[Federal Register Volume 89, Number 86 (Thursday, May 2, 2024)]
[Proposed Rules]
[Pages 35934-36649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07567]



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Vol. 89

Thursday,

No. 86

May 2, 2024

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 412, 413, 431, et al.





Medicare and Medicaid Programs and the Children's Health Insurance 
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 2025 Rates; Quality Programs 
Requirements; and Other Policy Changes; Proposed Rule

  Federal Register / Vol. 89, No. 86 / Thursday, May 2, 2024 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 431, 482, 485, 495, and 512

[CMS-1808-P]
RIN 0938-AV34


Medicare and Medicaid Programs and the Children's Health 
Insurance 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 2025 Rates; Quality 
Programs Requirements; and Other Policy Changes

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals; make changes relating to 
Medicare graduate medical education (GME) for teaching hospitals; 
update the payment policies and the annual payment rates for the 
Medicare prospective payment system (PPS) for inpatient hospital 
services provided by long-term care hospitals (LTCHs); and make other 
policy-related changes.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided in the ADDRESSES section, no later than 5 p.m. 
EDT on June 10, 2024.

ADDRESSES: In commenting, please refer to file code CMS-1808-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Comments, including mass comment 
submissions, must be submitted in one of the following three ways 
(please choose only one of the ways listed):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to https://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1808-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1808-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, and Michele Hudson, 
(410) 786-4487 or [email protected], Operating Prospective Payment, MS-
DRG Relative Weights, Wage Index, Hospital Geographic 
Reclassifications, Graduate Medical Education, Capital Prospective 
Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital 
(DSH) Payment Adjustment, Sole Community Hospitals (SCHs), Medicare-
Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital 
Payment Adjustment, and Inpatient Critical Access Hospital (CAH) 
Issues.
    Emily Lipkin, and Jim Mildenberger, [email protected], Long-Term Care 
Hospital Prospective Payment System and MS-LTC-DRG Relative Weights 
Issues.
    Lily Yuan, [email protected], New Technology Add-On Payments 
Issues.
    Mady Hue, [email protected], and Andrea Hazeley, 
[email protected], MS-DRG Classifications Issues.
    Siddhartha Mazumdar, siddhartha.mazumdar @cms.hhs.gov, Rural 
Community Hospital Demonstration Program Issues.
    Jeris Smith, [email protected], Frontier Community Health 
Integration Project (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.
    Lorraine Wickiser, [email protected], Long-Term Care 
Hospital Quality Reporting Program--Administration Issues.
    Jessica Warren, [email protected], and Elizabeth Holland, 
[email protected], Medicare Promoting Interoperability 
Program.
    Bridget Dickensheets, [email protected] and Mollie 
Knight, [email protected], LTCH Market Basket Rebasing.
    Benjamin Cohen, [email protected], Provider Reimbursement 
Review Board.
    [email protected] and [email protected], 
Payment Error Rate Measurement Program.
    [email protected], Transforming Episode Accountability Model 
(TEAM).
    The Clinical Standards Group, [email protected], 
Obstetrical Services Request for Information (RFI).

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

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public comments. CMS will not post on Regulations.gov public comments 
that make threats to individuals or institutions or suggest that the 
commenter will take actions to harm an individual. CMS continues to 
encourage individuals not to submit duplicative comments. We will post 
acceptable comments from multiple unique commenters even if the content 
is identical or nearly identical to other comments.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
plain language summary of this rule may be found at https://www.regulations.gov/.

Tables Available on the CMS Website

    The IPPS tables for this fiscal year (FY) 2025 proposed 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 2025 IPPS Proposed rule Home 
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables 
for this FY 2025 proposed rule are available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation 
Number CMS-1808-P. For further details on the contents of the tables 
referenced in this proposed rule, we refer readers to section VI. of 
the Addendum to this FY 2025 IPPS/LTCH PPS proposed rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites, as previously identified, should 
contact Michael Treitel, [email protected].

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2025 IPPS/LTCH PPS proposed rule would make payment and 
policy changes under the Medicare inpatient prospective payment system 
(IPPS) for operating and capital-related costs of acute care hospitals 
as well as for certain hospitals and hospital units excluded from the 
IPPS. In addition, it would make payment and policy changes for 
inpatient hospital services provided by long-term care hospitals 
(LTCHs) under the long-term care hospital prospective payment system 
(LTCH PPS). This proposed rule also would make policy changes to 
programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs. In this FY 2025 proposed rule, we are proposing 
to continue policies to address wage index disparities impacting low 
wage index hospitals. We are also proposing changes relating to 
Medicare graduate medical education (GME) for teaching hospitals and 
new technology add-on payments.
    We are proposing a separate IPPS payment for establishing and 
maintaining access to essential medicines.
    In the Hospital Value-Based Purchasing (VBP) Program, we are 
proposing to modify scoring of the Person and Community Engagement 
Domain for the FY 2027 through FY 2029 program years to only score six 
unchanged dimensions of the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey, and we are proposing to adopt 
the updated HCAHPS Survey in the Hospital VBP Program beginning with 
the FY 2030 program year after the updated survey would have been 
publicly reported under the Hospital Inpatient Quality Reporting (IQR) 
Program for 1 year. We are also proposing to modify scoring on the 
HCAHPS Survey beginning with the FY 2030 program year to incorporate 
the updated HCAHPS Survey measure into nine survey dimensions. Lastly, 
we are providing previously and newly established performance standards 
for the FY 2027 through FY 2030 program years for the Hospital VBP 
Program.
    In the Hospital IQR Program, we are proposing to add seven new 
measures, modify two existing measures including the HCAHPS Survey 
measure, and remove five measures. We are also proposing changes to the 
reporting and submission requirements for electronic clinical quality 
measures (eCQMs) and the validation process for the Hospital IQR 
Program data.
    In the PPS-Exempt Cancer Hospital Quality Reporting Program 
(PCHQR), we are proposing to adopt the Patient Safety Structural 
measure beginning with the CY 2025 reporting period/FY 2027 program 
year. We are also proposing to modify the HCAHPS Survey measure and to 
move up the start date for publicly displaying hospital performance on 
the Hospital Commitment to Health Equity measure.
    In the LTCH QRP, we are proposing to add four items to the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) and 
modify one item on the LCDS beginning with the FY 2028 LTCH QRP. 
Additionally, we are proposing to extend the admission assessment 
window for the LCDS beginning with the FY 2028 LTCH QRP. Finally, we 
are seeking information on future measure concepts for the LTCH QRP and 
a future LTCH Star Rating system.
    In the Medicare Promoting Interoperability Program, we are 
proposing to separate the Antimicrobial Use and Resistance (AUR) 
Surveillance measure into two measures, an Antimicrobial Use (AU) 
Surveillance measure and an Antimicrobial Resistance (AR) Surveillance 
measure, beginning with the electronic health record (EHR) reporting 
period in CY 2025. We are proposing to increase the performance-based 
scoring threshold from 60 to 80 points beginning with the EHR reporting 
period in CY 2025. We are proposing to adopt two new eCQMs and modify 
one eCQM, in alignment with the Hospital IQR Program. Finally, we are 
proposing changes to the reporting and submission requirements for 
eCQMs, in alignment with the Hospital IQR Program.
    The Transforming Episode Accountability Model (TEAM) proposes the 
creation and testing of a new mandatory alternative payment model. The 
intent of TEAM is to improve beneficiary care through financial 
accountability for episodes categories that begin with one of the 
following procedures: coronary artery bypass graft (CABG), lower 
extremity joint replacement (LEJR), major bowel procedure, surgical 
hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM would 
test whether financial accountability for these episode categories 
reduces Medicare expenditures while preserving or enhancing the quality 
of care for Medicare beneficiaries. We anticipate that TEAM would 
benefit Medicare beneficiaries through improving the coordination of 
items and services paid for through Medicare fee-for-service (FFS) 
payments, encouraging provider investment in health care infrastructure 
and redesigned care processes, and incentivizing higher value care 
across the inpatient and post-acute care settings for the episode. We 
propose to test TEAM for a 5-year model performance period, beginning 
January 1, 2026, and ending December 31, 2030. Under the Quality 
Payment Program (QPP), we anticipate that TEAM would be an Advanced 
Alternative Payment Model (APM)for Track 2 and Track 3 and a Merit-
based Incentive Payment System (MIPS) APM for all participation tracks.
    Under various statutory authorities, we either discuss continued 
program implementation or propose to make changes to the Medicare IPPS, 
the LTCH PPS, other related payment methodologies and programs for FY 
2025 and subsequent fiscal years, and

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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 period 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 adjustment 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 based on their performance on measures established for a 
performance period for such fiscal year.
     Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to 
applicable hospitals are adjusted to provide an incentive to reduce 
hospital-acquired conditions.
     Section 1886(q) of the Act, as amended by section 15002 of 
the 21st Century Cures Act, which establishes the Hospital Readmissions 
Reduction Program. Under the program, payments for discharges from an 
applicable hospital as defined under section 1886(d) of the Act will be 
reduced to account for certain excess readmissions. Section 15002 of 
the 21st Century Cures Act directs the Secretary to compare hospitals 
with respect to the number of their Medicare-Medicaid dual-eligible 
beneficiaries in determining the extent of excess readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital (DSH) payments under section 
1886(d)(5)(F) of the Act and for an additional uncompensated care 
payment to eligible hospitals. Specifically, section 1886(r) of the Act 
requires that, for fiscal year 2014 and each subsequent fiscal year, 
subsection (d) hospitals that would otherwise receive a DSH payment 
made under section 1886(d)(5)(F) of the Act will receive two separate 
payments: (1) 25 percent of the amount they previously would have 
received under the statutory formula for Medicare DSH payments in 
section 1886(d)(5)(F) of the Act if subsection (r) did not apply (``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 2 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 on 
quality measures 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, which provides for the 
establishment of standardized data reporting for certain

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post-acute care providers, including LTCHs.
     Section 1115A of the Act authorizes the testing of 
innovative payment and service delivery models that preserve or enhance 
the quality of care furnished to Medicare, Medicaid, and Children's 
Health Insurance Program (CHIP) beneficiaries while reducing program 
expenditures.
2. Summary of the Major Provisions
    The following is a summary of the major provisions in this proposed 
rule. In general, these major provisions are being proposed as part of 
the annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
changes in this proposed rule is presented in section I.D. of the 
preamble of this proposed rule.
a. Proposed Continuation of the Low Wage Index Hospital Policy
    To help mitigate growing wage index disparities between high wage 
and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 
through 42332), we adopted a policy to increase the wage index values 
for certain hospitals with low wage index values (the low wage index 
hospital policy). This policy was adopted in a budget neutral manner 
through an adjustment applied to the standardized amounts for all 
hospitals. We 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.5. of the preamble of this proposed rule, 
while we are using the FY 2021 cost report data for the FY 2025 wage 
index, we are unable to comprehensively evaluate the effect, if any, 
the low wage index hospital policy had on hospitals' wage increases 
during the years the COVID-19 public health emergency (PHE) was in 
effect. We believe it is necessary to wait until we have useable data 
from fiscal years after the PHE before reaching any conclusions about 
the efficacy of the policy. Therefore, we are proposing that the low 
wage index hospital policy and the related budget neutrality adjustment 
would be effective for at least three more years, beginning in FY 2025.
b. Proposed Separate IPPS Payment for Establishing and Maintaining 
Access to Essential Medicines
    As discussed in section V.J. of the preamble of this proposed rule, 
the Biden-Harris administration has made it a priority to strengthen 
the resilience of medical supply chains and support reliable access to 
products for public health, including through prevention and mitigation 
of medical product shortages. As a first step in this initiative, we 
are proposing to establish a separate payment for small, independent 
hospitals for the IPPS shares of the additional resource costs to 
voluntarily establish and maintain a 6-month buffer stock of one or 
more of 86 essential medicines, either directly or through contractual 
arrangements with a pharmaceutical manufacturer, distributor, or 
intermediary. For the purposes of this policy, we define small, 
independent hospitals as hospitals with 100 beds or fewer that are not 
part of a chain organization. We are proposing to make this separate 
payment in a non-budget neutral manner under section 1886(d)(5)(I) of 
the Act. We are proposing that the payment adjustments would commence 
for cost reporting periods beginning on or after October 1, 2024.
c. DSH Payment Adjustment, Additional Payment for Uncompensated Care, 
and Supplemental Payment
    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 would have 
been paid as Medicare DSH payments under section 1886(d)(5)(F) of the 
Act if subsection (r) did not apply, is paid as additional payments 
after the amount is reduced for changes in the percentage of 
individuals that are uninsured. Each Medicare DSH that has 
uncompensated care 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. This additional payment is known as the 
uncompensated care payment.
    In this proposed rule, we are proposing to update our estimates of 
the three factors used to determine uncompensated care payments for FY 
2025. We are also proposing to continue to use uninsured estimates 
produced by CMS' Office of the Actuary (OACT) as part of the 
development of the National Health Expenditure Accounts (NHEA) in 
conjunction with more recently available data in the calculation of 
Factor 2. Consistent with the regulation at Sec.  
412.106(g)(1)(iii)(C)(11), which was adopted in the FY 2023 IPPS/LTCH 
PPS final rule, for FY 2025, we will use the 3 most recent years of 
audited data on uncompensated care costs from Worksheet S-10 of the FY 
2019, FY 2020, and FY 2021 cost reports to calculate Factor 3 in the 
uncompensated care payment methodology for all eligible hospitals.
    Beginning with FY 2023 (87 FR 49047 through 49051), we also 
established a supplemental payment for IHS and Tribal hospitals and 
hospitals located in Puerto Rico. In section IV.D of the preamble of 
this proposed rule, we summarize the ongoing methodology for 
supplemental payments.
    In this proposed rule, we are also proposing, for FY 2025 and 
subsequent fiscal years, to calculate the per-discharge amount for 
interim uncompensated care payments using the average of the most 
recent 3 years of discharge data. Accordingly, for FY 2025, we propose 
to use an average of discharge data from FY 2021, FY 2022, and FY 2023. 
We believe that our proposed approach will likely result in a better 
estimate of the number of discharges during FY 2025 and subsequent 
years for purposes of the interim uncompensated care payment 
calculation. We propose to codify this proposed approach in new Sec.  
412.106(i)(1).
d. Proposed Adoption of the Patient Safety Structural Measure in the 
Hospital IQR Program and PCHQR Program
    The proposed Patient Safety Structural measure is an attestation-
based measure that assesses whether hospitals have a structure and 
culture that prioritizes safety as demonstrated by the following five 
domains: (1) leadership commitment to eliminating preventable harm; (2) 
strategic planning and organizational policy; (3) culture of safety and 
learning health system; (4) accountability and transparency; and (5) 
patient and family engagement. Hospitals would attest to whether they 
engage in specific evidence-based best practices within each of these 
domains to achieve a score from zero to five out of five points. We are 
proposing that hospitals would be required to report this measure 
beginning with the CY 2025 reporting period/FY 2027 program year for 
the PCHQR Program and for the CY 2025 reporting period/FY 2027 payment 
determination for the Hospital IQR Program.

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e. Proposed Updated Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure in the Hospital IQR 
Program, Hospital VBP Program, and PCHQR Program
    The proposal to use the updated version of the HCAHPS Survey 
measure aligns with the National Quality Strategy goal to bring patient 
voices to the forefront by incorporating feedback from patients and 
caregivers. The proposed updated HCAHPS Survey measure would be adopted 
for the Hospital IQR and PCHQR Programs beginning with the CY 2025 
reporting period/FY 2027 payment determination and the CY 2025 
reporting period/FY 2027 program year, respectively. For the Hospital 
VBP Program, we are proposing to modify scoring on the Person and 
Community Engagement Domain for the FY 2027 through FY 2029 program 
years to only score six unchanged dimensions of the HCAHPS Survey. We 
are proposing to adopt the updated HCAHPS Survey measure beginning with 
the FY 2030 program year, which would result in nine HCAHPS Survey 
dimensions for the Person and Community Engagement Domain. We are also 
proposing to modify scoring of the Person and Community Engagement 
Domain beginning with the FY 2030 program year to account for the 
proposed updates to the HCAHPS Survey.
f. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. In 
this proposed rule, we are proposing to modify scoring on the Person 
and Community Engagement Domain for the FY 2027 through FY 2029 program 
years while the updated HCAHPS Survey measure would be publicly 
reported under the Hospital IQR Program. In addition, we are proposing 
to adopt the updated HCAHPS Survey measure beginning with the FY 2030 
program year and modify scoring beginning with the FY 2030 program year 
to account for the updated HCAHPS Survey.
g. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) 
hospitals are required to report data on measures selected by the 
Secretary for a fiscal year in order to receive the full annual 
percentage increase. In the FY 2025 IPPS/LTCH PPS proposed rule, we are 
proposing several changes to the Hospital IQR Program. We are proposing 
the adoption of seven new measures: (1) Patient Safety Structural 
measure beginning with the CY 2025 reporting period/FY 2027 payment 
determination; (2) Age Friendly Hospital measure beginning with the CY 
2025 reporting period/FY 2027 payment determination; (3) Catheter-
Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio 
Stratified for Oncology Locations beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (4) Central Line-Associated 
Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified 
for Oncology Locations beginning with the CY 2026 reporting period/FY 
2028 reporting period; (5) Hospital Harm--Falls with Injury eCQM 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (6) Hospital Harm--Postoperative Respiratory Failure 
eCQM beginning with the CY 2026 reporting period/FY 2028 payment 
determination; and (7) Thirty-day Risk-Standardized Death Rate among 
Surgical Inpatients with Complications (Failure-to-Rescue) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 
payment determination. We are also proposing refinements to two 
measures currently in the Hospital IQR Program measure set: (1) Global 
Malnutrition Composite Score (GMCS) eCQM, beginning with the CY 2026 
reporting period/FY 2028 payment determination; and (2) the HCAHPS 
Survey beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We are also proposing the removal of five measures: (1) 
Death Among Surgical Inpatients with Serious Treatable Complications 
(CMS PSI 04) measure beginning with the July 1, 2023-June 30, 2025 
reporting period/FY 27 payment determination ; (2) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Acute Myocardial Infarction (AMI) measure beginning with the July 1, 
2021-June 30, 2024 reporting period/FY 2026 payment determination; (3) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Heart Failure (HF) measure beginning with the July 
1, 2021-June 30, 2024 reporting period/FY 2026 payment determination; 
(4) Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Pneumonia (PN) measure beginning with July 1, 2021-
June 30, 2024 reporting period/FY 2026 payment determination and (5) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 
2021-March 31, 2024 reporting period/FY 2026 payment determination.
    We are proposing to modify eCQM data reporting and submission 
requirements by proposing a progressive increase in the number of 
mandatory eCQMs a hospital would be required to report on beginning 
with the CY 2026 reporting period/FY 2028 payment determination. We are 
also proposing two changes to current policies related to validation of 
hospital data: (1) to implement eCQM validation scoring based on the 
accuracy of eCQM data beginning with the validation of CY 2025 eCQM 
data affecting the FY 2028 payment determination; and (2) modification 
of the data validation reconsideration request requirements to make 
medical records submission optional for reconsideration requests 
beginning with CY 2023 discharges/FY 2026 payment determination.
h. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 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. In the FY 2025 IPPS/LTCH PPS proposed 
rule, we are proposing to adopt the Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 program year. We 
are also proposing to modify the HCAHPS Survey measure beginning with 
the CY 2025 reporting period/FY 2027 program year. We are also 
proposing to move up the start date for publicly displaying hospital 
performance on the Hospital Commitment to Health Equity measure from 
July 2026 to January 2026 or as soon as feasible thereafter.
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    We are proposing the following changes to the LTCH QRP: (1) add 
four items to the LCDS beginning with the FY 2028 LTCH QRP; (2) modify 
one item on the LCDS beginning with the FY 2028 LTCH QRP; and (3) 
extend the admission assessment window for the LCDS beginning with the 
FY 2028 LTCH QRP. We are also seeking information on future measure 
concepts for the

[[Page 35939]]

LTCH QRP and a future LTCH Star Rating system.
j. Medicare Promoting Interoperability Program
    In section X.F. of the preamble of this proposed rule, we are 
proposing several changes to the Medicare Promoting Interoperability 
Program. Specifically, we are proposing: (1) to separate the 
Antimicrobial Use and Resistance (AUR) Surveillance measure into two 
measures, an Antimicrobial Use (AU) Surveillance measure and an 
Antimicrobial Resistance (AR) Surveillance measure, beginning with the 
EHR reporting period in CY 2025; to add a new exclusion for eligible 
hospitals or critical access hospitals (CAHs) that do not have a data 
source containing the minimal discrete data elements that are required 
for AU or AR Surveillance reporting; to modify the applicability of the 
existing exclusions to either the AU or AR Surveillance measures, 
respectively; and to treat the AU and AR Surveillance measures as new 
measures with respect to active engagement beginning with the EHR 
reporting period in CY 2025; (2) to increase the performance-based 
scoring threshold for eligible hospitals and CAHs reporting under the 
Medicare Promoting Interoperability Program from 60 points to 80 points 
beginning with the EHR reporting period in CY 2025; (3) to adopt two 
new eCQMs that hospitals can select as one of their three self-selected 
eCQMs beginning with the CY 2026 reporting period: the Hospital Harm--
Falls with Injury eCQM and the Hospital Harm--Postoperative Respiratory 
Failure eCQM; (4) beginning with the CY 2026 reporting period, to 
modify one eCQM, the Global Malnutrition Composite Score eCQM; and (5) 
to modify eCQM data reporting and submission requirements by proposing 
a progressive increase in the number of mandatory eCQMs eligible 
hospitals and CAHs would be required to report on beginning with the CY 
2026 reporting period.
k. Proposed Distribution of Additional Residency Positions Under the 
Provisions of Section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023 (CAA, 2023)
    In this proposed rule, we are including a proposal to implement 
section 4122 of the CAA, 2023. Section 4122(a) of the CAA, 2023, 
amended section 1886(h) of the Act by adding a new section 1886(h)(10) 
of the Act requiring the distribution of additional residency positions 
(also referred to as slots) to hospitals. We refer readers to section 
V.F.2. of the preamble of this proposed rule for a summary of the 
provisions of section 4122 of the CAA, 2023 that we are proposing to 
implement in this proposed rule.
l. Extension of the Medicare-Dependent, Small Rural Hospital (MDH) 
Program and the Temporary Changes to the Low-Volume Hospital Payment 
Adjustment
    The Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-
42), enacted on March 9, 2024, extended the MDH program and the 
temporary changes to the low-volume hospital qualifying criteria and 
payment adjustment under the IPPS for a portion of FY 2025. 
Specifically, section 306 of the CAA, 2024 further extended the 
modified definition of low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals under 
section 1886(d)(12) of the Act through December 31, 2024. Section 307 
of the CAA, 2024 extended the MDH program under section 1886(d)(5)(G) 
of the Act through December 31, 2024. Prior to enactment of the CAA, 
2024, the low-volume hospital qualifying criteria and payment 
adjustment were set revert to the statutory requirements that were in 
effect prior to FY 2011 at the end of FY 2024 and beginning October 1, 
2024, the MDH program would have no longer been in effect.
    We recognize the importance of these extensions with respect to the 
goal of advancing health equity by addressing the health disparities 
that underlie the health system is one of CMS' strategic pillars \1\ 
and a Biden-Harris Administration priority.\2\ These provisions are 
projected to increase payments to IPPS hospitals by approximately $137 
million in FY 2025.
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    \1\ https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan.
    \2\ https://www.whitehouse.gov/priorities/.

m. Transforming Episode Accountability Model (TEAM)
    In section X.A. of the preamble of this proposed rule, we propose 
the Transforming Episode Accountability Model (TEAM). TEAM would be a 
5-year mandatory model tested under the authority of section 1115A of 
the Act, beginning on January 1, 2026, and ending on December 31, 2030. 
The intent of TEAM is to improve beneficiary care through financial 
accountability for episodes categories that begin with one of the 
following procedures: coronary artery bypass (CABG), lower extremity 
joint replacement (LEJR), major bowel procedure, surgical hip/femur 
fracture treatment (SHFFT), and spinal fusion. TEAM would test whether 
financial accountability for these episode categories reduces Medicare 
expenditures while preserving or enhancing the quality of care for 
Medicare beneficiaries.
    Under Traditional Medicare, Medicare makes separate payments to 
providers and suppliers for the items and services furnished to a 
beneficiary over the course of an episode of care. Because providers 
and suppliers are paid for each individual item or service delivered, 
providers may not be incentivized to invest in quality improvement and 
care coordination activities. As a result, care may be fragmented, 
unnecessary, or duplicative. By holding hospitals accountable for all 
items and services provided during an episode, providers would be 
better incentivized to coordinate patient care, avoid duplicative or 
unnecessary services, and improve the beneficiary care experience 
during care transitions.
    Under the TEAM proposals, all acute care hospitals, with limited 
exceptions, located within the Core-Based Statistical Areas that CMS 
selects for model implementation would be required to participate in 
TEAM. As proposed, TEAM would have a 1-year glide path opportunity that 
would allow TEAM participants to ease into full financial risk as well 
as different participation tracks to accommodate different levels of 
financial risk and reward. Episodes would include non-excluded Medicare 
Parts A and B items and services and would begin with an anchor 
hospitalization or anchor procedure and would end 30 days after 
hospital discharge. We are proposing that the following episode 
categories, when furnished by a TEAM participant, would initiate a TEAM 
Episode: lower extremity joint replacement, surgical hip femur fracture 
treatment, spinal fusion, coronary artery bypass graft, and major bowel 
procedure.
    TEAM participants would continue to bill Medicare FFS as usual but 
would receive target prices for episodes prior to each performance 
year. Target prices would be based on 3 years of baseline data, 
prospectively trended forward to the relevant performance year, and 
calculated at the level of MS-DRG/HCPCS episode type and region. Target 
prices would also include a discount factor, normalization factor, and 
a risk-adjustment. Performance in the model would be assessed by 
comparing TEAM participants' actual Medicare FFS spending during a 
performance year to their reconciliation target price as well as by 
assessing performance on three quality measures. TEAM participants 
would earn a payment from CMS, subject to a quality performance

[[Page 35940]]

adjustment, if their spending is below the reconciliation target price. 
TEAM participants would owe CMS a repayment amount, subject to a 
quality performance adjustment, if their spending was above the 
reconciliation target price.
n. Maternity Care Request for Information (RFI)
    In alignment with our commitment to addressing the maternal health 
crisis, this RFI seeks to gather information on differences between 
hospital resources required to provide inpatient pregnancy and 
childbirth services to Medicare patients as compared to non-Medicare 
patients. To the extent that the resources required differ between 
patient populations, we also wish to gather information on the extent 
to which non-Medicare payers, or other commercial insurers may be using 
the IPPS as a basis for determining their payment rates for inpatient 
pregnancy and childbirth services and the effect, if any, that the use 
of the IPPS as a basis for determining payment by those payers may have 
on maternal health outcomes.
o. Obstetrical Services RFI
    As a result of ongoing concerns about the provision of maternity 
care in Medicare and Medicaid certified hospitals, CAHS, and REHs, this 
proposed rule includes a request for information regarding our intent 
to propose baseline health and safety standards for obstetrical 
services in future rulemaking. Public comments on the FY 2023 IPPS/LTCH 
PPS proposed rule maternal health request for information recommended 
that CMS explore options to establish an Obstetrical Services condition 
of participation (CoP) for participating hospitals in collaboration 
with relevant stakeholders. With this RFI, we hope to further explore 
such options as we develop a proposal for a targeted Obstetrical 
Services CoP. We are seeking public comment on multiple detailed 
questions, ultimately seeking potential solutions that can be 
implemented through the hospital CoPs to address well-documented 
concerns regarding maternal morbidity, mortality, and access in the 
United States. The goal is to ensure that any policy changes improve 
maternal health care outcomes, addresses unjust disparities in care, 
and do not exacerbate access to care issues.
p. Conditions of Participation Requirements for Hospitals and Critical 
Access Hospitals To Report Acute Respiratory Illnesses
    In section X.F. of the preamble of this proposed rule, we are 
proposing to update the hospital and CAH infection prevention and 
control and antibiotic stewardship programs conditions of participation 
(CoPs) to extend a limited subset of the current COVID-19 and influenza 
data reporting requirements. These proposed reporting requirements 
ensure that hospitals and CAHs have appropriate insight related to 
evolving infection control needs. Specifically, CMS is proposing to 
replace the COVID-19 and Seasonal Influenza reporting standards for 
hospitals and CAHs with a new standard addressing acute respiratory 
illnesses to require that, beginning on October 1, 2024, hospitals and 
CAHs would have to electronically report information about COVID-19, 
influenza, and RSV. CMS is proposing that outside of a public health 
emergency (PHE), hospitals and CAHs would have to report these data on 
a weekly basis.
q. Proposed Changes to the Severity Level Designation for Z Codes 
Describing Inadequate Housing and Housing Instability
    As discussed in section II.C. of the preamble of this proposed 
rule, we are proposing to change the severity level designation for the 
social determinants of health (SDOH) diagnosis codes describing 
inadequate housing and housing instability from non-complication or 
comorbidity (NonCC) to complication or comorbidity (CC) for FY 2025. 
Consistent with our annual updates to account for changes in resource 
consumption, treatment patterns, and the clinical characteristics of 
patients, CMS is recognizing inadequate housing and housing instability 
as indicators 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 
further 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.
---------------------------------------------------------------------------

    \[1]\ Available at 86 FR 7009 (January 25, 2021) (https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government).
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3. Summary of Costs and Benefits
    The following table provides a summary of the costs, savings, and 
benefits associated with the major provisions described in section 
I.A.2. of the preamble of this proposed rule.
BILLING CODE 4120-01-P

[[Page 35941]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.000


[[Page 35942]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.001


[[Page 35943]]


BILLING CODE 4120-01-C

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.
    With the recent enactment of section 307 of the CAA, 2024, under 
current law, the Medicare-dependent, small rural hospital (MDH) program 
is effective through December 31, 2024. For discharges occurring on or 
after October 1, 2007, but before January 1, 2025, an MDH receives the 
higher of the Federal rate or the Federal rate plus 75 percent of the 
amount by which the Federal rate is exceeded by the highest of its FY 
1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major 
source of care for Medicare beneficiaries in their areas. Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area (or, as amended by the Bipartisan Budget Act of 
2018, a hospital located in a State with no rural area that meets 
certain statutory criteria), has not more than 100 beds, is not an SCH, 
and has a high percentage of Medicare discharges (not less than 60 
percent of its inpatient days or discharges in its cost reporting year 
beginning in FY 1987 or in two of its three most recently settled 
Medicare cost reporting years). As section 307 of the CAA, 2024 
extended the MDH program through the first quarter of FY 2025 only, 
beginning on January 1, 2025, the MDH program will no longer be in 
effect absent a change in law. Because the MDH program is not 
authorized by statute beyond December 31, 2024, beginning January 1, 
2025, all hospitals that previously qualified for MDH status under 
section 1886(d)(5)(G) of the Act will no longer have MDH status and 
will be paid based on the IPPS Federal rate.
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments for those cases 
that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; extended 
neoplastic disease care hospitals, and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico (that is, hospitals 
located in the U.S. Virgin

[[Page 35944]]

Islands, Guam, the Northern Mariana Islands, and American Samoa). 
Religious nonmedical health care institutions (RNHCIs) are also 
excluded from the IPPS. Various sections of the Balanced Budget Act of 
1997 (BBA) (Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State 
Children's Health Insurance Program] Balanced Budget Refinement Act of 
1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) 
provide for the implementation of PPSs for IRF hospitals and units, 
LTCHs, and psychiatric hospitals and units (referred to as inpatient 
psychiatric facilities (IPFs)). (We note that the annual updates to the 
LTCH PPS are included along with the IPPS annual update in this 
document. Updates to the IRF PPS and IPF PPS are issued as separate 
documents.) Children's hospitals, cancer hospitals, hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico (that 
is, hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa), and RNHCIs continue to be paid 
solely under a reasonable cost-based system, subject to a rate-of-
increase ceiling on inpatient operating costs. Similarly, extended 
neoplastic disease care hospitals are paid on a reasonable cost basis, 
subject to a rate-of-increase ceiling on inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform 
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate 
under the LTCH PPS, which made the LTCH PPS a dual rate payment system 
beginning in FY 2016. Under this statute, effective for LTCH's cost 
reporting periods beginning in FY 2016 cost reporting period, LTCHs are 
generally paid for discharges at the site neutral payment rate unless 
the discharge meets the patient criteria for payment at the LTCH PPS 
standard Federal payment rate. The existing regulations governing 
payment under the LTCH PPS are located in 42 CFR part 412, subpart O. 
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS 
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413. Section 
1886(d)(5)(B) of the Act provides that prospective payment hospitals 
that have residents in an approved GME program receive an additional 
payment for each Medicare discharge to reflect the higher patient care 
costs of teaching hospitals relative to non-teaching hospitals. The 
additional payment is based on the indirect medical education (IME) 
adjustment factor, which is calculated using a hospital's ratio of 
residents to beds and a multiplier, which is set by Congress. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. The regulations regarding the indirect medical 
education (IME) adjustment are located at 42 CFR 412.105.

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

1. The Consolidated Appropriations Act, 2023 (CAA 2023; Pub. L. 117-
328)
    Section 4122 of the CAA, 2023, amended section 1886(h) of the Act 
by adding a new section 1886(h)(10) of the Act requiring the 
distribution of additional residency positions (also referred to as 
slots) to hospitals. Section 1886(h)(10)(A) of the Act requires that 
for FY 2026, the Secretary shall initiate an application round to 
distribute 200 residency positions. At least 100 of the positions made 
available under section 1886(h)(10)(A) of the Act shall be distributed 
for psychiatry or psychiatry subspecialty residency training programs. 
The Secretary is required, subject to certain provisions in the law, to 
increase the otherwise applicable resident limit for each qualifying 
hospital that submits a timely application by the number of positions 
that may be approved by the Secretary for that hospital. The Secretary 
is required to notify hospitals of the number of positions distributed 
to them by January 31, 2026, and the increase is effective beginning 
July 1, 2026.
    In determining the qualifying hospitals for which an increase is 
provided, section 1886(h)(10)(B)(i) of the Act requires the Secretary 
to take into account the ``demonstrated likelihood'' of the hospital 
filling the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(10)(B)(ii) of the Act requires a minimum 
distribution for certain categories of hospitals. Specifically, the 
Secretary is required to distribute at least 10 percent of the 
aggregate number of total residency positions available to each of four 
categories of hospitals. Stated briefly, and discussed in greater 
detail later in this proposed rule, the categories are as follows: (1) 
hospitals located in rural areas or that are treated as being located 
in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) 
of the Act); (2) hospitals in which the reference resident level of the 
hospital is greater than the otherwise applicable resident limit; (3) 
hospitals in States with new medical schools or additional locations 
and branches of existing medical schools; and (4) hospitals that serve 
areas designated as Health Professional Shortage Areas (HPSAs). Section 
1886(h)(10)(F)(iii) of the Act defines a qualifying hospital as a 
hospital in one of these four categories.
    Section 1886(h)(10)(B)(iii) of the Act further requires that each 
qualifying hospital that submits a timely application receive at least 
1 (or a fraction of 1) of the residency positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 residency position.
    Section 1886(h)(10)(C) of the Act places certain limitations on the 
distribution of the residency positions.

[[Page 35945]]

First, a hospital may not receive more than 10 additional full-time 
equivalent (FTE) residency positions. Second, no increase in the 
otherwise applicable resident limit of a hospital may be made unless 
the hospital agrees to increase the total number of FTE residency 
positions under the approved medical residency training program of the 
hospital by the number of positions made available to that hospital. 
Third, if a hospital that receives an increase to its otherwise 
applicable resident limit under section 1886(h)(10) of the Act is 
eligible for an increase to its otherwise applicable resident limit 
under 42 CFR 413.79(e)(3) (or any successor regulation), that hospital 
must ensure that residency positions received under section 1886(h)(10) 
of the Act are used to expand an existing residency training program 
and not for participation in a new residency training program.
2. The Consolidated Appropriations Act, 2024 (CAA, 2024; Pub. L. 118-
42)
    Section 306 of the CAA, 2024 extended through the first 3 months of 
FY 2025 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 2024. Specifically, under 
section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 
2024 and the portion of FY 2025 occurring before January 1, 2025, 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 December 31, 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 307 of the CAA, 2024 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 the first 3 months of FY 2025 (that is, through 
December 31, 2024).

D. Summary of the Proposed Provisions

    In this proposed rule, we set forth proposed payment and policy 
changes to the Medicare IPPS for FY 2025 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 2025.
    The following is a general summary of the changes that we are 
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of this proposed rule, we include 
the following:
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2025.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the proposed FY 2025 status of new 
technologies approved for add-on payments for FY 2024, a presentation 
of our evaluation and analysis of the FY 2025 applicants for add-on 
payments for high-cost new medical services and technologies (including 
public input, as directed by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) 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 
2025 new technology applicants under the alternative pathways for 
certain medical devices and certain antimicrobial products.
     A proposal to change the April 1 cutoff to October 1 for 
determining whether a technology would be within its 2- to 3-year 
newness period when considering eligibility for new technology add-on 
payments, beginning in FY 2026, effective for those technologies that 
are approved for new technology add-on payments starting in FY 2025 or 
a subsequent years (as discussed in II.E.7. of the preamble of this 
proposed rule).
     A proposal that, beginning with new technology add-on 
payment applications for FY 2026, we will no longer consider a hold 
status to be an inactive status for the purposes of eligibility for the 
new technology add-on payment (as discussed in section II.E.8. of the 
preamble of this proposed rule).
     A proposal that, subject to our review of the new 
technology add-on payment eligibility criteria, for certain gene 
therapies approved for new technology add-on payments in the FY 2025 
IPPS/LTCH final rule for the treatment of sickle cell disease (SCD), 
effective with discharges on or after October 1, 2024, and concluding 
at the end of the 2- to 3-year newness period for such therapy, we will 
temporarily increase the new technology add-on payment percentage to 75 
percent (as discussed in section II.E.9. of the preamble of this 
proposed rule).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of this proposed rule, we propose 
revisions to the wage index for acute care hospitals and the annual 
update of the wage data. Specific issues addressed include, but are not 
limited to, the following:
     Proposed changes in CBSAs as a result of new OMB labor 
market area delineations and proposed policies related to the proposed 
changes in CBSAs.
     The proposed FY 2025 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 2025 based on the 2022 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 2025 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 FY 2025 wage index.
3. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2025
    In section IV. of the preamble of this proposed rule, we discuss 
the following:
     Proposed calculation of Factor 1 and Factor 2 of the 
uncompensated care payment methodology.
     Proposed methodological approach for determining Factor 3 
of the uncompensated care payment for FY 2025, which is the same 
methodology that was used for FY 2024.
     Proposed methodological approach for determining the 
amount of interim uncompensated care payments using the average of the 
most recent 3 years of discharge data.

[[Page 35946]]

4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of this proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed inpatient hospital update for FY 2025.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status and clarification of 
the qualification under the discharge criterion for osteopathic 
hospitals.
     Proposed implementation of the statutory extension of the 
temporary changes to the low-volume hospital payment adjustment through 
December 31, 2024, the statutory expiration beginning January 1, 2025, 
and the proposed payment adjustments for low-volume hospitals for FY 
2025.
     Proposed implementation of the statutory extension of the 
MDH program through December 31, 2024, and the statutory expiration 
beginning January 1, 2025.
     A proposal to implement a provision of the Consolidated 
Appropriations Act relating to payments to hospitals for GME and IME 
costs, proposed direct graduate medical education (GME) and indirect 
medical education (IME) policy modifications to the criteria for new 
residency programs; technical fixes to the DGME regulations; a notice 
of closure of two teaching hospitals and opportunities to apply for 
available slots and a reminder of core-based statistical area (CBSA) 
changes and application to GME policies;.
     Proposed nursing and allied health education program 
Medicare Advantage (MA) add-on rates and direct GME MA percent 
reductions for CY 2023.
     Proposed update to the payment adjustment for certain 
clinical trial and expanded access use immunotherapy cases.
    Proposed separate IPPS payment for establishing and maintaining 
access to essential medicines.
     Updating the proposed estimate of the financial impacts 
for the FY 2025 Hospital Readmissions Reduction Program.
     Proposed modifications to the scoring of the Person and 
Community Engagement Domain in the Hospital VBP Program.
    ++ For the FY 2027 through FY 2029 program years to only score on 
six unchanged dimensions of the HCAHPS Survey.
    ++ Beginning with the FY 2030 program year to account for the 
proposed updated HCAHPS Survey.
     Updating the proposed estimate of the financial impacts 
for the FY 2025 Hospital-Acquired Conditions Reduction Program.
     Discussion of and proposed changes relating to the 
implementation of the Rural Community Hospital Demonstration Program in 
FY 2025.
5. Proposed FY 2025 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 2025.
6. 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 2025.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
    In section VIII. of the preamble of the proposed rule, we propose 
to rebase and revise the LTCH market basket to reflect a 2022 base 
year, which includes a proposed update to the LTCH PPS labor-related 
share. 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 2025. We are 
also proposing a technical clarification to the regulations for 
hospitals seeking to be classified as an LTCH.
8. 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:
     Solicitation of comment on adopting measures across the 
hospital quality reporting and value-based purchasing programs which 
capture more forms of unplanned post-acute care and encourage hospitals 
to improve discharge processes.
     Proposed changes to the requirements for the Hospital IQR 
Program.
     Proposed changes to the requirements for the PCHQR 
Program.
     Proposed adoption of the Patient Safety Structural measure 
in the Hospital IQR Program and the PCHQR Program.
     Proposed updated HCAHPS Survey measure in the Hospital IQR 
Program, PCHQR Program, and Hospital VBP Program.
     Proposed changes to the requirements for the Long-Term 
Care Hospital Quality Reporting Program (LTCH QRP), and request for 
information on future measure concepts for the LTCH QRP and a star 
rating system for the LTCH QRP.
     Proposed changes to requirements pertaining to eligible 
hospitals and CAHs participating in the Medicare Promoting 
Interoperability Program.
9. Other Proposals and Comment Solicitations Included in the Proposed 
Rule
    Section X. of the preamble of the proposed rule includes the 
following:
     Proposed implementation of TEAM that would test whether an 
episode-based pricing methodology linked with accountability for 
quality measure performance for select acute care hospitals reduces 
Medicare program expenditures while preserving or improving the quality 
of care for Medicare beneficiaries.
     Proposed changes to permit a Provider Reimbursement Review 
Board (PRRB) member to serve up to 3 consecutive terms (9 consecutive 
years total), and up to 4 consecutive terms (12 consecutive years 
total) in cases where a PRRB Member who, in their second or third 
consecutive term, is designated as Chairperson, to continue serving as 
Chairperson in the fourth consecutive term.
     Solicitation of comments to gather information on 
differences between hospital resources required to provide inpatient 
pregnancy and childbirth services to Medicare patients as compared to 
non-Medicare patients.
     Solicitation of comments to gather information on 
potential solutions that can be implemented through the hospital CoPs 
to address well-documented concerns regarding maternal morbidity, 
mortality, disparities, and maternity care access in the United States.
     Proposal to remove the exclusion of Puerto Rico from the 
Payment Error Rate Measurement (PERM) program found at 42 CFR 
431.954(b)(3).
     Proposal for a new hospital CoP to replace the COVID-19 
and Seasonal Influenza reporting standards for hospitals and CAHs that 
were created during PHE.
10. Other Provisions of the Proposed Rule
    Section XI.A. of the preamble of the proposed rule includes our 
discussion of the MedPAC Recommendations.

[[Page 35947]]

    Section XI.B. of the preamble of the proposed rule includes a 
descriptive listing of the public use files associated with this 
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.
11. 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 2025 prospective payment rates for operating costs and 
capital-related costs for acute care hospitals. We are proposing to 
establish the threshold amounts for outlier cases. In addition, in 
section IV. of the Addendum of the proposed rule, we address the 
proposed update factors for determining the rate-of-increase limits for 
cost reporting periods beginning in FY 2025 for certain hospitals 
excluded from the IPPS.
12. 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 2025 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 
2025. We are proposing to establish the adjustments for the wage index 
(including proposed changes to the LTCH PPS labor market area 
delineations based on the new OMB delineations), 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.
13. 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.
14. 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 2025 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.
15. 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 2024 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 2024 
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.

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

A. Background

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

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

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).
    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43764 through 43766) and the FYs 2011 through 2024 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; 87 FR 48800 through 48891; and 88 FR 58654 through 58787, 
respectively).
    For discussion regarding our previously finalized policies 
(including our historical adjustments to the payment rates) relating to 
the effect of changes in documentation and coding that do not reflect 
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48799 through 48800).

C. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 
2025 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

[[Page 35948]]

System (ICD-10-PCS) for inpatient hospital procedure coding, as well as 
the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and 
Reporting. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for Proposed FY 2025 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 SystemTM 
(MEARISTM), accessed at https://mearis.cms.gov. We stated 
that effective with FY 2024 MS-DRG classification change requests, CMS 
will only accept requests submitted via MEARISTM and will no 
longer consider requests sent via email. Additionally, we noted that 
within MEARISTM, 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 MEARISTM site. 
Questions regarding the MEARISTM system can be submitted to 
CMS using the form available under ``Contact'', also at the bottom of 
the MEARISTM site. Accordingly, interested parties had to 
submit MS-DRG classification change requests for FY 2025 by October 20, 
2023.
    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 OMB control number 0938-1431 and has an 
expiration date of 09/30/2025.
    Interested parties should submit any MS-DRG classification change 
requests, including any comments and suggestions for FY 2026 
consideration by October 20, 2024 via MEARISTM at: https://mearis.cms.gov/public/home.
    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.
    We received four requests to modify the GROUPER logic in a number 
of cardiac MS-DRGs under Major Diagnostic Category (MDC) 05 (Diseases 
and Disorders of the Circulatory System). Specifically, we received 
requests to--
     Modify the GROUPER logic of new MS-DRG 212 (Concomitant 
Aortic and Mitral Valve Procedures) to be defined by cases reporting 
procedure codes describing a single open mitral or aortic valve 
replacement/repair (MVR or AVR) procedure, plus an open coronary artery 
bypass graft procedure (CABG) or open surgical ablation or cardiac 
catheterization procedure plus a second concomitant procedure.
     Modify the GROUPER logic of new MS-DRG 212 by redefining 
the procedure code list that describes the performance of a cardiac 
catheterization by either removing the ICD-10-PCS codes that describe 
plain radiography of coronary artery codes from the logic list or 
adding ICD-10-PCS procedure codes that involve computed tomography (CT) 
or magnetic resonance imaging (MRI) scanning using contrast to the 
list. This requestor also suggested that CMS add ICD-10-PCS procedures 
codes that describe endovascular valve replacement or repair procedures 
into the GROUPER logic of MS-DRG 212.
     Modify the GROUPER logic of new MS-DRGs 323, 324 and 325 
(Coronary Intravascular Lithotripsy with Intraluminal Device with MCC, 
without MCC, and without Intraluminal Device, respectively). In two 
separate but related requests, the requestors suggested that we add 
procedure codes that describe additional percutaneous coronary 
intervention (PCI) procedures such as percutaneous coronary rotational, 
laser, and orbital atherectomy to the GROUPER logic of new MS-DRGs 323, 
324, and 325.
    We appreciate the submissions and related analyses provided by the 
requestors for our consideration as we review MS-DRG classification 
change requests for FY 2025; however, we note the complexity of the 
GROUPER logic for these MS-DRGs in connection with these requests 
requires more extensive analyses to identify and evaluate all of the 
data relevant to assessing these potential modifications. Specifically, 
we note the list of procedure codes that describe the performance of a 
cardiac catheterization is in the definition of multiple MS-DRGs in MDC 
05. Analyzing the impact of revising this list necessitates evaluating 
the impact across numerous other MS-DRGs in MDC 05 that also include 
this list in their definition, in addition to new MS-DRG 212. Secondly, 
as discussed further in section II.C.4.c of this proposed rule, our 
analysis continues to indicate that, when performed, open cardiac valve 
replacement and supplement procedures are clinically different from 
endovascular cardiac valve replacement and supplement procedures in 
terms of technical complexity and hospital resource use. Lastly, as we 
have stated in prior rule making (88 FR 58708), atherectomy is distinct 
from coronary lithotripsy in that each of these procedures are defined 
by clinically distinct definitions and objectives. Additional analysis 
to assess for unintended consequences across the classification is 
needed as we have made a distinction between the root operations used 
to describe atherectomy (Extirpation) and the root operation used to 
describe lithotripsy (Fragmentation) in evaluating other requests in 
rulemaking. We will need to consider the application of these two root 
operations in other scenarios where we have also specifically stated 
that Extirpation is not the same as Fragmentation and do not warrant 
similar MS-DRG assignment (85 FR 58572 through 58573). Furthermore, as 
MS-DRG 212 and MS-DRGs 323, 324 and 325 recently became effective on 
October 1, 2023 (FY 2024), we believe additional time is needed to 
review and evaluate extensive modifications to the structure of these 
MS-DRGs.
    We will continue to monitor the data as we consider these issues in 
connection with future rulemaking. As we continue the analysis of the 
claims data with respect to MS-DRGs in MDC 05, we welcome public 
comments and feedback on other factors that should be considered in the 
potential restructuring of these MS-DRGs. Feedback and other 
suggestions may be directed to MEARISTM at: https://mearis.cms.gov/public/home. As noted, interested parties should submit 
any MS-DRG classification change requests, including any comments and 
suggestions for FY 2026 consideration by October 20, 2024 via 
MEARISTM at: https://mearis.cms.gov/public/home.
    As we did for the FY 2024 IPPS/LTCH PPS proposed rule, for this FY 
2025

[[Page 35949]]

IPPS/LTCH PPS proposed rule we are providing a test version of the ICD-
10 MS-DRG GROUPER Software, Version 42, so that the public can better 
analyze and understand the impact of the proposals included in this 
proposed rule. We note that this test software reflects the proposed 
GROUPER logic for FY 2025. Therefore, it includes the new diagnosis and 
procedure codes that are effective for FY 2025 as reflected in Table 
6A.--New Diagnosis Codes--FY 2025 and Table 6B.--New Procedure Codes--
FY 2025 associated with this proposed rule and does not include the 
diagnosis codes that are invalid beginning in FY 2025 as reflected in 
Table 6C.--Invalid Diagnosis Codes--FY 2025, and Table 6D.--Invalid 
Procedure Codes--FY 2025 associated with this proposed rule. These 
tables are not published in the Addendum to this proposed rule, but are 
available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in 
section VI. of the Addendum to this proposed rule. Because the 
diagnosis codes no longer valid for FY 2025 are not reflected in the 
test software, we are making available a supplemental file in Table 
6P.1a and 6P.1b that includes the mapped Version 42 FY 2025 ICD-10-CM 
and ICD-10-PCS codes and the deleted Version 41 FY 2024 ICD-10-CM codes 
and V41.1 ICD-10-PCS codes that should be used for testing purposes 
with users' available claims data. Therefore, users will have access to 
the test software allowing them to build case examples that reflect the 
proposals included in this proposed rule. In addition, users will be 
able to view the draft version of the ICD-10 MS-DRG Definitions Manual, 
Version 42.
    We also note that in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58764), we stated 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 Medicare Code Editor (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 encouraged 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 the instructions provided in 
that proposed rule.
    In the CY 2024 OPPS/ASC final rule (88 FR 82121 through 82124), 
after consideration of the public comments we received, we finalized 
the proposal to remove discussion of the MCE from the annual IPPS 
rulemakings, beginning with FY 2025 rulemaking, and to generally 
address future changes or updates to the MCE through instruction to the 
MACs. Beginning with FY 2025, in association with the annual proposed 
rule, we are making available a draft version of the Definitions of 
Medicare Code Edits (MCE) Manual to provide the public with an 
opportunity to review any changes that will become effective October 1 
for the upcoming fiscal year. In addition, as a result of new and 
modified code updates approved after the annual spring ICD-10 
Coordination and Maintenance Committee meeting, any further changes to 
the MCE will be reflected in the finalized Definitions of Medicare Code 
Edits (MCE) Manual, made available in association with the annual final 
rule. We are making available the draft FY 2025 ICD-10 MCE Version 42 
Manual file on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
    The MCE manual is comprised of two chapters: Chapter 1: Edit code 
lists provides a listing of each edit, an explanation of each edit, and 
as applicable, the diagnosis and/or procedure codes for each edit, and 
Chapter 2: Code list changes summarizes the changes in the edit code 
lists (for example, additions and deletions) from the prior release of 
the MCE software. The public may submit any questions, comments, 
concerns, or recommendations regarding the MCE to the CMS mailbox at 
[email protected] for our review and consideration.
    The test version of the ICD-10 MS-DRG GROUPER Software, Version 42, 
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 42, 
the draft version of the Definitions of Medicare Code Edits Manual, 
Version 42, and the supplemental mapping files in Table 6P.1a and 6P.1b 
of the FY 2024 and FY 2025 ICD-10-CM diagnosis and ICD-10-PCS procedure 
codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Following are the changes that we are proposing to the MS-DRGs for 
FY 2025. We are inviting public comments on each of the MS-DRG 
classification proposed changes, as well as our proposals to maintain 
certain existing MS-DRG classifications discussed in this proposed 
rule. In some cases, we are proposing changes to the MS-DRG 
classifications based on our analysis of claims data and clinical 
appropriateness. In other cases, we are proposing to maintain the 
existing MS-DRG classifications based on our analysis of claims data 
and clinical appropriateness. For this FY 2025 IPPS/LTCH PPS proposed 
rule, our MS-DRG analysis was based on ICD-10 claims data from the 
September 2023 update of the FY 2023 MedPAR file, which contains 
hospital bills received from October 1, 2022 through September 30, 
2023. In our discussion of the proposed MS-DRG reclassification 
changes, we refer to these claims data as the ``September 2023 update 
of the FY 2023 MedPAR file.''
    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

[[Page 35950]]

or comorbidity (MCC) subgroup within a base MS-DRG. Specifically, we 
finalized the expansion of the criteria to include the NonCC subgroup 
for a three-way severity level split. We stated we believed that 
applying these criteria to the NonCC subgroup would better reflect 
resource stratification as well as promote stability in the relative 
weights by avoiding low volume counts for the NonCC level MS-DRGs. We 
noted that in our analysis of MS-DRG classification requests for FY 
2021 that were received by November 1, 2019, as well as any additional 
analyses that were conducted in connection with those requests, we 
applied these criteria to each of the MCC, CC, and NonCC subgroups. We 
also noted that the application of the NonCC subgroup criteria going 
forward may result in modifications to certain MS-DRGs that are 
currently split into three severity levels and result in MS-DRGs that 
are split into two severity levels. We stated that any proposed 
modifications to the MS-DRGs would be addressed in future rulemaking 
consistent with our annual process and reflected in Table 5--Proposed 
List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative 
Weighting Factors, and Geometric and Arithmetic Mean Length of Stay for 
the applicable fiscal year.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798), we finalized 
a delay in applying this technical criterion to existing MS-DRGs until 
FY 2023 or future rulemaking, in light of the public health emergency 
(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 association with our discussion of application of the NonCC 
subgroup criteria in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26673 through 26676), we provided an alternate test version of the ICD-
10 MS-DRG GROUPER Software, Version 41.A, reflecting the proposed 
GROUPER logic for FY 2024 as modified by the application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. 
Therefore, users had access to the alternate test software allowing 
them to build case examples that reflect the proposals included in the 
proposed rule with application of the NonCC subgroup criteria. We also 
provided additional files including 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 FY 2024 IPPS/LTCH PPS proposed rule on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    We stated that the alternate test software and additional files 
were made available 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 refer readers to the FY 2024 IPPS/
LTCH PPS proposed rule (88 FR 26673 through 26676) for further 
discussion of the alternate test software and additional files that 
were made available.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58655 through 
58661), we finalized to delay the application of the NonCC subgroup 
criteria to existing MS-DRGs with a three-way severity level split for 
FY 2024. We stated that we would continue to review and consider the 
feedback we had received in response to the additional information we 
made available in association with the FY 2024 IPPS/LTCH PPS proposed 
rule for our development of the FY 2025 proposed rule.
    We note that the IPPS Payment Impact File made available in 
connection with our annual IPPS rulemakings includes information used 
to categorize hospitals by various geographic and special payment 
consideration groups, including geographic location (urban or rural), 
teaching hospital status (that is, whether or not a hospital has GME 
residency programs and receives an IME adjustment), DSH hospital status 
(that is, whether or not a hospital receives Medicare DSH payments), 
special payment groups (that is, SCHs, MDHs, and RRCs) and other 
categories reflected in the impact analysis generally shown in Appendix 
A of the annual IPPS rulemakings. The IPPS Payment Impact File 
associated with the FY 2024 IPPS/LTCH PPS final rule can be found on 
the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2024-ipps-final-rule-home-page#Data.
    We are proposing to continue to delay application of the NonCC 
subgroup criteria to existing MS-DRGs with a three-way severity level 
split for FY 2025, as we continue to consider the public comments 
received in response to the FY 2024 rulemaking. We encourage interested 
parties to review the impacts and other information made available with 
the alternate test software (V41.A) and other additional files provided 
in connection with the FY 2024 IPPS/LTCH PPS proposed rule, as 
previously discussed, and we continue to welcome feedback for 
consideration for future rulemaking.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661), 
we 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. Accordingly, in 
our analysis of the MS-DRG classification requests for FY 2025 that we 
received by October 20, 2023, 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.

[[Page 35951]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.002

    In general, once the decision has been made to propose to make 
further modifications to the MS-DRGs as described previously, such as 
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG 
classification request to split (or subdivide) an existing base MS-DRG 
into severity levels, all five criteria must be met for the base MS-DRG 
to be split (or subdivided) by a CC subgroup. We note that in our 
analysis of requests to create a new MS-DRG, we typically evaluate the 
most recent year of MedPAR claims data available. For example, we 
stated earlier that for this FY 2025 IPPS/LTCH PPS proposed rule, our 
MS-DRG analysis was based on ICD-10 claims data from the September 2023 
update of the FY 2023 MedPAR file. However, in our evaluation of 
requests to split an existing base MS-DRG into severity levels, as 
noted in prior rulemaking (80 FR 49368), we typically analyze the most 
recent 2 years of data. This analysis includes 2 years of MedPAR claims 
data to compare the data results from one year to the next to avoid 
making determinations about whether additional severity levels are 
warranted based on an isolated year's data fluctuation and also, to 
validate that the established severity levels within a base MS-DRG are 
supported. 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.
2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-cell and Other 
Immunotherapies
    We received a request to revise the title of Pre-MDC MS-DRG 018 
(Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies) in 
connection with an ICD-10-PCS procedure code request that was submitted 
via MEARISTM by the December 1, 2023 deadline for 
consideration as an agenda topic to be discussed at the March 19-20, 
2024 ICD-10 Coordination and Maintenance Committee meeting. The 
procedure code request involves the application of an autologous 
genetically engineered cell-based gene therapy, prademagene zamikeracel 
(PZ), that is indicated in the treatment of recessive dystrophic 
epidermolysis bullosa (RDEB), an extremely rare genetic disease of the 
skin that leads to large chronic wounds. The proposal was presented and 
discussed at the March 19-20, 2024 ICD-10 Coordination and Maintenance 
Committee meeting. We refer the reader to the CMS website at https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-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 are due by April 19, 2024. The requestor suggested that if 
finalized, a new procedure code to identify the application of PZ 
should be assigned to Pre-MDC MS-DRG 018 and that the title for Pre-MDC 
MS-DRG 018 be revised to reflect ``Chimeric Antigen Receptor (CAR) T 
and Other Autologous Gene and Cell Therapies''.
    Because the diagnosis and procedure code proposals that are 
presented at the March ICD-10-CM Coordination and Maintenance Committee 
meeting for an October 1 implementation (upcoming FY) are not finalized 
in time to include in Table 6A.--New Diagnosis Codes and Table 6B.--New 
Procedure Codes in association with the proposed rule, as we have noted 
in prior rulemaking, we use our established process to examine the MS-
DRG assignment for the predecessor codes to determine the most 
appropriate MS-DRG assignment. Specifically, we review the predecessor 
code and MS-DRG assignment most closely associated with the new 
procedure code, and in the absence of claims data, we consider other 
factors

[[Page 35952]]

that may be relevant to the MS-DRG assignment, including the severity 
of illness, treatment difficulty, complexity of service and the 
resources utilized in the diagnosis and/or treatment of the condition. 
We have noted in prior rulemaking that this process does not 
automatically result in the new procedure code being assigned to the 
same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as 
the predecessor code. Under this established process, the MS-DRG 
assignment for the upcoming fiscal year for any new diagnosis or 
procedure codes finalized after the March meeting would be reflected in 
Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes 
associated with the final rule for that fiscal year. Accordingly, the 
MS-DRG assignment for any new procedure codes describing PZ, if 
finalized following the March meeting, would be reflected in Table 
6B.--New Procedure Codes associated with the final rule for FY 2025. As 
noted in prior rulemaking (87 FR 28135), the codes that are finalized 
after the March meeting are specifically identified with a footnote in 
Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes that 
are made publicly available in association with the final rule on the 
CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. The public may provide feedback on 
these finalized assignments, which is then taken into consideration for 
the following fiscal year.
    We do not agree with the request to revise the title for Pre-MDC 
MS-DRG 018 for FY 2025 as requested because the logic for Pre-MDC MS-
DRG 018 is intended to include other immunotherapies and is not 
restricted to CAR T-cell and autologous gene and cell therapies. As 
discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through 
44806), we finalized our proposal to revise the title of Pre-MDC MS-DRG 
018 to include ``Other Immunotherapies'' to better reflect the cases 
reporting the administration of non-CAR T-cell therapies and other 
immunotherapies that would also be assigned to this MS-DRG, in addition 
to CAR T-cell therapies. We noted that the term ``Other 
Immunotherapies'' is intended to encompass the group of therapies that 
are currently available and being utilized today (for which codes have 
been created for reporting in response to industry requests or are 
being considered for implementation), and to enable appropriate MS-DRG 
assignment for any future therapies that may also fit into this 
category and are not specifically identified as a CAR T-cell product, 
that may become available (for example receive marketing authorization 
or a newly established procedure code in the ICD-10-PCS 
classification).
    We also note, as discussed in prior rulemaking, that this category 
of therapies continues to evolve, and we are in the process of 
carefully considering the feedback we have previously received about 
ways in which we can continue to appropriately reflect resource 
utilization while maintaining clinical coherence and stability in the 
relative weights under the IPPS MS-DRGs. We appreciate the 
recommendations and suggestions for consideration we have received and 
will continue to examine these complex issues in connection with future 
rulemaking. We acknowledge that there may be distinctions to account 
for as we continue to gain more experience in the use of these 
therapies and have additional claims data to analyze. Therefore, we are 
not proposing to revise the title for Pre-MDC MS-DRG 018 to reflect 
``Chimeric Antigen Receptor (CAR) T and Other Autologous Gene and Cell 
Therapies'' at this time and are proposing to maintain the existing 
title to Pre-MDC MS-DRG 018, ``Chimeric Antigen Receptor (CAR) T-cell 
and Other Immunotherapies'' for FY 2025.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Logic for MS-DRGs 023 Through 027
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661 through 
58667), 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 (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) 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.
    We stated 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 was 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 believed 
that MS-DRG 021 was the most logical fit in terms of average costs and 
clinical coherence for reassignment 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.
    We noted that while our data findings demonstrated the average 
costs are higher for the cases with a principal diagnosis of epilepsy 
with a 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 represented 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 
believed additional time was needed to evaluate these cases as part of 
our ongoing examination of the case logic to the MS-DRGs for craniotomy 
and endovascular procedures, which are MS-DRG 023, 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).
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48808 
through 48820), in connection with our analysis of cases reporting 
laser interstitial thermal therapy (LITT) procedures performed on the 
brain or brain stem in MDC 01, we stated 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. We stated 
that specifically, we were 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

[[Page 35953]]

(where a hole approximately the size of a pencil is drilled) to obtain 
access to the brain in the performance of a procedure. We stated we 
were also reviewing the indications for these procedures, for example, 
malignant neoplasms versus epilepsy to consider if there may be merit 
in considering restructuring the current MS-DRGs to better recognize 
the clinical distinctions of these patient populations in the MS-DRGs.
    As part of this evaluation, as discussed in the FY 2024 IPPS/LTCH 
PPS final rule, we have begun to analyze the ICD-10 coded claims data 
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 referred the reader to Tables 6P.2b through 
6P.2f associated with the FY 2024 IPPS/LTCH PPS proposed rule 
(available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for data analysis 
findings of cases assigned to MS-DRGs 023 through 027 from the 
September 2022 update of the FY 2022 MedPAR file as we continue to look 
for patterns of complexity and resource intensity.
    In summary, we stated that while we agreed that 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. Therefore, for the reasons discussed, we finalized 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 for FY 2024.
    In the FY 2024 IPPS/LTCH PPS final rule, we stated 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 stated we would continue to explore mechanisms to 
ensure clinical coherence between these cases and the other cases with 
which they may potentially be grouped. We stated that the data analysis 
as displayed in Tables 6P.2b through 6P.2f associated with the FY 2024 
IPPS/LTCH PPS 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 welcomed 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. We also stated 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.
    In response to this discussion in the FY 2024 IPPS/LTCH PPS final 
rule, we received two comments by the October 20, 2023 deadline. A 
commenter recommended that CMS not use surgical approach (for example, 
open versus percutaneous) as a factor to reclassify MS-DRGs 023 through 
027. The commenter stated whether the opening is created via a drill 
into the skull percutaneously or through a larger incision in the skull 
for a craniotomy, both approaches involve the risk of intracranial 
bleeding, infection, and brain swelling. The commenter further stated 
they do not support a consideration of the reassignment of the ICD-10-
PCS procedure codes describing LITT, currently assigned to MS-DRGs 025 
through 027, based on the diagnosis being treated. The commenter stated 
that the LITT procedure requires the same steps, time, and clinical 
resources when performed for brain cancer or epilepsy. In the 
requestor's view, differences in the disease causing the tumors or 
lesions do not affect the resources used for performing the procedure 
or the post-operative care for the patient. Lastly, the commenter 
stated they support the current structure of MS-DRGs 023 and 024 based 
on an acute complicated principal diagnosis, or chemotherapy implant, 
or epilepsy with neurostimulator. The commenter stated these diagnoses 
represent severe complex conditions that require immediate and urgent 
intervention.
    Another commenter stated that the current logic for MS-DRGs 023 
through 027 is sufficient and supports the clinical and resource 
similarities of the procedures reflected in these MS-DRGs. The 
commenter performed its own analysis and stated they found that 
realignment based on surgical approach or root operation could create 
significant new inequities. The commenter recommended that CMS maintain 
the current logic for MS-DRGs 025 through 027, as making changes could 
be disruptive to hospitals and create challenges for Medicare 
beneficiary access to life-saving technologies. The commenter stated 
they strongly believe that maintaining the current structure provides 
payment stability and integrity of these procedures over time.
    CMS appreciates the comments submitted in response to the request 
for feedback in the FY 2024 IPPS/LTCH PPS final rule. As we continue 
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 stated in prior rulemaking, 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 41.1 (available on the CMS website 
at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 023 through 027. 
Feedback and other suggestions may continue to be directed to 
MEARISTM, discussed in section II.C.1.b. of the preamble of 
this proposed rule at: https://mearis.cms.gov/public/home.
b. Intraoperative Radiation Therapy (IORT)
    We received a request to add ICD-10-PCS procedure codes D0Y0CZZ 
(Intraoperative radiation therapy (IORT) of brain) and D0Y1CZZ 
(Intraoperative radiation therapy (IORT) of brain stem), to the 
Chemotherapy Implant logic list in MS-DRG 023 (Craniotomy with Major 
Device Implant or Acute Complex CNS Principal Diagnosis with MCC or 
Chemotherapy Implant or Epilepsy with Neurostimulator). According to 
the requestor, intraoperative radiation therapy (IORT) for the brain is 
always performed as part of the surgery to remove a brain tumor during 
the same operative episode. The requestor stated that once maximal safe 
tumor resection is achieved, the tumor cavity is examined for active 
egress of cerebrospinal fluid or bleeding. Next,

[[Page 35954]]

intraoperative measurements are made using neuro-navigation or 
intraoperative imaging such as magnetic resonance imaging (MRI) or 
computed tomography (CT) to ensure safe distance to organs or tissues 
at risk, aid in appropriate dose calculation, and selection of proper 
applicator size. The applicator is then implanted into the tumor cavity 
and the radiation dose is delivered. The requestor stated that delivery 
time can be up to 40 minutes and upon completion of the treatment, the 
source is removed, and the cavity is re-inspected for active egress of 
cerebrospinal fluid and bleeding.
    The requestor stated that currently the ICD-10-PCS procedure codes 
for excision of a brain tumor, 00B00ZZ (Excision of brain, open 
approach) and 00B70ZZ (Excision of cerebral hemisphere, open approach) 
map to both sets of craniotomy MS-DRGs. Specifically, MS-DRG 023 
(Craniotomy with Major Device Implant or Acute Complex CNS Principal 
Diagnosis with MCC or Chemotherapy Implant or Epilepsy with 
Neurostimulator) and 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). However, the requestor 
also stated that the procedure codes describing IORT (D0Y0CZZ or 
D0Y1CZZ) are not listed in the GROUPER logic and do not affect MS-DRG 
assignment. Therefore, cases reporting a procedure code describing 
excision of a brain tumor (00B00ZZ or 00B70ZZ) with IORT currently map 
to MS-DRGs 025, 026, and 027. The requestor suggested that cases 
reporting a procedure code describing excision of a brain tumor 
(00B00ZZ or 00B70ZZ) with IORT (D0Y0CZZ or D0Y1CZZ) should map to MS-
DRG 023 because of the higher costs associated with the addition of 
IORT to the excision of brain tumor surgery. According to the 
requestor, MS-DRG 023 includes complicated craniotomy cases involving 
the placement of radiological sources and chemotherapy implants. The 
requestor stated that because IORT involves a full course of radiation 
therapy delivered directly to the tumor bed via an applicator that is 
implanted into the tumor cavity during the same surgical session and is 
clinically similar to two other procedures listed in the Chemotherapy 
Implant logic list, it should also be included in the Chemotherapy 
Implant logic list. Specifically, the requestor stated procedure code 
00H004Z (Insertion of radioactive element, cesium-131 collagen implant 
into brain, open approach) and procedure code 3E0Q305 (Introduction of 
other antineoplastic into cranial cavity and brain, percutaneous 
approach) also involve the delivery of either radiation or chemotherapy 
directly after tumor resection. According to the requestor, the 
resources involved in placing the delivery device are similar for all 
three procedures and the distinction is that the procedures described 
by codes 00H004Z and 3E0Q305 involve the insertion of devices that 
deliver radiation or chemotherapy over a period of time, whereas IORT 
delivers the entire dose of radiation during the operative session. As 
such, the requestor asserted that IORT is clinically aligned with the 
other procedures from a therapeutic and resource utilization 
perspective.
    The requestor performed its own analysis using the FY 2022 MedPAR 
file that was made available in association with the FY 2024 IPPS/LTCH 
PPS final rule and stated it found fewer than 11 cases reporting IORT 
in MS-DRGs 025, 026, and 027, with the majority of those cases mapping 
to MS-DRG 025. According to the requestor, the volume of claims 
reporting IORT is anticipated to increase as appropriate use of the 
technology is adopted.
    The requestor is correct that currently, the logic for case 
assignment to MS-DRG 023 includes a Chemotherapy Implant logic list and 
the procedure codes that identify IORT (D0Y0CZZ and D0Y1CZZ) are not 
listed in the GROUPER logic and do not affect MS-DRG assignment as the 
procedures are designated as non-O.R. procedures. The requestor is also 
correct that cases reporting a procedure code describing excision of a 
brain tumor (00B00ZZ or 00B70ZZ) with IORT currently map to MS-DRGs 
025, 026, and 027. We refer the reader to the ICD-10 MS-DRG Definitions 
Manual Version 41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic.
    In review of this request, we analyzed claims data from the 
September 2023 update of the FY 2023 MedPAR file for MS-DRGs 023, 024, 
025, 026, and 027 and for cases reporting excision of brain tumor and 
IORT. We identified claims reporting excision of brain tumor with 
procedure code 00B00ZZ or 00B70ZZ and identified claims reporting IORT 
with procedure code D0Y0CZZ or D0Y1CZZ. The findings from our analysis 
are shown in the following table. We note that there were no cases 
found to report IORT of brain (D0Y0CZZ) or brain stem (D0Y1CZZ) with 
excision of brain (00B00ZZ) or excision of cerebral hemisphere 
(00B70ZZ).
BILLING CODE 4120-01-P

[[Page 35955]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.003


[[Page 35956]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.004

BILLING CODE 4120-01-C
    As the data show, there were no cases found to report the use of 
IORT in the performance of a brain tumor excision; therefore, we are 
unable to evaluate whether the use of IORT directly impacts resource 
utilization. For this reason, we are proposing to maintain the current 
structure of MS-DRGs 023, 024, 025, 026, and 027 for FY 2025. We will 
continue to monitor the claims data in consideration of any future 
modifications to the MS-DRGs for which IORT may be reported.
4. MDC 05 (Diseases and Disorders of the Circulatory System)
a. Concomitant Left Atrial Appendage Closure and Cardiac Ablation
    We received a request to create a new MS-DRG to better accommodate 
the costs of concomitant left atrial appendage closure and cardiac 
ablation for atrial fibrillation in MDC 05 (Diseases and Disorders of 
the Circulatory System). Atrial fibrillation (AF) is an irregular and 
often rapid heart rate that occurs when the two upper chambers of the 
heart experience chaotic electrical signals. AF presents as either 
paroxysmal (lasting <7 days), persistent (lasting >7 day, but less than 
1 year), or long standing persistent (chronic) (lasting >1 year) based 
on time duration and can increase the risk for stroke, heart failure, 
and mortality. Management of AF has two primary goals: optimizing 
cardiac output through rhythm or rate control and decreasing the risk 
of cerebral and systemic thromboembolism. Among patients with AF, 
thrombus in the left atrial appendage (LAA) is a primary source for 
thromboembolism. Left Atrial Appendage Closure (LAAC) is a surgical or 
minimally invasive procedure to seal off the LAA to reduce the risk of 
embolic stroke.
    According to the requestor, the manufacturer of the 
WATCHMANTM Left Atrial Appendage Closure (LAAC) device, 
patients who are indicated for a LAAC device can also have symptomatic 
AF. For these patients, performing a cardiac ablation and LAAC 
procedure at the same time is ideal. Cardiac ablation is a procedure 
that works by burning or freezing tissue on the inside of the heart to 
disrupt faulty electrical signals causing the arrhythmia, which can 
help the heart maintain a normal heart rhythm. The requestor 
highlighted a recent study (Piccini et al. Left atrial appendage 
occlusion with the WATCHMANTM FLX and concomitant catheter 
ablation procedures. Heart Rhythm Society Meeting 2023, May 19, 2023; 
New Orleans, LA.). According to the requestor, the results of this 
study indicate that when LAAC is performed concomitantly with cardiac 
ablation, the outcomes are comparable to patients who have undergone 
these procedures separately.

[[Page 35957]]

    The requestor identified the following potential procedure code 
combination that would comprise a concomitant left atrial appendage 
closure and cardiac ablation procedure: ICD-10-PCS procedure code 
02L73DK (Occlusion of left atrial appendage with intraluminal device, 
percutaneous approach), that identifies the WATCHMANTM 
device, in combination with 02583ZZ (Destruction of conduction 
mechanism, percutaneous approach). The requestor performed its own 
analysis of this procedure code combination and stated that it found 
the average costs of cases reporting concomitant left atrial appendage 
closure and cardiac ablation procedures were consistently higher 
compared to the average costs of other cases within their respective 
MS-DRG, which it asserted could limit beneficiary access to these 
procedures. The requestor asserted that improved Medicare payment for 
providers who perform these procedures concomitantly would help 
Medicare patients to gain better access to these lifesaving and 
quality-improving services and decrease the risk of future readmissions 
and the need for future procedures.
    We reviewed this request and noted concerns regarding making 
proposed MS-DRG changes based on a specific, single technology (the 
WATCHMANTM Left Atrial Appendage Closure (LAAC) device) 
identified by only one unique procedure code versus considering 
proposed changes based on a group of related procedure codes that can 
be reported to describe the same type or class of technology, which is 
more consistent with the intent of the MS-DRGs. Therefore, in reviewing 
this request, we identified eight additional ICD-10-PCS procedure codes 
that describe LAAC procedures and included these codes in our analysis. 
The nine codes we identified are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.005

    Similarly, as noted previously, the requestor identified code 
02583ZZ (Destruction of conduction mechanism, percutaneous approach) to 
describe cardiac ablation. In our review of the ICD-10-PCS 
classification, we identified 26 additional ICD-10-PCS codes that 
describe cardiac ablation that we also examined. The 27 codes we 
included in our analysis are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.006


[[Page 35958]]


    In the ICD-10 MS-DRGs Definitions Manual Version 41.1, for 
concomitant left atrial appendage closure and cardiac ablation 
procedures, the GROUPER logic assigns MS-DRGs 273 and 274 (Percutaneous 
and Other Intracardiac Procedures with and without MCC, respectively) 
depending on the presence of any additional MCC secondary diagnoses. We 
examined claims data from the September 2023 update of the FY 2023 
MedPAR file for all cases in MS-DRGs 273 and 274 and compared the 
results to cases reporting procedure codes describing concomitant left 
atrial appendage closure and cardiac ablation. Our findings are shown 
in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.007

    As shown in the table, in MS-DRG 273, we identified a total of 
7,250 cases with an average length of stay of 5.4 days and average 
costs of $35,197. Of those 7,250 cases, there were 80 cases reporting 
procedure codes describing concomitant left atrial appendage closure 
and cardiac ablation with average costs higher than the average costs 
in the FY 2023 MedPAR file for MS-DRG 273 ($70,447 compared to $35,197) 
and a slightly longer average length of stay (5.8 days compared to 5.4 
days). In MS-DRG 274, we identified a total of 47,801 cases with an 
average length of stay of 1.4 days and average costs of $29,209. Of 
those 47,801 cases, there were 781 cases reporting procedure codes 
describing concomitant left atrial appendage closure and cardiac 
ablation, with average costs higher than the average costs in the FY 
2023 MedPAR file for MS-DRG 274 ($66,277 compared to $29,209) and a 
slightly longer average length of stay (1.5 days compared to 1.4 days).
    We reviewed these data and note, clinically, the management of AF 
by performing concomitant left atrial appendage closure and cardiac 
ablation can improve symptoms, prevent stroke, and reduce the risk of 
bleeding compared with oral anticoagulants. The data analysis clearly 
shows that cases reporting concomitant left atrial appendage closure 
and cardiac ablation procedures have higher average costs and slightly 
longer lengths of stay compared to all the cases in their assigned MS-
DRG. For these reasons, we are proposing to create a new MS-DRG for 
cases reporting a LAAC procedure and a cardiac ablation procedure.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the claims data from the September 2023 
update of the FY 2023 MedPAR file. The following table illustrates our 
findings for all 1,723 cases reporting procedure codes describing 
concomitant left atrial appendage closure and cardiac ablation. We 
believe the resulting proposed MS-DRG assignment is more clinically 
homogeneous, coherent and better reflects hospital resource use.
[GRAPHIC] [TIFF OMITTED] TP02MY24.008

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2025 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 ``with 
MCC'' split, there were only 268 cases in the subgroup.
[GRAPHIC] [TIFF OMITTED] TP02MY24.009

    We then applied the criteria for a two-way split for the ``with CC/
MCC'' and ``without CC/MCC'' subgroups and found that the criterion 
that there be at least a 20% difference in average cost between 
subgroups could not be met. The following table illustrates our 
findings.
[GRAPHIC] [TIFF OMITTED] TP02MY24.010


[[Page 35959]]


    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 criterion that there be at least a 20% difference in 
average costs between the subgroups also was not met. The following 
table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP02MY24.011

    Therefore, for FY 2025, we are not proposing to subdivide the 
proposed new MS-DRG for cases reporting procedure codes describing 
concomitant left atrial appendage closure and cardiac ablation into 
severity levels.
    In summary, for FY 2025, taking into consideration that it 
clinically requires greater resources to perform concomitant left 
atrial appendage closure and cardiac ablation procedures, we are 
proposing to create a new base MS-DRG for cases reporting a LAAC 
procedure and a cardiac ablation procedure in MDC 05. The proposed new 
MS-DRG is proposed new MS-DRG 317 (Concomitant Left Atrial Appendage 
Closure and Cardiac Ablation). We are also proposing to include the 
nine ICD-10-PCS procedure codes that describe LAAC procedures and 27 
ICD-10-PCS procedure codes that describe cardiac ablation listed 
previously in the logic for assignment of cases reporting a LAAC 
procedure and a cardiac ablation procedure for the proposed new MS-DRG. 
We note that discussion of the surgical hierarchy for the proposed 
modification is discussed in section II.C.15. of this proposed rule.
b. Neuromodulation Device Implant for Heart Failure 
(BarostimTM Baroreflex Activation Therapy)
    The BAROSTIMTM system is the first neuromodulation 
device system designed to trigger the body's main cardiovascular reflex 
to target symptoms of heart failure. The system consists of an 
implantable pulse generator (IPG) that is implanted subcutaneously in 
the upper chest below the clavicle, a stimulation lead that is sutured 
to either the right or left carotid sinus to activate the baroreceptors 
in the wall of the carotid artery, and a wireless programmer system 
that is used to non-invasively program and adjust BAROSTIMTM 
therapy via telemetry. The BAROSTIMTM system is indicated 
for the improvement of symptoms of heart failure in a subset of 
patients with symptomatic New York Heart Association (NYHA) Class III 
or Class II (who had a recent history of Class III) heart failure, with 
a low left ventricular ejection fraction, who also do not benefit from 
guideline directed pharmacologic therapy or qualify for Cardiac 
Resynchronization Therapy (CRT). The BAROSTIMTM system was 
approved for new technology add-on payments for FY 2021 (85 FR 58716 
through 58717) and FY 2022 (86 FR 44974). The new technology add-on 
payment was subsequently discontinued effective FY 2023 (87 FR 48916).
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48837 through 
48843), we discussed a request we received to reassign the ICD-10-PCS 
procedure codes that describe the implantation of the 
BAROSTIMTM system from MS-DRGs 252, 253, and 254 (Other 
Vascular Procedures with MCC, with CC, and without MCC respectively) to 
MS-DRGs 222, 223, 224, 225, 226, and 227 (Cardiac Defibrillator Implant 
with and without Cardiac Catheterization with and without AMI/HF/Shock 
with and without MCC, respectively). The requestor stated that the 
subset of patients that have an indication for the implantation of a 
BAROSTIMTM system also have indications for the implantation 
of Implantable Cardioverter Defibrillators (ICD), Cardiac 
Resynchronization Therapy Defibrillators (CRT-D) and/or Cardiac 
Contractility Modulation (CCM) devices, all of which also require the 
permanent implantation of a programmable, electrical pulse generator 
and at least one electrical lead. The requestor further stated that the 
average resource utilization required to implant the 
BAROSTIMTM system demonstrates a significant disparity 
compared to all procedures within MS-DRGs 252, 253, and 254.
    In the FY 2023 IPPS/LTCH PPS final rule, we stated that the results 
of the claims analysis demonstrated we did not have sufficient claims 
data on which to base and evaluate any proposed changes to the current 
MS-DRG assignment. We also expressed concern in equating the 
implantation of a BAROSTIMTM system to the placement of ICD, 
CRT-D, and CCM devices as these devices all differ in terms of 
technical complexity and anatomical placement of the electrical 
lead(s). We noted there is no intravascular component or vascular 
puncture involved when implanting a BAROSTIMTM system. In 
contrast, the placement of ICD, CRT-D, and CCM devices generally 
involve a lead being affixed to the myocardium, being threaded through 
the coronary sinus or crossing a heart valve and are procedures that 
involve a greater level of complexity than affixing the stimulator lead 
to either the right or left carotid sinus when implanting a 
BAROSTIMTM system. We stated that we believed that as the 
number of cases reporting procedure codes describing the implantation 
of neuromodulation devices for heart failure increases, a better view 
of the associated costs and lengths of stay on average will be 
reflected in the data for purposes of assessing any reassignment of 
these cases. Therefore, after consideration of the public comments we 
received, and for the reasons stated earlier, we finalized our proposal 
to maintain the assignment of cases reporting procedure codes that 
describe the implantation of a neuromodulation device in MS-DRGs 252, 
253, and 254 for FY 2023.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58712 through 
58720), we discussed a request we received to add ICD-10-CM diagnosis 
code R57.0 (Cardiogenic shock) to the list of ``secondary diagnoses'' 
that grouped to 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). During our 
review of the issue, we noted that the results of our claims analysis 
showed that in procedures involving a cardiac defibrillator implant, 
the average costs and length of stay were generally similar without 
regard to the presence of diagnosis codes describing AMI, HF, or shock. 
We stated we believed that it may no longer be necessary to subdivide 
MS-DRGs 222, 223, 224, 225, 226, and 227 based on the diagnosis codes 
reported. After consideration of the public comments we received, and 
for the reasons stated in the rule, we finalized our proposal to delete 
MS-

[[Page 35960]]

DRGs 222, 223, 224, 225, 226, and 227. We also finalized 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 for FY 2024.
    For this FY 2025 IPPS/LTCH PPS proposed rule, we received a similar 
request to again review the MS-DRG assignment of the ICD-10-PCS 
procedure codes that describe the implantation of the 
BAROSTIMTM system. Specifically, the requestor recommended 
that CMS consider reassigning the ICD-10-PCS procedure codes that 
describe the implantation of the BAROSTIMTM system from MS-
DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, 
and without MCC respectively) to MS-DRGs 275 (Cardiac Defibrillator 
Implant with Cardiac Catheterization and MCC), MS-DRG 276, and 277 
(Cardiac Defibrillator Implant with MCC and without MCC respectively); 
or to other more clinically coherent MS-DRGs for implantable device 
procedures indicated for Class III heart failure patients. The 
requestor stated in their analysis the number of claims reporting 
procedure codes that describe the implantation of the 
BAROSTIMTM system has been consistently growing over the 
past few years. The requestor acknowledged that the implantation of the 
BAROSTIMTM system is predominantly performed in the 
outpatient setting but noted that a significant number of severely sick 
patients with multiple comorbidities (such as chronic kidney disease, 
end stage renal disease (ESRD), chronic obstructive pulmonary disease 
(COPD), and AF) are treated in an inpatient setting. The requestor 
stated in their experience, hospitals that have performed 
BAROSTIMTM procedures have stopped allowing patients to 
receive the device in the inpatient setting due to the high losses for 
each Medicare claim. The requestor asserted it is critically important 
to allow very sick and fragile patients access to the 
BAROSTIMTM procedure in an inpatient setting and stated 
these patients should not be denied access by hospitals due to the 
perceived gross underpayment of the current MS-DRG.
    The requestor stated the BAROSTIMTM procedure is not 
clinically coherent with other procedures assigned to MS-DRGs 252, 253, 
and 254 (Other Vascular Procedures) as the majority of the ICD-10-PCS 
codes assigned to MS-DRGs 252, 253, and 254 describe procedures to 
identify, diagnose, clear and restructure veins and arteries, excluding 
those that require implantable devices. Furthermore, the requestor 
stated the costs of the implantable medical devices used for the 
BAROSTIMTM system (that is, the electrical pulse generator 
and electrical lead) alone far exceed the average costs of other cases 
assigned to MS-DRGs 252, 253, and 254.
    The following ICD-10-PCS procedure codes uniquely identify the 
implantation of the BAROSTIMTM system: 0JH60MZ (Insertion of 
stimulator generator into chest subcutaneous tissue and fascia, open 
approach) in combination with 03HK3MZ (Insertion of stimulator lead 
into right internal carotid artery, percutaneous approach) or 03HL3MZ 
(Insertion of stimulator lead into left internal carotid artery, 
percutaneous approach).
    To analyze this request, we first examined claims data from the 
September 2023 update of the FY 2023 MedPAR file for MS-DRGs 252, 253, 
and 254 to identify cases reporting procedure codes describing the 
implantation of the BAROSTIMTM system with or without a 
procedure code describing the performance of a cardiac catheterization 
as MS-DRG 275 is defined by the performance of cardiac catheterization 
and a secondary diagnosis of MCC. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.012

    As shown in the table, in MS-DRG 252, we identified a total of 
18,964 cases with an average length of stay of 8 days and average costs 
of $30,456. Of those 18,964 cases, there was one case reporting 
procedure codes describing

[[Page 35961]]

the implantation of the BAROSTIMTM system with a procedure 
code describing the performance of a cardiac catheterization with costs 
higher than the average costs in the FY 2023 MedPAR file for MS-DRG 252 
($110,928 compared to $30,456) and a longer length of stay (9 days 
compared to 8 days). There were 12 cases reporting procedure codes 
describing the implantation of the BAROSTIMTM system without 
a procedure code describing the performance of a cardiac 
catheterization, with average costs higher than the average costs in 
the FY 2023 MedPAR file for MS-DRG 252 ($66,291 compared to $30,456) 
and a slighter shorter average length of stay (7.8 days compared to 8 
days). In MS-DRG 253, we identified a total of 15,551 cases with an 
average length of stay of 5.2 days and average costs of $22,870. Of 
those 15,551 cases, there were seven cases reporting procedure codes 
describing the implantation of the BAROSTIMTM system without 
a procedure code describing the performance of a cardiac 
catheterization, with average costs higher than the average costs in 
the FY 2023 MedPAR file for MS-DRG 253 ($52,788 compared to $22,870) 
and a shorter average length of stay (4 days compared to 5.2 days). We 
found zero cases in MS-DRG 253 reporting procedure codes describing the 
implantation of a BAROSTIMTM system with a procedure code 
describing the performance of a cardiac catheterization. In MS-DRG 254, 
we identified a total of 5,973 cases with an average length of stay of 
2.3 days and average costs of $15,778. Of those 5,973 cases, there were 
three cases reporting procedure codes describing the implantation of 
the BAROSTIMTM system without a procedure code describing 
the performance of a cardiac catheterization, with average costs higher 
than the average costs in the FY 2023 MedPAR file for MS-DRG 254 
($29,740 compared to $15,778) and a shorter average length of stay (1.3 
days compared to 2.3 days). We found zero cases in MS-DRG 254 reporting 
procedure codes describing the implantation of a BAROSTIMTM 
system with a procedure code describing the performance of a cardiac 
catheterization.
    We then examined claims data from the September 2023 update of the 
FY 2023 MedPAR file for MS-DRGs 275, 276, and 277. Our findings are 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.013

    As the table shows, for MS-DRG 275, there were a total of 3,358 
cases with an average length of stay of 10.3 days and average costs of 
$63,181. For MS-DRG 276, there were a total of 3,264 cases with an 
average length of stay of 8.2 days and average costs of $54,993. For 
MS-DRG 277, there were a total of 3,840 cases with an average length of 
stay of 4.2 days and average costs of $42,111.
    In exploring mechanisms to address this request, we noted in total, 
there were only 23 cases reporting procedure codes describing the 
implantation of a BAROSTIMTM system in MS-DRGs 252, 253, and 
254 (13, 7, and 3, respectively). We reviewed these data, and while we 
recognize that the average costs of the 23 cases reporting procedure 
codes describing the implantation of a BAROSTIMTM are 
greater when compared to the average costs of all cases in MS-DRGs 252, 
253, and 254, the number of cases continues to be too small to warrant 
the creation of a new MS-DRG for these cases.
    We further note, that of the 23 cases reporting procedure codes 
describing the implantation of a BAROSTIMTM system 
identified in MS-DRGs 252, 253, and 254, only one case reported the 
performance of cardiac catheterization. As discussed in the FY 2024 
IPPS/LTCH PPS final rule, when reviewing the consumption of hospital 
resources for the cases reporting a cardiac defibrillator implant with 
cardiac catheterization during a hospital stay, the claims data clearly 
showed that the cases reporting secondary diagnoses designated as MCCs 
were more resource intensive as compared to other cases reporting 
cardiac defibrillator implant. Therefore, we finalized the creation of 
MS-DRG 275 for cases reporting a cardiac defibrillator implant with 
cardiac catheterization and a secondary diagnosis designated as an MCC. 
Of the 23 cases reporting procedure codes describing the implantation 
of a BAROSTIMTM system, there was only one case reporting a 
procedure code describing the performance of cardiac catheterization 
and a secondary diagnosis designated as an MCC, and we note that there 
may have been other factors contributing to the higher costs of this 
one case. The results of the claims analysis demonstrate we do not have 
sufficient claims data on which to base and propose a change to the 
current MS-DRG assignment of cases reporting procedure codes describing 
the implantation of a BAROSTIMTM system from MS-DRGs 252, 
253, and 254 to MS-DRG 275.
    Further analysis of the claims data demonstrates that the 23 cases 
reporting procedure codes describing the implantation of a 
BAROSTIMTM system had an average length of stay of 5.8 days 
and average costs of $59,355, as compared to the 3,264 cases in MS-DRG 
276 that had an average length of stay of 8.2 days and average costs of 
$54,993. While the cases reporting procedure codes describing the 
implantation of a BAROSTIMTM system had average costs that 
were $4,362 higher than the average costs of all cases in MS-DRG 276, 
as noted, there were only a total of 23 cases, and there may have been 
other factors contributing to the higher costs. We noted, however, 
reassigning all cases reporting procedure codes describing the 
implantation of a BAROSTIMTM system to MS-DRG 276, even if 
there is not a MCC present, the cases would receive higher payment and 
better account for the differences in resource utilization of these 
cases than in their respective MS-DRG.
    We reviewed the clinical issues and the claims data, and while we 
continue to note that there is no intravascular component or vascular 
puncture involved when implanting a BAROSTIMTM system, and 
that the implantation of a BAROSTIMTM system is 
distinguishable from the placement of ICD, CRT-D, and CCM devices, as 
these devices all differ in terms of technical complexity and 
anatomical placement of the electrical lead(s), as discussed in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 48837 through 48843), we agree 
that ICD, CRT-D, and CCM devices and the BAROSTIMTM system 
are clinically coherent in that they share an indication of heart 
failure, a major cause of morbidity and mortality in the United States, 
and that these cases demonstrate comparable resource utilization. Based 
on our review of the clinical issues and

[[Page 35962]]

the claims data, and to better account for the resources required, we 
are proposing to reassign the cases reporting procedure codes 
describing the implantation of a BAROSTIMTM system to MS-DRG 
276, even if there is no MCC reported, to better reflect the clinical 
severity and resource use involved in these cases.
    Therefore, for FY 2025, we are proposing to reassign all cases with 
one of the following ICD-10-PCS code combinations capturing cases 
reporting procedure codes describing the implantation of a 
BAROSTIMTM system, to MS-DRG 276, even if there is no MCC 
reported:
     0JH60MZ (Insertion of stimulator generator into chest 
subcutaneous tissue and fascia, open approach) in combination with 
03HK3MZ (Insertion of stimulator lead into right internal carotid 
artery, percutaneous approach); and
     0JH60MZ (Insertion of stimulator generator into chest 
subcutaneous tissue and fascia, open approach) in combination with 
03HL3MZ (Insertion of stimulator lead into left internal carotid 
artery, percutaneous approach).
    We also are proposing to change the title of MS-DRG 276 from 
``Cardiac Defibrillator Implant with MCC'' to ``Cardiac Defibrillator 
Implant with MCC or Carotid Sinus Neurostimulator'' to reflect the 
proposed modifications to MS-DRG assignments. We note that discussion 
of the surgical hierarchy for this proposed modification is discussed 
in section II.C.15. of this proposed rule.
c. Endovascular Cardiac Valve Procedures
    The human heart contains four major valves--the aortic, mitral, 
pulmonary, and tricuspid valves. These valves function to keep blood 
flowing through the heart. When conditions such as stenosis or 
insufficiency/regurgitation occur in one or more of these valves, 
valvular heart disease may result. Intervention options, including 
surgical aortic valve replacement or transcatheter aortic valve 
replacement can be performed to treat diseased or damaged aortic heart 
valves. Surgical aortic valve replacement (SAVR) is a traditional, 
open-chest surgery where an incision is made to access the heart. The 
damaged valve is replaced, and the chest is surgically closed. Since 
SAVR is a major surgery that involves an incision, recovery time tends 
to be longer. Transcatheter aortic valve replacement (TAVR) is a 
minimally invasive procedure that involves a catheter being inserted 
into an artery, without an incision for most cases, and then guided to 
the heart. The catheter delivers the new valve without the need for the 
chest or heart to be surgically opened. Since TAVR is a non-surgical 
procedure, it is generally associated with a much shorter recovery 
time.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49892 through 
49893), we discussed a request we received to create a new MS-DRG that 
would only include the various types of cardiac valve replacements 
performed by an endovascular or transcatheter technique. We reviewed 
the claims data and stated the data analysis showed that cardiac valve 
replacements performed by an endovascular or transcatheter technique 
had a shorter average length of stay and higher average costs in 
comparison to all of the cases in their assigned MS-DRGs, which were 
MS-DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve & Other Major 
Cardiothoracic Procedure with and without Cardiac Catheterization, with 
MCC, with CC, and without CC/MCC, respectively). In the FY 2015 IPPS/
LTCH PPS final rule we stated that patients receiving endovascular 
cardiac valve replacements were significantly different from those 
patients who undergo an open chest cardiac valve replacement and noted 
that patients receiving endovascular cardiac valve replacements are not 
eligible for open chest cardiac valve procedures because of a variety 
of health constraints, which we said highlights the fact that peri-
operative complications and post-operative morbidity have significantly 
different profiles for open chest procedures compared with endovascular 
interventions. We further noted that separately grouping these 
endovascular valve replacement procedures provides greater clinical 
cohesion for this subset of high-risk patients. Therefore, we finalized 
our proposal to create MS-DRGs 266 and 267 (Endovascular Cardiac Valve 
Replacement, with MCC and without MCC, respectively) for FY 2015.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42080 through 
42089), we discussed a request we received to modify the MS-DRG 
assignment for transcatheter mitral valve repair (TMVR) with implant 
procedures. We reviewed the claims data and stated based on our data 
analysis, transcatheter cardiac valve repair procedures and 
transcatheter (endovascular) cardiac valve replacement procedures are 
more clinically coherent in that they describe endovascular cardiac 
valve interventions with implants, and were similar in terms of average 
length of stay and average costs to cases in MS-DRGs 266 and 267 when 
compared to other procedures in their current MS-DRG assignment. For 
the reasons described in the rule and after consideration of the public 
comments we received, we finalized our proposal to modify the structure 
of MS-DRGs 266 and 267 by reassigning the procedure codes that describe 
transcatheter cardiac valve repair (supplement) procedures, to revise 
the title of MS-DRG 266 from ``Endovascular Cardiac Valve Replacement 
with MCC'' to ``Endovascular Cardiac Valve Replacement and Supplement 
Procedures with MCC'' and to revise the title of MS-DRG 267 from 
``Endovascular Cardiac Valve Replacement without MCC'' to 
``Endovascular Cardiac Valve Replacement and Supplement Procedures 
without MCC'', to reflect the finalized restructuring.
    For this FY 2025 IPPS/LTCH PPS proposed rule, we received a request 
to delete MS-DRGs 266 and 267 and to move the cases reporting 
transcatheter aortic valve replacement or repair (supplement) 
procedures currently assigned to those MS-DRGs into MS-DRGs 216, 217, 
218, 219, 220, and 221. The requestor asserted that under the current 
IPPS payment methodology, TAVR procedures are not profitable to 
hospitals and when patients are clinically eligible for both a TAVR and 
SAVR procedures, factors beyond clinical appropriateness can drive 
treatment decisions. According to the requestor (the manufacturer of 
the SAPIENTM family of transcatheter heart valves) sharing a 
single set of MS-DRGs would eliminate the current disincentives 
hospitals face and create financial neutrality between the two 
lifesaving treatment options. The requestor stated the current 
disincentives are increasingly problematic because they contribute to 
treatment disparities among certain racial, socioeconomic, and 
geographic groups.
    The requestor noted that currently surgical cardiac valve 
replacement and supplement procedures, such as SAVR, are assigned to 
MS-DRGs 216, 217, 218, 219, 220, and 221, and endovascular cardiac 
valve replacement and supplement procedures, such as TAVR, are assigned 
to MS-DRGs 266 and 267. The requestor stated that both sets of MS-DRGs 
address valve disease and include valve repair or replacement 
procedures for any of the four heart valves. According to the 
requestor, while the sets of MS-DRGs involve clinically similar cases 
their payment rates differ which may be unintentionally influencing 
clinical decision-making by incentivizing hospitals to choose more 
invasive SAVR

[[Page 35963]]

procedures over less-invasive TAVR procedures.
    As mentioned earlier, the requestor recommended that CMS delete MS-
DRGs 266 and 267 and move the cases reporting transcatheter aortic 
valve replacement or repair (supplement) procedures currently assigned 
to those MS-DRGs into MS-DRGs 216, 217, 218, 219, 220, and 221. The 
requestor performed their own analysis and stated that their models of 
this suggested solution indicated the change would result in moderate 
differences in per case payments by case type and would not increase 
overall Medicare spending. The requestor noted that while their 
requested solution would potentially decrease payment to cases 
currently assigned to MS-DRGs 216, 217, 218, 219, 220, and 221, while 
at the same time increasing the payment to cases reporting endovascular 
cardiac valve replacement and supplement procedures, the results of 
their claim analysis demonstrated that the net difference in total 
payments across all cases would increase by approximately $6.5 million. 
The requestor stated that they anticipate that their proposed solution 
could increase Medicare patients' access to innovative endovascular 
cardiac valve procedures by establishing payment neutrality between 
SAVR and TAVR procedures.
    We reviewed this request and note the requestor is correct that in 
Version 41.1 cases reporting procedure codes that describe endovascular 
cardiac valve replacement and supplement procedures, including TAVR, 
group to MS-DRGs 266 and 267. The requestor is also correct that cases 
reporting procedure codes that describe surgical cardiac valve 
replacement and supplement procedures, including SAVR, group to MS-DRGs 
216, 217, 218, 219, 220, and 221. We refer the reader to the ICD-10 MS-
DRG Definitions Manual Version 41.1 (available on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 216, 217, 218, 219, 220, 
221, 266 and 267.
    To begin our analysis, we identified the ICD-10-PCS procedure codes 
that describe endovascular (transcatheter) cardiac valve replacement 
and supplement procedures and the ICD-10-PCS procedure codes that 
describe surgical cardiac valve replacement and supplement procedures. 
We also identified the ICD-10-PCS codes that describe cardiac 
catheterization, as 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) are defined by the 
performance of cardiac catheterization. We refer the reader to Table 
6P.2a, Table 6P.2b, and Table 6P.2c, respectively, associated with this 
proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the lists of the 
ICD-10-PCS procedure codes that we identified that describe 
endovascular cardiac valve replacement and supplement procedures, 
surgical cardiac valve replacement and supplement procedures, and 
cardiac catheterization procedures.
    We then examined the claims data from the September 2023 update of 
the FY 2023 MedPAR file for all cases in MS-DRGs 216, 217, 218, 219, 
220, and 221 and compared the results to cases reporting surgical 
cardiac valve replacement and supplement procedures in MS-DRG 216, 217, 
218, 219, 220, and 221. The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP02MY24.014

    As shown in the table, in MS-DRG 216, we identified a total of 
5,033 cases with an average length of stay of 13.9 days and average 
costs of $84,176. Of those 5,033 cases, there were 2,973 cases 
reporting surgical cardiac valve replacement and supplement procedures, 
with average costs higher than the average costs in the FY 2023 MedPAR 
file for MS-DRG 216 ($87,497 compared to $84,176) and a longer average 
length of stay (16.8 days

[[Page 35964]]

compared to 13.9 days). In MS-DRG 217, we identified a total of 1,635 
cases with an average length of stay of 7.2 days and average costs of 
$58,381. Of those 1,635 cases, there were 867 cases reporting surgical 
cardiac valve replacement and supplement procedures, with average costs 
lower than the average costs in the FY 2023 MedPAR file for MS-DRG 217 
($56,829 compared to $58,381) and a longer average length of stay (9.5 
days compared to 7.2 days). In MS-DRG 218, we identified a total of 275 
cases with an average length of stay of 3.4 days and average costs of 
$54,624. Of those 275 cases, there were 60 cases reporting surgical 
cardiac valve replacement and supplement procedures, with average costs 
lower than the average costs in the FY 2023 MedPAR file for MS-DRG 218 
($45,096 compared to $54,624) and a longer average length of stay (6.7 
days compared to 3.4 days). In MS-DRG 219, we identified a total of 
12,458 cases with an average length of stay of 10.5 days and average 
costs of $67,228. Of those 12,458 cases, there were 9,780 cases 
reporting surgical cardiac valve replacement and supplement procedures, 
with average costs lower than the average costs in the FY 2023 MedPAR 
file for MS-DRG 219 ($64,954 compared to $67,228), and a slightly 
shorter average length of stay (10.3 days compared to 10.5 days). In 
MS-DRG 220, we identified a total of 9,829 cases with an average length 
of stay of 6.3 days and average costs of $47,242. Of those 9,829 cases, 
there were 7,841 cases reporting surgical cardiac valve replacement and 
supplement procedures, with average costs lower than the average costs 
in the FY 2023 MedPAR file for MS-DRG 220 ($46,245 compared to $47,242) 
and a slightly longer average length of stay (6.4 days compared to 6.3 
days). In MS-DRG 221, we identified a total of 1,242 cases with an 
average length of stay of 3.8 days and average costs of $41,539. Of 
those 1,242 cases, there were 627 cases reporting surgical cardiac 
valve replacement and supplement procedures, with average costs lower 
than the average costs in the FY 2023 MedPAR file for MS-DRG 221 
($39,081 compared to $41,539) and a longer average length of stay (4.9 
days compared to 3.8 days).
    Next, we examined claims data from the September 2023 update of the 
FY 2023 MedPAR file for MS-DRGs 266 and 267. Our findings are shown in 
the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.015

    Because there is a two-way split within MS-DRGs 266 and 267 and 
there is a three-way split within MS-DRGs 216, 217, and 218, and 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), we also analyzed the cases reporting a 
code describing an endovascular cardiac valve replacement and 
supplement procedure with a procedure code describing the performance 
of a cardiac catheterization for the presence or absence of a secondary 
diagnosis designated as a complication or comorbidity (CC) or a major 
complication or comorbidity (MCC). We also analyzed the cases reporting 
a code describing an endovascular cardiac valve replacement and 
supplement procedure without a procedure code describing the 
performance of a cardiac catheterization for the presence or absence of 
a secondary diagnosis designated as a CC or an MCC.
[GRAPHIC] [TIFF OMITTED] TP02MY24.016

    As shown in the table, the data analysis performed indicates that 
the 5,443 cases in MS-DRG 266 reporting endovascular cardiac valve 
replacement and supplement procedures with a procedure code describing 
the

[[Page 35965]]

performance of a cardiac catheterization, and with a secondary 
diagnosis code designated as an MCC have an average length of stay that 
is shorter than the average length of stay (7.9 days versus 16.8 days) 
and lower average costs ($63,128 versus $87,497) when compared to the 
cases in MS-DRG 216 reporting surgical cardiac valve replacement and 
supplement procedures with a procedure code describing the performance 
of a cardiac catheterization, and with a secondary diagnosis code 
designated as an MCC. The 4,761 cases in MS-DRG 267 reporting 
endovascular cardiac valve replacement and supplement procedures with a 
procedure code describing the performance of a cardiac catheterization, 
and with a secondary diagnosis code designated as a CC have an average 
length of stay that is shorter than the average length of stay (2 days 
versus 9.5 days) and lower average costs ($42,163 versus $56,829) when 
compared to the cases in MS-DRG 217 reporting surgical cardiac valve 
replacement and supplement procedures with a procedure code describing 
the performance of a cardiac catheterization, and with a secondary 
diagnosis code designated as an CC. The 1,386 cases in MS-DRG 267 
reporting endovascular cardiac valve replacement and supplement 
procedures with a procedure code describing the performance of a 
cardiac catheterization, and without a secondary diagnosis code 
designated as a CC or MCC have an average length of stay that is 
shorter than the average length of stay (1.3 days versus 6.7 days) and 
lower average costs ($39,709 versus $45,096) when compared to the cases 
in MS-DRG 218 reporting surgical cardiac valve replacement and 
supplement procedures with a procedure code describing the performance 
of a cardiac catheterization, without a secondary diagnosis code 
designated as a CC or MCC.
    The 14,493 cases in MS-DRG 266 reporting endovascular cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and with a 
secondary diagnosis code designated as an MCC have an average length of 
stay that is shorter than the average length of stay (3.5 days versus 
10.3 days) and lower average costs ($50,831 versus $64,954) when 
compared to the cases in MS-DRG 219 reporting surgical cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and with a 
secondary diagnosis code designated as an MCC. The 22,996 cases in MS-
DRG 267 reporting endovascular cardiac valve replacement and supplement 
procedures without a procedure code describing the performance of a 
cardiac catheterization, and with a secondary diagnosis code designated 
as a CC have an average length of stay that is shorter than the average 
length of stay (1.5 days versus 6.4 days) and lower average costs 
($43,637 versus $46,245) when compared to the cases in MS-DRG 220 
reporting surgical cardiac valve replacement and supplement procedures 
without a procedure code describing the performance of a cardiac 
catheterization, and with a secondary diagnosis code designated as an 
CC. The 7,522 cases in MS-DRG 267 reporting endovascular cardiac valve 
replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, and without a 
secondary diagnosis code designated as a CC or MCC have an average 
length of stay that is shorter than the average length of stay (1.2 
days versus 4.9 days) and higher average costs ($42,472 versus $39,081) 
when compared to the cases in MS-DRG 221 reporting surgical cardiac 
valve replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization, without a 
secondary diagnosis code designated as a CC or MCC.
    This data analysis shows the cases in MS-DRG 266 and 267 reporting 
endovascular cardiac valve replacement and supplement procedures with a 
procedure code describing the performance of a cardiac catheterization 
when distributed based on the presence or absence of a secondary 
diagnosis designated as a CC or a MCC have average costs lower than the 
average costs of cases reporting surgical cardiac valve replacement and 
supplement procedures with a procedure code describing the performance 
of a cardiac catheterization in the FY 2023 MedPAR file for MS-DRGs 
216, 217, and 218 respectively, and the average lengths of stay are 
shorter. Similarly, the cases in MS-DRG 266 and 267 reporting 
endovascular cardiac valve replacement and supplement procedures 
without a procedure code describing the performance of a cardiac 
catheterization when distributed based on the presence or absence of a 
secondary diagnosis designated as a CC or a MCC generally have average 
costs lower than the average costs of cases reporting surgical cardiac 
valve replacement and supplement procedures without a procedure code 
describing the performance of a cardiac catheterization in the FY 2023 
MedPAR file for MS-DRGs 219, 220, and 221 respectively, and the average 
lengths of stay are shorter.
    For patients with an indication for cardiac valve replacement, 
clinical and anatomic factors must be considered when decision-making 
between procedures such as TAVR and SAVR. We note that SAVR is not a 
treatment option for patients with extreme surgical risk (that is, high 
probability of death or serious irreversible complication), severe 
atheromatous plaques of the ascending aorta such that aortic cross-
clamping is not feasible, or with other conditions that would make 
operation through sternotomy or thoracotomy prohibitively hazardous. We 
agree that the endovascular or transcatheter technique presents a 
viable option for high-risk patients who are not candidates for the 
traditional open surgical approach, however we also note that TAVR is 
not indicated for every patient. TAVR is contraindicated in patients 
who cannot tolerate an anticoagulation/antiplatelet regimen, or who 
have active bacterial endocarditis or other active infections, or who 
have significant annuloplasty ring dehiscence.
    We have concern with the assertion that clinicians perform more 
invasive surgical procedures, such as SAVR procedures, only to increase 
payment to their facility where minimally invasive TAVR procedures are 
also viable option. The choice of SAVR versus TAVR should not be based 
on potential facility payment. Instead, the decision on the procedural 
approach to be utilized should be based upon an individualized risk-
benefit assessment that includes reviewing factors such as the 
patient's age, surgical risk, frailty, valve morphology, and presence 
of concomitant valve disease or coronary artery disease. As we have 
stated in prior rulemaking (83 FR 41201), it is not appropriate for 
facilities to deny treatment to beneficiaries needing a specific type 
of therapy or treatment that involves increased costs. Conversely, it 
is not appropriate for facilities to recommend a specific type of 
therapy or treatment strictly because it may involve higher payment to 
the facility.
    Also, we have concern with the requestor's assertion that sharing a 
single set of MS-DRGs could eliminate any perceived disincentives 
hospitals may face and create financial neutrality between the two 
lifesaving treatment options. Data analysis shows that cases reporting 
surgical cardiac valve

[[Page 35966]]

replacement and supplement procedures have higher costs and longer 
lengths of stay. If clinical decision-making is being driven by 
financial motivations, as suggested by the requestor, in circumstances 
where the decision on which approach is best (for example, TAVR or 
SAVR) is left to the providers' discretion, it is unclear how reducing 
payment for surgical cardiac valve replacement and supplement 
procedures would eliminate possible disincentives, or not have the 
opposite effect, and instead incentivize endovascular cardiac valve 
replacement and supplement procedures.
    The MS-DRGs are a classification system intended to group together 
diagnoses and procedures with similar clinical characteristics and 
utilization of resources and are not intended to be utilized as a tool 
to incentivize the performance of certain procedures. When performed, 
surgical cardiac valve replacement and supplement procedures are 
clinically different from endovascular cardiac valve replacement and 
supplement procedures in terms of technical complexity and hospital 
resource use. In the FY 2015 IPPS/LTCH PPS final rule, we stated that 
separately grouping endovascular valve replacement procedures provides 
greater clinical cohesion for this subset of high-risk patients. Our 
claims analysis for this FY 2025 IPPS/LTCH PPS proposed rule 
demonstrates that this continues to be substantiated by the difference 
in average costs and average lengths of stay demonstrated by the two 
cohorts. We continue to believe that endovascular cardiac valve 
replacement and supplement procedures are clinically coherent in their 
currently assigned MS-DRGs. Therefore, we are proposing to maintain the 
structure of MS-DRGs 266 and 267 for FY 2025.
d. MS-DRG Logic for MS-DRG 215
    We received a request to review the GROUPER logic for MS-DRG 215 
(Other Heart Assist System Implant) in MDC 05 (Diseases and Disorders 
of the Circulatory System). The requestor stated that when the 
procedure code describing the revision of malfunctioning devices within 
the heart via an open approach is assigned, the encounter groups to MS-
DRG 215. The requestor stated that, in their observation, ICD-10-PCS 
code 02WA0JZ (Revision of synthetic substitute in heart, open approach) 
can only be assigned if a more specific anatomical site is not 
documented in the operative note. The requestor further stated they 
interpreted this to mean that an ICD-10-PCS procedure code describing 
the open revision of a synthetic substitute in the heart can only apply 
to the ventricular wall or left atrial appendage and excludes the 
atrial or ventricular septum or any valve to qualify for MS-DRG 215 and 
recommended that CMS consider the expansion of the open revision of 
heart structures to include the atrial or ventricular septum and heart 
valves.
    To begin our analysis, we reviewed the GROUPER logic. The requestor 
is correct that ICD-10-PCS procedure code 02WA0JZ is currently one of 
the listed procedure codes in the GROUPER logic for MS-DRG 215. While 
the requestor stated that when procedures codes describing the 
revisions of malfunctioning devices within the heart via an open 
approach are assigned, the encounter groups to MS-DRG 215, we wish to 
clarify that the revision codes listed in the GROUPER logic for MS-DRG 
215 specifically describe procedures to correct, to the extent 
possible, a portion of a malfunctioning heart assist device or the 
position of a displaced heart assist device. Further, it is unclear 
what is meant by the requestor's statement that ICD-10-PCS code 02WA0JZ 
can only be assigned if more specific anatomical site is not documented 
in the operative note, as ICD-10-PCS code 02WA0JZ is used to describe 
the open revision of artificial heart systems. Total artificial hearts 
are pulsating bi-ventricular devices that are implanted into the chest 
to replace a patient's left and right ventricles and can provide a 
bridge to heart transplantation for patients who have no other 
reasonable medical or surgical treatment options. We refer the reader 
to the ICD-10 MS-DRG Definitions Manual Version 41.1 (available on the 
CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRG 
215. We encourage the requestor and any providers that have cases 
involving heart assist devices for which they need ICD-10 coding 
assistance and clarification on the usage of the codes, to submit their 
questions to the American Hospital Association's Central Office on ICD-
10 at https://www.codingclinicadvisor.com/.
    As previously noted, the requestor recommended that we consider 
expansion of the open revision of heart structures to include the 
atrial or ventricular septum and heart valves. The requestor did not 
provide a specific list of procedure codes involving the open revision 
of heart structures. While not explicitly stated, we understood this 
request to be for our consideration of the reassignment of the 
procedure codes describing the open revision of devices in the heart 
valves, atrial septum, or ventricular septum to MS-DRG 215, therefore, 
we reviewed the ICD-10-PCS classification and identified the following 
18 procedure codes. These 18 codes are all assigned to MS-DRGs 228 and 
229 (Other Cardiothoracic Procedures with and without MCC, 
respectively) in MDC 05 in Version 41.1.

[[Page 35967]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.017

    Next, we examined claims data from the September 2023 update of the 
FY 2023 MedPAR file for MS-DRG 228 and 229 to identify cases reporting 
one of the 18 codes listed previously that describe the open revision 
of devices in the heart valves, atrial septum, or ventricular septum. 
Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.018

    As shown in the table, in MS-DRG 228, we identified a total of 
4,391 cases with an average length of stay of 8.7 days and average 
costs of $44,565. Of those 4,391 cases, there were 12 cases reporting a 
procedure code describing the open revision of devices in the heart 
valves, atrial septum, or ventricular septum, with average costs higher 
than the average costs in the FY 2023 MedPAR file for MS-DRG 228 
($51,549 compared to $44,565) and a longer average length of stay (15.7 
days compared to 8.7 days). In MS-DRG 229, we identified a total of 
5,712 cases with an average length of stay of 3.3 days and average 
costs of $28,987. Of those 5,712 cases, there was one case reporting a 
procedure code describing the open revision of devices in the heart 
valves, atrial septum, or ventricular septum with costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 229 ($11,322 
compared to $28,987) and a shorter length of stay (1 day compared to 
3.3 days).
    We then examined claims data from the September 2023 update of the 
FY 2023 MedPAR for MS-DRG 215. Our findings are shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.019

    Our analysis indicates that the cases assigned to MS-DRG 215 have 
much higher average costs than the cases reporting a procedure code 
describing the open revision of devices in the heart valves, atrial 
septum, or ventricular septum currently assigned to MS-DRGs 228 and 
229. Instead, the average costs and average length of stay for case 
reporting a procedure code describing the open revision of devices in 
the heart valves, atrial septum, or ventricular septum appear to be 
generally more aligned with the average costs and average length of 
stay for all cases in MS-DRGs 228 and 229, where they are currently 
assigned.
    In addition, based on our review of the clinical considerations, we 
do not believe the procedure codes describing the open revision of 
devices in the heart valves, atrial septum, or ventricular septum are 
clinically coherent with the procedure codes currently assigned to MS-
DRG 215. Heart assist devices, such as ventricular assist devices and 
artificial heart systems, provide circulatory support by taking over 
most of the workload of the left ventricle. Blood enters the pump 
through an

[[Page 35968]]

inflow conduit connected to the left ventricle and is ejected through 
an outflow conduit into the body's arterial system. Heart assist 
devices can provide temporary left, right, or biventricular support for 
patients whose hearts have failed and can also be used as a bridge for 
patients who are awaiting a heart transplant. Devices placed in the 
heart valves, atrial septum, or ventricular septum do not serve the 
same purpose as heart assist devices and we do not believe the 
procedure codes describing the revision of these devices should be 
assigned to MS-DRG 215. Further, the various indications for devices 
placed in the heart valves, atrial septum or ventricular septum are not 
aligned with the indications for heart assist devices. We believe that 
patients with indications for heart assist devices tend to be more 
severely ill and these inpatient admissions are associated with greater 
resource utilization. Therefore, for the reasons stated previously, we 
are proposing to maintain the GROUPER logic for MS-DRG 215 for FY 2025.
5. MDC 06 (Diseases and Disorders of the Digestive System): Excision of 
Intestinal Body Parts
    We identified a replication issue from the ICD-9 based MS-DRGs to 
the ICD-10 based MS-DRGs regarding the assignment of eight ICD-10-PCS 
codes that describe the excision of intestinal body parts by open, 
percutaneous, or percutaneous endoscopic approach. Under the Version 32 
ICD-9 based MS-DRGs, ICD-9-CM procedure code 45.33 (Local excision of 
lesion or tissue of small intestine, except duodenum) was designated as 
an O.R. procedure and was assigned to MDC 06 (Diseases and Disorders of 
the Digestive System) in MS-DRGs 347, 348, and 349 (Anal and Stomal 
Procedures with MCC, with CC, and without CC/MCC, respectively).
    There are eight ICD-10-PCS code translations that provide more 
detailed and specific information for ICD-9-CM code 45.33 that also 
currently group to MS-DRGs 347, 348, and 349 in the ICD-10 MS-DRGs 
Version 41.1. These eight procedure codes are shown in the following 
table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.020

    We noted during our review of this issue that under ICD-9-CM, 
procedure code 45.33 did not differentiate the specific type of 
approach used to perform the procedure. This is in contrast to the 
eight comparable ICD-10-PCS code translations listed in the previous 
table that do differentiate among various approaches (open, 
percutaneous, and percutaneous endoscopic). We also noted that there 
are four additional ICD-10-PCS code translations that provide more 
detailed and specific information for ICD-9-CM code 45.33, however 
these four codes currently group to MS-DRGs 329, 330, and 331 (Major 
Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, 
respectively), and not MS-DRGs 347, 348, and 349, in the ICD-10 MS-DRGs 
Version 41.1. These four procedure codes are shown in the following 
table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.021

    We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 
41.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER 
logic for MS-DRGs 329, 330, 331, 347, 348, and 349.
    Next, we examined claims data from the September 2023 update of the 
FY 2023 MedPAR file for MS-DRG 347, 348, and 349 to identify cases 
reporting one of the eight codes listed previously that describe 
excision of intestinal body parts by an open, percutaneous, or 
percutaneous endoscopic approach. Our findings are shown in the 
following table:

[[Page 35969]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.022

    As shown in the table, in MS-DRG 347, we identified a total of 752 
cases with an average length of stay of 7.6 days and average costs of 
$21,462. Of those 752 cases, there were 66 cases reporting one of eight 
procedure codes describing the excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach, with average 
costs higher than the average costs in the FY 2023 MedPAR file for MS-
DRG 347 ($27,081 compared to $21,462) and a longer average length of 
stay (8.5 days compared to 7.6 days). In MS-DRG 348, we identified a 
total of 1,580 cases with an average length of stay of 4.2 days and 
average costs of $12,020. Of those 1,580 cases, there were 192 cases 
reporting one of eight procedure codes describing the excision of 
intestinal body parts by an open, percutaneous, or percutaneous 
endoscopic approach, with average costs higher than the average costs 
in the FY 2023 MedPAR file for MS-DRG 348 ($17,063 compared to $12,020) 
and a longer average length of stay (4.9 days compared to 4.2 days). In 
MS-DRG 349, we identified a total of 644 cases with an average length 
of stay of 2.2 days and average costs of $9,095. Of those 644 cases, 
there were 117 cases reporting one of eight procedure codes describing 
the excision of intestinal body parts by an open, percutaneous, or 
percutaneous endoscopic approach, with average costs higher than the 
average costs in the FY 2023 MedPAR file for MS-DRG 349 ($14,612 
compared to $9,095), and a longer average length of stay (3 days 
compared to 2.2 days).
    We then examined claims data from the September 2023 update of the 
FY 2023 MedPAR for MS-DRGs 329, 330, and 331. Our findings are shown in 
the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.023

    While the average costs for all cases in MS-DRGs 329, 330, and 331 
are higher than the average costs of the cases reporting one of eight 
procedure codes describing the excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach, the data 
suggest that overall, cases reporting one of eight procedure codes 
describing the excision of intestinal body parts by an open, 
percutaneous, or percutaneous endoscopic approach may be more 
appropriately aligned with the average costs of the cases in MS-DRGs 
329, 330, and 331 in comparison to MS-DRGs 347, 348, and 349, even 
though the average lengths of stay are shorter.
    We reviewed this grouping issue, and our analysis indicates that 
the eight procedure codes describing the excision of intestinal body 
parts by an open, percutaneous, or percutaneous endoscopic approach 
were initially assigned to the list of procedures in the GROUPER logic 
for MS-DRGs 347, 348, and 349 as a result of replication in the 
transition from ICD-9 to ICD-10 based MS-DRGs. We also note that 
procedure codes 0DB83ZZ, 0DBA3ZZ, 0DBA4ZZ, 0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 
0DBC3ZZ, and 0DBC4ZZ do not describe procedures on a stoma, which is an 
artificial opening on the abdomen that can be connected to either the 
digestive or urinary system to allow waste to be diverted out of the 
body, or the anus. We support the reassignment of codes 0DB83ZZ, 
0DBA3ZZ, 0DBA4ZZ, 0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 0DBC3ZZ, and 0DBC4ZZ for 
clinical coherence and believe these eight procedure codes should be 
appropriately grouped along with the four other procedure codes that 
describe excision of intestinal body parts by an open, or percutaneous 
endoscopic approach currently assigned to MS-DRGs 329, 330, and 331.
    Accordingly, because the procedures described by the eight 
procedure codes that describe excision of intestinal body parts by an 
open, percutaneous, or percutaneous endoscopic approach are not 
clinically consistent with procedures on the anus or stoma, and it is 
clinically appropriate to reassign these procedures to be consistent 
with the four other procedure codes that describe excision of 
intestinal body parts by an open, or percutaneous endoscopic approach 
in MS-DRGs 329, 330, and 331, we are proposing the reassignment of 
procedure codes 0DB83ZZ, 0DBA3ZZ, 0DBA4ZZ, 0DBB3ZZ, 0DBB4ZZ, 0DBC0ZZ, 
0DBC3ZZ, and 0DBC4ZZ from MS-DRGs 347, 348, and 349 (Anal and Stomal 
Procedures with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 329, 330, and 331 (Major Small and Large Bowel Procedures with 
MCC, with CC, and without CC/MCC, respectively) in MDC 06, effective FY 
2025.

[[Page 35970]]

6. MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. MS-DRG Logic for MS-DRGs 456, 457, and 458
    We identified an inconsistency in the GROUPER logic for 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) related to ICD-10-CM diagnosis codes 
describing deforming dorsopathies. The logic for case assignment to MS-
DRGs 456, 457, and 458 as displayed in the ICD-10 MS-DRG Definitions 
Manual Version 41.1 (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) is comprised of 
four logic lists. The first logic list is entitled ``Spinal Fusion 
Except Cervical'' and is defined by a list of procedure codes 
designated as O.R. procedures that describe spinal fusion procedures of 
the thoracic, thoracolumbar, lumbar, lumbosacral, sacrococcygeal, 
coccygeal, and sacroiliac joint. The second logic list is entitled 
``Spinal Curvature/Malignancy/Infection'' and is defined by a list of 
diagnosis codes describing spinal curvature, spinal malignancy, and 
spinal infection that are used to define the logic for case assignment 
when any one of the listed diagnosis codes is reported as the principal 
diagnosis. The third logic list is entitled ``OR Secondary Diagnosis'' 
and is defined by a list of diagnosis codes describing curvature of the 
spine that are used to define the logic for case assignment when any 
one of the listed codes is reported as a secondary diagnosis. The 
fourth logic list is entitled ``Extensive Fusions'' and is defined by a 
list of procedure codes designated as O.R. procedures that describe 
extensive spinal fusion procedures. We refer the reader to the ICD-10 
MS-DRG Definitions Manual Version 41.1, (available on the CMS website 
at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRGs 456, 457, and 458.
    In the second logic list entitled ``Spinal Curvature/Malignancy/
Infection'' there are a subset of six diagnosis codes describing other 
specified deforming dorsopathies as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.024

    In the third logic list entitled ``OR Secondary Diagnosis'' there 
are currently 14 diagnosis codes listed, one of which is diagnosis code 
M43.8X9 (Other specified deforming dorsopathies, site unspecified) as 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.025

    We recognized that the five diagnosis codes describing deforming 
dorsopathies of specific anatomic sites that are listed in the second 
logic list entitled ``Spinal Curvature/Malignancy/Infection'' are not 
listed in the third logic list entitled ``OR Secondary Diagnosis'', 
rather, only diagnosis code M43.8X9 (Other specified deforming 
dorsopathies, site unspecified) appears in both logic lists. Therefore, 
we considered if it was clinically appropriate to add the five 
diagnosis codes describing deforming dorsopathies of specific anatomic 
sites that are listed in the second logic list entitled ``Spinal 
Curvature/Malignancy/Infection'' to the third logic list entitled ``OR 
Secondary Diagnosis''.
    A deforming dorsopathy is characterized by abnormal bending or 
flexion in the vertebral column. All spinal deformities involve 
problems with curve or rotation of the spine, regardless of site 
specificity. We believe the five diagnosis codes describing deforming 
dorsopathies of specific anatomic sites to be clinically aligned with 
the diagnosis codes currently

[[Page 35971]]

included in the ``OR Secondary Diagnosis'' logic list. Therefore, for 
clinical consistency we are proposing to add diagnosis codes M43.8X4, 
M43.8X5, M43.8X6, M43.8X7, and M43.8X8 to the ``OR Secondary 
Diagnosis'' logic list for MS-DRGs 456, 457, and 458, effective October 
1, 2024 for FY 2025.
b. Interbody Spinal Fusion Procedures
    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26726 through 
26729) and final rule (88 FR 58731 through 58735, as corrected in the 
FY 2024 final rule correction notice at 88 FR 77211), we discussed a 
request we received to reassign cases reporting spinal fusion 
procedures using 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 refer the reader to the ICD-10 MS-DRG 
Definitions Manual Version 41.1 (available on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic.
    We also noted that the aprevoTM Intervertebral Body 
Fusion Device technology was approved for new technology add-on 
payments for FY 2022 (86 FR 45127 through 45133). We further 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 the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58802), we finalized the continuation of new 
technology add-on payments for the transforaminal lumbar interbody 
fusion (TLIF) indication for aprevoTM for FY 2024, and the 
discontinuation of the new technology add-on payments for the anterior 
lumbar interbody fusion (ALIF) and lateral lumbar interbody fusion 
(LLIF) indications for FY 2024. We refer the reader to section II.E. 
for discussion of the FY 2025 status of technologies receiving new 
technology add-on payments for FY 2024, including the status for the 
aprevoTM technology.
    As also discussed in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26726 through 26729) and final rule (88 FR 58731 through 58735), 
effective October 1, 2021 (FY 2022), we implemented 12 new ICD-10-PCS 
procedure codes to identify and describe spinal fusion procedures using 
the aprevoTM customized interbody fusion device. In the 
proposed rule we noted that the manufacturer expressed concerns that 
there may be unintentional miscoded claims from providers with whom 
they do not have an explicit relationship and 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, it submitted a code proposal requesting a revision to the title 
of the procedure codes that were finalized effective FY 2022. As 
discussed in the FY 2024 IPPS/LTCH PPS final rule, a proposal to revise 
the code title for the procedure codes that identify and describe 
spinal fusion procedures using the aprevoTM customized 
interbody fusion device was presented and discussed as an Addenda item 
at the March 7-8, 2023 ICD-10 Coordination and Maintenance Committee 
meeting and subsequently finalized.
    The code title changes for the 12 ICD-10-PCS procedure codes to 
identify and describe spinal fusion procedures using the 
aprevoTM customized interbody fusion device were reflected 
in the FY 2024 ICD-10-PCS Code Update files available via the CMS 
website at: https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-pcs, as well as in Table 6F.--Revised Procedure Code 
Titles--FY 2024 associated with the FY 2024 IPPS/LTCH PPS final rule 
and available via the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We note that 
only the code titles were revised and the code numbers themselves did 
not change.
    Accordingly, effective with discharges on and after October 1, 2023 
(FY 2024), the 12 ICD-10-PCS procedure codes to identify and describe 
spinal fusion procedures using the aprevoTM customized 
interbody fusion device with their revised code titles are as follows:

[[Page 35972]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.026

    As discussed in the FY 2024 proposed and final rules, as part of 
our analysis of the manufacturer's request to reassign cases involving 
the aprevoTM device, we presented findings from our analysis 
of claims 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 12 original procedure codes describing 
utilization of an aprevoTM customized interbody spinal 
fusion device. We stated that while we agreed that the findings from 
our analysis appeared to indicate that cases reporting the performance 
of a procedure using an aprevoTM customized interbody spinal 
fusion device reflected a higher consumption of resources, due to the 
concerns expressed with respect to suspected inaccuracies of the coding 
and therefore, reliability of the claims data, we would continue to 
monitor the claims data for resolution of the potential coding issues 
identified by the requestor (the manufacturer). We stated that we 
continued to believe additional review of claims data was warranted and 
would be informative as we continued to consider cases involving this 
technology for future rulemaking. Specifically, we stated we believed 
it would be premature to propose any MS-DRG modifications for spinal 
fusion procedures using an aprevoTM customized interbody 
spinal fusion device for FY 2024 and finalized our proposal to maintain 
the structure of MS-DRGs 453, 454, 455, 456, 457, 458, 459, and 460, 
without modification, for FY 2024 (88 FR 58734 through 58735). As 
discussed further in the FY 2024 final rule correction, in response to 
the manufacturer's comment expressing concern about the reliability of 
the Medicare claims data in the MedPAR file used for purposes of CMS's 
claims data analysis, as compared to the manufacturer's analysis of its 
own customer claims data, we stated that in order for us to consider 
using non-MedPAR data, the non-MedPAR data must be independently 
validated, meaning when an entity submits non-MedPAR data, we must be 
able to independently review the medical records and verify that a 
particular procedure was performed for each of the cases that 
purportedly involved the procedure. We noted that, in this particular 
circumstance, where external data for cases reporting the use of an 
aprevoTM spinal fusion device was provided, we did not have 
access to the medical records to conduct an independent review; 
therefore, we were not able to validate or confirm the non-MedPAR data 
submitted by the commenter for consideration in FY 2024. However, we 
also noted that our work in this area was ongoing, and we would 
continue to examine the data and consider these issues as we develop 
potential future rulemaking proposals. We refer readers to the FY 2024 
IPPS/LTCH PPS correction notice (88 FR 77211) for further discussion.
---------------------------------------------------------------------------

    \3\ As noted earlier in the discussion, the code titles were 
updated but the code numbers themselves did not change.
---------------------------------------------------------------------------

    In advance of this FY 2025 IPPS/LTCH PPS proposed rule, the 
manufacturer provided us with a list of the providers with which it 
indicated it has an explicit relationship to assist in our ongoing 
review of its request for reassignment of cases reporting spinal fusion 
procedures using an aprevoTM interbody fusion device from 
the lower severity spinal fusion MS-DRGs to the higher severity level 
spinal fusion MS-DRGs.
    To continue our analysis of cases reporting spinal fusion 
procedures using an aprevoTM customized interbody fusion 
device, we first analyzed claims data from the September 2023 update of 
the FY 2023 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 the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device.\3\ Our findings are shown in the following tables.

[[Page 35973]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.027

    We identified the majority of cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device in MS-DRGs 453, 454, and 
455 with a total of 242 cases (26 + 129 + 87 = 242) with an average 
length of stay of 4.6 days and average costs of $68,526. The 26 cases 
found in MS-DRG 453 appear to have a comparable average length of stay 
(9.8 days versus 9.5 days) and higher average costs ($99,162 versus 
$80,420) compared to all the cases in MS-DRG 453, with a difference in 
average costs of $18,742 for the cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device. The 129 cases found in 
MS-DRG 454 appear to have a comparable average length of stay (4.9 days 
versus 4.3 days) and higher average costs ($71,527 versus $54,983) 
compared to all the cases in MS-DRG 454, with a difference in average 
costs of $16,544 for the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device. The 87 cases found in MS-DRG 455 have 
an identical average length of stay of 2.6 days in comparison to all 
the cases in MS-DRG 455, however, the difference in average costs is 
$13,907 ($54,922-$41,015 = $13,907) for the cases reporting the 
performance of a spinal fusion procedure using an

[[Page 35974]]

aprevoTM custom-made anatomically designed interbody fusion 
device.
    For MS-DRGs 456, 457, and 458, we found a total of 19 cases (2 + 11 
+ 6 = 19) reporting the performance of a spinal fusion procedure using 
an aprevoTM custom-made anatomically designed interbody 
fusion device with an average length of stay of 4.7 days and average 
costs of $51,384. The 2 cases found in MS-DRG 456 have a shorter 
average length of stay (8.5 days versus 12.6 days) and lower average 
costs ($69,009 versus $76,060) compared to all the cases in MS-DRG 456. 
The 11 cases found in MS-DRG 457 also have a shorter average length of 
stay (5.0 days versus 6.1 days) and lower average costs ($47,221 versus 
$52,179). For MS-DRG 458, we found 6 cases reporting the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device with a comparable average 
length of stay (3.0 days versus 3.1 days) and higher average costs 
($53,140 versus $39,260) compared to the average costs of all the cases 
in MS-DRG 458, with a difference in average costs of $13,880 ($53,140-
$39,260 = $13,880) for the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device.
    For MS-DRGs 459 and 460, we found a total of 65 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device with an 
average length of stay of 2.7 days and average costs of $57,128. The 
single case found in MS-DRG 459 had a longer average length of stay (22 
days versus 9.6 days) and higher average costs ($288,499 versus 
$53,192) compared to the average costs of all the cases in MS-DRG 459. 
For MS-DRG 460, the 64 cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device had a shorter average length of stay 
(2.4 days versus 3.4 days) and higher average cost ($53,513 versus 
$32,586), compared to all the cases in MS-DRG 460, with a difference in 
average costs of $20,927 ($53,513-$32,586 = $20,927) for the cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device.
    As discussed in the FY 2024 final rule, the manufacturer expressed 
concern that there may be unintentional miscoded claims from providers 
with whom they do not have an explicit relationship and, as previously 
discussed, subsequently provided the list of providers with which it 
indicated it has an explicit relationship to assist in our ongoing 
review. In connection with the list of providers submitted, the 
manufacturer also resubmitted claims data from the Standard Analytical 
File (SAF) that included FY 2022 claims and the first two quarters 
(discharges beginning October 1, 2022 through March 31, 2023) of FY 
2023 from these providers. We note that the list of providers the 
manufacturer submitted to us was considered applicable for the dates of 
service in connection with the resubmitted claims data. The 
manufacturer stated that the list of providers with which it has an 
explicit relationship is subject to change on a weekly basis as 
additional providers begin to use the technology. The manufacturer also 
clarified that the external customer data it had previously referenced 
in connection with the FY 2024 rulemaking that was received directly 
from the providers with which it has an explicit relationship is 
Medicare data. We reviewed the September update of the FY 2022 MedPAR 
file and compared it against the claims data file with the list of 
providers submitted by the manufacturer for FY 2022. In this updated 
analysis of the September update of the FY 2022 MedPAR claims data, we 
were able to confirm that the majority of the cases for the providers 
with which the manufacturer indicated it has an explicit relationship 
matched the claims data in our FY 2022 MedPAR file. However, we 
identified 3 claims that appeared in the manufacturer's file that were 
not found in our FY 2022 MedPAR file and could not be validated. Next, 
we reviewed the September update of the FY 2023 MedPAR file and 
compared it against the claims data file with the list of providers 
submitted by the manufacturer for the first two quarters of FY 2023. We 
were able to confirm that the majority of the cases for the providers 
with which the manufacturer indicated it has an explicit relationship 
matched the claims data in our FY 2023 MedPAR file. However, we 
identified 2 claims that appeared in the manufacturer's file that were 
not found in our FY 2023 MedPAR file and also could not be validated.
    In our analysis of the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device in MS-DRGs 453, 454, 455, 456, 457, 
458, 459, and 460 from the September update of the FY 2023 MedPAR file, 
we also reviewed the findings for cases identified based on the list of 
providers with which the manufacturer indicated it has an explicit 
relationship and cases based on other providers, (that is, those 
providers not included on the manufacturer's list), and compared those 
to the findings from all the cases we identified in the September 
update of the FY 2023 MedPAR file reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device in MS-DRGs 453, 454, 455, 456, 457, 
458, 459, and 460. The findings from our analysis are shown in the 
following table. We note that there were no cases found to report the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device based on the 
list of providers submitted by the manufacturer in MS-DRG 456.

[[Page 35975]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.028

    For MS-DRG 453, the data show that of the 26 cases found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, 10 cases were reported based on 
the manufacturer's provider list, and 16 cases were reported based on 
other providers. The average length of stay is longer (10.5 days versus 
9.4 days), and the average costs are higher ($118,863 versus $86,849) 
for the 10 cases reported based on the manufacturer's provider list 
compared to the 16 cases that were reported based on other providers. 
For MS-DRG 454, the data show that of the 129 cases found to report the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device from the FY 
2023 MedPAR file, 48 cases were reported based on the manufacturer's 
provider list, and 81 cases were reported based on other providers. The 
average length of stay is longer (6.3 days versus 4.1 days), and the 
average costs are higher ($81,680 versus $65,510) for the 48 cases 
reported based on the manufacturer's provider list compared to the 81 
cases that were reported based on other providers. For MS-DRG 455, the 
data show that of the 87 cases found to report the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from the FY 2023 MedPAR 
file, 14 cases were reported based on the manufacturer's provider list, 
and 73 cases were reported based on other providers. The average

[[Page 35976]]

length of stay is shorter (2.5 days versus 2.6 days), and the average 
costs are higher ($61,637 versus $53,634) for the 14 cases reported 
based on the manufacturer's provider list compared to the 73 cases that 
were reported based on other providers.
    For MS-DRG 456, the data show that of the 2 cases found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, there were no cases reported based 
on the manufacturer's provider list and the 2 cases reported were based 
on other providers. For MS-DRG 457, the data show that of the 11 cases 
found to report the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file, 2 cases were reported based on the 
manufacturer's provider list, and 9 cases were reported based on other 
providers. The average length of stay is shorter (4.5 days versus 5.1 
days), and the average costs are higher ($53,113 versus $45,912) for 
the 2 cases reported based on the manufacturer's provider list compared 
to the 9 cases that were reported based on other providers. For MS-DRG 
458, the data show that of the 6 cases found to report the performance 
of a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device from the FY 2023 MedPAR 
file, 3 cases were reported based on the manufacturer's provider list, 
and 3 cases were reported based on other providers. The average length 
of stay is longer (3.3 days versus 2.7 days), and the average costs are 
lower ($52,760 versus $53,520) for the 3 cases reported based on the 
manufacturer's provider list compared to the 3 cases that were reported 
for other providers.
    For MS-DRG 459, the data show that the single case found to report 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the FY 2023 MedPAR file was based on the manufacturer's 
provider list. There were no cases reported based on other providers. 
For MS-DRG 460, the data show that of the 64 cases found to report the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device from the FY 
2023 MedPAR file, 13 cases were reported based on the manufacturer's 
provider list, and 51 cases were reported based on other providers. The 
average length of stay is comparable (2.6 days versus 2.3 days), and 
the average costs are higher ($62,829 versus $51,138) for the 13 cases 
reported based on the manufacturer's provider list compared to the 51 
cases that were reported from other providers.
    We considered these data findings with regard to the concerns 
expressed by the manufacturer that there may be unintentional miscoded 
claims reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from providers with whom the manufacturer does not have an 
explicit relationship. Based on our review and analysis of the claims 
data, we are unable to confirm that the claims from these providers 
with whom the manufacturer indicated that it does not have an explicit 
relationship are miscoded.
    We note that, while a newly established ICD-10 code may be 
associated with an application for new technology add-on payment, such 
codes are not generally established to be product specific. If, after 
consulting the official coding guidelines, a provider determines that 
an ICD-10 code associated with a new technology add-on payment 
describes the technology that they are billing, the hospital may report 
the code and be eligible to receive the associated add-on payment. 
Providers are responsible for ensuring that they are billing correctly 
for the services they render. In addition, as we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38012), coding advice is issued 
independently from payment policy. We also note that, historically, we 
have not provided coding advice in rulemaking with respect to policy 
(82 FR 38045). As one of the Cooperating Parties for ICD-10, we 
collaborate with the American Hospital Association (AHA) through the 
Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We 
recommend that an entity seeking coding guidance submit any questions 
pertaining to correct coding to the AHA.
    Accordingly, after review of the list of providers and associated 
claims data submitted by the manufacturer, and our analysis of the 
MedPAR data, we believe these MedPAR data are appropriate for our FY 
2025 analysis. Therefore, in assessing the request for reassignment of 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the lower severity MS-DRG 455 to the higher severity MS-DRG 
453, from the lower severity MS-DRG 458 to the higher severity level 
MS-DRG 456 when a diagnosis of malalignment is reported, and cases from 
MS-DRGs 459 and 460 to MS-DRG 456 for FY 2025, we considered all the 
claims data reporting the performance of a spinal fusion procedure, 
including those spinal fusion procedures using an aprevoTM 
custom-made anatomically designed interbody fusion device as identified 
in the September update of the FY 2023 MedPAR file for these MS-DRGs. 
Consequently, our analysis also included claims based on the list of 
providers submitted by the manufacturer as well as other providers.
    Based on the findings from our analysis and clinical review, we do 
not believe the requested reassignments are supported. Specifically, it 
would not be appropriate to propose to reassign the 87 cases reporting 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device from the lower severity level MS-DRG 455 (without CC/MCC) with 
an average length of stay of 2.6 days and average costs of $54,922 to 
the higher severity level MS-DRG 453 (with MCC) with an average length 
of stay of 9.5 days and average costs of $80,420. If we were to propose 
to reassign the 87 cases from the lower severity MS-DRG 455 to the 
higher severity MS-DRG 453, the MS-DRGs would no longer be clinically 
coherent with regard to severity of illness of the patients, and the 
cases would reflect a difference in resource utilization, as 
demonstrated by the difference in average costs of approximately 
$25,498 ($80,420-$54,922 = $25,498), as well as a difference in average 
length of stay (2.6 days versus 9.5 days) compared to all the cases in 
MS-DRG 453. Similarly, it would not be appropriate to propose to 
reassign the 6 cases reporting the performance of a spinal fusion 
procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device from the lower severity level MS-DRG 
458 (without CC/MCC) with an average length of stay of 3.0 days and 
average costs of $53,140 to the higher severity level MS-DRG 456 (with 
MCC) with an average length of stay of 12.6 days and average costs of 
$76,060. If we were to propose to reassign the 6 cases from the lower 
severity MS-DRG 458 to the higher severity MS-DRG 456, the MS-DRGs 
would no longer be clinically coherent with regard to severity of 
illness of the patients and the cases would reflect a difference in 
resource utilization, as demonstrated by the difference in average 
costs of approximately $22,920 ($76,060-$53,140 = $22,920) as well as a 
difference in average length of stay

[[Page 35977]]

(3.0 days versus 12.6 days) compared to all the cases in MS-DRG 456. 
Finally, it would not be appropriate nor consistent with the definition 
of the MS-DRGs to propose to reassign the 65 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device from MS-DRGs 
459 and 460 with an average length of stay of 2.7 days and average 
costs of $57,128 to MS-DRG 456. In addition to the cases reflecting a 
difference in resource utilization as demonstrated by the difference in 
average costs of approximately $18,932 ($76,060-$57,128 = $18,932) as 
well as having a shorter average length of stay (2.7 days versus 12.6 
days), we note that the logic for case assignment to MS-DRGs 456, 457, 
and 458 is specifically defined by principal diagnosis logic. As such, 
cases grouping to this set of MS-DRGs require a principal diagnosis of 
spinal curvature, malignancy, or infection, or an extensive fusion 
procedure. Therefore, it would not be clinically appropriate to propose 
to reassign cases from MS-DRGs 459 and 460 that do not have a principal 
diagnosis of spinal curvature, malignancy, or infection, or an 
extensive fusion procedure, and are not consistent with the logic for 
case assignment to MS-DRG 456.
    In light of the higher average costs of the cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device in MS-DRGs 
453, 454, 455, 458, and 460, we further reviewed the claims data for 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in these MS-DRGs and identified a wide range in the average 
length of stay and average costs. For example, in MS-DRG 453, the 
average length of stay for the 26 cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device ranged from 3.0 days to 
27 days and the average costs ranged from $28,054 to $177,919. In MS-
DRG 454, the average length of stay for the 129 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device ranged from 
1.0 day to 16 days and the average costs ranged from $10,242 to 
$316,780. In MS-DRG 455, the average length of stay for the 87 cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device ranged from 1.0 day to 9.0 days and the average costs ranged 
from $7,961 to $216,200. In MS-DRG 456, the average length of stay for 
the 2 cases reporting the performance of a spinal fusion procedure 
using an aprevoTM custom-made anatomically designed 
interbody fusion device were 8.0 days and 9.0 days, respectively, with 
average costs of $107,457 and $30,560, respectively. In MS-DRG 457, the 
average length of stay for the 11 cases reporting the performance of a 
spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device ranged from 1.0 day to 17 
days and the average costs ranged from $25,955 to $89,176. In MS-DRG 
458, the average length of stay for the 6 cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device ranged from 
1.0 day to 5.0 days and the average costs ranged from $33,165 to 
$78,720. In MS-DRG 459, the length of stay for the single case 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device was 22 days with a cost of $288,499, indicating it is an 
outlier. In MS-DRG 460, the average length of stay for the 64 cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device ranged from 1.0 day to 8.0 days and the average costs ranged 
from $8,981 to $325,104.
    In our analysis of the claims data for MS-DRGs 453, 454, and 455, 
we also identified a number of cases for which additional spinal fusion 
procedures were performed, beyond the logic for case assignment to the 
respective MS-DRG. For example, the logic for case assignment to MS-
DRGs 453, 454, and 455 requires at least one anterior column fusion and 
one posterior column fusion (that is, combined anterior and posterior 
fusion). We note that the aprevoTM custom-made anatomically 
designed interbody fusion device is used in the performance of an 
anterior column fusion. Findings from our analysis of MS-DRG 453 show 
that of the 26 cases reporting a combined anterior and posterior fusion 
(including an aprevoTM custom-made anatomically designed 
interbody fusion device), 24 cases also reported another spinal fusion 
procedure. We categorized these cases as ``multiple level fusions'' 
where another procedure code describing a spinal fusion procedure was 
reported in addition to the combined anterior and posterior fusion 
procedure codes. Findings from our analysis of MS-DRG 454 show that of 
the 129 cases reporting a combined anterior and posterior fusion 
(including an aprevoTM custom-made anatomically designed 
interbody fusion device), 100 cases also reported another spinal fusion 
procedure. Lastly, findings from our analysis of MS-DRG 455 show that 
of the 87 cases reporting a combined anterior and posterior fusion 
(including an aprevoTM custom-made anatomically designed 
interbody fusion device), 51 cases also reported another spinal fusion 
procedure.
    While the findings from our analysis indicate a wide range in the 
average length of stay and average costs for cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device, we believe 
the increase in resource utilization for certain cases may be partially 
attributable to the performance of multiple level fusion procedures 
and, specifically for MS-DRGs 453 and 454, the reporting of secondary 
diagnosis MCC and CC conditions. Our analysis of the data for MS-DRGs 
453 and 454 show that the cases reporting the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device also reported multiple MCC and CC 
conditions, which we believe may be an additional contributing factor 
to the increase in resource utilization for these cases, combined with 
the reported performance of multiple level fusions.
    In our analysis of the data for MS-DRGs 453, 454, and 455 and cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device, we also identified other procedures that were reported, some of 
which are designated as operating room (O.R.) procedures, that we 
believe may be another contributing factor to the increase in resource 
utilization and complexity for these cases. (We note that because a 
discectomy is frequently performed in connection with a spinal fusion 
procedure, we did not consider these procedures as contributing factors 
to consumption of resources in these spinal fusion cases). In the 
tables that follow we provide a list of the top 5 MCC and CC 
conditions, as well as the top 5 O.R. procedures (excluding discectomy) 
reported in MS-DRGs 453, 454, and 455 that we believe may be 
contributing factors to the increase in resource utilization and 
complexity for these cases. We note that the logic for case assignment 
to MS-DRG 453 includes the reporting of at least one

[[Page 35978]]

secondary diagnosis MCC condition (``with MCC'') and cases that group 
to this MS-DRG may also report secondary diagnosis CC conditions. We 
are providing the frequency data for both the top 5 secondary diagnosis 
MCC conditions and the top 5 secondary diagnosis CC conditions, in 
addition to the top 5 O.R. procedures (excluding discectomy) that were 
reported for spinal fusion cases with an aprevoTM custom-
made anatomically designed interbody fusion device in MS-DRG 453. 
Because the logic for case assignment to MS-DRG 454 includes the 
reporting of at least one secondary diagnosis CC condition (``with 
CC'') we are providing the top 5 secondary diagnosis CC conditions and 
the top 5 O.R. procedures (excluding discectomy) that were reported for 
spinal fusion cases with an aprevoTM custom-made 
anatomically designed interbody fusion device in MS-DRG 454. We note 
that the logic for case assignment to MS-DRG 455 is ``without CC/MCC'' 
and does not include any secondary diagnosis MCC or CC conditions, 
therefore, we are only providing a table with the top 5 O.R. procedures 
(excluding discectomy) reported for that MS-DRG in addition to a spinal 
fusion procedure.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.029


[[Page 35979]]


    As previously summarized, our analysis of the claims data for cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device demonstrated a low volume of cases and higher average costs in 
comparison to all the cases in their respective MS-DRGs (that is, in 
MS-DRGs 453, 454, 455, 458, 459, and 460). Therefore, we expanded our 
analysis to include all spinal fusion cases in MS-DRGs 453, 454, 455, 
456, 457, 458, 459, and 460 to identify and further examine the cases 
reporting multiple level fusions versus single level fusions, multiple 
MCCs or CCs, and other O.R. procedures as we believed that clinically, 
all of these factors may contribute to increases in resource 
utilization, severity of illness and technical complexity.
    We began our expanded analysis with MS-DRGs 453, 454, and 455. 
Based on the findings for a subset of the cases (that is, the subset of 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device) in these MS-DRGs as previously discussed, and our review of the 
logic for case assignment to these MS-DRGs, we developed three 
categories of spinal fusion procedures to further examine. The first 
category was for the single level combined anterior and posterior 
fusions except cervical, the second category was for the multiple level 
combined anterior and posterior fusions except cervical and the third 
category was for the combined anterior and posterior cervical spinal 
fusions. We refer the reader to Table 6P.2d for the list of procedure 
codes we identified to categorize the single level combined anterior 
and posterior fusions except cervical, Table 6P.2e for the list of 
procedure codes we identified to categorize the multiple level combined 
anterior and posterior fusions except cervical, and Table 6P.2f for the 
list of procedure codes we identified to categorize the combined 
anterior and posterior cervical spinal fusions. Findings from our 
analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.030

BILLING CODE 4120-01-C
    The data show that across MS-DRGs 453, 454, and 455, cases 
reporting multiple level combined anterior and posterior fusion 
procedures have a comparable average length of stay (9.6 days versus 
9.5 days, 4.8 days versus 4.3 days, and 3.0 days versus 2.6 days, 
respectively) and higher average costs ($91,358 versus $80,420, $64,065 
versus $54,983, and $50,097 versus $41,015) compared to all the cases 
in MS-DRGs 453, 454, and 455, respectively. The data also show that 
across MS-DRGs 453, 454, and 455, cases reporting multiple level 
combined anterior and posterior fusion procedures have a longer average 
length of stay (9.6 days versus 6.4 days, 4.8 days versus 3.4 days, and 
3.0 days versus 2.3 days, respectively) and higher average costs 
($91,358 versus $47,031, $64,065 versus $38,107, and $50,097 versus 
$33,010, respectively) compared to cases reporting a single level 
combined anterior and posterior fusion. For cases reporting a combined 
anterior and posterior cervical fusion across MS-DRGs 453 and 454, the 
data show a longer average length of stay (12.5 days versus 9.5 days, 
and 5.1 days versus 4.3 days, respectively) compared to all the cases 
in MS-DRGs 453 and 454 and a comparable average length of stay (2.9 
days versus 2.6 days) for cases reporting a combined anterior and 
posterior cervical fusion in MS-DRG 455. The data also show that across 
MS-DRGs 453, 454, and 455, cases reporting a combined anterior and 
posterior cervical fusion have higher average costs ($75,077 versus 
$47,031, $52,274 versus $38,107, and $37,515 versus $33,010, 
respectively) compared to the single level combined anterior and 
posterior fusion cases.
    The data also reflect that in applying the logic that was developed 
for the three categories of spinal fusion in MS-DRGs 453, 454, and 455 
(single level combined anterior and posterior fusion except cervical, 
multiple level combined anterior and posterior fusion except cervical, 
and combined anterior and posterior cervical fusion), there is a

[[Page 35980]]

small redistribution of cases from the current MS-DRGs 453, 454, and 
455 to other spinal fusion MS-DRGs because the logic for case 
assignment to MS-DRGs 453, 454, and 455 is currently satisfied with any 
one procedure code from the anterior spinal fusion logic list and any 
one procedure code from the posterior spinal fusion logic list, 
however, the logic lists that were developed for our analysis using the 
three categories of spinal fusion are comprised of specific procedure 
code combinations to satisfy the criteria for case assignment to any 
one of the three categories developed. For example, based on our 
analysis of MS-DRG 453 using the September update of the FY 2023 MedPAR 
file, the total number of cases found in MS-DRG 453 is 4,066 and with 
application of the logic for each of the three categories, the total 
number of cases in MS-DRG 453 is 4,042 (791 + 2,664 + 587 = 4,042), a 
difference of 24 cases. Using the September update of the FY 2023 
MedPAR file, the total number of cases found in MS-DRG 454 is 20,425 
and with application of the logic for each of the three categories, the 
total number of cases in MS-DRG 454 is 20,370 (6,481 + 12,498 + 1,391 = 
20,370), a difference of 55 cases. Lastly, using the September update 
of the FY 2023 MedPAR file, the total number of cases found in MS-DRG 
455 is 17,000 and with application of the logic for each of the three 
categories, the total number of cases in MS-DRG 455 is 16,987 (9,763 + 
6,879 + 345 = 16,987), a difference of 13 cases. Overall, a total of 92 
cases are redistributed from MS-DRGs 453, 454, and 455 to other spinal 
fusion MS-DRGs.
    The findings from our analysis of MS-DRGs 453, 454, and 455 are 
consistent with the expectation that clinically, the greater the number 
of spinal fusion procedures performed during a single procedure (for 
example, intervertebral levels fused), the greater the consumption of 
resources expended. We believe the use of interbody fusion cages, other 
types of spinal instrumentation, operating room time, comorbidities, 
pharmaceuticals, and length of stay may all be contributing factors to 
resource utilization for spinal fusion procedures. In addition, it is 
expected that as a result of potential changes to the logic for case 
assignment to a MS-DRG, there will be a redistribution of cases among 
the MS-DRGs.
    Based on our review and analysis of the spinal fusion cases in MS-
DRGs 453, 454, and 455, we believe new MS-DRGs are warranted to 
differentiate between multiple level combined anterior and posterior 
spinal fusions except cervical, single level combined anterior and 
posterior spinal fusions except cervical, and combined anterior and 
posterior cervical spinal fusions, to more appropriately reflect 
utilization of resources for these procedures, including those 
performed with an aprevoTM custom-made anatomically designed 
interbody fusion device. We note that the performance of a spinal 
fusion procedure using an aprevoTM custom-made anatomically 
designed interbody fusion device as identified by any one of the 12 
previously listed procedure codes would not be reported for a cervical 
spinal fusion procedure as reflected in Table 6P.2f associated with 
this proposed rule and available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    To compare and analyze the impact of our suggested modifications, 
we ran simulations using claims data from the September 2023 update of 
the FY 2023 MedPAR file. The following table illustrates our findings 
for all 23,017 cases reporting procedure codes describing multiple 
level combined anterior and posterior spinal fusions.
[GRAPHIC] [TIFF OMITTED] TP02MY24.031

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the base MS-DRG to be split (or subdivided) by a CC 
subgroup. Therefore, we applied the criteria to create subgroups in a 
base MS-DRG. We note that, as shown in the table that follows, a three-
way split of this proposed new base MS-DRG was met. The following table 
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP02MY24.032

    For the proposed new MS-DRGs, there is (1) at least 500 or more 
cases in the MCC group, the CC subgroup, and in the without CC/MCC 
subgroup; (2) at least 5 percent of the cases are in the MCC subgroup, 
the CC subgroup, and in the without CC/MCC subgroup; (3) at least a 20 
percent difference in average costs between the MCC subgroup and the CC 
subgroup and between the CC group and NonCC subgroup; (4) at least a 
$2,000 difference in average costs between the MCC subgroup and the 
with CC subgroup and between the CC subgroup and NonCC subgroup; and 
(5) at least a 3-percent reduction in cost variance, indicating that 
the proposed severity level splits increase the explanatory power of 
the base MS-DRG in capturing differences in expected cost between the 
proposed MS-DRG severity level splits by at least 3 percent and thus 
improve the overall accuracy of the IPPS payment system.
    As a result, for FY 2025, we are proposing to create new MS-DRG 426 
(Multiple Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical with MCC), new MS-DRG 427 (Multiple Level Combined Anterior 
and Posterior Spinal Fusion Except Cervical with CC), and new MS-DRG 
428 (Multiple Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical without CC/MCC). The following table reflects a 
simulation of the proposed new MS-DRGs.

[[Page 35981]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.033

    The next step in our analysis of the impact of our suggested 
modifications to MS-DRGs 453, 454, and 455 was to review the cases 
reporting single combined anterior and posterior cervical fusions. The 
following table illustrates our findings for all 16,059 cases reporting 
procedure codes describing single level combined anterior and posterior 
spinal fusions.
[GRAPHIC] [TIFF OMITTED] TP02MY24.034

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the base MS-DRG to be split (or subdivided) by a CC 
subgroup. Therefore, we applied the criteria to create subgroups in a 
base MS-DRG. We note that, as shown in the table that follows, a three-
way split of this proposed new base MS-DRG failed to meet the criterion 
that at least 5% or more of the cases are in the MCC subgroup. It also 
failed to meet the criterion that there be at least a 20% difference in 
average costs between the CC and NonCC (without CC/MCC) subgroup. The 
following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP02MY24.035

    As discussed in section II.C.1.b. of the preamble of this proposed 
rule, if the criteria for a three-way split fail, the next step is to 
determine if the criteria are satisfied for a two-way split. We 
therefore applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups. We note that, as shown in the table that 
follows, a two-way split of this base MS-DRG failed to meet the 
criterion that there be at least 5% or more of the cases in the with 
MCC subgroup.
[GRAPHIC] [TIFF OMITTED] TP02MY24.036

    We then applied the criteria for a two-way split for the ``with CC/
MCC and without CC/MCC'' subgroups. 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 a 20% difference in average costs between the ``with 
CC/MCC and without CC/MCC'' subgroup.
[GRAPHIC] [TIFF OMITTED] TP02MY24.037

    We note that because the criteria for both of the two-way splits 
failed, a split (or CC subgroup) is not warranted for the proposed new 
base MS-DRG. As a result, for FY 2025, we are proposing to create new 
base MS-DRG 402 (Single Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical). The following table reflects a simulation of 
the proposed new base MS-DRG.
[GRAPHIC] [TIFF OMITTED] TP02MY24.038

    For the final step in our analysis of the impact of our suggested 
modifications to MS-DRGs 453, 454, and 455 we reviewed the cases 
reporting combined anterior and posterior cervical fusions. The 
following table illustrates our findings for all 2,323 cases reporting 
procedure codes

[[Page 35982]]

describing combined anterior and posterior cervical spinal fusions.
[GRAPHIC] [TIFF OMITTED] TP02MY24.039

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the base MS-DRG to be split (or subdivided) by a CC 
subgroup. Therefore, we applied the criteria to create subgroups in a 
base MS-DRG. We note that, as shown in the table that follows, a three-
way split of this proposed new base MS-DRG failed to meet the criterion 
that that there be at least 500 cases in the NonCC subgroup.
[GRAPHIC] [TIFF OMITTED] TP02MY24.040

    As discussed in section II.C.1.b. of the preamble of this proposed 
rule, if the criteria for a three-way split fail, the next step is to 
determine if the criteria are satisfied for a two-way split. We 
therefore applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups. We note that, as shown in the table that 
follows, a two-way split of this proposed new base MS-DRG was met. For 
the proposed MS-DRGs, there is at least (1) 500 or more cases in the 
MCC group and in the without MCC subgroup; (2) 5 percent or more of the 
cases in the MCC group and in the without MCC subgroup; (3) a 20 
percent difference in average costs between the MCC group and the 
without MCC group; (4) a $2,000 difference in average costs between the 
MCC group and the without MCC group; and (5) a 3-percent reduction in 
cost variance, indicating that the proposed severity level splits 
increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the proposed MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system. The following table illustrates our findings 
for the suggested MS-DRGs with a two-way severity level split.
[GRAPHIC] [TIFF OMITTED] TP02MY24.041

    Accordingly, because the criteria for the two-way split were met, 
we believe a split (or CC subgroup) is warranted for the proposed new 
base MS-DRG. As a result, for FY 2025, we are proposing to create new 
MS-DRG 429 (Combined Anterior and Posterior Cervical Spinal Fusion with 
MCC) and new MS-DRG 430 (Combined Anterior and Posterior Cervical 
Spinal Fusion without MCC). The following table reflects a simulation 
of the proposed new MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TP02MY24.042

    We then analyzed the cases reporting spinal fusion procedures in 
MS-DRGs 456, 457, and 458. As previously described, the logic for case 
assignment to MS-DRGs 456, 457, and 458 is defined by principal 
diagnosis logic and extensive fusion procedures. Cases reporting a 
principal diagnosis of spinal curvature, malignancy, or infection or an 
extensive fusion procedure will group to these MS-DRGs. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 41.1 available 
on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software for complete documentation of the GROUPER logic for MS-
DRGs 456, 457, and 458.
    As also previously described, in our initial analysis of cases 
reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device, the 13 cases we found in MS-DRGs 456 and 457 (2 + 11 = 13, 
respectively) appeared to be grouping appropriately, however, the 
average costs for the 6 cases found in MS-DRG 458 showed a difference 
of approximately $13,880. Because of the low volume of cases reporting 
the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in the ``without CC/MCC'' MS-DRG 458, and the low volume of 
cases reporting the performance of a spinal fusion procedure using an 
aprevoTM custom-made anatomically designed interbody fusion 
device in MS-DRGs 456, 457, and 458 overall (2 + 11 + 6 = 19), for this 
expanded review of the claims data, we are sharing the results of our 
analysis in association with cases reporting extensive fusion 
procedures in MS-DRGs 456, 457, and 458. Our findings are shown in the 
following table.

[[Page 35983]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.043

    The data show that the 332 cases reporting an extensive fusion 
procedure in MS-DRG 456 have a shorter average length of stay (11.5 
days versus 12.6 days) and higher average costs ($89,773 versus 
$76,060) compared to all the cases in MS-DRG 456. For MS-DRG 457, the 
data show that the 171 cases reporting an extensive fusion have a 
comparable average length of stay (6.6 days versus 6.1 days) and higher 
average costs ($75,588 versus $52,179) compared to all the cases in MS-
DRG 457. Lastly, for MS-DRG 458, the data show that the 146 cases 
reporting an extensive fusion procedure have a comparable average 
length of stay (3.8 days versus 3.1 days) and higher average costs 
($48,035 versus $39,260) compared to all the cases in MS-DRG 458.
    We believe that over time, the volume of cases reporting the 
performance of a spinal fusion procedure using an aprevoTM 
custom-made anatomically designed interbody fusion device in MS-DRGs 
456, 457, and 458 may increase and we could consider further in the 
context of the cases reporting an extensive fusion procedure. However, 
due to the logic for case assignment to these MS-DRGs also being 
defined by diagnosis code logic, additional analysis would be needed 
prior to considering any modification to the current structure of these 
MS-DRGs. As we continue to evaluate how we may refine these spinal 
fusion MS-DRGs, we are also seeking public comments and feedback on 
other factors that should be considered in the potential restructuring 
of MS-DRGs 456, 457, and 458. Thus, for FY 2025, we are proposing to 
maintain the current structure of MS-DRGs 456, 457, and 458, without 
modification. Feedback and other suggestions for future rulemaking may 
be submitted by October 20, 2024 and directed to MEARISTM at 
https://mearis.cms.gov/public/home.
    Next, we performed an expanded analysis for spinal fusion cases 
reported in MS-DRGs 459 and 460. We note that cases grouping to MS-DRG 
459 have at least one secondary diagnosis MCC condition reported 
(``with MCC'') and because MS-DRG 460 is ``without MCC'', cases 
grouping to this MS-DRG may include the reporting of at least one 
secondary diagnosis CC condition (in addition to cases that may not 
report a CC (for example, NonCC)). Based on the findings for a subset 
of the cases (that is, the subset of cases reporting the performance of 
a spinal fusion procedure using an aprevoTM custom-made 
anatomically designed interbody fusion device) in these MS-DRGs as 
previously discussed, and our review of the logic for case assignment 
to these MS-DRGs, we developed two categories of spinal fusion 
procedures to further examine. The first category was for the single 
level spinal fusions except cervical, and the second category was for 
the multiple level spinal fusions except cervical. We refer the reader 
to Table 6P.2g for the list of procedure codes we identified to 
categorize the single level spinal fusions except cervical and Table 
6P.2h for the list of procedure codes we identified to categorize the 
multiple level spinal fusions except cervical. Findings from our 
analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.044

    The data show that the 2,069 cases reporting a multiple level 
spinal fusion except cervical in MS-DRG 459 have a longer average 
length of stay (10.1 days versus 9.6 days) and higher average costs 
($57,209 versus $53,192) when compared to all the cases in MS-DRG 459. 
The data also show that the 2,069 cases reporting a multiple level 
spinal fusion except cervical in MS-DRG 459 have a longer average 
length of stay (10.1 days versus 8.9 days) and higher average costs 
($57,209 versus $46,031) when compared to the 1,098 cases reporting a 
single level spinal fusion except cervical in MS-DRG 459. For MS-DRG 
460, the data show that the 14,677 cases reporting a multiple level 
spinal fusion except cervical have a comparable average length of stay 
(3.9 days versus 3.4 days) and higher average costs ($36,932 versus 
$32,586) when compared to all the cases in MS-DRG 460. The data also 
show that the 14,677 cases reporting a multiple level spinal fusion 
except cervical have a comparable average length of stay (3.9 days 
versus 3.0 days) and higher average costs ($36,932 versus $28,110) when 
compared to the 14,058 cases reporting a single level spinal fusion 
except cervical in MS-DRG 460.
    Based on our review and analysis of the spinal fusion cases in MS-
DRGs 459 and 460, we believe new MS-DRGs are warranted to differentiate 
between multiple level spinal fusions except cervical and single level 
spinal fusions except cervical to more appropriately reflect 
utilization of resources for these procedures, including those 
performed with an aprevoTM custom-made anatomically designed 
interbody fusion device.

[[Page 35984]]

    To compare and analyze the impact of our suggested modifications, 
we ran simulations using claims data from the September 2023 update of 
the FY 2023 MedPAR file. The following table illustrates our findings 
for all 16,746 cases reporting procedure codes describing multiple 
level spinal fusions except cervical.
[GRAPHIC] [TIFF OMITTED] TP02MY24.045

    Consistent with our established process as discussed in section 
II.C.1.b. of the preamble of this proposed rule, once the decision has 
been made to propose to make further modifications to the MS-DRGs, such 
as creating a new base MS-DRG, all five criteria to create subgroups 
must be met for the proposed new base MS-DRG to be split (or 
subdivided) by a CC subgroup. Therefore, we applied the criteria to 
create subgroups in a base MS-DRG. We note that, as shown in the table 
that follows, a three-way split of this proposed new base MS-DRG failed 
to meet the criterion that there be at least a 20% difference in 
average costs between the CC and NonCC (without CC/MCC) subgroup. The 
following table illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP02MY24.046

    As discussed in section II.C.1.b. of the preamble of this proposed 
rule, if the criteria for a three-way split fail, the next step is to 
determine if the criteria are satisfied for a two-way split. We 
therefore applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups. We note that, as shown in the table that 
follows, a two-way split of this proposed new base MS-DRG was met. For 
the proposed MS-DRGs, there is at least (1) 500 or more cases in the 
MCC group and in the without MCC subgroup; (2) 5 percent or more of the 
cases in the MCC group and in the without MCC subgroup; (3) a 20 
percent difference in average costs between the MCC group and the 
without MCC group; (4) a $2,000 difference in average costs between the 
MCC group and the without MCC group; and (5) a 3-percent reduction in 
cost variance, indicating that the proposed severity level splits 
increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the proposed MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system. The following table illustrates our findings 
for the suggested MS-DRGs with a two-way severity level split.
[GRAPHIC] [TIFF OMITTED] TP02MY24.047

    As a result, for FY 2025, we are proposing to create new MS-DRGs 
447 (Multiple Level Spinal Fusion Except Cervical with MCC) and new MS-
DRG 448 (Multiple Level Spinal Fusion Except Cervical without MCC). We 
are also proposing to revise the title for existing MS-DRGs 459 and 460 
to ``Single Level Spinal Fusion Except Cervical with MCC and without 
MCC'', respectively. This proposal would better differentiate the 
resource utilization, severity of illness and technical complexity 
between single level and multiple level spinal fusions that do not 
include cervical spinal fusions in the logic for case assignment. The 
following table reflects a simulation of the proposed new MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TP02MY24.048

    In conclusion, we are proposing to delete MS-DRGs 453, 454, and 455 
and proposing to create 8 new MS-DRGs. We are proposing to create new 
MS-DRG 426 (Multiple Level Combined Anterior and Posterior Spinal 
Fusion Except Cervical with MCC), MS-DRG 427 (Multiple Level Combined 
Anterior and Posterior Spinal Fusion Except Cervical with CC), MS-DRG 
428 (Multiple Level Combined Anterior and Posterior Spinal Fusion 
Except Cervical without CC/MCC), MS-DRG 402 (Single Level Combined 
Anterior and Posterior Spinal Fusion Except Cervical), MS-DRG 429 
(Combined Anterior and Posterior Cervical Spinal Fusion with MCC), MS-
DRG 430 (Combined Anterior and Posterior Cervical Spinal Fusion without 
MCC), MS-DRG 447 (Multiple Level Spinal Fusion Except Cervical with 
MCC) and MS-DRG 448 (Multiple Level Spinal Fusion Except Cervical 
without MCC) for FY 2025. We are proposing the logic for case 
assignment to these proposed new MS-DRGs as displayed in Table 6P.2d, 
Table 6P.2e, Table 6P.2f, Table 6P.2g, and Table 6P.2h. We are also 
proposing to revise the title for MS-DRGs 459 and

[[Page 35985]]

460 to ``Single Level Spinal Fusion Except Cervical with MCC and 
without MCC'', respectively. Lastly, as discussed in section II.C.14 of 
the preamble of this proposed rule, we are proposing conforming changes 
to the surgical hierarchy for MDC 08.
7. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Resection of Right Large Intestine
    We identified an inconsistency in the MDC and MS-DRG assignment of 
procedure codes describing resection of the right large intestine and 
resection of the left large intestine with an open and percutaneous 
endoscopic approach. ICD-10-PCS procedure codes 0DTG0ZZ (Resection of 
left large intestine, open approach) and 0DTG4ZZ (Resection of left 
large intestine, percutaneous endoscopic approach) are currently 
assigned to MDC 10 in MS-DRGs 628, 629, and 630 (Other Endocrine, 
Nutritional and Metabolic O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively). However, the procedure codes that 
describe resection of the right large intestine with an open or 
percutaneous endoscopic approach, 0DTF0ZZ (Resection of right large 
intestine, open approach) and 0DTF4ZZ (Resection of right large 
intestine, percutaneous endoscopic approach) are not assigned to MDC 10 
in MS-DRGs 628, 629, and 630. To ensure clinical alignment and 
consistency, as well as appropriate MS-DRG assignment, we are proposing 
to add procedure codes 0DTF0ZZ and 0DTF4ZZ to MDC 10 in MS-DRGs 628, 
629, and 630 effective October 1, 2024 for FY 2025.
8. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
Perinatal Period): MS-DRG 795 Normal Newborn
    We received a request to review the GROUPER logic that would 
determine the assignment of cases to MS-DRG 794 (Neonate with Other 
Significant Problems). The requestor stated that it appears that MS-DRG 
794 is the default MS-DRG in MDC 15 (Newborns and Other Neonates with 
Conditions Originating in Perinatal Period), as the GROUPER logic for 
MS-DRG 794 displayed in the ICD-10 MS-DRG Version 41.1 Definitions 
Manual is defined by a ``principal or secondary diagnosis of newborn or 
neonate, with other significant problems, not assigned to DRG 789 
through 793 or 795''. The requestor expressed concern that defaulting 
to MS-DRG 794, instead of MS-DRG 795 (Normal Newborn), for assignment 
of cases in MDC 15 could contribute to overpayments in healthcare by 
not aligning the payment amount to the appropriate level of care in 
newborn cases. The requestor recommended that CMS update the GROUPER 
logic that would determine the assignment of cases to MS-DRGs in MDC 15 
to direct all cases that do not have the diagnoses and procedures as 
specified in the Definitions Manual to instead be grouped to MS-DRG 
795.
    Specifically, the requestor expressed concern that a newborn 
encounter coded with a principal diagnosis code from ICD-10-CM category 
Z38 (Liveborn infants according to place of birth and type of 
delivery), followed by code P05.19 (Newborn small for gestational age, 
other), P59.9 (Neonatal jaundice, unspecified), Q38.1 (Ankyloglossia), 
Q82.5 (Congenital non-neoplastic nevus), or Z23 (Encounter for 
immunization) is assigned to MS-DRG 794. The requestor stated that they 
performed a detailed claim level study, and in their clinical 
assessment, newborn encounters coded with a principal diagnosis code 
from ICD-10-CM category Z38, followed by diagnosis code P05.19, P59.9, 
Q38.1, Q82.5, or Z23 in fact clinically describe normal newborn 
encounters and the case assignment should instead be to MS-DRG 795.
    Our analysis of this grouping issue confirmed that when a principal 
diagnosis code from MDC 15, such as a diagnosis code from category Z38 
(Liveborn infants according to place of birth and type of delivery), is 
reported followed by ICD-10-CM code P05.19 (Newborn small for 
gestational age, other), Q38.1 (Ankyloglossia) or Q82.5 (Congenital 
non-neoplastic nevus), the case is assigned to MS-DRG 794.
    However, as we examined the GROUPER logic that would determine an 
assignment of cases to MS-DRG 795, we noted the ``only secondary 
diagnosis'' list under MS-DRG 795 already includes ICD-10-CM codes 
P59.9 (Neonatal jaundice, unspecified) and Z23 (Encounter for 
immunization). Therefore, when a principal diagnosis code from MDC 15, 
such as a diagnosis code from category Z38 (Liveborn infants according 
to place of birth and type of delivery) is reported, followed by ICD-
10-CM code P59.9 or Z23, the case is currently assigned to MS-DRG 795, 
not MS-DRG 794, as suggested by the requestor. We refer the reader to 
the ICD-10 MS-DRG Version 41.1 Definitions Manual (available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for 
complete documentation of the GROUPER logic for MS-DRGs 794 and 795.
    Next, we reviewed the claims data from the September 2023 update of 
the FY 2023 MedPAR file; however, we found zero cases across MS-DRGs 
794 and 795. We then examined the clinical factors. The description for 
ICD-10-CM diagnosis code P05.19 is ``Newborn small for gestational age, 
other'' and the inclusion term in the ICD-10-CM Tabular List of 
Diseases for this diagnosis code is ``Newborn small for gestational 
age, 2500 grams and over.'' We note that ``small-for-gestational age'' 
is diagnosed by assessing the gestational age and the weight of the 
baby after birth. There is no specific treatment for small-for-
gestational-age newborns. Most newborns who are moderately small for 
gestational age are healthy babies who just happen to be on the smaller 
side. Unless the newborn is born with an infection or has a genetic 
disorder, most small-for-gestational-age newborns have no symptoms and 
catch up in their growth during the first year of life and have a 
normal adult height. Next, ICD-10-CM diagnosis code Q38.1 describes 
ankyloglossia, also known as tongue-tie, which is a condition that 
impairs tongue movement due to a restrictive lingual frenulum. In 
infants, tongue-tie is treated by making a small cut to the lingual 
frenulum to allow the tongue to move more freely. This procedure, 
called a frenotomy, can be done in a healthcare provider's office 
without anesthesia. Newborns generally recover within about a minute of 
the procedure, and pain relief is usually not indicated. Lastly, ICD-
10-CM diagnosis code Q82.5 describes a congenital non-neoplastic nevus. 
A congenital nevus is a type of pigmented birthmark that appears at 
birth or during a baby's first year. Most congenital nevi do not cause 
health problems and may only require future monitoring.
    In reviewing these three ICD-10-CM codes and the conditions they 
describe; we believe these diagnoses generally do not prolong the 
inpatient admission of the newborn and newborns with these diagnoses 
generally receive standard follow-up care after birth. Clinically, we 
agree with the requestor that newborn encounters coded with a principal 
diagnosis code from ICD-10-CM category Z38 (Liveborn infants according 
to place of birth and type of delivery), followed by code P05.19 
(Newborn small for gestational age, other), Q38.1 (Ankyloglossia), or 
Q82.5 (Congenital non-neoplastic nevus) should not map to MS-DRG 794 
(Neonate with Other Significant Problems) and should instead be 
assigned to MS-DRG 795 (Normal

[[Page 35986]]

Newborn). Therefore, for the reasons discussed, we are proposing to 
reassign diagnosis code P05.19 from the ``principal or secondary 
diagnosis'' list under MS-DRG 794 to the ``principal diagnosis'' list 
under MS-DRG 795 (Normal Newborn). We are also proposing to add 
diagnosis codes Q38.1 and Q82.5 to the ``only secondary diagnosis'' 
list under MS-DRG 795 (Normal Newborn). Under this proposal, cases with 
a principal diagnosis described by an ICD-10-CM code from category Z38 
(Liveborn infants according to place of birth and type of delivery), 
followed by codes P05.19, Q38.1, or Q82.5 will be assigned to MS-DRG 
795.
    In response to the recommendation that CMS update the GROUPER logic 
that would determine an assignment of cases to MS-DRGs in MDC 15, we 
agree with the requestor that the GROUPER logic for MS-DRG 794 is 
defined by a ``principal or secondary diagnosis of newborn or neonate, 
with other significant problems, not assigned to DRG 789 through 793 or 
795''. We acknowledge that MS-DRG 794 utilizes ``fall-through'' logic, 
meaning if a diagnosis code is not assigned to any of the other MS-
DRGs, then assignment ``falls-through'' to MS-DRG 794. We have started 
to examine the GROUPER logic that would determine the assignment of 
cases to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795, to 
determine where further refinements could potentially be made to better 
account for differences in clinical complexity and resource 
utilization. However, as we have noted in prior rulemaking (72 FR 
47152), we cannot adopt the same approach to refine the newborn MS-DRGs 
because of the extremely low volume of Medicare patients there are in 
these MS-DRGs. Additional time is needed to fully and accurately 
evaluate cases currently grouping to the MS-DRGs in MDC 15 to consider 
if restructuring the current MS-DRGs would better recognize the 
clinical distinctions of these patient populations. Any proposed 
modifications to these MS-DRGs will be addressed in future rulemaking 
consistent with our annual process.
    As noted earlier, we have started our examination of the GROUPER 
logic that would determine an assignment of cases to MS-DRGs in MDC 15. 
During this review we noted the logic for MS-DRG 795 (Normal Newborn) 
includes five diagnosis codes from ICD-10-CM category Q81 
(Epidermolysis bullosa). We refer the reader to the ICD-10 MS-DRG 
Version 41.1 Definitions Manual (available via on the CMS website at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete 
documentation of the GROUPER logic for MS-DRG 795. The five diagnosis 
codes and their current MDC and MS-DRG assignments are listed in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.049

    We reviewed this grouping issue and noted that epidermolysis 
bullosa (EB) is a group of genetic (inherited) disorders that causes 
skin to be fragile, blister, and tear easily in response to minimal 
friction or trauma. In some cases, blisters form inside the body in 
places such as the mouth, esophagus, other internal organs, or eyes. 
When the blisters heal, they can cause painful scarring. In severe 
cases, the blisters and scars can harm internal organs and tissue 
enough to be fatal. Patients diagnosed with severe cases of EB have a 
life expectancy that ranges from infancy to 30 years of age.
    EB has four primary types: simplex, junctional, dystrophic, and 
Kindler syndrome, and within each type there are various subtypes, 
ranging from mild to severe. A skin biopsy can confirm a diagnosis of 
EB and identify which layers of the skin are affected and determine the 
type of epidermolysis bullosa. Genetic testing may also be ordered to 
diagnose the specific type and subtype of the disease. In caring for 
patients with EB, adaptions may be necessary in the form of handling, 
feeding, dressing, managing pain, and treating wounds caused by the 
blisters and tears. If there is a known diagnosis of EB, but the 
neonate has no physical signs at birth, there will still need to be 
specialty consultation in the inpatient setting or referral for 
outpatient follow-up. We believe the five diagnosis codes from ICD-10-
CM category Q81 (Epidermolysis bullosa) describe conditions that 
require advanced care and resources similar to other conditions already 
assigned to the logic of MS-DRG 794 and MS-DRGs 595 and 596 (Major Skin 
Disorders with MCC and without MCC, respectively), even in cases where 
the type of EB is unspecified.
    Therefore, for clinical consistency, we are proposing to reassign 
ICD-10-CM diagnosis codes Q81.0, Q81.1, Q81.2, Q81.8, and Q81.9 from 
MS-DRGs 606 and 607 in MDC 09 (Diseases and Disorders of the Skin, 
Subcutaneous Tissue and Breast) and MS-DRG 795 (Normal Newborn) in MDC 
15 to MS-DRGs 595 and 596 in MDC 09 and MS-DRG 794 in MDC 15, effective 
October 1, 2024 for FY 2025.
9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms): Acute Leukemia
    We identified a replication issue from the ICD-9 based MS-DRGs to 
the ICD-10 based MS-DRGs regarding the assignment of six ICD-10-CM 
diagnosis codes that describe a type of acute leukemia. Under the 
Version 32 ICD-9-CM based MS-DRGs, the ICD-9-CM diagnosis codes as 
shown in the following table were assigned to surgical MS-DRGs 820, 
821, and 822 (Lymphoma and Leukemia with Major O.R. Procedures with 
MCC, with CC, and without CC/MCC, respectively), surgical MS-DRGs 823, 
824, and 825 (Lymphoma and Non-Acute Leukemia with Other Procedures 
with MCC, with CC, and without CC/MCC, respectively), and medical MS-
DRGs 840, 841, and 842 (Lymphoma and Non-Acute Leukemia with MCC, with 
CC, and without CC/MCC, respectively) in MDC 17 (Myeloproliferative 
Diseases and Disorders, Poorly Differentiated Neoplasms). The six ICD-
10-PCS code translations also shown in the following table, that 
provide more detailed and specific information for the ICD-9-CM codes 
reflected, also currently group to MS-DRGs 820, 821, 822, 823, 824, 
825, 840, 841 and 842 in the ICD-10 MS-DRGs Version 41.1. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 41.1 (available 
on the CMS website at: https://www.cms.gov/

[[Page 35987]]

medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-
drg-classifications-and-software) for complete documentation of the 
GROUPER logic for MS-DRGs 820, 821, 822, 823, 824, 825, 840, 841, and 
842.
[GRAPHIC] [TIFF OMITTED] TP02MY24.050

    During our review of this issue, we noted that under ICD-9-CM, the 
diagnosis codes as reflected in the table did not describe the acuity 
of the diagnosis (for example, acute versus chronic). This is in 
contrast to their six comparable ICD-10-CM code translations listed in 
the previous table that provide more detailed and specific information 
for the ICD-9-CM diagnosis codes and do specify the acuity of the 
diagnoses.
    We note that ICD-10-CM codes C94.20, C94.21, and C94.22 describe 
acute megakaryoblastic leukemia (AMKL), a rare subtype of acute myeloid 
leukemia (AML) that affects megakaryocytes, platelet-producing cells 
that reside in the bone marrow. Similarly, ICD-10-CM codes C94.40, 
C94.41, and C94.42 describe acute panmyelosis with myelofibrosis 
(APMF), a rare form of acute myeloid leukemia characterized by acute 
panmyeloid proliferation with increased blasts and accompanying 
fibrosis of the bone marrow that does not meet the criteria for AML 
with myelodysplasia related changes. As previously mentioned, these six 
diagnosis codes are assigned to MS-DRGs 820, 821, 822, 823, 824, 825, 
840, 841, and 842. The GROUPER logic lists for MS-DRGs 820, 821, and 
822 includes diagnosis codes describing lymphoma and both acute and 
non-acute leukemias, however the logic lists for MS-DRGs 823, 824, 825, 
840, 841, and 842 contain diagnosis codes describing lymphoma and non-
acute leukemias. In our analysis of this grouping issue, we also noted 
that cases reporting a chemotherapy principal diagnosis with a 
secondary diagnosis describing acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis are assigned to MS-DRGs 846, 847, and 
848 (Chemotherapy without Acute Leukemia as Secondary Diagnosis, with 
MCC, with CC, and without CC/MCC, respectively) in Version 41.1.
    Next, we examined claims data from the September 2023 update of the 
FY 2023 MedPAR file for MS-DRG 823, 824, 825, 840, 841, and 842 to 
identify cases reporting one of the six diagnosis codes listed 
previously that describe acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis. We also examined MS-DRGs 846, 847, and 
848 (Chemotherapy without Acute Leukemia as Secondary Diagnosis, with 
MCC, with CC, and without CC/MCC, respectively). Our findings are shown 
in the following tables:
[GRAPHIC] [TIFF OMITTED] TP02MY24.051

    As shown in the table, in MS-DRG 823, we identified a total of 
2,235 cases with an average length of stay of 14 days and average costs 
of $40,587. Of those 2,235 cases, there were two cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs higher than the 
average costs in the FY 2023 MedPAR file for MS-DRG 823 ($49,600 
compared to $40,587) and a longer average length of stay (31.5 days 
compared to 14 days). We found zero cases in MS-DRG 824 reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis. In MS-DRG 825, we identified a total of 
427 cases with an average length of stay of 2.9 days and average costs 
of $10,959. Of those 427 cases, there was one case reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with costs higher than the average 
costs in the FY 2023 MedPAR file for MS-DRG 825 ($17,293 compared to 
$10,959) and a longer length of stay (6 days compared to 2.9 days).

[[Page 35988]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.052

    As shown in the table, in MS-DRG 840, we identified a total of 
7,747 cases with an average length of stay of 9.6 days and average 
costs of $26,215. Of those 7,747 cases, there were 12 cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 840 ($21,357 
compared to $26,215) and a shorter average length of stay (8.7 days 
compared to 9.6 days). In MS-DRG 841, we identified a total of 5,019 
cases with an average length of stay of 5.3 days and average costs of 
$13,502. Of those 5,019 cases, there were six cases reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis, with average costs lower than the 
average costs in the FY 2023 MedPAR file for MS-DRG 841 ($6,976 
compared to $13,502) and a shorter average length of stay (2.8 days 
compared to 5.3 days). We found zero cases in MS-DRG 842 reporting a 
diagnosis code that describes acute megakaryoblastic leukemia or acute 
panmyelosis with myelofibrosis.
[GRAPHIC] [TIFF OMITTED] TP02MY24.053

    As shown in the table, in MS-DRG 847, we identified a total of 
7,329 cases with an average length of stay of 4.4 days and average 
costs of $11,250. Of those 7,329 cases, there were two cases reporting 
a chemotherapy principal diagnosis code with a secondary diagnosis code 
that describes acute megakaryoblastic leukemia or acute panmyelosis 
with myelofibrosis, with average costs lower than the average costs in 
the FY 2023 MedPAR file for MS-DRG 840 ($7,569 compared to $11,250) and 
a longer average length of stay (5 days compared to 4.4 days). We found 
zero cases in MS-DRGs 846 and 848 reporting a diagnosis code that 
describes acute megakaryoblastic leukemia or acute panmyelosis with 
myelofibrosis.
    Next, we examined the MS-DRGs within MDC 17. Given that the six 
diagnoses codes describe subtypes of acute myeloid leukemia, we 
determined that the cases reporting a principal diagnosis of acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis would 
more suitably group to medical MS-DRGs 834, 835, and 836 (Acute 
Leukemia without Major O.R. Procedures with MCC, with CC, and without 
CC/MCC, respectively). Similarly, cases reporting a chemotherapy 
principal diagnosis with a secondary diagnosis describing acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis would 
more suitably group to medical MS-DRGs 837, 838, and 839 (Chemotherapy 
with Acute Leukemia as Secondary Diagnosis, or with High Dose 
Chemotherapy Agent with MCC, with CC or High Dose Chemotherapy Agent, 
and without CC/MCC, respectively).
    We then examined claims data from the September 2023 update of the 
FY 2023 MedPAR for MS-DRGs 834, 835, 836, 837, 838, and 839. Our 
findings are shown in the following table.

[[Page 35989]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.054

    While the average costs for all cases in MS-DRGs 834, 835, 836, 
837, 838, and 839 are higher than the average costs of the small number 
of cases reporting a diagnosis code that describes acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis, or 
reporting a chemotherapy principal diagnosis with a secondary diagnosis 
describing acute megakaryoblastic leukemia or acute panmyelosis with 
myelofibrosis, and the average lengths of stay are longer, we note that 
diagnosis codes C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 
describe types of acute leukemia. For clinical coherence, we believe 
these six diagnosis codes would be more appropriately grouped along 
with other ICD-10-CM diagnosis codes that describe types of acute 
leukemia.
    We reviewed this grouping issue, and our analysis indicates that 
the six diagnosis codes describing the acute megakaryoblastic leukemia 
or acute panmyelosis with myelofibrosis were initially assigned to the 
list of diagnoses in the GROUPER logic for MS-DRGs 823, 824, 825, 840, 
841, and 842 as a result of replication in the transition from ICD-9 to 
ICD-10 based MS-DRGs. We also note that diagnosis codes C94.20, C94.21, 
C94.22, C94.40, C94.41, and C94.42 do not describe non-acute leukemia 
diagnoses.
    Accordingly, because the six diagnosis codes that describe acute 
megakaryoblastic leukemia or acute panmyelosis with myelofibrosis are 
not clinically consistent with non-acute leukemia diagnoses, and it is 
clinically appropriate to reassign these diagnosis codes to be 
consistent with the other diagnosis codes that describe acute leukemias 
in MS-DRGs 834, 835, 836, 837, 838, and 839, we are proposing the 
reassignment of diagnosis codes C94.20, C94.21, C94.22, C94.40, C94.41, 
and C94.42 from MS-DRGs 823, 824 and 825 (Lymphoma and Non-Acute 
Leukemia with Other Procedures with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 840, 841, and 842 (Lymphoma and Non-Acute 
Leukemia with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 834, 835, and 836 (Acute Leukemia without Major O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 837, 
838, and 839 (Chemotherapy with Acute Leukemia as Secondary Diagnosis, 
or with High Dose Chemotherapy Agent with MCC, with CC or High Dose 
Chemotherapy Agent, and without CC/MCC, respectively) in MDC 17, 
effective FY 2025. Under this proposal, diagnosis codes C94.20, C94.21, 
C94.22, C94.40, C94.41, and C94.42 will continue to be assigned to 
surgical MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major 
O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).
    In our review of the MS-DRGs in MDC 17 for further refinement, we 
next examined the procedures currently assigned to MS-DRGs 820, 821, 
and 822 (Lymphoma and Leukemia with Major O.R. Procedures with MCC, 
with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827, and 
828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms 
with Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively). We note that the logic for case assignment to MS-DRGs 
820, 821, 822, 826, 827, and 828 is comprised of a logic list entitled 
``Operating Room Procedures'' which is defined by a list of 4,320 ICD-
10-PCS procedure codes, including 90 ICD-10-PCS codes describing bypass 
procedures from the cerebral ventricle to various body parts. We refer 
the reader to the ICD-10 MS-DRG Definitions Manual Version 41.1 
(available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for complete 
documentation of the GROUPER logic for MS-DRGs 820, 821, 822, 826, 827, 
and 828.
    In our review of the procedures currently assigned to MS-DRGs 820, 
821, 822, 826, 827, and 828, we noted 12 ICD-10-PCS procedure codes 
that describe bypass procedures from the cerebral ventricle to the 
subgaleal space or cerebral cisterns, such as subgaleal or cisternal 
shunt placement, that are not included in the logic for MS-DRGs 820, 
821, 822, 826, 827, and 828. The 12 procedure codes are listed in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.055


[[Page 35990]]


    A subgaleal shunt consists of a shunt tube with one end in the 
lateral ventricles while the other end is inserted into the subgaleal 
space of the scalp, while a ventriculo-cisternal shunt diverts the 
cerebrospinal fluid flow from one of the lateral ventricles, via a 
ventricular catheter, to the cisterna magna of the posterior fossa. 
Both procedures allow for the drainage of excess cerebrospinal fluid. 
Indications for ventriculosubgaleal or ventriculo-cisternal shunting 
include acute head trauma, subdural hematoma, hydrocephalus, and 
leptomeningeal disease (LMD) in malignancies such as breast cancer, 
lung cancer, melanoma, acute lymphocytic leukemia (ALL) and non-
hodgkin's lymphoma (NHL).
    Recognizing that acute lymphocytic leukemia (ALL) and non-hodgkin's 
lymphoma (NHL) are indications for ventriculosubgaleal or ventriculo-
cisternal shunting, we support adding the 12 ICD-10-PCS codes 
identified in the table to MS-DRGs 820, 821, 822, 826, 827, and 828 in 
MDC 17 for consistency to align with the procedure codes listed in the 
definition of MS-DRGs 820, 821, 822, 826, 827, and 828 and also to 
permit proper case assignment when a principal diagnosis from MDC 17 is 
reported with one of the procedure codes in the table that describes 
bypass procedures from the cerebral ventricle to the subgaleal space or 
cerebral cisterns. Therefore, we are proposing to add the 12 procedure 
codes that describe bypass procedures from the cerebral ventricle to 
the subgaleal space or cerebral cisterns listed previously to MS-DRGs 
820, 821, 822, 826, 827, and 828 in MDC 17 for FY 2025.
    Lastly, in our analysis of the MS-DRGs in MDC 17 for further 
refinement, we noted that the logic for case assignment to medical MS-
DRGs 834, 835, and 836 (Acute Leukemia without Major O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) as displayed in 
the ICD-10 MS-DRG Version 41.1 Definitions Manual (available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) is comprised of a logic list entitled 
``Principal Diagnosis'' and is defined by a list of 27 ICD-10-CM 
diagnosis codes describing various types of acute leukemias. When any 
one of the 27 listed diagnosis codes from the ``Principal Diagnosis'' 
logic list is reported as a principal diagnosis, without a procedure 
code designated as an O.R. procedure or without a procedure code 
designated as a non-O.R. procedure that affects the MS-DRG, the case 
results in assignment to MS-DRG 834, 835, or 836 depending on the 
presence of any additional MCC or CC secondary diagnoses. We note 
however, that while not displayed in the ICD-10 MS-DRG Version 41.1 
Definitions Manual, when any one of the 27 listed diagnosis codes from 
the ``Principal Diagnosis'' logic list is reported as a principal 
diagnosis, along with a procedure code designated as an O.R. procedure 
that is not listed in the logic list of MS-DRGs 820, 821, and 822 
(Lymphoma and Leukemia with Major O.R. Procedures with MCC, with CC, 
and without CC/MCC, respectively), the case also results in assignment 
to medical MS-DRG 834, 835, or 836 depending on the presence of any 
additional MCC or CC secondary diagnoses.
    As medical MS-DRG 834, 835, and 836 contains GROUPER logic that 
includes ICD-10-PCS procedure codes designated as O.R. procedures, we 
examined claims data from the September 2023 update of the FY 2023 
MedPAR file for MS-DRG 834, 835, and 836 to identify cases reporting an 
O.R. procedure. Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.056

    As shown by the table, in MS-DRG 834, we identified a total of 
4,094 cases, with an average length of stay of 16.3 days and average 
costs of $49,986. Of those 4,094 cases, there were 277 cases reporting 
an O.R. procedure, with higher average costs as compared to all cases 
in MS-DRG 834 ($92,246 compared to $49,986), and a longer average 
length of stay (28.2 days compared to 16.3 days). In MS-DRG 835, we 
identified a total of 1,682 cases with an average length of stay of 7.2 
days and average costs of $19,023. Of those 1,682 cases, there were 79 
cases reporting an O.R. procedure, with higher average costs as 
compared to all cases in MS-DRG 835 ($30,771 compared to $19,023), and 
a longer average length of stay (10.4 days compared to 7.2 days). In 
MS-DRG 836, we identified a total of 230 cases with an average length 
of stay of 4 days and average costs of $11,225. Of those 230 cases, 
there were 7 cases reporting an O.R. procedure, with higher average 
costs as compared to all cases in MS-DRG 836 ($17,950 compared to 
$11,225), and a longer average length of stay (5.9 days compared to 4 
days). The data analysis shows that the average costs of cases 
reporting an O.R. procedure are higher than for all cases in their 
respective MS-DRG.
    The data analysis clearly shows that cases reporting a principal 
diagnosis code describing a type of acute leukemia with an ICD-10-PCS 
procedure code designated as O.R. procedure that is not listed in the 
logic list of MS-DRGs 820, 821, and 822 have higher average costs and 
longer lengths of stay compared to all the cases in their assigned MS-
DRG. For these reasons, we are proposing to create a new surgical MS-
DRG for cases reporting a principal diagnosis code describing a type of 
acute leukemia with an O.R. procedure.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the claims data from the September 2023 
update of the FY 2023 MedPAR file. The following table illustrates our 
findings for all 367 cases reporting a principal diagnosis code 
describing a type of acute leukemia with an ICD-10-PCS procedure code 
designated as O.R. procedure that is not listed in the logic list of 
MS-DRGs 820, 821, and 822. We believe the resulting proposed MS-DRG 
assignment, reflecting these modifications, is more

[[Page 35991]]

clinically homogeneous, coherent and better reflects hospital resource 
use.
[GRAPHIC] [TIFF OMITTED] TP02MY24.057

    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.C.1.b. of this FY 2025 IPPS/LTCH PPS proposed 
rule. As shown in the table, we identified a total of 367 cases using 
the claims data from the September 2023 update of the FY 2023 MedPAR 
file, so the criterion that there are at least 500 or more cases in 
each subgroup could not be met. Therefore, for FY 2025, we are not 
proposing to subdivide the proposed new MS DRG for acute leukemia with 
other procedures into severity levels.
    In summary, for FY 2025, we are proposing to create a new base 
surgical MS-DRG for cases reporting a principal diagnosis describing a 
type of acute leukemia with an ICD-10-PCS procedure code designated as 
O.R. procedure that is not listed in the logic list of MS-DRGs 820, 
821, and 822 in MDC 17. The proposed new MS-DRG is proposed new MS-DRG 
850 (Acute Leukemia with Other Procedures). We are proposing to add the 
27 ICD-10-CM diagnosis codes describing various types of acute 
leukemias currently listed in the logic list entitled ``Principal 
Diagnosis'' in MS-DRGs 834, 835, and 836 as well as ICD-10-CM codes 
C94.20, C94.21, C94.22, C94.40, C94.41, and C94.42 discussed earlier in 
this section to the proposed new MS-DRG 850. We are also proposing to 
add the procedure codes from current MS-DRGs 823, 824, and 825 
(Lymphoma and Non-Acute Leukemia with Other Procedures with MCC, with 
CC, and without CC/MCC, respectively) to the proposed new MS-DRG 850. 
We note that in the current logic list of MS-DRGs 823, 824, and 825 
there are 189 procedure codes describing stereotactic radiosurgery of 
various body parts that are designated as non-O.R. procedures affecting 
the MS-DRG, therefore, as part of the logic for new MS-DRG 850, we are 
also proposing to designate these 189 codes as non-O.R. procedures 
affecting the MS-DRG.
    In addition, we are proposing to revise the titles for MS-DRGs 834, 
835, and 836 by deleting the reference to ``Major O.R. Procedures'' in 
the title. Specifically, we are proposing to revise the titles of 
medical MS-DRGs 834, 835, and 836 from ``Acute Leukemia without Major 
O.R. Procedures with MCC, with CC, and without CC/MCC'', respectively 
to ``Acute Leukemia with MCC, with CC, and without CC/MCC'', 
respectively to better reflect the GROUPER logic that will no longer 
include ICD-10-PCS procedure codes designated as O.R. procedures. We 
note that discussion of the surgical hierarchy for the proposed 
modifications is discussed in section II.C.15. of this proposed rule.
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 2023 update of the FY 2023 MedPAR file of cases found to 
group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we did not 
identify any cases for reassignment and are not proposing to move any 
cases from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into a 
surgical MS-DRGs for the MDC into which the principal diagnosis or 
procedure is assigned.
    In addition to the internal review of procedures producing 
assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we 
also consider requests that we receive to examine cases found to group 
to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if 
it would be appropriate to add procedure codes to one of the surgical 
MS-DRGs for the MDC into which the principal diagnosis falls or to move 
the principal diagnosis to the surgical MS-DRGs to which the procedure 
codes are assigned. We did not receive any requests suggesting 
reassignment.
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS DRGs 981 through 983, or 987 through 989, to ascertain whether 
any of those procedures should be reassigned from one of those two 
groups of MS DRGs to the other group of MS DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS DRG assignment illogical. If we find these shifts, we 
would propose to move cases to keep the MS DRGs clinically similar or 
to provide payment for the cases in a similar manner. Generally, we 
move only those procedures for which we have an adequate number of 
discharges to analyze the data.
    Additionally, we also consider requests that we receive to examine 
cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 
989 to determine if it would be appropriate for the cases to be 
reassigned from one of the MS-DRG groups to the other. Based on the 
results of our review of the claims data from the September 2023 update 
of the FY 2023 MedPAR file we did not identify any cases for 
reassignment. We also did not receive any requests suggesting 
reassignment. Therefore, for FY 2025 we are not proposing to move any 
cases reporting procedure codes from MS-

[[Page 35992]]

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 MS-DRGs), we have a list of 
procedure codes that are considered operating room (O.R.) procedures. 
Historically, we developed this list using physician panels that 
classified each procedure code based on the procedure and its effect on 
consumption of hospital resources. For example, generally the presence 
of a surgical procedure which required the use of the operating room 
would be expected to have a significant effect on the type of hospital 
resources (for example, operating room, recovery room, and anesthesia) 
used by a patient, and therefore, these patients were considered 
surgical. Because the claims data generally available do not precisely 
indicate whether a patient was taken to the operating room, surgical 
patients were identified based on the procedures that were performed.
    Generally, if the procedure was not expected to require the use of 
the operating room, the patient would be considered medical (non-O.R.).
    Currently, each ICD-10-PCS procedure code has designations that 
determine whether and in what way the presence of that procedure on a 
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure 
code is either designated as an O.R. procedure for purposes of MS-DRG 
assignment (``O.R. procedures'') or is not designated as an O.R. 
procedure for purposes of MS-DRG assignment (``non-O.R. procedures''). 
Second, for each procedure that is designated as an O.R. procedure, 
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R. 
procedure, that non-O.R. procedure is further classified as either 
affecting the MS-DRG assignment or not affecting the MS-DRG assignment. 
We refer to these designations that do affect MS-DRG assignment as 
``non O.R. affecting the MS-DRG.'' For new procedure codes that have 
been finalized through the ICD-10 Coordination and Maintenance 
Committee meeting process and are proposed to be classified as
    O.R. procedures or non-O.R. procedures affecting the MS-DRG, we 
recommend the MS-DRG assignment which is then made available in 
association with the proposed rule (Table 6B.--New Procedure Codes) and 
subject to public comment. These proposed assignments are generally 
based on the assignment of predecessor codes or the assignment of 
similar codes. For example, we generally examine the MS-DRG assignment 
for similar procedures, such as the other approaches for that 
procedure, to determine the most appropriate MS-DRG assignment for 
procedures proposed to be newly designated as O.R. procedures. As 
discussed in section II.C.13 of the preamble of this proposed rule, we 
are making Table 6B.--New Procedure Codes--FY 2025 available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html. We also refer readers to the ICD-10 
MS-DRG Version 41.1 Definitions Manual at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/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. We also stated that in consideration of the 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 final rule (88 FR 58749) 
that 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. In response to this discussion in the 
FY 2024 IPPS/LTCH PPS final rule, we received a comment by the October 
20, 2023 deadline. The commenter acknowledged that there is no easy 
rule that would allow CMS to designate certain surgeries as ``non-
O.R.'' procedures. The commenter stated that they believed that open 
procedures should always be designated O.R. procedures and approaches 
other than open should not be a sole factor in designating a procedure 
as non-O.R. as some minimally-invasive procedures using a percutaneous 
endoscopic approach require more training,

[[Page 35993]]

specialized equipment, time, and resources than traditional open 
procedures. In addition, the commenter stated that whether a procedure 
is frequently or generally performed in the outpatient setting should 
not be used for determination of O.R. vs non-O.R. designation and noted 
that a surgery that can be performed in the outpatient setting for a 
clinically stable patient may not be able to be safely performed on a 
patient who is clinically unstable. The commenter also asserted that 
for procedures that can be performed in various locations within the 
hospital, that is, bedside vs operating room, there should be a 
mechanism to differentiate the setting of the procedure to determine 
the MS-DRG assignment as in the commenter's assessment, the ICD-10 
classification does not provide a way to indicate the severity of 
certain conditions, or the complexity of procedures performed.
    CMS appreciates the commenter's feedback and recommendations as to 
factors to consider in evaluating O.R. designations. We agree with the 
commenter and believe that there may be other factors to consider with 
regard to resource utilization. As discussed in the FY 2024 IPPS/LTCH 
PPS final rule, 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 will consider as we examine the 
designation of a procedure in the ICD-10-PCS classification system. We 
are exploring alternatives on how we may restructure the current O.R. 
and non-O.R. designations for procedures by leveraging the detail that 
is available in the ICD-10 claims data. We are considering the feedback 
received on what factors and/or criteria to consider in determining 
whether a procedure is designated as an O.R. procedure in the ICD-10-
PCS classification system as continue to develop our process and 
methodology, and will provide more detail on this analysis and the 
methodology for conducting this comprehensive review 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.
    For this FY 2025 IPPS/LTCH PPS proposed rule, we did not receive 
any requests regarding changing the designation of specific ICD-10-PCS 
procedure codes from non-O.R. to O.R. procedures, or to change the 
designation from O.R. procedures to non-O.R. procedures by the October 
20, 2023 deadline. In this section of the proposed rule, we discuss the 
proposals we are making based on our internal review and analysis and 
we discuss the process that was utilized for evaluating each procedure 
code. For each procedure, we considered--
     Whether the procedure would typically require the 
resources of an operating room;
     Whether it is an extensive or a non-extensive procedure; 
and
     To which MS-DRGs the procedure should be assigned.
    We note that many MS-DRGs require the presence of any O.R. 
procedure. As a result, cases with a principal diagnosis associated 
with a particular MS-DRG would, by default, be grouped to that MS-DRG. 
Therefore, we do not list these MS-DRGs in our discussion in this 
section of this proposed rule. Instead, we only discuss MS-DRGs that 
require explicitly adding the relevant procedure codes to the GROUPER 
logic in order for those procedure codes to affect the MS-DRG 
assignment as intended.
    For procedures that would not typically require the resources of an 
operating room, we determined if the procedure should affect the MS-DRG 
assignment. In cases where we are proposing to change the designation 
of procedure codes from non-O.R. procedures to O.R. procedures, we also 
are proposing one or more MS-DRGs with which these procedures are 
clinically aligned and to which the procedure code would be assigned.
    In addition, cases that contain O.R. procedures will map to MS-DRGs 
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRGs 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) when they do not contain a principal diagnosis that 
corresponds to one of the MDCs to which that procedure is assigned. 
These procedures need not be assigned to MS-DRGs 981 through 989 in 
order for this to occur. Therefore, we did not specifically address 
that aspect in summarizing the proposals we are making based on our 
internal review and analysis in this section of this proposed rule.
b. Non-O.R. Procedures to O.R. Procedures
(1) Laparoscopic Biopsy of Intestinal Body Parts
    During our review, we noted inconsistencies in how procedures 
involving laparoscopic excisions of intestinal body parts are 
designated. Procedure codes describing the laparoscopic excision of 
intestinal body parts differ by qualifier. ICD-10-PCS procedure codes 
describing excisions of intestinal body parts with the diagnostic 
qualifier ``X'', are used to report these procedures when performed for 
diagnostic purposes. We identified the following five related codes:
[GRAPHIC] [TIFF OMITTED] TP02MY24.058

    We noted the ICD-10-PCS procedure codes describing the laparoscopic 
excision of intestinal body parts for diagnostic purposes listed 
previously have been assigned different attributes in terms of 
designation as an O.R. or Non-O.R. procedure when compared to similar 
procedures describing the laparoscopic excisions of intestinal body 
parts for nondiagnostic purposes. In the ICD-10 MS-DRGs Version 41, 
these ICD-10-PCS codes are currently recognized as non-O.R. procedures 
for purposes of MS-DRG assignment, while similar excision of intestinal 
body part procedure codes with the same approach but different 
qualifiers are recognized as O.R. procedures.
    Upon further review and consideration, we believe that procedure 
codes 0DBF4ZX, 0DBG4ZX, 0DBL4ZX, 0DBM4ZX and 0DBN4ZX describing a 
laparoscopic excision of an intestinal body parts for diagnostic

[[Page 35994]]

purposes warrant designation as an O.R. procedures consistent with 
other laparoscopic excision procedures performed on the same intestinal 
body parts for nondiagnostic purposes. We also believe it is clinically 
appropriate for these procedures to group to the same MS-DRGs as the 
procedures describing excision procedures performed on the intestinal 
body parts for nondiagnostic purposes. Therefore, we are proposing to 
add procedure codes 0DBF4ZX, 0DBG4ZX, 0DBL4ZX, 0DBM4ZX and 0DBN4ZX to 
the FY 2025 ICD-10 MS-DRG Version 42 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures assigned to MS-DRG 264 (Other Circulatory System O.R. 
Procedures) in MDC 05 (Diseases and Disorders of the Circulatory 
System); MS-DRGs 329, 330, and 331 (Major Small and Large Bowel 
Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 
06 (Diseases and Disorders of the Digestive System); MS-DRGs 820, 821, 
and 822 (Lymphoma and Leukemia with Major O.R. Procedures with MCC, CC, 
without CC/MCC, respectively) and MS-DRGS 826, 827, and 828 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Major O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, 
Poorly Differentiated Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. Procedures for 
Multiple Significant Trauma with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma).
(2) Laparoscopic Biopsy of Gallbladder and Pancreas
    During our review, we noted inconsistencies in how procedures 
involving laparoscopic excisions of gallbladder or pancreas are 
designated. Procedure codes describing the laparoscopic excision of the 
gallbladder or pancreas differ by qualifier. The ICD-10-PCS procedure 
code describing an excision of the gallbladder and the procedure code 
describing an excision of the pancreas with the diagnostic qualifier 
``X'', are used to report these procedures when performed for 
diagnostic purposes. We identified the following two related codes:
[GRAPHIC] [TIFF OMITTED] TP02MY24.059

    We noted the ICD-10-PCS procedure codes describing the laparoscopic 
excision of the gallbladder or the pancreas for diagnostic purposes 
listed previously have been assigned different attributes in terms of 
designation as an O.R. or a Non-O.R. procedure when compared to similar 
procedures describing the laparoscopic excisions of the gallbladder or 
the pancreas for nondiagnostic purposes. In the ICD-10 MS-DRGs Version 
41, these ICD-10-PCS codes are currently recognized as non-O.R. 
procedures for purposes of MS-DRG assignment, while similar excision of 
the gallbladder or the pancreas procedure codes with the same approach 
but different qualifiers are recognized as O.R. procedures.
    Upon further review and consideration, we believe that procedure 
code 0FB44ZX describing a laparoscopic excision of the gallbladder for 
diagnostic purposes and procedure code 0FBG4ZX describing a 
laparoscopic excision of the pancreas for diagnostic purposes both 
warrant designation as an O.R. procedure consistent with other 
laparoscopic excision procedures performed on the same body parts for 
nondiagnostic purposes. We also believe it is clinically appropriate 
for these procedures to group to the same MS-DRGs as the procedures 
describing excision procedures performed on the gallbladder or pancreas 
for nondiagnostic purposes. Therefore, we are proposing to add 
procedure code 0FB44ZX to the FY 2025 ICD-10 MS-DRG Version 42 
Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index as an O.R. procedure assigned to MS-DRGs 
411, 412, and 413 (Cholecystectomy with C.D.E., with MCC, with CC, and 
without CC/MCC, respectively) and MS-DRGs 417, 418, and 419 
(Laparoscopic Cholecystectomy without C.D.E., with MCC, with CC, and 
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the 
Hepatobiliary System and Pancreas); MS-DRGs 820, 821, and 822 (Lymphoma 
and Leukemia with Major O.R. Procedures with MCC, with CC, and without 
CC/MCC, respectively) and MS-DRGS 826, 827, and 828 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 17 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for 
Injuries with MCC, with CC, and without CC/MCC, respectively) in MDC 21 
(Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 
958, and 959 (Other O.R. Procedures for Multiple Significant Trauma 
with MCC, with CC, and without CC/MCC, respectively) in MDC 24 
(Multiple Significant Trauma).
    We are also proposing to add procedure code 0FBG4ZX to the FY 2025 
ICD-10 MS-DRG Version 42 Definitions Manual in Appendix E--Operating 
Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure 
assigned to MS-DRGs 405, 406, and 407 (Pancreas, Liver and Shunt 
Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 
06 (Diseases and Disorders of the Digestive System); MS-DRGs 628, 629 
and 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 10 
(Endocrine, Nutritional and Metabolic Diseases and Disorders); MS-DRGs 
907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with 
CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings 
and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. 
Procedures for Multiple Significant Trauma with MCC, with CC, and 
without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma).
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2025
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

[[Page 35995]]

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 IPPS/LTCH PPS final rule, we generally 
did not finalize our proposed changes to the severity designations for 
the ICD-10-CM diagnosis codes, other than the changes to the severity 
level designations for the diagnosis codes in category Z16 (Resistance 
to antimicrobial drugs) from a NonCC to a CC. We stated that postponing 
adoption of the proposed comprehensive changes in the severity level 
designations would allow further opportunity to provide additional 
background to the public on the methodology utilized and clinical 
rationale applied across diagnostic categories to assist the public in 
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42150 through 42152) for a complete discussion of our response 
to public comments regarding the proposed severity level designation 
changes for FY 2020.
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32550), to provide the public with more information on the CC/MCC 
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed 
and final rules, CMS hosted a listening session on October 8, 2019. The 
listening session included a review of this methodology utilized to 
mathematically measure the impact on resource use. We refer readers to 
https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for 
the transcript and audio file of the listening session. We also refer 
readers to https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software 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 summation of the comments we received for each of the nine 
guiding principles and our responses to those comments. We note that 
since the FY 2021 IPPS/LTCH PPS final rule we have continued to solicit 
feedback regarding the nine guiding principles, as well as other 
possible ways we can incorporate meaningful indicators of clinical 
severity. We have encouraged the public to provide a detailed 
explanation of how applying a suggested concept or principle would 
ensure that the severity designation appropriately reflects resource 
use for any diagnosis code when providing feedback or comments. In the 
FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26748 through 26750) we 
illustrated how the nine guiding principles might be applied in 
evaluating changes to the severity designations of diagnosis codes in 
our discussion of our proposed changes to the severity level 
designation for certain diagnosis codes that describe homelessness. 
Since the FY 2021 IPPS/LTCH PPS final rule, we have not received any 
additional feedback or comments on the nine guiding principles; 
therefore, we are proposing to finalize the nine guiding principles as 
listed previously in this FY 2025 IPPS/LTCH PPS proposed rule. Under 
this proposal, our evaluations to determine the extent to which the 
presence of a diagnosis code as a secondary diagnosis results in 
increased hospital resource use will include 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 the nine 
guiding principles.

[[Page 35996]]

    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through 
25180), as another interval step in our comprehensive review of the 
severity designations of ICD-10-CM diagnosis codes, we requested public 
comments on a potential change to the severity level designations for 
``unspecified'' ICD-10-CM diagnosis codes that we were considering 
adopting for FY 2022. Specifically, we noted we were considering 
changing the severity level designation of ``unspecified'' diagnosis 
codes to a NonCC where there are other codes available in that code 
subcategory that further specify the anatomic site. As summarized in 
the FY 2022 IPPS/LTCH PPS final rule, many commenters expressed concern 
with the potential severity level designation changes overall and 
recommended that CMS delay any possible change to the designation of 
these codes to give hospitals and their physicians time to prepare. 
After careful consideration of the public comments we received, we 
maintained the severity level designation of the ``unspecified'' 
diagnosis codes currently designated as a CC or MCC where there are 
other codes available in that code subcategory that further specify the 
anatomic site for FY 2022. We refer readers to the FY 2022 IPPS/LTCH 
PPS final rule (86 FR 44916 through 44926) for a complete discussion of 
our response to public comments regarding the potential severity level 
designation changes. Instead, for FY 2022, we finalized a new Medicare 
Code Editor (MCE) code edit for ``unspecified'' codes, effective with 
discharges on and after April 1, 2022. We stated we believe finalizing 
this new edit would provide additional time for providers to be 
educated while not affecting the payment the provider is eligible to 
receive. We refer the reader to section II.D.14.e. of the FY 2022 IPPS/
LTCH PPS final rule (86 FR 44940 through 44943) for the complete 
discussion.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48866), 
we stated that as the new unspecified edit became effective beginning 
with discharges on and after April 1, 2022, we believed it was 
appropriate to not propose to change the designation of any ICD-10-CM 
diagnosis codes, including the unspecified codes that are subject to 
the ``Unspecified Code'' edit, as we continue our comprehensive CC/MCC 
analysis to allow interested parties the time needed to become 
acclimated to the new edit.
    In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181), 
we also requested public comments on how the reporting of diagnosis 
codes in categories Z55-Z65 might improve our ability to recognize 
severity of illness, complexity of illness, and/or utilization of 
resources under the MS-DRGs. Consistent with the Administration's goal 
of advancing health equity for all, including members of historically 
underserved and under-resourced communities, as described in the 
President's January 20, 2021 Executive Order 13985 on ``Advancing 
Racial Equity and Support for Underserved Communities Through the 
Federal Government,'' \4\ 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.
---------------------------------------------------------------------------

    \4\ Available at: https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
---------------------------------------------------------------------------

    We noted that social determinants of health (SDOH) are the 
conditions in the environments where people are born, live, learn, 
work, play, worship, and age that affect a wide range of health, 
functioning, and quality-of-life outcomes and risks.\5\ The subset of Z 
codes that describe the social determinants of health are found in 
categories Z55-Z65 (Persons with potential health hazards related to 
socioeconomic and psychosocial circumstances). These codes describe a 
range of issues related--but not limited--to education and literacy, 
employment, housing, ability to obtain adequate amounts of food or safe 
drinking water, and occupational exposure to toxic agents, dust, or 
radiation.
---------------------------------------------------------------------------

    \5\ Available at: https://health.gov/healthypeople/priority-areas/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 discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 
through 58759), based on our analysis of the impact on resource use for 
the ICD-10-CM Z codes that describe homelessness and after 
consideration of public comments, we finalized 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. We stated our expectation that finalizing the changes 
would encourage 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 SDOH 
codes, CMS can further examine the claims data and consider future 
changes to the designation of these codes when reported as a secondary 
diagnosis. We further stated CMS would continue to monitor and evaluate 
the reporting of the diagnosis codes describing social and economic 
circumstances.
    We refer the reader to the following section of this proposed rule 
for our proposed changes to the severity level designation for the 
diagnosis codes that describe inadequate housing and housing 
instability for FY 2025.
    We have updated the Impact on Resource Use Files on the CMS website 
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 
2023 MedPAR files. These files are posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. As discussed in 
prior rulemaking, we also continue to be interested in receiving 
feedback on how we might further foster the documentation and reporting 
of the

[[Page 35997]]

most specific diagnosis codes supported by the available medical record 
documentation and clinical knowledge of the patient's health condition 
to more accurately reflect each health care encounter and improve the 
reliability and validity of the coded data.
    For new diagnosis codes approved for FY 2025, consistent with our 
annual process for designating a severity level (MCC, CC, or NonCC) for 
new diagnosis codes, we first review the predecessor code designation, 
followed by review and consideration of other factors that may be 
relevant to the severity level designation, including the severity of 
illness, treatment difficulty, complexity of service and the resources 
utilized in the diagnosis or treatment of the condition. We note that 
this process does not automatically result in the new diagnosis code 
having the same designation as the predecessor code. We refer the 
reader to section II.C.13 of this proposed rule for the discussion of 
the proposed changes to the ICD-10-CM and ICD-10-PCS coding systems for 
FY 2025.
c. Proposed Changes to Severity Levels
1. SDOH--Inadequate Housing/Housing Instability
    As discussed earlier in this section, in continuation of our 
examination of the SDOH Z codes, for this proposed rule, we reviewed 
the mathematical data on the impact on resource use for the subset of 
ICD-10-CM Z codes that describe the social determinants of health found 
in categories Z55-Z65 (Persons with potential health hazards related to 
socioeconomic and psychosocial circumstances).
    The ICD-10-CM SDOH Z codes that describe inadequate housing and 
housing instability are currently designated as NonCCs when reported as 
secondary diagnoses. The following table reflects the impact on 
resource use data generated using claims from the September 2023 update 
of the FY 2023 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 a more detailed explanation of the 
columns in the table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.060

    The table shows that the C1 value is 2.63 for ICD-10-CM diagnosis 
code Z59.10 and 1.85 for ICD-10-CM diagnosis code Z59.19. 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 two SDOH Z codes 
are reported as a secondary diagnosis, the resources involved in caring 
for a patient experiencing inadequate housing support increasing the 
severity level from a NonCC to a CC. In contrast, the C1 value for ICD-
10-CM diagnosis code Z59.11 is 0.51 and is 0.99 for ICD-10-CM diagnosis 
code Z59.12. A C1 value generally closer to 1 suggests the resources 
involved in caring for patients experiencing inadequate housing in 
terms of environmental temperature and utilities are more aligned with 
a NonCC severity level than a CC or an MCC severity level.
    The underlying cause of the inconsistency between the C1 values for 
inadequate housing, unspecified and other inadequate housing and the 
two more specific codes that describe the necessities unavailable in 
the housing environment is unclear. We note that diagnosis codes Z59.10 
(Inadequate housing, unspecified), Z59.11 (Inadequate housing 
environmental temperature), Z59.12 (Inadequate housing utilities), and 
Z59.19 (Other inadequate housing) became effective on April 1, 2023 (FY 
2023). In reviewing the historical C1 values for code Z59.1 (Inadequate 
housing), the predecessor code before the code was expanded to further 
describe inadequate housing and the basic necessities unavailable in 
the housing environment, we note the mathematical data for the impact 
on resource use generated using claims from the FY 2019, FY 2020, FY 
2021, and FY 2022 MedPAR files reflects C1 values for code Z59.1 of 
2.09, 1.73, 2.04, and 2.69, respectively. We refer the reader to the 
Impact on Resource Use Files generated using claims from the FY 2019 
through the FY 2022 MedPAR files posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. We believe the lower 
C1 values for ICD-10-CM

[[Page 35998]]

codes Z59.11 (Inadequate housing environmental temperature) and Z59.12 
(Inadequate housing utilities) reflected in the mathematical data for 
the impact on resource use generated using claims from the FY 2023 
MedPAR file may be attributed to lack of use or knowledge about the 
newly expanded codes, such that the data may not yet reflect the full 
impact on resource use for patients experiencing these circumstances.
    Similarly, the table shows that the C1 value is 1.97 for ICD-10-CM 
diagnosis code Z59.811. 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 value in the table is generally close to 2, the data suggest 
that when this SDOH Z code is reported as a secondary diagnosis, the 
resources involved in caring for a patient experiencing an imminent 
risk of homelessness support increasing the severity level from a NonCC 
to a CC. In contrast, the C1 value for ICD-10-CM diagnosis code Z59.812 
(Housing instability, housed, homelessness in past 12 months) and 
(Housing instability, housed unspecified) is 0.76 and is 0.92 for ICD-
10-CM diagnosis code Z59.819. A C1 value generally closer to 1 suggests 
the resources involved in caring for patients experiencing housing 
instability, with history of homelessness in the past 12 months or 
housing instability, unspecified are more aligned with a NonCC severity 
level than a CC or an MCC severity level. The underlying cause of the 
inconsistency between the C1 values for codes describing housing 
instability is unclear.
    We note that diagnosis codes Z59.811, Z59.812, and Z59.819 became 
effective on October 1, 2021 (FY 2022). In reviewing the historical C1 
values for code Z59.8 (Other problems related to housing and economic 
circumstances), the predecessor code before the code was expanded to 
further describe the problems related to housing and economic 
circumstances, we note the mathematical data for the impact on resource 
use generated using claims from the FY 2019 and FY 2020 MedPAR files 
reflects C1 values for code Z59.8 of 1.92 and 1.63, respectively. There 
were no data reflected for this code in the Impact on Resource Use File 
generated using claims from the FY 2021 MedPAR files. The mathematical 
data for the impact on resource use generated using claims from the FY 
2022 MedPAR file reflects C1 values for codes Z59.811, Z59.812, and 
Z59.819 of 2.44, 3.12, and 2.09, respectively. We are uncertain if the 
fluctuations in the C1 values from year to year, or FY 2021, in 
particular, may reflect fluctuations that may be a result of the COVID-
19 public health emergency or even reduced hospitalizations of certain 
conditions. We are also uncertain if the fluctuations may be attributed 
to lack of use or knowledge about the expanded codes, such that the 
data on the reporting of codes Z59.812 and Z59.819 may not yet reflect 
the full impact on resource use for patients experiencing these 
circumstances.
    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, we note that, similar to 
homelessness, inadequate housing and housing instability are 
circumstances that can impede patient cooperation or management of 
care, or both. In addition, patients experiencing inadequate housing 
and housing instability can require a higher level of care by needing 
an extended length of stay.
    Inadequate housing is defined as an occupied housing unit that has 
moderate or severe physical problems (for example, deficiencies in 
plumbing, heating, electricity, hallways, and upkeep).6 7 
Features of substandard housing have long been identified as 
contributing to the spread of infectious diseases. Patients living in 
inadequate housing may be exposed to health and safety risks, such as 
vermin, mold, water leaks, and inadequate heating or cooling 
systems.8 9 An increasing body of evidence has associated 
poor housing conditions with morbidity from infectious diseases, 
chronic illnesses, exposure to toxins, injuries, poor nutrition, and 
mental disorders.\10\
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    \6\ US Bureau of the Census. American Housing Survey (AHS). 
Washington, DC: US Bureau of the Census; 2010. Available at http://www.census.gov/hhes/www/housing/ahs/ahs.html.
    \7\ US Bureau of the Census. Codebook for the American Housing 
Survey, public use file: 1997 and later. Washington, DC: US Bureau 
of the Census; 2009. Available at http://www.huduser.org/portal/datasets/ahs/AHS_Codebook.pdf.
    \8\ Hern[aacute]ndez, D. (2016). Affording housing at the 
expense of health: Exploring the housing and neighborhood strategies 
of poor families. Journal of Family Issues, 37(7), 921-946. doi: 
10.1177/0192513X14530970.
    \9\ Joint Center for Housing Studies. (2020). The state of the 
nation's housing 2020. Harvard University. https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf.
    \10\ Krieger J, Higgins DL. Housing and health: time again for 
public health action. Am J Public Health. 2002 May;92(5):758-68. 
doi: 10.2105/ajph.92.5.758. PMID: 11988443; PMCID: PMC1447157.
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    Housing instability encompasses a number of challenges, such as 
having trouble paying rent, overcrowding, moving frequently, or 
spending the bulk of household income on housing.\11\ These experiences 
may negatively affect physical health and make it harder to access 
health care. Studies have found moderate evidence to suggest that 
housing instability is associated with higher prevalence of overweight/
obesity, hypertension, diabetes, and cardiovascular disease, worse 
hypertension and diabetes control, and higher acute health care 
utilization among those with diabetes and cardiovascular disease.\12\
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    \11\ Office of Disease Prevention and Health Promotion. 
Retrieved on December 27, 2023 from https://health.gov/healthypeople/priority-areas/social-determinants-health/literature-summaries/housing-instability.
    \12\ Gu, K.D., Faulkner, K.C. & Thorndike, A.N. Housing 
instability and cardiometabolic health in the United States: a 
narrative review of the literature. BMC Public Health 23, 931 
(2023). https://doi.org/10.1186/s12889-023-15875-6.
---------------------------------------------------------------------------

    In reviewing the mathematical data for the impact on resource use 
generated using claims from the FY 2023 MedPAR file for the seven ICD-
10-CM codes describing inadequate housing and housing instability 
comprehensively and reviewing the potential impact these circumstances 
could have on patients' clinical course, we note that whether the 
patient is experiencing inadequate housing or housing instability, the 
patient 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, and have difficulties adhering 
to medication regimens. Experiencing inadequate housing or housing 
instability may negatively affect a patient's physical health and make 
it harder to access timely health care.\8,9\ Delays in medical care may 
increase morbidity and mortality risk among those with underlying, 
preventable, and treatable medical conditions.\13\ In

[[Page 35999]]

addition, findings also suggest that patients experiencing inadequate 
housing or housing instability are associated with higher rates of 
inpatient admissions for mental, behavioral, and neurodevelopmental 
disorders, longer hospital stays, and substantial health care 
costs.\14\
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    \13\ Gertz AH, Pollack CC, Schultheiss MD, Brownstein JS. 
Delayed medical care and underlying health in the United States 
during the COVID-19 pandemic: A cross-sectional study. Prev Med Rep. 
2022 Aug;28:101882. doi: 10.1016/j.pmedr.2022.101882. Epub 2022 Jul 
5. PMID: 35813398; PMCID: PMC9254505.
    \14\ Rollings KA, Kunnath N, Ryus CR, Janke AT, Ibrahim AM. 
Association of Coded Housing Instability and Hospitalization in the 
US. JAMA Netw Open. 2022;5(11):e2241951. doi:10.1001/
jamanetworkopen.2022.41951.
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    Therefore, after considering the impact on resource use data 
generated using claims from the September 2023 update of the FY 2023 
MedPAR file for the seven ICD-10-CM diagnosis codes that describe 
inadequate housing and housing instability and consideration of the 
nine guiding principles, we are proposing to change the severity level 
designation for diagnosis codes Z59.10 (Inadequate housing, 
unspecified), Z59.11 (Inadequate housing environmental temperature), 
Z59.12 (Inadequate housing utilities), Z59.19 (Other inadequate 
housing), Z59.811 (Housing instability, housed, with risk of 
homelessness), Z59.812 (Housing instability, housed, homelessness in 
past 12 months) and Z59.819 (Housing instability, housed unspecified) 
from NonCC to CC for FY 2025.
    As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48868), 
if SDOH Z codes are not consistently reported in inpatient claims data, 
our methodology utilized to mathematically measure the impact on 
resource use, as described previously, may not adequately reflect what 
additional resources were expended by the hospital to address these 
SDOH circumstances in terms of requiring clinical evaluation, extended 
length of hospital stay, increased nursing care or monitoring or both, 
and comprehensive discharge planning. We will continue to monitor SDOH 
Z code reporting, including reporting based on SDOH screening performed 
as a result of new quality measures in the Hospital Inpatient Quality 
Reporting program. We may consider proposing changes for other SDOH 
codes in the future based on our analysis of the impact on resource 
use, per our methodology, as previously described, and consideration of 
the guiding principles. We also continue to be interested in receiving 
feedback on how we might otherwise foster the documentation and 
reporting of the diagnosis codes describing social and economic 
circumstances to more accurately reflect each health care encounter and 
improve the reliability and validity of the coded data including in 
support of efforts to advance health equity.
    To inform future rulemaking, feedback and other suggestions may be 
submitted by October 20, 2024 and directed to MEARISTM at: 
https://mearis.cms.gov/public/home.
2. Causally Specified Delirium
    Additionally, for this FY 2025 IPPS/LTCH PPS proposed rule, we 
received a request to change the severity level designations of the 
ICD-10-CM diagnosis codes that describe causally specified delirium 
from CC to MCC when reported as secondary diagnoses. Causally specified 
delirium is delirium caused by the physiological effects of a medical 
condition, by the direct physiological effects of a substance or 
medication, including withdrawal, or by multiple or unknown etiological 
factors. The requestor noted that ICD-10-CM diagnosis codes G92.8 
(Other toxic encephalopathy), G92.9 (Unspecified toxic encephalopathy) 
and G93.41 (Metabolic encephalopathy) are currently all designated as 
MCCs. According to the requestor, a diagnosis of delirium implies an 
underlying acute encephalopathy, and as such, the severity designation 
of the diagnosis codes that describe causally specified delirium should 
be on par with the severity designation of the diagnosis codes that 
describe toxic encephalopathy and metabolic encephalopathy. The 
requestor stated that toxic encephalopathy, metabolic encephalopathy, 
and causally specified delirium all describe core symptoms of 
impairment of level of consciousness and cognitive change caused by a 
medical condition or substance.
    The requestor further stated that there is robust literature 
detailing the impact delirium can have on cognitive decline, rates of 
functional decline, subsequent dementia diagnosis, 
institutionalization, care complexity and costs, readmission rates, and 
mortality. The requestor considered each of the nine guiding principles 
discussed earlier in this section and noted how each of the principles 
could be applied in evaluating changes to the severity designations of 
the diagnosis codes that describe causally specified delirium in their 
request. Specifically, the requestor stated that delirium is a textbook 
example that maps to the nine guiding principles for evaluating a 
potential change in severity designation in that delirium (1) has a 
bidirectional link with dementia, (2) indexes physiological 
vulnerability across populations, (3) impacts healthcare systems across 
levels of care, (4) complicates postoperative recovery, (5) consigns 
patients to higher levels of care, and for longer, (6)impedes patient 
engagement in care, (7) has several recent treatment guidelines, (8) 
indicates neuronal/brain injury, and (9) represents a common expression 
of terminal illness.
    The requestor identified 37 ICD-10-CM diagnosis codes that describe 
causally specified delirium. We agree that these 37 diagnosis codes are 
all currently designated as CCs. We refer the reader to Appendix G of 
the ICD-10 MS-DRG Version 41.1 Definitions Manual (available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for 
the complete list of diagnoses designated as CCs when reported as 
secondary diagnoses, except when used in conjunction with the principal 
diagnosis in the corresponding CC Exclusion List in Appendix C. To 
evaluate this request, we analyzed the claims data in the September 
2023 update of the FY 2023 MedPAR file. The following table shows the 
analysis for each of the diagnosis codes identified by the requestor 
that describe causally specified delirium.
BILLING CODE 4120-01-P

[[Page 36000]]

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[[Page 36001]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.062

BILLING CODE 4120-01-C
    We analyzed these data as described in FY 2008 IPPS final rule (72 
FR 47158 through 47161). The table shows that the C1 values of the 
diagnosis codes that describe causally specified delirium range from a 
low of 0.35 to a high of 4.00. As stated earlier, a C1 value close to 
2.0 suggests the condition is more like a CC than a non-CC but not as 
significant in resource usage as an MCC. On average, the C1 values of 
the diagnoses that describe causally specified delirium suggest that 
these codes are more like a NonCC than a CC. We note diagnosis code 
F11.221 (Opioid dependence with intoxication delirium) had a C1 value 
of 4.00, however our analysis reflects that this diagnosis code was 
reported as a secondary diagnosis in only 42 claims, and only one claim 
reported F11.221 as a secondary diagnosis with no other secondary 
diagnosis or with all other secondary diagnoses that are NonCCs.
    The C2 findings of the diagnosis codes that describe causally 
specified delirium range from a low of 0.28 to a high of 3.22 and the 
C3 findings range from a low of 1.25 to a high of 3.85. The data are 
clearly mixed between the C2 and C3 findings, and do not consistently 
support a change in the severity level. On average, the C2 and C3 
findings again suggest that these codes that describe causally 
specified delirium are more similar to a NonCC.
    In considering the nine guiding principles, as summarized 
previously, we note that delirium is a diagnosis that can impede 
patient cooperation or management of care or both. Delirium is a 
confusional state that can manifest as agitation, tremulousness, and 
hallucinations or even somnolence and decreased arousal. In addition, 
patients diagnosed with delirium can require a higher level of care by 
needing intensive monitoring, and a greater number of caregivers. 
Managing disruptive behavior, particularly agitation and combative 
behavior, is a challenging aspect in caring for patients diagnosed with 
delirium. Prevention and treatment of delirium can include avoiding 
factors known to cause or aggravate delirium; identifying and treating 
the underlying acute illness; and where appropriate using low-dose, 
short-acting pharmacologic agents.
    After considering the C1, C2, and C3 values of the 37 ICD-10-CM 
diagnosis codes that describe causally specified delirium and 
consideration of the nine guiding principles, we believe these 37 codes 
should not be designated as MCCs. While there is a lack of consistent 
claims data to support a severity level change from CCs to MCCs, we 
recognize patients with delirium can utilize increased hospital 
resources and can be at a higher severity level. Therefore, we are 
proposing to retain the severity designation of the 37 codes listed 
previously as CCs for FY 2025.
d. Proposed Additions and Deletions to the Diagnosis Code Severity 
Levels for FY 2025
    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 2025 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 2025;
    Table 6J.1--Proposed Additions to the CC List-FY 2025; and
    Table 6J.2--Proposed Deletions to the CC List-FY 2025

[[Page 36002]]

e. Proposed CC Exclusions List for FY 2025
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) to preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    The ICD-10 MS-DRGs Version 41.1 CC Exclusion List is included as 
Appendix C in the ICD-10 MS-DRG Definitions Manual (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.
    Effective for the April 1, 2024 release of the ICD-10 MS-DRG 
Definitions Manual, Version 41.1, a new section has been added to 
Appendix C as follows:
Part 3: Secondary Diagnosis CC/MCC Severity Exclusions in Select MS-
DRGs
    Part 3 lists diagnosis codes that are designated as a complication 
or comorbidity (CC) or major complication or comorbidity (MCC) and 
included in the definition of the logic for the listed MS-DRGs. When 
reported as a secondary diagnosis and grouped to one of the listed MS-
DRGs, the diagnosis is excluded from acting as a CC/MCC for severity in 
DRG assignment.
    The purpose of this new section is to include the list of MS-DRGs 
subject to what is referred to as suppression logic. In addition to the 
suppression logic excluding secondary diagnosis CC or MCC conditions 
that may be included in the definition of the logic for a DRG, it is 
also based on the presence of other secondary diagnosis logic defined 
within certain base DRGs. Therefore, if a MS-DRG has secondary 
diagnosis logic, the suppression is activated regardless of the 
severity of the secondary diagnosis code(s) for appropriate grouping 
and MS-DRG assignment.
    Each MS-DRG is defined by a particular set of patient attributes 
including principal diagnosis, specific secondary diagnoses, 
procedures, sex, and discharge status. The patient attributes which 
define each MS-DRG are displayed in a series of headings which indicate 
the patient characteristics used to define the MS-DRG. These headings 
indicate how the patient's diagnoses and procedures are used in 
determining MS-DRG assignment. Following each heading is a complete 
list of all the ICD-10-CM diagnosis or ICD-10-PCS procedure codes 
included in the MS-DRG. One of these headings is secondary diagnosis.
     Secondary diagnosis. Indicates that a specific set of 
secondary diagnoses are used in the definition of the MS-DRG. For 
example, a secondary diagnosis of acute leukemia with chemotherapy is 
used to define MS-DRG 839.
    The full list of MS-DRGs where suppression occurs is shown in the 
following table.

[[Page 36003]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.063

    We believe this additional information about the suppression logic 
may further assist users of the ICD-10 MS-DRG GROUPER software and 
related materials.
    In our review of the MS-DRGs containing secondary diagnosis logic 
in association with the suppression logic previously discussed, we 
identified another set of MS-DRGs containing secondary diagnosis logic 
in the definition of the MS-DRG. Specifically, we identified 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), as displayed in the ICD-10 
MS-DRG Version 41.1 Definitions Manual (which is available on the CMS 
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) which 
contains secondary diagnosis logic.
    Of the seven logic lists included in the definition of MS-DRGs 673, 
674, and 675, there are three ``Or Principal Diagnosis'' logic lists 
and one ``With Secondary Diagnosis'' logic list. The first ``Or 
Principal Diagnosis'' logic list is comprised of 21 diagnosis codes 
describing conditions such as chronic kidney disease, kidney failure, 
and complications related to a vascular dialysis catheter or kidney 
transplant. The second ``Or Principal Diagnosis'' logic list is 
comprised of four diagnosis codes describing diabetes with diabetic 
chronic kidney disease followed by a ``With Secondary Diagnosis'' logic 
list that includes diagnosis codes N18.5 (Chronic kidney disease, stage 
5) and N18.6 (End stage renal disease). These logic lists are 
components of 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. 
The third ``Or Principal Diagnosis'' logic list is comprised of three 
diagnosis codes describing Type 1 diabetes with different kidney 
complications as part of the special logic in MS-DRGs 673, 674, and 675 
for pancreatic islet cell transplantation performed in the absence of 
any other surgical procedure.
    Under the Version 41.1 ICD-10 MS-DRGs, diagnosis code N18.5 
(Chronic kidney disease, stage 5) is currently designated as a CC and 
diagnosis code N18.6 (End stage renal disease) is designated as an MCC. 
In our review of the MS-DRGs containing secondary diagnosis logic in 
association with the suppression logic, we noted that currently, when 
some diagnosis codes from the ``Or Principal Diagnosis'' logic lists in 
MS-DRGs 673, 674, and 675 are reported as the principal diagnosis and 
either diagnosis code N18.5 or N18.6 from the ``With Secondary 
Diagnosis'' logic list is reported as a secondary diagnosis, some cases 
are grouping to MS-DRG 673 (Other Kidney and Urinary Tract Procedures 
with MCC) or to MS-DRG 674 (Other Kidney and Urinary Tract Procedures 
with CC) in the absence of any other MCC or CC secondary diagnoses 
being reported.
    In our analysis of this issue, we noted that diagnosis codes N18.5 
and N18.6 are excluded from acting as a CC or MCC, when reported with 
principal

[[Page 36004]]

diagnoses from Principal Diagnosis Collection Lists 1379 and 1380, 
respectively, as reflected in Part 1 of Appendix C in the CC Exclusion 
List. We refer the reader to Part 1 of Appendix C in the CC Exclusion 
List as displayed in the ICD-10 MS-DRG Version 41.1 Definitions Manual 
(which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the complete list of principal 
diagnoses in Principal Diagnosis Collection Lists 1379 and 1380. 
Specifically, when codes N18.5 or N18.6 are reported as secondary 
diagnoses, they are considered as NonCCs when the diagnosis codes from 
the ``Or Principal Diagnosis'' logic lists in MS-DRGs 673, 674, and 675 
reflected in the following table are reported as the principal 
diagnosis under the CC Exclusion logic.
[GRAPHIC] [TIFF OMITTED] TP02MY24.064

    We also noted that currently, a subset of diagnosis codes from the 
first ``Or Principal Diagnosis'' logic list in MS-DRGs 673, 674, and 
675 are not listed in Principal Diagnosis Collection Lists 1379 or 1380 
for diagnosis codes N18.5 and N18.6, respectively. As a result, when 
one of the 13 diagnosis codes listed in the following table are 
reported as the principal diagnosis, and either diagnosis code N18.5 or 
N18.6 from the ``With Secondary Diagnosis'' logic list are reported as 
a secondary diagnosis, the cases are grouping to MS-DRG 673 (Other 
Kidney and Urinary Tract Procedures with MCC) or to MS-DRG 674 (Other 
Kidney and Urinary Tract Procedures with CC) when also reported with a 
procedure code describing the insertion of a tunneled or totally 
implantable vascular access device.

[[Page 36005]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.065

    Consistent with how other similar logic lists function in the ICD-
10 GROUPER software for case assignment to the ``with MCC'' or ``with 
CC'' MS-DRGs, the logic for case assignment to MS-DRG 673 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. 
Likewise, the logic for case assignment to MS-DRG 674 is intended to 
require any other diagnosis designated as a CC and reported as a 
secondary diagnosis for appropriate assignment.
    Therefore, for FY 2025, we are proposing to correct the logic for 
case assignment to MS-DRGs 673, 674, and 675 by adding suppression 
logic to exclude diagnosis codes N18.5 (Chronic kidney disease, stage 
5) and N18.6 (End stage renal disease) from the logic list entitled 
``With Secondary Diagnosis'' from acting as a CC or an MCC, 
respectively, when reported as a secondary diagnosis with one of the 13 
previously listed principal diagnosis codes from the ``Or Principal 
Diagnosis'' logic lists in MS-DRGs 673, 674, and 675 for appropriate 
grouping and MS-DRG assignment. Under this proposal, when diagnosis 
codes N18.5 or N18.6 are reported as a secondary diagnosis with one of 
the 13 previously listed principal diagnosis codes, the GROUPER will 
assign MS-DRG 675 (Other Kidney and Urinary Tract Procedures without 
CC/MCC) in the absence of any other MCC or CC secondary diagnoses being 
reported. We also note that the current list of MS-DRGs subject to 
suppression logic as previously discussed and listed under Version 41.1 
includes MS-DRGs that are not subdivided by a two-way severity level 
split (``with MCC and without MCC'' or ``with CC/MCC and without CC/
MCC'') or a three-way severity level split (with MCC, with CC, and 
without CC/MCC, respectively), or the listed MS-DRG includes diagnoses 
that are not currently designated as a CC or MCC. To avoid potential 
confusion, we are proposing to refine how the suppression logic is 
displayed under Appendix C--Part 3 to not display the MS-DRGs where the 
suppression logic has no impact on the grouping (meaning the logic list 
for the affected MS-DRG contains diagnoses that are all designated as 
NonCCs, or the MS-DRG is not subdivided by a severity level split) as 
reflected in the draft Version 42 ICD-10 MS-DRG Definitions Manual, 
which is available in association with this proposed rule at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    In addition, we are proposing changes to the ICD-10 MS-DRGs Version 
42 CC Exclusion List based on the diagnosis code updates as discussed 
in section II.C.13. of this FY 2025 IPPS/LTCH PPS proposed rule. 
Therefore, we have developed Table 6G.1.--Proposed Secondary Diagnosis 
Order Additions to the CC Exclusions List--FY 2025; Table 6G.2.--
Proposed Principal Diagnosis Order Additions to the CC Exclusions 
List--FY 2025; Table 6H.1.--Proposed Secondary Diagnosis Order 
Deletions to the CC Exclusions List--FY 2025; and Table 6H.2.--Proposed 
Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2025. 
For Table 6G.1, each secondary diagnosis code proposed for addition to 
the CC Exclusion List is shown with an asterisk and the principal 
diagnoses proposed to exclude the secondary diagnosis code are provided 
in the indented column immediately following it. For Table 6G.2, each 
of the principal diagnosis codes for which there is a CC exclusion is 
shown with an asterisk and the conditions proposed for addition to the 
CC Exclusion List that will not count as a CC are provided in an 
indented column immediately following the affected principal diagnosis. 
For Table 6H.1, each secondary diagnosis code proposed for deletion 
from the CC Exclusion List is shown with an asterisk followed by the 
principal diagnosis codes that currently exclude it. For Table 6H.2, 
each of the principal diagnosis codes is shown with an asterisk and the 
proposed deletions to the CC Exclusions List are provided in an 
indented column immediately following the affected principal

[[Page 36006]]

diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. associated with this 
proposed rule are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
13. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2025, 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 proposed rule. 
These tables are not published in the Addendum to this proposed rule, 
but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
described in section VI. of the Addendum to this proposed rule. As 
discussed in section II.C.15. of the preamble of this proposed rule, 
the code titles are adopted as part of the ICD-10 (previously ICD-9-CM) 
Coordination and Maintenance Committee meeting process. Therefore, 
although we publish the code titles in the IPPS proposed and final 
rules, they are not subject to comment in the proposed or final rules.
    We are proposing the MDC and MS-DRG assignments for the new 
diagnosis codes and procedure codes as set forth in Table 6A.--New 
Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, the 
proposed severity level designations for the new diagnosis codes are 
set forth in Table 6A. and the proposed O.R. status for the new 
procedure codes are set forth in Table 6B. Consistent with our 
established process, we examined the MS-DRG assignment and the 
attributes (severity level and O.R. status) of the predecessor 
diagnosis or procedure code, as applicable, to inform our proposed 
assignments and designations. Specifically, we review the predecessor 
code and MS-DRG assignment most closely associated with the new 
diagnosis or procedure code, and in the absence of claims data, we 
consider other factors that may be relevant to the MS-DRG assignment, 
including the severity of illness, treatment difficulty, complexity of 
service and the resources utilized in the diagnosis and/or treatment of 
the condition. We note that this process does not automatically result 
in the new diagnosis or procedure code being proposed for assignment to 
the same MS-DRG or to have the same designation as the predecessor 
code.
    We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
the following tables associated with this proposed rule:
     Table 6A.--New Diagnosis Codes--FY 2025;
     Table 6B.--New Procedure Codes--FY 2025;
     Table 6C.--Invalid Diagnosis Codes--FY 2025;
     Table 6D.--Invalid Procedure Codes--FY 2025;
     Table 6E.--Revised Diagnosis Code Titles--FY 2025;
     Table 6F.--Revised Procedure Code Titles--FY 2025;
     Table 6G.1.--Proposed Secondary Diagnosis Order Additions 
to the CC Exclusions List--FY 2025;
     Table 6G.2.--Proposed Principal Diagnosis Order Additions 
to the CC Exclusions List--FY 2025;
     Table 6H.1.--Proposed Secondary Diagnosis Order Deletions 
to the CC Exclusions List--FY 2025;
     Table 6H.2.--Proposed Principal Diagnosis Order Deletions 
to the CC Exclusions List--FY 2025;
     Table 6I.1.--Proposed Additions to the MCC List--FY 2025;
     Table 6J.1.--Proposed Additions to the CC List--FY 2025; 
and
     Table 6J.2.--Proposed Deletions to the CC List--FY 2025.
14. Proposed Changes to the Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
    Consequently, in many cases, the surgical hierarchy has an impact 
on more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this proposed rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of

[[Page 36007]]

reassigning cases on the basis of the hierarchy change, the average 
costs are likely to shift such that the higher-ordered surgical class 
has lower average costs than the class ordered below it.
    Based on the changes that we are proposing to make for FY 2025, as 
discussed in section II.C. of the preamble of this proposed rule, we 
are proposing to modify the existing surgical hierarchy for FY 2025 as 
follows.
    As discussed in section II.C.4.a. of the preamble of this proposed 
rule, we are proposing to revise the surgical hierarchy for the MDC 05 
(Diseases and Disorders of the Circulatory System) MS-DRGs as follows: 
In the MDC 05 MS-DRGs, we are proposing to sequence proposed new MS-DRG 
317 (Concomitant Left Atrial Appendage Closure and Cardiac Ablation) 
above MS-DRG 275 (Cardiac Defibrillator Implant with Cardiac 
Catheterization and 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). 
As discussed in section II.C.4.b. of the preamble of this proposed 
rule, we are proposing to revise the title for MS-DRG 276 from 
``Cardiac Defibrillator Implant with MCC'' to ``Cardiac Defibrillator 
Implant with MCC or Carotid Sinus Neurostimulator''.
    As discussed in section II.C.6.b. of the preamble of this proposed 
rule, we are proposing to delete MS-DRGs 453, 454, and 455 (Combined 
Anterior and Posterior Spinal Fusion with MCC, with CC, and without CC/
MCC, respectively). Based on the changes we are proposing to make for 
those MS-DRGs in MDC 08 (Diseases and Disorders of the Musculoskeletal 
System and Connective Tissue), we are proposing to revise the surgical 
hierarchy for MDC 08 as follows: In MDC 08, we are proposing to 
sequence proposed new MS-DRGs 426, 427, and 428 (Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC, 
with CC, and without CC/MCC, respectively) above proposed new MS-DRG 
402 (Single Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical). We are proposing to sequence proposed new MS-DRGs 429 and 
430 (Combined Anterior and Posterior Cervical Spinal Fusion with MCC 
and without MCC, respectively) above 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 below proposed new MS-DRG 402. We are proposing to sequence 
proposed new MS-DRGs 447 and 448 (Multiple Level Spinal Fusion Except 
Cervical with MCC and without MCC, respectively) above proposed revised 
MS-DRGs 459 and 460 (Single Level Spinal Fusion Except Cervical with 
and without MCC, respectively) and below MS-DRGs 456, 457, and 458.
    Lastly, as discussed in section II.C.9. of the preamble of this 
proposed rule, we are proposing to revise the surgical hierarchy for 
the MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms) MS-DRGs as follows: For the MDC 17 MS-DRGs, 
we are proposing to sequence proposed new MS-DRG 850 (Acute Leukemia 
with Other Procedures) above MS-DRGs 823, 824 and 825 (Lymphoma and 
Non-Acute Leukemia with Other Procedures with MCC, with CC, and without 
CC/MCC, respectively) and below MS-DRGs 820, 821, and 822 (Lymphoma and 
Leukemia with Major O.R. 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 42 is 
illustrated in the following tables.
[GRAPHIC] [TIFF OMITTED] TP02MY24.066


[[Page 36008]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.067

[GRAPHIC] [TIFF OMITTED] TP02MY24.068

15. 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://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-9-cm-diagnosis-procedure-codes-abbreviated-and-full-code-titles.
    The official list of ICD-10-CM and ICD-10-PCS codes can be found on 
the CMS website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the previously mentioned 
process by health- related organizations. In this regard, the Committee 
holds public meetings for discussion of educational issues and

[[Page 36009]]

proposed coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed during the 
public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2025 at a public meeting held on September 12-13, 
2023 and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 15, 2023.
    The Committee held its Spring 2024 meeting on March 19-20, 2024. 
The deadline for submitting comments on these code proposals is April 
19, 2024. 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 
2024 would be included in the October 1, 2024 update to the ICD-10-CM 
diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier 
sections of the preamble of this proposed rule, there are new, revised, 
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
that are captured in Table 6A.--New Diagnosis Codes, Table 6B.--New 
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--Invalid 
Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, and Table 
6F.--Revised Procedure Code Titles for this proposed rule, which are 
available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
    The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore, 
although we make the code titles available for the IPPS proposed rule, 
they are not subject to comment in the proposed rule. Because of the 
length of these tables, they are not published in the Addendum to the 
proposed rule. Rather, they are available on the CMS website as 
discussed in section VI. of the Addendum to the proposed rule.
    Recordings for the virtual meeting discussions of the procedure 
codes at the Committee's September 12-13, 2023 meeting and the March 
19-20, 2024 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 12-13, 2023 meeting and March 19-20, 2024 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].
    CMS implemented 41 new procedure codes including the insertion of a 
palladium-103 collagen implant into the brain, the excision or 
resection of intestinal body parts using a laparoscopic hand-assisted 
approach, the transfer of omentum for pedicled omentoplasty procedures, 
and the administration of talquetamab into the ICD-10-PCS 
classification effective with discharges on and after April 1, 2024. 
The procedure codes are as follows:
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    The 41 procedure codes are also reflected in Table 6B- New 
Procedure Codes, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. We are soliciting public comments on the most 
appropriate MDC, MS-DRG, and operating room status assignments for 
these codes for FY 2025, as well as any other options for the GROUPER 
logic.
    We note that Change Request (CR) 13458, Transmittal 12384, titled 
``April 2024 Update to the Medicare Severity--Diagnosis Related Group 
(MS-DRG) Grouper and Medicare Code Editor (MCE) Version 41.1'' was 
issued on November 30, 2023 (available on the CMS website at: https://www.cms.gov/regulations-and-guidance/guidance/transmittals/2023-transmittals/r12384cp) regarding the release of an updated version of 
the ICD-10 MS-DRG GROUPER and Medicare Code Editor software, Version 
41.1, effective with discharges on and after April 1, 2024, reflecting 
the new procedure codes. The updated software, along with the updated 
ICD-10 MS-DRG Version 41.1 Definitions Manual and the Definitions of 
Medicare Code Edits Version 41.1 manual is available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.

[[Page 36013]]

    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 the Medicare Modernization Act (Pub. L. 108-173) 
included a requirement for updating diagnosis and procedure codes twice 
a year instead of a single update on October 1 of each year. This 
requirement was included as part of the amendments to the Act relating 
to recognition of new technology under the IPPS. Section 503(a) of 
Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a 
clause (vii) which states that the Secretary shall provide for the 
addition of new diagnosis and procedure codes on April 1 of each year, 
but the addition of such codes shall not require the Secretary to 
adjust the payment (or diagnosis-related group classification) until 
the fiscal year that begins after such date. This requirement improves 
the recognition of new technologies under the IPPS by providing 
information on these new technologies at an earlier date. Data will be 
available 6 months earlier than would be possible with updates 
occurring only once a year on October 1.
    In the FY 2005 IPPS final rule, we implemented section 
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 
108-173, by developing a mechanism for approving, in time for the April 
update, diagnosis and procedure code revisions needed to describe new 
technologies and medical services for purposes of the new technology 
add-on payment process. We also established the following process for 
making these determinations. Topics considered during the Fall ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee meeting 
were considered for an April 1 update if a strong and convincing case 
was made by the requestor during the Committee's public meeting. The 
request needed to identify the reason why a new code was needed in 
April for purposes of the new technology process. Meeting participants 
and those reviewing the Committee meeting materials were provided the 
opportunity to comment on the expedited request. We refer the reader to 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further 
discussion of the implementation of this prior April 1 update for 
purposes of the new technology add-on payment process.
    However, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 
FR 44950 through 44956), we adopted an April 1 implementation date, in 
addition to the annual October 1 update, beginning with April 1, 2022. 
We noted that the intent of this April 1 implementation date is to 
allow flexibility in the ICD-10 code update process. With this new 
April 1 update, CMS now uses the same process for consideration of all 
requests for an April 1 implementation date, including for purposes of 
the new technology add-on payment process (that is, the prior process 
for consideration of an April 1 implementation date only if a strong 
and convincing case was made by the requestor during the meeting no 
longer applies). We are continuing to use several aspects of our 
existing established process to implement new codes through the April 1 
code update, which includes presenting proposals for April 1 
consideration at the September ICD-10 Coordination and Maintenance 
Committee meeting, requesting public comments, reviewing the public 
comments, finalizing codes, and announcing the new codes with their 
assignments consistent with the new GROUPER release information. We 
note that under our established process, requestors indicate whether 
they are submitting their code request for consideration for an April 1 
implementation date or an October 1 implementation date. The ICD-10 
Coordination and Maintenance Committee makes efforts to accommodate the 
requested implementation date for each request submitted. However, the 
Committee determines which requests are to be presented for 
consideration for an April 1 implementation date or an October 1 
implementation date. As discussed earlier in this section of the 
preamble of this proposed rule, there were code proposals presented for 
an April 1, 2024 implementation at the September 12-13, 2023 Committee 
meetings. Following the receipt of public comments, the code proposals 
were approved and finalized, therefore, there were new codes 
implemented April 1, 2024.
    Consistent with the process we outlined for the April 1 
implementation date, we announced the new codes in November 2023 and 
provided the updated code files in December 2023 and ICD-10-CM Official 
Guidelines for Coding and Reporting in January 2024. In the February 
05, 2024 Federal Register (89 FR 7710), notice for the March 19-20, 
2024 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, 2024 we made available the updated Version 41.1 ICD-10 MS-
DRG GROUPER software and related materials on the CMS web page at: 
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/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-billing/icd-10-codes/updates-revisions-icd-9-cm-procedure-codes-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-billing/icd-10-codes. CMS also sends electronic files containing all ICD-10-CM and 
ICD-10-PCS coding changes to its Medicare contractors for use in 
updating their systems and providing education to providers. 
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can be found on the CDC website at https://www.cdc.gov/nchs/icd/Comprehensive-Listing-of-ICD-10-CM-Files.htm.
    Additionally, information on new, revised, and deleted ICD-10-CM 
diagnosis and ICD-10-PCS procedure codes is provided to the AHA for 
publication in the Coding Clinic for ICD-10. The AHA also distributes 
coding update information to publishers and software vendors.
    For FY 2024, there are currently 74,044 diagnosis codes and 78,638 
procedure codes. As displayed in Table 6A.--New Diagnosis Codes and in 
Table 6B.--New Procedure Codes associated with this proposed rule (and 
available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps), there are 252 new 
diagnosis codes that have been finalized for FY 2025 at the time of the 
development of this proposed rule and 41 new procedure codes that were 
effective with discharges on and after April 1, 2024. The code titles 
are adopted as part of the ICD-10 Coordination and Maintenance 
Committee process. Thus, although we publish the code titles in the 
IPPS proposed and final rules, they are not subject to comment in the 
proposed or final rules. We will continue to provide the October 
updates in this manner in the IPPS proposed and final rules.

[[Page 36014]]

16. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Proposed Changes for FY 2025
    As discussed in section II.C.5. of the preamble of this proposed 
rule, for FY 2025, we are proposing to revise the title of MS-DRG 276 
from ``Cardiac Defibrillator Implant with MCC'' to ``Cardiac 
Defibrillator Implant with MCC or Carotid Sinus Neurostimulator''.
    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-DRG 276 is 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. Therefore, we are 
proposing that if the applicable proposed MS-DRG changes are finalized, 
we would make conforming changes to the title of MS-DRG 276 as 
reflected in the table that follows. We are also proposing to continue 
to include the existing MS-DRGs currently subject to the policy as 
displayed in the following table.
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    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be included in the 
FY 2025 IPPS/LTCH PPS final rule and also will be issued to providers 
in the form of a Change Request (CR).

D. Recalibration of the FY 2025 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 2025, we propose to use two data sources: 
claims data and cost report data. The claims data source is the MedPAR 
file, which includes fully coded diagnostic and procedure data for all 
Medicare inpatient hospital bills. The FY 2023 MedPAR data used in this 
proposed rule include discharges occurring on October 1, 2022, through 
September 30, 2023, based on bills received by CMS through December 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 2023 MedPAR file used in calculating the relative weights 
includes data for approximately 6,887,902 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 2023 update of 
the FY 2023 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
proposed relative weights for FY 2025 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. In addition, the data exclude Rural Emergency 
Hospitals (REHs), including hospitals that subsequently became REHs 
after the period from which the data were taken. We note that the 
proposed FY 2025 relative weights are based on the ICD-10-CM diagnosis 
codes and ICD-10-PCS procedure codes from the FY 2023 MedPAR claims 
data, grouped through the ICD-10 version of

[[Page 36017]]

the proposed FY 2025 GROUPER (Version 42).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the Healthcare 
Cost Report Information System (HCRIS). In general, we use the HCRIS 
dataset that is 3 years prior to the IPPS fiscal year. Specifically, 
for this proposed rule, we used the December 2023 update of the FY 2022 
HCRIS for calculating the FY 2025 cost-based relative weights. 
Consistent with our historical practice, for this FY 2025 proposed 
rule, we are providing the version of the HCRIS from which we 
calculated these 19 CCRs on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. Click on 
the link on the left side of the screen titled ``FY 2025 IPPS Proposed 
Rule Home Page'' or ``Acute Inpatient Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
    We calculated the proposed FY 2025 relative weights based on 19 
CCRs. The methodology we are proposing to use to calculate the FY 2025 
MS-DRG cost-based relative weights based on claims data in the FY 2023 
MedPAR file and data from the FY 2022 Medicare cost reports is as 
follows:
     To the extent possible, all the claims were regrouped 
using the proposed FY 2025 MS-DRG classifications discussed in sections 
II.B. and II.C. of the preamble of this proposed rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2023 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis.
    Because these acquisition costs are paid separately from the 
prospective payment rate, it is necessary to subtract the acquisition 
charges from the total charges on each transplant bill that showed 
acquisition charges before computing the average cost for each MS-DRG 
and before eliminating statistical outliers.
    Section 108 of the Further Consolidated Appropriations Act, 2020 
provides that, for cost reporting periods beginning on or after October 
1, 2020, costs related to hematopoietic stem cell acquisition for the 
purpose of an allogeneic hematopoietic stem cell transplant shall be 
paid on a reasonable cost basis. We refer the reader to the FY 2021 
IPPS/LTCH PPS final rule for further discussion of the reasonable cost 
basis payment for cost reporting periods beginning on or after October 
1, 2020 (85 FR 58835 through 58842). For FY 2022 and subsequent years, 
we subtract the hematopoietic stem cell acquisition charges from the 
total charges on each transplant bill that showed hematopoietic stem 
cell acquisition charges before computing the average cost for each MS-
DRG and before eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and equipment charges, therapy 
services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 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 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 Present on Admission (POA) 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

[[Page 36018]]

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 
that 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 2024, and consistent with how we have treated hospitals 
that participated in the BPCI Initiative, for FY 2025, 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 2024 IPPS/LTCH 
PPS final rule, we are also proposing to include all applicable data 
from subsection (d) hospitals participating in the Comprehensive Care 
for Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations.
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the proposed national average CCRs 
developed from the FY 2022 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in a supplemental data file, Cost Center HCRIS Lines 
Supplemental Data File, posted via the internet on the CMS website for 
this proposed rule and available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental 
data file shows the lines on the cost report and the corresponding 
revenue codes that we used to create the proposed 19 national cost 
center CCRs. If we receive comments about the groupings in this 
supplemental data file, we may consider these comments as we finalize 
our policy.
    Consistent with historical practice, we account for rare situations 
of non-monotonicity in a base MS-DRG and its severity levels, where the 
mean cost in the higher severity level is less than the mean cost in 
the lower severity level, in determining the relative weights for the 
different severity levels. If there are initially non-monotonic 
relative weights in the same base DRG and its severity levels, then we 
combine the cases that group to the specific non-monotonic MS-DRGs for 
purposes of relative weight calculations. For example, if there are two 
non-monotonic MS-DRGs, combining the cases across those two MS-DRGs 
results in the same relative weight for both MS-DRGs. The relative 
weight calculated using the combined cases for those severity levels is 
monotonic, effectively removing any non-monotonicity with the base DRG 
and its severity levels. For this FY 2025 proposed rule, this 
calculation was applied to address non-monotonicity for cases that 
grouped to the following: MS-DRG 016 and MS-DRG 017, MS-DRG 095 and MS-
DRG 096, MS-DRG 504 and MS-DRG 505, MS-DRG 797 and MS-DRG 798. In the 
supplemental file titled AOR/BOR File, we include statistics for the 
affected MS-DRGs both separately and with cases combined.
    We are inviting public comments on our proposals related to 
recalibration of the proposed FY 2025 relative weights and the changes 
in relative weights from FY 2024.
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 CAR T-cell therapies. We also finalized our proposal to 
modify our existing relative weight methodology to ensure that the 
relative weight for MS-DRG 018 appropriately reflects the relative 
resources required for providing CAR T-cell therapy outside of a 
clinical trial, while still accounting for the clinical trial cases in 
the overall average cost for all MS-DRGs (85 FR 58599 through 58600). 
Specifically, we stated that clinical trial claims that group to new 
MS-DRG 018 would not be included when calculating the average cost for 
MS-DRG 018 that is used to calculate the relative weight for this MS-
DRG, so that the relative weight reflects the costs of the CAR T-cell 
therapy drug. We stated that we identified clinical trial claims as 
claims that contain ICD-10-CM diagnosis code Z00.6 or contain 
standardized drug charges of less than $373,000, which was the average 
sales price of KYMRIAH and YESCARTA, the two CAR T-cell biological 
products licensed to treat relapsed/refractory large B-cell lymphoma as 
of the time of the development of the FY 2021 final rule. In addition, 
we stated that (a) when the CAR T-cell therapy product is purchased in 
the usual manner, but the case involves a clinical trial of a different 
product, the claim will be included when calculating the average cost 
for new MS-DRG 018 to the extent such cases can be identified in the 
historical data, and (b) when there is expanded access use of 
immunotherapy, these cases will not be included when calculating the 
average cost for new MS-DRG 018 to the extent such cases can be 
identified in the historical data.
    We also finalized our proposal to calculate an adjustment to 
account for

[[Page 36019]]

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 \15\ 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 MAC of expanded access use of CAR T-cell therapy. In this 
case, the MAC would add payer-only condition code ``ZB'' so that Pricer 
will apply the payment adjustment in calculating payment for the case. 
In cases when the CAR T-cell therapy product is purchased in the usual 
manner, but the case involves a clinical trial of a different product, 
the provider may enter a Billing Note NTE02 ``Diff Prod Clin Trial'' on 
the electronic claim 837I or a remark ``Diff Prod Clin Trial'' on a 
paper claim. In this case, the MAC would add payer-only condition code 
``ZC'' so that the Pricer will not apply the payment adjustment in 
calculating payment for the case.
---------------------------------------------------------------------------

    \15\ https://www.cms.gov/files/document/r10571cp.pdf.
---------------------------------------------------------------------------

    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. We also finalized use of this same 
proxy for the FY 2023 IPPS/LTCH PPS final rule (87 FR 48894).
    Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we 
issued guidance \16\ 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.
---------------------------------------------------------------------------

    \16\ https://www.cms.gov/files/document/r11727cp.pdf.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS final rule, we explained that the 
MedPAR claims data now includes a field that identifies whether or not 
the claim includes expanded access use of immunotherapy. We stated that 
for the FY 2022 MedPAR claims data, this field identifies whether or 
not the claim includes condition code ZB, and for the FY 2023 MedPAR 
data and subsequent years, this field will identify whether or not the 
claim includes condition code 90. We further noted 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.
    Accordingly, and as discussed further in the FY 2024 IPPS/LTCH PPS 
final rule, we finalized two modifications to our methodology for 
identifying clinical trial claims and expanded access use claims in MS-
DRG 018 (88 FR 58791). First, we finalized to exclude claims with the 
presence of condition code ``90'' (or, for FY 2024 ratesetting, which 
was 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, we finalized 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 finalized that in 
calculating the relative weight for MS-DRG 018 for FY 2024, only those 
claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis 
code Z00.6 and do not include payer-only code ``ZC'' or (2) contain 
condition code ``ZB'' (or, for subsequent fiscal years, condition code 
``90'') would be excluded from the calculation of the average cost for 
MS-DRG 018. Consistent with this, we also finalized modifications to 
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. We refer readers to the FY 2024 IPPS/
LTCH PPS final rule for further discussion of these modifications (88 
FR 58791).
    In this FY 2025 IPPS/LTCH PPS proposed rule, we are proposing to 
continue to use our methodology as modified in the FY 2024 IPPS/LTCH 
PPS final rule for identifying clinical trial claims and expanded 
access use claims in MS-DRG 018. First, we exclude claims with the 
presence of condition code ``90'' 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, we no 
longer use the proxy of standardized drug charges of less than $373,000 
to identify clinical trial claims and expanded access use cases when 
calculating the average cost for MS-DRG 018. Accordingly, we are 
proposing that in calculating the relative weight for MS-DRG 018 for FY 
2025, 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 ``90'' would be excluded from the 
calculation of the average cost for MS-DRG 018.
    We are also proposing to continue to use the methodology as 
modified in the FY 2024 IPPS/LTCH PPS final rule to calculate 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:

[[Page 36020]]

     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''.
     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.
    Under our proposal to continue to apply this methodology, based on 
the December 2023 update of the FY 2023 MedPAR file used for this 
proposed rule, we estimated that the average costs of cases assigned to 
MS-DRG 018 that are identified as clinical trial cases ($116,831) were 
34 percent of the average costs of the cases assigned to MS-DRG 018 
that are identified as non-clinical trial cases ($342,684). 
Accordingly, as we did for FY 2024, we are proposing to adjust the 
transfer-adjusted case count for MS-DRG 018 by applying the proposed 
adjustor of 0.34 to the applicable clinical trial and expanded access 
use immunotherapy cases, and to use this adjusted case count for MS-DRG 
018 in calculating the national average cost per case, which is used in 
the calculation of the relative weights. Therefore, in calculating the 
national average cost per case for purposes of this proposed rule, each 
case identified as an applicable clinical trial or expanded access use 
immunotherapy case was adjusted by 0.34. As we did for FY 2024, we are 
applying this same adjustor for the applicable cases that group to MS-
DRG 018 for purposes of budget neutrality and outlier simulations. We 
are also proposing to update the value of the adjustor based on more 
recent data for the final rule.
d. Cap for Relative Weight Reductions
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 
10-percent cap on the reduction in an MS-DRG's relative weight in a 
given fiscal year, beginning in FY 2023. We also finalized a budget 
neutrality adjustment to the standardized amount for all hospitals to 
ensure that application of the permanent 10-percent cap does not result 
in an increase or decrease of estimated aggregate payments. We refer 
the reader to the FY 2023 IPPS/LTCH PPS final rule for further 
discussion of this policy. In the Addendum to this IPPS/LTCH PPS 
proposed rule, we present the proposed budget neutrality adjustment for 
reclassification and recalibration of the FY 2025 MS-DRG relative 
weights with application of this cap. We are also making available on 
the CMS website a supplemental file demonstrating the application of 
the permanent 10 percent cap for FY 2025. For a further discussion of 
the proposed budget neutrality adjustment for FY 2025, we refer readers 
to the Addendum of this proposed rule.
3. Development of Proposed National Average Cost-To-Charge Ratios 
(CCRs)
    We developed the proposed national average CCRs as follows:
    Using the FY 2022 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. Then we created CCRs for each provider for each cost 
center (see the supplemental data file for line items used in the 
calculations) and removed any CCRs that were greater than 10 or less 
than 0.01. We normalized the departmental CCRs by dividing the CCR for 
each department by the total CCR for the hospital for the purpose of 
trimming the data. Then we took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the proposed relative weight. 
The proposed FY 2025 cost-based relative weights were then normalized 
by an adjustment factor of 1.92287 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 2024 relative weight, we set the 
proposed FY 2025 relative weight equal to 90 percent of the FY 2024 
relative weight. The proposed relative weights for FY 2025 as set forth 
in Table 5 associated with this proposed rule and available on the CMS 
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS reflect the application of this cap.
    The proposed 19 national average CCRs for FY 2025 are as follows:

[[Page 36021]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.074

    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We are proposing to use that same case 
threshold in recalibrating the proposed MS-DRG relative weights for FY 
2025. Using data from the FY 2023 MedPAR file, there were 8 MS-DRGs 
that contain fewer than 10 cases. For FY 2025, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we are proposing to compute relative 
weights for the low-volume MS-DRGs by adjusting their final FY 2024 
relative weights by the percentage change in the average weight of the 
cases in other MS-DRGs from FY 2024 to FY 2025. The crosswalk table is 
as follows.

[[Page 36022]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.075

E. Add-On Payments for New Services and Technologies for FY 2025

1. Background
    Effective for discharges beginning on or after October 1, 2001, 
section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish 
(after notice and opportunity for public comment) a mechanism to 
recognize the costs of new medical services and technologies (sometimes 
collectively referred to in this section as ``new technologies'') under 
the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical 
service or technology will be considered new if it meets criteria 
established by the Secretary after notice and opportunity for public 
comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new 
medical service or technology may be considered for new technology add-
on payment if, based on the estimated costs incurred with respect to 
discharges involving such service or technology, the DRG prospective 
payment rate otherwise applicable to such discharges under this 
subsection is inadequate. The regulations at 42 CFR 412.87 implement 
these provisions and Sec.  412.87(b) specifies three criteria for a new 
medical service or technology to receive the additional payment: (1) 
The medical service or technology must be new; (2) the medical service 
or technology must be costly such that the DRG rate otherwise 
applicable to discharges involving the medical service or technology is 
determined to be inadequate; and (3) the service or technology must 
demonstrate a substantial clinical improvement over existing services 
or technologies. In addition, certain transformative new devices and 
antimicrobial products may qualify under an alternative inpatient new 
technology add-on payment pathway, as set forth in the regulations at 
Sec.  412.87(c) and (d).
    We note that section 1886(d)(5)(K)(i) of the Act requires that the 
Secretary establish a mechanism to recognize the costs of new medical 
services and technologies under the payment system established under 
that subsection, which establishes the system for paying for the 
operating costs of inpatient hospital services. The system of payment 
for capital costs is established under section 1886(g) of the Act. 
Therefore, as discussed in prior rulemaking (72 FR 47307 through 
47308), we do not include capital costs in the add-on payments for a 
new medical service or technology or make new technology add-on 
payments under the IPPS for capital-related costs.
    In this rule, we highlight some of the major statutory and 
regulatory provisions relevant to the new technology add-on payment 
criteria, as well as other information. For further discussion on the 
new technology add-on payment criteria, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51572 through 51574), the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58736 through 58742).
a. New Technology Add-on Payment Criteria
(1) Newness Criterion
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will no longer be considered 
``new'' for purposes of new medical service or technology add-on 
payments after CMS has recalibrated the MS-DRGs, based on available 
data, to reflect the cost of the technology. We note that we do not 
consider a service or technology to be new if it is substantially 
similar to one or more existing technologies. That is, even if a 
medical product receives a new FDA approval or clearance, it may not 
necessarily be considered ``new'' for purposes of new technology add-on 
payments if it is ``substantially similar''

[[Page 36023]]

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 2025 
are presented in a data file that is available, along with the other 
data files associated with the FY 2024 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 2026 are 
presented in a data file that is available on the CMS website, along 
with the other data files associated with the FY 2025 proposed rule, by 
clicking on the FY 2025 IPPS Proposed 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;
    The new medical service or technology offers a treatment option for 
a patient population unresponsive to, or ineligible for, currently 
available treatments;
    The new medical service or technology offers the ability to 
diagnose a medical condition in a patient population where that medical 
condition is currently undetectable, or offers the ability to diagnose 
a medical condition earlier in a patient population than allowed by 
currently available methods, and there must also be evidence that use 
of the new medical service or technology to make a diagnosis affects 
the management of the patient. The new medical service or technology 
offers a treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments;
    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

[[Page 36024]]

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 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. To receive approval for the new technology add-on payment 
under that alternative pathway, the technology must have the applicable 
FDA designation and meet all other requirements in the regulations in 
Sec.  412.87(c) and (d), as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, a medical device designated under 
FDA's Breakthrough Devices Program that has received FDA marketing 
authorization will be considered not substantially similar to an 
existing technology for purposes of the new technology add-on payment 
under the IPPS, and will not need to meet the requirement under Sec.  
412.87(b)(1) that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. Under this alternative pathway, a 
medical device that has received FDA marketing authorization (that is, 
has been approved or cleared by, or had a De Novo classification 
request granted by, FDA) as a Breakthrough Device, for the indication 
covered by the Breakthrough Device designation, will need to meet the 
requirements of Sec.  412.87(c). We note that in the FY 2021 IPPS/LTCH 
PPS final rule (85 FR 58734 through 58736), we clarified our policy 
that a new medical device under this alternative pathway must receive 
marketing authorization for the indication covered by the Breakthrough 
Devices Program designation. We refer the reader to the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58734 through 58736) for further discussion 
regarding this clarification.
(2) Alternative Pathway for Certain Antimicrobial Products
    For applications received for new technology add-on payments for 
certain antimicrobial products, beginning with FY 2021, if a technology 
is designated by FDA as a QIDP and received FDA marketing 
authorization, and, beginning with FY 2022, if a drug is approved under 
FDA's LPAD pathway and used for the indication approved under the LPAD 
pathway, it will be considered not substantially similar to an existing 
technology for purposes of new technology add-on payments and will not 
need to meet the requirement that it represent an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. Under this 
alternative pathway for QIDPs and LPADs, a medical product that has 
received FDA marketing authorization and is designated by FDA as a QIDP 
or approved under the LPAD pathway will need to meet the requirements 
of Sec.  412.87(d). We refer the reader to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58737 through 58739) for further discussion on this policy.
    We note that, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 
through 58739), we clarified that a new medical product seeking 
approval for the new technology add-on payment under the alternative 
pathway for QIDPs must receive FDA marketing authorization for the 
indication covered by the QIDP designation. We also finalized our 
policy to expand our alternative new technology add-on payment pathway 
for certain antimicrobial products to include products approved under 
the LPAD pathway and used for the indication approved under the LPAD 
pathway.
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

[[Page 36025]]

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 to be considered for the 
following fiscal year.
    Section 503(d)(2) of the MMA (Pub. L. 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 the MMA, 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 (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 July 1 prior to the particular fiscal year 
for which the applicant applied for new technology add-on payments, 
provided that the technology otherwise meets the applicable add-on 
payment criteria. Under this policy, cases involving eligible 
antimicrobial products would begin receiving the new technology add-on 
payment sooner, effective for discharges the quarter after the date of 
FDA marketing authorization, provided that the technology receives FDA 
marketing authorization before July 1 of the fiscal year for which the 
applicant applied for new technology add-on payments.
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 
58958), we finalized that, beginning with the new technology add-on 
payment applications for FY 2025, for technologies that are not already 
FDA market authorized for the indication that is the subject of the new 
technology add-on payment application, applicants must have a complete 
and active FDA market authorization request at the time of new 
technology add-on payment application submission and must provide 
documentation of FDA acceptance or filing to CMS at the time of 
application submission, consistent with the type of FDA marketing 
authorization application the applicant

[[Page 36026]]

has submitted to FDA. See Sec.  412.87(e) and further discussion in the 
FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958). We also 
finalized 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), as reflected at Sec. Sec.  412.87(f)(2) and 
(f)(3), as amended and redesignated in the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 58948 through 58958, 88 FR 59331).
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 regarding Medicare's coverage, coding, 
and payment processes, and how they can navigate these processes, 
whether for new technology add-on payments or otherwise, should review 
the updated resource guide available at: https://www.cms.gov/medicare/coding-billing/guide-medical-technology-companies-other-interested-parties. Parties that would like to further discuss questions or 
concerns with CMS should 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 2026 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 2026, 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 December 31, 2026.
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 the MMA, provides for a mechanism for public input before 
publication of a notice of proposed rulemaking regarding whether a 
medical service or technology represents a substantial clinical 
improvement. The process for evaluating new medical service and 
technology applications requires the Secretary to do all of the 
following:
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of Medicare beneficiaries.
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending.
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement.
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2025 prior 
to publication of the FY 2025 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on September 28, 2023 (88 FR 66850) 
and held a virtual town hall meeting on

[[Page 36027]]

December 13, 2023. 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 
2025 new medical service and technology add-on payment applications 
before the publication of the FY 2025 IPPS/LTCH IPPS proposed rule.
    Approximately 130 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 18, 2023 deadline, in our evaluation of the 
new technology add-on payment applications for FY 2025 in the 
development of the FY 2025 IPPS/LTCH PPS proposed rule. In response to 
the published notice and the December 13, 2023 New Technology Town Hall 
meeting, we received written comments regarding the applications for FY 
2025 new technology add-on payments. As explained earlier and in the 
Federal Register notice announcing the New Technology Town Hall meeting 
(88 FR 66850 through 66853), 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 2025. Therefore, we are not summarizing any written comments in this 
proposed rule that are unrelated to the substantial clinical 
improvement criterion. In section II.E.5. of the preamble of the 
proposed rule, we are summarizing comments regarding individual 
applications, or, if applicable, indicating that there were no comments 
received in response to the New Technology Town Hall meeting notice or 
New Technology Town Hall meeting, at the end of each discussion of the 
individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), 
the ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
website at: https://www.cms.gov/Medicare/Coding/ICD10, including 
guidelines for ICD-10-PCS Section ``X'' codes. We encourage providers 
to view the material provided on ICD-10-PCS Section ``X'' codes.
4. Proposed FY 2025 Status of Technologies Receiving New Technology 
Add-On Payments for FY 2024
    In this section of the proposed rule, we discuss the proposed FY 
2025 status of 31 technologies approved for FY 2024 new technology add-
on payments, as set forth in the tables that follow. Specifically, we 
present our proposals to continue the new technology add-on payments 
for FY 2025 for those technologies that were approved for the new 
technology add-on payment for FY 2024, and which would still be 
considered ``new'' for purposes of new technology add-on payments for 
FY 2025. We also present our proposals to discontinue new technology 
add-on payments for FY 2025 for those technologies that were approved 
for the new technology add-on payment for FY 2024, and which would no 
longer be considered ``new'' for purposes of new technology add-on 
payments for FY 2025.
    Additionally, we note that we conditionally approved 
DefenCathTM (taurolidine/heparin) for FY 2024 new technology 
add-on payments under the alternative pathway for certain antimicrobial 
products (88 FR 58942 through 58944), subject to the technology 
receiving FDA marketing authorization by July 1, 2024. 
DefenCathTM (taurolidine/heparin) received FDA marketing 
authorization on November 15, 2023, and was eligible to receive new 
technology add-on payments in FY 2024 beginning with discharges on or 
after January 1, 2024. As DefenCathTM (taurolidine/heparin) 
received FDA marketing authorization prior to July 1, 2024, and was 
approved for new technology add-on payments in FY 2024, we are 
proposing to continue making new technology add-on payments for 
taurolidine/heparin for FY 2025.
    Our policy is that a medical service or technology may continue to 
be considered ``new'' for purposes of new technology add-on payments 
within 2 or 3 years after the point at which data begin to become 
available reflecting the inpatient hospital code assigned to the new 
service or technology. Our practice has been to begin and end new 
technology add-on payments on the basis of a fiscal year, and we have 
generally followed a guideline that uses a 6-month window before and 
after the start of the fiscal year to determine whether to extend the 
new technology add-on payment for an additional fiscal year. In 
general, we extend new technology add-on payments for an additional 
year only if the 3-year anniversary date of the product's entry onto 
the U.S. market occurs in the latter half of the fiscal year (70 FR 
47362).
    Table II.E.--01 lists the technologies for which we are proposing 
to continue making new technology add-on payments for FY 2025 because 
they are still considered ``new'' for purposes of new technology add-on 
payments. This table also presents the newness start date, new 
technology add-on payment start date, 3-year anniversary date of the 
product's entry onto the U.S. market, relevant final rule citations 
from prior fiscal years, proposed maximum add-on payment amount, and 
coding assignments for each technology. We refer readers to the cited 
final rules in the following table for a complete discussion of the new 
technology add-on payment application, coding, and payment amount for 
these technologies, including the applicable indications and discussion 
of the newness start date.
    We are inviting public comments on our proposals to continue new 
technology add-on payments for FY 2025 for the technologies listed in 
the following table.
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[[Page 36028]]

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[[Page 36029]]


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    Table II.E.-02 lists the technologies for which we are proposing to 
discontinue making new technology add-on payments for FY 2025 because 
they are no longer ``new'' for purposes of new technology add-on 
payments. This table

[[Page 36030]]

also presents the newness start date, new technology add-on payment 
start date, the 3-year anniversary date of the product's entry onto the 
U.S. market, and relevant final rule citations from prior fiscal years. 
We refer readers to the cited final rules in the following table for a 
complete discussion of 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.
    We are inviting public comments on our proposals to discontinue new 
technology add-on payments for FY 2025 for the technologies listed in 
Table II.E.-02.
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[[Page 36031]]

6. Proposed FY 2025 Applications for New Technology Add-On Payments 
(Traditional Pathway)
    As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, 
we finalized our policy to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this proposed rule. 
However, while we are continuing to provide discussion of the concerns 
or issues we identified with respect to applications submitted under 
the traditional pathway, we are providing more succinct information as 
part of the summaries in the proposed and final rules regarding the 
applicant's assertions as to how the medical service or technology 
meets the newness, cost, and substantial clinical improvement criteria. 
We refer readers to https://mearis.cms.gov/public/publications/ntap for 
the publicly posted FY 2025 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), including 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 2025 
new technology add-on payment applications.
    We received 16 applications for new technology add-on payments for 
FY 2025 under the new technology add-on payment traditional pathway. As 
discussed previously, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958). Of the 16 applications 
received under the traditional pathway, one applicant was not eligible 
for consideration for new technology add-on payment because it did not 
meet these requirements, and three applicants withdrew their 
application prior to the issuance of this proposed rule. In accordance 
with the regulations under Sec.  412.87(f), applicants for FY 2025 new 
technology add-on payments must have received FDA approval or clearance 
by May 1 of the year prior to the beginning of the fiscal year for 
which the application is being considered. We are addressing the 
remaining 12 applications. We note that the manufacturer for 
Casgevy\TM\ (exagamglogene autotemcel) submitted a single application, 
but for two separate indications, each of which is discussed separately 
in this section.
a. CASGEVYTM (exagamglogene autotemcel) First Indication: 
Sickle Cell Disease (SCD)
    Vertex Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for Casgevy\TM\ for FY 2025 for use in 
sickle cell disease. According to the applicant, Casgevy\TM\ is a one-
time, clustered regularly interspaced short palindromic repeats 
(CRISPR)/CRISPR-associated protein 9 (Cas9) modified autologous cluster 
of differentiation (CD)34+ hematopoietic stem & progenitor cell (HSPC) 
cellular therapy approved for the treatment of sickle cell disease 
(SCD) in patients 12 years and older with recurrent vaso-occlusive 
crises (VOC). Per the applicant, using a CRISPR/Cas9 gene editing 
technique, the patient's CD34+ HSPCs are edited ex vivo via Cas9, a 
nuclease enzyme that uses a highly specific guide ribonucleic acid 
(gRNA), at the critical transcription factor binding site GATA1 in the 
erythroid specific enhancer region of the B-cell lymphoma/leukemia 11A 
(BCL11A) gene. According to the applicant, as a result of the editing, 
GATA1 binding is irreversibly disrupted, and BCL11A expression is 
reduced, resulting in an increased production of fetal hemoglobin 
(HbF), and recapitulating a naturally occurring, clinically benign 
condition called hereditary persistence of fetal hemoglobin (HPFH) that 
reduces or eliminates SCD symptoms. As stated by the applicant, 
Casgevy\TM\ infusion induces increased HbF production in SCD patients 
to >=20 percent, which is known to be associated with fewer SCD 
complications via addressing the underlying cause of SCD by preventing 
RBC sickling. We note that the applicant is also seeking new technology 
add-on payments for Casgevy\TM\ for FY 2025 for use in treating 
transfusion-dependent beta thalassemia (TDT), as discussed separately 
later in this section.
    Please refer to the online application posting for Casgevy\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310171VPTU, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
Casgevy\TM\ was granted Biologics License Application (BLA) approval 
from FDA on December 8, 2023, for treatment of SCD in patients 12 years 
of age or older with recurrent VOCs. According to the applicant, 
Casgevy\TM\ became commercially available immediately after FDA 
approval. Casgevy\TM\ is available in 20 mL vials containing 4 to 13 x 
10\6\ CD34+ cells/mL frozen in 1.5 to 20 mL of solution. The minimum 
dose is 3 x 10\6\ CD34+ cells per kg of body weight, which may be 
contained within multiple vials.
    Effective April 1, 2023, the following ICD-10-PCS codes may be used 
to uniquely describe procedures involving the use of Casgevy\TM\: 
XW133J8 (Transfusion of exagamglogene autotemcel into peripheral vein, 
percutaneous approach, new technology group 8) and XW143J8 (Transfusion 
of exagamglogene autotemcel into central vein, percutaneous approach, 
new technology group 8). The applicant provided a list of ICD-10-CM 
diagnosis codes that may be used to identify this indication for 
Casgevy\TM\. Please refer to the online application posting for the 
complete list of ICD-10-CM codes provided by the applicant. We believe 
the relevant ICD-10-CM codes to identify the indication of SCD would 
be: D57.1 (Sickle-cell disease without crisis), D57.20 (Sickle-cell/Hb-
C disease without crisis), D57.40 (Sickle-cell thalassemia without 
crisis), D57.42 (Sickle-cell thalassemia beta zero without crisis), 
D57.44 (Sickle-cell thalassemia beta plus without crisis), or D57.80 
(Other sickle-cell disorders without crisis). We are inviting public 
comments on the use of these ICD-10-CM diagnosis codes to identify the 
indication of SCD for purposes of the new technology add-on payment, if 
approved.
    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 Casgevy\TM\ is not substantially similar to other 
currently available technologies, because Casgevy\TM\ is the

[[Page 36032]]

first approved therapy to use CRISPR gene editing technology and no 
other approved technology uses the same or a similar mechanism of 
action; 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 Casgevy\TM\ for the applicant's complete statements in 
support of its assertion that Casgevy\TM\ is not substantially similar 
to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP02MY24.079

    We note that CasgevyTM may have the same or similar 
mechanism of action to LyfgeniaTM, for which we also 
received an application for new technology add-on payments for FY 2025. 
Casgevy\TM\ and Lyfgenia\TM\ are both gene therapies using modified 
autologous CD34+ hematopoietic stem and progenitor cell (HSPC) 
therapies administered via stem cell transplantation for the treatment 
of SCD. LyfgeniaTM was approved by FDA for this indication 
on December 8, 2023. We note that both technologies are autologous, ex-
vivo modified hematopoietic stem-cell biological products. For these 
technologies, patients are required to undergo CD34+ HSPC mobilization 
followed by apheresis to extract CD34+ HSPCs for manufacturing and then 
myeloablative conditioning using busulfan to deplete the patient's bone 
marrow in preparation for the technologies' modified stem cells to 
engraft to the bone marrow. Once engraftment occurs for both 
technologies, the patient's cells start to produce a different form of 
hemoglobin in order to reduce the sickling hemoglobin. Further, both 
technologies appear to map to the same MS-DRGs, MS-DRG 016 (Autologous 
Bone Marrow Transplant with CC/MCC) and 017 (Autologous Bone Marrow 
Transplant without CC/MCC), and to treat the same or similar disease 
(sickle cell disease) in the same or similar patient population 
(patients 12 years of age and older who have a history of vaso-
occlusive events). Accordingly, as it appears that CasgevyTM 
and LyfgeniaTM may use the same or similar mechanism of 
action to achieve a therapeutic outcome (that is, to reduce the amount 
of sickling hemoglobin to reduce and prevent VOEs associated with SCD), 
would be assigned to the same MS-DRG, and treat the same or similar 
patient population and disease, we believe that these technologies may 
be substantially similar to each other such that they should be 
considered as a single application for purposes of new technology add-
on payments. We note that if we determine that this technology is 
substantially similar to LyfgeniaTM, we believe the newness 
period would begin on December 8, 2023, the date both 
CasgevyTM and LyfgeniaTM received FDA approval 
for SCD. We are interested in information on how these two technologies 
may differ from each other with respect to the substantial similarity 
criteria and newness criterion, to inform our analysis of whether 
CasgevyTM and LyfgeniaTM are substantially 
similar to each other and therefore should be considered as a single 
application for purposes of new technology add-on payments.
    We are inviting public comments on whether CasgevyTM 
meets the newness criterion, including whether CasgevyTM is 
substantially similar to LyfgeniaTM and whether these 
technologies should be evaluated as a single technology for purposes of 
new technology add-on payments.
    With respect to the cost criterion, the applicant searched the FY 
2022 MedPAR and provided multiple analyses to demonstrate that 
Casgevy\TM\ meets the cost criterion. The applicant included two 
cohorts in the analyses to identify potential cases representing 
patients who may be eligible for Casgevy\TM\: the first cohort included 
all cases in MS-DRG 014 (Allogeneic Bone Marrow Transplant) to account 
for the low volume of SCD or transfusion-dependent beta thalassemia 
(TDT) cases,

[[Page 36033]]

and the second cohort included cases in MS-DRG 014 (Allogeneic Bone 
Marrow Transplant) with any ICD-10-CM diagnosis code of SCD or TDT. The 
applicant explained that the cost analyses for SCD and TDT were 
combined because the volume of cases with a sickle cell disease or beta 
thalassemia diagnosis code was very low, and because it believed both 
indications would be approved in time for new technology add-on 
payment. In addition, the applicant noted that when searching for cases 
in DRG 014 with SCD or beta thalassemia diagnosis codes, there were no 
beta thalassemia cases. The applicant noted that cases included in the 
analysis may not be a completely accurate representation of cases that 
will be eligible for Casgevy\TM\ but that the analyses were provided in 
recognition of the low volume of cases.
    The applicant performed two analyses for each cohort: one with all 
prior drug charges maintained, representing a scenario in which there 
is no change to patient drug regimen with the use of Casgevy\TM\; and 
the other with all prior drug charges removed, representing a scenario 
in which no ancillary drugs are used in the treatment of Casgevy\TM\ 
patients. Per the applicant, this was done because some patients 
receiving CasgevyTM could receive fewer ancillary drugs 
during the inpatient stay, but it was difficult to know with certainty 
whether this would be the case or to identify the exact differences in 
drug regimens between patients receiving CasgevyTM and those 
receiving allogeneic bone marrow transplants. The applicant noted the 
analyses with drug charges removed were likely an over-estimation of 
the ancillary drug charges that would be removed in cases involving the 
use of Casgevy\TM\, but these were provided as sensitivity analyses.
    According to the applicant, eligible cases for CasgevyTM 
will be mapped to either Pre-MDC MS-DRG 016 (Autologous Bone Marrow 
Transplant with CC/MCC) or Pre-MDC MS-DRG 017 (Autologous Bone Marrow 
Transplant without CC/MCC), depending on whether complications or 
comorbidities (CCs) or major complications or comorbidities (MCCs) are 
present. For each analysis, the applicant used the FY 2025 new 
technology add-on payment threshold for Pre-MDC MS-DRG 016 for all 
identified cases, because it was typically higher than the threshold 
for Pre-MDC MS-DRG 017. Each analysis followed the order of operations 
described in the table later in this section.
    For the first cohort, the applicant included all cases associated 
with MS-DRG 014 (Allogeneic Bone Marrow Transplant). The applicant used 
the inclusion/exclusion criteria described in the following table and 
identified 996 claims mapping to MS-DRG 014. With all prior drug 
charges maintained (Scenario 1), the applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$12,325,062, which exceeded the average case-weighted threshold amount 
of $182,491. With all prior drug charges removed (Scenario 2), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,181,526, which exceeded the average 
case-weighted threshold amount of $182,491.
    For the second cohort, the applicant searched for cases within MS-
DRG 014 (Allogeneic Bone Marrow Transplant) with any ICD-10-CM 
diagnosis codes representing SCD or TDT. The applicant used the 
inclusion/exclusion criteria described in the following table and 
identified 11 claims mapping to MS-DRG 014 (Allogeneic Bone Marrow 
Transplant). With all prior drug charges maintained (Scenario 3), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,125,212, which exceeded the average 
case-weighted threshold amount of $182,491. With all prior drug charges 
removed (Scenario 4), the applicant calculated a final inflated average 
case-weighted standardized charge per case of $12,086,551, which 
exceeded the average case-weighted threshold amount of $182,491.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant maintained that Casgevy\TM\ meets the cost 
criterion.

