-label single-arm ECOSPOR 
IV trial which did not appear to provide a comparison against currently 
available therapies. We stated that the major limitation of these data 
was that patients who received ZINPLAVATM in the prior 3 
months were excluded. We stated that while the study provided data 
comparing the effectiveness of VOWSTTM to antibiotics alone, 
no data comparing the treatment of rCDI utilizing antibiotics plus 
ZINPLAVATM, as was recommended for rCDI, against antibiotics 
plus VOWSTTM (with or without ZINPLAVATM) was 
provided. Without a comparison against such currently available 
therapies, we

[[Page 58867]]

questioned whether the information provided by the applicant was 
sufficient to support the applicant's statements that 
VOWSTTM is well-tolerated and mitigates the safety concerns 
of other alternative therapies, and that VOWSTTM can be used 
in patients ineligible for ZINPLAVATM due to diagnosis of 
CHF.
    With regard to the claim that VOWSTTM 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. We stated that it was not clear whether this criterion 
necessarily excluded individuals with known pre-existing CHF from the 
study group and that it was also not clear how many individuals 
diagnosed with CHF prior to or during the study were identified in the 
study populations. We considered whether a lack of participants with 
CHF could potentially account for the low incidence of adverse effects, 
rather than being attributable to the safety of VOWSTTM 
relative to ZINPLAVATM for patients with CHF. Absent 
additional information, we stated that it was difficult to confirm that 
VOWSTTM offers a treatment option for patients ineligible 
for ZINPLAVATM due to CHF.
    The applicant stated that there is an increased resolution of the 
disease process because VOWSTTM 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 
cited three articles: two randomized controlled trials and one 
unpublished abstract. While the results of the Phase III randomized 
controlled trial \100\ demonstrated the superiority of 
VOWSTTM over placebo, we questioned whether other treatment 
options indicated to prevent rCDI, such as ZINPLAVATM, would 
have been a more appropriate comparator. We stated that additional 
information regarding clinical outcomes as a result of treatment with 
VOWSTTM compared to such treatment options, instead of 
placebo, would have been helpful in our assessment of the substantial 
clinical improvement criterion. With respect to the applicant's claim 
that VOWSTTM may reduce the number of future 
hospitalizations or physician visits for patients diagnosed with rCDI, 
the applicant cited the Feuerstadt study to suggest that reduced rates 
of rCDI shown in Phase III clinical trials would likely lead to fewer 
days in hospital. However, we stated that the study did not address 
this measure directly; rather, this was an inference by the applicant. 
We welcomed additional data to support the claim VOWSTTM may 
reduce the number of future hospitalizations or physician visits for 
patients with rCDI.
---------------------------------------------------------------------------

    \100\ Feuerstadt P, Louie TJ, Lashner B, et al., 
VOWSTTM (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 claim that VOWSTTM reduces the 
abundance of antimicrobial resistance genes (ARGs) and associated taxa 
compared to placebo, which accelerates microbiome recovery from 
antibiotics, we stated that the applicant cited one unpublished study 
showing treatment with VOWSTTM 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 invited public comments on whether REBYOTATM or 
VOWSTTM meet the substantial clinical improvement criterion.
    Comment: The applicants for REBYOTATM and 
VOWSTTM each submitted comments in response to CMS's 
concerns in the FY 2024 IPPS/LTCH PPS proposed rule regarding whether 
REBYOTATM and VOWSTTM meet the substantial 
clinical improvement criterion.
    In the applicant for VOWSTTM's comment regarding 
substantial clinical improvement, it asserted that VOWSTTM 
significantly improves clinical outcomes relative to services or 
technologies previously available as most CDI recurrences occur within 
2 weeks of antibiotic discontinuation, and VOWSTTM expedites 
microbiome repair during the ``window of vulnerability.'' The applicant 
further stated that reduction of CDI recurrence as a result of 
VOWSTTM may potentially lessen future healthcare costs, 
morbidity, and rCDI-related hospitalizations. The applicant also 
asserted that VOWSTTM offers a therapeutic option to a 
patient population with a suboptimal response to, or ineligible for, 
currently available treatments, specifically, patients who developed 
rCDI following antibiotic treatment due to continued disruption of the 
gut microbiome by antibiotics themselves. The applicant noted that 
ZINPLAVATM does not address the underlying gut microbiome 
dysbiosis, and that no data suggest that VOWSTTM cannot be 
used in patients diagnosed with CHF, who may be at an increased risk of 
heart failure associated with treatment with ZINPLAVATM. The 
applicant noted that its oral administration process may enhance the 
patient experience, in part, because the product can be taken at home 
compared to REBYOTATM.
    The applicant for VOWSTTM further stated, with regard to 
the concerns whether the information provided by the applicant is 
sufficient to support the applicant's statements that 
VOWSTTM is well-tolerated and mitigates the safety concerns 
of other alternative therapies, and whether VOWSTTM can be 
used in patients ineligible for ZINPLAVATM due to CHF, that 
treatment with VOWSTTM did not result in adverse events, nor 
deaths, in patients with CHF. The applicant noted that in the ECOSPOR 
III (SERES-012) and IV (SERES-013) Phase 3 clinical trials, 109 of 349 
(31%) participants had cardiac disease as a concomitant illness, and 24 
subjects with CHF who received VOWSTTM. The applicant stated 
that adverse event profile of VOWST in subjects with cardiac disease 
was consistent with that observed in the overall subject population.
    With regard to our question about whether other treatment options 
indicated to prevent rCDI, such as ZINPLAVATM, would have 
been a more appropriate comparator for VOWSTTM, rather than 
a placebo, the applicant for VOWSTTM stated that it 
consulted with the FDA on the design of the Phase 3 studies and was 
required to evaluate VOWSTTM against placebo. The applicant 
anticipated capability of collecting real world evidence of 
VOWSTTM against other preventative modalities as 
VOWSTTM becomes standard of care.
    With regard to CMS's concern that one unpublished study was used as 
evidence to show treatment with VOWSTTM led to a significant 
decrease in ARG abundance versus placebo, the applicant for 
VOWSTTM stated that a manuscript is in final redaction with 
the authors with an anticipated June 30 submission to an infectious 
diseases journal for publication.
    In the applicant for REBYOTATM's comment regarding 
substantial clinical improvement, with regard to the request for 
additional information demonstrating the safety of REBYOTATM 
in the patient population with CHF, the applicant presented

[[Page 58868]]

results from a post hoc subgroup analysis of the PUNCH CD3 trial by 
Tillotson et al.\101\ that was published in January 2023. The applicant 
stated that the subgroup of patients with cardiac disorders included 
patients with CHF, described as ``Cardiac failure congestive.'' Per the 
applicant, results from the Tillotson et al. subgroup analysis showed 
that REBYOTATM treatment success was better than placebo in 
older adults with cardiac disorders (69% [n = 25/36]), and that overall 
treatment success of older adults with comorbidities was similar to the 
total REBYOTATM-treated population (70.6%). The applicant 
also stated that the subgroup analysis of adverse events further 
supports REBYOTATM is safe for CHF patients, and that, 
unlike the CHF warning included with ZINPLAVA[supreg], the FDA did not 
issue a warning about CHF on the approved label for 
REBYOTATM.
---------------------------------------------------------------------------

    \101\ Glenn Tillotson et. al.; Microbiota-Based Live 
Biotherapeutic RBX2660 for the Reduction of Recurrent Clostridioides 
difficile Infection in Older Adults With Underlying Comorbidities, 
Open Forum Infectious Diseases, Volume 10, Issue 1, January 2023, 
ofac703, https://doi.org/10.1093/ofid/ofac703.
---------------------------------------------------------------------------

    The applicant for REBYOTATM also provided additional 
details regarding the absence of comparative data using 
ZINPLAVATM. The applicant stated that due to the limited use 
of ZINPLAVATM in real-world practice, it was not considered 
in a recent cost-effective analysis comparing REBYOTATM with 
standard-of-care. The applicant also noted that the different routes of 
administration for each of ZINPLAVATM (given by IV infusion) 
and REBYOTATM (via rectal administration) would make it 
difficult to blind the study and would require that the study sites be 
equipped to accommodate infusion administration, in addition to being 
overly burdensome to the study participants.
    Response: We thank the applicants for their comments regarding the 
substantial clinical improvement criterion. After consideration of the 
information previously submitted in the applications for 
REBYOTATM and VOWSTTM and summarized in this 
final rule, and after review of the comments we received, we agree that 
both REBYOTATM and VOWSTTM represent a 
substantial clinical improvement over existing technologies because the 
technologies improve clinical outcomes by increasing resolution of the 
disease process over placebo without serious adverse effects for 
patients who have previously received standard of care antibiotics for 
rCDI. We believe that these two technologies restore the gut microbiome 
and resolve dysbiosis to prevent the recurrence of CDI in patients 
following antibacterial treatment for rCDI. In summary, we have 
determined that REBYOTATM and VOWSTTM meet all of 
the criteria for approval of new technology add-on payments. Therefore, 
we are approving new technology add-on payments for 
REBYOTATM and VOWSTTM for FY 2024. As previously 
stated, cases involving REBYOTATM that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
code XW0H7X8 (Introduction of broad consortium microbiota-based live 
biotherapeutic suspension into lower GI, via natural or artificial 
opening, new technology group 8). Cases involving VOWSTTM 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS procedure code XW0DXN9 (Introduction of SER-109 into 
mouth and pharynx, external approach, new technology group 9).
    Each of the applicants submitted cost information for its 
technology. The applicant for REBYOTATM stated that the cost 
of its technology is $9,000.00 per patient, and projected that 2,180 
cases will involve the use of REBYOTATM in FY 2024. The 
manufacturer of VOWSTTM stated that the cost of its 
technology is $17,500.00 and projected that 448 cases will involve the 
use of VOWSTTM in FY 2024. Because the technologies are 
substantially similar to each other, we believe using a single cost for 
purposes of determining the new technology add-on payment amount is 
appropriate for REBYOTATM and VOWSTTM even though 
each applicant has its own set of codes. We also believe using a single 
cost provides predictability regarding the add-on payment when using 
REBYOTATM or VOWSTTM for the prevention of 
recurrence of CDI following antibiotic treatment for rCDI. As such, 
consistent with prior rulemaking (85 FR 58684), we believe that the use 
of a weighted average of the cost of REBYOTATM and 
VOWSTTM based on the projected number of cases involving 
each technology to determine the maximum new technology add-on payment 
would be most appropriate. To compute the weighted cost average, we 
summed the total number of projected cases for each of the applicants, 
which equaled 2,628 cases (2,180 plus 448). We then divided the number 
of projected cases for each of the applicants by the total number of 
cases, which resulted in the following case-weighted percentages: 83 
percent for REBYOTATM and 17 percent for VOWSTTM. 
We then multiplied the cost per case for the specific drug by the case-
weighted percentage (0.83 * $9,000 = $7,470 for REBYOTATM 
and 0.17 * $17,500 = $2,975 for VOWSTTM). This resulted in a 
case-weighted average cost of $10,445 for the technology. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the use of 
REBYOTATM or VOWSTTM is $6,789.25 for FY 2024.
g. SeptiCyte[supreg] RAPID
    Immunexpress, Inc. submitted an application for new technology add-
on payments for SeptiCyte[supreg] RAPID for FY 2024. Per the applicant, 
SeptiCyte[supreg] 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[supreg] RAPID generates a score 
(SeptiScore[supreg]) 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[supreg] 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[supreg] RAPID received 510(k) clearance (K203748) from FDA on 
November 29, 2021, for the following indication: SeptiCyte[supreg] 
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[supreg] Blood RNA Tube. The SeptiCyte[supreg] 
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[supreg] RAPID test

[[Page 58869]]

generates a score (SeptiScore[supreg]) that falls within one of four 
discrete Interpretation Bands based on the increasing likelihood of 
infection-positive systematic inflammation. SeptiCyte[supreg] RAPID is 
intended for in-vitro diagnostic use on the Biocartis 
IdyllaTM System. The applicant stated the SeptiCyte[supreg] 
RAPID was commercially available immediately after FDA clearance. Per 
the applicant, Septicyte[supreg] RAPID was cleared based on substantial 
equivalency to the predicate device SeptiCyte[supreg] LAB (K163260), 
which received 510(k) clearance \102\ 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[supreg] RAPID versus the manual extraction for 
SeptiCyte[supreg] LAB; reverse transcription polymerase chain reaction 
(RT-PCR) and dry format for SeptiCyte[supreg] RAPID versus reverse 
transcription-quantitative polymerase chain reaction (RT-qPCR) and wet 
format for SeptiCyte[supreg] LAB; use of the Biocartis 
IdyllaTM System for SeptiCyte[supreg] RAPID versus ABI 7500 
Fast Dx for SeptiCyte[supreg] LAB; different fluorescent probes and 
quenchers between SeptiCyte[supreg] RAPID and SeptiCyte[supreg] LAB; 
and use of MS2 phage internal sample processing control for 
SeptiCyte[supreg] RAPID versus three external controls for 
SeptiCyte[supreg] LAB.
---------------------------------------------------------------------------

    \102\ 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[supreg] RAPID: XXE5X38 (Measurement of infection, 
whole blood nucleic acid-base microbial detection, new technology group 
5). We note that the correct descriptor for this code appears to be 
(Measurement of infection, whole blood reverse transcription and 
quantitative real-time polymerase chain reaction, 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 SeptiCyte[supreg] RAPID is not substantially similar to 
other currently available technologies because SeptiCyte[supreg] 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[supreg] RAPID for the applicant's complete statements in 
support of its assertion that SeptiCyte[supreg] RAPID is not 
substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.180


[[Page 58870]]


    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26867 through 
26868), after reviewing of the information provided by the applicant, 
we stated that we had the following concerns with regard to the newness 
criterion. We noted that the applicant did not include 
SeptiCyte[supreg] LAB, the predicate device for SeptiCyte[supreg] 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, we explained that it does 
not appear that these differences materially affect the mechanism of 
action of the technology. We noted that both devices utilize a gene 
expression assay using reverse transcription polymerase chain reaction 
to quantify the relative expression levels of host response genes.\103\ 
We further noted that the applicant also appears to consider the 
devices as similar, as they rely on studies conducted using the 
SeptiCyte[supreg] LAB to demonstrate substantial clinical improvement.
---------------------------------------------------------------------------

    \103\ https://www.accessdata.fda.gov/cdrh_docs/reviews/K163260.pdf.
---------------------------------------------------------------------------

    We also noted that the applicant did not explain how 
SeptiCyte[supreg] RAPID targets a different disease or patient 
population compared to existing sepsis diagnostic testing. Instead, the 
applicant stated that SeptiCyte[supreg] 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 did not appear to be related to newness, and 
it was unclear how the patient population tested with Septicyte[supreg] 
RAPID differs from other patients tested for sepsis, including those 
tested with Septicyte[supreg] LAB. As the applicant stated that 
Septicyte[supreg] 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[supreg] LAB, we 
stated our belief these technologies may be substantially similar to 
each other. We noted that if Septicyte[supreg] RAPID is substantially 
similar to SeptiCyte[supreg] LAB, we believe the newness period for 
this technology would begin on April 6, 2017, with the 510(k) clearance 
date for SeptiCyte[supreg] 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 invited public comments on whether SeptiCyte[supreg] RAPID is 
substantially similar to existing technologies and whether 
SeptiCyte[supreg] RAPID meets the newness criterion.
    Comment: The applicant submitted a comment in response to CMS's 
concerns pertaining to the newness criterion. Regarding our concern 
whether SeptiCyte[supreg] RAPID uses the same or similar mechanism of 
action as existing technology, the applicant clarified that 
SeptiCyte[supreg] LAB, the predicate device to SeptiCyte[supreg] RAPID, 
was never manufactured, commercialized, or sold in the U.S. The 
applicant stated that it does not believe SeptiCyte[supreg] RAPID is 
substantially similar to SeptiCyte[supreg] LAB, because 
SeptiCyte[supreg] RAPID applies the technology to an improved, 
streamlined methodology consisting of fewer steps that result in a 1-
hour turnaround time. However, the applicant also noted that 
SeptiCyte[supreg] RAPID demonstrates a high correlation (r\2\ = 0.94) 
to SeptiCyte[supreg] LAB, which were developed and validated using the 
same underlying polymerase chain reaction technology.
    The applicant stated its belief that even if CMS considers 
SeptiCyte[supreg] RAPID to be substantially similar to 
SeptiCyte[supreg] LAB, SeptiCyte[supreg] RAPID should be considered new 
because SeptiCyte[supreg] LAB was never commercially available in the 
U.S. The applicant explained that FDA cleared SeptiCyte[supreg] LAB on 
April 6, 2017, but Immunexpress Inc. never manufactured or sold the 
device in the U.S. due to the market access impediment of a 6-hour test 
turnaround time, when clinical management of sepsis needs to meet a 3-
hour sepsis bundle of care, according to the CMS Severe Sepsis and 
Septic Shock Management Bundle core measure. The applicant stated that 
while FDA subsequently granted 510(k) clearance to SeptiCyte[supreg] 
RAPID on November 29, 2021, it believes the newness date for 
SeptiCyte[supreg] RAPID should begin on the date of the device's first 
sale, which was April 20, 2022. The applicant noted that it provided 
SeptiCyte[supreg] RAPID free of charge for evaluations and quality 
improvement initiatives between its FDA clearance on November 29, 2021, 
and April 20, 2022, the date of first sale. The applicant stated its 
belief because the date of first sale occurred after a substantial 
delay from the date of FDA clearance on November 29, 2021, it should 
therefore be the newness date for the purposes of new technology add-on 
payments.
    Regarding our concern that SeptiCyte[supreg] RAPID targets the same 
disease or patient population as existing sepsis diagnostic testing, 
the applicant stated that all sepsis diagnostic tools target the same 
population. The applicant stated that no existing diagnostic technology 
can accurately or rapidly differentiate sepsis from non-infectious 
systemic inflammation as SeptiCyte[supreg] RAPID does.
    Response: We thank the applicant for its comment and the additional 
information provided.
    Based on our review of comments received and information submitted 
by the applicant as part of its FY 2024 new technology add-on payment 
application for SeptiCyte[supreg] RAPID, we agree with the applicant 
that SeptiCyte[supreg] RAPID has a unique mechanism of action as the 
first commercially available gene expression assay using reverse 
transcription polymerase chain reaction to aid in differentiating 
infection-positive (sepsis) from infection-negative systemic 
inflammation. Therefore, we believe that SeptiCyte[supreg] RAPID is not 
substantially similar to existing diagnostic options and meets the 
newness criterion.
    In regard to the first criterion, whether a technology uses the 
same or similar mechanism of action to achieve a therapeutic outcome, 
we continue to believe that SeptiCyte[supreg] RAPID uses the same or 
similar mechanism of action as the predicate device, SeptiCyte[supreg] 
LAB, as gene expression assays using reverse transcription polymerase 
chain reaction to aid in differentiating infection-positive (sepsis) 
from infection-negative systemic inflammation. Although the applicant 
states that SeptiCyte[supreg] RAPID applies the technology to an 
improved methodology, which impacts clinical utility for rapid results 
to aid the clinician in suspected sepsis, we believe that improvements 
in clinical utility do not result in a substantially different 
mechanism of action, and these differences instead relate to an 
assessment of whether SeptiCyte[supreg] RAPID meets the substantial 
clinical improvement criterion. We also believe that regardless of 
whether the procedural steps have changed, the manner in which 
SeptiCyte[supreg] RAPID functions is unchanged from SeptiCyte[supreg] 
LAB. For example, we note that the applicant stated that 
SeptiCyte[supreg] RAPID was developed and validated using the same 
underlying PCR technology as SeptiCyte[supreg] LAB (RT-PCR). In 
addition, we note that the analytes assessed by SeptiCyte[supreg] RAPID 
(PLAC8; PLA2G7) are a subset of those assessed by SeptiCyte[supreg] LAB 
(PLAC8; PLA2G7; LAMP1; CEACAM4); and as noted previously, studies 
conducted using SeptiCyte[supreg] LAB were used to demonstrate 
substantial clinical improvement for SeptiCyte[supreg] RAPID. 
Therefore, we believe that the SeptiScore[supreg] results

[[Page 58871]]

obtained by SeptiCyte[supreg] RAPID are the same or similar as to those 
that would have been obtained with SeptiCyte[supreg] LAB, and that 
differences in methodology between the two technologies do not 
represent a new mechanism of action.
    Furthermore, we agree with the applicant that the two versions of 
the technology map to the same MS-DRGs and are intended to treat the 
same or similar disease in the same or similar patient population--
patients tested for sepsis to differentiate sepsis from infection-
negative systemic inflammation. Because SeptiCyte[supreg] RAPID meets 
all three of the substantial similarity criteria, we believe 
SeptiCyte[supreg] RAPID is substantially similar to the predicate 
technology, SeptiCyte[supreg] LAB.
    In accordance with our policy, because these technologies are 
substantially similar to each other, we use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies. However, we note that the applicant stated that 
SeptiCyte[supreg] LAB, although FDA cleared, was never manufactured, 
commercialized or sold in the U.S. market due to the market access 
impediment of a 6-hour test turnaround time. As we have discussed in 
prior rulemaking, generally, our policy is to begin the newness period 
on the date of FDA approval or clearance or, if later, the date of 
availability of the product on the U.S. market, and we may consider a 
documented delay in the technology's market availability in our 
determination of newness (77 FR 53348 and 70 FR 47341). Since 
SeptiCyte[supreg] LAB has not been available for sale on the U.S. 
market, we are unable to establish the beginning of the newness period 
for SeptiCyte[supreg] LAB. Therefore, we believe it is appropriate to 
use the earliest market availability date submitted for 
SeptiCyte[supreg] RAPID as the beginning of the newness period for both 
technologies.
    We note that, as stated previously, while CMS may consider a 
documented delay in the technology's market availability in our 
determination of newness, our policy for determining whether to extend 
new technology add-on payments for an additional year generally applies 
regardless of the volume of claims for the technology after the 
beginning of the newness period (83 FR 41280). We do not consider the 
date of first sale of a product as an indicator of its entry onto the 
U.S. market. The applicant stated that the date of first sale of 
SeptiCyte[supreg] RAPID was April 20, 2022, but it is unclear from the 
information provided when the technology first became available for 
sale and, absent additional information from the applicant, we cannot 
determine a newness date based on a documented delay in the 
technology's availability on the U.S. market. Therefore, we consider 
the beginning of the newness period for SeptiCyte[supreg] RAPID to 
commence on November 29, 2021, when SeptiCyte[supreg] RAPID received 
FDA marketing authorization.
    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[supreg] RAPID. The applicant identified three 
different types of patient cases where SeptiCyte[supreg] 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[supreg] RAPID Codes--FY 2024 associated 
with the 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[supreg] RAPID meets the cost 
criterion.

[[Page 58872]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.181

    We invited public comments on whether SeptiCyte[supreg] RAPID meets 
the cost criterion.
    Comment: The applicant submitted a comment reiterating that 
SeptiCyte[supreg] RAPID meets the cost criterion because the inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount.
    Response: We thank the applicant for its comment. We agree the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
SeptiCyte[supreg] RAPID meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SeptiCyte[supreg] RAPID represents a 
substantial clinical improvement over existing technologies because 
SeptiCyte[supreg] 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[supreg] 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.\104\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for SeptiCyte[supreg] RAPID for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.
---------------------------------------------------------------------------

    \104\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.

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

[[Page 58873]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.182


[[Page 58874]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.183


[[Page 58875]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.184


[[Page 58876]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.185

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26873), after 
reviewing the information provided by the applicant, we stated that we 
had the following concerns regarding whether SeptiCyte[supreg] RAPID 
meets the substantial clinical improvement criterion. First, we noted 
that the applicant submitted two studies 105 106 of 
SeptiCyte[supreg] LAB, the predicate device, to support its assertions 
as to why SeptiCyte[supreg] RAPID represents a substantial clinical 
improvement. The applicant did not present any clinical data to compare 
SeptiCyte[supreg] RAPID to SeptiCyte[supreg] LAB. Second, the studies 
provided showed that SeptiCyte[supreg] RAPID is not a definitive test 
and that resulting SeptiScores[supreg] in Bands 2 and 3 are 
inconclusive. We noted that the applicant stated that SeptiCyte[supreg] 
RAPID should be used in conjunction with clinical assessments and other 
laboratory findings. If additional diagnostic tests are needed in 
conjunction with SeptiCyte[supreg] RAPID to determine a diagnosis of 
sepsis or SIRS, we questioned whether SeptiCyte[supreg] RAPID can 
provide an earlier diagnosis and affect the management of the patient. 
In addition, we stated that the applicant did not provide evidence for 
this claim other than the 1-hour turnaround time for SeptiCyte[supreg] 
RAPID to provide test results. Additionally, we noted that the 
applicant did not provide any clinical data demonstrating that the 
SeptiCyte[supreg] RAPID affects the management of the patient, or that 
it improves clinical outcomes.
---------------------------------------------------------------------------

    \105\ Balk, R, Esper AM, Martin GS, et al. Validation of 
SeptiCyte[supreg] 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.
    \106\ McHugh, L.C. (2018). Modeling Improved Patient Management 
and Hospital Savings with SeptiCyte[supreg] LAB in the Diagnosis of 
Sepsis at ICU admission. Abstract at IDWeek 2018.
---------------------------------------------------------------------------

    We invited public comments on whether SeptiCyte[supreg] RAPID meets 
the substantial clinical improvement criterion.
    Comment: We received several comments in support of new technology 
add-on payments for SeptiCyte[supreg] RAPID. A few of the commenters 
stated their belief that SeptiCyte[supreg] RAPID has the potential to 
greatly improve patient care because of its high level of sensitivity, 
short turnaround time, and advantages over existing sepsis diagnostic 
tools. A commenter who recently evaluated SeptiCyte[supreg] RAPID's 
impact on sepsis bundle compliancy at their community hospital 
emergency department stated they had very encouraging findings and 
believe SeptiCyte[supreg] RAPID has the potential for clinical utility 
in the care of its sepsis patients, as well as the potential for 
improved antibiotic stewardship and reduced costs. A few commenters 
also explained that SeptiCyte[supreg] RAPID provides clinicians with 
the probability of sepsis to facilitate real-time decision making in 
patients with suspected sepsis. One commenter noted that 
SeptiCyte[supreg] RAPID has the potential to impact the morbidity and 
mortality of critically ill patients. A few commenters stated their 
support for approval of SeptiCyte[supreg] RAPID's new technology add-on 
payment application because approval for the payments would encourage 
adoption of the technology by hospitals and health systems who may 
otherwise delay usage of SeptiCyte[supreg] RAPID.

[[Page 58877]]

    Response: We thank the commenters for their input and have taken it 
into consideration in our determination of whether SeptiCyte[supreg] 
RAPID meets the substantial clinical improvement criterion, discussed 
later in this section.
    Comment: The applicant submitted a public comment regarding the 
substantial clinical improvement criterion and provided responses to 
concerns raised in the proposed rule. With respect to whether studies 
of SeptiCyte[supreg] LAB accurately represent clinical data from 
SeptiCyte[supreg] RAPID, the applicant stated that SeptiCyte[supreg] 
RAPID was compared to SeptiCyte[supreg] LAB and the two devices had a 
high correlation (r\2\ = 0.94), which measured the linear association 
between the two tests.
    With respect to CMS's concern about whether SeptiCyte[supreg] RAPID 
is a definitive test and that SeptiScores[supreg] in Bands 2 and 3 are 
inconclusive, the applicant stated that SeptiCyte[supreg] RAPID scores 
indicate the sepsis likelihood ratios based upon its four bands with 
high specificity and sensitivity for 80 percent of all patients. The 
applicant explained that for the remaining 20 percent of patients, 
whose SeptiScores[supreg] fall into Band 3, probability can be derived 
in conjunction with other lab variables. The applicant further 
explained that the high sensitivity of Band 1 and the high specificity 
of the test in Band 4 provides clinicians with rule-in or rule-out 
information, which is strong patient management information that is 
unavailable with current technologies.\107\
---------------------------------------------------------------------------

    \107\ Balk, R, Esper AM, Martin GS, et al. Validation of 
SeptiCyte[supreg] 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.
---------------------------------------------------------------------------

    With respect to whether SeptiCyte[supreg] RAPID should be used in 
conjunction with clinical assessments and other laboratory findings, 
the applicant stated that with the lack of a ``Gold Standard'' to 
effectively define sepsis, currently available diagnostic tools for 
suspected sepsis are inadequate, with high false positivity rates due 
to limited specificity (for example, C-reactive protein (CRP)), lengthy 
turnaround time for actionable results, and low sensitivity (for 
example, blood cultures). The applicant further stated that when used 
in conjunction with clinical assessments, vital signs, and laboratory 
findings, SeptiCyte[supreg] RAPID alone, or in combination with 
typically used biomarkers, is superior to existing technologies in 
differentiating sepsis from non-infectious systemic inflammation.\108\ 
The applicant also asserted that SeptiCyte[supreg] RAPID significantly 
differentiated between sepsis and non-infectious systematic 
inflammation in 143 patients where an expert panel of sepsis physicians 
was unable to retroactively diagnose sepsis or non-infectious systemic 
inflammation. In addition, the applicant noted that SeptiCyte[supreg] 
RAPID has been independently clinically validated for its role in 
triage and risk stratification of patients with severe COVID, which 
according to the applicant is a proxy for sepsis.
---------------------------------------------------------------------------

    \108\ Balk, R, Esper AM, Martin GS, et al. Validation of 
SeptiCyte[supreg] 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.
---------------------------------------------------------------------------

    With respect to whether SeptiCyte[supreg] RAPID can provide an 
earlier diagnosis and affect the management of the patient, the 
applicant reasserted that SeptiCyte[supreg] RAPID allows for earlier 
differentiation of sepsis from non-infectious systematic inflammation, 
thereby impacting the management of patients by allowing for earlier 
therapeutic intervention as well as antibiotic and diagnostic 
stewardship. The applicant stated that literature provides well 
documented evidence that patient management aligned with Surviving 
Sepsis Campaign guidelines and meeting CMS quality metrics of 1- or 3-
hour bundles improves care and clinical outcomes for sepsis patients. 
The applicant explained that this evidence supports its belief that the 
1-hour turnaround time and significant likelihood ratios of 
SeptiCyte[supreg] RAPID for differentiating sepsis versus non-
infectious systemic inflammation can impact sepsis bundle compliance 
and clinical outcomes.
    With respect to CMS's concern about the absence of clinical data 
demonstrating that the SeptiCyte[supreg] RAPID affects the management 
of the patient or that it improves clinical outcomes, the applicant 
reiterated its belief that by providing early and accurate 
differentiation between sepsis and non-infectious systemic 
inflammation, SeptiCyte[supreg] can decrease the time to diagnoses and 
treat sepsis resulting in improved outcomes and reduced mortality. To 
support this claim, the applicant included eight case studies which 
they stated demonstrate SeptiCyte[supreg] RAPID's impact on the care 
process, antibiotic stewardship, and diagnostic stewardship. More 
specifically, the applicant provided a case study to demonstrate 
SeptiCyte[supreg] RAPID's utility in each of the following: (1) 
monitoring patients post-operatively for secondary hospital acquired 
sepsis; (2) monitoring severe burn patients to differentiate infection 
negative systemic inflammation from infection positive systemic 
inflammation and sepsis; (3) diagnosing sepsis in an immunocompromised 
patient admitted with neutropenia and a recurrence of cancer who 
received chemotherapy; (4) confirming the presence of sepsis despite 
negative blood cultures; (5) evaluating the probability of sepsis in a 
patient with a change in clinical status and determining whether a de-
escalation of antibiotics was appropriate; (6) differentiating 
infection negative systemic inflammation from infection positive 
systemic inflammation and sepsis; and (7/8) aiding the diagnosis of 
secondary sepsis following a central nervous system bleed and surgical 
procedure.
    The first case study provided by the applicant pertains to a 64-
year-old female admitted for a right hemi hepatectomy for hepatobiliary 
carcinoma. After 19 days in the hospital, the patient exhibited 
clinical deterioration and an altered mental status. The patient was 
transferred to the intensive care unit (ICU), where the patient 
underwent blood cultures, SeptiCyte[supreg] RAPID, and an abdominal 
computed (CT) scan. The SeptiScore[supreg] was 7.5, within Band 4, 
indicating a high probability of sepsis. The CT showed a perihepatic 
abscess, which was drained, and the fluid was cultured. As a result of 
these tests, the patient started antibiotics. After 24 hours, 
SeptiCyte[supreg] RAPID showed a SeptiScore[supreg] of 8.8, within Band 
4, and blood cultures showed Escherichia coli and Candida, confirming 
sepsis. The patient received treatment for 7 days and was transferred 
from the ICU to the ward with a SeptiScore[supreg] of 7.1, within Band 
3, indicating an intermediate risk of sepsis. The applicant stated that 
the patient developed a post-operative infection and an abscess, and 
SeptiCyte[supreg] RAPID was used to confirm sepsis and to monitor the 
patient for evidence of secondary hospital acquired sepsis.
    The second case study included in the applicant's comment pertains 
to a 40-year-old male admitted to the burn unit with thermal burns 
covering 30 percent of his total body surface area (TBSA), with 10 
percent of his TBSA deeply burned. At admission, SeptiCyte[supreg] 
RAPID was administered showing a SeptiScore[supreg] of 4, within Band 
1, indicating a low probability of sepsis. During day 3 of admittance, 
the patient developed increased respiratory distress and another 
SeptiCyte[supreg] RAPID was administered. The SeptiScore[supreg] was

[[Page 58878]]

12.8, within Band 4, indicating a high probability of sepsis. The 
patient's sputum sample showed great Haemophilus influenzae and blood 
cultures were negative. As a result, the patient started antibiotics. 
On day 10, the patient developed fever, tachycardia, and leukocytosis. 
As a result, blood, urine, and cutaneous cultures were drawn and 
SeptiCyte[supreg] RAPID was administered. The SeptiScore[supreg] was 
10.1, within Band 4, indicating a high probability of sepsis. The 
cutaneous cultures showed Enterococcus faecalis and Pseudomonas 
aeruginosa. The patient received antibiotics. The applicant stated that 
severe burn patients frequently develop an inflammatory response due to 
repeated surgeries, debridement, thrombotic complications, and other 
treatments. The applicant also stated that this case study demonstrates 
the use of SeptiCyte[supreg] RAPID to monitor the patient following a 
baseline low SeptiScore[supreg] on admission and repeating the 
SeptiCyte[supreg] RAPID test at the time of developing SIRS and 
possible infection. The applicant explained that the high 
SeptiScore[supreg] in the presence of SIRS supports the early diagnosis 
of a hospital acquired infection and sepsis.
    The applicant stated that the third case study is intended to 
demonstrate the role of SeptiCyte[supreg] RAPID in the diagnosis of 
sepsis in an immunocompromised patient with neutropenia and recurrence 
of cancer who was receiving chemotherapy. A 47-year-old patient with a 
history of cervical cancer considered to be in remission was admitted 
with a hemorrhagic stroke. An examination revealed recurrence of the 
cancer with hepatic and cerebral metastatic lesions. As a result, the 
patient began chemotherapy. On day 7, the patient developed a fever and 
had an absolute neutrophil count of 200 per microliter. Blood and urine 
cultures were negative, and the patient was treated with antibiotics 
for seven days, after which chemotherapy was restarted. On day 30, the 
patient developed fever, tachycardia, anuria, and hypotension. The 
patient received blood tests and a clinical assessment that showed a 
decrease in neutrophils to 0 per microliter, down from 170 two days 
prior; a c-reactive protein 0 of 166 mg/L; and a blood pressure of 70/
40 mmHg. The patient was admitted to the ICU where volume and 
vasopressors were started, and blood and urine cultures obtained. In 
addition, the patient's SeptiScore[supreg] was 9, within Band 4, 
representing a high probability of sepsis. These clinical tests also 
showed growth of Enterococcus faecalis in the urine, and the patient 
started triple antibiotics and discontinued chemotherapy. The applicant 
stated that this case demonstrates SeptiCyte[supreg] RAPID's diagnostic 
capability of detecting sepsis much earlier in a patient with severe 
neutropenia and immunosuppression, confirming sepsis and prompting 
initiation of antibiotics and cessation of chemotherapeutics.
    The applicant explained that the fourth case study represented an 
example of how SeptiCyte[supreg] RAPID is used to confirm the presence 
of sepsis despite negative blood cultures. A 79-year-old male with 
diabetes mellitus and chronic obstructive pulmonary disease was 
admitted for endoscopic devolvulation of a sigmoid volvulus. The 
patient developed dyspnea and productive cough with decreasing 
consciousness and increasing work of breathing. The patient was 
intubated and admitted to the ICU where he was placed on vasopressors 
and intermittent mandatory ventilation. The patient had a Sequential 
Organ Failure Assessment (SOFA) score of 9, a white blood cell count of 
14,000, a lactate of 1.6 mm/L, a negative urine antigen test, and a 
chest x-ray that showed diffuse bilateral infiltrates. The patient's 
SeptiScore[supreg] was 7.7, within Band 4, indicating a high 
probability of sepsis. Blood and urine cultures were also obtained. The 
patient started triple antibiotics. The applicant stated that the 
SeptiScore[supreg] confirmed a high probability of sepsis resulting in 
early initiation of appropriate antibiotics and early source 
investigation and control.
    The applicant explained that the fifth case study is an example of 
how SeptiCyte[supreg] RAPID was used to evaluate an in-hospital change 
in clinical status and de-escalation of antibiotic therapy. A 63-year-
old male with a history of diabetes mellitus and non-dialysis chronic 
renal failure was admitted to the ICU with bilateral SARS-CoV-2 
pneumonia and respiratory failure. The patient's 78 day stay in the ICU 
included mechanical ventilation, tracheostomy, dialysis for acute renal 
failure, ventilator-associated pneumonia from Enterobacter cloacae, and 
two episodes of hospital-acquired bacteremia with Enterococcus faecalis 
and Staphylococcus aureus. Once the patient was transferred to the 
ward, his tracheostomy was removed, and dialysis was discontinued. Five 
days later, the patient presented a low-grade fever, shortness of 
breath, purulent sputum, and tachypnea and was readmitted to the ICU 
with hypoxic respiratory failure and intubated. At this time, the 
patient had a blood pressure of 70/50 mmHg, a SOFA score of 8, a white 
blood cell count of 9.800 with 89 percent neutrophils, and a chest x-
ray that showed bilateral infiltrates and pulmonary edema. Blood and 
sputum cultures were also obtained, and the patient began antibiotics. 
The patient's SeptiScore[supreg] was 3.7, within Band 1, representing a 
low probability of sepsis. Considering prompt clinical improvement with 
ventilation and diuresis, no culture growth after 24 hours, and a 
SeptiScore[supreg] of 3.7, antibiotics were discontinued. The applicant 
explained that this case study shows how SeptiCyte[supreg] RAPID 
confirms low probability of sepsis in the presence of negative cultures 
and clinical improvement allowed for the appropriate discontinuation of 
antibiotics, driving antibiotic stewardship and de-escalation of 
unnecessary therapy.
    The applicant described in the sixth case study how 
SeptiCyte[supreg] RAPID was used to differentiate infection negative 
systemic inflammation from infection positive systemic inflammation or 
sepsis in a 74-year-old patient with deteriorating mental status, loss 
of consciousness and tachypnea. The patient had normal initial 
diagnostic and laboratory studies and blood, sputum, urine cultures 
were ordered, and results were pending. The patient had 
SeptiCyte[supreg] RAPID which showed a SeptiScore[supreg] of 5, Band 1 
which is a low risk of sepsis. The care team discontinued antibiotics 
due to SeptiCyte[supreg] RAPID in conjunction with negative cultures 
after 3 days. Further evaluation showed mass in left upper lobe of the 
lung with metastases in adrenal gland.
    The applicant stated that, in the seventh and eighth case studies, 
SeptiCyte[supreg] RAPID aided in the diagnosis of sepsis after CNS 
bleed and surgical procedure. There were two patients who were both 
admitted to the ICU post subarachnoid hemorrhage with complicating 
secondary hydrocephalus requiring external ventricular drain placement. 
During the ICU stay, both patients developed fever and delirium, and 
both received CSF analysis with results that came back after 3 hours 
that showed high WBC count and protein but was gram stain negative. The 
patients received SeptiCyte[supreg] RAPID SeptiScore[supreg]'s of 8.8 
and 7, respectively, both elevated with high probability of sepsis with 
a 1-hour turnaround. The CSF culture grew Klebsiella pneumoniae 24 
hours after collection. The applicant stated that SeptiCyte[supreg] 
RAPID's 1-hour turnaround time confirmed the presence of systemic 
infection in both patients, prompting

[[Page 58879]]

early appropriate antibiotic therapy pending bacterial confirmation and 
sensitivity testing.
    Response: We thank the applicant and other commenters for their 
input. After further review, we continue to have concerns as to whether 
SeptiCyte[supreg] RAPID meets the substantial clinical improvement 
criterion to be approved for new technology add-on payments. Based on 
the additional information we received, we remain unclear whether 
SeptiCyte[supreg] RAPID offers the ability to diagnose a medical 
condition earlier in a patient population than allowed by currently 
available methods or that it changes the management of patients. While 
the applicant asserted that the technology allows for earlier 
differentiation of sepsis from SIRS, and thereby impacts the management 
of patients, it has not demonstrated that Septicyte[supreg] RAPID 
actually leads to changes in the management of patients such as 
initiating or discontinuing antibiotics. We note that the applicant 
stated it believes that the 1-hour time to results with 
SeptiCyte[supreg] RAPID can impact sepsis bundle compliance, and cited 
literature that meeting sepsis guidelines and quality metrics improves 
outcomes for sepsis patients. However, no evidence was presented to 
demonstrate that the technology improves compliance with guidelines or 
improves outcomes; this is only inferred. Although the applicant 
asserted that SeptiCyte[supreg] RAPID was independently clinically 
validated for its role in triage and risk stratification of patients 
with severe COVID-19, we could not determine that this is a proxy for 
sepsis. The applicant included case studies in support of 
SeptiCyte[supreg] RAPID's ability to improve monitoring of patients at 
risk of sepsis, or as a confirmation test, and a diagnostic aid. We are 
unable to determine, based on these case studies, that the clinical 
data demonstrates that SeptiCyte[supreg] RAPID itself directly affects 
management of patients or improves clinical outcomes. For example, we 
believe that in the clinical scenarios presented, antibiotics would 
have been started or stopped based on clinical presentation alone in 
some cases, and with the additional diagnostic tests in other cases. 
The case studies did not describe when SeptiCyte[supreg] RAPID was 
performed or when results were received in relation to the other tests 
performed, and also did not describe at what point during the timeline 
of tests the antibiotics were started/discontinued (that is, before or 
after the results of the SeptiCyte[supreg] RAPID test or other tests 
were received. Therefore, it did not appear that any change in 
management was initiated directly as a result of receiving the 
SeptiCyte[supreg] RAPID test results in any of the scenarios, despite 
the 1-hour turnaround time. Instead, it appears that, in these 
scenarios, SeptiCyte[supreg] RAPID was used to confirm results from 
standard of care procedures, rather than providing actionable results 
resulting in a change in patient antibiotic use before blood culture or 
molecular pathogen detection results. For example, with regards to Case 
Study #1, it appears that patient clinical deterioration and altered 
mental status following high risk abdominal surgery prompted standard 
of care procedures, and that antibiotics were started after an 
abdominal CT noted a perihepatic abscess, with results confirmed by 
blood and abscess cultures and SeptiCyte[supreg] RAPID results. 
Further, it is unclear how substantial clinical improvement based on 
these scenarios can be demonstrated without a comparison to diagnosis 
and management of these patients using standard of care (SOC) methods 
alone. While other commenters stated that SeptiCyte[supreg] RAPID has 
the potential to improve health outcomes and patient management, 
clinical evidence to support those statements was not provided.
    After review of the information submitted by the applicant as part 
of its FY 2024 new technology add-on payment application for 
SeptiCyte[supreg] RAPID and consideration of the comments received, we 
are unable to determine that SeptiCyte[supreg] RAPID meets the 
substantial clinical improvement criteria for the reasons discussed in 
the proposed rule and in this final rule, and therefore we are not 
approving new technology add-on payments for SeptiCyte[supreg] RAPID 
for FY 2024.
h. SPEVIGO[supreg] (Spesolimab)
    Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI), submitted an 
application for new technology add-on payments for SPEVIGO[supreg] for 
FY 2024. SPEVIGO[supreg] is a humanized antagonistic monoclonal 
immunoglobulin G1 antibody blocking human IL36R signaling for the 
treatment of flares in adult patients with generalized pustular 
psoriasis (GPP). We noted that the applicant submitted an application 
for new technology add-on payments for SPEVIGO[supreg] 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[supreg], 
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[supreg] was approved by FDA on September 1, 2022, 
for the treatment of GPP flares in adults. According to the applicant, 
SPEVIGO[supreg] 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[supreg]: 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[supreg] 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.

[[Page 58880]]

    With respect to the substantial similarity criteria, the applicant 
asserted that SPEVIGO[supreg] 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 biologic products, 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 applicant's 
assertions regarding the substantial similarity criteria. Please see 
the online application posting for SPEVIGO[supreg] for the applicant's 
complete statements in support of its assertion that SPEVIGO[supreg] is 
not substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.186

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26882), we stated 
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 noted that, when describing current treatments for 
the disease, the applicant stated that there are no FDA-approved 
therapies specifically indicated for GPP. However, we questioned 
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 requested additional information on any 
such treatments and how they compare to SPEVIGO[supreg] with regard to 
substantial similarity. We also noted that while the applicant stated 
that SPEVIGO[supreg] 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 believed these are the same MS-DRGs to 
which other treatments for GPP would map.
    We invited public comments on whether SPEVIGO[supreg] is 
substantially similar to existing technologies and whether 
SPEVIGO[supreg] meets the newness criterion.
    Comment: The applicant submitted a comment to address CMS's 
concerns regarding the newness criterion. With respect to the request 
for additional information on currently available treatments and how 
they compare to SPEVIGO[supreg], the applicant stated that 
SPEVIGO[supreg] is the only FDA approved therapy for the treatment of 
GPP flares in adults. The applicant noted that prior to 
SPEVIGO[supreg], there was no consensus standard of care for GPP 
flares. Per the applicant, due to historical lack of robust clinical 
trial evidence or previously approved therapies for GPP flares, 
systemic agents were experimented with clinically in patients with GPP 
flares, based mainly on clinical experience in patients with plaque 
psoriasis (PSO). The applicant stated that even with treatment with 
these agents, many patients still had residual symptoms. Patients with 
GPP report a poorer quality of life compared with those with PSO, with 
greater severity of itch, pain, and fatigue, and a greater impact on 
work and daily activities. Per the applicant, treatments approved for 
PSO, including oral systemic therapies and biologic products, may have 
a slow time to response in patients with GPP flares. Regarding 
currently available treatments indicated for PSO and their on-label use 
for GPP, the applicant stated that aside from SPEVIGO[supreg], there 
are no FDA-approved therapies indicated for the treatment of GPP flares 
in adults. The applicant noted that GPP flares have acute systemic 
presentation, with unpredictable and rapid periods of worsening disease 
and complications resulting from systemic inflammation and neutrophilic 
influx, often requiring hospitalization; PSO, on the other hand, is a 
chronic disease affecting mainly the skin, and is typically managed in 
an outpatient setting. The applicant noted that although historically 
considered a variant of PSO, GPP is a phenotypically, genetically, and 
histopathologically distinct entity from PSO.109 110 111 
According to the applicant, GPP is characterized clinically by 
widespread eruption of neutrophilic, non-infectious pustules, while PSO 
is characterized by localized discrete plaques with excess scale 
resulting from abnormal differentiation of keratinocytes.\112\ The 
applicant stated that the pathways driving GPP and PSO are distinct. 
This is relevant to specifically targeting GPP. Specifically, GPP 
results from dysregulation of the innate immune system involving 
disruption of the interleukin IL-36 signaling pathway leading to 
uncontrolled systemic inflammation and a large influx of

[[Page 58881]]

neutrophils. On the other hand, PSO is driven by the adaptive immune 
system, with dysregulation of the IL-17/IL-23 pathway being a key 
characteristic, leading to an inflammatory impact that is mainly 
observed on the skin.\113\ The applicant maintained that because of its 
extreme systemic impact, GPP has a considerable clinical burden, and 
symptoms related to GPP have been reported to affect everyday tasks 
such as walking and sleeping.\114\ Patients with GPP report a poorer 
quality of life compared with patients with PSO with greater severity 
of itch, pain, and fatigue, and a greater impact on work and daily 
activities).\115\ Per the applicant, without a consensus standard of 
care for GPP flares (prior to SPEVIGO), various off-label PSO 
treatments have been used in an attempt to control flare symptoms. Due 
to the historical lack of robust clinical trial evidence and no 
previously approved therapies for GPP flares, systemic agents have been 
experimented with clinically in patients with GPP flares, based mainly 
on clinical experience in patients with PSO. According to the 
applicant, an important result of this is that, even with treatment 
with these agents, many patients still have residual 
symptoms.116 117 118 Treatments approved for PSO, including 
oral systemic therapies and biologic products, may have a slow time to 
response in patients with GPP flares. The applicant stated that in a 
recently published consensus, a panel of international dermatology 
experts agreed that rapid response was critical to alleviate systemic 
and potentially life-threatening symptoms of GPP flares.\119\ In 
addition, there are well-documented safety concerns with long-term use 
of some of these systemic agents, making them inappropriate for 
continuous use. To name a few examples, retinoids are associated with 
teratogenic effects, liver toxicity, and skeletal abnormalities; \120\ 
cyclosporine has been associated with systemic hypertension and 
nephrotoxicity; \121\ and respiratory complications, myelosuppression, 
and hepatic impairment have reported with methotrexate.\122\ The 
applicant noted that with respect to biologic products used for 
treating PSO, many are specifically indicated for and tested in 
randomized, controlled trials of patients with PSO; however, there have 
been no results from randomized, placebo-controlled trials of any agent 
other than SPEVIGO[supreg] in patients with GPP flares; therefore, 
comparisons (even cross-trial) cannot be made, nor can assumptions that 
PSO agents would benefit patients with GPP flares. Per the applicant, 
some of these agents approved for the treatment of PSO have been 
studied in patients with GPP in Japan; however, none of the studies 
were randomized, controlled trials, most of the patient populations 
were mixed and included a small number of patients with GPP, and all of 
the trials used endpoints that were not specific to GPP. The applicant 
also stated that no study, aside from those of SPEVIGO[supreg], has 
specifically reported the outcome of pustular clearance, and there are 
limited data on systemic improvements with these 
agents.123 124 125 126 With regard to whether 
SPEVIGO[supreg] may be mapped to the same MS-DRGs as other current 
treatments for GPP, the applicant maintained that since SPEVIGO[supreg] 
is the only FDA approved treatment for GPP flares, it would be the only 
therapy to be mapped for patients with GPP flares. The applicant also 
argued that once approved, other off-label therapies would not be 
expected to be used for treating GPP flares.
---------------------------------------------------------------------------

    \109\ Bachelez H, Barker J, Burden AD, et al. (Oct 2022). 
Generalized pustular psoriasis is a disease distinct from psoriasis 
vulgaris: evidence and expert opinion. Expert Rev Clin Immunol. 
18(10):1033-1047. doi: 10.1080/1744666X.2022.2116003. Epub 2022 Sep 
20. PMID: 36062811.
    \110\ Navarini AA, Burden AD, Capon F, et al.; for the ERASPEN 
Network. European consensus statement on phenotypes of pustular 
psoriasis. J Eur Acad Dermatol Venereol. 201 (1): 1792-1799 
doi:lO.lll l/jdv.14386.
    \111\ Gooderham MJ, Van Voorhees AS, Lebwohl MG. (Sep 2019). An 
update on generalized pustular psoriasis. Expert Rev Clin Immunol. 
15(9):907-919. doi: 10.1080/1744666X.2019.1648209. Epub 2019 Sep 5. 
PMID: 31486687.
    \112\ Bachelez, et al. (2022), op.cit.
    \113\ Ibid.
    \114\ Burden AD, Choon SE, Gottlieb AB, et al. (Jan 2022). 
Clinical Disease Measures in Generalized Pustular Psoriasis. Am J 
Clin Dermatol. 23(Suppl 1):39-50. doi: 10.1007/s40257-021-00653-0. 
Epub 2022 Jan 21. PMID: 35061231; PMCID: PMC8801406.
    \115\ Lebwohl M, Langley RG, Paul C, et al. (2022). Evolution of 
Patient Perceptions of Psoriatic Disease: Results from the 
Understanding Psoriatic Disease Leveraging Insights for Treatment 
(UPLIFT) Survey. Dermatol Ther (Heidelb). 12(1):61-78. doi: 10.1007/
s13555-021-00635-4. Epub 2021 Oct 25. Erratum in: Dermatol Ther 
(Heidelb). PMID: 34704231; PMCID: PMC8547901.
    \116\ Kara Polat, A.; Alpsoy, E.; Kalkan, G.; et al. (2022). 
Sociodemographic, clinical, laboratory, treatment and prognostic 
characteristics of 156 generalized pustular psoriasis patients in 
Turkey: A multicentre case series. J. Eur. Acad. Dermatol. Venereol. 
36, 1256-1265.
    \117\ Choon SE, Lai NM, Mohammad NA, et al. (2014). Clinical 
profile, morbidity, and outcome of adult-onset generalized pustular 
psoriasis: analysis of 102 cases seen in a tertiary hospital in 
Johor, Malaysia. Int J Dermatol. 53(6):676-684. doi:10.1111/
ijd.12070.
    \118\ Strober B, Kotowsky N, Medeiros R, et al. (2021). Unmet 
medical needs in the treatment and management of generalized 
pustular psoriasis flares: evidence from a survey of Corrona 
registry dermatologists. Dermatol Ther (Heidelb). 1 1 (2):529-541. 
doi: O. 1007/s 13555-021-00493-0.
    \119\ Puig, L, Choon, SE, Gottlieb, AB, et al. (2023). 
Generalized pustular psoriasis: A global Delphi consensus on 
clinical course, diagnosis, treatment goals and disease management. 
J Eur Acad Dermatol Venereol. 37: 737- 752. https://doi.org/10.1111/jdv.18851.
    \120\ David M, Hodak E, Lowe NJ. (Jul-Aug 1988) Adverse effects 
of retinoids. Med Toxicol Adverse Drug Exp. 3(4):273-88. doi: 
10.1007/BF03259940. PMID: 3054426.
    \121\ Neoral. Prescribing Information. 2009 (available at 
https://www.accessdata.fda.gov/drugsatfda_docs/label/2009/050715s027,050716s028lbl.pdf).
    \122\ Kim BR, Ohn J, Choi CW, et al. (Jun 2017). Methotrexate in 
a Real-World Psoriasis Treatment: Is It Really a Dangerous 
Medication for All? Ann Dermatol. 29(3):346-348. doi: 10.5021/
ad.2017.29.3.346. Epub 2017 May 11. PMID: 28566915; PMCID: 
PMC5438945.
    \123\ Imafuku S, Honma M, Okubo Y, et al. (Sep 2016). Efficacy 
and safety of secukinumab in patients with generalized pustular 
psoriasis: A 52-week analysis from phase III open-label multicenter 
Japanese study. J Dermatol. 43(9):1011-7. doi: 10.1111/1346-
8138.13306. Epub 2016 Feb 26. PMID: 26919410.
    \124\ Sano S, Kubo H, Morishima H, et al. (May 2018). 
Guselkumab, a human interleukin-23 monoclonal antibody in Japanese 
patients with generalized pustular psoriasis and erythrodermic 
psoriasis: Efficacy and safety analyses of a 52-week, phase 3, 
multicenter, open-label study. J Dermatol. 45(5):529-539. doi: 
10.1111/1346-8138.14294. Epub 2018 Mar 22. PMID: 29569397; PMCID: 
PMC5947137.
    \125\ Saeki H, Kabashima K, Tokura Y (Aug 2017). Efficacy and 
safety of ustekinumab in Japanese patients with severe atopic 
dermatitis: a randomized, double-blind, placebo-controlled, phase II 
study. Br J Dermatol. 177(2):419-427. doi: 10.1111/bjd.15493. Epub 
2017 Jun 27. PMID: 28338223.
    \126\ Morita A, Yamazaki F, Matsuyama T, et al. (Dec 2018). 
Adalimumab treatment in Japanese patients with generalized pustular 
psoriasis: Results of an open-label phase 3 study. J Dermatol. 
45(12):1371-1380. doi: 10.1111/1346-8138.14664. Epub 2018 Oct 10. 
PMID: 30302793; PMCID: PMC6585693.
---------------------------------------------------------------------------

    Response: We thank the applicant for its comment regarding the 
newness criterion. Based on our review of comments received and 
information submitted by the applicant as part of its FY 2024 new 
technology add-on payment application for SPEVIGO[supreg], we agree 
with the applicant that SPEVIGO[supreg] has a new mechanism of action 
because it is a humanized anti-interleukin-36 (IL-36) receptor 
monoclonal antibody that targets the IL-36 pathogenetic pathway in the 
treatment of GPP. Therefore, we agree with the applicant that 
SPEVIGO[supreg] is not substantially similar to existing treatment 
options and meets the newness criterion. We consider the beginning of 
the newness period to commence on September 1, 2022, when 
SPEVIGO[supreg] was FDA approved for the treatment of GPP flares in 
adults.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for SPEVIGO[supreg], 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

[[Page 58882]]

$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[supreg] meets the cost criterion.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.187

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26825), we noted 
the applicant stated that removing charges for prior technology was not 
applicable to SPEVIGO[supreg]; however, to the extent patients were 
treated with other treatments before SPEVIGO[supreg], we questioned 
whether it may be appropriate to remove some portion of these charges 
to avoid inappropriately inflating the average charge per case. We 
invited public comments on whether it may be appropriate to remove 
charges for the prior technology and whether SPEVIGO[supreg] meets the 
cost criterion.
    Comment: The applicant submitted a comment in response to our 
concerns pertaining to cost criterion. With respect to the 
appropriateness of not removing charges for prior technologies 
SPEVIGO[supreg], the applicant responded that because there are no 
approved therapies specifically indicated for the treatment of GPP 
flares, and due to the severe condition of patients with GPP flares, 
off-label treatments may be experimented with, including those 
indicated for PSO. As a result, patients receiving SPEVIGO[supreg] may 
have altered utilization of the first- or second-line off-label 
therapies historically used to treat GPP flares. The applicant 
maintained that SPEVIGO[supreg] will replace the off-label PSO 
treatments as the primary standard of care based on the substantial 
clinical improvement demonstrated by SPEVIGO[supreg] in a robust 
clinical trial. The applicant stated that while removal of charges can 
be difficult with no consensus off-label standard of care previously, 
they provided an updated cost analysis in which they have removed all 
drug cost center charges (one of the 19 cost centers defined by CMS as 
part of the relative weight calculation process) to avoid any concern 
of costs from prior off-label therapies. According to the applicant's 
updated cost analysis, the final inflated case-weighted average 
standardized charge per case of $361,189 exceeded the case-weighted 
threshold of $46,244, and the applicant therefore maintained that 
SPEVIGO[supreg] meets the cost criterion.
    Response: We thank the applicant for the updated cost analysis. 
Based on the additional information received, we agree that the final 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount. Therefore, SPEVIGO[supreg] 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SPEVIGO[supreg] 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[supreg] 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[supreg] for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.

[[Page 58883]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.188

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26886), after 
review of the information provided by the applicant, we stated that we 
had the following concerns regarding whether SPEVIGO[supreg] meets the 
substantial clinical improvement criterion. With regard to the 
Effisayil-1 study, we noted that it is not designed to compare 
SPEVIGO[supreg] to current treatment options. While the applicant 
stated that SPEVIGO[supreg] will be the first GPP treatment targeting 
the IL-36 pathway, we noted that per the applicant, other treatments 
are available, and we therefore questioned whether placebo was the most 
appropriate comparator. In particular, we noted that the Effisayil-1 
trial primarily assessed clearance of skin manifestations, not systemic 
symptoms which the applicant noted differentiates GPP from other forms 
of psoriasis. We noted the applicant has stated in its application that 
existing treatments for

[[Page 58884]]

GPP are not specifically indicated for GPP and that it would not be 
appropriate to consider these treatments on-label for GPP. However, we 
noted that there are treatments that are indicated for psoriasis 
generally, such as methotrexate \127\ or retinoids,\128\ which may be 
considered an on-label use for subtypes of psoriasis such as GPP. 
Therefore, it was unclear whether there is a patient population 
ineligible for or unresponsive to existing technologies that could be 
treated with SPEVIGO[supreg]. In addition, although the applicant 
stated that SPEVIGO[supreg] represents a substantial clinical 
improvement over existing technologies where complete clearances were 
not always achieved, it seemed that complete clearance is also not 
always achieved with SPEVIGO[supreg]. As demonstrated in the Effisayil-
1 study cited by the applicant, 54.3 percent of the patients achieved 
complete pustular clearance in the SPEVIGO[supreg] arm.
---------------------------------------------------------------------------

    \127\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/008085Orig1s071lbl.pdf.
    \128\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/019821s028lbl.pdf.
---------------------------------------------------------------------------

    We noted that GPP occurs most frequently between the ages of 15-20 
years with a smaller peak occurring at 55-60 years.\129\ The mean age 
in the Effisayil-1 study was 43.2 years for the SPEVIGO[supreg] arm and 
42.6 years for the placebo group. Given the age range of patients, we 
questioned 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[supreg] would not be appropriate or effective. In 
addition, the study administered SPEVIGO[supreg] to the placebo group 
after one week, after which only outcomes with SPEVIGO[supreg] 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[supreg], 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 questioned whether the information we 
had supports a finding of substantial clinical improvement. We stated 
that additional information to support the applicant's assertion of 
superiority over existing technologies would be helpful in better 
informing our assessment of this criterion.130 131
---------------------------------------------------------------------------

    \129\ Samotij et al. Generalized pustular psoriasis: divergence 
of innate and adaptive immunity. Int J Mol Sci 2021;22(16):9048.
    \130\ Krueger et al. Treatment options and goals for patients 
with generalized pustular psoriasis. Am J Clin Dermatol 
2022:23(suppl 1):51-64.
    \131\ Choon et al. Clinical course and characteristics of 
generalized pustular psoriasis. Am J Clin Dermatol 2022;23(suppl 
1):21-9.
---------------------------------------------------------------------------

    We invited public comments on whether SPEVIGO[supreg] meets the 
substantial clinical improvement criterion.
    Comment: The applicant submitted a comment in response to CMS's 
concerns pertaining to the substantial clinical improvement criterion. 
With respect to the appropriateness of comparing SPEVIGO[supreg] to 
placebo instead of other current treatment options and of the sparsity 
of systemic end points, the applicant maintained that because there has 
been no established standard of care for GPP flares prior to the 
approval of SPEVIGO[supreg], numerous biologic and oral systemic agents 
indicated for PSO have been used anecdotally in clinical practice in 
attempts to treat GPP flares. The applicant stated that no other 
treatment approved for PSO has been tested in a randomized controlled 
trial in GPP flares, and evidence for these treatments come from small, 
single-arm, uncontrolled studies of mixed patient populations that did 
not evaluate clinically robust endpoints specific to GPP. The applicant 
further noted that because these treatments have variable efficacy and 
safety profiles, it becomes challenging to propose one of them as an 
active comparator for a trial in GPP flares. According to the 
applicant, due to the lack of FDA-approved treatments as well as 
consensus on standard of care for GPP flares, placebo can be considered 
an appropriate comparator. Per the applicant, FDA also considered 
placebo to be appropriate and requested the inclusion of the placebo 
arm for a robust and well controlled study. Regarding the selection of 
endpoints, the applicant mentioned that while the primary endpoint of 
the Effisayil-1 trial was complete pustular clearance, the trial also 
examined the impact of SPEVIGO[supreg] on additional endpoints, 
including measures of systemic inflammation like C-reactive protein 
(CRP) levels and neutrophil count over time. Per the applicant, both 
the CRP levels and neutrophil count over time were shown, in 
conjunction with skin clearance, to improve to normal levels in the 
trial and were maintained throughout the course of the trial. With 
regard to whether there is a patient population ineligible for or 
responsive to existing technologies that could be treated with 
SPEVIGO[supreg], the applicant noted that there are distinct 
differences in the dysregulation of IL pathways between GPP and PSO. As 
the only GPP-indicated therapy, SPEVIGO[supreg] offers patients an 
effective therapy targeting the GPP-specific IL-36 pathway. According 
to the applicant, it has been well-documented that GPP and psoriasis 
vulgaris (PV, also called plaque psoriasis) are separate clinical 
conditions, requiring specific treatment approaches.\132\ The applicant 
cited a recent longitudinal case series of patients with GPP as an 
example of the limited efficacy of the nontargeted immunomodulatory 
therapies (for example, methotrexate, retinoids) to treat GPP flares. 
\133\ Per the applicant, the result of these studies showed that 
despite the use of methotrexate and retinoids, which were among the 
most frequently used agents for treating GPP flares, the rates of 
emergency department visits and hospitalizations among GPP patients 
during the follow-up period remained at approximately 40 percent. Per 
the applicant, this suggested that these systemic agents are inadequate 
for controlling GPP flares. With regard to the result of the Effisayil-
1 study that 54.3 percent of the patients achieved complete pustular 
clearance in the SPEVIGO[supreg] arm, the applicant cited recent 
guidance, based on global expert consensus, that the goals of treatment 
of GPP flares are to achieve rapid and sustained clearance of pustules, 
inflammatory erythema, scaling, crust, and skin lesions; and to rapidly 
alleviate systemic symptoms and reduce pain while maintaining a 
favorable safety profile.\134\ According to the applicant, the primary 
endpoint was a Generalized Pustular Psoriasis Physician Global 
Assessment (GPPGA) pustulation subscore of zero at week 1, a highly 
stringent endpoint, according to many international dermatology 
experts. According to the applicant, 54.3 percent of the patients from 
the Effisayil-1 study achieved the GPPGA pustulation subscore of zero 
(complete pustular clearance) in the SPEVIGO[supreg] arm after one 
dose. Moreover, in patients who received up to 2 doses of 
SPEVIGO[supreg], 66 percent achieved a GPPGA pustulation subscore of 
zero at week 2. The applicant added that of the patients randomized to 
placebo and who received a dose of SPEVIGO[supreg] at week 1, 73 
percent had a GPPGA pustulation score of zero at week 2 (one week after 
receiving their first dose of SPEVIGO[supreg]) and 60 percent of 
patients maintained a GPPGA pustulation subscore of 0 out to week 12. 
The applicant asserted that,

[[Page 58885]]

based upon the data from Effisayil-1, SPEVIGO[supreg] treatment of GPP 
flares was associated with rapid pustular clearance within 1 week with 
clinically significant and prolonged normalizations in inflammatory 
markers, like CRP and neutrophil count in a robust, randomized clinical 
trial. The applicant maintained that these results were consistent with 
some of the treatment goals set forth by international dermatology 
experts and demonstrated substantial clinical improvement in this 
extremely burdensome and potentially life-threatening disease for which 
no standard of care previously existed. With regard to the 
generalizability of Effisayil-1 study results to the Medicare 
population, the applicant stated that the median onset of GPP is 
between 40 to 60 years of age, and while it is true that the average 
patient age was younger than the Medicare population in the Effisayil-1 
study, most patients with GPP are not considered by dermatology experts 
to be generally healthy, particularly during a flare. The applicant 
stated that patients with GPP often have multiple comorbidities, 
including hyperlipidemia, type 2 diabetes, chronic obstructive 
pulmonary disease (COPD), chronic kidney disease, and 
obesity28, making these patients not so dissimilar to the 
Medicare population. The applicant also noted that patients with these 
comorbidities were not excluded from the Effisayil-1 trial. According 
to the applicant, based on their internal data, 30 percent of treated 
patients since launch were Medicare beneficiaries. The applicant also 
stated that Medicare beneficiaries, including those with disabilities 
or comorbidities, are not excluded per the FDA label. With regard to 
the adequacy of the study length, the applicant argued that despite the 
short duration of the placebo-controlled portion of the Effisayil-1 
trial, it was compelling that 54 percent of patients in the 
SPEVIGO[supreg] arm experienced complete pustule resolution at week 1, 
and 60 percent of these patients maintained pustule resolution out to 
12 weeks, given the disease burden of GPP and its negative impact on 
daily activities. Per the applicant, these results demonstrated a stark 
clinical improvement, compared to the residual symptoms that many GPP 
patients experienced on the current off-label treatments. The applicant 
also noted that both the placebo and SPEVIGO[supreg] arms were eligible 
to receive a single, open-label, dose of SPEVIGO[supreg] at week 1 if a 
patient had prolonged symptoms, since it would be unethical to prevent 
GPP patients from receiving treatment after prolonged GPP flare 
symptoms.
---------------------------------------------------------------------------

    \132\ Bachelez et al, 2022, op.cit.
    \133\ Noe et al. (2022), op.cit.
    \134\ Bachelez et al (2022), op.cit.
---------------------------------------------------------------------------

    Response: We thank the applicant for their comments regarding the 
substantial clinical improvement criterion. Based on the additional 
information received, we agree that SPEVIGO[supreg] represents a 
substantial clinical improvement because the technology offers a 
treatment option for generalized pustular psoriasis (GPP) flares in 
adults, for which it is the first FDA approved treatment.
    After consideration of the public comments, we have determined that 
SPEVIGO[supreg] meets the criteria for approval for new technology add-
on payment. Therefore, we are approving new technology add-on payments 
for this technology for FY 2024. Cases involving the use of 
SPEVIGO[supreg] that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS code XW03308 (Introduction of 
spesolimab monoclonal antibody into peripheral vein, percutaneous 
approach, new technology group 8).
    In its application, the applicant estimated that the average 
inpatient cost of SPEVIGO[supreg] is $51,133 for one 900 mg dose, 
comprised of two 450 mg/7.5 mL (60 mg/mL) vials. Therefore, the average 
cost per patient for SPEVIGO[supreg] is $51,133. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the use of 
SPEVIGO[supreg] is $33,236.45 for FY 2024.
i. TECVAYLITM (Teclistamab-cqyv)
    Johnson & Johnson Health Care Systems, Inc. submitted an 
application for new technology add-on payments for 
TECVAYLITM for FY 2024. According to the applicant, 
TECVAYLITM 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 
TECVAYLITM 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 TECVAYLITM 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 
TECVAYLITM, 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, 
TECVAYLITM 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 
TECVAYLITM 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 percent of 
TECVAYLITM 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 TECVAYLITM: 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 TECVAYLITM is not substantially

[[Page 58886]]

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 
TECVAYLITM for the applicant's complete statements in 
support of its assertion that TECVAYLITM is not 
substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.189

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26887), we noted 
that TECVAYLITM 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 
TECVAYLITM. 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 barcoded medication administration 
(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 believed that the mechanism of action for 
TECVAYLITM may be the same or similar to that of 
elranatamab.
    We believed that TECVAYLITM 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

[[Page 58887]]

that TECVAYLITM 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 believed 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 stated that we were interested in information on how these 
two technologies may differ from each other with respect to the 
substantial similarity criteria and newness criterion, to inform our 
analysis of whether TECVAYLITM 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 invited public comment on whether TECVAYLITM meets 
the newness criterion, including whether TECVAYLITM is 
substantially similar to elranatamab and whether these technologies 
should be evaluated as a single technology for purposes of new 
technology add-on payments.
    Comment: The applicant submitted a comment regarding the newness 
criterion, reiterating that TECVAYLI[supreg] meets the overall 
requirements of the newness criterion as it does not meet all three 
criteria required to be deemed substantially similar to existing 
technology. With regard to whether TECVAYLITM and 
elranatamab are substantially similar and should be treated as a single 
technology for the purposes of new technology add-on payments, the 
applicant stated that while elranatamab and TECVAYLITM are 
both bispecific antibodies, the antibody for each product is 
meaningfully different, and therefore the mechanism of action for these 
two products should be considered distinct. The applicant explained 
that TECVAYLITM is a humanized IgG4 antibody, whereas 
elranatamab is a humanized IgG2a antibody, and IgG4 antibodies have a 
high affinity for Fc gamma receptor subtype I (Fc[gamma]RI) but weak 
affinities for all other Fc gamma receptor subtypes and are poor 
inducers of Fc-mediated effector functions, while IgG2 antibodies have 
a high affinity for the H131 form of Fc gamma receptor subtype IIA 
(Fc[gamma]RIIA) but no measurable or weak affinity for Fc[gamma]RI and 
all other Fc gamma receptors. The applicant agreed that both 
TECVAYLITM and elranatamab are bispecific T-cell engaging 
antibodies that exert their efficacy primarily by re-directing the 
patient's own T-cells to BCMA-expressing multiple myeloma cells, but 
stated they are distinctly and importantly different in regards to the 
whether the binding of the bispecific antibodies to Fc gamma receptors 
may activate immune effector cells that may lead to a pro-inflammatory 
state and contribute to cytokine release syndrome and other toxicities. 
The applicant asserted that the biological difference between 
TECVAYLITM and elranatamab may result in meaningful clinical 
differences, and that therefore, CMS should consider these technologies 
separately for new technology add-on payments. The applicant added that 
elranatamab is not yet FDA-approved and therefore should not be 
considered as an existing technology for inclusion in meeting the 
substantial similarity criteria.
    Another commenter, the manufacturer for elranatamab, stated that it 
believed that TECVAYLITM and elranatamab are substantially 
similar and should be considered under a single application on the 
basis of (1) the mechanism of action (BCMA-directed bispecific 
antibody), (2) the patient population and disease intended to be 
treated (RRMM in patients who have received four or more prior lines of 
therapy including a proteasome inhibitor (PI), immunomodulatory drug 
(IMiD), and anti-CD38 monoclonal antibody), and (3) MS-DRG assignment.
    Response: We thank the applicant and other commenter for their 
comments regarding newness. As discussed previously, elranatamab has 
not been FDA approved as of the July 1 deadline and is therefore no 
longer eligible for consideration for new technology add-on payments 
for FY 2024, and we further note that the technology has not yet been 
FDA approved as of the time of the development of this final rule. 
Therefore, we agree with the applicant that elranatamab is not 
considered an existing technology for the purposes of the substantial 
similarity determination at this time.
    Based on our review of comments received and information submitted 
by the applicant as part of its FY 2024 new technology add-on payment 
application for TECVAYLITM, we agree with the applicant that 
TECVAYLITM has a unique mechanism of action as a bispecific 
antibody containing 2 distinct binding domains that simultaneously bind 
the BCMA target on myeloma cells and the CD3 T-cell receptor to treat 
RRMM. Therefore, we believe that TECVAYLITM is not 
substantially similar to existing treatment options and meets the 
newness criterion. We consider the beginning of the newness period to 
commence on the date the product became commercially available, on 
November 9, 2022.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for TECVAYLITM, 
the applicant searched the FY 2021 MedPAR file for cases reporting one 
of the following ICD-10-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 
TECVAYLITM 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 
TECVAYLITM 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 TECVAYLITM meets the cost criterion.

[[Page 58888]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.190

    We invited public comments on whether TECVAYLITM meets 
the cost criterion.
    Comment: The applicant submitted a comment describing the analyses 
provided in the proposed rule and reiterating that, because the average 
charge per case for cases eligible for TECVAYLI[supreg] exceeded the 
threshold in both analyses, TECVAYLI[supreg] meets the cost criterion.
    Response: We thank the applicant for its comment. We agree that the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount. Therefore, 
TECVAYLITM meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that TECVAYLITM 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 TECVAYLITM 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 TECVAYLITM 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

[[Page 58889]]

claims, as well as 11 background articles about other available 
treatments for RRMM.\135\ The following table summarizes the 
applicant's assertions regarding the substantial clinical improvement 
criterion. Please see the online posting for TECVAYLITM for 
the applicant's complete statements regarding the substantial clinical 
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \135\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
[GRAPHIC] [TIFF OMITTED] TR28AU23.191

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26890 through 
26891), after review of the information provided by the applicant, we 
had the following concerns regarding whether TECVALITM meets 
the substantial clinical improvement criterion. The applicant claimed 
that other therapies have indications and side effects that restrict 
the treatment population and TECVAYLITM is available to some 
of these restricted patient populations. Regarding this claim, the 
applicant discussed restrictions for two other treatment options for 
RRMM in its application, XPOVIO[supreg] (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 
TECVAYLITM and appear to target a similar population. 
Therefore, we questioned the basis for the applicant's assertion that 
TECVAYLITM will fill a gap for patients unresponsive to or 
ineligible for current treatments.
    With regard to the claim that TECVAYLITM 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 U.S. indicating only 25 
percent of potential patients were reported to receive CD19 CAR T-cell

[[Page 58890]]

therapy, with a median wait time of 6 months.\136\ 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 questioned whether the evidence related to B-cell 
lymphoma is applicable to T-cell therapies used to treat MM.
---------------------------------------------------------------------------

    \136\ 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 claimed that CRS is less serious and less frequent 
for patients treated with TECVAYLITM than with BCMA CAR T-
cell therapies. Notably, the applicant compared data from separate, 
single-arm, open-label studies of these 
technologies.137 138 139 In review, CRS occurrence rates 
were 72.1 percent, 95 percent and 84 percent for TECVAYLITM, 
ciltacabtagene autoleucel, and idecabtagene vicleucel, respectively. In 
addition, only 0.6 percent of the CRS events for TECVAYLITM 
were of grade 3 or higher, compared to 4 percent for ciltacabtagene 
autoleucel and 5 percent for idecabtagene vicleucel. This improved 
safety claim, however, focused 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 percent, 97 
percent and 73 percent for TECVAYLITM, ciltacabtagene 
autoleucel, and idecabtagene vicleucel respectively. When comparing 
across studies, other metrics of efficacy noted in these studies also 
appeared to support a superiority of the CAR T-cell therapies compared 
to TECVAYLITM in the treatment of patients with RRMM. 
However, we also noted these comparisons are not matched cases within a 
comparative study. Therefore, we questioned the conclusions drawn by 
the applicant regarding the relative efficacy and safety profiles 
across these studies.
---------------------------------------------------------------------------

    \137\ Moreau P, Garfall AL, van de Donk NWCJ, et al. Teclistamab 
in relapsed or refractory multiple myeloma. NEJM. 2022; 387(6): 495-
505.
    \138\ 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.
    \139\ 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 claimed that TECVAYLITM improves clinical 
outcomes relative to other off-the-shelf therapies. The applicant 
stated the overall response rate (ORR) for XPOVIO[supreg] and BLENREP 
were 25 percent and 31 percent, while the ORR for TECVAYLITM 
was 63 percent. However, this claim did not consider the higher ORR for 
CAR T-cell therapies compared to TECVAYLITM when comparing 
across studies, as previously mentioned. While this claim compared 
TECVAYLITM only to other off-the-shelf therapies, which 
would not include CAR T-cell therapies, we questioned whether there is 
significant clinical improvement compared to existing therapies, which 
include CAR T-cell therapies.
    We invited public comments on whether TECVAYLITM meets 
the substantial clinical improvement criterion.
    Comment: We received a public comment stating that BCMA-directed 
bispecific antibody therapies indicated for the treatment of RRMM 
represent a substantial clinical improvement over existing treatment 
options. Specifically, the commenter stated while XPOVIO[supreg] may be 
an option for late-line patients with RRMM who are ineligible for or 
unable to access CAR T-cell therapies, they are unlikely to be treated 
with XPOVIO[supreg] due to the unfavorable benefit/risk ratio. 
Additionally, the commenter pointed out that BLENREP is no longer 
available on the U.S. market and is therefore not a treatment option 
for these patients. Furthermore, the commenter stated many patients do 
not have access to CAR T-cell therapies because of general access 
issues or because the disease is progressing quickly, and they are 
unable to wait for CAR T-cell therapy. Thus, the commenter continued 
that for nearly all RRMM patients, the choice will not be CAR T-cell 
therapy or a BCMA-directed bispecific antibody, it will be a BCMA-
directed bispecific antibody therapy or potentially nothing.
    Response: We thank the commenter for its input and have taken it 
into consideration in our determination of whether TECVAYLI[supreg] 
meets the substantial clinical improvement criterion, discussed later 
in this section.
    Comment: The applicant submitted a comment reiterating that 
TECVAYLI[supreg] meets the substantial clinical improvement criterion 
because the technology demonstrates improved clinical outcomes for 
patients with RRMM and plays an important role in addressing an unmet 
need for patients, including Medicare beneficiaries, who are otherwise 
ineligible for, or unable to access, other treatments for RRMM. The 
applicant also responded to the concerns raised by CMS in the proposed 
rule. With respect to whether CAR T-cell therapies are also options for 
patients ineligible for XPOVIO[supreg] and BLENREP, the applicant 
claimed certain beneficiaries are ineligible to receive CAR T-cell 
therapies based on their clinical profile. Specifically, the applicant 
stated beneficiaries that are not clinically fit, including those with 
poor performance status and inadequate organ function, are not always 
appropriate candidates for CAR T-cell therapy and its related safety 
profile. Based on CAR T-cell therapy clinical trials and their 
labeling, the applicant noted that some of the medically significant 
factors that might limit a patient's ability to receive a BCMA CAR T-
cell therapy include any cardiac conditions (that is, upper limit of 
normal and left ventricular ejection fraction <45%), pre-existing 
cytopenias prior to the start of therapy (that is, absolute neutrophil 
count <1000 cells/mm3 and platelet count <50,000/mm3), or impaired 
renal function (that is, creatinine clearance <40-45 mL/min).
    With respect to whether CAR T-cell therapy availability data was in 
reference to B-cell lymphoma, the applicant stated that, in contrast 
with TECVAYLITM, even with very strong CAR T-cell therapy 
patient support programs, the requirements on the patient and their 
family can be both financially and logistically challenging. For 
example, the applicant stated patients are required to have a personal 
caregiver present for several weeks following dosing, and such 
caregiver requirements may not be possible for some beneficiaries. The 
applicant added, unlike TECVAYLITM, CAR T-cell therapies 
require a specialized healthcare setting certification necessary for 
the collection and handling of patient cells prior to and after the 
engineering of the product. The applicant stated while steadily 
increasing, only a limited number of institutions in the U.S. have the 
necessary requirements to obtain this certification, and it will take 
time for additional centers to ramp up, therefore limiting the 
availability of CAR T-cell therapies to those patients who can access 
the certified centers. The applicant noted this growth has increased 
demand for certified CAR T-cell therapy centers and has further 
compounded the access issues, with the certified CAR T-cell therapy 
centers experiencing limited availability and

[[Page 58891]]

waitlists. Since the approvals of the CAR T-cell technologies in the MM 
space, the applicant stated studies have highlighted the lack of 
accessibility of CAR T-cell products to MM patients. The applicant 
specified one study published this year showed that out of 20 centers 
with MM CAR T-cell therapies that were surveyed, 17 have a median 
allotment of one patient slot per month (per center), and the median 
number of patients per center on the waitlist since the FDA's approval 
of idecabtagene vicleucel (ABECMA[supreg]) is 20 (range, 5 to 100). 
Furthermore, the applicant noted patients remain on the waitlist for a 
median of six months (range, 2 to 8 months) prior to leukapheresis, 
which is the first step in the CAR T-cell manufacturing process, and 
the centers participating in the study estimated that only 25 percent 
of waitlisted patients eventually receive a slot for commercial CAR T-
cell therapy, approximately 25 percent die or enroll in hospice, and 
the remaining 50 percent of patients are enrolled in clinical trials. 
According to the applicant, certain patients do not have a realistic 
chance of receiving a CAR T-cell product, and a percentage of these 
patients may not have access to an appropriate clinical trial due to 
eligibility criteria or distance from a large academic center with 
available studies, whereas these beneficiaries are eligible for 
TECVAYLITM. The applicant asserted for these patients 
starting their fifth line of therapy who may be on waitlists or 
otherwise unable to access CAR T-cell therapy, TECVAYLITM 
provides a more readily available option that does not require the 
complex T-cell collection, genetic engineering, and cell manufacturing, 
or lymphodepleting chemotherapy prior to administration of therapy.
    In response to CMS's concerns pertaining to the lack of comparative 
safety data with CAR T-cell therapies, the applicant stated that there 
is not direct comparison data available, but that TECVAYLITM 
has a strong safety profile concerning cytokine release syndrome (CRS) 
and immune effector cell-associated neurotoxicity syndrome (ICANS) 
compared with the BCMA CAR T-cell products. The applicant stated in the 
pivotal study of TECVAYLITM, CRS occurred in 72 percent of 
patients, including 50 percent in Grade 1, 21 percent in Grade 2, and 
0.6 percent in Grade 3.\140\ ICANS occurred in 6 percent of patients. 
CRS occurred in 85 percent (108/127) of patients receiving 
ABECMA[supreg] Grade 3 or higher CRS (Lee grading system 1) occurred in 
9 percent (12/127) of patients, with Grade 5 CRS reported in one (0.8%) 
patient. The applicant added that CAR T-cell-associated neurotoxicity 
occurred in 28 percent (36/127) of patients receiving ABECMA[supreg], 
including Grade 3 in 4 percent (5/127) of patients.\141\ 
CARVYKTI[supreg] was associated with CRS in 95 percent of patients, 
including 5 percent Grade 3-5 CRS and 1 percent Grade 5 CRS. ICANS 
occurred in 23 percent of patients, including Grade \3/4\ ICANS in 3 
percent of all patients and Grade 5 ICANS in 2 percent of 
patients.\142\ The applicant noted Hemophagocytic Lymphohistiocytosis 
(HLH)/Macrophage Activation Syndrome (MAS) occurred in the pivotal 
studies of both ABECMA[supreg] and CARVYKTI[supreg] but was not 
observed in the pivotal study of TECVAYLITM. Concerning non-
CAR T-cell therapies, the applicant stated fewer than 1 percent of 
TECVAYLITM patients discontinued therapy due to adverse 
events,\143\ while this was 27 percent of selinexor patients.\144\ The 
applicant claimed TECVAYLITM is an important treatment 
alternative to CAR T-cell therapies, with a median DOR of 21.6 months 
(ABECMA[supreg] is 11.0 months, and CARVYKTI[supreg] is 21.8 months). 
Additionally, the applicant stated the incidence and severity of both 
CRS and ICANS are less for TECVAYLITM compared to the BCMA 
CAR T-cell products, and severe and potentially fatal HLH/MAS was not 
observed in the pivotal study of TECVAYLITM.
---------------------------------------------------------------------------

    \140\ Moreau P, Garfall AL, van de Donk NWCJ, et al. Teclistamab 
in relapsed or refractory multiple myeloma. N Engl J Med. 
2022;387(6):495-505.
    \141\ https://www.fda.gov/media/147055/download [Package Insert; 
ABECMA[supreg]].
    \142\ https://reference.medscape.com/drug/carvykti-ciltacabtagene-autoleucel-4000224.
    \143\ Moreau P, Garfall AL, van de Donk NWCJ, et al. Teclistamab 
in relapsed or refractory multiple myeloma. N Engl J Med. 
2022;387(6):495-505.
    \144\ Chari A, Vogl DT, Gavriatopoulou M, Nooka AK, Yee AJ et 
al. (2019a). Oral Selinexor-Dexamethasone for Triple-Class 
Refractory Multiple Myeloma. N Engl J Med 381 727-738.
---------------------------------------------------------------------------

    Response: We thank the applicant and commenters for their 
statements regarding the substantial clinical improvement criterion. 
Based on the additional information received and the information 
submitted in the application, we agree with the applicant that 
TECVAYLITM represents a substantial clinical improvement 
over existing technologies because TECVAYLITM offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments. We agreed with the 
commenters that TECVAYLITM offers a treatment option for 
patients ineligible for CAR T-cell therapy or for who CAR T-cell 
therapy is not an available therapy and who are ineligible for 
XPOVIO[supreg].
    After consideration of the public comments we received, and the 
information included in the applicant's new technology add-on payment 
application, we have determined that TECVAYLITM meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for FY 
2024. Cases involving the use of TECVAYLITM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS code XW01348.
    In its application, the applicant estimated that the cost of 
TECVAYLI is $13,754.67 per patient, as discussed previously. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, the maximum new technology add-on payment for a case involving 
the use of TECVAYLITM is $8,940.54 for FY 2024.
j. TERLIVAZ[supreg] (Terlipressin)
    Mallinckrodt Hospital Products, Inc. submitted an application for 
new technology add-on payments for TERLIVAZ[supreg] for FY 2024. Per 
the applicant, TERLIVAZ[supreg] 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[supreg] 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[supreg] 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[supreg] 
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).

[[Page 58892]]

    Please refer to the online application posting for 
TERLIVAZ[supreg], 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[supreg]'s NDA was approved by 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[supreg] became commercially available on October 14, 2022. Per 
the applicant, there was a delay in market availability because 
TERLIVAZ[supreg] 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[supreg] 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[supreg] 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 percent or more from the baseline, then 
0.85 mg TERLIVAZ[supreg] can continue to be administered every 6 hours. 
The applicant stated that if the serum creatinine has decreased by less 
than 30 percent from the baseline, then TERLIVAZ[supreg] may be 
increased to 1.7 mg (2 vials) every 6 hours. According to the 
applicant, TERLIVAZ[supreg] 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[supreg] should 
be discontinued. According to the applicant, the mean treatment 
duration with TERLIVAZ[supreg] 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[supreg]: XW03367 (Introduction of 
terlipressin into peripheral vein, percutaneous approach, new 
technology group 7), or 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[supreg] 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[supreg] is not substantially similar to other 
currently available 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[supreg] 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[supreg] for the applicant's complete 
statements in support of its assertion that TERLIVAZ[supreg] is not 
substantially similar to other currently available technologies.

[[Page 58893]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.192

    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), in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26892) we 
noted that while TERLIVAZ[supreg] may address an unmet need because it 
is the first treatment indicated specifically for the treatment of HRS, 
the applicant's assertion that TERLIVAZ[supreg] 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[supreg] will offer a new 
treatment option, did not necessarily speak to the treatment of a new 
patient population for HRS.
    We invited public comments on whether TERLIVAZ[supreg] is 
substantially similar to existing technologies and whether 
TERLIVAZ[supreg] meets the newness criterion.
    Comment: Several commenters provided support for TERLIVAZ[supreg]'s 
eligibility for new technology add-on payments, indicating that there 
are currently no FDA-approved medications indicated specifically for 
the treatment of HRS-1.
    Response: We thank the commenters for their input and have taken it 
into consideration, as discussed later in this section.
    Comment: The applicant submitted a comment regarding the newness 
criterion. With regard to whether TERLIVAZ[supreg] involves treatment 
of the same/similar type of disease and the same/similar type of 
patient population when compared to an existing technology, the 
applicant stated that TERLIVAZ[supreg] offers an effective treatment 
for patients with HRS with rapid reduction in kidney function who are 
unresponsive to existing off-label therapies. The applicant noted that 
a large proportion of patients in the CONFIRM trial had failed prior 
therapy for HRS, and had received combination midrodrine and octreotide 
before enrollment. The applicant further stated that in this subgroup 
of patients, treatment with TERLIVAZ[supreg] was associated with a 
greater rate of verified HRS reversal compared to placebo,

[[Page 58894]]

leading to improved renal function in a population who did not respond 
to existing standard of care. The applicant also stated that 
TERLIVAZ[supreg] is listed as the preferred therapy for HRS by several 
U.S. and international guidelines, and these clinical recommendations 
provide greater support for the use of TERLIVAZ[supreg] compared to 
existing off-label therapies, suggesting that TERLIVAZ[supreg] may 
offer a treatment option for patients who would not respond to other 
available treatments.145 146 147 148
---------------------------------------------------------------------------

    \145\ Biggins SW, Angeli P, Garcia-Tsao G, et al. Diagnosis, 
evaluation, and management of ascites, spontaneous bacterial 
peritonitis and hepatorenal syndrome: 2021 Practice Guidance by the 
American Association for the Study of Liver Diseases. Hepatology. 
2021;74(2):1014-1048.
    \146\ European Association for the Study of the Liver. EASL 
Clinical Practice Guidelines for the management of patients with 
decompensated cirrhosis. J Hepatol. 2018;69(2):406-460.
    \147\ Bajaj JS, O'Leary JG, Lai LC, et al. Acute-on-chronic 
liver failure clinical guidelines. Am J Gastroenterol. 
2022;117(2):225-252.
    \148\ Flamm SL, Wong F, Ahn J, Kamath PS. AGA clinical practice 
update on the evaluation and management of acute kidney injury in 
patients with cirrhosis: expert review. Clin Gastroenterol Hepatol. 
2022;20(12):2707-2716.
---------------------------------------------------------------------------

    Response: We thank the applicant for its comment. Based on our 
review of comments, we agree with the applicant and commenters that 
TERLIVAZ[supreg] has a unique mechanism of action for selective 
vasoconstrictive effects on the splanchnic vasculature via activation 
of V1 vasopressin receptors as the first and only FDA-approved 
treatment for HRS. Therefore, we believe that TERLIVAZ[supreg] is not 
substantially similar to existing treatment options and meets the 
newness criterion. We consider the beginning of the newness period to 
commence on the date TERLIVAZ[supreg] became commercially available: 
October 14, 2022.
    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[supreg], 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 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[supreg] Codes (Analyses 1-
6)--FY 2024 associated with the 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[supreg] meets the 
cost criterion.
BILLING CODE 4120-01-P

[[Page 58895]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.193

    We are invited public comments on whether TERLIVAZ[supreg] meets 
the cost criterion.
    We did not receive any comments on whether TERLIVAZ[supreg] meets 
cost criterion. Based on the information submitted by the applicant as 
part of its FY 2024 new technology add-on payment application for 
TERLIVAZ[supreg], as previously summarized, the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount. Therefore, TERLIVAZ[supreg] meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that TERLIVAZ[supreg] represents a substantial 
clinical improvement over existing technologies because among HRS 
patients who failed previous therapy with available off-label 
treatments, TERLIVAZ[supreg] has been shown

[[Page 58896]]

to significantly improve renal function. Additionally, the applicant 
stated that TERLIVAZ[supreg] 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[supreg] 
offers a treatment option for HRS patients unresponsive to currently 
available treatments (for example, norepinephrine, midodrine, 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[supreg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
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[[Page 58904]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.202

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26903 through 
26904), after review of the information provided by the applicant, we 
stated that we had the following concerns regarding whether 
TERLIVAZ[supreg] meets the substantial clinical improvement criterion. 
With respect to the applicant's assertion that TERLIVAZ[supreg] 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[supreg], we noted that the applicant provided evidence from 
data on file for the clinical study report of the CONFIRM trial. We 
noted that this data on file appears to be a post-hoc analysis of the 
trial. As this was a post-hoc analysis, we stated we were cautious 
about drawing conclusions from this analysis alone without additional 
outcome data.
    We also noted 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[supreg] group than placebo, the difference between groups 
was not statistically significant (26% vs 17%, p=0.08).\149\ We also 
noted that the potential for HRS recurrence among patients treated with 
TERLIVAZ[supreg] after 30 days is unclear. We questioned whether a 
statistically significant difference in verified HRS reversal in the 
TERLIVAZ[supreg] group at 14 days was sufficient to provide evidence of 
the durability of improvement in renal function.
---------------------------------------------------------------------------

    \149\ 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[supreg] 
significantly improves clinical outcomes, we noted 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 RRT 
requirements in patients who received a liver transplant. Similar to 
our earlier concern, we questioned if we were able to draw conclusions 
from these post-hoc analyses alone without additional outcome data.
    We also noted 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[supreg] and placebo groups in 
this subpopulation. As such, we noted that differences between the 
TERLIVAZ[supreg] 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 noted that the difference 
in RRT requirements through 90 days in the CONFIRM study among 
surviving patients aged >=65 years was not statistically significant. 
Although the results numerically favored the TERLIVAZ[supreg] group, 
for those reasons, we questioned whether this analysis provided 
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[supreg] arm and the 
norepinephrine arm in this study.\150\
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    \150\ 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 invited public comments on whether TERLIVAZ[supreg] meets the 
substantial clinical improvement criterion.
    Comment: We received several comments in support of new technology 
add-on payments for TERLIVAZ[supreg]. The commenters supported the 
substantial clinical improvement assertations for TERLIVAZ[supreg], and 
described high mortality and significant rates of HRS-1-related 
readmissions in this patient

[[Page 58905]]

population. Commenters cited the results of randomized, placebo-
controlled trials where the use of TERLIVAZ[supreg] was associated with 
a reduced rate of mortality and more rapid resolution of the disease 
process as compared to the placebo. Furthermore, commenters indicated 
that the CONFIRM trial demonstrated the substantial clinical 
improvement of TERLIVAZ[supreg] as compared with placebo on multiple 
outcomes, including: verified HRS reversal, verified HRS reversal in 
patients with prior midodrine and octreotide use, durability of HRS 
reversal, HRS reversal in the systemic inflammatory response syndrome 
subgroup, decreased incidence of RRT through Day 14, and decreased 
incidence of RRT after liver transplant. Several commenters noted that 
the HRS-1 patient population has substantial need for an effective 
treatment for this disease, and that outcomes have not improved for 
these patients since 2002.\151\ Additionally, several commenters 
indicated the clinical guidelines recommend using vasoconstrictors in 
combination with albumin as the first-line treatment to counteract 
splanchnic arterial vasodilation and that TERLIVAZ[supreg] is 
considered the first line treatment of choice in treating HRS-1 
patients in European and Asian countries.152 153 A commenter 
further stated that the CONFIRM study demonstrated that 
TERLIVAZ[supreg] has an acceptable safety profile for this high-
morbidity patient population.
---------------------------------------------------------------------------

    \151\ Thomson MJ, Taylor A, Sharma P, et al. Limited Progress in 
Hepatorenal Syndrome (HRS) Reversal and Survival 2002-2018: A 
Systematic Review and Meta-Analysis. Dig Dis Sci. 2019;30. doi: 
10.1007/s10620-019-05858-2.
    \152\ Low G, Alexander GJM, Lomas DJ. Hepatorenal Syndrome: 
Aetiology, Diagnosis, and Treatment. Gastroenterology Research and 
Practice. 2015;2015:207012.
    \153\ Angeli P, Bernardi M, Villanueva C, et al. EASL Clinical 
Practice Guidelines for the management of patients with 
decompensated cirrhosis. Journal of Hepatology. 2018;69(2):406-460.
---------------------------------------------------------------------------

    Response: We thank the commenters for their input and have taken it 
into consideration in our determination regarding substantial clinical 
improvement, discussed later in this section.
    Comment: The applicant submitted public comments regarding the 
substantial clinical improvement criterion, in response to CMS's 
concerns raised in the proposed rule. With respect to CMS's concern 
that the applicant provide evidence that TERLIVAZ[supreg] offers a 
treatment option for a patient population unresponsive to currently 
available treatments from a post-hoc analysis of the trial from which 
we were cautious about drawing conclusions without additional outcome 
data, the applicant indicated that although these were findings from a 
post hoc analysis, the data was derived from the largest multicenter, 
double-blind, randomized, placebo-controlled clinical trial of 
TERLIVAZ[supreg] to date. The applicant further stated the study of a 
prospective, randomized, head-to-head trial by Cavallin et al. (2015), 
in which patients with HRS receiving TERLIVAZ[supreg] were compared 
against patients receiving combination midodrine and octreotide 
demonstrated that TERLIVAZ[supreg]-treated patients attained complete 
response (decrease in serum creatinine to <=1.5 mg/dL) at significantly 
higher rates (55.5%) than midodrine and octreotide-treated patients 
(4.8%; p < 0.001),\154\ providing greater confidence in the post hoc 
results from the CONFIRM trial. The applicant also noted that guidance 
and international guidelines stated that the efficacy of midodrine and 
octreotide is lower than that of TERLIVAZ[supreg], and should only be 
used if TERLIVAZ[supreg] is unavailable or contraindicated. The 
applicant noted that these recommendations were further supported by 
real-world efficacy data from the United Kingdom, demonstrating that 
TERLIVAZ[supreg] addresses an unmet need and may offer a treatment 
option for patients who do not respond to existing therapies.
---------------------------------------------------------------------------

    \154\ Cavallin M, Kamath PS, Merli M, et al. Terlipressin plus 
albumin versus midodrine and octreotide plus albumin in the 
treatment of hepatorenal syndrome: a randomized trial. Hepatology. 
2015;62(2):567-574.
---------------------------------------------------------------------------

    In response to CMS's concern that 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[supreg] 
group than placebo, the difference between groups was not statistically 
significant, and that the potential for HRS recurrence after 30 days 
was unclear, the applicant stated that verified HRS reversal was the 
primary endpoint of the CONFIRM trial, and based on study timing, was 
likely measured beyond Day 14 in most patients. The applicant stated 
that furthermore, although verified HRS reversal without recurrence was 
achieved in approximately 50 percent more patients treated with 
TERLIVAZ[supreg] compared to placebo, this endpoint was reported 
inconsistently, as recurrence was based on investigator judgment. The 
applicant stated that the endpoint of durability of HRS reversal was a 
more objective measure of sustained improvements in renal function than 
verified HRS reversal without HRS recurrence, and reached statistical 
significance in the CONFIRM trial. In addition, the applicant explained 
that regarding the potential for HRS recurrence beyond 30 days, HRS 
develops due to the hemodynamic alterations that occur from portal 
hypertension and cirrhosis and that TERLIVAZ[supreg] is not intended to 
resolve these complications. The applicant noted that patients whose 
underlying advanced liver disease is not corrected via transplant may 
develop HRS again if there is a new precipitating event, and that 
ultimately, the rate of HRS recurrence beyond 30 days would not be a 
reflection of TERLIVAZ efficacy, but an effect of patients' underlying 
liver disease.
    With respect to CMS's request for additional outcome data to 
support post-hoc analyses of patient subgroups, the applicant stated 
that although the data was derived from post hoc analyses, the CONFIRM 
trial is the largest multicenter, double-blind, randomized, placebo-
controlled clinical trial of TERLIVAZ[supreg] to date, and that the 
incidence of RRT through Day 90 was a prespecified endpoint for the 
full trial population. The applicant further stated that overall, data 
from the full intention-to-treat (ITT) population of the CONFIRM trial; 
data from the pooled analysis of the CONFIRM, REVERSE, and OT-0401 
trials; and pre-transplant and long-term data from the subgroup of 
patients in the CONFIRM trial who received a liver transplant all 
consistently support that treatment with TERLIVAZ[supreg] reduced the 
incidence of RRT compared to placebo. Thus, TERLIVAZ[supreg] treatment 
offers significant clinical efficacy by helping patients avoid 
RRT,\155\ and has been associated with significant reductions in 
intensive care unit (ICU) length of stay because it can be administered 
on the general medicine floor. The applicant further stated that in the 
subgroup analysis of patients with alcoholic hepatitis, post hoc data 
from CONFIRM was consistent with published pooled data from all 3 
trials, CONFIRM, REVERSE, and OT-0401, and showed that TERLIVAZ[supreg] 
led to significant improvements in renal function compared to 
placebo.\156\ The

[[Page 58906]]

applicant further stated that there was a significant improvement in 
renal function in the pooled population subgroup, with 38.0 percent of 
the TERLIVAZ[supreg] group vs 13.1 percent of the placebo group 
achieving HRS reversal (p<0.001). Additionally, the applicant noted 
that significantly more patients were alive without RRT and maintained 
HRS reversal to Day 30 in the TERLIVAZ[supreg] group (33.9% vs 10.7%; 
p<0.001), consistently demonstrating that TERLIVAZ[supreg] treatment 
led to significant improvements in renal function among patients with 
alcoholic hepatitis.
---------------------------------------------------------------------------

    \155\ Weinberg EM, Wong F, Vargas HE, et al. Pretransplant 
terlipressin treatment for hepatorenal syndrome decreases the need 
for renal replacement therapy both pre- and posttransplant: a 12-
month follow-up analysis of the CONFIRM trial. Hepatology. 
2022;76(S1):S145-S146.
    \156\ Sigal SH, Sanyal AJ, Frederick RT, Weinberg EM, Pappas SC, 
Jamil K. Terlipressin treatment is associated with reversal of 
hepatorenal syndrome in patients with alcoholic hepatitis. Clin 
Gastroenterol Hepatol. Published online February 26, 2023. 
doi:10.1016/j.cgh.2023.02.015.
---------------------------------------------------------------------------

    With respect to whether the analysis submitted by the applicant 
provides sufficient evidence of improved clinical outcomes in the 
Medicare population given that the CONFIRM trial was not powered to 
assess differences in clinical outcomes in the subpopulation of 
patients aged >=65 years, the applicant stated that HRS is a rare 
disease, and that therefore, it is difficult to enroll an adequate 
sample size to conduct large clinical trials that are powered to 
achieve statistical significance among specific subgroups. The 
applicant further stated that while the CONFIRM trial was not powered 
to detect a difference between therapies in patients aged 65 years and 
older, the mean age in the CONFIRM trial was 54 years, and 
approximately 18 percent of patients in each treatment group were aged 
65 years and older. The applicant further stated that although the 
endpoints shown in the poster by Mujtaba et al.\157\ did not reach 
statistical significance based on the small sample size, each endpoint 
trended toward improvement in the TERLIVAZ[supreg] group compared to 
placebo and that as a result treatment with TERLIVAZ[supreg] in 
patients aged >=65 years has shown efficacy results consistent with 
those of the larger CONFIRM population, and that available 
pharmacokinetic data does not suggest an older population would have a 
poorer response or tolerance to TERLIVAZ[supreg]. In a separate 
comment, the applicant also shared a manuscript, with data previously 
reported in the poster by Mujtaba et al.\158\ in abstract form, that 
had been accepted for publication in Annals of Hepatology.\159\ The 
applicant stated that the manuscript consisted of a pooled analysis of 
the CONFIRM, REVERSE, and OT-0401 trials that revealed positive results 
in patients aged 65 years or older with HRS, indicating that treatment 
with TERLIVAZ[supreg] and albumin was associated with clinical 
improvements for patients aged 65 years and older, and that no new 
safety signals were revealed in this analysis.
---------------------------------------------------------------------------

    \157\ Mujtaba M, Gamilla-Cruda AK, Merwat S, et al. 
Terlipressin, in combination with albumin, is an effective therapy 
for hepatorenal syndrome type 1 in patients aged >=65 years. Poster 
presented at: National Kidney Foundation Spring Clinical Meeting; 
April 6-10, 2022; Boston, MA.
    \158\ Ibid.
    \159\ Mujtaba, M.A., Gamilla-Crudo, A.K., Merwat, S.N., Hussain, 
S.A., Kueht, M., Karim, A., Khattak, M.W., Rooney, P.J., & Jamil, K. 
(2023). Terlipressin in combination with albumin as a therapy for 
hepatorenal syndrome in patients aged 65 years or older. Annals of 
hepatology, 28(5), 101126. Advance online publication. https://doi.org/10.1016/j.aohep.2023.101126.
---------------------------------------------------------------------------

    With respect to CMS's concern that the study by Arora et al. 
included patients with a diagnosis of ACLF as well as HRS-AKI, which 
may have contributed to the differences observed between the 
TERLIVAZ[supreg] arm and the norepinephrine arm, the applicant 
responded that ACLF and HRS are often comorbid conditions and both were 
seen in all patients included in the CONFIRM trial.\160\ The applicant 
further specified that though it was not specifically required in the 
inclusion criteria, every patient enrolled in the CONFIRM trial had at 
least ACLF grade 1 at study entry. The applicant conclude that the 
patient population studied in the Arora et al. was similar to that of 
the CONFIRM trial and can be used to demonstrate that the improved 
outcomes seen with TERLIVAZ[supreg] compared to norepinephrine is 
expected in patients with HRS who meet ACLF criteria.
---------------------------------------------------------------------------

    \160\ Wong F, Pappas SC, Reddy KR, et al. Terlipressin use and 
respiratory failure in patients with hepatorenal syndrome type 1 and 
severe acute-on-chronic liver failure. Aliment Pharmacol Ther. 
2022;56(8):1284-1293.
    23. Low G, Alexander GJM, Lomas.
---------------------------------------------------------------------------

    Response: We thank the applicant for its comments and the 
additional information provided regarding the substantial clinical 
improvement criterion. Based on the comments and additional information 
received, we agree that TERLIVAZ[supreg] represents a substantial 
clinical improvement over existing technologies because it is the only 
FDA-approved treatment for HRS patients, and significantly improves 
clinical outcomes among HRS patients by improving renal function, 
compared to placebo as well as currently available treatments, as 
demonstrated by statistically significant differences in HRS reversal 
rates, resulting in reduced RRT requirements and hospital length of 
stay.
    After consideration of the public comments we received and the 
information included in the applicant's new technology add-on payment 
application, we have determined that TERLIVAZ[supreg] meets the 
criteria for approval for new technology add-on payment. Therefore, we 
are approving new technology add-on payments for this technology for FY 
2024. Cases involving the use of TERLIVAZ[supreg] that are eligible for 
new technology add-on payments will be identified by ICD-10-PCS codes: 
XW03367 (Introduction of terlipressin into peripheral vein, 
percutaneous approach, new technology group 7) or XW04367 (Introduction 
of terlipressin into central vein, percutaneous approach, new 
technology group 7).
    Per the applicant, the WAC of TERLIVAZ[supreg] is $950 per vial, 
and the mean treatment duration with TERLIVAZ[supreg] in the CONFIRM 
trial was 6.2 days, using 27 vials. In its application, the applicant 
estimated that the average cost of therapy for TERLIVAZ[supreg] is 
$25,650 per patient ($950 x 27 vials). Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for a case involving the use of 
TERLIVAZ[supreg] is $16,672.50 for FY 2024.
k. XENOVIEWTM (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 XENOVIEWTM (xenon Xe 
129 hyperpolarized) for FY 2024. Per the applicant, 
XENOVIEWTM 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

[[Page 58907]]

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 
XENOVIEWTM 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 
XENOVIEWTM 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, 
XENOVIEWTM was granted NDA approval from FDA on December 23, 
2022, for the use of XENOVIEWTM (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, XENOVIEWTM 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 XENOVIEWTM 
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 XENOVIEWTM: 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 XENOVIEWTM 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, XENOVIEWTM 
identifies lung abnormalities reporting ventilation defect percent 
(VDP) diagnosing early deteriorating lung function to inform, guide and 
monitor therapy. The applicant explained that XENOVIEWTM'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 XENOVIEWTM for the applicant's 
complete statements in support of its assertion that 
XENOVIEWTM is not substantially similar to other currently 
available technologies.
BILLING CODE 4120-01-P

[[Page 58908]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.203

    Similar to our discussion in the FY 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28308), we noted in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 26917 through 26918) that although the applicant states that 
XENOVIEWTM has not been assigned to an MS-DRG and cannot be 
compared to an existing technology, we believed that based on its 
indication, cases involving the use of XENOVIEWTM 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.
    We invited public comments on whether XENOVIEWTM is 
substantially similar to existing technologies and whether 
XENOVIEWTM meets the newness criterion.
    Comment: The applicant submitted a comment maintaining that 
XENOVIEWTM meets the newness criterion. With respect to 
mechanism of action, the applicant stated that XENOVIEWTM 
creates a distinct image

[[Page 58909]]

requiring a special coil and multinuclear scanner for the MRI to 
respond to the HP Xe 129, and therefore does not use the same or 
similar mechanism of action as other imaging agents. Furthermore, the 
applicant stated that XENOVIEWTM is FDA-approved as a new 
chemical entity and that no conventional existing imaging or pulmonary 
function testing can report region specific quantified VDP. The 
applicant also explained that conventional MRI, CT, or VQ scintigraphy 
would not be ordered to measure oxygen exchange of lung tissue, 
therefore XENOVIEWTM MRI treats a population with 
respiratory disease by reporting findings not otherwise obtainable.
    With respect to whether cases involving the use of 
XENOVIEWTM 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, the applicant stated that 
XENOVIEWTM would not be assigned to the same MS-DRGs as 
cases involving the use of other MRIs or advanced imaging because 
medical necessity, images, spatial anatomy, and information obtained 
from the XENOVIEWTM MRI are different from the information 
from a conventional MRI, CT, and nuclear medicine lung imaging. The 
applicant further stated a patient's principal diagnosis (specifically 
asthma, COPD, interstitial lung disease, Bronchiolitis Obliterans, 
cystic fibrosis, or complication post lung transplant), underlying 
comorbidities, and surgical procedures drive the MS-DRG assignment at 
the time of discharge, and creation of a new MS-DRG is not required. 
The applicant stated that XENOVIEWTM would be assigned 
within MS-DRGs 190-192, 196-198, 202-206 and 951 when ICD-10-PCS code 
BB34Z3Z (Magnetic resonance imaging (MRI) of bilateral lungs using 
hyperpolarized xenon 129 (Xe-129)) is used. The applicant explained 
that within Major Diagnostic Category (MDC) 004--Diseases & Disorders 
of the Respiratory System, 0.12 percent of cases included lung or 
pulmonary ICD-10-PCS codes for CT, MRI, or nuclear imaging, and that 
these imaging services are not ordered to report quantitative lung 
ventilation, therefore the ICD-10-CM diagnosis code of patients who 
benefit from XENOVIEWTM are different from those with 
diagnosis codes where conventional CT, MRI, or nuclear imaging would be 
ordered. The applicant explained that XENOVIEWTM is ordered 
for patients with respiratory disease, using the VDP as new information 
to guide treatment decisions and improve patient outcomes.
    Response: We thank the applicant for the clarification regarding 
MS-DRG assignment for XENOVIEWTM. Based on our review of 
comments received and information submitted by the applicant as part of 
its FY 2024 new technology add-on payment application for 
XENOVIEWTM, we disagree with the applicant that 
XENOVIEWTM would not be assigned to the same MS-DRGs as 
cases involving the use of other MRIs or advanced imaging. We do not 
believe that the low volume of CT, MRI, or nuclear imaging cases within 
MDC 004 indicates that XENOVIEWTM would not be assigned to 
the same MS-DRGs as these technologies. As the applicant noted, for 
patients with lung disease who may be prescribed XENOVIEWTM, 
the resulting MS-DRGs are determined by the patient's primary diagnosis 
codes, not the XENOVIEWTM MRI ICD-10-PCS procedure code. 
Therefore, we believe that cases involving the use of 
XENOVIEWTM or other MRIs and imaging modalities for 
pulmonary function and imaging of the lungs that have the same primary 
diagnosis codes would be assigned to the same MS-DRGs.
    However, we agree with the applicant that XENOVIEWTM 
uses a new mechanism of action for the diagnosis of respiratory 
conditions when compared to existing diagnostics because there are 
currently no FDA-approved or cleared technologies that use imaging with 
an inhaled hyperpolarized contrast agent that reports VDP 
quantitatively to provide a detailed, quantifiable image of gas 
distribution in regions of the lung. Therefore, we believe that 
XENOVIEWTM is not substantially similar to existing 
diagnostic options and meets the newness criterion. We consider the 
newness period to begin on December 23, 2022, when 
XENOVIEWTM was approved by FDA for the evaluation of lung 
ventilation in adults and pediatric patients aged 12 years and older.
    With respect to the cost criterion, the applicant searched the FY 
2021 MedPAR file for potential cases representing patients who may be 
eligible for XENOVIEWTM. 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 
XENOVIEWTM (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 
XENOVIEWTM meets the cost criterion.

[[Page 58910]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.204

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26918) we noted 
that the applicant limited its analysis to eight MS-DRGs. We were 
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 
invited public comments on whether XENOVIEWTM meets the cost 
criterion.
    Comment: With respect to whether XENOVIEWTM would map to 
other MS-DRGs under Major Diagnostic Category 004--Diseases & Disorders 
of the Respiratory System, the applicant submitted a comment verifying 
that Version 40.1 of the FY 2023 MS-DRG grouper comparing diagnosis 
codes for the MS-DRGs within MDC 004 unique to the population that 
would benefit from XENOVIEWTM for lung ventilation returned 
the following: MS-DRGs 190-192, 196-198, 202-206 and 951. The applicant 
stated that they added MS-DRGs 204-206 and emphasized that not all MS-
DRGs within MDC 004 related to diagnoses that would result in ordering 
XENOVIEWTM for lung ventilation VDP measurement. For 
example, the applicant stated that MS-DRGs 163-168 are specific to 
thoracic surgical procedures and argued that XENOVIEWTM 
would not map to the assignment of these MS-DRGs and would likely not 
be used during that inpatient admission. Furthermore, the applicant 
stated that MS-DRGs 174 and 176 are specific to pulmonary embolism, not 
a diagnosis for XENOVIEWTM. The applicant also stated that 
MS-DRGs 177-179, 186-188, 189, 193-195 and 199-201 represent specific 
respiratory diseases with primary diagnosis codes not related to the 
diagnosis codes for XENOVIEWTM. The applicant stated that 
MS-DRGs 207-208 are specific to patients on a ventilator with diagnosis 
codes not related to the primary diagnosis codes for 
XENOVIEWTM. The applicant stated that lung imaging 
procedures were identified with MS-DRG 177; however, such imaging was 
ordered to monitor the accumulation of mucus in the lungs.
    After adding MS-DRGs 204-206 to the cost criterion analysis, the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $58,328, which exceeded the average 
case-weighted threshold amount of $47,107. The applicant asserted that 
because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, 
XENOVIEWTM meets the cost criterion.
    Response: We thank the applicant for their revised cost analysis 
with the addition of MS-DRGs 204-206. We agree the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, and therefore XENOVIEWTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that XENOVIEWTM 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

[[Page 58911]]

radiation or the half-life of nuclear imaging agents. The applicant 
further stated that HP \129\Xe MRI images are sharp and discrete, 
providing visual evidence of oxygen impairment across the barrier 
tissues leading to a quantifiable metric to follow patients' treatment. 
The applicant asserted that XENOVIEWTM 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 XENOVIEWTM for additional 
details on the applicant's statements regarding the substantial 
clinical improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \161\ 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.205


[[Page 58912]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.206


[[Page 58913]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.207

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

    \162\ 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.

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[[Page 58914]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.208


[[Page 58915]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.209

BILLING CODE 4120-01-C
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26923 through 
26924), after reviewing the information the applicant provided, we 
stated we had the following concerns regarding whether 
XENOVIEWTM meets the substantial clinical improvement 
criterion. We noted 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 
XENOVIEWTM 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 required under Sec.  
412.87(b)(1)(ii)(B). Although the applicant provided studies 
demonstrating that XENOVIEWTM 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 did not appear to demonstrate that subsequently, 
treatment planning or disease management was affected.
    For example, we noted that studies were designed to assess the 
ability of XENOVIEWTM 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,\163\ 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 XENOVIEWTM 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 was difficult to 
determine whether using XENOVIEWTM 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) 
\164\ noted that clinically relevant VDP improvements were observed 14-
days post-benralizumab in patients with minimal response detected using 
spirometry, it was not clear from the study abstract if the use of 
XENOVIEWTM to observe the effects of treatment impacted the 
clinical decision-making for these patients. In addition, we questioned 
the clinical significance of the findings in the Hahn et al. (2022) 
study \165\ to support the applicant's statement that in patients with 
IPF, HP \129\Xe MRI can predict disease progression in patient

[[Page 58916]]

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.
---------------------------------------------------------------------------

    \163\ 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.
    \164\ 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.
    \165\ 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 stated that HP \129\Xe MRI 
could 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 
questioned whether the detection of such abnormalities allows for a 
specific diagnosis of disease. For example, in the Grist et al. (2022) 
study,\166\ a follow-up to the Grist et al. (2021) study,\167\ 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) \168\ study also 
indicated that HP \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 noted that the Thomen et al. (2016) \169\ study provided 
by the applicant consists of a pediatric population, and we questioned 
whether such detection of ventilation abnormalities by 
XENOVIEWTM would be generalizable to a Medicare population.
---------------------------------------------------------------------------

    \166\ 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.
    \167\ 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.
    \168\ 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.
    \169\ 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 questioned whether the evidence provided 
demonstrates that earlier detection of alveolar gas-exchange defects 
using XENOVIEWTM results in earlier diagnosis and subsequent 
changes to clinical decision-making following an earlier diagnosis. As 
such, we were interested in additional evidence to support the 
applicant's assertion that use of XENOVIEWTM to make a 
diagnosis affects the management of the patient.
    We invited public comments on whether XENOVIEWTM meets 
the substantial clinical improvement criterion.
    Comment: We received several comments in support of new technology 
add-on payments for XENOVIEWTM, including one from the 
applicant, in response to CMS's concerns in the FY 2024 IPPS/LTCH PPS 
proposed rule regarding whether XENOVIEWTM meets the 
substantial clinical improvement criterion.
    The applicant asserted that the technology informs on spatial lung 
ventilation defects, leading to treatment decisions that positively 
impact patient outcomes. The applicant stated that VDP is able to 
provide quantitative information about a patient's specific region of 
ventilation and oxygen defect across all functional regions of the 
lung, unlike conventional chest CT, MRI, nuclear imaging, or pulmonary 
function tests (PFTs), and therefore can be used to identify treatment 
effects of drug therapy and guide physicians in making adjustments. The 
applicant explained that, as a diagnostic test, XENOVEWTM 
MRI would not be expected to directly change health outcomes; rather, a 
diagnostic test affects health outcomes through changes in disease 
management, and that the usefulness of a test result is constrained by 
the available treatment options. The applicant also noted that 
XENOVIEWTM is not effort dependent, unlike for patients who 
have difficulty with spirometry or PFTs. The applicant further asserted 
that XENOVIEWTM provides an objective quantified measure 
specific to the individual patient, which removes health disparities 
and improves equality in healthcare outcomes of chronic diseases where 
marginalized populations have few options for unbiased lung ventilation 
evaluation.
    The applicant stated that outcomes of interest for the technology 
as a diagnostic test include beneficial or adverse clinical effects, 
such as changes in management due to test findings or preferably, 
improved health outcomes for Medicare beneficiaries. The applicant 
asserted that results from XENOVIEWTM MRI lead physicians to 
prescribe different and better treatments, and that those patients 
whose treatments are changed by test results remain on the regimen and 
achieve better long-term lung disease control. The applicant asserted 
that the evidence provided demonstrates the utility of the technology 
to accurately identify those patients who will, if untreated with 
improved treatment protocols, suffer the morbidity and mortality of 
lung disease. The applicant explained that peer-reviewed publications 
across patients with asthma, COPD, and asthma plus COPD with underlying 
risk factors demonstrated a reliable measurement of VDP with 
XENOVIEWTM proprietary software. The applicant stated that 
XENOVIEWTM VDP is an unbiased, quantitative measure compared 
to the patient's own lung, rather than a population-based standard as 
in PFTs, and can detect subtle differences that cannot be captured by 
spirometry for PFTs. The applicant explained that higher rates of COPD 
diagnoses in non-Hispanic whites lends credibility to the inequity and 
bias in understanding and managing this disease, and asserted that 
XENOVIEWTM MRI can be used to reduce disparities in 
healthcare and improve management of chronic disease.
    The applicant asserted that XENOVIEWTM MRI could be used 
to inform treatment outcomes to make changes as needed. The applicant 
referenced the Hahn et al. (2022) study, and explained that the study 
identified patients where VDP could explain the patient symptoms that 
were unable to be diagnosed by conventional spirometry or lung CT 
imaging.\170\ The applicant also referenced the study abstract for 
McIntosh et al. (2020),\171\ stating that the results support practical 
clinical use of VDP to inform treatment change, as it allowed for the 
differentiation between non-responders from responders to benralizumab 
therapy in patients with severe asthma. The applicant stated that the 
study provided evidence that the technology effectively measures gas 
exchange and functional ventilation in a population of asthma patients, 
and

[[Page 58917]]

allows clinically meaningful longitudinal follow-up. The applicant also 
referenced the Mummy et al. (2021) study, and stated it provided 
further evidence of treatment effect as VDP significantly improved in 
subjects with COPD before and after bronchodilator therapy. The 
applicant also asserted that without VDP measurements, physicians 
prescribe drugs without quantitative measures to document the treatment 
effect, and referenced a study by Hall et al. (2021).\172\ The 
applicant explained that the use of bronchial thermoplasty (BT) in 
severe asthma has been limited by peri procedure adverse events, 
therefore VDP offers physicians an option to guide treatment to the 
specific region that will benefit. The applicant explained that the 
Hall et al. (2021) \173\ study randomly assigned 30 patients to BT 
treatment of the six most involved airways in the first session 
(XENOVIEWTM MRI VDP guided group) or a standard three-
session BT (unguided group). The applicant stated that statistically 
significant findings in XENOVIEWTM MRI guided BT patients 
resulted in actionable changes in the patient's management, and that 
VDP guided patients experienced a better outcome with fewer adverse 
asthmatic events. The applicant stated although there were no 
significant difference in quality of life after one guided BT compared 
with three unguided BTs (guided = 0.91 [95% confidence interval, 0.28-
1.53]; unguided = 1.49 [95% confidence interval, 0.84-2.14]; P = 
0.201); VDP guided patients, however, had a statistically significant 
greater reduction in the percentage of poorly and nonventilated lung 
from baseline when compared with unguided BT treatments (217.2%; p = 
0.009). The applicant further noted that 33 percent of patients 
experienced asthma exacerbations after one guided BT compared with 73 
percent after three unguided BTs (p = 0.028).
---------------------------------------------------------------------------

    \170\ 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.
    \171\ 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.
    \172\ Hall CS, Quirk JD, Goss CW, Lew D, Kozlowski J., et. al. 
Single-Session Bronchial Thermoplasty Guided by 129Xe Magnetic 
Resonance Imaging A Pilot Randomized Controlled Clinical Trial. 
American Journal of Respiratory and Critical Care Medicine. 2020; 
202(4): 529-534.
    \173\ Ibid.
---------------------------------------------------------------------------

    Additional commenters supported the use of XENOVIEWTM 
MRI to aid in the characterization of the individual patient's disease 
and impact clinical decision-making and patient management. One 
commenter suggested XENOVIEWTM may help characterize an 
individual's disease and inform treatment decisions in an inpatient 
setting as it provides information about lung disease severity and 
activity beyond what is available with conventional PFTs. The commenter 
added that they foresaw Xenon MRI playing an important role in: (1) 
patients with respiratory symptoms but normal spirometry or PFTs to 
assess for lung disease; (2) patients undergoing bronchoscopic 
treatment of lung disease to guide regional treatments; (3) patients 
with lung disease who are not responding to treatment to quantify 
response to treatment or determine if a different treatment was 
required; and (4) patients with respiratory symptoms but a confusing 
clinical picture. The commenter stated that hyperpolarized gas MRI is 
more sensitive than the spirometry or pulmonary function testing in 
detecting mild or early disease and changes with treatment; has no 
ionizing radiation compared to CT; and can be used to identify regional 
lung function defects not seen with other modalities. The commenter 
stated they envisioned using XENOVIEWTM in longitudinal 
assessment of a patient's response to therapy to stop or intensify 
treatments, and/or serve as an adherence tool to show patients their 
positive response to therapy and motivate continued compliance. The 
commenter explained that quantitative measures of VDP and the apparent 
diffusion coefficient-based emphysema index (ADC) can be safely 
obtained with hyperpolarized Xe MRI. The commenter also explained that 
hyperpolarized gas MRI is advantageous compared to spirometry because 
each patient serves as their own normative value, and may be 
particularly helpful in populations that struggle with spirometry 
maneuvers.
    Another commenter also asserted that XENOVIEWTM fills 
the current clinical gaps for the diagnosis and management of pulmonary 
diseases. The commenter stated that there are no clinical tests that 
can assess regional lung function with high resolution as PFT measures 
global lung function, while a CT scan provides structural details, but 
not direct functional measurement, and has a radiation risk. The 
commenter stated that ventilation/perfusion scans lack the resolution 
for diagnosing lung disease, except pulmonary embolism. The commenter 
stated that XENOVIEW is non-invasive, is sensitive to changes in 
ventilation abnormalities, and provides novel information on VDP and 
the apparent diffusion coefficient-based emphysema index (ADC), which 
would allow clinicians to develop personalized care for patients to 
increase patient's compliance with medications and decrease the need 
for unnecessary testing. The commenter described four common pulmonary 
conditions where XENOVIEWTM would be useful. The commenter 
suggested XENOVIEW could provide an early triage point in the clinical 
pathway for patients with unexplained dyspnea on exertion (DOE). The 
commenter provided a clinical scenario of a patient with DOE, and 
stated that if XENOVIEWTM had been available, they would 
have ordered the technology, which would have likely revealed 
ventilation defects that would have helped them diagnose small airway 
disease asthma with more confidence and chose the appropriate 
medications. The commenter stated that chronic cough with failed 
treatments was another common pulmonary condition, which may be a 
result of cough-variant asthma that is difficult to diagnose with 
current clinical tests, and that if XENOVIEWTM were 
available, it would assist with disease diagnosis and treatment. The 
commenter further suggested the use of XENOVIEWTM in 
patients with COPD to differentiate between two clinical phenotypes, 
chronic bronchitis and emphysema. The commenter noted that patients 
with ventilation patterns more consistent with chronic bronchitis 
tended to respond better to LABA/LAMA, even if there was minimal 
response in PFT,\174\ and that this information would help clinicians 
change medications earlier in the ``non-responders''. Finally, the 
commenter noted that patients with asthma may have a normal PFTs and 
other test results, while remaining symptomatic. The commenter 
referenced two studies using \129\Xe MRI that had shown the presence of 
ventilation defects in stable asthma patients even if PFT was normal, 
and ventilation defects improved after treatment.175 176 The 
commenter explained that ventilation defects on XENOVIEWTM 
could alert clinicians that the asthma may not have been well 
controlled.
---------------------------------------------------------------------------

    \174\ Mummy DG, Coleman EM, Wang Z, et al. Regional Gas Exchange 
Measured by (129) Xe Magnetic Resonance Imaging Before and After 
Combination Bronchodilators Treatment in Chronic Obstructive 
Pulmonary Disease. Journal of magnetic resonance imaging: JMRI 2021; 
54(3): 964-74.
    \175\ Serajeddini H, Eddy RL, Licskai C, McCormack DG, Parraga 
G. FEV1 and MRI ventilation defect reversibility in asthma and COPD. 
The European respiratory journal 2020; 55(3).
    \176\ Ebner L, He M, Virgincar RS, et al. Hyperpolarized 
129Xenon Magnetic Resonance Imaging to Quantify Regional Ventilation 
Differences in Mild to Moderate Asthma: A Prospective Comparison 
Between Semiautomated Ventilation Defect Percentage Calculation and 
Pulmonary Function Tests. Investigative radiology 2017; 52(2): 120-
7.
---------------------------------------------------------------------------

    An additional commenter affirmed that XENOVIEWTM, when 
available in the clinical setting, would inform and/or change their 
treatment decisions due

[[Page 58918]]

to knowledge of the underlying respiratory defect in a variety of 
clinical settings, and could serve as an adherence tool to motivate 
continued compliance. The commenter stated that children born 
prematurely have complex respiratory phenotypes, and that 
hyperpolarized Xe would allow simultaneous investigation of those 
phenotypes, and allow for targeted therapeutics. The commenter also 
stated that the technology could be used to detect, and therefore allow 
for treatment of, early onset obliterative bronchiolitis. The commenter 
noted that Xe MRI offered an alternative to assess lung function for 
children who were unable to cooperate with PFTs. The commenter stated 
that PFTs are insensitive to evaluate regional changes in lung 
function, and that XENOVIEWTM MRI can be used to identify 
regions of the lung with poor ventilation, changes in alveolar size, 
and gas exchange abnormalities to inform treatment options. The 
commenter stated that the technology would be able to image pulmonary 
anatomy not imaged by CT, while avoiding ionizing radiation, which 
would be particularly critical in children.
    With respect to CMS's question as to whether the detection of 
ventilation abnormalities by XENOVIEWTM in a study 
consisting of a pediatric population would be generalizable to a 
Medicare population, the applicant asserted that it would be because 
each XENOVIEWTM VDP measure is unique to individual patients 
across all ages, as it is compared to their own lung and not a 
contrived calculation as with PFTs. The applicant explained that as 
each XENOVIEWTM MRI is patient specific, the VDP 
relationship with poor regions of lung ventilation would be correctly 
identified in an adult when applying studies from patients under 18 
years of age. The applicant stated that clinical trial evidence from 
studies of patients with cystic fibrosis could be related to an adult 
population. The applicant stated that approximately 14 percent of 
patients with cystic fibrosis have Medicare, and that therefore, data 
for this population is relevant to CMS beneficiaries.
    In response to the same concern, a commenter stated they had 
performed hyperpolarized gas MRI in patients ranging from infants to 
those 80+ years, and asserted that results of research studies in lung 
diseases in the pediatric population are applicable to these diseases 
in the adult population since the underlying disease processes are the 
same. Another commenter stated that their group had successfully and 
safely implemented Xe MRI throughout childhood from birth through 
adolescence to gather clinically applicable information, highlighting 
the ability of hyperpolarized Xe technology to influence care across 
the lifespan.
    Response: We thank the applicant and other commenters for their 
comments. Based on our review of comments received and additional 
information submitted by the applicant as part of its FY 2024 new 
technology add-on payment application for XENOVIEW\TM\, we continue to 
have concerns as to whether XENOVIEW\TM\ meets the substantial clinical 
improvement criterion to be approved for new technology add-on 
payments. In particular, we remain concerned that although 
XENOVIEWTM may be able to diagnose pulmonary conditions, it 
remains unclear that use of the technology to make a diagnosis affected 
the management of patients. Although commenters provided statements as 
to how they believed XENOVIEWTM could be used in clinical 
settings to impact patient management, we note that these testimonials 
appear to consist of hypothetical use cases, and we are uncertain if 
these testimonials would reflect the actual use of 
XENOVIEWTM in the inpatient Medicare population.
    In particular, we note that neither the applicant nor the other 
commenters submitted evidence that demonstrated the use of 
XENOVIEWTM MRI to actually affect the management of 
patients, such as a change in diagnosis, a change in treatment 
planning, or discontinuation of or intensification of treatment 
regimens. For example, the study by Ebner et al. (2017) \177\ assessed 
the correlation between VDP and PFTs in asthmatic patients versus 
healthy controls, but did not describe changes in patient management 
due to VDP findings. In addition, we note that the study by Serajeddini 
et al. (2020) \178\ was a retrospective evaluation of spirometry and 
hyperpolarized \3\He MRI measurements, and as such, does not appear to 
speak to the use of XENOVIEWTM.
---------------------------------------------------------------------------

    \177\ Ebner L, He M, Virgincar RS, et al. Hyperpolarized 
129Xenon Magnetic Resonance Imaging to Quantify Regional Ventilation 
Differences in Mild to Moderate Asthma: A Prospective Comparison 
Between Semiautomated Ventilation Defect Percentage Calculation and 
Pulmonary Function Tests. Investigative radiology 2017; 52(2): 120-
7.
    \178\ Serajeddini H, Eddy RL, Licskai C, McCormack DG, Parraga 
G. FEV1 and MRI ventilation defect reversibility in asthma and COPD. 
The European respiratory journal 2020; 55(3).
---------------------------------------------------------------------------

    As described in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26923 and 26924), we continue to have concerns about the Hahn et al. 
(2022), McIntosh et al. (2020), and Mummy et al. (2021) studies 
described in the applicant's comment, and to continue to believe that 
these studies assess the ability of XENOVIEWTM to detect 
changes in lung function before and after treatment in comparison to 
other technologies, rather than a change in patient management. For the 
same reason, we have concerns that the Thomen et al. (2016) study \179\ 
does not demonstrate a change in patient management, as the study 
assessed the feasibility of \129\Xe MRI usage and if usage would 
demonstrate ventilation defects in mild CF with greater sensitivity 
than FEV1. Therefore, we note the technology was not used to 
diagnose CF in the study, as patients were known to be either healthy 
control volunteers or cystic fibrosis patients, nor was there a change 
in diagnosis or treatment due to \129\Xe MRI usage. In addition, we 
continue to have concerns with the preliminary results presented in the 
Grist et al. (2021) study \180\ referenced by commenters, as it was 
aimed to determine if hyperpolarized \129\Xe MRI imaging could identify 
the possible cause of breathlessness in patients after hospital 
discharge following COVID-19 infection, and did not assess for changes 
in patient management due to those findings. Furthermore, although the 
applicant shared a study \181\ of Xe-MRI VDP guided bronchial 
thermoplasty (BT) treatment compared to standard of care, with 
statistically significant findings reporting that Xe-MRI guided BT 
patients resulted in actionable changes in the patient's management due 
to VDP measure of lung ventilation, we note that the study provided, 
associated with clinical trial number NCT01832363, utilized the 
MagniXene[supreg] technology by Xemed LLC. We note that it is unclear 
if the XENOVIEWTM technology from Polarean, Inc. is the same 
as the MagniXene[supreg] technology from Xemed LLC, or what differences 
may exist between the technologies. Therefore, we are unable to 
conclude that use of the XENOVIEWTM technology affects the 
management of the patient.
---------------------------------------------------------------------------

    \179\ 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.
    \180\ 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.
    \181\ Hall CS, Quirk JD, Goss CW, Lew D, Kozlowski J., et. al. 
Single-Session Bronchial Thermoplasty Guided by 129Xe Magnetic 
Resonance Imaging A Pilot Randomized Controlled Clinical Trial. 
American Journal of Respiratory and Critical Care Medicine. 2020; 
202(4): 529-534.

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

[[Page 58919]]

    After review of the information submitted by the applicant as part 
of its FY 2024 new technology add-on payment application for 
XENOVIEW\TM\ and consideration of the comments received, we are unable 
to determine that XENOVIEW\TM\ meets the substantial clinical 
improvement criterion for the reasons discussed in the FY 2024 IPPS/
LTCH PPS proposed rule and in this final rule, and therefore we are not 
approving new technology add-on payments for XENOVIEW\TM\ for FY 2024.
7. 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 stated in the proposed rule that we are continuing to summarize each 
application in the proposed rule. However, we stated that 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 noted that we made 
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 the 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 of the proposed rule 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 the 
proposed rule. Subsequently, prior to the issuance of this final rule, 
seven additional applicants withdrew their respective applications for 
Selux NGP System, Total Ankle Talar Replacement, Transdermal GFR 
Measurement System utilizing Lumitrace, Ceribell Delirium Monitor, 
NUsurface, 4WEB Ankle Truss System, and the Nelli[supreg] Seizure 
Monitoring System. One applicant, LimFlow (the applicant for the 
LimFlow System), did not meet the July 1 deadline for FDA approval or 
clearance of the technology and, therefore, the technology is not 
eligible for consideration for new technology add-on payments for FY 
2024. Of the remaining 12 applications, we are approving 11 and 
conditionally approving 1 for new technology add-on payments for FY 
2024. A discussion of these 12 applications is presented in this final 
rule, including 9 technologies that have received a Breakthrough Device 
designation from FDA and 3 that were designated as a QIDP by FDA.
    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 the FY 2024 IPPS/LTCH PPS proposed rule we proposed to 
approve or disapprove each of these 12 applications for FY 2024 new 
technology add-on payments. Therefore, in this section of the preamble 
of this final rule, we provide background information on each of the 
remaining 12 alternative pathway applications and our determinations as 
to whether each technology is eligible for new technology add-on 
payments for FY 2024 or not. Consistent with our standard approach, we 
are not including in this final rule the description and discussion of 
applications that were withdrawn or that are ineligible for 
consideration for FY 2024 due to not meeting the July 1 deadline, 
described previously, which were included in the FY 2024 IPPS/LTCH PPS 
proposed rule. We are also not summarizing nor responding to public 
comments received regarding these withdrawn or ineligible applications 
in this final rule.

a. Alternative Pathway for Breakthrough Devices

(1) Aveir\TM\ AR Leadless Pacemaker
    Abbott Cardiac Rhythm Management submitted an application for new 
technology add-on payments for the

[[Page 58920]]

Aveir\TM\ AR Leadless Pacemaker for FY 2024. Per the applicant, the 
Aveir\TM\ 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/
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 Aveir\TM\ 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, Aveir\TM\ 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 the use of the Leadless Dual Chamber System included 
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 (that is, both the 
AveirTM AR Leadless Pacemaker and the AveirTM VR 
Leadless Pacemaker are implanted within the same procedure), 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 received FDA premarket approval 
for both the atrial leadless pacemaker (AveirTM AR Leadless 
Pacemaker) and the dual chamber leadless pacemaker (AveirTM 
Dual-Chamber Leadless Pacemaker) on June 29, 2023, for the same 
indications. We stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 26927) 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 appeared 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 appeared 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 stated in the proposed 
rule that 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 invited public comment on the eligibility of the 
AveirTM AR Leadless Pacemaker under the alternative pathway.
    Comment: The applicant submitted a comment regarding the 
eligibility of the AveirTM AR Leadless Pacemaker for new 
technology add-on payments. The applicant asserted that FDA granted 
Breakthrough Device designation to the modular Leadless Dual Chamber 
System, which consists of the AveirTM VR (ventricular 
leadless pacemaker) and the AveirTM AR (atrial leadless 
pacemaker). The applicant stated it developed the modular Leadless Dual 
Chamber System with bidirectional implant-to-implant (i2i) 
communication to accommodate all pacing indications. According to the 
applicant, the i2i technology provides beat-to-beat communication and 
synchrony between two leadless pacemakers, a necessary foundation of 
dual-chamber leadless pacing therapy. The applicant stated that this 
system allows the two devices to communicate with each other--sensing 
for delayed or missed heartbeat and then pacing the appropriate chamber 
of the heart. According to the applicant, the AveirTM system 
is modular, such that a single device can be implanted in a heart 
chamber initially, and the second pacemaker added to the other heart 
chamber in the future should the clinical need arise. The applicant 
asserted that the AveirTM AR Leadless Pacemaker specifically 
corresponds to the Atrial Pacing configuration listed by FDA in the 
Breakthrough Device designation, which is distinct from Ventricular 
Pacing and Dual-Chamber Pacing. The applicant asserted that it would be 
incongruous for AveirTM AR Leadless Pacemaker not to be a 
Breakthrough Device since it is the precise device that provides Atrial 
Pacing. The applicant stated that new technology add-on payment 
designation for the standalone AveirTM AR Leadless Pacemaker 
would enable CMS to recognize that the costs to hospitals are different 
when a single leadless pacemaker is implanted in the right atrium 
compared with implantation of both a leadless ventricular pacemaker and 
atrial leadless pacemaker in the same procedure. The applicant 
commented that the AveirTM AR Leadless Pacemaker with i2i 
technology also enables physicians to implant for single chamber pacing 
indications and adapt treatment if symptoms progress

[[Page 58921]]

and the patient requires dual-chamber pacing.
    Response: We appreciate the information submitted by the applicant 
regarding the eligibility of the AveirTM AR Leadless 
Pacemaker. However, we still note that Breakthrough Device designation 
was granted for the combination product. We agree with the applicant 
that the bidirectional i2i communication and synchrony between two 
leadless pacemakers is distinct from what is offered on implantation of 
the either the AveirTM AR or the AveirTM VR 
leadless pacemakers individually. While we understand that implantation 
of the AveirTM AR Leadless Pacemaker alone during a 
procedure could be included under the Breakthrough Device designation, 
it is our understanding that that would only be the case with a prior 
implanted AveirTM VR Pacemaker to trigger the i2i 
communication, and not with a future implant. Therefore, we believe 
that eligible uses of the AveirTM AR Leadless Pacemaker 
would be procedures that result in a dual-chamber leadless system 
(whether as part of an initial dual-chamber insertion procedure or as 
part of an upgrade procedure to a dual-chamber device, as described 
previously). Since the AveirTM AR Leadless Pacemaker on its 
own was not granted Breakthrough Device designation, it is therefore 
not eligible for consideration under the alternative pathway for 
Breakthrough Devices as a standalone device.
    Comment: The applicant provided a list of clinical scenarios and 
procedure codes for which it believed either the AveirTM AR 
Leadless Pacemaker or the AveirTM Dual-Chamber Leadless 
Pacemaker qualified for the Breakthrough Device designation. The 
applicant asserted: (1) X2H63V9 and X2HK3V9 (Insertion of dual-chamber 
intracardiac pacemaker into right atrium, percutaneous approach, new 
technology group 9, Insertion of dual-chamber intracardiac pacemaker 
into right ventricle, percutaneous approach, new technology group 9) 
could be used for de novo insertion, or removal and replacement of the 
dual chamber leadless system; (2) the procedure code X2H63V9 could be 
used for upgrading to dual chamber leadless system (AveirTM 
AR insertion when patient has existing AveirTM VR), or 
removal and replacement of right atrial component of dual chamber 
leadless system (AveirTM AR removal and replacement); and 
(3) the procedure code X2H63V9 could be used for de novo insertion of 
atrial only single chamber leadless pacemaker, or removal and 
replacement of right atrial single chamber leadless pacemaker.
    Another commenter requested that CMS clarify in the final rule the 
clinical scenarios to which the new technology add-on payment would 
apply if approved and provide guidance on appropriate coding to 
facilitate claims processing to ensure the new technology add-on 
payment is triggered only in cases that meet the alternative pathway 
requirements.
    Response: We thank the commenters for the comments. As discussed 
previously, only use of the Aveir\TM\ AR Leadless Pacemaker as part of 
an upgrade procedure to dual chamber pacemaker, or as part of a De Novo 
insertion of a dual chamber pacemaker (discussed in further detail in 
the following section for AveirTM Dual Chamber Leadless 
Pacemaker), are relevant for the purposes of new technology add-on 
payments. As noted later in this section, the Aveir\TM\ AR Leadless 
Pacemaker was granted approval for the following procedure code 
effective October 1, 2023: X2H63V9 (Insertion of dual-chamber 
intracardiac pacemaker into right atrium, percutaneous approach, new 
technology group 9), which describes upgrade procedures to dual-chamber 
pacing by implanting a leadless pacemaker into the atrium only where 
the patient already has a ventricular leadless pacemaker. We do not 
believe it would be appropriate to utilize X2H63V9 for a procedure that 
does not result in a dual-chamber pacemaker (such as implantation of an 
atrial-only pacemaker). We further note that single-chamber pacing is 
not intended to be captured by the new code, and additional codes are 
utilized for removal/replacement procedures in addition to insertion 
codes.
    The applicant stated that the following ICD-10-PCS code may be used 
to uniquely describe procedures involving the use of Aveir\TM\ AR 
Leadless Pacemaker effective beginning FY 2017: 02H63NZ (Insertion of 
intracardiac pacemaker into right atrium, percutaneous approach). The 
applicant also submitted a request for approval for a unique ICD-10-PCS 
code for the Aveir\TM\ AR Leadless Pacemaker beginning in FY 2024 and 
was granted approval for the following procedure code effective October 
1, 2023: X2H63V9 (Insertion of dual-chamber intracardiac pacemaker into 
right atrium, percutaneous approach, new technology group 9). The 
applicant stated that I49.9 (Cardiac arrythmia, unspecified) may be 
used to currently identify the proposed indication for Aveir\TM\ 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 Aveir\TM\ 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 Aveir\TM\ AR Leadless Pacemaker meets 
the cost criterion.

[[Page 58922]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.210

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26928), we stated 
that 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 
Aveir\TM\ AR Leadless Pacemaker) and ICD-10-PCS code 02HK3NZ (Insertion 
of Intracardiac Pacemaker into Right Ventricle, Percutaneous Approach). 
We questioned whether, by not excluding cases reporting ICD-10-PCS code 
02HK3NZ as part of the case selection for the cost analysis for the 
Aveir\TM\ AR Leadless Pacemaker, cases involving use of the dual 
chamber system could have been included as part of this analysis. Also, 
while it was 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 were 
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 questioned in the proposed rule which 
technology the cases identified in the MedPAR data represent. We 
questioned 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, in 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26928), we agreed that 
the technology meets the cost criterion and proposed to approve the 
Aveir\TM\ 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 had not provided an estimate for the cost of the 
Aveir\TM\ AR Leadless Pacemaker at the time of the proposed rule. We 
stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26928) that we 
expected the applicant to submit cost information prior to the final 
rule, and that we would provide an update regarding the new technology 
add-on payment amount for the technology, if approved, in the final 
rule. We stated that any new technology add-on payment for the 
Aveir\TM\ 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 invited public comments on whether the Aveir\TM\ AR Leadless 
Pacemaker meets the cost criterion and our proposal to approve new 
technology add-on payments for the Aveir\TM\ 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.
    Comment: We received a comment in support of our proposal to 
approve new technology add-on payments for the AveirTM AR 
Leadless Pacemaker. The commenter stated that the AveirTM AR 
Leadless Pacemaker allows for mapping prior to fixation and reduces the 
number of repositioning attempts. According to the commenter, 
positioning capabilities may result in better long-term outcomes for 
patients, and in addition to an increased battery life- twice the 
battery life of other leadless pacemakers--it may lead to fewer 
procedures and reduce patient risk.
    Response: We thank the commenter for the comments.
    Comment: The applicant submitted a comment regarding the cost 
criterion and provided an alternate cost analysis in response to CMS's 
concerns identified in the proposed rule regarding whether cases 
utilizing standard pacemakers instead of leadless pacemakers would 
better reflect the technology that the applicant anticipates 
AveirTM AR Leadless Pacemaker will be replacing. In the 
updated analysis, the applicant searched for cases using a combination 
of ICD-10-PCS codes for implanting a standard dual-chamber pacemaker 
plus the insertion of the additional lead in the right atrium (rather 
than codes for leadless pacemakers) based on the assertion that this 
would appropriately describe patients who already have a leadless right 
ventricle pacemaker who are implanted with the AveirTM AR 
Leadless Pacemaker. The applicant removed 100 percent of the charges 
from revenue centers 0275, 0278, 0279, and 0624 from the 1,317 
identified discharges to be as conservative as possible. Because the 
final inflated average case-weighted standardized charge per case of 
$252,073 for a device upgrade exceeded the average case-

[[Page 58923]]

weighted threshold amount of $122,326 in the updated cost analysis, the 
applicant asserted that the AveirTM AR Leadless Pacemaker 
met the cost criterion.
    With respect to CMS's question why the applicant searched for cases 
reporting procedure code 02H63NZ, the applicant stated that it included 
these cases in the original analysis with the expectation that CMS 
would seek that data because it is a code specific to a leadless 
pacemaker, notwithstanding that its technology was not reported until 
FY 2022. The applicant noted that it updated the analysis using 
traditional transvenous pacemaker codes and omitted this code, based on 
CMS's suggestion, and as described previously.
    In addition, the applicant provided an additional cost analysis for 
insertion of atrial only single chamber pacemaker in the right atrium 
to complement the prior analysis and other clinical scenarios, as it 
stated that Aveir ARTM Leadless Pacemaker with i2i 
technology also enables physicians to implant for single chamber pacing 
indications and adapt treatment if symptoms progress and the patient 
requires dual-chamber pacing. In the new cost analysis, because the 
final inflated average case-weighted standardized charge per case of 
$276,818 for an atrial-only pacemaker exceeded the average case-
weighted threshold amount of $137,401, the applicant maintained that 
the device meets the cost criterion.
    Response: We thank the applicant for its comments and appreciate 
the updated and additional cost analyses. We agree that the technology 
meets the cost criterion based on the first updated analysis where the 
applicant searched for cases utilizing standard pacemakers and 
implanting an atrial lead during insertion of a dual-chamber system. As 
previously stated, the Breakthrough Device designation was granted for 
the dual-chamber product and not for the AveirTM AR Leadless 
Pacemaker, and therefore eligible uses of the AveirTM AR 
Leadless Pacemaker would be procedures that result in the insertion of 
a dual-chamber system, and it is not eligible for consideration under 
the alternative pathway for Breakthrough Devices as a standalone 
device.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe Aveir\TM\ AR Leadless Pacemaker meets 
the cost criterion. The technology received FDA premarket approval on 
June 29, 2023, as a Breakthrough Device when used as part of the Dual-
Chamber system, with an indication for one or more of the following 
permanent conditions: syncope, presyncope, fatigue, disorientation due 
to arrhythmia/bradycardia, or any combination of those symptoms. 
Therefore, we are finalizing our proposal to approve new technology 
add-on payments for Aveir\TM\ AR Leadless Pacemaker for FY 2024. We 
note, as discussed previously, that only the use of the technology 
resulting in the insertion of a dual-chamber system is relevant for the 
purposes of new technology add-on payments. We consider the beginning 
of the newness period to commence on June 29, 2023, the date on which 
technology received FDA marketing authorizationfor the indication 
covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of Aveir\TM\ AR Leadless Pacemaker is $16,500, 
including one Aveir\TM\ AR atrial leadless pacemaker, one delivery 
catheter, and one introducer. 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 finalizing that the 
maximum new technology add-on payment for a case involving the use of 
Aveir\TM\ AR Leadless Pacemaker is $10,725 for FY 2024 (that is, 65 
percent of the average cost of the technology). Cases involving the use 
of the Aveir\TM\ AR Leadless Pacemaker that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
code X2H63V9 (Insertion of dual-chamber intracardiac pacemaker into 
right atrium, percutaneous approach, new technology group 9).
(2) 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.
    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

[[Page 58924]]

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 
received FDA premarket approval for the AveirTM Dual-Chamber 
Leadless Pacemaker on June 29, 2023, for the same indications.
    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. The applicant also submitted a request 
for approval for a unique ICD-10-PCS code for the Aveir\TM\ Dual-
Chamber Leadless Pacemaker beginning in FY 2024 and was granted 
approval for the following procedure code combination effective October 
1, 2023: X2H63V9 (Insertion of dual-chamber intracardiac pacemaker into 
right atrium, percutaneous approach, new technology group 9) and 
X2HK3V9 (Insertion of dual-chamber intracardiac pacemaker into right 
ventricle, percutaneous approach, new technology group). Both codes 
would be reported for this procedure to identify the percutaneous 
insertion of a dual-chamber leadless cardiac pacemaker system. 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] TR28AU23.211

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26930), we stated 
that we have the following concern regarding the cost criterion. It was 
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 
were 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 questioned in the proposed rule 
which technology the cases identified in the MedPAR data represent. We 
questioned whether searching for cases utilizing standard

[[Page 58925]]

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, in the 
FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26930), we agreed with the 
applicant that the technology meets the cost criterion and therefore 
proposed 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 had not provided an estimate for the cost of the 
AveirTM Dual-Chamber Leadless Pacemaker at the time of the 
proposed rule. We stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 26930) that we expected the applicant to submit cost information 
prior to the final rule, and that we would provide an update regarding 
the new technology add-on payment amount for the technology, if 
approved, in the final rule. We stated that 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 invited 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.
    Comment: The applicant submitted an alternate cost analysis in 
response to CMS's concerns identified in the proposed rule whether 
cases utilizing standard dual-chamber pacemakers instead of leadless 
pacemakers would be more representative of the discharges 
AveirTM Dual-Chamber Leadless Pacemaker would be replacing. 
The applicant asserted that the cases selected in the updated cost 
analysis appropriately describe traditional transvenous dual-chamber de 
novo implant procedures and provide a good comparator for procedures it 
anticipates would be replaced with AveirTM Dual-Chamber 
Leadless Pacemaker. The applicant removed 100 percent of the charges 
from revenue centers 0275, 0278, 0279, and 0624 from the 47,425 
identified discharges to be as conservative as possible. In the updated 
cost analysis, because the final inflated average case-weighted 
standardized charge per case of $201,227 still exceeded the average 
case-weighted threshold amount of $115,421, the applicant asserted that 
AveirTM Dual-Chamber Leadless Pacemaker meets the cost 
criterion.
    With respect to CMS's concern that whether cases coded with 02HK3NZ 
should be included in the analysis, the applicant stated that its 
original analysis included cases reporting 02H63NZ for purposes of 
completeness and in expectation that CMS would seek data on codes 
specific to a leadless pacemaker, notwithstanding that its specific 
technology was not reported until FY 2022. According to the applicant, 
the updated analysis used only the traditional transvenous pacemaker 
codes listed previously based on the CMS's suggestion and omitted 
02H63NZ.
    Response: We thank the applicant for the comments and the alternate 
cost analysis.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe AveirTM Dual-Chamber 
Leadless Pacemaker meets the cost criterion. The technology received 
FDA premarket approval on June 29, 2023, as a Breakthrough Device, with 
an indication for one or more of the following permanent conditions: 
syncope, presyncope, fatigue, disorientation due to arrhythmia/
bradycardia, or any combination of those symptoms. Therefore, we are 
finalizing our proposal to approve new technology add-on payments for 
AveirTM Dual-Chamber Leadless Pacemaker for FY 2024. We 
consider the beginning of the newness period to commence on June 29, 
2023, the date on which technology received FDA marketing authorization 
for the indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of AveirTM Dual-Chamber Leadless Pacemaker 
is $24,000, including two leadless pacemakers (Aveir\TM\ AR atrial 
leadless pacemaker and Aveir\TM\ VR ventricular leadless pacemaker), 
two delivery catheters (one for each leadless pacemaker), and one 
introducer. 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 finalizing that the maximum new 
technology add-on payment for a case involving the use of 
AveirTM Leadless Pacemaker is $15,600 for FY 2024 (that is, 
65 percent of the average cost of the technology). Cases involving the 
use of AveirTM Leadless Pacemaker that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
codes X2H63V9 (Insertion of dual-chamber intracardiac pacemaker into 
right atrium, percutaneous approach, new technology group 9) in 
combination with X2HK3V9 (Insertion of dual-chamber intracardiac 
pacemaker into right ventricle, percutaneous approach, new technology 
group). We note that both codes would be reported for this procedure to 
identify the percutaneous insertion of a dual-chamber leadless cardiac 
pacemaker system relevant for new technology add-on payments.
(3) 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

[[Page 58926]]

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.
    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 
and was granted approval for the following procedure code(s) effective 
October 1, 2023: XNHG0F9 (Insertion of tibial extension with motion 
sensors into right tibia, open approach, new technology group 9), or 
XNHH0F9 (Insertion of tibial extension with motion sensors into left 
tibia, open approach, new technology group 9).
    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 the 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.212

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26931), we agreed 
with the applicant that the technology meets the cost criterion and 
therefore proposed 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 
the proposed rule, the total cost of the CTE with CHIRP System to the 
hospital was approximately $1,654 per knee. This included $1,309 for 
the CTE and $345 for the Canary Medical Home Base Station. We noted 
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 noted that the Home Base 
Station provided to the patient to set up and connect to their home Wi-
Fi prior to surgery. We therefore stated that we believe the relevant 
inpatient costs for the add-on payment would include only the cost of 
the CTE.\182\ We noted that the cost information for this technology 
would be updated in the final rule based on revised or additional 
information CMS received 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 
proposed 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

[[Page 58927]]

percent of the average cost of the technology).
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    \182\ https://canarymedical.com/clinicians/additional-information-for-clinicians/.
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    We invited 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.
    Comment: The applicant submitted a comment regarding the cost of 
the technology relevant for add-on payments. Per the applicant, while 
they agreed that the home base station is used in the patient's home, 
the CTE with CHIRP is a system requiring both the CTE and the home base 
station components for the system to function. The applicant noted that 
the home base station is necessary for the communication of data to an 
external server, is paired to only one patient (that is, it is not 
reusable), and though it is paid for by the facility, it becomes the 
property of the patient. Thus, it is not a piece of equipment, an 
instrument, apparatus, implement or item for which depreciation and 
financing expenses are recovered by the hospital. The applicant 
maintained that the home base station is different from the operating 
room base station, which they agreed is not applicable to the new 
technology add-on payment calculation and was not included in their 
application because it is given to the hospital, and remains with the 
hospital, to be used intraoperatively to activate the CHIRP System in 
multiple patients. The applicant requested that CMS recognize that the 
CTE with CHIRP is one system and include the $345 cost of the home base 
station in the new technology add-on payment calculation to bring the 
maximum new technology add-on payment to $1,075.10 per knee ($1,654 x 
65%).
    Response: We thank the applicant for its input. However, as stated 
in the proposed rule, we are concerned that that the Home Base Station 
is provided to the patient to set up and connect to their home Wi-Fi 
prior to surgery. The Home Base Station is not an item administered to 
the patient during the hospital that leaves the hospital with the 
patient upon discharge. While the applicant states that the Home Base 
Station is not a piece of equipment, an instrument, apparatus, 
implement or item for which depreciation and financing expenses are 
recovered by the hospital, we still are unclear if the Home Base 
Station is billable in the inpatient setting. Therefore, for this final 
rule we are excluding the Home Base Station from the add on payment and 
the relevant inpatient costs for the add-on payment would include only 
the cost of the CTE. We welcome additional information from the 
applicant in the future on whether the Home Base Station should be 
included in the add on payment.
    Comment: Another commenter submitted a comment stating that the 
kinematic data generated by the CTE with CHIRP System has not 
demonstrated any clinical benefits or outcomes and is not intended to 
be utilized for clinical decision-making, and raised questions 
regarding how the technology would be used.
    Response: We thank the commenter for its comment. We note, as 
discussed previously, that a technology that applies under an 
alternative pathway does 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. We refer the reader to the FY 2020 IPPS/LTCH 
PPS final rule for a discussion of the development of these alternative 
pathways (84 FR 42292 through 42297).
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comment we received, we believe the CTE with CHIRP System meets the 
cost criterion. The technology received De Novo classification on 
August 27, 2021, as a Breakthrough Device for the following indication 
which is covered by its Breakthrough Device designation: to provide 
objective kinematic data from the implanted medical device during a 
patient's total knee arthroplasty (TKA) post-surgical care. 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. Therefore, we are finalizing our proposal to approve new 
technology add-on payments for CTE with CHIRP for FY 2024. We consider 
the beginning of the newness period to commence on October 4, 2021, the 
date on which the technology became commercially available for the 
indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
as stated previously, the relevant inpatient costs for the add-on 
payment would include only the cost of the CTE. The cost per case of 
the CTE with CHIRP System is $1,309 per knee. 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 
finalizing that the maximum new technology add-on payment for a case 
involving the use of the CTE with CHIRP System is $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). Cases involving the use of the CTE 
with CHIRP System that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS procedure codes XNHG0D9 (Insertion of 
tibial extension with motion sensors into right tibia, open approach, 
new technology group 9) or XNHH0D9 (Insertion of tibial extension with 
motion sensors into left tibia, open approach, new technology group 9).
(4) 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) 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 the technology received 510(k) clearance 
from FDA on May 23, 2023, for the same indication. In the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26933), we noted that the Ceribell EEG 
Headband and Ceribell Pocket EEG were not included on the Breakthrough 
Device designation, and it therefore appeared 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. We note that the

[[Page 58928]]

510k clearance for the technology provided by the applicant was also 
for the software only.
    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 and was granted approval for the following 
procedure code effective October 1, 2023: XX20X89 (Monitoring of brain 
electrical activity, computer-aided detection and notification, new 
technology group 9).
    With respect to the cost criterion, the applicant provided multiple 
updated 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 the 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 the 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 the 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 the 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 the 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 58929]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.213

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26934), we agreed 
that the technology meets the cost criterion and therefore proposed 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 
the 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). We stated in the proposed rule, however, that as discussed 
previously, it seemed that only the software would be eligible for the 
new technology add-on payment under the alternative pathway as it was 
the subject of the Breakthrough Device designation. We further noted, 
as discussed with regard to the Ceribell Delirium Monitor, that the 
Ceribell EEG headband appeared to have been 510(k)-cleared by FDA since 
August 2017 \183\ and was therefore no longer new. Therefore, it 
appeared any add-on payment for the Ceribell Status Epilepticus Monitor 
would include only the cost of the software ($1,800). We welcomed 
comment on including only the cost of the software in determining the 
add-on payment amount for the Ceribell Status Epilepticus Monitor. We 
noted that the cost information for this technology may be updated in 
the final rule based on revised or additional information CMS received 
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 proposed 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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    \183\ https://www.accessdata.fda.gov/cdrh_docs/pdf17/K171459.pdf.
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    We invited 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.
    Comment: The applicant submitted a comment and a revised cost 
analysis. In its comment, the applicant noted that they have updated 
their pricing structure to commercialize the Status Epilepticus Monitor 
software through a subscription-based pricing model. Under this model, 
a hospital will pay a fixed monthly subscription for use of the 
software that allows the hospital to utilize the technology without 
limitations on volume. Per the applicant, their rationale for charging 
hospitals a monthly subscription fee is based on prior experience using 
a similar charge structure for launching their current EEG technology 
in 2020. The applicant noted that because they anticipated a lot of 
overlap in the use of their current EEG technology and the anticipated 
use of the Status Epilepticus Monitor, they plan to also commercialize 
the Status Epilepticus Monitor using a subscription-based pricing 
model. According to the applicant, to arrive at the updated per-patient 
cost, they estimated the number of patients expected to be evaluated 
using the Status Epilepticus Monitor software and divided that number 
by

[[Page 58930]]

the projected monthly subscription cost. According to the applicant, it 
arrived at an estimated annual utilization of the Status Epilepticus 
Monitor per hospital based on the median annual utilization of their 
customers' existing EEG system over the three-year timeframe of 2020, 
2021, and 2022. This resulted in a per case charge of $1,406 (instead 
of $1,800 in the proposed rule); the cost of the headband was unchanged 
at $800. Thus, the updated per patient cost is $2,206, per the 
applicant.
    Using the new per patient cost, the applicant updated its cost 
analysis. According to the applicant, the updated analysis was 
consistent with what they had provided in the past, with the cost per 
patient as the only change. In their revised first analysis, in which 
the applicant used 100 percent of all cases within the revenue code 
categories, the final inflated average case-weighted standardized 
charge per case was $113,082, which exceeded the average case-weighted 
threshold amount of $85,765. In the revised second analysis, the 
applicant used 75 percent of all cases within the revenue code 
categories, the final inflated average case-weighted standardized 
charge per case was $109,784, which exceeded the average case-weighted 
threshold amount of $85,280. In the revised third analyses, in which 
the applicant provided sensitivity analyses limited to 100 percent of 
all the cases with the highest risk of Status Epilepticus, the inflated 
average case-weighted standardized charge per case was $125,611, which 
exceeded the average case-weighted threshold amount of $88,778. In 
their revised fourth analysis, in which the applicant provided 
sensitivity analyses limited to 75 percent of all the cases with the 
highest risk of Status Epilepticus, the final inflated average case-
weighted standardized charge per case was $121,188, which exceeded the 
average case-weighted threshold amount of $87,583. Per the applicant, 
all the revised cost analyses have demonstrated that the technology 
still meets cost criterion.
    Response: We thank the applicant for the updated information. We 
agree that the technology continues to meet the cost criterion using 
the revised pricing structure based on a subscription-based pricing 
model. We also thank the commenter for providing an explanation how it 
computed the per discharge amount based on a subscription-based pricing 
model.
    Comment: Several commenters submitted public comments providing 
general support for Ceribell Status Epilepticus Monitor. A commenter 
noted that diagnosing status epilepticus is often challenging, as 
community hospitals often lack EEG technicians or specialized 
providers. A commenter stated that this technology will be helpful to 
patients in both the emergency department and the inpatient setting, 
especially in the intensive care unit, where patients likely have 
altered awareness and need to have status epilepticus diagnosed or 
excluded timely. Several of the commenters disagreed with our proposal 
to cover only the Ceribell Status Epilepticus Monitor software and not 
the Ceribell headband. They stated that the technology is only 
operational as a complete system, and that the Ceribell Status 
Epilepticus Monitor software requires the use of the Ceribell headband. 
They therefore argued in favor of including the Ceribell headband in 
any new technology add-on payment for the Ceribell Status Epilepticus 
Monitor.
    Response: We thank the commenters for their comments. We note that, 
under the eligibility criteria for approval under the alternative 
pathway for certain transformative new devices, only the use of the 
Ceribell Status Epilepticus Monitor software is relevant for purposes 
of the new technology add-on payment application for FY 2024. Since 
only the software was designated as a Breakthrough Device by FDA, the 
Ceribell EEG Headband is not eligible to be included in the Ceribell 
Status Epilepticus Monitor add-on payment amount.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the Ceribell Status Epilepticus 
Monitor meets the cost criterion. The Ceribell Status Epilepticus 
Monitor System received 510(k) clearance from FDA on May 23, 2023, for 
the diagnosis of Electrographic Status Epilepticus in adult patients at 
risk for seizure, which is covered by its Breakthrough Device 
designation. We consider the beginning of the newness period to 
commence on May 23, 2023, the date on which Ceribell Status Epilepticus 
Monitor was 510(K)-cleared by FDA for the indication covered in its 
Breakthrough Device designation.
    As noted earlier, the applicant updated their pricing structure to 
commercialize the Status Epilepticus Monitor software through a 
subscription-based pricing model. Based on the information available at 
the time of this final rule, the cost per case of the Ceribell Status 
Epilepticus Monitor (using a per discharge amount based on a 
subscription-based pricing model) is $1,406, based on the cost per 
patient of the software only. 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 new technology, or 65 percent of the costs in excess of the 
MS-DRG payment for the case. As a result, we are finalizing that the 
maximum new technology add-on payment for a case involving the use of 
the Ceribell Status Epilepticus Monitor is $913.90 for FY 2024 (that 
is, 65 percent of the average cost of the technology). Cases involving 
the use of the Ceribell Status Epilepticus Monitor that are eligible 
for new technology add-on payments will be identified by ICD-10-PCS 
procedure code XX20X89 (Monitoring of brain electrical activity, 
computer-aided detection and notification, new technology group 9).
(5) DETOUR System
    Endologix, Inc., submitted an application for new technology add-on 
payments for the DETOUR System for 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 received FDA 
premarket approval on June 7, 2023, for the same indication. According 
to the applicant, the device became available on the market immediately 
upon FDA approval.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for DETOUR System beginning in FY 2024 and was 
granted

[[Page 58931]]

approval for the following procedure codes effective October 1, 2023: 
X2KH3D9 (Bypass right femoral artery using conduit through femoral vein 
to superficial femoral artery, percutaneous approach, new technology 
group 9), X2KH3E9 (Bypass right femoral artery using conduit through 
femoral vein to popliteal artery, percutaneous approach, new technology 
group 9), X2KJ3D9 (Bypass left femoral artery using conduit through 
femoral vein to superficial femoral artery, percutaneous approach, new 
technology group 9), or X2KJ3E9 (Bypass left femoral artery using 
conduit through femoral vein to popliteal artery, percutaneous 
approach, new technology group 9). 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 the 
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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.214

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26950), we agreed 
with the applicant that the DETOUR System meets the cost criterion and 
proposed 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.
    We stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26950) 
that we expected the applicant to submit cost information prior to the 
final rule, and we would 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

[[Page 58932]]

the average cost of the technology, or 65 percent of the costs in 
excess of the MS-DRG payment for the case.
    We invited 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.
    Comment: We received a comment from the applicant in support of 
CMS's proposal to approve the technology for new technology add-on 
payments. The applicant stated that the DETOUR System provides a 
transformative approach for the treatment of individuals with complex 
peripheral artery disease (PAD) through a novel, minimally invasive 
procedure referred to as percutaneous transmural arterial bypass 
(PTAB).
    Response: We thank the commenter for its support.
    Based on the information provided in the application for new 
technology add-on payments, we believe the DETOUR System meets the cost 
criterion. The technology received FDA marketing authorization on June 
7, 2023, as a Breakthrough Device with an indication 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, which is covered by its 
Breakthrough Device designation. Therefore, we are finalizing our 
proposal to approve new technology add-on payments for the DETOUR 
System for FY 2024. We consider the beginning of the newness period to 
commence on June 7, 2023, the date on which the technology became 
commercially available for the indication covered by its Breakthrough 
Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the DETOUR System is $25,000 for the single-use 
system comprised of the TORUS Stent Graft(s) and the ENDOCROSS device. 
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 finalizing that the maximum new technology add-on 
payment for a case involving the use of the DETOUR System is 65 percent 
of $16,250 for FY 2024 (that is, 65 percent of the average cost of the 
technology). Cases involving the use of the DETOUR System that are 
eligible for new technology add-on payments will be identified by one 
of the following ICD-10-PCS procedure codes: X2KH3D9 (Bypass right 
femoral artery using conduit through femoral vein to superficial 
femoral artery, percutaneous approach, new technology group 9), X2KH3E9 
(Bypass right femoral artery using conduit through femoral vein to 
popliteal artery, percutaneous approach, new technology group 9), 
X2KJ3D9 (Bypass left femoral artery using conduit through femoral vein 
to superficial femoral artery, percutaneous approach, new technology 
group 9), or X2KJ3E9 (Bypass left femoral artery using conduit through 
femoral vein to popliteal artery, percutaneous approach, new technology 
group 9).
(6) 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 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.
    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 
and was granted approval for the following procedure code effective 
October 1, 2023: XXE2X19 (Measurement of cardiac output, computer-aided 
assessment, new technology group 9). 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 
the 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 the proposed rule for the complete lists of 
ICD-10-CM codes

[[Page 58933]]

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 the 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 the 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 the 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 percent 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 the 
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 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 58934]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.215


[[Page 58935]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.216

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26937), we agreed 
with the applicant that EchoGo Heart Failure 1.0 meets the cost 
criterion and therefore proposed to approve EchoGo Heart Failure 1.0 
for new technology add-on payments for FY 2024.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant's anticipated cost per patient for 
EchoGo Heart Failure 1.0 was $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 noted that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS received 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 proposed 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 invited 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.
    Comment: The applicant submitted a public comment expressing 
support for the approval of EchoGo Heart Failure 1.0 for the new 
technology add-on payment for FY 2024. The applicant also supported 
CMS's proposed maximum new technology add-on payment amount.
    Response: We thank the applicant for its comments.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe EchoGo Heart Failure 1.0 meets the 
cost criterion. The technology was granted FDA marketing authorization 
on November 23, 2022, as a Breakthrough Device, with an indication for 
use as an automated machine learning-based decision support system, 
indicated as a diagnostic aid for patients undergoing routine 
functional cardiovascular 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. This indication is covered by its 
Breakthrough Device Designation. Therefore, we are finalizing our 
proposal to approve new technology add-on payments for EchoGo Heart 
Failure 1.0 for FY 2024. We consider the beginning of the newness 
period to commence on November 23, 2022, the date on which technology 
received its FDA 510(k) clearance for the indication covered by its 
Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of EchoGo Heart Failure 1.0 is $1,575. 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 
finalizing that the maximum new technology add-on payment for a case 
involving the use of EchoGo Heart Failure 1.0 is $1,023.75 for FY 2024 
(that is, 65 percent of the average cost of the technology). Cases 
involving the use of EchoGo Heart Failure 1.0 that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
code XXE2X19 (Measurement of cardiac output, computer-aided assessment, 
new technology group 9).
(7) Phagenyx[supreg] System
    Phagenesis Ltd. submitted an application for new technology add-on 
payments for the Phagenyx[supreg] System for FY 2024. The 
Phagenyx[supreg] 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[supreg] 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[supreg] 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[supreg] 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[supreg] 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. In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26943) we 
noted that 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,\184\ it appears that the 510(k) indication is 
appropriate for consideration for new technology add-on payment under 
the alternative pathway criteria.
---------------------------------------------------------------------------

    \184\ 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,

[[Page 58936]]

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, was the expected commercial availability date for the 
Phagenyx[supreg] System.
    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[supreg] System. The applicant provided a list of diagnosis 
codes that may be used to currently identify the indication for the 
Phagenyx[supreg] 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[supreg] 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[supreg] 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[supreg] System Codes--FY 2024 associated with the 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[supreg] System meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TR28AU23.217


[[Page 58937]]


    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26944), we agreed 
with the applicant that the Phagenyx[supreg] System meets the cost 
criterion and therefore proposed to approve the Phagenyx[supreg] System 
for new technology add-on payments for FY 2024.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the applicant anticipated the cost to the hospital 
for the Phagenyx[supreg] System to be $5,000, which is the price of the 
single use, per patient catheter. We noted that the cost information 
for this technology may be updated in the final rule based on revised 
or additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we proposed that the maximum new technology add-on payment for 
a case involving the use of the Phagenyx[supreg] System would be $3,250 
for FY 2024 (that is, 65 percent of the average cost of the 
technology).
    We invited public comments on whether the Phagenyx[supreg] System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the Phagenyx[supreg] 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.
    Comment: The applicant submitted a public comment expressing 
support for the approval of the Phagenyx[supreg] System for the new 
technology add-on payment for FY 2024. The applicant reiterated that 
the Phagenyx[supreg] System meets the cost criterion and confirmed the 
proposed cost of the Phagenyx[supreg] System. The applicant also 
restated that the ICD-10-PCS code XWHD7Q7 (Insertion of neurostimulator 
lead into mouth and pharynx, via natural or artificial opening, new 
technology group 7) must be used to appropriately describe the 
procedure. The applicant provided an update on the availability of the 
device, stating the actual commercial availability of the device was 
established when FDA cleared the product from U.S. customs on April 12, 
2023.
    Response: Based on the information provided in the application for 
new technology add-on payments, and after consideration of the public 
comments we received, we believe the Phagenyx[supreg] System meets the 
cost criterion. The technology was granted FDA marketing authorization 
on September 16, 2022, as a Breakthrough Device with an indication 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. 
Therefore, we are finalizing our proposal to approve new technology 
add-on payments for the Phagenyx[supreg] System for FY 2024. We 
consider the beginning of the newness period to commence on April 12, 
2023, the date that the technology became commercially available for 
the indication covered by its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the Phagenyx[supreg] System is $5,000. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the technology, or 65 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, we are 
finalizing that the maximum new technology add-on payment for a case 
involving the use of the Phagenyx[supreg] System is $3,250 for FY 2024 
(that is, 65 percent of the average cost of the technology). Cases 
involving the use of the Phagenyx[supreg] System that are eligible for 
new technology add-on payments will be identified by ICD-10-PCS 
procedure code XWHD7Q7 (Insertion of neurostimulator lead into mouth 
and pharynx, via natural or artificial opening, new technology group 
7).
(8) 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 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. In the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26945), the applicant noted that 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 noted 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 noted that a device must be designated 
under FDA's Breakthrough Devices Program to be eligible under the 
alternative pathway, and that 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

[[Page 58938]]

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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.218

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26946), we agreed 
with the applicant that SAINT Neuromodulation System meets the cost 
criterion and therefore proposed 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 
the 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 noted that the cost information for this technology may be updated 
in the final rule based on revised or additional information CMS 
receives prior to the final rule. Under Sec.  412.88(a)(2), we limit 
new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we proposed that the 
maximum new technology add-on payment for a case involving the use of 
the SAINT Neuromodulation System would be $12,675.00 for FY 2024 (that 
is, 65 percent of the average cost of the technology).
    We invited 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.
    Comment: Several commenters expressed support for our proposal to 
approve new technology add-on payments for the SAINT Neuromodulation 
System. Many commenters shared anecdotal experiences with transcranial 
magnetic stimulation (TMS) and advocated for implementing the SAINT 
Neuromodulation System in the inpatient setting. Some commenters 
emphasized the importance of the inpatient schedule of treatment. Many 
commenters stated that this technology will not be available to 
Medicare patients without a new technology add-on payment. There were a 
multitude of comments directly from people who participated in trials 
of the SAINT

[[Page 58939]]

Neuromodulation System who were supportive of CMS's proposal to approve 
new technology add-on payments and attributed significant and 
remarkable relief from depression resulting from use of the SAINT 
Neuromodulation System.
    Response: We thank the commenters for their support and feedback.
    Comment: Several commenters asserted that the SAINT Neuromodulation 
System meets the cost criterion and supported the applicant's use of 
MS-DRG 885 (Psychoses), and 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) in their analyses.
    Response: We thank the commenters for their input.
    Comment: A couple of commenters urged CMS to consider a higher 
reimbursement rate than what was proposed, stating that neuro-navigated 
TMS costs significantly more in the outpatient setting, than that of 
the SAINT Neuromodulation System's $19,500 inpatient technology cost. 
Commenters suggested that patients could resort to hospitalization to 
save on procedure costs, as a result. The commenters advocated for an 
increased rate of payment.
    Response: It is unclear what the commenters are referring to by 
advocating for an increased rate of payment. The cost of the technology 
of $19,500 is based on information directly from the manufacturer. 
While the commenter may have concerns with regard to reimbursement in 
the outpatient setting, we believe the information for the cost per 
case of the SAINT Neuromodulation System in this final rule for the 
inpatient setting is accurate for the purposes of new technology add-on 
payments. We also rely on clinicians to determine whether to treat a 
patient in the inpatient or outpatient setting.
    Comment: The applicant submitted a public comment in support of our 
proposal to approve new technology add-on payments for FY 2024 for the 
SAINT Neuromodulation System. The applicant reiterated that the SAINT 
Neuromodulation System meets the cost criterion, and reaffirmed the 
selection of codes and the MS-DRG used in the cost analysis, as 
discussed in the proposed rule. The applicant confirmed the proposed 
cost of the SAINT Neuromodulation System to the hospital of $19,500.00 
per patient, including personalized target identification using the 
SAINT software, neuro-navigation, and treatment for 50 sessions over 5 
days. The applicant also stated that they will commercially launch the 
SAINT Neuromodulation System, which is the subject of the Breakthrough 
Device designation (BDD) and is currently cleared by the FDA (510k 
number K220177, obtained September 1, 2022), on April 15, 2024. The 
applicant explained that the interval between the 510(k) clearance and 
the April 2024 launch date represents the time necessary to manufacture 
an adequate supply of SAINT Neuromodulation Systems and prepare for 
commercial launch. The applicant also stated that the company is also 
continuing to develop future versions of the technology but intends 
that any future modifications to the hardware system will be 
substantially equivalent to the hardware components in the current 
system, and that no changes to the BDD SAINT treatment are 
contemplated.
    Response: We thank the applicant for this information and support 
to approve new technology add-on payments for the SAINT Neuromodulation 
System. As we have discussed in prior rulemaking (86 FR 45132; 77 FR 
53348), generally, our policy is to begin the newness period on the 
date of FDA approval or clearance or, if later, the date of 
availability of the product on the U.S. market. The applicant states 
that the SAINT Neuromodulation System will be commercially available on 
April 15, 2024, but it is unclear whether the technology would be 
available for sale, prior to that date. At this time, we cannot 
determine a definitive, future newness date based on a documented delay 
in the technology's availability on the U.S. market. Absent additional 
information, we therefore consider the newness date for this technology 
to be September 1, 2022. We welcome updates from the applicant once the 
technology becomes commercially available for future rulemaking.
    Comment: A comment was submitted on behalf of the applicant, Magnus 
Medical, stating that if the manufacturer makes changes to the SAINT 
Hardware System to integrate certain components but retains the same 
indication for use and intended patient population, the new version 
will continue to be recognized under the SAINT Neuromodulation System's 
existing Breakthrough Device designation (BDD). The commenter further 
requested general confirmation that new technology add-on payment 
eligibility for devices qualified under the alternative pathway for 
transformative new devices will continue to apply to a future iteration 
of the device as long as: (1) FDA determines the device versions to be 
substantially equivalent via the 510(k) review and clearance process; 
and (2) the new version continues to meet the requirements of the new 
technology add-on payment program (for example, the indication for the 
new 510(k) is the indication covered by the Breakthrough Device 
designation).
    Response: We thank the commenter for its comment. As discussed 
previously, eligible devices under the alternative pathway for 
Breakthrough Devices are devices that are designated and market 
authorized by FDA as a Breakthrough Device for the indication covered 
by the Breakthrough Device designation. We understand that Magnus has 
outreached FDA on whether a subsequent cleared version of a device 
would still be considered a Breakthrough Device. We appreciate updates 
as they become available.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the SAINT Neuromodulation System meets 
the cost criterion. The technology was granted FDA marketing 
authorization on September 1, 2022, as a Breakthrough Device for the 
treatment of MDD in adult patients who have failed to receive 
satisfactory improvement from prior antidepressant medication in the 
current episode. Therefore, we are finalizing our proposal to approve 
new technology add-on payments for the SAINT Neuromodulation System for 
FY 2024. Absent additional information from the applicant, we consider 
the beginning of the newness period to commence on September 1, 2022, 
the date of FDA marketing authorization for the indication covered by 
its Breakthrough Device designation.
    Based on the information available at the time of this final rule, 
the cost per case of the SAINT Neuromodulation System is $19,500.00. 
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 finalizing that the maximum new technology add-on 
payment for a case involving the use of the SAINT Neuromodulation 
System is $12,675.00 for FY 2024 (that is, 65 percent of the average 
cost of the technology). Cases involving the use of the SAINT 
Neuromodulation System that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure code X0Z0X18 
(Computer-assisted transcranial magnetic stimulation of prefrontal 
cortex, new technology group 8).

[[Page 58940]]

(9) TOPS\TM\ System
    Premia Spine, Inc. submitted an application for new technology add-
on payments for the TOPS\TM\ 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 TOPS\TM\ 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 TOPS\TM\ 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 TOPS\TM\ 
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 TOPS\TM\ 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 was 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 noted in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 26950) that the proposed premarket 
approval indication did not include limitation to neurogenic 
claudication as noted in the Breakthrough Device designation. We noted 
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 subsequently 
received premarket approval from FDA on June 15, 2023, for patients 
between 35 and 80 years of age with symptomatic degenerative 
spondylolisthesis up to Grade I, with moderate to severe lumbar spinal 
stenosis and either the thickening of the ligamentum flavum and/or 
scarring of the facet joint capsule at one level from L3 to L5.
    The applicant stated that effective October 1, 2021, the following 
ICD-10-PCS procedure code 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). 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 noted 
that ICD-10-CM code M48.061 was 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 the 
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.

[[Page 58941]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.219

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26951), we agreed 
with the applicant that the TOPSTM System meets the cost 
criterion and therefore proposed 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 
the 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 noted that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 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 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 invited 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.
    We did not receive any comments any public comments related to the 
TOPSTM System. Based on the information provided in the 
application for new technology add-on payments, we believe the 
TOPSTM System meets the cost criterion. The technology 
received FDA premarket approval on June 15, 2023 as a Breakthrough 
Device, with an indication for patients between 35 and 80 years of age 
with symptomatic degenerative spondylolisthesis up to Grade I, with 
moderate to severe lumbar spinal stenosis and either the thickening of 
the ligamentum flavum and/or scarring of the facet joint capsule at one 
level from L3 to L5, which is covered by its Breakthrough Device 
designation. Therefore, we are finalizing our proposal to approve new 
technology add-on payments for the TOPS\TM\ System for FY 2024. We 
consider the beginning of the newness period to commence on June 15, 
2023, the date on which technology received FDA marketing authorization 
for the indication covered by its Breakthrough Device designation. We 
note that, under the eligibility criteria for approval under the 
alternative pathway for certain transformative new devices, only the 
use of TOPSTM for patients suffering from neurogenic 
claudication resulting from degenerative spondylolisthesis, and the FDA 
Breakthrough Device designation it received for that use, are relevant 
for purposes of the new technology add-on payment application for FY 
2024. Since the Breakthrough Device designation is limited to patients 
with neurogenic claudication specifically, as opposed to the PMA 
indication for patients with symptomatic disease, only use of the 
technology for patients with neurogenic claudication is relevant for 
new technology add-on payment purposes.
    Based on the information available at the time of this final rule, 
the cost per case of the TOPSTM System is $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. As a result, we 
are finalizing that the maximum new technology add-on payment for a 
case involving the use of the TOPSTM System is $11,375 for 
FY 2024 (that is, 65 percent of the average cost of the technology). 
Cases involving the use of the TOPSTM System that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS code XRHB018 (Insertion of posterior spinal motion preservation 
device into lumbar

[[Page 58942]]

vertebral joint, open approach, new technology group 8) in combination 
with ICD-10-CM code M48.062 (Spinal stenosis, lumbar region, with 
neurogenic claudication).
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 technology add-on payments 
for FY 2023, subject to DefenCathTM receiving FDA marketing 
authorization before July 1, 2023 (87 FR 48978 through 48982). In the 
proposed rule, we explained that 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. We stated that if the 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. We noted 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 further noted 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. We note that DefencathTM 
did not receive FDA marketing authorization by July 1, 2023, and 
therefore no add-on payments will be made for this technology for FY 
2023, and we are instead making a determination regarding this 
application 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 was 
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 code 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 the 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 the 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 the 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 58943]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.220

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26957), we agreed 
with the applicant that taurolidine/heparin meets the cost criterion 
based on the analysis presented. We also welcomed additional 
information on using additional codes and/or criteria to better target 
cases of taurolidine/heparin for the cost criterion.
    We stated that 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 proposed 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 proposed 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 
the proposed rule, the applicant stated the Wholesale Acquisition Cost 
of taurolidine/heparin is $1,170 per three milliliter vial taurolidine/
heparin. The applicant noted 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 would 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 anticipated the 
cost of taurolidine/heparin to the hospital per patient to be $22,815. 
We stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26957) that 
we were 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 noted that the cost information for this 
technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments 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 proposed 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 invited 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.
    Comment: A commenter submitted a comment in support of the 
implementation of add-on payments for taurolidine/heparin for the 
treatment of CRBSI from in-dwelling catheters in ESRD patients 
undergoing HD through a CVC as well CMS's proposal for conditional 
approval.
    Response: We thank the commenter for its support.

[[Page 58944]]

    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comment we received, we believe taurolidine/heparin meets the cost 
criterion. Therefore, we are granting conditional approval for 
taurolidine/heparin for new technology add-on payments for FY 2024, 
subject to the technology receiving FDA marketing authorization by July 
1, 2024 (that is, by July 1 of the fiscal year for which the applicant 
applied for new technology add-on payments (2024)). In the proposed 
rule we stated that as an application submitted under the alternative 
pathway for certain antimicrobial products at Sec.  412.87(d), 
taurolidine/heparin 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) (88 FR 26956 
to 26957). 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.
    Based on the information available at the time of this final rule, 
the cost per case of taurolidine/heparin is $22,815. Under Sec.  
412.88(a)(2), we limit new technology add-on payments 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 
finalizing that the maximum new technology add-on payment for a case 
involving the use of taurolidine/heparin is $17,111.25 for FY 2024 
(that is, 75 percent of the average cost of the technology). Cases 
involving the use of taurolidine/heparin that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
code XY0YX28 (Extracorporeal introduction of taurolidine anti-infective 
and heparin anticoagulant, new technology group 8).
(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. The applicant stated that 
REZZAYOTM would not be commercially available until July 
2023, but we note that a rationale for the delay in market availability 
was not provided. Due to the timing of receipt of FDA approval, we 
stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26958) that we 
were interested in additional information on whether the technology is 
considered a QIDP under this NDA.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for REZZAYOTM beginning in FY 2024 and 
was granted approval for the following procedure codes effective 
October 1, 2023: XW033R9 (Introduction of rezafungin into peripheral 
vein, percutaneous approach, new technology group 9) and XW043R9 
(Introduction of rezafungin into central vein, percutaneous approach, 
new technology group 9).
    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.

[[Page 58945]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.221

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26958), we agreed 
with the applicant that REZZAYOTM meets the cost criterion 
and therefore proposed 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.
    The applicant had not provided an estimate for the cost of 
REZZAYOTM at the time of the 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 estimated 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 stated that we expected the applicant to submit cost information 
prior to the final rule, and we would 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 invited 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.
    Comment: The applicant submitted a public comment urging CMS to 
finalize its proposal to approve REZZAYOTM for new 
technology add-on payments and reiterating that REZZAYOTM 
meets the criteria for approval. The applicant also stated that the 
wholesale acquisition cost of REZZAYOTM will be $1,950 per 
200 mg vial. Per the applicant, as discussed in the proposed rule, the 
estimated average dose during an inpatient stay is 600mg and therefore 
the average cost of the technology would be $5,850 per inpatient stay. 
The applicant recommended a maximum add-on payment of $4,387.50 or 75 
percent of the average cost of REZZAYOTM of $5,850.
    Response: We thank the applicant for its support and the additional 
information.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comment we received, we believe REZZAYOTM meets the cost 
criterion. The technology was granted FDA marketing authorization on 
March 22, 2023, with an indication 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, which is covered by its QIDP 
designation. Therefore, we are finalizing our proposal to approve new 
technology add-on payments for REZZAYOTM for FY 2024. The 
applicant has stated that the technology is not yet available for sale 
but has not provided information regarding a documented delay in market 
availability. Absent additional information, we therefore consider the 
newness period to commence on the date of marketing authorization, 
March 22, 2023.
    Based on the information available at the time of this final rule, 
the cost per case of REZZAYOTM is $5,850. Under Sec.  
412.88(a)(2), we limit new technology add-on payments 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 
finalizing that

[[Page 58946]]

the maximum new technology add-on payment for a case involving the use 
of REZZAYOTM is $4,387.50 for FY 2024 (that is, 75 percent 
of the average cost of the technology). Cases involving the use of 
REZZAYOTM that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure codes: XW033R9 
(Introduction of rezafungin into peripheral vein, percutaneous 
approach, new technology group 9) or XW043R9 (Introduction of 
rezafungin into central vein, percutaneous approach, new technology 
group 9).
(3) XACDURO[supreg] (Sulbactam/Durlobactam)
    Entasis Therapeutics, Inc. submitted an application for new 
technology add-on payments for XACDURO[supreg] (sulbactam/durlobactam, 
referred to as ``SUL-DUR'' in the proposed rule) for FY 2024. According 
to the applicant, XACDURO[supreg] 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 XACDURO[supreg], 
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, XACDURO[supreg] received QIDP 
designation for the treatment of HABP/VABP and bloodstream infections 
due to Acinetobacter baumannii. The applicant stated that it was 
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. In the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 26959), we noted that, under the eligibility criteria for approval 
under the alternative pathway for certain antimicrobial products, only 
the use of XACDURO[supreg] for the treatment of HABP/VABP and 
bloodstream infections due to Acinetobacter baumannii, and the FDA QIDP 
designation it received for that use, were relevant for purposes of the 
new technology add-on payment application for FY 2024. We also noted 
that, as an application submitted under the alternative pathway for 
certain antimicrobial products at Sec.  412.87(d), XACDURO[supreg] was 
eligible for conditional approval for new technology add-on payments if 
it did 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). The applicant stated that XACDURO[supreg] received 
FDA approval on May 23, 2023, with an indication for use in patients 18 
years of age and older for the treatment of HABP/VABP, caused by 
susceptible isolates of Acinetobacter baumanni-calcoaceticus complex. 
Since the indication for which the technology received FDA approval is 
included within the scope of the QIDP designation, it appears that the 
proposed FDA indication is appropriate for new technology add-on 
payment under the alternative pathway criteria.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for XACDURO[supreg] beginning in FY 2024 and was 
granted approval for the following procedure codes effective October 1, 
2023: XW033K9 (Introduction of sulbactam-durlobactam into peripheral 
vein, percutaneous approach, new technology group 9) and XW043K9 
(Introduction of sulbactam-durlobactam into central vein, percutaneous 
approach, new technology group 9). The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for XACDURO[supreg] 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 noted 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 believed the relevant ICD-10-CM 
codes to identify the QIDP-designated indications were: 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. We note that since the approved NDA indication is limited to 
HABP and VABP due to Acinetobacter baumannii and does not include 
bloodstream infections, we believe ICD-10-CM code A41.59 is no longer 
is relevant to describe the indication relevant for new technology add-
on payment purposes.
    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 XACDURO[supreg]. 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, XACDURO[supreg] was 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, XACDURO[supreg] 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.--XACDURO[supreg] Codes--FY 2024 
associated with the 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

[[Page 58947]]

case exceeded the average case-weighted threshold amount in both 
analyses, the applicant asserted that XACDURO[supreg] meets the cost 
criterion.
[GRAPHIC] [TIFF OMITTED] TR28AU23.222

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26960), we agreed 
with the applicant that XACDURO[supreg] meets the cost criterion and 
therefore proposed to approve XACDURO[supreg] 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. We stated that as an 
application submitted under the alternative pathway for certain 
antimicrobial products at Sec.  412.87(d), XACDURO[supreg] was eligible 
for conditional approval for new technology add-on payments if it did 
not receive FDA marketing authorization by the July 1 deadline 
specified in Sec.  412.87(e)(2), provided that the technology received 
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 XACDURO[supreg] received 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 was received 
on or after July 1, 2024, no new technology add-on payments would be 
made for cases involving the use of XACDURO[supreg] 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 
XACDURO[supreg] was $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 stated in the FY 
2024 IPPS/LTCH PPS proposed rule (88 FR 26960) that we were 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 noted that the cost information for this technology may 
be updated in the final rule based on revised or additional information 
CMS received 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 
proposed that the maximum new technology add-on payment for a case 
involving the use of XACDURO[supreg] 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 invited public comments on whether XACDURO[supreg] meets the 
cost criterion and our proposal to approve new technology add-on 
payments for XACDURO[supreg] 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.
    Comment: The applicant submitted a public comment in support of its 
application and responding to questions raised by CMS in the proposed 
rule

[[Page 58948]]

regarding the cost information. In its comment letter, the applicant 
stated that XACDURO[supreg] for injection is supplied as a kit 
containing 3 single-dose vials. Per the applicant, one vial contains 
sulbactam 1g and 2 vials each contains durlobactam 0.5g. The applicant 
stated that the expected dosing schedule for XACDURO varies, but most 
patients will receive one infusion every 6 hours, for a total of 4 kits 
per 24-hour period. The applicant provided the following table showing 
the dosage of XACDURO[supreg] based on renal function.
[GRAPHIC] [TIFF OMITTED] TR28AU23.223

BILLING CODE 4120-01-C
    The applicant stated that the recommended duration of treatment is 
7 to 14 days and should be guided by the severity and site of infection 
and the patient's clinical and bacteriological progress.
    Per the applicant, the claims data analysis would not allow for 
identifying XACDURO[supreg] dosing based on creatinine clearance 
utilizing ICD-10-CM, HCPCS Level I (CPT) and HCPCS Level II codes. 
Therefore, the applicant was unable to determine any XACDURO[supreg] 
dosing adjustments of different time intervals based on the coding in 
claims data.
    In response to CMS questions regarding cost and duration of 
treatment, the applicant submitted a change to the proposed average of 
days of treatment from 10 days to 9.6 days. The applicant calculated a 
weighted average duration of treatment (in days) across the treatment 
arms in the trial. In Part A of the study, there were 91 patients with 
an average of 9.3 days of treatment duration. In part B, there were 28 
patients with an average treatment duration of 10.6 days. The weighted 
average days of treatment across both groups is 9.6 days. Based on an 
average estimated length of stay of 9.6 days, the applicant submitted a 
change to the expected cost for treatment per stay to be $18,240.
    Based on the revised expected cost of treatment per stay, the 
applicant provided an updated analysis for the second analysis which 
matches the final approved indication and cost. The revised final 
inflated average case-weighted standardized charge per case was 
$219,780, which exceeded the average case-weighted threshold amount of 
$85,665. The applicant asserted that XACDURO[supreg] still met the cost 
criterion threshold.
    Response: We thank the applicant for it comments and the additional 
information.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comment we received, we believe XACDURO[supreg] meets the cost 
criterion. The technology was granted FDA marketing authorization on 
May 23, 2023, for the treatment of hospital-acquired bacterial 
pneumonia (HABP) and ventilator-associated bacterial pneumonia (VABP) 
caused by susceptible strains of bacteria called Acinetobacter 
baumannii-calcoaceticus complex, for patients 18 years of age and 
older, which is covered by its QIDP designation. Therefore, we are 
finalizing our proposal to approve new technology add-on payments for 
XACDURO[supreg] for FY 2024. We consider the beginning of the newness 
period to commence on May 23, 2023, the date on which the technology 
received FDA market authorization for the indication covered by its 
QIDP designation.
    Based on the information available at the time of this final rule, 
the average cost per case of XACDURO[supreg] is $18,240. Under Sec.  
412.88(a)(2), we limit new technology add-on payments 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 
finalizing that the maximum new technology add-on payment for a case 
involving the use of XACDURO[supreg] is $13,680 for FY 2024 (that is, 
75 percent of the average cost of the technology). Cases involving the 
use of XACDURO[supreg] that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure codes XW033K9 
(Introduction of sulbactam-durlobactam into peripheral vein, 
percutaneous approach, new technology group 9) or XW043K9 (Introduction 
of sulbactam-durlobactam into central vein, percutaneous approach, new 
technology group 9) in combination with one of the following ICD-10-CM 
codes: Y95 and J15.6 (describing HABP due to Acinetobacter baumannii); 
or J95.851 and B96.89 (describing VABP due to Acinetobacter baumannii)
8. Other Comments
    We received several public comments requesting changes to the new 
technology add-on payment policies, such as increasing the add-on 
payment amount to 85 percent or more, creating new alternative pathway 
categories for different FDA designations or types of treatments, and 
expanding the conditional approval process to additional types of 
technologies or designations, that were outside the scope of the 
proposals included in the FY 2024 IPPS/LTCH PPS proposed rule and we 
are therefore not addressing them in this final rule. We appreciate 
these comments and may consider them for possible proposals in future 
rulemaking.
    9. Modification of New Technology Add-On Payment Application 
Eligibility Requirements Related to FDA Application Status and Moving 
the Deadline for FDA Marketing Authorization 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 final rule, applicants for 
new technology add-on payments for new medical

[[Page 58949]]

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 marketing 
authorization status and the status of any relevant designations 
required for new technology add-on payment eligibility.
    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 
finalizing as proposed modifications to both the new technology add-on 
payment application eligibility requirements and the date by which 
applicants must receive FDA marketing authorization in order to be 
eligible for consideration. Specifically, we are finalizing our 
proposed policies 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 marketing 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 will 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 marketing authorization request to FDA at the time of 
submission of the new technology add-on payment application will 
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 will 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.
    Therefore, we proposed 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 marketing authorization request before submitting an 
application for new technology add-on payments. We proposed that, for 
the purposes of this policy, submission of a request for marketing 
authorization by 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 marketing authorization request at the time of submission of its 
new technology add-

[[Page 58950]]

on payment application to CMS. We stated our belief that requiring an 
FDA acceptance or filing letter will provide the clearest and most 
effective means of documenting that the applicant has submitted a 
complete request to FDA and therefore proposed to require this approach 
to documentation. We proposed that the applicant would also indicate on 
the new technology add-on payment application whether the FDA request 
has an active status with FDA. We noted that applicants for 
technologies that have already received FDA marketing 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 proposed 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 alone.
    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 marketing 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 indications and the clinical data that often only becomes 
available after receiving, and may only be available in, FDA marketing 
authorization will 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 proposed requiring applicants to 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 said we 
believed that 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 proposed 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, we will 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 will 
also neither summarize nor respond to public comments received 
regarding these withdrawn or ineligible applications in the final rule.
    We noted that we were 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) (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 
proposed to amend the redesignated Sec.  412.87(f)(3) to revise the 
current cross-reference to Sec.  412.87(e)(2) in light of the 
previously discussed amendments being proposed.
    We sought public comment on our proposal 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 marketing 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.
    Comment: We received several public comments regarding the stated 
policy goals behind our proposal of promoting transparency, 
facilitating public input, and improving the review process. As part of 
improving the new technology add-on payment review process, we stated 
that as new technologies continue to be developed, we expect both the 
complexity and the number of applications to increase, further 
increasing the need for additional information earlier in the new 
technology add-on payment review

[[Page 58951]]

process in order to fully evaluate the applications. As discussed 
further in this section, many commenters stated that they understood 
our policy goals but provided alternatives as to how to achieve those 
goals or asked for a delay in implementation. We discuss the specific 
comments concerning alternatives to our proposal and asking for a delay 
in implementation later in this section.
    Other commenters stated that it is unclear how the proposal would 
improve transparency, facilitate public input, and improve the review 
process, or disagreed that it would do so. One commenter specifically 
stated that it did not understand how our proposal would further 
facilitate and inform public comment, as the proposed rule is released 
in April and the information from the full FDA approval would not be 
available in the proposed rule at that time. A number of commenters 
asserted that the intent of these policies is to reduce the number of 
applications or decrease CMS's workload, and some of these commenters 
expressed the view that the proposal is unlikely to address the 
increasing volume and complexity of applications or reduce CMS's review 
time. Commenters also stated that they did not believe the volume of 
applications would decline because they believe that applicants will 
likely continue to pursue a new technology add-on payment application 
as a ``just in case'' strategy, or to solicit information on what 
concerns CMS may have with a future application, even if they are 
unlikely to receive FDA approval until well after the proposed May 1 
deadline. One commenter noted that even those with Priority Review 
status \185\ may not receive FDA approval until after May 1, and that 
technologies subject to the standard review timeline may not receive 
approval until late fall.
---------------------------------------------------------------------------

    \185\ A priority review designation means FDA's goal is to take 
action on the marketing application within 6 months of receipt 
(compared with 10 months under standard review). https://www.fda.gov/regulatory-information/search-fda-guidance-documents/expedited-programs-serious-conditions-drugs-and-biologics.
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    A few of the commenters noted that applicants who do not receive 
new technology add-on payment approval due to missing the marketing 
authorization deadline would likely apply again during the following 
application cycle and CMS would have to repeat this process the 
following year, resulting in a greater burden on both manufacturers and 
CMS. A few of these commenters also disagreed that our proposal would 
improve transparency nor materially impact the volume or complexity of 
applications, specifically for technologies with Breakthrough Device 
designations for which the new technology add-on payment applications 
only contain limited information as compared to traditional pathway 
applications that contain newness and SCI information.
    One commenter stated that complete new technology add-on payment 
applications should provide CMS with sufficient information to assess 
the medical technology in question regardless of whether the FDA 
application has been formally submitted, and another commenter stated 
that CMS currently has the discretion not to approve applications that 
are missing data, regardless of the status of the FDA marketing 
authorization application.
    Response: We thank commenters for their comments. While a number of 
commenters noted their belief that the intent of these policies is to 
reduce the number of applications or decrease CMS's workload, the 
intent of our proposal is instead to address the ever-increasing 
complexity and number of applications lacking critical information that 
is needed to evaluate whether the technology meets the eligibility 
criteria at Sec.  412.87(b), (c), or (d), by enhancing transparency and 
improving the evaluation process, as described in the proposed rule. 
Specifically, applications for technologies that have not yet received 
FDA marketing authorization often have incomplete information about the 
indication, lack cost information, and provide limited clinical 
information and supporting data (where applicable), all of which are 
necessary for a thorough analysis of new technology add-on payment 
criteria. Thus, the application summaries and lists of relevant CMS 
concerns in the proposed rule may be limited and the public may not 
have all of the necessary information on the new technology being 
considered for new technology add-on payment. Public commenters in 
previous final rules have noted that they cannot meaningfully comment 
on a product that has not yet been FDA approved because multiple 
sections of the new technology add-on payment applications are informed 
by the marketing authorization approval process. Public input on the 
new technology add-on payments is highly valued and an important 
consideration in our assessment of whether a new technology add-on 
payment application meets the eligibility criteria. This is especially 
important given that new technologies are becoming more complex and 
specialized and the volume of applications for new technology add-on 
payments is increasing.
    Therefore, we believe more comprehensive applications at the time 
of submission will allow CMS to better identify critical questions in 
the proposed rule and will enable more comprehensive evaluation by 
commenters during the public comment process. In summary, the goal of 
the proposal is to increase the quality of the information contained in 
the application to allow the public and the agency to more 
knowledgeably review and analyze the applications, supporting data, and 
evidence to inform an assessment of a technology's eligibility for the 
new technology add-on payment.
    Although a commenter stated that complete new technology add-on 
payment applications should provide CMS with sufficient information to 
assess the medical technology in question regardless of whether an 
application has been formally submitted to FDA, as noted previously, 
applications for technologies that have not yet received FDA marketing 
authorization often have incomplete information about the indication, 
lack cost information, and provide limited clinical information and 
supporting data (where applicable). In addition, in regard to the 
commenter that stated CMS has the discretion not to approve 
applications that are missing data, this does not address our intent to 
increase the quality of the information contained in the application, 
as previously described.
    CMS recognizes that some applicants who submit new technology add-
on payment applications prior to submitting applications for FDA 
marketing authorization may be doing so strategically to identify 
information regarding concerns CMS may have with new technology that is 
the subject of the new technology add-on payment application as early 
as possible, as described by a commenter. While we acknowledge that it 
could be advantageous for an applicant to learn of CMS's concerns 
regarding eligibility of its product for new technology add-on 
payments, we do not believe it is an appropriate use of resources to 
evaluate applications for technologies that will not be eligible in 
time for that particular rulemaking cycle. In addition, over the last 4 
years, 50 to 75 percent of applications (depending on the fiscal year) 
did not meet the July 1 deadline for obtaining FDA marketing 
authorization. We believe that this proposal will serve to mitigate 
these practices to some extent, though this is

[[Page 58952]]

not the goal behind the proposal, as described previously.
    Regarding the comments that stated that applicants who miss the 
marketing authorization deadline would likely apply again during the 
following application cycle, resulting in a greater burden on both 
manufacturers and CMS, we note that this would not be a change from our 
current policy. As noted previously, even with a July 1 deadline, 50-75 
percent of applications do not meet the deadline and many reapply the 
following year. As described later in this section, we believe 
requiring technologies to have submitted FDA marketing authorization 
requests prior to submitting applications for new technology add-on 
payments would mitigate this issue, as we believe applications for 
which a ``complete and active'' FDA application has been accepted or 
filed have a greater chance of meeting the deadline for FDA marketing 
authorization for new technology add-on payment eligibility purposes.
    Additionally, with regard to commenters' assertion that our 
proposal would not improve transparency and materially impact the 
volume or complexity of Breakthrough Device applications, we believe 
that requiring a FDA marketing authorization request to have been 
submitted and in an active status at the time of application for 
technologies with Breakthrough Device designations will lead to 
applicants submitting information in their new technology add-on 
payments applications that address the criteria needed to determine 
eligibility, such as the marketing authorization indication and other 
information that would help inform understanding of the details and 
interrelationship between the intended indication and FDA Breakthrough 
Device designation, which is the basis for a product's eligibility for 
the alternative pathway, and whether the device that is the subject of 
the application is the same device designated as a Breakthrough Device. 
We note, as we have gained more experience with applications for 
technologies with Breakthrough Device designations, these applications 
are increasingly complex and involve many considerations and nuances 
across multiple aspects of the application, not just the cost 
criterion. This requirement will enhance the quality of information CMS 
receives at the time of application for all application pathways, 
making more information available to the public and providing CMS with 
more robust information to evaluate the application.
    Although a commenter mentioned that the proposed rule is released 
in April and therefore, information from the full FDA approval would 
not be available in the proposed rule, we note that a May 1 deadline 
allows for information necessary to determine whether a technology 
meets the requirements for new technology add-on payment eligibility, 
such as the full FDA marketing authorization indication and information 
for which release is dependent on that approval, to be publicly 
available during the comment period in time for consideration by the 
public and the agency, since this deadline would generally occur 
approximately 30 days before the public comment period closes. A 
technology's FDA marketing authorization may differ from the proposed 
indication, which may require additional consideration when 
contemplating new technology add-on payment eligibility; for example, 
with respect to how the final marketing authorization indication 
compares to an alternative pathway designation, or what would be the 
appropriate comparators for newness and substantial clinical 
improvement for traditional pathway applications. Access to this 
information will enhance the quality of the review process and improve 
transparency for the public prior to the final rule.
    Comment: One commenter was fully supportive of our proposal and 
agreed that increasing transparency is critical for the new technology 
add-on payment process. The commenter stated applications that lack 
information at the time of submission make it difficult for CMS and the 
public to assess whether the technology meets the new technology add-on 
payment criteria. The commenter believed that the vast majority of 
applicants, if not virtually all, who apply for new technology add-on 
payments before they are ready to submit an application for marketing 
authorization to FDA, do not end up receiving FDA approval in time for 
the new technology add-on payment determination, which leads to a 
tremendous use of resources to review technologies and put them through 
the proposed rule and comment period, just to have the applications be 
withdrawn from new technology add-on payment consideration at the last 
minute. The commenter further asserted that due to the increased volume 
and complexity of applications over the years, these issues may have 
been compounded. The commenter noted that spreading limited resources 
over a large number of applications with an extremely short deadline to 
review the applications could result in a less than thorough review 
process.
    Response: We thank the commenter who was supportive of the proposal 
and agree that the policy will increase our stated goals of 
transparency, facilitating public input, and improving the review 
process.
    Comment: Many commenters who opposed our proposal stated that one 
or both aspects of the proposal would create a barrier to beneficiary 
and provider access to innovative technologies. A few commenters 
recommended that CMS analyze the proposal's impact on beneficiary 
access. Some of the commenters explained that the proposal would impact 
the timeliness of reimbursement for the new technology. One commenter 
stated that new technology add-on payments are often not in place until 
more than a year after a product receives marketing authorization from 
FDA and that the proposal would further delay that payment. Another 
commenter encouraged CMS to maintain the existing timelines as reducing 
the duration of the new technology add-on payment could reduce patient 
access to therapies like CAR T-cell therapy. One commenter raised 
concerns about the proposal having a negative effect on applicants that 
rely on new technology add-on payments to sustain a viable market entry 
point.
    Several commenters noted that the proposal would worsen the lag 
time between FDA marketing authorization and new technology add-on 
payments and create disruptions, and thus delay beneficiary access to 
new technologies, which would be the opposite of the intent of the new 
technology add-on payment process. A few commenters stated that this 
proposal would negatively affect therapies intended to treat serious 
conditions and address unmet needs, and one commenter raised several 
concerns about timing for new technology add-on payment approvals for, 
and patient access to, certain types of newly approved FDA therapies, 
such as cell and gene therapies and therapies treating orphan 
conditions and rare diseases. One commenter stated that there is risk 
that the policies would have a disproportionately negative effect on 
drugs that utilize the FDA ``rolling review'' process,\186\ delaying 
patient access to these drugs.
---------------------------------------------------------------------------

    \186\ Rolling Review means that a drug company can submit 
completed sections of its Biologic License Application (BLA) or New 
Drug Application (NDA) for review by FDA, rather than waiting until 
every section of the NDA is completed before the entire application 
can be reviewed. BLA or NDA review usually does not begin until the 
drug company has submitted the entire application to the FDA https://www.fda.gov/patients/fast-track-breakthrough-therapy-accelerated-approval-priority-review/fast-track.

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[[Page 58953]]

    Response: We thank the commenters for sharing their concerns. CMS 
shares the goal of ensuring Medicare beneficiaries and their providers 
have access to new technologies. However, as described in the FY 2005 
final rule (69 FR 49003 and 49009), patient access to these 
technologies should not be adversely affected if a technology does not 
qualify to receive new technology add-on payments, as CMS continues to 
pay for new technologies through the regular payment mechanism 
established by the MS-DRG methodology. We further note that whether a 
technology receives new technology add-on payments or not does not 
affect coverage of the technology or the ability for hospitals to 
provide a technology to patients where appropriate.
    Comment: Many commenters raised concerns that our proposals to 
require a complete and active FDA marketing authorization request at 
the time of submission of the new technology add-on payment application 
and to move the FDA approval deadline from July 1 to May 1 for 
technologies to receive FDA marketing authorization would adversely 
impact their ability to enjoy maximum flexibility with respect to when 
to apply to FDA and when they apply for new technology add-on payment.
    One commenter stated that the proposal could discourage applicants 
from applying for a new technology add-on payment. Another commenter 
noted a manufacturer could be working closely and actively with FDA 
through the FDA's voluntary pre-submission process, which is intended 
to improve the quality of subsequent submissions, shorten total review 
times, and facilitate the development process for new devices. The 
commenter explained that the proposal would discourage industry 
collaboration with FDA in its voluntary pre-submission process since 
the policy could potentially delay eligibility for a new technology 
add-on payment by a full year. A commenter stated that CMS should 
consider a flexible approach for submitting additional documentation on 
a rolling basis that corresponds with the type of technology's FDA 
review process to account for the variation in FDA review processes 
across new technologies and avoid creating new burdens on FDA.
    One commenter noted that manufacturers' timelines are driven 
primarily by trial enrollment so they may not be able to submit a BLA 
prior to the new technology add-on payment application submission or 
get approved by the May 1 deadline. A few commenters asserted that the 
proposal would jeopardize the ability of manufacturers to submit 
applications within the window of time necessary to be eligible to 
receive new technology add-on payments, leading to fewer products being 
eligible for approval each year.
    A few commenters noted how the proposal does not reflect the 
variations in FDA processes and timelines for different types of new 
technologies, whereas the new technology add-on payment designation is 
the same and only occurs once a year. Additionally, commenters noted 
that the FDA provides estimates of timeline, but it does not provide 
applicants with definitive timelines of when the product will be 
approved or provide feedback on what is needed. A few commenters raised 
concerns about how the FDA submission process can be impacted by 
several factors, including timing of interactions with the FDA and 
manufacturing readiness. One commenter noted that there are examples of 
technologies receiving FDA clearance after submitting their new 
technology add-on payment application and meeting the new-technology 
add-on payment criteria, and that as long as new technology add-on 
payments can only be awarded annually, applicants should be able to 
apply for new technology add-on payments as long as there is potential 
for FDA clearance prior to the July 1 deadline.
    Response: We understand the commenters' concerns with regard to the 
impact of having maximum flexibility with respect to when they apply 
for FDA marketing authorization and when they apply for new technology 
add-on payments. We believe the new technology add-on payment 
application timeline with the same deadline for submission of a request 
for FDA marketing authorization is appropriate regardless of how long 
it takes for a technology to receive FDA approval. To date, we have not 
specified how complete an application for new technology add-on 
payments must be at the time of its submission, and used a late 
deadline of July 1 for the requirement for FDA approval, in order to 
maximize flexibility for applicants. But as noted earlier, currently, 
many applicants submit new technology add-on payment applications prior 
to submitting a request to FDA for marketing authorization, and 
applicants have stated that information missing from their 
applications, which is needed to evaluate the eligibility of the 
technology for the add-on payment, will not become available until 
after submission to FDA. Our policy will further increase transparency 
and improve the evaluation process, including enabling CMS to identify 
critical questions regarding the technology's eligibility for add-on 
payments in the proposed rule. It will also reduce the number of 
applications that CMS receives that contain limited information.
    We further note that even under the current policy with the 
flexibilities mentioned by the commenters, most applicants do not 
receive FDA marketing authorization by the July 1 deadline. As noted 
previously, over the last 4 years, more than 50 percent of applications 
each year did not receive FDA marketing authorization by the July 1 
deadline and were therefore ineligible for new technology add-on 
payments for the fiscal year for which they applied. As the commenters 
noted, there are many factors (including timing of interactions with 
FDA and manufacturing readiness) that can impact a technology's 
approval or clearance by FDA, despite expected FDA timelines based on 
review time or submission planning. This is true regardless of whether 
the deadline for FDA approval is May 1 or July 1.
    We note that this policy does not eliminate flexibilities built 
into the new technology add-on payment process, as FDA marketing 
authorization is not required at the time of application, and 
applicants can continue to provide information as it becomes available 
according to our standard processes (such as the December supplemental 
deadline and the public comment period). We believe in providing 
maximum flexibility to applicants where feasible, but due to the 
increasing complexity and volume of applications lacking critical 
information that is needed to evaluate whether the technology meets the 
eligibility criteria at Sec.  412.87(b), (c), or (d), as we have noted 
previously, we will require information related to FDA submission at 
the time of application beginning with applications for FY 2025.
    We do not anticipate that the policy of requiring an applicant to 
have already submitted its marketing authorization application to FDA 
will discourage applicants from applying for new technology add-on 
payments, since they would be able to reasonably provide sufficient 
information at the time of application in order for CMS to identify 
critical questions regarding the technology's eligibility for add-on 
payments and to allow the public to assess the relevant new technology 
evaluation criteria in the proposed rule. In addition, the extent to 
which an applicant decides to collaborate with FDA is independent from 
the application process for new technology

[[Page 58954]]

add-on payment, and the applicants retain the autonomy to decide if, 
when, and how to collaborate with the FDA. Applicants are not precluded 
from continuing to work with FDA as appropriate, and can continue to 
submit applications to FDA based on their individual readiness and 
internal timelines.
    Comment: Many commenters expressed specific concerns regarding 
moving the FDA approval deadline to May 1 and how it would impact how 
long technologies may be eligible for a new technology add-on payment. 
Several of the commenters asserted that this policy change would 
prevent a 3-year new technology add-on payment duration for almost all 
applicants, as only those technologies that receive FDA marketing 
authorization in April would get 3 years of new technology add-on 
payments, shortening the window from 3 months under the current policy 
to just 1 month (April 1 until July 1, vs April 1 until May 1).\187\ 
One commenter stated that few new technology add-on payment 
applications have had a full three-year duration of add-on payments 
under existing policy, potentially limiting Medicare beneficiary 
access, and this new policy would exacerbate the issue. Further, 
another commenter provided an example of the potential impact of this 
policy by referring to Table II.P.-01 in the proposed rule that details 
the technologies that are scheduled to continue new technology add-on 
payments in FY 2024. The commenter noted that of the 11 technologies 
listed, seven (64%) received FDA approval/clearance between May 5 and 
June 30, and stated that if this policy had been in place at the time 
these new technology add-on payment applications were evaluated, each 
of these would not have been granted new technology add-on payments the 
following October, representing a delay of 12 months.
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    \187\ 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 add-on payment for an additional 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).
---------------------------------------------------------------------------

    Some commenters recommended that if CMS finalizes the aspect of its 
proposal to move the FDA approval date to May 1, it also adjust its 
regulations to provide that all devices that receive approval for a new 
technology add-on payment be granted 3 fiscal years of reimbursement 
from the time of approval for the new technology add-on payment, 
independent of the timing of the FDA approval. A few commenters noted 
that the shortened period resulting from decreasing the window for 3 
years of payment for new technology add-on payments to 1 month (April 1 
until May 1) would mean CMS would have less claims data available to 
determine the MS-DRG payment rate.
    Several commenters believed our proposal would worsen lag times 
between FDA approval and the new technology add-on payment designation, 
resulting in an FDA-approved product being on the market for up to 17-
18 months without being approved to receive new technology add-on 
payments and reducing the potential length of new technology add-on 
payment eligibility from a possible 3-year period to a 2-year period.
    Some commenters performed analyses to demonstrate the potential 
impact of the proposed May 1 deadline policy: one commenter noted that 
if the policy were currently in effect then new technology add-on 
payments would have been delayed for 4 out of the 25 technologies that 
received approval between 2019 and 2023; another noted that if this 
policy had already been implemented, then 9 out of the current 19 
traditional applications would be disqualified for consideration for 
the FY 2024 rule; and another commenter noted that almost all renewals 
proposed for FY 2024 would have had new technology add-on payments 
delayed by a year as their newness periods begin in May/June. One 
commenter noted that 20 percent of FY 2022 approved technologies and 30 
percent of FY 2023 approved technologies had FDA approval dates between 
May 2 and July 1, and that based on this data, the commenter estimated 
the proposed May 1 deadline would delay access by a full year for 
between one-in-three and one-in-five therapies. Another commenter cited 
a study finding that, historically, over 25 percent of new technology 
add-on payment denials were due to applicants being unable to meet the 
existing July 1 deadline, stating that the May 1 deadline would result 
in even more products experiencing delays in new technology add-on 
payments.
    Response: We thank the commenters for their feedback. We note that 
it appears that commenters' analyses may have conflated FDA approval 
dates with newness period start dates. For example, with respect to the 
commenter that referred to Table II.P.-01 in the proposed rule, we note 
that this table does not provide FDA approval/clearance dates, but 
rather the newness period start dates, for these technologies. 
Furthermore, the commenters' analyses of technologies in previous 
fiscal years that received approvals for new technology add-on payments 
with newness period start dates between May 2 and July 1 do not 
necessarily indicate that these technologies would have received a 
denial for new technology add-on payments for those respective fiscal 
years. In certain circumstances, the newness start date may occur after 
the FDA marketing authorization date. Applicants may have also applied 
for new technology add-on payments after receiving FDA marketing 
authorization. It is also possible that some of these manufacturers may 
have delayed their submission of their FDA marketing authorization 
application in an attempt to align that approval as much as possible 
with the existing new technology add-on payment timelines, rather than 
applying at a sooner time that could have resulted in an FDA marketing 
authorization date prior to May 1. With regard to the commenter that 
stated that 9 out of the current 19 traditional applications would be 
disqualified for consideration for the FY 2024 rule if CMS had already 
implemented an FDA marketing authorization deadline of May 1st, we note 
that of those 9 applications, 7 withdrew or were ineligible for new 
technology add-on payments.
    We also note that even under the current policy with the 
flexibilities mentioned by the commenters, not all applicants receive 
the full three years of new technology add on payments. As the 
commenters noted, there are many factors (including timing of 
interactions with the FDA and manufacturing readiness) that can delay a 
technology's approval by the FDA that would disrupt a technologies 
ability to receive the full three years of payment.
    We note that our data analysis of applications over the last 3 
years demonstrates that nearly all applicants who submit new technology 
add-on payment applications prior to FDA submission in fact do not 
receive FDA approval by the July 1 deadline. Between FY 2021 and FY 
2023, only 3.7 percent of applicants that applied for a new technology 
add-on payment prior to having submitted its marketing authorization 
application to FDA received FDA marketing authorization prior to the 
July 1 deadline. We believe this may result in part from strategically 
planning the timing of application submission to FDA, as noted by 
commenters. However, while we expect that applicants are applying for 
new technology add-on payments with the expectation that they will 
receive FDA marketing authorization by the deadline, we agree that this 
choice to

[[Page 58955]]

``time'' an application submission to FDA by applicants may not change 
with implementation of this policy. As stated previously, the goals of 
this policy are to increase transparency, facilitate public input, and 
improve the review process, and we believe that by receiving relevant 
information earlier (both in terms of the time of application and in 
terms of final FDA marketing authorization prior to the close of the 
comment period), these goals will be fostered and advanced. We further 
note that between FY 2021 and FY 2023, only 4 applications out of 107 
received FDA marketing authorization between May 1 and July 1 and were 
approved for new technology add-on payments. Based on this analysis, 
however, we note that it appears that changing the FDA approval date 
from July 1 to May 1 would still have affected only a small percentage 
of new technology add-on payment applications.
    We further note that section 1886(d)(5)(K)(ii) of the Act 
establishes a period of not less than two years and not more than three 
years for the collection of data with respect to the costs of new 
services or technologies; a full 3 years is not required. As previously 
stated, consistent with the statute and our implementing regulations, a 
technology is no longer considered ``new'' once it is more than 2 to 3 
years old, irrespective of how frequently the medical service or 
technology has been used in the Medicare population (70 FR 47349). As 
such, once a technology has been available on the U.S. market for more 
than 2 to 3 years, we consider the costs to be included in the MS-DRG 
relative weights regardless of whether the technology's use in the 
Medicare population has been frequent or infrequent. Therefore, we do 
not believe that 2 years' worth of data would be insufficient to inform 
rate-setting for the inpatient setting.
    However, we have noted commenters' concerns regarding the 
possibility that moving the FDA approval deadline from July 1 to May 1 
may limit the ability of new technology add-on payment recipients to 
receive three years of add-on payments, due to the shortened time 
period between April 1 and May 1. We note that we anticipate 
considering for future rulemaking changes to how we assess new 
technology add-on payment eligibility in the third year of newness, 
such as consideration of adjusting the April 1 cut-off to allow for a 
longer window of eligibility.
    Comment: One commenter supported this aspect of the proposal, 
agreeing that moving the deadline to May 1 would allow interested 
parties to review the FDA-approved indications and clinical data that 
often becomes available only after receiving FDA marketing 
authorization, and would strengthen the quality of the public comments, 
allowing for a more informed decision-making process in the final rule.
    Response: We thank the commenter and agree that the policy will 
increase our stated goals of transparency, facilitating public input, 
and improving the review process.
    Comment: Commenters asked for clarifications or raised concerns 
with the terminology used in the proposal regarding the requirement for 
a complete and active FDA marketing authorization request at the time 
of new technology add-on payment application submission and providing 
documentation of FDA acceptance or filing to CMS at the time of 
application submission.
    Some commenters requested that CMS clarify what constitutes a 
``complete and active FDA marketing authorization request.'' Some of 
these commenters stated it was unclear what the terms ``complete and 
active FDA marketing authorization'' means, as they are not defined in 
statute, regulation, or guidance, or adequately defined in the proposed 
rule. A few commenters noted that these terms do not correlate with the 
terms used by the FDA and that there is currently no certification 
provided by the FDA indicating such a status. Some commenters suggested 
this would create further confusion between FDA, CMS, and interested 
parties.
    A few commenters noted the FDA application status at the time of 
the new technology add-on payment application submission is not always 
an accurate representation of the maturity of the FDA application. A 
few commenters stated that the FDA application process is dynamic and 
could switch from ``active'' to ``on hold'' at any time for various 
reasons including temporary pauses for minor questions or the request 
of supplemental materials, and noted that a temporary hold may be 
lifted with submission of supplemental materials.
    Some commenters raised concerns about what documentation is 
sufficient to demonstrate that a product was submitted to FDA for 
approval or review at the time of submission of the new technology add-
on payment application and requested additional clarification from CMS. 
One commenter recommended that CMS accept a copy of the first page of 
the marketing authorization request cover letter submitted to the FDA 
as sufficient documentation. Another commenter raised concerns that 
this would increase the burden on the FDA to provide applicants with 
proof of a ``complete and active'' application status.
    One commenter requested clarification about whether a ``Refuse to 
File'' letter from the FDA would prevent an applicant from applying for 
new technology add-on payments, recommending that a ``Refuse to File'' 
letter should not preclude an applicant from applying for new 
technology add-on payments because the applicant could correct the 
filing error and re-submit their NDA or BLA and still meet the current 
July 1 FDA marketing authorization deadline.
    Response: We thank the commenters for the feedback and sharing 
their concerns. We note that we collaborated with the FDA in developing 
the terminology used in this proposal, and the intent behind using the 
terms we did was to ensure that the requirement could apply to and be 
inclusive of the different types of FDA applications for different 
types of drugs and devices. Many of the commenters only referenced 
terms used for either drugs or for devices, and because a variety of 
types of technologies, with different FDA marketing authorization 
application requirements, can be eligible for new technology add-on 
payment, we are not using terms defined in statute or existing 
regulations or terms defined by FDA.
    We consider, for the purposes of new technology add-on payment 
applications, an FDA marketing authorization application to be 
``complete'' when the full application has been submitted to FDA. 
Specifically, for relevant FDA application types, a full application 
includes all modules or all information following a rolling review or 
Real-Time Oncology Review (RTOR).\188\ We will only accept new 
technology add-on payment applications once FDA has received all of the 
information to determine whether it will accept (such as in the case of 
a 510k application or De Novo Classification request) or file (such as 
in the case of a PMA, NDA, or BLA) the application, as demonstrated by 
the acceptance/filing letter that is already provided by FDA to 
indicate that FDA has determined that the application is sufficiently 
complete to allow for substantive review by FDA. Additionally, for the 
purposes of new technology add-on payment applications, we consider an 
FDA marketing authorization application to be in an ``active'' status 
when the application has been determined by

[[Page 58956]]

FDA to be sufficiently complete to permit substantive review by FDA, 
and when it is still under review at the time of new technology add-on 
payment application submission (that is, it is not in an inactive 
status such as withdrawn, the subject of a Complete Response Letter or 
final decision from FDA to refuse to approve the application, or on 
hold). We have received a number of applications over the years for 
technologies that have received a Complete Response Letter (CRL) or not 
approvable status from FDA, or are in a hold status with up to 360 days 
allowed for submission of additional information. Applications that are 
submitted to CMS without a new submission to FDA or additional 
information submitted to FDA addressing the relevant issues leading to 
the inactive review status would still be missing significant relevant 
information to inform assessment of the add-on payment criteria. For 
these reasons, applications submitted for new technology add-on 
payments must be in an active status with FDA at the time of new 
technology add-on payment application submission, and must provide that 
information as part of their new technology add-on payment application. 
We believe that those technologies for which a ``complete and active'' 
FDA application has been accepted or filed also have a greater chance 
of meeting the deadline for FDA marketing authorization for new 
technology add-on payment eligibility purposes. We do not believe this 
process will increase the burden on FDA; we are requiring that 
applicants provide us with the initial acceptance or filing letter that 
is already provided by FDA after its initial administrative review 
(which can vary based on the FDA application type) which demonstrates 
FDA has begun substantive review of the application in full, as 
described further in this section. Aside from that, we do not require 
specific documentation from FDA to demonstrate continued ``active 
status'' after initial FDA acceptance or filing, as we believe 
applicants are aware of any changes to their FDA application status and 
would be able to provide this information to CMS in their new 
technology add-on payment application. We acknowledge that the FDA 
application process is dynamic and could switch from ``active'' to ``on 
hold'' at any time for various reasons, and do not intend for our 
requirement to exclude applicants that have submitted to FDA; the 
intention is that applicants apply for new technology add-on payments 
if they can indicate that the FDA application has an ``active status'' 
at the time of new technology add-on payment application submission. As 
described previously, the intent of this requirement is to ensure that 
applicants are far enough along in the FDA review process that 
applicants would be able to reasonably provide sufficient information 
at the time of application for CMS to identify critical questions 
regarding the technology's eligibility for add-on payments and to allow 
the public to assess the relevant new technology evaluation criteria in 
the proposed rule.
---------------------------------------------------------------------------

    \188\ https://www.fda.gov/about-fda/oncology-center-excellence/real-time-oncology-review.
---------------------------------------------------------------------------

    Regarding the documentation that would suffice for the purposes of 
this policy, as described previously, we are requiring the 
documentation provided to applicants by FDA after FDA concludes that 
the application is sufficiently complete to permit a substantive 
review. We note that when FDA instead provides applicants with a 
``Refuse to File'' (RTF) (or ``Refusal to Accept'' (RTA)) letter, this 
specifically indicates that FDA has determined the application is not 
complete and therefore those applicants that have received an RTF or 
RTA letter will not be eligible to apply for new technology add-on 
payment until the application is resubmitted to FDA and an acceptance/
filing letter is received.
    Comment: A few commenters requested exceptions for QIDPs and LPADs 
to one or both aspects of the proposal. The commenters stated that 
since applications for these technologies only require the cost 
criterion, they should be exempt from the proposal, as the proposal 
could delay access to QIDPs and LAPDs.
    Response: We thank commenters for their feedback. We note that we 
did not propose 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.  [thinsp]412.87(e)(3) (as 
finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58740)). 
However, we do not believe it is appropriate to exempt any technology 
from the requirement to request FDA marketing authorization prior to 
applying for new technology add-on payments. As discussed previously, 
this proposal is intended to increase transparency for the proposed 
rule, and as such, receiving the most information possible at the time 
of application would result in robust analysis and discussion for the 
proposed rule to maximize public input. Furthermore, as discussed 
previously, 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 QIDP (or Breakthrough Device) designation, which is the basis for a 
product's eligibility for the relevant alternative pathway.
    Comment: Several commenters requested that if CMS finalizes its 
proposal, it should delay implementing until after FY 2025. The 
commenters recommended that CMS provide more notice to manufacturers 
and delay implementation of the proposed new policies until FY 2026 or 
later to provide more time for manufacturers to adjust their 
development processes. Some commenters raised concerns that planning 
for the FY 2025 cycle is already underway and if these policy changes 
are implemented in this final rule, they would no longer be able to 
apply for a new technology add-on payment in the next cycle as they 
anticipated, which raises the risk that Medicare beneficiaries would 
not have reliable access to these new technologies for more than a year 
after FDA approval. One commenter also noted that it takes about 6-10 
months from the initial FDA application request to receive an approval 
decision, and that by the time the final rule releases in August, if 
the policy is finalized, it may be too late for manufacturers to apply 
and receive FDA approval before the May 1 deadline. Other commenters 
specifically noted that this could require Breakthrough Devices/510k 
applications to submit applications to FDA earlier, such as 4-6 months 
sooner (since their FDA timeline is shorter), which would mean a year 
delay in add-on payments if the deadline is missed, since they can 
currently apply to FDA as late as April and still anticipate approval 
by July 1.
    Response: We thank the commenters for their recommendations 
regarding delay of implementation of the proposal. It seems that 
commenters are suggesting that manufacturers may strategically time the 
submission of an application to the FDA in an attempt to align an 
expected decision by the FDA with the timelines for new technology add-
on payment eligibility. We encourage manufacturers to pursue the 
appropriate regulatory processes to bring new products to market as 
soon as practical. While FDA reviews often have standard estimated 
timeframes from application to approval, we understand that there can 
be many variables in the review, including FDA seeking new or 
additional information, that may result in a longer or shorter 
timeframe to approval than estimated. We further note that CMS 
continues to pay for new

[[Page 58957]]

technologies through the regular payment mechanism established by the 
MS-DRG methodology, with or without new technology add-on payments, and 
whether a technology receives new technology add-on payments or not 
does not affect coverage of the technology or ability for hospitals to 
provide a technology to patients where appropriate.
    As discussed previously and in the FY 2024 IPPS/LTCH PPS proposed 
rule, we believe these policies will help facilitate a more transparent 
process that will improve public engagement and help improve and 
streamline our review processes. Many of these products are novel and 
complex, and CMS has a responsibility to appropriately and thoroughly 
review applications for eligibility for new technology add-on payments 
against our established eligibility criteria. Therefore, we do not 
intend to delay implementation of the proposed new policies because we 
believe that such a delay would not lead to improved transparency and 
more robust applications or otherwise align with the issues this policy 
would address.
    Comment: Many commenters stated that the proposal was unlikely to 
achieve CMS's stated goals or to decrease workload, and would instead 
negatively impact beneficiary access or manufacturer flexibility. The 
commenters therefore recommended alternatives that they believed would 
maximize flexibility and improve access in line with the intent of new 
technology add-on payments, as described further in this section.
    Commenters recommended that rather than finalizing the proposal, 
CMS consider increasing the frequency of new technology add-on payment 
application reviews. Specifically, some commenters requested that CMS 
conduct quarterly or biannual reviews that align with existing CMS 
processes for the hospital outpatient transitional pass-through 
payments and ICD-10 coding cycles. One commenter supported the proposal 
to require applicants to submit their FDA marketing authorization 
requests prior to submitting a new technology add-on payment 
application only if the new technology add-on payment eligibility 
determinations are conducted biannually.
    For instance, a few commenters suggested the effective dates of a 
semiannual new technology add-on payment application process to begin 
making new technology add-on payments could fall on April 1 and October 
1. Some of the commenters suggested a biannual cycle as follows: For an 
October 1 add-on payment start date, new technology add-on payment 
applications could have a deadline of April 1, with a public meeting in 
early/mid-May, with new technology add-on payment proposals issued in 
early/mid-June allowing for a 30-day comment period leading to final 
new technology add-on payment decisions in late August with an 
effective date of October 1; the second cycle would follow a similar 
timeline with a new technology add-on payment application deadline of 
October 1 and April 1 add-on payment start date. This commenter stated 
that this proposed timeline would be consistent with the statute and 
would allow for more new technology add-on payment determinations, 
which would, in theory, enhance the quantity and quality of claims data 
used for ratesetting. Other commenters also noted that biannual new 
technology add-on payment reviews could also theoretically result in 
more claims data to analyze in the next fiscal year.
    Another commenter asserted that section 1886(d)(5)(K)(vii) of the 
Act does not prevent the agency from approving new technology add-on 
payment applications more than once a year, but mandates only that the 
Secretary provide the addition of new diagnosis and procedure codes on 
April 1, while giving the Secretary discretion to adjust the payment. 
One commenter proposed that the 60-day comment period could be avoided 
by CMS going through rulemaking to establish the substantive legal 
standards used to determine whether a product qualifies for new 
technology add-on payment, as well as the process, including the 
opportunity for public comment, for applying those standards. The 
commenter noted precedent for similar approaches under the Medicare 
program, including the Clinical Laboratory Fee Schedule rate setting 
process and the process for approving applications for transitional 
pass-through payment under the Outpatient Prospective Payment System. 
Another commenter stated that the statute \189\ does not preclude CMS 
from considering applications prior to the required public meeting, and 
accordingly supported a quarterly review process.
---------------------------------------------------------------------------

    \189\ See SSA sec. 1886(d)(5)(K)(viii)(III).
---------------------------------------------------------------------------

    A few commenters suggested that more frequent reviews could help 
address patient access challenges, reduce the volume of applications 
per application cycle, provide CMS with additional time to fully review 
and analyze applications and reduce the administrative burden on the 
agency, and ensure timely reimbursement for new technologies. Other 
commenters recommended that CMS consider expanding alternative pathways 
and conditional approvals to more types of technologies, for example, 
products designated as Breakthrough Therapies and Regenerative Medicine 
Advanced Therapies (RMAT) by the FDA, innovative therapies, cell and 
gene therapies, in-vitro diagnostics, etc., to reduce workload and 
accelerate review timelines. Some commenters recommended that CMS 
expand the new technology add-on payment conditional approval pathway 
to include all technologies approved or cleared by the FDA through the 
Breakthrough Device Program to reduce workload and improve access.
    One commenter stated that CMS should consider more frequent 
application cycles or other mechanisms that allow for faster NTAP 
eligibility, and indicated that certain technologies, such as 
antimicrobial products, have unique characteristics or policy needs 
recognized by CMS that warrant bespoke new technology add-on payment 
policies. The commenter stated that CMS should consider adopting a 
similar mechanism in other contexts to allow a new technology add-on 
payment to be implemented on a rolling or quarterly basis, especially 
in situations where there is a heightened policy need to facilitate new 
technology add-on payment availability.
    A number of commenters suggested that CMS not finalize these 
policies and instead gather additional input from interested parties to 
assist with finding alternative policies, such as convening various 
interested parties to discuss potential alternatives or issuing a 
separate request for information (RFI) related to the new technology 
add-on payment applications process. One commenter stated that a 200 
percent increase in new technology add-on payment applications would 
require additional resources but recommended that CMS work with 
interested parties to explore other options before finalizing any 
policy and ensure that any future changes to the new technology add-on 
payment process maintain transparency into the agency's decisions and 
provide applicants and the public the opportunity to provide comments.
    A few commenters recommended that instead of requiring proof of 
active FDA review by the application deadline, CMS should require that 
proof by the December supplemental information deadline. They stated 
that this could account for the lag between FDA submission and the 
acknowledgment letter CMS is proposing to require, and

[[Page 58958]]

this modification to the proposed policy would enable CMS to achieve 
the stated intent of striking a balance between being able to fully 
evaluate applications and preserving flexibility for manufacturers.
    Response: We thank the commenters for their suggestions and 
recommendations. We believe at the heart of these comments is a shared 
interest among commenters and CMS in the goal of the new technology 
add-on payment program, which is to facilitate access to innovative new 
technologies for Medicare beneficiaries. We understand that the goals 
of other new technology payment pathways, such as transitional pass-
through payments under the OPPS, may be similar.
    However, there are a number of complexities, both legal and 
operational, that CMS would need to consider before proposing and 
finalizing an increase in the frequency of new technology add-on 
payment application review cycles, and not all of these complexities 
are the same in other new technology payment programs, such as 
transitional pass-through payment under the Outpatient Prospective 
Payment System. For example, the assessment of whether new technology 
add-on payment applicants meet the newness criterion intersects with 
other requirements associated with MS-DRG development and assessment, 
which is tied to fiscal year rulemaking and ratesetting. We note that 
we did not propose increasing the frequency of the new technology add-
on payment application review cycle, and as such, we believe it is most 
appropriate to consider the feasibility of taking such steps in future 
years, so that we could solicit public comment through a full notice-
and-comment rulemaking cycle.
    Regarding the comments that recommended CMS should require proof of 
active FDA review by the December supplemental information deadline 
instead of the new technology add-on payment application deadline, as 
stated previously, we believe the new technology add-on payment 
application timeline with a simultaneous deadline for submission of a 
request for FDA marketing authorization is appropriate because when 
applicants submit new technology add-on payment applications prior to 
submitting a request to FDA for marketing authorization, missing 
information from their applications, which is needed to evaluate the 
eligibility of the technology for the add-on payment, will not become 
available until after submission to FDA.
    With regard to expanding conditional approvals to other types of 
technologies, we note that we only recently established the pathway of 
conditional approvals. To date, no application that has gone through 
the conditional approval pathway has received FDA approval after being 
granted conditional new technology add-on payment approval and we 
therefore do not yet have sufficient experience with the conditional 
approval process. We do not currently have any reasonable expectation 
that expansion of eligibility for conditional approvals would advance 
our policy goals of promoting transparency, facilitating public input, 
and improving the review/evaluation process, or lead to additional 
technologies being granted conditional approval based on other new 
technology add-on payment criteria that we are required to assess. In 
addition, we have stated in prior rulemaking that we do not believe it 
is appropriate for CMS to determine whether a medical service or 
technology represents a substantial clinical improvement over existing 
technologies before FDA makes a determination as to whether the medical 
service or technology is safe and effective, and therefore we are 
unable to extend conditional approval to traditional applications (86 
FR 45049).
    With regard to expanding alternative pathways, we will continue to 
consider these issues for future rulemaking, including suggestions 
previously made by commenters to develop other ways pursuant to which a 
technology could qualify for new technology add-on payments, such as 
technologies that are designated for an FDA expedited program for drugs 
or devices (85 FR 58432).
    We appreciate all the comments and various suggested alternatives 
to our proposal, as well as the recognition of our efforts toward 
greater transparency, public input, and streamlining of the new 
technology add-on application process. We acknowledge the concerns 
raised by commenters regarding flexibility and clarification of our 
policy. While commenters were concerned about our proposal, they did 
not address our concerns with regard to transparency. However, after 
having reviewed and carefully considered the comments and suggestions 
we received, we have determined that the additional information that 
will be made available by requiring a complete and active FDA marketing 
application prior to submission of a new technology add-on payment 
application, and the increased time for final review of such 
application made available by changing the FDA authorization deadline 
from July 1 to May 1, supports our decision to finalize these policy 
changes in this final rule. We have also further clarified the 
requirements for documentation and the meaning of ``complete and 
active'' under this policy, as described previously.
    Therefore, for the reasons discussed previously and in the FY 2024 
IPPS/LTCH proposed rule, we are finalizing our proposal to require 
applications to have a complete and active FDA marketing authorization 
request at the time of the new technology add-on payment application 
submission, and to move up the FDA marketing authorization deadline 
from July 1 to May 1, beginning with applications for FY 2025. As 
stated previously, we have noted commenters' concern regarding the 
potential impact of the shortened time period between April 1 and May 
1, and we anticipate considering potential changes to the April 1 cut-
off for future rulemaking. As previously noted, we are not making 
changes to the July 1 deadline for applications 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) (redesignated as Sec.  412.87(f)(3)) in this final rule), 
as finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58740). We 
are also finalizing our proposal to redesignate Sec.  
[thinsp]412.87(e)(3) as Sec.  [thinsp]412.87(f)(3), and to amend the 
redesignated Sec.  [thinsp]412.87(f)(3) to revise the current cross-
reference to Sec.  [thinsp]412.87(e)(2), in light of the previously 
discussed proposed amendments.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2024 hospital wage index based on the 
statistical areas appears under section III.A.2. of the preamble of 
this final rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-

[[Page 58959]]

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 adjustment for FY 2024 is discussed in section II.B. of 
the Addendum to this final rule.
    As discussed in section III.I. of the preamble of this final rule, 
we also take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act 
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of 
the Act, the Secretary is required to adjust the standardized amounts 
so as to ensure that aggregate payments under the IPPS after 
implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The budget neutrality adjustment for FY 2024 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. 
(The OMB control number for approved collection of this information is 
0938-0907, which expires on January 31, 2026.) A discussion of the 
occupational mix adjustment that we are applying to the FY 2024 wage 
index appears under sections III.E. and F. of the preamble of this 
final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 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 OMB Bulletin No. 17-01 (August 15, 2017). On September 14, 
2018, OMB issued OMB Bulletin No. 18-04 which superseded OMB Bulletin 
No. 18-03 (April 10, 2018). Historically OMB bulletins issued between 
decennial censuses have only contained minor modifications to CBSA 
delineations based on changes in population counts. However, OMB's 2010 
Standards for Delineating Metropolitan and Micropolitan Statistical 
Areas to Census Bureau population estimates created a larger mid-decade 
redelineation that takes into account commuting data from the American 
Commuting Survey. As a result, OMB Bulletin No. 18-04 (September 14, 
2018) 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

[[Page 58960]]

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 will 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 final rule and the County to CBSA Crosswalk 
File and Urban CBSAs and Constituent Counties for Acute Care Hospitals 
File posted on the CMS website reflect the latest FIPS code updates.

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

    The 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 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 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 FY 2024 wage index also excludes the salaries, 
hours, and wage-related costs of hospital-based rural health clinics 
(RHCs), and Federally Qualified Health Centers (FQHCs) because Medicare 
pays for these costs outside of the IPPS (68 FR 45395). In addition, 
salaries, hours, and wage-related costs of CAHs are excluded from the 
wage index for the reasons explained in the FY 2004 IPPS final rule (68 
FR 45397 through 45398). For FY 2020 and subsequent years, other wage-
related costs are also excluded from the calculation of the wage index. 
As discussed in the FY 2019 IPPS/LTCH final rule (83 FR 41365 through 
41369), other wage-related costs reported on Worksheet S-3, Part II, 
Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, as well as 
all other wage-related costs, such as contract labor costs, are 
excluded from the calculation of the wage index.
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers. We did not 
receive any comments on the discussion in this section.

[[Page 58961]]

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 FY 2024 wage 
index includes FY 2020 data submitted to us as of June 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.
    In the proposed rule we stated that 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 to 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, we stated 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 to the COVID-19 PHE did 
differentially impact the wages paid by individual hospitals over time, 
we further stated that 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 noted that we did not identify 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 stated that we believe 
the FY 2020 wage data is the best available wage data to use for FY 
2024. Therefore, we proposed to use the FY 2020 wage data for FY 2024.
    We also noted that 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.
    Comment: One commenter stated that CMS should not be utilizing any 
data from FY 2020 due to the impacts of COVID-19.
    Another commenter stated that based on the agency's description in 
the proposed rule, the specifics of the analysis above are unclear, as 
the agency does not reference specific tables or files for the public 
to review to confirm the agency's conclusion. The commenter further 
stated that while CMS states that the data does not show a significant 
discrepancy from prior years' data, when compared to trends from the 
previous three fiscal years, the FY 2020 data does not follow the same 
trends. Also, the commenter noted that the extent of the wage increases 
is important to consider, not just the percentage of hospitals that saw 
an hourly wage increase. The commenter stated that without knowing what 
other sources of data are available for future wage index calculations 
or evaluating a comparison of other data sources to identify any 
potential discrepancies, the commenter is concerned that the impact of 
the COVID-19 PHE may not be easily parsed out of future years' data.
    The commenter also commented that while CMS states that it does not 
believe the PHE alone is responsible for these changes, and that it is 
difficult to parse out what impact the PHE had versus other factors 
that may be driving up wages, the commenter is concerned that the 
agency does not provide alternate methods for calculating the wage 
index to try to account for the impact of COVID-19. Although the impact 
of the PHE may not have been apparent on wage data until partially 
through FY 2020, the commenter believes that CMS should consider 
approaches to best account for the wage spikes and changes that are a 
result of the pandemic. The commenter cited data from Vizient's May 
2023 Workforce Intelligence Report \190\ that contract labor rates are 
expected to stay 15% above pre-pandemic levels due to inflation and 
other external economic factors. The commenter also noted that numerous 
nursing workforce trends changed once the pandemic began in 2020, 
including those related to nursing overtime hours as a percentage of 
hours work, burnout, and turnover and asserted that these trends are 
not sustainable. The commenter also stated that if hospitals were to 
adopt and use strategies to address staffing challenges (e.g., ensure 
nurses are practicing at the top of their license, plan ahead for 
seasonable contract labor use, using technology as an enabler but not a 
standalone solution) they would impact the wage index and such trends 
are not considered by CMS. The commenter encouraged CMS to share 
additional information regarding its analysis and other information the 
agency needs so stakeholders can better understand the

[[Page 58962]]

agency's position and respond accordingly. The commenter further 
encouraged CMS to begin exploring alternate data sources and analyses 
to better understand how to account for the impact of the pandemic in 
the wage index given enduring employment trends that were triggered by 
the pandemic. The commenter concluded that CMS should work with 
stakeholders on further developing or refining such an approach to 
promote stability and accuracy.
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    \190\ https://vizientinc-delivery.sitecorecontenthub.cloud/api/public/content/c372877070484a40be8cde3b480606f9.
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    Response: We are unsure what the commenter means when it states 
that the agency does not reference specific tables or files for the 
public to review to confirm the agency's conclusion. As stated above, 
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. Therefore, any comparisons that CMS made within the current year 
data and prior year data can easily be replicated by the public by 
utilizing standard, commonly known statistical methods.
    Also, the commenter states that the FY 2020 data does not follow 
the same trends as prior years. However, as stated earlier, for the 
reasons described above (it is not apparent whether any changes due to 
the COVID-19 PHE differentially impacted the wages paid by individual 
hospitals; even if hypothetically changes due to the COVID-19 PHE did 
differentially impact the wages paid by individual hospitals over time, 
we further stated that 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; we did not identify 
any significant issues with the FY 2020 wage data itself in terms of 
our audits of this data), we continue to believe the FY 2020 wage data 
is the best available wage data to use for FY 2024.
    With regard to the use of alternative data, as stated above, we did 
not identify 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. Also, as stated above, it is not apparent whether 
any changes due to the COVID-19 PHE differentially impacted the wages 
paid by individual hospitals. Furthermore, the commenters did not 
present any data from the actual wage data demonstrating the need to 
use alternative data. The commenter cited outside data sources with no 
actual data from our public use files. Additionally, the commenter is 
asking CMS to project potential changes hospitals may make to address 
potential staffing shortages without any supporting data. Also, if 
hospital workforce trends changed uniformly once the pandemic began in 
2020 or if hospitals adopted strategies to address staffing shotages 
uniformly, then this would be reflected uniformly across the salaries 
and hours for all hospitals and areas (which is used to calculate an 
area's AHW) which would lead to a commensurate change to the national 
AHW and not the wage index itself. Therefore, we continue to believe 
the FY 2020 wage data is the best available wage data to use for FY 
2024.
    Comment: One commenter stated that as a result of high COVID-19 
patient volume for more than two years and subsequent healthcare staff 
departures during the pandemic, hospitals are in the midst of a 
national staffing shortage. The commenter continued that inflation is 
simultaneously driving up healthcare costs during this workforce 
shortage. The commenter believes CMS should offer short-term assistance 
to the hospital community, considering inflationary updates to the wage 
index as necessary to preserve current service levels, which is a 
particular risk point for underserved populations. The commenter 
recommended a more time-sensitive and layered approach to wage index 
updates to account for excess labor costs driven by increased contract 
labor and reimbursement rates to preserve critical national hospital 
system infrastructure. The commenter stated that CMS could accomplish 
this by leveraging current Medicare surveys and reporting to develop a 
wage adjustment until the labor market stabilizes. The commenter 
concluded that this approach would account for regional disparities and 
impact, use known and accepted survey data, create a standardized and 
auditable system, and support hospitals without disrupting the baseline 
Medicare wage index.
    Response: The commenter mentions that CMS could leverage current 
Medicare surveys and reporting to develop a wage adjustment until the 
labor market stabilizes. It is not clear what the commenter is 
requesting. As stated above, the latest audited wage data is from FY 
2020. We do not possesss audited wage data from a more recent period. 
We also are unsure what type of adjustment the commenter is requesting 
and how this adjustment would account for regional adjustments. Without 
additional information we are unable to respond directly to the 
comment. Also, as previously noted, section 1886(d)(3)(E) of the Act 
requires that, as part of the methodology for determining prospective 
payments to hospitals, the Secretary adjust the standardized amounts 
for area differences in hospital wage levels by a factor (established 
by the Secretary) reflecting the relative hospital wage level in the 
geographic area of the hospital compared to the national average 
hospital wage level. If the commenter is requesting a uniform 
adjustment to the salaries and hours then uniformly adjusting the 
salaries and hours for all areas (which is used to calculate an areas 
AHW) would lead to a commensurate change to the national AHW and not 
the wage index itself. This is because the wage index is required to be 
a relative measure.
    Comment: One commenter urged CMS to reconsider using FY 2020 cost 
report data to calculate the wage index. The commenter explained that 
CMS has stated that FY 2020 cost reports contained data that was 
significantly impacted by the COVID-19 PHE, which will 
disproportionately impact reimbursements for Massachusetts hospitals 
and cause these hospitals to be underpaid because of the ``Nantucket 
effect.'' That is, the commenter noted that, in general, Massachusetts 
hospitals saw heightened levels of COVID-19 patients in FY 2020, while 
one hospital located on the island of Nantucket saw almost no COVID-19 
patients because the island was able to isolate from the rest of the 
state. As a result of this effect, the commenter contended that the 
Nantucket hospital's FY 2020 cost report is not reflective of the COVID 
burden experienced by other hospitals in the state. The commenter 
recommended that CMS use the FY 2022 cost reports, which better 
reflects its labor market.
    Response: We believe the commeneter is referring to provider number 
220110, Nantucket Cottage Hospital, as this is the only hospital from 
Nantucket included in the wage data. Within the wage data each fiscal 
year, there are hospitals that have different hiring practices and 
experiences. For example, some hospitals may be smaller than others and 
not provide the same complex services as another hospital in the area. 
Or one hospital may have more contracted workers compared to another 
hospital in the same area that has no contracted workers. Perhaps one 
hospital is focused on cancer patients compared to another hospital 
that tries

[[Page 58963]]

to provide all types of servies. But these are not reasons that would 
make a hospitals data aberrant. This simply means that hospitals 
provide different care, have different hiring practices or have 
different case mixes and are different than eachother; but it does not 
make the wage data aberrant or not reflective of the area. Similarly, a 
hospital that may have had a different experience with COVID does not 
mean the wage data of that hospital is aberrant or not reflective of 
the area. Also, we are unsure what issue the commenter is referring to 
with regard to including this hospital in its area as Nantucket Cottage 
Hospital is the only hospital located in rural Massachusetts. Finally, 
the data for the FY 2024 wage index uses FY 2020 cost report data which 
was audited by the MACs, and there were no significant issues reported 
across the data for all hospitals. Additionally, CMS used the most 
recent audited surveys and data to develop the FY 2024 wage index. 
Audited cost report data from FY 2022 will be used for FY 2026 and is 
not available at the time of this final rule. Therefore, we do not have 
any audited data from the FY 2022 cost reports available for use at the 
time of this final rule. We continue to believe the FY 2020 wage data 
is the best available wage data to use for FY 2024.
    For the FY 2025 wage index, as in the past two fiscal years, we 
plan to review the audited wage data, and the impacts of the COVID-19 
PHE on such data and evaluate these data for future rulemaking.
    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 (the 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.
    Comment: Commenters opposed the exclusion of audited hospitals' 
wage data which they contended was arbitrarily excluded from the 
proposed rule wage data. These commenters stated that excluding 
accurate and verified data is inconsistent with the extensive process 
established by CMS to ensure the accuracy and reliability of hospital 
wage index data. Commenters also stated the following concerns about 
the lawfulness of excluding wage data for these hospitals:
     Nothing in the applicable statute, section 1886(d)(3)(E), 
permits CMS to exclude general acute care hospitals from the wage index 
data simply because those hospitals' wages are higher than the wages of 
other hospitals in their area. Rather, as indicated by CMS in past 
rulemakings, the wages of all short-term acute care hospitals must be 
included unless such data are incomplete or inaccurate.
     Even if CMS had the authority to exclude certain hospitals 
despite the fact that their data were accurate and verifiable (which is 
the case with these hospitals), the exclusion of these hospitals would 
be arbitrary and capricious, as CMS has promulgated no standards to 
govern the exercise of its discretion. CMS has established an extensive 
process to ensure the accuracy and reliability of hospital wage data, 
which the excluded hospitals have been subjected to. Yet, where the 
agency does not like the result, it has decided to deviate from this 
process by arbitrarily excluding hospitals with accurate data.
     CMS' exclusion of these hospitals is procedurally 
improper, as CMS has failed to promulgate a rule in accordance with the 
Administrative Procedures Act (APA) and section 2886 of the Social 
Security Act that would define what constitutes aberrant data or 
authorize excluding hospitals with verifiable data from the Medicare 
wage index.
     CMS has failed to consider the relevant factors and has 
relied on factors that are not relevant under the applicable statute. 
As a result, its action is arbitrary and capricious. The commenter 
explained that because CMS has not conducted notice-and-comment 
rulemaking to establish standards for excluding hospitals from the wage 
index, it is unknown what factors CMS considered. Further, since CMS 
has not proposed any ascertainable standards, the public has no 
meaningful opportunity to comment on the factors that should be 
considered.
     The proposed exclusions for FFY 2024 will cause 
significant harm to not only IPPS hospitals, but also inpatient 
psychiatric hospitals, SNFs, inpatient rehabilitation hospitals (IRFs), 
and many others. The consequence of these exclusions negatively 
impacting more than the IPPS hospitals appear to be unintended by CMS, 
as it failed to even consider them in its regulatory fiscal impact 
analysis in the proposed rule, which it is legally required to do. 
Thus, the exclusions are legally impermissible.
    Response: As discussed above, we responded to similar comments in 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45168 through 45169). We 
provide summary responses below based on our responses to similiar 
comments from previous rulemaking. However, we refer commenters to the 
Federal Register pages cited earlier for our complete response to 
similar comments with regard to the exclusion of hospitals' wage data 
from the wage index.
    Section 1886(d)(3)(E) of the Act requires the Secretary to adjust 
the proportion of hospitals' costs attributable to wages and wage-
related costs for area differences reflecting the relative hospital 
wage level in the geographic area of the hospital compared to the 
national average hospital wage level. As previously stated in those 
final rules, we believe that, under this section of the Act, we have 
discretion to exclude aberrant hospital data from the wage index PUFs 
to help ensure that the costs attributable to wages and wage-related 
costs in fact reflect the relative hospital wage level in the 
hospitals' geographic area.
    Also, as discussed in response to comments in prior rules (80 FR 
49490 and 86 FR 45168), as a standard part of the refinement of the 
annual wage index, CMS evaluates the wage data for both accuracy and 
reasonableness to ensure that the wage index is a relative measure of 
the labor value provided to a typical hospital in a particular labor 
market area. We have also previously stated that a hospital is included 
in the wage index if its data are reasonable, regardless of whether the 
hospital is open or whether it has terminated after the relevant past 
period, because the wage index is constructed to represent the relative 
average hourly wage for each labor market area in that past period. 
Thus, reasonableness and relativity to each area's average hourly wages 
have been longstanding tenets of the wage index development process 
that CMS has articulated in rulemaking.
    We acknowledge the commenters' suggestions for increased 
transparency and disclosure of criteria for hospitals' exclusion. We 
believe performing analysis of hospitals' wage data quality

[[Page 58964]]

and conducting edits for reasonableness are inherent parts of 
conducting a survey of the wages and wage-related costs of subsection 
(d) hospitals. We note that it has never been CMS' policy to disclose 
audit protocol, because CMS is concerned that allowing hospitals to 
become familiar with our audit parameters--which are based on standard 
mathematical processes--would create opportunities for hospitals to 
take action to manipulate their data in order to game audit thresholds. 
However, in the future, we will continue to consider a limited proposal 
regarding criteria for excluding a hospital's data from the wage index 
due to its overall average hourly wage being either too high or too 
low, as well as utilizing additional methods of communicating with 
stakeholders regarding the adequacy of their wage data.
    As discussed in response to comments in prior rules (80 FR 49491 
and 86 FR 45169), just as CMS has excluded certain hospitals from the 
wage index with extraordinarily high average hourly wages relative to 
their labor market areas, CMS also has excluded hospitals with 
extraordinarily low average hourly wages relative to their labor market 
areas. Therefore, we disagree with commenters' assertions that we have 
been ``arbitrary and capricious'' in excluding hospitals from the wage 
index.
    We also reiterate the following example of a hospital in California 
removed from the FY 2024 wage index. The hospital is located in CBSA 
23420 (Fresno, California) and had a very high average hourly wage and 
was removed from the wage data even though the hospital's wage data was 
properly documented. However, the hospital does not merely have the 
highest average hourly wage in the CBSA; its average hourly wage is 
extremely and unusually high, significantly higher than the next 
highest average hourly wage in that CBSA and in the surrounding areas. 
While we believe this is a result of the unique salary structure and 
business model of the hospital's owner, not from a lack of reliability 
in its wage data, we believe the data is nonetheless aberrant and we 
therefore have authority to remove it. We do not believe that the 
average hourly wage of this particular hospital accurately reflects the 
economic conditions in its labor market area during the FY 2018 cost 
reporting period. Therefore, its inclusion in the wage index would not 
ensure that the FY 2024 wage index represents the labor market area's 
current wages as compared to the national average of wages. Rather, its 
inclusion would distort the average hourly wage of its labor market 
area. Accordingly, we have exercised our discretion to remove this 
hospital's wage data from the FY 2024 wage index.
    With regard to the impact on facilities paid under other PPSs, we 
refer commenters to the rulemaking of those PPSs for comments on 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. However, we stated that if data 
elements for some of these providers are corrected, we intended to 
include data from those providers in the final FY 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. For the final FY 2024 wage index, we restored the 
data of 27 hospitals to the wage index, because their data was either 
verified or improved. Thus, 61 hospitals with aberrant data remain 
excluded from the FY 2024 wage index (88-27 = 61).
    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 stated in the proposed rule (88 FR 26965 
through 26967) that we believe that including the wage data for these 
hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398); that is, any 
hospital that is designated as a CAH by 7 days prior to the publication 
of the preliminary wage index public use file (PUF) is excluded from 
the calculation of the wage index. For the proposed FY 2024 wage index, 
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. Since the proposed rule, we 
learned of 1 more hospital that converted to CAH status on or after 
January 22, 2022, and through and including January 23, 2023, the cut-
off date for CAH exclusion from the FY 2024 wage index, for a total of 
2 hospital that were removed from the FY 2024 wage index due to 
conversion to CAH status. In summary, we calculated the FY 2024 wage 
index using the Worksheet S-3, Parts II and III wage data of 3,129 
hospitals.
    For the 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 final 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 58965]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.224

BILLING CODE 4120-01-C
    We note that, in past years, in Table 2, we have placed a ``B'' to 
designate the subordinate campus in the fourth position of the hospital 
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules 
and subsequent rules, we have moved the ``B'' to the third position of 
the CCN. Because all IPPS hospitals have a ``0'' in the third position 
of the CCN, we believe that placement of the ``B'' in this third 
position, instead of the ``0'' for the subordinate campus, is the most 
efficient method of identification and interferes the least with the 
other, variable, digits in the CCN.

D. Method for Computing the FY 2024 Unadjusted Wage Index

    As stated in the proposed rule (88 FR 26967 through 26970), the 
method used to compute the 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 did not propose any changes to this methodology. We have 
restated our methodology in this section of this rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the wage index (in this case, for FY 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

[[Page 58966]]

that had cost reporting periods 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

[[Page 58967]]

increase associated with total compensation (salaries plus fringes) 
rather than just the increase in salaries. In addition, the ECI 
includes managers as well as other hospital workers. This methodology 
to compute the monthly update factors uses actual quarterly ECI data 
and assures that the update factors match the actual quarterly and 
annual percent changes. We also note that, since April 2006 with the 
publication of March 2006 data, the BLS' ECI uses a different 
classification system, the North American Industrial Classification 
System (NAICS), instead of the Standard Industrial Codes (SICs), which 
no longer exist. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we did not propose to make any changes to the usage of the 
ECI for FY 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 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 final rule 
for the policy regarding rural areas that do not have IPPS hospitals.
    Step 11.--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area of a State may not be 
less than the area wage index applicable to hospitals located in rural 
areas in that State. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
final rule and available via the internet on the CMS website.
    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 did not propose 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 58968]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.225

    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, we stated in the 
proposed rule (88 FR 26970) that the proposed FY 2024 unadjusted 
national average hourly wage was $50.33.
    We did not receive any comments regarding the discussion of our 
method for computing the FY 2024 unadjusted wage index. Based on the 
previously described methodology, the final FY 2024 unadjusted national 
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TR28AU23.226

E. 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.

[[Page 58969]]

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 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
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26971), for FY 
2024, we proposed to calculate the occupational mix adjustment factor 
using the same methodology that we have used since the FY 2012 wage 
index (76 FR 51582 through 51586) and to apply the occupational mix 
adjustment to 100 percent of the FY 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 final rule (which is 
available via the internet on the CMS website), which contains the 
final 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 final rule for a chart 
listing the multicampus hospitals and the FTE percentages used to allot 
their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the FY 2024 wage index. For the proposed FY 2024 wage index, we used 
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 
applied proxy data for noncompliant hospitals, new hospitals, or 
hospitals that submitted erroneous or aberrant data in the same manner 
that we applied proxy data for such hospitals in the FY 2012 wage index 
occupational mix adjustment (76 FR 51586). As a result of applying this 
methodology, the proposed FY 2024 occupational mix adjusted national 
average hourly wage was $50.27.
    For the final FY 2024 wage index, we are using the Worksheet S3, 
Parts II and III wage data of 3,129 hospitals, and we are using the 
occupational mix surveys of 3,031 hospitals for which we also have 
Worksheet S-3 wage data, which is a ``response'' rate of 97 percent 
(3,031/3,129). For the final 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 final FY 2024 occupational mix adjusted national average hourly 
wage is the following:
[GRAPHIC] [TIFF OMITTED] TR28AU23.227

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 were required to 
submit their completed 2022 surveys to their MACs (not directly to CMS) 
by June 30, 2023. The preliminary, unaudited CY 2022 survey data was 
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.
    Comment: We received comments with regard to the CY 2022 
Occupational Mix Survey data. One commenter had concerns that the data 
may be skewed due to the PHE. Another commenter stated that CMS must 
ensure it is including all of the available data, including the data 
that were submitted

[[Page 58970]]

to the agency, when it constructs an occupational mix adjustment to the 
wage index. In addition, the commenter stated CMS must ensure that such 
data is corrected after the initial submission deadline.
    Response: CMS has yet to audit and review the CY 2022 Occupational 
Mix Survey data. We plan to assess the CY 2022 Occupational Mix Survey 
data in the FY 2025 IPPS proposed rule. Additionally, per the FY 2025 
wage index development timetable on the web at https://www.cms.gov/files/document/fy2025-hospital-wage-index-development-timetable.pdf, 
providers have until September 1, 2023, to request revisions to their 
Worksheet S-3 wage data and CY 2022 occupational mix data as included 
in the wage and occupational mix preliminary public use files. We refer 
the reader to the FY 2025 wage index development timetable for complete 
details.

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

    As discussed in section III.E. of the preamble of this final 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 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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.228

    The national average hourly wage for the entire nurse category is 
computed in Step 5 of the occupational mix calculation. Hospitals with 
a nurse category average hourly wage (as calculated in Step 4) of 
greater than the national nurse category average hourly wage receive an 
occupational mix adjustment factor (as calculated in Step 6) of less 
than 1.0. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4) of less than the national nurse category average 
hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2019 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) the following:
[GRAPHIC] [TIFF OMITTED] TR28AU23.229

    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] TR28AU23.230


[[Page 58971]]



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. 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 final rule 
(which is available via the internet on the CMS website) and based on 
the calculation of the rural floor including the wage data of hospitals 
that have reclassified as rural under Sec.  412.103 (as discussed in 
section III.K. of the preamble of this final rule), we estimate that 
646 hospitals will 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 final 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 (DDC 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

[[Page 58972]]

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 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.\191\ 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.
---------------------------------------------------------------------------

    \191\ 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 will 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's treatment of hospitals with dual Sec.  
412.103 and MGCRB reclassifications. 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 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 response to the FY 2023 IPPS/LTCH PPS proposed rule, 
commenters urged CMS to discontinue the policy of excluding the wage 
data of Sec.  412.103 hospitals from the rural floor calculation (87 FR 
49002). 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 regulatory 
framework.
    In the proposed rule, CMS took the opportunity to revisit the case 
law, prior public comments, and the relevant statutory language. After 
doing so, we stated that we now agree--for the reasons expressed by the 
U.S. Courts of Appeals for the Second and Third Circuits, 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. We 
stated that while CMS has previously treated section 1886(d)(8)(E) 
reclassifications as one among many reclassifications provided for 
under section 1886(d) of the Act 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 explained in the 
proposed rule that we are influenced by the fact that courts have 
largely adopted this interpretation of section 1886(d)(8)(E) of the 
Act, 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. We further note that such 
unwindings 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 acknowledged that this interpretation of section 1886(d)(8)(E) 
of the Act 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) of the Act 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

[[Page 58973]]

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 solicited comments on our proposed 
interpretation of sections 1886(d)(8)(E) and 1886(d)(3)(E)(i) of the 
Act.
    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 proposed to change that policy, consistent with our 
new proposed interpretation of section 1886(d)(8)(E) of the Act, 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 will also resolve 
the concerns about the rural floor raised in comments discussed 
previously. As far 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 solicited 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) of the Act, 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) of the 
Act 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 increases 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 final 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] TR28AU23.231


[[Page 58974]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.232

c. 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 would 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 proposed changing the rural wage index calculation 
methodology consistent with that proposed reinterpretation. We 
acknowledged the ongoing risk of the pending lawsuits cited previously, 
and recognized the challenge should we need to implement any future 
remedy in a budget neutral manner.
    Beginning with FY 2024, we proposed 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] TR28AU23.233

[GRAPHIC] [TIFF OMITTED] TR28AU23.234

    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 will no longer 
be treated as an inbound reclassification (calculation 3 of the current 
policy), but will instead be included in all calculations in which 
geographically rural hospitals are included (calculations 1-3 of the 
proposed policy). ``Dual reclass'' hospitals will 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 
final 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

[[Page 58975]]

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 proposed 
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.
    We acknowledged that these proposals will 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) of the Act--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 final 
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 will no longer be 
affected by this policy, as we proposed 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 will 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 proposed 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 
proposed 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 proposed 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) of the Act requires CMS to treat a 
reclassified hospital as being located in the rural area of the state, 
and section 1886(d)(8)(B) of the Act 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.
    Comment: Commenters strongly supported CMS's proposal to revise the 
rural wage index and rural floor calculation. Specifically, commenters 
supported CMS's proposed treatment of a Sec.  412.103 hospital in the 
calculation of the rural wage index of its state even when the hospital 
has an MGCRB reclassification to another area. Commenters stated that 
the inclusion of Sec.  412.103 hospitals in this manner represents a 
straightforward interpretation of the regulations and faithfully 
executes Congressional intent by treating Sec.  412.103 hospitals ``as 
being located in the rural area'' as required by section 1886(d)(8)(E) 
of the Act. Commenters also supported CMS's proposed treatment of Sec.  
412.103 hospitals for the calculation at section 1886(d)(8)(C)(ii) of 
the Act, stating that they believe that treating Sec.  412.103 
hospitals the same as geographically rural hospitals is the only lawful 
interpretation of the Act. A commenter stated that the proposed changes 
in response to the court cases illustrate the complexity, 
inconsistency, and even irrationality of the wage index system. 
Commenters also encouraged CMS to continue the policy of setting a 
state's rural floor equal to its rural wage index as part of coherent 
and consistent treatment of Sec.  412.103 hospitals.
    Numerous commenters stressed the positive payment impact of these 
proposals on many hospitals. Similarly, a commenter noted that the 
proposed change to the calculation of the rural wage index and rural 
floor would help further reduce the disparity between high and low wage 
index hospitals due to its larger impact on hospitals with wage index 
values at or below the 25th percentile. This commenter provided its own 
wage index analysis in support of this finding.
    Multiple commenters expressed concern regarding the increased rural 
floor budget neutrality factor due to the proposed changes. While some 
commenters acknowledged CMS's statutory budget neutrality requirement, 
another commenter requested that CMS not apply the rural floor budget 
neutrality factor to urban hospitals paid at the rural floor and to 
rural hospitals, stating that it was Congress's intent that these 
providers be excluded from this factor. Another commenter requested CMS 
provide a more complete summary of the specific impact of the proposed 
changes to the rural wage index calculation.
    Response: We appreciate the commenters' support for our proposal. 
We reviewed the analysis a commenter provided that suggests the 
proposed change to the rural wage index calculation methodology would 
reduce the total level of adjustments made under the low wage policy, 
by raising the wage index of hospitals with wage index values currently 
at or below the 25th percentile As proposed, nearly half of all IPPS 
hospitals will be assigned their State's rural wage index,\192\ either 
directly or through the application of the previously discussed 
``floor'' policies. We expect that this number will increase in future 
years as hospitals adjust to the policy and as the relative value of 
States' rural wage index values increase due to the strategic inclusion 
of hospitals that obtain Sec.  412.103 reclassification. An outcome of 
this trend would be that the majority of hospitals (if not all) will be 
assigned identical wage index values as all other hospitals within 
their states. This would greatly reduce wage index variations within a 
State but might dramatically increase wage index differentials between 
States.
---------------------------------------------------------------------------

    \192\ Some of these hospitals will receive an additional wage 
index adjustment due their county's out-migration adjustment, or via 
the 5 percent cap on wage index reductions.
---------------------------------------------------------------------------

    We understand the other commenters' concern regarding the effect 
that the

[[Page 58976]]

proposed modification of the rural wage index calculation has on the 
rural floor budget neutrality factor. This policy will result in the 
rural wage index being greater than the wage index of most or all urban 
areas in that State. This will result in substantially more hospitals 
receiving the rural floor (and the section 1886(d)(8)(C)(iii) 
reclassification hold-harmless floor), and a consequently greater 
budget neutrality impact. We acknowledge tension between hospitals 
receiving identical wage index values and the broader structure of a 
national wage index to reflect relative differences in regional labor 
market costs. However, we believe this result would be unavoidable 
given the requirement of section 1886(d)(8)(E) of the Act to treat 
Sec.  412.103 hospitals `as being located in the rural area' of the 
state.
    With regard to the commenter's assertion that urban hospitals paid 
at the rural floor and rural hospitals should be excluded from the 
application of the rural floor budget neutrality factor, we believe we 
have applied the rural floor budget neutrality adjustment correctly. 
Section 3141 of the Patient Protection and Affordable Care Act (Pub. L. 
111-148) requires that a national budget neutrality adjustment be 
applied in implementing the rural floor. There is a statutory 
requirement for budget neutrality, and the statute does not express 
intent to exempt certain hospitals as the commenter claims. Consistent 
with our longstanding methodology for implementing rural floor budget 
neutrality, we believe it is appropriate to continue to apply a budget 
neutrality adjustment to all hospitals' wage indexes so that the rural 
floor is implemented in a budget neutral manner.
    With regard to the commenter requesting a summary of the specific 
impact of the changes to the rural wage index calculation, we refer the 
commenter to section II.A.4.e. of the Addendum of this final rule for a 
complete discussion of the budget neutrality impact of the application 
of the rural floor.
    Comment: Several commenters expressed concern with the timing of 
our proposed policy as it relates to Medicare Advantage (MA) 
reimbursement funding for MA plans. Commenters cited locations that 
would have significant, sudden increases in hospital payment rates due 
to the proposed change in the calculation of the rural wage index 
values and cited potential severe financial hardships (including 
increased insurance rates) if such plans are not granted adequate time 
to transition and adjust to the implications of the policy change.
    Another commenter stated that while budget neutrality may mitigate 
the impact of CMS's rural wage index adjustments overall, it does not 
prevent significant regional impacts. The commenter stated that MA 
organizations have limited mechanisms to account for any increased 
costs given that they must pay the FFS rate for non-contracted 
providers. The negative impacts would be greater on small, regional 
plans that do not provide services across a broad enough area to 
mitigate the effects. Commenters requested CMS delay changes to the 
rural wage index or implement a companion policy to counterbalance the 
effects of the policy.
    Response: After reviewing the concerns submitted by commenters 
regarding the potential impact this policy would have on MA plan 
payments, we are not convinced that the impact of this specific policy 
is exceptionally unique (in either form or magnitude) from other policy 
proposals made in past cycles. That is, we note that any change in 
policy that has the effect of increasing the wage index of an area will 
always result in an increase in MA payment rates to non-contracted 
hospital providers in that area. It would be out of the scope of this 
rulemaking to implement any change in MA payment policy (for example, 
raising benchmark rates) and outside of our authority to change the 
statutory bidding deadline for MA organizations (the first Monday in 
June of the year preceding the payment and coverage year), and given 
the broad general support we received from other commenters, we find 
the benefits of the proposed policy outweigh the possible repercussions 
highlighted by the commenter. Further, MA rates (that is, the bidding 
benchmarks) are set, in part, using projections of national FFS per 
capita costs for the payment year combined with a localized cost index, 
or the average geographic adjustment (AGA). The AGA is based on the 
most recent five-years of historical FFS experience. The IPPS claims 
supporting the AGAs are repriced using the most recent available wage 
index, which is FY 2023 for the 2024 MA rates. (These projections are 
subject to specific statutory exclusions of certain costs that are 
explained in the annual Rate Announcement.)
    In response to the specific request to delay IPPS payment changes 
because of non-contract MA claims, for the reason cited in the proposed 
rule (83 FR 26976 through 26977), we believe that any delay to the 
proposed changes to the rural wage index calculation would be 
detrimental to hospitals and would result in additional litigation. 
Consistent with sections 1852(a)(2), 1852(k)(1), and 1866(a)(1)(O) of 
the Act, non-contract providers must accept as payment in full payment 
amounts applicable in Original Medicare. We will take these comments 
regarding MA payment implications into consideration for future 
rulemaking.
    Comment: A commenter requested that CMS provide clarification on 
how its proposed interpretation of Sec.  412.103 impacts the distance 
and proximity requirements for MGCRB reclassification. The commenter 
specifically asked if a Sec.  412.103 redesignated hospital can seek 
MGCRB reclassification to any CBSA within 35 miles of any point of the 
State's rural area or to any CBSA adjacent to the rural area.
    Response: We believe the commenter is misunderstanding the current 
MGCRB reclassification rules. Hospitals with a Sec.  412.103 
reclassification will continue to use the 35-mile rural proximity 
criterion at Sec.  412.230(b)(1). All reclassification proximity 
criteria that use mileage begin the measurement at the hospital's 
geographic address and end at the nearest point in the requested CBSA 
area.
    After consideration of public comments received, we are adopting 
the proposed changes to the rural wage index calculations as described 
in the proposed rule. Specifically, we are adopting without change our 
proposed interpretation of section 1886(d)(8)(E) of the Act. 
Accordingly, we are finalizing our proposal 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. We are also finalizing the 
proposed 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 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 finalizing our policy to continue 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, for wage index purposes only.
    We note in this final rule that an additional corollary of the 
changes

[[Page 58977]]

being finalized regarding our treatment of hospitals reclassified under 
Sec.  412.103 is that a hospital with a Sec.  412.103 reclassification 
should be considered as being located in its State's rural area for the 
purposes of applying the hold harmless provision under section 
1886(d)(8)(C)(iii) of the Act. This would prevent the rare situation 
where Sec.  412.103 hospitals with the state-to-state rural MGCRB 
reclassification would be assigned a lower wage index than 
geographically rural hospitals with the same state-to-state rural MGCRB 
reclassification.
    We note that this policy implication would not alter any wage index 
values for any hospital or CBSA for this FY 2024 rule, but will have 
some minor underlying budget neutrality implications, as several 
additional hospitals will be assigned their State's rural wage index 
prior to the application of the ``rural floor'' provision (insofar as 
CMS applies a budget neutrality adjustment in implementing the ``rural 
floor'').
2. Imputed Floor
    In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we 
adopted the imputed floor policy as a temporary 3-year regulatory 
measure to address concerns from hospitals in all urban States that 
have stated that they are disadvantaged by the absence of rural 
hospitals to set a wage index floor for those States. We extended the 
imputed floor policy eight times since its initial implementation, the 
last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and 
expired on September 30, 2018. We refer readers to further discussions 
of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014 
through 2019 (78 FR 50589 through 50590, 79 FR 49969 through 49971, 80 
FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 38138 through 
38142, and 83 FR 41376 through 41380, respectively) and to the 
regulations at 42 CFR 412.64(h)(4). For FYs 2019, 2020, and 2021, 
hospitals in all-urban states received a wage index that was calculated 
without applying an imputed floor, and we no longer included the 
imputed floor as a factor in the national budget neutrality adjustment.
    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) of the Act 
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 final rule, States that will be 
all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the 
Act, and thus hospitals in such States that will 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 final 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 will 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).
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 the FY 2024 IPPS/
LTCH PPS proposed rule, we did not propose any changes to the frontier 
floor policy for FY 2024. In the proposed rule we stated 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 did not receive any public comments on the application of the 
State frontier floor for FY 2024. In this final rule, 42 hospitals will 
receive the frontier floor value of 1.0000 for their FY 2024 wage 
index. These hospitals are located in Montana, North Dakota, South 
Dakota, and Wyoming. We note that while Nevada meets the criteria of a 
frontier State, all hospitals within the State currently receive a wage 
index value greater than 1.0000. The areas affected by the rural and 
frontier floor policies for the final FY 2024 wage index are identified 
in Table 2 associated with this final rule, which is available via the 
internet on the CMS website.
4. Continuation of the Low Wage Index Hospital Policy 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 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

[[Page 58978]]

increase employee compensation without the usual lag in those increases 
being reflected in the calculation of the wage index.\193\ 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.
---------------------------------------------------------------------------

    \193\ 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 final 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 proposed 
to continue the low wage index hospital policy and the related budget 
neutrality adjustment (discussed in this section of this rule).
    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 proposed 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 
final 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 final rule, the table displays the 25th percentile 
wage index value across all hospitals for FY 2024.
[GRAPHIC] [TIFF OMITTED] TR28AU23.235

    Comment: Several commenters supported the low wage index hospital 
policy. Numerous commenters indicated that they have used the increased 
payments resulting from the low wage index hospital policy as CMS 
intended, resulting in a positive impact on their workforce recruitment 
and retention. Commenters commended the extension of the policy and 
noted that there continues to be insufficient data to support modifying 
or discontinuing the policy. Commenters explained that CMS should 
continue to extend the policy until a full four-year period of wage 
data is gathered in order to more fully evaluate the effectiveness of 
the policy. Several commenters noted that the full 4 years of wage data 
gathered should be post-COVID-19 wage data in part due to ongoing 
workforce shortages and regional impacts as a result of the COVID-19 
public health emergency (PHE). Specifically, one commenter explained 
that CMS should not be utilizing any data from FY 2020 due to the 
impacts of the PHE and other commenters urged CMS to continue the low 
wage index policy at least through FY 2030 in order to collect wage 
data outside of the PHE.
    Some commenters asked that CMS provide clarification on its plans 
for this low-wage hospital policy moving forward, urging CMS to specify 
how many years of data it expects to need in order to evaluate whether 
the policy has increased wages for low-wage hospitals. Commenters also 
urged CMS to describe how it will account for the dramatic shifts in 
wage costs during the COVID-19 PHE, while explaining that doing so will 
help provide clarity and predictability to the field, especially during 
the current financial climate in which hospitals are operating.
    A commenter explained that regardless of whether the low-wage 
hospital policy had its intended effect, CMS should now enter the 
evaluation phase, ending the artificial increase in the low quartile 
hospitals' wage indices after four years. According to the commenter, 
if CMS disagrees that four

[[Page 58979]]

years of the policy is sufficient, it should better justify continuing 
the policy and lay out its criteria for evaluating the policy's 
potential success and at what point it should be terminated.
    Response: We thank the many commenters expressing their support of 
the low wage index hospital policy and the continued feedback regarding 
achievement of the intended policy goal. We appreciate the commenters' 
requests to consider the impacts of COVID-19, to extend this policy 
beyond four years due to COVID-19, and to extend the policy until the 
intended goals of the policy are reached. We appreciate commenters' 
suggestions on how we might evaluate the effectiveness of the policy 
and may consider those suggestions in future rulemaking.
    Regarding the comments requesting clarity about how many years of 
data are needed in order to evaluate whether the policy has increased 
wages for low-wage hospitals, as noted in the proposed rule and earlier 
in this section of the final rule, in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42326 through 42328) we stated our intention that this 
policy will be effective for at least 4 years, until the policy's 
effects could be reflected in the wage index data. As discussed in 
section III.B. of the preamble of this final 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). 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. Again, as described earlier in this section, when this policy 
was finalized in the FY 2020 IPPS/LTCH PPS final rule, it was our 
intention that it would be effective for at least 4 years, until the 
policy's effects could be reflected in the wage index data. Given our 
current lack of sufficient data with which to evaluate the low wage 
index hospital policy, currently having access to only one year of 
relevant data at this time due to the 4-year data lag also as described 
earlier in this section, 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.
    Comment: Several commenters expressed their support for the 
continued implementation of wage index payment increases for low-wage 
hospitals but urged CMS to do so in a non-budget-neutral manner. 
Commenters stated that implementing the policy with a budget neutrality 
adjustment merely redistributes funds from one hospital to another, 
arbitrarily causing some hospitals to experience a payment decrease and 
others an increase. One commenter stated that those hospitals that fall 
between approximately the 22nd and 25th percentile are receiving a 
reduction to the wage adjusted standardized rate because the amount of 
benefit received is less than the cost to fund the benefit. This 
commenter suggested holding hospitals under the 25th percentile 
harmless. Commenters also provided other suggestions for data and 
alternative methodologies to include: reducing the wage index for 
hospitals with values above the 75th percentile; working with Congress 
on a more permanent fix to address the disparities in the wage index by 
establishing a national floor for all hospitals; and seeking input from 
the hospital community on best overall reform options that will better 
avoid downstream consequences from wage index policy changes.
    Response: We disagree with the commenters that the low wage index 
hospital policy should be implemented in a non-budget neutral manner. 
As we stated in response to similar comments in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42331 and 42332), the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45180), and the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49007), under section 1886(d)(3)(E) of the Act, the wage index 
adjustment is required to be implemented in a budget neutral manner. 
However, even if the wage index were not required to be budget neutral 
under section 1886(d)(3)(E) of the Act, we would consider it 
inappropriate to use the wage index to increase or decrease overall 
IPPS spending. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42331), the wage index is not a policy tool but rather a technical 
adjustment designed to be a relative measure of the wages and wage-
related costs of subsection (d) hospitals. As a result, as we explained 
in the FY 2020 IPPS/LTCH PPS final rule, if it were determined that 
section 1886(d)(3)(E) of the Act does not require the wage index to be 
budget neutral, we invoke our authority at section 1886(d)(5)(I) of the 
Act in support of such a budget neutrality adjustment.
    With regard to the commenter's concern that application of the low 
wage index policy may result in a reduction to overall payment if the 
amount of benefit received from the wage index boost is less than the 
reduction to the standardized amount, we believe we have applied both 
the quartile policy and the budget neutrality policy appropriately. As 
we explained most recently in response to comments in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49007), the quartile adjustment is applied 
to the wage index, which results in an increase to the wage index for 
hospitals below the 25th percentile. The budget neutrality adjustment 
is applied to the standardized amount in order to ensure that the low 
wage index hospital policy is implemented in a budget neutral manner. 
Thus, consistent with our current methodology for implementing wage 
index budget neutrality under section 1886(d)(3)(E) of the Act and with 
how we implemented budget neutrality for the low wage index hospital 
policy in FY 2020, we believe it is appropriate to continue to apply a 
budget neutrality adjustment to the national standardized amount for 
all hospitals so that the low wage index hospital policy is implemented 
in a budget neutral manner for FY 2024.
    Regarding the comment about reducing the wage index for hospitals 
with values above the 75th percentile, in the FY 2020 IPPS/LTCH final 
rule (84 FR 42329), we discussed that we originally proposed to reduce 
the wage index values for high wage index hospitals using a methodology 
analogous to the methodology used to increase the wage index values for 
low wage index hospitals described in section III.N.3.a. of the 
preamble of the proposed rule; that is, we proposed to decrease the 
wage index values for high wage index hospitals by a uniform factor of 
the distance between the hospital's otherwise applicable wage index and 
the 75th percentile wage index value for a fiscal year across all 
hospitals. In response to comments we received (84 FR 42329 and 42330), 
we acknowledged that some commenters presented reasonable policy 
arguments that we should consider further regarding the relationship 
between our proposed budget neutrality adjustment targeting high wage 
hospitals and the design of the wage index to be a relative measure of 
the wages and wage-related costs of subsection (d) hospitals in the 
United States. Therefore, in the FY 2020 IPPS/LTCH final rule, we did 
not finalize our proposal to target that budget neutrality adjustment 
on high wage hospitals (84 FR 42331). Regarding the comment about the 
establishment of a national floor for all hospitals, we noted in 
response to a similar comment in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42338 through 42339), as we

[[Page 58980]]

do not have evidence a national rural labor market exists or would be 
created if we were to adopt this alternative, this alternative would 
not increase the accuracy of the wage index. Also, we believe we have 
applied both the quartile policy and the budget neutrality policy 
appropriately, as we explained in response to comments in the FYs 2021 
and 2022 IPPS/LTCH PPS final rules and most recently FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49007). The quartile adjustment is applied to the 
wage index, which resulted in an increase to the wage index for 
hospitals below the 25th percentile. The budget neutrality adjustment 
is applied to the standardized amount in order to ensure that the low 
wage index hospital policy is implemented in a budget neutral manner.
    Comment: Several commenters opposed the low wage index hospital 
policy, stating that it is inappropriately redistributive, ineffective, 
and outside the agency's statutory authority under section 
1886(d)(3)(E) of the Act. Specifically, some commenters stated that 
although the policy is intended to help rural hospitals, some rural 
hospitals in certain states do not benefit from this policy. 
Furthermore, a commenter stated that the policy undermines the intent 
of the wage index by not recognizing real differences in labor costs.
    Response: We believe we addressed the stated concerns in our 
responses to comments when we first finalized the policy and the 
related budget neutrality adjustment in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42325 through 42332). Concerning the policy's 
redistributive effect, we refer readers to our response to the previous 
comments about budget neutrality. With regard to the policy's 
effectiveness, we continue to believe that the comments in support of 
the policy, specifically comments from relatively low-wage hospitals 
stating that the increased payments under the policy have allowed them 
to raise compensation for their workers, indicate that many low wage 
hospitals are benefiting from this policy. Furthermore, we stated in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328) our 
intention that this policy will be effective for at least 4 years, 
until the policy's effects could be reflected in the wage index data. 
Regarding the policy's effect on rural hospitals, as we stated FY 2020 
IPPS/LTCH PPS final rule (84 FR 42328), the wage index is a technical 
payment adjustment. The intent of the low wage hospital policy is to 
increase the accuracy of the wage index as a technical adjustment, and 
not to use the wage index as a policy tool to address non-wage issues 
related to rural hospitals, or the laudable goals of the overall 
financial health of hospitals in low wage areas or broader wage index 
reform. The low wage hospital policy aims to increase the accuracy of 
the wage index as a relative measure because it allows low wage index 
hospitals to increase their employee compensation in ways that we would 
expect if there were no lag between the time a hospital increases 
employee compensation and the time these increases are reflected in the 
wage index, and allows those increases to be more timely reflected in 
the wage index. While one effect of the policy may be to improve the 
overall well-being of low wage hospitals, and we would welcome that 
effect, that is not the primary rationale for our policy.
    In response to comments stating the policy exceeds CMS's statutory 
authority, we refer the commenters to our prior discussion of the 
authority for the policy in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42326 through 42332).
    In response to the assertion that the low wage index hospital 
policy does not recognize real differences in labor costs, we continue 
to believe, for the reasons stated in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42327 and 42328), that by preserving the rank order in wage 
index values, our policy continues to reflect meaningful distinctions 
between the employee compensation costs faced by hospitals in different 
geographic areas. Thus, under the low wage index hospital policy, we 
believe the wage index for low wage index hospitals appropriately 
reflects the relative hospital wage level in those areas compared to 
the national average hospital wage level.
    Comment: Many commenters noted that the low wage index hospital 
policy is currently the subject of pending litigation in Bridgeport. A 
few commenters urged CMS not to finalize the policy for FY 2024, or to 
wait until a final court decision is reached. One such commenter 
suggested CMS should eliminate the budget neutrality adjustments for 
FYs 2020, 2021, 2022 and 2023 in light of Bridgeport. Many commenters 
applauded CMS's decision to appeal the district court's decision in 
Bridgeport. These commenters stated that the consequences of halting 
the policy would be dire.
    Response: We appreciate the commenters' input. As noted previously, 
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.
    After consideration of the comments we received, and for the 
reasons stated previously and in the proposed rule, we are finalizing 
as proposed to continue the low wage index hospital policy and the 
related budget neutrality adjustment for FY 2024.
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 will 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).
    Although we did not propose changes to the policy to apply a 
permanent cap on wage index decreases, we received comments which are 
summarized and responded to as follows.
    Comment: Many commenters expressed their support for CMS's policy, 
as finalized in the FY 2023 IPPS/

[[Page 58981]]

LTCH PPS final rule (87 FR 49018 through 49021), to limit any decrease 
in a hospital's wage index value to be no greater than 5 percent as 
compared to the hospital's wage index value for the prior fiscal year, 
regardless of the circumstances causing the decline. According to 
commenters, the policy helps maintain stability and predictability to 
current and future payments under the IPPS by preventing abrupt 
variation in year-to-year wage data for affected hospitals, much of 
which may be beyond a hospital's control.
    Response: We appreciate the support from commenters.
    Comment: Several commenters that supported the policy to apply a 
permanent cap on wage index decreases, explained that CMS is not bound 
by statute to make the policy budget neutral and urged CMS to revisit 
how the policy is funded in order to implement the policy in a non-
budget neutral manner. According to these commenters, the budget 
neutral aspect of the policy causes unintended consequences as payment 
rates are redistributed and undermines the intended benefit of the 
policy. Commenters asked CMS to examine alternatives to fund this 
policy so that the policy is funded using separate and additional 
funds, rather than in a budget neutral way that reduces the wage 
indexes of other hospitals. Furthermore, commenters explained that 
implementing this policy in a non-budget neutral manner would both 
stabilize provider reimbursement and avoid further unexpected 
reductions for other providers. Finally, commenters encouraged CMS to 
continue working with stakeholders and Congress to address the need for 
more comprehensive reforms.
    Response: We thank the commenters for their input regarding the 
policy to apply a permanent cap on wage index decreases. As discussed 
in our response to comments in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49020), the budget neutrality adjustment associated with the 
permanent cap on wage index increases policy is implemented through our 
authority under sections 1886(d)(3)(E) and (d)(5)(I)(i) of the Act. 
Section 1886(d)(3)(E) gives the Secretary broad authority to adjust for 
area differences in hospital wage levels by a factor (established by 
the Secretary) reflecting the relative hospital wage level in the 
geographic area of the hospital compared to the national average 
hospital wage level, and requires those adjustments to be applied in a 
budget neutral manner. However, even if the wage index were not 
required to be budget neutral under section 1886(d)(3)(E) of the Act, 
we would not consider it an appropriate alternative to use the wage 
index and the proposed permanent cap on wage index decreases to 
increase or decrease overall IPPS spending. The wage index is not a 
policy tool but rather a technical adjustment designed to be a relative 
measure of the wages and wage-related costs of subsection (d) hospitals 
in the United States. Furthermore, our past policies involving a 5 
percent cap on wage index decreases implemented in a budget neutral 
manner did not result in wage index volatility, and we expect the same 
for the overall budget neutrality adjustments associated with the 
permanent cap policy. For more information about the wage index cap 
policy and associated budget neutrality adjustment finalized in FY 2023 
for FY 2023 and subsequent years, we refer readers to the discussion in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021). For 
FY 2024, we will 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 will be updated, as appropriate, based on the final rule 
data. We refer readers to the Addendum of this final rule for further 
information regarding the budget neutrality calculations.

H. FY 2023 Wage Index Tables

    In this FY 2024 IPPS/LTCH PPS final 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 
final rule for a discussion of the wage index tables for FY 2024.

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

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

[[Page 58982]]

    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 to section III.G.1 of the preamble of this final 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. There are 466 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 271 hospitals approved for wage index reclassifications in 
FY 2022 that will continue for FY 2024, and 325 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, 1062 (approximately 30 percent) hospitals are in a 
MGCRB reclassification status for FY 2024 (with 187 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's 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.
    Comment: A commenter noted that the MGCRB issued determinations for 
FY 2024 on January 31, 2023. The commenter stated that this was earlier 
than in the past, when the MGCRB typically issued determinations mid-
February, to meet the statutory requirement for decisions to be issued 
by the end of February. The commenter requested that CMS limit the 
MGCRB from issuing decisions prior to the first week of February to 
allow hospitals ample time to submit documentation of rural 
reclassification, SCH and RRC status to the Board or to submit a 
request to withdraw an application based on review of the January PUF. 
The commenter stated that without a

[[Page 58983]]

more definitive timeline, hospitals face uncertainty if their 
documentation will be accepted by the MGCRB and could be adversely 
affected by an early decision being issued by the Board.
    Response: We disagree with the commenter that hospitals are 
disadvantaged by earlier issuance of MGCRB decisions. First, we believe 
hospitals should submit applications complete with supporting 
documentation at the time MGCRB applications are due. Hospitals taking 
advantage of the MGCRB's practice of accepting supporting documentation 
to supplement applications until the date of the MGCRB's review are 
aware that the review is not held on the same date annually. In fact, 
the MGCRB even issued determinations for FY 2024 on a later date in 
January than it issued determinations for FY 2023 (January 31, 2023, 
versus January 24, 2022). Furthermore, rural reclassification may be 
obtained at any time, and hospitals seeking benefits of rural status 
for MGCRB reclassification should plan accordingly. Finally, we note 
that hospitals dissatisfied with the MGCRB's decision may request the 
Administrator's review under Sec.  412.278. With regard to hospitals 
requesting to withdraw a pending reclassification application following 
review of the January PUF, hospitals may withdraw a reclassification 
after the MGCRB has issued decisions, within 45 days of the date that 
CMS's annual notice of proposed rulemaking is issued in the Federal 
Register, per the regulations at Sec.  412.273. Therefore, we do not 
believe hospitals are disadvantaged by the earlier timing of MGCRB 
decisions, because they can submit supporting documentation timely, 
obtain a rural reclassification in advance, request the Administrator's 
review of an MGCRB decision, and withdraw an unwanted reclassification.
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 out-migration 
adjustment. In addition, in that rule, we adopted a minor procedural 
change that allows 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 will 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 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 out-migration 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 out-migration adjustment will be denied, and the hospital 
will 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 
will 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 out-migration adjustment under section 
1886(d)(13)(G) of the Act.
    We received three timely requests in the [email protected] 
mailbox from CCN 230005 (located in Lenawee County, PA), and CCNs 
390183 and 390332 (located in Schuykill county, PA) to waive ``Lugar'' 
reclassification status to accept the county out-migration adjustment 
(OMA). These requests are approved. All three hospitals have current 
Sec.  412.103 rural reclassifications. Per the regulation at Sec.  
412.103(g)(5), the rural reclassification status will be terminated, 
effective October 1, 2023. The status of these requests will be listed 
in Table 2 in the addendum of this final rule.
    We received one request from CCN 150076 on June 13, 2023. The 
deadline to file a request to waive ``Lugar'' reclassification status 
to accept its county OMA was May 25, 2023; 45 days from the date of 
public display (April 10, 2023) of the proposed rule at the Office of 
the Federal Register. This request is therefore denied.

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

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment or OMA). 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

[[Page 58984]]

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 out-migration 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 proposed 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 
did not propose any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).)
    Comment: A commenter stated that CMS should reconsider whether an 
out-migration adjustment should be applied to hospitals with a Sec.  
412.103 rural reclassification. The commenter stated that, in light of 
the proposed modification to treat Sec.  412.103 hospitals the same as 
geographically rural hospitals in the wage index calculation 
methodology, a Sec.  412.103 hospital without an MGCRB or ``Lugar'' 
designation should be eligible to receive its county's calculated OMA.
    Response: We disagree that a hospital with an active Sec.  412.103 
rural reclassification is eligible to receive an OMA. Section 
1886(d)(13)(G) of the Act states that a hospital that receives an OMA 
is not eligible for reclassification under section 1886(d)(8) or 
1886(d)(10) of the Act. Section 1886(d)(8) of the Act describes both 
deemed urban status under section 1886(d)(8)(B) (``Lugar'' 
reclassification) and obtaining rural status under section 
1886(d)(8)(E) of the Act (implemented by Sec.  412.103). By voluntarily 
applying for a Sec.  412.103 rural reclassification, a hospital is 
therefore waiving the application of the OMA, as described at section 
1886(d)(13)(F) of the Act. Therefore, for the reasons set forth in this 
final rule and in the FY 2024 IPPS/LTCH PPS proposed rule, for FY 2024, 
we are finalizing our proposal, without modification, to continue using 
the same policies, procedures, and computations that were used for the 
FY 2012 out-migration adjustment and that were applicable for FYs 2016 
through 2023.
    Table 2 associated with this final 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 final rule, 
``List of Counties Eligible for the Out-Migration Adjustment under 
Section 1886(d)(13) of the Act'' (also available via the internet on 
the CMS website), consists of the following: A list of counties that 
are eligible for the out-migration adjustment for FY 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 final rule for instructions on 
accessing IPPS tables that are posted on the CMS websites identified in 
this final 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 data of urban hospitals 
reclassifying to rural areas under 42 CFR 412.103. We also refer 
readers to section III.G.1. of the preamble of this final 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

[[Page 58985]]

these remote locations in Table 2 with a ``B'' in the 3rd position of 
the CCN. These remote locations of hospitals with 42 CFR 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 final rule, we 
are changing 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 finalizing that in these 
circumstances, and subject to the requirements set forth at new Sec.  
412.92(b)(2)(vi), the effective date for rural reclassification will be 
as of the effective date set forth in new Sec.  412.92(b)(2)(vi).
    Also, in section V.C.2 of the preamble of this final rule, we are 
making 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 amending 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 new Sec.  412.92(b)(2)(vi), the effective 
date for rural reclassification for such hospital will 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 final 
rule for complete details on these policies.

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 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) was 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, was 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 were given the opportunity to examine Table 2 associated 
with the

[[Page 58986]]

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 noted in the proposed rule 
that the proposed hospital average hourly wages shown in Table 2 only 
reflected changes made to a hospital's data that were transmitted to 
CMS by early February 2023.
    We posted 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 was 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, was also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital was notified on or 
after 13 calendar days prior to April 1, 2023 (that is, March 19, 
2023), and at least 14 calendar days prior to May 26, 2023 (that is, 
May 12, 2023), that did not arise from a hospital's request for 
revisions. (Data corrections made by CMS of which a hospital was 
notified on or after 13 calendar days prior to May 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 were 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 were 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 attention. 
Moreover, because hospitals had 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

[[Page 58987]]

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

[[Page 58988]]

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. 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, 45529, and 
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 the proposed rule, 
for FY 2024, we did not propose to make any further changes to the 
labor-related share. For FY 2024, we are finalizing the policy 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 final rule, 
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 
percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2024, we did 
not propose 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 final rule and available via the 
internet on the CMS website, reflect the national labor-related share. 
Table 1C, in section VI. of the Addendum to this FY 2024 IPPS/LTCH PPS 
final rule and available via the internet on the CMS website, reflects 
the national labor-related share for hospitals located in Puerto Rico. 
For FY 2024, for all IPPS hospitals (including Puerto Rico hospitals) 
whose wage indexes are less than or equal to 1.0000, we are applying 
the wage index to a labor-related share of 62 percent of the national 
standardized amount. For all IPPS hospitals (including Puerto Rico 
hospitals) whose wage indexes are greater than 1.000, for FY 2024, we 
are applying the wage index to a labor-related share of 67.6 percent of 
the national standardized amount.
    Comment: A commenter requested that CMS maintain the labor-related 
share from FY 2023 for FY 2024.
    Response: We did not propose to make any further changes to the 
labor-related share for FY 2024. As discussed earlier, for FY 2024, we 
are continuing to use a labor-related share of 67.6 percent for 
discharges occurring on or after October 1, 2023.

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 method, is based on a complex statutory formula 
under which the DSH payment

[[Page 58989]]

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] TR28AU23.236

    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 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 provided uncompensated care. 
These additional 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.
    In summary, 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 two separately calculated payments:
[GRAPHIC] [TIFF OMITTED] TR28AU23.237

    Specifically, section 1886(r)(1) of the Act provides that the 
Secretary shall pay to such subsection (d) hospital 25 percent of the 
amount the hospital would have received under section 1886(d)(5)(F) of 
the Act for DSH payments, which represents the empirically justified 
amount for such payment, as determined by the MedPAC in its March 2007 
Report to Congress.\194\ We refer to this payment as the ``empirically 
justified Medicare DSH payment.''
---------------------------------------------------------------------------

    \194\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/Mar07_EntireReport.pdf.
---------------------------------------------------------------------------

    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, 
equal to 1 minus the percent change in the percent of individuals who 
are uninsured. For purposes of calculating this factor, the Secretary 
determines the percent change in the percent of individuals who are 
uninsured by comparing the percent of individuals who were uninsured in 
2013 (as estimated by the Secretary

[[Page 58990]]

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).
    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] TR28AU23.238

    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 beginning 
in 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 
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 
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. In addition, section 1886(r) of the Act states that 
hospitals must receive empirically justified Medicare DSH payments in a 
fiscal year to receive an additional Medicare uncompensated care 
payment for that year. Specifically, section 1886(r)(2) of the Act 
provides that, in addition to the empirically justified Medicare DSH 
payment made to a subsection (d) hospital under section 1886(r)(1), the 
Secretary will pay to ``such subsection (d) hospitals'' the 
uncompensated care payment. Section 1886(r)(2)'s reference to ``such 
subsection (d) hospitals'' refers to hospitals that receive empirically 
justified Medicare DSH payments under Section 1886(r)(1). Therefore, 
the uncompensated care payment provided for in Section 1886(r)(2) is 
limited to those hospitals that receive empirically justified Medicare 
DSH payments.
    Accordingly, 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 explained that hospitals that are not eligible to receive 
empirically justified Medicare DSH payments in a fiscal year will not 
receive uncompensated care payments for that year. We also specified 
that we would make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available).\195\ In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26988), we stated that we would estimate DSH status for all hospitals 
using the most recent available SSI ratios and information from the 
most recent available Provider Specific File.\196\ We noted that FY 
2020 SSI ratios available on the CMS website were the most recent 
available SSI ratios at the time of developing the proposed rule.\197\ 
We stated that if more recent data on DSH eligibility become available 
before the final rule, we would use such data in the final rule. The FY 
2020 SSI ratios were the most recent data available at the time of 
developing this FY 2024 IPPS/LTCH PPS final rule.
---------------------------------------------------------------------------

    \195\ For more information on interim uncompensated care 
payments, we refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50624 through 50625).
    \196\ The file contains information about the facts specific to 
the provider that affect computations for the IPPS.
    \197\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.
---------------------------------------------------------------------------

    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 specified our policies 
regarding the eligibility of several specific classes of hospitals to 
receive empirically justified Medicare DSH payments and uncompensated 
care payments under section 1886(r) of the Act.

[[Page 58991]]

    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).
     Sole community hospitals (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. If an SCH receives 
interim empirically justified Medicare DSH payments in a fiscal year, 
it also will receive interim uncompensated care payments for that 
fiscal year on a per discharge basis, subject 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 updated hospital-specific 
rate from certain specified base years (76 FR 51684) exceeds the 
Federal rate. 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) 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 final 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. Under this Model, which began on January 1, 2019, and 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.
     SCHs that are paid under their hospital-specific 
rate are not eligible for Medicare DSH and uncompensated care payments. 
(See 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 solicitation for applications for additional hospitals to 
participate in the demonstration program. The period of performance for 
this second 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 will end on 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 
excluded from receiving interim and final uncompensated care payments. 
At the time of development of this final rule, we expect 26 hospitals 
may participate in the demonstration program at the start of FY 2024.
    We received a comment that was outside the scope of the proposed 
rule. The comment related to the eligibility of SCHs paid under 
hospital-specific rate and MDHs to receive DSH payments.

[[Page 58992]]

Because we consider this public comment to be outside the scope of the 
proposed rule, we are not addressing the comment in this final rule.

C. Empirically Justified Medicare DSH Payments

    As we 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 Medicare program to pay a designated percentage of these 
payments and does not revise 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 had determined that it was 
unnecessary to develop new operational mechanisms for making 
empirically justified DSH payments under section 1886(r)(1). Therefore, 
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented 
section 1886(r)(1) of the Act by advising Medicare Administrative 
Contractors (MACs) to simply adjust subsection (d) hospitals' interim 
claim payments to an amount equal to 25 percent of what would have been 
paid if section 1886(r) of the Act did not apply. 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, which 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 fiscal 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 that 
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.
    Comment: Two commenters expressed continued support for these 
supplemental payments to lessen the impact of discontinuing the use of 
low-income patient days to calculate uncompensated care payments for 
IHS/Tribal hospitals and hospitals in Puerto Rico. Specifically, a 
commenter noted that the permanent supplemental payments will mitigate 
the undue long-term financial disruption that would have occurred due 
to the discontinuance of the previous methodology for calculating 
uncompensated care costs.
    Many commenters reiterated their recommendations that were 
submitted in response to the proposal to establish these supplemental 
payments in last year's proposed rule. Specifically, these commenters 
recommended that CMS calculate the supplemental payment for Puerto Rico 
hospitals using a base year amount determined from Medicaid days and an 
SSI days proxy of at least 40 percent of the hospital's Medicaid days, 
instead of the proxy that applied from FY 2017 through FY 2022, 
consisting of 14 percent of the hospital's Medicaid days, and was 
developed based on national data regarding the relationship between 
Medicare SSI days and Medicaid days. In addition, these commenters 
requested that CMS make all acute care hospitals in Puerto Rico 
eligible to receive uncompensated care payments, including those that 
do not qualify for empirically justified DSH payments, which the 
commenters believe would be consistent with statutory language. As an 
alternative, these commenters requested that CMS determine a hospital's 
eligibility to receive uncompensated care payments and supplemental 
payments using the suggested proxy for Medicare SSI days of 40 percent 
of the hospital's Medicaid days. These commenters contend that 
hospitals that fail to qualify for empirically justified DSH payments 
might still qualify for uncompensated care payments by using the 40 
percent metric.
    Another commenter requested that CMS evaluate alternatives to the 
supplemental payment that would better support hospitals in Puerto Rico 
in instances of increasing uninsured days. This commenter argued that 
the supplemental payment only mitigates the anticipated impact of the 
changes to the uncompensated care payment methodology starting in FY 
2023 relative to these hospitals' 2022 uncompensated care payment 
levels. However, the commenter stated that this approach is not helpful 
if uninsured patient volumes rise above the 2022 levels. The same 
commenter further expressed that they would alternatively support a 
return to the prior method of using a proxy to determine uninsured days 
for hospitals in Puerto Rico given the challenges around the collection 
of Worksheet S-10 data.
    The Medicare Payment Advisory Commission (MedPAC) recommended that 
CMS alter its methodology for making interim supplemental payments as 
an add-on payment to the IPPS payment rates for Puerto Rico hospitals 
to avoid distorting Medicare Advantage (MA) benchmarks. MedPAC argued 
that the $80 million in supplemental payments to Puerto Rico hospitals 
in 2023 would inappropriately boost payments to MA plans operating in 
Puerto Rico by almost $1 billion per year.
    Response: We appreciate the concerns and input raised by commenters 
regarding the supplemental payment for hospitals in Puerto Rico and IHS 
and Tribal hospitals that was established in

[[Page 58993]]

the FY 2023 IPPS/LTCH PPS final rule. We continue to recognize the 
unique financial circumstances and challenges faced by Puerto Rico 
hospitals and IHS and Tribal hospitals related to uncompensated care 
cost reporting on Worksheet S-10, with respect to uncompensated care 
due to structural differences in health care delivery and financing in 
these areas compared to the rest of the country (87 FR 49047). With 
respect to comments regarding SSI proxy recommendations, we refer 
readers to our response to a similar comment in the FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49049 and 49050).
    Regarding the commenter's request that all acute care hospitals in 
Puerto Rico receive uncompensated care payments regardless of DSH 
eligibility, we refer readers to the policy initially adopted in the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50622 and 50623), which explains 
that hospitals, including Puerto Rico hospitals, must be eligible to 
receive empirically justified Medicare DSH payments to receive an 
additional Medicare uncompensated care payment for that year. As 
discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048 and 
49049), the processes for determining eligibility for the supplemental 
payment and making interim and final payments are consistent with the 
processes for determining eligibility to receive interim and final 
uncompensated care payments adopted in FY 2014 IPPS/LTCH final rule and 
the approach used to make interim uncompensated care payments on a per 
discharge basis.
    With respect to the comments recommending that CMS determine 
eligibility to receive empirically justified DSH payments using the 
suggested proxy for SSI days of 40 percent of Medicaid days, we note 
that in the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose to 
adopt a proxy for Puerto Rico hospitals' SSI days for use in 
determining eligibility to receive empirically justified Medicare DSH 
payments or the amount of such payments. Therefore, these comments are 
considered to be outside the scope of the FY 2024 proposed rule. 
However, we note that as discussed in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49050), section 1886(d)(5)(F)(vi) of the Act prescribes the 
disproportionate patient percentage used to determine empirically 
justified Medicare DSH payments, and it specifically calls for the use 
of SSI days in the Medicare fraction and does not allow the use of 
alternative data. Therefore, we continue to disagree with the 
commenter's assertion that there is legal support for CMS to use a 
proxy for Puerto Rico hospitals' SSI days in the calculation of the 
empirically justified Medicare DSH payment or in the eligibility 
determination for this payment.
    Regarding the comments encouraging CMS to evaluate alternatives to 
supplemental payments to support Puerto Rico hospitals in the case of 
increasing uninsured days, we note that prior to FY 2023, we used low-
income insured days as a proxy for uncompensated care costs. In 
contrast, we have never directly considered fluctuations in uninsured 
days in the calculation of uncompensated care payments. Therefore, we 
continue to believe that the supplemental payments, which are based on 
the FY 2022 uncompensated care payments calculated for Puerto Rico 
hospitals and IHS and Tribal hospitals using the low-income insured 
days proxy, are an appropriate approach to address the difficulties for 
Puerto Rico and IHS and Tribal hospitals in reporting uncompensated 
care costs.
    In response to MedPAC's comment, we continue to believe the 
combined amount of empirically justified DSH payments, uncompensated 
care payments, and supplemental payments to IHS/Tribal hospitals and 
Puerto Rico hospitals will be comparable to the amount these hospitals 
would have received if CMS had continued to use the low-income days 
proxy to determine Factor 3 of the uncompensated care payment 
methodology. As a result, the supplemental payments are expected to 
have no significant impact on MA benchmarks in Puerto Rico. We also 
note that for the past several years, the MA benchmark rates in Puerto 
Rico have excluded beneficiaries with coverage for only Medicare Part A 
or only Medicare Part B. For calendar years 2020 and 2021, about 70 
percent of uncompensated care payments represented in Puerto Rico claim 
records were associated with Part A-only beneficiaries and thus 
excluded from the MA ratebook calculation. Accordingly, about 70 
percent of any supplemental payments to Puerto Rico providers would be 
excluded from the MA ratebook development.

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 our estimate of three 
factors: (1) 75 percent of the amount of Medicare DSH payments that 
would be made to subsection (d) hospitals under section 1886(d)(5)(F) 
of the Act if subsection (r) did not apply; (2) 1 minus the percent 
change in the national rate of uninsurance compared to the rate of 
uninsurance in 2013; and (3) each eligible hospital's estimated 
uncompensated care amount relative to the estimated uncompensated care 
amount for all eligible hospitals. In this section of this final rule, 
we discuss the data sources and methodologies for computing each of 
these factors, our final policies for FYs 2014 through 2023, and our 
final policies for FY 2024.
1. 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 DSH payments for the 
fiscal year in the absence of section 1886(r) of the Act; and (2) the 
amount of empirically justified Medicare DSH payments that are made for 
the fiscal year. The second element of Factor 1 reflects the statutory 
requirement to pay subsection (d) hospitals 25 percent of what would 
have otherwise been paid under section

[[Page 58994]]

1886(d)(5)(F) of the Act. In other words, Factor 1 represents 75 
percent (100 percent minus 25 percent) of our estimate of Medicare DSH 
payments that would be made for the fiscal year in the absence of 
section 1886(r) of the Act.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed that to 
determine Factor 1 in the uncompensated care payment formula for FY 
2024, we would 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). Accordingly, we 
proposed to determine 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 we 
have applied in previous years, these estimates are not revised or 
updated subsequent to the publication of our final projections in this 
FY 2024 IPPS/LTCH PPS final rule.
    Thus, in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26989 
through 26992), we proposed that to determine the two elements of 
proposed Factor 1 for FY 2024, we would use the most recent 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 FY 2023 IPPS/LTCH PPS final rule's 
Impact File.\198\ The determination of the amount of DSH payments is 
partially based on OACT's Part A benefits projection model. One of the 
components 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'' (88 FR 26991).
---------------------------------------------------------------------------

    \198\ This file is used in estimating the payment impacts of 
various policy changes to the IPPS as described in the annual 
proposed and final IPPS/LTCH PPS rules.
---------------------------------------------------------------------------

    For purposes of calculating the proposed Factor 1 and modeling the 
impact of the FY 2024 IPPS/LTCH PPS proposed rule, we used OACT's 
January 2023 Medicare DSH estimates, which were based on data from the 
September 2022 update to 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 FY 2023 IPPS/LTCH PPS final 
rule.\199\ Because SCHs that are projected to be paid under their 
hospital-specific rate are ineligible for empirically justified 
Medicare DSH payments and uncompensated care payments, they were 
excluded from the January 2023 Medicare DSH estimates. Furthermore, 
because Maryland hospitals are not paid under the IPPS, they are also 
ineligible for empirically justified Medicare DSH payments and 
uncompensated care payments and were also excluded from the OACT's 
January 2023 Medicare DSH estimates. Finally, the 26 hospitals that CMS 
anticipates may participate in the Rural Community Hospital 
Demonstration Program in FY 2024 were excluded from these estimates 
because these hospitals are not eligible to receive empirically 
justified Medicare DSH payments or uncompensated care payments under 
the payment methodology that applies under the demonstration.
---------------------------------------------------------------------------

    \199\ FY 2023 IPPS/LTCH PPS final rule IPPS Impact File, 
available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left 
side of the screen titled ``FY 2023 IPPS Final Rule Home Page'' or 
``Acute Inpatient--Files for Download.''
---------------------------------------------------------------------------

    Using the data sources as previously discussed, OACT's January 2023 
estimate of Medicare DSH payments for FY 2024 without regard to the 
application of section 1886(r)(1) of the Act was approximately $13.621 
billion, as explained in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26990). Therefore, based on that 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, was 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), Factor 1 is the 
difference between these two OACT estimates. Thus, in the FY 2024 IPPS/
LTCH PPS proposed rule, we proposed that Factor 1 for FY 2024 would be 
$10,216,040,319.50, which was equal to 75 percent of the total amount 
of estimated Medicare DSH payments for FY 2024 ($13.621 billion minus 
$3.405 billion). In the FY 2024 IPPS/LTCH PPS proposed rule, we noted 
that, consistent with our approach in previous rulemakings, OACT would 
use more recent data to project the final Factor 1 estimates for the FY 
2024 IPPS/LTCH PPS final rule if such data became available prior to 
the development of the final rule.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we noted 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 that Factor 1 
estimates for the final rules are generally consistent with those used 
for the Midsession Review of the President's Budget (88 FR 26990). For 
additional information on the development of the President's Budget, we 
refer readers to the Office of Management and Budget website at https://www.whitehouse.gov/omb/budget. Consistent with historical practice, we 
indicated in the proposed rule that we expected that the Midsession 
Review would have updated economic assumptions and actuarial analysis, 
which we would use to develop Factor 1 estimates in the FY 2024 final 
rule.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26990), we 
referred 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'' for a general overview of 
the principal steps involved in projecting future inpatient costs and 
utilization. We also noted that the annual reports of the Medicare 
Boards of Trustees to Congress represent the Federal Government's 
official evaluation of the financial status of the Medicare Program. 
The actuarial projections contained in these reports are based on 
numerous assumptions regarding future trends in program enrollment, 
utilization and costs of health care services covered by Medicare, as 
well as other factors affecting program expenditures. In addition, 
although the methods used to estimate future costs based on these 
assumptions are complex, they are subject to periodic review by 
independent experts to ensure their validity and reasonableness. We 
also referred 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).

[[Page 58995]]

    Comment: Some commenters requested greater transparency in the 
methodology used by CMS and OACT to calculate Factor 1. Several 
commenters specifically requested that a detailed description of the 
methodology and the data behind the assumptions be made public. 
Specifically, commenters requested more detail from CMS on the 
``Other'' component. A few commenters emphasized their inability to 
replicate CMS' calculations and requested that the agency clarify how 
the effects of the COVID-19 Public Health Emergency (PHE) were 
accounted for in the ``Other'' factor. Some commenters suggested that 
CMS address this issue by disaggregating the variables that contribute 
to the ``Other'' factor and then demonstrating the impact of each of 
those variables on the final value, while a few other commenters 
requested that CMS publish a detailed methodology of its ``Other'' 
calculation, including how all the components contribute to its 
estimates from year to year. A couple of commenters requested that CMS 
clarify why the ``Other'' factor frequently varies in successive 
rulemaking cycles. Commenters requested that this information be 
provided in advance of the publication of the final rule and in the 
IPPS proposed rule each year going forward, so that the data is 
available to replicate CMS' DSH calculation and comment sufficiently in 
future years.
    Additionally, a few commenters asserted that the lack of 
opportunity afforded to hospitals to review the data used in rulemaking 
is in violation of the Administrative Procedure Act. These commenters 
expressed concerns about the lack of transparency in how Factor 1 is 
calculated, arguing that hospitals cannot meaningfully comment on the 
methodology given the lack of details. In particular, these commenters 
asserted that the proposed rule provided neither sufficient details nor 
an explanation of the treatment of Medicaid expansions in the 
calculation for Factor 1.
    Response: We thank the commenters for their input. We disagree with 
commenters' assertion regarding the lack of transparency with respect 
to the methodology and assumptions used in the calculation of Factor 1. 
As explained in the FY 2024 IPPS/LTCH PPS proposed rule and in this 
section of this final rule, we have been and continue to be transparent 
about the methodology and data used to estimate Factor 1. Regarding the 
commenters who reference the Administrative Procedure Act, we note that 
under the Administrative Procedure Act, a proposed rule is required to 
include either the terms or substance of the proposed rule or a 
description of the subjects and issues involved. In this case, the FY 
2024 IPPS/LTCH PPS proposed rule included a detailed discussion of our 
proposed Factor 1 methodology and the data sources that would be used 
in making our final estimate. See 88 FR 26989 through 26992. 
Accordingly, commenters had sufficient information to meaningfully 
comment on our proposed estimate of Factor 1.
    To provide additional context, we note that Factor 1 is not 
estimated in isolation from other projections made by OACT. As we 
explained in the FY 2024 IPPS/LTCH PPS proposed rule and in other 
previous rulemakings, Factor 1 estimates used in our proposed rules are 
generally consistent with the economic assumptions and actuarial 
analyses used to develop the President's Budget estimates under current 
law, which are publicly available, and the Factor 1 estimates used in 
our final rules are generally consistent with the economic assumptions 
and actuarial analyses used for the Midsession Review of the 
President's Budget. As we have in the past, we refer readers to the 
``Midsession Review of the President's FY 2024 Budget'' for additional 
information on the development of the President's Budget and the 
specific economic assumptions used in the Midsession Review of the 
President's FY 2024 Budget, forthcoming on the Office of Management and 
Budget website at https://www.whitehouse.gov/omb/budget. We recognize 
that our reliance on the economic assumptions and actuarial analyses 
used to develop the President's Budget and the Midsession Review of the 
President's Budget in estimating Factor 1 has an impact on hospitals, 
health systems, and other impacted parties who wish to replicate the 
Factor 1 calculation, such as modeling the relevant Medicare Part A 
portion of the budget. Yet, commenters are able to meaningfully comment 
on our proposed estimate of Factor 1 without replicating the budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we refer readers to 
the ``2023 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds,'' available under ``Downloads'' on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html. 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 
(https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html). 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.
    As described in more detail later in this section, in the FY 2024 
IPPS/LTCH PPS proposed rule, we included information regarding the data 
sources, methods, and assumptions employed by the actuaries to 
determine OACT's estimate of Factor 1 (88 FR 26989 through FR 26992). 
We explained that the most recent Medicare DSH payment adjustments 
provided in the IPPS Impact File were used, and we provided the 
components of all update factors that were applied to the historical 
data to estimate the Medicare DSH payments for the upcoming fiscal 
year, along with the associated rationale and assumptions. This 
discussion also included a description of the ``Other'' and 
``Discharges'' assumptions, as well as additional information regarding 
how we address the Medicaid and CHIP expansion.
    For additional context, the ``Other'' factor column reflects the 
expectation that DSH payments will grow faster than IPPS payments in 
2023. This expectation is based on the 2023 IPPS Impact File, which 
reflects the change in the mix of cases between 2019 and 2021. The 
``Other'' factor varies in rulemaking cycles due to changing growth 
patterns for DSH payments and Medicaid enrollment. The impact of

[[Page 58996]]

Medicaid enrollment is captured in the ``Other'' column.
    For further information on our assumptions regarding Medicaid 
expansion in the Factor 1 calculation, later in this section, we 
provide a discussion of more recent estimates and assumptions regarding 
the Medicaid expansion as part of the discussion of the final Factor 1 
for FY 2024. This discussion also incorporates the estimated impact of 
the COVID-19 PHE.
    Comment: Many commenters questioned the proposed rule's estimate of 
the ``Discharges'' component of the Factor 1 calculation. Some 
commenters requested that CMS align the discharge volume estimates in 
Factor 1 with the forecasted estimates for Federal fiscal year 2022 
through Federal fiscal year 2024 cited in the March 2023 Medicare 
Trustee Report. Other commenters recommended that CMS use more recent 
data to reflect the changes in discharge volumes. Some commenters noted 
that the current assumptions of discharge volume may underestimate the 
growth in utilization in the Medicare fee-for-service (FFS) population. 
Four hospital associations questioned CMS' discharge factor for FY 2024 
based on ``the assumption of recent trends recovering back to the long-
term trend and the assumption related to how many beneficiaries will be 
enrolled in Medicare Advantage (MA) plans.'' These commenters noted 
that they expect that the discharge factor will continue to decrease, 
as half of Medicare beneficiaries are now enrolled in MA plans. These 
commenters further expressed concern about the effect of this 
decreasing trend on hospitals serving a disproportionate share of 
lower-income beneficiaries. The same commenters requested that CMS 
provide detailed calculations of the discharge estimates in the 
proposed rule each year going forward and welcomed the opportunity to 
work with CMS to examine the impacts of MA enrollment on FFS inpatient 
hospital payments. One commenter recommended that CMS exclude FY 2021 
and FY 2022 discharges from the FY 2024 Factor 1 calculation, as data 
from those years include atypical trends in Medicare discharges 
resulting from the COVID-19 PHE.
    Some commenters also raised concerns about the ``Case Mix'' update 
factor used in the proposed FY 2024 Factor 1 calculation. Commenters 
stated that the proposed ``Case Mix'' update factor underestimates the 
complexity of patients seeking care following the postponement or 
deferral of care during the COVID-19 PHE. Some commenters requested 
that CMS consider the impact of Medicaid disenrollment, which may 
inhibit care access and lead to worse outcomes, resulting in more 
complex cases and higher hospitalization rates. One commenter requested 
that CMS include an acuity factor to reflect the fact that COVID-19 
patients have longer lengths of stay and higher acuity than the typical 
patient population.
    Some commenters requested that CMS increase the FY 2022 market 
basket in the Factor 1 update factor by three percentage points to 
align with the ``trued up'' market basket cited in the March 2023 
MedPAC report to Congress.\200\ Some of these commenters further 
recommended that CMS apply the recommendation from MedPAC to increase 
the FY 2024 market basket in the Factor 1 update factor by an 
additional percentage point.
---------------------------------------------------------------------------

    \200\ https://www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/.
---------------------------------------------------------------------------

    Response: We thank the commenters for their input on the impact the 
COVID-19 PHE may have had on the factors used to estimate DSH payments 
for FY 2024. In updating our estimate of Factor 1 for this final rule, 
we considered, as appropriate, the same set of factors that we used in 
the proposed rule using the most recent available data at the time of 
developing this final rule. The ``Discharges'' and ``Case Mix'' factors 
incorporate the latest estimates of the COVID-19 PHE's impact on the 
Medicare program. The ``Case Mix'' factor is specific for Medicare 
inpatient claims. In 2020, the COVID-19 PHE had a significant impact on 
the ``Case Mix'' factor, however its impact has lessened in subsequent 
years. The impact of COVID-19 discharges is captured in the 2021 and 
2022 experience, which is the basis for the projections. The number of 
COVID-19 cases has dropped significantly since 2020, therefore we 
believe a separate acuity factor would not be necessary. We provide 
further details on the updated Factor 1 estimate and data sources as 
part of the discussion of the final Factor 1 estimate for FY 2024 in 
this section of the rule.
    Regarding the comments requesting that we exclude FY 2021 and FY 
2022 discharges due to the impacts of the COVID-19 PHE when estimating 
Factor 1 for FY 2024, we note that section 1886(r)(2)(A) of the Act 
specifies that Factor 1 is based on the amount of disproportionate 
share payments that would otherwise be made to subsection (d) hospitals 
for the fiscal year. As discussed further in this section, OACT's 
estimates of Medicare DSH payments used in the development of Factor 1 
reflect the estimated impact of the COVID-19 PHE on DSH payments. 
Excluding data from certain periods is not necessary to estimate DSH 
payments during FY 2024 for purposes of the Factor 1 calculation. To 
reasonably make projections for FY 2024, the FY 2021 and FY 2022 claims 
data experience is necessary to inform trends. The FY 2021 and FY 2022 
claims are not atypical, in contrast to FY 2020 claims. Furthermore, 
the FY 2021 claims data are used for the FY 2023 Impact File, which 
make it consistent and reliable to use in making projections of the 
amount of DSH payments in FY 2024.
    Regarding the comments on the impacts of MA enrollment on the 
Medicare FFS discharge volume, we believe the ``Discharge'' factor is a 
reasonable projection for purposes of Factor 1 estimates using the 
latest available data. For a discussion on trends in MA enrollment, we 
refer readers to the 2023 Annual Report of the Boards of Trustees of 
the Federal Hospital Insurance and Federal Supplementary Medical 
Insurance Trust Funds, which contains actuarial projections and 
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. We also note that the estimates 
for the ``Discharges'' factor used to estimate Medicare DSH 
expenditures incorporate OACT's analyses of ``Discharges'' using only 
claims from the Medicare FFS program rather than claims from the MA 
program.
    In response to commenters who requested that CMS align the 
discharge volume estimates in Factor 1 with the estimates in the March 
2023 Medicare Trustee Report and that CMS consider using more recent 
data to reflect the changes in discharge volume, we have determined 
that the use of the most recent available data to calculate Factor 1 at 
proposed and final rulemaking is appropriate and consistent with our 
approach in previous rulemakings and will produce results that are 
generally consistent with the Medicare Trustee Report. In this final 
rule, OACT has updated the estimate of Factor 1 with more recent 
economic assumptions and actuarial analyses.
    Regarding comments about the inpatient hospital update and the FY 
2024 update factor in the Factor 1 estimate, we refer readers to the 
discussion in the section V.B. of the preamble of this final rule. 
Consistent with the inpatient hospital update discussion in section 
V.B. of the rule, OACT is using the most recent available

[[Page 58997]]

inpatient hospital update for the final FY 2024 update factor in the 
Factor 1 calculation.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the methodology for calculating Factor 1 for 
FY 2024. We discuss the resulting Factor 1 amount for FY 2024 in this 
final rule. For this final rule, OACT used the most recently submitted 
Medicare cost report data from the March 2023 update of HCRIS to 
identify Medicare DSH payments and the most recent Medicare DSH payment 
adjustments provided in the Impact File and applied update factors and 
assumptions for future changes in utilization and case-mix to estimate 
Medicare DSH payments for the upcoming fiscal year. The June 2023 OACT 
estimate for Medicare DSH payments for FY 2024, without regard to the 
application of section 1886(r)(1) of the Act, was approximately $13.354 
billion. This estimate excluded Maryland hospitals participating in the 
Maryland All-Payer Model, hospitals participating in the Rural 
Community Hospital Demonstration, and SCHs paid under their hospital-
specific payment rate. Therefore, based on this June 2023 estimate, the 
estimate of empirically justified Medicare DSH payments for FY 2024, 
with the application of section 1886(r)(1) of the Act, was 
approximately $3.338 billion (or 25 percent of the total amount of 
estimated Medicare DSH payments for FY 2024). Under Sec.  
412.106(g)(1)(i), Factor 1 is the difference between these two OACT 
estimates. Therefore, the final Factor 1 for FY 2024 is 
$10,015,191,021.88, which is equal to 75 percent of the total amount of 
estimated Medicare DSH payments for FY 2024 ($13,353,588,029.18 minus 
$3,338,397,007.29).
    OACT's estimates for FY 2024 for this final 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] TR28AU23.239

    In this table, the discharges column shows the changes in the 
number of Medicare 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 
COVID-19 pandemic. The discharge figure for FY 2023 is based on 
preliminary data. The discharge figure for FY 2024 is an assumption 
based on recent historical experience and an assumed partial return to 
pre-COVID trends. In addition, this column reflects a decrease in FFS 
enrollment, as a growing share of beneficiaries have moved into 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 COVID-19 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 the recommendation of the 
2010-2011 Medicare Technical Review Panel.\201\ Accordingly, the case-
mix factor figures for FY 2021 to FY 2024 incorporate the actual impact 
and estimated future impact from the COVID-19 pandemic.
---------------------------------------------------------------------------

    \201\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/technicalpanelreport2010-2011.pdf.
---------------------------------------------------------------------------

    The ``Other'' column reflects the change 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 May 11, 2023, the Biden 
Administration ended the national emergency declaration and PHE 
declaration.
    Based on the most recent available data, Medicaid enrollment is 
estimated to change as follows: 12.3 percent in FY 2021, 8.2 percent in 
FY 2022, 4.2 percent in FY 2023, and -11.6 percent in FY 2024. In the 
future, the assumptions regarding Medicaid enrollment may change based 
on actual enrollment in the States.
    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, receive fewer hospital services. 
Specifically, based on the most recent available data at the time of 
developing the proposed rule, 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-

[[Page 58998]]

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:
[GRAPHIC] [TIFF OMITTED] TR28AU23.240

2. Calculation of 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). 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 Congressional Budget Office (CBO) estimates 
to determine the percent change in the rate of uninsurance beginning in 
FY 2018, provided the Secretary determines that the data source is 
appropriate and the Chief Actuary of CMS certifies it. 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. In the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 26992), we proposed 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 are the Federal 
Government's official estimates of economic activity (spending) within 
the health sector. The information contained in the NHEA are used to 
study numerous topics related to the health care sector, including the 
following topics: 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, on health care 
spending; and comparison of U.S. health care spending to other 
countries' health care 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 account 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, our view continues to be 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.
    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

[[Page 58999]]

(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 U.S. population. (We refer readers to the website at https://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available 
from SHADAC (available at https://datacenter.shadac.org) accounts for 
changes in the CPS methodology over time. OACT further adjusts the 
enhanced CPS for an estimated undercount of Medicaid enrollees (a 
population that is often not fully captured in surveys that include 
Medicaid enrollees due to a perceived stigma associated with being 
enrolled in the Medicaid program or confusion about the source of their 
health insurance).
    To estimate the number of uninsured individuals for 2010 through 
2018, OACT extrapolates from the 2009 CPS data through 2018 using data 
from the National Health Interview Survey (NHIS). The NHIS is one of 
the major data collection programs of the National Center for Health 
Statistics (NCHS), which is part of the Centers for Disease Control and 
Prevention (CDC). The estimate of the number of uninsured individuals 
in 2019 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.\202\ 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/.
---------------------------------------------------------------------------

    \202\ 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 rates of uninsurance in CY 2023 and CY 2024. On an 
annual basis, OACT projects enrollment and spending trends for the 
coming 10-year period. The projections for the rates of uninsurance in 
the FY 2024 IPPS/LTCH PPS proposed rule were derived using the most 
recent NHEA projections that were available at the time the proposed 
rule was developed (published March 28, 2022, with historical data 
through 2021). The NHEA projection methodology accounts for expected 
changes in enrollment across all 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 
2022 Medicare Trustees Report,\203\ 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 2022 Medicare Trustees Report. Greater detail on 
these projected rates of growth in enrollment for private health 
insurance and the uninsured 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.
---------------------------------------------------------------------------

    \203\ https://www.cms.gov/files/document/2022-medicare-trustees-report.pdf.
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b. Factor 2 for FY 2024
    Using these data sources and the previously described methodologies 
in section IV.E.2.a, at the time of developing the proposed rule, OACT 
had estimated that the uninsured rate for the historical, baseline year 
of 2013 was 14 percent, while the estimated rates of uninsurance for 
CYs 2023 and 2024 were 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 certified these estimates. We refer readers to OACT's Memorandum on 
Certification of Rates of Uninsured prepared for the 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 for the proposed rule.\204\
---------------------------------------------------------------------------

    \204\ OACT Memorandum on Certification of Rates of Uninsured. 
March 3, 2023. Available at: https://www.cms.gov/files/document/certification-rates-uninsured-2024-proposed-rule.pdf.
---------------------------------------------------------------------------

    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, 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, in the FY 2024 IPPS/LTCH PPS proposed rule, we 
proposed to continue to apply the weighted average approach used in 
past fiscal years to estimate the rate of uninsurance for FY 2024.
    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. In 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26993), we noted that we 
might also consider the use of more recent data that may become 
available for purposes of estimating the rates of uninsurance used in 
the calculation of the final Factor 2 for FY 2024. We noted the 
following examples of more up-to-date data that may become available 
for use in calculating Factor 2 for FY 2024: (1) data regarding the 
impacts of the expiration of the Families First Coronavirus Response 
Act's continuous enrollment provision for Medicaid, which permits 
states to actively begin disenrolling beneficiaries no longer eligible 
for the program starting on April 1, 2023; (2) data on the impact of 
the Inflation Reduction Act's extension of enhanced Marketplace premium 
tax credits through 2025; and (3) data on the impacts associated with 
the Internal Revenue Service's 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).
    In the proposed rule, we outlined the calculation of the proposed 
Factor 2 for FY 2024 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.