[[Page 36034]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.080

    We are inviting public comments on whether Casgevy\TM\ meets the 
cost criterion.
---------------------------------------------------------------------------

    \17\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachments included in the online posting for the 
technology.
---------------------------------------------------------------------------

    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Casgevy\TM\ represents a substantial clinical 
improvement over existing technologies because it is anticipated to 
expand patient eligibility for potentially curative SCD therapies, have 
improved clinical outcomes relative to available therapies, and avoid 
certain serious risks or side effects associated with existing 
potentially curative treatment options for SCD. The applicant provided 
one study to support these claims, as well as eight background articles 
about clinical outcomes and safety risks of other SCD treatments.\18\ 
The following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for Casgevy\TM\ for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \18\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 36035]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.081

    After review of the information provided by the applicant, we have 
the following concerns regarding whether Casgevy\TM\ meets the 
substantial clinical improvement criterion. We note that the only 
assessment of the technology submitted was from conference 
presentations that provide data on the ongoing CLIMB-121 trial, a phase 
1/2/3 single-arm trial assessing a single dose of CasgevyTM 
in patients 12 to 35 years old with SCD and a history of 2 or more 
severe VOCs per year over 2 years. The most recent data presented at 
ASH in December 2023,\19\ which appears to supersede the earlier 
results from Locatelli et al. (2023),\20\ indicates 44 participants 
received CasgevyTM for SCD, of which only 30 participants 
were evaluable for the primary and key secondary endpoints because they 
were followed for at least 16 months (up to 45.5 months) post 
CasgevyTM infusion. The applicant stated 96.7% of patients 
achieved the primary efficacy endpoint (free of severe VOCs for at 
least 12 consecutive months) and 100% of patients achieved the key 
secondary efficacy endpoint (free from in-patient hospitalization for 
severe VOCs for at least 12 consecutive months). Additionally, the 
applicant noted a safety profile consistent with myeloablative busulfan 
and autologous HSCT and that there were no malignancies nor serious 
adverse events related to CasgevyTM. However, we note that 
the provided evidence did not include peer-reviewed literature that 
directly assessed the use of Casgevy\TM\ for SCD. We also question 
whether the small study population may limit the generalizability of 
these study outcomes to a Medicare population. In addition, from the 
evidence submitted, we were also unable to determine where the study 
took place (that is, within the U.S. or in locations outside the U.S), 
which may also limit generalizability to the Medicare population. 
Additionally, we question if the short follow-up duration is sufficient 
to assess improvements in long-term clinical outcomes.
---------------------------------------------------------------------------

    \19\ Frangoul H, et al. Presented at the 65th Annual American 
Society of Hematology. 11 Dec 2023.
    \20\ Locatelli F, et al. Presented at the 28th Annual European 
Hematology Association; 11 June 2023.
---------------------------------------------------------------------------

    Furthermore, the applicant asserted that CasgevyTM 
significantly improves clinical outcomes relative to services or 
technologies previously available. Regarding the claim that 
CasgevyTM is the first gene therapy specifically approved 
for the treatment of SCD in patients 12 years and older with

[[Page 36036]]

recurrent VOCs, the applicant claims it was first to submit and have 
their BLA accepted for a genetic therapy for treatment of SCD. The 
applicant states the PDUFA date for CasgevyTM of December 8, 
2023, and the PDUFA data for another gene therapy for SCD is December 
20, 2023, and that Casgevy and another product were both approved on 
December 8, 2023, as the first gene therapies for SCD. However, while 
this claim was made in support of the assertion that 
CasgevyTM significantly improves clinical outcomes, we note 
that the information submitted regarding PDUFA dates and FDA approvals 
does not appear to provide data regarding a significantly improved 
clinical outcome under Sec.  412.87(b)(1)(ii)(C).
    With regards to the claim that CasgevyTM is expected to 
avoid certain serious risks or side effects associated with approved 
viral-based gene therapies for SCD, the applicant cites the potential 
risk of insertional oncogenesis after treatment with 
LyfgeniaTM per the package insert for this other gene 
therapy for SCD. We note that because clinical trials are conducted 
under widely varying conditions, we question whether adverse reaction 
rates observed in the clinical trials of one drug can be directly 
compared to rates in the clinical trials of another drug. We also 
question if the follow-up duration for patients treated with 
CasgevyTM is sufficient to assess improvement in the rate of 
malignancy.
    With regard to the claim that CasgevyTM is expected to 
avoid certain serious risks or side effects associated with existing 
potentially curative treatment options for SCD, the applicant states 
that there are significant risks associated with allo-HSCT, including 
graft failure (up to 9 percent frequency), acute and chronic graft-
versus-host disease (GVHD) (with chronic GVHD up to 18 percent 
frequency), severe infection, hematologic malignancy, bleeding events, 
and death. In contrast, the applicant claims CasgevyTM does 
not require an allogeneic donor as each patient is their own donor and 
therefore does not have risks of acute and chronic GVHD or immunologic 
risks of secondary graft failure/rejection, in addition to not 
requiring post-transplant immunosuppressive therapies. However, we 
would be interested in additional evidence regarding the frequency and 
clinical relevance of side effects such as severe infection, 
hematologic malignancy, bleeding events, and death for both therapies.
    We are inviting public comments on whether Casgevy\TM\ meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
Casgevy\TM\.
b. Casgevy\TM\ (exagamglogene autotemcel) Second Indication: 
Transfusion-Dependent [beta]-Thalassemia (TDT)
    Vertex Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for Casgevy\TM\ for FY 2025 for TDT. 
According to the applicant, Casgevy\TM\ is a one-time, clustered 
regularly interspaced short palindromic repeats (CRISPR)/CRISPR-
associated protein 9 (Cas9) modified autologous cluster of 
differentiation (CD)34+ hematopoietic stem & progenitor cell (HSPC) 
cellular therapy indicated for the treatment of transfusion-dependent 
[beta]-thalassemia (TDT) in patients 12 years of age or older. Per the 
applicant, using a CRISPR/Cas9 gene editing technique, the patient's 
CD34+ HSPCs are edited ex vivo via Cas9, a nuclease enzyme that uses a 
highly specific guide ribonucleic acid (gRNA), at the critical 
transcription factor binding site GATA1 in the erythroid specific 
enhancer region of the B-cell lymphoma/leukemia 11A (BCL11A) gene. 
According to the applicant, as a result of the editing, GATA1 binding 
is irreversibly disrupted, and BCL11A expression is reduced, resulting 
in an increased production of fetal hemoglobin (HbF). As stated by the 
applicant, this increase in HbF recapitulates a naturally occurring, 
clinically benign condition called hereditary persistence of fetal 
hemoglobin (HPFH). The applicant states that as a result, Casgevy\TM\ 
infusion induces increased HbF production in TDT patients so that 
circulating red blood cells (RBC) exhibit nearly 100 percent HbF, 
eliminating the need for RBC transfusions. As previously discussed 
earlier in this section, the applicant is also seeking new technology 
add-on payments for Casgevy\TM\ for FY 2025 for use in treating SCD.
    Please refer to the online application posting for Casgevy\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310171VPTU, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
Casgevy\TM\ was granted Biologics License Application (BLA) approval 
from FDA on January 16, 2024, for the treatment of TDT in patients 12 
years of age and older. The applicant also explained that the minimum 
dosage of Casgevy\TM\ is 3x10\6\ CD34 + cells per kg of patient's 
weight. A single dose of Casgevy\TM\ is supplied in one or more vials, 
with each vial containing 4 to 13x10\6\ cells/mL suspended in 1.5 to 20 
mL of cryo-preservative medium.
    Effective April 1, 2023, the following ICD-10-PCS codes may be used 
to uniquely describe procedures involving the use of Casgevy\TM\: 
XW133J8 (Transfusion of exagamglogene autotemcel into peripheral vein, 
percutaneous approach, new technology group 8) and XW143J8 (Transfusion 
of exagamglogene autotemcel into central vein, percutaneous approach, 
new technology group 8). The applicant provided a list of diagnosis 
codes that may be used to currently identify this indication for 
Casgevy\TM\ 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 believe the relevant ICD-10-CM codes to 
identify the indication of TDT would be: D56.1 (Beta thalassemia), 
D56.2 (Delta-beta thalassemia), or D56.5 (Hemoglobin E-beta 
thalassemia). We are inviting public comments on the use of these ICD-
10-CM diagnosis codes to identify the indication of TDT for purposes of 
the new technology add-on payment, if approved.
    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 Casgevy\TM\ is not substantially similar to other 
currently available technologies because Casgevy\TM\ is the first 
approved therapy to use CRISPR gene editing as its mechanism of action, 
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 Casgevy\TM\ for the applicant's complete statements in 
support of its assertion that Casgevy\TM\ is not substantially similar 
to other currently available technologies.

[[Page 36037]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.082

    We question whether Casgevy\TM\ may be the same or similar to other 
gene therapies used to treat TDT, specifically Zynteglo\TM\, which was 
approved for treatment of TDT on August 17, 2022. Casgevy\TM\ and 
Zynteglo\TM\ are both gene therapies using modified autologous CD34+ 
HSPC therapies administered via stem cell transplantation for the 
treatment of TDT. Both technologies are autologous, ex-vivo modified 
hematopoietic stem-cell biological products. For these technologies, 
patients are required to undergo CD34+ HSPC mobilization followed by 
apheresis to extract CD34+ HSPCs for manufacturing and then 
myeloablative conditioning using busulfan to deplete the patient's bone 
marrow in preparation for the technologies' modified stem cells to 
engraft to the bone marrow. Once engraftment occurs, the patient's 
cells start to produce a different form of hemoglobin to increase total 
hemoglobin and reduce the need for RBC transfusions. Therefore, it 
appears as if Casgevy\TM\ and Zynteglo\TM\ would use a similar 
mechanism of action to achieve a therapeutic outcome for the treatment 
of TDT. Further, both technologies appear to map to the same MS-DRGs, 
MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC) and 017 
(Autologous Bone Marrow Transplant without CC/MCC), and to treat the 
same or similar disease (beta thalassemia) in the same or similar 
patient population (patients who require regular blood transfusions). 
Accordingly, we believe that these technologies may be substantially 
similar to each other. We note that if Casgevy\TM\ is substantially 
similar to Zynteglo\TM\ for the treatment of TDT, we believe the 
newness period for this technology would begin on August 17, 2022, with 
the Biologics License Application (BLA) approval date for Zynteglo\TM\.
    We are inviting public comments on whether Casgevy\TM\ is 
substantially similar to existing technologies and whether Casgevy\TM\ 
meets the newness criterion.
    With respect to the cost criterion, the applicant searched the FY 
2022 MedPAR and provided multiple analyses to demonstrate that 
Casgevy\TM\ meets the cost criterion. The applicant included two 
cohorts in the analyses to identify potential cases representing 
patients who may be eligible for Casgevy\TM\: the first cohort included 
all cases in MS-DRG 014 (Allogeneic Bone Marrow Transplant) to account 
for the low volume of sickle cell disease (SCD) or TDT cases, and the 
second cohort included cases in MS-DRG 014 (Allogeneic Bone Marrow 
Transplant) with any ICD-10-CM diagnosis code of SCD or TDT. The 
applicant explained that the cost analyses for SCD and TDT were 
combined because the volume of cases with a sickle cell disease or beta 
thalassemia diagnosis code was very small, and because it believed both 
indications would be approved in time

[[Page 36038]]

for new technology add-on payment. In addition, the applicant noted 
that when searching for cases in DRG 014 with SCD or beta thalassemia 
diagnosis codes, there were no beta thalassemia cases. The applicant 
noted that cases included in the analysis may not be a completely 
accurate representation of cases that will be eligible for Casgevy\TM\ 
but that the analyses were provided in recognition of the low volume of 
cases.
    The applicant performed two analyses for each cohort: one with all 
prior drug charges maintained, representing a scenario in which there 
is no change to patient drug regimen with the use of Casgevy\TM\; and 
the other with all prior drug charges removed, representing a scenario 
in which no ancillary drugs are used in the treatment of Casgevy\TM\ 
patients. Per the applicant, this was done because some patients 
receiving CasgevyTM could receive fewer ancillary drugs 
during the inpatient stay, but it was difficult to know with certainty 
whether this would be the case or to identify the exact differences in 
drug regimens between patients receiving CasgevyTM and those 
receiving allogeneic bone marrow transplants. The applicant notes the 
analyses with drug charges removed were likely an over-estimation of 
the ancillary drug charges that would be removed in cases involving the 
use of Casgevy\TM\, but these were provided as sensitivity analyses.
    According to the applicant, eligible cases for CasgevyTM 
will be mapped to either Pre-MDC MS-DRG 016 (Autologous Bone Marrow 
Transplant with CC/MCC) or Pre-MDC MS-DRG 017 (Autologous Bone Marrow 
Transplant without CC/MCC), depending on whether complications or 
comorbidities (CCs) or major complications or comorbidities (MCCs) are 
present. For each analysis, the applicant used the FY 2025 new 
technology add-on payment threshold for Pre-MDC MS-DRG 016 for all 
identified cases, because it was typically higher than the threshold 
for Pre-MDC MS-DRG 017. Each analysis followed the order of operations 
described in the table later in this section.
    For the first cohort, the applicant included all cases associated 
with MS-DRG 014 (Allogeneic Bone Marrow Transplant). The applicant used 
the inclusion/exclusion criteria described in the following table and 
identified 996 claims mapping to MS-DRG 014. With all prior drug 
charges maintained (Scenario 1), the applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$12,325,062, which exceeded the average case-weighted threshold amount 
of $182,491. With all prior drug charges removed (Scenario 2), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,181,526, which exceeded the average 
case-weighted threshold amount of $182,491.
    For the second cohort, the applicant searched for cases within MS-
DRG 014 (Allogeneic Bone Marrow Transplant) with any ICD-10-CM 
diagnosis codes representing SCD or TDT. The applicant used the 
inclusion/exclusion criteria described in the following table and 
identified 11 claims mapping to MS-DRG 014 (Allogeneic Bone Marrow 
Transplant). With all prior drug charges maintained (Scenario 3), the 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $12,125,212, which exceeded the average 
case-weighted threshold amount of $182,491. With all prior drug charges 
removed (Scenario 4), the applicant calculated a final inflated average 
case-weighted standardized charge per case of $12,086,551, which 
exceeded the average case-weighted threshold amount of $182,491.
    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 Casgevy\TM\ meets the cost 
criterion.
---------------------------------------------------------------------------

    \21\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TP02MY24.083


[[Page 36039]]


    We are inviting public comments on whether Casgevy\TM\ meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Casgevy\TM\ represents a substantial clinical 
improvement over existing technologies because it is expected to avoid 
certain serious risks or side effects associated with the existing 
approved gene therapy for TDT, Zynteglo\TM\. The applicant provided one 
study to support these claims, as well as two package inserts.\22\ The 
following table summarizes the applicant's assertion regarding the 
substantial clinical improvement criterion. Please see the online 
posting for Casgevy\TM\ for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \22\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
[GRAPHIC] [TIFF OMITTED] TP02MY24.084

    After review of the information provided by the applicant, we have 
the following concerns regarding whether Casgevy\TM\ meets the 
substantial clinical improvement criterion. We note that the provided 
evidence did not include any peer-reviewed literature that directly 
assessed the use of Casgevy\TM\ for TDT. We note that the only 
assessment of the technology submitted was from a conference 
presentation \23\ that provides data on the CLIMB-111 trial, an ongoing 
phase 1/2/3 single-arm trial assessing a single dose of 
CasgevyTM in patients 12 to 35 years old with TDT. The data 
submitted by the applicant indicated 48 participants aged 12 to 35 
years received CasgevyTM for TDT, of which only 27 
participants were evaluable for the primary and key secondary endpoints 
because they were followed for at least 16 months (up to 43.7 months) 
after CasgevyTM infusion. Per the applicant's conference 
presentation, 88.9% of participants achieved both the primary efficacy 
endpoint (transfusion independence for 12 consecutive months while 
maintaining a weighted average hemoglobin of at least 9 g/dL) and the 
key secondary efficacy endpoint (transfusion independence for 6 
consecutive months while maintaining a weighted average hemoglobin of 
at least 9 g/dL). The applicant noted that two patients had serious 
adverse events related to CasgevyTM. Due to the small study 
population and the median age of participants in the study, we question 
if these study outcomes would be generalizable to a Medicare 
population. In addition, from the evidence submitted, we were also 
unable to determine where the study took place (that is, within the 
U.S. or in locations outside the U.S), which may also limit 
generalizability to the Medicare population. We also question if the 
short follow-up duration is sufficient to assess improvements in long-
term clinical outcomes.
---------------------------------------------------------------------------

    \23\ Locatelli F, et al. Presented at the 28th Annual European 
Hematology Association; 11 June 2023.
---------------------------------------------------------------------------

    Furthermore, with regard to the claim that CasgevyTM is 
expected to avoid certain serious risks or side effects associated with 
approved viral-based gene therapies for TDT, the applicant stated that 
Zynteglo\TM\ utilizes gene transfer to use a modified, inert lentivirus 
to add working exogenous copies of the [beta]-globin gene to increase 
functional hemoglobin A; due to this mechanism of action and the semi-
random nature of viral integration, the applicant stated that treatment 
with Zynteglo\TM\ carries the risk of lentiviral vector (LVV)-mediated 
insertional oncogenesis after treatment. The applicant explained that 
Casgevy\TM\ is an autologous ex-vivo modified hematopoietic stem-cell 
biological product which uses a non-viral mechanism of action (CRISPR/
Cas9 gene editing), and therefore, this technology does not carry a 
risk for insertional oncogenesis. The applicant also noted that gene 
editing approaches, including CRISPR/Cas9, have the potential to 
produce off-target edits, but in trials to date, off-target gene 
editing has not been observed in the edited CD34+ cells from healthy 
donors or patients. We note that we are unclear regarding the frequency 
and related clinical relevance of LVV-mediated oncogenesis. We also 
question if the follow-up duration for patients treated with 
CasgevyTM is sufficient to assess improvement in the rate of 
malignancy. We would be interested in more information on the overall 
safety profile comparison between Casgevy\TM\ and Zynteglo\TM\, as well 
as any comparisons of CasgevyTM to another potentially 
curative treatment, allogeneic hematopoietic stem cell transplant for 
patients with TDT.
    We are inviting public comments on whether Casgevy\TM\ meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
Casgevy\TM\.
c. DuraGraft[supreg] (Vascular Conduit Solution)
    Marizyme, Inc. submitted an application for new technology add-on 
payments for DuraGraft[supreg] for FY 2025. According to the applicant, 
DuraGraft[supreg] is an intraoperative vein-graft preservation solution 
used during the harvesting and grafting interval during coronary artery 
bypass graft surgery (CABG). The applicant stated that the use of 
DuraGraft[supreg] does not change clinical/surgical practice; it 
replaces solutions currently used for flushing and storage of the 
saphenous vein grafts (SVG) from harvesting through grafting, including 
tests for graft leakage. As noted in the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 26795), Somahlution, Inc., acquired by Marizyme in 
2020,\24\ submitted and

[[Page 36040]]

withdrew applications for new technology add-on payments for 
DuraGraft[supreg] for FY 2018 and FY 2019. The applicant also submitted 
an application for new technology add-on payments for FY 2020, as 
summarized in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19305 
through 19312), that it withdrew prior to the issuance of the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42180). We note that the applicant also 
submitted an application for new technology add-on payments for FY 
2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 
26795 through 26803), that it withdrew prior to the issuance of the FY 
2024 IPPS/LTCH PPS final rule (88 FR 58804).
---------------------------------------------------------------------------

    \24\ NASDAQ. Marizyme, Inc. Completes Acquisition of 
Somahlution, Inc. and Raises $7.0 Million in Private Placement 
[verbar] Nasdaq (accessed 1/23/2023).
---------------------------------------------------------------------------

    Please refer to the online application posting for 
DuraGraft[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP231012EE9NW, for additional detail describing the 
technology and intraoperative ischemic injury.
    With respect to the newness criterion, according to the applicant, 
DuraGraft[supreg] was granted De Novo classification from FDA on 
October 4, 2023, for adult patients undergoing Coronary Artery Bypass 
Grafting surgeries and is intended for flushing and storage of SVGs 
from harvesting through grafting for up to 4 hours. Per the applicant, 
DuraGraft[supreg] is not yet commercially available due to a delay 
related to finalizing the label prior to manufacturing.
    The applicant stated that effective October 1, 2017, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of DuraGraft[supreg]: XY0VX83 (Extracorporeal introduction of 
endothelial damage inhibitor to vein graft, new technology group 3). 
Please refer to the online application posting for the complete list of 
ICD-10-CM and PCS codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that DuraGraft[supreg] is not substantially similar to other 
currently available technologies because DuraGraft[supreg] is a first-
in-class product as a storage and flushing solution for vascular grafts 
used during CABG surgery and the components of DuraGraft[supreg] 
directly interfere with the mechanisms of oxidative damage, 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 
DuraGraft[supreg] for the applicant's complete statements in support of 
its assertion that DuraGraft[supreg] is not substantially similar to 
other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP02MY24.085

    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26796), we 
expressed concern that the mechanism of action of DuraGraft[supreg] may 
be the same or similar to other vein graft storage solutions. 
Similarly, we note that according to the applicant, DuraGraft[supreg] 
prevents intraoperative ischemic injury to the endothelial layer of 
free vascular grafts, reducing the risks for post-CABG vein graft 
disease and graft failure, which are clinical manifestations of graft 
ischemia reperfusion injury (IRI), and we question whether 
DuraGraft[supreg] might have a similar mechanism of action as existing 
treatments for preventing ischemic injury of vein grafts during CABG 
surgery and reducing vein graft disease or its complications following 
CABG surgery. We are inviting public comments on whether 
DuraGraft[supreg] is substantially similar to existing technologies and 
whether DuraGraft[supreg] meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for DuraGraft[supreg], the 
applicant searched the FY 2022 MedPAR file for cases reporting a 
combination of ICD-10-CM/PCS codes that represent patients who 
underwent CABG procedures. Please see the online posting for 
DuraGraft[supreg] for a complete list of MS-DRGs and ICD-10-CM and PCS 
codes provided by the applicant. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 33,511 cases 
mapping to 59 MS-DRGs, including MS-DRG 236 (Coronary Bypass Without 
Cardiac Catheterization Without MCC) representing 21.9 percent of the 
identified cases. The applicant followed the order of operations 
described in the following table and

[[Page 36041]]

calculated a final inflated average case-weighted standardized charge 
per case of $321,620, which exceeded the average case-weighted 
threshold amount of $235,829. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that 
DuraGraft[supreg] meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP02MY24.086

    We note the following concerns regarding the cost criterion. 
Although the applicant did not remove direct or indirect charges 
related to the prior technology, we note that the applicant indicated 
that the use of DuraGraft[supreg] replaces solutions currently used for 
flushing and storage of the SVGs harvested through grafting, including 
tests for graft leakage, in its discussion of the newness criterion. 
Therefore, we question whether the cost criterion analysis should 
remove charges for related or prior technologies, such as autologous 
heparinized blood (AHB), Plasmalyte/Normosol, Lactated Ringers, and 
heparinized saline (HS).
---------------------------------------------------------------------------

    \25\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    We are inviting public comments on whether DuraGraft[supreg] meets 
the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that DuraGraft[supreg] represents a substantial 
clinical improvement over existing technologies because there is no 
other product or technology that reduces the incidence of peri-
operative myocardial infarction. The applicant provided four studies to 
support this assertion, as well as 47 background articles about 
reducing major adverse cardiac events (MACE).\26\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
DuraGraft[supreg] for the applicant's complete statements regarding the 
substantial clinical improvement criterion and the supporting evidence 
provided.
---------------------------------------------------------------------------

    \26\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 36042]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.087

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether DuraGraft[supreg] meets the 
substantial clinical improvement criterion. As discussed in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 26800 through 26801), we expressed 
concern regarding the relatively small sample sizes of the Szalkiewicz 
et al. (2022) \27\ and Perrault et al. (2021) \28\ studies, as compared 
to the number of potentially eligible patients for this technology, and 
relatively short follow-up periods. We continue to question whether the 
sample was representative of the number of Medicare beneficiaries 
potentially eligible for DuraGraft[supreg]. We refer readers to the FY 
2024 IPPS/LTCH PPS proposed rule for further discussion of these 
concerns. For its FY 2025 application, the applicant also cited Lopez-
Menendez et al. (2021),\29\ which we note used a sample size of 180, 
and therefore we similarly question whether

[[Page 36043]]

the results of this study would be replicated with a larger patient 
sample.
---------------------------------------------------------------------------

    \27\ Szalkiewicz, P, Emmert, MY, and Heinisch, PP, et al (2022). 
Graft Preservation confers myocardial protection during coronary 
artery bypass grafting. Frontiers in Cardiovascular Medicine, July 
2022, pp 1-10. DOI 10.3389/fcvm.2022.922357.
    \28\ Perrault, LP, Carrier, M, and Voisine, P, et al (2021). 
Sequential multidetector computed tomography assessments after 
venous graft treatment solution in coronary artery bypass grafting. 
Journal of Thoracis and Cardiovascular Surgery. Jan. 2021, Vol. 161, 
Number 1, 96-106. https://doi.org/10.1016/j.jtcvs.2019.10.115.
    \29\ Lopez-Menendez J, Castro-Pinto M, and Fajardo E, Miguelena 
J, et al. Vein graft preservation with an endothelial damage 
inhibitor in isolated coronary artery bypass surgery: an 
observational propensity score-matched analysis. J Thorac Dis 
2023;15(10):5549-5558.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH proposed rule (88 FR 26800 through 26801), 
we also questioned whether the results from the Haime et al. (2018) 
\30\ study could be generalized to other patient groups, including 
nonveterans, women, or those from other racial or ethnic groups. We 
continue to question whether the demographic profiles in the Perrault, 
Szalkiewicz, and Haime studies that the applicant submitted were 
comparable with those of the U.S. Medicare patients who underwent CABG 
surgery. For its FY 2025 application, the applicant also cited the 
Lopez-Menendez et al. (2021) \31\ study, which was based on a European 
patient population that was predominantly male (82 percent to 90 
percent). However, as we noted in the FY 2024 IPPS/LTCH PPS proposed 
rule (88 FR 26800 through 26801), among the Medicare fee-for-service 
beneficiaries who underwent CABG surgery, male patients accounted for 
two-thirds (66 percent) of this population. Therefore, we continue to 
question whether the findings of these studies would be replicable 
among the Medicare population.
---------------------------------------------------------------------------

    \30\ Haime, M, McLean RR, and Kurgansky KE, et al (2018). 
Relationship between intra-operative vein graft treatment with 
DuraGraft[supreg] or saline and clinical outcomes after coronary 
artery bypass grafting, Expert Review of Cardiovascular Therapy, 
16:12, 963-970. DOI: 10.1080/14779072.2018.1532289.
    \31\ Ibid.
---------------------------------------------------------------------------

    We are inviting public comments on whether DuraGraft[supreg] meets 
the substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for DuraGraft[supreg].
    Comment: The applicant submitted a public comment in response to 
our question as to why two propensity match models were used in the 
propensity match comparison of the EU DuraGraft[supreg] Registry to the 
STS Registry that it presented during the New Technology Town Hall 
meeting. The applicant explained that the goal of propensity matching 
was to balance patient and technical factors predictive of mortality 
throughout the observation period and to correct for differences that 
may be encountered in the U.S. and Europe. The applicant stated that a 
primary propensity score model (PSM) with 35 variables (2,400 patients 
matched), and a secondary PSM with 25 variables (2,522 patients 
matched, sensitivity analysis) were used. The applicant noted that the 
propensity variables were chosen with a goal of comparing variables 
descriptive of (1) U.S. and Western European populations, (2) the 
general practice of cardiac surgery, and (3) standards of care for 
surgical technique. The applicant noted that an important set of 
variables that needed to be balanced were the components of the 
EuroScore II (ESII). ESII is comprised of 18 patient variables and, per 
the applicant, is considered to be the best predictor of peri-operative 
and early mortality. ESII variables relevant for shorter term mortality 
were supplemented with appropriate predictors for longer term 
mortality.32 33 34
---------------------------------------------------------------------------

    \32\ Aldea, G.S., Bakaeen, F.G., Pal, J., Fremes, S., Head, 
S.J., Sabik, J., Rosengart, T., Kappetein, A.P., Thourani, V.H., 
Firestone, S., Mitchell, J.D., & Society of Thoracic Surgeons 
(2016). The Society of Thoracic Surgeons Clinical Practice 
Guidelines on Arterial Conduits for Coronary Artery Bypass Grafting. 
The Annals of thoracic surgery, 101(2), 801-809. https://doi.org/10.1016/j.athoracsur.2015.09.100.
    \33\ Kolh, P., Kurlansky, P., Cremer, J., Lawton, J., Siepe, M., 
& Fremes, S. (2016). Transatlantic Editorial: A Comparison Between 
European and North American Guidelines on Myocardial 
Revascularization. The Annals of thoracic surgery, 101(6), 2031-
2044. https://doi.org/10.1016/j.athoracsur.2016.02.062.
    \34\ Shahian, D.M., O'Brien, S.M., Sheng, S., Grover, F.L., 
Mayer, J.E., Jacobs, J.P., Weiss, J.M., Delong, E.R., Peterson, 
E.D., Weintraub, W.S., Grau-Sepulveda, M.V., Klein, L.W., Shaw, 
R.E., Garratt, K.N., Moussa, I.D., Shewan, C.M., Dangas, G.D., & 
Edwards, F.H. (2012). Predictors of long-term survival after 
coronary artery bypass grafting surgery: results from the Society of 
Thoracic Surgeons Adult Cardiac Surgery Database (the ASCERT study). 
Circulation, 125(12), 1491-1500. https://doi.org/10.1161/CIRCULATIONAHA.111.066902.
---------------------------------------------------------------------------

    The applicant noted that the set of variables for the primary PSM 
included 35 characteristics that are most strongly associated with 
mortality across the time periods (including 1-year post-CABG) and were 
consistently observed to have the highest degree of impact in the 
studies. The applicant stated that these variables include 
demographics, cardiac and pre-op surgical risk factors, coronary 
anatomy, and surgical/procedural key characteristics (for example, 
grafting strategy and conduit selection) to serve as the primary 
analysis. The applicant indicated that all characteristics in the ESII 
are included in the risk factors, with the exception of endocarditis, 
surgery on the thoracic aorta, weight of the intervention, and poor 
mobility, as they are not relevant to the subset of patients being 
propensity matched, or in the case of poor mobility, not collected in 
both databases. The applicant stressed that this list was reviewed and 
edited with FDA during the pre-submission process. To further allow for 
the selection of a cohort matched for standard of care and surgical 
technique between the European and U.S. populations, additional 
relevant variables were added including pre-op cardiac risk, coronary 
anatomy, and surgical technique.
    The applicant further noted that the set of variables for the 
secondary PSM included 25 of the 35 variables from the primary PSM, 
excluding characteristics of pre-op cardiac risk factors, coronary 
anatomy, and aspects of surgical technique. The applicant asserted that 
the secondary PSM serves as a sensitivity analysis to estimate whether 
the standard of care for the treatment of patients with advanced 
coronary artery disease and surgical techniques differ for patients in 
the two cohorts which are otherwise balanced for surgical risk factors, 
and whether these differences could affect mortality outcomes.
    Response: We thank the applicant for its comments. We also note 
that the applicant has provided the baseline demographic 
characteristics and surgical risk factors of the two cohorts before and 
after propensity score matching, which appears to demonstrate that the 
two cohorts were more similar in those characteristics and factors as a 
result of propensity score matching. We will take this information into 
consideration when deciding whether to approve new technology add-on 
payments for DuraGraft[supreg].
d. ELREXFIOTM (elranatamab-bcmm)
    Pfizer, Inc. submitted an application for new technology add-on 
payments for ELREXFIOTM for FY 2025. According to the 
applicant, ELREXFIOTM is a B-cell maturation antigen (BCMA) 
directed cluster of differentiation (CD)3 T-cell engager indicated for 
the treatment of adult patients with relapsed or refractory multiple 
myeloma (RRMM) who have received at least four prior lines of therapy, 
including a proteasome inhibitor (PI), an immunomodulatory agent 
(IMiD), and an anti-CD38 monoclonal antibody (mAb). Per the applicant, 
ELREXFIOTM is a bispecific, humanized immunoglobulin 2-
alanine (IgG2[Delta]a) kappa antibody derived from two mAbs, 
administered as a fixed-dose, subcutaneous treatment. We note that the 
applicant submitted an application for new technology add-on payments 
for ELREXFIOTM for FY 2024 under the name elranatamab, as 
summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26803 
through 26809), but the technology did not meet the July 1, 2023 
deadline for FDA approval or clearance of the technology and,

[[Page 36044]]

therefore, was not eligible for consideration for new technology add-on 
payments for FY 2024 (88 FR 58804).
    Please refer to the online application posting for 
ELREXFIOTM available at https://mearis.cms.gov/public/publications/ntap/NTP2310176PV9B, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
ELREXFIOTM was granted Biologics License Application (BLA) 
approval from FDA on August 14, 2023, for the treatment of adult 
patients with RRMM who have received at least four prior lines of 
therapy, including a PI, an IMiD, and an anti-CD38 mAb. According to 
the applicant, ELREXFIOTM was commercially available 
immediately after FDA approval. Per the applicant, the recommended 
doses of ELREXFIO\TM\ subcutaneous injection are step-up doses of 12 mg 
on day 1 and 32 mg on day 4, followed by a first treatment dose of 76 
mg on day 8 and subsequent treatment doses as indicated in the label. 
The applicant noted that treatment doses may be administered in an 
inpatient or outpatient setting. Per the applicant, patients should be 
hospitalized for 48 hours after administration of the first step-up 
dose, and for 24 hours after administration of the second step-up dose. 
The applicant assumed that there would be a single inpatient stay, with 
one 44 mg vial used per dose, resulting in two doses (each a step-up 
dose) being administered.
    The applicant stated that effective October 1, 2023, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of ELREXFIOTM: XW013L9 (Introduction of elranatamab 
antineoplastic into subcutaneous tissue, percutaneous approach, new 
technology group 9). The applicant stated that C90.00 (Multiple myeloma 
not having achieved remission), C90.01 (Multiple myeloma in remission), 
C90.02 (Multiple myeloma in relapse), and Z51.12 (Encounter for 
antineoplastic immunotherapy) may be used to currently identify the 
indication for ELREXFIOTM 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 ELREXFIOTM is not substantially similar to 
other currently available technologies because it is the only therapy 
approved for the treatment of patients with RRMM who have received 4 
prior lines of therapy including a PI, IMiD, and mAb that uses a 
humanized IgG2a antibody for the mechanism of action. Per the 
applicant, it is also the only BCMA-directed bispecific antibody (bsAb) 
therapy with clinical study data in its prescribing information 
supporting use in patients who have received prior BCMA-directed 
therapy, 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 ELREXFIOTM for the applicant's 
complete statements in support of its assertion that 
ELREXFIOTM is not substantially similar to other currently 
available technologies.
BILLING CODE 4120-01-P

[[Page 36045]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.089


[[Page 36046]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.090

BILLING CODE 4120-01-C
    With regard to the newness criterion, similar to our discussion in 
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26804), we note that 
ELREXFIOTM may have a similar mechanism of action to that of 
TECVAYLI[supreg], for which we approved an application for new 
technology add-on payments for FY 2024 (88 FR 58891) for the treatment 
of adult patients with RRMM after four or more prior lines of therapy, 
including a PI, an IMiD, and an anti-CD38 mAb. As we previously noted, 
TECVAYLI[supreg]'s mechanism of action is described as a bsAb, with 
binding domains that simultaneously bind the BCMA target on tumor cells 
and the CD3 T-cell receptor (88 FR 58886). The applicant asserts that 
ELREXFIOTM has a unique CDR (the region of antibody that 
recognizes and binds to target epitopes) that is critical to the 
mechanism of action because it results in different targeted regions, 
impacting how the drug works to target the cancer cells. However, it is 
unclear how these differences result in a substantially different 
mechanism of action from TECVAYLI[supreg]. Because of the apparent 
similarity with the bsAb for ELREXFIOTM that uses binding 
domains that simultaneously bind the BCMA target on tumor cells and the 
CD3 T-cell receptor, we believe that the mechanism of action for 
ELREXFIOTM may be the same or similar to that of 
TECVAYLI[supreg]. The applicant also asserts that ELREXFIOTM 
is different from TECVAYLI[supreg] because the two are based on 
different immunoglobulin isotypes, and with the lower effector function 
of IgG2, ELREXFIOTM should only activate T-cells in the 
presence of BCMA and thus should only stimulate an immune response in 
the tumor. Based on our understanding, however, that this may relate to 
the risk of adverse event from ELREXFIOTM administration but 
is not critical to the way the drug treats the underlying disease, we 
question whether this would therefore relate to an assessment of 
substantial clinical improvement, rather than of substantial 
similarity.
    We also note that ELREXFIOTM and TECVAYLI[supreg] may 
treat the same or similar disease (RRMM) in the same or similar patient 
population (patients who have previously received a PI, IMiD, and an 
anti-CD38 mAb). The applicant claims ELREXFIOTM is different 
from TECVAYLI[supreg] because the prescribing information includes a 
new subpopulation, the patient population that had received prior BCMA-
directed therapy. However, we believe the lack of inclusion of this 
population in the prescribing information for TECVAYLI[supreg] does not 
necessarily exclude the use of TECVAYLI[supreg] in this patient 
population, nor does the FDA prescribing information for 
TECVAYLI[supreg] specifically exclude this patient population. As such, 
it is unclear whether ELREXFIOTM would in fact treat a 
patient population different from TECVAYLI[supreg]. Accordingly, as it 
appears that ELREXFIOTM and TECVAYLI[supreg] may use the 
same or similar mechanism of action to achieve a therapeutic outcome, 
would be assigned to the same MS-DRG, and treat the same or similar 
patient population and disease, we believe that these technologies may 
be substantially similar to each other. We note that if we determine 
that this technology is substantially similar to TECVAYLI[supreg], we 
believe the newness period for this technology would begin on November 
9, 2022, the date TECVAYLI[supreg] became commercially available.
    Furthermore, we believe another applicant for FY 2025 new 
technology add-on payments, TALVEYTM, may also be 
substantially similar to ELREXFIOTM. Per the application for 
TALVEYTM, TALVEYTM is a bispecific antibody 
approved for the treatment of adults with RRMM who have received at 
least four prior lines of therapy, including a PI, IMiD, and an anti-
CD38 monoclonal antibody. The applicant for TALVEYTM states 
TALVEYTM recruits CD3-expressing T cells to myeloma cells 
that express GPRC5D, resulting in activation of the T cell receptor 
pathway and lysis of GPRC5D-expressing MM cells. Per the applicant for 
TALVEYTM, TALVEYTM was available for sale 
immediately after its approval on August 9, 2023. We

[[Page 36047]]

believe TALVEYTM may be substantially similar to 
ELREXFIOTM because it is also a bispecific antibody that 
treats RRMM in patients who have previously received a PI, IMiD, and an 
anti-CD38 mAb. Additionally, we note that similar to 
ELREXFIOTM, the prescribing information for 
TALVEYTM includes the population with prior exposure to BCMA 
T-cell redirection therapy. Accordingly, as it appears that 
ELREXFIOTM and TALVEYTM would use the same or 
similar mechanism of action to achieve a therapeutic outcome, would be 
assigned to the same MS-DRG, and would treat the same or similar 
disease in the same or similar patient population, we believe that 
these technologies may also be substantially similar to each other such 
that they should be considered as a single application for purposes of 
new technology add-on payments. We note that if ELREXFIOTM 
is determined to only be substantially similar to TALVEYTM, 
and not TECVAYLI[supreg], we believe the newness period for 
ELREXFIOTM would begin on August 9, 2023, the date 
TALVEYTM received FDA approval.
    We are interested in receiving information on how these 
technologies may differ from each other with respect to the substantial 
similarity and newness criteria, to inform our analysis of whether 
ELREXFIOTM is substantially similar to TALVEYTM 
and/or TECVAYLI[supreg].
    We are inviting public comments on whether ELREXFIOTM is 
substantially similar to existing technologies and whether 
ELREXFIOTM meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for ELREXFIOTM, 
the applicant searched the FY 2022 MedPAR for cases reporting one of 
the following ICD-10-CM codes in any position: C90.00 (Multiple myeloma 
not having achieved remission), C90.01 (Multiple myeloma in remission), 
or C90.02 (Multiple myeloma in relapse). Using the inclusion/exclusion 
criteria described in the following table, the applicant identified 
4,689 claims mapping to five MS-DRGs: MS-DRGs 840, 841, and 842 
(Lymphoma and Non-Acute Leukemia with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 846 and 847 (Chemotherapy without Acute 
Leukemia as Secondary Diagnosis with MCC and with CC, respectively). 
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 $170,699, which exceeded the average 
case-weighted threshold amount of $77,190. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that 
ELREXFIOTM meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 36048]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.091

    We are inviting public comments on whether ELREXFIOTM 
meets the cost criterion.
    With regards to the substantial clinical improvement criterion, the 
applicant asserted that ELREXFIOTM represents a substantial 
clinical improvement over existing technologies because it is a new 
treatment option for late-line RRMM patients who are refractory to or 
otherwise ineligible for existing therapy. Per the applicant, it 
significantly improves outcomes compared to existing therapy (Cohort A 
objective response rate (ORR) of 57.7 percent with a complete response 
(CR) or better achieved in 25.8 percent and very good partial response 
(VGPR) in 25.8 percent; Cohort B ORR of 33.3 percent with duration of 
response (DOR) of 84.3 percent at 9 months), has a manageable safety 
profile, and shorter hospitalization than TECVAYLI[supreg] and 
TALVEYTM. The applicant provided nine studies assessing 
ELREXFIOTM to support these claims, as well as 12 background 
articles about RRMM and comparator technologies.\35\ The following 
table summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
ELREXFIOTM for the applicant's complete statements regarding 
the substantial clinical improvement criterion and the supporting 
evidence provided.
---------------------------------------------------------------------------

    \35\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 36049]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.092


[[Page 36050]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.093

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether ELREXFIOTM meets 
the substantial clinical improvement criterion.
    With respect to the claim ELREXFIOTM is a new treatment 
option for late-line patients with RRMM who are refractory to existing 
therapies or otherwise ineligible for or unable to access them, the 
applicant states the nature of the disease is such that patients 
typically become refractory to the available treatment options or 
patients may be unable to access some therapies for other reasons. The 
applicant further notes patients need new therapies with new mechanisms 
of action that can provide better efficacy, extend the duration of 
response, and be available to a larger subset of the late-line RRMM 
population, particularly patients with prior BCMA-directed therapy 
exposure. The applicant states that ELREXFIOTM addresses 
these limitations since it does not require patient-specific 
manufacturing and is the only BCMA-directed bispecific antibody therapy 
that has clinical study data on outcomes for patients exposed to prior 
BCMA-directed therapy in its prescribing information. We note the 
evidence presented does not identify a specific population that would 
benefit from ELREXFIOTM that would not be eligible for or 
benefit from other therapies for late-line RRMM, including 
TECVAYLI[supreg], TALVEYTM, CARVYKTI[supreg], and 
ABECMA[supreg]. With regard to the population with prior BCMA-directed 
therapy exposure, as noted previously, the prescribing information for 
TALVEYTM also includes efficacy data in this population and 
the lack of inclusion of this population in the prescribing information 
for TECVAYLI[supreg] does not exclude the use of this drug for these 
patients.
    With respect to the claim that ELREXFIOTM is the only 
BCMA-directed bispecific antibody with clinical study data in the 
prescribing information to support use in patients who have been 
treated with prior BCMA-directed therapy, the applicant states that 
although clinical studies evaluating TECVAYLI[supreg] included prior 
BCMA-exposed RRMM patients, in Section 14 of the prescribing 
information,\36\ the

[[Page 36051]]

FDA-approved labeling does not acknowledge outcomes or safety data for 
prior BCMA-exposed patients. Furthermore, the applicant contends this 
lack of inclusion suggests that prior-BCMA exposed patients continue to 
have a high unmet need despite the availability of TECVAYLI[supreg], 
and that the inclusion of this clinical study data in 
ELREXFIOTM's prescribing information suggests that 
ELREXFIOTM is able to fill this unmet need. However, as 
noted previously, the lack of inclusion of similar study data in 
TECVAYLI[supreg]'s prescribing information does not exclude the use of 
this drug in these patients. Additionally, TALVEYTM is a 
bsAb that was also studied in this patient population and has an 
indication for patients with prior BCMA-directed therapy.
---------------------------------------------------------------------------

    \36\ TECVAYLI (teclistamab-cqyv), injection, for subcutaneous 
use; Janssen Biotech, Inc., 2023.
---------------------------------------------------------------------------

    With respect to the claim that CAR T-cell therapies are largely 
unavailable to Medicare beneficiaries with late-line RRMM, the 
applicant states CAR T-cells take a significant amount of time to 
manufacture, and given the rapid nature of RRMM, some patients may die 
or become ineligible for treatment by the time the CAR T-cells are 
available for infusion. However, we note that TECVAYLI[supreg] and 
TALVEYTM have also received FDA approval and would therefore 
be options for patients who are unable to access or receive CAR T-cell 
therapy.
    The applicant states that MM is an incurable malignancy and that 
patients' ability to respond to therapy diminishes over time, leading 
to a reduced duration of response and eventually exhausting available 
therapy options to manage the disease. The applicant asserts that 
patients typically undergo several lines of therapy before exhausting 
therapy options and succumbing to the disease. The applicant references 
the low objective response rates (ORRs) of selinexor and conventional 
chemotherapy in RRMM patients. We note there are several treatments 
available to patients with RRMM who have received at least four prior 
lines of therapy including a PI, an IMiD, and an anti-CD38 mAb, such as 
TECVAYLI[supreg], TALVEYTM, ABECMA[supreg], and 
CARVYKTI[supreg]. It is not clear from the evidence provided that there 
is a patient population eligible for and responsive to 
ELREXFIOTM that is neither eligible for nor responsive to 
any of these other available therapies.
    The applicant further claims that ELREXFIOTM's generally 
manageable safety profile without dysgeusia and other toxicities that 
severely impact quality of life, in conjunction with the improved 
efficacy in late-line RRMM, makes it a substantial clinical improvement 
treatment over existing therapies. Additionally, the applicant asserts 
that dysgeusia and nail-related and skin-related toxicities that reduce 
quality of life with TALVEYTM are not reported with 
ELREXFIOTM. However, the safety profile of 
ELREXFIOTM was not compared to ABECMA[supreg], 
CARVYKTI[supreg], or TECVAYLI[supreg]. We also note we did not receive 
evidence related to improved efficacy that compares 
ELREXFIOTM with ABECMA[supreg], CARVYKTI[supreg], 
TALVEYTM, or TECVAYLI[supreg], and we question if 
ELREXFIOTM improves efficacy relative to these other 
therapies.
    With respect to the claim that ELREXFIOTM significantly 
improves outcomes compared to existing therapies approved for late-line 
RRMM, including prior BCMA-exposed patients, the applicant provides 
study results from MagnetisMM-3, an open-label, phase 2 study where 
after receiving two step-up priming doses, patients received 
subcutaneous ELREXFIOTM once weekly in 28-day cycles, which 
after six cycles, was followed by once every 2 weeks for persistent 
responders.\37\ The applicant stated the ORR for ELREXFIOTM 
was 61 percent and the percentage of patients that had at least a 
complete response was 37.4 percent after a median follow-up of 17.6 
months in patients with RRMM and no prior exposure to BCMA-directed 
therapy.\38\ The applicant acknowledges the lack of head-to-head 
studies and submits indirect comparison analyses comparing 
ELREXFIOTM to belantamab, selinexor-dexamethasone, real-
world physician's choice of treatment, real-world external control 
arms, and TECVAYLI[supreg] in patients with triple-class refractory 
multiple myeloma. The referenced indirect comparisons by Hlavacek et 
al. (2023) \39\ and Costa et al. (2023) 40 41 showed the ORR 
for ELREXFIOTM was significantly higher compared to 
belantamab, selinexor-dexamethasone, real-world physician's choice of 
treatment based on local clinical practice, and real-world external 
control arms. We note, however, that no similar comparative analyses 
were provided by the applicant to compare ELREXFIOTM to 
TALVEYTM ABECMA[supreg], or CARVYKTI[supreg] . In the 
absence of direct comparative trials between ELREXFIOTM and 
TECVAYLI[supreg], the applicant submitted the results of an unanchored 
matching-adjusted indirect comparison (MAIC) between the MagnetisMM-3 
study, previously described, and the MajesTEC-1 study, assessing the 
relative efficacy of the two therapies in patients with relapsed or 
refractory MM na[iuml]ve to prior BCMA-directed therapy (Isha Mol et 
al., 2023).\42\ MajesTEC-1 was an open-label, phase 1-2 study where 
patients with RRMM and no prior exposure to BCMA-targeted therapy 
received a weekly subcutaneous injection of TECVAYLI[supreg] after two 
step-up doses.\43\ As stated by the applicant, the results of the MAIC 
demonstrate ELREXFIOTM significantly improved ORR and PFS 
versus TECVAYLI[supreg]. We note, however, that the mechanism used in 
the MAIC to reweight MagnetisMM-3 patients to match the baseline 
characteristics of patients from MajesTEC-1 is unclear, as is the 
sensitivity analysis in which missing values of the adjusted baseline 
characteristics for ELREXFIOTM patients were imputed by a 
random sample of the observations in MagnetisMM-3 to potentially 
increase the effective sample size. In addition, while the ORR and PFS 
in the two analyses (base case adjusted and sensitivity analysis) were 
significantly improved with ELREXFIOTM over 
TECVAYLI[supreg], we note that the confidence intervals were wide, 
reducing the certainty in these conclusions. The ORR odds ratio 95 
percent confidence interval was 1.01 to 3.19 for the base case adjusted 
analysis and 1.04 to 3.14 for the sensitivity analysis. Furthermore, 
other outcomes

[[Page 36052]]

measured, such as the duration of response and overall survival, did 
not demonstrate significant improvement with ELREXFIOTM. 
Additionally, we note that with regard to the claim that 
ELREXFIOTM significantly improves outcomes specifically in 
RRMM patients who have had prior BMCA-directed therapy, the applicant 
references the ELREXFIOTM prescribing information and 
additional MagnetisMM-3 Cohort B data showing an ORR of 33.3 percent in 
patients with prior BCMA-directed antibody drug conjugate (ADC) or CAR 
T-cell therapy. However, we note that TECVAYLI[supreg] and 
TALVEYTM may also be treatment options for BCMA-exposed 
patients and we would appreciate information on comparative efficacy 
between ELREXFIOTM and these treatment options in the prior 
BCMA-directed therapy population.
---------------------------------------------------------------------------

    \37\ Lesokhin AM, Tomasson MH, Arnulf B, et al. Elranatamab in 
relapsed or refractory multiple myeloma: Phase 2 MagnetisMM-3 trial 
results. Nat Med. 2023 Aug 15. Online ahead of print.
    \38\ Michael H. Tomasson, et al., Long-Term Efficacy and Safety 
of Elranatamab Monotherapy in the Phase 2 MagnetisMM-3 Trial in 
Relapsed or Refractory Multiple Myeloma. Oral presentation at: 65th 
American Society of Hematology (ASH) Annual Meeting; 2023 Dec. 9-12.
    \39\ Hlavacek P, Mol I, Hu Y, et al. Indirect treatment 
comparison of elranatamab with belmaf, sel-dex, and real-world 
physician's choice of treatment in patients with triple-class 
exposed relapsed/refractory multiple myeloma. Presented at the 
European Hematology Association (EHA) Congress, 2023 June 8-11, 
Frankfurt, Germany.
    \40\ Costa LJ, LeBlanc TW, Tesch H, et al. An indirect 
comparison of elranatamab's (ELRA) objective response rate (ORR) 
from MagnetisMM-3 (MM-3) versus real-world external control arms in 
triple-class refractory (TCR) multiple myeloma (MM). Presented at 
the European Hematology Association (EHA) Congress, 2023 June 8-11, 
Frankfurt, Germany.
    \41\ Costa LJ, et al., An Indirect Comparison of Elranatamab's 
Progression-Free Survival and Overall Survival from MagnetisMM-3 
Versus Real-World External Control Arms in Triple-Class Refractory 
Multiple Myeloma. Abstract presented at the 65th American Society of 
Hematology (ASH) Annual Meeting; 2023 Dec. 9-12.
    \42\ Isha Mol, et al., A Matching-Adjusted Indirect Comparison 
of the Efficacy of Elranatamab and Teclistamab in Patients with 
Triple-Class Exposed/Refractory Multiple Myeloma. Oral presentation 
at: 65th American Society of Hematology (ASH) Annual Meeting; 2023 
Dec. 9-12.
    \43\ Moreau P, Garfall AL, van de Donk NWCJ, et al. Teclistamab 
in Relapsed or Refractory Multiple Myeloma. NEJM. 2022 Aug 11.
---------------------------------------------------------------------------

    With respect to the claim that ELREXFIOTM offers fewer 
hospitalization days during the step-up dosing period than other 
bispecific antibodies approved for patients with RRMM, thus lowering 
barriers to patient access, the applicant references the prescribing 
information for ELREXFIOTM, TECVAYLI[supreg], and 
TALVEYTM to indicate that assuming patients are not sent 
home between step-up doses, based on the step-up dosing schedules, the 
patient would be hospitalized for 5 days with ELREXFIOTM, 9 
days with TECVAYLI[supreg], and 9 to 12 days with TALVEYTM. 
While the shorter step-up dosing may lead to a shorter hospitalization, 
the applicant assumes, but does not demonstrate that the shorter step-
up dosing period and potentially shorter hospitalization would lower 
barriers to patient access. Additionally, we note that there are other 
variables besides duration of inpatient stay for the step-up dosing 
that may affect availability or access to therapies, such that a 
shorter step-up dosing duration may not necessarily result in better 
access to therapy. For instance, social, financial, age-related, prior 
therapy, and patient and provider dosing preferences may also affect 
access to therapy. Furthermore, while the shorter step-up dosing 
schedule should theoretically lead to a shorter hospitalization, we 
note that the risk and severity of adverse drug events and patient 
response could vary by drug, and that no clinical data was provided to 
support this claim.
    We are inviting public comments on whether ELREXFIOTM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
ELREXFIOTM.
e. FloPatch FP120
    Flosonics Medical (R.A. 1929803 Ontario Corp.) submitted an 
application for new technology add-on payments for FloPatch FP120 for 
FY 2025. According to the applicant, FloPatch FP120 is a wireless, 
wearable, continuous wave (4 MHz) Doppler ultrasound device that 
adheres over peripheral vessels (that is, carotid & jugular) that 
assesses blood flow in the peripheral vessels, enabling rapid and 
repeatable dynamic assessments of both arterial and venous flow 
simultaneously. According to the applicant, the FloPatch FP120 
cardiovascular blood flowmeter adheres to a patient's neck (or any 
other major vessel) and transmits Doppler-shifted ultrasonic waves from 
the transducer to the artery and vein at a fixed angle of insonation 
that are then reflected by moving blood cells back to the transducer. 
Per the applicant, the signal processing unit wirelessly outputs data 
to a secure iOS mobile medical application, which displays metrics from 
the Doppler signal, such as maximal velocity trace and corrected flow 
time, in a user-friendly interface. Per the applicant, FloPatch FP120 
will optimize clinical workflow, is easy-to-use and hands-free, cloud-
connected, and can be deployed in under one minute, providing 
instantaneous results.
    Please refer to the online application posting for FloPatch FP120, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231017D56F4, for additional detail describing the technology and the 
types of conditions that the technology might help diagnose and/or 
treat.
    With respect to the newness criterion, according to the applicant, 
FloPatch FP120 received 510(k) clearance from FDA on May 3, 2023 for 
use for the noninvasive assessment of blood flow in the carotid artery. 
Per the applicant, in a more recent FDA 510(k) submission, the proposed 
indication is for use for the noninvasive assessment of blood flow in 
peripheral vasculature. However, based on the application submitted by 
the applicant, the new technology add-on payment application for 
FloPatch FP120 is not eligible for consideration for FY 2025 for the 
proposed indication (for use for the noninvasive assessment of blood 
flow in peripheral vasculature) because documentation of FDA acceptance 
or filing of the marketing authorization request, that indicates that 
FDA has determined that the application is sufficiently complete to 
allow for substantive review by FDA, was not provided to CMS at the 
time of new technology add-on payment application submission. As such, 
the new technology add-on payment application for FloPatch FP120 is 
only eligible for consideration for FY 2025 for the narrower indication 
for use for the noninvasive assessment of blood flow in carotid artery.
    We note that prior to the May 3, 2023 clearance, there were two FDA 
510(k) clearances for the FloPatch FP120; one obtained in 2022 and one 
in 2020. The indications in the 2020, 2022, and 2023 clearances are 
identical, that is, for use for the noninvasive assessment of blood 
flow in the carotid artery.\44\ In addition, the 2020 clearance was 
based on substantial equivalence to the FloPatch FP110 device,\45\ 
which was an earlier version of FloPatch FP120 and was also FDA-
cleared. According to the applicant, FloPatch FP120 was commercially 
available for this use as of January 1, 2023. However, as noted 
earlier, the provided FDA 510(k) clearance was dated May 3, 2023. 
Because the market availability date as indicated by the applicant 
preceded the 2023 clearance date, and because the 2020 and 2022 
clearances had the same indication as the 2023 clearance, we question 
when the technology first became commercially available for use for the 
noninvasive assessment of blood flow in the carotid artery and request 
additional information on the market availability date for this 
indication. Per the applicant, one FloPatch FP120 device would be used 
per inpatient stay.
---------------------------------------------------------------------------

    \44\ K223843, May 3, 2023; K222242, December 9, 2022; and 
K200337, March 24, 2020.
    \45\ K191388, June 21, 2019.
---------------------------------------------------------------------------

    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify FloPatch FP120. We note that the 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for FloPatch FP120 beginning in FY 2025. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify the indication for FloPatch FP120 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.

[[Page 36053]]

    With respect to the substantial similarity criteria, the applicant 
asserted that FloPatch FP120 is not substantially similar to other 
currently available technologies because FloPatch FP120 offers real-
time, non-invasive monitoring of hemodynamic changes of both the 
arterial and venous blood flow, improving fluid management decisions. 
Per the applicant, FloPatch FP120 surpasses current methods by 
providing continuous data, enhancing patient safety, and addressing 
unmet clinical needs for immediate, precise assessments, 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 
FloPatch FP120, for the applicant's complete statements in support of 
its assertion that FloPatch FP120 is not substantially similar to other 
currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.094

BILLING CODE 4120-01-C

[[Page 36054]]

    We note the following concerns with regard to the newness 
criterion. With respect to the first substantial similarity criterion, 
whether FloPatch FP120 uses the same or similar mechanism of action for 
a therapeutic outcome when compared to existing technologies, we note 
we did not receive information from the applicant regarding predicate 
devices for FloPatch FP120 that were previously FDA-cleared in its 
discussion of existing technologies. As noted, there are three prior 
FDA 510(k) clearances for the FloPatch FP120, with the same indication 
for use for the noninvasive assessment of blood flow in the carotid 
artery.\46\ In addition, the 2020 clearance was based on substantial 
equivalence to the FloPatch FP110 device,\47\ which was an earlier 
version of FloPatch FP120 and was also FDA-cleared. We note that all of 
the FloPatch FP120 FDA-cleared devices, as well as the FP110 version 
have an identical method of attachment of the ultrasound probe to the 
human body, and the same intended use and indications for use. 
Accordingly, as the technology was already approved for use for this 
same indication outside of the 2- to 3-year newness period, it appears 
that it would no longer be considered new for purposes of new 
technology add-on payments.
---------------------------------------------------------------------------

    \46\ K223843, May 3, 2023; K222242, December 9, 2022; and 
K200337, March 24, 2020.
    \47\ K191388, June 21, 2019.
---------------------------------------------------------------------------

    In addition, we question whether a different placement method or 
the addition of a wearable functionality for the noninvasive assessment 
of blood flow would constitute a different mechanism of action, and 
also whether these differences may instead be relevant to the 
assessment of substantial clinical improvement, rather than of newness. 
For example, while the applicant described FloPatch FP120 as user-
friendly, we question whether ease-of-use in itself represents a 
mechanism of action unique from existing technologies for a therapeutic 
outcome, as the primary underlying mechanism of action is still Doppler 
ultrasound technology.
    With respect to the second substantial similarity criterion, that 
is, whether a product is assigned to the same or a different MS-DRG, 
although the applicant asserts that the device is new and has not 
undergone sufficient review to be recognized as a treatment within the 
existing MS-DRGs, we note that the applicant stated that FloPatch FP120 
could be relevant to existing MS-DRGs that pertain to septicemia or 
severe sepsis for the assessment of volume responsiveness. We believe 
that, based on its indication, cases involving the use FloPatch FP120 
would be assigned to the same MS-DRGs as those involving existing 
technologies used for invasive and non-invasive measurements of blood 
flow, such as for patients with septicemia or severe sepsis.
    With respect to the third substantial similarity criterion, that 
is, whether the technology involves treatment of the same or similar 
type of disease or patient population when compared to an existing 
technology, the applicant maintained that existing technologies do not 
provide clinicians with the information they need, and while FloPatch 
LP120 serves a similar purpose as existing technology, its process has 
been optimized by providing a safer, more accurate, and instantaneous 
method of assessment. While this may be relevant to the assessment of 
substantial clinical improvement, it does not appear to be related to 
newness, and we remain unclear about how the patient population for 
which FloPatch FP120 is used differs from other patients for which 
existing non-invasive (for example, Doppler ultrasound devices) and 
invasive technologies are used for hemodynamic monitoring in a same or 
similar type of disease (such as septicemia or severe sepsis).
    Accordingly, as it appears that the May 3, 2023 FDA 510(k) 
clearance and prior FDA 510(k) clearances for FloPatch FP120 may use 
the same or similar mechanism of action to achieve a therapeutic 
outcome, would be assigned to the same MS-DRG, and treat the same or 
similar patient population and disease, we believe that these 
technologies may be substantially similar to each other. We note that 
if FloPatch FP120 as described in its 2023 FDA 510(k) clearance is 
substantially similar to prior versions as described in the 2022 and 
2020 FDA 510(k) clearances, we believe the newness period for this 
technology would begin on March 24, 2020 with the earliest FDA 510(k) 
clearance date for FloPatch FP120 (K200337) and therefore, because the 
3-year anniversary date of the technology's entry onto the U.S. market 
(March 24, 2023) occurred in FY 2023, the technology would no longer be 
considered new and would not be eligible for new technology add-on 
payments for FY 2025.
    We are inviting public comments on whether FloPatch FP120 is 
substantially similar to existing technologies and whether FloPatch 
FP120 meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for FloPatch FP120, the 
applicant searched the FY 2022 MedPAR for cases with ICD-10-CM 
diagnosis code category of E877 (Fluid overload, unspecified) and MS-
DRG codes for septicemia or severe sepsis. Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 690,320 cases mapping to septicemia or severe sepsis 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 $93,703, which exceeded the average 
case-weighted threshold amount of $70,142. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that FloPatch 
FP120 meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 36055]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.095

BILLING CODE 4120-01-C
    We note the following concern regarding the cost criterion. Per the 
applicant, FloPatch FP120 is not indicated for use for a particular 
disease or diagnosis, but rather to assess changes in blood flow in 
response to a preload challenge and that it monitors hemodynamic change 
in response to a clinical intervention. We note that the applicant 
limited their coding determination and cost analysis to cases 
associated with a diagnosis of septicemia or severe sepsis with the 
identified MS-DRGs, 870, 871, and 872, as these are the cases for which 
FloPatch FP120 is best suited. However, the applicant stated that 
patients who are categorized under MS-DRGs other than 870, 871, and 872 
can develop sepsis even though they are not initially admitted under a 
sepsis-related DRG, such as post-surgical patients or patients admitted 
for acute conditions like heart failure or chronic illnesses such as 
diabetes or renal disease. As these patients may also require vigilant 
monitoring for sepsis and fluid overload in a broader range of clinical 
scenarios, we are interested in additional information regarding 
whether such cases using the technology would map to other DRGs, and if 
those cases should also be included in the cost analysis.
    We are inviting public comments on whether FloPatch FP120 meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that FloPatch FP120 overcomes barriers associated 
with traditional flow-directed therapies, which are often invasive and 
require specific expertise, by offering a non-invasive, user-friendly 
alternative. Per the applicant, the FloPatch FP120 makes precision 
fluid management more accessible, enabling early detection of preload 
unresponsiveness, thereby minimizing complications from over-
resuscitation. The applicant asserted that FloPatch FP120 offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments; 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 that use of FloPatch FP120 
significantly improves clinical outcomes relative to services or 
technologies previously available. The applicant provided five studies 
to support these claims. We also note that seven other articles 
submitted as supporting evidence should more appropriately be 
characterized as background articles because they do not directly 
assess the use of FloPatch FP120. Instead, those seven articles focus 
on the relationship between fluid responsiveness status during septic 
shock resuscitation.\48\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for FloPatch FP120 for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \48\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.

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

[[Page 36056]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.096

    We note the following concerns regarding whether FloPatch FP120 
meets the substantial clinical improvement criterion.
    In support of its assertion that FloPatch FP120 offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments, the applicant stated that FloPatch 
FP120 improves patient accessibility to flow-directed therapy. The 
applicant referred to the Kenny et al. (2021a) \49\ study that focused 
on a novel, hands-free CW Doppler patch developed for easily and 
continuously monitoring changes in blood flow velocities in the common 
carotid artery. The study included in vitro experiments conducted using 
moving string and blood-mimicking flow phantoms; a small usability 
study with 22 participants, and an in vivo proof-of-concept study with 
one healthy volunteer and one congestive heart failure patient. While 
the study found that the CW Doppler patch demonstrated accuracy in 
identifying changes in target velocity in string and flow phantom 
experiments, that it was easy to use, and that the Doppler patch could 
continuously record and track instantaneous changes in carotid velocity 
time integral (VTI) during a passive leg raise, we question if the 
evidence demonstrates that the FloPatch FP120 substantially improves 
patient accessibility to flow directed therapy relative to existing 
technologies. We would be interested in evidence comparing the use of 
FloPatch FP120 and existing technologies to demonstrate improvements in 
patient accessibility. In addition, we note that the study had small 
sample sizes, which may raise concerns about the reliability of the 
findings.
---------------------------------------------------------------------------

    \49\ Kenny J-[Eacute]S, Munding CE, Eibl JK, et al. (2021a) A 
novel, hands-free ultrasound patch for continuous monitoring of 
quantitative Doppler in the carotid artery. Scientific Reports 
11(1):1-11.
---------------------------------------------------------------------------

    To support its claim that FloPatch FP120 improves patient 
accessibility to flow-directed therapy, the applicant also included 
findings from the Kenny et al. (2023a) \50\ study about the time cost 
of physiologically ineffective intravenous fluid in the emergency 
department (ED). Per the applicant, this study sought to

[[Page 36057]]

quantify the burden of fluid unresponsiveness early in ED care and 
calculate the time spent providing physiologically ineffective IV fluid 
using FloPatch FP120. It was a prospective study design, using a 
convenience sample of 51 adult patients presenting to a single 
community ED requiring IV fluid expansion for any indication, and 
identified 86 preload challenges, and 19,667 carotid Doppler beats. The 
study authors concluded that a clinically significant fraction of fluid 
unresponsive or refractory patients was observed early in their ED 
care, and a considerable amount of time was spent providing 
physiologically ineffective IV fluid, and that these findings may 
indicate an area in ED care where using wearable Doppler ultrasound 
technology, like FloPatch FP120, would improve clinical efficiency. We 
question whether these findings can be replicated in studies with a 
larger sample. We also question if a study using a patient sample 
representative of those potentially appropriate for FloPatch FP120 
would yield similar results as one using a convenience sample. In 
addition, we are interested in whether a multi-center trial would 
generate the same result as a single-site study, where site-specific 
attributes could potentially confound study results, reducing the 
reliability of the findings.
---------------------------------------------------------------------------

    \50\ Kenny J-[Eacute]S, Gibbs SO, Johnston D, et al. (2023a) The 
time cost of physiologically ineffective intravenous fluids in the 
emergency department: an observational pilot study employing 
wearable Doppler ultrasound. Journal of Intensive Care 11:7 https://doi.org/10.1186/s40560-023-00655-6.
---------------------------------------------------------------------------

    The applicant also asserted that FloPatch FP120 is able to diagnose 
sepsis in a population where sepsis is currently undetectable, or to 
diagnose it earlier than currently available technologies. The 
applicant claimed that diagnosing preload unresponsiveness early in 
care is important because doing so reduces complications. However, 
although the applicant provided studies demonstrating that FloPatch 
FP120 can diagnose sepsis, these studies do not appear to demonstrate 
that the use of the technology to make a diagnosis affected the 
management of the patients, as required under Sec.  
412.87(b)(1)(ii)(B). For example, in the Kenny et al. (2023a) \51\ 
study on time cost of physiologically ineffective intravenous fluids in 
the ED, as discussed earlier, there was no evidence linking the use of 
FloPatch FP120 to changes in the management of patients such as 
initiating or discontinuing IV fluid expansion.
---------------------------------------------------------------------------

    \51\ Kenny J-[Eacute]S, Gibbs SO, Johnston D, et al. (2023a) The 
time cost of physiologically ineffective intravenous fluids in the 
emergency department: an observational pilot study employing 
wearable Doppler ultrasound. Journal of Intensive Care 11:7 https://doi.org/10.1186/s40560-023-00655-6.
---------------------------------------------------------------------------

    To further support its claim that diagnosing preload 
unresponsiveness early in care is important because doing so reduces 
complications, the applicant also used the Kenny et al. (2021c) \52\ 
study about correlation between carotid Doppler ultrasonography and 
stroke volume. The study found that compared with existing handheld 
Doppler devices, FloPatch FP120 was able to capture and analyze a large 
number of cardiac cycles, account for inherent SV variation over many 
cardiorespiratory cycles, and eliminate the effects of human errors. 
The applicant hypothesized that when measured over many cardiac cycles, 
monitoring SV change using FloPatch FP120 might support diagnosis and 
management of evolving hypovolemia. While this study and those 
discussed earlier demonstrated that FloPatch FP120 provided noninvasive 
assessment of blood flow to determine SV changes, similar to our 
previous concern, we remain interested in evidence showing how use of 
the technology to make a diagnosis affects the management of patients, 
such as the use of FloPatch FP120 to initiate or discontinue IV fluid 
expansion in response to the observed SV changes.
---------------------------------------------------------------------------

    \52\ Kenny JS, Barjaktarevic I, Mackenzie DC, et al. Carotid 
Doppler ultrasonography correlates with stroke volume in a human 
model of mypovolaemia and resuscitation: analysis of 48 570 cycles. 
British Journal of Anesthesia 2021c. 127(2):E62-E63.
---------------------------------------------------------------------------

    The applicant also referred to the findings of the Kenny et al. 
(2023b) \53\ study on simultaneous venous-arterial Doppler during 
preload augmentation to support its claim that diagnosing preload 
unresponsiveness early in care is important because it reduces 
complications. In that study, the researchers concluded that FloPatch 
FP120 (referenced as the wearable Doppler biosensor) can help identify 
patients with dynamic fluid intolerance, potentially guiding IV fluid 
management and preventing downstream complications and costs. We are 
concerned that the small clinical sample size and presence of potential 
confounders could call into question the reliability and validity of 
the findings. In addition, we note that this study does not appear to 
demonstrate that use of FloPatch FP120 to assess preload responsiveness 
affected the management of the patients, as the study states that the 
treating clinician was blinded to the results of the wearable 
ultrasound and that the choice for preload augmentation was at the 
discretion of the treating clinician.
---------------------------------------------------------------------------

    \53\ Kenny JS, Gibbs SO, Eibl JK, et al. (2023b) Simultaneous 
venous-arterial Doppler during preload augmentation: illustrating 
the Doppler Starling curve. Ultrasound J Jul 28;15(1):32. https://doi.org10.1186/s13089-023-00330-9.
---------------------------------------------------------------------------

    To support the assertion that FloPatch FP120 significantly improves 
clinical outcomes relative to services or technologies previously 
available, the applicant claimed that current services for sepsis 
patients are providing IV fluids without flow guidance, and referred to 
three Kenny studies (2021a, 2023a, and 2023b), discussed earlier. As 
discussed, we are interested in additional evidence that assesses the 
impact of FloPatch FP120 compared to existing technologies that can be 
used to provide flow guidance on clinical outcomes.
    We are inviting public comments on whether FloPatch FP120 meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for FloPatch 
FP120.
f. HEPZATOTM KIT (Melphalan for Injection/Hepatic Delivery 
System)
    Delcath System submitted an application for new technology add-on 
payments for HEPZATOTM KIT for FY 2025. According to the 
applicant, HEPZATOTM KIT is a drug/device combination 
product consisting of melphalan and the Hepatic Delivery System (HDS), 
indicated as a liver-directed treatment for adult patients with uveal 
melanoma with unresectable hepatic metastases. Per the applicant, the 
HDS is used to perform percutaneous hepatic perfusion (PHP), an 
intensive local hepatic chemotherapy procedure, in which the alkylating 
agent melphalan hydrochloride is delivered intra-arterially to the 
liver with simultaneous extracorporeal filtration of hepatic venous 
blood return (hemofiltration).
    Please refer to the online application posting for 
HEPZATOTM KIT, available at https://mearis.cms.gov/public/publications/ntap/NTP2310160RLLX, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
HEPZATOTM KIT was granted approval as a New Drug Application 
(NDA) from FDA on August 14, 2023, for use as a liver-directed 
treatment for adult patients with uveal melanoma with unresectable 
hepatic metastases affecting less than 50 percent of the liver and no 
extrahepatic disease or extrahepatic disease limited to the bone, lymph 
nodes, subcutaneous tissues, or lung that is amenable to resection or 
radiation. According to the

[[Page 36058]]

applicant, the technology became available for sale on January 8, 2024, 
because manufacturing did not commence until after FDA approval was 
granted. Melphalan hydrochloride, a component of the 
HEPZATOTM KIT, is administered by intra-arterial infusion 
into the hepatic artery at a dose of 3 mg/kg of body weight with a 
maximum dose of 220 mg during a single HEPZATO treatment. The drug is 
infused over 30 minutes, followed by a 30-minute washout period. 
According to the applicant, treatments should be administered every 6 
to 8 weeks, but can be delayed until recovery from toxicities, and as 
per clinical judgement.
    The applicant stated that, effective October 1, 2023, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of HEPZATOTM KIT: XW053T9 (Introduction of melphalan 
hydrochloride antineoplastic into peripheral artery, percutaneous 
approach, new technology group 9). The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for HEPZATOTM KIT under the ICD-10-CM coding system. Please 
refer to the online application posting for the complete list of ICD-
10-CM and ICD-10-PCS codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that HEPZATOTM KIT is not substantially similar to 
other currently available technologies because it offers the first 
liver-directed treatment option to patients with liver-dominant 
metastatic ocular melanoma (mOM) who may be poor candidates for liver 
resection and/or who may have difficulty tolerating systemic 
chemotherapy. According to the applicant, HEPZATOTM KIT uses 
a unique PHP procedure to isolate liver circulation and deliver a high 
concentration of melphalan to liver tumors via infusion followed by 
filtration of the hepatic venous flow to remove melphalan out of the 
blood with extracorporeal filters, 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 HEPZATOTM KIT 
for the applicant's complete statements in support of its assertion 
that HEPZATOTM KIT is not substantially similar to other 
currently available technologies.
BILLING CODE 4120-01-P

[[Page 36059]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.097

BILLING CODE 4120-01-C

[[Page 36060]]

    We are inviting public comments on whether HEPZATOTM KIT 
is substantially similar to existing technologies and whether 
HEPZATOTM KIT meets the newness criterion. We are also 
inviting public comments on drug-device combination technology 
considerations for new technology add-on payments. Specifically, we 
seek comment on whether reformatting the delivery mechanism for a drug 
would represent a new mechanism of action for drug-device combination 
technologies, and on factors that should be considered when considering 
new technology add-on payments for technologies that may use a drug or 
device component that is no longer new in combination with a new drug 
or device component.
    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 2022 MedPAR file using a 
combination of ICD-10-CM and/or PCS codes to identify potential cases 
representing patients who may be eligible for HEPZATOTM KIT. 
The applicant explained that it used different codes to demonstrate 
different cohorts that may be eligible for HEPZATOTM KIT 
because it is indicated for a rare condition, hepatic-dominant mOM, 
which does not have a unique ICD-10-CM diagnosis code to identify 
potential cases with the specific diagnosis of interest, nor a unique 
ICD-10-PCS procedure code that would identify patients receiving this 
specific procedure. The applicant believed the cases identified in the 
analysis are the closest proxies to the cases potentially eligible for 
the use of HEPZATOTM KIT. Each analysis followed the order 
of operations described in the table later in this section.
    For the first analysis, the applicant searched for cases with ICD-
10-PCS code 3E05305 (Introduction of other antineoplastic into 
peripheral artery, percutaneous approach) for the PHP procedure, and 
ICD-10-CM code Z51.11 (Encounter for antineoplastic chemotherapy) as 
the primary diagnosis for the administration of chemotherapy during an 
inpatient stay. In addition, the applicant narrowed the analysis to 
cases with liver-dominant mOM using at least one secondary liver 
metastases diagnosis plus at least one ocular melanoma diagnosis. 
Please see the online posting for HEPZATOTM KIT for the 
complete list of codes provided by the applicant. The applicant used 
the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 11 claims mapping to one 
MS-DRG: 829 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Other Procedures with CC/MCC). The applicant calculated 
a final inflated average case-weighted standardized charge per case of 
$1,068,530, which exceeded the average case-weighted threshold amount 
of $104,848.
    For the second analysis, the applicant searched for the following 
combination of ICD-10-CM diagnosis codes: Z51.11 (Encounter for 
antineoplastic chemotherapy) as the primary diagnosis code, in 
combination with at least one of the following secondary liver 
metastases codes: C78.7 (Secondary malignant neoplasm of liver and 
intrahepatic bile duct), or C22.9 (Malignant neoplasm of liver, not 
specified as primary or secondary). The applicant used the inclusion/
exclusion criteria described in the following table. Under this 
analysis, the applicant identified 1,134 claims mapping to nine MS-
DRGs, with 94 percent of identified cases mapping to three MS-DRGs: 829 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedures with CC/MCC), as well as 846 and 847 (Chemotherapy 
without Acute Leukemia as Secondary Diagnosis with MCC, and with CC, 
respectively). The applicant calculated a final inflated average case-
weighted standardized charge per case of $1,066,207, which exceeded the 
average case-weighted threshold amount of $81,652.
    For the third analysis, the applicant searched for cases where the 
ICD-10-CM code Z51.11 (Encounter for antineoplastic chemotherapy) is 
the primary diagnosis or the ICD-10 PCS code 3E05305 (Introduction of 
other antineoplastic into peripheral artery, percutaneous approach) is 
reported. In addition, the case also needed to include at least one of 
the following secondary liver metastases codes: C78.7 (Secondary 
malignant neoplasm of liver and intrahepatic bile duct) or C22.9 
(Malignant neoplasm of liver, not specified as primary or secondary). 
The applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 1,277 
claims mapping to 12 MS-DRGs with 92 percent of identified cases 
mapping to three MS-DRGs: 829 (Myeloproliferative Disorders or Poorly 
Differentiated Neoplasms with Other Procedures with CC/MCC); as well as 
846 and 847 (Chemotherapy without Acute Leukemia as Secondary Diagnosis 
with MCC, and with CC, respectively). The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$1,067,772, which exceeded the average case-weighted threshold amount 
of $80,245.
    For the fourth analysis, the applicant searched for cases reporting 
the following combination of ICD-10-CM diagnosis codes: C78.7 
(Secondary malignant neoplasm of liver and intrahepatic bile duct) or 
C22.9 (Malignant neoplasm of liver), in combination with at least one 
ocular melanoma ICD-10-CM code. Please see the online posting for 
HEPZATOTM KIT for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 1,059 claims mapping to 91 MS-DRGs with none exceeding 4.91 
percent. The applicant calculated a final inflated average case-
weighted standardized charge per case of $1,062,553, which exceeded the 
average case-weighted threshold amount of $66,104.
    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 HEPZATOTM KIT 
meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 36061]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.098

     
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    \54\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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[[Page 36062]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.099

    We are inviting public comments on whether HEPZATOTM KIT 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that HEPZATOTM KIT represents a 
substantial clinical improvement over existing technologies because it 
offers a minimally invasive, targeted, effective, and safe treatment 
option to patients with liver-dominant mOM who may be poor candidates 
for liver resection or who may have difficulty tolerating systemic 
chemotherapy which results in a substantial clinical improvement in 
response and survival rates over best available care and quality of 
life compared to pre-treatment. The applicant provided 11 studies to 
support these claims, as well as one background article about use of 
chemosaturation with PHP (CS-PHP) as a palliative treatment option for 
patients with unresectable cholangiocarcinoma.\55\ The following table 
summarizes the applicant's assertions regarding the substantial 
clinical improvement criterion. Please see the online posting for 
HEPZATOTM

[[Page 36063]]

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

    \55\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
[GRAPHIC] [TIFF OMITTED] TP02MY24.100


[[Page 36064]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.101

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether HEPZATOTM KIT meets 
the substantial clinical improvement criterion. With respect to the 
applicant's assertion that HEPZATOTM KIT offers a treatment 
option for a patient population unresponsive or ineligible for 
currently available treatments, while the applicant stated that 
HEPZATOTM KIT offers an additional treatment option to 
patients with liver-dominant mOM who may be poor candidates for liver 
resection or who may have difficulty tolerating systemic chemotherapy, 
it did not provide evidence in support of this assertion. We would be 
interested in information regarding whether there are potential 
Medicare patient populations that may have difficulty tolerating (or be 
unresponsive to) KIMMTRAK[supreg] or other currently available 
treatments, but would be a good candidate for HEPZATOTM KIT.

[[Page 36065]]

    Regarding the claim that HEPZATOTM KIT improves survival 
over other treatment options, the applicant provided seven peer-
reviewed cohort studies, summary material from an unpublished study, 
and one randomized controlled clinical study to support the claim.
    The seven peer reviewed cohort studies 
56 57 58 59 60 61 62 provide a range of results of overall 
survival as reported for patients treated with the HEPZATOTM 
KIT (median overall survival after first Chemosaturation with 
Percutaneous Hepatic Perfusion [CS-PHP] ranged from 9.6 months to 27.4 
months depending on the study, and median one-year overall survival 
rate raged from 44 percent to 77 percent depending on study). A few of 
the seven peer reviewed cohort studies (Karydis et al. (2018), Tong et 
al. (2022); Meier et al. (2021)) reported statistically significant 
improvement in overall survival (OS) when compared to non-responders or 
stable disease groups. Only one of the seven studies, Dewald et al. 
(2021), compared results to alternative treatments, but statistical 
significance was not achieved (P = 0.97) with CS-PHP resulting in a 
median OS of 24.1 months compared with 23.6 months for patients 
receiving other therapies. We believe that additional evidence 
supporting that HEPZATOTM KIT offers a significant 
difference in OS rates compared to currently available treatments would 
be helpful in our evaluation of the applicant's assertion. We note that 
several of the studies provided as evidence include small, non-
randomized studies without the use of comparators or controls, which 
may affect the ability to draw meaningful conclusions about treatment 
outcomes from the results of the studies. We also note that a majority 
of the studies provided (Bruning et al. (2020); Vogl et al. (2017); 
Dewald et al. (2021); Meijer et al. (2021); and Artzner et al. (2019)) 
were conducted outside the United States. We question if there may be 
differences in treatment guidelines between these countries that may 
have affected clinical outcomes.
---------------------------------------------------------------------------

    \56\ Bruning R, Tiede M, Schneider M, et al. Unresectable 
Hepatic Metastasis of Uveal Melanoma: Hepatic Chemosaturation with 
High-Dose Melphalan-Long-Term Overall Survival Negatively Correlates 
with Tumor Burden. Radiol Res Pract. 2020.
    \57\ Vogl TJ, Koch SA, Lotz G, et al. Percutaneous Isolated 
Hepatic Perfusion as a Treatment for Isolated Hepatic Metastases of 
Uveal Melanoma: Patient Outcome and Safety in a Multi-centre Study. 
Cardiovasc Intervent Radiol. Jun 2017;40(6):864-872.
    \58\ Dewald CLA, Hinrichs JB, Becker LS, et al. Chemosaturation 
with Percutaneous Hepatic Perfusion: Outcome and Safety in Patients 
with Metastasized Uveal Melanoma. Rofo. Aug 2021;193(8):928-936.
    \59\ Meijer TS, Burgmans MC, de Leede EM, et al. Percutaneous 
Hepatic Perfusion with Melphalan in Patients with Unresectable 
Ocular Melanoma Metastases Confined to the Liver: A Prospective 
Phase II Study. Ann Surg Oncol. Feb 2021;28(2):1130-1141.
    \60\ Karydis I, Gangi A, Wheater MJ, et al. Percutaneous hepatic 
perfusion with melphalan in uveal melanoma: A safe and effective 
treatment modality in an orphan disease. J Surg Oncol. May 
2018;117(6):1170-1178.
    \61\ Artzner C, Mossakowski O, Hefferman G, et al. 
Chemosaturation with percutaneous hepatic perfusion of melphalan for 
liver-dominant metastatic uveal melanoma: a single center 
experience. Cancer Imaging. Mayphip 30 2019;19(1):31.
    \62\ Tong TML, Samim M, Kapiteijn E, et al. Predictive 
parameters in patients undergoing percutaneous hepatic perfusion 
with melphalan for unresectable liver metastases from uveal 
melanoma: a retrospective pooled analysis. Cardiovasc Intervent 
Radiol. 2022;45(9):1304-1313.
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    The applicant also submitted summary presentation material evidence 
to support this claim in the form of a poster and slides for the FOCUS 
study,\63\ in which 144 patients were enrolled, with 91 patients 
receiving percutaneous hepatic perfusion (PHP) treatment and 32 
patients receiving best available care (BAC). According to the 
applicant, preliminary results from the phase III FOCUS Trial show that 
progression free survival (PFS) was 9.03 months among PHP patients and 
just over 3 months among best available care (BAC) patients. OS among 
treated PHP patients was 19.25 months and among treated BAC patients 
was 14.49 months. However, this study has yet to be published and is 
not yet available for analysis and peer review. At this point, we are 
unable to verify the methods, results, and conclusions of this study as 
the applicant only provided evidence in the form of a poster and 
presentation. For example, one citation provided by the applicant in 
the form of a non-peer-reviewed conference presentation details 
preliminary results from the FOCUS Phase III Trial. We would be 
interested in the statistical analysis (including p value and CI data) 
surrounding the OS rates. In addition, the poster notes that due to 
slow enrollment and patient reluctance to receive BAC treatment, the 
trial design was amended to a single arm design with all eligible 
patients receiving PHP after discussion with FDA. We would be 
interested in detail about these specific eligibility requirements, as 
well as how the potential for confounding variables resulting from any 
differences in the resulting populations were identified and mitigated.
---------------------------------------------------------------------------

    \63\ Delcath ASCO 2022 FOCUS Trial Poster; FOCUS Trial Ongoing 
(See online posting for Hepzato\TM\ Kit).
---------------------------------------------------------------------------

    In the published randomized clinical trial \64\ (RCT) provided by 
the applicant, the median hepatic progression free survival (hPFS), the 
primary endpoint of the trial, was 7.0 months for patients using 
HEPZATOTM KIT compared to 1.6 months for patients receiving 
BAC. However, the median overall survival (OS) with the treatment of 
HEPZATOTM KIT was 10.6 months (95 percent CI 6.9-13.6 
months) compared to 10.0 months (95 percent CI 6.0-13.1 months) for the 
group of patients who received BAC. The study notes that median OS was 
not significantly different (PHP-Mel 10.6 months vs. BAC 10.0 months), 
but OS was 13.1 months (95 percent CI 10.0-20.3 months) in BAC patients 
who crossed over and received treatment with PHP-Mel (n = 28, 57.1 
percent). In the study discussion of OS, Hughes, et al. concluded that 
the 57 percent of patients who were allowed to crossover confounded the 
ability to analyze any survival advantage associated with PHP Mel. We 
would be interested in additional evidence in our evaluation of the 
applicant's assertion that HEPZATOTM KIT substantially 
improves survival over other treatment options.
---------------------------------------------------------------------------

    \64\ Hughes MS, Zager J, Faries M, et al. Results of a 
Randomized Controlled Multicenter Phase III Trial of Percutaneous 
Hepatic Perfusion Compared with Best Available Care for Patients 
with Melanoma Liver Metastases. Ann Surg Oncol. Apr 2016;23(4):1309-
19.
---------------------------------------------------------------------------

    Regarding the claim that HEPZATOTM KIT increases 
response rate over BAC, we note that across the retrospective studies, 
response rates ranged from an overall response rate of 42.3 percent 
[Dewald et al (2021)] to a partial response of 89 percent [Vogl et al. 
(2017)] depending on the study. However, as the applicant cited to many 
of the same retroactive studies that it referenced in support of the 
claim of improved survival [Bruning et al. (2020); Vogl et al. (2017); 
Dewald et al. (2021); Meijer et al. (2021); Artzner et al. (2019); Tong 
et al. (2022); Karydis et al. (2018)], we have the same questions as 
discussed previously regarding the ability to draw meaningful 
conclusions from the results of these studies in evaluation of this 
claim.
    Regarding the unpublished FOCUS study (Delcath ASCO 2022 FOCUS 
Trial Poster),\65\ previously described, the applicant stated that in 
the preliminary results from the FOCUS Trial, the overall response rate 
(ORR) among PHP patients was 36.3 percent, nearly three

[[Page 36066]]

times better that the 12.5 percent ORR among BAC patients. However, as 
previously noted, we would be interested in details about the 
eligibility requirements, and how the potential for confounding 
variables resulting from any differences in the resulting populations 
were identified and mitigated.
---------------------------------------------------------------------------

    \65\ Delcath ASCO 2022 FOCUS Trial Poster; FOCUS Trial Ongoing 
(See online posting for Hepzato\TM\ Kit).
---------------------------------------------------------------------------

    Lastly, with regard to the assertion that HEPZATOTM KIT 
improves quality of life over pre-treatment, the applicant submitted 
the Vogl et al. (2017) study as evidentiary support. The study was a 
retrospective, multi-center study reporting outcome and safety after 
percutaneous isolated hepatic perfusion (PIHP) with Melphalan for 
patients with uveal melanoma and metastatic disease limited to the 
liver. Thirty-five PIHP treatments were performed in 18 patients (8 
male, 10 female) at seven hospitals across the U.S and Germany between 
January 2012 and December 2016. Patients' life quality was assessed 
using four-point scale questionnaires to rate overall health and life 
quality after therapy, how much their health and quality of life had 
changed after therapy, and how pleased they were with PIHP. We note 
that the study used a subjective four-point measurement scale to 
determine quality-of-life used in the study. We question if a more 
objective assessment tool would be more helpful in evaluating a 
patient's quality of life. It is unclear if the survey questions were 
asked verbally, and by whom, or if the survey was answered in writing 
by the patient alone. As the study was not randomized and the patients' 
responses were not anonymous, we question if there may have been 
resulting response bias, or interviewer bias that would impact our 
ability to draw meaningful conclusions about a subjective measurement 
of improved quality of life. In addition, we note that the study 
utilized the Delcath Hepatic CHEMOSAT[supreg] Delivery System for 
Melphalan components as part of the treatment, and it is unclear if the 
technologies used in the study are the same as HEPZATOTM 
KIT, or what differences may exist between the technologies. We would 
be interested in information about any differences between Delcath's 
HEPZATOTM KIT and the technologies used in this study for 
PIHP with Melphalan.
    We are inviting public comments on whether HEPZATOTM KIT 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
HEPZATOTM KIT.
g. LantidraTM (donislecel-jujn (Allogeneic Pancreatic Islet 
Cellular Suspension for Hepatic Portal Vein Infusion))
    CellTrans Inc. submitted an application for new technology add-on 
payments for LantidraTM for FY 2025. According to the 
applicant, LantidraTM is an allogeneic pancreatic islet 
cellular therapy indicated for the treatment of adults with Type 1 
diabetes who are unable to approach target hemoglobin A1c (HbA1c) 
because of repeated episodes of severe hypoglycemia despite intensive 
diabetes management and education. Per the applicant, 
LantidraTM is used in conjunction with concomitant 
immunosuppression. The applicant asserted that the route of 
administration for LantidraTM is infusion into the hepatic 
portal vein only. The applicant noted that following transplant, the 
patient is monitored for graft function and safety issues, including 
potential adverse reactions due to immunosuppression. The applicant 
stated that the primary mechanism of action for LantidraTM 
is the secretion of insulin by the beta cells within the infused 
allogeneic islet of Langerhans, which are responsible for regulating 
blood glucose levels in response to glucose stimulation.
    Please refer to the online application posting for 
LantidraTM, available at https://mearis.cms.gov/public/publications/ntap/NTP231017H5N2T, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
LantidraTM was granted approval for a Biologics License 
Application (BLA) from FDA on June 28, 2023, for the treatment of 
adults with Type 1 diabetes who are unable to approach target HbA1c 
because of current repeated episodes of severe hypoglycemia despite 
intensive diabetes management and education. According to the 
applicant, the technology was commercially available on January 8, 
2024. The applicant stated that the approved manufacturing site for 
LantidraTM is at the University of Illinois (UI) Health, UI 
in Chicago and time was needed to transfer islet cell transplant 
clinical protocols to the UI Health transplant division.
    We note that under national coverage determination (NCD) 260.3.1 
Islet Cell Transplantation in the Context of a Clinical Trial, Medicare 
will pay for the routine costs, as well as transplantation and 
appropriate related items and services, for Medicare beneficiaries 
participating in a National Institutes of Health (NIH)-sponsored 
clinical trial(s). Specifically, Medicare will cover transplantation of 
pancreatic islet cells, the insulin producing cells of the pancreas. 
Coverage may include the costs of acquisition and delivery of the 
pancreatic islet cells, as well as clinically necessary inpatient and 
outpatient medical care and immunosuppressants. Because 
LantidraTM may be covered by Medicare when it is used in the 
setting of a clinical trial, we will evaluate whether 
LantidraTM is eligible for new technology add-on payments 
for FY 2025. We note that any payment made under the Medicare program 
for services provided to a beneficiary would be contingent on CMS' 
coverage of the item, and any restrictions on the coverage would apply.
    The applicant stated that the recommended minimum dose is 5,000 
equivalent islet number (EIN)/kg for the initial infusion, and 4,500 
EIN/kg for subsequent infusion(s) in the same recipient. The maximum 
dose per infusion is dictated by the estimated tissue volume, which 
should not exceed 10 cc per infusion, and the total EIN present in the 
infusion bag (up to a maximum of 1 x 10[supcaret]6 EIN per bag). A 
second infusion may be performed if the patient does not achieve 
independence from exogenous insulin within 1-year post-infusion or 
within 1-year after losing independence from exogenous insulin after a 
previous infusion. A third infusion may be performed using the same 
criteria as for the second infusion.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify LantidraTM. We note 
that the applicant submitted a request for approval for a unique ICD-
10-PCS procedure code for LantidraTM beginning in FY 2025.
    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 LantidraTM has not been assigned to the same 
MS-DRG when compared to an existing technology to achieve a therapeutic 
outcome. The following table summarizes the applicant's assertions 
regarding the substantial similarity criteria. Please see the online 
application posting for LantidraTM for the applicant's 
complete statements in support of its assertion that 
LantidraTM

[[Page 36067]]

is not substantially similar to other currently available technologies.
[GRAPHIC] [TIFF OMITTED] TP02MY24.102

    We are inviting public comments on whether LantidraTM is 
substantially similar to existing technologies and whether 
LantidraTM meets the newness criterion.
    With respect to the cost criterion, the applicant included the two 
most recent patient cases with charges of LantidraTM billed 
by a hospital that administered the technology, based on that 
hospital's billing data file on the undiscounted costs. The applicant 
stated that it attempted to identify potential cases representing 
patients who may be eligible for LantidraTM by searching the 
FY 2022 MedPAR and the 100 percent sample FY 2022 Standard Analytical 
Files (SAF) for cases reporting ICD-10-CM/PCS codes and MS-DRGs codes 
that were relevant to the FDA approved indication and administration of 
LantidraTM, however, it could not confirm if cost data from 
the two most recent patient cases were included in the FY 2022 MedPAR 
or SAF. As a result, the applicant provided the charges billed by the 
hospital for these two cases. The applicant stated that the MS-DRG 
coded for the two cases was MS-DRG 639 (Diabetes without CC/MCC). 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 $374,547, which exceeded the average 
case-weighted threshold amount of $32,311. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that 
LantidraTM meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP02MY24.103

    We note the following concerns regarding the cost criterion. We 
note that the applicant did not remove any charges or indirect charges 
related to prior technology without providing further details. We are 
interested in

[[Page 36068]]

additional information regarding whether LantidraTM would 
replace any prior technology. We are also interested in how the 
applicant estimated an inflation factor of 10.00 percent to apply to 
the standardized charges. With respect to the cases included in the 
cost analysis, we note that the applicant limited the cost analysis to 
the two most recent patient cases with charges of LantidraTM 
billed by the hospital, which the applicant asserted were the best 
available data for the FY 2022 cost analysis. We note the MS-DRG coded 
for these two cases was MS-DRG 639 (Diabetes without CC/MCC). We are 
interested in information as to whether cases in other MS-DRGs would be 
potentially eligible for LantidraTM and if these cases 
should also be included in the cost analysis by using appropriate 
inclusion/exclusion criteria based on reporting of ICD-10-CM/PCS codes.
    We are inviting public comments on whether LantidraTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that LantidraTM represents a substantial 
clinical improvement over existing technologies. The applicant asserted 
that patients with the indication of Type 1 diabetes characterized by 
hypoglycemic unawareness are at risk of severe hypoglycemia, 
complications, and death, if untreated. According to the applicant, 
when intensive insulin therapy is not sufficient for addressing 
symptoms of severe hypoglycemia, LantidraTM infusion into 
the hepatic portal vein offers a safe and effective minimally invasive 
alternative with proven clinical outcomes, less complications, and 
similar overall costs to that of whole pancreas transplantation. The 
applicant also asserted that LantidraTM provides a treatment 
option for patients unresponsive to, or ineligible for, currently 
available treatments because whole pancreas transplant, a currently 
available treatment, is associated with greater surgical and post-
procedural risk than pancreatic islet transplantation. Additionally, 
the applicant asserted that due to procedural risks, some patients may 
not be appropriate surgical candidates for whole pancreas 
transplantation.\66\ The applicant provided two patient testimonials, 
one study combining results of a Phase 1/2 and a Phase 3 clinical study 
to support these claims, as well as one background article.\67\ The 
following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for LantidraTM for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.
---------------------------------------------------------------------------

    \66\ CellTrans Inc., Cellular, Tissue, and Gene Therapies 
Advisory Committee Briefing Document LantidraTM 
(donislecel) for the Treatment of Brittle Type 1 Diabetes Mellitus. 
https://www.fda.gov/media/147529/download April 15, 2021. Pages 22 
and 105.
    \67\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
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BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.104


[[Page 36069]]


BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether LantidraTM meets 
the substantial clinical improvement criterion. We are interested in 
evidence on clinical outcomes based on comparison of 
LantidraTM with currently available treatments, including 
whole pancreatic transplant or recent advances in glucose monitoring 
and insulin delivery systems that are FDA-approved. We also note that 
according to the summary of the long-term six-year follow-up of 
patients from the LantidraTM clinical trials,\68\ the number 
of evaluable patients was reduced from 30 at the baseline to 12 at year 
6. We question whether the small number would impact the reliability of 
the conclusions about insulin independence and reduction in severe 
hypoglycemic events. Regarding the applicant's claim that 
LantidraTM patients achieved insulin independence, improved 
HbA1c endpoints, had fewer hypoglycemia episodes, and experienced 
improved quality of life, the applicant stated that the Phase 1/2 and 3 
trials had over 10 years of extended follow-up, but specific results on 
long-term efficacy appear to be provided only up to 6 years post- the 
last transplant.\69\ We would be interested in learning about available 
results from any longer-term follow-up. In addition, we would be 
interested in data demonstrating that LantidraTM results in 
improved clinical outcomes like reduced mortality to support an 
assessment of whether LantidraTM represents a substantial 
clinical improvement.
---------------------------------------------------------------------------

    \68\ CellTrans, Inc. 2021, Table 20, p. 60.
    \69\ Ibid.
---------------------------------------------------------------------------

    We are inviting public comments on whether LantidraTM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
LantidraTM.
h. AMTAGVITM (lifileucel)
    Iovance Biotherapeutics, Inc. submitted an application for new 
technology add-on payments for AMTAGVITM (lifileucel) for FY 
2025. According to the applicant, AMTAGVITM is an one-time, 
single-dose autologous tumor-infiltrating lymphocyte (TIL) 
immunotherapy for the treatment of advanced (unresectable or 
metastatic) melanoma comprised of a suspension of TIL for intravenous 
infusion. We note that Iovance Biotherapeutics submitted an application 
for new technology add-on payments for AMTAGVITM for FY 2022 
under the name lifileucel, as summarized in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25272 through 25282) but withdrew the application 
prior to the issuance of the FY 2022 IPPS/LTCH PPS final rule (86 FR 
44979). We also note that the applicant submitted an application for 
AMTAGVITM for FY 2023 under the name lifileucel, as 
summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28244 
through 28257), 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 
AMTAGVITM, available at https://mearis.cms.gov/public/publications/ntap/NTP231012V8Y9J, for additional detail describing the 
technology and the treatment of unresectable or metastatic melanoma.
    With respect to the newness criterion, according to the applicant, 
AMTAGVITM was granted Biologics License Application (BLA) 
approval from FDA on February 16, 2024 for treatment of adult patients 
with unresectable or metastatic melanoma previously treated with a 
programmed cell death protein 1 (PD-1) blocking antibody, and if B-raf 
proto-oncogene (BRAF) V600 mutation positive, a BRAF inhibitor with or 
without a mitogen-activated extracellular signal-regulated kinase (MEK) 
inhibitor. The applicant stated that AMTAGVITM has received 
Regenerative Medicine Advanced Therapy (RMAT), Orphan Drug, and Fast 
Track designations from FDA for the treatment of advanced melanoma. 
According to the applicant, AMTAGVITM is expected to be 
commercially available within 30-40 days post-FDA approval due to the 
need for the physician to prescribe AMTAGVITM, the treatment 
center to receive approval from the patient's insurer and to schedule 
and surgically resect the patient's tumor tissue, the 22-day TIL 
manufacturing process, and shipment/invoicing of AMTAGVITM 
to the treatment center for patient administration. We are interested 
in additional information regarding the delay in the technology's 
market availability, as it seems that the technology would need to be 
available for sale before a physician would be able to prescribe 
AMTAGVITM.
    According to the applicant, AMTAGVITM is provided as a 
single dose for infusion containing a suspension of TIL in up to four 
patient-specific intravenous (IV) infusion bag(s), with each dose 
containing 7.5 x 10[supcaret]9 to 72 x 10[supcaret]9 viable cells. The 
applicant further noted that there is a lymphodepleting regimen 
administered before infusion of AMTAGVITM, and, post-
AMTAGVITM infusion, an interleukin 2 (IL-2) infusion at 
600,000 IU/kg is administered every 8 to 12 hours, for up to a maximum 
of 6 doses, to support cell expansion in vivo.
    The applicant stated that effective October 1, 2022, the following 
ICD-10-PCS codes may be used to uniquely describe procedures involving 
the use of AMTAGVITM: XW033L7 (Introduction of lifileucel 
immunotherapy into peripheral vein, percutaneous approach, new 
technology group 7), and XW043L7 (Introduction of lifileucel 
immunotherapy into central vein, percutaneous approach, new technology 
group 7). The applicant stated that all diagnosis codes under the 
category C43 (Malignant melanoma of skin) may be used to currently 
identify the indication for AMTAGVITM 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 AMTAGVITM is not substantially similar to 
other currently available technologies because TIL immunotherapy with 
AMTAGVITM has a novel and unique mechanism of action which 
delivers a highly customized, personalized, and targeted, single-
infusion treatment for advanced melanoma, and AMTAGVITM is 
the first and only TIL immunotherapy approved for the treatment of 
advanced (unresectable or metastatic) melanoma, 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 
AMTAGVITM for the applicant's complete statements in support 
of its assertion that AMTAGVITM is not substantially similar 
to other currently available technologies.
BILLING CODE 4120-01-P

[[Page 36070]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.105

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

    \70\ Olson D, et al. Immune checkpoint inhibitors (ICI) 
treatment after progression on anti-PD-1 therapy in advanced 
melanoma: a systematic literature review. National Comprehensive 
Care Network (NCCN) Annual Conference, Poster. March-April 2023.
    \71\ Schumacher TN, Schreiber RD: Neoantigents in cancer 
immunotherapy. Science 348:69-74, 2015.
    \72\ Simpson-Abelson MR, Hilton F, Fardis M, et al: Iovance 
generation-2 tumor-infiltrating lymphocyte (TIL) product is 
reinvigorated during the manufacturing process. Ann Ocol 31:S645-
S671, 2020 (suppl 4).
    \73\ Raskov H, et al. British Journal of Cancer (2021) 124:359-
367, https://doi.org/10.038/s41416-020-01048-4.
    \74\ Fardis M, et al. Current and future directions for tumor 
infiltrating lymphocyte therapy for the treatment of solid tumors. 
Cell and Gene Therapy Insights, 2020; 6(6), 855-863.

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[[Page 36071]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.106

    We are inviting public comments on whether AMTAGVITM is 
substantially similar to existing technologies and whether 
AMTAGVITM meets the newness criterion.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR file using 
different combinations of ICD-10-CM codes, ICD-10-PCS codes, and/or 
inpatient length-of-stay (LOS) of 10 or more days. The applicant 
explained that it used different combinations to demonstrate four 
different cohorts that may be eligible for the technology. According to 
the applicant, eligible cases for AMTAGVITM will be mapped 
to Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other 
Immunotherapies). For each analysis, the applicant used the FY 2025 new 
technology add-on payments threshold for Pre-MDC MS-DRG 018 for all 
identified cases. Each analysis followed the order of operations 
described in the table later in this section.
    For the first analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: 
any melanoma and metastasis diagnosis codes and any cytokine 
interleukin-2 (IL-2) or chemotherapy procedure codes. Please see the 
online posting for AMTAGVITM for the complete list of codes 
provided by the applicant. The applicant used the inclusion/exclusion 
criteria described in the following table. Under this analysis, the 
applicant identified 176 claims mapping to 16 MS-DRGs, with each MS-DRG 
representing 6.3 percent of identified cases. The applicant calculated 
a final inflated average case-weighted standardized charge per case of 
$2,150,682, which exceeded the average case-weighted threshold amount 
of $1,374,450.
    For the second analysis, the applicant searched for potential cases 
for the following ICD-10-CM diagnosis/procedure codes in combination 
with an inpatient LOS of 10 or more days: any melanoma and metastasis 
diagnosis codes and any cytokine interleukin-2 (IL-2) or chemotherapy 
procedure codes. Please see the online posting for AMTAGVITM 
for the complete list of codes provided by the applicant. The applicant 
used the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 77 claims mapping to 
seven MS-DRGs, with each MS-DRG representing 14.3 percent of identified 
cases. The applicant calculated a final inflated average case-weighted 
standardized charge per case of $2,207,367, which exceeded the average 
case-weighted threshold amount of $1,374,450.
    For the third analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: a 
code describing primary or admitting diagnosis of melanoma and a 
metastasis diagnosis code. Please see the online posting for 
AMTAGVITM for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 735 claims mapping to 64 MS-DRGs, with each MS-DRG 
representing 3.4 percent to 1.5 percent of identified cases. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $2,017,903, which exceeded the average 
case-weighted threshold amount of $1,374,450.
    For the fourth analysis, the applicant searched for potential cases 
for the following combination of ICD-10-CM diagnosis/procedure codes: a 
code describing any diagnosis of melanoma and a metastasis diagnosis 
code. Please see the online posting for AMTAGVITM

[[Page 36072]]

for the complete list of codes provided by the applicant. The applicant 
used the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 6,648 claims mapping to 
358 MS-DRGs, each MS-DRG representing 0.2 percent to 6.7 percent of 
identified cases. The applicant calculated a final inflated average 
case-weighted standardized charge per case of $2,018,905, which 
exceeded the average case-weighted threshold amount of $1,374,450.
    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 AMTAGVITM meets 
the cost criterion.

[[Page 36073]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.107


[[Page 36074]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.108

BILLING CODE 4120-01-C
    We are inviting public comments on whether AMTAGVITM 
meets the cost criterion.
---------------------------------------------------------------------------

    \75\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    With regard to the substantial clinical improvement criterion, the 
applicant asserted that AMTAGVITM represents a substantial 
clinical improvement over existing technologies because the efficacy 
and safety profile of the single infusion of AMTAGVITM TIL 
immunotherapy addresses an important unmet need in the advanced 
(unresectable or metastatic) melanoma population who lack effective or 
approved treatment options after being previously treated with ICI 
therapy. The applicant asserts that the clinically meaningful and 
durable activity of AMTAGVITM represents substantial 
clinical improvement over published outcomes for chemotherapy. The 
applicant provided four studies to support these claims, as well as 22 
background articles about treatments for advanced melanoma.\76\
---------------------------------------------------------------------------

    \76\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

    The following table summarizes the applicant's assertions regarding 
the substantial clinical improvement criterion. Please see the online 
posting for AMTAGVITM for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.

[[Page 36075]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.109

    After review of the information provided by the applicant, we have 
the following concerns regarding whether AMTAGVITM meets the 
substantial clinical improvement criterion.
    In support of its application, the applicant provided data from the 
C-144-01 study, an ongoing phase two multicenter study (NCT02360579) to 
assess the efficacy and safety of autologous TIL in patients with stage 
IIIc-IV metastatic melanoma, which consisted of: Cohort 1 (n = 30 
generation 1 no-cryopreserved TIL product); Cohort 2 (n = 66 generation 
2 cryopreserved TIL product); Cohort 3 (a sub-sample of n = 10 from 
Cohorts 1, 2, and 4); and Cohort 4 (n = 75 generation 2 cryopreserved 
TIL product). In regard to the sample studied (Cohorts 2 & 4 combined) 
by Chesney et al. (2022),\77\ similar to concerns raised in the FY 2022 
IPPS/LTCH PPS proposed rule (86 FR 25281), we continue to question the 
appropriateness of combining Cohorts 2 and 4 together. Furthermore, 
similar to concerns raised in the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28256 through 28257), we note that in the study of Chesney et 
al. (2022), 54 percent of the sample size included males with a median 
age of 56; data on race, ethnicity, and other demographics are not 
presented. Given that the average age of Medicare beneficiaries is 
substantially older, and that Medicare beneficiaries often have 
multiple comorbidities, we question whether the sample evaluated is 
appropriately representative of the Medicare population and whether 
this sample has a disease burden similar to that seen in Medicare 
beneficiaries.\78,79,80\ Thus, similar to concerns raised in the FY 
2023 IPPS/LTCH PPS proposed rule (87

[[Page 36076]]

FR 28256 through 28257), we are concerned that the findings may not be 
generalizable to Medicare beneficiaries. Furthermore, as discussed in 
the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28256), we continue to 
question whether the patient sample evaluated in the Sarnaik et al. 
(2021) \81\ study is appropriately representative of the Medicare 
population and whether this sample has a disease burden similar to that 
seen in Medicare beneficiaries.
---------------------------------------------------------------------------

    \77\ Chesney J, et al. J Immunother Cancer 2022 
;10:3005755.Doi:10.1136/jitc-2022-005755.
    \78\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/Medicare_Beneficiary_Characteristics.
    \79\ Centers for Medicare and Medicaid Services. Chronic 
Conditions among Medicare Beneficiaries, Chartbook, 2012 Edition. 
Baltimore, MD. 2012. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/chronic-conditions/downloads/2012chartbook.pdf.
    \80\ Cher, B., Ryan, A. M., Hoffman, G. J., & Sheetz, K. H. 
(2020). Association of Medicaid Eligibility With Surgical 
Readmission Among Medicare Beneficiaries. JAMA network open, 3(6), 
e207426. https://doi.org/10.1001/jamanetworkopen.2020.7426.
    \81\ Sarnaik A, et al. Lifileucel, a tumor-infiltrating 
lymphocyte therapy, in metastatic melanoma. J Clin Oncol. 
2021;39(24):2656-66. doi:10.1200/JCO.21.00612 (Published online 
first: 2021/05/13).
---------------------------------------------------------------------------

    Second, similar to concerns raised in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25279 through 25282) and the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28256 through 28257), we continue to note that 
while multiple background studies were provided in support of the 
applicant's claims for substantial clinical improvement, those that 
evaluate AMTAGVITM are based solely on the C-144-01 trial. 
The background studies focus primarily on describing the limitations of 
other therapies rather than supporting the role of 
AMTAGVITM, and no direct comparisons to other existing 
therapies such as targeted therapies with combination BRAF plus MEK 
inhibitors or nivolumab plus ipilimumab were provided. Therefore, we 
would be interested in additional information comparing 
AMTAGVITM to existing treatments (for example, evidence 
comparing AMTAGVITM phase two studies to the phase two 
studies of existing or approved treatments by using meta-analysis after 
systematic review, or evidence based on retrospective cohort studies of 
the relevant patients to assess whether AMTAGVITM had 
significantly different impact on any outcomes compared to existing or 
approved treatments).
    Third, similar to concerns raised in the FY 2022 IPPS/LTCH PPS 
proposed rule (86 FR 25279 through 25282), and the FY 2023 IPPS/LTCH 
PPS proposed rule (87 FR 28256 through 28257), we note that the Chesney 
et al. (2022) \82\ study uses a surrogate endpoint, ORR, which combines 
the results of complete and partial responders; we question whether 
this correlates to improvement in clinical outcomes such as overall 
survival (OS).
---------------------------------------------------------------------------

    \82\ Chesney J, et al. J Immunother Cancer 2022; 
10:3005755.Doi:10.1136/jitc-2022-005755.
---------------------------------------------------------------------------

    Finally, similar to concerns raised in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28256 through 28257), we note that according to 
the applicant, high-dose IL-2 has been used to treat metastatic 
melanoma in the past and is given as a post-treatment to 
AMTAGVITM. According to the applicant, the occurrence of 
grade 3 and 4 treatment-emergent adverse events (TEAEs) was early and 
consistent with the lymphodepletion regimen (NMA-LD) and known profile 
of IL-2. If AMTAGVITM is always given in conjunction with 
the pre- and post-treatments, we question how it is possible to 
determine the cause of the TEAEs which are categorized as severe based 
on the Common Terminology Criteria for Adverse Events v4.03. We 
continue to question whether the effect seen in C-144-01 is due to 
AMTAGVITM itself or due to other factors such as the use of 
IL-2, general changes in medical practice over time, and the specific 
sample identified for the trial at hand.
    We are inviting public comments on whether AMTAGVITM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
AMTAGVITM.
i. LyfgeniaTM (lovotibeglogene autotemcel)
    Bluebird bio, Inc. submitted an application for new technology add-
on payments for Lyfgenia\TM\ (lovotibeglogene autotemcel) for FY 2025. 
According to the applicant, Lyfgenia\TM\ is an autologous hematopoietic 
stem cell-based gene therapy indicated for the treatment of patients 12 
years of age or older with sickle cell disease (SCD) and a history of 
vaso-occlusive events (VOE). Lyfgenia\TM\, administered as a single-
dose intravenous infusion, consists of an autologous cluster of 
differentiation 34+ (CD34+) cell-enriched population from patients with 
SCD that contains hematopoietic stem cells (HSCs) transduced with BB305 
lentiviral vector (LVV) encoding the [beta]-globin gene 
([beta]A-T87Q-globin gene), suspended in a cryopreservation 
solution. The applicant explained that Lyfgenia\TM\ is designed to add 
functional copies of a modified form of the [beta]A-T87Q-
globin gene into a patient's own HSCs, which allows their red blood 
cells to produce an anti-sickling adult hemoglobin (HbA\T87Q\), to 
reduce or eliminate downstream complications of SCD.
    Please refer to the online application posting for Lyfgenia\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231013X3AK8, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
Lyfgenia\TM\ was granted Biologics License Application (BLA) approval 
from FDA on December 8, 2023, for the treatment of patients 12 years of 
age or older with SCD and a history of VOEs. The applicant stated that 
it anticipates that LyfgeniaTM will become available for 
sale on April 16, 2024 and that the first commercial claim for 
Lyfgenia\TM\ will occur within approximately 130 days post-FDA approval 
to allow for the one-time activity to commercially qualify the contract 
manufacturer organization (CMO), followed by apheresis of the first 
patient at the qualified treatment center (QTC), where the personalized 
starting material will be shipped to the CMO for drug product 
manufacturing, release testing, and shipment of final product to the 
QTC for the one-time infusion. We are interested in additional 
information regarding the delay in the technology's market 
availability, as it appears that the technology would need to be 
available for sale prior to the enrollment of the first patient at the 
QTC. According to the applicant, Lyfgenia\TM\ is provided in infusion 
bags containing 1.7 to 20x10\6\ cells/mL (1.4 to 20 x 10\6\ CD34+ 
cells/mL) in approximately 20 mL of solution and is supplied in one to 
four infusion bags. Per the applicant, the minimum dose is 3.0 x 10\6\ 
CD34+ cells/kg patient weight.
    According to the applicant, as of October 1, 2023, there are 
currently two ICD-10-PCS procedure codes to distinctly identify the 
intravenous administration of Lyfgenia\TM\: XW133H9 (Transfusion of 
lovotibeglogene autotemcel into central vein, percutaneous approach, 
new technology group 9) and XW143H9 (Transfusion of lovotibeglogene 
autotemcel into peripheral 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 Lyfgenia\TM\ under the 
ICD-10-CM coding system. Please refer to the online application posting 
for the complete list of ICD-10-CM codes provided by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that Lyfgenia\TM\ is not substantially

[[Page 36077]]

similar to other currently available technologies, because Lyfgenia\TM\ 
has a distinct mechanism of action, which converts SCD at the genetic, 
cellular, and physiologic level to a non-sickling phenotype through the 
expression of the gene therapy-derived antisickling 
[beta]A-T87Q-globin gene, and that therefore, the technology 
meets the newness criterion. Additionally, the applicant stated 
LyfgeniaTM is not substantially similar to other currently 
available therapeutic approaches indicated for SCD or to any drug 
therapy assigned to any MS-DRG in the 2022 MedPAR data.
    The following table summarizes the applicant's assertions regarding 
the substantial similarity criteria. Please see the online application 
posting for Lyfgenia\TM\ for the applicant's complete statements in 
support of its assertion that Lyfgenia\TM\ is not substantially similar 
to other currently available technologies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.110

BILLING CODE 4120-01-C
    We note that Lyfgenia\TM\ may have the same or similar mechanism of 
action to Casgevy\TM\, for which we also received an application for 
new technology add-

[[Page 36078]]

on payments for FY 2025. Lyfgenia\TM\ and Casgevy\TM\ are both gene 
therapies using modified autologous CD34+ hematopoietic stem and 
progenitor cell (HSPC) therapies administered via stem cell 
transplantation for the treatment of SCD. Both technologies are 
autologous, ex-vivo modified hematopoietic stem-cell biological 
products. As previously discussed, CasgevyTM was approved by 
FDA for this indication on December 8, 2023. For these technologies, 
patients are required to undergo CD34+ HSPC mobilization followed by 
apheresis to extract CD34+ HSPCs for manufacturing and then 
myeloablative conditioning using busulfan to deplete the patient's bone 
marrow in preparation for the technologies' modified stem cells to 
engraft to the bone marrow. Once engraftment occurs for both 
technologies, the patient's cells start to produce a different form of 
hemoglobin to reduce the amount of sickling hemoglobin. Further, both 
technologies appear to map to the same MS-DRGs, MS-DRG 016 (Autologous 
Bone Marrow Transplant with CC/MCC) and 017 (Autologous Bone Marrow 
Transplant without CC/MCC), and to treat the same or similar disease 
(sickle cell disease) in the same or similar patient population 
(patients 12 years of age and older who have a history of vaso-
occlusive events). Accordingly, as it appears that Lyfgenia\TM\ and 
Casgevy\TM\ may use the same or similar mechanism of action to achieve 
a therapeutic outcome (that is, to reduce the amount of sickling 
hemoglobin to reduce and prevent VOEs associated with SCD), would be 
assigned to the same MS-DRG, and treat the same or similar patient 
population and disease, we believe that these technologies may be 
substantially similar to each other such that they should be considered 
as a single application for purposes of new technology add-on payments. 
We note that if we determine that this technology is substantially 
similar to CasgevyTM, we believe the newness period would 
begin on December 8, 2023, the date both LyfgeniaTM and 
CasgevyTM received FDA approval for SCD. We are interested 
in information on how these two technologies may differ from each other 
with respect to the substantial similarity criteria and newness 
criterion, to inform our analysis of whether LyfgeniaTM and 
CasgevyTM are substantially similar to each other and 
therefore should be considered as a single application for purposes of 
new technology add-on payments.
    We are inviting public comment on whether LyfgeniaTM 
meets the newness criterion, including whether LyfgeniaTM is 
substantially similar to CasgevyTM and whether these 
technologies should be evaluated as a single technology for purposes of 
new technology add-on payments.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. For each 
analysis, the applicant searched the FY 2022 MedPAR using different 
ICD-10-CM codes to identify potential cases representing patients who 
may be eligible for Lyfgenia\TM\. Per the applicant, Lyfgenia\TM\ is 
intended for patients who have not already undergone Allogeneic Bone 
Marrow Transplant or Autologous Bone Marrow Transplant. The applicant 
explained that it used different ICD-10-CM codes to demonstrate 
different cohorts of SCD patients that may be eligible for the 
technology.
    According to the applicant, eligible cases for Lyfgenia\TM\ will be 
mapped to either Pre-MDC MS-DRG 016 (Autologous Bone Marrow Transplant 
with CC/MCC) or 017 (Autologous Bone Marrow Transplant without CC/MCC). 
For each cohort, the applicant performed two sets of analyses using 
either the FY 2025 new technology add-on payments threshold for Pre-MDC 
MS-DRG 016 or Pre-MDC MS-DRG 017 for all identified cases. We note that 
the FY 2025 new technology add-on payments thresholds for both Pre-MDC 
MS-DRG 016 and Pre-MDC MS-DRG 017 are $182,491. Each analysis followed 
the order of operations described in the table later in this section.
    For the primary cohort, the applicant searched for an appropriate 
group of patients with any ICD-10-CM diagnosis code for SCD with 
crisis. Please see the online posting for LyfgeniaTM for the 
complete list of ICD-10-CM codes provided by the applicant. The 
applicant used the inclusion/exclusion criteria described in the 
following table. Under this analysis, the applicant identified 12,357 
claims mapping to 167 MS-DRGs, including MS-DRGs 811 and 812 (Red Blood 
Cell Disorders with MCC and without MCC, respectively) representing 
76.0 percent of total identified cases. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$11,677,887, which exceeded the average case-weighted threshold amount 
of $182,491.
    For the sensitivity 1 cohort, the applicant searched for a narrower 
cohort of patients with the admitting or primary ICD-10-CM diagnosis 
codes of Hemoglobin-SS (Hb-SS) SCD with crisis for the most common 
genotype of SCD. Please see the online posting for 
LyfgeniaTM for a complete list of ICD-10-CM codes provided 
by the applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 10,987 claims mapping to 160 MS-DRGs, including MS-DRGs 811 
and 812 (Red Blood Cell Disorders with and without MCC, respectively) 
representing 75.1 percent of total identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $11,680,025, which exceeded the average case-weighted 
threshold amount of $182,491.
    For the sensitivity 2 cohort, the applicant searched for a broader 
cohort of patients with the primary or secondary ICD-10-CM diagnosis 
codes for SCD with or without crisis. Please see the online posting for 
LyfgeniaTM for a complete list of ICD-10-CM codes provided 
by the applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 17,120 claims mapping to 453 MS-DRGs, including MS-DRGs 811 
and 812 (Red Blood Cell Disorders with and without MCC, respectively) 
representing 56.3 percent of total identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $11,681,718, which exceeded the average case-weighted 
threshold amount of $182,491.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant maintained that Lyfgenia\TM\ meets the 
cost criterion.

[[Page 36079]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.111

    We are inviting public comments on whether Lyfgenia\TM\ meets the 
cost criterion. With regard to the substantial clinical improvement 
criterion, the applicant asserted that Lyfgenia\TM\ represents a 
substantial clinical improvement over existing technologies, because 
Lyfgenia\TM\ is a one-time administration gene therapy that uniquely 
impacts the pathophysiology of SCD at the genetic level and offers the 
potential for stable, durable production of anti-sickling hemoglobin 
HbA\T87Q\, with approximately 85 percent of RBCs producing HbA\T87Q\, 
leading to complete resolution of severe VOEs in patients with SCD 
through 5.5 years of follow-up. The applicant asserted that for these 
reasons Lyfgenia\TM\ is a much-needed treatment option for a patient 
population ineligible for allo-HSCT or without a matched related donor 
and significantly improves health-related quality of life. The 
applicant provided seven studies on LyfgeniaTM to support 
these claims, as well as 22 background articles about SCD and its 
current treatments.\84\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for Lyfgenia\TM\ for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \83\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
    \84\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
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BILLING CODE 4120-01-P

[[Page 36080]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.112


[[Page 36081]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.113

BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether Lyfgenia\TM\ meets the 
substantial clinical improvement criterion. With respect to the claim 
that Lyfgenia\TM\ presents an acceptable risk-benefit profile in terms 
of efficacy and safety for patients with SCD while allowing clinically 
meaningful improvements in HRQoL, the applicant stated the safety 
profile remains generally consistent with risk of autologous stem cell 
transplant, myeloablative conditioning, and underlying SCD. 
Additionally, the applicant mentions that serious treatment-emergent 
adverse events (TEAEs) of grade 3 or higher TEAEs were reported, but no 
cases of veno-occlusive liver disease, graft failure, or vector-
mediated replication competent lentivirus were reported. Per the 
applicant, three patients had adverse events attributed to 
Lyfgenia\TM\, including 2 events deemed possibly related and 1 event 
deemed definitely related, with all 3 resolving within 1 week of onset. 
We note that the applicant submitted one published article about Group 
C results, an interim analysis by Kanter et al. (2022) \85\ in which 
Lyfgenia\TM\'s safety and efficacy were evaluated in a nonrandomized, 
open-label, single-dose phase 1-2 clinical trial (HGB-206) where 35 
Group C patients had received LyfgeniaTM infusion. Group C 
was established after optimizing the treatment process in the initial 
cohorts, Groups A (7 patients) and B (2 patients). There was also a 
more stringent inclusion criterion for severe vaso-occlusive events 
before enrollment for Group C. The median follow-up was 17.3 months 
(range, 3.7-37.6) and 25 patients met both the inclusion criteria for 
vaso-occlusive events before enrollment and a minimum 6-month follow-up 
required for assessment of vaso-occlusive events. After receiving 
Lyfgenia\TM\, 12 patients (34 percent) had at least one serious adverse 
event; the most frequently reported were abdominal pain, drug 
withdrawal syndrome (opiate), nausea, and vomiting (6 percent each). 
The two events that were deemed to be possibly related to 
LyfgeniaTM were grade 2 leukopenia and grade 1 decreased 
diastolic blood pressure and the one event that was deemed to be 
definitely related was grade 2 febrile neutropenia. Although this 
evidence was provided to assert LyfgeniaTM improves clinical 
outcomes relative to previously available therapies, we note that the 
risk-benefit profile and HRQoL for LyfgeniaTM is not 
compared to existing therapies. We would be interested in additional 
information regarding the risk-benefit profile of LyfgeniaTM 
compared to existing therapies, including clarification regarding an 
acceptable risk-benefit profile for patients with SCD and whether 
Lyfgenia\TM\ fits this profile. We also question if the length of 
patient follow-up (median: 17.3 months, range: 3.7 to 37.6) would be 
sufficient to assess long-term safety outcomes.
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    \85\ Kanter, J., Walters, M.C., Krishnamurti, L., Mapara, M.Y., 
Kwiatkowski, J.L, Rifkin-Zenenberg, S., Aygun, B., Kasow, K.A., 
Pierciey, Jr., F.J., Bonner, M., Miller, A., Zhang, X., Lynch, J., 
Kim, D., Ribeil, J.A., Asmal, M., Goyal, S., Thompson, A.A., & 
Tisdale, J.F. (2022). Biologic and Clinical Efficacy of LentiGlobin 
for Sickle Cell Disease. The New England Journal of Medicine, 386, 
617-628. https://doi.org/10.1056/nejmoa2117175.
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    Finally, with respect to the applicant's assertion that 
LyfgeniaTM improves clinical outcomes by halting SCD 
progression, presenting an acceptable risk-benefit profile with 
clinically meaningful improvement in HRQoL, and results in complete 
resolution of sVOEs, we note that the applicant provided multiple 
sources of evidence that analyze the same phase 1-2 clinical study for 
LyfgeniaTM, HGB-206. We received an additional unpublished 
source \86\ that provided some data on the phase 3 HGB-210 trial and 
combined this with data from HGB-206 with a total of 34 patients being 
evaluable for efficacy and 47 for safety. The median age of these 47 
patients was 23 years. Due to the small study population and the median 
age of participants in the studies, we question if the safety and 
efficacy data from these studies would be generalizable to the Medicare 
population.
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    \86\ Kanter J, et al. 65th ASH Annual Meeting and Exposition. 
December 9-12, 2023. Abstract 1051. Oral presentation (December 
11th).
---------------------------------------------------------------------------

    We are inviting public comments on whether Lyfgenia\TM\ meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
Lyfgenia\TM\.
j. Quicktome Software Suite (Quicktome Neurological Visualization and 
Planning Tool)
    Omniscient Neurotechnology submitted an application for new 
technology add-on payments for Quicktome Software Suite for FY 2025. 
According to the applicant, Quicktome Software Suite is a cloud-based 
software that uses artificial intelligence (AI) tools and the 
scientific field of connectomics to analyze millions of data points 
derived from a patient's magnetic resonance imaging (MRI). Per the 
applicant, Quicktome Software Suite's proprietary Structural 
Connectivity Atlas (SCA) uses machine learning and

[[Page 36082]]

tractographic techniques to create highly specific and personalized 
maps of a patient's brain or connectome from a standard MRI scan, 
regardless of brain shape, size, or physical distortion. The applicant 
asserted that the SCA is combined with a key refinement algorithm which 
identifies the location of parcels based on the specific structural 
characteristics of an individual's brain. The applicant asserted that 
Quicktome Software Suite uses resting-state functional MRI (rs-fMRI) to 
unveil the brain's network architecture or functional connectome by 
mapping blood oxygen level dependent (BOLD) signal correlations across 
brain parcels. Per the applicant, using data from a structural or a 
functional MRI (fMRI) scan, Quicktome Software Suite's proprietary AI 
allows clinicians to quickly and accurately assess the structural 
layout (that is, the locations and integrity) or the functional 
connectivity (that is, how different brain regions are working 
together) of a patient's brain.
    Please refer to the online application posting for Quicktome 
Software Suite, available at https://mearis.cms.gov/public/publications/ntap/NTP23101722NQE, for additional detail describing the 
technology and the disease for which the technology is used.
    With respect to the newness criterion, according to the applicant, 
the Quicktome Software Suite received FDA 510(k) clearance on May 30, 
2023. Per the FDA-cleared indication, the Quicktome Software Suite is 
composed of a set of modules intended for the display of medical images 
and other healthcare data. It includes functions for image review, 
image manipulation, basic measurements, planning, 3D visualization (MPR 
reconstructions and 3D volume rendering), and the display of BOLD rs-
MRI scan studies. The FDA clearance for Quicktome Software Suite was 
based on substantial equivalence to the legally marketed predicate 
device, StealthViz Advanced Planning Application with Stealth Diffusion 
Tensor Imaging (DTI)TM Package (hereafter referred to as 
StealthVizTM), as both of these devices allow the import and 
export of DICOM images to a hospital picture archiving and 
communication system (PACS); contain a graphical user interface to 
conduct planning and visualization; display MRI anatomical images, as 
well as tractography constructed from Diffusion Weighted Images, in 2D 
and 3D views; register tractography and an atlas to the underlying 
anatomical images; allow adding, removing, and editing of objects 
(including automatically segmented and manually defined regions of 
interest); and are delivered as software on an off-the-shelf hardware 
platform.\87\ Prior to the FDA 510(k) clearance of Quicktome Software 
SuiteTM in 2023, the technology, under the trade name 
Quicktome, received FDA 510(k) clearance on March 9, 2021, based on 
substantial equivalence to StealthVizTM.\88\ 
StealthVizTM received FDA 510(k) clearance on May 16, 2008 
for use in two- and three-dimensional (2D and 3D) surgical planning and 
image review and analysis. According to the FDA 510(k) summary for 
StealthVizTM, it enables digital diagnostic and functional 
imaging datasets, reviewing and analyzing the data in various 2D and 3D 
presentation formats, performing image fusion of datasets, segmenting 
structures in the images with manual and automatic tools and converting 
them into 3D objects for display, and exporting results to other 
Medtronic Navigation planning applications, to a PACS or to Medtronic 
Navigation surgical navigation systems such as StealthStation System. 
According to the applicant, the Quicktome Software Suite was 
commercially available immediately after FDA clearance.
---------------------------------------------------------------------------

    \87\ Food and Drug Administration (FDA). 510(k) Premarket 
notification for Medtronic Navigation, Inc.'s StealthViz Advanced 
Planning Application with StealthDTI Package. K081512. May 16, 2008.
    \88\ FDA. K203518. 2021.
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    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Quicktome Software Suite. We 
note that the applicant submitted a request for approval for a unique 
ICD-10-PCS procedure code for the Quicktome Software Suite beginning in 
FY 2025. The applicant provided a list of diagnosis codes that may 
currently be used to identify the indication for Quicktome Software 
Suite under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria under the newness criterion, it would 
be considered substantially similar to an existing technology and would 
not be considered new for the purpose of new technology add-on 
payments.
    With respect to the substantial similarity criteria, the applicant 
asserted that Quicktome Software Suite is not substantially similar to 
other currently available technologies because it is the first and only 
FDA-cleared platform to enable connectomic analysis at an individual 
level using machine learning and tractographic techniques to create 
personalized maps of the human brain. In addition, the applicant 
asserted that Quicktome Software Suite is the first cleared 
neurological planning tool to offer rs-fMRI capabilities. Per the 
applicant, Quicktome Software Suite eliminates the need for highly 
trained personnel, who may not be available at most institutions, and 
therefore, the technology meets the newness criterion. The applicant 
further asserted that current technologies that rely on task-based fMRI 
(tb-fMRI) can be problematic in brain tumor patients who may be 
cognitively impaired because they may be unable to perform required 
tasks. The following table summarizes the applicant's assertions 
regarding the substantial similarity criteria. Please see the online 
application posting for Quicktome Software Suite for the applicant's 
complete statements in support of its assertion that the Quicktome 
Software Suite is not substantially similar to other currently 
available technologies.

[[Page 36083]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.114

    We note the following concerns regarding whether Quicktome Software 
Suite meets the newness criterion. With respect to the applicant's 
claim that Quicktome Software Suite does not use the same or similar 
mechanism of action as existing technologies to achieve a therapeutic 
outcome, we note that, according to the 510(k) application, it appears 
that the Quicktome Software Suite is equivalent to 
StealthVizTM, its predicate device. We are unclear how the 
Quicktome Software Suite's mechanism of action, which enables patient-
specific connectomic analysis for neurological planning, is different 
from that of StealthVizTM. We note that 
StealthVizTM received FDA 510(k) clearance on May 16, 2008 
for use in 2D/3D surgical planning and image review and analysis, and 
therefore is no longer considered new for purposes of new technology 
add-on payments. According to the applicant, Quicktome Software Suite 
is the first and only FDA-cleared platform to enable brain network 
mapping and analysis at an individual level and provides clinicians 
with information that was previously only available in a research 
setting. We would be interested in further information to support that 
the Quicktome Software Suite does not use the same or similar mechanism 
of action as StealthVizTM to achieve a therapeutic outcome, 
including information regarding capabilities of Quicktome Software 
Suite not found in StealthVizTM, and whether and how those 
capabilities are the result of a new mechanism of action.
    In addition, we note that there are several existing FDA-approved 
or cleared technologies (for example, StealthVizTM, 
Brainlab's Elements and iPlan products) that analyze fMRI and other 
medical imaging data to create 3-D maps of a patient's brain, including 
white matter tracts. Furthermore, while the applicant asserted that 
Quicktome Software Suite is the only FDA-cleared device that uses a rs-
fMRI, we question whether other FDA-cleared neurosurgical planning and 
visualization technologies integrate rs-fMRI, or if the analysis of rs-
fMRI for neurosurgical planning is a mechanism of action unique to 
Quicktome Software Suite. We would be interested in more information on 
the relevant current standard of care and technologies utilized for 
neurosurgical planning and how the mechanism of action of the Quicktome 
Software Suite compares to the mechanism of action of existing 
technologies and connectomics software.
    With respect to the third criterion, whether Quicktome Software 
Suite involves the treatment of the same or similar disease and patient 
population compared to existing technologies, we note that the 
applicant stated that the Quicktome Software Suite does not treat a new 
disease type or patient population, but does provide new information 
for the treatment of existing patient populations. However, the 
provision of new information for the treatment of existing patient 
populations does not mean that the technology treats a new disease type 
or patient population, and therefore, it is unclear what the basis is 
for the applicant's statement that the third criterion is not met. We 
would be interested in additional information to support whether and 
how Quicktome Software Suite may involve the treatment of a different 
type of disease or patient population.
    As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44981), 
we also continue to be interested in public comments regarding issues 
related to determining newness for technologies that use AI, an 
algorithm, or software. Specifically, we are interested in public 
comment on how these technologies may be considered for the purpose of 
identifying a unique mechanism of action; how updates to AI, an 
algorithm, or software would affect an already approved technology or a 
competing technology; whether software changes for an already approved 
technology could be considered a new mechanism of action, and whether 
an improved algorithm by competing technologies would represent a 
unique mechanism of action if the outcome is the same as an already 
approved AI new technology.
    We are inviting public comments on whether Quicktome Software Suite 
is substantially similar to existing technologies and whether Quicktome 
Software Suite meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for Quicktome Software Suite, 
the applicant searched 2020 Medicare Inpatient

[[Page 36084]]

Hospitals--by Provider and Service data.\89\ The applicant included all 
cases from the following MS-DRGs: 025 (Craniotomy and Endovascular 
Intracranial Procedures with MCC), 026 (Craniotomy and Endovascular 
Intracranial Procedures with CC), and 027 (Craniotomy and Endovascular 
Intracranial Procedures without CC/MCC). Using the inclusion/exclusion 
criteria described in the following table, the applicant identified 
28,401 cases mapping to these three craniotomy MS-DRGs, with 64 percent 
of the identified cases mapping to MS-DRG 025. 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 
$179,317, which exceeded the average case-weighted threshold amount of 
$134,802. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that Quicktome Software Suite meets the cost 
criterion.
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    \89\ The Medicare Inpatient Hospitals by Provider and Service 
dataset provides information on inpatient discharges for Original 
Medicare Part A beneficiaries by IPPS hospitals. It includes 
information on the use, payment, and hospital charges for more than 
3,000 U.S. hospitals that received IPPS payments. The data are 
organized by hospital and Medicare Severity Diagnosis Related Group 
(DRG): https://data.cms.gov/provider-summary-by-type-of-service/medicare-inpatient-hospitals/medicare-inpatient-hospitals-by-provider-and-service.
[GRAPHIC] [TIFF OMITTED] TP02MY24.115

    We note the following concerns regarding the cost criterion. We 
note that the applicant limited its cost analysis to MS-DRGs 025, 026, 
and 027 because those three MS-DRGs represent brain tumor resection 
procedures, which are the first and most clearly established procedures 
for which the technology offers clinical utility. We are interested in 
information as to whether the technology would map to other MS-DRGs, 
such as 023 and 024 (Craniotomy with Major Device Implant or Acute 
Complex CNS PDX with MCC or Chemotherapy, or without MCC, 
respectively), or 054 and 055 (Nervous System Neoplasms with and 
without MCC, respectively), and if these MS-DRGs should also be 
included in the cost analysis. In addition, we question whether every 
case within MS-DRGs 025, 026, 027 would be eligible for the technology 
and whether there would be any appropriate inclusion/exclusion criteria 
by ICD-10-CM/PCS codes within these MS-DRGs to identify potential cases 
representing patients who may be eligible for Quicktome Software Suite.
    We are inviting public comments on whether Quicktome Software Suite 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that Quicktome Software Suite represents a 
substantial clinical improvement over existing technologies because 
Quicktome supports the visualization and brain mapping that improve 
clinical outcomes such as reducing the risk of an extended length of 
stay (LOS) and unplanned readmissions for craniotomy patients by 
reducing new postoperative neurological deficits that are caused by 
damage to brain networks or a patient's connectome. The applicant 
further asserted that Quicktome Software Suite is the first and only 
FDA-cleared platform to enable connectomic analysis at an individual 
level, enabling surgeons to visualize and avoid damaging these brain 
networks during surgery, thereby significantly improving clinical

[[Page 36085]]

outcomes relative to services or technologies previously available. The 
applicant submitted three published studies and one unpublished study 
evaluating the Quicktome Software Suite to support these claims, as 
well as four background articles about complications leading to 
unplanned readmissions after cranial surgery, factors associated with 
extended LOS in patients undergoing craniotomy for tumor resection, the 
association of incorporating fMRI in presurgical planning with 
mortality and morbidity in brain tumor patients, and the clinical 
importance of non-traditional, large-scale brain networks with respect 
to the potential adverse effects on patients when these networks are 
disrupted during surgery.\90\ We note that one of the articles 
submitted as a study using the technology, the Dadario and Sughrue 
(2022) \91\ study, should more appropriately be characterized as a 
background article because it does not directly assess the use of 
Quicktome Software Suite.
---------------------------------------------------------------------------

    \90\ Background articles are not included in the following table 
but can be accessed via the online posting for the technology.
    \91\ Dadario NB, Sughrue ME. Should Neurosurgeons Try to 
Preserve Non-Traditional Brain Networks? A Systematic Review of the 
Neuroscientific Evidence. Journal of Personalized Medicine. 2022; 
12(4):587. https://doi.org/10.3390/jpm12040587.
---------------------------------------------------------------------------

    The following table summarizes the applicant's assertions regarding 
the substantial clinical improvement criterion. Please see the online 
posting for Quicktome Software Suite for the applicant's complete 
statements regarding the substantial clinical improvement criterion and 
the supporting evidence provided.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.116

BILLING CODE 4120-01-C
    After our review of the information provided by the applicant, we 
have the following concerns regarding whether Quicktome Software Suite 
meets the substantial clinical improvement criterion.
    With respect to the applicant's claim that Quicktome Software Suite 
supports the visualization of brain networks and surgical planning to 
avoid damaging them during surgery, we are concerned that the evidence 
does not appear to demonstrate that the Quicktome Software Suite's 
visualization and brain mapping techniques improve clinical outcomes 
relative to services or technologies already available by avoiding or 
reducing damage to the brain networks during surgery. For example, the 
Shah et al. (2023) \92\ study

[[Page 36086]]

describes the use of connectomics in planning and guiding an awake 
craniotomy for a tumor impinging on the language area in a 31-year-old 
bilingual woman. The authors stated that Quicktome Software Suite was 
used to generate preoperative connectome imaging for the patient, which 
helped in assessing the risk of functional deficits, guiding surgical 
planning, directing intraoperative mapping stimulation, and providing 
insights into postoperative function. The authors further described how 
preoperative imaging demonstrated proximity of the tumor to 
parcellations of the language area, and how intraoperative awake 
language mapping was performed, revealing speech arrest and paraphasic 
errors at areas of the tumor boundary correlating to functional regions 
that explained these findings. However, we are concerned that the 
report is based on a single case, and we question whether these 
findings would be generalizable to the broader Medicare population. In 
addition, we note that the applicant did not provide evidence based on 
comparison of the use of Quicktome Software Suite technology with 
currently available cranial mapping software or tractography tools, and 
we would be interested in comparisons that assess the use of Quicktome 
Software Suite technology to improve these clinical outcomes relative 
to currently available technologies, such as StealthVizTM or 
Brainlab's Elements and iPlan products.
---------------------------------------------------------------------------

    \92\ Shah HA, Ablyazova F, Alrez A, et al. Intraoperative awake 
language mapping correlates to preoperative connectomics imaging: An 
instructive case. Clin Neurol Neurosurg. 2023 Jun;229:107751. Doi: 
10.1016/j.clineuro.2023.107751 Epub 2023 Apr 29. PMID: 3714997. 2.
---------------------------------------------------------------------------

    In addition, we question whether the findings related to 
Quicktome's efficacy are generalizable to the Medicare population. 
Specifically, the Wu et al. (2023) \93\ study aimed to investigate the 
involvement of non-traditional brain networks in insulo-Sylvian gliomas 
and evaluate the potential of Quicktome Software Suite in optimizing 
surgical approaches to preserve cognitive function. The study included 
three parts. The first part involved a retrospective analysis of the 
location of insulo-Sylvian gliomas in 45 adult patients who underwent 
glioma surgery centered in the insular lobe. According to the research 
team, Quicktome showed that 98 percent of the tumors involved a non-
traditional eloquent brain network, which is associated with cognitive 
or neurological function. In part two, the research team prospectively 
collected neuropsychological data on seven patients to assess tumor-
network involvement with change in cognition. Using Quicktome, the 
research team found that all seven patients had a tumor involving a 
non-traditional eloquent brain network. Part three described how the 
research team used Quicktome Software Suite's network mapping 
capabilities to inform surgical decision-making and predict the 
preservation of cognitive function post-surgery for two prospective 
patients. We note that while Quicktome Software Suite was used to 
assist surgical decision-making in two patients, as previously 
discussed, we question whether these limited findings would be 
generalizable to the broader Medicare population, and we would be 
interested in comparisons between Quicktome Software Suite and other 
currently available technologies to improve these clinical outcomes.
---------------------------------------------------------------------------

    \93\ Wu Z, Hu G, Cao B, Liu X, et al. Non-traditional cognitive 
brain network involvement in insulo-Sylvian gliomas: a case series 
study and clinical experience using Quicktome. Chin Neurosurg J. 
2023 May 26;9(1):16. Doi: 10.1186/s41016-023-00325-4 PMID: 37231522; 
PMCID: PMC10214670.
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    We also question whether the use of Quicktome Software Suite has a 
direct impact on significantly reducing neurological or cognitive 
deficits post-surgery. The applicant cited Morell et al. (2022),\94\ a 
retrospective, single-center study of 100 patients who underwent 
surgery for brain tumor resection. The research team used Quicktome 
Software Suite to map and evaluate the integrity of nine large-scale 
brain networks in these patients. According to the research team, 
Quicktome's analysis showed that for more than half of these patients, 
at least one of their brain networks were either affected during brain 
surgery or at risk of postsurgical deficits. Among those at risk of 
postsurgical deficits, their cortical regions or white matter fibers 
were either displaced by the mass effect of the tumor or damaged during 
surgery due to proximity to the tumor and/or planned transcortical 
trajectory. We note that the primary focus of the study was to 
retrospectively map large-scale brain networks in brain tumor patients 
using Quicktome Software Suite platform, and therefore does not appear 
to demonstrate that use of Quicktome Software Suite avoided damaging 
these networks during surgery.
---------------------------------------------------------------------------

    \94\ Morell AA, Eichberg DG, Shah AH, et al. Using machine 
learning to evaluate large-scale brain networks in patients with 
brain tumors: Traditional and non-traditional eloquent areas. 
Neurooncol Adv. 2022 Sep 19;4(1):vdac142. Doi: 10.1093/noajnl/
vdac142. PMID: 36299797; PMCID: PMC9586213.
---------------------------------------------------------------------------

    Similarly, we note that the applicant cited Hendricks et al. 
(n.d.),\95\ which retrospectively analyzed the outcomes of 346 adult 
patients who underwent resection of superficial cerebral cavernous 
malformations (CMs) from November 2008 through June 2021. We note that 
the focus of the study was the use of Quicktome Software Suite to 
support the identification of areas of eloquent noneloquence, or cortex 
injured or transgressed that causes unexpected deficits. Therefore, we 
remain interested in evidence that incorporating Quicktome Software 
Suite's analytics into surgical strategies and navigational tools 
during craniotomy surgery is associated with improved post-surgical 
outcomes.
---------------------------------------------------------------------------

    \95\ Hendricks B, Scherschinkski L, Jubran J, et al. 
Supratentorial Cavernous Malformation Surgery: The Seven Hotspots of 
Novel Cerebral Risk (SUBMITTED MANUSCRIPT).
---------------------------------------------------------------------------

    With respect to the applicant's claim that damaging brain networks 
during surgery leads to neurologic complications, which are a leading 
contributor to increased length of stay (LOS), ICU admission, and 
readmissions, the applicant asserted that Quicktome Software Suite 
enables surgeons to visualize these brain networks and change their 
surgical approach as needed to avoid damaging these networks. We note 
that the applicant submitted two documents in support of this claim, 
both of which are background documents rather than studies that 
evaluate clinical outcomes associated with the use of Quicktome 
Software Suite. In particular, the Elsamadicy et al. (2018) \96\ study 
showed that altered mental status and sensory or motor deficits were 
the primary complications of craniotomies. The Philips et al. (2023) 
\97\ study demonstrated that post-operative neurological deficits, 
caused by damage to brain networks or a patient's connectome were 
responsible for extended length of stay. Although these studies 
supported the applicant's claim that damage to brain networks resulted 
in neurological complications, increasing LOS and inpatient service 
use, we note that the evidence provided for this claim does not assess 
the use of Quicktome Software Suite to improve these clinical outcomes, 
nor does the evidence appear to demonstrate that use of the technology 
substantially improves these clinical outcomes relative to existing 
technologies, such as StealthVizTM or Brainlab's Elements 
and iPlan products. We would be interested in evidence demonstrating 
that

[[Page 36087]]

utilization of the Quicktome Software Suite improves clinical outcomes 
related to LOS, ICU admissions, and readmissions relative to existing 
technologies.
---------------------------------------------------------------------------

    \96\ Elsamadicy, AA, Sergesketter, A, Adogwa, O, et al. 
Complications and 30-Day readmission rates after craniotomy/
craniectomy: A single Institutional study of 243 consecutive 
patients, Journal of Clinical Neuroscience, Volume 47, 2018, Pages 
178-182, ISSN 0967-5868, https://doi.org/10.1016/j.jocn.2017.09.021.
    \97\ Phillips KR, Enriquez-Marulanda A, Mackel C, et al. 
Predictors of extended length of stay related to craniotomy for 
tumor resection. World Neurosurg X. 2023 Mar 31;19:100176. 
doi:10.1016/j.wnsx.2023.100176 PMID: 37123627; PMCID: PMC10139985.
---------------------------------------------------------------------------

    With respect to the applicant's claim that damaging brain networks 
during surgery has adverse effects for patients, including decreased 
quality of life and loss of function, the applicant asserted that 
Quicktome Software Suite enables surgeons to visualize brain networks 
and change their surgical approach as needed to avoid damaging these 
networks. The applicant further asserted that while other techniques 
have enabled the visualization of tractography or of parts of eloquent 
networks, this is not an adequate substitute for the ability to review 
the entirety of a patient's connectome (networks such as motor, 
language, and vision). Per the applicant, Quicktome Software Suite is 
the first of its kind to show the location and function of these 
networks and that damage to these networks is associated with poor 
outcomes. The applicant cited Vysotski et al. (2019),\98\ who 
demonstrated that brain tumor patients who underwent a preoperative 
fMRI experienced significantly lower risks for mortality than those who 
did not. The applicant also cited Dadario and Sughrue (2022),\99\ who 
discussed the clinical importance of preserving non-traditional brain 
networks for neurosurgical patients. Similar to our previous concern, 
we note that the evidence provided for this claim does not assess the 
use of Quicktome Software Suite to improve quality of life and loss of 
function, nor does the evidence appear to demonstrate that use of the 
technology substantially improves these clinical outcomes relative to 
existing technologies. Therefore, we continue to question whether there 
is evidence to assess the effectiveness of Quicktome Software Suite to 
reduce damage to brain networks during surgery.
---------------------------------------------------------------------------

    \98\ Vysotski S, Madura C, Swan B, et al. Preoperative FMRI 
Associated with Decreased Mortality and Morbidity in Brain Tumor 
Patients. Interdiscip Neurosurg. 2018 Sep;13:40-45. doi: 10.1016/
j.inat.2018.02.001 Epub 2018 Feb 14. PMID: 31341789; PMCID: 
PMC6653633.
    \99\ Dadario NB, Sughrue ME. Should Neurosurgeons Try to 
Preserve Non-Traditional Brain Networks? A Systematic Review of the 
Neuroscientific Evidence. Journal of Personalized Medicine. 2022; 
12(4):587. https://doi.org/10.3390/jpm12040587.
---------------------------------------------------------------------------

    We are also interested in public comments related to how we should 
evaluate issues related to determining substantial clinical improvement 
for technologies that use AI, an algorithm or software, including 
issues related to algorithm transparency, and how CMS should consider 
these issues in our assessment of substantial clinical improvement, as 
we continue to gain experience in this area. Algorithm transparency 
refers to whether, and the extent to which, clinical users are able to 
access a consistent, baseline set of information about the algorithms 
they use to support their decision making and to assess such algorithms 
for fairness, appropriateness, validity, effectiveness, and 
safety.\100\
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    \100\ Department of Health and Human Services (December 13, 
2023). HHS Finalizes Rule to Advance Health IT Interoperability and 
Algorithm Transparency [verbar] HHS.gov, accessed 2/20/2024.
---------------------------------------------------------------------------

    We are inviting public comments on whether Quicktome Software Suite 
Software Suite meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for Quicktome 
Software Suite.
k. TALVEYTM (talquetamab-tgvs)
    Johnson & Johnson Health Care Systems, Inc. submitted an 
application for new technology add-on payments for TALVEYTM 
for FY 2025. According to the applicant, TALVEYTM is the 
first and only approved G protein-coupled receptor, class C, group 5, 
member D (GPRC5D) targeting therapy, a bispecific antibody (bsAb) 
approved for the treatment of adults with Relapsed or Refractory 
Multiple Myeloma (RRMM) who have received at least four prior lines of 
therapy (also referred to herein as 4L+RRMM), including a proteasome 
inhibitor (PI), an immunomodulatory agent (IMiD), and an anti-cluster 
of differentiation (CD)38 monoclonal antibody (mAb). GPRC5D is an 
orphan receptor expressed at a significantly higher level on malignant 
Multiple Myeloma (MM) cells than on normal plasma cells.
    Please refer to the online application posting for 
TALVEYTM available at https://mearis.cms.gov/public/publications/ntap/NTP2310163HW2V, for additional detail describing the 
technology and the disease treated by the technology.
    With respect to the newness criterion, according to the applicant, 
TALVEYTM was granted a Biologic License from FDA on August 
9, 2023 for the treatment of adult patients with 4L+RRMM who have 
received at least four prior lines of therapy, including a PI, an ImiD, 
and an anti-CD38 mAb. According to the applicant, TALVEYTM 
was commercially available immediately after FDA approval. Per the 
applicant, patients may be dosed on a weekly or bi-weekly dosing 
schedule. The applicant noted that patients on a weekly dosing schedule 
receive three weight-based doses--a 0.01 mg/kg loading dose, a 0.06 mg/
kg loading dose, and the first 0.40 mg/kg treatment dose--during the 
hospital stay; patients on a bi-weekly dosing schedule receive an 
additional 0.80 mg/kg treatment dose during the hospital stay.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for TALVEYTM and was granted approval for 
the following procedure code effective April 1, 2024: XW01329 
(Introduction of talquetamab antineoplastic into subcutaneous tissue, 
percutaneous approach, new technology group 9). The applicant stated 
that ICD-10-CM codes C90.00 (Multiple myeloma not having achieved 
remission) and C90.02 (Multiple myeloma in relapse) may be used to 
currently identify the indication for TALVEYTM.
    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 TALVEYTM is not substantially similar to other 
currently available technologies because it has a unique mechanism of 
action as a CD3 T-cell engaging bsAb targeting GPRC5D, 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 
TALVEYTM for the applicant's complete statements in support 
of its assertion that TALVEYTM is not substantially similar 
to other currently available technologies.
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BILLING CODE 4120-01-C
    With regard to the newness criterion, we note that 
TALVEYTM may have a similar mechanism of action to that of 
TECVAYLI[supreg], for which we approved an application for new 
technology add-on payments for FY 2024 for the treatment of adult 
patients with RRMM after four or more prior lines of therapy, including 
a PI, an IMiD, and an anti-CD38 mAb (88 FR 58891). We also note that 
TALVEYTM may have a similar mechanism of action to that of 
ELREXFIOTM, another applicant for FY 2025 new technology 
add-on payments. As previously discussed, ELREXFIOTM was 
approved on August 14, 2023 for the treatment of adult patients with 
RRMM who have received at least four prior lines of therapy, including 
a PI, an IMiD, and an anti-CD38 mAb.
    Per the applicant, TALVEYTM has a different mechanism of 
action from TECVAYLI[supreg] or ELREXFIOTM because it binds 
to different receptors. The applicant noted that TALVEYTM is 
the only medicine that targets GPRC5D on myeloma cells. As we 
previously noted, TECVAYLI[supreg]'s mechanism of action is described 
as a bsAb, with binding domains that simultaneously bind the BCMA 
target on tumor cells and the CD3 T-cell receptor (88 FR 58886). As 
previously discussed, the mechanism of action for ELREXFIOTM 
is as a bsAb that uses binding domains that simultaneously bind the 
BCMA target on tumor cells and the CD3 T-cell receptor. However, while 
the applicant asserts that TALVEYTM has a unique mechanism 
of action as compared to TECVAYLI[supreg] and ELREXFIOTM by 
binding to different receptors, we question how binding to a different 
protein (GPRC5D) on the tumor cell would result in a different 
mechanism of action compared to BCMA targeting bispecific antibodies. 
Furthermore, we note that the applicant claimed that the target of 
TALVEYTM, GPRC5D, has a unique tissue expression profile, 
which results in an adverse event profile distinct from those of the 
currently approved bispecific antibodies in RRMM targeting BCMA. 
However, as this relates to the risk of adverse event from 
TALVEYTM administration but is not critical to the way the 
drug treats the underlying disease, we question whether this would 
therefore relate to an assessment of substantial clinical

[[Page 36089]]

improvement rather than of substantial similarity. We would welcome 
additional information on how molecular differences, such as the 
regulation of expression of GPRC5D and BCMA on MM cells during 
treatment, should be considered in determining whether a technology 
utilizes a different mechanism of action to achieve a therapeutic 
outcome.
    Accordingly, as it appears that TALVEYTM and 
TECVAYLI[supreg] may use the same or similar mechanism of action to 
achieve a therapeutic outcome, would be assigned to the same MS-DRG, 
and treat the same or similar patient population and disease, we 
believe that these technologies may be substantially similar to each 
other. We note that if we determine that this technology is 
substantially similar to TECVAYLI[supreg], we believe the newness 
period would begin on November 9, 2022, the date TECVAYLITM 
became commercially available (88 FR 58887).
    Furthermore, as noted, we believe another applicant for FY 2025 new 
technology add-on payments, ELREXFIOTM, may also be 
substantially similar to TALVEYTM. Per the application for 
ELREXFIOTM, ELREXFIOTM is a bispecific antibody 
approved for the treatment of adults with RRMM who have received at 
least four prior lines of therapy, including a PI, an IMiD, and an 
anti-CD38 mAb. We believe ELREXFIOTM may be substantially 
similar to TALVEYTM because it is also a bispecific antibody 
that treats RRMM in patients who have previously received a PI, IMiD, 
and an anti-CD38 mAb. Additionally, we note that similar to 
TALVEYTM, the prescribing information for 
ELREXFIOTM includes the population with prior exposure to 
BCMA T-cell redirection therapy. Accordingly, as it appears that 
TALVEYTM and ELREXFIOTM would use the same or 
similar mechanism of action to achieve a therapeutic outcome, would be 
assigned to the same MS-DRG, and would treat the same or similar 
patient population and disease, we believe that these technologies may 
also be substantially similar to each other such that they should be 
considered as a single application for purposes of new technology add-
on payments. We note that if TALVEYTM is determined to only 
be substantially similar to ELREXFIOTM, and not 
TECVAYLI[supreg], we believe the newness period for TALVEYTM 
would begin on August 9, 2023, the date TALVEYTM received 
FDA approval.
    We are interested in receiving information on how these 
technologies may differ from each other with respect to the substantial 
similarity and newness criteria, to inform our analysis of whether 
TALVEYTM is substantially similar to ELREXFIOTM 
and/or TECVAYLI[supreg].
    We are inviting public comments on whether TALVEYTM is 
substantially similar to existing technologies and whether 
TALVEYTM meets the newness criterion.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for TALVEYTM, the 
applicant searched the FY 2022 MedPAR for cases reporting one of the 
following ICD-10-CM codes in the first five diagnosis positions on the 
claim: C90.00 (Multiple myeloma not having achieved remission), C90.01 
(Multiple myeloma in remission), and C90.02 (Multiple myeloma in 
relapse). Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 4,468 claims mapping to five 
MS-DRGs with 82 percent of identified cases mapping to MS-DRGs 840 and 
841 (Lymphoma and Non-acute Leukemia with MCC, with CC, respectively). 
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 $210,677, which exceeded the average 
case-weighted threshold amount of $77,360. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that 
TALVEYTM meets the cost criterion.
BILLING CODE 4120-01-P

[[Page 36090]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.118

    We are inviting public comments on whether TALVEYTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that TALVEYTM represents a substantial 
clinical improvement over existing technologies because 
TALVEYTM meets two of three criteria for substantial 
clinical improvement due to its off-the-shelf availability without the 
need for complex manufacturing. Additionally, according to the 
applicant, TALVEY\TM\ demonstrates clinically meaningful outcomes in 
heavily pre-treated patients who are exposed or naive to prior T-cell 
redirection therapy and provides a therapeutic option with a lower 
severe infection rate. The applicant provided four studies to support 
these claims. We also note that four other articles submitted as 
supporting evidence should more appropriately be characterized as 
background articles because they do not directly assess the use of 
TALVEYTM. Instead, those four articles focus on existing 
treatment options (ELREXFIOTM or TECVAYLI[supreg]) or the 
high mortality rate of MM patients who died while waiting for CAR-T 
cell therapies.\101\
---------------------------------------------------------------------------

    \101\ Background articles are not included in the following 
table but can be accessed via the online posting for the technology.
---------------------------------------------------------------------------

    The following table summarizes the applicant's assertions regarding 
the substantial clinical improvement criterion. Please see the online 
posting for TALVEYTM for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.

[[Page 36091]]

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BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether TALVEYTM meets the 
substantial clinical improvement criterion. With respect to the 
applicant's claim that TALVEYTM offers an efficacious 
treatment option for patients who are unable to receive CAR T-cell 
therapy, we note that TECVAYLI[supreg] and ELREXFIOTM are 
recently FDA-approved alternatives to CAR T-cell therapy with the same 
indication as treatments for RRMM for patients ineligible or 
unresponsive to four prior lines of therapy, including a PI, an IMiD, 
and an anti-CD38 mAb. In addition, although the applicant claimed that 
TALVEYTM is more accessible than CAR T-cell therapies 
because it is readily available and can be delivered at any acute care 
hospitals, we would be interested in evidence comparing the effects of 
TALVEYTM and CAR T-cell therapies on mortality and other 
clinical outcomes, as we did not receive results from clinical trials 
comparing the efficacy of TALVEYTM with CAR T-cell 
therapies.
    With respect to the applicant's claim that TALVEYTM has 
a low incidence of serious and higher-grade infections and preserves B-
cell function, we note that the clinical data from the Hammons et al. 
(2023) \102\ study did not appear to support this claim. Specifically, 
the difference in the proportion of grade 3+ infections among patients 
treated with BCMA bsAb (58 percent), GPRC5D bsAb combination therapy 
with daratumumab and/or pomalidomide (33 percent), and GPRC5D bsAb 
monotherapy (50 percent) was not statistically significant (p = 0.06). 
While the total infection rate per 100 days was lower for the GPRC5D 
monotherapy group, the difference was not statistically significant 
(BCMA: 0.57 percent, GPRC5D combination: 0.62 percent, GPRC5D 
monotherapy: 0.13 percent; p = 0.06). Moreover, the differences among 
the three groups in bacterial, viral, and fungal infection rates per 
100 days did not reach statistical significance (p = 0.07, 0.4, and 
0.14 respectively). In addition, the difference among the three groups 
regarding the need for hospitalization was not statistically 
significant (p = 0.07). Similarly, we note that according to the 
Rodriguez-Otero et al. (2023) \103\ poster presentation, of the 339 
patients treated with TALVEYTM, 64 percent (n = 217) 
experienced infections, of which 29 percent (n = 63) experienced grade 
3-4 infections. The applicant highlighted a conclusion in the 
Rodriguez-Otero poster that infection

[[Page 36092]]

rates, particularly rates of higher grade and fatal infections, 
occurred less frequently with TALVEYTM compared with those 
observed in BCMA-targeted T-cell based therapies. We note that because 
clinical trials are conducted under widely varying conditions, we 
question whether adverse reaction rates observed in the clinical trials 
of one drug can be directly compared to rates in the clinical trials of 
another drug without an effort to adjust for such conditions.
---------------------------------------------------------------------------

    \102\ Hammons L, Szabo, A, Janardan, A, et al. The changing 
spectrum of infection with BCMA and GPRC5D targeting bispecific 
antibody (bsAb) therapy in patients with relapsed refractory 
multiple myeloma. Haematologica. 2023 Aug 31.
    \103\ Rodriguez-Otero, P, Schinke, C, Chari, A, et al. Analysis 
of infections and parameters of humoral immunity in patients with 
relapsed/refractory multiple myeloma treated with Talquetamab 
monotherapy in MonumenTAL-1. 2023 American Society of Clinical 
Oncology Annual Meeting, Poster #8020.
---------------------------------------------------------------------------

    With respect to the applicant's claim that TALVEYTM 
offers clinically meaningful outcomes in heavily pre-treated patients 
na[iuml]ve to prior bsAb and CAR T-cell therapy, we note that the 
applicant compared the results from MonumenTAL-1, the ongoing 
TALVEYTM clinical study, with clinical study results of 
TECVAYLI[supreg] and ELREXFIOTM.104 105 The 
applicant noted that the overall response rates (ORRs) for 
TALVEYTM's 0.4 mg/kg weekly and 0.8 mg/kg biweekly cohorts 
of 74.1 percent and 71.7 percent respectively seem higher than the 
response rates reported for TECVAYLI[supreg] (63 percent) and 
ELREXFIOTM (61 percent). The applicant also noted the 
duration of response (DOR), progression free survival (PFS), and 
overall survival (OS) for TALVEYTM were comparable to that 
of the BCMA bispecific antibodies. However, we note that this was based 
on a comparison of three separate clinical trials, which can involve 
numerous confounding variables, and the applicant did not provide 
supporting data related to clinical trial design or statistical 
analysis to explain why the potential effects of confounding variables 
should not be a concern for purposes of this comparison. Therefore, we 
are interested in additional evidence demonstrating that 
TALVEYTM significantly improves clinical outcomes compared 
to BCMA bispecific antibodies in heavily pre-treated patients 
na[iuml]ve to prior bispecific antibody and CAR T-cell therapy that 
adjusts for the effects of confounding factors.
---------------------------------------------------------------------------

    \104\ Van de Donk, N, Moreau, P, Garfall, AL, et al. Long term 
follow-up from MajesTEC-1 of Teclistamab, a BCMAxCD3 bispecific 
antibody, in patients with relapsed/refractory multiple myeloma. 
2023 American Society of Clinical Oncology Annual Meeting, Poster 
#8011.
    \105\ Mohty, M, Tomasson, MH, and Arnulf, B, et al. Elranatamab, 
a B-cell maturation antigen (BCMA)-CD3 bispecific antibody, for 
patients with relapsed/refractory multiple myeloma: Extended follow-
up and bi-weekly administration from the MagnetisMM-3 study. 2023 
American Society of Clinical Oncology Annual Meeting, Poster #8039.
---------------------------------------------------------------------------

    With respect to the applicant's claim that TALVEYTM 
offers clinically meaningful outcomes in patients exposed to prior 
bispecific antibody and CAR T-cell therapy, the applicant referenced 
past results from MonumenTAL-1 that included a cohort of 51 patients 
with prior T-cell redirection therapies (TCR) including BCMA-directed 
CAR-T therapies and/or bispecific antibodies, citing an ORR of 64.7 
percent in these heavily pre-treated patients.\106\ The applicant also 
provided updated results that included an additional 19 patients with 
prior TCR that demonstrated similar efficacy, noting slightly higher 
ORRs and improved PFS and DOR rates in patients with prior BCMA CAR T-
cell versus prior bispecific antibody therapies. We welcome additional 
information demonstrating the efficacy of TALVEYTM in 
patients previously treated with BCMA-directed TCRs.
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    \106\ Jakubowiak, AJ, Anguille, S, Karlin, L, et al. Updated 
Results of Talquetamab, a GPRC5DxCD3 bispecific antibody, in 
patients with relapsed/refractory multiple myeloma with prior 
exposure to T-Cell redirecting therapies: results of the Phase \1/2\ 
MonumenTAL-1 Study 2023 American Society of Hematology Annual 
Meeting. Poster #3377.
---------------------------------------------------------------------------

    We are inviting public comments on whether TALVEYTM 
meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
TALVEYTM.
l. Odronextamab, First Indication: Relapsed or Refractory Diffuse Large 
B-Cell Lymphoma (R/R DLBCL)
    Regeneron Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for odronextamab for use in relapsed or 
refractory diffuse large B-cell lymphoma (R/R DLBCL) for FY 2025. 
According to the applicant, odronextamab is the first and only novel, 
fully-human Cluster of Differentiation (CD) 20 x CD 3 bispecific 
antibody (bsAb) with an immunoglobulin G4 (IgG4)-based structure in B-
Cell non-Hodgkin lymphoma (B-NHL) created using Regeneron's proprietary 
Veloci-Bi[supreg] technology that is designed to simultaneously bind to 
two types of antigens, CD20 found on both healthy and cancerous B 
cells, and CD3 found on T-cells. Per the applicant, simultaneous 
engagement of both arms of odronextamab results in the activation of 
immune system T-cells, causing it to generate cytotoxic T-cells that 
can destroy the targeted cells, including cancerous B-cells. We note 
that Regeneron Pharmaceuticals, Inc. also submitted an application for 
new technology add-on payments for odronextamab for use in relapsed or 
refractory follicular lymphoma (R/R FL) for FY 2025, as discussed 
separately later in this section.
    Please refer to the online application posting for odronextamab, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231017LHBUG, for additional detail describing the technology and the 
disease treated by the technology.
    With respect to the newness criterion, the applicant stated that 
its marketing authorization request for odronextamab has been filed by 
FDA and that it anticipates a Biologic License Application (BLA) 
decision from FDA for adults with R/R DLBCL after at least two prior 
systemic therapies, including patients with or without prior CAR T-cell 
therapy, before May 1, 2024. According to the applicant, odronextamab 
will be commercially available immediately after FDA approval. 
According to the applicant, it anticipates that inpatient usage of 
odronextamab might occur due to a physician's order or as a result of 
an adverse event, such as cytokine release syndrome (CRS) Grade 2 or 
higher, that results in an inpatient admission. The applicant noted 
that in the pivotal Phase 2 clinical trial (ELM-2), when CRS Grade 2 or 
3 events developed among DLBCL patients (there were no CRS Grade 4 or 
higher reported on the recommended dosing regimen), 31 percent of the 
time it occurred after the initial dose (0.7 mg), 46 percent after the 
first intermediate dose (4 mg), 15 percent after the second 
intermediate dose (20 mg), 0 percent after the first full dose (160 
mg), and 8 percent after the second full dose & beyond (160 mg). Using 
this information, the applicant developed a weighted average inpatient 
dose of 17.4 mg.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify odronextamab. We note that the 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for odronextamab beginning in FY 2025. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify this indication for odronextamab 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 believe the 
relevant ICD-10-CM codes to identify the indication of R/R DLBCL would 
be the codes included in category C83 (Non-follicular lymphoma) under 
the ICD-10-CM classification in subcategory: C83.3- (Diffuse large B-
cell

[[Page 36093]]

lymphoma). We are inviting public comments on the use of these ICD-10-
CM diagnosis codes to identify the indication of R/R DLBCL for purposes 
of the new technology add-on payment, if approved.
    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 odronextamab is not substantially similar to other 
currently available technologies. According to the applicant, the 
mechanism of action for odronextamab presents noteworthy distinctions, 
such as reduced potential for immunogenicity and anti-drug antibodies 
through its novel fully human design and reduced ability to elicit an 
immune response through the blocking effect of the IgG4-based 
structure. The applicant also asserted that odronextamab is the only 
bispecific antibody (bsAb) with a dedicated prospective cohort that 
shows efficacy in patients with R/R DLBCL with prior CAR T-cell therapy 
while also showing comparable efficacy in patients without prior CAR T-
cell therapy, 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 odronextamab for the applicant's complete 
statements in support of its assertions that odronextamab is not 
substantially similar to other currently available technologies.
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[[Page 36094]]


    We note that according to the applicant, odronextamab may have a 
similar mechanism of action to that of EPKINLYTM 
(epcoritamab) and COLUMVITM (glofitamab), for which we 
approved an application for new technology add-on payments for FY 2024 
(88 FR 58835) for the treatment of adult patients with R/R DLBCL after 
two or more prior lines of systemic therapy. Specifically, a similar 
IgG bsAb engaging CD3 x CD20 mechanism is utilized in the treatment of 
the same population of R/R DLBCL adult patients with two or more prior 
therapies. Although the applicant asserts that odronextamab is the 
first and only fully human, IgG4-based bsAb in B-NHL, which may help 
reduce potential for immunogenicity and anti-drug antibodies, we 
believe that this would relate to the risk of adverse event from 
odronextamab administration but is not critical to the way the drug 
treats the underlying disease, and therefore would relate to an 
assessment of substantial clinical improvement, rather than of 
substantial similarity.
    The applicant asserts that it treats a new patient population 
because it is indicated for a sub-population of patients within R/R 
DLBCL: adult patients with two or more prior therapies after transplant 
or CAR T-cell therapy. However, as noted by the applicant, both 
EPKINLYTM and COLUMVITM may also be used for 
patients with R/R DLBCL with disease progression after transplant or 
CAR T-cell therapy, also after two or more lines of systemic therapies. 
Therefore, we believe that odronextamab may treat the same or similar 
disease in the same or similar patient population as 
EPKINLYTM and COLUMVITM. Accordingly, as it 
appears that odronextamab, and EPKINLYTM and 
COLUMVITM may use the same or similar mechanism of action to 
achieve a therapeutic outcome, would be assigned to the same MS-DRG, 
and treat the same or similar patient population and disease, we 
believe that these technologies may be substantially similar to each 
other. We note that if we determine that this technology is 
substantially similar to EPKINLYTM and COLUMVITM, 
we believe the newness period for this technology would begin on May 
19, 2023, the date on which EPKINLYTM received FDA approval, 
which is the earliest market availability date submitted for 
EPKINLYTM and COLUMVITM. We are interested in 
information on how these technologies may differ from each other with 
respect to the substantial similarity criteria and newness criterion.
    We are inviting public comments on whether odronextamab meets the 
newness criterion, including whether odronextamab is substantially 
similar to EPKINLYTM and COLUMVITM or other 
existing technologies.
    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 2022 MedPAR using a combination 
of ICD-10-CM and/or PCS codes to identify potential cases representing 
patients who may be eligible for odronextamab. 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 tables later in this section.
    For the first analysis, the applicant used a list of ICD-10-CM 
diagnosis codes to identify cases with primary diagnosis of DLBCL. The 
applicant excluded cases with a corresponding ICD-10-CM or ICD-10-PCS 
code indicating active treatment. Per the applicant, active treatment 
was defined as allogeneic stem cell transplant, bone marrow transplant, 
transplant complications, chemotherapy administration, immunotherapy, 
or radiation. Please see the online posting for odronextamab for the 
complete list of codes provided by the applicant. The applicant used 
the inclusion/exclusion criteria described in the following table. 
Under this analysis, the applicant identified 3,066 claims mapping to 
10 MS-DRGs, including MS-DRG 840 (Lymphoma and Non-Acute Leukemia with 
MCC) representing 34.9 percent of the identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $141,787, which exceeded the average case-weighted 
threshold amount of $106,031.
    For the second analysis, the applicant identified cases using a 
list of ICD-10-CM diagnosis codes: T80.89XA (Other complications 
following infusion, transfusion, and therapeutic injection) or D89.832-
D89.839 (Cytokine release syndrome (CRS) Grades 2-5 or unspecified) in 
any position. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 80 claims mapping to two MS-DRGs: 018 (Chimeric Antigen 
Receptor (CAR) T-Cell and Other Immunotherapies) and 811 (Red Blood 
Cell Disorders with MCC). The applicant calculated a final inflated 
average case-weighted standardized charge per case of $1,095,920, which 
exceeded the average case-weighted threshold amount of $936,675.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all scenarios, the applicant maintained that odronextamab meets the 
cost criterion.
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[[Page 36096]]


    We are inviting public comments on whether odronextamab meets the 
cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that odronextamab represents a substantial clinical 
improvement over existing technologies because odronextamab offers a 
new treatment for patients who are ineligible for CAR T-cell therapy 
and represents a substantial clinical improvement over existing 
technologies in patients with R/R DLBCL, including those with or 
without prior CAR T-cell therapy. According to the applicant, 
odronextamab will expand access to heavily pretreated, highly 
refractory patients and will offer patients with R/R DLBCL a new 
monotherapy that demonstrates substantial clinical benefits, including 
a generally manageable safety profile and favorable Health Related 
Quality of Life (HRQoL). The applicant also asserted that odronextamab 
significantly improves clinical outcomes relative to services or 
technologies previously available (such as EPKINLY\TM\ and 
COLUMVI\TM\). The applicant provided three studies to support these 
claims, as well as nine background articles about other therapies.\107\ 
The following table summarizes the applicant's assertions regarding the 
substantial clinical improvement criterion. Please see the online 
posting for odronextamab for the applicant's complete statements 
regarding the substantial clinical improvement criterion and the 
supporting evidence provided.
---------------------------------------------------------------------------

    \107\ 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 36097]]

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BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether odronextamab meets the 
substantial clinical improvement criterion. We note that with respect 
to the claim that odronextamab will increase treatment options for 
patients with relapsed or refractory diffuse large B-cell lymphoma (R/R 
DLBCL) who have a high risk of cytokine release syndrome (CRS), the 
applicant submitted the oral presentation slides of the results from a 
pre-specified analysis by Kim et al. (2022),\108\ presenting the 
interim results for the Phase II trial for odronextamab, ELM-2. In this 
trial, 140 patients (median age: 66 years) with R/R DLBCL after 2 or 
more lines of therapy, Eastern Cooperative Oncology Group (ECOG) 0 or 
1, were assigned to receive either a

[[Page 36098]]

1/20 mg step-up regimen (n = 67) or 0.7/4/20 mg step-up regimen (n = 
73) after the study initiated with a first cycle of step-up regimen of 
1/20 mg. The regimen was modified to 0.7/4/20 mg during Cycle 1 to 
further mitigate the risk of CRS. The rates of CRS grades 2 and 3 for 
patients grouped to the 1/20 regimen were 17.9 percent and 7.5 percent 
respectively, while rates of CRS grades 2 and 3 for patients grouped to 
the 0.7/4/20 regimen were 13.7 percent and 1.4 percent. We note that 
although the incidence of grade 3 CRS was lower in the 0.7/4/20 regimen 
arm, the applicant indirectly compared these incidence rates with the 
rates of trials as found in the prescribing information for other 
existing technologies, including EPKINLY\TM\ and COLUMVI\TM\, and it is 
unclear if these differences are statistically significant. We also 
question whether there are differences between these clinical trials, 
such as patient characteristics or other confounding variables, which 
would limit such comparability between CRS incidence rates. We are 
concerned as to whether the differences identified by the applicant 
translate to clinically meaningful improvements for patients treated 
with odronextamab as compared to rates for existing treatments.
---------------------------------------------------------------------------

    \108\ Kim W, Kim T, Cho S, et al. Odronextamab in patients with 
relapsed/refractory (R/R) diffuse large B-cell lymphoma (DLBCL): 
results from a prespecified analysis of the pivotal Phase II study 
ELM-2. Presented at American Society of Hematology (ASH). December 
12, 2022.
---------------------------------------------------------------------------

    With respect to the claim that odronextamab monotherapy is an 
effective treatment option for patients with R/R DLBCL including those 
with or without prior CAR T-cell therapy, the applicant submitted the 
oral presentation slides of the results from a pre-specified analysis 
by Kim et al. (2022),\109\ previously described. The oral presentation 
slides refer to the Phase 1 trial for odronextamab (ELM-1) and indicate 
consistency of results across trials. The applicant noted that patients 
with prior CAR-T therapy demonstrated an objective response rate (ORR) 
of 48.4 percent (95 percent CI: 30.2, 66.9), and a Complete Response 
(CR) rate of 32.3 percent (n = 44 patients). The applicant cited other 
information about CD20xCD3 bsAbs in patients with R/R DLBCL including 
the United States Prescribing Information (USPI) for EPKINLY\TM\ and 
COLUMVI\TM\ for which 29 percent and 30 percent of patients 
respectively were refractory to CAR T-cell therapy. We note that the 
provided evidence did not compare the efficacy of odronextamab to 
EPKINLY\TM\ or COLUMVI\TM\. Similar to our earlier concern, we question 
whether there are confounding factors between studies that would limit 
indirect comparisons of ORR and CR. We would be interested in 
additional evidence to assess the use of odronextamab in improving 
these clinical outcomes relative to existing treatments.
---------------------------------------------------------------------------

    \109\ Kim W, Kim T, Cho S, et al. Odronextamab in patients with 
relapsed/refractory (R/R) diffuse large B-cell lymphoma (DLBCL): 
results from a prespecified analysis of the pivotal Phase II study 
ELM-2. Presented at American Society of Hematology (ASH). December 
12, 2022.
---------------------------------------------------------------------------

    With respect to the claim that the odronextamab clinical program 
enrolled heavily pre-treated and highly refractory patients with high-
grade non-Hodgkins Lymphoma (NHL) and sicker patients based on a worse 
ECOG performance status, the applicant submitted the oral slides of the 
results from a pre-specified analysis by Kim et al. (2022),\110\ 
previously described, and the peer-reviewed publication of the 
EPKINLY\TM\ dose expansion cohort of the phase I/II clinical trial. 
ECOG performance status is based on a five-point scale, with higher 
numbers indicating greater disability. Both trials included patients 
with ECOG performance status of 0 or 1 and the EPKINLY\TM\ trial also 
included ECOG performance status scores of 2; the odronextamab trial (n 
= 140) had rates of 32.1 percent and 67.9 percent for ECOG 0 and 1 
respectively, whereas the EPKINLY\TM\ trial has ECOG performance status 
scores of 47.1 percent, 49.7 percent, and 3.2 percent for ECOG 0, 1, 
and 2 respectively. However, we note that these incidence rates of 
patient characteristics are indirectly compared across unrelated 
clinical trials and patient outcomes are not stratified in either trial 
based on these characteristics. For example, we note that the 
classification of ``worse ECOG status'' in the odronextamab trial had a 
higher incidence rate of patients with ECOG 1 performance status, but 
this trial did not include patients with ECOG 2 performance status, as 
did the EPKINLY\TM\ trial.
---------------------------------------------------------------------------

    \110\ Kim W, Kim T, Cho S, et al. Odronextamab in patients with 
relapsed/refractory (R/R) diffuse large B-cell lymphoma (DLBCL): 
results from a prespecified analysis of the pivotal Phase II study 
ELM-2. Presented at American Society of Hematology (ASH). December 
12, 2022.
---------------------------------------------------------------------------

    With regards to the applicant's assertions that odronextamab 
significantly improves clinical outcomes relative to existing 
technologies because it is the first CD20xCD3 bsAb to report long-term 
patient outcomes at longest follow-up of 4.5 years, and that treatment 
until disease progression may have benefits on HRQoL for heavily 
pretreated patients with R/R DLBCL and potentially addresses unmet 
needs in a challenging treatment setting, we are concerned that the 
evidence presented does not compare these outcomes to existing 
technologies, such as EPKINLY\TM\ or COLUMVI\TM\. For example, although 
the applicant stated that odronextamab is the first to report on long-
term patient outcomes with the longest follow-up, there does not appear 
to be evidence demonstrating comparisons of long-term patient outcomes 
of odronextamab to existing technologies to support its claim that the 
technology improves clinical outcomes. In addition, there does not 
appear to be evidence of a direct HRQoL comparison to existing 
technologies to assess improvements to HRQoL for heavily pretreated 
patients with R/R DLBCL. Therefore, we welcome additional evidence 
demonstrating comparisons of odronextamab to existing technologies to 
support the applicant's claims.
    We are inviting public comments on whether odronextamab meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
odronextamab.
m. Odronextamab, Second Indication: Relapsed or Refractory Follicular 
Lymphoma (R/R FL)
    Regeneron Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for odronextamab for use in relapsed or 
refractory follicular lymphoma (R/R FL) for FY 2025. According to the 
applicant odronextamab is the first and only novel, fully-human Cluster 
of Differentiation (CD) 20 x CD 3 bispecific antibody (bsAb) with an 
immunoglobulin G4 (IgG4)-based structure in B-Cell non-Hodgkin lymphoma 
(B-NHL) created using Regeneron's proprietary Veloci-Bi[supreg] 
technology that is designed to simultaneously bind to two types of 
antigens, CD20, found on both healthy and cancerous B cells, and CD3, 
found on T-cells. Per the applicant, simultaneous engagement of both 
arms of odronextamab results in the activation of immune system T-
cells, causing it to generate cytotoxic T-cells that can destroy the 
targeted cells, including cancerous B cells. As previously discussed 
earlier in this section, Regeneron Pharmaceuticals, Inc. also submitted 
an application for new technology add-on payments for odronextamab for 
use in relapsed or refractory diffuse large B-cell lymphoma (R/R DLBCL) 
for FY 2025.
    Please refer to the online application posting for odronextamab, 
available at https://mearis.cms.gov/public/

[[Page 36099]]

publications/ntap/NTP231017YATW9, for additional detail describing the 
technology and B-NHL R/R FL.
    With respect to the newness criterion, the applicant stated that 
its marketing authorization request for odronextamab has been filed by 
FDA and that it anticipates a Biologic License Application (BLA) 
decision from FDA for adults with R/R FL after at least two prior 
systemic therapies, before May 1, 2024. According to the applicant, 
odronextamab will be commercially available immediately after FDA 
approval. According to the applicant, it anticipates that inpatient 
usage of odronextamab might occur due to a physician's order or as a 
result of an adverse event, such as cytokine release syndrome (CRS) 
Grade 2 or higher, that results in an inpatient admission. The 
applicant noted that in the pivotal Phase 2 clinical trial (ELM-2), 
when CRS Grade 2 or 3 events developed among FL patients (there were no 
CRS Grade 4 or higher reported on the recommended dosing regimen), 20 
percent of the time they occurred after the initial dose (0.7 mg), 50 
percent of the time after the first intermediate dose (4 mg), 20 
percent of the time after the second intermediate dose (20 mg), 0 
percent of the time after the first full dose (80 mg), and 10 percent 
of the time after the second full dose and beyond (80 mg). Using this 
information, the applicant developed a weighted average inpatient dose 
of 14.1 mg.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify odronextamab. We note that the 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for odronextamab beginning in FY 2025. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify this indication for odronextamab 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 believe the 
relevant ICD-10-CM codes to identify the indication of R/R FL would be 
the codes included in category C82 (Follicular lymphoma) under the ICD-
10-CM classification in subcategories: C82.0--(Follicular lymphoma 
grade I), C82.1--(Follicular lymphoma grade II), C82.2--(Follicular 
lymphoma grade III, unspecified), C82.3--(Follicular lymphoma grade 
IIIa), C82.4--(Follicular lymphoma grade IIIb), C82.5--(Diffuse 
follicle center lymphoma), C82.6--(Cutaneous follicle center lymphoma), 
C82.8--(Other types of follicular lymphoma), or C82.9--(Follicular 
lymphoma, unspecified). We are inviting public comments on the use of 
these ICD-10-CM diagnosis codes to identify the indication of R/R FL 
for purposes of the new technology add-on payment, if approved.
    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 odronextamab is not substantially similar to other 
currently available technologies because its mechanism of action 
presents notable distinctions, such as reduced potential for 
immunogenicity and anti-drug antibodies through its novel, fully human 
design and reduced ability to elicit an immune response through the 
blocking effect of the IgG4-based structure. The applicant further 
asserted that odronextamab also has demonstrated efficacy in patients 
with FL Grade 3b, which were excluded from the GO29781 study of 
mosunetuzumab, and offers consistent efficacy in other high-risk 
subgroups of patients with R/R FL, 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 odronextamab for the 
applicant's complete statements in support of its assertion that 
odronextamab is not substantially similar to other currently available 
technologies.
BILLING CODE 4120-01-P

[[Page 36100]]

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BILLING CODE 4120-01-C
    With regard to the newness criterion, we note that according to the 
applicant odronextamab may have a similar mechanism of action to that 
of LunsumioTM (mosunetuzumab), another IgG bsAb engaging 
CD3xCD20, for which we approved an application for new technology add-
on payments for FY 2024 (88 FR 58844), which treats the same population 
of R/R FL adult patients with two or more prior therapies. Although the 
applicant states that there are key distinctions between the mechanism 
of action of odronextamab and LunsumioTM because 
odronextamab is the first and only fully human, IgG4-based bsAb, which 
provides additional binding sites and reduces its ability to elicit an 
inflammatory immune response, we do not believe that the number of 
binding sites results in a different mechanism of action. We also 
believe that a reduction in inflammatory immune response would relate 
to the risk of an adverse event from odronextamab administration but is 
not critical to the way the drug treats the underlying disease, and 
therefore would relate to an assessment of substantial clinical 
improvement, rather than of substantial similarity.
    The applicant asserted that odronextamab treats a sub-population of 
patients within the R/R FL adult

[[Page 36101]]

patients with two or more prior therapies in its summary, specifically, 
that of R/R FL Grade 3b--a rare subgroup of patients who are generally 
excluded from clinical trials.\111\ However, we note that the FDA-
approved labeling for LunsumioTM does not appear to exclude 
this patient population. As such, it is unclear whether odronextamab 
would treat a patient population different from other CD20 x CD3 IgG 
bsAbs that treat patients with R/R FL, such as LunsumioTM. 
Accordingly, as it appears that odronextamab and LunsumioTM 
may use the same or similar mechanism of action to achieve a 
therapeutic outcome, would be assigned to the same MS-DRG, and treat 
the same or similar patient population and disease, we believe that 
these technologies may be substantially similar to each other. We note 
that if we determine that this technology is substantially similar to 
LunsumioTM, we believe the newness period for this 
technology would begin on December 22, 2022, the date 
LunsumioTM received FDA approval.
---------------------------------------------------------------------------

    \111\ Barraclough A, England JT, Villa D, Wight J, Hapgood G, 
Conn J, Doo NW, Li EW, Gilbertson M, Shaw B, Bishton MJ, Saeed M, 
Ratnasingam S, Abeyakoon C, Chong G, Wai SH, Ku M, Lee HP, Fleming 
K, Tam C, Douglas G, Cheah CY, Ng ZY, Rolfe T, Mills AK, Hamad N, 
Cashman H, Gleeson M, Narayana M, Hawkes EA. Outcomes in grade 3B 
follicular lymphoma: an international study led by the Australasian 
Lymphoma Alliance. Haematologica. 2023 Sep 1;108(9):2444-2453.
---------------------------------------------------------------------------

    We are inviting public comments whether odronextamab meets the 
newness criterion, including whether odronextamab is substantially 
similar to LunsumioTM or other existing technologies.
    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 2022 MedPAR using a combination 
of ICD-10-CM and/or PCS codes to identify potential cases representing 
patients who may be eligible for odronextamab. 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 tables later in this section.
    For the first analysis the applicant used a list of ICD-10-CM 
diagnosis codes to identify cases with primary diagnoses of follicular 
lymphoma. The applicant excluded cases with a corresponding ICD-10-CM 
or ICD-10-PCS code indicating active treatment. Per the applicant, 
active treatment was defined as allogeneic stem cell transplant, bone 
marrow transplant, transplant complications, chemotherapy 
administration, immunotherapy, or radiation. Please see the online 
posting for odronextamab for the complete list of codes provided by the 
applicant. The applicant used the inclusion/exclusion criteria 
described in the following table. Under this analysis, the applicant 
identified 482 claims mapping to nine MS-DRGs, including MS-DRG 840 
(Lymphoma and Non-Acute Leukemia with MCC) representing 29.3 percent of 
the identified 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 $101,177 which 
exceeded the average case-weighted threshold amount of $95,779.
    For the second analysis the applicant identified cases using a list 
of ICD-10-CM diagnosis codes: T80.89XA (Other complications following 
infusion, transfusion, and therapeutic injection) or D89.832-D89.839 
(Cytokine release syndrome (CRS) Grades 2-5 or unspecified) in any 
position. The applicant used the inclusion/exclusion criteria described 
in the table later in this section. Under this analysis, the applicant 
identified 80 claims mapping to two MS-DRGs, including 018 (Chimeric 
Antigen Receptor (CAR) T-Cell and Other Immunotherapies) and 811 (Red 
Blood Cell Disorders with MCC). The applicant calculated a final 
inflated average case-weighted standardized charge per case of 
$1,095,920, which exceeded the average case-weighted threshold amount 
of $963,675.
    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 odronextamab meets the cost 
criterion.
BILLING CODE 4120-01-P

[[Page 36102]]

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[GRAPHIC] [TIFF OMITTED] TP02MY24.125


[[Page 36103]]


    We are inviting public comments on whether odronextamab meets the 
cost criterion.
---------------------------------------------------------------------------

    \112\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

    With regard to the substantial clinical improvement criterion, the 
applicant asserted that odronextamab represents a substantial clinical 
improvement over existing technologies because it will expand access to 
heavily pretreated, highly refractory patients for whom existing 
therapies are not adequate. According to the applicant, treatment with 
odronextamab offers patients with R/R FL a new, readily available 
monotherapy that demonstrates multiple substantial clinical benefits, 
including a generally manageable safety profile, and establishes a new 
benchmark for efficacy. The applicant also asserted that odronextamab 
significantly improves clinical outcomes relative to services or 
technologies previously available (such as LunsumioTM). The 
applicant provided three studies to support these claims, as well as 
eight background articles about other therapies for the R/R FL patient 
population.\113\ The following table summarizes the applicant's 
assertions regarding the substantial clinical improvement criterion. 
Please see the online posting for odronextamab for the applicant's 
complete statements regarding the substantial clinical improvement 
criterion and the supporting evidence provided.
---------------------------------------------------------------------------

    \113\ 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 36104]]

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BILLING CODE 4120-01-C
    After review of the information provided by the applicant, we have 
the following concerns regarding whether odronextamab meets the 
substantial clinical improvement criterion. We note that with respect 
to the claim that odronextamab will increase treatment options for 
patients with R/R FL who have a high risk of CRS, the applicant 
submitted the oral presentation slides of the results from a pre-
specified analysis by Kim et al. (2022),\114\ presenting the

[[Page 36105]]

interim results for the Phase II trial for odronextamab on the FL 
cohort, ELM-2. In this Phase II trial, 131 patients (median age: 61 
years) with R/R FL after two or more lines of therapy were grouped to 
receive a 1/20 mg step-up regimen (n = 68) or 0.7/4/20 mg step-up 
regimen (n = 53) after the study initiated with a first cycle of step-
up regimen of 1/20 mg. The regimen was modified to 0.7/4/20 mg during 
Cycle 1 to further mitigate the risk of CRS. The rates of CRS grades 2 
and 3 for the 1/20 regimen are 17.6 percent and 5.9 percent, 
respectively, compared to the CRS grades 2 and 3 for the 0.7/4/20 
regimen of 11.1 percent and 1.6 percent. We note that although the 
incidence of grade 3 CRS was lower in the 0.7/4/20 regimen arm, the 
applicant submitted the United States Prescribing Information (USPI) 
for other therapies (including LunsumioTM and 
tisagenlecleucel) used to treat R/R FL patients to provide the CRS 
rates following treatment with existing therapies. As the applicant 
indirectly compared these incidence rates with those rates of trials as 
found in the prescribing information for other existing technologies, 
it is unclear if these differences are statistically significant. We 
note that because clinical trials are conducted under widely varying 
conditions, we question whether adverse reaction rates observed in the 
clinical trials of one drug can be directly compared to rates in the 
clinical trials of another drug. We question whether such comparisons 
across clinical trial cohorts adequately provide evidence of reduced 
adverse events in patients treated with odronextamab.
---------------------------------------------------------------------------

    \114\ Kim Tae Min, Taszner Michal, Cho Seok-Goo, et al. 
Odronextamab in patients with relapsed/refractory (R/R) follicular 
lymphoma (FL) Grade 1-3a: results from a prespecified analysis of 
the pivotal Phase II study ELM-2. Presented at American Society of 
Hematology (ASH). December 12, 2022.
---------------------------------------------------------------------------

    Similarly, we note that with respect to the claim that odronextamab 
offers patients with heavily pretreated, highly refractory FL a new, 
readily available, monotherapy that establishes a new benchmark for 
efficacy, the applicant submitted the objective response rates (ORR) 
and complete response rates (CR) of its Phase II study, ELM-2 and 
compared them to the ORR and CR rates of the LunsumioTM 
GO29781 study. We note the same concerns as with the previous claim 
about comparing outcomes across studies given the variability in 
clinical trial design.
    With respect to the claim that odronextamab demonstrated efficacy 
in patients with FL Grade 3b disease in the ELM-2 study, although the 
applicant provided additional analysis from the ELM-2 study where 
odronextamab demonstrated efficacy across six patients enrolled in the 
study with FL Grade 3B, we note that it is unclear whether the 
additional analysis that was provided in addition to the ELM-2 study 
represents an ad-hoc analysis, therefore, we are concerned about 
drawing conclusions from this ad-hoc analysis to appropriately 
demonstrate efficacy in the FL Grade 3B subgroup. Furthermore, we are 
concerned that the applicant did not compare the results of the study 
to the efficacy of existing therapies for patients with FL Grade 3B. We 
would be interested in additional evidence comparing outcomes between 
odronextamab and existing therapies such as Breyanzi[supreg], which is 
also approved for patients with FL Grade 3B with relapsed or refractory 
disease after two or more lines of systemic therapy.
    With respect to the claim that patients in the FL cohort of the 
ELM-2 study exhibited more unfavorable select baseline characteristics 
compared to those in the LunsumioTM study, the applicant 
presented the analysis for odronextamab by Kim et al. (2022),\115\ 
described previously, and the LunsumioTM phase 2 study on R/
R patients with FL.\116\ The applicant stated that patients treated 
with odronextamab in the ELM-2 cohort had received prior autologous 
stem cell transplants at a higher rate (30.5 percent) than those 
treated in the LunsumioTM study (21%). The applicant also 
noted additional unfavorable select baseline characteristics for 
patients in the ELM-2 study compared to patients in the 
LunsumioTM study, including: more patients with a worse 
Eastern Cooperative Oncology Group (ECOG) performance status, as 48.1 
percent of patients in ELM-2 had an ECOG performance status of 1, 
compared to 41 percent of patients in the LunsumioTM study; 
more patients with an Ann Arbor stage III-IV (84.7 percent of patients, 
compared to 77 percent of patients in the LunsumioTM study); 
more patients with a FLIPI score of 3-5 (58.8 percent of patients, 
compared to 44 percent of patients in the LunsumioTM study); 
and more older patients, with 38.9 percent of patients >=65 years old 
(median age of 61), compared to a median age of 60 for 
LunsumioTM. We note these are indirect rate comparisons 
across clinical trials without statistical adjustments performed across 
the patient populations and clinical outcomes. We also note that 
differences in patient characteristics across any two clinical trials, 
even with the same selection criteria, are likely to occur. As such, we 
question whether the comparison of baseline characteristics across 
cohorts in independent clinical trials can be taken as indicative of 
differences in clinical outcomes or efficacy between treatments.
---------------------------------------------------------------------------

    \115\ Kim Tae Min, Taszner Michal, Cho Seok-Goo, et al. 
Odronextamab in patients with relapsed/refractory (R/R) follicular 
lymphoma (FL) Grade 1-3a: results from a prespecified analysis of 
the pivotal Phase II study ELM-2. Presented at American Society of 
Hematology (ASH). December 12, 2022.
    \116\ Budde L, Sehn L, et al. Safety and efficacy of 
mosunetuzumab, a bispecific antibody, in patients with relapsed or 
refractory follicular lymphoma: a single-arm, multicentre, phase 2 
study. The Lancet Oncology. 2022; 23: 1055065. https://doi.org/10.1016/S1470-2045(22)00335-7.
---------------------------------------------------------------------------

    We are inviting public comments on whether odronextamab meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
odronextamab.
6. Proposed FY 2025 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

[[Page 36106]]

finalized our proposal to publicly post online applications for new 
technology add-on payment beginning with FY 2024 applications (87 FR 
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, 
we are continuing to summarize each application in this proposed rule. 
However, while we are continuing to provide discussion of the concerns 
or issues, we identified with respect to applications submitted under 
the alternative pathway, we are providing more succinct information as 
part of the summaries in the proposed and final rules regarding the 
applicant's assertions as to how the medical service or technology 
meets the applicable new technology add-on payment criteria. We refer 
readers to https://mearis.cms.gov/public/publications/ntap for the 
publicly posted FY 2025 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), including 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 2025 new technology 
add-on payment applications.
    We received 23 applications for new technology add-on payments for 
FY 2025 under the new technology add-on payment alternative pathway. As 
discussed previously, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958). Of the 23 applications 
received under the alternative pathway, seven applications were not 
eligible for consideration for new technology add-on payment because 
they did not meet these requirements; and two applicants withdrew their 
applications prior to the issuance of this proposed rule, including the 
withdrawal of the application for DefenCathTM (taurolidine/
heparin), which received conditional approval for new technology add-on 
payments for FY 2024, subsequently received FDA approval in November 
2023, and therefore was eligible to receive new technology add-on 
payments beginning with discharges on or after January 1, 2024. As 
discussed in section II.E.4. of this proposed rule, we are proposing to 
continue making new technology add-on payments for 
DefenCathTM (taurolidine/heparin) for FY 2025. Of the 
remaining 14 applications, 12 of the technologies received a 
Breakthrough Device designation from FDA. The remaining two 
applications were designated as a QIDP by FDA. We did not receive any 
applications for technologies approved through the LPAD pathway.
    In accordance with the regulations under Sec.  412.87(f)(2), 
applicants for new technology add-on payments for FY 2025 for 
Breakthrough Devices must have FDA marketing authorization by May 1 of 
the year prior to the beginning of the fiscal year for which the 
application is being considered. Under Sec.  412.87(f)(3), applicants 
for new technology add-on payments for FY 2025 for QIDPs and 
technologies approved under the LPAD pathway 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. The policy 
finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742) 
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 July 1 prior to the 
particular fiscal year for which the applicant applied for new 
technology add-on payments, provided that the technology receives FDA 
marketing authorization before July 1 of the 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 2024 IPPS/LTCH PPS proposed rule, for 
applications under the alternative new technology add-on payment 
pathway, in this proposed rule we are making a proposal to approve or 
disapprove each of these 14 applications for FY 2025 new technology 
add-on payments. Therefore, in this section of the preamble of this 
proposed rule, we provide background information on each alternative 
pathway application and propose whether or not each technology would be 
eligible for the new technology add-on payment for FY 2025. We refer 
readers to section II.H.8. of the preamble of the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58715 through 58733) for further discussion of the 
alternative new technology add-on payment pathways for these 
technologies.
a. Annalise Enterprise Computed Tomography Brain (CTB) Triage--
Obstructive Hydrocephalus (OH)
    Annalise-Ai Pty Ltd submitted an application for new technology 
add-on payments for the Annalise Enterprise CTB Triage--OH for FY 2025. 
According to the applicant, the Annalise Enterprise CTB Triage--OH is a 
medical device software application used to aid in the triage and 
prioritization of studies with features suggestive of obstructive 
hydrocephalus (OH). Per the applicant, the device analyzes studies 
using an artificial intelligence (AI) algorithm to identify suspected 
OH findings in non-contrast computed tomography (NCCT) brain scans and 
makes study-level output available to an order and imaging management 
system for worklist prioritization or triage.
    Please refer to the online application posting for the Annalise 
Enterprise CTB Triage--OH available at https://mearis.cms.gov/public/publications/ntap/NTP231017D5AA7, for additional detail describing the 
technology and how it is used.
    According to the applicant, the Annalise Enterprise CTB Triage--OH 
received Breakthrough Device designation from FDA on February 17, 2023, 
for use in the medical care environment to aid in triage and 
prioritization of studies with features suggestive of OH. The device 
analyzes studies using an AI algorithm to identify findings. It makes 
study-level output available to an order and imaging management system 
for worklist prioritization or triage. The applicant stated that the 
technology received 510(k) clearance from FDA on August 15, 2023, for 
the same indication consistent with the Breakthrough Device 
designation. Per the applicant, the Annalise Enterprise CTB Triage--OH 
was not immediately available for sale because there were additional 
steps to be completed following 510(k) clearance prior to the product 
becoming commercially available. According to the applicant, these 
additional steps involved generating a new unique device identifier 
(UDI) to incorporate the recently cleared finding for OH, integrating 
this UDI into the device, and

[[Page 36107]]

releasing it. Per the applicant, the Annalise Enterprise CTB Triage--OH 
became commercially available on October 10, 2023.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Annalise Enterprise CTB 
Triage--OH. The applicant submitted a request for approval for a unique 
ICD-10-PCS procedure code for the Annalise Enterprise CTB Triage--OH 
beginning in FY 2025. The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the Annalise 
Enterprise CTB Triage--OH 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 three 
analyses to demonstrate that the technology meets the cost criterion. 
The applicant stated that for all three analyses, it used the 2021 
Standard Analytic Files (SAF) Limited Data Set (LDS) to identify the 
top admitting diagnosis codes for inpatient stays that were admitted 
from the emergency room (ER) and included a non-contrast CT head scan. 
Next, it searched the FY 2022 MedPAR data to identify applicable 
inpatient stays based on different sets of admitting diagnosis codes 
for each of the three analyses. The applicant explained that it used 
admitting diagnosis codes from the inpatient stays, rather than 
discharge diagnosis codes, because the Annalise Enterprise CTB Triage--
OH is an AI-based technology used to identify and prioritize patients 
suspected of OH. As a result, it will commonly be used in the ER before 
the doctor and/or the hospital has assigned the primary or secondary 
diagnosis for the inpatient stay. The applicant stated that admitting 
diagnosis codes may be better predictors for whether the Annalise 
Enterprise CTB Triage--OH service will be used, rather than primary or 
secondary diagnosis at discharge, which will likely represent 
information known after the procedure is performed. Per the applicant, 
for identifying the top admitting diagnosis codes, the inpatient stays 
were further narrowed down to only those where the patient had a 
physician claim during the inpatient stay or 1 day before for a non-
contrast CT head scan (defined as CPT codes 70450, 70480, 70486), or 
had an outpatient claim for a non-contrast CT head scan the day of 
admission or 1 day before. Each analysis followed the order of 
operations described in the table that follows later in this section.
    For the primary analysis, the applicant stated that it searched the 
FY 2022 MedPAR file for cases with emergency room charges (that is, 
emergency room charge amount greater than $0) and/or an inpatient 
admission type code (IP_ADMSN_TYPE_CD) equal to 1 for emergency, and 
reporting one of the top 25 diagnosis codes associated with 50% of all 
identified inpatient stays in the 2021 SAF. According to the applicant, 
it identified 2,206,036 claims mapping to 714 MS-DRGs, including MS-DRG 
871 (Septicemia or Severe Sepsis without MV >96 Hours with MCC), which 
represented 16% of identified cases. The applicant stated that it 
calculated a final inflated average case-weighted standardized charge 
per case of $80,407, which exceeded the average case-weighted threshold 
amount of $69,892.
    For the second analysis, the applicant stated that it conducted a 
sensitivity analysis using cases with emergency room charges (that is, 
emergency room charge amount greater than $0) and/or an inpatient 
admission type code (IP_ADMSN_TYPE_CD) equal to 1 for emergency, and 
reporting one of the top 186 admitting diagnosis codes associated with 
80% of all identified inpatient stays in the 2021 SAF LDS. The 
applicant noted that it identified 3,991,354 claims mapping to 739 MS-
DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 
Hours with MCC), which represented 11% of identified cases. The 
applicant noted that it calculated a final inflated average case-
weighted standardized charge per case of $78,356, which exceeded the 
average case-weighted threshold amount of $68,660.
    For the third analysis, the applicant stated that it conducted a 
sensitivity analysis that identified cases using the same criteria as 
the primary analysis, and further limited it to cases that also 
incurred CT charges. Per the applicant, it performed this sensitivity 
analysis because although doctors are likely to order the Annalise AI 
technology when a NCCT head scan is performed and the patient is 
admitted through the emergency room, the MedPAR file variable for CT 
charges does not differentiate between contrast and NCCTs, or the area 
of the body where the CT is performed, and does not capture CT charges 
billed by physicians during the inpatient stay. As a result, it further 
limited the cases to those with charges for CT to assess if this would 
impact whether the technology would meet the cost criterion. Per the 
applicant, it identified 1,546,504 claims mapping to 702 MS-DRGs, 
including MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours 
with MCC), which represented 17% of identified cases. The applicant 
stated that it calculated a final inflated average case-weighted 
standardized charge per case of $89,176, which exceeded the average 
case-weighted threshold amount of $71,344.
    The applicant asserted that because the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount in all scenarios, the Annalise Enterprise CTB 
Triage--OH meets the cost criterion.
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    \117\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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[[Page 36108]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.127

    According to the applicant, the technology is used to aid in the 
triage and prioritization of studies with features suggestive of OH. 
However, the diagnosis codes that the applicant used to identify 
eligible cases included non-neurologic diagnosis codes (for example, 
U071, R0602, J189). We question whether these diagnosis codes are 
applicable, and whether using neurologic diagnosis codes for diagnoses 
that exhibit symptoms similar to OH would more accurately identify 
eligible cases.
    Subject to the applicant adequately addressing this concern, we 
would agree that the technology meets the cost criterion and are 
proposing to approve the Annalise Enterprise CTB Triage--OH for new 
technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
Annalise Enterprise CTB Triage--OH to the hospital to be $371.37 per 
patient. According to the applicant, hospitals acquire the Annalise 
Enterprise CTB Triage--OH system on a subscription-based model, with an 
annual cost of $180,000 per hospital. The applicant stated that the 
average cost per patient per hospital will vary by the volume of the 
NCCT cases for which the software is used. To determine the cost per 
case, the applicant used the following methodology:
    First, the applicant conducted market research to estimate the 
percent of NCCT cases where this software would likely be ordered, 
which was estimated at 50% of NCCT head scans for older patients (>65 
years of age) and 30% of NCCT head scans for younger patients (<65 
years of age).
    Second, the applicant used the 2021 SAF LDS to identify total NCCT 
scans by hospital. To represent the full Medicare fee-for-service 
population, the applicant multiplied total NCCT head scans at each 
hospital from the data by 20.
    Third, to calculate the total number of NCCT head scans for each 
hospital, the applicant assumed that 56.5% of all NCCT scans are for 
Medicare beneficiaries, based on literature on trends in the 
utilization of head CT scans in the United States.\118\
---------------------------------------------------------------------------

    \118\ Selfi, A, Jafari, S, and Mirmoeeni, S et al. (June 16, 
2022) Trends in inpatient utilization of head computerized 
tomography scans in the United States: A brief cross-sectional 
study. Cureus 14(6): e26018. DOI 10.7759/cureus.26018
---------------------------------------------------------------------------

    Fourth, to calculate the cost per case for each hospital, the 
applicant divided $180,000 by the estimated number of NCCT head scans 
analyzed by the technology for each hospital. Per the applicant, the 
average cost per case across all IPPS hospitals was then calculated at 
$371.37.
    The applicant asserted that calculating the cost per case across 
all IPPS hospitals was reasonable. The applicant noted that given its 
limited time on the market and low number of subscribers, it used all 
IPPS hospitals to calculate cost per case rather than

[[Page 36109]]

limiting the analysis to current subscribers. The applicant mentioned 
that for technologies that are commercially available for a longer 
period of time and with more subscribers, it may make sense to limit 
the cost per case analysis to hospitals that are current subscribers 
rather than using all IPPS hospitals in the calculation.
    As we noted in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58630) 
and in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44983), we 
understand that there are unique circumstances with respect to 
determining a cost per case for a technology that utilizes a 
subscription for its cost and we will continue to consider the issues 
relating to calculation of the cost per unit of technologies sold on a 
subscription basis as we gain more experience in this area. We continue 
to welcome comments from the public as to the appropriate method to 
determine a cost per case for such technologies, including comments on 
whether the cost analysis should be updated based on the most recent 
subscriber data for each year for which the technology may be eligible 
for add-on payment.
    We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65% of the 
average cost of the technology, or 65% of the costs in excess of the 
MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the Annalise Enterprise CTB Triage--OH would be $241.39 for FY 2025 
(that is, 65% of the average cost of the technology).
    We invite public comments on whether the Annalise Enterprise CTB 
Triage--OH meets the cost criterion and our proposal to approve new 
technology add-on payments for the Annalise Enterprise CTB Triage--OH 
for FY 2025 for use in the medical care environment to aid in triage 
and prioritization of studies with features suggestive of OH.
b. ASTar[supreg] System
    Q-linea submitted an application for new technology add-on payments 
for the ASTar[supreg] System for FY 2025. According to the applicant, 
the ASTar[supreg] System is a fully automated system for rapid 
antimicrobial susceptibility testing (AST). The applicant stated that 
the proprietary AST technology is based on broth microdilution (BMD), 
optimized for high sensitivity and short time-to-result, delivering 
phenotypic AST with true minimum inhibitory concentration (MIC) results 
in approximately six hours.
    Please refer to the online application posting for the 
ASTar[supreg] System, available at https://mearis.cms.gov/public/publications/ntap/NTP231013T7Y5F, for additional detail describing the 
technology and how it is used.
    According to the applicant, the ASTar[supreg] System consists of 
the ASTar[supreg] Instrument and the ASTar[supreg] BC G-Kit. According 
to the applicant, the ASTar[supreg] Instrument and ASTar[supreg] BC G-
Kit, which includes the ASTar[supreg] BC G-Consumable Kit and the ASTar 
BC G-Frozen Insert, received Breakthrough Device designation from FDA 
on April 7, 2022. The ASTar[supreg] BC G-Kit is a multiplexed, in 
vitro, diagnostic test utilizing AST methods and is intended for use 
with the ASTar[supreg] Instrument. The ASTar[supreg] BC G-Kit is 
performed directly on positive blood cultures confirmed positive for 
Gram-negative bacilli only by Gram stain, and tests antimicrobial 
agents with nonfastidious and fastidious bacterial species. According 
to the applicant, its marketing authorization request for the 
ASTar[supreg] BC G-Kit has been accepted by FDA, and it anticipates a 
510(k) decision from FDA for the same indication consistent with the 
Breakthrough Device designation before May 1, 2024. The applicant 
stated that it anticipates the technology will be available on the 
market immediately after 510(k) clearance from FDA.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the ASTar[supreg] System. The 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the ASTar[supreg] System beginning in FY 2025. The 
applicant provided a list of diagnosis codes that may be used to 
currently identify the indication for the ASTar[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 provided multiple 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used different ICD-10-CM codes to identify potential cases in the FY 
2022 MedPAR file representing patients who may be eligible for the 
ASTar[supreg] System. According to the applicant, Cohort 1 comprised 
patients with non-sepsis infections and Cohort 2 consisted of patients 
with sepsis resulting from bacteria identifiable by the ASTar[supreg] 
System. The applicant explained that these scenarios were separated as 
the applicant believed that charges and MS-DRG assignments may differ 
due to the resources required to treat sepsis patients compared to 
those required for less severe infections. Finally, Cohort 3 included 
all ICD-10-CM codes from Cohorts 1 and 2 because the applicant stated 
that the ASTar[supreg] System may be used to identify any infection 
caused by the bacteria listed in Cohorts 1 and 2. The applicant stated 
that in all three cohorts, the patients mapped to a large number of MS-
DRGs based on the listed ICD-10-CM codes. Therefore, in the analyses, 
the applicant only included the most common MS-DRGs, that is, the MS-
DRGs containing at least 1 percent of the potential case volume within 
each of the three cohorts, as these are the MS-DRGs to which potential 
ASTar[supreg] System cases would most closely map. The applicant used 
the inclusion/exclusion criteria described in the table that follows 
later in this section to identify claims for each cohort. Each analysis 
followed the order of operations described in the table that follows 
later in this section.
    For Cohort 1, the applicant identified 440,838 claims mapping to 14 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 25% of identified cases, and calculated a 
final inflated average case-weighted standardized charge per case of 
$85,525, which exceeded the average case-weighted threshold amount of 
$70,398.
    For Cohort2, the applicant identified 224,825 claims mapping to 7 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 54% of identified cases, and calculated a 
final inflated average case-weighted standardized charge per case of 
$99,508, which exceeded the average case-weighted threshold amount of 
$82,171.
    For Cohort3, the applicant identified 603,877 claims mapping to 13 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis with MV >96 
Hours with MCC) representing 34% of identified cases, and calculated a 
final inflated average case-weighted standardized charge per case of 
$88,395

[[Page 36110]]

which exceeded the average case-weighted threshold amount of $73,727.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all the three cohorts, the applicant asserted that the ASTar[supreg] 
System meets the cost criterion.
---------------------------------------------------------------------------

    \119\ Codes referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TP02MY24.128

    We agree with the applicant that the ASTar[supreg] System meets the 
cost criterion and are therefore proposing to approve the ASTar[supreg] 
System for new technology add-on payments for FY 2025, subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the operating cost of the 
ASTar[supreg] System to the hospital to be $150 per patient, based on 
the operating component ASTar[supreg] BC G-Kit (composed of the 
ASTar[supreg] BC G-Consumable Kit ($141) and ASTar BC G-Frozen Insert 
($9)). The applicant also noted a capital cost of $200,000 for the 
ASTar[supreg] Instrument. Because section 1886(d)(5)(K)(i) of the Act 
requires that the Secretary establish a mechanism to recognize the 
costs of new medical services or technologies under the payment system 
established under that subsection, which establishes the system for 
payment of the operating costs of inpatient hospital services, we do 
not include capital costs in the add-on payments for a new medical 
service or technology or make new technology add-on payments under the 
IPPS for capital-related costs (86 FR 45145). As noted, the applicant 
stated that the cost of the ASTar[supreg] Instrument is a capital cost. 
Therefore, it appears that this component is not eligible for new 
technology add-on payment because, as discussed in prior rulemaking and 
as noted, we only make new technology add-on payments for operating 
costs (72 FR 47307 through 47308). We note that any new technology add-
on payment for the ASTar[supreg] System would include only the cost of 
ASTar[supreg] BC G-Kit ($150). We note that the cost information for 
this technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit

[[Page 36111]]

new technology add-on payments to the lesser of 65% of the average cost 
of the technology, or 65% of the costs in excess of the MS-DRG payment 
for the case. As a result, we are proposing that the maximum new 
technology add-on payment for a case involving the use of the 
ASTar[supreg] System would be $97.50 for FY 2025 (that is, 65% of the 
average cost of the technology).
    We invite public comments on whether the ASTar[supreg] System meets 
the cost criterion and our proposal to approve new technology add-on 
payments for the ASTar[supreg] System for FY 2025, subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
c. Cefepime-Taniborbactam
    Venatorx Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for cefepime-taniborbactam for FY 2025. 
According to the applicant, cefepime-taniborbactam is an 
investigational [beta]-lactam antibiotic/[beta]-lactamase inhibitor 
combination under development for the treatment of complicated urinary 
tract infections (cUTI), including pyelonephritis, melioidosis, and 
hospital-acquired bacterial pneumonia (HABP)/ventilator-associated 
bacterial pneumonia (VABP).
    Please refer to the online application posting for cefepime-
taniborbactam, available at https://mearis.cms.gov/public/publications/ntap/NTP2310168RYEB, for additional detail describing the technology 
and the disease treated by the technology.
    According to the applicant, cefepime-taniborbactam received QIDP 
designation from FDA on February 4, 2022, for cUTI, complicated intra-
abdominal infections (cIAI), HABP, VABP, and melioidosis. The applicant 
stated that it is seeking approval from FDA for the treatment of 
patients 18 years of age and older with cUTI, including pyelonephritis 
caused by designated susceptible gram-negative bacteria, including 
cases with concurrent bacteremia. According to the applicant, its 
marketing request for cefepime-taniborbactam has been filed by FDA, and 
it anticipates an NDA decision before July 1, 2024. According to the 
applicant, cefepime-taniborbactam is not expected to be commercially 
available immediately after FDA approval due to manufacturing readiness 
activities and the expected commercial availability date is October 1, 
2024. We note that, as an application submitted under the alternative 
pathway for certain antimicrobial products at Sec.  412.87(d), 
cefepime-taniborbactam is eligible for conditional approval for new 
technology add-on payments if it does not receive FDA marketing 
authorization by July 1, 2024, provided that the technology receives 
FDA marketing authorization before July 1 of the fiscal year for which 
the applicant applied for new technology add-on payments (that is, July 
1, 2025), as provided in Sec.  412.87(f)(3). To estimate the average 
dosage per patient, the applicant calculated a weighted average 
duration of treatment. Per the applicant, based on the dosing schedule, 
a patient receives approximately 3 doses per 24 hours. The applicant 
noted for 48 patients with bacteremia, the average length of stay was 
10.9 days, and for 392 patients without bacteremia, the average length 
of stay was 7.2 days, which led to a weighted average treatment 
duration of 7.5 days and 23 doses per average inpatient stay.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify cefepime-taniborbactam. The 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for cefepime-taniborbactam beginning in FY 2025. The 
applicant stated that ICD-10-CM diagnosis codes for the treatment of 
cUTI may be used to currently identify the indication for cefepime-
taniborbactam under the ICD-10-CM coding system. Please refer to the 
online application posting for the complete list of ICD-10-CM codes 
provided by the applicant.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for cefepime-taniborbactam, 
the applicant searched the FY 2022 MedPAR file for claims that had one 
of the ICD-10-CM codes reflecting conditions that would be considered 
an indication for cefepime-taniborbactam for the treatment of cUTI. 
Using the inclusion/exclusion criteria described in the following 
table, the applicant identified 833,530 claims mapping to 526 MS-DRGs, 
including MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours 
with MCC), 690 (Kidney and Urinary Tract Infections without MCC), and 
689 (Kidney and Urinary Tract Infections with MCC). 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 $91,218, which exceeded the average case-weighted threshold 
amount of $71,256. Because the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount, the applicant asserted that cefepime-taniborbactam 
meets the cost criterion.
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    \120\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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[[Page 36112]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.129

    We agree with the applicant that cefepime-taniborbactam meets the 
cost criterion and are therefore proposing to approve cefepime-
taniborbactam for new technology add-on payments for FY 2025, subject 
to the technology receiving FDA marketing authorization as a QIDP for 
the indication corresponding to the QIDP designation by July 1, 2024. 
As an application submitted under the alternative pathway for certain 
antimicrobial products at Sec.  412.87(d), cefepime-taniborbactam is 
eligible for conditional approval for new technology add-on payments if 
it does not receive FDA marketing authorization by July 1, 2024, 
provided that the technology receives FDA marketing authorization 
before July 1 of the fiscal year for which the applicant applied for 
new technology add-on payments (that is, July 1, 2025), as provided in 
Sec.  412.87(f)(3). If cefepime-taniborbactam receives FDA marketing 
authorization before July 1, 2025, 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, 2025, no new technology add-on payments would be made 
for cases involving the use of cefepime-taniborbactam for FY 2025.
    The applicant has not provided an estimate for the cost of 
cefepime-taniborbactam at the time of this proposed rule. Per the 
applicant, based on the dosing schedule, a patient receives 
approximately 3 doses per 24 hours. The applicant noted for 48 patients 
with bacteremia, the average length of stay was 10.9 days, and for 392 
patients without bacteremia, the average length of stay was 7.2 days, 
which led to a weighted average treatment duration of 7.5 days and 23 
doses per average inpatient stay. We expect the applicant to submit 
cost information prior to the final rule, and we will provide an update 
regarding the new technology add-on payment amount for the technology, 
if approved, in the final rule. Any new technology add-on payment for 
cefepime-taniborbactam would be subject to our policy under Sec.  
412.88(a)(2)(ii)(B) where we limit new technology add-on payment for 
QIDPs to the lesser of 75% of the average cost of the technology, or 
75% of the costs in excess of the MS-DRG payment for the case.
    We invite public comments on whether cefepime-taniborbactam meets 
the cost criterion and our proposal to approve new technology add-on 
payments for cefepime-taniborbactam for FY 2025, subject to the 
technology receiving FDA marketing authorization consistent with its 
QIDP designation by July 1, 2024.
d. Edwards EVOQUE\TM\ Tricuspid Valve Replacement System (Transcatheter 
Tricuspid Valve Replacement System)
    Edwards Lifesciences LLC submitted an application for new 
technology add-on payments for the Edwards EVOQUE\TM\ Tricuspid Valve 
Replacement System (``EVOQUE\TM\ System'') for FY 2025. According to 
the applicant, the EVOQUE\TM\ System is a new, transcatheter treatment 
option for patients with at least severe tricuspid regurgitation. Per 
the applicant, the EVOQUE\TM\ System is designed to replace the native 
tricuspid valve and consists of a transcatheter bioprosthetic valve, a 
catheter-based delivery system, and supporting accessories.
    Please refer to the online application posting for the Edwards 
EVOQUE\TM\ Tricuspid Valve Replacement System, available at https://mearis.cms.gov/public/publications/ntap/NTP231013MRRBG, for additional 
detail describing the technology and the condition treated by the 
technology.
    According to the applicant, the EVOQUE\TM\ System received 
Breakthrough Device designation from FDA on December 18, 2019, for the 
treatment of patients with symptomatic moderate or above tricuspid 
regurgitation. The applicant stated that the technology received 
premarket approval from FDA on February 1, 2024 for a narrower 
indication for use, for the improvement of health status in patients 
with symptomatic severe tricuspid regurgitation despite optimal medical

[[Page 36113]]

therapy, for whom tricuspid valve replacement is deemed appropriate by 
a heart team. Since the indication for which the applicant received 
premarket approval is included within the scope of the Breakthrough 
Device designation, it appears that the PMA indication is appropriate 
for consideration for new technology add-on payment under the 
alternative pathway criteria. According to the applicant, the 
EVOQUE\TM\ System was commercially available immediately after FDA 
approval.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the EVOQUE\TM\ System. The 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the EVOQUE\TM\ System beginning in FY 2025. The 
applicant stated that ICD-10-CM diagnosis codes I07.1 (Rheumatic 
tricuspid insufficiency), I07.2 (Rheumatic tricuspid stenosis and 
insufficiency), I36.1 (Nonrheumatic tricuspid (valve) insufficiency), 
and I36.2 (Nonrheumatic tricuspid (valve) stenosis with insufficiency) 
may be used to currently identify the indication for the EVOQUE\TM\ 
System under the ICD-10-CM coding system.
    With respect to the cost criterion, the applicant provided two 
analyses to demonstrate that the technology meets the cost criterion. 
To identify potential cases representing patients who may be eligible 
for the EVOQUE\TM\ System, each analysis used the same ICD-10-CM 
diagnosis codes in different positions, with and without selected ICD-
10-PCS procedure codes, to identify relevant cases in the FY 2022 
MedPAR file. Each analysis followed the order of operations described 
in the table that follows later in this section.
    For the first analysis, the applicant searched for cases assigned 
to MS-DRGs 266 (Endovascular Cardiac Valve Replacement and Supplement 
Procedures with MCC) and 267 (Endovascular Cardiac Valve Replacement 
and Supplement Procedures without MCC) that included one of the four 
ICD-10-CM diagnosis codes in any position, as listed in the table that 
follows later in this section. The applicant used the inclusion/
exclusion criteria described in the table that follows later in this 
section. Under this analysis, the applicant identified 2,728 claims 
mapping to the two MS-DRGs and calculated a final inflated average 
case-weighted standardized charge per case of $267,720, which exceeded 
the average case-weighted threshold amount of $194,848.
    For the second analysis, the applicant searched for the cases that 
included any of the ICD-10-PCS codes for percutaneous repair or 
replacement of the tricuspid valve in any position, in combination with 
one of the four ICD-10-CM codes for tricuspid valve insufficiency as 
the primary diagnosis, as listed in the table that follows later in 
this section. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 198 claims mapping to 6 MS-DRGs and 
calculated a final inflated average case-weighted standardized charge 
per case of $327,236, which exceeded the average case-weighted 
threshold amount of $219,225.
    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 EVOQUE\TM\ System meets 
the cost criterion.

[[Page 36114]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.130

    We agree with the applicant that the EVOQUE\TM\ System meets the 
cost criterion and are therefore proposing to approve the EVOQUE\TM\ 
System for new technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
EVOQUE\TM\ System to the hospital to be $49,000 per patient, which 
includes the following components: the EVOQUE\TM\ Tricuspid Delivery 
System, the EVOQUE\TM\ Dilator Kit, the EVOQUE\TM\ Loading System, the 
Stabilizer, Base, and Plate, and the EVOQUE\TM\ Valve. The applicant 
noted that the listed

[[Page 36115]]

components of the EVOQUETM System are sold together as one 
unit because they are all needed to perform the procedure, are all 
single patient use, and are not sold separately. We note that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65% of the average cost of the technology, or 65% of 
the costs in excess of the MS-DRG payment for the case. As a result, we 
are proposing that the maximum new technology add-on payment for a case 
involving the use of the EVOQUE\TM\ System would be $31,850 for FY 2025 
(that is, 65% of the average cost of the technology).
    We invite public comments on whether the EVOQUE\TM\ System meets 
the cost criterion and our proposal to approve new technology add-on 
payments for the EVOQUE\TM\ System for FY 2025 for the improvement of 
health status in patients with symptomatic severe tricuspid 
regurgitation despite optimal medical therapy, for whom tricuspid valve 
replacement is deemed appropriate by a heart team.
e. GORE[supreg] EXCLUDER[supreg] Thoracoabdominal Branch Endoprosthesis 
(TAMBE Device)
    W.L. Gore & Associates, Inc. submitted an application for new 
technology add-on payments for the TAMBE Device for FY 2025. According 
to the applicant, the TAMBE Device is used for endovascular repair in 
patients with thoracoabdominal aortic aneurysms (TAAA) and high-
surgical risk patients with pararenal abdominal aortic aneurysms (PAAA) 
who have appropriate anatomy. Per the applicant, the TAMBE Device is 
comprised of multiple required components, including: (1) an Aortic 
Component, (2) Branch Components, (3) a Distal Bifurcated Component, 
and (4) Contralateral Leg Component. According to the applicant, these 
components together comprise the TAMBE Device.
    Please refer to the online application posting for the GORE[supreg] 
EXCLUDER[supreg] Thoracoabdominal Branch Endoprosthesis (TAMBE Device), 
available at https://mearis.cms.gov/public/publications/ntap/NTP231016DYQQX, for additional detail describing the technology and the 
condition treated by the technology.
    According to the applicant, the TAMBE Device received Breakthrough 
Device designation from FDA on October 1, 2021, for endovascular repair 
of thoracoabdominal and pararenal aneurysms in the aorta in patients 
who have appropriate anatomy. According to the applicant, the TAMBE 
Device received premarket approval (PMA) from FDA on January 12, 2024, 
for a slightly narrower indication for use, namely, TAAA and high-
surgical risk patients with PAAA who have appropriate anatomy. Since 
the indication for which the applicant received premarket approval is 
included within the scope of the Breakthrough Device designation, it 
appears that the PMA indication is appropriate for consideration for 
new technology add-on payment under the alternative pathway criteria. 
According to the applicant, the TAMBE Device is not yet available for 
sale due to the required lead time to train physicians on the TAMBE 
Device, and the first commercial device will only be implanted May 1, 
2024 or later. We are interested in additional information regarding 
the delay in the technology's market availability, as we question 
whether the date the device first became available for sale would be 
the same as the date the first commercial device is implanted.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the TAMBE Device. The applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for the TAMBE Device beginning in FY 2025. The applicant provided a 
list of diagnosis codes that may be used to currently identify the 
proposed indication for the TAMBE Device under the ICD-10-CM coding 
system. Please refer to the online application posting for the complete 
list of ICD-10-CM codes provided by the applicant.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the TAMBE Device, the 
applicant searched the FY 2022 MedPAR file for claims that had at least 
one of the ICD-10-CM codes and at least one of the ICD-10-PCS codes as 
listed in the following table. Using the inclusion/exclusion criteria 
described in the following table, the applicant identified 1,005 claims 
mapping to 19 MS-DRGs, including MS-DRG 269 (Aortic and Heart Assist 
Procedures except Pulsation Balloon without MCC), which represented 
54.5% of the identified 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 
$448,347, which exceeded the average case-weighted threshold amount of 
$185,799. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the TAMBE Device meets the cost criterion.
---------------------------------------------------------------------------

    \121\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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[[Page 36116]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.131

    We agree with the applicant that the TAMBE Device meets the cost 
criterion and are therefore proposing to approve the TAMBE Device for 
new technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
TAMBE Device to the hospital to be $72,675 per patient. Per the 
applicant, the TAMBE Device has a number of required components, 
including the aortic component ($29,000), branch components ($3,355), 
distal bifurcated component (DBC) ($10,758), DBC extender component 
($3,037), contralateral leg endoprosthesis ($4,390), and iliac extender 
endoprosthesis ($3,037). The applicant stated that the actual type and 
number of components used varies by patient depending on their anatomy 
and the extent of the patient's aneurysm. The applicant determined the 
number and types of components that were used in an average patient 
based on a multicenter pivotal clinical trial conducted predominantly 
in the U.S. and calculated the case cost per component. We note that 
the cost information for this technology may be updated in the final 
rule based on revised or additional information CMS receives prior to 
the final rule. Under Sec.  412.88(a)(2), we limit new technology add-
on payments to the lesser of 65% of the average cost of the technology, 
or 65% of the costs in excess of the MS-DRG payment for the case. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the use of the TAMBE Device would be $47,238.75 
for FY 2025 (that is, 65% of the average cost of the technology).
    We invite public comments on whether the TAMBE Device meets the 
cost criterion and our proposal to approve new technology add-on 
payments for the TAMBE Device for FY 2025, for endovascular repair in 
patients with thoracoabdominal aortic aneurysms and high-surgical risk 
patients with pararenal aortic aneurysms who have appropriate anatomy.
f. LimFlowTM System
    LimFlow Inc. submitted an application for new technology add-on 
payments for the LimFlowTM System for FY 2025. According to 
the applicant, the LimFlowTM System is a single-use, medical 
device system designed to treat patients who have chronic limb-
threatening ischemia with no suitable endovascular or surgical 
revascularization options and are at risk of major amputation. Per the 
applicant, the LimFlowTM System consists of LimFlow's 
Cylindrical and Conical Stent Grafts that are used in conjunction with 
a LimFlowTM Arterial Catheter, a LimFlowTM Venous 
Catheter, and a LimFlowTM Valvulotome. According to

[[Page 36117]]

the applicant, the LimFlowTM System is used for 
transcatheter arterialization of the deep veins, a minimally invasive 
procedure that aims to restore blood flow to the ischemic foot by 
diverting a stream of oxygenated blood through tibial veins in order to 
permanently bypass heavily calcified and severely stenotic arteries 
defined as unreconstructable. We note that LimFlow Inc. submitted an 
application for new technology add-on payments for the 
LimFlowTM System for FY 2024 as summarized in the FY 2024 
IPPS/LTCH PPS proposed rule (88 FR 26938 through 26940), but the 
technology did not meet the applicable deadline of July 1, 2023 for FDA 
approval or clearance of the technology and, therefore, was not 
eligible for consideration for new technology add-on payments for FY 
2024 (88 FR 58919).
    Please refer to the online application posting for the 
LimFlowTM System, available at https://mearis.cms.gov/public/publications/ntap/NTP23101627LXC, for additional detail 
describing the technology and the condition treated by the technology.
    According to the applicant, the LimFlowTM System 
received Breakthrough Device designation from FDA on October 3, 2017, 
for the treatment of critical limb ischemia by minimally invasively 
creating an arterio-venous bypass graft to produce the venous 
arterialization procedure in the below-the-knee vasculature. The 
applicant stated that the technology was granted premarket approval 
from FDA on September 11, 2023, for patients who have chronic limb-
threatening ischemia with no suitable endovascular or surgical 
revascularization options and are at risk of major amputation. Since 
the indication for which the applicant received premarket approval is 
considered equivalent to the Breakthrough Device designation, it 
appears that the premarket approval indication is appropriate for 
consideration for new technology add-on payment under the alternative 
pathway criteria. Per the applicant, the LimFlowTM System 
was not immediately available for sale because inventory build and ramp 
for commercial sales was set to commence following FDA approval to 
allow time for the conduct of surgeon training and medical education on 
patient selection, indications, and surgical technique. The applicant 
stated that the technology became commercially available on November 1, 
2023.
    The applicant provided a list of ICD-10-PCS codes that, effective 
October 1, 2018, can be used to uniquely describe procedures involving 
the use of the LimFlowTM System under the ICD-10-PCS coding 
system. Please see the online posting for the LimFlowTM 
System for the complete list of ICD-10-PCS codes provided by the 
applicant. The applicant provided a list of diagnosis codes that may be 
used to currently identify the indication for the LimFlowTM 
System under the ICD-10-CM coding system. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant.
    With respect to the cost criterion, the applicant provided three 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used the same ICD-10-PCS codes to identify potential cases representing 
patients who may be eligible for the LimFlowTM System. The 
applicant stated that the selected claims represent the exact 
situations in which the LimFlowTM System would be used and 
represent the cost of care associated with the use of the 
LimFlowTM System. The applicant utilized a different year of 
MedPAR data in each analysis. According to the applicant, it used 
multiple years of data because the case count in each individual year 
was low. The applicant imputed a value of 11 cases for MS-DRGs with 
less than 11 cases. Each analysis followed the order of operations 
described in the table that follows later in this section.
    For the first analysis, the applicant searched FY 2022 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 88 
claims mapping to 8 MS-DRGs, with none exceeding more than 13% of the 
total identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $307,461 which 
exceeded the average case-weighted threshold amount of $124,971.
    For the second analysis, the applicant searched FY 2021 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 111 
claims mapping to 10 MS-DRGs, with none exceeding more than 11% of the 
total identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $277,454, which 
exceeded the average case-weighted threshold amount of $116,278.
    For the third analysis, the applicant searched FY 2020 MedPAR data 
for claims reporting at least one of the ICD-10-PCS codes listed in the 
table that follows later in this section to identify cases that may be 
eligible for the LimFlowTM System. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 99 
claims mapping to 9 MS-DRGs, with none exceeding more than 12% of the 
total identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $273,638 which 
exceeded the average case-weighted threshold amount of $125,153.
    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 LimFlowTM 
System meets the cost criterion.
---------------------------------------------------------------------------

    \122\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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

[[Page 36118]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.132

    We agree with the applicant that the LimFlowTM System 
meets the cost criterion and are therefore proposing to approve the 
LimFlowTM System for new technology add-on payments for FY 
2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
LimFlowTM System to the hospital to be $25,000 per patient. 
According to the applicant, the LimFlowTM System is sold as 
a system, as such, the components of the LimFlowTM System 
are not priced or sold to hospitals independently. The applicant stated 
that all components of the LimFlowTM System are single-use 
and the entire system is an operating cost. We note that the cost 
information for this technology may be updated in the final rule based 
on revised or additional information CMS receives prior to the final 
rule. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65% of the average cost of the technology, or 65% of 
the costs in excess of the MS-DRG payment for the case. As a result, we 
are proposing that the maximum new technology add-on payment for a case 
involving the use of the LimFlowTM System would be $16,250 
for FY 2025 (that is, 65% of the average cost of the technology).
    We invite public comments on whether the LimFlowTM 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the LimFlowTM System for FY 
2025 for patients who have chronic limb-threatening ischemia with no 
suitable endovascular or surgical revascularization options and are at 
risk of major amputation.
g. ParadiseTM Ultrasound Renal Denervation System
    ReCor Medical submitted an application for new technology add-on

[[Page 36119]]

payments for the ParadiseTM Ultrasound Renal Denervation 
System for FY 2025. According to the applicant, the 
ParadiseTM Ultrasound Renal Denervation System is an 
endovascular catheter-based system that delivers SonoWave360\TM\ 
ultrasound energy circumferentially, thermally ablating and disrupting 
overactive renal sympathetic nerves to lower blood pressure in adult 
(>=22 years of age) patients with uncontrolled hypertension who may be 
inadequately responsive to or who are intolerant to anti-hypertensive 
medications.
    Please refer to the online application posting for the 
ParadiseTM Ultrasound Renal Denervation System, available at 
https://mearis.cms.gov/public/publications/ntap/NTP23101772HBQ, for 
additional detail describing the technology and the condition treated 
by the technology.
    According to the applicant, the ParadiseTM Ultrasound 
Renal Denervation System received Breakthrough Device designation from 
FDA on December 4, 2020, for reducing blood pressure in adult (>=22 
years of age) patients with uncontrolled hypertension, who may be 
inadequately responsive to, or who are intolerant to anti-hypertensive 
medications. The applicant received FDA premarket approval for the 
technology on November 7, 2023, for reducing blood pressure as an 
adjunctive treatment in hypertension patients in whom lifestyle 
modifications and antihypertensive medications do not adequately 
control blood pressure. Because we consider the indication for which 
the applicant received premarket approval to be within the scope of the 
Breakthrough Device designation, and FDA considers this marketing 
authorization to be for the Breakthrough Device designation,\123\ it 
appears that the premarket approval indication is appropriate for 
consideration for new technology add-on payment under the alternative 
pathway criteria. According to the applicant, the technology was 
commercially available immediately after FDA approval.
---------------------------------------------------------------------------

    \123\ List of Breakthrough Devices with Marketing Authorization: 
https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------

    The applicant stated that effective October 1, 2023, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of the ParadiseTM Ultrasound Renal Denervation 
System: X051329 (Destruction of renal sympathetic nerve(s) using 
ultrasound ablation, percutaneous approach, new technology group 9). 
The applicant stated that ICD-10-CM codes I10 (Essential (primary) 
hypertension), I15.1 (Hypertension secondary to other renal disorders), 
I15.8 (Other secondary hypertension), I15.9 (Secondary hypertension, 
unspecified), and I1A.0 (Resistant hypertension) may be used to 
currently identify the indication for the ParadiseTM 
Ultrasound Renal Denervation System under the ICD-10-CM coding system.
    With respect to the cost criterion, the applicant provided multiple 
analyses to demonstrate that it meets the cost criterion. Each analysis 
used different MS-DRGs and/or ICD-10-CM codes to identify potential 
cases representing patients who may be eligible for the 
ParadiseTM Ultrasound Renal Denervation System. 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 table that 
follows later in this section.
    For the first analysis, the applicant searched the FY 2022 MedPAR 
file for all cases that map to MS-DRG 264 (Other Circulatory System 
O.R. Procedures). The applicant stated that medical MS-DRGs 304 and 305 
(Hypertension with MCC and without MCC) are specific to hypertension. 
However, given the nature of the procedure, the applicant's expectation 
is that the DRG Grouper logic would assign potential cases representing 
patients who may be eligible for the ParadiseTM Ultrasound 
Renal Denervation System to a surgical MS-DRG. To identify the surgical 
MS-DRG, the applicant identified ICD-10-PCS code 015M3ZZ (Destruction 
of abdominal sympathetic nerve, percutaneous approach) as the procedure 
most similar to the procedure performed using the ParadiseTM 
Ultrasound Renal Denervation System, and determined the specific MS-DRG 
to which that ICD-10-PCS code maps. The applicant used the inclusion/
exclusion criteria described in the table that follows later in this 
section. Under this analysis, the applicant identified 7,064 claims 
mapping to MS-DRG 264 (Other Circulatory System O.R. Procedures) and 
calculated a final inflated average case-weighted standardized charge 
per case of $357,807, which exceeded the average case-weighted 
threshold amount of $98,708.
    For the second analysis, as a sensitivity analysis the applicant 
searched the FY 2022 MedPAR file for all cases that map to MS-DRGs 304 
or 305 (Hypertension with MCC and without MCC), which are specific to 
hypertension. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 32,433 claims mapping to MS-DRG 304 
(Hypertension with MCC) or 305 (Hypertension without MCC) and 
calculated a final inflated average case-weighted standardized charge 
per case of $268,298, which exceeded the average case-weighted 
threshold amount of $46,986.
    For the third analysis, the applicant provided a sensitivity 
analysis that combined the first and second scenario together for a 
broader list of MS-DRGs. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 39,497 claims mapping to 
MS-DRGs 264 (Other Circulatory System O.R. Procedures), 304 
(Hypertension with MCC), or 305 (Hypertension without MCC) and 
calculated a final inflated average case-weighted standardized charge 
per case of $284,306, which exceeded the average case-weighted 
threshold amount of $56,237.
    For the fourth analysis, the applicant performed a sensitivity 
analysis to subset the cases assigned to MS-DRG 264 (Other Circulatory 
System O.R. Procedures) to those reporting the following ICD-10-CM 
codes: I10 (Essential (primary) hypertension), I15.1 (Hypertension 
secondary to other renal disorders), I15.8 (Other secondary 
hypertension), or I15.9 (Secondary hypertension, unspecified) in any 
position. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this section. Under this analysis, 
the applicant identified 1,477 claims mapping to MS-DRG 264 (Other 
Circulatory System O.R. Procedures) and calculated a final inflated 
average case-weighted standardized charge per case of $325,810, which 
exceeded the average case-weighted threshold amount of $98,708.
    For the fifth analysis, the applicant performed a sensitivity 
analysis to subset the cases assigned to MS-DRGs 264 (Other Circulatory 
System O.R. Procedures), 304 (Hypertension with MCC), or 305 
(Hypertension without MCC) to those reporting the following ICD-10-CM 
codes: I10 (Essential (primary) hypertension), I15.1 (Hypertension 
secondary to other renal disorders), I15.8 (Other secondary 
hypertension), or I15.9 (Secondary hypertension, unspecified) in any 
position. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this

[[Page 36120]]

section. Under this analysis, the applicant identified 14,415 claims 
mapping to MS-DRGs 264 (Other Circulatory System O.R. Procedures), 304 
(Hypertension with MCC), or 305 (Hypertension without MCC) and 
calculated a final inflated average case-weighted standardized charge 
per case of $272,701, which exceeded the average case-weighted 
threshold amount of $50,817.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all analyses, the applicant asserted that the ParadiseTM 
Ultrasound Renal Denervation System meets the cost criterion.
---------------------------------------------------------------------------

    \124\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
[GRAPHIC] [TIFF OMITTED] TP02MY24.133


[[Page 36121]]


    We agree with the applicant that the ParadiseTM 
Ultrasound Renal Denervation System meets the cost criterion and are 
therefore proposing to approve the ParadiseTM Ultrasound 
Renal Denervation System for new technology add-on payments for FY 
2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
ParadiseTM Ultrasound Renal Denervation System to the 
hospital to be $23,000 per patient, based on single-use components 
including the operating costs of the catheter kit ($22,000), cable 
($250), and cartridge ($750). We note that the cost information for 
this technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65% of the average cost of the technology, or 65% of the 
costs in excess of the MS-DRG payment for the case. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving the use of the ParadiseTM Ultrasound Renal 
Denervation System would be $14,950 for FY 2025 (that is, 65% of the 
average cost of the technology).
    We invite public comments on whether the ParadiseTM 
Ultrasound Renal Denervation System meets the cost criterion and our 
proposal to approve new technology add-on payments for the 
ParadiseTM Ultrasound Renal Denervation System for FY 2025 
for reducing blood pressure as an adjunctive treatment in hypertension 
patients in whom lifestyle modifications and antihypertensive 
medications do not adequately control blood pressure, which corresponds 
to the Breakthrough Device designation.
h. PulseSelectTM Pulsed Field Ablation (PFA) Loop Catheter
    Medtronic, Inc. submitted an application for new technology add-on 
payments for the PulseSelectTM PFA Loop Catheter for FY 
2025. According to the applicant, the PulseSelectTM PFA Loop 
Catheter is used to perform pulmonary vein isolation in cardiac 
catheter ablation to treat atrial fibrillation. Per the applicant, 
unlike existing methods that rely on thermal energy (either 
radiofrequency or cryoablation), PulseSelectTM employs non-
thermal irreversible electroporation to induce cell death in cardiac 
tissue at the target site. According to the applicant, 
PulseSelectTM technology's non-thermal approach can avoid 
risks associated with existing thermal cardiac catheter ablation 
technologies.
    Please refer to the online application posting for the 
PulseSelectTM PFA Loop Catheter, available at https://mearis.cms.gov/public/publications/ntap/NTP231017BMQKQ, for additional 
detail describing the technology and the disease treated by the 
technology.
    According to the applicant, the PulseSelectTM PFA 
System, which includes a compatible Medtronic multi-electrode cardiac 
ablation catheter (the PulseSelectTM PFA Loop Catheter), 
received Breakthrough Device designation from FDA on September 27, 
2018, for the treatment of drug refractory recurrent symptomatic atrial 
fibrillation. The Medtronic multi-electrode cardiac ablation catheter 
is also intended to be used for cardiac electrophysiological (EP) 
mapping and measuring of intracardiac electrograms, delivery of 
diagnostic pacing stimuli and verifying electrical isolation post-
treatment. According to the applicant, the PulseSelectTM PFA 
System received premarket approval on December 13, 2023 for the 
following indication that reflects a slightly narrower patient 
population compared to the Breakthrough Device designation: for cardiac 
electrophysiological mapping (stimulation and recording) and for 
treatment of drug refractory, recurrent, symptomatic paroxysmal atrial 
fibrillation or persistent atrial fibrillation (episode duration less 
than 1 year). The applicant noted that the PulseSelectTM PFA 
System consists of two primary elements: the PulseSelectTM 
PFA Loop Catheter and the PulseSelectTM PFA Generator 
system, but that as capital equipment, the PulseSelectTM PFA 
Generator system is not the subject of this new technology add-on 
payment application. According to the applicant, the technology was 
commercially available immediately after FDA approval.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code for the PulseSelectTM PFA System and was 
granted approval for the following procedure code effective April 1, 
2024: 02583ZF (Destruction of conduction mechanism using irreversible 
electroporation, percutaneous approach). The applicant provided a list 
of diagnosis codes that may be used to currently identify the 
indication for the PulseSelectTM PFA Loop Catheter 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. The applicant 
stated that there is an expectation the PulseSelectTM PFA 
Loop Catheter will predominantly be used when both indicated uses are 
employed in a single patient case. Each analysis used different ICD-10-
CM codes to identify potential cases representing patients who may be 
eligible for the PulseSelectTM PFA Loop Catheter. 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 table that 
follows later in this section.
    For the first analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in any procedure code 
position on the claim and identified 98 MS-DRGs. The applicant limited 
the cost analysis to the top six MS-DRGs that had over 2% of cases in 
each MS-DRG (see the table that follows later in this section for a 
complete list of MS-DRGs provided by the applicant). According to the 
applicant, these six MS-DRGs represented 86% of all cardiac catheter 
ablation cases. Using the inclusion/exclusion criteria described in the 
table that follows later in this section, the applicant identified 
14,695 claims mapping to these 6 MS-DRGs. The applicant followed the 
order of operations described in the table that follows later in this 
section and calculated a final inflated average case-weighted 
standardized charge per case of $176,942, which exceeded the average 
case-weighted threshold amount of $136,813.
    For the second analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in any procedure code 
position on the claim, and had one of the ICD-10-CM codes for atrial 
fibrillation listed in the table that follows later in this section. 
The applicant used the inclusion/exclusion criteria described in the 
table that follows later in this section. Under this analysis, the 
applicant identified 12,088 claims mapping to the top six MS-DRGs 
(representing 82.3% of all cases) and calculated a final inflated 
average case-weighted standardized charge per case of $179,931, which 
exceeded the average case-weighted threshold amount of $136,782.
    For the third analysis, the applicant searched the FY 2022 MedPAR 
file for claims that had the ICD-10-PCS code 02583ZZ (Destruction of 
conduction mechanism, percutaneous approach) in

[[Page 36122]]

any procedure code position on the claim and had one of the ICD-10-CM 
codes for paroxysmal or persistent atrial fibrillation listed in the 
table that follows later in this section. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 9,446 
claims mapping to the top six MS-DRGs (representing 64.3% of all cases) 
and calculated a final inflated average case-weighted standardized 
charge per case of $180,114, which exceeded the average case-weighted 
threshold amount of $136,193.
    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 PulseSelectTM 
PFA Loop Catheter meets the cost criterion.
---------------------------------------------------------------------------

    \125\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 36123]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.134

BILLING CODE 4120-01-C
    We agree with the applicant that the PulseSelectTM PFA 
Loop Catheter meets the cost criterion and are therefore proposing to 
approve the PulseSelectTM

[[Page 36124]]

PFA Loop Catheter for new technology add-on payments for FY 2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the cost of the 
PulseSelectTM PFA Loop Catheter to the hospital to be $9,750 
per patient, and for the PulseSelectTM PFA Catheter 
Interface Cable to be $800 per patient, totaling $10,550 per inpatient 
stay. We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. We note that the applicant stated 
that the PulseSelectTM Pulsed Field Ablation (PFA) Interface 
Cable is listed as a component of the PulseSelectTM Pulsed 
Field Ablation (PFA) Generator Reusable Accessories. However, we note 
the submitted new technology add-on payment application is for the 
PulseSelectTM PFA Loop Catheter, and that the applicant had 
specified in its application that the PulseSelectTM PFA 
Generator System is not the subject of this new technology add-on 
payment application. Therefore, we believe the total cost per inpatient 
stay should be based only on the cost of the PulseSelectTM 
PFA Loop Catheter, which is $9,750 per the applicant. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65% of the average cost of the technology, or 65% of the costs in 
excess of the MS-DRG payment for the case. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving the use of the PulseSelectTM PFA Loop Catheter 
would be $6,337.50 for FY 2025 (that is, 65% of the average cost of the 
technology).
    We invite public comments on whether the PulseSelectTM 
PFA Loop Catheter meets the cost criterion and our proposal to approve 
new technology add-on payments for the PulseSelectTM PFA 
Loop Catheter for FY 2025 for cardiac electrophysiological mapping 
(stimulation and recording) and for treatment of drug refractory, 
recurrent, symptomatic paroxysmal atrial fibrillation or persistent 
atrial fibrillation (episode duration less than 1 year).
i. Restor3d TIDALTM Fusion Cage
    Restor3d submitted an application for new technology add-on 
payments for the restor3d TIDALTM Fusion Cage for FY 2025. 
According to the applicant, the TIDALTM Fusion Cages are 
porous cages that vary in shape and size to accommodate individual 
patient anatomy. Per the applicant, the TIDALTM Fusion Cage 
is comprised of a single, continuous piece of titanium alloy fabricated 
by laser powder bed fusion, an additive manufacturing technology. 
According to the applicant, the TIDALTM Fusion Cage is an 
accessory to the intramedullary nail for TTC Fusion and has a central 
clearance hole to contain the intramedullary nail. Per the applicant, 
the restor3d TIDALTM Fusion Cage can be used to aid in 
healing for fractures, bone voids, absent bone, or surgical resections 
in conjunction with an intramedullary nail for TTC fusion. The 
applicant noted that the restor3d TIDALTM Fusion Cages also 
serve to support and contain bone graft materials that aid in 
arthrodesis.
    Please refer to the online application posting for the restor3d 
TIDALTM Fusion Cage, available at https://mearis.cms.gov/public/publications/ntap/NTP2310167MCW9, for additional detail 
describing the technology and the disease treated by the technology.
    According to the applicant, the restor3d TIDALTM Fusion 
Cage System received Breakthrough Device designation from FDA on June 
26, 2023 for the indication of tibiotalocalcaneal arthrodesis (fusion) 
to provide stabilization of the hindfoot and ankle with critical size 
bone defect, in lieu of bulk allograft in procedures such as: post-
traumatic and degenerative arthritis; post-traumatic or primary 
arthrosis involving both ankle and subtalar joints; revision after 
failed ankle arthrodesis with subtalar involvement; failed total ankle 
arthroplasty; non-union ankle arthrodesis; rheumatoid hindfoot; 
talectomy; avascular necrosis of the talus; neuroarthropathy; 
neuromuscular disease and severe deformity; osteoarthritis; Charcot 
foot; and previously infected arthrosis, second degree. The restor3d 
Fusion Cage System is intended to provide stabilization in long bones 
of skeletally mature patients, including tibia, femur and humerus, in 
the presence of critical sized bone defects in lieu of bulk allograft, 
bone transport or other treatment for segmental defects in procedures 
such as: stabilization of fractures of the diaphyseal or metaphyseal 
regions of long bones; malunions and nonunion; osteomyelitis; 
periprosthetic fractures. According to the applicant, its marketing 
authorization request for the restor3d TIDALTM Fusion Cage 
System has been accepted by FDA, and it anticipates a 510(k) decision 
from FDA for the same indication consistent with the Breakthrough 
Device designation before May 1, 2024. The applicant anticipates that 
the technology will be commercially available immediately after 510(k) 
clearance from FDA.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the restor3d TIDALTM 
Fusion Cage. The applicant submitted a request for approval for a 
unique ICD-10-PCS procedure code for the restor3d TIDALTM 
Fusion Cage beginning in FY 2025. The applicant provided a list of 
diagnosis codes that may be used to currently identify the indication 
for the restor3d TIDALTM Fusion Cage under the ICD-10-CM 
coding system. Please refer to the online application posting for the 
complete list of ICD-10-CM codes provided by the applicant.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the restor3d 
TIDALTM Fusion Cage, the applicant searched the FY 2022 
MedPAR file for claims that had one of the ICD-10-PCS codes 
corresponding to fusion procedures or claims that had one of the other 
ICD-10-PCS codes in combination with one of the selected admitting 
diagnosis ICD-10-CM codes. According to the applicant, the selected 
claims represented potential candidates for the technology, who have 
undergone tibiotalocalcaneal arthrodesis (fusion) and require 
stabilization of the hindfoot and ankle due to a critical size bone 
defect. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 14,247 claims mapping to 24 
MS-DRGs, including MS-DRG 617 (Amputation of Lower Limb for Endocrine, 
Nutritional and Metabolic Disorders with CC) and MS-DRG 853 (Infectious 
and Parasitic Diseases with O.R. Procedures with MCC), each 
representing 16% of the identified 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 
$303,575, which exceeded the average case-weighted threshold amount of 
$109,972.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the restor3d TIDALTM Fusion Cage 
meets the cost criterion.
---------------------------------------------------------------------------

    \126\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 36125]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.135

BILLING CODE 4120-01-C
    We agree with the applicant that the restor3d TIDALTM 
Fusion Cage meets the cost criterion and are therefore proposing to 
approve the restor3d TIDALTM Fusion Cage for new technology 
add-on payments for FY 2025, subject to the technology receiving FDA 
marketing authorization as a Breakthrough Device for the indication 
corresponding to the Breakthrough Device designation by May 1, 2024.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the cost of the restor3d 
TIDALTM Fusion Cage for each patient to be $27,995. In 
addition, the applicant noted the costs related to the technology for 
required supporting instruments and materials consist of one unit each 
of the Instrument Kit ($6,995), TTC Fusion Nail ($7,500), and Bone 
Graft ($1,500). The applicant estimated the total cost to the hospital 
to be $43,990 for each procedure per patient, including the related 
cost of the technology. As we have discussed in prior rulemaking, when 
determining a new technology add-on payment, we provide payment based 
on the cost of the actual technology (such as the drug or device 
itself) and not for additional costs related to the use of the device 
(86 FR 45146). Based on the information provided by the applicant, the 
cost of the Instrument Kit is included in the costs of the supporting 
instruments and materials for each procedure related to the use of the 
technology, rather than a cost of the technology itself. In addition, 
the TTC Fusion Nail and Bone Graft are not new and unique components 
for this technology, and can be purchased separately in support of 
other technologies. Furthermore, we note that the Instrument Kit is not 
included in the Breakthrough Device designation, and it therefore 
appears that only the restor3d TIDALTM Fusion Cage would be 
designated as the Breakthrough Device once market authorized and would 
be eligible for new technology add-on payments under the alternative 
pathway. Therefore, it appears any add-on payment for the restor3d 
TIDALTM Fusion Cage would include only the cost of the 
restor3d TIDALTM Fusion Cage ($27,995).
    We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65% of the 
average cost of the technology, or 65% of the costs in excess of the 
MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the restor3d TIDALTM Fusion Cage would be $18,196.75 for FY 
2025 (that is, 65% of the average cost of the technology).
    We invite public comments on whether the restor3d 
TIDALTM Fusion Cage meets the cost criterion and our 
proposal to approve new technology add-on payments for the restor3d 
TIDALTM Fusion Cage for FY 2025, subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by May 
1, 2024.

[[Page 36126]]

j. Symplicity SpyralTM Multi-Electrode Renal Denervation 
Catheter
    Medtronic submitted an application for new technology add-on 
payments for the Symplicity Spyral\TM\ Multi-Electrode Renal 
Denervation Catheter for FY 2025. According to the applicant, the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter 
provides a treatment option for patients with uncontrolled 
hypertension, when used with the Symplicity G3TM Generator, 
by delivering targeted radiofrequency energy to the renal nerves, 
safely disrupting overactive sympathetic signaling between the kidneys 
and brain, as a treatment for uncontrolled hypertension.
    Please refer to the online application posting for the Symplicity 
Spyral\TM\ Multi-Electrode Renal Denervation Catheter, available at 
https://mearis.cms.gov/public/publications/ntap/NTP2310161U617, for 
additional detail describing the technology and the condition treated 
by the technology.
    According to the applicant, the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation System received Breakthrough Device 
designation from FDA on March 27, 2020, for the reduction of blood 
pressure in patients with uncontrolled hypertension despite the use of 
anti-hypertensive medications or in patients who may have documented 
intolerance to anti-hypertensive medications. The applicant received 
premarket approval for the technology on November 17, 2023, for 
reducing blood pressure as an adjunctive treatment in patients with 
hypertension in whom lifestyle modifications and antihypertensive 
medications do not adequately control blood pressure. Because we 
consider the indication for which the applicant received premarket 
approval to be within the scope of the Breakthrough Device designation, 
and FDA considers this marketing authorization to be for the 
Breakthrough Device,\127\ it appears that the premarket approval 
indication is appropriate for consideration for new technology add-on 
payment under the alternative pathway criteria. According to the 
applicant, the technology was commercially available immediately after 
FDA approval.
---------------------------------------------------------------------------

    \127\ 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, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter. The applicant submitted a request 
for approval for a unique ICD-10-PCS procedure code for the Symplicity 
Spyral\TM\ Multi-Electrode Renal Denervation Catheter beginning in FY 
2025. The applicant provided a list of diagnosis codes that may be used 
to currently identify the indication for the Symplicity Spyral\TM\ 
Multi-Electrode Renal Denervation Catheter 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 two 
analyses and two sensitivity analyses to demonstrate that it meets the 
cost criterion. Each analysis used a common set of ICD-10-CM codes but 
different criteria for the inclusion/exclusion of MS-DRGs and outlier 
cases to identify potential cases representing patients who may be 
eligible for the Symplicity Spyral\TM\ Multi-Electrode Renal 
Denervation Catheter. 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 table that follows later in this section.
    For the first scenario (Cost Analysis #1), the applicant searched 
the FY 2022 MedPAR file for cases where essential (primary) 
hypertension was the reason for the admission, using at least one of 
the ICD-10-CM diagnosis codes in the table that follows later in this 
section. The applicant used the inclusion/exclusion criteria described 
in the table that follows later in this section. Under this analysis, 
the applicant identified 490,387 claims mapping to 99 MS-DRGs, 
including MS-DRG 291 (Heart Failure and Shock With MCC) representing 
67% of identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $136,450, which 
exceeded the average case-weighted threshold amount of $62,312.
    The second scenario (Cost Analysis #1 with Outliers) was a 
sensitivity analysis that mirrored the first scenario, except that 
cases with outlier payments were included. The applicant used the 
inclusion/exclusion criteria described in the table that follows later 
in this section. Under this analysis, the applicant identified 501,760 
claims mapping to 101 MS-DRGs, including MS-DRG 291 (Heart Failure and 
Shock With MCC) representing 66.7% of identified cases. The applicant 
calculated a final inflated average case-weighted standardized charge 
per case of $145,001, which exceeded the average case-weighted 
threshold amount of $63,789.
    For the third scenario (Cost Analysis #2), the applicant searched 
the FY 2022 MedPAR file for claims reporting any of the ICD-10-CM 
diagnosis codes listed in the table that follows later in this section 
but limited the case selection to MS-DRGs where the principal diagnosis 
was essential hypertension, and no procedures were performed. Per the 
applicant, this list represents a subset of cases that were most likely 
to benefit from the new procedural treatment option for primary 
hypertension. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 390,384 claims mapping to 8 MS-DRGs, 
including MS-DRG 291 (Heart Failure and Shock With MCC) representing 
84.4% of identified cases. The applicant calculated a final inflated 
average case-weighted standardized charge per case of $124,525, which 
exceeded the average case-weighted threshold amount of $52,861.
    The fourth scenario (Cost Analysis #2 with Outliers) mirrored the 
third scenario, except that cases with outlier payments were included. 
The applicant used the inclusion/exclusion criteria described in the 
table that follows later in this section. Under this analysis, the 
applicant identified 395,634 claims mapping to 8 MS-DRGs, including MS-
DRG 291 (Heart Failure and Shock With MCC) representing 84.5% of 
identified cases. The applicant calculated a final inflated average 
case-weighted standardized charge per case of $128,356, which exceeded 
the average case-weighted threshold amount of $52,873.
    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 Symplicity Spyral\TM\ 
Multi-Electrode Renal Denervation Catheter meets the cost criterion.
---------------------------------------------------------------------------

    \128\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 36127]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.136


[[Page 36128]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.137

BILLING CODE 4120-01-C
    We agree with the applicant that the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter meets the cost criterion and are 
therefore proposing to approve the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter for new technology add-on payments 
for FY 2025.
    An estimate for the cost of the Symplicity Spyral\TM\ Multi-
Electrode Renal Denervation Catheter is not available for publication 
at the time of this proposed rule. We expect the applicant to release 
cost information prior to the final rule, and we will provide an update 
regarding the new technology add-on payment amount for the technology, 
if approved, in the final rule. The applicant stated that there would 
be two components for the cost of the technology, including operating 
costs for the Symplicity Spyral\TM\ Multi-Electrode Renal Denervation 
Catheter and capital costs for the Symplicity G3TM 
Generator. Because section 1886(d)(5)(K)(i) of the Act requires that 
the Secretary establish a mechanism to recognize the costs of new 
medical services or technologies under the payment system established 
under that subsection, which establishes the system for payment of the 
operating costs of inpatient hospital services, we do not include 
capital costs in the add-on payments for a new medical service or 
technology or make new technology add-on payments under the IPPS for 
capital-related costs (86 FR 45145). Based on the information from the 
applicant, it appears that the Symplicity G3TM Generator is 
a capital cost. Therefore, it appears that this component is not 
eligible for new technology add-on payment because, as discussed in 
prior rulemaking and as noted, we only make new technology add-on 
payments for operating costs (72 FR 47307 through 47308). Any new 
technology add-on payment for the Symplicity Spyral\TM\ Multi-Electrode 
Renal Denervation Catheter would be subject to our policy under Sec.  
412.88(a)(2) where we limit new technology add-on payment to the lesser 
of 65% of the average cost of the technology, or 65% of the costs in 
excess of the MS-DRG payment for the case.
    We invite public comments on whether the Symplicity Spyral\TM\ 
Multi-Electrode Renal Denervation Catheter meets the cost criterion and 
our proposal to approve new technology add-on payments for the 
Symplicity Spyral\TM\ Multi-Electrode Renal Denervation Catheter for FY 
2025 for reducing blood pressure as an adjunctive treatment in patients 
with hypertension in whom lifestyle modifications and antihypertensive 
medications do not adequately control blood pressure, which corresponds 
to the Breakthrough Device designation
k. Transdermal Glomerular Filtration Rate (GFR) Measurement System 
Utilizing Lumitrace
    MediBeacon, Inc. submitted an application for new technology add-on 
payments for the Transdermal GFR Measurement System utilizing Lumitrace 
for FY 2025. According to the applicant, the Transdermal GFR 
Measurement System utilizing Lumitrace is a three-component system: (1) 
an optical skin sensor, (2) a monitor, and (3) Lumitrace 
(relmapirazin), which is a proprietary fluorescent tracer agent

[[Page 36129]]

that glows in the presence of light and is removed from the blood 
exclusively by the GFR mechanism of the kidney. The technology is 
intended to measure GFR in patients with impaired or normal renal 
function during clinical conditions where the real time measurement of 
GFR (versus estimated measures) is clinically useful in the 
understanding of kidney function. We note that MediBeacon, Inc. 
submitted an application for new technology add-on payments for the 
Transdermal GFR Measurement System utilizing Lumitrace for FY 2024, as 
summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26954 
through 26955), that it withdrew prior to the issuance of the FY 2024 
IPPS/LTCH PPS final rule (88 FR 58919).
    Please refer to the online application posting for the Transdermal 
GFR Measurement System utilizing Lumitrace, available at https://mearis.cms.gov/public/publications/ntap/NTP23101671HAA, for additional 
detail describing the technology.
    According to the applicant, the Transdermal GFR Measurement System 
utilizing Lumitrace received Breakthrough Device designation from FDA 
on October 16, 2018, for measuring GFR in patients with impaired or 
normal renal function. According to the applicant, its marketing 
authorization request for the Transdermal GFR Measurement System 
utilizing Lumitrace has been filed by FDA, and it anticipates a 
premarket approval decision from FDA for the same indication consistent 
with the Breakthrough Device designation before May 1, 2024. According 
to the applicant, the Transdermal GFR Measurement System will not be 
immediately available for sale because it is waiting for premarket 
approval from FDA before producing large volumes of the agent, sensor, 
and monitor, and anticipates a limited launch prior to widespread 
availability.
    The applicant stated that effective October 1, 2019, the following 
ICD-10-PCS code may be used to uniquely describe procedures involving 
the use of the Transdermal GFR Measurement System utilizing Lumitrace: 
XT25XE5 (Monitoring of kidney using fluorescent pyrazine, external 
approach, new technology group 5).
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the Transdermal GFR 
Measurement System utilizing Lumitrace, the applicant searched the FY 
2022 MedPAR file for claims that had one of the ICD-10-CM codes or the 
ICD-10-PCS codes representing patients who are likely to require and/or 
benefit from real-time kidney function monitoring during the inpatient 
hospital stay. Using the inclusion/exclusion criteria described in the 
following table, the applicant identified 470,171 claims mapping to 697 
MS-DRGs, including MS-DRG 871 (Septicemia or Severe Sepsis without MV 
>96 Hours with MCC) representing 15% of the identified 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 $231,117, which exceeded the average 
case-weighted threshold amount of $134,438.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the Transdermal GFR Measurement System 
utilizing Lumitrace meets the cost criterion.
---------------------------------------------------------------------------

    \129\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.