[[Page 59000]]

1-[verbar]((0.14-0.092)/0.14)[verbar] = 1-0.3429 = 0.6571 (65.71 
percent).
    For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii) 
of the Act no longer includes any reduction to the previous calculation 
to determine Factor 2. Therefore, we proposed that Factor 2 for FY 2024 
would be 65.71 percent.
    The proposed FY 2024 uncompensated care amount was 
$10,216,040,319.50 * 0.6571 = $6,712,960,093.94.
[GRAPHIC] [TIFF OMITTED] TR28AU23.241

    We invited public comments on our proposed Factor 2 for FY 2024.
    Comment: Most commenters discussed Factor 2 in the context of the 
impact of the temporary COVID-19 PHE provisions on the uninsured rate, 
such as expiration of the Families First Coronavirus Response Act's 
Medicaid continuous coverage requirement and extension of the American 
Rescue Plan's Marketplace enhanced premium tax credits. Large and small 
healthcare organizations and associations opposed the proposed Factor 2 
and the estimated FY 2024 uninsured rate and urged OACT to update its 
estimate of Factor 2 to account for the projected increases in the 
number of uninsured individuals as the COVID-19 PHE Medicaid continuous 
enrollment provisions expire.
    Many commenters also indicated that they expect increases in the 
uninsured rates in their communities. To that end, these commenters 
urged CMS to use more recent and accurate data sources to account for 
the anticipated increases in the uninsured population, citing CMS' 
statement in the proposed rule that the agency may consider more recent 
data that may become available for the calculation of Factor 2 for the 
FY 2024 final rule. Some of these commenters urged CMS to monitor the 
forthcoming data to ensure that Factor 2 reflects the current coverage 
landscape considering the expiring COVID-19 PHE provisions. A few 
commenters expressed their concern that the NHEA data that CMS proposed 
to use for Factor 2 do not reflect current trends in the uninsured rate 
as the COVID-19 PHE ends, as they appear to be the same data utilized 
in the FY 2023 IPPS/LTCH PPS final rule. These commenters requested 
that CMS consider applying a one-time increase in Factor 2 to account 
for the data lag and the anticipated increase in the uninsured 
population in FY 2024 following the expiration of the Medicaid 
continuous enrollment provisions, if the agency chooses to continue 
with its proposal of utilizing the same NHEA data used in the FY 2023 
rule. In addition, one commenter stated as an example that an 
additional 0.7 percentage point increase in the uninsured rate for FY 
2024 (9.9 percent uninsured, reflecting a projection of approximately 
2.4 million additional uninsured individuals) would increase the 
proposed uncompensated care payment amount by about $511 million 
compared to the proposed rule's uncompensated care amount.
    Several commenters referenced various data sources and analyses 
that project between 3-18 million individuals will lose their Medicaid 
coverage in FY 2024, such as analyses by the Kaiser Family Foundation; 
the Congressional Budget Office; the Urban Institute; NORC at the 
University of Chicago; and HHS' Assistant Secretary for Planning and 
Evaluation (ASPE). Accordingly, these commenters requested that CMS 
increase Factor 2 to reflect the anticipated increase in the uninsured 
population.
    A few commenters requested CMS maintain the same level of total 
uncompensated care payments as in the FY 2023 IPPS/LTCH PPS final rule. 
Several other commenters opposed the proposed decrease in the total 
uncompensated care payments from the level in FY 2023. These commenters 
noted that the proposed decrease would disproportionately impact 
safety-net hospitals and negatively impact vulnerable patients and 
hospitals that are already financially strained.
    Response: We thank the commenters for their input regarding the 
estimate of proposed Factor 2 discussed in the proposed rule. In the FY 
2024 IPPS/LTCH PPS proposed rule we used the most recent available 
estimates from the NHEA at that time, and we refer readers to OACT's 
Memorandum on Certification of Rates of Uninsured prepared for the 
proposed rule for further details on the methodology and assumptions 
used in the calculation of the proposed rule's projection of the 
uninsured rate.
    We indicated that our projection of the rates of uninsurance for CY 
2023 and CY 2024 were from the latest NHEA historical data available 
and accounted for expected changes in enrollment across all categories 
of insurance coverage. As detailed in the proposed rule, we believe 
that the most recently updated NHEA data, on balance, best meet all our 
considerations for ensuring that the data source used to estimate the 
rate of uninsurance meets the statutory requirement that the estimate 
be based on data from the Census Bureau, or other sources the Secretary 
determines appropriate, and will provide reasonable estimates for the 
rate of uninsurance that are available in conjunction with the IPPS 
rulemaking cycle.
    For the final rule, we are using the NHEA data for the Factor 2 
calculation because we continue to believe that it is the most 
appropriate measure of changes in the rate of uninsurance.
    In response to the comments concerning the data sources used for 
calculating Factor 2, in this final rule we are updating Factor 2 using 
the most recently updated NHEA projections that were released in June 
2023, which reflect the most recent historical data and updated 
expectations for the uninsurance rate. We also refer readers to the 
OACT memo that accompanies this final rule, which provides additional 
information regarding the development of the uninsurance rate 
projection.\205\
---------------------------------------------------------------------------

    \205\ OACT Memorandum on Certification of Rates of Uninsured. 
July 3, 2024. Available at: https://www.cms.gov/medicare/medicare-
fee-for-service-Payment/AcuteInpatientPPS/dsh.
---------------------------------------------------------------------------

    Regarding the comments requesting that CMS maintain total 
uncompensated care payments at the FY 2023 level or delay any proposed 
changes to mitigate the impact on safety-net hospitals and vulnerable 
patients, we believe estimating Factor 2 based on the best available 
data is appropriate and consistent with the requirements of section 
1886(r)(2)(B)(ii) of the Act.
    Comment: Several commenters urged CMS to be transparent in its 
calculation of Factor 2 and how it accounts for Medicaid expansion 
populations and the expiration of the COVID-19 PHE Medicaid continuous 
enrollment provisions. Other commenters urged CMS to be transparent 
regarding the data sources used for calculating Factor 2 and the 
assumptions behind the uninsured rate.
    Response: In response to the comments concerning transparency, we 
note that the accompanying OACT memo contains additional background 
describing the methods used to derive the FY 2024 rate of uninsured for 
this final rule. For purposes of this final

[[Page 59001]]

rule, we are using the most recent NHEA estimates for the rate of 
uninsurance, which account for the legislative impacts from the 
expiration of the Families First Coronavirus Response Act's Medicaid 
continuous coverage requirement and extension of the American Rescue 
Plan's Marketplace enhanced premium tax credits and effects of the 
COVID-19 PHE on insurance coverage. Although Medicaid enrollment is 
expected to decrease significantly, the insured share of the population 
is only expected to decline in CY 2024 to 91.5 percent (from 92.3 
percent in CY 2023), as many individuals who were not disenrolled from 
Medicaid during the public health emergency already had comprehensive 
coverage from another source (such as through an employer) and thus 
remain insured even when disenrolled from Medicaid. We note that the 
most recent NHEA projections are that the uninsured population will 
change from 25.7 million in CY 2023 to 28.6 million in CY 2024 and 
increase to 29.8 million in CY 2025. For more information about the 
methodology and data used to estimate Factor 2, we refer readers to 
NHEA's ``Health Insurance Enrollment and Enrollment Growth Rates'' 
table.\206\
---------------------------------------------------------------------------

    \206\ Table 17 Health Insurance Enrollment and Enrollment Growth 
Rates located under Downloads: NHE Projections--Tables. Available 
at: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountsprojected.
---------------------------------------------------------------------------

    Section 1886(r)(2)(B)(ii) of the Act permits us to use a data 
source other than CBO estimates to determine the percent change in the 
rate of uninsurance beginning in FY 2018. The NHEA data and methodology 
that were used to estimate Factor 2 for this final rule are transparent 
and best meet all of our considerations for ensuring reasonable 
estimates for the rate of uninsurance that are available in conjunction 
with the IPPS rulemaking cycle. We have concluded it is appropriate to 
update the projection of the FY 2024 rate of uninsurance using the most 
recent NHEA data.
    After consideration of the public comments we received, we are 
updating the calculation of Factor 2 for FY 2024 using more recent data 
from NHEA. The final estimates of the percent of uninsured individuals 
have been certified by the Chief Actuary of CMS. The calculation of the 
final Factor 2 for FY 2024 using a weighted average of OACT's updated 
projections for CY 2023 and CY 2024 is as follows:
    Percent of individuals without insurance for CY 2013: 14 percent.
    Percent of individuals without insurance for CY 2023: 7.7 percent.
    Percent of individuals without insurance for CY 2024: 8.5 percent.
    Percent of individuals without insurance for FY 2024 (0.25 times 
0.077) + (0.75 times 0.085): 8.3 percent. 1-[verbar]((0.14-0.083)/
0.14)[verbar] = 1-0.4071 = 0.5929 (59.29 percent).
    Therefore, the final Factor 2 for FY 2024 is 59.29 percent. The 
final FY 2024 uncompensated care amount is $10,015,191,021.88 * 0.5929 
= $5,938,006,756.87.
[GRAPHIC] [TIFF OMITTED] TR28AU23.247

3. Calculation of 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 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 FY 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

[[Page 59002]]

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 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 one 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 41423 
and 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. 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. However, 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. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42369), we also 
noted that we had begun auditing the FY 2017 data in July 2019, with 
the goal of having the FY 2017 audited data available for future 
rulemaking.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58823 through 
58825), we finalized our proposal to use the most recent available 
single year of audited Worksheet S-10 data to determine Factor 3 for FY 
2021 and subsequent fiscal years. We explained our belief that using 
the most recent audited data available before the applicable Federal 
fiscal year (FY) 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. In the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58825), we finalized the use of a low-income 
insured days proxy to determine Factor 3 for FY 2021 for IHS and Tribal 
hospitals and Puerto Rico hospitals.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58825 through 
58828), 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. 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 (86 FR 45236 through 
45243), 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. 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 both governs the selection of the 
data to be used in calculating Factor 3 and 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

[[Page 59003]]

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 (86 FR 45237), 
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. In that same final rule (86 FR 
45237), 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 FY 2023 
IPPS/LTCH PPS final rule (87 FR 49041), we explained that in the rare 
cases when we use a cost report that starts in one fiscal year and 
spans the entirety of the subsequent Federal fiscal year to determine 
uncompensated care costs for the subsequent Federal fiscal year, we 
would not use the same cost report to determine the hospital's 
uncompensated care costs for the earlier fiscal year. We explained that 
using the same cost report to determine uncompensated care costs for 
both fiscal years would not be consistent with our intent to smooth 
year-to-year variation in uncompensated care costs. As an alternative, 
we 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 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 (CMS Certification Numbers) 
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

[[Page 59004]]

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 from 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.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), 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 (87 FR 49042 and 49043), 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 (79 
FR 50021), 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. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50021 and 50022), 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.
    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 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 uncompensated care costs (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

[[Page 59005]]

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 the most recent audited cost 
reports for hospitals that are projected to be DSH-eligible. We stated 
that we continued to believe these thresholds were 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 proposed to follow the same methodology as applied 
in FY 2023 and that is described in section IV.E.3.b. of the preamble 
of this final 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 the FY 2024 IPPS/LTCH PPS proposed rule, we used reports from the 
December 2022 Healthcare Cost Report Information System (HCRIS) extract 
to calculate Factor 3. We noted that we intended 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 (87 FR 49051), 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 we 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 final 
rule for a further discussion of these payments. We note that in the FY 
2024 IPPS/LTCH PPS proposed rule, we did not propose any changes to the 
methodology for determining supplemental payments, and we will 
calculate the supplemental payments to eligible IHS/Tribal and Puerto 
Rico hospitals for FY 2024 consistent with the methodology described in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051) and in 
the regulations 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 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 would 
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 would 
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 would 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 
would use the hospital's FY 2017 report if it spans some of the FY 2018 
time period. In other words, we would 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

[[Page 59006]]

report that spans the relevant Federal fiscal year period.
    Step 2: Annualize the 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 the result by a scaling factor.
    We received comments regarding the uncompensated care costs 
definition, Worksheet S-10 cost report audits, and Factor 3 calculation 
instructions.
    Comment: Several commenters expressed their support for CMS' 
proposal in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26997 and 
26998) to calculate Factor 3 for FY 2024 based on a three-year average 
of audited FY 2018, FY 2019, and FY 2020 Worksheet S-10 data, and the 
policy finalized in the FY 2023 IPPS/LTCH PPS final rule to implement a 
three-year average based on the most recent available audited data for 
subsequent fiscal years. Supporters of this proposal specified several 
benefits to the use of a multi-year average of Worksheet S-10 data, 
such as minimizing year-to-year volatility, promoting accuracy, and 
ensuring stability in future uncompensated care payments. One commenter 
noted their long-standing support for using audited Worksheet S-10 data 
to promote an accurate and consistent calculation of uncompensated care 
costs.
    Notably, none of the commenters expressed opposition to using a 
three-year average of Worksheet S-10 data to calculate uncompensated 
care payments moving forward.
    Response: We appreciate the commenters' support for our proposal to 
use a three-year average of audited FY 2018, FY 2019, and FY 2020 
Worksheet S-10 data to determine each hospital's share of uncompensated 
care costs in FY 2024. As explained in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 26995), we believe that using a multi-year average 
of Worksheet S-10 data will provide assurance that hospitals' 
uncompensated care payments remain stable and predictable and will not 
be subject to unpredictable swings and anomalies in a hospital's 
uncompensated care costs.
    Comment: A few commenters suggested approaches to mitigating the 
impact of the COVID-19 PHE on the three-year average of Worksheet S-10 
data. One commenter recommended that CMS exclude FY 2020 data entirely 
from FY 2024 DSH calculations, because the commenter believes the data 
are flawed due to COVID-19 PHE impacts. Another recommended that CMS 
hold the evaluation period of Worksheet S-10 data constant until data 
free of the impacts of the COVID-19 PHE are available. One commenter 
encouraged CMS to review the impact of the COVID-19 PHE may have on 
accurately capturing uncompensated care as the three-year average range 
includes more years with COVID-19 repercussions, while another 
recommended that CMS mitigate the effect of anomalies in FYs 2020-2022 
cost report data that may adversely impact DSH payments in future 
years.
    Response: Regarding requests that CMS account for the impact of the 
COVID-19 PHE on the three-year average of Worksheet S-10 cost report 
data, we note that we will continue to use the three-year average of 
the most recently audited cost report data for FY 2024 and subsequent 
years, as finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49038). In response to the comments requesting that we exclude FY 2020 
data or hold data constant, we continue to believe using the three-year 
average will smooth the variation in year-to-year uncompensated care 
payments and lessen the impacts of the COVID-19 PHE and future 
unforeseen events. Further, we anticipate that there will be less 
fluctuation in cost report data as the PHE disruptions on healthcare 
utilization recover. We will continue to monitor the impacts of the PHE 
and will consider this issue further in future rulemaking, as 
appropriate.
    Comment: Some commenters suggested alternative approaches to the 
uncompensated care payment calculation unrelated to methodological 
concepts concerning the blending of historical Worksheet S-10 data. 
Such recommendations included that CMS should consider the impact of 
the healthcare labor shortage on uncompensated care payments. One 
commenter recommended that CMS protect essential hospitals from 
fluctuations and cuts to uncompensated care payments, without reducing 
the payments to other DSH-eligible hospitals.
    Another commenter requested that CMS modify the FY 2024 methodology 
to compensate safety-net hospitals for any decrease in FY 2020 
uncompensated care payments inadvertently caused by the Factor 3 
policies from the FY 2020 IPPS/LTCH PPS final rule. Specifically, this 
commenter's recommendation was that CMS should account for FY 2015 
uncompensated care costs from reopened FY 2015 Worksheet S-10 on a one-
time basis to calculate Factor 3 for FY 2024.
    Further, a handful of commenters expressed concern about the 
proposed reduction in uncompensated care payments. These commenters 
indicated that the proposed decrease in payments in addition to the 
inadequate payment update would be insufficient for these hospitals in 
the current financial environment.
    Response: With regard to commenters' concerns and suggestions 
unrelated to the previously discussed methodological concepts for the 
blending of historical Worksheet S-10 data, we consider these public 
comments to be outside the scope of the proposed rule, we are not 
addressing them in this final rule. However, we appreciate commenters' 
input and note that we may address these and other considerations in 
future rulemaking.
    Concerning the commenter's suggestion to modify uncompensated care 
payments to account for payments from a previous year we are continuing 
to use Worksheet S-10 data from multiple years to mitigate fluctuations 
in the data and smooth variations in year-to-year uncompensated care 
payments. Regarding the commenter's suggestion to account for FY 2015 
uncompensated care costs from reopened Worksheet S-10, we are not 
considering re-using FY 2015 cost reports or supplementing the FY 2024 
uncompensated care payments with information from FY 2015. As explained 
in the FY 2024 IPPS/LTCH PPS proposed rule, we believe that using a 
multi-year average of the most recent audited Worksheet S-10 data will 
reflect the most recent available information regarding a hospital's 
uncompensated care costs. We note that MACs will continue to have 
discretion to determine if a provider revision may be accepted for 
amended or reopened cost reports, per 42 CFR 405.1885.
    Comment: Many commenters indicated that CMS' proposed reduction to 
the DSH payment amount by nearly

[[Page 59007]]

half a billion dollars from FY 2023 will have a disparate impact on DSH 
hospitals as they continue to face financial challenges related to the 
COVID-19 PHE. These challenges include increasing labor and supply 
costs, increasing inflation, and potential Medicare sequestration cuts. 
One commenter noted that any payment reduction during a time of 
increased operating costs for hospitals could hinder progress in areas 
that are top priorities for hospitals. These areas include investments 
in value-based payment models, climate policies, and data collection 
that are needed to build a foundation for improving health equity.
    Response: We thank the commenters for their feedback. We agree that 
the COVID-19 PHE presents unique challenges to hospitals' finances. 
Regarding the commenters' concerns regarding changes to the amount 
available to make uncompensated care payments in this rulemaking, we 
note that, as described in the FY 2024 IPPS/LTCH PPS proposed rule, the 
statute instructs the Secretary to estimate the amounts of 
uncompensated care for a period based on appropriate data, which for FY 
2024 include data that reflect the COVID-19 PHE's effect on hospitals.
    Comment: Some commenters proposed changes to the definition of 
uncompensated care and requested that CMS ensure its methodology 
accurately captures the full range of uncompensated care costs that 
hospitals incur in their provision of care for disadvantaged patients. 
One commenter urged CMS to include all patient care costs in the CCR, 
including those for teaching and providing physician and other 
professional services, to ensure an accurate distribution of 
uncompensated care payments to hospitals with the highest levels of 
uncompensated care. This commenter stated that doing so should include 
Graduate Medical Education (GME) costs, which are disproportionately 
detrimental to teaching hospitals. The commenter further suggested that 
CMS revise the data collected on Medicaid shortfalls to better capture 
actual shortfalls incurred by hospitals by allowing hospitals to 
include unpaid coinsurance and deductibles on Worksheet S-10. Another 
commenter suggested treating the unreimbursed portion of state or local 
indigent care as charity care.
    Response: We appreciate commenters' suggestions for revisions and/
or modifications to Worksheet S-10. We will consider modifications as 
necessary to further improve and refine the information that is 
reported on Worksheet S-10 to support collection of the information 
regarding uncompensated care costs.
    Regarding the request to include costs for teaching and providing 
physician and other professional services, including GME costs when 
calculating the CCR, we note that because the CCR on Line 1 of 
Worksheet S-10 is obtained from Worksheet C, Part I, and is also used 
in other IPPS rate setting contexts (such as high-cost outliers and the 
calculation of the MS-DRG relative weights) from which it is 
appropriate to exclude the costs associated with supporting physician 
and professional services and GME costs, we remain reluctant to adjust 
CCRs in the narrower context of calculating uncompensated care costs. 
Therefore, as stated in past final rules, including the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45241 and 45242), we continue to believe 
that it is not appropriate to modify the calculation of the CCR on Line 
1 of Worksheet S-10 to include any additional costs in the numerator of 
the CCR calculation.
    With regard to the comments requesting that payment shortfalls from 
Medicaid and State and local indigent care programs be included in 
uncompensated care cost calculations, we have consistently stated in 
past final rules (85 FR 58826; 86 FR 45238; and 87 FR 49039) in 
response to similar comments that we believe there are compelling 
arguments for excluding such shortfalls from the definition of 
uncompensated care. We refer readers to those prior rules for further 
discussion.
    Comment: Commenters expressed concern that the reductions in 
uncompensated care payments do not align with the Federal Government's 
focus on equity. One commenter stated that safety-net hospitals provide 
eight times more uncompensated care than other hospital types, which 
disproportionately impacts safety-net hospitals' payments. Another 
commenter requested that CMS revise the current payment policy to 
account for the proportion of low-income discharges for each hospital 
and the capacity of a hospital to absorb uncompensated care costs. This 
commenter recommended changing the uncompensated care payment 
calculation to be based on each hospital's uncompensated care and 
disproportionate share percentage.
    Response: We thank commenters for their continued concern regarding 
the distribution of uncompensated care payments and the impact of 
uncompensated care payments on safety-net hospitals and for their 
recommendations for potential changes to the uncompensated care payment 
methodology. We may consider this issue further in future rulemaking, 
if appropriate.
    We note that in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27187 through 27190), we included a Request for Information (RFI) that 
sought public feedback on the challenges faced by safety-net hospitals 
and potential approaches to help safety-net hospitals meet those 
challenges. We are in the process of reviewing the comments received in 
response to the RFI.
    Comment: In relation to the accuracy of the Worksheet S-10 data, 
one commenter requested that CMS regularly review Worksheet S-10 cost 
reports for any irregular trends in the data.
    Response: The use of the three-year average of the most recently 
audited cost report data for FY 2024 and subsequent years will smooth 
the variation in year-to-year uncompensated care payments and lessen 
the impacts of future unforeseen events, such as the COVID-19 PHE. 
Further, we anticipate that there will be less fluctuation in cost 
report data as the PHE has ended. We note that the audit process for 
Worksheet S-10 cost reports will continue to be an important part of 
identifying potential irregularities in the data.
    Comment: One commenter commended CMS for the agency's efforts to 
develop and improve the audit process for Worksheet S-10 data. Echoing 
concerns expressed in previous years, other commenters encouraged CMS 
to work with MACs to make the audit process clearer, more consistent, 
and more complete. The same commenters recommended that CMS establish a 
standardized process across auditors and make audit instructions 
publicly available. A few commenters cited the Medicare wage index 
audit as a model that CMS could use to clarify the timeline and process 
for Worksheet S-10 revisions. Like in the wage index audit process, 
these commenters recommended that CMS utilize a public use file, rather 
than the HCRIS data file, which would make the audit process more 
transparent. One commenter suggested that CMS ensure that Worksheet S-
10 audits impose minimal burden and are equitable and uniform across 
hospitals. The same commenter also suggested CMS consider making the 
audit process more transparent by disclosing criteria used to identify 
hospitals for audits and publishing audit protocols in advance to allow 
hospitals time and opportunity to respond to audits and address 
findings through notice and comment rulemaking. Given the high costs of

[[Page 59008]]

Worksheet S-10 audits, one commenter recommended that CMS select a 
discrete number of hospitals to audit every year. For example, in the 
case that CMS audits one third of DSH hospitals per year, every 
hospital would be audited once per 3-year cycle. Finally, this 
commenter also requested that CMS implement an informal, fast-track 
review process for audit appeals similar to the audit criteria the 
agency uses for retrospective DSH reimbursement, such that hospitals 
have the same protections afforded by the appeal rights for 
retrospective DSH reimbursement. One commenter expressed concern with 
the handling of Health Resources & Services Administration's (HRSA) 
COVID-19 claims and argued that claims not paid for by HRSA funds, but 
which are covered under the hospital's financial assistance policy 
(FAP), should be included on Worksheet S-10.
    Response: We thank commenters for their feedback on the audits of 
the FY 2020 Worksheet S-10 data and their recommendations for future 
audits. As we have stated previously in response to comments regarding 
audit protocols, they are provided to the MACs in advance of the audit 
to assure consistency and timeliness in the audit process. CMS began 
auditing the FY 2020 Worksheet S-10 data for selected hospitals last 
year so that the audited uncompensated care data for these hospitals 
would be available in time for use in the FY 2024 IPPS/LTCH PPS 
proposed rule. We chose to focus the audit on the FY 2020 cost reports 
in order to maximize the available audit resources. We also note that 
FY 2020 data are the most recent year of audited data.
    We appreciate all commenters' input and recommendations on how to 
improve our audit process and reiterate our commitment to continue 
working with MACs and providers on audit improvements, which include 
making changes to increase the efficiency of the audit process, 
building on the lessons learned in previous audit years. Regarding 
commenters' requests for a standard audit timeline, we do not intend to 
establish a fixed timeline for audits across MACs at this time, to 
ensure we can retain the flexibility to use our limited audit resources 
to address and prioritize audit needs across all CMS programs each 
year. We note that MACs collaborate with providers regarding scheduling 
dates during the Worksheet S-10 audit process. We also note that MACs 
work closely with providers to balance the time needed to complete the 
Worksheet S-10 audits and to minimize the burden on providers and will 
continue to do so.
    Regarding commenters' requests that CMS make public the audit 
instructions and criteria, as we previously stated in the FY 2021 IPPS/
LTCH PPS final rule and prior rules (81 FR 56964; 84 FR 42368; 85 FR 
58822), we do not make review protocols public as CMS desk review and 
audit protocols are confidential and are for CMS and MAC use only. 
Concerning the request to promulgate the Worksheet S-10 audit policy 
and protocols, there is no requirement under either the Administrative 
Procedure Act or the Medicare statute that CMS adopt the audit 
protocols through notice and comment rulemaking. As previously 
discussed in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58822), at 
this point, to maximize our limited audit resources, we do not plan on 
introducing an audit appeals process.
    Regarding commenters' recommendations that we establish a similar 
process to that used for the wage index audits, at this point we do not 
plan to introduce an audit process with such a structure in order to 
maximize limited audit resources.
    We also note that the quarterly HCRIS data is published as a public 
use file, available at https://www.cms.gov/research-statistics-data-and-systems/downloadable-public-use-files/cost-reports/cost-reports-by-fiscal-year. The December HCRIS extract is available for providers to 
review at the time the IPPS/LTCH PPS proposed rule is issued and the 
March HCRIS is generally available during the comment period.
    Regarding comments on the handling of claims under the HRSA-
administered COVID-19 Uninsured Program and the audits of Worksheet S-
10, providers should discuss with their MAC during the Worksheet S-10 
audit process if they encounter issues. In the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58827), we noted that one term and condition of the 
HRSA Uninsured Program states as follows: ``The Recipient will not 
include costs for which Payment was received in cost reports or 
otherwise seek uncompensated care reimbursement through federal or 
state programs for items or services for which Payment was received.''
    Comment: One commenter commended CMS for its efforts to provide 
clearer instructions for Worksheet S-10. Three commenters requested 
that CMS clarify whether Worksheet S-10 Part I or Part II should be 
utilized to calculate Factor 3. A few commenters recommended that CMS 
allow providers to submit Worksheet S-10 corrections following the 
March 2023 HCRIS deadline. These commenters noted that they were not 
aware of the March deadline until the publishing of the proposed rule. 
In addition, one commenter requested that CMS clarify the ``normal 
timeline'' MACs follow for allowing providers to amend or reopen 
previously audited Worksheet S-10 data used to calculate Factor 3. One 
commenter requested that CMS clarify inconsistent Worksheet S-10 
instructions so that non-Medicare bad debt is not multiplied by CCR. 
This commenter stated that CMS' revised instructions indicated that 
non-reimbursed Medicare bad debt is not reduced by the CCR, but that 
cost report instructions state that non-Medicare bad debt is multiplied 
by the CCR.\207\ This commenter indicated that such a practice is 
inconsistent with the way non-reimbursable Medicare bad debt is 
treated. The commenter also noted that CMS should provide opportunities 
for stakeholder feedback on Worksheet S-10 as well as additional 
educational outreach on revisions, extended submission deadlines, and 
training to hospital staff on accurately reporting data. Finally, one 
commenter proposed that CMS create a working group with industry and 
government stakeholders to develop standard specifications for the data 
fields and formats used for Worksheet S-10 cost reporting of 
uncompensated care, empirical DSH, and Medicare bad debt reimbursement.
    Response: We appreciate commenters' concerns regarding the need for 
clarification of the Worksheet S-10 instructions, as well as their 
suggestions for form revisions to improve reporting. We reiterate our 
commitment to continuing to work with impacted parties to address their 
concerns regarding Worksheet S-10 instructions and reporting through 
provider education and further refinement of the instructions as 
appropriate. We also encourage providers to share with their respective 
MAC any questions regarding clarifications of instructions, reporting, 
and submission deadlines.
    We continue to believe that our efforts to refine the instructions 
and guidance have improved provider understanding of the Worksheet S-10 
and added clarity to the instructions. We also recognize that there are 
continuing opportunities to further improve the accuracy and 
consistency of the information that is reported on the Worksheet S-10, 
and to the extent that commenters have raised new questions and 
concerns regarding the reporting requirements, we will attempt to 
address them through future rulemaking and/or sub-regulatory guidance 
and subsequent outreach. However, as stated in previous rules, we 
continue to believe that the Worksheet

[[Page 59009]]

S-10 instructions are sufficiently clear and continue to allow 
hospitals to accurately complete Worksheet S-10.
    Regarding commenters' requests for clarification on whether 
Worksheet S-10 Part I or Part II is used for the Factor 3 calculation 
for ``new'' hospital and ``newly merged'' hospitals, we would use 
information reported on the hospital's Worksheet S-10, Part I to 
determine Factor 3 if the hospital is determined to be DSH eligible at 
cost report settlement.
    Concerning commenters' requests to submit Worksheet S-10 
corrections after the March 2023 HCRIS, we note that the December HCRIS 
extract is publicly available for providers to review on the CMS 
website at the time of the publishing of the IPPS/LTCH PPS proposed 
rule. The March update of HCRIS is generally available during the 
comment period to the proposed rule. We are continuing to use the March 
HCRIS extract, which is the latest data available during this final 
rule's development, for Factor 3 calculations.
    Concerning commenters' request that CMS clarify the timeline and 
procedures MACs follow to amend or reopen previously audited Worksheet 
S-10 data, we note that MACs will continue to have discretion to 
determine if a provider's report may be accepted. We also note that 
MACs will not reject requests related to Worksheet S-10 revisions 
solely due to the direct reimbursement not meeting current year amended 
cost report or reopening thresholds. For hospital-requested revisions 
to Worksheet S-10, MACs make a determination to accept or reject the 
amended cost report or cost report reopening consistent with the 
current instructions at CMS Pub. 100-06, Chapter 8, available at 
www.cms.gov/regulations-and-guidance/guidance/manuals/internet-only-manuals-ioms-items/cms019018.
    Regarding the commenters' request that CMS to clarify whether non-
Medicare bad debt is multiplied by CCR, we believe that the Worksheet 
S-10 instructions are clear and indicate that the CCR will not be 
applied to the deductible and coinsurance amounts for insured patients 
approved for charity care and non-reimbursed Medicare bad debt.
    Regarding the comments requesting changes to Worksheet S-10 and/or 
further clarification of the reporting instructions, we note that these 
comments fall outside the scope of this final rule.
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26998), 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, would 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 would receive an uncompensated care payment calculated using a 
Factor 3, where the numerator is the uncompensated care costs reported 
on Worksheet S-10 of the hospital's FY 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 would 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.
    In the proposed rule, we stated that 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, 
would 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 this final rule is developed. However, at cost report settlement, 
we would determine the newly merged hospital's final uncompensated care 
payment based on the uncompensated care costs reported on its FY 2024 
cost report. That is, we would revise the numerator of Factor 3 for the 
newly merged hospital to reflect the uncompensated care costs reported 
on the newly merged hospital's FY 2024 cost report. The denominator 
would 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 
would also apply a scaling factor, as described previously.
    Comment: A couple of commenters expressed support for the policy 
currently in place for newly merged hospitals. This policy states that 
uncompensated care payments for a merged hospital will be based on the 
surviving hospital's cost report for the current fiscal year, and that 
the final uncompensated care payments for these hospitals will be 
determined during cost report settlement. These commenters also 
indicated support for the policy in place for new hospitals, which 
states that MACs will make the final determination concerning whether 
hospitals are eligible to receive DSH payments at cost report 
settlement based on the new hospital's cost report.
    Response: We appreciate the support for our policies for new and 
newly merged hospitals.
    As we explained in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26998), for a hospital that is subject to the trim for potentially 
aberrant data and is ultimately determined to be DSH-eligible at cost 
report settlement, its uncompensated care payment should be calculated 
only after the hospital's reporting of insured charity care costs on 
its FY 2024 Worksheet S-10 has been reviewed. Accordingly, the MAC 
would calculate a Factor 3 for the hospital only after reviewing the 
uncompensated care information reported on Worksheet S-10 of the 
hospital's FY 2024 cost report. Then we would calculate Factor 3 for a 
hospital subject to this alternative trim using the same methodology 
used to determine Factor 3 for new hospitals. Specifically, the 
numerator would reflect the uncompensated care costs reported on the 
hospital's FY 2024 cost report, while the denominator would 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 
would apply a scaling factor, as discussed previously, to the Factor 3 
calculation for the hospital. We stated that 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.
    We did not receive any comments on the discussion of CCR trim 
methodology or the UCC trim methodology.
    For purposes of this final 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26999), we stated 
that for purposes of this FY 2024 IPPS/LTCH PPS final rule, we intended 
to use data from the March 2023 HCRIS extract to calculate Factor 3. We 
explained that the March HCRIS extract would be the

[[Page 59010]]

latest quarterly HCRIS extract that would be publicly available at the 
time of the development of this 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 noted 
that MACs follow normal timelines and procedures. We explained that 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 was not 
available for the March HCRIS extract, then that amended and/or 
reopened report data would not be a part of the FY 2024 IPPS/LTCH PPS 
final rule's Factor 3 calculation. We noted that the March HCRIS data 
extract would be available during the comment period for the proposed 
rule if providers want to verify that their amended and/or reopened 
data is reflected in the March HCRIS extract.
    Comment: One commenter commended CMS for using the latest available 
data (i.e., the December 2022 HCRIS data) for determining DSH 
eligibility for the proposed rule and encouraged CMS to use the latest 
data that may become available prior to the development of the final 
rule (i.e., the March 2023 HCRIS update as indicated in the proposed 
rule) to ensure the proper allocation of uncompensated care payments.
    Response: We appreciate the commenter's support for our use of a 
later HCRIS extract for calculating Factor 3 for FY 2024. We are using 
the March HCRIS extract to calculate Factor 3 for this FY 2024 IPPS/
LTCH PPS final rule. We believe on balance this is the best available 
data for the purposes of calculating Factor 3 for FY 2024. We also 
intend to continue utilizing the most recent data available for the 
applicable rulemaking, which generally means the respective December 
HCRIS extract for purposes of Factor 3 calculations in future proposed 
rules. Furthermore, as noted in the FY 2024 IPPS/LTCH PPS proposed 
rule, we continue to intend to use the respective March HCRIS extract 
for future final rules.
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 proposed to calculate the 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 stated that we continued 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, as explained in 
the FY 2024 IPPS/LTCH IPPS proposed rule (88 FR 26999), we believed 
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 noted that 
including discharge data from FY 2022 to compute this 3-year average 
would be consistent with the proposal to use FY 2022 Medicare claims in 
the IPPS ratesetting, as discussed in section I.E. of the preamble of 
this FY 2024 IPPS/LTCH PPS final rule. As discussed in the proposed 
rule, we would use the resulting 3-year average of the number of 
discharges to calculate a per discharge payment amount that would 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 would 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 requested 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.
    Comment: Several commenters supported CMS' proposal to exclude FY 
2020 data from the per-discharge amount calculation for interim 
uncompensated care payments. In contrast, one commenter noted that the 
use of FY 2019, FY 2021, and FY 2022 data would overestimate the 
discharge volume and decrease interim uncompensated care payments in FY 
2024. The same commenter recommended alternative approaches, such as 
using the average of the two most recent years (FY 2020 and FY 2021) 
and applying a national adjustment factor to normalize the data based 
on projected discharge trends.
    Response: We agree with the commenter that using FY 2019 data to 
calculate the per-discharge amount for interim uncompensated care 
payments may overestimate the discharge volume, in general. For 
example, the updated claims data used to estimate the FY 2024 
discharges in the Factor 1 calculation indicate that discharge volumes 
are not expected to return to pre-pandemic levels during FY 2024; 
therefore, we believe omitting FY 2019 data from the per-discharge 
amount calculation for interim uncompensated care payments may more 
accurately estimate FY 2024 discharges. However, we note that we 
continue to believe the FY 2020 discharge data would underestimate 
discharges due to the effects of the COVID-19 PHE in FY 2020. 
Accordingly, to address these concerns regarding the use of FY 2019 
discharge data, we are finalizing our proposal with modification, and 
will calculate the per-discharge amount of uncompensated care payments 
using FY 2021 and FY 2022 discharge data.
    As we explained in the FY 2024 IPPS/LTCH PPS proposed rule, we 
finalized a voluntary process in the FY 2021 IPPS/LTCH PPS final rule 
(85 FR 58833 and 58834), through which a hospital may submit a request 
to its MAC for a lower per discharge interim uncompensated care payment 
amount,

[[Page 59011]]

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 discharges for the 
current fiscal year. 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 this FY 2024 IPPS/LTCH PPS final rule 
for the steps for determining the operating and capital Federal payment 
rate and the outlier payment calculation. No change would be made to 
the total uncompensated care payment amount determined for the hospital 
on the basis of its Factor 3. In other words, any change to the per 
discharge uncompensated care payment amount would not change how the 
total uncompensated care payment amount will be reconciled at cost 
report settlement.
    We received comments related to the uncompensated care payment 
reconciliation process.
    Comment: A couple of commenters recommended that CMS use the 
traditional payment reconciliation process to calculate final 
uncompensated care payments pursuant to section 1886(r)(2) of the Act. 
These commenters did not object to CMS using prospective estimates, 
derived from the best data available, to calculate interim payments for 
uncompensated care costs. However, the commenters stated that interim 
payments should be subject to later reconciliation based on estimates 
derived from actual data from the applicable Federal fiscal year. These 
same commenters noted that CMS' failure to provide meaningful 
explanations for uncompensated care payment calculations is in 
violation of the Administrative Procedure Act. Commenters also 
recommended that CMS satisfy its legal obligation by providing 
hospitals the opportunity to review and comment on the more recent data 
used in rulemaking before the agency publishes the final rule.
    Response: Consistent with the position that we have taken in past 
rulemaking, we continue to believe that applying our best estimates of 
the three factors used in the calculation of uncompensated care 
payments to determine payments prospectively is most conducive to 
administrative efficiency, finality, and predictability in payments (78 
FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; 82 FR 38195; 84 FR 
42373; 85 FR 58833; 86 FR 45246; and 87 FR 49046). We continue to 
believe that, in affording the Secretary the discretion to estimate the 
three factors used to determine uncompensated care payments and by 
including a prohibition against administrative and judicial review of 
those estimates in section 1886(r)(3) of the Act, Congress recognized 
the importance of finality and predictability under a prospective 
payment system. As a result, we do not agree with the commenter's 
suggestion that we should establish a process for reconciling our 
estimates of uncompensated care payments, which would be contrary to 
the notion of a prospective payment system. Furthermore, we note that 
this rulemaking has been conducted consistent with the requirements of 
the Administrative Procedure Act and Title XVIII of the Act. Under the 
Administrative Procedure Act, a proposed rule is required to include 
either the terms or substance of the proposed rule, or a description of 
the subjects and issues involved. In this case, the FY 2024 IPPS/LTCH 
PPS proposed rule included a detailed discussion of our proposed 
methodology for calculating Factor 3 and the data that would be used. 
We made public the best data available at the time of the proposed rule 
to allow hospitals to understand the anticipated impact of the proposed 
methodology and submit comments, and we have considered those comments 
in determining our final policies for FY 2024.
    After consideration of the comments received, we are finalizing our 
proposal to follow the same methodology used in the FY 2023 IPPS/LTCH 
PPS final rule to calculate Factor 3 for FY 2024 using data from the 
most recent 3 years of audited cost reports from FY 2018, FY 2019, and 
2020, based on the March 2023 HCRIS extract. In addition, we are 
finalizing our proposal for determining the per-discharge amount of 
interim uncompensated care payments with modification. Specifically, 
for this FY2024 IPPS/LTCH PPS final rule, we calculated the per-
discharge amount of interim uncompensated care payments using the FY 
2021 and FY 2022 discharge data.
e. Process for Notifying CMS of Merger Updates and To Report Upload 
Issues
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with this final rule, we will publish on the CMS 
website a table listing Factor 3 for 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

[[Page 59012]]

projected to be DSH-eligible, with a N/A in the Factor 3 column.
    Hospitals had 60 days from the date of public display of the FY 
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 the proposed rule and to notify CMS in writing of 
issues related to mergers and/or to report potential upload 
discrepancies due to MAC mishandling of Worksheet S-10 data during the 
report submission process (for example, report not reflecting audit 
results due to MAC mishandling, or most recent report differs from 
previously accepted amended report due to MAC mishandling). In the 
proposed rule, we stated that 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 indicated that we would address comments 
related to mergers and/or reporting upload discrepancies submitted to 
the CMS DSH inbox as appropriate in the table and the supplemental data 
file that we publish on the CMS website in conjunction with the 
publication of the FY 2024 IPPS/LTCH PPS final rule. We also stated 
that all other comments submitted in response to our proposed policies 
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 noted 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 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), in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 27000), we stated our belief that hospitals have sufficient 
opportunity during the comment period for the proposed rule to provide 
information about recent and/or pending mergers and/or to report upload 
discrepancies. Hospitals do not enter into mergers without advanced 
planning. A hospital can inform CMS during the comment period for the 
proposed rule regarding any merger activity not reflected in 
supplemental file published in conjunction with the proposed rule. 
Therefore, for FY 2024 and subsequent fiscal years, we proposed to 
discontinue the 15 business day 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 invited public comments on 
this proposal.
    Comment: One commenter expressed disagreement with the proposal to 
discontinue the 15-day period for hospitals to notify CMS of any data 
discrepancies after display of the final rule. This commenter asserted 
that the proposal affects all hospitals, not only those with recent or 
pending mergers. The commenter stated that the time period after the 
final rule is an important opportunity to address errors and/or verify 
the final rule's DSH Supplemental File.
    Response: We appreciate this commenter sharing their concerns 
regarding the proposal to discontinue the 15-day period following the 
final rule. However, we believe the opportunity for providers to notify 
CMS of discrepancies during the comment period on the proposed rule 
affords a sufficient opportunity to address data discrepancies and 
mergers. In addition, we note there is a policy for determining Factor 
3 for hospitals that merge after the final rule's Factor 3 calculation 
(i.e., newly merged hospitals during FY 2024). Accordingly, we are 
finalizing our proposal to discontinue the notification period 
following display of the final rule as proposed.

F. Counting Certain Days Associated With Section 1115 Demonstration in 
the Medicaid Fraction

1. Background
    Section 1886(d)(5)(F) of the Social Security Act (the Act) provides 
for additional Medicare inpatient prospective payment system (IPPS) 
payments to subsection (d) hospitals \208\ that serve a significantly 
disproportionate number of low-income patients. These payments are 
known as the Medicare disproportionate share hospital (DSH) adjustment, 
and the statute specifies two methods by which a hospital may qualify 
for the DSH payment adjustment.
---------------------------------------------------------------------------

    \208\ Defined in section 1886(d)(1)(B) of the Act.
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     Under the first method, hospitals that are located in an 
urban area and have 100 or more beds may receive a 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 method, is based on a complex 
statutory formula under which the DSH payment adjustment is based on 
the hospital's geographic designation, the number of beds in the 
hospital, and the level of the hospital's disproportionate patient 
percentage (DPP). A hospital's DPP is the sum of two fractions: the 
``Medicare fraction'' and the ``Medicaid fraction.'' The Medicare 
fraction (also known as the ``SSI fraction'' or ``SSI ratio'') is 
computed by dividing the number of the hospital's inpatient days that 
are furnished to patients who were entitled to both Medicare Part A and 
Supplemental Security Income (SSI) benefits by the hospital's total 
number of patient days furnished to patients entitled to benefits under 
Medicare Part A. The Medicaid fraction is computed by dividing the 
hospital's number of inpatient days furnished to patients who, for such 
days, were eligible for Medicaid but were not entitled to benefits 
under Medicare Part A, by the hospital's total number of inpatient days 
in the same period.
    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to apply only to hospital acute care inpatient 
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH 
payment adjustment and specify how the DPP is calculated as well as how 
beds and patient days are counted in determining the Medicare DSH 
payment adjustment. Under Sec.  412.106(a)(1)(i), the number of beds 
for the Medicare DSH payment adjustment is determined in accordance 
with bed counting rules for the Indirect Medical Education (IME) 
adjustment under Sec.  412.105(b).
    Section 1115(a) of the Act gives the Secretary the authority to 
approve a demonstration requested by a State which, ``in the judgment 
of the Secretary, is likely to assist in

[[Page 59013]]

promoting the objectives of [Medicaid.]'' In approving a section 1115 
demonstration, the Secretary may waive compliance with any Medicaid 
State plan requirement under section 1902 of the Act to the extent and 
for the period he finds necessary to enable the State to carry out such 
project. The costs of such project that would not otherwise be included 
as Medicaid expenditures eligible for Federal matching under section 
1903 of the Act may be regarded as such federally matchable 
expenditures to the extent and for the period prescribed by the 
Secretary.
    States use section 1115(a) demonstrations to test changes to their 
Medicaid programs that generally cannot be made using other Medicaid 
authorities, including to provide health insurance to groups that 
generally could not or have not been made ``eligible for medical 
assistance under a State plan approved under title XIX'' (Medicaid 
benefits). These groups, commonly referred to as expansion populations 
or expansion waiver groups, are specific, finite groups of people 
defined in the demonstration approval letter and special terms and 
conditions for each demonstration. (We note in the discussion that 
follows, we use the term ``demonstration'' rather than ``project'' and/
or ``waiver'' and the term ``groups'' instead of ``populations,'' as 
this terminology is generally more consistent with the implementation 
of the provisions of section 1115 of the Act. Therefore, we refer in 
what follows to groups extended health insurance through a 
demonstration as ``demonstration expansion groups.'')
2. History of 42 CFR 412.106(b)(4) and the Deficit Reduction Act of 
2005
    Prior to 2000, some States had chosen to only cover Medicaid 
populations under their State plans when State plan coverage was 
mandatory under the statute, and they did not provide State plan 
coverage for populations for whom the statute made State plan coverage 
optional. Instead, coverage for these optional State plan coverage 
groups (as well as groups not eligible for even optional coverage) 
could be provided through demonstrations approved under section 1115 of 
the Act. We referred to these demonstration groups that could have been 
covered under optional State plan coverage as ``hypothetical'' groups--
consisting of patients that could have been but were not covered under 
a State plan, but that received the same or very similar package of 
insurance benefits under a demonstration as did individuals eligible 
for those benefits under the State plan. Many other States, however, 
still elected to cover optional State plan coverage groups under their 
Medicaid State plans instead of through a demonstration. In order to 
avoid disadvantaging hospitals in States that covered such optional 
State plan coverage groups under a demonstration, CMS developed a 
policy of counting such hypothetical group patients in the numerator of 
the Medicaid fraction of the Medicare DSH calculation (hereinafter, the 
DPP Medicaid fraction numerator) as if those patients were eligible for 
Medicaid.
    Such demonstrations could also include individuals who could not 
have been covered under a State plan, such as childless adults for 
whom, at the time, State plan coverage was not mandatory under the 
statute, nor was optional State plan coverage available. We refer to 
these groups as ``expansion'' groups. Prior to 2000, CMS did not 
include expansion groups in the DPP Medicaid fraction numerator, even 
if individuals in that group received the same package of hospital 
insurance benefits under a demonstration as hypothetical groups and 
those eligible for Medicaid under the State plan.
    On January 20, 2000, we issued an interim final rule with comment 
period (65 FR 3136) (hereinafter, January 2000 interim final rule), 
followed by a final rule issued on August 1, 2000 (65 FR 47086 through 
47087), that changed the Secretary's policy on how to treat the patient 
days of expansion groups that received Medicaid-like benefits under a 
section 1115 demonstration in calculating the Medicare DSH adjustment. 
The policy adopted in the January 2000 interim final rule (65 FR 3136) 
permitted hospitals to include in the DPP Medicaid fraction numerator 
all patient days of groups made eligible for title XIX matching 
payments through a section 1115 demonstration, whether or not those 
individuals were, or could be made, eligible for Medicaid under a State 
plan (assuming they were not also entitled to benefits under Medicare 
Part A). Speaking literally, neither expansion groups nor hypothetical 
groups were in fact ``eligible for medical assistance under a State 
plan''--meaning neither group was eligible for Medicaid benefits. But, 
in CMS' view, certain section 1115 demonstrations introduced an 
ambiguity into the DSH statute (section 1886(d)(5)(F)(vi) of the Act) 
that justified including both hypothetical and expansion groups in the 
DPP Medicaid fraction numerator. Specifically, CMS thought it 
appropriate to count the days of individuals in these demonstration 
groups because the demonstrations provided them the same or very 
similar benefits as the benefits provided to Medicaid beneficiaries 
under the State plan. As we explained in that rule (65 FR 3137), 
allowing hospitals to include patient days for section 1115 
demonstration expansion groups in the DPP Medicaid fraction numerator 
is fully consistent with the Congressional goals of the Medicare DSH 
payment adjustment to recognize the higher costs to hospitals of 
treating low-income individuals covered under Medicaid. This policy was 
effective for discharges occurring on or after January 20, 2000.
    In the FY 2004 IPPS final rule (68 FR 45420 and 45421), we further 
revised our regulations to limit the types of section 1115 
demonstrations for which patient days could be counted in the DPP 
Medicaid fraction numerator. We explained that in allowing hospitals, 
in our 2000 rulemaking, to include patient days of section 1115 
demonstration expansion groups, our intention was to include patient 
days of those groups who under a demonstration receive benefits, 
including inpatient hospital benefits, that are similar to the benefits 
provided to Medicaid beneficiaries under a State plan. But within a few 
years, we had become aware that certain section 1115 demonstrations 
provided some expansion groups with benefit packages so limited that 
the benefits were unlike the relatively expansive health insurance 
(including insurance for inpatient hospital services) provided to 
beneficiaries under a Medicaid State plan. Thus, we explained in the FY 
2004 IPPS final rule that these limited section 1115 demonstrations 
extend benefits only for specific services and do not include similarly 
expansive benefits.
    In the FY 2004 IPPS final rule we specifically discussed family 
planning benefits offered through a section 1115 demonstration as an 
example of the kind of demonstration days that should not be counted in 
the DPP Medicaid fraction numerator because the benefits granted to the 
expansion group are too limited, and therefore, unlike the package of 
benefits received as Medicaid benefits under a State plan. Our 
intention in discussing family planning benefits provided under a 
section 1115 demonstration was not to single out family planning 
benefits, but instead to provide a concrete example of how the changes 
being made in the FY 2004 IPPS final rule would refine the Secretary's 
prior policy set forth in the January 2000 interim final rule (65 FR 
3136). This refinement was to allow only the days of those 
demonstration expansion groups who are provided benefits, and 
specifically inpatient hospital benefits, equivalent to the

[[Page 59014]]

health care insurance that Medicaid beneficiaries receive under a State 
plan, to be included in the DPP Medicaid fraction numerator. Moreover, 
this example was intended to illustrate the kind of benefits offered 
through a section 1115 demonstration that are so limited that the 
patients receiving them should not be considered eligible for Medicaid 
for purposes of the DSH calculation.
    Because of the limited nature of the Medicaid benefits provided to 
expansion groups under some demonstrations, as compared to the benefits 
provided to the Medicaid population under a State plan, we determined 
it was appropriate to exclude the patient days of patients provided 
limited benefits under a section 1115 demonstration from the 
determination of Medicaid days for purposes of the DSH calculation. 
Therefore, in the FY 2004 IPPS final rule (68 FR 45420 and 45421), we 
revised the language of Sec.  [thinsp]412.106(b)(4)(i) to provide that 
for purposes of determining the DPP Medicaid fraction numerator, a 
patient is deemed eligible for Medicaid on a given day only if the 
patient is eligible for inpatient hospital services under an approved 
State Medicaid plan or under a section 1115 demonstration. Thus, under 
our current regulations, hospitals are allowed to count patient days in 
the DPP Medicaid fraction numerator only if they are days of patients 
made eligible for inpatient hospital services under either a State 
Medicaid plan or a section 1115 demonstration, and who are not also 
entitled to benefits under Medicare Part A.
    In 2005, the United States Court of Appeals for the Ninth Circuit 
held that demonstration expansion groups receive care ``under the State 
plan'' and that, accordingly, our pre-2000 practice of excluding them 
from the DPP Medicaid fraction numerator was contrary to the plain 
language of the Act. Subsequently, the United States District Court for 
the District of Columbia reached the same conclusion, reasoning that if 
our policy after 2000 of counting the days of demonstration expansion 
groups was correct, then patients in demonstration expansion groups 
were necessarily ``eligible for medical assistance under a State plan'' 
(that is, eligible for Medicaid), and the Act had always required 
including their days in the Medicaid fraction.
    Shortly after these court decisions, in early 2006, Congress 
enacted the Deficit Reduction Act of 2005 (the DRA) (Pub. L. 109-171, 
February 8, 2006). Section 5002 of the DRA amended section 
1886(d)(5)(F)(vi) of the Act to clarify the Secretary's discretion to 
regard as eligible for Medicaid those not so eligible and to include in 
or exclude from the DPP Medicaid fraction numerator demonstration days 
of patients regarded as eligible for Medicaid. First, by distinguishing 
between ``patients who . . . were eligible for medical assistance under 
a State plan approved under subchapter XIX'' (that is, Medicaid) and 
``patients not so eligible but who are regarded as such because they 
receive benefits under a demonstration project,'' section 5002(a) of 
the DRA clarified that groups that receive benefits through a section 
1115 demonstration are not ``eligible for medical assistance under a 
State plan approved under title XIX.'' This provision effectively 
overruled the earlier court decisions that held that expansion groups 
were made eligible for Medicaid under a State plan. Second, the DRA 
stated ``the Secretary may, to the extent and for the period the 
Secretary determines appropriate, include patient days of patients not 
so eligible but who are regarded as such because they receive benefits 
under a demonstration project approved under title XI.'' Thus, the 
statute provides the Secretary the discretion to determine ``the 
extent'' to which patients ``not so eligible'' for Medicaid benefits 
``may'' be ``regarded as'' eligible ``because they receive benefits 
under a demonstration project approved under title XI.'' Third, this 
same language provides the Secretary with further authority to 
determine the days of which patients regarded as being eligible for 
Medicaid to include in the DPP Medicaid fraction numerator and for how 
long.
    Having provided the Secretary with the discretion to decide whether 
and to what extent to include patients who receive benefits under a 
demonstration project, Congress expressly ratified in section 5002(b) 
of the DRA our prior and then-current policies on counting 
demonstration days in the Medicaid fraction. As stated before, our pre-
2000 policy was not to include in the DPP Medicaid fraction numerator 
days of section 1115 demonstration expansion groups unless those 
patients could have been made eligible for Medicaid under a State plan 
(the ``hypothetical'' groups). We changed that policy in 2000 to 
include in the DPP Medicaid fraction numerator all patient days of 
demonstration expansion groups made eligible for matching payments 
under title XIX, regardless of whether they could have been made 
eligible for Medicaid under a State plan. And for FY 2004, before the 
DRA was enacted, CMS had further refined this policy and included in 
the DPP Medicaid fraction numerator the days of only a small subset of 
demonstration expansion group patients regarded as eligible for 
Medicaid: those that were eligible to receive inpatient hospital 
insurance benefits under the terms of a section 1115 demonstration. 
Thus, by ratifying the Secretary's pre-2000 policy, the January 2000 
interim final rule, and the FY 2004 IPPS final rule, the DRA further 
established that the Secretary had always had the discretion to 
determine which demonstration expansion group patients to regard as 
eligible for Medicaid and whether or not to include any of their days 
in the DPP Medicaid fraction numerator.
    Because at the time the DRA was passed the language of Sec.  
412.106(b)(4) already addressed the treatment of section 1115 days to 
exclude some expansion populations that received limited health 
insurance benefits through the demonstration, we did not believe it was 
necessary to update our regulations after the DRA explicitly granted us 
the discretion to include or exclude section 1115 days from the 
Medicaid fraction of the DSH calculation. We believed instead that the 
language of Sec.  412.106(b)(4) reflected our view that only those 
eligible to receive inpatient hospital insurance benefits under a 
demonstration project could be ``regarded as'' ``eligible for medical 
assistance'' under Medicaid. Thus, considering this history and the 
text of the DRA, we understand the Secretary to have broad discretion 
to decide (1) whether and the extent to which to ``regard as'' eligible 
for Medicaid because they receive benefits under a demonstration those 
patients ``not so eligible'' under the State plan, and (2) of such 
patients regarded as Medicaid eligible, the days of which types of 
these patients to count in the DPP Medicaid fraction numerator and for 
what period of time to do so.
    We do not believe that either the statute or the DRA permit or 
require the Secretary to count in the DPP Medicaid fraction numerator 
days of just any patient who is in any way related to a section 1115 
demonstration. Rather, section 1886(d)(5)(F)(vi) of the Act limits 
including days of expansion group patients to those who may be 
``regarded as'' ``eligible for medical assistance under a State plan 
approved under title XIX.''
3. Uncompensated/Undercompensated Care Funding Pools Authorized Through 
Section 1115 Demonstrations
    CMS's overall policy for including section 1115 demonstration days 
in the DPP Medicaid fraction numerator has

[[Page 59015]]

rested on the presumption that the demonstration provided a package of 
health insurance benefits that were essentially the same as what a 
State provided to its Medicaid population. More recently, however, 
section 1115 demonstrations have been used to authorize funding a 
limited and narrowly circumscribed set of payments to hospitals. For 
example, some section 1115 demonstrations include funding for 
uncompensated/undercompensated care pools that help to offset 
hospitals' costs for treating uninsured and underinsured individuals. 
These pools do not extend health insurance to such individuals nor are 
they similar to the package of health insurance benefits provided to 
participants in a State's Medicaid program under the State plan. 
Rather, such funding pools ``promote the objectives of Medicaid'' as 
required under section 1115 of the Act, but they do so by providing 
funds directly to hospitals, rather than providing health insurance to 
patients. These pools help hospitals that treat the uninsured and 
underinsured stay financially viable so they can treat Medicaid 
patients.
    By providing hospitals payment based on their uncompensated care 
costs, the pools directly benefit those providers, and, in turn, albeit 
less directly, the patients they serve. Unlike demonstrations that 
expand the group of people who receive health insurance beyond those 
groups eligible under the State plan and unlike Medicaid itself, 
however, uncompensated/undercompensated care pools do not provide 
inpatient health insurance to patients or, like insurance, make 
payments on behalf of specific, covered individuals.\209\ In these 
ways, payments from these pools serve essentially the same function as 
Medicaid DSH payments under sections 1902(a)(13)(A)(iv) and 1923 of the 
Act, which are also title XIX payments to hospitals meant to subsidize 
the cost of treating the uninsured, underinsured, and low-income 
patients and that promote the hospitals' financial viability and 
ability to continue treating Medicaid patients. Notably, as numerous 
Federal courts across the country have universally held, the patients 
whose care costs are indirectly offset by such Medicaid DSH payments 
are not ``eligible for medical assistance'' under the Medicare DSH 
statute and are not included in the DPP Medicaid fraction numerator. 
See, for example, Adena Regional Medical Center v. Leavitt, 527 F.3d 
176 (D.C. Cir. 2008); Owensboro Health, Inc. v. HHS, 832 F.3d 615 (6th 
Cir. 2016).
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    \209\ For more information on this distinction, as upheld by 
courts, we refer readers to Adena Regional Medical Center v. 
Leavitt, 527 F.3d 176 (D.C. Cir. 2008), and Owensboro Health, Inc. 
v. HHS, 832 F.3d 615 (6th Cir. 2016).
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    We also note that demonstrations can simultaneously authorize 
different programs within a single demonstration, thereby creating a 
group of people the Secretary regards as Medicaid eligible because they 
receive health insurance through the demonstration, while also creating 
a separate category of payments that do not provide health insurance to 
individuals, such as uncompensated/undercompensated care pools for 
providers.
4. Recent Court Decisions and Rulemaking Proposals on the Treatment of 
1115 Days in the Medicare DSH Payment Adjustment Calculation
    Several hospitals challenged our policy of excluding uncompensated/
undercompensated care days and premium assistance days from the DPP 
Medicaid fraction numerator, which the courts have recently decided in 
a series of cases.\210\ These decisions held that the current language 
of the regulation at Sec.  412.106(b)(4) requires CMS to count in the 
DPP Medicaid fraction numerator patient days for which hospitals have 
received payment from an uncompensated/undercompensated care pool 
authorized by a section 1115 demonstration, as well as days of patients 
who received premium assistance under a section 1115 demonstration. 
Interpreting this regulatory language, which was adopted before the DRA 
was enacted, two courts concluded that if a hospital received payment 
for a patient's otherwise uncompensated inpatient hospital treatment, 
that patient is ``eligible for inpatient hospital services'' within the 
meaning of the current regulation, and therefore, their patient day 
must be included in the DPP Medicaid fraction. Likewise, a court 
concluded that patients who receive premium assistance to pay for 
private insurance that covers inpatient hospital services are 
``eligible for inpatient hospital services'' within the meaning of the 
current regulation, and those patient days must be counted.
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    \210\ Bethesda Health, Inc. v. Azar, 980 F.3d 121 (D.C. Cir. 
2020); Forrest General Hospital v. Azar, 926 F.3d 221 (5th Cir. 
2019); HealthAlliance Hospitals, Inc. v. Azar, 346 F. Supp. 3d 43 
(D.D.C. 2018).
---------------------------------------------------------------------------

    As discussed previously, it was never our intent when we adopted 
the current language of the regulation to include in the DPP Medicaid 
fraction numerator days of patients that benefitted so indirectly from 
a demonstration. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 
25459) (hereinafter, the FY 2022 proposed rule), we stated that we 
continued to believe, as we have consistently believed since at least 
2000, that it is not appropriate to include patient days associated 
with funding pools and premium assistance authorized by section 1115 
demonstrations in the DPP Medicaid fraction numerator because the 
benefits provided patients under such demonstrations are not similar to 
Medicaid benefits provided beneficiaries under a State plan and may 
offset costs that hospitals incur when treating uninsured and 
underinsured individuals. In the FY 2022 proposed rule, we proposed to 
revise our regulations to more clearly state that in order for an 
inpatient day to be counted in the DPP Medicaid fraction numerator, the 
section 1115 demonstration must provide inpatient hospital insurance 
benefits directly to the individual whose day is being considered for 
inclusion. We specifically discussed that, under the proposed change, 
days of patients who receive premium assistance through a section 1115 
demonstration and the days of patients for which hospitals receive 
payments from an uncompensated/undercompensated care pool created by a 
section 1115 demonstration would not be included in the DPP Medicaid 
fraction numerator. Because neither premium assistance nor 
uncompensated/undercompensated care pools are inpatient hospital 
insurance benefits directly provided to individuals, nor are they 
comparable to the breadth of benefits available under a Medicaid State 
plan, we stated that individuals associated with such assistance and 
pools should not be ``regarded as'' ``eligible for medical assistance 
under a State plan.''
    Commenters generally disagreed with our proposal, arguing that both 
premium assistance programs and uncompensated/undercompensated care 
pools are used to provide individuals with inpatient hospital services, 
either by reimbursing hospitals for the same services as the Medicaid 
program in the case of uncompensated/undercompensated care pools or by 
allowing individuals to purchase insurance with benefits similar to 
Medicaid benefits offered under a State plan in the case of premium 
assistance. Thus, they argued, those types of days should be included 
in the DPP Medicaid fraction numerator. Following review of these 
comments, in the final rule with comment period that appeared in the 
December 27, 2021 Federal Register, which finalized certain provisions 
of the

[[Page 59016]]

FY 2022 proposed rule related to Medicare graduate medical education 
payments for teaching and Medicare organ acquisition payment, we stated 
that after further consideration of the issue we had determined not to 
move forward with our proposal and planned to revisit the issue of 
section 1115 demonstration days in future rulemaking (86 FR 73418).
    After considering the comments we received in response to the FY 
2022 proposed rule, in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 
28398) (hereinafter, the FY 2023 proposed rule), we proposed to revise 
our regulation to explicitly reflect our interpretation of the language 
``regarded as'' ``eligible for medical assistance under a State plan 
approved under title XIX'' in section 1886(d)(5)(F)(vi) of the Act to 
mean patients who (1) receive health insurance authorized by a section 
1115 demonstration or (2) patients who pay for all or substantially all 
of the cost of health insurance with premium assistance authorized by a 
section 1115 demonstration, where State expenditures to provide the 
health insurance or premium assistance may be matched with funds from 
title XIX. Moreover, of the groups we regarded as Medicaid eligible, we 
proposed to use our discretion under the Act to include in the DPP 
Medicaid fraction numerator only (1) the days of those patients who 
obtained health insurance directly or with premium assistance that 
provides essential health benefits (EHB) as set forth in 42 CFR part 
440, subpart C, for an Alternative Benefit Plan (ABP), and (2) for 
patients obtaining premium assistance, only the days of those patients 
for which the premium assistance is equal to or greater than 90 percent 
of the cost of the health insurance, provided in either case that the 
patient is not also entitled to Medicare Part A (87 FR 28398 through 
28402).
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49051), we noted 
that the agency received numerous, detailed comments on our proposal. 
We indicated that due to the number and nature of the comments that we 
received, and after further consideration of the issue, we had 
determined not to move forward with the FY 2023 proposal. We stated 
that we expected to revisit the treatment of section 1115 demonstration 
days for purposes of the DSH adjustment in future rulemaking (87 FR 
49051).
    In a proposed rule published in the Federal Register on February 
28, 2023 (88 FR 12623), hereinafter referred to as the February 2023 
proposed rule, we proposed revisions to our regulations on the counting 
of days associated with individuals eligible for certain benefits 
provided by section 1115 demonstrations in the Medicaid fraction of a 
hospital's disproportionate patient percentage, as discussed in greater 
detail below. We proposed the revised regulation would be effective for 
discharges occurring on or after October 1, 2023.
5. Amendment to 42 CFR 412.106(b)(4)
    Consistent with our interpretation of the Medicare DSH statute over 
more than two decades and the history of our policy on counting section 
1115 demonstration days in the DPP Medicaid fraction numerator set 
forth in our regulations, considering the series of adverse cases 
interpreting the current regulation, in light of what we proposed in 
the FY 2022 and FY 2023 proposed rules and our consideration of the 
comments we received thereon, and considering the comments we received 
on the February 2023 proposed rule (88 FR 12623), we are amending the 
regulation at Sec.  412.106(b)(4) as proposed. In order for days 
associated with section 1115 demonstrations to be counted in the DPP 
Medicaid fraction numerator, the statute requires those days to be of 
patients who can be ``regarded as'' eligible for Medicaid. Accordingly, 
and consistent with the proposed approach set forth in the FY 2023 
proposed rule and with our longstanding interpretation of the statute 
and as amended by the DRA, and with the current language of Sec.  
412.106(b)(4), we are modifying our regulations to explicitly state our 
long-held view that only patients who receive health insurance through 
a section 1115 demonstration where State expenditures to provide the 
insurance may be matched with funds from title XIX can be ``regarded 
as'' eligible for Medicaid.
    Similar to our statements in the FY 2023 and February 2023 proposed 
rules, and in further considering the comments received regarding the 
treatment of the days of patients provided premium assistance through a 
section 1115 demonstration to buy health insurance, we are finalizing 
our proposal that such patients can also be regarded as eligible for 
Medicaid under section 1886(d)(5)(F)(vi) of the Act. Therefore, we are 
finalizing our proposal for purposes of the Medicare DSH calculation in 
section 1886(d)(5)(F)(vi) of the Act to ``regard as'' ``eligible for 
medical assistance under a State plan approved under title XIX'' 
patients who (1) receive health insurance authorized by a section 1115 
demonstration or (2) buy health insurance with premium assistance 
provided to them under a section 1115 demonstration, where State 
expenditures to provide the health insurance or premium assistance is 
matched with funds from title XIX.
    Furthermore, of these expansion groups we proposed to regard as 
eligible for Medicaid, we are finalizing our proposal to include in the 
DPP Medicaid fraction numerator only the days of those patients who 
receive from the demonstration (1) health insurance that covers 
inpatient hospital services or (2) premium assistance that covers 100 
percent of the premium cost to the patient, which the patient uses to 
buy health insurance that covers inpatient hospital services, provided 
in either case that the patient is not also entitled to Medicare Part 
A.
    Finally, we are finalizing our proposed amendment of the regulation 
to state specifically that patients whose inpatient hospital costs are 
paid for with funds from an uncompensated/undercompensated care pool 
authorized by a section 1115 demonstration are not patients ``regarded 
as'' eligible for Medicaid, and the days of such patients may not be 
included in the DPP Medicaid fraction numerator.
    As discussed previously, we continue to believe it is not 
appropriate to include in the DPP Medicaid fraction numerator days of 
all patients who may benefit in some way from a section 1115 
demonstration. First, we do not believe the statute permits everyone 
receiving a benefit from a section 1115 demonstration to be ``regarded 
as'' ``eligible for medical assistance under a State plan approved 
under title XIX'' merely because they receive a limited benefit. 
Second, even if the statute were so to permit, as discussed herein, the 
Secretary believes the DRA provides him with discretion to determine 
which patients ``not so eligible'' for Medicaid under a State plan may 
be ``regarded as'' eligible. Thus, the Secretary is regarding as 
Medicaid eligible only those patients who receive as ``benefits'' from 
a demonstration health insurance or premium assistance to buy health 
insurance, because--at root--``medical assistance under a State plan 
approved under title XIX'' provides Medicaid beneficiaries with health 
insurance, not simply medical care. Third, the DRA also gives the 
Secretary the authority to decide which days of patients ``regarded 
as'' Medicaid eligible to include in the DPP Medicaid fraction 
numerator. Using this discretion, we are including only the days of 
those patients who receive from a demonstration (1) health insurance 
that covers inpatient hospital services or (2) premium assistance that

[[Page 59017]]

covers 100 percent of the premium cost to the patient, which the 
patient uses to buy health insurance that covers inpatient hospital 
services, provided in either case that the patient is not also entitled 
to Medicare Part A.
    We note this policy is a change from the proposal included in the 
FY 2023 proposed rule, which would have required that the insurance 
provide EHB and the premium assistance cover at least 90 percent of the 
cost of the insurance. The feedback we received on that proposal from 
interested parties included concerns regarding, among other issues, the 
burden associated with verifying whether a particular insurance program 
in which an individual was enrolled provided EHB, how to determine 
whether a particular premium assistance program covered at least 90 
percent of the cost of the insurance, and the difficulty in receiving 
accurate information on those issues in a timely manner. In light of 
this feedback, the rule we proposed in February 2023 and are now 
finalizing maintains the policy established in the regulations at least 
as far back as FY 2004 that days associated with individuals who obtain 
health insurance from a demonstration that covers inpatient hospital 
services be included in the DPP Medicaid fraction numerator. We do not 
believe that it would be unduly difficult for providers to verify that 
a particular insurance program includes inpatient benefits. (We refer 
readers to section XII.B.2. of this final rule for more information on 
the burden estimate associated with this final rule.) For those 
individuals who buy health insurance covering inpatient hospital 
services using premium assistance received from a demonstration, we 
proposed and are finalizing that the premium assistance cover 100 
percent of the individual's cost of the premium to be included in the 
DPP Medicaid fraction numerator. Indeed, it may be difficult to 
distinguish between patients who, on the one hand, receive through a 
demonstration health insurance for inpatient hospital services or 100 
percent premium assistance to purchase health insurance and patients 
who, on the other hand, are eligible for medical assistance under the 
State plan: all patients receive health insurance paid for with title 
XIX funds, and all may be enrolled in a Medicaid managed care plan. In 
the proposal, we stated that we also do not believe that it will be 
difficult for providers to verify that a particular demonstration 
covers 100 percent of the premium cost to the patient, as it is our 
understanding that all premium assistance demonstrations currently meet 
that standard. In other words, as a practical matter, if a hospital is 
able to document that a patient is in a demonstration that explicitly 
provides premium assistance, then that documentation would also 
document that a patient is in a demonstration that covers 100 percent 
of the individual's costs of the premium. We also stated in the 
proposal that we believe our proposed standard of 100 percent of the 
premium cost to the beneficiary is appropriate because it encapsulates 
all current demonstrations as a practical matter. We also said that if 
in the future there is a demonstration that explicitly provides premium 
assistance that does not cover 100 percent of the individual's costs 
for the premium, we may revisit this issue in future rulemaking.
    As we have consistently stated, individuals eligible for medical 
assistance under title XIX are eligible for, among other things, 
specific benefits related to the provision of inpatient hospital 
services in the form of inpatient hospital insurance. Because funding 
pool payments to hospitals authorized by a section 1115 demonstration 
do not provide health insurance to any patient, nor do the payments 
inure to any specific individual, uninsured patients whose costs are 
subsidized by uncompensated/undercompensated care pool payments to 
hospitals do not receive benefits to the extent that or in a manner 
similar to the full equivalent of ``medical assistance'' available to 
those eligible under a Medicaid State plan. Uninsured or underinsured 
individuals, whether or not they benefit from uncompensated/
undercompensated care pool payments to hospitals, do not have health 
insurance provided by the Medicaid program. Thus, we continue to 
believe that patients whose costs are associated with uncompensated/
undercompensated care pools may not be ``regarded as'' Medicaid-
eligible, and we are using the Secretary's discretion to not regard 
them as such. Even if they could be so regarded and irrespective of 
whether the Secretary has the discretion to not regard them as such, 
the Secretary also is using his authority to not include the days of 
such patients in the DPP Medicaid fraction numerator: Such patients 
have not obtained insurance under the demonstration, and including all 
uninsured patients associated with uncompensated/undercompensated care 
pools could distort the Medicaid proxy in the Medicare DSH calculation 
that is used to determine the low-income, non-senior population a 
hospital serves.\211\ An uninsured patient who does not pay their 
hospital bill (thereby creating uncompensated care for the hospital) is 
not necessarily a low-income patient.
---------------------------------------------------------------------------

    \211\ See, Becerra v. Empire Health Foundation, 142 S. Ct. 2354, 
2358 (2022) (the Medicaid fraction counts the low-income, non-senior 
population).
---------------------------------------------------------------------------

    Accordingly, in this rule, we are finalizing our proposal to revise 
our regulations at Sec.  [thinsp]412.106(b)(4) to explicitly reflect 
our interpretation of the language ``regarded as'' ``eligible for 
medical assistance under a State plan approved under title XIX'' 
``because they receive benefits under a demonstration project approved 
under title XI'' in section 1886(d)(5)(F)(vi) of the Act to mean 
patients provided health insurance benefits by a section 1115 
demonstration. Specifically, we are finalizing our proposal to regard 
as Medicaid eligible for purposes of the Medicare DSH payment 
adjustment patients (1) who receive health insurance through a section 
1115 demonstration itself or (2) who purchase health insurance with the 
use of premium assistance provided by a section 1115 demonstration, 
where State expenditures to provide the insurance or premium assistance 
is matchable with funds from title XIX. In addition, even if the 
statute would permit a broader reading, the Secretary is exercising his 
discretion under section 1886(d)(5)(F)(vi) of the Act to ``regard as'' 
Medicaid eligible only those patients. Furthermore, whether or not the 
Secretary has discretion to determine who is ``regarded as'' Medicaid 
eligible, we are using the authority provided the Secretary to limit 
the days of those section 1115 demonstration patients included in the 
DPP Medicaid fraction numerator to only those of individuals who 
receive from the demonstration (1) health insurance that covers 
inpatient hospital services or (2) premium assistance that covers 100 
percent of the premium cost to the patient, which the patient uses to 
buy health insurance that covers inpatient hospital services, provided 
in either case that the patient is not also entitled to Medicare Part 
A. And we are finalizing our proposal to explicitly exclude from the 
DPP Medicaid fraction numerator the days of patients with uncompensated 
care costs for which a hospital is paid from a funding pool authorized 
by a section 1115 demonstration project.
    Finally, we are finalizing as proposed that our revised regulation 
would be effective for discharges occurring on or after October 1, 
2023. As has been our practice for more than two decades, we

[[Page 59018]]

have made our periodic revisions to the counting of certain section 
1115 patient days in the Medicare DSH calculation effective based on 
patient discharge dates. Doing so again here treats all providers 
similarly and does not impact providers differently depending on their 
cost reporting periods.
    In developing the proposal we are finalizing, we considered 
counting the days of patients in the DPP Medicaid fraction numerator 
whose inpatient hospital costs are paid for with funds from an 
uncompensated/undercompensated care pool authorized by a section 1115 
demonstration. However, after consideration, as discussed in the 
proposal and in greater detail herein, because of the Secretary's 
interpretation of the statute and electing to exercise his discretion 
for policy reasons, we did not propose to include counting in the DPP 
Medicaid fraction numerator the days of patients whose inpatient 
hospital costs are paid for with funds from an uncompensated/
undercompensated care pool authorized by a section 1115 demonstration. 
We invited public comments with regard to our statutory interpretation 
and our election to exercise the Secretary's authority discussed above, 
as well as our proposal not to count in the DPP Medicaid fraction 
numerator days of patients whose inpatient hospital costs are paid to 
hospitals from uncompensated/undercompensated care pool funds 
authorized by a section 1115 demonstration.
6. Responses to Comments on CMS 1788-P
    In section II.E. of the February 2023 proposed rule (88 FR 12629-
12632), we addressed relevant comments the agency received on the 
proposed rules for FY 2022 and FY 2023 on the treatment of certain 1115 
days in the Medicare DSH payment adjustment calculation (86 FR 25459 
and 87 FR 28398). We direct the reader to section II.E. of the February 
2023 proposed rule to review those comments and responses.
    The agency received several timely comments on the February 2023 
proposed rule. Many commenters submitted comments similar or identical 
to those that were submitted on the FY 2022 and FY 2023 proposals. Some 
of the comments we received on the February 2023 proposed rule were out 
of scope of the proposal. We will keep these comments in mind for 
future rulemaking.
    Comment: Several commenters argued that CMS is prohibited from 
finalizing our proposed revisions with respect to days associated with 
1115 demonstrations. Many of these commenters argued that section 
1886(d)(5)(F)(vi) of the Act prohibits the Secretary from 
distinguishing days of patients that receive any benefit at all under a 
demonstration from patients made eligible under a demonstration for 
health insurance coverage that includes inpatient hospital services. In 
addition, many of these commenters also argued that two Federal appeals 
courts have held that the statute requires all patients who are 
``capable of receiving a demonstration project's helpful or useful 
effect by reason of a demonstration project's authority'' be counted in 
the Medicare DSH DPP Medicaid numerator, citing Forrest General 
Hospital v. Azar, 926 F.3d 221 (5th Cir. 2019), and Bethesda Health, 
Inc. v. Azar, 980 F.3d 121 (D.C. Cir. 2020). Some commenters argued 
that CMS was prohibited from revising our regulations in light of these 
court decisions and the decision in HealthAlliance Hospitals, Inc. v. 
Azar, 346 F. Supp. 3d 43 (D.D.C. 2018).
    Response: We thank commenters for their input but we continue to 
believe that the language ``regarded as'' ``eligible for medical 
assistance under a State plan approved under title XIX'' ``because they 
receive benefits under a demonstration project approved under title 
XI,'' in section 1886(d)(5)(F)(vi) of the Act, as amended by the 
Deficit Reduction Act of 2005, Public Law 109-171, 120 Stat. 4, 31 
(Feb. 8, 2006) (``DRA'') sec. 5002, means patients provided health 
insurance by a section 1115 demonstration, because health insurance is 
what patients covered under a Medicaid State plan receive under title 
XIX.
    As we explained in the FY 2023 proposed rule (87 FR 28108 and 
28400) and reiterated again in the February 2023 proposed rule (88 FR 
12623), we believe the statutory phrase ``regarded as such'' refers to 
patients who are regarded as eligible for medical assistance under a 
State plan approved under title XIX, and therefore, should be 
understood to refer to patients who receive benefits that are most like 
those that Medicaid-eligible patients get. Patients covered by a 
Medicaid State plan receive a guarantee of payment for an extensive 
list of medical services paid for with Medicaid funds--effectively 
health insurance. In other words, for the purposes of Medicare DSH, 
patients ``regarded as'' Medicaid-eligible under a demonstration are 
people the Medicaid program treats as if they are eligible for Medicaid 
because a demonstration approved under title XI provides them the same 
or very similar benefits that Medicaid beneficiaries receive under the 
State plan, and which are paid for with Medicaid funds. Patients who do 
not receive the same or very similar benefits, but who might receive 
from a demonstration a benefit that is not effectively health insurance 
(such as receiving treatment at a hospital) are not ``regarded as'' 
Medicaid-eligible.
    Moreover, we believe the DSH statute also provides the Secretary 
the discretion to determine which patients to ``regard[ ] as'' 
``eligible for medical assistance under a State plan approved under 
title XIX'' and to further determine, of those ``regarded as'' 
Medicaid-eligible, which patient days to include in the Medicare DSH 
DPP Medicaid fraction numerator. Therefore, under the Secretary's 
discretion, we are including in the DPP Medicaid fraction numerator 
only patients regarded as eligible for Medicaid who are provided by a 
section 1115 demonstration (1) health insurance that covers inpatient 
hospital services or (2) premium assistance that covers 100 percent of 
the premium cost to the patient, which the patient uses to buy health 
insurance that covers inpatient hospital services, provided in either 
case that the patient is not also entitled to Medicare Part A.
    In amending the DSH statute in 2006, Congress in section 5002 of 
the DRA provided the Secretary with: (1) authority to determine which 
types of patients extended benefits through a section 1115 
demonstration to regard as eligible for Medicaid; and (2) discretion to 
count or not count in the DPP Medicaid fraction numerator days of 
patients regarded as Medicaid-eligible. We know this because, as 
discussed above, DRA section 5002(a) confirmed that (1) groups that 
receive benefits through a section 1115 demonstration are not Medicaid-
eligible (meaning they do not receive benefits under a State plan), and 
(2) the Secretary's pre-2000 policy of excluding expansion populations 
from the DPP (like patients in Portland Adventist and Cookville \212\ 
who received the same benefits as Medicaid beneficiaries, only under a 
demonstration) was proper under the DSH statute at the time (i.e., pre-
DRA amendments). Thus, section 5002(a) of the DRA effectively 
overturned the Portland Adventist and Cookville cases that had held 
demonstration expansion groups received Medicaid benefits under a State 
plan. And by ratifying in DRA section 5002(b) the separate policies 
adopted in rulemaking in

[[Page 59019]]

January 2000 and for FY 2004, in which the Secretary first included in 
the DSH calculation all days of expansion groups and then later limited 
the inclusion to only the days of expansion group patients receiving 
coverage of inpatient hospital services, Congress affirmed that the 
Secretary could determine the contours and limits of what it meant 
under the amended statute for patients to be ``regarded as [Medicaid-
eligible] because they receive benefits under a demonstration project'' 
and the ``extent'' to which to include the days of those patients in 
the DSH DPP Medicaid fraction numerator.
---------------------------------------------------------------------------

    \212\ Portland Adventist Med. Ctr. v. Thompson, 399 F.3d 1091, 
1096 (9th Cir. 2005); Cookeville Reg'l Med. Ctr. v. Thompson, 2005 
U.S. Dist. LEXIS 33351, *18 (D.D.C. Oct. 28, 2005).
---------------------------------------------------------------------------

    In light of this history, we believe that commenters' reliance on 
the quotation from Portland Adventist, to say CMS ``has refused to 
implement the DSH provision in conformity with the intent behind the 
statute'' does not reflect the statute as amended and is therefore 
incorrect. In amending the DSH statute in the DRA, Congress effectively 
overturned Portland Adventist and clearly stated the authority the 
Secretary has, and has always had, to determine whether a recipient of 
benefits under a section 1115 demonstration may be regarded as 
Medicaid-eligible and, if so, that the Secretary may decide whether to 
include such patient day in the DPP Medicaid fraction numerator.
    As earlier noted, Section 5002(b) of the DRA ratified CMS' January 
2000 policy of including all demonstration expansion group days in the 
DPP Medicaid fraction numerator as those that the Secretary regarded as 
days of Medicaid-eligible patients. But Congress also ratified CMS' FY 
2004 policy that narrowed the type of expansion days included in the 
DPP Medicaid fraction numerator to only those of patients receiving 
coverage of inpatient hospital services. In revising the DSH regulation 
(42 CFR 412.106(b)(4)) for FY 2004, the agency noted that hospitals 
were claiming days of patients in the DPP Medicaid fraction numerator 
who were extended only limited benefits (like coverage for family 
planning services) by a section 1115 demonstration. Thus, in amending 
the DSH regulation for FY 2004 under the pre-DRA DSH statute, the 
Secretary affirmed his view that a patient receiving such limited 
benefits from a demonstration was not similar enough to a patient 
eligible for Medicaid under a State plan to include the demonstration 
patient's day in the DPP Medicaid fraction numerator. In other words, 
the FY 2004 rule--the current regulation we are amending in this rule--
underscored the Secretary's belief that patients receiving only some 
benefit provided by a demonstration, but not the more comprehensive 
coverage provided under a Medicaid State plan, was not enough to regard 
such patient as Medicaid-eligible and to count their patient days as 
Medicaid days for purposes of the DSH calculation.
    Moreover, by amending the DSH statute in DRA section 5002(a) to 
explicitly permit the Secretary to consider certain demonstration days 
as Medicaid days and include them in the DSH calculation, and by 
ratifying in section 5002(b) the Secretary's policy of including only 
demonstration days of patients provided select benefits (coverage of 
inpatient hospital services), we disagree that the DSH statute requires 
counting as Medicaid days in the DPP Medicaid fraction numerator all 
days of patients merely ``considered or accounted to be capable of 
receiving a demonstration project's helpful or useful effects,'' as 
some commenters assert. Rather, the DSH statute, as amended by the DRA, 
permits demonstration expansion groups to be ``regarded as'' Medicaid-
eligible only when they get benefits similar to those of State plan 
beneficiaries; provides the Secretary with discretion to determine, in 
the context of Medicare DSH calculations, whether populations that 
receive benefits under a section 1115 demonstration are ``regarded as'' 
eligible for Medicaid; and likewise provides the Secretary further 
discretion to determine ``the extent'' to which the days of those 
regarded as Medicaid-eligible may be included in the Medicare DSH DPP 
Medicaid fraction numerator. Therefore, considering our prior 
rulemakings on this subject and Congress' intervention in enacting 
section 5002 of the DRA, we disagree with commenters who read section 
1886(d)(5)(F)(vi) of the Act to mandate that all days of patients who 
may benefit in any way from a section 1115 demonstration must be 
included in the DSH DPP Medicaid fraction numerator.
    The text of the statute also confirms the Secretary's authority in 
these respects. The statute clearly uses discretionary language. It 
specifies that ``the Secretary may, to the extent and for the period 
the Secretary determines appropriate, include patient days of patients 
not so eligible but who are regarded as such because they receive 
benefits under a demonstration project approved under title XI.'' As 
the Supreme Court recently explained, ``may'' is quintessentially 
discretionary language and has repeatedly emphasized that the use of 
``may'' in a statute is intended to confer discretion rather than 
establish a requirement.\213\ ``The use of the word `may' . . . thus 
makes clear that . . . the Secretary `has the authority, but not the 
duty.' '' Lopez v. Davis, 531 U.S. 230, 241 (2001). So, while the DSH 
statute, section 1886(d)(5)(F)(vi)(II) of the Act, specifies the DPP 
Medicaid fraction numerator includes the days of patients ``eligible 
for medical assistance under a State plan approved under title XIX,'' 
(if they are not also entitled to Medicare Part A), the DRA provides 
that the Secretary may include the days of those ``not so eligible'' 
(that is, patients not eligible for Medicaid). The additional clause 
``to the extent and for the period the Secretary determines 
appropriate'' provides even more evidence that Congress sought to give 
the Secretary the authority to determine which ``patient days of 
patients not so eligible [for Medicaid] but who are regarded as such'' 
to count in the DPP Medicaid fraction numerator. In other words, the 
statute expressly contemplates that the Secretary may include the days 
of patients who are not actually eligible for Medicaid under the State 
plan but who the Secretary treats for all intents and purposes under a 
section 1115 demonstration as if they were so eligible. But the statute 
does not command that the Secretary must count such patients. 
Accordingly, we disagree with commenters who stated that the statute 
requires we count in the DPP Medicaid fraction numerator all patients 
who benefit in any way from a demonstration. Rather, the plain reading 
of the statute authorizes the Secretary to determine, as ``the 
Secretary determines [is] appropriate,'' whether patients are regarded 
as being eligible for Medicaid and, if so, ``the extent'' to which to 
include their days in the DPP Medicaid fraction numerator. Moreover, 
even if we are incorrect in interpreting the statute to give the 
Secretary the authority to determine what patients may be ``regarded 
as'' Medicaid-eligible, the statute still clearly provides the 
Secretary authority to choose not to include all days of patients so 
regarded under a demonstration.
---------------------------------------------------------------------------

    \213\ See Opati v. Republic of Sudan, 140 S. Ct. 1601, 1609 
(2020) (The Court has ``repeatedly observed'' that ``the word `may' 
clearly connotes discretion.''). See also, for example, Weyerhaeuser 
Co. v. United States Fish & Wildlife Serv., 139 S. Ct. 361, 371 
(2018); Jama v. Immigration & Customs Enforcement, 543 U.S. 335, 346 
(2005).
---------------------------------------------------------------------------

    Some commenters disagreed with this position, suggesting that all 
patients who benefit from a demonstration (e.g. even if they are 
uninsured or do not receive 100 percent of their premium costs as 
premium assistance from a demonstration) must be regarded as eligible 
for Medicaid and included in the DPP Medicaid fraction numerator. While 
it is true that courts have

[[Page 59020]]

interpreted the regulation we are replacing with the rule we are 
finalizing in that manner, we note that the current regulation was 
drafted prior to the enactment of DRA section 5002 and, therefore, the 
regulation does not interpret the language the DRA added to the 
Medicare statute, which, as we explain above and previously, gives the 
Secretary wide discretion whether to consider demonstration days as 
Medicaid-eligible days and whether to count them in the Medicaid 
fraction. Our revised regulation uses the authority granted to the 
Secretary under the DRA to not regard as eligible for Medicaid 
individuals eligible for certain 1115 demonstration benefits; and in 
the event they are ``regarded as'' Medicaid-eligible, the revised 
regulation uses the authority granted the Secretary under the DRA to 
not count their days in the DPP Medicaid fraction numerator.
    Also, to the extent commenters read the Forrest General or Bethesda 
cases as interpreting section 1886(d)(5)(F)(vi) of the Act to require 
that any patient who benefits from an approved demonstration is 
``regarded as'' eligible for Medicaid and required to be included in 
the DPP Medicaid fraction, as their comments suggest, we respectfully 
disagree with that reading of those cases. Rather, we believe the 
better readings of Forrest General and Bethesda are that the courts 
determined that days of any patient who is ``regarded as'' eligible for 
medical assistance under the DSH regulation (which the courts found 
uninsured patients to be because they received the ``benefit'' of 
inpatient hospital services) must be included in the Medicaid fraction. 
While, for the reasons already stated, we also disagree with the 
courts' finding that uninsured patients can be ``regarded as'' eligible 
for Medicaid under the current regulation, we nonetheless believe this 
is the better reading of the courts' decisions and, indeed, is what has 
led us to revising our regulations. The commenters' readings of these 
cases cannot square the decisions with Congress' ratification in DRA 
section 5002(b) of the Secretary's rulemakings that at first included 
all demonstration days and then excluded many types of demonstration 
days from the DPP Medicaid fraction numerator. Additionally, we do not 
believe anything in the courts' decisions, or in the HealthAlliance 
decision, limits the Secretary's authority to amend his own 
regulations.
    We believe that the revisions we have proposed are consistent with 
the amended DSH statute and our authority provided thereunder and, for 
the reasons stated above and in the February 2023 proposed rule, we 
believe that days associated with uncompensated/undercompensated care 
pools and premium assistance demonstrations which cover less than 100 
percent of the costs of the premium to the patient should not be 
included in the DPP Medicaid fraction numerator. We are finalizing the 
proposed changes to the regulation in this rule to clarify who, 
under1886(d)(5)(F)(vi) of the Act, as amended, the Secretary regards as 
eligible for Medicaid because of benefits provided by a section 1115 
demonstration and which patient days the Secretary will and will not 
include in the Medicare DSH DPP Medicaid fraction numerator. We believe 
that our revisions are consistent with the statute and our statutory 
authority and are not precluded by the court decisions cited by the 
commenters.
    Comment: Some commenters argued that our proposal violated the 
Administrative Procedure Act because it is arbitrary and capricious and 
irrationally overbroad.
    Response: For reasons we articulated both in the February 2023 
proposed rule and above, we do not believe our proposal is arbitrary, 
capricious or overbroad. We believe that our proposal conforms with the 
DSH statute, as amended, and the authority given to the Secretary under 
the Act as it relates to calculating a hospital's disproportionate 
patient percentage.
    Comment: Several commenters specifically objected to our proposal 
to exclude from counting in the DPP Medicaid fraction numerator days 
associated with uncompensated/undercompensated care funding pools 
authorized by section 1115 demonstrations. These commenters argued that 
patients whose hospital costs were paid for by a section 1115 funding 
pool must be ``regarded as'' Medicaid-eligible under the statute 
because such patients ``effectively'' receive insurance paid for with 
Medicaid funds under section 1115 demonstrations. Thus, they assert, 
these uninsured patients cannot reasonably be distinguished from 
patients who receive insurance from the Medicaid program. Commenters 
also asserted in the same vein that uninsured patients receive as 
benefits from a demonstration's uncompensated/undercompensated funding 
pool program inpatient hospital services that are the same inpatient 
benefits that Medicaid beneficiaries receive because the inpatient care 
they receive from hospitals is the same.
    Response: We thank commenters for their input, however we 
respectfully disagree with the factual predicates and the legal 
conclusions of these assertions. First, we disagree with the 
proposition that uninsured patients whose costs may be partially paid 
to hospitals by uncompensated/undercompensated care pools effectively 
have insurance which includes inpatient hospital benefits. Therefore, 
we do not believe that these patients are indistinguishable from 
Medicaid beneficiaries and expansion group patients who receive health 
insurance under the State plan or demonstration, respectively, and 
whose days the Secretary includes in the DPP Medicaid fraction 
numerator. Uninsured patients, unlike Medicaid or expansion group 
patients, do not have health insurance.
    It is clear, insurance is beneficial to specific patients in ways 
that uncompensated/undercompensated care pool payments to hospitals are 
not or could not possibly be to such patients.\214\ Medicaid and other 
forms of health insurance are not merely mechanisms of payment to 
providers for costs of patient care: Health insurance provides a 
reasonable expectation on the part of the insurance holder that they 
can seek treatment without the risk of financial ruin. On the other 
hand, hospitals may bill uninsured patients for the full cost of their 
care and refer their medical debts to collection agencies when they are 
unable to pay, even if some of their medical treatment costs may be 
paid to the provider by an uncompensated/undercompensated care pool. 
Thus, it remains the case that uninsured patients may avoid treatment 
for fear of being unable to pay for it. For example, if two patients 
receive identical care from a hospital that accepts government-funded 
insurance, but one of them has insurance as a Medicaid beneficiary or 
receives insurance through a section 1115 demonstration and, therefore, 
is financially protected, while the other patient is uninsured and 
spends years struggling to pay their hospital bill--even if the 
hospital receives partial payment from a demonstration-authorized 
uncompensated/undercompensated care pool for that patient's treatment--
the two patients have not received the same ``benefit'' from the 
government or one that could

[[Page 59021]]

reasonably be ``regarded as'' comparable. This distinction between 
insured and uninsured patients is meaningful in this context, and we 
believe it is a sound basis on which to distinguish the treatment of 
patient days in the DSH calculation of uninsured patients who may in 
some way benefit from a section 1115 demonstration-authorized 
uncompensated/undercompensated care pool and the days of patients 
provided health insurance as a Medicaid beneficiary under a State plan 
or through a demonstration as part of an expansion group.
---------------------------------------------------------------------------

    \214\ See Health Insurance Coverage and Health--What the Recent 
Evidence Tells Us (https://www.nejm.org/doi/pdf/10.1056/nejmsb1706645); Economic and Employment Effects of Medicaid 
Expansion Under ARP  Commonwealth Fund (https://www.commonwealthfund.org/publications/issue-briefs/2021/may/economic-employmenteffects-medicaid-expansion-under-arp). To be 
clear, we mention these studies only in support of our assertion 
that having health insurance is fundamentally different than not 
having insurance.
---------------------------------------------------------------------------

    Second, we also respectfully disagree with commenters who have 
stated that uninsured patients whose costs may be paid to hospitals by 
an uncompensated/undercompensated care pool receive the same benefits 
as patients eligible for Medicaid because the inpatient hospital care 
is likely the same for both groups. As stated above, within the meaning 
of section 1886(d)(5)(F)(vi) of the Act, the ``benefits'' provided to 
the individual by Medicaid and other forms of insurance a patient 
receives is the promise of a payment made on behalf of a specific 
patient to a provider of care for providing the care, not the care 
itself the hospital provides. The provision of inpatient hospital 
services and payment for such services are two distinct issues, and 
because a hospital treats a patient presenting a need for medical care 
does not indicate anything about whether or how the hospital may be 
paid for providing that care. And, similarly, the fact that a 
demonstration provides pool funding from which hospitals may be paid in 
no way creates an obligation under the demonstration to provide 
inpatient hospital care to any individual, nor does it create a 
reasonable expectation on behalf of a specific individual that a 
hospital must treat them or that such treatment will be paid for under 
the demonstration. Thus, the similarity of care a patient may receive 
and for which a hospital may receive some payment from a 
demonstration's uncompensated/undercompensated care fund is irrelevant 
to the question of whether the ``benefits'' provided a patient 
``because'' of a demonstration may be ``regarded as'' something akin to 
``medical assistance under a State plan approved under title XIX'' such 
that the Secretary could choose to count that patient's day in the DPP 
Medicaid fraction numerator. And even if hospitals that receive some 
Medicaid funds to provide similar treatment to uninsured patients 
permits or requires the Secretary to regard those patients as Medicaid-
eligible for DSH calculation purposes, the Secretary has still 
rationally distinguished such patients from Medicaid-eligible patients 
and is choosing not to count them in the DPP Medicaid fraction 
numerator.
    Comment: Some commenters argued that because partial payment of 
costs by a demonstration's uncompensated/undercompensated care fund to 
hospitals for the cost of treating uninsured/underinsured patients may 
be ``medical assistance'' within the meaning of the Medicaid statute, 
that the Medicare DSH statute requires the uninsured/underinsured 
patient to be ``regarded as'' eligible for Medicaid and their patient 
days included in the DPP Medicaid fraction numerator.
    Response: We disagree with the conclusion that individuals who may 
benefit from a demonstration's uncompensated/undercompensated care pool 
payments to hospitals must be ``regarded as'' eligible for Medicaid 
because those payments may be considered ``medical assistance'' under 
the Medicaid statute and that their patient days must be included in 
the DPP Medicaid fraction numerator. We believe this conclusion is 
precluded in light of Congress' amendment of the DSH statute and its 
ratification of the then-existing DSH regulation, which we are amending 
through this rule.
    As discussed above, Congress ratified the Secretary's FY 2004 
regulation, which limited the agency's prior DSH policy of including in 
the DSH DPP Medicaid fraction all expansion days authorized by a 
section 1115 demonstration. In limiting the January 2000 regulation, 
the agency determined a demonstration needed to extend coverage for 
inpatient hospital services, one form of ``medical assistance'' (under 
SSA section 1905(a)(1)), to individuals to include the days of such 
patients in the DPP Medicaid fraction numerator. As an example of the 
limitation promulgated in the FY 2004 rule, no longer would the 
Secretary consider a demonstration's provision of coverage only for 
family planning services sufficiently similar to the comprehensive 
coverage Medicaid beneficiaries receive under a State plan. Thus, 
despite family planning services being ``medical assistance'' under 
section 1905(a)(4)(C) of the Act, the FY 2004 rulemaking precluded 
including in the DPP Medicaid fraction numerator the days of patients 
receiving only that limited ``medical assistance'' under a 
demonstration because it was not similar enough to the medical 
assistance benefits Medicaid-eligible patients received. Therefore, the 
days of expansion group patients who only received coverage of this 
particular type of medical assistance (family planning services) were 
no longer included in the DSH DPP Medicaid fraction. Congress ratified 
the FY 2004 regulation, thereby confirming that not every provision of 
``medical assistance'' through a section 1115 demonstration constitutes 
a ``benefit'' under the DSH statute that requires the Secretary to 
regard the recipient as Medicaid-eligible and to include the patient 
day in the DSH DPP Medicaid fraction. Thus, even if the ``benefit'' an 
uninsured patient receives because a hospital is paid something under a 
section 1115 demonstration for providing that patient inpatient 
services could be considered ``medical assistance,'' the Secretary need 
not regard that patient as Medicaid-eligible for DSH purposes or 
include their patient day in the DPP Medicaid fraction numerator.
    In keeping with this view, we continue to disagree with commenters 
that our prior discussions of court cases like Adena Regional Medical 
Center v. Leavitt, 527 F.3d 176 (D.C. Cir. 2008), and Owensboro Health, 
Inc. v. HHS, 832 F.3d 615 (6th Cir. 2016), are irrelevant to this 
discussion because those cases did not involve section 1115 
demonstrations. We rely on these cases to refute the idea that the 
provision of something beneficial--like the provision of inpatient 
hospital services to the uninsured--even when paid for with Medicaid 
funds, transforms those things into ``medical assistance'' or makes the 
recipient of them ``eligible for medical assistance'' as those phrases 
are used in the Medicaid statute. The Medicaid program can subsidize 
the treatment of low-income uninsured patients without making those 
individuals eligible for ``medical assistance.'' The phrase, ``eligible 
for medical assistance under a state plan approved under title XIX'' is 
a term of art that Congress uses to identify patients that are eligible 
for Medicaid. As the D.C. Circuit put the point: ``Congress has, 
throughout the various Medicare and Medicaid statutory provisions, 
consistently used the words `eligible' to refer to potential Medicaid 
beneficiaries and `entitled' to refer to potential Medicare 
beneficiaries.'' Northeast Hospital Corp. v. Sebelius, 657 F. 3d 1, 12, 
(D.C. Cir. 2011). Congress simply followed suit when referring to the 
two programs in the Medicare DSH DPP provisions. Becerra v. Empire 
Health Foundation, 142 S. Ct. 2354 (2022). Indeed, the Medicaid DSH 
provision in section 1923 of the Act is a good example of how a 
Medicaid state plan may subsidize the treatment of low-income, 
uninsured patients without making those

[[Page 59022]]

individuals eligible for ``medical assistance'' as that phrase is used 
in the Medicaid statute. The Courts of Appeals have repeatedly rejected 
lawsuits that presented some variation of the argument that when 
hospitals received Medicaid DSH payments--i.e., payments funded by 
title XIX--because they incurred costs treating low-income uninsured 
patients, it meant that the uninsured patients treated were thereby 
rendered eligible for Medicaid (or received ``medical assistance''). 
They were not. Likewise here, a subsidy approved under section 1115 to 
hospitals for costs they incur in treating un- and under-insured 
patients--i.e., in the form of title XIX payments from a section 1115-
approved uncompensated care fund--does not render the patients whose 
cost may be covered in part by those payments eligible for ``medical 
assistance.'' We therefore disagree with comments suggesting that 
patients whose costs may be offset by demonstration-authorized pool 
funding to hospitals receive ``medical assistance'' within the meaning 
of the Medicare DSH provision at section 1886(d)(5)(F)(vi) of the Act 
that would require the Secretary to regard such patients as eligible 
for Medicaid and that those patients days must be included in the DPP 
Medicaid fraction numerator.
    Furthermore, even if uninsured patients could be regarded as 
eligible for Medicaid, we would not include them in the DPP Medicaid 
fraction numerator for policy reasons. The DPP is intended to be a 
proxy calculation for the percentage of low-income patients a hospital 
treats. Congress has defined the proxy to count in the Medicare 
fraction the days of patients entitled to Medicare Part A and SSI; the 
days of patients not entitled to Medicare but eligible for Medicaid are 
counted in the Medicaid fraction. Thus, because Medicaid has never 
covered everyone that could be considered low-income--for instance, it 
generally did not cover low-income, childless adults before passage of 
the Affordable Care Act--therefore not every low-income patient was 
ever necessarily accounted for in the DPP Medicaid proxy. If we counted 
all uninsured patients who could be said to have benefited from an 
uncompensated/undercompensated care pool (whether low income patients 
or not, because one need not be low-income to be uninsured and leave a 
hospital bill unpaid), we could potentially include in the DPP proxy 
not just all low-income patients in States with uncompensated/
undercompensated care pools, including those who have never been, and 
in our view should not be accounted for int the DPP Medicaid proxy, but 
also patients who are not low-income but who do not have insurance and 
did not pay their hospital bill, who we also believe should not be 
included in the DPP Medicaid fraction numerator. This would be a 
distortion from how Congress intended the DSH calculation to work, 
where the DPP is a proxy for the percentage of low-income patients that 
hospitals serve based on patients covered by Medicare or Medicaid. We 
note that in contrast to an individual who could afford but elects not 
to buy insurance and lets bills go unpaid, an individual who receives 
insurance coverage under Medicaid or a section 1115 demonstration, by 
definition, must meet low-income standards.
    Comment: Some commenters pointed out that in the recently approved 
Texas demonstration, the Special Terms and Conditions of that program 
only permit payment from the approved uncompensated/undercompensated 
care pool for costs incurred providing medical services to uninsured 
individuals as ``charity care'' and thus only the hospitals' costs of 
patients ``who demonstrated financial need according to the provider's 
charity care policy'' could be paid from such fund. They assert that 
this undercuts the above rationale for exercising the Secretary's 
discretion to exclude uncompensated/undercompensated care days from 
inclusion in the DPP Medicaid fraction numerator.
    Response: We respectfully disagree that the provision in the Texas 
program undercuts our rationale. As stated above, we think the fact 
that an individual is provided health insurance through Medicaid or a 
demonstration is a salient and rational basis for distinguishing 
individuals that should and should not count in the low-income proxy 
that is the DPP Medicaid fraction numerator. Moreover, a policy that 
incentivizes states to expand Medicaid eligibility by including in the 
DPP Medicaid fraction numerator only the days of patients made eligible 
for health insurance under a State plan or section 1115 demonstration 
is sound policy. And while recognizing that the objectives of the 
Medicaid program can be advanced through the approval of uncompensated/
undercompensated care pools in section 1115 demonstration programs 
because they help keep hospitals financially viable to provide services 
to Medicaid patients, these funding pools do not provide individuals 
with a right to seek medical care or any guarantee that the cost of any 
care will be made on their behalf. Thus, we continue to believe that 
there is a rational basis to distinguish for Medicare payment purposes 
days of uninsured patients from those who receive health insurance 
coverage under a Medicaid State plan or section 1115 demonstration.
    Also, counting all patients that may be ``capable of receiving a 
demonstration project's helpful or useful effect by reason of a 
demonstration project's authority'' in States with uncompensated/
undercompensated care pools could drastically and unfairly increase DSH 
payments to hospitals located in States with those programs in 
comparison to hospitals in States without them, even though the cost 
burden on hospitals of treating low-income, uninsured patients might be 
higher in States without uncompensated/undercompensated care pools, 
precisely because they do not have uncompensated/undercompensated care 
pools. The purpose ``of the DSH provisions is not to pay hospitals the 
most money possible; it is instead to compensate hospitals for serving 
a disproportionate share of low-income patients.'' \215\ We do not 
believe that purpose would be furthered by regarding uninsured patients 
associated with uncompensated/undercompensated care pool funding as if 
they were patients eligible for Medicaid or counting them in the DPP 
Medicaid fraction numerator.
---------------------------------------------------------------------------

    \215\ Becerra v. Empire Health Found., 142 S. Ct. 2354, 2367 
(2022) (emphasis added).
---------------------------------------------------------------------------

    Thus, while we continue to believe that the statute does not permit 
patients who might indirectly benefit from uncompensated/
undercompensated care pool funding to be ``regarded as'' eligible for 
Medicaid, if the statute permits us to regard such patients as eligible 
for medical assistance under title XIX, the statute also provides the 
Secretary with the discretion to determine whether to do so. We are 
electing to exercise the Secretary's discretion not to regard as 
eligible for Medicaid patients that may indirectly benefit from 
uncompensated/undercompensated funding pools. In any event, we believe 
the statute also expressly provides the Secretary with the authority to 
determine whether to include patient days of patients regarded as 
eligible for Medicaid in the DPP Medicaid fraction numerator ``to the 
extent and for the period'' that the Secretary deems appropriate. Thus, 
we are also exercising the Secretary's discretion not to include in the 
DPP Medicaid fraction numerator patient days of patients associated 
with

[[Page 59023]]

uncompensated/undercompensated care pool payments.
    Comment: Some commenters stated that because CMS does not have 
evidence that uncompensated/undercompensated care pools are improperly 
used, we lack the authority to exclude days associated with those 
programs from the numerator of the Medicaid fraction.
    Response: Our interpretation of the DSH statute and policy choices 
we are finalizing in this rule to exclude counting patient days for 
which hospitals are paid from demonstration-approved uncompensated/
undercompensated care pools is not based on any conclusion that such 
funding mechanisms are being improperly used; and for the reasons 
previously stated, we believe we have the authority to do so. To the 
extent approved by a section 1115 demonstration, funding pools can play 
a proper role in paying hospitals with title XIX funds for 
uncompensated costs they incur treating un- and under-insured patients. 
In doing so, these funding pools can further the objectives of the 
Medicaid program, as required by section 1115 of the Act, by helping to 
financially stabilize hospitals that serve Medicaid beneficiaries. We 
do not, however, agree that the fact that demonstration funding pools 
can be used properly under section 1115 of the Act requires us, under 
section 1886(d)(5)(F)(vi) of the Act, to count days associated with 
them in the DPP Medicaid fraction numerator. As we have stated, 
individuals who have the cost of their care partially offset through 
the use of uncompensated/undercompensated care pools do not receive 
``medical assistance'' that is sufficiently similar to the benefits 
individuals eligible for Medicaid receive under title XIX for us to 
regard them as eligible for Medicaid for the purposes of Medicare DSH 
or to count them in the DPP Medicaid fraction numerator, even if they 
could be regarded as Medicaid eligible under the Medicare statute.
    Comment: Many commenters objected to our proposal to exercise the 
Secretary's discretion to limit including in the DPP Medicaid fraction 
numerator days of patients who receive premium assistance under a 
section 1115 demonstration to only the days of those patients receiving 
such assistance that covers 100 percent of the premium cost to the 
patient and that are used to buy health insurance for inpatient 
hospital services. Some of these commenters stated that they believe 
CMS has ignored the burden of this proposal on hospitals.
    A commenter noted that CMS stated that ``if in the future there is 
a demonstration that explicitly provides premium assistance that does 
not cover 100 percent of the individual's costs for the premium,'' that 
it ``may revisit this issue in future rulemaking.'' The commenter 
asserted it is unclear who would furnish this data to hospitals or how 
hospitals would obtain the patient-specific data that they would need 
to prove eligibility for each patient under the proposed rule. 
Therefore, the commenter believes that the proposed limitation on 
counting patients receiving premium assistance pursuant to a section 
1115 waiver is arbitrary and capricious.
    Another commenter stated that CMS does not adequately consider the 
undue burden on hospitals to obtain the information necessary to 
document these proposed requirements for each patient whose patient 
days the hospital is seeking to include. Another commenter noted that 
CMS's existing regulation at Sec.  412.106(b)(4)(iii) requires 
providers ``of furnishing data adequate to prove eligibility for each 
Medicaid patient day.'' The commenter believes that the proposal would 
place an undue burden on hospitals to be able to count days associated 
with section 1115 premium assistance programs. The commenter also noted 
that CMS did not address adequately how hospitals are supposed to 
determine how much specific patients are paying in premiums to their 
private health plans or how much the premium assistance under the 
demonstration is funding for those patients. The commenter was also 
concerned that CMS has not clarified how hospitals would determine if 
the 100 percent threshold is met, thus potentially putting at risk even 
those waiver days that could qualify. The commenter also noted that if 
all the waiver programs already satisfy the standard of 100 percent of 
the individual's costs of the premium, it is unclear why CMS needs a 
new regulation to carve out premium assistance programs that do not 
even exist.
    Response: As we explained both herein and in our proposal, we 
believe that premium assistance that covers 100 percent of the costs of 
the premium to the patient, used to purchase health insurance coverage 
of inpatient hospital services is the level and type of benefit that is 
most similar to the benefits provided by the Medicaid program under 
title XIX of the Act--namely, health insurance that covers inpatient 
hospital benefits. Therefore, because this threshold of premium 
assistance to buy health insurance covering inpatient services provides 
the same benefit to individuals as Medicaid beneficiaries receive, 
albeit obtained through a slightly different mechanism, we believe it 
is an appropriate threshold to distinguish between individuals we will 
count for the purposes of calculating Medicare DSH and those we will 
not. Thus, we are choosing to not include in the DPP Medicaid fraction 
numerator the days of patients who buy insurance with demonstration-
authorized premium assistance that accounts for less than 100 percent 
of their premium costs because the benefit the government is providing 
is not similar enough to that which Medicaid-eligible beneficiaries 
receive. Additionally, we disagree with the commenters who believe that 
we have ignored the burden of this proposal on providers. In our 
February 2023 proposal, we stated that it was our understanding that 
all states with current 1115 premium assistance demonstration programs 
provide 100 percent premium assistance to individuals; and based on 
this understanding we quantified as best we could that it would cost 
310 hospitals a total of approximately $18,350,169 annually to 
determine whether a patient received under a demonstration's premium 
assistance program 100 percent of the cost of their premium for 
inpatient hospital services coverage (88 FR 12632). While commenters 
may disagree as to the accuracy of our estimate, we believe that our 
estimate was reasonable and demonstrates that the burden to providers 
was not ignored.
    We are unsure why some commenters have significant concerns with 
verifying an individual's section 1115 eligibility and the amount of 
premium assistance when hospitals are already communicating with their 
state Medicaid office to verify an individual's eligibility. We do not 
understand why it is unclear who would furnish this data to hospitals 
or how hospitals would obtain the patient-specific data that they would 
need to prove eligibility for each patient under the proposed premium 
assistance rule. The states have this information as part of the 
section 1115 demonstration requirements. Finally, as a commenter 
recognizes, it remains the hospitals' burden to furnish data adequate 
to prove eligibility for each Medicaid patient day it claims in the DPP 
Medicaid fraction numerator, and we believe that the state will 
continue to be able to furnish hospitals with the eligibility data 
necessary for the hospitals to do so.
    We note, as discussed below, since our proposal it has come to our 
attention that, in addition to the current

[[Page 59024]]

1115 demonstrations that all provide 100 percent premium assistance to 
at least some individuals, at least one demonstration--Massachusetts' 
discussed in more detail below--also provides a sliding scale of 
premium assistance to other individuals, dependent on their income 
levels. Therefore, we are revising our burden estimate accordingly, as 
discussed in more detail below in section XII.B.2. of this final rule.
    Comment: One commenter stated that the proposed requirement that 
premium assistance fund 100 percent of an individual's health insurance 
premium to have that patient's inpatient hospital day included in the 
DPP Medicaid fraction numerator ``will complicate and negate the 
counting of certain Medicaid patients.'' This commentator asserts that 
the Massachusetts 1115 demonstration provides premium assistance to 
enrollees in the state's Medicaid program (MassHealth), including those 
who have access to employer-sponsored health insurance (ESI), and to 
other non-Medicaid-eligible residents who purchase health insurance in 
the state's health insurance exchange (Health Connector). They claim 
setting the threshold at 100 percent of the patient's premium costs may 
cause an increased burden on Massachusetts and the state's providers to 
determine which patients receive 100 percent premium assistance.
    Response: We acknowledge the commenter appears concerned that, by 
finalizing the premium assistance proposal, Medicaid enrollees made to 
participate in the MassHealth premium assistance program, where some 
enrollees may be responsible for paying a small portion of premiums, 
would not be counted in the DPP Medicaid fraction numerator. We 
believe, however, that concern is unfounded. Under our proposal, the 
days of such Medicaid enrollees would be counted in the DPP Medicaid 
fraction numerator (assuming such enrollees are not also entitled to 
Medicare Part A), notwithstanding some small premium cost sharing 
required of the enrollees. As described by the commenter, these 
individuals are Medicaid enrollees under the State plan; the fact that 
the Secretary has approved a section 1115 demonstration for 
Massachusetts to leverage available ESI with premium assistance does 
not change the nature of an individual's status as a Medicaid enrollee 
under the State plan, and their Medicaid patient days, as they have 
always been, will continue to be included in the DPP Medicaid fraction 
numerator as a Medicaid day (assuming these enrollees are not also 
entitled to Medicare Part A). The requirement that the demonstration 
cover 100 percent of the cost of the premium to the patient only 
applies to individuals who are not eligible for Medicaid under the 
State plan.
    We also disagree that our premium assistance proposal will 
unreasonably burden hospitals or the state in determining which days of 
patients who receive premium assistance through an 1115 demonstration 
may properly be included in the DPP Medicaid fraction numerator. To the 
extent a hospital seeks to include a day in the DPP Medicaid fraction 
of a Medicaid enrollee who receives premium assistance to purchase ESI, 
we are not aware why the hospital would bear any greater burden to 
determine such patient's Medicaid-enrollee status than if such patient 
did not receive premium assistance. These patients are entitled to 
Medicaid under the State plan and should therefore be identifiable in 
any Medicaid eligibility system a state already maintains. Nothing in 
the comments we received suggests otherwise.
    This commenter also notes that Massachusetts's section 1115 
demonstration provides premium assistance to other, non-Medicaid-
eligible individuals, and that while the premium assistance covers 100 
percent of the patient's premium costs for some low-income individuals, 
others must contribute to the cost of their premiums depending on their 
income level and health plan choice. The commenter is concerned because 
they do not believe that current eligibility systems would inform 
hospitals whether an enrollee in the state's health exchange had their 
premium entirely covered or only partially covered with premium 
assistance provided through the demonstration, and thus, hospitals 
would be burdened with attempting to obtain this information, which may 
not be possible unless the state were to modify its own systems that 
communicate with providers.
    While we acknowledge that the premium assistance policy we are 
finalizing will lead to an increased burden on Massachusetts and 
providers in that state to identify which non-Medicaid-eligible 
patients have received premium assistance that covers 100 percent of 
their premium costs for that patient day to be included in the DPP 
Medicaid fraction, we do not believe that the burden involved is 
unreasonable. The commenters did not provide any supporting information 
as to the extent of the burden or why they believe it would be 
unreasonable for Massachusetts or hospitals in that state to bear such 
burden.
    While one commenter did point to a quotation in our proposed rule 
to support the difficulty in obtaining the required information, we 
believe that this quote has been misunderstood by the commenter. The 
commenter quotes our proposal as ``CMS notes it may be difficult for 
hospitals to distinguish between patients with premium assistance paid 
for by Medicaid from patients who are otherwise covered by Medicaid 
through fee-for-service or managed care.'' In the proposal (88 FR 
12628), we stated in the context of acknowledging a change in our 
premium assistance proposal from the FY 2023 proposed rule, which would 
have required premium assistance that covered at least 90 percent of 
the cost of the patient's premium for EHB coverage to be included in 
the DPP Medicaid fraction numerator, that the February 2023 proposal 
would require premium assistance to cover 100 percent of the patient's 
premium cost for inpatient hospital coverage to count. As a basis for 
changing our proposal, we said, ``Indeed, it may be difficult to 
distinguish between patients who, on the one hand, receive through a 
demonstration health insurance for inpatient hospital services or 100 
percent premium assistance to purchase health insurance and patients 
who, on the other hand, are eligible for medical assistance under the 
State plan: all patients receive health insurance paid for with title 
XIX funds, and all may be enrolled in a Medicaid managed care plan.'' 
Our point here was to show that those patients who receive under a 
demonstration 100 percent premium assistance to buy health insurance 
that provides inpatient hospital coverage look very similar to patients 
who receive health insurance under either a demonstration or a Medicaid 
State plan, thereby establishing why we have chosen to ``regard as'' 
Medicaid-eligible such premium assistance recipients and to count their 
patient days in the Medicare DSH DPP Medicaid numerator fraction. The 
proposal language the commenter noted was not a statement about the 
ease or difficulty a hospital may have in determining which patients 
receive--either under a State plan or 1115 demonstration--health 
insurance or premium assistance that covers 100 percent of a patient's 
premium costs for insurance coverage of inpatient hospital services.
    We do not believe it will be unreasonably difficult for providers 
to obtain from the state information on whether certain non-Medicaid-
eligible patients qualify through the demonstration to receive premium

[[Page 59025]]

assistance that covers 100 percent of the cost of their premium for 
insurance that covers inpatient hospital services. The current 
Massachusetts section 1115 demonstration provides premium assistance of 
100 percent of the cost of premiums to individuals making 150 percent 
or less of the Federal Poverty Level (FPL), and it provides a sliding 
scale of premium assistance to non-Medicaid-eligible residents whose 
income levels range from above 150 percent to over 1,000 percent FPL. 
(See MassHealth Medicaid and CHIP Section 1115 Demonstration (Project 
Number 11-W-00030/1 and 21-00071/1), Special Terms and Conditions 
(STCs), attachment C (Cost Sharing), https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ma-masshealth-ca-demstrtn-aprvl-05192023.pdf.) As stated in the September 28, 2022 Massachusetts 
Demonstration Extension Approval Letter, ``to evaluate the impact of 
the premium policy, the Commonwealth must continue to assess 
beneficiary access to and utilization of health care services, 
enrollment continuity, number and frequency of coverage gaps, and 
beneficiary experiences with care.'' Therefore, to comply with the 
terms of the section 1115 demonstration, Massachusetts can reasonably 
be expected to have information on the patients extended premium 
assistance through the demonstration, including patients' income levels 
relative to FPL and thus the level of premium assistance each patient 
receives, and to be able to provide that information to hospitals. See 
https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ma-masshealth-ca1.pdf, page 14. We believe that, because the 
state already collects the information hospitals would need to 
determine which individuals receive 100 percent premium assistance for 
insurance coverage of inpatient hospital services, there should be no 
significant hurdle to hospitals obtaining this information from the 
state.
    Comment: One commenter noted that in the proposal, CMS listed a 
number of states the agency believed to have a section 1115 
demonstration that may be affected by the premium assistance proposal, 
and that this list did not include Indiana. The commenter agreed that 
Indiana is not among those states that operate such a demonstration. 
Another commenter noted that Connecticut was not among the states 
listed as having a section 1115 premium assistance program and 
requested clarification that the Connecticut program would qualify.
    Response: We appreciate the commenter's thoughts on Indiana's 1115 
premium assistance demonstration as it might relate to the proposal we 
are finalizing; we agree with the commenter that Indiana does not 
currently operate a section 1115 premium assistance demonstration that 
would be affected by the rule we proposed and are finalizing.
    With respect to Connecticut, we agree with the commenter that 
individuals eligible for premium assistance under the current 
demonstration (which was approved subsequent to the issuance of the 
NPRM) would be ``regarded as'' eligible for Medicaid under the 
revisions to our regulations and included in the DPP Medicaid numerator 
(if not also entitled to Medicare Part A) because the demonstration 
covers 100 percent of the costs of the premium to individuals eligible 
for it. We note, however, that should the Connecticut program, or any 
other currently approved premium assistance program authorized under 
section 1115 of the Act, be revised or approved in the future so that 
premium assistance under the demonstration does not cover 100 percent 
of the costs of the premium to the individual or does not cover 100 
percent of the costs of the premium for all individuals eligible for 
it, only the days of those individuals for whom the demonstration 
covers 100 percent of the cost of the premium to the individuals may be 
included in the DPP Medicaid fraction numerator under our revised 
regulations. We have added Connecticut to the list of states in the 
final rule that currently operate premium assistance programs 
authorized by section 1115 of the Act.
    Comment: Some commenters suggested that the Secretary cannot 
finalize either the uncompensated/undercompensated care days policy or 
the premium assistance policy we proposed and apply them to currently 
approved demonstrations because of providers' reliance interests. They 
argue once the Secretary approves a section 1115 demonstration ``for 
purposes of the Medicaid program,'' it cannot exclude patient days 
attributable to such demonstration ``for purposes of the Medicare DSH 
patient percentage.'' They argue for the Secretary to do so would 
constitute a ``take back'' and has no basis in the text of the Medicare 
statute. In the alternative, some commenters stated that even if CMS 
had the authority to finalize the proposal with respect to currently 
approved demonstrations, we should not or specifically requested that 
we not.
    Response: We respectfully disagree with the commenters' 
interpretation of the statute and the effects of finalizing this rule. 
As stated above, we believe the Medicare statute provides the Secretary 
with the discretion to determine what patients may be ``regarded as'' 
Medicaid-eligible for purposes of being counted in the Medicare DSH DPP 
Medicaid fraction numerator and whether to include therein any or which 
days of patients so regarded. The Medicaid statute, section 1115(a) of 
the Act, separately provides the Secretary with the authority to 
authorize Medicaid demonstrations that waive Medicaid requirements and 
provide expenditure authority to states to incur costs not permitted 
under a State plan so that states may experiment with ways of using 
Medicaid funds to ``assist in promoting the objective of'' the Medicaid 
program. Thus, the Medicare DSH policies finalized here will not change 
the terms of any current demonstration or the calculations of Medicaid 
payments made thereunder. Therefore, by going through this notice and 
comment rulemaking to clarify our Medicare regulation (42 CFR 
412.106(b)(4)) on the treatment of section 1115 patient days in the 
calculation of Medicare DSH payment adjustments, the Secretary is not 
``taking back'' any Medicaid payments that hospitals or states might 
otherwise be entitled to under an approved Medicaid section 1115 
demonstration. Nor does finalizing this prospective rule unsettle any 
legitimate reliance interest the hospitals may otherwise have in future 
Medicare DSH payment adjustments. With respect to the argument that CMS 
should not finalize the proposal with respect to currently approved 
demonstrations, for the reasons explained more fully in our February 
2023 proposed rule and herein, we believe that, assuming CMS has the 
discretion to ``regard'' uninsured individuals as eligible for Medicaid 
(which we do not believe we can), we believe that the better policy is 
to exclude their days from the DPP Medicaid fraction numerator and to 
also exclude days of those receiving premium assistance that is less 
than 100 percent of the cost of their premiums for inpatient health 
insurance.
    Comment: Some commenters state the proposed changes will have 
serious financial ramifications for hospitals at a time the hospitals 
can least afford it. Specifically, commenters raised the financial 
hardships hospitals have been experiencing over the last few years due 
to the Covid-19 pandemic, recent inflationary cost pressures, and other 
causes of financial strain, to suggest that reductions in DSH payments 
that may result from finalizing this proposal are

[[Page 59026]]

``reason alone'' the proposal should be withdrawn. Some of these 
commenters expressed concern that the proposal would have a negative 
effect on health equity in general and safety net hospitals 
specifically. Other commenters expressed concern that the proposed 
changes to our regulations would make it more difficult for hospitals 
to participate in the 340B Program.
    Response: We appreciate the points the commenters raise and are 
sympathetic to the financial hardships faced by many hospitals and 
acknowledge that the proposed revisions to the regulations affect the 
calculation of the disproportionate patient percentage, which in turn 
affects the DSH adjustment, and that a certain DSH adjustment threshold 
is statutorily required for participation in the 340B Program as well 
as the unique concerns of safety net hospitals, and health equity 
remains an important goal of the Secretary. We note, however, as 
described above, that the Secretary is constrained by the statute as to 
which patients can be regarded as eligible for Medicaid under a 
demonstration, even though they are not actually Medicaid-eligible, and 
therefore whether such patient days may be included in the DPP Medicaid 
fraction numerator in calculating any DSH payment adjustment. And even 
if the statute does not require the Secretary to exclude from the DPP 
Medicaid fraction days of uninsured patients whose hospital care is 
paid to hospitals from uncompensated/undercompensated care pools or 
days of patients who receive less in premium assistance than 100 
percent of their premium costs to purchase health insurance that covers 
inpatient hospital care, the Secretary believes that these parameters 
best further the goals of the Medicare DSH payment adjustment, which is 
to pay hospitals extra for treating a disproportionate share of low 
income patients. Additionally, maximizing the size of Factor 1 or the 
number of hospitals that qualify for HRSA's 340B Program is neither 
required by the Medicare statute nor an appropriate policy goal of 
Medicare DSH policy. As the Supreme Court recently said, the purpose 
``of the DSH provisions is not to pay hospitals the most money 
possible; it is instead to compensate hospitals for serving a 
disproportionate share of low-income patients.'' \216\ To the extent 
hospitals may be suffering financially because of the COVID-19 
pandemic, recent inflationary cost pressures, and other causes of 
financial strain, the commenters have not demonstrated whether or how 
such strains have had the effect of causing hospitals to treat a 
disproportionate share of low-income patients, and therefore it is 
beyond the boundaries of this rule to address such financial strain.
---------------------------------------------------------------------------

    \216\ Becerra v. Empire Health Found., 142 S. Ct. 2354, 2367 
(2022) (emphasis added).
---------------------------------------------------------------------------

    By using our discretion to regard as Medicaid eligible for purposes 
of the DPP Medicaid fraction numerator only the days of demonstration 
patients for which the demonstration provides health insurance or 
premium assistance to purchase health insurance, and to only include 
the days of those patients that receive from a demonstration health 
insurance for inpatient hospital services or premium assistance to buy 
inpatient hospital insurance, where the premium assistance accounts for 
100 percent of the premium cost to the patient, we believe we are 
acting in accordance with Congress' intent to count some, but not 
necessarily all, low-income patients in the proxy.
    For the reasons stated previously, the DRA's ratification of the 
Secretary's prior regulations on including or excluding demonstration 
group patient days from the DPP Medicaid numerator also supports the 
Secretary having the discretion to exclude days of uninsured patients 
and patients that do not receive health insurance for inpatient 
hospital services, and for those receiving premium assistance, where 
the assistance is less than 100 percent of the premium cost to the 
patient. By ratifying the Secretary's prior regulation that explicitly 
stated that our intent was to include in the fraction only the days of 
those that most looked like Medicaid-eligible patients, the limits we 
are proposing here fully align with Congress's amendment of the 
statute.
    In summary, we proposed to revise our regulations at Sec.  
412.106(b)(4) to explicitly reflect our interpretation of the language 
``regarded as'' ``eligible for medical assistance under a State plan 
approved under title XIX'' ``because they receive benefits under a 
demonstration project approved under title XI'' in section 
1886(d)(5)(F)(vi) of the Act to mean patients (1) who receive health 
insurance through a section 1115 demonstration itself or (2) who 
purchase health insurance with the use of premium assistance provided 
by a section 1115 demonstration, where State expenditures to provide 
the insurance or premium assistance may be matched with funds from 
title XIX. Alternatively, we proposed exercising the discretion the 
statute provides the Secretary to limit to those two groups the 
patients the Secretary ``regard[s] as'' ``eligible for medical 
assistance under a State plan'' ``because they receive benefits under a 
demonstration.'' Moreover, using the Secretary's authority to determine 
the days of which demonstration groups ``regarded as'' Medicaid 
eligible to include in the DPP Medicaid fraction numerator, we proposed 
that only the days of those patients who receive from the demonstration 
(1) health insurance that covers inpatient hospital services or (2) 
premium assistance that covers 100 percent of the premium cost to the 
patient, which the patient uses to buy health insurance that covers 
inpatient hospital services, are to be included, provided in either 
case that the patient is not also entitled to Medicare Part A. Finally, 
we proposed exercising the Secretary's discretion to not regard as 
Medicaid-eligible patients whose costs are paid to hospitals from 
uncompensated/undercompensated care pool funds authorized by a section 
1115 demonstration; and we similarly proposed exercising the 
Secretary's authority to exclude the days of such patients from being 
counted in the DPP Medicaid fraction numerator, even if those patients 
could be ``regarded as'' ``eligible for medical assistance under a 
State plan authorized by title XIX.'' Thus, we proposed explicitly 
excluding from counting in the DPP Medicaid fraction numerator any days 
of patients for which hospitals are paid from demonstration-authorized 
uncompensated/undercompensated care pools.
    Finally, we proposed our revised regulation would be effective for 
discharges occurring on or after October 1, 2023. As has been our 
practice for more than two decades, we have made our periodic revisions 
to the counting of certain section 1115 patient days in the Medicare 
DSH calculation effective based on patient discharge dates. Doing so 
again here treats all providers similarly and does not impact providers 
differently depending on their cost reporting periods.
    For all the reasons stated in the February 2023 proposal and 
herein, after considering the comments received on this proposal, we 
are finalizing the rule as proposed. We are making some minor 
formatting changes to the regulation text to conform to the Office of 
Federal Register Document Drafting Handbook. See regulations text which 
appears at the end of this of final rule.

[[Page 59027]]

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

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

1. Background
    Existing regulations at 42 CFR 412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds 
the 55th percentile for all MS-DRGs and the proportion of short-stay 
discharges to postacute care to total discharges in the MS-DRG exceeds 
the 55th percentile for all MS-DRGs, CMS will apply the postacute care 
transfer policy to that MS-DRG and to any other MS-DRG that shares the 
same base MS-DRG. The statute at subparagraph 1886(d)(5)(J) to the Act 
directs CMS 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. Changes for FY 2024
    As discussed in section II.C. of the preamble of the proposed rule 
and this final rule, based on our analysis of FY 2022 MedPAR claims 
data, we proposed to make changes to a number of MS-DRGs, effective for 
FY 2024. Specifically, we proposed 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

[[Page 59028]]

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 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).
    As discussed in the proposed rule, in light of the proposed changes 
to the MS-DRGs for FY 2024, according to the regulations under Sec.  
412.4(d), we evaluated the MS-DRGs using the general postacute care 
transfer policy criteria and data from the December 2022 update of 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 noted that while CMS proposed the reassignment 
of procedure codes from MS-DRGs 252, 253, and 254 to proposed new MS-
DRGs 278 and 279, we do not consider the proposed revision to 
constitute a material change that would warrant reevaluation of the 
postacute care status of MS-DRGs 252, 253, and 254. We noted 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.
    We stated that 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 proposed 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. We note that, as discussed in section 
II. of this final rule, we are finalizing these proposed changes to the 
MS-DRGs.
    CMS has updated its analysis using the March 2023 update of the FY 
2022 MedPAR file, and has developed the following chart which sets 
forth the analysis of the postacute care transfer policy criteria 
completed for this final rule with respect to each of these new or 
revised MS-DRGs. We note that this chart is updated from the MedPAR 
file used in the proposed rule (the December 2022 update of the FY 2022 
MedPAR file).
BILLING CODE 4120-01-P

[[Page 59029]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.242

    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 of proposed revised or new MS-DRGs that qualify to be 
included on the list of

[[Page 59030]]

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 the 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 proposed 
that proposed new MS-DRG 277 also would be subject to the MS-DRG 
special payment methodology, effective for FY 2024. For this FY 2024 
final rule, we updated this analysis using data from the March 2023 
update of the FY 2022 MedPAR file.
[GRAPHIC] [TIFF OMITTED] TR28AU23.243

    Comment: One commenter, citing extremely high early stay costs, 
expressed concern about adding MS-DRGs 276 and 277 to the post-acute 
transfer policy unless the full cost of the cardiac defibrillator and 
the cost to implant is covered. The commenter stated that payment to 
the transferring hospital for these MS-DRGs would be twice the per-diem 
amount the first day and with each subsequent day paid at the per-diem 
amount up until the full MS-DRG payment.
    Response: The commenter described the payment methodology under the 
post-acute care transfer policy. However, CMS proposed that these MS-
DRGs also be added to the list of MS-DRGs subject to the special 
payment policy. Under this policy, the transferring hospital would 
receive 50 percent of the full MS-DRG payment, plus a 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). The intent of the 
special payment policy is specifically to address MS-DRGs with high 
initial costs, such as the one-time cost of surgically implanted 
devices. We believe the proposed addition of MS-DRGs 276 and 277 to the 
special payment policy adequately addresses the specific concerns 
expressed by the commenter.
    After consideration of public comments we received, we are 
finalizing our proposal to add new MS-DRGs 276 and 277 to the list of 
MS-DRGs that are subject to the postacute care transfer policy and the 
MS-DRG special payment methodology for FY 2024.
    The postacute care transfer and special payment policy status of 
these MS-DRGs is reflected in Table 5 associated with this final rule, 
which is listed in section VI. of the Addendum to this final rule and 
available on the CMS website.

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

1. 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 stated in the proposed rule that we are 
setting the applicable percentage increase by applying the adjustments 
listed in this section in the same sequence as we did for FY 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 stated 
that we are setting the applicable percentage increase by applying the 
following adjustments in the following sequence. The applicable 
percentage increase under the IPPS for FY 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

[[Page 59031]]

Affordable Care Act, states that application of the productivity 
adjustment may result in the applicable percentage increase being less 
than zero.
    We note, in compliance with section 404 of the MMA, in the FY 2022 
IPPS/LTCH PPS final rule (86 FR 45194 through 45204), we replaced the 
2014-based IPPS operating and capital market baskets with the rebased 
and revised 2018-based IPPS operating and capital market baskets 
beginning in FY 2022.
    We proposed to base the FY 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 was estimated to be 3.0 percent. We also proposed 
that if more recent data subsequently became available (for example, a 
more recent estimate of the market basket update), we would use such 
data, if appropriate, to determine the FY 2024 market basket update in 
the final rule.
    Comment: Several commenters stated that hospitals continue to face 
significant inflationary pressures. Commenters specifically expressed 
concern that the proposed hospital IPPS payment update for FY 2024 does 
not adequately consider the cost growth that hospitals have faced over 
the last few years, noting cost increases related to workforce 
(including contract labor), drugs, medical supplies, personal 
protective equipment (PPE), and capital investment. The commenters 
stated that the significant inflation over the past several years has 
not been fully captured by the IPPS payment updates during the COVID 
years.
    Several commenters requested that CMS use its exceptions and 
adjustments authority to increase the FY 2024 IPPS hospital market 
basket update higher than proposed. One commenter urged CMS to review 
the hospital cost data and the margin on Medicare reimbursement and 
readjust payment rates based on the new baseline cost of care that has 
resulted from supply shocks and labor shortages. A few commenters 
suggested CMS apply a market basket increase of at least 3.8 percent, 
reflecting MedPAC's March 2023 Report to Congress recommending a one-
percent increase to the FY 2024 market basket and requested that CMS 
consider a FY 2024 market basket that more accurately represents 
inflation on hospital expenses. One commenter supported a higher market 
basket payment update under the IPPS to reflect the actual effects of 
inflation on hospital operating costs and endorsed an annual inflation-
based payment update based on the full Medicare Economic Index (MEI) 
while one commenter requested CMS use its authority to increase the FY 
2024 IPPS hospital payment update to at least 5 percent.
    Many commenters stated that they have experienced their lowest 
margins in decades and anticipated additional worse operating losses in 
at least the next two fiscal years. One commenter stated that in its 
March 2023 report to Congress, MedPAC reported overall Medicare 
hospital margins were negative 6.2 percent in 2021 (after accounting 
for temporary COVID-19 relief funds). Moreover, the commenter stated 
that MedPAC also projected hospitals' Medicare margins in 2023 to be 
lower than in 2021, driven in part by the growth in hospitals' input 
costs, which exceeded the forecasts CMS used to set Medicare payment 
rate updates, and in part by the expected expiration of Federal relief 
funds and temporary Medicare payment increases related to the public 
health emergency. The commenter stated that MedPAC also projects that 
even ``relatively efficient'' hospitals' Medicare margins will fall 
below break-even in 2023.
    One commenter stated that while the 2022 market basket increase of 
4 percent provided some relief from the additional costs of COVID-19 
for 2023, the proposed FY 2024 market basket update would not carry 
these elevated costs associated with COVID-19 forward into 2024 even 
though the commenter stated that additional costs of COVID-19 still 
exist. The commenter noted that hospitals are now faced with rebuilding 
long-term funds, paying longer-term inflated costs of supplies and 
equipment and high wages due to the lack of staffing that still exists 
as a result of COVID burn out. Several commenters stated that this 
year's proposed update is inadequate and requested that CMS address the 
market basket update in the final rule.
    One commenter noted that CMS proposed ``that if more recent data 
subsequently become available, we would use such data, if appropriate, 
to determine the FY 2024 market basket update in the final rule.'' The 
commenter urged CMS to use more recent data that include the recent 
inflationary increases in cost; and in the absence of such data urged 
CMS to consider an alternative approach to better align the market 
basket increases with increases in cost to treat patients. A few 
commenters appreciated the proposed payment increase but also stated 
agreement with other commenters that the proposed increase is 
inadequate given inflation and labor and supply pressures that 
hospitals, particularly rural hospitals, have been facing and continue 
to face.
    Many commenters had significant concerns that the proposed IPPS 
payment update does not adequately reflect labor costs. Commenters 
stated the significant increases in labor expenses over the last couple 
of years have been largely driven by increased utilization of contract 
staff (due to workforce shortages) and growth in employee salaries. One 
commenter cited their own analysis of payroll data to calculate the 
increased cost of labor, which it stated was significantly higher than 
the annual increases for compensation prices that CMS finalized over 
the last several years. Given what they stated was the significant 
difference between the increased cost of labor versus what CMS 
estimates using the ECIs, the commenters stated they had significant 
concerns that CMS' data source for estimating the cost of labor does 
not capture current market dynamics and underestimates the actual cost 
of healthcare labor. Many commenters cited analysis that nursing staff 
shortages are predicted to continue for the next several years. 
Specifically, commenters raised concerns about the CMS use of the 
Bureau of Labor Statistics' Employment Cost Index (ECI) in the IPPS 
market basket. Commenters stated they believe the BLS' ECI does not 
accurately reflect the shift from salaried employees to contract labor 
since the ECI does not collect data for contract staff, and thus does 
not capture extraordinary labor cost growth associated with hospitals' 
increased reliance on clinicians contracted through staffing agencies 
in response to supply shortages. One commenter highlighted their belief 
that a closely related measure--the Employer Costs for Employee 
Compensation (ECEC)--may be a better and more timely data source for 
growth in hospital compensation costs compared to the ECI. The 
commenter claimed that all else equal, if the hospital ECI growth had 
matched the hospital ECEC growth, this would have meant an additional 
three percentage point increase in the IPPS hospital market basket over 
the 2019 to 2022 time period. Several commenters recommended that CMS 
use its exceptions and adjustments authority to adopt new or 
supplemental data sources such as commercial databases on hospital 
payrolls, to ensure labor costs are adequately reflected in the FY 2024 
payment update in the final rule.
    One commenter also requested CMS identify more accurate data inputs 
and use its existing authority to calculate the

[[Page 59032]]

final rule ``base'' (before additional adjustments) market basket 
update with data that better reflect the rapidly increasing input 
prices facing hospitals. The commenter suggested that CMS should 
consider using the average growth rate in allowable Medicare costs per 
risk adjusted discharge for IPPS hospitals between FY 2019 and FY 2021 
to calculate the FY 2024 final rule market basket update rather than 
using the growth in the ECI as the price proxy for compensation in the 
IPPS market basket. The commenter requested using Medicare cost report 
data from Worksheets D-1, Part II, Lines 48 and 49 and S-3, Part 1, 
Column 13 to determine the Medicare costs per discharge. The commenter 
stated that this growth rate will capture the increased cost of 
contract labor, unlike the ECI. Based on their analysis of Medicare 
cost report data, they found that this methodology would yield an 
unadjusted market basket update of 4.39 percent for FY 2024 rather than 
the 2.8 percent net market basket update proposed by CMS. The commenter 
also stated that Medicare margins have declined over the last 20 years 
and believes this is due to persistently inadequate Medicare market 
basket updates. They further stated that hospitals' financial 
situations are so precarious that MedPAC recommended to Congress that 
it increase IPPS and OPPS payments over current law to preserve access.
    Response: We acknowledge commenters' concerns regarding recent 
trends in inflation. Section 1886(b)(3)(B)(iii) of the Act states the 
Secretary shall update IPPS payments based on a market basket 
percentage increase based on an index of appropriately weighted 
indicators of changes in wages and prices that are representative of 
the mix of goods and services included in such inpatient hospital 
services. The 2018-based IPPS market basket is a fixed-weight, 
Laspeyres-type price index that measures the change in price, over 
time, of the same mix of goods and services purchased by hospitals in 
the base period. As we discussed in response to similar comments in the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49053), the IPPS market basket 
increase would reflect the prospective price pressures described by the 
commenters as increasing during a high inflation period (such as faster 
wage price growth or higher energy prices), but would inherently not 
reflect other factors that might increase the level of costs, such as 
the quantity of labor used or any shifts between contract and staff 
nurses (which would be reflected in the Medicare cost report data). We 
disagree that costs as reported on the Medicare cost report are a 
suitable data source for determining the trend in compensation prices 
for the market basket update. The Medicare cost report data also 
reflects factors that are beyond those that impact wage or price 
growth. For instance, overall Medicare costs per discharge as reported 
by hospitals on the Medicare cost report would also reflect observed 
IPPS case-mix (and associated higher payments to hospitals), which from 
2019 to 2022 has increased faster than in prior years and would be 
associated with the use of more skilled care and medical/drug supplies 
needed to provide these services.
    Regarding commenters' request that CMS consider other methods and 
data sources to calculate the final rule market basket update, we 
believe that the 2018-based IPPS market basket continues to 
appropriately reflect IPPS cost structures and we believe the price 
proxies used (such as those from BLS that reflect wage and benefit 
price growth) are an appropriate representation of price changes for 
the inputs used by hospitals in providing services. As discussed in 
appendix B of this final rule, in its March report, MedPAC recommended 
that the Congress update the inpatient hospital rates by the amount 
specified in current law plus one percent. Given that we believe the 
2018-based IPPS market basket reflects an index of appropriately 
weighted indicators of changes in wages and prices that are 
representative of the mix of goods and services included in such 
inpatient hospital services and the percentage change of the 2018-based 
IPPS market basket is based on IGI's more recent forecast reflecting 
the prospective price pressures for FY 2024, we do not believe it would 
be appropriate to use our exceptions and adjustment authority to create 
a separate payment that would have the effect of modifying the current 
law update.
    The ECI (published by the BLS) measures the change in the hourly 
labor cost to employers, independent of the influence of employment 
shifts among occupations and industry categories. We acknowledge that 
the ECI measures only reflect price changes and does not capture 
changes in quantity or mix of labor such as increased utilization of 
contract staff as noted by the commenter. We believe that the ECI for 
hospital workers is accurately reflecting the price change associated 
with the labor used to provide hospital care and appropriately does not 
reflect other factors that might affect labor costs (such as a shift in 
occupations that may occur due to increases in case-mix). The ECEC data 
cited by the commenter is limited in its usefulness in the market 
basket because it reflects averages across all employees (similar to 
another BLS wage series, Average Hourly Earnings, available from the 
Current Employment Statistics program). According to BLS documentation, 
the ECEC reflects average compensation in the economy at a point in 
time, including both changes in compensation and changes in employment. 
The wage measure in the market basket should not reflect changes in 
employment to be consistent with the statute that the market basket 
percentage increase be based on an index of appropriately weighted 
indicators of changes in wages and prices. The ECEC, an indicator that 
also includes changes in employment, is not as appropriate to use as 
the ECI in the IPPS market basket. For these reasons, we believe the 
ECI continues to be an appropriate measure to use in the IPPS market 
basket.
    We note that the Medicare cost report data shows contract labor 
hours account for about 4 percent of total compensation hours 
(reflecting employed and contract labor staff) for IPPS hospitals in 
2021. Therefore, while we acknowledge that the ECI measures only 
reflect price changes for employed staff, we believe that the ECI for 
hospital workers is accurately reflecting the price change associated 
with the labor used to provide hospital care (as employed workers' 
hours account for 96 percent of hospital compensation hours). 
Therefore, we believe it continues to be an appropriate measure to use 
in the IPPS market basket. We also note that when developing its 
forecast for the ECI for hospital workers, IGI considers overall labor 
market conditions (including rise in contract labor employment due to 
tight labor market conditions) as well as trends in contract labor 
wages, which both have an impact on wage pressures for workers employed 
directly by the hospital.
    We would highlight that the market basket percentage increase is a 
forecast of the price pressures that are expected to be faced in 2024. 
As projected by IGI (a nationally recognized economic and financial 
forecasting firm with which CMS contracts to forecast the price proxies 
of the market baskets) and upward price pressures are expected to slow 
in FY 2024 relative to FY 2022 and FY 2023. As is our general practice, 
we proposed that if more recent data became available, we would use 
such data, if appropriate, to derive the final FY 2024 IPPS market 
basket update for the final rule. We appreciate the commenter's concern 
regarding inflationary pressure and the request to use more recent data 
to determine the

[[Page 59033]]

FY 2024 IPPS market basket update. For this final rule, we are 
incorporating a projection of the 2018-based IPPS market basket that is 
based on the most recent forecast from IHS Global Inc. For this final 
rule, based on the more recent IGI second quarter 2023 forecast with 
historical data through the first quarter of 2023, the projected 2018-
based IPPS market basket increase factor for FY 2024 is 3.3 percent, 
which is 0.3 percentage point higher than the projected FY 2024 market 
basket increase factor in the proposed rule based on IGI's fourth 
quarter 2022 forecast, and reflects a projected increase in 
compensation prices of 4.3 percent. We would note that the 10-year 
historical average (2013-2022) growth rate of the 2018-based IPPS 
market basket is 2.5 percent reflecting a 10-year historical average 
(2013-2022) growth rate compensation prices equal to 2.4 percent.
    Comment: One commenter recommended that CMS reevaluate the data 
sources it uses for rebasing its market basket and calculating the 
annual market basket update, including labor costs. They strongly 
encouraged CMS to adopt new or supplemental data sources in future 
rulemaking that more accurately reflect the costs to hospitals, such as 
through use of more real time data from the hospital community. They 
stated that they believe that the current market basket does not 
account for the higher costs of contract labor, which has become more 
common in hospitals in an era of clinical labor shortages. One 
commenter requested that CMS rebase the market baskets more frequently 
and at least every three years to ensure the market basket reflects the 
appropriate mix of services provided to Medicare beneficiaries.
    Response: CMS appreciates the commenter's request to rebase more 
frequently. Section 404 of Public Law 108-173 states the Secretary 
shall establish a frequency for revising the cost weights of the IPPS 
market basket more frequently than once every 5 years. As published in 
the FY 2006 IPPS final rule (70 FR 47403), we established a rebasing 
frequency of every four years, in part because the cost weights 
obtained from the Medicare cost reports do not indicate much of a 
change in the weights from year to year. The most recent rebasing of 
the IPPS market basket was for the FY 2022 payment update and reflected 
a base year of 2018 costs. Given recent concerns raised by commenters 
regarding changes in costs as a result of recent inflation and the 
COVID-19 pandemic, we also have been regularly monitoring the Medicare 
cost report data to assess whether a rebasing is technically 
appropriate, and we will continue to do so in the future. Based on a 
preliminary analysis of the Medicare cost report data for IPPS 
hospitals for 2021 that became available for this final rule, the IPPS 
compensation cost weight for 2021 is estimated to be about 1 percentage 
point lower than the 2018-based IPPS market basket compensation cost 
weight of 53.0 percent, and reflects a combined decrease in the salary 
and benefit cost weights that is larger than the increase in the 
contract labor cost weight. The major cost categories that 
preliminarily show an increase in the cost weight over this period are 
pharmaceuticals (proxied by the PPI--Commodity--Special Index--
Pharmaceuticals for human use, prescription) and home office contract 
labor compensation costs (which would be proxied by the ECI for 
Professional and Related workers). We plan to review the 2021 Medicare 
cost report data in more detail as well as 2022 Medicare cost report 
data as soon as complete information is available and evaluate these 
data for future rebasing of the IPPS market basket.
    Regarding the comment about using new or supplemental data sources 
in future rulemaking, we believe the Medicare cost report data is the 
most complete, timely and relevant data source for the development of 
the cost weights. We also welcome feedback on alternative publicly 
available data sources that could be used to evaluate the cost 
conditions facing hospitals and the subsequent derivation of the market 
basket cost weights.
    Comment: Several commenters, including many associations, urged CMS 
to use its special exceptions and adjustments authority under section 
1886(d)(5)(I)(i) of the Act to implement a retrospective adjustment for 
FY 2024 to account for the difference between the market basket update 
that was implemented for FY 2022 and what the currently projected 
market basket is for FY 2022. Commenters stated this is, in large part, 
because the market basket is a time-lagged estimate that cannot fully 
account for unexpected changes that occur, such as historic inflation 
and increased labor and supply costs. They stated this is exactly what 
occurred at the end of the calendar year 2021 into calendar year 2022, 
which resulted in a large forecast error in the FY 2022 market basket 
update. Commenters stated the IPPS reimbursement has failed to keep 
pace with inflation as costs for drugs, supplies, insurance premiums, 
and labor have increased. They recommended that CMS utilize the FY 2024 
update to include a retrospective adjustment and methodology change to 
make the FY 2022 actual 5.7 percent market basket percentage increase 
to be more reflective of the costs hospitals face, including the true 
impact of inflation. One commenter also urged CMS to reflect the 
forecast error in FY 2022 as well as an additional 1.0 percent on top 
of the proposed FY 2024 market basket increase. One commenter requested 
that CMS use its special exceptions and adjustment authority to make a 
one-time retrospective adjustment of 10-15 percent to the market basket 
to account for what it stated hospitals should have received in 2022 
when accounting for inflation, while another commenter stated that at a 
minimum, CMS should address what it stated was the gross underpayment 
that occurred in FY 2022 via a one-time adjustment of at least 3 
percent.
    One commenter urged CMS to use its exceptions and adjustments 
authority to apply a one-time adjustment to course correct for its 
significantly lower estimates of costs for FY 2021 through FY 2023. The 
commenter stated that because the annual payment update builds on the 
prior year's payment rate, failing to correct what it described as CMS' 
gross underestimation of the payment updates during the pandemic will 
further perpetuate inaccuracies in the payment rate moving forward, 
resulting in a permanent cut to hospital payments. Similarly, another 
commenter stated that in three of the last five years for which they 
had data to compare, they observed that the forecasted hospital market 
basket data used to set IPPS payment rates has fallen short of actual 
market basket data. They estimated, based on actual expenditure data 
from the 2023 Medicare Trustees Report, that in 2021 hospitals may have 
lost nearly $1 billion and in 2022 hospitals may have lost more than $4 
billion as a result of the forecast error assumptions.
    Several commenters suggested CMS should consider implementing a 
market basket forecast error adjustment within the methodology for 
calculating the annual IPPS payment update. One commenter stated that 
this change would reduce the risk hospitals face when rapid inflation 
causes CMS's forecasted hospital market basket percentage increase to 
be out of alignment with the actual hospital market basket percentage 
increase. One commenter stated that CMS should do so if forecast error 
is more than 0.5 percentage point while another commenter recommended a 
threshold of 1.5 percentage points. One commenter stated that unlike 
other industries, hospitals cannot simply raise prices to

[[Page 59034]]

bring in additional revenue, but rather can only bring in additional 
revenue by renegotiating higher payments with employers and health 
insurers, something that is increasingly difficult in the current 
fiscal environment. They stated that if hospitals are unable to grow 
revenue from other sources, they must make cuts to important service 
lines just like any other business to remain financially viable.
    One commenter also noted that for both the SNF PPS and the capital 
IPPS, CMS is making the forecast error adjustments based on a threshold 
level of difference between the update and the market basket that was 
adopted through rulemaking in prior years.
    Response: While the projected IPPS hospital market basket updates 
for FY 2021 and FY 2022 were under forecast (actual increases less 
forecasted increases were positive), this was largely due to 
unanticipated inflationary and labor market pressures as the economy 
emerged from the COVID-19 PHE. However, an analysis of the forecast 
error of the IPPS market basket over a longer period of time shows the 
forecast error has been both positive and negative. For example, the 
10-year cumulative forecast error showed a negative forecast error 
(that is, forecasted increases were greater than actual increases) of 
1.1 percentage points (2013 through 2022). In addition, for each year 
from 2012 through 2020, the forecasted FY hospital market basket update 
implemented in the final rule was higher than the actual hospital 
market basket update once historical data were available, with 7 out of 
the 9 years having a negative forecast error greater than 0.5 
percentage point (in absolute terms). Only considering the forecast 
error for years when the final hospital market basket update was lower 
than the actual market basket update does not consider the numerous 
years that providers benefited from the forecast error. Relatedly, the 
capital PPS and SNF PPS forecast error adjustments were adopted very 
early in both payment systems and, unlike what commenters are 
requesting here for the IPPS, forecast errors over many years have been 
consistently addressed within each of the Capital PPS and SNF PPS
    For these reasons, we do not believe it is appropriate to include 
adjustments to the market basket update for future years based on the 
difference between the actual and forecasted market basket increase in 
prior years. We thank the commenters for their comments. After 
consideration of the comments received and consistent with our 
proposal, we are finalizing to use more recent data to determine the FY 
2024 market basket update for the final rule. Specifically, based on 
more recent data available, we determined final applicable percentage 
increases to the standardized amount for FY 2024, as specified in the 
table that appears later in this section.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
productivity adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this productivity adjustment as equal to 
the 10-year moving average of changes in annual economy-wide, private 
nonfarm business MFP (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, year, cost reporting 
period, or other annual period). The U.S. Department of Labor's Bureau 
of Labor Statistics (BLS) publishes the official measures of private 
nonfarm business productivity for the U.S. economy. We note that 
previously the productivity measure referenced in section 
1886(b)(3)(B)(xi)(II) was published by BLS as private nonfarm business 
multifactor productivity. Beginning with the November 18, 2021, release 
of productivity data, BLS replaced the term multifactor productivity 
(MFP) with total factor productivity (TFP). BLS noted that this is a 
change in terminology only and will not affect the data or methodology. 
As a result of the BLS name change, the productivity measure referenced 
in section 1886(b)(3)(B)(xi)(II) is now published by BLS as private 
nonfarm business total factor productivity. However, as mentioned, the 
data and methods are unchanged. Please see www.bls.gov for the BLS 
historical published TFP data. A complete description of IGI's TFP 
projection methodology is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch. In addition, we 
note that beginning with the FY 2022 IPPS/LTCH PPS final rule, we refer 
to this adjustment as the productivity adjustment rather than the MFP 
adjustment to more closely track the statutory language in section 
1886(b)(3)(B)(xi)(II) of the Act. We note that the adjustment continues 
to rely on the same underlying data and methodology.
    For FY 2024, we proposed a productivity adjustment of 0.2 percent. 
Similar to the proposed market basket update, for the proposed rule, 
the estimate of the proposed FY 2024 productivity adjustment was based 
on IGI's fourth quarter 2022 forecast. As noted previously, we proposed 
that if more recent data subsequently became available, we would use 
such data, if appropriate, to determine the FY 2024 productivity 
adjustment for the final rule.
    Comment: Several commenters expressed concern about the application 
of the productivity adjustment, stating that the PHE has had 
unimaginable impacts on hospital productivity. They state that even 
before the PHE, OACT indicated that hospital productivity will be less 
than the general economy-wide productivity, which is the measure that 
is required by law to be used to derive the productivity adjustment. 
Given that CMS is required by statute to implement a productivity 
adjustment to the market basket update, commenters asked the agency to 
work with Congress to permanently eliminate what they stated is an 
unjustified reduction to hospital payments. Further, they asked CMS to 
use its ``exceptions and adjustments'' authority to remove the 
productivity adjustment for any fiscal year that was covered under PHE 
determination (i.e., 2020 (0.4 percent), 2021 (0.0 percent), 2022 (0.7 
percent), and 2023 (0.3 percent) from the calculation of the market 
basket update for FY 2024 and any year thereafter. A few commenters 
expressed concerns about the proposed productivity adjustment given the 
extreme and uncertain circumstances under which hospitals and health 
systems are currently operating and urged CMS to eliminate the 
productivity cut for FY 2024.
    Response: While we appreciate the commenters' concerns, section 
1886(b)(3)(B)(xi) of the Act requires the application of the 
productivity adjustment. As required by statute, the FY 2024 
productivity adjustment is derived based on the 10-year moving average 
growth in economy-wide productivity for the period ending FY 2024.
    We thank the commenters for their comments. After consideration of 
the comments received and consistent with our proposal, we are 
finalizing as proposed to use more recent data to determine the FY 2024 
productivity adjustment for the final rule.
    Based on more recent data available for this FY 2024 IPPS/LTCH PPS 
final rule (that is, IGI's second quarter 2023 forecast of the 2018-
based IPPS market basket rate-of-increase with historical data through 
the first quarter of 2023), we estimate that the FY 2024 market basket 
update used to determine the applicable percentage increase for the 
IPPS is 3.3 percent. Based on more

[[Page 59035]]

recent data available for this FY 2024 IPPS/LTCH PPS final rule (that 
is, IGI's second quarter 2023 forecast of the productivity adjustment), 
the current estimate of the productivity adjustment for FY 2024 is 0.2 
percentage point.
    As previously discussed, based on the more recent data available, 
for this final rule, we have determined four final applicable 
percentage increases to the standardized amount for FY 2024. 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 standardized amount, as specified in this table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.244

    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 final rule, 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 final rule for further discussion of the 
MDH program.
    For FY 2024, we proposed 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 and is not an meaningful EHR 
user. We proposed that if more recent data subsequently became 
available (for example, a more recent estimate of the market basket 
update and the productivity adjustment), we would use such data, if 
appropriate, to determine the update in the final rule.
    We did not receive any public comments on our proposed updates to 
hospital-specific rates applicable to SCHs and MDHs. The general 
comments we received on the proposed FY 2024 update (including the 
proposed market basket update and productivity adjustment) are 
discussed earlier in this section. For FY 2024, we are finalizing the 
proposal to determine the update to the hospital specific rates for 
SCHs and MDHs in this final rule using the more recent available data, 
as previously discussed.
    For this final rule, based on more recent available data we are 
finalizing the following updates to the hospital specific rates 
applicable to SCHs and MDHs (the same update factor as for all other 
hospitals subject to the IPPS, consistent with the applicable 
percentage increases for the IPPS): An update of 3.1 percent for a 
hospital that submits quality data and is a meaningful EHR user; an 
update of 0.625 percent for a hospital that submits quality data and is 
not a meaningful EHR user; an update of 2.275 percent for a hospital 
that fails to submit quality data and is a meaningful EHR user; and an 
update of -0.2 percent for a hospital that fails to submit quality data 
and is not a meaningful EHR user.
2. 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

[[Page 59036]]

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.
    Based on IGI's fourth quarter 2022 forecast of the 2018-based IPPS 
market basket update with historical data through third quarter 2022, 
in the FY 2024 IPPS/LTCH PPS proposed rule, in accordance with section 
1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico 
hospitals we proposed a market basket update of 3.0 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, we stated there would be two possible applicable percentage 
increases that could be applied to the standardized amount. Based on 
these data, we determined the following proposed applicable percentage 
increases to the standardized amount for FY 2024 for Puerto Rico 
hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
we proposed 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 proposed 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 proposed that if more recent data 
subsequently became 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.
    We did not receive any public comments on our proposed updates to 
the standardized amount for FY 2024 for Puerto Rico hospitals. The 
general comments we received on the proposed FY 2024 update (including 
the proposed market basket update and productivity adjustment) are 
discussed in greater detail earlier in this section. For FY 2024, we 
are finalizing the proposal to determine the update to the standardized 
amount for FY 2024 for Puerto Rico hospitals in this final rule using 
the more recent available data, as previously discussed.
    As previously discussed in section V.A.1, based on more recent data 
available for this final rule (that is, IGI's second quarter 2023 
forecast of the 2018-based IPPS market basket rate-of-increase with 
historical data through the first quarter of 2023), we estimate that 
the FY 2024 market basket update used to determine the applicable 
percentage increase for the IPPS is 3.3 percent and the productivity 
adjustment is 0.2 percent. 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, accordance with section 1886(b)(3)(B) of 
the Act, we determined 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, 
an applicable percentage increase to the FY 2024 operating standardized 
amount of 3.1 percent (that is, the FY 2024 estimate of the market 
basket rate-of-increase of 3.3 percent less an adjustment of 0.2 
percentage point for the productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, an applicable percentage increase to the operating standardized 
amount of 0.625 percent (that is, the FY 2024 estimate of the market 
basket rate-of-increase of 3.3 percent, less an adjustment of 2.475 
percentage point (the market basket rate-of-increase of 3.3 percent x 
0.75 for failure to be a meaningful EHR user), and less an adjustment 
of 0.2 percentage point for the productivity adjustment).

[[Page 59037]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.245

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 an 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

[[Page 59038]]

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. 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) \217\ and meeting other criteria at Sec.  412.92(a). 
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.
---------------------------------------------------------------------------

    \217\ 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, in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 27007), we proposed 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. We explained that this 90-day timeframe would 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. Under 
this proposal, 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 also proposed 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 proposed 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 did not propose 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 did not propose 
any change to the effective date for an SCH application that does not 
involve a merger.
    In the proposed rule, we stated that 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 
noted that we did not propose 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 sought comment on the need for such a 
proposal, which we would consider for future rulemaking as appropriate.
    Comment: Commenters supported CMS' proposed change to the effective 
date for SCH status for SCH applications received on or after October 
1, 2023, in the case of a merger where eligibility for SCH 
classification depends on a hospital merger. Commenters also supported 
the proposed conforming change to the effective date of rural

[[Page 59039]]

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.
    Response: We appreciate the commenters' support.
    Comment: Commenters requested that CMS apply these proposals 
retroactively and provided various ideas for a retroactive effective 
date. One commenter suggested that we apply our proposed change 
retroactively to FY 2019, when CMS last changed the effective date for 
SCHs (83 FR 41430). The commenter stated that the reasoning given to 
the FY 2019 modification of the SCH effective date would apply to 
providers submitting a combined merger and SCH application. 
Specifically, the commenter indicated that the FY 2019 regulatory 
change to the SCH effective date was intended to minimize any payment 
disadvantage caused by the lag between the effective date of rural 
reclassification and the effective date of SCH status, and to reduce 
regulatory burden by providing for a more uniform policy. The same 
commenter stated that different CMS Regional Offices and/or MACs have 
applied different requirements and effective dates for SCH 
classifications in the case of a merger where eligibility for SCH 
classification depends on a hospital merger, and in order to avoid 
differing treatment, CMS should adopt this proposal retroactively to FY 
2019. Alternatively, the commenter suggested that CMS could apply the 
change to any situation for which the parties have preserved appeal 
rights over the effective date determination for an SCH approval. Other 
commenters suggested that CMS apply the change retroactively for 
providers who were seeking SCH classification during the COVID-19 
pandemic and were affected by the lag time between their merger and SCH 
classification.
    Response: We appreciate the commenters' ideas and suggestions. 
However, we do not agree that we should apply our proposed changes 
retroactively. The IPPS is a prospective system and, we generally make 
changes to IPPS regulations effective prospectively based on the date 
of discharge or the start of a cost reporting period within a certain 
Federal fiscal year. Under that approach, we believe that applying this 
change for a merger that already took place may constitute retroactive 
rulemaking--and would be a departure from our usual practice in IPPS--
regardless of whether there's a pending administrative appeal. We 
believe that following our usual approach and adopting the new 
effective date policies for SCH and rural reclassification applications 
where SCH eligibility is dependent on a hospital merger that are 
received on or after October 1, 2023 will allow for the most equitable 
application among all IPPS providers seeking to qualify for SCH 
classification and rural reclassification (as applicable). For these 
reasons, we are finalizing, without modification, that our proposed 
changes to the SCH and the rural reclassification effective dates will 
apply prospectively for applications received on or after October 1, 
2023.
    Comment: Several commenters requested that CMS clarify its current 
policy definition of a ``complete application'' for cases contingent on 
a merger.
    Response: As stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 27008), we did not propose to modify any SCH classification 
requirements or what constitutes a ``complete application''. We refer 
the commenters to the Chapter 28 of the Provider Reimbursement Manual 
(PRM), section 2810. B. (https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/p151_28.zip), for a list of documentation 
that must be included with its request for SCH classification. In 
addition to the documentation list in the PRM, for an SCH application 
where eligibility for SCH classification is dependent on a hospital 
merger, that documentation must include confirmation that the merger 
has been approved by CMS (for example, a CMS tie-in notice recognizing 
the two CCNs as merged). We note that we intend to update the list of 
required documentation in the PRM to include documentation indicating 
that the merger has been approved by CMS for SCH classification 
requests that are dependent on a hospital merger.
    After consideration of the public comments we received, we are 
finalizing our policies as proposed, without modification. 
Specifically, we are finalizing our proposal to revise Sec.  412.92 by 
adding a new 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 will 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 
will 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 finalizing our proposal to make conforming 
changes to the existing regulations at Sec.  412.92(b) by adding an 
exception referencing 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 finalizing our proposed technical correction to 
paragraph (b)(1)(v) by revising the word ``forward'' to ``forwards''.
    We are also finalizing our proposal to make a conforming change to 
the regulations at Sec.  412.103(d) by modifying 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 finalizing our 
proposed amendment to Sec.  412.103(d)(1) and the proposed addition of 
new Sec.  412.103(d)(3) to provide that, subject to the hospital 
meeting the requirements set forth at Sec.  412.92(b)(2)(vi), the 
effective date for rural reclassification for such hospital will be as 
of the effective date determined under Sec.  412.92(b)(2)(vi).

D. Rural Referral Centers (RRCs) Annual Updates to Case-Mix Index (CMI) 
and Discharge Criteria (Sec.  412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12-percent cap on DSH 
payments that is applicable to other rural hospitals. RRCs also are not 
subject to the proximity criteria when applying for geographic 
reclassification. In addition, they do not have to meet the requirement 
that a hospital's average hourly wage must exceed, by a certain

[[Page 59040]]

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 will 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 national median CMI 
value for FY 2024 is based on the CMI values of all urban hospitals 
nationwide, and the 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 values are based on discharges 
occurring during FY 2022 (October 1, 2021 through September 30, 2022), 
and include bills posted to CMS' records through March 2023. Because 
this is the latest available data, we believe that it is the best 
available data for use in calculating the 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27009), we 
proposed that, in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
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 were set forth in the 
table in the proposed rule (88 FR 27010). We stated in the proposed 
rule that we intended 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.
    Comment: Commenters supported our proposal to use FY 2022 data to 
calculate the national and regional median CMI values for FY 2024.
    Response: We appreciate the commenters' support.
    Therefore, based on the best available data (FY 2022 bills received 
through March 2023), 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:
     1.80655 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The final CMI values by region are set forth in the following 
table.

[[Page 59041]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.246

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
3. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. In the FY 2024 IPPS/LTCH 
PPS proposed rule (88 FR 27010), for FY 2024, we proposed 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). Because this is the latest available cost 
reporting data, we believe that it 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27010), we 
proposed that, in addition to meeting other criteria, a hospital, if it 
is to qualify for initial RRC status for cost reporting periods 
beginning on or after October 1, 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 table set forth in the FY 2023 IPPS/LTCH PPS 
proposed rule at 88 FR 27010).
    In the proposed rule, we stated that we intended to update to 
update these numbers in the FY 2024 final rule based on the latest 
available cost report data.
    Comment: Commenters supported our proposal to use FY 2021 data to 
calculate median number of discharges by region for FY 2024.
    Response: We appreciate the commenters' support.
    Therefore, based on the best available discharge data at this time, 
that is, for cost reporting periods that began during FY 2021, the 
final median number of discharges for urban hospitals by census region 
are set forth in the following table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.248

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

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

[[Page 59042]]

addition to any payment calculated under section 1886 of the Act. 
Therefore, the additional payment adjustment is based on the per 
discharge amount paid to the qualifying hospital under section 1886 of 
the Act. In other words, the low-volume hospital payment adjustment is 
based on total per discharge payments made under section 1886 of the 
Act, including capital, DSH, IME, and outlier payments. For SCHs and 
MDHs, the low-volume hospital payment adjustment is based in part on 
either the Federal rate or the hospital-specific rate, whichever 
results in a greater operating IPPS payment.
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 and in the FY 
2024 IPPS/LTCH proposed rule (88 FR 27010 through 27011). 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 59043]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.249

    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 final rule, 
we proposed 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.
    Comment: Many commenters supported the extension of the changes to 
the low-volume hospital qualifying criteria and payment adjustment 
methodology for FYs 2023 and 2024.
    Response: We appreciate the commenters sharing their support for 
the extension of the temporary changes to the low-volume hospital 
payment adjustment FYs 2023 and 2024.
    As discussed later in the section, we are finalizing our proposals 
without modification on the extension of the changes to the qualifying 
criteria and the payment adjustment methodology for low-volume 
hospitals through FY 2024, after consideration of the public comments.
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 4101 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 for FY 2023, specifically, 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 proposed to make conforming changes to the regulations text in 
Sec.  412.101 to codify these extensions for

[[Page 59044]]

FY 2023 as discussed in section V.E.4. of the preamble of this final 
rule.
    Comment: Many commenters supported the extension of the definition 
and payment of the low-volume hospital payment adjustment for FY 2023. 
A commenter urged CMS to expeditiously process claims and provide 
instructions to MACs for extensions, especially in instances when 
extensions are made retroactively. The commenter indicated seamless 
transition of these payments are crucial for rural providers.
    Response: We appreciate the commenters sharing their support for 
legislative action of the extension. As we have said in the past, we 
will make every effort to implement any extension of the low-volume 
payment policy as expeditiously as possible.
    After consideration of the public comments we received regarding 
the temporary changes to the qualifying criteria and the payment 
adjustment methodology for low-volume hospitals through FY 2023, we are 
finalizing our proposal without modification for the FY 2023 
extensions.
4. Payment Adjustment for FY 2024 and 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 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 
proposed to continue using the previously specified continuous, linear 
sliding scale formula to determine the low-volume hospital payment 
adjustment for FY 2024. We also proposed 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 proposed 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 proposed 
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 the low-volume hospital 
payment adjustment policy in effect for FYs 2005 through 2010, as 
described previously.
    Comment: In addition to expressing support for FY 2023, many 
commenters supported the extension to the FY 2024 definition and 
payment of the low-volume hospital payment adjustment.
    Response: We appreciate the commenters sharing their support for 
the extension of the low-volume hospital definition and payment 
adjustment for FY 2024, and for legislative action for the permanent 
modification of the low-volume hospital payment policy.
    Comment: Many commenters urged CMS to collaborate with Congress to 
make permanent the modifications to the low-volume hospital payment 
policy. Some commenters urged CMS to continue the temporary changes to 
the definition of a low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals for FY 2024 
and subsequent years. Commenters stated that not continuing these 
temporary changes would result in significant reductions in payment 
that could impede the services hospitals, including those in rural 
communities, provide in the communities they serve.
    Response: We appreciate the feedback from comments urging CMS to 
explore ways to continue the enhanced low-volume hospital payment 
policy for FY 2024 and subsequent years, we note that the statute only 
extends the temporary changes to the low-volume hospital policy for FYs 
2023 and 2024. Therefore, beginning with FY 2025, the low-volume 
hospital qualifying criteria and the amount of the payment adjustment 
to such hospitals will revert back to those policies that were in 
effect prior to the amendments made by recent legislation.
    After consideration of the public comments on the payment 
adjustment methodology for low-volume hospitals through FY 2024, we are 
finalizing our proposal to codify these extensions to the regulation 
text in Sec.  412.101 without modification.
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,

[[Page 59045]]

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 the 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 the 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 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 
proposed that a hospital must submit a written request for low-volume 
hospital status to its MAC that includes sufficient documentation to 
establish that the hospital meets the applicable mileage and discharge 
criteria (as described earlier). Specifically, we proposed 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) 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.
    We did not receive any comments on our process for requesting and 
obtaining the low-volume payment adjustment for FY 2024. For the 
reasons discussed in this final rule and in the FY 2024 IPPS/LTCH PPS 
proposed rule, we are finalizing our proposal, without modification.

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

[[Page 59046]]

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:
     Division D, Section 102 of the Continuing Appropriations 
and Ukraine Supplemental Appropriations Act, 2023 (Public Law 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.
     Division C, 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.
     Division FF, 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).
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27014), we 
proposed 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 Public Law 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 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 division D, section 102 of 
the Continuing Appropriations and Ukraine Supplemental Appropriations 
Act, 2023, division C, section 102 of the Further Continuing 
Appropriations and Extensions Act, 2023, and division FF, section 4102 
of the Consolidated Appropriations 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.
    Comment: Commenters supported our proposals to make conforming 
changes to the regulations to reflect the legislation extending the MDH 
provision. Commenters also urged CMS to expeditiously process claims 
and provide instructions to MACs during program extensions, especially 
in instances when extensions are made

[[Page 59047]]

retroactively. They noted that seamless transition of programmatic 
support are crucial life lines for rural providers.
    Response: We appreciate the commenters' support and their concern 
for the legislative interruption of Medicare programs that support 
rural providers. We note that in response to the multiple legislative 
extensions since the September 1, 2022, expiration (listed previously), 
CMS has issued multiple program instructions as expeditiously as 
possible to the MACs so that rural providers could benefit from the 
special payment protections afforded to MDHs.
    After consideration of the public comments we received, we are 
adopting as final the proposed conforming changes to the regulations 
text at Sec. Sec.  412.90 and 412.108 to reflect the extension of the 
MDH program through FY 2024 in accordance with division FF, section 
4102 of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328). We 
are finalizing the proposed changes in paragraphs (a)(1) and 
(c)(2)(iii) of Sec.  412.108 and paragraph (j) of Sec.  412.90 without 
modification.

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, 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 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

[[Page 59048]]

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). As discussed in 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27016), 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:
    Example of Medicare GME Affiliations:
    [GRAPHIC] [TIFF OMITTED] TR28AU23.250
    
    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 the 
Medicare GME affiliation agreement, Hospital A loans one less IME FTE 
to Hospital B in 2022 than it did in 2021. In the FY 2024 IPPS/LTCH PPS 
proposed rule, we proposed to clarify 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. We explained that 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 20) 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

[[Page 59049]]

(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 proposed clarification focused 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].
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27017 through 27018), 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. We proposed to 
clarify that, 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 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.''
    We further proposed to clarify that 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 explained the reasons for 
this in detail and restate the explanation in this section of this 
final rule. We also acknowledged 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 noted 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 stated that we believe that the 
``current year numerator'' referred to on Worksheet E, Part A line 20 
is line 15,

[[Page 59050]]

not line 12. This contrasts with 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 proposed 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.

    Comment: Several commenters appreciated CMS's proposed 
clarification to the IME worksheet on the Medicare cost report when 
hospitals enter into a Medicare GME affiliation agreement, stating it 
will assist hospitals in ensuring that they complete the worksheet and 
report FTE counts in the proper manner. A commenter supported CMS's 
clarification efforts and another asked CMS to continue listening to 
teaching hospitals when specific policies are unclear.
    Other commenters disagreed with aspects of CMS's proposed 
clarification. Another commenter noted that CMS's proposed 
clarification involves a comparison of the total allowable FTEs from 
the prior year and the current year as reported on line 12 (``. . . the 
provider . . . 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 . . .'' (88 FR 27017-27018, emphasis added). The commenter 
noted that the total allowable FTE count on line 12 is subject to the 
FTE cap, and since there are many hospitals that have IME FTE counts 
limited by their FTE caps, utilizing this line may not be the most 
accurate reflection of an actual increase or decrease in FTEs between 
years. The commenter suggested that a better reflection of an increase/
decrease between years would be to compare the actual current year FTEs 
from line 10 between years before any FTE cap limits are applied.
    Two commenters that opposed CMS's proposed clarification focused on 
another part of the clarification, where CMS proposed to compare 
current year line 15 and prior year line 12 (``. . . 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 . . .'') 
(88 FR 27018). The commenters provided two examples where they believed 
the prior year numerator would not be sufficiently increased as a 
result of this proposed clarification. In the first example, a hospital 
experiences a decrease in its three-year rolling average FTE count in 
the current year as a result of a decrease in its number of dental and 
podiatric FTEs, even though its allopathic and osteopathic FTE count 
and its FTE cap increase under the terms of a Medicare GME affiliation 
agreement. In the second example, a hospital's allopathic and 
osteopathic FTE count and cap similarly increase in the current year as 
a result of a Medicare GME affiliation agreement, but the hospital's 
three-year rolling average FTE count is nevertheless lower than the 
prior-year allowable FTE count as a result of a significantly lower FTE 
count in the penultimate year. Furthermore, the commenters noted that 
in these examples CMS's proposed clarification would result in an 
inappropriate reduction to the numerator of the prior-year IRB ratio, 
since subtracting prior year line 12 from current year line 15 would 
result in a negative number. In addition, these commenters argued that 
CMS's proposed language does not account for rural track FTE 
affiliation agreements.
    Response: We appreciate commenters' support of our proposed 
clarification and the careful review from those who raised concerns 
about it. Specifically, we proposed to add the following italicized 
language to Worksheet E, Part A, line 20 of CMS-Form-2552-10:

    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 (88 FR 27018).

    We do not concur with the commenters who disagreed with certain 
aspects of the proposed clarification, because we believe the 
commenters overlooked key portions of the law and regulations in 
drawing their conclusions. First, we reiterate that the point of 
permitting the numerator of the prior year IRB ratio to be adjusted due 
to the exceptions listed at 42 CFR 412.105(a)(1)(i) (for example, 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) is to more equitably compute a hospital's IME 
payment in certain situations where the IME cap increases year-over-
year, so that the hospital is not held to a lower IME payment based on 
the prior year's FTE cap. Second, once the appropriate adjustments are 
made to the numerator of the prior year IRB ratio, the law at section 
1886(d)(5)(B)(vi) of the Act requires that for actual payment, we take 
the lower of the current year IRB ratio or the prior year IRB ratio. 
That is, line 21 on Worksheet E, Part A states, ``Enter the lesser of 
line 19 or 20.'' It appears that the commenters disregarded this key 
point.
    In the examples the commenters provided, they argued that under 
CMS's proposed clarification, the prior year IRB ratio is not 
sufficiently increased, and that the comparison of current year line 15 
to prior year line 12 distorts the calculation of the IRB ratio. 
However, we have reviewed the examples and the adjustments that 
commenters suggested, and the result is that even if the prior year 
numerator were increased in the manner requested by commenters, this 
would not increase a hospital's IME payment, since doing so would have 
no effect on the value of the current year numerator: in both examples, 
the current year IRB ratio on line 19 would still be lower than the 
prior year IRB ratio on line 20, so that the current year IRB ratio 
would be reported on line 21. This demonstrates that there is no need 
to increase the prior year numerator

[[Page 59051]]

above the current year numerator; it is only necessary to ensure that 
the prior year numerator is adjusted to accommodate the additional FTEs 
counted as a result of certain increases to a hospital's IME FTE cap.
    In this way we also address the commenters' concern that the 
proposed clarification distorts the calculation of the IRB ratio, and 
their contention that a hospital is harmed if its current year three-
year average FTE count is less than its prior year total allowable FTE 
count, either through a decrease in dental or podiatry FTEs or because 
of a low FTE count in the penultimate year. Since the law requires IME 
payment to be based on the lesser of the current year IRB ratio or the 
prior year IRB ratio, if a hospital's current year FTE count goes down, 
then payment would logically be made based on the current year's lower 
IRB ratio; payment based on last year's higher ratio would result in an 
overpayment in the current year. Thus, if a hospital increases its cap 
through a Medicare GME affiliation agreement, but, for whatever reason, 
its three-year average FTE count is less than the prior year total 
allowable FTE count, then an adjustment to the prior year numerator 
will make no difference, as the law requires that the hospital use the 
lower of the current year IRB ratio or prior year IRB ratio for IME 
payment.
    Similarly, we do not believe it is appropriate to compare line 10 
of the current year to line 10 of the prior year, as a commenter 
suggested. First, the FTEs used in the IRB ratio are subject to a 
hospital's IME FTE cap, which applies to line 12 but not to line 10. 
Second, the following fairly common scenario demonstrates how comparing 
line 10 to line 10 may lead to unfair results. Assume a hospital is 
training FTEs significantly over its FTE cap, and even though it has 
increased its FTE cap via a Medicare GME affiliation agreement, it is 
still training FTEs in excess of that affiliated cap. However, this 
hospital's current year FTE count on line 10 is somewhat less than the 
prior year FTE count on line 10. Specifically, assume that in 2020, 
Hospital A has an FTE cap of 100 (line 9 = 100) and trains 200 
allopathic and osteopathic FTE residents (line 10 = 200); further 
assume that Hospital A does not train any dental or podiatry residents 
(line 11 = 0; line 12 = 100). In 2021, Hospital A has difficulty 
filling positions in a certain program, and therefore, it experiences a 
reduction in its FTE count and trains 190 allopathic and osteopathic 
residents (line 10 = 190). However, under the terms of a Medicare GME 
affiliation agreement, Hospital A increases its FTE cap by 10 to 110 
(line 8 = 10; line 9 = 110; line 12 = 110). Thus, the hospital's total 
FTE count decreased from 200 to 190, but because its FTE cap increased 
from 100 to 110 under the Medicare GME affiliation agreement, its 
allowable FTE count actually increased by 10, from 100 to 110. If we 
were to take the difference between the current year line 10 (190 FTEs) 
and prior year line 10 (200 FTEs), the result would be a negative 
number (-10), and there would be no adjustment to the prior year 
numerator, since the FTE count decreased in the current year. But under 
CMS's proposed clarification, the hospital increased its allowable FTE 
count, and when we determine the difference between current year line 
12 (110) and prior year line 12 (100), the result is a positive 
difference of 10, allowing the hospital to adjust the prior year 
numerator by +10. In this manner, the hospital's IME payment will 
reflect the fact that its current year allowable FTE count increased by 
10 relative to the prior year allowable FTE count. That is also why we 
proposed to clarify the language on line 20 to require that the 
hospital increase its allowable FTE count, as follows:

[[Page 59052]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.251

    In addition, the commenters correctly pointed out that the 
instructions should specifically reference line 7.02 to allow 
consideration of a cap increase under the terms of a rural track 
Medicare GME affiliation agreement. Therefore, in this final rule we 
are revising the instructions on line 20 to include this reference to 
line 7.02 of Worksheet E, Part A. We are finalizing our proposed 
clarification to the instructions on line 20 of Worksheet E, Part A of 
the Medicare cost report, in addition to adding the bolded changes 
stated later

[[Page 59053]]

in this section in response to comments, as follows:
[GRAPHIC] [TIFF OMITTED] TR28AU23.252

    We did not propose 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 proposed 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. We intend 
to insert the finalized clarification into the next update of the 
Medicare cost report instructions Form CMS-2552-10 Worksheet E, Part A, 
line 20.
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, 2021 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). 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 to be able to 
continue to provide healthcare

[[Page 59054]]

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 proposed 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 proposed 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 proposed 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 proposed to add a new paragraph (d) at 42 CFR 419.92 to 
implement these provisions.
    Comment: Commenters supported the proposal to treat REHs similar to 
CAHs for Medicare GME payment purposes such that an REH may choose to 
function as a nonprovider setting consistent with 42 CFR 
412.105(f)(1)(ii)(E) and 413.78(g) or choose to be paid based on 
reasonable costs for the GME training costs that it incurs.
    Many commenters stated that allowing REHs to be GME eligible 
facilities will help promote greater physician participation in rural 
healthcare thereby improving workforce shortages in rural areas and in 
turn improve patient access to care in underserved areas. Commenters 
noted the correlation between where residents train and where they 
practice such that increasing residency training in rural areas has a 
positive impact on physician supply and interest in serving in rural 
areas. A commenter noted that while the proposal is not a complete 
solution to oncology workforce challenges in rural areas, they support 
it as an initial step toward improving access to cancer care in rural 
communities. The commenter encouraged CMS to consider future policies 
to retain practitioners of various specialties, including oncology, in 
rural and underserved settings. A few commenters stated that family 
physicians are an essential source of emergency care in rural areas and 
are uniquely suited to work in REHs. The commenters stated that 
multiple studies have demonstrated that, while many family physicians 
provide emergency care in urban and suburban communities, rural family 
physicians are more likely to work in emergency departments. The 
commenters stated that The Accreditation Council for Graduate Medical 
Education (ACGME) requirements for family medicine residents include 
several proficiencies important for providing emergency care and that 
in addition to emergency services, REHs can offer other outpatient 
services like pregnancy and delivery care, behavioral health services, 
and primary care, all of which are within family physicians' scope of 
training. The commenters therefore believe that REHs would be a 
valuable training site for family medicine residents. A commenter 
stated that it is critically important that REHs be adequately staffed, 
considering the important role that they play in rural communities. The 
commenter stated that as long as the rotations at REHs meet the 
requirements set out by the ACGME, thereby ensuring that residents are 
still receiving the high-quality education they deserve, they support 
the expansion of considering REHs as nonprovider sites for purposes of 
GME training and payment. A commenter expressed support for the 
proposal and noted that a large part of their state is designated as a 
Health Professional Shortage Area and reimbursement for GME training 
programs is an important piece to sustain and hopefully grow healthcare 
in these areas. Another commenter stated that allowing REHs to attract, 
educate, and be reimbursed for training additional healthcare workforce 
will help sustain these critical healthcare access points across rural 
parts of their state. A commenter stated they anticipate the proposed 
policy will be favorable to rural communities and REHs as it would 
provide for continued training of residents in rural areas for 
converting CAHs and offer the opportunity for additional rural training 
of residents that might not otherwise be viable in the absence of the 
proposal.
    Response: We appreciate the commenters' support. After 
consideration of the public comments received, we are finalizing our 
proposal that effective for portions of cost reporting periods 
beginning on or after October 1, 2023, an REH may decide to be a non-
provider site. If the requirements at 42 CFR 412.105(f)(1)(ii)(E) and 
413.78(g) and any succeeding regulations 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. In the alternative, the REH 
may decide to incur direct GME costs and be paid based on reasonable 
costs for those training costs. We are finalizing our proposed 
regulation text to include these provisions at 42 CFR 419.92(d).
    Comment: A commenter stated that the designation of REHs as GME-
eligible

[[Page 59055]]

facilities is a perfect example of how a flexible policy can increase 
access to physicians in rural areas. The commenter stated that the 
proposed policy reduces barriers to Tribal facilities that may be 
considering redesignation to an REH by eliminating one of the cons from 
the equation, that is, deciding whether it can cut its training program 
and continue providing adequate care to its patient populations. The 
commenter stated as this new provider type rolls out, CMS must continue 
to address the concerns that come up from Tribal facilities to ensure 
that the REH program operates as intended, to best serve folks in rural 
areas. One of these identified concerns is that the REH payment 
structure does not include the all-inclusive encounter rate, so the new 
provider type is not as attractive as it could be to Indian Health Care 
Providers (IHCPs). These are the kinds of issues that come up and can 
be addressed when CMS engages with Tribes.
    Response: We appreciate hearing that the proposed policy may help 
alleviate concerns related to REH designation for Tribal facilities. 
Regarding the REH payment structure, while the proposed policy 
discussed in this section is not related to general REH payment 
policies, we appreciate hearing the concerns brought up by Tribal 
facilities regarding the REH program and look forward to continued 
discussions with Tribes to address these concerns.
    Comment: Several commenters stated that the proposed policy to 
consider REHs as GME eligible training sites will allow small rural 
teaching hospitals and CAHs that convert to REHs to minimize 
unnecessary financial burdens when they convert and choose to continue 
their educational mission. The commenters stated that the REH program 
should provide stability in health care delivery systems for 
communities that would otherwise experience the closure of a hospital 
and that the proposal helps limit the financial barriers for any REH 
with the capacity to operate as a rural training site. Another 
commenter stated that their concern lies principally in the financial 
viability of the REH model, given the prohibition on providing 
inpatient services, and therefore the commenter's advocacy focuses on 
ensuring that REHs retain every opportunity to participate fully in 
Medicare as permitted by Congress in the CAA, 2021. The commenters 
thanked CMS for the proposal to incorporate REHs into the GME program 
via the ``nonprovider'' designation and permit REHs the same 
opportunities as CAHs to receive reimbursement for the costs incurred 
in training residents.
    However, some commenters expressed concern over the proposed 
payment methodology should an REH choose to be reimbursed directly for 
training costs. Several commenters asked that CMS adopt cost-based 
reimbursement at 101 percent for REHs that choose to incur direct GME 
costs since CAHs currently receive reimbursement at 101 percent of 
reasonable costs for residency training and therefore CMS should 
maintain consistency for CAHs that convert to REHs. The commenters 
stated that hospitals that choose to convert to REHs do not make the 
decision lightly and are more likely to be independent CAHs, have a 
three-year negative operating margin, and have a relatively low average 
daily census. The commenters stated that hospitals that convert to REHs 
and decide to train residents are doing so while in a precarious 
financial position and thus should receive higher reimbursement. The 
commenters stated that aligning the REH GME policy with the policy 
applicable to CAHs is consistent with CMS' approach in other areas of 
law for REHs, such as mirroring many CAH conditions of participation 
for REHs. A few commenters stated that the REH provider type was 
created with the express goal of enabling CAHs to transition into REHs 
to keep their doors open amid financial challenges. The commenters 
stated that they do not believe REHs should be penalized in their GME 
payments when transitioning from a CAH to an REH. Another commenter 
requested that CMS pay for residency training at CAHs at 101 percent of 
the reasonable cost under section 1861(v) of the Social Security Act, 
which would align with CAH payments based on reasonable cost 
principals.
    Response: We appreciate the comments indicating that allowing REHs 
to be GME eligible facilities will reduce financial barriers to REH 
conversion and aid in supporting the financial viability of REHs. We 
understand the commenters' request to reimburse REHs based on 101 
percent of reasonable costs when they choose to be paid for the direct 
costs of training residents as is the case for CAHs. However, there is 
no statutory basis for reimbursing REHs for the direct costs of GME at 
101 percent of reasonable costs. Whereas the statutory language for CAH 
inpatient and outpatient reimbursement at sections 1814(l) and 1834(g) 
of the Act specifically refers to 101 percent of reasonable costs, 
payments made to REHs for outpatient services under section 1834(x) of 
the Act are generally made under the Outpatient Prospective Payment 
System plus 5 percent. Furthermore, sections 1886(k)(2)(D) of the Act 
(Payment to Nonhospital Providers) and 1861(v)(1)(A) of the Act 
(Reasonable Cost) do not specify reimbursement at 101 percent of 
reasonable costs. Therefore, as noted previously, we are finalizing the 
proposed policy that if an REH chooses to be reimbursed for its direct 
GME costs, it will be reimbursed based on 100 percent of reasonable 
costs. As stated in the proposed rule (88 FR 27019), if an REH chooses 
to be reimbursed for the direct costs of residency training, it is not 
limited by FTE residency caps. Therefore, training at REHs that choose 
to be reimbursed directly are Medicare GME payments that are made above 
the statutorily mandated caps and thus provide for additional funding 
supporting training in rural areas despite payment at 100 percent of 
reasonable costs as opposed to 101 percent of reasonable costs.
    Comment: Several commenters submitted comments specific to REHs and 
rural track programs (RTPs). Commenters stated that the size of REH 
facilities and training requirements from the ACGME will likely limit 
the number of residents who train at these sites, but with new 
opportunities for hospitals to expand training through RTPs, REH GME 
has the potential to create training partnerships in rural areas with 
larger academic medical centers. The commenters stated that the 
learning experience provided to trainees in rural areas is unique and 
additional resources like REH GME may have positive patient care 
outcomes in these underserved areas. A commenter stated that as 
evidenced by their strong advocacy for RTPs (formerly rural training 
tracks) and the inclusion of hospitals located in rural areas among the 
beneficiaries of resident cap relief legislation, they support 
innovative strategies that will incentivize bringing physician services 
to those living in rural areas. Another commenter stated they expect 
the proposed policy will enable REHs to serve as rotator sites for 
RTPs, which would enhance resident training in rural areas and 
potentially improve timely access to care in areas with an REH. The 
commenter specifically requested CMS clarify in the final rule that 
REHs will be able to serve as rotator sites in RTPs.
    Response: We appreciate the comments noting that training at REHs 
may help to expand RTPs. Since we are finalizing a policy to treat REHs 
similar to CAHs for Medicare GME payment purposes, REHs can serve as a 
rural training site in an RTP in the same

[[Page 59056]]

manner as a CAH would. Note that if an REH has reclassified as rural 
under 42 CFR 412.103 (section 1886(d)(8)(E) of the Act), it would only 
be considered rural for IME payment purposes in the event it is serving 
as a non-provider site. We refer readers to the current policies 
concerning RTPs as discussed in the December 27, 2021 Federal Register, 
which implements section 127 of the CAA, 2021 (86 FR 73445).
    Comment: A commenter stated that as the REH model evolves, it would 
be helpful for CMS to evaluate and request feedback from participating 
facilities to help guide future policy. The commenter encouraged CMS to 
continue working collaboratively to provide support for facilities 
converting, or considering converting, to the new REH status, as well 
as provide clarity and support for those considering participating as a 
GME training facility.
    Response: We appreciate the commenter's recommendation to continue 
collaborative efforts that will support facilities interested in REH 
status. We encourage individuals to contact CMS or their Medicare 
Administrative Contractor (MAC) should they have any questions on 
specific policies concerning REHs and Medicare GME payments.
    Comment: A commenter stated that to further alleviate workforce 
shortages and address the needs of rural and medically underserved 
communities, they urge CMS to work with members of the United States 
Senate Committee on Health, Education, Labor, and Pensions (HELP). The 
commenter stated that the Senate HELP Committee recently sought 
feedback from the public on healthcare workforce shortages, and 
provided several recommendations to reduce barriers to care, diversify 
the healthcare workforce, increase funding for GME programs 
specifically designated for mental health and substance use disorder 
providers, and advance technology solutions to reduce administrative 
friction and workforce burnout. The commenter stated by working 
together, CMS and the Senate HELP Committee can effectively address 
workforce shortages, increase community resources, and mitigate 
closures of rural hospitals. The commenter stated they welcome the 
opportunity to discuss their investments and recommendations with CMS 
and also encouraged CMS to work with Congress on additional policy 
changes and investments that support the healthcare workforce and rural 
and medically underserved communities.
    A commenter stated that they support other initiatives to transform 
physician training programs from urban settings, currently representing 
the majority of programs, and having more robust training options in 
rural communities. The commenter recommended that the financial support 
and resources for such training programs be sustainable and allow 
residents to fully complete their training without the concern of 
funding gaps. The commenter stated that they aim to ensure continuous 
financial support for training programs, avoiding any interruptions or 
breaks in funding. The commenter noted that since most rural hospitals 
are unable to financially support residency training positions 
independently, they rely on federally funded GME resources.
    A commenter requested that similar to the GME designation for CAHs, 
REHs also include advanced practice nursing education. The commenter 
stated that this designation is essential, especially since 221 
clinical sites for nurse anesthesia have been designated as having CAH 
status and are eligible to convert to REH status. The commenter stated 
that certified registered nurse anesthetists (CRNAs) predominate in 
rural hospitals, and it is critical that these educational 
opportunities are available for CRNAs and other advanced practice 
registered nurses. The commenter stated that in some states, CRNAs are 
the sole anesthesia providers in nearly100 percent of rural hospitals, 
affording these medical facilities obstetrical, surgical, trauma 
stabilization, and pain management capabilities. The commenter stated 
that the importance of CRNA services in rural areas was highlighted in 
a recent study which examined the relationship between socioeconomic 
factors related to geography, insurance type, and the distribution of 
anesthesia provider type. The study correlated CRNAs with lower income 
populations and correlated anesthesiologist services with higher-income 
populations. The commenter stated that of particular importance to the 
implementation of public benefit programs in the U.S., the study showed 
that compared with anesthesiologists, CRNAs are more likely to work in 
areas with lower median incomes and larger populations of citizens who 
are unemployed, uninsured, and/or Medicaid beneficiaries.
    Response: The policy finalized in this rule relates specifically to 
Medicare GME payments made to REH facilities. These payments are made 
only for the training of medical, dental, and podiatry residents. 
Because Medicare GME payments do not include payments for training 
CRNAs and because the policy finalized in this rule is limited in scope 
to residency training at REHs, we consider these comments to be out of 
scope and are not responding to them in this final rule.

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 substantive 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 for portions of cost 
reporting periods

[[Page 59057]]

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 the FY 2024 IPPS/LTCH PPS proposed rule, we proposed the rates 
for CY 2022. Consistent with the use of HCRIS data for past calendar 
years, we proposed 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 the 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 the proposed rule and 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 stated in the proposed 
rule that we intend to update these numbers in the FY 2024 final rule 
based on the latest available cost report data.

[[Page 59058]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.253

    We did not receive any comments on the proposed national NAH MA 
rates and percentages.
    For this final rule, consistent with the use of HCRIS data for past 
calendar years, for CY 2022, we 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 final rule, we accessed the 
HCRIS data from the first quarterly HCRIS update of 2023. 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 as the best 
available cost report data. Next, consistent with the method we 
described previously from the August 1, 2000 IFC, we increased these 
payment amounts from midpoint to midpoint of the appropriate calendar 
year using the increases allowed by section 1886(h) of the Act for 
these services (using the percentage applicable for the current 
calendar year for MA direct GME, and the Consumer Price Index--Urban 
(CPI-U) increases for Part A direct GME). For CY 2022, the direct GME 
projections are based on FY 2020 HCRIS, and the final national rates 
and percentages, and their data sources are set forth in this table.
[GRAPHIC] [TIFF OMITTED] TR28AU23.254

    In summary, we are finalizing our proposal to use NAH MA add-on 
rates as well as the direct GME MA percent reductions for CY 2022, 
based on sufficient HCRIS data to develop the rates for these years. We 
expect to propose to issue the rates for CY 2023 in the FY 2025 IPPS/
LTCH PPS proposed rule, when sufficient HCRIS data is available to 
develop the rates for CY 2023.
    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 the FY 2023 IPPS/LTCH PPS 
proposed rule (88 FR 27022), we proposed 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. In the proposed rule, we proposed 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 proposed 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 proposed 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 proposed that the MACs would subtract the payment amount 
determined under CR 11642 (or CR 12596 or CR 12407 as applicable) for a

[[Page 59059]]

CY from the recalculated amount in the second step, as previously 
detailed.
    Fourth, we proposed 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 noted 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) would 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 
would not occur.
[GRAPHIC] [TIFF OMITTED] TR28AU23.255

    We did not propose any changes to the regulations text at 42 CFR 
413.87.
    Comment: Multiple commenters stated that they support the steps 
outlined in the proposed rule as the method of returning the full 
amount of NAH MA recoupments to hospitals. Commenters also stated that 
they support the process outlined in previously issued CR 13122 as a 
first step towards returning a portion of the recoupments to hospitals 
while we engaged in rulemaking to implement section 4143 in full. One 
commenter asked that CMS provide guidance to the MACs instructing them 
to use the same variables that were in place prior to the release of 
Change Request 11642, to help ensure that the payments returned are 
accurate. Another commenter that expressed support for CMS's proposal 
urged CMS to direct MACs to expeditiously recalculate and reconcile NAH 
payments before the final rule goes into effect on October 1, 2023.
    Response: We appreciate the supportive comments, and we are 
finalizing the proposed methodology, such that 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. By returning 
the amounts previously recouped, the amounts would be consistent with 
the amounts calculated with variables in place prior to the release of 
CR 11642. After issuance of this final rule, we will issue another CR 
to reflect this finalized methodology. The exact timeframe and details 
of the implementation process will be specified in the CR.
    Comment: A commenter stated that under CMS's proposal, many 
hospitals will not have full payment restored as required by section 
4143 of the CAA. Specifically, several commenters added that CMS's 
proposed approach to not allow reopening after the 3-year reopening 
period is inconsistent with the language in section 4143(c), which 
states, ``The amendments made by this section shall apply to payments 
made for portions of cost reporting periods occurring in 2010 through 
2019.'' Another commenter stated that the ``reopening regulations at 42 
CFR 405.1885 do not require the three-year reopening limitation when 
related to reimbursement changes mandated by law.'' One commenter 
expressed concern that the proposal that would only permit corrections 
to cost reports within the three-year reopening time period as of 12/
29/2022 (that is, cost reports finalized prior to 12/29/2019 will not 
be reopened). A different commenter stated that Congress eliminated the 
cap for all years between 2010 and 2019, and it ``was clearly Congress' 
intent that nursing and allied health programs be made whole for past 
underpayments so long as they were still functioning at the time CAA, 
2023 was passed.''
    Response: As commenters are aware, in the proposed rule, we noted 
that the provision applies to ``each of 2010 through 2019,'' and 
included a table called CALCULATION TABLE FOR SECTION 4143 OF CAA OF 
2023 that includes revised Section 4143 Pool amounts for each of CYs 
2010 through 2019. That is, we provided revised payment rates for as 
far back as 2010, thereby conforming with the retroactive aspect of 
this provision. However, we proposed that MACs would use the table to 
recalculate an eligible hospital's NAH MA payment only for portions of 
cost reporting periods occurring in CY 2010 through CY 2019 that are 
still within the 3-year reopening period. We have reviewed the comments 
and the language in section 4143, subsection (c) regarding 
``Retroactive Application,'' and we do not believe that language 
overrides CMS's existing reopening regulations. Rather, we believe the 
statute indicates that Congress instructed us to ensure that necessary 
payments ``apply'' retroactively. We note that any recoupments under CR 
11642 (or CR 12596 or CR 12407 as applicable) occurred during the last 
three years, and thus we can reverse the recoupments by reopening cost 
reports affected by those CRs consistent with the reopening 
regulations. Further, because those CRs and the recoupments conducted 
under them are the source of the underpayments corrected by Section 
4143 and this implementing rule, we do not believe it is necessary to 
reopen other cost reports to ``apply'' ``the

[[Page 59060]]

amendments made under Section 4143.'' In addition, we do not understand 
the commenter's concern that the proposal would only permit corrections 
to cost reports within the three-year reopening time period ``as of 12/
29/2022''; nowhere in the proposal did we specify such a requirement. 
On the contrary, we point out that generally, there should be no 
concern that a cost report reopening timeframe would expire since the 
time that the cost report was adjusted under CR 11642. We note that CR 
11642 states that ``MACs shall not make recalculations or 
reconciliations for MA nursing and allied health education payments or 
MA direct GME payments for cost reports that are already beyond the 3-
year reopening period as of the implementation date of this CR.'' CR 
11642 further instructed MACs to complete their work between 
approximately December 14, 2020, and March 2022. This means that during 
that implementation timeframe, MACs would only have made adjustments to 
cost reports from 2010 and 2019 that were still open or reopenable. 
Thus, for example, a 2010 cost report would likely not have been 
reopenable as of December 14, 2020, and therefore would not have been 
subject to any recoupment under CR 11642. (If such a cost report were 
reopenable as of December 14, 2020, and was in fact reopened pursuant 
to CR 11642, it would be reopenable again for three years from the date 
of the reopening to implement CR 11642, meaning that it remains 
reopenable until December 14, 2023, at the earliest). Accordingly, 
there would either be no need to reverse a recoupment to that 2010 cost 
report, or that cost report would have been adjusted and would be 
subject to a reversal of that adjustment under Section 4143. 
Furthermore, if, after applying CR 11642 to a still open or reopenable 
cost report, the MAC subsequently settled that cost report, then that 
cost report should still fall within a new 3-year reopening period 
because the earliest possible reopening to implement CR 11642 would 
have occurred on December 14, 2020. Accordingly, since applicable cost 
reports would either still be open or would fall within a recently 
restarted 3-year reopening period, it is not obvious to us that there 
is any conflict between Congress's instructions to apply section 4143 
retroactively and our reopening regulations. In the absence of such 
conflict, we decline to create an exception to our reopening 
regulations.
    In addition, some commenters refer to restoration of ``past 
underpayments'' or being ``made whole for past underpayments'' under 
section 4143. We disagree with this position and point out that 
hospitals were generally being overpaid. Specifically, prior to 
issuance of CR 11642 on November 19, 2020, the MACs were relying on the 
instructions contained in CR 2692, which CMS had issued in 2003. Under 
these instructions, NAH MA payments were calculated on the basis of 
aggregate data that had not been updated since CY 2001, when total MA 
patient days were still relatively low, and the size of the NAH MA 
payment pool was $43,663,043 (refer to CR 2692, Transmittal A-03-043, 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/a03043.pdf). Over the course of those years from 2003 through 
2020, MACs were calculating NAH MA payments to individual hospitals 
using contemporaneous hospital-specific data, which, as the years 
passed, reflected the significant increase in MA patient days during 
this period. Because hospital-specific MA patient days are one of the 
factors used in the calculation of a hospital's NAH MA payments in a 
calendar year (see Sec.  413.87(e)(1)(iii)), the interaction of the 
aggregate data that had not been updated since 2001 and the 
contemporaneous hospital-specific data for each calendar year resulted 
in significant empirical overpayments to hospitals.
    Under CR 11642, CMS instructed MACs to recalculate historical 
payments to hospitals consistent with the $60 million limit per 
calendar year (applicable as of CY 2010 and after), and use updated 
national data and make applicable adjustments to NAH MA payments. Under 
our proposal for the implementation of section 4143, 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. 
In other words, CMS only imposed the $60 million cap that section 
4143(a)(2)(ii) stated ``shall not apply [for 2010-2019] to those 
hospitals that, as of [December 29, 2022], are operating a school of 
nursing, a school of allied health, or a school of nursing and allied 
health'' via the previously described CRs, and all cost reports 
affected by those CRs are within the three-year reopening window. We 
believe we can fulfill Congress's instructions to apply section 4143 
retroactively without creating an exception to our reopening 
regulations. For the reasons stated previously, we do not believe an 
override or exception to the reopening regulations is required, and we 
are finalizing our proposal to recalculate an eligible hospital's NAH 
MA payment only for portions of cost reporting periods occurring in CY 
2010 through CY 2019 that are still within the 3-year reopening period.
    Comment: Some commenters disagreed with CMS's proposal 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. One commenter stated that there is nothing in 
the statute that suggests a hospital must receive payments on an 
interim basis, only that a nursing and allied health program ``was 
operating'' on December 29, 2022. This commenter asked that CMS 
eliminate the reference to payments on an interim basis and indicate 
that all hospitals operating a nursing and allied health program as of 
December 29, 2022, are eligible under section 4143 to receive adjusted 
nursing and allied health MA payments for CYs 2010 through 2019. Other 
commenters recommended that instead of interim rates, the MACs should 
apply Section 4143 to hospitals that file pass-through costs for NAH 
programs on their cost reports, because these hospitals still have 
their NAH programs even though the MAC disallowed their pass-through 
costs as a result of audits. Another commenter stated that some 
hospitals may have closed their NAH programs because the MACs 
disallowed payment. This commenter asserted that regardless of why a 
NAH program may have closed prior to December 29, 2022, it seems unfair 
not to provide the same relief for underpayments they received in the 
past when they were operating those programs. In cases where the MACs 
disallowed payment, and the hospitals are appealing those 
determinations, the commenters argued that, even though the hospitals 
were not receiving interim payments as of December 29, 2022, they were 
still operating their programs, and they expect their NAH payments to 
be recognized after a successful appeal.
    Response: We understand that there may be a few possible reasons 
why a hospital may not have been receiving NAH MA payments on an 
interim basis as of December 29, 2022, even though the hospital had not 
formally closed its NAH program(s). For example, the hospital's NAH 
pass-through amount may be too small to qualify for interim payments. 
Also, as the commenters describe, the MAC may have disallowed the 
hospital's pass-through payments, and the hospital might currently be 
in

[[Page 59061]]

the process of appealing that determination. Alternatively, a hospital 
may have several years of cost reports that it filed with NAH costs, 
but those cost reports may not yet be settled, and thus, the MAC has 
not yet made a determination as to the allowability of the NAH pass-
through costs with regard to interim payments. In the first case, where 
the NAH pass-through amount is too small to qualify for interim 
payments, if the hospital's NAH pass-through would otherwise qualify 
for interim payments as of December 29, 2022, if the amount had been 
large enough, then for the purpose of implementing Section 4143, we 
would treat the hospital as though it was receiving interim payments as 
of December 29, 2022. With regard to multiple cost reporting years that 
have not yet been settled, it may be that CR 11642 was not yet applied 
to those cost reports, in which case there would be no need for 
reversal of a recoupment upon eventual settlement of those cost 
reports. However, regarding the situation where the MAC has disallowed 
the NAH payment, we understand that in many cases the MACs have found 
that hospitals are not ``operating'' the NAH program(s) consistent with 
the regulations at 42 CFR 413.85, although hospitals may believe that 
``as of the date of enactment'' of section 4143, the hospitals ``are 
operating'' a school or nursing and/or allied health. Where the MACs 
have disallowed the NAH payment, settled the cost report(s), and the 
hospitals are appealing the disallowance, then we believe the normal 
appeals process should be followed, and NAH payments, under section 
4143 or otherwise, are held in abeyance pending the outcome of the 
appeals. Thus, we proposed to use receipt of interim payments as of 
December 29, 2022 as an indicator of eligibility of NAH pass-through 
payments; lack of such pass-through payment could indicate a MAC 
disallowance, which should be adjudicated through the normal appeals 
process. If the hospitals should be successful in their appeals to 
restore NAH pass-through payment, then for the purpose of implementing 
section 4143, we would treat the hospitals as though they were 
receiving interim payments as of December 29, 2022. If, on the other 
hand, a hospital closed its NAH program(s), whether the closure was 
allegedly a result of MAC disallowances or due to some other reason, we 
do not believe that section 4143 applies in those cases, because 
section 4143 clearly states that payments should only be made to 
``those hospitals that, as of the date of enactment, are operating a 
school of nursing, a school of allied health, or a school of nursing 
and allied health (emphasis added).'' Thus, in this final rule, we are 
still requiring that MACs 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, with the 
exception of hospitals whose NAH pass-through payment would otherwise 
qualify for interim payments as of December 29, 2022, if the amount had 
been large enough, and hospitals that will be successful in their 
appeals to restore NAH pass-through payment.
    Comment: One commenter believed that no money should be siphoned 
away from DGME funding to pay for nonphysician training. Though the 
commenter appreciates the role that nonphysician providers play, the 
commenter believed that there should be a funding source separate from 
GME funding. This commenter also expressed concern that the rule does 
not contain proposals to ensure that in the future, too much MA DGME 
would not be removed from GME funding, and recommended that CMS put 
robust guardrails in place to ensure that GME funding updates are made 
accurately every year moving forward.
    Response: This comment is generally out of the scope of the 
proposals made in the FY 2024 IPPS/LTCH PPS proposed rule; therefore, 
we are not responding to it directly at this time. However, with regard 
to ensuring accurate (and timely) payment rate updates, we note that 
starting with the rates 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 the FY 2024 IPPS/LTCH PPS proposed rule, 
we proposed the rates for CY 2022, and we are finalizing the CY 2022 
rates in this final rule. Accordingly, we have established an annual 
process to ensure issuance of updated NAH MA and DGME MA rates that are 
as updated and accurate as possible.
    In summary, after consideration of the public comments received, we 
are finalizing the proposed methodology for the implementation of 
section 4143, such that 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. After issuance of this final rule, we will 
issue another CR to reflect this finalized methodology.

I. 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 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

[[Page 59062]]

the disease or condition (21 CFR 312.305).\218\
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    \218\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
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    Effective FY 2021, we also finalized an adjustment to the payment 
amount for applicable clinical trial and expanded access immunotherapy 
cases that group to MS-DRG 018 using the same methodology that we used 
to adjust the case count for purposes of the relative weight 
calculations (85 FR 58842 through 58844). (As previously noted, 
effective beginning FY 2022, we revised MS-DRG 018 to include cases 
that report the procedure codes for CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies (86 FR 44798 through 448106).) 
Specifically, under our finalized policy we apply a payment adjustment 
to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code 
Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell, 
or other immunotherapy product is purchased in the usual manner, but 
the case involves a clinical trial of a different product, the payment 
adjustment will not be applied in calculating the payment for the case. 
We also finalized that when there is expanded access use of 
immunotherapy, the payment adjustment will be applied in calculating 
the payment for the case. This payment adjustment is codified at 42 CFR 
412.85 (for operating IPPS payments) and 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 proposed to continue to apply an adjustment to the 
payment amount for expanded access use of immunotherapy and applicable 
clinical trial cases that would group to MS-DRG 018, 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 
proposed to use to adjust the case count for purposes of the relative 
weight calculations, as described in section II.D. of the preamble of 
the proposed rule and this final 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 the proposed 
rule and this final 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 proposed to use to adjust the case count for purposes of the 
relative weight calculations, we proposed 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 the 
proposed rule and this final rule for further discussion of these 
proposed methodology changes.
    Consistent with our calculation of the proposed adjustor for the 
relative weight calculations, for the proposed rule we proposed 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 412.312 (for capital IPPS payments), we proposed 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 
proposed to update the value of the adjustor based on more recent data 
for the final rule.
    We did not receive any comments specifically relating to the 
proposed payment adjustment for applicable clinical trial and expanded 
access use immunotherapy cases and are therefore finalizing our 
proposal without modification. We are also finalizing our proposal to 
update the value of this adjustor based on more recent data for this 
final rule. Therefore, using the March 2023 update of the FY 2022 
MedPAR data, we are finalizing an adjustor of 0.27 for FY 2024, which 
will be multiplied by the final FY 2024 relative weight for MS-DRG 018 
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.

J. Hospital Readmissions Reduction Program

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 1886(q) of the Act established 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.

[[Page 59063]]

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.
    We did not make any proposals or updates in the FY 2024 IPPS/LTCH 
PPS proposed rule (88 FR 27024) for the Hospital Readmissions Reduction 
Program. We refer readers to section V.G.5. of the preamble for an 
updated estimate of the financial impact of using the proportion of 
dually eligible beneficiaries, Excess Readmission Ratios, 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).
    While we did not make any proposals or updates to the Hospital 
Readmissions Reduction Program, we did receive comments noting 
additional opportunities for addressing health equity. Suggestions 
included expanding social risk adjustments, particularly to include 
homelessness Z codes in risk adjustments, a comment not to use dual 
eligibility status, and a comment to expand social risk adjustments to 
decrease annual readmissions penalties. A few commenters urged CMS to 
find more ways to support safety net hospitals including by 
incorporating an essential hospital definition in the peer grouping 
methodology. We thank the commenters for their input, and we will 
consider these comments for future rulemaking.

K. Hospital Value-Based Purchasing (VBP) Program: 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 March 2023 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 published proxy value-based incentive payment adjustment 
factors in Table 16 associated with the proposed rule (which is 
available via CMS website). We are publishing updated proxy value-based 
incentive payment adjustment factors in Table 16A associated with this 
final rule (which is available via the CMS website). We note that these 
proxy adjustment factors will not be used to adjust hospital payments 
for FY 2024 as they were calculated using the historical baseline and 
performance periods for the FY 2023 Hospital VBP Program. These updated 
proxy factors were calculated using the March 2023 update to the FY 
2022 MedPAR file. The updated slope of the linear exchange function 
used to calculate these proxy factors was 2.6517299103, and the 
estimated amount available for value-based incentive payments to 
hospitals for FY 2024 is approximately $1.7 billion. 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 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 did not propose any changes to these policies in the FY 2024 
IPPS/LTCH PPS proposed rule.

[[Page 59064]]

b. Codification of 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. In the FY 
2024 IPPS/LTCH PPS proposed rule, we proposed 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 (88 FR 27025). We believe that this codification 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 invited public comment on this proposal.
    We did not receive any comments on this proposal and are finalizing 
this proposal as proposed with minor technical modifications to 
regulation text at 42 CFR 412.164(c).
c. Substantive Measure Modifications
(1) Adoption of Substantive Measure Updates to the Medicare Spending 
per Beneficiary (MSPB)--Hospital Measure (CBE #2158) Beginning With the 
FY 2028 Program Year
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed to adopt 
substantive measure updates to the MSPB Hospital measure (CBE #2158) in 
the Hospital VBP Program beginning with the FY 2028 program year (88 FR 
27025 through 27026). 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 that the MSPB Hospital measure provides important data on 
resource use (addressing the Meaningful Measures Framework priority of 
making care affordable), which is why we proposed 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.\219\
---------------------------------------------------------------------------

    \219\ Medicare Spending Per Beneficiary (MSPB) Measure 
Methodology. Available at: https://qualitynet.cms.gov/inpatient/measures/mspb/methodology.
---------------------------------------------------------------------------

    We presented the three substantive updates to the MSPB Hospital 
measure (CBE #2158) to the consensus-based entity (CBE) \220\ 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).\221\ 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.\222\ Following re-endorsement, we included the updated 
measure in CMS's ``List of Measures Under Consideration (MUC) for 
December 1, 2021.'' \223\ The re-evaluated MSPB Hospital measure 
(MUC2021-131) underwent Measure Applications Partnership (MAP) \224\ 
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.\225\
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    \220\ 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.
    \221\ The submission materials, including the testing results, 
are available at: https://mmshub.cms.gov/sites/default/files/cost-and-efficiency-final-report-fall-2020.pdf.
    \222\ 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.
    \223\ 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.
    \224\ Interested parties convened by the consensus-based entity 
will provide input and recommendations on the Measures under 
Consideration (MUC) list as part of the pre-rulemaking process 
required by section 1890A of the Act. We refer readers to https://p4qm.org/PRMR-MSR for more information.
    \225\ 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 proposed 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 proposed 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 final rule where we discuss our defined baseline and 
performance periods for this updated measure under the Hospital VBP 
Program. We also proposed that the performance standards calculation 
methodology for the updated MSPB Hospital measure will be the same as 
that which we currently use for the measure. The performance standards 
for the updated measure for the FY 2028 program year are not yet 
available.
    We invited public comment on this proposal.

[[Page 59065]]

    Comment: Many commenters supported the proposal to implement the 
substantive updates to the MSPB Hospital measure in Hospital VBP 
Program. Several commenters commended CMS for its alignment with the 
Hospital IQR Program. A commenter cited the updates to readmission 
terminology as a significant factor in their support.
    Response: We thank commenters for their support, and we aim to 
maintain alignment with the Hospital IQR Program in line with our 
statutory requirements and to update our existing measures when 
possible.
    Comment: A few commenters did not support the proposal and 
expressed concern that allowing readmissions to trigger new episodes 
could lead to the same costs being attributed to hospitals twice and 
provide a misleading portrayal of hospital performance.
    Response: As previously stated in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49257 through 49263) where we adopted the MSPB re-evaluated 
measure in the Hospital IQR Program, the refinement allows readmissions 
to trigger new episodes which will result in some services being 
assigned to multiple episodes. These services, however, will only be 
counted once per episode, so the cost of these services will not be 
counted twice within the same episode. Additionally, the presence of an 
inpatient admission within 30 days before the start date of an episode 
based on a readmission is controlled for in the risk adjustment model 
to account for the additional complexity that readmissions may 
entail.\226\ Further, the inclusion of episodes triggered by 
readmissions does not necessarily result in a worse measure score for 
the provider. Such episodes still use the observed over expected cost 
ratios, where it is possible for the observed cost to be lower than 
expected cost, if the hospital performed better on the episode than 
expected.
---------------------------------------------------------------------------

    \226\ Medicare Spending Per Beneficiary (MSPB) Measure 
Methodology. Available at: https://qualitynet.cms.gov/inpatient/measures/mspb/methodology.
---------------------------------------------------------------------------

    Comment: A few commenters did not support the proposal to adopt the 
re-evaluated MSPB Hospital measure citing concern that hospitals have 
not had enough time to understand how these measure refinements will 
impact hospital performance. A few commenters recommended allowing 
hospitals to have a better understanding of the impact the measure 
updates will have on performance. Specifically, commenters recommended 
delaying implementation in the Hospital VBP Program so that hospitals 
have a better understanding of how the updates impacted hospital 
performance in the Hospital IQR Program, including allowing hospitals 
to see performance metrics, prior to implementation in the Hospital VBP 
Program. A commenter requested to see the calculations and impact 
changes before being able to appropriately comment, and a commenter 
recommended delaying adoption for one year to allow for more robust 
feedback. Additionally, a few commenters expressed concern that the 
measure will increase the burden on hospitals because they will have to 
monitor and validate two different performance rates using two 
different measure specifications. A few commenters also expressed 
concern that the policy will result in two slightly different measure 
specifications being used simultaneously in the two different programs 
which they believe could yield different results and make it more 
difficult to interpret results.
    Response: We appreciate the commenters' concerns. As we have 
previously stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27025 through 27026), we adopted the re-evaluated version of the MSPB 
Hospital measure into the Hospital IQR Program to accommodate the 
statutory and regulatory requirements as well as to provide interested 
parties with an opportunity to become familiar with the new version of 
the measure and provide feedback. We staged our proposals across the 
Hospital IQR Program and Hospital VBP Program to accommodate statutory 
and regulatory requirements, as further discussed later in this 
section. We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49257 through 49263) for more information on the policy to adopt the 
substantive updates to MSPB Hospital measure in the Hospital IQR 
Program, which provided interested parties with an opportunity to 
become familiar with the new version of the measure and provide 
feedback prior to our proposal to adopt the measure updates in the 
Hospital VBP Program. Hospital-specific reports for the re-evaluated 
MSPB Hospital measure in the Hospital IQR Program will be available for 
review in October 2023. Further, hospitals will be able to see their 
performance in the Hospital IQR Program for four years prior to measure 
implementation in the Hospital VBP Program beginning with the FY 2028 
program year.
    We acknowledge the commenters' concerns that two slightly different 
versions of the measure will be in use across the Hospital IQR and 
Hospital VBP Programs simultaneously until the measure is removed from 
the Hospital IQR Program with the FY 2028 payment determination. 
Section 1886(o)(2)(C)(i) of the Act and 42 CFR 412.164(b) state that 
measures must be publicly reported for one year in the Hospital IQR 
Program prior to the beginning of the performance period in the 
Hospital VBP Program. Additionally, section 1886(o)(2)(B)(ii) of the 
Act outlines that the Hospital VBP Program must contain an efficiency 
measure. As part of routine measure maintenance, we will continue to 
monitor the measure's impact on hospitals.
    Comment: A commenter recommended suppressing one set of measures 
from public reporting to reduce confusion caused by two different 
publicly reported rates.
    Response: Results for the MSPB Hospital measure currently 
implemented in the Hospital VBP Program will continue to be available 
on data.medicare.gov along with other Hospital VBP Program data until 
the re-evaluated measure is implemented under the finalized policy 
outlined in section V.K.2.a of this rule. We intend to continue 
publishing re-evaluated MSPB Hospital measure data on Care Compare for 
the period of time in which hospitals report on two versions of the 
measure to provide important cost measure information to the public. In 
addition, we will make sure it is clear which version of the measure is 
being displayed in which location through outreach and education 
efforts.
    Comment: A few commenters did not support the re-evaluated MSPB 
Hospital measure proposal because they believed that the measure was 
not adequately tested and adjusted for social risk factors. A commenter 
believed that measure scores shifted when social risk factors were 
applied within the risk model. A commenter recommended implementing a 
social risk factor adjustment in calculating measure performance 
because they believed that it will improve measure reliability. A 
commenter specifically stated that they believed that the endorsement 
review suggested low reliability and validity. Another commenter 
expressed concern about the scientific acceptability of the measure, 
and a commenter believed that there would be a potential inverse 
relationship between outcomes, adjustment for social risk factors, and 
medical complexities due to vulnerable patient groups driving 
performance differences.
    Response: We respectfully disagree with the commenters that the re-
evaluated MSPB Hospital measure has low reliability and validity. The 
CBE rated the measure's reliability as high

[[Page 59066]]

when endorsing the measure. The average reliability score of hospitals 
with at least 25 episodes was .92,\227\ which far exceeds the standard 
generally considered as `high' reliability. The CBE rated the measure's 
validity as moderate when endorsing the measure.\228\ Further, as part 
of the CBE endorsement submission we assessed the impact of social risk 
factors on the measure, conducting testing based on CBE precedents, as 
well as supplemented with novel testing and in response to specific 
stakeholder feedback. Specifically, we tested whether the inclusion of 
sex, dual eligibility status, race/ethnicity, the AHRQ socioeconomic 
status (SES) index, components of the AHRQ SES index, and the Area 
Deprivation Index could meaningfully be incorporated into the measure's 
risk adjustment model so as not to penalize the hospital for the 
patients they treat, while also not setting a lower standard of care 
for hospitals with patients who have social risk factors. Results 
showed that the inclusion of these social risk factors in the risk 
model had a limited and inconsistent effect on measure scores, and some 
of the variation that was captured by tested covariates was 
attributable to the hospital in which the episodes were initiated. The 
CBE's Scientific Methods Panel carefully reviewed the testing results 
on the impacts of social risk factors on the measure and our 
recommendation to continue not including them in the measure's risk 
adjustment model and passed the measure on the validity criterion. 
While social risk factors continue to not be included in the measure's 
risk adjustment model, we plan to continue to conduct testing and 
monitoring of the impact of social risk factors on the measure as part 
of normal measure maintenance.
---------------------------------------------------------------------------

    \227\ The submission materials, including the testing results, 
are available at: https://mmshub.cms.gov/sites/default/files/cost-and-efficiency-final-report-fall-2020.pdf.
    \228\ The submission materials, including the testing results, 
are available at: https://mmshub.cms.gov/sites/default/files/cost-and-efficiency-final-report-fall-2020.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concerns about the re-
evaluated MSPB Hospital measure, including their beliefs that the 
measure does not inform performance by condition, there could be an 
increased number of episodes included in the measure that could impact 
performance, and the explanation of how services are allocated to an 
episode is unclear on how this would not penalize a hospital twice.
    Response: Regarding the commenter's concern about hospitals being 
penalized twice, this refinement will not result in hospitals being 
penalized twice because the re-evaluated MSPB Hospital measure, whether 
used in the Hospital IQR Program or Hospital VBP Program, and the 
condition- and procedure-specific readmission measures used in the 
Hospital Readmissions Reduction Program assess readmissions for 
different purposes. The re-evaluated MSPB Hospital measure assesses 
hospitals' cost efficiency on readmissions and other costs for both the 
hospital and patient, while the condition- and procedure- specific 
measures in the Hospital Readmissions Reduction Program are intended to 
reduce avoidable readmissions.
    We respectfully disagree that there could be an increased number of 
episodes included in the measure and thus impact performance due to 
readmissions triggering new episodes. The inclusion of episodes 
triggered by readmissions does not necessarily result in a worse 
measure score for the provider. Such episodes still use the observed 
over expected cost ratios, where it is possible for the observed cost 
to be lower than expected cost, if the hospital performed better on the 
episode than expected. Additionally, allowing readmissions to trigger 
new MSPB Hospital episodes does not impact a hospital's readmissions 
rates, given that it merely captures episodes that are based on 
existing readmissions so that those episodes can be used to assess 
hospital performance.
    Comment: A commenter requested additional clarification around what 
is a hospital's reasonable influence for a readmission. They expressed 
concern that it may be difficult for hospitals to track readmissions 
without understanding what CMS considers to be reasonable influence and 
recommended providing additional information on Care Compare prior to 
FY 2028.
    Response: We interpret ``reasonable influence'' in the comment to 
mean the appropriateness to hold the hospital accountable for the costs 
associated with the readmissions if they are influenced not only by the 
hospital's care decisions but also other factors that the hospital may 
not have influence over (for example, a patient's age, comorbidities, 
or other risk factors). The Technical Expert Panel (TEP) that provided 
feedback to the measure developer on the re-evaluated MSPB Hospital 
measure agreed that readmissions should trigger MSPB episodes to 
capture costs in the subsequent 30 days post-discharge for the 
readmissions because they believed that it is clinically appropriate to 
hold a hospital responsible for these costs.\229\ Allowing readmissions 
to trigger new episodes (i) encourages hospitals to provide cost 
efficient care and improve care coordination not only during initial 
hospitalizations, but also during readmissions, (ii) increases the 
number of episodes for which a clinician can be scored, and (iii) 
captures potentially high-cost services that are otherwise excluded. 
Additionally, allowing readmissions to trigger new MSPB Hospital 
episodes does not impact a hospital's readmissions rates, given that it 
merely captures episodes that are based on existing readmissions so 
that those episodes can be used to assess hospital performance. 
Furthermore, readmissions trigger an episode similarly to how initial 
admissions trigger in an episode, in that the episode window starts 
three days prior to the inpatient stay (whether it's an initial 
admission or readmission) and ends 30 days after discharge--thus, this 
refinement to measure construction will not result in any additional 
burden for hospitals to track.
---------------------------------------------------------------------------

    \229\ Physician Cost Measures and Patient Relationship Codes TEP 
Summary Report. (2020). Available at: https://www.cms.gov/files/zip/physician-cost-measures-and-patient-relationship-codes-pcmp.zip.
---------------------------------------------------------------------------

    We provide clarification on (i) how readmissions trigger an 
episode, and (ii) the impact of the re-evaluated MSPB Hospital measure 
as follows. An episode is opened, or triggered, by an initial admission 
to an inpatient hospital, and the episode window starts three days 
prior to this index admission and ends 30 days after discharge. If a 
readmission for the same patient occurs within the 30-day post-
discharge of the first episode, then the readmission triggers a new 
episode. This new episode's window starts three days prior to the 
readmission and ends 30 days after discharge from the readmission. The 
hospital managing the readmission is now being measured under similar 
cost efficiency incentives by the new episode. Specifically, the new 
episode includes the costs in the post-discharge period of the 
readmission not previously captured. The refinement to allow 
readmissions to trigger a new episode will result in some services 
being assigned to multiple episodes. These services, however, are 
counted only once per episode (that is, cost will not be double-
counted). The revised measure calculation compares each hospital's 
observed episode costs to predicted episode costs among their peers for 
patients with the same

[[Page 59067]]

observable characteristics, rather than to a pre-defined standard. By 
comparing hospitals to other hospitals that are all attributed in the 
same way, we expect this comparison to be fair. This helps maintain 
care coordination incentives of the re-evaluated MSPB Hospital measure. 
Further, the inclusion of episodes triggered by readmissions does not 
necessarily result in a worse measure score for the provider--such 
episodes still use the observed over expected cost ratios, where it is 
possible for the observed cost to be lower than expected cost if the 
hospital performed better on the episode than expected. Additionally, 
the prior inpatient admission characteristic is controlled for in the 
risk adjustment model to avoid unfairly penalizing the hospital 
attributed to the newly triggered episode. An illustration of this 
refinement is available in Appendix B of the Measure Information Form 
(MIF) document available at: https://qualitynet.cms.gov/files/647f8ba16f7752001c37e302?filename=2023_HIQR_Re-eval_MSPB_%20MIF.pdf.
    We also wish to note that because the updated version of this 
measure was adopted in the Hospital IQR Program in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49257 through 49263), hospitals will receive 
hospital-specific reports for the re-evaluated MSPB Hospital measure on 
an annual basis, which include patient-level episode information, prior 
to public display on the Compare tool. In addition, hospitals receive 
hospital-specific reports for seven readmission measures used in the 
Hospital IQR and Hospital Readmissions Reduction Programs that provide 
patient-level readmissions information.
    Comment: A few commenters had recommendations for the re-evaluated 
MSPB Hospital measure including ensuring that the re-evaluated MSPB 
Hospital measure is reliable and valid for efficiency and cost 
reduction and exploring whether adding a new variable indicating a 
patient had an inpatient stay in the 30 days prior to an episode may 
unfairly disadvantage hospitals that frequently provide care to 
patients with a high case mix index.
    Response: As discussed earlier, the re-evaluated MSPB Hospital 
measure rated high for reliability and moderate for validity during the 
CBE endorsement process. As part of the CBE endorsement submission, we 
undertook three approaches to empirically examine the extent to which 
the re-evaluated MSPB Hospital measure captures what it intends to 
capture. Firstly, we examined the relationship between risk adjusted 
episode cost ratios and episodes with and without post-admission events 
that are known indicators of high cost or intensive care. Secondly, we 
examined the relationship between a hospital's average expected episode 
cost and average episode rates of several service use categories, to 
test whether the risk adjustment model can predict patient need for 
certain services. Thirdly, we examined the relationship between the re-
evaluated MSPB Hospital measure and other cost-specific measures, 
efficiency-related measures, and measures in other Hospital VBP Program 
domains. For all three types of validity testing, we observed results 
that were in line with our expectations, demonstrating that the measure 
is functioning as intended.
    We thank the commenter for their feedback regarding performance of 
hospitals with high case mix index. There has been extensive testing 
done on the measure to demonstrate the validity of its risk adjustment 
model. In general, the re-evaluated MSPB Hospital measure's risk 
adjustment methodology accounts for patient case-mix and other factors 
by adjustment for patient age and severity of illness. Specifically, 
the risk adjustment methodology includes 12 age categorical variables, 
79 hierarchical condition category (HCC) indicators, status indicator 
variables for whether the beneficiary qualifies for Medicare through 
disability or age and End-Stage Renal Disease (ESRD), indicators to 
account for disease interactions, an indicator of whether the 
beneficiary recently required long-term care, and the Medicare 
Severity-Diagnosis Related Group (MS-DRG) of the index hospitalization. 
We believe that this provides adequate adjustment for patient acuity. 
For the re-evaluated MSPB Hospital measure specifically, a variable 
indicator showing whether there was an inpatient stay in the 30 days 
prior to an episode start date is added to the risk adjustment model to 
account for differences in expected cost for episodes that are 
triggered by readmissions. This prior inpatient admission 
characteristic is controlled for in the risk adjustment model to ensure 
that the hospital attributed to the newly triggered episode from a 
readmission is not unfairly penalized for providing care to the patient 
during the episode that could be higher cost due to the readmission 
status. This refinement was supported by the TEP. As part of routine 
measure maintenance, we plan to continue to conduct testing and monitor 
the impact of risk factors on the measure.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(2) Adoption of 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
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 (88 FR 27026). 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 that this measure provides important data on resource 
use (addressing the Meaningful Measures Framework priority of making 
care affordable), which is why we proposed 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 FR 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,'' \230\ with identification 
number MUC2021-118. The MAP reviewed the re-evaluated the 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.\231\ The CBE re-endorsed the

[[Page 59068]]

original measure in July of 2021,\232\ and we intend to submit the re-
evaluated measure to the CBE for endorsement in Fall 2024.
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    \230\ 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.
    \231\ 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.
    \232\ 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 will 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 describes the same updates we proposed 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 will 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 that 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 
proposed 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 proposed 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 final rule where we discuss our defined baseline 
and performance periods for this updated measure under the Hospital VBP 
Program. We also proposed that the performance standards calculation 
methodology for the updated THA/TKA Complications measure will 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 invited public comment on this proposal.
    Comment: Many commenters supported the proposal to implement the 
re-evaluated THA/TKA Complications measure in Hospital VBP Program, 
with a commenter noting they believed that it is important to ensure 
measure specifications align across programs. A commenter believed the 
measure updates will reduce duplicative reporting requirements for 
hospitals participating in both programs, increase accountability for 
hospitals by rewarding hospitals with lower complication rates, and 
provide patients with information to guide their choices regarding 
where to seek care. The commenter also believed that the measure 
updates have the potential to lower healthcare costs by decreasing the 
likelihood of costly readmissions. A commenter noted that they believed 
that the expansion of the numerator events for this measure provides a 
more comprehensive picture of hospital performance for hip and knee 
arthroplasty procedures. A few commenters indicated their support of 
the inclusion of the 26 additional mechanical complication ICD-10 codes 
because the codes are clinically appropriate to be paired with 
arthroplasty and will improve the measure's accuracy. A commenter 
specifically mentioned the measure cohort expansion to include 
admission diagnoses and in-hospital comorbidity data in their support 
because they believed that it enables the inclusion of the 26 
additional mechanical complication ICD-10 codes.
    Response: We thank commenters for their support. We agree that it 
is important to align measures across programs where possible and that 
the 26 additional mechanical complication ICD-10 codes are clinically 
appropriate.
    Comment: A few commenters did not support the substantive updates 
to the THA/TKA Complications measure citing concerns with the length of 
the delay in implementation, the inability to assess impact prior to 
implementation and ability to appropriately comment, and public 
confusion with the measure currently in the Hospital IQR Program. A 
commenter noted that they believe that the proposal does not provide 
enough information to demonstrate the anticipated improvements once 
implemented.
    Response: Section 1886(o)(2)(C)(i) of the Act and 42 CFR 412.164(b) 
state that measures must be publicly reported for one year in the 
Hospital IQR Program prior to the beginning of the performance period 
in the Hospital VBP Program. As we stated in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27026), we previously adopted the re-evaluated 
THA/TKA Complication measure into the Hospital IQR Program to 
accommodate these statutory and regulatory requirements. We staged our 
proposals across the Hospital IQR Program and Hospital VBP Program to 
accommodate the statutory requirement. Therefore, we do not want to 
alter the public reporting timeline of the measures. Hospital-specific 
reports for the re-evaluated THA/TKA Complications measure in the 
Hospital IQR Program were released to hospitals

[[Page 59069]]

in May 2023. Additionally, hospitals will be able to see their 
performance in the Hospital IQR Program for 6 years prior to measure 
implementation in the Hospital VBP Program beginning with the FY 2030 
program year. Further, like the re-evaluated MSPB Hospital measure, we 
will make sure it is clear which version of the measure is being 
publicly displayed in which location through outreach and education 
efforts.
    Comment: A few commenters expressed concern that the measure will 
increase burden on hospitals because they will have to monitor and 
validate two different performance rates, with a commenter expressing 
concern regarding the number of hospitals that participate in the 
Hospital VBP Program versus the Hospital IQR Program. The commenter 
recommended monitoring reporting rates to make sure no reporting gaps 
occur when the measure is removed from the Hospital IQR Program.
    Response: We acknowledge the commenters' concerns regarding burden 
of reporting two slightly different versions of the measure in the 
Hospital IQR and Hospital VBP Programs simultaneously. However, we 
respectfully disagree that the proposed transition of the re-evaluated 
THA/TKA Complication measure from the Hospital IQR Program to the 
Hospital VBP Program will cause significant data collection burden. 
Hospitals will not be required to submit additional data for 
calculating the measure as it is a claims-based measure. Section 
1886(o) of the Act and at 42 CFR 412.164(b) of our regulations state 
that measures must be publicly reported for one year in the Hospital 
IQR Program prior to the beginning of the performance period in the 
Hospital VBP Program. As we have previously stated in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 27026 through 27027), we adopted the 
revised version of the THA/TKA Complication measure into the Hospital 
IQR Program first to accommodate the statutory and regulatory 
requirements. The benefits of keeping the original THA/TKA 
Complications measure until the statutory timeframe for the updated 
measure has been met outweighs the burden of reporting two measures. We 
refer readers to FY 2023 IPPS/LTCH PPS final rule (87 FR 49263 through 
49267), which provided interested parties with an opportunity to become 
familiar with the new version of the measure and provide feedback prior 
to our proposed adoption of that revised measure in the Hospital VBP 
Program.
    Comment: Several commenters recommended that CMS consider modifying 
the measure to capture both inpatient and outpatient procedures in the 
case that the shift of procedures from an inpatient setting to an 
outpatient setting alters the measure validity and reliability or 
impacts performance.
    Response: We thank the commenters for their feedback. We are 
monitoring the shifts of THA/TKA from the inpatient to outpatient 
setting as well as the potential impacts on this inpatient only 
measure. The proposed re-evaluated THA/TKA Complication measure is case 
mix adjusted for patient comorbidities and is a relative performance 
measure for hospitals performing these elective THA/TKA 
procedures.\233\ As such, we believe that this measure accurately 
reflects hospital performance even if patients receiving these 
procedures in the inpatient setting tend to be sicker, on average, than 
those treated in an outpatient setting. We also refer readers to 
section XIV.B.3.b of the CY 2024 OPPS proposed rule for a proposal to 
adopt the THA/TKA Patient-Reported Outcome-based Performance Measure 
(PRO-PM) in the Hospital Outpatient Quality Reporting (OQR) Program.
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    \233\ For more detailed measure specifications, we refer readers 
to the ``2022 Procedure-Specific Complication Measure Updates and 
Specifications: THA/TKA'' at the CMS.gov QualityNet website at: 
https://qualitynet.cms.gov/inpatient/measures/complication/methodology.
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    Comment: A few commenters expressed concerns about the inclusion of 
the additional ICD-10 codes, including that the feedback from subject 
matter experts have not been reviewed or endorsed by the CBE and that 
the additional codes will negatively impact patients and clinicians in 
small community hospitals.
    Response: As stated in the proposed rule (88 FR 27026), the re-
evaluated measure was conditionally supported by the MAP in December of 
2021. The CBE re-endorsed the original measure in July of 2021, and we 
intend to submit the re-evaluated measure to the CBE for endorsement in 
the fall of 2024. Additionally, 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.\234\ We also note 
while conducting internal analyses, orthopedic surgeons and clinical 
coding experts vetted the additional 26 mechanical complication ICD-10 
codes and agreed they should be included.
---------------------------------------------------------------------------

    \234\ 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.
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    Comment: A commenter recommended suppressing one set of measure 
results from public reporting to reduce potential confusion, while 
another commenter recommended reviewing the changes to makes sure 
reliability and validity of the measure were not impacted. Additional 
recommendations included allowing hospitals to have the ability to see 
the performance metrics to have a better understanding of the impacts 
of the modifications and publicly reporting the risk-adjusted, one-year 
mortality and revision rates on the Care Compare website.
    Response: We thank the commenters for their feedback on the re-
evaluated THA/TKA measure. We will work to clearly identify the version 
of the measure when publicly reporting the re-evaluated THA/TKA 
Complications measure and help address any potential confusion. Data 
for this measure will continue to be posted to the Care Compare 
website.
    Comment: A few commenters made recommendations about including 
adjustments around socioeconomic and SDOH considerations, including 
expanding the claims lines from 25 to a number that allows for the 
capture of mechanical complication codes along with SDOH diagnosis 
codes that could also impact the outcome of an elective THA or TKA, and 
creating a socioeconomic status risk-adjustment that stratifies by dual 
eligibility populations. A few commenters stated that they believe 
hospitals taking care of the most complex patients may be unfairly 
penalized and recommend exploring an alternative risk adjustment.
    Response: We are committed to measuring and improving health equity 
and addressing social risk factors in quality measurement. During the 
last CBE endorsement maintenance submission for the THA/TKA 
Complication measure prior to 2022, comprehensive testing was completed 
which included an assessment of the impact of social risk as captured 
by dual eligibility and the AHRQ SES Index. The AHRQ SES index score 
considers aspects of socioeconomic status and is computed using US 
census data and considers factors including median household income, 
percentage of persons below the Federal poverty line, unemployment, 
education, property value, and percentage of persons in crowded 
households at the 9-digit zip

[[Page 59070]]

code level.\235\ We found wide variation in the prevalence of the two 
social risk factors we examined, with a large proportion of hospitals 
treating zero patients with these risk factors. We also found that both 
had some association with complication risk. However, adjustment for 
these factors did not have a material impact on hospital 
RSCRs.236 237 Our decisions about which risk factors should 
be included in each measure's risk-adjustment model are based on 
whether inclusion of such variables is likely to make the measures more 
successful at illuminating quality differences and motivating quality 
improvement. Given these empiric findings and program considerations, 
we chose not to include these two social risk factors in the final risk 
model. In presenting these results and interpretation, the CBE re-
endorsed the original measure (CBE #1550) in June of 2021 without 
adjustment for patient-level social risk factors.\238\ We acknowledge 
the importance of balancing these competing considerations and we plan 
to continue to reevaluate the risk adjustment model and available risk 
factors on an ongoing basis as part of routine measure maintenance, 
with the goal of producing the most accurate and fair risk adjustment 
models for assessing provider performance. Further details related to 
social risk testing for this measure can be found from downloading the 
measure specifications from the National Quality Forum (NQF)'s Surgery 
Fall Cycle 2020 project here: https://nqfappservicesstorage.blob.core.windows.net/proddocs/22/Fall/2020/measures/1550/shared/1550.zip.
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    \235\ Bonito A, Bann C, Eicheldinger C, Carpenter L. Creation of 
new race-ethnicity codes and socioeconomic status (SES) indicators 
for Medicare beneficiaries. Final Report, Sub-Task. 2008;2.
    \236\ National Quality Forum. Surgery Fall Cycle 2020. Measure 
Testing (subcriteria 2a2, 2b1-2b6) Document. November 3, 2020. 
Available at: https://nqfappservicesstorage.blob.core.windows.net/proddocs/22/Fall/2020/measures/1550/shared/1550.zip.
    \237\ Health and Human Services. (2016) 2016 Procedure-Specific 
Measure Updates and Specifications Report Hospital-Level Risk-
Standardized Complication Measure. Available at: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/elective%20primary%20tha%20and-or%20tka%20complications%20measure%20specifications_0.pdf.
    \238\ National Quality Forum. Consensus Standards Approval 
Committee--Measure Evaluation Web Meeting, June 2021. Available at: 
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=95862.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our policy as proposed.
3. 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 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. New Measure Adoption 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.\239\ 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.\240\ 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.\241\ 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.\242\
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    \239\ 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.
    \240\ 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.
    \241\ 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.
    \242\ 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.
---------------------------------------------------------------------------

    In a 2001 study by Rivers et al.,\243\ 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.\244\
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    \243\ 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.
    \244\ 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

[[Page 59071]]

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, there have been 
significant reductions observed in hospital length of stay, re-
admission rates and mortality.245 246 Additional information 
about this measure is available on the CMS Measures Inventory Tool 
(CMIT) website.\247\
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    \245\ 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.
    \246\ 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.
    \247\ 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 that 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 of safety cultures.\248\ We also 
believe that 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.\249\ 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.\250\ 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.\251\ 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.\252\ 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.
---------------------------------------------------------------------------

    \248\ The National Healthcare System Action Alliance To Advance 
Patient Safety. HHS. Available at: ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \249\ 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.
    \250\ 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.
    \251\ Ibid.
    \252\ Chaudhary N, Donnelly, J, Wang H (2018). Critical Care 
Medicine 46(6):p 878-883, June 2018. [verbar] DOI: 10.1097/
CCM.0000000000003020.
---------------------------------------------------------------------------

    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 believed 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.\253\ We believe 
that 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.
---------------------------------------------------------------------------

    \253\ 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.
---------------------------------------------------------------------------

    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 will 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

[[Page 59072]]

for hospitals to report. However, in light of our high priority to 
address patient safety, in the FY 2024 IPPS/LTCH PPS proposed rule, we 
proceeded with the proposal to adopt the Severe Sepsis and Septic 
Shock: Management Bundle measure (88 FR 27027 through 27029). 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.\254\ 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 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 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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    \254\ Hospital IQR Program, Inpatient Specifications Manual 
v5.14. https://qualitynet.cms.gov/files/6391eabf76962e0016ad91ba?filename=HIQR_SpecsMan_v5.14.zip.
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    We have made technical updates to the measure specifications since 
we adopted this measure in the Hospital IQR Program, and we proposed 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] TR28AU23.256


[[Page 59073]]


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 proposed 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 final rule where we 
discussed our proposed baseline periods and performance periods for 
this measure if adopted for the Hospital VBP Program.
    We invited public comment on this proposal.
    Comment: Many commenters supported the Severe Sepsis and Septic 
Shock Management Bundle measure proposal, agreeing that the severity of 
the diagnoses warrants the implementation of the measure, that the 
measure will not create additional burden, and that the measure is in 
alignment with the Surviving Sepsis Campaign International Guidelines 
for Management of Severe Sepsis and Septic Shock. A commenter supported 
that the measure is kept up to date by incorporating Version 5.14 and 
that the review period includes updates between May 2022 and December 
2022. A commenter supported the measure proposal but recommended 
delaying implementation until streamlining and standardization of the 
severe sepsis and septic shock definition is completed by the Federal 
Sepsis Task Force.
    Several commenters supported the Severe Sepsis and Septic Shock: 
Management Bundle proposal because they believed that it will benefit 
clinicians and patients, including allowing flexibilities for clinician 
judgment in prescribing therapies and driving enhanced quality of care 
for the Medicare patient population. A commenter noted the clinician 
benefit of initial and serial procalcitonin monitoring that complements 
and enhances compliance with Severe Sepsis and Septic Shock: Management 
Bundle. A commenter recommended future modifications to better tailor 
individual patients' care.
    Response: We thank the commenters for their support of our proposal 
to adopt the Severe Sepsis and Septic Shock: Management Bundle (CBE 
#0500) measure for the Hospital VBP Program beginning with the FY 2026 
program year. We appreciate the commenters' recognition that the 
measure is in alignment with the most recent Surviving Sepsis Campaign 
International Guidelines for Management of Severe Sepsis and Septic 
Shock. We recognize the importance of making sure the measure is 
maintained and consistent with the most recent guidelines and best 
practice published evidence. We understand and respect the need to 
harmonize with sepsis definitions and measures used by other Federal 
agencies, such as the Centers for Disease Control and Prevention (CDC) 
Adult Sepsis Event (ASE) definition.\255\ We will apply the severe 
sepsis and septic shock screening criteria that the measure currently 
uses because those criteria are consistent with previous iterations of 
the measure and are an established, tested method for early 
identification of sepsis. We will reevaluate this as newer methods and 
definitions are finalized.
---------------------------------------------------------------------------

    \255\ Centers for Disease Control and Prevention. (2018) 
Hospital Toolkit for Adult Sepsis Surveillance. Available at: 
https://www.cdc.gov/sepsis/pdfs/sepsis-surveillance-toolkit-mar-2018_508.pdf.
---------------------------------------------------------------------------

    We believe that recent updates to the measure that incorporate 
options that acknowledge clinician judgment and enable greater 
assessment and prescribing flexibility consistent with clinical 
practice guidelines and recent literature will be beneficial. We thank 
commenters for their feedback on the use of serial procalcitonin and 
recommendation for future modifications to better account for 
individual patient care needs. We will take these into consideration 
for future program years.
    Comment: Several commenters supported the Severe Sepsis and Septic 
Shock: Management Bundle proposal in the Hospital VBP Program because 
they believed that it incentivizes hospitals to increase the quality 
and timeliness of care which result in better patient outcomes.
    A few commenters supported the Severe Sepsis and Septic Shock: 
Management Bundle measure proposal and commended CMS for taking steps 
to improve sepsis outcomes, particularly through the development of an 
eCQM in the future that could replace the Severe Sepsis and Septic 
Shock: Management Bundle in a less burdensome manner.
    A commenter supported the Severe Sepsis and Septic Shock: 
Management Bundle measure proposal because they believed in the 
importance of evidence-based correlation to outcomes. A commenter also 
supported the Severe Sepsis and Septic Shock: Management Bundle measure 
proposal because it promotes health equity.
    Response: We agree that additional incentivization will lead to 
continued improvements in the quality and timeliness of care leading to 
better patient outcomes. We thank commenters for their support of our 
proposal to adopt the Severe Sepsis and Septic Shock: Management Bundle 
measure for the Hospital VBP Program and continue to strive to develop 
measures that support improving outcomes for patients with severe 
sepsis and septic while minimizing reporting burden. We also continue 
to take updated published guidelines and evidence-based literature that 
demonstrates correlations between processes of care and improved 
outcomes into consideration for measures.
    We agree that efforts to support equity in the provision of health 
care are important to improving outcomes for all patients with severe 
sepsis and septic shock. As noted in the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 27028), and in section V.K.3(2) of this final rule, we 
believe that 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

[[Page 59074]]

Strategy.\256\ 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.\257\ 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.\258\ 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.\259\ 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.
---------------------------------------------------------------------------

    \256\ 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.
    \257\ 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.
    \258\ Ibid.
    \259\ Chaudhary N, Donnelly, J, Wang H (2018). Critical Care 
Medicine 46(6):p 878-883, June 2018. [verbar] DOI: 10.1097/
CCM.0000000000003020.
---------------------------------------------------------------------------

    Comment: Many commenters did not support Severe Sepsis and Septic 
Shock: Management Bundle measure because they believed that there are 
unrealistic documentation and data collection expectations that burden 
providers. A few commenters cited that the measure is time consuming, 
and many hospitals have difficulty meeting the measure requirements and 
implementing the measure. A commenter expressed concerns that the 
documentation requirements place a heavy burden on rural hospitals. A 
commenter noted that limitations of documentation tools make it 
difficult to measure compliance fairly. A commenter expressed concern 
that a piece of the documentation is missing for the IV fluid 
documentation requirements.
    Response: We acknowledge the commenters' concerns. However, the 
Severe Sepsis and Septic Shock: Management Bundle measure has been in 
the Hospital IQR Program since October 1, 2015, and eligible hospitals, 
including community and rural hospitals have successfully reported data 
on the measure. Additionally, the Rural Health Advisory Group expressed 
the importance of the measure for rural health.\260\ As we noted in the 
FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27028), adopting the measure 
into the Hospital VBP Program will not result in a change to measure 
data collection requirements and burden because hospitals are already 
required to report data on the measure under the Hospital IQR Program. 
We acknowledge that this measure has been subject to updates in 
response to changes in the published evidence and feedback from medical 
record abstractors and clinicians; however, we believe these are minor 
technical updates. Additionally, the level of documentation required 
for this measure is commensurate with the complexity of sepsis and 
septic shock and with the severity of the consequences for patients if 
sepsis and septic shock are not detected and managed in a timely 
manner. We have also initiated an effort in collaboration with the CDC 
to develop a sepsis outcome eCQM that is a less burdensome and could 
potentially replace the Severe Sepsis and Septic Shock: Management 
Bundle measure in the future. However, until that measure is fully 
developed and available for use in our programs, the severity of the 
diagnoses and the significant impact on patients warrants using the 
Severe Sepsis and Septic Shock: Management Bundle measure. CMS 
continues to work in collaboration with CDC and stakeholders and 
welcomes public comment and engagement in improving sepsis outcomes and 
mortality.
---------------------------------------------------------------------------

    \260\ Centers for Medicare & Medicaid Services. (2022) Measure 
Applications Partnership (MAP) Hospital Workgroup Preliminary 
Analyses. Available at: https://mmshub.cms.gov/sites/default/files/2022-preliminary-analysis-hospital-workgroup.pdf .
---------------------------------------------------------------------------

    With regard to the commenter's concern about the documentation 
requirements for IV fluids, the Crystalloid Fluid Administration data 
elements provide guidance with examples for abstractors to determine 
the volume of fluid ordered, the start time, end time, and volume of 
fluid administered based upon various scenarios provided by 
abstractors. At a minimum, there must be an order for the crystalloid 
fluids that includes the type of fluid, volume of fluid, and a rate or 
time over which the fluids are to be given. There must also be clear 
documentation in the medical record of the date and time the 
crystalloid fluids were started. We note that often the fluid 
administration end time is not clearly documented and the manual 
provides guidance to help abstractors determine the end time based upon 
a combination of the start time, fluid volume and infusion rate. If 
there is not sufficient documentation in the medical record to 
determine the volume ordered, the start, end time, and volume 
administered, then the case will not meet the requirements for the 
Crystalloid Fluid Administration data elements.
    Comment: Many commenters did not support the adoption of the Severe 
Sepsis and Septic Shock: Management Bundle measure because they 
believed that there will continue to be frequent updates to the measure 
that make it more difficult to implement the measure and educate staff. 
A few commenters cited concerns around the baseline periods noting that 
given the frequent updates, it is unclear how CMS will establish 
accurate baselines for evaluating hospitals' performance over time and 
that the comparison of the baseline period to the performance period 
would not be equal because of the measure updates every 6 months. A few 
commenters expressed that the continual shifts in the measure 
specifications have led to inconsistent interpretation across 
facilities. A commenter expressed concern that the measure is still not 
stable if it is undergoing changes with each manual release every 6 
months. A commenter noted that frequent updates to the measure leads to 
increased documentation burden.
    Response: We acknowledge the commenters' concerns that the Severe 
Sepsis and Septic Shock: Management Bundle measure has been subject to 
frequent updates in response to changes in the published evidence and 
feedback from medical record abstractors and clinicians. However, we 
respectfully disagree that the updates will impact performance. We wish 
to emphasize that, as noted in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27028), the updates made to Severe Sepsis and Septic Shock: 
Management Bundle are minor technical updates that are incorporated for 
consistency with recent published literature and to address hospital 
abstractor and clinician feedback received via the QualityNet Question 
and Answer Tool from hospital medical record abstractors and clinicians 
that do not impact performance. For example, in v5.13 of the Hospital 
IQR measure specifications manual, we added guidance about the use of 
documentation of severe sepsis and septic shock with a footnote in the 
EHR identifying the time based on question and comments from 
abstractors. We also added examples to the Crystalloid Fluid 
Administration data element based upon documentation scenarios provided 
by abstractors, and

[[Page 59075]]

we added guidance in the Initial Hypotension data element to clarify 
the time frame for abstraction of hypotension to count toward this data 
element which ends when the ordered crystalloid fluid volume is 
completely given. In v5.14 of the Hospital IQR measure specifications 
manual, we added guidance to allow documentation that no fluids were 
ordered because the patient was not volume or fluid responsive by 
clinical evidence. This is based upon newer technology that is becoming 
more widely used to assess a patient's fluid responsiveness. This 
noninvasive technology allows clinicians to identify whether a patient 
responds positively to crystalloid fluids without administering fluids 
or with administration of only a nominal amount. The guidance requires 
documentation that invasive or noninvasive measurements of cardiac 
output (CO), cardiac index (CI), stroke volume (SV), or stroke volume 
index (SVI) were used to determine the patient was not volume or fluid 
responsive. This impacts a small proportion of patients with sepsis-
induced hypotension and takes into consideration shifts in the 
availability and use of new technology. These minor technical updates 
to the measure ensure the measure is up to data and providing the most 
accurate data. The updates also help hospitals drive local quality 
improvement in patient care. We, therefore, believe that the baseline 
and performance periods are appropriate as proposed because the updates 
to the measure specifications are not substantive.
    Comment: Many commenters did not support the Severe Sepsis and 
Septic Shock: Management Bundle measure because they believed that the 
measure creates incentives to increase antibiotic use and potentially 
overuse antibiotics with a few commenters expressing their belief that 
overuse will be magnified if the Severe Sepsis and Septic Shock: 
Management Bundle measure shifts to pay-for-performance. A few 
commenters noted that the measure requires all patients to receive 
antibiotics within one hour of presentation but that not all patients 
with sepsis or septic shock need antibiotics. A few commenters noted 
that the measure does not allow exceptions for providers to treat 
patients in the manner they feel is clinically appropriate, which leads 
to non-discriminatory antibiotic administration. A commenter did not 
support the Severe Sepsis and Septic Shock: Management Bundle measure 
because of the requirement of parenteral antibacterial medications 
given that are not necessary for the management of some patients with 
sepsis and oral therapy is quicker. A few commenters recommended 
minimizing the potential for antibiotic overuse. A commenter 
recommended excluding patients with unconfirmed sepsis who do not have 
shock from the bundle, as the data supporting immediate antibiotics are 
weak, and a commenter recommended that Severe Sepsis and Septic Shock: 
Management Bundle be modified so that there is additional time 
permitted to confirm an infection prior to providing antibiotics.
    Response: We appreciate the commenters' concern and will continue 
to monitor the literature for signs of antibiotic overuse associated 
with the measure. While we agree with the importance of antimicrobial 
stewardship, we are not aware of published literature that demonstrates 
an association between the implementation of the measure and antibiotic 
overutilization. In the largest study to address sepsis and antibiotic 
use to date which includes 701,055 patients, Anderson et al. found that 
among the subgroup of ten hospitals with complete microbiology data and 
specifically assessing patients with suspected sepsis (31,013 
patients), antibiotic utilization was unchanged during the 12 months 
prior to measure implementation on October 1, 2015, and declined one 
percent each month during the 12 months after implementation of the 
measure in the Hospital IQR Program period from November 1, 2015, 
through October 31, 2016.\261\ We are not aware of any published 
information that reports a non-discriminatory increase in antibiotic 
administration associated with implementation of the Severe Sepsis and 
Septic Shock: Management Bundle measure. The measure screening criteria 
and construct focuses on patients with a high likelihood for sepsis or 
septic shock which is consistent with the Surviving Sepsis Campaign: 
International Guidelines for Management of Sepsis and Septic Shock 2021 
recommendation for the immediate administration of antibiotics to 
patients with septic shock or a high likelihood for sepsis. We wish to 
clarify that the Severe Sepsis and Septic Shock: Management Bundle 
measure does not require that patients receive antibiotics within one 
hour of presentation. The measure requirements are for antibiotic 
administration within three hours of severe sepsis presentation time. 
We are not aware of any evidence that oral antimicrobial therapy is 
quicker or more effective than parenteral therapy. We refer to the 
Surviving Sepsis Campaign: International Guidelines for Management of 
Sepsis and Septic Shock 2021 recommendations for further information on 
recommendations for the delivery of antibiotics. We also wish to 
clarify that the measure does allow for exclusion of patients if there 
is clinician documentation indicating the patient does not have severe 
sepsis or an infection within six hours following clinical criteria 
being met thereby preserving clinical judgement and clinical decision 
making. In addition, patients presenting with sepsis of a viral 
etiology are excluded from the measure because antibiotics are 
typically not warranted. We also wish to note that the measure is meant 
to complement clinical judgement in the best interest of the patient.
---------------------------------------------------------------------------

    \261\ Anderson DJ, Moehring RW, Parish A, et al. (2022) The 
Impact of Centers for Medicare & Medicaid Services SEP-1 Core 
Measure Implementation on Antibacterial Utilization: A Retrospective 
Multicenter Longitudinal Cohort Study With Interrupted Time-Series 
Analysis. Clin Infect Dis.75(3):503-511. doi: 10.1093/cid/ciab937. 
PMID: 34739080.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the Severe Sepsis and 
Septic Shock: Management Bundle measure because of the level of detail 
required of the measure, noting that the measure is too nuanced which 
makes it challenging to determine whether a hospital is providing 
quality care because the measure is all-or-nothing. A few commenters 
also noted that the Severe Sepsis and Septic Shock: Management Bundle 
measure is very complex in terms of data elements, calculations, and 
measurements.
    Response: We appreciate the commenters' concern about the 
complexity of the measure. However, the complexity of this measure is 
commensurate with the complexity of sepsis and septic shock and with 
the severity of the consequences for patients if sepsis and septic 
shock are not detected and managed in a timely manner. All components 
of this measure ensure that timely and optimal care is delivered for 
patients with sepsis and septic shock. We are assuming that by ``all-
or-nothing'' the commenter is referring to the fact that hospitals do 
not get partial credit for completing some of the protocols laid out in 
the Severe Sepsis and Septic Shock Management Bundle measure. In 
regards to the commenter's concern that the all-or-nothing nature of 
the measure makes it challenging to determine whether a hospital is 
providing quality care, we note that performance data for the Severe 
Sepsis and Septic Shock: Management Bundle measure is reported at a 
more granular level on a CMS-designated website, currently Care

[[Page 59076]]

Compare, at the national, state, and hospital level for measure 
performance overall and by the four measure bundles, severe sepsis 3-
hour, severe sepsis 6-hour, septic shock 3-hour, and septic shock 6-
hour bundles at https://data.cms.gov/provider-data/search?fulltext=timely%20and%20effective%20care&theme=Hospitals. This 
enables hospitals to view their performance for each bundle as well as 
their results overall and compare them to other hospitals, their state, 
and national average and top performing hospital results. We will take 
these comments into consideration as we evaluate updates for future 
program years.
    Comment: Many commenters did not support the adoption of Severe 
Sepsis and Septic Shock: Management Bundle measure due to concerns 
around the burden of chart abstraction, citing that the measure is time 
and resource intensive and that the value of the measure is not worth 
the challenges. A few commenters noted that chart abstraction is labor 
intensive, given that determining eligibility for the measure can take 
upwards of 45 minutes, which they did not believe is in line with the 
CMS Burden Reduction efforts, and that even highly experienced teams 
spend 1-4 hours reviewing each sepsis core measure chart which is 
challenging and costly. A few commenters believed that adding a manual 
chart abstracted measure is not in line with CMS' focus on 
transitioning to digital quality measures. A few commenters noted that 
the nuances of the measure make it challenging to develop a standard 
approach to abstraction, and that the complicated abstraction guidance 
leads to incorrect measure outcomes which affects performance. Many 
commenters recommended delaying adoption of a sepsis measure in the 
Hospital VBP Program until the development of sepsis outcome eCQM is 
available because they believed that an outcome eCQM measure is in 
alignment with the focus to reduce reporting burden, promotes unity in 
Federal measures, and emphasizes outcome measures. A commenter believed 
that the measure does not measure quality of care but rather quality of 
documentation. A commenter also recommended developing a risk 
standardized sepsis mortality measure, and another commenter 
recommended that the development of an eCQM include removing the SIRS 
criteria and diagnosis codes to simplify implementation and decrease 
variability between hospitals.
    Response: We respectfully disagree with commenters who believe the 
burden of the Severe Sepsis and Septic Shock: Management Bundle measure 
outweighs the benefits. We believe that the impact of this measure on 
patient care and improved outcomes for patients with severe sepsis and 
septic shock outweighs the abstraction burden. In a recent study that 
used chart-abstracted data for the Severe Sepsis and Septic Shock: 
Management Bundle measure 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.\262\ In that same 
study, Townsend et al. note that based on published average medical 
record abstraction times of 30 to 120 minutes per case and assuming 
that a hospital had 300 sepsis cases per quarter, less than one-quarter 
of a full-time employee would be required to perform medical record 
abstraction. In a study by Buchman et al., the costs of sepsis 
inpatient admissions and subsequent skilled nursing facility care to 
Medicare were estimated to exceed $41.5 billion annually with 6-month 
mortality rates for Medicare fee-for service beneficiaries of 
approximately 60 percent for septic shock and 36 percent for severe 
sepsis.\263\ Adding the measure to the Hospital VBP Program will not 
create a new burden for hospitals because they are already required to 
report data on the measure under the Hospital IQR Program. We will 
continue with plans for transitioning to digital quality measures and 
are currently developing a sepsis outcome eCQM that will reduce 
unnecessary burden for hospitals to report. However, until that measure 
is fully developed, we remain committed to patient safety as a high 
priority and believe that the adoption of the Severe Sepsis and Septic 
Shock: Management Bundle measure aligns with the core principles 
outlined in the HHS National Healthcare System Action Alliance to 
Advance Patient Safety and is consistent with this commitment.
---------------------------------------------------------------------------

    \262\ 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.
    \263\ 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.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the adoption of Severe 
Sepsis and Septic Shock: Management Bundle because of concerns that the 
measure will interfere with physicians' judgment, feeling pressure to 
meet the measure specifications as opposed to using clinician 
discretion. A few commenters believed that the measure disadvantages 
facilities that have large subsets of patients where elements of the 
Severe Sepsis and Septic Shock: Management Bundle measure may be 
contraindicated but are not excluded. A commenter stated that the 
measure does not allow exceptions for providers to treat patients using 
their discretion specifically regarding crystalloid fluids and 
vasopressors. A commenter noted that the bundled nature of the measure 
does not help hospitals target specific areas for improvement.
    Response: The measure includes flexibility for clinician judgment 
by providing multiple opportunities for exclusion of patients from the 
measure based on clinician documentation such as notations within six 
hours following clinical criteria being met that severe sepsis or an 
infection is not present or that SIRS criteria or signs of organ 
dysfunction are due to a chronic condition, medication, or a non-
infectious source. This measure is meant to complement clinical 
judgement in the best interest of the patient. We wish to clarify that 
the measure does include allowances for fluid volumes less than 30 mL/
kg with documentation of a reason for a lesser volume. We appreciate 
the commenter's concern about the bundled nature of the measure. With 
respect to the concern that the bundled nature of the measure does not 
help hospitals target specific areas for improvement, we note that 
performance data for the Severe Sepsis and Septic Shock: Management 
Bundle measure is reported at a more granular level on a CMS-designated 
website, currently Care Compare, at the national, state, and hospital 
level for measure performance overall and by the four measure bundles, 
severe sepsis 3-hour, severe sepsis 6-hour, septic shock 3-hour, and 
septic shock 6-hour bundles at https://data.cms.gov/provider-data/search?fulltext=timely%20and%20effective%20care&theme=Hospitals. This 
enables hospitals to view their performance for each bundle as well as 
their results overall, identify areas for improvement, and compare them 
to other hospitals, their state, and national average and top 
performing hospital results. Additionally, there are categories by 
bundle that providers can use for quality improvement information 
beyond seeing their performance rates.
    Comment: Many commenters did not support the adoption of the Severe 
Sepsis and Septic Shock: Management Bundle measure because they 
believed that the measure lacks evidence for improving patient outcomes 
and does

[[Page 59077]]

not provide any benefit to patient care. Several commenters cited that 
compliance with the measure does not reflect the care provided to 
sepsis patients. Several commenters noted that survival rates were not 
significantly improved, and sepsis mortality rates have not lowered 
under the measure. A few commenters believed that the measure 
incorrectly assumes all patients have similar characteristics and does 
not consider significant clinical variation. A few commenters cited 
potential harms and worsened outcomes in patients from the measure and 
noted that the risks of the measure outweigh the benefits. A few 
commenters recommended that CMS focus on evidence-based measures that 
improve outcomes for patients with sepsis. A commenter expressed 
concern that the measure may create unintended threats to the health of 
those with sepsis or other conditions that can mimic sepsis. A 
commenter believed that the measure lumps together septic shock and 
non-shock patients and it may not be appropriate for all patients to 
receive each of the bundle elements. A commenter noted that the 
requirement of universal blood cultures prior to antimicrobial therapy 
worsens outcomes by adding to episode cost and length of stay.
    Response: As referenced in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27028), there is evidence of an association between the elements 
of the Severe Sepsis and Septic Shock: Management Bundle measure and 
improved patient outcomes. A study by Townsend et al of over 1.3 
million patients that used chart-abstracted data for the Severe Sepsis 
and Septic Shock: Management Bundle measure found that compliance with 
the measure was associated with a reduction in 30-day mortality.\264\ 
The Severe Sepsis and Septic Shock: Management Bundle measure was 
designed based on evidence based relevant literature and clinical 
practice guidelines and is intended to measure appropriate care as it 
applies to the majority of the patient population represented in the 
measure. As noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27027 through 27029), the measure is CBE-endorsed and follows published 
international guidelines for the early identification and management of 
severe sepsis and septic shock, which reflects that the measure is 
evidence-based and has undergone rigorous processes in measure 
development and maintenance. We appreciate and recognize that some 
patients may present with clinical characteristics and response to care 
that varies from the majority of patients with the same condition. We 
agree that in some cases the best outcome for the patient may be 
dependent upon clinician judgement that varies from guideline 
recommendations for care. We wish to emphasize that the measure is not 
intended to replace clinician judgement or to treat every patient 
identically; rather, complement clinical judgement in the best interest 
of the individual patient. With this in mind, we do not expect 100 
percent performance for the measure with every patient. Recent data 
indicates that mean performance on this measure is less than 60% and 
thus there is still substantial room for improvement on sepsis care. 
Measure design and recent updates to the measure allow for some 
variations in care by allowing flexibility in crystalloid fluid 
administration volumes and exclusions for some groups of patients based 
on clinician documentation. We are not aware of published literature 
that makes an association between the measure and patient harm. We 
agree that all patients will not qualify for all of the bundle elements 
in the measure. While the measure performance results are reported as 
an overall score, the measure incorporates exclusion criteria for those 
patients who do qualify for specific elements of care. As referenced in 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27027 through 27029), 
there is evidence of an association between the elements of the Severe 
Sepsis and Septic Shock: Management Bundle measure and improved patient 
outcomes. A 2022 study by Townsend et al. of over 1.3 million patients 
that used chart-abstracted data for the Severe Sepsis and Septic Shock: 
Management Bundle measure found that compliance with the measure was 
associated with a reduction in 30-day mortality.\265\ In 2019, Kahn et 
al. published the results of a study of over 325,786 sepsis admissions 
to 163 hospitals in New York State and the impact that mandated public 
reporting of sepsis had on mortality.\266\ The requirement for 
protocolized sepsis care, consistent with the Severe Sepsis and Septic 
Shock: Management Bundle measure, was associated with a statistically 
significant reduction in risk-adjusted mortality. To address concerns 
about potential unintended consequences of protocol administration the 
authors also studied intensive care unit (ICU) admission rates, as an 
indicator of intensity of health care; hospital length of stay, as a 
reflection of resource utilization; central venous catheter use, to 
measure impact on invasive monitoring; and Clostridium difficile 
infection rates, as sign of potential antibiotic overuse. The study 
found no change in ICU admission, minimal impact on length of stay, a 
trend toward lower use of central venous catheters and a significant 
reduction in Clostridium difficile infection rates. With regard to the 
commenter's concern about other conditions that can mimic sepsis, the 
Surviving Sepsis Campaign: International Guidelines for Management of 
Sepsis and Septic Shock 2021 recommends that clinicians perform a rapid 
assessment for the possibility of infectious versus non-infectious 
causes and recommend this assessment be completed, whenever possible, 
within three hours of symptom presentation to expedite clinical 
decision making. The Severe Sepsis and Septic Shock: Management Bundle 
measure requirements are consistent with these guideline 
recommendations in that the time frame for antibiotic administration is 
within three hours of severe sepsis presentation. The guidelines note 
that it is best practice to continually reassess patients to determine 
whether diagnoses other than sepsis are possible to facilitate 
treatment adjustments as needed. The measure allows for exclusion of 
patients from the measure if there is clinician documentation 
indicating that severe sepsis or septic shock is not present within six 
hours after severe sepsis or septic shock presentation. Additionally, 
in regard to the commenter's concern about universal blood cultures, we 
are not aware of any published information demonstrating a significant 
increase in costs or hospital length of stay directly associated with 
obtaining blood cultures. The measure's requirement for obtaining blood 
cultures prior to antibiotic administration is consistent with the 
guideline recommendation to obtain routine microbiologic cultures 
(including blood) before starting antibiotic treatment in patients with

[[Page 59078]]

suspected sepsis and septic shock. Blood cultures are important to help 
optimize antibiotic coverage and assist with antibiotic de-escalation.
---------------------------------------------------------------------------

    \264\ 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.
    \265\ 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.
    \266\ Kahn JM, Davis BS, Yabes JG, et al. (2019) Association 
Between State-Mandated Protocolized Sepsis Care and In-hospital 
Mortality Among Adults With Sepsis. JAMA. 322(3):240-250. doi: 
10.1001/jama.2019.9021. PMID: 31310298; PMCID: PMC6635905.
---------------------------------------------------------------------------

    Comment: A few commenters did not support the adoption of Severe 
Sepsis and Septic Shock: Management Bundle measure because the measure 
does not include any risk stratification or stratification by race or 
other patient risk factors. A commenter noted that stratification would 
help advance health equity and is more appropriate for a claims-based 
measure.
    Response: We appreciate the commenters' feedback and 
recommendations regarding risk stratification and stratification by 
race or other patient factors. The Severe Sepsis and Septic Shock: 
Management Bundle measure provides a standard operating procedure for 
early risk stratification and management of a patient with severe 
infection by identifying patient risk levels relating to sepsis care 
needs. As we take these recommendations into consideration, we will 
carefully weigh the potential extra burden that collection of 
additional clinical information necessary for risk stratification of 
chart abstracted measures may impose upon hospitals. We are in the 
process of developing a methodology for stratifying measures by sex, 
race, ethnicity, and other social determinants of health.
    Comment: Several commenters did not support the adoption of this 
measure because they believed the difficulty of capturing a diagnostic 
start time creates challenges for all components of the bundle and 
creates challenges for clinicians. A few commenters noted that the 
criteria in the sepsis bundle are different from care teams' diagnostic 
criteria. A commenter believed that the complexity of the current time 
zero definition contributes to variability in abstraction and 
undermines the measure. A commenter believed that the measure is flawed 
because it is based on discharge diagnoses and retrospectively 
identifies a start time based on abnormal vital signs. A commenter 
recommended defining the inconsistent definition of time zero. A 
commenter noted that the Severe Sepsis and Septic Shock: Management 
Bundle measure's focus is only on the initial 6 hours of care which the 
commenter believed oversimplifies the complexity of comprehensive 
sepsis care.
    Response: We appreciate the commenters' concerns about the 
challenges with identifying the severe sepsis presentation time and 
will take this under consideration as future methods and tools for 
early identification of severe sepsis and septic shock become available 
and are tested. We recognize there is variation in screening tools and 
criteria used at the bedside for identification of severe sepsis and 
septic shock and wish to clarify that the measure does not dictate nor 
limit the severe sepsis and septic shock screening criteria that 
clinicians use at the bedside. While the measure uses ICD-10-CM 
diagnosis codes to identify the initial patient population, clinical 
criteria are used to confirm the presence of severe sepsis and septic 
shock and allow for exclusion of patients who do not meet the clinical 
criteria. The intent of the measure is to confirm care and 
interventions provided upon early identification of the presence of 
severe sepsis and septic shock. The clinical criteria used by the 
measure provides a well-established common set of criteria, identified 
by Waligora et al. as having high sensitivity for early identification 
of sepsis (72%-94.5%), that abstractors from all hospitals across the 
U.S. use to determine which patients from their initial populations 
remain in the measure.\267\ We agree that focusing on early therapies 
is not the only strategy important for sepsis care and improved 
outcomes but suggest that it is the predominate opportunity in the 
largest number of cases. The Surviving Sepsis Campaign: International 
Guidelines for Management of Sepsis and Septic Shock 2021, note that 
early identification of sepsis and timely appropriate management in the 
initial hours is associated with improved outcomes. The guidelines 
specifically note early administration of antibiotics as is one of the 
most effective interventions associated with reducing mortality and 
that fluid therapy is a crucial part of sepsis and septic shock 
resuscitation.
---------------------------------------------------------------------------

    \267\ Waligora G, Gaddis G, Church A, Mills L (2020). Rapid 
Systematic Review: The Appropriate Use of Quick Sequential Organ 
Failure Assessment (qSOFA) in the Emergency Department. J Emerg Med. 
59(6):977-983. doi: 10.1016/j.jemermed.2020.06.043. Epub 2020 Aug 
20. PMID: 32829969.
---------------------------------------------------------------------------

    Comment: Many commenters did not support the adoption of this 
measure because of concerns around tying the Severe Sepsis and Septic 
Shock: Management Bundle measure to hospital performance and payment 
given that high performance is not related to improving sepsis outcomes 
and bundle scoring makes it difficult for hospitals to achieve high 
scores. A few commenters expressed concern that there will be a 
disproportionate impact to safety-net healthcare systems if the measure 
is included in a pay-for-performance program and that financially 
strapped organizations will struggle to implement the full-scale 
interventions of the Severe Sepsis and Septic Shock: Management Bundle 
measure. A commenter conducted their own calculations that showed that 
66% of the hospitals that were scored on improvement under the Severe 
Sepsis and Septic Shock: Management Bundle measure had a score of zero, 
meaning that the hospital did not improve or improved minimally.
    Response: We appreciate the commenters' concern regarding the 
association between measure performance and patient outcomes. In a 
study by Townsend et al of over 1.3 million patients that used chart-
abstracted data for the Severe Sepsis and Septic Shock: Management 
Bundle measure the authors found that compliance with the measure was 
associated with a reduction in 30-day mortality. We recognize that 
achieving high scores on a bundled measure is challenging since all 
bundle elements for which a patient is eligible must be met for the 
patient case to meet the measure. However, we believe that all the 
bundle elements are needed because the complete bundle impacts patient 
outcomes. As we noted in the proposed rule, 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 wish to emphasize that under the Hospital VBP 
Program's scoring methodology, the highest performing hospitals will 
receive achievement points, even if the highest performing hospitals 
are not performing at 100%. Additionally, we note that this measure 
will be added to the Safety domain which currently has 5 other measures 
and is weighted at 25% of the TPS.
    We acknowledge commenters' concern about potential impact on 
safety-net healthcare systems. We note eligible hospitals have 
successfully reported on the measure in the Hospital IQR Program since 
October 1, 2015, including smaller community and rural hospitals. 
Additionally, we wish to note that smaller hospitals have performed 
better than large hospitals, on average, for the Severe Sepsis and 
Septic Shock: Management Bundle measure. Regarding a commenter's 
concern about sampling, sampling is a statistically valid method to 
estimate a hospital's performance, and we have allowed sampling for 
many chart-abstracted measures including the Severe Sepsis and Septic 
Shock: Management Bundle measure to help reduce the abstraction burden. 
We refer commenters to the Population and Sampling Specifications

[[Page 59079]]

in the Hospital Inpatient Specifications Manual located on QualityNet 
at https://qualitynet.cms.gov/inpatient/specifications-manuals for more 
information about case sampling for this measure.
    Comment: Several commenters did not support the adoption of this 
measure over concerns that the Severe Sepsis and Septic Shock: 
Management Bundle measure is not aligned with other standards and 
reimbursement criteria, which they believed results in confusion around 
definitions and inconsistency in diagnosing sepsis. A few commenters 
noted that because many commercial payers endorse SEP-3 definitions, 
organizations have difficulty determining which criteria to adopt and 
that some Medicare managed care organizations do not recognize or 
reimburse for Severe Sepsis and Septic Shock: Management Bundle. A few 
commenters believed that the measure does not align with the Surviving 
Sepsis Campaign or SEP-3. A commenter believed that sepsis management 
is misaligned with value-based purchasing but should be encouraged in 
other quality programs. A few commenters recommended that CMS ensure 
that the measure aligns with national standards for sepsis care. A 
commenter noted that the Severe Sepsis and Septic Shock: Management 
Bundle measure has not kept up with the shifting evidence of which 
interventions are most effective. A commenter recommended that the 
measure finalization be postponed until aspects of the Severe Sepsis 
and Septic Shock: Management Bundle measure are brought into alignment 
with scientific literature.
    Response: The measure does not dictate or limit the severe sepsis 
and septic shock screening criteria that clinicians use at the bedside. 
In Waligora et al., the clinical criteria used by the measure were 
identified as having a high sensitivity for early identification of 
sepsis (72%-94.5%) and as providing abstractors with a standard tool 
for confirmation of the presence of severe sepsis and septic 
shock.\268\ This aligns with the measure intent of early identification 
of patients with severe sepsis and septic shock and helps ensure the 
same criteria are used for all hospitals to determine which patients 
remain in the measure and which ones are excluded. We recognize there 
is variation in screening tools and criteria used at the bedside for 
identification of severe sepsis and septic shock and for other 
purposes.
---------------------------------------------------------------------------

    \268\ Waligora G, Gaddis G, Church A, Mills L (2020). Rapid 
Systematic Review: The Appropriate Use of Quick Sequential Organ 
Failure Assessment (qSOFA) in the Emergency Department. J Emerg Med. 
59(6):977-983. doi: 10.1016/j.jemermed.2020.06.043. Epub 2020 Aug 
20. PMID: 32829969.
---------------------------------------------------------------------------

    We emphasize the Severe Sepsis and Septic Shock: Management Bundle 
measure is in alignment with the Surviving Sepsis Campaign: 
International Guidelines for Management of Sepsis and Septic Shock 2021 
that recommended against using quick sequential organ failure 
assessment (qSOFA) compared with SIRS or other screening tools.\269\ In 
addition, antibiotic requirements and timing, measurement of lactate, 
administration of crystalloid fluids, monitoring response to fluid 
administration, and use of vasopressors for the measure are consistent 
with recommendations in the guidelines. We will continue to monitor the 
evidence and standards for sepsis care as they evolve and consider 
revisions as warranted for future program years. We also wish to 
clarify the concerns around the SEP-3 definitions. The SEP-3 
definition, introduced in The Third International Consensus Definitions 
for Sepsis and Septic Shock (Sepsis-3) published in February 2016, uses 
the Sequential Organ Failure Assessment (SOFA), which has been well-
validated association with mortality risk and the simplified quick SOFA 
(qSOFA).\270\ The SIRS based criteria used in the Severe Sepsis and 
Septic Shock: Management Bundle measure, were identified in a 
structured literature review by Waligora et al. as having a high 
sensitivity for early identification of sepsis (72%-94.5%) compared to 
the qSOFA (32%-58.3%).\271\ Use of the SIRS-based criteria aligns with 
the measure intent of early identification of patients with severe 
sepsis and septic shock. We wish to note that the criteria used by the 
measure is intended to provide abstractors with a standard tool for 
confirmation of the presence of severe sepsis and septic shock to help 
ensure the same criteria are used for all hospitals to determine which 
patients remain in the measure and which ones are excluded. The measure 
does not dictate nor limit the severe sepsis and septic shock screening 
criteria that clinicians use at the bedside.
---------------------------------------------------------------------------

    \269\ 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.
    \270\ Singer M, Deutschman CS, Seymour CW, et al. The Third 
International Consensus Definitions for Sepsis and Septic Shock 
(Sepsis-3). JAMA. 2016;315(8):801-810. doi:10.1001/jama.2016.0287.
    \271\ Waligora G, Gaddis G, Church A, Mills L (2020). Rapid 
Systematic Review: The Appropriate Use of Quick Sequential Organ 
Failure Assessment (qSOFA) in the Emergency Department. J Emerg Med. 
2020 Dec;59(6):977-983. doi: 10.1016/j.jemermed.2020.06.043. Epub 
2020 Aug 20. PMID: 32829969.
---------------------------------------------------------------------------

    Comment: A few commenters did not support the adoption of this 
measure because of concerns around the sampling methodology. A 
commenter noted that the results in a data set might not be 
representative of the sepsis population and therefore not compliant 
with valid statistical analysis. A commenter stated that the burden of 
abstraction will make hospitals reevaluate increasing their sampling 
size because the Severe Sepsis and Septic Shock: Management Bundle 
measure casts a wide population net with the initial population, then 
uses chart abstraction to determine if the patient has severe sepsis or 
septic shock. A commenter stated that because many cases are ultimately 
excluded for not meeting the criteria for severe sepsis, most hospitals 
end up oversampling to ensure they present a more accurate 
representation of their compliance with the measure. A commenter 
believed that because hospitals are allowed to sample the measure, it 
does not represent a complete picture of the hospital's performance.
    Response: Sampling is a statistically valid method to estimate a 
hospital's performance and we have allowed sampling for many chart-
abstracted measures including the Severe Sepsis and Septic Shock: 
Management Bundle measure to help reduce the abstraction burden. We 
refer commenters to the Population and Sampling Specifications in the 
Hospital Inpatient Specifications Manual located on QualityNet at 
https://qualitynet.cms.gov/inpatient/specifications-manuals for more 
information about case sampling for this measure. The Severe Sepsis and 
Septic Shock: Management Bundle measure has been in the Hospital IQR 
Program since October 1, 2015, and eligible hospitals, including 
smaller community and rural hospitals, have successfully reported on 
the measure. We are aware that many hospitals already choose to 
oversample due to the relatively high case exclusion rate associated 
with the measure. Sepsis is associated with patient deaths, hospital 
readmissions, and increased length of hospital stays. This measure 
fills an important measure gap and will positively impact patient care. 
We believe that these benefits outweigh data collection burdens. We 
also do not believe this measure will be more burdensome than other 
measures for hospitals, because the measure data may be collected 
concurrently, retrospectively, or a combination of both. As we noted in 
the proposed rule,

[[Page 59080]]

adopting the measure into the Hospital VBP Program does not result in a 
change to measure data collection requirements and burden since 
hospitals are already required to report data on the measure under the 
Hospital IQR Program.
    Comment: Several commenters recommended changes to the 
documentation requirements associated with the Severe Sepsis and Septic 
Shock: Management Bundle measure, including a commenter who recommended 
removing some of the documentation rules because they believed that it 
would make the measure less cumbersome, and a commenter who recommended 
making changes to allow providers to document rationale for why fluid 
bolus was not indicated.
    Response: We note the measure specifications do allow providers to 
document rationale for why fluid bolus was not indicated; specifically, 
recent updates to crystalloid fluid administration guidance allow for 
the administration of fluid volumes of less than 30 mL/kg, and in 
specific situations, no fluid administration with supporting 
documentation. We will take other recommendations regarding 
documentation into consideration for refinements to the measure.
    Comment: Several commenters recommended focusing solely on septic 
shock. A few commenters believed that focusing on septic shock would 
simplify data abstraction and a few commenters cited evidence 
supporting the benefits of immediate intervention with the subset of 
patients experiencing septic shock. A commenter believed that focusing 
on septic shock would minimize antibiotic overuse and eliminate bundle 
elements that do not contribute to improved patient outcomes. A 
commenter expressed concern that the measure is not supported by 
compelling evidence.
    Response: We respectfully disagree with the commenters' 
recommendations regarding focusing the measure only on septic shock. 
Early identification and treatment of patients with severe sepsis is 
essential and, in many cases, can prevent further clinical progression 
to septic shock. The Surviving Sepsis Campaign: International 
Guidelines for Management of Sepsis and Septic Shock 2021 includes a 
strong recommendation for the immediate administration of antibiotics 
to patients with septic shock or a high likelihood for sepsis. The 
measure is consistent with these guidelines since the measure screening 
criteria focus on patients with a high likelihood for sepsis or septic 
shock. We are not aware of published literature that demonstrates an 
association between the implementation of the measure and antibiotic 
overutilization. We appreciate the commenter's concerns about measure 
alignment with published evidence; however, we disagree. The Severe 
Sepsis and Septic Shock: Management Bundle measure is in alignment with 
the Surviving Sepsis Campaign: International Guidelines for Management 
of Sepsis and Septic Shock 2021 recommendations about use of screening 
tools, antibiotic requirements and timing, measurement of lactate, 
administration of crystalloid fluids, monitoring response to fluid 
administration, and use of vasopressors. We will continue to monitor 
the evidence and standards for sepsis care as the evolve and consider 
revisions as warranted for future program years.
    Comment: Several commenters recommended that the focus should be on 
improving patient outcomes with a commenter recommending elimination of 
bundle elements that do not contribute to improved patient outcomes, 
such as lactate testing. A few commenters expressed concern that the 
time-zero definition does not reflect excellent care and that the focus 
on the initial hours of care takes away incentive to optimize 
subsequent care for patients. A commenter expressed their belief that 
shifting to this measure amidst clinical disagreement on measure 
specifications and abstraction issues will bring no additional benefit 
to patients.
    Response: We appreciate the commenters' recommendations regarding 
measure focus. We note that providing patients with evidence-based care 
such as that included in the Severe Sepsis and Septic Shock: Management 
Bundle measure has been associated with improved outcomes. We refer 
commenters to the results of the study of over 1.3 million patients by 
Townsend et al that utilized chart-abstracted data for the Severe 
Sepsis and Septic Shock: Management Bundle measure from October 1, 
2015, to March 31, 2017, in which the authors found that compliance 
with the measure was associated with a reduction in 30-day 
mortality.\272\ We recognize that some elements of care may have a 
greater impact on outcomes and will take the commenter's 
recommendations into consideration for future program years. We also 
wish to note that while focusing on early therapies is not the only 
area of opportunity for sepsis care improvement, it is the predominate 
opportunity in the majority of cases as subsequent care needs are often 
dependent on the early care that is provided. We also emphasize that 
the measure is in alignment with the Surviving Sepsis Campaign: 
International Guidelines for Management of Sepsis and Septic Shock 2021 
recommendations about use of screening tools, antibiotic requirements 
and timing, measurement of lactate, administration of crystalloid 
fluids, monitoring response to fluid administration, and use of 
vasopressors. The guidelines note that the presence of an elevated 
lactate level in patients with suspected sepsis is associated with an 
increased likelihood of a final diagnosis of sepsis and that there is a 
well-established association between lactate levels and mortality in 
patients with suspected infection and sepsis. In a recent study that 
used chart-abstracted data for the Severe Sepsis and Septic Shock: 
Management Bundle measure submitted to CMS for over 1.3 million 
patients, Townsend et al. found that compliance with obtaining an 
initial lactate level was associated with decreased adjusted 
mortality.\273\
---------------------------------------------------------------------------

    \272\ 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.
    \273\ Ibid.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concerns about the 
flexibility of the measure or recommended that the measure be made more 
flexible. A commenter cited the challenge of a one-size-fits-all 
measure given the continuously evolving definition and best practices 
of sepsis. A commenter recommended that physicians should be able to 
opt out of blood cultures and parenteral therapy. A commenter also 
expressed concern that the all-or-nothing measure does not allow credit 
for timely and appropriate resuscitation efforts. A commenter 
recommended that the measure provide flexibility in a way that 
hospitals can receive support from CMS for quality improvement efforts 
to improve performance on the measure.
    Response: The measure includes flexibility for clinician judgment 
by providing multiple opportunities for exclusion of patients from the 
measure based on clinician documentation such as notations within six 
hours following clinical criteria being met that severe sepsis or an 
infection is not present or that SIRS criteria or signs of organ 
dysfunction are due to a chronic condition, medication, or a non-
infectious source. The measure also includes allowances for fluid 
volumes less than 30 mL/kg with documentation of a reason for a lesser 
volume. The measure is in alignment with the Surviving Sepsis Campaign: 
International Guidelines for

[[Page 59081]]

Management of Sepsis and Septic Shock 2021 recommendations about use of 
screening tools, antibiotic requirements and timing, measurement of 
lactate, administration of crystalloid fluids, monitoring response to 
fluid administration, and use of vasopressors. We appreciate the 
commenter's recommendations about opting out of blood cultures and 
parenteral therapy. The Surviving Sepsis Campaign guidelines upon which 
this measure is based recommend as a best practice obtaining routine 
microbiologic cultures (including blood) before starting antimicrobial 
therapy in patients with suspected sepsis and septic shock if it does 
not result in a substantial delay to starting the antimicrobials. The 
measure includes allowances for obtaining blood cultures after starting 
antimicrobials in specific situations such as when there is clear 
documentation that obtaining the culture prior to starting antibiotics 
will result in a delay that will be detrimental to the patient. We 
appreciate the commenter's concern about the bundled nature of the 
measure and recommendation for additional flexibility. We will take 
these recommendations into consideration for future refinements of the 
measure.
    Comment: A commenter expressed concern that the achievement 
threshold and benchmark should be reversed.
    Response: We thank the commenters for the notice and note that the 
achievement threshold and benchmark have been correctly updated in 
Table V.K-09 of this final rule.
    Comment: A commenter did not support converting the Severe Sepsis 
and Septic Shock: Management Bundle measure to an eCQM in the future.
    Response: We thank the commenter for their feedback and note that 
the sepsis eCQM we are currently developing in collaboration with the 
CDC is an outcome measure and not a direct conversion of the current 
measure to an eCQM.
    Comment: A commenter recommended removing the exclusion of COVID-19 
from the Severe Sepsis and Septic Shock: Management Bundle measure as 
done in the measurement and reporting of other respiratory diseases.
    Response: We interpret the commenter's recommendation as suggesting 
to remove the exclusion of patients with suspected or confirmed COVID-
19 from the measure. We added this exclusion because COVID-19 is viral, 
and the measure excludes cases of severe sepsis and septic shock with a 
viral etiology since antibiotics are generally not required unless 
there is also an underlying bacterial infection. In addition, early 
evidence suggested a conservative fluid resuscitation approach for 
patients with COVID-19 associated septic shock. As a result, patients 
with COVID-19 will have a higher likelihood of not meeting the measure 
numerator requirements.
    Comment: A few commenters recommended that CMS obtain input and 
support from all interested parties for intended changes and 
recommended that CMS work with interested parties to develop digital 
quality measurement that is outcome-based and a true metric of sepsis 
care.
    Response: We appreciate the commenters' recommendations. We 
consider input from multiple interested parties and resources when 
determining whether to implement measure updates and will continue to 
do so. For example, we have previously collaborated with clinician 
representatives from organizations such as the California Maternal 
Quality Care Collaborative (CMQCC), Infectious Disease Society of 
America (IDSA), and Society for Healthcare Epidemiology of America 
(SHEA), and from clinical specialties such as emergency medicine, 
critical care medicine, internal medicine, and infectious disease. We 
also convene an Expert Work Group (EWG) with critical care medicine, 
emergency care medicine, infectious disease, pharmacy, performance 
improvement and patient representation as needed to provide feedback on 
the clinical aspects of measure maintenance. We also wish to note that 
the Sepsis Technical Expert Panel (TEP) which provides guidance on the 
development of the sepsis outcome electronic clinical quality measure 
(eCQM) includes clinicians representing emergency medicine, critical 
care medicine, internal medicine, infectious disease, as well as 
patients and caregivers.
    Comment: A commenter did not support including year three of the 
COVID-19 public health emergency as baseline data because of concerns 
about the use of data from the COVID-19 public health emergency.
    Response: We thank the commenter for their concern regarding the 
use of CY 2022 data for the baseline period. This baseline period is in 
alignment with the previously finalized baseline periods for the 
Safety, Patient and Community Engagement, and Cost and Efficiency 
Domains for the FY 2026 program year (87 FR 49114). As discussed in the 
FY 2023 IPPS/LTCH PPS final rule we believe that using CY 2022 data is 
appropriate given the widespread availability of COVID-19 vaccines in 
CY 2022 and subsequent years (87 FR 49105 through 49106).
    Comment: A few commenters recommended providing additional clarity 
on how CMS will establish an appropriate baseline and account for 
changes in measurement between the baseline and performance periods 
given frequent updates to the measure.
    Response: We thank the commenters for their feedback. As we noted 
in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27028), the updates 
made to Severe Sepsis and Septic Shock: Management Bundle measure, as 
reflected in the specification's manual, are minor technical updates 
that do not impact performance. We, therefore, believe that the 
baseline and performance periods are appropriate as proposed because 
the updates to the measure specifications are not substantive and 
therefore do not require modifications to the baseline and performance 
periods.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
b. Summary of Previously Adopted Measures for the FY 2024 and FY 2025 
Program Years, and Previously Adopted Measures and Newly Adopted 
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. 
In the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to the FY 2024 and FY 2025 measure sets (88 FR 27029 through 
27030). The Hospital VBP Program measure set for the FY 2024 and FY 
2025 years will contain the following measures:

[[Page 59082]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.257

    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed substantive 
measure updates to the MSPB and THA/TKA Complication measures (88 FR 
27030 through 27031). We also proposed to adopt the Severe Sepsis and 
Septic Shock: Management Bundle. Table V.K.-02 summarizes the 
previously adopted and newly adopted Hospital VBP Program measures for 
the FY 2026 through FY 2030 program years:

[[Page 59083]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.258

c. 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 final rule where the 
Hospital IQR Program proposed to make updates to the administration and 
submission requirements of the HCAHPS Survey measure beginning with the 
FY 2027 payment determination. We also proposed 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 59084]]

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 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.
    We stated in the proposed rule that 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 
final rule. We also stated that there would be no changes to the HCAHPS 
Survey measure patient eligibility or exclusion criteria. We noted 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, we stated that 
this proposal to adopt technical changes would 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 invited public comment on this proposal.
    Comment: Many commenters stated their support of the proposed 
HCAHPS changes because they increase response rates, modernize and 
improve accessibility of the survey, advance health equity, and improve 
representation of different populations. A commenter recommended 
testing the impact on performance measures derived from HCAHPS data 
before publicly reporting results or using results for payment 
purposes.
    Response: We thank the commenters for their support. We refer the 
commenter who recommended testing changes to the Hospital IQR Program's 
section of the FY 2024 IPPS/LTCH PPS proposed rule, where we discussed 
a large-scale mode experiment that we conducted to test adding the web 
mode and other updates to the form, manner, and timing of HCAHPS Survey 
data collection and reporting (88 FR 27112 through 27113). We also note 
that because these changes are only being made to the form and manner 
of the administration of the survey, we do not believe that there will 
be substantive impacts to hospitals' performance.
    Comment: Many commenters supported allowing the survey to be 
administered in Spanish because they believed that it will improve 
response rates and advance health equity by ensuring that language does 
not hinder the quality or experience of care. A few commenters made 
recommendations to expand the requirement to other languages in the 
future, specifically the seven other languages that the survey is 
available in.
    Response: We appreciate the commenters support and agree that these 
changes will encourage improved response rates from a wider pool of 
patients in HCAHPS responses. We thank the commenters for their 
recommendations regarding future translations of HCAHPS for the seven 
other languages that the survey is available in (Chinese, Russian, 
Vietnamese, Portuguese, German, Tagalog, and Arabic) and further 
validation of existing translated versions, and we will take these 
recommendations into consideration for future program years. We also 
believe that the removing the requirement that only the patient may 
respond to the survey will improve response rates and address language 
barriers.
    Comment: Many commenters supported the expansion to electronic 
modes of administration because they will improve the volume and 
timeliness of survey response rates, particularly from the younger 
patient population, they are easier to administer, and they align with 
the Modernizing the HCAHPS Survey report.
    Response: We thank the commenters for their support and agree that 
the addition of these new modes of survey implementation will likely 
increase response rates and modernize the survey. We also agree that 
these new modes of survey implementation have the potential to reduce 
the burden of administering the survey.
    Comment: Several commenters supported removing the requirement that 
only the patient may respond to the survey because they believed that 
it improves the inclusivity of the survey, and it is a positive way for 
family and caregivers to contribute to patient-centered care.
    Response: We thank the commenters for their support and agree that 
removing the prohibition of proxy respondents will likely inclusivity 
and engage a more diverse pool of respondents.
    Comment: Several commenters supported the extension of the data 
collection period to 49 days. A commenter also recommends not exceeding 
the 49-day period because a longer extension may risk compromising the 
reliability and validity of the data.
    Response: We thank the commenters for their support of the extended 
collection period. We will also take the recommendation to not exceed 
the 49-day period into consideration for future program years.
    Comment: A commenter recommended using a separate patient 
experience survey that addresses psychiatric care rather than the 
traditional HCAHPS survey.
    Response: We thank the commenter for the recommendation and we 
refer the commenter to the FY 2024 IPPS/LTCH PPS (88 FR 27114) proposed 
rule in which the Hospital IQR Program solicited feedback on the 
potential addition of patients with a primary psychiatric diagnosis to 
the HCAHPS Survey measure.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
4. Previously Adopted and Newly Adopted Baseline and Performance 
Periods
a. Background
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program that begins and ends 
prior to the beginning of such fiscal year. We refer readers to the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for 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

[[Page 59085]]

PPS final rule (84 FR 42393 through 42395), the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58850 through 58854), the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45284 through 45290), and the 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. 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 final rule, we are 
finalizing the Severe and Septic Shock: Management Bundle measure 
beginning with the FY 2026 program year. In the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27032), we proposed to adopt a 12-month baseline 
period and a 12-month performance period for that measure. Therefore, 
for the FY 2026 program year, we proposed 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 proposed 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. Section V.K.3.a of this final rule 
describes the comments we received regarding the baseline and 
performance periods and our responses. We display these finalized 
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 Adopted 
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 newly adopting in this final rule.
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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, the FY 2014 IPPS/LTCH PPS final rule, and the 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. In the FY 2024 IPPS/LTCH PPS proposed rule, (88 FR 
27035 through 27036), we announced 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 were 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 final rule.
(2) Technical Correction to the 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. In the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27035), we issued a correction to display the 
correct performance standards for the Safety domain measures 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).
[GRAPHIC] [TIFF OMITTED] TR28AU23.264


[[Page 59089]]


(3) Technical Correction to the 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. In the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27036), we issued 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 and Table V.K.-12 of this final rule.
c. Previously and Newly Established 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. As discussed in section V.K.3.a of this final rule, we are 
finalizing the Severe and Septic Shock: Management Bundle measure 
beginning with the FY 2026 program year. The previously established and 
newly established performance standards for the measures in the FY 2026 
program year are set out in Tables V.K.-09 and V.K.-10.
[GRAPHIC] [TIFF OMITTED] TR28AU23.265

    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.

[[Page 59090]]

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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 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 substantive 
updates to the MSPB Hospital measure, discussed in section XXX of this 
final rule, will not change with the adoption of the substantive 
measure updates. 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] TR28AU23.267

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 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). As 
discussed in section V.K.5.b.(3) of this final rule, in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 27038), we issued 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 59091]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.268

f. Newly Established Performance Standards for Certain Measures for the 
FY 2029 Program Year
    As discussed previously, we have adopted certain measures for the 
Clinical Outcomes domain (MORT-30- AMI, MORT-30-HF, MORT-30-PN (updated 
cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP- KNEE) and the 
Efficiency and Cost Reduction domain (MSPB Hospital) for future program 
years to ensure that we can adopt baseline and performance periods of 
sufficient length for performance scoring purposes. In accordance with 
our methodology for calculating performance standards discussed more 
fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 
through 26513), which is codified at 42 CFR 412.160, we are 
establishing the following performance standards for the FY 2029 
program year for the Clinical Outcomes domain and the Efficiency and 
Cost Reduction domain. 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 newly established performance standards for these 
measures are set out in Table V.K.-13.

[[Page 59092]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.269

6. 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. In the FY 2024 IPPS/LTCH PPS 
proposed rule, we proposed modifications to the existing scoring 
methodology to reward excellent care in underserved populations.
b. Revision of 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.274 275 
Research shows that patients experiencing worse health outcomes often 
face barriers to accessing health care services and have access to 
fewer healthcare providers.276 277 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.\278\ 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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    \274\ 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.
    \275\ 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: 
https://nap.nationalacademies.org/21858.
    \276\ 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.
    \277\ Thompson, T., McQueen, A., Croston, M., Luke, A., Caito, 
N., Quinn, K., Funaro, J., & Kreuter, MW (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.
    \278\ 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 in Medicare's Value-Based Purchasing Program, 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.\279\ Patients with dual

[[Page 59093]]

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 likely to be medically complex, 
and have greater social needs compared to other beneficiaries.\280\ 
Patients with DES are one of the most vulnerable 
populations.281 282 Despite the multitude of indicators 
available for assessing vulnerability and health risks, dual 
eligibility remains the strongest predictor of negative health 
outcomes.\283\
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    \279\ 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.
    \280\ Johnston, KJ, & Joynt Maddox, KE (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.
    \281\ Johnston, KJ, & Joynt Maddox, KE (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.
    \282\ Wadhera, RK, Wang, Y., Figueroa, JF, Dominici, F., Yeh, 
R.W., & Joynt Maddox, KE (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.
    \283\ 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]A+) \284\ persons; persons with 
disabilities; persons who live in rural areas; and persons otherwise 
adversely affected by persistent poverty or inequality) (86 FR 7009).
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    \284\ 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.\285\ 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.
---------------------------------------------------------------------------

    \285\ Health Equity Strategic Pillar. Centers for Medicare & 
Medicaid Services. https://www.cms.gov/pillar/health-equity.
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    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.\286\ 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, in the FY 2024 IPPS/
LTCH PPS proposed rule, we proposed to add Health Equity Adjustment 
bonus points to a hospital's Total Performance Score (TPS) that will 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 (88 FR 27039 through 27049).
---------------------------------------------------------------------------

    \286\ 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 proposed 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 that 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.\287\
---------------------------------------------------------------------------

    \287\ 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.
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    We proposed 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 award to a hospital for each domain will 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 will 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 proposed 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 will use the total number of inpatient stays from 
January 1, 2024 through December 31, 2024. A logistic exchange function 
will 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 proposed that the HEA bonus points will 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

[[Page 59094]]

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 methodology for the calculation of the HEA bonus points is 
described in sections V.K.6.b.(3) and V.K.6.b.(4) of this final rule. 
By providing HEA bonus points to hospitals that serve higher 
proportions of patients with DES and perform well on quality measures, 
we believe that we can begin to bridge performance gaps and better 
address the social needs of patients, in alignment with our National 
Quality Strategy.\288\ 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 that this scoring methodology update will 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 the scoring methodology update aligns with the broader CMS 
health equity goals to close gaps in health care quality and promote 
the highest quality outcomes for all people.\289\
---------------------------------------------------------------------------

    \288\ 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.
    \289\ 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.
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    We proposed 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 final 
rule are similar to the health equity adjustment finalized in the 
Shared Savings Program. Additionally, a similar health equity 
adjustment was proposed in the FY 2024 Skilled Nursing Facility (SNF) 
Prospective Payment System (PPS) proposed rule for the SNF Value-Based 
Purchasing (VBP) Program (88 FR 21383 through 21393).
(2) Determining the Underserved Multiplier and Measure Performance 
Scaler
    At this time, for purposes of the Hospital VBP Program's health 
equity adjustment policy, 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 proposed to only use DES data at 
this time. As DES is a strong indicator of poorer healthcare outcomes 
in Medicare's VBP programs,\290\ we believe that it can serve as an 
appropriate underserved multiplier on its own in the Hospital VBP 
Program. We will 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 sought 
comment on the use of these additional indicators in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 27049) and summarized the comments we 
received in section V.K.6.b.(7) of this final rule.
---------------------------------------------------------------------------

    \290\ 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.
---------------------------------------------------------------------------

    The measure performance scaler points will be available to all 
hospitals that exhibit high quality care across the entire patient 
population. Each domain will be assessed independently such that a 
hospital that performs in the top or middle third of performance for 
one domain will 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 will receive measure performance 
scaler points for all domains. Alternatively, a hospital which is in 
the bottom third of performance for all four domains will 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 final rule.
    The underserved multiplier will 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.\291\ 
These data will 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 
proposed 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 will then be 
applied to this dual proportion. We will 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 final rule. Unlike the 
Shared Savings Program's policy, we note that we did not propose 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 to give every hospital an opportunity to participate in this 
final scoring change.
---------------------------------------------------------------------------

    \291\ 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 availability of HEA bonus points, we seek to improve 
outcomes by providing incentives to hospitals to strive for high 
performance

[[Page 59095]]

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 final rule. While we recognize and discuss in this 
final 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 population'' 
throughout this final rule. 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.\292\
---------------------------------------------------------------------------

    \292\ 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 will 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 final rule, the 
combination of the measure performance scaler and the underserved 
multiplier will 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 also proposed to codify at 42 CFR 412.160 of our regulations the 
definitions of these new scoring methodology terms, and we proposed 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) 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 proposed 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 will be 12.
    We proposed 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, the 
number of HEA bonus points that could then be added to a hospital's TPS 
for a program year will 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 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, the maximum 
number of HEA bonus points that could be added to the TPS would be 10 
points. In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed that no 
hospital could earn more than a 110 maximum final TPS that includes the 
HEA bonus points (88 FR 27049). We refer readers to section V.K.6.b.(6) 
of this final rule where we have finalized this proposal as proposed 
and our newly-adopted regulations at 42 CFR 412.160 where we modify the 
TPS maximum to 110. This final maximum at 110 will 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) Calculation Steps and Examples
    In this section and in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 27042 through 27045), 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 will be as 
follows:
Step One--Calculate the Number of Measure Performance Scaler Points for 
Each Hospital
    We proposed to first assign a measure performance scaler to each 
domain based on a hospital's domain level scores. We will assign point 
values to hospitals for each domain based on their performance on the 
measures in that domain. A hospital will 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


[[Page 59096]]


    Table V.K.-13 displays the measure performance scaler that three 
example hospitals will receive for each domain based on their 
performance.
[GRAPHIC] [TIFF OMITTED] TR28AU23.270

Step Two--Calculate the Underserved Multiplier
    Second, we proposed to calculate an underserved multiplier for each 
hospital, which we proposed 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 will 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 will have the opportunity for 
the most HEA bonus points. Thus, we proposed to utilize a logistic 
exchange function to calculate the underserved multiplier for scoring 
hospitals such that there will be a lower rate of increase at the 
beginning and the end of the curve.
    The underserved multiplier calculation will thus be:

Underserved Multiplier = Logistic Function (Number of Inpatient Stays 
for Patients with DES/Total Medicare Inpatient Stays)
[GRAPHIC] [TIFF OMITTED] TR28AU23.271

    To determine the proportion of the number of inpatient stays for 
patients with DES, we proposed 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 will 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 proposed to utilize a logistic exchange function to calculate 
the underserved multiplier for scoring hospitals such that there will 
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 will ensure that there will be very few differences in 
the points awarded between hospitals with similar proportions of 
patients served. For example, there will 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

[[Page 59097]]

points. We believe that 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 
that the 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.272

Step Three--Calculate the Health Equity Adjustment Bonus Points
    We proposed 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) 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 will earn 16 measure performance scaler points, which 
will 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.

[[Page 59098]]

Step Four--Add Health Equity Adjustment Bonus Points to the Total of 
the Weighted Domain Scores To Calculate the TPS
Health Equity Adjustment (HEA) bonus points = Performance Scaler x 
Underserved Multiplier
[GRAPHIC] [TIFF OMITTED] TR28AU23.273

    Finally, we proposed that we will 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 will remain as outlined in our 
regulations at 42 CFR 412.165(b)(4), and the HEA bonus points will be 
the hospital's TPS for the program year. We did not propose 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 proposed 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 final 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] TR28AU23.274

    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 that 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 invited public comment on this scoring change, which we also 
proposed to codify in our regulations at 42 CFR 412.160 and 412.165(b).
    Comment: Many commenters supported the adoption of a Health Equity 
Adjustment for the Hospital VBP Program. Many commenters supported the 
Health Equity Adjustment because they believed that it would promote 
high quality care for underserved populations and incentivize hospitals 
to focus on reducing disparities. A commenter believed that it would 
encourage hospitals to reach additional underserved patients in the 
healthcare system. Many commenters supported the Health Equity 
Adjustment because they believed that the scoring would in turn support 
providers treating greater proportions of patients in underserved 
communities with higher payments. A

[[Page 59099]]

commenter stated that the scoring revision would account for the 
additional challenges hospitals overcome to achieve high standards for 
all their patients. Several commenters supported the Health Equity 
Adjustment because they believed that the revision aligns with goals, 
initiatives, and programs across CMS, such as the goal to advance 
health equity and CMS's Health Equity Strategy and Roadmap. A few 
commenters stated how the proposal creates similarities in health 
equity adjustment policies across payment programs of CMS. A few 
commenters also supported the Health Equity Adjustment because it 
aligns with the health equity goals of their programs. A few commenters 
believed that this would allow for hospitals that care for patients 
from underserved communities with fewer resources to be fairly assessed 
and not heavily penalized. A few commenters supported the Health Equity 
Adjustment because it recognizes challenges that patients face and 
factors beyond a hospital's control that may impact performance. In 
addition to the support, a few commenters recommended improvements to 
the methodology such as considering alternative approaches to 
identifying hospitals that disproportionately serve marginalized 
patient populations.
    Response: We thank the commenters for their support of our proposal 
to adopt a Health Equity Adjustment. We agree that this adjustment will 
promote high quality care for underserved populations, incentivize 
addressing disparities, and recognize challenges hospitals overcome to 
achieve high standards for all their patients. We also agree that the 
adjustment recognizes structural challenges that patients with DES face 
and hospitals have to overcome to provide excellent care. We will take 
into consideration for future years the recommendations of assessing 
alternative approaches to identifying hospitals that disproportionately 
serve marginalized patient populations.
    Comment: Several commenters supported the initial use of DES with a 
few commenters noting the alignment with the Hospital Readmissions 
Reduction Program. A few commenters recommended considering alternate 
indicators and sources of social risk factor data in the future as 
Medicaid eligibility varies by state.
    Response: We thank commenters for their support of the initial use 
of DES and their recommendations to consider alternate approaches for 
capturing social risk. We will take this into consideration in future 
years. We also refer readers to section V.K.6.b.(7) of this final rule 
where we summarized additional comments we received in response to a 
request for information on additional indicators besides DES for the 
health equity adjustment. We remain committed to refining this health 
equity scoring methodology, as determined appropriate, in the future.
    Comment: A few commenters supported the use of the logistic 
exchange function for calculating the underserved multiplier.
    Response: We thank commenters for their support of using the 
logistic exchange function for calculating the underserved multiplier.
    Comment: A few commenters supported structuring the Health Equity 
Adjustment as a form of bonus points as opposed to an addition to the 
base TPS because the financial incentive would help offset costs 
associated with addressing the social needs of underserved patient 
populations. A few commenters supported that the bonus points from the 
Health Equity Adjustment would be available to those in the top two 
thirds of each domain performance rather than only those in the top 
third. A commenter also supported the threshold methodology of three 
levels because it is consistent with health equity calculations in 
other payment programs.
    Response: We thank the commenters for their support of the 
threshold methodology and how the Health Equity Adjustment is available 
as bonus points to the top two thirds of each domain performance.
    Comment: A commenter supported beginning the adjustment in the FY 
2026 program year to allow for an evaluation and adjustment period 
before it impacts hospital payments.
    Response: We appreciate the commenter's support. We note that for 
the FY 2026 program year, the dual proportion data will be calculated 
using stays from January 1, 2024, through December 31, 2024. We also 
refer readers to Table V.K.-04 in section V.K.4.c of this final rule 
that displays the baseline and performance periods for the FY 2026 
program year. We anticipate hospitals will receive their confidential 
Percentage Payment Summary Reports with their FY 2026 program year 
results to review by no later than August 1, 2025.
    Comment: A commenter did not support the alternate methodology in 
which hospitals must be in the top third of all performers in the 
measure domain to receive bonus points because it would create 
performance cliffs.
    Response: We appreciate the commenter's feedback and agree that 
awarding measure performance scaler points to the top two thirds of all 
performers instead of the top third of all performers for each domain 
would lessen the potential impact of performance cliffs. We are 
finalizing the proposed methodology as opposed to the alternate 
methodology.
    Comment: Several commenters did not support the use of DES as an 
indicator for the Health Equity Adjustment. Several commenters 
expressed concern around the challenges of using DES because dual 
eligible beneficiary percentages vary across states and that the 
proportion of patients with DES varies over time within a hospital. A 
few commenters believed that DES provides an incomplete picture of 
health equity. A commenter recommended replacing the underserved 
multiplier with direct billing for case management. A few commenters 
did not support the use of ADI because they believe it is highly 
correlated across domains which may lead to the overstating of aspects 
of social risk, and it is incapable of accurately reflecting 
neighborhood deprivation in high-cost areas. A commenter also did not 
support the use of Part D LIS alone because it is not a reasonable 
proxy for social risk. A commenter also expressed concern over the 
inconsistent definition of ``underserved'' across CMS programs. The 
commenter cited the Medicare Shared Savings Program (MSSP), which uses 
DES along with ADI and the Part D LIS, and the Center for Medicare & 
Medicaid Innovation (CMMI) ACO REACH model, which uses DES and ADI.
    Response: We appreciate the commenters' concern regarding the use 
of DES and agree that by itself DES does not capture all aspects of 
social risk for health inequities. However, we believe that use of DES 
data is an important first step to introducing a health equity 
adjustment in the Hospital VBP Program, as well as being a readily 
available data source. As ASPE noted in its 2020 report to Congress, 
DES is a strong indicator of poorer healthcare

[[Page 59100]]

outcomes in Medicare's VBP programs.\293\ Regarding its availability, 
as mentioned in the FY 2024 IPPS/LTCH PPS proposed rule, we are able to 
capture the proportion of patients with DES served by a hospital by 
using patient level data on the proportion of Medicare FFS and Medicare 
Advantage stays within the defined performance period of two years 
prior to the program year (88 FR 27043). We will consider alternative 
approaches in future years and will take the concerns around the ADI 
into consideration at that time. We appreciate the feedback on the use 
of the ADI, and we note that we did not propose using ADI at this time. 
We also refer readers to section V.K.6.b.(7) of this final rule where 
we summarized additional comments we received in response to a request 
for information on additional indicators besides DES for the health 
equity adjustment.
---------------------------------------------------------------------------

    \293\ 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.
---------------------------------------------------------------------------

    With regard to our use of the term ``underserved'' across CMS 
programs, we reference Executive Order 13985 of January 20, 2021 on 
Advancing Racial Equity and Support for Underserved Communities Through 
the Federal Government, which provides examples of individuals who 
belong to underserved communities, 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]A+ ) \294\ 
persons; persons with disabilities; persons who live in rural areas; 
and persons otherwise adversely affected by persistent poverty or 
inequality (86 FR 7009). We believe that our definition of underserved, 
as defined by patients with DES for the purposes of this health equity 
adjustment, is in line with this definition, particularly with regards 
to persons otherwise adversely affected by persistent poverty or 
inequality. Additionally, we specified in the FY 2024 IPPS/LTCH PPS 
proposed rule that the term ``underserved'' for purposes of discussing 
the health equity adjustment in the Hospital VBP Program refers to 
hospital patients with DES who receive inpatient services (88 FR 
27040).
---------------------------------------------------------------------------

    \294\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters recommended focusing exclusively on 
rewards as opposed to rewards and penalties. A commenter recommended 
guaranteeing that non-participation or poor performance does not result 
in negative repercussions.
    Response: We wish to clarify that the program is statutorily 
structured to withhold 2% from all hospitals and then distribute value-
based incentive payments based on performance. However, all hospitals 
are still eligible to earn HEA bonus points. As noted in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 27045 through 27046), under the 
health equity adjustment, even if a hospital receives a penalty, that 
hospital can still gain from the health equity adjustment, if the 
penalty is smaller after the health equity adjustment. The health 
equity adjustment thus offers every hospital an opportunity to earn HEA 
bonus points regardless of whether they receive a bonus or penalty 
under the Hospital VBP Program. In addition, we reiterate the budget 
neutral structure of the Hospital Value-Based Purchasing (HVBP) 
Program, as the HEA bonus points are added before the TPS is 
calculated. This would only result in changes to the hospital's 
relative position to other hospitals as opposed to the distribution of 
bonuses and penalties. With regard to the concern of non-participation, 
we note that subsection (d) hospitals cannot opt-out of this program.
    Comment: Several commenters recommended working with the hospital 
community to fine-tune the methodology for identifying underserved 
populations and to determine how they may impact hospitals across a 
diverse set of marginalized communities. A few commenters recommended 
working with relevant interested parties to create a standard framework 
and to implement consistent methodologies and risk factors for health 
equity adjustments across programs. A few commenters recommended that 
the HEA be utilized as a pilot before full implementation as it would 
allow for understanding potential impacts and identifying potential 
issues or challenges before going into full effect. A commenter 
recommended continuing to work to further optimize the use of reporting 
requirements and incentives to promote health equity.
    Response: We thank commenters for their feedback. We note that the 
Hospital VBP Program's proposed methodology is similar to the Shared 
Savings Program's health equity adjustment and to the SNF VBP Program's 
health equity adjustment proposal. While some differences exist between 
these programs' methodologies due to the data available to each program 
and the structure of each program as dictated by their respective 
statutes, across all of these programs we have aimed to apply the same 
conceptual framework of rewarding excellent care in underserved 
populations, with an upside-only incentive approach to the greatest 
extent feasible for the applicable program, be it in terms of bonus 
points like the Hospital VBP Program or both bonus points and 
additional payments like the Shared Savings Program and proposal for 
the SNF VBP Program.
    In regards to comments suggesting the health equity adjustment be 
implemented as a pilot, we refer readers to the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27045 through 27046) and section V.K.6.b.(5) of 
this final rule, where we presented the results of an impact analysis 
that simulated the proposed scoring methodology and provided an 
understanding of how hospitals will be impacted by the scoring change, 
as well as to show that the scoring change is feasible to implement 
across all hospitals participating in the Hospital VBP Program. 
Additionally, as noted in the proposed rule, this is a first step, and 
we expect the early years of this policy to effectively serve the 
purpose of piloting future health equity efforts in the program. We 
also note that we will monitor the impact of the adjustment and may, as 
necessary, consider modifications to the design of the adjustment 
through future notice and comment rulemaking. We agree with the 
commenter who recommended continuing to leverage reporting requirements 
and incentives to promote health equity. For example, in the FY 2023 
IPPS/LTCH PPS final rule, we adopted the Screening for Social Drivers 
of Health measure in the Hospital IQR Program (87 FR 49202 through 
49215). We welcome continued engagement with all interested parties on 
these efforts.
    Comment: A commenter recommended focusing on a specific population 
for the performance evaluation in the future because evaluating 
performance only across dual eligible beneficiaries ensures that 
improvement efforts are focused on the population with the greatest 
risk factors.
    Response: We thank the commenter for the feedback and will consider 
additional indicators for the underserved population in the future.

[[Page 59101]]

We believe that as a first step to incorporating a health equity 
adjustment in the Hospital VBP Program, the underserved multiplier 
adequately accounts for the patients with DES while the measure 
performance scaler accounts for overall quality such that if a large 
proportion of a hospital's patients with DES population is receiving 
low quality of care, then the health equity adjustment bonus points 
will appropriately decrease. The health equity adjustment was 
purposefully designed to not reward poor quality. Likewise, if the 
quality of care received by a hospital's underserved population is 
high, but the patients with DES represent only a small proportion of a 
hospital's total population, then the health equity adjustment will be 
lower.
    Comment: A commenter recommended incentivizing primary care or 
ambulatory services as an equity lever as they believed that those 
settings would be better for prevention and management of chronic 
conditions.
    Response: We agree on the importance of incentivizing health equity 
in not only the acute care setting, but also primary care and other 
ambulatory care settings. For example, the Shared Savings Program's 
Accountable Care Organizations are groups of doctors, hospitals, and 
other health care providers who collaborate to give coordinated high-
quality care to people with Medicare. 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 ADI score of 85 or 
above, as detailed in the CY 2023 Physician Fee Schedule final rule (87 
FR 69838 through 69857). In addition, in the CY 2023 Physician Fee 
Schedule final rule, the Merit-Based Incentive Payment System (MIPS) 
included four new health equity-related improvement activities (87 FR 
70059 through 70060), expanded the definition of ``high priority 
measure'' in the Quality category to include health equity measures (87 
FR 70047 through 70048), and added a new Quality measure called 
Screening for Social Drivers of Health (87 FR 70054 through 70055). We 
note that as outlined in section 1886(o)(1)(C)(i) of the Act, the 
Hospital VBP Program only applies to acute care hospitals that are paid 
under the IPPS.
    Comment: A few commenters expressed concern around potential 
negative impacts including that a commenter believed that the proposed 
logistic multiplier will inadvertently negatively affect safety net and 
rural hospitals while inadvertently rewarding urban and non-safety net 
hospitals that were not receiving an incentive prior to the adjustment. 
A commenter expressed concern that the HEA may result in harm through 
reduced incentive payments to high-performing hospitals that do not 
serve high proportions of underserved patient populations.
    Response: We do not believe that the logistic multiplier will 
negatively affect safety-net and rural hospitals given the results of 
the simulated impact analyses in the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 27045 through 27046) and in this final rule, which 
demonstrates that the increase in the number of hospitals receiving a 
bonus occurs primarily among safety net hospitals compared to non-
safety net and resulted in the greatest gains among safety net 
hospitals and rural hospitals. Lastly, we do not believe that the 
scoring adjustment will result in harm to high-performing hospitals. 
The intent of the HEA is to incentivize high quality care among all 
patients in the hospital and to recognize the additional resources 
required to care for patients with DES.
    Comment: A commenter expressed concern with utilizing overly 
complex scoring methods because they have been a challenge in getting 
hospitals to embrace data quality measurements in the past.
    Response: We recognize that there is some inherent complexity in 
developing a new health equity scoring adjustment, however, we believe 
that hospitals will have time to adapt to the methodology given that 
the scoring change will not go into effect until the FY 2026 program 
year. As stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27042 
through 27045) and this final rule, if a hospital, relative to other 
hospitals, is in the top or middle third of performance for any domain, 
they are eligible for measure performance scaler points. Additionally, 
if a hospital serves any proportion of patients with DES, they are 
eligible for the underserved multiplier. The HEA bonus points are then 
the product of the measure performance scaler and the underserved 
multiplier. The HEA bonus points are added to the total of hospital's 
four weighted domain scores before the TPS is calculated. A hospital 
that knows that they provide care for high proportions of patients with 
DES and performs well on any domains may anticipate a higher adjustment 
due to this addition to the program. We also reiterate that the HEA is 
intended to reward high quality performance and not solely adjust for a 
greater underserved patient population, which may leave lower 
performing hospitals with high proportions of patients with DES without 
any HEA bonus points. We do not intend to reward lower quality 
performance, and we believe that the current HEA incentivizes lower 
performing facilities to improve their quality scores. We will continue 
to provide regular outreach and education on the QualityNet website 
about this scoring methodology.
    Comment: A commenter expressed concern that the Health Equity 
Adjustment points will not be true bonus points as they will be added 
to the existing points and contribute to how the pool is distributed.
    Response: We disagree that the HEA points are not a true bonus 
because, as noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27045) and this final rule, we proposed to add the HEA bonus points 
before the TPS is calculated. Therefore, the bonus points can change 
the relative position of the hospital compared to other hospitals.
    Comment: A commenter did not support the proposed HEA as they 
believed that it may result in having to calculate a new linear 
exchange function to determine the minimum TPS at which a hospital 
begins to earn a bonus. A few commenters requested clarification around 
the linear exchange function slope and whether it would be adjusted by 
the HEA bonus points. A commenter expressed concern that the program 
would no longer be budget neutral.
    Response: As noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 
FR 27045) and this final rule, we proposed to add the HEA bonus points 
before the TPS is calculated. Therefore, the linear exchange function 
slope remains unchanged and the Hospital VBP Program remains budget 
neutral because the bonus points are added to the total of the four 
weighted domain scores that we then sum to calculate the hospital's 
TPS.
    Comment: Many commenters provided recommendations around the 
scoring methodology. Many commenters recommended sharing information on 
potential new indicators, such as geographic or socioeconomic 
indicators, and moving away from DES. A commenter recommended exploring 
the interaction between DES, ADI, and LIS variables as CMS continues to 
refine the HEA. Several commenters

[[Page 59102]]

recommended that CMS provide the logistic exchange function for the 
underserved multiplier. Several commenters recommended that CMS convene 
a technical expert panel from the hospital community to fine-tune the 
health equity adjustment methodology.
    Response: We thank commenters for their recommendation. At this 
time, we believe that using DES data is an important first step for the 
health equity adjustment in the Hospital VBP Program, but we will 
consider these alternative indicators in future years. We have added 
the logistic exchange function used for calculating the underserved 
multiplier to this final rule in section V.K.6.b.(4). We appreciate 
this feedback from commenters, and we will explore convening a 
technical expert panel in future years.
    Comment: Several commenters recommended that CMS provide additional 
information such as detailed specifications for proposed HEA bonus 
points, how payments will be redistributed once the HEA is accounted 
for, and how hospitals would perform on the HEA through confidential 
reports.
    Response: We thank the commenters for their recommendations. We 
wish to clarify that the methodology for distributing payments will 
remain the same. As noted in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27045) and in this final rule, the HEA bonus points will be 
added before the TPS is calculated, and the linear exchange function 
slope remains unchanged.
    Comment: A commenter recommended that the HEA be applied across the 
care delivery spectrum to ensure continuity of high-quality care. A 
commenter also recommended being consistent in the application of the 
HEA term and methodology, particularly for the use of indicators for 
underserved.
    Response: We thank the commenters for their feedback, and we will 
explore avenues to increase consistency across programs in future 
years. We also wish to note that the Hospital VBP Program's proposed 
methodology is similar to the Shared Savings Program's health equity 
adjustment and to the SNF VBP Program's health equity adjustment 
proposal. The differences that exist between these programs' 
methodologies are due to the data available to each program and the 
structure of each program, which prevents further consistency across 
programs at this time.
    Comment: A few commenters recommended accounting for differences 
that hospitals experience such as in budget and location, considering 
the realities that smaller health systems in rural areas face. A 
commenter expressed concern that the HEA may result in harm to high 
performing hospitals that do not serve a high proportion of the 
underserved patient population.
    Response: We thank commenters for their recommendations. We 
reiterate that, on average, the HEA would not negatively impact safety 
net and rural hospitals. As discussed in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27045 through 27046) and in this final rule, the 
impact analysis demonstrates that the increase in the number of 
hospitals receiving a bonus occurs primarily among safety net hospitals 
compared to non-safety net and that the greatest gains resulted among 
safety net hospitals and rural hospitals. We will consider additional 
ways to support smaller hospitals in rural areas, but we believe that 
this policy is a crucial first step in providing more opportunities to 
smaller and rural hospitals. With regard to high performance, on 
average, the HEA would similarly not negatively impact high-performing 
hospitals. The intent of the HEA is to incentivize high quality care 
among all patients in the hospital and to recognize the additional 
resources required to care for patients with DES. Additionally, 
hospitals that are high performing have other opportunities to be 
rewarded for their quality care under the Hospital VBP Program's 
existing scoring methodology.
    Comment: A commenter also recommended that CMS consider a peer 
grouping approach with regards to impacts on payments for providers 
with different shares of DES patients.
    Response: We will take a peer grouping approach into consideration 
in future program years.
    Comment: A commenter recommended that the measure performance 
scaler should exclude the Cost and Effectiveness Domain since the 
domain is further removed from quality of care.
    Response: In our impact analyses, we assessed the impact of 
excluding the Cost and Effectiveness Domain, however, the results were 
negligible. While the impact is negligible for excluding the Cost and 
Effectiveness Domain as the domain exists at this time with the one 
MSPB Hospital measure, we will take the commenter's suggestion into 
consideration with regard to any future potential changes to the HEA 
methodology.
    Comment: A few commenters recommended that CMS require standard 
practices for collecting and analyzing patient demographic data.
    Response: We thank commenters for their response. We may consider 
the requirement of standard practices for demographic data collection 
and analysis in future program years. We would like to note ongoing 
effort to develop the United States Core Data for Interoperability 
(USCDI) and we look to align with developed electronic standards in the 
future.
    After consideration of the public comments we received, we are 
finalizing this proposal as proposed with minor technical modifications 
to regulation text at 42 CFR 412.160 and 412.165(b).
(5) Impact Analysis of Scoring Methodology Change
    In the FY 2024 IPPS/LTCH PPS proposed rule, we included a 
discussion of the analyses we conducted 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 (88 FR 27045 through 27049). 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 to contextualize the request for 
additional information in section V.K.6.b.(7) of this final rule. 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.\295\ A logistic

[[Page 59103]]

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 proposed 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 final 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 will increase with the addition of the HEA bonus points.
---------------------------------------------------------------------------

    \295\ 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 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 final rule 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 sought feedback on the alternative scoring method in section 
V.K.6.b.(7) of this final rule for future consideration.

[[Page 59104]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.285

[GRAPHIC] [TIFF OMITTED] TR28AU23.286

    Based on the results of these analyses, we proposed 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 that 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.296 297 Therefore, 
we believe that our proposal ensures that we are addressing performance 
gaps and incentivizing high-quality care in underserved populations 
compared to the existing scoring methodology.
---------------------------------------------------------------------------

    \296\ 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.
    \297\ 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

[[Page 59105]]

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.298 299 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.300 301 302 303 304 Many rural areas also have 
relatively high levels of neighborhood disadvantage and high ADI 
levels. We believe that 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.\305\ 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 are considering using 
the ADI in the Hospital VBP Program in future years as data becomes 
more readily available through new measures in the Program 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.\306\ 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 do 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 that 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.
---------------------------------------------------------------------------

    \298\ Center for Health Disparities Research University of 
Wisconsin. (2022). Neighborhood Atlas. Available at: https://www.neighborhoodatlas.medicine.wisc.edu/.
    \299\ 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: https://dx.doi.org/10.5888/pcd13.160221.
    \300\ 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.
    \301\ 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.
    \302\ 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.
    \303\ 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.
    \304\ 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.
    \305\ 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.
    \306\ 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.
---------------------------------------------------------------------------

    Comment: A commenter expressed concern that the impact analysis 
does not make a compelling case to indicate that the alternative 
methodology would be superior to what is proposed and recommended 
finalizing a methodology that is not overly complex and allows 
hospitals to have every opportunity to receive the maximum number of 
points.
    Response: We thank the commenter for the feedback. We will not be 
finalizing the alternative methodology, and we believe that the 
proposed methodology that we are finalizing allows every hospital an 
opportunity to receive HEA bonus points. We recognize a level 
complexity with the methodology being adopted in this final rule and we 
will address this with education and outreach.
    Comment: A commenter recommended that the average bonus under the 
proposed methodology should be higher than the stated amount because it 
is lower than the average under the existing methodology.
    Response: We appreciate the commenter's concern. As noted in the FY 
2024 IPPS/LTCH PPS proposed rule (88 FR 27045 through 27048), the 
proposed methodology that we are finalizing 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. We wish to clarify that 
although the percent of hospitals gaining is higher under the proposed 
methodology, the average bonus under the proposed methodology is lower 
than the average under the existing methodology because the hospitals 
that are not benefitting from the bonus are larger and are fewer in 
number, and thus have a greater impact on the average payments. The 
change in average bonuses and penalties is based on the changes in how 
many hospitals receive a bonus or penalty, the size of the bonus or 
penalty, and the size of the hospital. The impact analysis showed that 
the proposed methodology spreads

[[Page 59106]]

the bonuses among more hospitals, with the largest hospitals having the 
lowest proportion of gaining compared to medium- and smaller-sized 
hospitals. The result is thus a lower average bonus under the proposed 
methodology despite that the percent of hospitals gaining is higher.
(6) Modification of 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. In the FY 
2024 IPPS/LTCH PPS proposed rule, we proposed 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 (FR 88 
27049). A TPS maximum of 110 will 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 modifying the TPS range will afford even top-performing 
hospitals the opportunity to receive up to an additional 10 HEA bonus 
points.
    We also proposed 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 that this policy will make it easier for interested 
parties to find these updated policies.
    We invited public comment on this proposal.
    Comment: Several commenters expressed their support for the 
proposal to modify the TPS numeric score range to be 0 to 110 because 
it allows for high performing hospitals to be eligible to earn HEA 
bonus points.
    Response: We thank the commenters for their support and agree that 
the modification of the TPS range will allow high performing hospitals 
to be eligible to earn the HEA bonus points.
    After consideration of the public comments we received, we are 
finalizing our policy as proposed with minor technical modifications at 
42 CFR 412.160, 412.162(b)(3), and 412.165(b)(6).
(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.\307\ 
We believe that the proposed scoring methodology embodies this 
commitment, but recognize it is only a first step.
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    \307\ 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 welcomed 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.
     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 that 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 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?
    We received many comments on this request for information, which 
are summarized in this section of this document:
    Comment: Many commenters provided feedback on alternative 
underserved multiplier variables. Several commenters recommended 
incorporating the ADI or LIS alongside the proposed use of patients 
with DES because there are multiple ways to recognize the structural 
challenges that patients and hospitals face and a combination of these 
will be the most sensitive to capturing at-risk beneficiaries. A 
commenter noted that the concerns of administrative complexity relating 
to using more than one variable are outweighed by the potential to draw 
on multiple sources of information. Another commenter also recommended 
incorporating partial-dual eligible patients. Another commenter 
recommended that CMS ensure that underserved variables are not double 
counted and redundancies within social risk indices as the ADI are

[[Page 59107]]

accounted for. A commenter recommended considering the impact of 
states' decisions for Medicaid expansion versus non-expansion because 
states without expansion will have higher rates of uninsured 
individuals, anticipated delays in access to care, and higher 
healthcare costs over time.
    A few commenters expressed concerns around the underserved 
multiplier alternatives including concerns that ignoring race or 
ethnicity underestimates adverse local factors and that only focusing 
on DES is problematic because of the differential expansion of 
Medicaid. A few commenters expressed concern around the ADI including 
that it is unclear how CMS would ensure a patient residence on file is 
accurate if incorporating the ADI into the calculation and that the ADI 
is heavily weighted towards income and home values with little 
contribution from other variables which masks inequities and 
underestimates vulnerabilities of neighborhoods. A commenter expressed 
concern that CMS is not considering other potential indices that would 
be better indicators of social needs.
    Several commenters recommended underserved multiplier variables 
beyond ADI, DES, and LIS, including such alternatives as, a 
socioeconomic index, a formal designation for essential hospitals that 
could be applied to the HEA adjustment to more accurately identify 
hospitals serving marginalized populations, a stratification by 
patients' HRSN, an index using regression that is tuned for predictive 
strength, the social screening measure results from IQR, and a more 
tailored individual level health related social needs predictor that 
assesses the availability of ICD-10 Z-codes and may document individual 
social need factors. A commenter recommended that any social risk 
indices be weighted appropriately given that social risk has varying 
degrees of association with adverse events, and a commenter recommended 
aligning SDOH data items across care settings when future health equity 
quality measures are developed.
    A few commenters also provided feedback on alternative thresholds 
for scoring including a few commenters recommending using quartiles or 
quintiles for performance scaler points to allow for greater diversity 
in the bonus points awarded to facilities. A commenter recommended 
considering whether institutions make improvement relative to where 
they started rather than which quintile or quartile, they are in by 
giving greater weight for improvement starting from a lower quintile 
than a similar improvement starting from a higher quintile.
    Many commenters offered recommendations for alternative scoring 
methodologies. A commenter recommended excluding the Cost and 
Effectiveness Domain from the measure performance scaler because the 
data is not actionable. A few commenters made recommended 
stratification including stratifying results and prioritizing 
disparities in treatment rendered and stratifying results in a way that 
reflects both ``within-provider'' and ``across-provider'' assessments 
of the level of disparities in clinical processes and outcomes. Several 
commenters made additional recommendations including measuring 
performance of different measures within a domain as separate scores 
rather than a composite score for the domain, incorporating measure 
performance scaler points that incentivize hospitals to initiate 
service connections when a patient screens positive for HRSN, assigning 
greater weight to a local socioeconomic index and amount of 
uncompensated care, capturing indicators among beneficiaries for which 
there are currently limited person-level data available, and 
considering the portion of behavioral health patients treated because 
Medicare patients suffering from behavioral health issues represent 
some of the most vulnerable beneficiaries.
    Several commenters made recommendations around improving data 
collection including creating a robust data collection system that 
identifies the social risk factors faced by patient populations, 
collecting demographic data, investing in strategies to improve more 
robust self-reporting of race and ethnicity data at point of service, 
working with the Office of the National Coordinator for Health 
Information Technology (ONC) to establish data exchange policies and 
infrastructure that allows access to electronic health record (EHR) 
data because private sector EHRs are successfully collecting 
demographic data with high volume and high levels of accuracy, and 
leveraging race and ethnicity data collected by NHIS, MEPS, and the 
2020 Census to address gaps in the current data pool.
    Several commenters made other recommendations including adopting 
health equity standards that could be used across medicine, aligning 
with the Hospital IQR Program's health equity measure, working with 
hospital stakeholders to better understand how hospitals are 
identifying health inequities in their communities to better inform 
agency's approach, prioritizing existing quality measures with 
identified disparity in treatment or outcomes, providing more staff 
education to increase awareness and understanding of social risk 
factors including better documentation of Z-codes, and continuously 
evaluating and adapting to reduce disparities and improve health 
equity. Several commenters recommended other considerations such as 
exploring if social risk factors should be added to the measures used 
in HVBP, including public reporting of stratified measure alongside 
overall measures in a meaningful and transparent way, considering 
hospital characteristics for equity in hospital scoring, considering 
various dimensions that influence inequities, and exploring new 
incentives to encourage providers to work with non-traditional 
healthcare workers to help address SDOH.
    A few commenters made recommendations around the clarity of the 
scoring calculations, recommending transparent and interpretable 
definitions and algorithms with an opportunity for patients and 
communities to understand how it is impacting their care.
    Response: We appreciate the comments and suggestions we have 
received. While we will not be responding to specific comments 
submitted in response to this request for information, we believe that 
this input is valuable in our efforts to continue to promote health 
equity in the Hospital VBP Program. We may consider these suggestions 
in future rulemaking.
c. 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to these domain weights (88 FR 27050).
d. 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 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

[[Page 59108]]

reweighted (79 FR 50084 through 50085).
    In the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to these domain weights (88 FR 27050).
e. 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to these policies (88 FR 27050).
f. 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 Established Minimum Numbers 
of Cases
    The previously adopted minimum numbers of cases for the Hospital 
VBP Program 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 proposed to maintain 
the same minimum number of cases as the current measures.
    We proposed to codify at 42 CFR 412.165(a)(1)(i) these minimum 
numbers of cases. We believe that this proposal will make it easier for 
interested parties to find these policies.
[GRAPHIC] [TIFF OMITTED] TR28AU23.275

    We invited comment on these proposals.
    We received no comments on this proposal and are finalizing this 
provision without modification.
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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to the Hospital VBP Program ECE policy (88 FR 27051).

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).

[[Page 59109]]

     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.\308\
---------------------------------------------------------------------------

    \308\ 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 
F;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.\309\
---------------------------------------------------------------------------

    \309\ 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.276

    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.
    We did not propose 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 did not propose 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 
COVID-19 hospitalized individuals on the CMS PSI 90 measure. We note 
the COVID-19 public health emergency ended on May 11, 2023.\310\
---------------------------------------------------------------------------

    \310\ 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 did not propose any changes to these policies.
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

[[Page 59110]]

2021, by 7 percent, 5 percent, and 14 percent respectively.\311\ 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.\312\ 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 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.\313\ 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.\314\ 
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.315 316
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    \311\ Centers for Disease Control and Prevention. (2022) Current 
HAI Progress Report. Available at: https://www.cdc.gov/hai/data/portal/progress-report.html#2018.
    \312\ 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.
    \313\ 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.
    \314\ 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.
    \315\ 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.
    \316\ 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 the FY 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28452), we sought 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 (HOB) & 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. In the 
FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27052), we sought 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 final rule, the Hospital IQR 
Program is finalizing the adoption of three additional eCQMs, which we 
sought 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 invited public comment on the adoption of these six eCQMs 
in the HAC Reduction Program.
    Our longstanding policy is that, 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 invited public comment on potential future measures as well as 
on how the HAC Reduction Program can further promote patient safety. 
Specifically, we invited 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?
    Comment: Several commenters recommended that new measures be 
introduced in the HAC Reduction Program that address medication safety 
related adverse events, procedure or surgery related adverse events, 
and SSIs. Many commenters suggested the adoption of a hospital-onset 
COVID-19 measure in the HAC Reduction Program,

[[Page 59111]]

defined as infections diagnosed after five days of admission or 
greater. Several commenters also recommended the adoption of a HOB 
measure with a blood culture contamination benchmark of less than one 
percent. Many commenters expressed support for the potential future 
adoption in the HAC Reduction Program of the three hospital harm and 
patient safety eCQMs that are currently in the Hospital IQR Program--
Opioid-Related Adverse Events, Severe Hypoglycemia, and Severe 
Hyperglycemia eCQMs--and the three patient safety related eCQMs that 
were proposed in the Hospital IQR Program in the FY 2024 IPPS/LTCH PPS 
proposed rule--Acute Kidney Injury, Pressure Injury, and Excessive 
Radiation Dose or Inadequate Image Quality for Diagnostic Computer 
Tomography in Adults eCQMs--for the HAC Reduction Program.
    Many commenters did not support the future adoption of the 
Excessive Radiation Dose or Inadequate Image Quality for Diagnostic 
Computer Tomography in Adults eCQM expressing concern about the 
metrics, calculation methods, and software used for the measure. Many 
commenters did not support the addition of new measures, specifically 
eCQMs, and expressed concern about receiving timely, actionable 
performance feedback and stated concern about the burden and cost 
associated with implementing eCQMs. Several commenters recommended CMS 
thoroughly review, test, and first adopt eCQMs in the Hospital IQR 
Program before adoption in the HAC Reduction Program. Several 
commenters recommended standardizing the health equity methods across 
quality reporting and value-based purchasing programs and to adjust 
measures for patients who are dually eligible for Medicare and 
Medicaid. A few commenters recommended peer grouping hospitals by size 
and hospital characteristics for better performance comparisons. 
Several commenters recommended stratifying measures by Medicaid 
eligibility and social risk factors for equitable comparisons and to 
mitigate overly penalizing hospitals that serve disproportionately 
impacted populations.
    Response: We thank commenters for their feedback on the potential 
future measures to include in the HAC Reduction Program. We also 
appreciate commenters' feedback on potential program modifications to 
encourage equitable care, reduce administrative and provider burden, 
and promote patient safety. We will consider all input and note that 
any future proposal to implement a new measure or program modification 
would be announced through future notice-and comment rulemaking.
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 did not propose 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, 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 did not 
propose any changes to these processes.
(2) Adopt a Validation Reconsideration Process
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed to add a 
validation reconsideration process to the HAC Reduction Program, giving 
hospitals the opportunity to request reconsideration of their final 
validation scores (88 FR 27054 through 27055). 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 
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

[[Page 59112]]

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 proposed 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 will 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.\317\
---------------------------------------------------------------------------

    \317\ To clarify, the validation reconsideration process would 
be conducted after validation of HAIs for all four quarters of the 
first year of the program's performance period and after the 
confidence interval has been calculated.
---------------------------------------------------------------------------

    The process will 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 proposed to notify a hospital that failed the HAC Reduction 
Program validation requirement for the CDC NHSN HAI measures via a 
notification letter sent by certified mail. The letter will instruct a 
hospital 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 will 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 will provide hospitals an email acknowledgement, following 
receipt of a request for validation reconsideration, using the contact 
information provided in the validation reconsideration request. We will 
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 will 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 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 will 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 will 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 
will not abstract medical records that were not submitted during the 
initial validation process. We will 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 will abstract 
data elements from the medical record submitted by the hospital as part 
of our review of its reconsideration request. After the reconsideration 
process is complete, we will 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 will 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

[[Page 59113]]

Scores, are subject to a 1-percent payment reduction under the HAC 
Reduction Program. We noted in the proposed rule that the HAC Reduction 
Program reconsideration process would be limited to reconsideration as 
to the data validation requirements of the program. We did not propose 
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 invited public comment on this proposal.
    Comment: Several commenters supported the proposal to establish a 
reconsideration process for data validation. A few commenters supported 
the proposal because it would provide hospitals an opportunity to 
request further review of mismatches between reported data and medical 
record information that were identified during the validation process 
and that may result in failing data validation and receiving the worst 
possible scores for the measures validated.
    Response: We thank the commenters for their support.
    Comment: A commenter questioned whether a hospital could file an 
appeal with the Provider Reimbursement Review Board (PRRB) and the 
potential options if it is dissatisfied with the reconsideration 
determination.
    Response: We appreciate the commenter's question on the options for 
hospitals to appeal their validation results. Hospitals will not have 
the option to file an appeal with the PRRB if it is dissatisfied with 
the reconsideration determination. We refer the commenter to the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41480) where we finalized the 
Educational Review Process in which hospitals selected for validation 
would have a 30-day period following the receipt of quarterly 
validation results to seek educational review. During this 30-day 
period, hospitals may review, seek clarification, and potentially 
identify a CMS validation error. Additionally, hospitals may request 
reconsideration of their validation results as described in section 
X.X. of this final rule. We believe that both the educational review 
and the reconsideration processes provide hospitals with multiple 
avenues to request review of their validation results.
    After consideration of the public comments we received, we are 
finalizing our proposal to establish a validation reconsideration 
process in the HAC Reduction Program beginning with the FY 2025 program 
year as proposed.
(3) Update the Targeting Criteria for Hospitals Granted an 
Extraordinary Circumstances Exception (ECE)
    As proposed in the Hospital IQR Program as discussed in section 
IX.C.11.b of this final rule, we proposed to update our targeting 
criteria for validation of hospitals granted an extraordinary 
circumstances exception (ECE) in the HAC Reduction Program (88 FR 
27055). Specifically, we proposed 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 proposed to add a new criterion to the five established 
targeting criteria used to select the up to 200 additional hospitals. 
We proposed that a hospital subject to validation that 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 will not receive the penalty of 
the maximum Winsorized z-scores, the worst scores, for measures 
validated. This exception will not except a hospital from participation 
in the HAC Reduction Program, and the hospital will 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 this additional criterion will promote alignment 
with the Hospital IQR Program. Hospitals that meet this criterion will 
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 or more quarters and does not meet the 
75 percent threshold.
    Specifically, we proposed 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 modification to the targeting criteria aligns 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). We discussed in the 
proposed rule that this policy would also allow us to appropriately 
address instances in which hospitals, with an ECE for one or more 
quarters for the data period validated, will 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 invited public comment on this proposal.
    Comment: A few commenters supported the modification to the data 
validation targeting criteria. A commenter expressed support for the 
proposal because it would align with other quality reporting programs 
and ensure hospitals granted an ECE are not penalized for failing to 
meet the validation requirement during an unforeseen circumstances.
    Response: We appreciate the commenters for their support of the 
proposal. We agree that the modification of the targeting criteria will 
further align the HAC Reduction Program with the Hospital IQR and 
Hospital OQR Programs. We agree that the addition of the criterion will 
appropriately address instances in which hospitals with an ECE for one 
or more quarters for the data period validated fail validation, and 
will prevent a hospital from receiving the maximum Winsorized z-scores 
based on data representing a period during an extraordinary event.
    After consideration of the public comments we received, we are 
finalizing, as proposed, to modify the HAC Reduction Program data 
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 for the data period validated beginning with 
the FY 2027 program

[[Page 59114]]

year, affecting validation of calendar year 2024 discharges.

K. Rural Community Hospital Demonstration Program

1. Introduction
    The Rural Community Hospital Demonstration was originally 
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 final rule, we summarize the status of the 
demonstration program, and the current methodologies for implementation 
and calculating budget neutrality.
    We are finalizing 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 including the reconciled amount of 
demonstration costs for FY 2018 in the FY 2024 IPPS/LTCH final rule, 
based on the finalized cost reports for this earlier year.
2. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing rural community hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1), is a hospital 
that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Our policy for implementing the 5-year extension period authorized 
by Public Law 116-260 (the Consolidated Appropriations Act, 2021) 
follows upon the previous extensions under the ACA (Pub. L. 111-148) 
and the Cures Act (Pub. L. 114-255). Section 410A of Pub L. 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 ACA, 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.
2. 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

[[Page 59115]]

costs of the demonstration set forth in the final rule for a prior 
fiscal year exceeded the actual costs of the demonstration for that 
year, this difference was subtracted from the estimated cost of the 
demonstration for the upcoming fiscal year when determining the budget 
neutrality adjustment for the upcoming fiscal year.
    We note that we have calculated this difference for FYs 2005 
through 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, 2021, we have continued upon the 
general budget neutrality methodology used in previous years, as 
described above in the citations to earlier IPPS final rules. In this 
final rule, we outline the methodology 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 
estimate the costs of the demonstration for the upcoming fiscal year, 
and 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 market basket percentage 
increase for FY 2024 IPPS final rule, which can be found at section 
V.B. of the preamble to this final 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) 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 applicable 
percentage increase amount identified in section V.B. of the preamble 
of this final rule.) This methodology differs from Step 1, in which we 
apply the market basket percentage increases to the hospitals' 
applicable estimated reasonable cost amount for covered inpatient 
hospital services. We believe that the IPPS applicable percentage 
increases are appropriate factors to update the estimated amounts that 
generally would otherwise be paid without the demonstration. This is 
because IPPS payments constitute the majority of payments that would 
otherwise be made without the demonstration and the applicable 
percentage increase is the factor used under the IPPS to update the 
inpatient hospital payment rates.
    Step 3: We subtract the amount derived in Step 2 from the amount 
derived in Step 1. According to our methodology, the resulting amount 
indicates the total difference for the 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 final rule, the resulting amount is $37,766,716, 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. We 
note that in this final rule we are using revised update factors as 
compared to the proposed rule, to estimate the costs for the 
demonstration program for FY 2024 in accordance with our methodology 
for determining the budget neutrality estimate.
(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 final rule, all of the finalized cost 
reports have become available for the 29 hospitals that completed cost 
report periods beginning in FY 2018 under the demonstration payment 
methodology. Thus, as we described in the proposed rule, we are 
including the difference between the actual cost of the demonstration 
for FY 2018 as determined from finalized cost reports and the estimated 
amount for the fiscal year within the budget neutrality offset amount 
in the FY 2024 final rule.
    The actual costs of the demonstration for FY 2018, as determined 
from the finalized cost reports for the 29 hospitals that completed 
cost report periods beginning in FY 2018 under the demonstration 
payment methodology, is $46,745,899. This amount exceeds the amount 
that was estimated for FY 2018 in the FY 2019 IPPS final rule 
($31,070,880) by $15,675,019. (Following upon the selection of new 
hospitals for the demonstration in 2017, the estimated costs of the 
demonstration for FYs 2018 and 2019 were included in the FY 2019 IPPS 
final rule). (83 FR 41054). Thus, keeping with past practice, we are 
adding this difference to the estimated cost for FY 2024 in determining 
the budget neutrality offset amount for the FY 2024 IPPS final rule.
(3) Total Budget Neutrality Offset Amount for FY 2024
    Therefore, for this FY 2024 IPPS/LTCH PPS final rule, the budget

[[Page 59116]]

neutrality offset amount for FY 2024 is the sum of two amounts:
    (i) the amount determined under section X.2.c.(1). of the preamble 
of this final rule, representing the difference applicable to FY 2024 
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 $37,766,716.
    (ii) the amount determined under section X.2.c.(2), which 
represents the difference between the actual costs of the demonstration 
for FY 2018, as determined from the finalized cost reports for the 29 
hospitals with cost reporting periods under the demonstration payment 
methodology that began in that fiscal year, and the earlier estimated 
cost of the demonstration for the fiscal year. This amount is 
$15,675,019.
    Thus, the total budget neutrality offset amount for the FY 2024 
IPPS final rule is $53,441,735. This amount will be subtracted from the 
national IPPS payment rates for FY 2024.
    Comment: The parent company for two of the participating hospitals 
expressed support for the continuation of the of the Rural Community 
Hospital Demonstration program, but noted that it does not offer long-
term financial stability needed to maintain health care access in rural 
areas. The commenter requests that the demonstration be made a 
permanent program, and, in addition, that CMS institute an application 
process to ensure the demonstration meets program capacity. 
Furthermore, the commenter requests several technical adjustments to 
the administration of the demonstration that may enhance stability in 
the payment to the participating hospitals.
    Response: We appreciate the comments. We have conducted the 
demonstration program in accordance with Congressional mandates. Title 
XVIII does not extend authority to make the demonstration a permanent 
program. With regard to any further actions, we intend to work with the 
commenter and other rural stakeholders to examine the issues involved.

VI. 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.

[[Page 59117]]

C. Annual Update for FY 2024

    The 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 final 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, in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27058 through 27059), we proposed to revise the 
capital DSH regulations in response to this court ruling. Specifically, 
we proposed 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 purposes of determining eligibility for 
capital DSH payments. We proposed 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.
    Comment: Commenters were generally supportive of our proposal to no 
longer consider hospitals reclassified as rural under Sec.  412.103 as 
rural for purposes of determining eligibility for capital DSH payments 
and some emphasized their belief that capital costs of reclassified 
rural providers under Sec.  412.103 are more equivalent to other urban 
providers as opposed to geographically rural providers. Some commenters 
expressed concern that CMS did not propose to apply this change in 
policy retroactively. These commenters disagree that the exception 
codified at Sec.  412.320(a)(1)(iii) should remain effective for 
discharges occurring on or after October 1, 2006, and before October 1, 
2023. These commenters believe that this exception remaining effective 
for this period is inconsistent with the court's decision and also 
inconsistent with the proposal that the exception will no longer apply 
for discharges on or after October 1, 2023. Some of these commenters 
believe at a minimum CMS should allow hospitals reclassified as rural 
under Sec.  412.103 to receive capital DSH payments for any open or 
reopenable cost reports between FY 2007 and FY 2023.
    Response: We thank commenters for their support of our proposal. We 
do not agree with commenters that believe our proposal should be 
applied retroactively. The IPPS is a prospective system, and therefore 
we generally make changes to IPPS regulations effective prospectively 
based on the date of discharge or the start of a cost reporting period 
within a certain Federal fiscal year.
    Comment: A commenter encouraged CMS to also expand capital DSH 
eligibility to geographically rural hospitals. The commenter believes 
this would bolster the rural health care safety net. The commenter 
cited negative capital margins at geographically rural hospitals, low 
occupancy rates in geographically rural hospitals, as well as recent 
closure of geographically rural hospitals as reasons why expanding 
capital DSH eligibility to geographically rural hospitals would be 
justified.
    Response: We believe this comment is out of scope of this 
rulemaking. We thank the commenter for this suggestion and may consider 
it in future rulemaking. We note that the capital DSH payment 
adjustments were finalized in the FY 1992 IPPS final rule (56 FR 43377 
through 43379) based on a cost regression analysis.
    After consideration of the public comments we received, we are 
finalizing as proposed, 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 purposes of determining 
eligibility for capital DSH payments. We also are finalizing our 
proposal to amend 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 
will apply with no exceptions.

VII. Changes for Hospitals Excluded From the IPPS

A. 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

[[Page 59118]]

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 the FY 2024 IPPS/LTCH PPS proposed rule, based on IGI's 2022 
fourth quarter forecast, we estimated that the 2018-based IPPS 
operating market basket percentage increase for FY 2024 would be 3.0 
percent (that is, the estimate of the market basket rate-of-increase). 
However, we proposed that if more recent data became 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. As proposed, we used more recent data for this FY 2024 
IPPS/LTCH PPS final rule, based on IGI's 2023 second quarter forecast, 
we estimate that the 2018-based IPPS operating market basket update for 
FY 2024 is 3.3 percent. 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, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa will be 3.3 percent, in accordance 
with the applicable regulations at 42 CFR 413.40.
    In addition, payment for inpatient operating costs for hospitals 
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer 
to as ``extended neoplastic disease care hospitals'') for cost 
reporting periods beginning on or after January 1, 2015, is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs for 
these hospitals is to be made as described in 42 CFR 412.526(c)(4). For 
additional information on these payment regulations, we refer readers 
to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 38322). 
Section 412.526(c)(3) provides that the hospital's Medicare allowable 
net inpatient operating costs for that period are paid on a reasonable 
cost basis, subject to that hospital's ceiling, as determined under 
Sec.  412.526(c)(1), for that period. Under Sec.  412.526(c)(1), for 
each cost reporting period, the ceiling was determined by multiplying 
the updated target amount, as defined in Sec.  412.526(c)(2), for that 
period by the 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 was 3.0 percent, which was based 
on IGI's fourth quarter 2022 forecast. Furthermore, we proposed that if 
more recent data became 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. For this FY 2024 
IPPS/LTCH PPS final rule, based on IGI's 2023 second quarter forecast, 
we estimate that the 2018-based IPPS operating market basket update for 
FY 2024 is 3.3 percent.
    We received no comments on this proposal and therefore are 
finalizing this provision without modification. Incorporating more 
recent data available for this final rule, as we proposed, we are 
adopting a 3.3 percent update for FY 2024.

B. Report on Adjustment (Exception) Payments

    Section 4419(b) of Public Law 105-33 requires the Secretary to 
publish annually in the Federal Register a report describing the total 
amount of adjustment payments made to excluded hospitals and hospital 
units by reason of section 1886(b)(4) of the Act during the previous 
fiscal year.
    The process of requesting, reviewing, and awarding an adjustment 
payment is likely to occur over a 2-year period or longer. First, 
generally, an excluded hospital must file its cost report for the 
fiscal year in accordance with Sec.  413.24(f)(2) of the regulations. 
The MAC reviews the cost report and issues a notice of provider 
reimbursement (NPR). Once the hospital receives the NPR, if its 
operating costs are in excess of the ceiling, the hospital may file a 
request for an adjustment payment. After the MAC receives the 
hospital's request in accordance with applicable regulations, the MAC 
or CMS, depending on the type of adjustment requested, reviews the 
request, and determines if an adjustment payment is warranted. This 
determination is sometimes not made until more than 180 days after the 
date the request is filed because there are times when the request 
applications are incomplete and additional information must be 
requested to have a completed request application. However, in an 
attempt to provide interested parties with data on the most recent 
adjustment payments for which we have data, we are publishing data on 
adjustment payments that were processed by the MAC or CMS during FY 
2022.
    The table that follows includes the most recent data available from 
the MACs and CMS on adjustment payments that were adjudicated during FY 
2022. As indicated previously, the adjustments made during FY 2022 only 
pertain to cost reporting periods ending in years prior to FY 2022. 
Total adjustment payments made to IPPS-excluded hospitals during FY 
2022 are $4,338,890. The table depicts for each

[[Page 59119]]

class of hospitals, in the aggregate, the number of adjustment requests 
adjudicated, the excess operating costs over the ceiling, and the 
amount of the adjustment payments.
[GRAPHIC] [TIFF OMITTED] TR28AU23.277

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 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 final 
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 
final 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 final 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

[[Page 59120]]

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 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) and 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

[[Page 59121]]

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 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 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 final 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

[[Page 59122]]

demonstration is appropriately captured.
    We received no comments on our proposal not to apply a budget 
neutrality payment offset to payments to CAHs in FY 2024. Therefore, we 
are finalizing this provision without modification. This policy will 
have no impact for any national payment system for FY 2024.

VIII. 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 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 final 
rule, when we refer to discharges, we describe Medicare discharges.) 
The August 30, 2002 final rule further details the payment policy under 
the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS. (For more information on these 
provisions, we refer readers to 82 FR 38299.)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extended

[[Page 59123]]

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 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 final rule 
for our discussion on our use of the most recent data available for the 
FY 2024 LTCH PPS ratesetting, including the FY 2022 MedPAR claims and 
FY 2021 cost report data.
    Comment: We received several comments unrelated to LTCH PPS 
proposals included in the proposed rule. For example, some commenters 
requested changes to the structure of the site neutral payment policy 
or the calculation of the average length of stay.
    Response: We appreciate the commenters' feedback and will keep 
these comments in mind for future rulemaking.

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

[[Page 59124]]

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 will be 
766 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the 
changes, as discussed in section II.E. of the preamble of this final 
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 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 
standard, 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 final rule. Additional coding 
instructions and examples are published in the AHA's Coding Clinic for 
ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    Medicare Administrative Contractors (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

[[Page 59125]]

the Medicare PRICER program, which accounts for hospital-specific 
adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to 
review the MS-LTC-DRG assignments made by the MAC and to submit 
additional information within a specified timeframe as provided in 
Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 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 final rule, as proposed, we updated the MS-LTC-DRG 
classifications effective October 1, 2023 through September 30, 2024 
(FY 2024) consistent with the changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
final rule. Accordingly, the MS-LTC-DRGs for FY 2024 are the same as 
the MS-DRGs being used under the IPPS for FY 2024. In addition, because 
the MS-LTC-DRGs for FY 2024 are the same as the MS-DRGs for FY 2024, 
the other changes that affect MS-DRG (and by extension MS-LTC-DRG) 
assignments under GROUPER Version 41, as discussed in section II.E. of 
the preamble of this final rule, including the changes to the MCE 
software and the ICD-10-CM/PCS coding system, are also applicable under 
the LTCH PPS for FY 2024.
3. 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 
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 methodology). For FY 2024, we are continuing to use applicable 
LTCH cases to establish the same volume-based categories to calculate 
the FY 2024 MS-LTC-DRG relative weights.
b. Development of the MS-LTC-DRG Relative Weights for FY 2024
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27064 through 
27073), we presented our proposed methodology for determining the MS-
LTC-DRG relative weights for FY 2024. In this section, we first respond 
to the public comments received regarding the proposed methodology and 
the proposed MS-LTC-DRG relative weights for FY 2024. As discussed in 
Section I.E., of the preamble to this final rule, we received several 
comments on our proposal to use FY 2022 data for purposes of the FY 
2024 LTCH PPS ratesetting. While the comments were nearly all focused 
on the specific use of FY 2022 data when determining the FY 2024 
outlier fixed-loss amount for LTCH PPS standard Federal payment rate 
cases, some commenters did state that CMS should not use FY 2022 data 
to calculate the MS-LTC-DRG relative weights without also modifying our 
proposed MS-LTC-DRG relative weight methodology. The commenters did not 
provide specific suggestions on what modifications CMS should make to 
the FY 2024 MS-LTC-DRG relative weight

[[Page 59126]]

methodology, but did express that modifications are necessary due to 
the impact of the COVID-19 PHE on the FY 2022 data. Since these 
comments were nearly all focused on the specific use of FY 2022 data 
when determining the FY 2024 outlier fixed-loss amount for LTCH PPS 
standard Federal payment rate cases, we have fully summarized and 
responded to all comments on the use of FY 2022 data for purposes of 
the FY 2024 LTCH PPS ratesetting in section V.D.3. of the Addendum to 
this final rule. For the reasons discussed in that section, we are 
finalizing our proposal to use FY 2022 data for purposes of the FY 2024 
IPPS and LTCH PPS ratesetting. We also are finalizing, without 
modification, our proposed methodology for determining the FY 2024 MS-
LTC-DRG relative weights.
    Comment: A commenter stated that the proposed MS-LTC-DRG relative 
weights would have a negative impact on Virginia hospitals. The 
commenter asked that CMS readdress the proposed MS-LTC-DRG weight 
methodology, stating that it appears to be flawed due to the cases used 
in the calculations. The commenter did not specify what cases they 
believe make the methodology flawed or provide a specific suggestion on 
what modifications CMS should make to our proposed methodology.
    Response: It is expected that the annual recalibration of the MS-
LTC-DRG relative weights will increase the estimated case-mix index of 
some hospitals while decreasing the estimated case-mix index of other 
hospitals. For example, based on the relative weights calculated for 
this final rule, we estimate that the FY 2024 recalibration of the MS-
LTC-DRG relative weights will result in the case-mix index for standard 
payment rate cases increasing for 3 Virginia LTCHs while decreasing for 
the other 3 Virginia LTCHs. We note that while the annual recalibration 
of the MS-LTC-DRG relative weights will have a positive impact for some 
LTCHs and a negative impact for other LTCHs, the MS-LTC-DRG weight 
methodology ensures that estimated aggregate payments under the LTCH 
PPS are not affected (that is, they are not decreased or increased) by 
the annual recalibration of the MS-LTC-DRG relative weights. For the 
reasons discussed in section V.D.3. of the Addendum to this final rule, 
we continue to believe that FY 2022 MedPAR claims are the best data 
available for calculating the FY 2024 MS-LTC-DRG relative weights and 
disagree that modifications to our proposed MS-LTC-DRG weight 
methodology are warranted for this final rule.
    Comment: A commenter stated that the proposed relative weights for 
18 of the top 25 MS-LTC-DRGs decreased, while the geometric length of 
stay for 6 of these 18 MS-LTC-DRGs increased. The commenter believes 
this is counterintuitive and that, by recognizing a MS-LTC-DRG will 
require longer care, the MS-LTC-DRG weight should innately increase. 
The commenter stated that the proposed decreases to the weights of 
these MS-LTC-DRGs will allocate less funding for patients who can only 
receive the level of care they need at LTCHs because other care 
settings cannot meet the medical needs of the patients.
    Response: We were unable to replicate the commenter's calculations. 
Based on the proposed FY 2024 MS-LTC-DRG relative weights, we 
determined that 16 of the top 25 MS-LTC-DRGs (determined by number of 
applicable LTCH cases in the FY 2022 MedPAR file) would see their 
relative weights decrease relative to their FY 2023 relative weight. Of 
these 16 MS-LTC-DRGs, we determined that the proposed geometric length 
of stay would increase for 3 of these MS-LTC-DRGs. We note that it 
should not be expected that an MS-LTC-DRG with an increased geometric 
length of stay will always have a corresponding increased relative 
weight. Each MS-LTC-DRG relative weight represents the average 
resources required to treat an LTCH patient grouped to that MS-LTC-DRG 
compared to the average resources require to treat all LTCH patients. 
If the average resources required to treat all LTCH patients increases 
more than the average resources required to treat an LTCH patient 
grouped to a certain MS-LTC-DRG, then the relative weight for that MS-
LTC-DRG will decrease.
    Comment: A commenter expressed concern regarding the high 
concentration of LTCH discharges assigned to only two MS-LTC-DRGs: 189 
(Pulmonary edema and respiratory failure) and 207 (Respiratory system 
diagnosis with ventilator support 96+ hours). The commenter stated that 
these two MS-LTC-DRGs alone account for more than 40 percent of LTCH 
stays. Due to this high concentration, the commenter encouraged CMS to 
study splitting and refining by complication or comorbidity (CC) and 
major complication or comorbidity (MCC) these MS-LTC-DRGs. The 
commenter believes this high concentration is one of the main factors 
causing annual increases in the fixed-loss amount for LTCH PPS standard 
Federal rate cases. The commenter stated that when there is significant 
concentration of cases in an MS-LTC-DRG, there is a wide range of costs 
among the cases assigned to the MS-LTC-DRG, making it more likely that 
there will be high cost outlier cases in the cases assigned to the MS-
LTC-DRG.
    Response: We thank the commenter for this suggestion to further 
study these MS-LTC-DRGs. We may consider this suggestion for future 
rulemaking.
    Comment: A commenter objected to our proposal to continue to apply 
a budget neutrality adjustment to the MS-LTC-DRG relative weights so 
that the 10-percent cap on relative weight reductions is implemented in 
a budget neutral manner. This commenter urged CMS to fund this policy 
for FY 2024 with additional new funds rather than through a budget-
neutrality reduction.
    Response: We thank the commenter for this comment. However, we 
continue to believe it is appropriate to apply this policy in a budget 
neutral manner, consistent with the existing budget neutrality 
requirement for annual MS-LTC-DRG reclassification and recalibration, 
which we adopted to mitigate estimated fluctuations in estimated 
aggregate LTCH PPS payments (72 FR 26881 through 26882).
    After consideration of the comments we received, we are finalizing, 
without modification, our proposed methodology for determining the MS-
LTC-DRG relative weights for FY 2024. In the remainder of this section, 
we present our finalized methodology. We first list and provide a brief 
description of our steps for determining the FY 2024 MS-LTC-DRG 
relative weights. We then, later in this section, discuss in greater 
detail each 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, as 
we proposed, we are returning 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). 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 MS-LTC-DRG relative weights.
     Step 2--Remove cases with a length of stay of 7 days or 
less. In this step, we

[[Page 59127]]

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 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27067), 
consistent with our proposal in section I.E. of the preamble of the 
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 proposed 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. 
Accordingly, for this final rule, we are establishing the FY 2024 MS-
LTC-DRG relative weights based on updated FY 2022 Medicare LTCH claims 
data from the March 2023 update of the FY 2022 MedPAR file, which is 
the best available data at the time of development of this final rule, 
and the finalized Version 41 of the GROUPER to classify LTCH cases.
    To calculate the FY 2024 MS-LTC-DRG relative weights under the dual 
rate LTCH PPS payment structure, as we proposed, we 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 March 2023 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 March 2023 update of the FY 2022 MedPAR 
file, we identified 166 LTCH PPS standard Federal payment rate cases 
for this LTCH. Of these 166 cases, 118 of the cases had charges that 
were exactly or

[[Page 59128]]

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, as we 
proposed, we removed 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 final rule, we also are removing 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 final 
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 
March 2023 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 March 2023 
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 steps to calculate the 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 calculation of the FY 2024 MS-LTC-DRG relative 
weights is to remove cases with a length of stay of 7 days or less. The 
MS-LTC-DRG relative weights reflect the average of resources used on 
representative cases of a specific type. Generally, cases with a length 
of stay of 7 days or less do not belong in an LTCH because these stays 
do not fully receive or benefit from treatment that is typical in an 
LTCH stay, and full resources are often not used in the earlier stages 
of admission to an LTCH. If we were to include stays of 7 days or less 
in the computation of the FY 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, as we proposed, consistent with 
our existing relative weight methodology, in determining the FY 2024 
MS-LTC-DRG relative weights, we removed LTCH cases with a length of 
stay of 7 days or less from applicable LTCH cases. (For additional 
information on what is removed in this step of the relative weight 
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
    Step 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, as we proposed, we are continuing to employ the quintile 
methodology for low-volume MS-LTC-DRGs, such that we grouped the ``low-
volume MS-LTC-DRGs'' (that is, MS-LTC-DRGs that contain between 1 and 
24 applicable LTCH cases into one of five categories (quintiles) based 
on average charges (67 FR 55984 through 55995; 72 FR 47283 through 
47288; and 81 FR 25148)).
    In this final rule, based on the best available data (that is, the 
March 2023 update of the FY 2022 MedPAR file), we identified 236 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 final rule, the number of MS-LTC-
DRGs with less than 25 applicable LTCH cases was not evenly divisible 
by 5. The quintiles each contained at least 47 MS-LTC-DRGs (236/5 = 47 
with a remainder of 1). As we proposed, we employed 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, as we proposed, we 
adjusted the resulting low-volume MS-LTC-DRGs to preserve monotonicity, 
as discussed in Step 7 of our methodology.
    To determine the FY 2024 relative weights for the low-volume MS-
LTC-DRGs, consistent with our historical practice, we used the five 
low-volume quintiles described previously. We determined a relative 
weight and (geometric) average length of stay for each of the five low-
volume quintiles using the methodology described in Step 6 of our 
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 final rule, we are providing the list of the composition 
of the 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 final 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 calculation of the 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, as we proposed, we are continuing 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

[[Page 59129]]

than or equal to 8 days. In this final 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 calculation of the FY 2024 MS-LTC-DRG 
relative weights, consistent with our historical approach, as we 
proposed, we adjusted each LTCH's charges per discharge for those 
remaining cases (that is, trimmed applicable LTCH cases) for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, as we proposed, we made this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay 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 FY 2024 MS-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 are 
continuing 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 
final rule, as we proposed, we are continuing 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, as we 
proposed, we calculated the 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 continued 
to standardize charges for each applicable LTCH case by first dividing 
the adjusted charge for the case (adjusted for SSOs under Sec.  412.529 
as described in Step 5 of our 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 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, it's 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.