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

[[Page 36130]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.138

    We agree with the applicant that the Transdermal GFR Measurement 
System utilizing Lumitrace meets the cost criterion and are therefore 
proposing to approve the Transdermal GFR Measurement System utilizing 
Lumitrace for new technology add-on payments for FY 2025, subject to 
the technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
    The applicant has not provided an estimate for the cost of the 
Transdermal GFR Measurement System utilizing Lumitrace at the time of 
this proposed rule. The applicant stated that there would be three 
components for the cost of the technology: the operating cost of the 
Transdermal GFR Measurement System Sensor, the operating cost of 
Lumitrace (relmapirazin) that glows in the presence of light and is 
removed from the blood exclusively by the GFR mechanism of the kidney, 
and the capital cost of the Transdermal GFR Measurement System Monitor 
that displays fluorescence collected by the Transdermal GFR Measurement 
System Sensor to provide an indication of changes in transdermal GFR 
over time. Because section 1886(d)(5)(K)(i) of the Act requires that 
the Secretary establish a mechanism to recognize the costs of new 
medical services or technologies under the payment system established 
under that subsection, which establishes the system for payment of the 
operating costs of inpatient hospital services, we do not include 
capital costs in the add-on payments for a new medical service or 
technology or make new technology add-on payments under the IPPS for 
capital-related costs (86 FR 45145). As noted, the applicant stated 
that the cost of the Transdermal GFR Measurement System Monitor is a 
capital cost. Therefore, it appears that this component is not eligible 
for new technology add-on payment because, as discussed in prior 
rulemaking and as noted, we only make new technology add-on payments 
for operating costs (72 FR 47307 through 47308). We expect the 
applicant to submit cost information prior to the final rule, and we 
will provide an update regarding the new technology add-on payment 
amount for the technology, if approved, in the final rule. Any new 
technology add-on payment for the Transdermal GFR Measurement System 
utilizing Lumitrace 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% of the average cost of the technology, or 65% of the 
costs in excess of the MS-DRG payment for the case.
    We invite public comments on whether the Transdermal GFR 
Measurement System utilizing Lumitrace meets the cost criterion and our 
proposal to approve new technology add-on payments for the Transdermal 
GFR Measurement System utilizing Lumitrace for FY 2025, subject to the 
technology receiving FDA marketing authorization as a Breakthrough 
Device for the indication corresponding to the Breakthrough Device 
designation by May 1, 2024.
l. TriClipTM G4
    Abbott submitted an application for new technology add-on payments 
for TriClip\TM\ G4 for FY 2025. According to the applicant, TriClip\TM\ 
G4 is intended for reconstruction of the insufficient tricuspid valve 
through tissue approximation via a transcatheter approach. The 
TriClip\TM\ G4 System consists of the TriClip\TM\ G4 Implant,

[[Page 36131]]

Clip Delivery System and Steerable Guide. The applicant explained that 
the TriClip\TM\ G4 Implant is a percutaneously delivered mechanical 
implant that helps close the tricuspid valve leaflets resulting in 
fixed tricuspid leaflet approximation throughout the cardiac cycle. 
According to the applicant, TriClip\TM\ G4 is intended for the 
treatment of patients with symptomatic, severe tricuspid valve 
regurgitation, whose symptoms and tricuspid regurgitation (TR) severity 
persist despite being treated optimally with medical therapy.
    Please refer to the online application posting for TriClip\TM\ G4, 
available at https://mearis.cms.gov/public/publications/ntap/NTP231016N52MH, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, the TriClip\TM\ G4 System received 
Breakthrough Device designation from FDA on November 19, 2020, for the 
treatment of patients with symptomatic, severe tricuspid valve 
regurgitation, whose symptoms and TR severity persist despite being 
treated optimally with medical therapy. According to the applicant, its 
marketing authorization request has been filed by FDA, and it 
anticipates a premarket approval (PMA) decision from FDA for the same 
indication consistent with the Breakthrough Device designation before 
May 1, 2024. According to the applicant, the technology is expected to 
be commercially available immediately after FDA approval.
    According to the applicant, the following ICD-10-PCS code may be 
used to describe procedures involving the use of TriClip\TM\ G4: 
02UJ3JZ (Supplement tricuspid valve with synthetic substitute, 
percutaneous approach). The applicant noted that there are no FDA-
approved technologies using this procedure code. The applicant stated 
that ICD-10-CM diagnosis codes I07.1 (Rheumatic tricuspid 
insufficiency) and I36.1 (Nonrheumatic tricuspid (valve) insufficiency) 
may be used to currently identify the indication for TriClip\TM\ G4 
under the ICD-10-CM coding system.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for TriClip\TM\ G4, the 
applicant searched the 2022 Medicare Inpatient Hospital Standard 
Analytical File (100%) for claims that had one of the following ICD-10-
CM codes, I07.1 (Rheumatic tricuspid insufficiency) or I36.1 
(Nonrheumatic tricuspid (valve) insufficiency) in the primary position, 
in combination with ICD-10-PCS code 02UJ3JZ (Supplement tricuspid valve 
with synthetic substitute, percutaneous approach). Using the inclusion/
exclusion criteria described in the following table, the applicant 
identified 235 claims mapping to two MS-DRGs, MS-DRG 266 (Endovascular 
Cardiac Valve Replacement and Supplement Procedures, with MCC), and 267 
(Endovascular Cardiac Valve Replacement and Supplement Procedures, 
without MCC). 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 $313,389 which exceeded the 
average case-weighted threshold amount of $192,861.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that TriClip\TM\ G4 meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TP02MY24.139


[[Page 36132]]


    We agree with the applicant that TriClip\TM\ G4 meets the cost 
criterion and are therefore proposing to approve TriClip\TM\ G4 for new 
technology add-on payments for FY 2025, subject to the technology 
receiving FDA marketing authorization as a Breakthrough Device for the 
indication corresponding to the Breakthrough Device designation by May 
1, 2024.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of 
TriClip\TM\ G4 to the hospital to be $40,000 per procedure. According 
to the applicant, the TriClip\TM\ System is composed of multiple 
components: the TriClip\TM\ G4 Implant, Clip Delivery System, and 
Steerable Guide Catheter. The applicant stated that all the components 
typically required for a single procedure are sold together for a 
single operating cost (for example, it is the same cost per procedure 
whether the patient requires one or two implants). We note that the 
cost information for this technology may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 65% of the average cost of the technology, or 
65% of the costs in excess of the MS-DRG payment for the case. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the use of TriClip\TM\ G4 would be $26,000 for FY 
2025 (that is, 65% of the average cost of the technology).
    We invite public comments on whether TriClip\TM\ G4 meets the cost 
criterion and our proposal to approve new technology add-on payments 
for TriClip\TM\ G4 for FY 2025, subject to the technology receiving FDA 
marketing authorization as a Breakthrough Device for the indication 
corresponding to the Breakthrough Device designation by May 1, 2024.
m. VADER[supreg] Pedicle System
    Icotec Medical, Inc. submitted an application for new technology 
add-on payments for the VADER[supreg] Pedicle System for FY 2025. 
According to the applicant, the VADER[supreg] Pedicle System is a 
pedicle screw system for standard posterior fixation of the spinal 
column used to provide stabilization of infected spinal segments after 
debridement of infectious tissues. According to the applicant, the 
VADER[supreg] Pedicle System is made from high strength carbon fiber 
reinforced polyether ether ketone, which provides low artifact imaging 
to allow for post-operative surveillance of the healing of the infected 
spinal segment.
    Please refer to the online application posting for the 
VADER[supreg] Pedicle System, available at https://mearis.cms.gov/public/publications/ntap/NTP231016CMGH3, for additional detail 
describing the technology and the condition treated by the technology.
    According to the applicant, the VADER[supreg] Pedicle System 
received Breakthrough Device designation from FDA on July 31, 2023 for 
stabilizing the thoracic and/or lumbar spinal column as an adjunct to 
fusion in patients diagnosed with an active spinal infection (for 
example, spondylodiscitis, osteomyelitis) who are at risk of spinal 
instability, progressive spinal deformity, or neurologic compromise, 
following surgical debridement. The applicant stated that the 
technology received 510(k) clearance from FDA on February 26, 2024, for 
the following indication, which is the subject of the new technology 
add-on payment application, and is consistent with the Breakthrough 
Device designation: to stabilize the thoracic and/or lumbar spinal 
column in patients who are or will be receiving concurrent medical 
treatment for an active spinal infection (for example, 
spondylodiscitis, osteomyelitis) that, without stabilization, could 
lead to deterioration of bony structures and misalignment with 
neurological compromise. We note that the VADER[supreg] Pedicle System 
has received FDA 510(k) clearance for multiple indications since 
2019.\130\ We also note that, under the eligibility criteria for 
approval under the alternative pathway for certain transformative new 
devices, only the use of the VADER[supreg] Pedicle System to stabilize 
the thoracic and/or lumbar spine as an adjunct to fusion in patients 
with spinal infection, 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 2025. According to the applicant, the 
technology was commercially available immediately after 510(k) 
clearance from FDA.
---------------------------------------------------------------------------

    \130\ K222789, January 9, 2023; K200596, October 13, 2020; 
K193423, May 22, 2020; and K190545, June 20, 2019.
---------------------------------------------------------------------------

    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify the VADER[supreg] Pedicle 
System. The applicant submitted a request for approval for a unique 
ICD-10-PCS procedure code for the VADER[supreg] Pedicle System 
beginning in FY 2025. The applicant provided a list of diagnosis codes 
that may be used to currently identify the indication for the 
VADER[supreg] Pedicle System under the ICD-10-CM coding system, 
describing spinal infections including osteomyelitis, discitis, and 
spondylopathies of various vertebral spine body parts including the 
cervical, thoracic, and lumbar regions. Please refer to the online 
application posting for the complete list of ICD-10-CM codes provided 
by the applicant. As previously noted, only use of the technology for 
the indications corresponding to the Breakthrough Device designation 
would be relevant for new technology add-on payment purposes. We 
believe the relevant ICD-10-CM codes to identify the Breakthrough 
Device-designated indication would be the codes included in category 
M46 (Other inflammatory spondylopathies) under the ICD-10-CM 
classification in subcategories: M46.2- (Osteomyelitis of vertebra), 
M46.3- (Infection of intervertebral disc (pyogenic)), M46.4- (Discitis, 
unspecified), M46.5- (Other infective spondylopathies), M46.8- (Other 
specified inflammatory spondylopathies), and M46.9- (Unspecified 
inflammatory spondylopathy). We are inviting public comment on the use 
of these ICD-10-CM diagnosis codes to identify the Breakthrough Device-
designated indication for purposes of the new technology add-on 
payment, if approved.
    With respect to the cost criterion, to identify potential cases 
representing patients who may be eligible for the VADER[supreg] Pedicle 
System, the applicant searched the FY 2022 MedPAR file for claims 
reporting a combination of ICD-10-CM/PCS codes as listed in the online 
posting for the VADER[supreg] Pedicle System. The applicant believes 
these cases represent patients who have undergone fusion procedures and 
have been diagnosed with an active spinal infection (such as 
spondylodiscitis or osteomyelitis), and these patients are at risk of 
spinal instability, progressive spinal deformity, or neurologic 
compromise following surgical debridement, making them suitable 
candidates for the use of the technology. Using the inclusion/exclusion 
criteria described in the following table, the applicant identified 
2,116 claims mapping to 22 MS-DRGs, with none exceeding more than 15% 
of the total identified 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 
$473,636, which exceeded the average case-weighted threshold amount of

[[Page 36133]]

$197,922. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the VADER[supreg] Pedicle System meets the 
cost criterion.
---------------------------------------------------------------------------

    \131\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.140

BILLING CODE 4120-01-C
    We agree with the applicant that the VADER[supreg] Pedicle System 
meets the cost criterion and are therefore proposing to approve the 
VADER[supreg] Pedicle System for new technology add-on payments for FY 
2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the applicant anticipated the total cost of the 
VADER[supreg] Pedicle System to the hospital to be $43,450 per patient. 
According to the applicant, the unit prices are $6,500 for a pedicle 
screw, $4,600 for a rod, and $350 for a set screw. The applicant stated 
that an average of five pedicle screws, two rods, and five set screws 
would be used for a spinal fusion procedure. The applicant calculated 
the total cost of the technology by multiplying the unit price of each 
component by the average number of that component used in the 
procedure. We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65% of the 
average cost of the technology, or 65% of the costs in excess of the 
MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the VADER[supreg] Pedicle System would be $28,242.50 for FY 2025 (that 
is, 65% of the average cost of the technology).
    We invite public comments on whether the VADER[supreg] Pedicle 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the VADER[supreg] Pedicle System for FY 
2025, when used

[[Page 36134]]

to stabilize the thoracic and/or lumbar spinal column in patients who 
are or will be receiving concurrent medical treatment for an active 
spinal infection (for example, spondylodiscitis, osteomyelitis) that, 
without stabilization, could lead to deterioration of bony structures 
and misalignment with neurological compromise.
n. ZEVTERATM (Ceftobiprole Medocaril)
    Basilea Pharmaceutica International Ltd, Allschwil submitted an 
application for new technology add-on payments for ZEVTERA\TM\ 
(ceftobiprole medocaril) for FY 2025. According to the applicant, 
ZEVTERA\TM\ is an advanced intravenous cephalosporin antibiotic 
designed to combat infections caused by antibiotic resistant pathogens. 
The applicant stated that ZEVTERATM targets a wide range of 
Gram-positive and Gram-negative bacteria, including methicillin-
resistant Staphylococcus aureus (MRSA), Streptococcus pneumoniae, 
including penicillin-non-susceptible pneumococci (PNSP) and 
Enterococcus faecalis, as well as non-Extended Spectrum Beta-Lactamase 
(non-ESBL) producing Enterobacterales. The applicant noted that 
ZEVTERA\TM\'s bactericidal activity is achieved by binding to essential 
penicillin-binding proteins, disrupting the synthesis of the bacterial 
cell wall's peptidoglycan layer and leading to bacterial cell death, 
which differentiates it from other beta-lactams by effectively 
addressing MRSA. Per the applicant, ZEVTERA\TM\ is stable against 
certain beta-lactamases in both gram-positive and gram-negative 
bacteria. The applicant stated that Phase 3 studies submitted to the 
FDA demonstrate its non-inferiority compared to standard treatments in 
various infections, including Staphylococcus aureus bacteremia (SAB), 
acute bacterial skin and skin structure infections (ABSSSI), and 
community-acquired bacterial pneumonia (CABP).
    Please refer to the online application posting for ZEVTERA\TM\, 
available at https://mearis.cms.gov/public/publications/ntap/NTP2310161DBB8, for additional detail describing the technology and the 
disease treated by the technology.
    According to the applicant, ZEVTERA\TM\ received QIDP designations 
for CABP on July 20, 2015, for ABSSI on August 7, 2015, and for SAB on 
December 8, 2017. According to the applicant, its marketing 
authorization request for ZEVTERATM has been filed by FDA, 
and it anticipates an NDA decision from FDA for the same indications 
consistent with the QIDP designations by July 1, 2024. According to the 
applicant, ZEVTERA\TM\ will be commercially available immediately after 
FDA approval. We note that, as an application submitted under the 
alternative pathway for certain antimicrobial products at Sec.  
412.87(d), ZEVTERA\TM\ is eligible for conditional approval for new 
technology add-on payments if it does not receive FDA marketing 
authorization by July 1, 2024, provided that the technology receives 
FDA marketing authorization before July 1 of the fiscal year for which 
the applicant applied for new technology add-on payments (that is, July 
1, 2025), as provided in Sec.  412.87(f)(3). According to the 
applicant, for CABP and ABSSSI, ZEVTERA\TM\ is dosed at 500mg and 
administered three times daily (Q8h) as a 2-hour intravenous infusion 
for 5-14 days. For SAB, it is administered four times daily (Q6h) for 
the first 8 days, followed by Q8h daily infusion for the subsequent 
days, up to a total of 42 days.
    According to the applicant, there are currently no ICD-10-PCS 
procedure codes to distinctly identify ZEVTERA\TM\. We note that the 
applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for ZEVTERA\TM\ beginning in FY 2025. The applicant 
provided a list of diagnosis codes that may be used to currently 
identify the indication for ZEVTERA\TM\ under the ICD-10-CM coding 
system, describing SAB, ABSSSI, and CABP. Please refer to the online 
application posting for the complete list of ICD-10-CM (and PCS) codes 
provided by the applicant. We believe the relevant combination of ICD-
10-CM codes to identify the indication of SAB would be: R78.81 
(Bacteremia) in combination with B95.61 (Methicillin susceptible 
Staphylococcus aureus infection as the cause of diseases classified 
elsewhere) or B95.62 (Methicillin resistant Staphylococcus aureus 
infection as the cause of diseases classified elsewhere). We are 
inviting public comments on the use of these ICD-10-CM diagnosis codes 
to identify the indication of SAB for purposes of the new technology 
add-on payment, if approved.
    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 2022 MedPAR file using 
different sets of ICD-10-CM codes in the first five diagnosis positions 
to identify potential cases representing different cohorts of patients 
who may be eligible for ZEVTERA\TM\. The applicant performed the same 
analysis on ABSSSI, CABP, and SAB cases individually and for all 
indications combined.
    For the first analysis, the applicant searched for claims with a 
diagnosis code for ABSSSI using the ICD-10-CM codes listed in the 
online posting for ZEVTERA\TM\. The applicant used the inclusion/
exclusion criteria described in the table that follows later in this 
section. Under this analysis, the applicant identified 261,397 claims 
mapping to 663 MS-DRGs and calculated a final inflated average case-
weighted standardized charge per case of $114,279, which exceeded the 
average case-weighted threshold amount of $63,767.
    For the second analysis, the applicant searched for claims with a 
diagnosis code for CABP using the ICD-10-CM codes listed in the online 
posting for ZEVTERA\TM\. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 635,628 claims mapping to 
611 MS-DRGs and calculated a final inflated average case-weighted 
standardized charge per case of $143,456, which exceeded the average 
case-weighted threshold amount of $78,778.
    For the third analysis, the applicant searched for claims with a 
diagnosis code for SAB using the ICD-10-CM codes listed in the online 
posting for ZEVTERA\TM\. The applicant used the inclusion/exclusion 
criteria described in the table that follows later in this section. 
Under this analysis, the applicant identified 105,068 claims mapping to 
626 MS-DRGs and calculated a final inflated average case-weighted 
standardized charge per case of $165,809, which exceeded the average 
case-weighted threshold amount of $82,238.
    For the fourth analysis, the applicant searched for claims with 
diagnosis codes for ABSSSI, CABP, or SAB in the first five positions on 
a claim, using the ICD-10-CM codes listed in the online posting for 
ZEVTERA\TM\. The applicant used the inclusion/exclusion criteria 
described in the table that follows later in this section. Under this 
analysis, the applicant identified 958,104 claims mapping to 680 MS-
DRGs and calculated a final inflated average case-weighted standardized 
charge per case of $137,861, which exceeded the average case-weighted 
threshold amount of $75,097.
    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 ZEVTERA\TM\ meets the cost 
criterion.
---------------------------------------------------------------------------

    \132\ Lists referenced here may be found in the cost criterion 
codes and MS-DRGs attachment included in the online posting for the 
technology.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 36135]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.141

BILLING CODE 4120-01-C
    We agree with the applicant that ZEVTERA\TM\ meets the cost 
criterion and are therefore proposing to approve ZEVTERA\TM\ for new 
technology add-on payments for FY 2025, subject to the technology 
receiving FDA marketing authorization for the indication corresponding 
to the QIDP designation by July 1, 2024. As an application submitted 
under the alternative pathway for certain antimicrobial products at 
Sec.  412.87(d), ZEVTERA\TM\ is eligible for conditional approval for 
new technology add-on payments if it does not receive FDA marketing 
authorization by July 1, 2024, provided that the technology receives 
FDA marketing authorization before July 1 of the fiscal year for which 
the applicant applied for new technology add-on payments (that is, July 
1, 2025), as provided in Sec.  412.87(f)(3). If ZEVTERA\TM\ receives 
FDA marketing authorization before July 1, 2025, 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, 2025, no new technology add-on payments 
would be made for cases involving the use of ZEVTERA\TM\ for FY 2025.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the pricing for this treatment is set at $125 per 
vial, and the recommended dosage varies depending on the condition 
being treated. The applicant stated that for ABSSSI and CABP, the 
suggested daily dose is 3 vials per day for a duration of 5-14 days, 
resulting in an estimated average cost of $3,750 for a 10-day therapy. 
The applicant noted that for SAB, the recommended dose is every 6 hours 
for the first 8 days, followed by every 8 hours for up to 42 days. The 
applicant made the assumption that patients would be inpatient for 28 
days and then continue the therapy as an outpatient for up to 42 days, 
which resulted in an average inpatient cost of $11,500. We note that 
the cost information for this technology may be updated in the final 
rule based on revised or additional information CMS receives prior to 
the final rule. Under Sec.  412.88(a)(2), we limit new technology add-
on payments for technologies designated as QIDPs to the lesser of 75% 
of the average cost of the technology, or 75% of the costs in excess of 
the MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
ZEVTERA\TM\ for FY 2025 would be $8,625.00 for the indication of SAB 
and $2,812.50 for the indications of ABSSSI and CABP (that is, 75% of 
the average cost of the technology).
    We invite public comments on whether ZEVTERA\TM\ meets the cost 
criterion and our proposal to approve new technology add-on payments 
for ZEVTERA\TM\ for FY 2025 for SAB, ABSSSI, and CABP, subject to the 
technology receiving FDA marketing

[[Page 36136]]

authorization consistent with its QIDP designations by July 1, 2024.
7. Proposed Change to the Method for Determining Whether a Technology 
Would Be Within Its 2- to 3-Year Newness Period When Considering 
Eligibility for New Technology Add-On Payments
    As discussed previously in this rule, section 1886(d)(5)(K)(i) of 
the Act requires the Secretary to establish (after notice and 
opportunity for public comment) a mechanism to recognize the costs of 
new medical services and 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. The 
regulations at 42 CFR 412.87 implement these provisions. As further 
discussed in FY 2005 IPPS final rule (69 FR 49002), the intent of 
section 1886(d)(5)(K) of the Act and regulations under Sec.  
412.87(b)(2) is to pay for new medical services and technologies for 
the first 2 to 3 years that a product comes on the market, during the 
period when the costs of the new technology are not yet fully reflected 
in the DRG weights. Generally, we use the FDA marketing authorization 
date as the indicator of the time when a technology begins to become 
available on the market and data reflecting the costs of the technology 
begin to become available for recalibration of the DRG weights. In 
specific circumstances, we have recognized a date later than the FDA 
marketing authorization date as the appropriate starting point for the 
2- to 3-year newness period. For example, we have recognized a later 
date where an applicant could prove a delay in actual availability of a 
product after FDA approval or clearance. The costs of the new medical 
service or technology, once paid for by Medicare for this 2- to 3-year 
period, are accounted for in the MedPAR data that are used to 
recalibrate the DRG weights on an annual basis. Therefore, we stated it 
is appropriate to limit the add-on payment window for technologies that 
have passed this 2- to 3-year timeframe.
    As discussed previously in this rule, 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 three-year 
anniversary date of the product's entry onto the U.S. market occurs in 
the latter half of the fiscal year, that is, after April 1 (70 FR 
47362).
    We have not implemented a policy to stop new technology add-on 
payment in the middle of the fiscal year (for example, during the month 
that a technology reaches its three-year anniversary date of entry onto 
the U.S. market) because, as we discussed in the FY 2005 IPPS final 
rule, we believe that predictability is an important aspect of the 
prospective payment system methodology. Accordingly, we believe that it 
is appropriate to apply a consistent payment methodology for new 
technologies throughout the fiscal year (69 FR 49016).
    As previously discussed, in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA marketing authorization 
request at the time of new technology add-on payment application 
submission and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. We also finalized that, beginning with FY 2025 applications, in 
order to be eligible for consideration for 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).
    As we summarized in the FY 2024 IPPS/LTCH PPS final rule, 
commenters raised concerns that this policy would adversely impact 
their ability to receive maximum flexibility with respect to when to 
apply to FDA and when they apply for new technology add-on payment (88 
FR 58953). Many commenters expressed specific concerns regarding moving 
the FDA marketing authorization deadline to May 1 and the impact it 
would have on how long technologies may be eligible for 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 be eligible for 3 years of new 
technology add-on payments, shortening the window from 3 months under 
the former policy (April 1 until July 1) to just 1 month (April 1 until 
May 1) (88 FR 58954). In response, we noted in that even under the 
former policy, not all applicants receive the full 3 years of new 
technology add on payments, and that 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 
technology's ability to receive the full 3 years of payment. However, 
we also noted the commenters' concerns regarding the shortened time 
period between April 1 and May 1 under the new policy and stated that 
we would consider for future rulemaking how we assess new technology 
add-on payment eligibility in the third year of newness, such as 
consideration of adjusting the April 1 cutoff to allow for a longer 
window of eligibility (88 FR 58955).
    After further consideration of commenters' concerns that the policy 
we finalized in the FY 2024 IPPS/LTCH PPS final rule may limit the 
ability of new technology add-on payment applicants to be eligible for 
a third year of new technology add-on payments due to the shortened 
timeframe between April 1 and May 1, we agree that there may be merit 
to modifying our current 6-month guideline to provide additional 
flexibility for applications submitted in accordance with this new 
policy. While technologies that are FDA approved or cleared in April, 
and technologies with a documented delay in availability on the U.S. 
market such that the product's entry onto the U.S. market falls within 
the second half of the fiscal year, would still be eligible for a third 
year of new technology add-on payments under current policy, we agree 
that the change in the FDA marketing authorization deadline from July 1 
to May 1 may limit the ability of new technology add-on payment 
applicants to be eligible for 3 years of new technology add-on 
payments. Therefore, we are proposing to change the April 1 cutoff for 
determining whether a technology would be within its 2- to 3-year 
newness period when considering eligibility for

[[Page 36137]]

new technology add-on payments. We believe this proposed change would 
continue the flexibility applicants had with respect to when they apply 
to FDA and when they apply for new technology add-on payment, while 
preserving a predictable and consistent payment methodology for new 
technologies throughout the fiscal year.
    Specifically, we are proposing that beginning with new technology 
add-on payments for FY 2026, in assessing whether to continue the new 
technology add-on payments for those technologies that are first 
approved for new technology add-on payments in FY 2025 or a subsequent 
year, we would extend new technology add-on payments for an additional 
fiscal year when the three-year anniversary date of the product's entry 
onto the U.S. market occurs on or after October 1 of that fiscal year. 
We are proposing that this policy change would become effective 
beginning with those technologies that are initially approved for new 
technology add-on payments in FY 2025 or a subsequent year to allow 
additional flexibility for those applications for new technologies 
which were first subject to the change in the deadline for FDA 
marketing authorization from July 1 to May 1. Therefore, for 
technologies that were first approved for new technology add-on 
payments prior to FY 2025, including for technologies we determine to 
be substantially similar to those technologies, we would continue to 
use the midpoint of the upcoming fiscal year (April 1) when determining 
whether a technology would still be considered ``new'' for purposes of 
new technology add-on payments. Similarly, we are also proposing that 
beginning with applications for new technology add-on payments for FY 
2026, we would use the start of the fiscal year (October 1) instead of 
April 1 to determine whether to approve new technology add-on payment 
for that fiscal year.
    We are seeking public comment on our proposal to change the April 1 
cutoff to October 1 for determining whether a technology would be 
within its 2- to 3-year newness period when considering eligibility for 
new technology add-on payments, beginning in FY 2026, effective for 
those technologies that are approved for new technology add-on payments 
starting in FY 2025 or a subsequent year.
8. Proposed Change to the Requirements Defining an Active FDA Marketing 
Application for the Purpose of New Technology Add-On Payment 
Application Eligibility
    As previously discussed, in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58948 through 58958), we finalized that beginning with the new 
technology add-on payment applications for FY 2025, for technologies 
that are not already FDA market authorized for the indication that is 
the subject of the new technology add-on payment application, 
applicants must have a complete and active FDA market authorization 
request at the time of new technology add-on payment application 
submission, and must provide documentation of FDA acceptance or filing 
to CMS at the time of application submission, consistent with the type 
of FDA marketing authorization application the applicant has submitted 
to FDA. See Sec.  412.87(e) and further discussion in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 58948 through 58958).
    As we discussed further in the FY 2024 IPPS/LTCH PPS final rule, 
the documentation of FDA acceptance or filing of a marketing 
authorization request must be provided at the time of new technology 
add-on payment application, and be consistent with the type of FDA 
marketing authorization the applicant has submitted to FDA. We stated 
that we only accept new technology add-on payment applications once FDA 
has received all of the information necessary to determine whether it 
will accept (such as in the case of a 510(k) premarket submission or De 
Novo Classification request) or file (such as in the case of a PMA, 
NDA, or BLA) the application as demonstrated by documentation of the 
acceptance/filing that is provided by FDA. The applicant is required to 
submit documentation with its new technology add-on payment application 
to demonstrate that FDA has determined that the application is 
sufficiently complete to allow for substantive review by the FDA (88 FR 
58955).
    We also explained that, for the purposes of new technology add-on 
payment applications, we consider an FDA marketing authorization 
application to be in an active status when it has not been withdrawn, 
is not the subject of a Complete Response Letter or final decision from 
FDA to refuse to approve the application, and is not on hold (88 FR 
58955 through 58956).
    As noted in the FY 2024 final rule, we collaborated with FDA in 
developing the terminology used for purposes of this policy, and the 
intent behind using the terms we did was to ensure that the requirement 
could apply to and be inclusive of the various FDA applications and 
approval pathways for different types of drugs and devices. As such, we 
did not use terms defined in statute or existing regulations or terms 
defined by FDA (88 FR 58955). While FDA may consider an application for 
an FDA marketing authorization to be under active review despite a hold 
status, under our current policy we do not consider marketing 
authorization applications in a hold status with FDA to be in an active 
status for the purposes of new technology add-on payment application 
eligibility. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 
FR 58956) our intent with respect to considering applications that are 
on hold at the time of new-technology add-on payment application 
submission to be inactive was 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 new technology 
add on payment 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. As noted in the FY 2024 final rule (88 FR 58956), we 
have received applications over the years for technologies that are in 
a hold status with up to 360 days allowed for submission of additional 
information.
    We also recognize that applications for FDA marketing authorization 
may go in and out of a hold status at various stages during the FDA 
application process and for various reasons. The maximum length of a 
hold status can vary based on the FDA approval pathway, such that the 
time remaining for an applicant to resolve the hold may vary from days 
to several months after the start of the new technology add-on payment 
application cycle, depending on the FDA pathway, reason(s) for the hold 
status, and how the timing of the hold coincides with the annual new 
technology add-on payment application submission date. Additionally, 
FDA may need to issue secondary letters of request for additional 
information, often depending on the quality of initial response from 
the applicant. Accordingly, while we continue to believe that an 
application that is in a hold status with FDA pending additional 
information may lack critical information that is needed to evaluate 
whether the technology meets the eligibility criteria, we also 
recognize the

[[Page 36138]]

variability in the reasons for a hold status and the varying lengths of 
time for which an application can be on hold with FDA, such that some 
applicants may be farther along in the process to obtain FDA marketing 
authorization at the time of the hold.
    After further consideration, based on the variability in the timing 
of and reasons underlying hold statuses with FDA, we believe it is 
appropriate to propose to update our policy. Specifically, we are 
proposing, beginning with new technology add-on payment applications 
for FY 2026, to no longer consider a hold status to be an inactive 
status for the purposes of eligibility for the new technology add-on 
payment. We would continue to consider an application to be in an 
inactive status where it is withdrawn, the subject of a Complete 
Response Letter, or the subject of a final decision from FDA to refuse 
to approve the application. Because of the variety of circumstances for 
which a technology may be in a hold status, as previously discussed, we 
note that we may reassess this policy for future years, if finalized, 
based on ongoing experience.
    We invite public comments on our proposal to no longer consider a 
hold status to be an inactive status for the purposes of eligibility 
for new technology add-on payment, beginning with new technology add-on 
payment applications for FY 2026.
9. Proposed Change to the Calculation of the Inpatient New Technology 
Add-On Payment for Gene Therapies Indicated for Sickle Cell Disease
    As discussed previously in this section, section 
1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or 
technology may be considered for a 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. Under our current policy, as set forth in Sec.  
412.88(b)(2), unless the discharge qualifies for an outlier payment, 
the additional Medicare payment will be limited to the full MS-DRG 
payment plus 65 percent (or 75 percent for a medical product designated 
by the FDA as a Qualified Infectious Disease Product [QIDP] or approved 
under FDA's Limited Population Pathway for Antibacterial and Antifungal 
Drugs [LPAD]) of the estimated costs of the new technology or medical 
service.
    Since establishing the new technology add-on payment, we have been 
cautious about increasing the new technology add-on payment percentage. 
As stated in the May 4, 2001 proposed rule (66 FR 22695), we believe 
limiting the new technology add-on payment percentage would provide 
hospitals an incentive for continued cost-effective behavior in 
relation to the overall costs of the case. In the FY 2020 IPPS/LTCH PPS 
final rule, in adopting the general increase in the new technology add-
on payment percentage from 50 percent to 65 percent, we stated that we 
believed that 65 percent would be an incremental increase that would 
reasonably balance the need to maintain the incentives inherent to the 
prospective payment system while also encouraging the development and 
use of new technologies. We continue to believe that it is important to 
balance these incentives in assessing any potential change to the new 
technology add-on payment calculation.
    In the FY 2020 IPPS/LTCH PPS final rule, we also finalized an 
increase in the new technology add-on payment percentage for QIDPs from 
65 percent to 75 percent. We stated that we shared commenters' concerns 
related to antimicrobial resistance and its serious impact on Medicare 
beneficiaries and public health overall. We noted that the Centers for 
Disease Control and Prevention (CDC) described antimicrobial resistance 
as ``one of the biggest public health challenges of our time.'' We 
stated that we believe that Medicare beneficiaries may be 
disproportionately impacted by antimicrobial resistance due in large 
part to the unique vulnerability to drug-resistant infections (for 
example, due to age-related and/or disease-related immunosuppression, 
greater pathogen exposure from via catheter use) among individuals aged 
65 or older. We further stated that antimicrobial resistance results in 
a substantial number of additional hospital days for Medicare 
beneficiaries, resulting in significant unnecessary health care 
expenditures.
    To address the continued issues related to antimicrobial resistance 
resulting in a substantial number of increased hospital days and 
significant unnecessary health care expenditures for Medicare 
beneficiaries, in the FY 2021 IPPS/LTCH PPS final rule, we finalized a 
proposal to expand the alternative new technology add-on payment 
pathway for QIDPs to include products approved under the LPAD pathway 
and to increase the maximum new technology add-on payment percentage 
for a product approved under FDA's LPAD pathway, from 65 percent to 75 
percent, consistent with the new technology add-on payment percentage 
for a product that is designated by FDA as a QIDP, beginning with 
discharges occurring on or after October 1, 2020 (85 FR 58739).
    Since finalizing our current policy for QIDPs and LPADs, we 
continue to receive feedback from interested parties regarding the 
adequacy of new technology add-on payments for certain categories of 
technologies, including cell and gene therapies to treat sickle cell 
disease (SCD). Although we still believe it is prudent to proceed 
cautiously with increasing the new technology add-on payment 
percentage, we recognize that SCD, the most common inherited blood 
disorder, has historically had limited treatment options. In addition, 
hospitalizations and other health episodes related to SCD cost the 
health system $3 billion per year.\133\ We further note that the 
administration has identified a need to address SCD and has made a 
commitment to improving outcomes for patients with SCD by facilitating 
access to cell and gene therapies that treat SCD.\134\
---------------------------------------------------------------------------

    \133\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
    \134\ Biden-Harris Administration Announces Action to Increase 
Access to Sickle Cell Disease Treatments https://www.hhs.gov/about/news/2024/01/30/biden-harris-administration-announces-action-increase-access-sickle-cell-disease-treatments.html.
---------------------------------------------------------------------------

    Accordingly, we believe that further facilitating access to these 
gene therapies for Medicare beneficiaries with SCD may have the 
potential to simultaneously improve the health of impacted Medicare 
beneficiaries and potentially lead to long-term savings in the Medicare 
program. We also note that some gene therapies that treat SCD are among 
the costliest treatments to date, and we are concerned about a 
hospital's ability to sustain a potential financial loss to provide 
access to such treatments. As we discussed when we increased the new 
technology add-on payment for QIDPs in the FY 2020 IPPS/LTCH PPS final 
rule and products approved under FDA's LPAD in the FY 2021 IPPS/LTCH 
PPS final rule from 65 percent to 75 percent, we believe that it may be 
appropriate to increase the maximum add-on amount in limited cases 
where the current new technology add-on payment does not provide a 
sufficient incentive for the use of a new technology, which we believe 
may be the case for gene therapies that treat SCD. Accordingly, and 
consistent with our new technology add-on payment policy for products 
designated by the FDA as a QIDP or LPAD, we believe

[[Page 36139]]

there would be merit in also increasing the new technology add-on 
payment percentage for gene therapies that are indicated and used for 
the treatment of SCD to 75 percent.
    Therefore, we are proposing that, subject to our review of the new 
technology add-on payment eligibility criteria, for certain gene 
therapies approved for new technology add-on payments in the FY 2025 
IPPS/LTCH PPS final rule for the treatment of SCD, effective with 
discharges on or after October 1, 2024 and concluding at the end of the 
2- to 3-year newness period for such therapy, if the costs of a 
discharge (determined by applying CCRs as described in Sec.  412.84(h)) 
involving the use of such therapy for the treatment of SCD exceed the 
full DRG payment (including payments for IME and DSH, but excluding 
outlier payments), Medicare would 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. We note that, if finalized, these 
payment amounts would only apply to any gene therapy indicated and used 
specifically for the treatment of SCD that CMS determines in the FY 
2025 IPPS/LTCH PPS final rule meets the criteria for approval for new 
technology add-on payment. We are also proposing to add new Sec.  
412.88(a)(2)(ii)(C) and Sec.  412.88(b)(2)(iv) to reflect this proposed 
change to the calculation of the new technology add-on payment amount, 
beginning in FY 2025 and concluding at the end of the 2- to 3-year 
newness period for each such therapy. With this incremental increase, 
we believe hospitals would continue to have an incentive to balance the 
desirability of using the new technology for patients as medically 
appropriate while also maintaining an incentive for continued cost-
effective behavior in relation to the overall costs of the case.
    We invite public comments on this proposal to temporarily increase 
the new technology add-on payment percentage to 75 percent for a gene 
therapy that is indicated and used for the treatment of SCD as 
described previously. We also seek comment on whether we should make 
this proposed 75 percent add-on payment percentage available only to 
applicants that meet certain additional criteria, such as attesting to 
offering and/or participating in outcome-based pricing arrangements 
with purchasers (without regard to whether the specific purchaser 
availed itself of the outcome-based arrangements), or otherwise 
engaging in behaviors that promote access to these therapies at lower 
cost.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the proposed FY 2025 hospital wage index based 
on the statistical areas appears under section III.B. of the preamble 
of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, IV. The OMB control number for this information 
collection request is 0938-0050, which expires on September 30, 2025. 
Section 1886(d)(3)(E) of the Act also requires that any updates or 
adjustments to the wage index be made in a manner that ensures that 
aggregate payments to hospitals are not affected by the change in the 
wage index. The proposed adjustment for FY 2025 is discussed in section 
II.B. of the Addendum to this proposed rule.
    As discussed in section III.I. of the preamble of this proposed 
rule, we also take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act when calculating IPPS payment amounts. Under section 
1886(d)(8)(D) of the Act, the Secretary is required to adjust the 
standardized amounts so as to ensure that aggregate payments under the 
IPPS after implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The proposed budget neutrality adjustment for FY 2025 is discussed in 
section II.A.4.b. of the Addendum to this proposed rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. 
(The OMB control number for approved collection of this information is 
0938-0907, which expires on January 31, 2026.) A discussion of the 
occupational mix adjustment that we are proposing to apply to the FY 
2025 wage index appears under section III.E. of the preamble of this 
proposed rule.
2. Proposed Core-Based Statistical Areas (CBSAs) for the FY 2025 
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 (69 FR 49026 
through 49032), 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 2021) are 
based on revised OMB delineations issued on Sept 14, 2018, in OMB 
Bulletin No. 18-04.\135\ OMB Bulletin No. 18-04 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 the American Community 
Survey (ACS) and Census Bureau population estimates for 2015.
---------------------------------------------------------------------------

    \135\ We note that while OMB Bulletin 20-01 superseded Bulletin 
No. 18-04, it included no changes that required CMS to formally 
adopt the revisions.
---------------------------------------------------------------------------

    Historically, OMB issued major revisions to statistical areas every 
10 years, based on the results of the decennial census and occasionally 
issues minor updates and revisions to statistical areas in the years 
between the decennial censuses through OMB Bulletins. On February 28, 
2013, OMB issued Bulletin No. 13-01. CMS adopted these delineations, 
based on the results of the 2010 census, effective beginning with the 
FY 2015 IPPS wage index (79 FR 49951 through 49957). OMB subsequently 
issued Bulletin No. 15-01 on July 15, 2015, followed by OMB Bulletin 
No. 17-01 on August 15, 2017, which provided updates to and superseded 
OMB Bulletin No. 15-01. 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

[[Page 36140]]

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. OMB Bulletin No. 17-01 was superseded by the April 10, 
2018 OMB Bulletin No. 18-03, and then by the September 14, 2018 OMB 
Bulletin No. 18-04. These bulletins established revised delineations 
for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. In FY 2021, we adopted the 
updates set forth in OMB Bulletin No. 18-04 (85 FR 58743 through 
58753). Thus, most recently in the FY 2024 IPPS/LTCH PPS final rule, 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, 17-01, and 18-04.
    In the July 16, 2021 Federal Register (86 FR 37777), OMB finalized 
a schedule for future updates based on results of the decennial Census 
updates to commuting patterns from the ACS. In accordance with that 
schedule, on July 21, 2023, OMB released Bulletin No. 23-01. A copy of 
OMB Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, 
the delineations reflect the 2020 Standards for Delineating Core Based 
Statistical Areas (``the 2020 Standards''), which appeared in the 
Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the 
application of those standards to Census Bureau population and journey-
to-work data (that is, 2020 Decennial Census, American Community 
Survey, and Census Population Estimates Program data).

B. Proposed Implementation of Revised Labor Market Area Delineations

    We believe that using the revised delineations based on OMB 
Bulletin No. 23-01 will increase the integrity of the IPPS wage index 
system by creating a more accurate representation of current geographic 
variations in wage levels. Therefore, we are proposing to implement the 
revised OMB delineations as described in the July 21, 2023 OMB Bulletin 
No. 23-01, beginning with the FY 2025 IPPS wage index. We are proposing 
to use these revised delineations to calculate area wage indexes in a 
manner that is generally consistent with the CMS' implementation of 
CBSA-based wage index methodologies.
    CMS has recognized that hospitals in certain areas may experience a 
negative impact on their IPPS payment due to the proposed adoption of 
the revised OMB delineations and has finalized transition policies to 
mitigate negative financial impacts and provide stability to year-to-
year wage index variations. We refer readers to the FY 2015 IPPS final 
rule (79 FR 49956 through 49962) for discussion of the transition 
period finalized the last time CMS adopted revised OMB delineations 
after a decennial census. In the FY 2020 final rule (84 FR 42336-
42337), CMS finalized a wage index transition policy to apply a 5 
percent cap on any decrease that hospitals may experience in their 
final wage index from the prior fiscal year. In FY 2023, the 5 percent 
cap policy was made permanent for all acute care hospitals. This 5 
percent cap on reductions policy is discussed in further detail in 
section III.G.6 of the preamble of this proposed rule. We believe it is 
important for the IPPS to use the updated labor market area 
delineations in order to maintain a more accurate and up-to date 
payment system that reflects the reality of current labor market 
conditions. We believe the 5 percent cap policy will sufficiently 
mitigate significant disruptive financial impacts on hospitals that are 
negatively affected by the proposed adoption of the revised OMB 
delineations and thus, we are not proposing a transition period for 
these hospitals.
1. Micropolitan Statistical Areas
    The OMB ``2020 Standards'' define a ``Micropolitan Statistical 
Area'' as being associated with at least one urban area that has a 
population of at least 10,000, but less than 50,000. A Micropolitan 
Statistical Area comprises the central county or counties containing 
the core, plus adjacent outlying counties having a high degree of 
social and economic integration with the central county or counties as 
measured through commuting (86 FR 37778). We refer to these areas as 
Micropolitan Areas. Since FY 2005, we have treated Micropolitan Areas 
as rural and included hospitals located in Micropolitan Areas in each 
State's rural wage index. We refer readers to the FY 2005 IPPS final 
rule (69 FR 49029 through 49032) and the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 49952) for a complete discussion regarding this policy and 
our rationale for treating Micropolitan Areas as rural. Based upon the 
new 2020 Decennial Census data, a number of urban counties have 
switched status and have joined or became Micropolitan Areas, and some 
counties that once were part of a Micropolitan Area, under current OMB 
delineations, have become urban. Overall, there are a similar number of 
Micropolitan Areas (542) under the new OMB delineations based on the 
2020 Census as existed under the latest data from the 2010 Census 
(541). We believe that the best course of action would be to continue 
the policy established in the FY 2005 IPPS final rule and include 
hospitals located in Micropolitan Areas in each State's rural wage 
index. These areas continue to be defined as having relatively small 
urban cores (populations of 10,000-49,999). We do not believe it would 
be appropriate to calculate a separate wage index for areas that 
typically may include only a few hospitals for the reasons set forth in 
the FY 2005 IPPS/LTCH PPS final rule (69 FR 49029 through 49032) and 
the FY 2015 IPPS final rule (79 FR 49952). Therefore, in conjunction 
with our proposal to implement the new OMB statistical area 
delineations beginning in FY 2025, we are proposing to continue to 
treat Micropolitan Areas as ``rural'' and to include Micropolitan Areas 
in the calculation of each state's rural wage index.
2. Metropolitan Divisions
    According to OMB's ``2020 Standards'' (86 FR 37776), a metropolitan 
division is a county or group of counties within a metropolitan 
statistical area (MSA) with a population of at least 2.5 million. Thus, 
MSAs may be subdivided into metropolitan divisions. A county qualifies 
as a ``main county'' of a metropolitan division if 65 percent or more 
of workers living in the county also work within the county and the 
ratio of the number of workers working in the county to the number of 
workers living in the county is at least 0.75. A county qualifies as a 
``secondary county'' if 50 percent or more, but less than 65 percent, 
of workers living in the county also work within the county and the 
ratio of the number of workers working in the county to the number of 
workers living in the county is at least 0.75. After all the main and 
secondary counties are identified and grouped, each additional county 
that already has qualified for inclusion in the MSA falls within the 
metropolitan division associated with the main/secondary county or 
counties with which the county at issue has the highest employment 
interchange measure. Counties in a metropolitan division must be 
contiguous. In the FY 2005

[[Page 36141]]

IPPS final rule (69 FR 49029), CMS finalized our policy to use the 
metropolitan divisions where applicable under the CBSA definitions. CMS 
concluded that including the metropolitan divisions in the CBSA 
definitions most closely approximated the labor market delineation from 
the ``Primary Metropolitan Statistical Areas'' delineations in place 
prior to FY 2005.
    Under the current delineations, 11 MSAs are subdivided into a total 
of 31 metropolitan divisions. The revised OMB delineations have 
subdivided two additional existing MSAs into metropolitan divisions 
relative to the previous delineations. Under the proposed delineations, 
13 MSAs (the 11 currently subdivided MSAs plus two additional MSAs) are 
subdivided into 37 metropolitan divisions. Since the configurations of 
most subdivided MSAs remain substantially similar in the revised 
delineations compared to those used in FY 2024, in order to maintain 
continuity and predictability in labor market delineations, we are 
proposing to continue our policy to include metropolitan divisions as 
separate CBSAs for wage index purposes.
3. Change to County-Equivalents in the State of Connecticut
    In a June 6, 2022 Notice (87 FR 34235 through 34240), the Census 
Bureau announced that it was implementing the State of Connecticut's 
request to replace the 8 counties in the State with 9 new ``Planning 
Regions.'' Planning regions now serve as county-equivalents within the 
CBSA system. OMB Bulletin No. 23-01 is the first set of revised 
delineations that referenced the new county-equivalents for 
Connecticut. We have evaluated the change in hospital assignments for 
Connecticut hospitals and are proposing to adopt the planning regions 
as county equivalents for wage index purposes. As all forthcoming 
county-based delineation data will utilize these new county-equivalent 
definitions for the Connecticut, we believe it is necessary to adopt 
this migration from counties to planning region county-equivalents in 
order to maintain consistency with OMB Bulletin No. 23-01 and future 
OMB updates. We are providing the following crosswalk for each hospital 
in Connecticut with the current and proposed FIPS county and county-
equivalent codes and CBSA assignments.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.142


[[Page 36142]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.143

    We note that we are proposing that the remote location currently 
indicated with 07B033 will be located in the same CBSA as the main 
provider 070033. Therefore, consistent with the policy for remote 
locations of multicampus hospitals discussed in FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41369 through 41374), it will no longer be necessary 
to identify this remote location separately from the main provider for 
wage index purposes.
    We also note, as discussed in Section III.B.3 of the preamble of 
this proposed rule, we propose to add both of the newly proposed rural 
planning areas in Connecticut to the list of ``Lugar'' counties.
4. Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations (based upon OMB Bulletin No. 23-01) 
beginning in FY 2025. Our analysis shows that a total of 53 counties 
(and county equivalents) and 33 hospitals that were once considered 
part of an urban CBSA would be considered to be located in a rural 
area, beginning in FY 2025, under these revised OMB delineations. The 
following chart lists the 53 urban counties that would be rural if we 
finalize our proposal to implement the revised OMB delineations. We 
note that there are four cases (CBSA 14100 [Bloomsburg-Berwick, PA], 
CBSA 19180 [Danville, IL], CBSA 20700 [East Stroudsburg, PA], and CBSA 
35100 [New Bern, NC]) where all constituent counties in an urban CBSA 
would become rural under the revised OMB delineations.

[[Page 36143]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.144


[[Page 36144]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.145

BILLING CODE 4120-01-C
    We are proposing that the wage data for all hospitals located in 
the counties listed here would now be considered when calculating their 
respective State's rural wage index. We further refer readers to 
section III.G.6 of the preamble of this proposed rule for a discussion 
of the 5 percent cap policy. We believe that this policy, which caps 
any reduction in wage index values at 5 percent of the hospital's prior 
year wage index value, provides an adequate transition to mitigate 
sudden negative financial impacts due to the adoption of wage index 
policies, including the adoption of revised OMB labor market 
delineations.
    We are also proposing revisions to the list of counties deemed 
urban under section 1886(d)(8)(B) of the Act, which will affect a 
number the hospitals located in these proposed rural counties. We note 
that we are proposing to add 17 of the 53 counties listed here to the 
list of ``Lugar'' counties whose hospitals, pursuant to 1886(d)(8)(B), 
are deemed to be in an urban area. We refer readers to section 
III.F.4.b for further discussion.
    In addition, we note the provisions of Sec.  412.102 of our 
regulations would continue to apply with respect to determining DSH 
payments. Specifically, in the first year after a hospital loses urban 
status, the hospital will receive an adjustment to its DSH payment that 
equals two-thirds of the difference between the urban DSH payments 
applicable to the hospital before its redesignation from urban to rural 
and the rural DSH payments applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an adjustment to its DSH 
payment that equals one third of the difference between the urban DSH 
payments applicable to the hospital before its redesignation from urban 
to rural and the rural DSH payments applicable to the hospital 
subsequent to its redesignation from urban to rural.
5. Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations (based upon OMB Bulletin No. 23-01) 
beginning in FY 2025. Analysis of these OMB statistical area 
delineations shows that a total of 54 counties (and county equivalents) 
and 24 hospitals that were located in rural areas would be located in 
urban areas under the revised OMB delineations. The following chart 
lists the 54 rural counties that would be urban if we finalize our 
proposal to implement the revised OMB delineations.

[[Page 36145]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.146


[[Page 36146]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.147

    We are proposing that when calculating the area wage index, the 
wage data for hospitals located in these counties would be included in 
their new respective urban CBSAs. We also note that due to the proposed 
adoption of the revised OMB delineations, some CAHs that were 
previously located in rural areas may be located in urban areas. The 
regulations at Sec. Sec.  412.103(a)(6) and 485.610(b)(5) provide 
affected CAHs with a two-year transition period that begins from the 
date the redesignation becomes effective. The affected CAHs must

[[Page 36147]]

reclassify as rural during this transition period in order to retain 
their CAH status after the two-year transition period ends. We refer 
readers to the FY 2015 IPPS/LTCH final rule (79 FR 50162 through 50163) 
for further discussion of the two-year transition period for CAHs. We 
also note that special statuses limited to hospitals located in rural 
areas (such as MDH or SCH status) may be terminated if hospitals are 
located in proposed urban counties. In these cases, affected hospitals 
should apply for rural reclassification status under Sec.  412.103 
prior to October 1, 2024 to ensure no disruption in status.
6. Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA to 
a new or existing urban CBSA under our proposal to adopt the new OMB 
delineations.
    In some cases, the change in CBSA would extend only to a change in 
name. Revised CBSA names can be found in Table 3 of the addendum of the 
proposed rule. In other cases, the CBSA number also would change. For 
these CBSAs, the list of constituent urban counties in FY 2024 and FY 
2025 would be the same (except in instances where an urban county 
became rural, or a rural county became urban; as discussed in the 
previous section). The following table lists the CBSAs where, under the 
proposed delineations, the CBSA name and number would change but the 
constituent counties would not change (not including instances where an 
urban county became rural, or a rural county became urban).
[GRAPHIC] [TIFF OMITTED] TP02MY24.148

    In some cases, all of the urban counties from a FY 2024 CBSA would 
be moved and subsumed by another CBSA in FY 2025. The following table 
lists the CBSAs that, under the proposed delineations, would be 
subsumed by an another CBSA.
[GRAPHIC] [TIFF OMITTED] TP02MY24.149

    In other cases, if we adopt the revised OMB delineations, some 
counties would shift between existing and new CBSAs, changing the 
constituent makeup of the CBSAs. For example, Calvert County, MD would 
move from the current CBSA 12580 (Washington-Arlington-Alexandria, DC-
VA-MD-WV) into proposed CBSA 30500 (Lexington Park, MD). The other 
constituent counties of CBSA 12580 would be split into urban CBSAs 
47664 (Washington, DC-MD) and 11694 (Arlington-Alexandria-Reston, VA-
WV). The following chart lists the urban counties that would split off 
from one urban CBSA and move to a newly proposed or modified urban CBSA 
if we adopt the revised OMB delineations.

[[Page 36148]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.150


[[Page 36149]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.151


[[Page 36150]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.152

    If hospitals located in these counties move from one CBSA to 
another under the revised OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. We refer 
readers to section III.F.3. of the preamble of this proposed rule for 
discussion of our proposals to address the reassignment of MGCRB wage 
index reclassifications for hospitals currently assigned to these 
modified CBSAs.
7. Transition
    Overall, we believe implementing the new OMB labor market area 
delineations would result in wage index values being more 
representative of the actual current costs of labor in a given area. 
However, we recognize that some hospitals would experience decreases in 
wage index values as a result of our proposed implementation of the new 
labor market area delineations. We also realize that some hospitals 
would have higher wage index values due to our proposed implementation 
of the new labor market area delineations.
    In the past, we have provided for transition periods when adopting 
changes that have significant payment implications, particularly large 
negative impacts. When adopting new OMB delineations based on the 
decennial census for the 2005 and 2015 wage indexes, we applied a 3-
year transition for urban hospitals that became rural under the new 
delineations and a 50/50 blended wage index adjustment for all 
hospitals that would experience any decrease in their actual payment 
wage index (69 FR 49032 through 49034 and 79 FR 28060 through 28062).
    In connection with our adoption in FY 2021 of the updates in OMB 
Bulletin 18-04, which included more modifications to the CBSAs than are 
typical for OMB bulletins issued between decennial censuses, we adopted 
a policy to place a 5-percent cap on any decrease in a hospital's wage 
index from the hospital's final wage index in FY 2020 so that a 
hospital's final wage index for FY 2021 would not be less than 95 
percent of its final wage index for FY 2020 (85 FR 58753 through 
58755). Given the unprecedented nature of the COVID-19 public health 
emergency (PHE), we adopted a policy in the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45164 through 45165) to apply an extended transition to the 
FY 2022 wage index for hospitals affected by the transition in FY 2021 
to mitigate significant negative impacts of, and provide additional 
time for hospitals to adapt to, the CMS decision to adopt the revised 
OMB delineations. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021), under the authority at sections 1886(d)(3)(E) and 
1886(d)(5)(I)(i) of the Act, we finalized a policy for FY 2023 and 
subsequent years 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.
    We believe that this permanent cap policy, reflected at 42 CFR 
412.64(h)(7) and discussed in section in III.G.6. of the preamble of 
this proposed rule, sufficiently mitigates any large negative impacts 
of adopting the new delineations. As we stated when finalizing the 
permanent 5-percent cap policy in the FY 2023 IPPS/LTCH PPS final rule 
(87 FR 49018 through 49021), we further considered the comments we 
received during the FY 2022 rulemaking recommending a permanent 5 
percent cap policy to prevent large year-to-year variations in wage 
index values as a means to reduce overall volatility for hospitals. We 
do not believe any additional transition period is necessary 
considering that the current cap on wage index decreases, which was not 
in place when we implemented the decennial census updates in FY 2005 
and FY 2015, ensures that a hospital's wage index would not be less 
than 95 percent of its final wage index for the prior year.

C. Worksheet S-3 Wage Data for the Proposed FY 2025 Wage Index

1. Cost Reporting Periods Beginning in FY 2021 for FY 2025 Wage Index
    The proposed FY 2025 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2021 (the FY 2024 wage indexes 
were based on data from cost reporting periods beginning during FY 
2020).
    The FY 2025 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.
    Consistent with the wage index methodology for FY 2024, the 
proposed wage index for FY 2025 excludes the direct and overhead 
salaries and hours for services not subject to IPPS payment, such as 
skilled nursing facility (SNF) services, home health services, costs 
related to GME (teaching physicians and residents) and certified 
registered nurse anesthetists (CRNAs), and other subprovider components 
that are not paid under the IPPS. The proposed FY 2025 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). Similar to our 
treatment of CAHs, as discussed below, we are proposing to exclude 
Rural Emergency Hospitals (REHs) from the wage index.
    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.

[[Page 36151]]

2. 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.
3. Verification of Worksheet S-3 Wage Data
    The wage data for the FY 2025 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, 2020, and before October 1, 2021. For wage index purposes, 
we refer to cost reports beginning on or after October 1, 2020, and 
before October 1, 2021, as the ``FY 2021 cost report,'' the ``FY 2021 
wage data,'' or the ``FY 2021 data.'' Instructions for completing the 
wage index sections of Worksheet S-3 are included in the Provider 
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 
4005.2 through 4005.4. The data file used to construct the proposed FY 
2025 wage index includes FY 2021 data submitted to us as of January 26, 
2024. 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 2023 wage index we used cost report 
data from FY 2019). We stated in the FY 2023 IPPS/LTCH 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 2025 wage index, the best available data 
typically would be from the FY 2021 wage data.
    In considering the impacts of the COVID-19 PHE on the FY 2021 wage 
data, we compared that data with recent historical data. Based on pre 
reclassified wage data, the changes in the wage data from FY 2020 to FY 
2021 show the following compared to the annual changes for the most 
recent 3 fiscal year periods (that is, FY 2017 to FY 2018, FY 2018 to 
FY 2019 and FY 2019 to FY 2020):
     Approximately 91 percent of hospitals have an increase in 
their average hourly wage (AHW) from FY 2020 to FY 2021 compared to a 
range of 76-86 percent of hospitals for the most recent 3 fiscal year 
periods.
     Approximately 97 percent of all CBSA AHWs are increasing 
from FY 2020 to FY 2021 compared to a range of 84-91 percent of all 
CBSAs for the most recent 3 fiscal year periods.
     Approximately 51 percent of all urban areas have an 
increase in their area wage index from FY 2020 to FY 2021 compared to a 
range of 36-43 percent of all urban areas for the most recent 3 fiscal 
year periods.
     Approximately 55 percent of all rural areas have an 
increase in their area wage index from FY 2020 to FY 2021 compared to a 
range of 31-46 percent of all rural areas for the most recent 3 fiscal 
year periods.
     The unadjusted national average hourly wage increased by a 
range of 2.4-5.4 percent per year from FY 2017-FY 2020. For FY 2021, 
the unadjusted national average hourly increased by 8.7 percent from FY 
2020.
    Similar to the FY 2024 wage index, it is not readily apparent even 
if the comparison with the historical trends had indicated greater 
differences at a national level in this context, how any changes due to 
the COVID-19 PHE differentially impacted the wages paid by individual 
hospitals. Furthermore, even if changes due to the COVID-19 PHE did 
differentially impact the wages paid by individual hospitals over time, 
it is not clear how those changes could be isolated from changes due to 
other reasons and what an appropriate potential methodology might be to 
adjust the data to account for the effects of the COVID-19 PHE.
    Lastly, we also note that we have not identified any significant 
issues with the FY 2021 wage data itself in terms of our audits of this 
data. As usual, the data was audited by the Medicare Administrative 
Contractors (MACs), and there were no significant issues reported 
across the data for all hospitals.
    Taking all of these factors into account, we believe the FY 2021 
wage data is the best available wage data to use for FY 2025 and are 
proposing to use the FY 2021 wage data for FY 2025.
    We welcome comment from the public with regard to the FY 2021 wage 
data. We note, AHW data by provider and CBSA, including the data upon 
which the comparisons provided above 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/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files.
    We requested that our MACs revise or verify data elements that 
resulted in specific edit failures. For the proposed FY 2025 wage 
index, we identified and excluded 69 providers with aberrant data that 
should not be included in the wage index. If data elements for some of 
these providers are corrected, we intend to include data from those 
providers in the final FY 2025 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 verification of questionable data elements and to 
transmit any changes to the wage data no later than March 20, 2024.
    In constructing the proposed FY 2025 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2021, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe that including the wage data for 
these hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398); that is, any 
hospital that is designated as a CAH by 7 days prior to the publication 
of the preliminary wage index public use file (PUF) is excluded from 
the calculation of the wage index. For the proposed rule, we removed 8 
hospitals that converted to CAH status on or after January 23, 2023, 
the cut-off date for

[[Page 36152]]

CAH exclusion from the FY 2024 wage index, and through and including 
January 24, 2024, the cut-off date for CAH exclusion from the FY 2025 
wage index. We note, we also removed 2 hospitals that converted to CAH 
status prior to January 23, 2023.
    The Consolidated Appropriations Act (CAA), 2021, was signed into 
law on December 27, 2020. Section 125 of Division CC (section 125) 
established a new rural Medicare provider type: Rural Emergency 
Hospitals (REHs). (We refer the reader to the CMS website at https://www.cms.gov/medicare/health-safety-standards/guidance-for-laws-regulations/hospitals/rural-emergency-hospitals for additional 
information on REHs.) In doing so, section 125 amended section 1861(e) 
of the Act, which provides the definition of a hospital and states that 
the term ``hospital'' does not include, unless the context otherwise 
requires, a critical access hospital (as defined in subsection (mm)(1)) 
or a rural emergency hospital (as defined in subsection (kkk)(2)). 
Section 125 also added section 1861(kkk) to the Act, which sets forth 
the requirements for REHs. Per section 1861(kkk)(2) of the Act, one of 
the requirements for an REH is that it does not provide any acute care 
inpatient services (other than post-hospital extended care services 
furnished in a distinct part unit licensed as a skilled nursing 
facility (SNF)). Similar to CAHs, we believe hospitals that have 
subsequently converted to REH status should be removed from the wage 
index calculation, because they are a separately certified Medicare 
provider type and are not comparable to other short-term, acute care 
hospitals as they do not provide inpatient hospital services. For FY 
2025, we are proposing to treat REHs the same as CAHs and exclude 15 
REHs from the wage index. Accordingly, similar to our policy on CAHs, 
any hospital that is designated as a REH 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. In summary, we 
calculated the FY 2025 wage index using the Worksheet S-3, Parts II and 
III wage data of 3,075 hospitals.
    For the proposed FY 2025 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 2025 wage 
index associated with this proposed rule (available via the internet on 
the CMS website), includes separate wage data for the campuses of 27 
multicampus hospitals. The following chart lists the multicampus 
hospitals by CMS certification number (CCN) and the FTE percentages on 
which the wages and hours of each campus were allotted to their 
respective labor market areas:

[[Page 36153]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.153

    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.
4. Process for Requests for Wage Index Data Corrections
a. Process for Hospitals To Request Wage Index Data Corrections
    The preliminary, unaudited Worksheet S-3 wage data files for the 
proposed FY 2025 wage index were made available on May 23, 2023, 
through the internet on the CMS website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. We subsequently identified some 
providers that were inadvertently omitted from the FY 2025 preliminary 
Worksheet S-3 wage data file originally posted on May 23, 2023. 
Therefore, on July 12, 2023, we posted an updated FY 2025 preliminary 
Worksheet S-3 wage data file to include these missing providers. In 
addition, the Calendar Year (CY) 2022 occupational mix survey data was 
made available on July 12, 2023, through the internet on the CMS 
website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. On 
August 14, 2023, we posted an updated CY 2022 Occupational Mix survey 
data file that includes survey data for providers that were 
inadvertently omitted from the file posted on July 12, 2023.
    On January 31, 2024, we posted a public use file (PUF) at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page containing FY 2025 wage 
index data available as of January 31, 2024. 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, 2020, through September 30, 2021; that is, FY 2021 wage 
data), a tab with the occupational mix data (which includes data from 
the CY 2022 occupational mix survey, Form CMS-10079), a tab containing 
the Worksheet S-3 wage data

[[Page 36154]]

of hospitals deleted from the January 31, 2024 wage data PUF, and a tab 
containing the CY 2022 occupational mix data of the hospitals deleted 
from the January 31, 2024 occupational mix PUF. In a memorandum dated 
January 31, 2024, we instructed all MACs to inform the IPPS hospitals 
that they service of the availability of the January 31, 2024, wage 
index data PUFs, and the process and timeframe for requesting revisions 
in accordance with the FY 2025 Hospital Wage Index Development Time 
Table available at https://www.cms.gov/files/document/fy2025-hospital-wage-index-development-timetable.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 4, 2023, 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 2022 occupational mix 
survey data files posted on May 23, 2023, 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, 2023, 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 1, 2023. 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 3, 2023 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 2024. CMS published the wage 
index PUFs that included hospitals' revised wage index data on January 
31, 2024. Hospitals had until February 16, 2024, to submit requests to 
the MACs to correct errors in the January 31, 2024, PUF due to CMS or 
MAC mishandling of the wage index data, or to revise desk review 
adjustments to their wage index data as included in the January 31, 
2024, PUF. Hospitals also were required to submit sufficient 
documentation to support their requests. Hospitals' requests and 
supporting documentation must have been received by the MAC by the 
February deadline (that is, by February 16, 2024, for the FY 2025 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, 2024. Under our 
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38153), the deadline for a hospital to request CMS intervention in 
cases where a hospital disagreed with a MAC's handling of wage data on 
any basis (including a policy, factual, or other dispute) is April 3, 
2024. Data that were incorrect in the preliminary or January 31, 2024, 
wage index data PUFs, but for which no correction request was received 
by the February 16, 2024, deadline, are not considered for correction 
at this stage. In addition, April 3, 2024, is the deadline for 
hospitals to dispute data corrections made by CMS of which the hospital 
was notified after the January 31, 2024, PUF and at least 14 calendar 
days prior to April 3, 2024 (that is, March 20, 2024), 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, 2024, 
for the FY 2025 wage index). We refer readers to the FY 2025 Hospital 
Wage Index Development Time Table for complete details. Hospitals are 
given the opportunity to examine Table 2 associated with this proposed 
rule, which is listed in section VI. of the Addendum to the proposed 
rule and available via the internet on the CMS website at https://www.cms.gov/medicare/medicare-fee-service-payment/acuteinpatientpps/wage-index-files/fy-2025-wage-index-home-page. Table 2 associated with 
the proposed rule contains each hospital's proposed adjusted average 
hourly wage used to construct the wage index values for the past 3 
years, including the proposed FY 2025 wage index, which was constructed 
from FY 2021 data. We note that the proposed hospital average hourly 
wages shown in Table 2 only reflect changes made to a hospital's data 
that were transmitted to CMS by early February 2024.
    We plan to post the final wage index data PUFs on April 29, 2024, 
on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2024-wage-index-home-page. 
The April 2024 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, 2024, 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 2024 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, 2024.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 31, 
2024, 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 2024 final wage index data PUFs, a 
hospital believes that its wage or occupational mix data are incorrect 
due to a MAC or CMS error in the entry or tabulation of the final data, 
the hospital is given the opportunity to notify both its MAC and CMS 
regarding why the hospital believes an error exists and provide all 
supporting information, including relevant dates (for example, when it 
first became aware of the error). The hospital is required to send its 
request to CMS and to the MAC so that it is received no later than May 
29, 2024. May 29, 2024, is also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital is notified on or 
after 13 calendar days prior to April 3, 2024 (that is, March 21, 
2024), and at least 14 calendar days prior to May 29, 2024 (that is, 
May 15, 2024), that did not arise from a hospital's request for

[[Page 36155]]

revisions. (Data corrections made by CMS of which a hospital is 
notified on or after 13 calendar days prior to May 29, 2024 (that is, 
May 16, 2024), may be appealed to the Provider Reimbursement Review 
Board (PRRB)). In accordance with the FY 2025 Hospital Wage Index 
Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy2025-hospital-wage-index-development-timetable.pdf, the May appeals are required to be submitted to CMS 
through an online submission process or through email. We refer readers 
to the FY 2025 Hospital Wage Index Development Time Table for complete 
details.
    Verified corrections to the wage index data received timely (that 
is, by May 29, 2024) by CMS and the MACs will be incorporated into the 
final FY 2025 wage index, which will be effective October 1, 2024.
    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 2025 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 2024, 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 2025 wage index by August 
2024, and the implementation of the FY 2025 wage index on October 1, 
2024. Given these processes, the wage index implemented on October 1 
should be accurate. Nevertheless, in the event that errors are 
identified by hospitals and brought to our attention after May 29, 
2024, we retain the right to make midyear changes to the wage index 
under very limited circumstances.
    Specifically, in accordance with Sec.  412.64(k)(1) of our 
regulations, we make midyear corrections to the wage index for an area 
only if a hospital can show that: (1) The MAC or CMS made an error in 
tabulating its data; and (2) the requesting hospital could not have 
known about the error or did not have an opportunity to correct the 
error, before the beginning of the fiscal year. For purposes of this 
provision, ``before the beginning of the fiscal year'' means by the May 
deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, May 29, 2024, for the FY 2025 
wage index). This provision is not available to a hospital seeking to 
revise another hospital's data that may be affecting the requesting 
hospital's wage index for the labor market area. As indicated earlier, 
because CMS makes the wage index data available to hospitals on the CMS 
website prior to publishing both the proposed and final IPPS rules, and 
the MACs notify hospitals directly of any wage index data changes after 
completing their desk reviews, we do not expect that midyear 
corrections will be necessary. However, under our current policy, if 
the correction of a data error changes the wage index value for an 
area, the revised wage index value will be effective prospectively from 
the date the correction is made.
    In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 
47485), we revised Sec.  412.64(k)(2) to specify that, effective on 
October 1, 2005, that is, beginning with the FY 2006 wage index, a 
change to the wage index can be made retroactive to the beginning of 
the Federal fiscal year only when CMS determines all of the following: 
(1) The MAC or CMS made an error in tabulating data used for the wage 
index calculation; (2) the hospital knew about the error and requested 
that the MAC and CMS correct the error using the established process 
and within the established schedule for requesting corrections to the 
wage index data, before the beginning of the fiscal year for the 
applicable IPPS update (that is, by the May 29, 2024, deadline for the 
FY 2025 wage index); and (3) CMS agreed before October 1 that the MAC 
or CMS made an error in tabulating the hospital's wage index data and 
the wage index should be corrected.
    In those circumstances where a hospital requested a correction to 
its wage index data before CMS calculated the final wage index (that 
is, by the May 29, 2024 deadline for the FY 2025 wage index), and CMS 
acknowledges that the error in the hospital's wage index data was 
caused by CMS' or the MAC's mishandling of the data, we believe that 
the hospital should not be penalized by our delay in publishing or 
implementing the correction. As with our current policy, we indicated 
that the provision is not available to a hospital seeking to revise 
another hospital's data. In addition, the provision cannot be used to 
correct prior years' wage index data; it can only be used for the 
current Federal fiscal year. In situations where our policies would 
allow midyear corrections other than those specified in Sec.  
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.
b. Process for Data Corrections by CMS After the January 31 Public Use 
File (PUF)
    The process set forth with the wage index timetable discussed in 
section III.C.4. of the preamble of this proposed rule allows hospitals 
to request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data in order 
to ensure the accuracy of the wage index. As we explained in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49490 through

[[Page 36156]]

49491) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56914), section 
1886(d)(3)(E) of the Act requires the Secretary to adjust the 
proportion of hospitals' costs attributable to wages and wage-related 
costs for area differences reflecting the relative hospital wage level 
in the geographic areas of the hospital compared to the national 
average hospital wage level. We believe that, under section 
1886(d)(3)(E) of the Act, we have discretion to make corrections to 
hospitals' data to help ensure that the costs attributable to wages and 
wage-related costs in fact accurately reflect the relative hospital 
wage level in the hospitals' geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. Since the origin of the 
IPPS, the wage index has been subject to its own annual review process, 
first by the MACs, and then by CMS. As a standard practice, after each 
annual desk review, CMS reviews the results of the MACs' desk reviews 
and focuses on items flagged during the desk review, requiring that, if 
necessary, hospitals provide additional documentation, adjustments, or 
corrections to the data. This ongoing communication with hospitals 
about their wage data may result in the discovery by CMS of additional 
items that were reported incorrectly or other data errors, even after 
the posting of the January 31 PUF, and throughout the remainder of the 
wage index development process. In addition, the fact that CMS analyzes 
the data from a regional and even national level, unlike the review 
performed by the MACs that review a limited subset of hospitals, can 
facilitate additional editing of the data the need for which 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 31 PUF based on a different understanding than the hospital 
about certain reported costs, for example, could potentially be 
resolved using this process before the final wage index is calculated. 
We believe this process and the timeline for requesting review of such 
corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS 
final rule) promote additional transparency in instances where CMS 
makes data corrections after the January 31 PUF and provide 
opportunities for hospitals to request further review of CMS changes in 
time for the most accurate data to be reflected in the final wage index 
calculations. These additional appeals opportunities are described 
earlier and in the FY 2025 Hospital Wage Index Development Time Table, 
as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 
38156).

D. Method for Computing the Proposed FY 2025 Unadjusted Wage Index

    The method used to compute the proposed FY 2025 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 58758-58761), and we 
are not proposing any changes to this methodology. We have restated our 
methodology in this section of this rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the wage index (in this case, for FY 2025, 
these were data from cost reports for cost reporting periods beginning 
on or after October 1, 2020, and before October 1, 2021). In addition, 
we included data from hospitals that had cost reporting periods 
beginning prior to the October 1, 2020 begin date and extending into FY 
2021 but that did not have any cost report with a begin date on or 
after October 1, 2020 and before October 1, 2021. We include this data 
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 data 
applicable to the fiscal year wage data being used to compute the wage 
index for those hospitals. We note that, if a hospital had more than 
one cost reporting period beginning during FY 2021 (for example, a 
hospital had two short cost reporting periods beginning on or after 
October 1, 2020, and before October 1, 2021), 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

[[Page 36157]]

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, 2020, through April 15, 
2022, for private industry hospital workers from data obtained from the 
Bureau of Labor Statistics' (BLS') Office of Compensation and Working 
Conditions. We use the ECI because it reflects the price increase 
associated with total compensation (salaries plus fringes) rather than 
just the increase in salaries. In addition, the ECI includes managers 
as well as other hospital workers. This methodology to compute the 
monthly update factors uses actual quarterly ECI data and assures that 
the update factors match the actual quarterly and annual percent 
changes. We also note that, since April 2006 with the publication of 
March 2006 data, the BLS' ECI uses a different classification system, 
the North American Industrial Classification System (NAICS), instead of 
the Standard Industrial Codes (SICs), which no longer exist. We have 
consistently used the ECI as the data source for our wages and salaries 
and other price proxies in the IPPS market basket, and we are not 
proposing to make any changes to the usage of the ECI for FY 2025. 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.

[[Page 36158]]

    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 CBSAs' 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,). 
We stated that we believe that, in the absence of wage data for an 
urban labor market area, it is reasonable to use a statewide urban 
average, which is based on actual, acceptable wage data of hospitals in 
that State, rather than impute some other type of value using a 
different methodology. For calculation of the proposed FY 2025 wage 
index, we note there is one urban CBSA for which we do not have IPPS 
hospital wage data. In Table 3 (which is available via the internet on 
the CMS website), which contains the area wage indexes, we include a 
footnote to indicate to which CBSA this policy applies. This CBSA's 
wage index would be calculated as described, based on the FY 2020 IPPS/
LTCH PPS final rule methodology (84 FR 42305). 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 proposed rule.
    We refer readers to section II. of the Appendix of the proposed 
rule for the policy regarding rural areas that do not have IPPS 
hospitals.
    Step 11.--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area of a State may not be 
less than the area wage index applicable to hospitals located in rural 
areas in that State. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
proposed rule and available via the internet on the CMS website.
    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). 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 ECI for compensation for each 30-day increment 
from October 14, 2020, through April 15, 2022, for private industry 
hospital workers from the BLS' Office of Compensation and Working 
Conditions data. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we are not proposing any changes to the usage of the ECI 
for FY 2025. The factors used to adjust the hospital's data were based 
on the midpoint of the cost reporting period, as indicated in the 
following table.

[[Page 36159]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.154

    For example, the midpoint of a cost reporting period beginning 
January 1, 2021, and ending December 31, 2021, is June 30, 2021. An 
adjustment factor of 1.03606 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 Division O, Title VI (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 2025, 
there is no Puerto Rico-specific overall average hourly wage or wage 
index.
    Based on the previously discussed methodology, the proposed FY 2025 
unadjusted national average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP02MY24.155

E. Proposed Occupational Mix Adjustment to the FY 2025 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered nurses, licensed practical nurses, nursing 
aides, and medical assistants for the purpose of providing nursing care 
to their patients. The varying labor costs associated with these 
choices reflect hospital management decisions rather than geographic 
differences in the costs of labor.
1. Use of New 2022 Medicare Wage Index Occupational Mix Survey for the 
FY 2025 Wage Index
    Section 304(c) of Appendix F, Title III 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

[[Page 36160]]

short-term, acute care hospital participating in the Medicare program 
and to measure the earnings and paid hours of employment for such 
hospitals by occupational category. 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. A new 
measurement of occupational mix is required for FY 2025.
    The FY 2025 occupational mix adjustment is based on a new calendar 
year (CY) 2022 survey. Hospitals were required to submit their 
completed 2022 surveys (Form CMS-10079, OMB Number 0938-0907, 
expiration date January 31, 2026) to their MACs by July 1, 2023. The 
preliminary, unaudited CY 2022 survey data were posted on the CMS 
website on July 12, 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 revised or verified data elements in hospitals' occupational mix 
surveys that resulted in certain edit failures.
    Consistent with the IPPS and LTCH PPS ratesettings, our policy 
principles with regard to the occupational mix adjustment include 
generally using the most current data and information available, which 
is usually occupational mix data on a 3-year lag in the first year of 
the use of the occupational mix survey (for example, for the FY 2022 
wage index we used occupational mix data from 2019; we also used this 
data for the FY 2023 and FY 2024 wage indexes). In the FY 2024 IPPS/
LTCH final rule (88 FR 58969-58970), one commenter had concerns that 
the 2025 occupational mix data may be skewed due to the COVID-19 PHE, 
and we stated that we plan to assess the CY 2022 Occupational Mix 
Survey data in the FY 2025 IPPS proposed rule.
    Based on pre-reclassified wage data, we computed the unadjusted and 
adjusted wage indexes for FY 2025 using the 2022 occupational mix 
survey data. We then measured the increases and decreases by CBSA as a 
result of the 2022 occupational mix survey data. We compared this table 
to the same table for the FY 2024 wage indexes, which used the 2019 
occupational mix data, as well as the FY 2021 wage indexes, which used 
the 2016 occupational mix data. This table demonstrates the impact of 
the occupational mix adjusted wage data compared to unadjusted wage 
data for the most recent three occupational mix surveys using the 2022 
survey data compared to the 2019 survey data and the 2016 survey data. 
That is, it shows whether hospitals' wage indexes will increase or 
decrease under the 2022 survey data as compared to the most recent 
years using the prior 2019 survey data and 2016 survey data 
respectively.

[[Page 36161]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.156

    Based on the table, increases and decreases by CBSA are alike 
across each year of occupational mix data. For example, 60.19 percent 
of urban areas' wage indexes are increasing in FY 2025 due to the CY 
2022 occupational mix data compared to 56.07 percent in FY 2024 using 
CY 2019 occupational mix data. Similarly, 59.57 percent of rural areas' 
wage indexes are increasing in FY 2025 due to the CY 2022 occupational 
mix data compared to 57.45 percent in FY 2024 using CY 2019 
occupational mix data. We also note that similar to the wage data, it 
is not readily apparent, even if the comparison with the historical 
trends had indicated greater differences by CBSA in this context, how 
any changes due to the COVID-19 PHE differentially impacted the 
occupational mix adjusted wages paid in each CBSA. Furthermore, even if 
hypothetically changes due to the COVID-19 PHE did differentially 
impact the occupational mix adjusted wage index over time, it is not 
clear how those changes could be isolated from changes due to other 
reasons and what an appropriate potential methodology might be to 
adjust the data accordingly.
    Lastly, we also note that we have not identified any significant 
issues with the 2022 occupational mix 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 these factors into account, we believe the CY 2022 
occupational mix data is the best available data to use for FY 2025 and 
are proposing to use the CY 2022 occupational mix data for FY 2025.
2. Calculation of the Occupational Mix Adjustment for FY 2025
    For FY 2025, we are proposing to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2025 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

[[Page 36162]]

Worksheets S-3, Parts II and III, and the occupational mix survey data, 
we continue to use these data ``as is'', and not round any of the 
individual line items or fields. However, for any dollar amounts within 
the wage index calculations, including any type of summed wage amount, 
average hourly wages, and the national average hourly wage (both the 
unadjusted and adjusted for occupational mix), we round such dollar 
amounts to 2 decimals. We round any hour amounts within the wage index 
calculations to the nearest whole number. We round any numbers not 
expressed as dollars or hours in the wage index calculations, which 
could include ratios, percentages, or inflation factors, to 5 decimals. 
However, we continue rounding the actual unadjusted and adjusted wage 
indexes to 4 decimals, as we have done historically.
    Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this proposed rule (which is 
available via the internet on the CMS website), which contains the 
proposed FY 2025 occupational mix adjusted wage index, includes 
separate wage data for the campuses of multicampus hospitals. We refer 
readers to section III.C. of the preamble of this proposed rule for a 
chart listing the multicampus hospitals and the FTE percentages used to 
allot their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the proposed FY 2025 wage index. For the proposed FY 2025 wage 
index, we are using the Worksheet S-3, Parts II and III wage data of 
3,075 hospitals, and we used the occupational mix surveys of 2,950 
hospitals for which we also had Worksheet S-3 wage data, which 
represented a ``response'' rate of 96 percent (2,950/3,075). For the 
proposed FY 2025 wage index, we are applying proxy data for 
noncompliant hospitals, new hospitals, or hospitals that submitted 
erroneous or aberrant data in the same manner that we applied proxy 
data for such hospitals in the FY 2012 wage index occupational mix 
adjustment (76 FR 51586). As a result of applying this methodology, the 
proposed FY 2025 occupational mix adjusted national average hourly wage 
is the following:
[GRAPHIC] [TIFF OMITTED] TP02MY24.157

3. Implementation of the Proposed Occupational Mix Adjustment and the 
Proposed FY 2025 Occupational Mix Adjusted Wage Index
    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2025, we are applying the occupational mix adjustment to 
100 percent of the FY 2025 wage index. We calculated the occupational 
mix adjustment using data from the 2022 occupational mix survey, using 
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51582-51586).
    Based on the 2022 occupational mix survey data, the proposed FY 
2025 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] TP02MY24.158

    The proposed national average hourly wage for the entire nurse 
category is computed in Step 5 of the occupational mix calculation. 
Hospitals with a nurse category average hourly wage (as calculated in 
Step 4) of greater than the national nurse category average hourly wage 
receive an occupational mix adjustment factor (as calculated in Step 6) 
of less than 1.0. Hospitals with a nurse category average hourly wage 
(as calculated in Step 4) of less than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2022 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) the following:
[GRAPHIC] [TIFF OMITTED] TP02MY24.159


[[Page 36163]]



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

F. Hospital Redesignations and Reclassifications

    The following sections III.F.1 through III.F.4 discuss revisions to 
the wage index based on hospital redesignations and reclassifications. 
Specifically, hospitals may have their geographic area changed for wage 
index payment by applying for urban to rural reclassification under 
section 1886(d)(8)(E) of the Act (implemented at Sec.  412.103), 
reclassification by the Medicare Geographic Classification Review Board 
(MGCRB) under section 1886(d)(10) of the Act, Lugar status 
redesignations under section 1886(d)(8)(B) of the Act, or a combination 
of the foregoing.
1. Urban to Rural Reclassification Under Section 1886(d)(8)(E) of the 
Act, Implemented at Sec.  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 Sec.  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 (such 
hospitals are referred to herein as ``Sec.  412.103 hospitals''). 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 2024 IPPS/LTCH final 
rule (88 FR 58971 through 58977) for a review of our policy finalized 
in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004) to calculate the 
rural floor with the wage data of urban hospitals reclassifying to 
rural areas under Sec.  412.103, and discussion of our modification to 
the calculation of 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 Sec. Sec.  412.92, 412.96, 412.103, and 412.108. We 
stated that reclassifications from urban to rural under Sec.  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 Sole Community Hospital (SCH), Rural Referral Center (RRC), or 
Medicare Dependent Hospital (MDH) status, or rural reclassification 
under Sec.  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 Sec.  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' 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 CBSAs on Worksheet S-2, Part I, Lines 
165 and 166 of form CMS-2552-10. In calculating wage index values, CMS 
identifies the allocated wage data for these remote locations in Table 
2 with a ``B'' in the 3rd position of the CCN. These remote locations 
of hospitals with Sec.  412.103 rural reclassification status in a 
different CBSA are identified in Table 2, and hospitals should evaluate 
potential wage index outcomes for their remote location(s) when 
withdrawing or terminating MGCRB reclassification, or canceling Sec.  
412.103 rural reclassification status.
    We also note that in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59038 through 59039), we changed 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 finalized that in these 
circumstances, and subject to the hospital meeting the requirements set 
forth at Sec.  412.92(b)(2)(vi), the effective date for rural 
reclassification will be the effective date set forth in Sec.  
412.92(b)(2)(vi).
    Finally, we remind hospitals currently located in rural areas 
becoming urban under the proposed adoption of the revised OMB 
delineations in this proposed rule that if they have SCH, MDH, or RRC 
status, they may choose to apply for a Sec.  412.103 urban to rural 
reclassification if qualifying criteria are met in order to maintain 
the SCH, MDH, or RRC status. We advise hospitals to evaluate their 
options and if desired, apply for Sec.  412.103 urban to rural 
reclassification before the beginning of FY 2025, to avoid a lapse in 
SCH, MDH, or RRC status at the beginning of FY 2025 should we finalize 
our proposal to adopt the revised OMB delineations.
a. Proposed Update to Rural Criteria at Sec.  412.103(a)(1)
    Section 1886(d)(8)(E) of the Act describes criteria for hospitals 
located in urban areas to be treated as being located in a rural area 
of their state. The criterion at section 1886(d)(8)(E)(ii)(I) of the 
Act requires that the hospital be located in a rural census tract of a 
metropolitan statistical area (as determined under the most recent 
modification of the Goldsmith Modification, originally published in the 
Federal Register on February 27, 1992 (57 FR 6725)).
    This condition is implemented in the regulation at Sec.  
412.103(a)(1), which currently states: ``the hospital is located in a 
rural census tract of a Metropolitan Statistical Area (MSA) as 
determined under the most recent version of the Goldsmith Modification, 
the Rural-Urban Commuting Area codes, as determined by the Office of 
Rural Health Policy (ORHP) of the Health Resources and Services 
Administration (HRSA), which is available via the ORHP website at: 
http://www.ruralhealth.hrsa.gov or from the U.S. Department of Health 
and Human Services, Health Resources and Services Administration, 
Office of Rural Health Policy, 5600 Fishers Lane, Room 9A-55, 
Rockville, MD 20857.''
    The Goldsmith Modification \136\ was originally designed to 
identify rural census tracts located in Metropolitan counties for 
purposes of grant eligibility unrelated to the hospital IPPS but were 
incorporated by section 1886(d)(8)(E)(ii)(I) of the Act for

[[Page 36164]]

purposes related to the hospital wage index.
---------------------------------------------------------------------------

    \136\ Known as the ``Goldsmith Modification'' for its principal 
developer, Harold F. Goldsmith, this method is described in detail 
in the paper ``Improving the Operational Definition of ``Rural 
Areas'' for Federal Programs'' available at https://www.ruralhealthinfo.org/pdf/improving-the-operational-definition-of-rural-areas.pdf.
---------------------------------------------------------------------------

    The Federal Office of Rural Health Policy (FORHP) (known as ORHP in 
Sec.  412.103) later funded development of Rural-Urban Commuting Area 
(RUCA) codes via the U.S. Department of Agriculture's (USDA) Economic 
Research Service as the latest version of the Goldsmith Modification, 
described in a May 3, 2007 Federal Register notice (72 FR 24589), to 
address limitations of the original Goldsmith Modification. RUCAs, like 
the Goldsmith Modification, are based on a sub-county unit, the census 
tract, permitting a finer delineation of what constitutes rural areas 
inside Metropolitan areas (72 FR 24590). In that notice, HRSA stated it 
believes that the use of RUCAs allows more accurate targeting of 
resources intended for the rural population to determine programmatic 
eligibility for rural areas inside of Metropolitan counties. Using data 
from the Census Bureau, every census tract in the United States is 
assigned a RUCA code. In the May 3, 2007 Federal Register, HRSA stated 
that ORHP considers all census tracts with RUCA codes 4-10 to be rural, 
plus an additional 132 large area census tracts with RUCA codes 2 or 3 
(72 FR 24591). They also stated that ORHP will continue to seek 
refinements in the use of RUCAs.
    FORHP has since published a revised definition of eligibility for 
rural health grants for FY 2022 in a January, 12, 2021 Federal Register 
Notice (86 FR 2418 through 2420). Specifically, FORHP added 
Metropolitan Statistical Area (MSA) counties that contain no Urbanized 
Area (UA) \137\ to the areas eligible for the rural health grant 
programs. FORHP did not remove any areas from the rural definition in 
the FY 2022 Federal Register Notice.
---------------------------------------------------------------------------

    \137\ UAs are defined by the Census Bureau as densely settled 
areas with a total population of at least 50,000 people (86 FR 
2418).
---------------------------------------------------------------------------

    It has come to our attention that our current regulation text at 
Sec.  412.103(a)(1) does not describe FORHP's expanded definition of a 
``rural area'' from the FY 2022 Federal Register Notice. In addition, 
Sec.  412.103(a)(1) contains a web link that is no longer active and 
requires updating. We believe the current rural definition used by 
FORHP for purposes of the rural health grant program constitutes ``the 
most recent modification of the Goldsmith Modification'' referred to in 
the statute, since the expanded definition of rural constitutes a 
refinement to the use of RUCA codes, which were developed as the latest 
version of the Goldsmith Modification. As stated in the FY 2022 Federal 
Register Notice (86 FR 2420), the expanded criteria reflect FORHP's 
desire to accurately identify areas that are rural in character using a 
data-driven methodology that relies on existing geographic identifiers 
and utilizes standard, national level data sources. We are therefore 
proposing to amend our regulation text at Sec.  412.103(a)(1) to 
provide a reference to the most recent Federal Register notice issued 
by HRSA defining ``rural areas.'' In this way, there will be no need to 
update the Medicare regulations if FORHP develops a further 
modification of the Goldsmith Modification or if the weblink changes. 
FORHP has published the current link in the Federal Register notice (86 
FR 2418-2420) along with the most recent revisions to the current 
complete rural definition, and it is available via the Rural Health 
Grants Eligibility Analyzer at https://data.hrsa.gov/tools/rural-health.
    We are proposing to amend the regulation text at 412.103(a)(1) to 
read: the hospital is located in a rural census tract of a Metropolitan 
Statistical Area (MSA) as determined under the most recent version of 
the Goldsmith Modification, using the Rural-Urban Commuting Area codes 
and additional criteria, as determined by the Federal Office of Rural 
Health Policy (FORHP) of the Health Resources and Services 
Administration (HRSA), which is available at the web link provided in 
the most recent Federal Register notice issued by HRSA defining rural 
areas.
b. Proposed Policy for Canceling Sec.  412.103 Reclassifications of 
Terminated Providers
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49499 through 
49500), CMS discussed its longstanding policy to terminate the Sec.  
1886(d)(10) MGCRB wage index reclassification status for hospitals with 
terminated CMS certification numbers (CCN). We determined that it would 
be appropriate to terminate the MGCRB reclassification status for these 
hospitals (with a limited exception for certain locations acquired by 
another hospital in a different CBSA), as the hospital may no longer be 
able to make timely and informed decisions regarding reclassification 
statuses.
    At the time, we did not articulate a similar policy for hospitals 
reclassified as rural under Sec.  412.103. While policies regarding 
MGCRB reclassification were adopted for purposes related to the 
hospital wage index, Sec.  412.103 reclassifications may have broader 
implications. At the time the policy to terminate MGCRB 
reclassifications for hospitals with terminated CCNs was implemented, 
Sec.  412.103 reclassifications were less common, and generally had 
negligible effects on State rural wage index values. Prior to FY 2024, 
as a result of various wage index value hold-harmless policies, 
discussed in detail in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58973-58974), Sec.  412.103 hospital data rarely affected a state's 
final rural wage index value. Under the current policy first 
implemented in FY 2024, however, Sec.  412.103 hospital data is only 
excluded from the rural wage index when indicated by the hold harmless 
provision at section 1886(d)(8)(C)(ii) of the Act. Hospitals 
reclassified under Sec.  412.103 now impact the rural wage index value 
of most states. We refer readers to the FY 2024 IPPS/LTCH final rule 
(88 FR 58973 through 58977) for discussion on how CMS finalized the 
current policy to include the wage index data for Sec.  412.103 
hospitals in more iterations of the rural wage index calculation. 
Furthermore, following the policy implemented in the April 21, 2016 
interim final rule with comment period (IFC) (81 FR 23428 through 
23438), which allowed hospitals to maintain dual Sec.  412.103 and 
MGCRB reclassification status, the number of rural reclassifications 
has grown significantly. We now believe it is appropriate to propose a 
policy regarding terminated or ``tied-out'' hospitals, effective for FY 
2025, to address our concerns regarding the impacts these hospitals 
would have on rural wage index values. Therefore, we are proposing that 
Sec.  412.103 reclassifications will be considered cancelled for the 
purposes of calculating area wage index for any hospital with a CCN 
listed as terminated or ``tied-out'' as of the date that the hospital 
ceased to operate with an active CCN. We propose to obtain and review 
the best available CCN termination status lists as of the Sec.  
412.103(b)(6) ``lock-in'' date (60 days after the proposed rule for the 
FY is displayed in the Federal Register). The lock-in date is used to 
determine whether a hospital has been approved for Sec.  412.103 
reclassification in time for that status to be included in the upcoming 
year's wage index development. We believe using this date for 
evaluating CCN terminations would be consistent with the wage index 
development timeline.
    As stated previously, Sec.  412.103 reclassification may have other 
implications for hospital status and payment. Hospitals may obtain 
rural reclassification for several reasons, such as in order to convert 
to a Critical Access Hospital (CAH), or to obtain Sole-Community 
Hospital (SCH) status.

[[Page 36165]]

Eligibility requirements for Rural Emergency Hospital (REH) 
qualification under section 1861(kkk)(3) of the Act included a 
reference to reclassification under section 1886(d)(8)(E) (implemented 
by Sec.  412.103). We note that our proposal to consider Sec.  412.103 
reclassifications cancelled for the purposes of calculating area wage 
index for any hospital with a CCN listed as terminated or ``tied-out'' 
is not intended to alter or affect the qualification for such statuses 
or to have other effects unrelated to hospital wage index calculations. 
The rural reclassification status would remain in effect for any period 
that the original PPS hospital remains in operation with an active CCN. 
For REH qualification requirement purposes, this would include the date 
of enactment of the Consolidated Appropriations Act, 2021 (Pub. L. 116-
260), which was December 27, 2020. We believe this policy provides 
consistency and predictability in wage index values.
2. General Policies and Effects of MGCRB Reclassification and Treatment 
of Dual Reclassified Hospitals
    Under section 1886(d)(10) of the Act, the 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 Sec. Sec.  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 Sec.  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 Sec.  412.103 
from the calculation of the rural floor, but we reverted 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 Sec.  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 for 
other purposes.
    We discussed that when there is both a Sec.  412.103 redesignation 
and an MGCRB reclassification, the MGCRB reclassification controls for 
wage index calculation and payment purposes. Prior to FY 2024, we 
excluded hospitals with Sec.  412.103 redesignations from the 
calculation of the reclassified rural wage index if they also have an 
active MGCRB reclassification to another area. That is, if an 
application for urban reclassification through the MGCRB is approved 
and is not withdrawn or terminated by the hospital within the 
established timelines, we consider the hospital's geographic CBSA and 
the urban CBSA to which the hospital is reclassified under the MGCRB 
for the wage index calculation. We refer readers to the April 21, 2016 
IFC (81 FR 23428 through 23438) and the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56922 through 56930), in which we finalized the April 21, 
2016 IFC, for a full discussion of the effect of simultaneous 
reclassifications under both the Sec.  412.103 and the MGCRB processes 
on wage index calculations. For FY 2024 and subsequent years, we refer 
readers to section III.G.1 of the preamble of the FY 2024 IPPS/LTCH PPS 
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 (88 FR 58971 through 58977).
a. Proposed Revision To Allow Sec.  412.103 Hospitals To Use Geographic 
Area or Rural Area for Reclassification
    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 purposes of applying 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.
    In a comment on the May 10, 2021 IFC (86 FR 24735 through 24739), a 
commenter noted that the IFC states that a hospital reclassified under 
Sec.  412.103 could potentially reclassify to any area with a pre-
reclassified average hourly wage that is higher than the pre-
reclassified average hourly wage for the rural area of the State for 
purposes of the regulation at Sec.  412.230(a)(5)(i). The commenter 
asserted that CMS' use of the word ``could'' in this context seems to 
suggest that CMS would allow the hospital to use either its home 
average hourly wage or the rural average hourly wage for purposes of 
the regulation at Sec.  412.230(a)(5)(i). The commenter suggested that 
CMS allow both comparison options, because the rural average hourly 
wage may occasionally be higher than the hospital's home urban area's 
average hourly wage.

[[Page 36166]]

    In response, we clarified that the commenter's interpretation of 
our policy is correct. We stated that while the court's decision in 
Bates County Memorial Hospital v. Azar requires CMS to permit hospitals 
to reclassify to any area with a pre-reclassified average hourly wage 
that is higher than the pre-reclassified average hourly wage for the 
rural area of the state, we do not believe that we are required to 
limit hospitals from using their geographic home area for purposes of 
the regulation at Sec.  412.230(a)(5)(i). Therefore, we clarified that 
we would allow hospitals to reclassify to an area with an average 
hourly wage that is higher than the average hourly wage of either the 
hospital's geographic home area or the rural area (86 FR 45189).
    While we clarified our policy in response to the aforementioned 
comment, the regulation text was not similarly clarified to reflect 
this policy inadvertently. We are therefore proposing to revise the 
regulation text at Sec.  412.230(a)(5)(i) to reflect our policy 
clarified in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45189). While 
it has been CMS' policy to allow a Sec.  412.103 hospital to use either 
its geographic area or the rural area of the State for purposes of 
Sec.  412.230(a)(5)(i), we believe that synchronizing the regulation 
text with our policy clarified in the FY 2022 IPPS/LTCH PPS final rule 
(86 FR 45189) is necessary for consistency and to reduce unnecessary 
Administrative appeals.
    Specifically, we are proposing to replace the phrase in the 
regulation at Sec.  412.230(a)(5)(i) that reads ``in the rural area of 
the state'' with the phrase ``either in its geographic area or in the 
rural area of the state.'' Section 412.230(a)(5)(i) with this proposed 
revision would read: An individual hospital may not be redesignated to 
another area for purposes of the wage index if the pre-reclassified 
average hourly wage for that area is lower than the pre-reclassified 
average hourly wage for the area in which the hospital is located. An 
urban hospital that has been granted redesignation as rural under Sec.  
412.103 is considered to be located either in its geographic area or in 
the rural area of the State for the purposes of this paragraph 
(a)(5)(i).
3. MGCRB Reclassification Issues for FY 2025
a. FY 2025 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 610 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2025. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2025, 
hospitals reclassified beginning in FY 2023 or FY 2024 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 237 hospitals approved for wage index reclassifications in 
FY 2023 that will continue for FY 2025, and 316 hospitals approved for 
wage index reclassifications in FY 2024 that will continue for FY 2025. 
Of all the hospitals approved for reclassification for FY 2023, FY 
2024, and FY 2025, 1,163 (approximately 32.5 percent) hospitals are in 
a MGCRB reclassification status for FY 2025 (with 248 of these 
hospitals reclassified back to their geographic location). We refer 
readers to Section III.F.3.b of this proposed rule for information on 
the effects of implementation of new OMB labor market area delineations 
on reclassified hospitals.
    Under the regulations at Sec.  412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
if the request for withdrawal is received by the MGCRB any time before 
the MGCRB issues a decision on the application, or after the MGCRB 
issues a decision, provided the request for withdrawal is received by 
the MGCRB within 45 days of the date that CMS' annual notice of 
proposed rulemaking is issued in the Federal Register concerning 
changes to the inpatient hospital prospective payment system and 
proposed payment rates for the fiscal year for which the application 
has been filed. Please note that Section III.F.3.c. of this proposed 
rule contains a proposal to change the deadline for the withdrawal 
requests to 45 days from the date of filing for public inspection of 
the proposed rule at the website of the Office of the Federal Register.
    For information about the current process for 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).
    Applications for FY 2026 reclassifications are due to the MGCRB by 
September 1, 2024. This is also the current deadline for canceling a 
previous wage index reclassification withdrawal or termination under 
Sec.  412.273(d) for the FY 2025 cycle.
    Applications and other information about MGCRB reclassifications 
may be obtained beginning in mid-July 2024 via the internet on the CMS 
website at https://www.cms.gov/medicare/regulations-guidance/geographic-classification-review-board. 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.
b. Effects of Implementation of Proposal To Adopt Revised OMB Labor 
Market Area Delineations on Reclassified Hospitals
(1) Background
    Reclassifications granted under section 1886(d)(10) of the Act are 
effective for 3 fiscal years, so that a hospital or county group of 
hospitals would be assigned a wage index based upon the wage data of 
hospitals in the labor market area to which it reclassified for a 3-
year period. Because hospitals that have been reclassified beginning in 
FY 2023, 2024, or 2025 were reclassified based on the current labor 
market delineations, if we adopt the revised OMB delineations based on 
the OMB Bulletin No. 23-01 beginning in FY 2025 the CBSAs to which they 
have been reclassified, or the CBSAs where they are located, may 
change. Hospitals with current reclassifications are encouraged to 
verify area wage indexes in Table 2 in the appendix of the proposed 
rule, and to confirm that the CBSAs to which they have been 
reclassified for FY 2025 would continue to provide a higher wage index 
than their geographic area wage index. Hospitals may withdraw or 
terminate their FY 2025 reclassifications by contacting the MGCRB 
within 45 days from the date this proposed rule is issued in the 
Federal Register (Sec.  412.273(c)).\138\

[[Page 36167]]

(2) Proposed Assignment Policy for Hospitals Reclassified to a CBSA 
Where One or More Counties Move to the Rural Area or One or More Rural 
Counties Move Into the CBSA
    In the case where a CBSA would add a current rural county, or lose 
a current constituent rural county, the current reclassification to the 
resulting proposed CBSA would be maintained. In some cases, a hospital 
may be located in a rural county that is proposed to join the CBSA to 
which the hospital is reclassified. We note that in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49977), CMS terminated reclassifications 
when, as a result of adopting the revised OMB delineations, a 
hospital's geographic county was located in the CBSA for which it was 
approved for MGCRB reclassification. At that time, there was no means 
for a hospital to obtain an MGCRB reclassification to its own 
geographic area (which we refer to as ``home area'' reclassifications). 
However, as discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56925), ``home area'' reclassifications have since become possible as a 
result of the change in policy in the 2016 IFC (81 FR 23428 through 
23438) discussed earlier allowing for dual reclassifications. We 
therefore do not believe it is necessary to terminate these 
reclassifications as we did in FY 2015. In general, once the MGCRB has 
approved a reclassification in accordance with subpart L of 42 CFR part 
412, that reclassification remains in place for 3 years (see Sec.  
412.274(b)(2)) unless terminated by the hospital pursuant to Sec.  
412.273, and CMS does not reevaluate whether the hospital continues to 
meet the criteria for reclassification during the three-year period. As 
such, we propose to maintain these as ``home area'' reclassifications 
instead of terminating them.
    If a county is proposed to be removed from a CBSA and becomes 
rural, a hospital in that county with a current ``home area'' 
reclassification would no longer be geographically located in the CBSA 
to which they are reclassified. We propose that these reclassifications 
would no longer be considered ``home area'' reclassifications, and the 
hospital would be assigned the wage index applicable to other hospitals 
that reclassify into the CBSA (which may be lower than the wage index 
calculated for hospitals geographically located in the CBSA due to the 
hold harmless provision at section 1886(d)(8)(C)(i) of the Act).\139\
---------------------------------------------------------------------------

    \139\ In accordance with section 1886(d)(8)(C)(i) of the Act, 
the wage index for hospitals located in a geographic area cannot be 
reduced by the inclusion of reclassified hospitals. Therefore, 
hospitals reclassified into the area would receive a wage index that 
includes their data, whereas hospitals geographically located there 
would receive a wage index that does not.
---------------------------------------------------------------------------

    Finally, as discussed in section III.B.4, all the constituent 
counties of CBSA 14100 (Bloomsberg-Berwick, PA), CBSA 19180 (Danville, 
IL), CBSA 20700 (East Stroudsburg, PA) and CBSA 35100 (New Bern, NC) 
become rural if we adopt the revised OMB delineations. There are 
currently 6 hospitals with reclassifications to these areas.
[GRAPHIC] [TIFF OMITTED] TP02MY24.160

    As there is no sufficiently similar CBSA in the proposed 
delineations, we are proposing that hospital reclassifications to these 
CBSAs would be terminated for FY 2025. While we prefer to maintain the 
remaining years of a MGCRB reclassification and transition the 
reclassified hospitals to the most appropriate proposed CBSA, in an 
instance when there is no urban county remaining, there is no 
equivalent urban area that can be assigned to the reclassified 
hospital. We note that Case No. 24C0548 is a ``home area'' 
reclassification, and the termination would have no direct effect on 
wage index calculations.
(3) Proposed Assignment Policy for Hospitals Reclassified to a CBSA 
Where the CBSA Number Changes, or the CBSA Is Subsumed by Another CBSA
    We propose that in the case of a CBSA that experiences a change in 
CBSA number, or where all urban counties in the CBSA are subsumed by 
another CBSA, MGCRB reclassifications approved to the FY 2024 CBSA 
would be assigned the proposed revised FY 2025 CBSA (as described in 
the section III.B.6). In some cases, this reconfiguration of CBSAs 
would result in an MGCRB reclassification approved to a different area 
becoming a ``home area'' reclassification, if a hospital's current 
geographic urban CBSA is subsumed by its reclassified CBSA. Otherwise, 
the current reclassification would continue to the proposed revised 
CBSA number.
(4) Proposed Assignment Policy for Hospitals Reclassified to CBSAs 
Where One or More Counties Move to a New or Different Urban CBSA
    In some cases, adopting the revised OMB delineations would result 
in one or more counties splitting apart from their current CBSAs to 
form new CBSAs, or counties shifting from one CBSA designation to 
another CBSA. If CBSAs are split apart, or if counties shift from one 
CBSA to another under the revised OMB delineations, for hospitals that 
have reclassified to these CBSAs we must determine which reclassified 
area to assign to the hospital for the remainder of a hospital's 3-year 
reclassification period.
    Consistent with the policy implemented in FY 2021 (85 FR 58743 
through 58753), we are proposing to assign current ``home area'' 
reclassifications to these CBSAs to the hospital's proposed geographic 
CBSA. That is, hospitals that were approved for MGCRB reclassification 
to the geographic area they are located in effective for FYs 2023, 
2024, or 2025 would continue to be assigned a reclassification to their 
geographic ``home area.'' The assigned ``home area''

[[Page 36168]]

reclassification CBSA may be different from previous years if the 
hospital is located in a county that was relocated to a new or 
different urban CBSA.
    The following is a table of hospitals with current active ``home 
area'' reclassification to CBSAs where one or more counties are 
proposed to move to a new or different urban CBSA. The table also lists 
reclassifications (noted by an asterisk on the ``MGCRB Case Number'') 
that were approved in FY 2023 or FY 2024 and would be superseded by a 
new FY 2025 reclassification. Per Sec.  412.273(d)(4), these prior year 
reclassifications are terminated once a new reclassification becomes 
effective. However, if the new reclassification is withdrawn, the prior 
year reclassification (often referred to as a ``fallback'' 
reclassification) would become active.
[GRAPHIC] [TIFF OMITTED] TP02MY24.161

    Consistent with the policy CMS implemented in the FY 2005 IPPS 
final rule (69 FR 49054 through 49056), the FY 2015 IPPS final rule (79 
FR 49973 through 49977), and in the FY 2021 IPPS/LTCH PPS final rule 
(85 FR 58743 through 58753), for FY 2025, if a CBSA would be 
reconfigured due to adoption of the revised OMB delineations and it 
would not be possible for the reclassification to continue seamlessly 
to the reconfigured CBSA (not including ``home area'' 
reclassifications, which were discussed previously), we believe it 
would be appropriate for us to determine the best alternative location 
to assign current reclassifications for the remaining 3 years. 
Therefore, to maintain the integrity of a hospital's 3-year 
reclassification period, we are proposing that current geographic 
reclassifications (applications approved effective for FY 2023, FY 
2024, or FY 2025) that would be affected by CBSAs that are split apart 
or counties that shift to another CBSA under the revised OMB 
delineations, would ultimately be assigned to a CBSA under the revised 
OMB delineations that contains at least one county (or county 
equivalent) from the reclassified CBSA under the current FY 2024 
delineations, and that would be generally consistent with rules that 
govern geographic reclassification. That is, consistent with the policy 
finalized in FY 2015 (79 FR 49973) we are proposing a policy that other 
affected reclassified hospitals be assigned to a CBSA that would 
contain the most proximate county that (1) is located outside of the 
hospital's proposed FY 2025 geographic labor market area, and (2) is 
part of the original FY 2024 CBSA to which the hospital is 
reclassified. We believe that assigning reclassifications to the CBSA 
that contains the nearest county that meets the aforementioned criteria 
satisfies the statutory requirement at section 1886(d)(10)(v) of the 
Act by maintaining reclassification status for a period of 3 fiscal 
years, while generally respecting the longstanding principle of 
geographic proximity in the labor market reclassification process. For 
county group reclassifications, we would follow our proposed policy, as 
previously discussed, except that we are proposing to reassign 
hospitals in a county group reclassification to the CBSA under the 
revised OMB delineations that contains the county to which the majority 
of hospitals in the group reclassification are geographically closest. 
We are also proposing to allow such hospitals, or county groups of 
hospitals, to submit a

[[Page 36169]]

request to the [email protected] mailbox for reassignment to 
another proposed CBSA that would contain a county that is part of the 
current CBSA to which it was approved to be reclassified (based on FY 
2024 delineations) if the hospital or county group of hospitals can 
demonstrate compliance with applicable reclassification proximity 
rules, as described later in this section.
    The following Table X provides a list of current FY 2024 CBSAs 
(column 1) where one or more counties would be relocated to a new or 
different urban CBSA. Hospitals with active MGCRB reclassifications 
into the current FY 2024 CBSAs in column 1 would be subject to the 
proposed reclassification assignment policy described in this 
subsection. The third column of ``eligible'' CBSAs lists all proposed 
revised CBSAs that contain at least one county that is part of the 
current FY 2024 CBSA (in column 1).
[GRAPHIC] [TIFF OMITTED] TP02MY24.162

    Table Y lists all hospitals subject to our proposed 
reclassification assignment policy and where their reclassifications 
would be assigned for FY 2025 under this proposed policy. The table 
lists reclassifications that would be in effect for FY 2025 under our 
proposed policy and that are included in Table 2 in the addendum of 
this proposed rule. The table also includes reclassifications (noted by 
an asterisk on the ``MGCRB Case Number'') that were approved in FY 2023 
or FY 2024 and that would be superseded by a new FY 2025 
reclassification. As discussed previously, these prior year 
``fallback'' reclassifications would become active if the subsequent FY 
2025 reclassification is withdrawn. Please note, the following table 
does not include hospitals currently reclassified to their ``home'' 
geographic area, which are discussed previously in this section.

[[Page 36170]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.163


[[Page 36171]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.164

(5) Proposed Assignment Policy for Hospitals Reclassified to CBSAs 
Reconfigured Due to the Migration to Connecticut Planning Regions
    As discussed in section III.B., CMS is proposing to adopt the 
revised OMB Bulletin No. 23-01 delineations, which use planning regions 
instead of counties as the basis for CBSA construction in the State of 
Connecticut. There are five current urban CBSAs that include at least 
one county in Connecticut. These are 14860 (Bridgeport-Stamford-
Norwalk, CT), 25540 (Hartford-East Hartford-Middletown, CT), 35300 (New 
Have-Milford, CT), 35980 (Norwich-New London, CT), and 49340 
(Worcester, MA-CT). In the proposed FY 2025 CBSAs, based on the OMB 
Bulletin No. 23-01 delineations, there are five CBSAs that will contain 
at least one county-equivalent ``planning region.'' The five CBSAs are 
14860 (Bridgeport-Stamford-Danbury, CT), 25540 (Hartford-West Hartford-
East Hartford, CT), 35300 (New Haven, CT), 35980 (Norwich-New London-
Willimantic, CT), and 47930 (Waterbury-Shelton, CT).
    As there was significant reconfiguration of the CBSAs due to the 
transition from counties to planning regions, we are proposing to adopt 
a similar assignment policy for hospitals reclassified to CBSAs that 
currently include Connecticut counties as we do for hospitals 
reclassified to CBSAs where one or more counties move to a new or 
different urban CBSA (described in the previous subsection).
    The following table lists all current ``home area'' 
reclassifications to one of the CBSAs that currently contain at least 
one county in Connecticut.

[[Page 36172]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.165

    The following table provides a list of current FY 2024 CBSAs 
(column 1) that contain at least one county in Connecticut. Hospitals 
with active MGCRB reclassifications into the CBSAs in column 1 would be 
subject to the proposed reclassification assignment policy. The third 
column of ``eligible'' CBSAs lists all proposed revised CBSAs that 
contain at least one planning region that is part of the current FY 
2025 CBSA (in column 1). Consistent with the policy proposed in the 
previous section, we are proposing a policy that affected reclassified 
hospitals be assigned to a CBSA that would contain the most proximate 
planning region that (1) is located outside of the hospital's proposed 
FY 2025 geographic labor market area, and (2) contains a portion of a 
county included in the original FY 2024 CBSA to which the hospital is 
reclassified.
[GRAPHIC] [TIFF OMITTED] TP02MY24.166

    The following table lists all hospitals subject to our proposed 
reclassification assignment policy and their reclassifications to a 
CBSA reconfigured due to the adoption of Connecticut planning regions 
in FY 2025 under this proposed policy. The table lists 
reclassifications that would be in effect for FY 2025 under our 
proposed policy, and that are included in Table 2 in the addendum of 
this proposed rule. The table also includes reclassifications (noted by 
an asterisk on the ``MGCRB Case Number'') that were approved in FY 2023 
or FY 2024 and would be superseded by a new FY 2025 reclassification. 
These prior year reclassifications, frequently referred to as 
``fallback'' reclassifications, may become active if the subsequent FY 
2025 reclassification is withdrawn. (Please note, the following table 
does not include hospitals currently reclassified to their ``home'' 
geographic area, which are discussed previously in this section.)

[[Page 36173]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.167

    We note that the remote location currently indicated with 07B033 
would, as proposed, be located in the same CBSA as the main provider 
070033. Therefore, it would no longer be necessary to identify this 
remote location separately from the main provider for wage index 
purposes, and its MGCRB reclassification would no longer be listed in 
Table 2 of the addendum of this proposed rule.
    We believe that assigning reclassifications to the CBSA that 
contains the nearest county-equivalent planning region that meets the 
aforementioned criteria satisfies the statutory requirement at section 
1886(d)(10)(v) of the Act by maintaining reclassification status for a 
period of 3 fiscal years, while generally respecting the longstanding 
principle of geographic proximity in the labor market reclassification 
process. For county group reclassifications, we would follow our 
proposed policy, as previously discussed, except that we are proposing 
to reassign hospitals in a county group reclassification to the CBSA 
under the revised OMB delineations that contains the county-equivalent 
to which the majority of hospitals in the group reclassification are 
geographically closest. We are also proposing to allow such hospitals, 
or county groups of hospitals, to submit a request to the 
[email protected] mailbox for reassignment to another proposed CBSA 
that would contain a county that is part of the current CBSA to which 
it was approved to be reclassified (based on FY 2024 delineations) if 
the hospital or county group of hospitals can demonstrate compliance 
with applicable reclassification proximity rules.
(6) Instructions To Request Reassignment of Reclassified CBSA
    Hospitals that wish to be reassigned to an eligible CBSA (other 
than the CBSA to which their reclassification would be assigned in this 
proposed rule) for which they meet the applicable proximity criteria 
under subpart L of 42 CFR part 412 may request reassignment within 45 
days from the date the proposed rule is placed on display at the 
Federal Register. Hospitals must send a request to 
[email protected] and provide documentation establishing that they 
meet the requisite proximity criteria for reassignment to an alternate 
CBSA that contains one or more counties (or county-equivalents) from 
the CBSA to which they are currently reclassified. We believe this 
option of allowing hospitals to submit a request to CMS would provide 
hospitals with greater flexibility with respect to their 
reclassification reassignment, while ensuring that the proximity 
requirements are met. We believe that where the proximity requirements 
are met, the reclassified wage index would be consistent with the labor 
market area to which the hospitals were originally approved for 
reclassification. A hospital may request to reassign an individual 
reclassification to any CBSA that in FY 2025 would contain a county or 
county-equivalent (or in the case of Connecticut CBSAs, a portion of a 
county) from the CBSA to which it was approved to be reclassified 
(based on FY 2024 delineations). However, to be reassigned to an area 
that is not the most proximate to the hospital, we believe it is 
necessary that the hospital demonstrates that it complies with the 
applicable proximity criteria under subpart L of 42 CFR part 412. If a 
hospital cannot demonstrate proximity to a different eligible CBSA, the 
hospital would not be considered for reclassification to that labor 
market area, and the reclassification would remain with the CBSA 
assigned under the general policy proposed earlier in this section. In 
the case of a county group reclassification, all requests for 
reassignment must include all actively reclassified hospitals (that is, 
excluding any hospital that has since closed or converted to a 
different provider type, or has terminated the reclassification). 
County

[[Page 36174]]

groups must also demonstrate that they meet the appropriate proximity 
requirements, including, for rural county groups, being adjacent to the 
MSA to which they seek redesignation (412.232(a)(1)(ii)), and for urban 
county groups, being in the same Combined Statistical Area or CBSA as 
the urban area to which they seek redesignation (412.234(a)(3)(iv)).
    All hospital requests for reassignment should contain the 
hospital's name, address, CCN, and point of contact information. All 
requests must be sent to [email protected]. Changes to a hospital's 
CBSA assignment on the basis of a hospital's disagreement with our 
determination of closest county, or on the basis of being granted a 
reassignment due to meeting applicable proximity criteria under subpart 
L of 42 CFR part 412 to an eligible CBSA will be announced in the FY 
2025 IPPS/LTCH PPS final rule. In any cases where a hospital requested 
the Administrator review a reclassification dismissal or denial by the 
MGCRB, the assignment and reassignment policies discussed in this 
proposed rule would apply if the Board's decision is overturned; that 
is, if the Administrator decides that the hospital's reclassification 
request should be granted but the CBSA to which the hospital would 
reclassify based on that decision would potentially be assigned to a 
different CBSA as a result of adoption of the new OMB delineations, the 
policies discussed in this proposed rule would apply to that 
assignment. At the time of writing, CMS does not have a list of cases 
for which the Administrator's review has been requested, nor the 
disposition of any such cases. If a hospital is requesting review of a 
reclassification to one of the CBSAs discussed in this section, they 
may contact [email protected] to confirm to what CBSA the 
reclassification would be assigned.
    We recognize that the proposed reclassification assignment policies 
may result in the assignment of the hospital for the remainder of its 
3-year reclassification period to a CBSA that has a lower wage index 
than the wage index that would have been assigned for the reclassified 
hospital in the absence of the proposed adoption of the revised OMB 
delineations. We believe that the 5 percent cap on negative wage index 
changes discussed in section III.G.6 would mitigate significant 
negative payment impacts for FY 2025, and hospitals would have adequate 
time to fully assess any additional reclassification options available 
to them.
d. Proposed Change to Timing of Withdrawals at 412.273(c)
    As mentioned in section III.F.3.a of this proposed rule, under the 
regulations at Sec.  412.273, hospitals that have been reclassified by 
the MGCRB are permitted to withdraw or terminate an approved 
reclassification. The current regulations at Sec.  412.273(c)(1)(ii) 
and (c)(2) for withdrawals and terminations require the request to be 
received by the MGCRB within 45 days of the date that CMS' annual 
notice of proposed rulemaking is issued in the Federal Register 
concerning changes to the IPPS and proposed payment rates.
    In the 2018 IPPS/LTCH PPS Final Rule (82 FR 38148 through 38150), 
we finalized changes to the 45-day notification rules so that hospitals 
have 45 days from the public display of the annual proposed rule for 
the IPPS instead of 45 days from publication to inform CMS of certain 
requested changes relating to the development of the hospital wage 
index. We stated that we believe that the public has access to the 
necessary information from the date of public display of the proposed 
rule at the Office of the Federal Register and on its website in order 
to make the decisions at issue. While we finalized changes to the 45-
day notification rules for decisions about the outmigration adjustment 
and waiving Lugar status, we did not finalize a change to the timing 
for withdrawing or terminating MGCRB decisions.
    Instead, in response to comments expressing concern that some 
hospitals may be disadvantaged if the Administrator's decision on a 
hospital's request for review of an MGCRB decision has not been issued 
prior to the proposed deadline for submitting withdrawal or termination 
requests to the MGCRB, we maintained our existing policy of requiring 
hospitals to request from the MGCRB withdrawal or termination of an 
MGCRB reclassification within 45 days of issuance in the Federal 
Register. We stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38149) that considering the usual dates of the MGCRB's decisions 
(generally early February) and of the public display of the IPPS 
proposed rule, the maximum amount of time for an Administrator's 
decision to be issued may potentially extend beyond the proposed 
deadline of 45 days from the date of public display.
    However, the MGCRB currently issues decisions earlier, in January, 
which mitigates this concern. For example, the MGCRB has sent decision 
letters to hospitals via email on January 23, 2024 for the FY 2025 
cycle and on January 31, 2023 for the FY 2024 cycle. We believe that 
the MGCRB will continue to issue its decisions in January, due to their 
upgrade to an electronic system that expedites processing applications 
and issuing decision letters efficiently. The regulations at Sec. Sec.  
412.278(a) and (b)(1) provide that a hospital may request the 
Administrator to review the MGCRB decision within 15 days after the 
date the MGCRB issues its decision. Under Sec.  412.278(f)(2)(i), the 
Administrator issues a decision not later than 90 days following 
receipt of the party's request for review. Consequently, MGCRB 
decisions could be issued as late as the end of January, and the 15 
days the hospital has to request the Administrator's review, plus the 
90 days the Administrator has to issue a decision, would result in 
hospitals receiving the results of the review prior to 45 days after 
display (which would be May 16th if the proposed rule is displayed on 
the target date of April 1, but later if there is a delay).
    While the current timing of MGCRB decisions in January allows for 
hospitals to receive the results of any review prior to 45 days after 
display of the proposed rule for the relevant FY, and we expect this 
timing to continue, we acknowledge that section 1886(d)(10)(C)(iii)(I) 
of the Act grants the MGCRB 180 days after the application deadline to 
render a decision. If the MGCRB were to delay issuing decisions until 
the last day possible according to the Statute, which is February 28th, 
a hospital requesting the Administrator's review may not receive the 
results of the review prior to 45 days after display.
    Therefore, we are proposing to change the deadline for hospitals to 
withdraw or terminate MGCRB classifications from within 45 days of the 
date that the annual notice of proposed rulemaking is issued in the 
Federal Register to within 45 days of the public display of the annual 
notice of proposed rulemaking on the website of the Office of the 
Federal Register, or within 7 calendar days of receiving a decision of 
the Administrator in accordance with Sec.  412.278 of this part, 
whichever is later. This proposed change will synchronize this deadline 
with other wage index deadlines, such as the deadlines for accepting 
the outmigration adjustment and waiving or reinstating Lugar status. As 
hospitals typically know the results of the Administrator's decisions 
on reviews within 45 days of the public display of the proposed rule 
for the upcoming fiscal year, we believe hospitals have access to the 
information they need to make reclassification decisions. In the rare 
circumstance that a hospital would not receive the results

[[Page 36175]]

of the review prior to 45 days of the public display date, or receives 
the results of the review less than 7 days before the deadline, the 
hospital would have 7 calendar days after receiving the Administrator's 
decision to request to withdraw or terminate MGCRB classification. 
While we do not anticipate frequent use of this extension, we believe 
this fully addresses the concern that some hospitals may be 
disadvantaged if the Administrator's decision on a hospital's request 
for review of an MGCRB decision has not been issued prior to the 
proposed deadline for submitting withdrawal or termination requests to 
the MGCRB. We believe that 7 days after receiving the Administrator's 
decision affords hospitals adequate time to make calculated 
reclassification decisions.
    Specifically, we are proposing to change the words ``within 45 days 
of the date that CMS' annual notice of proposed rulemaking is issued in 
the Federal Register'' in the regulation text at 412.273(c)(1)(ii) and 
412.273(c)(2) for withdrawals and terminations to ``within 45 days of 
the date of filing for public inspection of the proposed rule at the 
website of the Office of the Federal Register, or within 7 calendar 
days of receiving a decision of the Administrator in accordance with 
Sec.  412.278 of this part, whichever is later''.
4. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 
51600), we adopted the policy that, beginning with FY 2012, an eligible 
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS effective for the 
fiscal year in which the hospital receives the outmigration adjustment. 
In addition, in that rule, we adopted a minor procedural change that 
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45 
days from the issuance of the proposed rule in the Federal Register) to 
waive its urban status for the full 3-year period for which its out-
migration adjustment is effective. By doing so, such a Lugar hospital 
would no longer be required during the second and third years of 
eligibility for the out-migration adjustment to advise us annually that 
it prefers to continue being treated as rural and receive the out-
migration adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56930), we further clarified that if a hospital wishes to reinstate its 
urban status for any fiscal year within this 3-year period, it must 
send a request to CMS within 45 days of the issuance of the proposed 
rule in the Federal Register for that particular fiscal year. We 
indicated that such reinstatement requests may be sent electronically 
to [email protected]. In the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38147 through 38148), we finalized a policy revision to require a 
Lugar hospital that qualifies for and accepts the out-migration 
adjustment, or that no longer wishes to accept the out-migration 
adjustment and instead elects to return to its deemed urban status, to 
notify CMS within 45 days from the date of public display of the 
proposed rule at the Office of the Federal Register. These revised 
notification timeframes were effective beginning October 1, 2017. In 
addition, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we 
clarified that both requests to waive and to reinstate ``Lugar'' status 
may be sent to [email protected]. To ensure proper accounting, we 
request hospitals to include their CCN, and either ``waive Lugar'' or 
``reinstate Lugar'', in the subject line of these requests.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we 
clarified that in circumstances where an eligible hospital elects to 
receive the outmigration adjustment within 45 days of the public 
display date of the proposed rule at the Office of the Federal Register 
in lieu of its Lugar wage index reclassification, and the county in 
which the hospital is located would no longer qualify for an 
outmigration adjustment when the final rule (or a subsequent correction 
notice) wage index calculations are completed, the hospital's request 
to accept the outmigration adjustment would be denied, and the hospital 
would be automatically assigned to its deemed urban status under 
section 1886(d)(8)(B) of the Act. We stated that final rule wage index 
values would be recalculated to reflect this reclassification, and in 
some instances, after taking into account this reclassification, the 
out-migration adjustment for the county in question could be restored 
in the final rule. However, as the hospital is assigned a Lugar 
reclassification under section 1886(d)(8)(B) of the Act, it would be 
ineligible to receive the county outmigration adjustment under section 
1886(d)(13)(G) of the Act.
b. Effects of Proposed Implementation of Revised OMB Labor Market Area 
Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act
    As discussed in section III.A.2. of the preamble of this proposed 
rule, CMS is proposing to update the CBSA labor market delineations to 
reflect the changes made in the July 15, 2023, OMB Bulletin 23-01. In 
that section, we proposed that 54 currently rural counties be added to 
new or existing urban CBSAs. Of those 54 counties, 22 are currently 
deemed urban under section 1886(d)(8)(B) of the Act. Hospitals located 
in such a ``Lugar'' county, barring another form of wage index 
reclassification, are assigned the reclassified wage index of a 
designated urban CBSA. Section 1886(d)(8)(B) of the Act defines a 
deemed urban county as a ``rural county adjacent to one or more urban 
areas'' that meets certain commuting thresholds. Since we are proposing 
to modify the status of these 22 counties from rural to urban, they 
would no longer qualify as ``Lugar'' counties. Hospitals located within 
these counties would be considered geographically urban under the 
revised OMB delineations. The table in this section of this rule lists 
the counties that would no longer be deemed urban under section 
1886(d)(8)(B) of the Act if we adopt the revised OMB delineations. We 
note that in almost all instances, the ``Lugar'' county is joining the 
same (or a substantially similar) urban CBSA as it was deemed to in FY 
2024.

[[Page 36176]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.168

    We note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973 
through 49977), when we adopted large scale changes to the CBSA labor 
market delineations based on the new 2010 decennial census, we also re-
evaluated the commuting data thresholds for all eligible rural counties 
in accordance with the requirement set forth in section 
1886(d)(8)(B)(ii)(II) of the Act to base the list of qualifying 
hospitals on the most recently available decennial population data. We 
are therefore proposing to reevaluate the ``Lugar'' status for all 
counties in FY 2025 using the same commuting data table used to develop 
the OMB Bulletin No. 23-01 revised delineations. The data table is the 
``2016-2020 5-Year American Community Survey Commuting Flows'' 
(available on OMB's website: https://www.census.gov/data/tables/2020/demo/metro-micro/commuting-flows-2020.html). We are also proposing to 
use the same methodology discussed in the FY 2020 IPPS/LTCH final rule 
(84 FR 42315 through 42318) to assign the appropriate reclassified CBSA 
for hospitals in ``Lugar'' counties. That is, when assessing which CBSA 
to assign, we will sum the total number of workers that commute from 
the ``Lugar'' county to both ``central'' and ``outlying'' urban 
counties (rather than just ``central'' county commuters).
    By applying the 2020 American Community Survey (ACS) commuting data 
to the updated OMB labor market delineations, we are proposing the 
following changes to the current ``Lugar'' county list: 17 of the 53 
urban counties that are proposed to become rural under the revised OMB 
delineations, and both newly created rural Connecticut planning region 
county-equivalents would qualify as ``Lugar'' counties. We also have 
determined that, as proposed, 33 rural counties (an approximately 11 
hospitals) would lose ``Lugar'' status, as the county no longer meets 
the commuting thresholds or adjacency criteria specified in section 
1886(d)(8)(B) of the Act.

[[Page 36177]]

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    The following table lists all proposed ``Lugar'' counties for FY 
2025. We indicated additions to the list with ``New'' in column 5.

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[GRAPHIC] [TIFF OMITTED] TP02MY24.173

    We note that Litchfield County, CT is no longer listed as a 
``Lugar'' county as it is not included in the revised CBSA 
delineations. The majority of Litchfield County is now within the 
proposed Northwest Hills Planning Region county-equivalent, with some 
of the county's current constituent townships assigned to other urban 
county-equivalents. We also note that in prior fiscal years, Merrimack 
County, NH was included as a ``Lugar'' redesignated county pursuant to 
the provision at Sec.  412.62(f)(1)(ii)(B), which deems certain rural 
counties in the New England region to be part of urban areas. Merrimack 
County now meets the commuting standards to be considered deemed urban 
under the ``Lugar'' statute at section 1886(d)(8)(B) of the Act.
    We recognize that the changes to the ``Lugar'' list may have 
negative financial impacts for hospitals that lose deemed urban status. 
We believe that the 5 percent cap on negative wage index changes 
discussed in section III.G.6, would mitigate significant negative 
payment impacts for FY 2025, and would afford hospitals adequate time 
to fully assess any additional reclassification options available to 
them. We also note that special statuses limited to hospitals located 
in rural areas (such as MDH or SCH status) may be terminated if 
hospitals are deemed urban under section 1886(d)(8)(B) of the Act. In 
these cases, hospitals should apply for rural reclassification status 
under Sec.  413.103 prior to October 1, 2024, if they wish to ensure no 
disruption in status.

G. Wage Index Adjustments: Rural Floor, Imputed Floor, State Frontier 
Floor, Out-Migration Adjustment, Low Wage Index, and Cap on Wage Index 
Decrease Policies

    The following adjustments to the wage index are listed in the order 
that they are generally applied. First, the rural floor, imputed floor, 
and State frontier floor provide a minimum wage index. The rural floor 
at section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
provides that the wage index for hospitals in urban areas of a State 
may not be less than the wage index applicable to hospitals located in 
rural areas in that State. The imputed floor at section 
1886(d)(3)(E)(iv) of the Act provides a wage index minimum for all-
urban states. The state frontier floor at section 1886(d)(3)(E)(iii) of 
the Act requires that hospitals in frontier states cannot be assigned a 
wage index of less than 1.0000. Next, the out-migration adjustment at 
section 1886(d)(13)(A) of the Act is applied, potentially increasing 
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. The low-wage index hospital adjustment finalized in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42325 through 42339) is then applied, 
which increases the wage index values for hospitals with wage indexes 
at or below the 25th percentile. Finally, all hospital wage index 
decreases are capped at 95 percent of the hospital's final wage index 
in the prior fiscal year, according to the policy finalized in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
1. Rural Floor
    Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
provides that, for discharges on or after October 1, 1997, the area 
wage index applicable to any hospital that is located in an urban area 
of a State may not be less than the area wage index applicable to 
hospitals located in rural areas in that State. This provision is 
referred to as the rural floor. Section 3141 of the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) also requires that a national 
budget neutrality adjustment be applied in implementing the rural 
floor. Based on the FY 2025 wage index associated with this proposed 
rule (which is available via the internet on the CMS website), and 
based on the calculation of the rural floor including the wage data of 
hospitals that have reclassified as rural under Sec.  412.103, we 
estimate that 494 hospitals would receive the rural floor in FY 2025. 
The budget neutrality impact of the proposed application of the rural 
floor is discussed in section II.A.4.e. of Addendum A of this proposed 
rule.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48784), CMS 
finalized a

[[Page 36182]]

policy change to calculate the rural floor in the same manner as we did 
prior to the FY 2020 IPPS/LTCH PPS final rule, in which the rural wage 
index sets the rural floor. We stated that for FY 2023 and subsequent 
years, we would include the wage data of Sec.  412.103 hospitals that 
have no MGCRB reclassification in the calculation of the rural floor, 
and 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.
    In the FY 2024 IPPS/LTCH final rule (88 FR 58971-77), we finalized 
a policy change beginning that year to include the data of all Sec.  
412.103 hospitals, even 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 explained that 
after revisiting the case law, prior public comments, and the relevant 
statutory language, we agreed 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.
    Accordingly, in the FY 2024 IPPS/LTCH PPS final rule, we finalized 
a policy 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) that are 
implicated by the hold harmless provision at section 1886(d)(8)(C)(ii) 
of the Act. (For additional information on these changes, we refer 
readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58971 and 
58977).)
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 Sec.  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 Sec.  412.64(h)(4)(vi) as in effect for FY 
2018. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45176 through 45178) for further discussion of the original imputed 
floor calculation methodology implemented in FY 2005 and the 
alternative methodology implemented in FY 2013.
    Based on data available for this proposed rule, States that would 
be all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the 
Act, and thus hospitals in such States that would be eligible to 
receive an increase in their wage index due to application of the 
imputed floor for FY 2025, are identified in Table 3 associated with 
this proposed rule. States with a value in the column titled ``State 
Imputed Floor'' would be eligible for the imputed floor.
    The regulations at Sec.  412.64(e)(1) and (4) and (h)(4) and (5) 
implement the imputed floor required by section 1886(d)(3)(E)(iv) of 
the Act for discharges occurring on or after October 1, 2021. The 
imputed floor would continue to be applied for FY 2025 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 2025
    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 Sec.  412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In this FY 2025 IPPS/
LTCH PPS proposed rule, we are not proposing any changes to the 
frontier floor policy for FY 2025. In this proposed rule, 41 hospitals 
would receive the frontier floor value of 1.0000 for their FY 2025 
proposed wage index. These hospitals are located in Montana, North 
Dakota, South Dakota, and Wyoming.
    We note that while Nevada meets the criteria of a frontier State, 
all hospitals within the State are projected to receive a wage index 
value greater than 1.0000 prior to the application of the frontier 
floor policy for FY 2025.
    The areas affected by the rural and frontier floor policies for the 
proposed FY 2025 wage index are identified in Table 3 associated with 
this proposed rule, which is available via the internet on the CMS 
website.
4. Proposed Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on

[[Page 36183]]

commuting patterns of hospital employees (the ``out-migration'' 
adjustment). The process, outlined in the FY 2005 IPPS final rule (69 
FR 49061), provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage of 
hospital employees who reside in the county but work in a different 
county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section 1886(d)(13) of the 
Act was implemented for the FY 2005 wage index, we analyzed commuting 
data compiled by the U.S. Census Bureau that were derived from a 
special tabulation of the 2000 Census journey-to-work data for all 
industries (CMS extracted data applicable to hospitals). These data 
were compiled from responses to the ``long-form'' survey, which the 
Census Bureau used at that time, and which contained questions on where 
residents in each county worked (69 FR 49062). However, the 2010 Census 
was ``short form'' only; information on where residents in each county 
worked was not collected as part of the 2010 Census. The Census Bureau 
worked with CMS to provide an alternative dataset based on the latest 
available data on where residents in each county worked in 2010, for 
use in developing a new 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 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. We also stated that we would consider determining out-migration 
adjustments based on data from the next Census or other available data, 
as appropriate.
    As discussed earlier in section III.B., CMS is proposing to adopt 
revised delineations from the OMB Bulletin 23-01, published July 21, 
2023. The revised delineations incorporate population estimates based 
on the 2020 decennial census, as well as updated journey-to-work 
commuting data. The Census Bureau once again worked with CMS to provide 
an alternative dataset based on the latest available data on where 
residents in each county worked, for use in developing a new out-
migration adjustment based on new commuting patterns. We analyzed 
commuting data compiled by the Census Bureau that were derived from a 
custom tabulation of the ACS, utilizing 2016 through 2020 data. The 
Census Bureau produces county level commuting flow tables every 5 years 
using non-overlapping 5-year ACS estimates. The data include 
demographic characteristics, home and work locations, and journey-to-
work travel flows. The custom tabulation requested by CMS was specific 
to general medical and surgical hospital and specialty (except 
psychiatric and substance use disorder treatment) hospital employees 
(hospital sector Census code 8191/NAICS code 6221 and 6223) who worked 
in the 50 States, Washington, DC, and Puerto Rico and, therefore, 
provided information about commuting patterns of workers at the county 
level for residents of the 50 States, Washington, DC, and Puerto Rico.
    For the ACS, the Census Bureau selects a random sample of addresses 
where workers reside to be included in the survey, and the sample is 
designed to ensure good geographic coverage. The ACS samples 
approximately 3.5 million resident addresses per year.\140\ The results 
of the ACS are used to formulate descriptive population estimates, and, 
as such, the sample on which the dataset is based represents the actual 
figures that would be obtained from a complete count.
---------------------------------------------------------------------------

    \140\ According to the Census Bureau, the effects of the PHE on 
ACS activities in 2020 resulted in a lower number of addresses (~2.9 
million) in the sample, as well as fewer interviews than a typical 
year.
---------------------------------------------------------------------------

    For FY 2025, and subsequent years, we are proposing that the out-
migration adjustment will be based on the data derived from the 
previously discussed custom tabulation of the ACS utilizing 2016 
through 2020 (5-year) Microdata. As discussed earlier, we believe that 
these data are the most appropriate to establish qualifying counties, 
because they are the most accurate and up-to-date data that are 
available to us. Furthermore, with the proposed transition of several 
counties in Connecticut to ``planning region'' county equivalents 
(discussed in section III.B.3. of the preamble this proposed rule), the 
continued use of a commuting dataset developed with expiring county 
definitions would be less accurate in approximating commuting flows. We 
are proposing that the FY 2025 out-migration adjustments continue to be 
based on the same policies, procedures, and computation that were used 
for the FY 2012 out-migration adjustment. We have applied these same 
policies, procedures, and computations since FY 2012, and we believe 
they continue to be appropriate for FY 2025. (We refer readers to a 
full discussion of the out-migration adjustment, including rules on 
deeming hospitals reclassified under section 1886(d)(8) or section 
1886(d)(10) of the Act to have waived the out-migration adjustment, in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) 
Table 2 of this proposed rule (which is available via the internet on 
the CMS website) lists the proposed out-migration adjustments for the 
FY 2025 wage index.
5. Proposed Continuation of the Low Wage Index Hospital Policy and 
Budget Neutrality Adjustment
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to address the artificial magnification 
of wage index disparities, based in part on comments we received in 
response to our request for information included in our FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20372 through 20377). In the FY 2020 
IPPS/LTCH final rule, based on those public comments and the growing 
disparities between wage index values for high- and low-wage-index 
hospitals, we explained that those growing disparities are likely 
caused, at least in part, by the use of historical wage data to 
prospectively set hospitals' wage indexes. That lag creates barriers to 
hospitals with low wage index values being able to increase employee 
compensation, because those hospitals will not receive corresponding 
increases in their Medicare payment for several years (84 FR 42327). 
Accordingly, we finalized a policy that provided certain low wage index 
hospitals with an opportunity to increase employee compensation without 
the usual lag in those increases being reflected in the calculation of 
the wage index (as they would expect to do if not for the lag).\141\

[[Page 36184]]

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

    \141\ In the FY 2020 IPPS/LTCH proposed rule, we agreed with 
respondents to a previous 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 increased the wage index for hospitals with a wage index value 
below the 25th percentile wage index value for a fiscal year by half 
the difference between the otherwise applicable final wage index value 
for a year for that hospital and the 25th percentile wage index value 
for that year across all hospitals (the low wage index hospital 
policy). We stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 
through 42328) our intention that this policy 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.
    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.), No. 22-5249 (D.C. Cir.) (hereafter referred to 
as Bridgeport). The district court in Bridgeport held 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.
    As noted earlier, we finalized this policy in the FY 2020 IPPS/LTCH 
final rule to provide low wage index hospitals with an opportunity to 
increase employee compensation without the usual lag in those increases 
being reflected in the calculation of the wage index (as they would 
expect to do if not for the lag). This continues to be the purpose of 
the policy. We stated in the FY 2020 IPPS/LTCH PPS final rule our 
intention that it would be in effect for at least 4 years beginning 
October 1, 2019 (84 FR 42326). We also stated we intended to revisit 
the issue of the duration of this policy in future rulemaking as we 
gained experience under the policy. What could not have been 
anticipated at the time the policy was promulgated was that 
implementation of the policy would occur during the COVID-19 PHE, which 
was declared starting in January of 2020 and continued until May of 
2023. The effects of the COVID-19 PHE complicate our ability to 
evaluate the low wage policy and our ability to determine whether low 
wage hospitals have been provided a sufficient opportunity to increase 
employee compensation under the policy without the usual lag.
    In order to help gauge the impact of the COVID-19 PHE relative to 
the impact of the low wage index hospital policy, we examined the 
aggregate revenue each hospital reported on their FY 2020 cost reports 
from the COVID-19 PHE Provider Relief Fund, the Small Business 
Association Loan Forgiveness program, and other sources of COVID-19 
related funding such as payroll retention credits and State emergency 
relief funds. Specifically, we examined Worksheet G-3, lines 24.50 
through 24.60 for each IPPS hospital's 2020 cost report. We found that 
hospitals in the aggregate reported $31.1 billion in COVID-19 related 
funding, and of that amount low wage hospitals reported $3.6 billion. 
These amounts are much larger than, and likely had a much greater 
impact on hospital operations, the approximately $230 million impact of 
the low wage index hospital policy.\142\ For example, COVID-19 related 
funding impacted the ability of hospitals, both low wage hospitals and 
non-low wage hospitals, to change employee compensation in ways that 
overshadowed any differential impact of the low wage index hospital 
policy between the two groups that may have occurred in the absence of 
the COVID-19 PHE.
---------------------------------------------------------------------------

    \142\ As discussed in the FY 2020 IPPS final rule, the low wage 
index hospital policy was implemented in a budget neutral manner. In 
order to ensure that the overall effect of the application of the 
low wage index hospital policy was budget neutral, we applied a 
budget neutrality factor of 0.997987 to the FY 2020 standardized 
amount (84 FR 42667). The IPPS spending associated with the 
accounting statement in the FY 2020 IPPS final rule was 
approximately $113 billion. Applying the budget neutrality 
adjustment to the IPPS spending associated with the accounting 
statement results in roughly a $230 million impact of the low wage 
index hospital policy.
---------------------------------------------------------------------------

    In addition to examining the COVID-19 related funding data, we also 
examined the wage index data itself. For the FY 2025 wage index the 
best available data typically would be from the FY 2021 wage data from 
hospital cost reports. As discussed earlier in more detail in section 
III.C, in considering the impacts of the COVID-19 PHE on the FY 2021 
hospital wage data, we compared that data with recent historical data. 
While there are some differences, it is not readily apparent how any 
changes due to the COVID-19 PHE differentially impacted the wages paid 
by individual hospitals. Furthermore, even if changes due to the COVID-
19 PHE did differentially impact the wages paid by individual hospitals 
over time, it is not clear how those changes could be isolated from 
changes due to other reasons and what an appropriate potential 
methodology might be to adjust the data to account for the effects of 
the COVID-19 PHE. Our inability to isolate the wage data changes due to 
the COVID-19 PHE and disentangle them from changes due to the low wage 
index hospital policy makes isolating and evaluating the impact of the 
low wage index hospital policy challenging. We reached similar 
conclusions with respect to the FY 2020 hospital wage data.
    To help further inform our FY 2025 rulemaking with respect to the 
low wage index hospital policy, we also conducted an analysis of 
hospitals that received an increase to their wage index due to the 
policy in FY 2020 (referred to as the low wage index hospitals for 
brevity in the following discussion). Specifically, for each low wage 
index hospital we calculated the percent increase in its average hourly 
wages (AHWs) from FY 2019 to FY 2021 based on dividing its FY 2021 
average hourly wage (using the wage data one year after the low wage 
index hospital policy was implemented in FY 2020, available on the FY 
2025 IPPS Proposed Rule web page) by its average hourly wage from the 
FY 2019 wage data (the wage data one year before the low wage index 
hospital policy was implemented in FY 2020, available on the FY 2023 
IPPS final rule web page). We performed the same calculation for the 
hospitals that were not low wage index hospitals. We then compared the 
distributions of the average hourly wage increases between the two 
groups. The results are shown in the following chart (Chart 1).

[[Page 36185]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.174

    In general, the chart shows that the distribution of the changes in 
the average hourly wages of the low wage index hospitals (mean = 15.1%, 
standard deviation = 11.0%) is similar to the distribution of the 
changes in the average hourly wages of the non-low wage index hospitals 
(mean = 14.7%, standard deviation 8.9%). Although some low wage 
hospitals have indicated to us that they did use the increased payments 
they received under the low wage index hospital policy to increase 
wages more than they otherwise would have, the similarity in the two 
distributions indicates that, based on the audited wage data available 
to us, the policy has generally not yet had the effect of substantially 
reducing the wage index disparities that existed at the time the policy 
was promulgated. Also, to the extent that wage index disparities for a 
subset of low wage index hospitals has diminished, it is unclear to 
what extent that is attributable to the low wage index hospital policy 
given the effects of the COVID-19 PHE (as discussed below).
    The COVID-19 PHE ended in May of 2023. With regard to the wage 
index,4 years is the minimum time before increases in employee 
compensation included in the Medicare cost report could be reflected in 
the wage index data. The first full fiscal year of wage data after the 
COVID-19 PHE is the FY 2024 wage data, which would be available for the 
FY 2028 IPPS/LTCH PPS rulemaking. As we explained earlier in this 
section, at the time the low wage index hospital policy was finalized, 
our intention was that it would be in effect for at least 4 fiscal 
years beginning October 1, 2019 and to revisit the issue of the 
duration of this policy as we gained experience under the policy. 
Because the effects of the COVID-19 PHE complicate our ability to 
evaluate the low wage index hospital policy and our ability to 
determine whether low wage hospitals have been provided a sufficient 
opportunity to increase employee compensation under the policy without 
the usual lag, we are proposing that the low wage index hospital policy 
and the related budget neutrality adjustment would be effective for at 
least three more years, beginning in FY 2025. This would result in the 
policy being in effect for at least 4 full fiscal years in total after 
the end of the COVID-19 PHE in May of 2023. This will allow us to gain 
experience under the policy for the same duration and in an environment 
more similar to the one we expected at the time the policy was first 
promulgated.
    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 2025 and for subsequent fiscal years during which the low 
wage index hospital policy is in effect, we are proposing to apply a 
budget neutrality adjustment in the same manner as we have applied it 
since FY 2020, as a uniform budget neutrality factor applied to the 
standardized amount. We refer readers to section II.A.4.f. of the 
Addendum to this proposed rule for further discussion of the budget 
neutrality adjustment for FY 2025. For purposes of the low wage index 
hospital policy, based on the data for this proposed rule, the table 
displays the 25th percentile wage index value across all hospitals for 
FY 2025.
[GRAPHIC] [TIFF OMITTED] TP02MY24.175

6. 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

[[Page 36186]]

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 Sec.  
412.64(h)(7). We apply the cap in a budget neutral manner through a 
national adjustment to the standardized amount each fiscal year. For 
more information about the wage index cap policy and associated budget 
neutrality adjustment, we refer readers to the discussion in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
    For FY 2025, we would apply the wage index cap and associated 
budget neutrality adjustment in accordance with the policies adopted in 
the FY 2023 IPPS/LTCH PPS final rule. We note that the budget 
neutrality adjustment will be updated, as appropriate, based on the 
final rule data. We refer readers to the Addendum of this proposed rule 
for further information regarding the budget neutrality calculations.
H. FY 2025 Wage Index Tables
    In this FY 2025 IPPS/LTCH PPS proposed rule, we have included the 
following wage index tables: Table 2 titled ``Case-Mix Index and Wage 
Index Table by CCN''; Table 3 titled ``Wage Index Table by CBSA''; 
Table 4A titled ``List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act''; and Table 4B titled 
``Counties redesignated under section 1886(d)(8)(B) of the Act (Lugar 
Counties).'' We refer readers to section VI. of the Addendum to this 
proposed rule for a discussion of the wage index tables for FY 2025.
I. Proposed Labor-Related Share for the FY 2025 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 results 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 to a 2018-
based IPPS hospital market basket which replaced the 2014-based IPPS 
hospital market basket, effective beginning 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, 86 FR 45529 
through 45530). However, consistent with section 1886(d)(3)(E) of the 
Act, we did not take into account the additional payments that would be 
made as a result of hospitals with a wage index less than or equal to 
1.0000 being paid using a labor-related share lower than the labor-
related share of hospitals with a wage index greater than 1.0000.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. We include a cost category in the labor-related share if the 
costs are labor intensive and vary with the local labor market. In the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45204 through 45207), we 
included in the labor-related share the national average proportion of 
operating costs that are attributable to the following cost categories 
in the 2018-based IPPS market basket: Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; and All Other: Labor-Related Services. In this proposed rule, 
for FY 2025, we are not proposing to make any further changes to the 
labor-related share. For FY 2025, we are proposing to continue to use a 
labor-related share of 67.6 percent for discharges occurring on or 
after October 1, 2024. We note that, consistent with our established 
frequency of rebasing the IPPS market basket every 4 years, we 
anticipate proposing to rebase and revise the IPPS market basket in the 
FY 2026 IPPS/LTCH PPS proposed rule. Our preliminary evaluation of more 
recent Medicare cost report data for IPPS hospitals for 2022 indicates 
that the major IPPS market basket cost weights (particularly the 
compensation and drug cost weights) are similar to those finalized in 
the 2018-based IPPS market basket.
    As discussed in section V.B. of the preamble of this proposed rule, 
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 
percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2025, we are 
not proposing a Puerto Rico-specific labor-related share percentage or 
a nonlabor-related share percentage.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2025 IPPS/LTCH PPS proposed rule and available via 
the internet on the CMS website, reflect the proposed national labor-
related share. Table 1C, in section VI. of the Addendum to this FY 2025 
IPPS/LTCH PPS proposed rule and available via the internet on the CMS 
website, reflects the

[[Page 36187]]

national labor-related share for hospitals located in Puerto Rico. For 
FY 2025, for all IPPS hospitals (including Puerto Rico hospitals) whose 
wage indexes are less than or equal to 1.0000, we are proposing to 
apply the wage index to a labor-related share of 62 percent of the 
national standardized amount. For all IPPS hospitals (including Puerto 
Rico hospitals) whose wage indexes are greater than 1.000, for FY 2025, 
we are proposing to apply the wage index to a labor-related share of 
67.6 percent of the national standardized amount.

IV. Proposed Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2025 (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 more commonly used 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.
[GRAPHIC] [TIFF OMITTED] TP02MY24.176

    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to apply only to hospital acute care inpatient 
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH 
payment adjustment and specify how the DPP is calculated as well as how 
beds and patient days are counted in determining the Medicare DSH 
payment adjustment. Under Sec.  412.106(a)(1)(i), the number of beds 
for the Medicare DSH payment adjustment is determined in accordance 
with bed counting rules for the IME adjustment under Sec.  412.105(b).
    Section 3133 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 10316 of the same Act and 
section 1104 of the Health Care and Education Reconciliation Act (Pub. 
L. 111-152), added a section 1886(r) to the Act that modifies the 
methodology for computing the Medicare DSH payment adjustment. We refer 
to these provisions collectively as section 3133 of the Affordable Care 
Act. Beginning with discharges in FY 2014, hospitals that qualify for 
Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments. This provision applies 
equally to hospitals that qualify for DSH payments under section 
1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under 
the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals who are uninsured, is 
available to make additional payments to each hospital that qualifies 
for Medicare DSH payments and that has uncompensated care. The payments 
to each hospital for a fiscal year are based on the hospital's amount 
of uncompensated care for a given time period relative to the total 
amount of uncompensated care for that same time period reported by all 
hospitals that receive Medicare DSH payments for that fiscal year.
    Since FY 2014, section 1886(r) of the Act has required that 
hospitals that are eligible for DSH payments under section 
1886(d)(5)(F) of the Act receive 2 separately calculated payments:
[GRAPHIC] [TIFF OMITTED] TP02MY24.177


[[Page 36188]]


    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.\143\ We refer to this payment as the ``empirically 
justified Medicare DSH payment.''
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    \143\ https://www.medpac.gov/document/march-2007-report-to-the-congress-medicare-payment-policy/.
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    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply and the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year. Therefore, 
this factor amounts to 75 percent of the payments that would otherwise 
be made under section 1886(d)(5)(F) of the Act.
    The second factor is, for FY 2018 and subsequent fiscal years, 1 
minus the percent change in the percent of individuals who are 
uninsured, as determined by comparing the percent of individuals who 
were uninsured in 2013 (as estimated by the Secretary, based on data 
from the Census Bureau or other sources the Secretary determines 
appropriate, and certified by the Chief Actuary of CMS) and the percent 
of individuals who were uninsured in the most recent period for which 
data are available (as so estimated and certified).
    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] TP02MY24.178

    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the Medicare DSH payment 
methodology made by section 3133 of the Affordable Care Act for FY 
2014. In those rules, we noted that, because section 1886(r) of the Act 
modifies the payment required under section 1886(d)(5)(F) of the Act, 
it affects only the DSH payment under the operating IPPS. It does not 
revise or replace the capital IPPS DSH payment provided under the 
regulations at 42 CFR part 412, subpart M, which was established 
through the exercise of the Secretary's discretion in implementing the 
capital IPPS under section 1886(g)(1)(A) of the Act.
    Finally, section 1886(r)(3) of the Act provides that there shall be 
no administrative or judicial review under section 1869, section 1878, 
or otherwise of any estimate of the Secretary for purposes of 
determining the factors described in section 1886(r)(2) of the Act or 
of any period selected by the Secretary for the purpose of determining 
those factors. Therefore, there is no administrative or judicial review 
of the estimates developed for purposes of applying the three factors 
used to determine uncompensated care payments, or of the periods 
selected to develop such estimates.

B. Eligibility for Empirically Justified Medicare DSH Payments and 
Uncompensated Care Payments

    The payment methodology under section 3133 of the Affordable Care 
Act applies to ``subsection (d) hospitals'' that would otherwise 
receive a DSH payment made under section 1886(d)(5)(F) of the Act. 
Therefore, hospitals must receive empirically justified Medicare DSH 
payments in a fiscal year to receive an additional Medicare 
uncompensated care payment for that year. Specifically, section 
1886(r)(2) of the Act states that, in addition to the empirically 
justified Medicare DSH payment made to a subsection (d) hospital under 
section 1886(r)(1) of the Act, the Secretary shall 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) for the applicable fiscal year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2014 IPPS interim final rule with comment period (78 FR 61193), we 
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 (that is, eligibility to receive empirically justified Medicare 
DSH payments) for the applicable fiscal year (using the most recent 
data that are available). For this proposed rule, we estimated DSH 
status for all hospitals using the most recent available SSI ratios and 
information from the most recent available Provider Specific File. We 
note that FY 2020 SSI ratios available on the CMS website were the most 
recent available SSI ratios at the time of developing this proposed

[[Page 36189]]

rule.\144\ If more recent data on DSH eligibility becomes available 
before the final rule, we would use such data in the final rule.
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    \144\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.
---------------------------------------------------------------------------

    Our final determinations of a hospital's eligibility for 
uncompensated care and empirically justified Medicare DSH payments will 
be based on the hospital's actual DSH status at cost report settlement 
for FY 2025.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the 
rulemakings for subsequent fiscal years, we have specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. Eligible hospitals include the following:
     Subsection (d) Puerto Rico hospitals that are eligible for 
DSH payments also are eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act (78 FR 50623 and 79 FR 50006).
     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 fiscal 
year (based on the best available data at that time) subject to 
settlement through the cost report. If they receive interim empirically 
justified Medicare DSH payments in a fiscal year, they will also be 
eligible to receive interim uncompensated care payments for that fiscal 
year on a per discharge basis. Final eligibility determinations will be 
made at the end of the cost reporting period at settlement, and both 
interim empirically justified Medicare DSH payments and uncompensated 
care payments will be adjusted accordingly (78 FR 50624 and 79 FR 
50007).
     Medicare-dependent, small rural hospitals (MDHs) are paid 
based on the IPPS Federal rate or, if higher, the IPPS Federal rate 
plus 75 percent of the amount by which the Federal rate is exceeded by 
the updated hospital-specific rate from certain specified base years 
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment 
methodology is the same IPPS Federal rate that is used in the SCH 
payment methodology. Because MDHs are paid based on the IPPS Federal 
rate, they continue to be eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments if their DPP is 
at least 15 percent, and we apply the same process to determine MDHs' 
eligibility for interim empirically justified Medicare DSH and interim 
uncompensated care payments as we do for all other IPPS hospitals. 
Legislation has extended the MDH program into FY 2024. We refer readers 
to section V.F. of the preamble of this proposed rule for further 
discussion of the MDH program.
    Section 307 of the Consolidated Appropriations Act, 2024 extended 
the MDH program through December 31, 2024. We will continue to make a 
determination concerning an MDH's eligibility for interim empirically 
justified Medicare DSH and 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, will 
continue to be paid under the IPPS and, therefore, are eligible to 
receive empirically justified Medicare DSH payments and uncompensated 
care payments until the Model's final performance year, which ends 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 (CJR) Model's (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 final rule that appeared in the May 3, 2021, 
Federal Register (86 FR 23496), which extended the CJR Model for an 
additional three performance years. The Model's final performance year 
ends on December 31, 2024. For additional information on the CJR Model, 
we refer readers to the CMS website at https://www.cms.gov/priorities/innovation/innovation-models/CJR.
     Transforming Episode Accountability Model (TEAM) is a new 
proposed episode-based model, which is discussed in section X.A. of the 
preamble of this proposed rule. Hospitals participating in TEAM would 
continue to be paid under the IPPS and, therefore, are eligible to 
receive empirically justified Medicare DSH payments and uncompensated 
care payments. The proposed model's start date is January 2026.
    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 1866(r) of the Act because they are 
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41402 through 41403), CMS and the State have entered 
into an agreement to govern payments to Maryland hospitals under a new 
payment model, the Maryland Total Cost of Care (TCOC) Model, which 
began on January 1, 2019. Under the Maryland TCOC Model, which 
concludes on December 31, 2026, Maryland hospitals are not paid under 
the IPPS and are ineligible to receive empirically justified Medicare 
DSH payments and uncompensated care payments under section 1886(r) of 
the Act.
     SCHs that are paid under their hospital-specific rate are 
not eligible for Medicare DSH and uncompensated care payments (78 FR 
50623 and 50624).
     Hospitals participating in the Rural Community Hospital 
Demonstration Program are not eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act because they are not paid under the IPPS (78 FR 
50625 and 79 FR 50008). The Rural Community Hospital Demonstration 
Program was originally authorized for a 5-year period by section 410A 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173).\145\ 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 this most recent extension of 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 proposed rule, we believe 23 hospitals may 
participate in the

[[Page 36190]]

demonstration program at the start of FY 2025.
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    \145\ The Rural Community Hospital Demonstration Program was 
extended for a subsequent 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 on December 31, 
2016. Section 15003 of the 21st Century Cures Act (Pub. L. 114 255), 
enacted on December 13, 2016, again amended section 410A of Public 
Law 108-173 to require a 10-year extension period (in place of the 
5-year extension required by the Affordable Care Act), therefore 
requiring an additional 5-year participation period for the 
demonstration program. Section 15003 of Public Law 114-255 also 
required a solicitation for applications for additional hospitals to 
participate in the demonstration program. The period of performance 
for this 5-year extension period ended December 31, 2021. The 
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) amended 
section 410A of Public Law 108-173 to extend the demonstration 
program for an additional 5-year period.
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C. Empirically Justified Medicare DSH Payments

    As we have discussed earlier, section 1886(r)(1) of the Act 
requires the Secretary to pay 25 percent of the amount of the Medicare 
DSH payment that would otherwise be made under section 1886(d)(5)(F) of 
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the 
Act merely requires the Secretary to pay a designated percentage of 
these payments, without revising the criteria governing eligibility for 
DSH payments or the underlying payment methodology, we stated in the FY 
2014 IPPS/LTCH PPS final rule that we did not believe that it was 
necessary to develop any new operational mechanisms for making such 
payments.
    Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), 
we implemented this provision by advising Medicare Administrative 
Contractors (MACs) to simply adjust 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 could be settled at the 
appropriate level at the time of cost report settlement. We provided 
more detailed operational instructions and cost report instructions 
following issuance of the FY 2014 IPPS/LTCH PPS final rule that are 
available on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.

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

    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 
49051), we established a new supplemental payment for IHS/Tribal 
hospitals and hospitals located in Puerto Rico for FY 2023 and 
subsequent fiscal years. This payment was established to help to 
mitigate the impact of the decision to discontinue the use of low-
income insured days as a 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 2025 for purposes of this 
rulemaking) and FY 2022, where the total uncompensated care amount for 
a fiscal 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.
    We are not proposing any changes to the methodology for determining 
supplemental payments, and we will calculate the supplemental payments 
to eligible IHS/Tribal and Puerto Rico hospitals consistent with the 
methodology described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49047 through 49051) and Sec.  412.106(h).
    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 PPS final rule. We note that the MAC will make a final 
determination with respect to a hospital's eligibility to receive the 
supplemental payment for a fiscal year, in conjunction with its final 
determination of the hospital's eligibility for DSH payments and 
uncompensated care payments for that fiscal year.

E. Uncompensated Care Payments

    As we discussed earlier, section 1886(r)(2) of the Act provides 
that, for each eligible hospital in FY 2014 and subsequent years, the 
uncompensated care payment is the product of three factors, which are 
discussed in the next sections.
1. Proposed Calculation of Factor 1 for FY 2025
    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the 
calculation of the uncompensated care payment. The regulations located 
at 42 CFR 412.106(g)(1)(i) govern the Factor 1 calculation. Under a 
prospective payment system, we would not know the precise aggregate 
Medicare DSH payment amounts that would be paid for a fiscal year until 
cost report settlement for all IPPS hospitals is completed, which 
occurs several years after the end of the 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, we 
would not know the precise aggregate empirically justified Medicare DSH 
payment amounts that would be paid for a fiscal year until cost report 
settlement for all IPPS hospitals is completed. Thus, section 
1886(r)(2)(A)(ii) of the Act provides authority to estimate this 
amount. In brief, Factor 1 is the difference between the Secretary's 
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, which takes into account the 
requirement to pay 25 percent of what would have otherwise been paid 
under section 1886(d)(5)(F) of the Act.
    In this FY 2025 IPPS/LTCH PPS proposed rule, consistent with the 
policy that has applied since the FY 2014 final rule (78 FR 50627 
through 50631), we are determining Factor 1 from the most recently 
available estimates of the aggregate amount of Medicare DSH payments 
that would be made for FY 2025 in the absence of section 1886(r)(1) of 
the Act and the aggregate amount of empirically justified Medicare DSH 
payments that would be made for FY 2025, both as calculated by CMS' 
Office of the Actuary (OACT). Consistent with the policy that has 
applied in previous years, these estimates will not be revised or 
updated subsequent to the publication of our final projections in the 
FY 2025 IPPS/LTCH PPS final rule.
    For this proposed rule, to calculate both estimates, we used the 
most recently available projections of Medicare DSH payments for the 
fiscal year, as calculated by OACT using the most recently filed 
Medicare hospital cost reports with Medicare DSH payment information 
and the most recent DPPs and Medicare DSH payment adjustments provided 
in the IPPS Impact File. The projection of Medicare DSH payments for 
the fiscal year is also partially based on OACT's Part A benefits 
projection model, which projects, among other things, inpatient 
hospital spending. Projections of DSH payments additionally require 
projections of expected increases in

[[Page 36191]]

utilization and case-mix. The assumptions that were used in making 
these inpatient hospital spending, utilization, and case-mix 
projections and the resulting estimates of DSH payments for FY 2022 
through FY 2025 are discussed later in this section and in the table 
titled ``Factors Applied for FY 2022 through FY 2025 to Estimate 
Medicare DSH Expenditures Using FY 2021 Baseline.''
    For purposes of calculating Factor 1 and modeling the impact of 
this FY 2025 IPPS/LTCH PPS proposed rule, we used OACT's January 2024 
Medicare DSH estimates, which were based on data from the December 2023 
update of the Medicare Hospital Cost Report Information System (HCRIS) 
and the FY 2024 IPPS/LTCH PPS final rule IPPS Impact File, published in 
conjunction with the publication of the FY 2024 IPPS/LTCH PPS final 
rule. 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 2024 Medicare DSH estimates. 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 OACT's January 2024 Medicare DSH estimates.
    The 23 hospitals that CMS expects will participate in the Rural 
Community Hospital Demonstration Program in FY 2025 were also excluded 
from OACT's January 2024 Medicare DSH estimates because under the 
payment methodology that applies during the demonstration, these 
hospitals are not eligible to receive empirically justified Medicare 
DSH payments or uncompensated care payments.
    For this proposed rule, using the data sources as previously 
discussed, OACT's January 2024 estimates of Medicare DSH payments for 
FY 2025 without regard to the application of section 1886(r)(1) of the 
Act is approximately $13.943 billion. Therefore, also based on OACT's 
January 2024 Medicare DSH estimates, the estimate of empirically 
justified Medicare DSH payments for FY 2025, with the application of 
section 1886(r)(1) of the Act, is approximately $3.486 billion (or 25 
percent of the total amount of estimated Medicare DSH payments for FY 
2025). Under Sec.  412.106(g)(1)(i), Factor 1 is the difference between 
these two OACT estimates. Therefore, in this proposed rule, we are 
determining that Factor 1 for FY 2025 would be $10,457,250,000, which 
is equal to 75 percent of the total amount of estimated Medicare DSH 
payments for FY 2025 ($13.943 billion minus $3.486 billion). We note 
that consistent with our approach in previous rulemakings, OACT intends 
to use more recent data that may become available for purposes of 
projecting the final Factor 1 estimates for the FY 2025 IPPS/LTCH PPS 
final rule.
    We note that the Factor 1 estimates for proposed rules are 
generally consistent with the economic assumptions and actuarial 
analysis used to develop the President's Budget estimates under current 
law, and the Factor 1 estimates for the final rules are generally 
consistent with those used for the Midsession Review of the President's 
Budget.\146\ Consistent with historical practice, we expect that the 
Midsession Review will have updated economic assumptions and actuarial 
analysis, which will be used for the development of Factor 1 estimates 
in the FY 2025 IPPS/LTCH PPS final rule.
---------------------------------------------------------------------------

    \146\ As we have in the past, for additional information on the 
development of the President's Budget, we refer readers to the 
Office of Management and Budget website at https://www.whitehouse.gov/omb/budget.
---------------------------------------------------------------------------

    For 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 on the CMS website at https://www.cms.gov/oact/tr/2023 under ``Downloads.'' \147\ The actuarial projections contained in 
these reports are based on numerous assumptions regarding future trends 
in program enrollment, utilization and costs of health care services 
covered by Medicare, as well as other factors affecting program 
expenditures. In addition, although the methods used to estimate future 
costs based on these assumptions are complex, they are subject to 
periodic review by independent experts to ensure their validity and 
reasonableness. We also refer readers to the 2018 Actuarial Report on 
the Financial Outlook for Medicaid for a discussion of general issues 
regarding Medicaid projections (available at https://www.cms.gov/data-research/research/actuarial-studies/actuarial-report-financial-outlook-medicaid).
---------------------------------------------------------------------------

    \147\ 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.
---------------------------------------------------------------------------

    In this proposed rule, we include information regarding the data 
sources, methods, and assumptions employed by OACT's actuaries in 
determining our estimate of Factor 1. In summary, we indicate the 
historical HCRIS data update OACT used to estimate Medicare DSH 
payments, we explain that the most recent Medicare DSH payment 
adjustments provided in the IPPS Impact File were used, and we provide 
the components of all the update factors that were applied to the 
historical data to estimate the Medicare DSH payments for the upcoming 
fiscal year, along with the associated rationale and assumptions. This 
discussion also includes descriptions of the ``Other'' and 
``Discharges'' assumptions and provides additional information 
regarding how we address the Medicaid and CHIP expansion.
    OACT's estimates for FY 2025 for this proposed rule began with a 
baseline of $13.400 billion in Medicare DSH expenditures for FY 2021. 
The following table shows the factors applied to update this baseline 
through the current estimate for FY 2025:

[[Page 36192]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.179

    In this table, the discharges column shows the changes in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The discharge figures for FY 2022 and FY 2023 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 2024 is 
based on preliminary data. The discharge figure for FY 2025 is an 
assumption based on recent historical experience, an assumed partial 
return to pre-COVID 19 trends, and assumptions related to how many 
beneficiaries will be enrolled in Medicare Advantage (MA) plans. The 
discharge figures for FY 2022 to FY 2025 incorporate the actual impact 
and estimated future impact of the COVID-19 pandemic.
    The case-mix column shows the estimated change in case-mix for IPPS 
hospitals. The case-mix figures for FY 2022 and FY 2023 are based on 
actual claims data 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 case-mix figures for FY 2024 and 
for FY 2025 are assumptions based on the 2012 ``Review of Assumptions 
and Methods of the Medicare Trustees' Financial Projections'' report by 
the 2010-2011 Medicare Technical Review Panel.\148\
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    \148\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/technicalpanelreport2010-2011.pdf.
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    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 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. Based on the most recent available data, Medicaid 
enrollment is estimated to be as follows: +8.3 percent in FY 2022, +5.1 
percent in FY 2023, -13.9 percent in FY 2024, and -4.3 percent in FY 
2025. In future IPPS rulemakings, our 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 enrollee and, therefore, receive fewer hospital services.\149\ 
Specifically, based on the most recent available data at the time of 
developing this 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-expansion and post-expansion. In 
future IPPS rulemakings, the assumption about the average per-capita 
expenditures of Medicaid beneficiaries who enrolled due to the COVID-19 
pandemic may change.
---------------------------------------------------------------------------

    \149\ For a discussion of general issues regarding Medicaid 
projections, we refer readers to the 2018 Actuarial Report on the 
Financial Outlook for Medicaid, which is available at https://www.cms.gov/files/document/2018-report.pdf.
---------------------------------------------------------------------------

    The following table shows the factors that are included in the 
``Update'' column of the previous table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.180


[[Page 36193]]


    We are inviting public comments on our proposed Factor 1 for FY 
2025.

IV. Proposed Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2025 (Sec.  412.106)

2. Calculation of Proposed Factor 2 for FY 2025
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 are continuing to use the methodology that was used in FY 2018 
through FY 2024 to determine Factor 2 for FY 2025--to use the National 
Health Expenditure Accounts (NHEA) data to determine the percent change 
in the percent of individuals who are uninsured. We refer readers to 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198) for a 
complete discussion of the NHEA and why we determined, and continue to 
believe, that it is the data source for the rate of uninsurance that, 
on balance, best meets all 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.
    In brief, the NHEA represents the government's official estimates 
of economic activity (spending) within the health sector. 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. 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 for FY 2025, the first metric that is needed is 
the proportion of the total U.S. population that was uninsured in 2013. 
For a complete discussion of the approach OACT used to prepare the 
NHEA's estimate of the rate of uninsurance in 2013, including the data 
sources used, we refer readers to the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 58998 and 58999).
    The next metrics needed to compute Factor 2 for FY 2025 are 
projections of the rate of uninsurance in both CY 2024 and CY 2025. On 
an annual basis, OACT projects enrollment and spending trends for the 
coming 10-year period. The most recent projections are for 2022 through 
2031 and were published on June 14, 2023. Those projections used the 
latest NHEA historical data that were available at the time of their 
construction (that is, historical data through 2021). The NHEA 
projection methodology accounts for expected changes in enrollment 
across all of the categories of insurance coverage previously listed. 
For a complete discussion of how the NHEA data account for expected 
changes in enrollment across all the categories of insurance coverage 
previously listed, we refer readers to the FY 2024 IPPS/LTCH PPS final 
rule (88 FR 58999).
b. Proposed Factor 2 for FY 2025
    Using these data sources and the previously described 
methodologies, at the time of developing this proposed rule, OACT has 
estimated that the uninsured rate for the historical, baseline year of 
2013 was 14 percent, and that the uninsured rates for CYs 2024 and 2025 
were 8.5 percent and 8.8 percent, respectively. As required by section 
1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has certified 
these estimates. We refer readers to OACT's Memorandum on Certification 
of Rates of Uninsured prepared for this FY 2025 IPPS/LTCH PPS proposed 
rule for further details on the methodology and assumptions that were 
used in the projection of these rates of uninsurance.\150\
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    \150\ https://www.cms.gov/files/document/certification-rates-uninsured-2025-proposed-rule.pdf.
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    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 use a weighted average approach to project the rate of 
uninsurance for each fiscal year. We continue to believe that, in order 
to estimate the rate of uninsurance during a fiscal year accurately, 
Factor 2 should reflect the estimated rate of uninsurance that 
hospitals will experience during the fiscal year, rather than the rate 
of uninsurance during only one of the calendar years that the fiscal 
year spans. Accordingly, we are continuing to apply the weighted 
average approach used in past fiscal years to estimate this proposed 
rule's rate of uninsurance for FY 2025.
    OACT certified the estimate of the rate of uninsurance for FY 2025 
determined using this weighted average approach to be reasonable and 
appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. We 
note that we may also consider the use of more recent data that may 
become available for purposes of estimating the rates of uninsurance 
used in the calculation of the final Factor 2 for FY 2025. The 
calculation of the proposed Factor 2 for FY 2025 is as follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2024: 8.5 
percent.
     Percent of individuals without insurance for CY 2025: 8.8 
percent.
     Percent of individuals without insurance for FY 2025 (0.25 
times 0.085) + (0.75 times 0.088): 8.7 percent. 1-[verbar]((0.14-
0.087)/0.14)[verbar] = 1-0.3786 = 0.6214 (62.14 percent).
    We are proposing that Factor 2 for FY 2025 would be 62.14 percent.
    The proposed FY 2025 uncompensated care amount is equivalent to 
proposed Factor 1 multiplied by proposed Factor 2, which is 
$6,498,135,150.00.
    We are inviting public comments on our proposed Factor 2 for FY 
2025.
3. Calculation of Proposed Factor 3 for FY 2025
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).

[[Page 36194]]

    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 for us 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. For a discussion 
of the methodology, we used to calculate Factor 3 for fiscal years 2014 
through 2022, we refer readers to the FY 2024 IPPS/LTCH final rule (88 
FR 59001 and 59002).
b. Background on the Methodology Used To Calculate Factor 3 for FY 2023 
and Subsequent Years
    Section 1886(r)(2)(C) of the Act governs 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 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50647), 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 for a fiscal year and for those hospitals that we do not 
estimate will qualify for Medicare DSH payments for that fiscal year 
but that may ultimately qualify for Medicare DSH payments for that 
fiscal year at the time of cost report settlement.
    As described in the FY 2022 IPPS/LTCH PPS final rule, commenters 
expressed concerns that the use of only 1 year of data to determine 
Factor 3 would lead to significant variations in year-to-year 
uncompensated care payments. Some stakeholders recommended the use of 2 
years of historical data from Worksheet S-10 data of the Medicare cost 
report (86 FR 45237). In the FY 2022 IPPS/LTCH PPS final rule, we 
stated that we would consider using multiple years of data when the 
vast majority of providers had been audited for more than 1 fiscal year 
under the revised reporting instructions. Audited FY 2019 cost reports 
were available for the development of the FY 2023 IPPS/LTCH PPS 
proposed and final rules. 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. 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. 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. For IHS and Tribal hospitals 
and Puerto Rico hospitals, we use the same multi-year average of 
Worksheet S-10 data to determine Factor 3 for FY 2024 and subsequent 
fiscal years as is used to determine Factor 3 for all other DSH-
eligible hospitals (in other words, hospitals eligible to receive 
empirically justified Medicare DSH payments for a fiscal year) to 
determine Factor 3.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49033 through 
49047), we also modified our policy regarding cost reports that start 
in one fiscal year and span the entirety of the following fiscal year. 
Specifically, in the rare cases when we use a cost report that starts 
in one fiscal year and spans the entirety of the subsequent fiscal year 
to determine uncompensated care costs for the subsequent 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.\151\
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    \151\ For example, in determining Factor 3 for FY 2023, we did 
not use the same cost report to determine a hospital's uncompensated 
care costs for both FY 2018 and FY 2019. Rather, we used the cost 
report that spanned the entirety of FY 2019 to determine 
uncompensated care costs for FY 2019 and used the hospital's most 
recent prior cost report to determine its uncompensated care costs 
for FY 2018, provided that cost report spanned some portion of FY 
2018.
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(1) Scaling Factor
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59003), we continued 
the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49042) to address the effects of calculating Factor

[[Page 36195]]

3 using data from multiple fiscal years, in 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 DSH-eligible for a fiscal year will be consistent with 
the estimated amount available to make uncompensated care payments for 
that fiscal year. Pursuant to that policy, 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.
(2) New Hospital Policy for Purposes of Factor 3
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59003), we continued 
our new hospital policy that was modified in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49042) and initially adopted in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42370 through 42371) 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 fiscal 
year after the most recent year for which audits of the Worksheet S-10 
data have been conducted. For FY 2024, the FY 2020 cost reports were 
the most recent year of cost reports for which audits of Worksheet S-10 
data had been conducted. Thus, hospitals with CMS Certification Numbers 
(CCNs) established on or after October 1, 2020, were subject to the new 
hospital policy for FY 2024.
    Under our modified new hospital policy, if a new hospital has a 
preliminary projection of being DSH-eligible based on its most recent 
available disproportionate patient percentage, it may receive interim 
empirically justified DSH payments. However, new hospitals will not 
receive interim uncompensated care payments because we would have no 
uncompensated care data on which to determine what those interim 
payments should be. The MAC will make a final determination concerning 
whether the hospital is eligible to receive Medicare DSH payments at 
cost report settlement. In FY 2024, 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 determined 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.\152\
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    \152\ In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), 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, to 
improve consistency and predictability across all hospitals.
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(3) Newly Merged Hospital Policy
    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59004), we continued 
our policy of treating 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 2024 IPPS/LTCH PPS final rule (88 FR 59004), 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 methodology used to determine Factor 3 for new 
hospitals described in section IV.E.3. of the preamble of this proposed 
rule, we continued our 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 in section IV.E.3. of the preamble of this proposed rule, to 
the Factor 3 calculation for a newly merged hospital. In the FY 2024 
IPPS/LTCH PPS final rule, we explained that consistent with past 
policy, interim uncompensated care payments for the newly merged 
hospital would 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 2024 IPPS/LTCH PPS final rule (88 FR 59004 through 
59005), we continued the policy of trimming CCRs, which we adopted in 
the FY 2023 IPPS/LTCH PPS final rule (87 FR 49043), for FY 2024. Under 
this policy, 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 hospitals that are not DSH-eligible), 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.

[[Page 36196]]

    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 hospitals that 
are not DSH-eligible), 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 these 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 for the potentially aberrant fiscal year to 
determine an adjusted amount of uncompensated care costs for the 
applicable fiscal year.\153\
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    \153\ 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, as we explained in the FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58832), we determined it is unnecessary to apply the UCC 
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). In the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59004), we stated that in addition to the UCC trim methodology, we will 
continue to apply an alternative 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 not calculate a Factor 3 for the 
hospital at the time of proposed or final rulemaking. 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 hospitals projected to be DSH-eligible. 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 2024 IPPS/LTCH PPS 
final rule (88 FR 59005), we also stated that we would continue to use 
a threshold of 3 standard deviations from the mean ratio of insured 
patients' charity care costs to total uncompensated care costs (line 23 
column 2 divided by line 30) and a dollar threshold that is the median 
total uncompensated care cost reported on most recent audited cost 
reports for hospitals that are projected to be DSH-eligible. We stated 
that we continued to believe these thresholds are appropriate to 
address potentially aberrant data. We also continued to include 
Worksheet S-10 data from IHS/Tribal hospitals and Puerto Rico hospitals 
consistent with our policy finalized in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49047 through 49051). In addition, we continued our policy 
adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49044) of 
applying the same threshold amounts originally calculated for the FY 
2018 reports to identify potentially aberrant data for FY 2024 and 
subsequent fiscal years 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 2025
    For FY 2025, consistent with Sec.  412.106(g)(1)(iii)(C)(11), we 
are following the same methodology as applied in FY 2024 and described 
in the previous section of this proposed rule: to determine Factor 3 
using the most recent 3 years of audited cost reports, from FY 2019, FY 
2020, and FY 2021. Consistent with our approach for FY 2024, for FY 
2025, we are also applying the scaling factor, new hospital, newly 
merged hospital, CCR trim methodology, UCC trim, and alternative trim 
methodology policies discussed in the previous section of this proposed 
rule. For purposes of this FY 2025 IPPS/LTCH PPS proposed rule, we are 
using reports from the December 2023 HCRIS extract to calculate Factor 
3. We intend to use the March 2024 update of HCRIS to calculate the 
final Factor 3 for the FY 2025 IPPS/LTCH PPS final rule.
    Thus, for FY 2025, 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, following these steps:
    Step 1: Select the hospital's longest cost report for each of the 
most recent 3 years of fiscal year (FY) audited cost reports (FY 2019, 
FY 2020, and FY 2021). Alternatively, in the rare case when the 
hospital has no cost report for a particular year because the cost 
report for the previous fiscal year spanned the more recent fiscal 
year, the previous fiscal year cost report will be used in this step. 
In the rare case that using a previous fiscal year cost report results 
in

[[Page 36197]]

a period without a report, we would use the prior year report, if that 
cost report spanned the applicable period.\154\ In general, we note 
that, for purposes of the Factor 3 methodology, references to a fiscal 
year cost report are to the cost report that spans the relevant fiscal 
year.
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    \154\ For example, if a hospital does not have a FY 2020 cost 
report because the hospital's FY 2019 cost report spanned the FY 
2020 time period, we will use the FY 2019 cost report that spanned 
the FY 2020 time period for this step. Using the same example, where 
the hospital's FY 2019 report is used for the FY 2020 time period, 
we will use the hospital's FY 2018 report if it spans some of the FY 
2019 time period. We will not use the same cost report for both the 
FY 2020 and the FY 2019 time periods.
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    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 by a scaling factor, as discussed in the previous section of 
this proposed rule.
    For purposes of identifying new hospitals, for FY 2025, the FY 2021 
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, 2021, will be subject to the new 
hospital policy in FY 2025. If a new hospital is ultimately determined 
to be eligible for Medicare DSH payments for FY 2025, the hospital will 
receive an uncompensated care payment calculated using a Factor 3 where 
the numerator is the uncompensated care costs reported on Worksheet S-
10 of the hospital's FY 2025 cost report, and the denominator is the 
sum of the uncompensated care costs reported on Worksheet S-10 of the 
FY 2021 cost reports for all DSH-eligible hospitals. In addition, we 
will apply a scaling factor, as discussed previously, to the Factor 3 
calculation for a new hospital. As we explained in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59004), 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, to improve consistency and predictability across all 
hospitals.
    For FY 2025, the eligibility of a newly merged hospital to receive 
interim uncompensated care payments will be based on whether the 
surviving CCN has a preliminary projection of being DSH-eligible, and 
the amount of any interim uncompensated care payments will be based on 
the uncompensated care costs from the FY 2019, FY 2020, and FY 2021 
cost reports available for the surviving CCN at the time the final rule 
is developed. However, at cost report settlement, we will determine the 
newly merged hospital's final uncompensated care payment based on the 
uncompensated care costs reported on its FY 2025 cost report. That is, 
we will revise the numerator of Factor 3 for the newly merged hospital 
to reflect the uncompensated care costs reported on the newly merged 
hospital's FY 2025 cost report. The denominator will be the sum of the 
uncompensated care costs reported on Worksheet S-10 of the FY 2021 cost 
reports for all DSH-eligible hospitals, which is the most recent fiscal 
year for which audits have been conducted. We will also apply a scaling 
factor, as described previously.
    Under the CCR trim methodology, for purposes of this FY 2025 
proposed rule, the statewide average CCR was applied to 10 hospitals' 
FY 2019 reports, of which 4 hospitals had FY 2019 Worksheet S-10 data. 
The statewide average CCR was applied to 8 hospitals' FY 2020 reports, 
of which 3 hospitals had FY 2020 Worksheet S-10 data. The statewide 
average CCR was applied to 8 hospitals' FY 2021 reports, of which 3 
hospitals had FY 2021 Worksheet S-10 data.
    For a hospital that is subject to either of the trims for 
potentially aberrant data (the UCC trim and alternative trim 
methodology explained in the previous section of this proposed rule) 
and is ultimately determined to be DSH-eligible at cost report 
settlement, its uncompensated care payment will be calculated only 
after the hospital's reporting of insured charity care costs on its FY 
2025 Worksheet S-10 has been reviewed. Accordingly, the MAC will 
calculate a Factor 3 for the hospital only after reviewing the 
uncompensated care information reported on Worksheet S-10 of the 
hospital's FY 2025 cost report. Then we will calculate Factor 3 for the 
hospital using the same methodology used to determine Factor 3 for new 
hospitals. Specifically, the numerator will reflect the uncompensated 
care costs reported on the hospital's FY 2025 cost report, while the 
denominator will reflect the sum of the uncompensated care costs 
reported on Worksheet S-10 of the FY 2021 cost reports of all DSH-
eligible hospitals. In addition, we will apply a scaling factor, as 
discussed previously, to the Factor 3 calculation for the hospital.
    For purposes of the FY 2025 IPPS/LTCH PPS final rule, consistent 
with our Factor 3 methodology since the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50642), we intend to use data from the March 2024 HCRIS 
extract for this calculation, which will be the latest quarterly HCRIS 
extract that is publicly available at the time of the development of 
the FY 2025 IPPS/LTCH PPS final rule.
    Regarding requests from providers to amend and/or reopen previously 
audited Worksheet S-10 data for the most recent 3 cost reporting years 
that are used in the methodology for calculating Factor 3, we note that 
MACs follow normal timelines and procedures. For purposes of the Factor 
3 calculation for the FY 2025 IPPS/LTCH PPS final rule, 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 2024. In other words, if the amended report and/or reopened 
report is not available for the March HCRIS extract, then that amended 
and/or reopened report data will not be part of the FY 2025 IPPS/LTCH 
PPS final rule's Factor 3 calculation. We note that the March HCRIS 
data extract will be available during the comment period for this 
proposed rule if providers want to verify that their amended and/or 
reopened data is reflected in the March HCRIS extract.
d. Per-Discharge Amount of Interim Uncompensated Care Payments for FY 
2025 and Subsequent Fiscal Years
    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.

[[Page 36198]]

    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 using the most recent 3 years of discharge data, which would 
have included data from FY 2018, FY 2019, and FY 2020. We explained our 
belief that computing a 3-year average with FY 2020 discharge data 
would underestimate discharges, due to the decrease in discharges 
during the COVID-19 pandemic. For the same reason, 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 rather than a 3-year average using the most recent 
3 years of discharge data.
    We explained in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59010) 
that believed 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. We 
considered using an average of FY 2019, FY 2021, and FY 2022 discharge 
data to calculate the per-discharge amount for interim uncompensated 
care payments for FY 2024. However, we agreed with commenters that 
using FY 2019 data may overestimate discharge volume because updated 
claims data used to estimate the FY 2024 discharges in the Factor 1 
calculation indicated that discharge volumes were not expected to 
return to pre-pandemic levels during FY 2024. Therefore, for FY 2024, 
we finalized a policy of calculating the per-discharge amount for 
interim uncompensated care payments using an average of FY 2021 and FY 
2022 discharge data.
    For FY 2025 and subsequent fiscal years, we are proposing to 
calculate the per-discharge amount for interim uncompensated care 
payments using the average of the most recent 3 years of discharge 
data. Accordingly, for FY 2025, we propose to use an average of 
discharge data from FY 2021, FY 2022, and FY 2023. We believe that our 
proposed approach will likely result in a better estimate of the number 
of discharges during FY 2025 and subsequent years for purposes of the 
interim uncompensated care payment calculation.
    As we explained in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50645), we believe that it is appropriate to use a 3-year average of 
discharge data to reduce the degree to which we would over- or under-
pay the uncompensated care payment on an interim basis. In any given 
year, a hospital could have low or high Medicare utilization that 
differs from other years. For example, if a hospital had two Medicare 
discharges in its most recent year of claims data but experienced four 
discharges in FY 2025, during the fiscal year, we would pay two times 
the amount the hospital should receive and need to adjust for that at 
cost report settlement. Similarly, if a hospital had four Medicare 
discharges in its most recent year of claims data, but experienced two 
discharges in FY 2025, during the fiscal year, we would only pay half 
the amount the hospital should receive and need to adjust for that at 
cost report settlement.
    We also believe that, generally, use of the most recent 3 years of 
discharge data, rather than older data, is more likely to reflect 
current trends in discharge volume and provide an approximate estimate 
of the number of discharges in the applicable fiscal year. In addition, 
we note that including discharge data from FY 2023 to compute this 3-
year average is consistent with the proposed use of FY 2023 Medicare 
claims in the IPPS ratesetting, as discussed in section I.E. of the 
preamble of this FY 2025 IPPS/LTCH PPS proposed rule.
    Under this proposal, the resulting 3-year average of the most 
recent years of available historical discharge data would be used to 
calculate a per-discharge payment amount that will be used to make 
interim uncompensated care payments to each projected DSH-eligible 
hospital during FY 2025 and subsequent fiscal years. The interim 
uncompensated care payments made to a hospital during the fiscal year 
will be reconciled following the end of the year to ensure that the 
final payment amount is consistent with the hospital's prospectively 
determined uncompensated care payment for the fiscal year.
    We are proposing to make conforming changes to the regulations 
under 42 CFR 412.106. Specifically, we are proposing to modify 
paragraph (1) of Sec.  412.106(i) to state that for FY 2025 and 
subsequent fiscal years, interim uncompensated care payments will be 
calculated based on an average of the most recent 3 years of available 
historical discharge data. We are requesting comments on this proposal.
    In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 and 58834), we 
finalized a voluntary process through which a hospital may submit a 
request to its MAC for a lower per-discharge interim uncompensated care 
payment amount, including a reduction to zero, once before the 
beginning of the fiscal year and/or once during the fiscal year. In 
conjunction with this request, the hospital must provide supporting 
documentation demonstrating that there would likely be a significant 
recoupment at cost report settlement if the per-discharge amount is not 
lowered (for example, recoupment of 10 percent or more of the 
hospital's total uncompensated care payment, or at least $100,000). 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 (85 FR 58833 through 58834), the hospital's MAC will evaluate 
these requests and the supporting documentation before the beginning of 
the 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 
fiscal year. We are continuing to apply this policy for FY 2025.
    We refer readers to the Addendum in the FY 2023 IPPS/LTCH final 
rule for a more detailed discussion of the steps for determining the 
operating and capital Federal payment rate and the outlier payment 
calculation (87 FR 49431 through 49432). No change would be made to the 
total uncompensated care payment amount determined for the hospital on 
the basis of its Factor 3. In other words, any change to the per-

[[Page 36199]]

discharge uncompensated care payment amount will not change how the 
total uncompensated care payment amount will be reconciled at cost 
report settlement.
e. Process for Notifying CMS of Merger Updates and To Report Upload 
Issues
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with this proposed rule, we will publish on the 
CMS website a table listing Factor 3 for hospitals that we estimate 
will receive empirically justified Medicare DSH payments in FY 2025 
(that is, those hospitals that will receive interim uncompensated care 
payments during the fiscal year), and for the remaining subsection (d) 
hospitals and subsection (d) Puerto Rico hospitals that have the 
potential of receiving an uncompensated care payment in the event that 
they receive an empirically justified Medicare DSH payment for the 
fiscal year as determined at cost report settlement. However, we note 
that a Factor 3 will not be published for new hospitals and hospitals 
that are subject to the alternative trim for hospitals with potentially 
aberrant data that are not projected to be DSH-eligible.
    We also will publish a supplemental data file containing a list of 
the mergers that we are aware of and the computed uncompensated care 
payment for each merged hospital. In the DSH uncompensated care 
supplemental data file, we list new hospitals and the 10 hospitals that 
would be subject to the alternative trim for hospitals with potentially 
aberrant data that are not projected to be DSH-eligible, with a N/A in 
the Factor 3 column.
    Hospitals have 60 days from the date of public display of this FY 
2025 IPPS/LTCH PPS proposed rule in the Federal Register to review the 
table and supplemental data file published on the CMS website in 
conjunction with this proposed rule and to notify CMS in writing of 
issues related to mergers and/or to report potential upload 
discrepancies due to MAC mishandling of Worksheet S-10 data during the 
report submission process.\155\ Comments raising issues or concerns 
that are specific to the information included in the table and 
supplemental data file should be submitted by email to the CMS inbox at 
[email protected]. We will address comments related to mergers 
and/or reporting upload discrepancies submitted to the CMS DSH inbox as 
appropriate in the table and the supplemental data file that we publish 
on the CMS website in conjunction with the publication of the FY 2025 
IPPS/LTCH PPS final rule. All other comments submitted in response to 
our proposals for FY 2025 must be submitted in one of the three ways 
found in the ADDRESSES section of the proposed rule before the close of 
the comment period in order to be assured consideration. In addition, 
we note that the CMS DSH inbox is not intended for Worksheet S-10 audit 
process related emails, which should be directed to the MACs.
---------------------------------------------------------------------------

    \155\ For example, if the report does not reflect audit results 
due to MAC mishandling, or the most recent report differs from a 
previously accepted, amended report due to MAC mishandling.
---------------------------------------------------------------------------

IV. Proposed Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2025 (Sec.  412.106)

F. Impact on Medicare DSH Payment Adjustment of Proposed Implementation 
of New OMB Labor Market Delineations

    As discussed in section III.B. of the preamble of this proposed 
rule, we are proposing to implement the new OMB labor market area 
delineations (which are based on 2020 Decennial Census data) for the FY 
2025 wage index. This proposal also would have an impact on the 
calculation of Medicare DSH payment adjustments to certain hospitals. 
Hospitals that are designated as rural with less than 500 beds and are 
not rural referral centers (RRCs) or Medicare-dependent, small rural 
hospitals (MDHs) are subject to a maximum DSH payment adjustment of 12 
percent. Accordingly, hospitals with less than 500 beds that are 
currently in urban counties that would become rural if we finalize our 
proposal to adopt the new OMB delineations, and that do not become RRCs 
or MDHs, would be subject to a maximum DSH payment adjustment of 12 
percent. (We note, as discussed in section V.F.2. of the preamble of 
this proposed rule, under current law the MDH program will expire on 
December 31, 2024). We also note that urban hospitals are only subject 
to a maximum DSH payment adjustment of 12 percent if they have less 
than 100 beds.
    Our existing regulations at 42 CFR 412.102 will apply in FY 2025 
with respect to the calculation of the DSH payments to hospitals that 
are currently located in urban counties that would become rural if we 
finalize our proposal to adopt the new OMB delineations. The provisions 
of 42 CFR 412.102 specify that a hospital located in an area that is 
reclassified from urban to rural (as defined in the regulations), as a 
result of the most recent OMB standards for delineating statistical 
areas adopted by CMS, may receive an adjustment to its rural Federal 
payment amount for operating costs for two successive fiscal years. 
Specifically, the regulations state that, in the first year after a 
hospital loses urban status, the hospital will receive an additional 
payment that equals two thirds of the difference between the 
disproportionate share payments as applicable to the hospital before 
its redesignation from urban to rural and disproportionate share 
payments otherwise, applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an additional payment 
that equals one-third of the difference between the disproportionate 
share payments applicable to the hospital before its redesignation from 
urban to rural and disproportionate share payments otherwise applicable 
to the hospital subsequent to its redesignation from urban to rural.

G. Withdrawal of 42 CFR 412.106 (FY 2004 and Prior Fiscal Years) to the 
Extent It Included Only ``Covered Days'' in the SSI Ratio

    In Becerra v. Empire Health Foundation, for Valley Hospital Medical 
Center, 597 U.S. 424 (2022) (Empire Health), the Supreme Court 
addressed the question of whether Medicare patients remain ``entitled 
to benefits under part A'' when Medicare does not pay for their care, 
such as when they have exhausted their Medicare benefits for a spell of 
illness. Prior to fiscal year (FY) 2005, when we calculated a 
hospital's DSH adjustment we included in the Medicare fraction (also 
referred to as the Medicare-SSI fraction, SSI fraction, or SSI ratio) 
only ``covered'' Medicare patient days, that is, days paid by Medicare. 
42. CFR 412.106(b)(2)(i) (2003). The ``covered'' days rule originated 
in the FY 1986 IPPS interim final rule (51 FR 16,772 and 16,788) and 
originally appeared in Sec.  412.106(a)(1)(i) but was later re-
numbered. The approach of excluding from the Medicare fraction patient 
days for which Medicare did not pay was based on an interpretation of 
the statute's parenthetical phrase ``(for such days).''
    Section 1886(d)(5)(F)(vi)(I) of the Act. Following a series of 
judicial decisions rejecting a parallel interpretation of the same 
language in the numerator of the Medicaid fraction as counting only 
patient days actually paid by the Medicaid program, the Secretary 
revisited that approach in a 2004 rulemaking. Thus, the ``covered 
days'' rule was the relevant Medicare payment policy until it was 
revised and replaced

[[Page 36200]]

by the FY 2005 IPPS final rule (69 FR 48,916, 49,099, and 49,246).
    The FY 2005 regulation at issue in Empire Health--codified in the 
FY 2005 IPPS final rule--interpreted the statute to mean that the 
Medicare fraction includes non-covered days in the SSI ratio. (For more 
information see 69 FR 48916, 49099, and 49246 (amending 42 CFR 
412.106(b)(2)(i) to include in the Medicare fraction all days 
associated with patients who were entitled to Medicare Part A during 
their hospital stays, regardless of whether Medicare paid for those 
days).) In Empire Health, the Supreme Court upheld the FY 2005 
regulation and held that the statute ``disclose[s] a surprisingly clear 
meaning,'' 597 U.S. at 434, namely that beneficiaries remain ``entitled 
to benefits under part A'' on days for which Medicare does not pay and 
thus the Medicare fraction includes total days, not only covered days. 
The Supreme Court also definitively resolved the meaning of the 
parenthetical phrase ``(for such days)'' in the Medicare fraction, 
rejecting the provider's contention that the phrase changed the 
consistent meaning of ``entitled to benefits under Part A'' from 
``meeting Medicare's statutory (age or disability) criteria on the days 
in question,'' to ``actually receiving Medicare payments.'' Id. at 440. 
The Court determined that the ``for such days'' parenthetical ``instead 
works as HHS says: hand in hand with the ordinary statutory meaning of 
`entitled to [Part A] benefits.' '' Id.
    The Supreme Court has concluded that the interpretation set forth 
in the FY 2005 IPPS final rule ``correctly construes the statutory 
language at issue.'' Empire Health, 597 U.S. at 434. Because the pre-FY 
2005 rule conflicts with the plain meaning of the statute, as confirmed 
by the Supreme Court, it cannot govern the calculation of DSH payments 
for hospitals with properly pending claims in DSH appeals or open cost 
reports that include discharges that need to be determined pursuant to 
the statute, regardless of whether such discharges would otherwise pre-
date the change in the regulation finalized by the FY 2005 IPPS final 
rule. For that reason, we are proposing to formally withdraw 42 CFR 
412.106 as it existed prior to the effective date of the FY 2005 IPPS 
final rule to the extent it included only covered days in the SSI 
ratio. We will apply the statute as understood by the Supreme Court in 
Empire Health, instead of the pre-FY 2005 regulation, to any properly 
pending claim in a DSH appeal or open cost report to which that 
regulation would otherwise have applied. We do not believe this change 
constitutes an exercise of our ``retroactive'' rulemaking authority 
under section 1871(e)(1)(A) of the Act. Rather, we will apply the plain 
meaning of the statute (as it has existed unchanged, in relevant part, 
since its enactment on April 7, 1986). Moreover, because we are 
applying the substantive legal standard established by the statute 
itself, and not filling any gap therein, notice-and-comment rulemaking 
is not required by section 1871(e)(1)(A) of the Act, as construed in 
Azar v. Allina Health Services, 139 S. Ct. 1804 (June 3, 2019).
    The withdrawal of this regulation will not serve as a basis to 
reopen a CMS or contractor determination, a contractor hearing 
decision, a CMS reviewing official decision, or a decision by the 
Provider Reimbursement Review Board or the Administrator. We recognize 
that hospitals may have anticipated receiving greater Medicare 
reimbursement for still-open pre-FY 2005 cost reporting periods in 
circumstances where the ``covered'' days limitation would have resulted 
in a larger DSH adjustment. However, we are obliged to apply the 
statute as the Supreme Court determined Congress wrote it.

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 (Fixed-
Loss Outlier threshold for Nontransfer Cases adjusted for geographic 
variations in costs/Geometric Mean Length of Stay for the MS-DRG) * 
(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) of 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

[[Page 36201]]

length of stay must be greater than 4 days, and the average charges of 
1-day discharge cases in the MS-DRG must be at least 50 percent of the 
average charges for all cases within the MS-DRG. MS-DRGs that are part 
of an MS-DRG severity level group will qualify under the MS-DRG special 
payment methodology policy if any one of the MS-DRGs that share that 
same base MS-DRG qualifies (Sec.  412.4(f)(6)).
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was 
deemed a ``qualified discharge'' if the individual was discharged to 
one of the following postacute care settings:
     A hospital or hospital unit that is not a subsection (d) 
hospital.
     A skilled nursing facility.
     Related home health services provided by a home health 
agency provided within a timeframe established by the Secretary 
(beginning within 3 days after the date of discharge).
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
provided by a hospice program as a qualified discharge, effective for 
discharges occurring on or after October 1, 2018. In the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41394), we made conforming amendments to 
Sec.  412.4(c) of the regulation to include discharges to hospice care 
occurring on or after October 1, 2018, as qualified discharges. We 
specified that hospital bills with a Patient Discharge Status code of 
50 (Discharged/Transferred to Hospice--Routine or Continuous Home Care) 
or 51 (Discharged/Transferred to Hospice, General Inpatient Care or 
Inpatient Respite) are subject to the postacute care transfer policy in 
accordance with this statutory amendment.
2. Proposed Changes for FY 2025
    As discussed in section II.D. of the preamble of this proposed 
rule, based on our analysis of FY 2023 MedPAR claims data, we are 
proposing to make changes to a number of MS-DRGs, effective for FY 
2025. Specifically, we are proposing to do the following:
     Adding ICD-10-PCS codes describing left atrial appendage 
closure (LAAC) procedures and cardiac ablation procedures to proposed 
new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac 
Ablation).
     Delete existing MS-DRGs 453, 454, and 455 (Combined 
Anterior and Posterior Spinal Fusion with MCC, with CC, and without CC/
MCC, respectively) and to reassign procedures from the existing MS-
DRGs, 453, 454, and 455 and MS-DRGs 459 and 460 (Spinal Fusion except 
Cervical with MCC and without MCC, respectively) to proposed new MS-DRG 
402 (Single Level Combined Anterior and Posterior Spinal Fusion Except 
Cervical), proposed new MS-DRGs 426, 427, and 428 (Multiple Level 
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC, 
with CC, without MCC/CC, respectively), proposed new MS-DRGs 429 and 
430 (Combined Anterior and Posterior Cervical Spinal Fusion with MCC 
and without MCC, respectively), and proposed new MS-DRGs 447 and 448 
(Multiple Level Spinal Fusion Except Cervical with MCC, and without 
MCC, respectively). We note that we are also proposing to revise the 
title of MS-DRGs 459 and 460 to ``Single Level Spinal Fusion Except 
Cervical with MCC and without MCC, respectively''.
     Reassign cases that report a principal diagnosis of acute 
leukemia with an ``other'' O.R. procedure from MS-DRGs 834, 835, and 
836 (Acute Leukemia without Major O.R. Procedures with MCC, with CC, 
and without CC/MCC, respectively) to proposed new MS-DRG 850 (Acute 
Leukemia with Other O.R. Procedures). We note that we are also 
proposing to revise the title of MS-DRGs 834, 835, and 836 from ``Acute 
Leukemia without Major O.R. Procedures with MCC, with CC, and without 
CC/MCC'', respectively to ``Acute Leukemia with MCC, with CC, and 
without CC/MCC''.
    The proposed revised MS-DRGs 459 and 460 are currently subject to 
the postacute care transfer policy. We believe it is appropriate to 
reevaluate the postacute care transfer policy status for MS-DRGs 459 
and 460. When proposing changes to MS-DRGs that involve adding, 
deleting, and reassigning procedures between proposed new and revised 
MS-DRGs, we continue to believe it is necessary to evaluate all of the 
affected MS-DRGs to determine whether they should be subject to the 
postacute care transfer policy.
    MS-DRGs 834, 835, and 836 are currently not subject to the 
postacute care transfer policy. While we are proposing to reassign 
certain cases from these MS-DRGs to newly proposed MS-DRGs, we have 
estimated that less than 5 percent of the current cases would shift 
from the current assigned MS-DRGs to the proposed new MS-DRGs. We do 
not consider these proposed revisions to constitute a material change 
that would warrant reevaluation of the postacute care status of MS-DRGs 
834, 835, and 836. 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.
    In light of the proposed changes to the MS-DRGs for FY 2025, 
according to the regulations under Sec.  412.4(d), we have evaluated 
the MS-DRGs using the general postacute care transfer policy criteria 
and data from the FY 2023 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.
    Proposed new MS-DRGs 426, 427, 447, and 448 would qualify to be 
included on the list of MS-DRGs that are subject to the postacute care 
transfer policy. As described in the regulations at Sec.  
412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS DRG will all 
qualify under the postacute care transfer policy if any one of the MS-
DRGs that share that same base MS-DRG qualifies. We therefore propose 
to add proposed new MS-DRGs 426, 427, 428, 447, and 448 to the list of 
MS-DRGs that are subject to the postacute care transfer policy.
    MS-DRGs 459 and 460 are currently subject to the postacute care 
transfer policy. As a result of our review, these MS-DRGs, as proposed 
to be revised, would not qualify to be included on the list of MS-DRGs 
that are subject to the postacute care transfer policy. We therefore 
propose to remove proposed revised MS-DRGs 459 and 460 from the list of 
MS-DRGs that are subject to the postacute care transfer policy if the 
proposed changes to these MS-DRGs are finalized.
    Using the December 2023 update of the FY 2023 MedPAR file, we have 
developed the following chart which sets forth the most recent analysis 
of the postacute care transfer policy criteria completed for this 
proposed rule with respect to each of these proposed new or revised MS-
DRGs. For the FY 2025 final rule, we intend to update this analysis 
using the most recent available data at that time.
BILLING CODE 4120-01-P

[[Page 36202]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.181


[[Page 36203]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.182

BILLING CODE 4120-01-C
    During our annual review of proposed new or revised MS-DRGs and 
analysis of the December 2023 update of the FY 2023 MedPAR file, we 
reviewed the list of proposed revised or new MS-DRGs that qualify to be 
included on the list of MS-DRGs subject to the postacute care transfer 
policy for FY 2025 to determine if any of these MS-DRGs would also be 
subject to the special payment methodology policy for FY 2025. We note 
that MS-DRGs 459 and 460 are not currently subject to the special 
payment policy, and as we are proposing to remove them from the list of 
MS-DRGs subject to the postacute care transfer policy if the proposed 
changes to those MS-DRGs are finalized, no further evaluation of 
special payment policy is necessary.
    Based on our analysis of proposed changes to MS-DRGs included in 
this proposed rule, we determined that proposed new MS-DRGs 426, 427, 
and 447 meet the criteria for the MS-DRG special payment methodology. 
As described in the regulations at Sec.  412.4(f)(6)(iv), MS-DRGs that 
share the same base MS-DRG will all qualify under the MS-DRG special 
payment policy if any one of the MS-DRGs that share that same base MS-
DRG qualifies. Therefore, we are proposing that MS-DRGs 426, 427, 428, 
447, 448, would be subject to the MS-DRG special payment methodology, 
effective for FY 2025. For the FY 2025 final rule, we intend to update 
this analysis using the most recent available data at that time.
[GRAPHIC] [TIFF OMITTED] TP02MY24.183

B. Proposed Changes in the Inpatient Hospital Update for FY 2025 (Sec.  
412.64(d))

1. Proposed FY 2025 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 2025, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2024. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.) Specifically, consistent with 
section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act, we are setting the applicable 
percentage increase by applying the following adjustments in the 
following sequence. The applicable percentage increase under the IPPS 
for FY 2025 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).

[[Page 36204]]

    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.
    As published in the FY 2006 IPPS final rule (70 FR 47403), in 
accordance with section 404 of Public Law 108-173, CMS determined a new 
frequency for rebasing the hospital market basket of every 3 years. In 
compliance with section 404 of the of Public Law 108-173, 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. Consistent with our established frequency 
of rebasing the IPPS market basket every 4 years, we plan on proposing 
to rebase and revise the IPPS market basket in the FY 2026 IPPS/LTCH 
PPS proposed rule. We note that our preliminary evaluation of more 
recent Medicare cost report data for IPPS hospitals for 2022 indicates 
that the major IPPS market basket cost weights (particularly the 
compensation and drug cost weights) are similar to those finalized in 
the 2018-based IPPS market basket.
    We are proposing to base the FY 2025 market basket update used to 
determine the applicable percentage increase for the IPPS on IHS Global 
Inc.'s (IGI's) fourth quarter 2023 forecast of the 2018-based IPPS 
market basket rate-of-increase with historical data through third 
quarter 2023, which is estimated to be 3.0 percent. We also are 
proposing that if more recent data subsequently become available (for 
example, a more recent estimate of the market basket update), we would 
use such data, if appropriate, to determine the FY 2025 market basket 
update in the final rule.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
productivity adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this productivity adjustment as equal to 
the 10-year 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 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/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. 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 2025, we are proposing a productivity adjustment of 0.4 
percent. Similar to the proposed market basket rate-of-increase, for 
this proposed rule, the estimate of the proposed FY 2025 productivity 
adjustment is based on IGI's fourth quarter 2023 forecast. As noted 
previously, we are proposing that if more recent data subsequently 
become available, we would use such data, if appropriate, to determine 
the FY 2025 productivity adjustment for the final rule.
    Based on these data, we have determined four proposed applicable 
percentage increases to the standardized amount for FY 2025, as 
specified in the following table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.184

    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

[[Page 36205]]

data and Sec.  412.64(d)(3) for a hospital that is not a meaningful EHR 
user, less a productivity adjustment.
    As discussed in section V.F. of the preamble of this proposed rule, 
section 4102 of the Consolidated Appropriations Act (CAA), 2023 (Pub. 
L. 117-328), enacted on December 29, 2022, extended the MDH program 
through FY 2024 (that is, for discharges occurring on or before 
September 30, 2024). Subsequently, section 307 of the Consolidated 
Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 
9, 2024, further extended the MDH program for FY 2025 discharges 
occurring before January 1, 2025. Prior to enactment of the CAA, 2024, 
the MDH program was only to be in effect through the end of FY 2024. 
Under current law, the MDH program will expire for discharges on or 
after January 1, 2025. We refer readers to section V.F. of the preamble 
of this proposed rule for further discussion of the MDH program.
    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.
    For FY 2025, we are proposing the following updates to the 
hospital-specific rates applicable to SCHs and MDHs: A proposed update 
of 2.6 percent for a hospital that submits quality data and is a 
meaningful EHR user; a proposed update of 0.35 percent for a hospital 
that submits quality data and is not a meaningful EHR user; a proposed 
update of 1.85 percent for a hospital that fails to submit quality data 
and is a meaningful EHR user; and a proposed update of -0.4 percent for 
a hospital that fails to submit quality data and is not an meaningful 
EHR user. As previously discussed, we are proposing that if more recent 
data subsequently become available (for example, a more recent estimate 
of the market basket update and the productivity adjustment), we would 
use such data, if appropriate, to determine the market basket update 
and the productivity adjustment in the final rule.
2. Proposed FY 2025 Puerto Rico Hospital Update
    Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of 
the Act to specify that subsection (d) Puerto Rico hospitals are 
eligible for incentive payments for the meaningful use of certified EHR 
technology, effective beginning FY 2016. In addition, section 
1886(n)(6)(B) of the Act was amended to specify that the adjustments to 
the applicable percentage increase under section 1886(b)(3)(B)(ix) of 
the Act apply to subsection (d) Puerto Rico hospitals that are not 
meaningful EHR users, effective beginning FY 2022. Accordingly, for FY 
2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section 
602(d) of Public Law 114-113 requires that any subsection (d) Puerto 
Rico hospital that is not a meaningful EHR user as defined in section 
1886(n)(3) of the Act and not subject to an exception under section 
1886(b)(3)(B)(ix) of the Act will have ``three-quarters'' of the 
applicable percentage increase (prior to the application of other 
statutory adjustments), or three-quarters of the applicable market 
basket rate-of-increase, reduced by 33\1/3\ percent. The reduction to 
three-quarters of the applicable percentage increase for subsection (d) 
Puerto Rico hospitals that are not meaningful EHR users increases to 
66\2/3\ percent for FY 2023, and, for FY 2024 and subsequent fiscal 
years, to 100 percent. (We note that section 1886(b)(3)(B)(viii) of the 
Act, which specifies the adjustment to the applicable percentage 
increase for ``subsection (d)'' hospitals that do not submit quality 
data under the rules established by the Secretary, is not applicable to 
hospitals located in Puerto Rico.) The regulations at 42 CFR 
412.64(d)(3)(ii) reflect the current law for the update for subsection 
(d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years. In 
the FY 2019 IPPS/LTCH PPS final rule, we finalized the payment 
reductions (83 FR 41674).
    For FY 2025, 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 2023 forecast of the 2018-based IPPS 
market basket update with historical data through third quarter 2023, 
for this FY 2025 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, as discussed previously, for Puerto 
Rico hospitals we are proposing a market basket update of 3.0 percent 
less a productivity adjustment of 0.4 percentage point. Therefore, for 
FY 2025, depending on whether a Puerto Rico hospital is a meaningful 
EHR user, there are two possible applicable percentage increases that 
could be applied to the standardized amount. Based on these data, we 
determined the following proposed applicable percentage increases to 
the standardized amount for FY 2025 for Puerto Rico hospitals:
     For a Puerto Rico hospital that is a meaningful EHR user, 
we are proposing a FY 2025 applicable percentage increase to the 
operating standardized amount of 2.6 percent (that is, the FY 2025 
estimate of the proposed market basket rate-of-increase of 3.0 percent 
less 0.4 percentage point for the proposed productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we are proposing a FY 2025 applicable percentage increase to the 
operating standardized amount of 0.35 percent (that is, the FY 2025 
estimate of the proposed market basket rate-of-increase of 3.0 percent, 
less an adjustment of 2.25 percentage points (the proposed market 
basket rate-of-increase of 3.0 percent x 0.75 for failure to be a 
meaningful EHR user), and less 0.4 percentage point for the proposed 
productivity adjustment).
    As noted previously, we are proposing that if more recent data 
subsequently become available, we would use such data, if appropriate, 
to determine the FY 2025 market basket update and the productivity 
adjustment for the FY 2025 IPPS/LTCH PPS final rule.

[[Page 36206]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.185

C. 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 the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Pub. L. 108-173) raised the DSH payment 
adjustment for RRCs such that they are not subject to the 12-percent 
cap on DSH payments that is applicable to other rural hospitals. RRCs 
also are not subject to the proximity criteria when applying for 
geographic reclassification. In addition, they do not have to meet the 
requirement that a hospital's average hourly wage must exceed, by a 
certain percentage, the average hourly wage of the labor market area in 
which the hospital is located.
    Section 4202(b) of the Balanced Budget Act of 1997 (Pub. L. 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 through 46000), 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 
47087), we indicated that we were revisiting that decision. 
Specifically, we stated that we would permit hospitals that previously 
qualified as an RRC and lost their status due to OMB redesignation of 
the county in which they are located from rural to urban, to be 
reinstated as an RRC. Otherwise, a hospital seeking RRC status must 
satisfy all of the other applicable criteria. We use the definitions of 
``urban'' and ``rural'' specified in subpart D of 42 CFR part 412. One 
of the criteria under which a hospital may qualify as an RRC is to have 
275 or more beds available for use (Sec.  412.96(b)(1)(ii)). A rural 
hospital that does not meet the bed size requirement can qualify as an 
RRC if the hospital meets two mandatory prerequisites (a minimum case-
mix index (CMI) and a minimum number of discharges), and at least one 
of three optional criteria (relating to specialty composition of 
medical staff, source of inpatients, or referral volume). (We refer 
readers to Sec.  412.96(c)(1) through (5) and the September 30, 1988, 
Federal Register (53 FR 38513) for additional discussion.) With respect 
to the two mandatory prerequisites, a hospital may be classified as an 
RRC if the hospital's--
     CMI is at least equal to the lower of the median CMI for 
urban hospitals in its census region, excluding hospitals with approved 
teaching programs, or the median CMI for all urban hospitals 
nationally; and
     Number of discharges is at least 5,000 per year, or, if 
fewer, the median number of discharges for urban hospitals in the 
census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45217), in light of 
the COVID-19 PHE, we amended the regulations at Sec.  412.96(h)(1) to 
provide for the use of the best available data rather than the latest 
available data in calculating the national and regional CMI criteria. 
We also amended the regulations at Sec.  412.96(c)(1) to indicate that 
the individual hospital's CMI value for discharges during the same 
Federal fiscal year used to compute the national and regional CMI 
values is used for purposes of determining whether a hospital qualifies 
for RRC classification. We also amended the regulations Sec.  
412.96(i)(1) and (2), which describe the methodology for calculating 
the number of discharges criteria, to provide for the use of the best 
available data rather than the latest available or most recent data 
when calculating the regional discharges for RRC classification.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The proposed national 
median CMI value for FY 2025 is based on the CMI values of all urban 
hospitals nationwide, and the proposed regional median CMI values for 
FY 2025 are based on the CMI values of all urban hospitals within each 
census region, excluding those hospitals with approved teaching 
programs (that is, those hospitals that train residents in an approved 
GME program as provided in Sec.  413.75). These proposed values are 
based on discharges occurring during FY 2023 (October 1, 2022 through 
September 30, 2023), and include bills posted to CMS' records through 
December 2023. We believe that this is the best available data for use 
in calculating the proposed national and regional median CMI values and 
is consistent with our proposal to use the FY 2023 MedPAR claims data 
for FY 2025 ratesetting.
    In this FY 2025 IPPS/LTCH PPS proposed rule, we are proposing that, 
in addition to meeting other criteria, if rural hospitals with fewer 
than 275 beds are to qualify for initial RRC status for cost reporting 
periods beginning on or after October 1, 2024, they must have a CMI 
value for FY 2023 that is at least--
     1.7764 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals

[[Page 36207]]

(excluding hospitals with approved teaching programs as identified in 
Sec.  413.75) calculated by CMS for the census region in which the 
hospital is located.
    The proposed median CMI values by region are set forth in the 
following table. We intend to update the proposed CMI values in the FY 
2025 IPPS/LTCH PPS final rule to reflect the updated FY 2023 MedPAR 
file, which will contain data from additional bills received through 
March 2024.
[GRAPHIC] [TIFF OMITTED] TP02MY24.186

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. For FY 2025, we are 
proposing to update the regional standards based on discharges for 
urban hospitals' cost reporting periods that began during FY 2022 (that 
is, October 1, 2021 through September 30, 2022), which are the latest 
cost report data available at the time this proposed rule was 
developed. We believe that this is the best available data for use in 
calculating the proposed median number of discharges by region and is 
consistent with our data proposal to use cost report data from cost 
reporting periods beginning during FY 2022 for FY 2025 ratesetting. 
Therefore, we are proposing that, in addition to meeting other 
criteria, a hospital, if it is to qualify for initial RRC status for 
cost reporting periods beginning on or after October 1, 2024, must 
have, as the number of discharges for its cost reporting period that 
began during FY 2022, at least--
     5,000 (3,000 for an osteopathic hospital); or
     If less, the median number of discharges for urban 
hospitals in the census region in which the hospital is located. We 
refer readers to the proposed number of discharges as set forth in the 
following table. We intend to update these numbers in the FY 2025 final 
rule based on the latest available cost report data.
[GRAPHIC] [TIFF OMITTED] TP02MY24.187

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, under this proposed rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.
3. Qualification Under the Discharge Criterion for Osteopathic 
Hospitals
    Section 1886(d)(5)(C) of the Act sets forth certain criteria that 
must be met for a hospital to be classified as a rural

[[Page 36208]]

referral center, including a discharge criterion specifying the 
hospital has at least 5,000 discharges a year or, if less, the median 
number of discharges in urban hospitals in the region in which the 
hospital is located. Section 9106 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (Pub. L. 99-272) amended section 
1886(d)(5)(C) of the Act to provide for a separate discharge criterion 
for an osteopathic hospital to qualify for classification as a rural 
referral center, effective for cost reporting periods beginning on or 
after January 1, 1986. To implement this statutory provision, in the FY 
1987 IPPS final rule, we revised 42 CFR 412.96(c)(2) to specify that 
for cost reporting periods beginning on or after January 1, 1986 an 
osteopathic hospital, recognized by the American Osteopathic Hospital 
Association, that is located in a rural area must have at least 3,000 
discharges during its most recently completed cost reporting period to 
meet the number of discharges criterion (51 FR 31471). In the FY 1996 
IPPS final rule, in light of a name change of the American Osteopathic 
Hospital Association to the American Osteopathic Healthcare 
Association, we subsequently revised 42 CFR 412.96(c)(2) to specify 
that the osteopathic hospital must be recognized by the American 
Osteopathic Healthcare Association ``(or any successor organization)'' 
(60 FR 45810).
    As we discussed in implementing the number of discharges criterion 
for osteopathic hospitals in the FY 1987 IPPS final rule, ``[b]ecause 
section 1886(d)(5)(C)(i) of the Act specifically limits this 
qualification to osteopathic hospitals, we do not believe that this 
standard should apply to all hospitals'' (51 FR 31473). Accordingly, to 
qualify under this lower number of discharges criterion, a hospital 
must be an osteopathic hospital. It has come to the attention of CMS 
that the successor organization to the American Osteopathic Healthcare 
Association, namely the Accreditation Commission for Health Care, 
accredits acute care hospitals, including hospitals that are not 
osteopathic. Thus, a hospital receiving an accreditation letter or 
certificate from the successor organization is not necessarily an 
osteopathic hospital. We are therefore proposing to revise the 
regulations at 42 CFR 412.96(c)(2) to clarify that, to qualify for RRC 
classification based on the lower discharge criterion for osteopathic 
hospitals, a hospital must be an osteopathic hospital and by itself 
recognition (such as an accreditation letter) by a successor 
organization to the American Osteopathic Healthcare Association is not 
necessarily sufficient to demonstrate that a hospital is an osteopathic 
hospital.
    We propose to amend our regulations at 42 CFR 412.96 by revising 
paragraph (c)(2)(ii) as follows: ``(ii) For cost reporting periods 
beginning on or after January 1, 1986, an osteopathic hospital, 
recognized by the American Osteopathic Healthcare Association (or any 
successor organization), that is located in a rural area must have at 
least 3,000 discharges during its cost reporting period that began 
during the same fiscal year as the cost reporting periods used to 
compute the regional median discharges under paragraph (i) of this 
section to meet the number of discharges criterion. A hospital applying 
for rural referral center status under the number of discharges 
criterion in this paragraph must demonstrate its status as an 
osteopathic hospital.''
    Consistent with section 1886(d)(5)(C)(i) of the Act, evidence of 
osteopathic status may include, but is not limited to, the hospital's 
scope of services and its mix of medical specialties. CMS will consider 
the totality of the information demonstrating whether an applicant 
hospital is an osteopathic hospital. We seek comment on additional 
types of evidence we should consider in the determination of a 
hospital's osteopathic status.

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

1. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital under the IPPS beginning in FY 
2005. The low-volume hospital payment adjustment is implemented in the 
regulations at 42 CFR 412.101. The additional payment adjustment to a 
low-volume hospital provided for under section 1886(d)(12) of the Act 
is in addition to any payment calculated under section 1886 of the Act, 
and is based on the per discharge amount paid to the qualifying 
hospital. 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. The payment adjustment for 
low-volume hospitals is not budget neutral.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59041 
through 59045), section 4101 of the CAA, 2023 (Pub. L. 117-328) 
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. The 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the temporary changes to the low-
volume hospital qualifying criteria and payment adjustment under the 
IPPS for a portion of FY 2025. Specifically, section 306 of the CAA, 
2024 further extended the modified definition of low-volume hospital 
and the methodology for calculating the payment adjustment for low-
volume hospitals under section 1886(d)(12) through December 31, 2024. 
Beginning January 1, 2025, the low-volume hospital qualifying criteria 
and payment adjustment will revert to the statutory requirements that 
were in effect prior to FY 2011, and the preexisting low-volume 
hospital payment adjustment methodology and qualifying criteria, as 
implemented in FY 2005 and discussed later in this section, will 
resume. We discuss the proposed payment policies for FY 2025 in section 
V.E.2. in the preamble of this proposed rule.

[[Page 36209]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.188

2. Extension of Temporary Changes to Low-Volume Hospital Payment 
Definition and Payment Adjustment Methodology and Conforming Changes to 
Regulations
    As discussed previously, section 4101 of the CAA, 2023 modified the 
definition of low-volume hospital and the methodology for calculating 
the payment adjustment for low-volume hospitals under section 
1886(d)(12) of the Act through September 30, 2024. Prior to the 
enactment of the CAA, 2024 (Pub. L. 118-42), the temporary changes to 
the low-volume hospital qualifying criteria and payment adjustment 
provided by section 4101 of CAA, 2023 were set to expire on October 1, 
2024. Section 306 of the CAA, 2024 extends the temporary changes to the 
low-volume hospital qualifying criteria and payment adjustment under 
the IPPS for the portion of FY 2025 beginning on October 1, 2024, and 
ending on December 31, 2024 (that is, for discharges occurring before 
January 1, 2025).
    Under section 1886(d)(12)(C)(i) of the Act, as amended by Public 
Law 118-42, for FYs 2019 through 2024 and the portion of FY 2025 
occurring before January 1, 2025, 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. In accordance with the existing regulations at Sec.  
412.101(a), we define the term ``road miles'' to mean ``miles'' as 
defined at Sec.  412.92(c)(1). Under section 1886(d)(12)(D) of the Act, 
as amended, for discharges occurring in FY 2019 through December 31, 
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).
    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. For qualifying hospitals with fewer 
than 3,800 total discharges but more than 500 total discharges, the 
low-volume hospital payment adjustment is calculated using the formula 
at Sec.  412.101(c)(3)(ii) (which is shown in the Table V.E.-01). For 
this purpose, the term ``discharge'' refers to total discharges, 
regardless of payer (that is, Medicare and non-Medicare discharges). 
The hospital's most recently submitted cost report is used to determine 
if the hospital meets the discharge criterion to receive the low volume 
payment adjustment in the current year (Sec.  412.101(b)(2)(iii)). The 
low-volume hospital payment adjustment for FYs 2019 through 2024 is set 
forth in the regulations at Sec.  412.101(c)(3).
    Consistent with the extension of the methodology for calculating 
the payment adjustment for low-volume hospitals through FY 2024, we are 
proposing to continue using the previously specified continuous, linear 
sliding scale formula to determine the low-volume hospital payment 
adjustment for the portion of FY 2025 occurring before January 1, 2025. 
We are also proposing to make conforming changes to the regulation text 
in Sec.  412.101 to reflect the extensions of the changes to the 
qualifying criteria and the payment adjustment methodology for low-
volume hospitals in accordance with provisions of the CAA, 2024. 
Specifically, we are proposing to make conforming changes to paragraphs 
(b)(2)(iii) and (c)(3) introductory text of Sec.  412.101 to reflect 
that the low-volume hospital payment adjustment policy in effect for 
the portion of FY 2025 through December 31, 2024, is the same low-
volume hospital payment adjustment policy in effect for FYs 2019 
through 2024 (as described in the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41398 through 41399) and in the FY 2024 IPPS/LTCH final rule (88 FR 
59041 through 59045)). In addition, in accordance with the provisions 
of the CAA, 2024, we are proposing to make conforming changes to 
paragraphs (b)(2)(i) and (c)(1) of Sec.  412.101 to reflect that for 
the portion of FY 2025 beginning on January 1, 2025 and for subsequent 
fiscal years, the low-volume hospital payment adjustment policy will 
revert back to the low-volume hospital payment adjustment policy in 
effect for FYs 2005 through 2010, as described in section V.E.3. of 
this preamble. We further propose that if the temporary changes to the 
low-volume payment adjustment are extended through legislation beyond 
December 31, 2024, we would make the conforming changes to the 
regulations at Sec.  412.101 (b)(2)(i),

[[Page 36210]]

(b)(2)(iii), (c)(1), and (c)(3) to reflect any further extension.
3. Proposed Payment Adjustment for the Portion of FY 2025 Beginning on 
January 1, 2025, and Subsequent Fiscal Years
    In accordance with section 1886(d)(12) of the Act, as amended by 
section 306 of the CAA, 2024, beginning with FY 2025 discharges 
occurring on or after January 1, 2025, the low-volume hospital 
definition and payment adjustment methodology will revert to the 
statutory requirements that were in effect prior to the amendments made 
by the Affordable Care Act and subsequent legislation. Specifically, 
section 1886(d)(12)(B) of the Act requires, for discharges occurring in 
FYs 2005 through 2010, FY 2025 discharges occurring on or after January 
1, 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.
    Therefore, effective for the portion of FY 2025 beginning on 
January 1, 2025 and subsequent years, under current policy at Sec.  
412.101(b), to qualify as a low-volume hospital, a subsection (d) 
hospital must be more than 25 road miles from another subsection (d) 
hospital and have less than 200 discharges (that is, less than 200 
discharges total, including both Medicare and non-Medicare discharges) 
during the fiscal year. For the portion of FY 2025 beginning on January 
1, 2025, and subsequent years, the statute specifies that a low-volume 
hospital must have less than 800 discharges during the fiscal year. 
However, as required by section 1886(d)(12)(B)(i) of the Act, the 
Secretary has developed an empirically justifiable payment adjustment 
based on the relationship, for IPPS hospitals with less than 800 
discharges, between the additional incremental costs (if any) that are 
associated with a particular number of discharges. Based on an analysis 
we conducted for the FY 2005 IPPS final rule (69 FR 49099 through 
49102), a 25-percent low-volume adjustment to all qualifying hospitals 
with less than 200 discharges was found to be most consistent with the 
statutory requirement to provide relief for low-volume hospitals where 
there is empirical evidence that higher incremental costs are 
associated with low numbers of total discharges. (Under the policy we 
established in that same final rule, hospitals with between 200 and 799 
discharges do not receive a low-volume hospital adjustment.)
    As discussed previously, for FYs 2005 through 2010 and FY 2019 and 
subsequent years, the discharge determination is made based on the 
hospital's number of total discharges, that is, Medicare and non-
Medicare discharges. The hospital's most recently submitted cost report 
is used to determine if the hospital meets the discharge criterion to 
receive the low-volume payment adjustment in the current year (Sec.  
412.101(b)(2)(i)). We use cost report data to determine if a hospital 
meets the discharge criterion because this is the best available data 
source that includes information on both Medicare and non-Medicare 
discharges. We note that, for FYs 2011 through 2018, we used the most 
recently available MedPAR data to determine the hospital's Medicare 
discharges because only Medicare discharges were used to determine if a 
hospital met the discharge criterion for those years.
    In addition to the discharge criterion, a hospital must also meet 
the mileage criterion to qualify for the low-volume payment adjustment. 
As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume 
hospital must be more than 25 road miles (or 15 road miles for FYs 2011 
through 2024) from another subsection (d) hospital. Accordingly, for FY 
2025 and subsequent fiscal years, in addition to the discharge 
criterion, the eligibility for the low-volume payment adjustment is 
also dependent upon the hospital meeting the mileage criterion at Sec.  
412.101(b)(2)(i), which specifies that a hospital must be located more 
than 25 road miles from the nearest subsection (d) hospital, consistent 
with section 1886(d)(12)(C)(i) of the Act. We define, at Sec.  
412.101(a), the term ``road miles'' to mean ``miles'' as defined at 
Sec.  412.92(c)(1) (75 FR 50238 through 50275 and 50414). As previously 
noted, we are proposing to make conforming changes to paragraphs 
(b)(2)(i) and (c)(1) of Sec.  412.101 to reflect that for the portion 
of FY 2025 beginning on January 1, 2025, and subsequent fiscal years, 
the low-volume hospital payment adjustment policy is the same as that 
in effect for FYs 2005 through 2010.
    On average, approximately 600 hospitals per year were eligible for 
the low-volume hospital payment adjustment for FYs 2019 through 2024 
under the temporary changes in the low-volume hospital payment policy 
as amended by section 50204 of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), and section 4101 of the Consolidated Appropriations Act, 
2023 (CAA, 2023) (Pub. L. 117-328). As discussed previously, the CAA, 
2024 further extended the modified definition of low-volume hospital 
and the methodology for calculating the payment adjustment for low-
volume hospitals under section 1886(d)(12) through December 31, 2024. 
Therefore, for the portion of FY 2025 beginning on January 1, 2025 and 
for subsequent years the low-volume hospital qualifying criteria and 
payment adjustment will revert to the statutory requirements that were 
in effect prior to FY 2011. Based on historical data for hospitals that 
qualified during FYs 2005--2010, we estimate that fewer than 10 
hospitals would qualify for the low-volume hospital payment adjustment 
for the portion of FY 2025 beginning on January 1, 2025 under current 
law.
5. Process for Requesting and Obtaining the Low-Volume Hospital Payment 
Adjustment FY 2025
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking, most recently in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59044 through 59045), 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

[[Page 36211]]

determination is made based on the hospital's number of total 
discharges, that is, Medicare and non-Medicare discharges, as was the 
case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and (iii), 
a hospital's most recently submitted cost report is used to determine 
if the hospital meets the discharge criterion to receive the low volume 
payment adjustment in the current year. As discussed in the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report 
data to determine if a hospital meets the discharge criterion because 
this is the best available data source that includes information on 
both Medicare and non-Medicare discharges. (For FYs 2011 through 2018, 
the most recently available MedPAR data were used to determine the 
hospital's Medicare discharges because non-Medicare discharges were not 
used to determine if a hospital met the discharge criterion for those 
years.) Therefore, a hospital must refer to its most recently submitted 
cost report for total discharges (Medicare and non-Medicare) to decide 
whether or not to apply for low-volume hospital status for a particular 
fiscal year.
    In addition to the discharge criterion, eligibility for the low-
volume hospital payment adjustment is also dependent upon the hospital 
meeting the applicable mileage criterion specified in section 
1886(d)(12)(C)(i) of the Act, which is codified at Sec.  412.101(b)(2), 
for the fiscal year. Specifically, to meet the mileage criterion to 
qualify for the low-volume hospital payment adjustment for the portion 
of FY 2025 beginning October 1, 2024 through December 31, 2024, a 
hospital must be located more than 15 road miles from the nearest 
subsection (d) hospital, as reflected in proposed revised Sec.  
412.101(b)(2). Additionally, to meet the mileage criterion to qualify 
for the low-volume hospital payment adjustment for the portion of FY 
2025 beginning January 1, 2025 through September 30, 2025, a hospital 
must be located more than 25 road miles from the nearest subsection (d) 
hospital. (We define in Sec.  412.101(a) the term ``road miles'' to 
mean ``miles'' as defined in Sec.  412.92(c)(1) (75 FR 50238 through 
50275 and 50414).) For establishing that the hospital meets the mileage 
criterion, the use of a web-based mapping tool as part of the 
documentation is acceptable. The MAC will determine if the information 
submitted by the hospital, such as the name and street address of the 
nearest hospital(s), location on a map, and distance from the hospital 
requesting low-volume hospital status, is sufficient to document that 
it meets the mileage criterion. If not, the MAC will follow up with the 
hospital to obtain additional necessary information to determine 
whether or not the hospital meets the applicable mileage criterion.
    In accordance with our previously established process, a hospital 
must make a written request for low-volume hospital status that is 
received by its MAC by September 1 immediately preceding the start of 
the Federal fiscal year for which the hospital is applying for low-
volume hospital status in order for the applicable low-volume hospital 
payment adjustment to be applied to payments for its discharges for the 
fiscal year beginning on or after October 1 immediately following the 
request (that is, the start of the Federal fiscal year). For a hospital 
whose request for low-volume hospital status is received after 
September 1, if the MAC determines the hospital meets the criteria to 
qualify as a low-volume hospital, the MAC will apply the applicable 
low-volume hospital payment adjustment to determine payment for the 
hospital's discharges for the fiscal year, effective prospectively 
within 30 days of the date of the MAC's low-volume status 
determination.
    Consistent with this previously established process, for FY 2025, 
we are proposing that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria (as described earlier). Specifically, 
for the portion of FY 2025 beginning October 1, 2024 through December 
31, 2024, a hospital must make a written request for low-volume 
hospital status that is received by its MAC no later than September 1, 
2024, in order for the low-volume, add-on payment adjustment to be 
applied to payments for its discharges beginning on or after October 1, 
2024. If a hospital's written request for low-volume hospital status 
for the portion of FY 2025 beginning October 1, 2024 through December 
31, 2024 is received after September 1, 2024, 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 2025 discharges beginning 
October 1, 2024 through December 31, 2024, effective prospectively 
within 30 days of the date of the MAC's low-volume hospital status 
determination.
    Additionally, we are proposing that a hospital must also submit a 
written request for low-volume hospital status to its MAC that includes 
sufficient documentation to establish that the hospital continues to 
meet the applicable mileage and discharge criteria for the portion of 
FY 2025 beginning on January 1, 2025 through September 30, 2025 (as 
described earlier). Specifically, for the portion of FY 2025 beginning 
on January 1, 2025, a hospital must make a written request for low-
volume hospital status that is received by its MAC no later than 
December 1, 2024, in order for the 25-percent, low-volume, add-on 
payment adjustment to be applied to payments for its discharges 
beginning on or after January 1, 2025. If a hospital's written request 
for low-volume hospital status for the portion of FY 2025 beginning on 
January 1, 2025 is received after December 1, 2024, 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 2025 
discharges on or after January 1, 2025, effective prospectively within 
30 days of the date of the MAC's low-volume hospital status 
determination.
    A hospital may choose to make a single written request for low-
volume hospital status to its MAC for both the portion of FY 2025 
beginning on October 1, 2024 and ending December 31, 2024 and the 
portion of FY 2025 beginning on January 1, 2025 through September 30, 
2024 by the September 1, 2024 deadline discussed previously. 
Alternatively, a hospital may choose to submit separate written 
requests, one for the portion of FY 2025 beginning on October 1, 2024 
and ending on December 31, 2024 (by the September 1, 2024 deadline 
discussed previously), and another for the portion of FY 2025 beginning 
on January 1, 2025 through September 30, 2025 (by the December 1, 2024 
deadline discussed previously).
    Under this process, a hospital that qualified for the low-volume 
hospital payment adjustment for FY 2024 may continue to receive a low-
volume hospital payment adjustment for FY 2025 without reapplying if it 
meets both the discharge criterion and the mileage criterion applicable 
for FY 2025 (that is, the discharge criterion and mileage criterion for 
the period beginning October 1, 2024 through December 31, 2024, as well 
as the discharge criterion and mileage criterion for the period 
beginning on January 1, 2025 through September 30, 2025, respectively). 
As discussed previously, for the portion of FY 2025 beginning on 
January 1, 2025, the discharge and the mileage criteria are reverting 
to the statutory requirements that were in effect prior to FY 2011, and 
to the preexisting low-

[[Page 36212]]

volume hospital qualifying criteria, as implemented in FY 2005 and 
specified in the existing regulations at Sec.  412.101(b)(2)(i). As in 
previous years, we are proposing that such a hospital must send written 
verification that is received by its MAC no later than September 1, 
2024 or December 1, 2024, respectively, stating that it meets the 
mileage criterion for the applicable portion(s) of FY 2025, as 
described previously. For example, for the portion of FY 2025 beginning 
October 1, 2024 through December 31, 2024, the hospital must state it 
is located more than 15 road miles from the nearest ``subsection (d)'' 
hospital. Similarly, for the portion of FY 2025 beginning on January 1, 
2025, the hospital must state it is located more than 25 road miles 
from the nearest ``subsection (d)'' hospital. For FY 2025, we are 
further proposing that this written verification must also state, based 
upon the most recently submitted cost report, that the hospital meets 
the discharge criterion for the applicable portion(s) of FY 2025, as 
described previously. For example, for the portion of FY 2025 beginning 
October 1, 2024 through December 31, 2024, the hospital must have less 
than 3,800 discharges total, including both Medicare and non-Medicare 
discharges. Similarly, for the portion of FY 2025 beginning on January 
1, 2025, the hospital must have less than 200 discharges total, 
including both Medicare and non-Medicare discharges. If a hospital's 
request for low-volume hospital status for FY 2025 is received after 
September 1, 2024, (or after December 1, 2024 for the portion of FY 
2025 beginning on January 1, 2025) and if the MAC determines the 
hospital meets the criteria to qualify as a low-volume hospital, the 
MAC will apply the applicable low-volume add-on payment adjustment to 
determine the payment for the hospital's discharges for the applicable 
portion(s) FY 2025, effective prospectively within 30 days of the date 
of the MAC's low-volume hospital status determination.

E. Proposed Changes in the Medicare-Dependent, Small Rural Hospital 
(MDH) Program (Sec.  412.108)

1. Background for the MDH Program
    Section 1886(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to a Medicare-dependent, small rural 
hospital (MDH). (For additional information on the MDH program and the 
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51683 through 51684).) As discussed in section V.B. 
of the preamble of this proposed rule, section 307 of the Consolidated 
Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 
9, 2024, extended the MDH program for FY 2025 discharges occurring 
before January 1, 2025. Prior to enactment of the CAA, 2024, the MDH 
program was only to be in effect through the end of FY 2024. Under 
current law, the MDH program provisions at section 1886(d)(5)(G) of the 
Act will expire for discharges on or after January 1, 2025. Beginning 
with discharges occurring on or after January 1, 2025, all hospitals 
that previously qualified for MDH status will be paid based on the 
Federal rate.
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program had been 
extended by subsequent legislation as follows: section 606 of the 
American Taxpayer Relief Act (Pub. L. 112-240) extended the MDH program 
through FY 2013 (that is, for discharges occurring before October 1, 
2013). Section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 
113-67) extended the MDH program through the first half of FY 2014 
(that is, for discharges occurring before April 1, 2014). Section 106 
of the Protecting Access to Medicare Act (Pub. L. 113-93) extended the 
MDH program through the first half of FY 2015 (that is, for discharges 
occurring before April 1, 2015). Section 205 of the MACRA (Pub. L. 114-
10) extended the MDH program through FY 2017 (that is, for discharges 
occurring before October 1, 2017). Section 50205 of the Bipartisan 
Budget Act (Pub. L. 115-123) extended the MDH program through FY 2022 
(that is for discharges occurring before October 1, 2022). Section 102 
of the Continuing Appropriations and Ukraine Supplemental 
Appropriations Act, 2023 (Pub. L. 117-180) extended the MDH program 
through December 16, 2022. Section 102 of the Further Continuing 
Appropriations and Extensions Act, 2023 (Pub. L. 117-229) extended the 
MDH program through December 23, 2022. Section 4102 of the Consolidated 
Appropriations Act, 2023 (Pub. L. 117-328) extended the MDH program 
through FY 2024 (that is for discharges occurring before October 1, 
2024). Lastly, under current law, section 307 of the CAA, 2024 (Pub. L. 
118-42) extended the MDH program through December 31, 2024 (that is, 
for discharges occurring before January 1, 2025).
    For additional information on the extensions of the MDH program 
after FY 2012, we refer readers to the following Federal Register 
documents: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 
53405 and 53413 through 53414); the FY 2013 IPPS notice (78 FR 14689); 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649); the 
FY 2014 interim final rule with comment period (79 FR 15025 through 
15027); the FY 2014 notice (79 FR 34446 through 34449); the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50022 through 50024); the August 2015 
interim final rule with comment period (80 FR 49596); the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57054 through 57057); the FY 2018 notice (83 
FR 18303 through 18305); the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41429); and the FY 2024 IPPS/LTCH PPS final rule (88 FR 59045).
2. Implementation of Legislative Extension of MDH Program
    Prior to the enactment of Public Law 118-42, under section 4102 of 
Public Law 117-328, the MDH program authorized by section 1886(d)(5)(G) 
of the Act was set to expire at the end of FY 2024. Section 307 of 
Public Law 118-42 amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act by striking ``October 1, 2024'' and 
inserting ``January 1, 2025''. Section 307 of Public Law 118-42 also 
made conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act.
    Therefore, we are proposing to make conforming changes to the 
regulations governing the MDH program at Sec.  412.108(a)(1) and 
(c)(2)(iii) and the general payment rules at Sec.  412.90(j) to reflect 
the extension of the MDH program through December 31, 2024.
    As a result of the extension of the MDH program through December 
31, 2024 as provided by section 307 of Public Law 118-42, a provider 
that is classified as an MDH as of September 30, 2024, will continue to 
be classified as an MDH as of October 1, 2024, with no need to reapply 
for MDH classification.
3. Expiration of the MDH Program
    Because section 307 of the CAA, 2024 extended the MDH program 
through December 31, 2024 only, beginning January 1, 2025, the MDH 
program will no longer be in effect. Since the MDH program is not 
authorized by statute beyond December 31, 2024, beginning January 1, 
2025, all hospitals that previously qualified for MDH status under 
section 1886(d)(5)(G) of the Act will no longer have MDH status and 
will be paid based on the IPPS Federal rate. There are currently 173 
MDHs, of which we estimate 114 would have been paid under the blended 
payment of the Federal rate and hospital-specific rate while the 
remaining 59 would have

[[Page 36213]]

been paid based on the IPPS Federal rate. With the expiration of the 
MDH program, all these providers will all be paid based on the IPPS 
Federal rate beginning with discharges occurring on or after January 1, 
2025.
    When the MDH program was set to expire at the end of FY 2012, in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we 
revised our sole community hospital (SCH) policies to allow MDHs to 
apply for SCH status in advance of the expiration of the MDH program 
and be paid as such under certain conditions. We codified these changes 
in the regulations at Sec.  412.92(b)(2)(i) and (b)(2)(v). 
Specifically, the existing regulations at Sec.  412.92(b)(2)(i) and 
(b)(2)(v) allow for an effective date of an approval of SCH status that 
is the day following the expiration date of the MDH program. We note 
that these same conditions apply to MDHs that intend to apply for SCH 
status with the expiration of the MDH program on December 31, 2024. 
Therefore, in order for an MDH to receive SCH status effective January 
1, 2025, the MDH must apply for SCH status at least 30 days before the 
expiration of the MDH program; that is, the MDH must apply for SCH 
status by December 2, 2024. The MDH also must request that, if approved 
as an SCH, the SCH status be effective with the expiration of the MDH 
program; that is, the MDH must request that the SCH status, if 
approved, be effective January 1, 2025, immediately after its MDH 
status expires with the expiration of the MDH program on December 31, 
2024. We emphasize that an MDH that applies for SCH status in 
anticipation of the expiration of the MDH program would not qualify for 
the January 1, 2025 effective date for SCH status if it does not apply 
by the December 2, 2024 deadline. If the MDH does not apply by the 
December 2, 2024 deadline, the hospital would instead be subject to the 
usual effective date for SCH classification as specified at Sec.  
412.92(b)(2)(i); that is, as of the date the MAC receives the complete 
application from the provider.
    As noted, we are proposing to make conforming changes to the 
regulations governing the MDH program at Sec.  412.108(a)(1) and 
(c)(2)(iii) and the general payment rules at Sec.  412.90(j) to reflect 
the extension of the MDH program through December 31, 2024. We are 
further proposing that if the MDH program were to be extended by law 
beyond December 31, 2024, similar to how it was extended by prior 
legislation as described previously, we would, depending on timing of 
such legislation in relation to the final rule, modify our proposed 
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 any such further extension of the MDH 
program. These modifications to our proposed conforming changes would 
only be made if the MDH program were to be extended by statute beyond 
December 31, 2024.

F. Payment for Indirect and Direct Graduate Medical Education Costs 
(Sec. Sec.  412.105 and 413.75 Through 413.83)

1. Background
    Section 1886(h) of the Act, as added by section 9202 of the 
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 
99-272) and as currently implemented in the regulations at 42 CFR 
413.75 through 413.83, establishes a methodology for determining 
payments to hospitals for the direct costs of approved graduate medical 
education (GME) programs. Section 1886(h)(2) of the Act sets forth a 
methodology for the determination of a hospital-specific base-period 
per resident amount (PRA) that is calculated by dividing a hospital's 
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is, 
for most hospitals, the hospital's cost reporting period beginning in 
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base 
year PRA is updated annually for inflation. In general, Medicare direct 
GME payments are calculated by multiplying the hospital's updated PRA 
by the weighted number of FTE residents working in all areas of the 
hospital complex (and at nonprovider sites, when applicable), and the 
hospital's Medicare share of total inpatient days.
    Section 1886(d)(5)(B) of the Act provides for a payment adjustment 
known as the indirect medical education (IME) adjustment under the IPPS 
for hospitals that have residents in an approved GME program, in order 
to account for the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The regulations regarding 
the calculation of this additional payment are located at 42 CFR 
412.105. The hospital's IME adjustment applied to the DRG payments is 
calculated based on the ratio of the hospital's number of FTE residents 
training in either the inpatient or outpatient departments of the IPPS 
hospital (and, for discharges occurring on or after October 1, 1997, at 
non-provider sites, when applicable) to the number of inpatient 
hospital beds.
    The calculation of both direct GME payments and the IME payment 
adjustment is affected by the number of FTE residents that a hospital 
is allowed to count. Generally, the greater the number of FTE residents 
a hospital counts, the greater the amount of Medicare direct GME and 
IME payments the hospital will receive. In an attempt to end the 
implicit incentive for hospitals to increase the number of FTE 
residents, Congress 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 in the Balanced Budget 
Act of 1997 (Pub. L. 105-33). 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 
cannot exceed the hospital's unweighted FTE count for direct GME in its 
most recent cost reporting period ending on or before December 31, 
1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based 
on the FTE count for IME during that cost reporting period is applied, 
effective for discharges occurring on or after October 1, 1997. Dental 
and podiatric residents are not included in this statutorily mandated 
cap.
2. Distribution of Additional Residency Positions Under the Provisions 
of Section 4122 of Subtitle C of the Consolidated Appropriations Act, 
2023 (CAA, 2023)
a. Overview
    CMS has increased the overall number of slots available to teaching 
hospitals on several previous occasions. Notably, Congress authorized 
Medicare payment for one thousand additional FTE GME resident slots in 
section 126(a) of the Consolidated Appropriations Act, 2021, adding 
paragraph 1886(h)(9) to the Act. Most recently, section 4122(a) of the 
CAA, 2023 amended section 1886(h) of the Act by adding a new section 
1886(h)(10) of the Act requiring the distribution of additional 
residency positions (also referred to as slots) to hospitals. Section 
1886(h)(10)(A) of the Act requires that for FY 2026, the Secretary 
shall initiate an application round to distribute 200 residency 
positions. At least 100 of the positions made available under section 
1886(h)(10)(A) shall be distributed for psychiatry or psychiatry 
subspecialty residency training programs. The Secretary is required, 
subject to certain

[[Page 36214]]

provisions in the law, to increase the otherwise applicable resident 
limit for each qualifying hospital that submits a timely application by 
the number of positions that may be approved by the Secretary for that 
hospital. The Secretary is required to notify hospitals of the number 
of positions distributed to them by January 31, 2026, and the increase 
is effective beginning July 1, 2026.
    In determining the qualifying hospitals for which an increase is 
provided, section 1886(h)(10)(B)(i) of the Act requires the Secretary 
to take into account the ``demonstrated likelihood'' of the hospital 
filling the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary.
    Section 1886(h)(10)(B)(ii) of the Act requires a minimum 
distribution for certain categories of hospitals. Specifically, the 
Secretary is required to distribute at least 10 percent of the 
aggregate number of total residency positions available to each of four 
categories of hospitals. Stated briefly, and discussed in greater 
detail later in this proposed rule, the categories are as follows: (1) 
hospitals located in rural areas or that are treated as being located 
in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) 
of the Act); (2) hospitals in which the reference resident level of the 
hospital is greater than the otherwise applicable resident limit; (3) 
hospitals in states with new medical schools or additional locations 
and branches of existing medical schools; and (4) hospitals that serve 
areas designated as Health Professional Shortage Areas (HPSAs). Section 
1886(h)(10)(F)(iii) of the Act defines a qualifying hospital as a 
hospital in one of these four categories.
    Section 1886(h)(10)(B)(iii) of the Act further requires that each 
qualifying hospital that submits a timely application receive at least 
1 (or a fraction of 1) of the residency positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 residency position.
    Section 1886(h)(10)(C) of the Act places certain limitations on the 
distribution of the residency positions. First, a hospital may not 
receive more than 10 additional full-time equivalent (FTE) residency 
positions. Second, no increase in the otherwise applicable resident 
limit of a hospital may be made unless the hospital agrees to increase 
the total number of FTE residency positions under the approved medical 
residency training program of the hospital by the number of positions 
made available to that hospital. Third, if a hospital that receives an 
increase to its otherwise applicable resident limit under section 
1886(h)(10) of the Act is eligible for an increase to its otherwise 
applicable resident limit under 42 CFR 413.79(e)(3) (or any successor 
regulation), that hospital must ensure that residency positions 
received under section 1886(h)(10) of the Act are used to expand an 
existing residency training program and not for participation in a new 
residency training program.
b. Determinations Required for the Distribution of Residency Positions
(1) Determination That a Hospital Has a ``Demonstrated Likelihood'' of 
Filling the Positions
    Section 1886(h)(10)(B)(i) of the Act directs the Secretary to take 
into account the ``demonstrated likelihood'' of the hospital filling 
the positions made available within the first 5 training years 
beginning after the date the increase would be effective, as determined 
by the Secretary. In accordance with section 1886(h)(10)(A)(iv) of the 
Act, the increase would be effective beginning July 1 of the fiscal 
year of the increase; therefore, additional residency positions under 
section 1886(h)(10) of the Act would be effective July 1, 2026.
    Consistent with the application cycle established for section 126 
of the CAA, 2021 (86 FR 73419 through 73445) we are proposing that the 
application deadline for the additional positions made available for a 
fiscal year be March 31 of the prior fiscal year; that is, for FY 2026, 
the application deadline would be March 31, 2025. Accordingly, all 
references in this section to the application deadline are references 
to the application deadline of March 31, 2025.
    We are proposing that a hospital show a ``demonstrated likelihood'' 
of filling the additional positions (sometimes equivalently referred to 
as slots) for which it applies by demonstrating that it does not have 
sufficient room under its current FTE resident cap(s) to accommodate a 
planned new program or expansion of an existing program. In order to be 
eligible for additional positions, the new program or expansion of an 
existing program could not begin prior to July 1, 2026, the effective 
date of the section 4122 residency positions.
    In order to demonstrate that a hospital does not have sufficient 
room under its current FTE resident cap(s) for purposes of the 
prioritization discussed at section c.3. of this preamble, if 
applicable, we are proposing that a hospital would be required to 
submit copies of its most recently submitted Worksheet E, Part A and 
Worksheet E-4 from the Medicare cost report (CMS-Form- 2552-10) as part 
of its application for an increase to its FTE resident cap(s). The 
hospital would demonstrate and attest to a planned new program or 
expansion of an existing program by meeting at least one of the 
following two ``Demonstrated Likelihood'' criteria:
     ``Demonstrated Likelihood'' Criterion 1 (New Residency 
Program). The hospital does not have sufficient room under its FTE 
resident cap, is not a rural hospital eligible for an increase to its 
cap under 42 CFR 413.79(e)(3) (or any successor regulation), and 
intends to use the additional FTEs as part of a new residency program 
that it intends to establish on or after the date the increase would be 
effective (that is, a new program that begins training residents at any 
point within the hospital's first 5 training years beginning on or 
after the effective date of the increase). Under ``Demonstrated 
Likelihood'' Criterion 1, the hospital will be required to meet at 
least one of the following conditions as part of its application:
    ++ Application for accreditation of the new residency program has 
been submitted to the Accreditation Council for Graduate Medical 
Education (ACGME) (or application for approval of the new residency 
program has been submitted to the American Board of Medical Specialties 
(ABMS)) by the application deadline.
    ++ The hospital has received written correspondence from the ACGME 
(or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of site 
visit) by the application deadline.
     ``Demonstrated Likelihood'' Criterion 2 (Expansion of an 
Existing Residency Program). The hospital does not have sufficient room 
under its FTE resident cap, and the hospital intends to use the 
additional FTEs to expand an existing residency training program within 
the hospital's first 5 training years beginning on or after the date 
the increase would be effective. Under ``Demonstrated Likelihood'' 
criterion 2, the hospital will be required to meet at least one of the 
following conditions as part of its application:
    ++ The hospital has received approval by the application deadline 
from an appropriate accrediting body (the ACGME or ABMS) to expand the 
number of FTE residents in the program.
    ++ The hospital has submitted a request by the application deadline 
for

[[Page 36215]]

a permanent complement increase of the existing residency program.
    ++ The hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME and is now 
seeking to fill those positions.
    Under ``Demonstrated Likelihood'' Criterion 2, the hospital is 
applying for an increase in its FTE resident cap because it is 
expanding an existing residency program. We are proposing this means 
that as of the application deadline the hospital is either already 
training residents in this program, or, if the program exists at 
another hospital as of that date, the residents will begin to rotate to 
the applying hospital on or after the effective date of the increase. 
In addition, we note that section 1886(h)(10)(C)(ii) of the Act 
requires that if a hospital is awarded positions, that hospital must 
increase the number of its residency positions by the amount the 
hospital's FTE resident cap increases, based on the newly awarded 
positions under section 4122 of CAA, 2023. Therefore, we are proposing 
that a hospital must, as part of its application, attest to increasing 
the number of its residency positions by the amount of the hospital's 
FTE resident cap increase based on any newly awarded positions, in 
accordance with the provisions of section 1886(h)(10)(B)(i) of the Act.
(2) Determination That a Hospital Is Located or Treated as Being 
Located in a Rural Area (Category One)
    Section 1886(h)(10)(B)(ii) of the Act requires the Secretary to 
distribute not less than 10 percent of resident positions available for 
distribution to each of four categories of hospitals. Under section 
1886(h)(10)(B)(ii)(I) of the Act, the first of these categories 
consists of hospitals that are located in a rural area (as defined in 
section 1886(d)(2)(D) of the Act) or are treated as being located in a 
rural area (pursuant to section 1886(d)(8)(E) of the Act). We refer to 
this category as Category One. We note that the definition of Category 
One for purposes of section 4122 of the CAA, 2023 mirrors the 
definition of Category One included under section 1886(h)(9)(B)(ii)(I) 
for purposes of section 126 of the CAA, 2021. Therefore, we are 
proposing to determine Category One eligibility as discussed in the 
final rule implementing section 126 of the CAA, 2021 (86 FR 73422 
through 73424).
    For purposes of determining whether a hospital is considered rural, 
we are proposing to use the County to CBSA Crosswalk and Urban CBSAs 
and Constituent Counties for Acute Care Hospitals File, or successor 
files containing similar information, from the most recent FY IPPS 
final rule (or correction notice if applicable). This file will be 
available on the CMS website in approximately August 2024, the year 
prior to the year of the application deadline, March 31, 2025. Under 
the file's current format, blank cells in Columns D and E indicate an 
area outside of a CBSA.
    Under section 1886(d)(8)(E) of the Act, a subsection (d) hospital 
(that is, generally, an IPPS hospital) that is physically located in an 
urban area is treated as being located in a rural area for purposes of 
payment under the IPPS if it meets criteria specified in section 
1886(d)(8)(E)(ii) of the Act, as implemented in the regulations at 
Sec.  412.103. Under these regulations, a hospital may apply to CMS to 
be treated as located in a rural area for purposes of payment under the 
IPPS. Given the fixed number of available residency positions, it is 
necessary to establish a deadline by which a hospital must be treated 
as being located in a rural area for purposes of Category One. We are 
proposing to use Table 2, or a successor table containing similar 
information, posted with the most recent IPPS final rule, available on 
the CMS website in approximately August 2024, (or correction notice if 
applicable), to determine whether a hospital is reclassified to rural 
under Sec.  412.103. If a hospital is not listed as reclassified to 
rural on Table 2, but has been subsequently approved by the CMS 
Regional Office to be treated as being located in a rural area for 
purposes of payment under the IPPS as of the March 31, 2025 application 
deadline, the hospital would submit its approval letter with its 
application in order to be treated as being located in a rural area for 
purposes of Category One.
(3) Determination of Hospitals for Which the Reference Resident Level 
of the Hospital Is Greater Than the Otherwise Applicable Resident Limit 
(Category Two)
    Under section 1886(h)(10)(B)(ii)(II) of the Act, the second 
category consists of hospitals in which the reference resident level of 
the hospital (as specified in section 1886(h)(10)(F)(iv) of the Act) is 
greater than the otherwise applicable resident limit. We refer to this 
category as Category Two. We note the definition of Category Two under 
section 1886(h)(10)(B)(ii)(II) of the Act mirrors the definition of 
Category Two under section 1886(h)(9)(B)(ii)(II), section 126 of the 
CAA, 2021. Therefore, we are proposing to determine Category Two 
eligibility as discussed in the final rule implementing section 126 of 
the CAA, 2021 (86 FR 73424 through 73425) with adjustments to consider 
the provisions of sections 126, 127, and 131 of the CAA, 2021, as 
discussed later.
    Under section 1886(h)(10)(F)(iv) of the Act, the term `reference 
resident level' means, with respect to a hospital, the resident level 
for the most recent cost reporting period of the hospital ending on or 
before the date of enactment of section 1886(h)(10) of the Act, 
December 29, 2022, for which a cost report has been settled (or, if 
not, submitted (subject to audit)), as discussed in this proposed rule.
    Under section 1886(h)(10)(F)(v) of the Act, the term `resident 
level' has the meaning given such term in paragraph (7)(C)(i). That 
section defines ``resident level'' as with respect to a hospital, the 
total number of full-time equivalent residents, before the application 
of weighting factors (as determined under paragraph (4)), in the fields 
of allopathic and osteopathic medicine for the hospital.
    Under section 1886(h)(10)(F)(i) of the Act, the term `otherwise 
applicable resident limit' means, ``with respect to a hospital, the 
limit otherwise applicable under subparagraphs (F)(i) and (H) of 
paragraph (4) on the resident level for the hospital determined without 
regard to the changes made by this provision of the CAA, 2023, but 
taking into account section 1886(h)(7)(A), (7)(B), (8)(A), (8)(B), and 
(9)(A)'' of the Act. These cross-referenced sub-paragraphs all address 
the distribution of positions and redistribution of unused positions.
    As finalized for purposes of section 126 of the CAA, 2023, the 
``reference resident level'' refers to a hospital's allopathic and 
osteopathic FTE resident count for a specific period. The definition 
can vary based on what calculation is being performed to determine the 
correct allopathic and osteopathic FTE resident count (see, for 
example, 42 CFR 413.79(c)(1)(ii)) (86 FR 73424)). As noted previously, 
section 4122 of the CAA, 2023, under new section 1886(h)(10)(F)(iv) of 
the Act defines the ``reference resident level'' as coming from the 
most recent cost reporting period of the hospital ending on or before 
the date of enactment of the CAA, 2023 (that is, December 29, 2022).
    Under new section 1886(h)(10)(F)(i) of the Act, the term 
``otherwise applicable resident limit'' is defined as ``the limit 
otherwise applicable under subparagraphs (F)(i) and (H) of paragraph 
(4) on the resident level for the hospital determined without regard to 
this paragraph [that is, section 1886(h)(10) of the Act], but taking 
into

[[Page 36216]]

account paragraphs (7)(A), (7)(B), (8)(A), (8)(B), and (9)(A).'' In the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 25505), we finalized for 
purposes of section 126 of the CAA, 2021, the definition of ``otherwise 
applicable resident limit'' as the hospital's 1996 cap during its 
reference year, adjusted for the following: ``new medical residency 
training programs'' as defined at Sec.  413.79(l); participation in a 
Medicare GME affiliation agreement as defined at Sec. Sec.  413.75(b) 
and referenced at 413.79(f); participation in an Emergency Medicare GME 
affiliation agreement as defined at Sec.  413.79(f); participation in a 
hospital merger; whether an urban hospital has a separately accredited 
rural training track program as defined at Sec.  413.79(k); applicable 
decreases or increases under section 422 of the MMA, applicable 
decreases or increases under section 5503 of the Affordable Care Act, 
and applicable increases under section 5506 of the Affordable Care Act. 
For purposes of section 4122 of the CAA, 2023, we are proposing to use 
this same definition of ``otherwise applicable resident limit'' and 
adding to this definition the following: applicable increases or 
adjustments under sections 126, 127, and 131 of the CAA, 2021.
    Regarding the term ``resident level'', in the CY 2011 OPPS final 
rule (75 FR 46391) we indicated that we generally refer to a hospital's 
number of unweighted allopathic and osteopathic FTE residents in a 
particular period as the hospital's resident level, which we are 
proposing to define consistently with the definition in section 4122 of 
the CAA, 2023; that is, the ``resident level'' under section 
1886(h)(7)(c)(i) of the Act, which is defined as the total number of 
full-time equivalent residents, before the application of weighting 
factors (as determined under paragraph 1886(h)(4) of the Act), in the 
fields of allopathic and osteopathic medicine for the hospital.
    For the purposes of section 4122 of the CAA, 2023 we are proposing 
that the definitions of the terms ``otherwise applicable resident 
limit,'' ``reference resident level,'' and ``resident level'' should be 
as similar as possible to the definitions those terms have in the 
regulations at Sec.  413.79(c), as initially set out in the CY 2011 
OPPS rulemaking, as revised for purposes of section 126 of the CAA, 
2021 (86 FR 73424) with adjustments made to the definition of 
``otherwise applicable resident limit'' for sections 126, 127, and 131 
of the CAA, 2021.
(4) Determination of Hospitals Located in States With New Medical 
Schools, or Additional Locations and Branch Campuses (Category Three)
    The third category specified in section 1886(h)(10)(B)(ii)(III) of 
the Act, as added by section 4122 of CAA, 2023, consists of hospitals 
located in States with new medical schools that received `Candidate 
School' status from the Liaison Committee on Medical Education (LCME) 
or that received `Pre-Accreditation' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward `Full Accreditation' status (as 
such term is defined by the LCME) or toward `Accreditation' status (as 
such term is defined by the COCA); or additional locations and branch 
campuses established on or after January 1, 2000, by medical schools 
with `Full Accreditation' status (as such term is defined by LCME) or 
`Accreditation' status (as such term is defined by the COCA). We note 
that the statutory language is specific with respect to these 
definitions. We refer to this category as Category Three. We note that 
the definition of Category Three for purposes of section 4122 of the 
CAA, 2023, mirrors the definition of Category Three included under 
section 1886(h)(9)(B)(ii)(III) of the Act for purposes of section 126 
of the CAA, 2021. Therefore, we are proposing to determine Category 
Three eligibility as discussed in the final rule implementing section 
126 of the CAA, 2021 (86 FR 73425 through 73426).
    We are proposing that the hospitals located in the following 35 
States and one territory, referred to as Category Three States, would 
be considered Category Three hospitals: Alabama, Arizona, Arkansas, 
California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, 
Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, 
Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New 
York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South 
Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, 
and Wisconsin. If a hospital is located in a State not listed here, but 
it believes the State in which it is located should be on this list, 
the hospital may submit a formal comment on this proposed rule to make 
a change to this list, or must provide documentation with submission of 
its application to CMS that the State in which it is located has a 
medical school or additional location or branch campus of a medical 
school established on or after January 1, 2000. Pursuant to the 
statutory language, all hospitals in such states are eligible for 
consideration; the hospitals, themselves, do not need to meet the 
conditions of section 1886(h)(10)(B)(ii)(III)(aa) or (bb) of the Act in 
order to be considered.
(5) Determination of Hospitals That Serve Areas Designated as Health 
Professional Shortage Areas Under Section 332(a)(1)(A) of the Public 
Health Service Act (Category Four)
    The fourth category specified in the law consists of hospitals that 
serve areas designated as HPSAs under section 332(a)(1)(A) of the 
Public Health Service Act (PHSA), as determined by the Secretary. 
Category Four for section 4122 of the CAA, 2023 mirrors the definition 
of Category Four included under section 1886(h)(9)(B)(ii)(IV) for 
purposes of implementing section 126 of the CAA, 2021. Therefore, we 
are proposing to determine Category Four eligibility as discussed in 
the final rule implementing section 126 of the CAA, 2021 (86 FR 73426 
through 73430).
    We are proposing that an applicant hospital qualifies under 
Category Four if it participates in training residents in a program in 
which the residents rotate for at least 50 percent of their training 
time to a training site(s) physically located in a primary care or 
mental-health-only geographic HPSA. Specific to mental-health-only 
geographic HPSAs, we are proposing that the program must be a 
psychiatry program or a subspecialty of psychiatry. In addition, a 
Category Four hospital must submit an attestation, signed and dated by 
an officer or administrator of the hospital who signs the hospital's 
Medicare cost report, that it meets the requirement that residents 
rotate for at least 50 percent of their training time to a training 
site(s) physically located in a primary care or mental-health-only 
geographic HPSA.
(6) Determination of a Qualifying Hospital
    Section 1886(h)(10)(F)(iii) of the Act defines a ``qualifying 
hospital'' as ``a hospital described in any of the subclauses (I) 
through (IV) of subparagraph (B)(ii).'' As such, and consistent with 
the definition of ``qualifying hospital'' used for purposes of section 
126 of the CAA, 2021 (86 FR 73430 through 73431), we are proposing to 
define a qualifying hospital as a Category One, Category Two, Category 
Three, or Category Four hospital, or one that meets the definitions of 
more than one of these categories.

[[Page 36217]]

c. Number of Residency Positions Made Available to Hospitals and 
Limitation on Individual Hospitals
(1) Number of Residency Positions Made Available and Distribution for 
Psychiatry or Psychiatry Subspecialty Residencies
    Section 1886(h)(10)(A)(ii) of the Act limits the aggregate number 
of total new residency positions made available in FY 2026 across all 
hospitals to no more than 200. Section 1886(h)(10)(A)(iii) of the Act 
further specifies that at least 100 of the positions made available 
under section 1886(h)(10) must be distributed for a psychiatry or 
psychiatry subspecialty residency. The phrase ``psychiatry or 
psychiatry subspecialty residency'' is defined at section 
1886(h)(10)(F)(ii) of the Act to mean ``a residency in psychiatry as 
accredited by the Accreditation Council for Graduate Medical Education 
(ACGME) for the purpose of preventing, diagnosing, and treating mental 
health disorders.''
    We are proposing that of the total residency slots distributed 
under section 4122 of the CAA, 2023, at least 100 but not more than 200 
slots would be distributed to hospitals applying for residency programs 
in psychiatry and psychiatry subspecialties. For purposes of 
determining which programs are considered psychiatry subspecialties, we 
are proposing to refer to the list included on ACGME website at https://www.acgme.org/ under the ``Specialties'' tab, currently: Addiction 
Medicine, Addiction Psychiatry, Brain Injury Medicine, Child and 
Adolescent Psychiatry, Consultation-Liaison Psychiatry, Forensic 
Psychiatry, Geriatric Psychiatry, Hospice and Palliative Medicine, and 
Sleep Medicine. We note that the ACGME list of psychiatry 
subspecialties may change, and we are proposing that the list of 
psychiatry subspecialties included on the ACGME website at the time of 
application submission would guide determination of which programs CMS 
would consider psychiatry subspecialties. In accordance with statute, 
the subspecialty would have to be accredited with psychiatry as a core 
specialty. We are also proposing that the remaining non-psychiatric 
slots would be awarded to other approved medical residency programs 
under 42 CFR 413.75(b).
(2) Pro Rata Distribution and Limitation on Individual Hospitals
    As noted earlier in this preamble, section 1886(h)(10)(B)(iii) of 
the Act requires that each qualifying hospital that submits a timely 
application under subparagraph 1886(h)(10)(A) of the Act would receive 
at least 1 (or a fraction of 1) of the positions made available under 
section 1886(h)(10) of the Act before any qualifying hospital receives 
more than 1 of such positions. Section 1886(h)(10)(C)(i) of the Act 
limits a qualifying hospital to receiving no more than 10 additional 
FTEs from those authorized under section 1886(h)(10) of the Act. As 
stated earlier in this preamble, we are proposing that a qualifying 
hospital is a Category One, Category Two, Category Three, or Category 
Four hospital, or one that meets the definitions of more than one of 
these categories. For purposes of distributing residency slots under 
section 4122 of the CAA, 2023, we are proposing to first distribute 
slots by prorating the available 200 positions among all qualifying 
hospitals such that each qualifying hospital receives up to 1.00 FTE, 
that is, 1.00 FTE or a fraction of 1.00 FTE. We are proposing that if 
residency positions are awarded based on a fraction of 1.00 FTE, each 
qualifying hospital would receive the same FTE amount. Consistent with 
the number of decimal places used for the FTE slots awards in other 
distributions such as section 126 of the CAA, 2021, we are proposing to 
prorate the slot awards under section 4122 of the CAA, 2023, rounded to 
two decimal places. The table later in this section provides examples 
of how the 200 slots would be prorated based on the number of 
qualifying applicants. Given the limited number of residency positions 
available and the number of hospitals we expect to apply, we are 
proposing that a hospital may not submit more than one application 
under section 4122 of the CAA, 2023.
[GRAPHIC] [TIFF OMITTED] TP02MY24.189

    We refer readers to section I.O.6. of Appendix A of this proposed 
rule where we discuss an alternative we considered for the distribution 
of slots under section 4122 of the CAA, 2023.
(3) Prioritization of Applications by HPSA Score
    If any residency slots remain after distributing up to 1.00 FTE to 
each qualifying hospital, we will prioritize the distribution of the 
remaining slots based on the HPSA score associated with the program for 
which each hospital is applying. Taking an example from the table in 
the previous section, if 180 qualifying hospitals apply under section 
4122 of the CAA, 2023, each qualifying hospital would receive 1.00 FTE 
and the 20 remaining residency positions would be prioritized for 
distribution based on the HPSA score associated with the program for 
which each hospital is applying. We are proposing the HPSA 
prioritization methodology will be the methodology we finalized for 
purposes of section 126 of the CAA, 2021 (86 FR 73434 through 73440). 
We believe including such a prioritization will further support the 
training of residents in underserved and rural areas thereby helping to 
address physician shortages and the larger issue of health inequities 
in these areas. Using this HPSA prioritization method, we are proposing 
to limit a qualifying hospital's total award under section 4122 of the 
CAA, 2023, to 10.00 additional FTEs, consistent with section 
1886(h)(10)(C)(i) of the Act. Consistent with the methodology we use 
for implementing section 126 of the CAA, 2021, as part of determining 
eligibility for additional slots, we would compare the hospital's FTE 
resident count to its adjusted FTE resident cap on the cost report 
worksheets submitted with its application. If the hospital's FTE count 
is below its adjusted FTE cap, the hospital would be ineligible for its 
full FTE request, because the facility had not yet fully utilized the 
already-allotted slots. We note that in calculating the adjusted FTE 
cap we do not consider adjustments for Medicare GME Affiliation 
Agreements since these adjustments are temporary.
    As finalized under section 126 of the CAA, 2021 (86 FR 73435), for 
purposes of prioritization under section 4122 of

[[Page 36218]]

the CAA, 2023, primary care and mental-health-only population and 
geographic HPSAs apply. As discussed in the final rule implementing 
section 126 of the CAA, 2021, each year in November, prior to the 
beginning of the application period, CMS will request HPSA ID and score 
information from HRSA so that recent HPSA information is available for 
use for the application period. CMS will only use this HPSA 
information, HPSA ID's and their corresponding HPSA scores, in order to 
review and prioritize applications. To assist hospitals in preparing 
for their applications, the HPSA information received from HRSA will 
also be posted when the online application system becomes available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME. The information will also be 
posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. 
Click on the link on the left side of the screen associated with the 
appropriate final rule home page or ``Acute Inpatient--Files for 
Download'' (86 FR 73445).
    Given that residency slots under section 4122 of the CAA, 2023 are 
to be distributed in FY 2026, we are proposing that the HPSA IDs and 
scores used for the prioritization of slots, if applicable, would be 
the same HPSA IDs and scores used for the prioritization of slots under 
round 4 of section 126 of the CAA, 2021. This group would include HPSAs 
that are in designated or proposed for withdrawal status at the time 
the HPSA information is received from HRSA. As noted in section j. of 
this preamble, CMS will request HPSA data from HRSA in November 2024 to 
be used for purposes of section 4122 of the CAA, 2023.
(4) Requirement for Rural Hospitals To Expand Programs
    Section 1886(h)(10)(C)(iii) of the Act requires that if a hospital 
that receives an increase in the otherwise applicable resident limit 
under section 1886(h)(10) of the Act would be eligible for an 
adjustment to the otherwise applicable resident limit for participation 
in a new medical residency training program under 42 CFR 413.79(e)(3) 
(or any successor regulation), the hospital shall ensure that any 
positions made available under this paragraph are used to expand an 
existing program of the hospital, and not be utilized for new medical 
residency training programs. Under the regulations at 42 CFR 
413.79(e)(3), a rural hospital may receive an increase to its cap for 
participating in training residents in a new program, which is 
effective after a 5-year cap-building period for that new program. We 
note that if a rural hospital were to receive a cap increase for a new 
program under the 5-year cap-building period as well as a cap increase 
for the new program under section 4122 of the CAA, 2023, there may be 
duplicative awarding of cap slots for the same program. Therefore, we 
are proposing to implement section 1886(h)(10)(C)(iii) of the Act by 
allowing rural hospitals to apply for slots to expand an existing 
program, but not for slots to begin a new program. We are proposing 
that this policy apply to both geographically rural hospitals and 
hospitals that have reclassified as rural under 42 CFR 412.103, since 
both groups of hospitals are considered rural under section 
1886(h)(10)(B)(ii)(I), which we refer to as Category One hospitals. 
Only geographically urban hospitals that have not reclassified as rural 
under 42 CFR 412.103 would be permitted to apply for slots to begin a 
new program.
d. Distributing at Least 10 Percent of Positions to Each of the Four 
Categories
    Section 1886(h)(10)(B)(ii) of the Act requires the Secretary to 
distribute at least 10 percent of the aggregate number of total 
residency positions available to each of the following categories of 
hospitals discussed earlier. Given our experience with distributing 
slots under section 126 of the CAA, 2021, we expect many hospitals will 
meet the qualifications of more than one category. We are proposing to 
collect information regarding qualification for all four categories in 
the distribution of slots under section 4122 of the CAA, 2023, to allow 
us to confirm that we have met this statutory requirement. Like the 
CAA, 2023 provision, section 1886(h)(9)(B)(ii) of the Act from 2021 
also requires the Secretary to distribute at least 10 percent of the 
aggregate number of total residency positions available to the same 
four categories of hospitals. Section 126 of the CAA, 2021, makes 
available 1,000 residency positions and therefore, at least 100 
residency positions must be distributed to hospitals qualifying in each 
of the four categories. In the final rule implementing section 126 of 
the CAA, 2021, we stated we would track progress in meeting all 
statutory requirements and evaluate the need to modify the distribution 
methodology in future rulemaking (86 FR 73441).
    To date, we have completed the distribution of residency slots 
under rounds 1 and 2 of the section 126 distributions (refer to CMS' 
DGME web page for links to the round 1 and 2 awards: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme). In tracking the 
statutory requirement that at least 10 percent of the aggregate number 
of total residency positions (100 out 1,000 slots) be distributed to 
hospitals qualifying in each of the four categories, we have determined 
that in rounds 1 and 2, only 12.76 DGME slots and 18.06 IME slots were 
distributed to hospitals qualifying under Category Four. For each of 
the other 3 categories based on the slots awarded in rounds 1 and 2, we 
anticipate meeting the 10 percent requirement. For example, we have 
determined that in rounds 1 and 2, 374.59 DGME and 375.11 IME slots 
were distributed to hospitals qualifying under Category Three.
    As discussed in the final rule implementing section 126 of the CAA, 
2021, an applicant hospital qualifies under Category Four if it 
participates in training residents in a program in which the residents 
rotate for at least 50 percent of their training time to a training 
site(s) physically located in a primary care or mental-health-only 
geographic HPSA. Specific to mental-health-only geographic HPSAs, the 
program must be a psychiatric or a psychiatric subspecialty program (86 
FR 73430). Given that only 12.76 DGME slots and 18.06 IME slots have 
been distributed to hospitals qualifying under Category Four, we are 
proposing an amendment to our prioritization methodology for rounds 4 
and 5 of section 126 of the CAA, 2021, to ensure that at least 100 
residency slots are distributed to these hospitals. We are not 
proposing an amendment to our prioritization methodology for round 3 
because the application period for round 3 runs from January 9, 2024 to 
March 31, 2024, prior to the date any proposals in this rule might be 
finalized.
    Our current methodology for distributing residency slots under 
section 126 prioritizes slot awards based on the HPSA score associated 
with the program for which the hospital is applying, with higher scores 
receiving priority (86 FR 73434 through 73440). We are proposing that 
in rounds 4 and 5 of section 126 of the CAA, 2021, we will prioritize 
the distribution of slots to hospitals that qualify under Category 
Four, regardless of HPSA score. The remaining slots awarded under 
rounds 4 and 5 will be distributed using the existing methodology based 
on HPSA score (86 FR 73434 through 73440). That is, the remaining slots 
will be distributed to hospitals qualifying under Category One, 
Category Two, or Category Three, or hospitals that meet

[[Page 36219]]

the definitions of more than one of these categories, based on the HPSA 
score associated with the program for which each hospital is applying.
e. Hospital Attestation to National CLAS Standards
    For section 126 of the CAA, 2021, we finalized a policy that all 
applicant hospitals be required to attest that they meet the National 
Standards for Culturally and Linguistically Appropriate Services in 
Health and Health Care (the National CLAS Standards) (86 FR 73441). 
This was to ensure that the section 126 distribution broadened the 
availability of quality care and services to all individuals, 
regardless of preferred language, cultures, and health beliefs. We 
stated in the final rule that the National CLAS standards are aligned 
with the Administration's commitment to addressing healthcare barriers, 
which include that residents are educated and trained in culturally and 
linguistically appropriate policies and practices. This continues to be 
the case today. Therefore, we are proposing the same requirement for 
section 4122 of the CAA, 2023, that we adopted for section 126 of the 
CAA, 2021, for the same reason. Specifically, we are proposing that in 
order to ensure that residents are educated and trained in culturally 
and linguistically appropriate policies and practices, all applicant 
hospitals for slots allocated under section 4122 of the CAA, 2023, 
would be required to attest that they meet the National CLAS Standards 
to ensure that the section 4122 distribution broadens the availability 
of quality care and services to all individuals, regardless of 
preferred language, cultures, and health beliefs. (For more information 
on the CLAS standards, please refer to https://thinkculturalhealth.hhs.gov/)
f. Payment of Additional FTE Residency Positions Awarded Under Section 
4122 of the CAA, 2023
    Section 1886(h)(10)(D) requires that CMS pay a hospital for 
additional positions awarded under this paragraph using the hospital's 
existing direct GME nonprimary care PRAs consistent with the 
regulations at Sec.  413.77. We note that as specified in section 
1886(h)(2)(D)(ii) of the Act, for cost reporting periods beginning on 
or after October 1, 1993, through September 30, 1995, each hospital's 
PRA for the previous cost reporting period was not updated for 
inflation for any FTE residents who were not either a primary care or 
an obstetrics and gynecology resident. As a result, hospitals with both 
primary care and obstetrics and gynecology residents and nonprimary 
care residents in FY 1994 or FY 1995 have two separate PRAs: one for 
primary care and obstetrics and gynecology and one for nonprimary care. 
Those hospitals that only trained primary care and/or obstetrics and 
gynecology residents and those that did not become teaching hospitals 
until after this 2-year period, have a single PRA for direct GME 
payment purposes. Therefore, we are proposing that for purposes of 
direct GME payments for section 4122 of the CAA, 2023, if a hospital 
has both a primary care and obstetrics and gynecology PRA and a 
nonprimary care PRA, the nonprimary care PRA will be used, and if a 
hospital has a single PRA, that PRA will be used. Furthermore, similar 
to the policy finalized for purposes of direct GME payments under 
section 126 of the CAA, 2021 (86 FR 73441), we are proposing that a 
hospital that receives additional positions under section 4122 of the 
CAA, 2023, would be paid for the FTE residents counted under those 
positions using the PRAs for which payment is made for FTE residents 
subject to the 1996 FTE cap. We expect to revise Worksheet E-4 to add a 
line on which hospitals will report the number of FTEs by which the 
hospital's FTE caps were increased for direct GME positions received 
under section 4122 of the CAA, 2023.
g. Aggregation of Additional FTE Residency Positions Awarded Under 
Section 4122 of the CAA, 2023
    Section 1886(h)(10)(E) of the Act states that the Secretary shall 
permit hospitals receiving additional residency positions attributable 
to the increase provided under 1886(h)(10) to, beginning in the fifth 
year after the effective date of such increase, apply such positions to 
the limitation amount under paragraph (4)(F) that may be aggregated 
pursuant to paragraph (4)(H) among members of the same affiliated 
group. Therefore, we are proposing that FTE resident cap positions 
added under section 4122 of the CAA, 2023, may be used in a Medicare 
GME affiliation agreement beginning in the 5th year after the effective 
date of the FTE resident cap positions consistent with the regulations 
at 42 CFR 413.75(b) and 413.79(f). We are proposing to amend paragraph 
(8) at 42 CFR 413.79(f) to state that FTE resident cap slots added 
under section 4122 of Public Law 117-328 may be used in a Medicare GME 
affiliation agreement beginning in the fifth year after the effective 
date of those FTE resident cap slots.
h. Conforming Regulation Amendments for 42 CFR 412.105 and 42 CFR 
413.79
    Section 4122 of the CAA, 2023, under subsection (b), amends section 
1886(d)(5)(B) of the Act to provide for increases in FTE resident 
positions for IME payment purposes. Specifically, subsection (b) adds a 
new section 1886(d)(5)(B)(xiii) of the Act, which states that for 
discharges occurring on or after July 1, 2026, if additional payment is 
made for FTE resident positions distributed to a hospital for direct 
GME purposes under section 1886(h)(10) of the Act, the hospital will 
receive IME payments based on the additional residency positions 
awarded using the same IME adjustment factor used for the hospital's 
other FTE residents. We are proposing conforming amendments to the IME 
regulations at 42 CFR 412.105(f)(1)(iv)(C)(4) to specify that effective 
for portions of cost reporting periods beginning on or after July 1, 
2026, a hospital may qualify to receive an increase in its otherwise 
applicable FTE resident cap if the criteria specified in 42 CFR 
413.79(q) are met. We expect to revise Worksheet E Part A to add a line 
on which hospitals will report the number of FTEs by which the 
hospital's FTE caps were increased for IME positions received under 
section 4122 of the CAA, 2023.
    We are also proposing to amend our regulations at 42 CFR 413.79 by 
adding a paragraph (q) to specify that for portions of cost reporting 
periods beginning on or after July 1, 2026, a hospital may receive an 
increase in its otherwise applicable FTE resident cap (as determined by 
CMS) if the hospital meets the requirements and qualifying criteria 
under section 1886(h)(10) of the Act and if the hospital submits an 
application to CMS within the timeframe specified by CMS.
i. Prohibition on Administrative and Judicial Review
    Section 4122 of the CAA, 2023, under subsection (c), prohibits 
administrative and judicial review of actions taken under section 
1886(h)(10) of the Act. Specifically, subsection (c) amends section 
1886(h)(7)(E) of the Act by inserting ``paragraph (10),'' after 
``paragraph (8),'' adding to the that paragraph to the list of 
residency distributions not subject to review. Therefore, we are 
proposing that the determinations and distribution of residency 
positions under sections 1886(d)(5)(B)(xiii) and 1886(h)(10) of the Act 
would be final and could not be subject to administrative or judicial 
review.

[[Page 36220]]

j. Application Process for Receiving Increases in FTE Resident Caps
    All qualifying hospitals seeking increases in their FTE resident 
caps must submit timely applications for this distribution by March 31, 
2025. The completed application must be submitted to CMS using an 
online application system, the Medicare Electronic Application Request 
Information System\TM\ (MEARIS\TM\). The burden associated with this 
information collection requirement is the time and effort necessary to 
review instructions and register for MEARIS\TM\ as well as the time and 
effort to gather, develop and submit various documents associated with 
a formal request of resident position increases from teaching hospitals 
to CMS. The aforementioned burden is subject to the Paperwork Reduction 
Act (PRA); and as discussed in section XII.B. of this proposed rule, 
the burden associated with these requests will be captured under OMB 
control number 0938-1417 (expiration date March 31, 2025). We will 
submit a revised information collection estimate to OMB for approval 
under OMB control number 0938-1417 (expiration date March 31, 2025).
    We are proposing that the following information be submitted as 
part of an application for the application to be considered complete:
     The name and Medicare provider number (CCN) of the 
hospital.
     The name of the Medicare Administrative Contractor to 
which the hospital submits its Medicare cost report.
     The residency program for which the hospital is applying 
to receive an additional position(s).
     FTE resident counts for direct GME and IME and FTE 
resident caps for direct GME and IME reported by the hospital in the 
most recent as-filed cost report. (Including copies of Worksheet E, 
Part A, and Worksheet E-4).
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 1 (New Residency Program), which of the 
following applies:
    ++ Application for accreditation of the new residency program has 
been submitted to the Accreditation Council for Graduate Medical 
Education (ACGME) (or application for approval of the new residency 
program has been submitted to the American Board of Medical Specialties 
(ABMS)) by March 31, 2025.
    ++ The hospital has received written correspondence from the ACGME 
(or ABMS) acknowledging receipt of the application for the new 
residency program, or other types of communication concerning the new 
program accreditation or approval process (such as notification of a 
site visit) by March 31, 2025.
     If the hospital qualifies under ``Demonstrated 
Likelihood'' Criterion 2 (Expansion of an Existing Residency Program), 
which of the following applies:
    ++ The hospital has received approval by March 31, 2025 from an 
appropriate accrediting body (the ACGME or ABMS) to expand the number 
of FTE residents in the program.
    ++ The hospital has submitted a request by March 31, 2025 for a 
permanent complement increase of the existing residency training 
program.
    ++ The hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME and is now 
seeking to fill those positions.
     Indication of the categories under section 
1886(h)(10)(F)(iii) of the Act under which the hospital believes itself 
to qualify:
    ++ (I) The hospital 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 pursuant to section 1886(d)(8)(E) of the Act.
    ++ (II) The reference resident level of the hospital (as specified 
in section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit.
    ++ (III) The hospital is located in a State with a new medical 
school (as specified in section 1886(h)(10)(B)(ii)(III)(aa) of the 
Act), or with additional locations and branch campuses established by 
medical schools (as specified in section 1886(h)(10)(B)(ii)(III)(bb) of 
the Act) on or after January 1, 2000.
    ++ (IV) The hospital serves an area designated as a HPSA under 
section 332(a)(1)(A) of the Public Health Service Act, as determined by 
the Secretary.
     The HPSA (if any) served by the residency program for 
which the hospital is applying and the HPSA ID for that HPSA.
     An attestation, signed and dated by an officer or 
administrator of the hospital who signs the hospital's Medicare cost 
report, stating the following:
    ``I hereby certify that the hospital is a Qualifying Hospital under 
section 1886(h)(10)(F)(iii) of the Social Security Act, and that there 
is a ``demonstrated likelihood'' that the hospital will fill the 
position(s) made available under section 1886(h)(10) of the Act within 
the first 5 training years beginning after the date the increase would 
be effective.''
    ``I hereby certify that (choose if applicable):

__ If my application is for a currently accredited residency program, 
the number of full-time equivalent (FTE) positions requested by the 
hospital does not exceed the number of positions for which the program 
is accredited.
__ If my hospital currently has unfilled positions in its residency 
program that have previously been approved by the ACGME, the number of 
FTE positions requested by the hospital does not exceed the number of 
previously approved unfilled residency positions.
__ If my application is for a residency training program with more than 
one participating site, I am only requesting the FTE amount that 
corresponds with the training occurring at my hospital, and any FTE 
training occurring at nonprovider settings consistent with 42 CFR 
412.105(f)(1)(ii)(E) and 413.78(g).''

    ``I hereby certify that the hospital agrees to increase the number 
of its residency positions by the amount the hospital's FTE resident 
caps are increased under section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023, if awarded positions under section 
1886(h)(10)(C)(ii) of the Act.''
    ``I hereby certify that (choose one):

__ In the geographic HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 50 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the population of 
the HPSA and are physically located in the HPSA.
__ In the population HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 50 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the designated 
underserved population of the HPSA and are physically located in the 
HPSA.
__ In the geographic HPSA the hospital is requesting that CMS use for 
prioritization of its application, at least 5 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the population of 
the HPSA and are physically located in the HPSA, and the program's 
training time at those sites plus the program's training time at Indian 
or Tribal facilities located outside of the HPSA is at least 50 percent 
of the program's training time.
__ In the population HPSA the hospital is requesting that CMS use for

[[Page 36221]]

prioritization of its application, at least 5 percent of the program's 
training time based on resident rotation schedules (or similar 
documentation) occurs at training sites that treat the designated 
underserved population of the HPSA and are physically located in the 
HPSA, and the program's training time at those sites plus the program's 
training time at Indian or Tribal facilities located outside of that 
HPSA is at least 50 percent of the program's training time.
__ None of the above apply.''