[[Page 59130]]

    The MS-DRGs contain base DRGs that have been subdivided into one, 
two, or three severity of illness levels. Where there are three 
severity levels, the most severe level has at least one secondary 
diagnosis code that is referred to as an MCC (that is, major 
complication or comorbidity). The next lower severity level contains 
cases with at least one secondary diagnosis code that is a CC (that is, 
complication or comorbidity). Those cases without an MCC or a CC are 
referred to as ``without CC/MCC.'' When data do not support the 
creation of three severity levels, the base MS-DRG is subdivided into 
either two levels or the base MS-DRG is not subdivided. The two-level 
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG 
without CC/MCC. Alternatively, the other type of two-level subdivision 
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a 
three-level split). That is, theoretically, cases that are more severe 
typically require greater expenditure of medical care resources and 
would result in higher average charges. Therefore, in the three 
severity levels, relative weights should increase by severity, from 
lowest to highest. If the relative weights decrease as severity 
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC 
has a higher relative weight than one with MCC, or the MS-LTC-DRG 
``without CC/MCC'' has a higher relative weight than either of the 
others), they are nonmonotonic. We continue to believe that utilizing 
nonmonotonic relative weights to adjust Medicare payments would result 
in inappropriate payments because the payment for the cases in the 
higher severity level in a base MS-LTC-DRG (which are generally 
expected to have higher resource use and costs) would be lower than the 
payment for cases in a lower severity level within the same base MS-
LTC-DRG (which are generally expected to have lower resource use and 
costs). Therefore, in determining the FY 2024 MS-LTC-DRG relative 
weights, consistent with our historical methodology, as we proposed, we 
continued to combine MS-LTC-DRG severity levels within a base MS-LTC-
DRG for the purpose of computing a relative weight when necessary to 
ensure that monotonicity is maintained. For a comprehensive description 
of our existing methodology to adjust for nonmonotonicity, we refer 
readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 
through 43966). Any adjustments for nonmonotonicity that were made in 
determining the FY 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 final 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 March 2023 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 final rule). (For additional information on this 
step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    Consistent with our existing methodology, as we proposed, we cross-
walked each no-volume MS-LTC-DRG to another MS-LTC-DRG for which we 
calculated a relative weight (determined in accordance with the 
methodology as previously described). Then, the ``no-volume'' MS-LTC-
DRG is assigned the same relative weight (and average length of stay) 
of the MS-LTC-DRG to which it was cross-walked (as described in greater 
detail in this section of this final rule).
    Of the 766 MS-LTC-DRGs for FY 2024, we identified 429 MS-LTC-DRGs 
for which there were no trimmed applicable LTCH cases. The 429 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 401 MS-LTC-DRGs that 
for which, we assigned a relative weight using our existing ``no-
volume'' MS-LTC-DRG methodology (that is, 429 - 11 - 2 - 15 = 401). As 
we proposed, we assigned relative weights to each of the 401 no-volume 
MS-LTC-DRGs based on clinical similarity and relative costliness to 1 
of the remaining 337 (766 - 429 = 337) 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 337 MS-LTC-DRGs to which we cross-walked each 
of the 401 ``no-volume'' MS-LTC-DRGs.) Then, in general, we assigned 
the 401 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 March 2023 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 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,

[[Page 59131]]

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 final rule, we are providing the list of the no-volume MS-
LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, 
the cross-walked MS-LTC-DRGs) for FY 2024 in a supplemental data file 
for public use posted via the internet on the CMS website for this 
final 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.
    To illustrate this methodology for determining the 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 final rule for MS-LTC-DRG 061 
(Ischemic stroke, precerebral occlusion or transient ischemia with 
thrombolytic agent with MCC). We determined that MS-LTC-DRG 064 
(Intracranial hemorrhage or cerebral infarction with MCC) is similar 
clinically and based on resource use to MS-LTC-DRG 061. Therefore, we 
assigned the same relative weight (and average length of stay) of MS-
LTC-DRG 064 of 1.4532 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 
final rule and is available via the internet on the CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume would vary in 
the future. Consistent with our historical practice, as we proposed, we 
used 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, as we proposed, we are establishing 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 establishing 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 establishing 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 establishing 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, as 
we proposed, we continued to apply budget neutrality adjustments in 
determining the FY 2024 MS-LTC-DRG relative weights so that our update 
of the MS-LTC-DRG classifications and relative weights for FY 2024 are 
made in a budget neutral manner. For FY 2024, as we proposed, we 
applied 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 update of the MS-
LTC-DRG classifications and relative weights prior to the application

[[Page 59132]]

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 
budget neutrality factor that accounts for the application of the 10-
percent cap policy (step 11).
    In this final rule, to ensure budget neutrality for the 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 continued 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 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 normalization adjustment is intended to ensure that the 
recalibration of the MS-LTC-DRG relative weights (that is, the process 
itself) neither increases nor decreases the average case-mix index.
    To calculate the normalization factor for FY 2024, we used 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 FY 2024 GROUPER (that is, Version 41 for 
FY 2024) and the 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 MS-LTC-DRG 
relative weights for FY 2024, each recalibrated MS-LTC-DRG uncapped 
relative weight is multiplied by the normalization factor of 1.31064 
(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 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 
final rule, for FY 2024, we determined 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 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 FY 2024 MS-LTC-DRG relative weights, each 
uncapped normalized relative weight is then multiplied by a budget 
neutrality factor of 0.9964763 (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 
final 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, as we proposed, we limited the reduction 
to 10-percent. Under this policy, we do not apply the 10 percent cap to 
the low-volume MS-LTC-DRGs identified in Step 3 or the no-volume MS-
LTC-DRGs identified in Step 8.
    Therefore, in this step, for each 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 
normalization and 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 capped FY 2024 MS-LTC-DRG relative weight 
that is equal to 90 percent of that MS-LTC-DRG's FY 2023 relative 
weight (that is, we set the FY 2024 relative weight equal to the FY 
2023 weight x 0.90).
    In section II.E. of the preamble of this final rule, we discuss our 
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 did not propose any changes to this policy for FY 2024, and as 
such any new or renumbered MS-LTC-DRGs for FY 2024 were not eligible 
for the 10-percent cap.
    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 continued to apply a budget neutrality 
adjustment to the MS-LTC-DRG relative weights so that the 10-percent 
cap on relative weight reductions (step 10) is implemented in a budget 
neutral manner. Therefore, we determined the 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 capped relative weights for FY 2024 (determined in Step 
10) and GROUPER Version 41; (b) simulate estimated total FY 2024 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the uncapped relative weights for FY 2024 (determined in Step 9) 
and GROUPER Version 41; and (c) calculate

[[Page 59133]]

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 FY 2024 MS-LTC-DRG relative weights, each capped 
relative weight is then multiplied by a budget neutrality factor of 
0.9984221 (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 
final rule and is available via the internet on the CMS website, lists 
the MS-LTC-DRGs and their respective relative weights, geometric mean 
length of stay, and five-sixths of the geometric mean length of stay 
(used to identify SSO cases under Sec.  412.529(a)) for FY 2024. We 
also are making available on the website the MS-LTC-DRG relative 
weights prior to the application of the 10 percent cap on MS-LTC-DRG 
relative weight reductions and corresponding cap budget neutrality 
factor.

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

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.533 
and 412.535. In this section, we discuss the factors that we 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 final rule, we present our policies 
related to the annual update to the LTCH PPS standard Federal payment 
rate for FY 2024.
    The update to the LTCH PPS standard Federal payment rate for FY 
2024 is presented in section V.A. of the Addendum to this final rule. 
The components of the 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 final rule). 
As we proposed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27073), we also made an adjustment to the LTCH PPS standard Federal 
payment rate to account for the estimated effect of the changes to the 
area wage level for FY 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 final rule).
2. 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. 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 
final rule, as we proposed in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27073), we 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

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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 year being less than such payment rates for the 
preceding rate year.
c. Adjustment to the LTCH PPS Standard Federal Payment Rate Under the 
Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, requires that a 
2.0 percentage points reduction be applied 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 final rule.)
d. Annual Market Basket Update Under the LTCH PPS for FY 2024
    Consistent with our historical practice, we estimate the market 
basket percentage increase and the productivity adjustment based on IHS 
Global Inc.'s (IGI's) forecast using the most recent available data. 
Based on IGI's fourth quarter 2022 forecast, the proposed FY 2024 
market basket percentage increase for the LTCH PPS using the 2017-based 
LTCH market basket was 3.1 percent. The proposed productivity 
adjustment for FY 2024 based on IGI's fourth quarter 2022 forecast was 
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 
proposed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27074) to 
reduce the FY 2024 market basket percentage increase by the FY 2024 
productivity adjustment. To determine the proposed market basket update 
for LTCHs for FY 2024 we subtracted the proposed FY 2024 productivity 
adjustment from the proposed FY 2024 market basket percentage increase. 
(For additional details on our established methodology for adjusting 
the market basket percentage increase by the productivity adjustment, 
we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51771).) In addition, 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, in accordance with the 
statute, we proposed to reduce the proposed FY 2024 market basket 
percentage 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 proposed 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 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 proposed to further reduce the annual update to the 
LTCH PPS standard Federal payment rate by 2.0 percentage points, in 
accordance with section 1886(m)(5) of the Act. Accordingly, we proposed 
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 proposed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27074) 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 also proposed 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 the 
proposed rule).
    Comment: Many commenters expressed concern that the proposed 3.1 
percent market basket update and the 0.4 percentage point increase to 
the labor-related share do not sufficiently account for the dramatic 
increases in labor costs that LTCHs are incurring. They stated labor 
costs, especially for clinicians, are increasing faster than what CMS 
factored into the market basket for this FY 2024 update. Some of the 
commenters cited their own analysis of labor costs and many referenced 
the analysis from the American Hospital Association (AHA). Commenters 
also noted that medical supply costs had also increased significantly 
in recent years and are expected to continue to rise in FY 2024. 
Commenters stated that the rising labor and supply costs have resulted 
in nearly half of hospitals having negative profit margins for 2022, 
according to a Kauffman Hall analysis. Several commenters also stated 
that the proposed increase is inadequate noting the unprecedented 
inflationary environment that LTCHs are experiencing. Several 
commenters further stated that it is incorrect for CMS to argue that 
the market basket update appropriately accounts for provider costs when 
the projection used in the final rule has severely underestimated

[[Page 59135]]

LTCH costs in the recent annual updates.
    Commenters requested that CMS implement a temporary payment 
adjustment increase or add-on payment to increase LTCH payments to 
account for higher labor and supply costs. A commenter requested that 
the Secretary consider using his ``special adjustment authority'' to 
increase the market basket update to 10 percent to reflect the actual 
increases in costs over the last year. A few commenters requested that 
CMS modify the market basket update to provide an additional payment 
increase to help offset the unprecedented inflation currently faced by 
LTCHs and other providers.
    Several of the commenters indicated that a temporary payment 
adjustment should be applied to Medicare payments to LTCHs at least 
until CMS rebases the LTCH PPS market basket. A commenter noted that 
CMS did not propose to rebase and revise the 2017-based LTCH market 
basket despite CMS proposing to rebase the IRF and IPF market baskets 
for FY 2024. The commenter noted that CMS stated in the FY 2024 IRF PPS 
proposed rule that commenters in prior years reported significantly 
higher IRF labor and other costs due to the COVID-19 PHE and inflation 
and therefore, CMS determined that it was appropriate to rebase and 
revise the IRF PPS market basket using a 2021 base year. The commenter 
stated that LTCHs are similarly affected by increased costs 
attributable to COVID-19 and inflation, including labor and supply 
costs yet, CMS did not propose to rebase and revise the LTCH PPS market 
basket.
    A commenter stated that CMS clearly has the authority to implement 
this type of payment adjustment for the LTCH PPS in FY 2024 using its 
``broad authority under section 123 of the BBRA as amended by section 
307(b)(1) of the BIPA to determine appropriate adjustments under the 
LTCH PPS, including whether (and how) to provide for adjustments to 
reflect variations in the necessary costs of treatment among LTCHs,'' 
noting CMS has used this authority to establish other payment 
adjustment policies in the LTCH PPS. The commenter requested that if 
CMS does not apply a temporary payment increase or add-on payment then 
it should rebase and revise the 2017-based LTCH market basket for FY 
2024 using the most recent LTCH cost report data available to account 
for the drastic increase in labor costs.
    Response: CMS has historically used a market basket to account for 
input price increases in the services furnished by fee-for-service 
providers. Since the inception of the LTCH PPS, the LTCH PPS standard 
Federal payment rates (with the exception of statutorily mandated 
updates) have been updated based on a projection of a market basket 
percentage increase. The LTCH market basket (as well as other CMS 
market baskets) is a fixed-weight, Laspeyres-type index that measures 
price changes over time and would not reflect increases in costs 
associated with changes in the volume or intensity of input goods and 
services. As such, the LTCH market basket update would reflect the 
prospective price pressures described by the commenters as increasing 
during a high inflation period (such as faster wage growth or higher 
energy prices), but would inherently not reflect other factors that 
might increase the level of costs, such as the quantity of labor used. 
Changes in quantity or use of services would be captured when the 
market basket is rebased.
    While we did not propose to rebase the LTCH market basket in the FY 
2024 IPPS/LTCH proposed rule, we did review the most recent Medicare 
cost report data available for LTCHs. At the time of the FY 2024 
proposed rulemaking, the latest complete Medicare cost report data for 
LTCHs was for 2020. The latest 2020 Medicare cost report data showed a 
compensation cost weight of 52.1 percent compared to the 2017-based 
LTCH market basket compensation cost weight of 53.2 percent. As part of 
our review of the latest available Medicare cost report data, we found 
that about 50 percent of LTCHs have a Medicare cost reporting period 
that begins on or after July 1st of the current year and therefore 
complete 2021 Medicare cost report data for LTCHs was not available in 
time to analyze for the FY 2024 rulemaking cycle. Over the next year, 
we plan to analyze the submitted Medicare cost report data for LTCHs 
and assess whether a proposal to rebase and revise the LTCH market 
basket would be appropriate for FY 2025.
    We appreciate the commenters' concern regarding inflationary 
pressure, including labor and supply costs, encountered by LTCHs. We 
note that the market basket percentage increase is a forecast of the 
price pressures that LTCHs are expected to face in FY 2024, and the 
final FY 2024 LTCH market basket percentage increase reflects IGI's (a 
nationally recognized economic and financial forecasting firm with 
which CMS contracts to forecast the price proxies of the market 
baskets) projected inflation and overall economic outlook. As projected 
by IGI and other independent forecasters, compensation growth and 
upward price pressures are expected to slow in FY 2024 relative to FY 
2022 and FY 2023. As is our general practice, we proposed that if more 
recent data became available, we would use such data, if appropriate, 
to derive the final FY 2024 LTCH market basket update for the final 
rule. For this final rule, we now have an updated forecast of the price 
proxies underlying the market basket that incorporates more recent 
historical data. Based on IGI's second quarter 2023 forecast with 
historical data through the first quarter of 2023, the projected 2017-
based LTCH market basket percentage increase factor for FY 2024 is 3.5 
percent, which is 0.4 percentage point higher than the projected FY 
2024 LTCH market basket percentage increase factor in the proposed 
rule, and reflects a projected increase in compensation prices of 4.3 
percent. We note that the 10-year historical average (2013-2022) growth 
rate of the 2017-based LTCH market basket is 2.4 percent with the 
historical average growth rate of compensation prices equal to 2.5 
percent.
    As discussed earlier, we believe the LTCH market basket percentage 
increase appropriately reflects the input price growth (including 
compensation price growth) that LTCHs incur in providing medical 
services. As also described earlier, we are using an updated forecast 
of the price proxies underlying the market basket that incorporates 
more recent historical data. For these reasons, as discussed 
previously, we believe the LTCH market basket is methodologically sound 
and is using the best available data for FY 2024. Therefore, we 
disagree with the commenters that CMS should apply a temporary payment 
adjustment, add-on payment or additional payment increase to the LTCH 
PPS to account for or offset higher labor and supply costs or 
unprecedented inflation.
    Comment: Many commenters stated the existing market basket 
methodology has failed to properly account for inflation in recent 
annual updates, particularly in FY 2021 and FY 2022. They stated that 
in FY 2022, CMS implemented a 2.6 percent LTCH market basket update, 
and in contrast, the actual increase according to IGI data was 5.5 
percent. Many commenters urged CMS to use its authority to implement an 
adjustment for FY 2024 to account for the difference between the market 
basket update that was implemented for FY 2022 and what the market 
basket is currently projected to be for FY 2022.
    Commenters pointed out that there are bipartisan coalitions in both 
the Senate and House of Representatives sending letters to CMS, calling 
on the agency to use its broad authority to

[[Page 59136]]

reevaluate the hospital market basket update and implement a 
retrospective payment adjustment to account for the difference between 
the projected market basket update for FY 2022 and the actual market 
basket in FY 2022. These commenters stated that although these letters 
specify the IPPS, LTCH PPS payments are based on the same DRGs and LTCH 
site neutral payments are equivalent to IPPS payments; therefore, the 
commenters requested that CMS make the same types of changes to the 
LTCH PPS.
    Response: In responding to similar comments in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49165), we explained that under the law, the 
LTCH PPS is a per-discharge prospective payment system that uses a 
market basket percentage increase to set the annual update 
prospectively. This means that the update relies on a mix of both 
historical data for part of the period for which the update is 
calculated and forecasted data for the remainder. (For instance, the 
2017-based LTCH market basket growth rate for FY 2024 in this final 
rule is based on IGI's second quarter 2023 forecast with historical 
data through the first quarter of 2023.) While there is currently no 
mechanism to adjust for market basket forecast error in the LTCH 
payment update, the forecast error for a market basket update is equal 
to the actual market basket percentage increase for a given year less 
the forecasted market basket percentage increase. Due to the 
uncertainty regarding future price trends, forecast errors can be both 
positive and negative.
    While the projected LTCH market basket updates for FY 2021 and FY 
2022 were underforecast (actual increases less forecasted increases 
were positive), this was largely due to unanticipated inflation and 
labor market pressures as the economy emerged from the COVID-19 
pandemic. However, an analysis of the forecast error of the LTCH market 
basket over a longer period of time shows the forecast error has been 
both positive and negative. For example, for each fiscal year from 2012 
through 2020, the forecasted LTCH market basket update implemented in 
the final rule was shown to be higher than the actual LTCH market 
basket update once historical data were available. Only considering the 
forecast error for years when the final LTCH market basket update is 
lower than the actual LTCH market basket update addresses only one 
direction of a forecast error that can be either positive or negative. 
For these reasons, we are not adopting the commenters' request to 
implement an adjustment for FY 2024 to account for the difference 
between the actual and forecasted FY 2022 LTCH market basket update.
    Comment: A commenter believes that the IGI data does not conform 
with CMS's assumption about COVID-19 related costs. The commenter 
stated that the reduction in the proposed FY 2024 market basket update 
relative to the FY 2023 market basket update is likely due to the IGI 
projecting a decrease in COVID-19 cases, hospitalizations, and costs 
for providers. The commenter further states that CMS proposed to 
establish the outlier fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2024 using FY 2022 claims because CMS expects 
LTCH hospitalization rates and cases to be similar in these two fiscal 
years. The commenter therefore believes that CMS has taken inconsistent 
positions with respect to projected costs in FY 2024, and that this 
highlights the need for CMS to provide an adjustment to the FY 2024 
market basket update.
    Response: The forecast of the LTCH market basket update is derived 
using IGI's independent projections of price, wage, and economic 
expectations. These projections are not based on similar considerations 
as those used to derive the outlier fixed-loss amount for LTCH PPS 
standard Federal payment rate cases. However, we note that after 
consideration of comments received, as discussed in section V.D.3. of 
the addendum to this final rule, we are modifying our proposed 
methodology for establishing the FY 2024 outlier fixed-loss amount for 
LTCH PPS standard Federal payment rate cases. These modifications 
include changes to the proposed charge inflation factor and cost-to-
charge ratio adjustment factor, which when used to estimate the cost of 
each claim reflects a projected increase in the cost of FY 2024 LTCH 
PPS standard Federal payment rate cases that more closely aligns with 
the FY 2024 market basket update.
    Comment: Several commenters expressed concerns about the proposed 
productivity adjustment and requested that CMS use its existing 
authority to eliminate the adjustment for FY 2024. Several commenters 
requested that CMS at least temporarily (if not permanently) suspend 
the productivity adjustment due to recent declines in hospital 
productivity. A commenter noted that the private nonfarm business 
economy experienced a rapid increase in output and productivity gains 
when communities began emerging from COVID-19 lockdowns in late 2021, 
but that the same has not been true for hospital services. The 
commenter stated that generally, hospital services have not recovered 
to pre-pandemic levels, and it is highly unlikely that hospitals have 
achieved the significant productivity gains incorporated into the 
proposed FY 2024 payment update. The commenter stated that CMS research 
indicates that hospitals can only achieve a productivity gain that is 
one-third of the gains seen in the private nonfarm business sector and 
using the private nonfarm business sector total factor productivity to 
adjust the market basket exacerbates Medicare underpayments to 
hospitals.
    Response: As required by statute and as discussed in greater detail 
in section V.B.1. of this preamble, the FY 2024 productivity adjustment 
is derived based on the 10-year moving average growth in economy-wide 
productivity for the period ending in FY 2024. We recognize the 
concerns of the commenters regarding the appropriateness of the 
productivity adjustment; however, as we explained in response to 
similar comments in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49165), 
we are required pursuant to section 1886(m)(3)(A)(i) of the Act to 
apply the specific productivity adjustment described in section 
1886(b)(3)(B)(xi) of the Act; therefore, we do not have the authority 
to eliminate the productivity adjustment. For this final rule, based on 
IGI's second quarter 2023 forecast, we are updating the productivity 
adjustment to reflect more recent historical data as published by BLS 
for 2022 as well as a revised economic outlook for FY 2023 and FY 2024. 
Using this more recent forecast, the FY 2024 productivity adjustment 
based on the 10-year moving average growth in economy-wide total factor 
productivity for the period ending FY 2024 is 0.2 percentage point, 
which is lower than the productivity adjustments applied for FY 2022 
and FY 2023.
    Comment: A commenter cited a 2022 AHA report that stated that 
contract nurses continue to account for an outsized portion of 
hospitals' labor costs. The commenter noted that this is important for 
two reasons: first, because of the increased expense and second, 
because the Employment Cost Index (ECI) used by CMS to calculate the 
market basket update includes only hospital-employed staff and not the 
contract staffing that hospitals have been forced to rely on more than 
ever in recent years. The commenter urged CMS to use its broad 
authority to provide a more accurate payment update. The commenter 
recognized that CMS has an established methodology for calculating rate 
increases and that CMS relies on a specific source of data for those 
calculations, however, in the

[[Page 59137]]

commenter's view, that data source is failing to produce an appropriate 
update that reflects actual increases in health care costs. The 
commenter stated that CMS has the authority to change its methodology 
and encouraged CMS to do so.
    Response: As previously discussed, the 2017-based LTCH market 
basket is a fixed-weight, Laspeyres-type price index that measures the 
change in price, over time, of the same mix of goods and services 
purchased in the base period. Any changes in the quantity or mix of 
goods and services (that is, intensity) purchased over time relative to 
a base period are not measured.
    For the compensation cost weight in the 2017-based LTCH market 
basket (which includes salaried and contract labor employees), we use 
the ECI for wages and salaries and benefits for all civilian workers in 
hospitals to proxy the price increases of labor for LTCHs (there is not 
a publicly available data source for LTCH workers only). We note that 
the 2017-based LTCH market basket cost weights show that contract labor 
costs account for about 8 percent of total compensation costs 
(reflecting employed and contract labor staff) for LTCHs in 2017 and we 
found a similar proportion based on 2020 Medicare cost report data. As 
mentioned previously, we will analyze more recent Medicare cost report 
data as they become available. The ECI (published by the BLS) measures 
the change in the hourly labor cost to employers, independent of the 
influence of employment shifts among occupations and industry 
categories. An analysis of Medicare cost report data for LTCHs that 
reported contract labor hours on Worksheet S-3 part II shows that 
contract labor hours accounted for about 4 percent of total 
compensation hours (reflecting employed and contract labor staff) in 
2020. The proportion found for IPPS hospitals was similar. Therefore, 
while we acknowledge that the ECI measures only reflect price changes 
for employed staff, we believe that the ECI for hospital workers is 
accurately reflecting the price change associated with the labor used 
to provide hospital care (as employed workers' hours account for 96 
percent of hospital compensation hours). For these reasons, we believe 
it continues to be an appropriate measure to use in the LTCH market 
basket. Therefore, we are not adopting commenters' request to make an 
adjustment to the FY 2024 payment update. As discussed earlier, we plan 
to analyze the Medicare cost report data for LTCHs and assess whether a 
proposal to rebase and revise the LTCH market basket is appropriate for 
FY 2025.
    After consideration of public comments, we are finalizing the LTCH 
payment update using the most recent forecast of the 2017-based LTCH 
market basket percentage increase and productivity adjustment. As such, 
based on IGI's second quarter 2023 forecast, the FY 2024 market basket 
update for the LTCH PPS using the 2017-based LTCH market basket is 3.5 
percent. The current estimate of the productivity adjustment for FY 
2024 based on IGI's second quarter 2023 forecast is 0.2 percentage 
point. 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 establishing an annual market basket update 
to the LTCH PPS standard Federal payment rate for FY 2024 of 3.3 
percent (that is, the most recent estimate of the LTCH PPS market 
basket percentage increase of 3.5 percent less the productivity 
adjustment of 0.2 percentage point).
    For LTCHs that fail to submit quality reporting data under the LTCH 
QRP, under Sec.  412.523(c)(3)(xvii) in conjunction with 42 CFR 
412.523(c)(4), as we proposed, we further reduced 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 
establishing an annual update to the LTCH PPS standard Federal payment 
rate of 1.3 percent (that is, 3.3 percent minus 2.0 percentage points) 
for FY 2024 for LTCHs that fail to submit quality reporting data as 
required under the LTCH QRP.

IX. Quality Data Reporting Requirements for Specific Providers

A. Overview

    In section IX. of the preamble of the proposed rule (88 FR 27074 
through 27173), we sought comment on and proposed 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).
    We respond to public comments on each of these sections below.

B. 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 ``coronavirus disease 2019'' 
(COVID-19).\318\ 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 1.13 million deaths in the United States as of June 
19, 2023.\319\ In recognition of the ongoing significance and 
complexity of COVID-19, the Secretary 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.\320\

[[Page 59138]]

While the PHE status expired on May 11, 2023, HHS 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.\321\
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    \318\ 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.
    \319\ Centers for Disease Control and Prevention. COVID Data 
Tracker. Accessed June 19, 2023. Available at: https://covid.cdc.gov/covid-data-tracker/#datatracker-home.
    \320\ 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.
    \321\ 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.
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    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,\322\ 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 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,\323\ Moderna,\324\ and 
Janssen.\325\ 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.\326\ The FDA issued approval for the Moderna 
vaccine, marketed as Spikevax, on January 31, 2022,\327\ and an EUA for 
the Novavax adjuvanted vaccine on July 13, 2022.\328\ The FDA also 
issued EUAs for single booster doses of the then authorized COVID-19 
vaccines. As of November 19, 2021,329 330 331 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.\332\ FDA first authorized the use 
of a booster dose of bivalent or ``updated'' COVID-19 vaccines from 
Pfizer-BioNTech and Moderna in August 2022.\333\
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    \322\ 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.
    \323\ 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.
    \324\ 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.
    \325\ 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.
    \326\ 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.
    \327\ 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.
    \328\ 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.
    \329\ 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.
    \330\ 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.
    \331\ 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.
    \332\ 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.
    \333\ 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 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.\334\ 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.\335\ 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.\336\ 
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.\337\ In the presence of high

[[Page 59139]]

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.\338\ Overall, data demonstrate that COVID-
19 vaccines are effective and prevent severe disease, including 
hospitalization and death.
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    \334\ 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.
    \335\ 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://www.cdc.gov/mmwr/volumes/70/wr/mm7037e1.htm.
    \336\ 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.
    \337\ 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/.
    \338\ 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.\339\ 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.\340\ 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.\341\ The FDA 
issued EUAs for booster doses of two bivalent COVID-19 vaccines, one 
from Pfizer-BioNTech \342\ and one from Moderna,\343\ 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.\344\ 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.\345\ \346\ 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.\347\ 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.\348\
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    \339\ Centers for Disease Control and Prevention. (August 2021) 
Variants of the Virus. Available at: https://www.cdc.gov/coronavirus/2019-ncov/variants/index.html.
    \340\ Food and Drug Administration. (November 2022) COVID-19 
Bivalent Vaccine Boosters. Available at: https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/covid-19-vaccines.
    \341\ 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.
    \342\ 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.
    \343\ 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.
    \344\ 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.
    \345\ 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/.
    \346\ 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/.
    \347\ 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.
    \348\ 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-prliminary-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 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 remain up to date 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 proposed 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 proposed 
to update the numerator to specify the time frames within which an HCP 
is considered up to date with recommended COVID-19 vaccines, 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

[[Page 59140]]

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).\349\ 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.\350\ 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.\351\ 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 will 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.\352\ 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) 
\353\ and that the CDC intends to submit the updated measure for 
endorsement.
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    \349\ Interested parties convened by the consensus-based entity 
(CBE) will provide input and recommendations on the Measures Under 
Consideration (MUC) list as part of the pre-rulemaking process 
required by section 1890A of the SSA. We refer readers to https://p4qm.org/PRMR-MSR for more information.
    \350\ 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.
    \351\ 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.
    \352\ 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.
    \353\ 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 is 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: \354\
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    \354\ 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 
contraindications as defined by the CDC.\355\ There are no changes to 
the denominator exclusions.
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    \355\ 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 will 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. In the proposed rule we provided the example 
that HCP would have been 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 met one of the following criteria:
    1. Individuals who received an updated bivalent \356\ booster dose, 
or
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    \356\ 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 \357\ less than 
2 months ago.
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    \357\ 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 since publication of the proposed rule, CDC's 
definition for up to date vaccination has evolved. HCP would be 
considered up to date in the Quarter 3 CY 2023 reporting period for the 
Hospital IQR Program, PCHQR Program, and the LTCH QRP if they met the 
following criteria:

[[Page 59141]]

    1. Individuals who received an updated bivalent \358\ booster dose.
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    \358\ 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 
April 13, 2023, the original, monovalent mRNA vaccines are no longer 
authorized as a booster dose for people ages 12 years and older. 
More details are available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-changes-simplify-use-bivalent-mrna-covid-19-vaccines.
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    We refer readers to https://www.cdc.gov/nhsn/pdfs/nqf/covid-vax-hcpcoverage-rev-2023-508.pdf for more details on the measure 
specifications.
    We proposed that public reporting of the modified version of the 
COVID-19 Vaccination Coverage among HCP measure will 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.\359\ The applicable authorities of the 
Hospital IQR Program,\360\ PCHQR Program,\361\ and LTCH QRP \362\ 
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.\363\ In developing the FY 2024 IPPS/LTCH 
PPS proposed rule, 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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    \359\ 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.
    \360\ Sec. 1886(b)(3)(B)(viii)(IX)(aa) of the Act.
    \361\ Sec. 1866(k)(3)(A) of the Act.
    \362\ Sec. 1886(m)(5)(D)(i) of the Act.
    \363\ 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 did not propose any changes to the 
data submission or reporting process in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27074 through 27078), we proposed that reporting 
of the updated measure will 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 will 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 will be used to calculate the measure. Each quarter, the CDC will 
calculate a single quarterly COVID-19 HCP vaccination coverage rate for 
each provider, which will be calculated by taking the average of the 
data from the three weekly rates submitted by the provider for that 
quarter. We will 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). Following the ending of the PHE, which occurred 
on May 11, 2023,\364\ reporting requirements under the Hospital 
Conditions of Participation (CoP) have been revised.\365\ We plan to 
communicate any future changes to the CoP through Quality Safety & 
Oversight memoranda and other communications materials when new 
policies are finalized.
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    \364\ 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.
    \365\ 88 FR 36485.
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    We invited public comment on this proposal.
    Comment: Many commenters supported the proposed modification to the 
COVID-19 Vaccination Coverage among HCP measure. A few commenters noted 
the importance of vaccination in preventing greater spread of COVID-19 
and the potential for continued vaccination to prevent future large-
scale outbreaks.
    Response: We thank the commenters for their support. We agree that 
vaccination plays 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 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.
    Comment: Many commenters did not support updating the 
specifications for the COVID-19 Vaccination Coverage among HCP measure 
because the PHE has expired and the CoPs for hospitals have been 
revised \366\ to no longer require reporting of these data. Several 
commenters expressed concern that retaining measurement of COVID-19 
vaccination coverage among HCP after the vaccination requirement has 
been removed from CoPs sends an inconsistent message regarding CMS's 
priorities and increases the burden required to continue to collect and 
report these data. A commenter observed that the end of other Federal 
vaccination requirements creates challenges for justifying continued 
data collection for this measure, particularly in states where 
vaccination requirements have been contentious.
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    \366\ 88 FR 36485.
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    Response: Since publication of the FY 2024 IPPS/LTCH PPS proposed 
rule, the COVID-19 PHE expired on May 11, 2023.\367\ We acknowledge 
that some state and Federal requirements regarding COVID-19 vaccination 
have since changed. CMS requirements for Medicare and Medicaid-
certified providers and suppliers to ensure that their staff were fully 
vaccinated for COVID-19 have ended with the expiration of the COVID-19 
PHE (88 FR 36488). Nevertheless, we revised the hospital and critical 
access hospitals (CAHs) infection prevention and control CoP so that 
hospitals and CAHs will continue to report on a reduced number of 
COVID-19 data elements after the conclusion of the COVID-19 PHE until 
April 30, 2024, unless the Secretary

[[Page 59142]]

establishes an earlier end date.\368\ While these changes may impact 
certain aspects of facility reporting on COVID-19 data, we note that 
the reporting requirements of the Hospital IQR, PCHQR, and LTCH QRPs 
are distinct from those related to the expiration of the PHE and 
facilities participating in these programs are required to report the 
COVID-19 Vaccination Coverage among HCP measure. We further note that 
in our final rule removing staff vaccination requirements, we clarified 
that we were aligning our approach with that for other infectious 
diseases, specifically influenza, and that we would encourage ongoing 
COVID-19 vaccination through our quality reporting and value-based 
incentive programs (88 FR 38486).
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    \367\ 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.
    \368\ Centers for Medicare & Medicaid Services Center for 
Clinical Standards and Quality/Quality, Safety & Oversight Group. 
May 1, 2023. Guidance for the Expiration of the COVID-19 Public 
Health Emergency (PHE) QSO 23-13-ALL. Accessed May 22, 2023. 
Available at: https://www.cms.gov/files/document/qso-23-13-all.pdf.
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    This measure continues to align with our goals to promote wellness 
and disease prevention. Under CMS' Meaningful Measures Framework 2.0, 
the COVID-19 Vaccination Coverage among HCP measure addresses the 
quality priorities of ``Immunizations'' and ``Public Health'' through 
the Meaningful Measures Area of ``Wellness and Prevention.'' \369\ 
Under the National Quality Strategy, the measure addresses the goal of 
Safety under the priority area Safety and Resiliency.\370\ Our 
continued response to COVID-19 is not fully dependent on the emergency 
declaration for the COVID-19 PHE and, beyond the end of the COVID-19 
PHE, we continue to work to protect individuals and communities from 
the virus and its worst impacts by supporting access to COVID-19 
vaccines, treatments, and tests.\371\
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    \369\ Centers for Medicare & Medicaid Services. June 17, 2022. 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Accessed May 26, 2023. Available at: https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
    \370\ Centers for Medicare & Medicaid Services. May 1, 2023. CMS 
National Quality Strategy. Accessed May 26, 2023. Available at: 
https://www.cms.gov/medicare/quality-initiatives-patient-assessment-
instruments/value-based-programs/cms-quality-strategy.
    \371\ U.S. Department of Health and Human Services. May 9, 2023. 
Fact Sheet: End of the COVID-19 Public Health Emergency. Accessed 
May 22, 2023. Available at: https://www.hhs.gov/about/news/2023/05/
09/fact-sheet-end-of-the-covid-19-public-health-
emergency.html#:~:text=That%20means%20with%20the%20COVID,the%20expira
tion%20of%20the%20PHE.
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    Comment: Many commenters did not support updating the COVID-19 
Vaccination Coverage among HCP measure because of concerns that the 
frequency of changes to the CDC's definition of up to date combined 
with the uncertainty around future vaccination schedules creates 
unnecessary burden for facilities. Many commenters expressed concern 
that changing definitions and guidance exacerbates staffing and 
resource challenges and requires updates to facility or system-level 
vaccination policies, adding burden and confusion. Some of these 
commenters recommended maintaining current measure requirements to 
collect only primary vaccination series to reduce this burden or to 
remove the measure entirely.
    Response: Since the adoption of the current version of the COVID-19 
Vaccination Coverage among HCP measure, the public health response to 
COVID-19 has necessarily adapted to respond to the changing nature of 
the virus's transmission and community spread. When we finalized the 
adoption of the COVID-19 Vaccination Coverage among HCP measure in the 
FY 2022 IPPS/LTCH PPS final rule (Hospital IQR Program, 86 FR 45374; 
PCHQR Program, 86 FR 45428; LTCH QRP, 86 FR 45438), we received several 
comments encouraging us to continue to update the measure as new 
evidence on COVID-19 continues to arise and we stated our intention to 
continue to work with partners including the FDA and CDC to consider 
any updates to the measure in future rulemaking as appropriate. We 
recognize commenters' recommendations to limit reporting to primary 
series or remove the measure to reduce burden but disagree with these 
suggestions given the ongoing circulation of SARS-CoV-19. The measure 
modification aligns with the CDC's responsive approach to COVID-19 and 
will continue to support vaccination as the most effective means to 
prevent the worst consequences of COVID-19, including severe illness, 
hospitalization, and death.
    Comment: Many commenters did not support the measure modification 
and recommended that we reduce the required reporting frequency to 
quarterly or annually to reduce reporting burden for facilities. Some 
of these commenters observed that annual reporting would mirror the 
reporting schedule for the Influenza Vaccination Coverage among HCP 
measure, which is in some quality reporting programs. A couple of 
commenters observed that the COVID-19 Vaccination Coverage among HCP 
measure is significantly more burdensome than the Influenza Vaccination 
Coverage among HCP measure, which is a ``yes'' or ``no'' attestation. 
Others believed that annual reporting would not improve patient 
understanding of publicly reported measure data, which they considered 
as out of date at the time of display and therefore not accurately 
reflective of facility HCP vaccination levels. A couple of commenters 
stated that there is variation between states and facilities in what 
information can be requested of staff and under which conditions of 
employment, which may also impact the accuracy of public reporting and 
could increase the burden of reporting depending on a facility's 
location. A few commenters believed that the requirements to report 
vaccination status for all personnel, including contract personnel, 
students, volunteers, and independent contractors, is particularly 
burdensome and requires multiple applications and processes. Several 
commenters believed that, in addition to reducing reporting frequency, 
any future reporting of the measure should be voluntary. A commenter 
recommended collecting data only for HCP who have been vaccinated 
within the prior six months to reduce burden and increase data 
accuracy. Another commenter observed that, in addition to reduced 
reporting frequency, an alternate data collection option, such as 
collection of information at the location where the vaccinations 
occurred, would be less burdensome for small, rural, and underserved 
facilities.
    Response: As we stated in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27077), the measure developer noted that the model used for this 
measure is based on the Influenza Vaccination Coverage among HCP 
measure (CBE #0431), which is reported annually, and it intends to 
utilize a similar approach to the modified COVID-19 Vaccination 
Coverage among HCP measure if vaccination strategy becomes seasonal. 
While monitoring and surveillance are ongoing, we do not currently have 
data demonstrating seasonal trends in the circulation of SARS-CoV-2 and 
therefore at this time, reporting at least one self-selected week 
during each month of the reporting quarter remains appropriate. 
Additionally, while the measure developer noted that the model used for 
this measure is based on the Influenza Vaccination Coverage among HCP 
measure (CBE #0431), these are different public health initiatives, and 
different vaccines, and therefore the measure specifications are not in 
complete alignment (86 FR 45379). Furthermore, given the continued 
circulation of the SARS-CoV-2 virus in the United States, we do not 
believe it

[[Page 59143]]

is appropriate to propose voluntary reporting or reduce the population 
of HCP reported for the measure at this time.
    We agree with commenters who observe that there is a delay between 
data collection and public reporting for this measure and note that 
such a delay exists for all measures in the Hospital IQR, PCHQR, and 
LTCH Quality Reporting Programs. However, the data will provide 
meaningful information to consumers in making healthcare decisions 
because the data will be able to reflect differences between facilities 
in COVID-19 vaccination coverage of their workforce even if the data do 
not reflect immediate vaccination rates. While we recognize the 
commenter suggestion to limit data collection to those HCP vaccinated 
in the prior six months, we disagree that this would reduce burden for 
reporting facilities and would not improve data accuracy as reporting 
facilities may be required to revise reporting processes.
    Regarding commenter concerns about reporting burden, we note that 
for purposes of NHSN surveillance, the CDC began using the same 
definition of up to date reflected in the measure modification 
beginning with the Quarter 3 2023 surveillance period (June 26, 2023-
September 24, 2023). Additionally, facilities have been reporting the 
COVID-19 Vaccination Coverage among HCP measure since October 1, 2021 
and there has been sufficient time to allocate the necessary resources 
required to report the measure. We recognize the unique challenges of 
small and rural facilities but note that NHSN reporting does not permit 
data collection from the site of vaccination at this time. We continue 
to monitor COVID-19 as part of our public health response and will 
consider data as well as commenters' feedback to inform any future 
rulemaking.
    Comment: Several commenters expressed concern that the COVID-19 
Vaccination Coverage among HCP measure has not been endorsed by the 
CBE.
    Response: The current version of the measure received CBE 
endorsement (CBE #3636, ``Quarterly Reporting of COVID-19 Vaccination 
Coverage among Healthcare Personnel'') on July 26, 2022. As we stated 
in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27078), 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. For 
this FY 2024 IPPS/LTCH PPS rule cycle, we reviewed CBE-endorsed 
measures. While the current, CBE-endorsed version of the measure is 
available, the modified version of the measure more completely accounts 
for the availability of booster and bivalent doses which were not yet 
developed when the current version of the measure was adopted. Because 
the modified version of the measure is more comprehensive than the 
current version, the exception for non-CBE-endorsed measures applies. 
The measure steward, CDC, has submitted the modified measure to the CBE 
for endorsement and it is currently under review.\372\
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    \372\ Partnership for Quality Measurement. Quarterly Reporting 
of COVID-19 Vaccination Coverage among Healthcare Personnel (3636). 
Accessed July 13, 2023. Available at: https://p4qm.org/endorsements/measure/6041.
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    Comment: Some commenters recommended that we include an exclusion 
for sincerely held religious beliefs to adhere to HHS Office of Civil 
Rights Guidance. Some of these commenters also requested the measure be 
updated to track the number of HCP who decline vaccination. Several 
commenters observed that there are many factors beyond a facility's 
control (such as weather, holidays, state or local regulations, etc.) 
that may affect performance on this measure.
    Response: We recognize that there are many reasons, including 
religious objections or concerns regarding an individual HCP's specific 
health status that may lead individual HCP to decline vaccination. The 
CDC's NHSN tool allows facilities to report on the number of HCP who 
were offered a vaccination but declined for religious or philosophical 
objections.\373\ We understand the commenters' concern that there are 
many factors outside of a facility's control which could affect 
vaccination coverage; however, all facilities face such concerns. 
Nonetheless, public reporting of this measure can help patients and 
their caregivers identify which facilities have better vaccination 
coverage among their HCP. Furthermore, reporting of the measure based 
on one week per month over three months will allow some seasonal or 
other effects to be mitigated. We wish to emphasize that neither the 
modified measure nor the current version of the measure mandate 
vaccines. The COVID-19 Vaccination Coverage among HCP measure only 
requires reporting of vaccination rates for successful program 
participation.
---------------------------------------------------------------------------

    \373\ Weekly Healthcare Personnel Influenza Vaccination Summary 
for Non-Long-Term Care Facilities-HCP (cdc.gov).
---------------------------------------------------------------------------

    Comment: A commenter observed that removing the measure would be 
appropriate because vaccination percentage has been incorporated into 
the Overall Star Rating program, thereby penalizing hospitals with 
lower vaccine rates.
    Response: We note that the purpose of the Overall Hospital Quality 
Star Ratings is to summarize hospital quality information using 
measures posted on Care Compare in a way that is simple and easy to 
understand by patients. Although Overall Hospital Quality Star Ratings 
are reported through CMS programs, which are tied to payment, hospital 
performance on the Overall Hospital Quality Star Ratings is not used by 
CMS for any hospital payment or reimbursement purposes.
    Comment: A commenter stated that the bivalent boosters are 
currently approved under an EUA and believed it inappropriate to base 
the measure modification on bivalent boosters given the expiration of 
the PHE.
    Response: We note that on August 31, 2022, the FDA amended the EUAs 
for the Moderna COVID-19 vaccine and the Pfizer-BioNTech COVID-19 
vaccine to authorize bivalent formulations of the vaccines for use as a 
single booster dose at least two months following primary or booster 
vaccination.\374\ The bivalent boosters are appropriate for inclusion 
in the measure modification.
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    \374\ Food and Drug Administration. August 31, 2022. Coronavirus 
(COVID-19) Update: FDA Authorizes Moderna, Pfizer-BioNTech Bivalent 
COVID-19 Vaccines for Use as a Booster Dose. Accessed June 29, 2023. 
Available at: https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-authorizes-moderna-pfizer-biontech-bivalent-covid-19-vaccines-use.
---------------------------------------------------------------------------

    Comment: A couple of commenters requested clarification regarding 
NHSN reporting challenges. A commenter described issues that arise when 
a facility selects to report on a week that crosses between two months, 
whereafter the reporting is not properly received and the facility 
appears non-compliant. Another commenter requested clarification 
whether NHSN data submission for the measure meets all requirements for 
the measure under the Hospital IQR Program.
    Response: We thank the commenters for their questions. We are aware 
that some facilities may have experienced issues with reporting weeks 
that crossed between two months. CDC has clarified that a week is 
designated as belonging to the month of the week-end date. For example, 
reporting data for the week of September 27 through October 3 is

[[Page 59144]]

considered as submitting data for a week in October. More information 
is available in the NHSN Manual for COVID-19 Vaccination Reporting 
\375\ and through CDC Frequently Asked Questions on COVID-19 Hospital 
Data Reporting.\376\ We also wish to clarify that NHSN data submission 
for the measure does meet requirements under the Hospital IQR Program 
for participating facilities.
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    \375\ Centers for Disease Control and Prevention. August 2022. 
NHSN Manual for COVID-19 Vaccination Reporting. Accessed June 26, 
2023. Available at: https://www.cdc.gov/nhsn/pdfs/ltc/covidvax/protocol-resident-patient-508.pdf.
    \376\ Centers for Disease Control and Prevention. April 13, 
2023. CDC FAQs: COVID-19 Hospital Data Reporting. Accessed June 26, 
2023. Available at: https://www.cdc.gov/nhsn/covid19/hospital-reporting-faqs.html.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing the proposal as proposed.

C. 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 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 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 did not propose any changes to these policies in the 
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 did not propose any changes to these policies in 
the proposed rule. However, as discussed in section IX.C.7.d. of this 
final rule, we are codifying our measure retention and removal policies 
in our regulations at Sec.  412.140.
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.\377\ 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.\378\
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    \377\ 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.
    \378\ 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 did not propose any changes to these policies in the proposed 
rule.
5. Proposed New Measures for the Hospital IQR Program Measure Set
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27079 through 
27084), we proposed 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.
    We discuss each of these measures, along with the public comments 
that we received on them, in subsequent sections.

[[Page 59145]]

a. 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.\379\ Pressure injuries commonly lead to 
further patient harm, including local infection, osteomyelitis, anemia, 
and sepsis,\380\ in addition to causing pain and discomfort to 
patients.\381\ Development of a pressure injury can increase the length 
of a patient's hospital stay by an average of four days.\382\ Hospital-
acquired pressure injuries are associated with 1.5 to 2.0 times greater 
risk of 30, 60, and 90-day readmissions.\383\ 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).\384\
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    \379\ Li, Z., Lin, F., Thalib, L., & Chaboyer, W. (2020). Global 
prevalence and incidence of pressure injuries in hospitalized adult 
patients: A systematic review and meta-analysis. International 
Journal of Nursing Studies, Vol. 105. https://doi.org/10.1016/j.ijnurstu.2020.103546.
    \380\ 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.
    \381\ 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.
    \382\ 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.
    \383\ 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.
    \384\ 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 pressure injuries, including nutrition.\385\ 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. 
386 387 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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    \385\ 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.
    \386\ 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.
    \387\ 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.
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(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 will 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.\388\
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    \388\ 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).\389\
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    \389\ 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.
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    An older version of this measure was reviewed by the consensus-
based entity (CBE) convened Measure Applications Partnership (MAP) 
\390\ 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 
the proposed rule and this final rule. 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.\391\ 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).

[[Page 59146]]

The MAP noted that risk adjustment may be necessary to ensure the 
measure does not disproportionately penalize facilities that 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.\392\
---------------------------------------------------------------------------

    \390\ Interested parties convened by the consensus-based entity 
provide input and recommendations on the Measures under 
Consideration (MUC) list as part of the pre-rulemaking process 
required by section 1890A of the Act. We refer readers to https://p4qm.org/PRMR for more information.
    \391\ 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.
    \392\ Ibid.
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    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 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.393 394 395 396 397 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/eh-cah?qt-tabs_eh=1) for more details 
on the measure specifications.
---------------------------------------------------------------------------

    \393\ 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.
    \394\ 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/.
    \395\ 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.
    \396\ 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.
    \397\ 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 proposed 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 
final 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 final rule for a discussion of a similar 
policy to adopt this measure in the Medicare Promoting Interoperability 
Program.
    We invited public comment on this proposal.
    Comment: Many commenters supported the proposal to add the Hospital 
Harm-Pressure Injury eCQM (CBE #3498e) in the Hospital IQR Program. 
Many commenters noted that adoption of the measure would create 
valuable public transparency for hospitals and patients on the 
prevalence of pressure injuries and drive care improvements by 
encouraging the adoption of patient safety best practices, thereby 
reducing the risk for patient harm. A few commenters noted their 
appreciation for CMS expanding the list of available eCQMs within the 
Hospital IQR Program. A commenter suggested that the measure trigger an 
automatic mandatory submission of the Global Malnutrition Composite 
Score eCQM to strengthen the HAC Reduction Program by encouraging best 
practices for patient safety in inpatient facilities. A few commenters 
believed the measure should be incorporated into a value-based payment 
program to incentivize hospitals to adopt best practices. A few 
commenters appreciated the measure updates that exclude pressure 
injuries present on admission or that develop in a time window where 
the cause is unlikely to be tied to quality of care at the admitting 
hospital.
    Response: We thank commenters for their support and input on the 
inclusion of Hospital Harm-Pressure Injury eCQM (CBE #3498e) in the 
Hospital IQR Program measure set beginning with the CY 2025 reporting 
period/FY 2027 payment determination. Regarding

[[Page 59147]]

commenters' suggestion on mandatory reporting and use in a value-based 
payment program, we highlight that the Hospital Harm-Pressure Injury 
eCQM was proposed for the Hospital IQR Program and CMS separately makes 
decisions about inclusion of measures in value-based payment programs 
such as the HAC Reduction Program. However, in alignment with our goal 
of transitioning to a fully digital quality measurement landscape, we 
envision the potential future use of patient safety eCQMs in pay-for-
performance programs such as the HAC Reduction Program.
    Comment: A few commenters questioned whether 0.00 percent to 2.02 
percent variation in performance rates among 18 hospital test sites is 
a sufficient performance gap to allow users to distinguish meaningful 
differences in performance. A commenter requested CMS weigh the 
performance gap of this measure against its other existing and 
potential new measures of patient safety to ensure this measure merits 
use in a CMS program. Others were supportive of addressing important 
patient safety concerns with the measure, but requested additional 
testing in a broader set of EHRs and hospitals.
    Response: We acknowledge that some commenters have expressed 
concern regarding the magnitude of the performance gap, which they 
perceive to be small. We highlight that this measure was tested in 18 
hospital test sites with varying bed size, geographic location, 
teaching status, urbanicity, and two different EHR systems. While it is 
true that measure scores among the hospitals tested ranged from 0.00 
percent to 2.02 percent, regression results demonstrated that the 
measure detects clinically meaningful differences in pressure injuries 
across hospitals.\398\ During testing, several hospitals' performance 
rates were consistently below the system-wide average while a few 
others were above that mean, indicating room for quality improvement in 
the inpatient setting.\399\ We will monitor the performance gap as 
hospitals begin to report this measure.
---------------------------------------------------------------------------

    \398\ Measures Management System Hub. (December 1, 2022) Measure 
Applications Partnership (MAP) Hospital Workgroup: 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications 
Manual. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
    \399\ Measures Management System Hub. (December 1, 2022) Measure 
Applications Partnership (MAP) Hospital Workgroup: 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications 
Manual. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters requested CMS delay adoption of the 
measure until it was reviewed and endorsed by the CBE.
    Response: We thank commenters for their feedback. As mentioned 
previously, 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. The Hospital Harm-Pressure Injury measure 
was submitted to the CBE for endorsement review in the Fall 2022 cycle 
(CBE #3498e). The Patient Safety Standing Committee reviewed the 
measure at the measure evaluation meeting on February 9, 2023. The 
measure received high passing scores on all measure criterion (100% 
pass for evidence, reliability, validity, feasibility, usability and 
92.9% pass for performance gap and use) and the committee passed the 
measure unanimously (14/14) on suitability for endorsement.\400\ CMS 
expects final measure endorsement when the Consensus Standards Approval 
Committee (CSAC) meets on July 24, 2023.
---------------------------------------------------------------------------

    \400\ Patient Safety Standing Committee--Measure Evaluation Web 
Meeting Summary (February 9, 2023). Available at: https://www.p4qm.org/sites/default/files/2023-04/patient_safety_fall_2022_measure_evaluation_summary_final-508.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the adoption of the 
measure, raising concerns about implementation burden. A commenter 
requested that CMS allow hospitals two years to implement measures 
after they are finalized as there is significant technology and 
information technology (IT) systems work required to get hospital 
systems up to speed. Another commenter requested to delay measure 
adoption to the CY 2026 reporting period as pressure injuries are not 
currently documented in discrete fields at their facility but rather 
through provider notes. A few commenters had concerns with competing 
Federal quality reporting and EHR-related mandates given limited 
hospital quality and health IT resources.
    Response: We thank commenters for their input. We highlight that 
the addition of this eCQM further advances CMS' goal of transitioning 
to a fully digital quality measurement landscape, promoting 
interoperability that will help decrease burden. Feasibility testing in 
34 hospital inpatient acute care facilities (17 using Meditech EHRs and 
17 using Cerner EHRs) showed that all data elements for this measure 
are in defined fields in electronic sources.\401\ Further, this measure 
is able to capture the occurrence of pressure injuries through either 
clinical documentation or ICD-10-CM diagnosis codes, providing an 
alternative option for hospitals that do not yet use discrete fields 
for pressure injuries. This measure was proposed for inclusion 
beginning in the CY 2025 reporting period, which means it would first 
be reported to CMS in early March 2026. As hospitals will not be 
required to report on this eCQM, the selection of this measure in the 
Hospital IQR Program need not compete with other Federal quality 
reporting and EHR-related mandates for limited hospital quality and 
health IT resources. Rather, the measure will be included as one of the 
eCQMs that hospitals can self-select for reporting beginning with the 
CY 2025 reporting period/FY 2027 payment determination.
---------------------------------------------------------------------------

    \401\ Measures Management System Hub. (December 1, 2022) Measure 
Applications Partnership (MAP) Hospital Workgroup: 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications 
Manual. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters did not support measure adoption, 
citing that there is already a claims-based pressure injury measure in 
the Hospital-Acquired Condition (HAC) Reduction Program (CMS PSI-03 
within the CMS PSI-90 composite). Commenters noted that this measure is 
duplicative and does not reduce reporting requirements or align 
measures across programs. A few commenters asked for a single measure 
to streamline data tracking and avoid duplication and redundancies. A 
few commenters asked clarifying questions on measure implementation. A 
commenter asked if the intent is to retire PSI-03 when the Hospital 
Harm-Pressure Injury eCQM is added to the Hospital IQR Program. Another 
commenter asked if a single submission of the Hospital Harm-Pressure 
Injury eCQM would meet requirements for the Hospital IQR, Promoting 
Interoperability, and HAC Reduction Programs.

[[Page 59148]]

    Response: We appreciate commenters' feedback regarding duplicative 
measures. Hospital-acquired pressure injuries are currently measured 
and publicly reported in the HAC Reduction Program as Patient Safety 
Indicator (PSI) 03, a component of the Patient Safety PSI 90 measure. 
However, PSI-03 does not include stage 2 pressure injuries in the 
outcome, uses claims as its sole data source, and is focused only on 
Medicare fee-for-service beneficiaries aged 18 years and older. The 
Hospital Harm-Pressure Injury eCQM is the only EHR-based measure 
intended for use in acute care hospitals related to pressure injuries. 
By comparison with PSI 03, this measure utilizes EHR clinical 
documentation to identify pressure injuries more accurately, allowing 
hospitals to track pressure injury events and enabling other interested 
parties to understand the incidence of these events in a broader adult, 
all-payer population.
    In alignment with our goal of transitioning to a fully digital 
quality measurement landscape, we envision the potential future use of 
patient safety eCQMs not only in the Hospital IQR Program, but also 
pay-for-performance programs such as the HAC Reduction Program, 
including as a potential replacement for the claims-based PSI 90 
measure. As discussed in section V.L.2.b.(4) of the proposed rule, we 
seek to adopt patient safety focused eCQMs to promote further alignment 
across quality reporting and value-based purchasing programs However, 
until that time we intend to retain PSI 03 (within the PSI 90 
composite) in the HAC Reduction Program as well as finalizing the 
Hospital Harm-Pressure Injury eCQM in the Hospital IQR Program. We also 
clarify that meeting the Hospital IQR Program eCQM requirement also 
satisfies the eCQM reporting requirement for the Medicare Promoting 
Interoperability Program for eligible hospitals and critical access 
hospitals (CAHs). However, HAC Reduction Program reporting requirements 
for PSI 90 are separate.
    Comment: A commenter did not support the measure stating that it 
does not account for patients with complex comorbidities like acute 
skin failure, which may appear like a DTPI but is not and may lead to 
inaccurate reporting.
    Response: We appreciate the commenter's concern but reiterate that 
the measure specification allows a 72-hour time window for accurate 
identification of DTPI due to the lapse between a precipitating event 
and the onset of skin discoloration. These records with documented DTPI 
within 72 hours after the start of the encounter are excluded from the 
measure denominator. Although evidence surrounding the causes and 
prevention of hospital-acquired pressure injuries continues to 
progress, it is well-established that the risk of hospital-acquired 
pressure injuries, including DTPI, can be 
reduced.402 403 404
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    \402\ Tayyib, N., Coyer, F., & Lewis, P. (2016). Saudi Arabian 
adult intensive care unit pressure ulcer incidence and risk factors: 
A prospective cohort study. International Wound Journal, 13(5), 912-
919. https://doi.org/10.1111/iwj.12406.
    \403\ Bly, D., Schallom, M., Sona, C., & Klinkenberg, D. (2016). 
A model of pressure, oxygenation, and perfusion risk factors for 
pressure ulcers in the intensive care unit. American Journal of 
Critical Care, 25(2), 156-154. https://doi.org/10.4037/ajcc2016840.
    \404\ 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. https://doi.org/10.1097/NNR.0000000000000258.
---------------------------------------------------------------------------

    Comment: Several commenters provided feedback on the measure 
specifications and opportunities for improvement. A few commenters 
asked for additional population exclusions for patients in hospice, 
obstetrics, and behavioral health units. A commenter suggested 
exclusions for pressure injuries that reopen over scar tissue or are 
hypotensive at admission. Another commenter expressed concern that the 
two different time courses in the numerator and denominator (stage 2, 
3, or 4 or unstageable pressure injury greater than 24 hours after the 
start of the encounter and DTPI greater than 72 hours after the start 
of the encounter) adds to the complexity of the measure. A commenter 
had significant concerns about the inclusion of stage 2 pressure 
injuries, stating their experience that wounds related to incontinence-
associated dermatitis are often misidentified as stage 2 pressure 
injuries, resulting in inaccurate reporting and reimbursement. Another 
commenter recommended that the `encounter start' begin when the patient 
is admitted to inpatient, as patients may unfortunately have long hold 
times in the emergency room, where the usual inpatient protocols for 
skin care cannot reliably be implemented. Another commenter advised CMS 
to consider any changes to measure exclusion criteria as substantive, 
requiring use of the rulemaking process.
    Response: We thank commenters for their feedback on the measure 
specification. We clarify this measure captures the number of patients 
who experience a pressure injury of stage 2 or higher during an acute 
care hospitalization. Therefore, hospice and behavioral health 
encounters are indirectly excluded from the measure. With regards to 
obstetrical patients, although the incidence is rare (<1%), patients 
receiving care in hospital labor and delivery units are still at risk 
of developing pressure injuries.\405\ Some reported risk factors 
including: immobility and unsuitable positions (especially with 
epidural use), excessive humidity (particularly after rupture of 
membranes), excess weight, dehydration, prolonged labor, lack of risk 
assessment and planning, and lack of bariatric and pressure-relieving 
equipment.406 407 The target population for this measure is 
inpatient hospital encounters, inclusive of obstetrical encounters, and 
does not apply to hospice encounters or behavioral health encounters.
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    \405\ Newton H, Butcher M. Investigating the risk of pressure 
damage during childbirth. Br J Nurs. 2000 Mar 23-Apr 12;9(6 
Suppl):S20-2, S24, S26. doi: 10.12968/bjon.2000.9.Sup1.6347.
    \406\ Alfirevic, A., Argalious, M., & Tetzlaff, J.E. (2004). 
Pressure sore as a complication of labor epidural analgesia. 
Anesthesia and analgesia, 98(6), 1783-1784. https://doi.org/10.1213/01.ANE.0000116928.80605.D6.
    \407\ Newton, H., & Mitchell, M.D. (2000). Pressure ulcers 
during labour: the effect of epidural analgesia. Anaesthesia, 
55(11), 1140-1141. https://doi.org/10.1046/j.1365-2044.2000.01766-17.x.
---------------------------------------------------------------------------

    In response to commenter feedback regarding the two different time 
courses in the numerator and denominator, the use of a 24-hour time 
window for accurate and timely identification of stage 2, 3, 4, or 
unstageable pressure injury present on admission aligns with National 
Pressure Injury Advisory Panel (NPIAP) Clinical Practice Guidelines. 
The 72-hour time window for accurate and timely identification of DTPI 
was chosen because a longer time window is needed to exclude cases when 
the precipitating event occurred before the patient's admission. The 
use of two different time windows is determined by the complexity of 
the clinical condition and current practice guidelines.
    Regarding the inclusion of stage 2 pressure injuries, we highlight 
that over 50% of reported pressure injuries in hospitals are stage 2 or 
higher and new-onset pressure injuries of stage 2 or greater are widely 
considered to be potentially avoidable with best practices.\408\ The 
inclusion of stage 2 pressure injuries also harmonizes this measure 
with other National Database of Nursing Quality Indicators (NDNQI) 
measures, and CMS pressure injury measures used in the long-term care 
hospital, inpatient rehabilitation

[[Page 59149]]

facility, and home health care programs. CMS encourages hospitals to 
continue robust educational efforts to address knowledge gaps among 
health professionals, strengthen processes to avoid misidentification 
of pressure injuries, and ensure consistency in clinical documentation.
---------------------------------------------------------------------------

    \408\ 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.
---------------------------------------------------------------------------

    Regarding other recommendations to modify denominator exclusion 
criteria, CMS will continue to consider refinements as new information 
becomes available. Any proposed specification changes will be evaluated 
against CMS' existing criteria for technical measure specifications 
changes to determine whether the rulemaking process or a sub-regulatory 
process for review is most appropriate. We refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41538) for more details on previously 
finalized policies regarding substantive vs. non- substantive changes.
    As described in Sec.  412.164(c)(1), CMS announces technical 
measure specification updates through the QualityNet website (https://qualitynet.cms.gov) and listserv announcements.
    Finally, we appreciate the commenters' recommendation to begin 
`encounter start' upon admission to the acute unit (due to potentially 
long wait times and varying skin assessment protocols in the ED). 
However, as up to 40% of hospitalized patients are admitted through the 
emergency department annually,\409\ it is critical that pressure injury 
prevention begin at that point of entry to protect patients from 
avoidable harm.
---------------------------------------------------------------------------

    \409\ Santamaria N, Creehan S, Fletcher J, Alves P, Gefen A. 
Preventing pressure injuries in the emergency department: Current 
evidence and practice considerations. Int Wound J. 2019 
Jun;16(3):746-752. doi: 10.1111/iwj.13092. Epub 2019 Feb 27. PMID: 
30815991; PMCID: PMC7948891.
---------------------------------------------------------------------------

    Comment: A few commenters thought the measure would benefit from 
risk adjustment to ensure facilities treating patients with complex 
health conditions (such as safety net hospitals) or patient with higher 
illness acuity are not inadvertently penalized.
    Response: We appreciate commenters' feedback to consider risk 
adjusting this measure. New-onset pressure injuries of stage 2 or 
greater are widely considered to be potentially avoidable with 
appropriate identification and mitigation of risk factors. There are 
many actions hospitals can take to reduce risk, such as conducting a 
structured risk assessment to identify individuals at risk for pressure 
injury (as soon as possible upon arrival and at regular intervals 
thereafter), as well as proper skin care, nutrition, and careful 
repositioning of patients. Although higher risk patients require more 
intervention to prevent pressure injuries, there is no empirically 
observed association between pre-existing risk and perceived 
avoidability.\410\ For these reasons, none of the existing CMS measures 
of pressure injury (for example, home health care, skilled nursing 
facilities, rehabilitation facilities, long-term acute care) are risk-
adjusted.
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    \410\ Pittman J, Beeson T, Dillon J, Yang Z, Mravec M, Malloy C, 
Cuddigan J. Hospital-Acquired Pressure Injuries and Acute Skin 
Failure in Critical Care: A Case-Control Study. J Wound Ostomy 
Continence Nurs. 2021 Jan-Feb 01;48(1):20-30. doi: 10.1097/
WON.0000000000000734.
---------------------------------------------------------------------------

    Comment: A commenter requested clarification on whether diagnosis 
of a pressure ulcer as a numerator case will be determined based on 
physician or advanced practice provider documentation (for example, 
diagnoses in problem lists or discharge documentation).
    Response: We thank the commenter for their feedback. The numerator 
is determined through either ICD-10 CM coded diagnoses or structured 
clinical documentation to support variances in hospital documentation 
workflows and practices.
    Comment: A few commenters supported the inclusion of the measure 
and requested that CMS post the pressure injury rates for each hospital 
on a yearly basis, to allow the public to see improvements soon, and so 
that hospitals can assess their performance over time as they adopt new 
protocols and various innovative technologies to reduce pressure 
injuries.
    Response: We thank commenters for their suggestion of annual 
reporting and overall support for the measure. Based on our previously 
finalized policy in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58954 
through 58959), eCQM performance information is publicly displayed on a 
CMS-specified website (currently, data.cms.gov). For example, if a 
hospital chooses to self-select the Hospital Harm-Pressure Injury eCQM 
as one of their self-selected eCQMs to meet the eCQM requirement in the 
CY 2025 reporting period, results would be posted in the October 2026 
release on data.cms.gov. During a 30-day preview period, hospitals can 
review their data before the data are displayed. We will announce the 
public display of eCQM data on Care Compare on a later date.\411\
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    \411\ https://www.qualityreportingcenter.com/globalassets/iqr2022events/ecqm121922/ecqm-webinar_cy-2022-ecqm-reporting-tools-and-faqs_12.19.22_vfinal508.pdf.
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    Comment: A few commenters stated the measure should be kept as 
optional, as there are several operational challenges hospitals would 
need to work through if the measure were to be made mandatory.
    Response: As finalized in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49299 through 49302), hospitals must report on six total eCQMs 
beginning with the CY 2024 reporting period and subsequent years. 
Hospitals must report on three eCQMs chosen by CMS and then three 
additional eCQMs that are self-selected from the list of remaining 
eCQMs. We reiterate this measure will be included as one of the eCQMs 
hospitals have the option to self-select for reporting beginning with 
the CY 2025 reporting period/FY 2027 payment determination. Future 
changes to the eCQM reporting requirements, including any additional 
eCQMs for mandatory reporting, would go through notice-and-comment 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed. We also refer readers to section 
IX.H.10.a.2. of this final rule where we are finalizing the same eCQM 
for the Medicare Promoting Interoperability Program.
b. 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.\412\ 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.\413\ 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.\414\ Both worsening renal function and injury requiring 
dialysis have lasting negative

[[Page 59150]]

impacts.415 416 417 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.\418\ 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.\419\ About 30 percent of patients with AKI may require 
ongoing dialysis in the outpatient setting after hospital 
discharge.\420\ Survivors of AKI also have significantly lower health-
related quality of life (HRQOL) compared to the general 
population.\421\ HRQOL is a predictor of mortality among AKI survivors 
after adjusting for clinical risk variables.\422\ 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 
Disease: Improving Global Outcomes (KDIGO) guidelines suggest careful 
management of hemodynamic status, fluids, and vasoactive medications 
for the prevention of AKI.\423\ Literature suggests early AKI treatment 
such as nephrotoxic avoidance, drug dose adjustment, and attention to 
fluid balance are also effective preventive measures.424 425 
Using 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.\426\ 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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    \412\ Levey, A.S., & James, M.T. (2017). Acute Kidney Injury. 
Annals of internal medicine, 167(9), ITC66-ITC80.
    \413\ 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.
    \414\ Hoste, E.A., & Schurgers, M. (2008). Epidemiology of acute 
kidney injury: how big is the problem? Critical care medicine, 36(4 
Suppl), S146-S151.
    \415\ Hoste, E., & De Corte, W. (2011). Clinical consequences of 
acute kidney injury. Contributions to nephrology, 174, 56-64.
    \416\ Levey, A.S., & James, M.T. (2017). Acute Kidney Injury. 
Annals of internal medicine, 167(9), ITC66-ITC80.
    \417\ 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.
    \418\ 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.
    \419\ 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.
    \420\ 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.
    \421\ 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.
    \422\ 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.
    \423\ 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.
    \424\ Perazella M.A. (2012). Drug use and nephrotoxicity in the 
intensive care unit. Kidney international, 81(12), 1172-1178.
    \425\ 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.
    \426\ 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.
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(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.\427\ Accurately monitoring the rate at which AKI occurs in the 
hospital setting will allow hospitals to improve quality and reduce AKI 
harm rates.
---------------------------------------------------------------------------

    \427\ 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).\428\
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    \428\ 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.\429\ 
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.
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    \429\ 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.
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    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

[[Page 59151]]

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/eh-cah?qt-tabs_eh=1) 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.
    We proposed 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 final 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 final rule for a 
discussion of a similar proposal to adopt this measure in the Medicare 
Promoting Interoperability Program.
    We invited public comment on this proposal.
    Comment: Many commenters supported the adoption of the Hospital 
Harm-Acute Kidney Injury eCQM into the Hospital IQR Program. A few 
commenters noted that expanding the list of available eCQMs within the 
Hospital IQR Program is helpful for quality improvement and this is an 
important area of patient safety not currently addressed in the 
program. Another commenter made a general request that CMS include this 
measure as a pre-rulemaking publication measure on the eCQI Resource 
Center.
    Response: We thank the commenters for their support of our proposal 
to include Hospital Harm-Acute Kidney Injury eCQM (CBE #3713e) in the 
Hospital IQR Program measure set beginning with the CY 2025 reporting 
period/FY 2027 payment determination. We agree that accurately 
monitoring the rate at which AKI occurs in the hospital setting will 
allow hospitals to refine quality improvement programs and adopt best 
practices to identify AKI at an early stage, and intervene to prevent 
progression. We note that measure details including the electronic 
specifications were posted on the eCQI Resource Center pre-rulemaking 
page at the time of publication of the proposed rule at: https://ecqi.healthit.gov/ecqm/eh/pre-rulemaking/2024/cms0832v1.
    Comment: A few commenters questioned whether a 0.76 percent to 4.43 
percent variation in performance rates among the 20 hospital test sites 
is a sufficient performance gap to allow users to distinguish 
meaningful differences in performance. For this reason, a commenter was 
not supportive of adopting the measure, while others were supportive 
but requested additional testing in a broader set of EHRs and 
hospitals.
    Response: We acknowledge that some commenters have expressed 
concern regarding the magnitude of the performance gap, which they 
perceive to be small. We highlight that this measure was tested in 20 
hospital test sites with varying bed size, geographic location, 
teaching status, urbanicity, and two different EHR systems. While it is 
true that measure scores among the hospitals tested ranged from 0.76 
percent to 4.43 percent, regression results demonstrated that the 
measure detects clinically meaningful differences in AKI across 
hospitals.\430\ During testing, several hospitals' performance rates 
were consistently below the system-wide average while a few others were 
above that mean, indicating room for quality improvement in the 
inpatient setting.\431\ We will monitor the performance gap as 
hospitals begin to report this measure.
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    \430\ Measures Management System Hub. (December 1, 2022) Measure 
Applications Partnership (MAP) Hospital Workgroup: 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications 
Manual. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
    \431\ Measures Management System Hub. (December 1, 2022) Measure 
Applications Partnership (MAP) Hospital Workgroup: 2022-2023 
Measures Under Consideration (MUC) Cycle Measure Specifications 
Manual. Available at: https://mmshub.cms.gov/sites/default/files/map-hospital-measure-specifications-manual-2022.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters urged CMS to delay adoption of the 
measure until it was reviewed and endorsed by the CBE.
    Response: We thank commenters for their feedback to consider 
delaying adoption of Hospital Harm-Acute Kidney Injury measure until it 
has been endorsed by a CBE. This measure was submitted to the CBE for 
endorsement review in the Fall 2022 cycle (CBE #3498e). The Patient 
Safety Standing Committee reviewed the measure at the measure 
evaluation meeting on February 9, 2023. The measure received high 
passing scores on all measure criteria (100% pass for reliability, 
validity and performance gap, 92.9% pass for evidence, feasibility, and 
use, and 85.7% pass on usability) and the committee passed the measure 
almost unanimously (13/14) on suitability for endorsement.\432\ CMS 
expects final measure endorsement when the CSAC meets on July 24, 2023.
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    \432\ National Quality Forum (NQF). Patient Safety Fall 2022 
Measure Evaluation Summary Final. (2023) Retrieved from https://www.p4qm.org/sites/default/files/2023-04/patient_safety_fall_2022_measure_evaluation_summary_final-508.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters were concerned that this measure is 
duplicative, citing that there is already a claims-based measure of 
Acute Kidney Injury in the HAC Reduction Program (PSI-10 Postoperative 
Acute Kidney Injury Requiring Dialysis Rate within the CMS PSI 90 
composite). A few commenters were opposed to measure adoption as it 
would create instances of ``double jeopardy'' for the same patients or 
cases.
    Response: We appreciate commenters' feedback regarding duplicative 
measures. Patient Safety Indicator (PSI) 10: Postoperative Acute Kidney 
Injury

[[Page 59152]]

Requiring Dialysis Rate, a component of the CMS PSI 90 composite 
measure, only captures patients who develop postoperative kidney 
failure requiring renal replacement therapy, uses claims as its sole 
data source, and is focused only on Medicare fee-for-service 
beneficiaries aged 18 years and older. In comparison, the Hospital 
Harm-Acute Kidney Injury eCQM measures how often stage 2 or greater AKI 
occurs in the inpatient hospital setting, whether or not the patient 
received dialysis, and whether or not the patient had surgery before 
developing AKI. The new measure is developed as an eCQM for adult 
inpatients, regardless of payer, so it is the only EHR-based measure 
intended for use in acute care hospitals related to AKI.
    We wish to clarify that we intend to retain PSI-10 (within the PSI 
90 composite) in the HAC Reduction Program when this measure is 
implemented into the Hospital IQR Program. In alignment with our goal 
of transitioning to a fully digital quality measurement landscape, we 
envision the potential future use of patient safety eCQMs not only in 
the Hospital IQR Program, but also pay-for-performance programs such as 
the HAC Reduction Program, including as a potential replacement for the 
claims-based PSI 90 measure. As discussed in section V.L.2.b.(4) of the 
proposed rule, we seek to adopt patient safety focused eCQMs to promote 
further alignment across quality reporting and value-based purchasing 
programs. However, until that time we intend to retain PSI 10 (within 
the PSI 90 composite) in the HAC Reduction Program as well as 
finalizing the Hospital Harm-Acute Kidney Injury eCQM in the Hospital 
IQR Program.
    Comment: Several commenters raised concerns about implementation 
burden. A few commenters highlighted that there is a substantial cost 
and time burden faced by hospitals when adopting new eCQMs. A few 
commenters stated the measure should be kept as optional and a 
commenter requested that CMS delay until the CY 2026 reporting period. 
A commenter requested that new eCQMs be delayed until formats are 
changed to Fast Healthcare Interoperability Resources (FHIR) standard 
to avoid unnecessary duplication of work.
    Response: We thank commenters for their input. We reiterate this 
measure will be included as one of the eCQMs hospitals can self-select 
for reporting beginning with the CY 2025 reporting period/FY 2027 
payment determination.
    We highlight that the addition of this eCQM further advances CMS' 
goal of transitioning to a fully digital quality measurement landscape, 
promoting interoperability that will help decrease burden. As the field 
transitions to FHIR, eCQMs specified using the Quality Data Model (QDM) 
may be used as a validation tool to assess the outcomes between the QDM 
and FHIR-based specification.
    Comment: A few commenters expressed concern that the measure is not 
risk-adjusted or that the risk-adjustment model is not fully developed.
    Response: The AKI measure is risk-adjusted using a fully developed 
and validated model. Specifically, the risk-adjustment model accounts 
for patient sex and age, vital signs at the encounter start, index 
estimated glomerular filtration rate (eGFR) based on the index serum 
creatinine (patient sex and age; race neutral), comorbidities present 
on admission (cancer, diabetes, heart failure, hypertension, and 
obesity), and hospital length of stay.\433\ The risk-adjustment model 
has strong performance (C-statistic >0.8), ensuring that hospitals that 
care for sicker and more complex patients (for example, academic 
centers or hospitals that care for disadvantaged populations) are 
evaluated fairly.\434\
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    \433\ Risk Adjustment Methodology Report: Hospital Harm-Acute 
Kidney Injury (April 2022). Available at: https://ecqi.healthit.gov/sites/default/files/AKI-Risk-Adjust-Method-Rpt-508.pdf.
    \434\ Risk Adjustment Methodology Report: Hospital Harm-Acute 
Kidney Injury (April 2022). Available at: https://ecqi.healthit.gov/sites/default/files/AKI-Risk-Adjust-Method-Rpt-508.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters suggested alternative approaches to 
defining AKI, including measures of urine output or other biomarkers.
    Response: This eCQM uses a seven-day rolling window to examine a 
rise in serum creatinine by 2.0 times or greater, based on the KDIGO 
stage 2 definition established in the 2012 KDIGO AKI clinical practice 
guidelines.\435\ CMS will continue to monitor developments in the field 
and incorporate professional consensus into future refinements.
---------------------------------------------------------------------------

    \435\ 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.
---------------------------------------------------------------------------

    Additionally, this measure excludes encounters that do not have at 
least two serum creatine values within 48 hours of arrival. Two values 
are needed within this timeframe to determine if the patient has AKI or 
moderate-to-severe kidney dysfunction on arrival. Encounters for 
patients with an increase in serum creatinine value of at least 0.3 mg/
dL between the index serum creatinine and any subsequent serum 
creatinine taken within 48 hours of the encounter start are excluded. 
Due to the variability of decimal precision within programming 
languages and calculation tools, the value of >=0.3 is expressed in the 
logic as >0.299.
    Comment: A few commenters provided feedback on measure exclusions. 
A commenter recommended excluding patients who have a co-diagnosis of 
volume overload as their lowest creatinine level may be a result of not 
being at their dry weight or euvolemic state. Another commenter 
suggested expanding the list of patients ``at extremely high risk for 
AKI'' to include sepsis, cardiac arrest, and acute myocardial 
infarction requiring urgent/emergent cardiac catheterization. Another 
commenter expressed that the current set of exclusions may not 
adequately address the delay in kidney injury seen in the setting of 
complicated medical conditions that require complex interventions or 
those receiving palliative care.
    Response: We thank the commenters for their feedback on the measure 
denominator exclusions. Most of the suggested exclusions are already 
covered in the current measure specification, including:
     Inpatient hospitalizations for patients with an increase 
in serum creatinine value of at least 0.3 mg/dL between the index serum 
creatinine and a subsequent serum creatinine taken within 48 hours of 
the index serum creatinine. (This criterion excludes patients with AKI 
at presentation, including patients with sepsis, cardiogenic or 
traumatic shock, and other conditions that cause early-onset AKI.)
     Inpatient hospitalizations for patients with an eGFR value 
of <60 mL/min within 48 hours of the encounter start. (This criterion 
excludes patients with CKD stage 3a or greater at presentation as well 
as those with end stage kidney disease on dialysis.)
     Inpatient hospitalizations for patients who have kidney 
dialysis (CRRT, hemodialysis or peritoneal dialysis) initiated within 
48 hours of the encounter start. (This criterion excludes patients who 
require early dialysis due to complete renal failure, acute volume 
overload, or toxic exposures at presentation.)
     Encounters that do not have at least two serum creatine 
values within 48 hours of arrival. Two values are needed within this 
timeframe to determine if the patient has AKI or moderate-to-severe 
renal dysfunction on arrival.
    All of these denominator exclusions have been validated by manual 
review of medical records to ensure that

[[Page 59153]]

patients with conditions causing AKI at presentation to the hospital 
have been excluded. Regarding other recommendations to modify 
denominator exclusion criteria, we will continue to consider 
refinements as new information becomes available. Any proposed 
specification changes will be evaluated against our existing criteria 
for technical measure specifications changes to determine whether the 
rulemaking process or a sub-regulatory process for review is most 
appropriate. We refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41538) for more details on previously finalized policies 
regarding substantive vs. non- substantive changes. As described in 
Sec.  412.164(c)(1), CMS announces technical measure specification 
updates through the QualityNet website (https://qualitynet.cms.gov) and 
listserv announcements.
    Comment: A few commenters acknowledged that because there are 
different methods of calculating eGFR values, the measure should use a 
standard calculation and utilize a non-racially based formula to 
calculate eGFR.
    Response: The eGFR values are calculated using the CKD-EPI 
Creatinine Equation (2021), recommended by the National Kidney 
Foundation (NKF) and American Society of Nephrology (ASN).\436\ This is 
a gender-specific, race-neutral formula. This eCQM applies this formula 
to all reporting entities to eliminate variation in eGFR calculation 
methods across clinical laboratories.
---------------------------------------------------------------------------

    \436\ NKF and ASN Release New Way to Diagnose Kidney Diseases 
(Sept. 23, 2021). Available at: https://www.kidney.org/news/nkf-and-asn-release-new-way-to-diagnose-kidney-diseases.
---------------------------------------------------------------------------

    Comment: A few commenters indicated concerns with the capture of 
acute dialysis treatment and that dialysis treatment can be used for 
non-AKI reasons.
    Response: The measure has been carefully designed to exclude 
patients on chronic dialysis, including hospitalizations for patients 
who have kidney dialysis (CRRT, hemodialysis or peritoneal dialysis) 
initiated within 48 hours of the encounter start, hospitalizations for 
patients with stage 3a or greater CKD within 48 hours of the encounter 
start, and hospitalizations for patients whose serum creatinine rises 
by 0.3 mg/dL or more between the index serum creatinine and a 
subsequent serum creatinine taken within 48 hours of the index serum 
creatinine. The measure does not use diagnosis codes to identify 
patients on chronic dialysis; however, those patients would be captured 
by the previously noted exclusions. Although dialysis may be used for 
reasons other than AKI, these treatments are generally provided within 
48 hours of the encounter start (for example, salicylate toxicity), or 
they employ other modalities such as isolated ultrafiltration (for 
example, heart failure with anasarca), which are not captured by the 
proposed measure.437 438
---------------------------------------------------------------------------

    \437\ American College of Medical Toxicology (2015). Guidance 
document: management priorities in salicylate toxicity. Journal of 
medical toxicology: official journal of the American College of 
Medical Toxicology, 11(1), 149-152. https://doi.org/10.1007/s13181-013-0362-3.
    \438\ Kabach M, Alkhawam H, Shah S, Joseph G, Donath EM, Moss N, 
Rosenstein RS, Chait R. Ultrafiltration versus intravenous loop 
diuretics in patients with acute decompensated heart failure: a 
meta-analysis of clinical trials. Acta Cardiol. 2017 Apr;72(2):132-
141. doi: 10.1080/00015385.2017.1291195.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the measure due to 
concerns about false positives; they stated that serum creatinine 
levels can be influenced by various factors such as medications and 
underlying medical conditions such as sepsis. A commenter noted that 
aminoglycosides, cisplatin, and cyclosporin may cause reversible kidney 
injury, but are necessary for patient care and another commenter 
mentioned that trimethoprim-sulfamethoxazole (TMP-SMX), angiotensin-
converting enzyme (ACE) inhibitors, and sodium-glucose cotransporter-2 
(SGLT2) inhibitors cause an elevation in creatinine without kidney 
injury. A commenter noted that radiographic contrast can cause AKI, but 
may be essential for accurate diagnosis of a patient's condition.
    Response: We thank the commenters for their feedback on the use of 
serum creatinine as a marker for kidney function and diagnosis of AKI. 
We reiterate that KDIGO clinical practice guidelines for AKI cite serum 
creatinine as an acceptable and widely available proxy for defining and 
monitoring AKI and have provided detailed clinical guidelines to 
evaluate and monitor patients at-risk of kidney damage.\439\ While some 
instances of AKI may be due to natural progression of underlying 
illness or complication of a necessary treatment, a substantial 
proportion of AKI cases are preventable and treatable if detected at 
stage 1, with improved outcomes.440 441 Further, KDIGO 
guidelines suggest careful management of hemodynamic status, fluids, 
and vasoactive medications, along with avoidance of nephrotoxic 
exposure and drug dose adjustment, for the prevention of AKI and the 
progression of AKI once identified.442 443
---------------------------------------------------------------------------

    \439\ 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.
    \440\ 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.
    \441\ Wilson, F.P., Shashaty, M., Testani, J., Aqeel, I., 
Borovskiy, Y., Ellenberg, S.S., Fuchs, B. (2015). Automated, 
electronic alerts for acute kidney injury: a single-blind, parallel-
group, randomised controlled trial. Lancet, 385(9981), 1966-1974.
    \442\ 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.
    \443\ Ostermann, M., Bellomo, R., Burdmann, E.A., Doi, K., 
Endre, Z.H., Goldstein, S.L., Kane-Gill, S.L., Liu, K.D., Prowle, 
J.R., Shaw, A.D., Srisawat, N., Cheung, M., Jadoul, M., Winkelmayer, 
W.C., Kellum, J.A., & Conference Participants (2020). Controversies 
in acute kidney injury: conclusions from a Kidney Disease: Improving 
Global Outcomes (KDIGO) Conference. Kidney international, 98(2), 
294-309.
---------------------------------------------------------------------------

    We clarify that patients with an underlying medical condition such 
as sepsis are ``designed out'' of the measure specification in two 
ways. First, patients are excluded from the denominator if they have 
AKI when they present to the hospital or develop AKI (based on even the 
smallest meaningful bump in the serum creatinine, 0.3 mg/dl) within the 
first 48 hours of the encounter. Second, risk adjustment includes 
patient's vital signs at presentation, thus accounting for patients 
presenting with systemic inflammatory response syndrome (SIRS), 
including sepsis. Validation testing confirmed that the first criterion 
excludes nearly all patients admitted with community-acquired sepsis.
    The medications to which the commenters refer (for example, 
aminoglycosides, ACE inhibitors, SGL-2 inhibitors) generally cause 
modest increases in the serum creatinine, within the range of what is 
classified as stage 1 AKI (for example, 1.5-2.0 fold increase in serum 
creatinine).\444\ This measure's numerator is restricted to stage 2 
AKI, or ``a subsequent increase in 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.'' Recognizing stage 1 AKI will provide an opportunity for 
the clinician to discontinue or adjust the offending medication without 
penalty. Most of the drugs specified are not

[[Page 59154]]

nephrotoxic at the doses that are typically used, and with appropriate 
monitoring, significant increases in serum creatinine levels can be 
avoided.\445\ Risk-adjustment provides additional assurance that 
providers will not be penalized for appropriate care. Based on the 
risk-adjustment model, for example, patients with heart failure have 
about 70% higher odds of AKI than patients without heart failure. The 
risk model also includes pre-existing diabetes, hypertension, cancer, 
and obesity.\446\
---------------------------------------------------------------------------

    \444\ Rey, A., Gras-Champel, V., Choukroun, G., Masmoudi, K., & 
Liabeuf, S. (2022). Risk factors for and characteristics of 
community- and hospital-acquired drug-induced acute kidney injuries. 
Fundamental & clinical pharmacology, 36(4), 750-761. https://doi.org/10.1111/fcp.12758.
    \445\ Rey, A., Gras-Champel, V., Choukroun, G., Masmoudi, K., & 
Liabeuf, S. (2022). Risk factors for and characteristics of 
community- and hospital-acquired drug-induced acute kidney injuries. 
Fundamental & clinical pharmacology, 36(4), 750-761. https://doi.org/10.1111/fcp.12758.
    \446\ American Institutes for Research. Risk Adjustment 
Methodology Report: Hospital Harm-Acute Kidney Injury (April 2022). 
Available at: https://ecqi.healthit.gov/sites/default/files/AKI-Risk-Adjust-Method-Rpt-508.pdf.
---------------------------------------------------------------------------

    There has been extensive debate about whether contrast-induced 
nephropathy is a meaningful clinical entity.447 448 449 For 
example, a recent systematic review and meta-analysis of 13 
nonrandomized controlled studies involving over 25,000 patients found 
no increased AKI risk among patients who received intravenous 
contrast.\450\ Additionally, the risk of contrast-induced AKI is 
extremely low among patients with normal or minimally impaired kidney 
function at baseline, to which this measure is restricted 
451 452 453 Finally, the 2020 KDIGO conference directly 
addressed this question as follows: ``recent evidence suggests that the 
risks associated with IV contrast are far fewer with modern agents and 
practice patterns, and significant kidney injury is unusual in patients 
with normal or mildly reduced baseline kidney function. IV contrast 
should not be withheld owing to concern for AKI in life-threatening 
conditions in which the information gained from the contrast study 
could have important therapeutic implications.'' \454\ It is generally 
within the provider's control to determine if the benefits of the 
contrast study outweigh the risks, and to effectively mitigate those 
risks.455 456
---------------------------------------------------------------------------

    \447\ Ehrmann, S., Aronson, D. & Hinson, J.S. Contrast-
associated acute kidney injury is a myth: Yes. Intensive Care Med 
44, 104-106 (2018). https://doi.org/10.1007/s00134-017-4950-6.
    \448\ Kashani, K., Levin, A. & Schetz, M. Contrast-associated 
acute kidney injury is a myth: We are not sure. Intensive Care Med 
44, 110-114 (2018). https://doi.org/10.1007/s00134-017-4970-2.
    \449\ Weisbord, S.D., du Cheryon, D. Contrast-associated acute 
kidney injury is a myth: No. Intensive Care Med 44, 107-109 (2018). 
https://doi.org/10.1007/s00134-017-5015-6.
    \450\ McDonald, J., McDonald, R., Comin, J., Williamson, E., 
Katzberg, R, Hassan Murad, H., & Kallmes, D. Frequency of Acute 
Kidney Injury Following Intravenous Contrast Medium Administration: 
A Systematic Review and Meta-Analysis. Radiology 267:1, 119-128 
(2013).
    \451\ Hitinder S. Gurm, M.S., Kooiman, J., & Share, D. A Novel 
Tool for Reliable and Accurate Prediction of Renal Complications in 
Patients Undergoing Percutaneous Coronary Intervention. Journal of 
the American College of Cardiology, 61, 2242-2248 (2013). https://doi.org/10.1016/j.jacc.2013.03.026.
    \452\ Mehran, R., Aymong, E., Nikolsky, E., Lasic, Z., Iakovou, 
I., Fahy, M., Mintz, G., Lansky, A., Moses, J., Stone, G., Leon, M., 
& Dangas, G. A simple risk score for prediction of contrast-induced 
nephropathy after percutaneous coronary intervention: Development 
and initial validation. Journal of the American College of 
Cardiology, 44:7, 1393-1399 (2004). https://doi.org/10.1016/j.jacc.2004.06.068.
    \453\ Tsai, T., Patel, U., Chang, T., Kennedy, K., Masoudi, F., 
Matheny, M., Kosiborod, M., Amin, A., Messenger, J., Rumsfeld, J., & 
Spertus, J. Contemporary Incidence, Predictors, and Outcomes of 
Acute Kidney Injury in Patients Undergoing Percutaneous Coronary 
Interventions: Insights From the NCDR Cath-PCI Registry. JACC: 
Cardiovascular Interventions. 7:1. 1-9 (2014). https://doi.org/10.1016/j.jcin.2013.06.016.
    \454\ Ostermann, M., Bellomo, R., Burdmann, E.A., Doi, K., 
Endre, Z.H., Goldstein, S.L., Kane-Gill, S.L., Liu, K. D., Prowle, 
J.R., Shaw, A.D., Srisawat, N., Cheung, M., Jadoul, M., Winkelmayer, 
W.C., Kellum, J.A., & Conference Participants (2020). Controversies 
in acute kidney injury: conclusions from a Kidney Disease: Improving 
Global Outcomes (KDIGO) Conference. Kidney international, 98(2), 
294-309.
    \455\ Weisbord SD, Mor MK, Resnick AL, et al. Prevention, 
Incidence, and Outcomes of Contrast-Induced Acute Kidney Injury. 
Arch Intern Med. 2008;168(12):1325-1332. doi:10.1001/
archinte.168.12.1325
    \456\ Cho, A., Lee, J.E., Yoon, J.Y., Jang. H.R., Huh., W., Kim, 
Y.G., Kim, D., & Oh, H. Effect of an Electronic Alert on Risk of 
Contrast-Induced Acute Kidney Injury in Hospitalized Patients 
Undergoing Computed Tomography. AJKD: National Kidney Foundation. 
60:1, P74-81 (July 2012). https://doi.org/10.1053/j.ajkd.2012.02.331.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal as proposed. We also refer readers to section 
IX.H.10.a.2. of this final rule where we are finalizing the same eCQM 
for the Medicare Promoting Interoperability Program.
c. 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.\457\ 
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.\458\ 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.\459\
---------------------------------------------------------------------------

    \457\ Harvard Health Publishing. (2021) Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
    \458\ Ibid.
    \459\ Ibid.
---------------------------------------------------------------------------

    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.\460\ 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.\461\
---------------------------------------------------------------------------

    \460\ Ibid.
    \461\ 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.
---------------------------------------------------------------------------

    A large body of research links CT scans to a higher risk of 
developing cancer.462 463 464 465 466 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.\467\ While the

[[Page 59155]]

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.\468\ One study 
estimated that the percentage of cancers in the U.S. attributable to CT 
scans may be as high as two percent.\469\ Therefore, it is critically 
important to ensure that patients are exposed to the lowest possible 
level of radiation while preserving image quality.
---------------------------------------------------------------------------

    \462\ 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.
    \463\ 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.
    \464\ 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.
    \465\ 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.
    \466\ 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.
    \467\ Harvard Health Publishing. (2021) Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
    \468\ 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.
    \469\ Ibid.
---------------------------------------------------------------------------

(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.\470\ 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 will 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.\471\ We also proposed to adopt the 
Excessive Radiation eCQM to support the National Quality Strategy goal 
of promoting safety by reducing preventable harm to patients.\472\ 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,\473\ The 
Society of Interventional Radiology,\474\ The Society of Cardiovascular 
CT,\475\ cardiovascular imaging societies,\476\ Image Wisely 2020,\477\ 
and the FDA.\478\
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    \470\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \471\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \472\ CMS Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \473\ American College of Radiology. (2015). Development and 
Revision Handbook. https://www.acr.org/-/media/ACR/Files/Practice-Parameters/DevelopmentHandbook.pdf.
    \474\ Stecker, Michael S. et al. Guidelines for Patient 
Radiation Dose Management. Journal of Vascular and Interventional 
Radiology. 2009. Volume 20, Issue 7, S263-S273.
    \475\ 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.
    \476\ 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.
    \477\ Image Wisely 2020. Available at: https://www.imagewisely.org/.
    \478\ FDA. (2019). Computed Tomography (CT). https://www.fda.gov/radiation-emitting-products/medical-x-ray-imaging/computed-tomography-ct#6.
---------------------------------------------------------------------------

    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.\479\ 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 will encourage 
shared decision-making between providers and patients.\480\
---------------------------------------------------------------------------

    \479\ 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.
    \480\ Ibid.
---------------------------------------------------------------------------

(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 Alara Imaging Software for CMS Measure Compliance will be 
available to all reporting entities free of charge and will be 
accessible by creating a secure account through the measure developer's 
website. Education materials will provide step-by-step instructions on 
how hospitals can create an account and then link their EHR and PACS 
data to the software. Reporting entities and their vendors will 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 includes diagnostic CT scans that have a 
size-adjusted radiation dose greater than the

[[Page 59156]]

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.\481\
---------------------------------------------------------------------------

    \481\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
---------------------------------------------------------------------------

    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.\482\
---------------------------------------------------------------------------

    \482\ 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 Codes (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/eh-cah?qttabs_eh=1&globalyearfilter=2024&global_measure_group=3726) for 
more details on the measure specifications.
(5) Data Submission and Reporting
    We proposed 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 final 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 final rule for more information on our proposal to adopt the 
Excessive Radiation eCQM in the Medicare Promoting Interoperability 
Program.
    We invited public comment on this proposal.
    Comment: Many commenters supported our proposal to adopt the 
Excessive Radiation eCQM into the Hospital IQR Program. Many commenters 
expressed their belief that the measure would improve patient safety by 
reducing unnecessary radiation exposure and risk of developing cancer 
for patients. Several commenters appreciated that this measure could 
help address a lack of oversight of CT scans, which has led to wide 
variation in the radiation doses administered. Many commenters noted 
their belief that adopting the measure would not compromise diagnostic 
image quality. Several commenters supported the measure proposal, 
citing the rigorous testing that the measure went through, which 
demonstrated that implementation was highly feasible and would not 
place a large reporting burden on clinicians. Several commenters also 
expressed support because the measure was endorsed by the CBE. Several 
commenters supported the adoption of the eCQM as an optional measure 
that hospitals can select to meet eCQM reporting requirements.
    Response: We thank the commenters for their support. We agree that 
this measure will help reduce unnecessary radiation exposure from CT 
scans and improve patient safety. We also appreciate the commenters' 
support for the measure as part of the pool of eCQMs from which 
hospitals can self-select to meet the eCQM requirements.
    Comment: Many commenters recommended implementing this measure 
earlier than proposed, beginning as early as the CY 2024 reporting 
period. Many commenters urged CMS to make the measure mandatory to 
report for the Hospital IQR Program. Commenters expressed their belief 
that given the large number of exams performed annually, excessive 
radiation from CT scans is a major issue, and mandatory reporting of 
this measure would drive considerable improvements in safety.
    Response: We appreciate commenters' support for an earlier adoption 
date and for requiring reporting on the Excessive Radiation eCQM. When 
proposing this measure for adoption, we sought to balance quickly 
addressing the patient safety concerns presented by exposure to 
excessive radiation while still providing hospitals with enough time to 
implement the measure. To ensure this balance remains, we are not 
accelerating the adoption timeline. We will consider requiring 
reporting of this measure for future rulemaking.
    Comment: Many commenters did not support adoption of the Excessive 
Radiation eCQM and raised concerns with the measure's technical 
specifications. A few commenters stated their belief that the measure 
had not been adequately vetted by experts such as major radiology 
societies or standards organizations. Some commenters believed that 
some of the measure's data elements lack scientific and practical 
validity. A few commenters recommended that CMS find an alternate 
approach for optimizing radiation doses while preserving diagnostic 
image quality, whether through existing standards or by working with 
the medical imaging community to develop new approaches.
    Response: We thank the commenters for their input and feedback on 
this measure. We respectfully disagree that the measure has not been 
adequately tested. The data elements are scientifically and practically 
valid. The measure's thresholds for noise and radiation dose were 
developed with close input from an experienced and diverse TEP, which 
included representation from radiologists and physicists in medicine 
and were informed by an image quality study.\483\
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    \483\ Smith-Bindman, R., Yu, S., Wang, Y., Kohli, M. D., Chu, 
P., Chung, R., Luong, J., Bos, D., Stewart, C., Bista, B., 
Alejandrez Cisneros, A., Delman, B., Einstein, A. J., Flynn, M., 
Romano, P., Seibert, J. A., Westphalen, A. C., & Bindman, A. (2022). 
An Image Quality-informed Framework for CT Characterization. 
Radiology, 302(2), 380-389. https://doi.org/10.1148/radiol.2021210591.
---------------------------------------------------------------------------

    The measure also relies on evidence and consensus-based clinical 
guidelines for optimizing CT radiation doses. These include guidelines 
developed by the American College of Radiology,\484\ The Society of 
Interventional Radiology,\485\ The Society of Cardiovascular CT,\486\ 
cardiovascular imaging societies,\487\ Image Wisely 2020,\488\ and the 
FDA.\489\ Measure testing by the measure developer across 16 inpatient 
and outpatient hospitals

[[Page 59157]]

showed 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 testing sites 
reported that the assessment of their radiation doses as specified in 
the measure was helpful for identifying areas for quality improvement, 
and the measure received support from radiologists and medical 
physicists who serve as leaders of the testing sites (88 FR 27084). We 
also reiterate that this measure was submitted to the CBE by the 
measure developer for endorsement review (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 (88 FR 27083 and 27084).\490\
---------------------------------------------------------------------------

    \484\ American College of Radiology. (2015) Development and 
Revision Handbook. https://www.acr.org/-/media/ACR/Files/Practice-Parameters/DevelopmentHandbook.pdf.
    \485\ Stecker, Michael S. et al. Guidelines for Patient 
Radiation Dose Management. Journal of Vascular and Interventional 
Radiology. 2009. Volume 20, Issue 7, S263-S273.
    \486\ 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.
    \487\ 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.
    \488\ Image Wisely 2020. Available at: https://www.imagewisely.org/.
    \489\ FDA. (2019) Computed Tomography (CT). https://www.fda.gov/radiation-emitting-products/medical-x-ray-imaging/computed-tomography-ct#6.
    \490\ 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.
---------------------------------------------------------------------------

    Comment: Some commenters stated their belief that the complex 
relationship between noise and radiation is oversimplified by the 
measure. Many commenters did not support the measure out of concern 
that the fixed limits for noise and dose may prevent CT scan operators 
from appropriately adjusting radiation doses when needed, resulting in 
incorrect radiation doses and potential misdiagnoses, particularly for 
patients of size.
    Response: We thank the commenters for their feedback. We wish to 
clarify that the purpose of the Excessive Radiation eCQM is to ensure 
that radiation dose and image quality fall within thresholds that are 
safe and appropriate, and it is not intended to oversimplify the 
relationship between noise and radiation. The image quality component 
is included in the measure as a balancing component to the radiation 
dose thresholds, to ensure that CT image quality does not decrease as 
an unintended consequence of the measure.
    We also acknowledge the commenters' concerns about the fixed limits 
for noise and radiation dose. We reiterate that the thresholds for 
radiation doses are size-adjusted to accommodate patients of all sizes. 
We would like to further emphasize that hospitals should use the 
measure as a guideline for conducting CT scans while also adjusting 
noise and radiation doses when necessary to provide quality patient 
care in special circumstances. The measure seeks to reduce harm from 
excessive radiation for the vast majority of patients and should not 
replace appropriate clinical judgement if adjustments need to be made 
in select circumstances.
    Comment: A few commenters stated that CMS did not adequately 
consider references that express concern with the measure's 
benchmarking approach such as ``Benchmarking CT Radiation Doses Based 
on Clinical Indications: Is Subjective Image Quality Enough?'' by 
Mahadevappa Mahesh in Radiology (2022; 302:2, 390-391).
    Response: We acknowledge the commenters' concern. We note that the 
measure developer reviewed the reference cited by the commenters and 
took its recommendations into account while developing the Excessive 
Radiation eCQM. The measure developer then rigorously tested the 
measure across 16 inpatient and outpatient hospitals and a large system 
of outpatient radiology practices (88 FR 27084).
    Comment: Some commenters suggested that this measure is not 
suitable for eCQM reporting because the measure requires information 
from radiology data systems, as opposed to clinical information stored 
in an EHR system.
    Response: This measure is suitable for eCQM reporting. As set forth 
in the eCQI Resource Center, we define an eCQM as a measure specified 
in a standard electronic format that uses data electronically extracted 
from EHRs and/or health IT systems to measure the quality of health 
care provided.\491\ By using patients' radiology data that exist in a 
structured and standard electronic format that can be electronically 
extracted from radiology IT data systems, this measure meets the 
definition of an eCQM. And while radiology data are stored in health IT 
systems, we understand that for many hospitals the radiology data 
system may not be fully integrated or interoperable with the EHRs. To 
address this gap, the measure developer created the Alara Imaging 
Software for CMS Measure Compliance. 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 (88 FR 
27084).
---------------------------------------------------------------------------

    \491\ https://ecqi.healthit.gov/glossary.
---------------------------------------------------------------------------

    Comment: Many commenters expressed concern that implementing this 
software may be additionally burdensome. Specifically, commenters were 
concerned that integrating proprietary software and securely deploying 
it within existing IT systems would place an administrative burden 
exceeding that of other measures. They stated this burden could include 
ensuring the compatibility of the software with their system IT 
networks. Commenters questioned how hospitals unable to use the 
software for any reason would be able to report this measure.
    Other commenters believed that hospital staff would face additional 
burden in reporting the data. Commenters questioned how the software 
would integrate with certified EHR reporting technology. They believed 
that staff would need to manually enter data into the EHR and verify 
data accuracy across systems as part of the data submission processes. 
According to commenters, if the software integrates with the EHR, they 
believe staff time would also be required to build and maintain that 
integration.
    Commenters believed that EHR developers would face a burden in 
developing and configuring new software to support measure reporting. 
Multiple interfaces and third-party applications might need to be 
reconfigured and mapped to process radiology data.
    Response: We thank the commenters for sharing their concerns about 
the Alara Imaging Software for CMS Measure Compliance. The software 
accepts a wide range of FHIR, HL7 formats for EHR data, and DICOM CT 
radiation dose and image data to decrease burden. Similar to other 
eCQMs, the measure has also been developed using proven formats: 
Quality Data Model (QDM) for immediate implementation and FHIR when 
adopted in the future, in accordance with our aim of encouraging 
interoperability based on the FHIR Application Programming Interface 
(API). Thus, the overall burden is comparable to that of existing 
eCQMs.
    While the Alara Imaging Software for CMS Measure Compliance is 
proprietary, it will be available to all reporting entities free of 
charge and accessible by creating a secure account through the measure 
steward's website. To clarify the reporting process, we note that a 
hospital can log in through the measure developer's secure portal and 
run the Alara Imaging Software for CMS Measure Compliance inside the 
firewall. The software runs automatically to create the three 
intermediate data elements needed for the measure: CT Dose and Image 
Quality Category, Calculated CT Size-Adjusted Dose, and

[[Page 59158]]

Calculated CT Global Noise. Once the software finishes creating these 
intermediate variables, hospitals can send the data to its EHR for 
measure calculation and reporting. The software allows additional 
options such as the ability to send the data to other business 
associates of the hospital if needed. No manual data entry is required.
    We anticipate that some EHR vendors may develop solutions to ingest 
these calculated variables and calculate the eCQM, as they have done 
for other eCQMs. This burden to EHR developers should be similar to any 
other new eCQM adopted into the Hospital IQR Program.
    We additionally note that the adoption timeline and option to self-
select reporting on this measure should provide sufficient flexibility 
for those hospitals that may need time to integrate the software and 
implement this measure.
    Comment: A few commenters requested that we release the complete 
specifications and guidance on implementing the software at least one 
year before adopting this measure.
    Response: We note that measure details including the electronic 
specifications were posted on the eCQI Resource Center pre-rulemaking 
page at the time of publication of the proposed rule: https://ecqi.healthit.gov/ecqm/eh/pre-rulemaking/2024/cms1074v1. Education 
materials will provide step-by-step instructions for the creation of 
secure accounts and linking hospital EHRs and PACS data to the Alara 
Imaging Software for CMS Measure Compliance (88 FR 27084). Additional 
outreach and education will be provided through routine communication 
channels. This includes but is not limited to issuing memos, emails, 
and notices on the QualityNet and eCQI Resource Center websites. 
Therefore, hospitals should have sufficient guidance for implementing 
the software.
    Comment: Some commenters worried about relying on the measure 
developer as the sole vendor of the translation software. They believed 
that hospitals could be left unable to report data should the measure 
developer or its software experience problems. A few commenters raised 
the concern that hospitals would have to agree to onerous licensing and 
data use conditions to use the software. Commenters suggested that we 
allow other vendors to provide translation software to support 
reporting on this measure. Commenters expressed concern about potential 
data breaches and whether the measure developer and software have 
appropriate security protocols to safeguard sensitive patient 
information. Commenters also stated that hospitals would need to 
conduct a third-party risk management assessment prior to using the 
software. A commenter asked whether translation software is currently 
available for hospitals to integrate with their systems.
    Response: We appreciate the commenters' concerns. Hospitals are not 
required to use the Alara Imaging Software for CMS Measure Compliance. 
They may choose to use any software that performs the necessary 
functions to generate the same standardized data elements necessary to 
calculate the measure consistent with the measure's specifications. The 
Alara Imaging Software for CMS Measure Compliance was created for this 
purpose under a CMS-funded grant. The software links primary data 
elements, assesses CT scans for eligibility for inclusion in the 
measure, and generates three data elements mapped to clinical 
terminology for EHR consumption (CT Dose and Image Quality Category, 
Calculated CT Size-Adjusted Dose, and Calculated CT Global Noise). 
These calculations all occur within the hospital's firewall to ensure 
data security. We also note that the measure has been extensively 
tested in a variety of inpatient and outpatient settings.
    The Alara Imaging Software for CMS Measure Compliance has security 
protocols to safeguard sensitive patient information. It is installed 
and computes the measure within a hospital's firewall to be used for 
measure-related activities, including calculation, and reporting. The 
measure steward's security aligns with industry standards, including 
HIPAA and Systems and Organization Controls (SOC) 2 certification 
verified via ongoing third-party audits. As noted previously, while the 
Alara Imaging Software for CMS Measure Compliance is proprietary, it 
will be available to all reporting entities free of charge and 
accessible by creating a secure account through the measure steward's 
website.
    Comment: Many commenters did not support the measure due to 
concerns about the measure developer's relevant expertise and for-
profit status, as well as the potential for a conflict of interest due 
to the measure developer also being the only vendor for the translation 
software required for the measure.
    Response: We respectfully disagree with the commenters' belief that 
the measure developer lacks the relevant expertise to steward the 
Excessive Radiation eCQM. The measure developer team includes 
radiologists and medical imaging informaticists experienced in 
developing, testing, publishing, and maintaining national quality 
measures. Additionally, this measure has undergone rigorous testing and 
received endorsement from the CBE.
    We do not believe that Alara Imaging's corporate status by itself 
automatically poses a conflict of interest. The Alara Imaging Software 
for CMS Measure Compliance will be available to all reporting entities 
under the Hospital IQR and Medicare Promoting Interoperability Programs 
free of charge, as well as the Hospital Outpatient Quality Reporting 
(OQR) Program if the proposal to adopt the same measure is 
finalized.\492\ If in the future access to the software is more 
limited, then we will reconsider retaining the measure in these CMS 
programs.
---------------------------------------------------------------------------

    \492\ CY 2024 Outpatient Prospective Payment System (OPPS)/
Ambulatory Surgical Center (ASC) Payment System proposed rule, 88 FR 
49552, July 31, 2023.
---------------------------------------------------------------------------

    Comment: Many commenters questioned whether the risk of exposure to 
excessive radiation warranted adoption of this measure into the 
Hospital IQR Program. Many commenters suggested that this measure is 
not needed because existing regulations and accreditation programs 
already provide oversight. A few other commenters argued that there is 
not enough scientific evidence to link low-level radiation dose to 
cancer incidence and mortality.
    Response: We appreciate the commenters' position. However, 
excessive radiation during CT scans is a major patient safety issue. 
Over 80 million CT scans are performed each year in the United States, 
compared to only three million in 1980. As a result of the increased 
use of CT scans, it accounts for 24 percent of all radiation exposure 
for people in the U.S.\493\
---------------------------------------------------------------------------

    \493\ Harvard Health Publishing. (2021) Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
---------------------------------------------------------------------------

    We reiterate that a large body of research links CT scans to a 
higher risk of developing cancer.494 495 496 497 498 One

[[Page 59159]]

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.\499\
---------------------------------------------------------------------------

    \494\ 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.
    \495\ 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.
    \496\ 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.
    \497\ 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.
    \498\ 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.
    \499\ Harvard Health Publishing. (2021). Radiation Risk from 
Medical Imaging. Available at: https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging.
---------------------------------------------------------------------------

    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.\500\ 
One study estimated that the percentage of cancers in the U.S. 
attributable to CT scans may be as high as two percent.\501\ Ensuring 
that patients are exposed to the lowest possible level of radiation 
while preserving CT scan image quality therefore represents an 
opportunity to meaningfully reduce the incidence of cancer in the 
population (88 FR 27083).
---------------------------------------------------------------------------

    \500\ 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.
    \501\ Ibid.
---------------------------------------------------------------------------

    While there are established regulations and programs to regulate 
radiation doses, radiation doses still vary greatly depending on where 
a patient goes for care.\502\ This is concerning because the risk of 
developing cancer increases with the dose administered to 
patients.\503\ The Excessive Radiation eCQM will address the problem by 
establishing a common standard for hospitals to follow and providing 
transparency in the public reporting of data.
---------------------------------------------------------------------------

    \502\ Jeukens C, Boere H, Wagemans B, et al. Probability of 
receiving a high cumulative radiation dose and primary clinical 
indication of CT examinations: a 5-year observational cohort study. 
BMJ Open 2021;11(1):e041883. DOI: 10.1136/bmjopen-2020-041883.
    \503\ 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.
---------------------------------------------------------------------------

    Comment: Several commenters urged CMS not to require reporting of 
this measure. A few commenters recommended that CMS evaluate the 
feasibility and burden of measure implementation, as well as hospital 
performance, before considering requiring reporting or moving the 
measure to a pay-for-performance program.
    Response: We appreciate the commenters' input. We note that at this 
time, the measure is being finalized for addition to the list of eCQMs 
from which hospitals can self-select in the Hospital IQR Program and in 
the Medicare Promoting Interoperability Program as discussed in section 
IX.F. As finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49299 
through 49302), hospitals participating in the Hospital IQR Program 
must report on six total eCQMs beginning with the CY 2024 reporting 
period and subsequent years. Hospitals must report on three eCQMs 
chosen by CMS and then three additional eCQMs that are self-selected 
from the list of remaining eCQMs. We note that this eCQM is being added 
to the list of eCQMs from which a hospital can self-select to report 
and no hospital is required to select the Excessive Radiation eCQM to 
successfully meet the eCQM requirement in a given year.
    There are also no plans to add this eCQM to a pay-for-performance 
program at this time and any future adoption of the measure in pay-for-
performance programs would first be proposed in notice and comment 
rulemaking.
    Comment: Several commenters recommended that the adoption timeline 
be delayed to allow for additional measure testing and implementation 
of the measure. Specifically, a commenter suggested that the measure be 
tested in hospitals serving small or rural communities. Another 
commenter requested additional opportunities for consultation with 
hospitals for more testing and input prior to adoption. A commenter 
recommended starting with a voluntary reporting period for testing and 
validation before requiring the measure.
    Response: We thank the commenters for sharing these suggestions. 
When considering this measure for adoption, we sought to balance 
quickly addressing the patient safety concerns presented by exposure to 
excessive radiation while still providing hospitals with enough time to 
implement the measure. Indeed, as described earlier, many commenters 
requested that CMS adopt this measure earlier than proposed. The 
adoption timeline and option to self-select reporting on this measure 
provide sufficient flexibility for those hospitals that desire to 
report this measure but may need more time to integrate and implement 
this measure. Moreover, this measure is ready for adoption as proposed, 
as it has undergone rigorous testing and received endorsement from the 
CBE. The CBE endorsement process included review by the CBE-convened 
MAP Health Equity Advisory Group and Rural Health Advisory Group, which 
supported the measure.\504\ Therefore, the measure has received input 
from a variety of relevant parties including hospitals serving small or 
rural communities.
---------------------------------------------------------------------------

    \504\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters did not support the Excessive Radiation 
eCQM's adoption as proposed, citing the recent addition of many new 
measures to the Hospital IQR Program. They urged CMS to take a more 
gradual approach in changing reporting requirements, particularly 
noting the burden on hospitals to update their systems to report a new 
eCQM. One of these commenters further suggested that CMS delay adoption 
of new eCQMs until after hospitals have finished updating their systems 
to report in the FHIR-based format. A few commenters recommended that 
CMS instead consider adopting this measure as a dQM.
    Response: We acknowledge the commenters' concern over the rate that 
the Hospital IQR Program has been adopting new eCQMs during recent 
rulemaking, and emphasize that we are not changing the total number of 
eCQMs that a hospital must report in this final rule. This eCQM is 
being added to the list of eCQMs from which a hospital can self-select 
to report, which should provide hospitals with enough time to implement 
the measure should they choose to report it.
    We also appreciate the commenters' recommendation to adopt the 
measure as a dQM. An eCQM is a type of dQM. The addition of the 
Excessive Radiation eCQM further advances CMS' goal of transitioning to 
a fully digital quality measurement landscape, which promotes 
interoperability that will decrease the burden of reporting quality 
measures. While our goal is to eventually move to the FHIR API (87 FR 
49181), it is important to address excessive radiation exposure from CT

[[Page 59160]]

scans as soon as feasible to protect patients.
    Comment: A few commenters encouraged CMS to obtain endorsement from 
the CBE before adopting this measure.
    Response: We thank the commenters for their input. As we stated in 
the proposed rule (88 FR 27084), this measure has received endorsement 
from the CBE.\505\
---------------------------------------------------------------------------

    \505\ 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.
---------------------------------------------------------------------------

    Comment: A commenter stated that using the term ``Excessive 
Radiation'' could deter patients from undergoing needed clinical care 
and suggested using more neutral terminology instead.
    Response: We appreciate the commenter's recommendation. The measure 
name is nonetheless appropriate because excessive radiation doses are 
an outcome that the eCQM measures. We further expect that rather than 
deterring patients from needed care, reporting on this measure will 
reassure patients that the CT scans they undergo are safe and will use 
an appropriate amount of radiation.
    Comment: A commenter requested clarification regarding whether a 
facility choosing to report this measure would be able to use a single 
submission to meet requirements for the Hospital IQR, Promoting 
Interoperability, and HAC Reduction Programs. Another commenter stated 
that if the measure is also proposed for adoption in the Hospital OQR 
Program, CMS should streamline reporting and allow hospitals to report 
one set of data for both the Hospital IQR and Hospital OQR Programs.
    Response: We thank the commenters for their suggestions and 
feedback and will take it under consideration for future rulemaking. 
Regarding reporting a measure for multiple programs, hospitals can 
report the same Excessive Radiation eCQM for both the Hospital IQR and 
Medicare Promoting Interoperability Programs. This measure was not 
proposed in the HAC Reduction Program. We note that the HAC Reduction 
Program does not currently include eCQMs but has requested feedback on 
the possibility of adopting eCQMs (such as the Excessive Radiation 
eCQM) in the future, as discussed in section V.L.4. of this final rule. 
The Hospital OQR Program has also proposed to adopt the Excessive 
Radiation eCQM in the CY 2024 OPPS/ASC proposed rule,\506\ which if 
adopted would require a separate submission to report. At this time, 
hospitals would not be able to report one set of data for both the 
Hospital IQR and Hospital OQR Programs because the two programs operate 
with respect to distinct patient populations. As we strive to increase 
electronic quality reporting, we will consider ways to improve cross-
program reporting efficiencies.
---------------------------------------------------------------------------

    \506\ 88 FR 49552, July 31, 2023.
---------------------------------------------------------------------------

    Comment: A commenter stated that if the measure is adopted, CMS 
should develop a robust dissemination plan to inform patients and 
families of the measure's existence.
    Response: We appreciate this recommendation and will continue to 
share outreach and education about the measure when it is publicly 
reported.
    Comment: A commenter encouraged CMS to make specifications for the 
Excessive Radiation eCQM available for 2025 in the eCQI Resource 
Center, to allow the commenter to evaluate the measure's 
implementation.
    Response: We appreciate the commenter's input and will take it into 
account. The measure specifications were posted on the eCQI Resource 
Center at https://ecqi.healthit.gov/ecqm/eh/pre-rulemaking/2024/cms1074v1 at the time of the proposed rule. We will continue to update 
this page as more information becomes available. We will also provide 
information about the software's specifications as it becomes available 
through routine communication channels to hospitals, vendors, and other 
interested parties, including but not limited to, issuing memos, 
emails, and notices on QualityNet and the eCQI Resource Center 
websites.
    Comment: A commenter requested clarification on several aspects of 
the measure. The commenter asked how ``good image quality'' would be 
determined beyond noise and stated that there are other elements that 
should be taken into consideration such as contrast resolution, lesion 
detection ability, and physician preference. The commenter also 
requested greater transparency around the data inputs, algorithm, and 
how the software would classify individual cases. The commenter 
recommended that CMS specifically identify the threshold values, 
particularly for image quality, and provide additional information 
about how these values were derived. The commenter further encouraged 
CMS to be as transparent as possible about the cost and burden 
associated with the measure, including costs associated with hardware, 
application support, and software maintenance. The commenter further 
requested clarification on whether the one-year measurement period 
measures the cumulative dose for all patients or individual patients. 
The commenter also asked CMS to identify specific requirements for 
maintaining the data over time, such as where to store the information.
    Response: We appreciate the commenter's feedback. Regarding the 
commenter's question about how good image quality would be determined 
beyond noise, we wish to clarify that the image quality component, as 
measured by noise, was included to ensure that CT image quality does 
not decrease as an unintended consequence of lowering radiation doses. 
Noise was selected as the metric for measuring image quality because it 
is the most widely used measure of image quality for CT. Because the 
image quality component is not meant to be a comprehensive measure of 
image quality that can assess nuanced differences in quality across all 
CT scans, it does not take into account variables beyond noise.
    We also wish to clarify the data inputs, algorithm, and how the 
software would classify individual cases. The measure specifications 
are listed in measure submission materials to the NQF \507\ and on the 
eCQI Resource Center at https://ecqi.healthit.gov/ecqm/eh/pre-rulemaking/2024/cms1074v1. The framework for classifying CT scans into 
CT categories was published in ``An Image Quality-informed Framework 
for CT Characterization''.\508\
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    \507\ Measure 3663e Information Form. Available at: https://www.qualityforum.org/ProjectMeasures.aspx?projectID=86057&cycleNo=2&cycleYear=2021.
    \508\ Smith-Bindman, R., Yu, S., Wang, Y., Kohli, M.D., Chu, P., 
Chung, R., Luong, J., Bos, D., Stewart, C., Bista, B., Alejandrez 
Cisneros, A., Delman, B., Einstein, A.J., Flynn, M., Romano, P., 
Seibert, J.A., Westphalen, A.C., & Bindman, A. (2022). An Image 
Quality-informed Framework for CT Characterization. Radiology, 
302(2), 380-389. https://doi.org/10.1148/radiol.2021210591.
---------------------------------------------------------------------------

    Regarding the measure's threshold values and approach for deriving 
them, this information can be found in the materials that the measure 
developer submitted to the NQF for endorsement review.\509\ The 
thresholds were derived in part using data from the ACR Dose Index 
Registry and UCSF International CT Dose Registry.
---------------------------------------------------------------------------

    \509\ Measure 3663e Information Form. Available at: https://www.qualityforum.org/ProjectMeasures.aspx?projectID=86057&cycleNo=2&cycleYear=2021.
---------------------------------------------------------------------------

    We additionally thank the commenter for their encouragement to be 
as transparent as possible about the cost and burden associated with 
the measure. As discussed previously, to clarify the current reporting 
process, we note that a hospital would log in through the measure 
developer's secure portal and run the Alara Imaging

[[Page 59161]]

Software for CMS Measure Compliance inside the firewall. The software 
runs automatically to create the three intermediate data elements 
needed for the measure: CT Dose and Image Quality Category, Calculated 
CT Size-Adjusted Dose, and Calculated CT Global Noise. Once the 
software finishes creating these intermediate variables, hospitals can 
send the data to its EHR for measure calculation and reporting. No 
additional hardware will be needed, nor any manual data entry.
    With regard to the commenter's question about what the one-year 
measurement period is measuring, each CT scan in the one-year period is 
evaluated against size-adjusted dose and permissible image noise 
thresholds set for each CT category. There is no assessment that 
combines dose across time and there are no cumulative dose 
calculations.
    Additionally, regarding the question about requirements for data 
maintenance, the Excessive Radiation eCQM uses data from radiology 
electronic clinical data systems, including the Radiology Information 
System (RIS) and the Picture Archiving and Communication System (PACS), 
and these medical imaging information such as Radiation Dose Structured 
Reports and image pixel data are stored according to the universally 
adopted DICOM standard, as described in the proposed rule (88 FR 
27084). These data will need to be available at the time the hospital 
and/or its vendor calculates the eCQM for quality improvement and 
monitoring purposes as well reporting to CMS.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
6. Refinements to Current Measures in the Hospital IQR Program Measure 
Set
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27084 through 
27088), we proposed refinements to three measures currently in 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 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 final rule.
a. 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.\510\ 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.\511\ 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.\512\
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    \510\ 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.
    \511\ 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/.
    \512\ 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.
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    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.\513\
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    \513\ 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27085 through 
27086), we proposed 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 payment determination and subsequent 
years. The FY 2027 payment determination is associated with discharge 
data from July 1, 2024, through June 30, 2025. We proposed 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.\514\ The Congressional Budget Office 
estimates that by 2030, 62 percent of beneficiaries will be covered by 
MA plans.\515\ MA coverage also varies across counties and states 
(ranging between one to 59 percent) with lower enrollment in rural 
states.\516\ Including MA beneficiaries in hospital outcome measures 
will help ensure that hospital quality is measured across all Medicare 
beneficiaries. We further believe that the addition of MA beneficiaries 
to FFS will 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 will address interested parties' concerns about differences in 
quality for MA and FFS beneficiaries by ensuring hospital outcomes are 
measured across all Medicare beneficiaries.517 518
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    \514\ 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/.
    \515\ Ibid.
    \516\ Ibid.
    \517\ 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/.
    \518\ 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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[[Page 59162]]

(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 will 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.\519\ 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) mortality status obtained 
from the Medicare Enrollment Database.
---------------------------------------------------------------------------

    \519\ https://ecqi.healthit.gov/glossary.
---------------------------------------------------------------------------

    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.\520\
---------------------------------------------------------------------------

    \520\ 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.
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    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 
proposed is the addition of MA admissions into the cohort; all other 
specifications will 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.\521\ The modified measure 
with expanded cohort is expected to be submitted for CBE re-endorsement 
in Fall 2024.
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    \521\ 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
    We proposed that hospitals will 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

[[Page 59163]]

routinely collect, that can be feasibly extracted from hospital EHRs, 
and that can be utilized as part of specific quality outcome 
measures.\522\ 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).
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    \522\ 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 will need 
to submit the core clinical data elements included in the Hybrid HWM 
measure, as described for measure calculation,\523\ 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 will 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).
---------------------------------------------------------------------------

    \523\ 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 was the only change to the Hybrid HWM measure that was 
proposed. We proposed 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 invited public comment on this proposal.
    Comment: Many commenters supported our proposal to modify the 
Hybrid Hospital-Wide Mortality (Hybrid HWM) measure to include Medicare 
Advantage (MA) beneficiaries. A few commenters noted that MA enrollment 
is expected to surpass the Fee-for Service (FFS) population by the time 
this modification is implemented, and therefore, will allow a more 
robust view of all Medicare beneficiaries. A few commenters stated that 
the inclusion of MA beneficiaries is aligned with CMS' goal of 
providing more comprehensive information on the quality of care for all 
Medicare beneficiaries.
    Response: We agree and thank the commenters for their support.
    Comment: A commenter shared a concern that some MA plans may 
manipulate risk scoring by selectively enrolling healthier patients, 
down coding diagnoses, or other risk-adjustment gaming behaviors, yet 
they applauded CMS for having implemented a number of programs and 
initiatives to address these practices, including risk adjustment data 
validation, medical record audits, and continued refinement of the 
Hierarchical Condition Categories (HCC model).
    Response: We acknowledge the commenter's concerns related to the 
inclusion of MA data. In regard to the gaming behaviors, we thank the 
commenter for the recognition of the number of programs implemented by 
CMS to protect against impermissible practices. The Medicare Payment 
Advisory Commission (MedPAC) notes that the CMS-HCC risk-adjustment 
model, combined with requirements for MA plans to enroll all eligible 
Medicare beneficiaries who elect a plan, have generally reduced 
favorable selection of healthier or less costly beneficiaries by MA 
plans.\524\ In addition, we note that prior research has found evidence 
of more intensive use of diagnosis codes leading to higher risk scores 
used for payment based on the HCCs for MA beneficiaries as compared to 
FFS.\525\ In contrast, the risk variables we use in the Hybrid HWM 
measure do not apply the hierarchical methodology for the condition 
categories; rather, they are based on clinically relevant condition 
categories and Agency for Healthcare Research and Quality (AHRQ) 
clinical classification software (CCS) condition groups for principal 
diagnoses. Based on the Hybrid HWM measure's risk factors, we found the 
prevalence of comorbidities was slightly lower among MA beneficiaries. 
Additionally, as part of regular reevaluation efforts, we assess the 
need for measure modification annually. Modifications are informed by 
review of the most recent literature related to measure outcomes, 
feedback from interested parties, empirical analyses, and assessment of 
coding trends that reveal shifts in clinical practice or billing 
patterns.
---------------------------------------------------------------------------

    \524\ Medicare Payment Advisory Commission. March 2022 report to 
the Congress: Medicare Payment Policy: The Medicare Advantage 
program: Status Report and mandated report on dual-eligible special 
needs plans. May 30, 2022. Available from: https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_Ch12_SEC.pdf.
    \525\ Kronick R, Welch WP. Measuring coding intensity in the 
Medicare Advantage program Medicare & Medicaid Research Review. 
2014;4(2).
---------------------------------------------------------------------------

    Comment: A few commenters shared reliability concerns due to 
incomplete data for the MA population. A commenter recommended that CMS 
consider policies to ensure that MA plans provide complete encounter 
data that can be relied on for measurement, such as setting new data 
completeness requirements for plan payment and/or adopting sufficient 
penalties for plans that submit incomplete data. A commenter encouraged 
CMS to continue to explore different options to make data about MA 
beneficiary utilization and outcomes more available, particularly 
utility data at a procedure level across all care settings. A commenter 
suggested delaying the modification of the measure due to incomplete 
data for the MA population.
    Response: We respectfully disagree that the level of completeness 
of the MA data presents a significant issue with regards to measure 
reliability. We have been evaluating the MA data for use in quality 
measurement since 2017 as discussed further in this section, and we 
note recent CMS policies have aimed to improve timeliness, 
completeness, and accuracy of MA data, thereby further enhancing its 
usability for hospital outcome measures.526 527 Hospital-
submitted MA claims data are currently already in use for DSH and GME 
payment calculations and Medicare Advantage Organization (MAO)-
submitted encounter data are currently already in use for calculating 
MA beneficiary risk scores.\528\ In calculating the Hybrid HWM measure, 
we clarify that for each MA admission, we would use either the 
hospital-submitted MA claim or the MAO-submitted MA encounter claim, 
whichever is available. If the MA admission information for a patient 
is available in both sources, we would use the hospital-submitted MA

[[Page 59164]]

claim because it is timelier and already associated with the applicable 
hospital's CCN.
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    \526\ Centers for Medicare & Medicaid Services. Encounter Data 
Submission and Processing Guide 2022. Accessed March 4, 2023. 
Available from:https://www.csscoperations.com/internet/
csscw3_files.nsf/F2/2022ED_Submission_Processing_Guide_20221130.pdf/
$FILE/2022ED_Submission_Processing_Guide_20221130.pdf.
    \527\ Centers for Medicare & Medicaid Services. Calendar Year 
(CY) 2024 Advance Notice of Methodological Changes for Medicare 
Advantage (MA) Capitation Rates and Part C and Part D Payment 
Policies (the Advance Notice). Accessed March 5, 2023. Available 
from: https://www.cms.gov/files/document/2024-advance-notice.pdf.
    \528\ Medicare Payment Advisory Commission. March 2022 report to 
the Congress: Medicare Payment Policy: The Medicare Advantage 
program: Status Report and mandated report on dual-eligible special 
needs plans. May 30, 2022. Available from: https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_Ch12_SEC.pdf.
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    More generally, we have found that incorporating data regarding MA 
patients into the Hybrid HWM measure improves reliability, narrows the 
confidence intervals of measure scores, and leads to more hospitals and 
beneficiaries being included in the measures. Based on internal 
analyses of MA data reported to CMS by hospitals and MAOs for the years 
2017 through 2021, we determined that it is feasible to use MA 
admissions in CMS hospital outcome measures. Hospitals and MAOs submit 
the data on a schedule that allows for their use. National Provider 
Identifiers (NPIs) from inpatient MA claims in the Integrated Data 
Repository (IDR) can be matched to CMS Certification Numbers (CCNs) 
currently used to identify hospitals in the CMS outcome measures. A 
high percentage of MA claims were submitted within the three-month time 
frame needed for reporting hospital measures and has improved over time 
(90.3% in 2018 compared to 95.2% in 2021 for inpatient claims for acute 
care and critical access hospitals). Our internal analysis found a high 
rate of matching diagnoses between the MAO-submitted MA claims and the 
hospital-submitted MA claims, supporting the use of either data source 
for a given admission for measure calculation.
    Comment: A commenter expressed that they believe MA plans are 
already requiring this reporting as part of the payer contracts, which 
they believe places duplicative reporting burdens on hospitals. A 
commenter suggested CMS coordinate efforts, so hospitals are not double 
penalized by CMS and MA plans, noting that many MA contracts already 
include quality metrics tied to readmissions, so it is important to 
ensure that the metrics are aligned and easily reportable.
    Response: While we are not aware of MAOs specifically using this 
Hybrid HWM measure, particularly to assess quality of care for both 
Medicare FFS and MA beneficiaries, we acknowledge many MA contracts use 
a variety of quality metrics for many quality purposes including other 
mortality and readmissions measures. The Hybrid HWM measure was 
proposed for inclusion in the Hospital IQR Program, which is a pay-for-
reporting program, and does not penalize hospitals based on measure 
results. Importantly, the use of this measure in the Hospital IQR 
Program offers transparency through public reporting of the Hybrid HWM 
measure, which is intended to provide a comprehensive and comparable 
picture of hospital quality, recognizing that numerous practices and 
policies within a hospital impact the quality of care and patient 
outcomes, including mortality. The inclusion of FFS and MA 
beneficiaries in the Hybrid HWM measure ensures performance on this 
measure is reflective of care provided to the majority of patients. We 
also note that there is no duplicative burden on MAOs or hospitals to 
report the claims-based portion of this measure. We plan to publicly 
report performance on the Hybrid HWM measure to ensure transparency for 
hospitals and patients.
    Comment: Several commenters did not support the proposed inclusion 
of MA beneficiaries in the Hybrid HWM measure for the Hospital IQR 
Program. Some of these commenters expressed concern regarding the 
burden this modification would put on hospitals in regard to the 
collection and submission of linking variables and the difficulty of 
programming and implementing hybrid measures into hospital EHRs. These 
commenters suggested delaying mandatory reporting to allow hospitals or 
health systems time to make adjustments. A commenter suggested that it 
would be more efficient for CMS to use existing data sources, 
specifically MA plans, to incorporate MA enrollees into these measures, 
to avoid duplicate efforts and necessary changes to hospital reporting 
processes and systems.
    Response: We disagree that reporting of the Hybrid HWM measure with 
the addition of MA beneficiaries creates significant burden for 
hospitals. This hybrid measure uses both claims-based data and EHR 
data, specifically, a set of core clinical data elements consisting of 
vital signs and laboratory test information and patient linking 
variables collected from hospitals' EHR systems. We note that hospitals 
are not responsible for combining the claims data with the EHR data to 
calculate the measure score as that is performed by CMS and the results 
are shared with hospitals in feedback reports. We refer readers to the 
Information Collection Requirements (ICR) section B.6.d within this 
final rule, for information regarding burden for the Hybrid HWM measure 
including MA beneficiaries.
    The mandatory reporting requirement for the currently implemented 
version of the Hybrid HWM measure (with FFS beneficiaries only) was 
finalized in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45365 through 
45374). The implementation timeline started 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 previously adopted version of 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. The addition of the MA data to the cohort would not 
impact payment determinations until FY 2027 and subsequent years. The 
FY 2027 payment determination is associated with discharge data from 
July 1, 2024, through June 30, 2025. We proposed to expand the measure 
cohort to include MA patients because MA beneficiary enrollment has 
been rapidly increasing as a share of overall beneficiaries.\529\ Thus, 
it is important to avoid further delay of incorporating MA patients 
within the cohort of the currently implemented Hybrid HWM measure. 
There will be sufficient time to allow hospitals and their health IT 
vendors to familiarize themselves with the measure reporting process. 
We strongly encouraged hospitals to participate in the voluntary 
reporting periods as an opportunity to obtain detailed feedback on 
their performance on the measure, to provide us with additional 
feedback on the measure specifications and their implementation 
experience, to confirm mapping and extraction of data elements, to 
perform quality assurance, and to troubleshoot any problems during data 
submissions.
---------------------------------------------------------------------------

    \529\ 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/.
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    Comment: A few commenters suggested delaying implementation until 
the measure is endorsed by a consensus-based entity (CBE).
    Response: We acknowledge the commenters' concern regarding CBE 
endorsement of the measure. We note that the currently implemented 
version of the Hybrid HWM measure received CBE endorsement on October 
23, 2019.\530\ The modified measure with the addition of MA 
beneficiaries is expected to be submitted for CBE endorsement 
maintenance in Fall 2024. The re-endorsement process is expected to be 
completed prior to the FY 2027 payment determination. We believe the 
use of the updated measure is preferable to the existing, endorsed 
version of the

[[Page 59165]]

measure as the addition of MA beneficiaries to the cohort enhances the 
reliability and validity of the measure and all other fundamental 
elements of the endorsed measure remain unchanged.
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    \530\ 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.
---------------------------------------------------------------------------

    Comment: A commenter requested CMS make available the 
specifications for the new proposed eCQM. A few commenters requested 
CMS share information about how the incorporation of MA data has 
affected the validity, accuracy, and reliability of the hybrid measure.
    Response: Measure specifications for the Hybrid HWM measure with 
the inclusion of MA patients were posted on the eCQI Resource Center on 
the FY 2024 Pre-Rulemaking page at the time of publication of the 
proposed rule: https://ecqi.healthit.gov/eh-cah?qt-tabs_eh=1&globalyearfilter=2024&global_measure_group=3731. Measure 
specifications for the previously adopted Hybrid HWM measure are 
located in the Annual Update and Specifications (AUS) reports found at 
https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology.
    According to the eCQI Resource Center, an eCQM is a measure 
specified in a standard electronic format that uses data electronically 
extracted from EHRs and/or health IT systems to measure the quality of 
health care provided.\531\ Hybrid measures differ from eCQMs within the 
Hospital IQR Program because they merge EHR data elements, which are 
used for risk-adjustment, with claims data to calculate the risk-
standardized mortality rates. We do consider this hybrid measure to be 
a digital quality measure (dQM), under our draft definition. The draft 
definition of dQM that we have published as part of strategic materials 
on the eCQI Resource Center states that in general, eCQMs are 
considered to be a subset of dQMs. This draft definition states that 
dQMs are quality measures that use standardized, digital data from one 
or more sources of health information that are captured and exchanged 
via interoperable systems; apply quality measure specifications that 
are standards-based and use code packages; and are computable in an 
integrated environment without additional effort. CMS' definition of a 
dQM is available on the eCQI Resource Center at: https://ecqi.healthit.gov/dqm?qt-tabs_dqm=1.\532\
---------------------------------------------------------------------------

    \531\ https://ecqi.healthit.gov/glossary.
    \532\ Ibid.
---------------------------------------------------------------------------

    With regards to how expanding the measure cohort has affected the 
measures' validity, reliability, and accuracy, as described in the 
proposed rule, the inclusion of MA beneficiaries has several important 
benefits for the reliability and validity of this hospital outcome 
measure. 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). We also refer readers to Appendix G in the 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 \533\ for detailed rationale and 
testing results of integrating MA beneficiaries in the Hybrid Hospital-
Wide Mortality (HWM) measure.
---------------------------------------------------------------------------

    \533\ Hospital-Wide (All-Condition, All- Procedure) Risk-
Standardized Mortality Measure with Electronic Health Record 
Extracted Risk Factors Methodology Report. Updated March 2023. 
Available at: https://www.cms.gov/files/document/hybrid-hospital-wide-all-condition-all-procedure-risk-standardized-mortality-measure-electronic.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters recommended that CMS publicly report the 
Hybrid HWM measure in aggregate, as in not separately by Medicare FFS 
and MA or by insurance type, as they state the measure was developed 
and tested to provide information on hospital performance and has not 
been tested at the health plan level of analysis.
    Response: We plan to publicly report the Hybrid HWM measure as an 
aggregate, single summary score by each hospital's CCN. The 
modification to the Hybrid HWM measure to add MA beneficiaries to the 
cohort will not affect the way this measure is publicly reported. The 
measure summary score is 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. 
In the future, we may consider public reporting of more granular 
measure performance information, and will take commenters' feedback 
into consideration.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
b. 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.\534\ Some readmissions are unavoidable, for example, those 
that 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.535 536 537 538

[[Page 59166]]

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.\539\
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    \534\ 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.
    \535\ 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/.
    \536\ 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/.
    \537\ 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.
    \538\ 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/.
    \539\ 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.
---------------------------------------------------------------------------

    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.\540\
---------------------------------------------------------------------------

    \540\ 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27086 through 
27088), similar to our proposal for the Hybrid HWM measure, we proposed 
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 proposed 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.\541\ The 
Congressional Budget Office projects that by 2030, 62 percent of 
beneficiaries will be covered by MA plans.\542\ MA coverage also varies 
across counties and states (ranging between one to 59 percent) with 
lower enrollment in rural states.\543\ Including MA beneficiaries in 
CMS hospital outcome measures will 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 will 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 will address stakeholder concerns about differences in quality 
for MA and FFS beneficiaries by ensuring hospital outcomes are measured 
across all Medicare beneficiaries.544 545
---------------------------------------------------------------------------

    \541\ 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/.
    \542\ Ibid.
    \543\ Ibid.
    \544\ 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/.
    \545\ 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 proposed 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 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.\546\
---------------------------------------------------------------------------

    \546\ 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.

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[[Page 59167]]

    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 existing Hybrid HWR 
measure was the addition of MA admissions into the cohort; all other 
specifications remained the same. We refer readers to the Hybrid 
Hospital-Wide Readmission Measure with Electronic Health Record 
Extracted Risk Factors (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 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.\547\ 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.
---------------------------------------------------------------------------

    \547\ 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 will 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 will need 
to submit the core clinical data elements included in the Hybrid HWR 
measure, as described for measure calculation,\548\ 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.\549\ 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 will 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).
---------------------------------------------------------------------------

    \548\ 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.
    \549\ 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 was the only proposed change to the Hybrid HWR measure. We 
proposed 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 invited public comment on this proposal. Many commenters had the 
same comments about adding MA beneficiaries to the Hybrid HWR measure 
as they did for adding MA beneficiaries to the Hybrid HWM measure. We 
direct readers to section C.6.a. for the full discussion of these 
comments in the Hybrid HWM section. Comments specific to the Hybrid HWR 
measure are noted in the section.
    Comment: Many commenters supported our proposal to modify the 
Hybrid Hospital-Wide Readmission (Hybrid HWR) measure to include MA 
beneficiaries. A few commenters noted that MA enrollment is expected to 
surpass the FFS population by the time this modification is 
implemented, and therefore will allow a more robust view of all 
Medicare beneficiaries. A few commenters stated that the inclusion of 
MA beneficiaries is aligned with CMS' goal of providing more 
comprehensive information on the quality of care for all Medicare 
beneficiaries.
    Response: We agree and thank the commenters for their support.
    Comment: A commenter questioned whether the Hybrid HWR measure may 
be a measure of care utilization instead of a measure of quality of 
care and suggested that smaller hospitals or health systems may be 
disadvantaged by this measure unless it is somehow adjusted to reflect 
the environment of care delivery.
    Response: We acknowledge the commenters' concern that the Hybrid 
HWR measure may be a measure of care utilization rather than a measure 
of quality of care. We disagree that the Hybrid HWR measure is a 
measure of care utilization and assert that it is a measure of quality 
of care. The goal of the Hybrid HWR measure is to improve patient 
outcomes by providing patients, clinicians, and hospitals with

[[Page 59168]]

information about hospital level, risk standardized readmission rates 
of unplanned, all-cause readmission after admission for any eligible 
condition within 30 days of hospital discharge. The measure is adjusted 
to reflect the environment of care delivery as the risk model 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). Measurement of patient 
outcomes allows for a broad view of the quality of care that 
encompasses more than what can be captured by individual process of-
care measures, such as a care utilization measure. Complex and critical 
aspects of care, such as communication between providers, prevention 
of, and response to, complications, patient safety and coordinated 
transitions to the outpatient environment, all contribute to patient 
outcomes but are difficult to measure by individual process measures. 
In general, randomized controlled trials have shown that improvement in 
the following areas can directly reduce readmission rates: quality of 
care during the initial admission; improvement in communication with 
patients, their caregivers, and their clinicians; patient education; 
predischarge assessment; and coordination of care after discharge. 
Evidence that hospitals have been able to reduce readmission rates 
through these quality of-care initiatives illustrates the degree to 
which hospital practices can affect readmission rates.\550\ The Hybrid 
HWR measure provides an overall signal of quality for hospitals in 
contrast to condition specific measures which provide more narrowly 
focused quality information. Both types of readmission measures provide 
beneficiaries and providers with useful information that allows them to 
improve patient outcomes.
---------------------------------------------------------------------------

    \550\ We refer readers to the following sources for more detail 
on these issues: 1. 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; 2. Coleman EA, Smith JD, Frank JC, 
Min SJ, Parry C, Kramer AM. Preparing patients and caregivers to 
participate in care delivered across settings: The Care Transitions 
Intervention. J Am Geriatr Soc 2004;52(11):1817-25; 3. 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; 4. Garasen 
H, Windspoll R, Johnsen R. Intermediate care at a community hospital 
as an alternative to prolonged general hospital care for elderly 
patients: A randomised controlled trial. BMC Public Health 
2007;7:68; 5.Koehler BE, Richter KM, Youngblood L, Cohen BA, 
Prengler ID, Cheng D, et al. Reduction of 30-day postdischarge 
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; 6. Mistiaen P, Francke 
AL, Poot E. Interventions aimed at reducing problems in adult 
patients discharged from hospital to home: A systematic metareview. 
BMC Health Serv Res 2007;7:47; 7. Naylor M, Brooten D, Jones R, 
Lavizzo-Mourey R, Mezey M, Pauly M. Comprehensive discharge planning 
for the hospitalized elderly. A randomized clinical trial. Ann 
Intern Med 1994;120(12):999-1006; 8. Naylor MD, Brooten D, Campbell 
R, Jacobsen BS, Mezey MD, Pauly MV, et al. Comprehensive discharge 
planning and home follow-up of hospitalized elders: A randomized 
clinical trial. Jama 1999;281(7):613-20; 9. van Walraven C, Seth R, 
Austin PC, Laupacis A. Effect of discharge summary availability 
during post-discharge visits on hospital readmission. J Gen Intern 
Med 2002;17(3):186-92;10. Weiss M, Yakusheva O, Bobay K. Nurse and 
patient perceptions of discharge readiness in relation to 
postdischarge utilization. Med Care 2010;48(5):482-6; and 11. 
Krumholz HM, Amatruda J, Smith GL, et al. Randomized trial of an 
education and support intervention to prevent readmission of 
patients with heart failure. J Am Coll Cardiol. Jan 2 
2022;39(1):8389.
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    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
7. Proposed Measure Removals for the Hospital IQR Program Measure Set 
and Proposed Codification of Measure Removal Factors
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27088 through 
27093) we proposed 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 Gestation (PC-01) 
measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination.
    We also proposed 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, as well as the 
public comments we received on them, in the subsequent sections.
a. 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 will 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

[[Page 59169]]

Complications (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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27089 through 
27090), we proposed 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 proposed to adopt the re-evaluated measure to 
replace the original version of the measure that is in the Hospital VBP 
Program. Therefore, we proposed 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 will 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 final rule for more information on the policy 
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 
will 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 will 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 will 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),\551\ which is why we proposed 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.
---------------------------------------------------------------------------

    \551\ 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 proposed 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 invited public comment on this proposal.
    Comment: Many commenters supported the proposal to remove the THA/
TKA Complication measure from the Hospital IQR Program. Specifically, 
some commenters appreciated the removal of the THA/TKA Complication 
measure from the Hospital IQR Program as it will reduce duplication. A 
few commenters supported the removal of THA/TKA Complication measure 
from the Hospital IQR Program provided it will continue to be reported 
on the Care Compare website.
    Response: We thank the commenters for their support. Results for 
the updated THA/TKA Complication measure being adopted into the 
Hospital VBP Program will continue to be publicly reported on Care 
Compare and data.cms.gov for the period of time in which hospitals 
report on the two versions of this measure.
    Comment: A few commenters supported our proposal to remove the THA/
TKA Complication measure but shared concerns about the transition of 
the measure from the Hospital IQR Program to the Hospital VBP Program. 
Specifically, a commenter expressed concern about the burden of 
reporting two slightly different measures prior to the transition of 
the revised measure from the Hospital IQR Program to the Hospital VBP 
Program. Another commenter expressed concern about the public's ability 
to interpret the data from the two versions of the measure and 
suggested that we suppress one set of results from public reporting.
    Response: We acknowledge the commenters' concerns regarding burden 
of reporting two slightly different versions of the measure in the 
Hospital IQR and Hospital VBP Programs simultaneously. However, we 
respectfully disagree that the proposed transition of the THA/TKA 
Complication measure from the Hospital IQR Program to the Hospital VBP 
Program will cause significant data

[[Page 59170]]

collection burden. Hospitals will not be required to submit additional 
data for calculating the measure as it is a claims-based measure. 
Section 1886(o)(2)(C)(i) of the Act requires that a measure be publicly 
reported for one year in the Hospital IQR Program prior to the 
beginning of the applicable Hospital VBP Program performance period for 
the measure. As we have previously stated in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49263 through 49267), we adopted the revised version 
of the THA/TKA Complication measure into the Hospital IQR Program with 
the intention of eventually proposing the updated measure into the 
Hospital VBP Program with a performance period that starts after the 
required one year of public reporting in the Hospital IQR Program as 
well as to provide interested parties with an opportunity to become 
familiar with the new version of the measure and provide feedback. We 
refer readers to section V.K. of this final rule for more information 
on the policy to adopt the re-evaluated THA/TKA Complication measure in 
the Hospital VBP Program. We intend to continue publishing THA/TKA 
Complication measure data on the Care Compare site for the period of 
time in which this measure is reported in the Hospital IQR Program. In 
addition, we will make sure it is clear which version of the measure is 
being displayed in which location through outreach and education 
efforts.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
b. 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27090 through 
27091), we proposed 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 was proposed for adoption by the Hospital VBP 
Program in section V.K. of the proposed rule (88 FR 27025 through 
27026), and we proposed 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 will 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 final for more information on 
the proposal to adopt the re-evaluated version of the MSPB Hospital 
measure in the Hospital VBP Program.
    We believe that removing this measure from the Hospital IQR Program 
will 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 sought 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 will help achieve that goal. As discussed in 
section V.K. of the preamble of this final 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 proposed 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

[[Page 59171]]

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 proposed 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 invited public comment on this proposal.
    Comment: Many commenters expressed their support of CMS' proposal 
to remove the MSPB Hospital measure from the Hospital IQR Program. 
Specifically, some commenters appreciated the removal of the MSPB 
Hospital measure from the Hospital IQR Program as it will reduce 
duplication. A few commenters supported the removal of MSPB Hospital 
measure from the Hospital IQR Program provided it will continue to be 
reported on the Care Compare website.
    Response: We thank the commenters for their support. We intend to 
continue publicly reporting MSPB Hospital measure data on Care Compare 
for the period of time in which hospitals report on two version of the 
measure.
    Comment: A few commenters supported our proposal to remove the MSPB 
Hospital measure but also shared concerns about the transition of the 
measure from the Hospital IQR Program to the Hospital VBP Program. 
Specifically, a few commenters identified concerns about reporting on 
two different versions of the measure for a single year and suggested 
that we adjust the removal and adoption timeline. Another commenter 
expressed concern about the public's ability to interpret the data from 
the two versions of the measure and suggested that we suppress one set 
of results from public reporting. A commenter suggested we wait to 
transition the updated MSPB Hospital measure into the Hospital VBP 
Program until after the data had been available to hospitals.
    Response: We thank the commenters for their support and raising 
these concerns. We acknowledge the commenters' concerns that two 
slightly different versions of the measure would be in use across the 
Hospital IQR and Hospital VBP Programs simultaneously. Section 
1886(o)(2)(C)(i) of the Act requires that a measure be publicly 
reported for one year in the Hospital IQR Program prior to the 
beginning of the applicable Hospital VBP Program performance period for 
the measure. As we have previously stated in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49257), we adopted the revised version of the MSPB 
Hospital measure into the Hospital IQR Program with the intention of 
eventually proposing the updated measure into the Hospital VBP Program 
after the required year of public reporting in the Hospital IQR Program 
as well as to provide interested parties with an opportunity to become 
familiar with the new version of the measure and provide feedback. We 
refer readers to section V.K. of this final rule for more information 
on the policy to adopt the re-evaluated MSPB Hospital measure in the 
Hospital VBP Program.
    Additionally, by statute, the Hospital VBP Program must contain a 
cost measure. The MSPB Hospital measure, therefore, cannot be removed 
from the Hospital VBP Program, as it is the only cost measure under the 
Efficiency and Cost Reduction. Results for the MSPB Hospital measure 
currently implemented in the Hospital VBP Program will continue to be 
available on data.medicare.gov until it is removed under the finalized 
policy outlined in section X.k of the preamble this final rule. We 
intend to continue publishing MSPB Hospital measure data on Care 
Compare for the period of time in which this measure is reported in the 
Hospital IQR Program. In addition, we will make sure it is clear which 
version of the measure is being displayed in which location through 
outreach and education efforts.
    Comment: A commenter requested clarification about whether removal 
of the MSPB Hospital measure in the Hospital IQR Program will impact 
the Merit-based Incentive Payment System (MIPS) and MIPS Value Pathways 
(MVPs) programs.
    Response: We wish to clarify that the removal of MSPB Hospital 
measure from the Hospital IQR Program does not impact the MIPS and MVPs 
programs. MIPS eligible clinicians can continue to use their Hospital 
VBP Program Total Performance Score (TPS) for facility-based 
measurement. Facility-based measurement offers certain MIPS eligible 
clinicians and groups the opportunity to receive scores in traditional 
MIPS for the quality and cost performance categories based on their 
Hospital VBP Program TPS earned by their assigned facility.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
c. 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 59172]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.278

    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.\552\ 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.\553\
---------------------------------------------------------------------------

    \552\ 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.
    \553\ 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.
---------------------------------------------------------------------------

    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 
the Elective Delivery measure 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 measure 
was used widely in 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 proposed to remove the Elective 
Delivery measure, 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.
    Therefore, we proposed to remove the Elective Delivery (PC-01) 
measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination.
    We invited public comment on this proposal.
    Comment: Many commenters supported the removal of the measure. 
Several commenters agreed that the topped-out measure is no longer 
meaningful for hospital quality improvement efforts, with a few noting 
that the opportunity for improvement is small. Several commenters 
stated their belief that the recent addition of more meaningful 
maternal health measures in the Hospital IQR Program will support 
maternal health outcomes and reduce redundancy. A few commenters 
recommended continued exploration and adoption of additional impactful 
maternity measures.
    Response: We thank commenters for their support. We agree that the 
Elective

[[Page 59173]]

Delivery measure is no longer meaningful for hospital quality 
improvement efforts because it has been consistently topped-out for six 
years. We believe this demonstrates that the standard of care has 
improved to the point where other measurements are necessary to further 
drive improvements in maternal care. However, we recognize that the 
rates of Cesarean delivery have continued to rise and in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49220), we stated that there is a 
considerable amount of variation in the rates based on U.S. region, 
state, and healthcare institution as well as substantial variability 
across races and ethnicities.554 555 The Administration has 
prioritized the reduction of low-risk Cesarean deliveries as part of 
the HHS Initiative to Improve Maternal Health.\556\ Because the 
Elective Delivery measure has been consistently topped out and rates of 
Cesarean deliveries have not meaningfully decreased, there is still 
room for improvement and a need for more robust quality measurement on 
this topic. Therefore, we also agree with commenters that 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 and play a key role as part of our 
continued commitment to improve maternity care quality, safety, and 
equity.
---------------------------------------------------------------------------

    \554\ Kozhimannil, K.B., Law, M.R. & Virnig, B.A. (2013). 
Cesarean delivery rates vary tenfold among US hospitals; reducing 
variation may address quality and cost issues. Health Affairs, 
32(3): 527-35.
    \555\ Hamilton, B.E., Martin, J.A., Osterman, M.J.K. (2020). 
Births: Provisional Data for 2020. National Vital Statistics Rapid 
Release, no 12. DOI: https://doi.org/10.15620/cdc:104993.
    \556\ Department of Health and Human Services. HHS Initiative to 
Improve Maternal Health. Available at: https://aspe.hhs.gov/topics/public-health/hhs-initiative-improve-maternal-health.
---------------------------------------------------------------------------

    Specifically, the Cesarean Birth eCQM expands our measurement and 
quality improvement opportunities for non-medically indicated Cesarean 
deliveries by measuring all NTSV Cesarean births after 37 weeks, not 
only those prior to 39 weeks as currently captured by the Elective 
Delivery measure. The Cesarean Birth eCQM seeks to focus attention on 
the most variable portion of Cesarean births, the term labor Cesarean 
birth in nulliparous women, as more than 60 percent of the variation 
among hospitals can be attributed to first birth labor induction rates 
and first birth early labor admission rates.557 558 A 
reduction in primary Cesarean births will reduce the number of women 
having repeat Cesarean births as almost 90 percent of mothers who have 
a primary cesarean birth will have subsequent cesarean birth.\559\ As 
we stated in the FY 2023 IPPS/LTCH PPS final rule when we adopted the 
measure (87 FR 49221), Cesarean deliveries have higher morbidity and 
mortality than vaginal deliveries,\560\ higher risk of subsequent 
miscarriage, placental abnormalities, and repeat Cesarean delivery for 
NTSV births, and higher rates of transfusions, ruptured uteri, 
unplanned hysterectomies, and intensive care unit (ICU) admissions for 
NTSV births across all races and ethnicities.\561\ We recognize that 
Cesarean births are not a never event and the rate of Cesarean birth 
will never be zero as Cesarean delivery can be medically indicated. 
However, continued quality improvement efforts to reduce non-medically 
indicated Cesarean birth rates are important for improving patient 
safety, decreasing maternal and neonatal morbidity and mortality, and 
reducing health care costs.562 563 While the Elective 
Delivery measure has established the importance of measuring non-
medically indicated Cesarean deliveries and labor inductions, its 
topped-out status limits the utility of the measure moving forward. The 
addition of the Cesarean Birth eCQM, the Maternal Morbidity Structural 
measure, the Severe Obstetric Complications eCQM, and the Birthing-
Friendly Hospital designation offers hospitals greater opportunities 
for more comprehensive maternal health quality improvement, and 
reaffirms our commitment to and continued prioritization of maternal 
health quality measurement in the Hospital IQR Program. We also note 
that in the future we are planning to provide confidential reporting on 
the two new eCQMs that stratifies results by race and ethnicity.
---------------------------------------------------------------------------

    \557\ ECQI Resource Center. Cesarean Birth. Accessed July 18, 
2023. Available at: https://ecqi.healthit.gov/sites/default/files/ecqm/measures/CMS334v4.html.
    \558\ Main E.K., Morton, C.H., Melsop, K., Hopkins, D., 
Giuliani, G., & Gould, J.B. (2012). Creating a public agenda for 
maternity safety and quality in cesarean delivery. Obstetrics and 
gynecology, 120(5), 1194-1198. https://doi.org/10.1097/aog.0b013e31826fc13d.
    \559\ Centers for Disease Control and Prevention. 2020. Recent 
trends in vaginal birth after cesarean delivery: United States, 
2016-2018. Retrieved from National Center for Health Statistics: 
https://www.cdc.gov/nchs/products/databriefs/db359.htm.
    \560\ Caughey AB, Cahill AG, Guise JM, Rouse DJ. (2014). Safe 
prevention of the primary cesarean delivery. Am J Obstet Gynecol, 
210(3): 179-93. doi: 10.1016/j.ajog.2014.01.026.
    \561\ Keag, O.E., Norman, J.E. & Stock, S.J. (2018). Long-term 
risks and benefits associated with cesarean delivery for mother, 
baby, and subsequent pregnancies: Systematic review and meta-
analysis. Plos Med, 15(1): e1002494.
    \562\ ECQI Resource Center. Cesarean Birth. Accessed July 18, 
2023. Available at: https://ecqi.healthit.gov/sites/default/files/ecqm/measures/CMS334v4.html.
    \563\ American College of Obstetricians and Gynecologists. Safe 
prevention of the primary cesarean delivery. Obstetric Care 
Consensus No. 1. Obstet Gynecol 2014;123:693-711. Available at: 
https://www.acog.org/clinical/clinical-guidance/obstetric-care-consensus/articles/2014/03/safe-prevention-of-the-primary-cesarean-delivery.
---------------------------------------------------------------------------

    Comment: Several commenters did not support measure removal because 
they did not believe the Hospital IQR Program measure set included a 
suitable alternative. A few commenters stated that maternal morbidity 
and mortality is an ongoing public health crisis and rates of maternal 
mortality have continued to rise despite topped-out performance of the 
measure. Some commenters expressed concern about unintended 
consequences from removing the measure, including neonatal and maternal 
complications resulting from increases in non-medically indicated labor 
inductions and Cesarean deliveries.
    Response: We acknowledge commenters' concerns and agree that the 
improvement of maternity care quality and safety is critically 
important. When we adopted the Cesarean Birth eCQM in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49222), we stated that the measure is 
intended to facilitate safer patient care by assessing the rate of low-
risk 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. The Cesarean Birth eCQM measures the 
rate of NTSV patients delivered by Cesarean section after 37 weeks, 
with the exclusion of patients with abnormal presentation or placenta 
previa during the encounter. The measure will assist health care 
organizations to track all NTSV patients delivering by Cesarean section 
after 37 weeks and will support hospitals in their goals to reduce non-
medically indicated labor inductions and Cesarean deliveries by going 
beyond those deliveries prior to 39 weeks currently measured by the 
Elective Delivery measure. We reiterate that this measure, in 
combination with the Severe Obstetric Complications eCQM finalized in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49226 through 49233) and 
the Maternal Morbidity Structural measure finalized in the FY 2022 
IPPS/LTCH PPS final rule (86 FR 45361 through 45365), will provide 
hospitals with robust data to monitor and improve maternal

[[Page 59174]]

morbidity and mortality, disparities in maternity care quality, and 
rates of early elective delivery to expand quality measurement within 
the Hospital IQR Program and reflect our commitment to maternal health. 
Regarding commenter concerns about unintended consequences of removing 
the Elective Delivery measure, we regularly monitor measure data and 
performance as part of the standard measure maintenance and will 
continue to do so with the Cesarean Birth and Severe Obstetrics 
Complication eCQMs and the Maternal Morbidity Structural Measure. 
Finally, because the Cesarean Birth and Severe Obstetric Complications 
eCQMs will begin mandatory reporting in the CY 2024 reporting period/FY 
2026 payment determination, there will be no gap in reporting on 
Cesarean births following the removal of the Elective Delivery measure, 
which will also be effective beginning with the CY 2024 reporting 
period/FY 2026 payment determination.
    Comment: A few commenters expressed concern about the impact of 
removal on Medicaid programs and commercial payers that are still 
observing variation in rates and find value in the measure.
    Response: In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27092), 
we acknowledged that the Elective Delivery measure was used widely in 
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, it was appropriate to propose for 
removal at this time given its topped-out status and the availability 
of two new eCQMs to further drive improvements in maternal care. We 
also stated our belief that 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. Regarding information 
available to commercial payers, we note that more than 25 health plans 
have committed to displaying the Birthing-Friendly Hospital designation 
on their provider directories when the designation goes live, which 
will share important maternal health quality information with more than 
150 million enrollees in commercial plans.\564\ These additional 
maternal health measures will offer value to CMS quality reporting 
programs and other payers. While the Elective Delivery measure would no 
longer be included in the Hospital IQR Program, we expect that the 
improvements in reducing non-medically indicated labor inductions and 
Cesarean deliveries prior to 39 weeks that have been achieved outside 
of CMS quality reporting programs will remain because its removal would 
not prevent use of the measure outside of CMS quality programs and the 
measure continues to be maintained by The Joint Commission.\565\ We 
also note that our topped out analysis included all-payer data.
---------------------------------------------------------------------------

    \564\ U.S. Department of Health and Human Services. December 13, 
2022. Readout: CMS Hosts Maternal Health Convening with Leaders 
Across Government, Industry. Accessed July 18, 2023. Available at: 
https://www.hhs.gov/about/news/2022/12/13/readout-cms-hosts-
maternal-health-convening-with-leaders-across-government-
industry.html#:~:text=Earlier%20this%20year%2C%20building%20on,and%20
safety%20of%20maternity%20care.
    \565\ The Joint Commission. 2023. Measure Information Form. 
Accessed June 28, 2023. Available at: https://manual.jointcommissionorg/releases/TJC2023B/MIF0166.html.
---------------------------------------------------------------------------

    Comment: A commenter requested the eCQM version of the Elective 
Delivery measure be restored in place of the chart-abstracted measure 
to continue to prioritize low rates of non-medically indicated elective 
Cesarean births and reduce reporting burden.
    Response: We appreciate the commenter's suggestion. When we removed 
the eCQM version of the Elective Delivery measure in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41569), we stated if the chart-abstracted 
version of this measure were to be removed from the Hospital IQR 
Program, and hospitals could only elect to report the eCQM version of 
this measure, due to the low volume of patients relative to total adult 
hospital population, we would not receive enough data to produce 
meaningful analyses. Furthermore, the adoption of the Cesarean Birth 
eCQM, the Maternal Morbidity Structural measure, the Severe Obstetric 
Complications eCQM, and the Birthing-Friendly Hospital designation in 
the Hospital IQR Program continue to prioritize both a reduction of 
non-medically indicated elective Cesarean births and reporting burden 
for hospitals. Therefore, proposing to adopt the eCQM version of 
Elective Delivery for readoption would not be appropriate and would not 
reduce burden.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
d. 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 proposed 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.\566\ The current list of Measure Removal Factors for the 
Hospital IQR Program is:
---------------------------------------------------------------------------

    \566\ 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 the 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

[[Page 59175]]

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 proposed to codify our existing measure retention and removal 
policies in our regulations at 42 CFR 412.140(g)(1) through (3).
    We invited public comment on this proposal.
    Comment: A few commenters expressed support for our proposal to 
codify our measure retention and removal policies.
    Response: We thank the commenters for their support.
    Comment: A commenter opposed our proposal to codify our measure 
removal and retention factors, stating that we should consider more 
carefully whether measures are important to beneficiaries' or the 
public's interests. The commenter also suggested removing ``topped 
out'' status under Factor 1 from our measure removal criteria because 
some Hospital IQR Program measures quantify so-called never events, the 
methodology comparing performance between the 75th and 90th percentiles 
is ``problematic'' and does not adequately consider variation between 
higher and lower performing hospitals, and many Hospital IQR Program 
measures only include patients covered by FFS Medicare and exclude the 
large and growing population of MA beneficiaries, which makes the 
determination of whether a measure is topped out incomplete and 
inaccurate. The commenter also requested that we provide more details 
on the costs and benefits of a measure that we consider under Factor 8.
    Response: We thank the commenter for this feedback. We consider in 
detail and on a case-by-case basis how each measure in the Program 
affects clinical care, and the quality of care delivered to patients is 
of paramount importance to Medicare beneficiaries and the public. We 
respectfully disagree with the commenter's suggestion of removing the 
topped out status as a removal criterion. Measures on which hospitals' 
performance is so high and unvarying that meaningful distinctions and 
improvements in performance can no longer be made does not provide 
useful information to Medicare beneficiaries or the public about the 
quality of care that they receive. For this reason, topped out status 
is an important removal factor for the program. Regarding removal 
factor 8, we note that we estimate the information collection costs and 
other effects associated with each quality measure we adopt in each 
rule. For example, in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27194 through 27196), we discussed the estimated changes in reporting 
costs for participating hospitals associated with the rule's proposed 
changes to the Hospital IQR Program's measure set. We also discuss in 
detail the benefits of the measure to patients and to the health care 
system when we propose it. For example, in the FY 2024 IPPS/LTCH PPS 
proposed rule (88 FR 27079 through 27080), we discussed the problems 
presented by hospital-acquired pressure injuries as well as the details 
of the Hospital Harm--Pressure Injury measure and how it assesses that 
clinical topic. We will, nonetheless, take the commenter's feedback 
into consideration for future potential refinements to the measure 
removal factors, as well as whether additional information on the costs 
and benefits beyond the discussion that we place in proposed rules 
would be helpful for the public.
    After consideration of the public comments we received, we are 
finalizing the codification of this policy as proposed.
8. Summary of Previously Finalized and Newly Adopted Hospital IQR 
Program Measures
a. Summary of Previously Finalized and Newly Adopted 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 Newly Adopted Hospital IQR 
Program Measures for the FY 2026 Payment Determinations
    This table summarizes the previously finalized and newly finalized 
Hospital IQR Program measure set for the FY 2026 payment determination, 
including the 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 newly finalized 
Hospital IQR Program measure set for the FY 2027 payment determination 
including the 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 newly finalized 
Hospital IQR Program measure set for the FY 2028 payment determination, 
including the 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, in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27103 
through 27109) we sought public feedback on these measures as we 
consider how best to develop the Hospital IQR Program's measure set. 
These are discussed in more detail in this section.

[[Page 59186]]

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.\567\ 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.\568\ 
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.\569\
---------------------------------------------------------------------------

    \567\ 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.
    \568\ Ibid.
    \569\ Ibid.
---------------------------------------------------------------------------

    As the population ages, care can become more complex,\570\ with 
patients often developing multiple chronic conditions. The CDC 
estimates that 68.4 percent of Medicare beneficiaries have two or more 
chronic conditions.\571\ 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.\572\
---------------------------------------------------------------------------

    \570\ 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.
    \571\ Lochner KA, Cox CS. Prevalence of Multiple Chronic 
Conditions Among Medicare Beneficiaries, United States, 2010. Prev 
Chronic Dis 2013;10:120137. DOI: https://dx.doi.org/10.5888/pcd10.120137.
    \572\ Salive, M.E. (2013). Multimorbidity in older adults. 
Epidemiologic reviews, 35(1), 75-83.
---------------------------------------------------------------------------

    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.\573\ 
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.
---------------------------------------------------------------------------

    \573\ 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.\574\ 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.\575\ 
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.\576\
---------------------------------------------------------------------------

    \574\ 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.
    \575\ 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.
    \576\ 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 \577\ to the older adult and their family or other 
caregivers.\578\ 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.\579\ 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.\580\
---------------------------------------------------------------------------

    \577\ 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.
    \578\ Institute for Healthcare Improvement. (2020). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults. 
Available at: https://www.ihi.org/Engage/Initiatives/Age-Friendly-Health-Systems/Documents/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
    \579\ Ibid.
    \580\ 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 also requested 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.\581\ A major challenge presented in the geriatric 
population is that care is not a single structural element or 
process.\582\ 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.583 584 
Orchestrating all

[[Page 59187]]

these elements results in better outcomes, and improving their 
implementation would be an essential first step to improve geriatric 
outcomes.\585\
---------------------------------------------------------------------------

    \581\ 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/.
    \582\ Ibid.
    \583\ 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%20Siteslowbar;FINAL.pdf.
    \584\ 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.
    \585\ 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.\586\ More 
specifically, the measures align with the Meaningful Measures Framework 
priority focus on patient-centered care.\587\ 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.'' 
\588\ 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.\589\
---------------------------------------------------------------------------

    \586\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \587\ Ibid.
    \588\ 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.
    \589\ 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.\590\ 
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.\591\ 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.\592\ 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.\593\
---------------------------------------------------------------------------

    \590\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \591\ 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.
    \592\ Ibid.
    \593\ 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.\594\ 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.\595\
---------------------------------------------------------------------------

    \594\ Ibid.
    \595\ 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.\596\ 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.\597\ 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.
---------------------------------------------------------------------------

    \596\ Ibid.
    \597\ Ibid.
---------------------------------------------------------------------------

    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.\598\ 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.
---------------------------------------------------------------------------

    \598\ Ibid.

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[[Page 59188]]

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.\599\ 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.\600\ The MAP Coordinating Committee had 
concerns related to the subjectiveness of attestation based measures, 
noting a preference for outcome or process measures.\601\ 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.\602\
---------------------------------------------------------------------------

    \599\ Ibid.
    \600\ Ibid.
    \601\ Ibid.
    \602\ 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 invited public comment on the potential future use of this 
measure in the Hospital IQR Program.
    We thank readers for their comments and have summarized all 
responses to this potential future measure after the potential 
geriatric hospital designation RFI in section IX.C.9.b.
(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 invited public comment on the potential use of this measure in 
the Hospital IQR Program.
    We thank readers for their comments and have summarized all 
responses to this potential future measure after the potential 
geriatric hospital designation RFI in section IX.C.9.b.
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 invited 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27103 through 27109)?
     What are the best practices for hospitals to actively 
engage with post-

[[Page 59193]]

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 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?
    We received comments on this topic.
    Comment: Many commenters supported a combined geriatric measure 
that consolidates the attestation domains of the geriatric hospital and 
geriatric surgical measures, that could potentially be the foundation 
of a geriatric hospital designation. Commenters believed these measures 
and designation will help a rapidly aging, vulnerable population find 
the care they need.
    Other commenters did not support the implementation of the 
geriatric attestation-based measures because they believed the measure 
burden would outweigh the potential benefits and would not add value to 
the patient or measure outcomes. Several commenters did not support 
adoption of either geriatric measure stating that there is no clear 
link between attestation and improving patient outcomes. A few 
commenters did not support geriatric measures due to concerns related 
to increased burden, particularly on rural hospitals, and concerns that 
the measures and potential hospital designation may not benefit 
hospitals and could confuse patients.
    Commenters provided many recommendations for additional geriatric 
care considerations. These included recommendations regarding new 
attestations, the role of family caregivers, and clinical guidelines 
and screening tools. Additional recommendations focused on provider 
education regarding the specific needs of geriatric patients.
    Commenters additionally recommended moving away from attestation 
measures and encouraging development of a more fulsome and streamlined 
set of measures that assess performance to support the geriatric 
hospital designation, including CBE-endorsed outcome-based measures for 
display on Care Compare. A few commenters recommended that the scoring 
methodology for a geriatric hospital designation be based on hospital 
performance and outcomes. Commenters recommended voluntary 
participation in a geriatric hospital designation and that only 
participating hospitals be impacted.
    Response: We thank the commenters for their input and appreciate 
the many meaningful practices being utilized in hospitals across our 
nation and the commitment to improving geriatric care. We will consider 
these comments in any future rulemaking related to geriatric care in 
the Hospital IQR Program.
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.
    The data submission requirements, specifications manual, measure 
methodology reports, and submission deadlines are posted on the 
QualityNet 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.
    We did not propose any changes to these policies in the proposed 
rule.
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

[[Page 59194]]

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 did not propose any changes to these policies in the 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 did not propose any changes to these policies in the 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 did not propose any changes to these policies in the proposed 
rule.
    The following Table IX.C-08 summarizes our finalized policies.

[[Page 59195]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.293

(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 did not propose any changes to this policy in the 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 did not propose any changes to this policy in the 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 did not propose any changes to this policy in the 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 note the 
submission deadline will be moved to the next business day if it falls 
on a weekend or Federal holiday.
    We did not propose any changes to this policy in the 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

[[Page 59196]]

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 final 
rule where we finalized refinements of the 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 did not propose any changes to these policies in the 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 did not propose any changes to these policies in the 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) 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.\603\ Hospitals must survey patients throughout each 
month of the year.\604\ The HCAHPS Survey is available in official 
English, Spanish, Chinese, Russian, Vietnamese, Portuguese, German, 
Tagalog, and Arabic versions.
---------------------------------------------------------------------------

    \603\ 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.
    \604\ 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,\605\ and re-endorsed the measure in 2010, 
2015, and 2019.\606\
---------------------------------------------------------------------------

    \605\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \606\ CMS. Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (HCAHPS). 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, 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

[[Page 59197]]

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 did not 
propose changes to the HCAHPS Survey's content in this rule.
(b) Addition of Three New Modes of Survey Implementation
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27113), we 
proposed 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 proposed 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, 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 invited public comment on this proposed update.
    Comment: Many commenters expressed their support for the addition 
of three new modes of survey implementation and stated their belief 
that the additional modes of survey implementation would likely 
increase survey response rates. A few commenters believed that new 
modes of survey implementation would increase participation from more 
diverse and underserved patient populations. A commenter believed that 
the additional modes of survey implementation would streamline data 
collection and reduce the data management burden. Another commenter 
believed that the new modes of survey implementation will be more cost 
effective in the long run. A commenter recommended considering sending 
a second email survey to non-respondents.
    Response: We thank the commenters for their support and agree that 
the addition of these three new modes of survey implementation will 
likely increase response rates for all patient populations. We also 
agree that these new modes of survey implementation have the potential 
to reduce the data collection and management burden while reducing 
survey administration costs in the long run. We will send a second and 
third email invitation in the Web-Mail and Web-Phone modes, and a 
second email invitation in the Web-Mail-Phone mode, to patients who did 
not respond to earlier email invitations. We note that procedures for 
survey administration will be clearly defined in the HCAHPS Quality 
Assurance Guidelines for all survey administration modes.
    Comment: A commenter recommended that CMS ensure comparability of 
results across modalities and determine if adjustments are needed to 
ensure accuracy of results.
    Response: We thank the commenter for their feedback and remind the 
commenter that per HCAHPS Quality Assurance Guidelines, all HCAHPS 
Survey results are adjusted for survey mode and patient-mix prior to 
public reporting and note that only adjusted results are publicly 
reported and considered the official HCAHPS results.
    Comment: A commenter requested clarification on whether the 
telephone mode of administration included a text message option and a 
few commenters recommended that CMS explore the inclusion of text 
message-based modes of HCAHPS administration.
    Response: We thank the commenters for their feedback. While the 
current telephone administration mode does not include a text message 
option, we will take these recommendations into consideration for 
future program years, taking into consideration the Telephone Consumer 
Protection Act requirements.
    Comment: A commenter recommended that non-English translations of 
HCAHPS be made available for use in the new web modes and that vendors 
be allowed and encouraged to develop an option within the web survey 
interface to allow respondents to select their preferred language and 
choose the survey version that aligns with their language preference.
    Response: We thank the commenter for their feedback and would like 
to note that official HCAHPS Survey translations (English, Spanish, 
Chinese, Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic) 
will be available for use in the new modes of implementation.
    Comment: A commenter requested clarification on whether the 
sequence of mixed survey modes would be determined by CMS or whether 
hospitals would be permitted to choose the sequence of outreach.
    Response: We appreciate the commenter's feedback and wish to 
clarify that much like the original mixed

[[Page 59198]]

mode survey which consisted of Mail combined with Telephone follow-up, 
the sequence for new modes of survey administration will be clearly 
defined in the HCAHPS Quality Assurance Guidelines which are updated 
regularly and can be found online at https://www.hcahpsonline.org/en/quality-assurance/.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(c) 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 proposed 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 will, however, still encourage 
patients to respond to the survey rather than proxies.
    We invited public comment on this update.
    Comment: Many commenters supported removing the prohibition of 
proxy respondents to the HCAHPS Survey. Many commenters expressed their 
belief that this change would increase the overall response rate and 
several commenters noted that they believed the change would widen the 
diversity of experiences in responses.
    Response: We thank the commenters for their support.
    Comment: A commenter recommended that the new survey modes be 
implemented for one to two years to measure changes in response rates 
prior to removing the prohibition on proxy respondents.
    Response: We thank the commenter for this recommendation and would 
refer readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27112 
through 72113) which discusses the 2021 Mode Experiment upon which our 
proposed changes were based. This experiment included the addition of 
the new survey modes while simultaneously removing the prohibition on 
proxy respondents and 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.
    Comment: A commenter suggested that we report the results of the 
changes and their effects on HCAHPS survey completion rates.
    Response: We agree with the commenter suggesting that we continue 
reporting on HCAHPS completion rates and look forward to publishing 
additional information on the survey's details in the future.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(d) 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 therefore proposed to 
extend the data collection period for the HCAHPS Survey from 42 to 49 
days, beginning with January 2025 discharges.
    We invited public comment on the proposed change in the length of 
the data collection period.
    Comment: Many commenters supported the proposed extension of the 
data collection period. Several commenters expressed their belief that 
the extension of the data collection period will likely increase 
overall response rates.
    Response: We thank the commenters for their support and agree that 
the extended collection period will likely increase overall response 
rates.
    Comment: A few commenters did not support our proposal to extend 
the data collection period, expressing concern that recall bias is 
already an issue with the current data collection period. A commenter 
suggested that we shorten the data collection period to address this 
challenge and expressed concern about the quality of responses that may 
be collected and whether those responses are fully reflective of 
patients' actual experience. Another commenter recommended CMS allow 
hospitals to administer surveys as soon as a patient is discharged.
    Response: We understand and appreciate the commenters' concerns. 
Recall bias is a legitimate concern with survey responses, and we will 
continue to monitor results for potential recall bias effects, however, 
the benefits of extending the HCAHPS data collection period outweigh 
these concerns. Extending the data collection period will not delay the 
administration of the HCAHPS Survey, which may begin as soon as 48 
hours after discharge. The proposed change will allow for more time for 
responses to be received. Through patient-mix adjustment we will 
continue to control for response percentile, which adjusts for when 
during the data collection period the respondent completes the survey. 
The 2021 Mode Experiment upon which our proposed changes were based 
demonstrated that within the extended period, there was a statistically 
significant increase in responses specifically in groups that are 
typically underrepresented in HCAHPS and the increased representation 
among these populations will improve the extent to which HCAHPS results 
are reflective of the entire patient population experience.
    We thank the commenter for their recommendation to allow hospitals 
to immediately administer surveys upon patient discharge however we 
refer readers to the HCAHPS Quality Assurance Guidelines which outlines 
that the delay in allowing hospitals to administer the surveys is 
designed to ensure patients have time to return home and feel settled 
after a hospital stay prior to being contacted by the HCAHPS 
administrator.
    Comment: A commenter recommended that we delay extension of data 
collection period until CMS can first measure success of the new 
collection modes.
    Response: We thank the commenter for this recommendation and refer 
readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27112 through 
27113) which discusses the 2021 Mode Experiment upon which our proposed 
changes were based. This experiment included the addition of the new 
survey modes while simultaneously extending the data collection period 
and resulted in a statistically significant increase in responses from 
patients who are typically under-represented in HCAHPS.
    Comment: A commenter expressed concern that the extended data 
collection period would impact timelines for preview and publication of 
stars data.

[[Page 59199]]

    Response: We appreciate the commenter's concern, however we do not 
anticipate that the extension of the reporting period will result in a 
delay in the release of star ratings data.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(e) 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 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.\607\ 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.
---------------------------------------------------------------------------

    \607\ 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 invited public comment on our proposal to limit the number of 
supplemental items. We welcomed suggestions for alternative limits 
below 12 supplemental items.
    Comment: Many commenters supported limiting the number of 
supplemental survey items and several commenters noted they believe 
this would improve response rates.
    Response: We thank the commenters for their support and agree that 
limiting supplemental items will likely increase response rates.
    Comment: A few commenters did not support the proposal to limit the 
number supplemental HCAHPS survey items. A commenter requested 
clarification on the rationale for limiting the number of supplemental 
items at 12 and another commenter expressed their belief that capping 
the number of supplemental items at 12 was arbitrary and would not 
meaningfully affect response rates. A few commenters recommended 
setting the limit on supplemental items at 15.
    Response: We acknowledge the commenters' concerns, and we refer 
readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27113 through 
27114) which outlines the data-based evidence that informed the 
proposal. This evidence demonstrates that additional supplemental 
questions reduce response rates and supports the decision to limit 
supplemental items to 12. Furthermore, the proposed limit of 12 
supplemental items aligns with other CMS CAHPS surveys.
    Comment: A few commenters expressed concern that specific hospital 
designations may require incorporation of specific supplemental HCAHPS 
questions, and a commenter noted that standardized CAHPS surveys 
include supplemental questions to address specific needs.
    Response: We appreciate the commenters' concerns regarding required 
supplemental HCAHPS questions for hospital designation statuses, and we 
refer readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27113 
through 27114) which outlines the data-based evidence that informed the 
proposal. This evidence demonstrates that additional supplemental 
questions reduce response rates. Given the demonstrated decline in 
response rates as the number of supplemental questions increases, the 
benefits of limiting the number supplemental questions outweigh the 
benefits of unlimited supplemental questions. We would also remind 
readers that hospitals will still be able to select supplemental 
questions that best align with their hospital's unique needs.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(f) 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.\608\ 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 
proposed 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.
---------------------------------------------------------------------------

    \608\ HCAHPS Quality Assurance Guidelines V18.0. https://www.hcahpsonline.org/en/quality-assurance/.
---------------------------------------------------------------------------

    We invited public comment on the proposed requirement to administer 
the survey in Spanish. We also welcomed suggestions for additional 
translations beyond the existing translations in Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic.
    Comment: Many commenters expressed their support for the 
requirement to use official Spanish translation for Spanish Language-
Preferring patients. Many commenters also expressed the belief that 
these requirements would improve health equity by allowing more 
patients an opportunity to provide feedback.
    Response: We appreciate the commenters support and agree that these 
changes will encourage representation from a wider pool of patients in 
HCAHPS responses.
    Comment: Several commenters recommended expanding the number of 
translations available in the survey. On commenter specifically 
recommended including the following languages in future HCAHPS language 
translations: Armenian, Cambodian, Simplified Chinese, Farsi, Hindi, 
Hmong, Japanese, Korean, and Ilocano. A commenter specifically 
requested a translation to translation to Haitian Creole and another 
commenter requested that we ensure that the translated versions of the 
surveys are fully valid and reliable for all targeted languages.
    Response: We thank the commenters for their recommendations 
regarding future translations of HCAHPS and further validation of 
existing translated versions and we will take these recommendations 
into consideration for future program years.
    Comment: A commenter recommended that patients should be given the 
option of Spanish and English versions so that the patient can select

[[Page 59200]]

the version best aligning with their language preferences or those of 
their proxy.
    Response: We refer readers to the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 27114) where we proposed that hospitals be required to 
collect information about patient language preferences. This additional 
requirement will help to ensure that patients receive the version that 
best aligns with their language preferences.
    Comment: A commenter requested clarification on whether the 
requirement for hospitals to collect information about the language 
spoken by patients during their hospital also applies to separate 
certified Electronic Health Record technology (CEHRT) requirements, and 
recommended CMS consider this extension.
    Response: We wish to clarify that this proposal applied only to the 
HCAHPS Survey, however, we thank the commenter for their recommendation 
and will consider this in future program years.
    Comment: A commenter recommended the survey administration process 
be updated to allow for both preferred reading languages and preferred 
speaking languages as these may differ for some patients.
    Response: We thank the commenter for their suggestion and will take 
this into consideration for future program years. If a hospital 
collects detailed information about the language a patient prefers to 
read versus a language a patient prefers to speak, there is nothing in 
the HCAHPS protocols that would prevent the hospital from sharing this 
information with their survey vendor.
    Comment: A commenter requested clarification on whether HCAHPS 
survey translations would be available in all survey modes.
    Response: We thank the commenter for their concern and wish to 
clarify that language translations are available in additional modes 
for some but not all official HCAHPS translations. In the Web-Mail 
mode, the web survey will be available in all of the languages in which 
the Mail survey is available. In the Web-Phone mode, the web survey 
will be available in all of the languages in which the Phone survey is 
available. We would refer readers to the HCAHPS Quality Assurance 
Guidelines for further information on which HCAHPS translations are 
offered for additional survey modes.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(g) Removal of Two Administration Methods
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27114), we 
proposed 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. To streamline HCAHPS 
oversight and training, we proposed 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 will 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).
    To streamline HCAHPS oversight and training, we also proposed 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 will 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.
    We invited public comment on the proposed removal of two HCAHPS 
administration methods.
    Comment: Many commenters expressed support for the removal of two 
HCAHPS administration methods.
    Response: We thank the commenters for their support.
    Comment: A few commenters recommended that CMS temporarily suspend 
the Active Interactive Voice Response (IVR) survey mode and conduct 
further research as to why this mode is not widely utilized rather than 
permanently remove this mode from HCAHPS.
    Response: We thank the commenters for their recommendations. As 
noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27114), the 
touch-tone IVR survey mode has not been employed by any hospital since 
2016. Given the addition of three new survey modes, further assessment 
of the touch-tone IVR survey mode would not represent a responsible use 
of resources. Furthermore, the removal of this underutilized survey 
mode is necessary to streamline HCAHPS oversight and training, and to 
reduce HCAHPS administration burden.
    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
(h) Data Collection
    The HCAHPS Survey will 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 final rule. There 
will be no changes to HCAHPS patient eligibility or exclusion criteria 
(we note that 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 invited public comments on these proposals.
    Comment: Many commenters expressed their support these proposed 
changes.
    Response: We thank the commenters for their support.

[[Page 59201]]

    After consideration of the public comments we received, we are 
finalizing this policy as proposed.
i. Request for Information on Potential Addition of Patients With a 
Primary Psychiatric Diagnosis to the HCAHPS Survey Measure
    We solicited 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 sought 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 requested 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 
found in the HCAHPS Quality Assurance Guidelines, V18.0 at https://hcahpsonline.org/en/quality-assurance/.
    We invited public comments on these topics.
    Comment: We received many comments in support of the potential 
inclusion of patients with a primary psychiatric diagnosis in the 
HCAHPS Survey. Many of these commenters recommended that we conduct 
further testing within this population and engage hospitals and other 
interested parties in technical expert panels before proposing to 
include this group in the HCAHPS Survey population. Several commenters 
also recommended that we capture responses from patients with a primary 
psychiatric diagnosis who receive care in the Emergency Department. A 
commenter recommended adjusting the minimal sample size to ensure the 
psychiatric patient population is adequately represented in reporting.
    Other commenters did not support the potential inclusion of 
patients with a primary psychiatric diagnosis in the HCAHPS Survey. 
Several of these commenters instead recommended that we conduct a 
separate survey for patients with a primary psychiatric diagnosis that 
could be used across all care settings. A few commenters highlighted 
concerns about the ability to reach patients with a primary psychiatric 
diagnosis for follow-up surveys given higher rates of housing 
insecurity within this patient population. A few commenters recommended 
survey administration at discharge for this patient population.
    Response: We thank the commenters for their valuable input. We will 
consider their feedback if we make proposals on this subject in the 
future.
    Comment: A commenter recommended using a separate patient 
experience survey that addresses psychiatric care rather than the 
traditional HCAHPS survey.
    Response: We also wish to note that currently, the HCAHPS Survey 
excludes discharged patients with a primary diagnosis code related to 
psychiatric care (discharged patients who have a secondary diagnosis 
code related to psychiatric care are included). During the development 
of the HCAHPS Survey in the early 2000s, the exclusion of discharged 
patients with a primary diagnosis code related to psychiatric care 
occurred due to concerns about the sensitivity and privacy of such 
information and the possible risk of harm to the patient if the primary 
diagnosis was disclosed during survey administration. Because patients 
who receive psychiatric inpatient care were excluded from development 
of the survey, HCAHPS may not fully address aspects of their 
experiences that are associated with quality care.
    The Agency for Healthcare Research and Quality (AHRQ) has funded a 
patient experience of care survey development project that is exploring 
issues regarding inpatient care and patients with a primary psychiatric 
diagnosis. They are exploring issues around patient privacy issues, 
safety, and differences in state requirements, as well as the relevance 
of HCAHPS survey items and potential additional items for this 
population. The research team is following a standardized and rigorous 
development and testing process, including conducting Technical Expert 
Panels (TEPs) with relevant stakeholders and field testing. CMS plans 
to monitor this work closely and use information gleaned from this work 
to determine the best way to add patients with a primary psychiatric 
diagnosis to CMS's efforts to evaluate the patient experience of care 
in the inpatient acute care setting.
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 will 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 did not propose any changes to these policies in the 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 did not propose any changes to these policies in the proposed 
rule.

[[Page 59202]]

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 did not propose any changes to these policies in the proposed 
rule.
11. Validation of Hospital IQR Program Data
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27115 through 
27116), we proposed to update our targeting criteria for validation of 
hospitals granted an extraordinary circumstances exception (ECE). 
Specifically, we proposed 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.
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 through 49310) 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 will 
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-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. Addition of Targeting Criterion for Validation
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27115 through 
27116), beginning with validations of CY 2024 reporting period data for 
the FY 2027 payment determination, we proposed to add a new criterion 
to the six established targeting criteria used to select up to 200 
additional hospitals for validation. We proposed that a hospital with 
less than four quarters of data subject to validation due to receiving 
an 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 
proposed 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 will 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

[[Page 59203]]

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 proposed 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.
    Our proposal was intended to 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. This proposal 
was also to 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).
    We invited public comment on our proposal.
    Comment: A few commenters supported the proposed update to the 
targeting criterion.
    Response: We thank commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed.
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 did not propose any changes to this policy in the 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 did not propose any changes to these policies in the 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 the proposed rule (88 FR 27110 
through 27112) for a discussion of our previously finalized eCQM 
reporting and submission policies.
    We did not propose any changes to these policies in the 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 did not propose any changes to these policies in the 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 did not propose any changes to these policies in the proposed 
rule.
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 did not propose any changes to these policies in the 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);

[[Page 59204]]

     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 did not propose any changes to our 
measure removal or retention policies.
    We proposed 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 (88 FR 27117 through 
27121, 27122 through 27128, 27128 through 27130). We also referred 
readers to the proposed modifications of the COVID-19 Vaccination 
Coverage Among Healthcare Personnel (HCP) measure in the PCHQR, 
Hospital Inpatient Quality Reporting, and Long-Term Care Hospital 
Quality Reporting Programs and refer readers to section IX.B. of this 
final rule.
3. Adoption of 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.609 610 611 612 613 614 615 616 617 618 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.619 620 621 622 623 624 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.625 626 627 628 629 Data indicate that, even 
after accounting for factors such as socioeconomic conditions, members 
of racial and ethnic minority groups reported experiencing lower 
quality healthcare.\630\ 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.\631\ Additionally, inequities in the drivers of 
health affecting these groups, such as

[[Page 59205]]

poverty and healthcare access, are interrelated and influence a wide 
range of health and quality-of-life outcomes and risks.\632\
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    \609\ 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.
    \610\ 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.
    \611\ 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.
    \612\ 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.
    \613\ 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.
    \614\ 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.
    \615\ 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.
    \616\ 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.
    \617\ 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.
    \618\ 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.
    \619\ 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.
    \620\ 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.
    \621\ 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.
    \622\ 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.
    \623\ 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.
    \624\ 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.
    \625\ 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.
    \626\ 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.
    \627\ 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.
    \628\ 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.
    \629\ 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.
    \630\ 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.
    \631\ 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.
    \632\ 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.633 634 635 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.\636\ 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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    \633\ 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.
    \634\ 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.
    \635\ 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/.
    \636\ 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.637 638 639 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.\640\ We believe leadership commitment to health equity will 
have a parallel effect in contributing to a reduction in health 
disparities.
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    \637\ 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.
    \638\ 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.
    \639\ 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.
    \640\ 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.\641\ 
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.\642\ 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 proposed to adopt an 
attestation-based structural measure, Facility Commitment to Health 
Equity, beginning with the FY 2026 program.
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    \641\ 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.
    \642\ 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 \643\ reflects our 
deep 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.
---------------------------------------------------------------------------

    \643\ 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. Also see https://www.cms.gov/cms-strategic-plan.
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    We also believe this measure will incentivize PCHs 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 PCH 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 PCHs to act on any one 
data element or domain, but instead encourages PCHs 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 PCHs in leveraging available data, pursuing 
focused quality improvement activities, and promoting efficient and 
effective use of resources.
    The five questions of the structural measure are adapted from the 
CMS Office of Minority Health's Building an

[[Page 59206]]

Organizational Response to Health Disparities framework, which focuses 
on data collection, data analysis, culture of equity, and quality 
improvement.\644\ The 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.\645\ 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.\646\ 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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    \644\ 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.
    \645\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \646\ 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.
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b. Overview of Measure
    The Facility Commitment to Health Equity measure assesses 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 will 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 
will be required to attest. For a PCH to affirmatively attest ``yes'' 
to a domain, and receive credit for that domain, the PCH will evaluate 
and determine whether it engages in each of the sub-elements that 
comprise the domain. PCHs will 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 will be represented in 
the denominator as a point, for a total of 5 points (one per domain).
    For example, for Domain 1 (``Facility commitment to reducing 
healthcare disparities is strengthened when equity is a key 
organizational priority''), a PCH will 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 will affirmatively attest to Domain 1 and receive one 
(1) point for that attestation. A PCH will 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 will not be 
able to affirmatively attest to Domain 1 and will not receive a point 
for that attestation.
    The numerator will 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 will receive the 
maximum 5 points.
    Specifications for the measure are available on the CMS Measure 
Inventory page with the file name ``Facility Commitment to Health 
Equity Measure Specifications'' at: https://cmit.cms.gov/cmit/#/.
d. Data Submission and Reporting
    In the proposed rule, we proposed to require PCHs 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 will follow the submission and 
reporting requirements for web-based measures for the PCHQR Program 
posted on the QualityNet website.
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.\647\ The CBE-convened Measure Applications Partnership (MAP) 
\648\ 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.\649\ 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.\650\ 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.\651\ 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.\652\ 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.\653\
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    \647\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \648\ Interested parties convened by the consensus-based entity 
will provide input and recommendations on the Measures Under 
Consideration (MUC) list as part of the pre-rulemaking process 
required by section 1890A of the Act. We refer readers to https://p4qm.org/PRMR-MSR for more information.
    \649\ Interested parties convened by the consensus-based entity 
will provide input and recommendations on the Measures Under 
Consideration (MUC) list as part of the pre-rulemaking process 
required by section 1890A of the SSA. We refer readers to https://p4qm.org/PRMR-MSR for more information.
    \650\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \651\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \652\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \653\ 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 
could assess PCH progress in providing high-quality healthcare for all 
patients, regardless of social risk factors or demographic 
characteristics.

[[Page 59209]]

f. Consensus-Based Entity Endorsement
    We have not submitted this measure for consensus-based entity (CBE) 
\654\ 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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    \654\ 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
    In the proposed rule, we proposed to publicly display the PCH-
specific results for the Facility Commitment to Health Equity measure 
and refer readers to Table IX.D.-04 in the preamble of this final rule 
for the public display requirements.
    We invited public comment on this proposal.
    Comment: Many commenters expressed support for the measure 
believing it promotes health equity. A commenter expressed support for 
the measure because the measure includes several important domains of 
health equity, including inclusion in strategic plans, assessment of a 
commitment to data collection and reporting, and stratification of that 
data that will show whether there is improvement over time. Another 
commenter expressed its belief that the measure can incentivize 
hospitals to collect and use data to identify and address quality gaps. 
Another commenter expressed support for the measure believing it 
assesses important aspects of a hospital's commitment to health equity 
including an organizational commitment to reducing health disparities, 
collecting demographic data, and training staff on best practices for 
data collection. Another commenter expressed its support for the 
measure believing it supports efforts to identify and track 
institutional biases in the reimbursement structure and healthcare 
system.
    Response: We thank commenters for their support of our proposal to 
adopt the Facility Commitment to Health Equity measure. We agree that 
the measure assesses important aspects of a PCH's commitment to health 
equity and will incentivize the collection and use of data by PCHs to 
address health equity to identify and address quality gaps and deliver 
equitable culturally competent care to all patients.
    Comment: A few commenters expressed support for the measure with 
some concerns including that the measure should be monitored for 
unintended consequences and updating, that the data lack reliability or 
validity testing in the PCH setting, and that the measure may require 
data from outside of the hospital-setting. Another commenter 
recommended analyzing lessons learned from the Hospital IQR Program to 
inform implementation strategy.
    Response: We appreciate the commenters support and recommendations. 
We also understand commenters' concerns regarding the accuracy of 
provider self-reported data; however, while we do not have a specific 
means to validate PCHs' attestation to this measure, we do require all 
PCHs participating in the PCHQR Program to complete the Data Accuracy 
and Completeness Acknowledgement (DACA) each year which requires 
attestation that the quality measure results and any and all data 
including numerator and denominator data provided are accurate and 
complete. For more information on the PCHQR Program's DACA 
requirements, we refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53563). We also acknowledge commenters' desire to be able to 
learn from the experiences of PCH reporting of this measure over time. 
We note that the Hospital IQR Program adopted the Facility Commitment 
to Health Equity measure last year and that hospitals participating in 
the Hospital IQR Program will have already reported data on this 
measure before the reporting of the Facility Commitment to Health 
Equity Measure for the PCHQR Program begins, so we believe PCHs will 
have the opportunity to learn from the experiences of hospitals when 
hospital data is publicly reported in addition to monitoring the 
experience of PCHs when data reporting is required.
    Comment: A commenter expressed its belief that the data should be 
standardized and validated and collected in a way that minimizes 
burden. A commenter expressed concern that the measure may add burden 
without demonstrable benefits because it only requires attestation.
    Response: We recognize the commenter's concerns about burden of 
participating in the PCHQR Program and have aligned PCHQR Program 
measures with the Hospital IQR Program as appropriate, including the 
reporting of the Facility Commitment to Health Equity measure. We also 
believe the benefits of encouraging PCH commitment to health equity 
outweighs the burden of attestation under this measure.
    Comment: A commenter recommended the measure be submitted for CBE 
review and endorsement.
    Response: While we recognize the value of measures undergoing CBE 
endorsement review, measures of health equity are a priority for CMS, 
and we believe it is important to implement this measure as soon as 
possible. We note that under section 1886(s)(4)(D)(ii) 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(s)(4)(D)(ii) of the Act applies. We believe 
the Facility Commitment to Health Equity measure is sufficiently 
accurate and reliable without CBE endorsement, noting its adoption in 
the Hospital IQR Program, and that this measure establishes an 
important foundation to prioritize the achievement of health equity 
among PCHs.
    Comment: A commenter expressed support and requested more data on 
how high- and low-quality care facilities will be differentiated and 
used for quality improvement versus penalties.

[[Page 59210]]

    Response: We believe strong and committed leadership from PCH 
executives and board members is essential and can play a role in 
advancing equity goals for PCHs. The measure is intended to provide 
information to PCHs on the level of unmet need among their patients and 
potentially in the community and not for comparison between PCHs. We 
believe this measure is an important step toward assessing PCH 
leadership commitment and a fundamental step toward closing the gap in 
equitable care for all populations. The PCHQR Program does not include 
a financial incentive or penalty for PCHs, and we encourage providers 
to analyze their own data to understand the many factors, including 
race, ethnicity, and various drivers of health, such as housing 
stability and food security, to deliver more equitable care and, in 
turn, improve patient outcomes.
    Comment: A commenter recommended CMS revisit the measure as more 
sophisticated measures are developed and assess outcomes. Another 
commenter recommended CMS consider measuring other concepts such as 
accessibility and appropriateness of services, forming the right 
community partnerships, and improving patient experiences by reducing 
discrimination and implicit bias.
    Response: We appreciate the commenter's recommendations and believe 
this measure to be a building block that lays the groundwork for a more 
comprehensive suite of measures that could assess progress in providing 
high-quality healthcare for all patients regardless of social risk 
factors or demographic characteristics. A more comprehensive suite of 
measures could potentially include health equity related outcome 
measures.
    Comment: A commenter recommended that CMS delay public reporting 
until the data's accuracy are verified. Another commenter recommended 
making reporting voluntary and not subject to public display for the 
first year of the measure in the program.
    Response: We believe that adopting the Facility Commitment to 
Health Equity measure beginning with the FY 2026 program year and 
displaying the data publicly beginning July 2026 or as soon as feasible 
thereafter would allow PCHs the opportunity to review the accuracy of 
their data prior to public display and refer readers to Table IX.D.-04 
for our finalized public display requirements.
    Comment: A commenter did not support the measure believing it is 
built on the false premise not supported by evidence that medical 
institutions are mired by bigotry, racism, and discrimination. The 
commenter expressed its belief that disparate health outcomes should 
not be assumed to be a direct result of quality of care provided by a 
hospital. The commenter also expressed concerns that the proposal would 
force cancer hospitals to make a commitment to health equity beginning 
in FY 2026 with an adjustment to the funding formula.
    Response: We believe this measure is an important foundational 
measure for improving health equity among those that have been 
disadvantaged or underserved by the healthcare system, and there is 
substantial research showing differences in care and experiences among 
these populations and refer readers to the literature discussed in this 
section. We encourage providers to analyze their own data to understand 
the many factors, including race, ethnicity, and various drivers of 
health, such as housing stability and food security, to deliver more 
equitable care and in turn improve patient outcomes for all patients. 
We also believe the public display of data provides the opportunity for 
CMS, patients, and other stakeholders to recognize PCHs that provide 
equitable health care and refer readers to Table IX.D.-04 for our 
finalized public display requirements.
    After consideration of the public comments we received, we are 
finalizing this measure.
4. Adoption of the Screening for Social Drivers of Health Measure 
Beginning With Voluntary Reporting for the FY 2026 Program Year and 
Mandatory Reporting Beginning With 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.\655\ 
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.\656\ 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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    \655\ 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.
    \656\ 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.
---------------------------------------------------------------------------

    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 (87 FR 70054 
through 70055).
    These measures will 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

[[Page 59211]]

PCH's quality of care.657 658 659 660 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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    \657\ 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.
    \658\ 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.
    \659\ 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/.
    \660\ 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 final rule.
a. Background
    Health disparities manifest primarily as worse health outcomes in 
population groups where access to care is 
inequitable.661 662 663 664 665 Such differences persist 
across geography and healthcare settings irrespective of improvements 
in quality of care over time.666 667 668 Assessment of HRSNs 
is an essential mechanism for capturing the interaction between social, 
community, and environmental factors associated with health status and 
health outcomes.669 670 671 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.672 673 While 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 Screening for Social Drivers of 
Health and the Screen Positive for Social Drivers of Health measures, 
but only 24 percent of hospitals screening for all five HRSNs.\674\
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    \661\ 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/.
    \662\ 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.
    \663\ 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.
    \664\ 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.
    \665\ 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.
    \666\ 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.
    \667\ 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/.
    \668\ 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/patientlowbar;care/everyonelowbar;project/team-based-approach.pdf.
    \669\ 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.
    \670\ 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.
    \671\ 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.
    \672\ 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.
    \673\ 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.
    \674\ 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).675 676 677 678 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.679 680 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 
2018.681 682 Evaluation of the AHC Model data is still 
underway.
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    \675\ 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.
    \676\ 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.
    \677\ 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.
    \678\ Centers for Medicare & Medicaid Services. (2021) 
Accountable Health Communities Model. Accountable Health Communities 
Model [bond] CMS Innovation Center. Accessed November 23, 2021. 
Available at: https://innovation.cms.gov/innovation-models/ahcm.
    \679\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \680\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \681\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \682\ 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.683 684 685 686 The persistent

[[Page 59212]]

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.687 688 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.\689\ 
Additionally, associations between disproportionate health risk, 
hospitalization, and adverse health outcomes have been highlighted and 
magnified by the COVID-19 pandemic.690 691
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    \683\ 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.
    \684\ 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.
    \685\ 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.
    \686\ 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.
    \687\ 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.
    \688\ 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.
    \689\ 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.
    \690\ 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.
    \691\ 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.\692\ 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.693 694 695
---------------------------------------------------------------------------

    \692\ 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.
    \693\ 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.
    \694\ 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.
    \695\ 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 measures, are described in Table 
IX.D.-02.

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[[Page 59214]]


    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 programs to close equity gaps among the communities they 
serve.718 719 720 721 722
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    \696\ Berkowitz SA, Seligman HK, Meigs JB, Basu S. Food 
insecurity, healthcare utilization, and high cost: a longitudinal 
cohort study. Am J Managed Care. 2018 Sep;24(9):399-404. PMID: 
30222918; PMCID: PMC6426124.
    \697\ 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/.
    \698\ 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/.
    \699\ National Academies of Sciences, Engineering, and Medicine 
2006. Executive Summary: Cost-Benefit Analysis of Providing Non-
Emergency Medical Transportation. Washington, DC: The National 
Academies Press. Available at: https://doi.org/10.17226/23285.
    \700\ 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/.
    \701\ Berkowitz SA, Seligman HK, Meigs JB, Basu S. Food 
insecurity, healthcare utilization, and high cost: a longitudinal 
cohort study. Am J Managed Care. 2018 Sep;24(9):399-404. PMID: 
30222918; PMCID: PMC6426124.
    \702\ Dean, E.B., French, M.T., & Mortensen, K. (2020a). Food 
insecurity, health care utilization, and health care expenditures. 
Health Services Research, 55(S2), 883-893. Available at: https://doi.org/10.1111/1475-6773.13283.
    \703\ Larimer, M.E. (2009). Health Care and Public Service Use 
and Costs Before and After Provision of Housing for Chronically 
Homeless Persons with Severe Alcohol Problems. JAMA, 301(13), 1349. 
Available at: https://doi.org/10.1001/jama.2009.414.
    \704\ Hill-Briggs, F. (2021). Social Determinants of Health and 
Diabetes: A Scientific Review. Diabetes Care. Available at: https://pubmed.ncbi.nlm.nih.gov/33139407/.
    \705\ Henry M., de Sousa, T., Roddey, C., Gayen, S., Bednar, T.; 
Abt Associates. The 2020 Annual Homeless Assessment Report (AHAR) to 
Congress; Part 1: Point-in-Time Estimates of Homelessness, January 
2021. U.S. Department of Housing and Urban Development. Accessed 
November 24, 2021. Available at: https://www.huduser.gov/portal/sites/default/files/pdf/2020-AHAR-Part-1.pdf.
    \706\ Larimer, M.E. (2009). Health Care and Public Service Use 
and Costs Before and After Provision of Housing for Chronically 
Homeless Persons with Severe Alcohol Problems. JAMA, 301(13), 1349. 
Available at: https://doi.org/10.1001/jama.2009.414.
    \707\ Baxter, A., Tweed, E., Katikireddi, S., Thomson, H. 
(2019). Effects of Housing First approaches on health and well-being 
of adults who are homeless or at risk of homelessness: systematic 
review and meta-analysis of randomized controlled trials. Journal of 
Epidemiology and Community Health, 73; 379-387. Available at: 
https://jech.bmj.com/content/jech/73/5/379.full.pdf.
    \708\ National Academies of Sciences, Engineering, and Medicine 
(2006). Executive Summary: Cost-Benefit Analysis of Providing Non-
Emergency Medical Transportation. Washington, DC: The National 
Academies Press. Available at: https://doi.org/10.17226/23285.
    \709\ National Academies of Sciences, Engineering, and Medicine 
2006. Executive Summary: Cost-Benefit Analysis of Providing Non-
Emergency Medical Transportation. Washington, DC: The National 
Academies Press. Available at: https://doi.org/10.17226/23285.
    \710\ 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/.
    \711\ 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.
    \712\ Shier, G., Ginsburg, M., Howell, J., Volland, P., & 
Golden, R. (2013). Strong Social Support Services, Such as 
Transportation And Help For Caregivers, Can Lead To Lower Health 
Care Use And Costs. Health Affairs, 32(3), 544-551. Available at: 
https://doi.org/10.1377/hlthaff.2012.0170.
    \713\ Baxter, A., Tweed, E., Katikireddi, S., Thomson, H. 
(2019). Effects of Housing First approaches on health and well-being 
of adults who are homeless or at risk of homelessness: systematic 
review and meta-analysis of randomized controlled trials. Journal of 
Epidemiology and Community Health, 73; 379-387. Available at: 
https://jech.bmj.com/content/jech/73/5/379.full.pdf.
    \714\ Wright, B.J., Vartanian, K.B., Li, H.F., Royal, N., & 
Matson, J.K. (2016). Formerly Homeless People Had Lower Overall 
Health Care Expenditures After Moving into Supportive Housing. 
Health Affairs, 35(1), 20-27. Available at: https://doi.org/10.1377/hlthaff.2015.0393.
    \715\ 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.
    \716\ Henry M., de Sousa, T., Roddey, C., Gayen, S., Bednar, T.; 
Abt Associates. The 2020 Annual Homeless Assessment Report (AHAR) to 
Congress; Part 1: Point-in-Time Estimates of Homelessness, January 
2021. U.S. Department of Housing and Urban Development. Accessed 
November 24, 2021. Available at: https://www.huduser.gov/portal/sites/default/files/pdf/2020-AHAR-Part-1.pdf.
    \717\ Larimer, M.E. (2009). Health Care and Public Service Use 
and Costs Before and After Provision of Housing for Chronically 
Homeless Persons with Severe Alcohol Problems. JAMA, 301(13), 1349. 
Available at: https://doi.org/10.1001/jama.2009.414.
    \718\ 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.
    \719\ 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.
    \720\ 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.
    \721\ 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.
    \722\ 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 can 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.723 724 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.\725\ The AHC Model was tested across varied care-
delivery sites in diverse geographic locations across the U.S.\726\ 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.\727\ Moreover, the screening instrument can be 
implemented in a variety of places where patients seek healthcare, 
including cancer hospitals.\728\
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    \723\ 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.
    \724\ 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.
    \725\ More information on the HRSN Screening Tool is available 
at: https://innovation.cms.gov/files/worksheets/ahcm-screeningtool.pdf.
    \726\ RTI International. (2020). Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \727\ 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/.
    \728\ 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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[[Page 59215]]

    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,\729\ 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 final 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.'' \730\ 
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.\731\
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    \729\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.
    \730\ 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.
    \731\ 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 final rule) is 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 will 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 will 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 can 
enable us to set appropriate performance targets for PCHs.
b. Overview of Measure
    The Screening for Social Drivers of Health measure will 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 will 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/#/.
(g) Cohort
    The Screening for Social Drivers of Health measure will 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 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 will 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 will 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

    In the proposed rule, we proposed to require PCHs to 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 will 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.732 733 SIREN contains descriptions of the content and 
characteristics of various tools, including information about intended 
populations, completion time, and number of questions. We encourage 
PCHs to implement 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 and exchange 
of HRSN information in an interoperable fashion so that these data can 
be shared across

[[Page 59216]]

the care continuum to support coordinated care.
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    \732\ 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.
    \733\ 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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    PCHs will 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 will follow the established submission and 
reporting requirements for web-based measures for the PCHQR Program 
posted on the QualityNet website.
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.\734\ 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.\735\ 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.\736\ 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.\737\ 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.\738\
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    \734\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \735\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \736\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \737\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \738\ 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 
could 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
    In the proposed rule, we proposed to publicly display the PCH-
specific results for the Social Drivers of Health measure and refer 
readers to Table IX.D.-04 in the preamble of this final rule for the 
public display requirements.
    We invited public comment on this proposal.
    Comment: Many commenters expressed support believing the measure 
improves health equity. A few commenters expressed support for the 
measure for encouraging attention and resources for social needs. A 
commenter expressed support for the measure believing it addresses 
structural inequities faced in rural and underserved communities. 
Another commenter expressed support for screening believing it is an 
opportunity to build trust between patients and providers. Another 
commenter expressed support for public reporting of facility specific 
results. Another commenter expressed support for the measure noting 
that the delayed date for mandatory reporting may assist with concerns 
about creating additional burden capturing the required data elements.
    Response: We thank the commenters for their support.
    Comment: A few commenters expressed support for the measure, but 
with recommendations including that data may be more appropriately 
reported at the system or regional level, economic insecurity should be 
added as a social risk factor for screening, and occupational 
therapists should be included in the list of professionals who gather 
data for this measure.
    Response: We appreciate the commenters' support and 
recommendations. We note that this measure is considered a building 
block and lays the groundwork for future measures that could consider 
additional factors such as economic insecurity. We note that the 
Screening for Social Drivers of Health measure requires data collection 
at the PCH level rather than the system or regional level that allows 
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 outcomes. We will work with PCHs to monitor the 
data reported and for feedback on opportunities to improve the quality 
of the data or data collection and reporting processes.
    Comment: A few commenters recommended minimizing burden including 
standardizing data collection and validation, revising the measure to 
not burden patients with repeated requests for information within a 
single hospital stay, and allowing for use of prior screening 
information to satisfy the measure.
    Response: We recognize the concerns about burden of participating 
in the

[[Page 59217]]

PCHQR Program and have aligned PCHQR Program measures with the Hospital 
IQR Program as appropriate. While we understand implementation of HRSN 
screening processes and reporting of the Social Drivers of Health 
measures is associated with some burden, as discussed in sections VI.B. 
and VII.A of this final rule, we believe the benefits outweigh the 
burden as screening for and identifying patients' HRSNs is a critical 
step towards treating the whole patient, improving clinical outcomes, 
and eliminating health disparities. We also note that hospitals 
participating in the Hospital IQR Program will have already reported 
data on this measure before the reporting of the Screening for Social 
Drivers of Health measure for the PCHQR Program begins, so we believe 
PCHs will have the opportunity to learn from the experiences of 
hospitals including processes for data collection.
    Comment: A commenter recommended that CMS provide hospitals with 
additional flexibility to incorporate the patient screening for health-
related social needs at the most appropriate care location, whether in 
inpatient hospital, outpatient, or physician office locations. Another 
commenter recommended technical assistance and funding pathways to 
support connecting patients to services. Another commenter recommended 
CMS provide financial support for connecting with community resources.
    Response: While PCHs must meet the reporting requirements of the 
Screening for Social Drivers of Health measure for purposes of the 
PCHQR Program, we encourage PCHs to use the screening as a basis for 
developing their own individual action plans that could include 
additional settings other than the inpatient setting. For additional 
information on how to apply and report these screenings, we refer 
readers to the Hospital IQR Program's Frequently Asked Questions 
document regarding this measure in the Hospital IQR Program, available 
at: https://www.qualityreportingcenter.com/globalassets/2023/04/iqr/
sdoh-measure_faqs_vfinal_04012023508.pdf. We will develop a similar 
Frequently Asked Questions document for PCHs as part of providing 
educational and training materials; this document will be conveyed 
through routine communication channels to hospitals, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet website. Regarding the comment about financial support, 
it is not available through the PCHQR Program. However, the intent of 
the two Social Drivers of Health measures is to promote adoption of 
screening patients for HRSNs by healthcare providers as well as taking 
action to connect patients who identify one or more HRSNs with 
available resources. Evaluation of the AHC Model concluded that 
universal screening may identify needs that would otherwise remain 
undetected.\739\ While broad availability of community-based resources 
that address patients' health-related social needs would be ideal, we 
believe that one of the benefits of collecting data from screening for 
HRSNs will be identification of opportunities to enable meaningful 
action, including prioritizing and investing in such resources. 
Beginning to collect the data on patients' HRSNs remains imperative and 
a crucial step in developing resources for advancing health equity. 
Such data collection has already allowed some entities to reallocate 
resources to address particular HRSNs that disproportionately affect a 
given patient population or geographic region, as noted in the FY 2023 
IPPS/LTCH PPS final rule, in which the Hospital IQR Program adopted 
these measures (87 FR 49213).
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    \739\ RTI International. (2020) Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
---------------------------------------------------------------------------

    Comment: A commenter recommended analyzing lessons learned from the 
Hospital IQR Program to inform best practices and to identify pitfalls 
for the implementation of health equity measures.
    Response: We appreciate the recommendation and note that hospitals 
participating in the Hospital IQR Program will have already reported 
data on this measure before the reporting of the Screening for Social 
Drivers of Health measure for the PCHQR Program begins allowing PCHs 
the opportunity to learn from the experiences of hospitals when 
hospital data are publicly reported.
    Comment: A commenter recommended CMS revisit the topic as more 
sophisticated measures are developed to assess action by providers to 
address identified social needs.
    Response: We believe this measure to be a building block that lays 
the groundwork for a more comprehensive suite of measures that could 
assess progress in providing high-quality healthcare for all patients 
regardless of social risk factors or demographic characteristics. This 
more comprehensive suite of measures could eventually include health 
equity related outcome measures.
    Comment: A commenter supported the inclusion of this measure if 
sufficient time is allowed before implementation to develop the 
supporting infrastructure to train staff, develop documentation, and 
refine reporting.
    Response: Given the urgency of achieving health equity, we believe 
it is important to implement this measure as soon as possible while 
balancing PCHs' need for sufficient time to implement screening and 
data collection processes if not already implemented, which is why we 
proposed to adopt the measure beginning with voluntary reporting in the 
FY 2026 program year and mandatory reporting beginning with the FY 2027 
program year.
    Comment: A commenter expressed several concerns with the lack of 
alignment with other similar measures such as NCQA's Social Need 
Screening and Intervention measure proposed for adoption in HEDIS and 
the Screening for Social Drivers of Health and Screen Positive Rate for 
Social Drivers of Health measures under review for the Medicaid Core 
Set workgroup's annual review believing the misalignment will cause 
confusion and waste resources. This commenter recommended that the 
Screening for Social Drivers of Health measure and the Screen Positive 
Rate for Social Drivers of Health measure align with the Gravity 
Project's standards to lessen burden on patients and reduce missing 
data, and because the standards use interoperable data and are risk 
adjusted. This commenter also recommended CMS leverage interoperability 
requirements and other ways to connect with a person's record from 
their primary care provider to retrieve information. This commenter 
recommended CMS work with Core Quality Measures Collaborative (CQMC) 
and NCQA to harmonize the specifications of these measures through a 
multistakeholder process, such as the CBE endorsement process.
    Response: The current Screening for Social Drivers of Health and 
Screen Positive Rate for Social Drivers of Health measures mirror the 
core domains of NCQA by including food insecurity, housing insecurity, 
and transportation insecurity. We commend additional stakeholder 
efforts currently underway to expand capabilities to capture drivers of 
health data elements using health IT standards, including the Gravity 
Project, a public-private collaborative focused on standard development 
for the collection, use, and exchange of data to address social 
determinants of health, referenced by a commenter. We have prioritized 
the five HRSN domains in the Screening for Social Drivers of Health 
measure based on existing evidence from the AHC

[[Page 59218]]

Model including recommendations from a Technical Expert Panel that 
informed the initial selection. We note that the five domains covered 
by the Screening for Social Drivers of Health measure are included 
within the ``social risk domains'' of the Gravity Project. We also note 
ongoing reevaluation efforts that aim to improve the Screening for 
Social Drivers of Health and Screen Positive Rate for Social Drivers of 
Health measures through the development of the Addressing Social Needs 
(ASN) electronic clinical quality measure (eCQM). We support 
harmonization of social risk factor data for interoperable electronic 
health information exchange and encourage use of tools that can enable 
interoperable exchange of this data. In addition, adoption of the 
Screening for Social Drivers of Health and Screen Positive Rate for 
Social Drivers of Health measures for the PCHQR Program aligns with 
other quality reporting and value-based purchasing programs; 
specifically, the Hospital IQR Program and the Merit-based Incentive 
Payment System (87 FR 70055) as well as the same measure proposals for 
the Inpatient Psychiatric Facility Quality Reporting Program in the FY 
2024 IPF PPS proposed rule (88 FR 21280) and the End-Stage Renal 
Disease (ESRD) Quality Incentive Program in the CY 2024 ESRD PPS 
proposed rule (88 FR 42515). We appreciate commenter concern about the 
potential for misalignment with NCQA's Social Need Screening and 
Intervention measure proposed for adoption in HEDIS and for Social 
Drivers of Health measures that could be included in the Medicaid Core 
Set; however, we wish to reiterate that our approach to developing 
health equity measures is incremental and will evolve over time to 
capture health equity outcomes in the PCHQR Program and we will 
continue to look for ways to minimize provider reporting burden. While 
we recognize the value of measures undergoing CBE endorsement review, 
given the urgency of achieving health equity, we believe it is 
important to implement this measure in the PCH setting as soon as 
possible.
    Comment: A commenter recommended implementation of health equity 
measures over a longer period of time to ensure resources support 
patient outcomes and do not erode consumer trust.
    Response: We believe that adopting the Screening for Social Drivers 
of Health measure beginning with voluntary reporting for the FY 2026 
program year and mandatory reporting beginning with the FY 2027 program 
year will allow PCHs to have the time needed to prepare to collect 
these data if not already doing so and to identify community partners 
for connecting individuals to resources in their communities. However, 
we will continue to monitor implementation and consider feedback.
    Comment: A commenter recommended the Screening for Social Drivers 
of Health and Screen Positive Rate for Social Drivers of Health 
measures be implemented consistently and allow fair comparisons across 
providers and regions citing concerns with resource differences between 
hospitals and the potential for inaccurate or biased results for 
indicators that may have small denominators.
    Response: The Screening for Social Drivers of Health and Screen 
Positive Rate for Social Drivers of Health measures support the 
identification of specific risk factors for inadequate healthcare 
access and adverse health outcomes among patients. The Screening for 
Social Drivers of Health measure supports data collection for PCHs to 
inform more meaningful and sustainable solutions for closing equity 
gaps among the communities they serve. The Screen Positive Rate for 
Social Drivers of Health measure is intended to provide information to 
PCHs on the level of unmet need among their patients and potentially in 
the community while providing an opportunity to compare PCHs and to 
promote higher levels of screening. We believe public reporting of 
healthcare quality data promotes transparency in the delivery of care 
by increasing the involvement of leadership in healthcare quality 
improvement, creating a sense of accountability, helping to focus 
organizational priorities, and providing a means of delivering 
important healthcare information to consumers and patient advocates. To 
support patient and patient understanding and to minimize confusion, we 
intend to conduct outreach and education with providers and patients to 
share information about the two Social Drivers of Health measures in 
conjunction with public reporting.
    Comment: A commenter recommended CMS ensure social needs screenings 
are done in a respectful and person-centered way that build trust 
consumers on why hospitals are collecting these data, how it will be 
used, how it will not be used, and how it will be protected.
    Response: We agree with the commenter that it is important for the 
screening for HRSNs to be accomplished in a way that is respectful, 
person-centered, and engenders trust. We recommend that PCHs evaluate 
the requirements for administration (such as whether the screening 
instrument can be administered by peer support specialists) as part of 
their instrument selection process. We note that the AHC instrument 
described in this section of the preamble of the final rule allows 
administration by clinicians and staff \740\ and would allow 
administration by peer support specialists. We note that the data 
produced by these screenings are considered protected health 
information and are therefore covered by the HIPAA Privacy Rule. 
Therefore, PCHs are responsible for adopting reasonable safeguards to 
ensure that these data are not disclosed. We defer to PCHs to make the 
appropriate disclosures to their patients regarding how the collected 
data are used as well as ensuring that the patient and their 
caregiver(s) are informed of their option to opt-out of screening.
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    \740\ https://nam.edu/standardized-screening-for-health-related-social-needs-in-clinical-settings-the-accountable-health-communities-screening-tool/.
---------------------------------------------------------------------------

    Comment: A commenter recommended that CMS address the technical 
challenges of this measure including working with ONC to standardize 
documentation across EHRs and add the capability to screen for social 
needs and document the results to the ONC Health IT Certification 
Program.
    Response: We recognize that there are multiple sources for HRSN 
data that could be incorporated into a tool, such as administrative 
claims data, electronic clinical data, standardized patient 
assessments, patient-reported data and surveys, and multiple publicly 
available screening tools. We also recognize that this could present 
some technical challenges for PCHs. We encourage PCHs to implement 
digital standardized screening tools which conform to health IT 
vocabulary standards that enable interoperability of this data across 
systems. We note that the use of certified health IT can support the 
capture and exchange of HRSN information in an interoperable fashion so 
that these data can be shared across the care continuum to support 
coordinated care, for instance, through use of standards for SDOH 
Assessment data identified as part of the United States Core Data for 
Interoperability.\741\
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    \741\ https://www.healthit.gov/isa/united-states-core-data-interoperability-uscdi.
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    Comment: A commenter expressed its belief that the measure is vague 
and recommended it be submitted for review and endorsement by a CBE to 
ensure feasibility and scientific acceptability.
    Response: The two Social Drivers of Health measures are derived 
from

[[Page 59219]]

existing evidence from both the AHC Model \742\ and emerging evidence 
of correlations between the designated drivers of health and higher 
healthcare utilization of emergency departments and hospitals, worse 
health outcomes and/or drivers of health for which interventions have 
shown marked improvements in health outcomes and health care 
utilization. We disagree with the characterization of the measure as 
vague and refer to the measure specifications available at: https://cmit.cms.gov/cmit/#/. While we recognize the value of measures 
undergoing CBE endorsement review, given the urgency of achieving 
health equity, we believe it is important to implement this measure as 
soon as possible while balancing PCHs' need for sufficient time to 
implement screening and data collection processes if not already 
implemented, which is why we proposed to adopt the measure beginning 
with voluntary reporting in the FY 2026 program year and mandatory 
reporting beginning with the FY 2027 program year. We note that under 
section 1886(s)(4)(D)(ii) 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(s)(4)(D)(ii) of the Act applies.
---------------------------------------------------------------------------

    \742\ RTI International. (2020) Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
---------------------------------------------------------------------------

    Comment: A commenter recommended that the initiation of public 
display be contingent upon verification of accuracy of data reported.
    Response: We believe that adopting the Screening for Social Drivers 
of Health measure beginning with voluntary reporting for the FY 2026 
program year and mandatory reporting beginning with the FY 2027 program 
year and displaying the data publicly beginning July 2027 or as soon as 
feasible thereafter would allow PCHs the opportunity to review the 
accuracy of their data prior to public display.
    After consideration of the public comments we received, we are 
finalizing this measure.
5. Adoption of the Screen Positive Rate for Social Drivers of Health 
Beginning With Voluntary Reporting for the FY 2026 Program Year and 
Mandatory Reporting Beginning With the FY 2027 Program Year
a. Background
    The impact of social risk factors on health outcomes has been well-
established in the literature.743 744 745 746 747 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.\748\ 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.749 750 751 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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    \743\ 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.
    \744\ 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.
    \745\ 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.
    \746\ 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.
    \747\ 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.
    \748\ 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.
    \749\ 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.
    \750\ 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.
    \751\ 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 final 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.752 753 754 The Screen Positive Rate for 
Social Drivers of Health measure will 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).
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    \752\ 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.
    \753\ 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.
    \754\ 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 will 
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).\755\ We refer 
readers to

[[Page 59220]]

the discussion of the identification process resulting in the selection 
of these five domains in section IX.D.4. of the preamble of this final 
rule.
---------------------------------------------------------------------------

    \755\ 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.
---------------------------------------------------------------------------

    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.756 757 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.\758\ 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 planning.759 760 761 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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    \756\ 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.
    \757\ 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.
    \758\ RTI International. (2020) Accountable Health Communities 
(AHC) Model Evaluation. Available at: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
    \759\ 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.
    \760\ 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.
    \761\ 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 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.\762\
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    \762\ 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 will 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.'' \763\ Under CMS' Meaningful 
Measures Framework, the Screen Positive Rate for Social Drivers of 
Health measure will address the quality priority of ``Work with 
Communities to Promote Best Practices of Healthy Living'' through the 
Meaningful Measures Area of ``Equity of Care.'' \764\ Development of 
this measure also aligns with our strategic pillar to advance health 
equity by addressing the health disparities that underlie our health 
system.\765\
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    \763\ 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.
    \764\ 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.
    \765\ 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 could benefit from connection via the PCH to targeted community-
based services.\766\ The measure will 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 will 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.
---------------------------------------------------------------------------

    \766\ 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 provides 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 consists 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 consists 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 will be excluded from the

[[Page 59221]]

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 will 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
    In the proposed rule, we proposed to require PCHs 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 for the FY 
2026 program year and mandatory reporting beginning with the FY 2027 
program year. PCHs will follow the established submission and reporting 
requirements for web-based measures for the PCHQR Program posted on the 
QualityNet website.
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.\767\ 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.\768\ 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.\769\ 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).\770\ 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.\771\
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    \767\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \768\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \769\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \770\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \771\ 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 could 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
    In the proposed rule, we proposed 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 the preamble of 
this final rule for the public display requirements.
    We invited public comment on this proposal.
    We note that we have addressed comments that broadly referred to 
both the Screening for Social Drivers of Health measure and the Screen 
Positive Rate for Social Drivers of Health measure in the previous 
section IX.D.4. of this final rule.
    Comment: Many commenters expressed support for the measure to 
advance health equity. A few commenters expressed support for the 
measure as an important step in addressing equity through quality 
measurement. A commenter expressed support for the measure believing it 
will focus attention and resources on patient needs, address a 
measurement gap in CMS quality programs for hospitals, and help inform 
more comprehensive care and discharge planning. A commenter expressed 
support for the measure believing it is a positive first step toward 
considering and tracking SDOH.
    Response: We thank the commenters for their support.
    Comment: A few commenters expressed concern with how the results of 
the Screen Positive Rate for Social Drivers of Health measure would be 
communicated and displayed believing the results could be misunderstood 
by consumers.
    Response: We appreciate the commenters' concerns. As we discussed 
previously, the measure provides a means of delivering important

[[Page 59222]]

healthcare information to consumers and patient advocates on the level 
of unmet need among PCH patients and potentially in the community, and 
not for comparison between PCHs. We believe public reporting of 
healthcare quality data promotes transparency in the delivery of care 
by increasing the involvement of leadership in healthcare quality 
improvement, creating a sense of accountability, helping to focus 
organizational priorities, and providing a means of delivering 
important healthcare information to consumers and patient advocates. We 
intend to conduct outreach and education with providers and patients to 
share information about the two Social Drivers of Health measures in 
conjunction with public reporting.
    After consideration of the public comments we received, we are 
finalizing this measure.
6. Adoption of 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.\772\ One study 
found that Americans report having a serious illness conversation with 
their clinician only 11 percent of the time.\773\ 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.\774\
---------------------------------------------------------------------------

    \772\ 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.
    \773\ Hamel, Liz, et al. Views and Experiences with End-of-Life 
Medical Care in the U.S. 2017.
    \774\ 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.
---------------------------------------------------------------------------

    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.\775\ Care 
inconsistent with preferences is associated with a lower quality of 
care and higher medical costs.\776\
---------------------------------------------------------------------------

    \775\ 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.
    \776\ 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.
---------------------------------------------------------------------------

    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.\777\ 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.
---------------------------------------------------------------------------

    \777\ American Society of Clinical Oncology Quality Oncology 
Practice Initiative: Quality Clinical Data Registry Measures. 2014. 
https://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.
---------------------------------------------------------------------------

    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: \778\
---------------------------------------------------------------------------

    \778\ Alliance of Dedicated Cancer Centers. Improving Goal 
Concordant Care Initiative Implementation Planning Guide. September 
2020.
---------------------------------------------------------------------------

     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 assesses goals of care discussion documentation among 
patients with cancer who die while receiving care at the reporting PCH. 
On an annual basis, PCHs will 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 focuses 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 requires 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

[[Page 59223]]

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 is the number of patients meeting the criteria for 
inclusion in the measure's population in the reporting period.
(3) Numerator
    The numerator is 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 will require any 
documentation in one or more patient goals fields. To meet the 
requirements for inclusion in the numerator, the documentation in the 
EHR will 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
    In the proposed rule, we proposed to require PCHs 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 will follow the 
submission and reporting requirements for web-based measures for the 
PCHQR Program posted on the QualityNet website.
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.\779\ 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.\780\ 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).\781\ 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.\782\
---------------------------------------------------------------------------

    \779\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \780\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \781\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \782\ Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
---------------------------------------------------------------------------

    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
    In the proposed rule, we proposed 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 
the preamble of this final rule for the public display requirements.
    We invited public comment on this proposal.
    Comment: Several commenters expressed support for the Documentation 
of Goals of Care Discussions Among Cancer Patients measure. A commenter 
believed the measure is an initial step toward person-centered cancer 
care. Another commenter supported the measure because it supports 
delivering concordant care to cancer patients, particularly for 
coordination with primary care settings in rural communities. A few 
commenters expressed support for future public display.
    Response: We appreciate commenters' support for the Documentation 
of Goals of Care Discussions Among Cancer Patients measure. We agree 
that this measure is an important step in alignment with our commitment 
to person centered care. We also agree that public display is an 
important part of quality improvement in cancer care.
    Comment: A few commenters recommended CMS consider replacing the 
measure with a process or outcomes measure at a future point. A 
commenter recommended that occupational therapists should be added to 
the list of professionals who gather measure data citing their 
expertise gathering patient information and guiding patients through 
care planning. Another commenter recommended the measure should not 
include advance care

[[Page 59224]]

planning because it has not yet proven to have significant impact on 
end-of-life care.
    Response: We thank the commenters for their recommendations. We 
will consider the potential role for occupational therapists in future 
rulemaking. We note the commenter's concern about including advance 
care planning in the Documentation of Goals of Care Discussions Among 
Cancer Patients measure and will continue to work with PCHs for 
opportunities to improve the quality of data in the PCHQR Program.
    Comment: Another commenter recommended delaying public reporting at 
least one year to allow verification of data accuracy.
    Response: We appreciate the commenter's recommendation; however, we 
believe that adopting the Documentation of Goals of Care Discussions 
Among Cancer Patients measure beginning with the FY 2026 program year 
and publicly displaying PCH-specific results in July 2026 or as soon as 
feasible thereafter would provide the time needed for PCHs to review 
data for accuracy. We refer readers to Table IX.D.-04 for previously 
finalized and newly finalized public display requirements.
    After consideration of the public comments we received, we are 
finalizing this measure.
7. Summary of Previously Adopted and New PCHQR Program Measures for the 
FY 2026 Program Year and Subsequent Years
    For ease of reference, Table IX.D.-03 summarizes the previously 
adopted and the newly finalized measures for the PCHQR Program measures 
for the FY 2026 program year and subsequent years.

[[Page 59225]]

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[[Page 59226]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.300

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 did not propose 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 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 did not propose any changes to our previously finalized 
public display requirements.
b. 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 proposed 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 will make these data publicly available following 
a 30-day period in which PCHs would have an opportunity to review the 
data. We will announce the exact timeframe on a CMS website and our 
applicable listservs.
    We invited public comment on the proposal.
    Comment: Many commenters expressed support for the public reporting 
of the Surgical Treatment Complications for Localized Prostate Cancer 
measure. A commenter expressed support believing the two years of 
confidential data reporting prior to public display ensures data 
accuracy. Another commenter believed it is an important factor for 
patient choice of providers.
    Response: We thank the commenters for their support. We agree that 
two years of confidential data reporting prior to public reporting 
gives sufficient time ensure data accuracy. We also agree that publicly 
reporting this data will provide beneficiaries with important 
information when considering choice of providers.
    Comment: Another commenter expressed its belief that information 
gathered from the PCH-37 measure should be made available to the 
public; however, the commenter also expressed concerns with how the 
data for the PCHQR Program are displayed to patients believing it is 
difficult to find data that would help a patient identify a provider or 
facility that would meet their specific needs. This commenter 
recommended that the data should be made easier to find, understandable 
by patients at all levels of health literacy, and include a variety of 
elements related to patient care such as proximity to home, cultural 
competency of the

[[Page 59227]]

healthcare facility, quality of services, and communication protocols.
    Response: We strive to ensure all publicly reported data are 
reported both accurately and in a way that can be accessed by all our 
beneficiaries. We thank the commenter for the suggestion and intend to 
review for opportunities to increase useability of the data.
    After consideration of the public comments we received, we are 
finalizing this policy.
c. Summary of Previously Finalized and Newly Finalized Public Display 
Requirements for the PCHQR Program
    Our previously finalized and newly finalized public display 
requirements for the PCHQR Program measures are shown in the following 
Table IX.D.-04:

[[Page 59228]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.301


[[Page 59229]]


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. 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 
#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.\783\ 
Hospitals must survey patients throughout each month of the year.\784\ 
The HCAHPS Survey is available in official English, Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic versions.
---------------------------------------------------------------------------

    \783\ HHS: HCAHPS: Patients' Perspectives of Care Survey, 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \784\ 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. A CBE first endorsed 
the HCAHPS Survey in 2005,\785\ and re-endorsed the measure in 2010, 
2015, and 2019.\786\
---------------------------------------------------------------------------

    \785\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalHCAHPS.
    \786\ 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 did not 
propose changes to the HCAHPS Survey's content.
(2) Addition of Three New Modes of Survey Implementation
    We proposed 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 noted that the 2021 HCAHPS mode experiment 
added an initial web component to three current HCAHPS modes of survey

[[Page 59230]]

administration resulting 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, 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 invited public comment on this proposed update.
    Comment: A commenter expressed support for proposed changes to the 
administration of HCAHPS.
    Response: We thank the commenter for their support.
    Comment: Several commenters supported the additional survey 
administration modes believing the changes reflect current 
communication preferences, will increase response rates, and increase 
patient satisfaction with the survey. A commenter expressed its belief 
that the expanded internet methods would increase the response rates 
overall and among younger, Spanish-language preferring, racial and 
ethnic minority, and maternity care patients. Another commenter 
believed the addition of the new modes would meaningfully aid in 
streamlining the data procurement and analysis process, substantially 
reduce data entry errors, enhance data security, and be cost effective.
    Response: We thank the commenters for their support and agree that 
the addition of these three new modes of survey implementation will 
likely increase response rates for all patient populations. We also 
agree that these new modes of survey implementation have the potential 
to reduce the data collection and management burden while reducing 
survey administration costs in the long run. We will send a second and 
third email invitation in the Web-Mail and Web-Phone modes, and a 
second email invitation in the Web-Mail-Phone mode, to patients who did 
not respond to earlier email invitations. We note that procedures for 
survey administration will be clearly defined in the HCAHPS Quality 
Assurance Guidelines for all survey administration modes.
    After consideration of the public comments we received, we are 
finalizing this policy.
(3) 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 proposed 
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 will, however, still encourage 
patients to respond to the survey rather than proxies.
    We invited public comment on this proposed update.
    Comment: Several commenters expressed support for the allowance of 
proxies believing it will increase response rates among certain hard to 
reach groups, provide valuable insight into care improvement, and that 
the risk of a proxy's response not being reflective of a patient's 
experience is outweighed by the need to attempt to capture the 
experiences of vulnerable patient populations. A commenter expressed 
support believing that proxy completion is critical to older patients 
with serious illness.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing this policy.
(4) 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 therefore 
proposed to extend the data collection period for the HCAHPS Survey 
from 42 to 49 days, beginning with January 2025 discharge.
    We invited public comment on the proposed change in the length of 
the data collection period.
    Comment: A few commenters expressed support for the extension of 
the data collection period believing it will improve accessibility; 
increase engagement with disadvantaged groups and patients, including 
individuals recovering from an injury or illness; and allow for a more 
robust data set.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing this policy.
(5) 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 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.\787\ This is particularly

[[Page 59231]]

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.
---------------------------------------------------------------------------

    \787\ 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 invited public comment on our proposal to limit the number of 
supplemental items. We also welcomed suggestions for alternative limits 
below 12 supplemental items.
    Comment: A few commenters expressed support for the proposed limit 
on the number of supplemental HCAHPS Survey items preferring shorter 
surveys.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing this policy.
(6) 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 to accommodate patient 
populations.\788\ 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 
proposed 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.
---------------------------------------------------------------------------

    \788\ HCAHPS Quality Assurance Guidelines V18.0. https://www.hcahpsonline.org/en/quality-assurance/.
---------------------------------------------------------------------------

    We invited public comment on the proposed requirement to administer 
the survey in Spanish. We also welcomed suggestions for additional 
translations beyond the existing translations in Spanish, Chinese, 
Russian, Vietnamese, Portuguese, German, Tagalog, and Arabic.
    Comment: A few commenters expressed support believing the 
requirement will improve accessibility and engagement with patients and 
lead to better collection of preferred language at admission.
    Response: We thank the commenters for their support.
    Comment: A few commenters made recommendations including that CMS 
expand the list of approved languages to include Haitian Creole and 
that CMS use the data from hospitals tracking languages spoken to make 
additional official translations available or mandated.
    Response: We thank the commenters for their recommendations 
regarding future translations of HCAHPS and further validation of 
existing translated versions and we will take these recommendations 
into consideration for future program years.
    Comment: A commenter expressed support for the proposal, but also 
expressed its belief that the proposal would require a patient that is 
a Spanish speaker to be provided the official CMS Spanish translation 
of the HCAHPS Survey and recommended the patient should be given the 
option of both versions.
    Response: We appreciate the commenter's support. We would also 
clarify that the proposal would not require that a Spanish speaker be 
provided the Spanish language version of the HCAHPS survey, but instead 
that the Spanish language version would be offered to patients who 
identify as Spanish-preferred, not all Spanish-speaking patients.
    After consideration of the public comments we received, we are 
finalizing this policy.
(7) Removal of an Administration Method
    We proposed 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. To 
streamline HCAHPS oversight and training, we proposed to discontinue 
IVR as an approved mode of survey administration beginning in January 
2025. With the addition of three new web-based modes in January 2025, 
PCHs will 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, we encouraged 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.
    Comment: Several commenters expressed support for the removal of an 
administration method that has not been used by hospitals.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing this policy.
(8) Data Collection
    The HCAHPS Survey will be administered and data collected in 
exactly the same manner as the current HCAHPS Survey, except for the 
changes described in this section of the preamble of this final rule. 
There will 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 invited public comments on these proposals.
    Comment: A commenter expressed support for the update to data 
collection.
    Response: We thank the commenter for their support.
    After consideration of the public comments we received, we are 
finalizing this policy.
(9) Public Reporting
    The scoring of the updated HCAHPS Survey will be the same as the 
current HCAHPS Survey. Detailed information on how the measure will be 
scored for purposes of public reporting can be found on the HCAHPS 
website at: https://hcahpsonline.org/en/hcahps-star-ratings/.
    We invited public comments on these proposals.

[[Page 59232]]

    We did not receive any public comments on this topic; therefore, we 
are finalizing this policy.
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 did 
not propose 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 the proposed rule, we proposed to modify one measure in the LTCH 
QRP as described in section IX.E. of the preamble of this final rule. 
Second, we proposed to adopt two new measures, and remove two existing 
measures. Third, we sought information on principles CMS could use to 
select and prioritize LTCH QRP quality measures in future years. 
Fourth, we provided an update on our efforts to close the health equity 
gap. Fifth, we proposed to change the LTCH QRP data completion 
thresholds. Finally, we proposed to begin public reporting of four 
measures.
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 59233]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.302

4. Overview of LTCH QRP Quality Measures
    In the proposed rule, we included LTCH QRP proposals for FY 2025 
and FY 2026 LTCH QRP. Beginning with the FY 2025 LTCH QRP, we proposed 
to (1) modify the COVID-19 Vaccination Coverage among Healthcare 
Personnel (HCP) measure; (2) adopt the Discharge Function Score,\789\ 
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.
---------------------------------------------------------------------------

    \789\ 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 proposed 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. 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,\790\ vaccination is 
a critical part of the Nation's strategy to effectively counter the 
spread of COVID-19. While the PHE status ended on May 11, 2023,\791\ 
HHS has 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.\792\ We 
continue to

[[Page 59234]]

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 proposed 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.
---------------------------------------------------------------------------

    \790\ 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.
    \791\ https://www.whitehouse.gov/wp-content/uploads/2023/01/SAP-H.R.-382-H.J.-Res.-7.pdf.
    \792\ 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.
---------------------------------------------------------------------------

    The full proposal can be found in section IX.B. of this final rule. 
We invited public comment on our proposal to modify the HCP COVID-19 
Vaccine measure, beginning with the FY 2025 LTCH QRP. A summary of the 
comments we received on our proposal to modify the COVID-19 Vaccination 
Coverage among Healthcare Personnel (HCP) measure beginning with the FY 
2025 LTCH QRP and our responses can be found in section IX.B. of this 
final rule.
b. 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.\793\ 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.\794\ 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.795 796
---------------------------------------------------------------------------

    \793\ 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.
    \794\ 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.
    \795\ 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.
    \796\ 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 
proposed to remove it in section IX.E.4.c of the proposed rule. While 
there is an additional outcome measure addressing functional status 
\797\ 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.
---------------------------------------------------------------------------

    \797\ 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.\798\ 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.799 800 801 
Nonetheless, 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,802 803 804 805 rehospitalization 
rates,806 807 808

[[Page 59235]]

discharge to community,809 810 and falls.\811\
---------------------------------------------------------------------------

    \798\ 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.
    \799\ 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.
    \800\ 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.
    \801\ 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.
    \802\ 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.
    \803\ 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.
    \804\ 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.
    \805\ 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.
    \806\ 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.
    \807\ 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.
    \808\ 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.
    \809\ 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.
    \810\ 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.
    \811\ 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.
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    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.812 813 814 815 816 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,817 818 819 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.820 821
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    \812\ 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.
    \813\ 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.
    \814\ 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.
    \815\ 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.
    \816\ 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.
    \817\ 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.
    \818\ 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.
    \819\ 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.
    \820\ 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.
    \821\ 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.
---------------------------------------------------------------------------

    We proposed to adopt the Discharge Function Score (DC Function) 
measure \822\ 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 proposed to 
remove in section IX.E.4.c. of the preamble of the proposed rule the 
proposed measure would be calculated using standardized patient 
assessment data from the current LTCH assessment tool, the Long-Term 
Care Hospital (LTCH) Continuity Assessment Record and Evaluation (CARE) 
Data Set (LCDS).
---------------------------------------------------------------------------

    \822\ 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.\823\ 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 
the proposed rule). Unlike the existing functional outcomes measures, 
the 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.
---------------------------------------------------------------------------

    \823\ Meaningful Measures 2.0 can be found at https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
---------------------------------------------------------------------------

    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.\824\ Specifically, the measure 
(1) considers two dimensions of function \825\ (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

[[Page 59236]]

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.
---------------------------------------------------------------------------

    \824\ 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).
    \825\ 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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(b) 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 the 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] TR28AU23.303

    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.\826\ 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 the 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.
---------------------------------------------------------------------------

    \826\ ``Expected functional capabilities'' is defined as the 
predicted discharge function score.
---------------------------------------------------------------------------

    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 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.\827\
---------------------------------------------------------------------------

    \827\ 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.
---------------------------------------------------------------------------

(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.

[[Page 59237]]

    Therefore, after consideration of other available measures, we 
found that the exception under section 1899B(e)(2)(B) of the Act 
applies and proposed to adopt 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 TEP) \828\ and Technical 
Expert Panel (TEP) for Cross-Setting Function Measure Development 
Summary Report (January 2022 TEP) \829\ are available on the CMS 
Measures Management System (MMS) Hub.
---------------------------------------------------------------------------

    \828\ 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.
    \829\ 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.
---------------------------------------------------------------------------

    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.\830\ 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

[[Page 59238]]

convened MAP workgroups 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.
---------------------------------------------------------------------------

    \830\ 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.
---------------------------------------------------------------------------

    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 the 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. A 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 
patient 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 patient 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,\831\ for 
more information.
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    \831\ 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 
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.\832\
---------------------------------------------------------------------------

    \832\ 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 the 
proposed DC Function measure's statistical imputation allows missing 
values (for example, the ANA codes) to be replaced

[[Page 59239]]

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 
\833\ for measure specifications and additional details.
---------------------------------------------------------------------------

    \833\ 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 invited public comment on our proposal to adopt the DC Function 
measure beginning with the FY 2025 LTCH QRP. The following is a summary 
of the comments we received on our proposal to adopt the DC Function 
measure, beginning with the FY 2025 LTCH QRP, and our responses.
    Comment: Several commenters provided support for the DC Function 
measure. A commenter supported the proposed adoption of the DC Function 
measure, noting its importance as a patient-centered measure; however, 
this commenter strongly encouraged CMS to submit the measure for CBE 
endorsement.
    Response: We thank the commenters for their support of the proposed 
measure. We intend to submit the proposed measure to the CBE for 
consideration of endorsement when feasible.
    Comment: A commenter preferred separate quality measures for self-
care and mobility to ensure each setting is able to capture the items 
most relevant to its patient population needs and goals and use the 
measures to determine meaningful quality improvement activities. 
However, this commenter stated that if CMS uses one measure, then they 
would support the proposed measure since it does capture both self-care 
and mobility items, but encouraged the review and refinement of the 
measure as needed.
    Response: We thank the commenter for their support and agree with 
the importance of capturing both self-care and mobility items in the 
proposed measure as well as capturing each dimension of function in 
separate measures, one of which is reflected in the Change in Mobility 
Score for Ventilator Patients measure in the LTCH QRP. As with all 
other measures, we will routinely monitor this measure to ensure the 
measure maintains strong scientific acceptability and utility to ensure 
it captures the relevant patient population needs and goals.
    Comment: Several commenters opposed the proposed DC Function 
measure stating LTCH patients' capabilities and goals differ from other 
post-acute care settings, making this measure inappropriate for LTCHs. 
Two of these commenters explained that improved function upon discharge 
is not the primary goal of critically ill LTCH patients. One of these 
two commenters expanded that the functional improvements LTCH patients 
likely experience would not be visible in the DC Function measure, and 
they are concerned with using the DC Function measure to assess quality 
or using it in public reporting since measure scores between LTCHs and 
other PAC settings may be inappropriately compared. Finally, another 
commenter believed that to see LTCH patients' progression reflected in 
the proposed measure, LTCHs would be required to keep patients longer, 
causing financial burden for potential unpaid days.
    Response: We acknowledge that different patient populations are 
served across the PAC settings, including LTCHs, and the capabilities 
and goals of these populations differ. However, measuring function is 
important in all PAC settings and is appropriate for LTCHs. The PFAs we 
engaged in the development of the DC Function measure supported this 
measure's concept. We also understand that for many people, the overall 
goals of LTCH care may include maintaining functional abilities and 
avoiding institutionalization in addition to optimizing functional 
improvement and returning to a previous level of independence. We 
acknowledge that significant improvement may not be attainable in very 
low or high acuity patients. Because we recognized these cases, the 
proposed measure assesses whether a patient met or exceeded their 
expected discharge score and thus accounts for patients who are not 
expected to improve during their LTCH stay. For each stay included in 
the measure calculations, the observed function score is compared to 
the expected discharge score, which is adjusted to account for clinical 
characteristics, admission functional status, and demographic 
characteristics of the patient. Risk adjustment creates an 
individualized expectation for discharge function score for each stay 
that controls for these factors and ensures that each stay is measured 
against an expectation that is calibrated to the patient's individual 
circumstances when determining the numerator for each discharge 
function score.
    Because LTCHs determine when a patient is ready for discharge, 
keeping in mind the patient's health and safety, and are responsible to 
have an effective discharge planning process that is consistent with 
the patient's goals for care \834\ they coordinate the appropriate 
transition plan. Also, to clarify that cross-setting measures do not 
necessarily suggest that facilities can and should be compared across 
settings. Instead, these measures are intended to compare providers 
within a specific setting while standardizing measure specifications 
across settings. The proposed measure does just this, by aligning 
measure specifications across settings and using a common set of 
standardized functional assessment data elements.
---------------------------------------------------------------------------

    \834\ Section 482.43, Condition of participation: Discharge 
planning.
---------------------------------------------------------------------------

    Comment: A commenter believed the Discharge to Community measure 
captures LTCH patient outcomes better than the DC Function measure.
    Response: This commenter did not elaborate on why they believe the 
Discharge to Community (DTC) measure captures patient outcomes better, 
so we cannot address their point. However, we agree the DTC measure is 
an important measure for capturing LTCH patient outcomes. The DTC and 
DC Function measures have a correlation of 0.45, demonstrating that the 
proposed measure and the DTC measure each capture different aspects of 
care, with the proposed measure capturing functional status at 
discharge and the DTC measure capturing the successful discharge to the 
community after an LTCH stay. As such, each measure provides different 
insight into the quality of patient care and therefore, adds a 
different value to the LTCH QRP measure set.
    Comment: Three commenters opposed the proposed DC Function measure 
because they believe the measure is not cross-setting. Two of these 
commenters stated that the measure is only ``cross-setting'' in name 
and that while the measure attempts to take into account the ``myriad 
of differences'' in the patient populations across settings, the DC 
Function measure is nevertheless four different measures across 
settings because the differences in patient populations alter

[[Page 59240]]

the underlying calculation of the cross-setting measure.
    Response: We acknowledge that different patient populations are 
served across the post-acute care settings and the capabilities and 
goals of these populations differ. However, we would like to clarify 
that cross-setting measures do not necessarily suggest that facilities 
can and should be compared across settings. Instead, these measures are 
intended to compare providers within a specific setting while 
standardizing measure specifications across settings. The proposed 
measure does just this by aligning measure specifications across 
settings and using a common set of standardized functional assessment 
data elements. This alignment satisfies the requirement of 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.
    Comment: A commenter requested a rationale as to why confidence 
intervals were not calculated and reported for the expected function 
scores and utilized in determining meaningful differences between the 
observed and expected function score. This commenter also stated that 
the minimum clinical difference in discharge function scores that 
indicates a change is meaningful to patient progress has not been 
identified.
    Response: The proposed DC function measure uses the same approach 
in determining whether an observed discharge score is different than 
its associated, expected discharge score as the currently adopted 
function measures that are CBE endorsed. Specifically, the DC Function 
measure reports the proportion of a given provider's stays where 
observed discharge function matches or exceeds expected discharge 
function. The measure score is a continuous variable with values 
between 0 and 100, allowing for intuitive interpretation and 
comparisons. Our TEP supported that patients and families are more 
likely to understand a measure that expresses functional outcome as a 
simple proportion of patients who meet expectation for their discharge 
functional status, rather than units of change in a scoring system that 
is unfamiliar to most Care Compare website users (the primary audience 
for this measure). Measure scores based on statistical significance of 
differences between observed and expected values (based on confidence 
intervals) place providers in broad categories, such as ``No different 
than national average,'' which do not allow more granular provider 
comparisons for the public reviewing the measure's data on Care 
Compare. Given the excellent reliability of the DC Function measure, 
reporting provider scores as broad categories is not warranted.
    Comment: A commenter noted the variability in median scores and 
believed this range suggests the measure may not be valid, and that the 
variability may be problematic when making comparisons among providers.
    Response: We would like to clarify that median scores are not used 
in the calculation of this measure. While we would require additional 
information regarding the median scores referenced in this comment to 
provide a more complete response, we acknowledge that the measure has a 
large range of average expected discharge scores, as calculated for 
each provider. This range is consistent with the range of observed 
discharge scores, indicating that the measure is capturing the range of 
patient's functional abilities, and thus, in fact, supports the 
validity of the measure.
    Comment: A commenter noted that intrinsic to the discharge scores 
are the associated admission scores, and suggested an analysis of this 
measure to assess the variability in initial admission function scores 
between hospitals for similar types of patients as differences may 
account for the gaps in the observed discharge function scores.
    Response: We acknowledge that the observed gap in discharge 
function scores may be due to variability in the initial admission 
function scores. The admission function scores are included as 
covariates in the risk adjustment model and thus are accounted for in 
the calculations of the expected discharge function scores.
    Comment: A commenter questioned CMS' characterization of the 
adjusted R-squared value of 0.65 for the proposed DC Function measure's 
risk adjustment model. This commenter believed a 0.65 suggested 
moderate, rather than ``good'' model discrimination. This commenter 
suggested CMS should address the ability of the risk adjustment model 
to make predictions by comparing R-squared values of the ``training'' 
and ``validation'' sets and reporting ``predicted R-squared'' values.
    Response: We want to clarify that the adjusted R-squared for the DC 
Function measure, as reported in the Discharge Function Score for Long-
Term Care Hospitals (LTCHs) Technical Report,\835\ was 0.65. This value 
indicates ``good'' model discrimination and it is comparable to or 
greater than those of existing LTCH QRP measures, such as the Medicare 
Spending Per Beneficiary (0.45) and Change in Mobility for Ventilator 
Patients (0.16) measures. Additionally, because the measure model uses 
all available data, the concepts of `training' and `validation' sets 
(and any related `predicted R-squared') are not applicable. Rather, 
adjusted R-squared values capture model fit for the risk-adjustment 
model.
---------------------------------------------------------------------------

    \835\ 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.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the adoption of this 
proposed measure because it lacks CBE endorsement or has not undergone 
the CBE endorsement process. Three of these commenters noted that the 
CBE endorsement process provides information on whether or not the 
measure provides valuable information that can be used to inform 
improvements in care.
    Response: We direct readers to section IX.E.4.b.1. of this final 
rule, where we discuss this topic in detail. Measures adopted in the 
LTCH QRP are not required to be CBE endorsed. Section 1899B(e)(2)(B) of 
the Act permits the Secretary to specify a measure that is not CBE 
endorses, as long as due consideration is given to the measures that 
have been endorsed or adopted by a consensus organization identified by 
the Secretary. Despite the current absence of CBE endorsement for this 
measure, it is important to adopt the DC Function measure into the LTCH 
QRP because the DC Function measure relies on functional status data 
elements collected in all PAC settings. The measure also satisfies the 
requirement for a cross-setting quality measure as set forth in 
sections 1886(m)(5) and 1899B(c)(1)(A) of the Act, and assesses both 
domains of self-care and mobility. We also direct readers to section 
IX.E.4.b.2. of this final rule, where we discuss measurement gaps that 
the DC function measure fulfills in relation to competing and related 
measures. We also acknowledge the importance of the CBE endorsement 
process and plan to submit the proposed measure for CBE endorsement 
when feasible. We direct readers to section IX.E.4.b.1.b. of this final 
rule, and the technical report for detailed measures testing results 
demonstrating that the measure provides meaningful information which 
can be used to improve quality of care, and to the TEP report summaries 
836 837

[[Page 59241]]

which detail TEP support for the proposed measure concept.
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    \836\ 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) is 
available at https://mms-test.battelle.org/sites/default/files/TEP-Summary-Report-PAC-Function.pdf.
    \837\ Technical Expert Panel (TEP) for Cross-Setting Function 
Measure Development Summary Report (January 2022 TEP) is available 
at https://mmshub.cms.gov/sites/default/files/PAC-Function-TEP-Summary-Report-Jan2022508.pdf.
---------------------------------------------------------------------------

    Comment: Two commenters opposed the adoption of the DC Function 
measure because they do not believe it is appropriate or accurate for 
CMS to override the clinical judgement of the clinicians who are 
treating the patient by using statistical imputation to impute a value 
to a data element when an ANA (Activity Not Attempted) code is used. 
These commenters noted that the ``Activity Not Attempted'' codes allow 
clinicians to use their professional judgement when certain activities 
should not or could not be safely attempted by the patient, which may 
be due to medical reasons.
    Response: We acknowledge that the ``Activity Not Attempted'' (ANA) 
codes allow clinicians to use their professional judgement when certain 
activities should not or could not be attempted safely by the patient 
and that there may be medical reasons that a patient cannot safely 
attempt a task. We note that we did not propose any changes to the 
coding guidance for using ANA codes, and we would not expect LTCH 
coding practices to change. However, we want to clarify that utilizing 
statistical imputation to calculate a quality measure does not override 
the clinical judgement of clinicians who are expected to continue 
determining whether certain activities can be safely attempted by 
patients at the time of admission and discharge, and utilize that 
information to determine appropriate goals and treatment interventions 
for their LTCH patients. Rather, statistical imputation is a component 
in measure calculation of reported data and improves upon the current 
imputation approach in the currently adopted Change in Mobility Score 
for Ventilator Patients measure. In this currently adopted measure, ANA 
codes are always imputed to 1 (dependent) when calculating the measure 
scores, regardless of a patient's own clinical and functional 
information. However, the imputation approach implemented in the 
proposed DC Function measure uses each patient's available functional 
and clinical information to estimate each ANA value had the item been 
completed. Testing demonstrates that, relative to the current simple 
imputation method, the statistical imputation approach used in this DC 
Function measure increases precision and accuracy and reduces bias in 
estimates of ANA values.
    Comment: Three commenters expressed concern about the calculation 
of expected scores. Two of these commenters believed that the proposed 
measure numerator is not wholly attributed to facility's quality of 
care and that the calculation of the ``expected'' discharge score is 
opaque, resulting in difficulty for providers to determine the score 
that they're striving for. These commenters further noted that 
functional goals are not based on statistical regression and are 
identified via individual-specific goals related to function, 
independence, and overall health. One of these commenters requested 
clarification about whether the expected scores are calculated by using 
patient admission goals or risk adjustment.
    Response: We agree with the commenter that functional goals are 
identified for each patent as a result of an individual assessment and 
clinical decisions, rather than statistics. We want to remind 
commenters that the DC Function measure is not calculated using the 
goals identified in clinical process. The ``expected'' discharge score 
is calculated by risk-adjusting the observed discharge score (that is, 
the sum of individual function item values at discharge) for admission 
functional status, age, and clinical characteristics using an ordinary 
least squares linear regression model. To clarify, the model intercept 
and risk adjustor coefficients are determined by running the risk 
adjustment model on all eligible LTCH stays. For more detailed measure 
specifications, we direct readers to the document titled Discharge 
Function Score for Long-Term Care Hospitals (LTCHs) Technical 
Report.\838\ The risk-adjustment model for this measure controls for 
clinical, demographic, and function characteristics to ensure that the 
score fully reflects a facility's quality of care.
---------------------------------------------------------------------------

    \838\ 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.
---------------------------------------------------------------------------

    Comment: A commenter suggested for CMS to be more involved with 
clinicians in discussions surrounding the assessment and coding of 
patients rather than using an imputation approach if there is concern 
that ANA codes are not truly reflective of patients' function 
abilities.
    Response: We have engaged with post-acute care providers on several 
occasions. As described in Section IX.E.4.b.3. of this final rule, our 
measure development contractor convened two TEPs to obtain expert 
clinician input on the development of the measure. The TEPs consisted 
of interested parties with a diverse range of expertise, including LTCH 
and other PAC subject matter expertise, clinical knowledge, and measure 
development experience. As described in the PAC QRP Functions TEP 
Summary Report--March 2022,\839\ panelists agreed that the recode 
approach used in the already adopted functional outcome measures could 
be improved upon and reiterated that not all ANAs reflect dependence on 
a function activity. Based on the extensive testing results presented 
to the TEP, a majority of panelists favored the statistical imputation 
over alternative methodologies and an imputation method that is more 
accurate over one that is simpler.
---------------------------------------------------------------------------

    \839\ Technical Expert Panel (TEP) for Cross-Setting Function 
Measure Development Summary Report (January 2022 TEP) is available 
at https://mmshub.cms.gov/sites/default/files/PAC-Function-TEP-Summary-Report-Jan2022-508.pdf.
---------------------------------------------------------------------------

    Comment: A commenter expressed concern with the proposed 
statistical imputation approach utilized in the DC Function measure, 
and suggested it might lead to this measure score varying significantly 
from the existing function outcome measure.
    Response: It is important to capture both self-care and mobility 
items in the proposed measure as well as capturing each dimension of 
function in separate measures, which is reflected in the Change in 
Mobility Score for Ventilator Patients measure in the LTCH QRP. The DC 
Function measure captures information that is distinct from the Change 
in Mobility Score for Ventilator Patients measure. Specifically, the DC 
Function measure considers both dimensions of function (utilizing a 
subset of self-care and mobility GG items on the LCDS), controls for 
admission function levels, and applies to a much larger set of LTCH 
patients, while the Change in Mobility Score for Ventilator Patients 
measure considers one dimension of function (utilizing only mobility GG 
items), does not control for mobility at admission, and is only applied 
to a subset of patients (those requiring ventilator support). For these 
same reasons, we expect to see differences in outcome percentages among 
these two measures for reasons unrelated to the imputation approach 
used.
    Comment: A commenter expressed that the adoption of the proposed 
measure would result in additional provider burden. This commenter 
explained that the measure would increase costs and administrative

[[Page 59242]]

burden due to the measure's complexity.
    Response: The adoption of the proposed measure would not result in 
additional burden because we are not proposing changes to the number of 
items required or the reporting frequency of the items reported. In 
fact, this measure requires the same set of data elements that are 
currently reported. Additionally, CMS calculates this measure for 
LTCHs, and provides LTCHs with various resources to review and monitor 
their own performance on this measure.
    After careful consideration of the public comments we received, we 
are finalizing our proposal to adopt the DC Function measure as an 
assessment-based outcome measure beginning with the FY 2025 LTCH QRP as 
proposed.
c. 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 proposed 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.\840\ 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 final 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.
---------------------------------------------------------------------------

    \840\ 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.
---------------------------------------------------------------------------

    In regard to removal factor one, the Application of Functional 
Assessment/Care Plan measure has become topped out,\841\ 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).842 843 844 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,\845\ and for CY 2021, LTCHs had an average score 
of 99.4 percent, with nearly 63 percent of LTCHs scoring 100 
percent.\846\ 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.
---------------------------------------------------------------------------

    \841\ 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.
    \842\ 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.
    \843\ 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.
    \844\ 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.
    \845\ 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.
    \846\ 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.
---------------------------------------------------------------------------

    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 final 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.\847\ 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, 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.
---------------------------------------------------------------------------

    \847\ ``Expected functional capabilities'' is defined as the 
predicted discharge function score.
---------------------------------------------------------------------------

    Because the Application of Functional Assessment/Care Plan measure 
meets measure removal factors one and six under Sec.  412.560(b)(3), we 
proposed to remove it from the LTCH QRP beginning with the FY 2025 LTCH 
QRP. We also proposed 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 final 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 invited 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. The following is a summary of the comments 
we received on our proposal to remove the Application of Functional 
Assessment/Care Plan measure from the LTCH QRP beginning with the FY 
2025 LTCH QRP and our responses.
    Comment: Several commenters expressed support for the removal of 
the Application of Functional Assessment/Care Plan measure. A commenter 
noted their support in conjunction with the adoption of the DC Function 
measure. Meanwhile, another commenter, supported the removal given that 
the value of the measure has remained consistent over the last few 
years. The commenter indicated that the potential for improvement is 
very limited and therefore, the measure represents little to no value 
to the LTCH QRP. Additionally, the commenter recommends the immediate 
removal of

[[Page 59243]]

the Application of Functional Assessment/Care Plan measure from the 
LTCH QRP rather than waiting until FY 2025.
    Response: We thank the commenters for their support and agree that 
the Application of Functional Assessment/Care Plan measure should be 
removed due to topped-out performance. With respect to the commenter's 
request that the Application of Functional Assessment/Care Plan measure 
be removed immediately, we refer the commenter to section IX.E.4.c of 
this final rule where we proposed 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. Data reported in quarter 
four of 2023 counts toward the FY 2025 QRP.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the Application of Functional 
Assessment/Care Plan measure from the LTCH QRP beginning with the FY 
2025 LTCH QRP as proposed.
d. 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 proposed 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 proposed 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,\848\ 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).849 850 851 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,\852\ and for CY 2021, 
61 percent of LTCHs scored 100 percent.\853\
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    \848\ 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.
    \849\ 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.
    \850\ 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.
    \851\ 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.
    \852\ 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.
    \853\ 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.
---------------------------------------------------------------------------

    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 proposed 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 would 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 invited 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. The following is a summary of the 
comments we received on our proposal to remove the Functional 
Assessment/Care Plan measure from the LTCH QRP beginning with the FY 
2025 LTCH QRP and our responses.
    Comment: Several commenters expressed support for the removal of 
the Functional Assessment/Care Plan Measure. A commenter noted their 
support in conjunction with the adoption of the DC Function measure.
    Response: We thank the commenters for their support of the removal 
of this measure in conjunction with the adoption of the DC Function 
score measure. We agree the Functional Assessment/Care Plan measure 
should be removed due to topped-out performance.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the Functional Assessment/Care Plan 
measure from the LTCH QRP beginning with the FY 2025 LTCH QRP as 
proposed.
e. 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 June 19, 2023, the U.S. has reported 
103.9 million cumulative cases of COVID-19, and 1.13 million deaths due 
to COVID-19 in the United States.\854\ 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

[[Page 59244]]

rate.\855\ Older adults, in general, are prone to both acute and 
chronic infections owing to reduced immunity, and are a high-risk 
population.\856\ Adults age 65 and older comprise over 75 percent of 
total COVID-19 deaths despite representing 13.2 percent of reported 
cases.\857\ COVID-19 has 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.\858\
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    \854\ Centers for Disease Control and Prevention. COVID Data 
Tracker. 2023. https://covid.cdc.gov/covid-data-tracker.
    \855\ 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.
    \856\ 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.
    \857\ 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.
    \858\ 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.\859\ 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 \860\ (Pfizer-BioNTech or 
Moderna), and 84 percent for those receiving a viral vector vaccine 
\861\ (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.\862\ 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.\863\
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    \859\ 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.
    \860\ A person is fully vaccinated with an mRNA vaccine when 
they receive two doses of a primary series.
    \861\ A person is fully vaccinated with a viral vector vaccine 
after receiving one dose of a primary series.
    \862\ 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.
    \863\ 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.864 865 866 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.\867\ Additionally, a second vaccine 
booster dose has been shown to reduce risk of severe outcomes related 
to COVID-19, such as hospitalization or death.\868\ 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-19.869 870
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    \864\ 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.
    \865\ 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.
    \866\ 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.
    \867\ 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.
    \868\ 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.
    \869\ 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.
    \870\ 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.\871\ 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).\872\ 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.\873\ Variations are also present when examining vaccination 
rates by race, gender, and geographic location.\874\ 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

[[Page 59245]]

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.\875\ Disparities have been found in vaccination rates between 
rural and urban areas, with lower vaccination rates found in rural 
areas.876 877 Data 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.\878\ 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.\879\
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    \871\ 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.
    \872\ 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.
    \873\ 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/.
    \874\ 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.
    \875\ 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.
    \876\ 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.
    \877\ 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.
    \878\ Centers for Disease Control and Prevention. Vaccination 
Equity. COVID Data Tracker; 2023. https://covid.cdc.gov/covid-data-tracker/#vaccination-equity.
    \879\ 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 proposed 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. The 
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.\880\
---------------------------------------------------------------------------

    \880\ 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.

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[[Page 59246]]

    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).\881\ 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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    \881\ 87 FR 25070.
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(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),\882\ 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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    \882\ 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. A 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.\883\ Similarly, the MAP Rural Health 
Advisory Group met on December 8, 2022 and expressed that the measure 
is important for rural communities.\884\
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    \883\ 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.
    \884\ 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.\885\
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    \885\ 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.'' \886\ 
Despite the MAP Coordinating Committee's vote, we believed it was still 
important to propose the Patient/Resident COVID-19 Vaccine measure for 
the LTCH QRP. As we stated in the FY 2024 PPS proposed rule (88 FR 
27148), 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

[[Page 59247]]

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.\887\
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    \886\ National Quality Forum Measure Applications Partnership. 
2022-2023 MAP Final Recommendations. https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=98102.
    \887\ 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 
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.\888\ This measure has no exclusions and is not risk adjusted.
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    \888\ 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 final rule. For additional technical information about 
this final measure, we refer readers to the draft measure 
specifications document titled Patient-Resident-COVID-Vaccine-Draft-
Specs.pdf \889\ on the LTCH QRP Measures Information web page.
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    \889\ 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 invited public comments on the proposal to adopt the Patient/
Resident COVID-19 Vaccine measure beginning with the FY 2026 LTCH QRP. 
The following is a summary of the comments we received on our proposal 
to adopt the Patient/Resident COVID-19 Vaccine measure beginning with 
the FY 2026 LTCH QRP and our responses.
    Comment: Four commenters supported the adoption of this measure 
into the LTCH QRP beginning FY2026. A commenter noted that COVID-19 
pandemic has had a disproportionate and devastating impact on older 
adults, particularly those residing in long-term care and congregate 
care settings.
    Response: We thank the commenters for their support.
    A number of commenters did not support the proposal to adopt the 
Patient/Resident COVID-19 Vaccine measure to the IRF QRP for various 
reasons. The following is a summary of these public comments received 
on our proposal and our responses.
    Comment: Several commenters did not support the proposal due to the 
measure not being fully tested for reliability and validity, and 
questioned whether it was feasible for LTCHs to collect the information 
and whether the measure would produce statistically meaningful 
information. Two of these commenters noted that CMS should validate the 
data collection tool used in the measure prior to adopting the measure. 
These commenters also suggested CMS ``rushed through'' the validation 
process to add the measure to the LTCH QRP as soon as possible, 
pointing to the fact that CMS did not provide support showing the 
measure is practical or feasible.
    Response: We acknowledge the concerns raised by the commenters 
related to the measure testing. However, we have tested the item 
proposed for the LCDS to capture data for this measure and its 
feasibility and appropriateness. Since a COVID-19 vaccination item does 
not exist within the LCDS, we developed clinical vignettes to test 
item-level reliability of a draft Patient/Resident COVID-19 
vaccination. The clinical vignettes were a proxy for patient records 
with the most common and challenging cases providers would encounter, 
similar to the approach that CMS uses to train providers on all new 
assessment items, and the results demonstrated strong agreement (that 
is, 80 percent).
    Validity testing has not been completed yet, since a COVID-19 
vaccination item does not currently exist on the LCDS. However, the 
Patient/Resident COVID-19 Vaccine measure was constructed based on 
prior use of similar items, such as the Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short Stay) for the IRF QRP and LTCH QRP. We have 
used these types of patient vaccination assessment items in the 
calculation of vaccination quality measures in our PAC QRPs and intend 
to conduct reliability and validity testing for this specific Patient/
Resident COVID-19 Vaccine measure once a COVID-19 vaccination item has 
been added to the LCDS and we have collected sufficient data.
    Additionally, we solicited feedback from our Technical Expert Panel 
(TEP) on the proposed assessment item and its feasibility. No concerns 
were raised by the TEP regarding obtaining information required to 
complete the new COVID-19 vaccination item.\890\
---------------------------------------------------------------------------

    \890\ 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. https://mmshub.cms.gov/sites/default/files/COVID19-Patient-Level-Vaccination-TEP-Summary-Report-NovDec2021.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters did not support the measure due to lack 
of support from the MAP and urged CMS to delay adoption of the measure 
until concerns raised by the MAP Coordinating Committee have been 
addressed. Specifically, they noted that the MAP is a multi-stakeholder 
panel of experts representing providers, patients and payers and they 
encouraged CMS to address the MAP's recommendations for adding 
exclusions to the measure, conducting measure testing and submitting 
the measure for CBE endorsement. Several of these commenters 
specifically requested that exclusions for medical contraindications, 
religious beliefs, cultural norms, and patient refusals be added to the 
measure specifications, noting that without them the vaccination rates 
could be misleading.
    Response: As part of the pre-rulemaking process, HHS takes into 
consideration the recommendations of the MAP in selecting candidate 
quality and efficiency measures. HHS selects candidate measures and 
publishes proposed rules in the Federal Register, which allows for 
public comment and further consideration before a final rule is issued. 
If the CMS CBE has not endorsed a candidate measure, then HHS must 
publish a rationale for the use of the measure described in section 
1890(b)(7)(B) of the Act in the notice. We would like to reiterate that 
this measure is intended to promote transparency of raw data regarding 
COVID-19 vaccination rates for patients/caregivers to make informed 
decisions for selecting facilities, providing potential patients with 
an important piece of information regarding vaccination rates as part 
of their process of identifying providers they would want to seek care 
from. As we stated in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27148), we did not include exclusions for medical contraindications, 
religious beliefs, cultural norms, and patient refusals 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/

[[Page 59248]]

caregiver decision-making. Our TEP also agreed that developing a 
measure to report the rate of vaccination without denominator 
exclusions was an important goal.\891\ Based on this feedback, 
excluding patients/residents with contraindications from the measure 
would distort the intent of the measure of providing raw COVID-19 
patient vaccination rates, while making the information more difficult 
for patients/caregivers to interpret, and therefore we did not include 
any exclusions. We also stated in the FY 2024 IPPS/LTCH proposed rule 
(88 FR 27149) that we intend to conduct measure testing once sufficient 
data on the COVID-19 vaccination item is collected through the LCDS and 
plan to submit the measure for CBE endorsement when it is technically 
feasible to do so.
---------------------------------------------------------------------------

    \891\ 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. https://mmshub.cms.gov/sites/default/files/COVID19-Patient-Level-Vaccination-TEP-Summary-Report-NovDec2021.pdf.
---------------------------------------------------------------------------

    Comment: A commenter noted that vaccination administration rates 
can ebb and flow significantly based on factors outside the control of 
LTCHs, including holidays, weather, vaccine/pharmaceutical supply chain 
management, staff availability and more. As a result, they do not 
believe the rates will accurately depict the vaccination rate of an 
LTCH's patients.
    Response: LTCHs will be able to administer the COVID-19 vaccine if 
a patient consents. This measure does not require LTCHs to administer 
the vaccine themselves. They could arrange for the patient to obtain 
the vaccine outside of their facility, or work with community 
pharmacies to obtain vaccines.
    Comment: A few commenters opposed the measure because they believe 
vaccine uptake is subject to patient-level factors outside the control 
of the LTCH, including a patient's transparency regarding their 
vaccination status, and therefore the Patient/Resident COVID-19 Vaccine 
measure would not be a reflection of the actions or efforts taken by an 
LTCH to improve patient care. Three of these commenters referenced the 
MAP's Health Equity Advisory Group who ``expressed concerns about 
vaccine hesitancy due to cultural norms,'' and they want to honor the 
choice of their patients once they have been offered clinical advice. 
Two of these commenters noted that disparities in vaccine uptake exist 
among racial and geographic categories because of differences deeply 
rooted in culture, religion, ethnicity, socioeconomic status, and are 
not related to the local LTCH's efforts to vaccine their patients. A 
commenter noted that requiring vaccination data to be reported will not 
sway those individuals who are reluctant to continue receiving 
vaccines, while two other commenters noted that it is possible for an 
LTCH to encourage vaccination among their patients and still have a 
relatively low rate of vaccination.
    Response: We appreciate providers' commitment to ensuring that 
patients are educated and encouraged to receive vaccinations, and we 
acknowledge that individuals have a choice about whether to receive a 
COVID-19 vaccine or booster, despite an LTCH's best efforts. However, 
it is also true that patients and family/caregivers have choices about 
selecting and LTCH, and it is our intention to empower them with the 
information they need to make an informed decision by publicly 
reporting the data we receive from LTCHs on this measure. We understand 
that there may be instances where a patient chooses not to be 
vaccinated, and we want to remind LTCHs that this measure does not 
mandate patients be up to date with their COVID-19 vaccination, only 
that the LTCH report on patients' vaccination status. LTCHs are able to 
successfully report the measure, and comply with the LTCH QRP 
requirements, irrespective of the number of patients who have been 
vaccinated.
    Comment: Two commenters believe it is often infeasible or 
inappropriate to offer vaccination for patients due to length of stay, 
ability to manage side effects and medical contraindications, or other 
logistical challenges to gathering information from a patient who may 
have received care from multiple proximal providers. Another commenter 
noted that patients admitted to an LTCH almost exclusively come from a 
general acute care hospital following a complex course of illness or a 
traumatic event, and it is not unusual for such complex and compromised 
patients to be inappropriate to receive immunizations. Two commenters 
raised concerns that CMS had not addressed how LTCHs should report 
vaccination data for patients that are on mechanical ventilators.
    Response: We understand concerns about post-acute care length of 
stay, acuity of patient health, or effect of the vaccine on patient 
care. LTCHs should continue to use clinical judgement to determine if a 
patient is eligible to receive the vaccination, as well as when it is 
appropriate for a patient to receive vaccination, keeping in mind 
patient's health and safety. Regarding the commenters' concerns about 
reporting data for patients on mechanical ventilators, providers will 
be able to use multiple sources of information available to obtain the 
vaccination data, such as patient interviews, medical records, proxy 
response, and vaccination cards provided by the patient/
caregivers.\892\ Therefore, coding of this item in the LCDS would not 
be limited by a patient's ability to respond.
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    \892\ COVID-19 Vaccine: Percent of Patients/Residents Who Are Up 
to Date Draft Measure Specifications. https://www.cms.gov/files/document/patient-resident-covid-vaccine-draft-specs.pdf.
---------------------------------------------------------------------------

    Comment: A commenter noted that sometimes patients may not have the 
opportunity to `shop' for an LTCH outside of their region simply based 
on the COVID-19 vaccinations rates. They noted that insurance and 
proximity to loved ones are often the drivers for selecting an LTCH.
    Response: We acknowledge that sometimes patients may not have 
access to as many LTCH choices as others. However, the information 
provided by this measure will still be valuable to potential LTCH 
patients and their caregivers who may have geographic limitations.
    Comment: Several commenters opposed the Patient/Resident COVID-19 
Vaccine measure because they believe it will have minimal impact on 
patient health while increasing administrative burden on LTCHs, 
including burden associated with data collection, education, and 
updates to IT systems. Two of these commenters noted that collecting 
this information would be especially burdensome in cases where patients 
are unable or unwilling to provide the necessary information. Another 
commenter suggested that with extreme staffing shortages, the resources 
to spend additional time gathering COVID-19 vaccine data, administering 
the vaccine, or doing extensive education on vaccination are limited. A 
commenter was concerned that this would increase the burden associated 
with managing and updating IT system changes and re-training staff in 
data collection.
    Response: We think the measure could have an impact on patient 
health. This measure will provide potential patients with an important 
piece of information regarding vaccination rates as part of their 
process of identifying providers they would want to seek care from, 
empowering them to make informed decisions about their health care. 
Additionally, as noted in the

[[Page 59249]]

COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date 
Draft Measure Specifications,\893\ providers will be able to use all 
sources of information available to obtain the vaccination data, such 
as patient interviews, medical records, proxy response, and vaccination 
cards provided by the patient/caregivers. Therefore, coding would not 
be limited to a patient response. Regarding the comment about the 
additional time LTCHs would have to spend gathering COVID-19 vaccine 
data, LTCHs should be assessing whether patients are up to date with 
COVID-19 vaccination as a part of their routine care and infection 
control processes. During our item testing, we heard from LTCHs that 
they are already routinely inquiring about COVID-19 vaccination status 
when admitting patients. Additionally, this measure does not require 
LTCHs to administer the vaccine themselves. They could arrange for the 
patient to obtain the vaccine outside of their facility, or work with 
community pharmacies to obtain vaccines. In response to the comment on 
the burden associated with managing and updating IT systems, we will be 
posting the Final Measure Specifications and Draft Data Submission 
Specifications for the Patient/Resident COVID-19 Vaccine measure in the 
Fall of 2023, and believe IT vendors will have enough time to update 
their software prior to October 1, 2024. The item and response options 
are not complex, and the item is only required at discharge. The time, 
form, and manner in which the LCDS will be submitted is not changing; 
rather, it is the addition of one item to be collected at one time 
point. Therefore, the implementation of this proposal should not 
require health IT vendors to completely rewrite their software. 
Finally, as with any new assessment item, we will provide free training 
and education to LTCHs as well as publish coding guidance and 
instructions for LTCHs to be prepared for data collection.
---------------------------------------------------------------------------

    \893\ COVID-19 Vaccine: Percent of Patients/Residents Who Are Up 
to Date Draft Measure Specifications. https://www.cms.gov/files/document/patient-resident-covid-vaccine-draft-specs.pdf.
---------------------------------------------------------------------------

    Comment: A commenter requested that CMS consider utilizing the 
short-stay hospital questionnaire on this metric as its base and not 
require the LTCH to also collect this information. They noted that if a 
patient comes to an LTCH without having a predecessor short-stay 
hospital stay, only then an LTCH should be required to submit that 
data.
    Response: We are unable to determine what short-stay hospital 
questionnaire the commenter is referring to, and therefore are unable 
to respond.
    Comment: Two commenters believed the adoption of a patient-level 
measure of COVID-19 vaccination status would face similar challenges to 
the Percent of Residents of Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (CBE #0680) that was 
retired in the FY 2019 IRF PPS final rule (83 FR 38514). They also 
stated that LTCH performance on this proposed measure will fail to show 
meaningful distinctions in improvements since 94.3 percent of the 
United States population at least 65 years of age had completed their 
primary series as of May 2023.
    Response: We interpret the commenter to be referring to the Percent 
of Residents of Patients Who Were Assessed and Appropriately Given the 
Seasonal Influenza Vaccine (CBE #0680) that was removed from the LTCH 
QRP measure set in the FY 2018 LTCH PPS final rule (82 FR 38433 through 
38439). However, we do not believe this measure is at risk of being 
retired early. The proposed Patient/Resident COVID-19 Vaccine measure 
reports the percentage of patients in an LTCH who are up to date on 
their COVID-19 vaccinations per the CDC's latest guidance, rather than 
capturing the rates of primary vaccination series only. Because the 
measure reflects an ``up to date'' status, it minimizes the potential 
for topping out. We believe that continued monitoring of up to date 
vaccination will remain an important tool to minimize severe illness, 
hospitalization, and death in post-acute care facilities. Additionally, 
we find there is substantial room for improvement in measure 
performance. As of May 2023, while the vaccination rates among people 
65 and older were high for the primary vaccination series (94.3 
percent), the vaccination rates are lower for the first booster (73.9 
percent among those who received a primary series) and even lower for 
the second booster dose (60.4 percent among those who received a first 
booster).\894\ However, we routinely monitor measures to determine if 
they meet any of the measure removal factors, set forth in Sec.  
[thinsp]412.560(b)(3), and if identified, we may remove the measure 
through the rulemaking process.
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    \894\ Centers for Disease Control and Prevention. COVID-19 
vaccination age and sex trends in the United States, national and 
jurisdictional. Last updated May 11, 2023. https://data.cdc.gov/Vaccinations/COVID-19-Vaccination-Age-and-Sex-Trends-in-the-Uni/5i5k-6cmh.
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    Comment: A commenter noted that CMS should not adopt this proposed 
measure due to the end of the PHE, and that CMS should eliminate any 
tracking of vaccines with the end of Federal vaccination mandates. Two 
commenters noted that adding a new quality measure to the LTCH QRP now 
for reporting patient COVID-19 vaccination status is inconsistent with 
the agency's decision to remove the vaccination requirements for health 
care personnel from the hospital conditions of participation. These 
commenters said they found it confusing that CMS has proposed this new 
measure because it contradicts CMS's statement to treat COVID-19 like 
other infectious diseases going forward, specifically influenza, and 
they point out that there is no existing measure in the LTCH QRP 
addressing patient influenza vaccination status.
    Response: Despite the announcement of the end of the COVID-19 PHE, 
many people continue to be affected by COVID-19, particularly seniors, 
people who are immunocompromised, and people with disabilities. As 
mentioned in the End of COVID-9 Public Health Emergency Fact 
Sheet,\895\ our response to the spread of SARS-CoV-2, the virus that 
causes COVID-19, remains a public health priority. Even with the end of 
the COVID-19 PHE, we continue to work to protect Americans from the 
virus and its worst impacts by supporting access to COVID-19 vaccines, 
treatments, and tests, including for people without health insurance. 
Given the continued impacts of COVID-19, it is important to promote 
patient vaccination and education, which this measure aims to achieve. 
As mentioned previously, continued monitoring of up to date COVID-19 
vaccination will remain an important tool to minimize severe illness, 
hospitalization, and death in LTCHs because, as stated earlier, there 
is substantial room for improvement in measure performance. As of May 
2023, while the vaccination rates among people 65 and older were high 
for the primary vaccination series (94.3 percent), the vaccination 
rates are lower for the first booster (73.9 percent among those who 
received a primary series) and even lower for the second booster dose 
(60.4 percent among those who received a first booster).\896\
---------------------------------------------------------------------------

    \895\ Fact Sheet: End of the COVID-19 Public Health Emergency. 
U.S. Department of Health and Human Services. May 9, 2023. https://www.hhs.gov/about/news/2023/05/09/fact-sheet-end-of-the-covid-19-public-health-emergency.html.
    \896\ Centers for Disease Control and Prevention. COVID-19 
vaccination age and sex trends in the United States, national and 
jurisdictional. Last updated May 11, 2023. https://data.cdc.gov/Vaccinations/COVID-19-Vaccination-Age-and-Sex-Trends-in-the-Uni/5i5k-6cmh.

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[[Page 59250]]

    We also want to note that the proposed Patient/Resident COVID-19 
Vaccine measure is not associated with the Conditions of Participation. 
This measure is being proposed for the LTCH QRP to 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,'' which is consistent with previous 
vaccination measures.
    Comment: A commenter noted that the NHSN measure reflecting all 
patients provides a better picture of each facility. Two commenters 
suggested that having a single yes or no item on the LCDS without any 
requirements for documentation or validation of vaccination status 
would amount to a mere checkmark in a box with no evidence that it 
leads to improved quality of care.
    Response: Although some LTCHs may voluntarily submit patient-level 
COVID-19 vaccine data to the NHSN, we do not collect patient-level 
COVID vaccination data as part of the LTCH QRP. Therefore, adding an 
LCDS item for the purposes of collecting patient-level COVID 
vaccination data would be appropriate for data collection, similar to 
other assessment-based measures. As stated earlier in this section, 
assessment-based measures have several benefits, including patient-
level data and a variety of reports LTCHs can use to assess 
performance, inform patient engagement and refine infection control 
processes. Additionally, this data will allow for granular analyses of 
vaccinations, including identification of potential disparities within 
the LTCH QRP.
    Comment: A commenter noted that the CDC maintains different 
definitions of ``up to date'' and ``fully vaccinated.'' This commenter 
believed that the public has a limited appreciation for the differences 
in these definitions and could easily misreport their vaccination 
status to facility staff when asked, giving the public a misleading 
picture of the vaccination levels of a LTCH's patient population.
    Response: Gathering information about patient vaccination status 
gives LTCHs the opportunity to educate patients about what it means to 
be up to date per CDC guidelines, so that the item can be completed 
accurately. The CDC has also published FAQs that clearly state the 
difference in the terms `fully vaccinated' and `up to date.' When 
completing the item, LTCHs can access the CDC website at https://www.cdc.gov/coronavirus/2019-ncov/vaccines/stay-up-to-date.html to find 
the definition of up to date, in addition to using the LCDS Guidance 
Manual. Our item testing demonstrated strong agreement with the correct 
responses when facilities used the available guidance, and rates of 
correct responses increased when LTCHs accessed the CDC website.
    Comment: A few commenters provided alternate measure 
recommendations, such as the number of times during a stay the LTCH 
offered education, support and information concerning the vaccine to 
the patient and/or family, actions providers take in encouraging 
vaccination, or data reporting about patient respiratory illness.
    Response: We appreciate the input from the commenters. However, 
these alternate recommendations do not meet the intent of the measure, 
which is a raw rate of patient vaccinations, irrespective of LTCH 
actions. We will use this input to inform our future measure 
development efforts.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the Patient/Resident COVID-19 Vaccine 
measure as an assessment-based measure beginning with the FY 2026 LTCH 
QRP as proposed.
5. Principles for Selecting and Prioritizing LTCH QRP Quality Measures 
and Concepts Under Consideration for Future Years: Request for 
Information (RFI)
a. Solicitation of Comments
    We solicited 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 
solicited 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 sought input on data available to develop measures, 
approaches for data collection, perceived challenges or barriers, and 
approaches for addressing challenges.
    We received several comments in response to this RFI in the 
proposed rule, which are summarized later in this section.
    Comments: A commenter indicated that the principles for measure 
selection and prioritization identified by CMS in the RFI in the 
proposed rule are consistent with the principles inherent in the CMS 
Measure Management System (MMS), and recommended that MMS measure 
development principles be integrated into the LTCH QRP principles. The 
same commenter suggested that clearly delineated processes are required 
in order to guide the application of these principles. Two commenters 
expressed concern about the addition of measures to the QRP given the 
administrative burden associated with measure reporting. These 
commenters suggested that CMS' guiding principles consider whether a 
measure is important, well-defined, has scientific merit, is feasible 
and useable, and does not duplicate existing measures. A commenter 
recommended that CMS support testing through the CBE.
    Although several commenters agreed with CMS on the presence of 
measurement gaps in the LTCH QRP, not all commenters thought that 
measures should be added to the LTCH QRP. A commenter recommended that 
CMS continually evaluate whether measures are necessary, and remove 
measures that are deemed unnecessary. Another commenter, who agreed 
with CMS on the need to fill measurement gaps in the areas identified 
in the RFI, encouraged CMS to utilize measures and/or assessment data 
already available (for example, claims data, LCDS, and NHSN) in order 
to reduce LTCH burden. This commenter further

[[Page 59251]]

suggested that CMS reduce administrative burden by streamlining LTCH 
data collection (for example, incorporating additional skip logic to 
bypass questions that are not relevant to an LTCH).
    Three commenters recommended that CMS prioritize operational 
improvements to the LTCH QRP rather than the addition of new measures. 
Operational issues identified by the commenters included the lack of 
training on new instruments, time necessary to conduct patient 
assessments, and the need to remove ``low-value'' measures when new 
measures are added to the QRP. Another commenter urged CMS to ensure 
that reported measures account for LTCHs high-acuity patient 
population, and focus on topics that LTCHs are able to directly impact.
    A couple of commenters agreed that the area of cognitive function 
was an important LTCH QRP measurement gap that needs to be filled. A 
commenter encouraged CMS to select measures of cognitive functioning 
that are reliable, feasible, valid, and that are, or could be, endorsed 
by a CBE. The other commenter expressed concern about the inability of 
cognitive function tools to identify mild and moderate cognitive 
impairment. A commenter acknowledged the prevalence of behavioral and 
mental health issues in the U.S. adult population and recommended that, 
given occupational therapists' role in addressing behavioral and mental 
health issues, they be included in quality measures.
    A commenter agreed that the area of chronic condition and pain 
management is an important LTCH QRP measurement gap that needed to be 
filled. The commenter encouraged CMS to select measures that are 
reliable, feasible, valid, and that are, or could be, endorsed by a 
CBE. Another commenter expressed support for assessments of pain and 
its effect on sleep, participation in therapy, and ability to perform 
activities of daily living.
    A few commenters indicated that measurement gaps exist in areas not 
identified in the RFI. A commenter recommended that measures focusing 
on care rendered to patients with chronic kidney disease (CKD) be 
included as part of the LTCH QRP measure set. The commenter urged CMS 
to consider a suite of measures that addressed kidney care. Among the 
recommended measures, the commenter identified the Kidney Health 
Evaluation for Patients with Diabetes (KED) in order to promote 
screening and monitoring of kidney health; patient reported outcome 
measures that address care planning and shared-decision making; 
measures of CKD patients that are on a cardio-renal protective agent; 
and post-discharge measures of care coordination and medication 
management.
    Some commenters recommended that CMS incorporate measures of health 
equity in the LTCH QRP. Measures recommended for consideration included 
the Screening and Referral to Services for Social Needs, and the 
Screening for Social Drivers of Health. Two commenters further 
recommended that CMS report quality measures using stratification, such 
as race, socioeconomic status, dual eligibility status, disability 
status, sexual orientation and gender identity, to identify disparities 
in health outcomes. A commenter urged CMS to adopt measures of 
malnutrition in order to address health equity.
    Other measures and measurement concepts suggested by commenters 
included a measure of patients that are pharmacologically restrained 
during an acute inpatient stay, and that are subsequently discharged to 
an LTCH to be titrated off their medications; measures associated with 
issues related to vents, wounds, nutrition, and dialysis; and an 
updated version of the NHSN healthcare associated clostridioides 
difficile infection outcome measure derived from EHR data and 
microbiologic evidence.
    Response: We appreciate the input provided by commenters. While we 
will not be responding to specific comments submitted in response to 
this RFI in this final rule, we intend to use this input to inform our 
future measure development efforts.
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 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.'' \897\ 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 \898\ are in line with Executive Order 
13985, ``Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government.'' \899\ 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. 
The CMS Framework for Health Equity outlines the approach CMS will use 
to promote health equity for enrollees, mitigate health disparities, 
and prioritize CMS's commitment to expanding the collection, reporting, 
and analysis of standardized data.\900\
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    \897\ Centers for Medicare and Medicaid Services. Health Equity. 
https://www.cms.gov/pillar/health-equity. October 3, 2022.
    \898\ Centers for Medicare & Medicaid Services. CMS Framework 
for Health Equity 2022-2032. https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
    \899\ 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.
    \900\ Centers for Medicare and Medicaid Services. The Path 
Forward: Improving Data to Advance Health Equity Solutions. https://www.cms.gov/files/document/path-forwardhe-data-paper.pdf. July 11, 
2023.
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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).\901\ 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,

[[Page 59252]]

oversight strategies, and quality improvement initiatives.
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    \901\ 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.
---------------------------------------------------------------------------

    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.\902\ 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.\903\ 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.
---------------------------------------------------------------------------

    \902\ Turner A. The Business Case for Racial Equity: A Strategy 
for Growth. April 24, 2018. W.K. Kellogg Foundation and Altaru. 
https://altarum.org/RacialEquity2018.
    \903\ 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.
---------------------------------------------------------------------------

    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.\904\ Measure 
stratification by CMS is important for better understanding differences 
in health outcomes from across different patient population groups 
according to specific demographic and SDOH variables. 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.'' \905\ 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 (CFRs) and we think 
this learning opportunity would benefit post-acute care providers. The 
goals of the CFR are to provide LTCHs with their results so they can 
compare certain quality measures stratified by dual eligible status and 
race and ethnicity. The process is meant to increase provider's 
awareness of their data. We will solicit feedback from LTCHs for future 
enhancements to the CFRs.
---------------------------------------------------------------------------

    \904\ 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.
    \905\ 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.
---------------------------------------------------------------------------

    In the proposed rule, we said that 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 using our 
current SDOH data items of preferred language, interpreter services, 
health literacy, transportation, and social isolation. With 30 percent 
to 55 percent of health outcomes attributed to SDOH,\906\ a measure 
capturing and addressing SDOH could encourage LTCHs 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 according to existing health information technology (IT) 
vocabulary and codes sets where applicable and appropriate such as 
those included in the Office of the National Coordinator for Health 
Information (ONC) United States Core Data for Interoperability (USCDI) 
\907\ 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.\908\
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    \906\ World Health Organization. Social Determinants of Health. 
https://www.who.int/westernpacific/healthtopics/social-determinants-of-health.
    \907\ United States Core Data for Interoperability (USCDI), 
https://www.healthit.gov/isa/united-states-core-data-interoperability-uscdi.
    \908\ 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.
---------------------------------------------------------------------------

    Although we did not directly solicit feedback to our update, we did 
receive some public comments, which we summarize later in this section.
    Comment: Commenters were overwhelmingly supportive of CMS' efforts 
to develop ways to measure and mitigate health inequities. Four 
commenters applauded CMS' continuing efforts to advance health equity 
and encouraged CMS to continue to develop and adopt measures of social 
determinants of health (SDOH) into the LTCH QRP. One of these 
commenters suggested that CMS should ensure any quality measure is 
feasible and would have an intended impact within the LTCH.
    A commenter encouraged stratified reporting of all LTCH QRP quality 
measures by race, dual eligibility status, disability status, sexual 
orientation and gender identity, and socioeconomic status to provide 
visibility to clinicians and LTCHs as to where disparities exist within 
each measure. Another commenter believed collecting race and ethnicity 
information and other SDOH would provide LTCHs an opportunity to 
stratify their own data for patient populations to better plan for 
needed services; identify members of a target population to whom 
elements of an intervention would apply; understand potential patterns 
in access and outcomes for different segments of the patient 
population; and increase patient and provider understanding.
    We also received two comments supporting the adoption of screening 
or structural measures in the LTCH QRP. Both of these commenters 
supported the Screening and Referral to Services for Social Needs 
measure and the Screening for Social Drivers of Health measure,

[[Page 59253]]

noting that both of these align with the CMS Universal Foundation Set 
for adults. One of these commenters also supported CMS' structural 
measures. This commenter acknowledged that structural measures are not 
a complete solution, but believe they play an important role in 
achieving patient safety and health equity goals, and when combined 
with public reporting has the potential to focus the commitment of 
leaders and impact organizational cultures in LTCHs to address existing 
problems with both explicit and implicit bias.
    We also received feedback on other ways to incorporate health 
equity into the LTCH QRP. A commenter pointed out that nutritional 
status, and by consequence malnutrition, is often influenced by a 
variety of SDOH domains and could result in certain populations, such 
as the elderly, disabled, and the poorest segments of society, having a 
higher degree of malnutrition. This commenter recommended CMS adopt a 
diagnosis of malnutrition as a measure to address health equity to 
ensure appropriate identification and nutritional management of 
malnourished patients. Another commenter strongly urged CMS to adopt IT 
standards and consistent guidance across programs for the collection of 
structured data that addresses the capture, use, and exchange of 
relevant health data. This commenter noted that SDOH is a data class in 
USCDI, and referenced the work of the Gravity Project on health equity, 
SDOH, and other health-related social needs (HRSN) data.\909\ Finally, 
A commenter who noted that the ability to collect and analyze data is 
crucial to advance health equity also cautioned that there may be 
significant operational challenges for entities either not using 
electronic health records or not using them with standardized data 
entry.
---------------------------------------------------------------------------

    \909\ The Gravity Project, https://thegravityproject.net.
---------------------------------------------------------------------------

    Response: We thank all the commenters for responding to our update 
on this important CMS priority. We will continue to prioritize our 
efforts to advance health equity by designing, implementing, and 
operationalizing policies and programs that support health for all 
people served by our program.
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. 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 final 
rule, we proposed to adopt the DC Function measure beginning with the 
FY 2025 LTCH QRP. We proposed 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 invited public comments on this proposal. We did not receive 
public comments on this proposed provision, and therefore, we are 
finalizing as proposed.
c. 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 this final rule, we proposed 
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 
proposed 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 also proposed to add a new item to the LCDS in order for LTCHs 
to report the proposed 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.\910\
---------------------------------------------------------------------------

    \910\ 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 invited public comments on this proposal. The following is a 
summary of the comments we received on our proposal to require LTCHS to 
report a new LCDS assessment data item for the Patient/Resident COVID-
19 Vaccine measure beginning with patients discharged on October 1, 
2024 and our responses.
    Comment: Two commenters provided an alternate recommendation, 
encouraging CMS to explore other methods of collecting patient COVID-19 
vaccine data rather than imposing new reporting requirements on 
providers. They cited a Washington Post article that found that only 
around 20 percent of healthcare facilities are ``equipped to report 
disease cases electronically to state health departments.'' \911\ These 
commenters stated CMS should therefore continue to explore improvements 
in gathering data through the states rather than imposing these 
burdensome reporting requirements on providers.
---------------------------------------------------------------------------

    \911\ End of covid emergency highlights U.S. weakness in 
tracking outbreaks. The Washington Post. May 9, 2023. https://www.washingtonpost.com/health/2023/05/09/covid-data-public-health-emergency-ends/.
---------------------------------------------------------------------------

    Response: We do not find this article to be applicable to the LTCH 
QRP, nor do we think this article is relevant to the proposed measure 
since the proposed Patient/Resident COVID-19 Vaccine measure reports 
vaccination status, and not a disease case. LTCHs have been 
successfully reporting disease cases to the NHSN since 2013 and 
currently report Catheter-Associated Urinary Tract Infection (CAUTI), 
Central Line-Associated Bloodstream Infection (CLABSI) and Clostridium 
difficile Infection (CDI) information to NHSN as part of the LTCH QRP. 
We find assessment-based measures like the Patient/Resident COVID-19 
Vaccine measure have several benefits that are not provided by state 
reported data, such as patient-level data, a variety of reports LTCHs 
can use to assess performance, as well as public reporting of the data. 
This measure will be included in LTCH Review and Correct reports as 
well as QM patient and facility level confidential feedback reports. 
Additionally, this data will allow for granular analyses of 
vaccinations, including identification of potential disparities within 
the LTCH QRP.
    After consideration of the public comments we received, we are 
finalizing our proposal to require LTCHs to report the new LCDS 
assessment data item for the Patient/Resident COVID-19 Vaccine measure 
beginning with patients discharged on October 1, 2024 for the FY 2026 
LTCH QRP.

[[Page 59254]]

d. 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.\912\
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    \912\ 79 FR 50312 through 50313.
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    We proposed that, beginning with the FY 2026 LTCH QRP, 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, the proposal would contribute to further 
alignment of data completion thresholds across the PAC settings.
    We believe LTCHs should be able to meet the proposed requirement 
for the LTCH QRP because our data shows that LTCHs are already in 
compliance with, or exceeding, the proposed threshold. The complete 
list of items required under the LTCH QRP is updated annually and 
posted on the LTCH QRP Measures Information page.\913\
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    \913\ 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 proposed that LTCHs would be required to comply with the 
proposed new completion threshold beginning with the FY 2026 LTCH QRP 
LTCH QRP. 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 also proposed to update Sec.  
412.560(f)(1) of our regulations to reflect this new policy (see the 
regulation text in this final rule).
    We invited 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 LTCH QRP. The following is a summary of the 
comments we received and our responses.
    Comment: A commenter supported our proposal to increase the data 
compliance threshold for LCDS data items for the LTCH QRP.
    Response: We thank the commenter for their support.
    Comment: A number of commenters opposed the proposal to increase 
the data compliance threshold for LCDS data items and referenced CMS' 
statement in the proposed rule (88 FR 27154) that our data shows LTCHs 
are already in compliance with, or exceeding, the proposed threshold. 
They stated the existing 80 percent data completion threshold is a 
sufficient incentive for ensuring that CMS obtains the quality data it 
needs and the proposed higher threshold is unlikely to significantly 
increase the rate of complete LCDS assessments submitted by LTCHs, 
since many are already satisfying the 90 percent compliance threshold.
    Three of these commenters suggested that the increased threshold 
would put unnecessary pressure on those who were achieving the minimum 
80 percent threshold and potentially negatively affect the accuracy of 
the data. These commenters stated that increasing the data completion 
threshold from 80 percent to 90 percent would disadvantage LTCHs that 
care for the most vulnerable, highly complex patients while not 
providing any additional incentive for others to report better data.
    Response: We acknowledge the commenters concerns but we still think 
increasing the threshold will result in a greater number of complete 
LCDS assessments submitted by LTCHs. While we acknowledge that patients 
in LTCHs can be complex and acutely ill, it is for those reasons that 
collection of more complete data is important. The LCDS is composed of 
data items designed to inform quality measure calculations, including 
risk-adjustment calculations. Increasing the data completion threshold 
will further inform our quality work at CMS, allowing for the continued 
improvement in quality of care. Additionally, having more complete 
information will ensure we recognize the acuity and complexity of these 
patients for LTCH measures' risk adjustment, while also allowing our 
beneficiaries to gain a more complete understanding of LTCH performance 
related to LTCH QRP measures, and helping them to make informed 
healthcare choices.
    Comment: Several commenters opposed the increase in data completion 
threshold stating that the buffer is necessary in order to accommodate 
those instances in which it is not possible to complete the assessment 
for clinical reasons, such as when patients are discharged or 
transferred to an acute care hospital under emergency circumstances. 
They believe that in these cases, it would be inappropriate to stop the 
emergency discharge or transfer process to undertake, for example, a 
skin assessment of the patient. They believe that for facilities who 
serve larger proportions of complex and/or acutely ill patients, these 
cases are more frequent and increasing the threshold to 90 percent 
would put these facilities that have otherwise been in compliance with 
the reporting requirements at a serious disadvantage. A commenter noted 
that they are concerned CMS will use the higher compliance threshold to 
impose the 2 percent LTCH QRP payment penalty on more LTCH providers 
for unplanned discharges. They referenced the LCDS Manual V5.0 that 
states CMS is are ``aware that there are certain circumstances in which 
LTCHs may not be able to complete every item on the LCDS assessment.''
    Two of these commenters suggested that CMS should not adopt the 90 
percent data completion threshold until they also adopted an exclusion 
for unplanned discharges and hospital readmissions within 30 days of 
admission from the LTCH QRP data compliance calculation. They believe 
this exclusion is necessary because there are a significant number of 
unplanned or emergent discharges

[[Page 59255]]

where it is impossible to fully complete all LCDS data items. Another 
commenter suggested removing the skin assessment from the unplanned 
discharge LCDS item set.
    Response: We believe LTCHs consider patient care of paramount 
importance and should use clinical judgement when patients are 
discharged or transferred to an acute care hospital under emergency 
circumstances. The LCDS Manual V5.0 provides guidance on how to code 
LCDS items on discharge, and we encourage LTCHs to use the guidance as 
well as submit comments to the LTCH QRP Help Desk as needed. We also 
acknowledge the statement the commenters reference in the LCDS Manual 
V5.0 Chapter 2, and note that section of the manual goes on to say that 
we expect dash use to be a rare occurrence.\914\
---------------------------------------------------------------------------

    \914\ CMS LCDS Manual Version 5.0--Effective October 1, 2022. 
Chapter 2, Page 2-2. https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/ltch-quality-reporting/ltch-care-data-set-and-ltch-qrp-manual.
---------------------------------------------------------------------------

    We have considered emergent discharges as one reason that LTCHs may 
not meet data completion thresholds approaching 90 percent, but believe 
that LTCHs should be able to meet the proposed threshold of 90 percent 
and can confirm that the majority of LTCHs are meeting this threshold 
presently. Additionally, there is an LCDS item set specifically for 
unplanned discharges that contains a reduced set of data elements. The 
LCDS Version 5.0, Unplanned Discharge item set is 33 percent shorter 
than the LCDS Version 5.0, Planned Discharge item set, and has 
approximately 33 percent fewer items to complete. For each of the items 
on the Unplanned Discharge item set, the LCDS guidance manual provides 
instructions for how to code the items if the item does not apply to 
the patient or the patient is unable to respond. Selecting these 
responses when applicable counts toward the data completion threshold. 
Additionally, the assessments of the special services, treatments, and 
interventions with multiple responses are formatted as a ``check all 
that apply'' format. Therefore, when treatments do not apply, the 
assessor need only check one row for ``None of the Above,'' and the 
data completion requirement is met.
    Regarding the commenters' suggestion that we exclude unplanned 
discharges or discharges from the LTCH within 30 days of admission from 
the calculation of an LTCH's data completion, we believe collecting 
quality data using the LCDS on these patients is just as important as 
data we collect on patients who have a planned discharge.
    Comment: Several commenters expressed concern that if CMS were to 
raise the data completion threshold, it would be used to impose the 2 
percent payment penalty on more LTCH providers for technical issues or 
system problems that LTCHs frequently experience with CDC's National 
Healthcare Safety Network (NHSN) and CMS's internet Quality Improvement 
and Evaluation System (iQIES) data submission systems. They believe 
that until CMS adopts safeguards against these technical non-compliance 
and system errors, it should not increase the LCDS data completion 
threshold because it would punish more providers that make 
unintentional technical errors, experience challenges outside of their 
control, or are attempting to report data timely in good faith.
    Three of these commenters also request that CMS reconsider its 
position that only categorically and absolutely perfect quality data 
reporting is sufficient, without any leeway to correct clerical or 
administrative errors, or any grace period for inadvertently omitted 
data. They request CMS adopt a short grace period after each reporting 
deadline to allow LTCHs to confer with CMS, NHSN and iQIES staff to 
determine the specific data that was not properly submitted or received 
by CMS, and resolve the issue in a productive and collaborative way 
before the LTCH is penalized. Such a grace period would achieve the 
agency's goal of increased compliance and data completion, and reduce 
unnecessary payment penalties on well-intentioned providers. They also 
noted concerns with NHSN data submission.
    Response: Regarding the commenters' concerns about the CDC's NHSN, 
our proposal was specific to the data completion threshold for 
assessment-based data and therefore, we will not be responding to the 
comments about the NHSN.
    We acknowledge that there are occasional technical issues with the 
iQIES data submission system. However, in CY 2022, all of the known 
issues posted on the iQIES website \915\ were corrected with ample time 
remaining in the data submission window for LTCHs to submit data. In 
the FY 2016 IPPS/LTCH final rule (80 FR 49751), we finalized data 
submission and correction timelines for LTCH QRP data. LTCHs have 4.5 
months (approximately 135 days) from the end of a calendar year quarter 
to submit, review, and correct their quality data for that CY quarter. 
This timeline aligns with other quality reporting programs' data 
submission and correction deadlines and meets the goal of providing a 
`grace period' where LTCHs and CMS can resolve any issues.
---------------------------------------------------------------------------

    \915\ Internet Quality Improvement and Evaluation System, iQIES 
Known Issues. https://iqies.cms.gov/known-issues.
---------------------------------------------------------------------------

    We also want to remind providers that there are several reports 
available to providers to monitor their compliance with the QRP 
reporting requirements during the year. These reports are available 
within iQIES to providers, including the LTCH Final Validation Report 
(FVR) and the Provider Threshold Report (PTR). The LTCH FVR is 
automatically generated in iQIES within 24 hours of the submission of a 
file and placed in the provider's My Reports folder. The FVR provides 
detailed information about the status of submission files, including 
warnings and fatal errors encountered. The PTR allows providers to 
monitor their compliance status regarding the required data submission 
for the LTCH QRP measures for the current Annual Payment Update (APU). 
It is a user requested and on-demand report, meaning that it can be 
pulled anytime by the LTCH. LTCHs can sign up to receive informational 
messages if you are not meeting the APU threshold. These are sent out 
on a quarterly basis ahead of each submission deadline.\916\ The iQIES 
Help Desk is also available to answer any questions related to data 
submission.\917\
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    \916\ If you need to add or change the email addresses to which 
these messages are sent, please email [email protected] and be 
sure to include your facility name and CCN along with any requested 
email updated.
    \917\ iQIES Help Desk at [email protected].
---------------------------------------------------------------------------

    Finally, if LTCHs believe they have received the QRP penalty 
unfairly, they can choose to use the LTCH QRP Reconsideration and 
Exception and Extension process. LTCHs may file for reconsideration if 
they believe the finding of non-compliance is an error, or they have 
evidence of the impact of extraordinary circumstances that prevented 
timely submission of data. LTCHs dissatisfied with the reconsideration 
ruling may file a claim under 42 CFR part 405, subpart R (a Provider 
Reimbursement Review Board [PRRB] appeal).\918\ Details are available 
on the PRRB Review Instructions web page. Alternatively, LTCHs can 
request an exception or extension from the program's reporting 
requirements in the event they were unable to submit quality data due 
to extraordinary circumstances beyond their control, as

[[Page 59256]]

long as they submit the request within 90 days of the event.
---------------------------------------------------------------------------

    \918\ PRRB Instructions. Available at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/PRRB-Instructions.
---------------------------------------------------------------------------

    Comment: Two commenters believed that the statutory language 
Congress passed as part of the Patient Protection and Affordable Care 
Act (ACA) gives CMS the discretion to take a more flexible approach to 
the administration of the LTCH QRP. They point to paragraph (5) of the 
LTCH PPS statute at 42 U.S.C. 1395ww(m) that directs CMS to apply a 2 
percent payment penalty when the LTCH does not submit data on quality 
measures in the form and manner required by CMS. However, they 
suggested that CMS' interpretation of the statute is too strict since 
an LTCH must have essentially perfect compliance with the form, manner, 
and timing of its LTCH QRP data submissions to avoid the 2 percent 
payment penalty, and they believe there is no basis for this strict 
application.
    Response: We strive to have a program that enables the submission 
of complete measure data which informs not only the provider but the 
public on the care received during an LTCH stay. The goal is always to 
have 100 percent of the quality data submission, rather than an 
expectation that LTCHs will meet the minimum threshold of the 
compliance required. However, we understand that at times data cannot 
be gathered or entered perfectly. We have accounted for this in a 
variety of ways through outreach, reports, our exception and extension 
process, as well as the ability to use the `dash' within the assessment 
itself. We see this increase in the compliance threshold as moving the 
goal post to incentivize higher quality of care, rather than a punitive 
action. Currently, the threshold is set at 80 percent, and we proposed 
a 90 percent data submission threshold, which still allows a 10 percent 
buffer for LCDS assessments that fail to report 100 percent of the data 
required.
    We do not have the same interpretation of the statute. Our 
interpretation is based on the Affordable Care Act enacted by the 111th 
Congress, which stipulated that the Secretary of HHS set forth 
administration requirements for LTCH QRP. Specifically, section 
1886(m)(5)(C) of the Act requires that, for the FY 2014 payment 
determination and subsequent years, each LTCH submit data on quality 
measures specified by the Secretary in a form and manner, and at a 
time, specified by the Secretary. In the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 28273 through 28275), we adopted specific LTCH QRP 
thresholds for completeness of LTCH quality data beginning with data 
affecting the FY 2016 payment determination and subsequent years, and 
these are codified at Sec.  412.560(f). We want to reiterate that CMS 
does not use the data completion thresholds as a punitive tool but 
rather a way to benchmark the quality of care using quality measures. 
We must adhere to the standards previously enacted through notice and 
comment rulemaking, and currently the standard is that LTCH's must 
achieve at least 80 percent for completion of measures data and 
standardized patient assessment data collected using the LCDS submitted 
through the CMS designated data submission system.
    Comment: Several commenters opposed the proposal to increase the 
LTCH data completion thresholds for LCDS data items due to the burden 
associated with the increased number of items on the LCDS V5.0. Two of 
these commenters also related the burden to the ongoing workforce 
challenges, while two others related it to the complexity of their 
patients or the number of unplanned discharges they experience, both of 
which they stated are out of their control. Four of these commenters 
stated that before implementing any changes, CMS should do four things: 
(1) assess the actual burden of completing the LCDS; (2) gain an 
understanding of the data elements and factors driving below 90 percent 
response rates (for example, unplanned discharge assessments); (3) 
assess the quality of the information it has already collected; and (4) 
document how existing information is being used to improve patient 
outcomes.
    Response: We have strived to balance the scope and level of detail 
of the data elements against the potential burden placed on LTCHs. We 
have provided multiple training resources and opportunities for LTCHs 
to take advantage of in order to become more familiar and proficient 
with completing the LCDS. These continue to be available to LTCHs on 
the LTCH QRP Training web page so LTCHs can use them with new 
staff.\919\ While we acknowledge the impacts of the ongoing workforce 
challenges, these challenges also make it especially important now to 
monitor quality of care.\920\ We must maintain commitment to the 
quality of care for all patients, and we continue to believe that the 
collection of the standardized patient assessment data elements and 
other data elements on the LCDS will contribute to this effort. That 
includes staying committed to achieving health equity by improving data 
collection to better measure and analyze disparities across programs 
and policies \921\ and improving the quality of care in LTCHs through a 
reduction in preventable adverse events, such as emergent and unplanned 
discharges.
---------------------------------------------------------------------------

    \919\ https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/ltch-quality-reporting/ltch-quality-reporting-training.
    \920\ https://psnet.ahrq.gov/primer/nursing-and-patient-safety.
    \921\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy. 2016. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf. Report 
to Congress: Improving Medicare Post-Acute Care Transformation 
(IMPACT) Act of 2014 Strategic Plan for Accessing Race and Ethnicity 
Data. January 5, 2017. Available at: https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Research-Reports-2017-Report-to-Congress-IMPACT-ACT-of-2014.pdf. Rural Health Research Gateway. 
Rural Communities: Age, Income, and Health Status. Rural Health 
Research Recap. November 2018. https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf. www.cdc.gov/mmwr/volumes/70/wr/mm7005a1.htm. Poteat TC, Reisner SL, Miller M, Wirtz 
AL. COVID-19 Vulnerability of Transgender Women With and Without HIV 
Infection in the Eastern and Southern U.S. Preprint. medRxiv. 
2020;2020.07.21.20159327. Published 2020 Jul 24. doi:10.1101/
2020.07.21.20159327.
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    In response to the commenters' four recommendations CMS should 
undertake before raising the threshold, we address each of those next. 
First, we do assess the burden of completing the LCDS. Prior to adding 
any new data element to the LCDS, we evaluate the need for the 
information collection and its usefulness to the LTCH QRP, as well as 
the quality, utility, and clarity of the information to be collected. 
We employ a transparent process to seek input from interested parties 
and national experts and engage in a process that allows for pre-
rulemaking input on proposed data elements and consider all 
recommendations to minimize the information collection burden on LTCHs. 
The data elements are proposed in formal notice and comment rulemaking, 
so there is transparency for LTCHs in evaluating the proposal and the 
estimate of burden that accompanies it. Each time CMS has proposed 
adding a new item or items, we have followed this process.\922\
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    \922\ FY 2013, FY 2014, FY 2015, FY 2016, FY 2017, FY 2018, FY 
2020.
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    In response to the commenters' recommendation that CMS gain an 
understanding of the specific data elements and factors that contribute 
to LTCHs failing to achieve the data completion threshold, we do 
routinely monitor the LTCH data to identify performance gaps and 
trends. At the end of each reporting period, CMS reviews the data 
submitted by LTCHs to understand which item(s) may have contributed to 
a provider(s) lower compliance threshold. We use this information to 
build our education and

[[Page 59257]]

outreach programs. In response to the recommendations that we assess 
the quality of the information we have collected and document how 
existing information is being used to improve patient outcomes, we 
already undertake these activities. For example, we assess the quality 
of the information we collect each quarter before we publicly report 
the data on Care Compare. We have an obligation to beneficiaries to 
ensure complete and accurate LTCH QRP measure data, which allows our 
beneficiaries to gain a more complete understanding of LTCH 
performance, helping them to make informed healthcare choices. We also 
routinely monitor the individual data elements and the quality measures 
they contribute to, in order to ensure they produce statistically 
meaningful information that can inform improvements in care processes.
    In response to comments received, while still maintaining our goal 
of moving towards more complete data, we note that as part of this 
final rule, we are updating the proposed compliance threshold of 90 
percent to 85 percent. This iterative approach will incentivize LTCHs 
to strive for more complete data submission at the same time they meet 
the compliance threshold of 85 percent. Consequently, LTCHs will be 
required to collect and report LCDS assessment data on at least 85 
percent of assessments beginning with FY 2026. CMS will closely monitor 
LTCH's performance at this threshold. As we stated in previous rules 
\923\ it was always our intent to raise the 80 percent threshold, and 
it is still our intent to raise this threshold in order to further 
align data completion thresholds across the PAC settings. Such 
revisions would be proposed through the notice and comment rulemaking 
process.
---------------------------------------------------------------------------

    \923\ 79 FR 50312 through 50313.
---------------------------------------------------------------------------

    Comment: Three commenters suggested that if CMS finalizes the 
proposed increase to the LCDS data completion threshold it will not 
improve the data available to CMS, but it would lead to more LTCHs 
receiving the 2 percent payment penalty even when reporting data timely 
in good faith. However, they request that if CMS does increase the LCDS 
data completion threshold to 90 percent, CMS should also set a uniform 
90 percent threshold for the LTCH QRP by decreasing the NHSN compliance 
threshold from 100 percent to 90 percent. They believe the current 100 
percent threshold for NHSN quality measures has a clear history of 
being used in a punitive way that frequently results in consequences 
for LTCHs that they believe are impacted by NHSN system issues or minor 
clerical errors LTCHs make.
    Response: Increasing the LCDS data completion threshold will 
improve the data available to CMS and help ensure the validity and 
reliability of quality data items, including risk-adjustment models. As 
we stated in the FY 2024 IPPS/LTCH proposed rule (88 FR 27154), the 
increase in threshold percent is based on the need for substantially 
complete records and would contribute to further alignment of the data 
completion thresholds across the PAC settings. Regarding the 
commenters' suggestion that CMS should lower the NHSN compliance 
threshold from 100 percent to 90 percent, we did not propose to modify 
the NSHN threshold and therefore we will not be responding to the 
comment.
    Comment: Two commenters believe it is imperative that CMS address 
the calculation method of the LCDS data completion percentage. They do 
not believe CMS should treat a patient assessment with a single item 
omitted the same way a patient assessment missing 95 percent of the 
items is treated. As a result, they disagree that the proposed increase 
in the threshold from 80 percent to 90 percent ensures a significant 
increase in the patient assessment data CMS receives, but instead would 
result in 2 percent payment penalties to well-intentioned LTCHs that 
submit nearly flawless patient assessment.
    Response: The LCDS data completion threshold was adopted in the FY 
2015 IPPS/LTCH final rule (79 FR 50312-50313), and was based on the 
need for ``complete'' quality data, and therefore partial data 
submission cannot be considered to meet the quality standards. An LCDS 
is ``complete'' when the required data elements have actual patient 
data reported, as opposed to a non-informative response, such as a dash 
(-), that indicates the LTCH was unable to provide patient data. 
``Complete'' LCDS data is needed to create complete records, which 
allows for 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. In 
addition, complete data is needed to understand the validity and 
reliability of quality data items, including risk-adjustment models. 
Finally, we want to ensure complete quality data from LTCHs, which will 
ultimately be reported to the public.
    Comment: A commenter is especially concerned with the proposed 
increase in the data completion threshold because of the required 
Standardized Patient Assessment Data Elements (SPADEs) that they 
believe are neither used for quality reporting purposes nor proposed 
for use in any quality measure for the LTCH QRP. They state that CMS 
has not provided any additional information related to the intended use 
of many of the data elements other than the intent to levy payment 
penalties should the information not be collected. In addition, limited 
testing was conducted on the feasibility of collecting the new SPADEs 
and consideration was not given to whether these new data elements 
would differentiate patient characteristics or provider performance.
    Response: The standardized patient assessment data elements adopted 
for the LTCH QRP underwent extensive testing over several years. The 
Improving Medicare Post-Acute Care Transformation Act of 2014 (the 
IMPACT Act) required the reporting of standardized patient assessment 
data with regard to quality measures and standardized patient 
assessment data elements. Development of the candidate standardized 
patient assessment data items began in 2015 and there were multiple 
opportunities for input and comment by interested parties through 
technical expert panels, listening sessions, townhalls, and requests 
for information in formal notice and comment rulemaking. We encourage 
the commenter to go to the IMPACT Act web page where these materials 
are available for review.\924\
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    \924\ IMPACT Act of 2014 Data Standardization & Cross Setting 
Measures. https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/post-acute-care-quality-initiatives/impact-act-of-2014/impact-act-of-2014-data-standardization-and-cross-setting-measures.
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    Comment: A commenter shared feedback on LCDS Version 5.0 (effective 
October 1, 2022) and the challenges that were created with the most 
recent data collection and submission requirements.
    Response: Because we consider these public comments to be outside 
the scope of the proposed rule, we are not addressing them in this 
final rule.
    After consideration of the public comments we received, we are 
finalizing our proposal with modification to require LTCHs to report 
100 percent of the required quality measures data and standardized 
patient assessment data collected using the LCDS on at least 85 percent 
of all assessments submitted beginning with the FY 2026 payment 
determination and subsequent years.

[[Page 59258]]

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. 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 proposed 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 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 proposed 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 
proposed 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 invited 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. The following is a summary of the 
comments we received and our responses.
    Comment: We received overwhelming support for the proposal to 
publicly report the Transfer of Health Information to the Provider-PAC 
Measure and the Transfer of Health Information to the Patient-PAC 
Measure beginning with the September 2024 Care Compare refresh or as 
soon as possible.
    Response: We appreciate these commenters' support for the proposed 
public reporting of these measures.
    After consideration of the public comments we received, we are 
finalizing our proposal 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.
c. Public Reporting of the Discharge Function Score Measure Beginning 
With the FY 2025 LTCH QRP
    We proposed 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). We proposed that 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 proposed 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 invited 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. The 
following is a summary of the comments we received and our responses.
    Comment: A commenter provided support to publicly report the DC 
Function measure.
    Response: We thank the commenter for their support to publicly 
report the DC Function measure.
    After consideration of the public comments we received, we are 
finalizing our proposal to begin publicly displaying data for the DC 
Function measure beginning with the September 2024 Care Compare refresh 
or as soon as technically feasible.
d. 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 proposed 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). We proposed that 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 proposed 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 invited 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. The following is a summary of the 
comments we received and our responses.
    Comment: Three commenters supported public reporting of this 
measure. One of the commenters noted their support stating this would 
help patients, caregivers and loved ones make informed decisions about 
LTCH choices that might best suit their individual health care needs, 
especially

[[Page 59259]]

if they are greater risk of serious complications from COVID-19.
    Response: We thank the commenters for their support and agree this 
measure will provide potential patients with important information 
regarding COVID-19 vaccination rates as part of their process of 
identifying providers they would want to seek care from, in addition to 
other measures available on Care Compare.
    After consideration of the public comments we received, we are 
finalizing our proposal to begin publicly displaying data for the 
Patient/Resident COVID-19 measure beginning with the September 2025 
Care Compare refresh or as soon as technically feasible.

F. Changes to the Medicare Promoting Interoperability Program

1. Statutory Authority for the Medicare Promoting Interoperability 
Program for Eligible Hospitals and Critical Access Hospitals (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 the 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 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) and 413.70(a)(5) and (6) and part 495.
2. EHR Reporting Periods
a. 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 Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System (IPPS/LTCH PPS) final rule (86 FR 45460 
through 45462). We believe that maintaining a 180-day EHR reporting 
period for an additional year will 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 proposed in the FY 2024 
IPPS/LTCH PPS proposed rule that the EHR reporting period in CY 2025 
would continue to be a minimum of any continuous 180-day period within 
CY 2025 (88 FR 27155 through 27156). We described in the proposed rule 
that 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 proposed corresponding 
revisions to the definition of EHR reporting period for a payment 
adjustment year at Sec.  495.4 (88 FR 27155 through 27156).
    We invited public comment on this proposal.
    Comment: Many commenters supported our proposal to maintain a 180-
day EHR reporting period in CY 2025 for eligible hospitals and CAHs. 
One commenter specifically supported the proposal because they believed 
that vendors have consistently proven they are able to release software 
updates that can accommodate this length of a reporting period. Another 
commenter supported the proposal, while recommending CMS provide 
flexibility for hospitals that may switch EHRs within an EHR reporting 
period, and those that have an EHR vendor acquired or divested. A few 
commenters supported the proposal because they believed that it would 
maintain stability, flexibility, and consistency. One such commenter 
believed that program consistency has led to nearly universal EHR 
adoption among non-Federal acute care hospitals and use by most office-
based physicians. Another such commenter believed that the 180-day EHR 
reporting period would allow hospitals to adequately account for system 
upgrades and other pertinent changes to their EHR technology, ensuring 
accurate and comprehensive reporting.
    Response: We thank the commenters for their support. We agree that 
maintaining a minimum 180-day EHR reporting period for an additional 
year will 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 commenters asking for additional 
flexibility to account for a change in EHR vendor, we do not specify 
which 180-days must be chosen, only that the chosen 180-days are 
continuous. We recommend eligible hospitals and CAHs work with their 
chosen vendor on the timing of their system updates in advance.
    Comment: Many commenters did not support our proposal to maintain a 
180-day EHR reporting period in CY 2025 for eligible hospitals and 
CAHs. A few commenters believed that 180-days of continued reporting 
would be difficult to achieve and would place more burden on providers. 
One such commenter expressed that annual releases for the Medicare 
Promoting Interoperability Program measure specifications are usually 
made available during the second quarter of the calendar year from EHR 
developers. This commenter believed that the program measures require 
significant time and resources to configure, validate, optimize, and 
implement in the EHR. This commenter further believed that a period of 
one year or less when a new measure is released to mandatory reporting 
would not be adequate for the necessary preparations to report in a 
180-day reporting period. Several commenters wished to maintain a 90-
day EHR reporting period for CY 2024 onwards. One of these commenters 
believed that a 90-day EHR reporting period would give providers 
flexibility to develop their reporting infrastructure and make 
necessary updates to their EHR systems to comply with the Merit-based 
Incentive Payment System (MIPS) Promoting Interoperability performance 
category requirements. This commenter also believed that a shorter 
reporting period would give hospitals time to adjust to these changes 
and make system changes necessitated by revised

[[Page 59260]]

measures or vendor changes and upgrades. A few commenters expressed a 
preference for a 90-day reporting period because they believed that 
EHRs are continually undergoing software upgrades, system downtime, 
expansions to other sites within a system, and a variety of other 
improvement and maintenance activities. A commenter believed that 
changing the reporting period to a continuous 180-day EHR reporting 
period would not produce a more comprehensive score card of reliable 
data.
    Response: We thank the commenters for their feedback. We would like 
to remind commenters that under the definition of EHR reporting period 
for a payment adjustment year at Sec.  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 already a minimum of any continuous 180-day 
period within CY 2024, as previously finalized in the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 45460 through 45462). The proposal in the FY 2024 
IPPS/LTCH PPS proposed rule was for a continuation of our existing 180-
day EHR reporting period established for CY 2025. We disagree with 
commenters who believe that 180-days of continued reporting would be 
difficult to achieve and would place additional burden on health care 
providers. We believe that after finalizing the 180-day EHR reporting 
period for CY 2024 in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45460 
through 45462), and proposing to continue with the 180-day EHR 
reporting period in CY 2025 (88 FR 27155 through 27156), eligible 
hospitals and CAHs will have had more than three years of advance 
planning with their vendors to build upon and utilize investments 
already made within their infrastructure to meet site-specific needs 
for implementation. We also note that the EHR reporting period has 
remained at 90-days since its adoption in 2011, where at that time, we 
indicated that we would continue to increase the number of days in an 
EHR reporting period (75 FR 44320). We believe that maintaining an EHR 
reporting period of 180 days for CY 2025 will not impact eligible 
hospitals' and CAHs' efforts to update, implement, and test the EHR 
systems to maintain effective use of CEHRT in furtherance of meaningful 
use. Reporting on additional data will provide eligible hospitals and 
CAHs the opportunity to continuously monitor their performance and 
identify areas that may require investigation and corrective action. 
Maintaining the 180-day EHR reporting period in CY 2025 is important 
for the continued improvement of interoperability and health 
information exchange by producing more comprehensive and reliable data 
for patients and providers, which are key goals of the Medicare 
Promoting Interoperability Program. In response to commenters 
requesting that the Medicare Promoting Interoperability Program 
maintain alignment with the MIPS Promoting Interoperability performance 
category, we refer readers to the CY 2024 PFS proposed rule (FR Doc. 
2023-14624, publishing in the Federal Register on August 7, 2023; 
available at https://www.federalregister.gov/public-inspection/2023-14624/medicare-and-medicaid-programs-cy-2024-payment-policies-under-the-physician-fee-schedule-and-other), where we have proposed a minimum 
of a continuous 180-day performance period for MIPS eligible clinicians 
in CY 2024, in order to maintain alignment with the Medicare Promoting 
Interoperability Program's 180-day EHR reporting period.
    Comment: Several commenters did not support our proposal to 
maintain a 180-day EHR reporting period in CY 2025 for eligible 
hospitals and CAHs because they believed that vendors and providers 
need more time and additional resources. Several commenters believed 
that vendors need additional time to develop and deploy technology, 
understand CEHRT requirements, capabilities, and functionalities. 
Further, other commenters believed that eligible hospitals and CAHs 
need additional time to budget for the adoption and implementation of 
this requirement, and time to identify and resolve software issues. A 
few commenters believed that eligible hospitals, CAHs, and other health 
care organizations needed more time to recover from the financial, 
workforce, and operational challenges the COVID-19 pandemic placed on 
them, such as provider burnout, staffing shortages, and other burdens 
and disruptions. A commenter believed that eligible hospitals and CAHs 
need more time to return to the traditional reporting and regulatory 
landscape as they adjust clinical and administrative processes until 
all PHE flexibilities expire.
    Response: We thank commenters for sharing their concerns. We 
believe that continuing the 180-day EHR reporting period in CY 2025 
will not impact eligible hospitals' and CAHs' efforts to update, 
implement, and test their EHR systems to maintain effective use of 
CEHRT in furtherance of meaningful use. For commenters concerned with 
limited flexibility in choosing a 180-day EHR reporting period when 
considering general updates to health IT systems or transitions between 
health IT systems, we suggest early planning with vendors on the timing 
of routine system updates and downtimes to allow for maximum 
flexibility in choosing their 180-day EHR reporting period. 
Additionally, we would like to remind commenters that the Medicare 
Promoting Interoperability Program allows hardship exception 
applications for extreme and uncontrollable circumstances, including 
certain vendor issues, as permitted by section 1886(b)(3)(B)(ix)(II) of 
the Act. Additional information on this process is available at: 
https://www.cms.gov/files/document/medicare-pi-program-hardship-exception-fact-sheet-2023-04-06.pdf. Moreover, we understand there are 
residual impacts of the COVID-19 public health emergency (PHE) on 
eligible hospitals and CAHs. We believe that the COVID-19 PHE 
highlighted areas where we can focus our efforts, to include allowing 
eligible hospitals and CAHs the opportunity to monitor their 
performance over a longer EHR reporting period, and to identify areas 
that may require investigation and corrective action. This is important 
for the continued improvement of interoperability and health 
information exchange, which are key goals of the Medicare Promoting 
Interoperability Program. For additional information on our proposal to 
increase the EHR reporting period from 90-days to 180-days in CY 2024, 
we refer readers to the discussion in the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45461).
    After consideration of the public comments we received, we are 
finalizing that the EHR reporting period in CY 2025 will be a minimum 
of any continuous 180-day period within CY 2025. We are also finalizing 
our proposal to revise the definition of EHR reporting period for a 
payment adjustment year at Sec.  495.4.
b. 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 paragraphs (2)(vii) and (viii) of Sec.  495.4, we specify 
that 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, read as follows:
    For CY 2023: (A) If an eligible hospital has not successfully 
demonstrated it is a meaningful EHR

[[Page 59261]]

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, 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 one 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 proposed to 
change the rule for eligible hospitals that have not successfully 
demonstrated they are a meaningful EHR user in a prior year (88 FR 
27156 through 27157). We have made technological modifications to the 
data submission process for the Medicare Promoting Interoperability 
Program, including the registration and attestation processes. 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 the 
CCSQ help desk for assistance at [email protected] or 1-866-288-
8912 for instructions.
    According to the 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.\925\ We believe that few eligible 
hospitals or CAHs will be new participants in the Medicare Promoting 
Interoperability Program, and therefore, few eligible hospitals or CAHs 
are likely to be affected by this change. 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 believed that this 
proposal was feasible. Therefore, beginning with the EHR reporting 
period in CY 2025, we proposed in the FY 2024 IPPS/LTCH PPS proposed 
rule 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 (88 FR 27156 
through 27157).
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    \925\ 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.
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    We also proposed that for all eligible hospitals (new and returning 
participants), the EHR reporting period in CY 2025 will apply for 
purposes of the FY 2027 payment adjustment year (88 FR 27156 through 
27157). Eligible hospitals and CAHs will 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 will mean that for 
eligible hospitals that have not successfully demonstrated they are 
meaningful EHR users in a prior year, there will 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 will not 
have to attest to meaningful use by October 1, 2025. Instead, similar 
to eligible hospitals that have demonstrated meaningful use, these 
eligible hospitals would attest during the same 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 will be applied for the FY 2027 
payment adjustment year. We proposed corresponding revisions to the 
definition of EHR reporting period for a payment adjustment year at 
Sec.  495.4 (88 FR 27156 through 27157).
    We invited comment on this proposal.
    Comment: A few commenters supported our proposal to eliminate the 
requirement for eligible hospitals to attest to meaningful use by 
October 1 of the year prior to the payment adjustment year if they have 
not successfully demonstrated meaningful use in a prior year. A 
commenter believed that it will reduce confusion and level the playing 
field, as longer EHR reporting periods are now required. Another 
commenter appreciated our proposal to simplify the regulatory language 
at Sec.  495.4. Another commenter believed that requiring first time 
attesters to attest prior to October 1 of the reporting year is 
unworkable with the 180-day reporting period, and that allowing first 
time attesters the ability to attest during the two months following 
the end of the reporting year is appropriate.
    Response: We thank commenters for their support. We agree that 
eliminating the requirement for eligible hospitals to attest to 
meaningful use by October 1 (or by a later date specified by CMS) of 
the year prior to the payment adjustment year, and to allow first time 
attesters to attest during the two months following the end of the 
reporting year will level the playing field for new and returning 
eligible hospitals. We thank commenters for also supporting our 
proposal to make corresponding changes to the regulatory text.
    After consideration of the public comments we received, we are 
finalizing our proposal that beginning with the EHR reporting period in 
CY 2025 for all eligible hospitals (new and returning participants), 
the EHR reporting period in CY 2025 will apply for purposes of the FY 
2027 payment adjustment year, and we are finalizing

[[Page 59262]]

our proposed changes to Sec.  495.4, which reflect 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. 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 
proposed 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 stated 
that 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 noted 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 to download or use at https://jamanetwork.com/journals/jama/fullarticle/2788984.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 (88 FR 27157). Under this proposal, an attestation of ``no'' 
would result in the eligible hospital or CAH not meeting the measure 
requirements, and not satisfying the definition of a meaningful EHR 
user under Sec.  495.4, which would subject the eligible hospital or 
CAH to a downward payment adjustment. We refer readers to Table IX.F.-
03. in this final rule for a description of the measure.
    We invited public comment on this proposal.
    Comment: Many commenters expressed support for the proposal to 
require eligible hospitals and CAHs to attest ``yes'' to having 
conducted an annual self-assessment of all nine SAFER Guides. Several 
commenters expressed support because they believe that the self-
assessment promotes patient safety and EHR system security and 
reliability.
    Response: We appreciate the commenters' support to require an 
annual self-assessment with all nine SAFER Guides. We agree that yearly 
self-assessments of all nine SAFER Guides supports EHR-related patient 
safety and security practices.
    Comment: A commenter expressed support for the proposal to require 
an annual self-assessment with the SAFER Guides, but requested a delay 
of at least one additional year to ensure hospitals have had sufficient 
time for full adoption of the SAFER Guides' recommended practices.
    Response: We thank the commenter for their support and suggestion. 
We remind readers that the SAFER Guides measure only requires that 
eligible hospitals and CAHs attest ``yes'' to having conducted an 
annual self-assessment using all nine SAFER Guides at any point during 
the calendar year in which the EHR reporting period occurs. There is no 
requirement to implement any of the best practices identified while 
performing the self-assessment, and we defer to eligible hospitals and 
CAHs to identify an appropriate timeline and utility of adopting 
specific best practices contained within the SAFER Guides. We disagree 
that a delay in requiring an annual self-assessment would be helpful to 
prepare hospitals for full adoption, because implementation of SAFER 
Guides recommended practices is not required as part of the 
attestation.
    Comment: A commenter supported the proposal but requested that CMS 
include detailed instructions for completing the self-assessment after 
the first year.
    Response: We thank the commenter for their support and request for 
detailed instructions. As with other Medicare Promoting 
Interoperability Program measures, CMS will provide resources such as 
specification sheets, fact sheets, webinars, and public announcements 
to communicate details about the SAFER Guides measure requirements and 
how to fulfill them. CMS and ONC will continue to provide supporting 
material as necessary for the completion of the SAFER Guides self-
assessment, and we will continue to obtain publicly available materials 
for participants. We remind readers to visit the CMS resource library 
website at https://www.cms.gov/regulations-guidance/promoting-interoperability/resource-library and the ONC website at https://www.healthit.gov/topic/safety/safer-guides for resources on the content 
and appropriate use of the SAFER Guides.
    We expect that after the first year of conducting the initial SAFER 
Guides self-assessment, the answers to the assessment questions may not 
change significantly unless an eligible hospital or CAHs has made 
significant system upgrades or transitions between systems or vendors. 
If there have been no significant intervening changes to a 
participant's EHR system, vendor, or its relevant policies and 
procedures, then the participant's responses can be held to remain 
valid and repeated after confirmation of that fact while completing 
their annual self-assessments. Our larger focus is for eligible 
hospitals and CAHs to regularly assess their progress and status on 
important facets of patient safety.
    Comment: Many commenters did not support this proposal and 
expressed concerns regarding the perceived burden of requiring a 
``yes'' attestation to having conducted an annual self-assessment using 
all nine SAFER Guides. While commenters acknowledged the importance of 
implementing safety practices for

[[Page 59263]]

planned or unplanned EHR downtime, many believed that that requiring an 
annual assessment of all nine guides would place significant burden on 
acute care hospitals and CAHs, particularly small, rural hospitals with 
limited resources. A few commenters stated that it would be challenging 
for both smaller hospitals and large organizations to gather the 
required documentation from various staff, partner organizations, and 
other vendors. A commenter cautioned CMS against inadvertently passing 
the burden down through implementation requirements. Another commenter 
believed that the annual cost was drastically different from the 
entirety of the proposed changes to the Hospital IQR Program. Another 
commenter recommended performing a one-time self-assessment instead of 
annual self-assessments.
    Response: We thank commenters for sharing their feedback and 
concerns. We would like to clarify and emphasize that this proposal 
does not require eligible hospitals and CAHs to confirm that they have 
implemented any of the SAFER Guides practices. We are requiring 
eligible hospitals and CAHs to affirmatively attest that they have 
completed the self-assessment using each of the nine SAFER Guides. We 
believe that this requirement will incentivize hospitals and CAHs to 
conduct the annual self-assessment and assist them in actively 
understanding and addressing potential safety vulnerabilities 
routinely, which may significantly impact their organization's safety 
posture in a timelier manner. With regard to the estimated annual costs 
associated with the proposal, in section I.O. of appendix A we 
acknowledge that while an upfront investment of resources and staff 
time may be needed to conduct a SAFER Guides self-assessment, 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.
    Comment: A few commenters did not support this proposal because 
they believe that the SAFER Guides self-assessment is redundant with 
other efforts. A few commenters believed that this proposal was 
redundant to the required annual Security Risk Assessment and other 
policies and procedures that hospitals already enforce. Another 
commenter believed that this proposal overlaps with the CEHRT review 
requirements. A few commenters believed that some of the ``Recommended 
Practices'' and ``Recommended Risk Assessments'' within the SAFER 
Guides were related to the hospitals' EHR vendor, and that hospitals 
were relying on the EHR developers and vendors to make an accurate, 
thorough self-assessment. Therefore, these commenters were concerned 
that this proposal, if finalized, would impose unfair penalties on some 
healthcare providers.
    Response: We thank these commenters for sharing their feedback and 
concerns. The SAFER Guides were intended to be utilized by EHR users, 
developers, patient safety organizations, and those who are concerned 
with optimizing the safety and safe use of health IT. Therefore, 
eligible hospitals and CAHs may need to work together with their EHR 
vendors on implementation of EHR safety practices. Regarding other 
program requirements, while the SAFER Guides provide overall guidelines 
and practical recommendations to ensure users are advancing EHR safety, 
the Security Risk Analysis (https://www.cms.gov/files/document/security-risk-analysis-fact-sheet.pdf) is specifically focused on 
identifying and analyzing security risks related to protecting health 
information, and health IT certification criteria related to security 
concentrate on the security aspects of EHR technology and compliance 
with health IT standards. We believe these different requirements 
complement rather than duplicate each other.
    Comment: A few commenters did not support this proposal because of 
their concerns about the time necessary to meet the requirement of this 
proposal. One vendor stated that they would not have time to provide 
any development or other software support to their clients given the 
current list of health IT requirements to meet in CY 2023. Another 
commenter stated that their organization does not have sufficient time 
by CY 2024 to operationalize these requirements. A few commenters 
recommended that CMS continue the existing requirement and delay 
implementation of a required ``yes'' attestation to a later year.
    Response: We appreciate the commenters sharing their concerns. We 
recognize that conducting the SAFER Guides self-assessments may entail 
a time commitment for some eligible hospitals and CAHs. However, the 
benefits of ensuring EHR safety far outweigh the necessary investment 
of time. In addition, we would like to emphasize again that the measure 
only requires self-assessment using the SAFER Guides and does not 
require implementation of the practices described in the Guides. 
Furthermore, we expect that after the first year of conducting the 
initial SAFER Guides self-assessment, the answers to the assessment 
questions may not change significantly unless an eligible hospital or 
CAH has made significant system upgrades or transitions between systems 
or vendors. If there have been no significant intervening changes to a 
participant's EHR system, vendor, or its relevant policies and 
procedures, then the participant's responses can be held to remain 
valid and repeated after confirmation of that fact while completing 
their annual self-assessments. Eligible hospitals and CAHs may need to 
work together with health IT developers and other vendors to perform 
these self-assessments; however, the self-assessment requirement does 
not require any immediate updates or upgrades of their EHR systems. We 
believe that in conducting an annual self-assessment with the SAFER 
Guides promotes EHR-related safety practices, therefore we disagree 
with the recommendation to delay its requirement.
    Comment: One commenter believed that the acceptance of a ``no'' 
attestation in prior years did not entirely incentivize hospitals to 
adopt such a time-consuming process for all nine SAFER Guides.
    Response: We thank the commenter for their feedback. We understand 
that the initial self-assessment is the most time-consuming, and self-
assessments may be less burdensome in subsequent years. We offered 
eligible hospitals and CAHs a two year period to begin the process, 
without penalty for not being able to complete the self-assessments. 
Additionally, this two year period without penalty offered eligible 
hospitals and CAHs time to review available resources, work with staff 
and vendors on establishing an annual review process, where they would 
not be penalized for not having completed the self-assessments.
    Comment: A few commenters did not support this proposal and stated 
that requiring the SAFER Guides self-assessment is an inappropriate use 
of the Medicare Promoting Interoperability Program. A commenter 
believed that requiring an annual self-assessment of the SAFER Guides 
was to create an across-the-board requirement for all participants in 
the program as they believed that the Medicare Promoting 
Interoperability Program was supposed to provide differential rewards 
based on how hospitals perform in order to incentivize the adoption of 
a particular practice through adopting performance-based scoring. 
Another commenter believed that this proposal would impose a potential 
downward payment adjustment and penalty instead of an

[[Page 59264]]

incentive, and believed that it was counterintuitive to CMS' stated 
intention for the SAFER Guides measure.
    Response: We thank the commenters for sharing their concerns. The 
Medicare Promoting Interoperability Program uses both performance-based 
and attestation measures to assess the performance of eligible 
hospitals and CAHs, and potentially applies downward payment 
adjustments based on their performance scores and the results of their 
attestation measures as the financial consequence of not meeting the 
definition of a meaningful EHR user under Sec.  495.4. As we discussed 
in the Stage 2 final rule when we adopted the Protect Patient Health 
Information objective (77 FR 54002 through 54003), it is essential to 
all aspects of meaningful use to ensure that patient health information 
is protected and secure. Under the Protect Patient Health Information 
objective, the SAFER Guides measure is one way that we encourage 
eligible hospitals and CAHs, and their vendors, to proactively assess 
their readiness for EHR safety. Therefore, we respectfully disagree 
with the commenters' perspective.
    Comment: A commenter did not support this proposal and expressed 
concerns that there are no scholarly articles, journals, or systematic 
research citing or indicating the guides can offer any of the 
``potential'' CMS claims. Another commenter believed that ONC intended 
to use the SAFER Guides for informational purposes instead of legal 
compliance purposes. Another commenter believed that the SAFER Guides 
was a framework from a specific vendor instead of providing general 
standards.
    Response: We thank the commenters for expressing their concerns. We 
note that the SAFER Guides are based on extensive research and input 
from various stakeholders in the healthcare industry, have been widely 
adopted in the industry, and are not specific to any one vendor. The 
SAFER Guides provide general guidance and best practices for enhancing 
the safety and resilience of an organization's EHR system. Readers can 
visit the CMS resource library website at https://www.cms.gov/regulations-guidance/promoting-interoperability/resource-library and 
the ONC website at https://www.healthit.gov/topic/safety/safer-guides 
for resources on the content and appropriate use of the SAFER Guides. 
By providing practical guidance on enhancing security and resilience of 
EHR systems, the SAFER Guides meet the goal of the Medicare Promoting 
Interoperability Program to improve the safety, quality, and equity of 
healthcare systems.
    The proposal to update the SAFER Guides measure in the Medicare 
Promoting Interoperability Program was developed in consultation with 
ONC. The SAFER Guides themselves are not intended to be used for legal 
compliance purposes, and implementation of a recommended practice does 
not guarantee compliance with HIPAA, the HIPAA Security Rule, Medicare 
or Medicaid Conditions of Participation, or any other laws or 
regulations. The SAFER Guides are for informational purposes only and 
are not intended to be an exhaustive or definitive source, nor do they 
constitute legal advice. Users of the SAFER Guides are encouraged to 
consult with their own legal counsel regarding compliance with Medicare 
or Medicaid program requirements, HIPAA, and any other laws. However, 
attesting ``yes'' to the SAFER Guides measure each year would be a 
requirement for an eligible hospital or CAH to avoid a downward payment 
adjustment in the Medicare Promoting Interoperability Program.
    Comment: A commenter did not support this proposal and believed 
that the SAFER Guides were not applicable to every organization, which 
could cause extreme financial and workforce burden.
    Response: We thank the commenters for expressing their concerns, 
and we will take them under consideration. We acknowledge that every 
organization faces unique circumstances and will implement a particular 
safety practice differently. As a result, some of the specific examples 
in the SAFER Guides for recommended practices may not be applicable to 
every organization. However, conducting the self-assessments using the 
nine SAFER Guides can be valuable for any organization that utilizes 
EHR systems. In addition, it is important for eligible hospitals and 
CAHs to perform the annual self-assessment required by the SAFER Guides 
measure to address vulnerabilities early on.
    Comment: A few commenters requested clarification on what level of 
action is required to attest ``yes'' to having conducted the self-
assessment with the SAFER Guides. Specifically, commenters wanted to 
know if implementation of recommended practices is a necessary 
requirement for a ``yes'' attestation.
    Response: Only a review and annual self-assessment of each of the 
nine SAFER Guides is required for eligible hospitals and CAHs to attest 
``yes'' to the SAFER Guides measure. Implementation of any of the 
recommended practices is not required as part of our proposal. We 
recognize that participants will have unique circumstances, priorities, 
and constraints that inform their decision-making regarding when and 
how to undertake EHR safety improvements that may be identified through 
the assessment process. The requirement for the measure is thus only 
that eligible hospitals and CAHs affirmatively attest to having 
conducted a review of their own EHR safety practices using all nine 
SAFER Guides, and we defer to eligible hospitals and CAHs to determine 
what improvements, if any, are needed in their EHR safety practices.
    Comment: One commenter recommended that if CMS were to finalize the 
proposal, it should do so in a way where eligible hospitals and CAHs 
are able to complete self-assessments with minimal vendor support.
    Response: We thank the commenter for their suggestion. We believe 
that although many SAFER Guides self-assessment questions can be 
addressed by a hospital's clinical, administrative, and information 
technology staff, the SAFER Guides were intended to be best utilized by 
EHR users in collaboration with developers, and others who are 
concerned with optimizing the safe use of health IT. The appropriate 
configuration and maintenance of EHRs impacts patient safety and 
necessarily involves EHR vendors. Although eligible hospitals and CAHs 
have primary responsibility for performing the SAFER Guides self-
assessment under this measure, participants may need to solicit 
information from their EHR vendors to understand how EHR vendor 
installation or configuration decisions impact patient safety.
    Comment: A few commenters recommended that CMS and ONC update the 
SAFER Guides, citing that the SAFER Guides were last updated in 2016. 
These commenters questioned the relevancy of the SAFER Guides to 
patient safety in hospitals due to the rapid advancement of health IT. 
Two commenters suggested changing the guides to remove what they 
believe is redundant material between the nine guides, and a commenter 
suggested a more focused approach to address gap areas in EHR safety. 
Another commenter recommended convening technical experts to inform 
best practices in making updates to the SAFER Guides. Another commenter 
supported the proposal but encouraged CMS to work with ONC to update 
the SAFER Guides prior to requiring eligible hospitals and CAHs to 
report on all nine SAFER Guides, because they believed that ONC

[[Page 59265]]

and CMS should use current evidence and recommendations to update the 
guides and ensure that healthcare organizations have access to reliable 
and timely resources.
    Response: We thank the commenters for their suggestions, and for 
expressing their concerns. The SAFER Guides have been widely used in 
the healthcare industry to enhance the safety and resilience of EHR 
systems. CMS will continue to work with ONC to consider whether updates 
to the Guides are needed, for instance, to reflect new research 
available. We will also work to ensure the relevance of the SAFER 
Guides' content for eligible hospitals and CAHs specifically. However, 
we believe that the current SAFER Guides reflect relevant and valuable 
guidelines for safe practices with respect to current EHR systems. We 
do not believe that there is a safety benefit in delaying the 
requirement to conduct the self-assessment until after any future 
updates are made to the SAFER Guides, because the self-assessments 
themselves remain up to date and valuable as a means to promote EHR 
safety. In cases where a participant believes that a SAFER Guide 
question is redundant with one contained in another Guide, we expect 
that the additional burden of self-assessment would therefore be 
minimal, since the participant would have already answered it; however, 
we will continue to explore opportunities with ONC to identify these 
issues as part of future updates. We appreciate additional suggestions 
from commenters for consideration in any future updates to the Guides.
    Comment: A few commenters recommended that, rather than requiring 
self-assessment with all nine SAFER Guides, CMS should require self-
assessment using fewer guides, citing the belief that this would 
increase flexibility by invoking less burden while still promoting 
high-priority practices.
    Response: Because each SAFER Guide addresses a different component 
of EHR safety, and each SAFER Guide contains recommended practices not 
addressed in other guides, we believe that the safety benefit of 
conducting a self-assessment using all nine Guides is a better approach 
to promoting EHR safety than requiring only a subset of SAFER Guides 
for review. We therefore believe that the safety benefit of self-
assessment with all nine SAFER Guides outweighs its burden.
    Comment: A few commenters requested additional educational 
resources to assist eligible hospitals and CAHs in completing all nine 
SAFER Guides. A commenter noted that a supporting resource 
(``Guidelines for US Hospitals and Clinicians on Assessment of 
Electronic Health Record Safety Using SAFER Guides,'' accessible at 
https://jamanetwork.com/journals/jama/article-abstract/2788984) cited 
in the proposed rule is not freely available. Another commenter made a 
specific request for resources tailored to small and medium-sized 
health care organizations.
    Response: We agree that eligible hospitals and CAHs should have the 
necessary resources available to successfully complete a self-
assessment and attest ``yes'' to the SAFER Guides measure. As with 
other Medicare Promoting Interoperability Program measures, CMS will 
provide resources such as specification sheets, fact sheets, webinars, 
and events to communicate details about the SAFER Guides measure and 
its appropriate fulfillment. CMS and ONC will continue to provide 
supporting material as necessary for the completion of the SAFER Guides 
self-assessment, and we will work to obtain free access to available 
materials for participants.
    Comment: Two commenters requested clarification on how eligible 
hospitals and CAHs will be alerted when there are any updates to the 
SAFER Guides.
    Response: As with other Medicare Promoting Interoperability Program 
measures, we will provide resources such as specification sheets, fact 
sheets, webinars, and events to communicate details about the SAFER 
Guides measure. Updates to the SAFER Guides would be provided with 
accompanying educational and promotional materials to notify 
participants, in collaboration with ONC.
    Comment: A commenter requested that CMS include detailed 
instructions for completing the self-assessment in subsequent years 
after having completed a first self-assessment.
    Response: We expect that eligible hospitals and CAHs completing the 
SAFER Guides self-assessment will have a lower burden of completion 
after their first year conducting the self-assessment. For a given 
SAFER Guide Recommended Practice, within a given self-assessment, if 
there have been no significant intervening changes to a participant's 
EHR system, vendor, or its relevant policies and procedures, then the 
participant's responses can be held to remain valid and repeated on a 
subsequent self-assessment after confirmation of that fact. As with 
other Medicare Promoting Interoperability Program measures, we will 
provide resources such as specification sheets, fact sheets, webinars, 
and events to communicate details about the SAFER Guides measure.
    Comment: A commenter recommended that CMS promote EHR safety in 
other ways such as promoting certain approaches or guidelines rather 
than using a measure in the Medicare Promoting Interoperability 
Program.
    Response: We thank the commenter for their suggestion. Although CMS 
has other means available to disseminate best practices in EHR safety, 
we believe that the Medicare Promoting Interoperability Program is a 
very valuable means to promote the regular review of EHR-related safety 
practices by eligible hospitals and CAHs and using standard review 
criteria. Whereas the publication of guidelines alone is useful for 
proactive eligible hospitals and CAHs, the use of Medicare Promoting 
Interoperability Program measures incentivizes every eligible hospital 
and CAH to undertake a self-assessment of their EHR safety practices. 
As such, we believe that the Medicare Promoting Interoperability 
Program is the appropriate program to ensure broad attention to EHR 
safety in acute care hospitals.
    After consideration of the public comments we received, we are 
finalizing our proposal to modify our requirement 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, at any point during the calendar year in which 
the EHR reporting period occurs.
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 Sec.  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.F.-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

[[Page 59266]]

to 100 possible points for each eligible hospital or CAH (83 FR 41636 
through 41645).
    We did not propose any changes to the scoring methodology for the 
EHR reporting period in CY 2024. We refer readers to Table IX.F.-01. in 
this final 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.304

    The maximum points available in Table IX.F.-01. in this final rule 
do not include the points that would be redistributed in the event an 
exclusion is claimed for a given measure. We did not propose any 
changes to our policy

[[Page 59267]]

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 final 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.
[GRAPHIC] [TIFF OMITTED] TR28AU23.305

5. 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.H.-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.H.-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 Sec.  495.24(e)(3). For more information 
regarding the previous codification of the objectives, measures, and 
other policies under Sec.  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.H.-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.
    As we stated in the CY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27159 through 27160), we have reviewed the descriptions of the 
calculation considerations in Table IX.H.-07. and believe that some are 
not applicable to certain measures. We believe that 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 that 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 
proposed to modify the way we refer to calculation considerations 
related to

[[Page 59268]]

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)'' (88 FR 27159 through 
27160). The following measures will 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 
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 stated that we believe this policy will reduce 
potential confusion regarding which measures require calculations 
related to unique patients or actions. We have included the changes in 
Table IX.F.-03.
    We invited public comment on this proposal.
    Comment: A few commenters supported our proposal to modify the 
calculation considerations related to unique patients or actions for 
measures which have no numerator or denominator, and for which unique 
patients or actions are not counted.
    Response: We thank the commenters for their support. We believe 
that this update will reduce potential confusion regarding which 
measures require calculations related to unique patients or actions.
    After consideration of the public comments we received, we are 
finalizing our proposal that beginning with the EHR reporting period in 
CY 2024, we will 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)''.
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 (f) at Sec.  495.24, regarding the 
Stage 3 objectives and measures for eligible hospitals and CAHs 
attesting to CMS in CY 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 Sec.  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 proposed to update the regulatory text at Sec.  495.40 to make 
it consistent with Sec.  495.24(f) (88 FR 27160).
    We invited public comment on this proposal.
    Comment: A few commenters expressed support for our proposal to 
update the objectives and measures regulatory text at Sec.  495.40 for 
consistency with Sec.  495.24(f) for CY 2024 and subsequent years.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to update the regulatory text at Sec.  495.40 
to make it consistent with Sec.  495.24(f).
    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 changes 
adopted in this final rule. Table IX.F.-04. lists the 2015 Edition 
certification criteria required to meet the objectives and measures.
BILLING CODE 4201-01-P

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BILLING CODE 4120-01-C
7. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare Promoting Interoperability Program
a. 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 Sec.  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 final 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) 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 final rule, we proposed to adopt 
three new eCQMs for the Medicare Promoting Interoperability Program, 
beginning with the CY 2025 reporting period (88 FR 27171 through 
27173). Specifically, we proposed 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 proposed 
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 final rule 
for more information about these three measures and our policy reasons 
for finalizing them. Table IX.F.-07. in this final rule summarizes 
previously finalized, and newly proposed, eCQMs in the Medicare 
Promoting Interoperability Program for the CY 2025 reporting period and 
subsequent years.