    ``I hereby certify that the hospital meets the National Standards 
for Culturally and Linguistically Appropriate Services in Health and 
Health Care (the National CLAS Standards).''
    ``I hereby certify that I understand that misrepresentation or 
falsification of any information contained in this application may be 
punishable by criminal, civil, and administrative action, fine and/or 
imprisonment under Federal law. Furthermore, I understand that if 
services identified in this application were provided or procured 
through payment directly or indirectly of a kickback or where otherwise 
illegal, criminal, civil, and administrative action, fines and/or 
imprisonment may result. I also certify that, to the best of my 
knowledge and belief, it is a true, correct, and complete application 
prepared from the books and records of the hospital in accordance with 
applicable instructions, except as noted. I further certify that I am 
familiar with the laws and regulations regarding Medicare payment to 
hospitals for the training of interns and residents.''
    The completed application must be submitted to CMS using the online 
application system MEARIS\TM\. A link to the online application system 
as well as instructions for accessing the system and completing the 
online application process will be made available on the CMS Direct GME 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    We note that if the hospital is applying using a HPSA ID, the HPSA 
score associated with that ID will automatically populate in the 
application module. In preparing their applications for additional 
residency positions, hospitals should refer to HRSA's Find Shortage 
Areas by Address (https://data.hrsa.gov/tools/shortage-area/by-address) 
to obtain the HPSA ID of the HPSA served by the program and include 
this ID in its application. Using this HPSA Find Shortage Areas by 
Address, applicants may enter the address of a training location 
(included on the hospital's rotation schedule or similar 
documentation), provided the location chosen participates in training 
residents in a program where at least 50 percent (5 percent if an 
Indian and Tribal facility is included) of the training time occurs in 
the HPSA. In November 2024, prior to the beginning of the application 
period, CMS will request HPSA ID and score information from HRSA so 
that recent HPSA information is available for use for the application 
period. CMS will only use this HPSA information, HPSA IDs and their 
corresponding HPSA scores, in order to review and prioritize 
applications. To assist hospitals in preparing for their applications, 
the HPSA information received from HRSA will also be posted when the 
MEARIS\TM\ application module becomes available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.
    The information will also be posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices. Click on the link on 
the left side of the screen associated with the appropriate final rule 
home page or ``Acute Inpatient--Files for Download.''
3. Proposed Modifications to the Criteria for New Residency Programs 
and Requests for Information
    Section 1886(h)(4)(H)(i) of the Act requires CMS to establish rules 
for applying the direct GME cap in the case of medical residency 
training programs established on or after January 1, 1995. Under 
section 1886(d)(5)(B)(viii) of the Act, this provision also applies for 
purposes of the IME adjustment. Accordingly, we issued regulations at 
Sec. Sec.  413.79(e)(1) through (3) discussing the direct GME cap 
calculation for a hospital that begins training residents in a new 
medical residency training program(s) on or after January 1, 1995. The 
same regulations apply for purposes of the IME cap calculation at Sec.  
412.105(f)(1)(vii). CMS implemented these statutory requirements in the 
August 29, 1997 Federal Register (62 FR 46005) and in the May 12, 1998 
Federal Register (63 FR 26333). The calculation of both the DGME cap 
and IME cap for new programs is discussed in the August 31, 2012 
Federal Register (77 FR 53416).
    Section 413.79(l) defines a new medical residency training program 
as ``a medical residency that receives initial accreditation by the 
appropriate accrediting body or begins training residents on or after 
January 1, 1995.'' In the August 27, 2009 Federal Register (74 FR 43908 
through 43917), CMS clarified the definition of a ``new'' residency 
program and adopted supporting criteria regarding whether or not a 
residency program can be considered ``new'' for the purpose of 
determining if a hospital can receive additional direct GME and/or IME 
cap slots for that program. CMS adopted these criteria in part to 
prevent situations where a program at an existing teaching hospital 
would be transferred to a new teaching hospital, resulting in cap slots 
created for the same program at two different hospitals. To be 
considered a ``new'' program for which new cap slots would be created, 
a previously non-teaching hospital would have to ensure that the 
program meets three primary criteria (74 FR 43912):
     The residents are new, and
     The program director is new, and
     The teaching staff are new.
    Over the years, we have received questions regarding the 
application of these criteria, such as whether CMS would still consider 
a program to be new for cap adjustment purposes if the three criteria 
were partially, but not fully, met. We have answered such questions by 
stating that, generally, a residency program's newness would not be 
compromised as long as the ``overwhelming majority'' of the residents 
or staff are not coming from previously existing programs in that same 
specialty.
    The question of what constitutes a ``new'' program for purposes of 
receiving additional Medicare-funded GME slots has taken on increasing 
significance in light of the ability of urban hospitals to reclassify 
as rural under 42 CFR 412.103 for IME purposes, and thus receive 
additional IME cap slots for any new program started. To continue to 
ensure that newly funded cap slots are created appropriately, we 
ultimately would like to establish in rulemaking additional criteria 
for determining program newness. However, we are not yet certain about 
some of the criteria that should be proposed, and so we are soliciting 
comments to gain additional clarity on best practices in these areas. 
Accordingly, we discuss the items we are proposing and the items on 
which we are soliciting public input through a Request for Information 
(RFI).
a. Newness of Residents
    Generally, when a hospital is creating a new residency program, it 
recruits individuals that have recently graduated from medical school, 
have no previous residency training experience, and

[[Page 36222]]

would be entering the program as first year (PGY1) residents. However, 
new programs sometimes receive inquiries from applicants that have 
training experience already, but for a variety of reasons need to 
transfer to another program. If the program that such a resident wishes 
to join is still within the 5-year cap building period, then, 
consistent with the criteria adopted in the August 27, 2009 final rule, 
the program director of this ``new'' program should be judicious with 
regard to accepting residents who have received previous training in 
the same specialty. In order to maintain the classification as a 
``new'' residency program, the ``overwhelming majority'' of residents 
in the program must be new. We believe it would be useful for the 
provider community to have a concrete standard to refer to in 
determining whether the ``overwhelming majority'' of residents in a 
program are in fact new. Therefore, we propose that, in order for a 
residency program to be considered new, at least 90 percent of the 
individual resident trainees (not FTEs) must not have previous training 
in the same specialty as the new program. For example, if there were 50 
trainees (not FTEs) entering the program over the course of the 5-year 
cap building period, then at least 45 of the trainees (90 percent of 
50) must enter the program as brand new first year residents in that 
particular specialty. If more than 10 percent of the trainees (not 
FTEs) transferred from another program at a different hospital/sponsor 
in the same specialty, even during their first year of training, we 
propose that this would render the program ineligible for new cap 
slots. (Note--we would apply standard rounding when 90 percent of a 
number does not equal a whole number, rounding down to the nearest 
whole number when the remainder is less than 0.5, and rounding up to 
the nearest whole number when the remainder is 0.5 or above. For 
example, if there were 48 trainees (not FTEs) entering the program over 
the course of the 5-year cap building period, then at least 43 of the 
trainees (90 percent of 48 = 43.2, which rounds down to 43) must enter 
the program as brand new first year residents in that particular 
specialty. If there were 45 trainees (not FTEs) entering the program, 
then at least 41 of the trainees (90 percent of 45 = 40.5, which rounds 
up to 41) must enter the program as brand new first year residents in 
that particular specialty.)
    For example, if a new program is in internal medicine, then at 
least 90 percent of the entering residents must not have previously 
enrolled and trained in an internal medicine program. If a resident was 
formally enrolled in an internal medicine program (either preliminary 
or categorical), even if that resident switched programs during their 
first year of training, then we would consider that resident to have 
had previous training in that same specialty. Conversely, if an 
individual was a resident in a specialty other than internal medicine, 
and that resident switched into the new internal medicine program and 
began training in the new internal medicine program as a PGY1, then 
that resident would not be considered to have had previous training in 
the same specialty, and would be counted as a brand new resident. 
(Note, we are distinguishing between a resident that is not enrolled in 
an internal medicine program but may have done a rotation in internal 
medicine as part of the requirements for a different specialty, from a 
resident that actually was enrolled and participated in an internal 
medicine program, consistent with the definition of ``resident'' at 42 
CFR 413.75(b). In this example, we are generally focusing on 
individuals who were accepted, enrolled, and participated in internal 
medicine; we are generally not concerned with an individual that was 
enrolled, accepted, and participated in a program other than internal 
medicine but did a rotation in internal medicine.) We propose that the 
proportion of brand new residents in a residency program would be 
determined by the MAC based on all the individuals (not FTEs) that 
enter the program as a whole at any point during the 5-year cap 
building period, after the end of the 5 years.
    We are proposing a threshold of 90 percent for new residents as 
that is generally consistent with the concept of an ``overwhelming 
majority,'' and because we have precedent for such a threshold in the 
regulations for section 5506 of the Affordable Care Act, which State 
that a hospital is considered to have taken over an ``entire'' program 
from a closed hospital if it can demonstrate that it took in 90 percent 
or more of the FTE residents in that program. Accordingly, for a 
program to be considered ``new'' for the purpose of determining if a 
hospital can receive additional direct GME and/or IME cap slots for 
that program, we propose that at least 90 percent of the individual 
resident trainees (not FTEs) in the program as a whole must not have 
had previous training in the same specialty as the new program. If more 
than 10 percent of the trainees (not FTEs) transferred from another 
program at a different hospital/sponsor in the same specialty, even 
during their first year of training, we propose that this would render 
the program as a whole (but not the entire hospital or its other new 
programs, if applicable) ineligible for new cap slots.
    In addition, we understand that there may be certain challenges 
that are unique to small or rural-based programs in developing new 
residencies, and that meeting a proposed threshold of 90 percent of 
resident trainees with no previous training experience in the specialty 
may be more difficult for those programs. Accordingly, we are 
soliciting comments on what should be considered a ``small'' program 
and what percentage threshold or other approach regarding new resident 
trainees should be applied to these programs. We solicit comment on 
defining a small residency program as a program accredited for 16 or 
fewer resident positions, because 16 positions would encompass the 
minimum number of resident positions required for accredited programs 
in certain specialties, such as primary care and general surgery, that 
have historically experienced physician shortages, and therefore have 
been prioritized by Congress and CMS for receipt of slots under 
sections 5503 and 5506 of the Affordable Care Act.
b. Newness of Faculty and Program Director--RFI (Request for 
Information)
    Regarding the selection of teaching staff and a program director, 
we understand that it would be reasonable for a new program to wish to 
hire some staff that already have experience teaching residents and 
operating a program. Therefore, to accommodate the hiring of some 
experienced staff, we believe that the percentage of faculty with no 
previous experience teaching in a program in the same specialty should 
probably be less than 90 percent, but we are uncertain what the 
appropriate threshold should be. At one extreme, we can envision a 
scenario where recruitment of most or all of the experienced staff from 
a particular existing program may even result in the disintegration of 
and possible closure of that existing program. Such a situation could 
be chaotic to that hospital and leave residents scrambling for 
alternative sites to complete their training. Consequently, we do 
believe there should be some threshold for the relative proportion of 
non-experienced and experienced staff at a new residency program, and 
we are requesting information from commenters regarding what a 
reasonable threshold might be. We also are seeking comment on the 
variables involved in examining the

[[Page 36223]]

newness of teaching staff. We note that the ACGME defines ``Core 
Faculty'' \156\ in its Glossary of Terms as physician teachers that 
devote at least 15 hours per week to a residency program, or 10 hours 
per week to a fellowship. However, in addition to other minimum hours 
for staff, there may be other types of faculty or staff that CMS should 
consider to be involved in a program. We are therefore soliciting 
information from commenters regarding whether any threshold for 
determining the newness of teaching staff for a new program should 
consider only the ACGME's definition of ``Core Faculty'', or count non-
core faculty as well.
---------------------------------------------------------------------------

    \156\ Core Faculty: All physician faculty members who have a 
significant role in the education of residents/fellows and who have 
documented qualifications to instruct and supervise. Core faculty 
members devote at least 15 hours per week to resident, or 10 hours 
per week to fellow, education and administration. All core faculty 
members should evaluate the competency domains, work closely with 
and support the program director, assist in developing and 
implementing evaluation systems, and teach and advise residents/
fellows. (https://www.acgme.org/globalassets/pdfs/ab_acgmeglossary.pdf).
---------------------------------------------------------------------------

    While we are uncertain what percentage the threshold for 
experienced faculty should be, we are suggesting a threshold for 
commenters to consider. We suggest that up to 50 percent of the 
teaching staff in a new program may come from a previously existing 
program in the same specialty, but if so, each of those staff members 
should come from different previously existing programs. For example, 
if there are 6 teaching staff total, then at least 3 must have no 
previous experience teaching in the same specialty, while up to 3 may 
come from previously existing programs in the same specialty; however, 
each of the 3 experienced faculty would have to come from a different 
previously existing program. That is, one may come from Hospital A's 
existing program, another could come from Hospital B's existing 
program, and a third could come from Hospital C's existing program; but 
no more than one could come from any of Hospital A, Hospital B, or 
Hospital C. If two were to come from Hospital A, we suggest that would 
not be permissible.
    We have also been asked whether it would make a difference if a 
faculty member had previous teaching experience, but a certain amount 
of time has passed since they taught in a program in the same specialty 
(for example, because they accepted a non-teaching job in a different 
hospital, or the program where they previously taught has ceased to 
operate). As mentioned previously, we would want to avoid loss of most 
or all of an existing program's experienced faculty. However, we 
believe this concern might be mitigated if a faculty member has not 
been associated with an existing program for a certain amount of time, 
or if the program in question has closed.
    In the August 27, 2009 Federal Register, we discussed the specific 
scenario in which a hospital discontinued one of its previously 
existing residency programs, and then established a program in the same 
specialty at some time in the future:
    ``[I]f a hospital wishes to begin training residents in a 
particular program in which it trained residents in the past, but the 
program has not trained residents for the past 10 years, the program 
could be subsequently considered a new program. We believe that a 
program that is closed for several years and then reopens is separate 
and distinct from the previous program, and would likely not involve 
any residents that had trained in the previous program, even though, as 
the commenter indicated, the directors and teaching staff may be the 
same. (However, we note that it may be necessary to determine whether 
the program director and the teaching staff have been training [dental] 
residents during the past 10 years at another training site in order to 
determine whether the program at the hospital that is beginning to 
train residents after a 10-year hiatus is truly a new program)'' (74 FR 
43916, emphasis added).
    We continue to believe that if a hospital wishes to begin training 
residents in a particular program in which it trained residents in the 
past, but the program has not trained residents for the past 10 years, 
the program could be subsequently considered a new program. More 
generally, we believe that, in determining whether the presence of a 
faculty member might jeopardize the newness of a new residency program, 
it may make sense to consider whether a certain amount of time has 
passed since that faculty member last taught in another program in the 
same specialty. We are therefore soliciting comments on whether 10 
years, or some other amount of time, would be an appropriate period 
during which a faculty member should not have had experience teaching 
in a program in the same specialty. For example, it might make sense to 
consider whether a staff member taught in another program in the same 
specialty at any point during the 5 years prior to their employment in 
the ``new'' program, as 5 years is the time associated with building a 
new FTE cap, but not to consider teaching experience from more than 5 
years ago.
    In addition, since we understand that a new teaching hospital may 
also want to recruit an experienced program director, we are soliciting 
comments on whether it would make sense to define a similar period of 
time (for example, 10 years or 5 years) during which an individual must 
not have been employed as the program director in a program in the same 
specialty. In formulating suggestions, commenters may want to consider 
whether the suggested period of time (for example, 10 years or 5 years) 
aligns or conflicts with the ACGME common program requirements, which 
State that program director qualifications ``must include specialty 
expertise and at least three years of documented educational and/or 
administrative experience, or qualifications acceptable to the Review 
Committee'' (https://www.acgme.org/globalassets/pfassets/programrequirements/cprresidency_2023.pdf).
    Finally, we understand that there may be unique issues that small 
or rural residencies face in recruiting qualified program directors and 
faculty to ensure success during the early years of the residency. In 
small programs, when there may only be 2 or 3 core faculty members, 
flexibility may be necessary in the proportions of new and experienced 
teaching staff. As stated previously, we are soliciting comments on 
what should be considered a ``small'' program (for example, programs 
accredited for 16 or fewer positions), and what staff threshold or 
other approach should be applied to small, which may include rural, 
programs.
    To summarize, we are soliciting comments on the following points 
regarding the determination of whether the faculty and program director 
are new:
     What is a reasonable threshold for the relative 
proportions of experienced and new teaching staff? Should there be 
different thresholds for small, which may include rural, residency 
programs?
     Should a threshold for determining newness of teaching 
staff for a new program consider only Core Faculty, or non-core faculty 
(or key non-faculty staff) as well?
     We seek feedback on our suggestion that 50 percent of the 
teaching staff may come from a previously existing program in the same 
specialty, but if so, the 50 percent should comprise staff that each 
came from different previously existing programs in the specialty.
     In considering whether the presence of a faculty member 
might jeopardize the newness of a new program, would it be reasonable 
to consider whether 10 years or 5 years, or some other amount of time, 
has passed

[[Page 36224]]

during which that faculty member has not had experience teaching in a 
program in the same specialty?
     Would it make sense to define a similar period of time 
(for example, 10 years or 5 years) during which an individual must not 
have been employed as the program director in a program in the same 
specialty? Should there be a different criterion for small, which may 
include rural, residency programs?
c. Commingling of Residents in a New and an Existing Program--RFI
    We have learned that it is not uncommon for residents in separately 
accredited programs, but in the same specialty, to meet and share some 
clinical and didactic training experiences, which for the purpose of 
this discussion we refer to as ``commingling.'' For example, residents 
in two separately accredited anesthesiology programs may receive 
training simultaneously in a certain niche surgical competency, and may 
collaborate in certain shared scholarly activities required for 
completion of the anesthesiology residency. This is an issue different 
from the newness of residents, as the residents in this case are 
separately matched into distinct programs, yet have certain current 
training experiences in common. We believe this cooperative approach 
may be reasonable from an educational perspective, yet when taken to an 
extreme, may result in the inappropriate creation of new cap slots for 
a program that looks more like an expansion of an existing program 
rather than the formation of a truly new program. As an extreme 
example, we consider a hypothetical case in which a ``new'' program and 
an existing program share 100% of resident rotations, using the same 
faculty, and rotating simultaneously to the same locations. In this 
case, the ``new'' program would be just a ``carbon copy'' of the 
existing one. On the other hand, even a small percentage of shared 
rotations can be concerning, as shown under the following scenario:
    Assume New Teaching Hospital (NTH) A starts a new Family Medicine 
residency program. Residents in the new program spend 90 percent of 
their time at NTH Hospital A, and 10 percent at Existing Teaching 
Hospital (ETH) B. ETH B has reclassified as rural under 42 CFR 412.103, 
and is eligible for an IME cap adjustment for any portion of 
participation in the new program. NTH A hires a brand new program 
director and brand new faculty, and all the residents are new, so the 
newness criteria we adopted in the August 27, 2009 Federal Register are 
satisfied. However, during the 10 percent of total time they spend at 
ETH B, residents in the program share their rotations with residents in 
ETH B's existing Family Medicine program.
    In this case, commingling accounts for only 10 percent of total 
program time, but for 100 percent of the time at ETH B's existing 
Family Medicine program. Under current regulations at 42 CFR 
413.79(e)(1)(vi), ETH B would receive a one-tenth share of the overall 
IME cap increase, even though that 10 percent of resident time is 
functionally an expansion of its existing Family Medicine program. We 
are soliciting comments on whether and what amount, if any, of 
commingling is appropriate among residents in an existing program and 
residents in a program where training is occurring at a hospital that 
may be eligible for an FTE cap increase for training residents in a new 
program.
d. One Hospital Sponsoring Two Programs in the Same Specialty--RFI
    We have been asked whether it is permissible for one hospital to 
operate two programs in the same specialty. We have heard this commonly 
occurs in states with more sparsely populated areas, where there is 
often one dominant academic medical center/sponsor of residency 
programs in the state, and that sponsor creates more than one program 
in a specialty to provide access to care in different areas of the 
state. We have answered this question by saying that if each program in 
fact has separate program directors, and separate staff, and separately 
matched residents, then it is permissible for one hospital to sponsor 
two programs in the same specialty.
    However, we are taking the opportunity to solicit comments on why 
hospitals might want to train residents in separately accredited 
programs, but in the same specialty, and the degree to which this 
happens in general, in both sparsely populated and more densely 
populated areas. In conjunction with our solicitation of previous 
comments regarding commingling of residents in different programs in 
the same specialty, and our concerns regarding new FTE caps created for 
programs that may not truly be new at hospitals with an urban-to-rural 
reclassification, we are interested in hearing from commenters 
regarding the reasons why hospitals may sponsor more than one program 
in the same specialty, including but not limited to Rural Track 
Programs, and the degree to which commingling may occur in these 
programs.
4. Technical Fixes to the DGME Regulations
    In the course of our ongoing implementation of policies concerning 
payment for graduate medical education, we have become aware of the 
existence of several technical errors in the direct GME regulations at 
42 CFR 413.75 through 413.83. We therefore propose to correct these 
technical errors, as discussed later.
a. Correction of Cross-References to Sec.  413.79(f)(7)
    In the FY 2010 IPPS final rule (74 FR 43918 and 44001, August 27, 
2009), we amended 42 CFR 413.79(f) by adding a new paragraph (f)(6) and 
redesignating existing paragraph (f)(6) as paragraph (f)(7). The new 
Sec.  413.79(f)(6) sets forth requirements for participation in a 
Medicare GME affiliated group by a hospital that is new after July 1 
and begins training residents for the first time after the July 1 start 
date of an academic year, while the redesignated Sec.  413.79(f)(7) 
contains the regulations pertaining to emergency Medicare GME 
affiliated groups.
    We have discovered that, after redesignating the former Sec.  
413.79(f)(6) as Sec.  413.79(f)(7), we inadvertently did not update the 
cross-references to this paragraph at Sec. Sec.  413.75(b) and 413.78. 
Accordingly, in this proposed rule, we are proposing to revise the 
language of the definition of ``Emergency Medicare GME affiliated 
group'' under Sec.  413.75(b), as well as the language at Sec. Sec.  
413.78(e)(3)(iii) and (f)(3)(iii), by correcting the cross-references 
to read ``Sec.  413.79(f)(7).''
b. Removal of Obsolete Regulations Under Sec.  413.79(d)(6)
    Under 42 CFR 413.79(h), a hospital may receive a temporary 
adjustment to its FTE cap to reflect displaced residents added as a 
result of the closure of another hospital or residency training 
program. Furthermore, under Sec.  413.79(d)(6)(i) (previously Sec.  
413.79(d)(6)), displaced residents counted under a temporary cap 
adjustment are added to the receiving hospital's FTE count after 
application of the three-year rolling average for the duration of the 
time that the displaced residents are training at the receiving 
hospital.
    In the November 24, 2010 final rule (75 FR 72212 through 72238), we 
implemented the provisions of section 5506 of the Affordable Care Act, 
which directs the Secretary to redistribute Medicare GME residency 
slots from teaching hospitals that close after March 23, 2008. A 
hospital that had previously

[[Page 36225]]

accepted residents displaced by a teaching hospital closure and 
received a temporary cap adjustment for training those residents under 
Sec.  413.79(h) may subsequently apply for a permanent cap increase 
under section 5506.
    As part of the implementation of section 5506, we finalized several 
ranking criteria to prioritize applications, and specified the dates on 
which awards would become effective for hospitals that apply under each 
of those criteria. In particular, we finalized Ranking Criteria One and 
Three, which describe applicant hospitals that take over, respectively, 
an entire residency program(s) or part of a residency program(s) from 
the closed hospital. Consistent with the policy finalized in the 
November 24, 2010 final rule, a permanent cap increase awarded under 
Ranking Criterion One or Three would generally override any temporary 
cap adjustment that the applying hospital may have received under Sec.  
413.79(h), with the result that those resident slots would immediately 
become subject to the three-year rolling average calculation (75 FR 
72224).
    We also stated, however, that we believed it would still be 
appropriate to allow a hospital that ultimately would qualify to 
receive slots permanently under any of the ranking criteria and that 
took in displaced residents to receive temporary cap adjustments and, 
in a limited manner, an exemption from the three-year rolling average. 
Therefore, we finalized a policy that, in the first cost reporting 
period in which the applying hospital takes in displaced residents and 
the hospital closure occurs, the applying hospital could receive a 
temporary cap adjustment and an exemption from the rolling average for 
the displaced residents. Then, effective beginning with the cost 
reporting period following the one in which the hospital closure 
occurred, the applying hospital's permanent cap increase would take 
effect, and there would be no exemption from the rolling average (75 FR 
72225 and 72263).
    Therefore, we amended Sec.  413.79(d) by redesignating the existing 
paragraph (d)(6) as (d)(6)(i) and by adding new (d)(6)(ii), which 
states stated that if a hospital received a permanent increase in its 
FTE resident cap under Sec.  413.79(o)(1) due to redistribution of 
slots from a closed hospital, the displaced FTE residents that the 
hospital received would be added to the FTE count after applying the 
averaging rules only in the first cost reporting period in which the 
receiving hospital trained the displaced FTE residents. In subsequent 
cost reporting periods, the displaced FTE residents would be included 
in the receiving hospital's rolling average calculation.
    Subsequently, in the FY 2013 IPPS final rule (77 FR 53437 through 
53443, August 31, 2012), we finalized revisions to our policy 
concerning the effective dates of section 5506 cap increases awarded 
under the various ranking criteria. In particular, we finalized a 
policy that slots awarded under Ranking Criteria One and Three become 
effective seamlessly with the expiration of temporary cap adjustments 
under Sec.  413.79(h) (that is, on the day after the graduation date(s) 
of the displaced residents). As stated in that final rule, under this 
revised policy, permanent cap increases under section 5506 would no 
longer ``replace'' temporary cap adjustments under Sec.  413.79(h), and 
exemptions from the three-year rolling average would no longer be 
suspended as a consequence of the receipt of permanent slots (77 FR 
53441).
    Under the policy finalized in the FY 2013 IPPS final rule, there is 
no longer any need for the regulation at Sec.  413.79(d)(6)(ii), which 
would apply in the situation where a permanent cap increase under 
section 5506 would otherwise have overridden a temporary cap adjustment 
for displaced residents under Sec.  413.79(h). Instead, our policy is 
that displaced residents are excluded from the receiving hospital's 
rolling average calculation for the duration of the time that they are 
training at the receiving hospital, as specified at Sec.  413.79(6)(i). 
However, we have discovered that we neglected to make the appropriate 
revisions to the regulations text to reflect our current policy.
    Accordingly, we are proposing to amend Sec.  413.79(d)(6) by 
removing the no longer applicable paragraph (d)(6)(ii), and by 
redesignating existing (d)(6)(i) as (d)(6).
c. Correction of Typographical Errors at Sec.  413.79(k)(2)(i)
    In the final rule published on December 27, 2021, as part of the 
implementation of section 127 of the CAA, 2021 (Pub. L. 116-260), we 
finalized various changes throughout the regulations text at 42 CFR 
413.79(k), ``Residents training in rural track programs'' (86 FR 73445 
through 73457 and 73514 through 73515). We have discovered that the 
final sentence of Sec.  413.79(k)(2)(i), as amended in that rule, 
incorrectly states, ``For Rural Track Programs prior to the start of 
the urban or rural hospital's cost reporting period that coincides with 
or follows the start of the sixth program year of the rural track's 
existence . . .''
    The beginning of the quoted sentence should instead refer to ``cost 
reporting periods beginning on or after October 1, 2022,'' and should 
otherwise be analogous to the similar text that appears at Sec.  
413.79(k)(1)(i). Accordingly, we are proposing to revise Sec.  
413.79(k)(2)(i) to read as follows: ``For cost reporting periods 
beginning on or after October 1, 2022, before the start of the urban or 
rural hospital's cost reporting period that coincides with or follows 
the start of the sixth program year of the Rural Track Program's 
existence, the rural track FTE limitation for each hospital will be the 
actual number of FTE residents training in the Rural Track Program at 
the urban or rural hospital and, subject to the requirements under 
Sec.  413.78(g), at the rural nonprovider site(s).''
5. Notice of Closure of Teaching Hospital and Opportunity To Apply for 
Available Slots
a. Background
    Section 5506 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, 
``Affordable Care Act''), authorizes the Secretary to redistribute 
residency slots after a hospital that trained residents in an approved 
medical residency program closes. Specifically, section 5506 of the 
Affordable Care Act amended the Act by adding subsection (vi) to 
section 1886(h)(4)(H) of the Act and modifying language at section 
1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a 
process to increase the FTE resident caps for other hospitals based 
upon the full-time equivalent (FTE) resident caps in teaching hospitals 
that closed on or after a date that is 2 years before the date of 
enactment (that is, March 23, 2008). In the CY 2011 Outpatient 
Prospective Payment System (OPPS) final rule with comment period (75 FR 
72264), we established regulations at 42 CFR 413.79(o) and an 
application process for qualifying hospitals to apply to CMS to receive 
direct GME and IME FTE resident cap slots from the hospital that 
closed. We made certain additional modifications to Sec.  413.79 in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to 
the section 5506 application process in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50122 through 50134). The procedures we established apply 
both to teaching hospitals that closed on or after March 23, 2008, and 
on or before August 3, 2010, and to teaching hospitals that

[[Page 36226]]

close after August 3, 2010 (75 FR 72215).
b. Notice of Closure of McLaren St. Luke's Hospital Located in Maumee, 
OH, and the Application Process--Round 21
    CMS has learned of the closure of McLaren St. Luke's Hospital 
Located in Maumee, OH (CCN 360090). Accordingly, this notice serves to 
notify the public of the closure of this teaching hospital and initiate 
another round of the section 5506 application and selection process. 
This round will be the 21st round (``Round 21'') of the application and 
selection process. The table in this section of this rule contains the 
identifying information and IME and direct GME FTE resident caps for 
the closed teaching hospital, which are part of the Round 21 
application process under section 5506 of the Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TP02MY24.190

c. Notice of Closure of South City Hospital Located in St. Louis, MO, 
and the Application Process--Round 22
    CMS has learned of the closure of South City Hospital, located in 
St. Louis, MO (CCN 260210). Accordingly, this notice serves to notify 
the public of the closure of this teaching hospital and initiate 
another round (``Round 22'') of the application and selection process. 
This round will be the 22nd round (``Round 22'') of the application and 
selection process. The table in this section of this rule contains the 
identifying information and IME and direct GME FTE resident caps for 
the closed teaching hospital, which are part of the Round 22 
application process under section 5506 of the Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TP02MY24.191

d. Application Process for Available Resident Slots
    The application period for hospitals to apply for slots under 
section 5506 of the Affordable Care Act is 90 days following notice to 
the public of a hospital closure (77 FR 53436). Therefore, hospitals 
that wish to apply for and receive slots from the previously noted 
hospitals' FTE resident caps must submit applications using the 
electronic application intake system, Medicare Electronic Application 
Request Information SystemTM (MEARISTM), with 
application submissions for Round 21 and Round 22 due no later than 
July 9, 2024. The Section 5506 application can be accessed at: https://mearis.cms.gov/public/home.
    CMS will only accept Round 21 and Round 22 applications submitted 
via MEARISTM. Applications submitted through any other 
method will not be considered. Within MEARISTM, we have 
built in several resources to support applicants:
     Please refer to the ``Resources'' section for guidance 
regarding the application submission process at: https://mearis.cms.gov/public/resources.
     Technical support is available under ``Useful Links'' at 
the bottom of the MEARISTM web page.
     Application related questions can be submitted to CMS 
using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources.
    Application submission through MEARISTM will not only 
help CMS track applications and streamline the review process, but it 
will also create efficiencies for applicants when compared to a paper 
submission process.
    We have not established a deadline by when CMS will issue the final 
determinations to hospitals that receive slots under section 5506 of 
the Affordable Care Act. However, we review all applications received 
by the deadline and notify applicants of our determinations as soon as 
possible.
    We refer readers to the CMS Direct Graduate Medical Education 
(DGME) website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme. Hospitals should access this website for a list of additional 
section 5506 guidelines for the policy and procedures for applying for 
slots, and the redistribution of the slots under sections 
1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.
6. Reminder of Core-Based Statistical Area (CBSA) Changes and 
Application to GME Policies
    In section III.B. of the preamble of this proposed rule, we discuss 
the proposed changes to the most recent OMB standards for delineating 
statistical areas announced in the July 21, 2023 OMB Bulletin No. 23-
01. We refer to these statistical areas as Core-Based Statistical Areas 
(CBSAs). As a result of the new OMB delineations, some teaching 
hospitals may be redesignated

[[Page 36227]]

from being located in a rural CBSA to an urban CBSA, or from being 
located in an urban CBSA to a rural CBSA. In the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50111, August 22, 2014), we last discussed the 
effects of the CBSA changes on IME and DGME payment policy, as at that 
time, we implemented the changes to the statistical areas resulting 
from the February 28, 2013, OMB Bulletin No. 13-01. We refer readers to 
the FY 2015 IPPS/LTCH PPS final rule to learn more about CMS' policies 
regarding changes to the CBSAs and how IME and DGME payments are 
impacted. We emphasize that we are not currently proposing any 
additional policies as a result of the latest CBSA changes; we are 
merely providing a reference for readers that may have questions about 
our existing policies. As a general overview, the FY 2015 IPPS/LTCH PPS 
final rule discusses the effect on the FTE caps of a hospital that was 
located in a rural CBSA, either at the time that it started training 
residents in a new residency program, or was located in a rural area 
when it received accreditation for a new program, but either prior to 
actually starting the program or during the 5-year cap building period, 
the CBSA in which the hospital was located became an urban CBSA (79 FR 
50111 through 50113). We also discussed what happens to a rural 
training track when a rural hospital that is participating as the rural 
site is redesignated as urban, either during the period when the rural 
track is being established, or after it has been established (79 FR 
50113). (Note that under 42 CFR 413.75(b) and 413.79(k), we now refer 
to rural training tracks as Rural Training Programs (RTPs)). We 
provided for a transition period, wherein either the redesignated urban 
hospital must reclassify as rural under Sec.  412.103 for purposes of 
IME payment only (in addition, this reclassification option only 
applies to IPPS hospitals (or CAHs under 42 CFR 412.103(a)(6)), not 
other nonprovider sites), or the ``original'' urban hospital must have 
found a new site in a geographically rural area that will serve as the 
rural site for purposes of the rural track in order for the 
``original'' urban hospital to receive payment under Sec.  413.79(k)(1) 
or (k)(2). Also see DGME regulations at 42 CFR 413.79(c)(6), 42 CFR 
413.79(k)(7), and for IME, at 42 CFR 412.105(f)(1)(iv)(D).

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

a. General
    Under section 1861(v) of the Act, Medicare has historically paid 
providers for Medicare's share of the costs that providers incur in 
connection with approved educational activities. Approved nursing and 
allied health (NAH) education programs are those that are, in part, 
operated by a provider, and meet State licensure requirements, or are 
recognized by a national accrediting body. The costs of these programs 
are excluded from the definition of ``inpatient hospital operating 
costs'' and are not included in the calculation of payment rates for 
hospitals or hospital units paid under the IPPS, IRF PPS, or IPF PPS, 
and are excluded from the rate-of-increase ceiling for certain 
facilities not paid on a PPS. These costs are separately identified and 
``passed through'' (that is, paid separately on a reasonable cost 
basis). Existing regulations on NAH education program costs are located 
at 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 may receive 
additional payments to account for MA enrollees. Section 541 of the 
BBRA limits total spending under the provision to no more than $60 
million in any calendar year (CY). (In this document, we refer to the 
total amount of $60 million or less as the payment ``pool''.) Section 
541 of the BBRA also provides that direct graduate medical education 
(GME) payments for Medicare+Choice utilization are reduced to the 
extent that these additional payments are made for nursing and allied 
health education programs. This provision was effective for portions of 
cost reporting periods occurring in a CY, on or after January 1, 2000.
    Section 512 of the Benefits Improvement and Protection Act (BIPA) 
of 2000 changed the formula for determining the additional amounts to 
be paid to hospitals for MA nursing and allied health costs. Under 
section 541 of the BBRA, the additional payment amount was determined 
based on the proportion of each individual hospital's nursing and 
allied health education payment to total nursing and allied health 
education payments made to all hospitals. However, this formula did not 
account for a hospital's specific MA utilization. Section 512 of the 
BIPA revised this payment formula to specifically account for each 
hospital's MA utilization. This provision was effective for portions of 
cost reporting periods occurring in a calendar year, beginning with CY 
2001.
    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), and subsequently implemented the BIPA provision 
in the August 1, 2001 IPPS final rule (66 FR 39909 and 39910). In those 
rules, 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 
variables, 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)

[[Page 36228]]

of the Act 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 stated that 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 payments 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 are increased using the increases 
allowed by section 1886(h) of the Act for these services (using the 
percentage applicable for the current calendar year for Medicare+Choice 
direct GME and the Consumer Price Index (CPI-U) increases for Part A 
direct GME). We also stated that we would publish the applicable 
percentage reduction each year in the IPPS proposed and final rules (65 
FR 47038).
    Thus, in the August 1, 2000 IFC, we described our policy regarding 
the timing and source of the national data components for the NAH MA 
add-on payment and the percent reduction to the direct GME MA payments, 
and we stated that we would publish the rates for each calendar year in 
the IPPS proposed and final rules. While the rates for CY 2000 were 
published in the August 1, 2000 IFC (see 65 FR 47038 and 47039), the 
rates for subsequent CYs were only issued through Change Requests (CRs) 
(CR 2692, CR 11642, CR 12407). After recent issuance of the CY 2019 
rates in CR 12407 on August 19, 2021, we reviewed our update 
procedures, and were reminded that the August 1, 2000 IFC states that 
we would publish the NAH MA rates and direct GME percent reduction 
every year in the IPPS rules. Accordingly, for CY 2020 and CY 2021, we 
proposed and finalized the NAH MA add-on rates in the FY 2023 IPPS/LTCH 
PPS proposed and final rules. We stated that for CYs 2022 and after, we 
would similarly propose and finalize their respective NAH MA rates and 
direct GME percent reductions in subsequent IPPS/LTCH PPS rulemakings 
(see 87 FR 49073, August 10, 2022).
    In this FY 2025 IPPS/LTCH PPS proposed rule, we are proposing the 
rates for CY 2023. Consistent with the use of HCRIS data for past 
calendar years, we are proposing to use data from cost reports ending 
in FY 2021 HCRIS (the fiscal year that is 2 years prior to CY 2023) to 
compile these national amounts: NAH pass-through payment, Part A 
Inpatient Days, MA Inpatient Days.
    For this proposed rule, we accessed the FY 2021 HCRIS data from the 
fourth 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 proposed rule is CY 2023, 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 (CPI-U) increases for Part A direct GME). For CY 2023, the direct 
GME projections are based on the fourth quarterly update of CY 2021 
HCRIS, adjusted for the CPI-U and for increasing MA enrollment.
    For CY 2023, the proposed national rates and percentages, and their 
data sources, are set forth in this table. We intend to update these 
numbers in the FY 2025 final rule based on the latest available cost 
report data.
[GRAPHIC] [TIFF OMITTED] TP02MY24.192

H. Proposed Payment Adjustment for Certain Clinical Trial and Expanded 
Access Use Immunotherapy Cases (Sec. Sec.  412.85 and 412.312)

    Effective for FY 2021, we created MS-DRG 018 for cases that include 
procedures describing CAR T-cell therapies, which were reported using 
ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through 
58600). Effective for FY 2022, we revised MS-DRG 018 to include cases 
that report the procedure codes for CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies (86 FR 44798 through 448106).
    Effective for FY 2021, we modified our relative weight methodology 
for MS-DRG 018 in order to develop a relative weight that is reflective 
of the typical costs of providing CAR T-cell therapies relative to 
other IPPS services. Specifically, under our finalized policy we do not 
include claims determined to be clinical trial claims that group to MS-
DRG 018 when calculating the average cost for MS-DRG 018 that is used 
to calculate the relative weight for this MS-DRG, with the additional 
refinements that: (a) when the CAR T-cell therapy product is purchased 
in the usual manner, but the case involves a clinical trial of a 
different product, the claim will be included when calculating the 
average cost for MS DRG 018 to the extent such claims can be identified 
in the historical data; and (b) when there is expanded access use of

[[Page 36229]]

immunotherapy, these cases will not be included when calculating the 
average cost for MS-DRG 018 to the extent such claims can be identified 
in the historical data (85 FR 58600). The term ``expanded access'' 
(sometimes called ``compassionate use'') is a potential pathway for a 
patient with a serious or immediately life-threatening disease or 
condition to gain access to an investigational medical product (drug, 
biologic, or medical device) for treatment outside of clinical trials 
when, among other criteria, there is no comparable or satisfactory 
alternative therapy to diagnose, monitor, or treat the disease or 
condition (21 CFR 312.305).\157\
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    \157\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
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    Effective FY 2021, we also finalized an adjustment to the payment 
amount for applicable clinical trial and expanded access immunotherapy 
cases that group to MS-DRG 018 using the same methodology that we used 
to adjust the case count for purposes of the relative weight 
calculations (85 FR 58842 through 58844). (As previously noted, 
effective beginning FY 2022, we revised MS-DRG 018 to include cases 
that report the procedure codes for CAR T-cell and non-CAR T-cell 
therapies and other immunotherapies (86 FR 44798 through 448106).) 
Specifically, under our finalized policy we apply a payment adjustment 
to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code 
Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell, 
or other immunotherapy product is purchased in the usual manner, but 
the case involves a clinical trial of a different product, the payment 
adjustment will not be applied in calculating the payment for the case. 
We also finalized that when there is expanded access use of 
immunotherapy, the payment adjustment will be applied in calculating 
the payment for the case. This payment adjustment is codified at 42 CFR 
412.85 (for operating IPPS payments) and 42 CFR 412.312 (for capital 
IPPS payments), for claims appropriately containing Z00.6, as described 
previously, and reflects that the adjustment is also applied for cases 
involving expanded access use immunotherapy, and that the payment 
adjustment only applies to applicable clinical trial cases; that is, 
the adjustment is not applicable to cases where the CAR T-cell, non-CAR 
T-cell, or other immunotherapy product is purchased in the usual 
manner, but the case involves a clinical trial of a different product. 
The regulations at 42 CFR 412.85(c) also specify that the adjustment 
factor will reflect the average cost for cases to be assigned to MS-DRG 
018 that involve expanded access use of immunotherapy or are part of an 
applicable clinical trial to the average cost for cases to be assigned 
to MS-DRG 018 that do not involve expanded access use of immunotherapy 
and are not part of a clinical trial (85 FR 58844).
    For FY 2025, we are proposing to continue to apply an adjustment to 
the payment amount for expanded access use of immunotherapy and 
applicable clinical trial cases that would group to MS-DRG 018, as 
calculated using the same methodology, as modified in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59062), that we are proposing to use to 
adjust the case count for purposes of the relative weight calculations, 
as described in section II.D. of the preamble of this proposed rule.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule, the MedPAR 
claims data now includes a field that identifies whether or not the 
claim includes expanded access use of immunotherapy. For the FY 2023 
MedPAR data and for subsequent years, this field identifies whether or 
not the claim includes condition code 90. The MedPAR files now also 
include information for claims with the payer-only condition code 
``ZC'', which is used by the IPPS Pricer to identify a case where the 
CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased 
in the usual manner, but the case involves a clinical trial of a 
different product so that the payment adjustment is not applied in 
calculating the payment for the case (for example, see Change Request 
11879, available at https://www.cms.gov/files/document/r10571cp.pdf). 
We refer the readers to section II.D. of the preamble of this proposed 
rule for further discussion of our methodology for identifying clinical 
trial claims and expanded access use claims in MS-DRG 018 and our 
methodology used to adjust the case count for purposes of the relative 
weight calculations, as modified in the FY 2024 IPPS/LTCH PPS final 
rule.
    Using the same methodology that we are proposing to use to adjust 
the case count for purposes of the relative weight calculations, we are 
proposing to calculate the adjustment to the payment amount for 
expanded access use of immunotherapy and applicable clinical trial 
cases as follows:
     Calculate the average cost for cases assigned to MS-DRG 
018 that either (a) contain ICD-10-CM diagnosis code Z00.6 and do not 
contain condition code ``ZC'' or (b) contain condition code ``90''.
     Calculate the average cost for all other cases assigned to 
MS-DRG 018.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply this adjustor when calculating payments for expanded 
access use of immunotherapy and applicable clinical trial cases that 
group to MS-DRG 018 by multiplying the relative weight for MS-DRG 018 
by the adjustor.
    We refer the readers to section II.D. of the preamble of this 
proposed rule for further discussion of our methodology.
    Consistent with our calculation of the proposed adjustor for the 
relative weight calculations, for this proposed rule we propose to 
calculate this adjustor based on the December 2023 update of the FY 
2023 MedPAR file for purposes of establishing the FY 2025 payment 
amount. Specifically, in accordance with 42 CFR 412.85 (for operating 
IPPS payments) and 42 CFR 412.312 (for capital IPPS payments), we 
propose to multiply the FY 2025 relative weight for MS-DRG 018 by a 
proposed adjustor of 0.34 as part of the calculation of the payment for 
claims determined to be applicable clinical trial or expanded use 
access immunotherapy claims that group to MS-DRG 018, which includes 
CAR T-cell and non-CAR T-cell therapies and other immunotherapies. We 
also propose to update the value of the adjustor based on more recent 
data for the final rule.

I. Proposed Changes to the Calculation of the IPPS Add-On Payment for 
Certain End-Stage Renal Disease (ESRD) Discharges (Sec.  412.104)

    Under existing regulations at Sec.  412.104, we provide an 
additional payment to a hospital for inpatient services provided to 
certain Medicare beneficiaries with ESRD who receive a dialysis 
treatment during a hospital stay, if the hospital's ESRD Medicare 
beneficiary discharges, excluding discharges classified into the MS-
DRGs listed at Sec.  412.104(a), where the beneficiary received 
dialysis services during the inpatient stay, are 10 percent or more of 
its total Medicare discharges. The additional payment (referred to as 
the ESRD add-on payment) is intended to lessen the impact of the added 
costs for hospitals that deliver inpatient dialysis services to a high 
concentration of ESRD Medicare beneficiaries (76 FR 51692). The 
additional payment is based on the average length of stay for ESRD 
beneficiaries in the facility times a factor based on the average 
direct cost of furnishing dialysis services during a

[[Page 36230]]

usual beneficiary stay (49 FR 34747). The payment to a hospital equals 
the average length of stay of ESRD beneficiaries in the hospital, 
expressed as a ratio to 1 week, times the estimated weekly cost of 
dialysis multiplied by the number of ESRD beneficiary discharges not 
excluded under Sec.  412.104(a). The average direct cost of dialysis 
was determined from data obtained in connection with establishing the 
composite rate reimbursement for outpatient maintenance dialysis (49 FR 
34747).
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted, bundled PPS for renal dialysis services furnished by ESRD 
facilities as required by section 1881(b)(14) of the Act, as added by 
section 153(b) of the Medicare Improvements for Patients and Providers 
Act of 2008 (MIPPA) (Pub. L. 110-275). Section 1881(b)(14)(F) of the 
Act, as added by section 153(b) of MIPPA, and amended by section 
3401(h) of the Patient Protection and Affordable Care Act (the 
Affordable Care Act) (Pub. L. 111-148), established that beginning CY 
2012, and each subsequent year, the Secretary of the Department of 
Health and Human Services (the Secretary) shall annually increase 
payment amounts by an ESRD market basket percentage increase, reduced 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (74 FR 49927). The ESRD PPS replaced 
the basic case-mix adjusted composite rate payment system and the 
payment methodologies for separately billable outpatient renal dialysis 
items and services. Payment under Medicare Part B for outpatient renal 
dialysis services has been based entirely on the ESRD PPS since January 
1, 2014 (78 FR 72160). The ESRD PPS pays ESRD facilities a case-mix-
adjusted, bundled payment, which includes former composite rate 
services and ESRD-related drugs, laboratory services, and medical 
equipment and supplies (80 FR 68973). The ESRD PPS base rate is 
designed to reflect the average cost per-treatment of providing renal 
dialysis services.\158\ The per treatment payment amount (that is, the 
ESRD PPS base rate, subject to applicable adjustments) \159\ is 
typically applied to a regimen of three hemodialysis treatments per 
week. CMS updates the ESRD PPS base rate annually. We refer readers to 
the August 12, 2010, ESRD PPS final rule (75 FR 49030 through 49214) 
for additional details on the establishment of the ESRD PPS, including 
a discussion of the transition from the basic case-mix adjusted 
composite rate payment system to the ESRD PPS.
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    \158\ 42 CFR 413.215(a) and 413.220.
    \159\ Sec.  413.230.
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    As described previously, under current regulations the ESRD add-on 
payment is based on the average direct cost of furnishing dialysis 
services determined from data obtained in connection with establishing 
the composite rate. Under the current regulations, the average cost of 
dialysis is reviewed and adjusted, if appropriate, at the time the 
composite rate reimbursement for outpatient dialysis is reviewed. The 
last time CMS updated the composite rate was in the CY 2013 ESRD PPS 
final rule (77 FR 67454), as this was the final year in which payments 
to ESRD facilities were based on a blend of the composite rate and the 
ESRD PPS. In light of the time that has passed since the last update to 
the composite rate, we are proposing to change the methodology used to 
calculate the ESRD add-on payment under current regulations to the ESRD 
PPS base rate used under the ESRD PPS. In addition, since the renal 
dialysis services reflected in the ESRD PPS base rate do not include 
those services that are not essential for the delivery of maintenance 
dialysis (see Sec.  413.171), using the ESRD PPS base rate to calculate 
the ESRD add-on payment would maintain consistency with the current 
calculation, which is based on the average costs determined to be 
directly related to the renal dialysis service, as determined from the 
composite rate.
    As described previously, under Sec.  412.104(b)(1), the ESRD add-on 
payment is based on the estimated weekly cost of dialysis and the 
average length of stay of ESRD beneficiaries for the hospital. We are 
proposing that effective for cost reporting periods beginning on or 
after October 1, 2024, the estimated weekly cost of dialysis would be 
calculated as the applicable ESRD PPS base rate (as defined in 42 CFR 
413.171) multiplied by three, which represents the typical number of 
dialysis sessions per week. The ESRD PPS base rate is applicable for 
renal dialysis services furnished during the calendar year (CY) (that 
is, effective January 1 through December 31 each year) and updated 
annually (see Sec.  413.196). Under this proposal, the annual CY ESRD 
PPS base rate (as published in the applicable CY ESRD PPS final rule or 
subsequent corrections, as applicable) multiplied by three would be 
used to calculate the ESRD add-on payment for hospital cost reporting 
periods that begin during the Federal FY for the same year. For 
example, the CY 2025 ESRD PPS base rate would be used for all cost 
reports beginning during Federal FY 2025 (that is, for cost reporting 
periods starting on or after October 1, 2024, through September 30, 
2025). The table that follows illustrates the applicable CY ESRD PPS 
base rate that would be used to determine the add-on amount for 
eligible discharges during the hospital's cost reporting periods 
beginning on or after October 1, 2024 (FY 2025) and on or after October 
1, 2025 (FY 2026) under this proposed methodology.
    We note that use of the applicable CY ESRD PPS base rate to 
determine the add-on payment amount for the hospital's discharges 
occurring during the entire cost reporting period based on the cost 
report's begin date would be consistent with the determination of 
eligibility for the ESRD add-on payment, which occurs at cost report 
settlement and is based on the discharges that occur during that cost 
reporting period.
[GRAPHIC] [TIFF OMITTED] TP02MY24.193


[[Page 36231]]


    Under this proposal, the payment to a hospital would continue to be 
calculated as the average length of stay of ESRD beneficiaries in the 
hospital, expressed as a ratio to 1 week, multiplied by the estimated 
weekly cost of dialysis multiplied by the number of applicable ESRD 
beneficiary discharges. Specifically, for cost reporting periods 
beginning on or after October 1, 2024, the proposed payment to a 
hospital would equal the average length of stay of ESRD beneficiaries 
in the hospital, expressed as a ratio to 1 week, multiplied by the 
estimated weekly cost of dialysis (calculated as the applicable ESRD 
PPS base rate (as defined in 42 CFR 413.171), multiplied by 3) 
multiplied by the number of ESRD beneficiary discharges except for 
those excluded under Sec.  412.104(a).
    We are proposing to revise the regulations under 42 CFR 412.104(b) 
to reflect this proposed change to the calculation of the payment 
amount for cost reporting periods beginning on or after October 1, 
2024. We are proposing to revise Sec.  412.104(b)(2) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2024, the estimated weekly cost of dialysis is calculated as 3 dialysis 
sessions per week multiplied by the applicable ESRD PPS base rate (as 
defined in 42 CFR 413.171) that corresponds with the fiscal year in 
which the cost reporting period begins. For example, the CY 2025 ESRD 
PPS base rate (multiplied by 3 to determine the estimated weekly cost 
of dialysis, as described previously) would apply for all hospital cost 
reporting periods beginning during FY 2025 (that is, for cost reporting 
periods beginning on or after October 1, 2024, through September 30, 
2025). We are also proposing to make conforming changes to Sec.  
412.104(b)(3) and Sec.  412.104(b)(4) to reflect the proposed change in 
methodology for calculating the ESRD add-on payment amount for cost 
reporting periods beginning on or after October 1, 2024.

J. Separate IPPS Payment for Establishing and Maintaining Access to 
Essential Medicines

1. Overview
    As discussed in the CY 2024 OPPS/ASC proposed rule (88 FR 49867), 
on January 26, 2021, President Biden issued Executive Order 14001, ``A 
Sustainable Public Health Supply Chain'' (86 FR 7219), which launched a 
whole-of-government effort to strengthen the resilience of medical 
supply chains, especially for pharmaceuticals and simple medical 
devices. This effort was bolstered subsequently by Executive Orders 
14005, 14017, and 14081 (86 FR 7475, 11849, and 25711, respectively). 
In June 2021, as tasked in Executive Order 14017 on ``America's Supply 
Chains,'' the Department of Health and Human Services released a review 
of pharmaceuticals and active pharmaceutical ingredients, analyzing 
risks in these supply chains and recommending solutions to increase 
their reliability.\160\ In July 2021, as tasked in Executive Order 
14001, the Biden-Harris Administration also released the National 
Strategy for a Resilient Public Health Supply Chain, which laid out a 
roadmap to support reliable access to products for public health in the 
future, including through prevention and mitigation of medical product 
shortages.\161\
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    \160\ Department of Health and Human Services, Review of 
Pharmaceuticals and Active Pharmaceutical Ingredients (pp. 207-250), 
June 2021: https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
    \161\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
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    Over the last several years, shortages for critical medical 
products have persisted, with the average drug shortage lasting about 
1.5 years.\162\ For pharmaceuticals, even before the COVID-19 pandemic, 
nearly two-thirds of hospitals reported more than 20 drug shortages at 
any one time--from antibiotics used to treat severe bacterial 
infections to crash cart drugs necessary to stabilize and resuscitate 
critically ill adults.\163\ The frequency and severity of these supply 
disruptions has only been exacerbated over the last few years.\164\
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    \162\ Senate Committee on Homeland Security & Governmental 
Affairs, Short Supply: The Health and National Security Risks of 
Drug Shortages, March 2023: https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf.
    \163\ Vizient, Drug Shortages and Labor Costs: Measuring the 
Hidden Costs of Drug Shortages on U.S. Hospitals, June 2019: https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129.
    \164\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
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    Recent data suggests that hospitals are estimated to spend more 
than 8.6 million personnel hours and $360 million per year to address 
drug shortages,\165\ which will likely further result in treatment 
delays and denials, changes in treatment regimens, medication 
errors,166 167 168 as well as higher rates of hospital-
acquired infections and in-hospital mortality.169 170 The 
additional time, labor, and resources required to navigate drug 
shortages and supply chain disruptions also increase health care 
costs.171 172
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    \165\ Vizient, Drug Shortages and Labor Costs: Measuring the 
Hidden Costs of Drug Shortages on U.S. Hospitals, June 2019: https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129.
    \166\ American Journal of Health System Pharmacology, National 
Survey on the Effect of Oncology Drug Shortages on Cancer Care, 
2013: https://pubmed.ncbi.nlm.nih.gov/23515514/.
    \167\ JCO Oncology Practice, National Survey on the Effect of 
Oncology Drug Shortages in Clinical Practice, 2022: https://pubmed.ncbi.nlm.nih.gov/35544740/.
    \168\ Journal of the American Medical Association, Association 
between U.S. Norepinephrine Shortage and Mortality Among Patients 
with Septic Shock, 2017: https://pubmed.ncbi.nlm.nih.gov/28322415/.
    \169\ Clinical Infectious Diseases, The Effect of a 
Piperacillin/Tazobactam Shortage on Antimicrobial Prescribing and 
Clostridium difficile Risk in 88 US Medical Centers, 2017: https://pubmed.ncbi.nlm.nih.gov/28444166/.
    \170\ New England Journal of Medicine, The Impact of Drug 
Shortages on Children with Cancer: The Example of Mechlorethamine, 
2012: https://pubmed.ncbi.nlm.nih.gov/23268661/.
    \171\ Senate Committee on Homeland Security & Governmental 
Affairs, Short Supply: The Health and National Security Risks of 
Drug Shortages, March 2023: https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf.
    \172\ Department of Health and Human Services, ASPE Report to 
Congress: Impact of Drug Shortages on Consumer Costs, May 2023: 
https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs.
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    Hospitals' procurement preferences can be leveraged to help foster 
a more resilient supply of lifesaving drugs and biologicals. With 
respect to shortages, supply chain resiliency includes having 
sufficient inventory that can be leveraged in the event of a supply 
disruption or demand increase--as opposed to relying on ``just-in-
time'' inventory-management efficiency at the manufacturer level that 
can leave supply chains vulnerable to shortage.173 174 This 
concept is especially true for essential medicines, which generally 
comprise products that are medically necessary to have available at all 
times in an amount adequate to serve patient needs and in the 
appropriate dosage forms. A hospital's resilient supply can also

[[Page 36232]]

include essential medicines from multiple manufacturers, including the 
availability of domestic pharmaceutical manufacturing capacity, to 
diversify the sourcing of essential medicines. We believe it is 
necessary to support practices that can mitigate the impact of 
pharmaceutical shortages of essential medicines and promote resiliency 
to safeguard and improve the care hospitals are able to provide to 
beneficiaries. Additionally, sustaining sources of domestically sourced 
medical supplies can help support continued availability in the event 
of public health emergencies and other disruptions. This concept is 
consistent with our current policy for domestic National Institute for 
Occupational Safety and Health (NIOSH) approved surgical N95 
respirators (87 FR 72037). Hospitals, as major purchasers and users in 
the U.S. of essential medicines, can support the existence of domestic 
sources by sourcing domestically made essential medicines.
---------------------------------------------------------------------------

    \173\ Department of Health and Human Services, Review of 
Pharmaceuticals and Active Pharmaceutical Ingredients (pp. 207-250), 
June 2021: https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
    \174\ Department of Health and Human Services, National Strategy 
for a Resilient Public Health Supply Chain, July 2021: https://www.phe.gov/Preparedness/legal/Documents/National-Strategy-for-Resilient-Public-Health-Supply-Chain.pdf.
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    When hospitals have insufficient supply of essential medicines, 
such as during a shortage, care for Medicare beneficiaries can be 
negatively impacted. To mitigate negative care outcomes in the event of 
insufficient supply, hospitals can adopt procurement strategies that 
foster a consistent, safe, stable, and resilient supply of these 
essential medicines. Such procurement strategies can include provisions 
to maintain or otherwise provide for extra stock of product (for 
example, either to maintain or to hold directly at the hospital, 
arrange contractually for a distributor to hold off-site, or arrange 
contractually with a wholesaler for a manufacturer to hold product) 
which can act as a buffer in the event of an unexpected increase in 
product use or disruption to supply. In the event an essential medicine 
goes into shortage without existing procurement or substitution 
strategies for affected drugs, negative patient care outcomes can 
result in reduced quality of care and, in some instances, increased 
costs by the Medicare program to provide payment for unnecessary 
services that could have been avoided had the drug been available to 
the hospital.
    In the CY 2024 OPPS/ASC proposed rule (88 FR 49867), CMS requested 
public comments on a potential Medicare payment policy that would 
provide separate payment to hospitals under the IPPS for Medicare's 
share of the inpatient costs of establishing and maintaining access to 
a 3-month buffer stock of one or more of 86 essential medicines 
(referred to herein as the ``CY 2024 Request for Comment''). Under this 
potential policy, the allowable costs would have included the 
hospital's reasonable costs of establishing and maintaining buffer 
stock(s) of the essential medicines but not the cost of the medicines 
themselves. We stated that we expected that the resources required to 
establish and maintain access to a buffer stock of essential medicines 
would generally be greater than the resources required to establish and 
maintain access to these medicines without such a buffer stock. While 
CMS did not finalize any policy regarding payment under the IPPS and 
OPPS for establishing and maintaining access to essential medicines, we 
stated we intended to propose new Conditions of Participation in 
forthcoming notice and comment rulemaking addressing hospital processes 
for pharmaceutical supply and that we would continue to consider 
policies related to buffer stock.
    As discussed in the CY 2024 OPPS/ASC final rule, many commenters on 
the CY 2024 Request for Comment supported CMS's efforts to promote 
resiliency but expressed concerns regarding the potential for such a 
payment policy to induce or exacerbate drug shortages through demand 
shocks to the supply chain. Some commenters stated that a 3-month 
buffer stock may be inadequate to insulate hospitals from drug 
shortages, and that the policy may encourage hoarding behaviors and 
further fragment the existing supply of essential medicines, which 
would primarily disadvantage smaller, less resourced hospitals (88 FR 
82129 through 82130). While commenters stated that a 3-month buffer 
stock may be inadequate to insulate hospitals from shortages given the 
duration of many drug shortages, some commenters further stated that 
even a 6-month buffer stock may not fully protect hospitals in the 
event of a shortage. Commenters cautioned that drug shortages are 
difficult to predict and often due to problems at the manufacturer 
level, which can be compounded by panic buying and hoarding behaviors. 
Some commenters stated that any buffer stock would need to be 
sufficiently large to account for the ramp up time that manufacturers 
need to reestablish supply of a given drug in shortage.
    As a first step in this initiative, and based on consideration of 
the comments we received on the CY 2024 Request for Comment, for cost 
reporting periods beginning on or after October 1, 2024, we are 
proposing to establish a separate payment under the IPPS to small (100 
beds or fewer), independent hospitals for the estimated additional 
resource costs of voluntarily establishing and maintaining access to 6-
month buffer stocks of essential medicines to foster a more reliable, 
resilient supply of these medicines for these hospitals. This proposed 
separate payment could be provided biweekly or as a lump sum at cost 
report settlement. As discussed further in section V.J.3. of the 
preamble of this proposed rule, we are focusing this proposal on small, 
independent hospitals, many of which are rural, that may lack the 
resources available to larger hospitals and hospital chains to 
establish and maintain buffer stocks of essential medicines for use in 
the event of drug shortages. We believe by limiting separate payment to 
smaller, independent hospitals, we can also mitigate concerns raised by 
commenters regarding large demand driven shocks to the supply chain.
    The appropriate time to establish a buffer stock for a drug is 
before it goes into shortage or after a shortage period has ended. In 
order to further mitigate any potential for the proposed policy to 
exacerbate existing shortages or contribute to commenters' concerns of 
hoarding, if an essential medicine is listed as ``Currently in 
Shortage'' on the FDA Drug Shortages Database,\175\ we are proposing 
that a hospital that newly establishes a buffer stock of that medicine 
while it is in shortage would not be eligible for separate buffer stock 
payment for that medicine for the duration of the shortage. However, if 
a hospital had already established and was maintaining a buffer stock 
of that medicine prior to the shortage, we are proposing that the 
hospital would continue to be eligible for separate buffer stock 
payment for that medicine for the duration of the shortage. We are 
proposing that hospital would continue to be eligible even if the 
number of months of supply of that medicine in the buffer stock were to 
drop to less than 6 months as the hospital draws down that buffer 
stock. Once an essential medicine is no longer listed as ``Currently in 
Shortage'' in the FDA Drug Shortages Database, our proposed policy does 
not differentiate that essential medicine from other essential 
medicines and hospitals would be eligible to establish and maintain 
buffer stocks for the medicine as they would have before the shortage. 
CMS will conduct provider education regarding additions and deletions 
to the publicly available FDA Drug Shortages Database to assist 
hospitals with this proposed policy.
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    \175\ https://www.accessdata.fda.gov/scripts/drugshortages/default.cfm.
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    As described in sections V.J.2. and .4. of the preamble of this 
proposed rule, we are proposing that if the number of

[[Page 36233]]

months of supply of medicine in the buffer stock were to drop to less 
than 6 months for a reason other than the essential medicine(s) 
actively being listed as ``Currently in Shortage,'' any separate 
payment to a hospital under this policy would be adjusted based on the 
proportion of the cost reporting period for which the hospital did 
maintain the 6-month buffer stock of that essential medicine.
    We are proposing to make this separate payment under the IPPS for 
the additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines under section 1886(d)(5)(I) of the 
Act, which authorizes the Secretary to provide by regulation for such 
other exceptions and adjustments to the payment amounts under section 
1886(d) of the Act as the Secretary deems appropriate. We are not 
proposing to make this payment adjustment budget neutral under the 
IPPS.
2. Proposed List of Essential Medicines
    The report Essential Medicines Supply Chain and Manufacturing 
Resilience Assessment, as developed by the U.S. Department of Health 
and Human Services (HHS) Office of the Assistant Secretary for 
Preparedness and Response (ASPR) with the Advanced Regenerative 
Manufacturing Institute's (ARMI's) Next Foundry for American 
Biotechnology, prioritized 86 essential medicines (hereinafter referred 
to as the ``ARMI List'' or ``ARMI's List'') from the Executive Order 
13944 List of Essential Medicines, Medical Countermeasures, and 
Critical Inputs (hereinafter referred to as the ``E.O. 13944 List''), 
as developed under the E.O. by the U.S. Food and Drug Administration 
(FDA).\176\
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    \176\ https://www.fda.gov/about-fda/reports/executive-order-13944-list-essential-medicines-medical-countermeasures-and-critical-inputs.
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    The ARMI List is a prioritized list of 86 medicines that are either 
critical for minimum patient care in acute settings or important for 
acute care with no comparable alternatives available. The medicines 
included in the ARMI List were considered, by consensus, to be most 
critically needed for typical acute patient care. In this context, 
acute patient care was defined as: rescue and/or lifesaving use (that 
is, Intensive Care Units, Cardiac/Coronary Care Units, and Emergency 
Departments), stabilizing patients in hospital continued care to enable 
discharge, and urgent or emergency surgery.
    Development of the ARMI List focused on assessing the clinical 
criticality and supply chains of small molecules and therapeutic 
biologics. The development of the ARMI List was informed by meetings 
with multiple key pharmaceutical supply chain stakeholders (for 
example, manufacturers, group purchasing organizations, wholesale 
distributors, providers, pharmacies), surveys and workshops with groups 
of clinicians and industry stakeholders, public feedback on the E.O. 
13944 List (provided during a public comment period starting in October 
2020), and other research.
    We are proposing that for purposes of the proposed separate payment 
under the IPPS, the costs of buffer stocks that would be eligible for 
separate payment are the additional resource costs of establishing and 
maintaining access to a 6-month buffer stock for any eligible medicines 
on ARMI's List of 86 essential medicines, including any subsequent 
revisions to that list of medicines. As previously discussed, the ARMI 
List represents a prioritized list of 86 medicines that were 
considered, by consensus, to be most critically needed for typical 
acute patient care. At this time, we believe that the ARMI List 
constitutes an appropriate set of medicines to initially prioritize 
under this proposed payment policy in order to help insulate small, 
independent hospitals, and the inpatient care they provide, from the 
negative effects of drug shortages.
    As noted earlier, the appropriate time to establish a buffer stock 
for a drug is before it goes into shortage or after a shortage period 
has ended. If an essential medicine is listed as ``Currently in 
Shortage'' on the FDA Drug Shortages Database, we are proposing that a 
hospital that newly establishes a buffer stock of that medicine while 
it is in shortage would not be eligible for separate buffer stock 
payment for that medicine for the duration of the shortage. However, if 
a hospital had already established and was maintaining a buffer stock 
of that medicine prior to the shortage, we are proposing that the 
hospital would continue to be eligible for separate buffer stock 
payment for that medicine for the duration of the shortage as the 
hospital draws down that buffer stock even if the number of months of 
supply of that medicine in the buffer stock were to drop to less than 6 
months. By limiting eligibility in this way, we believe that we can 
both insulate smaller hospitals from short-term drug shortages and 
mitigate the potential for the proposed policy to exacerbate existing 
shortages or contribute to concerns of hoarding.
    As an illustrative example, suppose a hospital established and 
maintained 6-month buffer stocks for five essential medicines. However, 
one of those essential medicines was subsequently listed as ``Currently 
in Shortage'' on the FDA Drug Shortages Database. The hospital would no 
longer be required to maintain a 6-month buffer stock of the essential 
medicine that is in shortage to receive separate payment for 
maintaining the buffer stock of that essential medicine during the 
period of shortage. The hospital would continue to be eligible for the 
separate payment from CMS for the buffer stock for that medicine during 
the period of shortage as it draws down its established buffer stock of 
the medicine in shortage as needed. However, the hospital would be 
required to maintain buffer stocks of no less than 6 months for the 
other four essential medicines that are not in shortage to be eligible 
to receive separate payment for those four medicines.
    Because medicine can remain on the FDA Drug Shortage Database for 
years, we request comments on the duration that CMS should continue to 
pay hospitals for the maintenance of a less than 6-month buffer stock 
of the essential medicine if it is ``Currently in Shortage.'' We also 
request comments on if there is a quantity or dosage minimum floor 
where CMS should no longer pay to maintain a 6-month buffer stock of 
the essential medicine if it is ``Currently in Shortage.'' For example, 
if a hospital has one remaining dose of a drug ``Currently in 
Shortage'' and that drug remains in shortage on the FDA Drug Shortage 
Database for 5 years, should there be limits on how much and for how 
long CMS would pay a hospital for a 6-month buffer stock?
    We are proposing that if the ARMI List is updated to add or remove 
any essential medicines, all medicines on the updated list would be 
eligible for separate payment under this policy for the IPPS shares of 
the costs of establishing and maintaining access to 6-month buffer 
stocks as of the date the updated ARMI List is published. To the extent 
that in the future other medicines or lists are identified for 
eligibility in future iterations of this policy, we seek comment on the 
potential mechanism and timing for incorporating those updates. 
Comments may consider, among other factors, medicines that were 
excluded from the ARMI List, the E.O. 13944 List, or both. For example, 
some categories from the E.O. 13944 List--including Blood and Blood 
Products, Fractionated Plasma Products, Vaccines, and Volume 
Expanders--were excluded from the ARMI List due to

[[Page 36234]]

differences in their supply chains. Additionally, other categories were 
identified as not needed for routine/typical acute patient care (that 
is, Biological Threat Medical Countermeasures, Burn and Blast Injuries, 
Chemical Threat Medical Countermeasures, Pandemic Influenza Medical 
Countermeasures, Radiologic-Nuclear Threat Medical Countermeasures). 
The ARMI List does not include certain medicines that have recently 
been in shortage and that may be considered essential and are more 
prevalent in specific care settings other than an inpatient hospital, 
such as drugs used in oncology care on an outpatient basis. Further, 
there are medicines that are not included on the ARMI List nor the E.O. 
13944 List, such as buprenorphine-based medications for treatment of 
substance use disorder. We seek comment on whether eligibility for 
separate payment for the IPPS share of the costs of establishing and 
maintaining access to 6-month buffer stocks of essential medicines 
should include oncology drugs or other types of drugs not currently on 
the ARMI List.
    As noted earlier, CMS will conduct provider education regarding 
additions and deletions to the publicly available FDA Drug Shortages 
Database to assist hospitals with this proposed policy.
3. Hospital Eligibility
    Commenters on the CY 2024 Request for Comment (88 FR 82129 through 
82130) raised a number of concerns relating to access to essential 
medicines for small hospitals and potential hoarding behaviors among 
better resourced hospitals. Commenters also cautioned against the 
potential for the policy to cause demand-driven shocks to the 
pharmaceutical supply chain, exacerbating pharmaceutical access issues 
for hospitals, which they claimed would disproportionately impact 
smaller hospitals due to their smaller purchasing power. As hospitals 
and hospital systems increase in size through expansion of bed count 
and/or consolidation and vertical integration with other hospitals and 
health systems, they accrue bargaining leverage for payment 
negotiations and thereby increase their purchasing power.\177\ Those 
smaller (and often rural) hospitals that lack this increased purchasing 
power are faced with potentially lower payments from payers and less 
operating capital.\178\ To address this concern, and attempt to better 
insulate these smaller, independent hospitals against future supply 
disruptions of essential medicines, we are proposing to limit 
eligibility for separate payment for the resource costs of establishing 
and maintaining access to buffer stocks of essential medicines to 
small, independent hospitals that are paid under the IPPS, as defined 
later in this section. As many of these small, independent hospitals 
are located in rural areas, we also expect this policy to support rural 
hospitals, in line with the rural health strategy of the Biden-Harris 
Administration.\179\ \180\
---------------------------------------------------------------------------

    \177\ U.S. Congress, U.S. House of Representatives Committee on 
Ways and Means, Subcommittee on Health, Health Care Consolidation: 
The Changing Landscape of the U.S. Health Care System, May 2023: 
https://www.rand.org/content/dam/rand/pubs/testimonies/CTA2700/CTA2770-1/RAND_CTA2770-1.pdf.
    \178\ American Hospital Association, Rural Hospital Closures 
Threaten Access: Solutions to Preserve Care in Local Communities, 
September 2022: https://www.aha.org/system/files/media/file/2022/09/rural-hospital-closures-threaten-access-report.pdf.
    \179\ The White House, The Biden-Harris Administration is taking 
actions to improve the health of rural communities and help rural 
health care providers stay open, November 2023: https://www.hhs.gov/about/news/2023/11/03/department-health-human-services-actions-support-rural-america-rural-health-care-providers.html.
    \180\ The White House, Fact Sheet: Biden Administration Takes 
Steps to Address Covid-19 in Rural America and Build Rural Health 
Back Better, August 2021: https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/13/fact-sheet-biden-administration-takes-steps-to-address-covid-19-in-rural-america-and-build-rural-health-back-better/.
---------------------------------------------------------------------------

    We believe that by focusing eligibility on small, independent 
hospitals, we can both support these types of hospitals in their 
efforts to provide patient care during drug shortages and lessen any 
potential demand shocks to the pharmaceutical supply chain because the 
buffer stocks these hospitals would require are likely smaller compared 
to larger hospitals and hospital chains. As discussed further in the 
regulatory impact analysis associated with this proposed policy in 
section I.G.6. of Appendix A of this proposed rule, we identified 493 
potentially eligible hospitals based on FY 2021 hospital cost report 
data. Of these hospitals, 249 were identified as geographically rural, 
6 were identified as geographically urban but reclassified as rural 
(under our reclassification regulations at Sec.  412.103), and 238 were 
identified as geographically urban without a reclassification as rural. 
These hospitals had 216,557 Medicare discharges in total and an average 
of 442 Medicare discharges per hospital for the FY 2021 cost reporting 
year.
    Small Hospital: For the purposes of this policy, we propose to 
define a small hospital as one with not more than 100 beds. This 
definition is consistent with the definition of a small hospital used 
for Medicare-dependent, small rural hospitals (MDH) in section 
1886(d)(5)(G)(iv)(II) of the Act. Consistent with the MDH regulations 
at Sec.  412.108(a)(1)(ii), we propose that a hospital would need to 
have 100 or fewer beds as defined in Sec.  412.105(b) during the cost 
reporting period for which it is seeking the payment adjustment to be 
considered a small hospital for purposes of this payment adjustment. We 
request comment on using criteria other than the MDH bed size criterion 
to identify small hospitals for the purposes of this proposed payment 
policy.
    Independent Hospital: For the purposes of this policy, we propose 
to define an independent hospital as one that is not part of a chain 
organization, as defined for purposes of hospital cost reporting. A 
chain organization is defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization. This proposed definition is the 
definition of chain organization in CMS Pub 15-1, Provider 
Reimbursement Manual, Chapter 21, Cost Related to Patient Care Sec.  
2150: ``Home Office Costs--Chain Operations'' and used by a hospital 
when completing its cost report.
    Because this proposed definition is the definition of chain 
organization used by a hospital when filling out its cost report, to 
operationalize our proposed separate payment policy, we propose that 
any hospital that appropriately answers ``yes'' (denoted ``Y'') to line 
140 column 1 or fills out any part of lines 141 through line 143 on 
Worksheet S-2, Part I, on Form CMS-2552-10 is considered to be part of 
a chain organization and not independent, and therefore not eligible 
for separate payment under this proposal. Please see Table V.J.-01 for 
a partial example of this section of Form CMS-2552-10.

[[Page 36235]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.194

    Thus, we propose that in order to be eligible for this separate 
payment, under this policy, a hospital would need to be a small 
hospital with 100 or fewer beds and meet the definition of independent 
described previously. We seek comment on our proposed eligibility 
criteria and proposed definition of a small, independent hospital.
    We note that critical access hospitals (CAHs) are paid for 
inpatient and outpatient services at 101 percent of Medicare's share of 
reasonable costs, including Medicare's share of the reasonable costs of 
establishing and maintaining access to buffer stocks of medicines. We 
seek comment on the use of buffer stocks by CAHs, including the 
medicines in the buffer stocks, the costs of establishing and 
maintaining the buffer stocks, whether CAHs tend to contract out this 
activity, and any barriers that CAHs may face in establishing and 
maintaining access to buffer stocks.
4. Size of the Buffer Stock
    As summarized in the CY 2024 OPPS/ASC final rule and section V.J.1. 
of the preamble of this proposed rule, some commenters on the CY 2024 
Request for Comment expressed concerns that a 3-month supply of 
essential medicines may not be sufficient to adequately insulate 
hospitals from the detrimental effects of future drug shortages. 
Commenters stated that drug shortages often persist for durations of 
time in excess of 3 months, such that a 3-month buffer stock may be 
inadequate to insulate hospitals from the longer-term effects of drug 
shortages. As noted in section V.J.1. of the preamble of this proposed 
rule, drug shortages generally persist for many months, and some 
research suggests that these shortages last for an average of 1.5 
years. Accordingly, we believe a buffer stock of at least 6 months 
would better support small, independent hospitals in contending with 
future shortages. To better address commenters' concerns and hospital 
needs during drug shortages, we are proposing separate payment for the 
costs of establishing and maintaining access to a buffer stock that is 
sufficient for no less than a 6-month period of time for each of one or 
more essential medicines. As discussed in section V.J.5 of the preamble 
of this proposed rule, we are also seeking comments on whether a phase-
in approach that, for example, would provide separate payment for 
establishing and maintaining access to a 3-month supply for the first 
year in which the policy is implemented and a 6-month supply for all 
subsequent years would be appropriate.
    In estimating the amount of a buffer stock needed for each 
essential medicine, the hospital should consider that the amount needed 
to maintain a buffer stock could vary month to month and throughout the 
applicable months of the cost reporting period; that is, a hospital's 
historical use of a medicine may indicate that it is typically needed 
more often in January than June, for example. Accordingly, the size of 
the buffer stock should reflect this anticipated variation and be based 
on a reasonable estimate of the hospital's need for that essential 
medicine in the upcoming 6-month period. This estimate would be 
determined by the hospital and could be based on the historical usage 
of the essential medicine by the hospital for that 6-month period in a 
prior year, or another reasonable method to estimate its need for that 
upcoming period. If a hospital did not maintain a 6-month buffer stock 
of an essential medicine for an entire cost reporting period, any 
separate payment to the hospital under this policy would be adjusted 
based on the proportion of the cost reporting period for which the 
hospital did maintain the 6-month buffer stock of that essential 
medicine. As described in section V.J.2 of the preamble of this 
proposed rule, in the event that a hospital is not able to maintain a 
buffer stock of at least 6 months due to one or more of their chosen 
medicine(s) being listed as ``Currently in Shortage'' on the FDA's Drug 
Shortage Database after establishment of the buffer stock under this 
policy, the hospital would continue to be eligible for the buffer stock 
payment for the medicine(s) in shortage as the hospital draws down the 
buffer stock even if the number of months of supply of that medicine in 
the buffer stock were to drop to less than 6 months. Hospitals would be 
permitted to use multiple contracts to establish and maintain at least 
a 6-month buffer stock for any given essential medicine.
5. Proposed Separate Payment Under IPPS for Establishing and 
Maintaining Access to Buffer Stocks of Essential Medicines
    As discussed in the CY 2024 Request for Comment, CMS requested 
public comments on a potential separate payment under the IPPS for the 
additional, reasonable costs of establishing and maintaining a 3-month 
buffer stock of one or more essential medicine(s). We stated that 
participating hospitals could establish and maintain their buffer 
stocks directly, or through contractual arrangements with 
pharmaceutical distributors, intermediaries, or manufacturers.
    We received comments in response to the CY 2024 Request for Comment 
stating that hospitals that maintain buffer stocks of essential 
medicines typically do so through upstream entities, such as 
pharmaceutical group purchasing organizations and manufacturers. 
Furthermore, these commenters stated that hospitals typically lack the 
capacity to stockpile large quantities of essential medicines directly. 
Some of these commenters

[[Page 36236]]

stated that any buffer stocks established under the potential policy 
should be maintained by upstream intermediaries or a neutral third 
party instead of directly maintained by hospitals, as they stated that 
these upstream intermediaries are generally better positioned and 
equipped to maintain these buffer stocks. While other commenters were 
receptive to directly maintaining their buffer stock(s) or indicated 
that they already maintained substantial buffer stocks of medicines, 
these commenters were generally larger, better resourced hospitals or 
hospital systems.
    We agree with commenters that pharmaceutical intermediaries and 
manufacturers are generally better positioned to establish and maintain 
larger (for example, 6-month or greater) buffer stocks of essential 
medicines, as small, independent hospitals may generally lack the 
space, staff, and specific equipment (like large-scale refrigeration 
and large, onsite storage) to directly maintain 6-month buffer stock(s) 
of essential medicine(s). While we anticipate that most hospitals that 
elect to establish and maintain buffer stocks under this policy will do 
so through contractual arrangements with pharmaceutical intermediaries, 
manufacturers, and distributors, we are proposing that the additional 
resource costs associated with directly maintaining 6-month buffer 
stock(s) of essential medicine(s) would also be eligible for separate 
payment under this policy. Accordingly, we are proposing that for 
purposes of the proposed separate payment under the IPPS to small, 
independent hospitals for the estimated additional resource costs of 
voluntarily establishing and maintaining access to 6-month buffer 
stocks of essential medicines, those costs associated with establishing 
and maintaining access to 6-month buffer stocks either directly or 
through contractual arrangements with pharmaceutical manufacturers, 
intermediaries, or distributors would be eligible for additional 
payment under this policy. These costs do not include the cost of the 
medicines themselves which would continue to be paid in the current 
manner. We also note that the proposed payment is only for the IPPS 
share of the costs of establishing and maintaining access to buffer 
stock(s) of one or more essential medicine(s).
    The costs associated with directly establishing and maintaining a 
buffer stock may include utilities like cold chain storage and heating, 
ventilation, and air conditioning, warehouse space, refrigeration, 
management of stock including stock rotation, managing expiration 
dates, and managing recalls, administrative costs related to 
contracting and record-keeping, and dedicated staff for maintaining the 
buffer stock(s). We request comments on other types of costs intrinsic 
to directly establishing buffer stocks of essential medicines that 
should be considered eligible for purposes of separate payment under 
this policy. We also request comment regarding whether staff costs 
would increase with the number of essential medicines in buffer stock, 
and whether there would be efficiencies if multiple hospitals elect to 
establish buffer stocks of essential medicines with the same 
pharmaceutical manufacturer, intermediary, or distributor.
    We also request comment on whether this proposed policy should be 
phased in by the size of the buffer stock to address concerns about 
infrastructure investments that may be needed to store and maintain the 
supply. For example, under a phased approach, separate payment could be 
made available for establishing and maintaining access to a 3-month 
supply for the first year in which the policy is implemented and a 6-
month supply for all subsequent years. We also refer readers to the 
Collection of Information Requirements in section XII.B.2. of the 
preamble of this proposed rule regarding the estimated burden 
associated with this policy proposal and seek comment on whether there 
are any other potential methods for hospitals to report costs included 
under this policy besides the forthcoming supplemental cost reporting 
worksheet.
    Currently, payment for the resources required to establish and 
maintain access to medically reasonable and necessary drugs and 
biologicals is generally part of the IPPS payment. As noted in section 
V.J.2. of the preamble of this proposed rule, we expect that the 
resources required to establish and maintain access to buffer stocks of 
essential medicines will generally be greater than the resources 
required to establish and maintain access to these medicines without 
such buffer stocks. Given these additional resource costs and our 
concern that small, independent hospitals may lack the resources 
available to larger hospitals and hospital chains to establish buffer 
stocks of essential medicines, we believe it is appropriate to propose 
to pay these hospitals separately for the additional resource costs 
associated with voluntarily establishing and maintaining access, either 
directly or through contractual arrangements, to buffer stocks of 
essential medicines. As also noted in section V.J.2 of the preamble of 
this proposed rule, we are proposing that if the ARMI List is updated 
to add or remove any essential medicines, all medicines on the updated 
list would be eligible for separate payment under this policy for the 
IPPS shares of the costs of establishing and maintaining access to 6-
month buffer stocks as of the date the updated ARMI List is published. 
Any medicine(s) that are removed from the ARMI List in any future 
updates to the list would no longer be eligible for separate payment 
under this policy for the IPPS shares of the costs of establishing and 
maintaining access to 6-month buffer stocks as of the date the updated 
ARMI List is published.
    CMS is proposing to base the IPPS payment under this policy on the 
IPPS shares of the additional reasonable costs of a hospital to 
establish and maintain access to its buffer stock. The use of IPPS 
shares in this payment adjustment would be consistent with the use of 
these shares for the payment adjustment for domestic NIOSH approved 
surgical N95 respirators, which is based on the IPPS and OPPS shares of 
the difference in cost between domestic and non-domestic NIOSH approved 
surgical N95 respirators for the cost reporting period in which costs 
are claimed (87 FR 72037). The hospital would report these costs to CMS 
on the forthcoming supplemental cost reporting worksheet associated 
with this proposed policy. The hospital's costs may include costs 
associated with contractual arrangements between the hospital and a 
manufacturer, distributor, or intermediary or costs associated with 
directly establishing and maintaining buffer stock(s). These costs 
would not include the costs of the essential medicine itself, which 
would continue to be paid in the current manner.
    If a hospital establishes and maintains access to buffer stock(s) 
of essential medicine(s) through contractual arrangements with 
pharmaceutical manufacturers, intermediaries, or distributors, the 
hospital would be required to disaggregate the costs specific to 
establishing and maintaining the buffer stock(s) from the remainder of 
the costs present on the contract for purposes of reporting these 
disaggregated costs under this proposed policy. This disaggregated 
information, reported by the hospital on the new supplemental cost 
reporting worksheet, along with existing information already collected 
on the cost report, would be used to calculate a Medicare payment for 
the IPPS share of the hospital's costs of establishing and maintaining 
access to the buffer stock(s) of essential medicine(s).

[[Page 36237]]

    If a hospital contracts with one or more manufacturers or 
wholesalers or other intermediaries to establish and maintain 6-month 
buffer stocks of one or more essential medicines, the hospital must 
clearly identify those costs separately from the costs of other 
provisions of the contract(s). As a simplified example for purposes of 
illustration, suppose a hospital has a $500,000 contract with a 
pharmaceutical wholesaler. The contract is for pharmaceutical products, 
50 of which are qualifying essential medicines. Additionally, the 
contract contains a provision for the wholesaler to establish and 
maintain 6-month buffer stocks of those 50 essential medicines on the 
hospital's behalf. The contract further specifies that $10,000 of the 
$500,000 is for the provision of the contract that establishes and 
maintains the 6-month buffer stocks of those 50 essential medicines. 
This $10,000 amount does not include any costs to the hospital for the 
drugs themselves which, as previously noted, would continue to be paid 
in the current manner. Under this proposal, the hospital would report 
the $10,000 cost for establishing and maintaining the 6-month buffer 
stocks of the 50 essential medicines on the supplemental cost reporting 
worksheet. That $10,000 cost, in addition to other information already 
existing on the cost report, would be used to calculate the additional 
payment under this policy including the hospital-specific Medicare IPPS 
share percentage of this cost, expressed as the percentage of inpatient 
Medicare costs to total hospital costs. On average for the small, 
independent hospitals that are eligible for this policy, the Medicare 
IPPS share percentage is approximately 11 percent.
    If a hospital chooses to directly establish and maintain buffer 
stock(s) of one or more essential medicines, the hospital would be 
required to report the additional costs associated with establishing 
and maintaining its buffer stock(s) on the supplemental cost reporting 
form. The hospital should clearly specify the total additional resource 
costs to establish and maintain its 6-month buffer stock(s) of 
essential medicine(s). As in the previous example, this amount should 
not include the cost of the essential medicine(s) themselves and would 
be used, along with other information already existing on the cost 
report, to calculate the additional payment under this policy.
    Additionally, we would anticipate that when a hospital contracts 
with one or more manufacturers or wholesalers or other intermediaries 
to establish and maintain 6-month buffer stocks of one or more 
essential medicines, it would ensure that a discrete buffer stock is 
maintained for that hospital. For example, if two hospitals held 
contracts with a manufacturer arranging for 6-month buffer stocks of 
certain essential medicines, the hospitals would verify that the 
manufacturer is maintaining sufficient total buffer stock to account 
for the 6-month demand of both hospitals in aggregate.
    We seek to support the establishment of buffer stocks when drugs 
are not currently in shortage in order to promote the overall 
resiliency of drug supply chains. As previously discussed, we are 
proposing that buffer stocks for any of the essential medicines on the 
ARMI List that are listed as ``Currently in Shortage'' on the FDA Drug 
Shortages Database would not be eligible for additional payment under 
this policy for a hospital's cost reporting period unless the hospital 
had already established and was maintaining a buffer stock of that 
medicine prior to the shortage.
    Additionally, we are proposing that any essential medicine(s) for 
which a hospital has successfully established and maintained a buffer 
stock(s) of at least 6 months that is subsequently listed as 
``Currently in Shortage'' on the FDA Drug Shortages Database would be 
exempt from the requirement to maintain a 6-month supply of such 
essential medicine(s) for the duration of the period in which the 
medicine is in shortage. We are interested in public comments on the 
burden associated with hospitals' monitoring of the FDA Drug Shortage 
Database, and excluding from the cost report any resource costs 
associated with maintaining a buffer stock of an essential medicine 
that was listed as ``Currently in Shortage,'' except where the hospital 
had already established and was maintaining a 6-month buffer stock of 
that medicine prior to the shortage. As of the date that medicine is no 
longer listed as ``Currently in Shortage,'' eligibility for separate 
payment to the hospital for the drug in shortage would be prospectively 
adjusted based on the proportion of the cost reporting period for which 
the hospital does maintain the 6-month buffer stock of that essential 
medicine. Once an essential medicine is no longer listed as ``Currently 
in Shortage'' in the FDA Drug Shortages Database, our proposed policy 
does not differentiate that essential medicine from other essential 
medicines. However, we also seek comment on whether some minimum 
period, such as 6 months, should elapse after a shortage of a given 
essential medicine is resolved before that medicine can become eligible 
for separate payment under this proposed policy.
    We are proposing to make separate payments for the IPPS shares of 
these additional resource costs of establishing and maintaining access 
to buffer stocks of essential medicines. Payment could be provided as a 
lump sum at cost report settlement or biweekly as interim lump-sum 
payments to the hospital, which would be reconciled at cost report 
settlement. In accordance with the principles of reasonable cost as set 
forth in section 1861(v)(1)(A) of the Act and in 42 CFR 413.1 and 
413.9, Medicare could make a lump-sum payment for Medicare's share of 
these additional inpatient costs at cost report settlement. 
Alternatively, a provider may make a request for biweekly interim lump 
sum payments for an applicable cost reporting period, as provided under 
42 CFR 413.64 (Payments to providers: Specific rules) and 42 CFR 
412.116(c) (Special interim payments for certain costs). These payment 
amounts would be determined by the Medicare Administrative Contractor 
(MAC) consistent with existing policies and procedures. In general, 
interim payments are determined by estimating the reimbursable amount 
for the year using Medicare principles of cost reimbursement and 
dividing it into 26 equal biweekly payments. The estimated amount would 
be based on the most current cost data available, which will be 
reviewed and, if necessary, adjusted at least twice during the 
reporting period. (See CMS Pub 15-1 Sec.  2405.2 for additional 
information). The MACs would determine the interim lump-sum payments 
based on the data the hospital may provide that reflects the 
information that would be included on the new supplemental cost 
reporting form. CMS will separately seek comment through the Paperwork 
Reduction Act (PRA) process on a supplemental cost reporting form that 
would be used for this purpose. In future years, the MACs could 
determine the interim biweekly lump-sum payments utilizing information 
from the prior year's cost report, which may be adjusted based on the 
most current data available. This is consistent with the current 
policies for medical education costs, and bad debts for uncollectible 
deductibles and coinsurance paid on interim biweekly basis as noted in 
CMS Pub 15-1 Sec.  2405.2. It is also consistent with the payment 
adjustment for domestically sourced NIOSH approved surgical N95 
respirators (87 FR 72037).
    We are proposing to codify this payment adjustment in the 
regulations

[[Page 36238]]

by adding new paragraph (g) to 42 CFR 412.113 to state the following:
     Essential medicines are the 86 medicines prioritized in 
the report Essential Medicines Supply Chain and Manufacturing 
Resilience Assessment developed by the U.S. Department of Health and 
Human Services Office of the Assistant Secretary for Preparedness and 
Response and published in May of 2022, and any subsequent revisions to 
that list of medicines. A buffer stock of essential medicines for a 
hospital is a supply, for no less than a 6-month period, of one or more 
essential medicines.
     The additional resource costs of establishing and 
maintaining access to a buffer stock of essential medicines for a 
hospital are the additional resource costs incurred by the hospital to 
directly hold a buffer stock of essential medicines for its patients or 
arrange contractually for such a buffer stock to be held by another 
entity for use by the hospital for its patients. The additional 
resource costs of establishing and maintaining access to a buffer stock 
of essential medicines does not include the resource costs of the 
essential medicines themselves.
     For cost reporting periods beginning on or after October 
1, 2024, a payment adjustment to a small, independent hospital for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines is made as described in paragraph 
(g)(4) of this section. For purposes of this section, a small, 
independent hospital is a hospital with 100 or fewer beds as defined in 
Sec.  412.105(b) during the cost reporting period that is not part of a 
chain organization, defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization.
     The payment adjustment is based on the estimated 
reasonable cost incurred by the hospital for establishing and 
maintaining access to buffer stocks of essential medicines during the 
cost reporting period.
    We are also proposing to make conforming changes to 42 CFR 412.1(a) 
and 412.2(f) to reflect this proposed payment adjustment for small, 
independent hospitals for the additional resource costs of establishing 
and maintaining access to buffer stocks of essential medicines.
    In summary, for cost reporting periods beginning on or after 
October 1, 2024, we are proposing to establish a separate payment under 
the IPPS to small, independent hospitals for the additional resource 
costs involved in voluntarily establishing and maintaining access to 6-
month buffer stocks of essential medicines, either directly or through 
contractual arrangements with a manufacturer, distributor, or 
intermediary. We are proposing that the costs of buffer stocks that are 
eligible for separate payment are the costs of buffer stocks for one or 
more of the medicines on ARMI's List of 86 essential medicines. The 
separate payment would be for the IPPS share of the additional costs 
and could be issued in a lump sum, or as biweekly payments to be 
reconciled at cost report settlement. The separate payment would not 
apply to buffer stocks of any of the essential medicines on the ARMI 
List that are currently listed as ``Currently in Shortage'' on the FDA 
Drug Shortages Database unless a hospital had already established and 
was maintaining a 6-month buffer stock of that medicine prior to the 
shortage. Once an essential medicine is no longer listed as ``Currently 
in Shortage'' in the FDA Drug Shortages Database, our proposed policy 
does not differentiate that essential medicine from other essential 
medicines and hospitals would be eligible to establish and maintain 
buffer stocks for the medicine as they would have before the shortage. 
CMS will separately seek comment through the PRA process on a 
supplemental cost reporting form for this proposed payment.

K. Hospital Readmissions Reduction Program

1. Regulatory Background
    Section 3025 of the Patient Protection and Affordable Care Act, as 
amended by section 10309 of the Patient Protection and Affordable Care 
Act, added section 1886(q) to the Act, which establishes the Hospital 
Readmissions Reduction Program effective for discharges from applicable 
hospitals beginning on or after October 1, 2012. Under the Hospital 
Readmissions Reduction Program, payments to applicable hospitals may be 
reduced to account for certain excess readmissions. We refer readers to 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543) and 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240) for a 
general overview of the Hospital Readmissions Reduction Program. We 
also refer readers to 42 CFR 412.152 through 412.154 for codified 
Hospital Readmissions Reduction Program requirements.
2. Notice of No Program Proposals or Updates
    There are no proposals or updates in this proposed rule for the 
Hospital Readmissions Reduction Program. We refer readers to section 
I.G.7. of Appendix A of the proposed rule for an updated estimate of 
the financial impact of using the proportion of dually eligible 
beneficiaries, ERRs, and aggregate payments for each condition/
procedure and all discharges for applicable hospitals from the FY 2025 
Hospital Readmissions Reduction Program applicable period (that is, 
July 1, 2020, through June 30, 2023).

L. Hospital Value-Based Purchasing (VBP) Program

1. Background
a. Overview
    For background on the Hospital VBP Program, we refer readers to the 
CMS website at: https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/hospital-value-based-purchasing. We also 
refer readers to our codified requirements for the Hospital VBP Program 
at 42 CFR 412.160 through 412.168.
b. FY 2025 Program Year Payment Details
    Under section 1886(o)(7)(C)(v) of the Act, the applicable percent 
for the FY 2025 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 2025 is approximately $1.7 billion, based on 
the December 2023 update of the FY 2023 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 
through 53576), we will utilize a linear exchange function to translate 
this estimated amount available into a value-based incentive payment 
percentage for each hospital, based on its Total Performance Score 
(TPS). We are publishing proxy value-based incentive payment adjustment 
factors in Table 16 associated with this proposed rule (which is 
available via the internet on the CMS website). We note that these 
proxy adjustment factors will not be used to adjust hospital payments. 
These proxy value-based incentive payment adjustment factors were 
calculated using the historical baseline and performance periods for 
the FY 2024 Hospital VBP Program. These proxy factors were calculated 
using the December 2023 update to the FY 2023 MedPAR file. The slope of 
the linear exchange function used to calculate

[[Page 36239]]

these proxy factors was 4.7270521828, and the estimated amount 
available for value-based incentive payments to hospitals for FY 2025 
is approximately $1.7 billion. We intend to include an update to this 
table, as Table 16A, with the FY 2025 IPPS/LTCH PPS final rule, to 
reflect changes based on the March 2024 update to the FY 2023 MedPAR 
file. We will add Table 16B to display the actual value-based incentive 
payment adjustment factors, exchange function slope, and estimated 
amount available for the FY 2025 Hospital VBP Program. We expect that 
Table 16B will be posted on the CMS website in Fall 2024.
2. Previously Adopted Quality Measures for the Hospital VBP Program
    We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49110 through 49111) for summaries of previously adopted measures for 
the FY 2025 and FY 2026 program years and to the FY 2024 IPPS/LTCH PPS 
final rule for summaries of newly adopted measures beginning with the 
FY 2026 program year (88 FR 59081 through 59083). We are not proposing 
any changes to the measure set. Table V.L.-01 summarizes the previously 
adopted Hospital VBP Program measure set for the FY2025 program year.
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    As discussed in section IX.B.2.g(2) of the preamble of this 
proposed rule, we are proposing to adopt updates to the HCAHPS Survey 
measure beginning with the FY 2030 program year. We are also proposing 
to adopt updates to the HCAHPS Survey measure in the Hospital Inpatient 
Quality Reporting (IQR) Program, beginning with the FY 2027 program 
year, as described in section IX.B.2.e of the preamble of this proposed 
rule. We are also proposing to modify Hospital VBP Program scoring of 
the HCAHPS Survey for the FY 2027 through FY 2029 program years to 
score hospitals on only those dimensions of the survey that would 
remain unchanged from the current version, as

[[Page 36240]]

described in section IX.B.2.f of the preamble of this proposed rule. 
Lastly, we are also proposing to modify the scoring in FY 2030 to 
account for the adoption of the proposed modifications to the HCAHPS 
Survey measure that would result in a total of nine survey dimensions 
for the updated HCAHPS Survey measure in the Hospital VBP Program, 
which is described in section IX.B.2.g(3) of the preamble of this 
proposed rule. Table V.L.-02 summarizes the previously adopted Hospital 
VBP Program measures for the FY 2026 through FY 2030 program years.
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3. Baseline and Performance Periods for the FY 2026 Through FY 2030 
Program Years
a. Background
    We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59084 through 59087) for previously adopted baseline and performance 
periods for the FY 2025 through FY 2029 program years. We also refer 
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998) in which 
we finalized a schedule for all future baseline and performance periods 
for all measures.
b. Summary of Baseline and Performance Periods for the FY 2026 Through 
FY 2030 Program Years
    Tables V.L.-03, V.L.-04, V.L.-05, V.L.-06, and V.L.-07 summarize 
the baseline and performance periods that we have previously adopted.

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4. Performance Standards for the Hospital VBP Program
a. Background
    We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49115 through 49118) for previously established performance standards 
for the FY 2025 program year. We also refer readers to the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59089 through 59090) for the previously 
established performance standards for the FY 2026 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. Previously and Newly Estimated Performance Standards 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 Hospital measure 
are based on performance period data. Therefore, we are unable to 
provide numerical equivalents for the standards at this time. The 
previously established and newly estimated performance standards for 
the FY 2027 program year are set out in Tables V.L.-08 and V.L.-09.

[[Page 36244]]

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    As discussed in section IX.B.2.f of the preamble of this proposed 
rule, we are proposing to modify the scoring of the HCAHPS Survey for 
the FY 2027 through FY 2029 program years while the proposed updates to 
the survey would be publicly reported under the Hospital IQR Program. 
Scoring would be modified to only score hospitals on the six Hospital 
VBP Program dimensions of the HCAHPS Survey that would remain unchanged 
from the current version. These six dimensions of the HCAHPS Survey for 
the Hospital VBP Program would be:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Communication about Medicines,''
     ``Discharge Information,''
     ``Cleanliness and Quietness,'' and
     ``Overall Rating.''
    We are proposing to exclude the ``Responsiveness of Hospital 
Staff'' and ``Care Transition'' dimensions from scoring in the Hospital 
VBP Program's HCAHPS Survey measure in the Person and Community 
Engagement domain for the FY 2027 through FY 2029 program years. This 
would allow hospitals to be scored on only those dimensions of the 
survey in the Hospital VBP Program that would remain unchanged from the 
current version of the survey while the updated HCAHPS Survey is 
publicly reported on under the Hospital IQR Program for one year as 
required by statute. We are also proposing to adopt the updated version 
of the HCAHPS Survey measure for use in the Hospital VBP Program 
beginning in FY 2030 as outlined in section IX.B.2.g of this proposed 
rule.
    Scoring would be modified such that for each of the six dimensions 
listed previously, Achievement Points (0-10 points) and Improvement 
Points (0-9 points) would be calculated, the larger of which would be 
summed across these six dimensions to create a pre-normalized HCAHPS 
Base Score of 0-60 points (as compared to 0-80 points with the current 
eight dimensions). The pre-normalized HCAHPS Base Score would then be 
multiplied by \8/6\ (1.3333333) and rounded according to standard rules 
(values of 0.5 and higher are rounded

[[Page 36245]]

up, values below 0.5 are rounded down) to create the normalized HCAHPS 
Base Score. Each of the six dimensions would be of equal weight, so 
that, as currently scored, the normalized HCAHPS Base Score would range 
from 0 to 80 points. HCAHPS Consistency Points would be calculated in 
the same manner as the current method and would continue to range from 
0 to 20 points. Like the Base Score, the Consistency Points Score would 
consider scores across the six unchanged dimensions of the Person and 
Community Engagement domain. The final element of the scoring formula, 
which would remain unchanged from the current formula, would be the sum 
of the HCAHPS Base Score and the HCAHPS Consistency Points Score for a 
total score that ranges from 0 to 100 points. The method for 
calculating the performance standards for the six dimensions would 
remain unchanged. We refer readers to the Hospital Inpatient VBP 
Program final rule (76 FR 26511 through 26513) for our methodology for 
calculating performance standards. The estimated performance standards 
for the six dimensions that are proposed to be scored on for the FY 
2027 program year are set out in Table V.L.-09.
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c. 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). 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.L.-10.

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d. Previously Established Performance Standards for Certain Measures 
for the FY 2029 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 2024 IPPS/LTCH PPS final rule (88 FR 59091 through 
59092), we established performance standards for the FY 2029 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB 
Hospital). We 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.L.-11.

[[Page 36247]]

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e. Newly Established Performance Standards for Certain Measures for the 
FY 2030 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 2030 
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.L.-12.

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M. 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 50709) for a general overview of the HAC Reduction 
Program and a detailed discussion of the statutory basis for the 
Program. We also refer readers to 42 CFR 412.170 through 412.172 for 
codified HAC Reduction Program requirements.
2. Measures for FY 2025 and Subsequent Years in the HAC Reduction 
Program
    The previously finalized measures for the HAC Reduction Program are 
shown in table V.M.-01. 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 National Healthcare Safety Network (NHSN) 
HAI measures can be found at the CDC's NHSN website at http://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 web pages provide measure updates and other 
information necessary to guide hospitals participating in the 
collection of HAC Reduction Program data.

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    We are not making any proposals or updates for the HAC Reduction 
Program in this proposed rule. We refer readers to section I.G.9. of 
Appendix A of this proposed rule for an updated estimate of the impact 
of the Program policies on the proportion of hospitals in the worst 
performing quartile of the Total HAC Scores for the FY 2025 HAC 
Reduction Program.

N. 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, 2021 (Pub. L. 116-
260). In the preamble of this proposed rule, we summarize the status of 
the demonstration program, and the current methodologies for 
implementation and calculating budget neutrality.
    We are also proposing the amount to be applied to the national IPPS 
payment rates to account for the costs of the demonstration in FY 2025, 
and, in addition, we are proposing to include the reconciled amount of 
demonstration costs for FY 2019 in the FY 2025 IPPS/LTCH final rule. We 
expect all finalized cost reports for this earlier year to be available 
by that time.
2. Background
    Section 410A(a) of the MMA (Pub. L. 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 the CAA, 2021 (Pub. L. 116-260) follows upon the previous extensions 
under the Affordable Care Act (Pub. L. 111-148) and the Cures Act (Pub. 
L. 114-255). Section 410A of the MMA (Pub. L. 108-173) initially 
required a 5-year period of performance. Subsequently, sections 3123 
and 10313 of the Affordable Care Act (Pub. L. 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, the Affordable Care Act (Pub. L. 
111-148) limited the number of hospitals participating to no more than 
30. Section 15003 of the Cures Act (Pub. L. 114-255) required a 10-year 
extension period in place of the 5-year extension period under the 
Affordable Care Act (Pub. L. 111-148), thereby extending the 
demonstration for another 5 years. Section 128 of CAA, 2021 (Pub. L. 
116-260), in turn, revised the statute to indicate a 15-year extension 
period, instead of the 10-year extension period mandated by the Cures 
Act (Pub. L. 114-255).
    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 23 
hospitals participating in the demonstration.
2. Budget Neutrality
a. Statutory Budget Neutrality Requirement
    Section 410A(c)(2) of the MMA (Pub. L. 108-173) requires that, in 
conducting the demonstration program under this section, the Secretary 
shall ensure that

[[Page 36250]]

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 IPPS 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 2024. Please see the FY 2024 IPPS final rule for an account 
of how we applied the budget neutrality requirement for these fiscal 
years (88 FR 59114 through 59116).
b. General Budget Neutrality Methodology
    We have generally incorporated two components into the budget 
neutrality offset amounts identified in the final IPPS rules in 
previous years. First, we have estimated the costs of the demonstration 
for the upcoming fiscal year, generally determined from historical, 
``as submitted'' cost reports for the hospitals participating in that 
year. Update factors representing nationwide trends in cost and volume 
increases have been incorporated into these estimates, as specified in 
the methodology described in the final rule for each fiscal year. 
Second, as finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an earlier, 
given year differed from the estimated costs for the demonstration set 
forth in the final IPPS rule for the corresponding fiscal year, and 
incorporated that amount into the budget neutrality offset amount for 
the upcoming fiscal year. If the actual costs for the demonstration for 
the earlier fiscal year exceeded the estimated costs of the 
demonstration identified in the final rule for that year, this 
difference was added to the estimated costs of the demonstration for 
the upcoming fiscal year when determining the budget neutrality 
adjustment for the upcoming fiscal year. Conversely, if the estimated 
costs of the demonstration set forth in the final rule for a prior 
fiscal year exceeded the actual costs of the demonstration for that 
year, this difference was subtracted from the estimated cost of the 
demonstration for 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 2018 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 
CAA, 2021
    For the most-recently enacted extension period, under the CAA, 
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 proposed rule, we outline the methodology to 
be used for determining the offset to the national IPPS payment rates 
for FY 2025.
(1) Methodology for Estimating Demonstration Costs for FY 2025
    Consistent with the general methodology from previous years, we are 
estimating the costs of the demonstration for the upcoming fiscal year, 
and proposing to incorporate this estimate into the budget neutrality 
offset amount to be applied to the national IPPS rates for the upcoming 
fiscal year, that is, FY 2025. We are conducting this estimate for FY 
2025 based on the 23 currently participating hospitals. The methodology 
for calculating this amount for FY 2025 proceeds according to the 
following steps:
    Step 1: For each of these 23 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 2022. 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 23 hospitals eligible to 
participate during FY 2025.
    Then, we multiply this amount by the FYs 2023, 2024, and 2025 IPPS 
market basket percentage increases, which are calculated by the CMS 
Office of the Actuary. (We are using the proposed market basket 
percentage increase for FY 2025, which can be found at section V.B.1. 
of the preamble to this proposed rule). The result for the 23 hospitals 
is the general estimated reasonable cost amount for covered inpatient 
hospital services for FY 2025.
    Consistent with our methods in previous years for formulating this 
estimate, we are applying the IPPS market basket percentage increases 
for FYs 2023 through 2025 to the applicable estimated reasonable cost 
amount (previously described) to model the estimated FY 2025 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 2025 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 2023, 2024, and 2025 IPPS applicable 
percentage increases. (For FY 2025, we are using the proposed 
applicable percentage increase, per section V.B.1. of the preamble of 
this proposed rule). This methodology differs from Step 1, in which we 
apply the market basket percentage increases to the hospitals' 
applicable estimated reasonable cost

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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 23 hospitals (for covered 
inpatient hospital services, including swing beds), which will be the 
general estimated amount of the costs of the demonstration for FY 2025.
    For this proposed rule, the resulting amount is $49,522,206, to be 
incorporated into the budget neutrality offset adjustment for FY 2025. 
This estimated amount is based on the specific assumptions regarding 
the data sources used, that is, recently available ``as submitted'' 
cost reports and historical update factors for cost and payment. If 
updated data become available prior to the final rule, we will use them 
as appropriate to estimate the costs for the demonstration program for 
FY 2025 in accordance with our methodology for determining the budget 
neutrality estimate. We will also incorporate any statutory change that 
might affect the methodology for determining hospital costs either with 
or without the demonstration.
(2) Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years
    As described earlier, we have calculated the difference for FYs 
2005 through 2018 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 2025 proposed rule, not all of the 
finalized cost reports are available for the 26 hospitals that 
completed cost report periods beginning in FY 2019 under the 
demonstration payment methodology. We expect all of these finalized 
cost reports to be available by the time of the final rule, and thus we 
are proposing to include the difference between the actual cost of the 
demonstration for FY 2019 as determined from finalized cost reports 
within the budget neutrality offset amount in the FY 2025 final rule.
(3) Total Proposed Budget Neutrality Offset Amount for FY 2025
    Therefore, for this FY 2025 IPPS/LTCH PPS proposed rule, the 
proposed budget neutrality offset amount for FY 2025 is the amount 
determined under section X.2.c.(2) of the preamble of this proposed 
rule, representing the difference applicable to FY 2025 between the sum 
of the estimated reasonable cost amounts that would be paid under the 
demonstration for covered inpatient services to the 23 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 $49,522,206.
    However, we note, that the overall amount might change if there are 
any revisions prior to the final rule to the data used to formulate 
this estimate. We also expect to revise the budget neutrality offset 
amount upon calculating the actual costs of the demonstration for FY 
2019, after receiving all of the finalized cost reports for that fiscal 
year.

VI. Proposed Changes to the IPPS for Capital Related Costs

A. Overview

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

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

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

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, the regulations at 42 CFR 412.300(b) define 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS, a new hospital is paid 85 
percent of its allowable Medicare inpatient

[[Page 36252]]

hospital capital related costs through its first 2 years of operation, 
unless the new hospital elects to receive full prospective payment 
based on 100 percent of the Federal rate. We refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information 
on payments to new hospitals under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised 
the regulations at 42 CFR 412.374 relating to the calculation of 
capital IPPS payments to hospitals located in Puerto Rico beginning in 
FY 2017 to parallel the change in the statutory calculation of 
operating IPPS payments to hospitals located in Puerto Rico, for 
discharges occurring on or after January 1, 2016, made by section 601 
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 
601 of Public Law 114-113 increased the applicable Federal percentage 
of the operating IPPS payment for hospitals located in Puerto Rico from 
75 percent to 100 percent and decreased the applicable Puerto Rico 
percentage of the operating IPPS payments for hospitals located in 
Puerto Rico from 25 percent to zero percent, applicable to discharges 
occurring on or after January 1, 2016. As such, under revised Sec.  
412.374, for discharges occurring on or after October 1, 2016, capital 
IPPS payments to hospitals located in Puerto Rico are based on 100 
percent of the capital Federal rate.

C. Proposed Annual Update for FY 2025

    The proposed annual update to the national capital Federal rate, as 
provided for in 42 CFR 412.308(c), for FY 2025 is discussed in section 
III. of the Addendum to this FY 2025 IPPS/LTCH PPS proposed rule.

VII. Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 
2025

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling. A per discharge limit 
(the target amount, as defined in Sec.  413.40(a) of the regulations) 
is set for each hospital based on the hospital's own cost experience in 
its base year, and updated annually by a rate-of-increase percentage. 
For each cost reporting period, the updated target amount is multiplied 
by total Medicare discharges during that period and applied as an 
aggregate upper limit (the ceiling as defined in Sec.  413.40(a)) of 
Medicare reimbursement for total inpatient operating costs for a 
hospital's cost reporting period. In accordance with Sec.  403.752(a) 
of the regulations, religious nonmedical health care institutions 
(RNHCIs) also are subject to the rate-of-increase limits established 
under Sec.  413.40 of the regulations discussed previously. 
Furthermore, in accordance with Sec.  412.526(c)(3) of the regulations, 
extended neoplastic disease care hospitals also are subject to the 
rate-of-increase limits established under Sec.  413.40 of the 
regulations discussed previously.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, the 11 cancer hospitals, and RNHCIs.
    Consistent with the regulations at Sec. Sec.  412.23(g) and 
413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage 
increase in the IPPS operating market basket to update target amounts 
for short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa. In the FY 2018 
IPPS/LTCH PPS final rule, we rebased and revised the IPPS operating 
market basket to a 2014 base year, effective for FY 2018 and subsequent 
fiscal years (82 FR 38158 through 38175), and finalized the use of the 
percentage increase in the 2014-based IPPS operating market basket to 
update the target amounts for children's hospitals, the 11 cancer 
hospitals, RNHCIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa for FY 2018 and subsequent fiscal years. As discussed in section 
IV. of the preamble of the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45194 through 45207), we rebased and revised the IPPS operating market 
basket to a 2018 base year. Therefore, we used the percentage increase 
in the 2018-based IPPS operating market basket to update the target 
amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa for FY 2022 and 
subsequent fiscal years.
    For this FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's 2023 
fourth quarter forecast, we estimate that the 2018-based IPPS operating 
market basket percentage increase for FY 2025 is 3.0 percent (that is, 
the estimate of the market basket rate-of-increase). Based on this 
estimate, the FY 2025 rate-of-increase percentage that will be applied 
to the FY 2024 target amounts in order to calculate the FY 2025 target 
amounts for children's hospitals, the 11 cancer hospitals, RNCHIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa is 3.0 percent, 
in accordance with the applicable regulations at 42 CFR 413.40. 
However, we are proposing that if more recent data become available for 
the FY 2025 IPPS/LTCH PPS final rule, we would use such data, if 
appropriate, to calculate the final IPPS operating market basket update 
for FY 2025.
    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 2025, in accordance with Sec. Sec.  412.22(i) and 
412.526(c)(2)(ii) of the

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regulations, for cost reporting periods beginning during FY 2025, 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 2025 
is 3.0 percent, which is based on IGI's fourth quarter 2023 forecast. 
Furthermore, we are proposing that if more recent data become available 
for the FY 2025 IPPS/LTCH PPS final rule, we would use such data, if 
appropriate, to calculate the IPPS operating market basket rate of 
increase for FY 2025.

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 proposed 
rule, we are summarizing the status of the demonstration program, and 
the ongoing methodologies for implementation and budget neutrality for 
the demonstration extension period.
b. Background and Overview
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 591222), section 123 of the Medicare Improvements for Patients 
and Providers Act of 2008, as amended by section 3126 of the Affordable 
Care Act, authorized a demonstration project to allow eligible entities 
to develop and test new models for the delivery of health care services 
in eligible counties in order to improve access to and better integrate 
the delivery of acute care, extended care and other health care 
services to Medicare beneficiaries. The demonstration was titled 
``Demonstration Project on Community Health Integration Models in 
Certain Rural Counties,'' and commonly known as the Frontier Community 
Health Integration Project (FCHIP) Demonstration.
    The authorizing statute stated the eligibility criteria for 
entities to be able to participate in the demonstration. An eligible 
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as 
amended, is a Medicare Rural Hospital Flexibility Program (MRHFP) 
grantee under section 1820(g) of the Act (that is, a CAH); and is 
located in a State in which at least 65 percent of the counties in the 
state are counties that have 6 or less residents per square mile.
    The authorizing statute stipulated several other requirements for 
the demonstration. In addition, section 123(g)(1)(B) of Public Law 110-
275 required that the demonstration be budget neutral. Specifically, 
this provision stated that, in conducting the demonstration project, 
the Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary estimates would 
have been paid if the demonstration project under the section were not 
implemented. Furthermore, section 123(i) of Public Law 110-275 stated 
that the Secretary may waive such requirements of titles XVIII and XIX 
of the Act as may be necessary and appropriate for the purpose of 
carrying out the demonstration project, thus allowing the waiver of 
Medicare payment rules encompassed in the demonstration. CMS selected 
CAHs to participate in four interventions, under which specific waivers 
of Medicare payment rules would allow for enhanced payment for 
telehealth, skilled nursing facility/nursing facility beds, ambulance 
services, and home health services. These waivers were formulated with 
the goal of increasing access to care with no net increase in costs.
    Section 123 of Public Law 110-275 initially required a 3-year 
period of performance. The FCHIP Demonstration began on August 1, 2016, 
and concluded on July 31, 2019 (referred to in this section of the 
proposed rule as the ``initial period''). Subsequently, section 129 of 
the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended 
the demonstration by 5 years (referred to in this section of the 
proposed rule as the ``extension period''). The Secretary is required 
to conduct the demonstration for an additional 5-year period. CAHs 
participating in the demonstration project during the extension period 
began such participation in their cost reporting year that began on or 
after January 1, 2022.
    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), 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 2024 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, five 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.

[[Page 36254]]

c. Intervention Payment and Payment Waivers
    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), 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), 42 CFR 485.645(a)(2), and section 
1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more 
than 25 inpatient beds, including beds available for acute inpatient or 
swing bed services. CMS waives 1820(f) of the Act permitting 
designating or certifying a facility as a critical access hospital for 
which the facility at any time is furnishing inpatient beds which 
exceed more than 25 beds. Under this waiver, if the participating CAH 
has received swing bed approval from CMS, the participating CAH may 
maintain up to ten additional beds (for a total of 35 beds) available 
for acute inpatient or swing bed services; however, the participating 
CAH may only use these 10 additional beds for nursing facility or 
skilled nursing facility level of care. CMS would pay the participating 
CAH 101 percent of reasonable costs for its SNF/NF services furnished 
in the 10 additional beds.
d. Budget Neutrality
(1) Budget Neutrality Requirement
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 
45328), we finalized a policy to address the budget neutrality 
requirement for the demonstration initial period. As explained in the 
FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for 
participation in the demonstration with the goal of maintaining the 
budget neutrality of the demonstration on its own terms meaning that 
the demonstration would produce savings from reduced transfers and 
admissions to other health care providers, offsetting any increase in 
Medicare payments as a result of the demonstration. However, because of 
the small size of the demonstration and uncertainty associated with the 
projected Medicare utilization and costs, the policy we finalized for 
the demonstration initial period of performance in the FY 2022 IPPS/
LTCH PPS final rule provides a contingency plan to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 is 
met.
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 
49147), 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

[[Page 36255]]

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, 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 (87 FR 49144 through 
49147), 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 2024 IPPS/LTCH PPS final rule (88 FR 59119 
through 59122), 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 2025
    At this time, for the FY 2025 IPPS/LTCH PPS proposed rule, while 
this discussion represents our anticipated approach to assessing the 
financial impact of the demonstration extension period based on upon 
receiving data for the full demonstration extension period, we may 
update and/or modify the FCHIP Demonstration budget neutrality 
methodology and analytical approach to ensure that the full impact of 
the demonstration is appropriately captured.
    Therefore, we do not propose to apply a budget neutrality payment 
offset to payments to CAHs in FY 2025. This policy would have no impact 
for any national payment system for FY 2025.

[[Page 36256]]

VIII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2025

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 (67 FR 55954), we issued a 
final rule that implemented the LTCH PPS authorized under the BBRA and 
BIPA. For the initial implementation of the LTCH PPS (FYs 2003 through 
2007), the system used information from LTCH patient records to 
classify patients into distinct long-term care-diagnosis-related groups 
(LTCDRGs) based on clinical characteristics and expected resource 
needs. Beginning in FY 2008, we adopted the Medicare severity-long-term 
care-diagnosis related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97248) for payments for inpatient services provided by an LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA reasonable-cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this section of the preamble of this 
proposed rule, when we refer to discharges, we describe Medicare 
discharges.) The August 30, 2002 final rule further details the payment 
policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS. (For more information on these 
provisions, we refer readers to (82 FR 38299).)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years. We refer readers to 
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule 
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-

[[Page 36257]]

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
i. General
    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.
ii. Proposed Technical Clarification
    As explained more fully previously, LTCHs are required to have an 
average length of stay (ALOS) of greater than 25 days. Prior to a 
hospital being classified as an LTCH, the hospital must first 
participate in Medicare as a hospital (typically a hospital paid under 
the IPPS) during which time ALOS data is gathered. This data is used to 
determine whether the hospital has an ALOS of greater than 25 days, 
which is required to be classified as an LTCH. We generally refer to 
the period during which a hospital seeks to establish the required ALOS 
as a ``qualifying period.'' The qualifying period is the 6-month period 
immediately preceding the hospital's conversion to an LTCH, and it has 
been our policy that the requisite ALOS must be demonstrated based on 
patient data from at least 5 consecutive months of this period. For 
example, for a hospital seeking to become an LTCH effective January 1, 
2025, the qualifying period would be July 1, 2024 through December 31, 
2024 (that is, the 6 months immediately preceding the conversion to an 
LTCH). In order for the hospital to convert to an LTCH, the ALOS must 
be demonstrated for a period of at least 5 consecutive months (for 
example, July 1, 2024 through November 30, 2024 or July 15, 2024 to 
December 14, 2024) of the 6 month qualifying period.
    It has been our general policy to allow a hospital to be classified 
as an LTCH after only the 6-month qualifying period (as opposed to 
requiring the completion of the more typical 12-month cost reporting 
period). We have also referred to the ability of a hospital to be 
classified as an LTCH after a 6-month qualifying period in preamble 
previously (73 FR 29705), and the Provider Reimbursement Manual at 
3001.4 refers to using data from a 6-month period for hospitals which 
have not yet filed a cost report. However, our regulations have never 
explicitly articulated how the qualifying period policy applies to a 
hospital seeking classification as an LTCH. Therefore, we are proposing 
to revise our regulations at 42 CFR 412.23(e)(4) to explicitly state 
that a hospital that seeks to be classified as an LTCH may do so after 
completion of a 6-month qualifying period, provided that the hospital 
demonstrates an average length of stay (calculated under our existing 
regulations) of greater than 25 days during at least five consecutive 
months of the 6-month qualifying period (which is the same timeframe as 
the ``cure period'' for existing LTCHs). Specifically, we are proposing 
to add new paragraph Sec.  412.23(e)(4)(iv) to explain the qualifying 
period for hospitals seeking LTCH classification.
    Further, we are proposing to revise certain paragraphs and reorder 
certain paragraphs in Sec.  412.23(e) to improve the clarity of the 
regulation by clarifying how provisions apply to existing LTCHs and 
which provisions apply to hospitals seeking classification as an LTCH. 
First, we are proposing to revise paragraph Sec.  412.23(e)(3)(i) to 
incorporate a reference that includes new subparagraphs Sec.  
412.23(e)(4)(iv) and (e)(4)(v). Second, we are proposing to revise 
paragraph Sec.  412.23(e)(3)(iii) to clarify that it applies in cases 
of hospitals that have already obtained LTCH classification when the 
LTCH would not otherwise maintain an average Medicare inpatient length 
of stay of greater than 25 days. Third, we are proposing to reserve 
Sec.  412.23(e)(3)(iv) and move that text to new (e)(4)(v) in order to 
clarify that this regulation applies to hospitals seeking new LTCH 
classification. Fourth, we are proposing to revise Sec.  412.23(e)(4) 
to clarify that the provisions of paragraph (e)(3), with the exception 
of subparagraphs (e)(3)(iii) and (v) apply to hospitals seeking new 
LTCH classification. Fifth, we are proposing to revise paragraph Sec.  
412.23(e)(4)(i) to reflect the addition of new Sec.  412.23(e)(4)(iv) 
and (e)(4)(v) and clarify existing regulatory language.
    We note that none of these proposed revisions reflect a change to 
our existing policy; instead, we believe these revisions will improve 
the clarity of the regulatory text and better reflect our existing 
policy.
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 
3021 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

[[Page 36258]]

only pay for services. furnished during the days for which the 
beneficiary has coverage until the short-stay outlier (SSO) threshold 
is exceeded. If the Medicare payment was for a SSO case (in accordance 
with Sec.  412.529), and that payment was less than the full LTC-DRG 
payment amount because the beneficiary had insufficient coverage as a 
result of the remaining Medicare days, the LTCH also is currently 
permitted to charge the beneficiary for services delivered on those 
uncovered days (in accordance with Sec.  412.507). In the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49623), we amended our regulations to 
expressly limit the charges that may be imposed upon beneficiaries 
whose LTCHs' discharges are paid at the site neutral payment rate under 
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we 
amended the regulations under Sec.  412.507 to clarify our existing 
policy that blended payments made to an LTCH during its transitional 
period (that is, an LTCH's payment for discharges occurring in cost 
reporting periods beginning in FYs 2016 through 2019) are considered to 
be site neutral payment rate payments.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2025

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients.
    Under both the IPPS and the LTCH PPS, the DRG-based classification 
system uses information on the claims for inpatient discharges to 
classify patients into distinct groups (for example, DRGs) based on 
clinical characteristics and expected resource needs. When the LTCH PPS 
was implemented for cost reporting periods beginning on or after 
October 1, 2002, we adopted the same DRG patient classification system 
utilized at that time under the IPPS. We referred to this patient 
classification system as the ``long-term care diagnosis-related groups 
(LTC-DRGs).'' As part of our efforts to better recognize severity of 
illness among patients, in the FY 2008 IPPS final rule with comment 
period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS 
and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O, applicable to LTCHs for 
policy descriptions and payment calculations, all references to LTC-
DRGs would be considered a reference to MS-LTC-DRGs. For the remainder 
of this section, we present the discussion in terms of the current MS-
LTC-DRG patient classification system unless specifically referring to 
the previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    Consistent with section 123 of the BBRA, as amended by section 
307(b)(1) of the BIPA, and Sec.  412.515 of the regulations, we use 
information derived from LTCH PPS patient records to classify LTCH 
discharges into distinct MS-LTC-DRGs based on clinical characteristics 
and estimated resource needs. As noted previously, we adopted the same 
DRG patient classification system utilized at that time under the IPPS. 
The MS-DRG classifications are updated annually, which has resulted in 
the number of MS-DRGs changing over time. For FY 2025, there would be 
773 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the 
proposed changes, as discussed in section II.E. of the preamble of this 
proposed rule.
    Although the patient classification system used under both the LTCH 
PPS and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect the 
differences in patient resource use of LTCH patients, consistent with 
section 123(a)(1) of the BBRA. That is, we assign an appropriate weight 
to the MS-LTC-DRGs to account for the differences in resource use by 
patients exhibiting the case complexity and multiple medical problems 
characteristic of LTCH patients.
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although 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.

[[Page 36259]]

Among other requirements, on or after January 1, 2012, covered entities 
are required to use the ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3--Health Care Claim: Institutional 
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care 
Claim: Institutional (837) ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102(c)).
    HIPAA requires covered entities to use the applicable medical data 
code sets when conducting HIPAA transactions (45 CFR 162.1000). 
Currently, upon the discharge of the patient, the LTCH must assign 
appropriate diagnosis and procedure codes from the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for diagnosis coding and the International Classification of 
Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for 
inpatient hospital procedure coding, both of which were required to be 
implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For 
additional information on the implementation of the ICD-10 coding 
system, we refer readers to section II.F.1. of the preamble of the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section 
II.E.1. of the preamble of this proposed rule. Additional coding 
instructions and examples are published in the AHA's Coding Clinic for 
ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    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 the Medicare PRICER program, which 
accounts for hospital-specific adjustments. Under the LTCH PPS, we 
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments 
made by the MAC and to submit additional information within a specified 
timeframe as provided in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2025
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG 
classifications effective October 1, 2024 through September 30, 2025 
(FY 2025) consistent with the proposed changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2025 are 
the same as the MS-DRGs being proposed for use under the IPPS for FY 
2025. In addition, because the proposed MS-LTC-DRGs for FY 2025 are the 
same as the proposed MS-DRGs for FY 2025, the other proposed changes 
that affect MS-DRG (and by extension MS-LTC-DRG) assignments under 
proposed GROUPER Version 42, as discussed in section II.E. of the 
preamble of this proposed rule, including the proposed changes to the 
MCE software and the ICD-10-CM/PCS coding system, are also applicable 
under the LTCH PPS for FY 2025.
3. Proposed Development of the FY 2025 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

[[Page 36260]]

PPS standard Federal payment rate if the dual rate LTCH PPS payment 
structure had been in effect at the time of the discharge). We also 
adopted, beginning in FY 2023, a 10-percent cap policy on the reduction 
in a MS-LTC-DRG's relative weight in a given year. (For details on the 
modifications to our historical procedures for assigning relative 
weights in cases of zero volume and nonmonotonicity or both, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 
through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 
48550). For details on the change in our historical methodology to use 
LTCH claims data only from LTCH PPS standard Federal payment rate cases 
(or cases that would have qualified for such payment had the LTCH PPS 
dual payment rate structure been in effect at the time) to determine 
the MS-LTC-DRG relative weights, we refer readers to the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49614 through 49617). For details on our 
adoption of the 10-percent cap policy, we refer readers to the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49152 through 49154).)
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-
LTC-DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described later in this section in Step 3 of our proposed 
methodology) and assigned the relative weight of the quintile); and (3) 
no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based 
on the clinical similarities and assigned the relative weight of the 
cross-walked MS-LTC-DRG (as described later in this section in Step 8 
of our proposed methodology). For FY 2025, we are proposing to continue 
to use applicable LTCH cases to establish the same volume-based 
categories to calculate the FY 2025 MS-LTC-DRG relative weights.
b. Development of the MS-LTC-DRG Relative Weights for FY 2025
    In this section, we present our proposed methodology for 
determining the MS-LTC-DRG relative weights for FY 2025. We first list 
and provide a brief description of our proposed steps for determining 
the FY 2025 MS-LTC-DRG relative weights. We then, later in this 
section, discuss in greater detail each step. We note that, as we did 
in FY 2024, we are proposing to use 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).
     Step 1--Prepare data for MS-LTC-DRG relative weight 
calculation. In this step, we select and group the applicable claims 
data used in the development of the proposed MS-LTC-DRG relative 
weights.
     Step 2--Remove cases with a length of stay of 7 days or 
less. In this step, we trim the applicable claims data to remove cases 
with a length of stay of 7 days or less.
     Step 3--Establish low-volume MS-LTC-DRG quintiles. In this 
step, we employ our established quintile methodology for low-volume MS-
LTC-DRGs (that is, MS-LTC-DRGs with fewer 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 2025 MS-LTC-DRG relative weights in greater detail.
    Step 1--Prepare data for MS-LTC-DRG relative weight calculation.
    For this FY 2025 IPPS/LTCH PPS proposed rule, we obtained total 
charges from FY 2023 Medicare LTCH claims data from the December 2023 
update of the FY 2023 MedPAR file and used proposed Version 42 of the 
GROUPER to classify LTCH cases. Consistent with our historical 
practice, we are proposing that if better data become available, we 
would use those data and the finalized Version 42 of the GROUPER in 
establishing the FY 2025 MS-LTC-DRG relative weights in the final rule.
    To calculate the FY 2025 MS-LTC-DRG relative weights under the dual 
rate LTCH PPS payment structure, we are proposing to continue to use 
applicable LTCH data, which includes our policy of only using cases 
that meet the criteria for exclusion from the site neutral payment rate 
(or would have met the criteria had they been in effect at the time of 
the discharge) (80 FR 49624). Specifically, we began by first 
evaluating the LTCH claims data in the December 2023 update of the FY 
2023 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 2023 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

[[Page 36261]]

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 2023 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 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. Therefore, all LTCH PPS cases in FY 2023 with admission dates on 
or before the PHE expiration date 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 2025 (including MS-LTC-DRG relative 
weights), we used FY 2023 cases that meet the statutory patient 
criteria without consideration to how those cases were paid in FY 
2023.)
    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 
the abnormal charging practices of an LTCH (CCN 312024) in FY 2021 that 
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. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59127 through 
59128), we stated that the FY 2022 MedPAR claims also reflect the 
abnormal charging practices of this LTCH. Therefore, we removed claims 
from CCN 312024 when determining the FY 2024 MS-LTC-DRG relative 
weights and 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. Given recent actions by the Department of Justice regarding 
CCN 312024 (see https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), 
we are proposing to again remove claims from CCN 312024 when 
determining the FY 2025 MS-LTC-DRG relative weights and all other FY 
2025 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 2025 MS-LTC-DRG relative weights in this proposed 
rule by trimming claims data that were paid the site neutral payment 
rate or would have been paid the site neutral payment rate had the 
provisions of the CARES Act not been in effect. We trimmed the claims 
data of all-inclusive rate providers reported in the December 2023 
update of the FY 2023 MedPAR file and any Medicare Advantage claims 
data. There were no data from any LTCHs that are paid in accordance 
with a demonstration project reported in the December 2023 update of 
the FY 2023 MedPAR file, but had there been any, we would have trimmed 
the claims data from those LTCHs as well, in accordance with our 
established policy. We also removed all claims from CCN 312024.
    We used the remaining data (that is, the applicable LTCH data) in 
the subsequent proposed steps to calculate the proposed MS-LTC-DRG 
relative weights for FY 2025.
    Step 2--Remove cases with a length of stay of 7 days or less.
    The next step in our proposed calculation of the proposed FY 2025 
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 proposed FY 2025 MS-LTC-DRG 
relative weights, the value of many relative weights would decrease 
and, therefore, payments would decrease to a level that may no longer 
be appropriate. We do not believe that it would be appropriate to 
compromise the integrity of the payment determination for those LTCH 
cases that actually benefit from and receive a full course of treatment 
at an LTCH by including data from these very short stays. Therefore, 
consistent with our existing relative weight methodology, in 
determining the proposed FY 2025 MS-LTC-DRG relative weights, we are 
proposing to remove LTCH cases with a length of stay of 7 days or less 
from applicable LTCH cases. (For additional information on what is 
removed in this step of the relative weight methodology, we refer 
readers to 67 FR 55989 and 74 FR 43959.)
    Step 3--Establish low-volume MS-LTC-DRG quintiles.
    To account for MS-LTC-DRGs with low-volume (that is, with fewer 
than 25 applicable LTCH cases), consistent with our existing 
methodology, we are proposing to continue to employ the quintile 
methodology for low-volume MS-LTC-DRGs, such that we grouped the ``low-
volume MS-LTC-DRGs'' (that is, MS-LTC-DRGs that contain between 1 and 
24 applicable LTCH cases into one of five categories (quintiles) based 
on average charges (67 FR 55984 through 55995; 72 FR 47283 through 
47288; and 81 FR 25148)).
    In this proposed rule, based on the best available data (that is, 
the December 2023 update of the FY 2023 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 proposed 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). We are proposing to employ our 
historical methodology of assigning each remainder low-volume MS-LTC-
DRG to the low-volume quintile that contains an MS-LTC-DRG with an 
average charge closest to that of the remainder low-volume MS-LTC-DRG. 
In cases where these initial assignments of low-volume MS-LTC-DRGs to 
quintiles

[[Page 36262]]

results in nonmonotonicity within a base-DRG, we are proposing to make 
adjustments to the resulting low-volume MS-LTC-DRGs to preserve 
monotonicity, as discussed in Step 7 of our proposed methodology.
    To determine the FY 2025 relative weights for the low-volume MS-
LTC-DRGs, consistent with our historical practice, we are proposing to 
use the five low-volume quintiles described previously. We determined a 
relative weight and (geometric) average length of stay for each of the 
five low-volume quintiles using the methodology described in Step 6 of 
our proposed methodology. We assigned the same relative weight and 
average length of stay to each of the low-volume MS-LTC-DRGs that make 
up an individual low-volume quintile. We note that, as this system is 
dynamic, it is possible that the number and specific type of MS-LTC-
DRGs with a low-volume of applicable LTCH cases would vary in the 
future. Furthermore, we note that we continue to monitor the volume 
(that is, the number of applicable LTCH cases) in the low-volume 
quintiles to ensure that our quintile assignments used in determining 
the MS-LTC-DRG relative weights result in appropriate payment for LTCH 
cases grouped to low-volume MS-LTC-DRGs and do not result in an 
unintended financial incentive for LTCHs to inappropriately admit these 
types of cases.
    For this proposed rule, we are providing the list of the 
composition of the proposed low-volume quintiles for low-volume MS-LTC-
DRGs in a supplemental data file for public use posted via the internet 
on the CMS website for this proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
to streamline the information made available to the public that is used 
in the annual development of Table 11.
    Step 4--Remove statistical outliers.
    The next step in our proposed calculation of the proposed FY 2025 
MS-LTC-DRG relative weights is to remove statistical outlier cases from 
the LTCH cases with a length of stay of at least 8 days. Consistent 
with our existing relative weight methodology, we are proposing to 
continue to define statistical outliers as cases that are outside of 
3.0 standard deviations from the mean of the log distribution of both 
charges per case and the charges per day for each MS-LTC-DRG. These 
statistical outliers are removed prior to calculating the relative 
weights because we believe that they may represent aberrations in the 
data that distort the measure of average resource use. Including those 
LTCH cases in the calculation of the relative weights could result in 
an inaccurate relative weight that does not truly reflect relative 
resource use among those MS-LTC-DRGs. (For additional information on 
what is removed in this step of the relative weight methodology, we 
refer readers to 67 FR 55989 and 74 FR 43959.) After removing cases 
with a length of stay of 7 days or less and statistical outliers, in 
each set of claims, we were left with applicable LTCH cases that have a 
length of stay greater than or equal to 8 days. In this proposed rule, 
we refer to these cases as ``trimmed applicable LTCH cases.''
    Step 5--Adjust charges for the effects of Short Stay Outliers 
(SSOs).
    As the next step in the proposed calculation of the proposed FY 
2025 MS-LTC-DRG relative weights, consistent with our historical 
approach, we are proposing to adjust each LTCH's charges per discharge 
for those remaining cases (that is, trimmed applicable LTCH cases) for 
the effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we are proposing to make this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay of all 
cases grouped to the MS-LTC-DRG. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the proposed FY 2025 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 propose to continue to adjust for SSO cases under 
Sec.  412.529 in this manner because it would result in more 
appropriate payments for all LTCH PPS standard Federal payment rate 
cases. (For additional information on this step of the relative weight 
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
    Step 6--Calculate the relative weights on an iterative basis using 
the hospital-specific relative value methodology.
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH PPS, in this FY 2025 IPPS/LTCH PPS 
proposed rule, we are proposing to continue to use a hospital-specific 
relative value (HSRV) methodology to calculate the MS-LTC-DRG relative 
weights for FY 2025. 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

[[Page 36263]]

LTCH with high average charges as less resource-intensive than they 
would be at an LTCH with low average charges. For example, a $10,000 
charge for a case at an LTCH with an average adjusted charge of $17,500 
reflects a higher level of relative resource use than a $10,000 charge 
for a case at an LTCH with the same case-mix, but an average adjusted 
charge of $35,000. We believe that the adjusted charge of an individual 
case more accurately reflects actual resource use for an individual 
LTCH because the variation in charges due to systematic differences in 
the markup of charges among LTCHs is taken into account.
    Consistent with our historical relative weight methodology, we 
propose to calculate the proposed FY 2025 MS-LTC-DRG relative weights 
using the HSRV methodology, which is an iterative process. Therefore, 
in accordance with our established methodology, for FY 2025, we are 
proposing to continue to standardize charges for each applicable LTCH 
case by first dividing the adjusted charge for the case (adjusted for 
SSOs under Sec.  412.529 as described in Step 5 of our proposed 
methodology) by the average adjusted charge for all applicable LTCH 
cases at the LTCH in which the case was treated. The average adjusted 
charge reflects the average intensity of the health care services 
delivered by a particular LTCH and the average cost level of that LTCH. 
The average adjusted charge is then multiplied by the LTCH's case-mix 
index to produce an adjusted hospital-specific relative charge value 
for the case. We used an initial case-mix index value of 1.0 for each 
LTCH.
    For each proposed MS-LTC-DRG, we calculated the FY 2025 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.
    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 proposed FY 2025 MS-LTC-DRG 
relative weights, consistent with our historical methodology, we are 
proposing to continue to combine MS-LTC-DRG severity levels within a 
base MS-LTC-DRG for the purpose of computing a relative weight when 
necessary to ensure that monotonicity is maintained. For a 
comprehensive description of our existing methodology to adjust for 
nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43964 through 43966). Any adjustments for 
nonmonotonicity that were made in determining the proposed FY 2025 MS-
LTC-DRG relative weights by applying this methodology are denoted in 
Table 11, which is listed in section VI. of the Addendum to this 
proposed rule and is available via the internet on the CMS website.
    Step 8--Determine a relative weight for MS-LTC-DRGs with no 
applicable LTCH cases.
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the MS-LTC-DRGs for which there 
were no claims in the December 2023 update of the FY 2023 MedPAR file 
and, therefore, for which no charge data was available for these MS-
LTC-DRGs. Because patients with a number of the diagnoses under these 
MS-LTC-DRGs may be treated at LTCHs, consistent with our historical 
methodology, we generally assign a relative weight to each of the no-
volume MS-LTC-DRGs based on clinical similarity and relative costliness 
(with the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-
DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later in 
this section of this proposed rule). (For additional information on 
this step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    Consistent with our existing methodology, we are proposing to 
cross-walk each no-volume proposed MS-LTC-DRG to another proposed MS-
LTC-DRG for which we calculated a relative weight (determined in 
accordance with the methodology as previously described). Then, the 
``no-volume'' proposed MS-LTC-DRG is assigned the same relative weight 
(and

[[Page 36264]]

average length of stay) of the proposed MS-LTC-DRG to which it was 
cross-walked (as described in greater detail in this section of this 
proposed rule).
    Of the 773 proposed MS-LTC-DRGs for FY 2025, we identified 425 MS-
LTC-DRGs for which there were no trimmed applicable LTCH cases. The 425 
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 397 
MS-LTC-DRGs that for which, we are proposing to assign a relative 
weight using our existing ``no-volume'' MS-LTC-DRG methodology (that 
is, 425-11-2-15 = 397). We are proposing to assign relative weights to 
each of the 397 no-volume MS-LTC-DRGs based on clinical similarity and 
relative costliness to 1 of the remaining 348 (773-425 = 348) MS-LTC-
DRGs for which we calculated relative weights based on the trimmed 
applicable LTCH cases in the FY 2023 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 348 MS-LTC-DRGs to 
which we cross-walked each of the 397 ``no-volume'' MS-LTC-DRGs.) Then, 
in general, we are proposing to assign the 397 no-volume MS-LTC-DRGs 
the relative weight of the cross-walked MS-LTC-DRG (when necessary, we 
made adjustments to account for nonmonotonicity).
    We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which 
we calculated relative weights based on the December 2023 update of the 
FY 2023 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 2025, the relative weights assigned 
based on the cross-walked MS-LTC-DRGs would result in an appropriate 
LTCH PPS payment because the crosswalks, which are based on clinical 
similarity and relative costliness, would be expected to generally 
require equivalent relative resource use.
    Then we assigned the proposed relative weight of the cross-walked 
MS-LTC-DRG as the relative weight for the no-volume MS-LTC-DRG such 
that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and 
the cross-walked MS-LTC-DRG) have the same relative weight (and average 
length of stay) for FY 2025. We note that, if the cross-walked MS-LTC-
DRG had 25 applicable LTCH cases or more, its relative weight 
(calculated using the methodology as previously described in Steps 1 
through 4) is assigned to the no-volume MS-LTC-DRG as well. Similarly, 
if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was cross-walked 
had 24 or less cases and, therefore, was designated to 1 of the low-
volume quintiles for purposes of determining the relative weights, we 
assigned the relative weight of the applicable low-volume quintile to 
the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, 
the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same 
relative weight for FY 2025. (As we noted previously, in the infrequent 
case where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, 
additional adjustments are required to maintain monotonically 
increasing relative weights.)
    For this proposed rule, we are providing the list of the no-volume 
MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that 
is, the cross-walked MS-LTC-DRGs) for FY 2025 in a supplemental data 
file for public use posted via the internet on the CMS website for this 
proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html to streamline the information made 
available to the public that is used in the annual development of Table 
11.
    To illustrate this methodology for determining the proposed 
relative weights for the FY 2025 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 2023 
MedPAR file that we are using for this proposed rule for proposed MS-
LTC-DRG 061 (Ischemic stroke, precerebral occlusion or transient 
ischemia with thrombolytic agent with MCC). We determined that proposed 
MS-LTC-DRG 064 (Intracranial hemorrhage or cerebral infarction with 
MCC) is similar clinically and based on resource use to proposed MS-
LTC-DRG 061. Therefore, we are proposing to assign the same relative 
weight (and average length of stay) of proposed MS-LTC-DRG 064 of 
1.3009 for FY 2025 to proposed MS-LTC-DRG 061 (we refer readers to 
Table 11, which is listed in section VI. of the Addendum to this 
proposed rule and is available via the internet on the CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume would vary in 
the future. Consistent with our historical practice, we are proposing 
to use the best available claims data to identify the trimmed 
applicable LTCH cases from which we determine the relative weights in 
the final rule.
    For FY 2025, consistent with our historical relative weight 
methodology, we are proposing to establish a relative weight of 0.0000 
for the following transplant MS-LTC-DRGs: Heart Transplant or Implant 
of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver 
Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 
007); Simultaneous Pancreas and Kidney Transplant (MS-LTC-DRG 008); 
Simultaneous Pancreas and Kidney Transplant with Hemodialysis (MS-LTC-
DRG 019); Pancreas Transplant (MS-LTC-DRG 010); Kidney Transplant (MS-
LTC-DRG 652); Kidney Transplant with Hemodialysis with MCC (MS-LTC-DRG 
650), and Kidney Transplant with Hemodialysis without MCC (MS LTC DRG 
651). This is because Medicare only covers these procedures if they are 
performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these 11 transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS, removing 
these MS-LTC-DRGs would be administratively burdensome. (For additional 
information regarding our treatment of transplant MS-LTC-DRGs, we refer 
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, 
consistent with our historical policy, we are proposing to establish a 
relative weight of 0.0000 for the 2 ``error'' MS-LTC-DRGs (that is, MS-
LTC-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis) and 
MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH cases grouped to 
these MS-LTC-DRGs cannot be properly assigned to an MS-LTC-DRG 
according to the grouping logic.
    Additionally, we are proposing to establish a relative weight of 
0.0000 for

[[Page 36265]]

the following ``psychiatric or rehabilitation'' MS-LTC-DRGs: MS-LTC-DRG 
876 (O.R. Procedures with Principal Diagnosis 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 & Intellectual 
Disability); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol, Drug Abuse or Dependence, Left 
AMA); MS-LTC-DRG 895 (Alcohol, Drug Abuse or Dependence with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol, Drug Abuse or 
Dependence without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol, Drug Abuse or Dependence without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). We are proposing to establish 
a relative weight of 0.0000 for these 15 ``psychiatric or 
rehabilitation'' MS-LTC-DRGs because the blended payment rate and 
temporary exceptions to the site neutral payment rate would not be 
applicable for any LTCH discharges occurring in FY 2025, and as such 
payment under the LTCH PPS would be no longer be made in part based on 
the LTCH PPS standard Federal payment rate for any discharges assigned 
to those MS-LTC-DRGs.
    Step 9--Budget neutralize the uncapped relative weights.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).
    To achieve budget neutrality under the requirement at Sec.  
412.517(b), under our established methodology, for each annual update 
the MS-LTC-DRG relative weights are uniformly adjusted to ensure that 
estimated aggregate payments under the LTCH PPS would not be affected 
(that is, decreased or increased). Consistent with that provision, we 
are proposing to continue to apply budget neutrality adjustments in 
determining the proposed FY 2025 MS-LTC-DRG relative weights so that 
our proposed update of the MS-LTC-DRG classifications and relative 
weights for FY 2025 are made in a budget neutral manner. For FY 2025, 
we are proposing to apply two budget neutrality factors to determine 
the MS-LTC-DRG relative weights. In this step, we describe the 
determination of the budget neutrality adjustment that accounts for the 
proposed update of the MS-LTC-DRG classifications and relative weights 
prior to the application of the ten-percent cap. In steps 10 and 11, we 
describe the application of the 10-percent cap policy (step 10) and the 
determination of the proposed budget neutrality factor that accounts 
for the application of the 10-percent cap policy (step 11).
    In this proposed rule, to ensure budget neutrality for the proposed 
update to the MS-LTC-DRG classifications and relative weights prior to 
the application of the 10-percent cap (that is, uncapped relative 
weights), under Sec.  412.517(b), we are proposing to continue to use 
our established two-step budget neutrality methodology. Therefore, in 
the first step of our MS-LTC-DRG update budget neutrality methodology, 
for FY 2025, we calculated and applied a proposed normalization factor 
to the recalibrated relative weights (the result of Steps 1 through 8 
discussed previously) to ensure that estimated payments are not 
affected by changes in the composition of case types or the changes to 
the classification system. That is, the normalization adjustment is 
intended to ensure that the recalibration of the MS-LTC-DRG relative 
weights (that is, the process itself) neither increases nor decreases 
the average case-mix index.
    To calculate the proposed normalization factor for FY 2025, we 
propose to use the following three steps: (1.a.) use the applicable 
LTCH cases from the best available data (that is, LTCH discharges from 
the FY 2023 MedPAR file) and group them using the proposed FY 2025 
GROUPER (that is, Version 42 for FY 2025) and the proposed recalibrated 
FY 2025 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 2024 GROUPER (Version 41) and FY 2024 MS-LTC-DRG 
relative weights in Table 11 of the FY 2024 IPPS/LTCH PPS final rule 
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 2024 (determined in Step 1.b.) by the average case-mix 
index for FY 2025 (determined in Step 1.a.). As a result, in 
determining the proposed MS-LTC-DRG relative weights for FY 2025, each 
recalibrated MS-LTC-DRG uncapped relative weight is multiplied by the 
proposed normalization factor of 1.27356 (determined in Step 1.c.) in 
the first step of the budget neutrality methodology, which produces 
``normalized relative weights.''
    In the second step of our MS-LTC-DRG update budget neutrality 
methodology, we calculated a proposed budget neutrality adjustment 
factor consisting of the ratio of estimated aggregate FY 2025 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases before 
reclassification and recalibration to estimated aggregate payments for 
FY 2025 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases after reclassification and recalibration. That is, for this 
proposed rule, for FY 2025, we propose to determine the budget 
neutrality adjustment factor using the following three steps: (2.a.) 
simulate estimated total FY 2025 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases using the uncapped normalized 
relative weights for FY 2025 and proposed GROUPER Version 42; (2.b.) 
simulate estimated total FY 2025 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases using the FY 2024 GROUPER (Version 
41) and the FY 2024 MS-LTC-DRG relative weights in Table 11 of the FY 
2024 IPPS/LTCH PPS final rule; and (2.c.) calculate the ratio of these 
estimated total payments by dividing the value determined in Step 2.b. 
by the value determined in Step 2.a. In determining the proposed FY 
2025 MS-LTC-DRG relative weights, each uncapped normalized relative 
weight is then multiplied by a proposed budget neutrality factor of 
0.988292 (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-

[[Page 36266]]

DRGs with at least 25 applicable LTCH cases (Sec.  412.515(b)). Under 
this policy, in cases where CMS creates new MS-LTC-DRGs or modifies the 
MS-LTC-DRGs as part of its annual reclassifications resulting in 
renumbering of one or more MS-LTC-DRGs, the 10-percent cap does not 
apply to the relative weight for any new or renumbered MS-LTC-DRGs for 
the fiscal year. We refer readers to section VIII.B.3.b. of the 
preamble of the FY 2023 IPPS/LTCH PPS final rule with comment period 
for a detailed discussion on the adoption of the 10-percent cap policy 
(87 FR 49152 through 49154).
    Applying the 10-percent cap to MS-LTC-DRGs with 25 or more cases 
results in more predictable and stable MS-LTC-DRG relative weights from 
year to year, especially for high-volume MS-LTC-DRGs that generally 
have the largest financial impact on an LTCH's operations. For this 
proposed rule, in cases where the relative weight for a MS-LTC-DRG with 
25 or more applicable LTCH cases would decrease by more than 10-percent 
in FY 2025 relative to FY 2024, we are proposing to limit the reduction 
to 10-percent. Under this policy, we do not apply the 10 percent cap to 
the proposed low-volume MS-LTC-DRGs identified in Step 3 or the 
proposed no-volume MS-LTC-DRGs identified in Step 8.
    Therefore, in this step, for each proposed FY 2025 MS-LTC-DRG with 
25 or more applicable LTCH cases (excludes low-volume and zero-volume 
MS-LTC-DRGs) we compared its FY 2025 relative weight (after application 
of the proposed normalization and proposed budget neutrality factors 
determined in Step 9), to its FY 2024 MS-LTC-DRG relative weight. For 
any MS-LTC-DRG where the FY 2025 relative weight would otherwise have 
declined more than 10 percent, we established a proposed capped FY 2025 
MS-LTC-DRG relative weight that would be equal to 90 percent of that 
MS-LTC-DRG's FY 2024 relative weight (that is, we set the proposed FY 
2025 relative weight equal to the FY 2024 weight x 0.90).
    In section II.E. of the preamble of this proposed rule, we discuss 
our proposed changes to the MS-DRGs, and by extension the MS-LTC-DRGs, 
for FY 2025. As discussed previously, under our current policy, the 10-
percent cap does not apply to the relative weight for any new or 
renumbered MS-LTC-DRGs. We are not proposing any changes to this policy 
for FY 2025, and as such any proposed new or renumbered MS-LTC-DRGs for 
FY 2025 would not be 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 are proposing 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 (step 10) is implemented 
in a budget neutral manner. Therefore, we are proposing to determine 
the proposed budget neutrality adjustment factor for the 10-percent cap 
on relative weight reductions using the following three steps: (a) 
simulate estimated total FY 2025 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases using the proposed capped relative 
weights for FY 2025 (determined in Step 10) and proposed GROUPER 
Version 42; (b) simulate estimated total FY 2025 LTCH PPS standard 
Federal payment rate payments for applicable LTCH cases using the 
proposed uncapped relative weights for FY 2025 (determined in Step 9) 
and proposed GROUPER Version 42; and (c) calculate the ratio of these 
estimated total payments by dividing the value determined in step (b) 
by the value determined in step (a). In determining the proposed FY 
2025 MS-LTC-DRG relative weights, each capped relative weight is then 
multiplied by a proposed budget neutrality factor of 0.9946599 (the 
value determined in step (c)) to achieve the budget neutrality 
requirement.
    Table 11, which is listed in section VI. of the Addendum to this 
proposed rule and is available via the internet on the CMS website, 
lists the proposed MS-LTC-DRGs and their respective proposed relative 
weights, proposed geometric mean length of stay, and proposed five-
sixths of the geometric mean length of stay (used to identify SSO cases 
under Sec.  412.529(a)) for FY 2025. We also are making available on 
the website the proposed MS-LTC-DRG relative weights prior to the 
application of the 10 percent cap on MS-LTC-DRG relative weight 
reductions and corresponding proposed cap budget neutrality factor.

C. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2025

1. Overview of Development of the Proposed LTCH PPS Standard Federal 
Payment Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.533 
and 412.535. In this section, we discuss the factors that we are 
proposing to use to update the LTCH PPS standard Federal payment rate 
for FY 2025, that is, effective for LTCH discharges occurring on or 
after October 1, 2024, through September 30, 2025. 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 2025 IPPS/LTCH PPS proposed rule, we present our 
proposed policies related to the annual update to the LTCH PPS standard 
Federal payment rate for FY 2025.
    The proposed update to the LTCH PPS standard Federal payment rate 
for FY 2025 is presented in section V.A. of the Addendum to this 
proposed rule. The components of the proposed annual update to the LTCH 
PPS standard Federal payment rate for FY 2025 are discussed in this 
section, including the statutory reduction to the annual update for 
LTCHs that fail to submit quality reporting data for FY 2025 as 
required by the statute (as discussed in section VIII.C.2.c. of the 
preamble of this

[[Page 36267]]

proposed rule). We are proposing to make an adjustment to the LTCH PPS 
standard Federal payment rate to account for the estimated effect of 
the changes to the area wage level for FY 2025 on estimated aggregate 
LTCH PPS payments, in accordance with 42 CFR 412.523(d)(4) (as 
discussed in section V.B. of the Addendum to this proposed rule).
2. Proposed FY 2025 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). As discussed in 
section VIII.D. of the preamble of this proposed rule, we are proposing 
to rebase and revise the 2017-based LTCH market basket to reflect a 
2022 base year. For additional details on the historical development of 
the market basket used under the LTCH PPS, we refer readers to the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476), and for a 
complete discussion of the LTCH market basket and a description of the 
methodologies used to determine the operating and capital-related 
portions of the 2017-based LTCH market basket, we refer readers to the 
FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 58926).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year.'' We note that, because the annual update 
to the LTCH PPS policies, rates, and factors now occurs on October 1, 
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY) 
under the LTCH PPS beginning October 1, 2010, to conform with the 
standard definition of the Federal fiscal year (October 1 through 
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 
50397). Although the language of sections 3004(a), 3401(c), 10319, and 
1105(b) of the Affordable Care Act refers to years 2010 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for purposes of clarity, when discussing the annual update for 
the LTCH PPS standard Federal payment rate, including the provisions of 
the Affordable Care Act, we use ``fiscal year'' rather than ``rate 
year'' for 2011 and subsequent years.
b. Proposed Annual Update to the LTCH PPS Standard Federal Payment Rate 
for FY 2025
    As previously noted, for FY 2025, we are proposing to rebase and 
revise the 2017-based LTCH market basket to reflect a 2022 base year. 
The proposed 2022-based LTCH market basket is primarily based on the 
Medicare cost report data submitted by LTCHs and, therefore, 
specifically reflects the cost structures of LTCHs. As described in 
more detail in section VIII.D.1 of the preamble of this proposed rule, 
we are proposing to use data from cost reporting periods beginning on 
and after April 1, 2021, and prior to April 1, 2022 because these data 
reflect the most recent information that are most representative of FY 
2022. We believe that the proposed 2022-based LTCH market basket 
appropriately reflects the cost structure of LTCHs, as discussed in 
greater detail in section VIII.D. of the preamble of this proposed 
rule. In this proposed rule, we are proposing to use the proposed 2022-
based LTCH market basket to update the LTCH PPS standard Federal 
payment rate for FY 2025.
    Section 1886(m)(3)(A) of the Act provides that, beginning in FY 
2010, any annual update to the LTCH PPS standard Federal payment rate 
is reduced by the adjustments specified in clauses (i) and (ii) of 
subparagraph (A), as applicable. Clause (i) of section 1886(m)(3)(A) of 
the Act provides for a reduction, for FY 2012 and each subsequent rate 
year, by ``the productivity adjustment'' described in section 
1886(b)(3)(B)(xi)(II) of the Act. 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 multifactor 
productivity (as projected by the Secretary for the 10-year period 
ending with the applicable fiscal year, year, cost reporting period, or 
other annual period). 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 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/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. 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 2025.
    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. Proposed Adjustment to the LTCH PPS Standard Federal Payment Rate 
Under the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, 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

[[Page 36268]]

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 IX. of the preamble of this proposed rule.)
d. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2025
    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 2023 forecast, the proposed FY 2025 
market basket percentage increase for the LTCH PPS using the proposed 
2022-based LTCH market basket is 3.2 percent. The proposed productivity 
adjustment for FY 2025 based on IGI's fourth quarter 2023 forecast is 
0.4 percentage point.
    For FY 2025, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment, described in section 
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are 
proposing to reduce the FY 2025 market basket percentage increase by 
the FY 2025 productivity adjustment. To determine the proposed market 
basket update for LTCHs for FY 2025 we subtracted the proposed FY 2025 
productivity adjustment from the proposed FY 2025 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 2025, 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 this FY 2025 IPPS/LTCH PPS proposed rule, in accordance with the 
statute, we are proposing to reduce the proposed FY 2025 market basket 
percentage increase of 3.2 percent (based on IGI's fourth quarter 2023 
forecast of the proposed 2022-based LTCH market basket) by the proposed 
FY 2025 productivity adjustment of 0.4 percentage point (based on IGI's 
fourth quarter 2023 forecast). Therefore, under the authority of 
section 123 of the BBRA as amended by section 307(b) of the BIPA, 
consistent with 42 CFR 412.523(c)(3)(xvii), we are proposing to 
establish an annual market basket update to the LTCH PPS standard 
Federal payment rate for FY 2025 of 2.8 percent (that is, the LTCH PPS 
market basket increase of 3.2 percent less the productivity adjustment 
of 0.4 percentage point). For LTCHs that fail to submit quality 
reporting data under the LTCH QRP, under 42 CFR 412.523(c)(3)(xvii) in 
conjunction with 42 CFR 412.523(c)(4), we are proposing to further 
reduce the annual update to the LTCH PPS standard Federal payment rate 
by 2.0 percentage points, in accordance with section 1886(m)(5) of the 
Act. Accordingly, we are proposing to establish an annual update to the 
LTCH PPS standard Federal payment rate of 0.8 percent (that is, the 
proposed 2.8 percent LTCH market basket update minus 2.0 percentage 
points) for FY 2025 for LTCHs that fail to submit quality reporting 
data as required under the LTCH QRP. Consistent with our historical 
practice, we are proposing to use a more recent estimate of the market 
basket percentage increase and the productivity adjustment, if 
appropriate, to establish an annual update to the LTCH PPS standard 
Federal payment rate for FY 2025 in the final rule. We note that, 
consistent with historical practice, we are also proposing to adjust 
the FY 2025 LTCH PPS standard Federal payment rate by an area wage 
level budget neutrality factor in accordance with 42 CFR 412.523(d)(4) 
(as discussed in section V.B.5. of the Addendum to this proposed rule).

D. Proposed Rebasing of the LTCH Market Basket

1. Background
    The input price index (that is, the market basket) that was used to 
develop the LTCH PPS for FY 2003 was the ``excluded hospital with 
capital'' market basket. That market basket was based on 1997 Medicare 
cost report data and included data for Medicare-participating IRFs, 
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although the 
term ``market basket'' technically describes the mix of goods and 
services used in providing hospital care, this term is also commonly 
used to denote the input price index (that is, cost category weights 
and price proxies combined) derived from that mix. Accordingly, the 
term ``market basket,'' as used in this section, refers to an input 
price index.
    Since the LTCH PPS inception, the market basket used to update LTCH 
PPS payments has been rebased and revised to reflect more recent data. 
We last rebased and revised the market basket applicable to the LTCH 
PPS in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58909 through 
58926), where we adopted a 2017-based LTCH market basket. References to 
the historical market baskets used to update LTCH PPS payments are 
listed in the FY 2021 LTCH PPS final rule (85 FR 58909 through 58910).
    For this FY 2025 IPPS/LTCH proposed rule, we propose to rebase and 
revise the 2017-based LTCH market basket to reflect a 2022 base year, 
which would maintain our historical frequency of rebasing the market 
basket every 4 years. The proposed 2022-based LTCH market basket is 
primarily based on Medicare cost report data for LTCHs for FY 2022, 
specifically for cost reporting periods beginning on and after April 1, 
2021, and prior to April 1, 2022. For the 2017-based LTCH market, we 
used Medicare cost report data for LTCHs from cost reporting periods 
beginning on and after October 1, 2016, and before October 1, 2017, or 
reports that began in FY 2017. The majority of LTCHs have a cost report 
begin date of September 1 and so those LTCHs with a cost report begin 
date of September 1, 2021 have the majority of their expenses occurring 
in the FY 2022 time period. We are proposing to use data from cost 
reporting periods beginning on and after April 1, 2021, and prior to 
April 1, 2022 because these data reflect the most recent Medicare cost 
report data for LTCHs at the time of rulemaking where the majority of 
their costs are occurring in FY 2022 while still maintaining our 
historical frequency of rebasing the market basket every 4 years.
    We are unable to use data from the FY 2022 HCRIS file, which 
reflects cost reporting periods beginning on and after October 1, 2021 
and prior to September 30, 2022, as most reporters have a begin date of 
September 1, so the dataset in the file is not yet complete. In the 
interest of utilizing the most recent, complete data available, we are 
proposing to combine data from multiple HCRIS files to obtain a 2022 
base year. We are proposing to use a composite timeframe of cost 
reporting periods beginning on and after April 1, 2021 and prior to 
April 1, 2022, because

[[Page 36269]]

April 1 reflects the middle of the fiscal year and this timeframe would 
allow data from 2022 to be included in this rebasing. Using this 
proposed method, the weighted average of costs occurring in FY 2022 
(accounting for the distribution of providers by Medicare cost report 
begin date) is 82 percent. Therefore, we believe our proposed 
methodology of using Medicare cost report data based on cost reporting 
periods beginning on or after April 1, 2021 and prior to April 1, 2022 
reflects the most recent information that is most representative of FY 
2022.
    As described in the FY 2023 IPPS/LTCH final rule (87 FR 49164 
through 49165), we received comments on the FY 2023 IPPS/LTCH PPS 
proposed rule where stakeholders expressed concern that the proposed 
market basket update was inadequate relative to input price inflation 
experienced by LTCHs, particularly as a result of the COVID-19 PHE. 
These commenters stated that the PHE, along with inflation, has 
significantly driven up operating costs. Specifically, some commenters 
noted changes to the labor markets that led to the use of more contract 
labor. As described in more detail later in this section, we verified 
this trend when analyzing the Medicare cost reports submitted by LTCHs 
through 2022. Therefore, we believe it is appropriate to incorporate 
more recent data to reflect updated cost structures for LTCHs, and so 
we propose to use 2022 as the base year because we believe that the 
Medicare cost reports for this year represent the most recent, complete 
set of Medicare cost report data available for developing the proposed 
LTCH market basket at the time of this rulemaking. Given the recent 
trends in the major cost weights derived from the Medicare cost report 
data as discussed later in this section, we will continue to monitor 
these data going forward and any additional changes to the LTCH market 
basket will be proposed in future rulemaking.
    In the following discussion, we provide an overview of the proposed 
LTCH market basket, describe the proposed methodologies for developing 
the operating and capital portions of the proposed 2022-based LTCH 
market basket, and provide information on the proposed price proxies. 
Then, we present the proposed FY 2025 market basket update and labor-
related share based on the proposed 2022-based LTCH market basket.
2. Overview of the Proposed 2022-Based LTCH Market Basket
    Similar to the 2017-based LTCH market basket, the proposed 2022-
based LTCH market basket is a fixed-weight, Laspeyres-type price index. 
A Laspeyres price index measures the change in price, over time, of the 
same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix (that is, intensity) of goods and 
services purchased over time relative to the base period are not 
measured. The index itself is constructed using three steps. First, a 
base period is selected (in this proposed rule, we propose to use 2022 
as the base period) and total base period costs are estimated for a set 
of mutually exclusive and exhaustive spending categories, with the 
proportion of total costs that each category represents being 
calculated. These proportions are called cost weights. Second, each 
cost category is matched to an appropriate price or wage variable, 
referred to as a ``price proxy.'' In almost every instance, these price 
proxies are derived from publicly available statistical series that are 
published on a consistent schedule (preferably at least on a quarterly 
basis). Finally, the cost weight for each cost category is multiplied 
by the level of its respective price proxy. The sum of these products 
(that is, the cost weights multiplied by their price index levels) for 
all cost categories yields the composite index level of the market 
basket in a given period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing an index 
level for a given period by an index level for an earlier period 
produces a rate of growth in the input price index over that timeframe. 
As previously noted, the market basket is described as a fixed-weight 
index because it represents the change in price over time of a constant 
mix (quantity and intensity) of goods and services needed to furnish 
hospital services. The effects on total costs resulting from changes in 
the mix of goods and services purchased subsequent to the base period 
are not measured. For example, a hospital hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the hospital but would not be factored into 
the price change measured by a fixed-weight hospital market basket. 
Only when the index is rebased would changes in the quantity and 
intensity be captured, with those changes being reflected in the cost 
weights. Therefore, we rebase the market basket periodically so that 
the cost weights reflect recent changes in the mix of goods and 
services that hospitals purchase to furnish inpatient care between base 
periods.
3. Development of the Proposed 2022-Based LTCH Market Basket Cost 
Categories and Weights
    We are inviting public comments on our proposed methodology, 
discussed in this section of this rule, for deriving the proposed 2022-
based LTCH market basket.
a. Use of Medicare Cost Report Data
    The major types of costs underlying the proposed 2022-based LTCH 
market basket are derived from the Medicare cost reports (CMS Form 
2552-10, OMB Control Number 0938-0050) for LTCHs. Specifically, we use 
the Medicare cost reports for seven specific costs: Wages and Salaries, 
Employee Benefits, Contract Labor, Pharmaceuticals, Professional 
Liability Insurance (PLI), Home Office/Related Organization Contract 
Labor, and Capital. A residual category is then estimated and reflects 
all remaining costs not captured in the seven types of costs identified 
previously. The 2017-based LTCH market basket similarly used the 
Medicare cost reports.
    Medicare cost report data include costs for all patients (including 
but not limited to those covered by Medicare, Medicaid, and private 
insurance). Because our goal is to measure cost shares for facilities 
that serve Medicare beneficiaries and are reflective of case mix and 
practice patterns associated with providing services to Medicare 
beneficiaries in LTCHs, we propose to limit our selection of Medicare 
cost reports to those from LTCHs that have a Medicare average length of 
stay (LOS) that is within a comparable range of their total facility 
average LOS. We define the Medicare average LOS based on data reported 
on the Medicare cost report (CMS Form 2552-10, OMB Control Number 0938-
0050) Worksheet S-3, Part I, line 14. We believe that applying the LOS 
edit results in a more accurate reflection of the structure of costs 
associated with Medicare covered days as our proposed edit excludes 
those LTCHs that had an average total facility LOS that were notably 
different than the average Medicare LOS. For the 2017-based LTCH market 
basket, we used the cost reports submitted by LTCHs with Medicare 
average LOS within 25 percent (that is, 25 percent higher or lower) of 
the total facility average LOS for the hospital. Based on our analysis 
of the 2022 Medicare cost reports, for the proposed 2022-based LTCH 
market basket, we propose to again use the cost reports submitted by 
LTCHs with Medicare average LOS within 25 percent (that is, 25 percent 
higher or lower) of the total facility

[[Page 36270]]

average LOS for the hospital. The universe of LTCHs had an average 
Medicare LOS of 26 days, an average total facility LOS of 35 days, and 
aggregate Medicare utilization (as measured by Medicare inpatient LTCH 
days as a percentage of total facility inpatient LTCH days) of 34 
percent in 2022. Applying the proposed trim excludes 11 percent of LTCH 
providers and results in a subset of LTCH Medicare cost reports with an 
average Medicare LOS of 26 days, average facility LOS of 30 days, and 
aggregate Medicare utilization (based on days) of 40 percent. The 11 
percent of providers that are excluded had an average Medicare LOS of 
29 days, average facility LOS of 71 days, and aggregate Medicare 
utilization of 14 percent.
    We are proposing to use the cost reports for LTCHs that meet this 
requirement to calculate the costs for the seven major cost categories 
(Wages and Salaries, Employee Benefits, Contract Labor, Professional 
Liability Insurance, Pharmaceuticals, Home Office/Related Organization 
Contract Labor, and Capital) for the market basket. Also, as described 
in section VIII.D.3.d. of the preamble of this proposed rule, and as 
done for the 2017-based LTCH market basket, we are also proposing to 
use the Medicare cost report data to calculate the detailed capital 
cost weights for the Depreciation, Interest, Lease, and Other Capital-
Related cost categories.
    (1) Wages and Salaries Costs
    We propose to derive Wages and Salaries costs as the sum of routine 
inpatient salaries, ancillary salaries, and a proportion of overhead 
(or general service cost center) salaries as reported on Worksheet A, 
column 1. Because overhead salary costs are attributable to the entire 
LTCH, we propose to only include the proportion attributable to the 
Medicare allowable cost centers. For the 2022-based LTCH market basket, 
we propose that routine and ancillary Wages and Salaries costs would be 
equal to salary costs as reported on Worksheet A, column 1, lines 30 
through 35, 50 through 76 (excluding 52 and 75), 90 through 91, and 93. 
Then, we are proposing to estimate the proportion of overhead salaries 
that are attributed to Medicare allowable costs centers. We propose to 
first calculate overhead salaries as the sum of Worksheet A, column 1, 
lines 4 through 18. We then calculate the ``Medicare allowable ratio'' 
equal to routine and ancillary Wages and Salaries divided by total non-
overhead salaries (Worksheet A, column 1, line 200 less overhead 
salaries). We propose to multiply this Medicare allowable ratio by 
overhead salaries to determine the overhead salaries attributed to 
Medicare allowable cost centers. The sum of routine salaries, ancillary 
salaries, and the estimated Medicare allowable portion of overhead 
salaries represent Wages and Salaries costs. A similar methodology was 
used to derive Wages and Salaries costs in the 2017-based LTCH market 
basket.
(2) Employee Benefits Costs
    Similar to the 2017-based LTCH market basket, we propose to 
calculate Employee Benefits costs using data from Worksheet S-3, part 
II, column 4, lines 17, 18, 20, and 22. The completion of Worksheet S-
3, part II is only required for IPPS hospitals. For 2022, we found that 
approximately 42 percent of LTCHs voluntarily reported the Employee 
Benefits data, which has increased from the approximately 20 percent of 
LTCHs that reported these data that were used for the 2017-based LTCH 
market basket. Our analysis of the Worksheet S-3, part II data 
submitted by these LTCHs indicates that we continue to have a large 
enough sample to enable us to produce a reasonable Employee Benefits 
cost weight. Specifically, we found that when we recalculated the cost 
weight after weighting to reflect the characteristics of the universe 
of LTCHs (such as by type of ownership--nonprofit, for-profit, and 
government--and by region), the recalculation did not have a material 
effect on the resulting cost weight. Therefore, we propose to use 
Worksheet S-3, part II data (as was done for the 2017-based LTCH market 
basket) to calculate the Employee Benefits cost weight in the proposed 
2022-based LTCH market basket.
    We note that, effective with the implementation of CMS Form 2552-
10, OMB Control Number 0938-0050, we began collecting Employee Benefits 
and Contract Labor data on Worksheet S-3, part V, which is applicable 
to LTCHs. However, approximately 12 percent of LTCHs reported data on 
Worksheet S-3, part V for 2022, which has fallen since 2017 when 
roughly 17 percent of LTCHs reported these data. Because a greater 
percentage of LTCHs continue to report data on Worksheet S-3, part II 
than Worksheet S-3, part V, we are not proposing to use the Employee 
Benefits and Contract Labor data reported on Worksheet S-3, part V to 
calculate the Employee Benefits and Contract Labor cost weights in the 
proposed 2022-based LTCH market basket. We continue to encourage all 
providers to report Employee Benefits and Contract Labor data on 
Worksheet S-3, part V.
(3) Contract Labor Costs
    Contract Labor costs reported on the Medicare cost reports are 
primarily associated with direct patient care services. Contract Labor 
costs for services such as accounting, billing, and legal are estimated 
using other government data sources as described in this section of 
this proposed rule. Approximately 40 percent of LTCHs voluntarily 
reported Contract Labor costs on Worksheet S-3, part II, which was 
similar to the percentage obtained from 2017 Medicare cost reports.
    As was done for the 2017-based LTCH market basket, we propose to 
derive the Contract Labor costs for the proposed 2022-based LTCH market 
basket using voluntarily reported data from Worksheet S-3, part II. Our 
analysis of these data indicates that we have a large enough sample to 
enable us to produce a representative Contract Labor cost weight. 
Specifically, we found that when we recalculated the cost weight after 
weighting to reflect the characteristics of the universe of LTCHs by 
region, the recalculation did not have a material effect on the 
resulting cost weight. Therefore, we propose to use data from Worksheet 
S-3, part II, column 4, lines 11 and 13 to calculate the Contract Labor 
cost weight in the proposed 2022-based LTCH market basket.
(4) Pharmaceuticals Costs
    We propose to calculate Pharmaceuticals costs using non-salary 
costs reported for the pharmacy cost center (line 15) and drugs charged 
to patients cost center (line 73). We propose to calculate these costs 
as Worksheet A, column 7, less Worksheet A, column 1 for each of these 
lines. A similar methodology was used for the 2017-based LTCH market 
basket.
(5) Professional Liability Insurance Costs
    We propose that Professional Liability Insurance (PLI) costs (often 
referred to as malpractice costs) be equal to premiums, paid losses and 
self-insurance costs reported on Worksheet S-2, part I, columns 1 
through 3, line 118. A similar methodology was used for the 2017-based 
LTCH market basket.
(6) Home Office/Related Organization Contract Labor Costs
    We propose to calculate the Home Office/Related Organization 
Contract Labor costs using data reported on Worksheet S-3, part II, 
column 4, lines 1401, 1402, 2550, and 2551 for those LTCH providers 
reporting total salaries on Worksheet S-3, part II, line 1. A

[[Page 36271]]

similar methodology was used for the 2017-based LTCH market basket.
(7) Capital Costs
    We propose that Capital costs be equal to Medicare allowable 
capital costs as reported on Worksheet B, part II, column 26, lines 30 
through 35, 50 through 76 (excluding 52 and 75), 90 through 91 and 93. 
A similar methodology was used for the 2017-based LTCH market basket.
b. Final Major Cost Category Computation
    After we derive costs for the major cost categories for each 
provider using the Medicare cost report data as previously described, 
we propose to trim the data for outliers. For each of the seven major 
cost categories, we are first proposing to divide the calculated costs 
for the category by total Medicare allowable costs calculated for the 
provider to obtain cost weights for the universe of LTCH providers. For 
the 2022-based LTCH market basket (similar to the approach used for the 
2017-based LTCH market basket), we propose that total Medicare 
allowable costs would be equal to the total costs as reported on 
Worksheet B, part I, column 26, lines 30 through 35, 50 through 76 
(excluding 52 and 75), 90 through 91, and 93.
    For the Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, and Capital cost 
weights, after excluding cost weights that are less than or equal to 
zero, we propose to then remove those providers whose derived cost 
weights fall in the top and bottom 5 percent of provider specific 
derived cost weights to ensure the exclusion of outliers. We note that 
missing values are assumed to be zero consistent with the methodology 
for how missing values were treated in the 2017-based LTCH market 
basket. After the outliers have been excluded, we sum the costs for 
each category across all remaining providers. We are proposing to 
divide this by the sum of total Medicare allowable costs across all 
remaining providers to obtain a cost weight for the 2022-based LTCH 
market basket for the given category. This trimming process is done for 
each cost weight separately.
    For the Home Office/Related Organization Contract Labor cost 
weight, we propose to apply a 1-percent top only trimming methodology. 
We believe, as the Medicare cost report data (Worksheet S-2, part I, 
line 140) indicate, that not all LTCHs have a home office. LTCHs 
without a home office can incur these expenses directly by having their 
own staff, for which the costs would be included in the Wages and 
Salaries and Employee Benefits cost weights. Alternatively, LTCHs 
without a home office could also purchase related services from 
external contractors for which these expenses would be captured in the 
residual ``All Other'' cost weight. We believe this 1-percent top-only 
trimming methodology is appropriate as it addresses outliers while 
allowing providers with zero Home Office/Related Organization Contract 
Labor costs to be included in the Home Office/Related Organization 
Contract Labor cost weight calculation. If we applied both the top and 
bottom 5 percent trimming methodology, we would exclude providers who 
have zero Home Office/Related Organization Contract Labor costs.
    Finally, we propose to calculate the residual ``All Other'' cost 
weight that reflects all remaining costs that are not captured in the 
seven cost categories listed. We refer readers to Table EEEE 1 for the 
resulting proposed cost weights for these major cost categories.
[GRAPHIC] [TIFF OMITTED] TP02MY24.208

    The Wages and Salaries and Employee Benefits cost weights 
calculated from the Medicare cost reports for the proposed 2022-based 
LTCH market basket are similar to the Wages and Salaries and Employee 
Benefits cost weights for the 2017-based LTCH market basket. The 
proposed Contract Labor cost weight, however, is approximately 8 
percentage points higher than the Contract Labor cost weight in the 
2017-based LTCH market basket. The proposed 2022-based Pharmaceuticals 
and Capital cost weights are lower than the 2017-based LTCH market 
basket by 1.7 percentage points and 1.4 percentage points, 
respectively. The proposed 2022-based Home Office/Related Organization 
Contract Labor cost weight has increased by 1.8 percentage points 
compared to the 2017-based LTCH market basket.
    As we did for the 2017-based LTCH market basket, we propose to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that Contract Labor costs are comprised of both 
Wages and Salaries and Employee Benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 87 percent. Therefore, we propose to allocate 87 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 13 
percent to the Employee Benefits cost weight. We refer readers to Table 
EEEE 2 that shows the proposed Wages and Salaries and

[[Page 36272]]

Employee Benefits cost weights after Contract Labor cost weight 
allocation for both the proposed 2022-based LTCH market basket and the 
2017-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TP02MY24.209

    After the allocation of the Contract Labor cost weight, the 
proposed 2022-based Wages and Salaries cost weight is 7.2 percentage 
points higher and the Employee Benefits cost weight is 1.4 percentage 
points higher, relative to the respective cost weights for the 2017-
based LTCH market basket. As a result, in the proposed 2022-based LTCH 
market basket, the compensation cost weight is 8.6 percentage points 
higher than the Compensation cost weight for the 2017-based LTCH market 
basket.
c. Derivation of the Detailed Operating Cost Weights
    To further divide the residual ``All Other'' cost weight estimated 
from the 2022 Medicare cost report data into more detailed cost 
categories, we propose to use the 2017 Benchmark I-O ``The Use Table 
(Supply-Use Framework)'' data for NAICS 622000, Hospitals, published by 
the Bureau of Economic Analysis (BEA). These data are publicly 
available at the following website: https://www.bea.gov/industry/input-output-accounts-data. For the 2017-based LTCH market basket, we used 
the 2012 Benchmark I-O data, the most recent data available at the time 
(85 FR 58913).
    The BEA Benchmark I-O data are scheduled for publication every 5 
years with the most recent data available for 2017. The 2017 Benchmark 
I-O data are derived from the 2017 Economic Census and are the building 
blocks for BEA's economic accounts. Therefore, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\181\ BEA also 
produces Annual I-O estimates. However, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we propose to inflate the 2017 Benchmark I-O data forward to 2022 by 
applying the annual price changes from the respective price proxies to 
the appropriate market basket cost categories that are obtained from 
the 2017 Benchmark I-O data, and calculated the cost shares that each 
cost category represents using the inflated data. These resulting 2022 
cost shares were applied to the residual ``All Other'' cost weight to 
obtain the detailed cost weights for the proposed 2022-based LTCH 
market basket. For example, the cost for Food: Direct Purchases 
represents 4.3 percent of the sum of the residual ``All Other'' 2017 
Benchmark I-O Hospital Expenditures inflated to 2022. Therefore, the 
Food: Direct Purchases cost weight represents 4.3 percent of the 
proposed 2022-based LTCH market basket's residual ``All Other'' cost 
category (20.8 percent), yielding a ``final'' Food: Direct Purchases 
proposed cost weight of 0.9 percent in the proposed 2022-based LTCH 
market basket (0.043 x 20.8 percent = 0.9 percent).
---------------------------------------------------------------------------

    \181\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we propose to derive seventeen detailed 
LTCH market basket cost category weights within the proposed 2022-based 
LTCH market basket residual ``All Other'' cost weight (20.8 percent). 
These categories are: (1) Electricity and Other Non-Fuel Utilities; (2) 
Fuel: Oil and Gas; (3) Food: Direct Purchases; (4) Food: Contract 
Services; (5) Chemicals; (6) Medical Instruments; (7) Rubber and 
Plastics; (8) Paper and Printing Products; (9) Miscellaneous Products; 
(10) Professional Fees: Labor-Related; (11) Administrative and 
Facilities Support Services; (12) Installation, Maintenance, and Repair 
Services; (13) All Other Labor-Related Services; (14) Professional 
Fees: Nonlabor-Related; (15) Financial Services; (16) Telephone 
Services; and (17) All Other Nonlabor-Related Services. We note that 
these are the same categories as were used in the 2017-based LTCH 
market basket (with several cost categories being renamed for 
clarification purposes).
d. Derivation of the Detailed Capital Cost Weights
    As described in section VIII.D.3.b. of the preamble of this 
proposed rule, we are proposing a Capital-Related cost weight of 8.5 
percent in the proposed 2022-based LTCH market basket as calculated 
from the 2022 Medicare cost reports for LTCHs after applying the 
proposed trims as previously described. We propose to then separate 
this total Capital-Related cost weight into more detailed cost 
categories. Using Worksheet A-7 in the 2022 Medicare cost reports, we 
are able to group capital-related costs into the following categories: 
Depreciation, Interest, Lease, and Other Capital-Related costs, as 
shown in Table VIII.D-03, which is the same methodology used for the 
2017-based LTCH market basket.
    We also are proposing to allocate lease costs, which are 65 percent 
of total capital costs in the proposed 2022-based LTCH market basket, 
across each of the remaining detailed capital-related cost categories 
as was done in the 2017-based LTCH market basket. This would result in 
three primary capital-related cost categories in the proposed 2022 
based LTCH market basket: Depreciation, Interest, and Other Capital-
Related costs. Lease costs are unique in that they are not broken out 
as a separate cost category in the proposed 2022-based LTCH market 
basket. Rather, we propose to proportionally distribute these costs 
among the cost categories of Depreciation, Interest, and Other Capital-
Related, reflecting the assumption that the underlying cost structure 
of leases is similar to that of capital-related costs in general. As 
was done for the 2017-based LTCH market basket, we propose to assume 
that 10 percent of the lease costs represents

[[Page 36273]]

overhead and to assign those costs to the Other Capital-Related cost 
category accordingly. Therefore, we are assuming that approximately 6.5 
percent (65.0 percent x 0.1) of total capital-related costs represent 
lease costs attributable to overhead, and we propose to add this 6.5 
percentage points to the 7.3 percent Other Capital-Related cost 
category weight. We are also proposing to distribute the remaining 
lease costs (58.5 percent, or 65.0 percent less 6.5 percentage points) 
proportionally across the three cost categories (Depreciation, 
Interest, and Other Capital-Related) based on the proportion that these 
categories comprise of the sum of the Depreciation, Interest, and Other 
Capital-Related cost categories (excluding lease expenses). For 
example, the Other Capital-Related cost category represented 21.0 
percent of all three cost categories (Depreciation, Interest, and Other 
Capital-Related) prior to any lease expenses being allocated. This 21.0 
percent is applied to the 58.5 percent of remaining lease expenses so 
that another 12.3 percentage points of lease expenses as a percent of 
total capital-related costs is allocated to the Other Capital-Related 
cost category. Therefore, the resulting proposed Other Capital-Related 
cost weight is 26.1 percent (7.3 percent + 6.5 percent + 12.3 percent). 
This is the same methodology used for the 2017-based LTCH market 
basket. The proposed allocation of these lease expenses are shown in 
Table VIII.D-03.
    Finally, we propose to further divide the Depreciation and Interest 
cost categories. We propose to separate Depreciation cost category into 
the following two categories: (1) Building and Fixed Equipment and (2) 
Movable Equipment. We also propose to separate the Interest cost 
category into the following two categories: (1) Government/Nonprofit; 
and (2) For profit.
    To disaggregate the Depreciation cost weight, we needed to 
determine the percent of total depreciation costs for LTCHs (after the 
allocation of lease costs) that are attributable to Building and Fixed 
equipment, which we hereafter refer to as the ``fixed percentage.'' We 
propose to use depreciation and lease data from Worksheet A-7 of the 
2022 Medicare cost reports, which is the same methodology used for the 
2017-based LTCH market basket. Based on the 2022 LTCH Medicare cost 
report data, we have determined that depreciation costs for building 
and fixed equipment account for 39 percent of total depreciation costs, 
while depreciation costs for movable equipment account for 61 percent 
of total depreciation costs. As previously mentioned, we propose to 
allocate lease expenses among the Depreciation, Interest, and Other 
Capital-Related cost categories. We determined that leasing building 
and fixed equipment expenses account for 94 percent of total leasing 
expenses, while leasing movable equipment expenses account for 6 
percent of total leasing expenses. We propose to sum the depreciation 
and leasing expenses for building and fixed equipment, as well as sum 
the depreciation and leasing expenses for movable equipment. This 
results in the proposed Building and Fixed Equipment Depreciation cost 
weight (after leasing costs are included) representing 78 percent of 
total depreciation costs and the Movable Equipment Depreciation cost 
weight (after leasing costs are included) representing 22 percent of 
total depreciation costs.
    To disaggregate the Interest cost weight, we determine the percent 
of total interest costs for LTCHs that are attributable to government 
and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' because price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. We propose to use interest costs data from Worksheet A-7 of 
the 2022 Medicare cost reports for LTCHs, which is the same methodology 
used for the 2017-based LTCH market basket. The nonprofit percentage 
determined using this method is 48 percent.
    Table VIII.D-03 provides the proposed detailed capital cost shares 
obtained from the Medicare cost reports. Ultimately, if finalized, 
these detailed capital cost shares would be applied to the total 
Capital-Related cost weight determined in section VIII.D.3.b. of the 
preamble of this proposed rule to separate the total Capital-Related 
cost weight of 8.5 percent into more detailed cost categories and 
weights.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02MY24.210


[[Page 36274]]


e. Proposed 2022-Based LTCH Market Basket Cost Categories and Weights
    Table VIII.D-04 shows the proposed cost categories and weights for 
the proposed 2022-based LTCH market basket compared to the 2017-based 
LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TP02MY24.211

BILLING CODE 4210-01-C
4. Selection of Proposed Price Proxies
    After developing the proposed cost weights for the 2022-based LTCH 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate

[[Page 36275]]

of price change for each cost category. For the majority of the cost 
weights, we base the price proxies on U.S. Bureau of Labor Statistics 
(BLS) data and group them into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the NAICS and the occupational 
ECIs are based on the Standard Occupational Classification System 
(SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure the average change over time in the selling prices received by 
domestic producers for their output. The prices included in the PPI are 
from the first commercial transaction for many products and some 
services (https://www.bls.gov/ppi/).
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure the average change over time in the prices paid by urban 
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to 
those of retail consumers rather than purchases at the producer level, 
or if no appropriate PPIs are available.
    We evaluate the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.
    We believe that the CPIs, PPIs, and ECIs that we have selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table VIII.D-07 lists all price proxies that we propose to use for 
the 2022-based LTCH market basket. The next section of the rule 
contains a detailed explanation of the price proxies we are proposing 
for each cost category weight.
a. Price Proxies for the Operating Portion of the Proposed 2022-Based 
LTCH Market Basket
(1) Wages and Salaries
    We propose to continue to use the ECI for Wages and Salaries for 
All Civilian workers in Hospitals (BLS series code CIU1026220000000I) 
to measure the wage rate growth of this cost category. This is the same 
price proxy used in the 2017-based LTCH market basket (85 FR 58917).
(2) Employee Benefits
    We propose to continue to use the ECI for Total Benefits for All 
Civilian workers in Hospitals to measure price growth of this category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian workers in Hospitals (BLS series code CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the 2017-based LTCH 
market basket (85 FR 58917).
(3) Electricity and Other Non-Fuel Utilities
    We propose to continue to use the PPI Commodity Index for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. This is the same price proxy used 
in the 2017-based LTCH market basket (85 FR 58917).
(4) Fuel: Oil and Gas
    For the 2022-based LTCH market basket, we propose to use a blend of 
the PPI Industry for Petroleum Refineries (NAICS 3241), PPI for Other 
Petroleum and Coal Products (NAICS 32419) and the PPI Commodity for 
Natural Gas. Our analysis of the Bureau of Economic Analysis' 2017 
Benchmark I-O data for NAICS 622000 Hospitals shows that Petroleum 
Refineries expenses account for approximately 86 percent, Other 
Petroleum and Coal Products expenses account for about 7 percent and 
Natural Gas expenses account for approximately 7 percent of Hospitals' 
(NAICS 622000) total Fuel: Oil and Gas expenses. Therefore, we propose 
to use a blend of 86 percent of the PPI Industry for Petroleum 
Refineries (BLS series code PCU324110324110), 7 percent of the PPI for 
Other Petroleum and Coal Products (BLS series code PCU32419) and 7 
percent of the PPI Commodity Index for Natural Gas (BLS series code 
WPU0531) as the price proxy for this cost category. The 2017-based LTCH 
market basket used a 90/10 blend of the PPI Industry for Petroleum 
Refineries and PPI Commodity for Natural Gas, reflecting the 2012 I-O 
data (85 FR 58917). We believe that the three proposed price proxies 
are the most technically appropriate indices available to measure the 
price growth of the Fuel: Oil and Gas cost category in the 2022-based 
LTCH market basket.
(5) Professional Liability Insurance
    We propose to continue to use the CMS Hospital Professional 
Liability Index as the price proxy for PLI costs in the proposed 2022-
based LTCH market basket. To generate this index, we collect commercial 
insurance medical liability premiums for a fixed level of coverage 
while holding non-price factors constant (such as a change in the level 
of coverage). This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58917).
(6) Pharmaceuticals
    We propose to continue to use the PPI Commodity for Pharmaceuticals 
for Human Use, Prescription (BLS series code WPUSI07003) to measure the 
price growth of this cost category. This is the same proxy used in the 
2017-based LTCH market basket (85 FR 58917).
(7) Food: Direct Purchases
    We propose to continue to use the PPI Commodity for Processed Foods 
and Feeds (BLS series code WPU02) to measure the price growth of this 
cost

[[Page 36276]]

category. This is the same price proxy used in the 2017-based LTCH 
market basket (85 FR 58917).
(8) Food: Contract Purchases
    We propose to continue to use the CPI for Food Away From Home (BLS 
series code CUUR0000SEFV) to measure the price growth of this cost 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58917).
(9) Chemicals
    Similar to the 2017-based LTCH market basket, we propose to use a 
four-part blended PPI as the proxy for the chemical cost category in 
the 2022-based LTCH market basket. The proposed blend is composed of 
the PPI Industry for Industrial Gas Manufacturing, Primary Products 
(BLS series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519), and the PPI Industry for Other Miscellaneous 
Chemical Product Manufacturing (BLS series code PCU325998325998). For 
the 2022-based LTCH market basket, we propose to derive the weights for 
the PPIs using the 2017 Benchmark I-O data. The 2017-based LTCH market 
basket used the 2012 Benchmark I-O data to derive the weights for the 
four PPIs (85 FR 58917 through 58918).
[GRAPHIC] [TIFF OMITTED] TP02MY24.212

(10) Medical Instruments
    We propose to use a blended price proxy for the Medical Instruments 
category. The 2017 Benchmark I-O data shows the majority of medical 
instruments and supply costs are for NAICS 339112--Surgical and medical 
instrument manufacturing costs (approximately 64 percent) and NAICS 
339113--Surgical appliance and supplies manufacturing costs 
(approximately 36 percent). To proxy the price changes associated with 
NAICS 339112, we propose to use the PPI for Surgical and medical 
instruments (BLS series code WPU1562). This is the same price proxy we 
used in the 2017-based LTCH market basket. To proxy the price changes 
associated with NAICS 339113, we propose to use a 50/50 blend of the 
PPI for Medical and surgical appliances and supplies (BLS series code 
WPU1563) and the PPI for Miscellaneous products, Personal safety 
equipment and clothing (BLS series code WPU1571). We propose to include 
the latter price proxy as it would reflect personal protective 
equipment including but not limited to face shields and protective 
clothing. The 2017 Benchmark I-O data does not provide specific 
expenses for these products; however, we recognize that this category 
reflects costs faced by LTCHs. For the 2017-based LTCH market basket, 
we used a blend composed of 57 percent of the commodity-based PPI 
Commodity for Surgical and Medical Instruments (BLS series code 
WPU1562) and 43 percent of the PPI Commodity for Medical and Surgical 
Appliances and Supplies (BLS series code WPU1563) reflecting the 2012 
Benchmark I-O data (85 FR 58918).
(11) Rubber and Plastics
    We propose to continue to use the PPI Commodity for Rubber and 
Plastic Products (BLS series code WPU07) to measure price growth of 
this cost category. This is the same proxy used in the 2017-based LTCH 
market basket (85 FR 58918).
(12) Paper and Printing Products
    We are proposing to use a 61/39 blend of the PPI Commodity for 
Publications Printed Matter and Printing Material (BLS Series Code 
WPU094) and the PPI Commodity for Converted Paper and Paperboard 
Products (BLS series code WPU0915) to measure the price growth of this 
cost category. The 2017 Benchmark I-O data shows that 61 percent of 
paper and printing expenses are for Printing (NAICS 323110) and the 
remaining expenses are for Paper manufacturing (NAICS 322). The 2017-
based LTCH market basket (85 FR 58918) used the PPI Commodity for 
Converted Paper and Paperboard Products (BLS series code WPU0915) as 
this comprised the majority of expenses as reported in the 2012 
Benchmark I-O data.
(13) Miscellaneous Products
    We propose to continue to use the PPI Commodity for Finished Goods 
Less Food and Energy (BLS series code WPUFD4131) to measure the price 
growth of this cost category. This is the same proxy used in the 2017-
based LTCH market basket (85 FR 58918).
(14) Professional Fees: Labor-Related
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2017-based LTCH market basket (85 FR 
58918).
(15) Administrative and Facilities Support Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Office and Administrative Support (BLS 
series code CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58918).
(16) Installation, Maintenance, and Repair Services
    We propose to continue to use the ECI for Total Compensation for 
All Civilian

[[Page 36277]]

workers in Installation, Maintenance, and Repair (BLS series code 
CIU1010000430000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58918).
(17) All Other: Labor-Related Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Service Occupations (BLS series code 
CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58918).
(18) Professional Fees: Nonlabor-Related
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2017-based LTCH market basket (85 FR 
58919).
(19) Financial Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2017-based LTCH market basket (85 FR 
58919).
(20) Telephone Services
    We propose to continue to use the CPI for Telephone Services (BLS 
series code CUUR0000SEED) to measure the price growth of this cost 
category. This is the same proxy used in the 2017-based LTCH market 
basket (85 FR 58919).
(21) All Other: Nonlabor-Related Services
    We propose to continue to use the CPI for All Items Less Food and 
Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of 
this cost category. This is the same proxy used in the 2017-based LTCH 
market basket (85 FR 58919).
b. Price Proxies for the Capital Portion of the Proposed 2022-Based 
LTCH Market Basket
(1) Capital Price Proxies Prior to Vintage Weighting
    We propose to continue to use the same price proxies for the 
capital-related cost categories as were applied in the 2017-based LTCH 
market basket, which are provided in Table VIII.D-07 and described in 
this section of this rule. Specifically, we propose to proxy:
     Depreciation: Building and Fixed Equipment cost category 
by BEA's Chained Price Index for Nonresidential Construction for 
Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes 
for Private Fixed Investment in Structures by Type).
     Depreciation: Movable Equipment cost category by the PPI 
Commodity for Machinery and Equipment (BLS series code WPU11).
     Nonprofit Interest cost category by the average yield on 
domestic municipal bonds (Bond Buyer 20-bond index).
     For-profit Interest cost category by the average yield of 
the iBoxx AAA Corporate Bond Yield index.
     Other Capital-Related cost category by the CPI-U for Rent 
of Primary Residence (BLS series code CUUS0000SEHA).
    We believe these are the most appropriate proxies for LTCH capital-
related costs that meet our selection criteria of relevance, 
timeliness, availability, and reliability. We are also proposing to 
continue to vintage weight the capital price proxies for Depreciation 
and Interest in order to capture the long-term consumption of capital. 
This vintage weighting method is similar to the method used for the 
2017-based LTCH market basket and is described in section 
VIII.D.4.b.(2). of the preamble of this proposed rule.
(2) Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2022-based LTCH market basket 
is intended to capture the long-term consumption of capital, using 
vintage weights for depreciation (physical capital) and interest 
(financial capital). These vintage weights reflect the proportion of 
capital-related purchases attributable to each year of the expected 
life of building and fixed equipment, movable equipment, and interest. 
We propose to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual nonvintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for LTCH capital-related costs. 
The capital-related component of the proposed 2022-based LTCH market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    The methodology used to calculate the vintage weights for the 
proposed 2022-based LTCH market basket is the same as that used for the 
2017-based LTCH market basket with the only difference being the 
inclusion of more recent data. To calculate the vintage weights for 
depreciation and interest expenses, we first need a time series of 
capital-related purchases for building and fixed equipment and movable 
equipment. We found no single source that provides an appropriate time 
series of capital-related purchases by hospitals for all of the 
previously mentioned components of capital purchases. The early 
Medicare cost reports did not have sufficient capital-related data to 
meet this need. Data we obtained from the American Hospital Association 
(AHA) do not include annual capital-related purchases. However, the AHA 
does provide a consistent database of total expenses from 1963 to 
2020--the latest available data. Consequently, we propose to use data 
from the AHA Panel Survey and the AHA Annual Survey to obtain a time 
series of total expenses for hospitals. We are also proposing to use 
data from the AHA Panel Survey supplemented with the ratio of 
depreciation to total hospital expenses obtained from the Medicare cost 
reports to derive a trend of annual depreciation expenses for 1963 
through 2020. We propose to separate these depreciation expenses into 
annual amounts of building and fixed equipment depreciation and movable 
equipment depreciation as previously determined. From these annual 
depreciation amounts we derive annual end-of-year book values for 
building and fixed equipment and movable equipment using the expected 
life for each type of asset category. While data are not available that 
are specific to LTCHs, we believe this information for all hospitals 
serves as a reasonable proxy for the pattern of depreciation for LTCHs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
building and fixed equipment, movable equipment, and interest for the 
proposed 2022-based LTCH market basket. We propose to calculate the 
expected lives using Medicare cost report data for LTCHs.

[[Page 36278]]

The expected life of any asset can be determined by dividing the value 
of the asset (excluding fully depreciated assets) by its current year 
depreciation amount. This calculation yields the estimated expected 
life of an asset if the rates of depreciation were to continue at 
current year levels, assuming straight-line depreciation. Using this 
proposed method, we determined the average expected life of building 
and fixed equipment to be equal to 16 years, and the average expected 
life of movable equipment to be equal to 9 years. For the expected life 
of interest, we believe that vintage weights for interest should 
represent the average expected life of building and fixed equipment 
because, based on previous research described in the FY 1997 IPPS final 
rule (61 FR 46198), the expected life of hospital debt instruments and 
the expected life of buildings and fixed equipment are similar. We note 
that for the 2017-based LTCH-specific market basket, we derived an 
expected average life of building and fixed equipment of 18 years and 
an expected average life of movable equipment of 9 years (85 FR 58920).
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. Then we calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we propose to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual purchase amount by the associated price proxy as 
previously provided. For the interest vintage weights, we propose to 
use the total nominal annual capital-related purchase amounts to 
capture the value of the debt instrument (including, but not limited 
to, mortgages and bonds). Using these capital-related purchase time 
series specific to each asset type, we propose to calculate the vintage 
weights for building and fixed equipment, for movable equipment, and 
for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 16 years, and in the 
case of movable equipment, 9 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2020 back to 1964. These data allow us to derive forty-two 16-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and forty-nine 9-year periods of capital-related 
purchases for movable equipment. For each 16-year period for building 
and fixed equipment and interest, or 9-year period for movable 
equipment, we propose to calculate annual vintage weights by dividing 
the capital-related purchase amount in any given year by the total 
amount of purchases over the entire 16-year or 9-year period. This 
calculation is done for each year in the 16-year or 9-year period and 
for each of the periods for which we have data. Then we are proposing 
to calculate the average vintage weight for a given year of the 
expected life by taking the average of these vintage weights across the 
multiple periods of data.
    The vintage weights for the capital-related portion of the proposed 
2022-based LTCH market basket and the 2017-based LTCH market basket are 
presented in Table EEEE 6.

[[Page 36279]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.213

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table VIII.D-06 is applied to the most recent 
data point. We have provided on the CMS website an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the IPPS FY 2010 Proposed Rule.''
c. Summary of Price Proxies of the Proposed 2022-Based LTCH Market 
Basket
    Table VIII.D-07 shows both the operating and capital price proxies 
for the proposed 2022-based LTCH market basket.
BILLING CODE 4120-01-P

[[Page 36280]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.214

BILLING CODE 4120-01-C
5. Proposed FY 2025 Market Basket Update for LTCHs
    For FY 2025 (that is, October 1, 2024 through September 30, 2025), 
we propose to use an estimate of the proposed 2022-based LTCH market 
basket to update payments to LTCHs based on the best available data. 
Consistent with historical practice, we estimate the LTCH market basket 
update

[[Page 36281]]

for the LTCH PPS based on IHS Global, Inc.'s (IGI) forecast using the 
most recent available data. IGI is a nationally recognized economic and 
financial forecasting firm with which CMS contracts to forecast the 
components of the market baskets and total factor productivity (TFP).
    Based on IGI's fourth quarter 2023 forecast with history through 
the third quarter of 2023, the projected market basket update for FY 
2025 is 3.2 percent. This projected 2022-based LTCH market basket 
update reflects an increase in compensation prices (proxied by the ECIs 
for All Civilian workers in Hospitals) of 3.7 percent. IGI's forecast 
of the ECIs 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 note that the 10-year historical average (FY 2014 through 
FY 2023) growth rate of the proposed 2022-based LTCH market basket is 
2.7 percent with a 10-year historical average growth rate of 
compensation prices equal to 2.9 percent over this same time period. 
Consistent with our historical practice of estimating market basket 
increases based on the best available data, we are proposing a market 
basket update of 3.2 percent for FY 2025. Furthermore, because the 
proposed FY 2025 annual update is based on the most recent market 
basket estimate for the 12-month period (currently 3.2 percent), we 
also are proposing that if more recent data become subsequently 
available (for example, a more recent estimate of the market basket), 
we would use such data, if appropriate, to determine the FY 2025 annual 
update in the final rule. (The proposed annual update to the LTCH PPS 
standard payment rate for FY 2025 is discussed in greater detail in 
section V.A.2. of the Addendum to this proposed rule.)
    Using the current 2017-based LTCH market basket and IGI's fourth 
quarter 2023 forecast for the market basket components, the FY 2025 
market basket update would be 3.1 percent (before taking into account 
any statutory adjustment). Therefore, the update based on the proposed 
2022-based LTCH market basket is currently projected to be 0.1 
percentage point higher for FY 2025 compared to the current 2017-based 
LTCH market basket. This higher update is primarily due to the higher 
Compensation cost weight in the proposed 2022-based market basket (61.8 
percent) compared to the 2017-based LTCH market basket (53.2 percent). 
This is partially offset by the lower cost weight associated with All 
Other Services (such as Professional Fees and Installation, 
Maintenance, and Repair Services) for the proposed 2022-based LTCH 
market basket relative to the 2017-based LTCH market basket. Table 
VIII.D-08 compares the proposed 2022-based LTCH market basket and the 
2017-based LTCH market basket percent changes.
[GRAPHIC] [TIFF OMITTED] TP02MY24.215

    Over the historical time period covering FY 2020 through FY 2023, 
the average growth rate of the proposed 2022-based LTCH market basket 
is the same as the average growth rate of the 2017-based LTCH market 
basket. Over the forecasted time period covering FY 2024 through FY 
2027, the average growth rate of the proposed 2022-based LTCH market 
basket is 0.1 percentage point higher than the average growth rate of 
the 2017-based LTCH market basket. This is driven by higher projected 
growth for FY 2024 and FY 2025 for the proposed 2022-based LTCH market 
basket, which is primarily a result of the higher proposed Compensation 
cost weight combined with faster projected growth in Compensation 
prices for FY 2024 and FY 2025 relative to projected prices for All 
Other Services. In FY 2026 and FY 2027 prices for these two aggregate 
cost categories are projected to grow at similar rates.
6. Proposed FY 2025 Labor-Related Share
    As discussed in section V.B. of the Addendum to this proposed rule, 
under the authority of section 123 of the BBRA as amended by section 
307(b) of the BIPA, we established an adjustment to the LTCH PPS 
payments to account for differences in LTCH area wage levels (Sec.  
412.525(c)). The labor-related portion of the LTCH PPS standard Federal 
payment rate, hereafter referred to as the labor-related share, is 
adjusted to account for geographic differences in area wage levels by 
applying the applicable LTCH PPS wage index. The labor-related share is 
determined by identifying the national average proportion of total 
costs that are related

[[Page 36282]]

to, influenced by, or vary with the local labor market. As discussed in 
more detail in this section of this rule and similar to the 2017-based 
LTCH market basket, we classify a cost category as labor-related and 
include it in the labor-related share if the cost category is defined 
as being labor-intensive and its cost varies with the local labor 
market. As stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58988), the labor-related share for FY 2024 was defined as the sum of 
the FY 2024 relative importance of Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related Services; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-related Services; and a portion of the 
Capital-Related Costs from the 2017-based LTCH market basket.
    We propose to continue to classify a cost category as labor-related 
if the costs are labor-intensive and vary with the local labor market. 
Given this, based on our definition of the labor-related share and the 
cost categories in the proposed 2022-based LTCH market basket, we 
propose to include in the labor-related share for FY 2025 the sum of 
the FY 2025 relative importance of Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-Related Services; and a portion of the 
Capital-Related cost weight from the proposed 2022-based LTCH market 
basket.
    Similar to the 2017-based LTCH market basket, the proposed 2022-
based LTCH market basket includes two cost categories for nonmedical 
Professional fees (including but not limited to, expenses for legal, 
accounting, and engineering services). These are Professional Fees: 
Labor-Related and Professional Fees: Nonlabor-Related. For the proposed 
2022-based LTCH market basket, we propose to estimate the labor-related 
percentage of non-medical professional fees (and assign these expenses 
to the Professional Fees: Labor-Related services cost category) based 
on the same method that was used to determine the labor-related 
percentage of professional fees in the 2017-based LTCH market basket.
    As was done for the 2017-based LTCH market basket, we propose to 
determine the proportion of legal, accounting and auditing, 
engineering, and management consulting services that meet our 
definition of labor-related services based on a survey of hospitals 
conducted by CMS in 2008. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and did not 
receive any public comments in response to the notice (71 FR 8588). A 
discussion of the composition of the survey and post-stratification can 
be found in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43850 through 
43856). Based on the weighted results of the survey, we determined that 
hospitals purchase, on average, the following portions of contracted 
professional services outside of their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    For the proposed 2022-based LTCH market basket, we propose to apply 
each of these percentages to the respective 2017 Benchmark I-O cost 
category underlying the professional fees cost category to determine 
the Professional Fees: Nonlabor-Related costs. The Professional Fees: 
Labor-Related costs were determined to be the difference between the 
total costs for each Benchmark I-O category and the Professional Fees: 
Nonlabor-Related costs. This is the same methodology that we used to 
separate the 2017-based LTCH market basket professional fees category 
into Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related cost categories.
    Effective for transmittal 18 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i), the hospital 
Medicare Cost Report (CMS Form 2552-10, OMB No. 0938-0050) is 
collecting information on whether a hospital purchased professional 
services (for example, legal, accounting, tax preparation, bookkeeping, 
payroll, advertising, and/or management/consulting services) from an 
unrelated organization and if the majority of these expenses were 
purchased from unrelated organizations located outside of the main 
hospital's local area labor market. We encourage all providers to 
provide this information so we can potentially use these more recent 
data in future rulemaking to determine the labor-related share.
    In the proposed 2022-based LTCH market basket, nonmedical 
professional fees that were subject to allocation based on these survey 
results represent approximately 3.6 percent of total costs (and are 
limited to those fees related to Accounting and Auditing, Legal, 
Engineering, and Management Consulting services). Based on our survey 
results, we propose to apportion approximately 2.3 percentage points of 
the 3.6 percentage point figure into the Professional Fees: Labor-
Related cost category and designate the remaining approximately 1.3 
percentage points into the Professional Fees: Nonlabor-Related cost 
category.
    In addition to the professional services as previously listed, for 
the 2022-based LTCH market basket, we propose to allocate a proportion 
of the Home Office/Related Organization Contract Labor cost weight, 
calculated using the Medicare cost reports as previously stated, into 
the labor-related and nonlabor-related cost categories. We propose to 
classify these expenses as labor-related and nonlabor-related as many 
facilities are not located in the same geographic area as their home 
office and, therefore, do not meet our definition for the labor-related 
share that requires the services to be purchased in the local labor 
market.
    Similar to the 2017-based LTCH market basket, we propose for the 
2022-based LTCH market basket to use the Medicare cost reports for 
LTCHs to determine the home office labor-related percentages. The 
Medicare cost report requires a hospital to report information 
regarding their home office provider. Using information on the Medicare 
cost report, we compare the location of the LTCH with the location of 
the LTCH's home office. We propose to classify a LTCH with a home 
office located in their respective labor market if the LTCH and its 
home office are located in the same Metropolitan Statistical Area 
(MSA). Then we determine the proportion of the Home Office/Related 
Organization Contract Labor cost weight that should be allocated to the 
labor-related share based on the percent of total Home Office/Related 
Organization Contract Labor costs for those LTCHs that had home offices 
located in their respective MSA of total Home Office/Related 
Organization Contract Labor costs for LTCHs with a home office. We 
determined a LTCH's and its home office's MSA using their zip code 
information from the Medicare cost report. Using this methodology with 
the 2022 Medicare cost reports, we determined that 4 percent of LTCHs' 
Home Office/Related Organization Contract Labor costs were for home 
offices located in their respective MSA, or local labor markets. 
Therefore, we are allocating 4 percent of the Home Office/Related 
Organization Contract Labor cost weight (0.1 percentage point = 3.7 
percent x 4 percent) to the Professional Fees: Labor-Related cost 
weight and 96 percent of the Home Office/Related Organization Contract 
Labor cost weight to the Professional Fees: Nonlabor-Related cost 
weight (3.6 percentage

[[Page 36283]]

points = 3.7 percent x 96 percent). For comparison, for the 2017-based 
LTCH market basket we also allocated 4 percent of the Home Office/
Related Organization Contract Labor cost weight to the Professional 
Fees: Labor-Related cost weight (85 FR 58924).
    In summary, based on the two allocations mentioned earlier, we 
apportioned 2.4 percentage points (2.3 percentage points + 0.1 
percentage point) of the Professional Fees and Home Office/Related 
Organization Contract Labor cost weights into the Professional Fees: 
Labor-Related cost category. This amount was added to the portion of 
professional fees that we already identified as labor-related using the 
I-O data such as contracted advertising and marketing costs 
(approximately 0.6 percentage point of total costs) resulting in a 
total Professional Fees: Labor-Related cost weight of 3.0 percent.
    As previously stated, we propose to include in the labor-related 
share the sum of the relative importance of Wages and Salaries; 
Employee Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-Related Services; and a portion of the 
Capital-Related cost weight from the proposed 2022-based LTCH market 
basket. The relative importance reflects the different rates of price 
change for these cost categories between the base year (2022) and FY 
2025. Based on IGI's fourth quarter 2023 forecast of the proposed 2022-
based LTCH market basket, the sum of the FY 2025 relative importance 
for operating costs (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) is 68.9 percent. The portion of Capital costs 
that is estimated to be influenced by the local labor market is 46 
percent, which is the same percentage applied to the 2017-based LTCH 
market basket. Since the relative importance for Capital is 8.4 percent 
of the proposed 2022-based LTCH market basket in FY 2025, we took 46 
percent of 8.4 percent to determine the proposed labor-related share of 
Capital for FY 2025 of 3.9 percent. Therefore, we are proposing a total 
labor-related share for FY 2025 of 72.8 percent (the sum of 68.9 
percent for the operating cost and 3.9 percent for the labor-related 
share of Capital). Table VIII.D-09 shows the FY 2025 labor-related 
share using the proposed 2022-based LTCH market basket relative 
importance and the FY 2024 labor-related share using the 2017-based 
LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TP02MY24.216

    The total difference between the FY 2025 labor-related share using 
the proposed 2022-based LTCH market basket (72.8 percent) and the FY 
2024 labor-related share using the 2017-based LTCH market basket (68.5 
percent) is 4.3 percentage points and this difference is primarily 
attributable to the revision to the base year cost weights for those 
categories included in the labor-related share. The 4.3 percentage 
points revision to the base year cost weights is a result of: (1) an 
8.6 percentage points upward revision to the base year Compensation 
cost weight, which is derived using the LTCH Medicare cost report data; 
(2) a 3.6 percentage points downward revision in the base year labor-
related categories associated with incorporating the 2017 Benchmark I-O 
data; and (3) a 0.7 percentage point downward revision in the base year 
labor-related portion of capital costs, which is derived using the LTCH 
Medicare cost report data.

[[Page 36284]]

IX. Proposed Quality Data Reporting Requirements for Specific Providers

A. Overview

    In section IX. of the preamble of this proposed rule, we are 
seeking comment on and proposing changes to the following Medicare 
quality reporting programs:
     In section IX.B. of the preamble of this proposed rule, we 
have the following crosscutting quality program proposals or request 
for comment:
    ++ Proposed Adoption of the Patient Safety Structural Measure in 
the Hospital IQR Program and PCHQR Program.
    ++ Proposed Modification to the Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Survey in the Hospital IQR 
Program, Hospital VBP Program, and PCHQR Program.
    ++ Advancing Patient Safety and Outcomes Across the Hospital 
Quality Programs--Request for Comment.
     In section IX.C. of the preamble of this proposed rule, 
the Hospital IQR Program.
     In section IX.D. of the preamble of this proposed rule, 
the PCHQR Program.
     In section IX.E. of the preamble of this proposed rule, 
the LTCH QRP.
     In section IX.F. of the preamble of this proposed rule, 
the Medicare Promoting Interoperability Program for Eligible Hospitals 
and Critical Access Hospitals (CAHs) (previously known as the Medicare 
EHR Incentive Program).

B. Crosscutting Quality Program Proposals and Request for Comment

1. Proposed Adoption of the Patient Safety Structural Measure Beginning 
With the CY 2025 Reporting Period/FY 2027 Payment Determination for the 
Hospital Inpatient Quality Reporting (IQR) Program and the CY 2025 
Reporting Period/FY 2027 Program Year for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program
a. Background
    A foundational commitment of providing healthcare services is to 
ensure safety, as embedded in the centuries-old Hippocratic Oath, 
``First, do no harm.'' Yet, the landmark reports To Err is Human \182\ 
and Crossing the Quality Chasm \183\ surfaced major deficits in 
healthcare quality and safety. These reports resulted in widespread 
awareness of the alarming prevalence of patient harm and, over the past 
two decades, healthcare facilities implemented various interventions 
and strategies to improve patient safety, with some documented 
successes.\184\ However, progress has been slow, and preventable harm 
to patients in the clinical setting resulting in significant morbidity 
and mortality remains common. A recent systematic analysis of 
literature concluded that preventable mortality among inpatients 
results in approximately 22,165 preventable deaths annually.\185\ In 
another recent study, researchers identified adverse events in almost 
one-quarter of admissions and showed that more than one-fifth were 
deemed preventable and almost one-third were considered serious (that 
is, caused harm that required intervention or prolonged recovery).\186\
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    \182\ Institute of Medicine (U.S.) Committee on Quality of 
Health Care in America, Kohn, L. T., Corrigan, J. M., & Donaldson, 
M. S. (Eds.). (2000). To Err is Human: Building a Safer Health 
System. National Academies Press (U.S.).
    \183\ Institute of Medicine (U.S.) Committee on Quality of 
Health Care in America. (2001). Crossing the Quality Chasm: A New 
Health System for the 21st Century. National Academies Press (U.S.).
    \184\ Agency for Healthcare Research and Quality. (February 
2021). National Healthcare Quality and Disparities Report chartbook 
on patient safety. Rockville, MD. Available at: https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/nhqrdr/chartbooks/patientsafety/2019qdr-patient-safety-chartbook.pdf.
    \185\ Rodwin BA, Bilan VP, Merchant NB, Steffens CG, Grimshaw 
AA, Bastian LA, Gunderson CG. Rate of Preventable Mortality in 
Hospitalized Patients: a Systematic Review and Meta-analysis. J Gen 
Intern Med. 2020 Jul;35(7):2099-2106. doi: 10.1007/s11606-019-05592-
5. Epub 2020 Jan 21. PMID: 31965525; PMCID: PMC7351940.
    \186\ Bates DW, Levine DM, Salmasian H, et al. The Safety of 
Inpatient Health Care. New England Journal of Medicine. 
2023;388(2):142-153. https://doi.org/10.1056/nejmsa2206117.
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    Despite established patient safety protocols and quality measures, 
the COVID-19 public health emergency (PHE) strained the healthcare 
system substantially, introducing new safety risks and negatively 
impacting patient safety in the normal delivery of care. Since the 
onset of the COVID-19 PHE, the U.S. has seen marked declines in patient 
safety metrics, as evidenced by considerable increases in healthcare-
associated infections (HAIs).187 188 Studies found that 
central line-associated blood stream infections (CLABSIs) in hospitals 
were 60 percent higher than predicted in the absence of COVID-19, 
catheter-associated urinary tract infections (CAUTIs) were 43 percent 
higher, and methicillin-resistant Staphylococcus aureus (MRSA) 
bacteremia infections were 44 percent higher. Studies have shown that 
these results were likely due at least in part to disrupted routine 
infection control practices during the COVID-19 
pandemic.189 190 Notably, recent reports demonstrate that 
some HAI rates have begun to decrease towards pre-pandemic levels as 
the U.S. saw a 9 percent overall decrease in CLABSI, a 12 percent 
overall decrease in CAUTI and a 16 percent overall decrease in hospital 
onset MRSA bacteremia between 2021 and 2022 in acute care hospital 
settings.\191\
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    \187\ Lastinger LM, Alvarez CR, Kofman A, Konnor RY, Kuhar DT, 
Nkwata A, Patel PR, Pattabiraman V, Xu SY, Dudeck MA. Continued 
increases in the incidence of healthcare-associated infection (HAI) 
during the second year of the coronavirus disease 2019 (COVID-19) 
pandemic. Infect Control Hosp Epidemiol. 2023 Jun;44(6):997-1001. 
doi: 10.1017/ice.2022.116. Epub 2022 May 20. PMID: 35591782; PMCID: 
PMC9237489.
    \188\ Patel, PR, Weiner-Lastinger, LM, Dudeck, MA, et al. Impact 
of COVID-19 pandemic on central-line-associated bloodstream 
infections during the early months of 2020, National Healthcare 
Safety Network. Infect Control Hosp Epidemiol 2021. doi: 10.1017/
ice.2021.108.
    \189\ Baker MA, Sands KE, Huang SS, Kleinman K, Septimus EJ, 
Varma N, Blanchard J, Poland RE, Coady MH, Yokoe DS, Fraker S, 
Froman A, Moody J, Goldin L, Isaacs A, Kleja K, Korwek KM, Stelling 
J, Clark A, Platt R, Perlin JB; CDC Prevention Epicenters Program. 
The Impact of Coronavirus Disease 2019 (COVID-19) on Healthcare-
Associated Infections. Clin Infect Dis. 2022 May 30;74(10):1748-
1754. doi: 10.1093/cid/ciab688. PMID: 34370014; PMCID: PMC8385925.
    \190\ Centers for Disease Control and Prevention. (2021). 2021 
National and State Healthcare-Associated Infections Progress Report. 
Available at: https://www.cdc.gov/hai/data/archive/2021-HAI-progress-report.html#2018.
    \191\ Centers for Disease Control and Prevention. (2022). 2022 
National and State Healthcare-Associated Infections Progress Report. 
Available at: https://www.cdc.gov/hai/data/portal/progress-report.html.
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    As healthcare facilities struggled to address the challenges posed 
by the COVID-19 PHE, safety gaps and risks in healthcare delivery were 
illuminated,\192\ revealing a lack of resiliency in the healthcare 
system.193 194 Beyond HAIs, other preventable types of 
patient harm that were brought to the forefront by the COVID-19 PHE 
include occurrences of pressure injuries \195\ and patient falls \196\ 
among hospitalized patients.
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    \192\ Agency for Healthcare Research and Quality. (2021). AHRQ 
PSNet Annual Perspective: Impact of the COVID-19 Pandemic on Patient 
Safety. https://psnet.ahrq.gov/perspective/ahrq-psnet-annual-perspective-impact-covid-19-pandemic-patient-safety.
    \193\ Fleisher, L.A., Schreiber, M.D., Cardo, D., and 
Srinivasan, M.D. (2022). Health care safety during the pandemic and 
beyond--building a system that ensures resilience. N Engl J Med, 
386: 609-611. https://www.nejm.org/doi/full/10.1056/NEJMp2118285.
    \194\ Implications of the COVID-19 pandemic for patient safety: 
a rapid review. Geneva: World Health Organization; 2022. Licence: CC 
BY-NC-SA 3.0 IGO.
    \195\ 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.
    \196\ Dykes, P. C., Curtin-Bowen, M., Lipsitz, S., Franz, C., 
Adelman, J., Adkison, L., Bogaisky, M., Carroll, D., Carter, E., 
Herlihy, L., Lindros, M. E., Ryan, V., Scanlan, M., Walsh, M. A., 
Wien, M., & Bates, D. W. (2023). Cost of Inpatient Falls and Cost-
Benefit Analysis of Implementation of an Evidence-Based Fall 
Prevention Program. JAMA Health Forum, 4(1), e225125. https://doi.org/10.1001/jamahealthforum.2022.5125.

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[[Page 36285]]

    In addition to safety issues illuminated during the COVID-19 PHE, 
two other key patient safety indicators that are worth noting for their 
prevalence are postoperative respiratory failure 197 198 199 
and acute kidney injuries (AKI).200 201
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    \197\ Sabate S., Mazo V., Canet J. (2014). Predicting 
Postoperative Pulmonary Complications: Implications for Outcomes and 
Costs. Case Reports in Anesthesiology. 27(2), 201-209.
    \198\ Rosen, A. K., Loveland, S., Shin, M., Shwartz, M., 
Hanchate, A., Chen, Q., Kaafarani, H. M., & Borzecki, A. (2013). 
Examining the impact of the AHRQ Patient Safety Indicators (PSIs) on 
the Veterans Health Administration: the case of readmissions.Medical 
Care,51(1), 37-44.
    \199\ Lawson E.H., Hall B.L., Louie R., et al. (2013). 
Association Between Occurrence of a Postoperative Complication and 
Readmission: Implications for Quality Improvement and Cost Savings. 
Annals of Surgery, 258(1),10-18.
    \200\ 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.
    \201\ Hoste, E. A., & Schurgers, M. (2008). Epidemiology of 
acute kidney injury: how big is the problem? Critical care medicine, 
36(4 Suppl), S146-S151.
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    While the COVID-19 PHE may have disrupted routine infection control 
practices, these key patient safety indicators nevertheless show the 
importance of addressing gaps in safety in order to save lives, provide 
equitable medical care, and ensure that the U.S. healthcare system is 
resilient enough to withstand future challenges. Now is the time to 
recommit to better safety practices for both patients and healthcare 
workers, establish new protocols, and implement early interventions 
that will save many lives from preventable harms.
    To accomplish these goals, the federal government is taking a 
multi-pronged approach to improve safety and reduce preventable harm to 
patients. The Agency for Healthcare Research and Quality (AHRQ), on 
behalf of HHS, has established the National Action Alliance to Advance 
Patient and Workforce Safety as a public-private collaboration to 
improve both patient and workforce safety.\202\ As described by AHRQ, 
the National Action Alliance is a partnership between HHS and its 
Federal agencies and private stakeholders, including healthcare 
systems, clinicians, allied health professionals, patients, families, 
caregivers, professional societies, patient and workforce safety 
advocates, the digital healthcare sector, health services researchers, 
employers, and payors interested in recommitting the U.S. to advancing 
patient and workforce safety to move toward zero harm in 
healthcare.\203\
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    \202\ AHRQ. (2023). National Action Alliance To Advance Patient 
and Workforce Safety. https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \203\ AHRQ. (2023). National Action Alliance To Advance Patient 
and Workforce Safety. https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
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    In September 2023, the President's Council of Advisors on Science 
and Technology (PCAST) published the ``Report to the President: A 
Transformational Effort on Patient Safety,'' with a call to action to 
renew ``our nation's commitment to improving patient safety.'' \204\ 
The PCAST report put forth the following recommendations as a part of 
the call to action: (1) Establish and maintain Federal leadership for 
the improvement of patient safety as a national priority; (2) Ensure 
that patients receive evidence-based practices for preventing harm and 
addressing risks; (3) Partner with patients and reduce disparities in 
medical errors and adverse outcomes; and (4) Accelerate research and 
deployment of practices, technologies, and exemplar systems of safe 
care.\205\
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    \204\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
    \205\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
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    As part of this national recommitment to safety in healthcare, we 
are promoting the use of safety measures throughout our quality 
programs to identify and measure quality gaps and processes, and to 
make that information transparent and available to the public. 
Effective measurement is paramount to monitoring harm events, 
identifying key gaps, and tracking progress toward safer, more reliable 
care. Within CMS' hospital quality measurement programs, there are a 
number of outcome and process measures in use that capture specific 
conditions or procedures such as the Severe Sepsis and Septic Shock: 
Management Bundle measure, Patient Safety and Adverse Events Composite 
measure, Severe Obstetric Complications electronic clinical quality 
measure (eCQM), and the Safe Use of Opioids--Concurrent Prescribing 
eCQM. While these metrics are important, they are not sufficient by 
themselves to measure and incentivize investment in a resilient safety 
culture or the infrastructure necessary for sustainable high 
performance within the broad and complex domain of patient safety. The 
systems-level approach to patient safety maintains that errors and 
accidents in medical care are a reflection of system-level failures, 
rather than failings on the part of individuals.\206\ There is a strong 
alignment among patient safety experts to shift to a more holistic, 
proactive, systems-based approach to patient 
safety.207 208 209 210 211 212 While each of our existing 
measures address processes and outcomes that encourage providers to 
improve patient safety for specific conditions or related to specific 
treatments, these measures do not address the overall culture in which 
the care is provided. Including a systems-level measure would 
contribute to a culture that improves performance on these individual 
metrics as well as improves safety for all care provided within the 
hospital.
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    \206\ Patient Safety Network. Systems Approach. Agency for 
Healthcare Research and Quality. Published September 7, 2019. 
https://psnet.ahrq.gov/primer/systems-approach.
    \207\ National Patient Safety Foundation. Free from Harm: 
Accelerating Patient Safety Improvement Fifteen Years after To Err 
Is Human. Boston, MA: National Patient Safety Foundation; 2015.
    \208\ Gandhi, T. K., Feeley, D., & Schummers, D. (2020b). Zero 
Harm in Health Care. NEJM Catalyst, 1(2). https://doi.org/10.1056/cat.19.1137.
    \209\ Pronovost, P. Transforming patient safety: A sector-wide 
systems approach. Published January 8, 2015.
    \210\ Frankel A, Haraden C, Federico F, Lenoci-Edwards J. A 
Framework for Safe, Reliable, and Effective Care. White Paper. 
Cambridge, MA: Institute for Healthcare Improvement and Safe & 
Reliable Healthcare; 2017. (Available on https://www.ihi.org/resources/white-papers/framework-safe-reliable-and-effective-care).
    \211\ American College of Healthcare Executives and IHI/NPSF 
Lucian Leape Institute. Leading a Culture of Safety: A Blueprint for 
Success. Boston, MA: American College of Healthcare Executives and 
Institute for Healthcare Improvement; 2017.
    \212\ National Steering Committee for Patient Safety. Safer 
Together: A National Action Plan to Advance Patient Safety. Boston, 
Massachusetts: Institute for Healthcare Improvement; 2020. 
(Available at www.ihi.org/SafetyActionPlan).
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    To drive action and improvements in safety and address this gap in 
systems-level measurement for safety within the Hospital IQR and PCHQR 
Programs, we are proposing the adoption of the Patient Safety 
Structural measure, a new attestation-based measure that assesses 
whether hospitals demonstrate a structure, culture, and leadership 
commitment that prioritize safety. The Patient Safety Structural 
measure includes five complementary domains, each containing a related 
set of statements that aim to capture the most salient, evidenced-
based, structural and cultural elements of safety. This measure is 
intended to be a foundational measure and designed to assess hospital 
implementation of a

[[Page 36286]]

systems-based approach to safety best practices, as demonstrated by: 
leaders who prioritize and champion safety; organizational policies, 
protocols, goals, and metrics reflecting safety as a core value; a 
diverse group of patients and families meaningfully engaged with 
healthcare providers as partners in safety; practices indicative of a 
culture of safety; accountability and transparency in addressing 
adverse events; and continuous learning and improvement. This Patient 
Safety Structural measure is informed by the PCAST recommendations, 
Safer Together: The National Action Plan to Advance Patient 
Safety,\213\ developed by the National Steering Committee for Patient 
Safety convened by the Institute for Healthcare Improvement (IHI), as 
well as scientific evidence from existing patient safety literature, 
and detailed input from patient safety experts, advocates, and 
patients. Combining this leadership level structural measure with other 
high priority safety outcome measures would result in a robust and 
complementary patient safety measure set.
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    \213\ National Steering Committee for Patient Safety. Safer 
Together: A National Action Plan to Advance Patient Safety. Boston, 
Massachusetts: Institute for Healthcare Improvement; 2020.
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    We note that other safety measure adoption proposals in this FY 
2025 IPPS/LTCH PPS proposed rule complement the goals we have outlined 
for the Patient Safety Structural measure. Interested parties are 
encouraged to review our proposals to adopt measures for Hospital 
Harm--Falls with Injury (section IX.C.5.c of the preamble of this 
proposed rule), Hospital Harm--Postoperative Respiratory Failure 
(section IX.C.5.b of the preamble of this proposed rule), and the 
adoption of two healthcare-associated infection measures (section 
IX.C.5.d of the preamble of this proposed rule).
b. Measure Alignment to Strategy
    In addition to the other Federal safety initiatives noted 
previously, this measure also aligns with the CMS National Quality 
Strategy. Specifically, the CMS National Quality Strategy identifies 
four priority areas and eight goals, each with an identified objective, 
success target, and initial action steps for advancing a ``high-
quality, safe, equitable, and resilient health care system for all 
individuals.'' \214\ The Patient Safety Structural measure addresses 
the priority area Safety and Resiliency, and aligns with the goals to 
enable a responsive and resilient healthcare system to improve quality 
and to achieve zero preventable harm. For example, attestation 
statements within the measure require hospitals to confirm if their 
strategic plan includes publicly sharing their commitment to patient 
safety as a core value and outlines specific safety goals and 
associated metrics, including the goal of ``zero preventable harm.''
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    \214\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy Handout. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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    This measure aligns with our efforts under the CMS National Quality 
Strategy's goal of advancing equity and whole-person care.\215\ As 
stated in the measure attestation under Domain 2: Strategic Planning & 
Organizational Policy (see Table VIII.B.1-01 of this proposed rule), 
``Patient safety and equity in care are inextricable, and therefore 
equity, with the goal of safety for all individuals, must be embedded 
in safety planning, goal-setting, policy and processes.'' This measure 
furthers a patient-centered approach by promoting conversations on 
equity among hospital staff, leadership, and patients and caregivers 
that take into account the diverse communities served by participants 
in CMS programs and the particular needs of each hospital's own 
community.
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    \215\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy Handout. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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    The measure also aligns with our 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.\216\ 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.\217\ The Patient Safety 
Structural measure supports these efforts and is aligned with the 
Meaningful Measures Area of ``Safety'' and the Meaningful Measures 2.0 
goal to ``Ensure Safe and Resilient Health Care Systems.'' This measure 
also supports the Meaningful Measures 2.0 priority to ``promote a 
safety culture within a health care organization.'' This attestation 
measure focused on patient safety policies, processes, and activities 
aims to help hospitals better understand priorities for improving 
safety and serve as a prompt for action to invest in the infrastructure 
and safety culture necessary to reduce preventable harm to patients. 
When measure results are made public, patients and families would be 
able to make informed decisions on what facilities are best for them.
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    \216\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Framework. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20.
    \217\ Centers for Medicare & Medicaid Services. (2021). 
Meaningful Measures 2.0: Moving from Measure Reduction to 
Modernization. Available at: https://www.cms.gov/meaningful-measures-20-moving-measure-reduction-modernization. We note that 
Meaningful Measures 2.0 is still under development.
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c. Pre-Rulemaking Process and Measure Endorsement
    As required under section 1890A of the Act, the Consensus-Based 
Entity (CBE), currently Battelle, established the Partnership for 
Quality Measurement (PQM) to convene members comprised of clinicians, 
patients, measure experts, and health information technology 
specialists, to participate in the pre-rulemaking process and the 
measure endorsement process. The pre-rulemaking process, which we refer 
to as the Pre-Rulemaking Measure Review (PRMR), includes a review of 
measures published on the publicly available list of Measures Under 
Consideration (MUC List),218 219 by one of several 
committees convened by the PQM, for the purpose of providing multi-
stakeholder input to the Secretary on the selection of quality and 
efficiency measures under consideration for use in certain Medicare 
quality programs, including the PCHQR and Hospital IQR Programs. The 
PRMR process includes opportunities for public comment through a 21-day 
public comment period, as well as public listening sessions. The PQM 
posts the compiled comments and listening session inputs received 
during the public comment period and the listening sessions within 5 
days of the close of the public comment period. More details regarding 
the PRMR process may be found in the PQM Guidebook of Policies and 
Procedures for Pre-Rulemaking Measure Review and Measure Set Review, 
including details of the measure review processes in Chapter 3.
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    \218\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \219\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.

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    The CBE-established PQM also conducts the measure endorsement and 
maintenance (E&M) process to ensure a measure submitted for endorsement 
is evidence-based, reliable, valid, verifiable, relevant to enhanced 
health outcomes, actionable at the caregiver level, feasible to collect 
and report, and responsive to variations in patient characteristics--
such as health status, language capabilities, race or ethnicity, and 
income level--and is consistent across types of health care providers, 
including hospitals and physicians (see section 1890(b)(2) of the Act). 
The PQM convenes several E&M project groups twice yearly, formally 
called the E&M Committees, each comprised of an E&M Advisory Group and 
an E&M Recommendations Group, to vote on whether a measure meets 
certain quality measure criteria. More details regarding the E&M 
process may be found in the PQM Endorsement and Maintenance (E&M) 
Guidebook, including details of the measure endorsement process in the 
section titled, ``Endorsement and Review Process.''
    For the voting procedures of the PRMR and E&M processes, the PQM 
utilizes the Novel Hybrid Delphi and Nominal Group (NHDNG) multi-step 
process, which is an iterative consensus-building approach aimed at a 
minimum of 75 percent agreement among voting members, rather than a 
simple majority vote, and supports maximizing the time spent to build 
consensus by focusing discussion on measures where there is 
disagreement. For example, the PRMR Hospital Recommendation Group can 
reach consensus and have the following voting results: (A) Recommend, 
(B) Recommend with conditions (with 75 percent of the votes casted as 
recommend with conditions or 75 percent between recommend and recommend 
with conditions), and (C) Do not recommend. If no voting category 
reaches 75 percent or greater (including the combined [A] recommend and 
[B] recommend with conditions), the PRMR Hospital Recommendation Group 
did not come to consensus and the voting result is `Consensus not 
reached.' Consensus not reached signals continued disagreement amongst 
the committee despite being presented with perspectives from public 
comment, committee member feedback and discussion, and highlights the 
multi-faceted assessments of quality measures. More details regarding 
the PRMR voting procedures may be found in Chapter 4 of the PQM 
Guidebook of Policies and Procedures for Pre-Rulemaking Measure Review 
and Measure Set Review. More details regarding the E&M voting 
procedures may be found in the PQM Endorsement and Maintenance (E&M) 
Guidebook.
(1) Recommendation From the Pre-Rulemaking and Measure Review Process
    As part of the PRMR process, the PRMR Hospital Recommendation Group 
reviewed the Patient Safety Structural measure (MUC2023-188) during a 
meeting on January 18 and 19, 2024. The Patient Safety Structural 
measure was included for consideration in the Hospital IQR and PCHQR 
Programs on the publicly available ``2023 Measures Under Consideration 
List'' (MUC List).\220\
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    \220\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
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    The voting results of the PRMR Hospital Recommendation Group for 
the Patient Safety Structural measure for the Hospital IQR Program 
were: eight members of the group recommended adopting the measure into 
the Hospital IQR Program without conditions; five members recommended 
adoption with conditions; three committee members voted not to 
recommend the measure for adoption. Additionally, nine members of the 
group recommended adopting the measure into the PCHQR Program without 
conditions; four members recommended adoption with conditions; three 
committee members voted not to recommend the measure for adoption. 
Taken together, 81.3 percent of the votes were recommended with 
conditions for each program. Thus, the committee reached consensus and 
recommended the Patient Safety Structural measure for the Hospital IQR 
Program and the PCHQR Program with conditions.
    As mentioned previously, five members of the voting committee 
recommended the adoption of this measure into the Hospital IQR Program 
with conditions and four members of the voting committee recommended 
the adoption of this measure into the PCHQR Program with conditions. 
Those conditions were: the publication of an implementation guide that 
clearly documents how safety is to be measured; and using data to 
narrow the scope before approving the measure for programs. An 
attestation guide will be available at the time of the publication of 
this proposal. Data obtained from the measure's national use would 
allow us to evaluate the effectiveness of, and the potential to narrow 
the future scope of, the proposed attestations. Therefore, we are 
proposing this measure for adoption because we have adequately 
addressed the conditions raised by the PRMR Hospital Recommendations 
Group.
    In addition to the formal voting results on the adoption of the 
Patient Safety Structural measure, we note that the majority of public 
comments received on this measure during the PRMR process were 
supportive, with 91 out of 97 public comments (94%) either supporting 
(81) adoption or supporting adoption with conditions (10). Comments in 
support of this proposal included the need for a zero preventable harm 
goal, robust hospital leadership, developing trust through 
transparency, and the involvement of patients and their families in 
safety work. We thank the large number of patients, family members, and 
other interested parties who publicly participated in the PRMR process.
(2) Endorsement and Measure Review
    We are proposing to adopt this measure into the Hospital IQR 
Program and the PCHQR Program despite the measure not being endorsed by 
the CBE. Section 1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that 
each measure 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, and section 1866(k)(3)(A) of the Act imposes the same 
requirement for measures specified for use in the PCHQR Program. 
Sections 1886(b)(3)(B)(viii)(IX)(bb) and 1866(k)(3)(B) of the Act 
state, however, 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 a 
measure that has been endorsed or adopted by a consensus organization 
identified by the Secretary.
    We reviewed measures endorsed by both the CBE which currently holds 
the contract under section 1890(a) of the Act and measures endorsed by 
the entity which formerly held that contract and were unable to 
identify any other CBE-endorsed measures on strategies and practices to 
strengthen hospitals' systems and culture for safety. In light of the 
lack of endorsed measures on this specified area or medical topic, we 
have determined that it would be appropriate to use a measure that is 
not endorsed by the CBE. This measure is relevant to enhanced health 
outcomes. As described in the background section for this measure 
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[[Page 36288]]

adverse events occur frequently and lead to adverse patient outcomes. 
This measure is designed to identify hospitals that practice a system-
based approach to safety and embrace the importance of a safety 
culture. Demonstrating a structure, culture, and leadership commitment 
that prioritizes safety can improve care and outcomes for all 
patients.\221\ The validity, feasibility and relevance of the measure 
have been thoroughly vetted by a Technical Expert Panel (TEP) convened 
by a CMS contractor and comprised of thought leaders in the field.\222\ 
In response to the question of whether the domains capture the most 
important elements for advancing patient safety, most TEP members 
agreed that they do.\223\ Furthermore, the measure developers engaged 
the members of the TEP for their operational and clinical expertise to 
assure that each domain was actionable and measurable.\224\ As noted, 
the PRMR Hospital Committee received a total of 91 public comments 
expressing support for the Patient Safety Structural measure.\225\ Most 
commenters were patients and family members who described their 
individual experiences with the medical system and preventable harms to 
which they were exposed. These commenters then emphasized the 
importance of the Patient Safety Structural measure's intent and 
domains for improving patient safety related to these experiences.\226\ 
Due to the rigorous alignment with patient safety guidelines and 
literature as noted within the Background section of this proposal, as 
well as strong support from expert stakeholders, patients, and 
caregivers as noted above, we are confident that the foundational 
principles are sound, and the specifications are attainable, 
measurable, and actionable. We intend to submit the measure for future 
CBE endorsement.
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    \221\ DiCuccio MH. The Relationship Between Patient Safety 
Culture and Patient Outcomes: A Systematic Review. J Patient Saf. 
2015;11(3):135-42. doi:10.1097/PTS.0000000000000058.
    \222\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation. Summary of Technical Expert Panel 
(TEP) Meetings Patient Safety Structural Measure (PSSM). Available 
at: https://mmshub.cms.gov/sites/default/files/PSSM-TEP-Summary-Report-202306.pdf.
    \223\ ibid.
    \224\ ibid.
    \225\ Battelle--Partnership for Quality Measurement. Compiled 
MUC List Public Comment Posting. Available at: https://p4qm.org/sites/default/files/2024-01/Compiled-MUC-List-Public-Comment-Posting.xlsx.
    \226\ Battelle--Partnership for Quality Measurement. 2023 
Measures Under Consideration Public Comment Summary Hospital 
Committee. Available at: https://p4qm.org/sites/default/files/2024-01/PRMR-Hospital-Public-Comments-Final-Summary.pdf.
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d. Measure Overview
    The Patient Safety Structural measure is a structural measure 
developed to assess how well hospitals have implemented strategies and 
practices to strengthen their systems and culture for safety. The 
Patient Safety Structural measure comprises a set of complementary 
statements (or, attestations) that aim to capture the most salient, 
systems-oriented actions to advance safety. These statements should 
exemplify a culture of safety and leadership commitment to 
transparency, accountability, patient and family engagement, and 
continuous learning and improvement. Table IX.B.1-01 includes the five 
attestation domains and the corresponding attestation statements.
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e. Measure Calculation
    The Patient Safety Structural measure consists of five domains, 
each representing a complementary but separate safety commitment. Each 
of the five domains include five related attestation statements. 
Hospitals would need to evaluate and determine whether they can 
affirmatively attest to each domain. For a hospital to affirmatively 
attest to a domain, and receive a point for that domain, a hospital 
would evaluate and determine whether it engaged in each of the 
statements that comprise the domain (see Table IX.B.1-01), for a total 
of five possible points (one point per domain). A hospital would not be 
able to receive partial points for a domain.
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    \227\ Centers for Medicare & Medicaid Services, Patient Safety 
Structural Measure Attestation Guide, version 1.0, available at 
both: https://qualitynet.com.gov/inpatient/iqr/proposedmeasures and 
https://qualitynet.com.gov/pch/pchqr/proposedmeasures. We note that 
examples provided in this guide are for illustrative purposes.
    \228\ A just culture is defined by the Agency for Healthcare 
Research and Quality as a system that holds itself accountable, 
holds staff members accountable, and has staff members that hold 
themselves accountable. (The CUSP Method. https://www.ahrq.gov/hai/cusp/index.html.)
    \229\ Agency for Healthcare Research and Quality. (2019, 
September 7). Root Cause Analysis. https://psnet.ahrq.gov/primer/root-cause-analysis.
    \230\ Agency for Healthcare Research and Quality. Federally-
Listed Patient Safety Organizations (PSOs). Retrieved January 5, 
2024, from https://pso.ahrq.gov/pso/listed?f%5B0%5D=resources_provided%3A2.
    \231\ Agency for Healthcare Research and Quality. (2022). 
Communication and Optimal Resolution (CANDOR). https://www.ahrq.gov/patient-safety/settings/hospital/candor/index.html.
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    For example, for Domain 2 (``Strategic Planning & Organizational 
Policy''), a hospital would evaluate and determine whether it meets the 
statements related to its strategic plan (Statement A), its safety 
goals (Statement B), policies and protocols for a just culture 
(Statement C), a patient safety curriculum and competencies for all 
hospital staff (Statement D), and an action plan for workforce safety 
(Statement E) (see Table IX.B.1-01). If its plan meets all five of 
these statements, the hospital would attest ``yes'' to each of the 5 
attestation statements and would receive one point for Domain 2. If, 
for example, its plan only meets Statement A and Statement B, but does 
not meet Statement C, Statement D, and Statement E, the hospital would 
attest ``yes'' to Statement A and Statement B, attest ``no'' to 
Statement C, Statement D, and Statement E, and receive zero points for 
Domain 2. The hospital's overall score for the Patient Safety 
Structural measure can range from a total of zero to five points. If a 
hospital is comprised of more than one acute care hospital facility 
under one CCN, all such facilities reporting under the same CCN would 
need to satisfy these criteria in order for the hospital to 
affirmatively attest and receive points.
    For more details on the measure specifications and the attestation 
guide for the Hospital IQR Program, we refer readers to the Proposed 
Measures tab under the IQR Measures page on QualityNet at: https://qualitynet.com.gov/inpatient/iqr/proposedmeasures. For more details on 
the measure specifications for the PCHQR Program, we refer readers to 
the CMS Measures Inventory Tool (CMIT) with the file name ``Patient 
Safety Structural Measure'' at: https://cmit.cms.gov/cmit/#/.
f. Data Submission and Reporting
    We are proposing that hospitals would be required to submit 
information for the Patient Safety Structural measure once annually 
using the data submission and reporting standard procedures set forth 
by the CDC for the National Healthcare Safety Network (NHSN). 
Presently, hospitals report measure data to the CDC NHSN on a monthly 
or quarterly basis, depending on the measure. Under the data submission 
and reporting process for the Patient Safety Structural measure, 
hospitals would be required to submit data once annually. We refer 
readers to the CDC's NHSN website (https://www.cdc.gov/nhsn/index.html) 
for data submission and reporting procedures; information more specific 
to the Patient Safety Structural measure will be available through NHSN 
should this proposal be finalized. We refer readers to sections IX.C.9. 
and IX.D.4 of the preamble of this proposed rule for more details on 
our previously finalized data submission and deadline requirements for 
structural measures in the Hospital IQR Program and PCHQR Program, 
respectively. We further refer readers to sections IX.C.9. and IX.D.4 
of the preamble of this proposed rule for more details on our 
previously finalized data submission requirements for measures 
submitted via the CDC NHSN in the Hospital IQR Program and

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PCHQR Program, respectively. We propose to adopt the Patient Safety 
Structural measure in the Hospital IQR Program beginning with the CY 
2025 reporting period/FY 2027 payment determination and the PCHQR 
Program beginning with the CY 2025 reporting period/FY 2027 program 
year. Hospitals participating in the Hospital IQR Program and the PCHQR 
Program would satisfy their reporting requirement for the measure as 
long as they attest ``yes'' or ``no'' to each attestation statement in 
all five domains.
    We are proposing to publicly report the hospital's measure 
performance score, which would range from 0 to 5 points, on an annual 
basis on Care Compare beginning in fall 2026 and on the Provider Data 
Catalog available at data.cms.gov for the PCHQR Program beginning in 
fall 2026.
    We invite public comment on this proposal.
2. Proposal To Modify the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure Beginning With the CY 
2025 Reporting Period/FY 2027 Payment Determination for the Hospital 
IQR Program, the CY 2025 Reporting Period/FY 2027 Program Year for the 
PCHQR Program, and the FY 2030 Program Year for the Hospital VBP 
Program
a. Background
    We refer readers to the FY 2024 IPPS/LTCH PPS final rule for our 
most recent updates to HCAHPS survey administration requirements and 
additional background information for the Hospital VBP Program, the 
Hospital IQR Program, and the PCHQR Program (88 FR 59083 through 59089, 
88 FR 59196 through 59201, and 88 FR 59229 through 59232, 
respectively). For more details including information about patient 
eligibility for the HCAHPS Survey, please refer to the current HCAHPS 
Quality Assurance Guidelines, which can be found on the official HCAHPS 
website at: https://hcahpsonline.org/en/quality-assurance/.
    The HCAHPS Survey measure (CBE #0166) asks recently discharged 
patients questions about aspects of their hospital inpatient experience 
that they are uniquely suited to respond to. The HCAHPS Survey as a 
whole is termed as a single ``measure'' for purposes of the Hospital 
IQR, PCHQR, and Hospital VBP Programs. We refer to the elements of the 
HCAHPS Survey that are publicly reported as ``sub-measures'' and to the 
questions within each sub-measure as survey ``questions,'' for the 
Hospital IQR and PCHQR Programs. Sub-measures are comprised of one, 
two, or three survey questions. For example, the sub-measure, ``Overall 
Hospital Rating,'' consists of one survey question and the sub-measure 
``Communication with Nurses'' consists of three survey questions. In 
the Hospital VBP Program, the sub-measures of the HCAHPS Survey are 
referred to as ``dimensions.'' We refer readers to the HCAHPS On-Line 
website, www.HCAHPSonline.org, for a map of each question on the HCAHPS 
Survey and its sub-measures.
    The current HCAHPS Survey measure consists of 29 survey questions 
that are organized into ten sub-measures in the Hospital IQR and PCHQR 
Programs, including 19 questions that ask ``how often'' or whether 
patients experienced a critical aspect of hospital care, rather than 
whether they were ``satisfied'' with their care. The current survey 
also includes three screener questions that direct patients to relevant 
questions, five questions to adjust for the mix of patients across 
hospitals, and two questions (race and ethnicity) that support 
Congressionally mandated reports outlined in the Healthcare Research 
and Quality Act of 1999.232 233 These components of the 
survey are used to construct the ten publicly reported HCAHPS Survey 
sub-measures in the Hospital IQR and PCHQR Programs. The survey 
questions are organized into eight dimensions in the Person and 
Community Engagement Domain for the Hospital VBP Program. We note that 
the Hospital VBP Program uses 8 dimensions while the Hospital IQR and 
PCHQR Programs use 10 sub-measures because ``Cleanliness'' and 
``Quietness'' have been combined as a single dimension in the Hospital 
VBP Program for scoring purposes and the ``Recommend Hospital'' sub-
measure is not included in the Hospital VBP Program. The rationale for 
combining these elements of the survey is described further in section 
IX.B.2.g(3) of the preamble of this proposed rule and can be found in 
the Hospital Inpatient VBP Program final rule (76 FR 26497 through 
26526). The current HCAHPS Survey can be found at https://hcahpsonline.org/en/survey-instruments/.
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    \232\ Library of Congress. Healthcare Research and Quality Act 
of 1999, Public Law 106-129, 113 Stat. 1653. Available at: https://www.congress.gov/106/plaws/publ129/PLAW-106publ129.pdf.
    \233\ Agency for Healthcare Research and Quality. (2023) 2023 
National Healthcare Quality and Disparities Report. Available at: 
https://www.ahrq.gov/research/findings/nhqrdr/nhqdr23/index.html.
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b. Overview of Proposal To Modify the HCAHPS Survey Measure
    The proposed updated HCAHPS Survey would result in a survey with 32 
questions that make up a total of 11 sub-measures, with seven of those 
sub-measures being multi-question sub-measures and the other four sub-
measures being single-question sub-measures. Four of the multi-question 
sub-measures and three of the single-question sub-measures in the 
updated version of the HCAHPS Survey would remain unchanged from those 
that are in the current version of the HCAHPS Survey. We outline the 
specific updates below. We are proposing to adopt the updated HCAHPS 
Survey for the Hospital IQR and PCHQR Programs in section IX.B.2.e of 
the preamble of this proposed rule. The updates would result in the 
ability to use nine dimensions for the Hospital VBP Program, and we are 
proposing to adopt those updates in the Hospital VBP Program in section 
IX.B.2.g of the preamble of this proposed rule.
    We identified the need for the updates to the HCAHPS Survey through 
focus groups and cognitive interviews with patients and caregivers, 
discussions with technical experts, and literature reviews that were 
conducted by a CMS contractor who made recommendations to CMS. A 
literature scan was used to compile and review items from existing 
surveys, focusing on topics not covered in the current HCAHPS Survey. 
CMS, patient, and provider stakeholders reviewed the questions 
identified through the scan. Four patient focus groups were conducted 
to assign importance to and inform the further development of potential 
new questions, while also refining existing questions. This replicates 
the approach taken during the original development of the HCAHPS 
Survey. The focus groups included people with both planned and 
unplanned hospital stays, a variety of racial and ethnic groups, and 
both older and younger adults. The focus groups used both an 
exploratory and confirmatory approach to explore new topics and confirm 
the topics we had identified through the survey literature. The group 
discussion explored what it means to have a quality patient experience 
and what participants thought of their hospital stay--what went well 
and what went poorly. Group discussions were conducted in English and 
Spanish.
    The findings from the focus group informed the development of the 
updates to the HCAHPS Survey questions, including the newly developed 
questions that were tested in

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cognitive interviews. Cognitive interviews were also conducted in 
English and in Spanish. Lastly, a CMS contractor also conducted a 
technical expert panel that provided feedback on the current survey 
content and the new content areas.
    We have determined that adopting the proposed updated version of 
the HCAHPS Survey measure would amount to a minimal change in burden 
because the combination of removals and additions of survey questions 
would result in only an additional 45 seconds to complete the survey. 
The time required to complete the 32-question survey is estimated to 
average eight minutes. Additionally, prior to the removal of the 
``Communication About Pain'' questions in the CY 2019 OPPS/ASC final 
rule (83 FR 59140 through 59149), the HCAHPS Survey previously included 
32 questions. We refer readers to sections XII.B.4, XII.B.6, and 
XII.B.7 of the preamble of this proposed rule for more information on 
our estimated changes to the information collection burden.
    The proposed adoption of the updated version of the HCAHPS Survey 
measure would not result in any changes to the survey administration, 
the data submission and reporting requirements, or the data collection 
protocols. The proposed updated version of the HCAHPS Survey measure 
includes three new sub-measures: the multi-item ``Care Coordination'' 
sub-measure, the multi-item ``Restfulness of Hospital Environment'' 
sub-measure, and the ``Information About Symptoms'' single-item sub-
measure. The updated HCAHPS Survey measure also removes the existing 
``Care Transition'' sub-measure and modifies the existing 
``Responsiveness of Hospital Staff'' sub-measure. The seven new 
questions are as follows:
     During this hospital stay, how often were doctors, nurses 
and other hospital staff informed and up-to-date about your care?
     During this hospital stay, how often did doctors, nurses 
and other hospital staff work well together to care for you?
     Did doctors, nurses or other hospital staff work with you 
and your family or caregiver in making plans for your care after you 
left the hospital?
     During this hospital stay, how often were you able to get 
the rest you needed?
     During this hospital stay, did doctors, nurses and other 
hospital staff help you to rest and recover?
     During this hospital stay, when you asked for help right 
away, how often did you get help as soon as you needed?
     During this hospital stay, did doctors, nurses or other 
hospital staff give your family or caregiver enough information about 
what symptoms or health problems to watch for after you left the 
hospital?
    As discussed more fully below, these new questions address aspects 
of hospital care identified by patients and then tested in the 2021 
HCAHPS Survey large-scale mode experiment described in the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59196 through 59197) as important to 
measuring the quality of hospital care.
    The proposed updated HCAHPS Survey measure would no longer include 
the following four questions:
     During this hospital stay, after you pressed the call 
button, how often did you get help as soon as you wanted it?
     During this hospital stay, staff took my preferences and 
those of my family or caregiver into account in deciding what my health 
care needs would be when I left.
     When I left the hospital, I had a good understanding of 
the things I was responsible for in managing my health.
     When I left the hospital, I clearly understood the purpose 
for taking each of my medications.
    In the updated HCAHPS Survey measure, the question on the use of 
the call button is removed in response to hospital input indicating 
that call buttons have been replaced by other mechanisms (such as a 
direct phone line). The other questions are removed because they do not 
follow standard Consumer Assessment of Healthcare Providers & Systems 
(CAHPS) question wording and were perceived as duplicative of existing 
and new survey questions by the patients who participated in our 
content testing.
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    We refer hospitals and HCAHPS Survey vendors to the official HCAHPS 
website at https://www.hcahpsonline.org for information regarding the 
HCAHPS Survey, its administration, oversight, and data adjustments. 
Detailed information on current HCAHPS Survey data collection protocols 
can be found in the HCAHPS Quality Assurance Guidelines, located at: 
https://www.hcahpsonline.org/en/quality-assurance/. The Quality 
Assurance Guidelines for the proposed updated HCAHPS Survey measure 
will be available in May 2024 at the official HCAHPS website.
c. Measure Alignment to Strategy
    The HCAHPS Survey produces systematic, standardized, and comparable 
information about patients' experience of hospital care and promotes 
person-centered care. We have identified that patient experience 
measures, including the HCAHPS Survey, are foundational metrics, known 
as the Universal Foundation of quality measures. The Universal 
Foundation is intended to focus provider attention, reduce burden, 
identify disparities in care, prioritize development of interoperable, 
digital quality measures, allow for cross-comparisons across programs, 
and help identify measurement gaps.\234\ One of the goals of the 
National Quality Strategy \235\ is to foster engagement and to bring 
the voices of patients to the forefront. As part of fostering 
engagement, we believe it is critical to hear the voices of individuals 
by obtaining feedback directly from patients on hospital performance 
and to incorporate their feedback as part of our comprehensive approach 
to quality.
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    \234\ Centers for Medicare & Medicaid Services (2023) Aligning 
Quality Measures Across CMS--the Universal Foundation. Available at: 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
    \235\ Centers for Medicare and Medicaid Services. (2024) CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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d. Pre-Rulemaking Process and Measure Endorsement
(1) Recommendation From Pre-Rulemaking and Measure Review Process
    We refer readers to section IX.B.1.c of the preamble of this 
proposed rule for details on the Pre-Rulemaking Measure Review (PRMR) 
process including the voting procedures the PRMR process uses to reach 
consensus on measure recommendations. The PRMR Hospital Committee, 
comprised of the PRMR Hospital Advisory Group and PRMR Hospital 
Recommendation Group, reviewed the proposed updated version of the 
HCAHPS Survey measure. The PRMR Hospital Recommendation Group reviewed 
the proposed updated HCAHPS Survey measure (MUC2023-146, 147, 148, 149) 
during a meeting on January 18-19, 2024, to vote on a recommendation 
with regard to use of

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this measure for the PCHQR, Hospital IQR, and Hospital VBP Programs.
    The PRMR Hospital Recommendation Group reached consensus for each 
of the three programs. For each program, they recommended the updates 
to the HCAHPS Survey measure with conditions.\236\ The voting results 
of the PRMR Hospital Recommendation Group for the proposed updates to 
the HCAHPS Survey within the Hospital IQR Program were: nine members of 
the group recommended adopting the updates without conditions; eight 
members recommended adoption with conditions; and two committee members 
voted not to recommend the updates for adoption. Taken together, 89.5 
percent of the votes were between ``recommend'' and ``recommend with 
conditions.'' Thus, the committee reached consensus and recommended the 
updates to the HCAHPS Survey measure within the Hospital IQR Program 
with conditions.
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    \236\ Battelle--Partnership for Quality Measurement. (2024). 
Pre-Rulemaking Measure Review Measures Under Consideration 2023 
Recommendations Report. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final.pdf.
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    The voting results of the PRMR Hospital Recommendation Group for 
the proposed updates to the HCAHPS Survey within the Hospital VBP 
Program were: ten members of the group recommended adopting the updates 
without conditions; seven members recommended adoption with conditions; 
and two committee members voted not to recommend the updates for 
adoption. Taken together, 89.5 percent of the votes were between 
``recommend'' and ``recommend with conditions.'' Thus, the committee 
reached consensus and recommended the updates to the HCAHPS Survey 
measure within the Hospital VBP Program with conditions.
    The voting results of the PRMR Hospital Recommendation Group for 
the proposed updates to the HCAHPS Survey within the PCHQR Program 
were: eleven members of the group recommended adopting the updates 
without conditions; six members recommended adoption with conditions; 
and two committee members voted not to recommend the updates for 
adoption. Taken together, 89.5 percent of the votes were between 
``recommend'' and ``recommend with conditions.'' Thus, the committee 
reached consensus and recommended the updates to the HCAHPS Survey 
measure within the PCHQR Program with conditions.
    The conditions that the committee recommended for all three 
programs were: CBE endorsement; consideration should be given to not 
extending the survey length and removal of overlapping items; use of 
adaptive questions in computerized administration to minimize items; 
and use of a mechanism to monitor trends in performance data over time.
    We have taken these conditions into account and are proposing to 
adopt the updated HCAHPS Survey measure in all three programs in a 
manner that addresses the conditions raised by the committee. As noted 
in section IX.B.2.b of the preamble of this proposed rule and in 
response to the committee's condition that consideration be given to 
not extending the survey length, we note that the updated HCAHPS Survey 
measure would result in only an additional 45 seconds to complete the 
survey. We have estimated that the total time required to complete the 
32-question survey is, on average, eight minutes. Additionally, in 
response to the committee's condition that consideration be given to 
removing overlapping items, we note that similar or overlapping 
questions were identified and considered for removal during the 
development and testing of the updated HCAHPS Survey measure, as 
described further in section IX.B.2.b of the preamble of this proposed 
rule. By developing items with patients' and caregivers' input and then 
empirically testing the new questions, we have ensured that the 
questions proposed in the updated HCAHPS Survey add unique, non-
redundant information about key aspects of patient experience of 
care.\237\ The committee also raised the condition that the survey use 
adaptive questions in computerized administration to minimize items. 
However, we note that adaptive questions in computerized administration 
would be infeasible in the mail mode of the HCAHPS Survey. Since all 
modes of survey administration that are available for the updated 
HCAHPS Survey (Mail Only, Phone Only, Mail-Phone, Web-Mail, Web-Phone, 
and Web-Mail-Phone) must be parallel, adaptive questions in 
computerized modes would not be appropriate for this measure at this 
time. We will take this feedback into consideration for any future 
potential changes to survey administration. In response to the 
committee's condition that a mechanism to monitor trends in performance 
data over time be used, we note that as part of administering each of 
these quality programs, we regularly monitor and evaluate hospitals' 
performance data trends. We would continually monitor these trends in 
performance with the updated HCAHPS Survey. We address the committee's 
condition of CBE endorsement in the following section.
---------------------------------------------------------------------------

    \237\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(2) Measure Endorsement
    We refer readers to section IX.B.1.c of the preamble of this 
proposed rule for details on the endorsement and maintenance (E&M) 
process including the measure evaluation procedures the CBE's E&M 
Committees use to evaluate measures and whether they meet endorsement 
criteria. The HCAHPS Survey was first endorsed in 2005 by the former 
CBE, the National Quality Forum. The former CBE renewed its endorsement 
of the current HCAHPS Survey in 2009, 2015, and 2019. The current 
HCAHPS Survey measure was most recently submitted to the CBE for 
maintenance endorsement review in the Spring 2019 cycle (CBE #0166) and 
was endorsed on October 25, 2019.\238\ We note that the HCAHPS Survey 
measure remains an endorsed measure, and we intend to submit the 
updated HCAHPS Survey to the current CBE for endorsement in Fall 2025. 
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 
have determined that the updates to the HCAHPS Survey measure are 
appropriately specified. The HCAHPS Survey measure remains endorsed, 
and the updated survey only modifies some of the questions and sub-
measures within the survey. The HCAHPS Survey is designed to produce 
standardized information about patients' perspectives of care that 
allow objective and meaningful comparisons of hospitals on topics that 
are important to consumers, and these updates will improve the feedback 
we receive directly from patients on hospital performance. Therefore, 
we have determined it would be appropriate to propose to adopt these

[[Page 36298]]

updates to the measure before the updates receive CBE endorsement.
---------------------------------------------------------------------------

    \238\ Battelle--Partnership for Quality Measurement. HCAHPS 
(Hospital Consumer Assessment of Healthcare Providers and Systems) 
Survey. Available at: https://p4qm.org/measures/0166.
---------------------------------------------------------------------------

e. Proposal To Modify the HCAHPS Survey Measure for the Hospital IQR 
Program Beginning With the CY 2025 Reporting Period/FY 2027 Payment 
Determination and the PCHQR Program Beginning With the CY 2025 
Reporting Period/FY 2027 Program Year
    We are proposing to update the current HCAHPS Survey measure in the 
Hospital IQR and PCHQR Programs by adding three new sub-measures:

 ``Care Coordination'' sub-measure
 ``Restfulness of Hospital Environment'' sub-measure
 ``Information About Symptoms'' sub-measure

    The updates also remove the existing ``Care Transition'' sub-
measure and modify the existing ``Responsiveness of Hospital Staff'' 
sub-measure. The new ``Care Coordination'' sub-measure encompasses and 
broadens the current ``Care Transition'' sub-measure and the new 
questions in the ``Care Coordination'' sub-measure are more congruent 
with the other survey questions. The updated measure replaces one of 
the two survey questions in the current ``Responsiveness of Hospital 
Staff'' sub-measure with a new survey question that strengthens this 
sub-measure. The proposed updates to the HCAHPS Survey measure are 
detailed in section IX.B.2.b of the preamble of this proposed rule and 
we refer readers to the HCAHPS website at https://www.hcahpsonline.org 
for further details.
    We propose that the updated HCAHPS Survey measure would be 
implemented in the Hospital IQR and PCHQR Programs beginning with 
patients discharged on January 1, 2025. Reporting of responses from the 
updated HCAHPS Survey measure for patients discharged between January 
1, 2025 and December 31, 2025 would be used for the CY 2025 reporting 
period/FY 2027 payment determination for the Hospital IQR Program and 
for the CY 2025 reporting period/FY 2027 program year for the PCHQR 
Program. HCAHPS Survey sub-measures are publicly reported on a CMS 
website quarterly on a rolling basis, with the oldest quarter of data 
rolled off, and the most recent quarter rolled on with each refresh. As 
such, there would be a period during which some quarters of reporting 
data come from the current version of the HCAHPS Survey measure, and 
others come from the updated HCAHPS Survey measure. Through this time 
period, publicly reported HCAHPS Survey data for the Hospital IQR and 
PCHQR Programs would consist only of data from the eight unchanged sub-
measures in the current HCAHPS Survey. When four quarters of the 
updated HCAHPS Survey data have been submitted, public reporting would 
reflect all of the modifications in the updated HCAHPS Survey measure. 
The proposed public reporting timeline of the updates to the HCAHPS 
Survey for the Hospital IQR and PCHQR Programs can be found in Table 
IX.B.2-02.
[GRAPHIC] [TIFF OMITTED] TP02MY24.223


[[Page 36299]]


(1) Addition of the Care Coordination Sub-Measure in the Proposed 
Updated HCAHPS Survey Measure
    The ``Care Coordination'' sub-measure is a newly developed multi-
question sub-measure and is composed of three new survey questions that 
ask patients how often hospital staff were informed and up-to-date 
about the patient's care, how often hospital staff worked well together 
to care for the patient, and whether hospital staff worked with the 
patient and family or caregiver in making plans for the patient's care 
post-hospitalization. The new questions address aspects of hospital 
care identified by patients participating in focus groups as important 
to measuring the quality of hospital care. Cognitive testing 
demonstrated the new questions were accurately and consistently 
interpreted. The ``Care Coordination'' sub-measure was shown to have 
good measurement properties (hospital-level reliability is 0.792 and 
Cronbach's alpha is 0.765) and construct validity in the 2021 mode 
experiment.\239\ This sub-measure would fill a gap of furthering 
coordination efforts within the hospital setting and support our goals 
of including measures related to seamless care coordination and person-
centered care. Across multiple focus groups, patients indicated that 
how well doctors, nurses, and other staff work together or as a team in 
caring for a patient was the most important information to have to 
understand what their care would be like in one hospital versus 
another.
---------------------------------------------------------------------------

    \239\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(2) Addition of the Restfulness of Hospital Environment Sub-Measure in 
the Proposed Updated HCAHPS Survey Measure
    The Restfulness of Hospital Environment--Hospital Patient sub-
measure would fill a gap related to providing a restful and healing 
environment within the hospital setting and support our goal of 
including measures related to person-centered care. The ``Restfulness'' 
sub-measure is a newly developed multi-question sub-measure comprised 
of three survey questions: two new questions that ask how often 
patients were able to get the rest they needed, and whether hospital 
staff helped the patient to rest and recover, and one current survey 
question that asks how often the area around the patient's room was 
quiet at night (``Quietness''). Cognitive testing demonstrated the new 
questions were accurately and consistently interpreted. The 2021 mode 
experiment established that the ``Restfulness'' sub-measure has good 
measurement properties (hospital-level reliability is 0.870 and 
Cronbach's alpha is 0.735) and construct validity.\240\ The existing 
``Quietness'' sub-measure is currently a stand-alone question in the 
HCAHPS Survey. The updates to the HCAHPS Survey would move the stand-
alone ``Quietness'' sub-measure into the new Restfulness of Hospital 
Environment sub-measure. In the proposed updated version of the HCAHPS 
Survey measure, the ``Quietness'' question itself would not change and 
would continue to be publicly reported.
---------------------------------------------------------------------------

    \240\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(3) Addition of the Information About Symptoms Sub-Measure in the 
Proposed Updated HCAHPS Survey Measure
    The ``Information About Symptoms'' sub-measure is a newly developed 
single-question sub-measure that would fill a gap of providing 
instructions and information for family and caregivers to take care of 
patients after discharge and supports our goal of including measures 
related to person-centered care. The new question captures an aspect of 
hospital care identified by patients participating in focus groups as 
important, and cognitive testing demonstrated the question was 
accurately and consistently interpreted. The sub-measure is a stand-
alone question that asks the patient whether doctors, nurses, or other 
hospital staff gave the patient's family or caregiver enough 
information about symptoms or health problems to watch out for after 
the patient left the hospital. The sub-measure has good hospital level-
reliability (0.729) at the expected average number of completed surveys 
per hospital.\241\
---------------------------------------------------------------------------

    \241\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(4) Modification of the Responsiveness of Hospital Staff Sub-Measure in 
the Proposed Updated HCAHPS Survey Measure
    The revisions to the ``Responsiveness of Hospital Staff'' sub-
measure would entail adding one new survey question to this sub-measure 
and removing one current survey question from this sub-measure. The 
current survey question that would be removed from the ``Responsiveness 
of Hospital Staff'' sub-measure is the ``Call Button'' question. Input 
from hospitals indicated that call buttons have largely been replaced 
by other mechanisms (such as a direct phone line), and qualitative 
testing demonstrated that the new question captures all modes of 
requesting help. The 2021 mode experiment established that the modified 
``Responsiveness of Hospital Staff'' sub-measure has good measurement 
properties (hospital-level reliability is 0.786 and Cronbach's alpha is 
0.749) and construct validity.\242\ Having patients report their 
experience of the responsiveness of hospital staff highlights an 
important aspect of hospital care from the patient's perspective about 
getting help for one's needs during a hospital stay, which is a 
component of person-centered care. These modifications to the 
``Responsiveness of Hospital Staff'' sub-measure would fill a gap 
related to the care by nursing and other staff within the hospital 
setting and support our goals of including measures assessing person-
centered care and the quality of hospital staff. The revised 
``Responsiveness of Hospital Staff'' sub-measure would be comprised of 
two survey questions: one current survey question that asks how often 
patients received help in getting to the bathroom or in using a bedpan 
as soon as they wanted, and one new survey question that asks how often 
patients got help as soon as they needed it when they asked for help 
right away.
---------------------------------------------------------------------------

    \242\ Battelle--Partnership for Quality Measurement. (2023). 
2023 Pre-Rulemaking Measure Review (PRMR) Preliminary Assessment 
Report: Hospital Committee. Available at: https://p4qm.org/sites/default/files/2023-12/PRMR-Hospital-Committee-PA-Final-Report.pdf.
---------------------------------------------------------------------------

(5) Removal of the Care Transition Sub-Measure in the Proposed Updated 
HCAHPS Survey Measure
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53513 through 
53516), we added the three-question ``Care Transition'' sub-measure 
(CTM-3) to the HCAHPS Survey in the Hospital IQR Program. We finalized 
the addition of the HCAHPS Survey, including the CTM-3 sub-measure, for 
the PCHQR Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50844 
through 50845). The updates to the HCAHPS Survey measure would remove 
this three-question sub-measure from the HCAHPS Survey measure and 
replace it with a new ``Care Coordination'' sub-measure, which would 
encompass and broaden the current ``Care Transition'' sub-

[[Page 36300]]

measure and is more congruent with the other questions in the HCAHPS 
Survey in terms of question form and response options. For these 
reasons, the updated version of the HCAHPS Survey measure removes the 
``Care Transition'' sub-measure.
    We invite public comment on the proposed adoption of the updated 
HCAHPS Survey measure for the Hospital IQR Program beginning with the 
CY 2025 reporting period/FY 2027 payment determination and the PCHQR 
Program beginning with the CY 2025 reporting period/FY 2027 program 
year.
(6) Modification to the ``About You'' Section for the Hospital IQR, 
PCHQR, and Hospital VBP Programs
    The ``About You'' questions are used either for patient-mix 
adjustment or for Congressionally-mandated reports.
    The proposed changes to the ``About You'' section of the updated 
HCAHPS Survey would be:
     replacing the existing `Emergency Room Admission' question 
with a new, `Hospital Stay Planned in Advance' question;
     reducing the number of response options for the existing 
`Language Spoken at Home' question;
     alphabetizing the response options for the existing 
ethnicity question; and
     alphabetizing the response options for the existing race 
question.
    We note that to achieve the goal of fair comparisons across all 
hospitals that participate in HCAHPS Survey, it is necessary to adjust 
for factors that are not directly related to hospital performance but 
do affect how patients answer HCAHPS Survey questions. To ensure that 
differences in HCAHPS Survey results reflect differences in hospital 
quality only, HCAHPS Survey results are adjusted for patient-mix and 
mode of survey administration. Only the adjusted results are publicly 
reported and considered the official results. Information about the 
HCAHPS Survey patient-mix adjustment can be found at: https://hcahpsonline.org/en/mode--patient-mix-adj. We do not collect or adjust 
for patients' socioeconomic status, however, the HCAHPS Survey patient-
mix adjustment does include patients' highest level of education, which 
can be related to socioeconomic status. Several questions on the HCAHPS 
Survey, as well as information drawn from hospital administrative data, 
are used for the patient-mix adjustment. The questions in the ``About 
You'' section of the survey that are used in patient-mix adjustment 
are:
     In general, how would you rate your overall health?
     In general, how would you rate your overall mental or 
emotional health?
     What is the highest grade or level of school that you have 
completed?
     What language do you mainly speak at home?
    Administrative data provided by hospitals are also used in patient-
mix adjustment, including patient's age, sex, and service line. Lag 
time, which is the number of days between a patient's discharge from 
the hospital and the return of the mail survey, or the final 
disposition of the telephone or interactive voice recognition (IVR) 
survey, is also used in patient-mix adjustment.\243\
---------------------------------------------------------------------------

    \243\ Elliott, M.N., Zaslavsky, A.M., Goldstein, E. et al. 
(2009) Effects of Survey Mode, Patient Mix, and Nonresponse on CAHPS 
Hospital Survey Scores.'' Health Services Research. 44: 501-518. 
https://doi.org/10.1111/j.1475-6773.2008.00914.x.
---------------------------------------------------------------------------

    Neither patient race nor ethnicity is used to adjust HCAHPS Survey 
results; these questions are included on the survey to support 
Congressionally-mandated reports. The adjustment model also addresses 
the effects of non-response bias. More information about the patient-
mix adjustment coefficients for publicly reported HCAHPS Survey measure 
results can be found under ``Mode and Patient-Mix Adjustment'' at: 
https://www.hcahpsonline.org.
    The current ``About You'' survey question that asks whether the 
patient was admitted to the hospital through the Emergency Room would 
be replaced with a new question that asks whether this hospital stay 
was planned in advance. ``Hospital stay planned in advance'' is being 
proposed for possible use as a patient-mix adjuster to distinguish 
between planned and unplanned stays. Cognitive testing indicated that 
``Hospital stay planned in advance'' is better understood as intended 
than the current admission through the emergency room question. 
Unplanned stays are not within the hospital's control but can result in 
worse patient experiences than hospital stays that had been planned. 
Accounting for these differences in this preadmission characteristic 
allows for fairer comparisons of hospital performance.
    To make survey administration more efficient and reduce respondent 
burden, especially in the telephone mode of survey administration, we 
are proposing that the response options for the `Language Spoken at 
Home' question would be changed to: ``English,'' ``Spanish,'' 
``Chinese,'' or ``Some other language.'' English, Spanish, and Chinese 
account for 98.2% of all HCAHPS Survey responses. The response options 
for the two race/ethnicity questions would be alphabetized to 
correspond to current best survey practices.
    These proposed modifications would not be included in public 
reporting of the HCAHPS Survey and would not affect scoring under the 
Hospital VBP Program, but the `Hospital Stay Planned in Advance' 
question would be employed in the patient-mix adjustment of survey 
responses.
    We are proposing to implement these changes along with the proposed 
updated version of the HCAHPS Survey measure for the Hospital IQR, 
PCHQR, and Hospital VBP Programs described in the sections above.
f. Proposed Modifications to Scoring of the HCAHPS Survey for the 
Hospital VBP Program for the FY 2027 Through FY 2029 Program Years
(1) Background
    As discussed above, we are proposing to adopt an updated version of 
the HCAHPS Survey measure so that IPPS hospitals and PCHs can report 
patient responses to the updated survey for purposes of the Hospital 
IQR Program and PCHQR Program, respectively, beginning with January 1, 
2025 discharges. Although we are also proposing to adopt the updated 
version of the HCAHPS Survey measure for purposes of the Hospital VBP 
Program in section IX.B.2.g of the preamble of this proposed rule, 
section 1886(o)(2)(C)(i) precludes us from doing so until we have 
specified the updates under the Hospital IQR Program and included them 
on Care Compare for at least one year prior to the beginning of the 
performance period for such fiscal year. For this reason, we are 
proposing to adopt the updated version of the HCAHPS Survey measure 
beginning with the FY 2030 program year in the Hospital VBP Program. 
However, in order to relieve hospitals of the burden of having to use 
two different versions of the survey between FY 2027 and FY 2029, we 
are proposing that hospitals would be able to administer the updated 
version of the survey starting with January 1, 2025 discharges, and for 
the purposes of the Hospital VBP Program, we would only score hospitals 
on the six dimensions of the HCAHPS Survey that would remain unchanged 
from the current version of the survey.
(2) Proposed Scoring Modification of the HCAHPS Survey for the Hospital 
VBP Program for the FY 2027 Through FY 2029 Program Years
    We are proposing to modify scoring to not include the 
``Responsiveness of

[[Page 36301]]

Hospital Staff'' and ``Care Transition'' dimensions from scoring in the 
Hospital VBP Program's HCAHPS Survey measure in the Person and 
Community Engagement domain for the FY 2027 through FY 2029 program 
years. As noted above, we must collect and publicly report four 
quarters of data on the updated HCAHPS Survey measure before the 
updates could be adopted into the Hospital VBP Program. As described in 
section IX.B.2.g(2) of the preamble of this proposed rule, the updates 
to the ``Responsiveness of Hospital Staff'' dimension would be adopted 
in the Hospital VBP Program beginning with the FY 2030 program year 
along with the rest of the updates to the survey after the statutory 
requirements of section 1886(o)(2)(C)(i) of the Act have been met. As 
described in section IX.B.2.g(3), scoring on the updated 
``Responsiveness of Hospital Staff'' dimension would begin with the FY 
2030 program year. In addition, the ``Care Transition'' dimension in 
the current version of the survey would be removed permanently in the 
proposed updated HCAHPS Survey measure beginning with the FY 2030 
program year. Until these updates can be adopted in the Hospital VBP 
Program beginning in FY 2030, we are proposing to exclude these 
dimensions from scoring for the FY 2027 through FY 2029 program years.
    With the proposal to not score the ``Care Transition'' and 
``Responsiveness of Hospital Staff'' dimensions in the Person and 
Community Engagement domain for the FY 2027 through FY 2029 program 
years, only six dimensions would continue to be used in the Hospital 
VBP Program for FY 2027, FY 2028, and FY 2029. By excluding these two 
dimensions from scoring within the Hospital VBP Program for the FY 2027 
through FY 2029 program years, hospitals can continue to be scored on 
the remaining unchanged dimensions of the current HCAHPS Survey measure 
until the proposed updated HCAHPS Survey measure could be adopted for 
use in the Hospital VBP Program beginning in FY 2030.
    We are proposing to score hospitals only on these six dimensions 
because we cannot score hospitals on any of the new or updated 
dimensions associated with the updated HCAHPS Survey measure until they 
have been adopted and reported in the Hospital IQR Program for one year 
prior to the beginning of the first performance period of their use in 
the Hospital VBP Program. These six unchanged dimensions of the HCAHPS 
Survey would be:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Communication about Medicines,''
     ``Discharge Information,''
     ``Cleanliness and Quietness,'' and
     ``Overall Rating.''
    We are proposing to modify the scoring such that for each of these 
six dimensions, Achievement Points (0-10 points) and Improvement Points 
(0-9 points) would be calculated, the larger of which would be summed 
across these six dimensions to create a pre-normalized HCAHPS Base 
Score of 0-60 points (as compared to 0-80 points with the current eight 
dimensions). The pre-normalized HCAHPS Base Score would then be 
multiplied by \8/6\ (1.3333333) and then rounded according to standard 
rules (values of 0.5 and higher are rounded up, values below 0.5 are 
rounded down) to create the normalized HCAHPS Base Score. Each of the 
six unchanged dimensions would be of equal weight, so that, as 
currently scored, the normalized HCAHPS Base Score would range from 0 
to 80 points. HCAHPS Consistency Points would be calculated using our 
current methodology and would continue to range from 0 to 20 points. 
Like the Base Score, the Consistency Points Score would only consider 
scores across the remaining six unchanged dimensions of the Person and 
Community Engagement domain. The final element of the scoring formula, 
which would remain unchanged from the current formula, would be the sum 
of the HCAHPS Base Score and the HCAHPS Consistency Points Score for a 
total score that ranges from 0 to 100 points. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50065) and the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49565), we adopted a similar modified scoring methodology when 
the Care Transition sub-measure was added to the current HCAHPS Survey 
in the Hospital VBP Program.
    This proposed scoring modification would ensure that hospitals 
could continue to receive scores on the dimensions of the HCAHPS Survey 
that would remain unchanged in the current survey and would provide a 
period of transition until the Hospital VBP Program could adopt the 
updates to the survey. The updated version of the HCAHPS Survey measure 
would be adopted in the Hospital IQR and PCHQR Programs beginning with 
January 1, 2025 discharges, however, those updated sub-measures would 
not be scored as dimensions for the Hospital VBP Program until the FY 
2030 program year. We reiterate that hospitals will only have to 
circulate one version of the HCAHPS Survey at a time.
    We invite public comment on this proposal to modify scoring on the 
HCAHPS Survey measure in the Hospital VBP Program for the FY 2027 
through FY 2029 program years to only score on the six dimensions 
discussed above.
g. Proposed Adoption of the Updated HCAHPS Survey Measure and 
Associated Scoring Modifications in the Hospital VBP Program Beginning 
With the FY 2030 Program Year
(1) Background
    As described in section IX.B.2.e of the proposed rule, the 
modifications to the proposed updated version of the HCAHPS Survey 
measure include adding three new sub-measures, ``Care Coordination,'' 
``Restfulness of Hospital Environment,'' and ``Information About 
Symptoms'' to the survey. As noted above, the updates also include 
removing the existing ``Care Transition'' sub-measure and modifying the 
existing ``Responsiveness of Hospital Staff'' sub-measure. In the 
Hospital VBP Program beginning with the FY 2030 program year, we are 
proposing to adopt the updated HCAHPS Survey measure, and we are 
therefore also proposing additional scoring modifications. This 
timeline would allow for the updated HCAHPS Survey measure to be 
adopted and publicly reported under the Hospital IQR Program for one 
year, as statutorily mandated. We describe the proposed adoption of 
these updates and scoring modifications in the following sections.
(2) Proposed Adoption of the Updated HCAHPS Survey Measure in the 
Hospital VBP Program Beginning With the FY 2030 Program Year
    We are proposing to adopt the updated HCAHPS Survey measure in the 
Hospital VBP Program beginning with the FY 2030 program year to align 
with the adoption of the updated HCAHPS Survey measure that we are 
proposing to adopt in the Hospital IQR Program, as described in section 
IX.B.2.e of the preamble of this proposed rule. Under this proposal, 
the updated HCAHPS Survey measure will have been publicly reported for 
one year in the Hospital IQR Program prior to the beginning of the 
performance period for the HCAHPS Survey measure in the Hospital VBP 
Program for the FY 2030 program year, which consists of a performance 
period of CY 2028 and a baseline period of CY 2026.
    We note that the number and content of dimensions from the proposed 
updated HCAHPS Survey in the Person and Community Engagement Domain in

[[Page 36302]]

the Hospital VBP Program in FY 2030 differs slightly from the number 
and content of the sub-measures in the Hospital IQR and PCHQR Programs. 
Namely, the ``Cleanliness'' and ``Information about Symptoms'' sub-
measures are single-item sub-measures in the proposed updated HCAHPS 
Survey measure in the Hospital IQR and PCHQR Programs but they would be 
combined into one dimension in the proposed adoption of the updated 
HCAHPS Survey measure beginning with the FY 2030 Hospital VBP program 
year.
    The proposed dimensions in the Person and Community Engagement 
Domain in the Hospital VBP Program beginning with the FY 2030 program 
year are:
     ``Communication with Nurses,''
     ``Communication with Doctors,''
     ``Responsiveness of Hospital Staff,''
     ``Communication about Medicines,''
     ``Cleanliness and Information About Symptoms,''
     ``Discharge Information,''
     ``Overall Rating of Hospital,''
     ``Care Coordination,'' and
     ``Restfulness of Hospital Environment.''
    We refer readers to Table IX.B.2-03 for the timelines for the 
current and newly proposed HCAHPS Survey dimensions for the Hospital 
VBP Program.
    In the proposed updated HCAHPS Survey measure, the ``Care 
Transition'' dimension is removed. The new ``Care Coordination'' 
dimension and the new ``Information about Symptoms'' question, which is 
included in the proposed new ``Cleanliness and Information about 
Symptoms'' dimension, encompass a broader depiction of person-centered 
care than does the ``Care Transition'' dimension. The proposed updated 
HCAHPS Survey measure includes the new ``Care Coordination'' dimension, 
the new ``Restfulness of the Hospital Environment'' dimension, and the 
new ``Cleanliness and Information about Symptoms'' dimension. We 
propose to begin using these three new dimensions in the Hospital VBP 
Program beginning with the FY 2030 program year. As noted in section 
IX.B.2.e(1) of the preamble of this proposed rule, the ``Care 
Coordination'' dimension would further coordination efforts within the 
hospital setting and support our goals of including measures related to 
seamless care coordination and person-centered care. Additionally, the 
new ``Restfulness of the Hospital Environment'' dimension is comprised 
of three survey questions: two new questions that ask how often 
patients were able to get the rest they needed, and whether hospital 
staff helped the patient to rest and recover, and one current survey 
question that asks how often the area around the patient's room was 
quiet at night (``Quietness'').
    The proposed updated version of the HCAHPS Survey measure further 
modifies the current ``Cleanliness and Quietness'' dimension in two 
ways. In the FY 2030 program, the ``Quietness'' question would be 
removed from the ``Cleanliness and Quietness'' dimension and would 
instead be included in the new ``Restfulness of Hospital Environment'' 
dimension; however, the ``Quietness'' question itself would remain 
unchanged on the updated HCAHPS Survey. Additionally, in the FY 2030 
program year, we propose to modify the ``Cleanliness and Quietness'' 
dimension to be called the ``Cleanliness and Information About 
Symptoms'' dimension, which would include the existing ``Cleanliness'' 
question and the new ``Information About Symptoms'' question from the 
updated HCAHPS Survey. The newly developed ``Information About 
Symptoms'' question asks the patient whether doctors, nurses, or other 
hospital staff gave the patient's family or caregiver enough 
information about symptoms or health problems to watch out for after 
the patient left the hospital.
    We refer readers to section IX.B.2.b of the preamble of this 
proposed rule where we further describe the updates included in the 
updated HCAHPS Survey measure and to Table IX.B.2-03 for the timelines 
for the current and newly proposed HCAHPS Survey dimensions for the 
Hospital VBP Program.