[[Page 59281]]

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    We invited public comment on these proposals.
    Comment and Response: We received many comments about the Hospital 
Harm--Pressure Injury eCQM (CBE #3498e). To continue alignment of eCQM 
policies across the Medicare Promoting Interoperability Program and the 
Hospital IQR Program, we refer readers to section IX.C.5.a. of this 
final rule for a detailed summary of the comments received and our 
responses thereto.
    Comment and Response: We received many comments about the Hospital 
Harm--Acute Kidney Injury eCQM (CBE #3713e). To continue alignment of 
eCQM policies across the Medicare Promoting Interoperability Program 
and the Hospital IQR Program, we refer readers to section IX.C.5.b. of 
this final rule for a detailed summary of the comments received and our 
responses thereto.
    Comment and Response: We received many comments about the Excessive 
Radiation Dose or Inadequate Image Quality for Diagnostic Computed 
Tomography (CT) in Adults (Hospital Level--Inpatient) eCQM (CBE 
#3663e). To continue alignment of eCQM policies across the Medicare 
Promoting Interoperability Program and the Hospital IQR Program, we 
refer readers to section IX.C.5.c. of this final rule for a detailed 
summary of the comments received and our responses thereto.
    Comment: A commenter commended CMS's continued effort to align 
quality measures across its public reporting programs.
    Response: We thank the commenter for their support.
    After consideration of the public comments we received, we are 
finalizing these policies as proposed for both the Medicare Promoting 
Interoperability Program and the Hospital IQR Program. We refer readers 
to the discussion of these same measures 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 
final rule for more information about these finalized policies.
b. 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 did not propose 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).
    After consideration of the public comments we received, we are 
finalizing our proposal 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 measures

[[Page 59282]]

available for self-selection, in alignment with the Hospital IQR 
Program.

X. Other Provisions Included in This Final Rule

A. Medicare Program--Special Requirements for Rural Emergency Hospitals 
(REHs)

1. Background
    This final 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 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 proposed 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 final rule.
    We also proposed to update certain definitions in the survey and 
certification regulations to address REHs. Specifically, we proposed 
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 proposed 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 proposed 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 proposed 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.
    We also announce in this final rule that OMB approved information 
collection requirements in Sec.  488.18(d) that were published at 59 FR 
32120, June 22, 1994, on January 30, 1995.
5. Proposed Special Requirements for REHs (Sec.  488.70)
    We proposed 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 final 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 did not 
propose any additional information submissions at this time.
6. Proposed Requirements for Providers (Sec.  489.102) (Advance 
Directives)
    We proposed to add REHs to the applicable provisions at Sec.  
489.102(a) and add a new Sec.  489.102(b)(5) to also include a 
provision for REHs.
    Comment: We received comments on the proposed Special Requirements 
for Rural Emergency Hospitals at Sec.  488.70 that expressed 
appreciation to CMS for providing additional clarity in the proposed 
rule on how hospitals might become REHs. However, one commenter was 
concerned that these additional regulations could create barriers and 
burdens on rural hospitals seeking to

[[Page 59283]]

become REHs. The commenter recognized the value of having a detailed 
action plan, but noted that additional or burdensome paperwork could 
impact a rural hospital's ability to transition to an REH. The 
commenter requested that CMS implement the final regulation with an 
understanding of the challenges rural hospitals and communities face 
while maintaining standards for safety and high-quality care. The 
commenter stated that CMS must balance the need for oversight while 
minimizing the administrative burden for rural hospitals with limited 
capacities.
    Response: We appreciate the comments received on these requirements 
and recognize the need to minimize the burden of unnecessary paperwork 
requirements for rural hospitals and CAHs applying to become REHs. 
However, the proposed requirements at Sec.  488.70 contain only those 
provisions that are required by statute. Our guidance for the 
requirements at Sec.  488.70 (QSO-23-07-REH, issued January 26, 2023) 
provides details for rural hospitals and CAHs considering conversion to 
an REH and also provides flexibility in the process by allowing 
applicants to use either the model template attached to our memo or the 
facility's own letterhead with a description of the action plan and 
additional information as required by the statute at section 1861(kkk) 
of the Act (https://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/policy-and-memos-states/guidance-rural-emergency-hospital-provisions-conversion-process-and-conditions-participation).
    Comment: A commenter thanked CMS for implementing Congressional 
intent in creating these hospitals and noted that they serve an 
important role in our health care system. The commenter also agreed 
with CMS' proposed change to the definition of ``provider of services'' 
at Sec.  488.1 to now include REHs. The commenter also requested that 
CMS ensure that the submission of the action plan and additional 
information require adequate nurse staffing at REHs. Specifically, the 
commenter asked for CMS to ensure that appropriate nurse staffing is 
included in sections regarding transition plans for services 
maintained, added, or removed during the transition to an REH and that 
nursing is included in a detailed description of services that the REH 
intends to furnish.
    Response: We appreciate the commenter's support of the proposed 
changes and thank them for their recommendations regarding nurse 
staffing for REHs. Our guidance (QSO-23-07-REH) for these requirements 
specifically state that the action plan should include details 
regarding staffing provisions and the number and type of qualified 
staff for the provision of REH services. We expect that these staffing 
details would include the REH's plans for nursing staffing as well as 
those for other qualified staff providing services to patients of the 
REH.
    Comment: We received comments which expressed support for the 
special requirements for REHs and thanked CMS for codifying guidance on 
documentation for hospitals' REH applications and enrollment 
procedures. One commenter also encouraged CMS to incentivize maternity 
care in REHs to expand access to care for this critical service and 
improve maternal health outcomes.
    Response: We appreciate the commenter's expressed concern regarding 
access to maternal health services in rural communities and the 
improvement of maternal health outcomes. Section 1861(kkk)(1)(A)(ii) of 
the Act allows REHs to provide additional outpatient medical and health 
services which may include maternal health services that are aligned 
with the health needs of the community served by the REH as required by 
Sec.  [thinsp]485.524(a). This aligns with a priority of the Biden-
Harris Administration to improve access to maternal health care 
services. Therefore, we expect that REHs will provide various 
outpatient services including, but not limited to services such as, 
low-risk labor and delivery supported by any emergency surgical 
procedures necessary if identified by a health needs assessment of 
their community and in accordance with the CoPs for additional 
outpatient medical and health services.
    Comment: One commenter requests CMS clarification that a hospital 
may qualify for Rural Emergency Hospital status if the number of actual 
beds in use on December 27, 2020, was 50 beds or less as many hospitals 
report beds based on the licensed number of beds.
    Response: We thank the commenter for expressing the need for 
clarification as it relates to the methodology used to determine if a 
rural hospital with not more than 50 beds meets the bed count 
requirement to seek REH designation. 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'' (https://www.federalregister.gov/documents/2022/11/23/2022-23918/medicare-program-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center-pay) finalized the methodology used to determine if a 
rural hospital with not more than 50 beds meets the bed count 
requirement to seek REH designation. Based on the methodology 
finalized, this will be determined by calculating the number of 
available bed days during the most recent cost reporting period divided 
by the number of days in the most recent cost reporting period. We use 
this methodology to determine if Medicare-dependent small rural 
hospitals meet the required bed count for that program. We believe this 
is an appropriate methodology for determining if a rural hospital meets 
the bed count requirement to seek REH designation, as this is a known 
and existing methodology for small rural hospitals seeking to determine 
bed count for eligibility in Medicare programs.
    After consideration of the public comments we received, we are 
finalizing the requirements as proposed.

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 payor) 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.)

[[Page 59284]]

    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 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 hospitals with physician ownership or 
investment. 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 is considered to take into account 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.\926\ Following the issuance of these 
reports, the Congress held hearings and began to consider policies to 
limit the growth of these facilities.\927\ Section 6001(a) of the 
Affordable Care Act effectively eliminated the exceptions for physician 
ownership or investment in hospitals, although hospitals with physician 
ownership or investment and a Medicare provider agreement on December 
31, 2010, are ``grandfathered'' to continue using the rural provider 
exception, if applicable, and the whole hospital exception.
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    \926\ 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.
    \927\ 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 exception and the whole hospital exception to provide that a 
hospital with physician ownership or investment 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

[[Page 59285]]

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 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 applicable hospital are set forth at existing 
Sec.  411.362(c)(2) and the requirements for a high Medicaid facility 
are set forth at existing 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 
existing 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 to clarify certain aspects of the expansion exception 
process (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 from 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 expansion exception 
process (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 from 
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 on 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 on the expansion of applicable hospitals (85 FR 
86257).
2. Proposals
a. Process for Requesting an Exception From the Prohibition on 
Expansion of Facility Capacity
    To satisfy the requirements of the rural provider exception or the 
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 prohibits 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 final 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 final 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 final rule as an ``expansion exception''). The regulations at 
existing Sec.  411.362(c) set forth the current expansion exception 
process.
    As stated in the proposed rule, 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, to request an expansion 
exception with respect to which CMS may issue a decision, a hospital 
must first establish

[[Page 59286]]

that it meets the criteria for an applicable hospital or a 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 a high Medicaid facility. Put another way, it is 
our position that, under section 1877(i)(3)(A)(i) of the Act, meeting 
the criteria for an applicable hospital or a high Medicaid facility 
merely makes a hospital eligible to request an expansion exception, but 
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).)
    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 have always interpreted the requirement 
to provide for community input ``with respect to [an] application'' to 
require CMS to permit any input with respect to the expansion exception 
request--not just input related to whether the requesting hospital 
meets the criteria for an applicable hospital or a 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 a 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 proposed to 
modify and clarify our regulations at existing Sec.  411.362(c). 
Specifically, we proposed 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 exception and the 
whole hospital exception. We proposed to renumber existing Sec.  
411.362(c), as well as certain related definitions in existing Sec.  
411.362(a), at new Sec.  411.363, noting 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 proposed 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 proposed to include at new Sec.  411.363(a) 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 proposed 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 proposed 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) CMS Consideration of an Expansion Exception Request and Publication 
in the Federal Register
    We proposed 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 an applicable hospital or a high 
Medicaid facility, which we proposed to renumber at Sec.  411.363(c) 
and (d), respectively. We proposed 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 final rule.
    To facilitate the proposed reinstatement of the program integrity 
restriction regarding the maximum aggregate expansion of a hospital, we 
proposed at Sec.  411.363(b)(2)(i) that CMS would not consider an 
expansion exception request from a hospital for which CMS had 
previously approved an expansion exception that would allow the 
hospital's facility capacity to reach 200 percent of its baseline 
facility capacity if the full expansion is utilized, even if the 
hospital met the criteria for an applicable hospital or a high Medicaid 
facility. We also proposed to apply this eligibility restriction to any 
hospital requesting an expansion exception. We illustrated this 
proposal with the following example. 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 an additional 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.
    We proposed to implement section 1877(i)(3)(B) of the Act at 
proposed Sec.  411.363(b)(2)(ii), 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 proposed rule we noted that, after receiving no comments on our 
proposals in the CY 2012 OPPS/ASC final rule to allow an 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

[[Page 59287]]

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). (In that final rule, 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 (76 FR 74525).) However, 
as we noted in the 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, since January 1, 2021, a 
high Medicaid facility has been 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. In the proposed rule, we also noted that, even though we 
reversed the regulatory extension of the restriction on the frequency 
of expansion exception requests for hospitals that meet the criteria 
for a high Medicaid facility, in the CY 2021 OPPS/ASC final rule, we 
nonetheless limited a high Medicaid facility to applying for an 
expansion exception only when it does not have another expansion 
exception request pending with CMS. We reiterated that we did so to 
preserve CMS resources and continue to maintain an orderly and 
efficient expansion exception process (85 FR 86256), noting that, 
historically, CMS has worked with requesting hospitals for several 
weeks or months following the initial submission 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 emphasized that 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 
proposed at Sec.  411.363(b)(2)(ii) that CMS would not consider an 
expansion exception request from a hospital--even if it meets the 
criteria for an applicable hospital or a high Medicaid facility--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 regulations, CMS would consider an expansion 
exception request submitted by a hospital that meets the criteria for 
an applicable hospital or a high Medicaid facility and is otherwise 
eligible to request the expansion exception, provided that the request 
includes all information required under proposed Sec.  411.363(e). In 
the proposed rule we stated that, in processing an expansion exception 
request, we would first determine whether the requesting hospital is 
eligible to request the expansion exception (that is, whether the 
hospital meets the criteria for an applicable hospital or a high 
Medicaid facility). This would include providing an opportunity for 
community input regarding whether the requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility 
(depending on the specific request). If the hospital meets the criteria 
for an applicable hospital or a high Medicaid facility, and is not 
otherwise precluded from making an expansion exception request under 
proposed Sec.  411.363(b)(2), 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. Because community input would be relevant 
to both the determination that a requesting hospital meets the criteria 
for an applicable hospital or a high Medicaid facility and our decision 
whether to approve or deny the expansion exception request, we stated 
that 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. We noted that, 
in the Federal Register notice, we would seek community input on both 
whether the requesting hospital meets the criteria for an applicable 
hospital or a 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.
    In the proposed rule, we stated that, following publication of the 
notice of the expansion exception request in the Federal Register, 
receipt of community input, if any, 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 a high 
Medicaid facility (depending on the specific request). We proposed to 
codify this part of the process at Sec.  411.363(h). If CMS determines 
that the requesting hospital meets the criteria for an applicable 
hospital or a 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 its decision. We proposed to codify this 
part of the process at Sec.  411.363(i)(1). Other data and information 
relevant to 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, 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 also proposed a nonsubstantive revision to the introductory 
language at existing Sec.  411.362(c)(2) and (3). The existing 
regulations state the criteria that an applicable hospital or a high 
Medicaid facility, respectively, must satisfy. To conform to our 
regulations in 42 CFR part 411, subpart J more closely, we proposed to 
use the word ``meets'' in place of ``satisfies'' in the introductory 
language of these regulations, which we

[[Page 59288]]

proposed would be renumbered at Sec.  411.363(c) and (d).
(3) CMS Decision To Approve or Deny an Expansion Exception Request
    In proposed Sec.  411.363(i)(2), we identified factors that CMS 
would always consider when deciding whether to approve or deny an 
expansion exception request. As proposed, 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, in any county in 
which the hospital provides inpatient or outpatient hospital services 
as of the date the hospital submits the expansion exception request, or 
in any county in which the hospital plans to provide inpatient or 
outpatient hospital services if CMS approves the request. We stated 
that 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) did not limit CMS to the enumerated 
factors in making its decision. By way of example, we stated that 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. As explained in section 
X.B.2.A.(8). of this final rule, we are not finalizing our proposal to 
require information regarding how or where a requesting hospital would 
use approved expansion facility capacity if its request is approved. 
Therefore, we are not finalizing our proposal to include as a factor 
for our consideration of an expansion exception request whether there 
is a need for additional operating rooms, procedure rooms, or beds in 
any county in which the hospital plans to provide inpatient or 
outpatient hospital services if CMS approves the request. In the 
proposed rule, we noted that 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.
    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 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 proposed to 
revise for clarity and renumber at Sec.  411.363(k). In the proposed 
rule, we noted that, if CMS determines that the requesting hospital 
does not meet the criteria for an applicable hospital or a 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 a high Medicaid facility. We noted 
further that, if CMS determines that the requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility, 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 a 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 stated that 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. Therefore, we proposed 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, noting that this would 
include determinations regarding whether a hospital meets the criteria 
for an applicable hospital or a high Medicaid facility and decisions 
regarding whether to approve or deny a hospital's request. We also 
proposed to renumber the regulation 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 for CMS to consider the 
request. We proposed 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 did not propose 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 proposed to renumber this 
regulation at Sec.  411.363(e)(2)(i). We proposed 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 clarify that the 
request must include an address for receipt of hard copy mail by the 
contact person. We also proposed to require an electronic mail address 
for correspondence with the contact person. Finally, we proposed to 
renumber this regulation at Sec.  411.363(e)(2)(iii).
    We proposed to revise existing Sec.  411.362(c)(4)(ii)(B) and 
renumber this regulation at Sec.  411.363(e)(2)(ii). As proposed, an 
expansion exception 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. We stated 
that it is important to our ability to thoroughly consider an expansion 
exception request to understand where the expansion facility capacity 
would be

[[Page 59289]]

located. As explained in section X.B.2.a.(8). of this final rule, we 
are not finalizing our proposal to require a hospital to include in its 
expansion exception request the names of any counties in which the 
hospital plans to provide inpatient or outpatient hospital services if 
CMS approves the request.
    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 a 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 a 
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 proposed 
to bifurcate this regulation such that the first element of existing 
Sec.  411.362(c)(4)(ii)(D) (identification as an applicable hospital or 
a high Medicaid facility and supporting document regarding satisfaction 
of the criteria for such) would be separate from the requirement for 
information regarding nondiscrimination against beneficiaries of 
Federal health care programs. We also proposed 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. We proposed 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. In the proposed rule, we stated that, 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 proposed 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).
    In the proposed rule, we observed that 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 explained that, in light of this, 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 for underserved populations if the request is 
approved. Therefore, we proposed 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 
expansion facility capacity previously approved by CMS and whether it 
plans to use expansion facility capacity to provide specialty services 
if the request is approved. We proposed to include this revised 
requirement at Sec.  411.363(e)(2)(vi) (renumbered from existing Sec.  
411.362(c)(4)(ii)(E)). After consideration of the comments and as 
described in section X.B.2.a.(8). of this final rule, we are not 
mandating the inclusion of documentation supporting whether the 
requesting hospital plans to use expansion facility capacity to provide 
specialty care services if the request is approved.
    We also proposed 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 stated that 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 
emphasized that 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 
a 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. After consideration of the comments and as described 
in section X.B.2.a.(8). of this final rule, we are not mandating the 
inclusion of this information in an expansion exception request.
    Finally, we proposed 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 proposed 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,

[[Page 59290]]

which also requires specific certifications related to submissions to 
CMS, we proposed 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.
(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. As we stated in the proposed rule, 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 a high Medicaid facility. We noted that our 
current regulations do not define the ``community'' in which the 
requesting hospital is located. To eliminate uncertainty, we proposed 
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. We highlighted that 
certain exceptions to the physician self-referral law's prohibitions 
identify the geographic area served by a hospital to define the 
location where specified activity may occur (for example, the location 
of a recruited physician's medical practice) and stated that we believe 
that 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. As explained in section X.B.2.a.(8). of 
this final rule, we are not finalizing our proposal to include in the 
definition of ``community'' the counties in which the requesting 
hospital plans to provide inpatient or outpatient hospital services if 
CMS approves the request.
    We also proposed at Sec.  411.363(f)(2) that 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 a high Medicaid facility and to 
hospitals located in the requesting hospital's community. Thus, 
hospitals in the requesting hospital's community that wish to provide 
input related to the expansion exception request would be aware of the 
request. As explained in in section X.B.2.a.(8). of this final rule, we 
are not finalizing our proposal to require actual notification directly 
to any hospital whose data are not part of the comparisons required to 
determine whether the requesting hospital meets the criteria for an 
applicable hospital or a high Medicaid facility (depending on the 
specific request). In the proposed rule, we recognized 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. We stated that, if this proposal was 
finalized, 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.
    In the proposed rule, we noted our existing policy that the type of 
community input that we will accept is not restricted in any way (76 FR 
74522). To support the two-step process for first determining whether a 
requesting hospital meets the criteria for an applicable hospital or a 
high Medicaid facility and, if so, deciding whether to approve or deny 
the request, we proposed to revise existing Sec.  411.362(c)(5) and 
renumber it at Sec.  411.363(f)(3) to expressly 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. We stated that 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 (that is, whether the requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility), 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 have received 
hundreds of pages of community input on others. In the proposed rule, 
we stated that we believe that the revised expansion process would 
result in more robust community input 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 a 
high Medicaid facility (80 FR 55852). Therefore, to provide adequate 
time for interested parties to develop and submit community input, we 
proposed 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 stated that 
we did not believe that an extension of the 30-day period for the 
requesting hospital to submit a rebuttal statement was necessary but 
sought comment regarding whether we should extend this timeframe to 60 
days to provide the requesting hospital additional time to review and 
respond to any community input.
(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 a 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

[[Page 59291]]

requesting hospital would be unable to show that it met the statutory 
and regulatory criteria as an applicable hospital or a high Medicaid 
facility 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). In the CY 2015 OPPS/ASC final rule, 
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 (Id.). 
Therefore, we modified our regulations at existing 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.
    In the proposed rule, we announced that 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 finalized 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 the Secretary to announce his determination that HCRIS contains 
sufficiently complete inpatient Medicaid discharge data through notice-
and-comment rulemaking, we proposed 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 the effective date of the revised regulations if our proposals 
were finalized. As we stated in the CY 2012 OPPS/ASC final rule, we 
believe that requiring the use of filed Medicare hospital cost report 
data from HCRIS 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 filed Medicare hospital cost 
report data from HCRIS for all expansion exception requests will 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. As explained in the proposed rule (88 FR 27181 through 
27182) and in this section X.2.B.a.(6)., if Medicaid inpatient 
admissions data is not available for every hospital in a county for a 
particular comparison year, it would be impossible for any hospital in 
that county to meet the criteria for an applicable hospital or a high 
Medicaid facility under section 1877(i)(3)(E) or (F) of the Act, 
respectively, during the period when the use of data from that 
comparison year is required under the statute and our regulations. We 
do not believe that the Congress intended that a hospital that meets 
the criteria for an applicable hospital or a high Medicaid facility and 
is willing to expand in a community where there is a clear need for 
additional facility capacity would be foreclosed from doing so because 
one or more of the other hospitals in its 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). 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 proposed 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 a 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. In the proposed rule, we stated that 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 further stated that we believe that our proposal to 
permit only the use of filed Medicare hospital cost report data from 
HCRIS 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. As we stated in the 
proposed rule, we anticipate that requiring the use of filed Medicare 
hospital cost report data from HCRIS for all comparison calculations 
will have little practical impact on whether a requesting hospital 
meets the criteria for an applicable hospital or high Medicaid facility 
and that we do not believe that a requesting hospital would be 
prejudiced by this requirement.
    We also proposed to revise the terminology used in our regulations 
to describe the comparisons that a hospital requesting an expansion 
exception must make to show that it is an applicable hospital or a high 
Medicaid facility. We did 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 such admissions for ``any other'' hospital in the county. 
Our existing 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 existing 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

[[Page 59292]]

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 existing 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 proposed to revise 
the references in our regulations to refer to ``each'' or ``each 
other'' hospital (where appropriate). We did not propose 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 the county where the 
requesting hospital is located, as the existing language is consistent 
with the required comparison. However, for clarity, we proposed 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. The 
proposed regulation provided that 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. In the proposed rule, we also explained that, with 
respect to requests submitted on or after the effective date of the 
revised regulations if our proposals were 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 must have 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. The proposed 
regulation provided that 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. 
We noted that, with respect to requests submitted on or after the 
effective date of the revised regulations if our proposals were 
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.
    In the proposed rule, we recognized that 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 a high Medicaid facility, we proposed at Sec.  
411.363(c)(6) (for an applicable hospital) to consider the location of 
a hospital to be the county and State in which the main campus of the 
hospital is located and at and Sec.  411.363(d)(4) (for a high Medicaid 
facility) to consider the location of a hospital to be the county 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/ASC final rule, in addition to expanding the 
permissible data sources a hospital may use to show that it meets the 
criteria for an applicable hospital or a high Medicaid facility, we 
also amended the expansion exception process to increase the period of 
time after which an expansion exception request will be deemed complete 
when an external data source is used by a requesting hospital or in the 
community input to determine whether a hospital meets the criteria for 
an applicable hospital or a 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 proposed at Sec.  411.363(c)(2) and 
(d)(2) that only filed Medicare hospital cost report data from HCRIS 
may be used to show that the requesting hospital meets the criteria for 
an applicable hospital or a high Medicaid facility, in the proposed 
rule, we stated that we did not believe that we would continue to 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 proposed 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 rebuttal period, regardless of whether the requesting hospital 
submits a rebuttal statement, if CMS receives written comments from the 
community. We proposed that the regulation would be renumbered at Sec.  
411.363(g), which would also include 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

[[Page 59293]]

maintained by CMS, we stated that we believed 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 meets the criteria for 
an applicable hospital or a high Medicaid facility and whether CMS 
should approve or deny the request. We also stated that our proposals 
would not affect expansion exception requests submitted before the 
effective date of the revised regulations if our proposals were 
finalized.
(8) Provisions of the Final Rule: Expansion Exception Process
    We received comments both in support of and opposition to our 
proposals to modify and clarify the process for requesting an exception 
from the prohibition on facility expansion. Many of the assertions and 
suggestions made by commenters were founded on the commenter's view of 
whether section 1877(i) of the Act authorizes the Secretary to deny an 
expansion exception request from a hospital that meets the criteria for 
an applicable hospital or a high Medicaid facility. Some commenters 
agreed with CMS that the statute confers discretion for CMS to deny a 
request for an expansion exception even if the requesting hospital 
meets the criteria for an applicable hospital or a high Medicaid 
facility. These commenters viewed our proposals to identify the 
information required from a requesting hospital and the factors that 
CMS will consider in deciding whether to approve or deny an expansion 
exception request as bringing transparency to the expansion exception 
process to ensure that all parties are treated comparably in the 
process. Other commenters interpreted the statute to mean that CMS may 
not prohibit a hospital from expanding if the hospital meets the 
statutory criteria for an applicable hospital or a high Medicaid 
facility and completes any procedural requirements established by CMS 
under section 1877(i)(3)(A) of the Act. Because of this foundational 
view, these commenters viewed our proposals as adding criteria to the 
definitions of ``applicable hospital'' and ``high Medicaid facility.''
    We are finalizing our proposals with modifications. Under the final 
rule, we are establishing a new Sec.  411.363 that will include the 
expansion exception process and, therefore, removing existing Sec.  
411.362(c) from our regulations. At Sec.  411.363(a), we are including 
definitions for purposes of the expansion exception process. At Sec.  
411.363(b), we are finalizing our proposal to expressly state that CMS 
will not consider an expansion exception request from a hospital that 
is not eligible to request the exception. Under the final regulation, a 
hospital that meets the criteria for an applicable hospital or a high 
Medicaid facility is eligible to request an expansion exception, 
provided that: (i) the hospital has not already been approved by CMS 
for an expansion exception that would allow the hospital to reach 200 
percent of its baseline facility capacity; and (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 expansion exception. We 
note that, because section 1877(i)(3)(C)(ii) of the Act prohibits CMS 
from approving an increase in a hospital's facility capacity to the 
extent such increase would result in the hospital's facility capacity 
exceeding 200 percent of its baseline facility capacity, CMS could not 
approve further expansion of a hospital that CMS has already approved 
to expand to 200 percent of its baseline facility capacity. Therefore, 
under the final regulation at Sec.  411.363(b)(2)(i), such a hospital 
would be ineligible to request an additional expansion exception. To 
consider an expansion exception request that CMS is prohibited to 
approve would not be an appropriate use of agency and other Federal 
resources.
    Final Sec.  411.363(c) states the criteria that a hospital must 
meet to be an applicable hospital. In addition to incorporating the 
existing criteria for an applicable hospital, the final regulation 
provides that, for purposes of the statutorily required comparisons 
with respect to Medicaid inpatient admissions, the hospital need only 
compare itself to other hospitals that have a Medicare participation 
agreement with CMS and are located in the county in which the hospital 
is located. The final regulation also clarifies that a hospital is 
located in the county and State in which the main campus of the 
hospital is located. In addition, beginning with expansion exception 
requests submitted on or after October 1, 2023, the requesting hospital 
may use only filed Medicare cost report data from HCRIS to perform the 
required calculations. Final Sec.  411.363(d) states the criteria that 
a hospital must meet to be a high Medicaid facility. In addition to 
incorporating the existing criteria for high Medicaid facilities, the 
final regulation provides that, for purposes of the statutorily 
required comparisons with respect to Medicaid inpatient admissions, the 
hospital need only compare itself to other hospitals that have a 
Medicare participation agreement with CMS and are located in the county 
in which the hospital is located. The final regulation clarifies that a 
hospital is located in the county in which the main campus of the 
hospital is located. In addition, beginning with expansion exception 
requests submitted on or after October 1, 2023, the requesting hospital 
may use only filed Medicare cost report data from HCRIS to perform the 
required calculations.
    We are finalizing our proposals (with modification) to revise the 
procedure a hospital must follow in submitting an expansion exception 
request and the information that it must provide to CMS. Under final 
Sec.  411.363(e)(1), a hospital must submit its expansion exception 
request and the required signed certification electronically to CMS 
according to the instructions specified on the CMS website. We are 
making a slight technical modification to Sec.  411.363(e)(2)(i) to 
state that, among the other required demographic information for a 
hospital, the hospital must include its tax identification number and 
CMS certification number. The regulation at existing Sec.  
411.362(c)(4)(ii)(A) requires that the hospital must include tax 
identification number(s) and CMS certification number(s). However, 
because an ``entity'' (for purposes of the physician self-referral law) 
that furnishes designated health services would have only a single tax 
identification number and single CMS certification number (if it has a 
Medicare participation agreement with CMS), we are revising the 
regulation to eliminate potential confusion regarding the need to 
submit more than one tax identification number or CMS certification 
number. Also, with respect to the documentation that must be included 
in an expansion exception request, under the final regulations, certain 
information will be mandatory and other information may be submitted at 
the election of the requesting hospital but is not required to ensure 
that CMS will consider the expansion exception request. In addition to 
the information currently required to support that the hospital meets 
the criteria for an applicable hospital or a high Medicaid facility, we 
are requiring the hospital to submit documentation supporting whether 
and how it has used any expansion facility capacity approved in a prior 
request. However, other information may be submitted at the election of 
the requesting hospital. For example, a hospital may, but is not 
required to, submit information regarding whether it plans to use

[[Page 59294]]

expansion facility capacity to provide specialty services if the 
request is approved. Likewise, a hospital may, but is not required to, 
submit information regarding the current or future need for additional 
operating rooms, procedure rooms, or beds for itself, in the county 
where its main campus is located, or in any county where it provides 
inpatient or outpatient hospital services (that is, in any county in 
which one or more of its hospital-based facilities, if any, is 
located). We believe that the final regulations reduce the burden on a 
hospital that seeks approval for an expansion of its facility capacity 
while providing an opportunity to submit additional information that it 
wishes CMS to consider. We emphasize that the fact that a hospital 
elects not to provide information beyond what is required under Sec.  
411.363(e)(2) will not factor into CMS' decision to approve or deny the 
request.
    We are also finalizing our proposals regarding the community input 
that may be provided with respect to an expansion exception request. 
First, we are finalizing the definition of ``community'' at Sec.  
411.363(f)(3)(ii) to mean all of the following: the geographic area 
served by the hospital (as defined at Sec.  411.357(e)(2) of our 
regulations); the county in which the requesting hospital's main campus 
is located; and the counties in which the requesting hospital provides 
inpatient or outpatient hospital services as of the date that it 
submits its request. Final Sec.  411.363(f)(1) replicates our existing 
process by requiring that, upon submitting a request for an expansion 
exception and until the hospital receives a CMS decision on the 
request, the hospital must disclose on any public website for the 
hospital that it is requesting the expansion exception. However, we are 
making one notable modification in the final regulations. At Sec.  
411.363(f)(2), we are requiring the hospital requesting the expansion 
exception to provide actual notification of its request only to 
hospitals whose data are part of the comparisons required to show that 
it meets the criteria for an applicable hospital or a high Medicaid 
facility. The notice must be provided directly to these hospitals. We 
are not finalizing our proposal to require that the requesting hospital 
also provide actual notice directly to hospitals that are located in 
the remainder of the requesting hospital's community (as defined at 
Sec.  411.363(f)(3)(ii)). Lastly, we are finalizing our proposal to 
extend the period for community input from the current 30 days to 60 
days. Based on the comments received on this proposal, at Sec.  
411.363(f)(3)(iv), we are also extending the period for the requesting 
hospital to submit a rebuttal statement from the current 30 days to 60 
days.
    We are finalizing our proposal that, no later than 60 days after an 
expansion exception request is deemed complete, CMS will publish its 
determination whether the requesting hospital meets the criteria for an 
applicable hospital or a high Medicaid facility and, if so, its 
decision whether to approve or deny the request. In keeping with final 
Sec.  411.363(c)(2)(ii) and (d)(2)(ii), which require the use of CMS-
provided Medicare filed Medicare hospital cost report data from HCRIS 
for all expansion exception requests submitted on or after October 1, 
2023, we are finalizing our proposal to deem a request complete no 
later than 90 days after the end of the comment period if we do not 
receive community input or, if we do receive community input, 90 days 
after the end of the rebuttal period, regardless of whether the 
requesting hospital submits a rebuttal statement. For expansion 
exception requests that are submitted prior to October 1, 2023, and 
include data from an external data source in the expansion exception 
request, community input, or the hospital's rebuttal statement, the 
request will continue to be deemed complete no later than 180 days 
after the end of the comment period if we do not receive community 
input or, if we do receive community input, 180 days after the end of 
the rebuttal period, regardless of whether the requesting hospital 
submits a rebuttal statement.
    We are also finalizing the regulations at Sec.  411.363(h) and (i) 
to clarify that CMS will take a two-step approach to considering 
expansion exception requests. First, CMS will determine whether the 
requesting hospital meets the criteria for an applicable hospital or a 
high Medicaid facility using the information provided by the hospital 
in its expansion exception request and rebuttal statement, if any, and 
the community input, if any. Second, using data and information 
provided from these sources, as well as data and information that is 
otherwise available to CMS and relevant to its decision, CMS will 
decide whether to approve or deny the expansion exception request. 
Final Sec.  411.363(i)(2) identifies the factors that CMS will consider 
in deciding whether to approve or deny a hospital's request for an 
expansion exception. These factors include: (i) the specialty of the 
requesting hospital or the services furnished by (or to be furnished 
by) the hospital if CMS approves the expansion exception 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; and (iv) 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 or in any county in 
which the hospital provides inpatient or outpatient hospital services 
as of the date the hospital submits the request. As Sec.  411.363(i)(2) 
expressly states, CMS is not limited to consideration of these factors 
in deciding whether to approve or deny a hospital's expansion exception 
request.
    At Sec.  411.363(k), we are finalizing our proposal regarding the 
information that will be published in the Federal Register following 
CMS' consideration of an expansion exception request. Specifically, if 
CMS determines that the hospital does not meet the criteria for an 
applicable hospital or a high Medicaid facility, CMS will publish in 
the Federal Register notice of such determination. If CMS determines 
that the hospital meets the criteria for an applicable hospital or a 
high Medicaid facility, CMS will publish in the Federal Register notice 
of such determination and its decision regarding the hospital's request 
for an expansion exception. At Sec.  411.363(l), we are finalizing our 
proposal to codify that, under section 1877(i)(3)(I) of the Act, there 
is 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).
    To facilitate readers' understanding of our final policies, we 
provide here a high-level summary of the expansion exception process as 
finalized. Under the regulations finalized in this final rule, a 
hospital may submit its expansion exception request to CMS. CMS will 
confirm that the request includes all required information and that CMS 
is not precluded from considering the expansion exception request under 
final Sec.  411.363(b)(2)(i) or (ii). CMS will also confirm the 
accuracy of the required calculations (as we do under the existing 
process). If the requesting hospital has performed the required 
calculations incorrectly, CMS will continue its current practice and 
inform the hospital of the error(s) and work with the hospital to 
ensure the required calculations are performed correctly. After these 
steps are completed, if the hospital does not withdraw the expansion 
exception request, CMS will publish notice of the

[[Page 59295]]

expansion exception request in the Federal Register. Community input 
may be submitted during the 60-day comment period as set forth at final 
Sec.  411.363(f). If CMS receives community input on the expansion 
exception request, it will be provided to the requesting hospital. 
Under final Sec.  411.363(f)(3)(iv), the hospital will have 60 days to 
submit a rebuttal statement if it chooses to do so. Following the 
receipt of community input (if any) and the hospital's rebuttal 
statement (if any), CMS will determine whether the hospital meets the 
criteria for an applicable hospital or a high Medicaid facility. If the 
hospital meets the criteria for an applicable hospital or a high 
Medicaid facility, CMS will then consider the factors identified at 
Sec.  411.363(i)(2) and decide whether to approve or deny the expansion 
exception request. CMS will publish notice of its determination whether 
the requesting hospital meets the criteria for an applicable hospital 
or a high Medicaid facility in the Federal Register. If CMS determines 
that the requesting hospital meets the criteria for an applicable 
hospital or a high Medicaid facility, CMS will also publish notice of 
its decision to approve or deny the expansion exception request in the 
same Federal Register notice.
    We received the following comments on our proposals to revise and 
clarify the expansion exception process. Our responses follow.
    Comment: We received comments regarding our interpretation of 
section 1877(i)(3) of the Act as affording the Secretary the discretion 
to approve or deny a hospital's request for an expansion exception. 
Many commenters endorsed our interpretation of the statute, concurring 
that the language of section 1877(i)(3) of the Act provides CMS with 
discretion to consider and ultimately approve or deny requests for 
expansion exceptions, even if the requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility. One of 
these commenters stressed that CMS' interpretation of its authority is 
consistent with the statutory requirement for the Secretary to 
implement a process under which an applicable hospital or high Medicaid 
facility may ``apply'' for an exception from the prohibition on 
facility expansion and the statutory language referencing the ``grant'' 
of exceptions. Other commenters disagreed with our interpretation of 
the authority granted to the Secretary in section 1877(i)(3) of the 
Act. These commenters interpreted the statute as prohibiting the 
Secretary from denying a request for an expansion exception from a 
hospital that meets the criteria for an applicable hospital or a high 
Medicaid facility. One of these commenters described CMS' assessment 
that the words ``apply,'' ``granted,'' ``permit,'' and ``decision'' 
support a statutory grant of authority to approve or deny an 
application (that is, request) for an expansion exception as a 
contrived contortion of the English language, and further described our 
interpretation of CMS's authority as overriding an unambiguous 
statutory scheme in order to supersede it with the preferred policy of 
certain trade associations and competitors of physician-owned 
hospitals. This commenter interpreted the language of sections 
1877(i)(3)(E) and (F) of the Act, which set forth the definitions of an 
``applicable hospital'' and a ``high Medicaid facility,'' respectively, 
as establishing two expansion exceptions, which are automatically 
granted to any applicable hospital or high Medicaid facility that 
completes the procedural steps established by the Secretary under 
section 1877(i)(3)(A) of the Act. Another commenter asserted that 
nothing about establishing a process to grant expansion exceptions 
connotes discretion to approve or deny them. Both of these commenters 
asserted that, because section 1877(i)(3)(A)(i) of the Act directs the 
Secretary to establish and implement a process under which a hospital 
that meets the criteria for an applicable hospital or a high Medicaid 
facility ``may'' apply for an exception from the prohibition on 
facility expansion, the statute affords discretion to the requesting 
hospital (that is, discretion to apply or not to apply for an expansion 
exception) but not to the Secretary.
    Response: We are not persuaded by the arguments of the commenters 
that disagree with our interpretation of the authority granted to the 
Secretary in section 1877(i)(3) of the Act or that our reading of the 
statute's use of the terms ``apply,'' ``granted,'' ``permit,'' and 
``decision'' is a contrived contortion of the English language. As we 
stated in the proposed rule, section 1877(i)(3)(A)(i) of the Act 
directs CMS to establish a process under which an applicable hospital 
or a high Medicaid facility may apply for an exception from the 
prohibition on facility expansion, 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. 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.
    The dictionary definition of the term ``apply'' in this context is 
``to make an appeal or request, especially in the form of a written 
application.'' \928\ Further, Black's Law Dictionary (2nd ed. 1910) 
defines the term ``apply'' to mean ``to make a formal request or 
petition, usually in writing, to a court, officer, board, or company, 
for the granting of some favor, or of some rule or order, which is 
within his or their power or discretion.'' \929\ (As we noted in the 
proposed rule, we use the term ``apply'' in the same way as the term 
``request'' (88 FR 27177), which is supported in these definitions.) It 
follows that, in the case of a submitted application, a decision to 
approve or deny the application would be expected from the party that 
holds the discretion to grant the requested action. The dictionary 
definition of the term ``grant'' in this context is ``to agree to give 
somebody what they ask for, especially formal or legal permission to do 
something'' or ``to permit as a right, privilege, or favor.'' \930\ In 
addition, the dictionary definition of ``permit'' in this context is 
``to consent to, expressly or formally.'' \931\ Essentially, the terms 
``grant'' and ``permit'' are synonymous,\932\ and both require the 
action or decision of the party to whom the application or request is 
made. The dictionary definition of ``decision'' in this context is ``a 
determination arrived at after consideration.'' \933\ Even though the 
terms ``approve'' and ``deny'' do not appear in the text of section 
1877(i)(3) of the Act, the plain meanings of the terms that are used in 
section 1877(i)(3) of the Act are reasonably interpreted to confer 
discretion to approve or deny an expansion exception request made to 
CMS. We believe that this is the best interpretation of the statute. 
Accordingly, we also disagree with the

[[Page 59296]]

commenters that the definitions of the terms ``applicable hospital'' 
and ``high Medicaid facility'' in sections 1877(i)(3)(E) and (F) of the 
Act merely establish an automatic authorization to expand facility 
capacity for any hospital that meets the criteria of one of these 
sections, rendering the Secretary powerless to deny an expansion 
exception request from a hospital that completes any procedural steps 
set forth in our regulations.
---------------------------------------------------------------------------

    \928\ https://www.merriam-webster.com/dictionary/apply.
    \929\ https://thelawdictionary.org/apply/.
    \930\ https://www.oxfordlearnersdictionaries.com/us/definition/english/grant_1; and https://www.merriam-webster.com/dictionary/grant.
    \931\ https://www.merriam-webster.com/dictionary/permit.
    \932\ https://www.merriam-webster.com/thesaurus/permit.
    \933\ https://www.merriam-webster.com/dictionary/decision.
---------------------------------------------------------------------------

    We agree with the commenters that section 1877(i)(3)(A)(i) of the 
Act affords certain discretion to the requesting hospital (that is, 
discretion to apply or not to apply for an expansion exception). This 
provision clearly does not mandate that a hospital request an expansion 
exception at any given time or ever. However, we disagree that this is 
the only discretion that the statute affords. For the reasons discussed 
in this final rule, we interpret section 1877(i)(3) of the Act to also 
afford the Secretary discretion to approve or deny an expansion 
exception request made to CMS.
    Comment: One commenter asserted that CMS had previously made clear 
that CMS may not consider criteria not in the statute when reviewing an 
expansion exception request and, therefore, may not finalize its 
proposals based on the interpretation of the Secretary's statutory 
authority set forth in the proposed rule. The commenter cited a CMS 
2015 statement that it cannot consider any concerns raised in the 
community input that are unrelated to the statutory and regulatory 
eligibility criteria when determining whether to grant an exception to 
a requesting hospital (80 FR 55852). The commenter also cited CMS' 
statement that, if a hospital qualifies as an applicable hospital or a 
high Medicaid facility, CMS does not have the discretion to grant less 
than the requested increase in facility capacity (Id.).
    Response: The specific language cited by the commenter appeared in 
a decision notice published in the Federal Register announcing CMS' 
approval of an expansion exception request. We understand the commenter 
to suggest that CMS is permanently bound by the statement in the 2015 
notice. We disagree. An essential function of the agency is to 
implement the statute as enacted by the Congress. Assessing and, as 
necessary, reassessing the statutory authority granted to the Secretary 
is a critical step in implementing any statutory provision. As we 
stated in the proposed rule, we recently reviewed the expansion 
exception process, including a fresh examination of the statutory 
language and certain legislative history of the Affordable Care Act. 
The policies announced in this final rule supersede any prior 
statements regarding CMS' authority to approve or deny an expansion 
exception request. For all expansion exception requests submitted on or 
after October 1, 2023, receiving approval for an exception from the 
prohibition on expansion of facility capacity at section 1877(i)(B) of 
the Act is a two-step process. Meeting the criteria for an applicable 
hospital or a high Medicaid facility is the first step and makes a 
hospital eligible to request an expansion exception, subject to the 
limitations of final Sec.  411.363(b)(2). The second step for approval 
of an expansion exception request requires a decision by CMS after 
consideration of the data and information provided by the hospital in 
its request and rebuttal statement (if any), the community input (if 
any), and data and information otherwise available to CMS and relevant 
to its decision.
    Comment: We received two comments asserting that the statutory 
criteria that a hospital must meet to be an applicable hospital or a 
high Medicaid facility are the same and only criteria that must be met 
for a hospital to be granted an expansion exception. One of these 
commenters further asserted that CMS previously acknowledged that it 
did not have authority to create additional criteria for classification 
as an applicable hospital or high Medicaid facility.
    Response: We disagree with the commenters that a hospital is 
entitled to an expansion exception merely because it meets the 
definition of an ``applicable hospital'' or a ``high Medicaid 
facility.'' The plain language of section 1877(i)(3)(A) of the Act 
anticipates that an applicable hospital or a high Medicaid facility 
must apply for an expansion exception. It is our position that, when a 
hospital applies for an expansion exception request, it is making a 
request to CMS to grant permission for the hospital to expand its 
facility capacity without violating the prohibition set forth in 
section 1877(i)(1)(B) of the Act. We have considered the assertions of 
the commenters but are not persuaded to adopt their view that the use 
of the word ``apply'' in the statute is akin to exercising a right to 
an expansion exception for a hospital that meets the definition of an 
``applicable hospital'' or a ``high Medicaid facility.''
    As we explained in the proposed rule and in section X.B.2.a. of 
this final rule, we interpret section 1877(i)(3) of the Act to mean 
that a hospital must first establish that it meets the criteria for an 
applicable hospital or a high Medicaid facility and, if it does, it may 
request--but is not guaranteed--an exception from the prohibition on 
facility expansion. With respect to the comment regarding authority to 
create additional criteria for classification as an applicable hospital 
or a high Medicaid facility, we agree that sections 1877(i)(3)(E) and 
(F) of the Act, which define the terms ``applicable hospital'' and 
``high Medicaid facility,'' respectively, do not authorize CMS to 
establish additional criteria in regulation that a hospital must meet 
to be an applicable hospital or a high Medicaid facility. We did not 
propose to do so (88 FR 27178 through 27179), nor are we finalizing 
regulations that establish criteria beyond the statutory criteria for 
applicable hospitals and high Medicaid facilities. Rather, our 
proposals and final policies establish the sources of information and 
factors that CMS will consider when deciding whether to approve or deny 
an expansion exception request.
    Comment: We received little comment on our proposal to permit only 
the use of filed Medicare hospital cost report data from HCRIS to show 
that a hospital meets the criteria for an applicable hospital or a high 
Medicaid facility, although one commenter expressed support for the 
proposal as it would standardize data sources for all interested 
parties.
    Response: In accordance with existing Sec.  411.362(c)(2)(ii) and 
(c)(3)(ii), we announced in the proposed rule the Secretary's 
determination that HCRIS now contains sufficiently complete inpatient 
Medicaid discharge data to perform the calculations to estimate 
Medicaid inpatient admissions as required under both our existing 
expansion exception process and under this final rule (88 FR 27182). 
For the reasons explained in the CY 2012 OPPS/ASC final rule--namely, 
that requiring the use of filed Medicare hospital cost report data from 
HCRIS for all expansion exceptions 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--we are finalizing our proposal to require the use of filed 
Medicare hospital cost report data from HCRIS in all expansion 
exception requests submitted on or after October 1, 2023.
    Comment: We received comments generally in support of our proposed 
clarification of and revisions to the expansion exception process, as 
well as comments either opposed to any changes to the regulations that 
set forth the expansion exception process or the

[[Page 59297]]

statutory prohibition on the expansion of facility capacity in general. 
The commenters in support of the clarification and revisions cited 
benefits such as transparency, clarity, and uniform application of the 
process and CMS' decision making if we finalize our proposals. The 
commenters opposed to the proposals asserted that they represent an 
unfair departure from CMS' previously neutral stance in the friction 
between hospitals that have physician ownership and those that do not, 
and emphasized that hospitals with physician ownership or investment 
provide high-quality care, have high patient satisfaction ratings, and 
promote competition among health care providers. These commenters also 
suggested that the proposals, if finalized, would create barriers to 
access to care and lengthen the process for an applicable hospital or a 
high Medicaid facility to expand its facility capacity.
    Response: The prohibition on the expansion of a hospital's facility 
capacity in the rural provider exception and the whole hospital 
exception is statutory and may not be rescinded through regulation. The 
prohibition applies equally to any hospital seeking to use the rural 
provider exception or the whole hospital exception, regardless of 
whether the hospital provides high quality care, has high patient 
satisfaction scores, or promotes competition among health care 
providers. We are aware of the studies highlighted by commenters both 
in support of and opposition to our proposals. The policies that we are 
finalizing in this rulemaking do not represent an assessment of the 
quality or cost of care provided by any hospital, whether invested in 
by physicians or not, or the impact of any hospital on its local 
community or economy. We are not taking sides in what the commenter 
referred to as the friction between hospitals that have physician 
ownership and those that do not. CMS is statutorily obligated to 
establish a process for requesting an expansion exception, and we 
believe that providing transparency is essential to its implementation. 
Further, we are not persuaded (and the commenter provided no support 
for its suggestion) that ensuring transparency by refining the process 
for making, considering, and deciding an expansion exception request 
would harm access to care for Medicare or Medicaid beneficiaries, 
uninsured patients, or other underserved populations. Finally, because 
we are limiting the data that may be used in an expansion exception 
request submitted on or after October 1, 2023, to filed Medicare 
hospital cost report data from HCRIS, which CMS makes readily available 
on its website, we believe that the final regulations that update the 
expansion exception process may shorten the period from receipt of an 
expansion exception request until the issuance of CMS' decision on the 
request.
    Comment: Two commenters objected to the proposed requirement that a 
requesting hospital must identify where and how it plans to provide 
inpatient or outpatient hospital services if CMS approves its expansion 
exception request. One of the commenters noted that a hospital may not 
know at the time of its request what its future expansion plans may 
entail.
    Response: As explained in section X.B.2.b. of this final rule, we 
are finalizing our proposal to reinstate the program integrity 
restriction regarding the location of permitted expansion facility 
capacity. Consequently, all approved expansion facility capacity under 
an expansion exception request that is submitted on or after October 1, 
2023, will be restricted to the main campus of the requesting hospital. 
Thus, it is unnecessary to request information regarding the location 
of any planned CMS-approved expansion of operating rooms, procedure 
rooms, or beds. To address the commenters' concerns regarding the 
potential that a hospital may not know how it will use expansion 
facility capacity if CMS approves its expansion exception request, we 
are removing from the list of required information at Sec.  
411.363(e)(2)(vi) information regarding whether the hospital plans to 
use expansion facility capacity to provide specialty services if the 
request is approved. Instead, under final Sec.  411.363(e)(3), a 
hospital may--but is not required to--provide this information in its 
expansion exception request. Also, we are not requiring information 
regarding the hospital's need for additional facility capacity to serve 
Medicaid, uninsured, and underserved populations, or the need for 
additional operating rooms, procedure rooms, and beds in the county in 
which the main campus of the hospital is located or any county in which 
the hospital provides inpatient or outpatient hospital services as of 
the date the hospital submits its expansion exception request. Like 
information regarding the hospital's planned use of any approved 
expansion facility capacity, this information is optional and may be 
submitted at the requesting hospital's election.
    Even though we are not finalizing our proposal to require 
information from a requesting hospital regarding its plans for any 
potential approved expansion facility capacity or the need for such 
expansion facility capacity, we remind readers that, as we stated in 
the proposed rule and prior rules, 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 cases of clear community need (88 FR 27180 and 76 FR 74524). And, 
because the statutory criteria for an applicable hospital and a high 
Medicaid facility focus on Medicaid inpatient admissions, 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 hospital's community (88 FR 27180). It 
remains relevant to our decision with respect to an expansion exception 
request to ascertain whether the approval of the request could improve 
access to specialty services for populations whose need for such 
services often goes unaddressed. To the extent a requesting hospital 
has information regarding the need for additional facility capacity or 
is aware of its future plans for any approved expansion facility 
capacity, we welcome such information, but we emphasize that the fact 
that a hospital elects not to provide information beyond what is 
required under Sec.  411.363(e)(2) will not factor into CMS' decision 
to approve or deny the request.
    Comment: We received several comments from parties that viewed 
proposed Sec.  411.363(e)(2)(vi) and (vii), which (as proposed) set 
forth the information required to be included in an expansion exception 
request, and proposed Sec.  411.363(i)(2), which sets forth factors 
that CMS would consider in deciding whether to approve or deny a 
hospital's request for an expansion exception, as resembling, if not 
establishing, a Federal certificate of need (CON) program. In other 
words, the commenters viewed the proposed information requirements and 
factors as minimum thresholds that a requesting hospital must meet to 
prove that it deserves approval of its expansion exception request. 
Many of these commenters described CON programs as anti-competitive, 
time-consuming, and ineffective. One of these commenters questioned why 
CMS would require a Federal CON in instances where a hospital has been 
approved for expansion through a state CON process, while another 
expressed concern that the proposed factors could result in fewer 
approvals of expansion exception

[[Page 59298]]

requests and diminished competition among hospitals.
    Response: CMS is obligated to follow the statutory provisions of 
section 1877(i)(3) of the Act. The regulations finalized in this 
rulemaking are intended to support the purpose of the expansion 
exception process, which, as we stated in the proposed rule and the CY 
2012 OPPS/ASC final rule, is to provide the opportunity to expand in 
areas where a sufficient need for access is demonstrated (88 FR 27184 
and 76 FR 74524). The proposed regulations were not designed to make it 
harder for a hospital to obtain approval of an expansion exception 
request. To be clear, the proposed regulations were not intended to 
establish an actual or de facto Federal CON program or to establish 
minimum thresholds that must be met or maximum thresholds that may not 
be exceeded by a hospital to establish a showing of need for additional 
facility capacity. As the other commenters correctly assessed, the 
required information and enumerated factors were (and, as finalized, 
are) intended to aid a requesting hospital and interested parties in 
providing useful information that could assist CMS in deciding whether 
to approve or deny an expansion exception request.
    We emphasize that the final regulations do not establish an actual 
or de facto Federal CON program or establish minimum thresholds that 
must be met or maximum thresholds that may not be exceeded by a 
hospital to establish a showing of need for additional facility 
capacity. We encourage hospitals to include in their expansion 
exception requests information (beyond the data showing that they meet 
the criteria for an applicable hospital or a high Medicaid facility) to 
support that there is a need for additional operating rooms, procedure 
rooms, and beds for the hospital to serve Medicaid, uninsured, and 
underserved populations, or generally in the county in which the main 
campus of the hospital is located or any other county in which the 
hospital provides inpatient or outpatient hospital services as of the 
date it submits its expansion exception request. A hospital requesting 
an expansion exception may include any information it considers 
relevant or useful to support its request, and is not limited to 
specific data points, such as bed occupancy levels or expected 
population growth, to support that there is a need for additional 
facility capacity. We also remind parties that the statutory 
prohibition on expansion of facility capacity limits only the expansion 
of the hospital's aggregate number of operating rooms, procedure rooms, 
and beds.
    Comment: Some commenters viewed our proposals to identify the 
information required from a requesting hospital and the factors that 
CMS will consider in deciding whether to approve or deny an expansion 
exception request as a tool to facilitate the provision of useful 
information from the requesting hospital and in the community input 
with respect to an expansion exception request. These commenters 
expressed appreciation for the transparency and specificity of the 
information and factors that CMS will consider in deciding whether to 
approve or deny an expansion exception request. Other commenters 
asserted that CMS' consideration of anything other than whether the 
requesting hospital meets the criteria for an applicable hospital or a 
high Medicaid facility is inappropriate, if not impermissible. Some of 
these commenters specifically objected to proposed Sec.  411.363(i)(1), 
which describes the sources of the data and information that CMS will 
consider in reviewing an expansion exception request, and includes 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 makes clear that CMS may also consider 
any other data and information relevant to its decision. One of these 
commenters expressed concern that CMS' ability to consider data and 
information not provided by the requesting hospital or in the community 
input could result in arbitrary decisions whether to approve or deny 
expansion exception requests.
    Response: As a preliminary matter, we note that the comments 
addressing our proposals to require particular information in an 
expansion exception request and to identify the factors that CMS will 
consider in deciding whether to approve or deny a hospital's request 
were generally derivative of the commenter's view of CMS' statutory 
authority to deny an expansion exception request from a hospital that 
meets the criteria for an applicable hospital or a high Medicaid 
facility. That is, commenters that interpreted section 1877(i)(3) of 
the Act to authorize the Secretary to decide whether or not to grant an 
exception from the prohibition on expansion of facility capacity at 
section 1877(i)(1)(B) of the Act viewed our proposals as modifications 
and clarifications of the expansion exception process. Commenters that 
interpreted the statute as prohibiting the Secretary from denying a 
request for an expansion exception from a hospital that meets the 
criteria for an applicable hospital or a high Medicaid facility viewed 
our proposals as unauthorized additional criteria to qualify as an 
applicable hospital or a high Medicaid facility and secure a hospital's 
guaranteed right to expand.
    We are pleased that some commenters recognized our intention to 
bring transparency and uniformity to the expansion exception process. 
We agree that communicating the factors that CMS will consider in 
deciding whether to approve or deny a hospital's expansion exception 
request should assist hospitals and interested in parties with the 
preparation and submission of expansion exception requests and 
community input. We do not agree that the expansion exception process, 
as finalized, will result in inconsistent outcomes or arbitrary 
decisions to approve or deny expansion exception requests. Rather, we 
anticipate that, because expansion exception requests submitted on or 
after October 1, 2023, should include similar information (or 
categories of information) linked to the factors enumerated in Sec.  
411.363(i)(2), the final regulations identifying the information that 
is pertinent to our consideration of an expansion exception request 
will facilitate the uniform consideration of expansion exception 
requests.
    We reiterate that receiving approval for an expansion exception is 
a two-step process. Meeting the criteria for an applicable hospital or 
a high Medicaid facility is the first step and makes a hospital 
eligible to request an expansion exception, subject to the limitations 
of Sec.  411.363(b)(2). The second step for approval of an expansion 
exception requires a decision by CMS after consideration of the data 
and information provided by the hospital in its request and rebuttal 
statement (if any), the community input (if any), and data and 
information otherwise available to CMS and relevant to its decision. As 
we stated in the proposed rule, each expansion exception request will 
be assessed on a case-by-case basis, and we will consider the totality 
of the information available to CMS in deciding whether to approve or 
deny an expansion exception request (88 FR 27179). For each expansion 
exception request, CMS will consider the factors set forth in final 
Sec.  411.363(i)(2), as well as any other information provided by the 
requesting hospital or in the community input. No single factor, data 
point, or other piece of information is dispositive to a decision. Of 
course, a lack of information regarding a particular factor or factors 
could impact

[[Page 59299]]

CMS' decision with respect to an expansion exception request. We 
disagree that this will result in arbitrary decisions with respect to 
expansion exception requests. As required in section 1877(i)(3)(H) of 
the Act, CMS will publish a notice of each decision to approve or deny 
an expansion exception request in the Federal Register, and we will 
explain in detail the rationale for the approval or denial of the 
request in that notice.
    Under the final regulations, the information that must be included 
in a request is identical to that required under the historical 
expansion exception process, with two exceptions. First, we are 
requiring at Sec.  411.363(e)(2)(iii) that the hospital provide an 
address where hard copy mail may be sent to the contact person 
identified as available to discuss the request with CMS on behalf of 
the hospital. Second, final Sec.  411.363(e)(2)(vi) requires the 
requesting hospital to submit documentation supporting whether and how 
the hospital has used any expansion facility capacity approved in a 
prior request because this information is relevant to our decision to 
approve or deny an expansion exception request. Knowing whether the 
hospital has unused, previously approved expansion facility capacity 
(or has the ability to return to its baseline facility capacity if it 
has reduced its aggregate number of operating rooms, procedure rooms, 
and beds below the baseline prior to the date it submits its expansion 
exception request) will help us assess whether the hospital has a 
current or future need for additional facility capacity to serve 
Medicaid, uninsured, and underserved populations, as well as whether 
there is such a need in the counties where the hospital's main campus 
and hospital-based facilities, if any, are located. It is important to 
require this information, especially because we are not requiring the 
requesting hospital to provide information about the need for 
additional operating rooms, procedure rooms, and beds for the hospital 
or in the counties in which it operates.
    Final Sec.  411.363(i)(2) sets forth the factors that CMS will 
consider in its decision with respect to an expansion exception 
request. These are: 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; program integrity or quality of care concerns related to the 
requesting hospital; whether the requesting hospital has a need for 
additional facility capacity; and whether there is a need for 
additional operating rooms, procedure rooms, or beds in counties where 
the hospital's main campus and hospital-based facilities, if any, are 
located as of the date the hospital submits the request. Final Sec.  
411.363(i)(2) also makes clear that CMS will consider factors other 
than those expressly stated in the regulation; for example, depending 
on the facts and circumstances of the particular expansion exception 
request, CMS may consider 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 (88 FR 
27179).
    Final Sec.  411.363(i)(2)(i) includes the specialty (for example, 
maternity, psychiatric, or substance abuse disorder care) of the 
requesting hospital or the services furnished by or to be furnished by 
the hospital if CMS approves the request as a factor for CMS' 
consideration. As we stated in the proposed rule, we believe it is 
important to understand whether and how a hospital requesting an 
expansion exception could improve access to specialty care, such as 
maternity, psychiatric, and substance use disorder care, the need for 
which often goes unaddressed, especially for Medicaid beneficiaries and 
other underinsured or underserved populations (88 FR 27180). Although 
we understand that a hospital may not know at the time of its request 
what its future expansion plans may entail, it is still pertinent to 
our decision to approve or deny an expansion exception request, indeed 
to our faithful implementation of the statutorily required expansion 
exception process, to understand how approved expansion facility 
capacity could address the need for specialty services for Medicaid and 
other underserved populations in the hospital's community (see 88 FR 
27180).
    Final Sec.  411.363(i)(2)(ii) includes program integrity or quality 
of care concerns related to the requesting hospital as a factor for 
CMS' consideration. Because the underlying purpose of the physician 
self-referral law is to protect against the abuse of the Medicare 
program and its beneficiaries, program integrity concerns or quality of 
care concerns related to the requesting hospital or, for that matter, 
any hospital in the counties where the hospital's main campus and 
hospital-based facilities (if any) are located would be relevant to 
CMS' decision whether to approve or deny an expansion exception 
request. The nature and extent of the program integrity or quality of 
care concerns, as well as whether they relate to the requesting 
hospital or another hospital in its community, are most pertinent to 
our consideration of this factor.
    Final Sec.  411.363(i)(2)(iii) and (iv) list factors that relate to 
a community's general need for additional operating rooms, procedure 
rooms, and beds as factors for CMS' consideration. We are not 
prescribing the data points or other criteria that the requesting 
hospital or community input may use to support an assertion of the need 
for (or lack of need for) expansion facility capacity. Data and 
information that could relate to a hospital's or community's need for 
additional operating rooms, procedure rooms, and beds could include a 
number and variety of things, such as impediments to accessing timely 
care (for example, long wait times to schedule elective surgery), the 
closure of a hospital outside the community that could lead to 
increased utilization of the hospital and other services in the 
community, or information regarding population increase, bed occupancy, 
and bed capacity in the community, even with respect to expansion 
exception requests from high Medicaid facilities (which need not meet 
specific criteria related to these data points to qualify as a high 
Medicaid facility under section 1877(i)(3)(F) of the Act). We do not 
believe that a need for additional operating rooms, procedure rooms, 
and beds in a community is shown simply because the requesting hospital 
meets the criteria for an applicable hospital or a high Medicaid 
facility. For example, two of the criteria for an applicable hospital 
are that the hospital has an average bed occupancy rate that is higher 
than the average bed occupancy rate in the State in which it is located 
and that the State must have an average bed capacity that is less than 
the national bed capacity during the relevant time period. We do not 
see a clear or obvious indication of community need, for example, where 
a hospital that has a bed occupancy rate of only 60 percent is located 
in a State that has a bed occupancy rate of 59 percent or where a 
hospital is located in a State that has an average hospital bed 
capacity of 125 compared to the national average bed capacity of 126, 
both of which would meet the statutory criteria.
    We have not assigned a weight to any of these factors or to any 
particular data point that may be provided to support the assertions of 
a hospital or in the community input regarding one or more of the 
factors. We acknowledge the unique characteristics and needs of each 
community to which an expansion exception request may relate. Because 
the CMS decision to approve or deny an

[[Page 59300]]

expansion exception request will be made on a case-by-case basis, the 
significance of each factor (and any other information that CMS may 
consider when making its decision) will vary among requests. However, 
all expansion exception requests will be treated the same in that all 
factors will be considered. As we noted in the proposed rule, decisions 
to approve or deny requests from hospitals that appear similar could 
differ because of factors such as planned expansion of needed 
psychiatric (or other specialty) services instead of general acute care 
services or whether the requesting hospital seeks an expansion 
exception to replace facility capacity on its main campus that it has 
relocated or intends to relocate to other areas in need of services (88 
FR 27179). Other examples of information that could impact CMS' 
decision include but are not limited to: an expected increase in the 
number of Medicaid beneficiaries or uninsured patients in the 
community; an expected change in the population (or portion of the 
population) in the community; program integrity, quality of care, or 
patient safety concerns with providers or suppliers of services in the 
community; and development or planned development of additional 
operating rooms, procedure rooms, or beds in the community. CMS will 
consider any data and information provided by the requesting hospital 
or in the community input related to impediments to accessing timely 
care. In all instances where CMS has determined that the requesting 
hospital has met the criteria for an applicable hospital or a high 
Medicaid facility, CMS will provide a detailed explanation of its 
decision and the rationale for approving or denying the hospital's 
request in the Federal Register notice announcing the decision.
    Comment: One commenter objected to our proposal to require a 
hospital requesting an expansion exception request to provide actual 
notice of its request directly to hospitals whose data are part of the 
comparisons required to show that the requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility and/or 
to hospitals located in the requesting hospital's community, citing 
burden and asserting that the actual notice is unnecessary because the 
requesting hospital must disclose on any public website for the 
hospital that it is requesting an expansion exception. Other commenters 
urged CMS to expand the definition of ``community'' to allow widespread 
public comment from any interested parties.
    Response: Under our existing regulation at Sec.  411.362(c)(5), a 
hospital requesting an expansion exception currently must provide 
actual notice of its request directly to hospitals whose data are part 
of the comparisons required to show that the requesting hospital meets 
the criteria for an applicable hospital or a high Medicaid facility. As 
we explained in the CY 2015 OPPS/ASC proposed rule, the purpose of this 
requirement is to ensure that that comparison hospitals are aware of 
the opportunity to provide input. (At that time, we had not defined in 
regulation the requesting hospital's ``community'' for purposes of the 
statutory requirement that individuals and entities in the requesting 
hospital's community must have an opportunity to provide input with 
respect to the expansion exception request.) We are retaining this 
requirement at Sec.  411.363(f)(2).
    As discussed in section X.B.2.a.(8). of this final rule, we are 
finalizing regulations at Sec.  411.363(e)(2)(vi) and (vii) and (i)(2) 
that set forth the information required to be included in an expansion 
exception request, information that may be included in an expansion 
exception request at the requesting hospital's election, and factors 
that CMS will consider in deciding whether to approve or deny a 
hospital's request for an expansion exception, respectively. Although 
we believe that hospitals located in the geographic area served by the 
requesting hospital (as defined at existing Sec.  411.357(e)(2)) or in 
the counties in which the requesting hospital provides inpatient or 
outpatient hospital services as of the date it submits its expansion 
exception request would likely have information relevant and useful to 
CMS' decision to approve or deny a request, we are not finalizing our 
proposal to require actual notification of an expansion exception 
request to these hospitals. We do not believe that the incremental 
burden of providing actual notice to such hospitals, if any, outweighs 
the benefit of having the most comprehensive body of information for 
use in deciding whether to approve or deny a hospital's expansion 
exception request. However, we recognize that multiple configurations 
of the geographic area served by a requesting hospital could exist at 
any single point in time, and the regulation as proposed does not 
provide sufficient clarity and direction to requesting hospitals 
regarding which hospitals (other than the comparison hospitals) must 
receive actual notification of the expansion exception request. 
Therefore, we are not finalizing the proposed regulation at Sec.  
411.363(f)(2) which would have required actual notification by a 
hospital that it is requesting an exception, in either electronic or 
hard copy form, directly to hospitals located in the requesting 
hospital's community (other than the comparison hospitals, which must 
receive actual notification). We are finalizing the regulation at Sec.  
411.363(f)(1), which replicates our current requirement for disclosure 
on any public website for the hospital that it is requesting an 
exception from the prohibition on facility expansion.
    We decline to expand the definition of ``community'' as suggested 
by the last commenter. Section 1877(i)(3)(A)(ii) of the Act identifies 
the individuals and entities entitled to an opportunity to provide 
input with respect to an expansion exception request as those that are 
located in the community in which the requesting hospital is located. 
We interpret this statutory provision as establishing a geographic 
nexus between the individual or entity providing the input and the 
hospital requesting the expansion exception. We are confident that our 
definition of ``community'' for purposes of final Sec.  411.363 will 
allow for robust input on an expansion exception request while ensuring 
this important nexus. As we did in the proposed rule (88 FR 27181), we 
encourage parties that wish to have their input considered to address 
how they are part of the requesting hospital's community in their 
submissions.
    Comment: Recognizing that our existing regulations permitting 
community input with respect to all expansion exception requests were 
established through notice-and-comment rulemaking, one commenter 
nonetheless requested that we not permit community input with respect 
to an expansion exception request made by a high Medicaid facility 
because the statute does not expressly require community input with 
respect to such hospitals. Other commenters suggested that we limit 
community input to whether the requesting hospital meets the criteria 
for an applicable hospital or a high Medicaid facility. One commenter 
objected to our proposal to establish a 60-day timeframe for the 
submission of community input. This commenter suggested that, if we 
extend the period for community input, we should also extend the period 
for the requesting hospital's rebuttal statement from the current 30 
days to 60 days. In contrast, some commenters highlighted our 
longstanding policy that community input is not confined to the narrow 
question of whether the requesting hospital meets the criteria for an 
applicable hospital or a high Medicaid facility and supported our 
position that

[[Page 59301]]

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. One 
commenter asserted that broad community input on expansion exception 
requests will better enable CMS to provide case-by-case evaluation of 
requests and ensure that they are only approved where the requesting 
hospital meets the criteria for an applicable hospital or a high 
Medicaid facility and the totality of the information supports the 
appropriateness of the expansion.
    Response: We decline to adopt the first commenter's suggestion. We 
agree with the commenters on the proposed rule, as well as commenters 
on the CY 2021 OPPS/ASC proposed rule, some of which supported 
proposals to eliminate the program integrity restrictions on high 
Medicaid facilities, that community input is a valuable part of the 
expansion exception process and that it was the Congress' intent to 
include it (85 FR 86258). We also decline to limit community input to 
whether the requesting hospital meets the criteria for an applicable 
hospital or a high Medicaid facility. The plain language of section 
1877(i)(3)(A)(ii) of the Act requires that the expansion exception 
process provide for community input ``with respect to the application'' 
(that is, the expansion exception request). It is our position that, by 
not limiting community input to whether the requesting hospital meets 
the criteria for an applicable hospital or a high Medicaid facility, 
the Congress intended for CMS to obtain and consider community input on 
the entire application (or request) for an expansion exception. 
Moreover, our longstanding policy, established through notice-and-
comment rulemaking, is not to restrict the types of community input 
that may be submitted (76 FR 74522 through 74523). Finally, the final 
regulations should bring clarity regarding the factors that CMS will 
consider in deciding whether to approve or deny an expansion exception 
request and will likely result in the submission of more varied 
information than we have historically received from both requesting 
hospitals and parties that submit community input on their expansion 
exception requests. Therefore, we believe that extending the period for 
both community input and the requesting hospital's rebuttal statement, 
if any, to 60 days is appropriate.
b. Program Integrity Restrictions on Approved Facility Expansion
    As discussed in sections X.B.1.b. of this final rule, in the CY 
2012 OPPS/ASC final rule, we issued regulations setting forth the 
expansion exception process at existing 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 of a hospital with physician 
ownership or investment and the process for requesting an exception 
from the prohibition on expansion of facility capacity 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. 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.).
    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 exception process that treated high Medicaid facilities 
the same as applicable hospitals, and that such treatment is consistent 
with the Congress' intent to generally prohibit expansion of hospitals 
with physician ownership or investment. As 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 to eliminate potential burden under the former 
Patients over Paperwork initiative.
(1) Proposals
    As we explained in the proposed rule, we recently reviewed the CY 
2021 OPPS/ASC regulatory revisions, including the comments on our 
proposals in that rulemaking, 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. Commenters opposed 
to our proposal in the CY 2021 OPPS/ASC proposed rule 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 hospitals with physician ownership or investment present 
a risk of program or patient abuse through cherry-picking patients, 
avoiding Medicaid and uninsured patients, and treating fewer medically 
complex patients, and that unrestricted expansion of such hospitals 
could exacerbate the risk (85 FR 86256 through 86257). We also reviewed 
community input related generally to the expansion of hospitals with 
physician ownership or investment that we received in conjunction with 
an expansion exception request submitted 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 expansion of hospitals with physician 
ownership or investment.
    We stated in the proposed rule that our position, following this 
recent review, is 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. We noted that, 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 pertain 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,

[[Page 59302]]

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, as we stated in the 
proposed rule, 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 proposed 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 proposed 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 also proposed to renumber 
this regulation at Sec.  411.363(j). We noted 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 the 
day before the effective date of the revised regulations if our 
proposals were finalized. We did not propose any change to program 
integrity restrictions affecting applicable hospitals, which have been 
subject to the same limitations on maximum aggregate expansion of 
facility capacity and location of expansion facility capacity under our 
regulations since January 1, 2012. In addition to the regulation at 
proposed Sec.  411.363(j), the restriction on the maximum aggregate 
expansion of a hospital is also implemented at proposed Sec.  
411.363(b)(2)(i), which provides that CMS will not consider a request 
from a hospital 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, CMS would 
not consider a future expansion exception request from those hospitals 
on or after October 1, 2023. 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 are eligible to 
request another expansion exception request at Sec.  411.363(b) at the 
time of the request.
    The program integrity restriction on the location of expansion 
facility capacity proposed at Sec.  411.363(j) requires that any 
approved expansion occur only on the main campus of the hospital. We 
noted in the proposed rule, however, that nothing in our existing 
physician self-referral regulations affects 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 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 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?
    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,\934\ from a POH's main campus to a remote 
location. However, because the regulation at 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.
---------------------------------------------------------------------------

    \934\ 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.
---------------------------------------------------------------------------

    In the proposed rule, we noted that our policy has not changed 
since the publication of the FAQ, and this continues to be the case. 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 exception or the 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 
Sec.  411.362 no later than September 23, 2011. Section 1877(i)(1)(A) 
of the Act and 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. Put another way, 
for a hospital to bill Medicare (or another individual, entity, or 
third-party payor) 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

[[Page 59303]]

other than the main campus of a hospital.
    Finally, 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 also proposed, 
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). Specifically, we proposed that a 
hospital may not 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. As we noted in 
the proposed rule, applicable hospitals have been subject to this 
limitation under our regulations since the effective date of our CY 
2012 OPPS/ASC final rule. We did not propose any substantive change to 
the application of the limitation on applicable hospitals. However, we 
proposed to slightly revise the language of existing Sec.  
411.362(c)(1) and renumber it at Sec.  411.363(b)(2)(ii).
(2) Provisions of the Final Rule: Program Integrity Restrictions
    We are finalizing our proposals to reinstate the limitations on 
high Medicaid facilities with respect to the maximum aggregate 
expansion of a hospital and location of expansion facility capacity. 
Specifically, final Sec.  411.363(j) provides that an increase in 
facility capacity approved by CMS may not result in the hospital's 
aggregate facility capacity exceeding 200 percent of its baseline 
facility capacity and that the expansion facility capacity may occur 
only in facilities on the hospital's main campus. With respect to 
applicable hospitals, these program integrity restrictions apply to all 
increases in facility capacity approved by CMS. With respect to high 
Medicaid facilities, these program integrity restrictions do not apply 
to an increase in facility capacity approved by CMS with respect to an 
expansion exception request submitted between January 1, 2021, and 
September 30, 2023. As discussed in section X.B.2.a.(8). of this final 
rule, under final Sec.  411.363(b)(2)(ii), a hospital may submit an 
expansion exception request, provided that 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 expansion exception 
request.
    We received the following comments on our proposals to reinstate 
certain program integrity restrictions on high Medicaid facilities and 
our responses follow.
    Comment: We received comments in support of our proposals to 
reinstate, with respect to high Medicaid facilities, the program 
integrity restrictions on the maximum aggregate expansion of a hospital 
and the location of expansion facility capacity, as well as the 
limitation on the frequency of expansion exception requests. We also 
received comments that objected to these proposals. Commenters in 
support of finalizing the proposals identified benefits such as uniform 
application of the expansion exception process to both applicable 
hospitals and high Medicaid facilities and the appropriate use of 
agency resources. Importantly, these commenters asserted that 
finalizing these policies is necessary to protect the Medicare program 
and patients from abuses resulting when medical decision making is 
affected by a physician's financial self-interest, such as an ownership 
or investment interest in a hospital to which the physician refers 
Medicare and other patients for designated health services. These 
commenters also asserted that preventing such abuses outweighs any 
perceived burden on high Medicaid facilities. One commenter expressed 
concern that it has seen and would continue to see expansion exception 
requests from hospitals seeking to bring physician ownership to 
entirely new markets previously barred by section 1877(i)(1)(B) of the 
Act and CMS regulations. Other commenters in support of our proposals 
stated that the application of the program integrity restrictions to 
all hospitals requesting an expansion exception will encourage a wider 
breadth of access and choice among Medicare beneficiaries. In contrast, 
commenters opposed to the application of program integrity restrictions 
to high Medicaid facilities variously asserted that, recognizing the 
need to increase access to health care for Medicaid beneficiaries, the 
Congress intentionally did not apply the program integrity restrictions 
to high Medicaid facilities and that the application of such 
restrictions would create barriers to care and exacerbate poor health 
outcomes for patients with lower incomes and socioeconomic 
disadvantages because high Medicaid facilities serve many patients in 
such categories. One of these commenters suggested that CMS should not 
impose these program restrictions on high Medicaid facilities in the 
absence of a showing of cherry-picking, lemon-dropping, and the other 
harms of self-referral. Another of these commenters maintained that, 
because there have been a limited number of expansion exception 
requests to date, there is no need for consistency in the treatment of 
applicable hospitals and high Medicaid facilities.
    Response: As we stated in the proposed rule, we recently undertook 
a fresh review of the CY 2021 OPPS/ASC regulatory revisions, including 
the comments on our proposals in that rulemaking, 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 generally to the 
expansion of hospitals with physician ownership or investment (not 
specifically related to an individual hospital that requested an 
expansion exception) that we received in conjunction with an expansion 
exception request submitted after the effective date of the CY 2021 
OPPS/ASC final rule (88 FR 27185). Based on that review and the 
comments that we received on the FY 2024 IPPS proposed rule, we share 
many of the concerns expressed by commenters that support the 
application of the program integrity restrictions on all hospitals 
seeking an exception from the prohibition on expansion of facility 
capacity at section 1877(i)(1)(B) of the Act. As we have stated in 
previous rulemakings, we are concerned that, when physicians have a 
financial incentive to refer a patient to a particular entity, that 
incentive can affect utilization, patient choice, and competition. 
Physicians can overutilize by ordering items and services for patients 
that, absent a profit motive, they would not have ordered. A patient's 
choice is diminished when physicians steer patients to less convenient, 
lower quality, or more expensive providers of health care just because 
the physicians are sharing profits with, or receiving remuneration 
from, the providers. And lastly, where referrals are controlled by 
those sharing profits or receiving remuneration, the medical 
marketplace suffers if new competitors cannot win business with 
superior quality, service, or price (80 FR 41926 and 81 FR 80533).
    Section 1877 of the Act was enacted to combat the potential that 
financial self-interest would affect a physician's medical decision 
making and ensure that patients have options for quality care. The 
law's prohibitions were intended to prevent a patient from being 
referred for services that are not needed or steered to certain health 
care providers because the patient's physician may improve their 
financial standing through those referrals. These

[[Page 59304]]

prohibitions also aim to prevent the steering of ``desirable'' Medicare 
beneficiaries (that is, those who may have few complicating or other 
medical conditions or are economically advantaged) to entities from 
which the referring physician may benefit financially. Importantly, 
they protect the Medicare program from increased costs from physician 
referrals that are influenced by financial self-interest. (See, for 
example, 85 FR 77493.) At their core, our regulations, including those 
that govern the process for requesting an exception from the 
prohibition on expansion of facility capacity, share a common purpose 
with the statutory prohibitions. Their primary objective is to protect 
against program or patient abuse, which may occur for any of the 
reasons noted. To protect the Medicare program and its beneficiaries, 
as well as Medicaid beneficiaries, uninsured patients, and other 
underserved populations from potential harms such as (but not limited 
to) overutilization, patient steering, cherry-picking, and lemon-
dropping, we are finalizing our proposals to reinstate program 
integrity restrictions on high Medicaid facilities. Under final Sec.  
411.363(j) and (b)(2)(ii), with respect to expansion exception requests 
submitted on or after October 1, 2023, a high Medicaid facility may not 
expand beyond 200 percent of its baseline facility capacity, must 
locate all approved expansion facility capacity on its main campus, and 
may request an expansion exception no earlier than 2 calendar years 
from the date of the most recent decision by CMS approving or denying 
the hospital's most recent expansion exception request.
    As we stated in the proposed rule, 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 (88 FR 27185). 
Although we are cognizant that section 1877(i)(3) of the Act does not 
expressly apply these restrictions to high Medicaid facilities in the 
same way that they are applied to applicable hospitals, unlike the 
commenters opposed to our proposals, we see nothing in the plain 
language of the statute to indicate that this was intentional or that 
the Congress did not apply the restrictions to high Medicaid facilities 
because, as one commenter contended, it recognized the need to increase 
access to health care for Medicaid beneficiaries and the expansion of 
such hospitals would increase this access. In fact, the statutory 
criteria defining an applicable hospital and the statutory criteria 
defining a high Medicaid facility both include the hospital's Medicaid 
inpatient admissions as a criterion, indicating that any hospital that 
may request an expansion exception must show that it provides a certain 
level of access to health care for Medicaid beneficiaries relative to 
the other hospitals in the county in which it is located. Moreover, we 
are not persuaded that reinstating the program integrity restrictions 
on high Medicaid facilities would result in barriers to care for 
Medicaid, uninsured, or other underserved populations. We acknowledge 
that some high Medicaid facilities may serve a large number of Medicaid 
beneficiaries, but it is not true that--by definition--every high 
Medicaid facility serves a large (or even significant) number of 
Medicaid beneficiaries. Determining whether a hospital meets the 
criteria for a high Medicaid facility requires a relativity assessment. 
A hospital that meets the criteria for a high Medicaid facility need 
only have a higher annual percent of total inpatient admissions under 
Medicaid than each other hospital in the county that participates in 
the Medicare program for the relevant time period. For example, a 
hospital may have only 3 percent of its inpatient admissions under 
Medicaid and still be a high Medicaid facility if the each of the other 
Medicare-participating hospitals in the county have less than 3 percent 
of their inpatient admissions under Medicaid.
    As we stated in the proposed rule, 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 (88 FR 
27185). It remains our position that protecting the Medicare program 
and its beneficiaries, as well as Medicaid beneficiaries, uninsured 
patients, and other underserved populations, from potential harms such 
as overutilization, patient steering, cherry-picking, and lemon-
dropping outweighs any perceived burden on high Medicaid facilities. 
With respect to the commenter that suggested that CMS should not impose 
these program restrictions on high Medicaid facilities in the absence 
of a showing of cherry-picking, lemon-dropping, and the other harms of 
self-referral, we note that we have addressed similar comments in prior 
rulemakings. In the CY 2017 PFS final rule, we stated that an agency's 
reasoned assessment of the potential for abuse inherent in a particular 
business arrangement justifies the issuance of a prophylactic rule and 
cited longstanding judicial holdings in support of our position (81 FR 
80532). Our position has not changed.
    Like the commenters that highlighted the benefits of uniform 
treatment of all hospitals requesting an expansion exception, 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. Moreover, as these commenters asserted, doing so would be an 
appropriate use of (and may conserve) agency resources. As we stated in 
previous rulemaking--and commenters agreed--uniform treatment of all 
hospitals seeking an expansion exception balances the general ban on 
new or expanded hospitals with physician ownership or investment with 
the policy that allows limited growth of certain hospitals (76 FR 74523 
through 74524.) Finally, we are unclear regarding the basis of the last 
commenter's assertion that, because there have been a limited number of 
expansion exception requests to date, there is no need for consistency 
in the treatment of applicable hospitals and high Medicaid facilities. 
As such, we are unable to respond to this comment.
    Comment: Highlighting CMS' statement in the proposed rule that the 
program integrity restrictions on high Medicaid facilities, if 
finalized, would apply prospectively only (88 FR 27185), one commenter 
agreed that they should not be applied to expansion exceptions already 
approved by CMS.
    Response: Final Sec.  411.363(j), which implements the program 
integrity restrictions on the maximum aggregate expansion of a hospital 
and location of expansion facility capacity, does 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 final regulation 
at Sec.  411.363(j)(2) expressly states this limitation. Final Sec.  
411.363(b)(2), which implements the restriction on requesting an 
expansion exception more frequently than once every 2 calendar years, 
applies to all hospitals seeking an expansion exception request on or 
after the effective date of this final rule.
c. Technical and Grammatical Revisions
    We proposed certain technical and grammatical revisions to our 
regulations setting forth the expansion exception process. First, we 
proposed to revise the reference at Sec.  411.362(b)(2) to the

[[Page 59305]]

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, we 
also proposed to substitute the word ``approved'' for the reference to 
``granted'' at Sec.  411.362(b)(2). We proposed to use the same 
phrasing of ``exception from the prohibition on facility expansion'' 
wherever that language appears in the regulations. We proposed to use 
defined acronyms, such as HCRIS, where those terms appear following the 
initial designation of the acronym. In addition, we proposed to clarify 
that the references to section 1869 and 1878 in existing Sec.  
411.362(c)(8) (renumbered to at Sec.  411.363(l) under this final rule) 
are references to the Social Security Act. For consistency with our 
regulations in this subpart J, we proposed to revise the term ``Web 
site'' to ``website'' wherever the term appears in existing Sec.  
411.362. We also proposed to change numbers to words and vice versa 
where those conventions are correct in the Code of Federal Regulations. 
Finally, we proposed minor changes to correct grammatically the wording 
of certain regulations. For example, we proposed to restate the 
regulation at existing Sec.  411.362(c)(2)(iii) and renumber it at 
Sec.  411.363(c)(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.'' We received no comments on our proposed technical and 
grammatical revisions to the regulations and are finalizing these 
proposals without modification.

C. 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 proposed to correct these technical errors. Specifically, in 
Sec.  411.353(d) we proposed 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.'' We also proposed 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.''.
    We received no comments on these proposals and are therefore 
finalizing them as proposed.

D. Safety Net Hospitals--Request for Information

1. Background
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27187 through 27190), consistent with President Biden's Executive Order 
13985 on ``Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government,'' \935\ and Executive Order 
14091 on ``Further Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government,'' \936\ 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.\937\
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    \935\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \936\ 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).
    \937\ 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.\938\ In the FY 2024 IPPS/LTCH PPS 
proposed rule, we noted that, 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.\939\ 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 health care, 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.\940\ 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 
provided emergency care to many of the country's most at-risk patients 
and leveraged their position as trusted providers to drive vaccine 
uptake in their communities.\941\
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    \938\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
    \939\ https://www.ncbi.nlm.nih.gov/books/NBK224519/.
    \940\ https://www.ncbi.nlm.nih.gov/books/NBK224521/.
    \941\ https://www.nejm.org/doi/full/10.1056/NEJMp2114010.
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    In the proposed rule, we also noted that, 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 
pointed specifically to the greater share of patients insured by public 
programs, which it stated typically pay lower rates for the same

[[Page 59306]]

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.\942\ Moreover, the financial pressures on many safety-net 
hospitals have been further exacerbated by the impacts of the COVID-19 
pandemic.\943\ In response to the challenges posed by COVID-19, HHS had 
authorized several targeted distributions from the Provider Relief Fund 
to safety-net hospitals and other hospitals that serve vulnerable 
populations.\944\
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    \942\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \943\ https://www.nejm.org/doi/full/10.1056/NEJMp2114010.
    \944\ 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.\945\ 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.'' \946\ 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.\947\ 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.948 949
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    \945\ 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.
    \946\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \947\ https://www.nytimes.com/2020/07/01/nyregion/Coronavirus-hospitals.html; https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2768602.
    \948\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3272769/.
    \949\ https://www.healthaffairs.org/do/10.1377/forefront.20180503.138516/full/.
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    As explained in the FY 2024 IPPS/LTCH PPS proposed rule, 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 hospitals.\950\ 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.
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    \950\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
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    In the proposed rule, we stated that 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. We next 
discussed two potential approaches, as outlined in the following 
sections: the Safety-Net Index (SNI), 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
    As explained in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27188), the 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we explained that 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,\951\ 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.
---------------------------------------------------------------------------

    \951\ 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 final rule).
---------------------------------------------------------------------------

b. Uncompensated Care Costs to Total Operating Revenue Ratio
    In the FY 2024 IPPS/LTCH PPS proposed rule, we stated that, 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.\952\ 
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.
---------------------------------------------------------------------------

    \952\ 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 were available for the 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 the FY 2024 IPPS/LTCH PPS proposed rule, we stated that, in 
calculating the Medicare share of total

[[Page 59307]]

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).
    In the proposed rule, we also noted that, when calculating the SNI, 
the following circumstances may be encountered: new hospitals (for 
example, hospitals that begin participation in the 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 solicited 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 discussed in section IV.E.3. of 
the preamble to the proposed rule how these circumstances are addressed 
in the uncompensated care payment methodology.
    For MedPAC's SNI calculation, we also solicited 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
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27188 through 27189), 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. We noted that the Office of the Assistant 
Secretary for Planning and Evaluation (ASPE) had recently 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 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.\953\
---------------------------------------------------------------------------

    \953\ 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.954 955 956 957 958 Many rural areas 
also have relatively high levels of neighborhood disadvantage and high 
ADI levels.
---------------------------------------------------------------------------

    \954\ 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.
    \955\ 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.
    \956\ 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.
    \957\ 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.
    \958\ 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.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS proposed rule, we noted that 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 to support 
care improvement for underserved beneficiaries (87 FR 69845 through 
69849).\959\
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    \959\ 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.
---------------------------------------------------------------------------

    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

[[Page 59308]]

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
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27189 through 
27190), we stated that we were interested in public feedback on the 
challenges faced by safety-net hospitals, and potential approaches to 
help safety-net hospitals meet those challenges. We welcomed all 
feedback on this issue and asked 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 there is existing 
statutory authority, we requested that commenters 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?
    ++ 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?
    We greatly appreciate the many thoughtful and wide-ranging comments 
we received in response to this RFI, including comments from 
organizations representing safety-net hospitals, State hospital 
associations, industry trade groups, health systems, and other 
interested parties. Our public collaboration on these issues has been 
and will continue to be critical in achieving our mutual goal of 
helping safety-net hospitals meet the unique challenges they face. We 
are expeditiously conducting an in-depth review of the comments we 
received, and this will help to inform and guide our future rulemaking 
and other actions in this area.

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 occasionally referred 
to as the first disclosures proposed rule). This 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. It 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 first 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). Yet these concerns about PEC and REIT ownership are not 
limited to SNFs but extend to other provider and supplier types. Given 
the linkage discussed in the first disclosures proposed rule between 
PEC and REIT

[[Page 59309]]

ownership and a decline in nursing home quality, we believed it was 
critical for us to collect this information from all providers and 
suppliers that complete the Form CMS-855A. Doing so would enable us 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.\960\
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    \960\ 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 proposed in the May 1, 2023 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. 
We solicited comment on the propriety of the PEC and REIT definitions 
first proposed in the February 15, 2023 proposed rule and welcomed 
suggested revisions. We also sought comment and feedback on whether: 
(1) our proposed PEC definition should include publicly-traded PECs; 
and (2) CMS should consider collecting information on other types of 
private ownership besides PECs and REITs.
    We received approximately 10 sets of comments on our proposed 
application of the PEC and REIT definitions to all providers and 
suppliers that complete the Form CMS-855A application. As many of these 
comments closely aligned with those we received on the first disclosure 
proposed rule's PEC and REIT provisions, we believe that addressing all 
of them at one time would facilitate consistency, clarity, and a more 
streamlined approach. Accordingly, we are not finalizing in this rule 
the PEC and REIT proposals (including the associated information 
collection estimates) we made in the May 1, 2023 proposed rule. They 
will instead be addressed as part of a final rule that we will publish 
at a later date that will also address the February 15, 2023 
disclosures proposed rule.

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 final rule. MedPAC recommendations for the 
IPPS for FY 2024 are addressed in appendix B to this final rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at 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-Feefor-Service-Payment/AcuteInpatientPPS/index. We listed the 
data files available in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27190 through 27192).
    Commenters interested in discussing any data files used in 
construction of this final rule should contact Michael Treitel at (410) 
786-4552.

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 the FY 2024 IPPS/LTCH PPS proposed rule, we solicited public 
comment on each of these issues for the following sections of this 
document that contain information collection requirements (ICRs) except 
for the ICRs related to our proposal on counting certain days 
associated with section 1115 demonstrations in the Medicaid fraction, 
for which we solicited public comment in a proposed rule published in 
the Federal Register on February 28, 2023 (CMS-1788-P (88 FR 12623)). 
The following ICRs are listed in the order of appearance within the 
preamble (see sections II. through X. of the preamble of this final 
rule).

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 final 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. ICR Relating to Counting Certain Days Associated With Section 1115 
Demonstrations in the Medicaid Fraction
    In February 2023, we issued a proposed rule (88 FR 12623) to revise 
our regulations on the counting of days associated with individuals 
eligible for certain benefits provided by section 1115 demonstrations 
in the Medicaid fraction of a hospital's disproportionate patient 
percentage. In section IV.F. of the preamble of this final rule, we are 
revising the criteria for a hospital to count days associated with 
individuals eligible for certain benefits provided by section 1115 
demonstrations in the Medicaid fraction of a hospital's 
disproportionate patient percentage (DPP): for the patient days of 
individuals to be included in the DPP Medicaid fraction numerator (if 
they are not also entitled to Medicare Part A), the demonstration must 
provide those patients with insurance that includes coverage of 
inpatient hospital services, or the insurance the patient purchased

[[Page 59310]]

with premium assistance provided by the demonstration must include 
coverage of inpatient hospital service; and that for days of patients 
who have bought health insurance that provides inpatient hospital 
benefits using premium assistance obtained through a section 1115 
demonstration, that assistance must be equal to 100 percent of the 
premium cost to the patient.
    In section IV.F. of the preamble of this final rule, we summarized 
and responded to a comment that Connecticut recently received approval 
for a premium assistance program under section 1115 that pays through 
the health insurance exchange 100 percent of the premium costs to cover 
low-income individuals ineligible for Medicaid under the State plan. 
For this final rule, we are including Connecticut in the list of states 
that have section 1115 demonstrations with premium assistance programs.
    Overall, we estimate 340 hospitals will be affected by the 
requirement under our premium assistance policy, which is the total 
number of Medicare certified subsection (d) hospitals in the eight 
States (Arkansas, Connecticut, Massachusetts, Oklahoma, Rhode Island, 
Tennessee, Utah, and Vermont) that currently operate approved section 
1115 demonstrations with premium assistance programs. This estimated 
total burden is $20,899,060 a year (1,978,141 inquiries a year x 0.25 
hours per inquiry x (wages of $21.13/hour x 2 (fringe benefits)) = 
$20,899,060/year).
    The number of inquiries is calculated by subtracting the total CY 
2019 Medicare discharges from total CY 2019 discharges for all payers 
for all subsection (d) hospitals in each State with a currently 
approved premium assistance section 1115 demonstration. We used 
annualized discharges for both Medicare and all payer discharge figures 
rather than actual discharges, as some hospitals' cost reports do not 
provide data for an entire calendar year. To determine whether a 
patient's premiums for inpatient hospital services insurance are paid 
for by subsidies provided by a section 1115 demonstration, we believe 
hospitals would need to conduct inquiries for all patients with non-
Medicare insurance for purposes of reporting on the Medicare cost 
report.\961\ The estimated difference between all payer annualized 
discharges and annualized Medicare discharges was 1,978,141 in CY 2019.
---------------------------------------------------------------------------

    \961\ CMS-Form-2552-10 OMB No. 0938-0050.
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    We estimate that hospitals will use their existing communication 
methods that are in place to verify insurance information when 
collecting the information under this ICR. We estimate that verifying 
whether a patient receives 100 percent of the cost of their premium as 
premium assistance authorized by a section 1115 demonstration will take 
15 minutes per individual. We believe that information clerks will be 
making these inquiries. Based on the Bureau of Labor Statistics 
Occupational Employment Statistics data (May 2021) for Category 43-
4199,\962\ Information and Record Clerks, All Other, the mean hourly 
wage for an Information and Record Clerk is $21.13. We have added 100 
percent for fringe and other indirect costs benefits which calculates 
to $42.26 per hour. We estimate this total annual cost is $20,899,060 
(1,978,141 inquiries x 0.25 hours per inquiry x $42.26 per hour).
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    \962\ https://www.bls.gov/oes/2021/may/oes_nat.htm.
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    In addition, in section IV.F. of the preamble of this final rule, 
we summarized and responded to comments regarding Massachusetts' 
premium assistance program authorized under section 1115. The 
commentator asserted that the Massachusetts 1115 demonstration provides 
premium assistance to Medicaid enrollees and other non-Medicaid-
eligible residents who purchase health insurance in the state's health 
insurance exchange that supports low-income individuals enrolled in the 
Massachusetts Medicaid program who have access to employer-sponsored 
health insurance, and that this may cause an increased burden on 
Massachusetts and the providers in that state to determine which 
patients receive 100 percent premium assistance. In addition, the 
Massachusetts demonstration provides premium assistance to some non-
Medicaid-eligible individuals at levels less than 100 percent of the 
individual's premium cost.
    In response to this comment, we stated that while it may be that 
the premium assistance policy proposed will lead to an increased burden 
on Massachusetts and providers in that state to identify which non-
Medicaid-eligible patients have received premium assistance that covers 
100 percent of their costs for that patient day to be included in the 
DPP Medicaid fraction numerator, we do not believe that the burden 
involved is unreasonable. The commenters did not provide any 
information in support of their allegation as to the extent of the 
burden and why they believe it would be unreasonable.
    We are providing an estimate of the increase in burden with regard 
to Massachusetts to identify whether any non-Medicaid-eligible patients 
have received premium assistance that covers less than 100 percent of 
their costs for their patient day to be included in the DPP Medicaid 
fraction numerator. We estimate 56 hospitals will be affected by this 
requirement, which is the total number of Medicare certified subsection 
(d) hospitals in Massachusetts. This estimated total burden is $479,322 
a year (453,689 inquiries x 0.025 hours per x $42.26 per hour).
    To determine whether any non-Medicaid-eligible patients have 
received premium assistance that covers less than 100 percent of their 
premium costs, we estimate that hospitals will use their existing 
communication methods. As discussed previously, we estimated that 
verifying whether a patient receives 100 percent of the cost of their 
premium as premium assistance authorized by a section 1115 
demonstration will take 15 minutes per individual. We believe in many 
cases verifying whether a patient receives premium assistance under the 
demonstration that provides less than 100 percent of the individual's 
premium cost can occur during that same 15 minutes. However, to account 
for circumstances where additional time may be needed, we estimated 
this additional verification will take 1.5 minutes (or 10 percent more 
time in addition to the time we have estimated it will take to 
determine whether any non-Medicaid-eligible patients have received 
premium assistance that covers 100 percent of their premium costs). 
Overall, we estimate the difference between all payer annualized 
discharges and annualized Medicare discharges for the 56 Massachusetts 
hospitals was 453,689 in CY 2019. Similar to the previous discussion, 
we believe that information clerks will be making these inquiries, and 
we have used the Bureau of Labor Statistics Occupational Employment 
Statistics data (May 2021) for Category 43-4199,\963\ Information and 
Record Clerks, All Other, with the mean hourly wage for an Information 
and Record Clerk of $21.13. We have added 100 percent for fringe and 
other indirect costs benefits, which calculates to $42.26 per hour. We 
estimate the total annual cost is $479,322 for this additional 
verification (453,689 inquiries x 0.025 hours per inquiry x $42.26 per 
hour).
---------------------------------------------------------------------------

    \963\ https://www.bls.gov/oes/2021/may/oes_nat.htm.
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    In summary, we estimate that the total annual burden for Medicare 
certified subsection (d) hospitals in the eight states with currently 
approved premium assistance demonstrations to determine whether any 
non-Medicaid-eligible patients have received premium

[[Page 59311]]

assistance from a section 1115 demonstration that covers 100 percent of 
their premium costs under this requirement is $21,386,382 ($20,899,060 
+ $479,322).
3. ICRs for Payments for Low-Volume Hospitals
    As discussed in section V.E. of the preamble of this final 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 section V.E. of the preamble of this final rule, 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. (For qualifying hospitals, MACs determine the 
applicable low-volume hospital payment amount, and no additional action 
is needed by the hospital.) 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.
    We did not receive comments regarding the ICRs for payments for 
low-volume hospitals.
4. ICRs Relating to the Hospital Readmissions Reduction Program
    In section V.J. of the preamble of this final rule, we discuss 
requirements for the Hospital Readmissions Reduction Program. In the FY 
2024 IPPS/LTCH PPS proposed rule, we did not propose any changes to the 
Hospital Readmissions Reduction Program for FY 2024 (88 FR 27024). 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 will 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.
5. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section V.K. of the preamble of this final rule, we discuss 
updates to the Hospital VBP Program. Specifically, in the FY 2024 IPPS/
LTCH PPS proposed rule, we proposed to adopt substantial measure 
updates to the MSPB Hospital 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 (88 FR 27025 through 27026). We also proposed to adopt the 
Severe Sepsis and Septic Shock: Management Bundle measure beginning 
with the FY 2026 program year (88 FR 27027 through 27029). 
Additionally, we proposed to adopt technical changes to the form and 
manner of the administration of the Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Survey measure (88 FR 27031 
through 27032). We also proposed a scoring methodology change that 
adjusts for treating a high proportion of underserved patients, defined 
by dual eligibility, that rewards hospitals for providing excellent 
care to this population beginning with the FY 2026 program year (88 FR 
27039 through 27049). We also requested feedback on potential 
additional changes to the Hospital VBP Program that would address 
health equity (88 FR 27049 through 27050). Lastly, we proposed to 
modify the Total Performance Score (TPS) maximum to be 110, resulting 
in numeric score range of 0 to 110 (88 FR 27049). In the FY 2024 IPPS/
LTCH PPS proposed rule, we discussed collection of information burden 
for these proposals (88 FR 27193). In this final rule, we are 
finalizing all of the Hospital VBP's Program's proposals, as proposed.
    Data collections for the Hospital VBP Program are associated with 
the Hospital Inpatient Quality Reporting (IQR) Program under OMB 
control number 0938-1022, the National Healthcare Safety Network under 
OMB control number 0920-0666, and the 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 estimate any change in 
burden associated with these finalized measures. There is also no 
change in burden due to the finalized scoring methodology change 
because the policy does not require hospitals to submit any additional 
information but instead changes how hospitals are scored based on the 
information already being submitted.
6. 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 the FY 2024 IPPS/LTCH PPS 
proposed rule, we did not propose to add or remove any measures from 
the HAC Reduction Program.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 (88 FR 27054 through 27055). 
In section V.L. of the preamble of this final rule, we are finalizing 
this process. This reconsideration process will 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

[[Page 59312]]

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 process.
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 (88 FR 27055). In 
section V.L. of the preamble of this final rule, we are finalizing this 
modification. Because we are neither modifying the number of hospitals 
that will be selected for validation nor the number of records each 
selected hospital is required to submit, we do not estimate any changes 
to our currently approved burden estimates as a result of this policy.
7. 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 the FY 2024 IPPS/LTCH PPS proposed rule, we described 
the burden changes regarding collection of information under OMB 
control number 0938-1022, for IPPS hospitals (88 FR 27194 through 
27196).
    For more detailed information on our finalized policies for the 
Hospital IQR Program, we refer readers to section IX.C. of the preamble 
of this final rule. In the FY 2024 IPPS/LTCH PPS proposed rule, we 
proposed 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 eCQM (88 FR 
27079 through 27084). We proposed 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 (88 FR 27085 through 27088). We 
proposed to modify the COVID-19 Vaccination Coverage among Healthcare 
Personnel (HCP) measure beginning with the Q4 2023 reporting period/FY 
2025 payment determination (88 FR 27074 through 27078). We proposed to 
remove the Elective Delivery measure beginning with the CY 2024 
reporting period/FY 2026 payment determination (88 FR 27091 through 
27093). We proposed to remove two Medicare FFS claims-based measures: 
the Hospital-Level RSCR Following Elective Primary THA and/or TKA 
measure beginning with the April 1, 2025 through March 31, 2028 
reporting period impacting the FY 2030 payment determination, and the 
MSPB Hospital measure beginning with the CY 2026 reporting period/FY 
2028 payment determination (88 FR 27089 through 27091). We proposed 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 (88 FR 27116). Lastly, 
we proposed to modify data collection and reporting requirements for 
the HCAHPS survey measure beginning with the FY 2027 payment 
determination (88 FR 27112 through 27114). In this final rule, we are 
finalizing all of the Hospital IQR Program's proposals, as proposed.
    Our finalized policies to remove the Elective Delivery measure 
beginning with the CY 2024 reporting period/FY 2026 payment 
determination and to modify data collection and reporting requirements 
for the HCAHPS survey measure beginning with the FY 2027 payment 
determination result in changes of collection of information burden as 
detailed in this section. The remaining policies being finalized will 
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.\964\ 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.
---------------------------------------------------------------------------

    \964\ 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 final 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 Finalized 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 final rule, we discuss the removal of 
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 159,600 hours 
(51 hours x 3,150 hospitals) at a cost of $7,159,656 (159,600 hours x 
$44.86) related to this policy.
c. Information Collection Burden Estimate for the Finalized 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 eCQM
    In sections IX.C.5.a., b., and c. of the preamble of this final 
rule, we are adopting three new eCQMs: (1) Hospital Harm--Pressure 
Injury eCQM; (2) Hospital Harm--Acute Kidney Injury eCQM; and (3) 
Excessive Radiation

[[Page 59313]]

eCQM--beginning with the CY 2025 reporting period/FY 2027 payment 
determination. 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 one 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 associated with 
submitting eCQM measure data 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.
    For the Excessive Radiation eCQM, hospitals will also be required 
to log in through the measure developer's secure portal and run the 
Alara Imaging Software for CMS Measure Compliance inside the firewall. 
The software runs automatically to create the three intermediate data 
elements needed for the measure. Once the software finishes creating 
these intermediate variables, hospitals can either: (1) send the data 
to a hospital's EHR for reporting; (2) send the data to another vendor 
for reporting; or (3) have the measure developer submit the data on 
behalf of and at the behest of hospitals to CMS. No manual data entry 
is required. We estimate that each hospital will spend approximately 15 
minutes (0.25 hours) annually to conduct these activities prior to data 
submission and therefore estimate a total annual burden of 788 hours 
(0.25 hours x 3,150 hospitals) at a cost of $35,327 (788 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.L. of 
appendix A of this final rule).
d. Information Collection Burden Estimate for the Two Hybrid Measure 
Refinements
    In sections IX.C.6.a. and b. of this final rule, we are modifying 
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 finalized modifications of both measures will 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 finalizing any changes in burden associated with 
the finalized 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 HCP measure for the Hospital 
IQR Program (86 FR 45374 through 45382). In section IX.B. of this final 
rule, we are replacing 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 CY 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 finalizing any updates to the form, manner, and 
timing of data submission for this measure, there will be no increase 
in burden associated with the proposal. Furthermore, the modified 
COVID-19 Vaccination Coverage among HCP measure will 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).
f. Information Collection Burden for the Finalized Removal of Two 
Claims-Based Measures
    In sections IX.C.7.a. and b. of the preamble of this final rule, we 
are removing 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 will 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 Finalized Modification of 
Validation Targeting Criteria Beginning With the FY 2027 Payment 
Determination
    In section IX.C.11.b. of the preamble of this final rule, we are 
modifying 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 modifying 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 finalizing any 
changes to our currently approved burden estimates as a result of this 
proposal.
h. Information Collection Burden for the Finalized 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 final rule, we are 
finalizing 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 finalizing 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

[[Page 59314]]

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 removal of 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 policies 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.\965\ 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).
---------------------------------------------------------------------------

    \965\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
---------------------------------------------------------------------------

    We are not making any revisions to the information collection at 
this time; however, we will submit a revised information collection 
request to OMB for approval under OMB control number 0938-0981 as part 
of the FY 2025 IPPS/LTCH PPS rulemaking cycle.
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 
final rule will result in a total decrease of 158,812 hours at a 
savings of $7,124,329 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 final 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. The 
information collection request approved under OMB control number 0938-
0981 will be revised and submitted as part of the FY 2025 rulemaking 
cycle.

[[Page 59315]]

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8. 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 for measures finalized through the CY 2023 IPPS/LTCH PPS final 
rule. The PCHQR program also includes measures that are calculated 
using data submitted via the National Healthcare Safety Network (NHSN) 
under OMB control number 0920-0666, claims data that is already 
reported to the Medicare program for payment purposes, and survey-based 
measures that are calculated using data collected via the HCAHPS survey 
under OMB control number 0938-0981. In this final rule, we describe the 
collection of information impact under the same OMB control number for 
PPS-exempt cancer hospitals (PCHs).
    In the FY 2024 IPPS/LTCH PPS proposed rule, we proposed 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 for the FY 2026 program year and 
mandatory reporting beginning with the FY 2027 program year (88 FR 
27117 through 27132). We also proposed updates to the data collection 
and reporting for the HCAHPS survey measure (NQF #0166) beginning with 
the FY 2027 program year (88 FR 27135 through 27138). In the FY 2024 
IPPS/LTCH PPS proposed rule, we discussed our proposed burden estimates 
associated with these proposed policies (88 FR 27197 through 27202).
    We also proposed policies which will not affect the information 
collection burden associated with the PCHQR Program. As discussed in 
the FY 2024 IPPS/LTCH PPS proposed rule, we proposed to modify the 
COVID-19 Vaccination Coverage among HCP measure beginning with the FY 
2025 program year (88 FR 27074 through 27078). In addition, we proposed 
to begin public reporting of the Surgical Treatment Complications for 
Localized Prostate Cancer (PCH-37) measure with the FY 2025 Program 
Year (88 FR 27134). In this final rule, we are finalizing all of the 
PCHQR Program's proposals as proposed.
    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.\966\ 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 
final rule for the PCHQR Program.
---------------------------------------------------------------------------

    \966\ 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 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 final rule, we are 
adopting the Documentation of Goals of Care Discussions Among Cancer 
Patients measure beginning with the FY 2026 program year. PCHs will 
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 will 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 final rule).
b. Information Collection Burden Estimate for the Facility Commitment 
to Health Equity Structural Measure Beginning With the FY 2026 Program 
Year
    In section IX.D.3. of the preamble of this final rule, we are 
adopting 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 will be the same for PCHs.
    PCHs will 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 final 
rule).
c. Information Collection Burden for the Screening for Social Drivers 
of Health Measure Beginning With the FY 2026 Program Year
    In section IX.D.4. of the preamble of this final rule, we are 
adopting the Screening for Social Drivers of Health measure beginning 
with voluntary reporting for 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 will be the same 
for PCHs. As discussed in the preamble of this final rule, PCHs will 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 will report measure 
data through the HQR System annually.

[[Page 59318]]

    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 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 will screen 50 percent of patients. For 
the FY 2027 program year, we assume 100 percent of PCHs will screen 100 
percent of patients. For the FY 2026 program year, we estimate that 828 
total patients will 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 final rule).
d. Information Collection Burden for the 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 final rule, we are 
adopting the Screen Positive Rate for Social Drivers of Health measure 
with voluntary reporting for 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 will not need to 
provide any additional information for this measure (87 FR 49386). We 
believe the estimated burden will 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 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 final rule, we are 
finalizing updates to the data collection and reporting for the HCAHPS 
survey measure beginning with the FY 2027 program year. Specifically, 
we are finalizing the following: (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 removal of 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 are not making revisions to the information collection at this 
time; however, we will submit a revised information collection request 
to OMB for approval under OMB control number 0938-0981 as part of the 
FY 2025 IPPS rulemaking cycle.
f. Information Collection Burden Estimate for the Refinement of 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 adopted the COVID-19 
Vaccination Coverage among HCP Measure for the PCHQR Program (86 FR 
45428 through 45434). In section IX.B. of the preamble of this final 
rule, we are modifying 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

[[Page 59319]]

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 Vaccination Coverage among 
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 Policy 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 final rule, we are 
finalizing that we will 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 final rule.
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 
final 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 
these policies). Under OMB control number 0938-0981 (expiration date 
September 30, 2024), we estimate that the policies promulgated in this 
final 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 number 0938-1175. The information collection request 
approved under OMB control number 0938-0981 will be revised and 
submitted to OMB as part of the FY 2025 IPPS rulemaking cycle.

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9. 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.
    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 final rule, we 
proposed 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 final rule, we 
proposed that LTCHs submit data on one modified quality measure, the 
HCP COVID-19 Vaccine measure beginning with the FY 2025 LTCH QRP. LTCHs 
will 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 did not 
propose any updates to the form, manner, and timing of data submission 
for this measure, there would be no increase in burden associated with 
this final rule. We refer readers to the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45448 through 45449) for these policies.
    In section IX.E.4.a. of the preamble of the proposed rule, we 
proposed the DC Function measure beginning with the FY 2025 LTCH QRP. 
This assessment-based quality measure will be calculated using data 
from the LCDS that are already reported to the Medicare program for 
payment and other quality reporting purposes. There will be no 
additional burden for LTCHs because the measure will not require LTCHs 
to report new data elements.
    In section IX.E.4.b and IX.E.4.c. of the preamble of the proposed 
rule, we proposed to remove the Application of Functional Assessment/
Care Plan and Functional Assessment/Care Plan measures beginning with 
the FY 2025 LTCH QRP. We estimated that the removal of these two 
measures will result in a decrease of 0.01 hour \967\ (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.\968\ To account for 
overhead and fringe benefits, we have doubled the hourly wage. These 
amounts are detailed in Table XII.B.-05.
---------------------------------------------------------------------------

    \967\ A correction to the FY 2024 IPPS/LTCH proposed rule is 
made. The proposed rule inadvertently referenced a decrease of 0.1 
hour.
    \968\ https://www.bls.gov/oes/current/oes_nat.htm.
    [GRAPHIC] [TIFF OMITTED] TR28AU23.326
    
    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. The removal of the measure will 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. 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

[[Page 59324]]

$79.56/hr; LVN 2.5 percent at $49.86/hr; and SLP 2.5 percent at $82.52/
hr.
    Specifically, 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 collected for CY 2021, we 
estimated 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 the proposed rule, we 
proposed 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. After consideration of the public 
comments we received, we are modifying our proposal and finalizing that 
LTCHs are required to report 100 percent of the required quality 
measures data and standardized patient assessment data collected using 
the LCDS on at least 85 percent of all assessments submitted beginning 
with the FY 2026 payment determination and subsequent years. Because 
LTCHs have been required to submit LCDS assessments in this manner 
since October 1, 2012, there will be no increase in burden to LTCH 
providers associated with this final rule.
    In section IX.E.4.d. of the preamble of the proposed rule, we 
proposed to adopt the Patient/Resident COVID-19 Vaccine measure 
beginning with the FY 2026 LTCH QRP. The proposed measure will 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 will be added to the LCDS in order to allow for collection of 
this measure and will 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 estimated 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.
    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 finalized in this final 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] TR28AU23.327

    We invited public comments on the proposed information collection 
requirements.
    The following is a summary of the public comment received on the 
proposed revisions and our responses:
    Comment: A commenter suggested that CMS' burden estimates 
underestimated the burden on providers to complete the assessments, 
including the time it takes to conduct an interview, obtain a patient 
response, and change workflows to accomplish the collection. They also 
point to the burden of training and educating personnel, the burden on 
informatics to update paper-based facility forms and EMR builds 
increase the cost significantly. This commenter stated that it 
currently takes its members a minimum of 30 minutes to complete each 
LCDS V5.0 on admission and on discharge. However, they report that 
other members have estimated that it takes between 100 and 110 minutes 
to complete a full patient assessment, which is nearly three times more 
than the time CMS has estimated it takes to complete an assessment. 
This commenter also believes the data may be duplicative of other data 
captured in the medical chart, as well as being rarely relevant for 
ongoing training needs and facility-wide improvement efforts, and 
therefore takes time away from actual patient care without contributing 
to improved quality. Finally, this commenter also referenced a 2018 
report by the General Accounting Office that found calculation errors 
and inconsistencies across documentation that led to underestimates of 
time cost.
    Response: We appreciate the time and effort LTCHs invest in 
completing the LCDS. The LCDS is an evaluation and assessment tool and 
the data collected is directly relevant to patient care, such as 
hearing, speech, vision, cognition, mood, function, bladder and bowel 
function, pain, swallowing, nutrition, skin integrity, high-risk 
medications,

[[Page 59325]]

special treatments and procedures, and ventilator status. Each of these 
data elements contributes to the development of a patient-centered plan 
of care. We also would like to point out that LTCHs have been 
collecting the data elements in the LCDS V5.0 since October 1, 2022, 
and our proposal to increase the data completion threshold does not 
increase the number of items an LTCH must collect at admission or 
discharge.
    As the commenter pointed out in their example, the patient must be 
assessed and information gathered. After the patient assessment is 
completed, the LCDS is coded with the information and submitted to 
iQIES, and we want to remind LTCHs, that it is these steps (after the 
patient assessment) that the estimated burden and cost captures. The 
burden estimated is based on past LTCH burden calculations and 
represents the time it takes to encode the LCDS. Our assumptions for 
staff type were based on the categories generally necessary to perform 
an assessment, and subsequently encode it, which is consistent with 
past collection of information estimates. While we acknowledge that 
some LTCHs may train and utilize other personnel, our estimates are 
based on the categories of personnel necessary to complete the LCDS.
    We continually look for opportunities to minimize burden associated 
with collection of the LCDS for information users through strategies 
that simplify collection and submission requirements. At the time we 
adopt new items, we ensure that all instructions and notices are 
written in plain language and provide step-by-step examples for 
completing the LCDS. We provide a dedicated help desk to support users 
and respond to questions about the data collection. Additionally, a 
dedicated LTCH QRP web page houses multiple modes of tools, such as 
instructional videos, case studies, user manuals, and frequently asked 
questions which support understanding of the items collected on the 
LCDS generally, and these can be used by current and assist new users 
of the LCDS. We utilize a listserv to facilitate outreach to users, 
such as communicating timely and important new material(s), and we 
continue to use those outreach resources when providing training and 
information. We create data collection specifications for LTCH 
electronic health record (EHR) software with `skip' patterns associated 
with the items used for LTCH QRP compliance to ensure the LCDS is 
limited to the minimum data required to meet quality reporting 
requirements. These specifications are available free of charge to all 
LTCHs and their technology partners. Further, these minimum 
requirements are standardized for all users of the LCDS assessment 
forms. Finally, we provide LTCHs with various resources to review and 
monitor their own performance on APU, and provide a free internet-based 
system through which users can access on-demand reports for feedback on 
the collection of the LCDS associated with their facility.
10. ICRs for the Medicare Promoting Interoperability Program
a. Historical Background
    In section IX.F. of the preamble of this final rule, we discuss 
requirements 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 the FY 2024 IPPS/LTCH PPS proposed 
rule, we described the burden changes regarding collection of 
information under OMB control number 0938-1278 for eligible hospitals 
and CAHs (88 FR 27204 through 27205). The collection of information 
burden analysis in this final 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 finalized policies for the 
Medicare Promoting Interoperability Program, we refer readers to 
section IX.F. of the preamble of this final rule. In the FY 2024 IPPS/
LTCH PPS proposed rule, we proposed several policies that will not 
affect the information collection burden associated with the Medicare 
Promoting Interoperability Program. We proposed 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 (CT) in 
Adults (Hospital Level--Inpatient) eCQM (88 FR 27172 through 27173). We 
also proposed 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 (88 FR 
27157). Lastly, we proposed to establish an EHR reporting period of a 
minimum of any continuous 180-day period in CY 2025 (88 FR 27155 
through 27156). In this final rule, we are finalizing all of these 
policies as proposed.
    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.\969\ 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.
---------------------------------------------------------------------------

    \969\ 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 (87 FR 49392), our burden 
estimates were based on an assumption of 4,500 eligible hospitals and 
CAHs. For this final 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 Finalized 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 (Hospital Level--
Inpatient) eCQM
    In sections IX.F.7.a.(2). of the preamble of this final rule, we 
are adopting 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)

[[Page 59326]]

in Adults (Hospital Level--Inpatient) 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. The 
burden associated with the reporting of eCQM measures for 3,150 
eligible hospitals and 1,350 CAHs as part of the Hospital Inpatient 
Quality Reporting program is included under OMB control number 0938-
1022 (CAHs are referred to as non-IPPS hospitals under OMB 0938-1022).
    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 final rule).
c. Information Collection Burden Estimate for the Finalized 
Modification to the SAFER Guides Measure
    In section IX.F.3. of the preamble of this final rule, we are 
modifying 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 FY 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 modifying the information that eligible 
hospitals and CAHs will be required to submit but are instead requiring 
an attestation of ``yes,'' we are not finalizing any changes to our 
currently approved burden estimates as a result of this policy.
    With respect to additional costs/burdens unrelated to data 
submission, we refer readers to the Regulatory Impact Analysis (section 
I.O. of appendix A of this final rule).
d. Information Collection Burden for the Establishment of 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 final rule, we are 
establishing an EHR reporting period of a minimum of any continuous 
180-day period in CY 2025. Because we are not modifying the type or 
amount of data each eligible hospital and CAH will be required to 
submit, we are not finalizing any changes to our currently approved 
burden estimates as a result of this policy.
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 final rule will 
not result in a change in burden. We continue to estimate an annual 
burden of 6.6 hours per eligible.
11. ICRs Regarding Special Requirements for Rural Emergency Hospitals 
(REHs) (Sec.  488.70)
    The special requirements for REHs 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 regulation 
is discussed in this section.
a. Sources of Data Used in Estimates of Burden Hours and Cost Estimates
    For the estimated costs contained in this analysis, 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.\970\ 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.
---------------------------------------------------------------------------

    \970\ 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 08, 2023).
---------------------------------------------------------------------------

b. Burden Associated With Submission of Additional Information on the 
Action and Transition Plans 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 final rule. In accordance with section 
1861(kkk)(4)(A)(i) through (iv) of the Act, we specifically 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).
    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).\971\
---------------------------------------------------------------------------

    \971\ 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 previously. 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 \972\ This wage,

[[Page 59327]]

adjusted for the employer's fringe benefits and overhead would be $115.
---------------------------------------------------------------------------

    \972\ 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.
12. ICRs for Physician-Owned Hospitals
    In section X.B. of the preamble of this final rule, we discuss our 
changes pertaining to the process for hospitals with physician 
ownership or investment that request an exception from the prohibition 
against facility expansion and program integrity restrictions on 
approved facility expansion.
    Specifically, we are making 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 hard copy 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, 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); and (4) providing information regarding whether and how the 
hospital has used any expansion facility capacity approved in a prior 
request. The final rule also identifies additional information that a 
requesting hospital may submit in support of its request for an 
exception from the prohibition on facility expansion, including, but 
not limited to, whether it plans to use expansion facility capacity to 
provide specialty services if the request is approved and information 
about the current or future need for additional operating rooms, 
procedure rooms, or beds to serve Medicaid, uninsured, and underserved 
populations in the county where its main campus is located or in any 
county where it provides inpatient or outpatient hospital services. In 
addition, we are requiring electronic submission of requests following 
instructions posted on the CMS website and eliminating both 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 
eliminating the use of external data sources for determining whether a 
hospital meets the criteria for an applicable hospital or a high 
Medicaid facility. Finally, we are reinstating, with respect to high 
Medicaid facilities, the program integrity restrictions on the 
frequency of expansion exception requests at final Sec.  
411.363(b)(2)(ii), which provides that CMS will not consider an 
expansion exception request unless the date of submission is 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.
    As we stated in the proposed rule, we do not believe any of these 
revisions, as finalized, will result in any changes in burden under the 
PRA. The changes to the information required to be submitted under this 
final rule are primarily 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 changes will affect the annual number of respondents. We did not 
propose 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 will have little practical 
impact on whether a requesting hospital meets the criteria for an 
applicable hospital or a high Medicaid facility. Also, although our 
regulations have permitted high Medicaid facilities to potentially 
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 information collection would normally be subject to the PRA, 
we continue to 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 a high Medicaid facility. As 
stated in the CY 2021 OPPS/ASC 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 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 stated that 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

[[Page 59328]]

those that can meet applicable state or local requirements for 
expansion (such as certificate of need). Given all of these factors, we 
continue to 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), we believe 
that the information collection is exempt as it affects less than 10 
entities in a 12-month period. Although we believe the information 
collection is 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 an expansion exception request, we use a 2021 wage rate 
of $71.17 for lawyers from the Bureau of Labor Statistics,\973\ and we 
double that wage to account for overhead and benefits. The total 
estimated annual cost is $960.79.
---------------------------------------------------------------------------

    \973\ 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.
---------------------------------------------------------------------------

    Comment: A commenter asserted that the solicitation of community 
input on expansion exception requests is subject to the PRA. The 
commenter stated that CMS did not propose an information collection 
process for the solicitation of community input, provide a burden 
estimate, or request public comment on the proposed collection of 
information associated with the solicitation of community input. The 
commenter further asserted that CMS did not request approval from OMB.
    Response: We disagree that the solicitation of community input is 
subject to the PRA. For purposes of the PRA, ``information'' is defined 
at 5 CFR 1320.3(h); facts or opinions submitted in response to general 
solicitations of comments in the Federal Register or other publications 
do not constitute ``information'' subject to the requirements of the 
PRA. Further, as noted earlier in this section, we addressed the 
information collection requirements for our proposals in the proposed 
rule. The proposed rule, including the determination that the process 
for requesting an expansion exception is exempt from the PRA, was 
reviewed by OMB.
    Chiquita Brooks-LaSure, Administrator of the Center for Medicare & 
Medicaid Services, approved this document on July 24, 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, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 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--
    (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 
this section, are readily available and accessible to the requesting 
hospital, comparison hospitals, and CMS; and
    (iv) Maintains or generates data that, for purposes of the process 
described in 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) CMS consideration of requests for 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

[[Page 59329]]

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; and
    (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 an 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 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 this paragraph (c), a 
hospital is located in the county and State in which the main campus of 
the hospital is located.
    (d) Criteria for a 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 this paragraph (d), a 
hospital is located in the county in which the main campus of the 
hospital is located.

[[Page 59330]]

    (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 hospital's 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) The name, address, national provider identification number(s) 
(NPI), tax identification number (TIN), and CMS certification number 
(CCN) for the hospital.
    (ii)(A) The name of the county in which the main campus is located; 
and
    (B) The names of any counties in which the hospital provides 
inpatient or outpatient hospital services.
    (iii) The name, title, daytime telephone number, electronic mail 
address, and hard copy mail address for the contact person who will be 
available to discuss the request with CMS on behalf of the hospital.
    (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 supporting documentation, if available, 
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--
    (A) The hospital's calculations of its baseline number of operating 
rooms, procedure rooms, and beds;
    (B) The 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; and
    (D) The additional number of operating rooms, procedure rooms, and 
beds by which the hospital requests to expand.
    (3) A hospital may submit other information with respect to the 
request, including but not limited to information regarding--
    (i) Whether the hospital plans to use expansion facility capacity 
to provide specialty services (for example, maternity, psychiatric 
services, or substance use disorder care) if the request is approved; 
and
    (ii) The current or future need, if any, 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; and
    (C) In any county in which the hospital provides inpatient or 
outpatient hospital services as of the date the hospital submits the 
request.
    (4) 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, 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.
    (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 meets the criteria for an 
applicable hospital or a high Medicaid facility 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.
    (iii) Community input must be--
    (A) In the form of written comments;
    (B) Submitted according to the instructions in the Federal Register 
notice of the hospital's request; and
    (C) Received no later than 60 days after CMS publishes notice of 
the hospital's request in the Federal Register.
    (iv) If CMS receives written comments from the community, the 
hospital has 60 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 the end of--
    (i) The 60-day comment period if CMS does not receive written 
comments from the community.
    (ii) The 60-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 60-day rebuttal period, regardless of whether the hospital 
submits a rebuttal statement, if CMS receives written comments from the 
community.
    (h) Determination that the hospital is an applicable hospital or a 
high Medicaid facility. Based on the information described in paragraph 
(e) of this section and the community input described in paragraph (f) 
of this section, if any, CMS will first determine whether the hospital 
meets the criteria for an applicable hospital or a high Medicaid 
facility.
    (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

[[Page 59331]]

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 
its decision.
    (2) Factors considered by CMS. 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 county in which the main campus of the 
hospital is located or in any county in which the hospital provides 
inpatient or outpatient hospital services as of the date the hospital 
submits 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 determination and decision. Not later than 
60 days after receiving a complete request--
    (1) If CMS determines that the hospital does not meet the criteria 
for an applicable hospital or a high Medicaid facility, CMS will 
publish in the Federal Register notice of such determination; or
    (2) If CMS determines that the hospital meets the criteria for an 
applicable hospital or a high Medicaid facility, 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);
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.
* * * * *

[[Page 59332]]

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).
* * * * *

0
12. Section 412.106 is amended by--
0
a. Revising paragraphs (b)(4) introductory text and (b)(4)(i) and (ii);
0
b. Redesignating paragraphs (b)(4)(iii) and (iv) as paragraphs 
(b)(4)(iv) and (v), respectively; and
0
c. Adding a new paragraph (b)(4)(iii).
    The revisions and addition read as follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (b) * * *
    (4) Second computation. The fiscal intermediary determines, for the 
same cost reporting period used for the first computation, the number 
of the hospital's patient days of service for patients who were not 
entitled to Medicare Part A, and who were either eligible for Medicaid 
on such days as described in paragraph (b)(4)(i) of this section or who 
were regarded as eligible for Medicaid on such days and the Secretary 
has determined to include those days in this computation as described 
in paragraph (b)(4)(ii)(A) or (B) of this section. The fiscal 
intermediary then divides that number by the total number of patient 
days in the same period. For purposes of this second computation, the 
following requirements apply:
    (i) For purposes of this computation, a patient is eligible for 
Medicaid on a given day if the patient is eligible on that day for 
inpatient hospital services under a State Medicaid plan approved under 
title XIX of the Act, regardless of whether particular items or 
services were covered or paid for on that day under the State plan.
    (ii) For purposes of this computation, a patient is regarded as 
eligible for Medicaid on a given day if the patient receives health 
insurance authorized by a demonstration approved by the Secretary under 
section 1115(a)(2) of the Act for that day, where the cost of such 
health insurance may be counted as expenditures under section 1903 of 
the Act, or the patient has health insurance for that day purchased 
using premium assistance received through a demonstration approved by 
the Secretary under section 1115(a)(2) of the Act, where the cost of 
the premium assistance may be counted as expenditures under section 
1903 of the Act, and in either case regardless of whether particular 
items or services were covered or paid for on that day by the health 
insurance. Of these patients regarded as eligible for Medicaid on a 
given day, only the days of patients meeting the following criteria on 
that day may be counted in this second computation:
    (A) Patients who are provided by a demonstration authorized under 
section 1115(a)(2) of the Act health insurance that covers inpatient 
hospital services; or
    (B) Patients who purchase health insurance that covers inpatient 
hospital services using premium assistance provided by a demonstration 
authorized under section 1115(a)(2) of the Act and the premium 
assistance accounts for 100 percent of the premium cost to the patient.
    (iii) Patients whose health care costs, including inpatient 
hospital services costs, for a given day are claimed for payment by a 
provider from an uncompensated, undercompensated, or other type of 
funding pool authorized under section 1115(a) of the Act to fund 
providers' uncompensated care costs are not regarded as eligible for 
Medicaid for purposes of paragraph (b)(4)(ii) of this section on that 
day and the days of such patients may not be included in this second 
computation.
* * * * *


Sec.  412.108  [Amended]

0
13. 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
14. 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 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.

[[Page 59333]]

    (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.

0
15. 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'' and 
``Underserved population'' 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 points that a 
hospital can earn for a fiscal year based on its performance and 
proportion of inpatient stays for patients with dual eligibility 
status.
* * * * *
    Measure performance scaler means the sum of the points awarded to a 
hospital for each domain for the fiscal year based on the hospital's 
performance on the measures in those domains.
* * * * *
    Total Performance Score means the numeric score awarded to each 
hospital based on its performance under the Hospital VBP Program with 
respect to a fiscal year.
    Underserved multiplier means the mathematical result of applying a 
logistic function to the number of hospital inpatient stays for 
patients in the underserved population out of the hospital's total 
Medicare inpatient population during the calendar year that is 2 years 
prior to the applicable fiscal year.
    Underserved population, as used in this section, means hospital 
inpatients who are Medicare beneficiaries and also dually eligible for 
full Medicaid benefits during the month of discharge or, if a patient 
died during that month, during the previous month.
* * * * *

0
16. 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 fiscal years before FY 2026, the hospital's Total 
Performance Score divided by 100; or
    (B) Beginning with FY 2026, the hospital's Total Performance Score 
divided by 110; and
    (iii) The linear exchange function slope.
* * * * *

0
17. Section 412.164 is amended by--
0
a. In paragraph (b), removing the phrase ``. for at least'' and adding 
in its place the phrase ``, for at least''; and
0
b. Adding paragraph (c).
    The addition reads 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 measures selected under paragraph (a) of 
this section 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. CMS assesses the 
benefits of removing a measure from the Hospital VBP Program on a case-
by-case basis.
    (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 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
18. Section 412.165 is amended by--

[[Page 59334]]

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    Hospitals have a minimum of 1.000
 SSI.                                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) Beginning with FY 2026, CMS will calculate the number of health 
equity adjustment bonus points the hospital has earned for the fiscal 
year as follows:
    (i) Calculating the measure performance scaler for each domain in 
which the hospital reported the minimum number of cases 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; and
    (D) Summing the points awarded under paragraph (b)(5)(i) of this 
section to calculate the measure performance scaler for the hospital.
    (ii) Calculating the underserved multiplier for the hospital.
    (iii) Multiplying the measure performance scaler calculated under 
paragraph (b)(5)(i) of this section by the underserved multiplier and, 
if the resulting product is greater than 10, capping that product at 
10.
    (6) The hospital's Total Performance Score for the fiscal year is 
as follows:
    (i) For fiscal years before FY 2026, the sum of the weighted domain 
scores up to a maximum score of 100.
    (ii) Beginning with FY 2026, the sum of the weighted domain scores 
and the health equity adjustment bonus points up to a maximum score of 
110.


Sec.  412.320  [Amended]

0
19. Section 412.320 is amended in paragraph (a)(1)(iii) by adding the 
phrase ``and before October 1, 2023,'' after ``October 1, 2006,''.

0
20. Section 412.560 is amended by revising paragraph (f)(1) to read as 
follows:


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 
LTCH QRP.
    (B) The threshold set at 100 percent completion of measures data 
and standardized patient assessment data collected using the LCDS on at 
least 85 percent of the assessments LTCHs submit through the CMS 
designated data submission system beginning with the FY 2026 LTCH QRP.
    (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

[[Page 59335]]

FY 2014 and all subsequent payment updates.
* * * * *

PART 419--PROSECTIVE PAYMENT SYSTEMS FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES

0
21. The authority citation for part 419 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395l(t), and 1395hh.

0
22. 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
23. The authority citation for part 488 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.


Sec.  488.1  [Amended]

0
24. 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
25. 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.
1913.........................  Medicaid requirements for hospitals that
                                provide nursing facility (NF) care.
1919.........................  Medicaid requirements for NFs.
------------------------------------------------------------------------

Sec.  488.18  [Amended]

0
26. 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
27. Section 488.70 is added to read as follows:

[[Page 59336]]

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
28. 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
29. 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
30. The authority citation for part 495 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.


0
31. 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
32. 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: July 26, 2023.
Xavier Becerra,
Secretary, Department of Health and Human Services.

    Note: The following addendum and appendices will not appear in 
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning on 
or After October 1, 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 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 
figures for the standardized amounts, offsets, and budget neutrality 
factors. Therefore, in this final rule, we are setting forth the rate-
of-increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that will be effective for cost 
reporting periods beginning on or after October 1, 2023.
    In addition, we are setting forth a description of the methods and 
data we used to determine the LTCH PPS standard Federal payment rate 
that 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 final rule, 
uncompensated care payments under section 1886(r)(2) of the Act); the 
updated hospital-specific rate based on FY 1982 costs per discharge; 
the updated hospital-specific rate based on FY 1987 costs per 
discharge; the updated hospital-specific rate based on FY 1996 costs 
per discharge; or the updated hospital-specific rate based on FY 2006 
costs per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were paid 
based on the Federal national rate or, if higher, the Federal national 
rate plus 50 percent of the difference between the Federal national 
rate and the updated hospital-specific rate based on FY 1982 or FY 1987 
costs per discharge, whichever was higher. However, section 5003(a)(1) 
of Public Law 109-171 extended and modified the MDH special payment 
provision that was previously set to expire on October 1, 2006, to 
include discharges occurring on or after October 1, 2006, but before 
October 1, 2011. Under section 5003(b) of Public Law 109-171, if the 
change results in an increase to an MDH's target amount, we must rebase 
an MDH's hospital specific rates based on its FY 2002 cost report.

[[Page 59337]]

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 final 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 making 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 policy changes for 
determining the prospective payment rates for Medicare inpatient 
capital-related costs for FY 2024. In section IV. of this Addendum, we 
are setting forth the rate-of-increase percentage for determining the 
rate-of-increase limits for certain hospitals excluded from the IPPS 
for FY 2024. In section V. of this Addendum, we discuss policy changes 
for determining the LTCH PPS standard Federal rate for LTCHs paid under 
the LTCH PPS for FY 2024. The tables to which we refer in the preamble 
of this final rule are listed in section VI. of this Addendum and are 
available via the internet on the CMS website.

II. Changes to Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 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 using for 
determining the prospective payment rates for FY 2024.
    In summary, the standardized amounts set forth in Tables 1A, 1B, 
and 1C that are listed and published in section VI. of this Addendum 
(and available via the internet on the CMS website) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during FY 
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of 
the Act.
     The labor-related share that is applied to the 
standardized amounts to give the hospital the highest payment, as 
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the 
Act. For FY 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 final 
rule for a complete discussion on the FY 2024 inpatient hospital 
update. The table that follows shows these four scenarios:
[GRAPHIC] [TIFF OMITTED] TR28AU23.328

    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 adjustment for failure to

[[Page 59338]]

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.D.2.c. of the preamble of this final rule, 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 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.4 of the 
preamble of this final 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 final 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 applying 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 applying a uniform, national budget neutrality 
adjustment to the FY 2024 wage index for the rural floor.
    For FY 2024, as we proposed, we are continuing 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 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 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, as we proposed, we are continuing to use the national 
labor-related and nonlabor-related shares (which are based on the 2018-
based IPPS 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 final rule, as we proposed, 
we are using 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, as proposed, we are 
applying the wage index to a labor-related share of 62 percent of the 
national standardized amount for all IPPS hospitals (including 
hospitals in Puerto Rico) whose wage index values are less than or 
equal to 1.0000.
    The standardized amounts for operating costs appear in Tables 1A, 
1B, and 1C that are listed and published in section VI. of the Addendum 
to this final rule and are available via the internet on the CMS 
website.
2. Computing the National Average Standardized Amount
    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning 
with FY 2004 and thereafter, an equal standardized amount be computed 
for all hospitals at the level computed for large urban hospitals 
during FY 2003, updated by the applicable percentage update. 
Accordingly, as proposed, we are calculating 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 using the 2018-based IPPS operating 
and capital market baskets for FY 2024. As discussed in section IV.B. 
of the preamble of this final rule, in accordance with section 
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the 
Affordable Care Act, we are reducing the FY 2024

[[Page 59339]]

applicable percentage increase (which for this final rule is based on 
IGI's second quarter 2023 forecast of the 2018-based IPPS market 
basket) by the productivity adjustment, as discussed elsewhere in this 
final rule.
    Based on IGI's second quarter 2023 forecast (as discussed in 
appendix B of this final rule), the forecast of the hospital market 
basket percentage increase for FY 2024 for this final rule is 3.3 
percent and the forecast of the productivity adjustment for FY 2024 for 
this final rule is 0.2 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 final 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 standardized amounts shown in Tables 1A 
through 1C that are published in section VI. of this Addendum and that 
are available via the internet on the CMS website reflect these 
differential amounts.
    Although the update factors for FY 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 update factors is set forth in appendix B of 
this final rule.
4. Methodology for Calculation of the Average Standardized Amount
    The methodology we used to calculate the FY 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 final rule; exclude 
hospitals in Maryland (because these hospitals are paid under an all 
payer model under section 1115A of the Act); and remove PPS excluded--
cancer hospitals that have a ``V'' in the fifth position of their 
provider number or a ``E'' or ``F'' in the sixth position.
     As in the past, we are adjusting 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 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, 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), 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 
removing 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 not removing 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

[[Page 59340]]

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), as we proposed, we are including 
all applicable data from subsection (d) hospitals participating in the 
BPCI Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act. For the same reasons, as we proposed, 
we included all applicable data from subsection (d) hospitals 
participating in the Comprehensive Care for Joint Replacement (CJR) 
Model in our IPPS payment modeling and ratesetting calculations.
     Consistent with our methodology established in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that 
it is appropriate to include adjustments for the Hospital Readmissions 
Reduction Program and the Hospital VBP Program (established under the 
Affordable Care Act) within our budget neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) and 
the hospital VBP payment adjustment (redistribution) are applied on a 
claim-by-claim basis by adjusting, as applicable, the base-operating 
DRG payment amount for individual subsection (d) hospitals, which 
affects the overall sum of aggregate payments on each side of the 
comparison within the budget neutrality calculations.
    In order to properly determine aggregate payments on each side of 
the comparison, consistent with the approach we have taken in prior 
years, for FY 2024, we are applying a 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 the FY 2024 proposed hospital VBP payment 
adjustment on each side of the comparison (we note, generally, we use 
the prior year VBP factors. In the proposed rule, we used 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. 
For this final rule, we used the FY 2024 proposed proxy VBP factors 
from Table 16A of the proposed rule), 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 applying 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 final rule for a complete discussion on the 
Hospital Readmissions Reduction Program and section V.G. of the 
preamble of this final 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. 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), as 
we proposed, we are including 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 considered 
estimated empirically justified Medicare DSH payments at 25 percent of 
what would otherwise have been paid, and also the estimated additional 
uncompensated care payments for hospitals receiving Medicare DSH 
payment adjustments on both sides of our comparison of aggregate 
payments when determining all budget neutrality factors described in 
section II.A.4. of this Addendum.
    We also are including 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 final rule and later in this section, we 
are continuing to use the FY 2014 finalized methodology under which we 
take into consideration uncompensated care payments in the comparison 
of payments under the Federal rate and the hospital-specific rate for 
SCHs. Therefore, we are including estimated uncompensated care payments 
in this comparison.
    Similarly, for MDHs, as discussed in section IV.G. of the preamble 
of this final rule, when computing payments under the Federal national 
rate plus 75 percent of the difference between the payments under the 
Federal national rate and the payments under the updated hospital-
specific rate, we are continuing to take into consideration 
uncompensated care payments in the computation of payments under the 
Federal rate and the hospital-specific rate for MDHs.
     As we proposed, we included an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality for 
FY 2024. Similar to FY

[[Page 59341]]

2023, we are including this adjustment based on data on the prior 
year's performance. Payments for hospitals would be estimated based on 
the 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. Reclassification and Recalibration of MS-DRG Relative Weights Before 
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.D. 
of the preamble of this final rule, we normalized the recalibrated MS-
DRG relative weights by an adjustment factor so that the average case 
relative weight after recalibration is equal to the average case 
relative weight prior to recalibration. However, equating the average 
case relative weight after recalibration to the average case relative 
weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payments to hospitals are affected by factors other than average case 
relative weight. Therefore, as we have done in past years, we are 
making a budget neutrality adjustment to ensure that the requirement of 
section 1886(d)(4)(C)(iii) of the Act is met.
    For this FY 2024 final rule, as we proposed, 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 proxy FY 2024 hospital 
readmissions payment adjustments and proxy FY 2024 hospital VBP payment 
adjustments; and
     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 same proxy FY 2024 hospital readmissions payment adjustments and 
proxy FY 2024 hospital VBP payment adjustments applied previously.
    Because this payment simulation uses the FY 2024 relative weights 
(before applying the 10 percent cap), consistent with our policy in 
section IV.I. of the preamble to this final rule, we applied the 
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 applying 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 final rule for a complete 
discussion on the adjustor for certain cases that group to MS-DRG 018 
and to section II.D.2.b. of the preamble of this final rule, for a 
complete discussion of the 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 budget neutrality 
adjustment factor and applied this factor to the standardized amount. 
As discussed in section IV. of this Addendum, as we proposed, we are 
applying 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 FY 2024 
budget neutrality factors.
b. Budget Neutrality Adjustment for Reclassification and Recalibration 
of MS-DRG Relative Weights With Cap
    As discussed in section II.D.2.c of this final 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.D.2.c of the preamble of this final 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 final 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 proxy FY 2024 hospital readmissions payment adjustments and the 
proxy FY 2024 hospital VBP payment adjustments; and
     Aggregate payments using the FY 2023 labor-related share 
percentages, the FY 2024 relative weights after applying the 10-percent 
cap, and the FY 2023 pre-reclassified wage data, and applied the same 
proxy FY 2024 hospital readmissions payment adjustments and 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 
final rule and our historical policy, and as discussed in the preceding 
section, we applied the adjustor for certain cases that group to MS-DRG 
018 in our simulation of these payments.
    In addition, we applied the 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 budget 
neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, as 
we proposed, we are applying 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 FY 2024 budget neutrality 
factors.
c. Updated Wage Index--Budget Neutrality Adjustment
    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. This 
provision also requires us to make any updates or

[[Page 59342]]

adjustments to the wage index in a manner that ensures that aggregate 
payments to hospitals are not affected by the change in the wage index. 
Section 1886(d)(3)(E)(i) of the Act requires that we implement the wage 
index adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent 
for hospitals with a wage index less than or equal to 1.0000, and 
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall 
calculate the budget neutrality adjustment for the adjustments or 
updates made under that provision as if section 1886(d)(3)(E)(ii) of 
the Act had not been enacted. In other words, this section of the 
statute requires that we implement the updates to the wage index in a 
budget neutral manner, but that our budget neutrality adjustment should 
not take into account the requirement that we set the labor-related 
share for hospitals with wage indexes less than or equal to 1.0000 at 
the more advantageous level of 62 percent. Therefore, for purposes of 
this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act 
prohibits us from taking into account the fact that hospitals with a 
wage index less than or equal to 1.0000 are paid using a labor-related 
share of 62 percent. Consistent with current policy, for FY 2024, as we 
proposed, we are adjusting 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this final rule.
    To compute a budget neutrality adjustment factor for wage index and 
labor-related share percentage changes, we used FY 2022 discharge data 
to simulate payments and compared the following:
     Aggregate payments using the 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 
proxy FY 2024 hospital readmissions payment adjustment and the proxy FY 
2024 hospital VBP payment adjustment.
     Aggregate payments using the FY 2024 relative weights and 
the FY 2024 pre-reclassified wage indexes, applied the 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 proxy FY 2024 hospital readmissions payment 
adjustments and proxy FY 2024 hospital VBP payment adjustments applied 
previously.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the 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 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 budget neutrality factors.
d. Reclassified Hospitals--Budget Neutrality Adjustment
    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act 
provides for the reclassification of hospitals based on determinations 
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be 
reclassified for purposes of the wage index.
    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 final rule, we are finalizing as proposed, beginning with FY 
2024, to include hospitals with Sec.  412.103 reclassification along 
with geographically rural hospitals in all rural wage index 
calculations, and only exclude ``dual reclass'' hospitals (hospitals 
with simultaneous Sec.  412.103 and MGCRB reclassifications) in 
accordance with the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act. Consistent with the previous policy, 
beginning with FY 2024, we will 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 final 
rule, we acknowledge that this policy has significant effects on wage 
index values. In addition, as a result of this 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 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 FY 2024 relative weights, and the 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 proxy FY 2024 hospital 
readmissions payment adjustments and the proxy FY 2024 hospital VBP 
payment adjustments.
     Aggregate payments using the FY 2024 labor-related share 
percentage, the FY 2024 relative weights, and the FY 2024 wage data 
after such reclassifications, and applied the same proxy FY 2024 
hospital readmissions payment adjustments and the 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 final rule, which is available via the internet on the CMS 
website. This table reflects reclassification crosswalks for FY 2024 
and applies the policies explained in section III. of the preamble of 
this final rule. Based on this comparison, we computed a budget 
neutrality adjustment factor and applied this factor to the 
standardized amount to ensure that the effects of these provisions are 
budget neutral, consistent with the statute. Please see the table later 
in this section for a summary of the FY 2024 budget neutrality factors.
    The FY 2024 budget neutrality adjustment factor was applied to the 
standardized amount after removing the effects of the FY 2023 budget 
neutrality adjustment factor. We note that the 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 final rule. We finally note, in the absence of the policies 
discussed in section III.G.1 of this final rule (to include hospitals 
with Sec.  412.103 reclassification along with geographically rural 
hospitals in all

[[Page 59343]]

rural wage index calculations, and to only exclude ``dual reclass'' 
hospitals (hospitals with simultaneous Sec.  412.103 and MGCRB 
reclassifications) in accordance with the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act), the reclassification budget 
neutrality factor would be 0.984000.
e. Rural Floor Budget Neutrality Adjustment
    Under Sec.  412.64(e)(4), we make an adjustment to the wage index 
to ensure that aggregate payments after implementation of the rural 
floor under section 4410 of the BBA (Pub. L. 105-33) are equal to the 
aggregate prospective payments that would have been made in the absence 
of this provision. Consistent with section 3141 of the Affordable Care 
Act and as discussed in section III.G. of the preamble of this final 
rule and codified at Sec.  412.64(e)(4)(ii), the budget neutrality 
adjustment for the rural floor is a national adjustment to the wage 
index.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50369 through 50370), for FY 2024, as we proposed, we calculated 
a national rural Puerto Rico wage index. Because there are no rural 
Puerto Rico hospitals with established wage data, our calculation of 
the FY 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 to (share a border with) the rural 
counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under 
the OMB labor market area delineations, except for Arecibo, Puerto Rico 
(CBSA 11640), all other Puerto Rico urban areas are contiguous to a 
rural area. Therefore, based on our existing policy, the FY 2024 rural 
Puerto Rico wage index is calculated based on the average of the 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 
final rule, we are finalizing as proposed to include hospitals with 
Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations and are only excluding 
``dual reclass'' hospitals (hospitals with simultaneous Sec.  412.103 
and MGCRB reclassifications) in accordance with the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. Consistent with the 
previous policy, beginning with FY 2024 we will 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 final rule, we acknowledge that these 
policies have significant effects on wage index values. In addition, as 
a result of this 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 national rural floor 
budget neutrality adjustment factor. The national adjustment was 
applied to the national wage indexes to produce rural floor budget 
neutral wage indexes. Please see the table later in this section for a 
summary of the FY 2024 budget neutrality factors. We note, in the 
absence of the policies discussed in section III.G.1. of this final 
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) in 
accordance with the hold harmless provision at section 
1886(d)(8)(C)(ii) of the Act), the rural floor budget neutrality factor 
would be 0.985838.
    As further discussed in section III.G.2. of this final 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 final rule for a 
complete discussion regarding the imputed floor.
f. Continuation of the Low Wage Index Hospital Policy--Budget 
Neutrality Adjustment
    As discussed in section III.G.3. of the preamble of this final 
rule, we are continuing 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 final rule, consistent with our current methodology for 
implementing wage index budget neutrality under section 1886(d)(3)(E) 
of the Act, we are making a budget neutrality adjustment to the 
national standardized amount for all hospitals so that the increase in 
the wage index for hospitals with a wage index below the 25th 
percentile wage index, is implemented in a budget neutral manner.
    To calculate this final 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 FY 2024 relative weights, and the FY 2024 wage index 
for each hospital before adjusting the wage indexes under the low wage 
index hospital policy, and applied the proxy FY 2024 hospital 
readmissions payment adjustments and the proxy FY 2024 hospital VBP 
payment adjustments; and
     Aggregate payments using the FY 2024 labor-related share 
percentage, the FY 2024 relative weights, and the FY 2024 wage index 
for each hospital after adjusting the wage indexes under the low wage 
index hospital policy, and applied the same proxy FY 2024 hospital 
readmissions payment adjustments and the proxy FY 2024

[[Page 59344]]

hospital VBP payment adjustments applied previously.
    This final FY 2024 budget neutrality adjustment factor was applied 
to the standardized amount.
g. Permanent Cap Policy for Wage Index--Budget Neutrality Adjustment
    As noted previously, in section III.N. of the preamble to this 
final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021) we finalized a policy to apply a 5-percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY, regardless of the circumstances causing the decline. That is, 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 FY 
2024 labor-related share percentages, the FY 2024 relative weights, the 
FY 2024 wage index for each hospital after adjusting the wage indexes 
under the low wage index hospital policy, and applied the proxy FY 2024 
hospital readmissions payment adjustments and the proxy FY 2024 
hospital VBP payment adjustments.
     Aggregate payments with the 5-percent cap using the FY 
2024 labor-related share percentages, the FY 2024 relative weights, the 
FY 2024 wage index for each hospital after adjusting the wage indexes 
under the low wage index hospital policy, and applied the same proxy FY 
2024 hospital readmissions payment adjustments and the proxy FY 2024 
hospital VBP payment adjustments applied previously.
    We note, Table 2 associated with this final rule contains the wage 
index by provider before and after applying the low wage index hospital 
policy and the cap.
h. Rural Community Hospital Demonstration Program Adjustment
    In section V.L. of the preamble of this final 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 final rule for complete 
details regarding the Rural Community Hospital Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make an 
adjustment to the standardized amount to ensure the effects of the 
Rural Community Hospital Demonstration are budget neutral, as required 
under section 410A(c)(2) of Public Law 108-173. For FY 2024, based on 
the latest data for this final rule, the total amount that we are 
applying to make an adjustment to the standardized amounts to ensure 
the effects of the Rural Community Hospital Demonstration program are 
budget neutral is $53,441,735. 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 final 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 FY 2024 budget neutrality 
factors, as discussed in the previous sections.
[GRAPHIC] [TIFF OMITTED] TR28AU23.329

i. 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

[[Page 59345]]

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 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 
incorporating 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) 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 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), for FY 2024, as we proposed, we 
are continuing 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 final rule, we are 
determining a projection of outlier payment reconciliations for the FY 
2024 outlier threshold calculation, by advancing the methodology by 1 
year. Specifically, we are using 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, as we proposed, we are using the same methodology from 
FY 2020 to incorporate a projection of operating outlier payment 
reconciliations for the FY 2024 outlier threshold calculation.
    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

[[Page 59346]]

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.
    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). We 
note that a negative amount on Worksheet E, Part A, Line 2.01 for 
outlier reconciliation indicates an amount that was owed by the 
hospital, and a positive amount indicates this amount was paid to the 
hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage of 
total operating outlier reconciliation dollars to total Federal 
operating payments for FY 2018. This percentage amount would be used to 
adjust the outlier target for FY 2023 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 targeting 
5.1 percent minus the percentage determined in Step 4 in determining 
the outlier threshold. Using the FY 2018 cost reports, 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 methodology.
    For the 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 
proposed 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 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.
    In the 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 (Step 2). The total Federal operating payments 
based on the December 2021 HCRIS was $ 88,729,603,026 (Step 3). The 
ratio (Step 4) is a negative 0.007806 percent, which, when rounded to 
the second digit, is -0.01 percent. Therefore, for FY 2024, we proposed 
to incorporate a projection of outlier reconciliation dollars by 
targeting an outlier threshold at 5.11 percent [5.1 percent-(-0.01 
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 this Addendum, we 
provide the FY 2024 outlier threshold as calculated for this final rule 
both with and without including the final 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 was 0.949 (1-0.051).
    We invited public comment on our 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.
    We did not receive any comments on the proposed methodology, and 
for the reasons discussed in the proposed rule and in this final rule, 
we are finalizing the methodology described previously for 
incorporating the outlier reconciliation in the outlier threshold 
calculation. Therefore, for this final rule we used the same steps 
described previously and in the proposed rule to incorporate a 
projection of operating outlier payment reconciliations for the 
calculation of the FY 2024 outlier threshold calculation.
    Based on March 2023 HCRIS data, a total of 15 hospitals had an 
outlier reconciliation amount recorded on Worksheet E, Part A, Line 
2.01 for total operating outlier reconciliation dollars of negative 
$15,014,533 (Step 2). The total Federal operating payments based on the 
March 2023 HCRIS is $ 88,747,588,563 (Step 3). The ratio (Step 4) is a 
negative 0.016918 percent, which, when rounded to the second digit, is 
negative 0.02 percent. Therefore, for FY 2024, using the finalized 
methodology, we incorporated a projection of operating IPPS outlier 
reconciliation dollars by targeting an outlier threshold at 5.12 
percent [5.1 percent-(-0.02 percent)]. As noted previously, when the 
percentage of operating outlier reconciliation dollars to total Federal 
operating payments is negative (such is the case when the aggregate 
amount of outlier reconciliation is negative), the effect is a decrease 
to the outlier threshold compared to an outlier threshold that is 
calculated without including this estimate of operating outlier 
reconciliation dollars.
(b) 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 proposed to 
reduce the FY 2024 capital standard Federal rate by an adjustment

[[Page 59347]]

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 proposed 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. 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 proposed 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 (that 
is, the capital outlier payment adjustment factor). To do so, we 
proposed 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.
    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). We note that a negative amount on Worksheet E, Part 
A, Line 93 for capital outlier reconciliation indicates an amount that 
was owed by the hospital, and a positive amount indicates this amount 
was paid to the hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage of 
total capital outlier reconciliation dollars to total capital Federal 
payments for FY 2018. 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 proposed 
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 methodology would be lower than the percentage of capital outlier 
payments otherwise determined using the shared outlier threshold.
    For the 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 this FY 2024 final rule, we 
proposed 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, 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.
    For the FY 2024 proposed rule, the estimated percentage of FY 2024 
capital outlier payments otherwise determined using the shared outlier 
threshold was 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 the FY 2024 
proposed rule, we stated that 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 proposed to 
incorporate the capital outlier reconciliation dollars from Step 5 when 
applying the outlier adjustment factor in determining the capital 
Federal rate based on the

[[Page 59348]]

estimated percentage of capital outlier payments to total capital 
Federal rate payments for FY 2024.
    We invited public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2024 capital outlier payments for purposes of determining the capital 
outlier adjustment factor.
    We did not receive comments about the proposed capital outlier 
reconciliation methodology. For the reasons discussed earlier, we are 
finalizing the methodology for projecting an estimate of capital 
outlier reconciliation as previously described. Therefore, for this 
final rule, we used the same steps as described in the proposed rule 
and this final rule 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.
    For projecting the estimate of capital outlier reconciliation, 
similar to our projection of the estimate of operating outlier 
reconciliation, we are using cost report data from the March 2023 
HCRIS. We note that a difference in the number of cost reports for the 
operating and capital outlier reconciliation projections is possible 
and may be due to new hospitals defined in the regulations at 42 CFR 
412.300(b) that may receive capital cost-based payments (in lieu of 
Federal rate payments), and therefore would not receive capital outlier 
payments. As a result, capital outlier reconciliation is not applicable 
to such hospitals since there is no capital outlier payment.
    Based on the March 2023 HCRIS data, 10 hospitals had an outlier 
reconciliation amount recorded on Worksheet E, Part A, Line 93 for 
total capital outlier reconciliation dollars of negative $1,494,671 
(Step 2). The total Federal capital payments based on the March 2023 
HCRIS is approximately $8,032,054,774 (Step 3). The ratio (Step 4) is a 
negative 0.018609 percent, which, when rounded to the second digit, is 
negative 0.02 percent (Step 4). Therefore, for FY 2024, taking into 
account projected capital outlier reconciliation payments under our 
methodology will decrease the estimated percentage of FY 2024 aggregate 
capital outlier payments by 0.02 percent.
(2) 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 FY 2024 outlier 
threshold, we simulated payments by applying 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 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 Provider-Specific File (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).
    To determine the 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 
proposed 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 removing 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 FY 2024 relative 
weights, consistent with our policy discussed in section IV.I. of the 
preamble to this final rule, we applied the 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 the proposed rule, based on the information available at 
the time, we stated that 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 proposed to calculate the 
FY 2024 outlier threshold consistent with our historic

[[Page 59349]]

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 
proposed to use the same methodology as FY 2020 to determine the charge 
inflation factor. That is, for FY 2023, we proposed to use the MedPAR 
files for the two most recent available Federal fiscal year time 
periods to calculate the charge inflation factor, as we did for FY 
2020. Specifically, for the proposed rule we used the December 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 the FY 2024 IPPS/LTCH PPS proposed 
rule) to compute the proposed charge inflation factor. We proposed 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 methodology, to compute the 1-year average 
annual rate-of-change in charges per case, we compared the average 
covered charge per case of $70,089.49 ($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.
    As we have done in the past, in the FY 2024 IPPS/LTCH PPS proposed 
rule, we proposed 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 the proposed rule. We proposed to apply the following 
edits to providers' CCRs in the PSF. We believe these edits are 
appropriate 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 also proposed to continue to apply an adjustment factor to the 
CCRs to account for cost and charge inflation (as explained later in 
this section). We also proposed that, if more recent data become 
available, we would use that data to calculate the final FY 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, as we have done in the past, we proposed 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, in the proposed rule, 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 the 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:

--Application of the proposed rural and imputed floor adjustment.
--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 final 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

[[Page 59350]]

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 final 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.

    As stated earlier, 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 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 final rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the Hospital 
VBP Program, respectively. We do not believe that it is appropriate to 
include the proposed hospital VBP payment adjustments and the hospital 
readmissions payment adjustments in the proposed outlier threshold 
calculation or the outlier offset to the standardized amount. 
Specifically, consistent with our definition of the base operating DRG 
payment amount for the Hospital Readmissions Reduction Program under 
Sec.  412.152 and the Hospital VBP Program under Sec.  412.160, outlier 
payments under section 1886(d)(5)(A) of the Act are not affected by 
these payment adjustments. Therefore, outlier payments would continue 
to be calculated based on the unadjusted base DRG payment amount (as 
opposed to using the base-operating DRG payment amount adjusted by the 
hospital readmissions payment adjustment and the hospital VBP payment 
adjustment). Consequently, we proposed to exclude the 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 proposed 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 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 
proposed to include estimated FY 2024 uncompensated care payments in 
the computation of the proposed outlier fixed-loss cost threshold. 
Specifically, we proposed to use the estimated per-discharge 
uncompensated care payments to hospitals eligible for the uncompensated 
care payment for all cases in the calculation of the proposed outlier 
fixed-loss cost threshold methodology.
    In addition, consistent with the methodology finalized in the FY 
2023 final rule, we proposed 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 proposed 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 proposed to incorporate an 
estimate of FY 2024 outlier reconciliation in the methodology for 
determining the outlier threshold. As noted previously, for the 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 proposed 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 
proposed 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 reflected our proposal to 
incorporate an estimate of outlier reconciliation in the determination 
of the outlier threshold (as discussed in more detail in the previous 
section of this Addendum). We noted that, if calculated without 
applying our methodology for incorporating an estimate of outlier 
reconciliation in the determination of the outlier threshold, the 
proposed threshold would be $40,808. We proposed 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.
    Comment: A commenter expressed appreciation for the stabilization 
of the outlier threshold. Another commenter stated that the fixed loss 
threshold remains significantly higher than the threshold prior to the 
COVID-19 PHE. The commenter stated that this represents a more than 55 
percent increase over the pre-PHE fixed loss threshold. The commenter 
stated that this suggests the data to establish the threshold is 
abnormal and that CMS needs to adjust its process further so that the 
threshold will be established at a level likely to result in total 
outlier payments of 5.1 percent. This commenter requested that CMS 
model a significant reduction in COVID-19 cases compared to the volume 
of cases in the FY 2022 claims data to better model estimated post-PHE 
outlier cases. The commenter noted that this has the impact of reducing 
the threshold by $700. Another commenter requested that CMS maintain 
the outlier threshold from FY 2023 given the large increase

[[Page 59351]]

that took effect in FY 2023. Another commenter suggested that the 
increase to the fixed loss threshold should be limited to the 3 percent 
market basket update.
    A commenter recommended suppressing COVID-19 cases from the FY 2022 
MedPAR data for the first half of FY 2022 and duplicating the COVID-19 
cases from the second half of the year, essentially applying an 
extrapolation methodology based on data from the second half of FY 2022 
for COVID-19 cases. The commenter believes this approach is a rational 
and targeted strategy for adjusting the FY 2022 MedPAR data for use in 
estimating post-PHE outlier cases.
    Another commenter urged CMS to undertake a thorough examination of 
the outlier methodology and consider further changes to address the 
persistent upward trend of the fixed loss threshold. Another commenter 
requested that CMS share more information regarding the factors driving 
the increase to the fixed-loss threshold to facilitate more informed 
comments.
    A commenter stated that CMS did not explain why it is appropriate 
to use data from the PHE to calculate the CCR adjustment factor, and 
that the CCRs are expected to decrease even more than the adjustment 
factors included in the proposed rule.
    Response: We thank the commenters for their feedback. To determine 
the applicable fixed-loss amount, we estimate outlier payments and 
total payments using claims data from the MedPAR files. As discussed in 
section I.E. of the preamble to this final rule, in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26670 through 26671), we proposed to use 
the FY 2022 MedPAR claims file and the FY 2021 HCRIS (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 ratesetting 
without any modifications to our usual ratesetting methodologies to 
account for the impact of COVID-19 on the ratesetting data. One key 
component of our ratesetting methodologies is the determination of the 
outlier fixed-loss amount. In the proposed rule, we stated our belief 
that FY 2022 data, as the most recent available data, is the best 
available data for approximating the inpatient experience at both IPPS 
hospitals and LTCHs in FY 2024. We also stated that based on the 
information available at the time of the proposed rule, we believe 
there will continue to be COVID-19 cases treated at IPPS hospitals and 
LTCHs in FY 2024, such that it was 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 
that time, we did 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 in FY 2024 relative to FY 
2022, such that modifications to our usual ratesetting methodologies 
would be warranted. We acknowledge that COVID-19 hospitalizations have 
recently trended below FY 2022 levels. We believe there remains 
uncertainty regarding the impact that COVID-19 will have on IPPS in FY 
2024 relative to FY 2022. For this final rule, for the reasons stated 
previously we continue to believe that the most recent available data 
is the best available data for approximating the inpatient experience 
for IPPS hospitals for FY 2024, including for purposes of determining 
the adjustment factors used in the outlier fixed-loss cost threshold 
methodology, without modifications to that methodology for COVID-19.
    We also note that the final FY 2024 outlier fixed-loss cost 
threshold of $42,750 increased by 10 percent from the final FY 2023 
outlier fixed-loss cost threshold of $38,859. This increase is in line 
with increases from one year to the next for fiscal years prior to the 
PHE. For example, the FY 2017 outlier fixed-loss cost threshold was 
$23,573 and increased 12.5 percent in FY 2018 to $26,537. Other prior 
FYs such as FY 2015 have also seen increases greater than 10 percent. 
Therefore, with the increase in the threshold from FY 2023 to FY 2024 
in line with prior fiscal years, we do not see the need to make an 
adjustment to the outlier fixed-loss cost threshold due to COVID-19 for 
FY 2024.
    With respect to the commenter who stated that the increase over the 
pre-PHE fixed loss threshold suggests the data to establish the 
threshold is abnormal, while also noting that modeling a significant 
reduction to the COVID-19 cases would lower the threshold by $700, as 
stated earlier, we acknowledge that COVID-19 hospitalizations have 
recently trended below FY 2022 levels. We believe there remains 
uncertainty regarding the impact that COVID-19 will have on IPPS in FY 
2024 relative to FY 2022. For this final rule, for the reasons stated 
previously we continue to believe that the most recent available data 
is the best available data for approximating the inpatient experience 
for IPPS hospitals for FY 2024, including for purposes of determining 
the adjustment factors used in the outlier fixed-loss cost threshold 
methodology, without modifications to that methodology for COVID-19. 
Also, with respect to commenters who suggested alternative fixed loss 
thresholds, we note that using these alternative thresholds would mean 
that the fixed loss threshold for FY 2024 would not meet the 
requirement that outlier payments result in 5.1 percent of total 
payments.
    Regarding the comment that the CCRs are expected to decrease even 
more than the adjustment factors included in the proposed rule, the 
commenter did not provide any evidence or data as to why it believes 
the CCR adjustment factors are expected to decrease even more than the 
adjustment factors included in the proposed rule.
    With regard to the commenters that urged CMS to undertake a 
thorough examination of the outlier methodology, consider further 
changes to address the persistent upward trend of the fixed loss 
threshold and share more information regarding the factors driving the 
increase, each year we present our methodology to meet the statutory 
target. We believe we have thoroughly explained our proposed 
methodology so that commenters can review and provide meaningful 
comments. There are many factors that can drive the threshold to 
increase or decrease from one fiscal year to the next making it 
challenging to pinpoint which exact issue is causing the threshold to 
increase from one FY to the next.
    We appreciate the comments and concerns from the commenters. 
However, after consideration of the comments received and for the 
reasons discussed, for FY 2024, we are finalizing to use the most 
recent available data without any adjustments to the outlier fixed-loss 
cost threshold methodology for COVID-19.
    Comment: A commenter requested that CMS apply trims when 
calculating charge inflation as it does under the LTCH PPS to ``remove 
all claims from providers whose growth in average charges was a 
statistical outlier''.
    Response: With regard to the charge inflation methodology for the 
LTCH PPS, in section V.D.3 of this addendum, we stated that we remove 
all claims from providers whose growth in average charges was a 
statistical outlier. We further stated that we remove these statistical 
outliers prior to calculating the charge inflation factor because we 
believe they may represent aberrations in the data that would distort 
the measure of average charge growth. We note, in the FY 2024 LTCH PPS 
final rule impact file, there are 333 providers with approximately 
61,000 claims. In the FY 2024 IPPS final rule impact file,

[[Page 59352]]

there are 3,199 providers with approximately 6.8 million claims. There 
are many more providers and claims under the IPPS compared to the LTCH 
PPS. When we analyzed the LTCH PPS claims data, a single LTCH provider 
had substantial increases in its charges with average charges per case 
of approximately $10 million which significantly influenced the charge 
inflation factor. Since there are fewer hospitals and claims under the 
LTCH PPS, the potential for a single provider to influence the charge 
inflation factor is much more significant. We are not aware of a 
similar situation with a hospital having such high average charges 
under the IPPS. Therefore, we believe it is not necessary to apply the 
same trim to hospitals included in the IPPS charge inflation factor.
    Comment: A commenter stated that the growth in the fixed loss 
threshold is occurring because of inadequate IPPS payment rates. The 
commenter urged CMS to adopt a forecast error adjustment and apply a 
payment adjustment under section 7(b)(1)(B) of the TMA with a positive 
0.9412 percent adjustment, both of which would lower the fixed loss 
threshold.
    Response: We refer readers to section V.A of the preamble of this 
final rule for our response to comments about the market basket update.
    Comment: A commenter requested that CMS consider whether it is 
appropriate to include extreme cases when calculating the threshold. 
This commenter explained that high charge cases have a significant 
impact on the threshold. The commenter stated that it examined the data 
to understand the factors that drove an increase of over $15,000 
between FY 2017 and FY 2023, and to propose to increase the threshold 
almost an additional $1,900 for FY 2024, and stated that it observed 
that the inclusion of extreme cases in the calculation of the 
threshold, the rate of which are increasing over time, significantly 
impacts CMS' determination of the fixed-loss threshold. If this trend 
continues (that is, if the number (and proportion) of extreme cases 
continues to increase each year), the commenter stated that the impact 
of this population of cases on the threshold will likewise increase. 
Thus, the commenter recommended that CMS carefully consider what is 
causing this trend, whether the inclusion of these cases in the 
calculation of the threshold is appropriate, or whether a separate 
outlier mechanism should apply to these cases that more closely hews 
outlier payments to marginal costs.
    Response: As we explained when responding to a similar comment in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38526) and other prior 
rulemaking, the methodology used to calculate the outlier threshold 
includes all claims to account for all different types of cases, 
including high charge cases, to ensure that CMS meets the 5.1 percent 
target. As the commenter pointed out, the volume of these cases 
continues to rise, making their impact on the threshold significant. We 
believe excluding these cases would artificially lower the threshold. 
We believe it is important to include all cases in the calculation of 
the threshold no matter how high or low the charges. Including these 
cases with high charges lends more accuracy to the threshold, as these 
cases have an impact on the threshold and continue to rise in volume. 
Therefore, we believe the inclusion of the high-cost outlier cases in 
the calculation of the outlier threshold is appropriate. Also, in 
response to commenter recommending that CMS consider whether a separate 
outlier mechanism should apply to these cases that more closely hews 
outlier payments to marginal costs, we believe the current calculation 
of outlier payment meets these goals. If a case has high charges that 
once reduced to cost significantly exceed the payment plus the 
threshold, then the case will receive a larger outlier payment 
reflective of the higher costs. Therefore, we believe the current 
payment system provides such a mechanism.
    Comment: A commenter stated that it believes that CMS should 
disclose all aspects of its edits to the most current data used for the 
proposed rule and commit to the same process and methods when it 
recalculates the threshold for purposes of the final rule. 
Additionally, the commenter stated CMS should commit to make public the 
data files it uses for the final rule, including all edits and 
calculations, when it publishes the final rule.
    Response: We refer the reader to the FY 2022 IPPS/LTCH final rule 
(86 FR 45541) where we responded to a similar comment.
    Comment: A commenter supported the inclusion of the impact of 
outlier reconciliation in setting the FY 2024 fixed-loss threshold and 
requested that CMS release information on the outlier reconciliation 
process and data showing the amounts recovered so that it can evaluate 
the impact of the reconciliation process on the outlier threshold.
    Response: We appreciate the commenter's support. We note that the 
quarterly HCRIS data contains the information the commenter is 
requesting and is published as a public use file, available at https://www.cms.gov/research-statistics-data-and-systems/downloadable-public-use-files/cost-reports/cost-reports-by-fiscal-year. For the annual 
proposed rule we use the December HCRIS and for the annual final rule 
we use the March HCRIS. Quarterly updates of HCRIS are generally 
available by the end of the month following the quarterly cutoff date. 
For example, the December 2022 HCRIS update used in the FY 2024 
proposed rule would generally become available towards the end of 
January 2023. This final rule discusses the impact of incorporating the 
reconciliation amounts from March 2023 HCRIS reports.
    Comment: A commenter noted the final fixed-loss threshold 
established by CMS has consistently been lower than the threshold set 
forth in the proposed rule, and the variance between the proposed and 
final thresholds has generally exceeded 4 percent. The commenter 
emphasized that this demonstrates that CMS must ordinarily use the most 
recent data to appropriately calculate the outlier threshold.
    Response: We responded to similar comments in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50378 through 50379) and refer readers to that 
rule for our response. We reiterate that CMS' historical policy is to 
use the best available data when setting the payment rates and factors 
in both the proposed and final rules. Sometimes there are variables 
that change between the proposed and final rule as result of the 
availability of more recent data, such as the charge inflation factor 
and the CCR adjustment factors that can cause fluctuations in the 
threshold amount. Other factors such as changes to the wage indexes and 
market basket increase can also cause the outlier fixed loss cost 
threshold to fluctuate between the proposed rule and the final rule 
each year. We use the latest data that is available at the time of the 
development of the proposed and final rules, such as the most recent 
update of MedPAR claims data and CCRs from the most recent update of 
the PSF.
    After consideration of the public comments we received and for the 
reasons discussed, we are finalizing to use the same methodology we 
proposed, without modifications, to calculate the final outlier 
threshold for FY 2024.
    For the FY 2024 final outlier threshold, we used the used the March 
2022 MedPAR file of FY 2021 (October 1, 2020, through September 30, 
2021) charge data (released in conjunction with the FY 2023 IPPS/LTCH 
PPS final rule) and the March 2023 MedPAR file

[[Page 59353]]

of FY 2022 (October 1, 2021 through September 30, 2022) charge data 
(released in conjunction with this FY 2024 IPPS/LTCH PPS final rule) to 
determine the charge inflation factor. To compute the 1-year average 
annual rate-of-change in charges per case, we compared the average 
covered charge per case of $78,169.74 ($581,708,955,080/7,441,613 
cases) from October 1, 2020, through September 31, 2021, to the average 
covered charge per case of $82,691.67 ($578,217,120,322/6,992,447 
cases) from October 1, 2021, through September 31, 2022. This rate-of-
change was 5.8 percent (1.05785) or 11.9 percent (1.11904) over 2 
years. The billed charges are obtained from the claims from the MedPAR 
file and inflated by the inflation factor specified previously.
    As we have done in the past, we are establishing the FY 2024 
outlier threshold using hospital CCRs from the March 2023 update to the 
Provider-Specific File (PSF)--the most recent available data at the 
time of the development of the final rule. We applied the following 
edits to providers' CCRs in the PSF. We believe these edits are 
appropriate to accurately model the outlier threshold. We first search 
for Indian Health Service providers and those providers assigned the 
statewide average CCR from the current fiscal year. We then replaced 
these CCRs with the statewide average CCR for the upcoming fiscal year. 
We also assigned the statewide average CCR (for the upcoming fiscal 
year) to those providers that have no value in the CCR field in the PSF 
or whose CCRs exceed the ceilings described later in this section (3.0 
standard deviations from the mean of the log distribution of CCRs for 
all hospitals). We did not apply the adjustment factors described later 
in this section to hospitals assigned the statewide average CCR. For FY 
2024, we also are continuing to apply an adjustment factor to the CCRs 
to account for cost and charge inflation (as explained later in this 
section).
    For this final rule, as we have done since FY 2014 (with the 
exception of FYs 2022 and 2023, as discussed in the FY 2022 and FY 2023 
IPPS/LTCH PPS proposed and final rules), we are adjusting the CCRs from 
the March 2023 update of the PSF by comparing the percentage change in 
the national average case-weighted operating CCR and capital CCR from 
the March 2022 update of the PSF to the national average case-weighted 
operating CCR and capital CCR from the March 2023 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 methodology noted earlier, for this final rule, we 
calculated a March 2022 operating national average case-weighted CCR of 
0.251181 and a March 2023 operating national average case-weighted CCR 
of 0.248881. We then calculated the percentage change between the two 
national operating case-weighted CCRs by subtracting the March 2022 
operating national average case weighted CCR from the March 2023 
operating national average case-weighted CCR and then dividing the 
result by the March 2022 national operating average case-weighted CCR. 
This resulted in a national operating CCR adjustment factor of 
0.990843.
    We used the same methodology earlier to adjust the capital CCRs. 
Specifically, for this final rule, we calculated a March 2022 capital 
national average case-weighted CCR of 0.019678 and a March 2023 capital 
national average case-weighted CCR of 0.01779. We then calculated the 
percentage change between the two national capital case weighted CCRs 
by subtracting the March 2022 capital national average case-weighted 
CCR from the March 2023 capital national average case-weighted CCR and 
then dividing the result by the March 2022 capital national average 
case-weighted CCR. This resulted in a national capital CCR adjustment 
factor of 0.904055.
    As discussed previously, for purposes of estimating the final 
outlier threshold for FY 2024, we used a wage index that reflects the 
policies discussed in this final rule. This includes the following:

--Application of the rural imputed floor adjustment.
--The frontier State floor adjustments in accordance with section 
10324(a) of the Affordable Care Act.
--The out-migration adjustment as added by section 505 of Public Law 
108-173.
--Incorporating the FY 2024 low wage index hospital policy (described 
in section III.G.4 of the preamble of this final 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 final 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.

    As stated previously, if we did not take the previous into account, 
our estimate of total FY 2024 payments would be too low, and, as a 
result, our outlier threshold would be too high, such that estimated 
outlier payments would be less than our projected 5.12 percent of total 
payments (which reflects the estimate of outlier reconciliation 
calculated for this final rule).
     We excluded the hospital VBP payment adjustments and the 
hospital readmissions payment adjustments from the calculation of the 
outlier fixed-loss cost threshold.
     We used the estimated per-discharge uncompensated care 
payments to hospitals eligible for the uncompensated care payment for 
all cases in the calculation of the outlier fixed-loss cost threshold 
methodology.
     Based on the policy finalized, as previously described, we 
used the estimated per-discharge supplemental payments to hospitals 
eligible for the supplemental payment for all cases in the calculation 
of the outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described in 
the earlier section to this Addendum, we are finalizing to incorporate 
an estimate of FY 2024 outlier reconciliation in the methodology for 
determining the outlier threshold. As noted previously, for this final 
rule, the ratio of outlier reconciliation dollars to total Federal 
Payments (Step 4) is a negative 0.016918 percent, which, when rounded 
to the second digit, is -0.02 percent. Therefore, for FY 2024, we 
incorporated a projection of outlier reconciliation dollars by 
targeting an outlier threshold at 5.12 percent [5.1 percent-(-.02 
percent)]. Under this approach, we determined a threshold of $42,750 
and calculated total outlier payments of $4,289,273,383 and total 
operating Federal payments of $79,484,223,474. We then divided total 
outlier payments by total operating Federal payments plus total outlier 
payments and

[[Page 59354]]

determined that this threshold matched with the 5.12 percent target, 
which incorporated 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 methodology for incorporating an estimate of 
outlier reconciliation in the determination of the outlier threshold, 
the threshold would be $42,909. We are finalizing 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 $42,750.
(3) Other Changes Concerning Outliers
    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related costs. 
When we modeled the combined operating and capital outlier payments, we 
found that using a common threshold resulted in a higher percentage of 
outlier payments for capital-related costs than for operating costs. We 
project that the threshold for FY 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 
4.02 percent of capital payments based on the Federal rate (which 
reflects our methodology discussed previously to incorporate an 
estimate of capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we reduced the FY 2024 standardized amount by the 
percentage of 5.1 percent to account for the projected proportion of 
payments paid as outliers.
    The outlier adjustment factors that would be applied to the 
operating standardized amount and capital Federal rate based on the FY 
2024 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TR28AU23.330

    We are applying 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 1.209 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 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 available via the internet on the CMS 
website) contains the comparable statewide average capital CCRs. As 
previously stated, the CCRs in Tables 8A and 8B would be used during FY 
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 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 6.78 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

[[Page 59355]]

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 final rule. We will provide an 
estimate of actual FY 2023 outlier payments in the FY 2025 IPPS/LTCH 
PPS proposed rule.
5. 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 applying 
to all hospitals, except hospitals located in Puerto Rico, for FY 2024. 
The standardized amount for hospitals in Puerto Rico is shown in Table 
1C listed and published in section VI. of this Addendum (and available 
via the internet on the CMS website). The amounts shown in Tables 1A 
and 1B differ only in that the labor-related share applied to the 
standardized amounts in Table 1A is 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 applying a labor-related share of 62 percent, unless 
application of that percentage would result in lower payments to a 
hospital than would otherwise be made. In effect, the statutory 
provision means that we 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 standardized amounts 
reflecting the applicable percentage increases for FY 2024.
    The 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 FY 2024 national standardized 
amounts. The second through fifth columns display the changes from the 
FY 2023 standardized amounts for each 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.
BILLING CODE 4120-01-P

[[Page 59356]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.331


[[Page 59357]]


BILLING CODE 4120-01-C

B. Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this Addendum 
(and available via the internet on the CMS website), contain the labor-
related and nonlabor-related shares that we are using 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. 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 final rule, we are 
applying 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 applying the 
wage index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 1.0000. 
In section III. of the preamble of this final rule, we discuss the data 
and methodology for the FY 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 cost of living adjustment (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] TR28AU23.332

    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 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 rate (which, as 
discussed in section VI.G. of the preamble of this final rule,

[[Page 59358]]

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 (1 + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + Capital 
CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-Related 
Portion x CBSA Wage Index) + Nonlabor-Related portion)] x Operating CCR 
to Total CCR + Federal Payment with IME, DSH + Uncompensated Care 
Payment + 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 applicable percentage increases to the hospital-
specific rates applicable to SCHs and MDHs are the following:

[[Page 59359]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.333

    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 final 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 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.D.2.c. of the preamble this final 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 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. 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 used 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 Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update for FY 2024

    In the discussion that follows, we explain the factors that we used 
to determine the capital Federal rate for FY 2024. In particular, we 
explain why the FY 2024 capital Federal rate would increase 
approximately 4.14 percent, compared to the FY 2023 capital Federal 
rate. As discussed in the impact analysis in appendix A to this final 
rule, we estimate that capital payments per discharge will increase 
approximately 6.6 percent during that same period. Because capital 
payments constitute approximately 10 percent of hospital payments, a 1-
percent change in the capital Federal rate yields only approximately a 
0.1 percent change in actual payments to hospitals.
1. Projected Capital Standard Federal Rate Update
    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into account 
changes in a capital input price index (CIPI) and several other policy 
adjustment factors. Specifically, we adjust the projected CIPI rate of 
change, as appropriate, each year for case-mix index-related changes, 
for intensity, and for errors in previous CIPI forecasts. The update 
factor for FY 2024 under that framework is 3.8 percent based on a 
projected 2.9 percent increase in the 2018-based CIPI, a 0.0 percentage 
point adjustment for intensity, a 0.0 percentage point adjustment for 
case-mix, a 0.0 percentage point adjustment for the

[[Page 59360]]

DRG reclassification and recalibration, and a 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 final rule, we describe 
the policy adjustments that we applied 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, as proposed, 
the 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 final 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, as proposed, we are making 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 making 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 final rule, as proposed, we are continuing to use a 
Medicare-specific intensity measure that is based on a 5-year adjusted 
average of cost per discharge for FY 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 using 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 adjustment for FY 2024. 
Therefore, as proposed, we are making 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 3.8 percent capital update factor under the capital update 
framework for FY 2024, as shown in the following table.

[[Page 59361]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.334

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 have incorporated 
the estimated outlier reconciliation payment amounts into the outlier 
threshold model, as we did for FY 2023. (For more details on our 
incorporation of the estimated outlier reconciliation payment amounts 
into the outlier threshold model, please see section II.A. of this 
Addendum to this final 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 will equal 4.04 percent of 
inpatient capital-related payments based on the 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 will decrease the estimated percentage 
of FY 2024 capital outlier payments by 0.02 percent. Therefore, 
accounting for estimated capital outlier reconciliation, the estimated 
outlier payments for capital-related PPS payments would equal 4.02 
percent (4.04 percent - 0.02 percent) of inpatient capital-related 
payments based on the capital Federal rate in FY 2024. Accordingly, we 
applied an outlier adjustment factor of 0.9598 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 FY 2024 outlier adjustment of 
0.9598 is a 1.57 percent change from the FY 2023 outlier adjustment of 
0.9449. Therefore, the net change in the outlier adjustment to the 
capital Federal rate for FY 2024 is 1.0157 (0.9598/0.9449) so that the 
outlier adjustment will increase the FY 2024 capital Federal rate by 
approximately 1.57 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 final 
rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to help reduce wage index disparities 
between high and low wage index hospitals by increasing the wage index 
values for 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. As discussed in section III.G.3. of the 
preamble of this final rule, this policy was applied in FYs 2020 
through 2023, and will continue to apply in FY 2024 as we proposed. 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, 
which we are finalizing 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 finalizing 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 (also 
known as low wage index hospital policy). 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.

[[Page 59362]]

    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 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 changes to the wage index and other wage index 
policies for FY 2024 discussed previously, which directly affect the 
GAF, we continue to compute a budget neutrality adjustment for changes 
in the GAFs in two steps. We discuss our 2-step calculation of the 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 FY 2024 
GAFs without incorporating the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy. To 
achieve budget neutrality for these changes in the GAFs, we calculated 
an incremental GAF budget neutrality adjustment factor of 0.9869 for FY 
2024. Next, we compared estimated aggregate capital Federal rate 
payments based on the FY 2024 GAFs with and without 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 FY 2024 MS-DRG 
classifications and relative weights (after application of the 10-
percent cap discussed later in this section) and the FY 2024 GAFs (both 
with and without the lowest quartile hospital wage index adjustment and 
the 5-percent cap on wage index decreases policy). (We note, for this 
calculation the GAFs included the imputed floor, out-migration, and 
Frontier state adjustments.) To achieve budget neutrality for the 
effects of the lowest quartile hospital wage index adjustment and the 
5-percent cap on wage index decreases policy on the FY 2024 GAFs, we 
calculated an incremental GAF budget neutrality adjustment factor of 
0.9964. 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 budget neutrality factor for 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 budget neutrality factors in the discussion that 
follows, and this factor is not included in the calculation of the 
combined GAF/DRG adjustment factor described later in this section. (We 
note that the FY 2024 GAFs reflect the changes to the rural wage index 
methodology finalized in section III.G.1. of the preamble to this final 
rule.) As discussed, beginning in FY 2024, we are including hospitals 
with Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations, and are only excluding 
``dual reclass'' hospitals (hospitals with simultaneous Sec.  412.103 
and MGCRB reclassifications) in accordance with the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. We also are 
including the data of all Sec.  412.103 hospitals (including those that 
have an MGCRB reclassification when appropriate) 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 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 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 payments were calculated using the FY 2024 GAFs without 
the lowest quartile hospital wage index adjustment and the 5-percent 
cap on wage index decreases policy. The incremental adjustment factor 
for DRG classifications and changes in relative weights prior to the 
application of the 10-percent cap is 1.0017. Next, we compared 
estimated aggregate capital Federal rate payments based on the 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 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 FY 2024 GAFs without the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy. The 
incremental adjustment factor for the application of the 10-percent cap 
on relative weight decreases is 0.9999. Therefore, to

[[Page 59363]]

achieve budget neutrality for the FY 2024 MS-DRG reclassification and 
recalibration (including the 10-percent cap), based on the calculations 
described previously, we are applying an incremental budget neutrality 
adjustment factor of 1.0016 (1.0017 x 0.9999) for FY 2024 to the 
capital Federal rate. We note that all the values are calculated with 
unrounded numbers.
    The incremental adjustment factor for the FY 2024 MS-DRG 
reclassification and recalibration (1.0016) and for changes in the FY 
2024 GAFs due to the update to the wage data, wage index 
reclassifications and redesignations, and application of the rural 
floor policy (0.9869) is 0.9885 (1.0016 x 0.9869). This incremental 
adjustment factor is built permanently into the capital Federal rates. 
To achieve budget neutrality for the effects of 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 budget neutrality adjustment factor of 0.9964 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 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 incremental GAF/DRG adjustment factor of 0.9885 accounts for 
the MS-DRG reclassifications and recalibration (including application 
of the 10-percent cap on relative weight decreases) and for changes in 
the GAFs that result from 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 lowest quartile/cap adjustment factor of 0.9964 accounts 
for changes in the GAFs that result from our 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. 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 establishing an update 
of 3.8 percent in determining the FY 2024 capital Federal rate for all 
hospitals. As a result of this update and the budget neutrality factors 
discussed earlier, we are establishing a national capital Federal rate 
of $503.83 for FY 2024. The national capital Federal rate for FY 2024 
was calculated as follows:
     The FY 2024 update factor is 1.0380; that is, the update 
is 3.8 percent.
     The FY 2024 GAF/DRG budget neutrality adjustment factor 
that is applied to the capital Federal rate for changes in the MS-DRG 
classifications and relative weights (including application of the 10-
percent cap on relative weight decreases) and 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 0.9885.
     The 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 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 is 0.9964.
     The FY 2024 outlier adjustment factor is 0.9598.
    We are providing the following chart that shows how each of the 
factors and adjustments for FY 2024 affects the computation of the FY 
2024 national capital Federal rate in comparison to the FY 2023 
national capital Federal rate. The FY 2024 update factor has the effect 
of increasing the capital Federal rate by 3.8 percent compared to the 
FY 2023 capital Federal rate. The GAF/DRG budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 1.15 
percent. The FY 2024 lowest quartile/cap budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 0.08 
percent compared to the FY 2023 capital Federal rate. The FY 2024 
outlier adjustment factor has the effect of increasing the capital 
Federal rate by 1.57 percent compared to the FY 2023 capital Federal 
rate. The combined effect of all the changes will increase the national 
capital Federal rate by approximately 4.14 percent, compared to the FY 
2023 national capital Federal rate.

[[Page 59364]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.335

B. Calculation of the 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 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 fixed-
loss amount of $42,750.
    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 final rule, we are using 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 second quarter 2023 forecast, for this 
final rule, we are forecasting the 2018-based CIPI to increase 2.9 
percent in FY 2024. This reflects a projected 3.4 percent increase in 
vintage-weighted depreciation prices (building and fixed equipment, and 
movable equipment), and a projected 5.4 percent increase in other 
capital expense prices in FY 2024, partially offset by a projected 1.6 
percent decline in vintage-weighted interest expense prices in FY 2024. 
The weighted average of these three factors produces the forecasted 2.9 
percent increase for the 2018-based CIPI in FY 2024. As proposed in the 
FY 2024 IPPS/LTCH proposed rule (88 FR 27232), we are using the more 
recent data available for this final rule to determine the FY 2024 
increase in the 2018-based CIPI for this final rule.

IV. 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 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

[[Page 59365]]

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 the FY 2024 IPPS/LTCH PPS proposed rule, based on IGI's 2022 
fourth quarter forecast, we estimated that the 2018-based IPPS 
operating market basket percentage increase for FY 2024 would be 3.0 
percent (that is, the estimate of the market basket rate-of-increase). 
However, we proposed that if more recent data became 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. As proposed, we used more recent data for this FY 2024 
IPPS/LTCH PPS final rule, based on IGI's 2023 second quarter forecast, 
we estimate that the 2018-based IPPS operating market basket update for 
FY 2024 is 3.3 percent. 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, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa will be 3.3 percent, in accordance 
with the applicable regulations at 42 CFR 413.40.
    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 final 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. Changes to the Payment Rates for the LTCH PPS for FY 2024

A. LTCH PPS Standard Federal Payment Rate for FY 2024

1. Overview
    In section VIII. of the preamble of this final rule, we discuss our 
annual updates to the payment rates, factors, and specific policies 
under the LTCH PPS for FY 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 final rule. This section of 
the Act further provides that the application of section 1886(m)(3)(B) 
of the Act may result in the annual update being less than zero for a 
rate year, and may result in payment rates for a rate year being less 
than such payment rates for the preceding rate year. (As noted in 
section VIII.C.2. of the preamble of this final rule, the annual update 
to the LTCH PPS occurs on October 1 and we have adopted the term 
``fiscal year'' (FY) rather than ``rate year'' (RY) under the LTCH PPS 
beginning October 1, 2010. Therefore, for purposes of clarity, when 
discussing the annual update for the LTCH PPS, including the provisions 
of the Affordable Care Act, we use the term ``fiscal year'' rather than 
``rate year'' for 2011 and subsequent years.)
    For LTCHs that fail to submit the required quality reporting data 
in accordance with the LTCH QRP, the annual update is reduced by 2.0 
percentage points as required by section 1886(m)(5) of the Act.
2. Development of the FY 2024 LTCH PPS Standard Federal Payment Rate
    Consistent with our historical practice and Sec.  
412.523(c)(3)(xvii), for FY 2024, as we proposed, we are applying the 
annual update to the LTCH PPS standard Federal payment rate from the 
previous year. Furthermore, in determining the LTCH PPS standard 
Federal payment rate for FY 2024, we also are making certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the FY 2024 LTCH PPS standard Federal payment rate, as we 
proposed, we are applying a budget neutrality adjustment factor for the 
changes related to the area wage level adjustment (that is, changes to 
the wage data and labor-related share) as discussed in section V.B.6.of 
this Addendum.
    In this final rule, we are establishing an annual update to the 
LTCH PPS standard Federal payment rate of 3.3 percent (that is, the 
most recent estimate of the LTCH PPS market basket increase of 3.5 
percent less the productivity adjustment of 0.2 percentage point). 
Therefore, in accordance with Sec.  412.523(c)(3)(xvii), we are 
applying an update factor of 1.033 to the FY 2023 LTCH PPS standard 
Federal payment rate of $46,432.77 to determine the 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, we are 
establishing an annual update to the LTCH PPS standard Federal payment 
rate of 1.3 percent (or an update factor of 1.013). This update amount 
reflects the 0.2 percentage point productivity adjustment to the annual 
market basket update of 3.5 percent, as required by section 
1886(m)(3)(A)(i) of the Act, minus 2.0 percentage points for LTCHs 
failing to submit quality data under the LTCH QRP, as required by 
section 1886(m)(5) of the Act. Consistent with Sec.  412.523(d)(4), we 
are applying an area wage level budget neutrality factor to the FY 2024 
LTCH PPS standard Federal payment rate of 1.0031599, based on the best 
available data at this time, to ensure that any changes to the area 
wage level adjustment (that is, the 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) will not 
result in any change (increase or decrease) in estimated aggregate LTCH 
PPS standard Federal payment rate payments. Accordingly, we are 
establishing an LTCH PPS standard Federal payment rate of $48,116.62 
(calculated as $46,432.77 x 1.033 x 1.0031599) 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 the 
Act, we are establishing an LTCH PPS standard Federal payment rate of 
$47,185.03 (calculated as $46,432.77 x 1.013 x 1.0031599) for FY 2024.

B. 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

[[Page 59366]]

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 FY 2024 LTCH PPS standard Federal payment rate wage index 
values that will 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 this 
Addendum and available via the internet on the CMS website.
2. Geographic Classifications (Labor Market Areas) for the LTCH PPS 
Standard Federal Payment Rate
    In adjusting for the differences in area wage levels under the LTCH 
PPS, the labor-related portion of an LTCH's Federal prospective payment 
is adjusted by using an appropriate area wage index based on the 
geographic classification (labor market area) in which the LTCH is 
located. Specifically, the application of the LTCH PPS area wage level 
adjustment under existing Sec.  412.525(c) is made based on the 
location of the LTCH--either in an ``urban area,'' or a ``rural area,'' 
as defined in Sec.  412.503. Under Sec.  412.503, an ``urban area'' is 
defined as a Metropolitan Statistical Area (MSA) (which includes a 
Metropolitan division, where applicable), as defined by the Executive 
OMB, and a ``rural area'' is defined as any area outside of an urban 
area (75 FR 37246).
    The 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 OMB Bulletin No. 17-01 (August 15, 2017). On September 14, 
2018, OMB issued OMB Bulletin No. 18-04, which superseded OMB Bulletin 
No. 18-03 (April 10, 2018). 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, OMB 
Bulletin No. 18-04 (September 14, 2018) 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 OMB Bulletin No. 18-04 (September 14, 2018) 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 OMB 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). Therefore, for FY 2024, we did not propose 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

[[Page 59367]]

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. 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27235), 
consistent with our historical practice, we proposed that the LTCH PPS 
labor-related share for FY 2024 would be 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 
proposed 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 
was 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 basket capital-related costs relative importance). Since 
the FY 2024 relative importance for capital-related costs was 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, in the FY 2024 IPPS/LTCH PPS proposed rule 
(88 FR 27235), we proposed 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 also proposed that if more recent data became 
available after the publication of the 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.
    Comment: A commenter stated that they do not support the increase 
in the labor-related share from 68.0 percent in FY 2023 to 68.4 percent 
in FY 2024. They claimed that any increase to the labor-related share 
percentage penalizes any facility that has a wage index less than 1.0. 
They further stated that there is a growing disparity between high-wage 
and low-wage states that harms hospitals in many rural and underserved 
communities. The commenter stated that limiting the increase in the 
labor-related share helps mitigate that growing disparity.
    Response: We appreciate the commenter's concern over the proposed 
increase in the labor-related share and the impact to payments for 
facilities with a wage index less than 1.0; however, we believe it is 
technically accurate and appropriate to use the sum of the FY 2024 
relative importance values for the labor-related cost categories, based 
on the most recent forecast of the 2017-based LTCH market basket, in 
order to determine the final labor-related share for FY 2024, as it 
accounts for more recent data regarding price pressures and cost 
structure of LTCHs.
    After consideration of public comments, we are finalizing the FY 
2024 labor-related share using the most recently available data. Based 
on IHS Global Inc.'s second quarter 2023 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 64.3 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 basket capital-related costs relative importance). Since 
the FY 2024 relative importance for capital-related costs is 9.2 
percent based on IHS Global Inc.'s second quarter 2023 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 finalizing a total labor-related 
share for FY 2024 of 68.5 percent (the sum of 64.3 percent for the 
labor-related share of operating costs and 4.2 percent for the labor-
related share of capital-related costs).
4. 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

[[Page 59368]]

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, as we proposed, we are 
continuing to employ our historical practice of using the same data we 
used to compute the FY 2024 acute care hospital inpatient wage index, 
as discussed in section III. of the preamble of this final rule (that 
is, wage data collected from cost reports submitted by IPPS hospitals 
for cost reporting periods beginning during FY 2020) because these data 
are the most recent complete data available.
    In addition, as we proposed, we computed 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. As we proposed, we also continued to apportion the wage data 
for multicampus hospitals with campuses located in different labor 
market areas to each CBSA where the campus or campuses are located, 
consistent with the IPPS policy. Lastly, consistent with our existing 
methodology for determining the LTCH PPS wage index values, for FY 
2024, as we proposed, we continued to use our existing policy for 
determining area wage index values for areas where there are no IPPS 
wage data. Under our existing methodology, the LTCH PPS wage index 
value for urban CBSAs with no IPPS wage data is determined by using an 
average of all of the urban areas within the State, and the LTCH PPS 
wage index value for rural areas with no IPPS wage data is determined 
by using the unweighted average of the wage indices from all of the 
CBSAs that are contiguous to the rural counties of the State.
    Based on the FY 2020 IPPS wage data that we used to determine the 
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 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 this Addendum.
    Based on the FY 2020 IPPS wage data that we used to determine the 
FY 2024 LTCH PPS standard Federal payment rate area wage index values 
in this final rule, there are no rural areas without IPPS hospital wage 
data. Therefore, it is not necessary to use our established methodology 
to calculate a LTCH PPS 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 this Addendum.
    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 final 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 final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Comment: A commenter stated that while they support the permanent 
cap on LTCH PPS wage index decreases policy, they urge CMS to implement 
this policy in a non-budget-neutral manner. The commenter believes this 
would both stabilize provider reimbursement and avoid further 
unexpected reductions for other providers.
    Response: Implementation of this policy in a budget neutral manner 
is consistent with the requirement at Sec.  412.525(c)(2) that changes 
to area wage level adjustments are made in a budget neutral manner. 
Consistent with this requirement, we continue to believe that changes 
to area wage level adjustments, including the 5-percent cap on the 
decrease on an LTCH's wage index, should not result in any change in 
estimated aggregate LTCH PPS payments. Furthermore, we anticipate that, 
in the absence of wage index policy changes beyond an annual update of 
the wage data, most LTCHs will experience year-to-year wage index 
declines less than 5 percent in any given year, and that the overall 
budget neutrality adjustments associated with the cap on wage index 
decreases will therefore be relatively small and will not create 
volatility in LTCH PPS payments.

[[Page 59369]]

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 final 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 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 final rule at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
6. Budget Neutrality Adjustments for Changes to the LTCH PPS Standard 
Federal Payment Rate Area Wage Level Adjustment
    Historically, the LTCH PPS wage index and labor-related share are 
updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will be 
neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. Under 
this policy, we determine an area wage level adjustment budget 
neutrality factor that is applied to the standard Federal payment rate 
to ensure that any changes to the area wage level adjustments are 
budget neutral such that any changes to the area wage index values or 
labor-related share would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS payments. Accordingly, under 
Sec.  412.523(d)(4), we have applied an area wage level adjustment 
budget neutrality factor in determining the standard Federal payment 
rate, and we also established a methodology for calculating an area 
wage level adjustment budget neutrality factor. (For additional 
information on the establishment of our budget neutrality policy for 
changes to the area wage level adjustment, we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
    For FY 2024, in accordance with Sec.  412.523(d)(4), we are 
applying an area wage level budget neutrality factor to adjust the LTCH 
PPS standard Federal payment rate to account for the estimated effect 
of the adjustments or updates to the area wage level adjustment under 
Sec.  412.525(c)(1) on estimated aggregate LTCH PPS payments, 
consistent with the methodology we established in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51773). As discussed in section V.B.6. of this 
Addendum, 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 area wage level budget neutrality factor. 
Specifically, as we proposed, we determined an area wage level 
adjustment budget neutrality factor that is applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(4) for FY 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 FY 2024 wage index values (including 
application of the 5 percent cap on wage index decreases) and the FY 
2024 labor-related share of 68.5 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 and the labor-related 
share is discussed in section V.B.3. of this Addendum.)
    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 FY 2024 
updates to the area wage level adjustment (calculated in Step 2) to 
determine the 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 FY 2024 updates to the area wage level adjustment 
budget neutrality factor from Step 3 to determine the FY 2024 LTCH PPS 
standard Federal payment rate after the

[[Page 59370]]

application of the FY 2024 annual update.
    In section I.E., of the preamble of this final rule, we finalized 
our proposal to use the most recent data available for the FY 2024 LTCH 
PPS ratesetting, including the FY 2022 MedPAR file. Therefore, we used 
claims from the FY 2022 MedPAR file in calculating the 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 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 March 2023 update of the FY 2022 MedPAR file, we 
identified 166 LTCH PPS standard Federal payment rate cases for this 
LTCH. Of these 166 cases, 118 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, as we proposed, we 
removed claims from CCN 312024 when determining the FY 2024 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor.
    For this final rule, using the steps in the methodology previously 
described, we determined a FY 2024 LTCH PPS standard Federal payment 
rate area wage level adjustment budget neutrality factor of 1.0031599. 
Accordingly, in section V.A. of this Addendum, we applied the area wage 
level adjustment budget neutrality factor of 1.0031599 to determine the 
FY 2024 LTCH PPS standard Federal payment rate, in accordance with 
Sec.  412.523(d)(4).

C. 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 have updated 
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 final 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, as we proposed, we 
are continuing 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).)

[[Page 59371]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.336

D. Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background
    From the beginning of the LTCH PPS, we have included an adjustment 
to account for cases in which there are extraordinarily high costs 
relative to the costs of most discharges. Under this policy, additional 
payments are made based on the degree to which the estimated cost of a 
case (which is calculated by multiplying the Medicare allowable covered 
charge by the hospital's overall hospital CCR) exceeds a fixed-loss 
amount. This policy results in greater payment accuracy under the LTCH 
PPS and the Medicare program, and the LTCH sharing the financial risk 
for the treatment of extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when we 
implemented the dual rate LTCH PPS payment structure under section 1206 
of Public Law 113-67. LTCH discharges that meet the criteria for 
exclusion from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases) are paid at the LTCH PPS standard 
Federal payment rate, which includes, as applicable, HCO payments under 
Sec.  412.523(e). LTCH discharges that do not meet the criteria for 
exclusion are paid at the site neutral payment rate, which includes, as 
applicable, HCO payments under Sec.  412.522(c)(2)(i). In the FY 2016 
IPPS/LTCH PPS final rule, we established separate fixed-loss amounts 
and targets for the two different LTCH PPS payment rates. Under this 
bifurcated policy, the historic 8-percent HCO target was retained for 
LTCH PPS standard Federal payment rate cases, with the fixed-loss 
amount calculated using only data from LTCH cases that would have been 
paid at the LTCH PPS standard Federal payment rate if that rate had 
been in effect at the time of those discharges. For site neutral 
payment rate cases, we adopted the operating IPPS HCO target (currently 
5.1 percent) and set the fixed-loss amount for site neutral payment 
rate cases at the value of the IPPS fixed-loss amount. Under the HCO 
policy for both payment rates, an LTCH receives 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold, which is the sum of the LTCH PPS payment for the case 
and the applicable fixed-loss amount for such case.
    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).)
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 are also 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

[[Page 59372]]

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. LTCH Total CCR Ceiling
    Consistent with our historical practice, as we proposed, we used 
the best available data to determine the LTCH total CCR ceiling for FY 
2024 in this final rule. Specifically, in this final rule, we used our 
established methodology for determining the LTCH total CCR ceiling 
based on IPPS total CCR data from the March 2023 update of the Provider 
Specific File (PSF), which is the most recent data available. 
Accordingly, we are establishing an LTCH total CCR ceiling of 1.289 
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. (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).)
    We did not receive any public comments on our proposals and are 
finalizing our proposals as described previously, without modification.
c. LTCH Statewide Average CCRs
    Our general methodology for determining the statewide average CCRs 
used under the LTCH PPS is similar to our established methodology for 
determining the LTCH total CCR ceiling because it is based on ``total'' 
IPPS CCR data. (For additional information on our methodology for 
determining statewide average CCRs under the LTCH PPS, we refer readers 
to the FY 2007 IPPS final rule (71 FR 48119 through 48120).) Under the 
LTCH PPS HCO policy at Sec.  412.525(a)(4)(iv)(C), the SSO policy at 
Sec.  412.529(f)(4)(iii), and the site neutral payment rate at Sec.  
412.522(c)(1)(ii), the MAC may use a statewide average CCR, which is 
established annually by CMS, if it is unable to determine an accurate 
CCR for an LTCH in one of the following circumstances: (1) New LTCHs 
that have not yet submitted their first Medicare cost report (a new 
LTCH is defined as an entity that has not accepted assignment of an 
existing hospital's provider agreement in accordance with Sec.  
489.18); (2) LTCHs whose calculated CCR is in excess of the LTCH total 
CCR ceiling; and (3) other LTCHs for whom data with which to calculate 
a CCR are not available (for example, missing or faulty data). (Other 
sources of data that the MAC may consider in determining an LTCH's CCR 
include data from a different cost reporting period for the LTCH, data 
from the cost reporting period preceding the period in which the 
hospital began to be paid as an LTCH (that is, the period of at least 6 
months that it was paid as a short-term, acute care hospital), or data 
from other comparable LTCHs, such as LTCHs in the same chain or in the 
same region.)
    Consistent with our historical practice of using the best available 
data, in this final rule, as we proposed, we are using our established 
methodology for determining the LTCH PPS statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the March 2023 
update of the PSF. As we proposed, we are establishing LTCH PPS 
statewide average total CCRs for urban and rural hospitals that will be 
effective for discharges occurring on or after October 1, 2023, through 
September 30, 2024, in Table 8C listed in section VI. of this Addendum 
(and available via the internet on the CMS website).
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy is 
consistent with the policy that we established when we revised our 
methodology for determining the applicable LTCH statewide average CCRs 
in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the 
same as the policy applied under the IPPS. In addition, although 
Connecticut has areas that are designated as rural, in our calculation 
of the LTCH statewide average CCRs, there were no short-term, acute 
care IPPS hospitals classified as rural or LTCHs located in these rural 
areas as of March 2023. Therefore, consistent with our existing 
methodology, we used the national average total CCR for rural IPPS 
hospitals for rural Connecticut in Table 8C. While Massachusetts also 
has rural areas, the statewide average CCR for rural areas in 
Massachusetts is based on one IPPS provider whose CCR is an atypical 
1.105. Because this is much higher than the statewide urban average 
(0.46) and furthermore implies costs greater than charges, as with 
Connecticut, we used 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, as we proposed, we are continuing to use, as a proxy, the national 
average total CCR for urban IPPS hospitals and the national average 
total CCR for rural IPPS hospitals, respectively. We are using this 
proxy because we believe that the CCR data in the PSF for Maryland 
hospitals may not be entirely accurate (as discussed in greater detail 
in the FY 2007 IPPS final rule (71 FR 48120)).
    We did not receive any public comments on our proposals. We are 
finalizing our proposals as described previously, without modification.
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. 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).)

[[Page 59373]]

b. Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate Cases 
for FY 2024
    To determine the applicable fixed-loss amount for LTCH PPS standard 
Federal payment rate cases, we estimate outlier payments and total LTCH 
PPS payments using claims data from the MedPAR files. As discussed in 
section I.E. of the preamble to this final rule, in the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26670 through 26671), we proposed to use 
the FY 2022 MedPAR claims file and the FY 2021 HCRIS (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 LTCH PPS ratesetting 
without any modifications to our usual ratesetting methodologies to 
account for the impact of COVID-19 on the ratesetting data. One key 
component of our LTCH ratesetting methodologies is the determination of 
the outlier fixed-loss amount for LTCH PPS standard Federal payment 
rate cases. In the proposed rule, we stated our belief that FY 2022 
data, as the most recent available data, is the best available data for 
approximating the inpatient experience at both IPPS hospitals and LTCHs 
in FY 2024. We also stated that based on the information available at 
the time of the proposed rule, we believe there will continue to be 
COVID-19 cases treated at IPPS hospitals and LTCHs in FY 2024, such 
that it was 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 that time, 
we did not believe there was a reasonable basis for us to assume that 
there will be a meaningful difference in the number of COVID-19 cases 
treated at LTCHs in FY 2024 relative to FY 2022, such that 
modifications to our usual ratesetting methodologies would be 
warranted. We received several comments on our proposal to use FY 2022 
data for purposes of the FY 2024 LTCH PPS ratesetting, nearly all 
focused on the specific use of FY 2022 MedPAR claims data when 
determining the FY 2024 outlier fixed-loss amount for LTCH PPS standard 
Federal payment rate cases. Therefore, we summarize and respond to all 
of these comments in this section.
    As discussed in greater detail later in this section, in addition 
to the claims data, the charge inflation factor and CCR adjustment 
factors are key components of our methodology for determining the 
outlier fixed-loss amount for LTCH PPS standard Federal payment rate 
cases. In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27240 through 
27242), we presented our proposed methodology for determining the 
outlier fixed-loss amount for LTCH PPS standard Federal payment rate 
cases and proposed an outlier fixed-loss amount of $94,378. This 
proposed amount was significantly higher than the fixed-loss amount we 
finalized for FY 2023. For this reason, in the proposed rule (88 FR 
27242), we solicited comments on our proposed methodology and the 
assumptions underlying it, and stated that we would consider these 
comments when finalizing our methodology in the final rule. As noted 
previously, we summarize and respond to the comments received in 
response to that solicitation later in this section. Later in this 
section of the Addendum, we present the detailed application of our 
finalized methodology based on consideration of the comments and our 
responses that are presented later in the section.
    Comment: We received several comments expressing concern with our 
proposal to use FY 2022 data for purposes of the FY 2024 LTCH PPS 
ratesetting without any modifications to our usual ratesetting 
methodologies that would account for the impact of COVID-19 on the 
ratesetting data. Several commenters disagreed with our statement in 
the proposed rule that 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 LTCHs in FY 2024 relative to FY 
2022, such that modifications to our usual ratesetting methodologies 
would be warranted.
    Some commenters found this statement to be unsupported by the most 
recent data on COVID-19 hospitalizations. These commenters found that 
FY 2022 was the ``worst'' year for COVID-19 hospitalizations, citing 
surges in hospitalizations that occurred in January 2022 and again 
during the summer of 2022. The commenters pointed out, however, that 
since FY 2022 there has been a sustained decline in COVID-19 
hospitalizations. The commenters believe the most recent 
hospitalization data provide a reasonable basis to assume that the 
number of COVID-19 cases treated at LTCHs in FY 2024 will be lower 
relative to FY 2022. Some commenters also cited the CDC's most recent 
monthly COVID-19 hospitalization forecast, which predicts that trends 
in numbers of future hospitalizations are uncertain or predicted to 
remain stable in all states and territories over the next four weeks, 
as evidence that the number of COVID-19 cases treated at LTCHs will be 
lower in FY 2024 relative to FY 2022.
    Some commenters stated that the U.S. population's immunity to 
COVID-19 is higher than it was in FY 2022 due to increases in COVID-19 
vaccination rates and increases in natural immunity from prior 
infection. These commenters believe this increase in immunity supports 
the assumption that there will be a decrease in the number of COVID-19 
cases treated at LTCHs in FY 2024 relative to FY 2022. A few commenters 
stated that certain declarations (such as the World Health Organization 
(WHO) declaring an end to the COVID-19 global pandemic on May 5, 2023), 
certain measures (such as HHS allowing the COVID-19 PHE to expire on 
May 11, 2023), and other actions (such as the removal of the health 
care personnel vaccination requirements from the hospital conditions of 
participation), are inconsistent with CMS's stated belief that there is 
not a reasonable basis to assume that there will be a meaningful 
difference in the number of COVID-19 cases treated at LTCHs in FY 2024 
relative to FY 2022.
    Commenters cited several ways the COVID-19 PHE impacted the FY 2022 
LTCH data that we proposed to use for FY 2024 ratesetting. For example, 
some commenters discussed how they believe the FY 2022 claims data 
reflect the significant number of patients treated at LTCHs in FY 2022 
who were positive with COVID-19 or were suffering from varying diseases 
that resulted from a previous COVID-19 infection. Other commenters 
stated that the case-mix index and average length of stay for LTCHs 
rose significantly during the COVID-19 PHE, which resulted in major 
cost anomalies in the FY 2022 data. Since these commenters believe that 
there will be a decrease in the number of COVID-19 cases treated at 
LTCHs in FY 2024 relative to FY 2022, they argued CMS must make 
modifications to our usual LTCH PPS ratesetting methodologies to 
account for the effect of the COVID-19 PHE on the FY 2022 data 
ratesetting data.
    Some commenters suggested that CMS use FY 2019 LTCH claims (the 
last fiscal year prior to the PHE) to determine the outlier fixed-loss 
amount. These commenters stated that given the COVID-19 impacts on 
hospitals and other providers have diminished and the PHE waivers have 
expired, it would be reasonable to assume that LTCH utilization in FY 
2024 would more closely resemble pre-pandemic times. A commenter 
suggested blending FY 2019 and FY 2021 LTCH claims data for purposes of 
determining the outlier fixed-loss amount.
    Several commenters expressed that during FY 2022, many IPPS 
hospitals

[[Page 59374]]

were operating beyond capacity and could not always offer an ICU 
placement to critical patients for a full three days. Due to the CARES 
Act waiver of the site neutral payment rate, which was in effect for 
all of FY 2022 and expired on May 11, 2023, commenters stated that 
there was no financial disincentive to LTCHs for admitting these types 
of patients (that is, patients that did not meet the statutory patient 
criteria to be excluded from the site-neutral payment rate in section 
1886(m)(6) of the Act). Commenters stated that CMS is treating these 
types of cases in the FY 2022 MedPAR as site neutral payment rate cases 
and excluding them from the calculations of the FY 2024 outlier fixed-
loss amount. However, commenters believe that in the absence of the 
COVID-19 PHE and the CARES Act waiver, these types of cases would have 
met the statutory patient criteria to be paid the standard Federal 
payment rate. Commenters admitted that there is not an easy way to 
identify these types of cases in the FY 2022 MedPAR file. Therefore, 
for purposes of determining the FY 2024 outlier fixed-loss amount, 
commenters stated that CMS should use all FY 2022 cases regardless of 
whether the case would have met the statutory patient criteria to be 
excluded from the site-neutral payment rate. Some commenters urged CMS 
to exclude dialysis patients from the FY 2022 claims data when 
determining the outlier fixed-loss amount. Commenters discussed the 
rising cost of treating dialysis patients at LTCHs in FY 2022 and the 
difficulties LTCHs faced in discharging dialysis patients into 
outpatient dialysis or home care, which commenters stated led to longer 
lengths of stay and resulted in higher charges. In describing the 
challenges and increased costs faced by LTCHs in providing dialysis 
services, some commenters noted that they have made modifications to 
their procurement of dialysis services provided to their patients, such 
as updating their dialysis vendor contracts with third party companies, 
hiring additional clinical staff to be able to provide the service 
``in-house'' rather than under arrangements by third party companies, 
and making capital investments to purchase the necessary equipment. 
Some commenters stated that these issues are abating in their 
justification for why it would be appropriate for CMS to exclude claims 
for dialysis patients when calculating the fixed-loss threshold for FY 
2024.
    Numerous commenters made specific suggestions for modifying the 
proposed methodology for determining the FY 2024 outlier fixed-loss 
amount for LTCH PPS standard Federal payment rate cases. Many of these 
comments objected to the charge inflation factor we proposed to apply 
under our methodology when determining the FY 2024 fixed-loss amount. 
Commenters stated that the proposed 1-year charge inflation factor of 
13.56 percent was too high and is reflective of pandemic era 
inflationary trends. Some commenters stated the proposed charge 
inflation factor reflects the increase in patient complexity that 
occurred during the pandemic. Commenters believe it is unreasonable to 
assume that charges will continue to increase at this rate and 
therefore provided several modifications they believe CMS should adopt 
regarding the charge inflation factor.
    A commenter stated that CMS should modify the statistical outlier 
trim used in our usual methodology for determining the charge inflation 
factor. The commenter believes that CMS should modify this trim by 
removing claims for providers with a calculated charge growth factor 
that exceeds 1 standard deviation from the mean provider charge growth 
factor during the FY 2021 and FY 2022 period. Some commenters requested 
that CMS exclude claims for dialysis patients from the calculation of 
the charge inflation factor.
    Many commenters urged CMS to not base the charge inflation factor 
on the growth in charges that occurred from FY 2021 to FY 2022. Many 
commenters cited an AHA analysis that found that the average covered 
charge per case for LTCH PPS standard Federal payment rate cases during 
the first six months of FY 2023 only increased 2.5 percent compared to 
data from FY 2022. Many commenters supported setting the charge 
inflation factor based on this more recent data as they believe it 
would provide a more accurate indication of LTCH charges levels in FY 
2024. Other commenters recommended that CMS return to the methodology 
employed prior to FY 2022 in which the charge inflation factor was set 
equal to the market basket update. A commenter suggested that CMS 
continue to use a charge inflation factor based on data prior to the 
COVID-19 PHE.
    Response: We thank the commenters for their feedback. We 
acknowledge that COVID-19 hospitalizations have recently trended below 
FY 2022 levels, that a significant portion of the U.S. population has 
received at least one dose of the COVID-19 vaccination, and that 
certain COVID-19-related actions have subsequently been discontinued 
(such as the national COVID-19 PHE). We continue to believe there 
remains uncertainty regarding the impact that COVID-19 will have on 
LTCHs in FY 2024 relative to FY 2022.
    We also acknowledge that it is likely that some LTCH cases in the 
FY 2022 MedPAR file would have met the site neutral exclusion criteria 
but for extenuating circumstances involving the COVID-19 PHE and the 
CARES Act waiver. However, we do not believe the number of these types 
of cases is significant enough to justify including all cases in our 
calculation of the outlier fixed-loss amount. In the FY 2022 MedPAR 
file, we found approximately 32 percent of cases did not meet the 
statutory patient criteria for exclusion from the site neutral payment 
rate (that is, were treated as site neutral payment rate cases for the 
FY 2024 ratesetting in the proposed rule). This percentage of cases is 
not significantly different than the percentage of a site neutral 
payment rate cases we identified in years prior to the PHE. For 
example, in the FY 2018 and FY 2019 MedPAR files, respectively, we 
found approximately 29 percent and 25 percent of cases did not meet the 
statutory patient criteria for exclusion from the site neutral payment 
rate. Furthermore, the commenters did not describe why these types of 
cases differ significantly enough from the cases we treat as standard 
payment rate cases for the FY 2024 ratesetting such that including them 
in the calculation of the outlier fixed-loss amount would have a 
material effect on the resulting outlier fixed-loss amount. For these 
reasons, we disagree with commenters that it would be appropriate to 
include all cases in the FY 2022 MedPAR claims data in the 
determination of the FY 2024 outlier fixed-loss amount.
    We thank the commenters for the suggestion to exclude dialysis 
claims when calculating the fixed-loss threshold. However, as discussed 
in greater detail later in the section, 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 acknowledge that the factors that led to increased costs 
to treat dialysis patients in FY 2022 may be lessening for some LTCHs. 
However, we expect LTCHs will continue to treat such patients, and as 
such, those cases would continue to be eligible for high cost outlier 
payments. For example, some commenters stated that LTCHs are 
transitioning back to their prior admissions practices, and a commenter 
indicated that the ``in-hospital'' dialysis

[[Page 59375]]

issues that contributed to the increases in dialysis costs experienced 
in the last 2 years are not limited to COVID-19 surge periods. Although 
commenters provided evidence on why dialysis cases were costly in FY 
2022, we do not believe the commenters provided sufficient evidence to 
support why costs for these types of patients would differ 
significantly from FY 2022 to FY 2024, such that it would be 
appropriate to exclude them from our calculations. Therefore, we 
believe it would not be appropriate to completely exclude certain high 
cost cases from our payment model for determining the outlier fixed-
loss amount. For these reasons, we are not adopting commenters' 
suggestion to exclude dialysis claims when calculating the fixed-loss 
threshold for FY 2024.
    We appreciate feedback and suggestions commenters provided on the 
proposed charge inflation factor. In light of these comments, we 
examined the increase in LTCHs' charges between FY 2022 and FY 2023 
using the most recent available data for those years. Specifically, we 
calculated a charge inflation factor based on the average covered 
charge in the March 2023 update of the FY 2023 MedPAR claims compared 
to the average covered charge in the March 2022 update of the FY 2022 
MedPAR claims using our established charge inflation methodology. Based 
on this analysis, we found that charges for LTCH PPS standard Federal 
payment rate cases have increased approximately 6 percent during the 
first six months of FY 2023 compared to the first six months of FY 
2022. After reviewing this more recently available data on LTCH charges 
and considering the broader economic slowdown in inflation, we agree 
with commenters that it is not likely that charges will continue to 
increase at the rates observed during the FY 2021 to FY 2022 period. 
For this reason, in this final rule and under the broad authority of 
section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are 
modifying our proposed methodology for determining the charge inflation 
factor for FY 2024 by setting the charge inflation factor based on data 
prior to the COVID-19 PHE, as suggested by a commenter. Specifically, 
we are modifying our methodology to determine the FY 2024 outlier 
fixed-loss amount by applying the same charge inflation factor that we 
utilized in both the FY 2022 final rule (86 FR 45565) and the FY 2023 
final rule (87 FR 49446). This 2-year charge inflation factor of 
1.125133 is based on the 6.0723 percent growth in charges that occurred 
between FY 2018 and FY 2019, which is the last 1-year period prior to 
the COVID-19 PHE. We note that this charge inflation factor would be 
similar to a charge inflation factor based on the percentage growth in 
charges for the first six months of FY 2023 (discussed previously). We 
believe it is most appropriate to use the factor of 1.125133 because it 
is based on two full years of publicly available claims data.
    To be consistent with this modification to the charge inflation 
factor, we believe it is also appropriate to use a CCR adjustment 
factor based on data prior to the COVID-19 PHE. (As explained later in 
this section, our methodology for determining the outlier fixed-loss 
amount includes a charge inflation factor, and a CCR adjustment 
factor.) Therefore, under the broad authority of section 123(a)(1) of 
the BBRA and section 307(b)(1) of the BIPA, we are also modifying our 
methodology in this final rule to apply the same CCR adjustment factor 
that we utilized in both the FY 2022 final rule (86 FR 45565) and the 
FY 2023 final rule (87 FR 49447) to determine the FY 2024 outlier 
fixed-loss amount. This CCR adjustment factor of 0.961554 is based on 
the change in CCRs that occurred between the March 2019 PSF and the 
March 2020 PSF, which is the last 1-year period prior to the COVID-19 
PHE. We note that this CCR adjustment factor is considerably lower than 
CCR adjustment factor of 0.996923 calculated using the most recently 
available data and our usual methodology.
    Therefore, in this final rule, after consideration of public 
comments and for the reasons discussed previously, we are using the FY 
2022 MedPAR claims file and the FY 2021 HCRIS for purposes of the FY 
2024 LTCH PPS ratesetting, as proposed. However, we are making 
modifications to our usual ratesetting methodology for determining the 
FY 2024 outlier fixed-loss amount for LTCH PPS standard Federal payment 
rate cases by modifying the charge inflation factor and the CCR 
adjustment factor (as described earlier). As stated previously, later 
in this section of the Addendum, we present the detailed application of 
our finalized methodology based on consideration of the comments and 
our responses.
    Comment: Some commenters stated that CMS needs to better account 
for the impact of the dual rate payment structure on its methodology 
for determining the outlier fixed-loss amount for standard Federal rate 
cases. These commenters stated that the number of LTCH cases used in 
determining the fixed-loss amount has decreased since the 
implementation of the dual payment rate structure due to LTCH closures 
and because only standard Federal payment rate cases are used in the 
calculations. The commenter believes utilizing these relatively smaller 
datasets has led to fluctuations in the fixed-loss amount that CMS 
needs to address.
    Some commenters also stated that the ICU criterion and ventilator 
criterion exceptions to site neutral payment rate have resulted in a 
high concentration of LTCH discharges assigned to only a few MS-LTC-
DRGs. A commenter stated their belief that this concentration is one of 
the main factors causing the increase in the fixed-loss amount. The 
commenter explained that when there is a significant concentration of 
cases in an MS-LTC-DRG, there is a wider range of costs among the cases 
assigned to the MS-LTC-DRG. The commenter stated that when this occurs 
it is more likely that there will be high cost outlier cases in that 
MS-LTC-DRG. The commenter proposed a technically complex modification 
to the CMS methodology for determining the FY 2024 outlier amount that 
the commenter believes would address this. The modification involved 
regrouping cases with relatively long length of stays to a new 
temporary MS-LTC-DRG, calculating an alternative set of relative 
weights for all MS-LTC-DRGs using these regrouped cases, and then 
modelling payments for purposes of determining the high-cost outlier 
threshold using these alternative relative weights.
    A commenter stated that CMS should consider setting the FY 2024 
fixed-loss amount by looking at the previous three years high-cost 
outlier cases and developing a formula that adjusts with population 
health demographics, medical technology advancements, and cost 
variables.
    Response: We thank the commenters for this feedback. We note that 
comments did not provide specific recommendations on how CMS could 
address the decreasing number of cases available for LTCH PPS 
ratesetting or provide specific details on how CMS could develop a 
formula to adjust for the various factors noted. Without this 
information, we are unable to fully evaluate these suggested 
modifications to our methodology for this final rule; however, we may 
consider these comments for future rulemaking.
    We also acknowledge the commenters' concern regarding the potential 
impact that the high concentration of LTCH discharges in certain MS-
LTC-DRGs may have on LTCH PPS outlier payments. We may also consider 
this issue for future rulemaking. With regards to the specific

[[Page 59376]]

modification presented by the commenter, we do not believe it would be 
appropriate to use an alternative set of relative weights for purposes 
of calculating the FY 2024 outlier fixed-loss amount that differ from 
the relative weights that will be used to make payments. We are 
required by statute to establish an outlier fixed-loss amount that we 
project will 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 do not believe we can 
accurately model FY 2024 LTCH PPS payments without using the relative 
weights that we are finalizing for FY 2024.
    Comment: Many commenters stated that the proposed increase to the 
outlier fixed-loss amount would have devastating financial impacts on 
LTCHs and lead to LTCH closures. Commenters also stated that the 
proposed outlier fixed-loss amount would lead to LTCHs avoiding high-
cost cases and consequently creating an access barrier for the sickest 
of patients and leading to overcrowding at IPPS hospital ICUs. Some 
commenters stated that the proposed increase to the outlier fixed-loss 
amount violates CMS's principle for stability and predictability in 
reimbursement rates. A commenter stated that to the extent increases in 
the fixed-loss threshold are necessary, they should be limited to no 
more than the market basket percent increase in any given year. Another 
commenter stated that CMS should uses its regulatory authority to set 
the FY 2024 outlier fixed-loss amount equal to the FY 2023 outlier 
fixed-loss amount. Another commenter expressed that CMS should phase in 
the increase to the fixed-loss amount over a multi-year period.
    Response: We thank the commenters for their feedback. We 
acknowledged in the proposed rule that the proposed increase to the 
fixed-loss amount was substantial and sought comments on our proposed 
methodology and the assumptions underlying it to take into 
consideration when finalizing our methodology in the final rule. 
However, 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. Therefore, we do not agree 
with commenters that CMS should use its regulatory authority to 
establish an alternative outlier fixed-loss amount that would not be 
projected to 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. After consideration of all 
comments that discussed approaches that commenters believe would 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 in FY 2024, as described in greater detail later in this section, 
we are finalizing a fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2024 that is notably lower than in the 
proposed rule. Although this fixed-loss amount for FY 2024 is still 
considerably higher than the current fixed-loss amount, we believe this 
increase will meet the 7.975 percent target required by section 
1886(m)(7) of the Act. As we discussed in the IPPS/LTCH PPS proposed 
rule (88 FR 27242), we estimate that high cost outlier payments 
significantly exceeded the statutory 7.975 percent target in both FY 
2021 and FY 2022. Using the FY 2021 and FY 2022 MedPAR files, we 
currently estimate that actual high cost outlier payments accounted for 
11.1 and 11.9 percent of total LTCH PPS standard Federal payment rate 
payments in FY 2021 and FY 2022, respectively. We also currently 
project that in FY 2023, high cost outlier payments will be 
approximately 10.9 percent of the estimated total LTCH PPS standard 
Federal payment rate payments.
    In summary, we are finalizing our proposed methodology for 
determining the fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2024, with modifications. In this section of this 
Addendum, we present the detailed application of our finalized 
methodology, including the modifications discussed earlier.
    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 (CMS certification number (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 March 2023 update of the FY 
2022 MedPAR file, we identified 166 LTCH PPS standard Federal payment 
rate cases for this LTCH. Of these 166 cases, 118 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, as we proposed, we removed claims from CCN 312024 
when determining the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2024.
(1) Charge Inflation Factor for Use in Determining the 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.

[[Page 59377]]

    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 
this Addendum), 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27240 through 
27241) we described our methodology for computing the charge inflation 
factor in detail. Using this methodology and the most recently 
available data, we computed a proposed 2-year charge inflation factor 
of 1.289703. We proposed 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 fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2024.
    As we discussed earlier in this section, many commenters objected 
to this proposed charge inflation factor. After considering these 
comments, we are modifying our proposed methodology for determining the 
charge inflation factor by setting the charge inflation factor based on 
data prior to the COVID-19 PHE. Specifically, to determine the FY 2024 
outlier fixed-loss amount we applied the same charge inflation factor 
determined in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45565), which 
was based on the growth in charges that occurred between FY 2018 and FY 
2019 (the last 1-year period prior to the COVID-19 PHE). The rate of 
LTCH charge growth determined in the FY 2022 IPPS/LTCH PPS final rule, 
based on the growth in charges that occurred between FY 2018 and FY 
2019, was 6.0723 percent. This results in a 1-year charge inflation 
factor of 1.060723, and a 2-year charge inflation factor of 1.125133 
(calculated by squaring the 1-year factor). Therefore, for this final 
rule, we inflated the billed charges obtained from the FY 2022 MedPAR 
file by this 2-year charge inflation factor of 1.125133 when 
determining the fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2024.
    We note that, using data we would ordinarily use for purposes of 
determining the charge inflation factor for this final rule, which is 
FY 2021 MedPAR claims data from the March 2022 update and FY 2022 
MedPAR claims data from the March 2023 update, we calculated a 2-year 
charge inflation factor of 1.29349.
(2) CCRs for Use in Determining the 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 this Addendum), 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27241 through 
27242) we described our methodology for computing the CCR adjustment 
factor in detail. Using this methodology and the most recently 
available data, we computed a proposed 1-year national CCR adjustment 
factor of 0.975513. When calculating the proposed fixed-loss amount for 
FY 2024, we proposed to assign 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 proposed to multiply 
their CCR from the December 2022 PSF by the proposed 1-year national 
CCR adjustment factor of 0.975513.
    As we discussed earlier in this section, after consideration of 
comments received, we are modifying our methodology for determining the 
charge inflation factor for this final rule by setting the charge 
inflation factor based on data prior to the COVID-19 PHE. As discussed 
previously, to be consistent with this modification, we believe it is 
also appropriate to use a CCR adjustment factor based on data prior to 
the COVID-19 PHE. Therefore, we are modifying our methodology in this 
final rule to apply the same CCR adjustment factor that we utilized in 
both the FY 2022 final rule (86 FR 45565) and the FY 2023 final rule 
(87 FR 49447) to determine the FY 2024 outlier fixed-loss amount. This 
CCR adjustment factor of 0.961554 is based on the change in CCRs that 
occurred between the March 2019 PSF and the March 2020 PSF, which is 
the last 1-year period prior to the COVID-19 PHE.
    Therefore, for this final rule, when calculating the 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 March 2023 PSF or whose CCR was missing in the March 
2023 PSF. For all other providers, we multiplied their CCR from the 
March 2023 PSF by the 1-year national CCR adjustment factor of 
0.961554.
    We note that, using the data we would ordinarily use for purposes 
of determining the CCR for this final rule, which is the March 2022 PSF 
and the March 2023 PSF, we calculated a 1-year national CCR adjustment 
factor of 0.996923.
(3) Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate Cases 
for FY 2024
    In this final rule, for FY 2024, using the best available data and 
the steps described previously, we calculated a 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 payment rates and 
policies for these cases presented in this final rule). Consistent with 
our historical practice, we 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 March 2023 update 
of the FY 2022 MedPAR file adjusted for charge inflation and adjusted 
CCRs from the March 2023 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 establishing a fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2024 of $59,873 that will result in estimated 
outlier payments projected to be equal to 7.975 percent of estimated FY 
2024 payments for such cases. We are continuing, as proposed, to make 
an additional HCO payment for the cost of an LTCH PPS standard Federal 
payment rate case that exceeds the HCO threshold amount that is equal 
to 80 percent of the difference between the estimated cost of the case 
and the outlier threshold (the sum of the adjusted LTCH PPS standard 
Federal payment rate payment and the fixed-

[[Page 59378]]

loss amount for LTCH PPS standard Federal payment rate cases of 
$59,873).
4. High-Cost Outlier Payments for Site Neutral Payment Rate Cases
    When we implemented the application of the site neutral payment 
rate in FY 2016, in examining the appropriate fixed-loss amount for 
site neutral payment rate cases issue, we considered how LTCH 
discharges based on historical claims data would have been classified 
under the dual rate LTCH PPS payment structure and the CMS' Office of 
the Actuary projections regarding how LTCHs will likely respond to our 
implementation of policies resulting from the statutory payment 
changes. We again relied on these considerations and actuarial 
projections in FY 2017 and FY 2018 because the historical claims data 
available in each of these years were not all subject to the LTCH PPS 
dual rate payment system. Similarly, for 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 final rule, we 
are finalizing our proposal 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 final 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 final 
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, for FY 2024, as we 
proposed, we are establishing that the applicable HCO threshold for 
site neutral payment rate cases is the sum of the site neutral payment 
rate for the case and the IPPS fixed-loss amount. That is, we are 
establishing a fixed-loss amount for site neutral payment rate cases of 
$42,750, which is the same FY 2024 IPPS fixed-loss amount discussed in 
section II.A.4.i.(2). of this Addendum. Accordingly, under this policy, 
for FY 2024, we will calculate an 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 fixed-loss amount for site neutral payment rate 
cases of $42,750).
    In establishing an 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, as we proposed, we are 
continuing this policy.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate the fixed-loss threshold would

[[Page 59379]]

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, as we 
proposed, we are applying a budget neutrality factor of 0.949 (that is, 
the decimal equivalent of a 5.1 percent reduction, determined as 1.0-
5.1/100 = 0.949) to the site neutral payment rate for those site 
neutral payment rate cases paid under Sec.  412.522(c)(1)(i). We note 
that, consistent with our current policy, this HCO budget neutrality 
adjustment will not be applied to the HCO portion of the site neutral 
payment rate amount (81 FR 57309).
    We did not receive any public comments on our proposals and are 
finalizing our proposals as described previously, without modification.

E. Update to the IPPS Comparable Amount to Reflect the Statutory 
Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made by section 3133 of the Affordable 
Care Act in the calculation of the ``IPPS comparable amount'' under the 
SSO policy at Sec.  412.529 and the ``IPPS equivalent amount'' under 
the site neutral payment rate at Sec.  412.522. Historically, the 
determination of both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' includes an amount for inpatient operating costs 
``for the costs of serving a disproportionate share of low-income 
patients.'' Under the statutory changes to the Medicare DSH payment 
adjustment methodology that began in FY 2014, in general, eligible IPPS 
hospitals receive an empirically justified Medicare DSH payment equal 
to 25 percent of the amount they otherwise would have received under 
the statutory formula for Medicare DSH payments prior to the amendments 
made by the Affordable Care Act. The remaining amount, equal to an 
estimate of 75 percent of the amount that otherwise would have been 
paid as Medicare DSH payments, reduced to reflect changes in the 
percentage of individuals who are uninsured and any additional 
statutory adjustment, is made available to make additional payments to 
each hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. The additional uncompensated care payments are 
based on the hospital's amount of uncompensated care for a given time 
period relative to the total amount of uncompensated care for that same 
time period reported by all IPPS hospitals that receive Medicare DSH 
payments.
    To reflect the Medicare DSH payment adjustment methodology 
statutory changes in section 3133 of the Affordable Care Act in the 
calculation of the ``IPPS comparable amount'' and the ``IPPS equivalent 
amount'' under the LTCH PPS, we stated in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50766) 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, in the FY 2014 IPPS/LTC PPS final rule (78 
FR 50766), that the projected percentage will be updated annually, 
consistent with the annual determination of the amount of uncompensated 
care payments that will be made to eligible IPPS hospitals. We believe 
that this approach results in appropriate payments under the LTCH PPS 
and is consistent with our intention that the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS closely 
resemble what an IPPS payment would have been for the same episode of 
care, while recognizing that some features of the IPPS cannot be 
translated directly into the LTCH PPS (79 FR 50766 through 50767).
    As discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
27244), for FY 2024, based on the most recent data available at that 
time, we proposed to establish that the calculation of the ``IPPS 
comparable amount'' under Sec.  412.529 would include an applicable 
operating Medicare DSH payment amount that is equal to 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 proposed that, if more recent data 
became available, we would use that data to determine the applicable 
operating Medicare DSH payment amount used to calculate the ``IPPS 
comparable amount'' in the final rule.
    We did not receive any public comments in response to our proposal, 
and as such are finalizing this proposal. However, as we proposed, we 
are determining the applicable operating Medicare DSH payment amount 
used to calculate the ``IPPS comparable amount'' in this final rule 
using more recent data. For FY 2024, as discussed in greater detail in 
section IV.E.2.b. of the preamble of this final rule, based on the most 
recent data available, our estimate of 75 percent of the amount that 
would otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted to 
59.29 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 44.47 percent (the 
product of 75 percent and 59.29 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 
69.47 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 + 44.47 percent = 69.47 
percent).
    Therefore, for FY 2024, consistent with our proposal, we are 
establishing that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 will include an applicable operating Medicare DSH 
payment amount that is equal to 69.47 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.

[[Page 59380]]

F. Computing the 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 final FY 2024 values are shown in Tables 12A through 
12B listed in section VI. of this Addendum and are available via the 
internet on the CMS website). The LTCH PPS standard Federal payment 
rate is also adjusted to account for the higher costs of LTCHs located 
in Alaska and Hawaii by the applicable COLA factors (the final FY 2024 
factors are shown in the chart in section V.C. of this Addendum) in 
accordance with Sec.  412.525(b). In this final rule, we are 
establishing an LTCH PPS standard Federal payment rate for FY 2024 of 
$48,116.62, as discussed in section V.A. of this Addendum. We 
illustrate the methodology to adjust the LTCH PPS standard Federal 
payment rate for FY 2024, applying our finalized 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 FY 2024 LTCH PPS wage index value of 1.0419 (as 
shown in Table 12A listed in section VI. of this Addendum). The 
Medicare patient case is classified into MS-LTC-DRG 189 (Pulmonary 
Edema & Respiratory Failure), which has a relative weight for FY 2024 
of 0.9416 (as shown in Table 11 listed in section VI. of this 
Addendum). 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 Federal prospective payment 
for this Medicare patient case in FY 2024, we computed the wage-
adjusted Federal prospective payment amount by multiplying the 
unadjusted FY 2024 LTCH PPS standard Federal payment rate ($48,116.62) 
by the labor-related share (68.5 percent) and the wage index value 
(1.0419). This wage-adjusted amount was then added to the nonlabor-
related portion of the unadjusted LTCH PPS standard Federal payment 
rate (31.5 percent; adjusted for cost of living, if applicable) to 
determine the adjusted LTCH PPS standard Federal payment rate, which is 
then multiplied by the MS-LTC-DRG relative weight (0.9416) to calculate 
the total adjusted LTCH PPS standard Federal prospective payment for FY 
2024 ($46,606.98). The table illustrates the components of the 
calculations in this example.
[GRAPHIC] [TIFF OMITTED] TR28AU23.337

VI. Tables Referenced in This Final Rule Generally Available Through 
the internet on the CMS website

    This section lists the tables referred to throughout the preamble 
of this final rule and in the Addendum. In the past, a majority of 
these tables were published in the Federal Register as part of the 
annual proposed and final rules. However, similar to FYs 2012 through 
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 final 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 final 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 final rule, 
we made 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 the proposed rule. For this final rule, we have not 
updated these tables and therefore are not issuing Table 10 with this 
final 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

[[Page 59381]]

in this final rule should contact Michael Treitel at (410) 786-4552.
    The following IPPS tables for this final 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 Final Rule Home 
Page'' or ``Acute Inpatient-Files-for Download.''

    Table 2.--Case-Mix Index and Wage Index Table by CCN--FY 2024 Final 
Rule
    Table 3.--Wage Index Table by CBSA--FY 2024 Final Rule
    Table 4A.--List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2024 Final Rule
    Table 4B.--Counties Redesignated under Section 1886(d)(8)(B) of the 
Act (LUGAR Counties)--FY 2024 Final Rule
    Table 5.--List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean 
Length of Stay--FY 2024 Final Rule
    Table 6A.--New Diagnosis Codes--FY 2024
    Table 6B.--New Procedure Codes--FY 2024
    Table 6C.--Invalid Diagnosis Codes--FY 2024
    Table 6D.--Invalid Procedure Codes--FY 2024
    Table 6E.--Revised Diagnosis Code Titles--FY 2024
    Table 6F.--Revised Procedure Code Titles--FY 2024
    Table 6G.1.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2024
    Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2024
    Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024
    Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2024
    Table 6I.--Complete MCC List--FY 2024
    Table 6I.1.--Additions to the MCC List--FY 2024
    Table 6I.2.--Deletions to the MCC List--FY 2024
    Table 6J.--Complete CC List--FY 2024
    Table 6J.1.--Additions to the CC List--FY 2024
    Table 6J.2.--Deletions to the CC List--FY 2024
    Table 6K.--Complete List of CC Exclusions--FY 2024
    Table 8A.--Final FY 2024 Statewide Average Operating Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Final FY 2024 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 16A.--Updated Proxy Hospital Value-Based Purchasing (VBP) Program 
Adjustment Factors for FY 2024
    Table 18.--FY 2024 Final Rule Medicare DSH Uncompensated Care 
Payment Factor 3 (Final Methodology)

    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-F:
    Table 8C.--Final FY 2024 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)

    Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average Length 
of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS Discharges 
Occurring from October 1, 2023, through September 30, 2024
    Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring from October 1, 2023, through September 30, 2024
    Table 12B.--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 final rule is necessary 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 final 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 changes in this final rule, such as the 
updates to the IPPS and LTCH PPS rates, and the final policies and 
discussions relating to applications for new technology add-on 
payments, are needed to further each of these goals while 
maintaining the financial viability of the hospital industry and 
ensuring access to high quality health care for Medicare 
beneficiaries.
    We expect that these changes will 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. 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 final rule, we are 
updating the national standardized amount for inpatient hospital 
operating costs by the applicable percentage increase of 3.1 percent 
(that is, a 3.3 percent market basket update with a reduction of 0.2 
percentage point for the productivity adjustment). We are also 
applying the applicable percentage increase (including the market 
basket update and the 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 will receive an 
applicable percentage increase of 2.275 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 will 
receive an applicable percentage increase of 0.625 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 will receive an 
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. 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.9. of this final rule, beginning 
with new technology add-on payment applications for FY 2025, for 
technologies that are not already market authorized, we are 
finalizing our policy 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 finalizing our policy that, 
beginning with FY 2025 applications, 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 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. 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

[[Page 59383]]

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, 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 final 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 continuing the low wage index hospital policy 
and the related budget neutrality adjustment.

d. Modification to the Rural Wage Index Calculation Methodology

    As discussed in section III.G.1. of the preamble of this final 
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 finalizing the proposal 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 final rule, as required by section 1886(r)(2) of the 
Act, we are updating our estimates of the 3factors 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 Indian Health Service (IHS) and Tribal hospitals and hospitals 
located in Puerto Rico to help prevent undue long-term financial 
disruption to these hospitals due to the discontinuation of the use 
of the low-income insured days proxy in the uncompensated care 
payment methodology for these providers.
    In this final rule, beginning with FY 2024, we are revising our 
regulations governing the treatment of certain section 1115 
demonstration days in the calculation of the Medicaid fraction in 
the Medicare DSH disproportionate patient percentage. Specifically, 
we are to revising our regulations at Sec.  412.106(b)(4) to 
explicitly reflect our interpretation of the language ``regarded 
as'' ``eligible for medical assistance under a State plan approved 
under title XIX'' ``because they receive benefits under a 
demonstration project approved under title XI'' in section 
1886(d)(5)(F)(vi) of the Act to mean patients--(1) who receive 
health insurance through a section 1115 demonstration itself; or (2) 
who purchase health insurance with the use of premium assistance 
provided by a section 1115 demonstration, where State expenditures 
to provide the insurance or premium assistance may be matched with 
funds from title XIX and to explicitly state that we will not regard 
as Medicaid- eligible patients whose costs are paid to hospitals 
from uncompensated/undercompensated care pool funds authorized by a 
section 1115 demonstration; and we are similarly excluding the days 
of such patients from being counted in the DPP Medicaid fraction 
numerator. Thus, we are explicitly excluding from counting in the 
DPP Medicaid fraction numerator any days of patients for which 
hospitals are paid from demonstration-authorized uncompensated/
undercompensated care pools. Our revised regulation will be 
effective for discharges occurring on or after October 1, 2023. As 
has been our practice for more than two decades, we have made our 
periodic revisions to the counting of certain section 1115 patient 
days in the Medicare DSH calculation effective based on patient 
discharge dates. Doing so again here treats all providers similarly 
and does not impact providers differently depending on their cost 
reporting periods.

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 final 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 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 final rule, we proposed 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. Update to the LTCH PPS Payment Rates

    As described in section VIII.C.2. of the preamble of this final 
rule, to update payments to LTCHs using the best available data, we 
are updating the LTCH PPS standard Federal payment rate by 3.3 
percent (that is, a 3.5 percent market basket update with a 
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 
final rule, would receive an update of 1.3 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. This provision links 
the submission of quality data 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 technology for purposes of 
electronic exchange of health information to improve the quality of 
health

[[Page 59384]]

care; these provisions link 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 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 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 proposed to codify those requirements at 42 CFR 
488.70. We also proposed 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 final 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 provide transparency to facilitate compliance 
with the process for requesting an expansion exception, we are 
revising 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 
reinstating, 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 final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 
30, 1993), Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 18, 2011), Executive Order 14094 on 
Modernizing Regulatory Review (April 6, 2023), 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 (CRA) 
(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). 
Executive Order 14094 amends section 3(f) of Executive Order 12866 
to define a ``significant regulatory action'' as an action that is 
likely to result in a rule: (1) having an annual effect on the 
economy of $200 million or more in any 1 year, or adversely affect 
in a material way 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 legal or policy issues for which 
centralized review would meaningfully further the President's 
priorities or the principles set forth in this Executive order.
    A regulatory impact analysis (RIA) must be prepared for major 
rules with significant regulatory action/s and/or with significant 
effects as per section 3(f)(1) of $200 million or more in any 1 
year. Based on our estimates, OMB'S Office of Information and 
Regulatory Affairs has determined this rulemaking is significant per 
section 3(f)(1) as measured by the $200 million or more in any 1 
year. 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 regulations, and the Departments have 
provided the following assessment of their impact.
    We estimate that the changes for FY 2024 acute care hospital 
operating and capital payments would redistribute amounts in excess 
of $200 million to acute care hospitals. The applicable percentage 
increase to the IPPS rates required by the statute, in conjunction 
with other payment changes in this final rule, would result in an 
estimated $2.2 billion increase in FY 2024 payments, primarily 
driven by: (a) a combined $2.6 billion increase in FY 2024 operating 
payments, including uncompensated care payments, and FY 2024 capital 
payments and (b) a decrease of $ 0.364 million resulting from 
estimated changes in new technology add-on payments. These changes 
are relative

[[Page 59385]]

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 an increase in payments by approximately $6 million in FY 
2024 relative to FY 2023.
    Our operating payment impact estimate includes the 3.1 percent 
hospital update to the standardized amount (reflecting the 3.3 
percent market basket update reduced by the 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 final rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This final rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Office of Management and Budget has reviewed this final rule.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the changes in this final rule would further 
each of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes would 
ensure that the outcomes of the prospective payment systems are 
reasonable and equitable, while avoiding or minimizing unintended 
adverse consequences.
    Because this final rule contains a range of policies, we refer 
readers to the section of the final rule where each policy is 
discussed. These sections include the rationale for our decisions, 
including the need for the policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our policy changes, as well as statutory changes 
effective for FY 2024, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per 
case, while holding all other payment policies constant. We use the 
best data available, but, generally unless specifically indicated, 
we do not attempt to make adjustments for future changes in such 
variables as admissions, lengths of stay, case mix, changes to the 
Medicare population, or incentives. In addition, we discuss 
limitations of our analysis for specific policies in the discussion 
of those policies as needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital related- costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 24 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 3,131 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 1,429 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 changes to the 
prospective payment systems for these IPPS-excluded hospitals and 
units are not included in this final rule. The impact of the update 
and policy changes to the LTCH PPS for FY 2024 is discussed in 
section I.J. of this appendix.

F. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs

1. Basis and Methodology of Estimates

    In this final rule, we are announcing policy changes and payment 
rate updates for the IPPS for FY 2024 for operating costs of acute 
care hospitals. The FY 2024 updates to the capital payments to acute 
care hospitals are discussed in section I.I. of this appendix.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2024 operating payments would increase by 3.1 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 changes to each 
system. This section deals with the changes to the operating 
inpatient prospective payment system for acute care hospitals. Our 
payment simulation model relies on the best available claims data to 
enable us to estimate the impacts on payments per case of certain 
changes in this final rule. As discussed in section I.E. of the 
preamble to this final rule, we believe that the FY 2022 claims data 
is the best available data for purposes of the FY 2024 ratesetting 
and this impact analysis reflects the use of that data. However, 
there are other changes for which we do not have data available that 
would allow us to estimate the payment impacts using this model. For 
those changes, we have attempted to predict the payment impacts 
based upon our experience and other more limited data.
    The data used in developing the quantitative analyses of changes 
in payments per case presented in this section are taken from the FY 
2022 MedPAR file, as discussed previously in this final rule, and 
the most current Provider-Specific File (PSF) that is used for 
payment purposes. Although the analyses of the 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 final 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 
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 payments under the capital IPPS, and the impact of 
payments for costs other than inpatient operating costs, are not 
analyzed in this section. Estimated payment impacts of the capital 
IPPS for FY 2024 are discussed in section I.I. of this appendix.
    We discuss the following changes:
     The effects of the application of the applicable 
percentage increase of 3.1 percent (that is, a 3.3 percent market 
basket update with a reduction of 0.2 percentage point for the 
productivity adjustment), and the applicable percentage increase 
(including the market basket update and the productivity adjustment) 
to the hospital-specific rates.
     The effects of the changes to the relative weights and 
MS-DRG GROUPER.
     The effects of the changes in hospitals' wage index 
values reflecting updated wage data from hospitals' cost reporting 
periods beginning during FY 2020, compared to the FY 2019 wage data, 
to calculate the FY 2024 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this final rule) that will be effective 
for FY 2024.
     The effects of the rural floor with the application of 
the national budget neutrality

[[Page 59386]]

factor to the wage index and the change to the rural wage index and 
rural floor methodology.
     The effects of the imputed floor wage index adjustment. 
This provision is not budget neutral.
     The effects of the frontier State wage index adjustment 
under the statutory provision that requires hospitals located in 
States that qualify as frontier States to not have a wage index less 
than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, 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 FY 
2024 policies relative to payments based on FY 2023 policies.
    To illustrate the impact of the 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 rate-
of-increase. Therefore, 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 2.275 percent. At 
the time this impact was prepared, 65 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 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 
applicable market basket rate-of-increase determined without regard 
to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, 
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 0.625 
percent. At the time this impact analysis was prepared, 110 
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 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 
applicable percentage increase of -0.2 percent, which reflects a 
one-quarter reduction of the market basket rate-of-increase for 
failure to submit quality data and a three-quarter reduction of the 
market basket rate-of-increase for being identified as not a 
meaningful EHR user. At the time this impact was prepared, 31 
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 not submit quality data under section 
1886(b)(3)(B)(viii) of the Act.
    Each policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2024 model 
incorporating all of the changes. This simulation allows us to 
isolate the effects of each change.
    Our comparison illustrates the percent change in payments per 
case from FY 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 updating the standardized amounts for FY 2024 using 
a applicable percentage increase of 3.1 percent. This includes the 
FY 2024 IPPS operating hospital market basket increase of 3.3 
percent with a 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 
an update of 2.275 percent. This update includes a reduction of one-
quarter of the market basket rate-of-increase for failure to submit 
these data. Hospitals that do comply with the quality data 
submission requirements but are not meaningful EHR users would 
receive an update of 0.625 percent, which includes a reduction of 
three-quarters of the market basket rate-of-increase. Furthermore, 
hospitals that do not comply with the quality data submission 
requirements and are not meaningful EHR users would receive an 
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 3.1 percent, if 
the hospital submits quality data and is a meaningful EHR user.
    A second significant factor that affects the changes in 
hospitals' payments per case from FY 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 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 3,131 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 
2,416 hospitals located in urban areas and 715 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 1,320, 
respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency programs 
(teaching hospitals that receive an IME adjustment) or receive 
Medicare DSH payments, or some combination of these two adjustments. 
There are 1,900 nonteaching hospitals in our analysis, 953 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 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 133 RRCs, 256 SCHs, 116 
MDHs, 121 hospitals that are both SCHs and RRCs, and 18 hospitals 
that are both MDHs and RRCs. Of the hospitals that are reclassified 
from urban to rural, there are 491 RRCs, 45 SCHs, 30 MDHs, 43 
hospitals that are both SCHs and RRCs, and 13 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

[[Page 59387]]

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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[[Page 59390]]



a. Effects of the Hospital Update (Column 1)

    As discussed in section V.A. of the preamble of this final rule, 
this column includes the hospital update, including the 3.3 percent 
market basket rate-of-increase reduced by the 0.2 percentage point 
for the productivity adjustment. As a result, we are making a 3.1 
percent update to the national standardized amount. This column also 
includes the update to the hospital-specific rates which includes 
the 3.3 percent market basket rate-of-increase reduced by 0.2 
percentage point for the productivity adjustment. As a result, we 
are making a 3.1 percent update to the hospital-specific rates.
    Overall, hospitals would experience a 3.1 percent increase in 
payments primarily due to the combined effects of the hospital 
update to the national standardized amount and the hospital update 
to the hospital-specific rate.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights With Recalibration Budget Neutrality (Column 2)

    Column 2 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use 
of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of 
the Act, we calculated a recalibration budget neutrality factor to 
account for the changes in MS-DRGs and relative weights to ensure 
that the overall payment impact is budget neutral. 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.D. of the preamble of this final 
rule, for FY 2024, we calculated the MS-DRG relative weights using 
the FY 2022 MedPAR data grouped to the Version 41 (FY 2024) MS-DRGs. 
The reclassification changes to the GROUPER are described in more 
detail in section II.C. of the preamble of this final rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the MS-DRGs and relative weights would result in a 0.0 
percent change in payments with the application of the recalibration 
budget neutrality factor of 1.001463 and the recalibration cap 
budget neutrality factor of 0.999928to the standardized amount.

c. Effects of the Wage Index Changes (Column 3)

    Column 3 shows the impact of the updated wage data, with the 
application of the wage budget neutrality factor. The wage index is 
calculated and assigned to hospitals on the basis of the labor 
market area in which the hospital is located. Under section 
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on the Core Based Statistical 
Areas (CBSAs) established by OMB. The current statistical standards 
(based on OMB standards) used in FY 2024 are discussed in section 
III.A.2. of the preamble of this final 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 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 payment 
parameters constant in this simulation. That is, Column 3 shows the 
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 FY 2024 pre-
reclassification wage index with the 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 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 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 2024, we are calculating the wage budget 
neutrality factor to ensure that payments under updated wage data 
and the 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 FY 2024 wage budget neutrality 
factor is 1.000702 and the overall payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data. Overall, 
the new wage data and the labor-related share, combined with the 
wage budget neutrality adjustment, would lead to no change for all 
hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 5.2 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 5.2 percent increase in the 
national average hourly wage.
    The following chart compares the shifts in wage index values for 
hospitals due to 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 final 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 or less 
than or equal to 1.0. Therefore, the pre-reclassified wage index 
figures in the following chart may illustrate a somewhat larger or 
smaller change than would occur in a hospital's payment wage index 
and total payment.
    The following chart shows the projected impact of changes in the 
area wage index values for urban and rural hospitals based on the 
wage data used for this final rule.
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[[Page 59391]]



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, such as hospitals with a Sec.  412.103 
reclassification). The changes in Column 4 reflect the per case 
payment impact of moving from this baseline to a simulation 
incorporating the MGCRB decisions for FY 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 final rule, this column 
also reflects the 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) in accordance with the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act. Consistent with this change, 
beginning with FY 2024 we are including the data of all Sec.  
412.103 hospitals (including those that have an MGCRB 
reclassification where appropriate) 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 applying an adjustment 
of 0.971295 to ensure that the effects of the reclassifications 
under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are 
budget neutral (section II.A. of the Addendum to this final rule).
    Geographic reclassification generally benefits hospitals in 
rural areas. We estimate that the geographic reclassification would 
increase payments to rural hospitals by an average of 1.8 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 final rule 
and available via the internet on the CMS website reflects the 
reclassifications for FY 2024.

e. Effects of the 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 final rule, section 4410 of Pub. L. 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 rural floor.
    As discussed in section III.G.1 of this final rule, this column 
also reflects the 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) in accordance with the hold harmless provision at 
section 1886(d)(8)(C)(ii) of the Act. Consistent with this change, 
beginning with FY 2024, we are including the data of all Sec.  
412.103 hospitals (including those that have an MGCRB 
reclassification where appropriate) 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 FY 2024 rural floor budget neutrality factor to be 
applied to the wage index of 0.978183, which would reduce wage 
indexes by 2.2 percent compared to the rural floor provision not 
being in effect.
    Column 5 shows the projected impact of the rural floor with the 
national rural floor budget neutrality factor applied to the wage 
index based on the OMB labor market area delineations and the 
projected impact of the change to the rural floor and rural wage 
index methodology. The column compares the post-reclassification FY 
2024 wage index of providers before the rural floor adjustment and 
the post-reclassification FY 2024 wage index of providers with the 
rural floor adjustment based on the OMB labor market area 
delineations and with the change to the rural floor and the rural 
wage index methodology applied.
    We estimate that 646 hospitals would receive the rural floor in 
FY 2024. All IPPS hospitals in our model would have their wage 
indexes reduced by the rural floor budget neutrality adjustment of 
0.978183. We project that, in aggregate, rural hospitals would 
experience a 0.6 percent decrease in payments as a result of the 
application of the rural floor budget neutrality adjustment 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 non-rural 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 2.7 percent 
increase in payments primarily due to the application of the rural 
floor in California.

f. Effects of the Application of the Imputed Floor, Frontier State Wage 
Index and 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 
$230 million. There are an estimated 65 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 42 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 $60 
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 
173 providers that would receive the out-migration wage adjustment 
in FY 2024. This out-migration wage adjustment

[[Page 59392]]

is not budget neutral, and we estimate the impact of these providers 
receiving the out-migration increase would be approximately $52 
million.

g. Effects of All FY 2024 Changes (Column 7)

    Column 7 shows our estimate of the changes in payments per 
discharge from FY 2023 and FY 2024, resulting from all changes 
reflected in this final rule for FY 2024. It includes combined 
effects of the year-to-year change of the previous columns in the 
table.
    The average increase in payments under the IPPS for all 
hospitals is approximately 3.1 percent for FY 2024 relative to FY 
2023 and for this row is primarily driven by the changes reflected 
in Column 1. Column 7 includes the annual hospital update of 3.1 
percent to the national standardized amount. This annual hospital 
update includes the 3.3 percent market basket rate-of-increase 
reduced by the 0.2 percentage point productivity adjustment. 
Hospitals paid under the hospital-specific rate would receive a 3.1 
percent hospital update. As described in Column 1, the annual 
hospital update for hospitals paid under the national standardized 
amount, combined with the 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 3.1 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 final 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 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 0.3 
percent. Therefore, our estimate of the changes in payments per 
discharge from FY 2023 and FY 2024 in Column 7 reflects the 
estimated -0.3 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 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 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 3.1 percent for FY 2024. Hospitals in urban areas would 
experience a 3.1 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 3.5 percent in FY 2024.

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.

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4. Impact Analysis of Table III: Provider Deciles by Beneficiary 
Characteristics

    Advancing health equity is the first pillar of CMS's 2022 
Strategic Framework.\1\ 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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    \1\ 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 final rule 
contains a range of policies and there is a section of the final 
rule where each policy is discussed. Each section includes the 
rationale for our decisions, including the need for the final 
policy. The information contained in Table III is provided solely to 
demonstrate the quantitative effects of our policies across a number 
of health equity dimensions and does not form the basis or rationale 
for the 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 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.

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.\2\ 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.
---------------------------------------------------------------------------

    \2\ 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.\3\ 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.\4\ 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 final rule, where we discuss our 
final policy 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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    \3\ Available at: https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \4\ 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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[[Page 59396]]

d. Behavioral Health

    Beneficiaries with behavioral health diagnoses often face co-
occurring physical illnesses, but often experience difficulty 
accessing care.\5\ The combination of physical and behavioral health 
conditions can exacerbate both conditions and result in poorer 
outcomes than one condition alone.\6\ Additionally, the intersection 
of behavioral health and health inequities is a core aspect of CMS' 
Behavioral Health Strategy.\7\ 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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    \5\ 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.
    \6\ 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.
    \7\ 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.\8\ Disabled beneficiaries often have 
complex healthcare needs and difficulty accessing care. 
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).
---------------------------------------------------------------------------

    \8\ https://www.ssa.gov/disability/professionals/bluebook/general-info.htm.
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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.\9\ 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.
---------------------------------------------------------------------------

    \9\ 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.10 11 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.
---------------------------------------------------------------------------

    \10\ 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.
    \11\ 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.\12\ 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.13 14 15 16 17 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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    \12\ https://www.neighborhoodatlas.medicine.wisc.edu/.
    \13\ 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.
    \14\ 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.
    \15\ 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 athttps://www.acpjournals.org/doi/epdf/10.7326/M16-2671.
    \16\ 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.
    \17\ 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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    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. These decile groups provide an overview of the ways 
in which the average estimated payments per discharge vary between 
the providers with the lowest and highest percentages of discharges 
for each characteristic, as well as those above and below the 
median.
    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.
    The average payment per discharge, as well as the percentage 
difference between the average payment per discharge in FY 2023 and 
FY 2024, can be compared across decile groups. For example, 
providers with the lowest decile of discharges for Dual(All) or LIS 
Enrolled beneficiaries have an average FY 2023 payment per discharge 
of $13,500.03, while providers with the highest decile of discharges 
for Dual(All) or LIS Enrolled beneficiaries have an average FY 2023 
payment per discharge of $19,779.23.

[[Page 59397]]

This pattern is also seen in the average FY 2024 payment per 
discharge.
    Comment: A few commenters supported the addition of the 15 new 
health equity hospital categorizations as presented in the proposed 
rule.
    Response: We appreciate commenters' support. We are providing an 
updated Table III using the more recent data available for this 
final rule.
BILLING CODE 4120-01-P

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[[Page 59402]]



G. Effects of Other Policy Changes

    In addition to those policy changes discussed previously that we 
can model using our IPPS payment simulation model, we are making 
various other changes in this final rule. As noted in section I.D. 
of this appendix, our payment simulation model uses the most recent 
available claims data to estimate the impacts on payments per case 
of certain changes in this final rule. Generally, we have limited or 
no specific data available with which to estimate the impacts of 
these changes using that payment simulation model. For these 
changes, we have attempted to predict the payment impacts based upon 
our experience and other more limited data. Our estimates of the 
likely impacts associated with these other changes are discussed in 
this section.

1. Effects of Policy Changes Relating to New Medical Service and 
Technology Add-On Payments

    In addition to those proposed policy changes discussed 
previously that we are able to model using our IPPS payment 
simulation model, we are making various other changes in this final 
rule. As noted in section I.D. of this appendix, 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 final rule. Generally, we have limited or no 
specific data available with which to estimate the impacts of these 
changes using that payment simulation model. For those changes, we 
have attempted to predict the payment impacts based upon our 
experience and other more limited data. Our estimates of the likely 
impacts associated with these other changes are discussed in this 
section.

1. Effects of Policy Changes Relating to New Medical Service and 
Technology Add-On Payments

a. FY 2024 Status of Technologies Approved for FY 2023 New Technology 
Add-On Payments

    As discussed in section II.E.5. of the preamble of this final 
rule, we are continuing new technology add-on payments in FY 2024 
for 11 technologies that are still within their newness period. 
Under Sec.  412.88(a)(2), the new technology add-on payment for each 
case involving use of an approved technology 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, the estimated total 
payments in this final rule are based on the applicant's estimated 
cost and volume projections at the time they submitted their 
application (or based on updated figures provided during the public 
comment period) and the assumption that every claim that would 
qualify for a new technology add-on payment would receive the 
maximum add-on payment.
    In the following table, we present estimated payment for the 11 
technologies for which we are continuing to make new technology add-
on payments in FY 2024:
[GRAPHIC] [TIFF OMITTED] TR28AU23.354

b. FY 2024 Applications for New Technology Add-On Payments

    In sections II.E.6. and 7. of the preamble to this final rule, 
we discussed 25 technologies for which we received applications for 
add-on payments for new medical services and technologies for FY 
2024. We noted that of the 54 applications (27 alternative and 27 
traditional) we received, 26 applicants withdrew their application 
(14 alternative and 12 traditional) prior to the issuance of this 
final rule, and 3 technologies (1 alternative and 2 traditional) did 
not meet the July 1 deadline for FDA approval or clearance of the 
technology and are therefore ineligible for consideration for new 
technology add-on payments for FY 2024. Of the 25 technologies 
discussed in the preamble of this final rule, we are not approving 
3, and 4 other applications are considered as 2 technologies due to 
substantial similarity. This results in a total of 20 new approvals 
or conditional approvals (8 traditional and 12 alternative) for new 
technology add-on payments for FY 2024. As explained in the preamble 
to this final rule, add-on payments for new medical services and 
technologies under section 1886(d)(5)(K) of the Act are not required 
to be budget neutral.
    As discussed in section II.E.7. of the preamble of this final 
rule, under the alternative pathway for new technology add-on 
payments, new technologies that are medical products with a QIDP 
designation, 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 final rule, and must also still meet the cost 
criterion.
    As fully discussed in section II.E.7. of the preamble of this 
final rule, we are approving or conditionally approving 12 
alternative pathway applications submitted for FY 2024 new 
technology add-on payments, including 9 technologies that received a 
Breakthrough Device designation from FDA and 3 that were designated 
as a QIDP by FDA. We did not receive any LPAD applications for add-
on payments for new technologies for FY 2024.
    Based on information from the applicants at the time of this 
final rule, we estimate that total payments for the 12 technologies 
approved under the alternative pathway will be approximately $305 
million for FY 2024. Total estimated FY 2024 payments for new 
technologies that are designated as a QIDP are approximately $218 
million, and the total estimated FY 2024 payments for new 
technologies that are part of the Breakthrough Device program are 
approximately $87 million.

[[Page 59403]]

    In the following table, we present detailed estimates for the 12 
technologies for which we are approving or conditionally approving 
new technology add-on payments under the alternative pathway in FY 
2024:
[GRAPHIC] [TIFF OMITTED] TR28AU23.355

    As fully discussed in section II.E.6. of the preamble of this 
final rule, we are approving 8 new technology add-on payments for 10 
technologies that applied under the traditional pathway for new 
technology add-on payments for FY 2024. Based on information from 
the applicants at the time of rulemaking, we estimate that total 
payments for the technologies for which we are making new technology 
add-on payments is approximately $59 million for FY 2024.
    In the following table, we present detailed estimates for the 10 
technologies for which we are providing 8 new technology add-on 
payments under the traditional pathway in FY 2024:
[GRAPHIC] [TIFF OMITTED] TR28AU23.356

c. Total Estimated Costs for NTAP in FY 2024

    In the following table, we present summary estimates for all 
technologies approved for new technology add-on payments for FY 
2024:

[[Page 59404]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.357

2. Effects of the Changes to Medicare DSH and Uncompensated Care 
Payments and Supplemental Payments for Indian Health Service Hospitals 
and Tribal Hospitals and Hospitals Located in Puerto Rico for FY 2024

a. Effects of the Changes to Medicare DSH Payments of Counting Certain 
Days Associated With Section 1115 Demonstrations in the Medicaid 
Fraction

    In February 2023 we issued a proposed rule (88 FR 12623) to 
revise our regulations on the counting of days associated with 
individuals eligible for certain benefits provided by section 1115 
demonstrations in the Medicaid fraction of a hospital's 
disproportionate patient percentage (DPP). In section IV.F. of the 
preamble to this final rule, we discuss our finalized policies 
related to counting certain days associated with section 1115 
demonstrations in the Medicaid fraction. Specifically, we are 
revising our regulations to explicitly reflect our interpretation of 
the statutory language ``patients . . . regarded as'' ``eligible for 
medical assistance under a State plan approved under title XIX'' 
``because they receive benefits under a demonstration project 
approved under title XI'' in section 1886(d)(5)(F)(vi) of the Act to 
mean patients who receive health insurance authorized by a section 
1115 demonstration or patients who pay for health insurance with 
premium assistance authorized by a section 1115 demonstration, where 
State expenditures to provide the health insurance or premium 
assistance may be matched with funds from title XIX. Alternatively, 
we are using the statutory discretion provided the Secretary to 
regard as eligible for Medicaid only these same groups of patients. 
Moreover, of individuals who are ``regarded as'' Medicaid eligible, 
the Secretary is exercising his discretion to include in the DPP 
Medicaid fraction numerator only the days of those patients who 
receive from a section 1115 demonstration (1) health insurance that 
covers inpatient hospital services or (2) premium assistance that 
covers 100 percent of the premium cost to the patient, which the 
patient uses to buy health insurance that covers inpatient hospital 
services, provided in either case that the patient is not also 
entitled to Medicare Part A.
    Eight states currently have section 1115 demonstrations that 
explicitly include premium assistance programs that we believe 
include providing assistance that covers 100 percent of the premium 
cost to patients: Arkansas, Connecticut, Massachusetts, Oklahoma, 
Rhode Island, Tennessee, Utah, and Vermont. In the preamble of this 
final rule, we summarized a comment that Connecticut recently 
received demonstration approval for a premium assistance program 
that pays through the health insurance exchange to cover low-income 
individuals ineligible for Medicaid. For this final rule, we are 
including Connecticut in the list of states that have section 1115 
waivers, bringing the total to eight from the seven we noted in the 
February 2023 proposal (88 FR 12634). We also summarized in the 
preamble of this final rule a comment that Massachusetts' 
demonstration, in addition to providing 100 percent premium 
assistance to some patients, also provides premium assistance to 
some Medicaid-ineligible patients at less than 100 percent of the 
premium cost to the patients. We note in the finalized policy in 
this final rule that patient days of patients receiving this type of 
premium assistance are not includable in the DPP Medicaid fraction 
numerator.
    Hospitals in States that have section 1115 demonstrations that 
explicitly include premium assistance programs that provide 100 
percent of the premium cost to the patient will be allowed to 
continue to include days of those patients receiving 100 percent 
premium assistance in the DPP Medicaid fraction numerator, provided 
the patient is not also entitled to Medicare Part A. Therefore, 
there will be no change to these hospitals reporting these days as 
Medicaid days and no impact on their Medicaid fraction as a result 
of our revisions to the regulations regarding the counting of 
patient days associated with these section 1115 demonstrations. 
However, to the extent any state's demonstration includes a premium 
assistance program that provides assistance that covers less than 
100 percent of the premium cost to the patient (such as 
Massachusetts's program), days of the patients receiving less than 
100 percent premium assistance cannot be included in the DPP 
Medicaid fraction numerator. This is a change to how some hospitals 
may report Medicaid days for purposes of the DSH calculation and may 
have some impact on their Medicaid fraction and DSH payment 
adjustment.
    To estimate the impact of the policy to exclude days of the 
patients receiving less than 100 percent premium assistance, we 
would need to know the number of these section 1115 demonstration 
days per hospital for the hospitals potentially impacted. As we 
explained in the February 2023 proposed rule, the Medicare cost 
report does not include lines for section 1115 demonstration days to 
be reported separately from other types of days that providers 
report for Medicare payment purposes. Days associated with 
individuals eligible for certain benefits provided by section 1115 
demonstrations are counted in the Medicaid fraction of a hospital's 
DPP, along with days associated with Medicaid State plans. Because 
the cost report does not collect the number of section 1115 
demonstration days separately from Medicaid State plan days, and we 
do not have a mechanism to disaggregate section 1115 demonstration 
days from the Medicaid days reported by hospitals on the cost 
report, we do not currently possess data to estimate an impact of 
this aspect of our policy.
    For States that have section 1115 demonstrations that include 
uncompensated/undercompensated care pools, the patients whose care 
is subsidized by these section 1115 demonstration funding pools will 
not be ``regarded as'' ``eligible for medical assistance under a 
State plan approved under title XIX'' in section 1886(d)(5)(F)(vi) 
of the Act because the demonstration does not provide them with 
health insurance benefits. Even if they could be regarded as 
Medicaid eligible, the Secretary is using his authority to not so 
regard such patients and to exclude the days of those patients from 
being counted in the DPP Medicaid fraction numerator. Therefore, 
hospitals in the following six States can no longer report days of 
patients for which they receive payments from uncompensated/
undercompensated care pools authorized by the States' section 1115 
demonstration as Medicaid days in the DPP Medicaid fraction 
numerator: Florida, Kansas, Massachusetts, New Mexico, Tennessee, 
and Texas.
    As discussed in the February 2023 proposed rule (88 FR 12623) 
and in section IV.F. of this final rule, to estimate the impact of 
the policy to exclude uncompensated/undercompensated care pool days, 
we would need to know the number of these section 1115 demonstration 
days per hospital for the hospitals potentially impacted. As 
described previously, we do not currently possess such data because 
the Medicare cost report does not include lines for section 1115 
demonstration days to be reported separately from other types of 
days that providers report for Medicare payment purposes. Therefore, 
the number of demonstration-authorized uncompensated/
undercompensated care pool days per hospital and the net overall 
savings of our proposal were (and continue to be) especially 
challenging to estimate.
    However, in light of public comments received in prior 
rulemakings recommending that we use plaintiff data to help inform 
this issue, in the February 2023 proposed rule, we examined the 
unaudited figures claimed by plaintiffs in the most recent of the 
series of court cases on this issue, Bethesda Health, Inc. v. Azar, 
980 F.3d 121 (D.C. Cir. 2020), as reflected in the System for 
Tracking Audit and Reimbursement (STAR or the STAR system) as of the 
time of the development of the February 2023 proposed rule. (We 
note, there were no changes in these figures in the STAR system at 
the time of this final

[[Page 59405]]

rulemaking.) Of the Bethesda Health plaintiff data in the STAR 
system that listed reported section 1115 demonstration-approved 
uncompensated/undercompensated care pool days for purposes of 
implementing the judgment in that case, we used the reported 
unaudited amounts in controversy claimed by the plaintiffs for the 
more recent of their cost reports ending in FY 2016 or FY 2017 
($6,167,193). We then used the total number of beds (2,490) reported 
in the March 2022 Provider Specific File to determine the average 
unaudited amount in controversy per bed for these plaintiffs. Based 
on the data as shown in Table I.G.-1, the average unaudited amount 
in controversy per bed for these plaintiffs is $2,477 (= $6,167,193/
2,490). We note that there are Bethesda Health plaintiffs that do 
not have section 1115 demonstration program days listed in STAR, and 
one plaintiff that has section 1115 demonstration program days 
listed in STAR, but the most recent cost report with this data ends 
in FY 2012; therefore, these plaintiffs are not included in the 
calculation reflected in Table I.G.-1.
[GRAPHIC] [TIFF OMITTED] TR28AU23.358

    In Table I.G.-2, we used the number of beds in DSH eligible 
hospitals in the six States currently with section 1115 
demonstration programs that include uncompensated/undercompensated 
care pools and the average unaudited per bed amount derived in Table 
I.G.-1 to extrapolate an unaudited amount in controversy for all DSH 
eligible hospitals in those States. The result is $348,749,215 (= 
140,795 x $2,477).

[[Page 59406]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.359

BILLING CODE 4120-01-C
    Note, we caution against considering the extrapolated unaudited 
amount in controversy to be the estimated Trust Fund savings that 
would result from our proposal. As we explained in the February 2023 
proposed rule, for the reasons described earlier, the savings from 
our proposal are highly uncertain. The savings may be higher or 
lower than the extrapolated amount. However, in the proposed rule we 
provided the transfer calculations earlier in response to the public 
comments received on prior rulemaking on this issue, requesting that 
we use plaintiff data in some manner to help inform this issue.
    Comment: A commenter noted that CMS stated in the regulatory 
impact analysis in the February 2023 proposed rule that ``The 
financial viability of the hospital industry and access to high 
quality health care for Medicare beneficiaries will be maintained.'' 
The commenter asserted that the proposed rule provides no 
quantitative assurances or analyses to back up this assertion. If 
CMS were to finalize this proposal, the commenter stated that CMS 
must include a more detailed impact analysis that will help 
guarantee that the payment cuts do not contribute to even more 
hospital closures or reductions in critical, life-saving services.
    Response: We do not believe our proposed and finalized policy 
would cause harm to hospitals, especially to the point that would 
cause hospital closures. We also disagree that we provided no 
quantitative analysis; we provided the analysis described earlier in 
Tables 1 and 2. While we do not provide a quantitative analysis 
beyond this due to the agency's lack of data on the number of days 
for which hospitals receive payment from demonstration-approved 
uncompensated/undercompensated care pools and for which patients 
receive less than 100 percent of their premium cost in premium 
assistance from a demonstration, the extrapolated unaudited amount 
in controversy of $348,749,215 is approximately 0.3 percent (less 
than half of one percent) of total IPPS payments. Therefore, we 
continue to believe that the financial viability of the hospital 
industry and access to high quality health care for Medicare 
beneficiaries will be maintained in light of our proposed and final 
policy.
    Comment: A commenter concluded that the proposal, in violation 
of the Administrative Procedure Act (APA) and the Regulatory 
Flexibility Act (RFA), inadequately considers the financial impact 
of the policy changes on safety-net hospitals nationwide. A 
commenter stated that CMS' proposal is ``fatally flawed'' because it 
fails to consider the impact of its policy on low-income patients 
and the hospitals that care for them. The commenter explained that 
CMS identifies in the proposed rule the states that have currently 
approved 1115 demonstration projects that include uncompensated care 
pools or premium assistance programs, but they fall short in 
determining what the patient and hospital impacts would be for those 
hospitals in the affected states. The commenter further stated that 
for states with premium assistance programs, CMS makes a modest 
attempt to estimate hospital burden but does not estimate the 
potential loss of DSH payments, and for states with uncompensated 
care pools, CMS states that it cannot estimate the impact because 
the Medicare cost report does not have information on 1115 
demonstration days by hospital. The commenter stated that, in 
reality, the impacts would be devastating to low-income individuals 
and the providers who care for them in many states. Another 
commenter was concerned that CMS remains unable to sufficiently 
account for the potential financial implications and burdens on 
hospitals by excluding these section 1115 demonstration days. The 
commenter believes that the estimates in the proposed rule vastly 
understate the likely financial impacts on hospitals, which the 
commenter believes would exceed $1 billion.
    Response: We respectfully disagree that our proposal (88 FR 
12623), which we finalize here, inadequately considers the financial 
impact of the policy changes on hospitals or patients. As stated in 
the proposed rule, to estimate the impact of the proposal to exclude 
uncompensated/undercompensated care pool days, we would need to know 
the number of these section 1115 demonstration days per hospital for 
the hospitals potentially impacted. Similarly, to estimate the 
impact of demonstrations that provide less than 100 percent of the 
patient's premium cost in premium assistance, we would need to know 
the number of these section 1115 demonstration days per hospital for 
the hospitals potentially impacted. We do not currently possess such 
data because the Medicare cost report does not include lines for 
section 1115 demonstration days to be reported separately from other 
types of days that providers report for Medicare payment purposes, 
and we do not have a mechanism to disaggregate section 1115 
demonstration days from the aggregate Medicaid days reported by 
hospitals on the cost report. Therefore, the number of 
demonstration-authorized uncompensated/undercompensated care pool 
days and premium assistance days that provide less than 100 percent 
of the patient's premium cost per hospital and the net overall 
savings of this proposal are especially challenging to estimate. 
However, to mitigate concerns, we provided an estimate in the 
proposed rule in light of public comments received in prior 
rulemakings recommending that we utilize plaintiff data in some 
manner to help inform this issue. Specifically, we examined the 
unaudited figures claimed by plaintiffs in the most recent of the 
series of court cases on this issue, Bethesda Health, Inc. v. Azar, 
980 F.3d 121 (D.C. Cir. 2020), as currently reflected in the STAR 
system. While

[[Page 59407]]

commenters may not agree with CMS regarding the source of data used 
in the estimate or the total of the estimate, we believe the 
estimate we provided responds to commenters concerns on the impact 
of the proposal by using unaudited figures claimed by plaintiffs in 
the most recent of the series of court cases on this issue, which we 
believe is the best information currently available upon which to 
estimate the net overall savings of the proposal.
    With regard to hospital burden concerns, we note we respond to 
similar comments in section IV.F. of the preamble of this final 
rule. In that section, in particular, we explain that we are unsure 
why some commenters have significant concerns with verifying an 
individual's 1115 eligibility and premium assistance when hospitals 
are already communicating with their state Medicaid office to verify 
an individual's eligibility. In addition, as we noted in the 
February 2023 proposed rule (88 FR 12634), there would be no change 
to how these hospitals report Medicaid days and no impact on their 
Medicaid fraction as a result of our proposed revisions to the 
regulations regarding the counting of patient days associated with 
patients receiving 100 percent of the cost of their premium from 
premium assistance provided under a section 1115 demonstration. To 
the extent a demonstration provides patients with premium assistance 
that covers less than 100 percent of a patient's premium costs, as 
stated above, we do not possess data upon which to estimate the 
economic impact of excluding days of those patients from the DPP 
Medicaid fraction numerator. We also note, we have updated our 
burden estimate as discussed in section XII.B.2. of the preamble to 
this final rule, and refer readers to that section for complete 
details on the development of this estimate.
    While we appreciate commenters' concerns for low-income 
patients, we also do not understand or agree with comments that 
suggest our proposal will adversely affect low-income patients. 
Nothing in the proposal that we are finalizing diminishes or 
eliminates any benefit low-income patients receive from section 1115 
demonstrations, including any ``benefit'' a patient might receive by 
having some part of their hospital bill paid for by an uncompensated 
care pool authorized by a demonstration or by receiving some portion 
of the cost of their premium paid for with premium assistance 
authorized by a demonstration; such patient will remain in the same 
position whether or not a hospital is permitted to include their 
patient day in the hospital's DPP Medicaid fraction numerator. The 
policies we are finalizing here merely seek to clarify which days 
patients provided certain benefits under a Medicaid section 1115 
demonstration may also be counted in calculating the Medicare DSH 
payment adjustment. And because the purpose of the DSH payment 
adjustment is not to provide as much money as possible to hospitals, 
but to reflect payment for a hospital's provision of a 
disproportionate share of care to low-income patients, we believe we 
have properly considered the effects of the proposal on such 
patients. Therefore, we do not agree that we have ignored an 
important factor in issuing our proposal, considering the comments 
we received, or that by finalizing the rule as proposed we would be 
in violation of the APA. We further note that the commenter did not 
provide any data or analyze how our proposal would adversely impact 
low-income individuals and providers.
    Similarly, the February 2023 proposed rule we are finalizing has 
not ignored or violated the requirements of the RFA. We said in the 
February 2023 proposed rule, HHS's practice in interpreting the RFA 
is to consider the effects of a proposed policy economically 
significant'' if a proposal affects greater than five percent of 
providers in the amount of three to five percent or more of total 
revenue or total costs. We based our belief that the requirements in 
the proposed rule would not reach this threshold using data from the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49051). We estimated that 
DSH payments were approximately 2.8 percent of all payments under 
the IPPS for FY 2023. Therefore, the Secretary certified that the 
impact of the February 2023 proposed rule, which we are finalizing 
here and could result in a reduction in total DSH payments to some 
hospitals, will not have a significant economic impact on a 
substantial number of small entities, which the Secretary considers 
the great majority of hospitals to be. (88 FR 12636)
    Comment: Another commenter asserted that CMS's estimate of the 
financial impact is arbitrary and capricious because the agency 
fails to consider other available sources of data in arriving at its 
estimate. The commenter explained that CMS does not take into 
account that many hospitals across the country have protested this 
issue on their cost reports or appealed the issue to the Provider 
Reimbursement Review Board and have submitted calculations of the 
protested amounts to the agency. The commenter believes that CMS 
could have collected the data that it needs to determine the true 
impact on those hospitals. The commenter asserted that the agency's 
failure to do so renders its proposed rule arbitrary and capricious 
under the APA, and cited several court cases. Other commenters 
further asserted that CMS's estimate is also arbitrary and 
unreasonable because the agency entirely failed to account for the 
adverse effect of its proposal on safety-net hospitals in 
particular, which is problematic given the purpose of the 2000 DSH 
regulation and the DSH adjustment.
    Response: We disagree that the agency has acted arbitrarily or 
capriciously in estimating the financial impact of the proposed rule 
by failing to consider other available sources of data in arriving 
at its estimate. As explained previously, the Medicare cost report 
does not provide a way for hospitals to indicate the number of days 
they want treated as Medicaid days in the DPP calculation because 
they received demonstration-authorized uncompensated/
undercompensated care pool payments for treatment they provided to 
the uninsured or for days of patients who purchase health insurance 
using premium assistance provided through a demonstration. Thus, we 
concluded that an estimate of the savings created by the proposal 
was highly uncertain because hospitals do not provide the necessary 
data on their Medicare cost report. When urged by commenters on 
previous rulemakings in which we also acknowledged the difficulty 
and uncertainty in estimating the savings from the proposal, they 
suggested we use data provided by plaintiff hospitals in 
effectuating a recent litigation judgment on this issue. We did so 
and provided what we think is the best estimate of the savings, 
given the lack of available audited information. We do not believe 
that using more unaudited data from hospitals with pending 
administrative appeals or who have protested amounts on their cost 
reports will produce a more accurate estimate of the total savings 
than what we have included in the February 2023 proposed rule.
    We also do not understand comments that the estimate we have 
provided is arbitrary and unreasonable because it fails to address 
safety-net hospitals, and that this is problematic given the purpose 
of the 2000 DSH regulation and the DSH adjustment. It is not clear 
exactly what types of hospitals the commenters are considering to be 
safety-net hospitals. In this context we believe the commenters are 
referring to DSH hospitals, and the February 2023 proposed rule 
included our best estimate of the reduction in DSH payments under 
our proposal. Given that we do not have individual hospital data on 
the number of section 1115 demonstration days, and in light of 
public comments received in prior rulemakings recommending that we 
use plaintiffs' data to help inform this issue, we extrapolated 
unaudited amounts in controversy, estimating approximately $350 
million. We further note that individual hospitals report their 
patient days for inclusion in the Medicaid fraction, which includes 
1115 demonstration days, on the cost report, and we believe they are 
in the best position to understand how their individual payments 
would change under our proposal. Regarding the 2000 DSH regulation, 
we note that regulation has not been effective since the beginning 
of FY 2004, when we modified the regulation through rulemaking to 
limit the types of patient days that could be included in the 
Medicare DSH DPP Medicaid fraction numerator.
    Comment: A commenter asserted that CMS' failure to consider 
adequately the significant financial impact of the policy change 
also violates the RFA, which requires an agency to evaluate the 
negative impact of its rules on small businesses, including 
hospitals. The commenter explained that the agency's RFA assessment 
that the financial impact is not ``significant'' contradicts its 
statements elsewhere in the rule that its proposal would reduce 
hospitals' DSH payments by over nearly $350 million annually. This 
commenter stated that the internal inconsistency between the RFA 
assessment that the proposal's impact would not be ``significant,'' 
on the one hand, and its determination that the proposal would be 
``economically significant'' and cost hospitals nearly $350 million 
per year, on the other hand, is unreasonable and unexplained. By 
failing to make a proper financial assessment, the commenter stated 
that the agency has

[[Page 59408]]

ignored the RFA, and its proposed rule is invalid as a result, 
citing several court cases.
    Response: As noted earlier, we disagree that we have failed to 
make a proper financial assessment of the proposed rule's impact or 
that the agency has ignored the RFA. The commenters are confusing 
the requirement of section 3(f) of Executive Order 12866, which 
defines a ``significant regulatory action'' as an action that is 
likely to result in a rule having an annual effect on the economy of 
$100 million or more in any one year, with the RFA, which 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. As discussed in the February 2023 proposed rule and 
reiterated earlier, HHS's practice in interpreting the RFA is to 
consider the effects of a policy to be economically ``significant'' 
under the RFA if the policy affects greater than five percent of 
providers in the amount of three to five percent or more of total 
revenue or total costs. We have followed the regulations for each of 
these requirements (Executive Order 12866 and the RFA), estimating 
the overall impact under the Executive order, and determining under 
the separate RFA standard for what is ``significant'' that the 
agency did not need to analyze options for regulatory relief of 
small entities because the finalized rule will not have a 
significant impact on a substantial number of small entities.
    Comment: One commenter noted that the agency bases its policy 
changes on the Federal fiscal year and not according to a hospital's 
cost reporting year, making such changes administratively 
challenging for hospitals.
    Response: As we stated in the February 2023 proposed rule and 
reiterated in the preamble to this final rule, as has been our 
practice for more than two decades, we have made our periodic 
revisions to the counting of certain section 1115 patient days in 
the Medicare DSH calculation effective based on patient discharge 
dates. Thus, doing so again here treats all providers similarly and 
does not impact providers differently depending on their cost 
reporting periods. All hospitals will equally be able to include or 
not include certain section 1115 demonstration days in the DPP 
Medicaid fraction numerator, as permitted under this final rule, 
based on discharge dates of October 1, 2023, or later. We therefore 
disagree that the changes being finalized here will present 
administrative challenges or administratively impact hospitals 
differently depending on their cost reporting year.
    Comment: One commenter stated that the exclusion of 
uncompensated care pool patient days from the Medicaid fraction 
would significantly reduce hospitals' empirical Medicare DSH 
payments in states that use an uncompensated care pool to cover 
inpatient hospital care under a section 1115 demonstration. The 
commenter also noted the proposed policy would also have the follow-
on effect of significantly reducing national Medicare uncompensated 
care payments under section 1886(r) of the Act, and that CMS's cost 
estimate does not address or account for the impact of the proposed 
rule on Medicare uncompensated care payments. Therefore, the 
commenter stated that the February 2023 proposed rule's estimated 
impact of approximately $350 million likely represents only a 
portion of the aggregate financial impact of the proposal on IPPS 
hospitals nationally.
    Response: As stated in the proposed rule, to estimate the impact 
of the proposal to exclude uncompensated/undercompensated care pool 
days, we would need to know the number of these section 1115 
demonstration days per hospital for the hospitals potentially 
impacted. We do not currently possess such data because the Medicare 
cost report does not include lines for section 1115 demonstration 
days separately from other types of days. Therefore, the number of 
demonstration-authorized uncompensated/undercompensated care pool 
days per hospital and the net overall savings of this proposal are 
especially challenging to estimate. We did use extrapolated 
unaudited amount in controversy data from plaintiffs to help inform 
the issue, but we cautioned against considering the extrapolated 
amount in controversy to be the estimated Trust Fund savings that 
would result from our proposal (88 FR 12634 through 12635). Given 
this lack of data and level of uncertainty, we do not believe it 
would be appropriate to explicitly reduce Factor 1 of the FY 2024 
Medicare uncompensated care payments by the extrapolated unaudited 
amount in controversy and did not propose to do so, nor are we doing 
so in this final rule. Please see section IV.E. of the preamble to 
this final rule for a discussion of the components of Factor 1 for 
the FY 2024 Medicare uncompensated care payments. Therefore, our 
proposal had no impact on Factor 1 of the FY 2024 Medicare 
uncompensated care payments in the proposed rule and our final 
policy has no impact on Factor 1 of the FY 2024 Medicare 
uncompensated care payments in this final rule.

b. Medicare DSH Uncompensated Care Payments and Supplemental Payment 
for Indian Health Service Hospitals and Tribal Hospitals and Hospitals 
Located in Puerto Rico

    As discussed in section IV.E. of the preamble of this final 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 
percent of what formerly would have been paid as Medicare DSH 
payments (Factor 1), reduced to reflect changes in the percentage of 
uninsured individuals (Factor 2), is available to make additional 
payments to each hospital that qualifies for Medicare DSH payments 
and that has reported uncompensated care. Each hospital eligible for 
Medicare DSH payments will receive an additional payment based on 
its estimated share of the total amount of uncompensated care for 
all hospitals eligible for Medicare DSH payments. The uncompensated 
care payment methodology has redistributive effects based on the 
proportion of a hospital's amount of uncompensated care relative to 
the aggregate amount of uncompensated care of all hospitals eligible 
for Medicare DSH payments (Factor 3). The change to Medicare DSH 
payments under section 3133 of the Affordable Care Act is not budget 
neutral.
    In this final rule, we are establishing the amount to be 
distributed as uncompensated care payments (UCP) to DSH eligible 
hospitals for FY 2024, which is $5,938,006,756.87. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 
59.29 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 $83.2 million in supplemental 
payments in FY 2024, as determined based on the difference between 
each hospital's FY 2022 UCP (reduced by negative 13.6 percent, which 
is the projected change between the 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 final 
rule, the total uncompensated care payments and supplemental 
payments equal approximately $6.021 billion. For FY 2024, we are 
using 3 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 final rule. For a 
discussion regarding the methodology for calculating the 
supplemental payments, we refer readers to section IV.D. of the 
preamble of this final rule.
    To estimate the impact of the combined effect of the 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 uncompensated care payments and the supplemental 
payments estimated in this FY 2024 IPPS/LTCH PPS final 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 Factor 2

[[Page 59409]]

of 59.29 percent and multiplied by a Factor 3 calculated using the 
methodology described previously. For this final 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 2,384 hospitals that are projected to be 
eligible for DSH in FY 2024. Our analysis did not include hospitals 
that had terminated their participation in the Medicare program as 
of June 13, 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 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:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR28AU23.360


[[Page 59410]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.361

BILLING CODE 4120-01-C
    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 
decreases in Factor 1 and Factor 2. The final Factor 1 has decreased 
from the FY 2023 final rule's Factor 1 of $10.461 billion to this 
final rule's Factor 1 of $10.015 billion. The final Factor 2 has 
decreased from FY 2023 final rule's Factor 2 of 65.71 percent to 
this final rule's Factor 2 of 59.29 percent. In addition, we note 
that there is a slight increase in the number of projected DSH 
eligible hospitals to 2,384 at the time of the development for this 
final rule compared to the projected 2,368 DSHs in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49472). Based on the changes, the impact 
analysis found that, across all projected DSH eligible hospitals, FY 
2024 uncompensated care payments and supplemental payments are 
estimated at approximately $6.021 billion, or

[[Page 59411]]

a decrease of approximately 13.62 percent from FY 2023 uncompensated 
care payments and supplemental payments (approximately $6.971 
billion). While the changes 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 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 13.62 
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 13.62 percent 
indicates that a hospital type is projected to have a smaller 
decrease 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 Factor 3 computation 
and whether the hospital is eligible to receive the supplemental 
payment.
    Rural hospitals, in general, are projected to experience a 
slightly larger decrease in uncompensated care payments compared to 
the decrease their urban counterparts are projected to experience. 
Overall, rural hospitals are projected to receive a 13.65 percent 
decrease in payments, while urban hospitals are projected to receive 
a 13.62 percent decrease in payments, which is equal to the overall 
hospital average.
    By bed size, rural hospitals with 100 to 249 beds and rural 
hospitals with 250+ beds are projected to receive larger than 
average decreases of a 15.21 percent and 15.38 percent, 
respectively, while rural hospitals with 0 to 99 beds are projected 
to receive a smaller than average decrease of 12.33 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 14.01 percent. In contrast, smaller 
urban hospitals with 0-99 beds and urban hospitals with 100-249 beds 
are projected to receive a 11.06 and 12.81 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 
smaller than average decreases in payments. 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 
are projected to receive larger than average decreases in payments, 
while urban hospitals in New England, West South Central, and 
Mountain regions, as well as hospitals in Puerto Rico, are projected 
to receive smaller than average decreases in payments.
    By payment classification, although hospitals in urban payment 
areas overall are expected to receive a 13.34 percent decrease in 
uncompensated care payments and supplemental payments, hospitals in 
large urban payment areas are projected to receive a decrease in 
payments of 13.27 percent. In contrast, hospitals in rural payment 
areas are projected to receive a larger than average decrease in 
payments of 14.01 percent.
    Teaching hospitals with fewer than 100 residents are projected 
to receive a larger than average payment decrease of 14.91 percent. 
Nonteaching hospitals and teaching hospitals with 100+ residents are 
projected to receive smaller than average payment decreases of 12.35 
percent and 13.29 percent, respectively. Proprietary and government 
owned hospitals are projected to receive smaller than average 
decreases of 12.66 and 13.30 percent respectively, while voluntary 
hospitals are expected to receive a larger than average payment 
decrease of 14.02 percent. Hospitals with less than 25 percent 
Medicare utilization are projected to receive larger than average 
decreases of 13.89 percent, while hospitals with Medicare 
utilization of 25 percent or more are projected to receive smaller 
than average payment decreases. 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 12.25 and 10.50 percent respectively, while hospitals 
with 25-50 percent Medicaid utilization and those with greater than 
65 percent Medicaid utilization are projected to receive a larger 
than average decrease of 15.20 percent and 15.67 percent, 
respectively.
    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 $83.2 million in FY 2024.

3. Effects of the Changes to Indirect Medical Education and Direct 
Graduate Medical Education Payments

a. Calculation of Prior Year IME Resident to Bed Ratio When There Is a 
Medicare GME Affiliation Agreement

    Under section V.G.2. of the preamble of this final rule, we are 
finalizing a proposed clarification to 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 are clarifying how to 
determine if the hospital increased its current year allowable FTE 
count, and are clarifying 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 final 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.

b. Training in New REH Facility Type

    As discussed in section V.G.3. of the preamble of this final 
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 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 final 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 proposed 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 proposed 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. In response 
to comments, we are finalizing these policies as proposed.
    If a hospital or CAH 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

[[Page 59412]]

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.

4. Effects of Changes for Reasonable Cost Payments for Nursing and 
Allied Health Programs

    Under section V.H. of the preamble of this final rule, we 
finalize our proposal 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.

5. Effects of Requirements Under the Hospital Readmissions Reduction 
Program for FY 2024

    In section V.J. of the preamble of the FY 2024 IPPS/LTCH PPS 
proposed rule, we did not propose to add, modify, or remove any 
policies for the FY 2024 Hospital Readmissions Reduction Program (88 
FR 27024); 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 final rule 
illustrate the estimated financial impact of the Hospital 
Readmissions Reduction Program payment adjustment methodology by 
hospital characteristic for the FY 2024 program year. 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, 2019, and June 30, 2022 (that is, the FY 2024 Hospital 
Readmissions Reduction Program's applicable period).\18\ 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 Medicare budget 
neutrality. In this FY 2024 IPPS/LTCH PPS final rule, we are 
providing 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.
---------------------------------------------------------------------------

    \18\ Although the FY 2024 performance period is July 1, 2019, 
through June 30, 2022, 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, 2019, through December 1, 2019, and July 1, 
2020, through June 30, 2022.
---------------------------------------------------------------------------

    The results in Table I.G.-03 include 2,855 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 
during the FY 2024 applicable period. 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.-03 indicates the percentage of 
penalized hospitals among those eligible to receive a penalty by 
hospital characteristic. For example, 78.53 percent of eligible 
hospitals characterized as non-teaching hospitals are expected to be 
penalized. Among teaching hospitals, 87.63 percent of eligible 
hospitals with fewer than 100 residents and 90.29 percent of 
eligible hospitals with 100 or more residents are expected to be 
penalized. The fourth column in Table I.G.-03 estimates the 
financial impact on hospitals by hospital characteristic. Table 
I.G.-03 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, 2021, through September 30, 2022 
(FY 2022). For example, the penalty as a share of payments for non-
teaching hospitals is 0.49 percent. This means that total penalties 
for all non-teaching hospitals are 0.49 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.-03.
BILLING CODE 4120-01-P

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[[Page 59414]]


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6. Effects of 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 final rule, we discuss 
the Hospital VBP Program under which the Secretary makes value-based 
incentive payments to hospitals based on their performance on 
measures during the performance period with respect to a fiscal 
year. These incentive payments will be funded for FY 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 final 
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 March 
2023 update to the FY 2022 MedPAR file.
    The estimated impacts of the FY 2024 program year by hospital 
characteristic, found in Table V.G.-05, are based on historical 
Total Performance Scores. We used the FY 2022 program year's TPSs to 
calculate the proxy adjustment factors used for this impact 
analysis. These are the most recently available scores that 
hospitals were given an opportunity to review and correct. The proxy 
adjustment factors use estimated annual base operating DRG payment 
amounts derived from the March 2023 update to the FY 2022 MedPAR 
file. The proxy adjustment factors can be found in Table 16A 
associated with this final rule (available via the internet on the 
CMS website).
    The impact analysis shows that, for the FY 2024 program year, 
the number of hospitals with a positive percent change in base 
operating DRG (46.2 percent) is lower than the number of hospitals 
with a negative percentage change (53.8 percent). On average, urban 
hospitals in the West North Central region and rural hospitals in 
the East South Central region have the highest positive

[[Page 59415]]

percent change in base operating DRG. Urban hospitals in the New 
England, South Atlantic, East South Central and Pacific regions and 
rural hospitals in the Middle Atlantic region experience an average 
negative percent change in base operating DRG. All other regions 
(both urban and rural) experience an average positive percent change 
in base operating DRG. With respect to hospitals' Medicare 
utilization as a percent of inpatient days (MCR), as the MCR percent 
increases, the average percent change in base operating DRG 
generally increases, except for those hospitals of more than 50 
percent MCR. As DSH percent increases, the average percent change in 
base operating DRG generally stays the same. On average, non-
teaching hospitals have a lower percent change in base operating DRG 
compared to teaching hospitals; both non-teaching hospitals and 
teaching hospitals have a positive percent change in base operating 
DRG.
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[[Page 59416]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.365

    The actual FY 2024 program year's TPSs will 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 have been used for the updated impact analysis in this final 
rule.

b. Estimated Effects for the FY 2026 Program Year Applying Finalized 
Scoring Methodology Change

    The estimated effects of the finalized 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 finalized HEA scoring option increases the number of hospitals 
gaining compared to the existing scoring methodology. ``Gaining'' in 
this analysis means both those who are receiving a larger bonus and 
those who are receiving a smaller penalty under the health equity 
scoring change than they would receive in the existing scoring 
methodology. Through these analyses, we found that the average 
hospital-weighted payment adjustment is positive even though the 
Hospital VBP Program remains budget neutral. The increase in the 
number of hospitals gaining occurs primarily among safety net 
hospitals compared to non-safety net. Additionally, the distribution 
of TPSs 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 final 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 the FY 2024 IPPS/LTCH PPS proposed rule, we did not propose to 
add or remove any measures from the HAC Reduction Program, nor did 
we propose any changes to reporting or submission requirements which 
would have any significant 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. Not all 
data from the FY 2024 HAC Reduction Program CMS PSI 90 performance 
period (January 1, 2021 through June 30, 2022) were available at the 
publication of the final rule. 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, 2022, and December 31, 2022. Hospital characteristics are 
based on the FY 2024 IPPS Proposed 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 the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27054 through 
27055) and finalized in this rule will result in any significant 
economic impacts because the reconsideration request form will 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

[[Page 59417]]

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 2,997 non-Maryland hospitals with an 
estimated 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, 566 hospitals out of 1,767 
hospitals characterized as non-teaching hospitals would be subject 
to a payment reduction. Among teaching hospitals, 123 out of 931 
hospitals with fewer than 100 residents and 43 out of 279 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, 32.0 
percent of the 1,767 hospitals characterized as non-teaching 
hospitals, 13.2 percent of the 931 teaching hospitals with fewer 
than 100 residents, and 15.4 percent of the 279 teaching hospitals 
with 100 or more residents would be subject to a payment reduction.

[[Page 59418]]

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[[Page 59419]]


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BILLING CODE 4120-01-C
    In section V.L.6.a.(3) of the preamble of the FY 2024 IPPS/LTCH 
PPS proposed rule, we proposed to update our targeting criteria for 
validation of hospitals granted an extraordinary circumstances 
exception (ECE) in the HAC Reduction Program (88 FR 27055). 
Specifically, we proposed 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. In section 
V.L.6.a.(3). of the preamble of this final rule, we are finalizing 
this modification. We do not believe this modification of 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 will not 
exceed the total maximum number of hospitals that will 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 final rule for FY 2023, 
we discussed our implementation and budget neutrality methodology 
for section 410A of Public Law 108-173, as amended by sections 3123 
and 10313 of Public Law 111-148, 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 116-255 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 final rule, the resulting amount applicable to FY 2024 
is $37,766,716, which we are including in 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 
continue this general procedure. At this time, for the FY 2024 final 
rule, all of the finalized cost reports are available for the 29 
hospitals that completed cost report periods beginning in FY 2019 
under the demonstration payment methodology; these cost reports show 
the actual costs of the demonstration for this fiscal year to be 
$46,745,899. This amount exceeds the amount that was estimated for 
FY 2018 in the FY 2019 IPPS final rule ($31,070,880) by $15,675,019. 
(Following upon the selection of new hospitals for the demonstration 
in 2017, the estimated costs of the demonstration for FYs 2018 and 
2019 were included in the FY 2019 IPPS final rule). (83 FR 41054). 
Thus, keeping with past practice, we are adding this difference to 
the estimated cost for FY 2024 in determining the budget neutrality 
offset amount for the FY 2024 IPPS final rule.
    Therefore, for this FY 2024 IPPS/LTCH PPS final rule, the budget 
neutrality offset amount for FY 2024 is based on the sum of two 
amounts:
     The amount representing the difference applicable to FY 
2024 between the sum of the estimated reasonable cost amounts that 
would be paid under the demonstration for covered inpatient services 
to the 26 hospitals participating 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 
$37,766,716.
     The amount by which the actual costs of the 
demonstration in FY 2018 (as shown by finalized cost reports from 
that fiscal year) differ from the amount determined for FY 2018. The 
amount of this difference is for FY 2018 is $15,675,019.
    We are thus subtracting the sum of these amounts ($53,441,735) 
from the national IPPS rates for FY 2024.

9. Effects of Continued Implementation of the Frontier Community Health 
Integration Project (FCHIP) Demonstration

    In section VII.B.2. of the preamble of this final 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 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

[[Page 59420]]

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 final 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 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 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 did not propose 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 Changes for Rural Emergency Hospitals

    Section X.A. of the preamble of this final 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 final 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 based on 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 (COI) 
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.\19\

[[Page 59421]]

For these facilities, the 3 percent threshold would be about 
$219,000, nearly 500 times our 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.
---------------------------------------------------------------------------

    \19\ ``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 Changes for Physician-Owned Hospitals

    Provisions related to hospitals that have physician ownership or 
investment are discussed in section X.B. of the preamble of this 
final rule. Section X.B.2.a. of the preamble of this final rule 
describes our changes to 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 and the information that a requesting 
hospital may submit at its option, identify factors that CMS will 
consider when deciding whether to approve or deny an expansion 
exception request, and revise certain aspects of the process for 
requesting an expansion exception. We expect that the clarifications 
and revisions, as finalized, along with the description of the 
factors we will consider when deciding whether to approve or deny an 
expansion exception request, will 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. The use of HCRIS data for all 
comparison calculations, as required under the final rule, will have 
little practical impact on whether a requesting hospital meets the 
criteria for an applicable hospital or a high Medicaid facility, nor 
will a requesting hospital be prejudiced by this requirement.
    Section X.B.2.b. of the preamble of this final rule describes 
our reinstatement, with respect to high Medicaid facilities, of 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 in the expansion exception process 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.
    More information on the comments received on the physician-owned 
hospital provisions can be found in section X.B. of the preamble of 
this final rule.

H. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of July 2023, there were 91 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 9 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 rate 
updates discussed in this final rule. The impacts of the 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 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 
second quarter 2023 forecast of the 2018-based IPPS market basket 
increase, we are estimating the FY 2024 update to be 3.3 percent 
(that is, the estimate of the market basket rate-of-increase), as 
discussed in section V.A. of the preamble of this final rule. We 
proposed 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 (0.2 percentage point 
reduction for FY 2024), resulting in a 3.1 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 final 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 update is the percentage increase in 
the 2018-based IPPS operating market basket for FY 2024, estimated 
at 3.3 percent.
    The impact of the update in the rate-of-increase limit on those 
excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
would not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit; or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

I. Effects of Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented in this section of this final 
rule, we used data from the March 2023 update of the FY 2022 MedPAR 
file and the March 2023 update of the Provider-Specific File (PSF) 
that was used for payment purposes. Although the analyses of the 
changes to the capital prospective payment system do not incorporate 
cost data, we used the March 2023 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 final rule.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
change. In addition, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases (for instance, 
the number of beds), there is a fair degree of variation in the data 
from different sources. We have attempted to construct these 
variables with the best available sources overall. However, it is 
possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the March 2023 update of the FY 2022 MedPAR 
file, we simulated payments under the capital IPPS for FY 2023 and 
the 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

[[Page 59422]]

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 final rule, the update to the 
capital Federal rate is 3.8 percent for FY 2024.
     In addition to the FY 2024 update factor, the FY 2024 
capital Federal rate was calculated based on a GAF/DRG budget 
neutrality adjustment factor of 0.9885, a budget neutrality factor 
for the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy of 0.9964, and a outlier 
adjustment factor of 0.9598.

2. Results

    We used the payment simulation model previously described in 
section I.I. of appendix A of this final rule to estimate the 
potential impact of the changes for FY 2024 on total capital 
payments per case, using a universe of 3,131 hospitals. As 
previously described, the individual hospital payment parameters are 
taken from the best available data, including the March 2023 update 
of the FY 2022 MedPAR file, the March 2023 update to the PSF, and 
the most recent available cost report data from the March 2023 
update of HCRIS. In Table III, we present a comparison of estimated 
total payments per case for FY 2023 and estimated total payments per 
case for FY 2024 based on the FY 2024 payment policies. Column 2 
shows estimates of payments per case under our model for FY 2023. 
Column 3 shows estimates of payments per case under our model for FY 
2024. Column 4 shows the total percentage change in payments from FY 
2023 to FY 2024. The change represented in Column 4 includes the 
3.80 percent update to the capital Federal rate and other changes in 
the adjustments to the capital Federal rate. The comparisons are 
provided by: (1) geographic location; (2) region; and (3) payment 
classification.
    The simulation results show that, on average, capital payments 
per case in FY 2024 are expected to increase 6.6 percent compared to 
capital payments per case in FY 2023. This expected increase is 
primarily due to the 3.80 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 final rule, we are finalizing 
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 policy, geographically urban hospitals with 100 or more beds 
reclassified as rural under Sec.  412.103 will be eligible for 
capital DSH payments beginning in FY 2024. The CMS' Office of the 
Actuary estimates this change in policy will 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 changes in GAFs, and are generally 
consistent with the projected changes in payments due to changes in 
the wage index (and policies affecting the wage index), as shown in 
Table I in section I.F. of this appendix. We note that the FY 2024 
GAFs reflect the changes to the rural wage index methodology 
finalized in section III.G.1. of the preamble to this final rule. As 
discussed, beginning in FY 2024, we are including hospitals with 
Sec.  412.103 reclassification along with geographically rural 
hospitals in all rural wage index calculations, and are only 
excluding ``dual reclass'' hospitals (hospitals with simultaneous 
Sec.  412.103 and MGCRB reclassifications) in accordance with the 
hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. We 
also are including the data of all Sec.  412.103 hospitals 
(including those that have an MGCRB reclassification when 
appropriate) 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 6.6 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 will experience an increase in 
capital IPPS payments per case in FY 2024 as compared to FY 2023. 
Capital IPPS payments per case will increase by an estimated 6.7 
percent for hospitals in urban areas while payments to hospitals in 
rural areas will increase by 5.8 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 3.5 percent increase for Puerto Rico to a 9.6 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 2.4 
percent increase for the New England rural region to a 16.8 percent 
increase for the Middle Atlantic region. These regional differences 
are primarily due to the changes in the GAFs, which reflect the 
changes to the rural wage index methodology. We note that the 
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 hospitals are 
expected to experience the highest increase in capital payments per 
case from FY 2023 to FY 2024 of 6.6 percent. Meanwhile, proprietary 
and government hospitals are expected to experience an increase in 
capital payments per case from FY 2023 to FY 2024 of 6.4 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 final rule for FY 2024, we show the average 
capital payments per case for reclassified hospitals for FY 2024. 
Urban reclassified hospitals are expected to experience an increase 
in capital payments of 8.5 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 4.6 
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 
finalizing a change to our capital DSH policy under which 
geographically urban hospitals with 100 or more beds reclassified as 
rural under Sec.  412.103 will be eligible for capital DSH payments 
beginning in FY 2024. Rural reclassified hospitals are expected to 
experience an increase in capital payments of 5.4 percent; rural 
nonreclassified hospitals are expected to experience an increase in 
capital payments of 6.6 percent.

[[Page 59423]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.368


[[Page 59424]]


[GRAPHIC] [TIFF OMITTED] TR28AU23.369

J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS

1. Introduction and General Considerations

    In section VII. of the preamble of this final rule and section 
V. of the Addendum to this final rule, we set forth the annual 
update to the payment rates for the LTCH PPS for FY 2024. In the 
preamble of this final rule, we specify the statutory authority for 
the provisions that are presented, identify the policies for FY 
2024, and present rationales for our provisions as well as 
alternatives that were considered. In this section, we discuss the 
impact of the changes to the payment rate, factors, and other 
payment rate policies related to the LTCH PPS that are presented in 
the preamble of this final rule in terms of their estimated fiscal 
impact on the Medicare budget and on LTCHs.
    There are 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 final rule). We have also excluded data for CCN 
312024 from this impact

[[Page 59425]]

analysis due to their abnormal charging practices. We note this is 
consistent with our removal of 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 final rule). Moreover, in the claims data 
used for this final 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 payment rate, factors, and 
policies presented in this final rule, the 3.3 percent annual update 
to the LTCH PPS standard Federal payment rate, the update to the MS-
LTC-DRG classifications and relative weights, the 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 provided a 
waiver of the application of the site neutral payment rate for LTCH 
cases admitted during the COVID-19 PHE period. The COVID-19 PHE 
expired 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 final 
rule, we estimate that overall LTCH PPS payments in FY 2024 will 
increase by approximately 0.2 percent (or approximately $6 million) 
based on the rates and factors presented in section VII. of the 
preamble and section V. of the Addendum to this final rule.
    Based on the FY 2022 LTCH cases that were used for the analysis 
in this final 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 finalized for FY 2024. Taking this into 
account along with other changes that will 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 will increase by 
approximately 3.2 percent (or approximately $10 million). This 
projected increase in payments to LTCH PPS site neutral payment rate 
cases is primarily due to the finalized updates to the IPPS rates 
and payments reflected in our estimate of the IPPS comparable per 
diem amount. We note that we estimate payments to site neutral 
payment rate cases in FY 2024 will represent approximately 12 
percent of estimated aggregate FY 2024 LTCH PPS payments.
    Based on the FY 2022 LTCH cases that were used for the analysis 
in this final 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 0.2 percent (or 
approximately $4 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 2.9 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 final rule.
    Based on the 333 LTCHs that were represented in the FY 2022 LTCH 
cases that were used for the analyses in this final rule presented 
in this appendix, we estimate that aggregate FY 2023 LTCH PPS 
payments will be approximately $2.603 billion, as compared to 
estimated aggregate FY 2024 LTCH PPS payments of approximately 
$2.609 billion, resulting in an estimated overall increase in LTCH 
PPS payments of approximately $6 million. We note that the estimated 
$6 million increase in LTCH PPS 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 policies in this final 
rule.
    The LTCH PPS standard Federal payment rate for FY 2023 is 
$46,432.77. For FY 2024, we are establishing an LTCH PPS standard 
Federal payment rate of $48,116.62 which reflects the 3.3 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 1.0031599 (discussed in section V.B.6. of the Addendum 
to this final rule). For LTCHs that fail to submit data for the LTCH 
QRP, in accordance with section 1886(m)(5)(C) of the Act, we are 
establishing an LTCH PPS standard Federal payment rate of 
$47,185.03. This LTCH PPS standard Federal payment rate reflects the 
updates and factors previously described, as well as the required 
2.0 percentage point reduction to the annual update for failure to 
submit data under the LTCH QRP.
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the annual update of 3.3 percent to the LTCH PPS standard Federal 
payment rate is projected to result in an increase of 3.2 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 3.2 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 3.2 percent.
    For FY 2024, we are updating 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 establishing a labor-related 
share of 68.5 percent for FY 2024, based on the most recent 
available data (IGI's second quarter 2023 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 applying an area 
wage level budget neutrality factor of 1.0031599 to ensure that the 
changes to the area wage level adjustment will 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 final 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 10.9 
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

[[Page 59426]]

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 2.9 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 described in section V.D.3.b. of the 
Addendum to this final 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 finalized methodology described in section 
V.D.3.b. of the Addendum to this 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.
    Comment: We received comments expressing concern about the 2.5 
percent decrease in payments to LTCH PPS standard Federal payment 
rate cases that we projected in the proposed rule. Some commenters 
stated that this decrease would jeopardize the ability of LTCHs to 
continue caring for their patients and would lead to LTCH closures. 
Some commenters stated that Medicare reimbursements already do not 
cover hospital costs and therefore they found the projected payment 
reduction especially concerning.
    Response: We appreciate commenters' concerns about the proposed 
2.5 percent decrease in payments to LTCH PPS standard Federal 
payment rate cases. As explained in the proposed rule (88 FR 27286), 
that estimated decrease of approximately 2.5 percent was primarily 
due to the projected decrease in high cost outlier payments. 
Specifically, we explained that we estimated high cost outlier 
payments in FY 2023 would account for approximately 12.7 percent of 
total LTCH PPS standard Federal payment rate payments. Because this 
exceeds the statutory 7.975 percent target, it resulted 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.
    Based on the finalized payment rates and factors in this final 
rule, we now project a 0.2 percent decrease in payments to LTCH PPS 
standard Federal payment rate cases for FY 2024. This change in 
projected payments is primarily being driven by a downward revision 
in this final rule to our estimate of FY 2023 high cost outlier 
payments to LTCH PPS standard Federal payment rate cases. In this 
final rule, after incorporating into our payment model the modified 
charge inflation and CCR adjustment factors discussed in section 
V.D.3.b. of the Addendum to this final rule, we now estimate that 
high cost outlier payments for LTCH PPS standard Federal payment 
rate cases will be approximately 10.9 percent of the estimated total 
LTCH PPS standard Federal payment rate payments in FY 2023 (as 
compared to 12.7 percent in the proposed rule as noted previously). 
In addition, this change in projected payments is partially being 
driven by the annual update factor of 3.3 percent (which is 0.4 
percentage point higher than the proposed annual update factor). As 
discussed in section VIII.C.2. of the preamble to this final rule, 
we believe this LTCH market basket increase appropriately reflects 
the input price growth that LTCHs will incur providing medical 
services in FY 2024.
    As we discuss in detail throughout this final rule, based on the 
best available data, we believe that the provisions of this final 
rule relating to the LTCH PPS, which are projected to result in an 
overall increase in estimated aggregate LTCH PPS payments (for both 
LTCH PPS standard Federal payment rate cases and site neutral 
payment rate cases), 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 0.3 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases for LTCHs located in a rural 
area. This estimated impact is based on the FY 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 LTCH PPS Payment Rate Changes and Policy 
Changes

a. Budgetary Impact

    Section 123(a)(1) of the BBRA requires that the PPS developed 
for LTCHs ``maintain budget neutrality.'' We believe that the 
statute's mandate for budget neutrality applies only to the first 
year of the implementation of the LTCH PPS (that is, FY 2003). 
Therefore, in calculating the FY 2003 standard Federal payment rate 
under Sec.  412.523(d)(2), we set total estimated payments for FY 
2003 under the LTCH PPS so that estimated aggregate payments under 
the LTCH PPS were estimated to equal the amount that would have been 
paid if the LTCH PPS had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH 
PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. Under this statutory change, LTCH 
discharges that meet the patient-level criteria for exclusion from 
the site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) are paid based on the LTCH PPS standard Federal 
payment rate. LTCH discharges paid at the site neutral payment rate 
are generally paid the lower of the IPPS comparable per diem amount, 
reduced by 4.6 percent for FYs 2018 through 2026, including any 
applicable 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 an 
increase in aggregate LTCH PPS payments in FY 2024 of approximately 
$6 million. This estimated increase in payments reflects the 
projected decrease in payments to LTCH PPS standard Federal payment 
rate cases of approximately $4 million and the projected increase in 
payments to site neutral payment rate cases of approximately $10 
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 final rule, 
our actuaries project cost and resource changes for site neutral 
payment rate cases due to the site neutral payment rates required 
under the statute. Specifically, our actuaries project that the 
costs and resource use for cases paid at the site neutral payment 
rate will likely be lower, on average, than the costs and resource 
use for cases paid at the LTCH PPS standard Federal payment rate, 
and will likely mirror the costs and resource use for IPPS cases 
assigned to the same MS-DRG. While we are able to incorporate this 
projection at an aggregate level into our payment modeling, because 
the historical claims data that we are using in this final rule to 
project estimated FY 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 changes in LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases and, unless otherwise noted, the 
remaining discussion in section I.J.3. of this appendix refers only 
to the impact on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. In the following section, we present our 
provider impact analysis for the changes that affect LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases.

b. Impact on Providers

    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is currently set 
forth under Sec. Sec.  412.515 through 412.533 and 412.535. In 
addition to adjusting the LTCH PPS standard Federal payment rate by 
the MS-LTC-DRG relative weight, we make adjustments to account for 
area wage levels and SSOs. LTCHs located in Alaska and Hawaii also 
have their payments adjusted by a COLA. Under our application of the 
dual rate LTCH PPS payment structure, the LTCH PPS standard Federal 
payment rate is generally only used to determine payments for LTCH 
PPS standard Federal payment rate cases (that is, those LTCH PPS 
cases that meet the statutory criteria to be excluded from the site 
neutral payment rate). LTCH discharges that do not meet the patient-
level criteria for exclusion are paid the site neutral payment rate, 
which we are calculating as the lower of the IPPS comparable per 
diem amount as determined under Sec.  412.529(d)(4),

[[Page 59427]]

reduced by 4.6 percent for FYs 2018 through 2026, including any 
applicable outlier payments, or 100 percent of the estimated cost of 
the case as determined under existing Sec.  412.529(d)(2). In 
addition, when certain thresholds are met, LTCHs also receive HCO 
payments for both LTCH PPS standard Federal payment rate cases and 
site neutral payment rate cases that are paid at the IPPS comparable 
per diem amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
final rule on different categories of LTCHs for FY 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 rates, factors, and the policies in this final rule (as 
discussed in section VII. of the preamble of this final rule and 
section V. of the Addendum to this final rule). As discussed 
elsewhere in this final rule, these estimates are based on the best 
available LTCH claims data and other factors, such as the 
application of inflation factors to estimate costs for HCO cases in 
each year. The resulting analyses can then be used to compare how 
our policies applicable to LTCH PPS standard Federal payment rate 
cases affect different groups of LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in 
HCRIS, and PSF data. Hospital groups included the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Calculation of LTCH PPS Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our policies on payments for LTCH PPS 
standard Federal payment rate cases, we simulated FY 2023 and 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 FY 2024 LTCH PPS 
standard Federal payment rate, we used the finalized FY 2024 
standard Federal payment rate of $48,116.62 (or $47,185.03 for LTCHs 
that failed to submit quality data as required under the 
requirements of the LTCH QRP). In each case, we applied the 
applicable adjustments for area wage levels and the COLA for LTCHs 
located in Alaska and Hawaii. Specifically, for modeling FY 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 FY 2024 LTCH PPS 
payments, we used the FY 2024 LTCH PPS labor-related share (68.5 
percent), the FY 2024 wage index values from Tables 12A and 12B 
listed in section VI. of the Addendum to this final rule (which are 
available via the internet on the CMS website), the FY 2024 HCO 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
of $59,873 (as discussed in section V.D.3. of the Addendum to this 
final rule), and the FY 2024 COLA factors (shown in the table in 
section V.C. of the Addendum to this final rule) to adjust the FY 
2024 nonlabor-related share (31.5 percent) for LTCHs located in 
Alaska and Hawaii. We note that in modeling payments for HCO cases 
for LTCH PPS standard Federal payment rate cases, we inflated 
charges reported on the FY 2022 claims by the charge inflation 
factors in section V.D.3.b. of the Addendum to this final rule. We 
also note 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 finalized methodology described in section 
V.D.3.b. of the Addendum to this final 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 final 
rule. Table IV illustrates the estimated aggregate impact of the 
change in LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases among various classifications of LTCHs. (As discussed 
previously, these impacts do not include LTCH PPS site neutral 
payment rate cases.)
     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 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 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 annual update to the standard Federal rate (as 
discussed in section V.A.2. of the Addendum to this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2023 to FY 2024 for changes to the area 
wage level adjustment (that is, the updated hospital wage data and 
labor-related share) and the application of the corresponding budget 
neutrality factor (as discussed in section V.B.6. of the Addendum to 
this final rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2023 (Column 4) to FY 2024 (Column 5) for 
all changes.

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[[Page 59430]]



d. Results

    Based on the FY 2022 LTCH cases (from 333 LTCHs) that were used 
for the analyses in this final rule, we have prepared the following 
summary of the impact (as shown in Table IV) of the LTCH PPS payment 
rate and policy changes for LTCH PPS standard Federal payment rate 
cases presented in this final rule. The impact analysis in Table IV 
shows that estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases are projected to decrease 0.2 percent, on 
average, for all LTCHs from FY 2023 to FY 2024 as a result of the 
payment rate and policy changes applicable to LTCH PPS standard 
Federal payment rate cases presented in this final rule. This 
estimated 0.2 percent decrease in LTCH PPS payments per discharge 
was determined by comparing estimated FY 2024 LTCH PPS payments 
(using the finalized payment rates and factors discussed in this 
final 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 finalizing an annual update to the 
LTCH PPS standard Federal payment rate for FY 2024 of 3.3 percent. 
For LTCHs that fail to submit quality data under the requirements of 
the LTCH QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 
percentage point reduction is applied to the annual update to the 
LTCH PPS standard Federal payment rate. Consistent with Sec.  
412.523(d)(4), we also are applying a budget neutrality factor for 
changes to the area wage level adjustment of 1.0031599 (discussed in 
section V.B.6. of the Addendum to this final rule), based on the 
best available data at this time, to ensure that any changes to the 
area wage level adjustment will not result in any change (increase 
or decrease) in estimated aggregate LTCH PPS standard Federal 
payment rate payments. As we also explained earlier in this section 
of the final rule, for most categories of LTCHs (as shown in Table 
IV, Column 6), the estimated payment increase due to the 3.3 percent 
annual update to the LTCH PPS standard Federal payment rate is 
projected to result in approximately a 3.2 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 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 0.2 percent. Urban LTCHs are also projected to 
experience a decrease of 0.2 percent. Meanwhile, rural LTCHs are 
projected to experience an increase of 0.3 percent.

(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 0.1 percent and 0.3 percent, 
respectively. LTCHs that began participating in the Medicare program 
between October 1983 and September 1993 are projected to experience 
an increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2023 to FY 2024 of 0.3 
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 2.2 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 an increase in payments to LTCH PPS standard Federal 
payment rate cases of 0.1 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 1.8 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 0.7 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 2.6 percent in the West North Central region to an increase of 
1.0 percent in the Mountain region. These regional variations are 
primarily due to the 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 will 
experience a decrease in payments for LTCH PPS standard Federal 
payment rate cases of 0.6 percent. LTCHs with 25-49 beds are 
projected to experience an increase in payments of 0.1 percent. The 
remaining bed size categories are projected to experience a decrease 
in payments in the range of 0.1 to 0.5 percent.

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
final rule will 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 $4 million (or approximately 
0.2 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 
final rule will 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 $10 million (or approximately 3.2 
percent) for the 333 LTCHs in our database. (As noted previously, we 
estimate payments to site neutral payment rate cases in FY 2024 
represent approximately 12 percent of total estimated FY 2024 LTCH 
PPS payments.) Therefore, we project that the provisions of this 
final rule will result in an increase in estimated aggregate LTCH 
PPS payments for all LTCH cases in FY 2024 relative to FY 2023 of 
approximately 6 million (or approximately 0.2 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 final rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed 
previously, we do not expect the continued implementation of the 
site neutral payment system to have a negative impact on access to 
or quality of care, as demonstrated in areas where there is little 
or no LTCH presence, general short-term acute care hospitals are 
effectively providing treatment for the same types of patients that 
are treated in LTCHs.

K. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

    In section IX.C. of the preamble of this final rule, we discuss 
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.

[[Page 59431]]

    In this final rule, we are: (1) removing the Elective Delivery 
measure beginning with the CY 2024 reporting period/FY 2026 payment 
determination; (2) adopting the Hospital Harm-Pressure Injury 
electronic clinical quality measure (eCQM) beginning with the CY 
2025 reporting period/FY 2027 payment determination; (3) adopting 
the Hospital Harm--Acute Kidney Injury eCQM beginning with the CY 
2025 reporting period/FY 2027 payment determination; (4) adopting 
the Excessive Radiation eCQM beginning with CY 2025 reporting 
period/FY 2027 payment determination; (5) modifying 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) modifying 
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) modifying the COVID-19 Vaccination Coverage among Healthcare 
Personnel (HCP) measure beginning with the Q4 CY 2023 reporting 
period/FY 2025 payment determination; (8) removing the Risk-
Standardized Complication Rate Following Elective Primary Total Hip 
Arthroplasty and/or Total Knee Arthroplasty measure beginning with 
the April 1, 2025 through March 31, 2028 reporting period impacting 
the FY 2030 payment determination; (9) removing the Medicare 
Spending per Beneficiary Hospital measure beginning with the CY 2026 
reporting period/FY 2028 payment determination; (10) modifying 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) modifying 
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 tables in section XII.B.6. of the 
preamble of this final rule, we estimate a total information 
collection burden decrease for 3,150 IPPS hospitals of 144,836 hours 
at a savings of $6,834,886 annually associated with the policies we 
are finalizing 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 final rule, we are adopting 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 the 
finalized policies with regard to submission of measure data, we 
believe that costs associated with adopting three new eCQMs are 
multifaceted and include not only the burden associated with 
reporting, but also the costs associated with implementing and 
maintaining all of the eCQMs available for use in the Hospital IQR 
Program in hospitals' EHR systems (83 FR 41771). For the Excessive 
Radiation eCQM, hospitals will be required to create a secure 
account through the measure developer's website and link their EHR 
and PACS data to the Alara Imaging Software for CMS Measure 
Compliance. We estimate this one-time activity will require no more 
than one hour to complete and therefore estimate a total of 3,150 
hours (1 hour x 3,150 hospitals) at a cost of $141,309 (3,150 hours 
x $44.86) for all IPPS hospitals.
    In section IX.B. of this final rule, we are modifying 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. 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 will 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 policies to remove or modify existing 
measures, we do not believe any of these policies will result in any 
additional economic impact beyond those discussed in section 
XII.B.6. (Collection of Information). Similarly, we do not believe 
the finalized policy 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 will 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.

L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program

    In section IX.D. of the preamble of this final rule, we discuss 
our policies for the quality data reporting program for PPS-exempt 
cancer hospitals (PCHs), which we refer to as the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program. The PCHQR Program is 
authorized under section 1866(k) of the Act. 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 final rule, we are: (1) 
adopting the Documentation of Goals of Care Discussions Among Cancer 
Patients measure beginning with the FY 2026 program year; (2) 
adopting the Facility Commitment to Health Equity measure beginning 
with the FY 2026 program year; (3) adopting the Screening 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; (4) adopting the Screen Positive Rate 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; (5) updating the data collection and reporting for the 
HCAHPS Survey Measure (NQF #0166) beginning with the FY 2027 program 
year; (6) modifying the COVID-19 Vaccination Coverage among 
Healthcare Personnel (HCP) measure beginning with the FY 2025 
program year; and (7) beginning 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 final 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 finalized 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 final 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 final rule, we are 
adopting the Documentation of Goals of Care Discussions Among Cancer 
Patients measure beginning with the FY 2026 program year. This 
measure will 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 will 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. of the 
preamble of this final rule) and estimate a

[[Page 59432]]

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 final rule, we are 
adopting the Facility Commitment to Health Equity measure. In order 
for PCHs to receive credit for all of the five domains in the 
measure, affirmative attestations are required for all of those 
domains. For PCHs that are unable to attest affirmatively for a 
domain, there are likely to be additional costs associated with 
activities which could include updating hospital policies, engaging 
senior leadership, participating in new quality improvement 
activities, performing additional data analysis, or training staff. 
The extent of these costs will vary from PCH to PCH depending on 
what activities the PCH is already performing, size, and the 
individual choices each PCH makes to meet the criteria necessary to 
attest affirmatively.
    In section IX.D.4. of the preamble of this final rule, we are 
adopting the Screening for Social Drivers of Health measure with 
voluntary reporting with the FY 2026 program year and mandatory 
reporting beginning with 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 will 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 final rule, we are 
modifying 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 PCHs to 
update IT systems or workflow related to maintaining accurate 
vaccination records for HCP, we assume most PCHs are currently 
recording all necessary information for HCP such that this 
modification will 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 policies will result in any 
additional economic impact.

M. Effects of Requirements for the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)

    In section IX.G. of the preamble of this final rule, we proposed 
to modify one measure, adopt two measures and remove two measures 
from the LTCH QRP. Specifically, we proposed 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 
proposed 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 proposed to begin 
publicly displaying data for the quality measures TOH-Patient, TOH-
Provider, DC Function, and Patient/Resident COVID-19 Vaccine 
measures. We proposed to increase the LTCH QRP data completion 
thresholds for the LCDS items beginning with the FY 2026 LTCH QRP. 
Finally, we sought information on principles for selecting and 
prioritizing LTCH QRP quality measures and concepts for measure 
development and provided 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 did not propose any updates to the form, 
manner, and timing of data submission for this measure, there will 
be no increase in burden associated with the proposal.
    The effect of the remaining proposals for the LTCH QRP will 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 final 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 LTCH QRPs compared to our currently approved information 
collection burden estimates. We refer readers to section XII.B.8. of 
the preamble of this final 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.

N. Effects of Requirements Regarding the Medicare Promoting 
Interoperability Program

    In section IX.F of this final rule, we are finalizing 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 eCQM beginning with the CY 2025 reporting period; 
(2) adoption of the Hospital Harm--Acute Kidney 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 (Hospital Level--Inpatient) 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) establishment of an EHR 
reporting period of a minimum of any continuous 180-day period in CY 
2025. As discussed in section XII.B.9 of the preamble of this final 
rule, we do not estimate a change in total information collection 
burden associated with our finalized policies.
    In section IX.F.7.a.(2). of the preamble of this final rule, we 
are adopting 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 the finalized 
policies with regard to submission of measure data, we believe that 
costs associated with adopting three new eCQMs are multifaceted and 
include not only the burden associated with reporting, but also the 
costs associated with implementing and maintaining all of the eCQMs 
available for use in the Medicare Promoting Interoperability Program 
in hospitals' and CAHs' EHR systems (83 FR 41771).
    In section IX.F.3. of the preamble of this final rule, we are 
modifying 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 FY 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). As a result of 
this finalized policy, eligible hospitals and CAHs will 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 
will spend performing each self-assessment or the staff they would 
utilize. Therefore, we estimate the time required to conduct each 
self-assessment will range from approximately 30 minutes per guide 
to approximately 20 minutes per recommendation.\20\ Across the

[[Page 59433]]

nine SAFER Guides and 165 recommendations within them, the estimated 
time to complete all nine self-assessments will 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. The following table provides 
the detail of our calculated cost to conduct SAFER Guide self-
assessments.
---------------------------------------------------------------------------

    \20\ Toward More Proactive Approaches to Safety in the 
Electronic Health Record Era. Available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8136246/. Accessed July 13, 
2023.
    \21\ https://www.bls.gov/oes/current/oes_nat.htm. Accessed 
December 14, 2022.
[GRAPHIC] [TIFF OMITTED] TR28AU23.372

    Using the cost to complete all nine self-assessments from Table 
XX, 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) to 
attest ``yes'' to the measure. We did not receive any public 
comments regarding our assumptions or estimate of economic impact 
associated with the 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.\22\
---------------------------------------------------------------------------

    \22\ https://www.eisneramper.com/safer-guides-healthcare-organizations-0822/. Accessed December 14, 2022.
---------------------------------------------------------------------------

O. Alternatives Considered

    This final rule contains a range of policies. It also provides 
descriptions of the statutory provisions that are addressed, 
identifies the finalized policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered.

1. Alternatives Considered to the Hospital Wage Index Calculations

    As discussed in section III.G.1. of the preamble of this final 
rule, we are finalizing our proposal 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) in accordance with 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 including the 
data of all Sec.  412.103 hospitals (including those that have an 
MGCRB reclassification when appropriate) 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 final rule, we acknowledge that 
these policies will have significant effects on wage index values. 
In addition, as a result of this change, both the geographic 
reclassification budget neutrality adjustment and the rural floor 
budget neutrality adjustment are significantly larger than in prior 
years.
    Considering past concerns with hospitals' use of Sec.  412.103 
reclassification to increase the rural wage index and rural floor 
(as discussed in prior rulemaking (72 FR 47371 through 47373, 84 FR 
42332, and 85 FR 58788) and in this rule), 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, after revisiting the case 
law, prior public comments, and the relevant statutory language, 
along with public comments on the proposed rule, we now agree 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. We 
are influenced by the fact that courts have largely adopted this 
interpretation of section 1886(d)(8)(E) of the Act, 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 further note that such unwindings may 
have budget neutrality implications. Therefore, after consideration 
of public comments, we determined that it was necessary to finalize 
our proposal 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 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 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

[[Page 59434]]

as provide data to patients and caregivers through transparency of 
data. Therefore, these measures have the potential to generate 
actionable data on COVID-19 vaccination rates.

3. Alternatives Considered to the 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 was 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. However, after consideration of 
the public comments we received, we are finalizing our proposal to 
require LTCHs to report 100 percent of the required quality measures 
data and standardized patient assessment data collected using the 
LCDS on at least 85 percent of all assessments submitted beginning 
with the FY 2026 payment determination and subsequent years.

4. Alternatives Considered for the 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,\23\ and no longer provide meaningful distinctions in 
improvements in performance. Therefore, no alternatives were 
considered.
---------------------------------------------------------------------------

    \23\ 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 changes to the LTCH QRP will 
result in an overall decrease in burden for LTCHs, and we believe 
the importance of the information necessitates these provisions.

P. Overall Conclusion

1. Acute Care Hospitals

    Acute care hospitals are estimated to experience an increase of 
approximately $2.2 billion in FY 2024, including operating, capital, 
and new technology changes. The estimated change in operating 
payments is approximately $2.1 billion (discussed in section I.F. 
and I.G. of this appendix). The estimated change in capital payments 
is approximately $0.474 billion (discussed in section I.I. of this 
appendix). The estimated change in new technology add-on payments is 
approximately -$0.364 billion as discussed in section I.G. of this 
appendix. 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 will experience a 6.6 percent 
increase in capital payments per case, as shown in Table III. of 
section I.I. of this appendix. We project that there will be a $474 
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 final rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments in FY 2024. In the impact analysis, we are using 
the rates, factors, and policies presented in this final rule based 
on the best available claims and CCR data to estimate the change in 
payments under the LTCH PPS for FY 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 increase 
approximately $6 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.

Q. 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 would review the final rule, we assumed that the total 
number of timely pieces of correspondence on this year's proposed 
rule would be the number of reviewers of the final rule. We 
acknowledge that this assumption may understate or overstate the 
costs of reviewing the rule. It is possible that not all commenters 
reviewed this 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 the final 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 3,274 number of timely pieces of 
correspondence on the FY 2024 IPPS/LTCH PPS proposed rule as our 
estimate for the number of reviewers of the final rule. We continue 
to acknowledge the uncertainty involved with using this number, but 
we believe it is a fair estimate due to the variety of entities 
affected and the likelihood that some of them choose to rely (in 
full or in part) on press releases, newsletters, fact sheets, or 
other sources rather than the comprehensive review of preamble and 
regulatory text. Using the wage information from the BLS for medical 
and health service managers (Code 11-9111), we estimate that the 
cost of reviewing the final 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 24.35 hours for the staff to review half of 
this final rule. For each IPPS hospital or LTCH that reviews this 
final rule, the estimated cost is $2,805.61 (24.35 hours x $115.22). 
Therefore, we estimate that the total cost of reviewing this final 
rule is $9,185,567 ($2,805.61 x 3,274 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 final rule as 
they relate to acute care hospitals. This table provides our best 
estimate of the change in Medicare payments to providers as a result 
of the changes to the IPPS presented in this final rule. All 
expenditures are classified as transfers to Medicare providers.
    As shown in Table V. of this appendix, the net costs to the 
Federal Government associated with the policies in this final rule 
are estimated at $2.2 billion.

[[Page 59435]]

[GRAPHIC] [TIFF OMITTED] TR28AU23.373

B. LTCHs

    As discussed in section I.J. of this appendix, the impact 
analysis of the payment rates and factors presented in this final 
rule under the LTCH PPS is projected to result in an increase in 
estimated aggregate LTCH PPS payments in FY 2024 relative to FY 2023 
of approximately $6 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 final rule as 
they relate to the changes to the LTCH PPS. Table VI. of this 
appendix provides our best estimate of the estimated change in 
Medicare payments under the LTCH PPS as a result of the payment 
rates and factors and other provisions presented in this final 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 net cost to the 
Federal Government associated with the policies for LTCHs in this 
final rule are estimated at $6 million.
[GRAPHIC] [TIFF OMITTED] TR28AU23.374

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 final 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 final 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 final rule would have a 
significant economic impact on a substantial number of small 
entities. For example, the majority of the 3,131 IPPS hospitals 
included in the impact analysis shown in ``Table I.--Impact Analysis 
of Changes to the IPPS for Operating Costs for FY 2024,'' on average 
are expected to see increases in the range of 3.1 percent, primarily 
due to the hospital rate update, as discussed in section I.G. of 
this appendix. On average, the rate update for these hospitals is 
estimated to be 3.1 percent.
    The 333 LTCH PPS hospitals included in the impact analysis shown 
in ``Table IV: Impact of 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 0.2 percent, primarily due to the 2.9 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 final rule contains a range of final policies. It provides 
descriptions of the statutory provisions that are addressed, 
identifies the finalized 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 final rule constitutes our regulatory flexibility analysis. 
We solicited public comments on our estimates and analysis of the 
impact of our proposals on small entities.

IV. Impact on Small Rural Hospitals

    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed or final rule that may have a 
significant impact on the operations of a substantial number of 
small rural hospitals. This analysis must conform to the provisions 
of section 604 of the RFA. With the exception of hospitals located 
in certain New England counties, for purposes of section 1102(b) of 
the Act, we define a small rural hospital as a hospital that is 
located outside of an urban area and has fewer than 100 beds. 
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals.
    As shown in Table I. in section I.G. of this appendix, rural 
IPPS hospitals with 0-49 beds (363 hospitals) and 50-99 beds (188 
hospitals) are expected to experience an increase in payments from 
FY 2023 to FY 2024 of 3.1 percent and 4.0 percent, respectively, 
primarily driven by the hospital rate update and the 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 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 an increase in payments from FY 2023 to FY 
2024 of 0.3 percent. This increase is primarily due to the 3.3 
percent annual update to the LTCH PPS standard Federal payment rate 
for FY 2024

[[Page 59436]]

and the projected 2.9 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 final 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 final 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 final 
rule contains general provisions also applicable to hospitals and 
facilities operated by the Indian Health Service or Tribes or Tribal 
organizations under the Indian Self-Determination and Education 
Assistance Act. 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 the 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 final 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 
to MedPAC's recommended update factors for inpatient hospital 
services.

II. Inpatient Hospital Update for FY 2024

A. FY 2024 Inpatient Hospital Update

    As discussed in section IV.A. of the preamble to this final 
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 the FY 2024 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we proposed 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 was estimated to 
be 3.0 percent. In accordance with section 1886(b)(3)(B) of the Act, 
as amended by section 3401(a) of the Affordable Care Act, in section 
IV.B. of the preamble of the FY 2024 IPPS/LTCH PPS proposed rule, 
based on IGI's fourth quarter 2022 forecast, we proposed a 
productivity adjustment of 0.2 percentage point for FY 2024. We also 
proposed that if more recent data subsequently became e 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.
    In the FY 2024 IPPS/LTCH PPS proposed rule, 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 presented 4 possible applicable percentage increases that could 
be applied to the standardized amount.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, we are establishing 
the applicable percentages increase for the FY 2024 updates based on 
IGI's second quarter 2023 forecast of the 2018-based IPPS market 
basket of 3.3 percent and the productivity adjustment of 0.2 
percentage point, as discussed in section V.A of the preamble of 
this final rule, depending on whether a hospital submits quality 
data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, as shown in the table in this 
section.

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B. 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).
    Division FF, 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 final 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 establishing the same four 
possible applicable percentage increases in the previous table for 
the hospital-specific rate applicable to SCHs and MDHs.

C. 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 discussed under section IV.A.1. of the 
preamble of this final rule.
    In addition, as discussed in section IV.A.2. of the preamble of 
this final 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.
    Accordingly, 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, in the FY 2024 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, as previously discussed, for 
Puerto Rico hospitals, we proposed 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, we stated that there are two possible 
applicable percentage increases that can be applied to the 
standardized amount. Based on these data, we 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 proposed 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 proposed 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 proposed that if more recent data 
subsequently became 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.
    As discussed in section V.A.1. of the preamble of this final 
rule, based on more recent data available for this FY 2024 IPPS/LTCH 
PPS final rule (that is, IGI's second quarter 2023 forecast of the 
2018-based IPPS market basket rate-of-increase with historical data 
through the first quarter of 2023), we estimate that the FY 2024 
market basket update used to determine the applicable percentage 
increase for the IPPS is 3.3 percent less a productivity adjustment 
of 0.2 percentage point. Therefore, in accordance with section 
1886(b)(3)(B) of the Act, for this final rule, for Puerto Rico 
hospitals the more recent update of the market basket update is 3.3 
percent less a productivity adjustment of 0.2 percentage point. 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 determined 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, an applicable percentage increase to the FY 2024 operating 
standardized amount of 3.1 percent (that is, the FY 2024 estimate of 
the market basket rate-of-increase of 3.3 percent less 0.2 
percentage point for the productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, an applicable percentage increase to the operating 
standardized amount of 0.625 percent (that is, the FY 2024 estimate 
of the market basket rate-of-increase of 3.3 percent, less an 
adjustment of 2.475 percentage point (the market basket rate-of-
increase of 3.3 percent x 0.75 for failure to be a meaningful EHR 
user), and less 0.2 percentage point for the productivity 
adjustment).

D. 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).

[[Page 59438]]

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 final rule, we are finalizing our proposal 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 
final rule, the current estimate of the IPPS operating market basket 
percentage increase for FY 2024 is 3.3 percent.

E. 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 final rule, 
we are updating the LTCH PPS standard Federal payment rate for FY 
2024 by 3.3 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 
reducing the annual update to the LTCH PPS standard Federal rate by 
2.0 percentage points for failure of a LTCH to submit the required 
quality data. Accordingly, we are establishing an update factor of 
1.033 in determining the LTCH PPS standard Federal rate for FY 2024. 
For LTCHs that fail to submit quality data for FY 2024, we are 
establishing an annual update to the LTCH PPS standard Federal rate 
of 1.3 percent (that is, the annual update for FY 2024 of 3.3 
percent less 2.0 percentage points for failure to submit the 
required quality data in accordance with section 1886(m)(5)(C) of 
the Act and our rules) by applying an update factor of 1.013 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 final 
rule, the update to the LTCH PPS standard Federal payment rate of 
3.3 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 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. 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 3.3 percent.
    For FY 2024, consistent with policy set forth in section VII. of 
the preamble of this final rule, for LTCHs that submit quality data, 
we are recommending an update of 3.3 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 1.3 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 that the 
Congress update 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 sought comments on approaches CMS could take. We are 
establishing an applicable percentage increase for FY 2024 of 3.1 
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 update to the capital rate is discussed in 
section III. of the Addendum to this final 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 
final 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 final rule for a further discussion of Medicare DSH and 
uncompensated care payments.

[FR Doc. 2023-16252 Filed 8-1-23; 4:15 pm]
BILLING CODE 4120-01-P