[[Page 36303]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.224


[[Page 36304]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.225

    We invite public comment on the proposal to adopt the updated 
HCAHPS Survey measure in the Hospital VBP Program beginning With the FY 
2030 program year.
(3) Proposal To Modify Scoring of the HCAHPS Survey in the Hospital VBP 
Program Beginning With the FY 2030 Program Year
    We are also proposing to adopt a new scoring methodology beginning 
with the FY 2030 program year. For each of the nine dimensions, 
Achievement Points (0-10 points) and Improvement Points (0-9 points) 
would be calculated, the larger of which would be summed across the 
nine dimensions to create a pre-normalized HCAHPS Base Score of 0-90 
points (as compared to 0-80 points with the current eight dimensions). 
The pre-normalized HCAHPS Base Score would then be multiplied by \8/9\ 
(0.88888889) and rounded according to standard rules (values of 0.5 and 
higher are rounded up, values below 0.5 are rounded down) to create the 
normalized HCAHPS Base Score. Each of the nine dimensions would be of 
equal weight, so that, as currently scored, the normalized HCAHPS Base 
Score would range from 0 to 80 points. HCAHPS Consistency Points would 
then be calculated in the same manner as with the original HCAHPS 
Survey in the Hospital VBP Program and would continue to range from 0 
to 20 points. Like the Base Score, the Consistency Points Score would 
consider scores across all nine of the Person and Community Engagement 
domain dimensions. The final element of the scoring formula, which 
would remain unchanged from the current formula in the Hospital VBP 
Program, would be the sum of the HCAHPS Base Score and the HCAHPS 
Consistency Points Score for a total score that ranges from 0 to 100 
points, as before. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50065) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49565), we 
adopted a similar scoring methodology when the Care Transition 
dimension was added to the Person and Community Engagement domain in 
the Hospital VBP Program.
    Additionally, we note that in the scoring of the current HCAHPS 
Survey measure in the Hospital VBP Program, the ``Cleanliness and 
Quietness'' dimension is the average of the publicly reported stand-
alone ``Cleanliness'' and ``Quietness'' questions. As previously noted, 
the proposed adoption of the updated HCAHPS Survey measure would result 
in ``Quietness'' being removed from this dimension and included as a 
question in the new ``Restfulness of the Hospital Environment'' 
dimension, and ``Cleanliness'' would be combined with the new 
``Information about Symptoms.'' Therefore, ``Quietness'' would be 
scored as part of the ``Restfulness of the Hospital Environment'' 
dimension in conjunction with the other questions under that dimension. 
For the proposed ``Cleanliness and Information about Symptoms'' 
dimension, we would take the average of the stand-alone ``Cleanliness'' 
and ``Information about Symptoms'' questions to obtain a score for the 
``Cleanliness and Information about Symptoms'' dimension. For the 
purposes of the Hospital VBP Program, we are proposing these two 
questions be combined so as not to put more weight on these single-
question dimensions compared to the rest of the HCAHPS Survey 
dimensions, which are multi-question dimensions (with the exception of 
Overall Rating). If these dimensions, ``Cleanliness'' and ``Information 
About Symptoms,'' were separated, ``Cleanliness,'' for example, as a 
single-question dimension, would receive as much weight as the 
``Communication with Nurses'' dimension, which includes three 
questions. Therefore, the combined ``Cleanliness and Information about 
Symptoms'' dimension would be a two-question dimension that is more 
comparable to the other HCAHPS Survey dimensions in the Person and 
Community Engagement domain.
    We invite public comment on this proposal to modify scoring of the 
HCAHPS Survey in the Hospital VBP Program beginning with the FY 2030 
program year to account for the adoption of the updated HCAHPS Survey 
measure.
3. Advancing Patient Safety and Outcomes Across the Hospital Quality 
Programs--Request for Comment
    The Hospital Readmissions Reduction Program was implemented to 
reduce

[[Page 36305]]

excess readmissions effective for discharges from applicable hospitals 
beginning on or after October 1, 2012. The program uses six claims-
based measures to track unplanned inpatient admissions within 30 days 
following discharge. Using the data collected from these measures, we 
have observed that since the inception of the program, inpatient 
readmission rates for the conditions and procedures included in the 
program have gone down.\244\
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    \244\ Medicare Hospital Quality Chartbook. National Rates over 
Time. Available at: https://www.cmshospitalchartbook.com/visualization/national-rates-over-time. Accessed March 12, 2024.
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    However, studies have found a concurrent increase in patients who, 
after being discharged from an inpatient stay, visit the emergency 
department (ED) or receive observation services as an 
outpatient.245 246 247 248 249 As a result, we are concerned 
that our hospital quality reporting and value-based purchasing programs 
may not be adequately incentivizing hospitals to improve quality of 
care by accounting for more types of post-discharge events, such as a 
return to the ED or the receipt of observation services.
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    \245\ Nuckols TK, Fingar KR, Barrett ML, et al. Returns to 
Emergency Department, Observation, or Inpatient Care Within 30 Days 
After Hospitalization in 4 States, 2009 and 2010 Versus 2013 and 
2014. J Hosp Med. 2018;13(5):296-303.
    \246\ Shammas NW, Kelly R, Lemke J, et al. Assessment of Time to 
Hospital Encounter after an Initial Hospitalization for Heart 
Failure: Results from a Tertiary Medical Center. Cardiol Res Pract. 
2018; 2018:6087367.
    \247\ Sabbatini AK, Joynt-Maddox KE, Liao JM, et al. Accounting 
for the growth of observation stays in the assessment of Medicare's 
hospital readmissions reduction program. JAMA Netw Open. 
2022;5(11):e2242587.
    \248\ Sabbatini AK, Wright B. Excluding observation stays from 
readmission rates--what quality measures are missing. New Engl J 
Med. 2018;378(22):2062-2065.
    \249\ Wadhera RK, Joynt Maddox KE, Kazi DS, Shen C, Yeh RW. 
Hospital revisits within 30 days after discharge for medical 
conditions targeted by the Hospital Readmissions Reduction Program 
in the United States: national retrospective analysis. BMJ. 
2019;366: l4563.
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    From a patient perspective, unexpectedly returning to any acute 
care setting, including the ED, or receiving observation services after 
being discharged from an inpatient hospital stay,\250\ is an 
undesirable outcome of care. Patients who are discharged from an 
inpatient stay but then make an unplanned return to the hospital may 
incur higher healthcare costs than those that do not return to the 
hospital setting due to potential out-of-pocket charges for the 
unplanned follow-up care. Research has found that the median out-of-
pocket cost of observation services received by Medicare beneficiaries 
as outpatients was $448.94, with low-income beneficiaries being more 
likely to report being concerned about costs of follow-up care, as 
compared to higher income beneficiaries, and limiting health care 
utilization that could otherwise be deemed essential in response to 
higher out-of-pocket costs.\251\
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    \250\ Observation care is a well-defined set of specific, 
clinically appropriate services, which include ongoing short-term 
treatment, assessment, and reassessment before a decision can be 
made regarding whether patients will require further treatment as 
hospital inpatients or if they are able to be discharged from the 
hospital. Observation services are commonly ordered for patients who 
present to the emergency department and who then require a 
significant period of treatment or monitoring in order to make a 
decision concerning their admission or discharge. See additional 
explanation here: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c06.pdf.
    \251\ Goldstein, J.N., Schwartz, J.S., McGraw, P. et al. 
``Implications of cost-sharing for observation care among Medicare 
beneficiaries: a pilot survey''. BMC Health Serv Res 19, 149 (2019). 
https://doi.org/10.1186/s12913-019-3982-8.
---------------------------------------------------------------------------

    While these unplanned returns to the hospital impose significant 
burden on patients, such visits can often be avoided with greater 
attention to care coordination.\252\ This coordination can include 
addressing barriers such as poor health literacy or social determinants 
of health that complicate a patient's ability to follow post-discharge 
instructions, fill prescriptions, or alert hospital staff to new 
symptoms.\253\ For example, in one study, nurses implemented evidence-
based practices for transition care, including engaging in patient 
education, providing clear post-discharge instructions, and following 
up with patients via phone calls. The study found that 9.4 percent of 
patients who received such intervention were readmitted 30 days after 
discharge, compared to an 18.8 percent readmission rate among patients 
not receiving such interventions. Similarly, 19.8 percent of patients 
receiving evidence-based transitional care were readmitted within 90 
days after discharge, compared to 31.5 percent among patients in the 
usual care group.\254\ These findings indicate that supporting 
patients' discharges by proactively addressing potential barriers is 
effective in reducing unplanned readmissions.
---------------------------------------------------------------------------

    \252\ Kripalani S, Theobald CN, Anctil B, Vasilevskis EE. 
Reducing hospital readmission rates: current strategies and future 
directions. Annu Rev Med. 2014;65:471-85. doi: 10.1146/annurev-med-
022613-090415. Epub 2013 Oct 21.
    \253\ Hoyer EH, Brotman DJ, Apfel A, Leung C, Boonyasai RT, 
Richardson M, Lepley D, Deutschendorf A. Improving Outcomes After 
Hospitalization: A Prospective Observational Multicenter Evaluation 
of Care Coordination Strategies for Reducing 30-Day Readmissions to 
Maryland Hospitals. J Gen Intern Med. 2018 May; 33(5): 621-627. 
Published online 2017 Nov 27. doi: 10.1007/s11606-017-4218-4.
    \254\ Kripalani S, Chen G, Ciampa P, Theobald C, Cao A, McBride 
M, Dittus RS, Speroff T. A Transition Care Coordinator Model Reduces 
Hospital Readmissions and Costs. Contemp Clin Trials. 2019 Jun; 81: 
55-61. Published online 2019 Apr 25. doi: 10.1016/j.cct.2019.04.014.
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    Therefore, we are seeking ways to build on current measures in 
several quality reporting programs that account for unplanned patient 
hospital visits to encourage hospitals to improve discharge processes. 
Current measures include three Excess Days in Acute Care (EDAC) 
measures currently in the Hospital Inpatient Quality Reporting (IQR) 
Program, which estimate days spent in acute care within 30 days post 
discharge from an inpatient hospitalization for a principal diagnosis 
of the measure's specified condition. The acute care outcomes include 
ED visits, receipt of observation services, and unplanned 
readmissions.\255\ The measures are:
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    \255\ Centers for Medicare & Medicaid Services. 2023 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
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     Excess Days in Acute Care (EDAC) after Hospitalization for 
Acute Myocardial Infarction (AMI), adopted in the FY 2016 IPPS/LTCH PPS 
final rule beginning with the FY 2018 payment determination (80 FR 
49680 through 49682);
     Excess Days in Acute Care (EDAC) after Hospitalization for 
Heart Failure (HF), adopted in the FY 2016 IPPS/LTCH PPS final rule 
beginning with the FY 2018 payment determination (80 FR 49682 through 
49690); and
     Excess Days in Acute Care (EDAC) after Hospitalization for 
Pneumonia, adopted in the FY 2017 IPPS/LTCH PPS final rule beginning 
with the FY 2019 payment determination (81 FR 57142 through 57148).
    Another existing measure that CMS uses to assess unplanned hospital 
returns is the Hospital Visits After Hospital Outpatient Surgery 
measure. We adopted this measure into the Hospital Outpatient Quality 
Reporting (OQR) Program in the CY 2017 OPPS/ASC final rule beginning 
with the CY 2020 reporting period (81 FR 79764 through 79771) and the 
Rural Emergency Hospital Quality Reporting (REHQR) Program in the CY 
2024 OPPS/ASC final rule beginning with the CY 2024 reporting period 
(88 FR 82064 through 82066). This measure's outcome includes any 
unplanned hospital visits (ED visits, receipt of observation services, 
or unplanned inpatient admissions) within seven days of outpatient 
surgery. The measure calculates facility-level measure scores based on 
the ratio of predicted to

[[Page 36306]]

expected number of post-surgical hospital visits. By publicly reporting 
these scores, the measure encourages providers to engage in quality 
improvement activities to reduce unplanned follow-up visits (81 FR 
79765).
    While our hospital quality reporting and value-based purchasing 
programs currently encourage hospitals to address concerns about 
unplanned returns through several existing measures, we recognize that 
these measures, taken together, do not comprehensively capture 
unplanned patient returns to inpatient or outpatient care after 
discharge. The EDAC measures currently in the Hospital IQR Program only 
cover patients with a primary discharge of AMI, HF, or Pneumonia. 
Meanwhile, the Hospital Visits After Hospital Outpatient Surgery 
measure only covers patients discharged from outpatient surgeries. 
Furthermore, since both the Hospital IQR and Hospital OQR Programs are 
quality reporting programs, a hospital's performance on these measures 
is not tied to payment incentives.
    Therefore, we invite public comment on how these programs could 
further encourage hospitals to improve discharge processes, such as by 
introducing measures currently in quality reporting programs into 
value-based purchasing to link outcomes to payment incentives. We are 
specifically interested in input on adopting measures which better 
represent the range of outcomes of interest to patients, including 
unplanned returns to the ED and receipt of observation services within 
30 days of a patient's discharge from an inpatient stay.
    We invite public comment on this topic.

C. Requirements for and 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 
healthcare. 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 the Centers for Medicare & Medicaid 
Services (CMS) programs. In combination with other efforts across the 
Department of Health and Human Services (HHS), 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 some 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 82 FR 38348);
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 
41609);
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42448 through 
42509);
     The FY 2021 IPPS/LTCH PPS final rule (85 FR 58926 through 
58959);
     The FY 2022 IPPS/LTCH PPS final rule (86 FR 45360 through 
45426);
     The FY 2023 IPPS/LTCH PPS final rule (87 FR 49190 through 
49310); and
     The FY 2024 IPPS/LTCH PPS final rule (88 FR 59144 through 
59203).
    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 42 CFR 412.140(g)(1) for our finalized measure 
retention policy. We first adopted these policies in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53512 through 53513) and codified them in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 59174 through 59175). 
Pursuant to this policy, when we adopt measures for the Hospital IQR 
Program beginning with a particular payment determination, we 
automatically readopt these measures for all subsequent payment 
determinations unless a different or more limited period is proposed 
and finalized. Measures are also retained unless we propose to remove, 
suspend, or replace the measures.
    We are not proposing any changes to these policies in this proposed 
rule.
3. Removal of and Removal Factors for Hospital IQR Program Measures
    We refer readers to 42 CFR 412.140(g)(2) and (3) for the Hospital 
IQR Program's policy regarding the factors CMS considers when removing 
measures from the program. We first adopted these factors in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41540 through 41544) and codified 
them in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59174 through 
59175). We are not proposing any changes to these policies in this 
proposed rule.
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 are not proposing any changes to these policies in this 
proposed rule. We also refer readers to the CMS National Quality 
Strategy that we launched in 2022, with the aims of promoting the 
highest quality outcomes and safest care for all individuals.\256\
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    \256\ 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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    To comply with statutory requirements that the Secretary of HHS 
make publicly available certain quality and efficiency measures that 
the Secretary is considering for adoption through rulemaking under 
Medicare,\257\ the Consensus-Based Entity (CBE), currently Battelle, 
convenes the

[[Page 36307]]

Partnership for Quality Measurement (PQM), which is comprised of 
clinicians, patients, measure experts, and health information 
technology specialists, to participate in the pre-rulemaking process 
and the measure endorsement process. We refer readers to the proposed 
Patient Safety Structural measure in section IX.B.1.c. of this proposed 
rule for more details on the updated pre-rulemaking measure reviews 
(PRMR) process, including measure endorsement and maintenance (E&M) 
process, for the purpose of providing multi-interested party input to 
the Secretary on the selection of quality and efficiency measures under 
consideration for use in certain Medicare quality programs, including 
the Hospital IQR Program.
---------------------------------------------------------------------------

    \257\ See section 1890A(a)(2) of the Social Security Act (42 
U.S.C. 1395aaa-1(a)(2)).
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5. Proposed New Measures for the Hospital IQR Program Measure Set
    We are proposing to adopt seven new measures: (1) Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
payment determination; (2) Age Friendly Hospital measure beginning with 
the CY 2025 reporting period/FY 2027 payment; (3) Catheter-Associated 
Urinary Tract Infection (CAUTI) Standardized Infection Ratio Stratified 
for Oncology Locations measure beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (4) Central Line-Associated 
Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified 
for Oncology Locations measure beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (5) Hospital Harm--Falls with 
Injury eCQM beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (6) Hospital Harm--Postoperative Respiratory Failure 
eCQM beginning with the CY 2026 reporting period/FY 2028 payment 
determination; and (7) Thirty-day Risk-Standardized Death Rate among 
Surgical Inpatients with Complications (Failure-to-Rescue) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 
payment determination. We provide more details on these proposals in 
the subsequent sections of the preamble, and details on the proposal 
for the Patient Safety Structural measure are in section IX.B.1.
a. Proposal To Adopt the Age Friendly Hospital Measure Beginning With 
the CY 2025 Reporting Period/FY 2027 Payment Determination
(1) Background
    The U.S. population is aging rapidly, with nearly one in seven 
Americans at age 65 years or older in 2019.\258\ In the next 10 years, 
one in five Americans is estimated to be over 65 years old, reaching 
80.8 million by 2040.\259\ As the population ages, care can become more 
complex,\260\ with patients often developing multiple chronic 
conditions such as dementia, heart disease, arthritis, type 2 diabetes, 
and cancer.\261\ These chronic conditions are among the nation's 
leading drivers of illness, disability, and healthcare costs.\262\
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    \258\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.
    \259\ 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.
    \260\ 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.
    \261\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.
    \262\ Centers for Disease Control and Prevention. (September 
2022). Promoting Health for Older Adults. Retrieved from: https://www.cdc.gov/chronicdisease/resources/publications/factsheets/promoting-health-for-older-adults.htm.

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[[Page 36308]]

    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.\263\ 
The Centers for Disease Control and Prevention (CDC), and other 
interested parties, have estimated that over 60 percent of Medicare 
beneficiaries have two or more chronic conditions.264 265 To 
address the challenges of delivering care to older adults with multiple 
chronic conditions from a hospital and health system perspective, 
multiple organizations, including American College of Surgeons (ACS), 
the Institute for Healthcare Improvement (IHI), and the American 
College of Emergency Physicians, collaborated to identify and establish 
age-friendly initiatives based on evidence-based best practices that 
provide goal centered, clinically effective care for older 
patients.266 267 These organizations define age-friendly 
care as: (1) following an essential set of evidence-based practices; 
(2) causing no harm; and (3) aligning with ``What Matters'' \268\ to 
the older adult and their family or other caregivers.\269\ Based on 
these age-friendly initiatives and definition, these organizations have 
developed 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.\270\ The elements of 
the ``4 Ms'' help organize care for older adults wellness regardless of 
the number of chronic conditions, a person's culture, or their racial, 
ethnic, or religious background.\271\
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    \263\ 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.
    \264\ Lochner KA, Cox CS. Prevalence of Multiple Chronic 
Conditions Among Medicare Beneficiaries, United States, 2010. Prev 
Chronic Dis 2013;10:120137. DOI: http://dx.doi.org/10.5888/pcd10.120137.
    \265\ Salive, M.E. (2013). Multimorbidity in older adults. 
Epidemiologic reviews, 35(1), 75-83.
    \266\ 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.
    \267\ 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.
    \268\ 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/insights/how-focusing-what-matters-simplifies-complex-care-older-adults.
    \269\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
    \270\ Ibid.
    \271\ Ibid.
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    The collective evidence from these age-friendly efforts 
demonstrates that hospitals should prioritize patient-centered care for 
aging patient populations with multiple chronic conditions. With CMS 
being the largest provider of healthcare coverage for the 65 years and 
older population, proposing a quality measure aimed at optimizing care 
for older patients, using a holistic approach to better serve the needs 
of this unique population, is timely. Although existing quality metrics 
have improved both the rate and reporting of clinical outcomes that are 
important to older individuals, these measures can be narrow in scope 
and may have limited long term effectiveness due to ceiling effects. We 
are therefore proposing to adopt an attestation-based structural 
measure, the Age Friendly Hospital measure, for the Hospital IQR 
Program, beginning with the CY 2025 reporting period/FY 2027 payment 
determination. This structural measure seeks to ensure that hospitals 
are reliably implementing the ``4 M's'', and thus providing evidence-
based elements of high-quality care for all older adults.\272\ The 
elements in the Age Friendly Hospital measure align with IHI's and 
Hartford Foundation national initiative for Age Friendly Systems in 
which many hospitals already participate.\273\
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    \272\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
    \273\ Institute for Healthcare Improvement. (2022). Age-friendly 
health systems: Guide to using the 4Ms in the care of older adults 
in hospitals and ambulatory practices. Available at: https://forms.ihi.org/hubfs/IHIAgeFriendlyHealthSystems_GuidetoUsing4MsCare.pdf.
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    In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27103 through 
27109) we solicited public comments about the potential inclusion of 
two geriatric care measures in the Hospital IQR Program measure set. 
These two potential geriatric care measures focused on ensuring 
hospitals were committed to implementing surgical, and general hospital 
best practices, for geriatric populations. Public commenters were 
largely in support of both geriatric care measures (88 FR 59185 through 
59193) and stated that measures focused on geriatric care would help a 
rapidly aging population with unique characteristics find the care they 
need. The two potential measures, Geriatric Hospital (MUC2022-112) and 
Geriatric Surgical (MUC2022-032), were included in the ``2022 Measures 
Under Consideration List'' (MUC List) \274\ and received significant 
support from the CBE, and it was recommended that the two measures be 
combined into one.\275\ In response to CBE and public feedback, we are 
proposing this streamlined and combined version of the former two 
measures (88 FR 59185 through 59193). This structural measure applies a 
broad scope of evidence-based best practices, focused on goal centered, 
clinically effective care for older patients in the hospital inpatient 
setting.
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    \274\ Centers for Medicare & Medicaid Services. 2022 MUC List. 
Available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports.
    \275\ 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.
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    We note that past comments have reflected concerns regarding 
structural measures because they do not explicitly link to improved 
outcomes. This is because there is no existing validation process 
confirming the accuracy of hospitals' responses to these types of 
measures. Despite this, structural measures, over time and in select 
circumstances, have certain advantages over other types of measures. 
Structural measures provide a way to address a new topic for which no 
outcome measure exists, such as the Age Friendly Hospital measure, the 
Hospital Commitment to Health Equity measure (87 FR 49191 through 
49201), and the Maternal Morbidity structural measure (86 FR 45361 
through 45365). In these examples, structural measures set a new 
expectation for the development of evidence-based programs and 
processes that will support improvements in these high impact areas. In 
the future, these structural measures can also be linked to new outcome 
measures or included in the Hospital Star Ratings Program.
(2) Overview of Measure
    The Age Friendly Hospital measure assesses hospital commitment to 
improving care for patients 65 years or older receiving services in the 
hospital, operating room, or emergency department. This measure 
consists of five domains that address essential aspects of clinical 
care for older patients. Table IX.C.1 includes the five

[[Page 36309]]

attestation domains and corresponding attestation statements.
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BILLING CODE 4120-01-C
(3) Measure Alignment to Strategy
    This measure aligns with our efforts under the CMS National Quality 
Strategy priority area of ``Equity and Engagement'' that seeks to 
advance equity and whole-person care as well as to engage individuals 
and communities to become partners in their care.\276\ This measure 
additionally aligns with the CMS National Quality Strategy priority 
area of ``Outcomes and Alignment'' that aims to improve quality and 
health outcomes across the care journey including the objective to 
improve quality in high-priority clinical areas and supportive 
services.\277\
---------------------------------------------------------------------------

    \276\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \277\ Ibid.
---------------------------------------------------------------------------

    The domains and attestation statements in this measure span the 
breadth of the clinical care pathway and, together, provide a framework 
for optimal care of the older adult patient. More specifically, the 
domains focus on patient goals, medication management, frailty, social 
vulnerability, and leadership/governance commitment. This structural 
measure identifies the best evidence-based practices for hospital 
leadership, operations, and high reliability across each domain, 
particularly with the unavailability of more direct metrics related to 
each of the domains. In addition, this measure complements current 
patient safety reporting, supports hospitals in improving the quality 
of care for a complex patient population, and furthers our commitment 
to advancing health equity among the diverse older communities served 
by participants in CMS programs.
(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this proposed rule for details 
on the PRMR process including the voting procedures used to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List),278 279 including the Age

[[Page 36310]]

Friendly Hospital measure (MUC2023-219), and to vote on a 
recommendation with regard to use of this measure.
---------------------------------------------------------------------------

    \278\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \279\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The PRMR Hospital Recommendation Group for the Age Friendly 
Hospital measure did not reach consensus and did not recommend 
including this measure in the Hospital IQR Program either with or 
without conditions. Eleven of the sixteen members of the group 
recommended adopting the measure into the Hospital IQR Program without 
conditions; zero members recommended adoption with conditions; five 
committee members voted not to recommend the measure for adoption. No 
voting category reached 75 percent or greater, including the 
combination of the recommend and the recommend with conditions 
categories. Thus, the committee did not reach consensus and did not 
recommend including this measure in the Hospital IQR Program either 
with or without conditions.
    Several PRMR Hospital Committee members applauded the intent of 
this measure and the push toward transparency and consistency in 
reporting, noting these types of measures signal to hospital leadership 
and governance the importance of prioritizing initiatives and 
implementing frameworks outlined in the measure, highlighting how 
important this specific measure is for prioritizing improving care for 
older patients.\280\ PRMR Hospital Committee members also commented on 
the measure's flexibility regarding screening tools noting it was not 
overly prescriptive.\281\ Several PRMR Hospital Committee members noted 
concerns about structural measures in general and whether they drive 
action.\282\ Specifically, PRMR Hospital Committee members expressed 
concerns that the measure domains were not tightly scoped enough to 
drive discrete action. We acknowledge the concerns identified by the 
PRMR Hospital Committee members. Nevertheless, we have concluded that 
this measure does support reliable practices that drive change, 
transparent reporting, and prioritization of resources to implement 
these best practices. The measure was developed from a large 
collaborative that has evaluated the elements incorporated into these 
domains across many different geographic locations, hospital sizes, and 
patient demographics. We also refer readers to the FY 2024 IPPS/LTCH 
PPS final rule (88 FR 59186) where we discussed previous CBE review of 
the Geriatric Hospital and Geriatric Surgical measures, which were 
combined by the measure developer based on previous CBE recommendations 
to create the Age Friendly Hospital measure. As previously discussed, 
this structural measure plays a role in establishing the foundation for 
health outcome quality measures and that this particular measure would 
support improvements in quality of care in hospitals participating in 
the Hospital IQR Program by filling gaps in care management for older 
adults.
---------------------------------------------------------------------------

    \280\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
    \281\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
    \282\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

(b) Measure Endorsement
    The measure has not been submitted for CBE endorsement at this 
time. We are proposing in this preamble of this proposed rule to adopt 
this measure into the Hospital IQR Program despite the measure not yet 
being endorsed by the CBE. 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. During measure endorsement, the CBE 
considers whether a measure ``is evidence-based, reliable, valid, 
verifiable, relevant to enhanced health outcomes, actionable at the 
caregiver level, feasible to collect and report, and responsive to 
variations in patient characteristics, such as health status, language 
capabilities, race or ethnicity, and income level; and is consistent 
across types of health care providers, including hospitals and 
physicians (section 1890(b)(2)(A) and (B) of the Act).
    We reviewed CBE-endorsed measures and were unable to identify any 
other CBE-endorsed measures on this topic. We are adopting this measure 
pursuant to section 1886(b)(3)(B)(viii)(IX)(bb) of the Act. As 
previously discussed, we have determined this an appropriate topic for 
a measure to be adopted absent endorsement because this measure is 
important for establishing a foundation for future health outcome 
measures and that this measure provides a framework of best practices 
for delivering care to older adults with multiple chronic conditions 
from a hospital and health system perspective.
(5) Measure Calculation
    The Age Friendly Hospital measure consists of five domains, each 
representing a separate domain commitment. Hospitals or health systems 
would need to evaluate and determine whether they can affirmatively 
attest to each domain, some of which have multiple attestation 
statements, for each hospital reported under their CMS certification 
number (CCN). For a hospital or a health system to affirmatively attest 
to a domain, and receive a point for that domain, a hospital or health 
systems would evaluate and determine whether it engaged in each of the 
elements that comprise the domain (see Table IX.C.1), for a total of 
five possible points (one point per domain).
    A hospital or health system would not be able to receive partial 
points for a domain. For example, for Domain 3 (``Frailty Screening and 
Intervention''), a hospital or health system would evaluate and 
determine whether their hospital or health system's processes meet each 
of the corresponding attestation statements described in (A), (B), (C), 
and (D) (see Table IX.C.1). If the hospital or health system's 
processes meet all four attestation statements in Domain 3, the 
hospital or health system would receive a point for that domain. 
However, if the hospital could only affirmatively attest to (B) and 
(C), for example, then no points could be earned for Domain 3. We note 
that because the Hospital IQR Program is a pay-for-reporting program, 
hospitals would receive credit for the reporting of their measure 
results regardless of their responses to the attestation questions.
    For more details on the measure specifications for the Hospital IQR 
Program, we refer readers to the Web-Based Data Collection tab under 
the Hospital IQR Program measures page on QualityNet at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab1

[[Page 36311]]

(or other successor CMS designated websites).
(6) Data Submission and Reporting
    Hospitals and/or health systems are required to submit information 
for structural measures once annually using a CMS-approved web-based 
data collection tool available within the Hospital Quality Reporting 
(HQR) System. We are proposing the mandatory reporting of this measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We refer readers to section IX.C.9. of the preamble of 
this proposed rule for more details on our data submission and deadline 
requirements for structural measures. Specifications for the measure 
will also be posted on the QualityNet web page at: https://qualitynet.cms.gov/inpatient/iqr/measures#tab1 (or other successor CMS 
designated websites).
    We refer readers to section IX.C.9. of this proposed rule for our 
previously finalized structural measure reporting and submission 
requirements. We invite public comment on our proposal to adopt the Age 
Friendly Hospital measure beginning with CY 2025 reporting period/FY 
2027 payment determination.
b. Proposal To Adopt Two Healthcare-Associated Infection (HAI) Measures 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
    Healthcare-associated infections (HAIs) are a major cause of 
illness and death in hospitals, posing a significant threat to patient 
safety. One in 31 hospital patients in the U.S. have a HAI at any given 
time, totaling about 687,000 cases per year.\283\ The CDC estimated 
that about 72,000 patients die from HAIs per year.\284\ HAIs not only 
put patients at risk, but also increase the hospitalization days 
required for patients and add considerably to healthcare costs. The CDC 
estimates that HAIs cost the U.S. healthcare system $28.4 billion per 
year.\285\ Statistics on preventability vary but suggest that 55-70 
percent of HAIs could be prevented through practices including hand 
hygiene, cleaning surfaces with an appropriate antiseptic, and wearing 
gowns and gloves.\286\
---------------------------------------------------------------------------

    \283\ CDC. (2023). HAI Data Portal. Available at: https://www.cdc.gov/hai/data/portal/index.html.
    \284\ Ibid.
    \285\ CDC. (2021). Health Topics--Healthcare-associated 
Infections (HAI). Available at: https://www.cdc.gov/policy/polaris/
healthtopics/hai/
index.html#:~:text=HAIs%20in%20U.S.%20hospitals%20have,least%20%2428.
4%20billion%20each%20year.
    \286\ Bearman, G., Doll, M., Cooper, K. et al. Hospital 
Infection Prevention: How Much Can We Prevent and How Hard Should We 
Try? Curr Infect Dis Rep 21, 2. (2019). https://doi.org/10.1007/s11908-019-0660-2.
---------------------------------------------------------------------------

    Given the high risk to patient safety, we previously adopted the 
National Healthcare Safety Network (NHSN) Catheter-Associated Urinary 
Tract Infection (CAUTI) and NHSN Central Line-Associated Bloodstream 
Infection (CLABSI) measures in various quality reporting programs that 
measure the annual risk-adjusted standardized infection ratio (SIR) 
among adult inpatients. The measures were originally introduced in the 
Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51617 through 51618) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50200 through 50202). In the FY 2014 IPPS/LTCH PPS final rule, the 
CAUTI and CLABSI measures were then moved into the Hospital-Acquired 
Condition (HAC) Reduction Program (78 FR 50717) and the Hospital Value-
Based Purchasing (VBP) Program (78 FR 50681 through 50687). The CAUTI 
and CLABSI measures used in these programs include most major inpatient 
care wards at acute care hospitals, including inpatient psychiatric 
facilities, hospice, inpatient acute care facilities, and inpatient 
rehabilitation facilities. However, locations mapped as oncology wards 
have not been included.
    Patients with cancer are especially vulnerable to developing HAIs. 
Chemotherapy, a common treatment for patients with cancer, can weaken 
patients' immune systems and leave them vulnerable to opportunistic 
infections.\287\ Cancer treatment may also require major surgeries or 
invasive devices, which can act as another vector for infections.\288\ 
It is estimated that 10.5 percent of patients undergoing major cancer 
surgery contract a HAI, compared to only three percent of patients 
undergoing elective surgeries.\289\ Researchers from the same study 
also found that patients undergoing major cancer surgery who contracted 
a HAI were significantly more likely to die in the hospital than 
patients who did not contract a HAI.\290\ In another study, researchers 
found that developing a HAI was linked to higher costs of care and 
longer lengths of stay for patients with cancers of the lip, oral 
cavity, and pharynx.\291\ Therefore in the FY 2013 IPPS/LTCH PPS final 
rule, beginning with the FY 2014 program year, we adopted the CAUTI and 
CLABSI measures in the PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program (77 FR 53557 through 53559).
---------------------------------------------------------------------------

    \287\ da Silva R, Casella T. (2022). Healthcare-associated 
infections in patients who are immunosuppressed due to chemotherapy 
treatment: a narrative review. J Infect Dev Ctries 16:1784-1795. 
doi: 10.3855/jidc.16495.
    \288\ Biscione A, Corrado G, Quagliozzi L, Federico A, Franco R, 
Franza L, Tamburrini E, Spanu T, Scambia G, Fagotti A. Healthcare 
associated infections in gynecologic oncology: clinical and economic 
impact. Int J Gingerol Cancer. 2023 Feb 6;33(2):278-284. doi: 
10.1136/ijgc-2022-003847. PMID: 36581487.
    \289\ Sammon, J., Trinh, V.Q., Ravi, P., Sukumar, S., Gervais, 
M.-K., Shariat, S.F., Larouche, A., Tian, Z., Kim, S.P., Kowalczyk, 
K.J., Hu, J.C., Menon, M., Karakiewicz, P.I., Trinh, Q.-D. and Sun, 
M. (2013), Health care-associated infections after major cancer 
surgery. Cancer, 119: 2317-2324. https://doi.org/10.1002/cncr.28027.
    \290\ Ibid.
    \291\ Sankaran SP, Villa A, Sonis S. Healthcare-associated 
infections among patients hospitalized for cancers of the lip, oral 
cavity and pharynx. Infect Prev Pract. 2021 Jan 13;3(1):100115. doi: 
10.1016/j.infpip.2021.100115. PMID: 34368735; PMCID: PMC8336044.
---------------------------------------------------------------------------

    While many oncology services have transitioned to outpatient 
settings, acute care hospitals continue to specialize in the treatment 
of certain types of patients with cancer, for example, patients who 
have received a hematopoietic stem cell transplant and patients who 
have febrile neutropenia.\292\ Based on an internal CMS analysis, in 
2019 there were 321,961 Medicare beneficiaries with a primary diagnosis 
of cancer who received some portion of their care in an inpatient 
hospital setting. Within these inpatient settings, the majority of 
Medicare beneficiaries with a primary diagnosis of cancer received 
their care at National Cancer Institute (NCI)-designated hospitals or 
other acute care hospitals, while only about four percent of Medicare 
beneficiaries received care at PPS-exempt cancer hospitals (PCHs). 
Additionally, based on internal CMS analysis, a portion of these 
Medicare beneficiaries who received care at a PCH also received at 
least some of their inpatient care at non-PCHs (NCI-affiliated or other 
hospitals).
---------------------------------------------------------------------------

    \292\ CDC. (2019). Basic Infection Control and Prevention Plan 
for Outpatient Oncology Settings. https://www.cdc.gov/hai/settings/outpatient/basic-infection-control-prevention-plan-2011/index.html.
---------------------------------------------------------------------------

    The Biden-Harris administration's Cancer Moonshot Program has put a 
renewed focus on improving outcomes for patients with cancer.\293\ 
Under this initiative, we seek to ensure that patients with cancer 
treated at hospitals reporting to the Hospital IQR Program are able to 
benefit from public reporting of hospital safety data and choose the 
best provider for their needs. We are proposing to adopt the Catheter-
Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio 
Stratified for Oncology Locations and the Central Line-Associated 
Bloodstream Infection (CLABSI)

[[Page 36312]]

Standardized Infection Ratio Stratified for Oncology Locations 
(hereinafter referred to as the CAUTI-Onc measure and CLABSI-Onc 
measure, respectively), beginning with the CY 2026 reporting period/FY 
2028 payment determination. These measures would supplement, not 
duplicate, the existing hospital CAUTI and CLABSI measures, as the 
original hospital CAUTI and CLABSI measures look at hospital inpatients 
except for those in oncology wards, and the CAUTI-Onc and CLABSI-Onc 
measures look only at patients in oncology wards. Our proposals to 
adopt the CAUTI-Onc and CLABSI-Onc measures are part of our renewed 
effort to improve patient safety. We refer readers to the proposal to 
adopt the Patient Safety Structural measure in section IX.B.1. for more 
information.
---------------------------------------------------------------------------

    \293\ The White House. Cancer Moonshot. https://www.whitehouse.gov/cancermoonshot/.
---------------------------------------------------------------------------

(1) Proposal To Adopt the CAUTI-Onc Measure Beginning With the CY 2026 
Reporting Period/FY 2028 Payment Determination
(a) Background
    Urinary tract infections (UTIs) are a common type of HAI and come 
with many risks to patients. About 12-16 percent of adult patients in 
inpatient hospitals will have a urinary catheter at some point during 
their hospital stay, and almost all healthcare associated UTIs are 
introduced through instrumentation in the urinary tract.\294\ 
Furthermore, each day the indwelling urinary catheter remains, a 
patient has between a three and seven percent increased risk of 
acquiring a catheter-associated urinary tract infection.\295\ Based on 
data from the NHSN, the CDC reported that among the 3,780 general acute 
care hospitals that reported data in 2022, there were 20,237 CAUTIs in 
that year.\296\
---------------------------------------------------------------------------

    \294\ CDC. (2024). Urinary Tract Infection (Catheter-Associated 
Urinary Tract Infection [CAUTI] and Non-Catheter-Associated Urinary 
Tract Infection [UTI]) Events. Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf.
    \295\ Ibid.
    \296\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Catheter-Associated Urinary Tract Infections. Available at: 
https://arpsp.cdc.gov/profile/nhsn/cauti.
---------------------------------------------------------------------------

    CAUTIs can lead to many negative consequences for patients 
including cystitis, pyelonephritis, gram-negative bacteremia, 
endocarditis, vertebral osteomyelitis, septic arthritis, 
endophthalmitis, and meningitis.\297\ Other consequences of CAUTIs 
include prolonged hospital stays, higher healthcare costs, and an 
increased likelihood of mortality.\298\
---------------------------------------------------------------------------

    \297\ CDC. (2024). Urinary Tract Infection (Catheter-Associated 
Urinary Tract Infection [CAUTI] and Non-Catheter-Associated Urinary 
Tract Infection [UTI]) Events. Available at: https://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf.
    \298\ Ibid.
---------------------------------------------------------------------------

    However, CAUTIs can often be prevented by following guidelines for 
urinary catheter use, insertion, and maintenance. At a large academic 
hospital system, a study investigated the effects of implementing a 
CAUTI prevention bundle in the intensive care unit (ICU). Prevention 
practices in this bundle included reducing unnecessary catheter use, 
following proper catheter maintenance, and ordering a urine culture 
only when warranted by a clear indication. The research team also 
updated the electronic health record (EHR) system to support compliance 
with these prevention guidelines. Researchers found that the CAUTI 
rates in the ICU decreased from 6.0 CAUTIs per 1,000 urinary catheter 
days to 0.0. The rest of the hospital then implemented the CAUTI 
prevention bundle, leading to a decrease in CAUTI rates from 2.0 cases 
per 1,000 catheter days to 0.6 cases per 1,000 catheter days.\299\
---------------------------------------------------------------------------

    \299\ Sampathkumar, P., Barth, J. W., Johnson, M., Marosek, N., 
Johnson, M., Worden, W., Lembke, J., Twing, H., Buechler, T., 
Dhanorker, S., Keigley, D., & Thompson, R. (2016). Mayo Clinic 
Reduces Catheter-Associated Urinary Tract Infections Through a 
Bundled 6-C Approach. Joint Commission journal on quality and 
patient safety, 42(6), 254-261. https://doi.org/10.1016/s1553-7250(16)42033-7.
---------------------------------------------------------------------------

    In another study, nurses at a large urban teaching hospital 
implemented CAUTI prevention protocols, including removing catheters 
from patients no longer needing them and finding alternatives to 
indwelling urinary catheters. As a result of this initiative, catheter 
days decreased by 11.8 percent and CAUTI rates declined by 38 
percent.\300\ More information on the prevention of CAUTIs is available 
in the CDC's Guideline for Prevention of Catheter-associated Urinary 
Tract Infections, including recommendations regarding who should 
receive a catheter, catheter insertion, proper insertion techniques, 
maintenance, quality improvement, and surveillance.\301\
---------------------------------------------------------------------------

    \300\ Baker, Susan BSN, RN; Shiner, Darcy BSN, RN; Stupak, Judy 
MSN, RN, CNRN; Cohen, Vicki MSN, RN, CNRN; Stoner, Alexis BSN, RN. 
Reduction of Catheter-Associated Urinary Tract Infections: A 
Multidisciplinary Approach to Driving Change. Critical Care Nursing 
Quarterly 45(4):p 290-299, October/December 2022. [verbar] DOI: 
10.1097/CNQ.0000000000000429.
    \301\ CDC. (2019). Guideline for Prevention of Catheter-
Associated Urinary Tract Infections. Available at: https://www.cdc.gov/infectioncontrol/guidelines/cauti/index.html.
---------------------------------------------------------------------------

    To encourage the use of best practices for urinary catheters and 
reduce the incidence of CAUTIs, we previously adopted the CAUTI measure 
(CBE #0138) to several quality reporting and value-based payment 
programs, including the Hospital IQR, Hospital VBP, and HAC Reduction 
Programs (76 FR 51617 through 51618, 78 FR 50681 through 50687, and 78 
FR 50717, respectively) as discussed earlier. We adopted the measure as 
part of the HHS Action Plan to Prevent HAIs, as this measure was 
included among the prevention metrics established in the plan which is 
available at: https://www.hhs.gov/oidp/topics/health-care-associated-infections/hai-action-plan/index.html. Eventually, in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41547 through 41553), we removed the CAUTI 
measure from the Hospital IQR Program beginning with the CY 2019 
reporting period/FY 2021 payment determination to streamline reporting 
through the HAC Reduction Program.
    As noted earlier, the CAUTI measure used in the HAC Reduction and 
Hospital VBP Programs does not include inpatients in cancer wards. 
Because patients with cancer are especially vulnerable to developing 
HAIs like CAUTIs,\302\ it is important to implement quality reporting 
for patients with cancer, as we have done in adopting the CAUTI measure 
in the PCHQR Program. Significant associations have been found between 
UTIs and post-surgery complications, longer hospitalizations, and 
higher hospital costs among patients with cancer \303\ and post-surgery 
CAUTI incidence has been found to be as high as 12.5 percent in 
specific cancer populations.\304\ Therefore, it is important to address 
the needs of this high-risk population and adopt the CAUTI-Onc measure 
to the Hospital IQR Program. The adoption of this measure would also 
provide more data to compare CAUTI rates between PCHs and non-PCHs.
---------------------------------------------------------------------------

    \302\ da Silva R, Casella T. (2022). Healthcare-associated 
infections in patients who are immunosuppressed due to chemotherapy 
treatment: a narrative review. J Infect Dev Ctries 16:1784-1795. 
doi: 10.3855/jidc.16495.
    \303\ Chan JY, Semenov YR, Gourin CG. Postoperative urinary 
tract infection and short-term outcomes and costs in head and neck 
cancer surgery. Otolaryngol Head Neck Surg. 2013 Apr;148(4):602-10. 
doi: 10.1177/0194599812474595. Epub 2013 Jan 24. PMID: 23348871.
    \304\ Mercadel, A.J., Holloway, S.B., Saripella, M., & Lea, J.S. 
(2023). Risk factors for catheter-associated urinary tract 
infections following radical hysterectomy for cervical cancer. 
American journal of obstetrics and gynecology, 228(6), 718.e1-
718.e7. https://doi.org/10.1016/j.ajog.2023.02.019.
---------------------------------------------------------------------------

(b) Overview of Measure
    We are proposing to adopt the CAUTI-Onc measure for the Hospital 
IQR Program beginning with the CY 2026 reporting period/FY 2028 payment 
determination. The purpose of this

[[Page 36313]]

measure is to encourage the use of best practices for urinary catheters 
as set by the CDC and to reduce the incidence of CAUTIs for patients 
with cancer. To report this measure, hospitals will need to verify that 
all locations, including those housing oncology patients, are correctly 
mapped in NHSN.
    Reducing CAUTI incidence through the adoption of this measure could 
lead to improved cancer patient outcomes, including reduced morbidity 
and mortality, less need for antimicrobials, and reduced patient length 
of stays and medical costs.\305\
---------------------------------------------------------------------------

    \305\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

(c) Measure Alignment to Strategy
    The proposal to adopt the CAUTI-Onc measure supports the CMS 
National Quality Strategy priority area of ``Safety and Resiliency.'' 
\306\ Specifically, this supports our safety goal to ``achieve zero 
preventable harm,'' and to expand the collection and use of safety 
indicator data across programs for key areas to improve tracking and 
show progress toward reducing harm. The adoption of this measure 
additionally supports the ``Outcomes and Alignment'' priority area in 
the CMS National Quality Strategy by collaborating with other federal 
agencies, namely the CDC, to promote alignment in quality measurement 
and close the existing reporting gap among vulnerable patients with 
cancer in inpatient settings.\307\ This proposal to adopt the CAUTI-Onc 
measure not only supports two of the CMS National Quality Strategy 
priority areas, it also supports the Biden-Harris Administration's 
Cancer Moonshot program that aims to improve outcomes for patients with 
cancer.
---------------------------------------------------------------------------

    \306\ CMS National Quality Strategy. (2023). Available at: 
https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \307\ Ibid.
---------------------------------------------------------------------------

(d) Pre-Rulemaking Process and Measure Endorsement
(i) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this proposed rule for details 
on the PRMR process, including the voting procedures used to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List), including the CAUTI-Onc measure (MUC2023-220),308 309 
and to vote on a recommendation with regard to use of this measure 
recommendation with regard to use of this measure.\310\
---------------------------------------------------------------------------

    \308\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \309\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \310\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

    The PRMR Hospital Committee reached consensus and recommended 
including this measure in the Hospital IQR Program with conditions. 
Fourteen members of the group recommended adopting the measure into the 
Hospital IQR Program without conditions; four members recommended 
adoption with conditions; and one committee member voted not to 
recommend the measure for adoption. Taken together, 94.7 percent of the 
votes recommended this measure in the Hospital IQR Program with 
conditions.\311\
---------------------------------------------------------------------------

    \311\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

    Four members of the voting committee recommended the adoption of 
this measure into the Hospital IQR Program with the first condition 
being that CMS consider expanding the reporting period. This would 
increase the patient volume included in the denominator and increase 
precision. We have reviewed this recommendation and concluded that 
expanding the reporting period would result in a critical loss in the 
ability to observe changes in the SIR over time. Obscuring any 
observable changes in the SIR would degrade the measure's ability to 
assess prevention efforts and further drive quality improvement. 
Therefore, we are proposing this measure for adoption without the 
modification suggested by four committee members in order to preserve 
the measure's ability to observe changes in the SIR more quickly.
    The second condition the PRMR Hospital Committee recommended for 
the Hospital IQR Program was that the measure should evaluate data by 
oncology unit type, such as hematology-oncology versus solid 
organ.\312\ We acknowledge this condition and may consider it for 
future rulemaking. We are proposing to adopt the CAUTI-Onc measure in 
the Hospital IQR Program having taken into consideration the conditions 
raised by the PRMR Hospital Committee.
---------------------------------------------------------------------------

    \312\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

    The measure received strong support from the committee as it 
addresses an important patient safety concern. During the PRMR Hospital 
Committee's discussion, some expressed concern about the burden of 
manual abstraction. Others asked about the measure's validity, and 
whether the measure should include risk adjustments when HAIs are an 
issue across the board.
    (ii) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the E&M 
process including the measure evaluation procedures the E&M Committees 
use to evaluate measures and whether they meet endorsement criteria. 
The CAUTI measure was most recently submitted to the CBE for 
endorsement review in the Spring 2019 cycle (CBE #0138) and was 
endorsed on October 23, 2019.\313\ In the submission of the CAUTI-Onc 
measures to the 2023 MUC list, the CDC provided additional oncology-
only reliability testing based on existing data submitted to the CDC's 
NHSN. Because the CAUTI-Onc measure has the same specifications as the 
CAUTI measure, with the only difference being that it is stratified for 
oncology locations, additional endorsement of the oncology specific 
locations is not necessary. The calculations pertinent to those 
locations are inherently part of the endorsement performed for the 
CAUTI measure, and the measure (i.e. numerator/denominator) is endorsed 
across all inpatient hospital settings, including oncology locations. 
The calculation of the SIR includes and accounts for the location of 
the patient within the facility. The CDC will incorporate information 
on the stratification by oncology patients during the regularly 
scheduled measure maintenance re-endorsement process.
---------------------------------------------------------------------------

    \313\ Battelle--Partnership for Quality Measurement. NHSN 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure. 
Available at: https://p4qm.org/measures/0138.
---------------------------------------------------------------------------

(e) Measure Specifications
    For this measure, the NHSN calculates the quarterly risk-adjusted 
SIR of CAUTIs among inpatients at acute care hospitals who are in 
oncology

[[Page 36314]]

wards.\314\ The CDC then calculates the SIR using all four quarters of 
data from the reporting period year, which CMS uses for performance 
calculation and public reporting purposes. The CDC defines an oncology 
ward as an area for the evaluation and treatment of patients with 
cancer. For more details, we refer readers to the CDC Locations and 
Descriptions and Instructions for Mapping Patient Care Locations 
document.\315\
---------------------------------------------------------------------------

    \314\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \315\ CDC. (2023). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
---------------------------------------------------------------------------

    The numerator is the number of annually observed CAUTIs among acute 
care hospital inpatients in oncology wards. The denominator is the 
number of annually predicted CAUTIs among acute care hospital 
inpatients in oncology wards. By dividing the number of observed CAUTIs 
by the number of predicted CAUTIs, the SIR compares the actual number 
of cases to the expected number of cases. However, this does not 
preclude SIRs from being ranked. The SIR is calculated when there is at 
least one predicted CAUTI, to achieve a minimum level of 
precision.\316\
---------------------------------------------------------------------------

    \316\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The measure requires a facility to have at least one predicted 
CAUTI before calculating the SIR because the precision of a facility's 
CAUTI rate can vary, especially in low volume hospitals. For this 
reason, the NHSN calculates the SIR instead of reporting the CAUTI rate 
directly. A facility's SIR is not meant to be compared directly to that 
of another facility. Rather, the primary role of the SIR is to compare 
a facility's CAUTI rate to the national rate after adjusting for 
facility- and patient-level risk factors.\317\
---------------------------------------------------------------------------

    \317\ CDC. (2022). NHSN SIR Guide. Available at: https://www.cdc.gov/nhsn/pdfs/ps-analysis-resources/nhsn-sir-guide.pdf.
---------------------------------------------------------------------------

    The numerator and denominator exclude the following because they 
are not considered indwelling catheters by NHSN definitions: suprapubic 
catheters, condom catheters, ``in and out'' catheters, and nephrostomy 
tubes. If a patient has either a nephrostomy tube or a suprapubic 
catheter and also has an indwelling urinary catheter, the indwelling 
urinary catheter will be included in the CAUTI surveillance.\318\
---------------------------------------------------------------------------

    \318\ Battelle--Partnership for Quality Measurement. NHSN 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure. 
Available at: https://p4qm.org/measures/0138.
---------------------------------------------------------------------------

    The SIR also adjusts for various facility and patient-level factors 
that contribute to HAI risk within each facility. For more information 
on the risk adjustment methodology please reference the CDC website at: 
https://www.cdc.gov/nhsn/2022rebaseline/index.html.
(f) Data Submission and Reporting
    We are proposing to collect data for the CAUTI-Onc measure via the 
NHSN, consistent with the current approach for HAI reporting for the 
HAC Reduction and Hospital VBP Programs. The NHSN is a secure, 
internet-based surveillance system maintained and managed by the CDC 
and provided free of charge to providers. To report to the NHSN, 
hospitals must first agree to the NHSN Agreement to Participate and 
Consent form, which specifies how NHSN data will be used, including 
fulfilling CMS's quality measurement reporting requirements for NHSN 
data.\319\
---------------------------------------------------------------------------

    \319\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

    Beginning in 2012, hospitals participating in the Hospital IQR 
Program began reporting CAUTIs in all adult, pediatric, and neonatal 
intensive care locations followed by reporting all adult and pediatric 
medical, surgical, and medical/surgical wards in 2015 using NHSN. 
According to a 2022 CDC report, 3,780 hospitals are reporting CAUTI 
data to NHSN; of these, 478 hospitals reported CAUTI data from at least 
one oncology location.\320\ We anticipate that because most of the 
hospitals which would begin to report the CAUTI-Onc measure for the 
Hospital IQR Program are already reporting via NHSN for CAUTI in other 
locations as well as other measures, they have already set up an 
account. Hospitals currently reporting CAUTI must verify that locations 
housing oncology patients are correctly mapped as an oncology location 
based on NHSN's location mapping guidance for accurate event location 
attribution.
---------------------------------------------------------------------------

    \320\ CDC. (2022). National and State Healthcare-associated 
Infections Progress Report. Available at: https://www.cdc.gov/hai/data/portal/progress-report.html.
---------------------------------------------------------------------------

    Hospitals would report their data for the CAUTI-Onc measure on a 
quarterly basis for the purposes of Hospital IQR Program requirements. 
Presently, hospitals report CAUTI data to the NHSN monthly and the SIR 
is calculated on a quarterly basis. Under the data submission and 
reporting process, hospitals would collect the numerator and 
denominator for the CAUTI-Onc measure each month and submit the data to 
the NHSN. The data from all 12 months would be calculated into 
quarterly reporting periods which would then be used to determine the 
SIR for CMS performance calculation and public reporting purposes. We 
refer readers to the NHSN website for further information about NHSN 
reporting requirements. We refer readers to the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59141) for information on data submission and 
reporting requirements for our most recent updates to data submission 
and reporting requirements for measures submitted via the CDC NHSN.
    We invite public comment on our proposal to adopt the CAUTI-Onc 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination.
(2) Proposal To Adopt the CLABSI-Onc Measure Beginning With the CY 2026 
Reporting Period/FY 2028 Payment Determination
(a) Background
    Central venous catheters (CVCs) are a crucial aspect of hospital 
care for administering medications, fluids, and nutrients to patients, 
as well as running medical tests.\321\ However, they also carry the 
risk of introducing infections, referred to as central line-associated 
bloodstream infections (CLABSIs).\322\ CLABSIs are a leading cause of 
HAIs and are associated with increased morbidity and mortality, 
prolonged hospitalization, and increased costs.\323\
---------------------------------------------------------------------------

    \321\ Medical News Today. (2023). What are central venous 
catheters? Available at: https://www.medicalnewstoday.com/articles/central-venous-catheters.
    \322\ CDC. (2011). Central Line-associated Bloodstream 
Infections: Resources for Patients and Healthcare Providers. 
Available at: https://www.cdc.gov/hai/bsi/clabsi-resources.html#print.
    \323\ Novosad, S.A., Fike, L., Dudeck, M.A., Allen-Bridson, K., 
Edwards, J.R., Edens, C., Sinkowitz-Cochran, R., Powell, K., & 
Kuhar, D. (2020). Pathogens causing central-line-associated 
bloodstream infections in acute-care hospitals-United States, 2011-
2017. Infection control and hospital epidemiology, 41(3), 313-319. 
https://doi.org/10.1017/ice.2019.303.
---------------------------------------------------------------------------

    According to one study, the development of bloodstream infections 
(BSIs) after CVC insertion was associated with longer hospital stays of 
on average seven additional days and a three times higher risk of death 
during the patient's hospital stay.\324\ Additionally, a single CLABSI 
episode

[[Page 36315]]

costs hospitals an estimated $48,108 on average.\325\ While the CLABSI 
SIR has declined by 16 percent since 2015, CLABSIs still remain 
prevalent.\326\ Based on data from the NHSN, the CDC reported that 
among the 3,728 general acute care hospitals that reported data in 
2022, there were 23,389 CLABSIs in that year.\327\
---------------------------------------------------------------------------

    \324\ Brunelli, S.M., Turenne, W., Sibbel, S., Hunt, A., 
Pfaffle, A. (2016). Clinical and economic burden of bloodstream 
infections in critical care patients with central venous catheters. 
Journal of Critical Care, 35, 69-74. https://doi.org/10.1016/j.jcrc.2016.04.035.
    \325\ Agency for Healthcare Research and Quality. (2017). 
Estimating the Additional Hospital Inpatient Cost and Mortality 
Associated With Selected Hospital-Acquired Conditions. Available at: 
https://www.ahrq.gov/hai/pfp/haccost2017-results.html.
    \326\ CDC. (2022). Antibiotic Resistance & Patient Safety 
Portal: Central Line-Associated Bloodstream Infections. Available 
at: https://arpsp.cdc.gov/profile/nhsn/clabsi.
    \327\ Ibid.
---------------------------------------------------------------------------

    In one study conducted on a group of academic medical centers 
across a three-year period, the overall CLABSI rate was 1.73 cases per 
1,000 central-line days.\328\ Another study, retrospectively conducted 
on patients with a CVC in four U.S. hospitals within the same health 
system, found that patients with a CVC who developed a CLABSI had a 
36.6 percent higher likelihood of mortality, and 37 percent higher 
chance of being readmitted compared to patients who did not develop a 
CLABSI. The study also found that the average hospital length of stay 
in patients who developed a CLABSI increased by two days when compared 
to patients without a CLABSI.\329\
---------------------------------------------------------------------------

    \328\ DiBiase, L., Summerlin-Long, S., Stancill, L., Vavalle, 
E., Teal, L., & Weber, D. (2023). Examining CLABSI rates by central-
line type. Antimicrobial Stewardship & Healthcare Epidemiology, 
3(S2), S48-S49. doi:10.1017/ash.2023.288.
    \329\ Chovanec, K., Arsene, C., Gomez, C., Brixey, M., Tolles, 
D., Galliers, J. W., Kopaniasz, R., Bobash, T., & Goodwin, L. 
(2021). Association of CLABSI With Hospital Length of Stay, 
Readmission Rates, and Mortality: A Retrospective Review. Worldviews 
on evidence-based nursing, 18(6), 332-338. https://doi.org/10.1111/wvn.12548.
---------------------------------------------------------------------------

    Following evidence-based guidelines when inserting and maintaining 
central lines can help prevent the occurrence of CLABSIs.\330\ Proper 
central line insertion practices include applying skin antiseptic, 
ensuring proper hand hygiene, using sterile barrier precautions, and 
ensuring the skin preparation agent has dried completely before 
insertion.\331\ One study of 30 long-term acute care hospitals found 
that adoption of a catheter maintenance bundle led to the CLABSI rate 
decreasing by 29 percent.\332\ In another study, researchers 
implemented the standard CDC bundle along with additional measures in a 
large acute care hospital. As a result, the CLABSI rate decreased by 68 
percent from 2013 to 2017.\333\ Despite a large body of evidence 
indicating that adopting a central line bundle decreases CLABSI rates, 
adoption of these best practices remains inconsistent. A systematic 
review of the available literature on hospital adherence to the CDC's 
central line bundle checklist found that none of the medical facilities 
in the studies followed all elements of the bundle, and compliance 
rates remained low in follow-up studies.\334\ For more information on 
the standard CDC bundle, we refer readers to the Guidelines for the 
Prevention of Intravascular Catheter-Related Infections.\335\
---------------------------------------------------------------------------

    \330\ Bell, T., & O'Grady, N. P. (2017). Prevention of Central 
Line-Associated Bloodstream Infections. Infectious disease clinics 
of North America, 31(3), 551-559. https://doi.org/10.1016/j.idc.2017.05.007.
    \331\ CDC. (2011). Central Line-associated Bloodstream 
Infections: Resources for Patients and Healthcare Providers. 
Available at: https://www.cdc.gov/hai/bsi/clabsi-resources.html#print.
    \332\ Grigonis, A. M., Dawson, A. M., Burkett, M., Dylag, A., 
Sears, M., Helber, B., & Snyder, L. K. (2016). Use of a Central 
Catheter Maintenance Bundle in Long-Term Acute Care Hospitals. 
American journal of critical care: an official publication, American 
Association of Critical-Care Nurses, 25(2), 165-172. https://doi.org/10.4037/ajcc2016894.
    \333\ Wei, A. E., Markert, R. J., Connelly, C., & Polenakovik, 
H. (2021). Reduction of central line-associated bloodstream 
infections in a large acute care hospital in Midwest United States 
following implementation of a comprehensive central line insertion 
and maintenance bundle. Journal of infection prevention, 22(5), 186-
193. https://doi.org/10.1177/17571774211012471.
    \334\ Burke, C., Jakub, K., & Kellar, I. (2021). Adherence to 
the central line bundle in intensive care: An integrative review. 
American journal of infection control, 49(7), 937-956. https://doi.org/10.1016/j.ajic.2020.11.014.
    \335\ CDC. (2011). Guidelines for the Prevention of 
Intravascular Catheter-Related Infections. Available at: https://www.cdc.gov/infectioncontrol/guidelines/BSI/index.html.
---------------------------------------------------------------------------

    To encourage adherence to best practices for central line use and 
to reduce the incidence of CLABSIs, we previously adopted the CLABSI 
measure (CBE #0139) to several quality reporting and value-based 
payment programs, including the Hospital IQR, Hospital VBP, and HAC 
Reduction Programs (75 FR 50200 through 50202, 78 FR 50681 through 
50687, and 78 FR 50717, respectively) as discussed earlier. We adopted 
the measure as part of the HHS Action Plan to Prevent HAIs, as this 
measure was included among the prevention metrics established in the 
plan which is available at: https://www.hhs.gov/oidp/topics/health-care-associated-infections/hai-action-plan/index.html. In the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41547 through 41553), we removed the 
CLABSI measure from the Hospital IQR Program beginning with the CY 2019 
reporting period/FY 2021 payment determination to streamline reporting 
through the HAC Reduction Program.
    Currently, the CLABSI measure used in the HAC Reduction and 
Hospital VBP Programs does not include inpatients in cancer wards. 
Because patients with cancer are especially vulnerable to developing 
HAIs like CLABSIs,\336\ it is important to implement quality reporting 
for patients with cancer, as we have done in adopting the CLABSI 
measure in the PCHQR Program. While central lines are a crucial 
component of cancer treatment, they are also associated with at least 
400,000 bloodstream infections in oncology patients every year in the 
U.S.\337\ CLABSIs in patients with cancer may lead to sepsis, require 
interruptions in chemotherapy, and increase the hospital length of 
stay.\338\ CLABSIs among patients with cancer also incur a high 
economic burden, costing the U.S. healthcare system over $18 billion 
annually.\339\ Therefore, it is important to address the needs of this 
high-risk population and adopt the CLABSI-Onc measure to the Hospital 
IQR Program. The adoption of this measure would also provide more data 
to compare CLABSI rates between PCHs and non-PCHs.
---------------------------------------------------------------------------

    \336\ Page, J., Tremblay, M., Nicholas, C., & James, T.A. 
(2016). Reducing Oncology Unit Central Line-Associated Bloodstream 
Infections: Initial Results of a Simulation-Based Educational 
Intervention. Journal of oncology practice, 12(1), e83-e87. https://doi.org/10.1200/JOP.2015.005751.
    \337\ Raad, I., & Chaftari, A.M. (2014). Advances in prevention 
and management of central line-associated bloodstream infections in 
patients with cancer. Clinical infectious diseases: an official 
publication of the Infectious Diseases Society of America, 59 Suppl 
5, S340-S343. https://doi.org/10.1093/cid/ciu670.
    \338\ Page, J., Tremblay, M., Nicholas, C., & James, T.A. 
(2016). Reducing Oncology Unit Central Line-Associated Bloodstream 
Infections: Initial Results of a Simulation-Based Educational 
Intervention. Journal of oncology practice, 12(1), e83-e87. https://doi.org/10.1200/JOP.2015.005751.
    \339\ Raad, I., & Chaftari, A.M. (2014). Advances in prevention 
and management of central line-associated bloodstream infections in 
patients with cancer. Clinical infectious diseases: an official 
publication of the Infectious Diseases Society of America, 59 Suppl 
5, S340-S343. https://doi.org/10.1093/cid/ciu670.
---------------------------------------------------------------------------

(b) Overview of Measure
    We are proposing to adopt the CLABSI-Onc measure to the Hospital 
IQR Program beginning with the CY 2026 reporting period/FY 2028 payment 
determination. The purpose of this measure is to promote CLABSI 
prevention activities and reduce the incidence of CLABSIs for patients 
with cancer. Unlike the version of the measure previously in the 
Hospital IQR Program and that is currently in the HAC Reduction and 
Hospital VBP Programs, this version we are proposing to adopt is 
limited to inpatients at acute care hospitals in oncology wards. To

[[Page 36316]]

report this measure, hospitals would need to verify that all locations, 
including those housing oncology patients, are correctly in NHSN.
    Reducing the CLABSI incidence through the adoption of this measure 
could lead to improved cancer patient outcomes, including reduced 
morbidity and mortality, less need for antimicrobials, and reduced 
patient length of stays and medical costs.\340\
---------------------------------------------------------------------------

    \340\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

(c) Measure Alignment to Strategy
    The proposal to adopt the CLABSI-Onc measure supports the CMS 
National Quality Strategy priority area of ``Safety and Resiliency.'' 
Specifically, this supports our safety goal to ``achieve zero 
preventable harm,'' and to expand the collection and use of safety 
indicator data across programs for key areas to improve tracking and 
show progress toward reducing harm. The adoption of this measure 
additionally supports the ``Outcomes and Alignment'' priority area in 
the CMS National Quality Strategy by collaborating with other federal 
agencies, namely the CDC, to promote alignment in quality measurement 
and close the existing reporting gap among vulnerable patients with 
cancer in inpatient settings.\341\ This proposal to adopt CLABSI-Onc 
not only supports two of the CMS National Quality Strategy priority 
areas, it also supports the Biden-Harris Administration's Cancer 
Moonshot program that aims to improve outcomes for patients with 
cancer.
---------------------------------------------------------------------------

    \341\ CMS National Quality Strategy. (2023). Available at: 
https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
---------------------------------------------------------------------------

(d) Pre-Rulemaking Process and Measure Endorsement
(i) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the PRMR 
process including the voting procedures the PRMR process uses to reach 
consensus on measure recommendations. The PRMR Hospital Committee met 
on January 18-19, 2024, to review measures included by the Secretary on 
a publicly available ``2023 Measures Under Consideration List'' (MUC 
List), including the CLABSI-Onc measure (MUC2023-
219),342 343 and to vote on a recommendation with regard to 
use of this measure.\344\
---------------------------------------------------------------------------

    \342\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \343\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \344\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Fourteen members 
of the group recommended adopting the measure into the Hospital IQR 
Program without conditions; four members recommended adoption with 
conditions; and one committee member voted not to recommend the measure 
for adoption. Taken together, 94.7 percent of the votes recommended the 
measure.\345\
---------------------------------------------------------------------------

    \345\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Final MUC Recommendation Report. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

    Four members of the voting committee recommended the adoption of 
this measure into the Hospital IQR Program, with the first condition 
being that CMS consider expanding the reporting period. This would 
increase the patient volume included in the denominator and increase 
precision. We have reviewed this recommendation and concluded that 
expanding the reporting period would result in a critical loss in the 
ability to observe changes in the SIR over time. Obscuring any 
observable changes in the SIR would degrade the measure's ability to 
assess prevention efforts and further drive quality improvement. 
Therefore, we are proposing this measure for adoption without the 
modification suggested by four committee members in order to preserve 
the measure's ability to observe changes in the SIR more quickly.
    The second condition the committee recommended for the Hospital IQR 
Program was that the measure should evaluate data by oncology unit 
type, such as hematology-oncology versus solid organ.\346\ We 
acknowledge this condition and may consider it for future rulemaking. 
We are proposing to adopt the CLABSI-Onc measure in the Hospital IQR 
Program having taken into consideration the conditions raised by the 
PRMR Hospital Recommendation Committee.
---------------------------------------------------------------------------

    \346\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/PRMR.
---------------------------------------------------------------------------

    The measure received strong support from the committee as it 
addresses an important patient safety concern. During the committee's 
discussion, some expressed concern about the burden of manual 
abstraction. Others asked about the measure's validity, and whether the 
measure should include risk adjustments when HAIs are an issue across 
the board.
(ii) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the E&M 
process including the measure evaluation procedures the E&M Committees 
use to evaluate measures and whether they meet endorsement criteria. 
The CLABSI measure was most recently submitted to the CBE for 
endorsement review in the Spring 2019 cycle (CBE #0139) and was 
endorsed on October 23, 2019.\347\ In the submission of the CLABSI-Onc 
measure to the 2023 MUC list, the CDC provided additional oncology-only 
reliability testing based on existing data submitted to the CDC's NHSN. 
Because the CLABSI-Onc measure has the same specifications as the 
CLABSI measure, with the only difference being that it is stratified 
for oncology locations, additional endorsement of CLABSI-Onc is not 
necessary. The calculations pertinent to those locations are inherently 
part of the endorsement performed for the CLABSI measure, and the 
measure (i.e., numerator/denominator) is endorsed across all inpatient 
hospital settings, including oncology locations. The calculation of the 
SIR includes and accounts for the location of the patient within the 
facility. The CDC will incorporate information on the stratification by 
oncology patients during the regularly scheduled measure maintenance 
re-endorsement process.
---------------------------------------------------------------------------

    \347\ Battelle--Partnership for Quality Measurement. NHSN 
Central Line-Associated Bloodstream Infection (CLABSI) Outcome 
Measure. Available at: https://p4qm.org/measures/0139.
---------------------------------------------------------------------------

(e) Measure Specifications
    For this measure, the NHSN calculates the quarterly risk-adjusted 
SIR of CLABSIs among inpatients at acute care hospitals who are in 
oncology wards.\348\ The CDC then calculates the SIR using all four 
quarters of data from the reporting period year, which CMS uses for 
performance calculation and public reporting purposes. The CDC defines 
an oncology ward as an area for

[[Page 36317]]

the evaluation and treatment of patients with cancer. For more details, 
we refer readers to the CDC Locations and Descriptions and Instructions 
for Mapping Patient Care Locations document.\349\
---------------------------------------------------------------------------

    \348\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \349\ CDC. (2023). CDC Locations and Descriptions and 
Instructions for Mapping Patient Care Locations. Available at: 
https://www.cdc.gov/nhsn/pdfs/pscmanual/15locationsdescriptions_current.pdf.
---------------------------------------------------------------------------

    The numerator is the number of annually observed CLABSIs among 
acute care hospital inpatients in oncology wards. The denominator is 
the number of annually predicted CLABSIs among acute care hospital 
inpatients in oncology wards. By dividing the number of observed 
CLABSIs by the number of predicted CLABSIs, the SIR compares the actual 
number of cases to the expected number of cases. However, this does not 
preclude SIRs from being ranked. The SIR is calculated when there is at 
least one predicted CLABSI, to achieve a minimum level of 
precision.\350\
---------------------------------------------------------------------------

    \350\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The measure requires a facility to have at least one predicted 
CLABSI before calculating the SIR because the precision of a facility's 
CLABSI rate can vary, especially in low volume hospitals. For this 
reason, the NHSN calculates the SIR instead of reporting the CLABSI 
rate directly. A facility's SIR is not meant to be compared directly to 
that of another facility. Rather, the primary role of the SIR is to 
compare a facility's CLABSI rate to the national rate after adjusting 
for facility- and patient-level risk factors.\351\
---------------------------------------------------------------------------

    \351\ CDC. (2022). NHSN SIR Guide. Available at: https://www.cdc.gov/nhsn/pdfs/ps-analysis-resources/nhsn-sir-guide.pdf.
---------------------------------------------------------------------------

    The numerator and denominator exclude the following devices because 
they are not considered central lines: arterial catheters unless in the 
pulmonary artery, aorta or umbilical artery, arteriovenous fistula, 
arteriovenous graft, atrial catheters (also known as transthoracic 
intra-cardiac catheters, those catheters inserted directly into the 
right or left atrium via the heart wall), extracorporeal membrane 
oxygenation (ECMO), hemodialysis reliable outflow (HERO) dialysis 
catheter, intra-aortic balloon pump (IABP) devices, peripheral IV or 
midlines, or ventricular assist devices (VAD). Additionally, CLABSI 
events reported to the NHSN as mucosal barrier injury laboratory-
confirmed bloodstream infections (MBI-LCBIs) are excluded.\352\
---------------------------------------------------------------------------

    \352\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
---------------------------------------------------------------------------

    The SIR also adjusts for various facility and patient-level factors 
that contribute to HAI risk within each facility. For more information 
on the risk adjustment methodology please reference the CDC website at: 
https://www.cdc.gov/nhsn/2022rebaseline/index.html.
(f) Data Submission and Reporting
    We are proposing to collect data for the CLABSI-Onc measure via the 
NHSN, consistent with the current approach for HAI reporting for the 
HAC Reduction and Hospital VBP Programs. The NHSN is a secure, 
internet-based surveillance system maintained and managed by the CDC 
and provided free of charge to providers. To report to the NHSN, 
hospitals must first agree to the NHSN Agreement to Participate and 
Consent form, which specifies how NHSN data will be used, including 
fulfilling CMS's quality measurement reporting requirements for NHSN 
data.\353\
---------------------------------------------------------------------------

    \353\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

    Starting in 2011, facilities operating under the Hospital IQR 
Program began reporting CLABSIs in all adult, pediatric, and neonatal 
intensive care locations followed by reporting all adult and pediatric 
medical, surgical, and medical/surgical wards in 2015 using NHSN. 
According to a 2022 CDC report, 3,728 hospitals are reporting CLABSI 
data to NHSN; of these, 488 hospitals reported data from at least one 
oncology location.\354\ We anticipate that because most of the 
hospitals which would begin to report the CLABSI-Onc measure for the 
Hospital IQR Program are already reporting via NHSN for other measures, 
they have already set up an account. Hospitals currently reporting 
CLABSI must verify that locations housing oncology patients are 
correctly mapped as an oncology location based on NHSN's location 
mapping guidance for accurate event location attribution.
---------------------------------------------------------------------------

    \354\ CDC. (2022). National and State Healthcare-associated 
Infections Progress Report. Available at: https://www.cdc.gov/hai/data/portal/progress-report.html.
---------------------------------------------------------------------------

    Hospitals would report their data for the CLABSI-Onc measure on a 
quarterly basis for the purposes of Hospital IQR Program requirements. 
Presently, hospitals report CLABSI data to the NHSN monthly and the SIR 
is calculated on a quarterly basis. Under the data submission and 
reporting process, hospitals would collect the numerator and 
denominator for the CLABSI-ONC measure each month and submit the data 
to the NHSN. The data from all 12 months would be calculated into 
quarterly reporting periods which would then be used to determine the 
SIR for CMS performance calculation and public reporting purposes. We 
refer readers to the NHSN website for further information about NHSN 
reporting requirements. We refer readers to the FY 2024 IPPS/LTCH PPS 
final rule (88 FR 59141) for information on data submission and 
reporting requirements for our most recent updates to data submission 
and reporting requirements for measures submitted via the CDC NHSN.
    We invite public comment on our proposal to adopt the CLABSI-Onc 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination.
c. Proposal To Adopt the Hospital Harm--Falls With Injury eCQM 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
(1) Background
    Patient falls are among the most common hospital harms reported and 
can increase length of stay and patient costs.355 356 357 It 
has been estimated that there are 700,000-1,000,000 inpatient falls in 
the U.S. annually, with more than one-third resulting in injury and up 
to 11,000 resulting in patient death.358 359 Protocols and 
prevention measures to reduce patient falls with injury include using 
fall risk assessment tools to gauge individual patient risk, 
implementing fall prevention protocols directed at individual patient 
risk

[[Page 36318]]

factors, and implementing environmental rounds to assess and correct 
environmental fall hazards.\360\ There is wide variation in fall rates 
between hospitals which suggests that this is an area where quality 
measurement and further improvement is still 
needed.361 362 363 364
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    \355\ Bysshe, T., Gao, Y., Heaney-Huls, K., et al. (2017). Final 
Report Estimating the Additional Hospital Inpatient Cost and 
Mortality Associated with Selected Hospital Acquired Conditions.
    \356\ Morello, R.T., Barker, A.L., Watts, J.J., Haines, T., 
Zavarsek, S.S., Hill, K.D., Brand, C., Sherrington, C., Wolfe, R., 
Bohensky, M.A., & Stoelwinder, J.U. (2015). The Extra Resource 
Burden of In-hospital Falls: a Cost of Falls Study. The Medical 
Journal of Australia, 203(9), 367. https://doi.org/10.5694/mja15.00296.
    \357\ Dykes, P.C., Curtin-Bowen, M., Lipsitz, S., Franz, C., 
Adelman, J., Adkison, L., Bogaisky, M., Carroll, D., Carter, E., 
Herlihy, L., Lindros, M.E., Ryan, V., Scanlan, M., Walsh, M.A., 
Wien, M., & Bates, D.W. (2023). Cost of Inpatient Falls and Cost-
Benefit Analysis of Implementation of an Evidence-Based Fall 
Prevention Program. JAMA Health Forum, 4(1), e225125. https://doi.org/10.1001/jamahealthforum.2022.5125.
    \358\ AHRQ. (2019). Patient Safety Primer: Falls. Retrieved July 
24, 2019, from AHRQ PSNet website: https://psnet.ahrq.gov/primers/primer/40/Falls.
    \359\ Currie, L. (2008). Fall and Injury Prevention. In E. 
Hughes RG (Ed.), Patient Safety and Quality: An Evidence-Based 
Handbook for Nurses (pp. 195-250). Rockville: Agency for Healthcare 
Research and Quality.
    \360\ Montero-Odasso, M., Van der Velde, N., Martin, F.C., et 
al. (2022). World Guidelines for Falls Prevention and Management for 
Older Adults: A Global Initiative. Age and Ageing, 51(9), 1-36.
    \361\ Staggs, V.S., Mion, L.C., & Shorr, R.I. (2015). Consistent 
Differences in Medical Unit Fall Rates: Implications for Research 
and Practice. Journal of the American Geriatrics Society, 63(5), 
983-987. https://doi.org/10.1111/jgs.13387.
    \362\ Registered Nurses' Association of Ontario. (2017). 
Preventing Falls and Reducing Injury from Falls (4th ed.). Toronto, 
ON: Registered Nurses' Association of Ontario.
    \363\ National Institute of Health and Care Excellence. (2013). 
Falls in Older People: Assessing Risk and Prevention.
    \364\ ACS National Surgical Quality Improvement Program (NSQIP)/
American Geriatrics Society (AGS). (2016). Optimal Perioperative 
Management of the Geriatric Patient: Best Practices Guideline from 
ACS NSQIP/AGS. https://www.facs.org/media/y5efmgox/acs-nsqip-geriatric-2016-guidelines.pdf.
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    Currently there are no electronic clinical quality measures (eCQMs) 
that focus specifically on acute care inpatient falls with major or 
moderate injury in any of the hospital quality reporting or value-based 
purchasing programs. The Patient Safety Indicator (PSI) 90 composite 
measure,\365\ which is currently included in the HAC Reduction Program, 
does include a fall related component, (PSI 08): In Hospital Fall-
Associated Fracture Rate; however, it is a claims-based measure that 
uses a two-year performance period, it is focused on the Medicare Fee 
For Service (FFS) population, and the numerator is limited to fractures 
and does not include other fall-associated major and moderate injuries. 
In the FY 2022 IPPS/LTCH PPS final rule, we highlighted our commitment 
to developing new digital quality measures that assess various aspects 
of patient safety in the inpatient setting (87 FR 49181 through 49190). 
As discussed later in this section of the preamble, the Hospital Harm--
Falls with Injury eCQM provides the opportunity to assess the rate of 
falls that result in a wider range of injuries, in a much larger 
patient population, and using more timely information from patients' 
electronic medical records instead of administrative claims data.
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    \365\ PSI 90 Technical Specification can be found here: https://qualitynet.cms.gov/inpatient/measures/psi/resources.
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(2) Overview of Measure
    The Hospital Harm--Falls with Injury measure is a risk-adjusted 
outcome eCQM. The denominator is inpatient hospitalizations for 
patients aged 18 and older with a length of stay less than or equal to 
120 days that ends during the measurement period. The numerator is 
inpatient hospitalizations where the patient has a fall that results in 
moderate injury (such as lacerations, open wounds, dislocations, 
sprains, and strains) or major injury (such as fractures, closed head 
injuries, internal bleeding). The diagnosis of a fall and of a moderate 
or major injury that was present on admission would be excluded from 
the measure.
    The baseline risk-adjustment model accounts for age and several 
risk factors present on admission (weight loss or malnutrition, 
delirium, dementia, and other neurological disorders).\366\ The risk-
adjustment model has been developed to ensure that hospitals that care 
for sicker and more complex patients are evaluated fairly.\367\ We 
refer readers to the eCQI Resource Center (https://ecqi.healthit.gov/eh-cah) for more details on the measure specifications and risk 
methodology.
---------------------------------------------------------------------------

    \366\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \367\ Ibid.
---------------------------------------------------------------------------

(3) Measure Alignment to Strategy
    This measure aligns with several goals under the CMS National 
Quality Strategy in addition to supporting our re-commitment to better 
patient and healthcare worker safety.\368\ The COVID-19 public health 
emergency (PHE) put significant strain on hospitals and health systems 
which negatively impacted patient safety in routine care delivery, 
highlighting the need to address gaps in safety. Proposing the Hospital 
Harm--Falls with Injury measure is one of several initial actions we 
are taking in response to the President's Council of Advisors on 
Science and Technology (PCAST) call to action to renew ``our nation's 
commitment to improving patient safety.'' \369\ By establishing 
additional safety indicators, such as this measure, we are building a 
stronger, more resilient U.S. healthcare system. We refer readers to 
section IX.B.1. for more details on other efforts toward better patient 
and healthcare workers safety practices and the proposal to adopt the 
Patient Safety Structural measure into the Hospital IQR Program and the 
PCHQR Program.
---------------------------------------------------------------------------

    \368\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \369\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
---------------------------------------------------------------------------

    This measure aligns with the ``Safety and Resiliency'' goal of our 
CMS National Quality Strategy to achieve zero preventable harm, the 
``Equity and Engagement'' goal to ensure that all individuals have the 
information needed to make the best choices and complements the HHS 
National Action Alliance to Advance Patient Safety. By providing 
hospitals with the opportunity to assess the rate of falls with injury 
in a much larger patient population (all-payer) compared to current 
measures such as PSI 08 (limited to Medicare FFS), this measure expands 
the available safety indicator data within CMS programs and promotes 
equitable care for all. This measure additionally supports the 
``Outcomes and Alignment'' goals to improve quality and health outcomes 
by providing hospitals a mechanism to track falls with injury event 
rates and improve falls intervention efforts over time, a key patient 
safety metric across the care journey. Third, this measure supports 
CMS' Interoperability goal to improve quality measure efficiency by 
transitioning to digital measures in CMS quality reporting programs. As 
an eCQM, this measure increases the digital measure footprint and can 
also serve as a potential replacement for the claims-based PSI 08 
measure (reported within the PSI 90 composite) in the future.
(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of the preamble of this is proposed rule for 
details on the PRMR process including the voting procedures used to 
reach consensus on measure recommendations. The PRMR Hospital Committee 
met on January 18-19, 2024, to review measures included by the 
Secretary on a publicly available ``2023 Measures Under Consideration 
List'' (MUC List), including the Hospital Harm--Falls with Injury 
measure (MUC2023-048), and to vote on a recommendation with regard to 
use of this measure.370 371
---------------------------------------------------------------------------

    \370\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \371\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.

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[[Page 36319]]

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the group voted to adopt the measure into the Hospital IQR Program 
without conditions; six members voted to adopt with conditions; one 
committee member voted not to recommend the measure for adoption. Taken 
together, 94.7 percent of the votes were recommended or recommended 
with conditions. The six members who voted to adopt with conditions, 
specified the condition as monitoring unintended for consequences, such 
as use of patient restraints. We agree that the potential for 
unintended consequences exists and note that we consistently monitor 
all of the measures in the Hospital IQR Program for unintended 
consequences. Furthermore, we note that under our previously finalized 
measure removal Factor 6, collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm, if 
we were to identify unintended consequences related to this measure we 
would consider it for removal. Furthermore, we note that various 
programs have been instituted that reduce hospital falls without 
decreasing mobility (such as the Hospital Elder Life Program) \372\ and 
that the benefits of promoting mobility outweigh any increase in fall 
risk.\373\
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    \372\ Hshieh, T.T., Yue, J., Oh, E., Puelle, M., Dowal, S., 
Travison, T., & Inouye, S.K. (2015). Effectiveness of multicomponent 
nonpharmacological delirium interventions: a meta-analysis. JAMA 
internal medicine, 175(4), 512-520. https://doi.org/10.1001/jamainternmed.2014.7779.
    \373\ Montero-Odasso, M., van der Velde, N., Martin, F.C., 
Petrovic, M., Tan, M.P., Ryg, J., Aguilar-Navarro, S., Alexander, 
N.B., Becker, C., Blain, H., Bourke, R., Cameron, I.D., Camicioli, 
R., Clemson, L., Close, J., Delbaere, K., Duan, L., Duque, G., Dyer, 
S.M., . . . Rixt Zijlstra, G.A. (2022). World guidelines for falls 
prevention and management for older adults: a global initiative. Age 
and Ageing, 51(9), 1-36.
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(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the E&M 
process including the measure evaluation procedures the E&M Committees 
uses to evaluate measures and whether they meet endorsement criteria. 
The E&M Management of Acute Events, Chronic Disease, Surgery, and 
Behavioral Health Committee \374\ convened in the Fall 2023 cycle to 
review the Hospital Harm--Falls with Injury measure (CBE #4120e) 
submitted to the CBE for endorsement. The E&M Management of Acute 
Events, Chronic Disease, Surgery, and Behavioral Health Committee 
ultimately voted to endorse the measure on January 29, 2024.\375\
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    \374\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Fall Injury Measure Specifications. Available at: https://p4qm.org/measures/4120e.
    \375\ Battelle--Partnership for Quality Measurement. 2023 
Management of Acute and Chronic Events Meeting Summary. https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events%2C%20Chronic%20Disease%2C%20Surgery%2C%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
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(5) Measure Specifications
    This ratio measure is reported as the number of inpatient 
hospitalizations with falls with moderate or major injury per 1,000 
patient days. The measure is calculated using the following: (Total 
number of encounters with falls with moderate or major injury/total 
number of eligible hospital days) x 1,000. To calculate the numerator 
(that is, the total number of encounters with falls with moderate or 
major injury): (1) identify the initial population (inpatient 
hospitalizations for patients aged 18 and older with a length of stay 
less than or equal to 120 days that ends during the measurement 
period), (2) remove exclusions (patients who had a fall diagnosis 
present at the time the order for inpatient admission occurs), and (3) 
determine if the patient meets numerator criteria (patient has both a 
fall diagnosis and major or moderate injury diagnosis not present on 
admission). Hospital days are measured in 24-hour periods starting from 
the time of arrival at the hospital (including time in the emergency 
department and or observation). The number of hospital days is rounded 
down to whole numbers; any fractional periods are dropped. All data 
elements necessary to calculate the numerator and denominator are 
defined within value sets available in the Value Set Authority Center 
(VSAC).\376\
---------------------------------------------------------------------------

    \376\ To access the value sets for the measure, please visit the 
Value Set Authority Center (VSAC), sponsored by the National Library 
of Medicine, at https://vsac.nlm.nih.gov/.
---------------------------------------------------------------------------

    The measure was tested in 12 hospital test sites with two different 
EHR vendors (Epic and Allscripts) with varying bed size, geographic 
location, and teaching status. Risk-adjusted rates showed substantial 
variation in performance scores across the 12 test hospitals indicating 
ample room for quality improvement.\377\ Test results using one year of 
data indicated strong measure reliability and validity (including 
agreement between data exported from the EHR and data in the patient 
chart).\378\ As PSI 08 uses a two-year performance period, this eCQM 
would allow hospitals to receive more timely information about measure 
performance.
---------------------------------------------------------------------------

    \377\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Falls with Injury. Available at: https://p4qm.org/measures/4120e.
    \378\ Ibid.
---------------------------------------------------------------------------

    We recognize there may be stakeholder concern regarding measure 
duplication with PSI 08 (a component of PSI 90 that is currently 
measured and publicly reported in the HAC Reduction Program). However, 
as described earlier, the Hospital Harm--Falls with Injury eCQM 
provides the opportunity to assess the rate of falls with a wider range 
of injuries in a larger population compared to PSI 08. 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. However, until that time we intend to retain PSI 
08 (within the PSI 90 composite) in the HAC Reduction Program as well 
as include the Hospital Harm--Falls with Injury eCQM in the Hospital 
IQR Program.
(6) Data Submission 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 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 hospital EHRs and measure implementation is 
feasible.
    We are proposing the adoption of the Hospital Harm--Falls with 
Injury eCQM as part of the eCQM measure set beginning with the CY 2026 
reporting period/FY 2028 payment determination. The eCQM measure set is 
the measure set from which hospitals can self-select measures to report 
to meet the eCQM reporting requirement. We refer readers to section 
IX.C.9.c. of this proposed rule for a discussion of our previously 
finalized eCQM reporting and submission requirements, as well as 
proposed modifications for these requirements. Additionally, we refer 
readers to section IX.F.6.a.(2). of the preamble of this proposed rule 
for a discussion of a similar proposal to adopt

[[Page 36320]]

this measure in the Medicare Promoting Interoperability Program.
    We invite public comment on our proposal to adopt the Hospital 
Harm--Falls with Injury eCQM beginning with the CY 2026 reporting 
period/FY 2028 payment determination.
d. Proposal To Adopt the Hospital Harm--Postoperative Respiratory 
Failure eCQM Beginning With the CY 2026 Reporting Period/FY 2028 
Payment Determination
(1) Background
    Postoperative respiratory failure is defined as unplanned 
intubation or prolonged mechanical ventilation (MV) after an 
operation.\379\ It is considered to be the most serious of the 
postoperative respiratory complications because it represents the ``end 
stage'' of several types of pulmonary complications (for example, 
pneumonia, aspiration, pulmonary edema, and acute respiratory distress 
syndrome) and non-pulmonary problems (for example, sepsis, 
oversedation, seizures, stroke, heart failure, pulmonary embolism, and 
fluid overload), and it often results in negative outcomes, including 
prolonged morbidity, longer hospital stays, increased readmissions, 
higher costs, or death.380 381 382 Postoperative respiratory 
failure is potentially preventable with optimal care, such as carefully 
managing intraoperative ventilator use and fluids, reducing surgical 
duration, using regional anesthesia, and preventing wound infection and 
pain.383 384 385 Published data suggest room for 
improvement; a Nationwide Inpatient Sample (NIS) database study of over 
500,000 hospitalizations involving a brain tumor between 2002 and 2010 
found the incidence of postoperative respiratory failure varied by 
hospital characteristics, with higher reported rates of postoperative 
respiratory failure in nonteaching hospitals than teaching hospitals, 
and incidence increased with hospital bed size.\386\
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    \379\ Stocking, J.C., Utter, G.H., Drake, C., Aldrich, J.M., 
Ong, M.K., Amin, A., Marmor, R.A., Godat, L., Cannesson, M., 
Gropper, M.A., & Romano, P.S. (2020). Postoperative Respiratory 
Failure: An Update on the Validity of the Agency for Healthcare 
Research and Quality Patient Safety Indicator 11 in an Era of 
Clinical Documentation Improvement Programs. American Journal of 
Surgery, 220(1), 222-228. https://doi.org/10.1016/j.amjsurg.2019.11.019.
    \380\ Sabate S., Mazo V., Canet J. (2014). Predicting 
Postoperative Pulmonary Complications: Implications for Outcomes and 
Costs. Case Reports in Anesthesiology. 27(2), 201-209.
    \381\ Rosen, A.K., Loveland, S., Shin, M., Shwartz, M., 
Hanchate, A., Chen, Q., Kaafarani, H.M., & Borzecki, A. (2013). 
Examining the impact of the AHRQ Patient Safety Indicators (PSIs) on 
the Veterans Health Administration: the case of readmissions. 
Medical Care, 51(1), 37-44.
    \382\ Lawson E.H., Hall B.L., Louie R., et al. (2013). 
Association Between Occurrence of a Postoperative Complication and 
Readmission: Implications for Quality Improvement and Cost Savings. 
Annals of Surgery, 258(1),10-18.
    \383\ Stocking, J.C., Drake, C., Aldrich, J.M., Ong, M.K., Amin, 
A., Marmor, R.A., Godat, L., Cannesson, M., Gropper, M.A., Romano, 
P.S., Sandrock, C., Bime, C., Abraham, I., & Utter, G.H. (2022). 
Outcomes and Risk Factors for Delayed-onset Postoperative 
Respiratory Failure: A Multi-center Case-control Study by the 
University of California Critical Care Research Collaborative 
(UC\3\RC). BMC Anesthesiology, 22(1), 146.
    \384\ Encinosa, W.E., & Hellinger, F.J. (2008). The Impact of 
Medical Errors on Ninety-day Costs and Outcomes: An Examination of 
Surgical Patients. Health Services Research, 43(6), 2067-2085.
    \385\ Zrelak, P.A., Utter, G.H., Sadeghi, B., Cuny, J., Baron, 
R., & Romano, P.S. (2012). Using the Agency for Healthcare Research 
and Quality patient safety indicators for targeting nursing quality 
improvement. Journal of Nursing Care Quality, 27(2), 99-108.
    \386\ Rahman, M., Neal, D., Fargen, K.M., & Hoh, B.L. (2013). 
Establishing Standard Performance Measures for Adult Brain Tumor 
Patients: A Nationwide Inpatient Sample Database Study. Neuro-
oncology, 15(11), 1580-1588.
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    Currently there are no eCQMs that focus specifically on 
postoperative respiratory failure in the inpatient setting in any of 
the hospital quality reporting or value-based purchasing programs. The 
PSI 90 composite measure,\387\ which is currently included in the HAC 
Reduction Program, does include a postoperative respiratory failure 
related component, (PSI 11): Postoperative Respiratory Failure Rate; 
however, it is a claims-based measure that uses a two-year performance 
period, it is focused on the Medicare FFS population, and is dependent 
upon ICD-10-CM codes. In the FY 2022 IPPS/LTCH PPS final rule, we 
highlighted our commitment to developing new digital quality measures 
that assess various aspects of patient safety in the inpatient setting 
(87 FR 49181 through 49190). The Hospital Harm--Postoperative 
Respiratory Failure eCQM provides the opportunity to assess the rate of 
postoperative respiratory failure in a much larger patient population 
and use more timely information from patients' electronic medical 
records instead of administrative claims data.
---------------------------------------------------------------------------

    \387\ PSI 90 Technical Specification can be found here: https://qualitynet.cms.gov/inpatient/measures/psi/resources.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hospital Harm--Postoperative Respiratory Failure measure is a 
risk-adjusted outcome eCQM. The denominator is elective inpatient 
hospitalizations that end during the measurement period for patients 18 
years old and older without an obstetrical condition and at least one 
surgical procedure was performed within the first three days of the 
encounter.\388\ The numerator is elective inpatient hospitalizations 
for patients with postoperative respiratory failure: For more detail on 
how postoperative respiratory failure is determined we refer readers to 
the measure specifications at the eCQI Resource Center (https://ecqi.healthit.gov/eh-cah).
    The baseline risk-adjustment model accounts for ten comorbidities 
present on admission (weight loss, deficiency anemias, heart failure, 
diabetes with chronic complications, moderate to severe liver disease, 
peripheral vascular disease, pulmonary circulation disease, valvular 
disease, ASA categories 3 through 5) and lab values for oxygen (partial 
pressure), leukocytes, albumin, BUN, bilirubin, and pH of arterial 
blood.\389\ The risk-adjustment ensures that hospitals that care for 
sicker and more complex patients are evaluated fairly.\390\ We refer 
readers to the eCQI Resource Center (https://ecqi.healthit.gov/eh-cah) 
for more details on the measure specifications and risk-adjustment 
methodology.
---------------------------------------------------------------------------

    \389\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \390\ Ibid.
---------------------------------------------------------------------------

(3) Measure Alignment to Strategy
    This measure aligns with several goals under the CMS National 
Quality Strategy in addition to supporting our re-commitment to better 
patient and healthcare worker safety.\391\ The COVID-19 public health 
emergency (PHE) highlighted the need to address gaps in safety by 
putting significant strain on hospitals and health systems which, in 
turn, negatively impacted patient safety. Proposing the Hospital Harm--
Postoperative Respiratory Failure measure is one of several initial 
actions we are taking in response to the President's Council of 
Advisors on Science and Technology (PCAST), call to action to renew 
``our nation's commitment to improving patient safety.'' \392\ By 
establishing additional safety indicators, such as this measure, we are 
building a stronger, more resilient U.S. healthcare system. We refer 
readers to section IX.B.1. for more details on other efforts toward 
better patient and healthcare workers safety practices and the proposal 
to adopt the Patient Safety Structural measure into

[[Page 36321]]

the Hospital IQR Program and the PCHQR Program.
---------------------------------------------------------------------------

    \391\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \392\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
---------------------------------------------------------------------------

    In alignment with the CMS National Quality Strategy \393\ this 
measure supports the ``Safety and Resiliency'' goal to achieve zero 
preventable harm, the ``Equity and Engagement'' goal to ensure that all 
individuals have the information needed to make the best choices and 
complements the HHS National Action Alliance to Advance Patient Safety. 
By providing hospitals the opportunity to assess postoperative 
respiratory failure rates in a much larger patient population (all-
payer) compared to current measures such as PSI 11 (limited to Medicare 
FFS), this measure expands the available safety indicator data within 
CMS programs and promotes equitable care for all. Second, this measure 
supports the ``Outcomes and Alignment'' goals to improve quality and 
health outcomes by providing hospitals a mechanism to track their 
postoperative respiratory failure incidents and improve harm reduction 
efforts over time, a key patient safety metric across the care journey. 
Third, this measure supports CMS' Interoperability goal to improve 
quality measure efficiency by transitioning to digital measures in CMS 
quality reporting programs. As an eCQM, this measure increases the 
digital measure footprint and can also serve as a potential replacement 
for the claims-based PSI 11 measure (reported within the PSI-90 
composite) in the future.
---------------------------------------------------------------------------

    \393\ CMS National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
---------------------------------------------------------------------------

(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the PRMR 
process including the voting used to reach consensus on measure 
recommendations. The PRMR Hospital Committee met on January 18-19, 
2024, to review measures included by the Secretary on a publicly 
available ``2023 Measures Under Consideration List'' (MUC 
List),394 395 including the Hospital Harm--Postoperative 
Respiratory Failure measure (MUC2023-050), and to vote on a 
recommendation for rulemaking for the Hospital IQR Program.
---------------------------------------------------------------------------

    \394\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \395\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the group voted to adopt the measure into the Hospital IQR Program 
without conditions; five members voted to adopt with conditions; two 
committee members voted not to recommend the measure for adoption. 
Taken together, 89.5 percent of the votes were between recommend and 
recommend with conditions. The five members who voted to adopt with 
conditions specified the condition as monitoring unintended 
consequences, such as avoidance of life-saving procedures with higher 
risk for respiratory failure. We agree that the potential for 
unintended consequences exists and note that we consistently monitor 
all of the measures in the Hospital IQR Program for unintended 
consequences. Furthermore, we note that under our previously finalized 
measure removal Factor 6, collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm, if 
we were to identify unintended consequences related to this measure, we 
would consider it for removal. Furthermore, the measure logic allows 
for the use of mechanical ventilation or intubation or extubation 
documentation outside of a procedural area to trigger a postoperative 
respiratory event, thus expanding opportunities for electronic capture 
of information and accommodating varying clinical documentation 
workflows.
(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the E&M 
process including the measure evaluation procedures the E&M Committees 
uses to evaluate measures and whether they meet endorsement criteria. 
The E&M Management of Acute and Chronic Events Committee convened in 
the Fall 2023 cycle to review the Hospital Harm--Postoperative 
Respiratory Failure measure (CBE #4130e) submitted to the CBE for 
endorsement.\396\ The E&M Management of Acute and Chronic Events 
Committee ultimately voted to endorse the measure on January 29, 
2024.\397\
---------------------------------------------------------------------------

    \396\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \397\ Battelle--Partnership for Quality Measurement. Fall 2023 
Management of Acute and Chronic Events Meeting Summary. Available 
at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events%2C%20Chronic%20Disease%2C%20Surgery%2C%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
---------------------------------------------------------------------------

(5) Measure Calculation
    Postoperative respiratory failure is evaluated using MV 
documentation, intubation or extubation documentation to determine if 
an unplanned initiation of MV occurred or if MV was continued without 
interruption after a procedure.
    The following calculation is applied to report the overall 
performance rate: [Number of encounters in numerator/(Number of 
encounters in denominator--Number of encounters in denominator 
exclusions)] x 1,000. All data elements necessary to calculate the 
numerator and denominator are defined within value sets available in 
the VSAC.\398\
---------------------------------------------------------------------------

    \398\ To access the value sets for the measure, please visit the 
Value Set Authority Center (VSAC), sponsored by the National Library 
of Medicine, athttps://vsac.nlm.nih.gov/.
---------------------------------------------------------------------------

    The measure was tested in 12 hospitals (test sites) with two 
different EHR vendors (Epic and Cerner) with varying bed size, 
geographic location, and teaching status. Risk-adjusted rates showed 
substantial variation in performance scores across the 12 test 
hospitals.\399\ Test results indicated high measure reliability and 
validity (including agreement between data exported from the EHR and 
data in the patient chart).\400\
---------------------------------------------------------------------------

    \399\ Battelle--Partnership for Quality Measurement. Hospital 
Harm--Postoperative Respiratory Failure. Available at: https://p4qm.org/measures/4130e.
    \400\ Ibid.
---------------------------------------------------------------------------

(6) Data Submission and Reporting
    This eCQM uses data collected through hospitals' EHRs. The measure 
is designed to be calculated by the hospitals' CEHRT using patient-
level data and then submitted by hospitals to CMS. As with all quality 
measures we develop, testing was performed to confirm the feasibility 
of the measure, data elements, and validity of the numerator, using 
clinical adjudicators who validated the EHR data compared with medical 
chart-abstracted data. Testing demonstrated that all critical data 
elements were reliably and consistently captured in patient EHRs and 
measure implementation is feasible.
    We are proposing the adoption of the Hospital Harm--Postoperative 
Respiratory Failure eCQM as part of the eCQM measure set beginning with 
the CY 2026 reporting period/FY 2028 payment determination. The eCQM

[[Page 36322]]

measure set is the measure set from which hospitals can self-select 
measures to report to meet the eCQM reporting requirement. We refer 
readers to section IX.C.9.c. of this proposed rule for a discussion of 
our previously finalized eCQM reporting and submission policies, as 
well as proposed modifications for these requirements. Additionally, we 
refer readers to section IX.F.6.a.(2). of the preamble of this proposed 
rule for a discussion of a similar proposal to adopt this measure in 
the Medicare Promoting Interoperability Program.
    We invite public comment on our proposal to adopt the Hospital 
Harm--Postoperative Respiratory Failure eCQM beginning with the CY 2026 
reporting period/FY 2028 payment determination.
e. Proposal To Adopt the Thirty-Day Risk-Standardized Death Rate Among 
Surgical Inpatients With Complications (Failure-To-Rescue) Measure 
Beginning With the FY 2027 Payment Determination
(1) Background
    Failure-to-rescue is defined as the probability of death given a 
postoperative complication.401 402 403 Hospitals can 
implement evidence-supported interventions to improve timely 
identification of clinical deterioration and treatment of potentially 
preventable complications, including improved nurse staffing, 
simulation training, standardized communication tools, electronic 
monitoring and/or warning systems, and rapid response 
systems.404 405 406 407 408 409 Studies also show that other 
processes of care can influence failure-to-rescue rates, including a 
hospital's aggressiveness of care (defined as the level of resources or 
inpatient spending), with hospitals that treat patients more 
aggressively (such as providing more inpatient days or ICU days in the 
last 2 years of life) having lower surgical mortality and failure-to-
rescue rates than otherwise similar hospitals that treat patients less 
aggressively.410 411 Hospitals and healthcare providers 
benefit from knowing not only their institution's mortality rate, but 
also their institution's ability to rescue patients after an adverse 
occurrence. Using a failure-to-rescue measure is especially important 
if hospital resources needed for preventing complications are different 
from those needed for rescue.
---------------------------------------------------------------------------

    \401\ Silber J.H., Williams S.V., Krakauer H., Schwartz J.S., 
Hospital and patient characteristics associated with death after 
surgery. A study of adverse occurrence and failure to rescue. Med. 
Care. 1992 Jul.;30(7):615-29. doi: 10.1097/00005650-199207000-00004.
    \402\ Needleman J., Buerhaus P., Mattke S., Stewart M., 
Zelevinsky K., Nurse-staffing levels and the quality of care in 
hospitals. N. Engl. J. Med. 2002 May 30;346(22):1715-22. doi: 
10.1056/NEJMsa012247.
    \403\ Portuondo J.I., Shah S.R., Singh H., Massarweh N.N., 
Failure to Rescue as a Surgical Quality Indicator: Current Concepts 
and Future Directions for Improving Surgical Outcomes. 
Anesthesiology. 2019 Aug.;131(2):426-437. doi: 10.1097/
ALN.0000000000002602.
    \404\ Silber, J.H., Rosenbaum, P.R., Ross, R. (1995). Comparing 
the Contributions of Groups of Predictors: Which Outcomes Vary with 
Hospital Rather than Patient Characteristics? Journal of the 
American Statistical Association, 90(429), 7-18. https://doi.org/10.2307/2291124.
    \405\ Liao, L.M., Sun, X.Y., Yu, H., & Li, J.W. (2016). The 
Association of Nurse Educational Preparation and Patient Outcomes: 
Systematic Review and Meta-Analysis. Nurse Education Today, 42, 9-
16. https://doi.org/10.1016/j.nedt.2016.03.029.
    \406\ Burke, J.R., Downey, C., & Almoudaris, A.M. (2022). 
Failure to Rescue Deteriorating Patients: A Systematic Review of 
Root Causes and Improvement Strategies. Journal of Patient Safety, 
18(1), e140-e155. https://doi.org/10.1097/PTS.0000000000000720.
    \407\ Hall K.K., Lim A., Gale B. (2020). Failure To Rescue. In: 
Hall, K.K., Shoemaker-Hunt, S., Hoffman, et al. Making Healthcare 
Safer III: A Critical Analysis of Existing and Emerging Patient 
Safety Practices. Agency for Healthcare Research and Quality (US).
    \408\ Hall K.K., Lim A., Gale B. (2020). The Use of Rapid 
Response Teams to Reduce Failure to Rescue Events: A Systematic 
Review. Journal of Patient Safety.16(3S Suppl 1):S3-S7.
    \409\ Johnston, M.J., Arora, S., King, D., Bouras, G., 
Almoudaris, A.M., Davis, R., & Darzi, A. (2015). A Systematic Review 
to Identify the Factors that Affect Failure to Rescue and Escalation 
of Care in Surgery. Surgery, 157(4), 752-763. https://doi.org/10.1016/j.surg.2014.10.017.
    \410\ Kaestner, R., & Silber, J.H. (2010). Evidence on the 
Efficacy of Inpatient Spending on Medicare Patients. The Milbank 
Quarterly, 88(4), 560-594.
    \411\ Silber, J.H., Kaestner, R., Even-Shoshan, O., Wang, Y., & 
Bressler, L.J. (2010). Aggressive Treatment Style and Surgical 
Outcomes. Health Services Research, 45(6 Pt 2), 1872-1892.
---------------------------------------------------------------------------

    This Failure-to-Rescue measure was designed to improve upon the CMS 
Patient Safety Indicator 04 Death Rate Among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI 04) measure in the Hospital 
IQR Program. We refer readers to section IX.C.6.a. for our proposal to 
remove the CMS PSI 04 measure contingent upon the adoption of the 
Failure-to-Rescue measure. Both the Failure-to-Rescue measure and the 
CMS PSI 04 measure focus on hospitals' ability to rescue patients who 
experience clinically significant complications after inpatient 
operations, so that these complications do not result in death. Both 
measures are sensitive to factors such as appropriate nurse staffing 
and nursing skill-mix, which enable hospitals to identify complications 
earlier and intervene effectively to prevent death.
    The proposed Failure-to-Rescue measure directly addresses 
stakeholder concerns about the CMS PSI 04 measure, including:
     Complications sometimes develop before the index operation 
in CMS PSI 04, even before transferring to the index hospital. For 
example, the operation is part of an effort to ``rescue'' the patient.
     The heterogeneous cohort includes patients with very high-
risk surgery (for example, trauma surgery, burn surgery, organ 
transplants, intracranial hemorrhage) and very low-risk surgery (for 
example, eye, ear, urolithiasis).
     Mean length of stay and prevalence of early discharge to 
post-acute facilities vary across hospitals, causing bias in comparing 
performance.
     CMS PSI 04 may slightly disadvantage teaching hospitals, 
even after risk-adjustment, due to residual confounding from unmeasured 
case-mix differences.
    The proposed Failure-to-Rescue measure has four major differences 
compared to CMS PSI 04:
    1. Captures all deaths of denominator-eligible patients within 30 
days of the first qualifying operating room procedure, regardless of 
site.
    2. Limits the denominator to patients in general surgical, 
vascular, and orthopedic Medicare Severity Diagnosis Related Groups 
(MS-DRGs).
    3. Excludes patients whose relevant complications preceded (rather 
than followed) their first inpatient operating room procedure, while 
broadening the definition of denominator-triggering complications to 
include other complications that may predispose to death (for example, 
pyelonephritis, osteomyelitis, acute myocardial infarction, stroke, 
acute renal failure, heart failure/volume overload).
    4. Measure cohort includes Medicare Advantage patients.
    We are proposing to adopt the Failure-to-Rescue measure beginning 
with the performance period of July 1, 2023-June 30, 2025 affecting the 
FY 2027 payment determination.
(2) Overview of Measure
    The Failure-to-Rescue measure is a risk-standardized measure of 
death after hospital-acquired complication. The measure denominator 
includes patients 18 years old and older admitted for certain 
procedures in the General Surgery, Orthopedic, or Cardiovascular 
Medicare Severity Diagnosis Related Groups (MS-DRGs) who were enrolled 
in the Medicare program and had a documented complication that was not 
present on admission. The measure numerator includes patients who died 
within 30 days from the date of their first ``operating room'' 
procedure, regardless of site of death.

[[Page 36323]]

    We refer readers to CMS' QualityNet website: https://qualitynet.cms.gov/inpatient/measures/psi (or other successor CMS 
designated websites) for more details on the measure specifications.
(3) Measure Alignment to Strategy
    The Failure-to-Rescue measure aligns with several goals under the 
CMS National Quality Strategy.\412\ In alignment with the goal to 
``Promote Alignment'' and ``Improved Health Outcomes,'' this outcome-
based measure would allow hospitals to track their institution's 
ability to rescue patients after an adverse occurrence and encourage 
hospitals to focus on early identification and rapid treatment of 
complications, thereby improving the overall quality of care and health 
outcomes of patients in the inpatient setting. In alignment with the 
goal to ``Ensure Safe and Resilient Health Care Systems,'' the Failure-
to-Rescue measure includes a larger patient population than the CMS PSI 
04 measure. The Failure-to-Rescue measure includes Medicare Advantage 
data and the denominator includes a much broader range of hospital-
acquired complications (for example, kidney dysfunction, seizures, 
stroke, heart failure, and wound infection) than the CMS PSI 04 
measure.
---------------------------------------------------------------------------

    \412\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
---------------------------------------------------------------------------

(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to section IX.B.1.c. of the preamble of this 
proposed rule for details on the PRMR process including the voting 
procedures the PRMR process uses to reach consensus on measure 
recommendations. The PRMR Hospital Committee, comprised of the PRMR 
Hospital Advisory Group and PRMR Hospital Recommendation Group, 
reviewed measures included by the Secretary on a publicly available 
``2023 Measures Under Consideration List'' (MUC 
List),413 414 including the Failure-to-Rescue measure 
(MUC2023-049). The PRMR Hospital Recommendation Group reviewed the 
proposed updates to the Failure-to-Rescue measure (MUC2023-049) during 
a meeting on January 18-19, 2024.415 416
---------------------------------------------------------------------------

    \413\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \414\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \415\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \416\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The committee reached consensus and recommended including this 
measure in the Hospital IQR Program with conditions. Twelve members of 
the group voted to adopt the measure into the Hospital IQR Program 
without conditions; five members voted to adopt with conditions; two 
committee members voted not to recommend the measure for adoption. 
Taken together, 89.5 percent of the votes were recommend or recommended 
with conditions. The five members of the voting committee who voted to 
adopt with conditions specified the condition as collecting data to 
evaluate possible unintended consequences, such as hospitals 
encouraging patients to sign a DNR order or enter hospice. We agree 
with the potential for unintended consequences and note that we 
consistently monitor all of the measures in the Hospital IQR Program 
for unintended consequences. Furthermore, we note that under our 
previously finalized measure removal Factor 6, collection or reporting 
of a measure leads to negative unintended consequences other than 
patient harm, if we were to identify unintended consequences related to 
this measure we would consider it for removal.
    Feedback was generally positive with some discussion around whether 
the measure was enough of an improvement on CMS PSI 04. The measure 
developer highlighted several areas of improvement compared to CMS PSI 
04, including increased reliability and validity largely due to the 
application of this measure to both Medicare Advantage and fee-for-
service enrollees, as well as the inclusion of deaths after hospital 
discharge but within 30 days of the index operative procedure.\417\
---------------------------------------------------------------------------

    \417\ Battelle--Partnership for Quality Measurement. (February 
2024). 2023 Pre-Rulemaking Measure Review (PRMR) Meeting Summary: 
Hospital Committee. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-Hospital-Recommendation-Group-Meeting-Summary-Final.pdf.
---------------------------------------------------------------------------

(b) Measure Endorsement
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the E&M 
process including the measure evaluation procedures the E&M Committees 
uses to evaluate measures and whether they meet endorsement criteria. 
The E&M Management of Acute Events, Chronic Disease, Surgery, and 
Behavioral Health Committee convened in the Fall Cycle 2023 to review 
the Failure-to-Rescue measure (CBE #4125) which was submitted to the 
CBE for endorsement. The E&M Management of Acute Events, Chronic 
Disease, Surgery, and Behavioral Health Committee ultimately voted to 
endorse with conditions on January 29th, 2024.\418\ The condition was: 
perform additional reliability testing for endorsement review, namely 
conducting additional simulation analyses of minimum case volume 
adjustments.\419\ We would monitor the data as part of the standard 
measure maintenance.
---------------------------------------------------------------------------

    \418\ Battelle--Partnership for Quality Measurement. (February 
2024). Fall 2023 Management of Acute and Chronic Events Meeting 
Summary. Available at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events,%20Chronic%20Disease,%20Surgery,%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
    \419\ Battelle--Partnership for Quality Measurement. (February 
2024). Fall 2023 Management of Acute and Chronic Events Meeting 
Summary. Available at: https://p4qm.org/sites/default/files/Management%20of%20Acute%20Events,%20Chronic%20Disease,%20Surgery,%20and%20Behavioral%20Health/material/EM-Acute-Chronic-Events-Fall2023-Endorsement-Meeting-Summary.pdf.
---------------------------------------------------------------------------

(5) Measure Calculation
    The measure is calculated using Medicare fee-for-service (FFS) Part 
A inpatient claims data and Medicare Inpatient Encounter data for 
Medicare Advantage enrollees, in combination with validated death data 
from the Medicare Beneficiary Summary File or equivalent resources. CMS 
receives death information from a number of sources: Medicare claims 
data from the Medicare Common Working File (CWF); online date of death 
edits submitted by family members; and benefit information used to 
administer the Medicare program collected from the Railroad Retirement 
Board (RRB) and the Social Security Administration (SSA). Similar to 
the CMS 30-day mortality measures, the ``Valid Date of Death Switch'' 
is used to confirm that the exact day of death has been validated.
    This measure was tested using Medicare inpatient hospital discharge 
data from 2,055 IPPS hospitals with at least 25 eligible discharges 
from January 1, 2021 through June 30, 2022. Hospital-level performance 
rates are depicted in

[[Page 36324]]

Table IX.C-2.\420\ Because lower scores are better the lower 
performance percentiles are better performing hospitals than those in 
the higher percentiles (for example, the hospitals in the fifth 
percentile are the best performing hospitals).
---------------------------------------------------------------------------

    \420\ Battelle--Partnership for Quality Measurement. Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue). Available at: https://p4qm.org/measures/4125.
[GRAPHIC] [TIFF OMITTED] TP02MY24.227

    If hospitals currently in the worst quartile (that is, those at the 
75th percentile) were to improve performance to the performance of 
hospitals in the best quartile (that is, those at the 25th percentile) 
it would represent a 50 percent decrease in the frequency of deaths 
after postoperative complications at those hospitals.\421\
---------------------------------------------------------------------------

    \421\ Ibid.
---------------------------------------------------------------------------

    Test results indicated moderate measure reliability and strong 
validity.\422\
---------------------------------------------------------------------------

    \422\ Ibid.
---------------------------------------------------------------------------

(6) Data Submission and Reporting
    This measure uses readily available administrative claims data 
routinely generated and submitted to CMS for all Medicare 
beneficiaries, which includes Medicare Advantage and Medicare fee-for-
service patients. Hospitals would not be required to report any 
additional data. We have used a similarly designed claims-based measure 
(CMS PSI 04) for over a decade. The Failure-to-Rescue measure would be 
calculated and publicly reported on annual basis using a rolling 24 
months of prior data for the measurement period, consistent with the 
approach currently used for CMS PSI 04 and PSI 90, the Patient Safety 
and Adverse Events Composite.
    We invite public comment on our proposal to adopt the Thirty-day 
Risk-Standardized Death Rate Among Surgical Inpatients with 
Complications (Failure-to-Rescue) measure beginning with the CY 2025 
reporting period/FY 2027 payment determination.
6. Proposed Measure Removals for the Hospital IQR Program Measure Set
    We are proposing to remove five measures: (1) Death Among Surgical 
Inpatients with Serious Treatable Complications (CMS PSI 04) measure 
beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 
payment determination; (2) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Acute Myocardial 
Infarction (AMI) measure beginning with the July 1, 2021-June 30, 2024 
reporting period/FY 2026 payment determination; (3) Hospital-level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Heart Failure (HF) measure beginning with the July 1, 2021-June 30, 
2024 reporting period/FY 2026 payment determination; (4) Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-of-
Care for Pneumonia (PN) measure beginning with the July 1, 2021-June 
30, 2024 reporting period/FY 2026 payment determination; and (5) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 
2021-March 31, 2024 reporting period/FY 2026 payment determination. We 
provide more details on each of these proposals in the subsequent 
sections.
a. Proposal To Remove the Death Among Surgical Inpatients With Serious 
Treatable Complications (CMS PSI 04) Measure Beginning With the CY 2025 
Reporting Period/FY 2027 Payment Determination
    We are proposing to remove the Death Among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI 04) measure, beginning with 
the FY 2027 payment determination associated with the performance 
period of July 1, 2023-June 30, 2025, based on removal Factor 3,\423\ 
the availability of a more broadly applicable measure (across settings, 
populations), or the availability of a measure that is more proximal in 
time to desired patient outcomes for the particular topic. The CMS PSI 
04 measure was adopted into the Hospital IQR Program in the FY 2009 
IPPS/LTCH PPS final rule (73 FR 48607). The CMS PSI 04 measure records 
in-hospital deaths per 1,000 elective surgical discharges, among 
patients ages 18 through 89 years old or obstetric patients with 
serious treatable complications (shock/cardiac arrest, sepsis, 
pneumonia, deep vein thrombosis/pulmonary embolism, or gastrointestinal 
hemorrhage/acute ulcer).\424\ It is a claims-based measure which uses 
claims and administrative data to calculate the measure without any 
additional data collection from hospitals. The measure was previously 
endorsed (CBE #0351), but given the measurement's limitations, 
endorsement was not maintained by the measure steward, and the measure 
has not been updated since 2017.\425\
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    \423\ 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. Removal Factors were codified at Sec.  
412.140. (88 FR 59144).
    \424\ Agency for Healthcare Research and Quality. (2023). AHRQ 
Quality IndicatorsTM (AHRQ QITM) ICD-9-CM 
Specification Version 6.0. Available at: https://qualityindicators.ahrq.gov/Downloads/Modules/PSI/V2023/TechSpecs/PSI_04_Death_Rate_among_Surgical_Inpatients_with_Serious_Treatable_Complications.pdf.
    \425\ Partnership for Quality Measurement. (2023). Death Rate 
among Surgical Inpatients with Serious Treatable Complications (PSI 
04). Available at: https://p4qm.org/measures/0351.
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25579 through 
25580), we proposed to remove this measure under removal Factor 3, 
noting at that time that the Hybrid Hospital-Wide Mortality measure 
(Hybrid HWM) (CBE #3502) was more broadly applicable. Some public 
commenters, however, expressed concerns about replacing CMS PSI 04 with 
the Hybrid HWM measure since the Hybrid HWM measure would report on the 
mortality

[[Page 36325]]

rate of the entire hospital, instead of specifically measuring the 
deaths of surgical inpatients in an effort to assess postoperative 
mortality distinct from hospital-wide mortality (86 FR 45391). Other 
commenters elaborated on this concern stating that by removing a 
postoperative-specific mortality measure, hospitals may lose the 
ability to account for what resources they need to better care for 
surgical inpatients since that population's needs often differs from 
the needs of non-surgical IPPS hospital patients (86 FR 45391 through 
45392).\426\ Some commenters suggested modifications to the existing 
CMS PSI 04 measure such as changing its methodology to refine the types 
of surgical patients and complications included in the measure and to 
expand the measure beyond surgical inpatients (86 FR 45390 through 
45391). Other commenters suggested keeping CMS PSI 04 unchanged because 
of the importance of evaluating patient deaths when assessing patient 
safety and suggested adding more patient safety measures to the 
Hospital IQR Program measure set, expressing their belief that there 
were too few patient safety measures in the program (86 FR 45391). 
After consideration of the public comments on our proposal to remove 
CMS PSI 04 in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25579 
through 25580) we decided not to finalize removal of the measure at 
that time.
---------------------------------------------------------------------------

    \426\ Nilsson, U., Gruen, R., & Myles, P. S. (2020). 
Postoperative recovery: The importance of the team. Anesthesia, 
75(S1). https://doi.org/10.1111/anae.14869.
---------------------------------------------------------------------------

    Since then, we have developed the Thirty-Day Risk-Standardized 
Death Rate Among Surgical Inpatients with Complications (Failure-to-
Rescue) (CBE #4125) measure, as proposed for adoption in section 
IX.C.5.e. of this proposed rule beginning with the FY 2027 payment 
determination. The Failure-to-Rescue measure is a more broadly 
applicable measure that would be more appropriate for inclusion in the 
Hospital IQR Program. Recent studies have indicated that the CMS PSI 04 
measure does not consistently recognize preventable in-hospital deaths 
(failure to rescue cases). A 2023 study indicated that CMS PSI 04 is 
being used to an unknown extent outside of postoperative cases, and 
there is often erroneous categorization of patients as having a CMS PSI 
04 complication.\427\ This same study found significant variation in 
the identification of CMS PSI 04 complications at different procedure 
locations (For example: bedside versus operating room procedures).\428\ 
Therefore, both the temporal and causal relationship attributing a CMS 
PSI 04 complication to patient mortality has been found to be poorly 
understood, particularly because CMS PSI 04 relates to a complication 
being deemed treatable.\429\
---------------------------------------------------------------------------

    \427\ Azad, T.D., Rodriguez, E., Raj, D., Xia, Y., Materi, J., 
Rincon-Torroella, J., Gonzalez, L.F., Suarez, J.I., Tamargo, R.J., 
Brem, H., Haut, E.R., & Bettegowda, C. (2023). Patient Safety 
Indicator 04 Does Not Consistently Identify Failure to Rescue in the 
Neurosurgical Population. Neurosurgery, 92(2), 338-343. https://doi.org/10.1227/neu.0000000000002204.
    \428\ Ibid
    \429\ Ibid.
---------------------------------------------------------------------------

    We are proposing to adopt the Failure-to-Rescue measure to replace 
CMS PSI 04 as a more broadly applicable patient safety indicator and 
one which can better address concerns previously raised by interested 
parties. The Failure-to-Rescue measure assesses the percentage of 
surgical inpatients who experienced a complication and then died within 
30-days from the date of their first ``operating room'' procedure. We 
refer readers to section IX.C.5.e. of this proposed rule for more 
detail on the Failure-to-Rescue measure including the timeline for its 
initial performance, reporting, and payment determination periods.
    While CMS PSI 04 only measures the rate of in-hospital deaths among 
surgical inpatients within a set of serious treatable conditions, the 
Failure-to-Rescue measure assesses the probability of death given a 
postoperative complication and is inclusive of a broader range of 
conditions commonly experienced by surgical inpatients. To best address 
the needs of a broader scope of surgical inpatients and conditions, it 
allows for more context-specific approaches to measure preventable 
deaths due to the highly variable nature of surgical procedures between 
specialties. This highly variable and context-specific nature of 
postoperative cases has been considered a challenge of using CMS PSI 04 
as an effective universal patient safety metric.\430\ There would be 
minimal burden for hospitals associated with replacing CMS PSI 04 with 
the Failure-to-Rescue measure due to the Failure-to Rescue measure's 
data sources, including its use of Medicare Advantage encounter data. 
Thus, the Failure-to-Rescue measure would include a wider range of 
patients and better reflect the true nature of postoperative patient 
safety at institutions. In addition, multiple failure-to-rescue 
measures have been repeatedly validated by their consistent association 
with nurse staffing, nursing skill mix, technological resources, rapid 
response systems, and other activities that improve early 
identification and prompt intervention when complications arise after 
surgery.431 432 433
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    \430\ Azad, T.D., Rodriguez, E., Raj, D., Xia, Y., Materi, J., 
Rincon-Torroella, J., Gonzalez, L.F., Suarez, J.I., Tamargo, R.J., 
Brem, H., Haut, E.R., & Bettegowda, C. (2023). Patient Safety 
Indicator 04 Does Not Consistently Identify Failure to Rescue in the 
Neurosurgical Population. Neurosurgery, 92(2), 338-343. https://doi.org/10.1227/neu.0000000000002204.
    \431\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \432\ Rosero, E.B., Romito, B.T., & Joshi, G.P. (2021). Failure 
to rescue: A quality indicator for postoperative care. Best Practice 
& Research Clinical Anesthesiology, 35(4), 575-589. https://doi.org/10.1016/j.bpa.2020.09.003.
    \433\ Hall K.K., Lim A., Gale B. Failure To Rescue. In: Hall 
K.K., Shoemaker-Hunt S., Hoffman L., et al. Making Healthcare Safer 
III: A Critical Analysis of Existing and Emerging Patient Safety 
Practices [internet]. Rockville (MD): Agency for Healthcare Research 
and Quality (US); 2020 Mar. 2. Available at: https://www.ncbi.nlm.nih.gov/books/NBK555513/.
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    By using the Failure-to-Rescue measure, hospitals can identify 
opportunities to improve their quality of care and patient safety. 
Hospitals and healthcare providers can benefit from knowing not only 
their institution's mortality rate, but also their institution's 
ability to provide each patient with the appropriate and necessary 
standard of care after an adverse occurrence.\434\ Using the Failure-
to-Rescue measure as opposed to the current CMS PSI 04 measure is 
especially important if the hospital resources needed for preventing 
and treating 30-day postoperative complications among surgical 
inpatients are different from those needed for targeted care after an 
adverse event, such as more skilled care personnel or equipment 
specific to postoperative care. From a quality improvement perspective, 
the Failure-to-Rescue measure rate would complement the mortality rate 
to improve our understanding of mortality statistics and identify 
opportunities for improvement.\435\ Therefore, the quality-of-care 
measurement may be improved if both mortality and Failure-to-Rescue 
measure rates are reported instead of relying on the Hybrid HWM measure 
alone. Using the Failure-to-Rescue measure instead of the CMS PSI 04 
measure would allow us to assess an

[[Page 36326]]

expanded population and encourage safe practices for the widest range 
of surgical inpatients.
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    \434\ Rodziewicz T.L., Houseman B., Hipskind J.E. Medical Error 
Reduction and Prevention. [Updated 2023 May 2]. In: StatPearls 
[internet]. Treasure Island (FL): StatPearls Publishing; 2023 Jan-. 
Available at: https://www.ncbi.nlm.nih.gov/books/NBK499956/.
    \435\ Ward, S.T., Dimick, J.B., Zhang, W., Campbell, D.A., & 
Ghaferi, A.A. (2019). Association Between Hospital Staffing Models 
and Failure to Rescue. Annals of surgery, 270(1), 91-94. https://doi.org/10.1097/SLA.0000000000002744.
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    We are proposing to remove the CMS PSI 04 measure from the Hospital 
IQR Program beginning with the FY 2027 payment determination associated 
with the performance period of July 1, 2023-June 30, 2025, contingent 
upon finalizing our proposal to adopt the Failure-to-Rescue measure 
beginning with the FY 2027 payment determination so that there is no 
gap in measuring this important topic area.
    We invite public comment on our proposal to remove the CMS PSI 04 
measure from the Hospital IQR Program beginning with the FY 2027 
payment determination associated with the performance period of July 1, 
2023-June 30, 2025, contingent upon finalizing our proposal to adopt 
the Failure-to-Rescue measure beginning with the FY 2027 payment 
determination.
b. Proposal To Remove Four Clinical Episode-Based Payment Measures 
Beginning With the FY 2026 Payment Determination
    We are proposing to remove four clinical episode-based payment 
measures from the Hospital IQR Program beginning with the FY 2026 
payment determination:
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Acute Myocardial Infarction (AMI) (CBE 
#2431) (AMI Payment) (adopted at 78 FR 50802 through 50805). This 
measure assesses hospital risk-standardized payment associated with a 
30-day episode-of-care for acute myocardial infarction for Medicare FFS 
patients aged 65 or older for any hospital participating in the 
Hospital IQR Program;
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Heart Failure (HF) (CBE #2436) (HF 
Payment) (adopted at 79 FR 50231 through 50235). This measure assesses 
hospital risk-standardized payment associated with a 30-day episode-of-
care for heart failure for Medicare FFS patients aged 65 or older for 
any hospital participating in the Hospital IQR Program;
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Pneumonia (PN) (CBE #2579) (PN Payment) 
(adopted at 79 FR 50227 through 50231). This measure assesses hospital 
risk-standardized payment associated with a 30-day episode-of-care for 
pneumonia for any hospital participating in the Hospital IQR Program 
and includes Medicare FFS patients aged 65 or older; and
     Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode of Care for Elective Primary Total Hip Arthroplasty 
(THA) and/or Total Knee Arthroplasty (TKA) (CBE #3474) (THA/TKA 
Payment) (adopted at 80 FR 49674 through 49680; revised at 87 FR 49267 
through 49269). This measure assesses hospital risk-standardized 
payment (including payments made by CMS, patients, and other insurers) 
associated with a 90-day episode-of-care for elective primary THA/TKA 
for any hospital participating in the Hospital IQR Program and includes 
Medicare FFS patients aged 65 or older.
    The proposed final performance periods for these four payment 
measures are indicated in the following table:
[GRAPHIC] [TIFF OMITTED] TP02MY24.228

    We are proposing to remove the AMI Payment, HF Payment, PN Payment, 
and THA/TKA Payment measures under measure removal Factor 3, the 
availability of a more broadly applicable measure (across settings, 
populations, or the availability of a measure that is more proximal in 
time to desired patient outcomes for the particular topic)--
specifically, the Medicare Spending Per Beneficiary Hospital measure 
(CBE #2158) (MSPB Hospital measure) in the Hospital VBP Program.\436\ 
The MSPB Hospital measure has been intermittently included in the 
Hospital IQR Program's measure set, most recently to update the measure 
specifications in the Hospital VBP Program. The Hospital VBP Program's 
statute requires that measures be publicly reported for one year in the 
Hospital IQR Program prior to the beginning of the performance period 
in the Hospital VBP Program (section 1886(o)(2)(B)(ii) of the Act and 
42 CFR 412.164(b)).\437\ In the FY 2023 IPPS/LTCH PPS final rule, we 
re-adopted the previously removed MSPB Hospital measure into the 
Hospital IQR Program with refinements (87 FR 28529 through 28532) to 
update the measure specifications for purposes of the Hospital VBP 
Program. We subsequently removed it again from the Hospital IQR Program 
and concurrently adopted the refined version into the Hospital VBP 
Program (88 FR 59064 through 59067, 59170 through 59171, respectively). 
We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49257 
through 49263) for more details on this measure's history in the 
Hospital IQR and Hospital VBP Programs.
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    \436\ 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. Removal Factors were codified at Sec.  
412.140. (88 FR 59144).
    \437\ When substantive updates to measure specifications are 
needed, we have had to readopt the measure and updates into the 
Hospital IQR Program first. The measure was initially adopted into 
the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51618) and then was finalized for removal in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41559 through 41560) to deduplicate the 
measure sets across programs and reduce burden for hospitals.
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    The MSPB Hospital measure evaluates hospitals' efficiency and 
resource use relative to the efficiency of the national median 
hospital. The MSPB Hospital measure is a more broadly applicable 
measure because it captures the same data as the four clinical episode-
based payment measures being proposed for removal but incorporates a 
much larger set of conditions and procedures. We note that we recently 
adopted refinements to the MSPB

[[Page 36327]]

Hospital measure to ensure a more comprehensive and consistent 
assessment of hospital performance (87 FR 49257 through 49263, 88 FR 
59064 through 59067). Those refinements allow the measure to capture 
more episodes and adjusted the measure calculation.\438\
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    \438\ These refinements are available in a summary of the 
measure re-evaluation on the CMS QualityNet website, Medicare 
Spending Per Beneficiary (MSPB) Measure Methodology. Available at: 
https://qualitynet.cms.gov/inpatient/measures/hvbp-mspb.
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    The four clinical episode-based payment measures being proposed for 
removal are condition-specific whereas the MSPB Hospital measure is 
not. Although the MSPB Hospital measure does not provide the same level 
of granularity as the four condition-specific measures, the important 
data elements would be captured more broadly under the Hospital VBP 
Program by evaluating and publicly reporting the hospitals' efficiency 
relative to the efficiency of the median national hospital. 
Specifically, the MSPB Hospital measure assesses the cost to Medicare 
for services performed by hospitals and other healthcare providers 
during an episode of care, which includes the three days prior to, 
during, and 30 days following an inpatient's hospital stay.\439\ 
Additionally, providers will continue to receive confidential feedback 
reports containing details on the MSPB Hospital measure.
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    \439\ Centers for Medicare & Medicaid Services. (2023). Medicare 
Spending Per Beneficiary--National https://data.cms.gov/provider-data/dataset/3n5g-6b7f.
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    We note that performance on these four clinical episode-based 
payment measures has either remained stable or decreased since FY 2019. 
Based on an internal CMS analysis, the mean performance for the PN 
Payment, HF Payment, and AMI Payment measures has decreased, while the 
mean performance for the THA/TKA Payment measure has remained stable. 
Considering these performance trends, we highlight that these four 
clinical episode-based payment measures have not been as beneficial in 
recent years to the Hospital IQR Program.
    We invite public comment on our proposal to remove these four 
clinical episode-based payment measures from the Hospital IQR Program 
beginning with the FY 2026 payment determination.
7. Proposed Refinements to Current Measures in the Hospital IQR Program 
Measure Set
    We are proposing refinements to two measures currently in the 
Hospital IQR Program measure set: (1) Global Malnutrition Composite 
Score (GMCS) eCQM, beginning with the CY 2026 reporting period/FY 2028 
payment determination and for subsequent year, and (2) the Hospital 
Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey 
measure beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We provide more details on the GMCS eCQM proposal in the 
subsequent sections and details on the proposed modification to HCAHPS 
Survey measure are in section IX.B.2.e. of this proposed rule.
a. Proposal To Modify the Global Malnutrition Composite Score Measure 
Beginning With the CY 2026 Reporting Period/FY 2028 Payment 
Determination
(1) Background
    The previously finalized GMCS eCQM (CBE #3592e) assesses the 
percentage of hospitalizations for adults 65 years old and older prior 
to the start of the measurement period with a length of stay equal to 
or greater than 24 hours who received optimal malnutrition care during 
the current inpatient hospitalizations where care performed was 
appropriate to the patient's level of malnutrition risk and severity. 
We adopted the GMCS eCQM in the FY 2023 IPPS/LTCH PPS final rule 
beginning with the CY 2024 reporting period/FY 2026 payment 
determination (87 FR 49239 through 49246). We refer readers to the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49241 through 49242) for more 
detailed discussion of the CBE review and endorsement of the current 
GMCS eCQM, which received CBE endorsement in July 2021 (CBE 
#3592e).440 441
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    \440\ Partnership for Quality Measurement. (2023). Global 
Malnutrition Composite Score. Available at: https://p4qm.org/measures/3592e.
    \441\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5120&sectionNumber=1.
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    While we understand the unique challenges malnutrition creates for 
older adults, we also recognize that hospital and disease-related 
malnutrition is not limited to that population (87 FR 49239). Data from 
the Agency for Healthcare Research and Quality (AHRQ) indicate that 
approximately eight percent of all hospitalized adults have a diagnosis 
of malnutrition,\442\ and additional research finds that malnutrition 
and malnutrition risk can be found in 20 to 50 percent of hospitalized 
adults 18 years old and older.\443\ Failure to diagnose and 
insufficient treatment of malnutrition in hospitals is also associated 
with poor institutional coordination between nurses, physicians, and 
other hospital staff regarding screening, diagnosis, and treatment, 
further emphasizing the need to address malnutrition in all 
hospitalized adults.\444\ Because malnutrition impacts adults of all 
ages, preventive screening and intervention among all hospitalized 
adults 18 years old and older would greatly reduce the risk and improve 
the treatment of malnutrition.\445\ A 2020 study estimated that every 
dollar spent on nutrition interventions in a hospital setting can 
result in up to $99 in savings on subsequent medical care.\446\ 
Screening all patients over age 18 for malnutrition instead of only 
those over age 65 could result in both improved clinical outcomes for 
patients and substantial financial savings for the healthcare system.
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    \442\ United States Agency for Healthcare Research and Quality. 
(2016). Non-maternal and non-neonatal inpatient stays in the United 
States involving malnutrition 2016. Available at: https://hcup-us.ahrq.gov/reports/ataglance/HCUPMalnutritionHospReport_083018.pdf.
    \443\ Kabashneh, S., Alkassis, S., Shanah, L., & Ali, H. (2020). 
A Complete Guide to Identify and Manage Malnutrition in Hospitalized 
Patients. Cureus, 12(6), e8486. https://doi.org/10.7759/cureus.8486.
    \444\ Anghel, S., Kerr, K.W., Valladares, A.F., Kilgore, K.M., & 
Sulo, S. (2021). Identifying patients with malnutrition and 
improving use of nutrition interventions: A quality study in four US 
hospitals. Nutrition, 91-92, 111360. https://doi.org/10.1016/j.nut.2021.111360.
    \445\ Sauer, A.C., Goates, S., Malone, A., Mogensen, K.M., 
Gewirtz, G., Sulz, I., Moick, S., Laviano, A., & Hiesmayr, M. 
(2019). Prevalence of malnutrition risk and the impact of nutrition 
risk on hospital outcomes: Results from nutrition day in the U.S. 
Journal of Parenteral and Enteral Nutrition, 43(7), 918-926. https://doi.org/10.1002/jpen.1499.
    \446\ Suela Sulo, Leah Gramlich, Jyoti Benjamin, Sharon 
McCauley, Jan Powers, Krishnan Sriram & Kristi Mitchell (2020) 
Nutrition Interventions Deliver Value in Healthcare: Real-World 
Evidence, Nutrition and Dietary Supplements, 12:, 139-146, DOI: 
10.2147/NDS.S262364.
---------------------------------------------------------------------------

    Therefore, in this proposed rule, we are proposing to modify the 
GMCS eCQM to expand the applicable population from hospitalized adults 
65 or older to hospitalized adults 18 or older. The modified GMCS eCQM 
would broaden the measure to assess hospitalized adults 18 years old 
and older who received care appropriate to their level of malnutrition 
risk and malnutrition diagnosis, if properly identified.
(2) Measure Alignment to Strategy
    In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49239), we noted 
that the adoption of a malnutrition measure may help address several 
priority areas identified in the CMS Framework for

[[Page 36328]]

Health Equity \447\ (87 FR 49240 through 49241) and expanding the 
current measure's population to include all adults over 18 years old 
would further address these priorities. Malnutrition in the U.S., 
whether caused by challenges from disease and functional limitations, 
food insecurity, other factors, or a combination of causes, is more 
frequently experienced by underserved populations and can thus be a 
contributing factor to health inequities.\448\ Adopting the updated 
measure as proposed would lead to a more diverse population being 
assessed for malnutrition, and by identifying instances of malnutrition 
among younger populations, the benefits of proper nutrition could be 
felt over a lifetime. As part of the CMS National Quality Strategy, the 
modified GMCS eCQM would also address the priority area of ``Promote 
Aligned and Improved Health Outcomes.'' \449\ Under the CMS Meaningful 
Measures 2.0 Initiative, which is a key component of the CMS National 
Quality Strategy, the modified GMCS eCQM addresses the quality 
priorities of ``Seamless Care Coordination,'' ``Person-Centered Care,'' 
and ``Equity.'' It would address these priorities by connecting 
providers at different levels of care to ensure the largest possible 
population of adult patients with in-hospital malnutrition are 
identified and treated using a patient-centered approach.
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    \447\ Centers for Medicare & Medicaid Services. (2023). CMS 
Framework for Health Equity. Available at: https://www.cms.gov/priorities/health-equity/minority-health/equity-programs/framework.
    \448\ Blankenship, J., & Blancato, R.B. (2022). Nutrition 
Security at the Intersection of Health Equity and Quality Care. 
Journal of the Academy of Nutrition and Dietetics, 122(10S), S12-
S19. https://doi.org/10.1016/j.jand.2022.06.017.
    \449\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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(3) Overview of Measure Update
    The modified GMCS eCQM still includes the four component measures 
corresponding to documented best practices as described in the FY 2023 
IPPS/LTCH PPS final rule (87 FR 49241) and in the first column of Table 
IX.C.4. The only change we are proposing is to expand the applicable 
population for this measure. The measure specifications for the 
modified GMCS eCQM can be found on the eCQI Resource Center website, 
available at: https://ecqi.healthit.gov/ecqm/eh/2024/cms0986v2.
(4) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
    We refer readers to the proposed Patient Safety Structural measure 
in section IX.B.1.c. of this proposed rule for details on the PRMR 
process including the voting procedures used to reach consensus on 
measure recommendations. The PRMR Hospital Committee met on January 18-
19, 2024, to review measures included by the Secretary on a publicly 
available ``2023 Measures Under Consideration List'' (MUC 
List),450 451 including the modified GMCS eCQM (MUC2023-
114), to vote on a recommendation with regard to use of this 
measure.452 453
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    \450\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \451\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
    \452\ Centers for Medicare & Medicaid Services. 2023 Measures 
Under Consideration (MUC) List. Available at: https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \453\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

    The PRMR Hospital Committee reached consensus and recommended 
including this measure (MUC2023-114) in the Hospital IQR Program with 
conditions. Fourteen members of the group recommended adopting the 
measure into the Hospital IQR Program without conditions; three members 
recommended adoption with conditions; two committee members voted not 
to recommend the measure for adoption. Taken together, 84.2 percent of 
the votes were recommended with conditions.\454\ The three members who 
voted to adopt with conditions specified the condition as screening and 
assessment includes hospital-acquired malnutrition and high-risk 
nutritional practices in hospitals, such as prolonged fasting for 
rescheduled procedures, and to obtain more feedback from patient 
groups. We agree that the potential for unintended consequences exists 
and note that we consistently monitor all of the measures in the 
Hospital IQR Program for unintended consequences. Furthermore, we note 
that under our previously finalized measure removal Factor 6, 
collection or public reporting of a measure leads to negative 
unintended consequences other than patient harm, if we were to identify 
unintended consequences related to this measure, we would consider it 
for removal.
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    \454\ Battelle--Partnership for Quality Measurement. (February 
2024). Pre-Rulemaking Measure Review Measures Under Consideration 
2023 RECOMMENDATIONS REPORT. Available at: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
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(b) Measure Endorsement
    We refer readers to section IX.B.1.c. of the preamble of this 
proposed rule for details on the E&M process including the measure 
evaluation procedures the E&M Committees, comprised of the E&M Advisory 
Group and E&M Recommendation Group, uses to evaluate measures and 
whether they meet endorsement criteria. The GMCS eCQM was initially 
endorsed in the Fall 2020 cycle by the CBE (CBE #3592e) and is 
scheduled for endorsement review with the proposed modification in 
2024.\455\ 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. 
Here, after reviewing the current measure, we found no measures, other 
than the current GMCS measure, on this topic. We have determined this 
is an appropriate medical topic for us to propose the adoption of an 
unendorsed measure because of its general consistency with the current, 
endorsed measure, and the usefulness of the measure would be 
substantially improved by the proposed modification.
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    \455\ Battelle--Partnership for Quality Measurement. Global 
Malnutrition Composite Score eCQM. Available at: https://p4qm.org/measures/3592e.
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(5) Measure Calculation
    The modified GMCS eCQM would still use 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.
    The modified GMCS eCQM continues to consist of four component 
measures,

[[Page 36329]]

which are first scored separately.\456\ \457\ The overall composite 
score is derived from averaging the individual performance scores of 
the four component measures. The malnutrition component measures are 
all fully specified for use in EHRs. Table IX.C.4 describes each of the 
four measure components with the proposed expanded population.
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    \456\ Valladares A.F., McCauley S.M., Khan M., D'Andrea C., 
Kilgore K., Mitchell K. Development and Evaluation of a Global 
Malnutrition Composite Score. J Acad Nutr Diet. 2022 Feb;122(2):251-
258. doi: 10.1016/j.jand.2021.02.002. Epub 2021 Mar 10. PMID: 
33714687.
    \457\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/.
[GRAPHIC] [TIFF OMITTED] TP02MY24.229

    The modified GMCS eCQM numerator is comprised of the four component 
measures, that are individually scored for patients 18 years old and 
older who are admitted to an acute inpatient hospital. The measure 
denominator is the composite, or total, of the four component measures 
for patients 18 years old and older who are admitted to an acute 
inpatient hospital. The only exclusion for this measure population 
remains as patients whose length of stay is less than 24 hours, the 
same as previously adopted in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49244).
    Each measure component is a proportion with a possible performance 
score of 0 to 100 percent (higher percent reflects better performance). 
After each component score is calculated individually, an unweighted 
average of all four scores is computed to determine the final composite 
score for the individual with a total score ranging from 0 to 100 
percent (higher percent reflects better performance).\458\
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    \458\ Centers for Medicare & Medicaid Services Measures 
Inventory Tool. (2023). Global Malnutrition Composite Score. 
Available at: https://cmit.cms.gov/cmit/#/MeasureView?variantId=5120&sectionNumber=1.
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(6) Data Submission and Reporting
    We are proposing the adoption of the modified GMCS eCQM as part of 
the Hospital IQR Program measure set from which hospitals can self-
select beginning with the CY 2026 reporting period/FY 2028 payment 
determination. Since this modification uses the same data sources and 
collection methods as the current version of the GMCS eCQM, there is 
not expected to be any major impact to workflows or other aspects of 
data collection. The only anticipated change to data collection 
processes is that the data would be collected from a larger patient 
population. We refer readers to section XI.C.9.c. of this proposed rule 
for our previously finalized eCQM reporting and submission 
requirements, as well as proposed modifications for these requirements.
    We also refer readers to section IX.F.6.a.(2). of the preamble of 
this proposed rule for discussion of a similar proposal to adopt this 
measure in the Medicare Promoting Interoperability Program for Eligible 
Hospitals and CAHs.
    We invite public comment on our proposal to modify the GMCS eCQM to 
expand the applicable population from hospitalized adults 65 years old 
or older to hospitalized adults 18 years old or older beginning with 
the CY 2026 reporting period/FY 2028 payment determination.
8. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures
a. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2026 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2026 payment determination including the 
proposed removals of four claims-based payment measures:
BILLING CODE 4120-01-P

[[Page 36330]]

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[[Page 36331]]


b. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2027 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2027 payment determination including the 
proposed adoption of two new structural measures, one new claims-based 
patient safety measure, and the proposed removal of the CMS PSI 04 
measure:
[GRAPHIC] [TIFF OMITTED] TP02MY24.231


[[Page 36332]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.232

c. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2028 Payment Determination
    This table summarizes the previously finalized and proposed 
Hospital IQR Program measure set for the FY 2028 payment determination 
including the proposed adoption of two new Hospital Harm measures, two 
new NHSN measures, proposed modification of the GMCS eCQM, and the 
proposed Updated Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (including Care Transition Measure):

[[Page 36333]]

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[[Page 36334]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.243

d. Summary of Previously Finalized and Proposed Hospital IQR Program 
Measures for the FY 2029 Payment Determination and for Subsequent Years
    This table summarizes the previously finalized and proposed 
Hospital IQR Program measure set for the FY 2029 payment determination 
and for subsequent years:

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BILLING CODE 4120-01-C
9. Form, Manner, and Timing of Quality Data Submission
    We are proposing changes to our reporting and submission 
requirements for eCQMs. There are no proposed changes to the following 
requirements, and thus have been omitted from the Form, Manner, and 
Timing of Quality Data Submission section: procedural requirements; 
data submission requirements for chart-abstracted measures; data 
submission and reporting requirements for hybrid measures; sampling and 
case thresholds for chart-abstracted measures; HCAHPS Survey 
administration and submission requirements; data submission 
requirements for structural measures; data submission and reporting 
requirements for CDC NHSN measures; and data submission and reporting 
requirements for Patient-Reported Outcome-Based Performance Measures 
(PRO-PMs). We refer readers to the QualityNet website at: https://qualitynet.cms.gov/inpatient/iqr (or other successor CMS designated 
websites) for more details on the Hospital IQR Program data submission 
and procedural requirements.
a. Background
    Section 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act 
state that the applicable percentage increase for FY 2015 and each 
subsequent year shall be reduced by one-quarter of such applicable 
percentage increase (determined without regard to sections 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) 
hospital that does not submit data required to be submitted on measures 
specified by the Secretary in a form and manner and at a time specified 
by the Secretary. 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
    Section 412.140(c)(1) of title 42 of the Code of Federal 
Regulations generally requires that a subsection (d) hospital 
participating in the Hospital IQR Program must submit to CMS data on 
measures selected under section 1886(b)(3)(B)(viii) of the Act in a 
form and manner, and at a time, specified by CMS. 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 2024 reporting period/FY 
2026 payment determination, hospitals are collecting and will submit 
eCQM data using the May 2023 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) (42 CFR 412.140(a)). 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.
c. Reporting and Submission Requirements for eCQMs
    We are proposing a progressive increase in the number of mandatory 
eCQMs a hospital must report beginning with the CY 2026 reporting 
period/FY 2028 payment determination. We are not proposing any changes 
to the current eCQM reporting or submission requirements for the CY 
2024 reporting period/FY 2026 payment determination or the CY 2025 
reporting period/FY 2027 payment determination. We provide additional 
detail in our proposal later in this section of the preamble.
(1) Background
    We began requiring hospitals to report on eCQMs in the CY 2016 
reporting period, with a goal of progressively increasing the number of 
eCQMs hospitals are required to report in the Hospital IQR Program 
while also being responsive to hospitals' concerns about timing, 
readiness, and burden associated with the increased number of measures 
(80 FR 49693 through 49698, and 81 FR 57150 through 57157). To allow 
hospitals and their vendors time

[[Page 36337]]

to gain experience with reporting eCQMs we gradually increased the 
number of eCQMs on which hospitals were required to report over the 
course of several years. We required hospitals to report on certain 
specific eCQMs that we prioritized while retaining an element of choice 
by allowing hospitals to self-select some eCQMs. We also gradually 
increased the number of reporting quarters to improve measure 
reliability for public reporting of performance information (84 FR 
42503 through 42505, 85 FR 58932 through 58939, 86 FR 45418, and 87 FR 
49299 through 49302).
    Under our current eCQM reporting policies, hospitals must report 
four calendar quarters of data for each required eCQM: (1) the Safe Use 
of Opioids--Concurrent Prescribing eCQM; (2) the Cesarean Birth eCQM; 
(3) the Severe Obstetric Complications eCQM; and (4) three self-
selected eCQMs; for a total of six eCQMs for the CY 2024 reporting 
period/FY 2026 payment determination and subsequent years (85 FR 58932 
through 58939, 86 FR 45418, and 87 FR 49298 through 49302). We refer 
readers to the QualityNet website for additional information on current 
and previous reporting and submission requirements policies for eCQMs 
at: https://qualitynet.cms.gov/inpatient/measures/ecqm (or other 
successor CMS designated websites).
    In the CY 2024 Medicare Physician Fee Schedule (PFS) final rule (88 
FR 79307 through 79312), we finalized the revisions to the definition 
of CEHRT for the Medicare Promoting Interoperability Program at 42 CFR 
495.4. Specifically, we finalized the addition of a reference to the 
revised name of ``Base EHR definition,'' proposed in the Health Data, 
Technology, and Interoperability: Certification Program Updates, 
Algorithm Transparency, and Information Sharing (HTI-1) proposed rule 
(88 FR 23759, 23905), to ensure, if the HTI-1 proposals were finalized, 
the revised name of ``Base EHR definition'' would be applicable for the 
CEHRT definitions going forward (88 FR 79309 through 79312). We also 
finalized the replacement of our references to the ``2015 Edition 
health IT certification criteria'' with ``ONC health IT certification 
criteria,'' and the addition of the regulatory citation for ONC health 
IT certification criteria in 45 CFR 170.315. We finalized the proposal 
to specify that technology meeting the CEHRT definition must meet ONC's 
health IT certification criteria ``as adopted and updated in 45 CFR 
170.315'' (88 FR 79553). This approach is consistent with the 
definitions subsequently finalized in ONC's HTI-1 final rule, which 
appeared in the Federal Register on January 9, 2024 (89 FR 1205 through 
1210). For additional background and information on this update, we 
refer readers to the discussion in the CY 2024 PFS final rule on this 
topic (88 FR 79307 through 79312).
(2) Proposal To Progressively Increase Mandatory eCQM Reporting 
Beginning With CY 2026 Reporting Period/FY2028 Payment Determination
    Increasing the number of mandatory eCQMs, specifically to include 
the five previously adopted Hospital Harm eCQMs, would support our re-
commitment to better safety practices for both patients and healthcare 
workers to save lives from preventable harms.\459\ Proposing mandatory 
reporting of these Hospital Harms eCQMs are a part of our initial 
actions in responding and joining the President's Council of Advisors 
on Science and Technology (PCAST) call to action to renew ``our 
nation's commitment to improving patient safety.'' \460\ We refer 
readers to section IX.B.1. for more details on other efforts toward 
better patient and healthcare workers safety practices and the proposal 
to adopt the Patient Safety Structural measure into the Hospital IQR 
Program and the PCHQR Program.
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    \459\ AHRQ. (2023). National Action Alliance To Advance Patient 
and Workforce Safety. Available at: https://www.ahrq.gov/cpi/about/otherwebsites/action-alliance.html.
    \460\ President's Council of Advisors on Science and Technology. 
(2023). Report to the President: A Transformational Effort on 
Patient Safety. Available at: https://www.whitehouse.gov/wp-content/uploads/2023/09/PCAST_Patient-Safety-Report_Sept2023.pdf.
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    This proposal also aligns with CMS' National Quality Strategy 
priority area of ``Patient Safety and Resiliency,'' that seeks to 
``improve performance on key patient safety metrics through the 
applications of CMS levers such as quality measurement, payment, health 
and safety standards, and quality improvement support.'' \461\ It is 
important to more comprehensively collect data on these measures from 
all hospitals participating in the Hospital IQR Program instead of 
limiting data collection to just those hospitals that chose to report 
it. Capturing this important quality information is crucial to improve 
surveillance on safety metrics in the Hospital IQR Program and support 
the CMS National Quality Strategy target success goal of reducing 
preventable harm.\462\ Additionally, this proposal aligns with the 
``Interoperability'' goal outlined in the National Quality Strategy 
that eCQMs use standard and interoperable data requirements that are 
less burdensome than other types of measures. By increasing the number 
of required eCQMs, and prioritizing the measures focused on preventable 
hospital harms, we are progressing towards our goal of using all 
digital measures. Thus, we are proposing to increase the number of 
mandatory eCQMs over a two-year period to ultimately require reporting 
on five additional eCQMs. We provide additional details on the 
proposals later in this section of the preamble.
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    \461\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
    \462\ Centers for Medicare & Medicaid Services. (2023). CMS 
National Quality Strategy. Available at: https://www.cms.gov/files/document/cms-national-quality-strategy-handout.pdf.
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(a) Proposal To Change the Reporting and Submission Requirements for 
eCQMs for the CY 2026 Reporting Period/FY 2028 Payment Determination
    Beginning with the CY 2026 reporting period/FY 2028 payment 
determination, we are proposing to modify the eCQM reporting and 
submission requirements to require hospitals to report on the following 
three eCQMs in addition to the existing eCQMs: (1) Hospital Harm--
Severe Hypoglycemia eCQM; (2) Hospital Harm--Severe Hyperglycemia eCQM; 
and (3) Hospital Harm--Opioid-Related Adverse Events eCQM. If this 
proposal is finalized, beginning with the CY 2026 reporting period/FY 
2028 payment determination, hospitals would be required to report four 
calendar quarters of data for a total of nine eCQMs (six specified 
eCQMs and three self-selected eCQMs).
(b) Proposal To Change the Reporting and Submission Requirements for 
eCQMs for the CY 2027 Reporting Period/FY 2029 Payment Determination 
and for Subsequent Years
    Beginning with the CY 2027 reporting period/FY 2029 payment 
determination, we are proposing to modify the eCQM reporting and 
submission requirements to require hospitals to report on the following 
two eCQMs in addition to the eCQMs proposed for the CY 2026 reporting 
period/FY 2028 payment determination: (1) Hospital Harm--Pressure 
Injury eCQM; and (2) Hospital Harm--Acute Kidney Injury eCQM. If this 
proposal is finalized, beginning with the CY 2027 reporting period/FY 
2029 payment determination, hospitals would be required to report four 
calendar quarters of data for a total of

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eleven eCQMs (eight specified eCQMs and three self-selected eCQMs).
    This stepwise approach to increasing the number of required eCQMs 
is in response to public comments noting the burden and resources 
necessary to implement new eCQMs (88 FR 59145 through 59149, and 88 FR 
59149 through 59154), while also balancing the need to prioritize more 
comprehensive reporting on important safety and preventable harm 
metrics. Waiting until the CY 2027 reporting period/FY 2029 payment 
determination to require that hospitals report on these two Hospital 
Harm eCQMs would allow hospitals to experience2 years of self-selecting 
to report on these relatively new eCQMs and build the infrastructure 
necessary to report these measures (88 FR 59145 through 59149, and 88 
FR 59149 through 59154). Therefore, we are proposing to require these 
two measures in the CY 2027 reporting period instead of the CY 2026 
reporting period to provide hospitals with additional time to gain 
experience with these newer measures.
(c) Summary of Proposed Changes to the eCQM Reporting and Submission 
Requirements
    We refer readers to section IIX.C.8. for the full list of eCQMs by 
payment determination in the Hospital IQR Program. If a hospital does 
not have patients that meet the denominator criteria for any of the 
eCQMs included in this proposal, the hospital would submit a zero 
denominator declaration for the measure that allows a hospital to meet 
the reporting requirements for a particular eCQM. We refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50258), 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. A QRDA Category I file with patients meeting the 
initial patient population of the applicable measures, a zero 
denominator declaration, and/or a case threshold exemption all count 
toward a successful submission for eCQMs for the Hospital IQR Program 
(82 FR 38387). The following Table IX.C.9 summarizes our proposed 
policies:
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    We invite public comment on our proposal to increase the number of 
mandatory eCQMs over a two-year period to ultimately require reporting 
on five additional eCQMs beginning with CY 2026 Reporting Period/FY 
2028 Payment Determination. We refer readers to section IX.F.6.b. of 
this proposed rule, in which we propose the same reporting and 
submission requirements under the Medicare Promoting Interoperability 
Program for Eligible Hospitals and Critical Access Hospitals.
10. Validation of Hospital IQR Program Data
    We are proposing changes to our policies for eCQM validation 
scoring processes beginning with validation of eCQMs affecting the FY 
2028 payment determinations.
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 
53553), we finalized the processes and procedures for validation of 
chart-abstracted measures in the Hospital IQR Program for the FY 2015 
payment determination and subsequent years. In the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38398 through 38403), we finalized several 
requirements for the validation of eCQM data, including a policy 
requiring submission of at least 75 percent of sampled eCQM medical 
records in a timely and complete manner for validation (81 FR 57181). 
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58950 through 58952), we 
finalized the existing Hospital IQR Program validation scoring 
processes such that a combined score is calculated based on a weighted 
combination of a hospital's

[[Page 36339]]

validation performance for chart-abstracted measures and eCQMs. Under 
the aligned validation policies, each hospital selected for validation 
is expected to submit medical record data for both chart-abstracted 
measures and eCQMs (85 FR 58942 through 58953). Beginning with 
validation procedures affecting the FY 2024 payment determination, we 
finalized a policy to annually identify one pool of up to 200 hospitals 
selected through random selection and one pool of up to 200 hospitals 
selected using targeting criteria to participate in both chart-
abstracted measure and eCQM validation (85 FR 58942 through 58953).
    We refer readers to 42 CFR 412.140(d) for our codification of 
validation policies and to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49308 through 49310) for a discussion of the most recent changes to 
chart-abstracted and eCQM data validation requirements for the Hospital 
IQR Program wherein we finalized the requirement that hospitals 
selected for validation must submit timely and complete data for 100 
percent of requested records for eCQM validation. We refer readers to 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57178 through 57180) for 
details on the Hospital IQR Program data submission requirements for 
chart-abstracted measures.
b. Proposal To Modify eCQM Data Validation Beginning With the CY 2025 
Reporting Period/FY 2028 Payment Determination
(1) Proposal To Modify eCQM Validation Scoring Beginning With CY 2025 
eCQM Data Affecting the FY 2028 Payment Determination
    Under the existing eCQM data validation policy, as described in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57180 through 57181), the 
accuracy of eCQM data (the extent to which data abstracted for 
validation matches the data submitted in the QRDA I file) has not 
affected a hospital's validation score. Instead, hospitals have been 
scored on the completeness of eCQM medical record data that were 
submitted for the validation process. In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38401), we noted our intention for the accuracy of 
eCQM data validation to affect validation scores in the future.
    We have assessed agreement rates, or the rates by which hospitals' 
reported eCQM data agree with the data resulting from the review 
process that we conduct as part of validation. The agreement rates for 
validation accuracy, which have been confidentially reported to 
hospitals selected for eCQM validation in recent years, are 
consistently robust overall. For example, around 90 percent (national 
average agreement rate) for current eCQMs that would be validated in FY 
2028 (ranging from a low average of about 84 percent for the 
Anticoagulation Therapy for Atrial Fibrillation/Flutter eCQM) to a high 
of average of about 94 percent for the Antithrombotic Therapy by the 
End of Hospital Day Two eCQM), based on FY 2024 validation results. 
With the low end of the average accuracy range being well above a 
passing threshold of 75 percent, it is now appropriate to move forward 
with scoring hospitals' eCQM data based on the accuracy of the data 
submitted for purposes of determining whether a hospital has met the 
validation requirements under the Hospital IQR Program. Therefore, in 
this proposed rule, we are proposing to implement eCQM validation 
scoring based on the accuracy of eCQM data beginning with CY 2025 eCQM 
data affecting the FY 2028 payment determination. By the time our 
proposed eCQM validation scoring methodology would go into effect, we 
will have been validating eCQM data for completeness for 8 years, which 
is ample time for hospitals to have prepared for data to be validated 
based on its accuracy. We would also note that because hospitals are 
already required to submit 100 percent of requested eCQM medical 
records to pass the eCQM validation requirement, there is no additional 
burden to hospitals associated with this proposal to begin scoring the 
submitted records.
    Separately, we are proposing to remove the requirement at Sec.  
412.140(d)(2)(ii) that hospitals submit 100 percent of the requested 
eCQM medical records to pass the eCQM validation requirement and 
proposing that missing eCQM medical records would be treated as 
mismatches, beginning with the validation of CY 2025 eCQM data 
affecting the FY 2028 payment determination. This is the same 
methodology that is applied for missing medical records in chart-
abstracted measure validation to incentivize the timely submission of 
requested medical records. Because mismatches count against the 
agreement rate, by treating missing eCQM medical records as mismatches, 
we can ensure our validation scoring methodology clearly requires that 
hospitals submit all necessary eCQM data for our review without also 
requiring medical records submissions.
    We are proposing that eCQM validation scores be determined using 
the same methodology that is currently used to score chart-abstracted 
measure validation. Hospitals' eCQM data would be used to compute an 
agreement rate and its associated confidence interval. The upper bound 
of the two-tailed 90 percent confidence interval would be used as the 
final eCQM validation score for the selected hospital. A minimum score 
of 75 percent accuracy would be required for the hospital to pass the 
eCQM validation requirement. Based on the FY 2024 results, most 
measures had national agreement rates well above the proposed 75 
percent threshold, however these FY 2024 results are based on only two 
quarters of data and included data only from eCQMs that have been in 
the Hospital IQR Program for several years. We anticipate that the 
average agreement rates may decrease with a full year of data and the 
introduction of newer eCQMs that hospitals may have less experience 
reporting. As such, while we may consider raising the minimum passing 
threshold from 75 percent in future years, at this time we have 
determined that the 75 percent threshold is appropriate for initial 
scoring of eCQMs in Hospital IQR Program validation.
    We invite public comment on our proposal to Modify eCQM Validation 
Scoring beginning with CY 2025 eCQM data affecting the FY 2028 payment 
determination.
(2) Proposal To Modify the Combined Validation Scoring Process 
Beginning With CY 2025 Data Affecting the FY 2028 Payment Determination
    We are proposing to remove the existing combined validation score 
based on a weighted combination of a hospital's validation performance 
for chart-abstracted measures and eCQMs and replace it with two 
separate validation scores, one for chart-abstracted measures, and one 
for eCQMs. Based on our current policies, the eCQM portion of the 
combined agreement rate is multiplied by zero percent, and the chart-
abstracted measure agreement rate is weighted at 100 percent. A minimum 
passing score for this combined score is set at 75 percent.
    Reporting requirements and procedures for eCQMs are different than 
those for chart-abstracted measures. For instance, hospitals implement 
electronic algorithms to query eCQM data and submit eCQM measure 
results using a custom file layout for quality data reporting to CMS. 
In contrast, validation of chart-abstracted measures is conducted using 
measure specifications written to support manual abstraction processes. 
As such, separate validation scores are consistent with the distinct 
requirements and procedures for the

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reporting of quality measure data. Moreover, CMS intends to retain an 
emphasis on data accuracy through the validation efforts across both 
measure types (that is, chart-abstracted measures and eCQMs). It is 
important to ensure necessary analysis and resources are placed on 
chart-abstracted measures that are still currently being validated, 
especially because of their use within the Hospital Value-Based 
Purchasing (VBP) Program. Therefore, we are proposing to implement two 
separate scoring processes, one for chart-abstracted measures and one 
for eCQMs, for the FY 2028 payment determination and subsequent years. 
Hospitals would be required to receive passing validation scores for 
both chart-abstracted measure data and eCQM data to pass validation.
    Under our proposal, beginning with the validation of CY 2025 data 
affecting the FY 2028 payment determination, hospitals would receive 
separate validation scores for both chart-abstracted measure data and 
eCQM data, which would be used to determine a hospital's overall annual 
payment update. As established in the FY 2006 IPPS final rule (70 FR 
47420 through 47428), a hospital that fails to meet validation 
requirements may not receive the full annual payment update. Under our 
proposal, if a hospital fails either chart-abstracted validation 
requirements or eCQM validation requirements, it may not receive the 
full annual payment update. To be eligible for a full annual payment 
update, provided all other Hospital IQR Program requirements are met, a 
hospital would have to attain at least a 75 percent validation score 
for chart-abstracted measure validation and at least a 75 percent 
validation score for eCQM data validation.
    Our existing and newly proposed validation scoring changes are 
summarized in Table IX.C.10.
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    We invite public comment on our proposal to Modify the Combined 
Validation Scoring Process beginning with CY 2025 Data affecting the FY 
2028 payment determination.
11. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously adopted details on DACA requirements. We are not 
proposing any changes to this policy in this proposed rule. We refer 
readers to the QualityNet website at: https://qualitynet.cms.gov (or 
other successor CMS designated websites) for more details on DACA 
requirements.
12. 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 are not proposing any changes to these policies or the public 
reporting of eCQM data or overall hospital star ratings in this 
proposed rule. We also refer readers to the QualityNet website at: 
https://qualitynet.cms.gov/inpatient/public-reporting (or other 
successor CMS designated websites) for details on public display 
requirements.
13. Reconsideration and Appeal Procedures
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650 through 
51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), and 42 CFR 
412.140(e), we established an approach for reconsideration and appeal 
procedures for the Hospital IQR Program. As part of this 
reconsideration process, hospitals can request reconsideration if CMS 
determines that the hospital did not meet the Hospital IQR Program's 
validation requirements. Under these requirements as established in the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50225 through 50229), for 
purposes of validation, hospitals are required to resubmit copies of 
all medical records that were originally submitted to the Clinical Data 
Abstraction Center (CDAC) each relevant quarter. With the transition to 
all electronic submission of copies of medical records for Hospital IQR 
Program validation as established in they FY 2021 IPPS/LTCH final rule 
(85 FR 58949 through 58950), both through eCQMs and digitized charts, 
the current reconsideration requirement to resubmit records used for 
validation results is no longer necessary and creates duplicative files 
and work.
    Therefore, we are proposing to revise Sec.  412.140(e)(2)(vii)(A) 
to no longer require hospitals to resubmit medical records as part of 
their request for reconsideration of validation, beginning with CY 2023 
discharges affecting the FY 2026 payment determination.

[[Page 36341]]

    Under our proposal, hospitals that need to submit a revised medical 
record may still do so, but those hospitals that would otherwise be 
resubmitting copies of the previously submitted records would no longer 
be required to submit them. Removing record submission as a requirement 
for validation reconsideration would reduce hospital administrative 
burden for the majority of hospitals that do not have revised records 
to submit. Making this step optional would also reduce the burden for 
CMS to collect and track medical records that are already available.
    We invite public comment on our proposal to remove the requirement 
for hospitals to resubmit medical records as part of their request for 
reconsideration of validation, beginning with CY 2023 discharges 
affecting the FY 2026 payment determination.
14. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    We are not proposing any changes to this policy in this proposed 
rule. We refer readers to Sec.  412.140(c)(2) and the QualityNet 
website at: https://qualitynet.cms.gov (or other successor CMS 
designated websites) for our current requirements for submission of a 
request for an exception.

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

1. Background
    The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program, 
authorized by 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''). In this proposed rule, we are 
proposing to adopt the Patient Safety Structural measure beginning with 
the CY 2025 reporting period/FY 2027 program year. We are also 
proposing to modify the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey measure and to move up the start 
date for publicly displaying hospital performance on the Hospital 
Commitment to Health Equity measure.\463\
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    \463\ To provide clarity and to better align with the Hospital 
IQR Program, we are changing the name of the Facility Commitment to 
Health Equity measure in the PCHQR Program to the Hospital 
Commitment to Health Equity measure. This is a non-substantive 
change and does not impact the measure's specifications or reporting 
requirements.
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2. Proposal To Adopt the Patient Safety Structural Measure Beginning 
With the CY 2025 Reporting Period/FY 2027 Program Year
    We refer readers to section IX.B.1. of the preamble of this 
proposed rule where we are proposing adoption of the Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
program year for the PCHQR Program. We are also proposing to adopt this 
measure for the Hospital Inpatient Quality Reporting (IQR) Program, as 
discussed in that section.
3. Proposal To Modify the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) Survey Measure Beginning With the CY 
2025 Reporting Period/FY 2027 Program Year
    We refer readers to section IX.B.2. of the preamble of this 
proposed rule where we are proposing to modify the HCAHPS Survey 
measure (CBE #0166) beginning with the CY 2025 reporting period/FY 2027 
program year. We are also proposing to adopt the same modifications to 
this measure for purposes of the Hospital IQR Program and the Hospital 
VBP Program, as discussed in the same section.
4. Summary of Previously Adopted and Newly Proposed PCHQR Program 
Measures for the CY 2025 Reporting Period/FY 2027 Program Year and 
Subsequent Years
    Table IX.D.-01 summarizes the previously adopted and the newly 
proposed measures for the PCHQR Program measure set beginning with the 
CY 2025 reporting period/FY 2027 program year.
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5. Proposal To Move Up the Start Date for Public Display of the 
Hospital Commitment to Health Equity Measure
    In the FY 2024 IPPS/LTCH PPS final rule, we adopted the Hospital 
Commitment to Health Equity measure for the PCHQR measure set beginning 
with the CY 2024 reporting period/FY 2026 program year (88 FR 59204 
through 59210). We also finalized that we would publicly report PCH 
performance on this measure beginning with CY 2024 data beginning July 
2026 or as soon as feasible thereafter (88 FR 59209; 59228).
    In this proposed rule, we are proposing to accelerate the timeline 
for beginning to publicly report PCH performance on this measure. 
Specifically, we are proposing to start public reporting of PCH 
performance on this measure using CY 2024 data beginning January 2026 
or as soon as feasible thereafter. We believe that the public could 
benefit from having access to the information sooner because the data 
provide an opportunity to recognize PCHs that have attested to their 
commitment to health equity at an earlier date. We also believe the 
modification of the date for public reporting would promote 
efficiencies through alignment of the performance periods, data 
submission periods, and the anticipated public reporting release with 
the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program 
that adopted the Facility Commitment to Health Equity measure (which 
requires the same attestations as the Hospital Commitment to Health 
Equity measure) beginning with reporting of CY 2024 data for the FY 
2026 payment determination and would provide this information for 
providers participating in the PCHQR Program and the IPFQR Program 
types simultaneously. We are seeking comment on this proposal to move 
up the start of public reporting of the Hospital Commitment to Health

[[Page 36343]]

Equity measure to January 2026 or as soon as feasible thereafter.
6. Summary of Previously Finalized Public Display Policies and Proposed 
Public Display Start Date Change for the PCHQR Program
    Our previously finalized public display policies and newly proposed 
public display start date change for the Hospital Commitment to Health 
Equity measure for the PCHQR Program are described in Table IX.D.-02:
[GRAPHIC] [TIFF OMITTED] TP02MY24.240

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

[[Page 36344]]

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.
    We are proposing to require LTCHs to report four new items to the 
LTCH Continuity Assessment and Record of Evaluation (CARE) Data Set 
(LCDS) and modify one item on the LCDS as described in section IX.E.4. 
of the preamble of this proposed rule. Second, we are proposing to 
extend the Admission assessment window for the LCDS. Third, we are 
seeking information on future measure concepts for the LTCH QRP. 
Finally, we are seeking information on a future LTCH Star Rating 
system.
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 2025 LTCH QRP
    The LTCH QRP currently has 18 adopted measures, 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).
[GRAPHIC] [TIFF OMITTED] TP02MY24.241


[[Page 36345]]


BILLING CODE 4120-01-C
    We are not proposing to adopt any new measures for the LTCH QRP.
4. Proposal To Collect Four New Items as Standardized Patient 
Assessment Data Elements and Modify One Item Collected as a 
Standardized Patient Assessment Data Element Beginning With the FY 2028 
LTCH QRP
    In this proposed rule, we are proposing to add four new items \464\ 
to be collected as standardized patient assessment data elements under 
the social determinants of health (SDOH) category under the LTCH QRP: 
Living Situation (one item); Food (two items); and Utilities (one 
item). We are also proposing to modify one of the current items 
collected as standardized patient assessment data under the SDOH 
category (the Transportation item), as described in section X.E.4.e. of 
the preamble of this proposed rule.
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    \464\ Items may also be referred to as ``data elements.''
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a. Definition of Standardized Patient Assessment Data
    Section 1886(m)(5)(F)(ii) of the Act requires LTCHs to submit 
standardized patient assessment data required under section 1899B(b)(1) 
of the Act. Section 1899B(b)(1)(A) of the Act requires post-acute care 
(PAC) providers to submit standardized patient assessment data under 
applicable reporting provisions (which, for LTCHs, is the LTCH QRP) 
with respect to the admission and discharge of an individual (and more 
frequently as the Secretary deems appropriate). Section 1899B(a)(1)(C) 
of the Act requires, in part, the Secretary to modify the PAC 
assessment instruments in order for PAC providers, including LTCHs, to 
submit standardized patient assessment data under the Medicare program. 
LTCHs are currently required to report patient assessment data through 
the LCDS. Section 1899B(b)(1)(B) of the Act describes standardized 
patient assessment data as data required for at least the quality 
measures described in section 1899B(c)(1) of the Act and that is with 
respect to the following categories: (1) functional status, such as 
mobility and self-care at admission to a PAC provider and before 
discharge from a PAC provider; (2) cognitive function, such as ability 
to express ideas and to understand, and mental status, such as 
depression and dementia; (3) special services, treatments, and 
interventions, such as need for ventilator use, dialysis, chemotherapy, 
central line placement, and total parenteral nutrition; (4) medical 
conditions and comorbidities, such as diabetes, congestive heart 
failure, and pressure ulcers; (5) impairments, such as incontinence and 
an impaired ability to hear, see, or swallow, and (6) other categories 
deemed necessary and appropriate by the Secretary.
b. Social Determinants of Health Collected as Standardized Patient 
Assessment Data Elements
    Section 1899B(b)(1)(B)(vi) of the Act authorizes the Secretary to 
collect standardized patient assessment data elements with respect to 
other categories deemed necessary and appropriate. Accordingly, we 
finalized the creation of the SDOH category of standardized patient 
assessment data elements in the FY 2020 LTCH PPS final rule (84 FR 
42578 through 42581), and defined SDOH as the socioeconomic, cultural, 
and environmental circumstances in which individuals live that impact 
their health.\465\ According to the World Health Organization, research 
shows that the SDOH can be more important than health care or lifestyle 
choices in influencing health, accounting for between 30-55% of health 
outcomes.\466\ This is a part of a growing body of research that 
highlights the importance of SDOH on health outcomes. Subsequent to the 
FY 2020 LTCH PPS final rule, we expanded our definition of SDOH: 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.467 468 469 This expanded definition aligns our 
definition of SDOH with the definition used by HHS agencies, including 
OASH, the Centers for Disease Control and Prevention (CDC) and the 
White House Office of Science and Technology Policy.470 471 
We currently collect seven items in this SDOH category of standardized 
patient assessment data elements: ethnicity, race, preferred language, 
interpreter services, health literacy, transportation, and social 
isolation (84 FR 42578 through 42581).
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    \465\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE). Second Report to Congress on Social Risk and 
Medicare's Value-Based Purchasing Programs. June 28, 2020. Available 
at: https://aspe.hhs.gov/reports/second-report-congress-social-risk-medicares-value-based-purchasing-programs.
    \466\ World Health Organization. Social determinants of health. 
Available at: https://www.who.int/health-topics/social-determinants-of-health#tab=tab_1.
    \467\ Using Z Codes: The Social Determinants of Health (SDOH). 
Data Journey to Better Outcomes.
    \468\ Improving the Collection of Social Determinants of Health 
(SDOH) Data with ICD-10-CM Z Codes. https://www.cms.gov/files/document/cms-2023-omh-z-code-resource.pdf.
    \469\ CMS.gov. Measures Management System (MMS). CMS Focus on 
Health Equity. Health Equity Terminology and Quality Measures. 
https://mmshub.cms.gov/about-quality/quality-at-CMS/goals/cms-focus-on-health-equity/health-equity-terminology.
    \470\ Centers for Disease Control and Prevention. Social 
Determinants of Health (SDOH) and PLACES Data.
    \471\ ``U.S. Playbook To Address Social Determinants Of Health'' 
from the White House Office Of Science And Technology Policy 
(November 2023).
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    We currently collect seven SDOH items in the category of 
standardized patient assessment data elements: ethnicity, race, 
preferred language, interpreter services, health literacy, 
transportation, and social isolation (84 FR 42577 through 42579).\472\ 
In accordance with our authority under section 1899B(b)(1)(B)(vi) of 
the Act, we similarly finalized the creation of the SDOH category of 
standardized patient assessment data elements for Skilled Nursing 
Facilities (SNFs) in the FY 2020 SNF PPS final rule (84 FR 38805 
through 38817), for Inpatient Rehabilitation Facilities (IRFs) in the 
FY 2020 IRF PPS final rule (84 FR 39149 through 39161), and for Home 
Health Agencies (HHAs) in the Calendar Year (CY) 2020 HH PPS final rule 
(84 60597 through 60608). We also collect the same seven SDOH items in 
these PAC providers' respective patient/resident assessment instruments 
(84 FR 38817, 39161, and 60610, respectively).
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    \472\ These SDOH data are also collected for purposes outlined 
in section 2(d)(2)(B) of the Improving Medicare Post-Acute Care 
Transitions Act (IMPACT Act). For a detailed discussion on SDOH data 
collection under section 2(d)(2)(B) of the IMPACT Act, see the FY 
2020 LTCH PPS final rule (84 FR 42577 through 42579).
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    Access to standardized data relating to SDOH on a national level 
permits us to conduct periodic analyses, and to assess their 
appropriateness as risk adjustors or in future quality measures. Our 
ability to perform these analyses and to make adjustments relies on 
existing data collection of SDOH items from PAC settings. We adopted 
these SDOH items using common standards and definitions across the four 
PAC providers to promote interoperable exchange of longitudinal 
information among these PAC providers, including LTCHs, and other 
providers. We believe this information may facilitate coordinated care, 
improve patient focused care planning, and allow for continuity of the 
discharge planning process from PAC settings.
    We noted in our FY 2020 LTCH PPS final rule that each of the items 
was identified in the 2016 National Academies of Sciences, Engineering,

[[Page 36346]]

and Medicine (NASEM) report as impacting care use, cost, and outcomes 
for Medicare beneficiaries (84 FR 39150). At that time, we acknowledged 
that other items may also be useful to understand. The SDOH items we 
are proposing to collect as standardized patient assessment data 
elements under the SDOH category in this proposed rule were also 
identified in the 2016 NASEM report \473\ or the 2020 NASEM report 
\474\ as impacting care use, cost, and outcomes for Medicare 
beneficiaries. These items have the potential to affect treatment 
preferences and goals of patients and their caregivers. Identification 
of these SDOH items may also help LTCHs be in a position to offer 
assistance, by connecting patients and their caregivers with these 
associated needs to social support programs, as well as inform our 
understanding of patient complexity.
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    \473\ Social Determinants of Health. Healthy People 2020. 
https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-health. (February 2019).
    \474\ National Academies of Sciences, Engineering, and Medicine. 
2020. Leading Health Indicators 2030: Advancing Health, Equity, and 
Well-Being. Washington, DC: The National Academies Press. https://doi.org/10.17226/25682.
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    Health-related social needs (HRSNs) are the resulting effects of 
SDOH, which are individual-level, adverse social conditions that 
negatively impact a person's health or health care.\475\ Examples of 
HRSNs include lack of access to food, housing, or transportation, and 
have been associated with poorer health outcomes, greater use of 
emergency departments and hospitals, and higher health care costs. 
Certain HRSNs can lead to unmet social needs that directly influence an 
individual's physical, psychosocial, and functional status.\476\ This 
is particularly true for food security, housing stability, utilities 
security, and access to transportation.\477\
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    \475\ Centers for Medicare & Medicaid Services. ``A Guide to 
Using the Accountable Health Communities Health-Related Social Needs 
Screening Tool: Promising Practices and Key Insights.'' August 2022. 
Available at https://www.cms.gov/priorities/innovation/media/document/ahcm-screeningtool-companion.
    \476\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
    \477\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
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    We are proposing to require LTCHs collect and submit four new items 
in the LCDS as standardized patient assessment data elements under the 
SDOH category because these items would collect information not already 
captured by the current SDOH items. Specifically, we believe the 
ongoing identification of SDOH would have three significant benefits. 
First, promoting screening for SDOH could serve as evidence-based 
building blocks for supporting healthcare providers in actualizing 
their commitment to address disparities that disproportionately impact 
underserved communities. Second, screening for SDOH improves health 
equity through identifying potential social needs so the LTCH may 
address those with the patient, their caregivers, and community 
partners during the discharge planning process, if indicated.\478\ 
Third, these SDOH items could support our ongoing LTCH QRP initiatives 
by providing data with which to stratify LTCHs' performance on measures 
or in future quality measures.
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    \478\ American Hospital Association. (2020). Health Equity, 
Diversity & Inclusion Measures for Hospitals and Health System 
Dashboards. December 2020. Accessed: January 18, 2022. Available at: 
https://ifdhe.aha.org/system/files/media/file/2020/12/ifdhe_inclusion_dashboard.pdf.
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    Additional collection of SDOH items would permit us to continue 
developing the statistical tools necessary to maximize the value of 
Medicare data and improve the quality of care for all beneficiaries. 
For example, we recently developed and released the Health Equity 
Confidential Feedback Reports, which provided data to LTCHs on whether 
differences in quality measure outcomes are present for their patients 
by dual-enrollment status and race and ethnicity.\479\ We note that 
advancing health equity by addressing the health disparities that 
underlie the country's health system is one of our strategic pillars 
\480\ and a Biden-Harris Administration priority.\481\
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    \479\ In October 2023, we released two new annual Health Equity 
Confidential Feedback Reports to LTCHs: The Discharge to Community 
(DTC) Health Equity Confidential Feedback Report and the Medicare 
Spending Per Beneficiary (MSPB) Health Equity Confidential Feedback 
Report. The PAC Health Equity Confidential Feedback Reports 
stratified the DTC and MSPB measures by dual-enrollment status and 
race/ethnicity. For more information on the Health Equity 
Confidential Feedback Reports, please refer to the Education and 
Outreach materials available on the LTCH QRP Training web page at 
https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-quality-reporting-training.
    \480\ 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.
    \481\ The White House. The Biden-Harris Administration Immediate 
Priorities [website]. https://www.whitehouse.gov/priorities/.
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c. Proposal To Collect Four New Items as Standardized Patient 
Assessment Data Elements Beginning With the FY 2028 LTCH QRP
    We are proposing to require LTCHs collect four new items as 
standardized patient assessment data elements under the SDOH category 
using the LCDS: one item for Living Situation, as described in section 
IX.4.c.(1) of this proposed rule; two items for Food, as described in 
section IX.4.c.(2) of this proposed rule; and one item for Utilities, 
as described in section IX.4.c.(3) of this proposed rule.
    We selected the proposed SDOH items from the AHC HRSN Screening 
Tool developed for the AHC Model. The AHC HRSN Screening Tool is a 
universal, comprehensive screening for HRSNs that addresses five core 
domains as follows: (i) housing instability (for example, homelessness, 
poor housing quality), (ii) food insecurity, (iii) transportation 
difficulties, (iv) utility assistance needs, and (v) interpersonal 
safety concerns (for example, intimate-partner violence, elder abuse, 
child maltreatment).\482\
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    \482\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
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    We believe that requiring LTCHs to report new items that are 
currently included in the AHC HRSN Screening Tool would further 
standardize the screening of SDOH across quality programs. For example, 
our proposal would align, in part, with the requirements of the 
Hospital Inpatient Quality Reporting (IQR) Program and the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program. As of January 
2024, hospitals are required to report whether they have screened 
patients for the standardized SDOH categories of housing stability, 
food security, utility difficulties, transportation needs, and 
interpersonal safety to meet the Hospital IQR Program 
requirements.\483\ Beginning January 2025, IPFs will also be required 
to report whether they have screened patients for the same set of SDOH

[[Page 36347]]

categories.\484\ As we continue to standardize data collection across 
PAC settings, we believe using common standards and definitions for new 
items is important to promote interoperable exchange of longitudinal 
information between LTCHs and other providers to facilitate coordinated 
care, continuity in care planning, and the discharge planning process.
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    \483\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49191 through 49194).
    \484\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
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    Below we describe each of the four proposed items in more detail.
(1) Living Situation
    Healthy People 2030 prioritizes economic stability as a key SDOH, 
of which housing stability is a component.485 486 Lack of 
housing stability encompasses several challenges, such as having 
trouble paying rent, overcrowding, moving frequently, or spending the 
bulk of household income on housing.\487\ These experiences may 
negatively affect one's physical health and access to health care. 
Housing instability can also lead to homelessness, which is housing 
deprivation in its most severe form.\488\ On a single night in 2023, 
roughly 653,100 people, or 20 out of every 10,000 people in the United 
States, were experiencing homelessness.\489\ Studies also found that 
people who are homeless have an increased risk of premature death and 
experience chronic disease more often than among the general 
population.\490\
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    \485\ https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \486\ Healthy People 2030 is a long-term, evidence-based effort 
led by the U.S. Department of Health and Human Services (HHS) that 
aims to identify nationwide health improvement priorities and 
improve the health of all Americans.
    \487\ Kushel, M.B., Gupta, R., Gee, L., & Haas, J.S. (2006). 
Housing instability and food insecurity as barriers to health care 
among low-income Americans. Journal of General Internal Medicine, 
21(1), 71-77. doi: 10.1111/j.1525-1497.2005.00278.x.
    \488\ Homelessness is defined as ``lacking a regular nighttime 
residence or having a primary nighttime residence that is a 
temporary shelter or other place not designed for sleeping.'' 
Crowley, S. (2003). The affordable housing crisis: Residential 
mobility of poor families and school mobility of poor children. 
Journal of Negro Education, 72(1), 22-38. doi: 10.2307/3211288.
    \489\ The 2023 Annual Homeless Assessment Report (AHAR) to 
Congress. The U.S. Department of Housing and Urban Development 2023. 
https://www.huduser.gov/portal/sites/default/files/pdf/2023-AHAR-Part-1.pdf.
    \490\ Baggett, T.P., Hwang, S.W., O'Connell, J.J., Porneala, 
B.C., Stringfellow, E.J., Orav, E.J., Singer, D.E., & Rigotti, N.A. 
(2013). Mortality among homeless adults in Boston: Shifts in causes 
of death over a 15-year period. JAMA Internal Medicine, 173(3), 189-
195. doi: 10.1001/jamainternmed.2013.1604. Schanzer, B., Dominguez, 
B., Shrout, P.E., & Caton, C.L. (2007). Homelessness, health status, 
and health care use. American Journal of Public Health, 97(3), 464-
469. doi: 10.2105/AJPH.2005.076190.
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    We believe that LTCHs can use information obtained from the Living 
Situation item during a patient's discharge planning. For example, 
LTCHs could work in partnership with community care hubs and community-
based organizations to establish new care transition workflows, 
including referral pathways, contracting mechanisms, data sharing 
strategies, and implementation training that can track HRSNs to ensure 
unmet needs, such as housing, are successfully addressed through closed 
loop referrals and follow-up.\491\ LTCHs could also take action to help 
alleviate a patient's other related costs of living, like food, by 
referring the patient to community-based organizations that would allow 
the patient's additional resources to be allocated towards housing 
without sacrificing other needs.\492\ Finally, LTCHs could use the 
information obtained from the Living Situation item to better 
coordinate with other healthcare providers, facilities, and agencies 
during transitions of care, so that referrals to address a patient's 
housing stability are not lost during vulnerable transition periods.
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    \491\ U.S. Department of Health & Human Services (HHS), Call to 
Action, ``Addressing Health Related Social Needs in Communities 
Across the Nation.'' November 2023. https://aspe.hhs.gov/sites/default/files/documents/3e2f6140d0087435cc6832bf8cf32618/hhs-call-to-action-health-related-social-needs.pdf.
    \492\ Henderson, K.A., Manian, N., Rog, D.J., Robison, E., 
Jorge, E., AlAbdulmunem, M. ``Addressing Homelessness Among Older 
Adults'' (Final Report). Washington, DC: Office of the Assistant 
Secretary for Planning and Evaluation, U.S. Department of Health and 
Human Services. October 26, 2023.
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    Due to the potential negative impacts housing instability can have 
on a patient's health, we are proposing to adopt the Living Situation 
item as a new standardized patient assessment data element under the 
SDOH category. This proposed Living Situation item is based on the 
Living Situation item currently collected in the AHC HRSN Screening 
Tool,493 494 and was adapted from the Protocol for 
Responding to and Assessing Patients' Assets, Risks, and Experiences 
(PRAPARE) tool.\495\ The proposed Living Situation item asks, ``What is 
your living situation today?'' The proposed response options are: (1) I 
have a steady place to live; (2) I have a place to live today, but I am 
worried about losing it in the future; (3) I do not have a steady place 
to live; (7) Patient declines to respond; and (8) Patient unable to 
respond. A draft of the proposed Living Situation item to be adopted as 
a standardized patient assessment data element under the SDOH category 
can be found in the Downloads section of the LCDS and LTCH Manual web 
page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    \493\ More information about the AHC HRSN Screening Tool is 
available on the website at https://innovation.cms.gov/Files/worksheets/ahcm-screeningtool.pdf.
    \494\ The AHC HRSN Screening Tool Living Situation item includes 
two questions. In an effort to limit IRF burden, we are only 
proposing the first question.
    \495\ National Association of Community Health Centers and 
Partners, National Association of Community Health Centers, 
Association of Asian Pacific Community Health Organizations, 
Association OPC, Institute for Alternative Futures. ``PRAPARE.'' 
2017. https://prapare.org/the-prapare-screening-tool/.
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(2) Food
    The U.S. Department of Agriculture, Economic Research Service 
defines a lack of food security as a household-level economic and 
social condition of limited or uncertain access to adequate food.\496\ 
Adults who are food insecure may be at an increased risk for a variety 
of negative health outcomes and health disparities. For example, a 
study found that food-insecure adults may be at an increased risk for 
obesity.\497\ Another study found that food-insecure adults have a 
significantly higher probability of death from any cause or 
cardiovascular disease in long-term follow-up care, in comparison to 
adults that are food secure.\498\
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    \496\ U.S. Department of Agriculture, Economic Research Service. 
(n.d.). Definitions of food security. Retrieved March 10, 2022, from 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/definitions-of-food-security/
    \497\ Hernandez, D.C., Reesor, L.M., & Murillo, R. (2017). Food 
insecurity and adult overweight/obesity: Gender and race/ethnic 
disparities. Appetite, 117, 373-378.
    \498\ Banerjee, S., Radak, T., Khubchandani, J., & Dunn, P. 
(2021). Food Insecurity and Mortality in American Adults: Results 
From the NHANES-Linked Mortality Study. Health promotion practice, 
22(2), 204-214. https://doi.org/10.1177/1524839920945927.
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    While having enough food is one of many predictors for health 
outcomes, a diet low in nutritious foods is also a factor.\499\ The 
United States Department of Agriculture (USDA) defines nutrition 
security as ``consistent and equitable access to healthy, safe, 
affordable foods essential to optimal health and well-being.'' \500\ 
Nutrition security builds on

[[Page 36348]]

and complements long standing efforts to advance food security.\501\ 
Studies have shown that older adults struggling with food security 
consume fewer calories and nutrients and have lower overall dietary 
quality than those who are food secure, which can put them at 
nutritional risk.\502\ Older adults are also at a higher risk of 
developing malnutrition, which is considered a state of deficit, 
excess, or imbalance in protein, energy, or other nutrients that 
adversely impacts an individual's own body form, function, and clinical 
outcomes.\503\ About 50% of older adults are affected by malnutrition, 
which is further aggravated by a lack of food security and 
poverty.\504\ These facts highlight why the Biden-Harris Administration 
launched the White House Challenge to End Hunger and Build Health 
Communities.\505\
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    \499\ National Center for Health Statistics. (2022, September 
6). Exercise or Physical Activity. Retrieved from Centers for 
Disease Control and Prevention: https://www.cdc.gov/nchs/fastats/exercise.htm.
    \500\ Food and Nutrition Security. (n.d.). USDA. https://www.usda.gov/nutrition-security.
    \501\ Food and Nutrition Service. (March 2022). USDA. https://www.usda.gov/sites/default/files/documents/usda-actions-nutrition-security.pdf.
    \502\ Ziliak, J.P., & Gundersen, C. (2019). The State of Senior 
Hunger in America 2017: An Annual Report. Prepared for Feeding 
America. Available at: https://www.feedingamerica.org/research/senior-hunger-research/senior.
    \503\ The Malnutrition Quality Collaborative. (2020). National 
Blueprint: Achieving Quality Malnutrition Care for Older Adults, 
2020 Update. Washington, DC: Avalere Health and Defeat Malnutrition 
Today. Available at: https://defeatmalnutrition.today/advocacy/blueprint/.
    \504\ Food Research & Action Center (FRAC). ``Hunger is a Health 
Issue for Older Adults: Food Security, Health, and the Federal 
Nutrition Programs.'' December 2019. https://frac.org/wp-content/uploads/hunger-is-a-health-issue-for-older-adults-1.pdf.
    \505\ The White House Challenge to End Hunger and Build Health 
Communities (Challenge) was a nationwide call-to-action released on 
March 24, 2023 to stakeholders across all of society to make 
commitments to advance President Biden's goal to end hunger and 
reduce diet-related diseases by 2030--all while reducing 
disparities. More information on the White House Challenge to End 
Hunger and Build Health Communities can be found: https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/24/fact-sheet-biden-harris-administration-launches-the-white-house-challenge-to-end-hunger-and-build-healthy-communities-announces-new-public-private-sector-actions-to-continue-momentum-from-hist/.
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    We believe that adopting items to collect and analyze information 
about a patient's food security at home could provide additional 
insight to their health complexity and help facilitate coordination 
with other healthcare providers, facilities, and agencies during 
transitions of care, so that referrals to address a patient's food 
security are not lost during vulnerable transition periods. For 
example, an LTCH's dietitian or other clinically qualified nutrition 
professional could work with the patient and their caregiver to plan 
healthy, affordable food choices prior to discharge.\506\ LTCHs could 
also refer a patient that indicates lack of food security to government 
initiatives such as the Supplemental Nutrition Assistance Program 
(SNAP) and food pharmacies (programs to increase access to healthful 
foods by making them affordable), two initiatives that have been 
associated with lower health care costs and reduced hospitalization and 
emergency department visits.\507\
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    \506\ Schroeder K., Smaldone A., Food Insecurity: A Concept 
Analysis. Nurse Forum. 2015 Oct.-Dec.;50(4):274-84. doi: 10.1111/
nuf.12118. Epub. 2015 Jan. 21. PMID: 25612146; PMCID: PMC4510041.
    \507\ Tsega M., Lewis C., McCarthy D., Shah T., Coutts K., 
Review of Evidence for Health-Related Social Needs Interventions. 
July 2019. The Commonwealth Fund. https://www.commwealthfund.org/sites/default/files/2019-07/ROI-EVIDENCE-REVIEW-FINAL-VERSION.pdf.
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    We are proposing to adopt two Food items as new standardized 
patient assessment data elements under the SDOH category. These 
proposed items are based on the Food items currently collected in the 
AHC HRSN Screening Tool, and were adapted from the USDA 18-item 
Household Food Security Survey (HFSS).\508\ The first proposed Food 
item states, ``Within the past 12 months, you worried that your food 
would run out before you got money to buy more.'' \509\ The second 
proposed Food item states, ``Within the past 12 months, the food you 
bought just didn't last and you didn't have money to get more. We 
propose the same response options for both items: (1) Often true; (2) 
Sometimes true; (3) Never True; (7) Patient declines to respond; and 
(8) Patient unable to respond. A draft of the proposed Food items to be 
adopted as a standardized patient assessment data element under the 
SDOH category can be found in the Downloads section of the LCDS and 
LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    \508\ More information about the HFSS tool can be found at 
https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/survey-tools/.
    \509\ The AHC HRSN Screening Tool Food item includes two 
questions. In an effort to limit LTCH burden, we are only proposing 
the first question.
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(3) Utilities
    A lack of energy (utility) security can be defined as an inability 
to adequately meet basic household energy needs.\510\ According to the 
Department of Energy, one in three households in the U.S. are unable to 
adequately meet basic household energy needs.\511\ The consequences 
associated with a lack of utility security are represented by three 
primary dimensions: economic, physical, and behavioral. Patients with 
low incomes are disproportionately affected by high energy costs, and 
they may be forced to prioritize paying for housing and food over 
utilities.\512\ Some patients may face limited housing options and 
therefore are at increased risk of living in lower-quality physical 
conditions with malfunctioning heating and cooling systems, poor 
lighting, and outdated plumbing and electrical systems.\513\ Patients 
with a lack of utility security may use negative behavioral approaches 
to cope, such as using stoves and space heaters for heat.\514\ In 
addition, data from the Department of Energy's U.S. Energy Information 
Administration confirm that a lack of energy security 
disproportionately affects certain populations, such as low-income and 
African American households.\515\ The effects of a lack of utility 
security include vulnerability to environmental exposures such as 
dampness, mold, and thermal discomfort in the home, which have a direct 
impact on a person's health.516 517 For example, research 
has shown associations between a lack of energy security and 
respiratory conditions as well as mental health-related disparities and 
poor sleep quality in vulnerable populations such as the elderly, 
children, the socioeconomically disadvantaged, and the medically 
vulnerable.\518\
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    \510\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc. Sci. Med. 2016 Oct.; 167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub. 2016 Aug. 21. PMID: 27592003; 
PMCID: PMC5114037.
    \511\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \512\ Hern[aacute]ndez D. ``Understanding `energy insecurity' 
and why it matters to health.'' Soc. Sci. Med. 2016; 167:1-10.
    \513\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc. Sci. Med. 2016 Oct;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub. 2016 Aug. 21. PMID: 27592003; 
PMCID: PMC5114037.
    \514\ Hern[aacute]ndez D. ``What `Merle' Taught Me About Energy 
Insecurity and Health.'' Health Affairs, VOL.37, NO.3: Advancing 
Health Equity Narrative Matters. March 2018. https://doi.org/10.1377/hlthaff.2017.1413.
    \515\ US Energy Information Administration. ``One in Three U.S. 
Households Faced Challenges in Paying Energy Bills in 2015.'' 2017 
Oct 13. https://www.eia.gov/consumption/residential/reports/2015/energybills/.
    \516\ Hern[aacute]ndez D. Understanding `energy insecurity' and 
why it matters to health. Soc. Sci. Med. 2016 Oct.;167:1-10. doi: 
10.1016/j.socscimed.2016.08.029. Epub. 2016 Aug. 21. PMID: 27592003; 
PMCID: PMC5114037.
    \517\ Institute of Medicine. (2004). Damp Indoor Spaces and 
Health. Washington, DC: National Academies Press. http://www.nap.edu/openbook.php?record_id=11011&page=R2.
    \518\ Siegal et al., ``Energy Insecurity Indicators Associated 
with Increased Odds of Respiratory, Mental Health, And 
Cardiovascular Conditions.'' Health Affairs 43, NO. 2 (2024): 260-
268. https://doi.org/10.1377/hlthaff.2023.01052.

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[[Page 36349]]

    We believe adopting an item to collect information about a 
patient's utility security upon admission to an LTCH would facilitate 
the identification of patients who may not have utility security and 
who may benefit from engagement efforts. For example, LTCHs may be able 
to use the information on utility security to help connect identified 
patients in need, such as older adults, to programs that can help pay 
for home energy (heating/cooling) costs, like the Low-Income Home 
Energy Assistance Program (LIHEAP). LTCHs may also be able to partner 
with community care hubs and community-based organizations to assist 
the patient in applying for these and other local utility assistance 
programs, as well as helping them navigate the enrollment process.\519\
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    \519\ National Council on Aging (NCOA). ``How to Make It Easier 
for Older Adults to Get Energy and Utility Assistance.'' Promising 
Practices Clearinghouse for Professionals. Jan 13, 2022. https://www.ncoa.org/article/how-to-make-it-easier-for-older-adults-to-get-energy-and-utility-assistance.
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    We are proposing to adopt a new item, Utilities, as a new 
standardized patient assessment data element under the SDOH category. 
This proposed item is based on the Utilities item currently collected 
in the AHC HRSN Screening Tool and was adapted from the Children's 
Sentinel Nutrition Assessment Program (C-SNAP) survey.\520\ The 
proposed Utilities item asks, ``In the past 12 months, has the 
electric, gas, oil, or water company threatened to shut off services in 
your home?'' The proposed response options are: (1) Yes; (2) No; (3) 
Already shut off; (7) Patient declines to respond; and (8) Patient 
unable to respond. A draft of the proposed Utilities item to be adopted 
as a standardized patient assessment data element under the SDOH 
category can be found in the Downloads section of the LCDS and LTCH 
Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    \520\ This validated survey was developed as a clinical 
indicator of household energy security among pediatric caregivers. 
Cook, J.T., D.A. Frank., P.H. Casey, R. Rose-Jacobs, M.M. Black, M. 
Chilton, S. Ettinger de Cuba, et al. ``A Brief Indicator of 
Household Energy Security: Associations with Food Security, Child 
Health, and Child Development in US Infants and Toddlers.'' 
Pediatrics, vol. 122, no. 4, 2008, pp. e874-e875. https://doi.org/10.1542/peds.2008-0286.
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d. Stakeholder Input
    We developed our proposal to add these items after considering 
feedback we received in response to our request for information (RFI) 
on Closing the Health Equity Gap in CMS Hospital Quality Programs in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45349 through 45362). This 
RFI sought to update providers on CMS initiatives to make reporting of 
health disparities more comprehensive and actionable for LTCHs, 
providers, and patients. The RFI also invited public comment on future 
potential stratification of quality measures and improving demographic 
data collection. In response to the solicitation of public comment on 
future potential stratification and improving demographic data 
collection, commenters supported and recommended that CMS collect 
additional social and demographic data, like gender expression, 
disability status, language including English proficiency, housing 
security, food security, and forms of economic or financial insecurity 
to help provides address health equity in LTCHs. In addition, 
commenters suggested CMS use standardized data collection across 
agencies when incorporating health equity initiatives, while also 
expressing concern about the burden additional data collection efforts 
would place on providers (86 FR 45358).
    Furthermore, we considered feedback we received when we proposed 
the creation of the SDOH category of standardized patient assessment 
data elements in the FY 2020 LTCH PPS proposed rule (84 FR 19545). 
Commenters were generally in favor of the concept of collecting SDOH 
items and noted the inclusion of additional SDOH would provide greater 
breadth and depth of data when developing policies to address social 
factors related to health. Many commenters also recommended including 
additional factors, such as food insecurity, housing insecurity, and 
independent living status, to ensure the full spectrum of social needs 
is examined. The FY 2020 LTCH PPS final rule (84 FR 42578 through 
42581) includes a summary of the public comments that we received and 
our responses to those comments. We incorporated this input into the 
development of this proposal.
    We invite comment on the proposal to adopt four new items as 
standardized patient assessment data elements under the SDOH category 
beginning with the FY 2028 LTCH QRP: one Living Situation item; two 
Food items; and one Utilities item.
e. Proposal To Modify the Transportation Item Beginning With the FY 
2028 LTCH QRP
    Beginning October 1, 2022, LTCHs began collecting seven 
standardized patient assessment data elements under the SDOH category 
on the LCDS.\521\ One of these items, A1250. Transportation, collects 
data on whether a lack of transportation has kept a patient from 
getting to and from medical appointments, meetings, work, or from 
getting things they need for daily living. This item was adopted as a 
standardized patient assessment data element under the SDOH category in 
the FY 2020 LTCH PPS final rule (84 FR 42587). As we discussed in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42586), we continue to believe 
that access to transportation for ongoing health care and medication 
access needs, particularly for those with chronic diseases, is 
essential to successful chronic disease management and the collection 
of a Transportation item would facilitate the connection to programs 
that can address identified needs.
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    \521\ The seven SDOH items are ethnicity, race, preferred 
language, interpreter services, health literacy, transportation, and 
social isolation (84 FR 42577 through 42579).
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    As part of our routine item and measure monitoring work, we 
continually assess the implementation of the new SDOH items. We have 
identified an opportunity to improve the data collection for A1250. 
Transportation by aligning it with the Transportation category 
collected in our other programs.522 523 Specifically, we are 
proposing to modify the current Transportation item so that it aligns 
with a Transportation item collected on the AHC HRSN Screening Tool 
available to the IPFQR and IQR Programs.
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    \522\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
    \523\ Centers for Medicare & Medicaid Services, FY2023 IPPS/LTCH 
PPS final rule (87 FR 49202 through 49215).
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    A1250. Transportation currently collected in the LCDS asks: ``Has 
lack of transportation kept you from medical appointments, meetings, 
work, or from getting things needed for daily living?'' The response 
options are: (A) Yes, it has kept me from medical appointments or from 
getting my medications; (B) Yes, it has kept me from non-medical 
meetings, appointments, work, or from getting things that I need; (C) 
No; (X) Patient unable to respond; and (Y) Patient declines to respond. 
The Transportation item collected in the AHC HRSN Screening Tool asks, 
``In the past 12 months, has lack of reliable transportation kept you 
from medical appointments, meetings, work or from getting things needed 
for daily living?'' The two response options are: (1) Yes; and (2) No. 
Consistent with the AHC HRSN Screening Tool, we are proposing

[[Page 36350]]

to modify the A1250. Transportation item currently collected in the 
LCDS in two ways: (1) revise the look-back period for when the patient 
experienced lack of reliable transportation; and (2) simplify the 
response options.
    First, the proposed modification of the Transportation item would 
use a defined 12-month look back period, while the current 
Transportation item uses a look back period of six to 12 months. We 
believe the distinction of a 12-month look back period would reduce 
ambiguity for both patients and clinicians, and therefore improve the 
validity of the data collected. Second, we are proposing to simplify 
the response options. Currently, LTCHs separately collect information 
on whether a lack of transportation has kept the patient from medical 
appointments or from getting medications, and whether a lack of 
transportation has kept the patient from non-medical meetings, 
appointments, work, or from getting things they need. Although 
transportation barriers can directly affect a person's ability to 
attend medical appointments and obtain medications, a lack of 
transportation can also affect a person's health in other ways, 
including accessing goods and services, obtaining adequate food and 
clothing, and social activities.\524\ The proposed modified 
Transportation item would collect information on whether a lack of 
reliable transportation has kept the patient from medical appointments, 
meetings, work or from getting things needed for daily living, rather 
than collecting the information separately. As discussed previously, we 
believe reliable transportation services are fundamental to a person's 
overall health, and as a result, the burden of collecting this 
information separately outweighs its potential benefit.
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    \524\ Centers for Medicare & Medicaid Services, FY2024 Inpatient 
Psychiatric Prospective Payment System--Rate Update (88 FR 51107 
through 51121).
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    For the reasons stated, we are proposing to modify A1250. 
Transportation based on the Transportation item adopted for use in the 
AHC HRSN Screening Tool and adapted from the PRAPARE tool. The proposed 
Transportation item asks, ``In the past 12 months, has a lack of 
reliable transportation kept you from medical appointments, meetings, 
work or from getting things needed for daily living?'' The proposed 
response options are: (0) Yes; (1) No; (7) Patient declines to respond; 
and (8) Patient unable to respond. A draft of the proposed Living 
Situation item to be adopted as a standardized patient assessment data 
element under the SDOH category can be found in the Downloads section 
of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
    We invite comment on this proposal to modify the current 
Transportation item previously adopted as a standardized patient 
assessment data element under the SDOH category beginning with the FY 
2028 LTCH QRP.
5. LTCH QRP Quality Measure Concepts Under Consideration for Future 
Years: Request for Information (RFI)
    We are seeking input on the importance, relevance, appropriateness, 
and applicability of each of the concepts under consideration listed in 
Table IX.E.-02 for future years in the LTCH QRP. In the FY 2024 LTCH 
PPS proposed rule (88 FR 27150-27153), we published a request for 
information (RFI) on the set of principles for selecting and 
prioritizing LTCH QRP measures, identifying measurement gaps, and 
suitable measures for filling these gaps. Within this proposed rule, we 
also sought input on data available to develop measures, approaches for 
data collection, perceived challenges or barriers, and approaches for 
addressing identified challenges. We refer readers to the FY 2024 LTCH 
PPS final rule (88 FR 59250-59252) for a summary of the public comments 
we received in response to the RFI.
    Subsequently, our measure development contractor convened a 
Technical Expert Panel (TEP) on December 15, 2023 to obtain expert 
input on future measure concepts that could fill the measurement gaps 
identified in the FY 2024 RFI.\525\ The TEP discussed the alignment of 
PAC and Hospice measures with CMS's ``Universal Foundation'' of quality 
measures.\526\ The Universal Foundation aims to focus provider 
attention, reduce burden, identify disparities in care, prioritize 
development of interoperable, digital quality measures, allow for 
cross-comparisons across programs, and help identify measurement gaps.
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    \525\ The Post-Acute Care (PAC) and Hospice Quality Reporting 
Program Cross-Setting TEP summary report will be published in early 
summer or as soon as technically feasible. LTCHs can monitor the 
Partnership for Quality Measurement website at https://mmshub.cms.gov/get-involved/technical-expert-panel/updates for 
updates.
    \526\ Centers for Medicare & Medicaid Services. Aligning Quality 
Measures Across CMS--the Universal Foundation. November 17, 2023. 
https://www.cms.gov/aligning-quality-measures-across-cms-universal-foundation.
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    In consideration of the feedback we received through these 
activities, we are seeking input on three measure concepts for the LTCH 
QRP. One is a composite of vaccinations,\527\ which could represent 
overall immunization status of LTCH patients such as the Adult 
Immunization Status measure \528\ in the Universal Foundation. A second 
concept we are seeking feedback on is the concept of depression for the 
LTCH QRP, which may be similar to the Clinical Screening for Depression 
and Follow-up measure \529\ in the Universal Foundation. Finally, we 
are seeking feedback on the concept of pain management.
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    \527\ A composite measure can summarize multiple measures 
through the use of one value or piece of information. More 
information can be found at https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/mms/downloads/composite-measures.pdf.
    \528\ CMS Measures Inventory Tool. Adult immunization status 
measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=26.
    \529\ CMS Measures Inventory Tool. Clinical Depression Screening 
and Follow-Up measure found at https://cmit.cms.gov/cmit/#/FamilyView?familyId=672.
[GRAPHIC] [TIFF OMITTED] TP02MY24.242

    While we will not be responding to specific comments in response to 
this RFI in the FY 2025 LTCH PPS final rule, we intend to use this 
input to inform our future measure development efforts.

[[Page 36351]]

6. Future LTCH Star Rating System: Request for Information (RFI)
    Section 1886(m)(5)(E) of the Act requires that the Secretary 
establish procedures for making data submitted under the LTCH QRP 
available to the public. Such procedures must ensure the LTCHs 
participating in the LTCH QRP have the opportunity to review the LTCH-
submitted data prior to such data being made public. The Secretary must 
publicly report quality measures that relate to services furnished in 
LTCHs on the CMS website. We currently publicly report data we receive 
on measures under the LTCH QRP on our Care Compare website.\530\
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    \530\ Centers for Medicare & Medicaid Services (CMS). Care 
Compare. 2023. https://www.medicare.gov/care-compare.
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    Care Compare displays star ratings for many provider types, 
specifically: doctors and clinicians, hospitals, nursing homes, home 
health, hospice, and dialysis facilities. Rating methodologies vary by 
provider type. Star ratings summarize performance using symbols to help 
consumers quickly and easily understand quality of care information. 
Star ratings are designed to enhance and supplement existing publicly 
reported quality information, and also serve to spotlight differences 
in health care quality and identify areas for improvement.\531\ Some 
providers receive ``overall star ratings,'' which are a composite score 
calculated using different data sources, such as quality measures or 
survey results. Others receive ``patient survey star ratings,'' a 
composite score derived from patient experience of care surveys. 
Depending on the provider type, some utilize one--or both--of these 
rating methodologies.
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    \531\ Centers for Medicare & Medicaid Services (CMS). Home 
Health Star Ratings. 2023. https://www.cms.gov/medicare/quality/home-health/home-health-star-ratings.
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    Star ratings serve an important function for patients, caregivers, 
and families, helping them to more quickly comprehend complex 
information about a health care providers' care quality and to easily 
assess differences among providers. This transparency serves an 
important educational function, while also helping to promote 
competition in health care markets. Informed patients and consumers are 
more empowered to select among health care providers, fostering 
continued quality improvement. CMS' commitment to establishing star 
ratings systems across health care settings is consistent with the 
Biden-Harris Administration's goal to promote an open, transparent, and 
competitive economy as outlined in President Biden's July 2021 
Executive Order on Promoting Competition in the American Economy.\532\
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    \532\ Executive Order on Promoting Competition in the American 
Economy [verbar] The White House.
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    We are seeking feedback on the development of a five-star 
methodology for LTCHs that can meaningfully distinguish between quality 
of care offered by providers. Star ratings for LTCHs will be designed 
to help consumers quickly identify differences in quality when 
selecting a provider. We are committed to developing a well-tested, 
data-driven methodology that encourages continuous quality improvement. 
We plan to engage with the LTCH community and provide multiple 
opportunities for LTCHs and other interested parties to give input on 
the development of a star rating system for LTCHs. Additionally, LTCHs 
would have the ability to preview their own facility's quality data 
before public posting of the LTCH's star rating on the Care Compare 
website in accordance with section 1886(j)(7)(E) of the Act.
    We invite general comments on a potential star rating system as 
well as measures suitable to use in a star rating system. Specifically, 
we invite public comment on the following questions:
     Are there specific criteria CMS should use to select 
measures for a star rating system?
     How should CMS present star ratings information in a way 
that it is most useful to consumers?
    While we will not be responding to specific comments in response to 
this RFI in the FY 2025 IPPS/LTCH PPS final rule, we intend to use this 
input to inform our future star rating development efforts. We intend 
to consider how a rating system would determine an LTCH's star rating, 
the methods used for such calculations, and an anticipated timeline for 
implementation. We will consider comments in response to this RFI for 
future rulemaking.
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 specified data 
for the LTCH QRP.
b. Proposed Reporting Schedule for the Submission of Proposed New Items 
as Standardized Patient Assessment Data Elements and the Modified 
Transportation Item Beginning With the FY 2028 LTCH QRP
    As discussed in section X.4. of this proposed rule, we are 
proposing to adopt four new items as standardized patient assessment 
data elements under the SDOH category (one Living Situation item, two 
Food items, and one Utilities item), and to modify the Transportation 
standardized patient assessment data elements previously adopted under 
the SDOH category beginning with the FY 2028 LTCH QRP.
    We are proposing that LTCHs would be required to report these new 
items and the modified Transportation item using the LCDS beginning 
with patients admitted on October 1, 2026 for purposes of the FY 2028 
LTCH QRP. Starting in CY 2027, LTCHs would be required to submit data 
for the entire calendar year for purposes of the FY 2029 LTCH QRP.
    We are also proposing that LTCHs who submit the Living Situation, 
Food, and Utilities items proposed for adoption as standardized patient 
assessment data elements under the SDOH category with respect to 
admission only would be deemed to have submitted those items with 
respect to both admission and discharge. We propose that LTCHs would be 
required to submit these items at admission only (and not at 
discharge), because it is unlikely that the assessment of those items 
at admission will differ from the assessment of the same item at 
discharge. This would align the data collection for these proposed 
items with other SDOH items (that is, Race, Ethnicity, Preferred 
Language, and Interpreter Services) which are only collected at 
admission.\533\ A draft of the proposed items is available in the 
Downloads section of the LCDS and LTCH Manual web page at https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
---------------------------------------------------------------------------

    \533\ FY 2020 IPPS/LTCH PPS final rule (84 FR 42588 through 
42590).
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    As we noted in Section X.E,4.e. of the preamble of this proposed 
rule, we continually to assess the implementation of the new SDOH 
items, including A1250. Transportation, as part of our routine item and 
measure monitoring work. We received feedback from stakeholders in 
response to the FY 2020 LTCH PPS proposed rule (84 FR 19551) noting 
their concern with the burden of collecting the Transportation item at 
admission and discharge.

[[Page 36352]]

Specifically, commenters stated that a patient's access to 
transportation is unlikely to change between admission and discharge. 
We analyzed the data LTCHs reported from October 1, 2022 to June 30, 
2023 (Q4 CY 2022 through Q2 CY 2023) and found that patient responses 
did not significantly change from admission to discharge.\534\ 
Specifically, the proportion of patients \535\ who responded ``Yes'' to 
the Transportation item at admission versus at discharge differed by 
only 1.65 percentage points during this period. We find these results 
convincing, and therefore are proposing to require LTCHs to collect and 
submit the proposed modified standardized patient assessment data 
element, Transportation, at admission only.
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    \534\ Due to data availability of LTCH SDOH standardized patient 
assessment data elements, this is based on three quarters of 
Transportation data.
    \535\ The analysis is limited to patients who responded to the 
Transportation item at both admission and discharge.
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    We invite public comment on our proposal to collect data on the 
following items proposed as standardized patient assessment data 
elements under the SDOH category at admission beginning October 1, 2026 
with the FY 2028 LTCH QRP: (1) Living Situation as described in section 
X.4.c.(1) of this proposed rule; (2) Food as described in section 
X.4.c.(2) of this proposed rule; and (3) Utilities as described in 
section X.4.c.(3) of this proposed rule. We also invite comment on our 
proposal to submit the proposed modified standardized patient 
assessment data element, Transportation, at admission only beginning 
October 1, 2026 with the FY 2028 LTCH QRP as described in section 
IX.4.e. of this proposed rule.
c. Proposal To Modify the LCDS Admission Assessment Window to Four Days 
Beginning With the FY 2028 LTCH QRP
    Since the FY2012 IPPS/LTCH Final Rule, LTCHs have collected 
information for the LTCH QRP utilizing the LCDS.\536\ Since 2012, the 
LTCH QRP has evolved in response to both quality initiatives and 
statutory requirements, and as a result, the LCDS has evolved to 
support data collection for evaluation of health outcomes in the LTCH. 
The LCDS Version 5.0 was implemented on October 1, 2022, and is 
currently in use.\537\
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    \536\ Office of the Federal Register of the National Archives 
and Records Administration and the U.S. Government Publishing 
Office. Medicare Program; Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System and FY 2012 Rates; Hospitals' FTE 
Resident Caps for Graduate Medical Education Payment. 2011. https://www.federalregister.gov/d/2011-19719/p-3517.
    \537\ Centers for Medicare & Medicaid Services (CMS). Long-Term 
Care Hospital (LTCH) Continuity Assessment Record and Evaluation 
(CARE) Data Set (LCDS) & LCDS Manual. 2023. https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual.
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    As specified in the LCDS Manual, the LCDS Admission assessment has 
a maximum three-day assessment period, beginning with the date of 
admission, in which the patient's assessment must be conducted to 
obtain information for the LCDS Admission assessment items. All LTCHs 
are required to record the Assessment Reference Date (ARD) (A0210) on 
each LCDS, which is defined as the end point of the assessment period 
for the LCDS assessment record. LTCHs can set their own ARD, as long as 
it is no later than the third calendar day (date of admission plus two 
calendar days) of the patient's stay.
    We continually look for opportunities to minimize LTCHs' burden 
associated with collection of the LCDS through strategies that include 
improving communication and conducting outreach with users, as well as 
simplifying collection and submission requirements. In recent years, we 
have received feedback regarding the difficulty of collecting the 
required LCDS data elements within the three-day assessment window when 
medically complex patients are admitted prior to and on weekends. On 
October 17th, 2023, our measure development contractor hosted an LTCH 
Listening Session on the Administrative Burden of the LTCH QRP, and 
invited providers to comment on several LTCH QRP topics, including a 
potential expansion of the assessment period to four days.\538\ During 
the listening session, we received support for revising the Admission 
assessment window, with participants suggesting that extending the 
assessment window would ease the difficulties noted above.
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    \538\ A summary of the LTCH Listening Session can be found on 
the LTCH QRP Measures Information web page at: https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-quality-reporting-measures-information.
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    We propose to extend the Admission assessment period from three 
days to four days, beginning with LTCH admissions on October 1, 2026. 
For example, if a patient was admitted on Friday, October 19, the ARD 
for the LCDS Admission assessment could be no later than Monday, 
October 22. This change to the assessment period would only apply to 
the LCDS Admission assessment, and have no impact on burden.
    We invite public comment on our proposal to extend the LCDS 
Admission assessment window from three to four days beginning with the 
FY 2028 LTCH QRP.
8. Policies Regarding Public Display of Measure Data for the LTCH QRP
    We are not proposing any new policies regarding the public display 
of measure data at this time. For a more detailed discussion about our 
policies regarding public display of LTCH QRP measure data and 
procedures for the opportunity to review and correct data and 
information, we refer readers to the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57231 through 57236).

F. Medicare Promoting Interoperability Program

1. Statutory Authority for the Medicare Promoting Interoperability 
Program for Eligible Hospitals and Critical Access Hospitals (CAHs)
    Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Social Security 
Act (as amended by the Health Information Technology for Economic and 
Clinical Health Act, Title XIII of Division A and Title IV of Division 
B of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5) 
authorize downward payment adjustments under Medicare, beginning with 
fiscal year (FY) 2015 for eligible hospitals and CAHs that do not 
successfully demonstrate meaningful use of certified electronic health 
record technology (CEHRT) for the applicable electronic health record 
(EHR) reporting periods. Section 602 of Title VI, Division O of the 
Consolidated Appropriations Act, 2016 (Pub. L. 114-113) added 
subsection (d) hospitals in Puerto Rico as eligible hospitals under the 
Medicare EHR Incentive Program and extended the participation timeline 
for these hospitals such that downward payment adjustments were 
authorized beginning in FY 2022 for section (d) Puerto Rico hospitals 
that do not successfully demonstrate meaningful use of CEHRT for the 
applicable EHR reporting periods.
2. Proposal To Change the Antimicrobial Use and Resistance (AUR) 
Surveillance Measure Beginning With the EHR Reporting Period in 
Calendar Year (CY) 2025
a. Proposal To Modify the AUR Surveillance Measure Beginning With the 
EHR Reporting Period in CY 2025
    The Medicare Promoting Interoperability Program encourages 
healthcare data exchange for public health purposes through the Public 
Health and Clinical Data Exchange objective. In the FY 2023 Hospital 
Inpatient Prospective Payment System

[[Page 36353]]

and Long Term Care Hospital Prospective Payment System (IPPS/LTCH PPS) 
final rule, we finalized the requirement for eligible hospitals and 
CAHs to report the AUR Surveillance measure with a modification to 
begin reporting with the EHR reporting period in CY 2024 (87 FR 49337). 
Under the AUR Surveillance measure, eligible hospitals and CAHs report 
two kinds of data to the Centers for Disease Control and Prevention 
(CDC) National Healthcare Safety Network (NHSN): Antimicrobial Use (AU) 
data and Antimicrobial Resistance (AR) data (87 FR 49335). Separate 
data elements and technical capabilities are required for reporting the 
AU data and AR data, and we refer readers to the CDC NHSN AUR protocols 
for technical details regarding implementation.\539\ Eligible hospitals 
and CAHs that report a ``yes'' response indicate that they have 
submitted data for both AU and AR, and will receive credit for 
reporting the measure, unless they claim an exclusion for which they 
are eligible. Eligible hospitals and CAHs must also use technology 
certified to the criterion at 45 CFR 170.315(f)(6), ``Transmission to 
public health agencies--antimicrobial use and resistance reporting'' 
for data submission (87 FR 49337).
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    \539\ https://www.cdc.gov/nhsn/psc/aur/index.html.
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    After finalization of the AUR Surveillance measure, we received 
feedback from some eligible hospitals and CAHs seeking clarity 
regarding reporting requirements and exclusion eligibility for eligible 
hospitals and CAHs. Comments and questions included whether eligible 
hospitals or CAHs with an eligible exclusion preventing their 
participation in reporting either AU data or AR data were required or 
able to report any available data to receive credit under the AUR 
Surveillance measure. Under our current policy, if an eligible hospital 
or CAH meets the exclusion criteria with respect to reporting either AU 
data or AR data, the hospital is excluded from the entire AUR 
Surveillance measure (87 FR 49337).
    In collaboration with the CDC, we identified the need to separate 
the AUR Surveillance measure into two measures to clarify reporting 
requirements and incentivize greater data reporting from eligible 
hospitals and CAHs. In addition, because AU and AR reporting rely on 
different data sources, such as an electronic medication administration 
record (eMAR)/bar-coded medication administration (BCMA) for AU, and 
lab information systems (LISs) for AR, we also believe that separating 
the measure into two measures would more appropriately target the 
availability of exclusions for participants who have difficulty with 
data transmission using a single data source.
    Specifically, we are proposing to separate the AUR Surveillance 
measure into two measures, beginning with the EHR reporting period in 
CY 2025:
     AU Surveillance measure: The eligible hospital or CAH is 
in active engagement with CDC's NHSN to submit AU data for the selected 
EHR reporting period and receives a report from NHSN indicating its 
successful submission of AU data for the selected EHR reporting period.
     AR Surveillance measure: The eligible hospital or CAH is 
in active engagement with CDC's NHSN to submit AR data for the selected 
EHR reporting period and receives a report from NHSN indicating its 
successful submission of AR data for the selected EHR reporting period.
    Under the proposed AU Surveillance measure, eligible hospitals and 
CAHs would be required to report AU data to CDC's NHSN. Under the 
proposed AR Surveillance measure, eligible hospitals and CAHs would 
also be required to report AR data to CDC's NHSN. Under this proposal, 
eligible hospitals and CAHs must report a ``yes'' response or claim an 
exclusion, separately, to receive credit for reporting the AU 
Surveillance measure and the AR Surveillance measure. For both 
measures, we propose that eligible hospitals and CAHs be required to 
use technology certified to the Office of the National Coordinator for 
Health Information Technology (ONC) Certification Program for Health 
Information Technology (health IT) certification criterion at 45 CFR 
170.315(f)(6), ``Transmission to public health agencies--antimicrobial 
use and resistance reporting,'' as they are for the AUR Surveillance 
measure. We believe that separating the AUR Surveillance measure into 
two measures would encourage participation from eligible hospitals and 
CAHs that could report data for only the AU measure or for only the AR 
measure that might previously have been excluded because of their 
inability to report both AU data and AR data as required by the AUR 
Surveillance measure.
    Under current policy with a single AUR Surveillance measure, 
eligible hospitals and CAHs that meet the exclusion criteria with 
respect to reporting data of one kind (for example, AR) are excluded 
from all AUR Surveillance measure reporting requirements, even if they 
can report data of the other kind (for example, AU). Offering a 
complete AUR Surveillance measure exclusion, even when participants can 
report either AU or AR data, is contrary to the goals of the Public 
Health and Clinical Data Exchange objective, because it discourages the 
sending of partial data as available. Separating the single AUR 
Surveillance measure into two measures would better reflect the reality 
that AU data reporting and AR data reporting rely on different data 
sources that require different types of exclusions to reflect the 
separate clinical and data domains of prescribing and microbiological 
testing. Separation of AU data reporting and AR data reporting into two 
measures also supports the Medicare Promoting Interoperability 
Program's administrative requirements with respect to scoring, because 
the current scoring methodology for the Public Health and Clinical Data 
Exchange objective does not grant partial credit for reporting on 
individual measures. We note that the separation of the AUR 
Surveillance measure does not expand on the previously finalized 
requirements of the measure; the proposed separation from one measure 
into two measures allows eligible hospitals and CAHs the opportunity to 
submit data for either AU or AR if it can only submit data for one of 
the two, versus an all or nothing approach.
    We invite public comment on our proposal to separate the AUR 
Surveillance measure into two measures, AU Surveillance and AR 
Surveillance, beginning with the EHR reporting period in CY 2025.
b. Proposal To Adopt Exclusions for the AU Surveillance Measure and the 
AR Surveillance Measure Beginning With the EHR Reporting Period in CY 
2025
    We previously finalized the availability of three exclusions for an 
eligible hospital or CAH reporting on the AUR Surveillance measure 
that: (1) Does not have any patients in any patient care location for 
which data are collected by NHSN during the EHR reporting period; (2) 
Does not have an eMAR/BCMA records or an electronic admission discharge 
transfer (ADT) system during the EHR reporting period; or (3) Does not 
have an electronic LIS or electronic ADT system during the EHR 
reporting period (87 FR 49337).
    We have received feedback from eligible hospitals and CAHs 
requesting clarity on whether an AUR Surveillance exclusion applies 
when they possess all necessary health IT systems but lack discrete 
electronic access to data elements necessary for NHSN AUR reporting. 
For example, an eligible

[[Page 36354]]

hospital or CAH may possess an LIS, but it may refer AR testing to an 
outside reference laboratory that does not provide data elements 
necessary for NHSN AUR reporting results to the referring laboratory. 
As the eligible hospital or CAH has an LIS system and therefore could 
not claim the third exclusion, assuming it could not claim another 
exclusion, the eligible hospital or CAH would be required to manually 
extract the data elements to successfully report the AUR Surveillance 
measure.
    Our current policy inadvertently causes difficulties for eligible 
hospitals and CAHs such as the one in the example because manual 
reporting of NHSN AUR data is both infeasible and against NHSN AUR 
recommendations.\540\ In addition, we require that eligible hospitals 
and CAHs must use technology certified to the criterion at 45 CFR 
170.315(f)(6), ``Transmission to public health agencies--antimicrobial 
use and resistance reporting'' for data submission (87 FR 49337). We 
believe an exclusion that applies to eligible hospitals and CAHs that 
lack discrete electronic access to required data elements, including 
interface or configuration issues beyond their control, would address 
the difficulties for eligible hospitals and CAHs engaging in manual 
data collection to conduct AU or AR reporting. Therefore, we are 
proposing to add a new exclusion to account for scenarios where 
eligible hospitals or CAHs lack a data source containing discrete 
electronic data elements that are required for reporting the AUR 
Surveillance measure, meaning an eligible hospital or CAH cannot query, 
extract, or download the data elements in a discrete, structured manner 
from the systems to which it has access. Specifically, under this new 
exclusion, an eligible hospital or CAH would be excluded from reporting 
the AUR Surveillance measure when it does not have a data source 
containing the minimal discrete data elements that are required for 
reporting.
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    \540\ https://www.cdc.gov/nhsn/pdfs/pscmanual/11pscaurcurrent.pdf.
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    Should we finalize our proposal to separate the AUR Surveillance 
measure into two separate measures, AU Surveillance and AR 
Surveillance, we propose modifying the existing exclusions under the 
AUR measure, to maintain applicability to the AU measure and AR 
measure. For example, we propose to assign current exclusion 2 to the 
AU Surveillance measure because it relies on eMAR/BCMA data, and 
current exclusion 3 to the AR Surveillance measure because it relies on 
LIS data.
    Should we finalize our previously discussed proposal to add a new 
exclusion for the eligible hospitals and CAHs that lack discrete 
electronic access to data elements that are required for reporting, we 
propose that the new exclusion would be available for both the AU 
Surveillance measure and the AR Surveillance measure. Specifically, for 
the AU Surveillance measure, we propose to adopt three eligible 
exclusions, as follows: Any eligible hospital or CAH may be excluded 
from the AU Surveillance measure if the eligible hospital or CAH: (1) 
Does not have any patients in any patient care location for which data 
are collected by NHSN during the EHR reporting period; (2) Does not 
have an eMAR/BCMA electronic records or an electronic ADT system during 
the EHR reporting period; or (3) Does not have a data source containing 
the minimal discrete data elements that are required for reporting. For 
the AR Surveillance measure, we propose to adopt three eligible 
exclusions, as follows: Any eligible hospital or CAH may be excluded 
from the AR Surveillance measure if the eligible hospital or CAH: (1) 
Does not have any patients in any patient care location for which data 
are collected by NHSN during the EHR reporting period; (2) Does not 
have an electronic LIS or electronic ADT system during the EHR 
reporting period; or (3) Does not have a data source containing the 
minimal discrete data elements that are required for reporting.
    We invite public comment on our proposals to adopt three eligible 
exclusions for the proposed AU Surveillance measure and for the AR 
Surveillance measure, of which the third exclusion for each measure is 
a new exclusion for eligible hospitals and CAHs that lack discrete 
electronic access to data elements that are required for reporting.
c. Proposal To Adopt Active Engagement for the Proposed AU Surveillance 
Measure and AR Surveillance Measure Beginning With the EHR Reporting 
Period in CY 2025
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to 
limit the amount of time an eligible hospital or CAH may spend in the 
Option 1: Pre-production and Validation level of active engagement to 
one EHR reporting period (87 FR 49340 through 49342). As finalized, 
this limitation applies beginning with the EHR reporting period in CY 
2024. Should we finalize our proposal to modify the AUR Surveillance 
measure into two new measures, AU Surveillance and AR Surveillance, we 
propose to treat these two measures as new measures with respect to 
active engagement, beginning with the EHR reporting period in CY 2025 
and subsequent years.
    We propose to evaluate the level of active engagement for the AU 
Surveillance and AR Surveillance measures beginning with the EHR 
reporting period in CY 2025, independent of the participant's prior 
level of active engagement for the AUR Surveillance measure in the EHR 
reporting period in CY 2024. If we finalize the AU Surveillance and AR 
Surveillance measures, we are proposing that for each measure, eligible 
hospitals and CAHs may spend only one EHR reporting period at the 
Option 1: Pre-production and Validation level of active engagement, and 
they must progress to the Option 2: Validated Data Production level for 
the next EHR reporting period for which they report the measure.
    This proposal would offer eligible hospitals and CAHs an additional 
year to gain familiarity with reporting in the NHSN AUR Module before 
they are required to participate in Option 2: Validated Data 
Production, and if finalized, the AU Surveillance and AR Surveillance 
measures.
    We invite public comment on our proposal to evaluate the level of 
active engagement for the proposed AU Surveillance and AR Surveillance 
measures, independent of the participant's prior active engagement for 
the AUR Surveillance measure.
d. Proposal To Maintain the Scoring Approach for Reporting Required 
Measures in the Public Health and Clinical Data Exchange Objective 
Beginning With the EHR Reporting Period in CY 2025
    Should we finalize our proposal to separate the AUR Surveillance 
measure into two measures, AU Surveillance and AR Surveillance, we do 
not believe this change should affect scoring or the exclusion 
redistributions for the Public Health and Clinical Data Exchange 
objective, previously adopted in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 59266). We note that the separation of the AUR Surveillance 
measure does not expand on the previously finalized requirements of the 
measure. In other words, eligible hospitals and CAHs are required to 
report AU and AR data, whether combined under the AUR Surveillance 
measure, or separated into AU Surveillance and AR Surveillance 
measures.
    Therefore, we propose to maintain a scoring value of 25 points for 
reporting

[[Page 36355]]

all required measures in the Public Health and Clinical Data Exchange 
objective, which would increase from five measures to six measures, 
including the four previously finalized measures and the two proposed 
required measures (AU Surveillance and AR Surveillance). We also 
propose to maintain the exclusion redistribution policy we adopted in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 59267) but modify it to 
indicate there are six measures as opposed to five measures. If an 
eligible hospital or CAH claims an exclusion for each of the six 
required measures, the 25 points of the Public Health and Clinical Data 
Exchange objective would continue to be redistributed to the Provide 
Patients Electronic Access to their Health Information measure.
    We invite public comment on our proposals to maintain the current 
approach to scoring and points redistribution for the proposed AU 
Surveillance and AR Surveillance measures.
3. Overview of Objectives and Measures for the Medicare Promoting 
Interoperability Program for the EHR Reporting Period in CY 2025
    For ease of reference, Table IX.F.-01 lists the objectives and 
measures for the Medicare Promoting Interoperability Program for the 
EHR reporting period in CY 2025, as revised, to reflect the proposals 
in this proposed rule.
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BILLING CODE 4120-01-C
4. Updates to the Definition of CEHRT in the Medicare Promoting 
Interoperability Program Beginning With the EHR Reporting Period in CY 
2024
    In the CY 2024 Medicare Physician Fee Schedule (PFS) final rule (88 
FR 79307 through 79312), we finalized revisions to the definition of 
CEHRT for the Medicare Promoting Interoperability Program at 42 CFR 
495.4. Specifically, we finalized the addition of a reference to the 
revised name of ``Base EHR definition,'' proposed in the Health Data, 
Technology, and Interoperability: Certification Program Updates, 
Algorithm Transparency, and Information Sharing (HTI-1) proposed rule 
(88 FR 23759, 23905), to ensure, if the HTI-1 proposals were finalized, 
the revised name of ``Base EHR definition'' would be applicable for the 
CEHRT definitions going forward (88 FR 79309 through 79312). We also 
finalized the replacement of our references to the ``2015 Edition 
health IT certification criteria'' with ``ONC health IT certification 
criteria,'' and the addition of the regulatory citation for ONC health 
IT certification criteria in 45 CFR 170.315. We finalized the proposal 
to specify that technology meeting the CEHRT definition must meet ONC's 
health IT certification criteria ``as adopted and updated in 45 CFR 
170.315'' (88 FR 79553). This approach is consistent with the 
definitions subsequently finalized in ONC's HTI-1 final rule, which 
appeared in the Federal Register on January 9, 2024 (89 FR 1205 through 
1210). For additional background and information on this update, we 
refer readers to the discussion in the CY 2024 PFS final rule on this 
topic (88 FR 79307 through 79312).
    In consideration of the updates finalized in the CY 2024 PFS final 
rule and the HTI-1 final rule, we refer to ``ONC health IT 
certification criteria'' throughout this proposed rule where we 
previously would have referred to ``2015 Edition health IT 
certification criteria.'' We believe that these revisions to the 
definition of CEHRT in 42 CFR 495.4 will ensure that updates to the 
definition of Base EHR in 45 CFR 170.102, and updates to applicable ONC 
health IT certification criteria in 45 CFR 170.315, will be 
incorporated into the CEHRT definition without additional regulatory 
action by CMS. We also believe these updates align with the transition, 
where the ONC health IT certification criteria were adopted as year 
themed ``editions,'' to the ``edition-less approach finalized in the 
ONC HTI-

[[Page 36367]]

1 final rule. For ease of reference, Table IX.F.-02. lists the ONC 
health IT certification criteria required to meet the Medicare 
Promoting Interoperability Program objectives and measures.
    We also wish to highlight certain updates to ONC health IT 
certification criteria finalized in the ONC HTI-1 final rule that 
impact certification criteria referenced under the CEHRT definition. 
ONC adopted the certification criterion, ``decision support 
interventions (DSI)'' in 45 CFR 170.315(b)(11) to replace the 
``clinical decision support (CDS)'' certification criterion in 
170.315(a)(9) included in the Base EHR definition (89 FR 1231). The 
finalized DSI criterion ensures that Health IT Modules certified to 45 
CFR 170.315(b)(11) must, among other functions, enable a limited set of 
identified users to select (activate) evidence-based and Predictive 
DSIs (as defined in 45 CFR 170.102) and support ``source attributes''--
categories of technical performance and quality information--for both 
evidence-based and Predictive DSIs. ONC further finalized that a Health 
IT Module may meet the Base EHR definition by either being certified to 
the existing CDS version of the certification criterion in 45 CFR 
170.315(a)(9), or being certified to the revised DSI criterion in 45 
CFR 170.315(b)(11), for the period up to, and including, December 31, 
2024. On and after January 1, 2025, ONC finalized that only the DSI 
criterion in 45 CFR 170.315(b)(11) will be included in the Base EHR 
definition, and the adoption of the criterion in 45 CFR 170.315(a)(9) 
will expire on January 1, 2025 (89 FR 1281).
    In addition to the DSI criterion, which is required to meet the 
Base EHR definition after January 1, 2025, ONC finalized other updates 
related to health IT certification criteria referenced in the CEHRT 
definition in the HTI-1 final rule. For these updates, health IT 
developers must update and provide certified Health IT Modules to their 
customers by January 1, 2026, including updates resulting from the 
following finalized policies:
     ONC updated the ``Transmission to public health agencies--
electronic case reporting'' criterion in 45 CFR 170.315(f)(5) 
specifying consensus-based, industry-developed electronic standards and 
implementation guides (IGs) to replace functional, descriptive 
requirements in the existing criterion (89 FR 1226).
     ONC adopted the United States Core Data for 
Interoperability (USCDI) version 3 in 45 CFR 170.213(b) and finalized 
that USCDI version 1 in 45 CFR 170.213(a) will expire on January 1, 
2026. This change impacts ONC health IT certification criteria that 
reference the USCDI, including the ``transitions of care'' 
certification criteria in 45 CFR 170.315(b)(1)(iii)(A)(1)-(2), 
``Clinical information reconciliation and incorporation--
Reconciliation'' (45 CFR 170.315(b)(2)(iii)(D)(1) through (3)); and 
``View, download, and transmit to 3rd party'' (45 CFR 
170.315(e)(1)(i)(A)(1)) (89 FR 1210).
     ONC updated the ``demographics'' certification criterion 
(45 CFR 170.315(a)(5)), including renaming the criterion to ``patient 
demographics and observations'' (89 FR 1295).
     ONC updated the ``standardized API for patient and 
population services'' certification criterion in 45 CFR 170.315(g)(10) 
to include newer versions of certain standards and updated 
functionality to support the criterion (89 FR 1283).
    For complete information about the updates to ONC health IT 
certification criteria finalized in the HTI-1 Final Rule, we refer 
readers to the text of the final rule (89 FR 1192) as well as resources 
available on ONC's website.\541\
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    \541\ For more information, see: https://www.healthit.gov/topic/laws-regulation-and-policy/health-data-technology-and-interoperability-certification-program.

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5. Proposal To Change the Scoring Methodology Beginning With the EHR 
Reporting Period in CY 2025
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41636 through 
41645), we adopted a performance-based scoring methodology for eligible 
hospitals and CAHs reporting 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, that eligible hospitals and CAHs must meet to satisfy 
the requirement to report on the objectives and measures of meaningful 
use under 42 CFR 495.24. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45491 through 45492), we increased the minimum scoring threshold from 
50 to 60 points beginning with the EHR reporting period in CY 2022 and 
adopted corresponding changes to the regulatory text at 42 CFR 
495.24(e)(1)(i)(C) for the EHR reporting period in CY 2022. In the FY 
2023 IPPS/LTCH PPS final rule, we extended the 60-point threshold for 
the EHR reporting period in CY 2023 and subsequent years in the 
regulatory text at 42 CFR 495.24(f)(1)(i)(B) (87 FR 49410 through 
49411).
    For the EHR reporting period in CY 2025 and subsequent years, we 
are proposing to increase the minimum scoring threshold from 60 points 
to 80 points and are proposing corresponding changes to the regulation 
text at 42 CFR 495.24(f)(1)(i). Our review of the CY 2022 Medicare 
Promoting Interoperability Program's performance results found 98.5 
percent of eligible hospitals and CAHs (that is 97 percent of CAHs and 
99 percent of eligible hospitals) that reported to the Medicare 
Promoting Interoperability Program successfully met the minimum 
threshold score of 60 points, and 81.5 percent of eligible hospitals 
and CAHs (that is 78 percent of CAHs and 83 percent of eligible 
hospitals) that reported to the Medicare Promoting Interoperability 
Program exceeded the score of 80 points. Given the widespread success 
of eligible hospitals and CAHs participating in the Medicare Promoting 
Interoperability Program in CY 2022, we believe that by adopting a

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higher scoring threshold, we would incentivize more eligible hospitals 
and CAHs to align their health information systems with evolving 
industry standards and would encourage increased data exchange. We note 
that eligible hospitals and CAHs would have gained3 years of experience 
in the Medicare Promoting Interoperability Program (CYs 2022, 2023, and 
2024) at the 60-point minimum score threshold to improve performance. 
We believe an increase from 60 points to 80 points would encourage 
higher levels of performance through the advanced use of CEHRT to 
further incentivize eligible hospitals and CAHs to improve 
interoperability and health information exchange. We are also proposing 
to make corresponding changes to the regulatory text at 42 CFR 
495.24(f)(1)(i) to reflect our proposed scoring threshold change and, 
if finalized, this would take effect for the EHR reporting period in CY 
2025 and subsequent years. Specifically, we propose to adopt 42 CFR 
495.24(f)(1)(i)(C), which states ``In 2025 and subsequent years, earn a 
total score of at least 80 points.''
    We invite public comment on our proposal to increase the minimum 
scoring threshold from 60 points to 80 points for the EHR reporting 
period in CY 2025 and subsequent years, and to make corresponding 
changes to the regulatory text at 42 CFR 495.24(f)(1)(i).
    As shown in Table [IX.F.-03.], the points associated with the 
required measures sum to 100 points, and reporting one of the optional 
measures under the Public Health and Clinical Data Exchange Objective 
adds an additional 5 bonus points. The scores for each of the measures 
are added together to calculate a total score of up to 100 possible 
points for each eligible hospital or CAH. We refer readers to Table 
[IX.F.-03.] in this proposed rule, which reflects the objectives, 
measures, maximum points available, and whether a measure is required 
or optional for the EHR reporting period in CY 2025 based on our 
previously adopted policies, and the proposals included in this 
proposed rule.

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    The maximum points available, by measure, in this proposed rule, as 
shown in Table IX.F.-03, do not include the points that would be 
redistributed in the event an exclusion is claimed for a given measure. 
We are not proposing any changes to our policy for point redistribution 
in the event an exclusion is claimed. We refer readers to Table IX.F.-
04 in this proposed rule, which shows how points would be redistributed 
among the objectives and measures for the EHR reporting period in CY 
2025, in the event an eligible hospital or CAH claims an exclusion.

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6. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare Promoting Interoperability Program
a. Proposal To Update Clinical Quality Measures and Reporting 
Requirements in Alignment With the Hospital Inpatient Quality Reporting 
(IQR) Program
(1) Background
    Under sections 1814(l)(3)(A) and 1886(n)(3)(A) of the Social 
Security Act and the definition of ``meaningful EHR user'' under 42 CFR 
495.4, eligible hospitals and CAHs must report on clinical quality 
measures selected by CMS using CEHRT (also referred to as eCQMs), as 
part of being a meaningful EHR user under the Medicare Promoting 
Interoperability Program.
    Tables IX.F.-05. and IX.F.-06 in this proposed rule summarize the 
previously finalized eCQMs available for eligible hospitals and CAHs to 
report under the Medicare Promoting Interoperability Program for the CY 
2024 and CY 2025 reporting periods, as finalized in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59280 through 59281). To maintain alignment 
with the Hospital IQR program, in sections IX.C.5.c and IX.C.5.d of the 
preamble of this proposed rule, the order of the eCQMs displayed in 
Tables IX.F.-05 and IX.F.-06 mirrors that of the Hospital IQR program. 
In addition, the short names and the CBE numbers of the measures in the 
tables match the measures on the Electronic Clinical Quality 
Improvement Resource Center website at: https://ecqi.healthit.gov/.

[[Page 36373]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.259

[GRAPHIC] [TIFF OMITTED] TP02MY24.260

(2) Proposal To Adopt eCQMs
    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 and eCQM 
measure set for the Medicare Promoting Interoperability Program with 
similar requirements under the Hospital IQR Program, to the extent 
feasible.
    As discussed in the sections IX.C.5.c and IX.C.5.d of this proposed 
rule with respect to the Hospital IQR Program, we are proposing to 
adopt two new eCQMs for the Medicare Promoting Interoperability Program 
and to modify one eCQM, beginning with the CY 2026 reporting period. 
Specifically, we propose to add the following two eCQMs to the Medicare 
Promoting Interoperability Program eCQM measure set from which eligible 
hospitals and CAHs could self-select to report, beginning with the CY 
2026 reporting period: (1) the Hospital Harm--Falls

[[Page 36374]]

with Injury eCQM (CBE #4120e) and (2) the Hospital Harm--Postoperative 
Respiratory Failure eCQM (CBE #4130e). We are also proposing to modify 
the Global Malnutrition Composite Score eCQM (CBE #3592e) in the 
Medicare Promoting Interoperability Program measure set beginning with 
the CY 2026 reporting period, adding patients ages 18 to 64 to the 
current cohort of patients 65 years or older. A full description of 
this proposed change can be found in section IX.F.2 of the preamble of 
this proposed rule, including where interested parties can find the 
measure specification and other supporting information, which applies 
equally to support this proposal for the Medicare Promoting 
Interoperability Program.
    We refer readers to the discussion of the same proposals for the 
Hospital IQR Program in sections IX.C.5.c and IX.C.5.d of the preamble 
of this proposed rule for more information about these three measures, 
and our policy reasons for proposing them for adoption and 
modification. We propose to adopt the Hospital Harm--Falls with Injury 
eCQM and the Hospital Harm--Postoperative Respiratory Failure eCQM for 
the reasons stated in sections IX.C.5.c and IX.C.5.d of the preamble of 
this proposed rule. We propose to modify the Global Malnutrition 
Composite Score eCQM for the reasons stated in section IX.C. of the 
preamble of this proposed rule. Table IX.F.-07 and Table IX.F.-08 in 
the preamble of this proposed rule summarize previously finalized, 
newly proposed, and a proposed modification to eCQMs in the Medicare 
Promoting Interoperability Program for the CY 2026 reporting period, 
the CY 2027 reporting period, and subsequent years.
[GRAPHIC] [TIFF OMITTED] TP02MY24.261


[[Page 36375]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.262

    We invite public comment on our proposals to adopt (1) the Hospital 
Harm--Falls with Injury eCQM (CBE #4120e) and (2) the Hospital Harm--
Postoperative Respiratory Failure eCQM (CBE #4130e) to the measure set 
from which eligible hospitals and CAHs could self-select to report, and 
to modify the Global Malnutrition Composite Score eCQM (CBE #3592e), in 
the Medicare Promoting Interoperability Program for the CY 2026 and CY 
2027 reporting periods, respectively, and subsequent years.
b. Proposal To Revise the eCQM Reporting and Submission Requirements 
for the CY 2026 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, eligible hospitals and CAHs are currently 
required to report four calendar quarters of data for each required 
eCQM: (1) the Safe Use of Opioids--Concurrent Prescribing eCQM; (2) the 
Severe Obstetric Complications eCQM; (3) the Cesarean Birth eCQM; and 
(4) three self-selected eCQMs, for the CY 2024 reporting period and 
subsequent years (87 FR 49365 through 49367).
    In alignment with the Hospital IQR Program, we are proposing that, 
if our proposals to adopt the Hospital Harm--Falls with Injury eCQM and 
the Hospital Harm--Postoperative Respiratory Failure eCQM as detailed 
in sections IX.C and IX.F of the preamble of this proposed rule are 
finalized, these measures would be available for eligible hospitals and 
CAHs to select as one of their three self-selected eCQMs for the CY 
2026 reporting period and subsequent years.
    We are also proposing to add the Hospital Harm--Severe Hypoglycemia 
eCQM, the Hospital Harm--Severe Hyperglycemia eCQM, and the Hospital 
Harm--Opioid-Related Adverse Events eCQM to the mandatory eCQM measure 
set for eligible hospitals and CAHs for the CY 2026 reporting period 
and subsequent years, bringing the total number of required eCQMs to 
nine for the CY 2026 reporting period. In summary, we are proposing 
that eligible hospitals and CAHs under the Medicare Promoting 
Interoperability Program would be required to report four calendar 
quarters of data for each of the following: (1) Three self-selected 
eCQMs; (2) the Safe Use of Opioids--Concurrent Prescribing eCQM; (3) 
the Severe Obstetric Complications eCQM; (4) the Cesarean Birth eCQM; 
(5) the Hospital Harm--Severe Hypoglycemia eCQM; (6) the Hospital 
Harm--Severe Hyperglycemia eCQM; and (7) the

[[Page 36376]]

Hospital Harm--Opioid-Related Adverse Events eCQM, for a total of nine 
eCQMs, beginning with the CY 2026 reporting period.
    In addition, we are proposing to add the Hospital Harm--Pressure 
Injury eCQM and the Hospital Harm--Acute Kidney Injury eCQM to the 
mandatory eCQM measure set for eligible hospitals and CAHs beginning 
with the CY 2027 reporting period and subsequent years. In summary, we 
are proposing that eligible hospitals and CAHs under the Medicare 
Promoting Interoperability Program would be required to report four 
calendar quarters of data for each of the following: (1) Three self-
selected eCQMs; (2) the Safe Use of Opioids--Concurrent Prescribing 
eCQM; (3) the Severe Obstetric Complications eCQM; (4) the Cesarean 
Birth eCQM; (5) the Hospital Harm--Severe Hypoglycemia eCQM; (6) the 
Hospital Harm--Severe Hyperglycemia eCQM; (7) the Hospital Harm--
Opioid-Related Adverse Events eCQM; (8) the Hospital Harm--Pressure 
Injury eCQM; and (9) the Hospital Harm--Acute Kidney Injury eCQM, for a 
total of eleven eCQMs, beginning with the CY 2027 reporting period and 
subsequent years.
    We refer readers to the discussion of the same proposals for the 
Hospital IQR Program in sections [IX.C.5.c.] and [IX.C.5.d.] of the 
preamble of this proposed rule for more information about the eCQM 
reporting and submission requirements, and our policy reasons for 
proposing these changes, which apply equally to support these proposals 
for the Medicare Promoting Interoperability Program.
    We invite public comment on our proposals to increase the number of 
mandatory eCQM measures to a total of nine beginning with the CY 2026 
reporting period, and to increase the number of mandatory eCQM measure 
to a total of eleven beginning with the CY 2027 reporting period and 
subsequent years.
7. Potential Future Update of the SAFER Guides Measure
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,\542\ 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 reporting 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). In the FY 2024 IPPS/LTCH PPS final rule, we finalized a 
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 to be considered a meaningful user (88 FR 
59262).
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    \542\ https://www.healthit.gov/topic/safety/safer-guides.
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b. Status of Updates to SAFER Guides
    We received comments in the FY 2024 IPPS/LTCH PPS proposed rule 
recommending that we work with ONC to update the SAFER Guides, citing 
that the SAFER Guides were last updated in 2016 (88 FR 59264). In 
response to these comments, we noted that, while the current SAFER 
Guides reflect relevant and valuable guidelines for safe practices with 
respect to current EHR systems, we would consider exploring updates in 
collaboration with ONC. We reminded 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 (88 FR 59262). We also noted 
that future updates to the SAFER Guides would be provided with 
accompanying educational and promotional materials to notify 
participants, in collaboration with ONC, when available (88 FR 59265). 
In this proposed rule, we are seeking to make readers aware that 
efforts to update the SAFER Guides are currently underway. We 
anticipate that updated versions of the SAFER Guides may become 
available as early as CY 2025, and we would consider proposing a change 
to the SAFER Guides measure for the EHR reporting period beginning in 
CY 2026 to permit use of an updated version of the SAFER Guides at that 
time. We encourage eligible hospitals and CAHs to become familiar with 
the updated versions of the SAFER Guides when they become available and 
consider them as they implement appropriate EHR safety practices.
8. Proposal To Update the Definition of Meaningful EHR User for 
Healthcare Providers That Have Committed Information Blocking
    The Department of Health and Human Services (HHS) proposed rule, 
21st Century Cures Act: Establishment of Disincentives for Health Care 
Providers That Have Committed Information Blocking (hereafter referred 
to as the Disincentives proposed rule) (88 FR 74947), appeared in the 
Federal Register on November 1, 2023. If finalized, the final rule 
would implement the provision of the 21st Century Cures Act specifying 
that a healthcare provider, determined by the HHS Office of the 
Inspector General (OIG) to have committed information blocking, shall 
be referred to the appropriate agency to be subject to appropriate 
disincentives set forth through notice and comment rulemaking. In the 
Disincentives proposed rule, we proposed that an eligible hospital or 
CAH would not be considered a meaningful EHR user in an EHR reporting 
period if the OIG refers, during the calendar year of the reporting 
period, a determination that the eligible hospital or CAH committed 
information blocking as defined at 45 CFR 171.103 (88 FR 74968). 
Furthermore, we proposed to revise the definition of ``Meaningful EHR 
User'' in 42 CFR 495.4 to state that an eligible hospital or CAH is not 
a meaningful EHR user in a payment adjustment year if the OIG refers a 
determination that the eligible hospital or CAH committed information 
blocking, as defined at 45 CFR 171.103, during the calendar year of the 
EHR reporting period (88 FR 74968 through 74969). Based upon the 
proposed revisions to 42 CFR 495.4, the downward payment adjustment 
would apply 2 years after the year of the referral and the EHR 
reporting period in which the eligible hospital was not a meaningful 
EHR user. For CAHs, the downward payment adjustment would apply to the 
payment adjustment year in which the OIG referral was made (88 FR 
74957).
    If the Disincentives proposed rule is finalized, an eligible 
hospital subject to this disincentive would be subject to a three 
quarters reduction of the annual market basket increase, while a CAH 
subject to this disincentive would have its payment reduced to 100 
percent of reasonable costs, from the 101 percent of reasonable costs 
it might have otherwise earned, for failing to qualify as a meaningful 
EHR user in an applicable year. Additional regulatory

[[Page 36377]]

provisions have been proposed at 45 CFR 171 Subpart J, related to the 
disincentives application process (88 FR 74953).
    We note if the Disincentives proposed rule is finalized as 
proposed, the revised definition of Meaningful EHR User in 42 CFR 495.4 
would become effective when the 21st Century Cures Act: Establishment 
of Disincentives for Health Care Providers That Have Committed 
Information Blocking final rule takes effect. For additional background 
and information on this proposed update, we refer readers to the 
discussion in the 21st Century Cures Act: Establishment of 
Disincentives for Health Care Providers That Have Committed Information 
Blocking proposed rule on this topic (88 FR 74955 through 74957).
9. Future Goals of the Medicare Promoting Interoperability Program
a. Future Goals With Respect to Fast Healthcare Interoperability 
Resources[supreg] (FHIR) APIs for Patient Access
    In partnership with ONC, we envision a future where patients have 
timely, secure, and easy access to their health information through the 
health application of their choice. We are working with ONC to enable 
this type of access to health information by requiring the use of APIs 
that utilize the Health Level Seven International[supreg] (HL7) FHIR. 
We work with ONC and other federal partners to improve timely and 
accurate data exchange, partner with industry to enhance digital 
capabilities, advance adoption of FHIR, support enterprise 
transformation efforts that increase our technological capabilities, 
and promote interoperability. In the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32858), we described our future vision for the Medicare 
Promoting Interoperability Program and stated that we will continue to 
consider changes that support a variety of HHS goals, including 
supporting alignment with the 21st Century Cures Act, advancing 
interoperability and the exchange of health information, and promoting 
innovative uses of health IT. We also solicited public comment on 
issues relevant to the Medicare Promoting Interoperability Program that 
related to policies finalized in the 21st Century Cures Act: 
Interoperability, Information Blocking, and the ONC Health IT 
Certification Program final rule, including finalization of a new 
certification criterion for a standards-based API using FHIR, among 
other health IT topics (85 FR 32858).
    ONC finalized the HTI-1 final rule (89 FR 1192), effective March 
11, 2024, to further implement the 21st Century Cures Act, among other 
policy goals. ONC finalized revisions to the ``standardized API for 
patient and population services'' certification criterion at 45 CFR 
170.315(g)(10). It also adopted the HL7 FHIR US Core Implementation 
Guide (IG) Standard for Trial Use version 6.1.0 at 45 CFR 
170.215(b)(1)(ii), which provides the latest consensus-based 
capabilities aligned with the USCDI version 3 \543\ data elements for 
FHIR APIs. The HTI-1 final rule also created the Insights Condition and 
Maintenance of Certification requirements (Insights Condition) within 
the ONC Health IT Certification Program to provide transparent 
reporting on certified health IT (89 FR 1199). This Insights Condition 
will require developers of certified health IT subject to the 
requirements to report on measures that provide information about the 
use of specific certified health IT functionalities by end users. One 
such measure calculates the number of unique individuals who access 
their electronic health information overall and by different methods 
such as through a standardized API for patient and population services.
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    \543\ https://www.healthit.gov/isa/united-states-core-data-interoperability-uscdi#uscdi-v3.
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    By adopting these new and updated standards, implementation 
specifications, certification criteria, and conditions of 
certification, provisions in the HTI-1 final rule advance 
interoperability, improve transparency, and support the access, 
exchange, and use of electronic health information. CMS aims to further 
advance the use of FHIR APIs through policies in the Medicare Promoting 
Interoperability Program to advance interoperability, encourage the 
exchange of health information, and promote innovative uses of health 
IT. We also hope to gain insights into the adoption and use of FHIR 
APIs by eligible hospitals and CAHs due to the ONC Health IT 
Certification Program Insights Condition. We believe maintaining our 
focus on promoting interoperability, alignment, and simplification 
would reduce healthcare provider burden while allowing flexibility to 
pursue innovative applications that improve care delivery. For 
additional background and information, we refer readers to the 
discussion in the ONC HTI-1 final rule on this topic (89 FR 1192).
b. Improving Cybersecurity Practices
    The Medicare Promoting Interoperability Program encourages the 
advancement of patient safety by promoting appropriate cybersecurity 
practices through the Security Risk Analysis and SAFER Guides measures. 
On February 14, 2023, the National Institute of Standards and 
Technology (NIST) published updated guidance for health care entities 
implementing requirements of the Health Insurance Portability and 
Accountability (HIPAA) Security Rule (45 CFR Part 160 and Subparts A 
and C of Part 164; see also, most recently, 75 FR 40868 and 78 FR 
5566). The guidance, NIST SP 800-66r2, provides information and 
resources to HIPAA-covered entities to improve their cybersecurity risk 
practices.\544\ We also wish to alert readers of additional HHS 
resources and activities regarding cybersecurity best practices as 
recently summarized in an HHS strategy document that provides an 
overview of HHS recommendations to help the health care sector address 
cyber threats.\545\ HHS has also recently published a website detailing 
recommended cybersecurity performance goals.\546\ We intend to consider 
how the Medicare Promoting Interoperability Program can promote 
cybersecurity best practices for eligible hospitals and CAHs in the 
future.
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    \544\ https://csrc.nist.gov/pubs/sp/800/66/r2/final.
    \545\ https://aspr.hhs.gov/cyber/Documents/Health-Care-Sector-Cybersecurity-Dec2023-508.pdf.
    \546\ https://hphcyber.hhs.gov/performance-goals.html.
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c. Improving Prior Authorization Processes
    We recently released the CMS Interoperability and Prior 
Authorization final rule (CMS-0057-F), which appeared in the Federal 
Register on February 8, 2024 (89 FR 8758). This final rule aims to 
enhance health information exchange and access to health records for 
patients, healthcare providers, and payers, and improve prior 
authorization processes. In the final rule, we finalized the 
``Electronic Prior Authorization'' measure under the HIE objective of 
the Merit-based Incentive Payment System (MIPS) Promoting 
Interoperability performance category and under the HIE objective of 
the Medicare Promoting Interoperability Program, beginning, for the 
Medicare Promoting Interoperability Program, in the EHR reporting 
period in CY 2027 (89 FR 8909 through 8927).
10. Request for Information Regarding Public Health Reporting and Data 
Exchange
a. Background
    The COVID-19 public health emergency (PHE) highlighted the 
interdependencies of public health and

[[Page 36378]]

healthcare, and the importance of timely, integrated, and interoperable 
data exchange across the health ecosystem to protect the health and 
safety of patients, populations, and the broader public. It also called 
attention to the distance between where we are as a nation and where we 
want to be with the interoperability of data between healthcare 
providers and PHAs, especially in the event of a fast-evolving pandemic 
or other type of PHE. While many jurisdictions were able to demonstrate 
the advantages of capabilities such as electronic laboratory reporting 
for reportable conditions, surveillance systems to support case 
investigations, immunization registries to track COVID-19 
immunizations, and syndromic surveillance data for situational 
awareness, exchange across jurisdictions, and with some healthcare 
partners, remains inconsistent and, in some cases, burdensome.
    The Medicare Promoting Interoperability Program plays an important 
role in advancing the exchange of health information between PHAs and 
eligible hospitals and CAHs, using certified Health IT Modules that 
meet criteria and standards established under the ONC Health IT 
Certification Program. Measures under the Public Health and Clinical 
Data Exchange objective focus on a key set of exchange capabilities for 
healthcare providers that have evolved over time to incorporate new 
priorities and technical approaches. In recent years, we have also 
focused on expanding and strengthening the Public Health and Clinical 
Data Exchange objective to further support the exchange of data that 
ultimately supports better patient and public health outcomes.
    Efforts across HHS to advance the public health information 
infrastructure offer opportunities to further evolve the Medicare 
Promoting Interoperability Program. In 2020, the CDC launched the Data 
Modernization Initiative (DMI),\547\ a multi-year, billion-plus dollar 
public health ecosystem initiative aimed at moving the public health 
community from a siloed and static public health data system to 
connected, resilient, adaptable, and sustainable `response-ready' 
systems capable of meeting present and future health challenges. The 
DMI seeks to answer the need for a longer-term, whole-of-public health 
strategy that prioritizes collaboration and continuous improvement and 
recognizes that modernization is not a one-time event. To establish 
clear near-term priorities and milestones that complement the DMI's 
longer term focus and improve alignment of data modernization efforts 
at all levels of public health and across partners, CDC released its 
first Public Health Data Strategy (Ph.D.S) in 2023.\548\ The Ph.D.S 
outlines the data, technology, policy, and administrative actions 
essential to exchange critical core data efficiently and securely 
across healthcare and public health.
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    \547\ https://www.cdc.gov/surveillance/data-modernization/index.html.
    \548\ https://www.cdc.gov/ophdst/public-health-data-strategy/index.html.
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    In tandem with these efforts to chart a new strategic direction for 
improvements to the nation's public health infrastructure, evolving 
technical approaches are offering opportunities to automate and expand 
information exchange between healthcare providers and PHAs. ONC is 
exploring updates to existing certification criteria for health IT that 
support current measures in the Medicare Promoting Interoperability 
Program's Public Health and Clinical Data Exchange objective, new 
criteria that incorporate modern approaches to exchange, support 
additional types of information needed by PHAs, and criteria that focus 
on entities receiving public health data. In the HTI-1 final rule, ONC 
finalized updates to the health IT certification criterion for 
electronic case reporting in 45 CFR 170.315(f)(5), incorporating 
standards-based approaches to existing functional requirements in 
accordance with the HL7 FHIR Electronic Case Report (eCR) 
Implementation Guide (IG) or HL7 Clinical Document Architecture (CDA) 
Electronic Initial Case Report (eICR) IG (89 FR 1226). ONC is also 
considering recent recommendations from federal advisory committees 
that have focused on issues related to public health interoperability. 
These include the Public Health Data Systems Task Force, which was 
charged by the Health Information Technology Advisory Committee (HITAC) 
to inform ONC's continued collaborative work with CDC on improving 
public health data systems, and in support of CDC's greater DMI 
efforts. In November 2022, the Public Health Data Systems Task Force 
issued recommendations to the HITAC,\549\ which included a focus on new 
criteria for Health IT Modules that support public health use cases 
that aim to standardize technology that receives information from 
healthcare providers. In addition, the CDC Advisory Committee to the 
Director (ACD) Data and Surveillance Workgroup adopted a report on 
November 3, 2022, which addressed standards for public health data 
systems and implementing a certification program for public health IT, 
and other issues.\550\ We are working in partnership with the CDC and 
ONC to explore how the Medicare Promoting Interoperability Program 
could advance public health infrastructure through more advanced use of 
health IT and data exchange standards. This Request for Information 
(RFI) describes a series of goals and principles for the Medicare 
Promoting Interoperability Program's Public Health and Clinical Data 
Exchange objective, provides information about recommended updates to 
certified health IT under consideration that may impact eligible 
hospitals and CAHs, and seeks public comment on potential updates to 
the program that could help achieve these goals.
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    \549\ See ``Final Report of the Health Information Technology 
Advisory Committee on Public Health Data Systems'' https://www.healthit.gov/sites/default/files/page/2022-11/2022-11-10_PHDS_TF_Recommendations_Report_Transmittal_Letter_508.pdf.
    \550\ See ``Data and Surveillance Workgroup Report,'' CDC 
Advisory Committee to the Director (ACD) Data and Surveillance 
Workgroup (DSW). https://www.cdc.gov/about/pdf/advisory/dsw-recommendations-report.pdf.
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b. Goals for Public Health Reporting
    As we look toward the future of the Public Health and Clinical Data 
Exchange objective of the Medicare Promoting Interoperability Program, 
we believe decision-making and prioritization about policy change 
should adhere to four goals:
     The meaningful use of CEHRT enables continuous improvement 
in the quality, timeliness, and completeness of public health data 
being reported.
     The meaningful use of CEHRT allows for flexibility to 
respond to new public health threats and meet new data needs without 
requiring new and substantial regulatory and technical development.
     The meaningful use of CEHRT supports mutual data sharing 
between public health and healthcare providers.
     Reporting burden on eligible hospitals and CAHs is 
significantly reduced.
    These goals inform the questions provided at the end of this RFI. 
We invite public comment on these four goals.
c. Public Health in the ONC Health IT Certification Program
    We continue to collaborate closely with ONC on policy changes in 
the ONC Health IT Certification Program that either impact existing 
functionality reflected in the Medicare Promoting Interoperability 
Program measures or represent new capabilities for eligible

[[Page 36379]]

hospitals and CAHs that could offer opportunities to achieve our goals 
for the Public Health and Clinical Data Exchange objective. In this 
section we describe recommended updates to health IT certification 
criteria.
(1) Making Available New Capabilities for Exchanging Data With PHAs 
Using the FHIR Standard
    Current public health related certification criteria at 45 CFR 
170.315(f)(1) through (7) generally reference HL7 version 2 and CDA 
standards that support single-patient, event-based submission of data 
from healthcare providers to PHAs, such as electronic transmission of 
laboratory results (HL7[supreg] Version 2.5.1 Implementation Guide for 
Electronic Laboratory Reporting to Public Health, Release 1 with Errata 
and Clarifications) or electronic initial case reports (HL7 CDA[supreg] 
R2 Implementation Guide: Public Health Case Report--the Electronic 
Initial Case Report (eICR) Release 2) to public health agencies. 
However, these standards may not adequately support more complex data 
exchange use cases, such as bulk exchange of data for patients who 
received a specific vaccine. Approaches using FHIR could more 
effectively support a wide-scale public health response and reduce 
burden of implementation and maintenance for data exchange between and 
among healthcare providers and PHAs.
    Increased availability of FHIR-based APIs across systems used by 
PHAs and healthcare providers could help to create an ecosystem where 
PHAs could use health IT to securely query data directly from the 
source, in real time, based on an initial push of relevant data, when 
needed. Availability of a FHIR API in a healthcare provider's certified 
health IT could enable a PHA to query an eligible hospital or CAH's 
CEHRT for data on any patient with a specific condition when needed, 
avoiding the need for the eligible hospital or CAH to take additional 
action to submit additional information.
    As noted, ONC has already finalized an update to the electronic 
case reporting criterion in 45 CFR 170.315(f)(5), which provides an 
option to implement the HL7 FHIR eCR IG as part of a Health IT Module 
certified to the criterion (89 FR 1226). The Public Health Data Systems 
Task Force report stated that ``FHIR-based query may offer public 
health additional avenues to meet the needs of case investigation to 
supplement electronic case reporting and emerging public health 
threats'' and that ``FHIR may support a more focused and relevant 
response by providers to meet public health queries.'' \551\
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    \551\ Public Health Data Systems Task Force, Recommendation 23, 
p. 11 https://www.healthit.gov/sites/default/files/page/2022-11/2022-11-10_PHDS_TF_Recommendations_Report_Transmittal_Letter_508.pdf.
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    While FHIR specifications are not available for all the use cases 
currently supported in the public health criteria at 45 CFR 
170.315(f)(1)-(7), ONC continues to evaluate standards development 
activities around the use of FHIR for public health data exchange that 
could be incorporated into existing or new certification criteria, such 
as replacing HL7 version 2 and CDA exchange specifications with a FHIR 
approach over time.
(2) Expanding the Scope of Public Health Exchange Supported by 
Certified Health IT Capabilities
    Existing health IT certification criteria are linked to measures 
under the Medicare Promoting Interoperability Program and the MIPS 
Promoting Interoperability performance category, covering use cases 
from transmission to immunization registries and syndromic 
surveillance, to reportable laboratory test values/results and eCR.
    The Public Health Data Systems Task Force report recommended the 
addition of several additional certification criteria reflecting 
exchange of information such as birth and death data, the results of 
newborn screening services, and situational awareness.\552\ ONC is 
monitoring these and other areas of importance to public health that 
are not reflected in the current certification criteria.
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    \552\ Public Health Data Systems Task Force, Recommendation 18-
21, p. 10-11 https://www.healthit.gov/sites/default/files/page/2022-11/2022-11-10_PHDS_TF_Recommendations_Report_Transmittal_Letter_508.pdf.
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(3) Introducing Certification Criteria for Systems That Receive Public 
Health Data
    To date, ONC health IT certification criteria have been designed 
with systems that send data to PHAs in mind, particularly health IT 
systems used by healthcare providers, that exchange data with PHAs. 
Misalignment between certified health IT products and technology and 
systems used by PHA, has created challenges for both healthcare 
providers and PHAs, including reliance on complex workflows to 
accommodate non-harmonized and variable data elements and exchange 
standards. Inefficiencies associated with workarounds and custom 
processes can lead to further reductions in data quality, completeness, 
consistency, and interoperability.
    The HITAC Public Health Data Systems Task Force's report includes a 
recommendation ``that ONC establish certification criteria for public 
health technologies used by Public Health Authorities in support of 
their responsibilities in exchanging data for public health purposes 
including those defined in the existing (f) criteria.'' \553\
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    \553\ Public Health Data Systems Task Force, Recommendation 1, 
p. 7. https://www.healthit.gov/sites/default/files/page/2022-11/2022-11-10_PHDS_TF_Recommendations_Report_Transmittal_Letter_508.pdf.
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    By establishing minimum functional capabilities and exchange 
standards to both send and receive public health data, health IT 
certification criteria could enhance interoperability across healthcare 
providers and PHAs and provide a long-term mechanism for alignment as 
data exchange matures over time. An expansion of the ONC Health IT 
Certification Program to focus on the receiving side could also bolster 
CDC's public health infrastructure modernization efforts described 
above, by helping PHAs align with health care provider data sources 
using the same certification criteria and standards, and enabling 
entities to move together on a common timeline for updating technology 
requirements.
d. RFI Questions
(1) Questions for Goal #1: Quality, Timeliness, and Completeness of 
Public Health Reporting
    The Medicare Promoting Interoperability Program's requirement that 
eligible hospitals and CAHs report their level of ``active engagement'' 
between the eligible hospital or CAH, and a PHA, as well as the 
recently established one-year limitation in how long an eligible 
hospital or CAH may spend in Pre-Production and Validation, has 
provided a basis that could broadly incentivize the exchange of EHR 
data (87 FR 49339 through 49340). However, because active engagement 
reporting only requires an attestation of whether an eligible hospital 
or CAH is reporting production data or still in the process of 
validation, this approach does not allow us to assess eligible 
hospitals and CAHs on the comprehensiveness, quality, or timeliness of 
the data they provide to PHAs. We are considering whether alternatives 
to the ``active engagement'' approach could better allow us to assess 
eligible hospital and CAH performance, meet the data needs of PHAs, and 
ultimately allow us to incentivize increased performance in these 
areas. We are interested in how we could

[[Page 36380]]

think about alternatives to the ``active engagement'' approach 
described above. We are also interested in the increasing focus on 
leveraging FHIR-based data exchange for public health needs. Finally, 
we are interested in ensuring that any changes to the active engagement 
approach are implemented in a way that takes advantage of opportunities 
to further automate reporting and minimize administrative burden for 
eligible hospitals and CAHs. Therefore, we are seeking public comment 
and feedback on the questions and topic areas listed:
     Today, the measures in the Public Health and Clinical Data 
Exchange objective assess whether there is active engagement between an 
eligible hospital or CAH and a PHA, but do not measure the level of 
performance the eligible hospital or CAH has achieved in sending 
information. Specifically, we are seeking public comment on the 
following questions:
    ++ Should CMS shift to numerator/denominator reporting requirements 
for current and future measures in the Public Health and Clinical Data 
Exchange objective? If so, should CMS prioritize only certain measures 
for numerator/denominator reporting?
    ++ New technical approaches such as the use of FHIR APIs to support 
information exchange with PHAs could enable PHAs to query healthcare 
provider systems directly, after an initial trigger, rather than solely 
relying on a healthcare provider to take action to share information. 
How could performance be measured under approaches such as the use of 
FHIR APIs to support information exchange with PHAs? Would numerator/
denominator reporting be appropriate under such approaches?
     Continued expansion of the measures under the Public 
Health and Clinical Data Exchange objective to address different 
reporting use cases can incentivize eligible hospitals and CAHs to make 
more comprehensive information available to PHAs. We are seeking public 
comment on the following questions:
    ++ Should CMS continue to add measures under the Public Health and 
Clinical Data Exchange objective to include additional system-specific 
requirements (for example, vital records)? If so, which ones and why?
    ++ Should CMS create a new measure for each new type of data or use 
case added to the Public Health and Clinical Data Exchange objective? 
What are the risks of including too many measures under the objective?
    ++ Alternatively, should CMS explore ways to group data types and 
use cases under a more limited set of Public Health and Clinical Data 
Exchange objective measures?

--Anecdotal reports suggest that some healthcare providers are 
attesting to active engagement with public health for the ``Electronic 
Case Reporting'' measure if they report cases for at least one 
notifiable condition (for example, COVID-19).

    ++ How can CMS incentivize more complete electronic case reporting 
to PHAs? For example, should CMS update the measure to require 
healthcare providers to meet a certain threshold for conditions 
reported?
    ++ What potential benefit versus burden trade-offs CMS should 
consider? How should CMS account for varying levels of public health 
readiness and capacity for expanding conditions reported 
electronically, such as in rural areas?
    ++ What additional levers besides the Medicare Promoting 
Interoperability Program should CMS explore to improve the completeness 
of reporting to public health? How should CMS work with other partners 
to incentivize or require reporting?
(2) Questions for Goal #2, Flexibility and Adaptability of the Public 
Health Reporting Enterprise
    During the COVID-19 and Mpox PHEs, healthcare providers and PHAs 
often had to quickly update their systems to report case, laboratory, 
and vaccination data related to these novel pathogens and interventions 
devised in response to them. In this section, we are seeking 
information about how the Medicare Promoting Interoperability Program 
could improve the ability for public health infrastructure \554\ to 
quickly adapt to new threats. Specifically, we are seeking public 
comment on the following questions:
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    \554\ https://www.cdc.gov/infrastructure/pdfs/PHIC-Overview.pdf.
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     How can the Medicare Promoting Interoperability Program 
support or incentivize response ready reporting capabilities for 
healthcare providers? What, if any, challenges exist around sharing 
data with PHAs?
     How can CMS and ONC work with vendors to ensure that 
provider systems are being continually updated to meet new data needs, 
such as those in rural areas?
(3) Questions for Goal #3, Increasing Bi-Directional Exchange With 
Public Health Agencies
    The transition to, and use of, more modern, flexible approaches and 
networks that support data exchange between and across public health 
and healthcare is a key goal of HHS efforts to modernize the public 
health information infrastructure. We are interested in ways that the 
Medicare Promoting Interoperability Program can support this 
transition. Specifically, we are seeking public comment on the 
following questions:
     Both CDC's ACD and ONC's HITAC have recommended that CDC 
and ONC work together to establish certification criteria for public 
health technologies used by PHAs and implement a coordinated, phased 
approach to incentivize and eventually require their adoption.\555\ 
How, if at all, could the Medicare Promoting Interoperability Program 
support or incentivize PHA adoption of certified systems and 
technologies?
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    \555\ https://www.healthit.gov/sites/default/files/page/2023-03/2023-02-08_HITAC_Annual_Report_for_FY22_508_1.pdf.
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     How can CMS use the Public Health and Clinical Data 
Exchange objective to incentivize early adoption of FHIR-based APIs for 
public health data exchange?
     CMS previously finalized the Enabling Exchange under TEFCA 
measure under the HIE objective for eligible hospitals and CAHs to 
attest to engaging in health information exchange. Should CMS introduce 
a similar measure to allow providers to receive credit for the HIE 
objective by exchanging public health data through participation in 
TEFCA?
(4) Questions for Goal #4, Eliminating Reporting Burden for Healthcare 
Providers
    We are committed to continuing to reduce reporting burden for 
healthcare providers, such as in rural areas, as part of any updates to 
the Medicare Promoting Interoperability Program undertaken to support 
the priorities described above. Specifically, we are seeking public 
comment on the following questions:
     Under the current Public Health and Clinical Data Exchange 
objective, which measures, or other requirements result in the most 
administrative burden for eligible hospitals and CAHs?
     How can the Medicare Promoting Interoperability Program 
balance robust Public Health and Clinical Data Exchange objective 
requirements with our desire to reduce burden on eligible hospitals and 
CAHs?
     How can new technical approaches to data exchange with 
PHAs, such as the use of FHIR APIs, reduce burden for health care 
providers? What are potential barriers to achieving burden

[[Page 36381]]

reduction as these new approaches are implemented?

X. Other Provisions Included in This Proposed Rule

A. Proposed Transforming Episode Accountability Model (TEAM)

1. General Provisions
a. Introduction
    The CMS Innovation Center has designed and tested numerous 
alternative payment models that each include specific payment, quality, 
and other policies. However, there are some general provisions that are 
very similar across models. The general provisions address beneficiary 
protections, model evaluation and monitoring, audits and record 
retention, rights in data and intellectual property, monitoring and 
compliance, remedial action, model termination by CMS, limitations on 
review, and miscellaneous provisions on bankruptcy and other 
notifications.
    We propose to implement the general provisions, described later in 
this section and in subpart E of this part 512, based on similar 
requirements that have been previously finalized in existing model 
tests. In addition to the general provisions discussed here, TEAM-
specific provisions that are uniquely tailored to this model are 
described elsewhere in this rule.
b. Basis and Scope
    In Sec.  512.500, we propose that the proposed general provisions 
in this section X.A.1. of the preamble of this proposed rule would only 
be applicable to TEAM. These proposed general provisions would not, 
except as specifically noted in proposed part 512, subpart E, affect 
the applicability of other provisions affecting providers and suppliers 
under Medicare FFS, including the applicability of provisions regarding 
payment, coverage, and program integrity (such as those in parts 413, 
414, 419, 420, and 489 of chapter IV of 42 CFR and those in parts 1001 
through 1003 of chapter V of 42 CFR).
    We invite public comment on the proposed general provisions 
discussed in this section of the proposed rule.
c. Definitions
    We propose at Sec.  512.505 to define certain terms relevant to the 
general provisions proposed in this section X.A.1. of the preamble of 
this proposed rule. We are proposing to define the term ``TEAM 
participant'' to mean an acute care hospital that is identified as a 
TEAM participant under the terms of and defined in proposed Sec.  
512.505. We propose to define ``downstream participant'' to mean an 
individual or entity that has entered into a written arrangement with a 
TEAM participant pursuant to which the downstream participant engages 
in one or more TEAM activities. A downstream participant may include, 
but would not be limited to, an individual practitioner, as defined for 
purposes of TEAM. We propose to define ``TEAM activities'' to mean any 
activities impacting the care of model beneficiaries related to the 
test of TEAM performed under the terms of proposed 512 subpart E.
    We describe additional proposed definitions in context throughout 
this section X.A.1. of the preamble of this proposed rule.
d. Cooperation With Model Evaluation and Monitoring
    Section 1115A(b)(4) of the Act requires the Secretary to evaluate 
each model tested under the authority of section 1115A of the Act and 
to publicly report the evaluation results in a timely manner. The 
evaluation must include an analysis of the quality of care furnished 
under the model and the changes in program spending that occurred due 
to the model. Models tested by the CMS Innovation Center are rigorously 
evaluated. For example, when evaluating models tested under section 
1115A of the Act, we require the production of information that is 
representative of a wide and diverse group of model participants and 
includes data regarding potential unintended or undesirable effects, 
such as cost-shifting. The Secretary must take the evaluation into 
account if making any determinations regarding the expansion of a model 
under section 1115A(c) of the Act.
    In addition to model evaluations, the CMS Innovation Center 
regularly monitors model participants for compliance with model 
requirements. For the reasons described in section X.A.1. of the 
preamble of this proposed rule, these compliance monitoring activities 
are an important and necessary part of the model test.
    Therefore, we are proposing to codify at Sec.  512.584, that TEAM 
participants and their downstream participants must comply with the 
requirements of 42 CFR 403.1110(b) (regarding the obligation of 
entities participating in the testing of a model under section 1115A of 
the Act to report information necessary to monitor and evaluate the 
model), and must otherwise cooperate with CMS' model evaluation and 
monitoring activities as may be necessary to enable CMS to evaluate 
TEAM in accordance with section 1115A(b)(4) of the Act. This 
participation in the evaluation may include, but is not limited to, 
responding to surveys and participating in focus groups. Additional 
details on the specific research questions that we propose that the 
TEAM evaluation will consider can be found in section X.A.3.o. of the 
preamble of this proposed rule. Further, we propose to conduct 
monitoring activities according to proposed Sec.  512.590(b), described 
in section X.A.3.i. of the preamble of this proposed rule, including 
producing such data as may be required by CMS to evaluate or monitor 
TEAM, which may include protected health information as defined in 45 
CFR 160.103 and other individually identifiable data.
e. Rights in Data and Intellectual Property
    To enable CMS to evaluate TEAM as required by section 1115A(b)(4) 
of the Act and to monitor TEAM pursuant to Sec.  512.590, described at 
section X.A.3.i. of the preamble of this proposed rule, we are 
proposing to allow CMS to use any data obtained in accordance with 
proposed Sec.  512.588 to evaluate and monitor the proposed TEAM. We 
further propose that, consistent with section 1115A(b)(4)(B) of the 
Act, that CMS would be allowed to disseminate quantitative and 
qualitative results and successful care management techniques, 
including factors associated with performance, to other providers and 
suppliers and to the public. We propose that the data to be 
disseminated would include, but would not be limited to, patient de-
identified results of patient experience of care and quality of life 
surveys, as well as patient de-identified measure results calculated 
based upon claims, medical records, and other data sources.
    In order to protect the intellectual property rights of TEAM 
participants and downstream participants, we propose in Sec.  
512.588(c) to TEAM participants and their downstream participants to 
label data they believe is proprietary and should be protected from 
disclosure under the Trade Secrets Act. We would note that this 
approach is already in use in other models currently being tested by 
the CMS Innovation Center, including the Radiation Oncology and End 
Stage Renal Disease Treatment Choices models. Any such assertions would 
be subject to review and confirmation prior to CMS's acting upon such 
assertion.
    We further propose to protect such information from disclosure to 
the full extent permitted under applicable laws, including the Freedom 
of Information Act. Specifically, in proposed Sec.  512.588(b), we 
propose to not release data that has been confirmed by CMS to

[[Page 36382]]

be proprietary trade secret information and technology of the TEAM 
participant or its downstream participants without the express written 
consent of the TEAM participant or its downstream participants, unless 
such release is required by law.
f. Remedial Action
    As stated earlier in this proposed rule, as part of the CMS 
Innovation Center's monitoring and assessment of the impact of models 
tested under the authority of section 1115A of the Act, we have a 
special interest in ensuring that these model tests do not interfere 
with the program integrity interests of the Medicare program. For this 
reason, we monitor for compliance with model terms as well as other 
Medicare program rules. When we become aware of noncompliance with 
these requirements, it is necessary for CMS to have the ability to 
impose certain administrative remedial actions on a noncompliant model 
participant.
    The terms of many models currently being tested by the CMS 
Innovation Center permit CMS to impose one or more administrative 
remedial actions to address noncompliance by a model participant. We 
propose that CMS may impose any of the remedial actions set forth in 
proposed Sec.  512.592 if we determine that the TEAM participant or a 
downstream participant--
     Has failed to comply with any or all of the terms of TEAM, 
if finalized;
     Has failed to comply with any applicable Medicare program 
requirement, rule, or regulation;
     Has taken any action that threatens the health or safety 
of a beneficiary or other patient;
     Has submitted false data or made false representations, 
warranties, or certifications in connection with any aspect of TEAM;
     Has undergone a change in control (as defined in proposed 
Sec.  512.505) that presents a program integrity risk;
     Is subject to any sanctions of an accrediting organization 
or a Federal, state, or local government agency;
     Is subject to investigation or action by HHS (including 
the HHS-OIG and CMS) or the Department of Justice due to an allegation 
of fraud, a pattern of improper billing, or significant misconduct, 
including being subject to the filing of a complaint or filing of a 
criminal charge, being subject to an indictment, being named as a 
defendant in a False Claims Act qui tam matter in which the Federal 
Government has intervened, or similar action; or
     Has failed to demonstrate improved performance following 
any remedial action imposed by CMS.
    In Sec.  512.592(b), we propose to codify that CMS may take one or 
more of the following remedial actions if CMS determined that one or 
more of the grounds for remedial action described in proposed Sec.  
512.592(a) had taken place--
     Notify the TEAM participant and, if appropriate, require 
the TEAM participant to notify its downstream participants of the 
violation;
     Require the TEAM participant to provide additional 
information to CMS or its designees;
     Subject the TEAM participant to additional monitoring, 
auditing, or both;
     Prohibit the TEAM participant from distributing TEAM 
payments;
     Require the TEAM participant to terminate, immediately or 
by a deadline specified by CMS, its agreement with a downstream 
participant with respect to TEAM;
     Terminate the TEAM participant from the model test;
     Require the TEAM participant to submit a corrective action 
plan in a form and manner and by a date specified by CMS;
     Discontinue the provision of data sharing and reports to 
the TEAM participant;
     Recoup TEAM payments;
     Reduce or eliminate a TEAM payment otherwise owed to the 
TEAM participant, as applicable; or
     Such other action as subpart E of part may be permitted 
under the terms of proposed 512.
    We would note that because TEAM is a mandatory model, we would not 
expect to use the proposed provision that would allow CMS to terminate 
a TEAM participant's participation in the model, except in 
circumstances in which the TEAM participant has engaged, or is engaged 
in, egregious actions.
    We invite public comment on these proposed provisions regarding the 
proposed grounds for remedial actions, remedial actions generally, and 
whether additional types of remedial action would be appropriate.
g. CMS Innovation Center Model Termination by CMS
    We are proposing certain provisions that would allow CMS to 
terminate TEAM under certain circumstances. Section 1115A(b)(3)(B) of 
the Act requires the CMS Innovation Center to terminate or modify the 
design and implementation of a model, after testing has begun and 
before completion of the testing, unless the Secretary determines, and 
the Chief Actuary certifies with respect to program spending, that the 
model is expected to: improve the quality of care without increasing 
program spending; reduce program spending without reducing the quality 
of care; or improve the quality of care and reduce spending.
    We propose at Sec.  512.596 that CMS could terminate TEAM for 
reasons including, but not limited to, one of the following 
circumstances:
     CMS determines that it no longer has the funds to support 
TEAM.
     CMS terminates TEAM in accordance with section 
1115A(b)(3)(B) of the Act.
    As provided by section 1115A(d)(2)(E) of the Act and proposed Sec.  
512.596, termination of TEAM in accordance with section 1115A(b)(3)(B) 
of the Act would not be subject to administrative or judicial review.
    To ensure model participants had appropriate notice in the case of 
the termination of TEAM by CMS, we also propose to codify at Sec.  
512.596 that we would provide TEAM participants with written notice of 
the model termination, which would specify the grounds for termination 
as well as the effective date of the termination.
h. Limitations on Review
    In proposed Sec.  512.594, we propose to codify the preclusion of 
administrative and judicial review under section 1115A(d)(2) of the 
Act. Section 1115A(d)(2) of the Act states that there is no 
administrative or judicial review under section 1869 or 1878 of the Act 
or otherwise for any of the following:
     The selection of models for testing or expansion under 
section 1115A of the Act.
     The selection of organizations, sites, or participants to 
test models selected.
     The elements, parameters, scope, and duration of such 
models for testing or dissemination.
     Determinations regarding budget neutrality under section 
1115A(b)(3) of the Act.
     The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of the Act.
     Determinations about expansion of the duration and scope 
of a model under section 1115A(c) of the Act, including the 
determination that a model is not expected to meet criteria described 
in paragraph (1) or (2) of such section.
    We propose to interpret the preclusion from administrative and 
judicial review regarding the CMS Innovation Center's selection of 
organizations, sites, or participants to test TEAM to preclude from 
administrative and judicial review our selection of a TEAM participant, 
as well as our decision to terminate TEAM

[[Page 36383]]

participant, as these determinations are part of our selection of 
participants for TEAM.
    We invite public comment on the proposed codification of these 
statutory preclusions of administrative and judicial review for TEAM, 
as well as our proposed interpretations regarding their scope.
i. Miscellaneous Provisions on Bankruptcy and Other Notifications
    The proposed TEAM would have a defined period of performance, but 
final payment under the model may occur long after the end of this 
performance period. In some cases, a TEAM participant could owe money 
to CMS. We recognize that the legal entity that is the TEAM participant 
could experience significant organizational or financial changes during 
or after the period of performance for TEAM. To protect the integrity 
of the proposed TEAM and Medicare funds, we are proposing a number of 
provisions to ensure that CMS is made aware of events that could affect 
a TEAM participant's ability to perform its obligations under TEAM, 
including the payment of any monies owed to CMS.
    First, in proposed Sec.  512.595(a), we propose that a TEAM 
participant must promptly notify CMS and the local U.S. Attorney Office 
if it files a bankruptcy petition, whether voluntary or involuntary. 
Because final payment may not take place until after the TEAM 
participant ceases active participation in TEAM, we further propose 
that this requirement would apply until final payment has been made by 
either CMS or TEAM participant under the terms of the model and all 
administrative or judicial review proceedings relating to any payments 
under TEAM has been fully and finally resolved.
    Specifically, we propose that notice of the bankruptcy must be sent 
by certified mail within 5 days after the bankruptcy petition has been 
filed and that the notice must contain a copy of the filed bankruptcy 
petition (including its docket number), unless final payment has been 
made under the terms of TEAM and all administrative or judicial review 
proceedings regarding TEAM payments between the TEAM participant and 
CMS have been fully and finally resolved. The notice to CMS must be 
addressed to the CMS Office of Financial Management, Mailstop C3-01-24, 
7500 Security Boulevard, Baltimore, Maryland 21244 or to such other 
address as may be specified for purposes of receiving such notices on 
the CMS website.
    By requiring the submission of the filed bankruptcy petition, CMS 
would obtain information necessary to protect its interests, including 
the date on which the bankruptcy petition was filed and the identity of 
the court in which the bankruptcy petition was filed. We recognize that 
such notices may already be required by existing law, but CMS often 
does not receive them in a timely fashion, and they may not 
specifically identify TEAM. The failure to receive such notices on a 
timely basis can prevent CMS from asserting a claim in the bankruptcy 
case. We are particularly concerned that a TEAM participant may not 
furnish notice of bankruptcy after it has completed its performance in 
TEAM, but before final payment has been made or administrative or 
judicial proceedings have been resolved. We believe our proposal is 
necessary to protect the financial integrity of the proposed TEAM and 
the Medicare Trust Funds.
    Second, in proposed Sec.  512.595(b), we propose that the TEAM 
participant would have to provide written notice to CMS within 30 days 
of any change in the TEAM participant's legal name becoming effective. 
The notice of legal name change would have to be in a form and manner 
specified by CMS and include a copy of the legal document effecting the 
name change, which would have to be authenticated by the appropriate 
state official. The purpose of this proposed notice requirement is to 
ensure the accuracy of our records regarding the identity of TEAM 
participants and the entities to whom TEAM payments should be made or 
against whom payments should be demanded or recouped. We solicit 
comment on requiring notice to be furnished promptly, that is, within 
30 days after a change in legal name has become effective.
    Third, in proposed Sec.  512.595(c), we propose that the TEAM 
participant would have to provide written notice to CMS at least 90 
days before the effective date of any change in control. We propose 
that the written notification must be furnished in a form and manner 
specified by CMS. For purposes of this notice obligation, we propose 
that a ``change in control'' would mean any of the following: (1) The 
acquisition by any ``person'' (as such term is used in sections 13(d) 
and 14(d) of the Securities Exchange Act of 1934) of beneficial 
ownership (within the meaning of Rule 13d-3 promulgated under the 
Securities Exchange Act of 1934), of beneficial ownership (within the 
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 
1934), directly or indirectly, of voting securities of the TEAM 
participant representing more than 50 percent of the TEAM participant's 
outstanding voting securities or rights to acquire such securities; (2) 
the acquisition of the TEAM participant by any individual or entity; 
(3) the sale, lease, exchange or other transfer (in one transaction or 
a series of transactions) of all or substantially all of the assets of 
the TEAM participant; or (4) the approval and completion of a plan of 
liquidation of the TEAM participant, or an agreement for the sale or 
liquidation of the TEAM participant. The proposed requirement and 
definition of change in control are the same requirements and 
definition used in certain models that are currently being tested under 
section 1115A authority. We believe this proposed notice requirement is 
necessary to ensure the accuracy of our records regarding the identity 
of model participants and to ensure that we pay and seek payment from 
the correct entity. For this reason, we propose that if CMS determined 
in accordance with proposed Sec.  512.592(a)(5) that a TEAM 
participant's change in control would present a program integrity risk, 
CMS could take remedial action against the TEAM participant under 
proposed Sec.  512.592(b). In addition, to ensure payment of amounts 
owed to CMS, we propose that CMS may require immediate reconciliation 
and payment of all monies owed to CMS by a model participant that is 
subject to a change in control.
    We invite public comment on these proposed notification 
requirements.
2. Proposed Transforming Episode Accountability Model (TEAM)--
Introduction
    We are proposing the implementation and testing of the Transforming 
Episode Accountability Model (TEAM), a new mandatory alternative 
payment model under the authority of section 1115A of the Act, 
beginning on January 1, 2026, and ending on December 31, 2030. TEAM 
would test whether an episode-based pricing methodology linked with 
quality measure performance for select acute care hospitals reduces 
Medicare program expenditures while preserving or improving the quality 
of care for Medicare beneficiaries who initiate certain episode 
categories. Specifically, the proposed TEAM would test five surgical 
episode categories: coronary artery bypass graft (CABG), lower 
extremity joint replacement (LEJR), major bowel procedure, surgical 
hip/femur fracture treatment (SHFFT), and spinal fusion.
    Under the FFS program, Medicare makes separate payments to 
providers and suppliers for the items and services furnished to a 
beneficiary over the

[[Page 36384]]

course of an episode. With the amount of payments dependent on the 
volume of services delivered, acute care hospitals may not have 
incentives to invest in quality improvement and care coordination 
activities. As a result, care may be fragmented, unnecessary, or 
duplicative. By holding acute care hospitals accountable for all items 
and services provided during an episode, acute care hospitals are 
better incentivized to coordinate patient care, avoid duplicative or 
unnecessary services, and improve the beneficiary care experience 
during care transitions.
    This proposed model falls within a larger framework of activities 
initiated by the CMS Innovation Center during the past several years, 
including the release of the CMS Innovation Center strategic refresh 
and the comprehensive specialty strategy.556 557 The 
strategic refresh includes a goal of having 100 percent of Medicare FFS 
beneficiaries and the vast majority of Medicaid beneficiaries in an 
accountable care relationship by 2030. Episode-based payment models, 
such as TEAM, can be a tool to support this goal by increasing provider 
participation in value-based care initiatives with accountability for 
quality and cost outcomes. To further the goals of the strategic 
refresh, the CMS Innovation Center released the comprehensive specialty 
care strategy in 2022, which includes an element to maintain momentum 
established by episode-based payment models and supports development of 
TEAM.\558\ In addition, in July 2023, we published a Request for 
Information (RFI) to gain public input on design elements for a new 
mandatory bundled payment model.\559\ Given TEAM's alignment with many 
strategic facets of the CMS Innovation Center, our proposal to test a 
new episode-based payment model for acute care hospitals is based on: 
(1) lessons learned from testing the Bundled Payments for Care 
Improvement (BPCI) Initiative, the BPCI Advanced Model, and the 
Comprehensive Care for Joint Replacement (CJR) Model; and (2) comments 
received from the Episode-based Payment Model RFI (88 FR 45872) 
published in the Federal Register.
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    \556\ Innovation Center Strategy Refresh: https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper.
    \557\ The CMS Innovation Center's Strategy to Support Person-
centered, Value-based Specialty Care: https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care.
    \558\ https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care.
    \559\ https://www.federalregister.gov/documents/2023/07/18/2023-15169/request-for-information-episode-based-payment-model.
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    Under this proposed TEAM, TEAM participants continue to bill 
Medicare under the traditional FFS system for services furnished to 
Medicare FFS beneficiaries. However, the TEAM participant may also 
receive a reconciliation payment amount from CMS depending on their 
Composite Quality Score (CQS) and if their performance year spending is 
less than their reconciliation target price. As TEAM is a two-sided 
risk model, meaning the model requires TEAM participants to be 
accountable for performance year spending that is above or below their 
reconciliation target price, TEAM participants may also owe CMS a 
repayment amount depending on their CQS and if their performance year 
spending is more than their reconciliation target price.
    The model performance period for the proposed TEAM would consist of 
five performance years, beginning January 1, 2026, and ending December 
31, 2030, with final data submission of clinical data elements and 
quality measures in CY 2031 to account for episodes ending in CY 2030, 
and final reconciliation reports and TEAM reconciliation payment 
amounts and repayment amounts in CY 2031.
a. Background
    CMS is seeking to improve beneficiary care by using an episode-
based payment structure to align incentives in pursuit of improved 
quality and reduced spending. A FFS payment system pays health care 
providers and suppliers for discrete services over a single episode, 
potentially resulting in fragmented care and duplicative use of 
resources. Paying for discrete services may also not provide sufficient 
financial incentive for health care providers and suppliers to invest 
in quality improvement and care coordination that could help avoid 
adverse outcomes. Further, providers and suppliers may be paid under 
different FFS payment systems which may create challenges managing 
beneficiaries in an episode. Therefore, providers and suppliers have 
less of an incentive to collaborate to improve the quality of care and 
decrease the cost and unnecessary utilization of services.
    An episode-based payment methodology creates an incentive for 
participating providers and suppliers to coordinate across care 
settings as the participating entity takes responsibility for the 
quality and cost outcomes across the entire episode. All of the 
projected payments to the physician, hospital, and other health care 
provider and supplier services are combined into a target price. This 
target price represents the expected cost of all items and services 
furnished to a beneficiary during an episode. Health care providers 
included in such initiatives may either realize a financial gain or 
loss, based on how successfully they perform on quality measure 
assessment and manage resources and total costs throughout each 
episode. Payment models that hold entities accountable for spending and 
quality performance metrics for an entire episode can motivate health 
care providers to furnish services more efficiently, to better 
coordinate care, and to improve the quality of care.
    The CMS Innovation Center has tested episode-based payment models 
for over a decade, including the BPCI initiative, the BPCI Advanced 
Model, and the CJR Model. The CJR Model and the BPCI Advanced Models 
are current CMS Innovation Center model tests that are set to end on 
December 31, 2024, and December 31, 2025, respectively. When 
considering the future of episode-based payment models, we reviewed 
results of the CJR Model and the BPCI Advanced Model given promising 
evaluation findings that support these models reducing episode 
payments, before accounting for incentive payments, and maintaining 
quality of care, as described further in section X.A.2.c. of the 
preamble of this proposed rule. However, both models experienced 
significant model changes, including changes in participation volume, 
in the later years of their model test and assessing the results of 
these models based on their current methodologies requires additional 
evaluation data, which would not be available until after each model 
has concluded. We believe TEAM would allow the CMS Innovation Center to 
test a new episode-based payment model that builds upon lessons learned 
in previous episode-based payment models by incorporating the most 
promising model features, while also continuing care transformation 
efforts that we have promoted through the CJR or BPCI Advanced models.
    If the proposed TEAM is successful, we hope this model would 
establish the framework for managing episodes as a standard practice in 
Traditional Medicare. The proposed TEAM includes features that are 
attentive to operational feasibility for both participants and CMS, 
such as how often reconciliation would be conducted to minimize 
administrative burden, a pricing methodology that would be responsive 
to providers with varying levels of experience and different patient 
populations, and the selection of episodes with sufficient volume that 
would warrant standard care pathways

[[Page 36385]]

during the acute and post-acute care periods of an episode. Any future 
policy changes to this proposed model test, such as the addition of 
episode categories, would be implemented through future notice and 
comment rulemaking.
    Increasing quality, patient-centeredness, and cost-effective care 
requires collaboration among hospitals, physicians, and post-acute care 
(PAC) providers. To encourage this collaboration, TEAM proposes to 
further align incentives between hospitals and physicians by specifying 
certain types of financial arrangements that participants may elect to 
pursue to share reconciliation payment amounts received from CMS under 
the model. By doing so, TEAM participants would be able to share 
incentives with downstream providers and suppliers when they achieve 
higher quality and more cost-effective care through collaboration.
b. Evidence Base for Model Proposal
    Medicare beneficiaries can experience fragmented and costly care, 
distinguished by frequent diagnostics, imaging, tests and other 
treatment approaches delivered by different providers across different 
sites of care.\560\ A 2022 study examining fragmentation of ambulatory 
care for Medicare FFS beneficiaries found that four in ten 
beneficiaries experience highly fragmented care, with a mean of 13 
ambulatory visits across seven practitioners in one year.\561\ 
Fragmented care is further evident when focusing on the clinical 
management of Medicare beneficiaries for acute procedural care since 
these beneficiaries may be receiving care from different physicians in 
different settings before, during, and after their procedure.\562\ In 
the absence of effective communication between patients, families, 
physicians, hospitals, and other care settings, beneficiaries receiving 
acute procedural care may not receive comprehensive care management and 
coordination. The proposed TEAM is based on the premise that 
appropriately aligned financial incentives would improve care 
coordination for beneficiaries who are in an episode, resulting in 
better health outcomes.
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    \560\ Papanicolas, I., Woskie, L., & Jha, A. K. (2018). Health 
care spending in the United States and other High-Income countries. 
JAMA, 319(10), 1024. https://doi.org/10.1001/jama.2018.1150.
    \561\ Timmins, L., Urato, C., Kern, L. M., Ghosh, A., & Rich, E. 
C. (2022). Primary care redesign and care fragmentation among 
Medicare beneficiaries. The American Journal of Managed Care, 28(3), 
e103-e112. https://doi.org/10.37765/ajmc.2022.88843.
    \562\ The Center for Healthcare Research & Transformation. 
(2013). Payment Strategies: A Comparison of Episodic and Population-
based Payment Reform. Retrieved November 14, 2023, from https://www.chrt.org/wp-content/uploads/2013/11/CHRT_Payment-Strategies-A-Comparison-of-Episodic-and-Population-based-Payment-Reform-.pdf.
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    Care fragmentation in acute surgical procedures in the United 
States is well documented, leading to care variation and inefficiencies 
producing unfavorable patient outcomes and increased health 
spending.563 564 565 Given the variation in acute surgical 
care and costs, including post-acute care costs immediately following a 
procedure, significant literature has been devoted to evaluating 
opportunities to improve the quality and efficiency of 
care.566 567 This includes the design and implementation of 
standardized care processes that emphasize high-value care that can 
support episode-based care initiatives. For example one study found 
that, ``Enhanced Recovery After Surgery protocols have resulted in 
shorter length of hospital stay by 30% to 50% and similar reductions in 
complications, while readmissions and costs are reduced''.\568\ 
Moreover, other findings focus on perioperative care delivery and 
indicate, ``that through elements that emphasize care coordination, 
standardization, and patient-centeredness, perioperative surgical home 
programs can improve patient postoperative recovery outcomes and 
decrease hospital utilization''.\569\
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    \563\ Fry, D. E., Pine, M., Jones, B., & Meimban, R. J. (2011). 
The impact of ineffective and inefficient care on the excess costs 
of elective surgical procedures. Journal of the American College of 
Surgeons, 212(5), 779-786. https://doi.org/10.1016/j.jamcollsurg.2010.12.046.
    \564\ Justiniano, C. F., Xu, Z., Becerra, A. Z., Aquina, C. T., 
Boodry, C. I., Swanger, A. A., Temple, L. K., & Fleming, F. J. 
(2017). Long-term deleterious impact of surgeon care fragmentation 
after colorectal surgery on survival: Continuity of care continues 
to count. Diseases of the Colon & Rectum, 60(11), 1147-1154. https://doi.org/10.1097/dcr.0000000000000919.
    \565\ Tsai, T. C., Orav, E. J., & Jha, A. K. (2015). Care 
fragmentation in the postdischarge period. JAMA Surgery, 150(1), 59. 
https://doi.org/10.1001/jamasurg.2014.2071.
    \566\ Tsai, T. C., Greaves, F., Zheng, J., Orav, E. J., Zinner, 
M. J., & Jha, A. K. (2016). Better patient care at High-Quality 
hospitals may save Medicare money and bolster Episode-Based payment 
models. Health Affairs, 35(9), 1681-1689. https://doi.org/10.1377/hlthaff.2016.0361.
    \567\ Scally, C. P., Thumma, J. R., Birkmeyer, J. D., & Dimick, 
J. B. (2015). Impact of surgical quality improvement on payments in 
Medicare patients. Annals of Surgery, 262(2), 249-252. https://doi.org/10.1097/sla.0000000000001069.
    \568\ Ljungqvist, O., Scott, M. J., & Fearon, K. C. H. (2017). 
Enhanced recovery after surgery. JAMA Surgery, 152(3), 292. https://doi.org/10.1001/jamasurg.2016.4952.
    \569\ Cline, K. M., Clement, V., Rock-Klotz, J., Kash, B. A., 
Steel, C. A., & Miller, T. R. (2020). Improving the cost, quality, 
and safety of perioperative care: A systematic review of the 
literature on implementation of the perioperative surgical home. 
Journal of Clinical Anesthesia, 63, 109760. https://doi.org/10.1016/j.jclinane.2020.109760.
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    CMS, commercial payers, and other stakeholders are continuously 
testing a variety of approaches to constructing episodes of care, 
including through different patient populations, clinical episode 
categories, and pricing methodologies.570 571 572 Though the 
results of alternative payment models focused on episodes of care have 
been mixed, evidence related to models' ability to realize savings and 
improve quality is promising, especially given the 10 years of 
experience yielded from participants and the CMS Innovation Center 
model tests. The BPCI Advanced and CJR models are still being tested, 
and the effects of the models' care redesign changes aimed to achieve 
Medicare savings and maintain or improve quality of care are still 
being evaluated, see section X.A.2.c. of the preamble of this proposed 
rule, but have generated evidence from multiple evaluation reports to 
support the design of TEAM. Beyond quantitative data, qualitative data 
collected from model participants and data from site visits indicate 
care transformation is happening, and quality of care is improving 
across the spectrum. Qualitative data range from reported improved 
relationships between inpatient providers and post-acute care (PAC) 
providers, to reshaping patient and provider expectations about 
appropriate discharge destinations, to process changes, such as 
standardized care pathways, identification and mitigation of medical 
and social risk factors, monitoring patients in the post-discharge 
period, and connecting patients to primary care providers. As noted in 
section X.A.2.c. of the preamble of this proposed rule, evaluation 
results from the previous and current episode-based payment models 
consistently indicate that these models can reduce episode payments, 
before

[[Page 36386]]

considering incentive payments, and generally without compromising 
quality of care.
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    \570\ Agarwal, R., Liao, J. M., Gupta, A., & Navathe, A. S. 
(2020). The Impact of bundled payment on health care spending, 
utilization, and quality: A Systematic review. Health Affairs, 
39(1), 50-57. https://doi.org/10.1377/hlthaff.2019.00784.
    \571\ Steenhuis, S., Struijs, J. N., Koolman, X., Ket, J. C. F., 
& Van Der Hijden, E. (2020). Unraveling the complexity in the design 
and implementation of bundled payments: A scoping review of key 
elements from a payer's perspective. The Milbank Quarterly, 98(1), 
197-222. https://doi.org/10.1111/1468-0009.12438.
    \572\ Sutherland, A., Boudreau, E., Bowe, A., Huang, Q., Liao, 
J. M., Flagg, M., Cousins, D., Antol, D. D., Shrank, W. H., Powers, 
B., & Navathe, A. S. (2023). Association between a bundled payment 
program for lower extremity joint replacement and patient outcomes 
among Medicare Advantage beneficiaries. JAMA Health Forum, 4(6), 
e231495. https://doi.org/10.1001/jamahealthforum.2023.1495.
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c. ACE, BPCI, BPCI Advanced, and CJR Evaluation Results
    The CMS Innovation Center previously tested episode-based payment 
approaches among acute episodes, including the Medicare Acute Care 
Episode (ACE) demonstration and the BPCI Initiative, and currently is 
testing additional approaches under the BPCI Advanced model and the CJR 
model.\573\ The ACE demonstration tested a bundled payment approach for 
cardiac and orthopedic inpatient surgical services and procedures. All 
Medicare Part A and Part B services pertaining to the inpatient stay 
were included in the ACE demonstration episodes of care. Evaluations 
results found that Medicare saved an average of $585 per episode from 
the combined Medicare Part A and B expected payments or a total of $7.3 
million across all episodes (12,501 episodes), all ACE MS-DRGs, and 
four ACE Sites. However, increases in post-acute care spending reduced 
these savings by approximately 45 percent, resulting in per episode 
savings of $319 and total net savings of approximately $4 million. With 
respect to quality of care, findings suggest that the ACE sites 
maintained their quality-of-care levels without any systematic or 
consistent changes in clinical outcomes or in the type of patients they 
admitted in response to the demonstration. Despite the lack of strong 
quantitative evidence for realized improvements in quality, there was 
qualitative evidence that hospitals worked to improve processes and 
outcomes.\574\
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    \573\ Medicare Acute Care Episode Demonstration (https://
innovation.cms.gov/innovation-models/ace), BPCI Initiative (https://www.cms.gov/priorities/innovation/innovation-models/bundled-payments), BPCI Advanced Model (https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced), CJR Model (https://www.cms.gov/priorities/innovation/innovation-models/CJR).
    \574\ Evaluation of the Medicare Acute Care Episode (ACE) 
Demonstration. (2013). Centers for Medicare & Medicaid Services. 
Retrieved December 1, 2023, from http://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf.
---------------------------------------------------------------------------

    The BPCI initiative tested whether linking payments for providers 
that furnish Medicare-covered items and services during an episode 
related to an inpatient hospitalization could reduce Medicare 
expenditures while maintaining or improving quality of care.
     Model 1 episodes were limited to the acute inpatient 
hospitalizations for all MS-DRGs.
     Model 2 episodes began with a hospital admission and 
extended for 30, 60, or 90 days after discharge.
     Model 3 episodes began with the initiation of post-acute 
care following a hospital admission and extended for 30, 60, or 90 
days.
     Model 4 episodes began with a hospital admission and 
included readmissions within 30 days after discharge.
    Model 1 was unique, as compared to Models 2-4, in that target 
prices weren't generated but awardees received a predetermined discount 
percentage to their Medicare Inpatient payment system (IPPS) operating 
payment rates for episodes at their hospital. Model 1 had a small 
volume of participants, however, evaluation results found that there 
were no consistent negative or positive statistically significant 
impacts to Medicare payments or quality of care effects on Medicare 
beneficiaries.\575\ Similarly, Model 4 had a small volume of 
participants, and by the end of the model there was no change in 
allowed payments nor were there any changes in the quality of care as 
measured by claims-based quality measures.\576\
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    \575\ Evaluation and Monitoring of the Bundled Payments for Care 
Improvement Model 1 Initiative. (2016). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/files/reports/bpci-mdl1yr2annrpt.pdf.
    \576\ CMS Bundled Payments for Care Improvement Initiative 
Models 2-4: Year 7 Evaluation & Monitoring Annual Report. (2021). 
Centers for Medicare & Medicaid Services. Retrieved December 1, 
2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-models2-4-yr7evalrpt.
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    Evaluation results for BPCI Models 2 and 3 were more robust given 
the greater volume of participants in each model. Similar to Model 1 
and Model 4, quality of care generally remained unchanged in BPCI 
Models 2 and 3. With respect to the financial performance of the 
models, findings demonstrated reductions in FFS payments of $1,193 
million for Model 2 and $232 million for Model 3. However, Medicare 
experienced net losses of $418 million (p<0.05) for Model 2, or $332 
per episode, and $110 million (p<0.05) for Model 3, or $714 per 
episode, after accounting for reconciliation payments to participants. 
These net losses to Medicare represented 1.3% of what payments would 
have been absent BPCI under Model 2 and 3.1% under Model 3. The largest 
contributing factor to these losses was the elimination of 
participants' repayment responsibility. If CMS had not eliminated 
repayment responsibility, and assuming model participation remained the 
same, Model 2 would have resulted in no net losses or savings, and net 
losses under Model 3 would have been reduced to $ 66 million (p<0.05), 
or 1.9% of what payments would have been absent BPCI.\577\
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    \577\ CMS Bundled Payments for Care Improvement Initiative 
Models 2-4: Year 7 Evaluation & Monitoring Annual Report. (2021). 
Centers for Medicare & Medicaid Services. Retrieved December 1, 
2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-models2-4-yr7evalrpt.
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    We currently are testing the BPCI Advanced model, which is a 
voluntary episode-based model based on the BPCI Initiative's Model 2, 
that tests whether linking payments for an episode will incentivize 
health care providers to invest in innovation and care redesign to 
improve care coordination and reduce expenditures, while maintaining or 
improving the quality of care for Medicare FFS beneficiaries. We are 
still evaluating the effects of the BPCI Advanced model on patient 
experience of care, quality outcomes, and cost of care for Medicare FFS 
beneficiaries. However, evaluation results to date demonstrated 
reductions in episode payments and maintenance of quality of care, but 
the model has thus far been unable to generate Medicare savings. As of 
Model Year 3 (2020), BPCI Advanced participants reduced average episode 
payments by 3.8% or $1,028 per episode, and more specifically 3.1% 
($796 per episode) for medical episodes and 5.8% ($1,800 per episode) 
for surgical episodes. Despite the reductions in FFS payments, after 
accounting for reconciliation payments to participants, Medicare had a 
net loss of $114 million in 2020, or 0.8% of what Medicare payments 
would have been in absence of the model. When looking at Medicare 
savings by episode type, surgical episodes resulted in an estimated net 
savings of $71.3 million, or 2.3%, but those savings were offset by 
medical episodes which resulted in an estimated net loss of $200.5 
million, or 1.9%.\578\ The BPCI Advanced model implemented changes, 
most notably in 2021-23, and most recently made further changes to 
extend the model through 2025 and support provider engagement in value-
based care.
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    \578\ CMS Bundled Payments for Care Improvement Advanced Model: 
Fourth Evaluation Report. (2023). Centers for Medicare & Medicaid 
Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/bpci-adv-ar4.
---------------------------------------------------------------------------

    We are also currently testing the CJR model, which is a mandatory 
episode-based payment model in 34 metropolitan statistical areas (MSAs) 
for lower extremity joint replacement episodes that encourages 
hospitals, physicians, and PAC providers to work

[[Page 36387]]

together to improve the quality and coordination of care from the 
initial hospitalization or outpatient procedure through recovery. 
Evaluation results to date have indicated that in the first four 
performance years, mandatory hospitals generated $72 million dollars in 
savings to Medicare, although not statistically significant. But in 
Performance Year 5, reconciliation payments substantially increased 
generating $95.4M in statistically significant Medicare losses, due to 
adjustments made to the model made during the COVID-19 Public Health 
Emergency (PHE). CMS enacted these temporary adjustments, which 
effectively waived downside risk for all CJR episodes, in order to 
minimize any financial burden associated with model participation given 
the financial challenges and uncertainties hospitals faced early in the 
COVID-19 PHE. These adjustments resulted in reconciliation payments 
being triple what they were in previous years, which reversed the 
savings trajectory and resulted in statistically significant losses to 
Medicare for mandatory hospitals. The losses in Performance Year 5 were 
large enough to offset total estimated savings prior to the public 
health emergency.\579\ Like the BPCI Advanced model, the CJR model was 
revised and extended until December 31, 2024.
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    \579\ CMS Comprehensive Care for Joint Replacement Model: 
Performance Year 5 Evaluation Report. (2023). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
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    We believe that providers', suppliers', and CMS' experiences with 
the BPCI Advanced and CJR models support the design of the proposed 
TEAM. Stakeholders both directly and indirectly involved in testing the 
BPCI Advanced and CJR models have conveyed that they perceive episode-
based payments to be an effective mechanism for advancing better, more 
accountable care through care coordination and opportunities to improve 
care efficiency. CMS has also heard similar sentiment through other 
efforts including the CMS Innovation Center's Specialty Care Strategy 
Listening Session and recent Episode-based Payment Model Request for 
Information (RFI) (88 FR 45872).\580\
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    \580\ CMS Innovation Center's Specialty Care Strategy Listening 
Session (https://www.cms.gov/priorities/innovation/media/document/spec-care-listening-session-slides).
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    Further information of why specific elements of the models and 
initiatives were incorporated into the TEAM's designs is discussed 
later in this proposed rule.
d. CMS Innovation Center Specialty Care Strategy
    In 2021, the CMS Innovation Center announced a strategic refresh 
with a vision of having a health care system that achieves equitable 
outcomes through high quality, affordable, person-centered care.\581\ 
To guide this updated vision, the CMS Innovation Center intends to 
design, implement, and evaluate future models with a focus on five 
strategic objectives: (i) driving accountable care; (ii) advancing 
health equity; (iii) supporting innovation; (iv) addressing 
affordability; and (v) partnering to achieve system transformation. One 
of the goals established by the strategic refresh was having 100% of 
traditional Medicare beneficiaries and the vast majority of Medicaid 
beneficiaries in accountable care relationships by 2030. This means 
that beneficiaries should experience longitudinal, accountable care 
with providers that are responsible for the quality and total cost of 
their care. Beneficiaries will experience accountable care 
relationships mostly through advanced primary care or accountable care 
organizations (ACOs), and these entities are expected to coordinate 
with or fully integrate specialty care to deliver whole-person care.
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    \581\ Centers for Medicare & Medicaid Services. (2021). 
Innovation Center Strategy Refresh. https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper.
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    To support specialty care integration, the CMS Innovation Center 
released a comprehensive specialty strategy to test models and 
innovations supporting access to high-quality, integrated specialty 
care across the patient journey--both longitudinally and for procedural 
or acute services.\582\ Specialty integration cannot be achieved with a 
single approach given a beneficiary's health needs may change 
influencing the types of providers and settings where they receive 
care. Therefore, the specialty care strategy consists of four elements: 
(i) enhancing specialty care performance data transparency; (ii) 
maintaining momentum on acute episode payment models and condition-
based models; (iii) creating financial incentives within primary care 
for specialist engagement; and (iv) creating financial incentives for 
specialists to affiliate with population-based models and move to 
value-based care. The proposed TEAM falls within the second element of 
the specialty care strategy and utilizes lessons learned from our 
experience with the BPCI Advanced model and the CJR model to design 
TEAM as a new episode-based payment model that would focus on 
accountability for quality and cost, health equity, and specialty 
integration. TEAM is further informed by the Episode-Based Payment 
Model RFI (88 FR 45872) published in July 2023, which gathered public 
comment on potential model design elements.
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    \582\ The CMS Innovation Center's strategy to support person-
centered, value-based specialty care [verbar] CMS. (2022). https://www.cms.gov/blog/cms-innovation-centers-strategy-support-person-centered-value-based-specialty-care#_ftn1.
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    The proposed TEAM represents one aspect of the specialty care 
strategy, and does not capture all beneficiaries, providers, and care 
settings to achieve complete person-centered value-based care on its 
own. Improving the health care system for Medicare beneficiaries 
requires a comprehensive approach that cannot be addressed by a single 
model or initiative since beneficiary health care needs are dynamic 
across the patient care continuum. This means TEAM would center 
accountability on beneficiary health care needs during narrow, focused 
periods of acute and post-acute care while health care needs outside of 
this scope would be addressed with other elements of the specialty care 
strategy. Therefore, we believe TEAM would complement other elements of 
the specialty care strategy (for example, another element of the 
strategy is to share TEAM-style episode data with ACOs) and would 
promote care transformation that generates standard care pathways and 
new best practices across broad patient populations (not just Medicare 
FFS).
3. Provisions of Proposed Transforming Episode Accountability Model
a. Model Performance Period, TEAM Participants, Participation Tracks, 
and Geographic Area Selection
(1) Model Performance Period
    We are proposing a 5-year ``model performance period'', defined as 
the 60-month period from January 1, 2026, to December 31, 2030, during 
which TEAM is being tested and the TEAM participants is held 
accountable for spending and quality. The model would have 5 
``performance years'' (PYs), which we propose to define as a 12-month 
period beginning on January 1 and ending on December 31 of each year 
during the model performance period in which TEAM is being tested and 
TEAM participants are held accountable for spending and quality. We are 
proposing to define the start of the model performance period as the 
``model start date''.
    We are proposing a 5-year model performance period to allow for a 
sufficient time period for TEAM

[[Page 36388]]

Participants to invest in care delivery transformation and observe 
return on investments. A five-year period would also allow for an 
adequate evaluation period to determine model results, given that many 
of the episode categories we are proposing to test under TEAM have thus 
far only been tested among voluntary model participants.
    We alternatively considered a 3- or 10-year model performance 
period. However, we believe a 3-year period to be too short to allow 
adequate time to invest in transformations and achieve considerable 
model savings to the Medicare trust fund. We also considered a 10-year 
model performance period, similar to several recently announced CMS 
Innovation Center models; however, given this would be a mandatory 
model, we believe 5 years would be sufficient to gather the necessary 
data to evaluate whether the model is successful for the included 
episode categories.
    We also considered beginning TEAM on April 1, 2026, July 1, 2026, 
or October 1, 2026, to allow selected TEAM participants more time to 
prepare for model implementation. However, based on our experience with 
prior and current episode-based payment models, we believe that 
potential participants would have sufficient time to prepare to 
participate in a model that begins January 1, 2026, which is why we are 
proposing TEAM at least 18 months before the proposed model start date. 
In addition, given that the current BPCI Advanced model concludes on 
December 31, 2025, beginning TEAM on January 1, 2026, would ensure 
continuity between models for those hospitals in BPCI Advanced that are 
in the CBSAs selected to participate in TEAM. We also recognize the 
potential misalignment between the performance measurement period based 
on the calendar year and an alternative model start date, so if we were 
to adjust the model start date based on public input, we propose that 
we would also alter the model performance period. For example, if TEAM 
were to begin April 1, 2026, the PY would still be defined as a 12-
month period from the start date, meaning April 1, 2026, to March 31, 
2027. As a result, the model performance period end date would also 
shift to reflect a 60-month period from the model start date of the 
first PY--for example, April 1, 2026, to March 31, 2031.
    We seek comment on the proposed model performance period of 5 years 
and proposed model start date of January 1, 2026, for Performance Year 
1, and on the alternatively considered start dates (April 1, 2026, July 
1, 2026, and October 1, 2026), and the subsequent adjustment to dates 
of the model performance period if we were to change the model start 
date.
(2) Participants
(a) Background
    The proposed TEAM builds upon previous CMS Innovation Center 
episode-based payment models, including the BPCI Advanced and CJR 
models. While these models have similarities, they have some notable 
differences with regard to participant structure and the entity who can 
initiate episodes. The BPCI Advanced model is a voluntary model that 
includes convener and non-convener participants. A non-convener 
participant initiates episodes, is either an acute care hospital or 
physician group practice (PGP) and bears financial risk for itself. A 
convener participant is an entity willing to bear financial risk for 
downstream episode initiators, either acute care hospitals or PGPs, and 
generally provides supportive services such as data analytics or 
clinical care navigators. In contrast, the CJR model is a mandatory 
model in 34 MSAs that does not include convener participants or allow 
PGPs to initiate episodes but does parallel BPCI Advanced by including 
participant hospitals (non-convener) that initiate episodes. While the 
CJR Model does not have a formal convener role, some CJR participant 
hospitals contract with (non-model participant) convener-organizations 
to provide administrative, operational, analytical, and clinical 
services.
    We are interested in testing and evaluating the impact of a 
mandatory episode-based payment model in selected geographic areas, see 
section X.A.3.a.(4) of the preamble of this proposed rule, for acute 
care hospitals that initiate certain episode categories, including 
among those hospitals that have not chosen to voluntarily participate 
in the BPCI Advanced model or those that were selected to participate 
in the CJR model. Testing the model among acute care hospitals in 
select geographic areas would allow CMS and participants to gain 
experience testing and evaluating an episode-based payment approach for 
certain episodes furnished by hospitals with a variety of historic 
utilization patterns; roles within their local markets, including with 
regard to accountable care organization participation or affiliation; 
volume of services provided; access to financial, community, or other 
resources; and population and health care provider density. Further, 
Medicare beneficiaries and providers in rural and underserved areas can 
be underrepresented in voluntary models, whereas under a mandatory 
model we may include these entities, with safeguards as appropriate, 
for participation so that beneficiaries have equitable access to care 
redesign approaches intended to improve the quality care, and such 
providers gain experience in value-based care. Lastly, participation of 
hospitals in selected geographic areas would allow CMS to test episode-
based payments without introducing participant attrition or selection 
bias such as the selection bias inherent in the BPCI Advanced model due 
to self-selected participation in the model and self-selection of 
episode categories.
(b) Proposed TEAM Participant Definition
    As previously discussed, the CJR model has participant hospitals 
who are acute care hospitals that initiate episodes whereas the BPCI 
Advanced model allows either acute care hospitals or PGPs to initiate 
episodes, who may or may not be the participant in the model. Since two 
different types of entities are permitted to initiate episodes and they 
may be co-located, meaning the PGP may initiate episodes and practices 
at a hospital that also initiates episodes, the BPCI Advanced model 
includes precedence rules. Precedence rules dictate which entity will 
be attributed the episode and accountable for quality and cost 
performance, but they also contribute to operational complexity. For 
example, in BPCI Advanced a single episode could be attributed to one 
of three potential provider or suppliers: the attending PGP, the 
operating PGP, or the hospital. Data feeds can help inform entities of 
episode attribution when multiple provider or suppliers have interacted 
with the beneficiary, but BPCI Advanced participants have expressed 
challenges with identifying their potential episodes due to lack of 
real-time data.
    Given the challenges of having multiple provider or suppliers in a 
single model initiate an episode, we believe it would benefit TEAM to 
only allow a single entity to initiate episodes and be the participant 
in TEAM. This is because it would simplify episode attribution, meaning 
it would avoid precedence rules, and make it easier for the single 
entity to identify beneficiaries that may be included in the model. 
Therefore, similar to the CJR model, we propose that acute care 
hospitals would be the TEAM participant and the only entity able to 
initiate an episode in TEAM. Specifically, we propose defining a TEAM 
participant as an acute

[[Page 36389]]

care hospital that initiates episodes and paid under the IPPS with a 
CMS Certification Number (CCN) primary address located in one of the 
geographic areas selected for participation in TEAM, as described in 
section X.A.3.a.(4) of the preamble of this proposed rule. We are also 
proposing that the term ``hospital'' has the same meaning as hospital 
as defined in section 1886(d)(1)(B) of the Act. This statutory 
definition of hospital includes only acute care hospitals paid under 
the IPPS.
    We believe that hospitals are more likely than other providers or 
suppliers to have an adequate volume of episodes to justify an 
investment in episode management. We also believe that hospitals, 
compared to other providers or suppliers, are most likely to have 
access to resources that would allow them to appropriately manage and 
coordinate care throughout these episodes. Further, the hospital staff 
is already involved in discharge planning and placement recommendations 
for Medicare beneficiaries, and more efficient PAC service delivery 
provides substantial opportunities for improving quality and reducing 
costs in TEAM.
    We also believe hospitals being TEAM participants aligns with how 
episodes are initiated in TEAM, as described in section X.A.3.b.(5)(c) 
of the preamble of this proposed rule, since it relies on a 
beneficiary's inpatient admission to a hospital or a beneficiary 
receiving a procedure in a hospital outpatient department. 
Additionally, we believe that utilizing the hospital as the TEAM 
participant is a straightforward approach for this model because the 
hospital furnishes the acute surgical procedure and plans for and 
manages post-discharge (or post-procedure) care. We also want to test a 
broad model in a variety of hospitals, including safety net hospitals 
specified in section X.A.3.f.(2) and rural hospitals specified in 
section X.A.3.f.(3) of the preamble of this proposed rule, under TEAM 
to examine results from a more generalized payment model. Finally, as 
described in the following sections that present our proposed approach 
to geographic area selection, our geographic area selection approach 
relies upon our definition of hospitals as the TEAM participant and the 
entity that initiates episodes.
    We seek comment on our proposal at Sec.  512.505 to define TEAM 
participants as an acute care hospital that initiates episodes and paid 
under the IPPS with a CMS CCN primary address located in one of the 
geographic areas selected for participation in TEAM. We also seek 
comment on our proposal at Sec.  512.505 to define hospital as defined 
in section 1886(d)(1)(B) of the Act.
(i) TEAM Participant Exclusions and Considerations
    Under this proposal, all acute care hospitals in Maryland would be 
excluded from being TEAM participants because Maryland hospitals are 
not currently paid under the IPPS and OPPS. Therefore, any acute care 
hospital located in Maryland would not be able to satisfy the 
definition of TEAM participant. Currently, CMS and the State of 
Maryland are testing the Maryland Total Cost of Care (TCOC) Model, 
which sets a per capita limit on Medicare total cost of care in 
Maryland. The TCOC Model holds the State fully at risk for the total 
cost of care for Medicare beneficiaries. Maryland acute care hospitals 
are not paid under the IPPS or OPPS, but rather are paid using a global 
budget methodology that establishes pricing of medical services 
provided by hospitals, primary care doctors, and specialists across all 
payers. Therefore, we are also proposing that payments to Maryland 
acute care hospitals would be excluded in the pricing calculations as 
described in section X.A.3.d. of the preamble of this proposed rule. We 
seek comment on this proposal and whether there are potential 
approaches for including Maryland acute care hospitals as TEAM 
participants. In addition, we seek comment on whether Maryland 
hospitals should be TEAM participants in the future.
    We also recognize that the Maryland TCOC Model may not be the only 
CMS model or initiative that may use hospital global budgets as part of 
their alternative payment models. The States Advancing All-Payer Health 
Equity Approaches and Development (AHEAD) Model is a State-based 
voluntary TCOC model that will incorporate hospital global budgets. 
There are several cohorts in which states may participate, and we 
expect that the AHEAD Model implementation period would overlap with 
the performance years of TEAM. Given that CMS envisions that up to 
eight states would participate in the AHEAD Model, unlike the Maryland 
TCOC Model, we are hesitant to propose excluding hospitals that 
participate in the AHEAD Model from being TEAM participants because it 
may reduce the volume of beneficiaries that may benefit from episodic, 
acute coordinated care. We are also aware that allowing overlap may 
introduce model complexities with respect to constructing TEAM prices 
or the AHEAD global budgets and statewide total cost of care 
calculations. However, there may be other opportunities, such as 
sharing of TEAM-style summary episode data (not beneficiary-
identifiable) with AHEAD hospitals, to support episodes without 
allowing hospitals participating in the AHEAD Model to participate in 
TEAM as TEAM participants. Thus, we are unsure if we should allow AHEAD 
hospitals located in areas selected for TEAM participation to 
participate in TEAM as TEAM participants. We seek comment on whether 
there may be potential approaches for including hospitals participating 
in the AHEAD Model in TEAM as TEAM participants, or other approaches 
that may not result in participation in both models but support the 
integration of episodes and hospital global budgets. We gather that the 
AHEAD Model would be voluntary for participating states and hospitals 
within those states, and as such, we also seek comment on whether 
hospitals located in AHEAD states should be required to participate in 
TEAM as TEAM participants if they either do not participate in in the 
AHEAD Model or if they terminate their participation in the AHEAD Model 
(or CMS terminates them) before the AHEAD Model ends.
    Since TEAM is built from lessons learned from previous episode-
based payment models, including the BPCI Advanced model, we considered 
including PGPs in the definition of TEAM participant in the future. We 
recognize that PGPs demonstrated some successes in the BPCI Advanced 
model, most specifically that BPCI Advanced PGPs reduced average 
episode payments by $2,157 for surgical episodes in Model Year 3 (2020) 
and reduced unplanned hospital readmissions for surgical episodes in 
Model Years 1&2 (October 2018-December 2019).583 584 Despite 
these favorable findings, we have concerns about requiring PGPs, who 
are generally smaller entities and care for a lower volume of Medicare 
beneficiaries, to participate in an Advanced APM such as TEAM given the 
more than nominal financial risk standard required of Advanced APMs set 
forth in 42 CFR 414.1415I. While BPCI Advanced is an Advanced APM, 
participation is voluntary, and PGPs have the autonomy to determine if 
they have the infrastructure and resources to take on

[[Page 36390]]

the level of financial risk to participate in the model and determine 
if they have sufficient episode volume to create systematic care 
redesign efficiencies. Further, most eligible clinicians in the BPCI 
Advanced model do not meet Qualifying APM Participant determinations in 
the model due to not meeting the required thresholds for Medicare Part 
B payments or Medicare beneficiaries, suggesting that acute care-based 
episodes may not sufficiently capture the full panel of patients a PGP 
manages. We believe there are other meaningful opportunities for PGPs 
to engage in TEAM, specifically through financial arrangements with 
TEAM participants, or through other CMS value-based care initiatives, 
including future PGP-specific opportunities under development through 
the CMS Innovation Center specialty care strategy. For these reasons, 
we are not proposing PGPs to be included in the definition of TEAM 
participant in TEAM at this time. However, we seek comment on whether 
we should include PGPs in the definition of TEAM participant through 
future rulemaking, or if there are other ways, beyond financial 
arrangements, that we can incorporate PGPs to promote collaboration 
between TEAM participants and other providers who may care for a TEAM 
beneficiary over the course of the episode.
---------------------------------------------------------------------------

    \583\ CMS Bundled Payments for Care Improvement Advanced Model: 
Third Evaluation Report. (2022). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2022/bpci-adv-ar3.
    \584\ CMS Bundled Payments for Care Improvement Advanced Model: 
Year 2 Evaluation Report. (2021). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-yr2-annual-report.
---------------------------------------------------------------------------

    We seek comment on our proposal to exclude hospitals located in 
Maryland from TEAM participation, and how to address hospitals that 
would participate in the AHEAD model. We also seek comment on including 
PGPs in the definition of TEAM participant.
(c) Proposed Mandatory Participation
    We are proposing to require hospitals located in selected 
geographic areas, as described in section X.A.3.a.(4) of the preamble 
of this proposed rule, that meet the proposed TEAM participant 
definition to participate in TEAM. Such hospitals would be required to 
participate in the Model even if they have not had previous episode-
based payment model or value-based care experience. Shifting hospitals 
away from the traditional Medicare FFS payment system to value-based 
care may require significant time, effort, and resources to build 
infrastructure and establish care redesign processes.\585\ We intend to 
provide sufficient time for potential TEAM participants to prepare for 
model implementation, which is why we are proposing TEAM at least 18 
months before the proposed model start date. However, we acknowledge 
that time alone may not be adequate to prepare TEAM participants for 
model participation, especially those with limited or no value-based 
care experience. We seek comment on whether 1 year would be a 
sufficient amount of time for hospitals required to participate in TEAM 
to prepare for TEAM participation or whether a longer timeframe (for 
example, 18 months) or shorter timeframe (for example, 6 months) would 
be sufficient time for hospitals to prepare to become TEAM 
participants, effective on the model start date.
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    \585\ Erikson, C., Pittman, P., LaFrance, A., & Chapman, S. 
(2017). Alternative payment models lead to strategic care 
coordination workforce investments. Nursing Outlook, 65(6), 737-745. 
https://doi.org/10.1016/j.outlook.2017.04.001.
---------------------------------------------------------------------------

    We alternatively considered making participation in TEAM voluntary. 
However, we would be concerned that a fully voluntary model would not 
lead to meaningful evaluation findings especially since the CMS 
Innovation Center has tested voluntary episode-based payment models for 
over a decade. We recognize that a mandatory model test limits the 
selection of participants to only those captured within the selected 
geographic areas. We also recognize there may be participants of 
previous or current models that wish to continue their care redesign 
efforts, further care transformation, and maintain efficiencies to 
avoid reliance on the volume-based FFS payment system. We considered 
allowing hospitals that have previously participated (or are currently 
participating) in a Medicare episode-based payment model to voluntarily 
opt-into TEAM to increase the footprint of the model and allow those 
entities to maintain their momentum in value-based care. However, we 
recognize several challenges with including a voluntary opt-in for a 
model such as TEAM. First, allowing an opt-in may limit the ability of 
the model to achieve Medicare savings, given that opt-in participants 
may self-select into the model based on their belief that they would 
benefit financially. Second, an opt-in may compromise the rigor of our 
evaluation of TEAM, because it could limit the number of hospitals 
available for our comparison group and our ability to detect 
generalizable evaluation results, due to participant self-selection 
into the model. Finally, we note that we have been testing the five 
episode categories that we have proposed to include in TEAM, as 
described in section X.A.3.b. of the preamble of this proposed rule, on 
a voluntary basis via BPCI Advanced and the BPCI Initiative, so we have 
a significant amount of data on the performance of those episode 
categories in a voluntary structure already.
    For these reasons, we are not proposing a voluntary opt-in 
participation arm to TEAM. However, for the reasons discussed below, we 
are considering and seek comment regarding a voluntary opt-in 
participation arm in the proposed TEAM. Specifically, we are 
considering limiting voluntary opt-in participation to TEAM for 
hospitals that currently participate in the BPCI Advanced or the CJR 
model, that are not located in an area mandated for TEAM participation, 
and continue to participate until completion, of the model in which 
they are currently participating.\586\ For those hospitals that meet 
this criteria and that would want to voluntarily opt into TEAM 
participation, we would require those hospitals to participate in all 
TEAM episode categories for the full five-year model performance period 
and they would not be permitted to voluntarily terminate model 
participation. The TEAM voluntary opt-in would be a one-time 
opportunity to join TEAM participation and those hospitals would need 
to complete and submit an application to CMS in a form and manner and 
by a date specified by CMS, prior to the first performance year of 
TEAM. Further, hospitals that submit an application would need to 
undergo and pass at minimum multiple levels of program integrity and 
law enforcement screening. Hospitals that pass screening would be 
offered a participation agreement from CMS to participate in TEAM, 
which would at minimum subject them to all the same terms, conditions 
and requirements of those hospitals mandated to participate in TEAM. 
Lastly, hospitals offered a participation agreement to voluntarily opt 
into TEAM would be required to submit and execute a participation 
agreement with CMS in a manner and form, and by a date specified by CMS 
prior to the model start date.
---------------------------------------------------------------------------

    \586\ Current BPCI Advanced hospitals would need to participate 
in BPCI Advanced until December 31, 2025 and current CJR participant 
hospitals would need to participate in the CJR model until December 
31, 2024.
---------------------------------------------------------------------------

    We believe that offering this potential voluntary opt-in 
consideration would allow those hospitals that have made significant 
investments in care redesign and episode management to further their 
efforts to improve beneficiary quality of care and reduce Medicare 
spending. We recognize the pool of hospitals that could potentially 
apply for voluntary opt-in participation may be narrow. However, we 
believe extending the voluntary opt-in opportunity to hospitals that 
terminated

[[Page 36391]]

BPCI Advanced or CJR model participation or to hospitals not mandated 
to participate in TEAM would jeopardize the model's ability to have a 
robust evaluation. This is because we would want to ensure we have a 
sufficient comparison group of hospitals not participating in TEAM to 
produce generalizable findings. As previously indicated, we are not 
proposing a voluntary opt-in participation arm to TEAM; however, we are 
considering and seek comment regarding a voluntary opt-in participation 
arm in the proposed TEAM. Lastly, we seek comment on our proposal for 
hospitals located in selected geographic areas that meet the proposed 
TEAM participant definition to participate in TEAM.
(d) Financial Accountability of a TEAM Participant
    As we did with the CJR model, we continue to believe it is most 
appropriate to identify a single entity to bear financial 
accountability for making repayment if quality and spending performance 
metrics are not met to CMS under the model after reconciliation has 
been performed. Consistent with the CJR model, we propose to make TEAM 
participants financially accountable for the episode for the following 
reasons:
     We believe hospitals would play a central role in 
coordinating episode-related care and ensuring smooth transitions for 
beneficiaries undergoing services related to episodes. A large portion 
of a beneficiary's recovery trajectory from an episode would begin 
during the hospital inpatient stay or procedure performed in the 
hospital outpatient department.
     Most hospitals already have some infrastructure related to 
health information technology, patient and family education, and care 
management and discharge planning. This infrastructure includes post-
acute care coordination infrastructure and resources such as case 
managers, which hospitals can build upon to achieve efficiencies under 
TEAM.
     We are proposing that episodes in TEAM begin with an acute 
care hospital stay or hospital outpatient department procedure visit. 
Some episodes may be preceded by an emergency room visit and possible 
transfer from another hospital's emergency room, or followed by PAC. 
However, we do not believe it would be appropriate to hold a PAC 
provider or a hospital other than the TEAM participant where the 
inpatient stay or initial hospital outpatient procedure that initiated 
the episode happened fully financially accountable for an episode under 
this model.
    Episodes in TEAM may be associated with multiple hospitalizations 
through readmissions or transfers. When more than one hospitalization 
occurs during a single episode, we propose to hold the TEAM participant 
to which the episode is initiated, as described in section 
X.A.3.b.(5)(c) of the preamble of this proposed rule, financially 
accountable for the episode nonetheless. We recognize that, 
particularly where the hospital admission may be preceded by an 
emergency room visit and subsequent transfer to a tertiary or other 
regional hospital facility, patients often wish to return home to their 
local area for post-acute care. Many hospitals have recently heightened 
their focus on aligning their efforts with those of community 
providers, both those in the immediate area as well as more outlying 
areas from which they receive transfers and referrals, to provide an 
improved continuum of care. In many cases, this heightened focus on 
alignment is due to the incentives under other CMS models and programs, 
including ACO initiatives such as the Shared Savings Program or the 
Hospital Readmissions Reduction Program (HRRP). By focusing on the TEAM 
participant as the accountable or financially responsible entity, we 
hope to continue to encourage this coordination across providers and 
seek comment on ways we can best encourage these relationships within 
the scope of TEAM.
    We seek comment on our proposal to require TEAM participants to be 
financially accountable for episodes in TEAM.
(i) Financial Accountability Considerations
    We recognize in the proposed TEAM that a beneficiary in an episode 
may receive care from multiple providers and suppliers, and not just 
from the TEAM participant where the episode was initiated. We 
considered allowing providers or suppliers, other than the TEAM 
participant, to bear financial accountability for episodes given their 
involvement in a TEAM beneficiary's care. Specifically, we considered 
splitting financial accountability between the TEAM participant and 
other providers and suppliers that provide items and services to the 
TEAM beneficiary. For example, we considered the TEAM participant being 
financially accountable for a majority of the episode spending, such as 
all Medicare Part A spending, and other suppliers, such as PGPs, being 
accountable for a portion episode spending related to Medicare Part B 
spending. However, we have concerns about how to accurately determine a 
reasonable sharing methodology that reflects the portion of spending 
either the TEAM participant or the PGP should be financially 
accountable for. Further, we have concerns about requiring PGPs to be 
financially accountable given practices can vary by size and resources. 
As previously noted, the BPCI Advanced model includes PGPs, and the 
physician groups electing to participate in BPCI Advanced have done so 
because their practice structure supports care redesign and other 
infrastructure necessary to bear financial accountability for episodes. 
However, these physician groups are not necessarily representative of 
the typical group practice. The infrastructure necessary to accept 
financial accountability for episodes is not present across all PGPs, 
and thus we do not believe it would be appropriate to designate PGPs to 
bear a portion of the financial accountability for episodes under the 
proposed TEAM. Further, shared financial accountability would require 
more than hospitals being TEAM participants and introduces model 
complexity. We seek comment on approaches to splitting financial 
accountability when multiple providers care for a single beneficiary in 
an episode.
    While we propose that the TEAM participant be financially 
responsible for the episode, we also believe that effective care 
redesign requires meaningful collaboration among acute care hospitals, 
PAC providers, physicians, and other providers and suppliers within 
communities to achieve the highest value care for Medicare 
beneficiaries. We believe it may be essential for key providers and 
suppliers to be aligned and engaged, financially and otherwise, with 
the TEAM participants, with the potential to share financial 
accountability for an episode with those TEAM participants. We note 
that all relationships between and among TEAM participants and other 
providers and suppliers would still need to comply with all relevant 
laws and regulations, including the fraud and abuse laws and all 
Medicare payment and coverage requirements unless otherwise specified 
further in this section and in section X.A.3.g of the preamble of this 
proposed rule. Depending on a TEAM participant's current degree of 
clinical integration, new and different contractual relationships among 
hospitals and other health care providers may be important, although 
not necessarily required, for TEAM success in a community. We 
acknowledge that there may need to be incentives for other providers 
and suppliers to partner with TEAM

[[Page 36392]]

participants and develop strategies to improve episode efficiency.
    We acknowledge the important role that conveners play in the BPCI 
Advanced model with regard to providing financial responsibility and 
infrastructure support to hospitals and PGPs participation in BPCI 
Advanced. The convener relationship (where another entity assumes 
financial responsibility) may take numerous forms, including 
contractual (such as a separate for-profit company that agrees to take 
on a hospital or PGP's financial risk in the hopes of achieving 
financial gain through better management of the episodes) and through 
ownership (such as when risk is borne at a corporate level within a 
hospital chain). We considered allowing convener entities, like those 
recognized in the BPCI Advanced model, to have formal roles in TEAM. At 
peak BPCI Advanced participation, over 70%, or 1,439, of the hospitals 
and PGPs in Model Year 3 (2020) participated as downstream episode 
initiators under one of the 92 convener participants.\587\ While the 
majority of BPCI Advanced hospitals and PGPs participated under a 
convener participant, some hospitals and PGPs found the participation 
relationship with a convener challenging. Specifically, some hospitals 
and PGPs felt removed from participation decisions since they were not 
party to the participation agreement between CMS and the convener 
participant. Additionally, convener participants that are not Medicare 
providers or suppliers may need financial guarantees that can impose 
significant upfront financial investment for participation and be 
administratively burdensome for CMS and the participant. We are not 
proposing to require convener entities in this model and we do not 
intend to identify or require any Medicare-enrolled providers or 
suppliers (or providers and suppliers that are not enrolled in 
Medicare) to be convener entities in TEAM, in light of the experiences 
and resources that would be needed to ``convene'' over one or more TEAM 
participants. As with the CJR model, we do not intend to restrict the 
ability of TEAM participants to enter into administrative or risk 
sharing arrangements related to TEAM with entities that may provide 
similar support as a convener, except to the extent that such 
arrangements are already restricted or prohibited by existing law. We 
are also not proposing to require TEAM participants to partner with 
convener entities and we are not proposing to require any entities, 
providers, or suppliers to serve as conveners for purposes of TEAM. We 
refer readers to section X.A.3.g. of the preamble of this proposed rule 
for further discussion of model design elements that may outline 
financial arrangements between TEAM participants and other providers 
and suppliers.
---------------------------------------------------------------------------

    \587\ CMS Bundled Payments for Care Improvement Advanced Model: 
Year 2 Evaluation Report. (2021). Centers for Medicare & Medicaid 
Services. Retrieved November 28, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2021/bpci-yr2-annual-report.
---------------------------------------------------------------------------

    We seek comment on approaches to splitting financial accountability 
when multiple providers or suppliers care for a single beneficiary in 
an episode.
(3) TEAM Participation Tracks
    One way to help providers and suppliers gain experience in 
alternative payment models is through model participation tracks where 
the levels of risk and reward are reduced while the participants 
establish and hone their care redesign processes. Stakeholders have 
urged CMS to offer a glide path in its models, most recently in the 
Episode-based Payment Model RFI (88 FR 45872), to smooth the transition 
to risk. Such a glide path could provide more time for participants to 
gain experience with two-sided financial risk by phasing-in risk rather 
than requiring full-risk participation at the start of the model. 
Previous and current CMS models and programs have implemented this 
approach, including the recently announced Making Care Primary Model, 
which offers a progressive three-track approach that increases 
participants' accountability, and the Medicare Shared Savings Program, 
which offers an incremental glide path for ACOs to transition to higher 
levels of potential risk and reward. We note that these models and 
programs have longer durations than the model duration that we are 
proposing in TEAM, which makes it easier to offer a gradual transition 
to two-sided financial risk or higher levels of risk and reward. 
However, in light of our proposal to make TEAM a five-year model test, 
we believe that TEAM participants would still benefit from the 
opportunity to ease into two-sided financial risk participation as they 
develop efficiencies.
    We are proposing that there will be three tracks in TEAM, each with 
differing financial risk and quality performance adjustments. Track 1 
would be available only in PY 1 for all TEAM participants and would 
have only upside financial risk with quality adjustment applied to 
positive reconciliation amounts. Track 2 would be available in PYs 2 
through 5 to a limited set of TEAM participants, including safety net 
hospitals, and would have two-sided financial risk with quality 
adjustment to reconciliation amounts. Lastly, Track 3 would be 
available in PYs 1 through 5 for all TEAM Participants and would have 
two-sided financial risk with quality adjustment to reconciliation 
amounts.
    We are proposing a one-year glide path to two-sided risk for TEAM 
participants in an effort to ensure that TEAM participants have time to 
prepare for two-sided financial risk. We are proposing to allow all 
TEAM participants to select between one of two tracks for the first 
performance year of TEAM. For PY 1, a TEAM participant may elect to 
participate in either Track 1 or Track 3. For PY 1, Track 1 would have 
upside-only financial risk provided through reconciliation payments, 
subject to a 10% stop-gain limit and a Composite Quality Score (CQS) 
adjustment percentage of up to 10%, as described in sections 
X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of this proposed 
rule, that would allow TEAM participants to be rewarded for their work 
to improve quality and cost outcomes for their episodes, but not be 
held financially accountable if spending exceeds the reconciliation 
target price. We believe the 10% stop-gain limit and a CQS adjustment 
percentage of up to 10% for Track 1 are appropriate and would allow 
TEAM participants to be rewarded for spending and quality performance 
while easing into financial risk. We propose that Track 3 would have 
two-sided financial risk in the form of reconciliation payments or 
repayment amounts, subject to 20% stop-gain and stop-loss limits and a 
CQS adjustment percentage of up to 10%, as described in sections 
X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of this proposed 
rule, that would allow TEAM participants to have higher levels of 
reward and risk based on their quality and cost performance for their 
episodes. We are proposing to only allow TEAM participants to 
participate in Track 1 for one performance year, specifically PY 1. We 
are proposing a five-year model test, and we do not believe that making 
Track 1 available for more than one performance year would motivate 
TEAM participants to improve quality or spending performance since 
there would be no financial accountability when spending reductions are 
not achieved.
    We believe a one-year glide path is an appropriate length of time 
for a five-year model test that aims to improve patient quality of care 
and reduce Medicare

[[Page 36393]]

spending. We considered limiting eligibility for Track 1 during PY 1 to 
TEAM participants that have not previously participated in a Medicare 
episode-based payment model, but given that TEAM would be a mandatory 
model, we believe prior experience does not guarantee successful 
participation, and that it is important for TEAM participants to 
consider their own unique organizational position and characteristics 
when determining their desired track selection for PY 1. We seek 
comment on this proposal and whether there are alternative potential 
approaches for constructing a glide path in TEAM.
    We are also proposing that TEAM participants would be required to 
notify CMS of their track selection prior to the start of PY 1, in a 
form and manner and by a date specified by CMS. TEAM participants who 
fail to timely notify CMS would be automatically assigned to Track 1 
for PY 1. We seek comment on the proposal to require TEAM participants 
to notify CMS of their track selection and to automatically assign TEAM 
participants to Track 1 if they fail to timely notify CMS of their 
desired track selection.
    The proposed glide path opportunity is limited to one year. We 
propose that TEAM participants who elected to participate in Track 1 
for PY 1 would automatically be assigned to Track 3 for PY 2 and would 
remain in Track 3 for the remainder of the model (PYs 2 through 5). We 
recognize that offering different participation tracks in TEAM presents 
an opportunity to provide flexibilities to TEAM participants that may 
care for a greater proportion of underserved beneficiaries and TEAM 
participants that lack the financial reserves to invest in value-based 
care, including safety net, rural, and other hospital providers. 
Research has identified APM participation challenges for these types of 
providers, such as a lack of capital to finance the upfront costs of 
transitioning to an APM, including purchasing electronic health record 
technology, and challenges acquiring or conducting data analysis 
necessary for participation.\588\ CMS has taken significant steps to 
address and improve health equity in value-based care models and 
programs, including health equity adjustments to the Hospital Value-
Based Purchasing Program (88 FR 58640) and the Medicare Shared Savings 
Program (87 FR 69404).
---------------------------------------------------------------------------

    \588\ Medicare Information on the Transition to Alternative 
Payment Models by Providers in Rural, Health Professional Shortage, 
or Underserved Areas: Report to Congressional Committees. (2021). 
United States Government Accountability Office. Retrieved December 
1, 2023, from https://www.gao.gov/assets/gao-22-104618.pdf.
---------------------------------------------------------------------------

    We are proposing to require different types of hospitals to 
participate in TEAM, and we believe that certain TEAM participants may 
benefit from a participation option that has limited two-sided 
financial risk so that their beneficiaries may receive high quality, 
coordinated care without imposing significant financial pressure. 
Therefore, we propose that rather than automatically being assigned to 
Track 3 beginning in PY 2, certain TEAM participants could elect to 
participate in Track 2 beginning in PY 2 and stay in Track 2 for the 
remainder of the model (PYs 2 through 5). As further described in 
sections X.A.3.d.(5)(h) and X.A.3.d.(5)(g) of the preamble of this 
proposed rule, we propose that Track 2 would have two-sided financial 
risk in the form of reconciliation payments and repayment amounts, 
subject to 10% stop-gain and stop-loss limits, a CQS adjustment 
percentage of up to 10% for positive reconciliation amounts, and a CQS 
adjustment percentage of up to 15% for negative reconciliation amounts. 
We believe the CQS adjustment percentage of up to 15% for negative 
reconciliation amounts, is appropriate for Track 2 because it further 
limits a TEAM participant's financial risk given that a higher CQS 
adjustment percentage for negative reconciliation amounts results in a 
lower repayment amount. These proposed payments and payment adjustments 
would allow TEAM participants to receive reconciliation payment amounts 
or owe repayment amounts based on their quality and cost performance 
for their episodes.
    We propose that only the following types of TEAM participants would 
be eligible to participate in Track 2 for PYs 2 through 5:
     Hospitals that are safety net hospitals, as further 
described in section X.A.3.f.(2) of the preamble of this proposed rule. 
For purposes of TEAM, we propose that a TEAM participant must meet at 
least one of the following criteria in order to be considered a safety 
net hospital:
    ++ Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries considered dually eligible for Medicare and Medicaid 
across all PPS acute care hospitals in the baseline period (as 
described in section X.A.3.d.(3)(a)).
    ++ Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries partially or fully eligible to receive Part D low-income 
subsidies across all PPS acute care hospitals in the baseline period.
     Hospitals that are rural hospitals, as further described 
in section X.A.3.f.(3) of the preamble of this proposed rule. For 
purposes of TEAM, we propose that a TEAM participant must meet at least 
one of the following criteria in order to be considered a rural 
hospital:
    ++ Is located in a rural area as defined under Sec.  412.64.
    ++ Is located in a rural census tract defined under Sec.  
412.103(a)(1).
    ++ Has reclassified as a rural hospital under Sec.  412.103.
    ++ Is a rural referral center (RRC), which has the same meaning 
given this term under Sec.  412.96.
     Hospitals that are Medicare dependent hospitals (MDH) as 
defined under 42 CFR 412.108.
     Hospitals that are sole community hospitals (SCHs) as 
defined under 42 CFR 412.92.
     Hospitals that are essential access community hospitals as 
defined under 42 CFR 412.109.
    We believe that allowing TEAM participants that meet the safety net 
hospital or rural hospital criteria, as well as those that are Medicare 
dependent hospitals, sole community hospitals, or essential access 
community hospitals to participate in Track 2 during PYs 2 through 5 
would provide an opportunity for these hospitals to develop 
capabilities to deliver value-based care and would avoid the financial 
pressures of a two-sided financial risk model that could make their 
participation in TEAM untenable.
    We propose that TEAM participants that meet the Track 2 hospital 
criteria described above would be required to notify CMS on an annual 
basis prior to the start of every performance year, beginning for PY 2, 
of their desire to participate in Track 2. We propose that TEAM 
participants that meet the Track 2 hospital criteria could switch 
between Track 2 and Track 3 on an annual basis. Such TEAM participants 
would need to notify CMS of their preference, in a form and manner and 
by the date specified by CMS. We propose that TEAM participants would 
need to meet the hospital criteria for Track 2 participation by the 
date CMS requires notification of their preference. TEAM participants 
who fail to timely notify CMS or do not meet the Track 2 hospital 
criteria would not be approved by CMS to participate in Track 2 and 
would be automatically by assigned to Track 3 for the given performance 
year. We recognize that allowing these specific TEAM participants to 
self-select into Track 2 for PYs 2 through 5 could create challenges 
when evaluating the model, such as the generalizability of evaluation 
findings. We also recognize

[[Page 36394]]

that requiring these specific TEAM participants to notify CMS every 
year would permit them to switch tracks if they no longer desire to be 
participate in Track 2 or no longer meet the Track 2 hospital criteria. 
Therefore, we seek comment on whether we should prohibit TEAM 
participants from switching tracks after PY2 or if there are other 
options we should consider to mitigate evaluation challenges.
    We considered but are not proposing allowing TEAM participants who 
meet the safety net hospital criteria to remain in Track 1 for all 
performance years so that they would not be subject to downside 
financial risk during their participation in the model. Further, we 
considered not allowing these TEAM participants who meet the safety net 
hospital criteria to switch between tracks, meaning that they would 
have to participate in Track 1 for all performance years. However, we 
did not want to limit a TEAM participant who meets the safety net 
hospital criteria from making their own decision about whether to 
participate in a track with downside financial risk. Further, we 
believe that having downside risk by PY 2 for all TEAM participants 
would help to drive care improvements and establish care efficiencies 
that could lead to better outcomes on cost and quality of care. We seek 
comment on whether we should consider allowing TEAM participants who 
meet the safety net hospital criteria to participate in Track 1 for all 
performance years.
    Table X.A.-01 summarizes the proposed TEAM tracks.
    [GRAPHIC] [TIFF OMITTED] TP02MY24.263
    
    We seek comment on the proposals for the TEAM Participation Tracks 
at Sec.  512.520. We also seek comment on the proposal that TEAM 
participants who meet the eligibility criteria for Track 2 may self-
select into Track 2 and change which track their track selection 
annually.
(4) Proposed Approach To Select TEAM Participants and Statistical Power
    Our proposed participant selection methodology for TEAM is designed 
to provide adequate statistical power for evaluating and detecting 
changes in cost and quality.
    We are proposing that TEAM would be an episode-based payment model 
implemented at the hospital level that captures all items and services 
furnished to a beneficiary over a defined period of time. We are 
proposing to test five episode categories in TEAM, as described in 
section X.A.3.b. of the preamble of this proposed rule, focusing on 
acute clinical procedures initiated in the hospital inpatient and 
outpatient settings. Specifically, TEAM is proposing to test episodes 
that begin with CABG, LEJR, major bowel procedure, SHFFT, and spinal 
fusion. We considered whether the model should be limited to hospitals 
where a high volume of the proposed five episode categories are 
performed, which would result in a more narrow test on the effects of 
an episode-based payment approach, or whether to include all hospitals 
in particular geographic areas, which would result in testing the 
effects of an episode-based payment approach more broadly across an 
accountable care community seeking to coordinate care longitudinally 
across settings. Selecting only those hospitals where a high volume of 
the proposed episode categories are performed may result in fewer 
hospitals being selected as TEAM participants, but could still result 
in a sufficient number of episodes to evaluate the success of the 
model. However, there would be more potential for behaviors that could 
impact the model test, such as patient shifting and steering between 
hospitals in a given geographic area.
    We propose to select geographic areas and require all hospitals, as 
defined in section X.A.3.a.(2).(b). of the preamble of this proposed 
rule, in those selected areas to participate in TEAM to help minimize 
the risk of TEAM participants shifting higher cost cases to hospitals 
not participating in TEAM. We propose that, instead of taking a simple 
random sampling where all geographic areas have the same chance for 
selection, we would group these geographic areas according to certain 
characteristics and then randomly select geographic areas from within 
those groups, also known as strata, for model implementation. Such a 
stratified random sampling method based on geographic area would 
provide several benefits. We expect that this method would allow us to 
observe the experiences of hospitals in geographic areas with various 
characteristics, such as variations in the number of hospitals, average 
episode spending, number of hospitals that serve a higher proportion

[[Page 36395]]

of historically underserved beneficiaries, and differing experience 
with previous CMS bundled payment models. We could then examine whether 
these characteristics impact the effect of the model on patient 
outcomes and Medicare expenditures within episodes of care. Using a 
stratified random sampling based on geographic area would also 
substantially reduce the extent to which the selected hospitals would 
differ from other hospitals on the characteristics used for 
stratification, compared to a simple random sample. Simple 
randomization may ensure similarity between the selected hospitals and 
hospitals that are not selected, but simple randomization can also lead 
to differences if enough units are drawn in a group-randomized design 
where the number of available groups is relatively small,. Finally, 
using a stratified random sampling of geographic areas would improve 
the statistical power of the subsequent model evaluation improve our 
ability to reach conclusions about the model's effects on episode 
spending and the quality of patient care. Section 1115A(a)(5) of the 
Act allows the Secretary to limit the testing of a model to certain 
geographic areas, and we propose for the reasons stated above to use a 
stratified random sampling method to select geographic areas and 
require all hospitals within those selected geographic areas to 
participate in TEAM.
(a) Overview and Options for Geographic Area Selection
    We considered using a stratified random sampling methodology to 
select the following geographic areas: (1) certain counties based on 
their CBSAs, (2) certain ZIP codes based on their Hospital Referral 
Regions (HRR) or (3) certain states. We address each geographic unit in 
turn.
    We considered selecting certain counties based on their CBSA. CBSA 
includes a core area with a substantial portion of the population in 
adjacent communities having a high degree of economic and social 
integration with that core. A county is designated as part of a CBSA 
when the county is associated with at least one core (urbanized area or 
urban cluster) with a population of at least 10,000, with the adjacent 
counties having a high degree of social and economic integration with 
the core as measured through commuting ties with the other counties 
associated with the core.
    OMB Bulletin 23-01, issued on July 21, 2023, states that there are 
935 CBSAs in the United States and Puerto Rico. The 935 CBSAs include 
393 Metropolitan Statistical Areas (MSAs), which have an urban core 
population of at least 50,000, and 542 Micropolitan Statistical Areas 
(mSAs), which have an urban core population of at least 10,000 but less 
than 50,000. CBSAs may be further combined into a Combined Statistical 
Area (CSA) which consists of two or more adjacent CBSAs (including 
MSAs, mSAs, or both) with substantial employment interchange. Counties 
not classified as a CBSA are typically categorized and examined at a 
state level.
    The choices for a geographical unit based on CBSA include a CBSA, 
an MSA, or a CSA. We propose to select CBSAs in this model, which we 
will discuss later in this section. We note that CJR, a previous 
mandatory episode-based payment model, utilized MSAs as the geographic 
unit. Under TEAM, we are proposing to expand upon the CJR model's 
representation of geographic units by also including smaller geographic 
units, mSAs, in addition to MSAs. We propose that counties and other 
areas not located in a CBSA would not be included in the TEAM selection 
method.
    We considered, but ultimately decided against, using CSAs instead 
of CBSAs as the geographic unit of selection. Under this scenario, we 
would look at how OMB classifies counties. We would first assess 
whether a county has been identified as belonging to a CSA, a unit 
which consists of adjacent CBSAs. If the county was not in a CSA, we 
would determine if it was in a CBSA that is not part of a larger CSA. 
Counties not located in a CBSA would be excluded from selection.
    We considered a number of factors to decide whether to select 
geographic areas on the basis of CSAs and CBSAs or just on CBSAs alone, 
including an assessment of the anticipated degree to which patients who 
have one of the proposed episode categories would be willing to travel 
for their initial hospitalization, the extent to which surgeons are 
expected to have admitting privileges in multiple hospitals located in 
different CBSAs, and statistical power considerations related to the 
number of independent geographic units available for selection (there 
are only 184 CSAs vs. 935 CBSAs). We also considered the risk for 
patient shifting and steering between CBSAs within a CSA, and we 
believe that the anticipated risk is not severe enough to warrant 
selecting CSAs.
    We next considered selecting hospital referral regions (HRRs). HRRs 
represent regional health care markets for tertiary medical care. HRRs 
are defined by determining where the majority of patients were referred 
for major cardiovascular surgical procedures and for neurosurgery. 
There are 306 HRRs with at least one city where both major 
cardiovascular surgical procedures and neurosurgery are performed. HRRs 
may not sufficiently reflect referral patterns for the five episode 
categories we are proposing to test in TEAM, as only one of the five 
proposed episode categories is cardiovascular (coronary artery bypass 
graft surgery), and this episode category has the smallest procedure 
volume. Therefore, we believe that CBSAs as a geographic unit are 
preferable over HRRs for this model.
    We also considered selecting states as the geographic areas for 
TEAM. However, we concluded that CBSAs as a geographic unit are 
preferable over states. Choosing states as the geographic unit would 
require us to automatically include hospitals in all rural areas within 
the selected states. Using a unit of selection smaller than a state 
would allow for a more deliberate choice about the extent of inclusion 
of rural or small population areas. Selecting states rather than CBSAs 
would also greatly reduce the number of independent geographic areas 
subject to selection under the model, which would decrease the 
statistical power of the model evaluation. Finally, CBSAs straddle 
state lines where providers and Medicare beneficiaries can easily cross 
these boundaries for health care. Choosing states as the geographic 
unit would potentially divide a hospital market and set up a greater 
potential for patient shifting and steering to different hospitals 
under the model. CMS decided that the CBSA-level analysis was more 
analytically appropriate based on the specifics of this model.
    For the reasons previously discussed, we propose to require all 
hospitals, as defined in section X.A.3.a.(2).(b). of the preamble of 
this proposed rule and in proposed Sec.  512.505, within a CBSA that 
CMS selects through the stratified random sampling methodology, 
described in section X.A.3.a.(4).(d). of the preamble of this proposed 
rule, to participate in TEAM. Although CBSAs are revised periodically, 
with additional counties added to or removed from certain CBSAs, we 
propose to use the CBSA designations in OMB Bulletin 23-01 issued on 
July 21, 2023 as the CBSA designations for purposes of selecting 
participants for this model, regardless of whether such CBSA 
designations have changed since July 21, 2023, or will change at some 
point during the model performance period. We believe that this 
approach would best maintain the consistency of the TEAM participants 
in

[[Page 36396]]

the model, which is crucial for our ability to evaluate the effects of 
the model test on quality of care and changes in Medicare spending.
(b) Exclusion of Certain CBSAs
    We propose to exclude from the stratified random sampling of 
geographic areas any CBSAs that are located entirely in the state of 
Maryland, and certain CBSAs that straddle Maryland and another state. 
If a CBSA: (1) includes a portion of Maryland; and (2) more than 50 
percent of the episodes that initiated at hospitals within that CBSA 
between January 1, 2022 and June 30, 2023 for any of the five episode 
categories proposed for testing in TEAM did so at hospitals in 
Maryland, that CBSA will also be excluded from TEAM. We are proposing 
to exclude these CBSAs from selection because the state of Maryland is 
currently participating in another Innovation Center Model--the 
Maryland Total Cost Of Care Model, as further described in section 
X.A.3.a.(2).(b).(i). of the preamble of this proposed rule.
    We also propose to exclude CBSAs in which no episodes were 
initiated at hospitals for any of the five episode categories proposed 
for testing in TEAM between January 1, 2022 and June 30, 2023. We 
believe it will be highly unlikely for these CBSAs to have data 
available for evaluation after the model starts. After applying these 
criteria, 803 CBSAs remain available for selection in TEAM. We propose 
to use a stratified random sampling method as described below to select 
approximately 25 percent of eligible CBSAs in TEAM following the 
process we describe in the next two sections. We are providing the 
proposed list of CBSAs eligible for selection in TEAM in Table X.A.-
02.\589\
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    \589\ This list was generated using the criteria and methods 
that are being proposed, and is subject to change if different 
criteria and methods end up being finalized.
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BILLING CODE 4120-01-C
(c) Selection Strata
    We propose to stratify CBSAs into groups based on average 
historical episode spending, the number of hospitals, the number of 
safety net hospitals, and the CBSA's exposure to prior CMS bundled 
payment models.
    Stratification enables certain groups of interest to be represented 
at a higher level, or oversampled, in the model test. One of CMS' 
policy objectives is to extend the reach of value-based care to more 
beneficiaries, including beneficiaries from underserved communities. 
Consistent with that objective, CMS proposes to oversample CBSAs that 
have limited previous exposure to CMS' bundled payment models and CBSAs 
with a higher number of safety net hospitals.
    We considered stratifying eligible CBSAs into mutually exclusive 
groups corresponding to the 16 unique combinations of ``high'' and 
``low'' values for the following four CBSA-level characteristics (based 
on the median values across all CBSAs):
     Average spend for a broad set of episode categories in the 
CBSA. There are significant healthcare cost differences across 
geographic regions. One of the main objectives of TEAM is to reduce 
episode spending, and the proposed pricing methodology for episodes is 
regional. Thus, it will be important for the TEAM design to account for 
the significant variation in average episode spending across geographic 
regions. We propose to use the episode categories included in the 
predecessor bundled payment model, BPCI Advanced, initiated between 
January 1, 2022 and June 30, 2023 to determine the average spend for 
broad set of episode categories for each CBSA. The episode categories 
are: Acute myocardial infarction; Cardiac arrhythmia; Congestive heart 
failure; Cardiac defibrillator; Cardiac valve; Coronary artery bypass 
graft; Endovascular cardiac valve replacement; Pacemaker; Percutaneous 
coronary intervention; Cardiac defibrillator; Percutaneous coronary 
intervention; Disorders of liver except malignancy; cirrhosis or 
alcoholic hepatitis; Gastrointestinal hemorrhage; Gastrointestinal 
obstruction; Inflammatory bowel disease; Bariatric surgery; Major bowel 
procedure; Cellulitis; Chronic obstructive pulmonary disease; 
bronchitis, asthma, Renal failure; Sepsis; Simple pneumonia and 
respiratory infections; Urinary tract infection; Seizures; Stroke; 
Double joint replacement of the lower extremity; Fractures of the femur 
and hip or pelvis; Hip & femur procedures except major joint; Lower 
extremity and humerus procedure except hip, foot, femur; Major joint 
replacement of the lower extremity; Major joint replacement of the 
upper extremity; Back & neck except spinal fusion; Spinal fusion; Back 
& neck except spinal fusion. \590\
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    \590\ See the technical resources section of the following web 
page on how these episode categories were constructed: https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced/participant-resources.
---------------------------------------------------------------------------

     Number of hospitals within the CBSA. We are proposing to 
select CBSAs for purposes of model implementation, which include mSA 
areas in addition to MSAs, meaning that TEAM would be highly 
representative of the United States and would include many areas with 
only a single hospital as well as areas with a high number of 
hospitals. We expect significant differences in the healthcare 
environment and beneficiary characteristics across CBSAs with low and 
high numbers of hospitals. Consequently, we believe it is important to 
select areas above and below the median to have broad representation of 
CBSAs included in the model.
     CBSA's past exposure to CMS' bundled payment models (BPCI 
Models 2, 3, and 4, CJR, or BPCI Advanced) during the period from 
October 1, 2013 to December 31, 2022. The extent of previous 
participation in bundled payment models in a CBSA may be a factor in 
how successful TEAM participants will be at reducing costs and 
improving quality of care under the model. This stratification will 
allow CMS to assess how TEAM's impacts vary by past regional exposure 
to bundled payment models.
     Number of safety net hospitals in the CBSA. Safety net 
providers have historically not participated in voluntary episode-based 
payment models as frequently as other providers. Through TEAM, we see 
an opportunity to improve care for beneficiaries served by safety net 
providers and want to ensure focus on care redesign and improving 
quality of care for beneficiaries in underserved communities, 
consistent with CMS' objectives to improve health equity. Stratifying 
CBSAs by the number of safety net hospitals will allow CMS to gather 
robust data to assess TEAM's effects across a range of provider types.
    We ultimately decided to create an additional stratum from one of 
these 16 strata for a total of 17 strata to select CBSAs into TEAM. 
Below, we identify the stratum we propose to split into two strata and 
how we would do that; and describe the reasons for this decision.
    We note that there are only a handful of outlier CBSAs with a very 
high number of safety net hospitals. Inclusion of these outlier CBSAs 
result in an extremely lopsided or asymmetrical distribution when 
stratifying CBSAs by this characteristic. Depending on the 
circumstances, these handful of CBSAs may potentially lead to 
significant differences in the total number of safety net hospitals 
between the CBSAs that are selected for TEAM and those that are not 
selected. We therefore propose to move these CBSAs into a new 17th 
stratum. The proposed stratification process would result in 17 
mutually exclusive strata of CBSAs.
(d) Random Selection of CBSAs from Strata
    We propose to randomly select CBSAs for TEAM from the 17 stratified 
groups using a method that reflects CMS' policy objectives described 
above, including expanding the reach of value-based care. We propose to 
oversample CBSAs with low past exposure to CMS' bundled payment models 
and CBSAs with a high number of safety net hospitals. The selection 
probability for a given CBSA would differ across strata, but all CBSAs

[[Page 36412]]

within a particular stratum, will have the same chance of being 
selected. The hospitals located in the selected CBSAs will be required 
to participate. CMS' proposed method of randomly selecting CBSAs while 
oversampling CBSAs with certain characteristics would result in the 
following selection probabilities:
     33.3% (one out of three) CBSAs will be selected in strata 
with high number of safety net hospitals and low past exposure to CMS' 
bundled payment models. Four strata have this selection probability.
     25% (1 out of 4) CBSAs will be selected in strata with 
either high number of safety net hospitals or low past exposure to CMS' 
bundled payment models (but not both). Eight strata have this selection 
probability.
     20% (1 out of 5) CBSAs will be selected in strata with 
neither high number of safety net hospitals nor low past exposure to 
CMS' bundled payment models. Four strata have this selection 
probability.
     50% (1 out of 2) CBSAs will be selected with the highest 
number of safety net hospitals (One strata has this selection 
probability: the 17th stratum).
    The 17 selection strata and their relationship to the dimensions 
discussed above are represented in Table X.A.-03.
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BILLING CODE 4120-01-C
    Through this selection scheme, CMS would select approximately a 
quarter of eligible CBSAs listed in Table X.A.-03 across the CBSAs in 
which TEAM would be implemented. A hospital's probability of being 
required to participate in TEAM would depend on the stratum their CBSA 
is in, and would range from 20% to 50%.
    We conducted power analyses to identify detectable changes in 
episode spending between a potential group of CBSAs selected for the 
model and a potential control group of CBSAs using a Type I error of 
0.05 and Type 2 error of 0.2 (implying a power of 0.8). The analysis 
shows that, if a quarter of eligible CBSAs are selected for TEAM, we 
will be able to detect 1.5% changes in episode spending, all else being 
equal. This change in episode spending is within the savings range that 
CMS might expect to achieve given estimates for surgical episodes from 
previous episode-based payment models, including BPCI Model 2, CJR, and 
BPCI Advanced. This is critical to ensuring that CMS is able to assess 
the model's impact on Medicare spending.
    We seek comment on our proposed approach to selecting TEAM 
participants at Sec.  512.515.
b. Proposed Episodes
(1) Background
    A key model design feature for episode-based payment models is the 
definition of the episodes included in the model. The episode 
definition has two significant dimensions--(1) a clinical dimension 
that describes which clinical conditions and associated services are 
included in the episode; and (2) a time dimension that describes the 
beginning and end of the episode, its length, and when the episode may 
be cancelled prior to the end of the episode.

[[Page 36413]]

(2) Overview of Proposed Episodes
    In selecting episodes to test in TEAM, we considered a variety of 
factors, including the number and type of episodes best suited to meet 
the goals of the model. We chose to limit episode categories for TEAM 
to those that were included in BPCI Advanced through a robust selection 
process similar to that used for the CJR model (80 FR 73277). These 
episode categories represent high-expenditure, high-volume care 
delivered to Medicare beneficiaries and are evaluable in an episode-
based payment model. BPCI Advanced clinical episodes include both 
surgical episodes, which are triggered by a surgical procedure, and 
medical episodes that are primarily non-surgical in nature.
    While we continue to strive for our models to reduce Medicare 
expenditures and improve quality of care, we also want to ensure that 
there is a potential for participating hospitals to succeed. We want 
the conditions captured by episode categories in TEAM to be clinically 
similar enough that participants could drive care improvements by 
streamlining care pathways and transitions between clinical settings. 
In general, elective surgical procedures are associated with greater 
clinical homogeneity than unplanned hospitalizations or medical 
conditions. In addition, when episodes are clinically similar, episode 
spending is more predictable. Unsurprisingly, medical episodes are 
associated with greater spending variability. Medical episodes may also 
be more difficult to manage for hospitals without previous experience 
implementing value-based care and care redesign activities.
    Notably, evaluations of CJR and BPCI Advanced suggest that surgical 
episode categories do not capture underserved populations to the same 
degree as medical episodes and that medical episodes may offer 
relatively greater opportunity to address health equity. Specifically, 
medical episodes generally have a higher proportion of dual-eligible 
beneficiaries when compared to surgical episodes. TEAM will test novel 
ways to improve representation of underserved populations in surgical 
episodes through targeted flexibilities for safety net hospitals and 
more broadly defined beneficiary-level social risk adjustment described 
in section X.A.3.f. of the preamble of this proposed rule). Although we 
are not proposing medical episodes for TEAM at this time due to their 
relatively greater clinical heterogeneity, we will consider adding 
medical episodes in future years of the model. We are soliciting 
comments on including medical episodes in TEAM, as well as input on 
which specific medical episodes would best support the goals of the 
model.
    We also selected episodes for this proposed model with a greater 
proportion of spending in the post-acute period relative to the anchor 
hospitalization or procedure as such episodes may reflect a greater 
opportunity to improve care transitions for beneficiaries and reduce 
unnecessary hospitalizations and emergency care.
    Finally, we acknowledge that testing all of the BPCI Advanced 
episodes in a novel mandatory model could overwhelm participants, as 
previous mandatory models have only tested a single episode category.
    For the reasons discussed previously, we propose testing five 
surgical episodes in the model--Coronary Artery Bypass Grafting (CABG), 
Lower Extremity Joint Replacement (LEJR), Surgical Hip and Femur 
Fracture Treatment (SHFFT), Spinal Fusion, and Major Bowel Procedure. 
Based on our experience with the BPCI Advanced and CJR models and the 
stakeholder feedback received in response to the July 2023 Episode-
Based Payment Model Request for Information, we believe that beginning 
the model with these five episode categories is the most reasonable 
course for TEAM.\591\ Specifically, we are proposing to test surgical 
episodes because they are time-limited with well-defined triggers, have 
clinically similar patient populations with common care pathways, and 
have sufficient spending or quality variability, particularly in the 
post-acute period, to offer participants the opportunity for 
improvement.
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    \591\ Request for Information; Episode-Based Payment Model.
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    The proposed episodes have been previously tested in BPCI Advanced 
voluntarily, allowing CMS to assess engagement and gather data. The 
proposed episodes represent the highest volume and highest cost 
surgical episodes performed in the inpatient setting. Although CABG and 
SHFFT episodes were finalized in the Advancing Care Coordination 
through Episode Payment Models (Cardiac and Orthopedic Bundled Payment 
Models) Final Rule (CMS-5519-F) on December 20, 2016, that mandatory 
test was not implemented. The proposed TEAM is the next logical step 
for applying lessons learned from BPCI Advanced in a mandatory model. 
TEAM would enable CMS to capture a more diverse population of 
providers, and potentially beneficiaries.
    The proposed Lower Extremity Joint Replacement (LEJR) episode 
category would include hip, knee, and ankle replacements performed in 
either the hospital inpatient or outpatient setting. This episode 
category was selected because, using 2021 data, it was the highest 
volume, highest cost BPCI Advanced surgical episode category. There 
were 204,160 episodes with a total cost of $5.01 billion, with more 
than 40% of spending occurring in the post-acute period.
    The proposed SHFFT episode category, referred to as Hip and Femur 
Procedures except Major Joint in BPCI Advanced, would include 
beneficiaries who receive a hip fixation procedure in the presence of a 
hip fracture. It would not include fractures treated with a joint 
replacement. This episode was selected because it was the second 
highest volume, and second-highest cost BPCI Advanced surgical episode 
performed in the inpatient setting, using 2021 data. There were 69,076 
episodes with a total cost of $3.22 billion, with more than 63% of 
spending occurring in the post-acute period.
    The proposed CABG episode category would include beneficiaries 
undergoing coronary revascularization by CABG.\592\ This episode was 
selected because we wanted to maintain the engagement of cardiac 
surgeons who have participated in prior episode-based models. Among 
cardiac procedures it was the second highest cost and second highest 
volume BPCI Advanced surgical episode performed in the inpatient 
setting using 2021 data. There were 26,259 episodes with a total cost 
of $1.39 billion; approximately 22% of spending occurred in the post-
acute period. We also considered percutaneous coronary intervention 
(PCI) for TEAM because it was the highest volume and highest cost 
surgical cardiac episode. However, we did not select this episode 
because PCI has been described as a low-value service by the Medicare 
Payment Advisory Commission when performed for stable coronary artery 
disease,\593\ and the majority of PCIs are performed in the outpatient 
setting and are not associated with an acute event.
---------------------------------------------------------------------------

    \592\ https://www.cms.gov/icd10m/version38-fullcode-cms/fullcode_cms/P0008.html.
    \593\ MedPAC March 2021 Report to the Congress. https://www.medpac.gov/.
---------------------------------------------------------------------------

    The proposed Spinal Fusion episode category would include 
beneficiaries who undergo certain spinal fusion procedures in either a 
hospital inpatient or outpatient setting. This episode was selected 
because it was the third-highest cost BPCI Advanced surgical episode 
performed in the inpatient setting using

[[Page 36414]]

2021 data. There were 62,345 episodes with a total cost of $3.2 
billion; more than 27% of spending occurred in the post-acute period.
    The proposed Major Bowel Procedure episode would include 
beneficiaries who undergo a major small or large bowel surgery.\594\ 
This episode was selected because it was the fifth-highest volume and 
fourth-highest cost BPCI Advanced surgical episode performed in the 
inpatient setting using 2021 data. There were 54,848 episodes with a 
total cost of $1.95 billion; 37% of spending occurred in the post-acute 
period.
---------------------------------------------------------------------------

    \594\ https://www.cms.gov/icd10m/version38-fullcode-cms/fullcode_cms/P0009.html.
---------------------------------------------------------------------------

    Each of the episodes provides different opportunities in TEAM to 
improve the coordination and quality of care, as well as efficiency of 
care during the episode, based on varying current patterns of 
utilization and Medicare spending. While these episode categories have 
been tested previously, we believe TEAM will provide additional 
information that can be used for potential expansion through its 
greater focus on care transitions back to primary care, health equity, 
and refined payment methodology, as described elsewhere in this 
proposed rule.
    In addition, the mandatory nature of TEAM would address selection 
bias, where high performing hospitals have elected to voluntarily 
participate in a model but then withdrew from the model in the face of 
financial losses or uncertainty of receiving financial rewards. In BPCI 
Advanced, participants were able to select clinical episode categories 
and, later, service lines, which further ensures selection bias.
    We performed an analysis of Medicare FFS claims data, beginning in 
CY 2021, to estimate the average annual number of historical episodes 
that extended 30 days post-hospital discharge, and, therefore, would 
have been included in TEAM. Based on that analysis, we anticipate the 
number of episodes that TEAM would capture to be approximately 28,088 
for CABG; 75,254 for SHFFT; 59,983 for Major Bowel Procedure; 215,957 
for LEJR; and 65,968 for Spinal Fusion. The average episode cost for 
these historical episodes was approximately $48,905 for CABG, $35,501 
for SHFFT, $29,184 for Major Bowel Procedure, $21,063 for LEJR, and 
$46,326 for Spinal Fusion.
    As previously stated, we are proposing five episode categories for 
TEAM to ease TEAM participants into episode accountability. We also 
intend to add additional episode categories in future performance years 
of the model, offering a gradual transition to greater episode 
accountability, and ultimately capturing a larger proportion of FFS 
spending in value-based care. We would use future notice and comment 
rulemaking to add episode categories in future performance years.
    We seek comment on the five proposed episode categories, described 
at Sec.  512.525(d) and any additional episode categories we should 
consider for the model.
(3) Clinical Dimensions of Episodes
    We believe that a straightforward approach for hospitals and other 
providers to identify Medicare beneficiaries in this payment model is 
important for the care redesign that is required for model success. 
Some of the inpatient procedures that group to the included MS-DRGs are 
also performed in the outpatient setting. To identify outpatient 
episodes for TEAM, we propose to use methods similar to BPCI Advanced 
and CJR. Specifically, we propose to match a hospital's institutional 
claim for TEAM procedure codes billed through the OPPS.
    Therefore, as in the BPCI Advanced and CJR models, hospitals 
participating in the proposed TEAM would be able to identify 
beneficiaries in included episodes through their Medicare Severity-
Diagnosis Related Group (MS-DRG) during the anchor hospitalization or, 
for hospital outpatient procedures, by their Healthcare Common 
Procedure Coding System (HCPCS) codes, allowing active coordination of 
beneficiary care during and after the procedure.
    The MS-DRG for inpatient procedures would determine the ultimate 
MS-DRG assignment for the hospitalization, unless additional surgeries 
higher in the MS-DRG hierarchy also are reported.\595\ This approach 
offers operational simplicity for providers and CMS and is consistent 
with the approach taken by the BPCI Advanced and CJR models to identify 
beneficiaries whose care is included in those episodes.
---------------------------------------------------------------------------

    \595\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015). https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html.
---------------------------------------------------------------------------

    We seek comment on our proposal to identify episodes with MS-DRGs 
and HCPCS for inclusion in TEAM.
(4) Episode Category Definitions
    Episode definitions have two significant dimensions--(1) a clinical 
dimension that describes which clinical conditions and associated 
services are included in the episode category; and (2) a time dimension 
that describes the beginning and end of the episode, its length, and 
when the episode may be cancelled prior to the end of the episode.
    For the purposes of TEAM, we propose to define episodes as 
including all Medicare Part A and Part B items and services described 
in Sec.  512.525(e), with some exceptions described below and at Sec.  
512.525(f), beginning with an admission to an acute care hospital stay 
(hereinafter ``the anchor hospitalization'') or an outpatient procedure 
at a hospital outpatient department (HOPD) (hereinafter ``anchor 
procedure''), and ending 30 days following hospital discharge or anchor 
procedure.
    As previously discussed in section X.A.3.b.(2) of the preamble of 
this proposed rule, the proposed episode categories were previously 
tested in BPCI Advanced and were voluntarily selected by BPCI Advanced 
participants. They represent the highest volume and highest cost 
surgical episode categories performed in the inpatient setting. We 
believe, based on current patterns of utilization and Medicare 
spending, there are still efficiencies to be gained by streamlining 
care pathways and transitions between clinical settings.
    We selected these episode categories because elective surgical 
procedures are more clinically similar and have greater spending 
predictability. In addition, these episode categories have a 
significant proportion of spending in the post-acute period, reflecting 
a greater opportunity to improve care transitions for beneficiaries and 
reduce unnecessary hospitalizations and emergency care.
(a) Lower Extremity Joint Replacement Episode Category
    As mentioned previously in this section of the proposed rule, we 
have identified the LEJR episode category for inclusion in this model. 
This proposed episode category would include hip, knee, and ankle 
replacements, but exclude arthroplasty of the small joints in the foot. 
The proposed LEJR episode category would include both hospital 
inpatient and outpatient procedures reimbursed through the Inpatient 
Prospective Payment System (IPPS) under select Medicare Severity- 
Diagnosis Related Groups (MS-DRG) and HOPD procedures billed under 
select HCPCS codes through the Outpatient Prospective Payment System 
(OPPS).\596\
---------------------------------------------------------------------------

    \596\ ICD-10-CM/PCS MS-DRG v38.0 Definitions Manual: https://www.cms.gov/icd10m/version38-fullcode-cms/fullcode_cms/P0011.html.

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[[Page 36415]]

    We recognize LEJR has been tested in other episode-based payment 
models. Given the promising findings for this episode category in those 
model tests, we believe there is value in continuing to test this 
episode category under an alternate payment methodology, particularly 
given the high volume of such procedures among the Medicare population. 
In addition, as previously mentioned, TEAM would potentially capture 
underserved populations who were disproportionately underrepresented in 
CJR. Therefore, we propose to define the LEJR episode category as a 
hip, knee, or ankle replacement that is paid through the IPPS under MS-
DRG 469, 470, 521, or 522 or through the OPPS under HCPCS code 27447, 
27130, or 27702. This approach offers operational simplicity for 
providers and CMS and is consistent with the approach taken by previous 
models to identify beneficiaries whose care is included in the LEJR 
episode category.
    We note that Medicare-covered outpatient total ankle arthroplasty 
(TAA) was excluded from both BPCI Advanced and CJR models. However, 
since its removal from the Inpatient-Only List in 2021, the majority of 
TAA procedures have shifted to the outpatient setting. For example, in 
2022, there were approximately 2,600 outpatient TAAs and only 600 TAAs 
performed in the inpatient setting. For this reason, and to be 
consistent with other episodes in the LEJR episode category, we propose 
that both inpatient and outpatient TAAs would trigger an episode in 
TEAM.
    Based on an analysis of 2021 Medicare FFS claims data for 
historical LEJR episodes and an estimated number of additional 
outpatient TAAs, the annual number of potentially eligible beneficiary 
discharges for this mandatory model nationally would be approximately 
226,000. We seek public comment on our proposed definition of LEJR 
episodes for TEAM at Sec.  512.525(d)(1). We also seek comment on the 
proposed MS-DRG and HCPCS codes and our proposal to include outpatient 
TAA in the LEJR episode category.
(b) Surgical Hip & Femur Fracture Treatment (Excluding Lower Extremity 
Joint Replacement) Episode Category
    We propose to define the Surgical Hip and Femur Fracture Treatment 
(SHFFT) episode as a hip fixation procedure, with or without fracture 
reduction, but excluding joint replacement, that is paid through the 
IPPS under MS-DRG 480-482. The SHFFT episode would include 
beneficiaries treated surgically for hip and femur fractures, other 
than hip arthroplasty. SHFFT procedures include open and closed 
surgical hip fixation, with or without reduction of the fracture. The 
SHFFT episode was selected because it was the second highest volume, 
and second-highest cost BPCI Advanced surgical episode performed in the 
inpatient setting, based on an analysis of 2021 Medicare FFS claims 
data. There were 69,076 episodes with a total cost of $3.22 billion. In 
addition, more than 63% of spending occurring in the post-acute period, 
signifying potential opportunity for care improvement. Using that same 
data for historical SHFFT episodes, the annual number of potentially 
eligible beneficiary discharges for this episode category nationally 
would be approximately 85,000.
    Together, the LEJR and SHFFT episode categories cover all surgical 
treatment options for Medicare beneficiaries with hip fracture (that 
is, hip arthroplasty and fixation). Although a small number of SHFFT 
procedures are furnished in the outpatient hospital setting, TEAM would 
only include inpatient procedures, which conforms with hip and femur 
procedure except major joint episodes under BPCI Advanced.
    Thus, we propose to include episodes for beneficiaries admitted and 
discharged from an anchor hospitalization paid under a SHFFT MS-DRG 
(480-482) under the IPPS in TEAM. We seek comment on our proposed 
definition of SHFFT and our proposal to include the SHFFT episode 
category at Sec.  512.525(d)(2).
(c) Coronary Artery Bypass Graft Episode Category
    The proposed CABG episode category would include beneficiaries 
undergoing coronary revascularization by CABG.\597\ This episode 
category was selected in order to maintain the engagement of cardiac 
surgeons who have participated in prior episode-based models. Among 
cardiac procedures, it was the second highest cost and second highest 
volume BPCI Advanced surgical episode performed in the inpatient 
setting using 2021 data. There were 26,259 episodes with a total cost 
of $1.39 billion.
---------------------------------------------------------------------------

    \597\ https://www.cms.gov/icd10m/version38-fullcode-cms/fullcode_cms/P0008.html.
---------------------------------------------------------------------------

    We also considered the percutaneous coronary intervention (PCI) 
episode category for TEAM because it was the highest volume and highest 
cost surgical cardiac episode. However, we did not select this episode 
because PCI has been described as a low-value service by the Medicare 
Payment Advisory Commission when performed for stable coronary artery 
disease,\598\ and the majority of PCIs are not associated with an acute 
care hospitalization.
---------------------------------------------------------------------------

    \598\ MedPAC March 2021 Report to the Congress. https://www.medpac.gov/.
---------------------------------------------------------------------------

    We propose to define the Coronary Artery Bypass Graft (CABG) 
episode category as any coronary revascularization procedure that is 
paid through the IPPS under MS-DRG 231-236, including both elective 
CABG and CABG procedures performed during initial acute myocardial 
infarction treatment (AMI). Based on an analysis of 2021 Medicare FFS 
claims data for historical CABG episodes, the annual number of 
potentially eligible beneficiary discharges for CABG episodes in TEAM 
would be approximately 30,000. We seek comment on our proposed 
definition of the CABG episode category and our proposal to include 
emergent CABG in episodes at Sec.  512.525(d)(3).
(d) Spinal Fusion Category
    We propose to include in TEAM the Spinal Fusion episode category 
for beneficiaries undergoing inpatient and outpatient spinal fusion. 
The spinal fusion episode category was selected because it was the 
third-highest cost BPCI Advanced surgical episode performed in the 
inpatient setting using 2021 data. There were 62,345 episodes with a 
total cost of $3.2 billion. Based on the high number of episodes and 
its voluntary selection by participants in BPCI Advanced, we believe 
there are additional opportunities to improve care for beneficiaries 
undergoing these procedures.
    We propose to define the spinal fusion episode category as any 
cervical, thoracic, or lumbar spinal fusion procedure paid through the 
IPPS under MS-DRG 453-455, 459-460, or 471-473, or through the OPPS 
under HCPCS codes 22551, 22554, 22612, 22630, or 22633. Based on an 
analysis of 2021 Medicare FFS claims data and an estimated number of 
additional outpatient episodes, the annual number of potentially 
eligible TEAM Spinal Fusion episodes would be approximately 94,000. We 
seek comment on our definition and inclusion of the Spinal Fusion 
episode category at Sec.  512.525(d)(4).
(e) Major Bowel Procedure Episode Category
    We propose to include in TEAM the Major Bowel Procedure episode 
category for beneficiaries undergoing inpatient major small bowel and 
large bowel procedures. This episode

[[Page 36416]]

category was selected because it was the fifth-highest volume and 
fourth-highest cost BPCI Advanced surgical episode performed in the 
inpatient setting using 2021 data. There were 54,848 episodes with a 
total cost of $1.95 billion. We believe there are still opportunities 
to streamline care pathways and improve care transitions for 
beneficiaries receiving this care.
    We proposed to define the Major Bowel Procedure episode category as 
any small or large bowel procedure paid through the IPPS under MS-DRG 
329-331. Based on an analysis of 2021 Medicare FFS claims data for 
historical Major Bowel Procedure episodes, the annual number of 
potentially eligible beneficiary discharges for episodes in TEAM would 
be approximately 64,000. We seek comment on our proposed definition and 
inclusion of the Major Bowel Procedure episode at Sec.  512.525(d)(5).
    The following Table X.A.-04 summarizes the five proposed episodes 
and corresponding billing codes that would be used to identify 
episodes.
[GRAPHIC] [TIFF OMITTED] TP02MY24.280

(5) Items and Services Included in Episodes
    Like previous episode-based payment models, TEAM would incentivize 
comprehensive, coordinated, patient-centered care through inclusive 
episodes. We propose to include in the episode all items and services 
paid under Medicare Part A and Part B during the performance period, 
unless such items and services fall under a proposed exclusion 
described in section X.A.3.b.(5)(a) of the preamble of this proposed 
rule.
    We propose to include all Part A services furnished during the 
proposed 30-day post-discharge period of the episode, other than 
certain excluded hospital readmissions, as post-hospital discharge Part 
A services are typically intended to be comprehensive in nature. In 
particular, we believe that claims for services with diagnosis codes 
that are directly related to the proposed episode categories or the 
quality and safety of care furnished during the episode, based on 
clinical judgment (for example, surgical wound infection) and taking 
into consideration coding guidelines, should be included in an episode. 
Thus, we propose that items and services for episodes would include the 
following items and services paid under Medicare Part A and Part B, 
subject to the proposed exclusions in section X.A.3.b.(5)(a) of the 
preamble of this proposed rule:
     Physicians' services.
     Inpatient hospital services, including services paid 
through IPPS operating and capital payments.
     Inpatient psychiatric facility (IPF) services.
     Long-Term Care Hospital (LTCH) services.
     Inpatient Rehabilitation Facility (IRF) services.
     Skilled Nursing Facility (SNF) services.
     Home Health Agency (HHA) services.
     Hospital outpatient services.
     Outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment.
     Part B drugs and biologicals except for those excluded 
under Sec.  512.525 (f) as proposed.
     Hospice services.
     Part B professional claims dated in the 3 days prior to an 
anchor hospitalization if a claim for the surgical procedure for the 
same episode category is not detected as part of the hospitalization 
because the procedure was performed by the TEAM participant on an 
outpatient basis but the patient was subsequently admitted as an 
inpatient.
    We seek comment on the items and services we are proposing to 
include in TEAM in proposed Sec.  512.525(e).
(a) Items and Services Excluded From Episodes
    We propose to exclude from episodes certain Part A and B items and 
services that are clinically unrelated to the anchor hospitalization or 
anchor procedure. The proposed exclusions would be applicable to 
episodes included during the baseline period, the three-year historical 
period used to construct target prices, as described in section 
X.A.3.d.(3) of the preamble of this proposed rule, and episodes 
initiated during a performance year. The proposed exclusions are 
similar to those excluded from BPCI Advanced, as discussed in detail 
later in this section.\599\ We have used similar exclusions in CMS 
Innovation Center Models, with minor adjustments, since BPCI and intend 
to continue to apply them to TEAM. These exclusion lists were developed 
through a collaborative effort between CMS and external stakeholders 
and have been vetted broadly in the health care community. We propose 
to use the BPCI Advanced exclusions list in TEAM based on several years 
of experience with them and their suitability for episodes in TEAM. The 
rationale for these exclusions described below is consistent with the 
rationale for exclusions in the CJR model (80 FR 73304) and in BPCI 
Advanced.
---------------------------------------------------------------------------

    \599\ A complete list of excluded items, services, and 
readmission MS-DRGs can be found in the ``BPCI Advanced Exclusions 
List--MY7 (XLS)'' available under Participant Resources at the CMS 
BPCI Advanced website.
---------------------------------------------------------------------------

    We propose to exclude from episodes all Part A and B items and 
services, for both the baseline period and performance years, for 
hospital admissions and readmissions for specific categories of 
diagnoses, such as oncology, trauma medical admissions, organ 
transplant, and ventricular shunts determined by MS-DRGs, as well as 
all of the following excluded Major Diagnostic Categories (MDC):\600\
---------------------------------------------------------------------------

    \600\ MDCs are formed by dividing all possible principal 
diagnoses (from ICD-10-CM) into 25 mutually exclusive diagnosis 
areas. The diagnoses in each MDC correspond to a single organ system 
or etiology and in general are associated with a particular medical 
specialty.

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[[Page 36417]]

     MDC 02 (Diseases and Disorders of the Eye).
     MDC 14 (Pregnancy, Childbirth, and Puerperium).
     MDC 15 (Newborns).
     MDC 25 (Human Immunodeficiency Virus).
    We propose to exclude from episodes IPPS new technology add-on 
payments for drugs, technologies, and services identified by value code 
77 on IPPS hospital claims for episodes in the baseline period and 
performance years.\601\ New technology add-on payments are made 
separately and in addition to the MS-DRG payment under the IPPS for 
specific new drugs, technologies, and services that substantially 
improve the diagnosis or treatment of Medicare beneficiaries and would 
be inadequately paid under the MS-DRG system. We believe it would not 
be appropriate for TEAM to potentially diminish beneficiaries' access 
to new technologies or to burden hospitals who choose to use these new 
drugs, technologies, or services with concern about these payments 
counting toward TEAM participants' actual episode spending. 
Additionally, new drugs, technologies, or services approved for the 
add-on payments vary unpredictably over time in their application to 
specific clinical conditions. Exclusion of new technology add-on 
payments for drugs, technologies, or services approved for add-on 
payments from episodes in TEAM is similar to episode exclusions in the 
CJR model (80 FR 73303 and73304 and 73315).
---------------------------------------------------------------------------

    \601\ This exclusion is applied during the payment 
standardization process.
---------------------------------------------------------------------------

    We also propose to exclude from episodes OPPS transitional pass-
through payments for medical devices as identified through OPPS status 
indicator H for episodes in the baseline period and performance years. 
Through the established OPPS review process, we have determined that 
these technologies have a substantial cost but also lead to substantial 
clinical improvement for Medicare beneficiaries. This proposal also is 
consistent with the BPCI Advanced and CJR model final exclusions policy 
(80 FR 73308 and 73315).
    We propose to exclude from episodes drugs or biologics that are 
paid outside of the MS-DRG, specifically hemophilia clotting factors 
(Sec.  412.115), identified through HCPCS code, diagnosis code, and 
revenue center on IPPS claims for episodes in the baseline period and 
performance years. Hemophilia clotting factors, in contrast to other 
drugs and biologics that are administered during an inpatient 
hospitalization and paid through the MS-DRG, are paid separately by 
Medicare in recognition that clotting factors are costly and essential 
to appropriate care for certain beneficiaries. Because we do not 
believe that there are any spending efficiencies to be gained by 
including hemophilia clotting factors, we propose to exclude these 
high-cost drugs from episodes initiated during the baseline period and 
performance year.
    We propose to exclude from episodes certain Part B payments for 
high-cost drugs and biologicals, low-volume drugs,\602\ and blood 
clotting factors for hemophilia patients billed on outpatient, carrier, 
and durable medical equipment claims for episodes in the baseline 
period and initiated in the performance years. These high-cost items 
are essential to appropriate care of certain beneficiaries and we do 
not believe including them in the episode would improve any spending or 
quality of care efficiencies. Specifically, this proposed list would 
include:
---------------------------------------------------------------------------

    \602\ To determine if a drug HCPCS meets the cost or volume 
thresholds for exclusion, the episodes are pooled across all episode 
categories.
---------------------------------------------------------------------------

     For episodes included during the baseline period:
    ++ Drug/biological HCPCS codes that are billed in fewer than 31 
episodes in total across all episodes in TEAM during the baseline 
period;
    ++ Drug/biological HCPCS codes that are billed in at least 31 
episodes in the baseline period, and have a mean allowed cost of 
greater than $25,000 per episode in the baseline period; and
    ++ HCPCS codes corresponding to clotting factors for hemophilia 
patients, identified in the quarterly average sales price file \603\ 
for certain Medicare Part B drugs and biologicals as HCPCS codes with 
clotting factor = 1, HCPCS codes for new hemophilia clotting factors 
not in the baseline period, and other HCPCS codes identified as 
hemophilia.
---------------------------------------------------------------------------

    \603\ https://www.cms.gov/medicare/payment/all-fee-service-providers/medicare-part-b-drug-average-sales-price/asp-pricing-files.
---------------------------------------------------------------------------

     For episodes initiated during a performance year, in 
addition to those listed in the previous bullet, Part B payments for 
high-cost drugs and biologicals, low-volume drugs, and blood clotting 
factors for hemophilia billed on outpatient, carrier, and durable 
medical equipment (DME) claims, including, but not limited to:
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period, and appear in 10 or fewer episodes in the performance 
year;
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of greater than $25,000 per episode in the 
performance year; and
    ++ Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of $25,000 or less per episode in the 
performance year, and correspond to a drug/biological that appears in 
the baseline period list but was assigned a new HCPCS code between the 
baseline period and performance year.
    ++ HCPCS codes for new hemophilia clotting factors not in the 
baseline period.
    Complete lists of proposed excluded MS-DRGs for readmissions and 
proposed excluded HCPCS codes for Part B services furnished during TEAM 
episodes after TEAM beneficiary discharge from an anchor 
hospitalization would be posted on the CMS TEAM website at https://innovation.cms.gov/initiatives/TEAM. The lists would apply to all 
performance years of the model until and unless the lists are updated. 
We propose that revisions to the exclusion lists would be initiated 
through rulemaking to allow for public input. Potential updates to the 
lists could include additions to or deletions from the list, reflect 
changes to ICD-10-CM coding and the MS-DRGs under the IPPS, or address 
any other issues that are brought to our attention throughout the 
course of the TEAM performance period.
    We seek comment on the proposed excluded services, the lists of 
excluded services, and the process for updating the lists of excluded 
services for TEAM included in Sec.  512.525(f), Sec.  512.525(g), and 
Sec.  512.525(h).
(b) Beneficiary Inclusion Criteria
    We propose to begin an episode with an anchor hospitalization or 
anchor procedure because of the challenges related to clinical 
variability leading up to the episodes and identifying unrelated 
services, given the multiple chronic conditions experienced by many 
TEAM beneficiaries. We propose that all services that are included in 
the IPPS (for example, 3-day payment window payment policies) would be 
included in the episodes. We further propose that the population of 
Medicare beneficiaries whose care would be included in TEAM would be 
those beneficiaries who meet all of the following criteria at the time 
of admission to the anchor hospitalization or anchor procedure:

[[Page 36418]]

     Enrolled in Medicare Part A and Part B.
     Not eligible for Medicare on the basis of end-stage renal 
disease.
     Not enrolled in any managed care plan (for example, 
Medicare Advantage, Health Care Prepayment Plans, cost-based health 
maintenance organizations).
     Not covered under a United Mine Workers of America health 
plan, which provides health care benefits for retired mine workers.
     Have Medicare as their primary payer.
    We seek comment on the proposed beneficiary inclusion criteria 
included in Sec.  512.535.
(c) Initiating Episodes
    We propose that, if the beneficiary meets the beneficiary inclusion 
criteria, an episode would begin when a beneficiary is admitted for an 
anchor hospitalization or anchor procedure for one of the following MS-
DRGs, or by the presence of one of the following HCPCS codes on an 
outpatient claim (specifically, a hospital's institutional claim for an 
included outpatient procedure billed through the OPPS):
    LEJR MS-DRGs and HCPCS--
     469 (Major joint replacement or reattachment of lower 
extremity with major complications or comorbidities (MCC)).
     470 (Major joint replacement or reattachment of lower 
extremity without MCC).
     521 (Hip replacement with principal diagnosis of hip 
fracture with MCC).
     522 (Hip replacement with principal diagnosis of hip 
fracture without MCC).
     27447 (Total knee arthroplasty).
     27130 (Total hip arthroplasty).
     27702 (Total ankle arthroplasty).
    SHFFT MS-DRGs--
     480 (Hip and femur procedures except major joint with 
MCC).
     481 (Hip and femur procedures except major joint with 
complication or comorbidity (CC)).).
     482 (Hip and femur procedures except major joint without 
CC/MCC).
    CABG MS-DRGs--
     231 (Coronary bypass with percutaneous transluminal 
coronary angioplasty (PTCA) with MCC).
     232 (Coronary bypass with PTCA without MCC).
     233 (Coronary bypass with cardiac catheterization with 
MCC).
     234 (Coronary bypass with cardiac catheterization without 
MCC).
     235 (Coronary bypass without cardiac catheterization with 
MCC).
     236 (Coronary bypass without cardiac catheterization 
without MCC).
    Spinal fusion MS-DRGs and HCPCS--
     453 (Combined anterior/posterior spinal fusion with MCC).
     454 (Combined anterior/posterior spinal fusion with CC).
     455 (Combined anterior/posterior spinal fusion without CC/
MCC).
     459 (Spinal fusion except cervical with MCC).
     460 (Spinal fusion except cervical without MCC).
     471 (Cervical spinal fusion with MCC).
     472 (Cervical spinal fusion with CC).
     473 (Cervical spinal fusion without CC/MCC).
     22551 (Anterior cervical spinal fusion with decompression 
below C2).
     22554 (Anterior cervical spinal fusion without 
decompression).
     22612 (Posterior or posterolateral lumbar spinal fusion).
     22630 (Posterior lumbar interbody lumbar spinal fusion).
     22633 (Combined posterior or posterolateral lumbar and 
posterior lumbar interbody spinal fusion).
    Major small and large bowel procedure MS-DRGs--
     329 (Major small and large bowel procedures with MCC).
     330 (Major small and large bowel procedures with CC).
     331 (Major small and large bowel procedures without CC/
MCC).
    We propose that the episode start date will be the day of the 
anchor procedure for outpatient procedures or the date of admission on 
the IPPS claim associated with the anchor hospitalization that 
triggered the episode. However, if an anchor hospitalization is 
initiated on the same day as or within 3 days of an outpatient 
procedure for the same episode category, we propose to begin the 
episode on the date of the outpatient procedure rather than the date of 
the inpatient admission.
    We recognize there could potentially be episodes initiated in TEAM 
as a result from a TEAM beneficiary being transferred from one hospital 
to another, where at least one or both hospitals are TEAM participants 
and where at least one of the hospital admissions are for a MS-DRG that 
would initiate an anchor hospitalization in TEAM. In the BPCI Advanced 
model, this is viewed as one continuous hospitalization, whereas in the 
CJR model and in the proposed TEAM, it is viewed as two separate 
hospitalizations that may result in an episode initiating depending on 
the hospital participation in the model and the MS-DRGs involved in the 
hospital admissions. Specifically, if the initial inpatient admission 
is at a TEAM participant for a proposed MS-DRG in TEAM, then it would 
initiate an anchor hospitalization and the resulting transfer to the 
second hospital would not initiate a new anchor hospitalization, rather 
it would be included in the episode initiated from the first 
hospitalization. However, if the initial inpatient admission is for an 
MS-DRG not proposed in TEAM, then an anchor hospitalization is not 
initiated and the resulting transfer to the second hospital could 
initiate an episode depending on the second hospitals participation 
status and the MS-DRG for the inpatient admission.
    We considered mimicking the BPCI Advanced model and proposing a 
transfer policy where a TEAM beneficiary that is transferred from one 
hospital to another would be considered one continuous hospitalization. 
Specifically, we considered defining an acute-to-acute hospital 
transfer as consecutive inpatient stays for a TEAM beneficiary where 
the admission date of the latter inpatient hospital stay is the same as 
the discharge date of the initial hospital inpatient stay for different 
acute care hospitals. This would mean that acute-to-acute hospital 
transfers are treated as one continuous hospitalization and would be 
assigned the admission date and the hospital from the first leg of the 
transfer and the MS-DRG and discharge date from the last leg of the 
transfer. For example, hospital A is a TEAM participant and hospital B 
is not a TEAM participant. A beneficiary is admitted to hospital A on 
January 1st for an MS-DRG 637 (diabetes) not in TEAM and discharged on 
January 5th with a transfer to hospital B on the same day. The 
beneficiary is admitted to hospital B for MS-DRG 470 (LEJR) and is 
discharged on January 10th. In this example, the episode is attributed 
to hospital A and is considered a LEJR episode with an anchor 
hospitalization start date of January 1st and an anchor hospitalization 
end date of January 10th. All of the spending between both 
hospitalizations would be captured in the episode. If the example would 
be reversed, and hospital A was not a TEAM participant and hospital B 
was a TEAM participant, then neither hospital would be attributed the 
episode since hospital A is not a participant and the transfer policy 
prevents the episode from being attributed to hospital B. We recognize 
this policy helps to keep the initial hospital accountable and may 
mitigate perverse incentives to transfer a beneficiary, however, it 
does increase complexity when determining when an episode is initiated, 
and which hospital

[[Page 36419]]

is accountable for the episode. We also note that the BPCI Advanced 
model included additional requirements in their transfer policy, where 
if one of the hospitals was a critical access hospital or a PPS-exempt 
cancer hospital or if one of the inpatient admissions was for a MS-DRG 
on the exclusions list, the episode was cancelled. We seek comment on 
whether we should consider a transfer policy similar to BPCI Advanced 
for TEAM.
    We seek comment on our proposal for initiating TEAM episodes based 
on MS-DRG or HCPCS included in Sec.  512.510.
(d) Episode Length
    The proposed episodes would cover time periods marked by 
significant PAC needs, potential complications of surgery, and short-
term, intense management of chronic conditions that may be destabilized 
by the surgery. We believe that hospitals have substantial ability to 
influence the quality and efficiency of care that TEAM beneficiaries 
receive over the weeks and months following a procedure. For this 
reason, both CJR and BPCI Advanced utilize a 90-day post-discharge 
episode duration.
    An episode duration longer than 30 days poses a greater risk for 
the hospital because of variability due to medical events outside the 
intended scope of the model. Our analysis of BPCI Advanced episodes 
found that the need for care for chronic conditions and other non-
anchor MS-DRG-related conditions becomes much more prevalent in days 31 
to 90 following hospital discharge. Longer episodes increase the 
potential for ACO overlap (where a beneficiary aligned or assigned to 
an ACO has an episode included in TEAM), are associated with a greater 
number of episode-level exclusions in the post-discharge period and are 
more likely to include potential readmissions for an unrelated 
condition. Shorter episode lengths are used in other models that employ 
total cost-of-care approaches. In the Medicare Spending Per Beneficiary 
(MSPB) measure of the Hospital Value-Based Program (HVBP), episodes 
include Part A and Part B payments for services furnished three days 
prior to a patient's inpatient stay and extend for 30 days after 
discharge.
    We believe reducing episode duration to 30 days could both sustain 
the spending reductions demonstrated in BPCI Advanced and CJR and 
mitigate some of the current challenges experienced between ACOs, 
hospitals, and other providers. A 30-day episode would position the 
specialist as the principal provider near the anchor event with a hand 
off back to the primary care provider for longitudinal care management 
and we believe that ACOs are better equipped to address the population 
health needs of Medicare beneficiaries.
    Additionally, the majority of episode spending occurs in the first 
30 days following discharge or the anchor procedure. Based on an 
internal analysis of BPCI Advanced episodes between 2020 and 2022, 
seventy-five percent of episode spending occurred in the first 30 days 
of the episode and 90 percent occurred in the first 60 days. We expect 
TEAM would continue to provide hospitals with opportunities to improve 
care and incentivize coordinated, quality care among acute care 
hospitals, HOPDs, physicians, and PAC providers throughout care 
transitions, given that the majority of episode spending during 90-day 
episodes occurred in the first 30 days.
    Based on the rationale noted earlier, we propose that episodes end 
30 days after discharge from the anchor hospitalization or anchor 
procedure and that day 1 of the 30-day post-acute portion of the 
episode is the date of the anchor procedure or the date of discharge 
from an anchor hospitalization. To the extent that a Medicare payment 
for services included in an episode spans a period of care that extends 
beyond the episode duration, we propose that these payments would be 
prorated so that only the portion attributable to care during the fixed 
duration of the episode is attributed to the episode spending. The 
proposal for a 30-day post-discharge episode length is included in 
Sec.  512.537(a)(1). We seek comment on our proposal to implement a 30-
day post-discharge episode length. We also seek comment on alternative 
episode durations, such as a 60-day or 90-day post-discharge episode 
length.
(e) Cancelling Episodes
    Similar to the CJR model, we propose that once an episode begins, 
the episode continues until the end of the episode as described in the 
following section, unless the episode is cancelled because the 
beneficiary ceases to meet any of the general beneficiary inclusion 
criteria described in section X.A.3.b.(5)(b) of the preamble of this 
proposed rule.
    We believe it would be appropriate to cancel the episode when a 
beneficiary's status changes during the episode such that they no 
longer meet the criteria for inclusion because the episode target price 
reflects full payment for the episode, yet we would not have full 
Medicare episode payment data for the beneficiary to reconcile against 
the target price.
    In the case that a beneficiary has a subsequent admission for an 
episode on the same day as or within 3 days of an outpatient procedure 
from the same episode category, the outpatient episode would be not 
initiate an anchor procedure and the outpatient procedure would instead 
initiate an anchor hospitalization. That is, the anchor hospitalization 
start date will be that of the outpatient procedure. We propose this 
policy in order because we believe that an inpatient episode should 
take precedence over an outpatient procedure performed on the same day, 
given the likelihood of higher spend associated with the inpatient 
episode and potential for higher clinical acuity.
    We propose to cancel the episode if a beneficiary dies during the 
anchor hospitalization or anchor procedure, rather than at any point 
during the post-discharge period of the episode, as is done in BPCI 
Advanced. As discussed in the CJR Final Rule, we believe there would be 
limited incentive for efficiency that could be expected when death 
occurs during the anchor hospitalization itself (80 FR 73318).
    As discussed in the EPM proposed rule (81 FR 50841), we consider 
mortality to be a harmful beneficiary outcome that should be targeted 
for improvement through care redesign for these clinical conditions. We 
do not believe that it would be appropriate to exclude beneficiaries 
from episodes who die any time during the episode. Instead, we propose 
to maintain beneficiary episodes in TEAM unless death occurs during the 
anchor hospitalization or anchor procedure. We would calculate actual 
episode spending when beneficiaries die following discharge from the 
anchor hospitalization or anchor procedure, but within the 30-day post-
hospital discharge episode duration and reconcile it against the target 
price. We believe this proposal would encourage TEAM participants to 
actively manage beneficiaries to reduce their risk of death, especially 
as death would often be preceded by expensive care for emergencies and 
complications. Therefore, we propose to cancel episodes for death only 
during the anchor hospitalization or anchor procedure.
    Finally, we propose that episodes subject to extreme and 
uncontrollable circumstances (EUC) would be canceled, meaning that the 
services associated with the episode would continue to be paid through 
Medicare FFS but the episode would not be reconciled against a target 
price. We propose to base the TEAM EUC definition on the definition 
finalized in

[[Page 36420]]

the CJR 2018 Final Rule (83 FR 26604), which was designed to address 
the extreme and uncontrollable costs associated with natural disasters 
such as hurricanes, flooding, and wildfires. Specifically, we propose 
that the EUC policy would apply to TEAM participants located in a 
county where both: (1) a major disaster has been declared under the 
Stafford Act; and (2) section 1135 waivers have been issued. We believe 
that it is appropriate for our EUC policy to apply only in the narrow 
circumstance of a major disaster, which is catastrophic in nature and 
tends to have significant impacts on infrastructure, rather than the 
broader grounds for which an emergency could be declared. In regard to 
determining the start date of episodes to which the EUC would apply, we 
stated our belief that a episodes initiated during an emergency period 
or in the 30 days before the start date of an emergency period (as 
defined in section 1135(g) of the Act) should reasonably capture those 
beneficiaries whose high episode costs could be attributed to extreme 
and uncontrollable circumstances.
    In summary, we propose that the following circumstances would 
cancel an episode:
     The beneficiary no longer meets the criteria for 
inclusion.
     The beneficiary dies during the anchor hospitalization or 
anchor procedure.
     The participating hospital is subject to the EUC policy.
    When an episode is canceled, we propose that the services furnished 
to beneficiaries prior to and following the episode cancellation would 
continue to be paid by Medicare as usual but there would be no episode 
spending calculation that would be reconciled against the TEAM target 
price (see section X.A.3.d.(5)(f) of the preamble of this proposed 
rule). As discussed in section X.A.3.h. of the preamble of this 
proposed rule, waivers of program rules applicable to beneficiaries in 
episodes would apply to the care of beneficiaries who are in episodes 
at the time the waiver is used to bill for a service that is furnished, 
even if the episode is later canceled.
    We seek comment on our proposals to cancel episodes once they have 
begun but prior to the end of the 30-day post-discharge period included 
in Sec.  512.537(b).
c. Quality Measures and Reporting
(1) Background
    As discussed in the CJR model final rule (80 FR 73358), Medicare 
payment policy has moved away from FFS payments unlinked to quality of 
care. Through the Medicare Modernization Act and the Affordable Care 
Act, we have implemented specific IPPS programs like the Hospital 
Inpatient Quality Reporting (IQR) Program (section 1886(b)(3)(B)(viii) 
of the Act), the Hospital Value-Based Purchasing (VBP) Program 
(subsection (o) of section 1886), the Hospital-Acquired Condition (HAC) 
Reduction Program (subsection (q) of section 1886), and the Hospital 
Readmissions Reduction Program (subsection (p) of section 1886), where 
payment reflects the quality of care delivered to Medicare 
beneficiaries. The CJR model similarly incorporates pay-for-
performance, offering TEAM participants the potential for financial 
reward based on quality performance or, in some cases, quality 
improvement. Through the use of quality measures, CMS is also able to 
pursue objectives beyond resource alignment, such as the development of 
new quality measures and performance indicators.\604\ Additionally, CMS 
may incorporate new quality measures, re-evaluate or improve existing 
quality measures, or adjust a quality measure set to take effect at the 
start of each Model Year, or at other times specified by CMS.
---------------------------------------------------------------------------

    \604\ Damberg CL et al., Research Report: Measuring Success in 
Health Care Value-Based Purchasing Programs, Summary and 
Recommendations. RAND (2014). Available from http://www.rand.org/content/dam/rand/pubs/research_reports/RR300/RR306z1/RAND_RR306z1.pdf.
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    We believe that episode payment models such as the proposed TEAM 
should include pay-for performance methodologies that incentivize 
improvements in patient outcomes while simultaneously lowering health 
care spending. We also believe that improved quality of care, 
specifically achieved through coordination and communication among 
providers, patients, and their caregivers, can favorably influence 
patient outcomes. We are proposing that TEAM would incorporate quality 
measures that focus on care coordination, patient safety, and patient 
reported outcomes (PROs) which we believe represents areas of quality 
that are particularly important to patients undergoing acute 
procedures. Finally, wherever possible, we would align TEAM quality 
measures with those used in ongoing models and programs to minimize 
participant burden. Our goal is to focus on improving beneficiary 
quality of care and capture meaningful quality data for use in the TEAM 
pay-for-performance methodologies.
    We are starting with a parsimonious set of quality measures that 
are being tied to payment and plan to incorporate more PRO-PMs in the 
future of the model. We recognize that there are some gaps in the 
proposed measures with respect to post-acute care settings and limited 
measures for episode-specific PROs. We considered including generic PRO 
data to support the collection and reporting of PROs, similar to the 
CJR model requiring voluntary submission of the Veterans RAND 12 Item 
Health Survey (VR-12) or Patient-Reported Outcomes Measurement 
Information System (PROMIS) Global-10 generic PRO survey. However, we 
recognize PRO collection and reporting may increase participant and 
patient burden and we do not want to impose this on TEAM participants 
for generic PRO data since it may be less clinically meaningful to the 
episodes that would be tested in TEAM. We will continue to assess the 
evolving inventory of measures and refine measures based on public 
comments, changes to payment methodologies, recommendations from TEAM 
participants and their collaborators, and new CMS episode measure 
development activities.
    We are proposing that the proposed TEAM's quality measures would be 
scored according to the methodology described in section X.A.3.d.(5)(e) 
of the preamble of this proposed rule to calculate the CQS. The CQS 
would be combined with the TEAM participants' reconciliation amount, as 
specified in section X.A.3.d.(5)(g) of the preamble of this proposed 
rule, during the reconciliation process to tie quality performance to 
payment.
    While we believe the proposed measure set would provide CMS with 
sufficient measures to monitor quality, and to calculate scoring on 
quality performance, we may adjust the measure set in future 
performance years by adding new measures or removing measures, if we 
determine those adjustments to be appropriate at the time. We note that 
a selection of these measures may be used for evaluation purposes as 
well. Prior to adding or removing measures for monitoring quality and 
calculating scores for quality performance, we would use notice and 
comment rulemaking.
(2) Selection of Proposed Quality Measures
    As proposed, TEAM is designed to provide financial incentives for 
improving coordination of care for beneficiaries. We expect care 
redesign activities to reduce post-surgical complications and hospital 
readmissions and enhance patient experience and outcome. Furthermore, 
we acknowledge that achieving savings while continuing to ensure high-
quality

[[Page 36421]]

care for Medicare FFS beneficiaries will require close collaboration 
among hospitals, physicians, PAC providers, and other providers. In 
order to encourage greater care collaboration among the providers of 
TEAM beneficiaries, we propose three measures as described in section 
X.A.3.c.(3) of the preamble of this proposed rule. These measures would 
be used to determine hospital quality of care and eligibility for a 
TEAM reconciliation payment.
    The measures we are proposing are--
     For all TEAM episodes: Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356);
     For all TEAM episodes: CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) (CMIT ID #135); and
     For LEJR episodes: Hospital-Level Total Hip and/or Total 
Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618).
    Beginning in Performance Year 1 and continuing for the duration of 
the model, we propose to adjust reconciliation amounts by the TEAM 
participants' CQS based on their performance of quality measures 
previously listed.
    We are initially proposing these three quality measures due to 
their: (1) Alignment with the goals of TEAM; (2) hospitals' familiarity 
with the measures due to their use in other CMS hospital quality 
programs, including the Hospital IQR and HAC Reduction Programs; and 
(3) alignment to CMS priorities, including the CMS National Quality 
Strategy which has goals that support safety, outcomes, and engagement. 
We believe the three quality measures we propose to link to payment 
reflect these goals and accurately measure hospitals' level of 
achievement on such goals.
    We note that shared-decision making (SDM) is an important aspect of 
care around elective procedures, including elective procedures captured 
in episodes such as the LEJR episode and Spinal Fusion episode. Use of 
SDM prior to episode initiation can serve as an important tool to 
ensure appropriate care. SDM allows the clinician and patient to have 
informed discussion about treatment options, balancing the risks and 
expected outcomes with a patient's preferences and values, and can help 
contribute to ensuring appropriate use of procedures and minimization 
of low value care. CMS has taken steps to incorporate SDM in care 
pathways, such as requiring SDM interaction prior to ICD implantation 
for certain patients for national coverage determinations.\605\ 
However, implementing SDM in episode-based payment models such as TEAM 
poses challenges with respect to the timing of the patient/provider 
interaction and when an episode is initiated. While there are upstream 
opportunities for SDM in the case of elective surgical episodes, 
unplanned or non-elective episodes may be less conducive to SDM. 
Although we are not proposing a measure initially, we are seeking 
feedback on the opportunity for TEAM to capture quality data related to 
SDM between patients and providers, and avoidance of low value care and 
procedures. We invite public comment on whether such a measure concept 
or any existing measures would be appropriate for TEAM.
---------------------------------------------------------------------------

    \605\ https://www.cms.gov/medicare-coverage-database/view/ncacal-decision-memo.aspx?proposed=N&NCAId=288.
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    Lastly, we also recognize that there are certain measures on the 
2023 Measures Under Consideration (MUC) List 606 607 that 
may be more clinically meaningful and specific to the episodes in TEAM. 
These measures are as follows:
---------------------------------------------------------------------------

    \606\ Centers for Medicare & Medicaid Services. (December 1, 
2023). 2023 Measures Under Consideration (MUC) List. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List.xlsx.
    \607\ Centers for Medicare & Medicaid Services. (December 2023). 
Overview of the List of Measures Under Consideration. Available at: 
https://mmshub.cms.gov/sites/default/files/2023-MUC-List-Overview.pdf.
---------------------------------------------------------------------------

     Hospital Harm--Falls with Injury (MUC2023-048).
     Thirty-day Risk-Standardized Death Rate among Surgical 
Inpatients with Complications (Failure-to-Rescue) (MUC2023-049).
     Hospital Harm--Postoperative Respiratory Failure (MUC2023-
050).
    These three outcome measures focus on improving quality and health 
outcomes across a beneficiary's care journey and allow for hospitals to 
better align and coordinate care across various programs and care 
settings. TEAM is seeking further comment on these three MUC measures, 
and potentially replacing the CMS PSI 90 measure beginning in 2027, 
TEAM's second performance year. This timeline will allow TEAM 
participants to have one year to gain experience with reporting the 
measures in the Hospital IQR program before their performance is tied 
to payment beginning in TEAM's second performance year. Further details 
on these MUC measures can be found in section X.A.3.c.(3)(d) of the 
preamble of this proposed rule.
(3) Proposed Quality Measures
(a) Hybrid Hospital-Wide All-Cause Readmission Measure With Claims and 
Electronic Health Record Data (CMIT ID #356)
    Hospital readmission, for any reason, is disruptive to patients and 
caregivers, costly to the healthcare system, and puts patients at 
additional risk of hospital-acquired infections and complications. 
Readmissions are also a major source of patient and family stress and 
may contribute substantially to loss of functional ability, 
particularly in older patients. Some readmissions are unavoidable and 
result from inevitable progression of disease or worsening of chronic 
conditions. However, readmissions may also result from poor quality of 
care or inadequate transitional care. Transitional care includes 
effective discharge planning, transfer of information at the time of 
discharge, patient assessment and education, and coordination of care 
and monitoring in the post-discharge period. Numerous studies have 
found an association between quality of inpatient or transitional care 
and early (typically 30-day) readmission rates for a wide range of 
conditions.\608\ In 2013, CMS contracted with Yale New Haven Services 
Corporation, Center for Outcomes Research and Evaluation (CORE) to 
demonstrate whether clinical data derived from electronic health 
records (EHRs) could be used to reengineer and enhance the Hospital-
Wide All-Cause Unplanned Readmission (HWR) measure.\609\ Under the 
contract with CMS, Yale CORE identified a set of core clinical data 
elements (CCDE) that are feasibly extracted from hospital EHRs and are 
related to patients' clinical status at the start of an inpatient 
encounter.
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    \608\ Frankl SE, Breeling JL, Goldman L. Preventability of 
emergent hospital readmission. American Journal of Medicine. Jun 
1991;90(6):667-674.
    \609\ https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology.
---------------------------------------------------------------------------

    We propose including the Hybrid Hospital-Wide Readmission (HWR) 
Measure with Claims and Electronic Health Record Data (CMIT ID #356) 
measure in TEAM, for all episode categories. Previously, within the CJR 
rule, CMS proposed using the Hospital-Level 30-day, All-Cause Risk-
Standardized Readmission Rate (RSRR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551) 
measure because we believed that this measure aligned with CMS 
priorities to improve the rate of LEJR complications and readmissions, 
while improving the

[[Page 36422]]

overall patient experience. As a result of stakeholder feedback voicing 
concerns over the requirements already set in place by the Hospital 
Readmissions Reduction Program for this measure, the Hospital-level 30-
day, all-cause RSRR following elective primary THA and/or TKA (NQF 
#1551) was not included in the CJR Model. Our rationale for including 
the Hybrid HWR measure within TEAM is because the increased use of EHRs 
by hospitals creates an opportunity to incorporate clinical data into 
outcome measures without the laborious process of extracting them from 
paper medical records. Although claims-based risk adjustment has been 
shown to be comparable to risk adjustment using clinical data when 
observing hospital-level performance, clinical providers continue to 
express preference for using patient-level clinical 
data.610 611 Additionally, we believe this version of HWR 
provides an opportunity to align the measure with clinical decision 
support systems that many providers utilize to alert care teams about 
patients at increased risk of poor outcomes, such as readmission, in 
real time during the inpatient stay. Further, utilizing the same 
variables to calculate hospital performance that are used to support 
clinical decision, we believe, would be clinically sensible and cost 
effective, as it may reduce the burden of EHR data mapping and 
extraction required for quality reporting.
---------------------------------------------------------------------------

    \610\ Keenan PS, Normand SL, Lin Z, Drye EE, Bhat KR, Ross JS, 
et al. An administrative claims measure suitable for profiling 
hospital performance on the basis of 30-day all-cause readmission 
rates among patients with heart failure. Circ Cardiovasc Qual 
Outcomes. 2008 Sep;1(1):29-37. PubMed PMID: 20031785. Epub 2008/09/
01. eng.
    \611\ Krumholz HM, Lin Z, Drye EE, Desai MM, Han LF, Rapp MT, et 
al. An administrative claims measure suitable for profiling hospital 
performance based on 30-day all-cause readmission rates among 
patients with acute myocardial infarction. Circ Cardiovasc Qual 
Outcomes. 2011 Mar;4(2):243-52. PubMed PMID: 21406673. PMCID: 
PMC3350811. Epub 2011/03/17. eng.
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    In addition, clinical data captured in electronic health records 
are recorded by clinicians who are interacting with the patient and who 
value the accuracy of the data to guide the care they provide. 
Therefore, many clinical data elements that are captured in real-time 
to support patient care are less susceptible to gaming, coding drift, 
and variations in billing practices compared with administrative data 
used for billing purposes. These reporting processes allow for more 
stable measurements over time. Finally, the measures that are included 
within HRRP do not capture some of the episodes that we are proposing 
for TEAM. The Hybrid HWR measure is one of the only existing 
readmission measures that captures readmission data for patients 
following procedures such as spine surgery. By using the Hybrid HWR 
measure, we are inclusive of the specified episodes and encourage 
broader efforts to reduce unnecessary returns to the hospital at 
participating hospitals within TEAM.
    For TEAM, we propose to use the measure specifications detailed 
here: https://ecqi.healthit.gov/sites/default/files/ecqm/measures/CMS529v4.html and https://qualitynet.cms.gov/inpatient/measures/hybrid/methodology. If we were to remove the measure, we would use notice and 
comment rulemaking. This measure would be a pay-for-performance measure 
beginning in Performance Year 1 and scored in accordance with our 
proposed methodology in section X.A.3.d.(5)(e) of the preamble of this 
proposed rule.
    We seek public comment on our proposal to include the Hybrid 
Hospital-Wide All-Cause Readmission Measure with Claims and Electronic 
Health Record Data measure in TEAM at Sec.  512.547(a)(1).
(b) CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT 
ID #135)
    The Agency for Healthcare Research and Quality (AHRQ) developed 
patient safety indicators for health providers to identify potential in 
hospital patient safety problems for targeted institution-level quality 
improvement efforts. These Patient Safety Indicators (PSIs) are 
comprised of 26 measures (including 18 provider-level indicators) that 
highlight safety-related adverse events occurring in hospitals 
following operations, procedures, and childbirth. AHRQ developed the 
PSIs after a comprehensive literature review, analysis of available ICD 
codes, review by clinical panels, implementation of risk adjustment, 
and empirical analyses. The CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) is used in the HAC Reduction Program to support 
CMS public reporting and pay-for-performance. The CMS PSI 90 measure is 
calibrated using the Medicare fee-for-service population and based on 
the AHRQ Patient Safety Indicators. The CMS PSI 90 measure summarizes 
patient safety across multiple indicators, monitors performance over 
time, and facilitates comparative reporting and quality improvement at 
the hospital level. The CMS PSI 90 composite measure intends to reflect 
the safety climate of a hospital by providing a marker of patient 
safety during the delivery of care. However, we are aware of the common 
stakeholder concerns surrounding the CMS PSI 90 measure, including the 
following: \612\
---------------------------------------------------------------------------

    \612\ Adverse Effects of the Medicare PSI 90 Hospital Penalty 
System on Revenue-Neutral Hospital-Acquired Conditions (Jun 2020).
---------------------------------------------------------------------------

     PSI 90 may be associated with adverse prioritization for 
preventing some conditions over others. Not all conditions are equal 
with respect to prevention guidelines.
    ++ Sepsis prevention may include use of prophylactic antibiotics.
    ++ Fall prevention requires assessment of fall risk and 
appropriately applied remediation methods.
     Pressure injury prevention consists of a time-consuming, 
complex series of unrelated tasks for nurses, consisting of daily skin 
checks and risk assessments, repositioning every 3 to 4 hours, and 
managing moisture and incontinence among other tasks.
     Simple clinical decision points can expose patients to 
many risks reflected in PSI 90; however, PSI 90 weighting system may 
influence risk because HACs are weighted in PSI 90 based on volume and 
harm.
     The PSI 90 composite score could create incentives to 
prioritize low hanging fruit (for example, procedures and treatments 
that are directly remunerated) over pressure injury prevention.
    We propose including the CMS PSI 90 measure in TEAM, for all 
episode categories, because it includes a broad array of safety events, 
many of which are relevant to patients in the episodes, are familiar to 
hospitals and have no additional burden. CMS would use the CMS PSI 90 
software to produce the CMS PSI 90 results. Since CMS is currently 
using the CMS PSI 90 measure in certain quality programs, including the 
Hospital-Acquired Condition Reduction Program, we do not anticipate 
additional administrative burden for TEAM participants.
    For TEAM, we propose to use the measure specifications detailed 
here: https://qualitynet.cms.gov/inpatient/measures/psi/resources. If 
we were to remove the measure, we would use notice and comment 
rulemaking. This measure would be a pay-for-performance measure 
beginning in performance year 1 and scored in accordance with our 
proposed methodology in section X.A.3.d.(5)(e) of the preamble of this 
proposed rule.
    We seek public comment on our proposal to include the CMS PSI 90 
measure in TEAM at proposed Sec.  512.547(a)(2) and are also seeking 
comment on other hospital level safety measures appropriate for these 
episodes

[[Page 36423]]

that are not already tied to payment in CMS programs. We also invite 
public comment on the ones that were on the 2023 MUC list and the 
possible approach to transition from CMS PSI 90 to the three measures 
beginning in TEAM's second performance year.
(c) Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) 
Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID 
#1618)
    As part of the CMS Innovation Center's Strategy Refresh, TEAM is 
working to align with the Center's Patient-Reported Outcome Measure 
Strategy. This strategy supports the CMS Innovation Center's Advancing 
Quality Initiative, which aims to support a more person-centered 
quality strategy in accountable care and specialty care models and 
demonstrations. The Patient-Reported Outcome Measure Strategy aims to 
increase the use of patient-reported measures in CMS Innovation Center 
models and demonstrations. PROs are reported by the patient and capture 
a person's perception of their own health through surveys and 
questionnaires. Broadly, patient-reported data includes PROs and ePROs, 
which is the electronic capture of this data; patient-reported outcome 
measures (PROMs), which reflect how the PRO data is reported (for 
example, a survey instrument); and patient-reported outcome-based 
performance measures (PRO-PMs), which are reliable and valid quality 
measures of aggregated PRO data reported through a PROM and potentially 
used for performance assessment.
    The CJR model includes voluntary reporting of PRO data. In order to 
meet the requirements for successful submission of PRO data, hospitals 
must submit the Veterans RAND 12 Item Health Survey (VR-12) or Patient-
Reported Outcomes Measurement Information System (PROMIS) Global-10 
generic PRO survey; and the (HOOS Jr.)/(KOOS Jr). or HOOS/KOOS 
subscales PRO survey for patients undergoing eligible elective primary 
THA/TKA procedures. The Center for Clinical Standards and Quality 
(CCSQ) was able to use the CJR THA/TKA PRO data collection to develop 
the THA/TKA PRO-PM as a part of the Hospital IQR Program, included in 
the FY 2023 IPPS/LTCH PPS Final rule (87 FR 48780).
    Elective THA/TKAs are most commonly performed for degenerative 
joint disease, or osteoarthritis, which is the most common joint 
disorder in the US, affecting more than 32.5 million, or 1 in every 7, 
US adults.613 614 This condition is one of the leading 
causes of disability among non-institutionalized adults; roughly 80% of 
patients with osteoarthritis have some limitation in 
mobility.615 616 Osteoarthritis also significantly burdens 
the health care system--in 2017, it was the second most expensive 
treated condition across all payers in US hospitals, and in 2018, it 
accounted for approximately 1,128,000 
hospitalizations.617 618 619 THAs and TKAs offer significant 
improvement in quality of life by decreasing pain and improving 
function in a majority of patients, without conferring a high risk of 
complications or death.620 621 Over 1 million hip and knee 
replacements are performed annually in the US, 60% of which are paid 
for by Medicare. This number is expected to double by 2030 with an 
estimated annual cost of $50 billion to Medicare.\622\
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    \613\ Zhang, Y. and J.M. Jordan, Epidemiology of osteoarthritis. 
Clin Geriatr Med, 2010. 26(3): p. 355-69.
    \614\ Centers for Disease Control and Prevention. Osteoarthritis 
(OA). 2020; Available from: https://www.cdc.gov/arthritis/basics/osteoarthritis.htm.
    \615\ Guccione, A.A., et al., The effects of specific medical 
conditions on the functional limitations of elders in the Framingham 
Study. Am J Public Health, 1994. 84(3): p. 351-8.
    \616\ Michaud, C.M., et al., The burden of disease and injury in 
the United States 1996. Popul Health Metr, 2006. 4: p. 11.
    \617\ Levit, K., et al. HCUP Facts and Figures, 2006: Statistics 
on Hospital-based Care in the United States. 2008; Available from: 
https://www.hcupus.ahrq.gov/reports/factsandfigures/facts_figures_2006.jsp.
    \618\ Healthcare Cost and Utilization Project. HCUP Fast Stats--
Most Common Diagnoses for Inpatient Stays 2021; Available from: 
https://www.hcupus.ahrq.gov/faststats/NationalDiagnosesServlet?year1=2018&characteristic1=0&included1=1&year2=2017&characteristic2=0&included2=1&expansionInfoState=hide&dataTablesState=hide&definitionsState=hide&exportState=hide.
    \619\ Liang, L., B. Moore, and A. Soni, National Inpatient 
Hospital Costs: The Most Expensive Conditions by Payer, 2017. HCUP 
Statistical Brief #261. 2020.
    \620\ Lopez, C.D., et al., Hospital and Surgeon Medicare 
Reimbursement Trends for Total Joint Arthroplasty. Arthroplast 
Today, 2020. 6(3): p. 437-444.
    \621\ Rissanen, P., et al., Health and quality of life before 
and after hip or knee arthroplasty. The Journal of Arthroplasty, 
1995. 10(2): p. 169-175.
    \622\ Lopez, C.D., et al., Hospital and Surgeon Medicare 
Reimbursement Trends for Total Joint Arthroplasty. Arthroplast 
Today, 2020. 6(3): p. 437-444.
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    In order to encourage greater use of patient-reported outcome data, 
we are proposing to require submission of THA/TKA PRO-PM. However, we 
recognize that this PRO-PM is only applicable to the LEJR episode 
category and seek comment on other PROs or PROMs that would be 
applicable to other episode categories tested and could be incorporated 
in future performance years of TEAM. Please note, that the addition of 
the use of generic PROs may be applicable across numerous episodes 
versus PROs that are more episode specific to given procedures. Also, 
we recognize that hospitals will be newly adapting to the Hospital IQR 
Program requirement for the THA/TKA PRO-PM but that infrastructure and 
process development should make the incorporation of future PRO-PMs 
less burdensome.
    For TEAM, we propose to use the measure specifications detailed 
here: https://qualitynet.cms.gov/files/631b6163642a6000163edbf0?filename=THA_TKA-PRO-PM_MeasMthdlgy.pdf. If we 
were to remove the measure, we would use notice and comment rulemaking. 
This measure would be a pay-for-performance measure beginning in 
performance year 1 and scored in accordance with our proposed 
methodology in section X.A.3.d.(5)(e) Of the preamble of this proposed 
rule.
    We seek public comment on our proposal to include the Hospital-
Level, Risk-Standardized Patient-Reported Outcomes Following Elective 
Primary THA/TKA measure in TEAM at Sec.  512.547(a)(3).
(d) Measures Under Consideration for Future Rulemaking
    We recognize there are other measures that may be more clinically 
relevant to the proposed TEAM clinical episode categories but are not 
yet being used in the Hospital IQR Program. Therefore, we are seeking 
comment on requiring submission of the Thirty-day Risk-Standardized 
Death Rate among Surgical Inpatients with Complications (Failure-to-
Rescue) (MUC2023-049) measure for use in all of our episode categories. 
This measure assesses the percentage of surgical inpatients who 
experienced a complication and then died within 30-days from the date 
of their first ``operating room'' procedure. Failure-to-rescue (FTR) is 
defined as the probability of death given a postoperative complication.
    We believe inclusion of the potential FTR measure in TEAM would 
allow hospitals to identify opportunities to improve their quality of 
care. Hospitals and health care providers benefit from knowing not only 
their institution[acute]s mortality rate, but also their 
institution[acute]s ability to rescue patients after an adverse 
occurrence. Using a failure-to-rescue measure is especially important 
if hospital resources needed for preventing complications are different 
from those needed for rescue. From a research and policy perspective,

[[Page 36424]]

knowing the failure-to-rescue rate in addition to the mortality rate 
would improve our understanding of mortality statistics. Since the 
death rate appears to be composed of two distinct rates, quality of 
care measurement may be improved if both mortality and FTR rates are 
reported instead of relying on the adjusted mortality rate alone. 
Failure to rescue measures have been repeatedly validated by their 
consistent association with nurse staffing, nursing skill mix, 
technological resources, rapid response systems, and other activities 
that improve early identification and prompt intervention when 
complications arise after surgery.
    We are also seeking comment on requiring submission of two hospital 
harm measures for potential use in TEAM; the Hospital Harm--Falls with 
Injury (MUC2023-048) and the Hospital Harm--Postoperative Respiratory 
Failure (MUC2023-050).
    We believe including the Hospital Harm--Falls with Injury (MUC2023-
048) would address the importance of patient safety in the acute care 
setting. We recognize that inpatient falls are among the most common 
incidents reported in hospitals and can increase length of stay and 
patient costs. Due to the potential for serious harm associated with 
patient falls, ``patient death or serious injury associated with a fall 
while being cared for in a health care setting'' is considered a 
Serious Reportable Event by the National Quality Forum (NQF).
    Falls (including unplanned or unintended descents to the floor) can 
result in patient injury ranging from minor abrasion or bruising to 
death as a result of injuries sustained from a fall. While major 
injuries (for example, fractures, closed head injuries, internal 
bleeding) (Mintz, 2022) have the biggest impact on patient outcomes, 
2008-2021 data findings from the 2022 Network of Patient Safety 
Databases (NPSD) demonstrated that 41.8% of falls resulted in moderate 
injuries such as skin tear, avulsion, hematoma, significant bruising, 
dislocations and lacerations requiring suturing. Moderate injury is, as 
defined by NDNQI, that resulted in suturing, application of steric-
strips or skin glue, splinting, or muscle/joint strain (Press Ganey, 
2020). NPSD findings also demonstrated that mild to moderate level of 
harm represent 24.2%, 0.4%--severe harm, and 0.1%--death (levels of 
harm definitions developed by WHO, 2009).
    By focusing on falls with major and moderate injuries, the goal of 
this hospital harm eCQM is to raise awareness of fall rates and, 
ultimately, to improve patient safety by preventing falls with injury 
in all hospital patients. The purpose of measuring the rate of falls 
with major and moderate injury events is to improve hospitals' 
practices for monitoring patients at high risk for falls with injury 
and, in so doing, to reduce the frequency of patient falls with 
injury.623 624 625 626
---------------------------------------------------------------------------

    \623\ Mintz, J., Duprey, M. S., Zullo, A. R., Lee, Y., Kiel, D. 
P., Daiello, L. A., Rodriguez, K. E., Venkatesh, A. K., & Berry, S. 
D. (2022). Identification of Fall-Related Injuries in Nursing Home 
Residents Using Administrative Claims Data. The journals of 
gerontology. Series A, Biological sciences and medical sciences, 
77(7), 1421-1429. https://doi.org/10.1093/gerona/glab274.
    \624\ Network of Patient Safety Databases Chartbook, 2022. 
Rockville, MD: Agency for Healthcare Research and Quality; September 
2022. AHRQ Pub. No. 22-0051.
    \625\ National Quality Forum. Serious Reportable Events. http://www.qualityforum.org/topics/sres/serious_reportable_events.aspx. 
Accessed July 24, 2019.
    \626\ WHO. (2009). Conceptual Framework for the International 
Classification for Patient Safety, Version 1.1. https://apps.who.int/iris/bitstream/handle/10665/70882/WHO_IER_PSP_2010.2_eng.pdf.
---------------------------------------------------------------------------

    Additionally, we are considering including the Hospital Harm--
Postoperative Respiratory Failure (MUC2023-050). This eCQM assesses the 
proportion of elective inpatient hospitalizations for patients aged 18 
years and older without an obstetrical condition who have a procedure 
resulting in postoperative respiratory failure (PRF). PRF is defined as 
unplanned endotracheal reintubation, prolonged inability to wean from 
mechanical ventilation, or inadequate oxygenation and/or ventilation, 
and is the most common serious postoperative pulmonary complication, 
with an incidence of up to 7.5% (the incidence of any postoperative 
pulmonary complication ranges from 10-40%).\627\ This measure addresses 
the prevalence of PRF and the incidence variance between hospitals. PRF 
is a serious complication that can increase the risk of morbidity and 
mortality, with in-hospital mortality resulting from PRF estimated at 
25% to 40%.\628\ Surgical procedures complicated by PRF have 3.74 times 
higher adjusted odds of death than those not complicated by respiratory 
failure, 1.47 times higher odds of 90-day readmission, and 1.86 times 
higher odds of an outpatient visit with one of 44 postoperative 
conditions (for example, bacterial infection, fluid and electrolyte 
disorder, abdominal hernia) within 90 days of hospital discharge.\629\ 
PRF is additionally associated with prolonged mechanical ventilation 
and the need for rehabilitation or skilled nursing facility placement 
upon discharge.\630\
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    \627\ Arozullah AM, Daley J, Henderson WG, Khuri SF. (2000). 
Multifactorial risk index for predicting postoperative respiratory 
failure in men after major noncardiac surgery. The National Veterans 
Administration Surgical Quality Improvement Program. Annals of 
surgery. 232(2):242-253.
    \628\ Arozullah AM, Daley J, Henderson WG, Khuri SF. (2000). 
Multifactorial risk index for predicting postoperative respiratory 
failure in men after major noncardiac surgery. The National Veterans 
Administration Surgical Quality Improvement Program. Annals of 
surgery. 232(2):242-253.
    \629\ Miller MR, Elixhauser A, Zhan C, Meyer GS. (2001). Patient 
Safety Indicators: using administrative data to identify potential 
patient safety concerns. Health services research. 36(6 Pt 2):110-
132.
    \630\ Thompson SL, Lisco SJ. Postoperative Respiratory Failure. 
Int Anesthesiol Clin. 2018;56(1):147-164.
---------------------------------------------------------------------------

    The incidence of PRF varies by hospital, with higher reported rates 
of PRF in nonteaching hospitals than teaching hospitals (Rahman, et 
al., 2013). Additionally, one study found that the odds of developing 
PRF increased by 6% for each level increase in hospital size from small 
to large.\631\ This finding suggests that there remains room for 
improvement in hospitals reporting higher rates of PRF.
---------------------------------------------------------------------------

    \631\ Rahman M, Neal D, Fargen KM, Hoh BL. Establishing standard 
performance measures for adult brain tumor patients: a Nationwide 
Inpatient Sample database study. Neuro Oncol. 2013;15(11):1580-1588.
---------------------------------------------------------------------------

    The most widely used current measures of PRF are based on either 
claims data (CMS Patient Safety Indicator PSI 11) or proprietary 
registry data (National Surgical Quality Improvement Program (NSQIP) of 
the American College of Surgeons). The proposed eCQM is closely modeled 
after the NSQIP measure of PRF, which has been widely adopted across 
American hospitals, and is intended to complement and eventually 
supplant CMS PSI 11. As mentioned of section X.A.3.c.(3)(b) of the 
preamble of this proposed rule, these three MUC measures would 
potentially take the place of the CMS PSI 90 measure beginning in 
TEAM's second performance year. These three MUC measures will be 
available for optional reporting in the Hospital IQR Program beginning 
in 2026.
(4) Form, Manner, and Timing of Quality Measures Reporting
    We believe it is important to be transparent and to outline the 
form, manner, and timing of quality measure data submission so that 
accurate measure results are provided to hospitals, and that timely and 
accurate calculation of measure results are consistently produced to 
determine reconciliation payment amounts and repayment amounts. We 
propose that data submission for the Hybrid Hospital-Wide Readmission 
Measure with Claims and Electronic Health

[[Page 36425]]

Record Data (CMIT ID #356), CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) (CMIT ID #135), Hospital-Level, and Risk-
Standardized Patient-Reported Outcomes Following Elective Primary Total 
Hip and/or Total Knee Arthroplasty (THA/TKA) (CMIT ID #1618) be 
accomplished through existing Hospital IQR Program processes. Since 
these measures are or will soon be reported to the Hospital IQR and HAC 
Reduction Programs, hospitals would not need to submit additional data 
for TEAM.
    For the Measures Under Consideration (MUC) measures, Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) (MUC2023-049), Hospital Harm--
Postoperative Respiratory Failure (MUC2023-050) and Hospital Harm--
Falls with Injury (MUC2023-048) measures, we would propose that data 
submission for these measures align with the Hospital IQR Program if 
they are finalized for that program as proposed. Similar to the 
proposed required measures noted previously, hospitals would not need 
to submit any additional data on these proposed measures if they are 
finalized and implemented for the Hospital IQR Program. We invite 
public comment on the proposal to collect quality measure data through 
the existing mechanisms of the Hospital IQR and HAC Reduction Program.
(5) Display of Quality Measures and Availability of Information for 
Public
    We believe that the display of measure results is an important way 
to educate the public on hospital performance and increase the 
transparency of the model. We propose to display quality measure 
results on the publicly available CMS website in a form and manner 
consistent with other publicly reported measures. CMS would share each 
TEAM participants' quality metrics with the hospital prior to display 
on the CMS website. The timeframe for when TEAM participants would 
receive data on our proposed measures align with the Care Compare 
schedule that can be found here: https://data.cms.gov/provider-data/topics/hospitals/measures-and-current-data-collection-periods. The 
Hybrid HWR and CMS PSI 90 measure results are posted annually in July. 
The THA/TKA PRO-PM is still in the voluntary reporting stage and the 
public reporting schedule for this measure will be reported on an 
annual basis. All measures under the statutory hospital quality 
programs have a 30-day preview period prior to results being posted on 
the Care Compare web page. TEAM participant measure scores will be 
delivered to TEAM participants confidentially. We propose to publicly 
report PY1 measure scores in 2027 and we would continue to publicly 
report scores every performance year with a one-year lag. TEAM has 
proposed 2027 as the first performance year for when scores will be 
publicly available due to the amount of lag time it takes for a few of 
our measures to fully process. For example, the Hybrid HWR measure 
which uses claims data and core clinical data elements from the EHR has 
about a year between from when the data is submitted and when that data 
is publicly posted. The applicable time periods for the measures during 
TEAM are summarized in the Table X.A.-05:
[GRAPHIC] [TIFF OMITTED] TP02MY24.281

    The proposed time periods for the Hybrid Hospital-Wide Readmission 
Measure with Claims and Electronic Health Record Data (CMIT ID #356), 
CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID 
#135) and Hospital-Level, Risk-Standardized Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty 
(THA/TKA) (CMIT ID #1618) are consistent with the Hospital IQR Program 
performance periods for the Hybrid HWR measure and THA/TKA PRO-PM and 
consistent with the HAC Reduction Program performance period for the 
CMS PSI 90 measure. We believe the public is familiar with the proposed 
measures, which have mostly been publicly reported in past releases of 
Care Compare as part of the Hospital IQR and HAC Reduction Programs. We 
are aware that the Hospital-Level, Risk-Standardized Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) PRO-PM is new to the Hospital IQR Program, 
although it has been used in the CJR model for several years, and are 
seeking comment on the use of this measure for TEAM. To minimize 
confusion and facilitate access to the data on the measures included in 
TEAM, we propose to post the data on each TEAM participant's 
performance on each of the three proposed quality measures in a 
downloadable format in a section of the website specific to TEAM, 
similar to

[[Page 36426]]

what is done for the Hospital Readmissions Reduction Program and the 
HAC Reduction Program. We invite public comments on these proposals to 
post data for the required measures on the TEAM specific website.
d. Pricing and Payment Methodology
(1) Background
    In determining the best methodology for setting target prices for 
episodes, we can draw on lessons learned from multiple iterations of 
both the CJR and BPCI Advanced target price methodologies. As we 
developed the methodologies for CJR and BPCI Advanced, and refined them 
over time in response to observed changes in nationwide spending trends 
and payment system changes (such as the removal of TKA and THA from the 
IPO list, and the reclassification of certain MS-DRGs), each new 
iteration drew from lessons learned in the previous iteration. For 
purposes of TEAM, we aim to find the balance between simplicity and 
predictive accuracy. CMS aims to choose a payment methodology that will 
be as transparent and understandable as possible for participants of 
varying levels of statistical background and knowledge; proposing 
calculations that are relatively straightforward and easy to explain 
would further this goal. On the other hand, the more elements we 
consider and more sophisticated statistical modeling we use, the better 
able we are to accurately predict performance period spending. Accurate 
performance period spending predictions increase the likelihood of 
achieving our model goals of setting target prices that provide a 
reasonable opportunity to achieve savings for Medicare but are not too 
onerous for participants.
(i) Previous Episode-Based Payment Methodologies
(A) CJR
    When designing the CJR payment methodology, one goal was to be as 
simple and straightforward as possible, given that it was a mandatory 
model covering only one episode category. The initial CJR payment 
methodology included a 3-year baseline period that rolled forward every 
2 years. Target prices used a blend of participant-specific and 
regional spending, which shifted towards 100% regional spending for PY 
4-5. Downside risk was waived for the first performance year of the 
model to allow participants time to enact practice changes that would 
help them succeed in the model. Beginning in PY 2, participants were 
subject to both upside and downside risk, within stop-loss and stop-
gain limits that increased to a maximum of 20% by PY 3 for most 
hospitals. The stop-loss and stop-gain limits were designed to ensure 
that participants would neither be subject to an unmanageable level of 
risk, nor be incentivized to stint on care to achieve savings. The 
initial CJR payment methodology is described in detail in the final 
rule titled ``Medicare Program; Comprehensive Care for Joint 
Replacement Payment Model for Acute Care Hospitals Furnishing Lower 
Extremity Joint Replacement Service'' that appeared in the November 24, 
2015 Federal Register (80 FR 73274) (referred to in this proposed rule 
as the ``2015 CJR Final Rule''), starting at 80 FR 73324.
    The initial CJR payment methodology was modified in the final rule 
titled ``Medicare Program: Comprehensive Care for Joint Replacement 
Model Three-Year Extension and Changes to Episode Definition and 
Pricing; Medicare and Medicaid Programs; Policies and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency'' that 
appeared in the May 3, 2021 Federal Register (86 FR 23496) (referred to 
in this proposed rule as the ``2021 CJR 3-Year Extension Final Rule''). 
The CJR model's 3-year extension and modification was due to a number 
of factors, as described in detail starting at 86 FR 23508. A principal 
reason for the modifications to the payment methodology was the fact 
that the initial CJR target price methodology did not account for 
changing downward trends in spending on LEJR episodes, both among CJR 
participant hospitals and non-participant hospitals. The resulting 
reconciliation payments under the initial methodology rewarded 
participants for spending reductions that likely would have happened 
regardless of the model, which led to concerns that target prices could 
be too high for Medicare to achieve savings in the model over time.
    The changes to the model increased the complexity in some ways (for 
example, the addition of risk adjustment multipliers) while simplifying 
it in other ways (for example, the removal of update factors) in order 
to calculate target prices that would more accurately reflect 
performance period spending. A retrospective Market Trend Factor was 
applied to target prices at reconciliation to capture changes in 
spending patterns that occurred nationally during the performance 
period. This market trend factor, in combination with the change from a 
3-year baseline to a 1 year baseline, negated the need for setting-
specific update factors that we had used previously to set purely 
prospective target prices. At the same time, our added risk adjustment 
increased target prices for episodes with more complex patients, to 
better reflect the higher costs associated with those patients. The 
changes to the CJR payment methodology are described in detail in the 
2021 CJR 3-Year Extension Final Rule starting at 86 FR 23508.
(B) BPCI Advanced
    By contrast, the BPCI Advanced methodology is more complex. The 
target price calculation method was designed to support participation 
from a broad range of providers by accounting for variation in episode 
payments and factors that contribute to differences that are beyond 
providers' control. In Model Years 1-3, BPCI Advanced target prices 
were constructed using a 4-year rolling baseline period and were based 
on hospital historical payments, patient risk adjustment, a prospective 
peer group trend factor, and 3% CMS discount. PGP target prices 
adjusted hospital target prices for PGP-specific patient case mix and 
differences between PGP and hospital historical payments. Risk 
adjustment is performed using a 2-stage model, with Stage 1 consisting 
of a compound log-normal model with episode cost as the dependent 
variable, and Stage 2 consisting of an Ordinary Least Squares 
regression with case mix adjusted spending as the dependent variable.
    The use of a prospective trend in Model Years 1-3 resulted in 
prices not accurately predicting spending that arose from 
unanticipated, systematic factors. For example, changes in coding 
guidelines can lead to cost changes. In fiscal year 2017, there were 
changes to the guidelines for coding the congestive heart failure (CHF) 
and simple pneumonia episodes, two of the highest-volume episodes in 
the BPCI Advanced model. The change resulted in an increase in the 
share of patients classified as having more serious CHF and simple 
pneumonia diagnoses in the performance period than in the baseline 
period. Because target prices are based on the seriousness of a 
patient's diagnosis, target prices increased leading to larger 
reconciliation payments to participants and losses to Medicare.
    The losses to Medicare spurred changes to the BPCI Advanced pricing 
methodology. Similar to CJR, the prospective trend factor used in Model 
Years 1-3 was replaced in Model Year 4 with a retrospective trend 
factor adjustment at reconciliation, although this retrospective trend 
adjustment was

[[Page 36427]]

subject to guardrails. Specifically, the trend at reconciliation could 
not exceed +/-10% of the prospective trend for Model Years 4 and 5, and 
in response to participant feedback, the trend adjustment was limited 
to +/-5% beginning in Model Year 6. The CMS discount was also reduced 
in Model Year 6 from 3% to 2% for medical episodes. Pricing methodology 
changes since Model Year 4 were intended to improve pricing accuracy 
and reflect actual spending trends during the performance period. 
Future evaluation reports will assess the effectiveness of these 
changes. Additional information on the BPCI Advanced pricing 
methodology may be found on the BPCI Advanced participant resources 
page.\632\
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    \632\ https://www.cms.gov/priorities/innovation/innovation-models/bpci-advanced/participant-resources.
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    In TEAM, our goal is a target price methodology that blends the 
most successful elements of each of these model iterations, striking a 
balance of predictability and accuracy.
(2) Overview of TEAM Pricing and Payment Methodology
    While we describe each element of the pricing and payment 
methodology in detail in the following sections, here we present an 
overview of the proposed TEAM pricing and payment methodology. At 
proposed Sec.  512.540, we are proposing to use3 years of baseline 
data, trended forward to the performance year, to calculate target 
prices at the level of MS-DRG/HCPCS episode type and region. We propose 
to group episodes from the baseline period by applicable MS-DRG for 
episode types that include only inpatient hospitalizations, and by 
applicable MS-DRG or HCPCS code for episode types that include both 
inpatient hospitalizations and outpatient procedures. For episodes 
types that include both inpatient hospitalizations (identified by MS-
DRGs) and outpatient procedures (identified by HCPCS codes), HCPCS 
codes are combined for purposes of target pricing with the applicable 
MS-DRG representing an inpatient hospitalization without Major 
Complications and Comorbidities, as we expect those beneficiaries to 
have similar clinical characteristics and costs. After capping high-
cost outlier episodes at the 99th percentile for each of the 24 
proposed MS-DRG/HCPCS episode types and 9 regions (which we propose at 
proposed Sec.  512.505 to define as the 9 U.S. census divisions, as 
defined by the U.S. Census Bureau), we propose to use average 
standardized spending for each MS-DRG/HCPCS episode type in each region 
as the benchmark price for that MS-DRG/HCPCS episode type for that 
specific region, resulting in 216 MS-DRG/HCPCS episode type/region-
level benchmark prices. We propose to apply a prospective trend factor 
and a discount factor to benchmark prices (as well as a prospective 
normalization factor, described later in this section) to calculate 
preliminary target prices. The prospective trend factor would represent 
expected changes in overall spending patterns between the most recent 
calendar year of the baseline period and the performance year, based on 
observed changes in overall spending patterns between the earliest 
calendar year of the baseline period and the most recent year of the 
baseline period. The discount factor would represent Medicare's portion 
of potential savings from the episode.
    At proposed Sec.  512.545, we propose to risk adjust episode-level 
target prices at reconciliation by the following beneficiary-level 
variables: age group, Hierarchical Condition Category count (a measure 
of clinical complexity), and social risk (the components of which are 
described in more detail in sections X.A.3.d.(4) and X.A.3.f of the 
preamble of this proposed rule). We propose to calculate risk 
adjustment multipliers prospectively at the MS-DRG/HCPCS episode type 
level based on baseline data and hold those multipliers fixed for the 
performance year. To ensure that risk adjustment does not inflate 
target prices overall, we further propose to calculate a prospective 
normalization factor based on the data used to calculate the risk 
adjustment multipliers. We propose to apply the prospective 
normalization factor, in addition to the prospective trend factor and 
discount factor described previously, to the benchmark price to 
calculate the preliminary target price for each MS-DRG/HCPCS episode 
type and region. We propose that the prospective normalization factor 
would be subject to a limited adjustment at reconciliation based on 
TEAM participants' observed performance period case mix, such that the 
final normalization factor would not exceed +/-5% of the prospective 
normalization factor.
(3) Target Prices
(a) Baseline Period for Benchmarking
    At proposed Sec.  512.540(b)(2) we propose to use 3 years of 
baseline episode spending to calculate benchmark prices, which we would 
further adjust as described in section X.A.3.d.(3)(i) of the preamble 
of this proposed rule to create preliminary target prices. We propose 
to roll this 3-year baseline period forward every year. Specifically, 
we propose that--
     To determine baseline episode spending for PY1, CMS would 
use baseline episode spending for episodes that started between January 
1, 2022 and December 31, 2024;
     To determine baseline episode spending for PY2, CMS would 
use baseline episode spending for episodes that started between January 
1, 2023 and December 31, 2025;
     To determine baseline episode spending for PY 3, CMS would 
use baseline episode spending for episodes that started between January 
1, 2024 and December 31, 2026;
     To determine baseline episode spending for PY 4, CMS would 
use baseline episode spending for episodes that started between January 
1, 2025 and December 31, 2027;
     To determine baseline episode spending for P Y 5, CMS 
would use baseline episode spending for episodes that started between 
January 1, 2026 and December 31, 2028.
    The use of 3 years of baseline episode spending is consistent with 
our initial CJR methodology, as described in the 2015 CJR Final Rule at 
80 FR 73340. In that case, the 3-year baseline period moved forward 
every 2 years. However, in combination with the lack of a retrospective 
trend factor, the use of a 3-year baseline period that only moved 
forward every 2 years meant that our methodology was not able to 
capture the degree to which spending on LEJR episodes was decreasing 
nationwide, both among CJR and non-CJR hospitals. As a result, we 
believe our target prices partially reflected spending decreases that 
were not due specifically to participation in CJR.
    Subsequently, in the 2021 CJR 3-Year Extension Final Rule, we 
finalized a policy to use a 1-year baseline period that would move 
forward every year (with the exception of skipping data from 2020 due 
to COVID-19 irregularities) (86 FR 23514). In combination with a 
retrospective market trend factor, using 1 year of baseline episode 
spending updated every year meant that our target prices would not be 
inflated as they had been under the initial CJR methodology. BPCI 
Advanced employs a strategy that blends elements of both CJR 
approaches, with a longer baseline period (4 years) similar to the 
initial CJR methodology, but shifting forward every year, as we do in 
the CJR extension.
    Participants in episode-based payment models have expressed 
concerns about a concept known as the ``ratchet effect'' when choosing 
the baseline period from which to calculate

[[Page 36428]]

target prices. That is, participants do not want to be penalized for 
achieving lower spending by having lower target prices in subsequent 
years. The use of fewer years of the most recent baseline episode 
spending, as well as more frequent rebasing, will generally decrease 
target prices more quickly year over year if overall episode spending 
is decreasing, as opposed to a longer, fixed baseline. However, we need 
to balance this concern against the likelihood of having inaccurate 
target prices if we use older baseline episode spending or rebase less 
frequently.
    One way that we propose to mitigate the ratchet effect is that we 
propose to use a 3-year baseline period and rebase annually. We believe 
this approach would achieve a balance between having target prices 
based on sufficiently up-to-date spending patterns but not requiring 
participants to compete against only the most recent spending patterns.
    We propose to adjust baseline episode spending to trend all episode 
spending to the most recent year of the baseline period. The adjustment 
would reflect the impact of inflation and any changes in episode 
spending due to evolving patterns of care, Medicare payment policies, 
payment system updates, and other factors during the baseline period. 
We propose to define a baseline year as any of the three CYs during a 
given baseline period. For example, baseline year 1 for PY 1 will be CY 
2022, baseline year 2 will be CY 2023, and baseline year 3 will be CY 
2024. We propose to calculate the adjustment factors for baseline years 
1 and 2 by dividing average episode spending for baseline year 3 
episodes by average episode spending for episodes from baseline years 1 
and 2, respectively. We would then apply the applicable adjustment 
factors to the episode spending of each episode in baseline years 1 and 
2. This adjustment would bring all baseline episode spending forward to 
the most recent baseline year, so that baseline year 1 and 2 spending 
would be expressed in baseline year 3 dollars. This method would be 
consistent with how we calculated the baseline trend factor for CJR in 
the performance years that used the 3-year baseline period, as 
described in the 2015 CJR Final Rule (80 FR 73342). We propose to 
calculate these baseline trend factor adjustments at the MS-DRG/HCPCS 
episode type and region level.
    In recognition of the fact that baseline episode spending from more 
recent years are likely to be a better predictor of performance year 
spending, we propose to weight recent baseline episode spending more 
heavily than episode spending from earlier baseline years. 
Specifically, we propose to weight episode spending from baseline year 
1 at 17%, baseline year 2 at 33%, and baseline year 3 at 50%. This 
method of weighting would mean that the most recent episode spending 
patterns, expected to be the most accurate predictor of performance 
year spending, would contribute most strongly to the benchmark price at 
50%. The remaining 50% would be divided into thirds, with baseline year 
2 contributing approximately \2/3\, while baseline year 1, which is 
likely to be the least accurate predictor of performance year spending, 
would contribute \1/3\.
    We seek comment on our proposal at proposed Sec.  512.540(b)(2-3) 
to use 3 years of baseline episode spending, rolled forward for each 
performance year, with more recent baseline years weighted more 
heavily, to calculate TEAM target prices.
(b) Regional Target Prices
    We are proposing to provide to TEAM participants target prices for 
each proposed MS-DRG/HCPCS episode type and region based on 100% 
regional data for all TEAM participants prior to each PY. This approach 
would be consistent with PY 4-8 of CJR. While CJR target prices used a 
blend of \2/3\ hospital-specific data and \1/3\ regional data for PY 1-
2, and \1/3\ hospital-specific data and \2/3\ regional data for PY 3, 
we stated our reasons in the 2015 CJR Final Rule for moving towards 
fully regional target pricing as participants gained more experience in 
the model (80 FR73347). Target prices based on hospital-specific data 
would require a TEAM participant to compete against its own previous 
performance, such that improvement over previous performance would 
result in a reconciliation payment. Conversely, target prices based on 
regional data would require a TEAM participant to compete against its 
peers in that region, such that only a specific level of achievement, 
as opposed to improvement alone, would result in a reconciliation 
payment. For TEAM participants that are historically inefficient 
compared to their peers, hospital-specific target prices would be 
higher than regional target prices because hospital-specific baseline 
episode spending would be greater than average baseline episode 
spending for the region. For TEAM participants that are historically 
efficient compared to their peers, hospital-specific target prices 
would be lower than regional target prices because hospital-specific 
baseline episode spending would be lower than average baseline episode 
spending for the region. We noted in the 2015 CJR Final Rule that if we 
used 100% hospital-specific pricing in CJR, historically efficient 
hospitals could have fewer opportunities for achieving additional 
efficiencies under the model and would not be rewarded for maintaining 
high quality and efficiency, whereas less efficient hospitals would be 
rewarded for improvement even if they did not reach the same level of 
high quality and efficiency as the more historically efficient 
hospitals. However, as described in section X.A.3.f of the preamble of 
this proposed rule, health equity has been a priority in the proposed 
design of TEAM. We are concerned by literature stating that safety net 
hospitals in CJR were disproportionately likely to owe a repayment once 
we moved to 100% regional pricing.633 634 We note that these 
findings reflect the original CJR payment methodology, which did not 
include risk adjustment at the beneficiary level. For PY 6-8, the 
modified CJR payment methodology incorporates beneficiary level risk 
adjustment, including an adjustment for dual income eligibility. 
Additionally, although we provided lower stop-loss limits for rural and 
low-volume hospitals, we did not identify or provide protective stop-
loss limits for safety net hospitals.
---------------------------------------------------------------------------

    \633\ Carey, K., & Lin, M-Y. (2022). Safety-net hospital 
performance under Comprehensive Care for Joint Replacement. Health 
Services Research, 2022(1-6). https://doi:10.1111/1475-6773.14042.
    \634\ Shashikumar, S.A., Ryan, A.M., & Joynt Maddox, K.E. 
(2022). Equity implications of hospital penalties during 4 years of 
the Comprehensive Care for Joint Replacement Model, 2016 to 1019. 
JAMA Health Forum, 3(12). https://doi.org/10.1001/jamahealthforum.2022.4455.
---------------------------------------------------------------------------

    Therefore, in addition to lower stop-loss limits for Track 1 and 
Track 2 TEAM participants as compared to Track 3 TEAM participants, and 
the incorporation of additional measures of social need in our 
beneficiary-level risk adjustment, we considered an alternative target 
price proposal to provide Track 1 and Track 2 TEAM participants with 
100% hospital-specific, rather than regional, target prices. However, 
given our proposal to calculate target prices at the MS-DRG/HCPCS 
episode type level, we are concerned that many Track 1 or Track 2 TEAM 
participants would not meet the low volume threshold of baseline 
episodes to calculate reliable target prices for many of the MS-DRG/
HCPCS episode types included in TEAM. Additionally, there may be some 
hospitals that serve a high proportion of underserved populations, yet 
have already achieved high levels of quality and efficiency, such that 
a 100%

[[Page 36429]]

hospital-specific target price would be disadvantageous.
    We also considered blending hospital-specific pricing with regional 
pricing as we did in the first 3 years of CJR. For instance, we 
considered using a blend of 50% hospital-specific data and 50% regional 
data to calculate target prices for Track 1 and Track 2 participants. 
We further considered using a different blend for Track 1 and Track 2 
participants vs. Track 3 participants. For example, we considered using 
a blend of \2/3\ hospital-specific data and \1/3\ regional data for 
Track 1 and Track 2 participants, and a blend of \1/3\ hospital-
specific data and \2/3\ regional data for Track 3 hospitals. However, 
blending hospital-specific pricing with regional pricing could be 
subject to the same concerns regarding low volume or disadvantaging 
efficient hospitals as 100% hospital-specific pricing, though to a 
lesser degree.
    We also considered, but are not proposing, calculating target 
prices at the region/episode category level as compared to our proposed 
region/MS-DRG/HCPCS level. Calculating target prices at the region/
episode category would help to mitigate some concerns with certain MS-
DRG/HCPCS episode types having a low volume of episodes in a given 
region. However, to ensure target prices are sufficiently risk-adjusted 
to capture spending differences between the different MS-DRG/HCPCS 
within a given episode category, we considered including MS-DRG/HCPCS 
risk adjusters in TEAM's risk adjustment methodology if we calculated 
target prices at the region/episode category level. We seek comment on 
calculating target prices at the region/episode category level.
    We seek comment on our proposal at proposed Sec.  512.540(b)(1) to 
provide regional target prices to all TEAM participants for each PY 
during the model performance period. We also seek comment on other 
potential ways to set target prices for Track 1 or Track 2 TEAM 
participants, including adjustments to regional target prices for Track 
1 or Track 2 TEAM participants, that would decrease the likelihood of 
safety net hospitals being disproportionately penalized by regional 
target prices.
(c) Services That Extend Beyond an Episode
    As we are proposing a fixed 30-day post discharge episode length as 
discussed in section X.A.3.b.(5)(d) of the preamble of this proposed 
rule, we recognize that there may be some instances where a service 
included in the episode begins during the episode but concludes after 
the end of the episode and for which Medicare makes a single payment 
under an existing payment system. An example would be a beneficiary in 
an episode who is admitted to a SNF for 15 days, beginning on Day 26 
post-discharge from the TEAM anchor hospitalization or anchor 
procedure. The first 5 days of the SNF admission would fall within the 
episode, while the subsequent 10 days would fall outside of the 
episode.
    We propose that, to the extent that a Medicare payment for included 
episode services spans a period of care that extends beyond the 
episode, these payments would be prorated so that only the portion 
attributable to care during the episode is attributed to the episode 
payment when calculating actual Medicare payment for the episode. For 
non-IPPS inpatient hospital (for example, CAH) and inpatient PAC (for 
example, SNF, IRF, LTCH, IPF) services, we propose to prorate payments 
based on the percentage of actual length of stay (in days) that falls 
within the episode window. For HHA services that extend beyond the 
episode, we propose that the payment proration be based on the 
percentage of days, starting with the first billable service date 
(``start of care date'') and through and including the last billable 
service date, that fall within the episode. This proposed policy would 
ensure that TEAM participants are not held responsible for the cost of 
services that did not overlap with the episode period.
    For IPPS services that extend beyond the episode (for example, 
readmissions included in the episode definition), we propose to 
separately prorate the IPPS claim amount from episode target price and 
actual episode payment calculations, called the normal MS-DRG payment 
amount for purposes of this proposed rule. The normal MS-DRG payment 
amount would be pro-rated based on the geometric mean length of stay, 
comparable to the calculation under the IPPS PAC transfer policy at 
Sec.  412.4(f) and as published on an annual basis in Table 5 of the 
IPPS/LTCH PPS final rules. Consistent with the IPPS PAC transfer 
policy, the first day for a subset of MS-DRGs (indicated in Table 5 of 
the IPPS/LTCH PPS final rules) would be doubly weighted to count as 2 
days to account for likely higher hospital costs incurred at the 
beginning of an admission. If the actual length of stay that occurred 
during the episode is equal to or greater than the MS-DRG geometric 
mean, the normal MS-DRG payment would be fully allocated to the 
episode. If the actual length of stay that occurred during the episode 
is less than the geometric mean, the normal MS-DRG payment amount would 
be allocated to the episode based on the number of inpatient days that 
fall within the episode. If the full amount is not allocated to the 
episode, any remainder amount would be allocated to the 30-day post-
episode payment calculation discussed in section X.A.3.(d)(5) of the 
preamble of this proposed rule. The proposed approach for prorating the 
normal MS-DRG payment amount is consistent with the IPPS transfer per 
diem methodology.
    This methodology would be consistent with CJR, and is described as 
applied to CJR in the 2015 CJR Final Rule (80 FR 73333). We seek 
comment on our proposed methodology at proposed Sec.  512.555 for 
prorating services that extend beyond the episode.
(d) Episodes That Begin in One Performance Year and End in the 
Subsequent Performance Year
    Given that we are proposing episodes with a 30-day post discharge 
period, we recognize that some episodes will begin during one 
performance year and end during the following performance year. We 
propose that all episodes would receive the target price associated 
with the date of discharge from the anchor hospitalization or the 
anchor procedure, as applicable, regardless of the episode end date, 
which determines the performance year in which the episode would be 
reconciled. We note that the assignment of target prices based on the 
date of discharge from the anchor hospitalization or the anchor 
procedure is different from CJR, where the target price was assigned 
based on the episode start date rather than the discharge date, but it 
is consistent with BPCI Advanced. As noted in section X.A.3.d.(5)(a) of 
the preamble of this proposed rule, annual reconciliation is based on 
episodes that end during a PY, so if an episode extends past the end of 
a PY, that episode would factor into the next PY's reconciliation, when 
the episode ends, which is consistent with both CJR and BPCI Advanced. 
Accordingly, if an episode were to end after the final performance year 
of the model, we propose that it would not be reconciled. We seek 
comment on our proposal at proposed Sec.  512.540(a)(3) for applying 
target prices to an episode that begins in one performance year and 
ends in the subsequent performance year.
(e) High-Cost Outlier Cap
    Given the broad proposed episode definition and 30-day proposed 
post-discharge period, we want to ensure that hospitals have some 
protection from the downside risk associated with especially high 
payment episodes,

[[Page 36430]]

where the clinical scenarios for these cases each year may differ 
significantly and unpredictably. As we stated in the 2015 CJR Final 
Rule (80 FR 73335), we do not believe that the opportunity for a 
hospital's systematic care redesign of particular surgical episodes has 
the significant potential to impact the clinical course of these 
extremely disparate high payment cases. In the 2015 CJR Final Rule (80 
FR 73335) we finalized a policy to limit the hospital's responsibility 
for high episode payment cases by utilizing a high price payment 
ceiling at two standard deviations above the mean episode payment 
amount in calculating the target price and in comparing actual episode 
payments during the performance year to the target prices. This policy 
was designed to prevent participant hospitals from being held 
responsible for catastrophic episode spending amounts that they could 
not reasonably have been expected to prevent. The policy, and the 
reasoning behind it, is described in detail at (80 FR 73335).
    However, as we described in 86 FR 23518, based on data from the 
first few years of the CJR model, we observed that the original 2 
standard deviation methodology was insufficient to identify and cap 
high episode spending, as more episodes than expected exceeded the 
spending cap. We describe in detail our reasoning for finalizing a 
change to the high episode spending cap in the 2021 CJR 3-Year 
Extension Final Rule (86 FR 23518). We finalized a change to the 
calculation of the high episode spending cap to derive the amount by 
setting the high episode spending cap at the 99th percentile of 
historical costs for each MS-DRG for each region. The resulting 
methodology was similar to the BPCI Advanced methodology for capping 
high-cost episode spending at the 99th percentile for each MS-DRG.
    We propose a similar high-cost outlier policy for TEAM. We propose 
to cap both baseline episode spending and performance year episode 
spending at the 99th percentile of spending at the MS-DRG/HCPCS episode 
type and region level, referred to as the high-cost outlier cap. We 
propose to determine the 99th percentile of spending at the MS-DRG/
HCPCS episode type and region level during the applicable time period, 
and then set spending amounts that exceed the high-cost outlier cap to 
the amount of the high-cost outlier cap. For instance, if the high-cost 
outlier cap was set at $30,000, an episode that had actual episode 
spending of $45,000 would have its spending amount, for purposes of the 
model, reduced by $15,000 when the cap was applied and therefore, the 
spending for that episode would be held at $30,000. We propose to use 
capped episode spending when calculating benchmark prices in order to 
ensure that high-cost outlier episodes do not artificially inflate the 
benchmark. When calculating performance year episode spending at 
reconciliation, we propose to use capped episode spending so that a 
TEAM participant would not be held responsible for catastrophic episode 
spending amounts that they could not reasonably have been expected to 
prevent. We seek comment on our proposal at proposed Sec.  
512.540(b)(4) for calculating and applying the high-cost outlier cap.
(f) Trending Prices
    Target prices are derived from a prediction based on previous 
Medicare spending patterns, but it is not possible to perfectly predict 
how Medicare spending patterns may change over the course of the 
performance year. In the original BPCI model, prospective target prices 
were not provided to participants, so the trend factor was calculated 
retrospectively based on the observed spending during the performance 
period. Quarterly reconciliations in BPCI meant that participants could 
gain a sense of how their target prices tended to change over time and 
get relatively frequent feedback on their performance in the model. 
However, BPCI participants did not like the uncertainty of not knowing 
their target prices in advance.
    In the initial CJR methodology and Model Years 1-3 of BPCI 
Advanced, CMS provided fully prospective target prices to participants. 
Participants appreciated the certainty of prospective target prices, 
where we predict in advance how spending patterns might shift and hold 
those target prices firm even if we underpredicted or overpredicted 
spending. This methodology included applying update factors to account 
for setting-specific payment system updates, allowing us to estimate 
how a given set of services performed during the baseline would be 
priced had those same services been subject to the fee schedules in 
effect during the performance period.
    In CJR, we originally overpredicted performance period spending, 
not accounting for the overall decline in spending on LEJR episodes 
nationwide that occurred outside of the model during its first few 
performance years. In BPCI Advanced, we similarly overpredicted 
performance period spending for certain episodes because our 
methodology was unable to account for medical coding changes that 
occurred between the baseline and performance period, or during the 
performance period itself. For instance, in FY 2016, changes to medical 
coding guidance were made for Inpatient Congestive Heart Failure, such 
that certain patients who during the baseline would have been coded as 
the less expensive MS-DRG 292, were instead coded as the more expensive 
MS-DRG 291, in spite of having the same clinical characteristics. This 
meant that many beneficiaries who received a target price associated 
with the more expensive MS-DRG 291, actually had the lower performance 
period costs previously associated with the less expensive MS-DRG 292. 
The use of a fully prospective trend factor was unable to capture these 
changes in both practice patterns and coding guidelines.
    Subsequently, we modified both models' methodologies to include a 
retrospective trend adjustment. Starting in Model Year 4, we continued 
to provide BPCI Advanced participants with a prospective target price 
using an estimated trend factor, but we adjusted the target price at 
reconciliation based on the retrospective calculation of the trend 
factor using performance period data. Initially, this policy included 
guardrails around the magnitude of the retrospective trend factor 
adjustment of +/-10%. In response to participant feedback, we lowered 
the maximum level of the retrospective trend factor adjustment to +/-5% 
starting in Model Year 6.
    In the CJR extension, the retrospective trend is known as the 
market trend factor adjustment. It is fully retrospective and 
calculated at reconciliation, meaning that the unadjusted target price 
we post on the CJR website prior to the performance year does not 
include a prospective trend factor. In response to participant 
requests, we provided estimates of the market trend factor on the CJR 
website based on the most recently available data to help participants 
estimate their potential target prices. The market trend factor is 
calculated separately for each MS-DRG/region combination. For the PY 6 
reconciliation (corresponding to episodes that ended between October 1, 
2021 and December 31, 2022), the highest market trend factor was 1.294 
for MS-DRG 469 episodes in the West South Central region, while the 
lowest market trend factor was 0.972 for MS-DRG 521 episodes in the New 
England region.
    For TEAM, we are proposing to provide preliminary target prices 
that incorporate a prospective trend factor to TEAM participants. We 
propose at Sec.  512.540(b)(7) to calculate this prospective trend 
factor as the percent difference between the average regional

[[Page 36431]]

MS-DRG/HCPCS episode type expenditures computed using the most recent 
year of the applicable baseline period, and the comparison average 
regional MS-DRG/HCPCS episode type expenditures during the first year 
of the baseline. By comparing baseline year 3 to baseline year 1, the 
prospective trend would capture changes across a two-year period, which 
we believe is appropriate given that we would be projecting spending 
patterns in the performance year which would be 2 years after baseline 
year 3. This proposed trend factor calculation would be similar to how 
the market trend factor is currently calculated in the CJR extension, 
but instead of retrospectively comparing average regional MS-DRG/HCPCS 
episode type spending during the performance year to spending during 
the baseline year, the calculation would be performed prospectively, so 
that performance year expenditures would not be considered. A fully 
prospective trend factor would give participants more certainty about 
what their reconciliation target prices would be, although 
reconciliation target prices as proposed would incorporate both 
beneficiary-level risk adjustment and an adjustment to the prospective 
normalization factor, as applicable (as described in section 
X.A.3.d.(4) of the preamble of this proposed rule).
    Given our proposal to use a prospective trend factor to predict 
future spending for the purposes of pricing stability, we considered 
but are not proposing to include update factors that take into account 
Medicare payment systems updates for each fiscal year (FY) or calendar 
year (CY) and could improve pricing accuracy. Specifically, we 
considered a methodology similar to BPCI Advanced and Performance Years 
1-5 of CJR, where preliminary target prices are updated to reflect the 
most current FY and CY payment system rates using setting-specific 
update factors for payment system, including the IPPS, the OPPS, the 
Physician Fee Schedule (PFS), the Home Health Prospective Payment 
System (HH PPS), the Medicare Economic Index (MEI), the Inpatient 
Rehabilitation Facility (IRF) Prospective Payment System (PPS), and the 
Skilled Nursing Facility (SNF) PPS. However, updating target prices 
using setting-specific update factors would result in TEAM participants 
receiving more than one target price for a MS-DRG/HCPCS episode type in 
a performance year which can increase complexity. Further, while 
including update factors would generally increase target prices, it 
also decreases pricing stability since the preliminary target price 
would change due to the application of update factors. We seek comment 
on whether we should include setting-specific update factors in 
preliminary target prices to improve pricing accuracy, or if there are 
other ways we should consider updating target prices that would reflect 
Medicare payment system updates.
    We considered, but are not proposing, an alternative proposal to 
adjust the preliminary target price at reconciliation based on the 
observed trend during the performance year. We considered proposing to 
limit the magnitude of this retrospective trend adjustment by applying 
guardrails, similar to what we currently do in BPCI Advanced. 
Specifically, if the trend factor calculated at reconciliation based on 
performance year expenditures differed from the prospective trend 
factor by up to +/-5%, we considered proposing to adjust the 
preliminary target price at reconciliation by applying the final trend 
factor to the baseline target price. If the final trend factor differed 
from the prospective trend factor by more than +/-5%, we considered 
proposing to only adjust the preliminary target price by +/-5%. In 
other words, we considered proposing that the maximum upward trend 
adjustment we would make to the preliminary target price at 
reconciliation would be 5%, and the maximum downward trend adjustment 
we would make to the preliminary target price at reconciliation would 
be -5%. We also considered lower percentages for the guardrails, 
including 3% and 1%, given the BPCI Advanced model's experience 
initially having a higher percentage maximum adjustment and then 
reducing the percentage in later years of the model. We considered 
these alternative proposals because we believed that these guardrails 
would help us achieve a balance of providing predictability to 
participants and mitigating the risk that target prices would be 
disproportionately impacted by performance year shifts in spending 
patterns that could not have been foreseen.
    We are also requesting comment on alternative ways to calculate the 
trend factor to both increase accuracy of prospective target prices and 
to mitigate the ratchet effect. We recognize that spending on some 
episodes, such as Lower Extremity Joint Replacement, has been 
decreasing over time and may reach a point where further decreases in 
spending could compromise quality and patient safety. While in the 
early years of CJR, our target prices failed to account for decreasing 
trends in spending for LEJR nationwide and thus were overinflated, that 
downward trend has since stabilized, suggesting that there may no 
longer be as much of an opportunity for participant savings as there 
was in the early years of CJR. In the case of an episode where spending 
has been decreasing but has since stabilized, trending the target price 
forward based on previous years' trends could result in target prices 
that are too low. In such a scenario, a retrospective trend adjustment 
might actually result in a higher target price than a fully prospective 
trend. We are seeking comment on ways to construct a trend factor that 
can result in a reasonable target price regardless of whether spending 
has been increasing, decreasing, or stabilizing.
    For example, in the CY 2023 Physician Fee Schedule final rule, CMS 
finalized a policy to include a prospectively-determined component, the 
Accountable Care Prospective Trend (ACPT), in the factor used to update 
the benchmark to the performance year for ACO agreement periods 
starting on or after January 1, 2024 (see 87 FR 69881 to 69898) to help 
address the ratchet effect by insulating a portion of the update factor 
from the impact that ACO savings can have on retrospective national and 
regional spending trends. This type of trend is referred to as an 
administrative trend, because it is not directly linked to ongoing 
observed FFS spending. However, we recognize that there may be some 
concerns using administrative trends for episode-based payment models, 
as opposed to population-based payment models like ACOs, because 
administrative trends may not capture episode-specific trends, which 
could lead to higher or lower preliminary target prices when compared 
to actual performance year spending. We request comment on this type of 
trending approach, or other potential ways to increase the accuracy of 
prospective target prices and mitigate the ratchet effect when we 
update TEAM target prices.
    We seek comment on our proposal at proposed Sec.  512.540(b)(7) for 
calculating and applying a prospective trend factor.
(g) Discount Factor
    In addition to the prospective trend factor, at proposed Sec.  
512.540(c) we propose to apply a discount factor to the benchmark price 
when calculating preliminary target prices. Specifically, we propose to 
apply a 3% discount factor to the benchmark price to serve as 
Medicare's portion of reduced expenditures from the episode. This 
discount would be similar to the 3% discount factor applied to target 
prices

[[Page 36432]]

in the CJR model and to surgical episode target prices in BPCI 
Advanced.
    However, we recognize that there may be different levels of 
opportunity for savings within different episode types. For instance, 
in BPCI Advanced, in recognition of the fact that participants were 
generally able to achieve greater savings in surgical, as opposed to 
medical, episodes, we incorporated a 3% discount into surgical episode 
target prices and a 2% discount into medical episode target prices. 
Given differential opportunities for savings across the different types 
of proposed episode categories, as well as our intention to incorporate 
additional episodes in future years of TEAM, we considered but are not 
proposing varying the Medicare discount based on episode category. 
Specifically, we considered but are not proposing lower discount 
factors including 2%, 1%, 0.5%, or no discount factor. We also 
considered linking the discount to variability in episode spending 
during the baseline, such that an episode with minimal variability in 
baseline spending might have a lower discount percentage, given that 
lower variability in baseline spending might indicate fewer 
opportunities for savings in that episode, as opposed to episodes with 
greater spending variability. We also considered but are not proposing 
lower discount factors, including 2%, 1%, 0.5%, or no discount factor, 
for specific types of TEAM participants. For example, we considered no 
discount factor for safety net hospitals given the proportion of 
underserved beneficiaries they care for and many of these safety net 
hospitals may be new to episode-based payment participation. Although 
we are not proposing these alternatives, we seek comment on whether we 
should include any of these alternatives in TEAM and also seek comment 
on different ways to adjust the Medicare discount based on differential 
savings opportunities for different episode types.
    We seek comment on our proposal at proposed Sec.  512.540(c) to 
apply a 3% discount factor to preliminary episode target prices for 
episodes.
(h) Special Considerations for Low Volume Hospitals
    In both CJR and BPCI Advanced, we recognized that hospitals that 
perform a number of episodes below a certain volume threshold would 
have insufficient volume to receive a target price based on their own 
baseline data. In the 2015 CJR Final Rule (80 FR 73285), we 
acknowledged that such hospitals might not find it in their financial 
interests to make systemic care redesigns or engage in an active way 
with the CJR model. At 80 FR 73292, we acknowledged commenter concerns 
about low volume providers, including but not limited to, observations 
that low volume providers could be less proficient in taking care of 
LEJR patients in an efficient and cost-effective manner, more 
financially vulnerable with fewer resources to respond to the financial 
incentives of the model, and disproportionately impacted by high- cost 
outlier cases. In spite of these potential challenges, we stated that 
the inclusion of low volume hospitals in CJR was consistent with the 
goal of evaluating the impact of bundled payment and care redesign 
across a broad spectrum of hospitals with varying levels of 
infrastructure, care redesign experience, market position, and other 
considerations and circumstances (80 FR 73292).
    In CJR, we set the low volume threshold as fewer than 20 CJR 
episodes across the 3-year baseline years of 2012-2014. Low volume 
hospitals received target prices based on 100% regional data, rather 
than a blended target price that incorporated their participant-
specific data, because a target price based on limited data is less 
likely to be accurate and reliable. These hospitals were also subject 
to the lower stop-loss limits that we offered to rural hospitals, in 
recognition of the fact that they might be less prepared to take on 
downside risk than hospitals with higher episode volume. In the CJR 
2017 Final Rule that reduced the number of mandatory MSAs, low volume 
hospitals were among the types of hospitals that were required to opt 
in if they wanted to remain in the model (82 FR 57072). In the 2020 
Final Rule, we removed the remaining low volume hospitals from the CJR 
extension when we limited the CJR participant hospital definition to 
those hospitals that had been mandatory participants throughout the 
model (86 FR 23497).
    In BPCI Advanced, our low volume threshold policy was to not 
provide a target price for a given clinical episode category if 
performed at a hospital that did not meet the 41 clinical episode 
minimum volume threshold during the 4-year baseline period. This meant 
that no BPCI Advanced episodes would be triggered for that particular 
clinical episode category during the applicable performance period at 
that hospital. However, participants could continue to trigger other 
clinical episode categories for which they had enrolled and for which 
there was sufficient baseline volume. Additionally, clinical episodes 
that occurred at the hospital during the performance period, though not 
triggering a BPCI Advanced episode, would count toward the low volume 
threshold when that year became part of the baseline. Therefore, as the 
baseline shifted forward each year, bringing a more recent year into 
the baseline and dropping the oldest year, a hospital could potentially 
meet the volume threshold and receive a target price for the clinical 
episode category for a subsequent performance period.
    In TEAM, we propose that there will be a low volume threshold for 
purposes of reconciliation. This low volume threshold would apply to 
total episodes across all episode categories in the baseline period for 
a given PY. If a TEAM Participant did not meet the proposed low volume 
threshold of at least 31 total episodes in the baseline period for PY1, 
CMS would still reconcile their episodes, but the TEAM participant 
would be subject to the Track 1 stop-loss and stop-gain limits for PY1. 
If a TEAM Participant did not meet the proposed low volume threshold of 
at least 31 total episodes in the applicable baseline periods for PYs 
2-5, the TEAM Participant would be subject to the Track 2 stop-loss and 
stop-gain limits for PY 2-5, as described in section X.A.3.d.(5)(h) of 
the preamble of this proposed rule.
    We considered, but are not proposing, including alternative 
approaches to a minimum episode volume threshold in TEAM, including an 
approach similar to BPCI Advanced, where if a TEAM participant did not 
meet the 31 episode minimum volume threshold for a given episode 
category in the 3-year baseline period, the TEAM participant would not 
be held accountable for that episode category for the performance year 
that aligned with the 3-year baseline period. We also considered 
different minimum volume thresholds in the baseline period, including 
51, 21, and 11. However, we are concerned that imposing a minimum 
volume threshold that removes TEAM participant accountability may 
restrict the number of hospitals eligible to participate in TEAM and 
limit beneficiary access to the benefits of value-based, coordinated 
care. We also considered implementing minimum episode volume thresholds 
during the performance year. Specifically, we considered not holding 
TEAM participants accountable for a given episode category if they 
initiated less than 11 or 6 episodes in a given episode category or 
less than 31 or 21 total episodes across episode categories in a 
performance year. However, we are concerned that including minimum 
episode volume thresholds during the performance year may introduce 
program integrity issues where TEAM

[[Page 36433]]

participants steer TEAM beneficiaries to other providers to be below 
the threshold and not be accountable for episodes in TEAM. We seek 
comment on whether TEAM should consider implementing the alternatives 
to the minimum volume thresholds for either the 3-year baseline period 
or the performance year.
    We seek comment on our proposal at proposed Sec.  512.550(e)(3) for 
setting and applying the low volume threshold at reconciliation.
(i) Preliminary Target Prices
    We propose that CMS would provide preliminary target prices to TEAM 
participants prior to the start of each performance year. For instance, 
since the earliest episodes for a given performance year would end on 
January 1, and most of these episodes would have been initiated by an 
anchor hospitalization or anchor procedure that occurred near the end 
of November or the beginning of December of the previous calendar year, 
we propose to provide preliminary target prices to the TEAM participant 
by the end of November prior to each performance year. We propose that 
preliminary target prices would be based on regional episode spending 
during the baseline period. TEAM participants would receive the 
preliminary target prices for each MS-DRG/HCPCS episode type that 
corresponded to their region. We propose that these preliminary target 
prices would incorporate a prospective trend factor (as described in 
section X.A.3.d.(3)(f) of the preamble of this proposed rule) and a 
discount factor (as described in section X.A.3.d.(3)(g) of the preamble 
of this proposed rule), as well as a prospective normalization factor 
(as described in section X.A.3.d.(4) of the preamble of this proposed 
rule) that would be subject to limited adjustment at reconciliation (as 
described in section X.A.3.d.(5)(h) of the preamble of this proposed 
rule).
(4) Risk Adjustment and Normalization
    In the original CJR methodology, we first proposed that risk 
adjustment be limited to providing separate target prices for episodes 
initiated by MS-DRG 469 versus MS-DRG 470, because MS-DRGs under the 
IPPS are designed to account for some of the clinical and resource 
variations that exist and that impact hospitals' costs of providing 
care (80 FR 73338). In response to comments requesting further risk 
adjustment, in the 2015 CJR Final Rule we finalized a policy to risk 
adjust target prices based on the presence of hip fractures in order to 
capture a significant amount of patient-driven episode expenditure 
variation (80 FR 73339). As a result, we provided four separate target 
prices to participant hospitals based on MS-DRG 469 versus MS-DRG 470, 
and presence versus absence of a primary hip fracture. The impact of 
hip fractures on inpatient costs associated with a hip replacement was 
subsequently acknowledged by CMS' decision to create two new MS-DRGs 
(521 and 522) for hip replacements in the presence of a primary hip 
fracture (85 FR 58432). We incorporated these new MS-DRGs into the CJR 
model episode definition as of October 1, 2020 via the November 2020 
Interim Final Rule with Comment (IFC) (85 FR 71170).
    In the 2021 CJR 3-Year extension Final Rule, we acknowledged the 
need for further risk adjustment to account for beneficiary-level 
factors that tend to impact spending in a way that is beyond the 
control of the provider. We introduced age bracket (less than 65 years, 
65 to 74 years, 75 to 84 years, and 85 years or more), CJR HCC count 
(zero, one, two, three, and four or more), and dual eligibility 
(receiving both full Medicare and Medicaid benefits) as beneficiary-
level risk adjustment factors that would be applied to each episode at 
reconciliation. The definition of these risk adjustment variables, and 
our reasoning for incorporating them into the risk adjustment 
methodology, is described in detail at 86 FR 23523.
    The coefficients for the risk adjustment variables in the CJR 
extension were calculated prospectively, prior to the beginning of each 
performance year, using a linear regression model. As we stated at 86 
FR 23524, this regression model approach would allow us to estimate the 
impact of each risk adjustment variable on the episode cost of an 
average beneficiary, based on typical spending patterns for a 
nationwide sample of beneficiaries with a given number of CMS-HCC 
conditions, within a given age bracket, and with dual eligibility or 
non-dual eligibility status. We used an exponential model to account 
for the fact that CJR episode costs are not normally distributed. A 
detailed description of the regression model begins at 86 FR 23524.
    At reconciliation, after applying the high-cost episode cap to 
remove outliers, the risk adjustment coefficients for the three risk 
adjustment variables were applied to the episode-level target price 
based on the applicable episode region and MS-DRG. However, since age, 
CJR HCC count, and dual eligibility status are inherently included in 
the regional target price, since regions with beneficiaries who are 
older, more medically complex, and socioeconomically disadvantaged tend 
to have higher average episode costs, we applied a normalization factor 
to remove the overall impact of adjusting for age, CJR HCC count, and 
dual eligibility on the national average target price, as described at 
86 FR 23527.
    By contrast, BPCI Advanced has used a more complex risk adjustment 
model that includes many more risk adjustment coefficients, including 
both patient and provider characteristics. Categories of patient 
characteristics include (but are not limited to): HCCs (individual 
flags, interactions, and counts), recent resource use, and 
demographics. Provider characteristics, which are used to group 
hospitals into peer groups, include bed size, rural vs. urban, safety 
net vs. non-safety net, and whether or not the participant is a major 
teaching hospital. The first stage of the BPCI Advanced risk adjustment 
methodology uses a compound log-normal model in order to account for 
the substantial right skew of the distribution of episode costs. This 
means that it combines two log-normal distributions in order to capture 
costs associated with both low-cost episodes (which are the majority of 
episodes) and very high cost episodes (which are fewer in number but 
exert a strong influence on spending averages). However, participants 
have found the risk adjustment model difficult to interpret, 
particularly since is it is not widely used in other research or 
healthcare models.
    In an effort to simplify the risk adjustment methodology for TEAM 
and allow participants to more easily calculate an episode level 
estimated target price, we propose to base our methodology on the CJR 
extension methodology, with a few key differences. Rather than 
calculate one national set of risk adjusters across all MS-DRGs for a 
given episode category, we propose to calculate risk adjustment 
coefficients at the MS-DRG/HCPCS episode type level. We considered 
calculating risk adjustment at the MS-DRG/HCPCS episode type/region 
level, but we believe that, when further subdivided into regions, the 
low volume of episodes for certain MS-DRG/HCPCS episode types would be 
insufficient to create accurate and reliable risk adjustment 
multipliers.
    We propose to use the same age bracket risk adjustment variable 
(less than 65 years, 65 to less than 75 years, 75 to less than 85 
years, and 85 years or more) that we use in the CJR extension, based on 
the participant's age on the first day of the episode, as determined 
through Medicare enrollment data. We also propose to use

[[Page 36434]]

an HCC count risk adjustment variable, but we propose to calculate it 
differently than the CJR HCC count risk adjustment variable. For this 
risk adjustment variable, which we would call the TEAM HCC count, we 
propose to conduct a 90-day lookback for each beneficiary, beginning 
with the day prior to the anchor hospitalization or anchor procedure. 
We propose to use the beneficiary's Medicare FFS claims from that 90-
day lookback period to determine which HCC flags the beneficiary is 
assigned, and create a count of those HCC flags. This methodology would 
be consistent with BPCI Advanced, and would represent a more uniform 
way of measuring clinical complexity across beneficiaries, as opposed 
to using the annual HCC file that is used in CJR. It would also reduce 
the incentive for increased coding intensity at the time of the 
initiating procedure.
    We propose to use an expanded risk adjustment variable that 
accounts for multiple potential markers of beneficiary social risk. 
Although it would function as a single, binary (yes=1 or no=0) variable 
in our risk adjustment model, the variable would represent the union of 
three different potential markers of beneficiary social risk. The first 
would be full Medicare/Medicaid dual eligibility status, which is 
currently used in both CJR and BPCI Advanced. We further propose to 
incorporate two additional elements to the beneficiary social risk 
adjustment variable. We propose that beneficiaries would also be 
assigned the value of yes=1 for the social risk adjustment variable if 
they either fall into a state or national Area Deprivation Index 
percentile beyond a certain threshold, or if they qualify for the 
Medicare Part D Low Income Subsidy. The beneficiary would be assigned a 
value of yes=1 on this single, binary social risk variable if one or 
more of these three indicators of social risk applied to the 
beneficiary. We propose to use a threshold of the 80th percentile for 
the national ADI and the 8th decile for the state ADI. Across other CMS 
Innovation Center models, as well as peer reviewed publications, and we 
did not find a consensus on a specific threshold that is universally 
used. For example, the Making Care Primary Model uses 75th percentile 
for the national ADI and in existing literature, some papers use a 
continuous measure, and some use a 75%, an 80%, or 85% cut-
off.635 636 637 638 639 Therefore, we feel that an 80% 
threshold is comparable to other risk adjustment methodologies. We seek 
comment on whether there are different thresholds for national and 
state ADI that we should consider. Lastly, we propose to enforce sign 
restrictions to avoid negative coefficients for beneficiary social risk 
adjustment. In other words, the adjustment to the preliminary or 
reconciliation target prices would only happen if the coefficient on 
the beneficiary social risk adjustment variable is positive. We believe 
enforcing sign restrictions will more accurately reflect episode 
spending for underserved beneficiaries who may experience access and 
underutilization issues. The proposed beneficiary social risk variable 
and our reasons for choosing each component are described in detail in 
section X.A.3.f of the preamble of this proposed rule.
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    \635\ Kind, A., Jencks, S., Brock, J. E., Yu, M., Bartels, C. 
M., Ehlenbach, W. J., Greenberg, C., & Smith, M. (2014). 
Neighborhood socioeconomic disadvantage and 30-Day 
rehospitalization. Annals of Internal Medicine, 161(11), 765. 
https://doi.org/10.7326/m13-2946.
    \636\ D[iacute]az, A., Lindau, S. T., Obeng[hyphen]Gyasi, S., 
Dimick, J. B., Scott, J. W., & Ibrahim, A. M. (2023). Association of 
hospital quality and neighborhood deprivation with mortality after 
inpatient surgery among Medicare beneficiaries. JAMA Network Open, 
6(1), e2253620. https://doi.org/10.1001/jamanetworkopen.2022.53620.
    \637\ Bose, S., Dun, C., Zhang, G. Q., Walsh, C., Makary, M. A., 
& Hicks, C. W. (2022). Medicare beneficiaries in disadvantaged 
neighborhoods increased telemedicine use during the COVID-19 
pandemic. Health Affairs, 41(5), 635-642. https://doi.org/10.1377/hlthaff.2021.01706.
    \638\ Tung, E. L., Peek, M. E., Rivas, M., Yang, J. P., & 
Volerman, A. (2021). Association of neighborhood disadvantage with 
racial disparities in COVID-19 positivity in Chicago. Health 
Affairs, 40(11), 1784-1791. https://doi.org/10.1377/hlthaff.2021.00695.
    \639\ Durfey, S. N. M., Kind, A., Gutman, R., Monteiro, K., 
Buckingham, W. R., DuGoff, E. H., & Trivedi, A. N. (2018). Impact of 
risk adjustment for socioeconomic status on Medicare Advantage Plan 
quality Rankings. Health Affairs, 37(7), 1065-1072. https://doi.org/10.1377/hlthaff.2017.1509.
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    While we are proposing a limited set of risk adjusters that is 
closer in number to the CJR methodology for simplicity, we considered 
using the same set of risk adjusters in the BPCI Advanced model because 
we recognize that there may be particular episode categories or MS-DRGs 
that would benefit from additional clinical risk adjusters. For 
instance, in BPCI Advanced, just over half (53%) of CABG procedures 
have been performed electively, with the remainder performed 
emergently. Some clinicians have stated their belief that CABG episodes 
should be priced differently based on whether they are performed 
electively (that is, scheduled in advance) or emergently, even when 
they are assigned to the same MS-DRG. They stated their belief that 
non-emergent procedures are generally performed on relatively healthier 
beneficiaries, and providers may have greater control over outcomes. 
Conversely, they stated that episodes following an emergency room visit 
on the same day or the day before tend to involve sicker patients, 
leading to greater clinical variability and less predictable episode 
spending. We are therefore requesting comment on whether TEAM's should 
use the BPCI Advanced episode-specific risk adjuster or if there are 
other potential episode-specific or MS-DRG-specific clinical risk 
adjusters, and how those clinical risk adjusters should be defined 
based on information available on the IPPS claim associated with the 
episode trigger.
    We also considered including peer group or hospital-specific risk 
adjusters in TEAM. Similar to the BPCI Advanced model, we considered 
including peer group adjusters that would be based off of hospital 
characteristics, including hospital size (for example, number of 
hospital beds), safety net hospital status, location (for example, CBSA 
urban and rural indicators and census division), and if the hospital 
was a major teaching hospital determined by looking at the intern to 
bed ratio in the provider specific files.\640\ We recognize including 
this level of risk adjustment may improve pricing accuracy for 
hospitals, but it introduces an additional layer of complexity to the 
risk adjustment model that could be challenging for TEAM participants 
understand when factoring in the existing risk adjustment variable and 
other pricing components. Since TEAM is a mandatory model, and it may 
capture more hospitals that have not previously participated in an 
episode-based payment model, we are want to create a pricing 
methodology that all TEAM participants, regardless of experience or 
resource, can understand. We seek comment on whether target prices in 
TEAM should include risk adjustment variables based on hospital 
characteristics.
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    \640\ https://www.cms.gov/medicare/payment/prospective-payment-systems/provider-specific-data-public-use-text-format.
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    Another key difference between our proposal and the current CJR 
risk adjustment methodology is that we propose to provide a prospective 
normalization factor with preliminary target prices. We propose that 
the prospective normalization factor would be subject to a limited 
adjustment at reconciliation based on the observed case mix, up to +/-
5%. This would allow participants to better estimate their target 
prices, as it would incorporate the normalization factor prospectively, 
rather than only introducing the normalization factor at

[[Page 36435]]

reconciliation. We believe that this approach strikes a balance between 
predictability and protecting TEAM participants and CMS from 
significant shifts in patient case mix between the final baseline year 
and the performance year.
    A goal of TEAM's risk adjustment approach is to balance simplicity 
with accuracy to ensure our pricing methodology reflects episode 
spending that accounts for provider spending trends by region and MS-
DRG as well as accounting for beneficiary acuity. Our proposed risk 
adjustment approach relies on capturing data from Medicare claims or 
other sources of information that do not include patient functional 
assessment data. Evidence suggests that risk adjustment models may be 
improved when taking into account patient functional status.\641\ We 
recognize there are existing data sets that capture patient functional 
status information. Specifically, the Improving Medicare Post-Acute 
Care Transformation Act of 2014 (the IMPACT Act) requires the reporting 
of standardized patient assessment data with regard to quality measures 
and standardized patient assessment data elements. The standardized 
patient assessment elements include functional status and are collected 
and reported by Long-Term Care Hospitals (LTCHs), Skilled Nursing 
Facilities (SNFs), Home Health Agencies (HHAs) and Inpatient 
Rehabilitation Facilities (IRFs). Since an episode encompasses post-
acute care spend, the standardized patient assessment data could be 
incorporated into TEAM's risk adjustment methodology. However, we 
recognize inclusion of such data may increase the risk adjustment 
methodology complexity and make it challenging for TEAM participants to 
understand how it affects their preliminary or reconciliation target 
price. Therefore, we seek comment on the utility of including 
standardized patient assessment data in TEAM's risk adjustment 
methodology or whether there is other functional status data we should 
consider and whether standardized patient assessment data or other 
functional status data should be included in TEAM's risk adjustment 
methodology in future performance years.
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    \641\ Benefits and Challenges of Payment Adjustments Based on 
Beneficiaries' Ability to Perform Daily Tasks (GAO-18-588). (2018). 
United States Government Accountability Office. https://www.gao.gov/assets/gao-18-588.pdf.
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    To summarize, for TEAM we propose a risk adjustment methodology 
based on the CJR extension methodology, but with key differences that 
we believe would maximize target price predictability and transparency. 
As in CJR, we propose to use baseline data to calculate risk adjustment 
multipliers and hold them constant at reconciliation. We propose that 
participants would be provided with these risk adjustment multipliers 
prior to the start of the Performance Year and would be able to use 
them to estimate their episode-level target prices. We propose that, 
unlike in CJR, these risk adjustment multipliers would be calculated at 
the MS-DRG level, resulting in a separate set of risk adjustment 
multipliers for each MS-DRG episode type. We also propose to 
incorporate a prospective normalization factor into preliminary target 
prices, which would be subject to a limited adjustment at 
reconciliation. We seek comment on our proposals at proposed Sec.  
512.545(a-d) for risk adjusting episodes.
(5) Proposed Process for Reconciliation
    This section outlines our proposals on how we intend to reconcile 
performance year spending for a TEAM participant's beneficiaries in 
episodes against the reconciliation target price in order to determine 
if CMS owes the TEAM participant a reconciliation payment, or if the 
TEAM participant owes CMS a repayment (for all Track 3 participants and 
beginning in performance year 2 for Track 2 hospitals). We propose to 
adjust the reconciliation amount for quality based on the TEAM 
participant's CQS, which would be constructed from their quality 
measure performance, to calculate the quality-adjusted reconciliation 
amount. We propose to apply stop-loss/stop-gain limits to the quality-
adjusted reconciliation amount to determine the TEAM participant's Net 
Payment Reconciliation Amount (NPRA). Finally, we propose to adjust the 
NPRA for post-episode spending, when applicable, to determine the 
reconciliation payment or repayment amount.
    We refer readers to section X.A.3.b.(5) of the preamble of this 
proposed rule for our proposed definition of related services for our 
proposed episodes, to section X.A.3.a.(1) of the preamble of this 
proposed rule for our proposed definition of performance years, and to 
section X.A.3.d.(3) of the preamble of this proposed rule for our 
proposed approach to establish preliminary target prices.
(a) Annual Reconciliation
    At proposed Sec.  512.550 we propose to conduct an annual 
reconciliation calculation that would compare performance year spending 
on episodes that ended during that PY with reconciliation target prices 
for those episodes to calculate a reconciliation amount for each TEAM 
participant. We would reconcile, on an annual basis, all episodes 
attributed to a TEAM participant that end in a given calendar year 
during the model performance period. This would be consistent with CJR 
and numerous other CMS value-based payment programs. We believe that 
one annual reconciliation accommodates the need for regular performance 
feedback while minimizing the administrative burden of more frequent 
reconciliations. Therefore, we propose to align the TEAM reconciliation 
approach with reconciliation in CJR, and to reconcile episodes based on 
performance years. We seek comment on this proposal to conduct one 
reconciliation for each performance year.
(b) Timing
    We propose to conduct the annual reconciliation of each TEAM 
participant's actual episode payments against the target price(s) 6 
months after the end of the performance year. This policy would be 
consistent with the 6 months of claims runout we allow for the CJR 
reconciliation for PY6-8. We believe that 6 months is sufficient time 
for claims runout given that an internal review of Medicare claims data 
found that 98.71% of IP claims had been received, and 89.96% were 
considered final, by 6 months after the date of service.\642\ For HOPD 
claims, those rates were 98.10% and 95.78%, respectively. Similar rates 
were found for all other types of claims, including Carrier, SNF, HH, 
and DME, indicating that we would have a nearly complete picture of 
performance year spending by 6 months after the end of the performance 
year. For TEAM, we propose to capture claims submitted by July 1st 
following the end of the performance year and carry out the NPRA 
calculation as described previously to make a reconciliation payment or 
hold TEAM participants responsible for repayment, as applicable, in 
quarters 3 or 4 of that calendar year. We seek comment on our proposal 
at proposed Sec.  512.550(b) to perform reconciliation 6 months after 
the end of the performance year.
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    \642\ Medicare Claims Maturity: CCW White Paper accessed at 
https://www2.ccwdata.org/web/guest/white-papers?p_l_back_url=%2Fweb%2Fguest%2Fsearch%3Fq%3Dmedicare%2Bclaims%2Bmaturity on Jan, 26, 2024.

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[[Page 36436]]

(c) TEAM Participants That Experience a Reorganization Event
    We recognize that there may be TEAM participants that experience a 
reorganization event during a given performance year. At proposed Sec.  
512.505, we propose to define a reorganization event as a merger, 
consolidation, spin off or other restructuring that results in a new 
hospital entity under a given CCN. As a result of such an event, the 
TEAM participant may begin billing under a different CCN, or an 
additional entity could be incorporated into the TEAM participant's 
existing CCN, resulting in a new hospital entity. For instance, TEAM 
participant A may merge with, or be purchased by, TEAM participant B 
and begin billing under TEAM participant B's CCN. In this case, we 
propose to perform separate reconciliation calculations for TEAM 
participant A and TEAM participant B for those episodes where the 
anchor hospitalization admission or the anchor procedure occurred 
before the effective date of the merger or purchase. We propose to 
reconcile episodes where the anchor hospitalization admission or the 
anchor procedure occurred on or after the effective date of the merger 
or purchase under the new or surviving CCN that applies to the blended 
entity. We are proposing this policy in recognition that the blended 
entity may have different spending patterns, or a different overall 
patient case mix, than the two separate entities prior to the merger. 
In a different instance, if a TEAM participant merges into or is 
purchased by a non-TEAM participant and begins billing under the CCN on 
the non-TEAM participant, we propose to reconcile episodes for the TEAM 
participant where the anchor hospitalization admission or the anchor 
procedure occurred before the effective date of the merger or purchase. 
This policy would allow for the TEAM participant to earn a 
reconciliation payment or owe a repayment for the episodes that 
occurred during the portion of the performance year that they were in 
the model. However, once the TEAM participant begins to bill under the 
non-TEAM participant's CCN, the blended entity would not be considered 
a TEAM participant and we would not reconcile episodes where the anchor 
hospitalization admission or the anchor procedure occurred on or after 
the effective date of the merger or purchase under the new or surviving 
CCN that applies to the blended entity. We seek comment on our proposal 
at proposed Sec.  512.550(b)(2) for conducting reconciliations for TEAM 
participants that experience a reorganization event during a given 
performance year.
(d) Updating Preliminary Target Prices To Create Reconciliation Target 
Prices
    As discussed in section X.A.3.d.(4) of the preamble of this 
proposed rule, we are proposing to apply beneficiary-level risk 
adjustment and a limited adjustment to the prospective normalization 
factor, as applicable, to increase the accuracy of our reconciliation 
calculations. At the time of reconciliation, we would apply these 
adjustments, if applicable, to the preliminary target prices we 
calculated and communicated to TEAM participants prior to the 
applicable performance year, as described in Section X.A.3.d.(3)(i) of 
the preamble of this proposed rule. We note that in some cases, the 
final target price applied to an episode in a given performance year at 
reconciliation will not change. In addition, in some cases the 
reconciliation target price will increase from the preliminary target 
price provided prior to the performance year, potentially benefitting 
TEAM participants. For instance, if the prospective normalization 
factor were calculated as 0.85, but the beneficiary case mix during the 
performance year differed from the case mix during the final year of 
the baseline such that the final normalization factor were calculated 
as 0.89, the reconciliation target price would incorporate the final 
normalization factor and therefore be higher than the preliminary 
target price.
(e) Composite Quality Score
(i) Overview
    Incorporating quality performance into the model payment structure 
is an essential component of TEAM, just as it is for the CJR model (80 
FR 73370) and BPCI Advanced. Section X.A.3.c of the preamble of this 
proposed rule discusses the specific measures for which we propose that 
TEAM participants would be held accountable. In addition to Quality 
Payment Program requirements to tie quality performance to payment for 
Advanced APMs, we believe it is important for TEAM to link the 
opportunity to earn a reconciliation payment with performance on 
quality measures to place greater emphasis on beneficiary quality of 
care and patient-centered care.
    As discussed in section X.A.3.d.(5)(g) of the preamble of this 
proposed rule, which outlines the proposed process for incorporating 
quality into the reconciliation calculation, for each TEAM participant, 
we propose to calculate the difference between the TEAM participant's 
performance year spending and their reconciliation target price at 
reconciliation, identified as the reconciliation amount. We propose 
that the reconciliation amount would then be adjusted based on the TEAM 
participant's quality performance. We propose to use the quality 
measures discussed in section X.A.3.c of the preamble of this proposed 
rule to calculate a Composite Quality Score, in a similar manner to 
what we have implemented for many CMS models and initiatives, including 
CJR and BPCI Advanced. The Composite Quality Score (CQS) methodology 
would allow performance on each required TEAM quality measure to be 
meaningfully valued in the TEAM pay- for-performance methodology, 
incentivizing and rewarding cost savings in relation to the quality of 
episode care provided by the TEAM participant.
    For TEAM, the actual level of quality performance achieved will be 
the most important factor in calculating the CQS to reward those TEAM 
participants furnishing high quality care to TEAM beneficiaries. Like 
the CJR model, TEAM would include a wide range of participants with 
varying levels of experience with value-based care and different 
current levels of quality performance. Other CMS programs, also capture 
a wide range of participants and include quality performance 
methodologies that may directly affect the participant's financial 
performance. We note that the Shared Savings Program utilizes similar 
features as the proposed TEAM CQS methodology, such as benchmarking 
quality performance, calculating scores for each measure and 
constructing an overall score (see 42 CFR 425.502). Additionally, the 
Hospital VBP Program and the HAC Reduction Program also utilize a 
similar scoring methodology, which applies weights to various measures 
and assigns an overall score to a hospital (42 CFR 412.165 and 42 CFR 
412.172). Despite the small number of quality measures proposed for 
TEAM, the measures represent both clinical outcomes and patient 
experience, and each would carry substantial value in the TEAM 
composite quality score.
    Although performance on each measure would be valued in the TEAM 
composite quality score methodology, it is the TEAM participant's 
overall quality performance that would be considered in the pay-for-
performance approach, rather than performance on each quality measure 
individually determining the financial opportunity under TEAM. The TEAM 
composite score methodology also provides a framework for incorporating 
additional

[[Page 36437]]

measures of meaningful outcomes for episodes in the future. The TEAM 
composite score methodology would provide the potential for financial 
reward for TEAM participants that reach an overall acceptable quality 
performance, thus incentivizing their continued efforts to improve the 
quality and efficiency of episodes. We seek comment on our proposal to 
use a composite quality score in the pay-for-performance methodologies 
of TEAM.
(ii) Determining Composite Quality Score
    The CQS is one component of the reconciliation process and we 
propose that it would be calculated based on the TEAM participant's 
performance on the quality measures proposed for the model. One of the 
primary purposes of the CQS is to create a comparative assessment for 
performance across episode categories and TEAM participants. Since not 
all quality measures apply to all episode categories, quality measures 
that apply to more episode categories will be volume-weighted more 
heavily in the CQS.
    As indicated in section X.A.3.c.(3) of the preamble of this 
proposed rule, the proposed TEAM quality measures would be collected 
from the CMS Hospital IQR Program and the HAC Reduction Program. The 
proposed TEAM quality measures collected from the Hospital IQR Program 
and HAC Reduction Program would have raw quality measure scores, 
however, these raw quality measure scores may be in different 
measurement units making it difficult to make comparisons. Therefore, 
raw quality measure scores must be manipulated in order to produce a 
CQS. Similar to the BPCI Advanced model, for each TEAM performance year 
we propose for each quality measure to convert raw quality measure 
scores into scaled quality measure scores by comparing the raw quality 
measure score to the distribution of raw quality measure score 
percentiles among the national cohort of hospitals, which would consist 
of TEAM participants and hospitals not participating in TEAM, in the 
CQS baseline period, so that each measure has a scaled quality measure 
score between 0 and 100 for each episode category. For example, if a 
TEAM participant's raw quality measure score of 71% in PY 1 is 
equivalent to the 60th percentile during the CQS baseline period, their 
scaled quality measure score for that measure will be 60 in the 
performance year. We recognize there may be instances where the raw 
quality score may fall between percentiles or may be higher or lower 
than the raw quality scores in the CQS baseline period. Therefore, we 
propose if the raw quality measure score could belong to either of two 
percentiles in the CQS baseline period, then we would assign the higher 
percentile. Further we would assign a scaled score of 100 if the TEAM 
participant has a raw quality measure score greater than the maximum of 
the raw quality measure scores in the CQS baseline period and assign a 
scaled quality measure score of zero if the TEAM participant has a raw 
quality score less than the minimum of the raw scores in the CQS 
baseline period. Lastly, we would not assign a scaled quality measure 
score if the TEAM participant has no raw quality measure score.
    We propose the CQS baseline period to be calendar year 2025 for the 
duration of TEAM. We believe using calendar year 2025 as the CQS 
baseline period is similar with other CMS Innovation Center models, 
including the BPCI Advanced model, where the baseline period was 
established before the incentives of the model were in place in order 
to assess quality improvement. We considered using a contemporaneous 
CQS baseline period, where the CQS baseline period would be the same as 
the performance year for each performance year, but we believe that may 
increase CQS calculation complexity and may create challenges for TEAM 
participants to implement meaningful quality improvement efforts. 
Lastly, we also considered a rolling CQS baseline period, where the CQS 
baseline period would move forward by one year each performance year, 
but similar to a contemporaneous CQS baseline period, we believe the 
simplicity of have a fixed CQS baseline period will be easier for TEAM 
participants to understand the CQS calculation methodology. However, as 
indicated in section X.A.3.b.(1) of the preamble of this proposed rule, 
we recognize the potential for additional episodes added to TEAM in 
future performance years, which may result in different quality 
measures being used in the CQS calculation. If new episodes categories 
or quality measures are introduced to TEAM, we would reassess the CQS 
baseline period and implement any changes in future notice and comment 
rulemaking.
    Prior to calculating the CQS, we propose volume weighting the 
quality measures based on the volume of episodes for a TEAM 
participant. Specifically, a normalized weight would be calculated by 
dividing the TEAM participant's volume of episodes for a given quality 
measure by the total volume of all the TEAM participant's episodes. 
This calculation would be applied to all quality measures for the TEAM 
participant (see Table X.A.-06). We believe it is important to volume 
weight the quality measures so that more weight is given to the quality 
measures that apply to more episode categories.
[GRAPHIC] [TIFF OMITTED] TP02MY24.282

    We would then take the quality measures normalized weights and 
combine it with the scaled quality measure scores to determine the 
weighted scaled score. Specifically, we propose to calculate a weighted 
average by multiplying each quality measure's scaled quality measure 
score by its normalized weight to create weighted scaled scores for a 
TEAM participant. The weighted scaled scores would then be added 
together to construct the CQS

[[Page 36438]]

for the TEAM participant (see Table X.A.-07)
[GRAPHIC] [TIFF OMITTED] TP02MY24.283

    Lastly, although the required set of quality measures proposed for 
TEAM are ones currently being reported through the Hospital IQR Program 
and HAC Reduction Program, we recognize that CMS may, in future 
regulations, remove current measures or require different measures for 
hospitals to report in the Hospital IQR Program and HAC Reduction 
Program. Therefore, CMS may propose changes to the TEAM measures and 
the methodology for constructing the composite quality score through 
future notice and comment rulemaking. We seek comment on our proposed 
methodology to calculate the TEAM composite quality score.
(f) Calculating the Reconciliation Payment Amount or Repayment Amount
    After the completion of a performance year, we propose to 
retrospectively calculate a TEAM participant's actual episode 
performance based on the episode definition. We note that episode 
spending would be subject to proration for services that extend beyond 
the episode (as described in section X.A.3.d.(3)(c) of the preamble of 
this proposed rule). We propose to cap performance year spending at the 
high-cost outlier cap as described in section X.A.3.d.(3)(e) of the 
preamble of this proposed rule. We propose to apply the high-cost 
outlier cap to episodes in the performance year similarly to how we 
propose to apply it to baseline episodes, using the 99th percentile for 
each MS-DRG/HCPCS episode type and region as the maximum. Any 
performance year episode spending amount above the high cost outlier 
cap would be set to the amount of the high cost outlier cap. We then 
propose to compare each TEAM participant's performance year spending to 
its reconciliation target prices. Specifically, we propose to define 
the reconciliation amount as the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, prior to adjustments for quality, stop-gain/stop-loss limits, 
and post-episode spending. We note that, as discussed in section 
X.A.3.d.(3) of the preamble of this proposed rule, a TEAM participant 
would have multiple target prices for episodes ending in a given 
performance year, based on the MS-DRG/HCPCS episode type and the 
performance year when the episode was initiated. We propose to 
determine the applicable reconciliation target price for each episode 
using the aforementioned criteria, and calculate the difference between 
each TEAM participant's performance year spending and its aggregated 
reconciliation target price for all episodes in the performance year, 
resulting in the reconciliation amount. Specifically, we propose to 
define the reconciliation amount as the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, prior to adjustments for quality, stop-gain/stop-loss limits, 
and post-episode spending. We propose to adjust the reconciliation 
amount for quality performance as discussed in section X.A.3.d.(5)(e) 
of the preamble of this proposed rule to determine the quality-adjusted 
reconciliation amount. We then propose to apply the stop-loss and stop-
gain limits to the quality-adjusted reconciliation amount, as discussed 
in section X.A.3.d.(5)(f) of the preamble of this proposed rule, 
creating the Net Payment Reconciliation Amount (NPRA). Finally, we 
propose to combine the NPRA with the results of the post-episode 
payment calculation (as discussed in section X.A.3.d.(5)(g) of the 
preamble of this proposed rule), to create the reconciliation payment 
amount or repayment amount. We seek comment on our proposal at proposed 
Sec.  512.550(c-g) for calculating the reconciliation payment amount or 
repayment amount.
    We do not propose to include any TEAM reconciliation payments or 
repayments to Medicare under this model for a given performance year in 
the reconciliation amount for a subsequent performance year. We want to 
incentivize providers to provide high quality and efficient care in all 
years of the model. If reconciliation payments for a performance year 
are counted as performance year spending in a subsequent performance 
year, a hospital would experience higher performance year spending in 
the subsequent performance year as a consequence of providing high 
quality and efficient care in the prior performance year, negating some 
of the incentive to perform well in the prior year. Therefore, we 
propose to not have the reconciliation amount for a given performance 
year be impacted by TEAM Medicare repayments or reconciliation payments 
made in a prior performance year. We seek comment on our proposal not 
to include TEAM reconciliation payments or repayments in performance 
year spending.
(g) Incorporating the Composite Quality Score Into the Reconciliation 
Amount
    As indicated in section X.A.3.c of the preamble of this proposed 
rule, the TEAM quality measure assessment is a pay-for-performance 
methodology aimed to incentivize and reward cost savings in relation to 
the quality of episode care provided by the TEAM participant. Similar 
to the BPCI Advanced model, we propose that a TEAM participant's 
quality performance would be linked to payment by translating the CQS 
into a CQS adjustment percentage and applying the CQS adjustment 
percentage to any positive or negative reconciliation amount. 
Specifically, for Track 1 TEAM

[[Page 36439]]

participants we propose that the CQS adjustment percentage would adjust 
a positive reconciliation amount up to 10%, and because Track 1 does 
not have downside risk, there would be no CQS adjustment percentage for 
negative reconciliation amounts. In the event a TEAM participant in 
Track 1 would have earned a negative reconciliation amount, their CQS 
would still be reported in their reconciliation report so that they may 
use this information to improve their quality measure performance in 
the next performance year. For Track 2 we propose that the CQS 
adjustment percentage would adjust a positive reconciliation amount up 
to 10% and a negative reconciliation amount up to 15%. In other words, 
the CQS adjustment percent would not adjust the positive reconciliation 
amount down by more than 10%, nor would it adjust the negative 
reconciliation amount up (meaning more towards a positive amount) by 
more than 15%. For Track 3 TEAM participants, we propose that the CQS 
adjustment percentage would adjust a positive reconciliation amount up 
to 10% and a negative reconciliation amount up to 10%. We would 
determine the CQS adjustment percentage using the following proposed 
formulas in Table X.A.-08.
[GRAPHIC] [TIFF OMITTED] TP02MY24.284

    The CQS adjustment percentage would be multiplied with the TEAM 
participant's positive or negative reconciliation amount to produce the 
CQS adjustment amount. The CQS adjustment amount would then be 
subtracted from the positive or negative reconciliation amount to 
create the quality-adjusted reconciliation amount. We propose to define 
the quality-adjusted reconciliation amount as the dollar amount 
representing the difference between the reconciliation target price and 
performance year spending, after adjustments for quality, but prior to 
application of stop-gain/stop-loss limits and the post-episode spending 
adjustment, as described in sections X.A.3.d.(5)(h). and 
X.A.3.d.(5)(i). of the preamble of this proposed rule. Since Track 2 
participation after is limited to TEAM participants who may care for a 
higher proportion of underserved TEAM beneficiaries, we believe an 
asymmetric application of the CQS adjustment percentage for Track 2 
TEAM participants may help to mitigate some the negative financial 
burden that may be associated with caring for underserved beneficiaries 
who tend to be higher cost and have worse health outcomes. Table X.A.-
09 illustrates TEAM's proposed methodology of incorporating CQS into 
payment using the different CQS adjustment percentage scenarios using 
rounded values.
[GRAPHIC] [TIFF OMITTED] TP02MY24.285

    We considered an asymmetric application of the CQS adjustment 
percentage for TEAM participants in Track 3, but we believe the 
proposed symmetric application is appropriate to balance the amount of 
financial risk associated with quality performance since Track 3 is 
meant to have higher risks and rewards. Further, we also considered 
different CQS adjustment percentages for TEAM participants in all 
tracks including 20%, 25%, 33% and 50% but felt that these percentages 
may be too high given TEAM participants will have varying levels of 
experience with value-based care and a pay-for-performance methodology. 
We also considered lower CQS adjustment percentages for TEAM 
participants in all tracks including 1%, 3%, and 5%, but we believe 
these percentages would be too low and minimize the importance of 
quality improvement and thus would not incentivize TEAM participants to 
strive for quality of care improvements.
    We also considered other approaches to tying TEAM quality measure 
performance to payment, including how the CJR Model applied their CQS 
methodology to adjust the discount factor. However, we believe the 
TEAM's proposed approach creates a greater incentive to improve quality 
measure performance because a TEAM participant must achieve of a CQS of 
100 in order to receive the maximum quality-adjusted reconciliation 
amount. While this may be perceived as setting

[[Page 36440]]

a high standard, it is consistent with the approach we have taken in 
BPCI Advanced and also emphasizes the importance of beneficiary quality 
of care. Lastly, we considered applying a CQS threshold in order to be 
eligible to receive a reconciliation payment in TEAM. A similar 
approach was used in the CJR model where a participant hospital had to 
achieve a minimum CQS in order to receive a reconciliation payment, 
however, a level of quality performance that was below acceptable would 
not affect participant hospitals' repayment responsibility. We believe 
TEAMs proposed pay-for-performance methodology does not need a CQS 
threshold since poor quality performance in TEAM would negatively 
affect any positive or negative reconciliation amount.
    We seek comment on TEAM's proposed methodology at proposed Sec.  
512.550(d) to calculate and apply the CQS. We also seek comment on our 
proposed definition of quality-adjusted reconciliation amount at Sec.  
512.505.
(h) Limitations on NPRA
    In CJR and BPCI Advanced, we included both stop-loss and stop-gain 
limits on the total amount that a participant could owe to CMS as a 
repayment or receive from CMS as a reconciliation payment. For CJR, 
this policy and its justification is described in the 2015 CJR Final 
Rule at 80 FR 73398. For both CJR and BPCI Advanced, these limits were 
applied as a percentage of a participant's total aggregate target price 
at reconciliation. Stop-loss and stop-gain limits gradually increased 
over the first few years of the CJR model, reaching a maximum of 20% 
for most hospitals for performance years 4-8, while the BPCI Advanced 
model has maintained 20% limits every model year for all participants.
    As with CJR, we propose to phase in risk in TEAM. We propose that 
Track 1 TEAM participants would not be subject to downside risk in 
performance year 1. We also propose a stop-gain limit of 10% for Track 
1 TEAM participants in performance year 1. We propose that TEAM 
participants in Track 2 would be subject to downside and upside risk 
with a symmetric stop-gain and stop-loss limits of 10% for PY 2-5. We 
believe a 10% stop-gain and stop-loss limit of 10% is appropriate for 
Track 2 participants who can gain value-based care experience but have 
less financial risk. However, since Track 3 would be designed for TEAM 
participants with prior experience in value-based care or those who are 
prepared to accept greater financial risk in the first year of TEAM, we 
propose that TEAM participants that opt into Track 3 of the model would 
be subject to both upside and downside risk, with symmetric stop-gain 
and stop-loss limits of 20% for all performance years. The greater 
level of downside risk in Track 3 would therefore be balanced by higher 
stop-gain limits for Track 3 compared to Track 1 or Track 2, which we 
propose to continue for all performance years.
    We considered, but are not proposing, higher and lower stop-gain 
and stop-loss limits for Track 3, including 25%, 15%, and 10% but we 
believe maintaining consistency with 20% stop-gain and stop-loss limits 
of previous episode-based payment models provides the appropriate 
balance of financial risk and reward to promote spending reductions 
with reasonable risk thresholds. We also considered lower stop-gain and 
stop-loss limits for Track 2, including 5%, 3% and 1% limits, or 
asymmetric limits, such as 10% stop-gain and 5% stop-loss limits or 5% 
stop-gain and 3% or 1% stop-loss. We also considered, but are not 
proposing, lower and asymmetric limits for certain TEAM participants. 
For example, we considered a 10% or 5% stop-gain paired with a 3% or 1% 
stop-loss for TEAM participants who meet the criteria of a safety net 
hospitals. Since TEAM offers a one-year glide path where all TEAM 
participants could elect to participate in Track 1 with no downside 
risk for PY1, we don't believe lower or asymmetric limits would be 
necessary for Track 2. By PY2 when Track 2 is available for certain 
TEAM participants, they should have sufficient infrastructure in place 
to assume two-sided risk while having less financial risk compared to 
Track 3. We seek comment on these alternative proposals for stop-gain 
and stop-loss limits and whether there are other mechanisms we should 
consider to help limit a TEAM participant's financial risk in the 
model.
    We also propose to apply stop-loss and stop-gain limits after 
application of the CQS which would result in the NPRA. We propose to 
define NPRA as the dollar amount representing the difference between 
the reconciliation target price and performance year spending, after 
adjustments for quality and stop-gain/stop-loss limits, but prior to 
the post-episode spending adjustment, which is described in section 
X.A.3.d.(5)(g) of the preamble of this proposed rule. We believe 
applying the stop-loss and stop-gain limits after the CQS is 
appropriate because it limits the financial risk associated with 
episode spending and quality performance, which is similar to how the 
BPCI Advanced model and CJR model apply stop-loss and stop-gain limits.
    We seek comment on our proposal at proposed Sec.  512.550(c)(vi) 
for differential stop-gain and stop-loss limits for TEAM participants 
by Track and Performance Year. We also seek comment on our NPRA 
definition at proposed Sec.  512.505.
(i) Participant Responsibility for Increased Post-Episode Payments
    While the proposed episodes would extend 30 days post-discharge 
from the anchor hospitalization or post-procedure (for outpatient 
episodes), some hospitals may have an incentive to withhold or delay 
medically necessary care until after an episode ends to reduce their 
actual episode payments. We do not believe this would be likely, but in 
order to identify and address such inappropriate shifting of care, we 
propose to calculate for each performance year the total Medicare Parts 
A and B expenditures in the 30-day period following completion of each 
episode for all services covered under Medicare Parts A and B, 
regardless of whether the services are included in the proposed episode 
definition (section X.A.3.b.(5) of the preamble of this proposed rule). 
Because we base the proposed episode definition on exclusions, 
identified by MS-DRGs for readmissions and ICD-10-CM diagnosis codes 
for Part B services as discussed in section X.A.3.b.(5)(a) of the 
preamble of this proposed rule, and Medicare beneficiaries may 
typically receive a wide variety of related (and unrelated) services 
during episodes, there is some potential for hospitals to 
inappropriately withhold or delay a variety of types of services until 
the episode concludes regardless of whether the service is included in 
the episode definition, especially for Part B services where diagnosis 
coding on claims may be less reliable. This inappropriate shifting 
could include both those services that are related to the episode (for 
which the hospital would bear financial responsibility as they would be 
included in the actual episode spending calculation) and those that are 
unrelated (which would not be included in the actual episode spending 
calculation), because a hospital engaged in shifting of medically 
necessary services outside the episode for potential financial benefit 
may be unlikely to clearly distinguish whether the services were 
related to the episode or not.
    This calculation would include prorated payments for services that 
extend beyond the episode as discussed in section X.A.3.d.(3)(c) of 
this proposed rule. Specifically, at proposed

[[Page 36441]]

Sec.  512.550(f) we propose to identify whether the average 30-day 
post-episode spending for a TEAM participant in any given performance 
year is greater than three standard deviations above the regional 
average 30-day post-episode spending, based on the 30-day post-episode 
spending for episodes attributed to all TEAM regional hospitals in the 
same region as the TEAM participant. We proposed that beginning with 
PY1 for Track 3 TEAM participants, and PY2 for Track 2 TEAM 
participants, if the TEAM participant's average post-episode spending 
exceeds this threshold, the amount above the threshold would be 
subtracted from the reconciliation amount or added to the repayment 
amount for that performance year. The amount above the threshold would 
not be subject to the stop-loss limits proposed elsewhere in the 
proposed rule. We seek comment on this proposal at proposed Sec.  
512.550(f) to make TEAM participants responsible for making repayments 
to Medicare based on high spending in the 30 days after the end of the 
episode and for our proposed methodology to calculate the threshold for 
high post-episode spend.
(j) Reconciliation Payments and Repayments
    For the performance year 1 reconciliation process for Track 1 TEAM 
participants, we would combine a TEAM participant's NPRA and post-
episode spending amount, as described previously in this section, and 
if positive, the TEAM participant would receive the amount as a one-
time lump sum reconciliation payment from Medicare. If negative, the 
TEAM participant would not be responsible for repayment to Medicare, 
consistent with our proposal for a 1-year glide path to phase in 
greater financial responsibility in the model. For TEAM participants in 
Track 3 for PY 1, and Track 2 or Track 3 for PYs 2-5, if the amount is 
positive, the TEAM participant would receive the amount as a one-time 
lump sum reconciliation payment from Medicare. If the amount is 
negative, Medicare would hold the TEAM participant responsible for a 
one-time lump sum repayment. CMS would collect the one-time lump sum 
repayment in a manner that is consistent with all relevant federal debt 
collection laws and regulations.
    We want participants to succeed in TEAM by providing high quality 
care to TEAM beneficiaries and reducing episode spending, but we 
understand there may be instances when a TEAM participant does not meet 
performance metrics and owes a repayment amount. We acknowledge paying 
back Medicare in a lump sum for a repayment amount may introduce 
financial hardship for some TEAM participants, especially those who may 
be new to value-based care with downside risk or those who have fewer 
financial resources. In some CMS Innovation Center models, certain 
participants are required to have financial guarantees, which act as a 
reinsurance policy for CMS if the participant is unable to pay back 
debts owed as a result of their performance in the model. For example, 
the BPCI Advanced model requires certain participants to have secondary 
repayment sources, generally in the form of a letter of credit or 
escrow agreement, that can be drawn upon if the participant is unable 
or fails to pay their repayment amount. Yet, financial guarantees 
require upfront capital and must be replenished in a timely manner for 
potential use in future debts. Further, financial guarantees generally 
need to be established before the model starts, thus before the TEAM 
participant would be eligible to use any TEAM payment amounts to fund 
the financial guarantee.
    We do not believe financial guarantees would be appropriate for 
TEAM given the aforementioned concerns but recognize that providing 
some process to prolong recovery of a repayment amount may be needed to 
mitigate potential financial hardships. Existing Medicare policy allows 
the recovery of Medicare debt, defined as recoupment in 42 CFR 405.370, 
and non-Medicare debt, defined as offset in 42 CFR 405.370, by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. To leverage the existing Medicare policy to recover 
debts in TEAM, we considered whether the reduction of present or future 
Medicare payments should be a dollar amount reduction, for example a 
$100 reduction of all Medicare payments, or a percentage reduction 
applied to all Medicare payments, for example a 2% reduction to 
Medicare payments. A dollar amount reduction may be simpler to 
calculate while translating a debt to a percentage reduction may be 
more complex to calculate. We also considered whether the reduction of 
present or future Medicare payments should only be associated with a 
TEAM participant's Medicare Part A payments for the corresponding 
episode categories tested in TEAM or for all of a TEAM participant's 
Medicare Part A payments. Limiting the Medicare payment reduction to 
only corresponding episode categories tested in TEAM may draw out the 
length of time for debt recovery, but it may ease TEAM participant 
bookkeeping when accounting for TEAM financial performance. Conversely, 
reduction of Medicare payments for all of a TEAM participant's Medicare 
Part A payments may reduce the length of time for debt recovery, but it 
may be more challenging to identify and track TEAM participant 
financial performance.
    We are not proposing to require financial guarantees or change 
existing Medicare recoupment or offsetting policies, but we are seeking 
comment on whether we should consider these options further or if there 
are other ways to reduce financial hardship for TEAM participants that 
owe a repayment amount. We also seek comment on whether we should 
consider a Medicare payment policy waiver to reduce financial hardship, 
what the waiver would waive, and if the waiver is necessary to avoid 
undue burden on TEAM participants.
    We also considered an alternative approach to making reconciliation 
payments and collecting repayments from TEAM participants. Under this 
alternative approach, in lieu of making a lump sum payment to TEAM 
participants, or collecting a repayment amount from TEAM participants, 
we would instead make a percentage adjustment to future FFS claims for 
TEAM participants. The magnitude of the adjustments would be intended 
to approximate the same dollar amount that would be paid or recouped 
via a reconciliation process; adjustments would be made in the form of 
a multiplier on claims for the anchor procedures for the episodes 
included in TEAM. For example, we would make adjustments to IPPS claims 
containing the MS-DRGs included in the model, and the amounts of the 
adjustments for each TEAM participant over the course of a year would, 
in aggregate, be intended to approximately equal the dollar amount that 
would have otherwise been paid via a reconciliation payment (or 
recouped via a repayment amount). The alternative approach would look 
similar to the operational payment mechanisms used in other Medicare 
programs and initiatives such as the Hospital Value-Based Purchasing 
Program, the SNF Value-Based Purchasing Program, the Expanded Home 
Health Value-Based Purchasing Model, and the Hospital Readmissions 
Reduction Program. We considered a value-based purchasing payment 
approach because we believe it has the potential to be less 
operationally cumbersome than making separate reconciliation payments 
if TEAM is expanded nationally in the future. We

[[Page 36442]]

also believe that a value-based purchasing payment approach that 
adjusts future FFS claims up or down would provide financial stability 
for TEAM participants, because they would receive notice of their 
adjustment amounts ahead of the year in which those adjustments would 
apply, and TEAM participants that would otherwise owe a repayment 
amount could effectively pay that debt over time automatically via 
claims adjustments, versus writing a check to CMS.
    A value-based purchasing approach for TEAM would not be without 
challenges, however. First, preliminary modeling indicates that payment 
adjustment percentages for the proposed episodes may need to be 
relatively large in order to approximate the same dollar amount that 
would otherwise be paid out via a reconciliation payment, or paid to 
CMS via a repayment amount. Although the adjustment percentages would 
be limited to a subset of FFS claims for a given TEAM participant, we 
believe we must be cautious that particularly for some providers, a 
negative adjustment to FFS claims could represent a financial hardship. 
Second, we considered whether claims adjustments should be made to only 
IPPS claims (for the MS-DRGs that trigger an anchor procedure/
hospitalization for an episode), or also to OPPS claims, given that we 
are proposing to include episodes that initiate in the outpatient 
setting in TEAM for certain episode categories. Making adjustments to 
both IPPS and OPPS claims would add complexity, particularly since the 
IPPS payment updates are made on a fiscal year schedule, while the OPPS 
updates payments on a calendar year cycle. We seek comment on whether, 
for TEAM or other future initiatives that may consider a similar value-
based purchasing approach, we should make adjustments to IPPS claims 
only or also OPPS claims that trigger model episodes.
    We seek comment on our proposal making reconciliation payments to, 
and collecting repayment amounts from, TEAM participant as a one-time, 
lump sum payment, as well as the alternative considered to implement a 
value-based purchasing approach where we make payment adjustments to 
future FFS claims in lieu of lump sum payments or repayments.
(6) Proposed Appeals Process
(a) First Level Appeal Process
    At proposed Sec.  512.560, we propose the following first level 
appeal process for TEAM participants to contest matters related to 
payment or reconciliation, of which the following is a non-exhaustive 
list: The calculation of the TEAM participant's reconciliation amount 
or repayment amount as reflected on a TEAM reconciliation report; the 
calculation of NPRA; and the calculation of the CQS. We propose that 
TEAM participants would review their TEAM reconciliation report and be 
required to provide a notice of calculation error that must be 
submitted in a form and manner specified by CMS. Unless the participant 
provides such notice, we propose that the reconciliation report would 
be deemed final within 30 calendar days after it is issued, and CMS 
would proceed with payment or repayment. We propose that if CMS 
receives a timely notice of an error in the calculation, CMS would 
respond in writing within 30 calendar days to either confirm or refute 
the calculation error, although CMS would reserve the right to an 
extension upon written notice to the TEAM participant. We propose that 
if a TEAM participant does not submit timely notice of calculation 
error in accordance with the timelines and processes specified by CMS, 
the TEAM participant would be precluded from later contesting any 
element of the TEAM reconciliation report for that performance year.
    At proposed Sec.  512.560(b) we propose an exception to the appeals 
process. We propose that if a TEAM participant contests a matter that 
does not involve an issue contained in, or a calculation that 
contributes to, a TEAM reconciliation report, a notice of calculation 
error is not required. A notice of calculation error form would not be 
an appropriate format for addressing issues other than calculation 
errors, given that it is tailored specifically to calculation errors. 
In these instances, we propose that if CMS does not receive a request 
for reconsideration from the TEAM participant within 10 calendar days 
of the notice of the initial reconciliation, the initial determination 
is deemed final and CMS proceeds with the action indicated in the 
initial determination. We note that this proposed exception does not 
apply to the limitations on review in Sec.  512.594.
    We solicit comment on our proposal for the first level appeals 
process.
(b) Reconsideration Review Process
    At proposed Sec.  512.561, we propose a reconsideration process 
that is based on processes implemented under current models being 
tested by the CMS Innovation Center. The process would enable TEAM 
participants to contest determinations made by CMS. We propose at to 
waive section 1869 of the Act, which governs determinations and appeals 
in Medicare and instead we propose to codify a reconsideration process 
for TEAM participants to utilize. We propose at Sec.  512.561(a) that 
only TEAM participants may utilize the dispute resolution process. We 
believe establishing a reconsideration process is necessary to give 
TEAM participants a means to dispute certain determinations made by 
CMS.
    This proposed reconsideration review process would be utilized in 
the case that a determination has been made and the TEAM participant 
disagrees with that determination. Part 512 subpart E would include 
specific details about when a determination is final and may be 
disputed through the reconsideration review processes.
    We propose at Sec.  512.561(b) that TEAM participants may request 
reconsideration of a determination made by CMS, only if such 
reconsideration is not precluded by section 1115A(d)(2) of the Act or 
this subpart. We propose at Sec.  512.561(b)(1)(i) that a request for 
review of those final determinations made by CMS that are not precluded 
from administrative or judicial review would be submitted to a CMS 
reconsideration official. The CMS reconsideration official would be 
authorized to receive such requests and would not have been involved in 
the initial determination or, if applicable, the notice of calculation 
error process. We propose at Sec.  512.561(b)(1)(ii) that the 
reconsideration review request would be required to include a copy of 
CMS's initial determination, contain a detailed written explanation of 
the basis for the dispute, and at Sec.  512.561(b)(1)(iii) that the 
request would have to be made within 30 days of the date of CMS's 
initial determination via email addressed to an address specified by 
CMS. At Sec.  512.561(b)(2), we propose that requests that do not meet 
the requirements of paragraphs (b)(1) are denied.
    We propose that the reconsideration official would send a written 
acknowledgement to CMS and to the TEAM participant requesting 
reconsideration within 10 business days of receiving the 
reconsideration request. The acknowledgement would set forth the review 
procedures and a schedule that permits each party an opportunity to 
submit documentation in support of their position for consideration by 
the reconsideration official.
    We propose at Sec.  512.561(b)(1)(i)(B), that, to access the 
reconsideration process for a determination concerning a TEAM payment, 
the TEAM participant

[[Page 36443]]

would be required to satisfy the notice of calculation error 
requirements specified in section X.A.3.d.(6)(a) of the preamble of 
this proposed rule before submitting a reconsideration request under 
this process. In the event that the model participant fails to timely 
submit an error notice with respect to a TEAM payment, we propose that 
the reconsideration review process would not be available to the TEAM 
participant with regard to that payment.
    We propose to codify standards for the reconsideration at Sec.  
512.561(c). First, during the course of the reconsideration, both CMS 
and the party requesting the reconsideration must continue to fulfill 
all responsibilities and obligations during the course of any dispute 
arising under TEAM. Second, the reconsideration would consist of a 
review of documentation timely submitted to the reconsideration 
official and in accordance with the standards specified by the 
reconsideration official in the acknowledgement at Sec.  512.561(b)(3). 
Finally, we propose that the burden of proof would be on the TEAM 
participant to prove to the reconsideration official, by a standard of 
clear and convincing evidence, that the determination made by CMS was 
inconsistent with the terms of TEAM.
    We propose to codify at Sec.  512.561(d) that the reconsideration 
determination would be an on-the-record review. By this, we mean a 
review that would be conducted by a CMS reconsideration official who is 
a designee of CMS who is authorized to receive such requests under 
proposed Sec.  512.561(b)(1)(i), of the position papers and supporting 
documentation that are timely submitted and meet the standards of 
submission under proposed Sec.  512.561(b)(1) as well as any documents 
and data timely submitted to CMS by the TEAM participant in the 
required format before CMS made the initial determination. Under the 
proposed Sec.  512.561(d)(2), the reconsideration official would issue 
to CMS and the TEAM participant a written reconsideration 
determination. Absent unusual circumstances in which the 
reconsideration official would reserve the right to an extension upon 
written notice to the TEAM participant, the reconsideration 
determination would be issued within 60 days of CMS's receipt of the 
timely filed position papers and supporting documentation. Under 
proposed Sec.  512.561(d)(3), the determination made by the CMS 
reconsideration official would be final and binding 30 days after its 
issuance, unless the TEAM participant or CMS were to timely request 
review of the reconsideration determination by the CMS Administrator in 
accordance with Sec.  512.5610(e)(1) and (2).
(c) CMS Administrator Review Process
    We propose to codify at Sec.  512.561(e) a process for the CMS 
Administrator to review reconsideration determinations made under 
proposedSec.  512.561(d). We propose that either the TEAM participant 
or CMS may request that the CMS Administrator review the 
reconsideration determination made by the reconsideration official. 
Under proposed Sec.  512.561(e)(1), the request to the CMS 
Administrator would have to be made via email, within 30 days of the 
reconsideration determination, to an email address specified by CMS. 
The request would have to include a copy of the reconsideration 
determination, as well as a detailed written explanation of why the 
model participant or CMS disagrees with the reconsideration 
determination. Under proposed Sec.  512.561(e)(4), promptly after 
receiving the request for review, the CMS Administrator would send the 
parties an acknowledgement of receipt that outlines whether the request 
for review was granted or denied and, should the request for review be 
granted, the review procedures and a schedule that would permit both 
CMS and the TEAM participant an opportunity to submit a brief in 
support of their positions for consideration by the CMS Administrator. 
Should the request for review be denied, under proposed Sec.  
512.561(e)(5), the reconsideration determination would be final and 
binding as of the date of denial of the request for review by the CMS 
Administrator. Under proposed Sec.  512.561(e)(6), should the request 
for review by the CMS Administrator be granted, the record for review 
would consist solely of timely submitted briefs and evidence contained 
in the record before the reconsideration official and evidence as set 
forth in the documents and data described in proposed Sec.  
512.561(d)(1)(ii); the CMS Administrator would not consider evidence 
other than information set forth in the documents and data described in 
proposed Sec.  512.561(d)(1)(ii). The CMS Administrator would review 
the record and issue to CMS and the TEAM participant a written 
determination that would be final and binding as of the date the 
written determination was sent.
    We invite public comment on the proposed reconsideration review 
process for TEAM.
e. Model Overlap
(1) Background
    When determining the best strategy for addressing model overlap, we 
recognize we need to consider how to promote meaningful collaboration 
between providers and TEAM participants. In prior models, overlap 
policies were intended to be simple by avoiding duplicative incentive 
payments or giving precedence to a single accountable entity. However, 
what resulted were confusing methodologies or misaligned incentives 
which were difficult to navigate. Participants from prior models have 
also cited confusion with identifying to which model(s) a beneficiary 
may be aligned or attributed.
    In earlier episode-based payment models, such as CJR (in certain 
circumstances) and BPCI, CMS addressed overlap by implementing a 
complex calculation and recouping a portion of the pricing discount for 
providers also participating in certain ACO initiatives. The recoupment 
was intended to prevent duplicate incentive payments for the same 
beneficiary's care; however, some participants perceived the resulting 
recoupment as a financial loss, discouraging providers from 
participating in both initiatives.
(2) Previous Episode-Based Model Overlap Policies
    To avoid complexity, the CJR and BPCI Advanced models exclude 
beneficiaries aligned or assigned to certain ACOs, and these 
beneficiaries will not trigger a clinical episode.\643\ While this 
exclusionary approach creates a clean demarcation of who is accountable 
for a beneficiary's care, it also limits the number of providers in 
accountable care relationships and becomes less tenable as we work 
towards the goal of increased accountability. Additionally, 
participants may be informed of beneficiary ACO alignment or assignment 
after the potential episode has been initiated and the expending of 
resources on unattributed beneficiaries. This concern highlights the 
opportunity to incentivize coordinated care, expand care redesign 
efforts to more patients, and strengthen APM participation.
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    \643\ Currently, the BPCI Advanced model does not allow overlap 
with the ACO Realizing Equity, Access, and Community Health (ACO 
REACH) model, the Vermont Medicare ACO Initiative, and the 
Comprehensive Kidney Care Contracting (CKCC) Options of the Kidney 
Care Choices (KCC) Model. The CJR model does not allow overlap with 
the ENHANCED Track of the Medicare Shared Savings Program.
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    Even passive avoidance of duplicated payments has its drawbacks 
such as lack

[[Page 36444]]

of incentive to coordinate care. For example, the CJR and BPCI Advanced 
models allow overlap with the Medicare Shared Savings Program without a 
financial recoupment.644 645 However, this policy does not 
encourage behavior change to ensure a smooth transition back to 
population-based providers.
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    \644\ The Medicare Shared Savings Program benchmark updates 
include retrospective county-level trends that implicitly reflect 
BPCI Advanced and CJR spending changes; such methodology helps 
mitigate potential overlap of federal outlays.
    \645\ The CJR model only allows overlap with the BASIC track of 
the Medicare Shared Savings Program.
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(3) Beneficiary Overlap
    We acknowledge that there may be circumstances where a Medicare 
beneficiary in an episode may also be assigned to an ACO, advanced 
primary care model, or other model or initiative being implemented 
through the CMS Innovation Center or otherwise through CMS. For the 
purposes of this proposed rule, ``total cost of care'' models or 
programs refer to models or programs in which episodes or performance 
periods include participant financial responsibility for all Part A and 
Part B spending, as well as some Part D spending in select cases. We 
use the term ``shared savings'' in this proposed rule to refer to 
models or programs in which the payment structure includes a 
calculation of savings (that is, the difference between FFS amounts and 
program or model benchmark) and CMS and the model or program 
participant each retain a particular percentage of that savings. We 
note that there exists the possibility for overlap between episode-
based payment model and shared savings models or programs such as 
Shared Savings Program, specialty care models such as the Enhancing 
Oncology Model (EOM), advanced primary care models such as Making Care 
Primary (MCP), state-based models such as the All-Payer Health Equity 
Approaches and Development model (AHEAD), or other CMS Innovation 
Center payment models that incorporate per-beneficiary-per-month (PBPM) 
fees or other payment structures. In addition to the Shared Savings 
Program, there are other ACO and CMS Innovation Center models that make 
or will make, once implemented, providers accountable for total cost of 
care over a period of time (for example, 6 to 12 months). Some of these 
are shared savings models (or programs, in the case of the Shared 
Savings Program), while others are not shared savings but hold 
participating providers accountable for the total cost of care during a 
defined episode. Each of these payment models or programs holds 
providers accountable for the total cost of care over the course of an 
extended period or episode by applying various payment methodologies. 
We believe it is important to simultaneously allow beneficiaries to 
participate in broader population-based and other total cost of care 
models, as well as episode payment models that target a specific 
episode with a shorter duration, such as TEAM. Allowing beneficiaries 
to receive care under both types of models may maximize the potential 
benefits to the Medicare Trust Funds and participating providers and 
suppliers, as well as beneficiaries. Research suggests that shared 
beneficiaries in episode-based payment models and ACOs can lead to 
lower post-acute care spending and reduced readmissions.\646\ 
Beneficiaries stand to benefit from care redesign that may lead to 
improved quality for episodes even while also receiving care under 
these broader models, while entities that participate in other models 
and programs that assess total cost of care stand to benefit, at least 
in part, from the cost savings that accrue under TEAM. For example, a 
beneficiary receiving a procedure under TEAM may benefit from a 
hospital's care coordination efforts regarding care during the 
inpatient hospital stay. The same beneficiary may be attributed to a 
primary care physician affiliated with an ACO who is actively engaged 
in coordinating care for all the beneficiary's clinical conditions 
throughout the entire performance year, beyond the 30-day post-
discharge period of the episode.
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    \646\ Navathe, A.S., Liao, J.M., Wang, E., Isidro, U., Zhu, J., 
Cousins, D., & Werner, R.M. (2021). Association of patient outcomes 
with bundled payments among hospitalized patients attributed to 
accountable care organizations. JAMA Health Forum, 2(8), e212131. 
https://doi.org/10.1001/jamahealthforum.2021.2131.
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    We propose that a beneficiary could be in an episode in TEAM, as 
described in section X.A.3.b. of the preamble of this proposed rule, by 
undergoing a procedure at a TEAM participant, and be attributed to a 
provider participating in a total cost of care or shared savings model 
or program. For example, a beneficiary may be attributed to a provider 
participating in the Shared Savings Program for an entire performance 
year, as well as have initiated an episode in TEAM during the ACO's 
performance year. Each model or program incorporates a reconciliation 
process, where total included spending during the performance period or 
episode are calculated, as well as any potential savings achieved by 
the model or program. We propose to allow any savings generated on an 
episode in TEAM and any contribution to savings in the total cost of 
care model be retained by each respective participant. This would mean 
the episode spending in TEAM would be accounted for the in the total 
cost of care model's total expenditures, but TEAM's reconciliation 
payment amount or repayment amount would not be included in the total 
cost of care model's total expenditures. Likewise, the total cost of 
care model's savings payments or losses would not be included in the 
episode spending in TEAM.
    By allowing a beneficiary aligned to a total cost of care model 
participant to also be attributed to an episode in TEAM, we would be 
eliminating complexities experienced in prior models where it was 
difficult for participants to know when a beneficiary would trigger an 
episode and when the episode would be excluded. In prior models such as 
BPCI, we implemented a recoupment process after reconciliation to 
account for any duplicative savings generated on overlapping 
beneficiaries. This process involved disbursing reconciliation payments 
to BPCI participants and then submitting a recoupment demand for any 
savings generated on overlap. Overwhelming feedback from participants 
indicated that this recoupment process was perceived negatively and 
postured participants in BPCI and the total cost of care model into an 
adversarial relationship. Allowing overlap between beneficiaries 
aligned to a total cost of care model who also initiate an episode in 
TEAM and by allowing both participants to retain savings will have a 
positive impact on beneficiaries by fostering a cooperative 
relationship between accountable care and TEAM participants where all 
parties have interest in providing coordinated, longitudinal care.
    Allowing overlap does mean that episode expenditures will be 
included in ACO expenditures and thus, have a potential impact on ACO 
performance. Whether or not this benefits an ACO's shared savings 
involves a variety of contributing factors that span beyond merely the 
results of episodes in TEAM. For example, an ACO's size and volume of 
aligned beneficiaries or the dynamics of certain markets in which an 
ACO operates could impact an ACO's expenditure calculations and shared 
savings. CMS cannot isolate each variable that could influence an ACO's 
expenditures and shared savings, nor can CMS propose a singular policy 
that will ensure all ACOs benefit from interaction, or lack thereof, 
with TEAM.

[[Page 36445]]

But because TEAM will be mandatory in specific markets, the model will 
be generally expected to similarly impact a Shared Savings Program 
ACO's episode spending and corresponding regional episode spending that 
contributes most of its retrospective benchmark update. This 
interaction is anticipated to largely mitigate potential overlapping 
incentive payments for the largest ACO program in traditional Medicare. 
CMS believes that allowing overlap and the retention of savings by ACOs 
and TEAM participants will encourage providers to collaboratively 
deliver coordinated care and yield improved outcomes to beneficiaries. 
This aligns with broader agency goals to foster increased beneficiary 
alignment to value-based care and allows us to learn from experience 
and avoid creating challenges managing shared beneficiaries between 
ACOs and episodes of care participants. In addition, there are other 
potential benefits to allowing overlap between a beneficiary aligned to 
a total cost of care model and initiate an episode in TEAM, such as 
strengthening the volume of episodes a TEAM participant is responsible 
for. We know from prior experience that low episode volume creates 
challenges for participants to generate meaningful savings and manage 
outlier cases with unusually high episode expenditures.
    We also acknowledge that certain ACOs may prefer for their aligned 
beneficiary population to not be included in TEAM. Since ACOs are 
accountable for total cost of care, they may prefer to manage their 
beneficiaries and have full control over all expenditures and 
beneficiary care instead of sharing that responsibility with a TEAM 
participant. Alternatively, we seek comment on prohibiting aligned 
beneficiaries from full-risk population-based care relationships (for 
example, Shared Savings Program Enhanced Track) from being in an 
episode in TEAM. We seek comment specifically on non-condition specific 
care relationships (that is, this would exclude condition-specific 
models such as the Enhancing Oncology Model (EOM)).
    Additionally, we seek comment on the use of supplemental data (for 
example, shadow bundles \647\ data) as providing a total cost of care 
or shared savings model participant with the ability to utilize 
episodes to improve care coordination and reduce cost.
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    \647\ Shadow bundles are claims data for services, supplies, and 
their associated payments grouped into discrete procedural- and/or 
condition-specific episodes of care. Episodes are constructed based 
on a consistent set of rules for ACO-attributed beneficiaries who 
meet the criteria to trigger an episode. Target prices are 
incorporated to measure performance and provide opportunity for 
sharing savings with providers.
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(a) Considerations for Notification Process for Shared Savings or Total 
Cost of Care Model
    Prior model experience has shown that it can be challenging for 
model participants to understand in real time whether a beneficiary's 
episode will be excluded, and we know that prior recoupment policies 
created friction between episode model participants and total cost of 
care model participants. We recognize the importance of coordination 
between a TEAM participant and total cost of care participant to ensure 
the beneficiary has continuous care moving beyond the structure of an 
episode. In order to accommodate a smooth transition for the aligned 
beneficiary, we considered, but are not proposing there be a 
notification process required of the TEAM participant to ensure they 
are alerting the total cost of care participant of their aligned 
beneficiary's episode during the anchor hospitalization or anchor 
procedure. This notification process would allow the total cost of care 
participant the time to deploy their resources (for example, care 
coordination staff) and be prepared as the patient discharges from 
their anchor hospitalization or anchor procedure. However, we recognize 
that identifying beneficiaries aligned to a total cost of care 
participant may be challenging because it would require timely access 
to beneficiary alignment list for total cost of care participants and 
would increase burden to implement a notification process. We seek 
comment on ways to implement a notification process for shared savings 
or total cost of care participants that would be used to alert a shared 
savings or total cost of care participant that one of their aligned 
beneficiaries has initiated an episode in TEAM.
    Many total cost of care models (that is, ACOs) use their market's 
Health Information Exchange (HIE) to provide admission, discharge, and 
transfer (ADT) alerts. Others use less automated processes including 
fax or telephone to provide the alert. We recognize there is variation 
in the capabilities and sophistication of HIEs nationally and we 
recognize there is an increased administrative burden on participants 
when providing a telephonic or fax alert. Additionally, we recognize 
that there is a variation in the timeframe in which these alerts can be 
issued based on the mechanism in which they are provided. We seek 
comment on what timeframe should be required to issue the notification 
and what process(es) should be used to provide the notification without 
causing undue burden on the TEAM participant, including both the 
processes cited previously or other processes not mentioned. We also 
seek comment on how broader use of ADT data exchange between TEAM 
participants and ACOs could improve care coordination, including any 
perceived barriers to better ADT exchange, and opportunities to improve 
ADT exchange, and how CMS could address these barriers and 
opportunities.
(b) Accounting for Beneficiary Overlap With New CMS Models and Programs
    We acknowledge there may be new models or programs that could have 
overlap with TEAM. This could occur because a beneficiary may trigger 
an episode in TEAM while being aligned to a new CMS model or program or 
because a TEAM participant also participates in another CMS model or 
program. We would plan to assess each new model to determine if the 
structure of payment and savings calculation are subject to the current 
proposed overlap policy or if there would be a need to bring forward 
any additional overlap requirements to account for the new model.
f. Health Equity
(1) Background
    Consistent with President Biden's Executive Order 13985 on 
``Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government,'' and Executive Order 14091 on 
``Further Advancing Racial Equity and Support for Underserved 
Communities Through the Federal Government,'' CMS has made advancing 
health equity the first pillar in its Strategic Plan.648 649 
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. We are working to advance health equity by 
designing,

[[Page 36446]]

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.\650\
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    \648\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \649\ 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).
    \650\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
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    Disparities in access to surgical care by race/ethnicity, insurance 
status, income, and geography are well-documented, including 
disparities in the progression to surgery once surgical indication is 
determined and disparities in receipt of optimal surgical care.\651\ 
Research has also highlighted disparities in readmissions rates 
following surgical intervention, indicating opportunities to tailor 
readmission-focused interventions to specific sites of care, such as 
safety net hospitals, to improve surgical outcomes.652 653 
For Medicare beneficiaries, higher health-related social need is also 
associated with a higher risk of complications, length of stay, and 30-
day readmission, and mortality following surgery.\654\ Accordingly, 
there are opportunities to improve disparities in surgical outcomes by 
transforming infrastructure and care delivery processes, particularly 
for hospitals that serve higher proportions of historically underserved 
populations.
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    \651\ de Jager E, Levine AA, Udyavar NR, et al. Disparities in 
Surgical Access: A Systematic Literature Review, Conceptual Model, 
and Evidence Map. J Am Coll Surg. 2019;228(3):276-298. doi:10.1016/
j.jamcollsurg.2018.12.028 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6391739/.
    \652\ Tsai TC, Orav EJ, Joynt KE. Disparities in surgical 30-day 
readmission rates for Medicare beneficiaries by race and site of 
care. Ann Surg. 2014;259(6):1086-1090. doi:10.1097/
SLA.0000000000000326. https://pubmed.ncbi.nlm.nih.gov/24441810/.
    \653\ Paredes AZ, Hyer JM, Diaz A, Tsilimigras DI, Pawlik TM. 
Examining healthcare inequities relative to United States safety net 
hospitals. Am J Surg. 2020;220(3):525-531. doi:10.1016/
j.amjsurg.2020.01.044 https://pubmed.ncbi.nlm.nih.gov/32014296/.
    \654\ Paro A, Hyer JM, Diaz A, Tsilimigras DI, Pawlik TM. 
Profiles in social vulnerability: The association of social 
determinants of health with postoperative surgical outcomes. 
Surgery. 2021;170(6):1777-1784. doi:10.1016/j.surg.2021.06.001 
https://pubmed.ncbi.nlm.nih.gov/34183179/.
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    In this section, we discuss proposals for identifying safety net 
hospitals and rural hospitals within TEAM, and the associated 
flexibilities for TEAM participants meeting these definitions. We are 
seeking comment on the proposed safety net hospital and rural hospital 
definitions for TEAM, proposed model flexibilities for participants 
meeting each of these definitions, and the alternatives discussed.
(2) Identification of Safety Net Hospitals
(a) Background
    Among the goals of CMS's health equity pillar is to evaluate 
policies to determine how we can support safety net providers, partner 
with providers in underserved communities, and ensure care is 
accessible to those who need it.\655\ There are also opportunities to 
engage more safety net providers in CMS Innovation Center models to 
increase the diversity of Medicare beneficiaries reached by 
models.\656\ Although various approaches exist to identify ``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.\657\ As such, safety net providers, including 
acute care hospitals, play a crucial role in the advancement of health 
equity by making essential services available to the uninsured, 
underinsured, and other populations that face barriers to accessing 
healthcare, including people from racial and ethnic minority groups, 
the LGBTQ+ community, rural communities, and members of other 
historically disadvantaged groups. Whether located in urban centers or 
geographically isolated rural areas, safety net hospitals are often the 
sole providers in their communities of specialized services such as 
burn and trauma units, neonatal care and inpatient psychiatric 
facilities.\658\ 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.
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    \655\ https://www.cms.gov/sites/default/files/2022-04/Health%20Equity%20Pillar%20Fact%20Sheet_1.pdf.
    \656\ https://www.healthaffairs.org/content/forefront/advancing-health-equity-through-cms-innovation-center-first-year-progress-and-s-come.
    \657\ https://www.ncbi.nlm.nih.gov/books/NBK224519/.
    \658\ https://www.ncbi.nlm.nih.gov/books/NBK224521/.
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    Because they serve many low-income and uninsured patients, safety 
net hospitals may experience greater financial challenges compared to 
other hospitals. Among the factors that negatively impact safety net 
hospital finances, MedPAC has pointed specifically to the greater share 
of patients insured by public programs, which it stated typically pay 
lower rates for the same services than commercial payers; the increased 
costs associated with treating low-income patients, whose conditions 
may be complicated by social determinants of health, such as 
homelessness and food insecurity; and the provision of higher levels of 
uncompensated care.\659\
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    \659\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
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    In its June 2022 Report to Congress, MedPAC expressed concern over 
the financial position of safety net hospitals.\660\ 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.'' \661\ 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.662 663
---------------------------------------------------------------------------

    \660\ 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.
    \661\ https://www.medpac.gov/wp-content/uploads/2022/06/Jun22_MedPAC_Report_to_Congress_v2_SEC.pdf.
    \662\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3272769/.
    \663\ https://www.healthaffairs.org/do/10.1377/forefront.20180503.138516/full/.
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    Given the critical importance of safety net hospitals to the 
communities they serve, we have considered different safety net 
hospital definitions to identify the best way to represent providers 
serving historically underserved populations in TEAM and/or provide 
flexibilities to those deemed as safety net providers. In the following 
section, we discuss multiple methodological options for identifying 
safety net providers in TEAM.
(b) Methodological Considerations
(i) CMS Innovation Center Strategy Refresh Safety Net Definition
    The CMS Innovation Center's Strategy Refresh developed a definition 
of safety net providers to monitor the percent of safety net facilities 
participating in CMS Innovation Center models. The CMS Innovation 
Center's Strategy Refresh defined safety net hospitals as short-term 
hospitals and critical access hospitals (CAHs) that serve above a

[[Page 36447]]

baseline threshold of beneficiaries with dual eligibility or Part D 
Low-Income Subsidy (LIS), as a proxy for low-income status.\664\ Under 
the CMS Innovation Center's Strategy Refresh definition, hospitals are 
identified as safety net when their patient mix of beneficiaries with 
dual eligibility or Part D LIS exceeds the 75th percentile threshold 
for all congruent facilities who bill Medicare.
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    \664\ https://www.cms.gov/priorities/innovation/data-and-reports/2022/cmmi-strategy-refresh-imp-tech-report.
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    To calculate the hospital-level proportions of beneficiaries with 
dual eligibility and Part D LIS, a one-year or multiple-year 
retrospective baseline (for example, weighted three-year average) for 
each measure could be calculated for each TEAM participant. We would 
then determine the 75th percentile threshold for each measure 
separately based on the distribution of the two proportions 
(beneficiaries with dual eligibility or Part D LIS) for all PPS 
hospitals who bill Medicare. TEAM participants with proportions that 
meet or exceed the determined threshold for either dual eligibility or 
Part D LIS will be considered as a safety net hospital for the purposes 
of TEAM.
    We could make safety net determinations based on the CMS Innovation 
Center's Strategy Refresh's definition using the described approach as 
of the model start date and hold the determinations constant for TEAM's 
duration. Alternatively, we could calculate the hospital-level 
proportions of beneficiaries with dual eligibility and Part D LIS and 
the corresponding 75th percentile threshold for each measure annually, 
using a single year or rolling multiple-year weighted average of data 
from all PPS hospitals who bill Medicare. We could then make 
redeterminations of safety net qualification under TEAM annually. This 
annual approach could mean that TEAM participants' safety net hospital 
qualifications could vary over the model's duration.
(ii) Medicare Safety Net Index (MSNI)
    Another approach to identify safety net hospitals would be to use 
MedPAC's Safety Net Index (SNI), which 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. MSNI is calculated at the hospital level using data from CMS 
cost reports for each hospital.\665\
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    \665\ MedPAC. ``March 2023 Report to Congress: Medicare Payment 
Policy, Chapter 3''. https://www.medpac.gov/document/chapter-3-hospital-inpatient-and-outpatient-services-march-2023-report/.
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    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 LIS because they 
have limited assets and an income below 150 percent of the Federal 
poverty level. Collectively, MedPAC refers to this population as ``LIS 
beneficiaries'' because those who receive full or partial Medicaid 
benefits are automatically eligible to receive the LIS. MedPAC states 
that its intent in defining low-income beneficiaries in this manner is 
to reduce the effect of variation in states' Medicaid policies on the 
share of beneficiaries whom MedPAC considers low-income, but to allow 
for appropriate variation across states based on the share of 
beneficiaries who are at or near the Federal poverty level. To 
calculate the LIS ratio for a hospital for a given fiscal year, we 
could use the number of inpatient discharges of Medicare beneficiaries 
who are also LIS beneficiaries, using the most recent MedPAR claims for 
the discharge information, divided by the total number of inpatient 
discharges of Medicare beneficiaries.
    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.\666\ For further discussion on how this ratio could be calculated 
using audited cost report, please refer to 88 FR 26658.
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    \666\ The most recent available cost report data for this 
purpose generally lags 4 years behind the rulemaking year (for 
example, FY 2020 cost report data are available for this FY 2024 
proposed rule).
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    For the indicator of how dependent a hospital is on Medicare, 
MedPAC's recommendation is to use one-half of the Medicare share of 
total inpatient days. In calculating the Medicare share of total 
inpatient days for a hospital, we could use the most recent available 
audited cost report data. For further information on how the numerator 
and denominator could be determined to calculate the indicator of how 
dependent a hospital is on Medicare from audited cost report data, 
please refer to 88 FR 26658.
    Using the sum of the three indicators as described, each TEAM 
participant could be assigned an SNI score, where a higher value means 
that a participant has either a high Medicare share of services, low 
incomes among a high share of its Medicare patients, and/or a high 
share of its revenue spent on uncompensated care.
    To apply the Medicare Safety Net Index (MSNI) to identify safety 
net hospital participants in TEAM, we could calculate the SNI for TEAM 
participants using a one-year or multiple-year baseline period (for 
example, a three-year average). We could then set a threshold to 
identify safety net providers with TEAM based on the distribution of 
scores for all PPS hospitals that bill Medicare (for example, providers 
with scores in the 75th percentile of SNI scores could be considered 
safety net providers). We could make safety net determinations based on 
the described approach as of the model start date and hold the 
determinations constant for TEAM's duration. Alternatively, we could 
calculate the SNI and corresponding threshold annually using a one-year 
or multiple-year moving average and make redeterminations of safety net 
designations annually. This annual approach could mean that TEAM 
participant safety net qualifications for TEAM could vary over the 
model's duration.
(iii) Area Deprivation Index
    Another approach to identifying safety net hospitals could be to 
use 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. In a recent 
environmental scan, the Office of the Assistant Secretary for Planning 
and Evaluation (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 
identified in the environmental scan were ideal, they concluded that 
the area deprivation index (ADI) was one of the best available choices 
when selecting an index for addressing health related

[[Page 36448]]

social needs or social determinants of health.\667\
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    \667\ 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 through research supported by the National 
Institutes of Health'' (NIH) 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--including 
measures of income, education, employment, and housing quality--from 
the American Community Survey (ACS) 5-year estimate datasets.\668\ Each 
neighborhood is assigned an ADI value from 1 to 100 (corresponding to 
percentile), where a higher value means that a neighborhood is more 
deprived. 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.669 670 671
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    \668\ https://www.neighborhoodatlas.medicine.wisc.edu/.
    \669\ 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.
    \670\ 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.
    \671\ 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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    Medicare already uses ADI to assess underserved beneficiary 
populations in the Shared Savings Program, and ADI is also used in CMS 
Innovation Center models. In the CY 2023 PFS final rule, CMS adopted a 
policy to provide eligible Accountable Care Organizations (ACOs) with 
an option to receive advanced investment payments (87 FR 69778). 
Advance investment payments are intended to encourage low-revenue ACOs 
that are inexperienced with risk to participate in the Shared Savings 
Program and to provide additional resources to such ACOs in order to 
support care improvement for underserved beneficiaries (87 FR 69845 
through 69849). The risk-factors based (using ADI) 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).
    To use ADI to identify safety net hospitals for TEAM, episodes 
could be assigned an ADI value based on the beneficiary's address found 
in the Common Medicare Environment (CME) file. Episodes meeting an 
established national ADI percentile threshold (for example, ADI >80) 
could be classified as high-ADI episodes, and a distribution of the 
proportion of high-ADI episodes could be constructed. Those TEAM 
participants that fell above an established threshold of high-ADI 
episodes (for example, 75th percentile) could be classified as safety 
net hospitals. For PY1, the proportion of high-ADI episodes and its 
corresponding distribution could be determined based on a single-year 
or multiple-year retrospective baseline (for example, three-year 
average). Those TEAM participants that met or exceeded the determined 
threshold would be designated as safety net. We could hold these 
designations constant for TEAM's duration or recalculate the proportion 
of high-ADI episodes annually (using a one-year or multiple-year moving 
average) and make safety net redeterminations based on an updated 
threshold on an annual basis. This annual approach could mean that TEAM 
participants' safety net qualifications for TEAM could vary over the 
model's duration.
(c) Proposed Methodology for Identifying Safety Net Hospitals
    We considered the previously mentioned methods for identifying 
safety net hospitals and we propose to use the CMS Innovation Center's 
Strategy Refresh definition for identifying safety net hospitals within 
TEAM. Use of the CMS Innovation Center's Strategy Refresh's safety net 
definition allows for a consistent and streamlined approach to how the 
CMS Innovation Center plans to monitor safety net participation with 
CMS Innovation Center models. Further, the definition uses two 
recognized measures of social risk to identify hospitals serving a 
higher proportion of beneficiaries that may face barriers to receiving 
or accessing care.
    Beneficiaries with dual eligibility are considered a vulnerable 
group for several reasons including the nature of dual eligibility 
requirements, a higher proclivity for experiencing chronic conditions, 
and an increased likelihood of mental health 
diagnosis.672 673 In its 2016 ``Report to Congress Social 
Risk Factors and Performance Under Medicare's Value-Based Purchasing 
Programs,'' the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) found that dual eligibility status was the strongest 
predictor of poor outcomes of quality measures among multiple social 
risk factors examined.\674\ TEAM's proposed approach to identify safety 
net hospitals is also similar to other approaches used in CMS 
Innovation Center models. For example, BPCI Advanced identifies safety 
net hospitals by tabulating the proportion of episodes with fully or 
partially dual eligible beneficiaries; if a hospital exceeded a 60% 
threshold of episodes based on the previous model year, then they would 
be considered a safety net hospital.\675\
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    \672\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/MMCO_Factsheet.pdf.
    \673\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/NationalProfile_2012.pdf.
    \674\ https://aspe.hhs.gov/reports/report-congress-social-risk-factors-performance-under-medicares-value-based-purchasing-programs.
    \675\ https://www.cms.gov/files/document/bpcia-model-trg-price-specs-my7.pdf.
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    While dual eligibility status does not fully capture all aspects of 
social risk, the incorporation of the proportion of patients with Part 
D LIS as a proxy for income into TEAM's proposed safety net definition 
broadens the range of possible beneficiary social risk factors used to 
make safety net hospital designations under the model. In its 2017 
report on ``Accounting for Social Risk Factors in Medicare Payment,'' 
the National Academies found that accounting for dual eligibility alone 
may not be sufficient to capture all social risk factors, and the 
incorporation of multiple measures may help to better characterize 
overall social risk.\676\
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    \676\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press. doi: 10.17226/23635.
---------------------------------------------------------------------------

    We seek comment on our proposal to identify safety net hospitals 
using the CMS Innovation Center's Strategy Refresh's definition in TEAM 
at Sec.  512.505.
(3) Identification of Rural Hospitals
(a) Background
    Americans who live in rural areas of the nation make up about 20 
percent of the United States (U.S.) population, and

[[Page 36449]]

they often experience shorter life expectancy, higher all-cause 
mortality, higher rates of poverty, fewer local doctors, and greater 
distances to travel to see health care providers, compared to their 
urban and suburban counterparts.\677\ The health care inequities that 
many rural Americans face raise serious concerns that the trend for 
poor health care access and worse outcomes overall in rural areas will 
continue unless the potential causes of such health care inequities are 
addressed. Barriers such as workforce shortages can impact health care 
access in rural communities and can lead to unmet health needs, delays 
in receiving appropriate care, inability to get preventive services, 
financial burdens, and preventable hospitalizations.\678\
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    \677\ Rural Health Research Gateway. (2018). Rural Communities: 
Age, Income, and Health Status. https://www.ruralhealthresearch.org/assets/2200-8536/rural-communities-age-income-health-status-recap.pdf.
    \678\ Healthy People 2020 (n.d.) Access to Health Services. 
https://www.healthypeople.gov/2020/topics-objectives/topic/Access-to-Health-Services.
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    Hospitals in rural areas often face other unique challenges. Rural 
hospitals may be the only source of healthcare services for 
beneficiaries living in rural areas, and beneficiaries have limited 
alternatives. Rural hospitals may also be in areas with fewer providers 
including fewer physicians and PAC facilities, rural hospitals may have 
more limited options in coordinating care and reducing spending while 
maintain quality of care under a value-based care arrangement. We 
believe that urban hospitals may not have similar concerns as they are 
often in areas with many other providers and have greater opportunity 
to develop efficiencies.
(b) Definition of Rural Hospital
    We do not propose to include any geographically rural areas for 
TEAM based on the proposed CBSAs as defined in section X.A.3.a.(4) of 
the preamble of this proposed rule. However, some hospitals in the 
proposed CBSAs for TEAM may be considered rural for other reasons, such 
as being reclassified as rural under the Medicare wage index 
regulations or being designated a rural referral center (RRC).
    For the purposes of TEAM, we propose a rural hospital to mean an 
IPPS hospital that is located in a rural area as defined under Sec.  
412.64 of this chapter; is located in a rural census tract defined 
under Sec.  412.103(a)(1) of this chapter; has reclassified as a rural 
hospital under Sec.  412.103 of this chapter, or is designated a rural 
referral center (RRC) under Sec.  412.96 of this chapter. This 
definition would be an expanded version of the rural hospital 
definition used by the CJR model as defined in 42 CFR 510.
    For PY1, rural designations under TEAM would be based on the TEAM 
participant's rural classification as of the model start date. We 
recognize that rural designations and rural reclassification requests 
in accordance with Sec.  412.103 may occur over on a rolling basis over 
the course of the model and can take several months to be reviewed and 
approved by CMS. TEAM participants that receive an approved rural 
designation under the criteria defined in the preceding paragraph or an 
approved rural reclassification in accordance with Sec.  412.103 must 
notify CMS at least 60 calendar days prior to the start of a model's 
performance year for CMS to consider classifying the TEAM participant 
as rural under the model for the following performance year. We propose 
that model rural designations will occur only once at the beginning of 
each model performance year regardless of when a TEAM participant's 
rural classification may change within a given performance year.
    We propose that if a TEAM participant's classification is no longer 
rural pursuant to Sec.  412.103 or any other criteria previously 
qualifying them as rural as defined earlier in this section, the TEAM 
participant must notify CMS in a manner chosen by CMS within 60 
calendar days of receipt of this designation change. We propose that 
TEAM participants would continue to receive the flexibilities for rural 
hospitals as described in section X.A.3.a.(3) of the preamble of this 
proposed rule through the remainder of the performance year in which 
the redesignation occurs, but the TEAM participant would no longer 
qualify for rural hospital flexibilities at the start of the next 
performance year.
    We seek comment on our proposal to identify rural hospitals in this 
section. We are not proposing to include a measure of hospital rurality 
within our risk adjustment model as described in sectionX.A.3.d.(4) of 
the preamble of this proposed rule but seek comments on whether 
inclusion of this risk adjustor would be warranted.
(4) Beneficiary Social Risk Adjustment
    In recent years there has been a push for Medicare and other payers 
to include beneficiary social risk adjustment into financial 
methodologies that determine health care payments.\679\ It is believed 
that the inclusion of beneficiary social risk adjustment may provide 
more resources to providers who care for underserved beneficiaries to 
offset the additional costs often attributed to SDOH. In other words, 
patients with limited resources or access to care may require more 
spending from providers to achieve equitable outcomes. Beneficiary 
social risk adjustment has been limited in previous episode-based 
payment models. The BPCI Advanced and CJR models included beneficiary 
social risk adjustment for beneficiary dual eligibility status, yet 
that single adjuster alone may not be sufficient in capturing spending 
differences for beneficiary social risk. Findings from the CJR model's 
5th Annual Report found that, during the baseline period, historically 
underserved populations generally had higher episode payments, used 
more institutional post-acute care, had higher rates of emergency 
department use and readmissions, and received elective LEJRs at a lower 
rate than their reference populations.\680\
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    \679\ Adjusting Medicare payments for social risk to better 
support social needs. (2021). [Dataset]. In Forefront Group. https://doi.org/10.1377/forefront.20210526.933567.
    \680\ CMS Comprehensive Care for Joint Replacement Model: 
Performance Year 5 Evaluation Report. (2023). Centers for Medicare & 
Medicaid Services. Retrieved December 1, 2023, from https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
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    There is significant literature and research surrounding the 
inclusion of social risk adjustment in health care payments, especially 
given the varying social risk adjustment indicators 
available.681 682 683 In a recent environmental scan, ASPE 
indicated that area-level deprivation indices tend to have the broadest 
coverage across the entire range of social risk factors. According to 
ASPE's report, area-level deprivation indices are, by definition, 
measured for geographic areas, which presents challenges in including 
them in payment models because a provider's patients are unlikely to be 
representative of the population of the

[[Page 36450]]

geographic area in which the provider is located.\684\
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    \681\ Powers, B., Figueroa, J.F., Canterberry, M., Gondi, S., 
Franklin, S.M., Shrank, W.H., & Maddox, K.E.J. (2023). Association 
between Community-Level Social Risk and spending among Medicare 
beneficiaries. JAMA Health Forum, 4(3), e230266. https://doi.org/10.1001/jamahealthforum.2023.0266.
    \682\ Irvin, J., Kondrich, A., Ko, M., Rajpurkar, P., Haghgoo, 
B., Landon, B.E., Phillips, R.L., Petterson, S., Ng, A.Y., & Basu, 
S. (2020). Incorporating machine learning and social determinants of 
health indicators into prospective risk adjustment for health plan 
payments. BMC Public Health, 20(1). https://doi.org/10.1186/s12889-020-08735-0.
    \683\ Addressing social risk factors in Value-Based Payment: 
Adjusting payment not performance to optimize outcomes and fairness. 
(2021). [Dataset]. In Forefront Group. https://doi.org/10.1377/forefront.20210414.379479.
    \684\ Landscape of Area-Level Deprivation Measures and Other 
Approaches to Account for Social Risk and Social Determinants of 
Health in Health Care Payments. (2022). Office of the Assistant 
Secretary for Planning and Evaluation. Retrieved December 1, 2023, 
from https://aspe.hhs.gov/sites/default/files/documents/ce8cdc5da7d1b92314eab263a06efd03/Area-Level-SDOH-Indices-Report.pdf.
---------------------------------------------------------------------------

    Several CMS Innovation Center initiatives incorporate (or may 
incorporate) beneficiary social risk adjustment into their financial 
calculations or determining payment amounts, including the ACO REACH 
model, the Enhancing Oncology Model (EOM), the Making Care Primary 
(MCP) model, and the Guiding an Improved Dementia Experience (GUIDE) 
model. To avoid relying on a single indicator that may not be 
representative of the beneficiaries a provider cares for, these models 
incorporate multiple social risk indicators. Specifically, these models 
take into account one or more of the following indicators in their risk 
adjustment models: state and national ADI, Medicare Part D Low-Income 
Subsidy (LIS), and dually eligible beneficiaries enrolled in both 
Medicare and Medicaid. Factoring in multiple indices may avoid 
challenges when an underserved beneficiary lives in higher cost-of-care 
area or beneficiaries that have difficulty accessing care. For example, 
incorporating both state and national ADI allows the for the risk 
adjustment model to capture national and local socioeconomic factors 
correlated with medical disparities and underservice, while including 
the LIS measure will capture socioeconomic challenges that could affect 
a beneficiary's ability to access care. For these reasons, and to align 
with other CMS Innovation Center models, we propose to incorporate and 
equally weight three social risk indicators in TEAM's target price 
methodology, see section X.A.3.d.(4) of the preamble of this proposed 
rule, specifically state and national ADI indicators, the Medicare Part 
D LIS indicator, and Dual-eligibility status for Medicare and Medicaid. 
We believe that including these social risk indicators would ensure 
TEAM participants that serve disproportionately high numbers of 
underserved beneficiaries are not inadvertently penalized when setting 
TEAM target prices.
    We seek comment on the proposed beneficiary social risk adjusters 
for TEAM and whether there are potential beneficiary social risk 
indicators we should consider in TEAM's target price methodology.
(5) Health Equity Plans and Reporting
(a) Health Equity Plans
    We believe it is important for TEAM participants to identify and 
monitor where disparities exist in their TEAM beneficiary population, 
and to use the data that they collect to implement evidence-based 
strategies aimed at addressing the identified health disparities and 
advancing health equity. To further align with other CMS Innovation 
Center models and promote health equity, we are proposing that TEAM 
participants can voluntarily submit to CMS, in a form and manner and by 
the date(s) specified by CMS, a health equity plan for the first 
performance year. This proposal to make submission of a health equity 
plan voluntary in PY1 recognizes that constructing a health equity plan 
may require significant time and effort by the TEAM participant. 
Beginning in PY2, we propose that TEAM participants would be required 
to submit a health equity plan in a form and manner and by the date(s) 
specified by CMS. Beginning in PY2 for those TEAM participants that 
voluntarily submitted a health equity plan in PY1 and beginning in PY3 
for those TEAM participants that first reported a health equity plan in 
PY2, we propose that the TEAM participant would submit updates to their 
previously submitted health equity plans in a form and manner and by 
date(s) specified by CMS. We propose that the health equity plans 
submitted in all performance years would include the following 
elements:
     Identifies health disparities. We propose to define 
``health disparities'' as preventable differences in the burden of 
disease, injury, violence, or opportunities to achieve optimal health, 
health quality, or health outcomes that are experienced by one or more 
``underserved communities'' \685\ within the TEAM participant's 
population of TEAM beneficiaries that the participant will aim to 
reduce. We propose to define ``underserved communities'' as populations 
sharing a particular characteristic, as well as geographic communities, 
that have been systematically denied a full opportunity to participate 
in aspects of economic, social, and civic life.\686\ We propose that 
the data sources used to inform the identification of health 
disparities should also be noted in the plan.
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    \685\ https://www.cms.gov/priorities/innovation/key-concepts/
health-
equity#:~:text=(Source%3A%20CMS),underserved%20populations%20(Adapted
%20from%20CDC).
    \686\ https://www.federalregister.gov/d/2021-01753/p-6.
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     Identifies health equity goals and describes how the TEAM 
participant will use the health equity goals to monitor and evaluate 
progress in reducing the identified health disparities. We propose to 
define ``health equity goals'' as targeted outcomes relative to the 
health equity plan performance measures for the first PYs and all 
subsequent PYs.
     Describes the health equity plan intervention strategy. We 
propose to define ``health equity plan intervention strategy'' as the 
initiative(s) the TEAM participant will create and implement to reduce 
the identified health disparities.
     Identifies health equity plan performance measure(s), the 
data sources used to construct the health equity plan performance 
measures, and an approach to monitor and evaluate the health equity 
plan performance measures. We propose to define ``health equity plan 
performance measure(s)'' as one or more quantitative metrics that the 
TEAM participant will use to measure changes in health disparities 
arising from the health equity plan interventions.
    We solicit comment on the proposed voluntary health equity plan 
submission in PY1 and mandatory health equity plan submission in PY2 
and all following performance years as proposed in Sec.  512.563. We 
also solicit comment on whether TEAM participants should be required to 
submit a health equity plan in PY2 and for all subsequent performance 
years if a TEAM participant submits a health equity plan to CMS for 
another CMMI model in the same performance year, or if the TEAM 
participant should be required to submit a health equity plan that is 
specific to TEAM and the TEAM participant's population of TEAM 
beneficiaries. We also solicit comment on the proposed elements of the 
health equity plan.
(b) Demographic Data Reporting
    We recognize disparities exist for beneficiaries in the health care 
system, including those receiving episodic care. Health care 
disparities highlight the importance of data collection and analysis 
that includes race, ethnicity, language, disability, sexual 
orientation, gender identity, and sex characteristics or other 
demographics by health care facilities. Such data are necessary for 
integration of health equity in quality programs, because the data 
permits stratification by patient

[[Page 36451]]

subpopulation.687 688 Stratified data can produce meaningful 
measures that can be used to expose health disparities, develop focused 
interventions to reduce them, and monitor performance to ensure 
interventions to improve care do not have unintended consequences for 
certain patients.\689\ Furthermore, quality programs are carried out 
with well-known and widely used standardized procedures including but 
not limited to root cause analysis, plan-do-study-act (PDSA) cycles, 
health care failure mode effects analysis, and fish bone diagrams. 
These are common approaches in the health care industry to uncover the 
causes of problems, to show the potential causes of a specific event, 
test a change that is being implemented, prevent failure by correcting 
a process proactively, and identify possible causes of a problem and 
soft ideas into useful categories, 
respectively.690 691 692 693 Adding a health equity prompt 
to these standardized procedures integrates a health equity lens within 
the quality structure and cues considerations of the patient 
subpopulations who receive care and services from a hospital.\694\
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    \687\ IOM (Institute of Medicine). 2009. Race, Ethnicity, and 
Language Data: Standardization for Health Care Quality Improvement 
(p.287). The National Academies Press https://www.ahrq.gov/sites/default/files/publications/files/iomracereport.pdf.
    \688\ Sivashanker, K., & Gandhi, T.K. (2020). Advancing Safety 
and Equity Together. New England Journal of Medicine, 382(4), 301-
303. https://doi.org/10.1056/nejmp1911700.
    \689\ Weinick, R.M., & Hasnain-Wynia, R. (2011). Quality 
Improvement Efforts Under Health Reform: How To Ensure That They 
Help Reduce Disparities--Not Increase Them. Health Affairs, 30(10), 
1837-1843. https://doi.org/10.1377/hlthaff.2011.0617.
    \690\ American Society for Quality. (2019). What is root cause 
analysis (RCA)? Asq.org. https://asq.org/quality-resources/root-cause-analysis.
    \691\ Agency for Healthcare Research and Quality. (2020). Plan-
Do-Study-Act (PDSA) directions and examples. Www.ahrq.gov. https://www.ahrq.gov/health-literacy/improve/precautions/tool2b.html.
    \692\ Failure Modes and Effects Analysis (FMEA) Tool [verbar] 
IHI--Institute for Healthcare Improvement. (2017). Www.ihi.org. 
https://www.ihi.org/resources/Pages/Tools/FailureModesandEffectsAnalysisTool.aspx.
    \693\ Kane, R. (2014). How to Use the Fishbone Tool for Root 
Cause Analysis. https://www.cms.gov/medicare/provider-enrollment-and-certification/qapi/downloads/fishbonerevised.pdf.
    \694\ Sivashanker, K., & Gandhi, T.K. (2020). Advancing Safety 
and Equity Together. New England Journal of Medicine, 382(4), 301-
303. https://doi.org/10.1056/nejmp1911700.
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    To align with other CMS efforts, we are proposing that TEAM 
participants could voluntarily report to CMS demographic data of TEAM 
beneficiaries pursuant to 42 CFR 403.1110(b) in PY1. Beginning in PY2 
and all subsequent performance years, we propose that TEAM participants 
would be required to report demographic data of TEAM beneficiaries to 
CMS in a form and manner and by a date specified by CMS. The 
demographic data would also be required to conform to USCDI version 2 
data standards, at a minimum. Collection of this data could provide 
synergies with goals articulated in health equity plans of TEAM 
participants. Further, this expanded demographic data would allow CMS 
to gain more nuanced understanding of the expanded demographics of TEAM 
beneficiaries--including data on race, ethnicity, language, disability, 
sexual orientation, gender identity, sex characteristics, and other 
demographics--to monitor and evaluate the model.
    We propose that in conducting the collection required beginning in 
PY2 under this section that the TEAM participant would make a 
reasonable effort to collect demographic data from all TEAM 
beneficiaries; however, we recognize this may require additional 
administrative effort to collect this data or identify TEAM 
beneficiaries that may elect to not provide this data. We recognize 
that CEHRT may help to reduce administrative burden once EHR platforms 
have been programmed to capture and exchange the types of demographic 
date elements of interest. We also recognize that this demographic data 
may already be reported to CMS for other CMS initiatives.
    We seek comment on the proposed voluntary reporting of demographic 
data of TEAM beneficiaries in PY1 with mandatory reporting beginning in 
PY2 and all following performance years. As we wish to minimize 
reporting burden on TEAM participants to ensure sufficient time and 
effort is spent adjusting to the requirements of a mandatory model, we 
seek comments on how reporting of this demographic data could minimize 
burden and if it could be collected from existing data sources.
(c) Health Related Social Needs Data Reporting
    The CMS Innovation Center is charged with testing innovations that 
improve quality and reduce the cost of health care. There is strong 
evidence that non-clinical drivers of health are the largest 
contributor to health outcomes and are associated with increased health 
care utilization and costs.695 696 These individual-level, 
adverse social conditions that negatively impact a person's health or 
healthcare are referred to as ``health-related social needs'' or HRSNs. 
CMS aims to expand the collection, reporting, and analysis of 
standardized HRSNs data in its efforts to drive quality improvement, 
reduce health disparities, and better understand and address the unmet 
social needs of patients. Standardizing HRSN screening and referral as 
a practice can inform larger, community-wide efforts to ensure the 
availability of and access to community services that are responsive to 
the needs of Medicare beneficiaries. While screening for HRSN is an 
important step to identify the unmet HRSNs of patients, it is also 
critical for providers to build referral relationships with community-
based organizations and other social service organizations that can 
more directly support patients identified to have unmet HRSNs.
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    \695\ Booske, B.C., Athens, J.K., Kindig, D.A., Park, H., & 
Remington, P.L. (2010). County Health Rankings (Working Paper). 
https://www.countyhealthrankings.org/sites/default/files/differentPerspectivesForAssigningWeightsToDeterminantsOfHealth.pdf.
    \696\ ROI Calculator for Partnerships to Address the Social 
Determinants of Health Review of Evidence for Health-Related Social 
Needs Interventions. (2019). https://www.commonwealthfund.org/sites/default/files/2019-07/COMBINED-ROI-EVIDENCE-REVIEW-7-1-19.pdf.
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    While more common nationally, HRSN screening is not uniform across 
geography or health care setting. A literature review of national 
surveys measuring prevalence of HRSN screening found that 56-77 percent 
of health care payers and/or delivery organizations screened for 
HRSN.\697\ The review also found that almost half of state Medicaid 
agencies have established managed care contracting requirements for 
HRSN screening in Medicaid.\698\ Despite screening proliferation and 
generally positive views toward screening among both patients and 
health care providers, implementation of screening and referral 
policies for beneficiaries of CMS programs with similar health--and 
even demographic--profiles may be inconsistent, potentially 
exacerbating disparities in the comprehensiveness and quality of care.
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    \697\ De Marchis EH, Brown E, Aceves B, et al. State of the 
Science of Screening in Healthcare Settings. Social Interventions 
Research & Evaluation Network, 2022. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings.
    \698\ De Marchis EH, Brown E, Aceves B, et al. State of the 
Science of Screening in Healthcare Settings. Social Interventions 
Research & Evaluation Network, 2022. https://sirenetwork.ucsf.edu/tools-resources/resources/state-science-social-screening-healthcare-settings.
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    To help facilitate alignment of HRSN screening within inpatient 
settings, beginning in 2024, the Hospital Inpatient Quality Reporting 
Program began mandatory reporting of a Screening for Social Drivers of 
Health (SDOH-1) measure, the proportion of

[[Page 36452]]

admitted adults screened for five HRSNs, and a Screen Positive Rate for 
Social Drivers of Health (SDOH-2) measure, the percentage of screened 
admitted adults that screened positive for one or more HRSN. The 
measures reflect screening for five HRSNs: housing instability, food 
insecurity, transportation needs, utility difficulties, and 
interpersonal safety. The CMS Innovation Center Strategy Refresh also 
established a goal to require all new models to collect and report 
demographic and social determinants of health (SDOH) data in support of 
broader system transformation that support goals of advancing health 
equity.
    Beginning in PY1, we propose that TEAM participants would be 
required to screen attributed TEAM beneficiaries for at least four HRSN 
domains--such as but not limited to food insecurity, housing 
instability, transportation needs, and utilities difficulty--because we 
believe these areas are most pertinent for the TEAM beneficiary 
population. We also considered requiring TEAM participants to screen on 
a standardized set of HRSN domains.
    We also propose that TEAM participants would need to report 
aggregated HRSN screening data and screened-positive data for each HRSN 
domain for TEAM beneficiaries that received screening to CMS in a form 
and manner and by date(s) specified by CMS beginning in PY1 and for all 
following performance years. As part of this reporting to CMS, we also 
propose that TEAM participants would report on policies and procedures 
for referring beneficiaries to community-based organizations, social 
service agencies, or similar organizations that may support patients in 
accessing services to address unmet social needs.
    We recognize TEAM participants may already report some of this HRSN 
screening data through other CMS initiatives and requiring reporting of 
aggregated HRSN screening data in TEAM may be redundant. For example, 
the Hospital Inpatient Quality Reporting Program will begin mandatory 
reporting beginning with the CY 2024 reporting period/FY 2026 payment 
determination of two evidence-based measures related to HRSN screening: 
the Screening for Social Drivers of Health measure and the Screen 
Positive Rate for Social Drivers of Health measure (87 FR 49201 through 
49220). We therefore seek comment on reporting processes that would 
streamline reporting of aggregated HRSN screening data for attributed 
TEAM beneficiaries, including potential use of the Hospital Inpatient 
Quality Report Program measures related to HRSN screening.
    We also seek comment on how the reporting of aggregated HRSN 
screening data could incorporate data on referrals of beneficiaries 
screening positive for HRSNs to community-based organizations and other 
organizations helping to address beneficiaries' HRSNs.
(6) Other Considerations
    In addition to the preceding health equity proposals, we seek 
comment on possibly providing upfront infrastructure payments to 
qualified safety net hospital participants to further support safety 
net hospitals in the transformation of care delivery. Subject to 
certain limitations, these funds could be available to cover approved 
expenses aimed at supporting beneficiaries with unmet health and social 
needs. Payment could support Health Information Technology (health IT)/
Electronic Health Records (EHR) enhancements, to the extent they 
involve population health analytics, support care coordination with 
other providers within and across care settings, and support referrals 
to address HRSNs (such as closed loop community-based organization 
referrals). Participants might also use the infrastructure payment to 
fund the upfront expenses involved in recruiting dedicated staff (for 
example, care managers). Participants could distribute or use 
infrastructure payments received under this model in accordance with 
existing law or the terms of applicable waivers. Such funds would 
ensure the infrastructure of safety net hospitals could support the 
transformational goals of the model, and would not come out of the 
Medicare Parts A and B Trust Funds.
    We believe that transformation of acute care delivery in 
underserved areas is fundamental to addressing persistent disparities 
and engaging safety net hospitals may broaden the landscape of 
clinicians focusing on value-based care. We would need to consider the 
amount of the infrastructure payment, which may include a standard 
fixed funding component and a variable component that depends on the 
size of the population served by the safety net hospital participant. 
We would also need to define a specific set of parameters and formula 
to calculate the infrastructure payment for each qualifying TEAM 
participant and seek feedback on the set of parameters we could 
consider using.
    We seek feedback from hospitals and health IT vendors for estimates 
on the potential upfront start-up costs of health IT investments for 
safety net hospitals, such as new health information exchange 
capabilities, solutions to provide patients with access to their health 
data (for instance, patient portals), capabilities to capture patient-
reported outcomes, event notification systems, and community referral 
capacity. Should we decide to provide such payments, we also expect the 
infrastructure improvement would require financial investment on the 
part of the participant, clinicians, and other payer partners, 
including those on the commercial side.
    The goal of the infrastructure payment would be to assist safety 
net hospital participants, many of whom have less access to capital, 
participate in and be successful in this model. CMS recognizes that 
start-up and ongoing annual operating costs could vary greatly between 
participants for various reasons, including those related to the 
experience, size, and funding available to the participant.
    Past CMS Innovation Center models have proven the utility of 
infrastructure payments in certain circumstances, which may or may not 
apply to TEAM. These models include the ACO Investment Model (AIM), a 
CMS Innovation Center model that tested the effects of making advanced 
payments to certain ACOs participating in the Shared Savings Program to 
assist them in transforming care by funding infrastructure investments 
or staffing. AIM ACOs overwhelmingly used these funds to invest in 
health IT systems and care management staff and to cover administrative 
and program compliance costs. At the start of the model, many AIM ACOs 
lacked the capacity and knowledge to implement population health 
initiatives, to manage claims-based analytics, and to coordinate 
practice management. The demonstrated Medicare savings by AIM ACOs 
suggest that financial accountability with upfront investments can 
succeed in allowing under-resourced clinicians serving underserved 
areas to deliver care more efficiently and afford them more flexibility 
in how they meet beneficiaries' needs without increasing Medicare 
spending.
    To receive an infrastructure payment, we could consider the 
following requirements and seek comment on any changes: (1) require 
TEAM participants to be a safety net hospital, as defined by section 
X.A.3.f.(2)(c) of the preamble of this proposed rule. The TEAM 
participant would also submit a detailed plan that describes their 
intended use of the funds and how those funds would support the goals 
of the model and improve the care of underserved beneficiaries.

[[Page 36453]]

    With respect to use of funds for technology investments that 
involve implementing, acquiring, or upgrading health IT, the hospital 
would also be required to ensure such technology is certified under the 
ONC Health IT Certification Program or utilizes nationally recognized, 
consensus-based standards adopted under section 3004 of the PHSA,\699\ 
where such criteria or standards are available for the health IT-
related activity. Use of these standards and certification criteria 
ensure that technology investments would support interoperability 
across systems. Should we make an infrastructure payment to a safety 
net hospital, we would need to monitor the spending of infrastructure 
payments to prevent funds from being misdirected and ensure they are 
used for activities that constitute a permitted use of the funds (for 
example, health IT/EHR enhancements to the extent those involve 
population health analytics and support for referrals to address HRSNs, 
in addition to costs associated with recruiting and hiring dedicated 
staff). In addition to the initial plan of anticipated spending, should 
a safety net hospital participant receive upfront funds, they could 
also be required to submit annual reports (in a standardized format 
specified by CMS) that includes an itemization of how infrastructure 
payments were actually spent during the performance year, including 
expenditure categories, the dollar amounts spent on the various 
categories, any changes to the spend plan, and such other information 
as may be specified by CMS. This itemization could include expenditures 
not identified or anticipated in the submitted spend plan and any 
amounts remaining unspent. Any infrastructure payments that are spent 
for unauthorized purposes or are unspent at the end of a specified 
timeframe, that is, 3 years, must be repaid to CMS.
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    \699\ For more information ONC Health IT Certification Criteria, 
see https://www.healthit.gov/topic/certification-ehrs/certification-criteria. For standards and implementation specifications adopted 
under PHSA section 3004, see 45 CFR part 170, subpart B.
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    Should safety net hospital participants receive such payments, they 
would be required to retain adequate records to ensure that we have the 
information necessary to conduct appropriate monitoring and oversight 
of the use of infrastructure payments (for example, invoices, receipts, 
and other supporting documentation of disbursements). CMS would need to 
conduct audits on a percentage of funding recipients annually to 
monitor and assess a safety net hospital participant's use of 
infrastructure funds and participant compliance related to such 
payments. To encourage speedy resolution of noncompliance and provide 
an added safeguard against abuse, if CMS determines that a participant 
has spent infrastructure funds on an identified prohibited use, has 
unspent funds at the end of the designated eligible spending period, 
otherwise fails to comply with infrastructure requirements, and/or 
meets any of the grounds for termination, CMS may require repayment 
equal to the amount of any infrastructure funds spent on a prohibited 
use.
    As mandatory model, one consideration in potentially implementing 
an infrastructure payment for qualifying safety net hospital TEAM 
participants is the long-term scalability of the model. With the goal 
of longer-term expansion of the TEAM model, inclusion of a one-time 
infrastructure payment for qualifying safety net hospitals as part of 
model design could present challenges to the financial sustainability 
of the model. Accordingly, the potential objectives and benefits of the 
infrastructure payment would need to be considered against the 
feasibility of implementing this model feature should the model be 
expanded.
    We seek comment on the considerations surrounding provision of 
infrastructure payments and their utility in the acute care setting, 
including how to identify participants most likely to benefit. We also 
seek comment on how best to ensure the integrity of such payments in 
supporting the goal of addressing known health disparities among the 
episode categories we are proposing to test via TEAM. We also seek 
comment on the proposed methodology and/or parameters that could be 
used in a formula to determine the infrastructure payment amounts for 
qualifying TEAM participants.
g. Financial Arrangements
(1) Background
    We believe it is necessary to provide TEAM participants with 
flexibilities that could support their performance in TEAM and allow 
for greater support for the needs of beneficiaries. These flexibilities 
are outlined in this section and include the ability to engage in 
financial arrangements to share a TEAM participant's reconciliation 
payment amounts and repayment amounts. Such flexibilities would allow 
TEAM participants to share all or some of the TEAM participant's 
reconciliation payment amount or repayment amount. Finally, we believe 
that TEAM participants caring for beneficiaries may want to offer 
beneficiary incentives to encourage adherence to recommended treatment 
and beneficiary engagement in recovery. These financial and beneficiary 
incentives may help a TEAM participant reach their quality and 
efficiency goals for the model. They may also provide a benefit to 
beneficiaries and benefit the Medicare Trust Fund if the TEAM 
participant improves the quality and efficiency of care that results in 
reductions in hospital readmissions, complications, days in acute care, 
and mortality, while recovery continues uninterrupted or accelerates.
(2) Overview of TEAM Financial Arrangements
    We believe that TEAM participants may wish to enter into financial 
arrangements with certain providers and suppliers participating in TEAM 
activities to share their reconciliation payment amount or repayment 
amount resulting from participation in TEAM. Allowing these types of 
financial arrangements would allow the alignment of financial 
incentives of those providers and suppliers participating in TEAM 
activities to improve quality of care, drive equitable outcomes, and 
reduce Medicare spending through improved beneficiary care transitions 
and reduced fragmentation following select episodes of care. We expect 
that TEAM participants would identify key providers and suppliers 
caring for beneficiaries in the surrounding communities, and then could 
establish partnerships with these individuals and entities to promote 
accountability for the quality, cost, and overall care for 
beneficiaries, including managing and coordinating care; encouraging 
investment in infrastructure, enabling technologies, and redesigning 
care processes for high quality and efficient service delivery; and 
carrying out other obligations or duties under TEAM . These providers 
and suppliers may invest substantial time and other resources in these 
activities, yet they would not be the direct recipients of any 
reconciliation payment amounts or repayment amounts as they are not the 
risk bearing entity and do not directly participate in TEAM. Therefore, 
we believe it is possible that a TEAM participant that may receive a 
reconciliation payment amount or repayment amount may want to enter 
into financial arrangements with other providers or suppliers to share 
this reconciliation payment amount or repayment amount with the TEAM 
participant. We expect that all financial

[[Page 36454]]

relationships established between TEAM participants and providers or 
suppliers for purposes of TEAM would be those permitted only under 
applicable law and regulations, including the applicable fraud and 
abuse laws and all applicable payment and coverage requirements. As 
discussed in section X.A.3.g.(9) of the preamble of this proposed rule, 
CMS expects, if the proposed arrangements are finalized, to make a 
determination that the anti-kickback statute safe harbor for CMS-
sponsored model arrangements (42 CFR 1001.952(ii)) is available to 
protect certain remuneration proposed in this section when arrangements 
with eligible providers and suppliers are in compliance with the 
requirements established in the final rule and the conditions of the 
safe harbor for CMS-sponsored model arrangements established at 42 CFR 
1001.952(ii).
    We recognize that there are numerous arrangements that TEAM 
participants may wish to enter other than the financial arrangements 
described in the proposed regulations for which safe harbor protection 
may be extended that could be beneficial to the TEAM participants. For 
example, TEAM participants may choose to engage with organizations that 
are neither providers nor suppliers to assist with matters such as data 
analysis; local provider and supplier engagement; care redesign 
planning and implementation; beneficiary outreach; beneficiary care 
coordination and management; monitoring TEAM participants' compliance 
with the model's terms and conditions; or other model-related 
activities. Such organizations may play important roles in a TEAM 
participant's plans to implement the model based on the experience 
these organizations may bring, such as prior experience with episode-
based payment models, care coordination expertise, familiarity with a 
particular local, or knowledge of bundled data. We expect that all 
relationships established between TEAM participants and these 
organizations for purposes of the model would be those permitted only 
under existing law and regulation, including any relationships that 
would include the TEAM participant's sharing of the reconciliation 
payment amount or repayment amount. We would expect these relationships 
to be solely based on the level of engagement of the organization's 
resources to directly support the TEAM participants' model 
implementation.
(3) TEAM Collaborators
    As proposed, TEAM is a two-sided financial risk model and the TEAM 
participant would bear sole financial risk for any repayment amount to 
CMS in the absence of financial arrangements. However, given the 
incentive to reduce episode spending to earn a reconciliation payment 
amount, as described in section X.A.3.d.(5)(j) of the preamble of this 
proposed rule, a TEAM participant may want to engage in financial 
arrangements with providers and suppliers or participants in Medicare 
ACO initiatives who are making contributions to the TEAM participant's 
performance in the model. Such arrangements would allow the TEAM 
participant to share reconciliation payment amounts or repayment 
amounts with individuals and entities that have a role in the TEAM 
participant's performance in the model. We propose to use the term 
``TEAM collaborator'' to refer to these individuals and entities.
    Because TEAM participants would be accountable for spending and 
quality during the anchor hospitalization or anchor procedure and the 
30-day post discharge period, as described in section X.A.3.b.(5) of 
the preamble of this proposed rule, providers and suppliers other than 
the TEAM participant may furnish services to the beneficiary during the 
model performance period. As such, for purposes of the Federal anti-
kickback statute safe harbor for CMS-sponsored model arrangements (42 
CFR 1001.952(ii)), we propose at Sec.  512.505 that the following types 
of providers and suppliers that are Medicare-enrolled and eligible to 
participate in Medicare or entities that are participating in a 
Medicare ACO initiative may be TEAM collaborators:
     Skilled Nursing Facility (SNF).
     Home Health Agency (HHA).
     Long-Term Care Hospital (LTCH).
     Inpatient Rehabilitation Facility (IRF).
     Physician.
     Nonphysician practitioner.
     Therapist in a private practice.
     Comprehensive Outpatient Rehabilitation Facility (CORF).
     Provider or supplier of outpatient therapy services.
     Physician Group Practice (PGP).
     Hospital.
     Critical Access Hospital (CAH).
     Non-physician provider group practice (NPPGP).
     Therapy group practice (TGP).
     Medicare ACO.
    We seek comment on the proposed definition of TEAM collaborators 
and any additional Medicare-enrolled providers or suppliers, such as 
Rural Emergency hospitals, Rural Health Clinics, and Federally 
Qualified Health Centers, that should be included in this definition.
(4) Sharing Arrangements
(a) General
    Similar to the CJR Model (42 CFR 510.500), we propose that certain 
financial arrangements between a TEAM participant and a TEAM 
collaborator be termed ``sharing arrangements.'' For purposes of the 
Federal anti-kickback statute safe harbor for CMS-sponsored model 
arrangements (42 CFR 1001.952(ii)), we propose that a sharing 
arrangement would be to share reconciliation payment amounts or 
repayment amounts. Where a payment from a TEAM participant to a TEAM 
collaborator is made pursuant to a sharing arrangement, we propose to 
define that payment as a ``gainsharing payment,'' which is discussed in 
section X.A.3.g.(4)(c) of the preamble of this proposed rule. Where a 
payment from a TEAM collaborator to a TEAM participant is made pursuant 
to a sharing arrangement, we propose to define that payment as an 
``alignment payment,'' which is discussed in section X.A.3.g.(4)(c) of 
the preamble of this proposed rule. A TEAM participant must not make a 
gainsharing payment or receive an alignment payment except in 
accordance with a sharing arrangement. We propose that a sharing 
arrangement must comply with the provisions of section X.A.3.g.(b) of 
the preamble of this proposed rule. And all other applicable laws and 
regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements. We propose that the TEAM 
participant and TEAM collaborator must document this agreement in 
writing and, per monitoring and compliance guidelines (Sec.  512.590), 
we propose that it must be made available to CMS upon request.
    We propose that the TEAM participant must develop, maintain, and 
use a set of written policies for selecting individuals and entities to 
be TEAM collaborators. To safeguard against potentially fraudulent or 
abusive practices, we propose that the selection criteria determined by 
the TEAM participant must include the quality of care delivered by the 
potential TEAM collaborator. Moreover, the selection criteria cannot be 
based directly or indirectly on the volume or value of referrals or 
business otherwise generated by, between or among the TEAM participant, 
any TEAM collaborator, any collaboration agent, or any individual or 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent. In addition to including quality of care in their selection 
criteria, TEAM participants must also consider selection of TEAM

[[Page 36455]]

collaborators based on criteria that include the anticipated 
contribution to the performance of the TEAM participant in the model by 
the potential TEAM collaborator to ensure that the selection of TEAM 
collaborators takes into consideration the likelihood of their future 
performance.
    Finally, we propose that if a TEAM participant enters a sharing 
arrangement, its compliance program must include oversight of sharing 
arrangements and compliance with the applicable requirements of the 
model. Requiring oversight of sharing arrangements to be included in 
the compliance program provides a program integrity safeguard.
    We seek comment about all provisions described in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
(b) Requirements
    We propose several requirements for sharing arrangements to help 
ensure that their sole purpose is to create financial alignment between 
TEAM participants and TEAM collaborators toward the goals of the model 
while maintaining adequate program integrity safeguards. We propose 
that the sharing arrangement must be in writing, signed by the parties, 
and entered into before care is furnished to TEAM beneficiaries under 
the sharing arrangement. In addition, participation in a sharing 
arrangement must be voluntary and without penalty for nonparticipation. 
It is important that providers and suppliers rendering items and 
services to beneficiaries during the model performance period have the 
freedom to provide medically necessary items and services to 
beneficiaries without any requirement that they participate in a 
sharing arrangement to safeguard beneficiary freedom of choice, access 
to care, and quality of care. The sharing arrangement must set out the 
mutually agreeable terms for the financial arrangement between the 
parties to guide and reward model care redesign for future performance 
toward model goals, rather than reflect the results of model 
performance years that have already occurred and where the financial 
outcome of the sharing arrangement terms would be known before signing.
    We propose that the sharing arrangement must require the TEAM 
collaborator and its employees, contractors, and subcontractors to 
comply with certain requirements that are important for program 
integrity under the arrangement. We note that the terms contractors and 
subcontractors include collaboration agents as defined later in this 
section. The sharing arrangement must require all of the individuals 
and entities party to the arrangement to comply with the applicable 
provisions of this proposed rule, including proposed requirements 
regarding beneficiary notifications, at proposed Sec.  512.582(b), 
access to records and record retention, at proposed Sec.  512.586, and 
participation in any evaluation, monitoring, compliance, and 
enforcement activities performed by CMS or its designees, at proposed 
Sec.  512.590 because these individuals and entities all would play a 
role in model care redesign and be part of financial arrangements under 
the model as proposed. The sharing arrangement must also require all 
individuals and entities party to the arrangement who are providers or 
suppliers to comply with the applicable Medicare provider enrollment 
requirement at Sec.  424.500, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement. This proposed 
requirement is to ensure that the individuals and entities have the 
required enrollment relationship with CMS under the Medicare program, 
although we note that they are not responsible for complying with 
requirements that do not apply to them. Finally, the sharing 
arrangement must require individuals and entities to comply with all 
other applicable laws and regulations.
    We propose that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between TEAM participants and TEAM 
collaborators do not negatively impact beneficiary protections under 
the model. The sharing arrangement as proposed must require the TEAM 
collaborator to have a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the 
model, just as we require TEAM participants to have a compliance 
program that covers oversight of the sharing arrangement for this 
purpose as a program integrity safeguard. We seek comment on the 
anticipated effect of the proposed compliance program requirement for 
TEAM collaborators, particularly with regard to individual physicians 
and nonphysician practitioners, small PGPs, NPPGPs, and TGPs and 
whether alternative compliance program requirements for all or a subset 
of TEAM collaborators should be adopted to mitigate any effect of the 
proposal that could make participation as a TEAM collaborator 
infeasible for any provider, supplier, or other entity on the proposed 
list of types of TEAM collaborators.
    It is necessary that TEAM participants have adequate oversight over 
sharing arrangements to ensure that all arrangements meet the 
requirements of this section and provide program integrity protections. 
Therefore, we propose that the board or other governing body of the 
TEAM participant have responsibility for overseeing the TEAM 
participant's' participation in the model, its arrangements with TEAM 
collaborators, its payment of gainsharing payments, its receipt of 
alignment payments, and its use of beneficiary incentives in the model. 
Additionally, we propose that the TEAM participant and TEAM 
collaborator must document this agreement in writing and, as part of 
the model's monitoring and compliance activities as proposed in (Sec.  
512.590), we propose that this agreement must be made available to CMS 
upon request.
    For purposes of sharing arrangements under the model, we propose at 
Sec.  512.505 to define activities related to promoting accountability 
for the quality, cost, and overall care for TEAM beneficiaries and 
performance in the model, including managing and coordinating care; 
encouraging investment in infrastructure and redesigned care processes 
for high quality and efficient service delivery; or carrying out any 
other obligation or duty under the model as TEAM activities. In 
addition to the quality of care provided during episodes, we believe 
the activities that would fall under this proposed definition encompass 
the totality of activities upon which it would be appropriate for 
sharing arrangements under the model to be based in order to value the 
contributions of providers, suppliers, and other entities toward 
meeting the performance goals of the model. We seek comment on the 
proposed definition of TEAM activities as an inclusive and 
comprehensive framework for capturing direct care and care redesign 
that contribute to performance toward model goals.
    We propose that the written agreement memorializing a sharing 
arrangement must specify the following parameters of the arrangement:
     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified TEAM activities and other services to be performed by the 
parties under the sharing arrangement.

[[Page 36456]]

     The date of the sharing arrangement.
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out TEAM activities.
     The financial or economic terms for payment, including the 
following:
    ++ Eligibility criteria for a gainsharing payment.
    ++ Eligibility criteria for an alignment payment.
    ++ Frequency of gainsharing or alignment payment.
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is solely based on quality of care and the 
provision of TEAM activities.
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we propose to require that the terms of the sharing 
arrangement must not induce the TEAM participant, TEAM collaborator, or 
any employees, contractors, or subcontractors of the TEAM participant 
or TEAM collaborator to reduce or limit medically necessary services to 
any beneficiary or restrict the ability of a TEAM collaborator to make 
decisions in the best interests of its patients, including the 
selection of devices, supplies, and treatments. These requirements are 
to ensure that the quality of care for beneficiaries is not negatively 
affected by sharing arrangements under the model.
    The proposals for the requirements for sharing arrangements under 
the model are included in Sec.  512.565. We seek comment on all of the 
requirements set out in the preceding discussion, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of the 
model are met.
(c) Gainsharing Payment and Alignment Payment Conditions and 
Limitations
    We propose several conditions and limitations for gainsharing 
payments and alignment payments as program integrity protections for 
the payments to and from TEAM collaborators. We propose to require that 
gainsharing payments be derived solely from a TEAM participant's 
reconciliation payment amounts, internal costs savings, or both; that 
they be distributed on an annual basis, not more than once per calendar 
year; that they not be a loan, advance payment, or payment for 
referrals or other business; and that they be clearly identified as a 
gainsharing payment at the time they are paid.
    We believe that gainsharing payment eligibility for TEAM 
collaborators should be conditioned on two requirements--(1) quality of 
care criteria; and (2) the provision of TEAM activities. With respect 
to the first requirement, we propose that to be eligible to receive a 
gainsharing payment, the TEAM collaborator must meet quality of care 
criteria during the performance year for which the TEAM participant 
earned a reconciliation payment amount that comprises the gainsharing 
payment. We propose that this quality of care criteria will be included 
in the sharing arrangement and mutually agreed upon by the TEAM 
participant and TEAM collaborator. With regard to the second 
requirement, to be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator other than a 
PGP, NPPGP, or TGP must have directly furnished a billable item or 
service to a TEAM beneficiary during the same performance year for 
which the TEAM participant earned a reconciliation payment amount or 
repayment amount. For purposes of this requirement, we consider a 
hospital, CAH or post-acute care provider to have ``directly 
furnished'' a billable service if one of these entities billed for an 
item or service for a TEAM beneficiary in the performance year for 
which the TEAM participant earned a reconciliation payment amount or 
repayment amount. The phrase ``episode'' refers to all Part A and B 
items and services described in section X.A.3.b.(5) (excluding the 
items and services described in section X.A.3.b.(5)(a)) of the preamble 
of this proposed rule that are furnished to a beneficiary described in 
section X.A.3.b.(5).(b) of the preamble of this proposed rule. During 
the time period that begins with the beneficiary's admission to an 
anchor hospitalization or the date of the anchor procedure, as 
applicable, and ends on the 30th day of either the date of discharge 
from the anchor hospitalization or the date of service for the anchor 
procedure. These requirements ensure that there is a required 
relationship between eligibility for a gainsharing payment and the 
direct care for TEAM beneficiaries during an episode for these TEAM 
collaborators. We believe the provision of direct care is essential to 
the implementation of effective care redesign, and the requirement 
provides a safeguard against payments to TEAM collaborators other than 
a PGP, NPPGP, or TGP that are unrelated to direct care for TEAM 
beneficiaries during the model's performance year.
    We propose to establish similar requirements for PGPs, NPPGPs and 
TGPs that vary because these entities do not themselves directly 
furnish billable services. To be eligible to receive a gainsharing 
payment or required to make an alignment payment for a given 
performance year, a PGP, NPPGP or TGP must have billed for an item or 
service that was rendered by one or more members of the PGP, NPPGP or 
TGP to a TEAM beneficiary during the episode that is attributed to the 
same performance year for which the TEAM participant earned a 
reconciliation payment amount or repayment amount. Like the proposal 
for TEAM collaborators that are not PGPs, these proposals also require 
a link between the TEAM collaborator that is the PGP, NPPGP or TGP and 
the provision of items and services to beneficiaries during the episode 
by PGP, NPPGP or TGP members.
    Moreover, we further propose that, because PGPs, NPPGPs and TGPs do 
not directly furnish items and services to beneficiaries, in order to 
be eligible to receive a gainsharing payment or be required to make an 
alignment payment, for a given performance year the PGP, NPPGP or TGP 
must have contributed to TEAM activities and been clinically involved 
in the care of beneficiaries during an episode that is attributed to 
the same performance year for which the TEAM participant earned a 
reconciliation payment amount or repayment amount that comprises the 
gainsharing payment.
    We propose that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities. We considered 
whether this methodology could substantially, rather than solely, be 
based on quality of care and the provision of TEAM activities, but 
ultimately determined that basing the methodology solely on these two 
elements creates a model safeguard where gainsharing aligns directly 
with the model goal of quality of care and with TEAM activities. The 
gainsharing methodology may take into account the amount of such TEAM 
activities provided by a TEAM collaborator relative to other TEAM 
collaborators. While we emphasize that financial arrangements may not 
be conditioned directly or indirectly on the volume or value of 
referrals or business otherwise generated by, between or among TEAM 
participants, any TEAM collaborator, any collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator,

[[Page 36457]]

or collaboration agent so that their sole purpose is to align the 
financial incentives of the TEAM participant and TEAM collaborators 
toward the model, we believe that accounting for the relative amount of 
TEAM activities by TEAM collaborators in the determination of 
gainsharing payments does not undermine this objective. Rather, the 
proposed requirement allows flexibility in the determination of 
gainsharing payments where the amount of a TEAM collaborator's 
provision of TEAM activities (including direct care) to beneficiaries 
during a performance year may contribute to the TEAM participant's 
reconciliation payment amount that may be available for making a 
gainsharing payment. Greater contributions of TEAM activities by one 
TEAM collaborator versus another TEAM collaborator that result in 
greater differences in the funds available for gainsharing payments may 
be appropriately valued in the methodology used to make gainsharing 
payments to those TEAM collaborators in order to reflect these 
differences in TEAM activities among TEAM collaborators.
    However, we do not believe it would be appropriate to allow the 
selection of TEAM collaborators or the opportunity to make or receive a 
gainsharing payment or an alignment payment to take into account the 
amount of TEAM activities provided by a potential or actual TEAM 
collaborator relative to other potential or actual TEAM collaborators 
because these financial relationships are not to be based directly or 
indirectly on the volume or value of referrals or business otherwise 
generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, or any individual or entity 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent. Specifically, with respect to the selection of TEAM 
collaborators or the opportunity to make or receive a gainsharing 
payment or an alignment payment, we do not believe that the amount of 
model activities provided by a potential or actual TEAM collaborator 
relative to other potential or actual TEAM collaborators could be taken 
into consideration by the TEAM participant without a significant risk 
that the financial arrangement in those instances could be based 
directly or indirectly on the volume or value of referrals or business 
generated by, between or among the parties. Similarly, if the 
methodology for determining alignment payments was allowed to take into 
account the amount of TEAM activities provided by a TEAM collaborator 
relative to other TEAM collaborators there would be a significant risk 
that the financial arrangement could directly account for the volume or 
value of referrals or business generated by, between or among the 
parties and, therefore, we propose that the methodology for determining 
alignment payments may not directly take into account the volume or 
value of referrals or business generated by, between or among the 
parties.
    We seek comment on this proposal, where any gainsharing payments 
must be determined in accordance with a methodology that is based on 
quality of care and the provision of TEAM activities. We also seek 
comment on whether the methodology must be based solely on these two 
elements, or if, alternately, the methodology must be based 
substantially on these two elements. We seek comment on this proposal 
for gainsharing payments, where the methodology could take into account 
the amount of TEAM activities provided by a TEAM collaborator relative 
to other TEAM collaborators. We are particularly interested in comments 
about whether this standard would provide sufficient additional 
flexibility in the gainsharing payment methodology to allow the 
financial reward of TEAM collaborators commensurate with their level of 
effort that achieves model goals. In addition, we are interested in 
comment on whether additional safeguards or a different standard is 
needed to allow for greater flexibility to provide certain performance-
based payments consistent with the goals of program integrity, 
protecting against abuse and ensuring the goals of the model are met.
    We propose that for each performance year, the aggregate amount of 
all gainsharing payments that are derived from a reconciliation payment 
amount by the TEAM participant must not exceed the amount of the 
reconciliation payment amount. In accordance with the prior discussion, 
no entity or individual, whether a party to a sharing arrangement or 
not, may condition the opportunity to make or receive gainsharing 
payments or to make or receive alignment payments on the volume or 
value of referrals or business otherwise generated by, between or among 
the TEAM participant, any TEAM collaborator, any collaboration agent, 
or any individual or entity affiliated with a TEAM participant, TEAM 
collaborator, or collaboration agent. We propose that a TEAM 
participant must not make a gainsharing payment to a TEAM collaborator 
that is subject to any action for noncompliance by CMS or any other 
federal or state entity or subject to noncompliance with any other 
federal or state laws or regulations, or for the provision of 
substandard care to beneficiaries or other integrity problems. Finally, 
the sharing arrangement must require the TEAM participant to recover 
any gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation payment amount or was based on the 
submission of false or fraudulent data. These requirements provide 
program integrity safeguards for gainsharing under sharing 
arrangements.
    With respect to alignment payments, we propose that alignment 
payments from a TEAM collaborator to a TEAM participant may be made at 
any interval that is agreed upon by both parties. Alignment payments 
must not be issued, distributed, or paid prior to the calculation by 
CMS of the repayment amount, and cannot be assessed in the absence of a 
repayment amount. The TEAM participant must not receive any amounts 
under a sharing arrangement from a TEAM collaborator that are not 
alignment payments.
    We also propose certain limitations on alignment payments that are 
consistent with the CJR model. For a performance year, the aggregate 
amount of all alignment payments received by the TEAM participant from 
all of the TEAM participant's TEAM collaborators must not exceed 50 
percent of the repayment amount. Given that the TEAM participant would 
be responsible for developing and coordinating care redesign strategies 
in response to its TEAM participation, we believe it is important that 
the TEAM participant retain a significant portion of its responsibility 
for repayment amounts. In addition, the aggregate amount of all 
alignment payments from a TEAM collaborator to the TEAM participant for 
a TEAM collaborator other than an ACO may not be greater than 25 
percent of the TEAM participant's repayment amount. The aggregate 
amount of all alignment payments from a TEAM collaborator to the TEAM 
participant for a TEAM collaborator that is an ACO may not be greater 
than 50 percent of the TEAM participant's repayment amount.
    We seek comment on our proposed aggregate and individual TEAM 
collaborator limitations on alignment payments.
    We propose that all gainsharing payments and any alignment payments 
must be administered by the TEAM participant in accordance with GAAP 
and Government Auditing Standards (The Yellow Book). Additionally, we

[[Page 36458]]

propose that all gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction. We make this proposal to mitigate the administrative 
burden that the electronic fund transfer (EFT) requirement would place 
on the financial arrangements between certain TEAM participants and 
TEAM collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, NPPGPs or TGPs which could discourage 
participation of those suppliers as TEAM collaborators. We seek comment 
on the effect of this proposal.
    The proposals for the conditions and restrictions on gainsharing 
payments, alignment payments, and internal cost savings under the model 
are included in proposed Sec.  512.56. We seek comment about all of the 
conditions and restrictions set out in the preceding discussion, 
including whether additional or different safeguards would be needed to 
ensure program integrity, protect against abuse, and ensure that the 
goals of TEAM are met.
(d) Documentation Requirements
    To ensure the integrity of the sharing arrangements, we propose 
that TEAM participants must meet a variety of documentation 
requirements for these arrangements. Specifically, the TEAM participant 
must--
     Document the sharing arrangement contemporaneously with 
the establishment of the arrangement;
     Maintain accurate current and historical lists of all TEAM 
collaborators, including TEAM collaborator names and addresses; update 
such lists on at least a quarterly basis; and publicly report the 
current and historical lists of TEAM collaborators on a web page on the 
TEAM participant's website; and
     Maintain and require each TEAM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--
    ++ Nature of the payment (gainsharing payment or alignment 
payment);
    ++ Identity of the parties making and receiving the payment;
    ++ Date of the payment;
    ++ Amount of the payment;
    ++ Date and amount of any recoupment of all or a portion of a TEAM 
collaborator's gainsharing payment; and
    ++ Explanation for each recoupment, such as whether the TEAM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment of a reconciliation payment amount, or 
was based on the submission of false or fraudulent data.
    In addition, we propose that the TEAM participant must keep records 
for all of the following:
     Its process for determining and verifying its potential 
and current TEAM collaborators' eligibility to participate in Medicare 
if the TEAM collaborator is a Medicare-enrolled provider or supplier.
     A description of current health information technology, 
including systems to track reconciliation payment amounts and repayment 
amounts.
     Its plan to track gainsharing payments and alignment 
payments.
    Finally, we propose that the TEAM participant must retain and 
provide access to, and must require each TEAM collaborator to retain 
and provide access to, the required documentation in accordance with 
section X.A.3.j. of the preamble of this proposed rule and 42 CFR 
1001.952(ii).
    The proposals for the requirements for documentation of sharing 
arrangements under the model are included in Sec.  512.565. We seek 
comment about all of the requirements set out in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
(5) Distribution Arrangements
(a) General
    Similar to the CJR model, we propose that certain financial 
arrangements between TEAM collaborators and other individuals or 
entities called ``collaboration agents'' be termed ``distribution 
arrangements.'' A collaboration agent is an individual or entity that 
is not a TEAM collaborator and that is a PGP, NPPGP, or TGP member that 
has entered into a distribution arrangement with the same PGP, NPPGP, 
or TGP in which he or she is an owner or employee. For purposes of the 
Federal anti-kickback statute safe harbor for CMS-sponsored model 
arrangements (42 CFR 1001.952(ii)), we propose that a distribution 
arrangement is a financial arrangement between a TEAM collaborator that 
is a PGP, NPPGP or TGP and a collaboration agent for the sole purpose 
of sharing a gainsharing payment received by the PGP, NPPGP or TGP. 
Where a payment from a TEAM collaborator to a collaboration agent is 
made pursuant to a TEAM distribution arrangement, we define that 
payment as a ``distribution payment.'' A collaboration agent may only 
make a distribution payment in accordance with a distribution 
arrangement which complies with the provisions of this proposed model 
and all other applicable laws and regulations, including the fraud and 
abuse laws.
    Like our proposal for gainsharing payments, we propose that the 
amount of any distribution arrangements must be determined in 
accordance with a methodology that is solely based on quality of care 
and the provision of TEAM activities. We considered whether this 
methodology could substantially, rather than solely, be based on 
quality of care and the provision of TEAM activities, but ultimately 
determined that basing the methodology solely on these two elements 
creates a model safeguard where gainsharing aligns directly with the 
model goal of quality of care and with TEAM activities.
    The proposals for the general provisions for distribution 
arrangements under the model are included in Sec.  512.568. We seek 
comment about all of the provisions set out in the preceding 
discussion, including whether additional or different safeguards would 
be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the model are met.
(b) Requirements
    We propose several specific requirements for distribution 
arrangements as a program integrity safeguard to help ensure that their 
sole purpose is to create financial alignment between TEAM 
collaborators and collaboration agents and performance toward TEAM 
goals. These requirements largely parallel those proposed in section 
X.A.3.g.(4) Of the preamble of this proposed rule for sharing 
arrangements and gainsharing payments based on similar reasoning for 
these two types of arrangements and payments. We propose that all 
distribution arrangements must be in writing and signed by the parties, 
contain the effective date of the agreement, and be entered into before 
care is furnished to TEAM beneficiaries under the distribution 
arrangement. Furthermore, we propose that participation must be 
voluntary and without penalty for nonparticipation, and the 
distribution arrangement must require the collaboration agent to comply 
with all applicable laws and regulations.
    We seek comment on this proposal, where any distribution payments 
must be determined in accordance with a

[[Page 36459]]

methodology that is based on quality of care and the provision of TEAM 
activities. We also seek comment on whether the methodology must be 
based solely on these two elements, or if the methodology must be based 
substantially on these two elements. Additionally, and also like our 
proposal for gainsharing payments, we propose that the opportunity to 
make or receive a distribution payment must not be conditioned directly 
or indirectly on the volume or value of referrals or business otherwise 
generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, or any individual or entity 
affiliated with a TEAM participant, TEAM collaborator, or collaboration 
agent. We propose more flexible standards for the determination of the 
amount of distribution payments from PGPs, NPPGPs and TGPs allowing 
TEAM collaborators and collaboration agents to create tailored 
distribution payments that supports the individual structure of their 
arrangement.
    We note that for distribution payments made by a PGP to PGP 
members, by NPPGPs to NPPGP members, or TGPs to TGP members, the 
requirement that the amount of any distribution payments must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities may be more 
limiting in how a PGP, NPPGP or TGP pays its members than is allowed 
under existing law. However, we believe quality of care is an important 
facet of episode-based payment models and making this a requirement for 
distribution payment supports greater emphasis on quality of care 
improvement in TEAM. Further this is consistent with the BPCI Advanced 
model that required their NPRA Shared Payments and Partner Distribution 
Payments to achieve quality performance targets to receive these 
payments.
    We seek comment on this proposal and specifically whether there are 
additional safeguards or a different standard is needed to allow for 
greater flexibility in calculating the amount of distribution payments 
that would avoid program integrity risks and whether additional or 
different safeguards are reasonable, necessary, or appropriate for the 
amount of distribution payments from a PGP to its members, a NPPGP to 
its members or a TGP to its members.
    Similar to our proposed requirements for sharing arrangements for 
those TEAM collaborators that furnish or bill for items and services, 
we propose that a collaboration agent is eligible to receive a 
distribution payment only if the collaboration agent furnished or 
billed for an item or service rendered to a beneficiary during an 
episode that occurred during the same performance year for which the 
TEAM participant accrued the internal cost savings or earned a 
reconciliation payment amount that comprises the gainsharing payment 
being distributed. We note that all individuals and entities that fall 
within our proposed definition of collaboration agent may either 
directly furnish or bill for items and services rendered to 
beneficiaries. This proposal ensures that, there is the same required 
relationship between direct care for beneficiaries during a performance 
year and distribution payment eligibility that we require for 
gainsharing payment eligibility. We believe this requirement provides a 
safeguard against payments to collaboration agents that are unrelated 
to direct care for beneficiaries during the performance year.
    We further propose that with respect to the distribution of any 
gainsharing payment received by an ACO, PGP, NPPGP or TGP, the total 
amount of all distribution payments in a performance year must not 
exceed the amount of the gainsharing payment received by the TEAM 
collaborator from the TEAM participant for that performance year. Like 
gainsharing and alignment payments, we propose that all distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. The collaboration agent must retain the 
ability to make decisions in the best interests of the beneficiary, 
including the selection of devices, supplies, and treatments. Finally, 
the distribution arrangement must not induce the collaboration agent to 
reduce or limit medically necessary items and services to any Medicare 
beneficiary or reward the provision of items and services that are 
medically unnecessary.
    We propose that the TEAM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.586, including--
     The relevant written agreements;
     The date and amount of any distribution payment(s);
     The identity of each collaboration agent that received a 
distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any distribution payment.
    We propose that the TEAM collaborator may not enter into a 
distribution arrangement with any individual or entity that has a 
sharing arrangement with the same TEAM participant. This proposal 
ensures that the proposed separate limitations on the total amount of 
gainsharing payment and distribution payment to PGPs, NPPGPs, TGPs, 
physicians, and nonphysician practitioners that are solely based on 
quality of care and the provision of TEAM activities are not exceeded 
in absolute dollars by a PGP, NPPGP, TGP, physician, or nonphysician 
practitioner's participation in both a sharing arrangement and 
distribution arrangement for the care of the same TEAM beneficiaries 
during the performance year. Allowing both types of arrangements for 
the same individual or entity for care of the same beneficiary during 
the performance year could also allow for duplicate counting of the 
individual or entity's same contribution toward model goals and 
provision of TEAM activities in the methodologies for both gainsharing 
and distribution payments, leading to financial gain for the individual 
or entity that is disproportionate to the contribution toward model 
goals and provision of TEAM activities by that individual or entity. 
However, we recognize there could be instances where an individual or 
entity could have distribution arrangements with multiple TEAM 
collaborators. For example, a physician may practice with and have 
reassigned their Medicare billing rights to multiple PGPs, and those 
PGPs may each be TEAM collaborators. We seek comment on allowing an 
individual or entity to have distribution arrangements with multiple 
TEAM collaborators and whether there are additional program integrity 
safeguards that should be established in those scenarios. Finally, we 
propose that the TEAM collaborator must retain and provide access to, 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with Sec.  512.586.
    The proposals for requirements for distribution arrangements under 
the model are included in Sec.  512.568. We seek comment about all of 
the requirements set out in the preceding discussion, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of the 
model are met. In addition, we seek comment on how the regulation of 
the financial arrangements under this proposal may interact with how 
these or similar financial arrangements are regulated under the 
Medicare Shared Savings Program.

[[Page 36460]]

(6) Downstream Distribution Arrangements
(a) General
    We propose that TEAM allow for certain financial arrangements 
within an ACO between a PGP and its members. Specifically, we propose 
that certain financial arrangements between a collaboration agent that 
is both a PGP, NPPGP, or TGP and an ACO participant and other 
individuals termed ``downstream collaboration agents'' be termed a 
``downstream distribution arrangement.'' A downstream distribution 
arrangement is a financial arrangement between a collaboration agent 
that is both a PGP, NPPGP, or TGP and an ACO participant and a 
downstream collaboration agent for the sole purpose of sharing a 
distribution payment received by the PGP, NPPGP, or TGP. A downstream 
collaboration agent is an individual who is not a TEAM collaborator or 
a collaboration agent and who is a PGP member, a NPPGP member, or a TGP 
member that has entered into a downstream distribution arrangement with 
the same PGP, NPPGP, or TGP in which he or she is an owner or employee, 
and where the PGP, NPPGP, or TGP is a collaboration agent. Where a 
payment from a collaboration agent to a downstream collaboration agent 
is made pursuant to a downstream distribution arrangement, we define 
that payment as a ``downstream distribution payment.'' A collaboration 
agent may only make a downstream distribution payment in accordance 
with a downstream distribution arrangement which complies with the 
requirements of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
    We seek comment about all of the provisions set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the TEAM are met.
(b) Requirements
    We propose several specific requirements for downstream 
distribution arrangements as a program integrity safeguard to help 
ensure that their sole purpose is to create financial alignment between 
collaboration agents that are PGPs, NPPGPs, or TGPs which are also ACO 
participants and downstream collaboration agents toward the goals of 
the TEAM to improve the quality and efficiency of episodes. These 
requirements largely parallel those proposed for sharing and 
distribution arrangements at proposed Sec.  512.565 and Sec.  512.568 
and gainsharing and distribution payments at proposed Sec.  512.565 and 
Sec.  512.568 based on similar reasoning for these types of 
arrangements and payments. We propose that all downstream distribution 
arrangements must be in writing and signed by the parties, contain the 
effective date of the agreement, and entered into before care is 
furnished to TEAM beneficiaries under the downstream distribution 
arrangement. Furthermore, we propose that participation must be 
voluntary and without penalty for nonparticipation, and the downstream 
distribution arrangement must require the downstream collaboration 
agent to comply with all applicable laws and regulations.
    Like our proposals for gainsharing and distribution payments, we 
propose that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of referrals or business otherwise generated by, 
between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent. 
We propose the amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
downstream collaboration agent relative to other downstream 
collaboration agents. We believe that the amount of a downstream 
collaboration agent's provision of TEAM activities (including direct 
care) to TEAM beneficiaries during episodes may contribute to the TEAM 
participant's internal cost savings and reconciliation payment amount 
that may be available for making a gainsharing payment to the TEAM 
collaborator that is then shared through a distribution payment to the 
collaboration agent with which the downstream collaboration agent has a 
downstream distribution arrangement. Greater contributions of TEAM 
activities by one downstream collaboration agent versus another 
downstream collaboration agent that result in different contributions 
to the distribution payment made to the collaboration agent with which 
the downstream collaboration agents both have a downstream distribution 
arrangement may be appropriately valued in the methodology used to make 
downstream distribution payments to those downstream collaboration 
agents.
    Similar to our proposed requirements for distribution arrangements 
for those TEAM collaborators that are PGPs, we propose that a 
downstream collaboration agent is eligible to receive a downstream 
distribution payment only if the PGP billed for an item or service 
furnished by the downstream collaboration agent to a TEAM beneficiary 
during an episode that was attributed to the same performance year for 
which the TEAM participant accrued the internal cost savings or earned 
the reconciliation payment amount that comprise the gainsharing payment 
from which the ACO made the distribution payment to the PGP that is an 
ACO participant. This proposal ensures that there is the same required 
relationship between direct care for TEAM beneficiaries during episodes 
and downstream distribution payment eligibility that we require for 
gainsharing and distribution payment eligibility. We believe this 
requirement provides a safeguard against payments to downstream 
collaboration agents that are unrelated to direct care for TEAM 
beneficiaries during episodes.
    We further propose that the total amount of all downstream 
distribution payments made to downstream collaboration agents must not 
exceed the amount of the distribution payment received by the 
collaboration agent (that is, the PGP, NPPGP, or TGP that is an ACO 
participant) from the ACO that is a TEAM collaborator. Like 
gainsharing, alignment, and distribution payments, we propose that all 
downstream distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction. The downstream 
collaboration agent must retain the ability to make decisions in the 
best interests of the patient, including the selection of devices, 
supplies, and treatments. The distribution arrangement must not induce 
a downstream collaboration agent to reduce or limit medically necessary 
items and services to any Medicare beneficiary or reward the provision 
of items and services that are medically unnecessary.
    We propose that the PGP, NPPGP, or TGP must maintain 
contemporaneous documentation regarding downstream distribution 
arrangements in accordance with Sec.  512.586, including all of the 
following:
     The relevant written agreements.
     The date and amount of any downstream distribution 
payment(s).

[[Page 36461]]

     The identity of each downstream collaboration agent that 
received a downstream distribution payment.
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We propose that the PGP, NPPGP, or TGP may not enter into a 
downstream distribution arrangement with any PGP, NPPGP, or TGP member 
who has a sharing arrangement with a TEAM participant or distribution 
arrangement with the ACO the PGP, NPPGP, or TGP is a participant in. 
This proposal ensures that the proposed separate limitations on the 
total amount of gainsharing payment, distribution payment, and 
downstream distribution payment to PGP, NPPGP, or TGP members that are 
solely based on quality of care and the provision of TEAM activities 
are not exceeded in absolute dollars by a PGP, NPPGP, or TGP member's 
participation in more than one type of arrangement for the care of the 
same TEAM beneficiaries during episodes. Allowing more than one 
arrangement for the same PGP, NPPGP, or TGP member for the care of the 
same TEAM beneficiaries during episodes could also allow for duplicate 
counting of the PGP, NPPGP, or TGP member's effort in TEAM activities 
in the methodologies for the different payments. Finally, we propose 
that the PGP, NPPGP, or TGP must retain and provide access to, and must 
require downstream collaboration agents to retain and provide access 
to, the required documentation in accordance with Sec.  512.586.
    We seek comment about all of the requirements, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of TEAM are 
met.
(7) Beneficiary Incentives
    We believe it is necessary and appropriate to provide additional 
flexibilities to TEAM participants for purposes of testing the Model, 
to give TEAM participants additional access to the tools necessary to 
improve beneficiaries' quality of care, drive equitable outcomes, and 
reduce Medicare spending through improved beneficiary care transitions 
and reduced fragmentation during episodes of care. TEAM participants 
may choose to provide in-kind patient engagement incentives to 
beneficiaries in an episode, which may include but not be limited to 
items of technology, subject to the following conditions consistent 
with 42 CFR 510.515.
    As discussed in section X.A.3.g.(9) of the preamble of this 
proposed rule, if the proposed beneficiary incentives are finalized, we 
expect to make a determination that the anti-kickback statute safe 
harbor for CMS-sponsored model patient incentives (42 CFR 1001.952(ii)) 
is available to protect the beneficiary incentives proposed in this 
section when the incentives are offered in compliance with the 
requirements established in the final rule and the conditions for use 
of the anti-kickback statute safe harbor set out at 42 CFR 
1001.952(ii).
    As stated previously, TEAM participants may choose to provide in-
kind engagement incentives, which may include but not be limited to 
items of technology, to TEAM beneficiaries in an episode, subject to 
the following proposed conditions. We propose that the incentive must 
be provided directly by the TEAM participant or by an agent of the TEAM 
participant under their direction and control to the TEAM beneficiary 
during an episode. Additionally, we propose that the item or service 
provided must be reasonably connected to the TEAM beneficiary's medical 
care, and be a preventive care item or service or an item of service 
that advances a clinical goal, as described in section X.A.3.g.(7)(b) 
of the preamble of this proposed rule, by engaging the TEAM beneficiary 
in better managing their own health. We seek comment on the proposed 
conditions for TEAM beneficiary incentives, as outlined in 512.575. 
Specifically, we seek comment on whether these proposed conditions are 
reasonable, and whether additional conditions are appropriate to 
further engage TEAM beneficiaries in their own healthcare management 
while preventing fraud or abuse.
(a) Technology Provided to a TEAM Beneficiary
    In some cases, items or services involving technology may be useful 
as beneficiary engagement incentives that can advance a clinical goal 
of TEAM by engaging a beneficiary in managing their health during the 
30 days following discharge from the anchor hospitalization or anchor 
procedure. However, we believe specific enhanced safeguards are 
necessary for these items and services to prevent abuse, and our 
proposals are consistent with the CJR model policies (80 FR 73437). 
Specifically, we propose that items or services involving technology 
provided to a beneficiary may not exceed $1,000 in retail value for any 
TEAM beneficiary in any episode (per episode), and that items or 
services involving technology provided to a TEAM beneficiary must be 
the minimum necessary to advance a clinical goal as discussed in this 
section for a TEAM beneficiary in an episode. We propose additional 
enhanced requirements for items of technology exceeding $75 in retail 
value as an additional safeguard against misuse of these items as 
beneficiary engagement incentives. Specifically, we propose that these 
items of technology that exceed $75 in retail value remain the property 
of the TEAM participant and be retrieved from the TEAM beneficiary at 
the end of the episode. The TEAM participant must document all 
retrieval attempts, including the ultimate date of retrieval. We 
understand that TEAM participants may not always be able to retrieve 
these items after the episode ends, such as when a TEAM beneficiary 
dies or moves to another geographic area. Therefore, in cases when the 
item of technology is not able to be retrieved, the TEAM participant 
must determine why the item was not retrievable and if it was 
determined that the item was used inappropriately (if it were sold, for 
example) preventing future beneficiary incentives for that TEAM 
beneficiary. Following this process, the documentation of diligent, 
good faith attempts to retrieve items of technology will be deemed to 
meet the retrieval requirement.
    Our proposals for enhanced requirements for technology provided to 
TEAM beneficiaries as beneficiary engagement incentives under TEAM are 
included in proposed Sec.  512.578. We seek comment on our proposed 
requirements for beneficiary engagement incentives that involve 
technology. Additionally, we seek comment on the types of technology 
that may be useful to advance the goals of the Model. We welcome 
comment on additional or alternative program integrity safeguards for 
this type of beneficiary engagement incentive, including whether the 
financial thresholds proposed in this section are reasonable, 
necessary, and appropriate.
(b) Clinical Goals of TEAM
    As discussed in section X.A.3.b. of the preamble of this proposed 
rule, the proposed episodes are broadly defined to include most Part A 
and Part B items and services furnished during episodes of care that 
extend 30 days following discharge from the anchor hospitalization or 
anchor procedure that begins the episode. Therefore, we believe that 
in-kind beneficiary engagement incentives may appropriately be provided 
for managing acute conditions arising from episodes, as well as chronic 
conditions if the condition is likely to have been affected

[[Page 36462]]

by care during the episode or when substantial services are likely to 
be provided for the chronic condition during the episode. We are 
proposing to allow TEAM participants to offer in-kind beneficiary 
engagement incentives, where such incentives must be closely related to 
the provision of high-quality care and advance a clinical goal for a 
TEAM beneficiary and should not serve as inducements for TEAM 
beneficiaries to seek care from the TEAM participants or other specific 
suppliers and providers. We propose that beneficiary incentives must 
advance one of the following clinical goals of TEAM:
     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment during the episode.
     Management of chronic diseases and conditions that may be 
affected by treatment for the TEAM clinical condition.
    Our proposals for beneficiary engagement incentives are included in 
Sec.  512.575. We seek comment on our proposed clinical goals of TEAM, 
as well as whether the advancement of additional or different clinical 
goals through beneficiary engagement incentives may better advance the 
overarching goals of TEAM while maintaining appropriate program 
integrity safeguards.
(c) Documentation of Beneficiary Engagement Incentives
    As a program safeguard against misuse of beneficiary engagement 
incentives under TEAM, we propose that TEAM participants must maintain 
documentation of items and services furnished as beneficiary engagement 
incentives that exceed $25 in retail value including items of 
technology. In addition, we propose to require that the documentation 
established contemporaneously with the provision of the items and 
services must include at least the following:
     The date the incentive is provided.
     The incentive and estimated value of the item or service.
     The identity of the beneficiary to whom the item or 
service was provided.
    We further propose that the documentation regarding items of 
technology exceeding $75 in retail that are required to be retrieved 
from the beneficiary at the end of an episode must also include 
contemporaneous documentation of any attempt to retrieve technology. In 
instances where the item of technology is not able to be retrieved, the 
TEAM participant must determine why it is not retrievable, and if the 
item were misappropriated (if it were sold, for example), then further 
steps must be taken to ensure that TEAM beneficiary does not receive 
further TEAM beneficiary incentives. Following this process, 
documented, diligent, good faith attempts to retrieve items of 
technology will be deemed to meet the retrieval requirement.
    Finally, we propose that the TEAM participant must retain and 
provide access to the required documentation in accordance with Sec.  
512.586.
    Our proposals for the documentation requirements for beneficiary 
engagement incentives under TEAM are included in proposedSec.  
512.578(d). We seek comment on our proposed documentation requirements, 
including whether additional or different documentation requirements 
may provide better program integrity safeguards.
(8) Enforcement Authority
    OIG authority is not limited or restricted by the provisions of the 
model, including the authority to audit, evaluate, investigate, or 
inspect the TEAM participant, TEAM collaborators, collaboration agents, 
downstream collaboration agents, or any other person or entity or their 
records, data, or information, without limitations. Additionally, no 
model provisions limit or restrict the authority of any other 
Government Agency to do the same.
    The proposals for enforcement authority under the model are 
included in Sec.  512.575. We seek comment about all of the 
requirements set out in the preceding discussion, including whether 
additional or different safeguards would be needed to ensure program 
integrity, protect against abuse, and ensure that the goals of the 
model are met.
(9) Fraud and Abuse Waiver and OIG Safe Harbor Authority
    Under section 1115A(d)(1) of the Act, the Secretary may waive such 
requirements of Titles XI and XVIII and of sections 1902(a)(1), 
1902(a)(13), 1903(m)(2)(A)(iii) of the Act, and certain provisions of 
section 1934 of the Act as may be necessary solely for purposes of 
carrying out section 1115A of the Act with respect to testing models 
described in section 1115A(b) of the Act.
    For this model and consistent with the authority under section 
1115A(d)(1) of the Act, the Secretary may consider issuing waivers of 
certain fraud and abuse provisions in sections 1128A, 1128B, and 1877 
of the Act. No fraud or abuse waivers are being issued in this 
document; fraud and abuse waivers, if any, would be set forth in 
separately issued documentation. Any such waiver would apply solely to 
TEAM and could differ in scope or design from waivers granted for other 
programs or models. Thus, notwithstanding any provision of this 
proposed rule, TEAM participants, TEAM collaborators, collaboration 
agents, and downstream collaboration agents must comply with all 
applicable laws and regulations, except as explicitly provided in any 
such separately documented waiver issued pursuant to section 
1115A(d)(1) of the Act specifically for TEAM.
    In addition to or in lieu of a waiver of certain fraud and abuse 
provisions in sections 1128A and 1128B of the Act, CMS expects to make 
a determination that the anti-kickback statute safe harbor for CMS-
sponsored model arrangements and CMS-sponsored model patient incentives 
(42 CFR 1001.952(ii) (1) and 42 CFR 1001.952(ii)(2)) is available to 
protect remuneration exchanged pursuant to certain financial 
arrangements and patient incentives that may be permitted under the 
final rule, if issued. Specifically, if the proposed rule is finalized, 
we expect to determine that the CMS-sponsored models safe harbor will 
be available to protect the following financial arrangements and 
incentives: the TEAM sharing arrangement's gainsharing payments and 
alignment payments, the distribution arrangement's distribution 
payments with TEAM collaborators and collaboration agents, the 
downstream distribution arrangements and downstream distribution 
payments with collaboration agents and downstream collaboration agents, 
and TEAM beneficiary incentives. At proposed Sec.  512.576, we propose 
to make the Federal anti-kickback statute safe harbor for CMS-sponsored 
model arrangements available to protect remuneration furnished in the 
TEAM in the form of sharing arrangement's gainsharing payments and 
alignment payments, the distribution arrangement's distribution 
payments, and the downstream distribution arrangement's distribution 
payments provided that all of the financial arrangements associated 
with such payment meet all safe harbor requirements set forth in 42 CFR 
1001.952(ii), proposed Sec.  512.565, proposed Sec.  512.568, and 
proposed Sec.  512.570. We considered, but are not proposing, adopting 
an alternative approach in which the availability of the safe harbor 
for a specific type of financial arrangement would only be conditioned 
on compliance with the specific requirements for that type of financial 
arrangement and the

[[Page 36463]]

compliance of the other financial arrangements associated with such 
payment would not implicate the availability of the safe harbor. For 
example, we considered, but are not proposing, an alternative proposal 
making the availability of the safe harbor for sharing arrangement's 
gainsharing payments only conditioned on compliance with the 
requirements associated with that type of financial arrangement and not 
also conditioned on the compliance of a downstream financial 
arrangement associated with such payment.
    We considered not allowing use of the safe harbor provisions. 
However, we decided that use of the safe harbor will encourage the 
goals of the model. We believe that a successful model requires 
integration and coordination among TEAM participants and other health 
care providers and suppliers. We believe the use of the safe harbor 
will encourage and improve beneficiary experience of care and 
coordination of care among providers and suppliers. We also believe 
these safe harbors offer flexibility for innovation and customization. 
The safe harbors allow for emerging arrangements that reflect up-to-
date understandings in medicine, science, and technology.
    We seek comment on this proposal, including that the anti-kickback 
safe harbor for CMS-sponsored model arrangements (42 CFR 
1001.952(ii)(1)) and CMS-sponsored model patient incentives (42 CFR 
1001.952(ii)(2)) be available to TEAM participants and TEAM 
collaborators, collaboration agents, and downstream collaboration 
agents.
h. Proposed Waivers of Medicare Program Requirements
(1) Overview
    We believe it may be necessary and appropriate to provide 
flexibilities to hospitals participating in TEAM, as well as other 
providers and suppliers that furnish services to beneficiaries in 
episodes. The purpose of such flexibilities would be to increase 
episode quality, decrease episode spending or internal costs, or both 
of providers and suppliers, resulting in better, more coordinated care 
for beneficiaries and improved financial efficiencies for Medicare, 
providers, and beneficiaries. These possible additional flexibilities 
could include use of our waiver authority under section 1115A of the 
Act, which provides authority for the Secretary to waive such 
requirements of title XVIII of the Act as may be necessary solely for 
purposes of carrying out section 1115A of the Act with respect to 
testing models described in section 1115A(b) of the Act. This provision 
affords broad authority for the Secretary to waive statutory Medicare 
program requirements as necessary to carry out the provisions of 
section 1115A of the Act.
    As we have stated elsewhere in section X.A.2.c. of the preamble of 
this proposed rule, our previous and current efforts in testing episode 
payment models have led us to believe that models where entities bear 
financial responsibility for total Medicare spending for episodes of 
care hold the potential to incentivize the most substantial 
improvements in episode quality and efficiency. As discussed in section 
X.A.3.a.(3) of the preamble of this proposed rule, we are proposing 
that TEAM participants participating in Track 1 of this model be 
eligible for reconciliation payment amounts based on spending and 
quality performance in PY1. TEAM participants in Track 2 would be 
eligible for repayment amounts and reconciliation payment amounts 
starting in PY2, while TEAM participants in Track 3 are eligible for 
repayment amounts and reconciliation payment amounts starting in PY1. 
We believe that where TEAM participants bear financial accountability 
for excess episode spending beyond the reconciliation target price 
while high quality care is valued, they will have an increased 
incentive to coordinate care furnished by the hospital and other 
providers and suppliers throughout the episode to improve the quality 
and efficiency of care. With these incentives present, there may be a 
reduced likelihood of over-utilization of services that could otherwise 
result from waivers of Medicare program rules. Given these 
circumstances, waivers of certain program rules for providers and 
suppliers furnishing services to TEAM beneficiaries may be appropriate 
to offer more flexibility than under existing Medicare rules for such 
providers and suppliers, so that they may provide appropriate, 
efficient care for beneficiaries. An example of such a program rule 
that could be waived to potentially allow more efficient inpatient 
episodes would be the 3-day inpatient hospital stay requirement prior 
to a covered skilled nursing facility (SNF) stay for beneficiaries who 
could appropriately be discharged to a SNF after less than a 3-day 
inpatient hospital stay. This type of waiver was implemented in a range 
of previous and existing CMS initiatives, including various episode-
based payment models and accountable care initiatives.
    We welcome comments on possible waivers under section 1115A of the 
Act of certain Medicare program rules beyond those specifically 
discussed in this proposed rule that might be necessary to test this 
model. We will consider the comments that are received during the 
public comment period and may make future proposals regarding program 
rule waivers during the course of the model test. We are especially 
interested in comments explaining how such waivers could provide 
providers and suppliers with additional flexibilities that are not 
permitted under existing Medicare rules to increase quality of care and 
reduce unnecessary episode spending, but that could be appropriately 
used in the context of TEAM where TEAM participants bear full 
responsibility for total episode spending.
    Specific program rules for which we propose waivers under TEAM to 
support provider and supplier efforts to increase quality and decrease 
episode spending and for which we invite comments are included in the 
sections that follow. We propose that these waivers of program rules 
would apply to the care of beneficiaries who are in episodes at the 
time when the waiver is used to bill for a service that is furnished to 
the beneficiary, even if the episode is later cancelled as described in 
section X.A.3.b.(5)(e) of the preamble of this proposed rule. Finally, 
we propose that if a service is found to have been billed and paid by 
Medicare under circumstances only allowed by a program rule waiver for 
a beneficiary not in TEAM at the time the service was furnished, CMS 
would recover payment for that service from the provider or supplier 
who was paid, and require that provider and supplier to repay the 
beneficiary for any coinsurance previously collected.
(2) Post-Discharge Home Visits and Homebound Requirement
    We expect that the broadly defined episodes with a duration of 30 
days following an anchor hospitalization or anchor procedure discharge 
as we propose in section X.A.3.b. of the preamble of this proposed rule 
would result in TEAM participants redesigning care by increasing care 
coordination and management of beneficiaries following discharge from 
an anchor hospitalization or anchor procedure. This result would 
require TEAM participants to pay close attention to any underlying 
medical conditions that could be affected by the anchor hospitalization 
or anchor procedure and improving coordination of care across care 
settings and providers. Beneficiaries may have mobility limitations 
during certain episodes

[[Page 36464]]

following discharge to their home or place of residence that may 
interfere with their ability to travel easily to physicians' offices or 
other health care settings. Increasing beneficiary adherence to and 
engagement with recommended treatment and follow-up care following 
discharge from the hospital or PAC setting would be important to high 
quality episode care. Evidence exists to support the use of home visits 
among Medicare beneficiaries in improving clinical outcomes and 
reducing readmissions following hospital discharge.700 701 
In addition, we believe the financial incentives in TEAM would 
encourage hospitals to closely examine the most appropriate PAC 
settings for beneficiaries, taking into consideration beneficiary 
choice and location of beneficiary home or place of residence, so that 
the clinically appropriate setting of the lowest acuity is recommended 
following discharge from the anchor hospitalization or anchor 
procedure. We expect that all these considerations would lead to 
greater interest on the part of hospitals and other providers and 
suppliers caring for TEAM beneficiaries in furnishing services to 
beneficiaries in their home or place of residence. Such services could 
include visits by licensed clinicians other than physicians and 
nonphysician practitioners.
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    \700\ Nabagiez, J.P., Shariff, M.A., Khan, M.A., Molloy, W.J., & 
McGinn, J.T. (2013). Physician assistant home visit program to 
reduce hospital readmissions. The Journal of Thoracic and 
Cardiovascular Surgery, 145(1), 225-233. https://doi.org/10.1016/j.jtcvs.2012.09.047.
    \701\ Hall, M.L., Esposito, G., Pekmezaris, R., Lesser, M., 
Moravick, D., Jahn, L., Blenderman, R., Akerman, M., Nouryan, C., & 
Hartman, A.R. (2014). Cardiac surgery nurse practitioner home visits 
prevent coronary artery bypass graft readmissions. The Annals of 
Thoracic Surgery, 97(5), 1488-1495. https://doi.org/10.1016/j.athoracsur.2013.12.049.
---------------------------------------------------------------------------

    In order for Medicare to pay for home health services, a 
beneficiary must be determined to be ``'home-bound''. Specifically, 
sections 1835(a) and 1814(a) of the Act require that a physician 
certify (and recertify) that in the case of home health services under 
the Medicare home health benefit, such services are or were required 
because the individual is or was ''confined to the home'' and needs or 
needed skilled nursing care on an intermittent basis, or physical or 
speech therapy or has or had a continuing need for occupational 
therapy. A beneficiary is considered to be confined to the home if the 
beneficiary has a condition, due to an illness or injury, that 
restricts his or her ability to leave home except with the assistance 
of another individual or the aid of a supportive device (that is, 
crutches, a cane, a wheelchair or a walker) or if the beneficiary has a 
condition such that leaving his or her home is medically 
contraindicated. While a beneficiary does not have to be bedridden to 
be considered confined to the home, the condition of the beneficiary 
must be such that there exists a normal inability to leave home and 
leaving home requires a considerable and taxing effort by the 
beneficiary. Absent this condition, it would be expected that the 
beneficiary could typically get the same services in an outpatient or 
other setting. Thus, the homebound requirement provides a way to help 
differentiate between patients that require medical care at home versus 
patients who could more appropriately receive care in a less costly 
outpatient setting. Additional information regarding the homebound 
requirement is available in the Medicare Benefit Manual (Pub 100-02); 
Chapter 7, ``Home Health Services,'' Section 30.1.1, ``Patient Confined 
to the Home.''
    We considered whether a waiver of the homebound requirement would 
be appropriate under TEAM. Waiving the homebound requirement would 
allow additional beneficiaries to receive home health care services in 
their home or place of residence. As previously discussed, physician 
certification that a beneficiary meets the homebound requirement is a 
prerequisite for Medicare coverage of home health services, and waiving 
the homebound requirement could result in lower episode spending in 
some instances. For example, if a beneficiary is allowed to have home 
health care visits, even if the beneficiary is not considered 
homebound, the beneficiary may avoid a hospital readmission. All other 
requirements for the Medicare home health benefit would remain 
unchanged. Thus, under such a waiver, only beneficiaries who otherwise 
meet all program requirements to receive home health services would be 
eligible for coverage of home health services without being homebound.
    However, we are not proposing to waive the homebound requirement 
under TEAM for several reasons. Based on the typical clinical course of 
beneficiaries after certain surgical procedures, we believe that many 
beneficiaries would meet the homebound requirement for home health 
services immediately following discharge from the anchor 
hospitalization or following discharge to their home or place of 
residence from a SNF that furnished PAC services immediately following 
the hospital discharge, so they could receive medically necessary home 
health services under existing program rules. Home health agencies 
(HHAs) are paid a national, standardized 30-day period payment rate if 
a period of care meets a certain threshold of home health visits. 30-
day periods of care that do not meet the visit threshold are paid a 
per-visit payment rate for the discipline providing care. For those 
TEAM beneficiaries who could benefit from home visits by a licensed 
clinician for purposes of assessment and monitoring of their clinical 
condition, care coordination, and improving adherence with treatment 
but who are not homebound, we do not believe that paying for these 
visits as home health services under Medicare is necessary or 
appropriate, especially given that Medicare payments for home health 
services are set based on the clinical care furnished to beneficiaries 
who are truly homebound. Finally, in other CMS episode payment models, 
such as BPCI Advanced and CJR, we have not waived the homebound 
requirement for home health services.
    In the BPCI Advanced and CJR models, we have provided a waiver of 
the ``incident to'' rule to allow a physician or nonphysician 
practitioner participating in care redesign under a participating 
provider to bill for services furnished to a beneficiary who does not 
qualify for Medicare coverage of home health services as set forth 
under Sec.  409.42 where the services are furnished in the 
beneficiary's home during the episode after the beneficiary's discharge 
from an acute care hospital. The ``incident to'' rules are set forth in 
Sec.  410.26(b)(5), which requires services and supplies furnished 
incident to the service of a physician or other practitioner must be 
provided under the direct supervision (as defined at Sec.  
410.32(b)(3)(ii)) of a physician or other practitioner.
    In the BPCI Advanced and CJR models, the waiver is available only 
for services that are furnished by licensed clinical staff under the 
general supervision (as defined at Sec.  410.32(b)(3)(i)) of a 
physician (or other practitioner), or other qualified health care 
professional, and who are allowed by law, regulation, and facility 
policy to perform or assist in the performance of a specific 
professional service, but do not individually report that professional 
service. While the services may be furnished by licensed clinical 
staff, they must be billed by the physician (or other practitioner) or 
participant to which the supervising physician has reassigned their 
billing rights in accordance with CMS instructions using a Healthcare 
Common Procedures Coding System (HCPCS) G-code created by CMS

[[Page 36465]]

specifically for the BPCI Advanced or CJR model. In the case of the 
incident to waiver under BPCI Advanced, the waiver allows physician and 
nonphysician practitioners to furnish the services up to 13 home visits 
during each 90-day clinical episode. In the case of the incident to 
waiver under CJR, the waiver allows physician and nonphysician 
practitioners to furnish the services up to 9 home visits during each 
90-day clinical episode. All other Medicare coverage and payment 
criteria must be met for both BPCI Advanced and CJR models.
    We considered waiving the ``incident to'' rule set forth in Sec.  
410.26(b)(5) for TEAM, similar to the BPCI Advanced and CJR models, 
however, we reviewed this specific waiver utilization and found that 
there was very low uptake in these models. While waiving the ``incident 
to'' rule set forth in Sec.  410.26(b)(5) could be beneficial in 
furnishing services to beneficiaries in their home or place of 
residence, we believe there has been a greater shift towards 
telemedicine as a modality for post-discharge follow-up, especially 
after the COVID-19 public health emergency which drove greater adoption 
and standard practice of telehealth services. Evidence suggests that 
telemedicine post-discharge visits were effective, safe, and did not 
negatively affect health care utilization as compared to in-person 
visits.702 703 For these reasons, we are not proposing to 
waive the ``incident to'' rule set forth in Sec.  410.26(b)(5) for 
TEAM, but we seek comment if we should waive the ``incident to'' rule 
set forth in Sec.  410.26(b)(5), if we should consider modifications or 
alternatives to this waiver, and how we could make this waiver 
beneficial to TEAM participants and beneficiaries.
---------------------------------------------------------------------------

    \702\ Harkey, K., Kaiser, N., Zhao, J., Gutnik, B., Kelz, R.R., 
Matthews, B.D., & Reinke, C.E. (2023). Utilization of telemedicine 
to provide post-discharge care: A comparison of pre-pandemic vs. 
pandemic care. The American Journal of Surgery, 226(2), 163-169. 
https://doi.org/10.1016/j.amjsurg.2023.03.007.
    \703\ Grauer, A., Cornelius, T., Abdalla, M., Moise, N., 
Kronish, I.M., & Ye, S. (2023). Impact of early telemedicine follow-
up on 30-Day hospital readmissions. PLOS ONE, 18(5), e0282081. 
https://doi.org/10.1371/journal.pone.0282081.
---------------------------------------------------------------------------

(3) Telehealth
    As discussed in the previous section, we expect that the proposed 
TEAM design features would lead to greater interest on the part of 
hospitals and other providers and suppliers caring for TEAM 
beneficiaries in furnishing services to beneficiaries in their home or 
place of residence, including physicians' professional services. TEAM 
would create new incentives for comprehensive episode care management 
for beneficiaries, including early identification and intervention 
regarding changes in health status following discharge from the anchor 
hospitalization or anchor procedures. Given that we are not waiving the 
``incident to'' rule set forth in Sec.  410.26(b)(5) for TEAM, we 
understand that TEAM participants may still want to engage physicians 
in furnishing timely visits to homebound or non-homebound TEAM 
beneficiaries in their homes or places of residence to address 
concerning symptoms or observations raised by beneficiaries themselves, 
clinicians furnishing home health services, or licensed clinicians 
furnishing post-discharge home visits, while physicians committed to 
TEAM care redesign may not be able to revise their practice patterns to 
meet this home visit need for TEAM beneficiaries.
    Under section 1834(m) of the Act, Medicare pays for telehealth 
services furnished by a physician or practitioner under certain 
conditions even though the physician or practitioner is not in the same 
location as the beneficiary. The telehealth services must be furnished 
to a beneficiary located in one of the eight types of originating sites 
specified in section 1834(m)(4)(C)(ii) of the Act and the site must 
satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act. Generally, for Medicare payment to be made 
for telehealth services under the Medicare Physician Fee Schedule 
several conditions must be met, as set forth under Sec.  410.78(b). 
Specifically, the service must be on the Medicare list of telehealth 
services and meet all of the following other requirements for payment:
     The service must be furnished via an interactive 
telecommunications system.
     The service must be furnished to an eligible telehealth 
individual.
     The individual receiving the services must be in an 
eligible originating site.
    When all of these conditions are met, Medicare pays a facility fee 
to the originating site and provides separate payment to the distant 
site practitioner for the service. Section 1834(m)(4)(F)(i) of the Act 
defines Medicare telehealth services to include professional 
consultations, office visits, office psychiatry services, and any 
additional service specified by the Secretary, when furnished via a 
telecommunications system. For the list of approved Medicare telehealth 
services, see the CMS website at https://www.cms.gov/medicare/coverage/telehealth/list-services. Under section 1834(m)(4)(F)(ii) of the Act, 
CMS has an annual process to consider additions to and deletions from 
the list of telehealth services. We do not include any services as 
telehealth services when Medicare does not otherwise make a separate 
payment for them.
    Some literature suggests the benefits of telehealth technologies 
that enable health care providers to deliver care to patients in 
locations remote from providers are being increasingly used to 
complement face-to-face patient-provider encounters to increase access 
to care, especially in rural or underserved areas.\704\ In these cases, 
the use of remote access technologies may improve the accessibility and 
timeliness of needed care, increase communication between providers and 
patients, enhance care coordination, and improve the efficiency of 
care. We note that certain professional services that are commonly 
furnished remotely using telecommunications technology are paid under 
the same conditions as in-person physicians' services, and thus do not 
require a waiver to be considered as telehealth services. Such services 
that do not require the patient to be present in person with the 
practitioner when they are furnished are covered and paid in the same 
way as services delivered without the use of telecommunications 
technology when the practitioner is in person at the medical facility 
furnishing care to the patient.
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    \704\ Gajarawala, S.N., & Pelkowski, J.N. (2021). Telehealth 
benefits and barriers. The Journal for Nurse Practitioners, 17(2), 
218-221. https://doi.org/10.1016/j.nurpra.2020.09.013.
---------------------------------------------------------------------------

    In other CMS episode-based payment models, such as the BPCI 
Advanced and CJR models, participants were permitted to use telehealth 
waivers that applied to two provisions:
     CMS waived the geographic site requirements under 
1834(m)(4)(C)(i)(I) through (III) of the Act which allowed telehealth 
services to be furnished to eligible telehealth individuals when they 
are located at one of the eight originating sites at the time the 
service is furnished via a telecommunications system but without regard 
to the site meeting one of the geographic site requirements.
     CMS waived the originating site requirements under section 
1834(m)(4)(C)(ii)(I) through (VIII) of the Act which allowed the 
eligible telehealth individual to not be in an originating site when 
the otherwise eligible individual is receiving telehealth services in 
their home or place of residence.
    These telehealth waivers allowed providers and suppliers furnishing

[[Page 36466]]

services to model beneficiaries to utilize telemedicine for 
beneficiaries that are not classified as rural and allowed the greatest 
degree of efficiency and communication between providers and suppliers 
and beneficiaries by allowing beneficiaries to receive telehealth 
services at their home or place of residence. We believe similar 
telehealth waivers would be essential to maximize the opportunity to 
improve the quality of care and efficiency for episodes of care in 
TEAM.
    Specifically, like the telehealth waivers in the BPCI Advanced and 
CJR models, we propose to waive the geographic site requirements of 
section 1834(m)(4)(C)(i)(I) through (III) of the Act that limit 
telehealth payment to services furnished within specific types of 
geographic areas or in an entity participating in a federal 
telemedicine demonstration project approved as of December 31, 2000. 
Waiver of this requirement would allow beneficiaries located in any 
region to receive services related to the episode to be furnished via 
telehealth, as long as all other Medicare requirements for telehealth 
services are met. Any service on the list of Medicare approved 
telehealth services and reported on a claim that is not excluded from 
the proposed episode definition (see section X.A.3.b. of the preamble 
of this proposed rule) could be furnished to a TEAM beneficiary, 
regardless of the beneficiary's geographic location. Under TEAM, this 
waiver would support care coordination and increasing timely access to 
high quality care for all TEAM beneficiaries, regardless of geography. 
Additionally, we propose for TEAM waiving the originating site 
requirements of section 1834(m)(4)(C)(ii)(I)-(VIII) of the Act that 
specify the particular sites at which the eligible telehealth 
individual must be located at the time the service is furnished via a 
telecommunications system. Specifically, we propose to waive the 
requirement only when telehealth services are being furnished in the 
TEAM beneficiary's home or place of residence during the episode. Any 
service on the list of Medicare approved telehealth services that is 
not excluded from the proposed episode definition (see section 
X.A.3.b.(5)(a) of the preamble of this proposed rule) could be 
furnished to a TEAM beneficiary in their home or place of residence, 
unless the service's HCPCS code descriptor precludes delivering the 
service in the home or place of residence. For example, subsequent 
hospital care services could not be furnished to beneficiaries in their 
home since those beneficiaries would not be inpatients of the hospital.
    The existing set of codes used to report evaluation and management 
(E/M) visits are extensively categorized and defined by the setting of 
the service, and the codes describe the services furnished when both 
the patient and the practitioner are located in that setting. Section 
1834(m) of the Act provides for particular conditions under which 
Medicare can make payment for office visits when a patient is located 
in a health care setting (the originating sites authorized by statute) 
and the eligible practitioner is located elsewhere. However, we do not 
believe that the kinds of E/M services furnished to patients outside of 
health care settings via real-time, interactive communication 
technology are accurately described by any existing E/M codes. This 
would include circumstances when the patient is located in his or her 
home and the location of the practitioner is unspecified. In order to 
create a mechanism to report E/M services accurately, the BPCI Advanced 
and CJR models created specific sets of HCPCS G-codes to describe the 
E/M services furnished to the model beneficiaries in their homes via 
telehealth. Similarly for TEAM, we propose to create a specific set of 
nine HCPCS G-codes to describe the E/M services furnished to TEAM 
beneficiaries in their homes via telehealth. If the proposed TEAM is 
finalized, we would specify the precise G-code created for TEAM and 
share them to TEAM participants prior to the first performance year.
    Among the existing E/M visit services, we envision these services 
would be most similar to those described by the office and other 
outpatient E/M codes. Therefore, we propose to structure the new codes 
similarly to the office/outpatient E/M codes but adjusted to reflect 
the location as the beneficiary's residence and the virtual presence of 
the practitioner. Specifically, we propose to create a parallel 
structure and set of descriptors currently used to report office or 
other outpatient E/M services, see Table FF-A 10, for CPT codes 99201 
through 99205 for new patient visits and CPT codes 99212 through 99215 
for established patient visits. For example, the proposed G- code for a 
level 3 E/M visit for an established patient would be a telehealth 
visit for the evaluation and management of an established patient in 
the patient's home, which requires at least 2 of the following 3 key 
components:
     An expanded problem focused history;
     An expanded problem focused examination;
     Medical decision making of low complexity.
    Counseling and coordination of care with other physicians, other 
qualified health care professionals or agencies are provided consistent 
with the nature of the problem(s) and the patient's or family's needs 
or both. Usually, the presenting problem(s) are of low to moderate 
severity. Typically, 15 minutes are spent with the patient or family or 
both via real-time, audio and video intercommunications technology.

[[Page 36467]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.286

    We note that we are not proposing a G-code to parallel the level 1 
office/outpatient visit for an established patient, since that service 
does not require the presence of the physician or other qualified 
health professional.
    We propose to develop payment rates for these new telehealth G-
codes for E/M services in the patient's home that are similar to the 
payment rates for the office/outpatient E/M services, since the codes 
will describe the work involved in furnishing similar services. 
Therefore, we propose to include the resource costs typically incurred 
when services are furnished via telehealth. In terms of the relative 
resource costs involved in furnishing these services, we believe that 
the efficiencies of virtual presentation generally limit resource costs 
other than those related to the professional time, intensity, and 
malpractice risk to marginal levels. Therefore, we propose to adopt 
work and malpractice (MP) RVUs associated with the corresponding level 
of office/outpatient codes as the typical service because the 
practitioner's time and intensity and malpractice liabilities when 
conducting a visit via telehealth are comparable to the office visit. 
We would include final RVUs under the CY 2026 Medicare Physician Fee 
Schedule for PY 1. Additionally, we propose to update these values each 
performance year to correspond to final values established under the 
Medicare Physician Fee Schedule.
    We considered whether each level of visit typically would warrant 
support by auxiliary licensed clinical staff within the context of 
TEAM. The cost of such staff and any associated supplies, for example, 
would be incorporated in the practice expense (PE) RVUs under the PFS. 
For the lower level visits, levels 1 through 3 for new and 2 and 3 for 
established visits, we did not believe that the visit would necessarily 
require auxiliary medical staff to be available in the patient's home. 
We anticipate these lower level visits would be the most commonly 
furnished and would serve as a mechanism for the patient to consult 
quickly with a practitioner for concerns that can be easily described 
and explained by the patient. We do not propose to include PE RVUs for 
these services, since we do not believe that virtual visits envisioned 
for this model typically incur the kinds of costs included in the PE 
RVUs under the Medicare Physician Fee Schedule. For higher level 
visits, we typically would anticipate some amount of support from 
auxiliary clinical staff. For example, wound examination and minor 
wound debridement would be considered included in an E/M visit and 
would require licensed clinical staff to be present in the 
beneficiary's home during the telehealth visit in order for the 
complete service to be furnished. We believe it would be rare for a 
practitioner to conduct as complex and detailed a service as a level 4 
or 5 E/M home visit via telehealth for TEAM beneficiaries in episodes 
without licensed clinical staff support in the home.
    We have considered support by auxiliary clinical staff to be 
typical for level 4 or 5 E/M visits furnished to TEAM beneficiaries in 
the home via telehealth, however, we do not propose to incorporate 
these costs through PE RVUs. Given the anticipated complexity of these 
visits, we would expect to observe level 4 and 5 E/M visits to be 
reported on the same claim with the same date of service as a home 
visit or during a period of authorized home health care. If neither of 
these occurs, we propose to require the physician to document in the 
medical record that auxiliary licensed clinical staff were available on 
site in the patient's home during the visit and if they were not, to 
document the reason that such a high- level visit would not require 
such personnel.
    We note that because the services described by the proposed G-
codes, by definition, are furnished remotely using telecommunications 
technology, they therefore are paid under the same conditions as in-
person physicians' services and they do not require a waiver to the 
requirements of section 1834(m) of the Act. We also note that

[[Page 36468]]

because these home telehealth services are E/M services, all other 
coverage and payment rules regarding E/M services would continue to 
apply.
    Under TEAM, this proposal to waive the originating site 
requirements and create new home visit telehealth HCPCS codes would 
support the greatest efficiency and timely communication between 
providers and beneficiaries by allowing beneficiaries to receive 
telehealth services at their places of residence.
    With respect to home health services paid under the home health 
prospective payment system (HH PPS), we emphasize that telehealth 
visits under this model cannot substitute for in- person home health 
visits per section 1895(e)(1)(A) of the Act. Furthermore, telehealth 
services by social workers cannot be furnished for TEAM beneficiaries 
who are in a home health episode because medical social services are 
included as home health services per section 1861(m) of the Act and 
paid for under the Medicare HH PPS. However, telehealth services 
permitted under section 1834 of the Act and furnished by physicians or 
other practitioners, specifically physician assistants, nurse 
practitioners, clinical nurse specialists, certified nurse midwives, 
nurse anesthetists, psychologists, and dieticians, can be furnished for 
TEAM beneficiaries who are in a home health episode. Finally, sections 
1835(a) and 1814(a) of the Act require that the patient has a face-to-
face encounter with the certifying physician or an allowed nonphysician 
practitioner (NPP) working in collaboration with or under the 
supervision of the certifying physician before the certifying physician 
certifies that the patient is eligible for home health services. Under 
Sec.  424.22(a)(1)(v), the face-to-face encounter can be performed up 
to 90 days prior to the start of home health care or within 30 days 
after the start of home health care. Section 424.22(a)(1)(v)(A) also 
allows a physician, with privileges, who cared for the patient in an 
acute or PAC setting (from which the patient was directly admitted to 
home health) or an allowed NPP working in collaboration with or under 
the supervision of the acute or PAC physician to conduct the face-to-
face encounter.
    Although sections 1835(a) and 1814(a) of the Act allow the face-to-
face encounter to be performed via telehealth, we are not proposing 
that the waiver of the telehealth geographic site requirement for 
telehealth services and the originating site requirement for telehealth 
services furnished in the TEAM beneficiary's home or place of residence 
would apply to the face-to- face encounter required as part of the home 
health certification when that encounter is furnished via telehealth. 
In other words, when a face-to-face encounter furnished via telehealth 
is used to meet the requirement for home health certification, the 
usual Medicare telehealth rules apply with respect to geography and 
eligibility of the originating site. We expect that this policy would 
not limit TEAM beneficiaries' access to medically necessary home health 
services because beneficiaries receiving home health services during an 
episode will have had a face-to- face encounter with either the 
physician or an allowed NPP during their anchor hospitalization or a 
physician or allowed NPP during a post-acute facility stay prior to 
discharge directly to home health services.
    Under the proposed waiver of the geographic site requirement and 
originating site requirement, all telehealth services would be required 
to be furnished in accordance with all Medicare coverage and payment 
criteria, and no additional payment would be made to cover set-up 
costs, technology purchases, training and education, or other related 
costs. The facility fee paid by Medicare to an originating site for a 
telehealth service would be waived if there is no facility as an 
originating site (that is, the service was originated in the 
beneficiary's home). Finally, providers and suppliers furnishing a 
telehealth service to a TEAM beneficiary in his or her home or place of 
residence during the episode would not be permitted to bill for 
telehealth services that were not fully furnished when an inability to 
provide the intended telehealth service is due to technical issues with 
telecommunications equipment required for that service. Beneficiaries 
would be able to receive services furnished pursuant to the telehealth 
waivers only during the episode.
    We plan to monitor patterns of utilization of telehealth services 
under TEAM to monitor for overutilization or reductions in medically 
necessary care, and significant reductions in face-to- face visits with 
physicians and NPPs. We plan to specifically monitor the distribution 
of new telehealth home visits that we are proposing, as we anticipate 
greater use of lower level visits. Given our concern that auxiliary 
licensed clinical staff be present for level 4 and 5 visits, we will 
monitor our proposed requirement that these visits be billed on the 
same claim with the same date of service as a home nursing visit, 
during a period authorized home health care, or that the physician 
document the presence of auxiliary licensed clinical staff in the home 
or an explanation as to the specific circumstances precluding the need 
for auxiliary staff for the specific visit. We seek comments on the 
proposed waivers with respect to telehealth services, and the proposed 
creation of the home visit telehealth codes.
(4) 3-Day SNF Rule
    Pursuant to section 1861(i) of the Act, a beneficiary must have a 
prior inpatient hospital stays of no fewer than 3 consecutive days to 
be eligible for Medicare coverage of inpatient SNF care. We refer to 
this as the SNF 3-day rule. We note that the SNF 3-day rule has been 
waived for Medicare SNF coverage under other episode payment models, 
including the BPCI Advanced the CJR models. Model participants that 
elect to use the waiver can discharge model beneficiaries in fewer than 
3 days from an anchor hospital stay or anchor procedure (in the case of 
the CJR model) to a SNF, where services are covered under Medicare Part 
A if all other coverage requirements for such services are satisfied.
    Episode-based payment models like BPCI Advanced and CJR have the 
potential to mitigate the existing incentives under the Medicare 
program to overuse SNF benefits for beneficiaries, as well as to 
furnish many fragmented services that do not reflect significant 
coordinated attention to and management of complications following 
hospital discharge. These model participants considering the early 
discharge of a beneficiary pursuant to the waiver must evaluate whether 
early discharge to a SNF is clinically- appropriate and SNF services 
are medically necessary. Next, they must balance that determination and 
the potential benefits to the hospital in the form of internal cost 
savings due to greater financial efficiency with the understanding that 
a subsequent hospital readmission, attributable to premature discharge 
or low quality SNF care, could substantially increase episode spending 
while also resulting in poorer quality of care for the beneficiary. 
Furthermore, early hospital discharge for a beneficiary who would 
otherwise not require a SNF stay (that is, the beneficiary has no 
identified skilled nursing or rehabilitation need that cannot be 
provided on an outpatient basis) following a hospital stay of typical 
length does not improve episode efficiency.
    Because of the potential benefits we see for TEAM participants, 
their provider partners, and beneficiaries, we propose to waive the SNF 
3-day rule for coverage of a SNF stay following the

[[Page 36469]]

anchor hospitalization or anchor procedure under TEAM. We propose to 
use our authority under section 1115A of the Act with respect to 
certain SNFs that furnish Medicare Part A post- hospital extended care 
services to beneficiaries included in an episode in TEAM. We believe 
this waiver is necessary to the model test so that TEAM participants 
can redesign care throughout the episode continuum of care extending to 
30 days post-discharge from the anchor hospital stay or anchor 
procedure to maximize quality and hospital financial efficiency, as 
well as reduce episode spending under Medicare. All other Medicare 
rules for coverage and payment of Part A-covered SNF services would 
continue to apply to TEAM beneficiaries in all performance years of the 
model. Further, to ensure protection to TEAM beneficiary safety and 
optimize health outcomes, we propose to require that TEAM participants 
may only discharge a TEAM beneficiary under this proposed waiver of the 
SNF 3-day rule to a SNF rated an overall of three stars or better by 
CMS based on information publicly available at the time of hospital 
discharge from an anchor hospital stay or anchor procedure. Problem 
areas due to early hospital discharge may not be discovered through 
model monitoring and evaluation activities until well after the episode 
has concluded, and the potential for later negative findings alone may 
not afford sufficient beneficiary protections. CMS created a Five-Star 
Quality Rating System for SNFs to allow SNFs to be compared more easily 
and to help identify areas of concerning SNF performance. The Nursing 
Home Compare website gives each SNF an overall rating of between 1 and 
5 stars.\705\ Those SNFs with 5 stars are considered to have much above 
average quality, and SNFs with 1 star are considered to have quality 
much below average. Published SNF ratings include distinct ratings of 
health inspection, staffing, and quality measures, with ratings for 
each of the three sources combined to calculate an overall rating. 
These areas of assessment are all relevant to the quality of SNF care 
following discharge from the anchor hospitalization or anchor procedure 
initiating an episode, especially if that discharge occurs after fewer 
than 3 days in the hospital. Because of the potential greater risks 
following early inpatient hospital discharge, we believe it is 
appropriate that all TEAM beneficiaries discharged from the TEAM 
participant to a SNF in fewer than 3 days be admitted to a SNF that has 
demonstrated that it can provide quality care to patients with 
significant unresolved post- surgical symptoms and problems. We believe 
such a SNF would need to provide care of at least average overall 
quality, which would be represented by an overall SNF 3-star or better 
rating.
---------------------------------------------------------------------------

    \705\ https://www.medicare.gov/care-compare/?redirect=true&providerType=NursingHome.
---------------------------------------------------------------------------

    Thus, the TEAM participant must discharge the beneficiary to a SNF 
that is qualified under the SNF 3-day rule waiver. We are proposing 
that to be qualified under the SNF 3-day rule waiver a SNF must be 
included in the most recent calendar year quarter Five- Star Quality 
Rating System listing for SNFs on the Nursing Home Compare website for 
the date of the beneficiary's admission to the SNF. The qualified SNF 
must be rated an overall 3 stars or better for at least 7 of the 12 
months based on a review of the most recent rolling 12 months of 
overall star ratings. We propose to post on the CMS website the list of 
qualified SNFs in advance of the calendar quarter.
    We recognize that there may be instances where a TEAM participant 
would like to use the 3-day SNF rule waiver, but the TEAM beneficiary 
receives inpatient PAC through swing bed arrangements in a hospital or 
Critical Access Hospital (CAH), as designated in Sec.  485.606 of this 
chapter, which is not subject to the Five-Star Quality Rating System. 
For example, a TEAM beneficiary located in a rural area may wish to 
receive PAC care closer to their home but there are no qualified SNFs 
in their area. Allowing TEAM participants to use the 3-day SNF rule 
waiver for hospitals and CAHs operating under swing bed agreements may 
support beneficiary freedom of choice and provide greater flexibility 
to TEAM participants for their care coordination efforts. This approach 
is consistent with the Shared Savings Program, which offers a similar 
3-day SNF rule waiver and allows their ACOs to partner with hospitals 
and CAHs to with swing bed arrangements to utilize the waiver. 
Therefore, we seek comment on whether we should allow TEAM participants 
to use hospitals and CAHs operating under swing bed agreements for the 
3-day SNF rule waiver and what beneficiary protections we should 
include since the Five-Star Quality Rating System would not apply.
    We plan to monitor patterns of SNF utilization under the TEAM, 
particularly with respect to hospital discharge in fewer than 3 days to 
a SNF, to ensure that beneficiaries are not being discharged 
prematurely to SNFs and that they are able to exercise their freedom of 
choice without patient steering. We seek comment on our proposal to 
waive the SNF 3-day stay rule for stays in SNFs rated overall as 3 
stars or better following discharge from the anchor hospitalization or 
anchor procedures for episodes in TEAM.
(a) Additional Beneficiary Protections Under the SNF 3-Day Stay Rule 
Waiver
    We believe that it will be necessary to propose beneficiary 
protections against financial liability in addition to the beneficiary 
protections discussed elsewhere in this proposed rule. Specifically, we 
believe it is important to discern whether a waiver applies to SNF 
services furnished to a particular beneficiary to ensure compliance 
with the conditions of the waiver and improve our ability to monitor 
waivers for misuse.
    In considering additional beneficiary protections that may be 
necessary to ensure proper use of SNF 3-day rule waiver under the TEAM, 
we note that there are existing, well-established payment and coverage 
policies for SNF services based on sections 1861(i), 1862(a)(1), and 
1879 of the Act that include protections for beneficiaries from 
liability for certain non-covered SNF charges. These existing payment 
and coverage policies for SNF services continue to apply under the 
TEAM, including SNF services furnished pursuant to the SNF 3-day 
waiver. (For example, see section 70 in the Medicare Claims Processing 
Manual, Chapter 30--Financial Liability Protections on the CMS website 
at https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c30.pdf; and Medicare Coverage of Skilled Nursing 
Facility Care https://www.medicare.gov/coverage/skilled-nursing-facility-snf-care; Medicare Benefit Policy Manual, Chapter 8--Coverage 
of Extended Care (SNF) Services Under Hospital Insurance at https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/bp102c08pdf.pdf). In general, CMS requires that the SNF inform a 
beneficiary in writing about services and fees before the beneficiary 
is discharged to the SNF (Sec.  483.10(b)(6)); the beneficiary cannot 
be charged by the SNF for items or services that were not requested 
(Sec.  483.10(c)(8)(iii)(A)); a beneficiary cannot be required to 
request extra services as a condition of continued stay (Sec.  
483.10(c)(8)(iii)(B)); and the SNF must inform a beneficiary that 
requests an item or service for which a charge will be made that there 
will be a charge for the item or service and what the charge will be 
(Sec.  483.10(c)(8)(iii)(C)). (See also section 6 of Medicare Coverage 
of Skilled

[[Page 36470]]

Nursing Facility Care at https://www.cms.gov/regulations-and-guidance/
guidance/manuals/downloads/bp102c06.pdf.)
    As we discussed in the CJR final rule (80 FR 73454 through 73460), 
commenters expressed concern regarding the lag between a CJR 
beneficiary's Medicare coverage or eligibility status change and a TEAM 
participant's awareness of that change. There may be cases in which a 
SNF waiver is used by a TEAM participant because the TEAM participant 
believes that the beneficiary meets the inclusion criteria, based on 
the information available to the hospital and SNF at the time of the 
beneficiary's admission to the SNF, but in fact the beneficiary's 
Medicare coverage has changed and the hospital was unaware of it based 
on available information. We recognize that despite good faith efforts 
by TEAM participants and SNFs to determine a beneficiary's Medicare 
status for the model, it may occur that a beneficiary is not eligible 
to be included in the TEAM at the time the SNF waiver is used. In these 
cases, we will cover services furnished under the waiver when the 
information available to the provider at the time the services under 
the waiver were furnished indicated that the beneficiary was included 
in the model.
    Based on our experience with SNF 3-day rule waiver, including the 
CJR model, we believe there are situations where it would be 
appropriate to require additional beneficiary financial protections 
under the SNF 3-day waiver for the TEAM. Specifically, we are concerned 
about potential beneficiary financial liability for non-covered Part A 
SNF services that might be directly related to use of the SNF 3-day 
waiver under the TEAM. We are concerned that there could be scenarios 
where a beneficiary could be charged for non-covered SNF services that 
were a result of a TEAM participant's inappropriate use of the SNF 
waiver. Specifically, we are concerned that a beneficiary could be 
charged for non-covered SNF services if a TEAM participant discharges a 
beneficiary to a SNF that does not meet the quality requirement (3 
stars or higher in 7 of the last 12 months), and payment for SNF 
services is denied for lack of a qualifying inpatient hospital stay. We 
recognize that requiring a discharge planning notice would help 
mitigate concerns about beneficiaries' potential financial liability 
for non-covered services. Nevertheless, we are concerned that in this 
scenario, once the claim is rejected, the beneficiary may not be 
protected from financial liability under existing Medicare rules 
because the waiver would not be available, and the beneficiary would 
not have had a qualifying inpatient hospital stay. Thus, the TEAM 
beneficiary could be charged by the SNF for non-covered SNF services 
that were a result of an inappropriate attempt to use the waiver. In 
this scenario, Medicare would deny payment of the SNF claim, and the 
beneficiary could potentially be charged by the SNF for these non-
covered SNF services, potentially subjecting such beneficiaries to 
significant financial liability. In this circumstance, we assume the 
TEAM participant's intent was to rely upon the SNF 3-day waiver, but 
the waiver requirements were not met. We believe that in this scenario, 
the rejection of the claim could easily have been avoided if the 
hospital had confirmed that the requirements for use of the SNF 3-day 
waiver were satisfied or if the beneficiary had been provided the 
discharge planning notice and elected to go to a SNF that met the 
quality requirement.
    The CJR model (82 FR 180) addressed beneficiary liability financial 
concerns for non- covered SNF services related to the waiver by 
generally placing the risk on the participant hospital and we believe 
it is appropriate to propose a similar policy for TEAM. CJR participant 
hospitals are generally held financially responsible for misusing the 
waiver in situations where waiver requirements are not met, because 
participant hospitals are required to be aware of the 3-day waiver 
requirements. Participant hospitals are the entities financially 
responsible for episode spending under the model and will make the 
decision as to whether it is appropriate to discharge a beneficiary 
without a 3-day stay. In addition, the requirements for use of the SNF 
waiver are clearly laid out in the CJR final rule (80 FR 73273). CMS 
posts on the public website a list of qualifying SNFs (those with a 3-
star or higher rating for 7 of the last 12 months). CJR participant 
hospitals are required to consult the published list of SNFs prior to 
utilizing the SNF 3-day rule waiver.
    For participant hospitals that provide a beneficiary with the 
discharge planning notice, the hospital would not have financial 
liability for non-covered SNF services that result from inapplicability 
of the waiver. In other words, when the participant hospital has 
discharged a beneficiary to a SNF that does not qualify under the 
conditions of the waiver, and has not provided the required discharge 
planning notice so that the beneficiary is aware that he or she is 
accepting financial liability for non-covered SNF services as a result 
of not having a qualifying inpatient stay, the ultimate responsibility 
and financial liability for the non-covered SNF stay rests with the 
participant hospital. For this reason, we are proposing to align with 
the CJR model policy and require TEAM participants to keep a record of 
discharge planning notice distribution to TEAM beneficiaries. We will 
monitor TEAM participants' use of discharge planning notices to assess 
the potential for their misuse.
    To protect TEAM beneficiaries from being charged for non-covered 
SNF charges in instances when the waiver was used inappropriately, and 
similar to the CJR model (82 FR 180), we are proposing to add certain 
beneficiary protection requirements that would apply for SNF services 
that would otherwise have been covered except for lack of a qualifying 
hospital stay. Specifically, we propose that if a TEAM participant 
discharges a beneficiary without a qualifying 3-day inpatient stay to a 
SNF that is not on the published list of SNFs that meet the TEAM SNF 3-
Day Rule waiver quality requirements as of the date of admission to the 
SNF, the TEAM participant will be financially liable for the SNF stay 
if no discharge planning notice is provided to the beneficiary, 
alerting them of potential financial liability. If the TEAM participant 
provides a discharge planning notice then the TEAM participant will not 
be financially liable for the cost of the SNF stay and the normal 
Medicare FFS rules for coverage of SNF services will apply. In cases 
where the TEAM participant provides a discharge planning notice and the 
beneficiary chooses to obtain care from a non- qualified SNF without a 
qualifying inpatient stay, the beneficiary assumes financial liability 
for services furnished (except those that are covered by Medicare Part 
B during a non-covered inpatient SNF stay).
    In the event a TEAM beneficiary is discharged to a SNF without a 
qualifying 3-day inpatient stay, but the SNF is not on the qualified 
list as of the date of admission to the SNF, and the TEAM participant 
has failed to provide a discharge planning notice, we propose that CMS 
apply the following rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services; and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the 
uncovered SNF stay.
    We seek comment on these proposals. Specifically, we seek comment 
on

[[Page 36471]]

whether it is reasonable to--(1) cover services furnished under the SNF 
waiver based on TEAM participant knowledge of beneficiary eligibility 
for the TEAM as determined by Medicare coverage status at the time the 
services under the waiver were furnished; and (2) to hold the TEAM 
participant financially responsible for rejected SNF claims if a TEAM 
beneficiary is discharged to a SNF without a qualifying 3-day inpatient 
stay, but the SNF is not on the qualified list as of the date of 
admission to the SNF, and the TEAM participant has failed to provide a 
discharge planning notice. Finally, we seek comment on any other 
related issues that we should consider in connection with these 
proposals to protect beneficiaries from significant financial liability 
for non-covered SNF services related to the waiver of the SNF 3-day 
rule under the proposed TEAM. We may address those issues through 
future notice and comment rulemaking.
i. Monitoring and Beneficiary Protection
(1) Overview
    We are proposing the TEAM as we believe it is an opportunity to 
improve the quality of care and that the policies of the model support 
making care more easily accessible to consumers when and where they 
need it, increasing consumer engagement and thereby informing consumer 
choices. For example, under this model we are proposing certain waivers 
which would offer TEAM participants additional flexibilities with 
respect to furnishing telehealth services and care in SNFs, as 
discussed in section X.A.3.h. of the preamble of this proposed rule. We 
believe that this model will improve beneficiary access and outcomes. 
Conversely, we do note that these same opportunities could be used to 
try to steer beneficiaries into lower cost services without an 
appropriate emphasis on maintaining or increasing quality. We direct 
readers to sections X.A.3.d.(5) of the preamble of this proposed rule 
for discussion of the methodology for calculating the reconciliation 
payment amount or repayment amount to determine the cost and quality 
performance utilized for this model. We believe that existing Medicare 
provisions can be effective in protecting beneficiary freedom of choice 
and access to appropriate care under the TEAM. However, because the 
TEAM is designed to promote care delivery efficiencies for episodes, 
providers may seek greater control over the continuum of care and, in 
some cases, could attempt to direct beneficiaries into care pathways 
that save money at the expense of beneficiary choice or even 
beneficiary outcomes. As such, we acknowledge that some additional 
safeguards may be necessary under the TEAM for program integrity 
purposes as providers are simultaneously seeking opportunities to 
decrease costs and utilization. We believe that it is important to 
consider any possibility of adverse consequences to patients and to 
ensure that sufficient controls are in place to protect Medicare 
beneficiaries in episodes under the TEAM.
(2) Beneficiary Choice and Notification
    Because we have proposed that hospitals in selected geographic 
areas would be required to participate in the model, individual 
beneficiaries would not be able to opt out of the TEAM when they 
receive care from a TEAM participant in the model. We do not believe 
that it is consistent with other Medicare programs to allow patients to 
opt out of a payment system that is unique to a particular geographic 
area. For example, the state of Maryland has a unique payment system 
under Medicare, but that payment system does not create an alternative 
care delivery system, and we do not expect it in any way impact 
beneficiary decisions. Moreover, we do not believe that an ability to 
opt out of a payment system is a critical factor in upholding 
beneficiary choice if other safeguards are in place given that this 
model does not increase beneficiary cost-sharing. However, a 
beneficiary is not precluded from seeking care from providers or 
suppliers who do not participate in TEAM. We do believe that full 
notification and disclosure of the payment model and its possible 
implications is critical for beneficiary understanding and protection. 
It is important to create safeguards for beneficiaries to ensure that 
care recommendations are based on clinical needs and not inappropriate 
cost savings. It is also important for beneficiaries to know that they 
can raise any concerns with their clinicians, with 1-800-Medicare, or 
with their local Quality Improvement Organizations (QIOs).
    This proposed payment model would not limit a beneficiary's ability 
to choose among Medicare providers or limit Medicare's coverage of 
items and services available to the beneficiary. Beneficiaries may 
continue to choose any Medicare participating provider, or any provider 
who has opted out of Medicare, with the same costs, copayments and 
responsibilities as they have with other Medicare services. The 
proposed model would allow TEAM participants to enter into TEAM sharing 
arrangements, as proposed in section X.A.3.g.(4) of the preamble of 
this proposed rule, with certain providers and these preferred 
providers may be recommended to beneficiaries as long as those 
recommendations are made within the constraints of current law. 
However, TEAM Participants may not limit beneficiaries to a preferred 
or recommended providers list that is not compliant with restrictions 
existing under current statutes and regulations.
    Moreover, TEAM participants may not charge any TEAM collaborator, 
as proposed in section X.A.3.g.(3) of the preamble of this proposed 
rule, a fee to be included on any list of preferred providers or 
suppliers, nor may the hospital accept such payments, which would be 
considered to be outside the realm of risk-sharing agreements. Thus, 
this proposed payment model does not create any restriction of 
beneficiary freedom to choose providers, including surgeons, hospitals, 
post-acute care or any other providers or suppliers. Moreover, as TEAM 
participants redesign care pathways, it may be difficult for providers 
to sort individuals based on health care insurance and to treat them 
differently. We anticipate that care pathway redesign occurring in 
response to the model will increase coordination of care, improve the 
quality of care, and decrease cost for all patients, not just for 
Medicare beneficiaries. We anticipate this broader care delivery impact 
to all patients may further promote consistent treatment of all 
beneficiaries.
    We believe that beneficiary notification and engagement is 
essential because there will be a change in the way participating 
hospitals are paid. We believe that appropriate beneficiary 
notification should explain the model, advise patients of both their 
clinical needs and their care delivery choices, and should clearly 
specify any providers, suppliers, and ACOs holding a sharing 
arrangement with the TEAM participant should be identified to the 
beneficiary as a ``financial partner of the hospital for the purposes 
of participation in TEAM.'' These policies seek to enhance 
beneficiaries' understanding of their care, improve their ability to 
share in the decision- making, and ensure that they have the 
opportunity to consider competing benefits even as they are presented 
with cost-saving recommendations. We believe that appropriate 
beneficiary notification should do all of the following:
     Explain the model and how it will or will not impact the 
beneficiary's care.

[[Page 36472]]

     Inform patients that they retain freedom of choice to 
choose providers and services.
     Explain how patients can access care records and claims 
data through an available patient portal and through sharing access to 
care-givers to their Blue Button[supreg] electronic health information.
     Explain that TEAM participants may receive beneficiary-
identifiable claims data.
     Advise patients that all standard Medicare beneficiary 
protections remain in place, including the ability to report concerns 
of substandard care to QIOs and 1-800-MEDICARE.
     Provide a list of the providers, suppliers, and ACOs with 
whom the TEAM participant has a sharing arrangement. We recognize an 
exhaustive list of providers, suppliers, and ACOs may lengthen the 
beneficiary notification unnecessarily, therefore this requirement may 
be fulfilled by the TEAM participant including in the beneficiary 
notification a web address where beneficiaries may access the list.
    After carefully considering the appropriate timing and 
circumstances for the necessary beneficiary notification, we are 
proposing that TEAM participants must require all ACOs, providers, and 
suppliers who execute a Sharing Arrangement with a TEAM participant to 
share beneficiary notification materials, to be developed or approved 
by CMS, that detail this proposed payment model with the beneficiary 
prior to discharge from the anchor hospitalization, or prior to 
discharge from the anchor procedure for a Medicare FFS patient who 
would be included under the model. TEAM participants must require this 
notification as a condition of any Sharing Arrangement. Where a TEAM 
participant does not have Sharing Arrangements with providers or 
suppliers that furnish services to beneficiaries during an episode, or 
where the anchor hospitalization or anchor procedure for a Medicare FFS 
patient who would be included under the model was ordered by a 
physician who does not have a Sharing Arrangement, the beneficiary 
notification materials must be provided to the beneficiary by the TEAM 
participant. The purpose of this proposed policy is to ensure that all 
TEAM beneficiaries receive the beneficiary notification materials, and 
that they receive such materials as early as possible but no later than 
discharge from the hospital or hospital outpatient department. We 
believe that this proposal targets beneficiaries for whom information 
is relevant, and increases the likelihood that patients will become 
engaged and seek to understand the model and its potential impact on 
their care.
    In addition, we propose at Sec.  512.582(b)(2) requiring that TEAM 
participants must require every TEAM collaborator to provide written 
notice, to be developed by CMS, to applicable TEAM beneficiaries of the 
existence of its sharing arrangement with the TEAM participant and the 
basic quality and payment incentives under the model. We propose that 
the notice must be provided no later than the time at which the 
beneficiary first receives an item or service from the TEAM 
collaborator during an episode. We recognize that due to the patient's 
condition, it may not be feasible to provide notification at such time, 
in which case the notification must be provided to the beneficiary or 
his or her representative as soon as is reasonably practicable. We note 
that beneficiaries are accustomed to receiving similar notices of 
rights and obligations from healthcare providers prior to the start of 
inpatient care. However, we also considered that this information might 
be best provided by hospitals at the point of admission for all 
beneficiaries, as hospitals provide other information concerning 
patient rights and responsibilities at that time. We invite comment on 
ways in which the timing and source of beneficiary notification could 
best serve the needs of beneficiaries without creating unnecessary 
administrative work for providers and suppliers. We believe that this 
notification is an important safeguard to help ensure that 
beneficiaries in the model receive all medically necessary services, 
but it is also an important clinical opportunity to better engage 
beneficiaries in defining their goals and preferences as they share in 
the planning of their care.
(3) Monitoring for Access to Care
    Given that TEAM participants would receive a reconciliation payment 
when they are able to meet certain cost and quality performance 
thresholds, they could have an incentive to avoid complex, high-cost 
cases by referring them to nearby facilities or specialty referral 
centers. We intend to monitor the claims data from TEAM participants--
for example, to compare a hospital's case mix relative to a pre-model 
historical baseline to determine whether complex patients are 
potentially being systematically excluded. We will publish these data 
as part of the model evaluation to promote transparency and an 
understanding of the model's effects. We also propose to continue to 
review and audit hospitals if we have reason to believe that they are 
compromising beneficiary access to care. For example, we may audit a 
hospital or conduct additional claims analyses where initial claims 
analysis indicates an unusual pattern of referral to regional hospitals 
located outside of the model catchment area or a clinically unexplained 
increase or decrease in surgical rates for procedures included in TEAM. 
We seek comment on our proposals to monitor TEAM participants at Sec.  
512.584.
(4) Monitoring for Quality of Care
    As we noted previously, in any payment system that promotes 
efficiencies of care delivery, there may be opportunities to direct 
patients away from more expensive services at the expense of outcomes 
and quality. We believe that professionalism, the quality measures in 
the model, and clinical standards can be effective in preventing 
beneficiaries from being denied medically necessary care in the 
inpatient setting, outpatient setting, and in post-acute care settings 
during the 30 days post- discharge. Accordingly, we believe that the 
potential for the denial of medically necessary care within the TEAM 
will not be greater than that which currently exists under IPPS. 
However, we also believe that we have the authority and responsibility 
to audit the medical records and claims of participating hospitals and 
their TEAM collaborators in order to ensure that beneficiaries receive 
medically necessary services. Similarly, at Sec.  512.590, we propose 
to monitor arrangements between TEAM participants and their TEAM 
collaborators to ensure that such arrangements do not result in the 
denial of medically necessary care or other program or patient abuse. 
We invite public comment on these proposals and on whether there are 
elements of the TEAM that would require additional beneficiary 
protection for the appropriate delivery of inpatient care, and if so, 
what types of monitoring or safeguards would be most appropriate.
    We believe that these safeguards are all enhanced by beneficiary 
knowledge and engagement. Therefore, we are proposing at Sec.  
512.582(a)(3) to require that TEAM participants must, as part of 
discharge planning, account for potential financial bias by providing 
TEAM beneficiaries with a complete list of all available post-acute 
care options in the Medicare program, including HHAs, SNFs, IRFs, or 
LTCHs, in the service area consistent with medical need, including 
beneficiary cost-sharing and quality information (where available and 
when applicable). This list

[[Page 36473]]

should also indicate whether the TEAM participant has a sharing 
arrangement with the post-acute care provider. We expect that the 
treating surgeons or other treating practitioners, as applicable, will 
continue to identify and discuss all medically appropriate options with 
the beneficiary, and that hospitals will discuss the various facilities 
and providers who are available to meet the clinically identified 
needs. These proposed requirements for TEAM participants would 
supplement the existing discharge planning requirements under the 
hospital Conditions of Participation. We also specifically note that 
neither the Conditions of Participation nor this proposed transparency 
requirement preclude hospitals from recommending preferred providers 
within the constraints created by current law, as coordination of care 
and optimization of care are important factors for successful 
participation in this model. We invite comment on this proposal, 
including additional opportunities to ensure high quality care.
(5) Monitoring for Delayed Care
    We believe the proposed TEAM would incent TEAM participants to 
create efficiencies in the delivery of care within a 30-day episode 
following an acute clinical event. Theoretically, the proposed TEAM 
also could create incentives for TEAM participants or their TEAM 
collaborators to delay services until after such 30-day window has 
closed. Consistent with the CJR model, we believe that existing 
Medicare safeguards are sufficient to protect beneficiaries in the 
TEAM.
    First, our experience with other episode-based payment models such 
as the BPCI Advanced model has shown that providers focus first on 
appropriate care and then on efficiencies only as obtainable in the 
setting of appropriate care. We believe that a 30-day post- discharge 
episode is sufficient to minimize the risk that TEAM participants and 
their TEAM collaborators would compromise services furnished in 
relation to a beneficiary's care. While we recognize that ongoing care 
for underlying conditions may be required after the 30-day episode, we 
believe that TEAM participants and other providers and suppliers would 
be unlikely to postpone key services beyond a 30-day period because the 
consequences of delaying care beyond such episode duration would be 
contrary to usual standards of care.
    However, we also note that additional monitoring would occur as a 
function of the proposed TEAM. As with the CJR model, we propose as 
part of the reconciliation process (see section X.A.3.d.(5)(i) of the 
preamble of this proposed rule) that TEAM participants would be 
financially accountable for certain post- episode payments occurring in 
the 30 days after conclusion of the episode. We believe that including 
such a payment adjustment would create an additional deterrent to 
delaying care beyond the episode duration. In addition, we believe the 
data collection and calculations used to determine such adjustment 
would provide a mechanism to check whether providers are 
inappropriately delaying care. Finally, we note that the proposed 
quality measures create additional safeguards as such measures are used 
to monitor and influence clinical care at the institutional level.
    We invite public comment on our proposed requirements for 
notification of beneficiaries and our proposed methods for monitoring 
participants' actions and ensuring compliance as well as on other 
methods to ensure that beneficiaries receive high quality, clinically 
appropriate care.
j. Access to Records and Record Retention
    By virtue of their participation in an CMS Innovation Center model, 
TEAM participants and TEAM collaborators may receive model-specific 
payments, access to payment rule waivers, or some other model-specific 
flexibility. Therefore, we believe that CMS's ability to audit, 
inspect, investigate, and evaluate records and other materials related 
to participation in CMS Innovation Center models is necessary and 
appropriate. There is a need for CMS to be able to audit, inspect, 
investigate, and evaluate records and materials related to 
participation in CMS Innovation Center models to allow us to ensure 
that TEAM participants are not denying or limiting the coverage or 
provision of benefits for beneficiaries as part of their participation 
in the CMS Innovation Center model. We propose at Sec.  512.505 to 
define ``model-specific payment'' to mean a payment made by CMS only to 
TEAM participants, under the terms of the CMS Innovation Center model 
that is not applicable to any other providers or suppliers; the term 
``model-specific payment'' would include, unless otherwise specified, 
the reconciliation payment, described in section X.A.3.d.(5)(j) of the 
preamble of this proposed rule.
    We note that there are audit and record retention requirements 
under the Medicare Shared Savings Program (42 CFR 425.314) and in 
current models being tested under section 1115A (such as under 42 CFR 
510.110 for the CMS Innovation Center's Comprehensive Care for Joint 
Replacement Model). Building off those existing requirements, we 
propose in Sec.  .135(a), that the Federal Government, including, but 
not limited to, CMS, HHS, and the Comptroller General, or their 
designees, would have a right to audit, inspect, investigate, and 
evaluate any documents and other evidence regarding implementation of a 
CMS Innovation Center model. Additionally, in order to align with the 
policy of current models being tested by the CMS Innovation Center, we 
are proposing that the TEAM participant and its TEAM Collaborators must 
maintain and give the Federal Government, including, but not limited 
to, CMS, HHS, and the Comptroller General, or their designees, access 
to all documents (including books, contracts, and records) and other 
evidence sufficient to enable the audit, evaluation, inspection, or 
investigation of the CMS Innovation Center model, including, without 
limitation, documents and other evidence regarding all of the 
following:
     Compliance by the TEAM participant and its TEAM 
Collaborators with the terms of the CMS Innovation Center model, 
including proposed new subpart A of proposed part 512.
     The accuracy of model-specific payments made under the CMS 
Innovation Center model.
     The TEAM participant's payment of amounts owed to CMS, or 
payment adjustments, under the CMS Innovation Center model.
     Quality measure information and the quality of services 
performed under the terms of the CMS Innovation Center model, including 
proposed new subpart A of proposed part 512.
    Utilization of items and services furnished under the CMS 
Innovation Center model.
     The ability of the TEAM participant to bear the risk of 
potential losses and to repay any losses through claims adjustments to 
CMS, as applicable.
     Patient safety under TEAM.
     Any other program integrity issues.
    We propose that TEAM participants must maintain the documents and 
other evidence for a period of 6 years from the last payment 
determination for the TEAM participant under the CMS Innovation Center 
model or from the date of completion of any audit, evaluation, 
inspection, or investigation, whichever is later, unless--
     CMS determines there is a special need to retain a 
particular record or group of records for a longer period and notifies 
the TEAM participant at least 30

[[Page 36474]]

days before the normal disposition date; or
     There has been a termination, dispute, or allegation of 
fraud or similar fault against the TEAM participant in which case the 
records must be maintained for an additional 6 years from the date of 
any resulting final resolution of the termination, dispute, or 
allegation of fraud or similar fault.
    If CMS notifies the TEAM participant of a special need to retain a 
record or group of records at least 30 days before the normal 
disposition date, we propose that the records must be maintained for 
such period of time determined by CMS. We also propose that, if CMS 
notifies the TEAM participant of a special need to retain records or 
there has been a termination, dispute, or allegation of fraud or 
similar fault against the TEAM participant or its TEAM Collaborators, 
the TEAM participant must notify its TEAM Collaborators of the need to 
retain records for the additional period specified by CMS. This 
provision will ensure that that the government has access to the 
records.
    To avoid any confusion or disputes regarding the timelines outlined 
in this section of this proposed rule, we propose to define the term 
``days'' to mean calendar days.
    We invite public comment on these proposed provisions described at 
Sec.  512.586 regarding audits and record retention.
    Historically, the CMS Innovation Center has required participants 
in section 1115A models to retain records for at least 10 years, which 
is consistent with the outer limit of the statute of limitations for 
the Federal False Claims Act and is consistent with the Shared Savings 
Program's policy outlined at 42 CFR 425.314(b)(2). For this reason, we 
also solicit public comments on whether we should require hospital 
participants and TEAM Collaborators to maintain records for less than 
10 years.
k. Data Sharing
(1) Overview
    In this proposed rule, we aim to incentivize TEAM participants to 
engage in care redesign efforts to improve quality of care and reduce 
Medicare FFS spending for beneficiaries included in the model during 
the anchor hospitalization or anchor procedure and the 30 days post-
discharge from the hospital or hospital outpatient department. These 
care redesign efforts would require TEAM participants to work with and 
coordinate care with other health care providers and suppliers to 
improve the quality and efficiency of care for Medicare beneficiaries.
    We have experience with a range of efforts designed to improve care 
coordination for Medicare beneficiaries, including the BPCI Advanced 
and CJR models, both of which make certain Medicare data available to 
participants to better enable them to achieve their goals. For example, 
both the BPCI Advanced and CJR participants may request to receive 
beneficiary-identifiable claims data and financial performance data 
from the baseline period and throughout their tenure in the model to 
help them better understand the FFS beneficiaries that are receiving 
services from their providers and help them improve quality of care and 
conduct care coordination and other care redesign activities to improve 
patient outcomes or reduce health care for beneficiaries that could 
have initiated an episode in the model.
    Based on our experience with these efforts, as set forth later in 
this section, we propose to make certain beneficiary-identifiable 
claims data and regional aggregate data available to participants in 
TEAM regarding Medicare FFS beneficiaries who may initiate an episode 
and be attributed to them in the model. However, we also expect that 
TEAM participants are able to, or will work toward, independently 
identifying and producing their own data, through electronic health 
records, health information exchanges, or other means that they believe 
are necessary to best evaluate the health needs of their patients, 
improve health outcomes, and produce efficiencies in the provision and 
use of services.
(2) Beneficiary-Identifiable Claims Data
(a) Legal Authority To Share Beneficiary-Identifiable Data
    We believe that TEAM participants may need access to certain 
Medicare beneficiary-identifiable data for the purposes of evaluating 
their performance, conducting quality assessment and improvement 
activities, conducting population-based activities relating to 
improving health or reducing health care costs, or conducting other 
health care operations listed in the first or second paragraph of the 
definition of ``health care operations'' under the HIPAA Privacy Rule, 
45 CFR 164.501. We recognize that there are issues and sensitivities 
surrounding the disclosure of beneficiary-identifiable health 
information, and that several laws place constraints on sharing 
individually identifiable health information. For example, section 1106 
of the Act generally bars the disclosure of information collected under 
the Act without consent unless a law (statute or regulation) permits 
the disclosure. Here, the HIPAA Privacy Rule would allow for the 
proposed disclosure of individually identifiable health information by 
CMS. In this proposed rule, we propose to make TEAM participants 
accountable for quality and cost outcomes for TEAM beneficiaries during 
an anchor hospitalization or anchor procedure and during the 30-day 
post-discharge period. We believe that it is necessary for the purposes 
of this model to offer TEAM participants the ability to request summary 
or raw beneficiary-identifiable claims data for a 3-year baseline 
period as well as on a monthly basis during the performance year to 
help TEAM participants engage in care coordination and quality 
improvement activities for TEAM beneficiaries in an episode. For the 3-
year baseline period, TEAM participants would only receive beneficiary-
identifiable claims data for beneficiaries that initiated an episode in 
their hospital or hospital outpatient department in the 3-year baseline 
period, and the beneficiary-identifiable claims data shared with the 
TEAM participant would be limited to the items and services included in 
the episode. In other words, the TEAM participant would not receive 
beneficiary-identifiable claims data for beneficiaries that were 
admitted to their hospital or hospital outpatient department and did 
not initiate an episode in the baseline period. Nor would the TEAM 
participant receive beneficiary-identifiable claims data, for 
beneficiaries who did initiate an episode in their hospital or hospital 
outpatient department during the baseline period, for items and 
services that are not included in an episode, such as a primary care 
visit 5 days before the episode or a hospital readmission 1 day after 
the episode ends. We are proposing to apply a similar approach for the 
beneficiary-identifiable claims data sharing during the performance 
year. We believe that these data would constitute the minimum 
information necessary to enable the TEAM participant to understand 
spending patterns during the episode, appropriately coordinate care, 
and target care strategies toward individual beneficiaries furnished 
care by the TEAM participant and other providers and suppliers.
    Under the HIPAA Privacy Rule, covered entities (defined as health 
care plans, providers that conduct covered transactions, including 
hospitals, and health care clearinghouses) are barred from using or 
disclosing individually

[[Page 36475]]

identifiable health information that is ``protected health 
information'' or PHI in a manner that is not explicitly permitted or 
required under the HIPAA Privacy Rule, without the individual's 
authorization. The Medicare FFS program, a ``health plan'' function of 
the Department, is subject to the HIPAA Privacy Rule limitations on the 
disclosure of PHI. Hospitals, which would be TEAM participants, and 
other Medicare providers and suppliers are also covered entities, 
provided they are health care providers as defined by 45 CFR 160.103 
and they conduct (or someone on their behalf conducts) one or more 
HIPAA standard transactions electronically, such as for claims 
transactions. Since TEAM participants are hospitals who are covered 
entities and are the only entity able to request the beneficiary-
identifiable data and with whom CMS would share the beneficiary-
identifiable data, we believe that the proposed disclosure of the 
beneficiary claims data for an anchor hospitalization or an anchor 
procedure plus 30-day post-discharge for episodes included under the 
TEAM model would be permitted by the HIPAA Privacy Rule under the 
provisions that permit disclosures of PHI for ``health care 
operations'' purposes. Under those provisions, a covered entity is 
permitted to disclose PHI to another covered entity for the recipient's 
health care operations purposes if both covered entities have or had a 
relationship with the subject of the PHI to be disclosed, the PHI 
pertains to that relationship, and the recipient will use the PHI for a 
``health care operations'' function that falls within the first two 
paragraphs of the definition of ``health care operations'' in the HIPAA 
Privacy Rule (45 CFR 164.506(c)(4)).
    The first paragraph of the definition of health care operations 
includes ``conducting quality assessment and improvement activities, 
including outcomes evaluation and development of clinical guidelines,'' 
and ``population-based activities relating to improving health or 
reducing health costs, protocol development, case management and care 
coordination'' (45 CFR 164.501).
    Under our proposal, TEAM participants would be using the data on 
their patients to evaluate the performance of the TEAM participant and 
other providers and suppliers that furnished services to the patient, 
conduct quality assessment and improvement activities, and conduct 
population-based activities relating to improved health for their 
patients. When done by or on behalf of a covered entity, these are 
covered functions and activities that would qualify as ``health care 
operations'' under the first and second paragraphs of the definition of 
health care operations at 45 CFR 164.501. Hence, as previously 
discussed, we believe that this provision is extensive enough to cover 
the uses we would expect a TEAM participant to make of the beneficiary-
identifiable data and would be permissible under the HIPAA Privacy 
Rule. Moreover, our proposed disclosures would be made only to HIPAA 
covered entities, specifically hospitals that are TEAM participants 
that have (or had) a relationship with the subject of the information, 
the information we would disclose would pertain to such relationship, 
and those disclosures would be for purposes listed in the first two 
paragraphs of the definition of ``health care operations.''
    When using or disclosing PHI, or when requesting this information 
from another covered entity, covered entities must make ``reasonable 
efforts to limit'' the information that is used, disclosed, or 
requested to a ``minimum necessary'' to accomplish the intended purpose 
of the use, disclosure, or request (45 CFR 164.502(b)). We believe that 
the provision of the proposed data elements, as described in section 
X.A.3.k.(2).(c). of the preamble of this proposed rule, would 
constitute the minimum data necessary to accomplish the TEAM's model 
goals of the TEAM participant.
    The Privacy Act of 1974 also places limits on agency data 
disclosures. The Privacy Act applies when the federal government 
maintains a system of records by which information about individuals is 
retrieved by use of the individual's personal identifiers (names, 
Social Security numbers, or any other codes or identifiers that are 
assigned to the individual). The Privacy Act prohibits disclosure of 
information from a system of records to any third party without the 
prior written consent of the individual to whom the records apply (5 
U.S.C. 552a(b)).
    ``Routine uses'' are an exception to this general principle. A 
routine use is a disclosure outside of the agency that is compatible 
with the purpose for which the data was collected. Routine uses are 
established by means of a publication in the Federal Register about the 
applicable system of records describing to whom the disclosure will be 
made and the purpose for the disclosure. For the proposed TEAM, the 
system of records would be covered in Master Demonstration, Evaluation, 
and Research Studies (DERS) for the Office of Research, Development and 
Information (ORDI) system of record (72 FR 19705). We believe that the 
proposed data disclosures are consistent with the purpose for which the 
data discussed in the proposed rule was collected and may be disclosed 
in accordance with the routine uses applicable to those records.
    We note that, as is the case with the CJR model, in this proposed 
rule, we propose to disclose beneficiary-identifiable data to only the 
hospitals that are bearing risk for episodes and not with their 
collaborators. As stated in the final CJR rule (80 FR 73515), we 
believe that the hospitals that are specifically held financially 
responsible for an episode should make the determination as to which 
data are needed to manage care and care processes with their 
collaborators as well as which data they might want to re-disclose, if 
any, to their collaborators provided they are in compliance with the 
HIPAA Privacy Rule.
    We believe our data sharing proposals are permitted by and are 
consistent with the authorities and protections available under the 
aforementioned statutes and regulations. We seek comments on our 
proposals regarding the authority to share beneficiary-identifiable 
data with TEAM participants.
(b) Summary and Raw Beneficiary-Identifiable Claims Data Reports
    Based on our experience with BPCI Advanced and CJR participants, we 
recognize that TEAM participants could vary with respect to the kinds 
of beneficiary-identifiable claims information that would best meet 
their needs. For example, while many TEAM participants might have the 
ability to analyze raw claims data, other TEAM participants could find 
it more useful to have a summary of these data. Given this, we propose 
to make beneficiary-identifiable claims data for episodes in TEAM 
available through two formats, summary and raw, both for the baseline 
period and on an ongoing monthly basis during their participation in 
the model as we do for BPCI Advanced and CJR. Summary beneficiary-
identifiable claims data summarizes the claims data by combining and 
categorizing claims data to provide a broad view of the TEAM 
participant's health care expenditures and utilization. For example, a 
TEAM participant may use summary beneficiary-identifiable data to 
identify total episode spending for a given episode category across all 
of a TEAM participant's episodes in a given performance year. Raw 
beneficiary-identifiable claims data is unrefined and has not been 
grouped or combined and includes the specific claims fields, as 
described in the minimum necessary data section X.A.3.k.(2).(c). of the

[[Page 36476]]

preamble of this proposed rule, at the episode level. For example, a 
TEAM participant may use raw beneficiary-identifiable data to look at a 
particular episode to identify the diagnosis code(s) that were 
associated with a hospital readmission for a TEAM beneficiary.
    First, for TEAM participants who wish to receive summary Medicare 
Parts A and B claims data, we propose to offer TEAM participants, that 
enter into a TEAM data sharing agreement with CMS, as specified in 
section X.A.3.k.(6). of the preamble of this proposed rule, the option 
to submit a formal data request for summary beneficiary-identifiable 
claims data that have been aggregated to provide summary-level spending 
and utilization data on TEAM beneficiaries who would be in an episode 
during the baseline period and performance years in accordance with 
applicable privacy and security laws and established privacy and 
security protections. Such summary beneficiary-identifiable claims data 
would provide tools to monitor, understand, and manage utilization and 
expenditure patterns as well as to develop, target, and implement 
quality improvement programs and initiatives. For example, if the data 
provided by CMS to a particular TEAM participant reflects that, 
relative to their peers, a certain provider is associated with 
significantly higher rates of inpatient readmissions than the rates 
experienced by other beneficiaries with similar care needs, that may be 
evidence that the TEAM participant could consider, among other things, 
the appropriateness of that provider, whether other alternatives might 
be more appropriate, and whether there exist certain care interventions 
that could be incorporated post-discharge to lower readmission rates.
    Secondly, for TEAM participants who wish to receive raw Medicare 
Parts A and B claims data, we propose to offer TEAM participants, that 
enter into a TEAM data sharing agreement with CMS, the opportunity to 
submit a formal data request for raw beneficiary-identifiable claims 
data for TEAM beneficiaries who would be in an episode during the 
baseline period and performance years in accordance with applicable 
privacy and security laws and established privacy and security 
protections. These raw beneficiary-identifiable claims data would be 
much more detailed compared to the summary beneficiary-identifiable 
claims data and include all beneficiary-identifiable claims for all 
episodes in TEAM. In addition, they would include episode summaries, 
indicators for excluded episodes, diagnosis and procedure codes, and 
enrollment and dual eligibility information for beneficiaries that 
initiate episodes in TEAM. Through analysis, these raw beneficiary-
identifiable claims data would provide TEAM participants with 
information to improve their ability to coordinate and target care 
strategies as well as to monitor, understand, and manage utilization 
and expenditure patterns. Such data would also aid them in developing, 
targeting, and implementing quality improvement programs and 
initiatives.
    The summary and raw beneficiary-identifiable data would allow TEAM 
participants to assess summary and raw data on their relevant TEAM 
beneficiary population, giving them the flexibility to utilize the data 
based on their analytic capacity. Therefore, for both the baseline 
period and at a minimum on a monthly basis during an TEAM participant's 
performance year, we propose to provide TEAM participants with an 
opportunity to request summary beneficiary-identifiable claims data and 
raw beneficiary-identifiable claims data that would meet minimum 
necessary requirements in 45 CFR 164.502(b) and 164.514(d) and include 
Medicare Parts A and B beneficiary-identifiable claims data for TEAM 
beneficiaries in an episode during the 3-year baseline period and 
performance year. This means the summary and raw beneficiary-
identifiable claims data would encompass the total expenditures and 
claims for the proposed episodes, including the anchor hospitalization 
or anchor procedure, and all non-excluded items and services in an 
episode covered under Medicare Parts A and B within the 30 days after 
discharge, including hospital care, post- acute care, and physician 
services for the TEAM participant's beneficiaries.
    We propose that if a TEAM participant wishes to receive 
beneficiary-identifiable claims data, they must submit a formal request 
for data on an annual basis in a manner form and by a date specified by 
CMS, indicating if they want summary beneficiary-identifiable data, raw 
beneficiary-identifiable data, or both, and sign a TEAM data sharing 
agreement. To comply with applicable laws and safeguards, we propose 
the TEAM participant must attest that--
     The TEAM participant is requesting claims data of TEAM 
beneficiaries who would be in an episode during the baseline period or 
performance year as a HIPAA-covered entity;
     The TEAM participant's request reflects the minimum data 
necessary for the TEAM participant to conduct health care operations 
work that falls within the first or second paragraph of the definition 
of health care operations at 45 CFR 164.501;
     The TEAM participant's use of claims data will be limited 
to developing processes and engaging in appropriate activities related 
to coordinating care and improving the quality and efficiency of care 
and conducting population-based activities relating to improving health 
or reducing health care costs that are applied uniformly to all TEAM 
beneficiaries, in an episode during the baseline period or performance 
year, and that these data will not be used to reduce, limit or restrict 
care for specific Medicare beneficiaries.
    We propose that the summary and raw beneficiary-identifiable data 
would be packaged and sent to a data portal (to which the TEAM 
participants must request and be granted access) in a ``flat'' or 
binary format for the TEAM participant to retrieve. We also note that, 
for both the summary and raw beneficiary-identifiable claims data, we 
would exclude information that is subject to the regulations governing 
the confidentiality of substance use disorder patient records (42 CFR 
part 2) from the data shared with a TEAM participant. We believe our 
proposal to make data available to TEAM participants, through the most 
appropriate means, may be useful to TEAM participants to determine 
appropriate ways to increase the coordination of care, improve quality, 
enhance efficiencies in the delivery system, and otherwise achieve the 
goals of the proposed model. TEAM beneficiaries would be informed of 
TEAM and the potential sharing of Medicare beneficiary-identifiable 
claims data through the beneficiary notification, as discussed in 
section X.A.3.i.(2) of the preamble of this proposed rule. Further, CMS 
would make beneficiary-identifiable claims data available to a TEAM 
participant for beneficiaries who may be included in episodes, in 
accordance with applicable privacy and security laws and only in 
response to the TEAM participant's request for such data, through the 
use of an executed TEAM data sharing agreement with CMS.
    We request comments on this proposal to share beneficiary-
identifiable claims data with TEAM participants at Sec.  512.562(b).
(c) Minimum Necessary Data
    We propose TEAM participants must limit their beneficiary-
identifiable data requests, for TEAM beneficiaries who are in an 
episode during the baseline period or performance year, to the minimum 
necessary to accomplish a permitted use of the data. We propose

[[Page 36477]]

the minimum necessary Parts A and B data elements may include but are 
not limited to the following data elements:
     Medicare beneficiary identifier (ID).
     Procedure code.
     Gender.
     Diagnosis code.
     Claim ID.
     The from and through dates of service.
     The provider or supplier ID.
     The claim payment type.
     Date of birth and death, if applicable.
     Tax identification number.
     National provider identifier.
    We seek comment on the minimum data necessary beneficiary-
identifiable information for TEAM participants to request beneficiary-
identifiable information for purposes of conducting permissible health 
care operations purposes under this model at Sec.  512.562(c).
(3) Regional Aggregate Data
    As discussed in section X.A.3.d.(3) of the preamble of this 
proposed rule, we propose to incorporate regional pricing data when 
establishing target prices for TEAM participants, similar to the CJR 
model's target prices that are constructed at the regional level. As 
indicated in the CJR final rule (80 FR 73510), we finalized our 
proposal to share regional pricing data with CJR participants because 
it was a factor affecting target prices. Given some of the similar 
features between the CJR model and the TEAM proposed in this proposed 
rule, particularly our proposal to incorporate regional pricing data 
when establishing target prices under the model, we propose to provide 
regional aggregate expenditure data available for all Parts A and B 
claims associated with episodes in TEAM for the U.S. Census Division in 
which the TEAM participant is located, as we similarly provide to 
hospitals participating in the CJR model. Specifically, we propose to 
provide TEAM participants with regional aggregate data on the total 
expenditures during an anchor hospitalization or anchor procedure and 
the 30-day post-discharge period for all Medicare FFS beneficiaries who 
would have initiated an episode under our proposed episode definitions 
in section X.A.3.b. of the preamble of this proposed rule during the 
baseline period and performance years. This data would be provided at 
the regional level; that is, we propose to share regional aggregate 
data with a TEAM participant for episodes initiated in the U.S. Census 
Division where the TEAM participant is located. These regional 
aggregate data would be in a format similar to the proposed summary 
beneficiary-identifiable claims data and would provide summary 
information on the average episode spending for episodes in TEAM in the 
U.S. Census Division in which the TEAM participant is located. However, 
the regional aggregate data would not be beneficiary-identifiable and 
would be de-identified in accordance with HIPAA Privacy Rule, 45 CFR 
164.514(b). Further, the regional aggregate data would also comply with 
CMS data sharing requirements, including the CMS cell suppression 
policy which stipulates that no cell (for example, admissions, 
discharges, patients, services, etc.) containing a value of 1 to 10 can 
be reported directly. Given the regional aggregate data is de-
identified, we propose TEAM participants would not have to submit a 
request to receive this data and the data would not be subject to the 
terms and conditions of the TEAM data sharing agreement.
    We seek comments on our proposal at Sec.  512.562(d) to provide 
these data to TEAM participants.
(4) Timing and Period of Baseline Period Data
    We recognize that providing the ability for TEAM participants to 
request the summary and raw beneficiary-identifiable claims baseline 
data and receive regional aggregate baseline data would be important 
for TEAM participants to be able to detect unnecessary episode 
spending, coordinate care, and identify areas for practice 
transformation, and that early provision of this data, specifically 
before the model start date, as defined in Sec.  512.505, could 
facilitate their efforts to do so. Also, as discussed in section 
X.A.3.d.(3)(a) of the preamble of this proposed rule, target prices 
would be calculated using a TEAM participant's historical episode 
spending during their baseline period. Further, we believe that TEAM 
participants would view the episode payment model effort as one 
involving continuous improvement. As a result, changes initially 
contemplated by a TEAM participant could be subsequently revised based 
on updated information and experiences.
    Therefore, as with the BPCI Advanced model, we propose to make 3-
years of baseline period data available to TEAM participants, who enter 
into a TEAM data sharing agreement with CMS, for beneficiaries who 
would have been included in an episode had the model been implemented 
during the baseline period, and intend to make these data available 
upon request prior to the start of each performance year and in 
accordance with applicable privacy and security laws and established 
privacy and security protections. We would provide the 3 years of 
baseline period data for the summary and raw beneficiary-identifiable 
data and for the regional aggregate data. We believe that 3 years of 
baseline period data is sufficient to support a TEAM participant's 
ability to detect unnecessary episode spending, coordinate care, and 
identify areas for practice transformation. We believe that if a TEAM 
participant has access to baseline period data for the 3-year period 
for each performance year used to set target prices, then it would be 
better able to assess its practice patterns, identify cost drivers, and 
ultimately redesign its care practices to improve efficiency and 
quality. We considered proposing to make available 4 years of baseline 
period data, or offering 1 year of baseline period data, but we believe 
offering 4 years of baseline period data would not be necessary since 
target prices in TEAM are constructed from a 3-year baseline period and 
1 year of data may not sufficiently help TEAM participants identify 
areas to improve beneficiary health and care coordination or reducing 
health costs.
    Therefore, we propose that the 3-year period utilized for the 
baseline period match the baseline data used to create TEAM 
participants target prices every performance year, and roll forward one 
year every performance year, as discussed in section X.A.3.d.(3)(a) of 
the preamble of this proposed rule. Specifically, we propose that the 
baseline period data for the summary and raw beneficiary-identifiable 
data reports and regional aggregate data report would be shared 
annually at least 1 month prior to the start of a performance year and 
available for episodes for each of the following performance years:

 Performance Year 1: Episodes that began January 1, 2022 
through December 31, 2024
 Performance Year 2: Episodes that began January 1, 2023 
through December 31, 2025
 Performance Year 3: Episodes that began January 1, 2024 
through December 31, 2026
 Performance Year 4: Episodes that began January 1, 2025 
through December 31, 2026
 Performance Year 5: Episodes that began January 1, 2026 
through December 31, 2027

    We request comments on these proposals at proposed Sec.  
512.562(b)(6)(i) and Sec.  512.562(d)(1)(i) to share beneficiary-
identifiable data and regional aggregate data for a 3-year

[[Page 36478]]

baseline period at least 1 month prior to the start of a performance 
year.
(5) Timing and Period of Performance Year Data
    The availability of periodically updated raw and summary 
beneficiary-identifiable claims data and regional aggregate data would 
assist TEAM participants to identify areas where they might wish to 
change their care practice patterns, as well as monitor the effects of 
any such changes. With respect to these purposes, we have considered 
what would be the most appropriate period for making updated raw and 
summary beneficiary-identifiable claims data and regional aggregate 
data available to TEAM participants, while complying with the HIPAA 
Privacy Rule's ``minimum necessary'' provisions, described in 45 CFR 
164.502(b) and 164.514(d). We believe that monthly data updates would 
align with a 30-day post-discharge episode window given the episode's 
duration and the need to share data in a timely manner and identify 
areas for care improvement. Accordingly, we are proposing to make 
updated raw and summary beneficiary-identifiable claims data and 
regional aggregate data available for a given performance year to TEAM 
participants upon receipt of a request for such information and 
execution of a TEAM data sharing agreement with CMS, that meets CMS's 
requirements to ensure the applicable HIPAA conditions for disclosure 
have been met, as frequently as on a monthly basis during the 
performance year and continue sharing the claims data for up to 6 
months beyond the end of that performance year to capture claims run 
out. We believe 6 months of claims run out is sufficient given that an 
internal review of Medicare claims data found that the majority of 
Medicare claims had been received, and were considered final, by 6 
months after the date of service and is also consistent with how we are 
proposing claims run out for the reconciliation process, as described 
in section X.A.3.d.(5). of the preamble of this proposed rule.\706\
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    \706\ Medicare Claims Maturity: CCW White Paper accessed at 
https://www2.ccwdata.org/web/guest/white-papers?p_l_back_url=%2Fweb%2Fguest%2Fsearch%3Fq%3Dmedicare%2Bclaims%2Bmaturity on Jan, 26, 2024.
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    To accomplish this for the first performance year of the TEAM 
(2026), we would propose to provide, upon request and execution of a 
TEAM data sharing agreement with CMS, and in accordance with the HIPAA 
Privacy Rule, beneficiary-identifiable claims data and aggregate 
regional data from January 1, 2026 to December 30, 2026 on as 
frequently as a running monthly basis, as claims are available. We 
would continue sharing beneficiary-identifiable claims data and 
regional aggregate data for episodes in performance year 1 for an 
additional 6 months, so until June 30, 2027, to capture claims run out 
for items and services billed during this time period. These datasets 
would represent all potential episodes that were initiated in 2026 and 
capture sufficient amount of time, up to 6 months, for relevant claims 
to have been processed. We would limit the content of this data set to 
the minimum data necessary for the TEAM participant to conduct quality 
assessment and improvement activities and effectively coordinate care 
of its patient population. This data sharing process would continue 
each performance year of TEAM. We considered proposing to extend this 
period to capture more than 30 days of data or updating on a quarterly 
frequency. However, we do not believe this would benefit the TEAM 
participant since it may create challenges to timely identify potential 
TEAM beneficiaries for care coordination efforts. We seek comment on 
whether we should consider extending the period to capture more than 30 
days of data or updating the data on a frequency other than monthly.
    We seek comments on this proposal at proposed Sec.  
512.562(b)(6)(ii) and Sec.  512.562(d)( )(ii) to make beneficiary-
identifiable data and regional aggregate data available on a monthly 
basis and for up to 6 months after a performance year.
(6) TEAM Data Sharing Agreement
    We propose that if a TEAM participant wishes to retrieve the 
beneficiary-identifiable data, the TEAM participant would be required 
to first complete, sign, and submit--and thereby agree to the terms 
of--a data sharing agreement with CMS, which we would call the TEAM 
data sharing agreement. We propose to define the TEAM data sharing 
agreement as an agreement between the TEAM participant and CMS that 
includes the terms and conditions for any beneficiary-identifiable data 
being shared with the TEAM participant under Sec.  512.562. Further, we 
propose to require TEAM participants to comply with all applicable laws 
and the terms of the TEAM data sharing agreement as a condition of 
retrieving the beneficiary-identifiable data. We also propose that the 
TEAM data sharing agreement would include certain protections and 
limitations on the TEAM participant's use and further disclosure of the 
beneficiary-identifiable data and would be provided in a form and 
manner specified by CMS. Additionally, we propose that a TEAM 
Participant that wishes to retrieve the beneficiary-identifiable data 
would be required to complete, sign, and submit a signed TEAM data 
sharing agreement at least annually. We believe that it is important 
for the TEAM Participant to complete and submit a signed TEAM data 
sharing agreement at least annually so that CMS has up-to-date 
information that the TEAM participant wishes to retrieve the 
beneficiary-identifiable data and information on the designated data 
custodian(s). As described in greater detail later in this section, we 
propose that a designated data custodian would be the individual(s) 
that a TEAM participant would identify as responsible for ensuring 
compliance with all privacy and security requirements and for notifying 
CMS of any incidents relating to unauthorized disclosures of 
beneficiary-identifiable data.
    CMS believes it is important for the TEAM participant to first 
complete and submit a signed TEAM data sharing agreement before it 
retrieves any beneficiary-identifiable data to help protect the privacy 
and security of any beneficiary-identifiable data shared by CMS with 
the TEAM participant. There are important sensitivities surrounding the 
sharing of this type of individually identifiable health information, 
and CMS must ensure to the best of its ability that any beneficiary-
identifiable data that it shares with TEAM participants would be 
further protected in an appropriate fashion.
    We considered an alternative proposal under which TEAM participants 
would not need to complete and submit a signed TEAM data sharing 
agreement, but we concluded that, if we proceeded with this option, we 
would not have adequate assurances that the TEAM participants would 
appropriately protect the privacy and security of the beneficiary-
identifiable data that we are proposing to share with them. We also 
considered an alternative proposal under which the TEAM participant 
would need to complete and submit a signed TEAM data sharing agreement 
only once for the duration of the TEAM. However, we concluded that this 
similarly would not give CMS adequate assurances that the TEAM 
participant would protect the privacy and security of the beneficiary-
identifiable data from CMS. We concluded that it is critical that we 
have up-to-date information and designated data custodians, and that 
requiring the TEAM participant to

[[Page 36479]]

submit an TEAM data sharing agreement at least annually would represent 
the best means of achieving this goal.
    We solicit public comment on our proposal to define TEAM data 
sharing agreement at Sec.  512.505. We also seek comment on our 
proposal to require, in Sec.  512.562(e)(2), that the TEAM participant 
agree to comply with all applicable laws and the terms of the TEAM data 
sharing agreement as a condition of retrieving the beneficiary-
identifiable data, and on our proposal in Sec.  512.562(e)(1) that the 
TEAM participant would need to submit the signed TEAM data sharing 
agreement at least annually if the TEAM participant wishes to retrieve 
the beneficiary-identifiable data.
(a) Content of TEAM Data Sharing Agreement
    We are proposing that, under the TEAM data sharing agreement, TEAM 
participants would agree to certain terms, namely: (1) To comply with 
the requirements for use and disclosure of this beneficiary-
identifiable data that are imposed on covered entities by the HIPAA 
regulations and the requirements of the proposed TEAM; (2) to comply 
with additional privacy, security, and breach notification requirements 
to be specified by CMS in the TEAM data sharing agreement; (3) to 
contractually bind each downstream recipient of the beneficiary-
identifiable data that is a business associate of the TEAM participant 
or performs a similar function for the TEAM participant, to the same 
terms and conditions to which the TEAM participant is itself bound in 
its data sharing agreement with CMS as a condition of the downstream 
recipient's receipt of the beneficiary-identifiable data retrieved by 
the TEAM participant under the TEAM; and (4) that if the TEAM 
participant misuses or discloses the beneficiary-identifiable data in a 
manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the TEAM data sharing agreement, the TEAM participant would no longer 
be eligible to retrieve the beneficiary-identifiable data and may be 
subject to additional sanctions and penalties available under the law. 
CMS believes that these terms for sharing beneficiary-identifiable data 
with TEAM participants are appropriate and important, as CMS must 
ensure to the best of its ability that any beneficiary identifiable 
data that it shares with TEAM participants would be further protected 
by the TEAM participant, and any business associates of the TEAM 
participant, in an appropriate fashion. CMS believes that these 
proposals would allow CMS to accomplish that.
    CMS seeks public comment on the additional privacy, security, 
breach notification, and other requirements that we would include in 
the TEAM data sharing agreement. CMS has these types of agreements in 
place as part of the governing documents of other models tested under 
section 1115A of the Act and in the Medicare Shared Savings Program. In 
these agreements, CMS typically requires the identification of data 
custodian(s) and imposes certain requirements related to 
administrative, physical, and technical safeguards relating to data 
storage and transmission; limitations on further use and disclosure of 
the data; procedures for responding to data incidents and breaches; and 
data destruction and retention. These provisions would be imposed in 
addition to any restrictions required by law, such as those provided in 
the HIPAA privacy, security and breach notification regulations. These 
provisions would not prohibit the TEAM participant from making any 
disclosure of the data otherwise required by law.
    CMS also seeks public comment on what disclosures of the 
beneficiary-identifiable data might be appropriate to permit or 
prohibit under the TEAM data sharing agreement. For example, CMS is 
considering prohibiting, in the TEAM data sharing agreement, any 
further disclosure, not otherwise required by law, of the beneficiary-
identifiable data to anyone who is not a HIPAA covered entity or 
business associate, as defined in 45 CFR 160.103, or to an individual 
practitioner in a treatment relationship with the TEAM beneficiary, or 
that practitioner's business associates. Such a prohibition would be 
similar to that imposed by CMS in other models tested under section 
1115A of the Act in which CMS shares beneficiary identifiable data with 
model participants.
    CMS is considering these possibilities because there exist 
important legal and policy limitations on the sharing of the 
beneficiary-identifiable data and CMS must carefully consider the ways 
in which and reasons for which we would provide access to this data for 
purposes of the TEAM. CMS believes that some TEAM participants may 
require the assistance of business associates, such as contractors, to 
perform data analytics or other functions using this beneficiary-
identifiable data to support the TEAM participant's review of their 
care management and coordination, quality improvement activities, or 
clinical treatment of TEAM beneficiaries. CMS also believes that this 
beneficiary-identifiable data may be helpful for any HIPAA covered 
entities who are in a treatment relationship with the TEAM beneficiary.
    We seek public comment on how a TEAM participant might need to, and 
want to, disclose the beneficiary-identifiable data to other 
individuals and entities to accomplish the goals of the TEAM, in 
accordance with applicable law.
    Under our proposal, the TEAM data sharing agreement would include 
other provisions, including requirements regarding data security, 
retention, destruction, and breach notification. For example, we are 
considering including, in the TEAM data sharing agreement, a 
requirement that the TEAM participant designate one or more data 
custodians who would be responsible for ensuring compliance with the 
privacy, security and breach notification requirements for the data set 
forth in the TEAM data sharing agreement; various security requirements 
like those found in other models tested under section 1115A of the Act, 
but no less restrictive than those provided in the relevant Privacy Act 
system of records notices; how and when beneficiary-identifiable data 
could be retained by the TEAM participant or its downstream 
participants of the beneficiary identifiable data; procedures for 
notifying CMS of any breach or other incident relating to the 
unauthorized disclosure of beneficiary-identifiable data; and 
provisions relating to destruction of the data. These are only examples 
and are not the only terms CMS would potentially include in the TEAM 
data sharing agreement.
    We solicit public comment on this proposal that CMS, by adding 
Sec.  512.562(e)(1)(ii), would impose certain requirements in the TEAM 
data sharing agreement related to privacy, security, data retention, 
breach notification, and data destruction.
    Finally, CMS proposes, at Sec.  512.562(e)(1)(iv), that the TEAM 
data sharing agreement would include a term providing that if the TEAM 
participant misuses or discloses the beneficiary-identifiable data in a 
manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the TEAM data sharing agreement, the TEAM participant would no longer 
be eligible to retrieve beneficiary-identifiable data under proposed 
Sec.  512.562(b) and may be subject to additional sanctions and 
penalties available under law. We also propose that if CMS determines 
that one or more grounds for remedial action specified in Sec.  
512.592(a) has taken

[[Page 36480]]

place, CMS may discontinue the provision of data sharing and reports to 
the model participant. We propose that CMS may take remedial action if 
the model participant misuses or discloses the beneficiary-identifiable 
data in a manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the applicable data sharing agreement.
    We solicit public comment on this proposal, to prohibit the TEAM 
participant from obtaining beneficiary-identifiable data pertaining to 
the TEAM if the TEAM participant fails to comply with applicable laws 
and regulations, the terms of the TEAM, or the TEAM data sharing 
agreement.
l. Referral to Primary Care Services
    As noted elsewhere in this proposed rule, the CMS Innovation Center 
has placed accountable care at the center of our comprehensive 
strategy, with a goal of 100 percent of Medicare FFS beneficiaries (and 
most Medicaid beneficiaries as well) being in an accountable care 
relationship by 2030. Achieving the goal of increasing the number of 
beneficiaries in accountable care relationships and testing models and 
innovations supporting access to high-quality, integrated specialty 
care across the patient journey--both longitudinally and for procedural 
or acute services--will greatly depend on numerous factors, including 
the models and initiatives available for providers in value-based 
payment, but also our ability to create incentives for providers and 
suppliers to coordinate care across different aspects of care. With 
TEAM, we have an opportunity to further integrate care during the 
transition from an acute event- an episode- back to longitudinal care 
relationships, such as primary care.
    Acute care hospitals commonly refer patients back to primary care 
providers in the community upon discharge from the hospital, given the 
connection between ongoing care follow-up and reduced readmissions, 
among other benefits. While the hospital Conditions of Participation 
for discharge planning at Sec.  482.43(a) outline requirements for 
referring patients to post-acute providers as well as community-based 
providers and suppliers, there is no specific requirement for referral 
back to a supplier, as defined in in section 1861(d) of the Act and 
codified at Sec.  400.202, of primary care services, as defined in 
section 1842(i)(4) of the Act, at hospital discharge for all patients. 
Under TEAM, we are proposing that TEAM participants be required to 
include in hospital discharge planning a referral to a supplier of 
primary care services for a TEAM beneficiary, on or prior to discharge 
from an anchor hospitalization or anchor procedure. We also propose 
that the TEAM participant must comply with beneficiary freedom of 
choice requirements, as described in section X.A.3.i.(2) of the 
preamble of this proposed rule and proposed at Sec.  512.582(a), and 
not limit a TEAM beneficiary's ability to choose among Medicare 
providers or suppliers. If a TEAM participant fails to comply with 
requiring a referral to a supplier of primary care services during 
hospital discharge planning then we propose the TEAM participant would 
be subject to remedial action, as described in section X.A.1.f. of the 
preamble of this proposed rule.
    Referring TEAM beneficiaries to a supplier of primary care services 
would require the TEAM participant to confirm the TEAM beneficiary's 
primary care provider status during the anchor hospitalization or 
anchor procedure and make the referral to primary care services by the 
point of the hospital discharge. By requiring a referral to primary 
care services, TEAM would be used to connect TEAM beneficiaries with 
ongoing care beyond the course of the episode. Further, TEAM 
participants would be required to ensure TEAM beneficiaries preference 
of suppliers are taken into account to ensure proper beneficiary 
protections.
    We recognize that TEAM is comprised of procedural episodes, which 
may mean TEAM beneficiaries have a greater need to stay connected to 
their surgeon or specialist involved in their episode, rather than make 
a connection to primary care for ongoing care. Additionally, we also 
recognize requiring a referral to primary care services for all TEAM 
beneficiaries may increase TEAM participant burden. However, we believe 
many hospitals already have this perform this process as a standard of 
care for discharge planning, therefore the burden on TEAM participants 
should be minimal.
    We seek comment on our proposal at proposed Sec.  515.564 to 
require TEAM participants during hospital discharge planning to make a 
referral to a supplier of primary care services for a TEAM beneficiary 
on or prior to discharge from the anchor hospitalization or anchor 
procedure. We also seek comment on whether there are other mechanisms 
or ways to connect the TEAM beneficiary back to a supplier of primary 
care services that would support a patient's continuum of care.
m. Alternative Payment Model Options
(1) Background
    As specified in the Quality Payment Program (42 CFR 414.1415), an 
APM must meet three criteria to be considered an Advanced APM:
     Beginning with the calendar year 2025 Qualifying APM 
Participant (QP) performance period, an Advanced APM must require all 
eligible clinicians in each participating APM Entity, or for APMs in 
which hospitals are the participants, each hospital, to use Certified 
Electronic Health Record Technology (CEHRT).
     An Advanced APM must include quality measure performance 
as a factor when determining payment to participants for covered 
professional services under the terms of the APM.
     Meet the financial risk standard under 42 CFR 
414.1415(c)(1) or (2) and the nominal amount standard under 42 CFR 
414.1415(c)(3) or (4).
    We seek to align the design of TEAM with the Advanced APM criteria 
in the Quality Payment Program and enable CMS to have the necessary 
information on eligible clinicians to make the requisite QP 
determinations. Eligible clinicians, as defined in 42 CFR 414.1305, 
that are captured on a CMS-maintained list for the APM entity, as 
defined in 42 CFR 414.1305, may be eligible to receive benefits for 
participating in an Advanced APM, including burden reduction and 
financial incentives. We propose that the TEAM participant would be 
considered the APM entity, but that the TEAM participant's eligible 
clinicians may be assessed for QP determinations depending on which 
track the TEAM participant is in and whether the CEHRT criteria are 
met. However, we also seek to ensure the design of TEAM meets the 
Merit-based Incentive Payment System (MIPS) APM criteria and that CMS 
has the necessary information on MIPS eligible clinicians, as defined 
in 42 CFR 414.1305, so that they may be eligible for certain scoring 
benefits under MIPS. We therefore propose to adopt two different APM 
options for TEAM--an AAPM option in which TEAM participants would 
attest to meeting the CEHRT standards and in which the TEAM 
participant's eligible clinicians may be assessed for QP determinations 
(to the extent TEAM is determined to be an Advanced APM for Track 2 and 
Track 3), and a non-AAPM option in which TEAM participants would not 
meet CEHRT or financial risk standards and in which the TEAM 
participant's MIPS eligible clinicians may be assessed for reporting 
and scoring through the APM Performance

[[Page 36481]]

Pathway (APP) (to the extent the TEAM is determined to be a MIPS APM 
for all tracks).
(2) TEAM APM Options
    As previously stated, an Advanced APM must require participants to 
use CEHRT (42 CFR 414.1415(a)), make payment based on quality measures 
(42 CFR 414.1415(b)) and meet financial risk standards (42 CFR 
414.1415(c)). We propose to have two APM options in TEAM: a non-
Advanced APM (non-AAPM) option and an Advanced APM (AAPM) option. The 
non-AAPM option would be for TEAM participants that do not meet the 
CEHRT or financial risk standards. These TEAM participants may still be 
considered APM entities in a MIPS APM. The AAPM option would be for 
TEAM participants in Tracks 2 and 3 that meet the CEHRT and financial 
risk standards. These TEAM participants would be considered APM 
entities in an Advanced APM., TEAM participants in Track 1 would 
automatically be assigned into the non-AAPM option since Track 1 would 
have no downside financial risk. The financial risk that we propose in 
Tracks 2 and 3 would meet the generally applicable nominal amount 
standard, as defined in 42 CFR 414.1415(c)(3), but there may be TEAM 
participants in Tracks 2 and 3 who do not meet the CEHRT standard. TEAM 
participants in Tracks 2 or 3 that do not meet and attest to the CEHRT 
use requirement would fall into the non-AAPM option of TEAM, but these 
TEAM participants may still be considered APM entities in a MIPS APM. 
TEAM participants that participate in Tracks 2 or 3 and meet and attest 
to the CEHRT use requirement would be in the AAPM option of TEAM.
    We propose to require TEAM participants who wish to participate in 
the AAPM option to attest to meeting the CEHRT use requirement that 
meets the CEHRT definition in our regulations at section 414.1305 on an 
annual basis prior to the start of each performance year in a form and 
manner and by a date specified by CMS. We propose that the TEAM 
participant would be required to retain and provide CMS access to the 
attestation upon request. We further propose that meeting and attesting 
to the CEHRT use criteria would be voluntary, and that CMS would assign 
TEAM participants who choose not to do so to the non-AAPM option. 
Lastly, we propose to require TEAM participants who wish to participate 
in the AAPM option to provide their CMS Electronic Health Record (EHR) 
Certification IDs on an annual basis prior to the end of each 
performance year in a form and manner and by a date specified by CMS.
    We believe that a TEAM participant's decision to meet and attest to 
the CEHRT use criteria would not create significant additional 
administrative burden for the TEAM participant. Moreover, the choice of 
whether to meet and attest to the CEHRT use criteria would not 
otherwise affect the TEAM participant's requirements or opportunities 
under the model. However, a TEAM participant's decision to attest to 
CEHRT use may affect the ability of its clinicians to qualify as a QP. 
In other words, if a TEAM participant chose not to attest to CEHRT use, 
its clinicians would not be assessed for QPs status.
    We seek comment on our proposals for the TEAM Advanced APM options 
and the associated requirements at Sec.  512.522. We also seek comment 
on our proposed definitions for the AAPM option and non-AAPM option at 
Sec.  512.505.
(3) Financial Arrangements List and Clinician Engagement List
    We propose that each TEAM participant would be required to submit 
information about the eligible clinicians or MIPS eligible clinicians 
who enter into financial arrangements with the TEAM participant for 
purposes of supporting the TEAM participants' cost or quality goals as 
discussed in section X.A.3.g. of the preamble of this proposed rule. 
This information would enable CMS to make determinations as to eligible 
clinicians who could be considered QPs based on the services furnished 
under TEAM (to the extent the model is determined to be an AAPM) and 
would be necessary for APP reporting and scoring for MIPS eligible 
clinicians (to the extent the model is determined to be a MIPS APM), We 
are proposing that for purposes of TEAM, the eligible clinicians or 
MIPS eligible clinicians could be: (1) TEAM collaborators, as described 
in section X.A.3.g.(3). of the preamble of this proposed rule, engaged 
in sharing arrangements with a TEAM participant; (2) PGP, NPPGP, or TGP 
members who are collaboration agents engaged in distribution 
arrangements with a PGP, NPPGP, or TGP that is a TEAM collaborator, as 
described in section X.A.3.g.(5). of the preamble of this proposed 
rule; or (3) PGP, NPPGP, or TGP members who are downstream 
collaboration agents engaged in downstream distribution arrangements 
with a PGP, NPPGP, or TGP that is also an ACO participant in an ACO 
that is a TEAM collaborator, as described in section X.A.3.g.(6). of 
the preamble of this proposed rule. The list of physicians and 
nonphysician practitioners in these three groups that we are proposing 
to require TEAM participants to submit to CMS would satisfy the 
criteria to be considered an Affiliated Practitioner List, as defined 
in Sec.  414.1305. We are proposing to use the list submitted by TEAM 
participants to make determinations regarding which physicians and 
nonphysician practitioners should receive QP determinations or be 
reported for the APP based on the services they furnish under TEAM.
    We propose for the reasons detailed above that each TEAM 
participant with eligible clinicians or MIPS eligible clinicians must 
submit to CMS a financial arrangements list in a form and manner and by 
the date specified by CMS on a quarterly basis during each performance 
year, or attest that there are no individuals to report on the 
financial arrangements list. We believe submission of the financial 
arrangements list on a quarterly basis would align with the Quality 
Payment Program's QP determination dates, as described in Sec.  
414.1425. We are proposing to define the financial arrangements list as 
the list of eligible clinicians or MIPS eligible clinicians that have a 
financial arrangement with the TEAM participant, TEAM collaborator, 
collaboration agent, or downstream collaboration agent. We propose that 
the TEAM participant would be required to retain and provide CMS access 
to the financial arrangements list upon request. The proposed list must 
include the following information:
     For each TEAM collaborator who is a physician, 
nonphysician practitioner, or therapist during the performance year--
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the TEAM collaborator; and
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the TEAM participant and the TEAM collaborator.
     For each collaboration agent who is a physician, 
nonphysician practitioner, or therapist during the performance year--
    ++ The name, TIN, and NPI of the collaboration agent and the name 
and TIN of the TEAM collaborator with which the collaboration agent has 
entered into a distribution arrangement; and
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the TEAM collaborator and the 
collaboration agent.

[[Page 36482]]

     For each downstream collaboration agent who is a physician 
or nonphysician practitioner, or therapist during the performance 
year--
    ++ The name, TIN, and NPI of the downstream collaboration agent and 
the name and TIN of the collaboration agent; and
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent and the 
downstream collaboration agent.
     If there are no individuals that meet the reporting 
criteria above for TEAM collaborators, collaboration agents, or 
downstream collaboration agents, then the TEAM participant must attest 
on a quarterly basis in a form and manner and by a date specified by 
CMS that there are no individuals to report on the financial 
arrangements list.
    While the proposed submission of the financial arrangements list 
may create some additional administrative burdens for certain TEAM 
participants, we expect that TEAM Participants could modify their 
contractual relationships with their TEAM collaborators and, 
correspondingly, require those TEAM collaborators to include similar 
requirements in their contracts with collaboration agents and in the 
contracts of collaboration agents with downstream collaboration agents.
    We also recognize there may be physicians and nonphysician 
practitioners who would not be listed on the financial arrangements 
list because they have not entered into a financial arrangement as a 
TEAM collaborator, collaboration agent, or downstream collaboration 
agent, but who may nevertheless participate in TEAM activities, as 
defined at proposed Sec.  512.505, and may be eligible for QP 
determinations or eligible for APP reporting because they are 
affiliated with and support the APM Entity. We propose that, in order 
to capture these physicians and nonphysician practitioners who are not 
listed on the TEAM participant's financial arrangements list for QP 
determinations or APP reporting, TEAM participants must also submit to 
CMS a clinician engagement list in a form and manner and by a date 
specified by CMS on a quarterly basis every performance year. We 
propose to use the clinician engagement list for assessing QP 
determinations and for APP reporting. The submission of the clinician 
engagement lists may create some additional administrative burdens for 
TEAM participants, but we expect the effort to be worthwhile since some 
of these QP determinations may result in eligible clinicians receiving 
burden reduction benefits and financial incentives, and some MIPS 
eligible clinicians may receive MIPS APM scoring benefits.
    We are proposing to define the clinician engagement list as the 
list of eligible clinicians or MIPS eligible clinicians that 
participate in TEAM activities and have a contractual relationship with 
the TEAM participant, and who are not listed on the financial 
arrangements list . We propose that the TEAM participant must submit 
the list to CMS on a quarterly basis during each performance year in a 
form and manner and by a date specified by CMS or attest that there are 
no individuals to report on the clinician engagement list. We believe 
submission of the clinician engagement list on a quarterly basis would 
align with the Quality Payment Program's QP determination dates, as 
described in Sec.  414.1425. We propose that the TEAM participant would 
be required to retain and provide CMS access to the clinician 
engagement list upon request. We propose that the clinician engagement 
list must include the following information:
     For each physician, nonphysician practitioner, or 
therapist who is not listed on the TEAM participant's financial 
arrangements list during the performance year but who does have a 
contractual relationship with the TEAM participant and participates in 
TEAM activities during the performance year--
    ++ The name, TIN, and NPI of the physician, nonphysician 
practitioner, or therapist; and
    ++ The start date and, if applicable, end date, for the contractual 
relationship between the physician, nonphysician practitioner, or 
therapist and the TEAM participant.
     We are proposing that if there are no individuals that 
meet the requirements to be reported on the clinician engagement list, 
then the TEAM participant must attest on a quarterly basis in a form 
and manner and by a date specified by CMS that there are no individuals 
to report on the clinician engagement list.
    We seek comments on the proposal to require TEAM participants to 
submit a financial arrangements list and clinician engagement list on a 
quarterly basis or attest that there are no individuals to report. We 
are especially interested in comments about approaches to information 
submission, including the content of the lists, and periodicity and 
method of submission to CMS that would minimize the reporting burden on 
TEAM participants while providing CMS with sufficient information about 
eligible clinicians to facilitate QP determinations and APP reporting 
to the extent that TEAM is considered to be an Advanced APM for Track 2 
and Track 3 and a MIPS APM for all tracks, respectively.
n. Interoperability
    Improved interoperability of software systems and tools used to 
manage patients supports the goals of value-based care, enabling care 
coordination and data-driven decision making to improve outcomes and 
lower healthcare expenditures. Hospitals use electronic health record 
(EHR) systems to document patient medical history, which may include 
clinical data relevant to that person's care, including demographics, 
clinical notes, medications, vital signs, past medical and surgical 
history, immunizations, laboratory data and radiology reports. The EHR 
also has the ability to support other care-related and administrative 
activities directly or indirectly through various interfaces, including 
clinical decision support, quality improvement, and population-health 
outcomes reporting. While EHRs also include capabilities to coordinate 
care by sharing data in a structured system with other health care 
providers, health information exchanges (HIEs) and health information 
networks (HINs), as defined in 45 CFR 171.102, have played an 
increasingly important role in assisting hospitals to connect with 
other health care providers and ensure that information supporting care 
coordination is consistently shared.\707\ A hospital may be connected 
to an HIE or HIN, that focuses on exchange within a defined geographic 
area, or nationally across systems and regions. Evidence suggests that 
participation with an entity facilitating cross-system exchange may 
improve patient outcomes, including decreased hospital readmission 
rates, as well as decreased utilization, such as repeat laboratory or 
radiology studies.708 709
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    \707\ https://www.healthit.gov/topic/health-it-and-health-information-exchange-basics/health-information-exchange.
    \708\ Chen, M., Guo, S., & Tan, X. (2019). Does health 
information exchange improve patient outcomes? Empirical evidence 
from Florida hospitals. Health Affairs, 38(2), 197-204. https://doi.org/10.1377/hlthaff.2018.05447.
    \709\ Menachemi, N., Rahurkar, S., Harle, C. A., & Vest, J. R. 
(2018). The benefits of health information exchange: an updated 
systematic review. Journal of the American Medical Informatics 
Association, 25(9), 1259-1265. https://doi.org/10.1093/jamia/ocy035.
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    Despite the growth of HIEs and HINs, important gaps remain for an 
infrastructure that supports the seamless exchange of clinical data 
across disparate healthcare organizations and software vendors. 
Barriers to

[[Page 36483]]

interoperability create silos that limit care coordination between 
hospitals and other health care providers, especially during care 
transitions such as a patient being discharged from a hospital to a 
post-acute care facility. Existing HHS and CMS initiatives aim to 
support health care organizations engaging in interoperable exchange of 
health information. The Office of the National Coordinator for Health 
Information Technology (ONC) launched The Trusted Exchange Framework 
and Common Agreement (TEFCA), which establishes a universal governance, 
policy, and technical floor for nationwide interoperability; simplifies 
connectivity for organizations to securely exchange information to 
improve patient care, enhance the welfare of populations, and generate 
health care value; and enables individuals to gather their healthcare 
information.\710\
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    \710\ https://www.healthit.gov/topic/interoperability/policy/trusted-exchange-framework-and-common-agreement-tefca.
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    CMS acknowledged the importance of TEFCA in the FY 2023 Inpatient 
Prospective Payment System (IPPS) final rule (87 FR 48780) by adding 
the Enabling Exchange under TEFCA (87 FR 49329) as a new measure under 
the Health Information Exchange Objective for the Medicare Promoting 
Interoperability Program. Participants in the Medicare Promoting 
Interoperability Program may also earn credit for the Health 
Information Exchange Objective by reporting on the previously finalized 
Health Information Exchange (HIE) Bidirectional Exchange measure (86 FR 
45465).
    In the CY 2023 Physician Fee Schedule final rule (87 FR 70067 
through 70071), CMS also added a new optional measure, Enabling 
Exchange Under TEFCA, to the Health Information Exchange objective for 
the Merit-based Incentive Payment System (MIPS) Promoting 
Interoperability performance category beginning with the CY 2023 
performance period/2025 MIPS payment year. Currently, for the CY 2024 
performance period/2026 MIPS payment year, MIPS eligible clinicians may 
fulfill the Health Information Exchange objective via three avenues by 
reporting: (1) the two Support Electronic Referral Loops measures; (2) 
the Health Information Exchange Bidirectional Exchange measure; or (3) 
the Enabling Exchange under TEFCA measure (88 FR 79357 through 79362).
    TEAM would like to support TEAM participants' interoperability 
efforts that could lead to best practices across U.S. health care 
landscape. However, we recognize that given the existing federal 
interoperability initiatives, we do not want to create duplicate 
efforts or create unnecessary burden on TEAM participants. We are 
seeking comment on how CMS can promote interoperability in the proposed 
TEAM, in particular, to what extent TEAM participants are planning on 
participating in TEFCA in the next 1-2 years, as well as other means by 
which interoperability may support care coordination for an episode. 
Any further proposals related to interoperability included in TEAM 
would be done in future notice and comment rulemaking.
o. Evaluation Approach
(1) Background
    The proposed TEAM is intended to enable CMS to better understand 
the effects of bundled payments models on a broader range of Medicare 
providers and capture a greater number of episodes of care than what is 
currently available under the CJR model and BPCI Advanced. Obtaining 
information that is representative of a wide and diverse group of 
providers and episodes of care will best inform us on how such a 
payment model might function were it to be more fully integrated within 
the Medicare program. All CMS Innovation Center models, which would 
include the proposed TEAM, are rigorously evaluated on their ability to 
improve quality and reduce costs. In addition, we routinely monitor CMS 
Innovation Center models for potential unintended consequences of the 
model that run counter to the stated objective of lowering costs 
without adversely affecting quality of care. Outlined later in this 
section are the proposed design and evaluation methods, the data 
collection methods, key evaluation research questions, and the 
evaluation period and anticipated reports for the proposed TEAM.
(2) Design and Evaluation Methods
    Our evaluation methodology for TEAM would be consistent with the 
standard CMS Innovation Center evaluation approaches we have taken in 
other projects such as the BPCI initiative, BPCI Advanced and the CJR 
model, and other CMS Innovation Center models. Specifically, the 
evaluation design and methodology for the proposed TEAM would be 
designed to allow for a comparison of historic patterns of care among 
the TEAM participants to any changes made in these patterns in response 
to the TEAM. In addition, the overall design would include a comparison 
of TEAM participants with hospitals not participating in TEAM to help 
us discern simultaneous and competing provider and market level forces 
that could influence our findings.
    Our evaluation methodology for this model builds upon the fact that 
we are proposing CBSAs to be selected for participation in the model 
based on a stratified random assignment. In this approach, researchers 
evaluate the effects of the model on outcomes of interest by directly 
comparing CBSAs that are randomly selected to participate in the model 
to a comparison group of CBSs that were not randomly selected for the 
model (but could have been). Randomized evaluation designs of this kind 
are widely considered the ``gold standard'' for social science and 
medical research because they ensure that the systematic differences 
are reduced between units that do and do not experience an 
intervention, which ensures that (on average) differences in outcomes 
between participating and non-participating units reflect the effect of 
the intervention.
    We plan to use a range of analytic methods, including regression 
and other multivariate methods appropriate to the analysis of 
stratified randomized experiments to examine each of our measures of 
interest. Measures of interest could include, for example, quality of 
and access to care, utilization patterns, expenditures, and beneficiary 
experience. With these methodologies, we would be able to examine the 
experience of the TEAM participants over time relative to those in the 
comparison group controlling for as many of the relevant confounding 
factors as is possible. The evaluation would also include rigorous 
qualitative analyses in order to capture the evolving nature of care 
delivery transformation.
    In our design, we plan to take into account the impact of the TEAM 
at the geographic unit level, the hospital level, and at the patient 
level. We are also considering various statistical methods to address 
factors that could confound or bias our results. For example, we would 
use statistical techniques to account for clustering of patients within 
hospitals and markets. Clustering allows our evaluation to compensate 
for commonalities in beneficiary outcomes by hospitals and by markets. 
Accounting for clustering ensures that we do not overstate our 
effective sample size by failing to account for the fact that 
performance of hospitals in a given market may not be fully independent 
of one another. Alternatively, accounting for clustering may improve 
statistical precision or allow us to better examine how patterns of 
performance vary across hospitals. Thus, in our analysis, if a

[[Page 36484]]

large hospital consistently has poor performance, clustering would 
allow us to still be able to detect improved performance in the other, 
smaller hospitals in a market rather than place too much weight on the 
results of one hospital and potentially lead to biased estimates and 
mistaken inferences.
    Finally, we plan to use various statistical techniques to examine 
the effects of the TEAM while also taking into account the effects of 
other ongoing interventions such as Medicare Shared Savings Program. 
For example, we are considering additional regression techniques to 
help identify and evaluate the incremental effects of adding the TEAM 
in areas where patients and market areas are already subject to these 
other interventions as well as potential interactions among these 
efforts.
(3) Data Collection Methods
    We are considering multiple sources of data to evaluate the effects 
of the TEAM. We expect to base much of our analysis on secondary data 
sources such as the Medicare FFS claims. The beneficiary claims data 
would provide information such as expenditures in total and by type of 
provider and service as well as whether or not there was an inpatient 
hospital readmission. In conjunction with the secondary data sources 
mentioned previously, we are considering a CMS-administered survey, 
guided interviews and focus groups of beneficiaries who were in an 
episode during the performance year. This survey would be administered 
to TEAM beneficiaries who were in an episode or similar patients 
selected as part of a control group. The primary focus of this survey 
would be to obtain information on the TEAM beneficiary's experience in 
episodes relative to usual care. The administration of this beneficiary 
survey would be coordinated with administration of the HCAHPS (Hospital 
Consumer Assessment of Healthcare Providers and Systems) survey so as 
to not conflict with or compromise this HCAHPS efforts. Likewise, we 
are considering a survey administered by CMS with providers including, 
but not limited to, TEAM participants, physicians, and PAC providers 
participating in the TEAM. These surveys would provide insight on 
providers' experience under the model and further information on the 
care redesign strategies undertaken by health care providers.
    In addition, we are considering CMS evaluation contractor 
administered site visits and focus groups with selected TEAM 
participants, physicians and PAC providers. We believe that these 
qualitative methods would provide contextual information that would 
help us better understand the dynamics and interactions occurring among 
the providers in TEAM. For example, these data could help us better 
understand hospitals' intervention plans as well as how they were 
implemented and what they achieved. Moreover, in contrast to relying on 
quantitative methods alone, qualitative approaches would enable us to 
capture variations in implementation as well as identify factors that 
are associated with successful interventions and distinguish the 
effects of multiple interventions that may be occurring within 
participating providers, such as simultaneous ACO and bundled payment 
participation.
    We are considering primary data collection efforts with providers 
and beneficiaries within the control group. The systematic data 
collection from control group providers would allow for parsing out 
changes in standard of care from the TEAM impact. Additionally, primary 
data collection with beneficiaries who received care at control group 
providers will provide critical information about the impact of the 
model on self-reported health status, experience of care and overall 
satisfaction.
(4) Key Evaluation Research Questions
    Our evaluation would assess the impact of the TEAM on the aims of 
improved care quality and efficiency as well as reduced health care 
costs. This would include assessments of patient experience of care, 
utilization, outcomes, Medicare expenditures, provider costs, quality, 
and access. Our key evaluation questions would include, but are not 
limited to, the following:
     Payment. Is there a reduction in Medicare expenditures in 
absolute terms? By subcategories? Do the TEAM participants reduce or 
eliminate variations in expenditures that are not attributable to 
differences in health status? If so, how have they accomplished these 
changes? Did TEAM result in net savings to the Medicare program, after 
accounting for the financial incentives distributed under the model?
     Utilization. Are their changes in Medicare utilization 
patterns overall and for specific types of services? How do these 
patterns compare to historic patterns, regional variations, and 
national patterns of care? How are these patterns of changing 
utilization associated with Medicare payments, patient outcomes and 
general clinical judgment of appropriate care?
     Referral Patterns and Market Impact. How has provider 
behavior in the selected CBSAs changed under the model? Is there 
evidence of broader changes to the market? Are provider relationships 
changing over the course of the model? Is the model facilitating 
continuity of care by connecting beneficiaries with new or existing 
primary care providers?
     Outcomes/Quality. Is there either a negative or positive 
impact on quality of care and/or better patient experiences of care? 
Did the incidence of relevant clinical outcomes such as complications 
remain constant or decrease? Were there changes in beneficiary outcomes 
under the model compared to appropriate comparison groups?
     Equity. Were there notable impacts by subgroups based on 
beneficiary characteristics such as race/ethnicity, dual status, 
rurality, or other measures of socio-economic disadvantage? How did 
TEAM participants address health disparities in care? Did the financial 
performance differ for hospitals furnishing a substantial share of 
services to uninsured and low-income patients?
     Transformation. Is there evidence that the participants' 
changes in care delivery, that were made in the response to the model, 
will be sustained? Did TEAM enable positive spillover effects to other 
episodes of care, or other providers across the local market of the 
health system?
     Unintended Consequences. Did TEAM result in any unintended 
consequences, including adverse selection of patients, access problems, 
cost shifting beyond the agreed upon episode, evidence of stinting on 
appropriate care, anti-competitive effects on local health care 
markets, evidence of inappropriate referrals practices? Is so, how, to 
what extent, and for which beneficiaries or providers?
     Potential for Extrapolation of Results. What was the 
typical patient case mix in the participating practices and how did 
this compare to regional and national patient populations? What were 
the characteristics of participating practices and to what extent were 
they representative of practices treating Medicare FFS beneficiaries? 
Was the model more successful in certain types of markets? To what 
extent would the results be able to be extrapolated to similar markets 
and/or nationally?
     Explanations for Variations in Impact. What factors are 
associated with the pattern of results (previously)? Specifically, are 
they related to:
     Characteristics of the model including variations by year 
and factors such as presence of downside risk or track assignment?
    The TEAM participant's specific features and structure, including 
such

[[Page 36485]]

factors as the number of relevant cases, provider mix, and health 
system affiliation?
     The TEAM participant's organizational culture and 
readiness
     The TEAM participant's care redesign interventions and 
their ability to carry out their proposed intervention?
     Characteristics and nature of interaction with partner 
providers including PAC provider community?
     Characteristics of market and CBSA such as resources, care 
infrastructure and supply of physicians and associated providers?
     Characteristics associated with the patient populations 
served?
(5) Evaluation Period and Anticipated Reports
    As discussed in section X.A.3.a.(1). of the preamble of this 
proposed rule, TEAM would have a 5-year model performance period. The 
evaluation period would encompass this entire 5-year model performance 
period and up to 2 years after. We plan to evaluate the TEAM on an 
annual basis. However, we recognize, that interim results are subject 
to issues such as sample size and random fluctuations in practice 
patterns. Hence, while CMS intends to conduct periodic summaries to 
offer useful insight during the course of the model test, a final 
analysis after the end of the 5-year model performance period will be 
important for ultimately synthesizing and validating results.
    We seek comments on our design, evaluation, data collection 
methods, and research questions.
p. Decarbonization and Resilience Initiative
    In this section, we discuss a proposal for a voluntary 
Decarbonization and Resilience Initiative within TEAM to assist 
hospitals in addressing the threats to the nation's health and its 
health care system presented by climate change and the effects of 
hospital carbon emissions on health outcomes, health care costs and 
quality of care. The voluntary initiative would have two elements: 
technical assistance for all interested TEAM participants and a 
proposed voluntary reporting option to capture information related 
Scope 1 and Scope 2 emissions as defined by the Greenhouse Gas Protocol 
(GHGP) framework,\711\ with the potential to add Scope 3 in future 
years.
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    \711\ Janet Ranganathan, Laurent Corbier, Pankaj Bhatia, Simon 
Schultz, Peter Gage, & Kjeli Oren. The Greenhouse Gas Protocol: A 
Corporate Accounting and Reporting Standard (Revised Edition). World 
Business Council for Sustainable Development and World Resources 
Institute. 2004. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf.
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    The threats presented by climate change to the health of 
beneficiaries and to health care operations are growing. These include 
acute climate-related events (for example, wildfires, high--powered 
storms, flooding) that can harm exposed populations and disrupt service 
delivery, exacerbations of chronic illness (for example, extreme heat 
impacts on cardiovascular and pulmonary health) and increases in water-
borne and insect-borne illness.\712\ These risks often fall 
disproportionately on traditionally underserved populations, 
heightening existing health disparities.\713\ In view of these 
challenges, health care organizations must increase their resilience, 
and understand and address their patients' climate-related health 
risks.
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    \712\ Allison R. Crimmins & Alexa K. Jay (eds.). U.S. Global 
Change Research Program. Fifth National Climate Assessment. U.S. 
Global Change Research Program. 2023. https://nca2023.globalchange.gov/.
    \713\ EPA's Office of Atmospheric Programs. Climate Change and 
Social Vulnerability in the United States: A Focus on Six Impacts. 
U.S. Environmental Protection Agency. U.S. Environmental Protection 
Agency. EPA 430-R-21-003. September 2021. https://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdf.
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    Health systems have reduced their own significant emissions and 
ground-level air pollution, often through the introduction of energy 
efficiency solutions, renewable energy initiatives, and focused 
efficiency measures in clinical care delivery in areas including 
surgery (described throughout section X.A.3.p. of the preamble of this 
proposed rule). We believe these types of cumulative reductions have 
the potential to make significant contributions to nationwide emission 
reductions and produce savings. At an individual facility level, these 
reductions have the potential to save the facility money and enhance 
their operational resilience (as many sustainable energy solutions can 
create more energy independence for facilities), meaning 
decarbonization has bearing on quality of care and cost. More efficient 
utilization of resources in the surgical setting, specifically, can 
also reduce cost and improve sustainability; for example, although 
operating rooms represent a relatively small proportion of hospitals' 
physical footprint, they typically consume 3-6 times more energy per 
square foot as the hospital as a whole,\714\ account for 40-60 percent 
of the hospital's supply costs, and produce 30 percent of the 
hospital's waste.\715\
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    \714\ Andrea J. MacNeill, Robert Lillywhite, & Carl J. Brown. 
The Impact of Surgery on Global Climate: A Carbon Footprinting Study 
Of Operating Theatres in Three Health Systems. Lancet Planetary 
Health, vol. 1, no. 9, pp. E381-E388. December 2017. https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(17)30162-6/
fulltext.
    \715\ Maya A Babu, Angela K Dalenberg, Glen Goodsell, Amanda B 
Holloway, Marcia M Belau, & Michael J Link. Greening the Operating 
Room: Results of a Scalable Initiative to Reduce Waste and Recover 
Supply Costs. Neurosurgery, vol. 85, no. 3, pp. 432-437. September 
1, 2019. https://pubmed.ncbi.nlm.nih.gov/30060055/.
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    Because hospital activities (such as surgical procedures) impact 
emissions and the work of hospitals requires uninterrupted service 
delivery, we believe TEAM presents an opportunity for CMS to learn more 
about key strategies for decarbonization (for example, clinical 
decarbonization approaches, approaches to reducing low-value services 
and physical waste) and improving resiliency in the health care system. 
It is hoped that this initiative would help bring savings to the health 
system and the Medicare Program, consistent with TEAM's goals.
(1) Background
(a) Climate Impact on Health
    Climate change driven by greenhouse gas (GHG) emissions threatens 
patients' health. The health care industry's contribution to those 
emissions is well-documented and accounts for between 4.4 and 4.6 
percent of worldwide GHG emissions.\716\ In the U.S. in 2018, GHG 
emissions from the health care sector accounted for 8.5 percent of 
total U.S. GHG emissions.\717\ According to the National Climate 
Assessment, the US Government's official report on climate change 
impacts, children, older adults, and low-income communities are 
disproportionately affected by climate change and pollution, meaning 
the Medicare, Medicaid, and CHIP programs bear much of the medical 
expenses and caregiving services related to emissions. \718\ Medicare 
beneficiaries face several health conditions related to GHG emissions, 
including, but not limited to, heart disease, stroke, cancer, and

[[Page 36486]]

respiratory diseases.'' \719\ More discussion on the impact of climate 
to Medicare, Medicaid, and CHIP beneficiaries is presented in section 
X.A.3.p.(1).(c).(v). of the preamble of this proposed rule. The 
estimated disease burden from U.S. health care pollution is the same 
order of magnitude as years of life lost as a result of deaths from 
preventable medical errors.\720\
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    \716\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
    \717\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
    \718\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United 
States: Fourth National Climate Assessment, Volume II [Reidmiller, 
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. 
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research 
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
    \719\ Joel D. Kaufman, Sara D. Adar, R. Graham Barr, et al. 
Association Between Air Pollution and Coronary Artery Calcification 
Within Six Metropolitan Areas in the USA (The Multi-Ethnic Study of 
Atherosclerosis and Air Pollution): A Longitudinal Cohort Study. 
Lancet, vol. 388, no. 10045, pp. 696-704. August 13, 2017. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/.
    \720\ Joel D. Kaufman, Sara D. Adar, R. Graham Barr, et al. 
Association Between Air Pollution and Coronary Artery Calcification 
Within Six Metropolitan Areas in the USA (The Multi-Ethnic Study of 
Atherosclerosis and Air Pollution): A Longitudinal Cohort Study. 
Lancet, vol. 388, no. 10045, pp. 696-704. August 13, 2017. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5019949/.
---------------------------------------------------------------------------

    In keeping with an increased focus on climate resilience and 
sustainability across HHS, the Biden Administration in 2021 called for 
the creation of a new Office of Climate Change and Health Equity 
(OCCHE) within HHS via executive order (E.O. 14008), and for the first 
time HHS set an aim for addressing climate-related threats to health in 
its 2022-2026 strategic plan, requiring all Operating Divisions to 
contribute. In 2022, the Biden Administration launched the Health 
Sector Climate Pledge, a voluntary commitment to climate resilience and 
emissions reduction that invites health sector organizations to align 
with administration goals, cutting GHG emissions by 50 percent by 2030 
and achieving net zero emissions by 2050. A group of 133 organizations 
representing 900 hospitals have signed the Pledge as of November 16, 
2023.\721\ To support health sector efforts with climate resilience and 
emissions reduction, OCCHE developed a resource hub \722\, featuring 
tools from across HHS such as a compendium of federal resources for the 
healthcare sector, information on how to leverage the IRA, an 
educational webinar series, and the Agency for Healthcare Research and 
Quality (AHRQ)'s Decarbonization Primer \723\ (referred to hereafter as 
the AHRQ primer). OCCHE also convenes federal health systems (for 
example, Indian Health Service, Veteran's Health Administration) to 
collaborate on meeting the administration's goals for emissions 
reduction, which can inform this initiative.
---------------------------------------------------------------------------

    \721\ HHS Office of Climate Change & Health Equity. Health 
Sector Commitments to Emissions Reduction and Resilience. HHS Office 
of the Assistant Secretary for Health--Health Sector Pledge. January 
3, 2024. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-sector-pledge/index.html.
    \722\ HHS Office of Climate Change & Health Equity. Compendium 
of Federal Resources for Health Sector Emissions Reduction and 
Resilience. HHS Office of the Assistant Secretary for Health--Health 
Sector Pledge. December 7, 2023. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/actions/health-care-sector-pledge/federal-resources/index.html.
    \723\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-Edwards, 
Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing Health care 
Carbon Emissions: A Primer on Measures and Actions for Health Care 
Organizations to Mitigate Climate Change. U.S. Agency for Healthcare 
Research & Quality. AHRQ pub. No. 22-M011. September 2023. Reducing 
Healthcare Carbon Emissions: A Primer on Measures and Actions to 
Mitigate Climate Change (ahrq.gov).
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(b) Greenhouse Gas Protocol and Health
    CMS has twice sought and received feedback on approaches to 
decarbonization and resilience through requests for information in 
proposed rules. The feedback to these requests was summarized in the 
final rules. The first request for information was published in the 
Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2023 proposed rule (87 FR 693 through 694) and a 
summary presented in the final rule (87 FR 27354). The second was in 
the in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28478 through 
28479) and the summary was presented in the final rule (87 FR 49167). 
Overall, respondents showed a notable interest in reducing health 
sector emissions and increasing transparent GHG emissions reporting. 
CMS continues to update policies to promote energy efficiency and 
reduce GHG emissions. For example, in 2023, CMS issued the Categorical 
Waiver Health Care Microgrid System. CMS requires specified providers 
to have ``emergency power for an essential electrical system (EES) to 
be supplied by a generator or batter system.'' \724\ The waiver permits 
normal and emergency power to be supplied by sources other than a 
generator or battery system, including a health care microgrid systems 
that use sustainable sources of energy such as solar power.
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    \724\ CMS Quality, Safety, & Oversight Group (QSOG) Director and 
CMS Survey & Operations Group (SOG) Director. Categorical Waiver--
Health Care Microgrid Systems (HCMSs). CMS Center for Clinical 
Standards and Quality reference no. QSO-23-11-LSC. March 31, 2023. 
https://www.cms.gov/medicare/provider-enrollment-and-certification/surveycertificationgeninfo/policy-and-memos-states/categorical-waiver-health-care-microgrid-systems-hcmss.
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    When discussing GHG for this initiative, we refer to the Greenhouse 
Gas Protocol (GHGP) framework, which is a globally recognized standard 
for quantifying and reporting on emissions. The framework defines 3 
scope levels.\725\ We have included examples that relate to health 
care. 726 727
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    \725\ Janet Ranganathan, Laurent Corbier, Pankaj Bhatia, Simon 
Schultz, Peter Gage, & Kjeli Oren. The Greenhouse Gas Protocol: A 
Corporate Accounting and Reporting Standard (Revised Edition). World 
Business Council for Sustainable Development and World Resources 
Institute. 2004. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf.
    \726\ Nick Watts (ed.). Delivering a `Net Zero' National Health 
Service. NHS England & NHS Improvement publication no. PAR133. July 
2022. B1728-delivering-a-net-zero-nhs-july-2022.pdf 
(england.nhs.uk).
    \727\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
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     Scope 1: Direct emissions. Direct GHG emissions occur from 
sources that are owned or controlled by an organization or company. For 
health care, Scope 1 captures health care operations such as direct 
facilities emissions, anesthetic gases, and GHG emissions from leased 
or owned vehicles.
     Scope 2: Indirect emissions from purchased energy. GHG 
emissions from the generation of purchased electricity consumed by the 
organization or company. For health care facilities, Scope 2 includes 
purchased or acquired electricity, and steam, heat, or cooling consumed 
by the reporting organization or company.
     Scope 3: Other indirect GHG emissions. Scope 3 allows for 
the treatment of all other indirect emissions. Scope 3 incorporates 
upstream and downstream emissions in the supply chain. For health care, 
Scope 3 may include purchased pharmaceuticals and chemicals, medical 
devices and supplies, food, water, waste, employee and patient 
transportation, and additional emissions outside of Scopes 1 and 2. In 
Scope 3, all purchased and sold goods have an estimated emissions 
factor for their production, transportation, and life cycle. For 
example, in a health care setting, Scope 3 emissions may include 
prescribed medicine such as metered dose inhalers (MDI). Scope 3 
uniquely incorporates intangible emissions through the organization's 
reported investments.
    In a 2018 analysis, Scope 1 accounted for 7 percent of the U.S. 
National Health Care GHG emissions, Scope 2 accounted for 11 percent, 
and Scope 3 accounted for the remaining 82 percent.\728\ We

[[Page 36487]]

believe that Scopes 1 and 2 emissions reduction measures represent 
areas where there are significant opportunities to increase hospital 
operating efficiency and reduce operating costs. Therefore, we are 
proposing in section X.A.3.p.(4). of the preamble of this proposed rule 
that TEAM participants could voluntarily report on organizational 
questions and Scopes 1 and 2 metrics, as participants in TEAM would 
have direct oversight of these items. While we are not proposing Scope 
3 metrics in this rule, we recognize Scope 3 accounts for the largest 
portion of GHG emissions. Therefore, we are seeking comment in section 
X.A.3.p.(4).(a).(vii). of the preamble of this proposed rule on how we 
might be able to standardize and collect this information in the 
future.
---------------------------------------------------------------------------

    \728\ Matthew J. Eckelman, Kaixin Huang, Robert Lagasse, Emily 
Senay, Robert Dubrow, & Jodi D. Sherman. Health Care Pollution and 
Public Health Damage in The United States: An Update. Health 
Affairs, vol. 39, no. 12, pp. 2071-2079. December 2020. https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01247.
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(c) Rationale for Establishing the Decarbonization and Resilience 
Initiative
(i) GHG Emissions Are Relevant to Monitoring and Evaluating Quality 
Outcomes
    The CMS Innovation Center is granted discretion to collect data 
necessary for the purposes of evaluating and monitoring its models 
under section 1115A(b)(4)(B) of the Act. Overwhelming evidence points 
to GHG emission's deleterious effect on patient health and the 
disproportionate impact born by Medicare, Medicaid, and CHIP 
beneficiaries. See section X.A.3.p.(1).(c).(v). of the preamble of this 
proposed rule, for GHG Emissions Impact on Medicare, Medicaid, and CHIP 
populations.
    Given the established impact GHG emissions have on Medicare, 
Medicaid, and CHIP beneficiary health, CMS proposes to collect data on 
GHG emissions, through voluntary reporting, as part of our monitoring 
and evaluation of the model, just as CMS monitors for other quality 
indicators that may impact beneficiary health.
(ii) Measuring GHG Emissions is a Key First Step To Reducing GHG 
Emissions Which Could Improve Quality Outcomes for Beneficiaries
    Measuring GHG emissions is an important first step toward reducing 
GHG emissions, and such reductions could lead to outcome quality 
improvements among beneficiaries. By organizing a GHG emissions 
reporting system, CMS is supporting TEAM participants in establishing a 
baseline understanding of their GHG emissions, how much and how 
efficiently energy is used in their facilities, and the emissions 
generated by their facilities or activities. Establishing this baseline 
understanding is a necessary first step to lowering emissions. The 
proposed decarbonization initiative could directly lead to lower 
emissions through: (1) sharing benchmarkable data back to TEAM 
participants, which will support identification of opportunities to 
improve energy efficiency; (2) supporting their GHG emissions reporting 
activities, which will support TEAM participants in better 
understanding their current state energy consumption, GHG emissions, 
and opportunities to improve energy efficiency; and (3) providing 
technical assistance related to reporting, identifying, and accessing 
resources for and undertaking activities to reduce GHG emissions.
    Given the association of emissions with chronic diseases, including 
respiratory and cardiovascular disease, the decarbonization and 
resilience initiative could improve health outcomes for the Medicare, 
Medicaid, and CHIP beneficiaries disproportionately affected by GHG 
emissions. In particular, the Environmental Protection Agency (EPA) 
released a report on the health impacts of GHG emissions, pollution, 
and climate change and health and pointed towards key health outcomes 
that are impacted--new asthma diagnoses in children age 0-17 due to 
particulate air pollution, premature deaths in adults ages 65 and older 
due to particulate air pollution, and deaths due to extreme 
temperatures.\729\ We would expect reductions in GHG emissions to 
improve these health outcomes for its patient populations.
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    \729\ EPA's Office of Atmospheric Programs. Climate Change and 
Social Vulnerability in the United States: A Focus on Six Impacts. 
U.S. Environmental Protection Agency. U.S. Environmental Protection 
Agency. EPA 430-R-21-003. September 2021. https://www.epa.gov/system/files/documents/2021-09/climate-vulnerability_september-2021_508.pdf.
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(iii) Measuring GHG Emissions Could Improve Hospitals' Resilience and 
Beneficiaries' Continuity of Care, Both of Which Impact Quality 
Outcomes
    In addition to these general health quality impacts, there are also 
resilience and continuity of care impacts associated with energy 
efficiency and a transition to sustainable energy sources for 
hospitals, which also impact quality outcomes. One study that examined 
158 hospital evacuations between 2000 and 2017 found that nearly three-
quarters were for climate-sensitive events such as wildfires or 
hurricanes.\730\ In addition to causing hospital evacuations, climate 
change can disrupt health care system operations by causing facility 
damage and closures, power outages, displacement of health care 
professionals, and disruptions in transportation. These climate impacts 
affect access to and quality of care.
---------------------------------------------------------------------------

    \730\ Sharon E. Mace & Aishwarya Sharma. Hospital Evacuations 
Due to Disasters in the United States in the Twenty-First Century. 
American Journal of Disaster Medicine, vol. 15, no. 1, pp. 7-22. 
January 2020, Hospital evacuations due to disasters in the United 
States in the twenty-first century--PubMed (nih.gov).
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    By sharing back benchmarkable data with TEAM participants (as 
described in section X.A.3.p.(6).(a). of the preamble of this proposed 
rule, Individualized Feedback Reports to TEAM Participants, of the 
preamble of this proposed rule), providing technical assistance related 
to GHG emissions reporting, and providing technical assistance to 
improve energy efficiency and energy resilience, the Decarbonization 
and Resilience Initiative could directly support TEAM participants in 
building greater energy resilience to disasters and ensuring greater 
continuity of care. We expect the Decarbonization and Resilience 
Initiative to increase the energy efficiency of participating TEAM 
participants and the degree to which they have sustainable, more 
localized sources of energy that are resilient to disasters and other 
climate change related hazards.\731\ We expect this to lead to fewer 
hospital closures during disasters and therefore improve continuity of 
care and other health quality outcomes for effected beneficiaries. 
Greenwich Hospital offers an example of this. In 2008, the hospital 
invested in building a low- carbon, energy efficient energy 
infrastructure with the intention of it being able to withstand the 
impact of an extreme weather event. The investment proved to be 
valuable because when Hurricane Sandy hit the New Jersey coast in 2012, 
the hospital was still able to carry on with normal healthcare 
operations.
---------------------------------------------------------------------------

    \731\ NOAA Climate Program Office. Hospital Plans Ahead for 
Power, Serves the Community Through Hurricane Sandy. U.S. National 
Oceanic & Atmospheric Administration Climate Resilience Toolkit. 
February 15, 2018. https://toolkit.climate.gov/case-studies/hospital-plans-ahead-power-serves-community-through-hurricane-sandy.
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(iv) GHG Emissions are Relevant To Reducing Program Expenditures
    Reductions in operating costs and spending due to energy efficiency 
and more efficient provision of care (in the case of anesthetic gases) 
directly contribute to savings for CMS. GHG

[[Page 36488]]

emissions reporting is a necessary first step for hospitals to begin to 
understand their emissions, how energy efficient their facilities and 
processes are, and to identify opportunities to increase efficiencies 
and lower operating costs and spending tied to GHG emissions and to 
overutilization of anesthetic gas. In turn, increased energy efficiency 
and reduced energy expenditures may reduce Medicare Program costs. 
Technical assistance provided under the initiative would also further 
help hospitals identify, resource, and implement energy efficiency 
improvements.
    Medicare pays Critical Access Hospitals based on each hospital's 
reported costs outside of IPPS. Therefore, reductions in operating 
costs and some capital costs could lead to cost savings for the 
Medicare program. Medicare pays for capital and operating costs as part 
of IPPS payments, and efficiencies achieved through decarbonization 
could lead to savings to the Medicare program. In addition, reporting 
questions and metrics related to energy use could improve understanding 
of those costs and inform potential future policy development to secure 
further savings.
    Medicare covers anesthesia services through both Part A and Part B. 
Research has shown that low-flow anesthesia techniques (<=1 L/min) are 
associated with lower costs, reduced emissions, and do not impact 
quality of care or health outcomes.\732\ The Patient Safety and Support 
of Positive Experiences with Anesthesia MIPS Value Pathway already 
includes an efficiency measure focused on encouraging the use of low 
flow inhalation general anesthesia during the maintenance phase of the 
anesthetic for patients aged 18 years or older who undergo an elective 
procedure lasting 30 minutes or longer (ABG44). Such improvements to 
the provision of care and anesthesia could simultaneously lower 
emissions and reduce costs/produce savings.
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    \732\ Alicia Edmonds, Hilary Stambaugh, Scot Pettey, & Kenn B. 
Daratha. Evidence-Based Project: Cost Savings and Reduction in 
Environmental Release With Low-Flow Anesthesia. AANA J, vol. 89, no. 
1, pp. 27-33. February 2021. Evidence-Based Project: Cost Savings 
and Reduction in Environmental Release With Low-Flow Anesthesia--
PubMed (nih.gov).
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(v) GHG Emissions Impact on Medicare, Medicaid, and CHIP Populations
    Medicare and Medicaid beneficiary health and program expenditures 
are directly impacted by GHG emissions. Older adults, or those 65 years 
old and older, experience poorer health outcomes because of rising 
temperatures, air pollution, and disaster events. Depending on global 
trajectories of global warming, particulate matter concentrations are 
estimated to result in approximately 2,000 to 6,000 premature U.S. 
deaths for those over 65 years old on an annual basis. Air pollution 
has other negative health consequences, including the exacerbation of 
chronic obstructive pulmonary disease and increased occurrence of heart 
attacks, especially for those living with diabetes or obesity.\733\
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    \733\ Lulin Wang, Junqing Xie, Yonghua Hu, & Yaohua Tian. Air 
Pollution and Risk of Chronic Obstructed Pulmonary Disease: The 
Modifying Effect of Genetic Susceptibility and Lifestyle. Lancet 
eBioMedicine, vol. 79, pp. 103994. May 2022. Air pollution and risk 
of chronic obstructed pulmonary disease: The modifying effect of 
genetic susceptibility and lifestyle--PMC (nih.gov).
---------------------------------------------------------------------------

    Other studies have documented the impact of weather-related events 
such as high temperatures, flood, storms, or hurricanes that may 
disproportionately affect older adults.734 735 736 737
---------------------------------------------------------------------------

    \734\ Marina Romanello, Alice McGushin, Claudia Di Napoli, et 
al. The 2021 Report of the Lancet Countdown on Health and Climate 
Change: Code Red for a Healthy Future. Lancet, vol. 398, no. 10311, 
pp. 1619-1662. October 20, 2021. The 2021 report of the Lancet 
Countdown on health and climate change: code red for a healthy 
future--The Lancet.
    \735\ Janet L. Gamble & John Balbus. Chapter. 9: Populations of 
Concern. In: U.S. Global Change Research Program. The Impacts of 
Climate Change on Human Health in the United States: A Scientific 
Assessment. 2016. The Impacts of Climate Change on Human Health in 
the United States: A Scientific Assessment (globalchange.gov).
    \736\ Diarmid Campbell-Lendrum & Nicola Wheeler. COP24 Special 
Report: Health & Climate Change. World Health Organization Special 
Report. 2018. 9789241514972-eng.pdf (who.int).
    \737\ Laura P. Sands, Quyen Do, Pang Du, Yunnan Xu, & Rachel 
Pruchno. Long Term Impact of Hurricane Sandy on Hospital Admissions 
of Older Adults. Social Science & Medicine, vol. 293, pp. 114659. 
January 1, 2023. Long term impact of Hurricane Sandy on hospital 
admissions of older adults--PMC (nih.gov).
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    Medicaid beneficiaries are typically lower-income populations, 
pregnant people, and children, all of whom experience many direct and 
indirect health challenges because of climate drivers and events, 
including greater exposure to air pollution, mortality and injury from 
extreme temperatures, and food insecurity.\738\
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    \738\ Wim Thiery, Stefan Lange, Joeri Rogel, et al. 
Intergenerational Inequities in Exposure to Climate Extremes. 
Science, vol. 374, no. 6564, pp. 158-160. September 26, 2021. 
Intergenerational inequities in exposure to climate extremes--PubMed 
(nih.gov).
---------------------------------------------------------------------------

    Medicare and Medicaid beneficiaries are among the groups most 
vulnerable to the health effects of climate change and GHG emissions 
and bear the highest share of climate-sensitive health costs including 
those from GHG emissions which may account for billions in health-
related costs to both programs.739 740 The Office of 
Management and Budget's (OMB) 2022 Assessment of the Federal 
Government's Financial Risks to Climate Change estimates that ``Federal 
climate-related healthcare spending in a few key areas could increase 
by between $824 million and $22 billion (2020$) by the end of the 
century.'' \741\
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    \739\ Vijay S. Limaye, Wendy Max, Juanita Constible, & Kim 
Knowlton. Estimating the Health-Related Costs of 10 Climate-
Sensitive U.S. Events During 2012. GeoHealth, vol. 3, no. 9, pp. 
245-265. September 17, 2019. Estimating the Health-Related Costs of 
10 Climate-Sensitive U.S. Events During 2012--PMC (nih.gov).
    \740\ Ibid.
    \741\ U.S. Office of Management & Budget. Climate Risk Exposure: 
An Assessment of the Federal Government's Financial Risks to Climate 
Change. OMB White Paper. April 2022. https://www.whitehouse.gov/wp-content/uploads/2022/04/OMB_Climate_Risk_Exposure_2022.pdf.
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(2) Defining the Decarbonization and Resilience Initiative
    We are proposing at Sec.  512.505 that a Decarbonization and 
Resilience Initiative is an initiative for TEAM participants that 
includes technical assistance on decarbonization and a voluntary 
reporting program where TEAM participants may annually report questions 
and metrics related to emissions to CMS based on information that we 
describe in section X.A.3.p.(4). of the preamble of this proposed rule.
    We are proposing that CMS would make available to TEAM participants 
technical assistance related to decarbonization, emissions reduction, 
and energy efficiency as described in section X.A.3.p.(4). of the 
preamble of this proposed rule. The voluntary reporting component of 
the initiative described in section X.A.3.p.(4). of the preamble of 
this proposed rule would allow TEAM participants to elect to report 
metrics including emissions data and assessment questions on four 
potential categories: organizational questions, building energy 
metrics, anesthetic gas metrics, and transportation metrics to CMS. We 
are proposing the building metrics would be reported to CMS using the 
ENERGY STAR[supreg] PortfolioManager[supreg] and all other metrics 
would be reported to CMS in a manner and form specified by CMS. TEAM 
participants that elect to report all the metrics after a performance 
year would receive individualized feedback reports and public 
recognition from CMS.
(3) Technical Assistance
    For the technical assistance portion of the Decarbonization and 
Resilience Initiative we are proposing that CMS

[[Page 36489]]

would provide three types of support to interested TEAM participants:
     Developing approaches to enhance organizational 
sustainability and resilience;
     Transitioning to care delivery methods that result in 
lower GHG emissions and are clinically equivalent to or better than 
previous care delivery methods (for example, switching from Desflurane 
to alternative inhaled anesthetics); and
     Identifying and using tools to measure emissions and 
associated measurement activities.
    In the first support type, developing organizational approaches, 
CMS would entail offer interested TEAM participants guidance on best 
practices and methods for identifying opportunities to reduce GHG 
emissions while promoting sustainability and resilience. Particular 
attention will be placed on building efficiency and sustainable 
transportation. We would also help to identify potential non-Medicare 
financing strategies for this work, noting that TEAM participants have 
access to tax credits and grant programs that can support 
decarbonization and climate resilience investments through the 
Inflation Reduction Act,\742\ as well as other federal funding 
opportunities.\743\ OCCHE is leading a Catalytic Program to support 
safety-net health providers in taking advantage of these unprecedented 
opportunities; TEAM participants would be encouraged to take advantage 
of the recorded content and other materials from that program.\744\
---------------------------------------------------------------------------

    \742\ HHS Office of Climate Change & Health Equity. (OCCHE) 
Quickfinder for Leveraging the Inflation Reduction Act for the 
Health Sector. HHS Office of the Assistant Secretary for Health. 
February 27, 2024. The Office of Climate Change and Health Equity 
(OCCHE) Quickfinder for Leveraging the Inflation Reduction Act for 
the Health Sector [verbar] HHS.gov.
    \743\ HHS Office of Climate Change & Health Equity. Compendium 
of Federal Resources for Health Sector Emissions Reduction and 
Resilience. HHS Office of the Assistant Secretary for Health. 
December 7, 2023. Compendium of Federal Resources for Health Sector 
Emissions Climate Change Technical Assistance for Territories 
Reduction and Resilience [verbar] HHS.gov.
    \744\ HHS Office of Climate Change & Health Equity. Catalytic 
Program on Utilizing the IRA. HHS Office of the Assistant Secretary 
for Health Resource Hub. March 1, 2024. https://www.hhs.gov/climate-change-health-equity-environmental-justice/climate-change-health-equity/health-sector-resource-hub/new-catalytic-program-utilizing-ira/index.html.
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    With respect to the second type of support transitioning to lower-
carbon clinical alternatives, we would offer guidance on strategies for 
reducing emissions associated with inhaled anesthetic gases in pursuit 
of improvements on the measures described later in this section 
(drawing in part on ongoing work by federal health systems in this 
area). Other types of care delivery transitions could benefit patients 
by reducing demand for hospital services through education, addressing 
health inequities, improving telehealth options, and improving upstream 
care management.
    For the third type of support, developing emissions measurement 
strategies, we would identify relevant measures, existing tools (for 
example, the ENERGY STAR Portfolio Manager platform described in 
section X.A.3.p.(4). of the preamble of this proposed rule) and new 
tools as needed. We would also offer guidance on strategies for using 
emissions data to identify opportunities to save energy and reduce 
emissions (for example, ENERGY STAR[supreg] Treasure Hunt to identify 
potential areas to reduce energy usage).\745\
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    \745\ Energy Star Treasure Hunts, https://www.energystar.gov/industrial_plants/treasure_hunt.
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    We are proposing that this technical assistance would be targeted 
to interested TEAM participants, but we would also make this 
information available to other hospitals that might request it, as 
feasible.
(4) Voluntary Reporting
    For the voluntary reporting portion of the TEAM Decarbonization and 
Resiliency Initiative, we are proposing at Sec.  512.598 that TEAM 
participants may elect to report metrics and questions related to 
emissions to CMS on an annual basis following each performance year. 
TEAM participants that elect to report on all the initiative metrics 
and questions to CMS, in the form and manner required by CMS, would be 
eligible for benefits such as receiving individualized feedback reports 
and public recognition as well as potentially achieving operational 
savings (please note these savings would be incidental and not a result 
of model-related payments). In section X.A.3.p.(4). of the preamble of 
this proposed rule, we propose the metrics and questions that would be 
included in the voluntary reporting initiative. In section X.A.3.p.(5). 
of the preamble of this proposed rule, we propose how and when the 
metrics and questions would be reported to CMS. Finally, in section 
X.A.3.p.(6). of the preamble of this proposed rule, we outline our 
proposals for benefits for TEAM participants that elect to engage in 
the voluntary reporting portion of the Decarbonization and Resiliency 
Initiative as well as document some potential indirect benefits, such 
as operational savings.
(a) Decarbonization and Resilience Initiative Metrics
(i) Background on Scope and Metrics Sources
    As discussed in section X.A.3.p.(1). of the preamble of this 
proposed rule, the GHGP establishes a framework for measuring Scope 1 
and Scope 2 emissions. In identifying priority Scope 1 and Scope 2 
categories and metrics for emissions reporting for TEAM participants, 
we considered guidance and research from several sources. In 2022, AHRQ 
convened an expert panel to develop a primer for identifying, 
prioritizing, monitoring, and reducing health care carbon emissions. In 
developing our proposals, we referred to this AHRQ primer to identify 
potential measures for Scopes 1 and 2. We also looked at guideline 
sources, such as the new Sustainable Healthcare Certification 
requirements by The Joint Commission (TJC), for their elements on 
leadership, measurement, and performance improvement; and guidance from 
the National Academy of Medicine (NAM) for steps and key actions to 
reduce GHG emission within health care systems.
    The AHRQ primer identified three categories that fit into Scopes 1 
and 2: building energy, anesthetic gases, and transportation. NAM 
published key actions that facilities could take to address greenhouse 
gas emissions.\746\ These actions are broken into two steps. Step I 
focuses on actions to start a decarbonization journey and includes 
activities like assembling an executive sustainability team, performing 
a GHG inventory, and establishing specific decarbonization goals. Step 
II actions, which focus on specific interventions, include activities 
for reducing emissions from building energy, anesthetic gas, and 
transportation. TJC launched a Sustainable Healthcare Certification 
program that includes required standards for organizational performance 
and leadership, such as a sustainability plan, as well as requirements 
for collection of detailed emissions information for at least 3 
different sources out of six--energy use (fuel combustion), purchased 
electricity

[[Page 36490]]

(purchased grid electricity, district steam, chilled and hot water), 
anesthetic gas use (including volatile agents and nitrous oxide), 
pressurized metered-dose inhaler use), fleet vehicle carbon-based fuel 
use (from organization-owned vehicles), and waste disposal.
---------------------------------------------------------------------------

    \746\ Kathy Gerwig, Hardeep Singh, Jodi Sherman, Walt Vernon, & 
Beth Schenk. Action Collaborative on Decarbonizing the Health 
Sector. Key Actions to Reduce Greenhouse Gas Emissions by U.S. 
Hospitals and Health Systems. National Academy of Medicine Climate 
Collaborative. 2022. https://nam.edu/programs/climate-change-and-human-health/action-collaborative-on-decarbonizing-the-u-s-health-sector/key-actions-to-reduce-greenhouse-gas-emissions-by-u-s-hospitals-and-health-systems/.
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(ii) Proposed Scope and Sources for Metrics
    At this time, we are proposing to limit metrics that TEAM 
participants may voluntarily report for the Decarbonization and 
Resilience Initiative to Scope 1 (direct emissions related to health 
care operations) and Scope 2 (emissions related to purchased 
electricity consumption). We believe that TEAM participants have more 
ability to track and report these metrics at this time and could use 
information from these metrics to assess ways to reduce their carbon 
emissions and improve their operating efficiency. TEAM participants 
would be encouraged to look at emissions across all three Scopes, but 
for this initial program, the proposed metrics would include Scopes 1 
and 2. We seek comment on our proposal to limit the focus of the 
Decarbonization and Resilience Initiative to Scopes 1 and 2 for the 
initial years of the TEAM Model.
    Based on programs and publications discussed in section 
X.A.3.p.(4).(a).(i). of the preamble of this proposed rule, we are 
proposing four areas for reporting: (1) Organizational Questions; (2) 
Building Energy Metrics; (3) Anesthetic Gas Metrics; and (4) 
Transportation Metrics. We are proposing at Sec.  512.598(a) the 
metrics for the voluntary program. TEAM participants, if they so 
choose, would report on these four categories. In proposing these 
voluntary questions and areas for voluntary metric reporting, CMS is 
prioritizing alignment with existing initiatives such as those 
described in section X.A.3.p.(4).(a).(i). of the preamble of this 
proposed rule.
(iii) Organizational Questions
    For the Decarbonization and Resilience Initiative, we are proposing 
at Sec.  512.598(a)(1) a set of organizational questions about the TEAM 
participants' sustainability team and sustainability activities. These 
questions are generally based on NAM's key action Step I shortlist. We 
propose the organizational questions would include the following:
     Does your facility have a sustainability team? If so, does 
your facility's sustainability team include broad representation, 
seeking input across operational and clinical lines, and engaging 
staff, executive leaders, clinicians, board members, and patients?
     Does your facility perform a GHG inventory? If so, which 
of the following are included in your facility's GHG inventory:
    ++ Scope 1 emissions.
    ++ Scope 2 emissions.
    ++ Scope 3 emissions (business travel, employee commuting, waste)?
     Has your facility implemented a decarbonization goal that 
compares performance to a baseline year?
     What are your facility's decarbonization goals (for 
example, 10 percent GHG reduction annually across all operations, 
aiming to achieve 50 percent reduction by 2030)? What is the baseline 
year used to measure your facility's decarbonization success?
     Has your facility implemented a decarbonization plan?
     What is your facility's implementation plan? What 
milestones and deliverables to track progress are you documenting?
     Has your facility designated resources for decarbonization 
and resilience initiatives?
     Does your facility track operation room (OR) specific 
energy use or waste? If so, what, if any, OR energy efficiency or waste 
reduction initiatives have you implemented?
    We anticipate these questions would be relatively straightforward 
to report on and may encourage TEAM participants who that have not yet 
started working on decarbonization and/or resilience initiatives to see 
what other hospitals are doing to implement decarbonization efforts. We 
seek feedback on the potential burden of adding overall organizational 
questions to the Decarbonization and Resilience Initiative.
(iv) Building Energy Metrics
    For building energy usage, we are proposing metrics that would 
assess both the raw GHG emissions (location-based and market-based 
methods of calculation) from energy use (direct and indirect), source 
information, and information to normalize these metrics. Specifically, 
we are proposing at Sec.  512.598(a)(2) a set of building energy 
metrics related to measuring and reporting GHG emissions related to 
energy use at TEAM participant facilities. We are proposing at Sec.  
512.598(a)(2)(i) that these proposed building energy metrics would be 
based on the ENERGY STAR[supreg] Portfolio Manager[supreg] guidelines 
for the time of submission and that TEAM participants choosing to 
report these metrics must submit using ENERGY STAR[supreg] Portfolio 
Manager[supreg] according to the reporting and timing requirements 
proposed in section X.A.3.p.(5). of the preamble of this proposed rule. 
We are proposing to adopt the ENERGY STAR[supreg] Portfolio 
Manager[supreg] guidelines at the time of submission to ensure that the 
metrics collected are consistent with current standards.
    For the Decarbonization and Resilience initiative, we are proposing 
at Sec.  512.598(a)(2)(ii) the following metrics: ENERGY STAR[supreg] 
Score for Hospitals, as well as the supporting data that goes into that 
calculation, and energy costs and basic energy consumption metrics such 
as total, direct, and indirect GHG emissions and emissions intensity as 
specified in the ENERGY STAR[supreg] Portfolio Manager[supreg].\747\ As 
of this publication, the most recent ENERGY STAR[supreg] Score for 
Hospitals methodology was published in February 2021 \748\ and requires 
information such as energy use intensity, electricity, natural gas, and 
other source emissions usage and several normalizing factors such as 
building size, number of full-time equivalent workers, number of 
staffed beds, number of magnetic resonance imaging (MRI) machines, and 
zip code (to pull weather and climate related data such as the number 
of heating and cooling days).\749\ We propose that this supporting data 
would be reported to CMS, as well. Having both the aggregate score and 
the underlying details would provide CMS additional detail to monitor 
the impact of emissions. As described in section X.A.3.p.(5). of the 
preamble of this proposed rule, TEAM participants who elect to report 
data would submit after the performance year. Should the ENERGY 
STAR[supreg] Score for Hospitals method change, we would default to the 
methods that ENERGY STAR[supreg] is using at the time of submission so 
that the data reported to CMS would be consistent with ENERGY 
STAR[supreg] Score for Hospitals.
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    \747\ EPA Office of Air Programs. ENERGY STAR Portfolio Manager 
Glossary. U.S. Environmental Protection Agency & U.S. Department of 
Energy. Undated. https://portfoliomanager.energystar.gov/pm/glossary.
    \748\ EPA Office of Air Programs. ENERGY STAR Score for 
Hospitals (General Medical and Surgical). U.S. Environmental 
Protection Agency & U.S. Department of Energy. February 19, 2021. 
https://www.energystar.gov/buildings/tools-and-resources/energy-star-score-hospitals-general-medical-and-surgical.
    \749\ EPA Office of Air Programs. Technical Reference: ENERGY 
STAR Score for Hospitals in the United States. U.S. Environmental 
Protection Agency & U.S. Department of Energy. February 2021. 
https://www.energystar.gov/sites/default/files/tools/Hospital_TechnicalReference_Feb2021_508.pdf.
---------------------------------------------------------------------------

    ENERGY STAR[supreg] Portfolio Manager[supreg] also allows users to 
track GHG

[[Page 36491]]

emissions and energy costs, which captures total energy cost and can 
inform tracking of potential savings.
    There are several reasons we are proposing that TEAM participants 
use the ENERGY STAR[supreg] Portfolio Manager[supreg] for submitting 
building energy metrics. First, ENERGY STAR[supreg] Portfolio 
Manager[supreg] is a free, on-line benchmarking tool used by over 3,000 
hospitals as of January 2024 (approximately half of the number of U.S. 
hospitals \750\) to benchmark energy, water, and waste. Approximately 
forty-seven state and local governments \751\ require its use to track 
and report energy usage and emissions on an annual basis. We believe 
that by using data and information collected in the ENERGY STAR[supreg] 
Portfolio Manager[supreg] tool, we would minimize the reporting burden 
for TEAM participants and maximize the benchmarking value of reporting, 
which should make comparisons and measuring progress easier. We also 
believe the information collected in the ENERGY STAR[supreg] Score for 
Hospitals are similar to recommended measures in the AHRQ primer.
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    \750\ AHA Health Forum. Fast Facts on Hospitals. American 
Hospital Association. 2024. https://www.aha.org/statistics/fast-facts-us-hospitals.
    \751\ EPA Office of Air Programs. State/Local Compliance 
Ordinances. U.S. Environmental Protection Agency & U.S. Department 
of Energy. February 20, 2024. State/local compliance ordinances 
(site.com).
---------------------------------------------------------------------------

    Finally, we also considered an alternative where we instead allowed 
private vendors with a relationship to the facility to submit 
equivalent information, aligned to the GHG Protocol, instead of ENERGY 
STAR Portfolio Manager. Ideally, we would like TEAM participants to 
have options to collect and capture their emissions data, but we also 
want to ensure that any benchmarks are consistent across TEAM 
participants.
    We seek feedback on our proposed metrics reported through ENERGY 
STAR Portfolio Manager and on the alternative of allowing private 
vendors to submit equivalent information.
(v) Anesthetic Gas Metrics
    We believe anesthetic gas metrics are important to collect for the 
TEAM Decarbonization and Resilience Initiative because the TEAM's 
proposed initial performance focus is on surgical procedures which 
regularly utilize anesthetic gas, as discussed previously. We are 
proposing at Sec.  512.598(a)(3) a set of metrics related to measuring 
and managing emissions from anesthetic gas. These metrics include total 
GHG emissions from inhaled anesthetic gasses (based on purchase 
records) along with the associated normalization factors, and 
additional assessment questions.
    We evaluated methods to consistently capture anesthesia metrics. 
ENERGY STAR Portfolio Manager currently does not collect information or 
calculate benchmarks on anesthetic gases. There are other calculators, 
such as Practice Greenhealth's [supreg] Health Care Emissions Impact 
Calculator that collect and calculate data related to anesthetic 
metrics,\752\ but we were concerned that using multiple tools to report 
metrics (considering we are already proposing to use ENERGY 
STAR[supreg] Portfolio Manager[supreg] for the building energy metrics) 
would increase reporting complexity and reporting burden. The AHRQ 
primer recommended total GHG emissions from inhaled anesthetics and 
mean gas flow rates, but we were concerned on the feasibility of 
capturing mean gas flow rates. Based on all these factors, we are 
therefore proposing at Sec.  512.598(a)(3)(i) to include a metric for 
total GHG emissions from inhaled anesthetics using purchased records. 
The metric would include information such as volume of the bottle, the 
number of bottles, and/or the number of pounds, depending on the 
anesthetic gas.\753\ We believe purchase records provide a proxy for 
actual utilization and that purchased records may be easier for TEAM 
participants to report compared to actual usage which generally would 
have to be extracted from electronic health records. Also, we are 
proposing at Sec.  512.598(a)(3)(ii) normalization factors which we 
propose to be anesthetic hours so we could more accurately compare the 
carbon impact across different facilities. We believe these metrics 
would provide information on anesthetic gases which would be most 
relevant to the episodes and provide a means for which to create 
anesthetic gas metric benchmarks.
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    \752\ Practice Greenhealth. Health Care Emissions Impact 
Calculator. 2023. https://practicegreenhealth.org/tools-and-resources/health-care-emissions-impact-calculator.
    \753\ We recognize that certain gases and compounds are most 
easily measured by volume and others in weight as they are not 
purchased by bottle (for example, Nitrous Oxide).
---------------------------------------------------------------------------

    At Sec.  512.598(a)(3)(iii), we are also proposing to include 
assessment questions broadly based on the key actions recommended by 
NAM Step II for reducing emissions from anesthetic gases that TEAM 
participants may choose to answer. Assessment questions include the 
following:
     Has your facility set an emissions reduction goal related 
to anesthetic gases?
     Does your facility track and benchmark anesthetic gas 
emissions at the procedure and provider level?
     Has your facility removed the use of desflurane or removed 
vaporizers when using desflurane?
     Has your facility decommissioned piped nitrous oxide and 
substituted e-cylinders? If not, are these activities in process?
    We believe answering these assessment questions would provide 
facilities with ideas and actions that could in turn reduce impact on 
emissions and would supplement the other anesthesia gases data.
    We seek comment on our proposed anesthesia gas metrics which would 
include the total GHG emissions from inhaled anesthetics and anesthetic 
hours and assessment questions for anesthetic gases. We particularly 
seek feedback on the feasibility of reporting data based on purchase 
records or whether we should require actual records. We also seek 
comment on the feasibility of capturing anesthetic hours or if we 
should consider a different normalization factor such as number of 
operating rooms. We are also seeking feedback on whether we should 
consider other calculators, metrics and inputs to determine GHG 
emissions from anesthetic gases, or quality measures such as ABG44: Low 
Flow Inhalational General Anesthesia.
    Finally, while we believe it is important to capture the data on 
total GHG emissions from inhaled anesthetics, anesthetic hours, and the 
assessment questions for anesthetic gases, we also considered whether 
we provide the TEAM participants an option of reporting either the 
total GHG emissions from inhaled anesthetics (with anesthetic hours) or 
reporting the assessment questions for the voluntary reporting program. 
We believe this flexibility for TEAM participants could reduce 
reporting burden and enhance participation, but we are concerned this 
alternative may not provide comparable data across the TEAM 
participants who voluntarily submit data. We seek feedback on this 
alternative for TEAM participants who choose to submit to report either 
anesthetic gases and anesthetic hours or to report the assessment 
questions.
(vi) Transportation Metrics
    The third category of information relevant to health care 
facilities is the GHG emissions related to leased or owned vehicles. We 
are proposing at Sec.  512.598(a)(4) a set of metrics that focus on 
greenhouse gases related to leased or owned vehicles. We are proposing 
Sec.  512.598(a)(4)(i) through (a)(4)(iii)

[[Page 36492]]

metrics that include gallons for owned and leased vehicles consistent 
with GHGP Scope 1 requirements, patient encounter volume as a 
normalization factor, and assessment questions. For transportation 
emissions related to patient transportation and supply chain, please 
see the RFI on Scope 3 emissions which seeks comment on the feasibility 
of reporting Scope 3 emissions such as those from Scope 3 
transportation emissions (for example, patient transportation).
    Including information on gallons for owned and leased vehicles 
aligns with the AHRQ primer core measure for transportation, and we 
anticipate that TEAM participants can capture this information. We also 
propose that if TEAM participants choose to partake in the 
Decarbonization and Resilience Initiative Voluntary Reporting, we would 
require TEAM participants to capture patient encounter volume as a 
normalization factor and are considering a range of other factors 
consistent with GHG protocols such as full-time equivalents (FTEs).
    We are also proposing a series of assessment questions that align 
with the NAM recommended key actions to reduce transportation 
emissions. Assessment questions include the following:
     Has your facility set an emissions reduction goal related 
to transportation?
     Has your facility executed plans to reduce fleet emissions 
(either from reducing miles or replacing with electric vehicles [EVs])?
     Has your facility identified measures to optimize product 
delivery?
     Has your facility provided (or in the process of 
providing) EV charging infrastructure?
    We seek feedback on the proposed transportation metrics. 
Additionally, we seek feedback to the extent hospitals are tracking 
this information and the operational feasibility to track and report 
this information or if other alternative metrics may be more feasible 
(for example, mileage). Finally, while we believe it is important to 
capture both the data on the gallons of gas as well as the assessment 
questions, we also considered whether we provide the TEAM participants 
an option of reporting either the gallons data or reporting the 
assessment questions for the voluntary reporting program. We believe 
this flexibility for TEAM participants could reduce reporting burden 
and enhance participation, but we are concerned this alternative may 
not provide comparable data across the TEAM participants who 
voluntarily submit data. We seek feedback on this alternative for TEAM 
participants who choose to submit to report either gallons and patient 
encounter or to report the assessment questions.
(vii) Request for Information on Scope 3 Metrics and MDIs
    Both Scope 3 and MDI emissions account for a large percentage of 
medical carbon emissions and CMS is interested in potential ways in 
which to provide technical assistance to TEAM participants to assess 
available metrics to help reduce the enormity of this impact.
(a) Scope 3 Metrics
    We believe Scope 3 emissions are relevant to a Decarbonization and 
Resilience Initiative connected to TEAM because Scope 3 emissions 
account for 82 percent of all U.S. health care emissions. Scope 3 
includes all emissions upstream and downstream in the supply chain and 
other indirect emissions. We seek additional information regarding 
potential future voluntary reporting of Scope 3 emissions.
     What metrics or data collection elements would be 
appropriate for TEAM participants to accurately report Scope 3 
emissions?
     Is there an industry standard tool that can be utilized 
for Scope 3 reporting?
     Which Scope 3 categories are most feasible and appropriate 
for hospitals participating in TEAM to report at this time?
     How can CMS and hospitals engage other parts of supply 
chain that contribute to Scope 3 emissions or incentivize their 
reduction of Scope 3 GHGs?
     Would hospital burden of Scope 3 reporting differ from 
Scope 1 and 2 reporting?
(b) MDIs
    Also, under Scope 3, we seek additional information regarding MDIs. 
We believe that further understanding of the MDI prescription and usage 
rates could assist in finding pathways of reduction and substitution to 
a less harmful environmental option. However, we understand that most 
MDI prescriptions and the management of related conditions occur in the 
outpatient setting and may not be directly relevant to TEAM 
participants. Hospital reductions in MDI prescriptions can still result 
in significant reductions of GHG emissions. For example, Providence 
Oregon hospitals identified clinically equivalent MDI formulations of 
albuterol with 3-fold differences in emissions.\754\ By prioritizing 
the lower emissions intensity inhalers, these emissions are projected 
to drop by 42 percent, or 298 tons of CO2e (the equivalent of 64 
gasoline powered passenger vehicles driven) per year. We are seeking 
information on the feasibility of capturing information on MDI 
outpatient prescriptions as a percentage of all inhaler prescriptions 
relevant to TEAM participants.
---------------------------------------------------------------------------

    \754\ Bhargavi Sampath, Matthew Jensen, Jennifer Lenoci-Edwards, 
Kevin Little, Hardeep Singh, & Jodi D. Sherman. Reducing Health care 
Carbon Emissions: A Primer on Measures and Actions for Health Care 
Organizations to Mitigate Climate Change. U.S. Agency for Healthcare 
Research & Quality. AHRQ pub. No. 22-M011. September 2023. Reducing 
Healthcare Carbon Emissions: A Primer on Measures and Actions to 
Mitigate Climate Change (ahrq.gov).
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     What role do acute care hospitals, hospital-based 
pharmacies, or other providers in the inpatient setting play in 
prescribing MDIs and guiding patients toward environmentally preferable 
selections, such as dry powder inhaler,\755\ when clinically safe to do 
so?
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    \755\ Kimberly Wintemute & Fiona Miller. Dry Powder Inhalers Are 
Environmentally Preferable to Metered-Dose Inhalers. CMAJ, vol. 192, 
no. 29, pp. E846. July 20, 2020. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7828988/.
---------------------------------------------------------------------------

    We believe it would be important to record data such as the volume 
of each MDI cannister (micrograms) and number of MDI cannisters 
prescribed on an annual basis and this would be helpful to capture. We 
are seeking feedback on the feasibility of capturing information for 
the following questions:
     What is the utilization rate of MDIs and dry powder 
inhalers, for inpatients?
     What is the prescription rate of MDIs and dry powder 
inhalers?
     Is there a way to replace the MDI propellant from a 
hydrofluorocarbon to hydrofluoroalkane?
(5) Report Timing
    For the Decarbonization and Resilience Initiative, we are proposing 
at Sec.  512.598(b) that if TEAM participants so choose, they would 
report information annually to CMS after each performance period. The 
form and manner would be specified by CMS for each performance period 
including using ENERGY STAR[supreg] Portfolio Manager[supreg] for 
building energy metrics proposed in section X.A.3.p.(4).(a).(iv). of 
the preamble of this proposed rule. We anticipate reporting for the 
other metrics and assessment questions would be a survey and 
questionnaire in a form and manner specified by CMS. We are also 
proposing at Sec.  512.598(b) that the Decarbonization and Resilience 
Initiative information would need to be reported to CMS by no later 
than 120 days in the year following the

[[Page 36493]]

performance period, or a later date as determined by CMS. We believe it 
is important to have flexibility to delay the reporting in case of an 
emergency or technical issue.
    We also considered requiring reporting by June 1 after the 
performance period to align with the majority of the local 
decarbonization programs that report to ENERGY STAR[supreg].\756\ We 
are seeking comment on the proposed report timing and alternatives.
---------------------------------------------------------------------------

    \756\ EPA Office of Air Programs. State/Local Compliance 
Ordinances. U.S. Environmental Protection Agency & U.S. Department 
of Energy. February 20, 2024. State/local compliance ordinances 
(site.com).
---------------------------------------------------------------------------

(6) Benefits for TEAM Participants Who Elect To Report in the 
Decarbonization and Resiliency Initiative
    We are proposing at Sec.  512.598(c) that TEAM participants who 
elect to report all the metrics identified in section X.A.3.p.(4). of 
the preamble of this proposed rule in the manner described in section 
X.A.3.p.(5). of the preamble of this proposed rule would receive 
individualized feedback reports and be eligible to receive public 
recognition for their commitment to decarbonization. In addition to 
these proposed benefits, we believe TEAM participants may receive 
additional indirect benefits from engaging in the voluntary reporting 
portion of the Decarbonization and Resiliency Initiative.
(a) Individualized Feedback Reports to TEAM Participants
    We are proposing at Sec.  512.598(c)(1) to provide individualized 
feedback reports to TEAM participants who voluntarily report to CMS the 
four emissions-related metrics in the Decarbonization and Resilience 
Initiative. We anticipate these reports would summarize facilities' 
emissions metrics and would include benchmarks, as feasible, for 
normalized metrics to compare facilities, in aggregate, to other TEAM 
participants in the Decarbonization and Resilience Initiative. While 
ENERGY STAR has many robust benchmarks related to building energy 
efficiency, we believe that TEAM participants would be able to learn 
additional information from peers about emissions from anesthetic gases 
and transportation emissions. See section X.A.3.p.(4).(a). of the 
preamble of this proposed rule for discussion of the proposed metrics 
and calculator tools to be used as part of the Decarbonization and 
Resilience Initiative. CMS does not intend to make these individualized 
feedback reports available to the public or other TEAM participants and 
intends them for the purpose of learning and improvement.
    We invite public comment on this proposal.
(b) Establishment of a Publicly Reported Hospital Recognition of 
Decarbonization Commitment
    We propose at Sec.  512.598(c)(2) to establish a publicly reported 
hospital recognition badge for the TEAM participant's commitment to 
decarbonization; CMS would post a hospital recognition badge on a CMS 
website. We would provide annual recognition to TEAM participants for 
reporting all the metrics detailed in section X.A.3.p.(4).(a). of the 
preamble of this proposed rule. The recognition badge would be 
reevaluated each year based on the reporting of performance year 
metrics to CMS. We believe adding this recognition to a consumer-facing 
CMS website would allow patients and families to choose hospitals that 
have participated in efforts to measure health care carbon emissions.
    To encourage meaningful reductions in emissions, we are seeking 
comments on potentially expanding to a tiered recognition in future 
years. We believe a tiered approach could better acknowledge TEAM 
participants that have elected to voluntarily report their emissions 
data, actively engage in decarbonization activities that would result 
in reduced Scopes 1, 2, and 3 emissions, and meet absolute or relative 
standards of reported energy efficiency and lowered emissions. We seek 
comment on tiering such badging so as to recognize TEAM Participants 
that meet certain absolute or relative standards based on emissions 
reporting measures or other standards such as the Department of 
Energy's National Definition for a Zero Emission Building and may 
consider making select reported information public.\757\ Any 
modifications to the public recognition benefit would be addressed 
through future rulemaking.
---------------------------------------------------------------------------

    \757\ Kent Peterson, Paul Torcellini, & Roger Grant. A Common 
Definition for Zero Energy Buildings. National Institute of Building 
Sciences. September 2015. DOE/EE-1247. https://www.energy.gov/sites/default/files/2015/09/f26/bto_common_definition_zero_energy_buildings_093015.pdf.
---------------------------------------------------------------------------

    We invite public comment on the proposed publicly reported hospital 
recognition of decarbonization commitment.
(c) Indirect Benefits
    We believe that in addition to the direct benefits of participating 
in the Decarbonization and Resilience Initiative there are several 
indirect benefits associated with the Initiative's efforts to assist 
interested TEAM participants in undertaking decarbonization and 
resilience activities. Decarbonization can help improve the financial 
well-being of health care facilities by reducing operational costs. 
Estimates indicate that up to 30 percent of the energy used in 
hospitals and other commercial buildings is consumed unnecessarily and 
investing in decarbonization has been shown to decrease operational 
costs through supply chain optimization and reduced energy consumption 
and expenditures.\758\
---------------------------------------------------------------------------

    \758\ Hardeep Singh, Walt Vernon, Terri Scannell, & Kathy 
Gerwig. (2023). Crossing the Decarbonization Chasm: A Call to Action 
for Hospital and Health System Leaders to Reduce Their Greenhouse 
Gas Emissions. National Academy of Medicine Discussion Paper. 
November 29, 2023. https://nam.edu/crossing-the-decarbonization-chasm-a-call-to-action-for-hospital-and-health-system-leaders-to-reduce-their-greenhouse-gas-emissions/.
---------------------------------------------------------------------------

    Beyond the potential cost reduction benefit of decarbonization, 
investing in decarbonization may help to improve patient care and 
outcomes. For example, facilities that opt to reduce GHG emissions by 
switching to renewable energy sources increase their resilience and 
thus can bypass power outages in the electric grid during climate 
emergencies. Furthermore, by reducing GHG emissions, healthcare 
facilities are contributing to preventing or ameliorating adverse 
health outcomes that are linked to air pollution and climate change-
related hazards like hurricanes (for example, respiratory illnesses, 
injury).\759\ Health systems could benefit patients by reduced demand 
for hospital services through encouraging health education, addressing 
health inequities perpetuated by social determinants of health, 
improving telehealth options, and improving upstream care management. A 
well-developed sustainability strategy could allow health systems to 
become more resilient to the consequences of extreme weather events, 
which exacerbate patients' chronic cardiac, respiratory, and other 
conditions.\760\
---------------------------------------------------------------------------

    \759\ Vijay S. Limaye, Wendy Max, Juanita Constible, & Knowlton. 
Estimating the Health-Related Costs of 10 Climate-Sensitive U.S. 
Events During 2012. GeoHealth, vol. 3, no. 9, pp. 245-265. September 
17, 2019. Estimating the Health-Related Costs of 10 Climate-
Sensitive U.S. Events During 2012--PMC (nih.gov).
    \760\ The Joint Commission. Sustainable Healthcare 
Certification. 2024. Sustainable Healthcare Certification [verbar] 
The Joint Commission.

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[[Page 36494]]

(d) Request for Information on Potential Future Incentives for 
Participation in the Voluntary Decarbonization and Resilience 
Initiative
    At this time, we are not proposing any bonuses, payments, or 
payment adjustments to TEAM participants for voluntary reporting in the 
Decarbonization and Resilience Initiative. We may add such a policy to 
the Decarbonization and Resilience Initiative in future years, subject 
to additional rulemaking. We seek feedback on the ways we could 
structure potential payments, bonuses, or payment adjustments. To offer 
some examples:
     A potential bonus added to the Composite Quality Score 
(CQS), which is discussed in section X.A.3.d.(5).(e). of the preamble 
of the proposed rule, for TEAM participants who report the information 
for the Decarbonization and Resilience Initiative. This would reward 
TEAM participants for collecting and reporting data, but not 
necessarily for better performance.
     We could elect to modify the CQS score by providing a 
bonus for those who perform well on the Decarbonization and Resilience 
Initiative. We welcome thoughts on which metrics we should identify for 
measuring performance and how a bonus could be structured.
    We invite public comment on the future bonuses, payments, or 
adjustments for participation in the Decarbonization and Resilience 
Initiative.
q. Termination of the TEAM
    The general provisions relating to termination of the model by CMS 
in 42 CFR 512.596 would apply to the TEAM. Consistent with these 
provisions, in the event we terminate the TEAM, we would provide 
written notice to TEAM participants specifying the grounds for 
termination and the effective date of such termination or ending. As 
provided by section 1115A(d)(2) of the Act and Sec.  512.594, 
termination of the model under section 1115A(b)(3)(B) of the Act would 
not be subject to administrative or judicial review.

B. Provider Reimbursement Review Board (PRRB) (Sec.  405.1845)

    Section 1878 of the Act (42 U.S.C. 1395oo) established by the 
Social Security Amendments of 1972, describes the role and function of 
the Provider Reimbursement Review Board (PRRB), a five-member 
administrative tribunal that adjudicates disputes over Medicare 
reimbursement for certain providers of services in the Medicare 
program. The statute requires the HHS Secretary to appoint individuals 
to the PRRB for a 3-year term of office; the law also established a 
shorter length of office for the first appointments for the newly 
created PRRB to permit staggered terms of office. To qualify for 
appointment to the PRRB, all members must be knowledgeable in the field 
of payment of providers of services; two members must be representative 
of a Medicare provider of services; and at least one member must be a 
certified public accountant. In 1974, the Social Security 
Administration (SSA), which administered the Medicare program prior to 
its transfer to the Health Care Financing Administration in the 
Department of Health and Human Services, promulgated the implementing 
regulations for the PRRB. The regulations governing the operation and 
administration of the PRRB reside at 42 CFR part 405 subpart R, with 
the provision governing the composition of the PRRB at 42 CFR 405.1845. 
In addition to codifying the statutory requirements governing the 
composition of the PRRB, the regulations established that no Board 
Member is permitted to serve more than two consecutive 3-year terms of 
office and that the Secretary has the authority to terminate a Board 
Member's term of office for good cause.
    When the PRRB was established more than 50 years ago, payment to 
providers participating in the Medicare program was on a cost 
reimbursement basis. Beginning October 1, 1983, Medicare transitioned 
to a prospective payment system for inpatient hospitals. These changes 
in reimbursement have led to changes in the types of cases adjudicated 
by the Board, the complexity of the matters that come before the Board, 
and often, the amount of time required to bring matters to resolution. 
While the limit on the number of consecutive terms served by a Board 
Member was established in the 1974 implementing regulations, CMS no 
longer believes that the current limitation on the number of 
consecutive terms a Board Member may serve makes good sense.
    In this proposed rule, we propose to amend paragraphs (a) and (b) 
of 42 CFR 405.1845, effective January 1, 2025.
     First, we seek to modify the requirement that Board 
Members shall be knowledgeable in the area of cost reimbursement, so 
that it instead requires them to be knowledgeable in the field of 
payment of providers under Medicare Part A.
     Second, we propose to permit a Board Member to serve no 
more than three consecutive terms, instead of two consecutive terms 
allowed under current regulations.
     Third, we propose to permit a Board Member who is 
designated as Chairperson in their second or third consecutive term to 
serve a fourth consecutive term to continue leading the Board as 
Chairperson.
    The proposed change to paragraph (a) is intended to align the 
regulatory language with the statute, which, at section 1878(h) of the 
Act states, ``All of the members of the Board shall be persons 
knowledgeable in the field of payment of providers of services . . .'' 
As explained earlier in this preamble, it was the case that Medicare 
payment to providers was on cost reimbursement basis when this 
provision became law; however, this change would clarify that a Board 
Member must have knowledge of Medicare Part A payment (which broadly 
covers the category of cases adjudicated by the PRRB, as opposed to the 
narrower subcategory of cost reimbursement matters). The proposed 
changes to paragraph (b) are intended to reduce the amount of turnover 
that occurs on the PRRB, enabling CMS to recruit and retain highly 
qualified individuals as they gain experience in adjudicating cases. We 
believe that these changes have the potential to expand the pool of 
applicants seeking to serve on the Board and who, because of the 
current two-term limitation, may not be willing to entertain a job 
change for what would be at most a 6-year period of service. These 
changes would also create a new pathway for advancement for an 
experienced Board Member to continue their service to the PRRB in the 
Chairperson position. Under current regulations, if a Board Member is 
serving in their first or second consecutive term and later designated 
as Chairperson, the total length of service on the PRRB remains 6 
years, or two consecutive terms. In other words, a Board Member who is 
designated as Chairperson in year 4 or 5 of their second consecutive 
term is only permitted to serve 1 to 2 more years as Chairperson. Under 
this proposal, the PRRB would continue to benefit from having an 
experienced Board Member serve for a total of 12 years, if they were 
designated as Chairperson in their second or third consecutive term.
    We recognize that the limit of two consecutive terms under current 
regulations creates more openings on the PRRB, which offers 
opportunities for newly appointed individuals to apply their unique 
skill sets, experience, and perspective to the work. However, there is 
an opportunity cost associated with the current level of turnover. 
Recruitment of Board Members occurs

[[Page 36495]]

with regularity, generally every 1 to 3 years, and considerable time 
and effort have been expended by CMS and HHS in recruiting and vetting 
candidates as well as training newly appointed Board Members. Over 
time, it has been increasingly challenging to attract a large pool of 
qualified candidates who have relevant skills and experience in matters 
that come before the PRRB.
    Even after a candidate is identified, they must be formally 
appointed to the PRRB by the Secretary. Upon accepting the appointment, 
a Board Member must devote significant time to learning the duties of 
the job. As a result, in our experience, a newer Board Member takes 
more time to complete tasks relative to their colleagues who have more 
experience in the role. While Board Members may have a strong legal, 
accounting, health care, or other professional background, this 
position often is the first time they are in an adjudicatory role. 
Conversely, when a Board Member departs, there is a loss of 
institutional knowledge and expertise that adversely impacts efficiency 
and productivity. Turnover also impacts the relationships among and 
between the Board Members, and it takes time for the newly constituted 
Board to learn how to work together. This proposal would decrease the 
frequency of turnover and permit lengthier periods of service for Board 
Members, which we believe would have the potential to increase the 
PRRB's efficiency and productivity.
    The volume of cases filed with the PRRB has remained relatively 
steady over the past several decades with the average number of appeals 
filed and closed annually hovering around 2,000. The PRRB's docket has 
experienced years in which fewer appeals were filed in large part due 
to holds on issuing Notices of Program Reimbursement from which many 
providers file their appeals. A year or years with a lower appeals 
volume was then followed in subsequent years by spikes of new appeals 
once the holds were lifted. The PRRB's total docket has ranged from 
about 5,000 appeals to about 10,000 appeals over the last 30 years, 
with an average ending annual inventory of 8,700 cases. The PRRB's 
fiscal year 2023 docket ended with 8,698 open appeals.
    Additionally, the nature of the PRRB's cases has evolved. For 
example, in the past decade, the PRRB has seen an increase in broad-
based legal challenges to regulatory interpretations and fewer appeals 
of reimbursable expenses specific to individual providers, which were 
common in the early years of the PRRB's operation. Early on, disputes 
over a provider's allowable costs in its cost report involving such 
expenses as owners' compensation, malpractice insurance, and marketing 
expenses were the norm, and generally these issues are simpler matters 
to adjudicate. With the evolution of Part A reimbursement to a 
prospective payment system, the issues on appeal with the PRRB 
frequently involve nuanced issues that implicate highly specialized and 
complex areas of law. Cases that have been adjudicated by the PRRB 
often reach the federal courts, and on occasion, are decided by the 
U.S. Supreme Court.\761\ Permitting Board Members to serve more than 
two consecutive terms would allow them greater opportunity to follow 
the landscape of issues under judicial review, as it is not unusual for 
it to take years for cases to wind their way through the courts. Over 
their length of service, a Board Member develops an understanding of 
how certain issues are decided in the courts and applies that knowledge 
to the issues presented to the PRRB. The longer length of service would 
allow Board Members to obtain a deeper understanding of, and knowledge 
about, the issues and caselaw.
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    \761\ See e.g.: Becerra v. Empire Health Found., for Valley 
Hosp. Med. Ctr., 142 S. Ct. 2354 (2022); Sebelius v. Auburn Reg'l 
Med. Ctr., 568 U.S. 145 (2013); Your Home Visiting Nurse Servs., 
Inc. v. Shalala, 525 U.S. 449 (1999); and Bethesda Hosp. Ass'n v. 
Bowen, 485 U.S. 399 (1988).
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    We also are considering a policy of permitting a Board Member to 
serve four consecutive 3-year terms, which would effectively permit an 
individual to serve as long as 12 years (with the potential of serving 
another 3 years, or 15 years total, if the Board Member would later be 
designated as Chairperson), as opposed to 9 years under this proposed 
regulatory change (with the potential of serving a total of 12 years by 
concluding their service on the PRRB as Chairperson). Making a Board 
Member eligible to serve as many four consecutive terms could have an 
advantage over three consecutive terms, which means even less turnover 
and a greater ability to retain highly qualified Board Members. We seek 
public comment on this alternative option of four consecutive terms 
rather than three.
    We also are considering permitting a Board Member who ascends to 
the position of Chairperson to serve an additional two or three 
consecutive terms, instead of the proposed one additional consecutive 
term. Such a policy would permit an individual to serve 15 or 18 years 
(three 3-year terms as a Board Member and another two or three 3-year 
terms as Chairperson). Allowing a Board Member who is later designated 
as Chairperson to serve two or three additional consecutive terms would 
likely make all Board vacancies more attractive relative to current 
regulations (given the prospect of career progression and a longer 
tenure) and provide a longer period for a Board Member to gain 
experience prior to assuming the role of Chairperson, as they develop 
the knowledge, skills, and abilities in serve in a leadership capacity 
on the Board. Our intent in this proposal is to strike an appropriate 
balance between an appropriate level of turnover and CMS's desire to 
recruit and retain qualified Board Members. We solicit comment on these 
alternative options for the extended tenure of the Chairperson and 
whether our proposal or one of the alternative proposals best strikes 
this balance.

C. Maternity Care Request for Information (RFI)

1. Overview
    As described in the White House Blueprint for Addressing the 
Maternal Health Crisis and in the CMS Maternity Care Action Plan we are 
committed to reducing maternal health disparities and improving 
maternal health outcomes during pregnancy, childbirth, and the 
postpartum period.762 763 In alignment with our commitment 
to addressing the maternal health crisis, this RFI seeks to gather 
information on differences between hospital resources required to 
provide inpatient pregnancy and childbirth services to Medicare 
patients as compared to non-Medicare patients. To the extent that the 
resources required differ between patient populations, we also wish to 
gather information on the extent to which non-Medicare payers, or other 
commercial insurers, may be using the IPPS as a basis for determining 
their payment rates for inpatient pregnancy and childbirth services and 
the effect, if any, that the use of the IPPS as a basis for determining 
payment by those payers may have on maternal health outcomes.
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    \762\ White House. White House Blueprint for Addressing the 
Maternal Health Crisis. 2022. Accessed January 2, 2024. https://www.whitehouse.gov/wp-content/uploads/2022/06/Maternal-Health-Blueprint.pdf.
    \763\ CMS. CMS Cross Cutting Initiative: Maternity Care Action 
Plan. 2022. Accessed January 2, 2023. https://www.cms.gov/files/document/cms-maternity-care-action-plan.pdf.
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2. Use of Medicare Data for the Calculation of the IPPS MS-DRG Relative 
Weights
    As explained in section II.A. of the preamble of this proposed 
rule, section 1886(d)(4) of the Act requires the Secretary to establish 
a classification of inpatient hospital discharges by diagnosis-related 
groups and a

[[Page 36496]]

methodology for classifying specific hospital discharges within these 
groups. We refer to these groups of diagnoses as the IPPS Medicare 
Severity Diagnosis Related Groups (MS-DRGs). For each MS-DRG, the 
Secretary is required to assign an appropriate weighting factor which 
reflects the relative hospital resources used with respect to 
discharges classified within that group compared to discharges 
classified within other groups. The Secretary is also required to 
adjust the MS-DRG classifications and weighting factors at least 
annually to reflect changes in treatment patterns, technology, and 
other factors which may change the relative use of hospital resources.
    As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58652), 
our goal is always to use the best available data overall for 
ratesetting, including the calculation of the IPPS MS-DRG relative 
weights. We primarily utilize Medicare claims data and Medicare cost 
report data for IPPS ratesetting for inpatient hospital services. The 
claims data we utilize is specific to the Medicare beneficiaries 
population, which includes people 65 and older or people with 
disabilities, End-Stage Renal Disease, or amyotrophic lateral sclerosis 
(ALS) that qualifies them for Medicare earlier than the age of 65.\764\ 
Although most Medicare beneficiaries are 65 and older, in 2021 around 
13% of the total share of Medicare beneficiaries were under the age of 
65.\765\ Therefore, people of reproductive age may have Medicare as 
their primary health insurance. Notably, a study from the National 
Institutes of Health found that pregnant women with disabilities have 
higher risks for maternal mortality and severe complications during 
birth and pregnancy compared to other pregnant women.\766\ Thus, 
considering we utilize data that is specific to the Medicare 
beneficiary population in our ratesetting for inpatient hospital 
services we caution against using the IPPS rates and DRGs without first 
taking into account the characteristics of the Medicare beneficiary 
population.
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    \764\ Who's eligible for Medicare? U.S. Department of Health and 
Human Services. Accessed January 2, 2024. https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html.
    \765\ Medicare Beneficiaries at a Glance 2023 Edition. Centers 
for Medicare and Medicaid Services. https://data.cms.gov/infographic/medicare-beneficiaries-at-a-glance.
    \766\ Gleason JL, Grewal J, Chen Z, Cernich AN, Grantz KL. Risk 
of Adverse Maternal Outcomes in Pregnant Women With Disabilities. 
JAMA Netw Open. 2021;4(12):e2138414. Published 2021 Dec 1. 
doi:10.1001/jamanetworkopen.2021.38414.
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3. Request for Information
    This RFI seeks to gather information on differences between the 
resources required to provide inpatient obstetrical services to 
Medicare patients, on which the IPPS MS-DRGs relative weights for those 
services are based, as compared to non-Medicare patients. To the extent 
that the resources required differ, we also seek information regarding 
the extent to which non-Medicare payers, such as state Medicaid 
programs, may be using the IPPS MS-DRG relative weights to determine 
payment for inpatient obstetrical services and the effect, if any, that 
the use of those relative weights by those payers may have on maternal 
health outcomes. For instance, what types of modifications or 
assumptions, if any, are being made by payers when they are using the 
IPPS MS-DRG relative weights to account for the fact they are based on 
the Medicare beneficiary population? For example, one area where we are 
seeking additional information is the extent to which the use of the 
IPPS MS-DRG relative weights by state Medicaid programs may influence 
the number of low-risk cesarean deliveries for Medicaid patients. There 
are state Medicaid programs that have implemented payment initiatives, 
such as bundled payment models, blended payments, reduced payment or 
nonpayment for some procedures, and pay-for-performance models to 
improve maternal health outcomes. Some initiatives have demonstrated 
improved outcomes, such as a reduction in unnecessary cesarean 
deliveries.\767\ Does the use of the IPPS MS-DRG relative weights as 
the basis for setting rates for other payers, to the extent it occurs, 
impact efforts to reduce low-risk cesarean deliveries? For example, if 
the differential between the hospital resources required for vaginal 
versus cesarean births is not the same for Medicare and non-Medicare 
patients, does the use of the IPPS MS-DRG relative weights for non-
Medicare patients impact the number of low-risk cesarean deliveries? If 
so, how? For reference, IPPS MS-DRG relative weights and arithmetic 
length of stay for MS-DRGs for vaginal births and cesarean births are 
shown in Table X.C.-01.\768\
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    \767\ MACPAC. Medicaid Payment Initiatives to Improve Maternal 
and Birth Outcomes. MACPAC. Published April 2019. https://www.macpac.gov/wp-content/uploads/2019/04/Medicaid-Payment-Initiatives-to-Improve-Maternal-and-Birth-Outcomes.pdf.
    \768\ For other obstetrics MS-DRGs not listed in the table, 
refer to MS-DRG Definitions Manual: MDC 14 Pregnancy, childbirth and 
the puerperium located at: https://www.cms.gov/icd10m/FY2024-nprmversion41.0-fullcode-cms/fullcode_cms/P0017.html.
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    In summary, we pose the following questions to help facilitate 
feedback. We note that posing these questions to facilitate feedback in 
no way alters our longstanding principle, reiterated each year in the 
IPPS rulemaking, that facilities should not consider differences in 
relative weights when making treatment decisions.
     What policy options could help drive improvements in 
maternal health outcomes?
     How can CMS support hospitals in improving maternal health 
outcomes?
     What, if any, payment models have impacted maternal health 
outcomes, and how?
     What, if any, payment models have been effective in 
improving maternal health outcomes, especially in rural areas?
     What factors influence the number of vaginal deliveries 
and cesarean deliveries?
     To what extent do non-Medicare payers, such as state 
Medicaid programs, use the IPPS MS-DRG relative weights to determine 
payment for inpatient obstetrical services? What effect, if any, does 
the use of those relative weights by those payers have on maternal 
health outcomes?
     To what extent are Medicare claims and cost report data 
reflective of the differences in relative costs between vaginal births 
and cesarean section births for non-Medicare patients?
     Are there other data beyond claims and cost reports that 
Medicare should consider incorporating in development of relative 
weights for vaginal births and cesarean section births?
     What impact, if any, does the relatively lower numbers of 
births in Medicare have on the variability of the relative weights?
     What effect, if any, does potential variability in the 
relative weights on an annual basis have on maternal health outcomes?
BILLING CODE 4120-01-P

[[Page 36497]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.287


[[Page 36498]]


BILLING CODE 4120-01-C

D. Request for Information on Obstetrical Services Standards for 
Hospitals, CAHs, and REHs

1. Background
    CMS establishes health and safety requirements for Medicare-
certified providers and suppliers and selected Medicaid provider types. 
The requirements apply to all patients served by these facilities and 
must be met in order for facilities to participate in the Medicare and 
Medicaid programs. Conditions of participation (CoPs) for hospitals, 
CAHs, and rural emergency hospitals (REHs) set regulatory standards for 
many of the basic functions of such hospitals, as well as for some 
optional services that hospitals are not required by law to provide. 
Hospital CoPs at 42 CFR part 482 include standards regarding the 
responsibilities of the governing body, requirements for protecting 
patient rights, quality assessment and performance improvement 
requirements (QAPI), medical staff standards, and infection prevention 
and control and antibiotic stewardship requirements. All of these 
current standards together exist to protect patient health and safety, 
including the health and safety of pregnant, postpartum, and birthing 
patients. Similar provisions for CAHs and REHs are found at 42 CFR 485 
subparts F and E, respectively.
    Currently, there are no baseline care requirements for hospitals, 
CAHs, and REHs that are specific to maternal-child services (that is, 
labor and delivery, prenatal and post-partum care, and care for newborn 
infants, alternately referred to in this discussion as obstetrical 
services, obstetrics, maternal health, or maternity care). In addition 
to obstetrical units, care for pregnant and postpartum patients may 
also occur in other parts of facilities such as other inpatient wards, 
emergency departments, hospital-associated outpatient departments, as 
well as in facilities without obstetrical units and/or emergency 
services. Such care may occur before, during, or after delivery. Given 
the ongoing concerns about the delivery of maternity care in Medicare 
and Medicaid certified hospitals, CAHs, and REHs, CMS plans to propose 
baseline health and safety standards for obstetrical services in the 
calendar year (CY) 2025 Outpatient Prospective Payment System/
Ambulatory Surgical Center (ASC) proposed rule.
    Access to maternity care in the U.S. has continued to decline in 
recent years. Specifically, it is estimated that up to 6.9 million 
women have low to no access to maternity care.\769\ From 2014 to 2018, 
53 rural counties experienced closures of their hospital-based 
obstetrical (OB) services. This is in addition to the 1,045 counties 
that already did not have obstetric services in 2014.\770\ Furthermore, 
200 urban counties lost one or more obstetric units between 2019 and 
2020.\771\ The March of Dimes published a report which found that there 
were closures across 12 states from 2019 to 2020, in which 21 rural 
counties lost one or more hospital obstetric units.\772\ In 2019, an 
estimated 58.7 percent of rural counties had no obstetricians, 81.7 
percent had no advanced practice midwives, 86.3 percent had no 
midwives, and 56.9 percent had no family physicians who delivered 
babies, and nearly a third of rural counties (608, 30.8 percent) had 
none of these types of OB clinicians.\773\ Explanations for these 
closures include shortages of obstetricians and family physicians, low 
volume of births, and low-income/poor payer-mix in these 
communities.\774\ When these units close, women must travel long 
distances to a hospital that has obstetrical services. Specifically, in 
a survey of 133 hospital administrators, those in areas that lost 
access to inpatient obstetric services also reported limited access to 
many supports and services (such as midwifery and doula care) 
indirectly related to inpatient obstetric care that have strong 
evidence of improving maternal and infant health outcomes.\775\ Factors 
that affect the availability of rural hospital-based obstetric care 
include labor costs, liability insurance costs, a high proportion of 
births to people who are uninsured or covered by Medicaid, and low 
payment rates for maternity care services.\776\ Lack of access 
contributes to women in rural areas having a nine percent increased 
probability of maternal mortality or morbidity as compared to women in 
urban areas.\777\ Poor maternal health access disproportionately 
affects non-Hispanic black women, American Indian and Alaska Native 
women (AI/AN), low-income women and women with disabilities. For 
example, in 2021, the maternal mortality rate for non-Hispanic Black 
women was 69.9 deaths per 100,000 live births, 2.6 times the rate for 
non-Hispanic White women. Rates for Black women were significantly 
higher than rates for White and Hispanic women. The increases from 2020 
to 2021 for all race and Hispanic-origin groups were significant.\778\ 
CMS considers it imperative to address disparities in care when 
discussing policy changes for improving maternal health care.
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    \769\ Nowhere to Go: Maternity Care Deserts Across the U.S. 2022 
Report. March of Dimes. https://www.marchofdimes.org/sites/default/files/2022-10/2022_Maternity_Care_Report.pdf.
    \770\ Kozhimannil KB, Interrante JD, Tuttle MKS, Henning-Smith 
C. Changes in Hospital-Based Obstetric Services in Rural US 
Counties, 2014-2018. JAMA. 2020;324(2):197-199.
    \771\ American Hospital Association, 2019-2020.
    \772\ Nowhere to Go: Maternity Care Deserts Across the U.S. 2022 
Report. March of Dimes. https://www.marchofdimes.org/sites/default/files/2022-10/2022_Maternity_Care_Report.pdf.
    \773\ https://depts.washington.edu/fammed/rhrc/wp-content/uploads/sites/4/2020/06/RHRC_PB168_Patterson.pdf.
    \774\ Nowhere to Go: Maternity Care Deserts Across the U.S. 2022 
Report. March of Dimes. https://www.marchofdimes.org/sites/default/files/2022-10/2022_Maternity_Care_Report.pdf and American Hospital 
Association, 2019-2020.
    \775\ https://rhrc.umn.edu/wp-content/uploads/2022/12/UMN_Infographic_Comparison-of-Evidence-based-supports.pdf
    \776\ The Government Accountability Office, GAO-23-105515, 
MATERNAL HEALTH: Availability of Hospital-Based Obstetric Care in 
Rural Areas, https://www.gao.gov/assets/gao-23-105515.pdf.
    \777\ Hostetter M, Klein S. Restoring Access to Maternity Care 
in Rural America. The Commonwealth Fund. September 20, 2021. 
Available at: https://www.commonwealthfund.org/publications/2021/sep/restoring-access-maternity-careruralamerica. Accessed May 17, 
2022.
    \778\ https://www.cdc.gov/nchs/data/hestat/maternal-mortality/2021/maternal-mortality-rates-2021.htm.
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    In Fall 2023, CMS launched the first-ever ``Birthing-Friendly'' 
designation icon on CMS's Care Compare online tool to describe 
facilities with high-quality maternity care. To earn the designation, 
hospitals and health systems report their progress on our Maternal 
Morbidity Structural Measure to the Hospital Inpatient Quality 
Reporting (IQR) Program. The measure identifies whether a hospital or 
health system has participated in a statewide or national perinatal 
quality improvement collaborative program and implemented evidence-
based quality interventions in hospital settings to improve maternal 
health, such as maternal safety bundles. Maternal safety bundles have 
demonstrated success in driving improvements, particularly with regards 
to obstetric hemorrhage, severe hypertension in pregnancy, and non-
medically indicated Cesarean deliveries.779 780 781 
Hospitals and health professionals also have access to evidence-based 
best practices for determining the risk of obstetric

[[Page 36499]]

hemorrhage and hypertension and for managing patients with these 
complications (including in the emergency setting). Yet, these best 
practices are not universally utilized nor incorporated into 
facilities' standards of care.\782\ We direct readers to the quality, 
safety, and oversight memorandum (QSO-22-05-Hospitals) released by 
CMS,\783\ which encourages hospitals to consider implementation of 
evidence-based best practices for the management of obstetric 
emergencies, along with interventions to address other key contributors 
to maternal health disparities, to support the delivery of equitable, 
high-quality care for all pregnant and postpartum individuals. 
Facilities could implement these best practices voluntarily as part of 
a hospital's QAPI program (Sec.  482.21), which requires that hospitals 
develop, implement, and maintain an effective, ongoing, hospital wide, 
data-driven quality assessment and performance improvement program. The 
Quality Safety and Oversight (QSO) memo (QSO-22-05-Hospitals) further 
directs hospitals to a variety of resources available to assist in 
improvement efforts. These include the following:
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    \779\ Jennifer A. Callaghan-Koru et al. Implementation of the 
Safe Reduction of Primary Cesarean Births safety bundle during the 
first year of a statewide collaborative in Maryland. Obstet Gynecol 
2019;134:109-19.
    \780\ Elliott K. Main et al. Reduction of severe maternal 
morbidity from hemorrhage using a state perinatal quality 
collaborative. Am J Obstet Gynecol 2017;216(3):298.e1-298.e11.
    \781\ Patricia Lee King et al. Reducing time to treatment for 
severe maternal hypertension through statewide quality improvement. 
Am J Obstet Gynecol 2018;218:S4.
    \782\ Jennifer A. Callaghan-Koru et al. Implementation of the 
Safe Reduction of Primary Cesarean Births safety bundle during the 
first year of a statewide collaborative in Maryland. Obstet Gynecol 
2019;134:109-19.
    \783\ https://www.cms.gov/files/document/qso-22-05-hospitals.pdf.

 Agency for Healthcare Research and Quality Toolkit for 
Improving Perinatal Safety https://www.ahrq.gov/patient-safety/settings/labor-delivery/perinatal-care/index.html
 Centers for Disease Control and Prevention-Funded Perinatal 
Quality Collaboratives https://www.cdc.gov/reproductivehealth/maternalinfanthealth/pqc.htm
 HRSA-Funded AIM Program Patient Safety Bundles https://
saferbirth.org/
 HRSA-Funded Rural Health Information Hub Rural Maternal Health 
Toolkit https://www.ruralhealthinfo.org/toolkits/maternal-health
 Institute for Healthcare Improvement Tools https://www.ihi.org/resources/tools
 National Institute for Children's Health Quality National 
Network of Perinatal Quality Collaboratives https://nichq.org/project/national-network-perinatal-quality-collaboratives
 The Joint Commission Provision of Care, Treatment, and 
Services Standards for Maternal Safety https://www.jointcommission.org/standards/r3-report/r3-report-issue-24-pc-standards-for-maternal-safety/
 U.S. Department of Health and Human Services and March of 
Dimes Public-Private Partnership, Maternal Health Collaborative to 
Advance Racial Equity (Maternal HealthCARE), Quality Improvement 
Initiative https://www.maternalhealthcare.org/

    This list is not exhaustive. We recommend that hospitals also 
explore other national resources, as well as those specific to their 
state and region.
    In the FY 2023 IPPS/LTCH PPS proposed rule, we published a maternal 
health RFI that solicited feedback on a wide range of maternal health 
issues and opportunities for CMS to improve maternal health care (87 FR 
28549).\784\ In response, some commenters were concerned that failure 
to comply with the new CoP would result in the loss of Medicare 
certification, that access to obstetrical care would be negatively 
impacted, that a new CoP may potentially exacerbate rates of maternal 
morbidity/mortality, and that a new maternal health CoP would 
exacerbate disparities in obstetrical care. Other commenters, including 
the American College of Obstetrics and Gynecology (ACOG) and the 
American Medical Association (AMA) supported the creation of a CoP 
specifically for labor and delivery, recognizing that CoPs establish 
minimum health and safety standards across participating entities and 
institutions, and recommending that CMS explore options to establish 
such CoPs for participating hospitals with relevant stakeholders.\785\
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    \784\ Medicare Program; Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long Term Care Hospital 
Prospective Payment System and Proposed Policy Changes and Fiscal 
Year 2023 Rates; Quality Programs and Medicare Promoting 
Interoperability Program Requirements for Eligible Hospitals and 
Critical Access Hospitals; Costs Incurred for Qualified and 
NonQualified Deferred Compensation Plans; and Changes to Hospital 
and Critical Access Hospital Conditions of Participation, May 10, 
2022 (87 FR 28549). https://www.govinfo.gov/content/pkg/FR-2022-05-10/pdf/2022-08268.pdf.
    \785\ Medicare Program; Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-term Care Hospital 
Prospective Payment System and Policy Changes and Fiscal Year 2023 
Rates; Quality Programs and Medicare Promoting Interoperability 
Program Requirements for Eligible Hospitals and Critical Access 
Hospitals; Costs Incurred for Qualified and Non-Qualified Deferred 
Compensation Plans; and Changes to Hospital and Critical Access 
Hospital Conditions of Participation, (August 10, 2022; (87 FR 
49291)) https://www.govinfo.gov/content/pkg/FR-2022-08-10/pdf/2022-16472.pdf.
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2. Obstetrical Services CoP
    With this RFI, we hope to further explore such options and plan to 
propose a targeted obstetrical services CoP to establish baseline 
requirements for obstetrical care within participating facilities in 
the CY 2025 OPPS/ASC proposed rule based in part on public comments 
received in response to this RFI. The comments that we receive on this 
RFI will help to inform CMS on potential proposals that may be included 
in the proposed rule. Therefore, we are seeking public comment on 
potential solutions that could reduce the rates of maternal mortality 
and reduce disparities in maternal mortality and morbidity, which can 
be implemented through the hospital CoPs. We believe it is necessary to 
develop a standard by which obstetrics care delivery is performed in 
order to address well-documented concerns regarding maternal morbidity, 
mortality, and maternity care access in the United States. The goal 
would be to ensure that any policy change to obstetrical services 
improves maternal health care outcomes and addresses preventable 
disparities in care but does not exacerbate access to care issues. We 
recognize that section 1801 of the Act prohibits federal interference 
in the practice of medicine and therefore we are seeking comment on 
interventions that do not interfere in medical practice.
    Specifically, we are soliciting comment on what should be the 
overarching requirement, scope, and structure for an obstetrical 
services CoP. What types of facilities and care settings should such a 
CoP apply to (that is, all hospitals, hospitals with/without OB units, 
hospitals with/without emergency services, CAHs, REHs, outpatient 
settings, which may include inpatient and outpatient prenatal, 
postpartum, emergency, and birthing care services)? CoP policy options 
could include (but are not limited to) the following. We welcome data, 
alternatives, benefits, and descriptions of possible unintended 
consequences on these potential options:
     Creating an optional services CoP specific to obstetrical 
services, similar to the current Optional Services CoPs for Surgical 
services (42 CFR 482.51), Anesthesia services (42 CFR 482.52), 
Outpatient services (42 CFR 482.54), or Emergency services (42 CFR 
482.55). In this case, hospitals providing obstetrical services would 
be required to ensure that obstetrical services are well organized and 
provided in accordance with nationally recognized standards of care and 
evidence-based best practices. Such a requirement would be flexible 
enough to be tailored to hospitals of differing sizes and capabilities. 
The organization of OB services would be required to be appropriate to 
the scope of the services offered, and to integrate the OB services 
with other departments

[[Page 36500]]

of the hospital, as appropriate. Policies governing obstetrical care 
would need to be designed to assure the achievement and maintenance of 
high standards of medical practice and patient care and safety.
     Modelling an OB services CoP after infection prevention 
and control stewardship program CoPs (42 CFR 482.42). This could 
include requirements relating to service organization and policies, 
leadership responsibilities, and application to multi-hospital systems.
     Requiring hospitals to develop standard processes for 
managing pregnant, birthing, and postpartum patients with or at risk 
for: (1) obstetric hemorrhage (a leading cause of maternal mortality); 
and (2) severe hypertension (a common pregnancy complication). Best 
practices for handling these issues, such as those highlighted in the 
resources cited above, already exist and CMS could require that 
hospitals establish policies that adopt or are consistent with existing 
accredited protocols.
    Additionally, we solicit public comment on the following questions:
     What are existing acceptable standards of practice, 
organization, and staffing for obstetrical services (including staff 
qualifications and scope of practice considerations) in hospital 
obstetrical wards, emergency departments, CAHs, and REHs?
     What are existing regulatory barriers to quality care for 
pregnant and postpartum patients in hospital obstetrical wards, 
hospitals and CAHs that do not operate obstetrical wards, emergency 
departments, and in REHs?
     What regulatory changes are needed to ensure quality care 
for all pregnant, laboring, and postpartum patients across all care 
settings? Would establishing regulatory standards for organization, 
staffing, and for delivery of services for obstetrical units, similar 
to the existing standards for surgical services, advance this goal? 
What additional standards should be considered?
     How could CMS better understand patients' experience of 
maternity care? What tools or instruments exist to understand 
individuals' experience of maternity care? How might CMS incorporate 
these tools or instruments into an obstetrical CoP?
     How would an obstetrical services CoP impact access to 
care for pregnant, birthing, and postpartum individuals? How will the 
CoP impact hospitals with respect to factors that have led some 
facilities to close their maternity units, including high costs, labor 
shortages, and declining birth rates?
     What policy options would help alleviate any potential 
unintended consequences of an obstetrical services CoP and the impact 
on maternity care access and workforce? How should these policy options 
account for variation in hospital size, volume, and complexity of 
services? What other hospital-specific factors should be accounted for?
     How would the growth in the number of birth centers affect 
the impact of establishing an obstetrical services CoP? As of February 
2022, 400 midwifery-led birth centers exist across 40 states and 
Washington DC, with their numbers more than doubling in the last decade 
(representing 0.52 percent of births in 2017).\786\ Birth centers, 
which are not subject to the Emergency Medical Treatment and Labor Act 
(EMTALA),\787\ treat primarily low risk pregnancies. However, in 
approximately 18 percent of cases birth centers will direct or transfer 
pregnant or postpartum individuals or newborns to a hospital.\788\
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    \786\ MacDorman MF, Declercq E. Trends and state variations in 
out-of-hospital births in the United States, 2004-2017. Birth. 2019 
Jun;46(2):279-288. doi: 10.1111/birt.12411. Epub 2018 Dec 10. PMID: 
30537156; PMCID: PMC6642827.
    \787\ https://www.cms.gov/medicare/provider-enrollment-and-certification/certificationandcomplianc/downloads/emtala.pdf.
    \788\ https://www.birthcenters.org/news/nbcs2.
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     What should minimum oversight requirements be for an 
obstetrical unit? We believe it is necessary to require that 
obstetrical units (including patient rooms/suites, operation rooms, and 
postpartum/recovery rooms whether combined or separate) be supervised 
by an experienced certified nurse practitioner, physician assistant, 
certified nurse midwife, or a doctor of medicine or osteopathy. 
Experienced oversight is necessary to ensure safe, high-quality care. 
However, we welcome comments on staffing and oversight requirements for 
obstetrical units, including whether these oversight requirements in an 
obstetric unit lead to improved quality outcomes for the mother and the 
baby or may result in unintended consequences. We also welcome comments 
on whether there should be similar or different oversight requirements 
for small hospitals, CAHs, and REHs.
     What should be required with respect to credentialling of 
health professionals to provide obstetrical services within a specific 
facility? We understand that health professionals (midwives, advanced 
practice providers, physicians, doulas, etc.) have differing skill sets 
and expertise. Therefore, we would expect that facility credentialling 
of health professionals to provide obstetrical services, consistent 
with state law, must be delineated for all practitioners providing 
obstetrical care in the facility in accordance with the competencies of 
each practitioner and that the facility maintain a roster of 
practitioners specifying the duties and privileges of each 
practitioner. Such a requirement would be consistent with the existing 
surgical services CoP (42 CFR 482.51(a)(4)).
     Should obstetrical units be required to maintain a minimum 
set of obstetrical care equipment and supplies? We recognize that 
facilities have different capacities and populations, and we are 
seeking comment on whether there is a core set of equipment and 
supplies that could enhance obstetrical readiness. For example, 
facilities might need to ensure that all delivery rooms have a call-
system, fetal monitoring capabilities, adult and neonatal resuscitation 
equipment, accessible medical equipment, and adequate provisions for 
emergent/precipitous deliveries, obstetrical emergencies (such as 
hypertensive emergencies and hemorrhage), and immediate post-delivery 
care. Should hospitals and CAHs without obstetrical units, emergency 
departments, and REHs have similar requirements? Such requirements 
would be consistent with the existing surgical services CoP (42 CFR 
482.51(b)(3)).
     Beyond what is already required for emergency department 
(ED) patients under EMTALA, should a hospital obstetrical services CoP 
include a requirement for transfer protocols for when a non-ED patient 
needs care that exceed the capability of the hospital (that is, 
inpatient to inpatient transfers)? Should a similar requirement apply 
to hospitals and CAHs without emergency services and/or obstetrical 
services?
     Are there additional ways the CoPs could improve or 
address the health and safety of pregnant and postpartum patients 
across all care settings?
     Are there refinements to Medicare and/or Medicaid payment 
structures for obstetrics care, and/or perinatal care that could 
improve the delivery of maternal care, and also address existing 
disparities? We are interested in specific refinements that are within 
CMS statutory authorities.
3. Staff Training
    According to the AHA, between 2015 and 2019, there were at least 89 
obstetric unit closures in the U.S.,\789\

[[Page 36501]]

with a disproportionate impact on rural and underserved 
communities.790 791 792 793 Given the increasing number of 
areas across the country with limited to no access to maternal health 
care, emergency departments, CAHs, and REH and non-obstetrical 
professionals working in these settings may experience a higher acuity 
and frequency of patients needing obstetrical care. Moreover, a number 
of emergency departments, CAHs, and REHs, especially in rural areas, 
may be staffed by clinicians with less training in obstetrical 
emergencies.794 795 796 797 798 Rural hospitals with and 
without obstetric units report that their greatest concerns in 
responding to local obstetric emergencies include a lack of specialty 
care providers and a lack of skills to address emergency births.
---------------------------------------------------------------------------

    \789\ American Hospital Association Infographic https://www.aha.org/system/files/media/file/2022/04/Infographic-rural-health-obstetrics-15ap22.pdf accessed 12/06/2023.
    \790\ https://rhrc.umn.edu/wp-content/uploads/2021/09/UMN-emOB-Training-Needed_11.12.20_508.pdf.
    \791\ https://jamanetwork.com/journals/jama/fullarticle/2674780.
    \792\ https://pubmed.ncbi.nlm.nih.gov/32473598/.
    \793\ https://jamanetwork.com/journals/jama/fullarticle/2674780.
    \794\ https://ilpqc.org/ILPQC%202020+/HTN/OB%20triage%20Wolf%20Delao%20Baker%20and%20Zavotsky%202021.pdf.
    \795\ https://www.cdc.gov/wcms/video/low-res/hearher/2022/819819Role-EmergMed-Specialists.mp4.
    \796\ https://www.awhonn.org/wp-content/uploads/2020/11/ENA-AWHONN-Consensus-Statement-Final-11.18.2020.pdf.
    \797\ https://kffhealthnews.org/news/article/doctors-are-disappearing-from-emergency-rooms-as-hospitals-look-to-cut-costs/.
    \798\ https://www.annemergmed.com/article/S0196-0644(18)30267-1/
fulltext.
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    We note that existing hospital CoPs for emergency services (42 CFR 
482.55) already require that ``there must be adequate medical and 
nursing personnel qualified in emergency care to meet the written 
emergency procedures and needs anticipated by the facility.'' In 
addition, EMTALA requires Medicare-participating hospitals, CAHs, and 
REHs with emergency departments to ``provide a medical screening 
examination (MSE) [. . .] for an emergency medical condition (EMC), 
including active labor, regardless of an individual's ability to pay. 
Applicable facilities are then required to provide stabilizing 
treatment for patients with EMCs.'' \799\ Furthermore, existing the 
Joint Commission (TJC) standards on the provision of care, treatment, 
and services standards for maternal safety require the education of all 
staff and providers who treat pregnant/postpartum patients on the 
hospital's evidence-based severe hypertension/preeclampsia and 
hemorrhage procedures.\800\ The standards also recommend that hospitals 
use in-situ training and drills that include multidisciplinary teams. 
We expect that facilities will ensure their emergency staff are trained 
to handle obstetrical related emergencies in compliance with CMS' CoPs, 
EMTALA, and TJC standards.
---------------------------------------------------------------------------

    \799\ https://www.cms.gov/medicare/regulations-guidance/legislation/emergency-medical-treatment-labor-act.
    \800\ https://www.jointcommission.org/standards/r3-report/r3-report-issue-24-pc-standards-for-maternal-safety/.
---------------------------------------------------------------------------

    Despite these existing regulations and standards, several 
organizations have cited that obstetrical readiness for hospitals with 
and without obstetrical services is suboptimal.801 802 803 
In these situations, appropriate training, best practice protocols 
(such as recognizing early warning signs of hemorrhage and other 
adverse events associated with pregnancy and birth), and transfer 
protocols are critical to averting avoidable maternal complications and 
deaths, establishing and maintaining facilities' obstetrical 
readiness,\804\ and ensuring compliance with existing CoP and EMTALA 
regulations.
---------------------------------------------------------------------------

    \801\ https://www.acog.org/news/news-articles/2022/01/commitment-to-action-eliminating-preventable-maternal-mortality.
    \802\ https://rhrc.umn.edu/wp-content/uploads/2021/09/UMN-emOB-Training-Needed_11.12.20_508.pdf.
    \803\ https://www.cdcfoundation.org/sites/default/files/files/ReportfromNineMMRCs.pdf.
    \804\ https://saferbirth.org/aim-obstetric-emergency-readiness-resource-kit/.
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    We are interested in feedback on requiring additional training, 
protocols, or equipment for hospital non-OB unit, emergency department, 
CAH, and REH staff that treat pregnant and postpartum patients as a 
stop-gap measure to ensure individuals living without access to 
maternal health care can safely and effectively receive necessary 
services. Training requirements could encompass training in common 
obstetrical conditions and emergencies or training on methods for 
improving the respectful delivery of care to pregnant and postpartum 
patients or both. This could be connected to the hospital emergency 
services CoPs or applied more broadly to all or a subset of hospital, 
CAH, and REH staff and require that such facilities demonstrate that 
staff have adequate or minimum obstetrical training as well as training 
in hospital protocols, such as transfer protocols for when a pregnant, 
birthing, or postpartum persons under the facilities' care (including 
emergency department patients) need a higher level of obstetrical care 
than the hospital is able to provide. We also seek feedback on how 
potential challenges with such a requirement could be mitigated.
    We note that since hospitals are neither required to provide 
obstetrical services nor emergency services, we are interested in ways 
to mitigate potential impacts and costs to hospitals in implementing 
such a possible requirement. We seek feedback from the public to learn 
more about the impact of this particular potential requirement and 
evidence supporting the need for such a requirement.
    Therefore, we are seeking public comment specifically on the 
following:
     Should minimum OB staff training requirements (both 
initial and ongoing) be included in an obstetric services CoP? The 
Joint Commission (TJC) requires the education of all staff and 
providers who treat pregnant/postpartum/birthing patients on the 
hospital's evidence-based severe hypertension/preeclampsia and 
hemorrhage procedures.\805\ Should a similar requirement be included in 
an OB services CoP? Are there other requirements for training that 
should be included, such as neonatal resuscitation?
---------------------------------------------------------------------------

    \805\ https://www.jointcommission.org/standards/r3-report/r3-report-issue-24-pc-standards-for-maternal-safety/.
---------------------------------------------------------------------------

     Given the rate of OB unit closures, should CMS require a 
minimum obstetrical training standard for hospital/CAH non-OB unit, 
emergency department, REH, or other non-OB staff that may care for 
pregnant, birthing, and postpartum patients to improve maternal health 
outcomes? What evidence exists to support the need for further or 
baseline obstetrical training for these non-obstetrical health 
professionals? What might this training entail? Which clinical staff 
and which facility types should such requirements apply to? What 
intervals should such training be required? Is there data and evidence 
that demonstrates that such training improves maternal health care 
outcomes? If so, what evidenced-based trainings, best practice 
standards, and protocols are currently available? What are the barriers 
to accessing such obstetrical training, including in rural areas? What 
are policy options to mitigate any potential unintended consequences or 
provider burden of such a requirement? Should this training apply to 
all hospitals or a subset (that is, those with emergency services; or 
those with emergency services but no obstetrical services)? For 
example, the existing Emergency Services CoP at 42 CFR 482.55 could be 
revised to require that hospitals with emergency services (which would 
include hospitals with and without obstetrical services units) 
establish best

[[Page 36502]]

practice protocols, transfer protocols, and regular staff training for 
management of common obstetrical conditions and emergencies.
     Should such additional staff training include separate 
training on methods for providing respectful care for pregnant, 
birthing, and postpartum patients in an effort to improve maternal 
health outcomes? Which staff should this apply to? Is there data and 
evidence that demonstrates that such training improves maternal health 
care outcomes? If so, what evidenced-based trainings on respectful care 
for pregnant, birthing, and postpartum patients are currently 
available?
     Should staff also be trained on implicit bias, trauma-
informed care, or other specific training topics aimed at addressing 
bias and reducing disparities in maternity care? Which staff should 
this apply to? Is there data and evidence that demonstrates that 
implicit bias and trauma-informed care training improves maternal 
health care outcomes? If so, what evidenced-based trainings are 
currently available?
     Should additional staff training include separate training 
on the screening, assessment, treatment, and referral for maternal 
depression and related behavioral health disorders by staff? Which 
staff should this apply to? Is there data and evidence that 
demonstrates that such training improves maternal health care outcomes? 
If so, what evidenced-based trainings are currently available?
     For all possible training topics discussed in above 
bullets of this section, what is the recommended frequency of staff 
training needed to balance maintaining skills and teamwork with 
minimizing associated burdens (i.e., staff time, costs), especially for 
rural facilities?
     What additional policies should CMS consider to support 
the obstetrical readiness of hospitals with and without labor and 
delivery units for obstetrical emergencies, high-risk pregnancy related 
conditions, and common obstetrical conditions?
4. Data
    We are also interested in understanding if and how requiring 
hospitals to submit data related to maternal morbidity and mortality 
could be incorporated into any maternal services CoP. In January 2010, 
the Transforming Maternity Care Symposium Steering Committee issued a 
Blueprint for Action that included improving the availability and ease 
of collection of standardized maternity care data in order to encourage 
high quality clinical care, allow performance measurement and 
comparison, and support creation and implementation of a national 
public reporting system for maternity care data available to all 
relevant stakeholders in order to drive improvements in maternity 
care.\806\ Maternal health advocates have stated that the lack of 
maternal morbidity and mortality data limits where meaningful changes 
can occur. Currently, Maternal Mortality Review Committee (MMRC) data 
reporting is dependent upon state requirements and often voluntary 
reporting by health care facilities. While there are concerns about a 
lack of data, some parties have suggested that, though voluntary, MMRC 
data collection from facilities is robust and timely. We encourage 
facilities to report data to their state MMRC, where they exist and in 
alignment with requirements in their specific states. However, not all 
states have an MMRC. We believe that improving the available data would 
enable facilities to compare data and conduct more complete assessments 
of their maternal health readiness and opportunities for growth and 
improvement. To that end, we are interested in public comment on the 
following:
---------------------------------------------------------------------------

    \806\ Angood P. B, Armstrong E. M., Ashton D, Burstin H., Corry 
M. P, Delbanco S. F, et al. Blueprint for action: Steps toward a 
high-quality, high-value maternity care system. Women's Health 
Issues. 2010;20(1) (Suppl. 1): S18-S49.
---------------------------------------------------------------------------

     How could CMS help improve data collection related to 
maternal morbidity and mortality across all demographics?
     Should hospitals be required to directly report to MMRCs 
when available? (https://www.cdc.gov/reproductivehealth/maternal-mortality/erase-mm/index.html#maternal-mortality-review)
     Could such a data collection requirement be incorporated 
into an obstetrical services CoP, or would it be more appropriately 
incorporated into another existing hospital CoP, such as QAPI?
     Are there common critical data elements that would be most 
important and appropriate to collect through a CoP aimed at improving 
maternal health data? Are there data standards currently available or 
under development that can support standardized reporting? How do we 
ensure data collection encompasses all demographics?
     How can any associated burden of possible future data 
collection and reporting requirements for providers be mitigated?

D. Proposed Changes to the Payment Error Rate Measurement (PERM)

    The Payment Integrity Information Act of 2019 requires federal 
agencies to annually review programs susceptible to significant 
improper payments, estimate the amount of improper payments, report 
those estimates to Congress, and submit a report on actions the agency 
is taking to reduce the improper payments.
    Medicaid and the Children's Health Insurance Program (CHIP) were 
identified as programs at risk for significant improper payments. We 
measure Medicaid and CHIP improper payments through the Payment Error 
Rate Measurement (PERM) program. Under PERM, reviews are conducted in 
three component areas (FFS, managed care, and eligibility) for both the 
Medicaid program and CHIP. The results of these reviews are used to 
produce national program improper payment rates, as well as state-
specific program improper payment rates. The PERM program uses a 17-
state, 3-year rotation cycle for measuring improper payments, so every 
state is measured once every 3 years.
    Section 202 of Division N of the Further Consolidated 
Appropriations Act, 2020 (FCAA, 2020) (Pub. L. 116-94) amended Medicaid 
program integrity requirements in Puerto Rico. Puerto Rico was required 
to publish a plan, developed by Puerto Rico in coordination with CMS, 
and approved by the CMS Administrator, not later than 18 months after 
the FCAA's enactment, for how Puerto Rico would develop measures to 
comply with the PERM requirements of 42 CFR part 431, subpart Q. Puerto 
Rico published this plan on June 20, 2021,\807\ and it was approved by 
the CMS Administrator on June 22, 2021. We propose to remove the 
exclusion of Puerto Rico from the PERM program found at 42 CFR 
431.954(b)(3). In compliance with section 202 of Division N of the 
FCAA, 2020, Puerto Rico has developed measures to comply with the PERM 
requirements of 42 CFR part 431, subpart Q. Including Puerto Rico in 
the PERM program will increase transparency in its Medicaid and CHIP 
operations and will improve program integrity efforts, that protect 
taxpayer dollars from improper payments.
---------------------------------------------------------------------------

    \807\ https://www.medicaid.pr.gov/pdf/Congress/PRDOH_Congressional%20Report%202%20PERM%20Compliance%20Plan_FINAL[2][
1].pdf.
---------------------------------------------------------------------------

    Puerto Rico would be incorporated into the PERM program starting in 
RY27 (Cycle 3), which covers the payment period between July 1, 2025 
through June 30, 2026.

[[Page 36503]]

F. CoP Requirements for Hospitals and CAHs To Report Acute Respiratory 
Illnesses

1. Background
    Under sections 1866 and 1902 of the Act, providers of services 
seeking to participate in the Medicare or Medicaid program, or both, 
must enter into an agreement with the Secretary or the state Medicaid 
agency, as appropriate. Hospitals (all hospitals to which the 
requirements of 42 CFR part 482 apply, including short-term acute care 
hospitals, LTC hospitals, rehabilitation hospitals, psychiatric 
hospitals, cancer hospitals, and children's hospitals) and CAHs seeking 
to be Medicare and Medicaid providers of services under 42 CFR part 
485, subpart F, must be certified as meeting Federal participation 
requirements. Our conditions of participation (CoPs), conditions for 
coverage (CfCs), and requirements set out the patient health and safety 
protections established by the Secretary for various types of providers 
and suppliers. The specific statutory authority for hospital CoPs is 
set forth in section 1861(e) of the Act; section 1820(e) of the Act 
provides similar authority for CAHs. The hospital provision at section 
1861(e)(9) of the Act authorizes the Secretary to issue any regulations 
he or she deems necessary to protect the health and safety of patients 
receiving services in those facilities; the CAH provision at section 
1820(e)(3) of the Act authorizes the Secretary to issue such other 
criteria as he or she may require. The CoPs are codified at 42 CFR part 
482 for hospitals, and at 42 CFR part 485, subpart F, for CAHs.
    Our CoPs at Sec.  482.42 for hospitals and Sec.  485.640 for CAHs 
require that hospitals and CAHs, respectively, have active facility-
wide programs for the surveillance, prevention, and control of 
healthcare-associated infections (HAIs) and other infectious diseases 
and for the optimization of antibiotic use through stewardship. 
Additionally, the programs must demonstrate adherence to nationally 
recognized infection prevention and control guidelines, as well as to 
best practices for improving antibiotic use where applicable, and for 
reducing the development and transmission of HAIs and antibiotic-
resistant organisms. Infection prevention and control problems and 
antibiotic use issues identified in the required hospital and CAH 
programs must also be addressed in coordination with facility-wide 
quality assessment and performance improvement (QAPI) programs.
    Infection prevention and control is a primary goal and 
responsibility of hospitals and CAHs in their normal day-to-day 
operations, and these programs have been at the center of initiatives 
taking place in hospitals and CAHs since the beginning of the Public 
Health Emergency (PHE) for COVID-19. Our regulations for hospitals and 
CAHs at Sec. Sec.  482.42(a)(3) and 485.640(a)(3), respectively, 
require infection prevention and control program policies to address 
any infection control issues identified by public health authorities.
    On March 4, 2020, we issued guidance stating that hospitals should 
inform infection prevention and control services, local and state 
public health authorities, and other health care facility staff as 
appropriate about the presence of a person under investigation for 
COVID-19 (QSO-20-13-Hospitals). CMS followed this guidance with an 
interim final rule with comment period (IFC), ``Medicare and Medicaid 
Programs, Clinical Laboratory Improvement Amendments (CLIA), and 
Patient Protection and Affordable Care Act; Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency,'' published on September 2, 2020 (85 FR 54820), that 
required hospitals and CAHs to report important data critical to 
support the fight against COVID-19. The IFC provisions specifically 
required that hospitals and CAHs report specified information about 
COVID-19 in a format and frequency specified by the Secretary. Examples 
of data elements that could be required to be reported included things 
such as the number of staffed beds in a hospital and the number of 
those that are occupied, information about its supplies, and a count of 
patients currently hospitalized who have laboratory-confirmed COVID-19. 
These elements proved essential for developing and directing 
implementation of infection prevention and control guidance, as well as 
resource allocations and technical assistance during the PHE.
    On August 10, 2022, we finalized revisions to the COVID-19 and 
Seasonal Influenza reporting standards for hospitals and CAHs (at 
Sec. Sec.  482.42(e) and (f); and 485.640(d) and (e), respectively) in 
the FY 2023 IPPS final rule ``Medicare Program; Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long Term 
Care Hospital Prospective Payment System and Policy Changes and Fiscal 
Year 2023 Rates'' (87 FR 48780, 49409), to require that, beginning at 
the conclusion of the COVID-19 PHE declaration and continuing until 
April 30, 2024, hospitals and CAHs must electronically report 
information about COVID-19 and seasonal influenza virus, influenza-like 
illness, and severe acute respiratory infection in a standardized 
format specified by the Secretary. In establishing these requirements, 
we stressed that such reporting continued to be necessary for CMS to 
monitor whether individual hospitals and CAHs were appropriately 
tracking, planning for, responding to, and mitigating the spread and 
impact of COVID-19 and influenza on patients, the staff who care for 
them, and the general public (87 FR 49377). We also noted that the 
approach finalized in that rule would provide a path towards ending the 
overall reporting of COVID-19-related data between the end of the 
current PHE and April 2024, when those requirements would sunset (87 FR 
49379).
2. Hospital Respiratory Illness Data Are and Will Continue To Be 
Critical for Patient Health and Safety
    The COVID-19 pandemic highlighted the importance of taking a broad 
view of patient safety--one that recognizes patient safety is 
determined not just by what is happening at the bedside, but also what 
is happening in the broader hospital, and in hospitals across the 
region, state, and country. At the same time, it also demonstrated the 
patient benefits of strong integration between public health and health 
care systems, particularly when data are available to direct 
collaborative actions that protect patient and public health and 
safety. Data from health care providers remain the key driver to 
identify and respond to public health threats, yet health care and 
public health data systems have long persisted on separate, often 
poorly compatible tracks.
    Hospital and CAH-reported data on COVID-19, influenza, and RSV 
infections among patients, as well as hospital bed capacity and 
occupancy rates, continue to play a critical role in infection 
prevention and control efforts at every level of the health system. The 
value of these data extend beyond the COVID-19 PHE. For example, source 
control remains an important intervention during periods of higher 
respiratory virus transmission.\808\ Data on hospital admissions 
reported under the current CoPs continue to inform national, state, and 
county recommendations for community and health care mitigation 
measures.\809\

[[Page 36504]]

Notably, the CDC recommends that health care facilities consider levels 
of respiratory virus transmission in the whole community when making 
decisions about source control. Comprehensive and consistent 
surveillance across hospitals creates a shared resource that all health 
care facilities in a community can use to inform infection control 
policies. Hospitals and CAH requirement to report this data ends in 
April 2024. Not maintaining this reporting would result in an absence 
of vital information on local, regional, and national transmission and 
impact of respiratory illness, with significant implications for both 
patient care and public health mitigation.
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    \808\ https://www.cdc.gov/infectioncontrol/guidelines/core-practices/index.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fhicpac%2Frecommendations%2Fcore-practices.html.
    \809\ Infection Control: Severe acute respiratory syndrome 
coronavirus 2 (SARS-CoV-2) [verbar] CDC; 2023.12.14--IDPH Recommends 
Healthcare Facilities Adopt Mitigation Measures as Respiratory 
Viruses Increase (illinois.gov) 2024-doh-masking-advisory.pdf 
(ny.gov); Health Alert Network (HAN)--00503 [verbar] Urgent Need to 
Increase Immunization Coverage for Influenza, COVID-19, and RSV and 
Use of Authorized/Approved Therapeutics in the Setting of Increased 
Respiratory Disease Activity During the 2023-2024 Winter Season 
(cdc.gov).
---------------------------------------------------------------------------

    The data produced by hospital respiratory virus reporting 
requirements under the PHE informed coordination of hospital operations 
and were especially important to anticipate and prepare for surge 
conditions. Collaborative, data driven approaches can help to manage 
patient transfers and alleviate strained hospitals, ultimately aiding 
to improve patient care. Medical operations coordination centers 
(MOCCs) and similar structures showed promise as effective tools for 
facilitating medical surge response.\810\ MOCCs are often rapidly stood 
up as needed and reliant on shared visibility across multiple, often 
competitive, hospitals. Standardized data collections enable MOCCs and 
other partners to support patient placements and transfers and identify 
patient load balancing needs.\811\ This helps the health care community 
to prepare for and effectively respond to respiratory illness surges in 
ways that maintain the safety and availability of critical care 
services. MOCCs or similar structures were implemented in multiple 
jurisdictions to help place patients and mitigate strain.\812\ Even 
without formal MOCCs, jurisdictions, health care coalitions, and health 
systems have used hospital capacity data to coordinate patient 
placement and reduce ED boarding and overcrowding.\813\ These efforts 
are especially critical as surge conditions can impact quality of care 
and patient outcomes--many COVID-19 deaths were potentially 
attributable to surge-strained hospitals.\814\ The data reported under 
the COP were important to inform MOCC operations and identify and 
mitigate strain on health care systems.
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    \810\ Hick, J. L., Hanfling, D., & Wynia, M. (2022). Hospital 
Planning for Contingency and Crisis Conditions: Crisis Standards of 
Care Lessons from COVID-19. Joint Commission journal on quality and 
patient safety, 48(6-7), 354-361. https://doi.org/10.1016/j.jcjq.2022.02.003.
    US Department of Health and Human Services. 2nd ed. Medical 
Operations Coordination Cells Toolkit; Nov 2021. Office of the 
Assistant Secretary for Preparedness and Response; Technical 
Resources, Assistance Center, and Information Exchange. https://files.asprtracie.hhs.gov/documents/fema-mocc-toolkit.pdf. Accessed 
Jan 30, 2024.
    Valin JP, et. al. Physician executives guide a successful COVID-
19 response in Colorado. NEJM Catalyst. Epub 2021 Oct 15. Accessed 
Jan 30, 2024. https://catalyst.nejm.org/doi/full/10.1056/CAT.20.0402.
    Villarroel L. Collaboration on the Arizona surge line: how 
COVID-19 became the impetus for private, public, and federal 
hospitals to function as one system. NEJM Catalyst. Epub. 2021 Jan.
    \811\ https://aspr.hhs.gov/HealthCareReadiness/StoriesfromtheField/Pages/Stories/WA-HospitalSurge-March2020.aspx 
(March 2020).
    \812\ https://aspr.hhs.gov/HealthCareReadiness/StoriesfromtheField/Pages/Stories/CO-Combined-Hospital-Transfer-Cntr.aspx.
    \813\ e.g., Alaska Hospital Capacity Dashboard (arcgis.com); 
https://files.asprtracie.hhs.gov/documents/aspr-tracie-hcc-engagement-in-covid-19-assessment.pdf.
    \814\ Kadri SS, Sun J, Lawandi A, et al. Association between 
caseload surge and COVID-19 survival in 558 U.S. hospitals, March to 
August 2020. Ann Intern Med. Jul 06 2021.174(9):1240-1251.
    Auld SC, Caridi-Scheible M, Blum JM, et al. ICU and ventilator 
mortality among critically ill adults with coronavirus disease 2019. 
Crit Care Med. 09 2020;48(9):e799[hyphen]e804.
    Keene AB, Admon AJ, Brenner SK, Gupta S, Lazarous D, Leaf DE, 
Gershengorn HB; STOP-COVID Investigators. Association of Surge 
Conditions with Mortality Among Critically Ill Patients with COVID-
19. J Intensive Care Med. 2022 Apr;37(4):500-509. doi: 10.1177/
08850666211067509. Epub 2021 Dec 23. PMID: 34939474; PMCID: 
PMC8926920.
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    Insight into hospital and CAH capacity helps ensure capabilities 
are available to meet patient needs with quality care through enhanced 
planning, technical assistance, resource allocation, and 
coordination.\815\ While health care entities often work independently 
within their own systems, health care partners are ultimately part of 
an ecosystem caring for patients in their community. This 
interdependency is especially highlighted during times of strain--
whether it is due to temporary conditions such as diversion, permanent 
changes with facility closures, or PHEs. Regardless of facility status, 
the need for patient care remains--resulting in increased strain on 
surrounding hospitals. Health care coalitions (HCCs) are one example of 
local health care partners working together to increase local and 
regional health care resilience during respiratory illness surges and 
more.\816\ HCCs plan and respond together, sharing real-time 
information and providing technical assistance to support their 
partners.\817\ At the state level, in addition to patient placements 
and load balancing operations, hospital associations and state health 
departments have used hospital data to monitor for potential trends and 
to inform their response. Hospital capacity data helped to inform and 
monitor triggers for patient load balancing, allocations of scarce 
resources, and requests for additional resources or mutual aid.\818\ 
Hospitals and health care systems can also use the information for 
planning purposes, identifying how their facility may be impacted and 
to help prepare accordingly.\819\ Information sharing across the health 
care ecosystem helps the health care community to prepare for, and 
effectively respond to, respiratory illness surges in ways that 
maintain the safety and availability of critical care services.
---------------------------------------------------------------------------

    \815\ https://aspr.hhs.gov/HealthCareReadiness/StoriesfromtheField/Pages/Stories/Kentucky-Collaborates-Community.aspx.
    \816\ https://aspr.hhs.gov/HealthCareReadiness/HealthCareReadinessNearYou/Documents/HCC-FactSheet-April2021-508.pdf.
    \817\ https://aspr.hhs.gov/HealthCareReadiness/HealthCareReadinessNearYou/Documents/HCC-FactSheet-April2021-508.pdf.
    \818\ Mitchell SH, Rigler J, Baum K. Regional Transfer 
Coordination and Hospital Load Balancing During COVID-19 Surges. 
JAMA Health Forum. 2022;3(2):e215048. doi:10.1001/
jamahealthforum.2021.5048. https://aspr.hhs.gov/HealthCareReadiness/StoriesfromtheField/Pages/Stories/HCC-Regional-Approach-Illinois.aspx.
    \819\ https://aspr.hhs.gov/HealthCareReadiness/StoriesfromtheField/Pages/Stories/Maryland-HCC-covid19.aspx.
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    Data from hospitals play a central role in guiding actions to 
reduce the prevalence of respiratory infections in the community.\820\ 
In recognition of this point, the Biden-Harris Administration's 
National Biodefense Strategy includes a goal to, ``maintain and enhance 
an enduring domestic all-hazards hospital data collection capability, 
including data reporting and management systems, governance processes, 
and user guidance, to enable comprehensive data reporting for 
biosurveillance, situational awareness, and emergency response 
operations at the federal and STLT levels.'' \821\
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    \820\ COVID-19 Surveillance After Expiration of the Public 
Health Emergency Declaration--United States, May 11, 2023 [verbar] 
MMWR (cdc.gov).
    \821\ National-Biodefense-Strategy-and-Implementation-Plan-
Final.pdf (whitehouse.gov).
---------------------------------------------------------------------------

    The prevalence of respiratory infections in the community affects 
patient safety within hospitals in at least two ways: First, community 
prevalence is a key risk factor for within-facility pathogen 
transmission. Higher infection

[[Page 36505]]

prevalence in the community unavoidably translates to higher prevalence 
among staff, patients, and visitors entering a facility. The more times 
a pathogen is introduced into a facility, the more times it has a 
chance to spread onward within that facility. Within-facility infection 
control measures can substantially mitigate this risk, but no single 
action confers absolute protection--rather, layered mitigation 
measures, particularly when those include community level actions, are 
most effective. Second, the community prevalence of respiratory 
infections is a key driver of health care worker absenteeism, which can 
lead to staff shortages that adversely affect patient safety.
    Data on hospitalizations feature prominently on CDC's website and 
are directly tied to specific disease-prevention guidance (for example, 
whether mask-wearing is recommended in public indoor spaces). 
Additionally, analyses that measure the trajectory of waves of COVID-19 
and seasonal influenza and analyses that generate forecasts have relied 
on nationally comprehensive data on hospital admissions.\822\ 
Similarly, scenario models that have been used to generate seasonal 
projections for COVID-19 and that have informed vaccination policy are 
based on hospital admissions data.\823\ The incidence of COVID-19 and 
influenza hospital admissions inform urgent messages from CDC on 
actions health care providers can take to protect their patients from 
respiratory viruses.\824\ No other data source available to CDC has the 
same level of timeliness, geographic resolution and coverage, and 
interpretability as nationally comprehensive hospitalization 
surveillance.
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    \822\ CFA and NCIRD Modeling and Forecasting of Respiratory 
Diseases (cdc.gov).
    \823\ Public health impact of the U.S. Scenario Modeling Hub--
ScienceDirect.
    \824\ Health Alert Network (HAN)--00503 [verbar] Urgent Need to 
Increase Immunization Coverage for Influenza, COVID-19, and RSV and 
Use of Authorized/Approved Therapeutics in the Setting of Increased 
Respiratory Disease Activity During the 2023-2024 Winter Season 
(cdc.gov).
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    Respiratory illness reporting proved invaluable during the COVID-19 
PHE, and these data have significant and ongoing value for protecting 
patient health and safety. While the COVID-19 PHE has ended, SARS-CoV-2 
continues to circulate throughout the globe. Although COVID-19 activity 
and hospitalization rates have been lower, than those of 2020 through 
early 2022, there was no epidemiologic bright line associated with the 
end of the PHE. For example, in January 2024, COVID-19 hospital 
admissions were only modestly lower than they were at the July 2022 or 
December 2022 peaks.\825\ At the same time, other respiratory viruses 
have seen a resurgence, and the moderate COVID-19 burden coinciding 
with resurgent influenza and RSV has led to an overall hospitalization 
burden larger than observed during severe influenza and RSV seasons 
prior to the COVID-19 pandemic, placing patient health and safety at 
risk.\826\
---------------------------------------------------------------------------

    \825\ https://covid.cdc.gov/covid-data-tracker/#trends_weeklyhospitaladmissions_select_00.
    \826\ Respiratory Disease Season Outlook (cdc.gov).
---------------------------------------------------------------------------

    The result of this ``new normal'' will be more burdensome 
respiratory virus seasons for the foreseeable future, which promises to 
place continued strain on the nation's hospitals.\827\ In response to 
this changed landscape, public health agencies such as CDC have shifted 
prevention and control strategies from a focus on specific viruses to 
an approach that addresses the threats presented by the broader 
respiratory virus season, including overall impacts on hospital 
capacity and patient health and safety.\828\
---------------------------------------------------------------------------

    \827\ Respiratory Disease Season Outlook (cdc.gov).
    \828\ See https://www.cdc.gov/respiratory-viruses/index.html and 
data summaries of respiratory virus burden at https://www.cdc.gov/respiratory-viruses/data-research/dashboard/snapshot.html. https://www.cdc.gov/respiratory-viruses/whats-new/track-hospital-capacity.html.
---------------------------------------------------------------------------

    The elevated risks of respiratory viruses in the post-PHE era 
present ongoing threats, both direct and indirect, to patient health 
and safety. As discussed elsewhere in this proposed rule, the COVID-19 
PHE strained the health care system substantially, introducing new 
safety risks and negatively impacting patient safety in the normal 
delivery of care. Data from the pandemic showed that the incidence of 
health care associated infections would increase when COVID-19 
hospitalizations were high,\829\ creating a feedback loop between 
increased stress on hospitals, increased illness in the community, and 
negative effects on patient health and safety. Degradation in other 
measures of patient safety, including pressure ulcers and falls, 
further demonstrate how the strains associated with surge response 
adversely affect routine safety practices.\830\ Elevated respiratory 
virus activity also impacts patient access to hospital care and 
services and the resiliency of the health care system overall. During 
the most severe waves of respiratory illness, hospitals see delays in 
elective procedures, bed capacity issues that require diversion, and 
other disruptions to routine patient care.\831\
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    \829\ Continued increases in the incidence of healthcare-
associated infection (HAI) during the second year of the coronavirus 
disease 2019 (COVID-19) pandemic [verbar] Infection Control & 
Hospital Epidemiology [verbar] Cambridge Core; https://www.nejm.org/doi/full/10.1056/NEJMp2118285; The impact of coronavirus disease 
2019 (COVID-19) on healthcare-associated infections in 2020: A 
summary of data reported to the National Healthcare Safety Network--
PubMed (nih.gov); Impact of COVID-19 pandemic on central-line-
associated bloodstream infections during the early months of 2020, 
National Healthcare Safety Network--PubMed (nih.gov).
    \830\ https://www.nejm.org/doi/full/10.1056/NEJMp2118285.
    \831\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9526134/; 
Infect Control Hosp Epidemiol. 2022 Oct;43(10):1473-1476.doi: 
10.1017/ice.2021.280. Epub 2021 Jun 24.; Changes in the number of 
intensive care unit beds in US hospitals during the early months of 
the coronavirus disease 2019 (COVID-19) pandemic--PubMed (nih.gov).
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3. Proposal To Continue Respiratory Illness Reporting in a Modified 
Form
    In light of continued utility of respiratory illness data, we 
propose to revise the hospital and CAH infection prevention and control 
and antibiotic stewardship programs CoPs to extend a modified form of 
the current COVID-19 and influenza reporting requirements that will 
include data for RSV and reduce the frequency of reporting for 
hospitals and CAHs. These proposed requirements would take effect on 
October 1, 2024. While hospitals and CAHs are encouraged to voluntarily 
continue reporting these data in the interim, we recognize that there 
would be a 5-month gap between the sunset date for current reporting 
requirements (April 30, 2024) and the proposed implementation date for 
these new requirements. We welcome public comment on strategies to 
mitigate challenges and support an informed transition.
    Specifically, we propose to replace the COVID-19 and Seasonal 
Influenza reporting standards for hospitals and CAHs at Sec.  482.42(e) 
and (f) and Sec.  485.640(d) and (e), respectively, with a new standard 
addressing respiratory illnesses to require that, beginning on October 
1, 2024, hospitals and CAHs electronically report information about 
COVID-19, influenza, and RSV in a standardized format and frequency 
specified by the Secretary. To the extent determined by the Secretary, 
we propose that the data elements for which reporting would be required 
at this time include--
     Confirmed infections of respiratory illnesses, including 
COVID-19, influenza, and RSV, among hospitalized patients;
     Hospital bed census and capacity (both overall and by 
hospital setting and population group [adult or pediatric]); and

[[Page 36506]]

     Limited patient demographic information, including age.
    We considered the data elements that proved most actionable and 
informative over the course of the COVID-19 PHE with evidence of 
protecting health and safety, as well as more recent lessons that have 
emerged during the 2023-2024 respiratory virus response.\832\ We also 
considered ways to balance the burden of reporting on hospitals and 
CAHs with the need to maintain a level of situational awareness that 
will benefit hospitals and the patients and communities they serve. 
Therefore, outside a declared national PHE for an acute respiratory 
illness (as discussed further below), we propose that hospitals and 
CAHs would have to report these data on a weekly basis (either in the 
form of weekly totals or snapshots of key indicators) through a CDC-
owned or supported system.
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    \832\ https://emergency.cdc.gov/han/2023/han00503.asp, https://emergency.cdc.gov/han/2023/han00498.asp.
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    Sustained data collection and reporting outside of emergencies 
would help ensure that hospitals and CAHs maintain a functional 
reporting capacity that can be mobilized quickly when a new threat 
emerges to inform and direct response efforts (for example, resource 
allocations or patient load balancing within and across facilities) 
that protect patients and their communities. It will also provide the 
baseline data necessary to forecast, detect, quantify and, ultimately, 
direct responses to signals of strain. For example, to estimate the 
extent to which a novel SARS-CoV-2 variant threatens hospital capacity, 
analysts need data on a population's epidemiologic history (for 
example, the presence and magnitude of prior waves of SARS-CoV-2) and 
they need data to infer the relationship between respiratory virus 
admissions and strain on hospital capacity.
    Unlike the previous and sunsetting hospital and CAH reporting CoPs, 
the reporting requirements proposed in this rule are not tied to a 
specific PHE declaration. PHE declarations are valuable tools to 
marshal nimble and fast emergency responses. However, there are many 
respiratory disease threats to hospital operations and patient safety 
that would not necessarily be subject to a PHE declaration nor have 
significant potential to become a PHE. In those instances, routine data 
about influenza hospitalizations and admissions are critical to inform 
allocation of resources to hospitals and planning to prevent 
disruptions to patient care.
    These proposals are scaled back and tailored from the current post-
COVID-19 PHE requirements, continuing the collection of the minimal 
necessary data to maintain a level of situational awareness that would 
benefit patients and hospitals across the country while reducing 
reporting burden on hospitals and CAHs.
    We welcome public comments on our proposals, and on ways that 
reporting burden can be minimized while still providing adequate data. 
We also welcome feedback on any challenges of collecting and reporting 
these data; ways that CMS could reduce reporting burden for facilities; 
and alternative reporting mechanisms or quality reporting programs 
through which CMS could instead effectively and sustainably incentivize 
reporting. Finally, we welcome comments on the value of these data in 
protecting the health and safety of individuals receiving treatment and 
working in hospitals and CAHs.
4. Soliciting Input on Collecting Data by Race and Ethnicity
    The COVID-19 pandemic devastated communities across the United 
States, and socially vulnerable populations have been 
disproportionately affected. From the beginning, reports indicated that 
people of color and people from economically disadvantaged communities 
were at an increased risk of becoming sick from COVID-19, being 
hospitalized due to COVID-19, and dying from COVID-19, compared to 
members of predominantly white and/or affluent communities.\833\ At the 
same time, the data necessary to detect and respond to these 
disparities were not consistently available from core data sources, 
including hospitalization data reported by hospitals and CAHs under 
Sec. Sec.  482.42(e) and (f); and 485.640(d) and (e), respectively.
---------------------------------------------------------------------------

    \833\ https://oig.hhs.gov/oei/reports/OEI-05-20-00540.asp; 
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9533809/
#:~:text=In%20this%20study%20cohort%2C%2062,%2C%20and%205%25%20were%2
0Hispanic.
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    We are committed to protecting patients from all communities and 
preventing inequities caused or exacerbated by respiratory viruses like 
COVID-19, influenza, and RSV. Timely, complete data on racial and 
ethnic differences in hospitalizations are critical to meeting that 
commitment in policy solutions. In addition, timely, complete data on 
granular demographic information can assist us in assuring the health 
and safety of individuals receiving health care services to the 
greatest extent possible. For that reason, we seek comment on expanding 
the scope of demographic information collection to further support 
improvements in clinical outcomes while also protecting privacy and the 
safety of demographic groups.
    At the same time, we recognize that efforts to improve the 
collection of race/ethnicity data and standards for how these data are 
captured are still evolving.\834\ We also recognize that in the context 
of aggregate data collection, requesting multiple demographic details 
for each data element may increase data collection and reporting 
burdens.
---------------------------------------------------------------------------

    \834\ https://www.federalregister.gov/documents/2023/01/27/2023-01635/initial-proposals-for-updating-ombs-race-and-ethnicity-statistical-standards.
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    For this reason, we invite comment as to whether race/ethnicity 
demographic information should be explicitly included as part of 
requirements for ongoing reporting beginning on October 1, 2024. We are 
particularly interested in comments that address the ways these 
additional data elements could be used to better protect patient and 
community health and safety both during and outside of a declared PHE. 
We are interested in comments on how to protect patient privacy within 
demographic groups and best use the data to inform public health 
efforts without stigmatizing demographic groups.\835\ We are also 
interested in comments that address system readiness and capacity to 
collect and report these data. Finally, we request comments as to 
whether the additional demographic factors including socioeconomic or 
disability status that may be associated with disparities in outcome, 
should be required for mandatory ongoing reporting starting on October 
1, 2024. After considering the public comments on this issue, we may 
decide to finalize a policy of collecting demographic information on 
race/ethnicity and/or additional factors.
---------------------------------------------------------------------------

    \835\ Landers S, Kapadia F, Tarantola D. Monkeypox, After HIV/
AIDS and COVID-19: Suggestions for Collective Action and a Public 
Health of Consequence, November 2022. Am J Public Health. 2022 
Nov;112(11):1564-1566. doi: 10.2105/AJPH.2022.307100. PMID: 
36223580; PMCID: PMC9558195. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9558195/.
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5. Proposal To Collect Additional Elements During a PHE
    Routinely collected data from hospitals also power forecasts that 
inform decision making during an emergency response.\836\ In the face 
of future illness emergencies, we anticipate stakeholders--including 
health care systems--will continue to

[[Page 36507]]

need data on how respiratory illnesses are affecting and burdening the 
health care system. Better understanding anticipated impacts empower 
hospitals and CAHs, health systems, and jurisdictions to take steps 
that protect patient safety and health care system capacity in the face 
of surges in respiratory virus cases, including low-probability, high-
impact events such as pandemics that pose catastrophic risks to patient 
safety and the health care system. These include facility-initiated 
actions, such as delaying elective procedures or activating contracts 
for additional surge staffing support, as well as jurisdiction or 
federal-level actions to mobilize supplies, staffing, or other forms of 
support. Collaborations during the COVID-19 pandemic demonstrated the 
value of bringing together analysts, public health officials, and 
health care practitioners and leaders to use advanced analytics to 
guide emergency response, and data from hospitals were central to some 
of these efforts.\837\ The federal government has made significant 
investments to consolidate these gains and develop response-ready 
analytic tools that work at scale to meet the needs of the health care 
and public health systems.\838\
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    \836\ JMIR Preprints #54340: Responding to the return of 
influenza in the United States: applying CDC surveillance, analysis, 
and modeling to inform understanding of seasonal influenza.
    \837\ Real-time pandemic surveillance using hospital admissions 
and mobility data [verbar] PNAS Coordinated Strategy for a Model-
Based Decision Support Tool for Coronavirus Disease, Utah, USA--
Volume 27, Number 5--May 2021--Emerging Infectious Diseases 
journal--CDC.
    \838\ cdc-cfa-annual-report-2023.pdf.
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    These proposed requirements would provide a foundation for 
response-ready hospitals, CAHs, and the broader health system. However, 
we also recognize that, while necessary, they may not be sufficient in 
the course of an actual emergency response. Accordingly, we propose 
that--
     During a declared federal, state, or local PHE for an 
infectious disease the Secretary may require hospitals to report data 
up to a daily frequency without notice and comment rulemaking.
     During a declared PHE for infectious disease, the 
Secretary may require the reporting of additional or modified data 
elements relevant to infectious disease PHE including but not limited 
to: confirmed infections of the infectious disease, facility structure 
and infrastructure operational status; hospital/ED diversion status; 
staffing and staffing shortages; supply inventory shortages (for 
example, equipment, blood products, gases); medical countermeasures and 
therapeutics; and additional, demographic factors.
     If the Secretary determines that an event is significantly 
likely to become a PHE for an infectious disease, the Secretary may 
require hospitals to report data up to a daily frequency without notice 
and comment rulemaking.
    We invite comments on if, during a PHE, there should be any limits 
to the data the Secretary can require without notice and comment 
rulemaking, such as limits on the duration of additional reporting or 
the scope of the jurisdiction of reporting (that is, state or local 
PHEs). We also seek comments on whether and how the Secretary should 
still seek stakeholder feedback on additional elements during a PHE 
without notice and comment rulemaking and how HHS should notify 
hospitals of new required infectious disease data. We also invite 
comments on the evidence HHS should provide to demonstrate: (1) that an 
event is ``significantly likely to become a PHE''; or (2) that the 
increased scope of required data will be used to protect patient and 
community health and safety. Finally, we invite comment on whether 
hospitals should be incentivized for this data if the burden of 
collecting and reporting reaches a certain threshold of cost or time.
6. Collaboration
    To further reduce burden in the short term, we will work with the 
CDC to ensure hospitals can continue to use existing, established 
systems to report data in the interim. The CDC will continue increasing 
the automation capabilities of the surveillance systems like NHSN and 
its ability to connect with other data submission techniques, vendors, 
and systems. The CDC, CMS, and ASPR are also working with Office of the 
National Coordinator for Health Information Technology (ONC), 
jurisdictions, health information technology (health IT) vendors, 
hospitals and CAHs, and other public and private partners to establish 
national standards and interoperability requirements that reduce burden 
and promote standardization. We request comment from facilities on the 
existing, established data systems; what has worked well and what has 
been the challenges? Do facilities recommend alternative data reporting 
mechanisms?
    We recognize that some of the proposed data elements are currently 
reported via multiple mechanisms, and this could place unnecessary 
burdens on hospitals. If finalized, CMS, CDC, and ASPR will work with 
hospitals, health systems, and state, territorial, local and tribal 
agencies (STLTs) to streamline this federal, state, and local reporting 
burden, utilizing the least burdensome technical exchange mechanism for 
reporting. CDC and ASPR, together with ONC, would also take steps to 
encourage state, local, jurisdictional partners to utilize the same 
HHS-adopted health IT standards like USCDI for data exchange, which 
would further reduce burden on health care systems. We will also 
explore where guidance can leverage data sets being developed under the 
USCDI+ initiative, which focuses on develop and advancing use of 
standardized data elements for exchange for additional use cases that 
build on the USCDI.\839\
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    \839\ For more information about USCDI+ https://www.healthit.gov/topic/interoperability/uscdi-plus.
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    CMS, CDC, and ASPR recognize the immense value of partnerships with 
hospitals, health systems, STLTs, associations, and other partners. 
Throughout the COVID-19 PHE, partners at all levels worked alongside 
CMS, CDC, and ASPR to provide additional context, insight, and feedback 
based on conditions on the ground. This context helped data collections 
be more effective and helped provide a fuller picture than data alone. 
CMS, CDC, and ASPR are grateful for the many collaborations with 
partners on data and beyond. CDC, ASPR, and ONC will explore 
opportunities to codify continued partnerships to prepare for and 
respond to incidents such as respiratory illnesses more effectively. We 
welcome public comment on ways that all public agencies involved in 
these types of data collections can be good partners.
7. Request for Information on Health Care Reporting to the National 
Syndromic Surveillance Program
    CDC's National Syndromic Surveillance Program (NSSP) is a 
collaboration among CDC, other federal agencies, local and state health 
departments, and academic and private sector partners who have formed a 
Community of Practice. They collect, analyze, and share electronic 
patient encounter data received from emergency departments, urgent and 
ambulatory care centers, inpatient health care settings, and 
laboratories.
    The electronic health data are integrated through a shared 
platform; the BioSense Platform. The public health community uses 
analytic tools on the platform to analyze data received as early as 24 
hours after a patient's visit to a participating facility. Public 
health officials use these timely and actionable data to detect, 
characterize, monitor, and respond to events of public health concern.
    The primary dataset used for analysis is Emergency Department 
patient visit data obtained through data leveraging

[[Page 36508]]

HL7v2 ADT-based messaging among CDC, local and state health 
departments, and the nation's acute care hospitals. By tracking 
symptoms and diagnoses of patients using this electronic health data 
source, analysts can detect unusual levels or changing patterns of 
illness. Every day, more than 2,000 users (analysts at all levels of 
government including 73 state and local health departments) conduct 
4,000 searches of these data for response, decision-making, and action. 
In 2022-23, these data were used to provide critical insights for more 
than 40 responses across infectious diseases (including COVID-19, RSV, 
influenza, tickborne disease, domestic polio, and Mpox), disasters 
(including hurricanes and typhoons, extreme heat and cold, flooding, 
chemical exposure, food and water contamination), injuries (including 
overdose, poisonings, boating injuries in collaboration with the Coast 
Guard, child abuse and elder abuse) and for mental health, mass 
gatherings, and other conditions. These data provide public health with 
a common situational awareness of health threats over time and across 
regional boundaries. New responses between 2022 and 2023 included the 
Mpox public health emergency, domestic malaria, asthma from Canadian 
wildfire smoke, Hurricane Ian, Typhoon Mawar, volcanic eruption in 
Hawaii, the train derailment in Ohio, hepatitis of unknown cause in 
children, encephalitis and meningitis in young children, group A 
Streptococcal Disease, and pertussis. Nationwide, CDC's NSSP data are 
presented on many local, state, and federal public websites.
    CDC's NSSP data provide crucial insights that inform hospital 
preparedness and better prepare for emerging health events. Syndromic 
surveillance relies on the secondary use of EHR data that supports 
delivery of care, enabling an efficient and cost-effective way to 
identify and characterize public health threats. The provision of these 
data requires no ongoing action from a health care provider, with data 
exchange automated from the EHR.
    Currently, CDC receives data from 78 percent of the non-federal 
emergency departments across 50 states, Washington DC, and Guam. In 
most cases, the technical pathway for these data is from health care 
facilities' and health care systems' EHRs to their state or local 
public health agency, which then further shares these data with CDC. 
However, a number of other options exist, and CDC has worked with 
Health Information Exchanges, EHR vendors, and individual facilities 
and health systems to support the technical provisioning of ED data 
feeds to CDC's NSSP and to supplement the technical capacity of some 
state and local public health agencies. Recognizing the tremendous 
value that these data offer in providing a fast and broad look at the 
trends and patterns of illness and injury across the county, CDC is 
seeking to close the remaining participation gap to ensure all 
communities served by acute care hospitals and CAHs are well 
represented in CDC's NSSP.
    The current level of reporting and participation has been the 
result of many years of active effort by state and local public health 
agencies, CDC, and hospitals devoted to building a broad network of 
data providers and program participants. The CMS EHR Incentive Program, 
and subsequently the Promoting Interoperability Program, have helped to 
incentivize and offset some of the health care system investment that 
has been needed for this public health reporting activity to occur. 
However, some challenges remain in closing the participation gap. In 
some instances, data are already being shared locally between health 
care and public health agencies, but they are not yet provided to the 
national system, CDC's NSSP. In other cases, some health care 
facilities have not yet begun providing data despite their 
jurisdictional public health agency already actively participating in 
CDC's NSSP.
    Syndromic surveillance is not a part of any condition of 
participation under this program, but the continued growth of national 
syndromic surveillance would benefit hospitals, health care, and public 
health. The goal of this RFI is better understand what else can be done 
to ensure that this effort can continue to make progress and that this 
critical data source is available at all levels of public health to 
support health care preparedness, public health readiness, and 
responsiveness to existing and emerging health threats. We seek input 
on the following:
     How can CMS further advance hospital and CAH participation 
in CDC's NSSP?
     Should CMS require hospitals and CAHs to report data to 
CDC's NSSP, whether as a condition of participation or as a 
modification to current requirements under the Promoting 
Interoperability Program?
     Should CMS explore other incentive or existing quality and 
reporting programs to collect this information?
     What would be the potential burden for facilities in 
creating these connections in state and local public health 
jurisdictions that have not yet established syndromic programs and/or 
where state and local public health are not presently exchanging data 
with CDC's NSSP? Are there unique challenges in rural areas that CMS 
should take into consideration?
     Data reported as part of syndromic surveillance 
requirements could serve as an alternative source for the COVID-19, 
influenza, and RSV hospitalization reporting requirements proposed in 
this rule--and even support eventual evolution towards an all-hazards 
approach for monitoring inpatient hospitalizations for conditions of 
public health significance. Should CMS consider a future requirement or 
otherwise incentivize facilities to expand ADT-based reporting 
currently provided for emergency department visits to include data 
collected from inpatient settings as defined in the HHS COVID-19 
reporting guidance,\840\ or a subset of these? If the latter, should a 
subset of inpatient locations be subject to such a requirement? What 
would be the potential value and burden trade-offs to facilities? And, 
should any requirement specify that reporting also be to CDC's NSSP (in 
addition to more general reporting to state/local syndromic 
surveillance systems? (noting that often the reporting to CDC's NSSP 
happens through a given state/local system and that applicable law may 
apply).
---------------------------------------------------------------------------

    \840\ https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf.
---------------------------------------------------------------------------

     How can CMS leverage its authorities and programs to 
improve the quality of data reported to CDC's NSSP, especially for key 
elements that are sometimes incomplete, including discharge diagnoses, 
discharge disposition, and patient class? \841\
---------------------------------------------------------------------------

    \841\ https://www.cdc.gov/nssp/technical-pubs-and-standards.html#Dictionaries.
---------------------------------------------------------------------------

     In addition to its value for public health, how could 
CDC's NSSP serve as a tool to directly improve clinical practice, 
patient safety, and overall situational awareness? What types of 
questions would you like the system to help answer?

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

[[Page 36509]]

reviewed MedPAC's March 2024 ``Report to the Congress: Medicare Payment 
Policy'' and have given the recommendations in the report consideration 
in conjunction with the policies set forth in this proposed rule. 
MedPAC recommendations for the IPPS for FY 2025 are addressed in 
Appendix B to this proposed rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at https://www.medpac.gov.

B. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. Following is 
a listing of the IPPS-related data files that are available.
    Commenters interested in discussing any data files used in 
construction of this proposed rule should contact Michael Treitel at 
(410) 786-4552.
1. CMS Wage Data Public Use File
    This file contains the hospital hours and salaries from Worksheet 
S-3, parts II and III from FY 2021 Medicare cost reports used to create 
the proposed FY 2025 IPPS wage index. Multiple versions of this file 
are created each year. For a discussion of the release of different 
versions of this file, we refer readers to section III.C.4. of the 
preamble of this proposed rule.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2007 through FY 2025 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2022 occupational mix survey data to be 
used to compute the occupational mix adjusted wage indexes. Multiple 
versions of this file are created each year. For a discussion of the 
release of different versions of this file, we refer readers to section 
III.C.4 of the preamble of this proposed rule.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2025 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational 
Category Public Use File
    This file contains each hospital's occupational mix adjustment 
factors by occupational category. Two versions of these files are 
created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2025 IPPS Update.
4. Other Wage Index Files
    CMS releases other wage index analysis files after each proposed 
and final rule.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2005 through FY 2025.
5. FY 2025 IPPS FIPS CBSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Federal Information Processing Standards (FIPS), county name, and a 
list of Core Based Statistical Areas (CBSAs).
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2025 proposed rule home 
page or the FY 2025 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2025 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on or after September 30, 1996. These data files contain 
the highest level of cost report status.
    Media: internet at https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.
    (We note that data are no longer offered on a CD. All of the data 
collected are now available free for download from the cited website.)
7. Provider-Specific File
    This file is a component of the PRICER program used in the MAC's 
system to compute DRG/MS-DRG payments for individual bills. The file 
contains records for all prospective payment system eligible hospitals, 
including hospitals in waiver States, and data elements used in the 
prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.
    Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
based on the MS-DRGs assigned to the hospital's discharges using the 
GROUPER version in effect on the date of the discharge. The case-mix 
index is a measure of the costliness of cases treated by a hospital 
relative to the cost of the national average of all Medicare hospital 
cases, using DRG/MS-DRG weights as a measure of relative costliness of 
cases. Two versions of this file are created each year to support the 
rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 1985 through FY 2025.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    This file contains a listing of MS-DRGs, MS-DRG narrative 
descriptions, relative weights, and geometric and arithmetic mean 
lengths of stay for each fiscal year. Two versions of this file are 
created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or the fiscal year final 
rule home page desired).
    Periods Available: FY 2005 through FY 2025 IPPS Update.

[[Page 36510]]

10. IPPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR 
Limited Data Sets, and prior impact files. The data set is abstracted 
from an internal file used for the impact analysis of the changes to 
the prospective payment systems published in the Federal Register. Two 
versions of this file are created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Historical-Impact-Files-for-FY-1994-through-Present, or for the more recent data files, https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/Index.html (on the navigation panel on the left side 
of page, click on the specific fiscal year proposed rule home page or 
fiscal year final rule home page desired).
    Periods Available: FY 1994 through FY 2025 IPPS Update.
11. AOR/BOR File
    This file contains data used to develop the MS-DRG relative 
weights. It contains mean, maximum, minimum, standard deviation, and 
coefficient of variation statistics by MS-DRG for length of stay and 
standardized charges. The BOR file are ``Before Outliers Removed'' and 
the AOR file is ``After Outliers Removed.'' (Outliers refer to 
statistical outliers, not payment outliers.) Two versions of this file 
are created each year to support the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 2005 through FY 2025 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
    This file contains information that standardizes the charges used 
to calculate relative weights to determine payments under the hospital 
inpatient operating and capital prospective payment systems. Variables 
include wage index, cost-of-living adjustment (COLA), case-mix index, 
indirect medical education (IME) adjustment, disproportionate share, 
and the Core-Based Statistical Area (CBSA). The file supports the 
rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2025 proposed rule home 
page or the FY 2025 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2025 IPPS Update.
13. MS-DRG Relative Weights Cost Centers File
    This file provides the lines on the cost report and the 
corresponding revenue codes that we used to create the 19 national cost 
center cost-to-charge ratios (CCRs) that we used in the relative weight 
calculation.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2025 proposed rule home 
page or the FY 2025 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2025 IPPS Update.
14. Hospital Readmissions Reduction Program Supplemental File
    The Hospital Readmissions Reduction Program Supplemental File is 
only available and updated for the final rule, when the most recent 
data is available. Therefore, we refer readers to the FY 2024 IPPS/LTCH 
PPS final rule supplemental file, which has the most recent finalized 
payment adjustment factor components and is the same data as would have 
been used to create the FY 2025 IPPS/LTCH PPS proposed rule 
supplemental file.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2025 proposed rule home 
page or the FY 2025 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2025 IPPS Update.
15. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for DSH-eligible hospitals as well as the 
supplemental payments for eligible IHS and Tribal hospitals and 
hospitals located in Puerto Rico for FY 2025. Variables include the 
data used to determine a hospital's share of uncompensated care 
payments, total uncompensated care payments, estimated per-claim 
uncompensated care payment amounts, and if applicable, supplemental 
payment amounts. The file supports the rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the FY 2025 proposed rule home 
page or the FY 2025 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2025 IPPS Update.
16. New Technology Thresholds File
    This file contains the cost thresholds by MS-DRG that are generally 
used to evaluate applications for new technology add-on payments for 
the fiscal year that follows the fiscal year that is otherwise the 
subject of the rulemaking. (As discussed in section II.G. of this 
proposed rule, we use the proposed threshold values associated with the 
proposed rule for that fiscal year to evaluate the cost criterion for 
applications for new technology add-on payments and previously approved 
technologies that may continue to receive new technology add-on 
payments, if those technologies would be assigned to a proposed new MS-
DRG for that same fiscal year.) Two versions of this file are created 
each year to support rulemaking.
    Media: internet at https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/AcuteInpatientPPS/Index.html (on the navigation panel 
on the left side of the page, click on the applicable fiscal year's 
proposed rule or final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: For FY 2025 and FY 2026 applications.

[[Page 36511]]

XII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comment on each of 
these issues for the following sections of this document that contain 
information collection requirements (ICRs). The following ICRs are 
listed in the order of appearance within the preamble (see sections II. 
through X. of the preamble of this proposed rule).

B. Collection of Information Requirements

1. ICRs Regarding the Implementation of Section 4122 of the 
Consolidated Appropriations Act, 2023--Distribution of Additional 
Residency Positions
    As discussed in section V.G.2. of the preamble of this proposed 
rule, teaching hospitals would be able to submit electronic 
applications to CMS for resident slot increase requests under section 
4122 of the Consolidated Appropriations Act (CAA), 2023. The burden 
associated with these requests will be captured under OMB control 
number 0938-1417 (expiration date March 31, 2025), currently approved 
for CMS to receive electronic applications for Medicare-funded GME 
Residency Positions submitted in accordance with Section 126 of the 
CAA, 2021. For that information collection, we estimated each eligible 
hospital (1,325 hospitals) would require 8 hours per eligible hospital 
annually to gather appropriate documentation, prepare and submit an 
application for a total burden of 10,600 hours (8 hours x 1,325 
hospitals). The most recent data from the BLS reflects a mean salary 
for legal secretaries and administrative assistants of $26.05.\842\ 
With the fringe benefits included the salary is $52.10 ($26.05 x 2). 
The total cost related to this information collection is approximately 
$416.80 per eligible hospital per year ($52.10 x 8.0 hours per 
hospital). The total estimated burden is $552,260 ($52.10 x 10,600 
hours). As a result of the proposed policies in this proposed rule, for 
FY 2026, if an eligible hospital submits an electronic application to 
CMS for section 126 of the CAA, 2021 or for section 4122 of the CAA, 
2023, the total annual burden remains the same. However, if an eligible 
hospital submits an electronic application to CMS for both section 126 
of the CAA, 2021, and section 4122 of the CAA, 2023, we estimate that 
the new total annual burden to be 16 hours per eligible hospital. We 
estimate the adjustment in the number of hours from 8 hours to 16 
hours, results in 21,200 hours (16 hours x 1,325 hospitals) at a cost 
of $1,104,520 ($52.10 x 21,200 hours) for FY 2026 only. We will submit 
the revised information collection request to OMB for approval under 
OMB control number 0938-1417 (expiration date March 31, 2025).
---------------------------------------------------------------------------

    \842\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Legal Secretaries and Administrative Assistants. Accessed 
on February 6, 2024. Available at: https://www.bls.gov/oes/current/oes436012.htm.
---------------------------------------------------------------------------

2. ICRs for Payment Adjustments for Establishing and Maintaining Access 
to Essential Medicines
    In section V.J. of the preamble of this proposed rule, we are 
proposing, for cost reporting periods beginning on or after October 1, 
2024, a separate payment under IPPS to small, independent hospitals for 
establishing and maintaining access to buffer stocks of essential 
medicines to foster a more reliable, resilient supply of these 
medicines for these hospitals. The proposed payment adjustments would 
be based on the reasonable cost incurred by the hospital for 
establishing and maintaining access to a 6-month buffer stock of one or 
more essential medicines during the cost reporting period. In order to 
calculate the essential medicines payment adjustment for each eligible 
cost reporting period, we propose to create a new supplemental cost 
reporting form that would collect the additional information from 
hospitals.
    Specifically, the new cost reporting worksheet would only collect 
the costs of a hospital that voluntarily requests separate payment 
under this proposed policy for the costs associated with establishing 
and maintaining access to its buffer stock of one or more essential 
medicines. This new information would include the costs associated with 
contractual arrangements to establish and maintain access to buffer 
stock(s) of essential medicine(s) as well as the costs associated with 
directly establishing and maintaining buffer stock(s) of essential 
medicine(s) such as (but not limited to) utilities like cold chain 
storage and heating, ventilation, and air conditioning, warehouse 
space, refrigeration, management of stock including stock rotation, 
managing expiration dates, and managing recalls, administrative costs 
related to contracting and record-keeping, and dedicated staff for 
maintaining the buffer stock(s). This information would be used, along 
with other information already collected on the Hospitals and Health 
Care Complex Cost Report (Form CMS-2552-10) approved under OMB control 
number 0938-0050, to calculate the IPPS payment adjustment amount. This 
new cost report worksheet may be submitted by a provider of service as 
part of the annual filing of the cost report and the provider should 
make available to its contractor and CMS, documentation to substantiate 
the data included on this Medicare cost report worksheet. The 
documentation requirements are based on the recordkeeping requirements 
at current Sec.  413.20, which require providers of services to 
maintain sufficient financial records and statistical data for proper 
determination of costs payable under Medicare.
    The burden associated with filling out this new essential medicine 
cost report worksheet would be the time and effort necessary for the 
provider to locate and obtain the relevant supporting documentation to 
report the costs of a hospital to establish and maintain access to its 
buffer stock for the cost reporting period. We estimate the number of 
respondents to be 493. This number is comprised of Medicare certified 
section 1886(d) hospitals that are small, independent hospitals that 
would be eligible for the proposed payment adjustment. We estimate the 
average burden hours per facility to be 1.0 hour. This breaks down to 
approximately 0.4 hours per provider for recordkeeping, which includes 
a 0.10-hour burden associated with monitoring the FDA Drug Shortage 
Database once when the hospital elects to establish a buffer stock of 
an essential medicine and again when the hospital is not able to 
maintain a previously established 6-month buffer stock of an essential 
medicine. We estimate 0.6

[[Page 36512]]

hour per provider for obtaining and analyzing the data and reporting. 
We recognize this average varies depending on the provider size and 
complexity. In addition to seeking general comment on this burden 
estimate, we are specifically seeking feedback on the burden estimate 
that is associated with monitoring the FDA shortage list as described. 
CMS would conduct provider education regarding additions and deletions 
to the publicly available FDA Drug Shortages Database to assist 
hospitals with this proposed policy.
    We estimate the associated labor costs as follows. As explained 
earlier, the estimate of 0.4 hour is required for recordkeeping 
including time for bookkeeping activities. Based on the most recent 
data published by Bureau of Labor Statistics (BLS) in its 2022 
Occupation Employment and Wage Statistics Program, the mean hourly wage 
for Bookkeeping, Accounting, and Auditing Clerks (Category 43-3031) is 
$22.81. We added 100 percent of the mean hourly wage to account for 
fringe and overhead benefits, which calculates to $45.62 ($22.81 + 
$22.81) and multiplied it by 0.4 hour, to determine the annual 
recordkeeping costs per hospital to be $18.25 ($45.62 per hour 
multiplied by 0.4 hour). The estimated 0.6 hours for reporting include 
time for accounting and audit professionals' activities. The mean 
hourly wage for Accountants and Auditors (Category 13-2011) is $41.70. 
We added 100 percent of the mean hourly wage to account for fringe and 
overhead benefits, which calculates to $83.40 ($41.70 plus $41.70) and 
multiplied it by 0.6 hour, to determine the annual reporting costs per 
hospital to be $50.04 ($83.40 per hour multiplied by 0.6 hour). We 
calculated the total average annual cost per hospital of $68.29 by 
adding the recordkeeping costs (which includes monitoring the FDA Drug 
Shortages Database) of $18.25 plus the reporting costs of $50.04. We 
estimated the total annual cost to be $33,667 ($68.29 cost per hospital 
multiplied by 493 hospitals). We seek comment on our estimates and cost 
of recordkeeping and oversight.
3. ICRs Relating to the Hospital Readmissions Reduction Program
    In this proposed rule, we are not proposing any changes to the 
Hospital Readmissions Reduction Program for FY 2025. All six of the 
current Hospital Readmissions Reduction Program's measures are claims-
based measures. We believe that continuing to use these claims-based 
measures would not create or reduce any information collection burden 
for hospitals because they will continue to be collected using Medicare 
FFS claims that hospitals are already submitting to the Medicare 
program for payment purposes.
4. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IX.B.2. of the preamble of this proposed rule, we 
discuss our proposed updates to the Hospital VBP Program. Specifically, 
in this proposed rule, we are proposing to adopt an updated version of 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey measure beginning with the FY 2030 program year to 
align with the proposed adoption of the updated measure in the Hospital 
IQR Program beginning with the CY 2025 reporting period/FY 2027 payment 
determination. The proposed updated HCAHPS Survey measure in the 
Hospital VBP Program would add three new survey dimensions, remove one 
existing survey dimension, and modify one existing survey dimension. We 
are also proposing to modify scoring on the HCAHPS Survey measure 
beginning with the FY 2030 program year to account for the proposed 
updates to the survey. We are also proposing to modify scoring of the 
HCAHPS Survey measure in the Hospital VBP Program for the FY 2027 to FY 
2029 program years to only score on the six unchanged dimensions of the 
survey while the updates to the survey are adopted and publicly 
reported on in the Hospital IQR Program.
    Data collections for the Hospital VBP Program are associated with 
the Hospital IQR Program under OMB control number 0938-1022 (expiration 
date January 31, 2026), the National Healthcare Safety Network under 
OMB control number 0920-0666 (expiration date December 31, 2026), and 
the HCAHPS Survey under OMB control number 0938-0981 (expiration date 
January 31, 2025). The Hospital VBP Program would use data that are 
also used to calculate quality measures in these programs and Medicare 
FFS claims data that hospitals are already submitting to CMS for 
payment purposes, therefore, the program does not anticipate any 
additional change in burden associated with these proposed updates 
outside of the burden that is associated with collecting that data 
under the Hospital IQR Program. There is also no estimated change in 
burden related to the proposed scoring methodology change because the 
proposal does not require hospitals to submit any additional 
information specific to the Hospital VBP Program but instead would 
change how hospitals are scored based on the information already being 
submitted under the Hospital IQR Program.
    We discuss the burden associated with the similar proposal to adopt 
the updated HCAHPS Survey measure under the Hospital IQR Program in 
section XII.B.6. of the preamble of this proposed rule. We note that 
respondents would only complete the HCAHPS Survey once for use in both 
programs, so there is no additional information collection burden for 
the Hospital VBP Program.
5. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    OMB has currently approved 28,800 hours of burden and approximately 
$1.2 million under OMB control number 0938-1352 (expiration date 
November 30, 2025), accounting for information collection burden 
experienced by 400 subsection (d) hospitals selected for validation 
each year in the HAC Reduction Program.
    In section V.M. of the preamble of this proposed rule, we state 
that we are not proposing to add or remove any measures from the HAC 
Reduction Program.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
    Data collections for the Hospital IQR Program are associated with 
OMB control number 0938-1022. OMB has currently approved 2,286,977 
hours of burden at a cost of approximately $80.3 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 2026 payment 
determination. In this proposed rule, we describe the burden changes 
regarding collection of information, under OMB control number 0938-
1022, for IPPS hospitals.
    For more detailed information on our proposals for the Hospital IQR 
Program, we refer readers to sections IX.B.1., IX.B.2., and IX.C. of 
the preamble of this proposed rule. We are proposing to adopt seven new 
measures: (1) Age-Friendly Hospital measure beginning with the CY 2025 
reporting period/FY 2027 payment determination; (2) Patient Safety 
Structural measure beginning with the CY 2025 reporting period/FY 2027 
payment determination; (3) Catheter-Associated Urinary Tract Infection 
(CAUTI) Standardized Infection Ratio Stratified for Oncology Locations 
measure beginning with the

[[Page 36513]]

CY 2026 reporting period/FY 2028 payment determination; (4) Central 
Line-Associated Bloodstream Infection (CLABSI) Standardized Infection 
Ratio Stratified for Oncology Locations measure beginning with the CY 
2026 reporting period/FY 2028 reporting period; (5) Hospital Harm--
Falls with Injury electronic clinical quality measure (eCQM) beginning 
with the CY 2026 reporting period/FY 2028 payment determination; (6) 
Hospital Harm--Postoperative Respiratory Failure eCQM beginning with 
the CY 2026 reporting period/FY 2028 payment determination; and (7) 
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) measure beginning with the July 1, 
2023-June 30, 2025 reporting period/FY 2027 payment determination. We 
are proposing refinements to two measures: (1) the Global Malnutrition 
Composite Score (GMCS) eCQM, beginning with the CY 2026 reporting 
period/FY 2028 payment determination; and (2) the HCAHPS Survey 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. We are proposing to remove five measures: (1) Death 
Among Surgical Inpatients with Serious Treatable Complications (CMS 
PSI-04) measure beginning with the July 1, 2023-June 30, 2025 reporting 
period/FY 2027 payment determination; (2) Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for Acute 
Myocardial Infarction (AMI) measure beginning with the July 1, 2021-
June 30, 2024 reporting period/FY 2026 payment determination; (3) 
Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Heart Failure (HF) measure beginning with the July 
1, 2021-June 30, 2024 reporting period/FY 2026 payment determination; 
(4) Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Pneumonia (PN) measure beginning with the July 1, 
2021-June 30, 2024 reporting period/FY 2026 payment determination; and 
(5) Hospital-level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 
2021-March 31, 2024 reporting period which is associated with the FY 
2026 payment determination. We are proposing to increase the total 
number of eCQMs reported from six to nine for the CY 2026 reporting 
period/FY 2028 payment determination and then from nine to eleven 
beginning with the CY 2027 reporting period/FY 2029 payment 
determination. Lastly, we are proposing to update the scoring 
methodology for eCQM validation, to remove the requirement that 
hospitals must submit 100 percent of eCQM records to pass validation 
beginning with CY 2025 eCQM data affecting the FY 2028 payment 
determination, and to no longer require hospitals to resubmit medical 
records as part of their request for reconsideration of validation 
beginning with CY 2025 discharges affecting the FY 2028 payment 
determination.
    In the FY 2024 IPPS/LTCH PPS final rule, we utilized the median 
hourly wage rate for Medical Records Specialists, in accordance with 
the Bureau of Labor Statistics (BLS), to calculate our burden estimates 
for the Hospital IQR Program (88 FR 59312). Using the most recent data 
the May 2022 National Occupational Employment and Wage Estimates (OEWS) 
from the BLS reflects a mean hourly wage of $24.56 per hour for all 
medical records specialists (SOC 29-2072), however, we are proposing to 
use the mean hourly wage for medical records specialists for the 
industry, ``general medical and surgical hospitals,'' which is 
$26.06.\843\ We believe the industry of ``general medical and surgical 
hospitals'' is more specific to our settings for use in our 
calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities.'' 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 ($26.06 x 2 
= $52.12) 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 $52.12 per 
hour throughout the discussion in this section of this rule for the 
Hospital IQR Program.
---------------------------------------------------------------------------

    \843\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed January 3, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59312), our burden 
estimates were based on an assumption of approximately 3,150 IPPS 
hospitals. For this proposed rule, based on data from the FY 2024 
Hospital IQR Program payment determination, we are updating our 
assumption and estimate that approximately 3,050 IPPS hospitals will 
report data to the Hospital IQR Program for the CY 2025 reporting 
period.
b. Information Collection Burden Estimate for the Proposed Adoption of 
the Age-Friendly Hospital Measure Beginning With the CY 2025 Reporting 
Period/FY 2027 Payment Determination
    In section IX.C.5.a. of the preamble of this proposed rule, we 
discuss the proposal to adopt the Age-Friendly Hospital measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. Hospitals would submit responses on an annual basis 
during the submission period through CMS' Hospital Quality Reporting 
(HQR) System. Specifically, for the Age-Friendly Hospital measure, 
hospitals would be required to attest ``yes'' or ``no'' in response to 
questions across five domains annually for a given reporting period. 
Similar to the Hospital Commitment to Health Equity measure currently 
approved under OMB control number 0938-1022 (expiration date January 
31, 2026), which also requires a ``yes'' or ``no'' attestation to 
questions across five domains, we estimate the information collection 
burden associated with this measure to be, on average across all 3,050 
IPPS hospitals, no more than 10 minutes per hospital per year (87 FR 
49385). Using the estimate of 10 minutes (or 0.167 hour) per hospital 
per year, we estimate that the adoption of this measure would result in 
a total annual burden increase of 509 hours across all participating 
IPPS hospitals (0.167 hour x 3,050 IPPS hospitals) at a cost of $26,529 
(509 hours x $52.12).
c. Information Collection Burden Estimate for the Proposed Adoption of 
the Patient Safety Structural Measure Beginning With the CY 2025 
Reporting Period/FY 2027 Payment Determination
    In section IX.B.1. of the preamble of this proposed rule, we 
discuss the proposal to adopt the Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 payment 
determination. Hospitals would submit responses on an annual basis 
during the submission period through the Center for Disease Control and 
Prevention's (CDC) National Healthcare Safety Network (NHSN). 
Specifically, hospitals would be required to provide responses and 
attest ``yes'' or ``no'' in response to a total of five domains for a 
given reporting period. Similar to the Hospital Commitment to Health 
Equity measure currently approved under OMB control

[[Page 36514]]

number 0938-1022 (expiration date January 31, 2026), which also 
requires a ``yes'' or ``no'' response to each of five domains, we 
estimate the information collection burden associated with this measure 
to be, on average across all 3,050 IPPS hospitals, no more than 10 
minutes per hospital per year. Using the estimate of 10 minutes (or 
0.167 hour) per hospital per year, and the updated wage estimate as 
described previously, we estimate that the adoption of this measure 
would result in a total annual burden increase of 509 hours across all 
participating IPPS hospitals (0.167 hour x 3,050 IPPS hospitals) at a 
cost of $26,529 (509 hours x $52.12).
    We discuss the burden associated with the proposal to adopt the 
Patient Safety Structural measure for the PCHQR Program in section 
XII.B.7.a. We will submit the revised information collection estimates 
to OMB for approval under OMB control number 0920-0666.
d. Information Collection Burden Estimate for the Proposed Adoption of 
Two Healthcare-Associated Infection (HAI) Measures Beginning With the 
CY 2026 Reporting Period/FY 2028 Payment Determination
    In section IX.C.5.b. of the preamble of this proposed rule, we are 
proposing to adopt two HAI measures beginning with the CY 2026 
reporting period/FY 2028 payment determination: (1) the CAUTI 
Standardized Infection Ratio Stratified for Oncology Locations measure, 
and (2) the CLABSI Standardized Infection Ratio Stratified for Oncology 
Locations measure. We are proposing to collect data for both measures 
via the National Healthcare Safety Network (NHSN), which is a secure, 
internet-based surveillance system maintained and managed by the CDC 
that is provided free of charge to providers. To report to the NHSN, 
hospitals must first agree to the NHSN Agreement to Participate and 
Consent form, which specifies how NHSN data will be used, including 
fulfilling CMS's quality measurement reporting requirements for NHSN 
data.\844\ Hospitals would provide data for both measures from their 
EHRs and report on a quarterly basis. The burden associated with 
submission of data via the NHSN continues to be accounted for under OMB 
control number 0920-0666 (expiration date December 31, 2026). 
Therefore, we do not anticipate any changes in burden associated with 
OMB control number 0938-1022.
---------------------------------------------------------------------------

    \844\ CDC. (2023). FAQs About NHSN Agreement to Participate and 
Consent. Available at: https://www.cdc.gov/nhsn/about-nhsn/faq-agreement-to-participate.html.
---------------------------------------------------------------------------

e. Information Collection Burden for the Proposed Adoption of Two eCQMs 
and Modification of One eCQM Beginning With the CY 2026 Reporting 
Period/FY 2028 Payment Determination
    In sections IX.C.5.c. and IX.C.5.d of the preamble of this proposed 
rule, we are proposing to adopt two new eCQMs beginning with the CY 
2026 reporting period/FY 2028 payment determination: (1) the Hospital 
Harm--Falls With Injury eCQM, and the (2) Hospital Harm--Postoperative 
Respiratory Failure eCQM, to add to the set of eCQMs from which 
hospitals may self-select to meet their eCQM reporting requirements. In 
section IX.C.7.a. of the preamble of this proposed rule, we are 
proposing to modify the GMCS eCQM to add patients ages 18 to 64 to the 
current cohort of patients 65 years or older beginning with the CY 2026 
reporting period/FY 2028 payment determination.
    Under OMB control number 0938-1022 (expiration date January 31, 
2026), the currently approved burden estimate for reporting and 
submission of eCQM measures is one hour per quarter per IPPS hospital 
(0.167 hours/eCQM x 6 eCQMs) for all six required eCQM measures. The 
addition of these two new eCQMs and modification of the GMCS eCQM would 
not affect the information collection burden associated with submitting 
eCQM measure data under the currently established Hospital IQR Program, 
which is that hospitals are not required to report more than a total of 
six eCQMs (87 FR 49299 through 49302). However, in the immediately 
following section of this Collection of Information section, we discuss 
the burden associated with our proposal to increase the total number of 
eCQMs.
f. Information Collection Burden for the Modification of the eCQM 
Reporting and Submission Requirements Beginning With the CY 2026 
Reporting Period/FY 2028 Payment Determination
    In section IX.C.9.c. of the preamble of this proposed rule, we are 
proposing to modify the eCQM reporting and submission requirements 
whereby we would increase the total number of eCQMs to be reported from 
six to nine eCQMs for the CY 2026 reporting period/FY 2028 payment 
determination and then from nine to eleven eCQMs beginning with the CY 
2027 reporting period/FY 2029 payment determination.
    We previously finalized in the FY 2023 IPPS/LTCH PPS final rule 
that, for the CY 2024 reporting period/FY 2026 payment determination 
and subsequent years, hospitals are required to submit data quarterly 
for six eCQMs each year which must include the Safe Use of Opioids-
Concurrent Prescribing, Cesarean Birth, and Severe Obstetric 
Complications eCQMs in addition to three self-selected eCQMs (87 FR 
49387). In this proposed rule, we are proposing that, for the CY 2026 
reporting period/FY 2028 payment determination, hospitals would be 
required to submit data for nine total eCQMs: three self-selected, Safe 
Use of Opioids, Severe Obstetric Complications, Cesarean Birth, 
Hospital Harm--Severe Hypoglycemia, Hospital Harm--Severe 
Hyperglycemia, and Hospital Harm--Opioid-Related Adverse Events. We are 
also proposing that, beginning with the CY 2027 reporting period/FY 
2029 payment determination, hospitals would be required to submit data 
for these nine eCQMs as well as the Hospital Harm--Pressure Injury and 
Hospital Harm--Acute Kidney Injury eCQMs.
    We continue to estimate the information collection burden 
associated with the eCQM reporting and submission requirements to be 10 
minutes per measure per quarter. For the increase in submission from 
six to nine eCQMs for the CY 2026 reporting period/FY 2028 payment 
determination, we estimate a total of 30 minutes or 0.5 hour (10 
minutes x 3 eCQMs) per hospital per quarter. We estimate a total burden 
increase of 6,100 hours (0.5 hour x 3,050 IPPS hospitals x 4 quarters) 
at a cost of $317,932 (6,100 hours x $52.12). For the additional 
increase in submission from nine to eleven eCQMs beginning with the CY 
2027 reporting period/FY 2029 payment determination, we estimate a 
total of 50 minutes or 0.83 hours (10 minutes x 5 eCQMs) per hospital 
per quarter, accounting for both the increase of three eCQMs for the CY 
2026 reporting period/FY 2028 payment determination and the increase of 
two eCQMs for the CY 2027 reporting period/FY 2029 payment 
determination. We estimate a total burden increase of 10,126 hours 
annually (0.83 hour x 3,050 IPPS hospitals x 4 quarters) at a cost of 
$527,767 (10,126 hours x $52.12) compared to the currently approved 
burden estimate.
g. Information Collection Burden for the Proposed Adoption of Thirty-
day Risk-Standardized Death Rate Among Surgical Inpatients With 
Complications (Failure-to-Rescue) Measure Beginning with the July 1, 
2023--June 30, 2025 Reporting Period/FY 2027 Payment Determination
    In section IX.C.5.e. of the preamble of this proposed rule, we are 
proposing to adopt the Thirty-day Risk-standardized Death Rate among 
Surgical Inpatients

[[Page 36515]]

with Complications (Failure-to-Rescue) claims measure beginning with 
the July 1, 2023--June 30, 2025 reporting period/FY 2027 payment 
determination. Because this measure is calculated using Medicare 
Advantage data and Medicare FFS claims that are already reported to the 
Medicare program for payment purposes, adopting this measure would not 
result in a change in burden associated with OMB control number 0938-
1022 (expiration date January 31, 2026).
h. Information Collection Burden for the Proposed Removal of Four 
Payment Measures and One Claims-Based Measure
    In section IX.C.6.b. of the preamble of this proposed rule, we are 
proposing to remove four claims-based payment measures beginning with 
the FY 2026 payment determination: (1) Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for AMI 
measure; (2) Hospital-level, Risk-Standardized Payment Associated with 
a 30-Day Episode-of-Care for HF measure; (3) Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for 
Pneumonia measure; and (4) Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Elective Primary THA and/
or TKA measure. In section IX.C.6.a., we are also proposing to remove 
the Death Among Surgical Inpatients with Serious Treatable 
Complications (CMS PSI-04) claims-based measure beginning with the FY 
2027 payment determination.
    Because these measures are calculated using Medicare FFS claims 
that are already reported to the Medicare program for payment purposes, 
removing these measures would not result in a change in burden 
associated with OMB control number 0938-1022.
i. Information Collection Burden for the Proposed Modification of the 
HCAHPS Survey Beginning With the CY 2025 Reporting Period/FY 2027 
Payment Determination
    In section IX.B.2.e.of the preamble of this proposed rule, we are 
proposing to modify the HCAHPS Survey measure beginning with the CY 
2025 reporting period/FY 2027 program year. Specifically, the updated 
measure includes adding three new sub-measures, removing one existing 
sub-measure, and revising one existing sub-measure. The new sub-
measures would include: ``Care Coordination,'' ``Restfulness of 
Hospital Environment,'' and ``Information about Symptoms.''
    Under OMB control number 0938-0981 (expiration date January 31, 
2025), we estimate the time to complete the HCAHPS Survey is 
approximately 7.25 minutes per respondent and approximately 2,309,985 
respondents would complete and submit the HCAHPS Survey as part of the 
Hospital IQR Program. As stated in section IX.B.2.b. of this proposed 
rule, we estimate the combination of survey sub-measure removals and 
additions would result in an additional 0.75 minute (0.0125 hour) per 
respondent to complete the updated version of the HCAHPS Survey. 
Therefore, we estimate the updated time to complete the HCAHPS Survey 
would be 8 minutes per respondent (0.133 hour).
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$24.04/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.\845\ To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers from BLS's Labor Force Statistics program, Current 
Population Survey (CPS) of $1,118, divided by 40 hours to calculate an 
hourly pre-tax wage rate of $27.95/hr.\846\ This rate is adjusted 
downwards by an estimate of the effective tax rate for median income 
households of about 14 percent calculated by comparing pre- and post-
tax income,\847\ resulting in the post-tax hourly wage rate of $24.04/
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 28,875 hours (2,309,985 respondents x 0.0125 hour) at a cost of 
$694,155 (28,875 hours x $24.04).
---------------------------------------------------------------------------

    \845\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \846\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \847\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

    We will submit the revised information collection estimates to OMB 
for approval under OMB control number 0938-0981.
j. Information Collection Burden for the Proposed Changes to Data 
Validation Policies
    In section IX.C.10. of the preamble of this proposed rule, we are 
proposing to update the scoring methodology for eCQM validation, 
replace the existing combined validation score for eCQMs and chart-
abstracted measures with two separate validation scores for chart-
abstracted measures and eCQMs beginning with the FY 2028 payment 
determination, and remove the requirement that hospitals must submit 
100 percent of eCQM records to pass validation beginning with CY 2025 
eCQM data affecting the FY 2028 payment determination. We are also 
proposing in section IX.C.13 of this proposed rule to no longer require 
hospitals to resubmit medical records as part of their request for 
reconsideration of validation, beginning with CY 2025 discharges 
affecting the FY 2028 payment determination.
    Proposed changes to the scoring methodology and validation score 
would not affect burden as neither the amount of data nor frequency of 
data submission is impacted. The proposal to remove the requirement 
that hospitals must submit 100 percent of eCQM records to pass 
validation would not affect burden, as the proposal to implement eCQM 
validation scoring would still require hospitals to submit the same 
number of requested medical records to validate the accuracy of eCQM 
data (the extent to which data abstracted from the submitted medical 
record matches the data submitted in the QRDA I file). Lastly, as 
finalized in the FY 2011 IPPS/LTCH PPS final rule regarding information 
collection burden associated with the Hospital IQR Program's request 
for reconsideration process, information collection requirements 
imposed subsequent to an administrative action are not subject to the 
Paperwork Reduction Act (PRA) under 5 CFR 1320.4(a)(2), therefore the 
proposal to no longer require hospitals to resubmit medical records as 
part of their request for reconsideration of validation would not 
affect burden (75 FR 50411).
k. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022 (expiration date 
January 31, 2026), we estimate that the policies promulgated in this 
proposed rule would result in a total increase of 10,635 hours at a 
cost of $554,296 annually for 3,050 IPPS hospitals from the CY 2025 
reporting period/FY 2027

[[Page 36516]]

payment determination through the CY 2027 reporting period/FY 2029 
payment determination. Under OMB control number 0920-0666 (expiration 
date December 31, 2026), we estimate that the policies being proposed 
in this proposed rule would result in a total increase of 509 hours at 
a cost of $26,529 annually for 3,050 IPPS hospitals beginning with the 
CY 2025 reporting period/FY 2027 payment determination. Under OMB 
control number 0938-0981 (expiration date January 31, 2025), we 
estimate that the policies promulgated in this proposed rule would 
result in a total increase of 28,875 hours at a cost of $694,155 
annually for 3,050 hospitals beginning with the CY 2025 reporting 
period/FY 2027 payment determination. The total increase in burden 
associated with the proposed information collections under OMB control 
numbers 0938-1022, 0920-0666, and 0938-0981 is approximately 40,019 
hours (10,635 + 509 + 28,875) at a cost of $1,274,980 ($554,296 + 
$26,529 + $694,155). We will submit the revised information collection 
estimates to OMB for approval under OMB control numbers 0938-1022, 
0920-0666, and 0938-0981.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.K. of 
Appendix A of this proposed rule).
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7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    OMB has currently approved 109 hours of burden at a cost of $2,452 
under OMB control number 0938-1175 (expiration date January 31, 2027), 
accounting for the annual information collection requirements for 11 
PCHs for the PCHQR Program. In the preamble of this proposed rule, we 
are proposing to adopt the Patient Safety Structural measure beginning 
with the CY 2025 reporting period/FY 2027 program year, which we 
anticipate would affect the information collection burden. We are also 
proposing to modify the HCAHPS survey beginning with the CY 2025 
reporting period/FY 2027 program year, which is currently approved 
under OMB control number 0938-0981 (expiration date January 31, 2025). 
We are also proposing to move up the start date for public display of 
the Hospital Commitment to Health Equity (HCHE) measure. This proposal 
would not affect the information collection burden associated with the 
PCHQR Program.
    In the FY 2024 IPPS/LTCH PPS final rule, we utilized the median 
hourly wage rate for Medical Records Specialists, in accordance with 
the Bureau of Labor Statistics (BLS), to calculate our burden estimates 
for the PCHQR Program (88 FR 59317). While the most recent data from 
the BLS reflects a mean hourly wage of $24.56 per hour for all medical 
records specialists, $26.06 is the mean hourly wage for ``general 
medical and surgical

[[Page 36521]]

hospitals,'' which is an industry within medical records 
specialists.\848\ We believe the industry of ``general medical and 
surgical hospitals'' is more specific to our settings for use in our 
calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities.'' We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the mean 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 ($26.06 x 2 
= $52.12) 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 $52.12 per 
hour throughout the discussion in this section of this rule for the 
PCHQR Program.
---------------------------------------------------------------------------

    \848\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 2, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

a. Information Collection Burden Estimate for the Proposal To Adopt the 
Patient Safety Structural Measure Beginning With the CY 2025 Reporting 
Period/FY 2027 Program Year
    In section IX.B.1. of the preamble of this proposed rule, we 
discuss the proposal to adopt the Patient Safety Structural measure 
beginning with the CY 2025 reporting period/FY 2027 program year. PCHs 
would submit responses on an annual basis during the submission period 
through the Center for Disease Control and Prevention's (CDC) National 
Healthcare Safety Network (NHSN). Specifically, PCHs would be required 
to provide responses and attest ``yes'' or ``no'' in response to a 
total of five domains for a given reporting period. Similar to the 
Hospital Commitment to Health Equity measure currently approved under 
OMB control number 0938-1022 (expiration date January 31, 2026), which 
also requires a yes or no response to each of five domains, we estimate 
the information collection burden associated with this measure to be, 
on average across all 11 PCHs, no more than 10 minutes per PCH per 
year. 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 the adoption of this measure would result in a total 
annual burden increase of 2 hours across all participating PCHs (0.167 
hours x 11 PCHs) at a cost of $104 (2 hours x $52.12).
    We discuss the burden associated with the proposal to adopt the 
Patient Safety Structural measure for the Hospital IQR Program in 
section XII.B.6.c. of the preamble of this proposed rule. We will 
submit the revised information collection estimates to OMB for approval 
under OMB control number 0920-0666.
b. Information Collection Burden for the Proposed Modification of the 
HCAHPS Survey Beginning With the CY 2025 Reporting Period/FY 2027 
Program Year
    In section IX.B.2.e of the preamble of this proposed rule, we are 
proposing to modify the HCAHPS Survey measure beginning with the CY 
2025 reporting period/FY 2027 program year. Specifically, we are 
proposing to refine the current HCAHPS Survey by adding three new sub-
measures, removing one existing sub-measure, and revising one existing 
sub-measure. The new sub-measures would include: ``Care Coordination,'' 
``Restfulness of Hospital Environment,'' and ``Information about 
Symptoms.''
    Under OMB control number 0938-0981 (expiration date January 31, 
2025), we estimate the time to complete the HCAHPS Survey is 
approximately 7.25 minutes per respondent and approximately 13,105 
respondents would complete and submit the HCAHPS survey as part of the 
PCHQR Program. As stated in section IX.B.2.b of this proposed rule, we 
estimate the combination of sub-measure removals and additions would 
result in an additional 0.75 minutes (0.0125 hours) per respondent to 
complete the HCAHPS Survey. Therefore, we estimate the updated time to 
complete the HCAHPS Survey would be 8.0 minutes per respondent (0.133 
hours).
    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage of 
$24.04/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.\849\ To derive the costs for 
beneficiaries, a measurement of the usual weekly earnings of wage and 
salary workers of $1,118, divided by 40 hours to calculate an hourly 
pre-tax wage rate of $27.95/hr. \850\ This rate is adjusted downwards 
by an estimate of the effective tax rate for median income households 
of about 14 percent calculated by comparing pre- and post-tax 
income,\851\ resulting in the post-tax hourly wage rate of $24.04/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 164 hours (13,105 respondents x 0.0125 hours) at a cost of $3,943 
(164 hours x $24.04).
---------------------------------------------------------------------------

    \849\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \850\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \851\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

    We will submit the revised information collection request to OMB 
for approval under OMB control number 0938-0981.
c. Information Collection Burden Estimate for the Proposal To Move Up 
the Start Date of Public Display of the Hospital Commitment to Health 
Equity Measure
    In section IX.D.5. of the preamble of this proposed rule, we are 
proposing to move up the start date of PCH performance on the Hospital 
Commitment to Health Equity measure. Because we are not proposing to 
require PCHs to collect or submit any additional data, we do not 
estimate any change in information collection burden associated with 
this proposal.
d. Summary of Information Collection Burden Estimates for the PCHQR 
Program
    In summary, under OMB control number 0920-0666 (expiration date 
December 31, 2026), we estimate that the policies being proposed in 
this proposed rule would result in a total increase of 2 hours at a 
cost of $104 annually for 11 PCHs beginning with the CY 2025 reporting 
period/FY 2027 program year. Under OMB control number 0938-0981 
(expiration date January 31, 2025), we estimate that the policies being 
proposed in this proposed rule would result in a total increase of 164 
hours at a cost of $3,943 annually for 11 PCHs beginning with the CY 
2025 reporting period/FY 2027 program year. The total increase in 
burden associated with this information collection would be 
approximately 166 hours at a cost of $4,047. We will submit the revised 
information collection request to OMB for approval under OMB control 
numbers 0920-0666 and 0938-0981.
BILLING CODE 4120-01-P

[[Page 36522]]

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[[Page 36523]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.294

BILLING CODE 4120-01-C
8. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    An LTCH that does not meet the requirements of the LTCH QRP for a 
fiscal year will receive a 2-percentage point reduction to its 
otherwise applicable annual update for that fiscal year.
    We believe that the burden associated with the LTCH QRP is the time 
and effort associated with complying with the requirements of the LTCH 
QRP. In sections IX.E.4.c. and IX.E.4.e. of the preamble of this 
proposed rule, we proposed to add four items to the LCDS and replace 
one item on the LCDS. The

[[Page 36524]]

LCDS V5.1 has been approved under OMB control number 0938-1163 
(Expiration date: 08/31/2025). The following is a discussion of this 
information collection.
    In section IX.E.4.c. of the preamble of this proposed rule, we are 
proposing to adopt four new items as standardized patient assessment 
data elements under the SDOH category beginning with the FY 2028 LTCH 
QRP. The proposed items, Living Situation (one item), Food (two items), 
and Utilities (one item), would be collected at admission using the 
LCDS. If adopted as proposed, four new items would be added to the LCDS 
and would result in an increase of 0.02 hours (1.2 minutes/60) of 
clinical staff time at admission. We are also proposing to modify the 
current Transportation item on the LCDS, which is currently collected 
at admission and discharge. We are proposing that the Transportation 
item would only be collected at admission beginning with the FY 2028 
LTCH QRP as described in sections IX.E.4.e. and E.7.b. of the preamble 
of this proposed rule. The burden associated with collecting this item 
at admission and discharge was accounted for in the FY 2020 IPPS/LTCH 
final rule (84 FR 42606) when the item was originally adopted. If 
adopted as proposed, LTCHs would no longer have to collect one item at 
discharge to meet LTCH QRP reporting requirements, which would result 
in a decrease of 0.005 hours (0.3 minutes/60) of clinical staff time at 
discharge. Using data collected for FY 2023, we estimated 130,050 total 
admissions and 96,890 planned discharges from 329 LTCHs annually. This 
equates to an increase of 2,117 hours for all LTCHs [(130,050 x 0.02 
hour) - (96,890 x 0.005 hour)] and 6.43 hours per LTCH.
    We believe that the additional SDOH items would be completed 
equally by RNs and LPN/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 $65.31/hr was calculated by 
weighting each hourly wage equally [($78.10 + $52.52)/2]. We estimate 
the total cost would be increased by $420.16 per LTCH annually, or 
$138,231.88 for all LTCHs annually ([(130,050 admission assessments x 
0.02 hour = 2,601 hours) x $65.31/hr] - [(96,890 planned discharge 
assessments x 0.005 hour = 484.45 hours) x $65.31/hr] = $138,231.88); 
($138,231.88/329 LTCHs = $420.16/LTCH).
[GRAPHIC] [TIFF OMITTED] TP02MY24.295

    As described in Table XII.B-06, under OMB control number 0938-1163, 
we estimate that the policies finalized in this final rule for the LTCH 
QRP would result in an overall increase of 2,117 hours annually for 329 
LTCHs. The total cost increase related to this proposed information 
collection is estimated at approximately $138,231.88. The increase in 
burden would be accounted for in a revised information collection 
request under OMB control number (0938-1163).
[GRAPHIC] [TIFF OMITTED] TP02MY24.296

    In section IX.E.7.c. of the preamble of this proposed rule, we are 
proposing to extend the LCDS Admission assessment window from three 
days to four days beginning with the FY 2028 LTCH QRP. However, this 
change would have no impact on burden.
    We invite public comments on the proposed information collection 
requirements.
9. ICRs for the Medicare Promoting Interoperability Program
a. Background
    In section IX.F. of the preamble of this proposed rule, we discuss 
several proposed policies for the Medicare

[[Page 36525]]

Promoting Interoperability Program. As discussed in the most recent 
Paperwork Reduction Act (PRA) notice pending approval under OMB control 
number 0938-1278 (expiration date December 31, 2025), we have requested 
approval for 29,625 hours of burden at a cost of approximately $1.3 
million, accounting for information collection burden experienced by 
approximately 3,150 eligible hospitals and 1,350 CAHs for the EHR 
reporting period in CY 2024. In this proposed rule, we describe the 
burden changes regarding collection of information under OMB control 
number 0938-1278 for eligible hospitals and CAHs. The collection of 
information burden analysis in this proposed rule focuses on all 
eligible hospitals and CAHs that could participate in the Medicare 
Promoting Interoperability Program and report the objectives and 
measures, and report eCQMs, under the Medicare Promoting 
Interoperability Program for the EHR reporting periods in CY 2025 
through CY 2027.
    We are proposing to adopt two new eCQMs beginning with the CY 2026 
reporting period: (1) the Hospital Harm--Falls with Injury eCQM, and 
(2) the Hospital Harm--Postoperative Respiratory Failure eCQM. We are 
proposing to separate the previously finalized Antimicrobial Use and 
Resistance (AUR) Surveillance measure into two separate measures, 
beginning with the EHR reporting period in CY 2025: (1) the 
Antimicrobial Use (AU) Surveillance measure and (2) the Antimicrobial 
Resistance (AR) Surveillance Measure. We are also proposing to modify 
the Global Malnutrition Composite Score (GMCS) eCQM, beginning with the 
CY 2026 reporting period. In addition, we are proposing to increase the 
total number of eCQMs eligible hospitals and CAHs report from six to 
nine for the CY 2026 reporting period, and then from nine to eleven 
beginning with the CY 2027 reporting period. Lastly, we are proposing 
to increase the minimum scoring threshold from 60 points to 80 points 
beginning with the EHR reporting period in CY 2025; this proposal would 
not affect the information collection burden associated with the 
Medicare Promoting Interoperability Program.
    In the FY 2024 IPPS/LTCH PPS final rule, we utilized the median 
hourly wage rate for Medical Records Specialists, in accordance with 
the BLS, to calculate our burden estimates for the Medicare Promoting 
Interoperability Program (88 FR 59325). Using the most recent data, the 
May 2022 National Occupational Employment and Wage Estimates (OEWS) 
from the BLS reflects a mean hourly wage of $24.56 per hour for all 
medical records specialists (SOC 29-2072), however, we are proposing to 
use the mean hourly wage for medical records specialists for the 
industry, ``general medical and surgical hospitals,'' which is 
$26.06.\852\ We believe the industry of ``general medical and surgical 
hospitals'' is more specific to our settings for use in our 
calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities.'' 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 ($26.06 x 2 
= $52.12) to estimate total cost is a reasonably accurate estimation 
method. Accordingly, unless otherwise specified, we will calculate cost 
burden to eligible hospitals and CAHs using a wage plus benefits 
estimate of $52.12 per hour throughout the discussion in this section 
of this rule for the Medicare Promoting Interoperability Program.
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    \852\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records Specialists. Accessed on January 3, 2024. 
Available at: https://www.bls.gov/oes/current/oes292072.htm.
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    In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59325), our burden 
estimates were based on an assumption of 4,500 eligible hospitals and 
CAHs. In the FY 2024 IPPS/LTCH PPS final rule, the Medicare Promoting 
Interoperability Program and Hospital IQR Program used the same 
estimate for the number of eligible hospitals and IPPS hospitals for 
both programs (88 FR 59325). In section XII.B.6.a. of the preamble of 
this proposed rule, we provide our updated estimate of 3,050 IPPS 
hospitals for the Hospital IQR Program for the CY 2025 reporting 
period. Upon further analysis, we believe it is no longer appropriate 
to use the same estimate for both programs as the approximately 100 
eligible hospitals located in Maryland and Puerto Rico which were 
previously excluded from our estimate of IPPS hospitals and included in 
our estimate of non-IPPS hospitals should be included as eligible 
hospitals for the Medicare Promoting Interoperability Program. 
Therefore, for this proposed rule, based on data from the EHR reporting 
period in CY 2022, we estimate approximately 3,150 eligible hospitals 
and 1,400 CAHs will report data to the Medicare Promoting 
Interoperability Program for the EHR reporting period in CY 2025, for a 
total number of 4,550 respondents.
b. Information Collection Burden for the Proposed Adoption of the Two 
eCQMs and Modification of One eCQM Beginning With the CY 2026 Reporting 
Period
    In section IX.F.6.a. of the preamble of this proposed rule, we are 
proposing to adopt two new eCQMs beginning with the CY 2026 reporting 
period: (1) the Hospital Harm--Falls With Injury eCQM and (2) the 
Hospital Harm--Postoperative Respiratory Failure eCQM, to add to the 
set of eCQMs from which hospitals may self-select to meet their eCQM 
reporting requirements. In section IX.F.6.a. of the preamble of this 
proposed rule, we are proposing to modify the GMCS eCQM to add patients 
ages 18 to 64 to the current cohort of patients 65 years or older 
beginning with the CY 2026 reporting period.
    Under OMB control number 0938-1278 (expiration date December 31, 
2025), the currently approved burden estimate for reporting and 
submission of eCQM measures is one hour per CAH for all six required 
eCQM measures. The addition of these two eCQMs and modification of the 
GMCS eCQM do not affect the information collection burden associated 
with submitting eCQM measure data under the Medicare Promoting 
Interoperability Program. As finalized in the FY 2023 IPPS/LTCH PPS 
final rule, current policy requires CAHs to select six eCQMs from the 
eCQM measure set on which to report (87 FR 49365 through 49367). In 
other words, although these new eCQMs are being added to the eCQM 
measure set, CAHs are not required to report more than a total of six 
eCQMs.
    In section XII.B.9.c. (of the Collection of Information section of 
this proposed rule), we account for the burden associated with our 
proposal to increase the total number of eCQMs reported from six to 
nine for the CY 2026 reporting period and then from nine to eleven 
beginning with the CY 2027 reporting period. We refer readers to 
section XII.B.7.f. of this Collection of Information section for 
discussion of the similar proposals impacting eligible hospitals 
(referred to as IPPS hospitals under the Hospital IQR Program).
c. Information Collection Burden for the Modification of the eCQM 
Reporting and Submission Requirements Beginning With the CY 2026 
Reporting Period
    In section IX.F.6.b. of the preamble of this proposed rule, we are 
proposing to modify our eCQM reporting and submission requirements by 
increasing

[[Page 36526]]

the total number of eCQMs to be reported from six to nine eCQMs for the 
CY 2026 reporting period and from nine to eleven beginning with the CY 
2027 reporting period.
    We previously finalized in the FY 2023 IPPS/LTCH PPS final rule 
that, for the CY 2024 reporting period, CAHs are required to annually 
submit quarterly data for six eCQMs each year, which must consist of 
the Safe Use of Opioids-Concurrent Prescribing, Cesarean Birth, and 
Severe Obstetric Complications eCQMs in addition to three self-selected 
eCQMs (87 FR 49394 through 49395). In this proposed rule, we are 
proposing that, for the CY 2026 reporting period, CAHs would be 
required to submit data for nine total eCQMs: three self-selected, Safe 
Use of Opioids, Severe Obstetric Complications, Cesarean Birth Rate, 
Hospital Harm--Severe Hypoglycemia, Hospital Harm--Severe 
Hyperglycemia, and Hospital Harm--Opioid-Related Adverse Events. We are 
also proposing that, beginning with the CY 2027 reporting period, CAHs 
would be required to submit data for these nine eCQMs as well as the 
Hospital Harm--Pressure Injury and Hospital Harm--Acute Kidney Injury 
eCQMs.
    To calculate the information collection burden associated with this 
proposal, we estimate a total of 1,500 respondents, which includes the 
100 eligible hospitals not included as IPPS hospitals for the Hospital 
IQR Program as well as the 1,400 CAHs required to report eCQM data for 
the Medicare Promoting Interoperability Program. We continue to 
estimate the information collection burden associated with the eCQM 
reporting and submission requirements to be 10 minutes per measure per 
quarter. For the increase in submission from six to nine eCQMs for the 
CY 2026 reporting period, we estimate a total of 30 minutes or 0.5 hour 
(10 minutes x 3 eCQMs) per CAH per quarter. We estimate a total burden 
increase of 3,000 hours (0.5 hour x 1,500 CAHs x 4 quarters) at a cost 
of $156,360 (3,000 hours x $52.12). For the additional increase in 
submission from nine to eleven eCQMs beginning with the CY 2027 
reporting period, we estimate a total of 50 minutes or 0.83 hour (10 
minutes x 5 eCQMs) per CAH per quarter. We estimate a total burden 
increase of 5,000 hours annually (0.83 hour x 1,500 CAHs x 4 quarters) 
at a cost of $260,600 (5,000 hours x $52.12).
    With respect to any costs/burdens related to eligible hospitals 
(referred to as IPPS hospitals under the Hospital IQR Program), we 
refer readers to section XII.B.7.f. of the preamble of this proposed 
rule.
d. Information Collection Burden for the Proposal To Separate the AUR 
Surveillance Measure Into Two Measures Beginning With the EHR Reporting 
Period in CY 2025
    In section IX.F.2. of the preamble of this proposed rule, we are 
proposing to modify the AUR Surveillance measure by separating the 
single measure into two measures: (1) AU Surveillance and (2) AR 
Surveillance, beginning with the EHR reporting period in CY 2025. In 
the CY 2023 IPPS/LTCH PPS final rule, we finalized a burden estimate of 
0.5 minutes per eligible hospital and CAH to attest the AUR 
Surveillance measure (87 FR 49394). In association with this proposal, 
we estimate an annual increase in burden for each eligible hospital and 
CAH to attest to both measures of 0.5 minutes (.0083 hours). Therefore, 
we estimate a total increase in burden of 38 hours across all eligible 
hospitals and CAHs (.0083 hours x 4,550 eligible hospitals and CAHs) 
annually at a cost of $1,981 (38 hours x $52.12).
e. Information Collection Burden for the Proposed Increase to the 
Minimum Scoring Threshold From 60 Points to 80 Points Beginning With 
the EHR Reporting Period in CY 2025
    In section IX.F.5. of the preamble of this proposed rule, we are 
proposing to increase the minimum scoring threshold from 60 points to 
80 points beginning with the EHR reporting period in CY 2025. Because 
we are not requiring eligible hospitals or CAHs to collect or submit 
any additional data, we do not estimate any change in information 
collection burden associated with this proposal.
f. Summary of Estimates Used To Calculate the Collection of Information 
Burden
    In summary, under OMB control number 0938-1278 (expiration date 
December 31, 2025), we estimate that the policies in this proposed rule 
would result in an increase in burden of 5,038 hours at a cost of 
$262,581. Based on these proposed policies, the annual burden per 
eligible hospital and CAH would increase to 6 hours and 36 minutes (6.6 
hours) as well as an additional 7.33 hours annually for CAHs to report 
eCQMs. We will submit the revised information collection estimates to 
OMB for approval under OMB control number 0938-1278.
    With respect to any costs/burdens unrelated to data submission, we 
refer readers to the Regulatory Impact Analysis (section I.N. of 
Appendix A of this proposed rule).
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10. ICRs for the Transforming Episode Accountability Model
    In section X.A. of the preamble of this proposed rule, we are 
proposing to test the Transforming Episode Accountability Model (TEAM) 
under the authority of the CMS Innovation Center. Section 1115A of the 
Act authorizes the CMS Innovation Center to test innovative payment and 
service delivery models that preserve or enhance the quality of care 
furnished to Medicare, Medicaid, and Children's Health Insurance 
Program beneficiaries while reducing program expenditures. As stated in 
section 1115A(d)(3) of the Act, Chapter 35 of title 44, United States 
Code, shall not apply to the testing and evaluation of models under 
section 1115A of the Act. As a result, the information collection 
requirements contained in this proposed rule for TEAM need not be 
reviewed by the Office of Management and Budget.
11. ICRs for Payment Error Rate Measurement (PERM)
a. ICRs Regarding Sec.  431.970 Information Submission and Systems 
Access Requirements
    Section 431.970 defines state and provider submission 
responsibilities, including state submission of Medicaid and CHIP FFS 
claims and managed care payments on a quarterly basis; and provider 
submission of medical records. These claims and payments are rigorously 
reviewed by the federal statistical contractor. Additionally, states 
are required to collect and submit (with an estimate of 4 submissions) 
state policies. There would be an initial submission and quarterly 
updates. The ongoing burden associated with the requirements under 
Sec.  431.970 is the time and effort it would take each of the up to 36 
state programs (17-18 Medicaid and 17-18 CHIP agencies for 17-18 states 
equates to maximum 36 total respondents each PERM year) to submit its 
claims universe, and collect and submit state policies, and the time 
and effort it would take providers to furnish medical record 
documentation. We estimate that it will take 1,350 hours annually per 
state program to develop and submit its claims universe and state 
policies. The total estimated hours is broken down between the FFS, 
managed care, and eligibility components and is estimated at 900 hours 
for universe development and submission, and 450 hours for policy 
collection and submission. Per component it is estimated at 1,150 FFS 
hours, 100 managed care hours, and 100 eligibility hours for a total of 
48,600 annual hours (1,350 hours x 36 respondents). The total estimated 
annual cost per respondent is $86,832 (1,350 hours x $64.32), and the 
total estimated annual cost across all respondents is $3,125,952 
($86,832 x 36 respondents). The preceding requirements and burden 
estimates will be submitted to OMB as reinstatements with changes of 
the information collection requests previously approved under control 
numbers 0938-0974, 0938-0994, and 0938-1012. Inclusion of Puerto Rico 
has added an additional burden of 2,700 hours and $173,664 for 
Information Submission and Systems Access Requirements.
b. ICRs Regarding Sec.  431.992 Corrective Action Plan
    Section 431.992 requires states to submit corrective action plans 
to address all improper payments and deficiencies found through the 
PERM review as defined at Sec.  431.960(f)(1) and evaluate corrective 
actions from the previous PERM cycle as defined at Sec.  431.992(b)(4). 
The ongoing burden associated with the requirements under Sec.  431.992 
is the time and effort it would take each of the up to 36 state 
programs (17-18 Medicaid and 17-18 CHIP agencies for 17-18 states 
equates to maximum 36 total respondents per PERM cycle) to submit its 
corrective action plan. We estimate that it will take 750 hours (250 
hours for FFS, 250 hours for managed care and an additional 250 hours 
for eligibility), per PERM cycle per state program to submit its 
corrective action plan for a total estimated annual burden of 27,000 
hours (750 hours x 36 respondents). We estimate the total cost per 
respondent to be $48,240 (750 hours x $64.32). The

[[Page 36528]]

total estimated cost for all respondents is $1,736,640 ($48,240 x 36 
respondents). The preceding requirements and burden estimates will be 
submitted to OMB as part of reinstatement of the information collection 
requests previously approved under control numbers 0938-0974, 0938-
0994, and 0938-1012. total burden would amount to: 36 annual 
respondents, 36 annual responses, and 750 hours per corrective action 
plan Inclusion of Puerto Rico has added an additional burden of 1,500 
hours and $96,480 for Corrective Action Plan requirements.
c. ICRs Regarding Sec.  431.998 Difference Resolution and Appeal 
Process
    Section 431.998 allows states to dispute federal contractor 
findings. The ongoing burden associated with the requirements under 
Sec.  431.998 is the time and effort it would take each of the up to 36 
state programs (17-18 Medicaid and 17-18 CHIP agencies for 17-18 states 
equates to maximum 36 total respondents per PERM cycle) to review PERM 
findings and inform the federal contractor(s) of any additional 
information and/or dispute requests. We estimate that it will take 
1,625 hours (500 hours for FFS, 475 hours for managed care and an 
additional 650 hours for eligibility) per PERM cycle per state program 
to review PERM findings and inform federal contractor(s) of any 
additional information or dispute requests for FFS, managed care, and 
eligibility components for a total estimated annual burden of 58,500 
hours (1,625 hours x 36 respondents). We estimate the total cost per 
respondent to be $104,520 (1,625 hours x $64.32). The total estimated 
cost for all respondents is $3,762,720 ($104,520 x 36 respondents). The 
preceding requirements and burden estimates will be submitted to OMB as 
reinstatements of the information collection requests previously 
approved under control numbers 0938-0974, 0938-0994, and 0938-1012. 
total burden would amount to: 36 annual respondents, 36 annual 
responses, and 1,625 hours per PERM cycle.
    Inclusion of Puerto Rico has added an additional burden of 3,250 
hours and $209,040 for Difference Resolution and Appeal Process 
requirements.
12. ICRs for the CoP Requirements for Hospitals and CAHs To Report 
Acute Respiratory Illnesses
a. Ongoing Reporting
    The hospital must electronically report information on acute 
respiratory illnesses, including influenza, SARS-CoV-2/COVID-19, and 
RSV, in a standardized format and frequency specified by the Secretary. 
To the extent as required by the Secretary, this report must include 
the following data elements:
     Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
     Total bed census and capacity, including for critical 
hospital units and age groups.
     Limited patient demographic information, including but not 
limited to age.
    For purposes of burden estimates, we do not differentiate among 
hospitals and CAHs as they all would collect data. For the estimated 
costs contained in the analysis that follows, we used data from the BLS 
to determine the mean hourly wage for the staff member responsible for 
reporting the required information for a hospital (or a CAH).\1\ Based 
on our experience with hospitals and CAHs and the previous COVID-19 and 
related reporting requirements, we believe that this would primarily be 
the responsibility of a registered nurse and we have used this position 
in this analysis at an average hourly salary of $39.05. 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. 
Therefore, we estimated the total hourly cost for a registered nurse to 
perform these duties would be $78.
    Based on the assumption of weekly reporting frequency, we estimate 
that total annual burden hours for all participating hospitals and CAHs 
to comply with these requirements would be 248,976 hours based on 
weekly reporting of the required information by approximately 6,384 
hospitals and CAHs x 52 weeks per year and at an average weekly 
response time of 0.75 hours for a registered nurse with an average 
hourly salary of $78. Therefore, the estimate for total annual costs 
for all hospitals and CAHs to comply with the required reporting 
provisions weekly would be $19,420,128 (248,976 hours x 6,384 
facilities) or approximately $3,042 per facility annually ($19,420,128/
6,384 facilities).
    Furthermore, we note that this estimate likely overestimates the 
costs associated with reporting because it assumes that all hospitals 
and CAHs would report manually. Efforts are underway to automate 
hospital and CAH reporting that have the potential to significantly 
decrease reporting burden and improve reliability. Our preliminary 
estimates for these reporting activities (OMB control numbers 0938-0328 
for hospitals and 0938-1043 for CAHs) can be found in the tables that 
follow.
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[[Page 36529]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.301

b. PHE Reporting
    In the event that the Secretary has declared a national Public 
Health Emergency (PHE) for an acute respiratory illness or determined 
that a significant threat for one exists, the hospital must also 
electronically the report the following data elements in a standardized 
format and frequency specified by the Secretary:
     Supply inventory shortages.
     Staffing shortages.
     Relevant medical countermeasures and therapeutic 
inventories, usage, or both.
     Facility structure and operating status, including 
hospital/ED diversion status.
    In addition, we propose reporting requirements for future acute 
respiratory illness PHEs or significant threats thereof that would 
require hospitals and CAHs to electronically report additional 
information on acute respiratory illnesses and related impacts on 
facility operations only when the Secretary has declared a national PHE 
directly related to such illnesses or determined that a significant 
threat for one exists. Specifically, we proposed that when the 
Secretary has declared an applicable PHE or identified a threat 
thereof, hospitals and CAHs would be required to report specific data 
elements to the CDC's National Health Safety Network (NHSN), or other 
CDC-supported surveillance systems, as determined by the Secretary.
    For purposes of burden estimates, we do not differentiate among 
hospitals and CAHs as they all would complete the same data collection. 
For the estimated costs contained in the analysis that follows, we used 
data from the U.S. Bureau of Labor Statistics (BLS) to determine the 
mean hourly wage for the staff member responsible for reporting the 
required information for a hospital (or a CAH).\2\ Based on our 
experience with hospitals and CAHs and the previous COVID-19 and 
related reporting requirements, we believe that this would primarily be 
the responsibility of a registered nurse and we have used this position 
in this analysis at an average hourly salary of $39.05. 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. 
Therefore, we estimated the total hourly cost for a registered nurse to 
perform these duties would be $78.
    We acknowledge that the data elements and reporting frequency could 
increase or decrease due to the what the Secretary deems necessary for 
the given PHE; the changes would impact this burden estimate. For 
instance, data reporting requirements may be active for less than or 
more than a year. During the COVID-19 PHE, facilities reported daily. 
However, we cannot predict how often the Secretary would require data 
reporting for future PHE. Therefore, we included two burden estimates 
to encapsule a range in frequency of reporting. The lower range is 
based on twice a week reporting. The higher range is based on daily 
reporting.
    Based on the assumption of twice weekly reporting frequency, we 
estimated that total annual burden hours for all participating 
hospitals and CAHs to comply with these requirements would be 995,904 
hours based on twice weekly reporting of the required information by 
approximately 6,384 hospitals and CAHs x 104 days a year and at an 
average twice weekly response time of 1.5 hours for a registered nurse 
with an average hourly salary of $78. Therefore, the estimate for total 
annual costs for all hospitals and CAHs to comply with the required 
reporting provisions weekly would be $77,680,512 (995,904 hours x $78) 
or approximately $12,168 ($77,680,512/6,384 facilities) per facility 
annually.
    Based on the assumption of daily reporting frequency, we estimated 
that total annual burden hours for all participating hospitals and CAHs 
to comply with these requirements would be 3,495,240 hours based on 
daily reporting of the required information by approximately 6,384 
hospitals and CAHs x 365 days a year and at an average daily response 
time of 1.5 hours for a registered nurse with an average hourly salary 
of $78. Therefore, the estimate for total annual costs for all 
hospitals and CAHs to comply with the required reporting provisions 
weekly would be $272,628,720 (3,495,240 hours x $78) or approximately 
$42,705 ($272,628,720/6,384 facilities) per facility annually.
    Furthermore, we note that this estimate likely overestimates the 
costs associated with reporting because it assumes that all hospitals 
and CAHs would report manually. Efforts are underway to automate 
hospital and CAH reporting that have the potential to significantly 
decrease reporting burden and improve reliability. Our preliminary 
estimates for these reporting activities (OMB control numbers 0938-0328 
for hospitals and 0938-1043 for CAHs) can be found in the tables that 
follow.

[[Page 36530]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.302


[[Page 36531]]


[GRAPHIC] [TIFF OMITTED] TP02MY24.303


[[Page 36532]]



XIII. Response to Comments

    Because of the large number of public comments, we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this proposed 
rule, and, when we proceed with a subsequent document(s), we will 
respond to those comments in the preamble to that document.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on April 2, 2024.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Diseases, Health facilities, 
Health professions, Medical devices, Medicare Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Diseases, Health facilities, Medicare, Puerto Rico, Reporting and 
recordkeeping requirements.

42 CFR Part 431

    Grant programs--health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 482

    Grant programs--health, Hospitals, Medicaid, Incorporation by 
reference, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 485

    Grant programs--health, Health facilities, Incorporation by 
Reference, Medicaid, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 495

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Health records, 
Medicaid, Medicare, Penalties, Privacy, and Reporting and recordkeeping 
requirements.

42 CFR Part 512

    Administrative practice and procedure, Health care, Health 
facilities, Health insurance, Intergovernmental relations, Medicare, 
Penalties, Reporting and recordkeeping requirements.

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority: 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Section 405.1845 is amended by--
0
a. Revising paragraphs (a) and (b); and
0
b. Revising the paragraph (c) paragraph heading.
    The revisions read as follows:


Sec.  405.1845  Composition of Board; hearings, decisions, and remands.

    (a) Composition of the Board. The Board consists of five members 
appointed by the Secretary.
    (1) All members must be knowledgeable in the field of payment of 
providers under Medicare Part A.
    (2) At least one member must be a certified public accountant.
    (3) At least two Board members must be representative of providers 
of services.
    (b) Terms of office. The term of office for Board members must be 3 
years, except that initial appointments may be for such shorter terms 
as the Secretary may designate to permit staggered terms of office.
    (1) No member may serve more than three consecutive terms of 
office, except a Board member who, in their second or third consecutive 
term, is designated as Chairperson, as described in paragraph (c) of 
this section, may serve a maximum of four consecutive terms, provided 
that the Member continues to serve as Chairperson once so designated.
    (2) The Secretary has the authority to terminate a Board member's 
term of office for good cause.
    (c) Role of the Chairperson. * * *
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
3. The authority citation for part 412 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.
0
4. Section 412.1 is amended by revising paragraph (a)(1)(iv) to read as 
follows:


Sec.  412.1  Scope of part.

    (a) * * *
    (1) * * *
    (iv) Additional payments are made for outlier cases, bad debts, 
indirect medical education costs, for serving a disproportionate share 
of low-income patients, for the additional resource costs of domestic 
National Institute for Occupational Safety and Health approved surgical 
N95 respirators, and for the additional resource costs for small, 
independent hospitals to establish and maintain access to buffer stocks 
of essential medicines.
* * * * *
0
5. Section 412.2 is amended by adding paragraph (f)(11) to read as 
follows:


Sec.  412.2  Basis of payment.

* * * * *
    (f) * * *
    (11) A payment adjustment for small, independent hospitals for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines as specified in Sec.  412.113.
* * * * *
0
6. Section 412.23 is amended by revising paragraphs (e)(3)(i), (iii), 
and (iv) and revising and republish paragraph (e)(4) to read as 
follows:


Sec.  412.23  Excluded hospitals: Classifications.

* * * * *
    (e) * * *
    (3) * * *
    (i) Subject to the provisions of paragraphs (e)(3)(ii) through 
(vii) of this section and paragraphs (e)(4)(iv) and (v) of this section 
as applicable, the average Medicare inpatient length of stay specified 
under paragraph (e)(2)(i) of this section is calculated by dividing the 
total number of covered and noncovered days of stay of Medicare 
inpatients (less leave or pass days) by the number of total Medicare 
discharges for the hospital's most recent complete cost reporting 
period. Subject to the provisions of paragraphs (e)(3)(ii) through 
(vii) of this section, the average inpatient length of stay specified 
under paragraph (e)(2)(ii) of this section is calculated by dividing 
the total number of days for all patients, including both Medicare and 
non-Medicare inpatients (less leave or pass days) by the number of 
total discharges for the hospital's most recent complete cost reporting 
period.
* * * * *
    (iii) If a change in a hospital's average length of stay specified 
under paragraph (e)(2)(i) or (e)(2)(ii) of this section would result in 
the hospital not maintaining an average Medicare inpatient length of 
stay of greater than 25 days, the calculation is made by the same 
method for the period of at least 5 months of the immediately preceding 
6-month period.
    (iv) [Reserved]
* * * * *
    (4) For the purpose of calculating the average length of stay for 
hospitals

[[Page 36533]]

seeking to become long-term care hospitals, with the exception of 
paragraphs (e)(3)(iii) and (v) of this section, the provisions of 
paragraph (e)(3) of this section apply.
    (i) Definition. For the purpose of payment under the long-term care 
hospital prospective payment system under subpart O of this part, a new 
long-term care hospital is a provider of inpatient hospital services 
that meets the qualifying criteria in paragraphs (e)(1) and (e)(2) of 
this section; meets the applicable requirements of paragraphs 
(e)(4)(ii) through (v) of this section; and, under present or previous 
ownership (or both), its first cost reporting period as a LTCH begins 
on or after October 1, 2002.
    (ii) Satellite facilities and remote locations of hospitals seeking 
to become new long-term care hospitals. Except as specified in 
paragraph (e)(4)(iii) of this section, a satellite facility (as defined 
in Sec.  412.22(h)) or a remote location of a hospital (as defined in 
Sec.  413.65(a)(2) of this chapter) that voluntarily reorganizes as a 
separate Medicare participating hospital, with or without a concurrent 
change in ownership, and that seeks to qualify as a new long-term care 
hospital for Medicare payment purposes must demonstrate through 
documentation that it meets the average length of stay requirement as 
specified under paragraphs (e)(2)(i) or (e)(2)(ii) of this section 
based on discharges that occur on or after the effective date of its 
participation under Medicare as a separate hospital.
    (iii) Provider-based facility or organization identified as a 
satellite facility and remote location of a hospital prior to July 1, 
2003. Satellite facilities and remote locations of hospitals that 
became subject to the provider-based status rules under Sec.  413.65 as 
of July 1, 2003, that become separately participating hospitals, and 
that seek to qualify as long-term care hospitals for Medicare payment 
purposes may submit to the fiscal intermediary discharge data gathered 
during 5 months of the immediate 6 months preceding the facility's 
separation from the main hospital for calculation of the average length 
of stay specified under paragraph (e)(2)(i) or paragraph (e)(2)(ii) of 
this section.
    (iv) Qualifying period for hospitals seeking to become long-term 
care hospitals. A hospital may be classified as a long-term care 
hospital after a 6-month qualifying period, provided that the average 
length of stay during at least 5 consecutive months of that 6-month 
qualifying period, calculated under paragraph (e)(2) of this section, 
is greater than 25 days. The 6-month qualifying period for a hospital 
is the 6 months immediately preceding the date of long-term care 
hospital classification.
    (v) Special rule for hospitals seeking to become long-term care 
hospitals that experience a change in ownership. If a hospital seeks 
exclusion from the inpatient prospective payment system as a long-term 
care hospital and a change of ownership (as described in Sec.  489.18 
of this chapter) occurs within the period of at least 5 months of the 
6-month period preceding its petition for long-term care hospital 
status, the hospital may be excluded from the inpatient prospective 
payment system as a long-term care hospital for the next cost reporting 
period if, for the period of at least 5 months of the 6 months 
immediately preceding the start of the cost reporting period for which 
the hospital is seeking exclusion from the inpatient prospective 
payment system as a long-term care hospital (including time before the 
change of ownership), the hospital has met the required average length 
of stay, has continuously operated as a hospital, and has continuously 
participated as a hospital in Medicare.
* * * * *
0
7. Section 412.88 is amended by adding paragraphs (a)(2)(ii)(C) and 
(b)(2)(iv) to read as follows:


Sec.  412.88  Additional payment for new medical service or technology.

* * * * *
    (a) * * *
    (2) * * *
    (ii) * * *
    (C) For a medical product that is a gene therapy that is indicated 
and used specifically for the treatment of sickle cell disease and 
approved for new technology add-on payments in the FY 2025 IPPS/LTCH 
PPS final rule, for discharges occurring on or after October 1, 2024, 
if the costs of the discharge (determined by applying the operating 
cost-to-charge ratios as described in Sec.  412.84(h)) exceed the full 
DRG payment, an additional amount equal to the lesser of--
    (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.
* * * * *
    (b) * * *
    (2) * * *
    (iv) For discharges occurring on or after October 1, 2024, for a 
medical product that is a gene therapy that is indicated and used 
specifically for the treatment of sickle cell disease and approved for 
new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule, 
75 percent of the estimated costs of the new medical service or 
technology.
0
8. Section 412.90 is amended by revising paragraph (j) to read as 
follows:


Sec.  412.90  General rules.

* * * * *
    (j) Medicare-dependent, small rural hospitals. For cost reporting 
periods beginning on or after April 1, 1990, and before October 1, 
1994, and for discharges occurring on or after October 1, 1997 and 
before January 1, 2025, CMS adjusts the prospective payment rates for 
inpatient operating costs determined under subparts D and E of this 
part if a hospital is classified as a Medicare-dependent, small rural 
hospital.
* * * * *
0
9. Section 412.96 is amended by revising paragraph (c)(2)(ii) to read 
as follows:


Sec.  412.96  Special treatment: Referral centers.

* * * * *
    (c) * * *
    (2) * * *
    (ii) For cost reporting periods beginning on or after January 1, 
1986, an osteopathic hospital, recognized by the American Osteopathic 
Healthcare Association (or any successor organization), that is located 
in a rural area must have at least 3,000 discharges during its cost 
reporting period that began during the same fiscal year as the cost 
reporting periods used to compute the regional median discharges under 
paragraph (i) of this section to meet the number of discharges 
criterion. A hospital applying for rural referral center status under 
the number of discharges criterion in this paragraph must demonstrate 
its status as an osteopathic hospital.
* * * * *
0
10. Section 412.101 is amended by revising paragraphs (b)(2)(i), 
(b)(2)(iii), (c)(1), and (c)(3) introductory text to read as follows:


Sec.  412.101  Special treatment: Inpatient hospital payment adjustment 
for low-volume hospitals.

* * * * *
    (b) * * *
    (2) * * *
    (i) For FY 2005 through FY 2010, the portion of FY 2025 beginning 
on January 1, 2025 and subsequent fiscal years, a hospital must have 
fewer than 200 total discharges, which includes Medicare and non-
Medicare discharges, during the fiscal year, based on the hospital's 
most recently submitted cost report, and be located more than 25 road 
miles (as defined in paragraph (a) of this

[[Page 36534]]

section) from the nearest ``subsection (d)'' (section 1886(d) of the 
Act) hospital.
* * * * *
    (iii) For FY 2019 through FY 2024 and the portion of FY 2025 
beginning on October 1, 2024, and ending on December 31, 2024, a 
hospital must have fewer than 3,800 total discharges, which includes 
Medicare and non-Medicare discharges, during the fiscal year, based on 
the hospital's most recently submitted cost report, and be located more 
than 15 road miles (as defined in paragraph (a) of this section) from 
the nearest ``subsection (d)'' (section 1886(d) of the Act) hospital.
* * * * *
    (c) * * *
    (1) For FY 2005 through FY 2010, the portion of FY 2025 beginning 
on January 1, 2025 and subsequent fiscal years, the adjustment is an 
additional 25 percent for each Medicare discharge.
* * * * *
    (3) For FY 2019 through FY 2024 and the portion of FY 2025 
beginning on October 1, 2024, and ending on December 31, 2024, the 
adjustment is as follows:
* * * * *
0
11. Section 412.103 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  412.103  Special treatment: Hospitals located in urban areas and 
that apply for reclassification as rural.

    (a) * * *
    (1) The hospital is located in a rural census tract of a 
Metropolitan Statistical Area (MSA) as determined under the most recent 
version of the Goldsmith Modification, using the Rural-Urban Commuting 
Area codes and additional criteria, as determined by the Federal Office 
of Rural Health Policy (FORHP) of the Health Resources and Services 
Administration (HRSA), which is available at the web link provided in 
the most recent Federal Register notice issued by HRSA defining rural 
areas.
* * * * *
0
12. Section 412.104 is amended by revising paragraphs (b)(2) through 
(b)(4) to read as follows:


Sec.  412.104  Special treatment: Hospitals with high percentage of 
ESRD discharges.

* * * * *
    (b) * * *
    (2)(i) Effective for cost reporting periods beginning before 
October 1, 2024, the estimated weekly cost of dialysis is the average 
number of dialysis sessions furnished per week during the 12-month 
period that ended June 30, 1983, multiplied by the average cost of 
dialysis for the same period.
    (ii) Effective for cost reporting periods beginning on or after 
October 1, 2024, the estimated weekly cost of dialysis is calculated as 
3 dialysis sessions per week multiplied by the applicable ESRD 
prospective payment system (PPS) base rate (as defined in 42 CFR 
413.171) that corresponds with the fiscal year in which the cost 
reporting period begins.
    (3) The average cost of dialysis used for purposes of determining 
the estimated weekly cost of dialysis for cost reporting periods 
beginning before October 1, 2024, includes only those costs determined 
to be directly related to the renal dialysis services. (These costs 
include salary, employee health and welfare, drugs, supplies, and 
laboratory services.)
    (4) Effective for cost reporting periods beginning before October 
1, 2024, the average cost of dialysis is reviewed and adjusted, if 
appropriate, at the time the composite rate reimbursement for 
outpatient dialysis is reviewed.
* * * * *
0
13. Section 412.105 is amended by adding paragraph (f)(1)(iv)(C)(4) to 
read as follows:


Sec.  412.105  Special treatment: Hospitals that incur indirect costs 
for graduate medical education programs.

* * * * *
    (f) * * *
    (1) * * *
    (iv) * * *
    (C) * * *
    (4) Effective for portions of cost reporting periods beginning on 
or after July 1, 2026, a hospital may qualify to receive an increase in 
its otherwise applicable FTE resident cap if the criteria specified in 
Sec.  413.79(q) of this subchapter are met.
* * * * *
0
14. Section 412.106 is amended by revising paragraph (i)(1) to read as 
follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (i) * * *
    (1) Interim payments are made during the payment year to each 
hospital that is estimated to be eligible for payments under this 
section at the time of the annual final rule for the hospital inpatient 
prospective payment system, subject to the final determination of 
eligibility at the time of cost report settlement for each hospital. 
For FY 2025 and subsequent fiscal years, interim uncompensated care 
payments are calculated based on an average of the most recent 3 years 
of available historical discharge data.
* * * * *
0
15. Section 412.108 is amended by revising paragraphs (a)(1) 
introductory text and (c)(2)(iii) introductory text to read as follows:


Sec.  412.108  Special treatment: Medicare-dependent, small rural 
hospitals.

    (a) * * *
    (1) General considerations. For cost reporting periods beginning on 
or after April 1, 1990, and ending before October 1, 1994, or for 
discharges occurring on or after October 1, 1997, and before January 1, 
2025, a hospital is classified as a Medicare-dependent, small rural 
hospital if it meets all of the following conditions:
* * * * *
    (c) * * *
    (2) * * *
    (iii) For discharges occurring during cost reporting periods (or 
portions thereof) beginning on or after October 1, 2006, and before 
January 1, 2025, 75 percent of the amount that the Federal rate 
determined under paragraph (c)(1) of this section is exceeded by the 
highest of the following:
* * * * *
0
16. Section 412.113 is amended by adding paragraph (g) to read as 
follows:


Sec.  412.113  Other payments.

* * * * *
    (g) Additional resource costs of establishing and maintaining 
access to buffer stocks of essential medicines. (1) Essential medicines 
are the 86 medicines prioritized in the report Essential Medicines 
Supply Chain and Manufacturing Resilience Assessment developed by the 
U.S. Department of Health and Human Services Office of the Assistant 
Secretary for Preparedness and Response and published in May of 2022, 
and any subsequent revisions to that list of medicines. A buffer stock 
of essential medicines for a hospital is a supply, for no less than a 
6-month period of one or more essential medicines.
    (2) The additional resource costs of establishing and maintaining 
access to a buffer stock of essential medicines for a hospital are the 
additional resource costs incurred by the hospital to directly hold a 
buffer stock of essential medicines for its patients or arrange 
contractually for such a buffer stock to be held by another entity for 
use by the hospital for its patients. The additional resource costs of 
establishing and maintaining access to a buffer stock of essential 
medicines does not include the resource costs of the essential 
medicines themselves.

[[Page 36535]]

    (3) For cost reporting periods beginning on or after October 1, 
2024, a payment adjustment to a small, independent hospital for the 
additional resource costs of establishing and maintaining access to 
buffer stocks of essential medicines is made as described in paragraph 
(g)(4) of this section. For purposes of this section, a small, 
independent hospital is a hospital with 100 or fewer beds as defined in 
Sec.  412.105(b) during the cost reporting period that is not part of a 
chain organization, defined as a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization.
    (4) The payment adjustment is based on the estimated reasonable 
cost incurred by the hospital for establishing and maintaining access 
to buffer stocks of essential medicines during the cost reporting 
period.
0
17. Section 412.140 is amended by revising paragraphs (d)(2)(ii) and 
(e)(2)(vii) introductory text to read as follows:


Sec.  412.140  Participation, data submission, and validation 
requirements under the Hospital Inpatient Quality Reporting (IQR) 
Program.

* * * * *
    (d) * * *
    (2) * * *
    (ii)(A) Prior to the FY 2028 payment determination, a hospital 
meets the eCQM validation requirement with respect to a fiscal year if 
it submits 100 percent of sampled eCQM measure medical records in a 
timely and complete manner, as determined by CMS.
    (B) For the FY 2028 payment determination and later years, a 
hospital meets the eCQM validation requirement with respect to a fiscal 
year if it achieves a 75-percent score, as determined by CMS.
* * * * *
    (e) * * *
    (2) * * *
    (vii) If the hospital has requested reconsideration on the basis 
that CMS concluded it did not meet the validation requirement set forth 
in paragraph (d) of this section, the reconsideration request must 
contain a detailed explanation identifying which data the hospital 
believes was improperly validated by CMS and why the hospital believes 
that such data are correct.
* * * * *


Sec.  412.230  [Amended]

0
18. In Sec.  412.230 amend paragraph (a)(5)(i) by removing the phrase 
``in the rural area of the state'' and adding in its place the phrase 
``either in its geographic area or in the rural area of the State''.
0
19. Amend Sec.  412.273 by revising paragraphs (c)(1)(ii) and (c)(2) to 
read as follows:


Sec.  412.273  Withdrawing an application, terminating an approved 3-
year reclassification, or canceling a previous withdrawal or 
termination.

* * * * *
    (c) * * *
    (ii) After the MGCRB issues a decision, provided that the request 
for withdrawal is received by the MCGRB within 45 days of the date of 
filing for public inspection of the proposed rule at the website of the 
Office of the Federal Register, or within 7 calendar days of receiving 
a decision of the Administrator's in accordance with Sec.  412.278, 
whichever is later concerning changes to the inpatient hospital 
prospective payment system and proposed payment rates for the fiscal 
year for which the application has been filed.
    (2) A request for termination must be received by the MGCRB within 
45 days of the date of filing for public inspection of the proposed 
rule at the website of the Office of the Federal Register, or within 7 
calendar days of receiving a decision of the Administrator's in 
accordance with Sec.  412.278, whichever is later concerning changes to 
the inpatient hospital prospective payment system and proposed payment 
rates for the fiscal year for which the termination is to apply.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
20. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.


Sec.  413.75  [Amended]

0
21. Section 413.75 is amended in paragraph (b), in the definition of 
``Emergency Medicare GME Affiliated Group'' by removing the reference 
``Sec.  413.79(f)(6)'' and adding in its place the reference ``Sec.  
413.79(f)(7)''.


Sec.  413.78  [Amended]

0
22. Section 413.78 is amended by--
0
a. In paragraph (e)(3)(iii), removing the reference ``Sec.  
413.79(f)(6)'' and adding in its place the reference ``Sec.  
413.79(f)(7)''; and
0
b. In paragraph (f)(3)(iii) introductory text, removing the reference 
``Sec.  413.79(f)(6)'' and adding in its place the reference ``Sec.  
413.79(f)(7)''.
0
23. Section 413.79 is amended by--
0
a. Revising paragraphs (d)(6), (f)(8) and (k)(2)(i); and
0
b. Adding paragraph (q).
    The revisions and addition read as follows:


Sec.  413.79  Direct GME payments: Determination of the weighted number 
of FTE residents.

* * * * *
    (d) * * *
    (6) Subject to the provisions of paragraph (h) of this section, FTE 
residents who are displaced by the closure of either another hospital 
or another hospital's program are added to the FTE count after applying 
the averaging rules in this paragraph (d), for the receiving hospital 
for the duration of the time that the displaced residents are training 
at the receiving hospital.
* * * * *
    (f) * * *
    (8) FTE resident cap slots added under section 126 of Public Law 
116-260 and section 4122 of Public Law 117-328 may be used in a 
Medicare GME affiliation agreement beginning in the fifth year after 
the effective date of those FTE resident cap slots.
* * * * *
    (k) * * *
    (2) * * *
    (i)(A) For rural track programs started before October 1, 2012, for 
the first 3 years of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average specified in paragraph (d)(7) 
of this section, training in the rural track at the urban hospital and 
the rural nonprovider site(s).
    (B) For rural track programs started on or after October 1, 2012, 
and before October 1, 2022, prior to the start of the urban hospital's 
cost reporting period that coincides with or follows the start of the 
sixth program year of the rural track's existence, the rural track FTE 
limitation for each urban hospital will be the actual number of FTE 
residents, subject to the rolling average specified in paragraph (d)(7) 
of this section, training in the rural track at the urban hospital and 
the rural nonprovider site(s).
    (C) For cost reporting periods beginning on or after October 1, 
2022, before the start of the urban or rural

[[Page 36536]]

hospital's cost reporting period that coincides with or follows the 
start of the sixth program year of the Rural Track Program's existence, 
the rural track FTE limitation for each hospital will be the actual 
number of FTE residents training in the Rural Track Program at the 
urban or rural hospital and subject to the requirements under Sec.  
413.78(g), at the rural nonprovider site(s).
* * * * *
    (q) Determination of an increase in the otherwise applicable 
resident cap under section 4122 of the Consolidated Appropriations Act 
(Pub. L. 117--328). For portions of cost reporting periods beginning on 
or after July 1, 2026, a hospital may receive an increase in its 
otherwise applicable FTE resident cap (as determined by CMS) if the 
hospital meets the requirements and qualifying criteria under section 
1886(h)(10) of the Act and if the hospital submits an application to 
CMS within the timeframe specified by CMS.

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
24. The authority citation for part 431 continues to read as follows:

    Authority: 42 U.S.C. 1302.


Sec.  431.954  [Amended]

0
25. Section 431.954 is amended in paragraph (b)(3) by removing the 
phrase ``Puerto Rico, Guam,'' and adding in its place the word 
``Guam,''.

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

0
26. The authority citation for part 482 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395hh, and 1395rr, unless otherwise 
noted.

0
27. Section 482.42 is amended by revising paragraph (e) and removing 
paragraph (f) to read as follows:


Sec.  482.42  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (e) Respiratory illness reporting--(1) Ongoing reporting. The 
hospital must electronically report information on acute respiratory 
illnesses, including influenza, SARS-CoV-2/COVID-19, and RSV.
    (i) The report must be in a standardized format and frequency 
specified by the Secretary.
    (ii) To the extent as required by the Secretary, this report must 
include all of the following data elements:
    (A) Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
    (B) Total bed census and capacity, including for critical hospital 
units and age groups.
    (C) Limited patient demographic information, including but not 
limited to age.
    (2) Public health emergency (PHE) reporting. In the event that the 
Secretary has declared a national, state, or local PHE for an acute 
infectious illness or determined that a significant threat for one 
exists, the hospital must also electronically the report the following 
data elements in a standardized format and frequency specified by the 
Secretary:
    (i) Supply inventory shortages.
    (ii) Staffing shortages.
    (iii) Relevant medical countermeasures and therapeutic inventories, 
usage, or both.
    (iv) Facility structure and operating status, including hospital/ED 
diversion status.

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
28 The authority citation for part 482 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.

0
29. Section 485.640 is amended revising paragraph (d) and removing 
paragraph (e) to read as follows:


Sec.  485.640  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (d) Respiratory illness reporting--(1) Ongoing reporting. The CAH 
must electronically report information on acute respiratory illnesses, 
including influenza, SARS-CoV-2/COVID-19, and RSV.
    (i) The report must be in a standardized format and frequency 
specified by the Secretary.
    (ii) To the extent as required by the Secretary, the report must 
include the following data elements:
    (A) Confirmed infections for a limited set of respiratory 
illnesses, including but not limited to influenza, SARS-CoV-2/COVID-19, 
and RSV, among newly admitted and hospitalized patients.
    (B) Total bed census and capacity, including for critical hospital 
units and age groups.
    (C) Limited patient demographic information, including but not 
limited to age.
    (2) Public health emergency (PHE) reporting. In the event that the 
Secretary has declared a national, state, or local PHE for an acute 
infectious illness or determined that a significant threat for one 
exists, the CAH must also electronically the report the following data 
elements in a standardized format and frequency specified by the 
Secretary:
    (i) Supply inventory shortages.
    (ii) Staffing shortages.
    (iii) Relevant medical countermeasures and therapeutic inventories, 
usage, or both.
    (iv) Facility structure and operating status, including CAH/ED 
diversion status.

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 495.24 is amended by--
0
a. In paragraph (f)(1)(i)(B) removing the phrase ``In 2023 and 
subsequent years'' and adding in its place the phrase ``In 2023 and 
2024,''; and
0
b. Adding paragraph (f)(1)(i)(C).
    The addition reads as follows:


Sec.  495.24  Stage 3 meaningful use objectives and measures for EPs, 
eligible hospitals and CAHs for 2019 and subsequent years.

* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (C) In 2025 and subsequent years, earn a total score of at least 80 
points.
* * * * *
0
32. Revise the heading for part 512 to read as follows:

PART 512--STANDARD PROVISIONS FOR INNOVATION CENTER MODELS AND 
SPECIFIC PROVISIONS FOR CERTAIN MODELS

0
33. The authority citation for part 512 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1315a, and 1395hh.

0
34. Amend part 512 by adding subparts D and E to read as follows:

Subpart D [Reserved]

Subpart E--Transforming Episode Accountability Model (TEAM)

Sec.

General

512.500 Basis and scope of subpart.
512.505 Definitions

TEAM Participation

512.515 Geographic areas.

[[Page 36537]]

512.520 Participation tracks.
512.522 APM options.

Scope of Episodes Being Tested

512.525 Episodes.
512.535 Beneficiary inclusion criteria.
512.537 Determination of the episode.

Pricing Methodology

512.540 Determination of preliminary target prices.
512.545 Determination of reconciliation target prices.

Quality Measures and Composite Quality Score

512.547 Quality measures, composite quality score, and display of 
quality measures.

Reconciliation and Review Process

512.550 Reconciliation process and determination of the 
reconciliation payment or repayment amount.
512.552 Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.
512.555 Proration of payments for services that extend beyond an 
episode.
512.560 Appeals process.
512.561 Reconsideration review processes.

Data Sharing and Other Requirements

512.562 Data sharing with TEAM participants.
512.563 Health equity plans.
512.564 Referral to primary care services.

Financial Arrangements and Beneficiary Incentives

512.565 Sharing arrangements.
512.568 Distribution arrangements
512.570 Downstream distribution arrangements.
512.575 TEAM beneficiary incentives.
512.576 Application of the CMS-sponsored model arrangements and 
patient incentives safe harbor.

Medicare Program Waivers

512.580 TEAM Medicare Program waivers.

General Provisions

512.582 Beneficiary protections.
512.584 Cooperation in model evaluation and monitoring.
512.586 Audits and record retention.
512.588 Rights in data and intellectual property.
512.590 Monitoring and compliance.
512.592 Remedial action.
512.594 Limitations on review.
512.595 Bankruptcy and other notifications.
512.596 Termination of TEAM or TEAM participant from model by CMS.
512.598 Decarbonization and resilience initiative.

General


Sec.  512.500  Basis and scope of subpart.

    (a) Basis. This subpart implements the test of the Transforming 
Episode Accountability Model (TEAM) under section 1115A(b) of the Act. 
Except as specifically noted in this part, the regulations under this 
subpart do not affect the applicability of other provisions affecting 
providers and suppliers under Medicare FFS, including the applicability 
of provisions regarding payment, coverage, and program integrity.
    (b) Scope. This subpart sets forth the following:
    (i) Participation in TEAM.
    (ii) Scope of episodes being tested.
    (iii) Pricing methodology.
    (iv) Quality measures and quality reporting requirements.
    (v) Reconciliation and review processes.
    (vi) Data sharing and other requirements
    (vii) Financial arrangements and beneficiary incentives.
    (viii) Medicare program waivers
    (ix) Beneficiary protections.
    (x) Cooperation in model evaluation and monitoring.
    (xi) Audits and record retention.
    (xii) Rights in data and intellectual property.
    (xiii) Monitoring and compliance.
    (xiv) Remedial action.
    (xv) Limitations on review.
    (xvi) Miscellaneous provisions on bankruptcy and other 
notifications.
    (xvii) Model termination by CMS.
    (xviii) Decarbonization.


Sec.  512.505  Definitions

    For the purposes of this part, the following definitions are 
applicable unless otherwise stated:
    AAPM stands for Advanced Alternative Payment Model.
    AAPM option means the advanced alternative payment model option of 
TEAM for Track 2 and Track 3 TEAM participants that provide their CMS 
EHR Certification ID and attest to their use of CEHRT in accordance 
with Sec.  512.522.
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.
    Acute care hospital means a provider subject to the prospective 
payment system specified in Sec.  412.1(a)(1) of this chapter.
    Age bracket risk adjustment factor means the coefficient of risk 
associated with a patient's age bracket, calculated as described in 
Sec.  512.545(a)(1).
    Aggregated reconciliation target price refers to the sum of the 
reconciliation target prices for all episodes attributed to a given 
TEAM participant for a given performance year.
    Alignment payment means a payment from a TEAM collaborator to a 
TEAM participant under a sharing arrangement, for the sole purpose of 
sharing the TEAM participant's responsibility for making repayments to 
Medicare.
    Anchor hospitalization means the initial hospital stay upon 
admission for an episode category included in TEAM, as described in 
Sec.  512.525(c), for which the institutional claim is billed through 
the inpatient prospective payment system (IPPS).
    Anchor procedure means a procedure related to an episode category, 
as described in Sec.  512.525(c), included in TEAM that is permitted 
and paid for by Medicare when performed in a hospital outpatient 
department (HOPD) and billed through the Hospital Outpatient 
Prospective Payment System (OPPS).
    ADI stands for Area Deprivation Index.
    APM stands for Alternative Payment Model.
    APM Entity means an entity as defined in Sec.  414.1305 of this 
chapter.
    Baseline episode spending refers to total episode spending by all 
providers and suppliers associated with a given MS-DRG/HCPCS episode 
type for all hospitals in a given region during the baseline period.
    Baseline period means the 3-year historical period used to 
construct the preliminary target price and reconciliation target price 
for a given performance year.
    Baseline year means any one of the3 years included in the baseline 
period.
    Benchmark price means average standardized episode spending by all 
providers and suppliers associated with a given MS-DRG/HCPCS episode 
type for all hospitals in a given region during the applicable baseline 
period.
    Beneficiary means an individual who is enrolled in Medicare FFS.
    BPCI stands for the Bundled Payments for Care Improvement Model, 
which was an episode-based payment initiative with four models tested 
by the CMS Innovation Center from April 2013 to September 2018.
    BPCI Advanced stands for the Bundled Payments for Care Improvement 
Advanced Model, which is an episode-based payment model tested by the 
CMS Innovation Center from October 2018 to December 2025.
    CCN stands for CMS certification number.
    CEHRT means certified electronic health record technology that 
meets the requirements set forth in Sec.  414.1305 of this chapter.
    Change in control means any of the following:
    (1) The acquisition by any ``person'' (as this term is used in 
sections 13(d)

[[Page 36538]]

and 14(d) of the Securities Exchange Act of 1934) of beneficial 
ownership (within the meaning of Rule 13d-3 promulgated under the 
Securities Exchange Act of 1934), directly or indirectly, of voting 
securities of the TEAM participant representing more than 50 percent of 
the TEAM participant's outstanding voting securities or rights to 
acquire such securities.
    (2) The acquisition of the TEAM participant by any individual or 
entity.
    (3) The sale, lease, exchange or other transfer (in one transaction 
or a series of transactions) of all or substantially all of the assets 
of the TEAM participant.
    (4) The approval and completion of a plan of liquidation of the 
TEAM participant, or an agreement for the sale or liquidation of the 
TEAM participant.
    CJR stands for the Comprehensive Care for Joint Replacement Model, 
which is an episode-based payment model tested by the CMS Innovation 
Center from April 2016 to December 2024.
    Clinician engagement list means the list of eligible clinicians or 
MIPS eligible clinicians that participate in TEAM activities and have a 
contractual relationship with the TEAM participant, and who are not 
listed on the financial arrangements list, as described in Sec.  
512.522(c).
    CMS Electronic Health Record (EHR) Certification ID means the 
identification number that represents the combination of Certified 
Health Information Technology that is owned and used by providers and 
hospitals to provide care to their patients and is generated by the 
Certified Health Information Technology Product List.
    Collaboration agent means an individual or entity that is not a 
TEAM collaborator and that is either of the following:
    (1) A member of a PGP, NPPGP, or TGP that has entered into a 
distribution arrangement with the same PGP, NPPGP, or TGP in which he 
or she is an owner or employee, and where the PGP, NPPGP, or TGP is a 
TEAM collaborator.
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating, and where the ACO is a TEAM collaborator.
    Composite quality score (CQS) means a score computed for each TEAM 
participant to summarize the TEAM participant's level of quality 
performance and improvement on specified quality measures as described 
in Sec.  512.547.
    Core-based statistical area (CBSA) means a statistical geographic 
entity defined by the Office of Management and Budget (OMB) consisting 
of the county or counties associated with at least one core (urbanized 
area or urban cluster) of at least 10,000 population, plus adjacent 
counties having a high degree of social and economic integration with 
the core as measured through commuting ties with the counties 
containing the core.
    CORF stands for comprehensive outpatient rehabilitation facility.
    Coronary artery bypass graft (CABG) means any coronary 
revascularization procedure paid through the IPPS under MS-DRG 231-236, 
including both elective CABG and CABG procedures performed during 
initial acute myocardial infarction treatment (AMI).
    Covered services means the scope of health care benefits described 
in sections 1812 and 1832 of the Act for which payment is available 
under Part A or Part B of Title XVIII of the Act.
    Critical access hospital (CAH) means a hospital designated under 
subpart F of part 485 of this chapter.
    CQS adjustment amount means the amount subtracted from the positive 
or negative reconciliation amount to generate the reconciliation 
payment or repayment amount.
    CQS adjustment percentage means the percentage CMS applies to the 
positive or negative reconciliation amount based on the TEAM 
participant's CQS performance.
    CQS baseline period means calendar year 2025 and is the time period 
used to benchmark quality measure performance.
    Days means calendar days.
    Decarbonization and Resilience Initiative means an initiative for 
TEAM participants that includes technical assistance on decarbonization 
and a voluntary reporting program where TEAM participants may annually 
report metrics and questions related to emissions in accordance with 
Sec.  512.598.
    Descriptive TEAM materials and activities means general audience 
materials such as brochures, advertisements, outreach events, letters 
to beneficiaries, web pages, mailings, social media, or other materials 
or activities distributed or conducted by or on behalf of the TEAM 
participant or its downstream participants when used to educate, 
notify, or contact beneficiaries regarding TEAM. All of the following 
communications are not descriptive TEAM materials and activities:
    (1) Communications that do not directly or indirectly reference 
TEAM (for example, information about care coordination generally).
    (2) Information on specific medical conditions.
    (3) Referrals for health care items and services, except as 
required by Sec.  512.564.
    (4) Any other materials that are excepted from the definition of 
``marketing'' as that term is defined at 45 CFR 164.501.
    Discount factor means a set percentage included in the preliminary 
target price and reconciliation target price intended to reflect 
Medicare's potential savings from TEAM.
    Distribution arrangement means a financial arrangement between a 
TEAM collaborator that is an ACO, PGP, NPPGP, or TGP and a 
collaboration agent for the sole purpose of distributing some or all of 
a gainsharing payment received by the ACO, PGP, NPPGP, or TGP.
    Distribution payment means a payment from a TEAM collaborator that 
is an ACO, PGP, NPPGP, or TGP to a collaboration agent, under a 
distribution arrangement, composed only of gainsharing payments.
    DME stands for durable medical equipment.
    Downstream collaboration agent means an individual who is not a 
TEAM collaborator or a collaboration agent and who is a member of a 
PGP, NPPGP, or TGP that has entered into a downstream distribution 
arrangement with the same PGP, NPPGP, or TGP in which he or she is an 
owner or employee, and where the PGP, NPPGP, or TGP is a collaboration 
agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP, NPPGP, or TGP and an 
ACO participant and a downstream collaboration agent for the sole 
purpose of sharing a distribution payment received by the PGP, NPPGP, 
or TGP.
    Downstream participant means an individual or entity that has 
entered into a written arrangement with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent 
under which the downstream participant engages in one or more TEAM 
activities.
    Dually eligible beneficiary means a beneficiary enrolled in both 
Medicare and full Medicaid benefits.
    EHR stands for electronic health record.
    Eligible clinician means a clinician as defined in Sec.  414.1305 
of this chapter.
    Episode category means one of the five episodes tested in TEAM as 
described at Sec.  512.525(d).
    Episode means all Medicare Part A and B items and services 
described in Sec.  512.525(e) (and excluding the items and services 
described in Sec.  512.525(f)) that are furnished to a beneficiary

[[Page 36539]]

described in Sec.  512.535 during the time period that begins on the 
date of the beneficiary's admission to an anchor hospitalization or the 
date of the anchor procedure, as described at Sec.  512.525(c), and 
ends on the 30th day following the date of discharge from the anchor 
hospitalization or anchor procedure, with the date of discharge or date 
of the anchor procedure itself being counted as the first day in the 
30-day post-discharge period, as described at Sec.  512.537. In the 
case that an anchor hospitalization for the same episode category 
occurs within 3 days of an anchor procedure, the anchor procedure 
episode is canceled, and the episode start date for the anchor 
hospitalization is the same as the outpatient procedure.
    Essential access community hospital means a hospital as defined 
under Sec.  412.109 of this chapter.
    Final normalization factor refers to the national mean of the 
benchmark price for each MS-DRG/HCPCS episode type divided by the 
national mean of the risk-adjusted benchmark price for the same MS-DRG/
HCPCS episode type.
    Financial arrangements list means the list of eligible clinicians 
or MIPS eligible clinicians that have a financial arrangement with the 
TEAM participant, TEAM collaborator, collaboration agent, and 
downstream collaboration agent, as described in Sec.  512.522(b).
    Gainsharing payment means a payment from a TEAM participant to a 
TEAM collaborator, under a sharing arrangement, composed of only 
reconciliation payments, internal cost savings, or both.
    HCPCS stands for Healthcare Common Procedure Coding System, which 
is used to bill for items and services.
    Health disparities means preventable differences in the burden of 
disease, injury, violence, or opportunities to achieve optimal health, 
health quality, or health outcomes that are experienced by one or more 
underserved communities within the TEAM participant's population of 
TEAM beneficiaries that the participant will aim to reduce.
    Health equity goal means a targeted outcome relative to health 
equity plan performance measures.
    Health equity plan means a document that identifies health equity 
goals, intervention strategies, and performance measures to improve 
health disparities identified within the TEAM participant's population 
of TEAM beneficiaries that the TEAM participant will aim to reduce as 
described in Sec.  512.563.
    Health equity plan intervention strategy means the initiative the 
TEAM participant creates and implements to reduce the identified health 
disparities as part of the health equity plan.
    Health equity plan performance measure means a quantitative metric 
that the TEAM participant uses to measure changes in health disparities 
arising from the health equity plan intervention strategies.
    HHA means a Medicare-enrolled home health agency.
    High-cost outlier cap refers to the 99th percentile of regional 
spending for a given MS-DRG/HCPCS episode type in a given region, which 
is the amount at which episode spending would be capped for purposes of 
determining baseline and performance year episode spending.
    Hospital means a hospital as defined in section 1886(d)(1)(B) of 
the Act.
    Hospital discharge planning means the standards set forth in Sec.  
482.43 of this chapter.
    ICD-CM stands for International Classification of Diseases, 
Clinical Modification.
    Internal cost savings means the measurable, actual, and verifiable 
cost savings realized by the TEAM participant resulting from care 
redesign undertaken by the TEAM participant in connection with 
providing items and services to TEAM beneficiaries within an episode. 
Internal cost savings does not include savings realized by any 
individual or entity that is not the TEAM participant.
    IPF stands for inpatient psychiatric facility.
    IPPS stands for Inpatient Prospective Payment System, which is the 
payment system for subsection (d) hospitals as defined in section 
1886(d)(1)(B) of the Act.
    IRF stands for inpatient rehabilitation facility.
    LIS stands for Medicare Part D Low-Income Subsidy.
    Lower-extremity joint replacement (LEJR) means any hip, knee, or 
ankle replacement that is paid under MS-DRG 469, 470, 521, or 522 
through the IPPS or HCPCS code 27447, 27130, or 27702 through the OPPS.
    LTCH stands for long-term care hospital.
    Major bowel procedure means any small or large bowel procedure paid 
through the IPPS under MS-DRG 329-331.
    Mandatory CBSA means a core-based statistical area selected by CMS 
in accordance with Sec.  512.520 where all eligible hospitals are 
required to participate in TEAM.
    MDC stands for Major Diagnostic Category.
    Medically necessary means reasonable and necessary for the 
diagnosis or treatment of an illness or injury, or to improve the 
functioning of a malformed body member.
    Medicare severity diagnosis-related group (MS-DRG) means, for the 
purposes of this model, the classification of inpatient hospital 
discharges updated in accordance with Sec.  412.10 of this chapter.
    Medicare-dependent, small rural hospital (MDH) means a specific 
type of hospital that meets the classification criteria specified under 
Sec.  412.108 of this chapter.
    Member of the NPPGP or NPPGP member means a nonphysician 
practitioner or therapist who is an owner or employee of an NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment.
    Member of the PGP or PGP member means a physician, nonphysician 
practitioner, or therapist who is an owner or employee of the PGP and 
who has reassigned to the PGP his or her right to receive Medicare 
payment.
    Member of the TGP or TGP member means a therapist who is an owner 
or employee of a TGP and who has reassigned to the TGP his or her right 
to receive Medicare payment.
    MIPS stands for Merit-based Incentive Payment System
    MIPS eligible clinician means a clinician as defined in Sec.  
414.1305 of this chapter.
    Model-specific payment means a payment made by CMS only to TEAM 
participants and includes, unless otherwise specified, the 
reconciliation payment.
    Model performance period means the 60-month period from January 1, 
2026, to December 31, 2030, during which TEAM is being tested and the 
TEAM participant is held accountable for spending and quality.
    Model start date means January 1, 2026, the start of the model 
performance period.
    MS-DRG/HCPCS episode type refers to the subset of episodes within 
an episode category that are associated with a given MS-DRG/HCPCS, as 
set forth at Sec.  512.540(a)(1).
    Non-AAPM option means the option of TEAM for TEAM participants in 
Track 1 or for TEAM participants in Track 2 or Track 3 that do not 
attest to use of CEHRT as described in Sec.  512.522.
    Nonphysician practitioner means one of the following:
    (1) A physician assistant who satisfies the qualifications set 
forth at Sec.  410.74(a)(2)(i) and (ii) of this chapter.

[[Page 36540]]

    (2) A nurse practitioner who satisfies the qualifications set forth 
at Sec.  410.75(b) of this chapter.
    (3) A clinical nurse specialist who satisfies the qualifications 
set forth at Sec.  410.76(b) of this chapter.
    (4) A certified registered nurse anesthetist (as defined at Sec.  
410.69(b) of this chapter).
    (5) A clinical social worker (as defined at Sec.  410.73(a) of this 
chapter).
    (6) A registered dietician or nutrition professional (as defined at 
Sec.  410.134 of this chapter).
    NPI stands for National Provider Identifier.
    NPPGP stands for Non-Physician Provider Group Practice, which means 
an entity that is enrolled in Medicare as a group practice, includes at 
least one owner or employee who is a nonphysician practitioner, does 
not include a physician owner or employee, and has a valid and active 
TIN.
    NPRA stands for Net Payment Reconciliation Amount, which means the 
dollar amount representing the difference between the reconciliation 
target price and performance year spending, after adjustments for 
quality and stop-gain/stop-loss limits, but prior to the post-episode 
spending adjustment.
    OIG stands for the Department of Health and Human Services Office 
of the Inspector General.
    OP means an outpatient procedure for which the institutional claim 
is billed by the hospital through the OPPS.
    OPPS stands for the Outpatient Prospective Payment System.
    PAC stands for post-acute care.
    PBPM stands for per-beneficiary-per-month.
    Performance year means a 12-month period beginning on January 1 and 
ending on December 31 of each year during the model performance period.
    Performance year spending means the sum of standardized Medicare 
claims payments during the performance year for the items and services 
that are included in the episode in accordance with Sec.  512.525(e), 
excluding the items and services described in Sec.  512.525(f).
    PGP stands for physician group practice.
    Physician has the meaning set forth in section 1861(r) of the Act.
    Post-episode spending amount means the sum of all Medicare Parts A 
and B payments for items and services furnished to a beneficiary within 
30 days after the end of an episode and includes the prorated portion 
of services that began during the episode and extended into the 30-day 
post-episode period.
    Preliminary target price refers to the target price provided to the 
TEAM participant prior to the start of the performance year, which is 
subject to adjustment at reconciliation, as set forth at Sec.  512.540.
    Primary care services has the meaning set forth in section 
1842(i)(4) of the Act.
    Prospective normalization factor refers to the multiplier 
incorporated into the preliminary target price to ensure that the 
average of the total risk-adjusted preliminary target price does not 
exceed the average of the total non-risk adjusted preliminary target 
price, calculated as set forth in Sec.  512.540(b)(6).
    Prospective trend factor refers to the multiplier incorporated into 
the preliminary target price to estimate changes in spending patterns 
between the baseline period and the performance year, calculated as set 
forth in Sec.  512.540(b)(7).
    Provider means a ``provider of services'' as defined under section 
1861(u) of the Act and codified in the definition of ``provider'' at 
Sec.  400.202 of this chapter.
    Provider of outpatient therapy services means an entity that is 
enrolled in Medicare as a provider of therapy services and furnishes 
one or more of the following:
    (1) Outpatient physical therapy services as defined in Sec.  410.60 
of this chapter.
    (2) Outpatient occupational therapy services as defined in Sec.  
410.59 of this chapter.
    (3) Outpatient speech-language pathology services as defined in 
Sec.  410.62 of this chapter.
    QP stands for Qualifying APM Participant as defined in Sec.  
414.1305 of this chapter.
    Quality-adjusted reconciliation amount refers to the dollar amount 
representing the difference between the reconciliation target price and 
performance year spending, after adjustments for quality, but prior to 
application of stop-gain/stop-loss limits and the post-episode spending 
adjustment.
    Raw quality measure score means the quality measure value as 
obtained from the Hospital Inpatient Quality Reporting Program and the 
Hospital-Acquired Condition Reduction Program.
    Reconciliation amount means the dollar amount representing the 
difference between the reconciliation target price and performance year 
spending, prior to adjustments for quality, stop-gain/stop-loss limits, 
and post-episode spending.
    Reconciliation payment amount means the amount that CMS may owe to 
a TEAM participant after reconciliation as determined in accordance 
with Sec.  512.550(g).
    Reconciliation target price means the target price applied to an 
episode at reconciliation, as determined in accordance with Sec.  
512.545.
    Region means one of the nine U.S. census divisions, as defined by 
the U.S. Census Bureau.
    Reorganization event refers to a merger, consolidation, spin off or 
other restructuring that results in a new hospital entity under a given 
CCN.
    Repayment amount means the amount that the TEAM participant may owe 
to Medicare after reconciliation as determined in accordance with Sec.  
512.550(g).
    Rural hospital means an IPPS hospital that meets one of the 
following criteria:
    (1) Is located in a rural area as defined under Sec.  412.64 of 
this chapter.
    (2) Is located in a rural census tract defined under Sec.  
412.103(a)(1) of this chapter.
    (3) Has reclassified as a rural hospital under Sec.  412.103 of 
this chapter.
    (4) Is a rural referral center (RRC), which has the same meaning 
given this term under Sec.  412.96 of this chapter.
    Safety Net hospital means an IPPS hospital that meets at least one 
of the following criteria:
    (1) Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries considered dually eligible for Medicare and Medicaid 
across all PPS acute care hospitals in the baseline period.
    (2) Exceeds the 75th percentile of the proportion of Medicare 
beneficiaries partially or fully eligible to receive Part D low-income 
subsidies across all PPS acute care hospitals in the baseline period.
    Scaled quality measure score means the score equal to the 
percentile to which the TEAM participant's raw quality measure score 
would have belonged in the CQS baseline period.
    Sharing arrangement means a financial arrangement between a TEAM 
participant and a TEAM collaborator for the sole purpose of making 
gainsharing payments or alignment payments under TEAM.
    SNF stands for skilled nursing facility.
    Sole community hospital (SCH) means a hospital that meets the 
classification criteria specified in Sec.  412.92 of this chapter.
    Spinal fusion means any cervical, thoracic, or lumbar spinal fusion 
procedure paid through the IPPS under MS-DRG 453-455, 459-460, or 471-
473, or through the OPPS under HCPCS codes 22551, 22554, 22612, 22630, 
or 22633.
    SHFFT (Surgical Hip and Femur Fracture Treatment) means a hip 
fixation procedure, with or without

[[Page 36541]]

fracture reduction, but excluding joint replacement, that is paid 
through the IPPS under MS-DRGs 480-482.
    Supplier means a supplier as defined in section 1861(d) of the Act 
and codified at Sec.  400.202 of this chapter.
    TAA stands for total ankle arthroplasty.
    TEAM activities mean any activity related to promoting 
accountability for the quality, cost, and overall care for TEAM 
beneficiaries and performance in the model, including managing and 
coordinating care; encouraging investment in infrastructure and 
redesigned care processes for high quality and efficient service 
delivery; or carrying out any other obligation or duty under the model.
    TEAM beneficiary means a beneficiary who meets the beneficiary 
inclusion criteria in Sec.  512.535 and who is in an episode.
    TEAM collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) Therapy Group Practice (TGP).
    TEAM data sharing agreement means an agreement between the TEAM 
participant and CMS that includes the terms and conditions for any 
beneficiary-identifiable data shared with the TEAM participant under 
Sec.  512.562.
    TEAM HCC count refers to the TEAM Hierarchical Condition Category 
count, which is a categorical risk adjustment variable designed to 
reflect a beneficiary's overall health status during a 90-day lookback 
period by grouping similar diagnoses into one related category and 
counting the total number of diagnostic categories that apply to the 
beneficiary.
    TEAM participant means an acute care hospital that initiates 
episodes and is paid under the IPPS with a CCN primary address located 
in one of the geographic areas selected for participation in TEAM in 
accordance with Sec.  512.515.
    TEAM payment means a payment made by CMS only to TEAM participants, 
or a payment adjustment made only to payments made to TEAM 
participants, under the terms of TEAM that is not applicable to any 
other providers or suppliers.
    TEAM reconciliation report means the report prepared after each 
reconciliation that CMS provides to the TEAM participant notifying the 
TEAM participant of the outcome of the reconciliation.
    TGP or therapy group practice means an entity that is enrolled in 
Medicare as a therapy group in private practice, includes at least one 
owner or employee who is a therapist in private practice, does not 
include an owner or employee who is a physician or nonphysician 
practitioner, and has a valid and active TIN.
    THA means total hip arthroplasty.
    Therapist means one of the following individuals as defined at 
Sec.  484.4 of this chapter:
    (1) Physical therapist.
    (2) Occupational therapist.
    (3) Speech-language pathologist.
    Therapist in private practice means a therapist that--
    (1) Complies with the special provisions for physical therapists in 
private practice in Sec.  410.60(c) of this chapter;
    (2) Complies with the special provisions for occupational 
therapists in private practice in Sec.  410.59(c) of this chapter; or
    (3) Complies with the special provisions for speech-language 
pathologists in private practice in Sec.  410.62(c) of this chapter.
    TIN stands for taxpayer identification number.
    TKA stands for total knee arthroplasty.
    Track 1 means a participation track in TEAM in which a TEAM 
participant may participate for the first performance year. TEAM 
participants in Track 1 are subject to the CQS adjustment percentage 
described in Sec.  512.550(d)(1)(i), the limitations on gain described 
in Sec.  512.550(e)(2) and the calculation of the reconciliation 
payment described in Sec.  512.550(g).
    Track 2 means a participation track in TEAM in which certain TEAM 
participants, as described in Sec.  512.520(b)(3), may request to 
participate in for performance years 2 through 5. TEAM participants in 
Track 2 are subject to the CQS adjustment percentage described in Sec.  
512.550(d)(1)(ii), limitations on gain and loss described in Sec.  
512.550(e)(2) and Sec.  512.550(e)(3), and the calculation of the 
reconciliation payment or repayment amount described in Sec.  
512.550(g).
    Track 3 means a participation track in TEAM in which a TEAM 
participant may participate in for performance years 1 through 5. TEAM 
participants in Track 3 are subject to the CQS adjustment percentage 
described in Sec.  512.550(d)(1)(iii), limitations on loss and gain 
described in Sec.  512.550(e)(1) and in Sec.  512.550(e)(2), and the 
calculation of the reconciliation payment or repayment amount described 
in Sec.  512.550(g).
    Underserved community means a population sharing a particular 
characteristic, including geography, that has been systematically 
denied a full opportunity to participate in aspects of economic, 
social, and civic life.
    U.S. Territories means American Samoa, the Federated States of 
Micronesia, Guam, the Marshall Islands, and the Commonwealth of the 
Northern Mariana Islands, Palau, Puerto Rico, U.S. Minor Outlying 
Islands, and the U.S. Virgin Islands.
    Weighted scaled score means the scaled quality measure score 
multiplied by its normalized weight.

TEAM Participation


Sec.  512.515  Geographic areas.

    (a) General. CMS selects the CBSAs included in TEAM. All acute care 
hospitals paid under the IPPS and located within the selected CBSAs 
must participate in TEAM. CMS uses a stratified random sampling to 
select the CBSAs.
    (b) Exclusions. CMS excludes from the selection of geographic areas 
CBSAs that meet any of the following criteria:
    (1) Are located entirely in the State of Maryland.
    (2) Are located partially in Maryland, and in which more than 50 
percent of the five episode categories tested in TEAM were initiated at 
a Maryland hospital between January 1, 2022 and June 30, 2023.
    (3) Did not have at least one episode for at least one of the five 
episode categories tested in TEAM between January 1, 2022 and June 30, 
2023.
    (c) Stratification. CMS stratifies the CBSAs that are not excluded 
in accordance with paragraph (b) of this section into ``high'' and 
``low'' categories based four characteristics. CMS then stratifies the 
CBSAs into mutually exclusive groups corresponding to the 16 unique 
combinations of high and low values, based on the median, across the 
four characteristics. CMS then moves outlier CBSAs with a very high 
number of safety net hospitals into a separate group and thereby 
creates a total of 17 mutually exclusive stratified groups. The four 
characteristics are as follows:
    (1) Average episode spend for a broad set of episode categories 
tested in the

[[Page 36542]]

BPCI Advanced Model, as described in Sec.  512.505, between January 1, 
2022 and June 30, 2023.
    (2) Number of acute care hospitals paid under the IPPS between 
January 1, 2022 and June 30, 2023.
    (3) Past exposure to Bundled Payments for Care Improvement (BPCI) 
Models 2, 3, and 4, as described in Sec.  512.505, Comprehensive Care 
for Joint Replacement (CJR) as described in Sec.  512.505, or BPCI 
Advanced between October 1, 2013 and December 31, 2022.
    (4) Number of Safety Net hospitals in 2022 that have initiated at 
least one episode between January 1, 2022 and June 30, 2023 for at 
least one of the five episode categories tested in TEAM.
    (d) Random selection. CMS randomly selects CBSAs from the 17 
stratified groups, with a higher chance of selection for those CBSAs 
with a high number of safety net hospitals or low past exposure to 
bundles and a lower chance of selection for all other CBSAs.


Sec.  512.520  Participation tracks.

    (a) For performance year 1: (1) The TEAM participant may choose to 
participate in Track 1 or Track 3.
    (2) The TEAM participant must notify CMS of its track choice, prior 
to performance year 1, in a form and manner and by a date specified by 
CMS.
    (3) CMS assigns the TEAM participant to Track 1 for performance 
year 1 if a TEAM participant does not choose a track in the form and 
manner and by the date specified by CMS.
    (b) For performance years 2 through 5: (1) CMS assigns a TEAM 
participant to participate in Track 3 unless the TEAM participant 
requests to participate in Track 2 and receives approval from CMS to 
participate in Track 2.
    (2) The TEAM participant must notify CMS of its Track 2 request 
prior to performance year 2, and prior to every performance year 
thereafter, in a form and manner and by a date specified by CMS.
    (3) CMS does not approve a TEAM participant's request to 
participate in Track 2 submitted in accordance with paragraph (b)(2) of 
this section unless the TEAM participant is one of the following 
hospital types at the time of the request:
    (i) Medicare-dependent hospital (as defined in Sec.  512.505).
    (ii) Rural hospital (as defined in Sec.  512.505).
    (iii) Safety Net hospital (as defined in Sec.  512.505).
    (iv) Sole community hospital (as defined in Sec.  512.505).
    (v) Essential access community hospital (as defined in Sec.  
512.505).
    (4) A TEAM participant who does not notify CMS of its Track 2 
request prior to a given performance year in the form and manner and by 
the date specified by CMS or who is not one of the hospital types 
specified in paragraph (b)(3) of this section at the time of the 
request is assigned to Track 3 for the applicable performance year.


Sec.  512.522  APM options.

    (a) TEAM APM options. For performance years 1 through 5, a TEAM 
participant may choose either of the following options based on their 
CEHRT use and track participation:
    (1) AAPM option. A TEAM participant participating in Track 2 or 
Track 3 may select the AAPM option by attesting in a form and manner 
and by a date specified by CMS to their use of CEHRT, as defined in 
Sec.  414.1305 of this chapter, on an annual basis prior to the start 
of each performance year.
    (i) A TEAM participant that selects the AAPM option as provided for 
in paragraph (a)(1) must provide their CMS electronic health record 
certification ID in a form and manner and by a date specified by CMS on 
annual basis prior to the end of each performance year.
    (ii) A TEAM participant that selects the AAPM option as provided 
for in paragraph (a)(1) must retain documentation of their attestation 
to CEHRT use and provide access to the documentation in accordance with 
Sec.  512.586.
    (2) Non-AAPM option. CMS assigns the TEAM participant to the non-
AAPM option if the TEAM participant is in Track 1 or if the TEAM 
participant is in Track 2 or Track 3 and does not attest in a form and 
manner and by a date specified by CMS to their use of CEHRT as defined 
in Sec.  414.1305 of this chapter.
    (b) Financial arrangements list. A TEAM participant with TEAM 
collaborators, collaboration agents, or downstream collaboration agents 
during a performance year must submit to CMS a financial arrangements 
list in a form and manner and by a date specified by CMS on a quarterly 
basis for each performance year. The financial arrangements list must 
include the following:
    (1) TEAM collaborators. For each physician, nonphysician 
practitioner, or therapist who is a TEAM collaborator during the 
performance year:
    (i) The name, TIN, and NPI of the TEAM collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the TEAM participant and the TEAM collaborator.
    (2) Collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a collaboration agent during the 
performance year:
    (i) The name, TIN, and NPI of the collaboration agent and the name 
and TIN of the TEAM collaborator with which the collaboration agent has 
entered into a distribution arrangement.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the TEAM collaborator and the 
collaboration agent.
    (3) Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the performance year:
    (i) The name, TIN, and NPI of the downstream collaboration agent 
and the name and TIN of the collaboration agent with which the 
downstream collaboration agent has entered into a downstream 
distribution arrangement.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent and 
the downstream collaboration agent.
    (c) Clinician engagement list. A TEAM participant must submit to 
CMS a clinician engagement list in a form and manner and by a date 
specified by CMS on a quarterly basis during each performance year. The 
clinician engagement list must include the following:
    (1) For each physician, nonphysician practitioner, or therapist who 
is not on a TEAM participant's financial arrangements list during the 
performance year but who does have a contractual relationship with the 
TEAM participant and participates in TEAM activities during the 
performance year:
    (i) The name, TIN, and NPI of the physician, nonphysician 
practitioner, or therapist.
    (ii) The start date and, if applicable, the end date for the 
contractual relationship between the physician, nonphysician 
practitioner, or therapist and the TEAM participant.
    (d) Attestation to no individuals. A TEAM participant with no 
individuals that meet the criteria specified in paragraphs (b)(1) 
through (3) of this section for the financial arrangements list or 
paragraph (c) of this section for the clinician engagement list must 
attest in a form and manner and by a date specified by CMS that there 
are no financial arrangements or clinician engagements to report.
    (e) Documentation requirements. A TEAM participant that submits a 
financial arrangements list specified in paragraph (b) of this section 
or a clinician engagement list specified in paragraph (c) of this 
section must retain and provide access to the documentation in 
accordance with Sec.  512.586.

[[Page 36543]]

Scope of Episodes Being Tested


Sec.  512.525  Episodes.

    (a) Time periods. All episodes must begin on or after January 1, 
2026 and end on or before December 31, 2030.
    (b) Episode attribution. All items and services included in the 
episode are attributed to the TEAM participant at which the anchor 
hospitalization or anchor procedure, as applicable, occurs.
    (c) Episode initiation. An episode is initiated by--
    (1) A beneficiary's admission to a TEAM participant for an anchor 
hospitalization that is paid under a MS-DRG specified in paragraph (d) 
of this section; or
    (2) A beneficiary's receipt of an anchor procedure billed under a 
HCPCS code specified in paragraph (d) of this section. If an anchor 
hospitalization is initiated on the same day as or within 3 days of an 
outpatient procedure for the same episode category, the episode start 
date will be that of the outpatient procedure rather than the admission 
date, and an anchor procedure will not be initiated.
    (d) Episode categories. The MS-DRGs and HCPCS codes included in the 
episodes are as follows:
    (1) Lower extremity joint replacement (LEJR):
    (i) IPPS discharge under MS-DRG 469, 470, 521, or 522; or
    (ii) OPPS claim for HCPCS codes 27447, 27130, or 27702.
    (2) Surgical hip/femur fracture treatment (SHFFT). IPPS discharge 
under MS-DRG 480 to 482.
    (3) Coronary artery bypass graft (CABG). IPPS discharge under MS-
DRG 231 to 236.
    (4) Spinal fusion:
    (i) IPPS discharge under MS-DRG 453, 454, 455, 459, 460, 471, 472, 
473; or
    (ii) OPPS claim for HCPCS codes 22551, 22554, 22612, 22630, or 
22633.
    (5) Major bowel procedure. IPPS discharge under MS-DRG 329 to 331.
    (e) Included services. All Medicare Part A and B items and services 
are included in the episode, except as specified in paragraph (f) of 
this section. These services include, but are not limited to, the 
following:
    (1) Physicians' services.
    (2) Inpatient hospital services (including hospital readmissions).
    (3) IPF services.
    (4) LTCH services.
    (5) IRF services.
    (6) SNF services.
    (7) HHA services.
    (8) Hospital outpatient services.
    (9) Outpatient therapy services.
    (10) Clinical laboratory services.
    (11) DME.
    (12) Part B drugs and biologicals, except for those excluded under 
paragraph (f) of this section.
    (13) Hospice services.
    (14) Part B professional claims dated in the 3 days prior to an 
anchor hospitalization if a claim for the surgical procedure for the 
same episode category is not detected as part of the hospitalization 
because the procedure was performed by the TEAM participant on an 
outpatient basis but the patient was subsequently admitted as an 
inpatient.
    (f) Excluded services. The following items, services, and payments 
are excluded from the episode:
    (1) Select items and services considered unrelated to the anchor 
hospitalization or the anchor procedure for episodes in the baseline 
period and performance year, including, but not limited to, the 
following:
    (i) Inpatient hospital admissions for MS-DRGs that group to the 
following categories of diagnoses:
    (A) Oncology.
    (B) Trauma medical.
    (C) Organ transplant.
    (D) Ventricular shunt.
    (ii) Inpatient hospital admissions that fall into the following 
Major Diagnostic Categories (MDCs):
    (A) MDC 02 (Diseases and Disorders of the Eye).
    (B) MDC 14 (Pregnancy, Childbirth, and Puerperium).
    (C) MDC 15 (Newborns).
    (D) MDC 25 (Human Immunodeficiency Virus).
    (2) New technology add-on payments, as defined in part 412, subpart 
F of this chapter for episodes in the baseline period and performance 
year.
    (3) Transitional pass-through payments for medical devices as 
defined in Sec.  419.66 of this chapter for episodes initiated in the 
baseline period and performance year.
    (4) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter for episodes in the baseline period and 
performance year.
    (5) Part B payments for low-volume drugs, high-cost drugs and 
biologicals, and blood clotting factors for hemophilia for episodes in 
the baseline period and performance year, billed on outpatient, 
carrier, and DME claims, defined as--
    (i) Drug/biological HCPCS codes that are billed in fewer than 31 
episodes in total across all episodes in TEAM during the baseline 
period;
    (ii) Drug/biological HCPCS codes that are billed in at least 31 
episodes in the baseline period and have a mean cost of greater than 
$25,000 per episode in the baseline period; and
    (iii) HCPCS codes corresponding to clotting factors for hemophilia 
patients, identified in the quarterly average sales price file for 
certain Medicare Part B drugs and biologicals as HCPCS codes with 
clotting factor equal to 1, HCPCS codes for new hemophilia clotting 
factors not included in the baseline period, and other HCPCS codes 
identified as hemophilia.
    (6) Part B payments, in addition to those listed in paragraph 
(f)(5) of this section, for low-volume drugs, high-cost drugs and 
biologicals, and blood clotting factors for hemophilia for episodes 
initiated in the performance year, billed on outpatient, carrier, and 
DME claims, defined as--
    (i) Drug/biological HCPCS codes that were not captured in the 
baseline period and appear in 10 or fewer episodes in the performance 
year;
    (ii) Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, and have a mean cost of greater than $25,000 per episode in the 
performance year; and
    (iii) Drug/biological HCPCS codes that were not included in the 
baseline period, appear in more than 10 episodes in the performance 
year, have a mean cost of $25,000 or less per episode in the 
performance year, and correspond to a drug/biological that appears in 
the baseline period but was assigned a new HCPCS code between the 
baseline period and the performance year.
    (iv) HCPCS codes for new hemophilia clotting factors not included 
in the baseline period.
    (g) List of excluded services. The list of excluded MS-DRGs, MDCs, 
and HCPCS codes is posted on the CMS website.
    (h) Updating the list of excluded services. The list of excluded 
services is updated through rulemaking to reflect:
    (1) Changes to the MS-DRGs under the IPPS.
    (2) Coding changes.
    (3) Other issues brought to CMS' attention.


Sec.  512.535  Beneficiary inclusion criteria.

    (a) Episodes tested in TEAM include only those in which care is 
furnished to beneficiaries who meet all of the following criteria upon 
admission for an anchor procedure or anchor hospitalization:
    (1) Are enrolled in Medicare Parts A and B.
    (2) Are not eligible for Medicare on the basis of having end stage 
renal disease, as described in Sec.  406.13 of this chapter.
    (3) Are not enrolled in any managed care plan (for example, 
Medicare

[[Page 36544]]

Advantage, health care prepayment plans, or cost-based health 
maintenance organizations).
    (4) Are not covered under a United Mine Workers of America health 
care plan.
    (5) Have Medicare as their primary payer.
    (b) The episode is canceled in accordance with Sec.  512.537(b) if 
at any time during the episode a beneficiary no longer meets all of the 
criteria in this section.


Sec.  512.537  Determination of the episode.

    (a) Episode conclusion. (1) An episode ends on the 30th day 
following the date of the anchor procedure or the date of discharge 
from the anchor hospitalization, as applicable, with the date of the 
anchor procedure or the date of discharge from the anchor 
hospitalization being counted as the first day in the 30-day post-
discharge period.
    (b) Cancellation of an episode. The episode is canceled and is not 
included in the reconciliation calculation as specified in Sec.  
512.545 if any of the following occur:
    (1) The beneficiary ceases to meet any criterion listed in Sec.  
512.535.
    (2) The beneficiary dies during the anchor hospitalization or the 
outpatient stay for the anchor procedure.
    (3) The episode qualifies for cancellation due to extreme and 
uncontrollable circumstances. An extreme and uncontrollable 
circumstance occurs if both of the following criteria are met:
    (i) The TEAM participant has a CCN primary address that--
    (A) Is located in an emergency area, as those terms are defined in 
section 1135(g) of the Act, for which the Secretary has issued a waiver 
under section 1135 of the Act; and
    (B) Is located in a county, parish, or tribal government designated 
in a major disaster declaration or emergency disaster declaration under 
the Stafford Act.
    (ii) The date of admission to the anchor hospitalization or the 
date of the anchor procedure is during an emergency period (as defined 
in section 1135(g) of the Act) or in the 30 days before the date that 
the emergency period (as defined in section 1135(g) of the Act) begins.

Pricing Methodology


Sec.  512.540  Determination of preliminary target prices.

    (a) Preliminary target price application. CMS establishes 
preliminary target prices for TEAM participants for each performance 
year of the model as follows:
    (1) MS-DRG/HCPCS episode type. CMS uses the MS-DRGs and, as 
applicable, HCPCS codes specified in Sec.  512.525(d) when calculating 
the preliminary target prices for each MS-DRG/HCPCS episode type.
    (i) CMS determines a separate preliminary target price for each of 
the 24 MS-DRGs specified in Sec.  512.525(d).
    (ii) Preliminary target prices for a subset of the MS-DRGs 
specified in Sec.  512.525(d) include certain HCPCS codes as follows:
    (A) HCPCS 27130 and 27447 are included in MS-DRG 470
    (B) HCPCS 27702 is included in MS-DRG 469.
    (C) HCPCS 22633 is included in MS-DRG 455.
    (D) HCPCS 22612 and 22630 are included in MS-DRG 460.
    (E) HCPCS 22551 and 22554 are included in MS-DRG 473.
    (2) Applicable time period for preliminary target prices. CMS 
calculates preliminary target prices for each MS-DRG/HCPCS episode type 
and region for each performance year and applies the preliminary target 
price to each episode based on the episode's date of discharge from the 
anchor hospitalization or the episode's date of the anchor procedure, 
as applicable.
    (3) Episodes that begin in one performance year and end in the 
subsequent performance year. CMS applies the preliminary target price 
to the episode based on the date of discharge from the anchor 
hospitalization or the date of the anchor procedure, as applicable, but 
reconciles the episode based on the end date of the episode.
    (b) Preliminary target price calculation.
    (1) CMS calculates preliminary target prices based on average 
baseline episode spending for the region where the TEAM participant is 
located.
    (i) The region used for calculating the preliminary target price 
corresponds to the U.S. Census Division associated with the primary 
address of the CCN of the TEAM participant, and the regional episode 
spending amount is based on all hospitals in the region, except as 
specified in Sec.  512.540(b)(1)(ii).
    (ii) In cases where a TEAM participant is located in a CBSA 
selected for participation in TEAM which spans more than one region, 
the TEAM participant and all other hospitals in the CBSA will be 
grouped into the region where the most populous city in the CBSA is 
located for pricing and payment calculations.
    (2) CMS uses the following baseline periods to determine baseline 
episode spending:
    (i) Performance Year 1: Episodes beginning on January 1, 2022 
through December 31, 2024.
    (ii) Performance Year 2: Episodes beginning on January 1, 2023 
through December 31, 2025.
    (iii) Performance Year 3: Episodes beginning on January 1, 2024 
through December 31, 2026.
    (iv) Performance Year 4: Episodes beginning on January 1, 2025 
through December 31, 2027.
    (v) Performance Year 5: Episodes beginning on January 1, 2026 
through December 31, 2028.
    (3) CMS calculates the benchmark price as the weighted average of 
baseline episode spending, applying the following weights:
    (i) Baseline episode spending from baseline year 1 is weighted at 
17 percent.
    (ii) Baseline episode spending from baseline year 2 is weighted at 
33 percent.
    (iii) Baseline episode spending from baseline year 3 is weighted at 
50 percent.
    (4) Exception for high episode spending. CMS applies a high-cost 
outlier cap to baseline episode spending at the 99th percentile of 
regional spending for each of the MS-DRG/HCPCS episode types specified 
in Sec.  512.540(a)(1)(ii).
    (5) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain Medicare incentive programs 
and add-on payments are excluded from baseline episode spending by 
using, with certain modifications, the CMS Price (Payment) 
Standardization Detailed Methodology used for the Medicare spending per 
beneficiary measure in the Hospital Value-Based Purchasing Program.
    (6) Prospective normalization factor. Based on the episodes in the 
most recent calendar year of the baseline period, CMS calculates a 
prospective normalization factor, which is a multiplier that ensures 
that the average risk adjusted target price does not exceed the average 
unadjusted target price, by doing the following:
    (i) CMS applies risk adjustment multipliers, as specified in Sec.  
512.545(a)(1) through (3), to the most recent baseline year episodes to 
calculate the estimated risk-adjusted target price for all performance 
year episodes.
    (ii) CMS divides the mean of the preliminary target price for each 
episode across all hospitals and regions by the mean of the estimated 
risk-adjusted

[[Page 36545]]

target price calculated in Sec.  512.540(b)(6)(i) for the same episode 
types across all hospitals and regions.
    (7) Prospective trend factor. CMS calculates the average regional 
episode spending for each MS-DRG/HCPCS episode type using the most 
recent calendar year of the applicable baseline period. CMS then 
calculates the difference between the average regional spending for 
each MS-DRG/HCPCS episode type during the most recent calendar year of 
the baseline period and the average regional spending for each MS-DRG/
HCPCS episode type during the first years of the baseline period to 
determine the prospective trend factor.
    (8) Communication of preliminary target prices. CMS communicates 
the preliminary target prices for each MS-DRG/HCPCS episode type for 
each region to the TEAM participant before the performance year in 
which they apply.
    (c) Discount factor. CMS incorporates a discount factor of 3 
percent to the TEAM participant's preliminary episode target prices 
intended to reflect Medicare's potential savings from TEAM.


Sec.  512.545  Determination of reconciliation target prices.

    CMS calculates the reconciliation target price as follows:
    (a) CMS risk adjusts the preliminary episode target prices computed 
under Sec.  512.540 at the beneficiary level using a TEAM Hierarchical 
Condition Category (HCC) count risk adjustment factor, an age bracket 
risk adjustment factor, and a social need risk adjustment factor.
    (1) The TEAM HCC count risk adjustment factor uses five variables, 
representing beneficiaries with zero, one, two, three, or four or more 
CMS-HCC conditions based on a 90-day lookback period that begins 91 
days prior to the anchor hospitalization or anchor procedure and ends 
on the day prior to the anchor hospitalization or anchor procedure.
    (2) The age bracket risk adjustment factor uses four variables, 
representing beneficiaries in the following age groups as of the first 
day of the episode:
    (i) Less than 65 years.
    (ii) 65 to less than 75 years.
    (iii) 75 years to less than 85 years.
    (iv) 85 years or more.
    (3) The social need risk adjustment factor uses two variables, 
representing beneficiaries that, as of the first day of the episode--
    (i) Meet one or more of the following measures of social need:
    (A) State ADI above the 8th decile.
    (B) National ADI above the 80th percentile.
    (C) Eligibility for the low-income subsidy.
    (D) Eligibility for full Medicaid benefits.
    (ii) Do not meet any of the three measures of social need in Sec.  
512.545(a)(1)(iii)(A).
    (b) All risk adjustment factors are computed prior to the start of 
the performance year via a linear regression analysis. The regression 
analysis is computed using 3 years of claims data as follows:
    (1) For performance year 1, CMS uses claims data with dates of 
service dated January 1, 2022 to December 31, 2024.
    (2) For performance year 2, CMS uses claims data with dates of 
service dated January 1, 2023 to December 31, 2025.
    (3) For performance year 3, CMS uses claims data with dates of 
service dated January 1, 2024 to December 31, 2026.
    (4) For performance year 4, CMS uses claims data with dates of 
service dated January 1, 2025 to December 31, 2027.
    (5) For performance year 5, CMS uses claims data with dates of 
service dated January 1, 2026 to December 30, 2028.
    (c) The annual linear regression analysis produces exponentiated 
coefficients to determine the anticipated marginal effect of each risk 
adjustment factor on episode costs. CMS transforms, or exponentiates, 
these coefficients, and the resulting coefficients are the TEAM HCC 
count risk adjustment factor, the age bracket risk adjustment factor, 
and the social need risk adjustment factor that would be used during 
reconciliation for the subsequent performance year.
    (d) At the time of reconciliation, the preliminary target prices 
computed under Sec.  512.540 are risk adjusted at the beneficiary level 
by applying the applicable TEAM HCC count risk adjustment factor, the 
age bracket risk adjustment factor, and the social need risk adjustment 
factor specific to the beneficiary in the episode, as set forth in 
paragraph (a)(1) of this section.
    (e) The risk-adjusted preliminary target prices are normalized at 
reconciliation to ensure that the average of the total risk-adjusted 
preliminary target price does not exceed the average of the total non-
risk adjusted preliminary target price.
    (1) The final normalization factor at reconciliation--
    (i) Is the national mean of the benchmark price for each MS-DRG/
HCPCS episode type divided by the national mean of the risk-adjusted 
benchmark price for the same MS-DRG/HCPCS episode type.
    (ii) As applied, cannot exceed + /-5 percent of the prospective 
normalization factor (as specified in Sec.  512.540(b)(7)).
    (2) CMS applies the final normalization factor to the previously 
calculated, beneficiary level, risk-adjusted target prices specific to 
each region and MS-DRG/HCPCS episode type (as specified in paragraph 
(a)(4) of this section) to calculate the reconciliation target prices, 
which are compared to performance year spending at reconciliation, as 
specified in Sec.  512.550(c).

Quality Measures and Composite Quality Score


Sec.  512.547  Quality measures, composite quality score, and display 
of quality measures.

    (a) Quality measures. CMS calculates the quality measures used to 
evaluate the TEAM participant's performance using Medicare claims data 
or patient-reported outcomes data that requires no action or reporting 
by the TEAM participants beyond what is currently required in the 
Hospital Inpatient Quality Reporting Program and the Hospital-Acquired 
Condition Reduction Program. The following quality measures are used 
for public reporting and for determining the TEAM participant's CQS as 
described in paragraph (b) of this section:
    (1) For all episode categories: Hybrid Hospital-Wide All-Cause 
Readmission Measure with Claims and Electronic Health Record Data (CMIT 
ID #356);
    (2) For all episode categories: CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) (CMIT ID #135); and
    (3) For LEJR episodes: Hospital-Level Total Hip and/or Total Knee 
Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance 
Measure (PRO-PM) (CMIT ID #1618).
    (b) Calculation of the composite quality score (CQS). (1) CMS 
converts the TEAM participant's raw quality measure score for the 
performance year into a scaled quality measure score by comparing the 
raw quality measure score to the distribution of raw quality measure 
score percentiles among a national cohort of hospitals, consisting of 
TEAM participants and hospitals not participating in TEAM, in the CQS 
baseline period.
    (i) CMS assigns a scaled quality measure score equal to the 
percentile to which the TEAM Participant's raw quality measure score 
would have belonged in the CQS baseline period.
    (A) CMS assigns the higher scaled quality measure score if the TEAM 
participant's raw quality measure score straddles two percentiles in 
the CQS baseline period.
    (B) CMS assigns a scaled quality measure score of 100 if the TEAM

[[Page 36546]]

participant's raw quality measure score is greater than the maximum of 
the raw quality measure scores in the CQS baseline period.
    (C) CMS assigns a scaled quality measure score of 0 if the raw 
quality measure score is less than the minimum of the raw quality 
measure scores in the baseline period.
    (D) CMS does not assign a scaled quality measure score if the TEAM 
participant has no raw quality measure score.
    (2) CMS calculates a normalized weight for each quality measure by 
dividing the TEAM participant's volume of attributed episodes for a 
given quality measure by the total volume of all the TEAM participant's 
attributed episodes.
    (3) CMS calculates a weighted scaled score for each quality measure 
by multiplying each quality measure's scaled quality measure score, 
computed under paragraph (b)(2) of this section, by its normalized 
weight, computed under paragraph (b)(3) of this section.
    (4) CMS sums each quality measure's weighted scaled score, computed 
under paragraph (b)(4) of this section, to construct the CQS.
    (c) Display of quality measures. (1) CMS displays quality measure 
results on the publicly available CMS website that is specific to TEAM, 
in a form and manner consistent with other publicly reported measures.
    (2) CMS shares quality measures with the TEAM participant prior to 
display on the CMS website.
    (3) CMS uses the following time periods to share quality measure 
performance:
    (i) Quality measure performance in performance year 1 is reported 
in 2027.
    (ii) Quality measure performance in performance year 2 is reported 
in 2028.
    (iii) Quality measure performance in performance year 3 is reported 
in 2029.
    (iv) Quality measure performance in performance year 4 is reported 
in 2030.
    (v) Quality measure performance in performance year 5 is reported 
in 2031.

Reconciliation and Review Process


Sec.  512.550  Reconciliation process and determination of the 
reconciliation payment or repayment amount.

    (a) General. Providers and suppliers furnishing items and services 
included in the episode bill for such items and services in accordance 
with existing Medicare rules.
    (b) Reconciliation process. Six months after the end of each 
performance year, CMS does the following:
    (1) Performs a reconciliation calculation to establish a 
reconciliation payment or repayment amount for each TEAM participant.
    (2) For TEAM participants that experience a reorganization event in 
which one or more hospitals reorganize under the CCN of a TEAM 
participant, performs--
    (i) Separate reconciliation calculations for each predecessor TEAM 
participant for episodes where the anchor hospitalization admission or 
the anchor procedure occurred before the effective date of the 
reorganization event; and
    (ii) Reconciliation calculations for each new or surviving TEAM 
participant for episodes where the anchor hospitalization admission or 
anchor procedure occurred on or after the effective date of the 
reorganization event.
    (c) Calculation of the reconciliation amount. CMS compares the 
reconciliation target prices described in Sec.  512.545 and the TEAM 
participant's performance year spending to establish a reconciliation 
amount for the TEAM participant for each performance year as follows:
    (1) CMS determines the performance year spending for each episode 
included in the performance year (other than episodes that have been 
canceled in accordance with Sec.  512.537(b)) using claims data that is 
available 6 months after the end of the performance year.
    (2) CMS calculates and applies the high-cost outlier cap for 
performance year episode spending by applying the calculation described 
in Sec.  512.540(b)(4) to performance year episode spending.
    (3) CMS applies the adjustments specified in Sec.  512.545 to the 
preliminary target prices computed in accordance with Sec.  512.540 to 
calculate the reconciliation target prices.
    (4) CMS aggregates the reconciliation target prices computed in 
accordance with paragraph (c)(3) of this section for all episodes 
included in the performance year (other than episodes that have been 
canceled in accordance with Sec.  512.537(b)).
    (5) CMS subtracts the performance year spending amount determined 
under paragraph (c)(1-2) of this section from the aggregated 
reconciliation target price amount determined under paragraph (c)(4) of 
this section to determine the reconciliation amount.
    (d) Calculation of the quality-adjusted reconciliation amount. CMS 
adjusts the reconciliation amount based on the Composite Quality Score 
as follows:
    (1) CMS calculates a CQS adjustment percentage based on a TEAM 
participant's CQS, computed in accordance with Sec.  512.547(b).
    (i) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts for TEAM participants in Track 1.
    (ii) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts and up to 15 percent for negative 
reconciliation amounts for TEAM participants in Track 2.
    (iii) CMS applies a CQS adjustment percentage up to 10 percent for 
positive reconciliation amounts and up to 10 percent for negative 
reconciliation amounts for TEAM participants in Track 3.
    (2) CMS multiplies the CQS adjustment percentage, computed under 
paragraph (d)(1) of this section, by the TEAM participant's positive or 
negative reconciliation amount calculated in paragraph (c) of this 
section to construct the CQS adjustment amount.
    (3) CMS subtracts the CQS adjustment amount, computed from 
paragraph (d)(2) of this section, from the positive or negative 
reconciliation amount calculated in paragraph (c) of this section to 
construct the quality-adjusted reconciliation amount.
    (e) Calculation of the net payment reconciliation amount (NPRA). 
CMS applies stop-loss and stop gain limits to the quality-adjusted 
reconciliation amount computed in paragraph (d) of this section to 
calculate the NPRA as follows:
    (1) Limitation on loss. For TEAM participants in Track 3, except as 
provided in paragraph (e)(3) of this section, the repayment amount for 
a performance year cannot exceed 20 percent of the aggregated 
reconciliation target price amount calculated in paragraph (c)(3) of 
this section for the performance year. The post-episode spending 
calculation amount in paragraph (f) of this section is not subject to 
the limitation on loss.
    (2) Limitation on gain. For TEAM participants in Tracks 1 or 2, the 
reconciliation payment amount for a performance year cannot exceed 10 
percent of the aggregated reconciliation target price amount calculated 
in accordance with paragraph (c)(3) of this section for the performance 
year. For TEAM participants in Track 3, the reconciliation payment 
amount for a performance year cannot exceed 20 percent of the 
aggregated reconciliation target price amount calculated in accordance 
with paragraph (c)(3) of this section for the performance year. The 
post-episode spending amount calculated in accordance with paragraph 
(f) of this section is not subject to the limitation on gain.
    (3) Limitation on loss for certain providers. For performance years 
2-5, the repayment amount for a TEAM

[[Page 36547]]

participant in Track 2 defined at Sec.  512.505, or a TEAM participant 
that does not meet the low volume threshold of at least 31 episodes 
across the applicable 3-year baseline period, cannot exceed 10 percent 
of the aggregated reconciliation target price amount calculated in 
accordance with paragraph (c)(3) of this section.
    (f) Post-episode spending calculation. CMS calculates the post-
episode spending amount as follows: If the average post-episode 
spending amount for a TEAM participant in the performance year being 
reconciled is greater than 3 standard deviations above the regional 
average post-episode spending amount for the performance year, then the 
post-episode spending amount that exceeds 3 standard deviations above 
the regional average post-episode spending amount for the performance 
year is subtracted from the NPRA for that performance year.
    (g) Calculation of the reconciliation payment or repayment amount. 
(1) CMS applies the results of the post-episode spending calculation 
set forth in paragraph (f) of this section to the NPRA as follows:
    (i) For TEAM participants whose post-episode spending amount does 
not exceed the limit calculated in paragraph (f) of this section, the 
reconciliation payment or repayment amount is equal to the NPRA.
    (ii) If the TEAM participant's post-episode spending exceeds the 
limit calculated in paragraph (f) of this section, CMS subtracts the 
amount of post-episode spending exceeding the limit from the NPRA to 
calculate the reconciliation payment or repayment amount.
    (2) If the amount calculated in paragraph (g)(1) of this section is 
positive, the TEAM participant is owed a reconciliation payment in that 
amount, to be paid by CMS in one lump sum payment.
    (3) If the amount calculated in paragraph (g)(1) of this section is 
negative, CMS determines the repayment amount as follows:
    (i) For TEAM participants in Track 1 for Performance Year 1, the 
TEAM participant will not owe a repayment amount.
    (ii) For TEAM participants in Track 2 or Track 3 for Performance 
Years 1-5, the Team participant will owe that amount as a repayment to 
CMS.
    (h) TEAM reconciliation report. CMS issues each TEAM participant a 
TEAM reconciliation report for the performance year. Each TEAM 
reconciliation report contains the following:
    (1) The total performance year spending for the TEAM participant.
    (2) The TEAM participant's reconciliation target prices.
    (3) The TEAM participant's reconciliation amount.
    (4) The TEAM participant's composite quality score calculated in 
accordance with Sec.  512.547(b).
    (5) The TEAM participant's quality-adjusted reconciliation amount.
    (6) The stop-loss and stop-gain limits that apply to the TEAM 
participant.
    (7) The TEAM participant's NPRA.
    (8) The TEAM participant's post-episode spending amount, if 
applicable.
    (9) The amount of any reconciliation payment owed to the TEAM 
participant or repayment owed by the TEAM participant to CMS for the 
performance year, if applicable.


Sec.  512.552  Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.

    The TEAM does not replace any existing Medicare incentive programs 
or add-on payments. The TEAM payments are independent of, and do not 
affect, any incentive programs or add-on payments under existing 
Medicare payment systems.


Sec.  512.555  Proration of payments for services that extend beyond an 
episode.

    (a) General. CMS prorates services included in the episode that 
extend beyond the episode so that only those portions of the services 
that were furnished during the episode are included in the calculation 
of the actual episode payments.
    (b) Proration of services. CMS prorates payments for services that 
extend beyond the episode for the purposes of calculating both baseline 
episode spending and performance year spending using the following 
methodology:
    (1) Non-IPPS inpatient services. Non-IPPS inpatient services that 
extend beyond the end of the episode are prorated according to the 
percentage of the actual length of stay (in days) that falls within the 
episode.
    (2) Home health agency services. Home health agency services paid 
under the Medicare prospective payment system in accordance with part 
484, subpart E of this chapter that extend beyond the episode are 
prorated according to the percentage of days, starting with the first 
billable service date and through and including the last billable 
service date, that occur during the episode.
    (3) IPPS services. IPPS services that extend beyond the end of the 
episode are prorated according to the MS-DRG geometric mean length of 
stay, using the following methodology:
    (i) The first day of the IPPS stay is counted as 2 days.
    (ii) If the actual length of stay that occurred during the episode 
is equal to or greater than the MS-DRG geometric mean, the full MS-DRG 
payment is allocated to the episode.
    (iii) If the actual length of stay that occurred during the episode 
is less than the MS-DRG geometric mean length of stay, the MS-DRG 
payment amount is allocated to the episode based on the number of 
inpatient days that fall within the episode.
    (4) If the full amount of the payment is not allocated to the 
episode, any remainder amount is allocated to the post-episode spending 
calculation (defined in Sec.  512.550(f)).


Sec.  512.560  Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in Sec.  512.594, if a TEAM participant 
wishes to dispute calculations involving a matter related to payment, 
reconciliation amounts, repayment amounts, the use of quality measure 
results in determining the composite quality score, or the application 
of the composite quality score during reconciliation, the TEAM 
participant is required to provide written notice of the calculation 
error, in a form and manner and by a date specified by CMS.
    (1) Unless the TEAM participant provides such written notice, CMS 
deems the TEAM reconciliation report to be final 30 calendar days after 
it is issued and proceeds with the payment or repayment processes as 
applicable.
    (2) If CMS receives a notice of a calculation error within 30 
calendar days of the issuance of the TEAM reconciliation report, CMS 
responds in writing within 30 calendar days to either confirm that 
there was an error in the calculation or verify that the calculation is 
correct. CMS reserves the right to extend the time for its response 
upon written notice to the TEAM participant.
    (3) Only TEAM participants may use the calculation error process 
described in this part.
    (b) Exception to the appeals process. If the TEAM participant 
contests a matter that does not involve an issue contained in, or a 
calculation that contributes to, a TEAM reconciliation report, a notice 
of calculation error is not required. In these instances, if CMS does 
not receive a request for reconsideration from the TEAM participant 
within 10 calendar days of the notice of the initial reconciliation,

[[Page 36548]]

the initial determination is deemed final and CMS proceeds with the 
action indicated in the initial determination. This does not apply to 
the limitations on review in Sec.  512.594.


Sec.  512.561  Reconsideration review processes.

    (a) Applicability of this section. This section is applicable only 
where section 1869 of the Act has been waived or is not applicable for 
TEAM participants. This section is only applicable to TEAM 
participants.
    (b) Right to reconsideration. The TEAM participant may request 
reconsideration of a determination made by CMS only if such 
reconsideration is not precluded by section 1115A(d)(2) of the Act or 
this subpart.
    (1) A request for reconsideration by the TEAM participant must 
satisfy the following criteria:
    (i) The request must be submitted to a designee of CMS 
(``Reconsideration Official'') who--
    (A) Is authorized to receive such requests; and
    (B) Did not participate in the determination that is the subject of 
the reconsideration request or, if applicable, the notice of 
calculation error process.
    (ii) The request must include a copy of the initial determination 
issued by CMS and contain a detailed, written explanation of the basis 
for the dispute, including supporting documentation.
    (iii) The request must be made within 30 days of the date of the 
initial determination for which reconsideration is being requested via 
email to an address as specified by CMS.
    (2) Requests that do not meet the requirements of paragraph (b)(1) 
of this section are denied.
    (3) Within 10 business days of receiving a request for 
reconsideration, the Reconsideration Official sends the parties a 
written acknowledgement of receipt of the reconsideration request. This 
acknowledgement sets forth the following:
    (i) The review procedures.
    (ii) A schedule that permits each party to submit position papers 
and supporting documentation in support of the party's position for 
consideration by the reconsideration official.
    (4) The TEAM participant must satisfy the notice of calculation 
error requirements specified in this part before submitting a 
reconsideration request under paragraph (b) of this section.
    (c) Standards for reconsideration. (1) The parties must continue to 
fulfill all responsibilities and obligations under TEAM during the 
course of any dispute arising under this part.
    (2) The reconsideration consists of a review of documentation that 
is submitted timely and in accordance with the standards specified by 
the reconsideration official.
    (3) The burden of proof is on the TEAM participant to demonstrate 
to the reconsideration official with clear and convincing evidence that 
the determination is inconsistent with the terms of this subpart.
    (d) Reconsideration determination. (1) The reconsideration 
determination is based solely upon--
    (i) Position papers and supporting documentation that are timely 
submitted to the reconsideration official per the schedule defined in 
paragraph (b)(3)(ii) and meet the standards for submission under 
paragraph (b)(1) of this section; and
    (ii) Documents and data that were timely submitted to CMS in the 
required format before CMS made the determination that is the subject 
of the reconsideration request.
    (2) The reconsideration official issues the reconsideration 
determination to CMS and to the TEAM participant in writing.
    (3) Absent unusual circumstances, in which case the reconsideration 
official reserves the right to an extension upon written notice to the 
TEAM participant, the reconsideration determination is issued within 60 
days of receipt of timely filed position papers and supporting 
documentation per the schedule defined in paragraph (b)(3)(ii) of this 
section.
    (4) The reconsideration determination is final and binding 30 days 
after its issuance, unless the TEAM participant or CMS timely requests 
review of the reconsideration determination in accordance with 
paragraphs (e)(1) and (2) of this section.
    (e) CMS Administrator review. The TEAM participant or CMS may 
request that the CMS Administrator review the reconsideration 
determination.
    (1) The request must be made via email within 30 days of the date 
of the reconsideration determination to the address specified by CMS.
    (2) The request must include a copy of the reconsideration 
determination and a detailed written explanation of why the TEAM 
participant or CMS disagrees with the reconsideration determination.
    (3) The CMS Administrator promptly sends the parties a written 
acknowledgement of receipt of the request for review.
    (4) The CMS Administrator sends the parties notice of the 
following:
    (i) Whether the request for review is granted or denied.
    (ii) If the request for review is granted, the review procedures 
and a schedule that permits each party to submit a brief in support of 
the party's position for consideration by the CMS Administrator.
    (5) If the request for review is denied, the reconsideration 
determination is final and binding as of the date the request for 
review is denied.
    (6) If the request for review is granted--
    (i) The record for review consists solely of--
    (A) Timely submitted briefs and the evidence contained in the 
record of the proceedings before the reconsideration official; and
    (B) Evidence as set forth in the documents and data described in 
paragraph (d)(1)(ii) of this section;
    (ii) The CMS Administrator reviews the record and issues to CMS and 
to the TEAM participant a written determination; and
    (iii) The written determination of the CMS Administrator is final 
and binding as of the date the written determination is sent.

Data Sharing and Other Requirements


Sec.  512.562  Data sharing with TEAM participants.

    (a) General. CMS shares certain beneficiary-identifiable data as 
described in paragraphs (b), (c), and (e) of this section and certain 
regional aggregate data as described in paragraph (d) of this section 
with TEAM participants regarding TEAM beneficiaries and performance 
under the model.
    (b) Beneficiary-identifiable claims data. CMS shares beneficiary-
identifiable claims data with TEAM participants as follows:
    (1) CMS makes available certain beneficiary-identifiable claims 
data described in paragraph (b)(5) of this section for TEAM 
participants to request for purposes of conducting health care 
operations work that falls within the first or second paragraph of the 
definition of health care operations at 45 CFR 164.501 regarding their 
TEAM beneficiaries.
    (2) A TEAM participant that wishes to receive beneficiary-
identifiable claims data for its TEAM beneficiaries must do all of the 
following:
    (i) Submit a formal request for the data on an annual basis in a 
manner and form and by a date specified by CMS, indicating their 
selection of summary beneficiary-identifiable data, raw beneficiary-
identifiable data, or both, and attest that--
    (A) The TEAM participant is requesting claims data of TEAM

[[Page 36549]]

beneficiaries who would be in an episode during the baseline period or 
performance year, as a HIPAA covered entity.
    (B) The TEAM participant's request reflects the minimum data 
necessary, as set forth in paragraph (c) of this section, for the TEAM 
participant to conduct health care operations work that falls within 
the first or second paragraph of the definition of health care 
operations at 45 CFR 164.501.
    (C) The TEAM participant's use of claims data will be limited to 
developing processes and engaging in appropriate activities related to 
coordinating care, improving the quality and efficiency of care, and 
conducting population-based activities relating to improving health or 
reducing health care costs that are applied uniformly to all TEAM 
beneficiaries, in an episode during the baseline period or performance 
year, and that these data will not be used to reduce, limit or restrict 
care for specific Medicare beneficiaries.
    (ii) Sign and submit a TEAM data sharing agreement, as defined in 
Sec.  512.505, with CMS as set forth in paragraph (e) of this section.
    (3) CMS shares this beneficiary-identifiable claims data with a 
TEAM participant in accordance with applicable privacy and security 
laws and established privacy and security protections.
    (4) CMS omits from the beneficiary-identifiable claims data any 
information that is subject to the regulations in 42 CFR part 2 
governing the confidentiality of substance use disorder patient 
records.
    (5) The beneficiary-identifiable claims data will include, when 
available, the following:
    (i) Unrefined (raw) Medicare Parts A and B beneficiary-identifiable 
claims data for TEAM beneficiaries in an episode during the 3-year 
baseline period and performance year.
    (ii) Summarized (summary) Medicare Parts A and B beneficiary-
identifiable claims data for TEAM beneficiaries in an episode during 
the 3-year baseline period and performance year.
    (6) CMS makes available the beneficiary-identifiable claims data 
for retrieval by TEAM participants at the following frequency:
    (i) Annually, at least 1 month prior to every performance year for 
baseline period data, based on the baseline periods described in Sec.  
512.540(b)(2).
    (ii) Monthly during the performance year and for up to 6 months 
after the performance year for performance year data.
    (c) Minimum necessary data. The TEAM participant must limit its 
request for beneficiary-identifiable data under paragraph (b) of this 
section to the minimum necessary Parts A and B data elements which may 
include, but are not limited to the following:
    (1) Medicare beneficiary identifier (ID).
    (2) Procedure code.
    (3) Gender.
    (4) Diagnosis code.
    (5) Claim ID.
    (6) The from and through dates of service.
    (7) The provider or supplier ID.
    (8) The claim payment type.
    (9) Date of birth and death, if applicable.
    (10) Tax identification number.
    (11) National provider identifier.
    (d) Regional aggregate data. (1) CMS shares regional aggregate data 
for the 3-year baseline period and performance years with TEAM 
participants as follows.
    (i) CMS shares 3-year baseline period regional aggregate data 
annually at least 1 month before the performance year, based on the 
baseline periods described in Sec.  512.540(b)(2).
    (ii) CMS shares performance year regional aggregate data on a 
monthly basis during the performance year and for up to 6 months after 
the performance year.
    (2) Regional aggregate data will--
    (i) Be aggregated based on all Parts A and B claims associated with 
episodes in TEAM for the U.S. Census Division in which the TEAM 
participant is located.
    (ii) Summarize average episode spending for episodes in TEAM in the 
U.S. Census Division in which the TEAM participant is located.
    (iii) Be de-identified in accordance with 45 CFR 164.514(b).
    (e) TEAM data sharing agreement. (1) A TEAM participant who wishes 
to retrieve the beneficiary-identifiable data specified in paragraph 
(b) of this section, must complete and submit, on at least an annual 
basis, a signed TEAM data sharing agreement, as defined in Sec.  
512.505, to be provided in a form and manner and by a date specified by 
CMS, under which the TEAM participant agrees:
    (i) To comply with the requirements for use and disclosure of this 
beneficiary-identifiable data that are imposed on covered entities by 
the HIPAA regulations and the requirements of the TEAM set forth in 
this part.
    (ii) To comply with additional privacy, security, breach 
notification, and data retention requirements specified by CMS in the 
TEAM data sharing agreement.
    (iii) To contractually bind each downstream recipient of the 
beneficiary-identifiable data that is a business associate of the TEAM 
participant to the same terms and conditions to which the TEAM 
participant is itself bound in its TEAM data sharing agreement with CMS 
as a condition of the business associate's receipt of the beneficiary-
identifiable data retrieved by the TEAM participant under the TEAM.
    (iv) That if the TEAM participant misuses or discloses the 
beneficiary-identifiable data in a manner that violates any applicable 
statutory or regulatory requirements or that is otherwise non-compliant 
with the provisions of the data sharing agreement, CMS may deem the 
TEAM participant ineligible to retrieve beneficiary-identifiable data 
under paragraph (b) of this section for any amount of time, and the 
TEAM participant may be subject to additional sanctions and penalties 
available under the law.
    (2) A TEAM participant must comply with all applicable laws and the 
terms of the TEAM data sharing agreement in order to retrieve the 
beneficiary-identifiable data.


Sec.  512.563  Health equity plans.

    (a) The TEAM participant may voluntarily submit a health equity 
plan to CMS for performance year 1 that includes the elements specified 
in paragraph (c) of this section,.
    (b) For performance years 2 through 5, the TEAM participant must 
submit a health equity plan in a form and manner and by the dates 
specified by CMS.
    (c) Health equity plans must include the following elements:
    (1) Identifies health disparities in the TEAM participant's 
population of TEAM beneficiaries.
    (2) Identifies health equity goals and describes how the TEAM 
participant will use the health equity goals to monitor and evaluate 
progress in reducing the identified health disparities.
    (3) Describes the health equity plan intervention strategy.
    (4) Identifies health equity plan performance measure(s), the data 
sources used to construct the performance measures, and an approach to 
monitor and evaluate the measures.


Sec.  512.564  Referral to primary care services.

    (a) A TEAM participant must include in hospital discharge planning 
a referral to a supplier of primary care services for a TEAM 
beneficiary, on or prior to

[[Page 36550]]

discharge from an anchor hospitalization or anchor procedure.
    (b) In making the referral described in paragraph (a), the TEAM 
participant must comply with beneficiary freedom of choice, as 
described in Sec.  512.582(a) of this subpart.
    (c) A TEAM participant that does not comply with paragraph (a) of 
this section, may be subject to remedial action as described in Sec.  
512.592.

Financial Arrangements and Beneficiary Incentives


Sec.  512.565  Sharing arrangements.

    (a) General. (1) A TEAM participant may enter into a sharing 
arrangement with a TEAM collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. A TEAM participant must not 
make a gainsharing payment to a TEAM collaborator or receive an 
alignment payment from a TEAM collaborator except in accordance with a 
sharing arrangement.
    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) TEAM participants must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be TEAM 
collaborators.
    (i) These policies must contain criteria related to, and inclusive 
of, the quality of care delivered by the potential TEAM collaborator 
and the provision of TEAM activities.
    (ii) The selection criteria cannot be based directly or indirectly 
on the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the TEAM participant, any TEAM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a TEAM participant, 
TEAM collaborator, collaboration agent, or downstream collaboration 
agent.
    (iii) A selection criterion that considers whether a potential TEAM 
collaborator has performed a reasonable minimum number of services that 
would qualify as TEAM activities, as determined by the TEAM 
participant, will be deemed not to violate the volume or value standard 
if the purpose of the criterion is to ensure the quality of care 
furnished to TEAM beneficiaries.
    (4) If a TEAM participant enters into a sharing arrangement, its 
compliance program must include oversight of sharing arrangements and 
compliance with the applicable requirements of TEAM.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to 
TEAM beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the TEAM collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with all of the following:
    (i) The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees).
    (ii) All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement.
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the TEAM collaborator to 
have or be covered by a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of TEAM 
that apply to its role as a TEAM collaborator, including any 
distribution arrangements.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (6) The board or other governing body of the TEAM participant must 
have responsibility for overseeing the TEAM participant's participation 
in TEAM, its arrangements with TEAM collaborators, its payment of 
gainsharing payments, its receipt of alignment payments, and its use of 
beneficiary incentives in the TEAM model.
    (7) The specifics of the agreement must be documented in writing 
and must be made available to CMS upon request (as outlined in Sec.  
512.590).
    (8) The sharing arrangement must specify the following:
    (i) The purpose and scope of the sharing arrangement.
    (ii) The obligations of the parties, including specified TEAM 
activities and other services to be performed by the parties under the 
sharing arrangement.
    (iii) The date range for which the sharing arrangement is 
effective.
    (iv) The financial or economic terms for payment, including the 
following:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payments.
    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment or alignment payment.
    (9) The sharing arrangement must not--
    (i) Induce the TEAM participant, TEAM collaborator, or any 
employees, contractors, or subcontractors of the TEAM participant or 
TEAM collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    (ii) Restrict the ability of a TEAM collaborator to make decisions 
in the best interests of its patients, including the selection of 
devices, supplies, and treatments.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payment amounts, or 
internal cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, a TEAM 
collaborator must meet quality of care criteria for the performance 
year for which the TEAM participant accrued the internal cost savings 
or earned the reconciliation payment that comprises the gainsharing 
payment. The quality-of-care criteria must be established by the TEAM 
participant and directly relate to the episode.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator other than 
ACO, PGP, NPPGP, or TGP must have directly furnished a billable item or 
service to a TEAM beneficiary during an episode that was attributed to 
the same performance year for which the TEAM participant accrued the 
internal cost savings or earned the reconciliation payment amount or 
repayment amount that comprises the gainsharing payment or the 
alignment payment.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:

[[Page 36551]]

    (A) The PGP, NPPGP, or TGP must have billed for an item or service 
that was rendered by one or more PGP member, NPPGP member, or TGP 
member respectively to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount or repayment amount that comprises the gainsharing payment or 
the alignment payment.
    (B) The PGP, NPPGP, or TGP must have contributed to TEAM activities 
and been clinically involved in the care of TEAM beneficiaries during 
the same performance year for which the TEAM participant accrued the 
internal cost savings or earned the reconciliation payment amount or 
repayment amount that comprises the gainsharing payment or the 
alignment payment. A non-exhaustive list of examples where, a PGP, 
NPPGP, or TGP might have been clinically involved in the care of TEAM 
beneficiaries includes--
    (1) Providing care coordination services to TEAM beneficiaries 
during or after inpatient admission;
    (2) Engaging with a TEAM participant in care redesign strategies, 
and actually performing a role in implementing such strategies, that 
are designed to improve the quality of care for episodes and reduce 
episode spending; or
    (3) In coordination with other providers and suppliers (such as PGP 
members, NPPGP members, or TGP members; the TEAM participant; and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of TEAM beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a TEAM collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount or repayment amount that comprises the gainsharing payment or 
the alignment payment; and
    (B) The ACO must have contributed to TEAM activities and been 
clinically involved in the care of TEAM beneficiaries during the 
performance year for which the TEAM participant accrued the internal 
cost savings or earned the reconciliation payment amount or repayment 
amount that comprises the gainsharing payment or the alignment payment. 
A non-exhaustive list of ways in which an ACO might have been 
clinically involved in the care of TEAM beneficiaries could include--
    (1) Providing care coordination services to TEAM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with a TEAM participant in care redesign strategies 
and performing a role in implementing such strategies that are designed 
to improve the quality of care and reduce spending for episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the TEAM participant, and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of TEAM beneficiaries.
    (3)(i) The methodology for accruing, calculating and verifying 
internal cost savings will be determined by the TEAM participant; 
however, the methodology must be transparent, measurable, and 
verifiable in accordance with generally accepted accounting principles 
(GAAP) and Government Auditing Standards (The Yellow Book).
    (ii) The methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the TEAM 
participant through the documented implementation of TEAM activities 
identified by the TEAM participant and must exclude--
    (A) Any savings realized by any individual or entity that is not 
the TEAM participant; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.
    (4) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is based solely on quality of care 
and the provision of TEAM activities. The methodology may take into 
account the amount of TEAM activities provided by a TEAM collaborator 
relative to other TEAM collaborators.
    (5) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from reconciliation payment amounts must not 
exceed the amount of that year's reconciliation payment amount.
    (6) No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the TEAM 
participant, any TEAM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with a TEAM participant, TEAM collaborator, collaboration agent, or 
downstream collaboration agent.
    (7) A TEAM participant must not make a gainsharing payment to a 
TEAM collaborator if CMS has notified the TEAM participant that such 
TEAM collaborator is subject to any action by CMS, HHS or any other 
governmental entity, or its designees, for noncompliance with this part 
or the fraud and abuse laws, for the provision of substandard care to 
TEAM beneficiaries or other integrity problems, or for any other 
program integrity problems or noncompliance with any other laws or 
regulations.
    (8) The sharing arrangement must require the TEAM participant to 
recoup any gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation payment amount or was based on the 
submission of false or fraudulent data.
    (9) Alignment payments from a TEAM collaborator to a TEAM 
participant may be made at any interval that is agreed upon by both 
parties, and must not be--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount; payment;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by a TEAM participant in the absence of a repayment 
amount.
    (10) The TEAM participant must not receive any amounts under a 
sharing arrangement from a TEAM collaborator that are not alignment 
payments.
    (11) For a performance year, the aggregate amount of all alignment 
payments received by the TEAM participant must not exceed 50 percent of 
the TEAM participant's repayment amount.
    (12) The aggregate amount of all alignment payments from a TEAM 
collaborator to the TEAM participant may not be greater than--
    (i) With respect to a TEAM collaborator other than an ACO, 25 
percent of the TEAM participant's repayment amount.
    (ii) With respect to a TEAM collaborator that is an ACO, 50 percent 
of the TEAM participant's repayment amount.
    (13) The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the TEAM

[[Page 36552]]

participant, any TEAM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with a TEAM participant, TEAM collaborator, collaboration agent, or 
downstream collaboration agent.
    (14) All gainsharing payments and any alignment payments must be 
administered by the TEAM participant in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (15) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) TEAM participants must--
    (i) Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    (ii) Publicly post (and update on at least a quarterly basis) on a 
web page on the TEAM participant's website--
    (A) Accurate lists of all current TEAM collaborators, including the 
TEAM collaborators' names and addresses as well as accurate historical 
lists of all TEAM collaborators.
    (B) Written policies for selecting individuals and entities to be 
TEAM collaborators as required by Sec.  512.565(a)(3).
    (iii) Maintain, and require each TEAM collaborator to maintain, 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes, at a 
minimum:
    (A) Nature of the payment (gainsharing payment or alignment 
payment);
    (B) Identity of the parties making and receiving the payment;
    (C) Date of the payment;
    (D) Amount of the payment; and
    (E) Date and amount of any recoupment of all or a portion of a TEAM 
collaborator's gainsharing payment.
    (F) Explanation for each recoupment, such as whether the TEAM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment of a reconciliation payment or was based 
on the submission of false or fraudulent data.
    (2) The TEAM participant must keep records of all of the following:
    (i) Its process for determining and verifying its potential and 
current TEAM collaborators' eligibility to participate in Medicare.
    (ii) Its plan to track internal cost savings.
    (iii) Information on the accounting systems used to track internal 
cost savings.
    (iv) A description of current health information technology, 
including systems to track reconciliation payment amounts, repayment 
amounts, and internal cost savings.
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The TEAM participant must retain and provide access to and must 
require each TEAM collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  512.586.


Sec.  512.568  Distribution arrangements.

    (a) General. (1) An ACO, PGP, NPPGP, or TGP that is a TEAM 
collaborator and has entered into a sharing arrangement with a TEAM 
participant may distribute all or a portion of any gainsharing payment 
it receives from the TEAM participant only in accordance with a 
distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the parties, contain the effective date of the 
agreement, and be entered into before care is furnished to TEAM 
beneficiaries under the distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO, from an 
NPPGP to an NPPGP member, or from a TGP to a TGP member, must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
collaboration agent relative to other collaboration agents.
    (7) A collaboration agent is eligible to receive a distribution 
payment only if the collaboration agent furnished or billed for an item 
or service rendered to a TEAM beneficiary during an episode that was 
attributed to the same performance year for which the TEAM participant 
accrued the internal cost savings or earned the reconciliation payment 
amount that comprises the gainsharing payment being distributed.
    (8) With respect to the distribution of any gainsharing payment 
received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments for a performance year must not exceed the amount 
of the gainsharing payment received by the TEAM collaborator from the 
TEAM participant for the same performance year.
    (9) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (10) The collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments.
    (11) The distribution arrangement must not--
    (i) Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (12) The TEAM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.586, including all of the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any distribution payment(s).
    (iii) The identity of each collaboration agent that received a 
distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (13) The TEAM collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same TEAM participant.
    (14) The TEAM collaborator must retain and provide access to and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  512.586.

[[Page 36553]]

Sec.  512.570  Downstream distribution arrangements.

    (a) General. (1) An ACO participant that is a PGP, NPPGP, or TGP 
and that has entered into a distribution arrangement with a TEAM 
collaborator that is an ACO, may distribute all or a portion of any 
distribution payment it receives from the TEAM collaborator only in 
accordance with a downstream distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the effective date of 
the agreement, and be entered into before care is furnished to TEAM 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.
    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the TEAM participant, any TEAM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a TEAM participant, TEAM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is solely based on 
quality of care and the provision of TEAM activities and that may take 
into account the amount of such TEAM activities provided by a 
downstream collaboration agent relative to other downstream 
collaboration agents.
    (6) The amount of any downstream distribution payments from a PGP 
must be determined in accordance with a methodology that is solely 
based on quality of care and the provision of TEAM activities and that 
may take into account the amount of such TEAM activities provided by a 
downstream collaboration agent relative to other downstream 
collaboration agents.
    (7) A downstream collaboration agent is eligible to receive a 
downstream distribution payment only if the downstream collaboration 
agent furnished an item or service to a TEAM beneficiary during an 
episode that is attributed to the same performance year for which the 
TEAM participant accrued the internal cost savings or earned the 
reconciliation payment amount that comprises the gainsharing payment 
from which the ACO made the distribution payment to the PGP, NPPGP, or 
TGP that is an ACO participant.
    (8) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP, NPPGP, or TGP from the ACO.
    (9) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (10) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the beneficiary, 
including the selection of devices, supplies, and treatments.
    (11) The downstream distribution arrangement must not--
    (i) Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (12) The PGP, NPPGP, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  512.586, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (13) The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    (i) A sharing arrangement with a TEAM participant.
    (ii) A distribution arrangement with the ACO that the PGP, NPPGP, 
or TGP is a participant in.
    (14) The PGP, NPPGP, or TGP must retain and provide access to, and 
must require downstream collaboration agents to retain and provide 
access to, the required documentation in accordance with Sec.  512.586.


Sec.  512.575  TEAM beneficiary incentives.

    (a) General. TEAM participants may choose to provide in-kind 
patient engagement incentives including but not limited to items of 
technology to TEAM beneficiaries in an episode, subject to the 
following conditions:
    (1) The incentive must be provided directly by the TEAM participant 
or by an agent of the TEAM participant under the TEAM participant's 
direction and control to the TEAM beneficiary during an episode.
    (2) The item or service provided must be reasonably connected to 
medical care provided to a TEAM beneficiary during an episode.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (c) of this section, for a TEAM beneficiary in an episode by 
engaging the TEAM beneficiary in better managing his or her own health.
    (4) The item or service must not be tied to the receipt of items or 
services outside the episode.
    (5) The item or service must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (6) The availability of the items or services must not be 
advertised or promoted, except that a TEAM beneficiary may be made 
aware of the availability of the items or services at the time the TEAM 
beneficiary could reasonably benefit from them.
    (7) The cost of the items or services must not be shifted to any 
Federal health care program, as defined at section 1128B(f) of the Act.
    (b) Technology provided to a TEAM beneficiary. TEAM beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (1) Items or services involving technology provided to a TEAM 
beneficiary may not exceed $1,000 in retail value for any one TEAM 
beneficiary during any one episode.
    (2) Items or services involving technology provided to a TEAM 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an 
episode.
    (3) Items of technology exceeding $75 in retail value must--
    (i) Remain the property of the TEAM participant; and
    (ii) Be retrieved from the TEAM beneficiary at the end of the 
episode, with documentation of the ultimate date of retrieval. The TEAM 
participant must document all retrieval attempts. In cases when the 
item of technology is not able to be retrieved, the TEAM participant

[[Page 36554]]

must determine why the item was not retrievable. If it was determined 
that the item was misappropriated (if it were sold, for example), the 
TEAM participant must take steps to prevent future beneficiary 
incentives for that TEAM beneficiary. Following this process, 
documented, diligent, good faith attempts to retrieve items of 
technology will be deemed to meet the retrieval requirement.
    (c) Clinical goals of TEAM. The following are the clinical goals of 
TEAM, which may be advanced through TEAM beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications following an 
episode.
    (4) Management of chronic diseases and conditions that may be 
affected by the TEAM procedure.
    (d) Documentation of TEAM beneficiary incentives. (1) TEAM 
participants must maintain documentation of items and services 
furnished as beneficiary incentives that exceed $25 in retail value.
    (2) The documentation must be established contemporaneously with 
the provision of the items and services with a record established and 
maintained to include at least the following:
    (i) The date the incentive is provided.
    (ii) The identity of the TEAM beneficiary to whom the item or 
service was provided.
    (3) The documentation regarding items of technology exceeding $75 
in retail value must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an episode, or why the 
items were not retrievable, as described in paragraph (b)(3) of this 
section.
    (4) The TEAM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.586.


Sec.  512.576  Application of the CMS-sponsored model arrangements and 
patient incentives safe harbor.

    (a) Application of the CMS-sponsored model arrangements safe 
harbor. CMS has determined that the Federal anti-kickback statute safe 
harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)(1)) is 
available to protect remuneration furnished in the TEAM in the form of 
sharing arrangement's gainsharing payments and alignment payments, the 
distribution arrangement's distribution payments, and the downstream 
distribution arrangement's distribution payments that meet all safe 
harbor requirements set forth in 42 CFR 1001.952(ii), and Sec. Sec.  
512.565, 512.568, 512.570.
    (b) Application of the CMS-sponsored model patient incentives safe 
harbor. CMS has determined that the Federal anti-kickback statute safe 
harbor for CMS-sponsored model patient incentives (42 CFR 
1001.952(ii)(2)) is available to protect TEAM beneficiary incentives 
that meet all safe harbor requirements set forth in 42 CFR 1001.952(ii) 
and Sec.  512.575.

Medicare Program Waivers


Sec.  512.580  TEAM Medicare Program Waivers

    (a) Waiver of certain telehealth requirements--(1) Waiver of the 
geographic site requirements. Except for the geographic site 
requirements for a face-to-face encounter for home health 
certification, CMS waives the geographic site requirements of section 
1834(m)(4)(C)(i)(I) through (III) of the Act for episodes being tested 
in TEAM solely for services that--
    (i) May be furnished via telehealth under existing Medicare program 
requirements; and
    (ii) Are included in the episode in accordance with Sec.  
512.525(e).
    (2) Waiver of the originating site requirements. Except for the 
originating site requirements for a face-to-face encounter for home 
health certification, CMS waives the originating site requirements 
under section 1834(m)(4)I(ii)(I) through (VIII) of the Act for episodes 
to permit a telehealth visit to originate in the beneficiary's home or 
place of residence solely for services that--
    (i) May be furnished via telehealth under existing Medicare program 
requirements; and
    (ii) Are included in the episode in accordance with Sec.  
512.525(e).
    (3) Waiver of selected payment provisions. (i) CMS waives the 
payment requirements under section 1834(m)(2)(A) of the Act so that the 
facility fee normally paid by Medicare to an originating site for a 
telehealth service is not paid if the service is originated in the 
beneficiary's home or place of residence.
    (ii) CMS waives the payment requirements under section 
1834(m)(2)(B) of the Act to allow the distant site payment for 
telehealth home visit HCPCS codes unique to TEAM.
    (4) Other requirements. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply, 
including the list of specific services approved to be furnished by 
telehealth.
    (b) Waiver of the SNF 3-day rule--(1) Episodes initiated by an 
anchor hospitalization. CMS waives the SNF 3-day rule for coverage of a 
SNF stay within 30 days of the date of discharge from the anchor 
hospitalization for a beneficiary who is a TEAM beneficiary on the date 
of discharge from the anchor hospitalization if the SNF is identified 
on the applicable calendar quarter list of qualified SNFs at the time 
of the TEAM beneficiary's admission to the SNF.
    (2) Episodes initiated by an anchor procedure. CMS waives the SNF 
3-day rule for coverage of a SNF stay within 30 days of the date of 
service of the anchor procedure for a beneficiary who is a TEAM 
beneficiary on the date of service of the anchor procedure if the SNF 
is identified on the applicable calendar quarter list of qualified SNFs 
at the time of the TEAM beneficiary's admission to the SNF.
    (3) Determination of qualified SNFs. CMS determines the qualified 
SNFs for each calendar quarter based on a review of the most recent 
rolling 12 months of overall star ratings on the Five-Star Quality 
Rating System for SNFs on the Nursing Home Compare website. Qualified 
SNFs are rated an overall of 3 stars or better for at least 7 of the 12 
months.
    (4) Posting of qualified SNFs. CMS posts to the CMS website the 
list of qualified SNFs in advance of the calendar quarter.
    (5) Financial liability for non-covered SNF services. If CMS 
determines that the waiver requirements specified in paragraph (b) of 
this section were not met, the following apply:
    (i) CMS makes no payment to a SNF for SNF services if the SNF 
admits a TEAM beneficiary who has not had a qualifying anchor 
hospitalization or anchor procedure.
    (ii) In the event that CMS makes no payment for SNF services 
furnished by a SNF as a result of paragraph (5)(i) of this section, the 
beneficiary protections specified in paragraph (5)(iii) of this section 
apply, unless the TEAM participant has provided the beneficiary with a 
discharge planning notice in accordance with Sec.  512.582(b)(3).
    (iii) If the TEAM participant does not provide the beneficiary with 
a discharge planning notice in accordance with Sec.  512.582(b)(3)--
    (A) The SNF must not charge the beneficiary for the expenses 
incurred for such services;
    (B) The SNF must return to the beneficiary any monies collected for 
such services; and
    (C) The TEAM participant is financially liable for the expenses 
incurred for such services.
    (4) If the TEAM participant provided a discharge planning notice to 
the

[[Page 36555]]

beneficiary in accordance with Sec.  512.582(b)(3), then normal SNF 
coverage requirements apply and the beneficiary may be financially 
liable for non-covered SNF services.
    (c) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered services continue to apply except as 
otherwise waived in this part.

General Provisions


Sec.  512.582  Beneficiary protections.

    (a) Beneficiary freedom of choice. (1) A TEAM participant, TEAM 
collaborators, collaboration agents, downstream collaboration agent and 
downstream participants must not restrict Medicare beneficiaries' 
ability to choose to receive care from any provider or supplier.
    (2) The TEAM participant and its downstream participants must not 
commit any act or omission, nor adopt any policy that inhibits 
beneficiaries from exercising their freedom to choose to receive care 
from any provider or supplier or from any health care provider who has 
opted out of Medicare. The TEAM participant and its downstream 
participants may communicate to TEAM beneficiaries the benefits of 
receiving care with the TEAM participant, if otherwise consistent with 
the requirements of this part and applicable law.
    (3) As part of discharge planning and referral, TEAM participants 
must provide a complete list of HHAs, SNFs, IRFs, or LTCHs that are 
participating in the Medicare program, and that serve the geographic 
area (as defined by the HHA) in which the patient resides, or in the 
case of a SNF, IRF, or LTCH, in the geographic area requested by the 
patient.
    (i) This list must be presented to TEAM beneficiaries for whom home 
health care, SNF, IRF, or LTCH services are medically necessary.
    (ii) TEAM participants must specify on the list those post-acute 
care providers on the list with whom they have a sharing arrangement.
    (iii) TEAM participants may recommend preferred providers and 
suppliers, consistent with applicable statutes and regulations.
    (iv) TEAM participants may not limit beneficiary choice to any list 
of providers or suppliers in any manner other than as permitted under 
applicable statutes and regulations.
    (v) TEAM participants must take into account patient and family 
preferences for choice of provider and supplier when they are 
expressed.
    (4) TEAM participants may not charge any TEAM collaborator a fee to 
be included on any list of preferred providers or suppliers, nor may 
the TEAM participant accept such payments.
    (b) Required beneficiary notification--(1) TEAM participant 
beneficiary notification--(i) Notification to beneficiaries. Each TEAM 
participant must provide written notification to any TEAM beneficiary 
that meets the criteria in Sec.  512.535 of his or her inclusion in the 
TEAM model.
    (ii) Timing of notification. Prior to discharge from the anchor 
hospitalization, or prior to discharge from the anchor procedure, as 
applicable, the TEAM participant must provide the TEAM beneficiary with 
a beneficiary notification as described in paragraph (b)(1)(iv) of this 
section.
    (iii) List of beneficiaries who have received a notification. The 
TEAM participant must be able to generate a list of all beneficiaries 
who have received such notification, including the date on which the 
notification was provided to the beneficiary, to CMS or its designee 
upon request.
    (iv) Content of notification. The beneficiary notification must 
contain all of the following:
    (A) A detailed explanation of TEAM and how it might be expected to 
affect the beneficiary's care.
    (B) Notification that the beneficiary retains freedom of choice to 
choose providers and services.
    (C) Explanation of how patients can access care records and claims 
data through an available patient portal, if applicable, and how they 
can share access to their Blue Button[supreg] electronic health 
information with caregivers.
    (D) Explanation of the type of beneficiary-identifiable claims data 
the TEAM participant may receive.
    (E) A statement that all existing Medicare beneficiary protections 
continue to be available to the TEAM beneficiary. These include the 
ability to report concerns of substandard care to Quality Improvement 
Organizations or the 1-800-MEDICARE helpline.
    (F) A list of the providers, suppliers, and ACOs with whom the TEAM 
participant has a sharing arrangement. This requirement may be 
fulfilled by the TEAM participant including in the detailed 
notification a Web address where beneficiaries may access the list.
    (2) TEAM collaborator notice. A TEAM participant must require every 
TEAM collaborator to provide written notice to applicable TEAM 
beneficiaries of TEAM, including information on the quality and payment 
incentives under TEAM, and the existence of its sharing arrangement 
with the TEAM participant.
    (i) With the exception of ACOs, PGPs, NPPGPs, and TGPs, a TEAM 
participant must require every TEAM collaborator that furnishes an item 
or service to a TEAM beneficiary during an episode to provide written 
notice to the beneficiary of TEAM, including basic information on the 
quality and payment incentives under TEAM, and the existence of the 
TEAM collaborator's sharing arrangement. The notice must be provided no 
later than the time at which the beneficiary first receives an item or 
service from the TEAM collaborator during an episode. In circumstances 
where, due to the patient's condition, it is not feasible to provide 
notification at such time, the notification must be provided to the 
beneficiary or his or her representative as soon as is reasonably 
practicable. The TEAM collaborator must be able to provide a list of 
all beneficiaries who received such a notice, including the date on 
which the notice was provided to the beneficiary, to CMS upon request.
    (ii) A TEAM participant must require every PGP, NPPGP, or TGP that 
is a TEAM collaborator where a member of the PGP, member of the NPPGP, 
or member of the TGP furnishes an item or service to a TEAM beneficiary 
during an episode to provide written notice to the beneficiary of TEAM, 
including basic information on the quality and payment incentives under 
TEAM, and the existence of the entity's sharing arrangement. The notice 
must be provided no later than the time at which the beneficiary first 
receives an item or service from any member of the PGP, member of the 
NPPGP, or member of the TGP, and the required PGP, NPPGP, or TGP notice 
may be provided by that member respectively. In circumstances where, 
due to the patient's condition, it is not feasible to provide notice at 
such times, the notice must be provided to the beneficiary or his or 
her representative as soon as is reasonably practicable. The PGP, 
NPPGP, or TGP must be able to provide a list of all beneficiaries who 
received such a notice, including the date on which the notice was 
provided to the beneficiary, to CMS upon request.
    (iii) A TEAM participant must require every ACO that is a TEAM 
collaborator where an ACO participant or ACO provider/supplier 
furnishes an item or service to a TEAM beneficiary during an episode to 
provide written notice to the beneficiary of TEAM, including basic 
information on the quality and payment incentives under TEAM, and the 
existence of the entity's sharing arrangement. The notice must be 
provided no later than the time at which the beneficiary first receives 
an item or

[[Page 36556]]

service from any ACO participant or ACO provider/supplier and the 
required ACO notice may be provided by that ACO participant or ACO 
provider/supplier respectively. In circumstances where, due to the 
patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The ACO must be 
able to provide a list of all beneficiaries who received such a notice, 
including the date on which the notice was provided to the beneficiary, 
to CMS upon request.
    (3) Discharge planning notice. A TEAM participant must provide the 
beneficiary with a written notice of any potential financial liability 
associated with non-covered services recommended or presented as an 
option as part of discharge planning, no later than the time that the 
beneficiary discusses a particular post-acute care option or at the 
time the beneficiary is discharged from an anchor procedure or anchor 
hospitalization, whichever occurs earlier.
    (i) If the TEAM participant knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the TEAM participant must notify the beneficiary in writing 
that the service would not be covered by Medicare.
    (ii) If the TEAM participant is discharging a beneficiary to a SNF 
after an inpatient hospital stay, and the beneficiary is being 
transferred to or is considering a SNF that would not qualify under the 
SNF 3-day waiver in Sec.  512.580, the TEAM participant must notify the 
beneficiary in accordance with paragraph (b)(3)(i) of this section that 
the beneficiary will be responsible for payment for the services 
furnished by the SNF during that stay, except those services that would 
be covered by Medicare Part B during a non-covered inpatient SNF stay.
    (4) Access to records and retention. Lists of beneficiaries that 
receive notifications or notices must be retained, and access provided 
to CMS, or its designees, in accordance with Sec.  512.586.
    (c) Availability of services. (1) The TEAM participant and its 
downstream participants must continue to make medically necessary 
covered services available to beneficiaries to the extent required by 
applicable law. TEAM beneficiaries and their assignees retain their 
rights to appeal claims in accordance with part 405, subpart I of this 
chapter.
    (2) The TEAM participant and its downstream participants must not 
take any action to select or avoid treating certain Medicare 
beneficiaries based on their income levels or based on factors that 
would render the beneficiary an ``at-risk beneficiary'' as defined at 
Sec.  425.20 of this chapter.
    (3) The TEAM participant and its downstream participants must not 
take any action to selectively target or engage beneficiaries who are 
relatively healthy or otherwise expected to improve the TEAM 
participant's or downstream participant's financial or quality 
performance, a practice commonly referred to as ``cherry-picking.''
    (d) Descriptive TEAM materials and activities. (1) The TEAM 
participant and its downstream participants must not use or distribute 
descriptive TEAM materials and activities that are materially 
inaccurate or misleading.
    (2) The TEAM participant and its downstream participants must 
include the following statement on all descriptive TEAM materials and 
activities: ``The statements contained in this document are solely 
those of the authors and do not necessarily reflect the views or 
policies of the Centers for Medicare & Medicaid Services (CMS). The 
authors assume responsibility for the accuracy and completeness of the 
information contained in this document.''
    (3) The TEAM participant and its downstream participants must 
retain copies of all written and electronic descriptive TEAM materials 
and activities and appropriate records for all other descriptive TEAM 
materials and activities in a manner consistent with Sec.  512.135(c).
    (4) CMS reserves the right to review, or have a designee review, 
descriptive TEAM materials and activities to determine whether or not 
the content is materially inaccurate or misleading. This review takes 
place at a time and in a manner specified by CMS once the descriptive 
TEAM materials and activities are in use by the TEAM participant.


Sec.  512.584  Cooperation in model evaluation and monitoring.

    The TEAM participant and its TEAM collaborators must comply with 
the requirements of Sec.  403.1110(b) of this chapter and must 
otherwise cooperate with CMS' TEAM evaluation and monitoring activities 
as may be necessary to enable CMS to evaluate TEAM in accordance with 
section 1115A(b)(4) of the Act and to conduct monitoring activities 
under Sec.  512.590, including producing such data as may be required 
by CMS to evaluate or monitor TEAM, which may include protected health 
information as defined in 45 CFR 160.103 and other individually-
identifiable data.


Sec.  512.586  Audits and record retention.

    (a) Right to audit. The Federal government, including CMS, HHS, and 
the Comptroller General, or their designees, has the right to audit, 
inspect, investigate, and evaluate any documents and other evidence 
regarding implementation of TEAM.
    (b) Access to records. The TEAM participant and its TEAM 
collaborators must maintain and give the Federal government, including 
CMS, HHS, and the Comptroller General, or their designees, access to 
all such documents and other evidence sufficient to enable the audit, 
evaluation, inspection, or investigation of the implementation of TEAM, 
including without limitation, documents and other evidence regarding 
all of the following:
    (1) The TEAM participant's and its downstream participants' 
compliance with the terms of TEAM.
    (2) The accuracy of TEAM reconciliation payment amounts and 
repayment amounts.
    (3) The TEAM participant's payment of amounts owed to CMS under 
TEAM.
    (4) Quality measure information and the quality of services 
performed under the terms of TEAM.
    (5) Utilization of items and services furnished under TEAM.
    (6) The ability of the TEAM participant to bear the risk of 
potential losses and to repay any losses to CMS, as applicable.
    (7) Patient safety.
    (8) Other program integrity issues.
    (c) Record retention. (1) The TEAM participant and its downstream 
participants must maintain the documents and other evidence described 
in paragraph (b) of this section and other evidence for a period of 6 
years from the last payment determination for the TEAM participant 
under TEAM or from the date of completion of any audit, evaluation, 
inspection, or investigation, whichever is later, unless--
    (i) CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the TEAM 
participant at least 30 days before the normal disposition date; or
    (ii) There has been a termination, dispute, or allegation of fraud 
or similar fault against the TEAM participant or its downstream 
participants, in which case the records must be maintained for an 
additional 6 years from the date of any resulting final resolution of 
the

[[Page 36557]]

termination, dispute, or allegation of fraud or similar fault.
    (2) If CMS notifies the TEAM participant of the special need to 
retain records in accordance with paragraph (c)(1)(i) of this section 
or there has been a termination, dispute, or allegation of fraud or 
similar fault against the TEAM participant or its downstream 
participants described in paragraph (c)(1)(ii) of this section, the 
TEAM participant must notify its downstream participants of this need 
to retain records for the additional period specified by CMS.


Sec.  512.588  Rights in data and intellectual property.

    (a) CMS may--
    (1) Use any data obtained under Sec. Sec.  512.584, 512.586, or 
512.590 to evaluate and monitor TEAM; and
    (2) Disseminate quantitative and qualitative results and successful 
care management techniques, including factors associated with 
performance, to other providers and suppliers and to the public. Data 
disseminated may include patient--
    (i) De-identified results of patient experience of care and quality 
of life surveys, and patient;
    (ii) De-identified measure results calculated based upon claims, 
medical records, and other data sources.
    (b) Notwithstanding any other provision of this part, for all data 
that CMS confirms to be proprietary trade secret information and 
technology of the TEAM participant or its downstream participants, CMS 
or its designee(s) will not release this data without the express 
written consent of the TEAM participant or its downstream participant, 
unless such release is required by law.
    (c) If the TEAM participant or its downstream participant wishes to 
protect any proprietary or confidential information that it submits to 
CMS or its designee, the TEAM participant or its downstream participant 
must label or otherwise identify the information as proprietary or 
confidential. Such assertions are subject to review and confirmation by 
CMS prior to CMS' acting upon such assertions.


Sec.  512.590  Monitoring and compliance.

    (a) Compliance with laws. The TEAM participant and each of its 
downstream participants must comply with all applicable laws and 
regulations.
    (b) CMS monitoring and compliance activities. (1) CMS staff, or its 
approved designee, may conduct monitoring activities to ensure 
compliance by the TEAM participant and each of its downstream 
participants with the terms of TEAM under this subpart to--
    (i) Understand TEAM participants' use of TEAM payments; and
    (ii) Promote the safety of beneficiaries and the integrity of TEAM.
    (2) Monitoring activities may include, without limitation, all of 
the following:
    (i) Documentation requests sent to the TEAM participant and its 
downstream participants, including surveys and questionnaires.
    (ii) Audits of claims data, quality measures, medical records, and 
other data from the TEAM participant and its downstream participants.
    (iii) Interviews with members of the staff and leadership of the 
TEAM participant and its downstream participants.
    (iv) Interviews with beneficiaries and their caregivers.
    (v) Site visits to the TEAM participant and its downstream 
participants, performed in a manner consistent with paragraph (c) of 
this section.
    (vi) Monitoring quality outcomes and clinical data, if applicable.
    (vii) Tracking patient complaints and appeals.
    (3) In conducting monitoring and oversight activities, CMS or its 
designees may use any relevant data or information including without 
limitation all Medicare claims submitted for items or services 
furnished to TEAM beneficiaries.
    (c) Site visits. (1) In a manner consistent with Sec.  512.584, the 
TEAM participant and its downstream participants must cooperate in 
periodic site visits performed by CMS or its designees in order to 
facilitate the evaluation of TEAM and the monitoring of the TEAM 
participant's compliance with the terms of TEAM.
    (2) CMS or its designee provides, to the extent practicable, the 
TEAM participant or downstream participant with no less than 15 days 
advance notice of any site visit. CMS--
    (i) Attempts, to the extent practicable, to accommodate a request 
for particular dates in scheduling site visits; and
    (ii) Does not accept a date request from a TEAM participant or 
downstream participant that is more than 60 days after the date of the 
CMS initial site visit notice.
    (3) The TEAM participant and its downstream participants must 
ensure that personnel with the appropriate responsibilities and 
knowledge associated with the purpose of the site visit are available 
during all site visits.
    (4) Additionally, CMS may perform unannounced site visits at the 
office of the TEAM participant and any of its downstream participants 
at any time to investigate concerns about the health or safety of 
beneficiaries or other patients or other program integrity issues.
    (5) Nothing in this part shall be construed to limit or otherwise 
prevent CMS from performing site visits permitted or required by 
applicable law.
    (d) Reopening of payment determinations. (1) CMS may reopen a TEAM 
payment determination on its own motion or at the request of a TEAM 
participant, within 4 years from the date of the determination, for 
good cause (as defined at Sec.  405.986 of this chapter).
    (2) CMS may reopen a TEAM payment determination at any time if 
there exists reliable evidence (as defined in Sec.  405.902 of this 
chapter) that the determination was procured by fraud or similar fault 
(as defined in Sec.  405.902 of this chapter).
    (3) CMS's decision regarding whether to reopen a TEAM payment 
determination is binding and not subject to appeal.
    (e) OIG authority. Nothing contained in the terms of TEAM limits or 
restricts the authority of the HHS Office of Inspector General or any 
other Federal government authority, including its authority to audit, 
evaluate, investigate, or inspect the TEAM participant or its 
downstream participants for violations of any Federal statutes, rules, 
or regulations.


Sec.  512.592  Remedial action.

    (a) Grounds for remedial action. CMS may take one or more remedial 
actions described in paragraph (b) of this section if CMS determines 
that the TEAM participant or a downstream participant:
    (1) Has failed to comply with any of the terms of TEAM, included in 
this subpart.
    (2) Has failed to comply with any applicable Medicare program 
requirement, rule, or regulation.
    (3) Has taken any action that threatens the health or safety of a 
beneficiary or other patient.
    (4) Has submitted false data or made false representations, 
warranties, or certifications in connection with any aspect of TEAM.
    (5) Has undergone a change in control that presents a program 
integrity risk.
    (6) Is subject to any sanctions of an accrediting organization or a 
Federal, State, or local government agency.
    (7) Is subject to investigation or action by HHS (including the HHS 
Office of Inspector General and CMS) or the Department of Justice due 
to an allegation of fraud or significant misconduct, including any of 
the following:
    (i) Being subject to the filing of a complaint or filing of a 
criminal charge.
    (ii) Being subject to an indictment.
    (iii) Being named as a defendant in a False Claims Act qui tam 
matter in

[[Page 36558]]

which the Federal government has intervened, or similar action.
    (8) Has failed to demonstrate improved performance following any 
remedial action imposed under this section.
    (9) Has misused or disclosed beneficiary-identifiable data in a 
manner that violates any applicable statutory or regulatory 
requirements or that is otherwise non-compliant with the provisions of 
the applicable data sharing agreement.
    (b) Remedial actions. If CMS determines that one or more grounds 
for remedial action described in paragraph (a) of this section has 
taken place, CMS may take one or more of the following remedial 
actions:
    (1) Notify the TEAM participant and, if appropriate, require the 
TEAM participant to notify its downstream participants of the 
violation.
    (2) Require the TEAM participant to provide additional information 
to CMS or its designees.
    (3) Subject the TEAM participant to additional monitoring, 
auditing, or both.
    (4) Prohibit the TEAM participant from distributing TEAM payments, 
as applicable.
    (5) Require the TEAM participant to terminate, immediately or by a 
deadline specified by CMS, its agreement with a downstream participant 
with respect to TEAM.
    (6) Require the TEAM participant to submit a corrective action plan 
in a form and manner and by a date specified by CMS.
    (7) Discontinue the provision of data sharing and reports to the 
TEAM participant.
    (8) Recoup TEAM payments.
    (9) Reduce or eliminate a TEAM payment otherwise owed to the TEAM 
participant.
    (10) Such other action as may be permitted under the terms of this 
part.


Sec.  512.594  Limitations on review.

    There is no administrative or judicial review under sections 1869 
or 1878 of the Act or otherwise for all of the following:
    (a) The selection of models for testing or expansion under section 
1115A of the Act.
    (b) The selection of organizations, sites, or participants to test 
TEAM, including a decision by CMS to remove a TEAM participant or to 
require a TEAM participant to remove a downstream participant from 
TEAM.
    (c) The elements, parameters, scope, and duration of testing or 
dissemination, including without limitation the following:
    (1) The selection of quality performance standards for TEAM by CMS.
    (2) The methodology used by CMS to assess the quality of care 
furnished by the TEAM participant.
    (3) The methodology used by CMS to attribute TEAM beneficiaries to 
the TEAM participant, if applicable.
    (d) Determinations regarding budget neutrality under section 
1115A(b)(3) of the Act.
    (e) The termination or modification of the design and 
implementation of TEAM under section 1115A(b)(3)(B) of the Act.
    (f) Determinations about expansion of the duration and scope of 
TEAM under section 1115A(c) of the Act, including the determination 
that TEAM is not expected to meet criteria described in paragraph (a) 
or (b) of this section.


Sec.  512.595  Bankruptcy and other notifications.

    (a) Notice of bankruptcy. If the TEAM participant has filed a 
bankruptcy petition, whether voluntary or involuntary, the TEAM 
participant must provide written notice of the bankruptcy to CMS and to 
the U.S. Attorney's Office in the district where the bankruptcy was 
filed, unless final payment has been made by either CMS or the TEAM 
participant under the terms of TEAM and all administrative or judicial 
review proceedings relating to any TEAM payments have been fully and 
finally resolved. The notice of bankruptcy must be sent by certified 
mail no later than 5 days after the petition has been filed and must 
contain a copy of the filed bankruptcy petition (including its docket 
number). The notice to CMS must be addressed to the CMS Office of 
Financial Management at 7500 Security Boulevard, Mailstop C3-01-24, 
Baltimore, MD 21244 or such other address as may be specified on the 
CMS website for purposes of receiving such notices.
    (b) Notice of legal name change. A TEAM participant must furnish 
written notice to CMS within 30 days of any change in its legal name 
becomes effective. The notice of legal name change must be in a form 
and manner specified by CMS and must include a copy of the legal 
document effecting the name change, which must be authenticated by the 
appropriate State official.
    (c) Notice of change in control. (1) A TEAM participant must 
furnish written notice to CMS in a form and manner specified by CMS at 
least 90 days before any change in control becomes effective.
    (2) If CMS determines, in accordance with Sec.  512.592(a)(5), that 
a TEAM participant's change in control would present a program 
integrity risk, CMS may--
    (i) Take remedial action against the TEAM participant under Sec.  
512.160(b).
    (ii) Require immediate reconciliation and payment of all monies 
owed to CMS by a TEAM participant that is subject to a change in 
control.


Sec.  512.596  Termination of TEAM or TEAM participant from model by 
CMS.

    (a) Termination of TEAM. (1) CMS may terminate TEAM for reasons 
including, but not limited to, the following:
    (i) CMS determines that it no longer has the funds to support TEAM.
    (ii) CMS terminates TEAM in accordance with section 1115A(b)(3)(B) 
of the Act.
    (2) If CMS terminates TEAM, CMS provides written notice to the TEAM 
participant specifying the grounds for termination and the effective 
date of such termination.
    (b) Notice of a TEAM participant's termination from TEAM. If a TEAM 
participant receives notification that it has been terminated from TEAM 
and wishes to dispute the termination, it must provide a written notice 
to CMS requesting review of the termination within 10 calendar days of 
the notice. CMS has 30 days to respond to the TEAM participant's 
request for review. If the TEAM participant fails to notify CMS, the 
termination is deemed final.


Sec.  512.598  Decarbonization and Resilience initiative.

    TEAM participants may elect to report questions and metrics related 
to emissions to CMS on an annual basis following each performance 
period.
    (a) Voluntary Reporting includes the following metrics:
    (1) Organizational questions, which are a set of questions about 
the TEAM participants' sustainability team and sustainability 
activities.
    (2) Building energy metrics, which are a set of metrics related to 
measuring and reporting GHG emissions related to energy use at TEAM 
participant facilities.
    (i) Building energy metrics are based on the ENERGY STAR[supreg] 
PortfolioManager[supreg] guidelines for the time of submission. TEAM 
participants reporting these metrics must submit using ENERGY STAR 
Portfolio Manager in manner described in paragraph (b).
    (ii) Metrics to be collected include:
    (A) ENERGY STAR Score for Hospitals as defined in the ENERGY STAR 
Portfolio Manager as well as supporting data which may include energy 
use intensity, electricity, natural

[[Page 36559]]

gas, and other source emissions and normalizing factors such as 
building size, number of full-time equivalent workers, number of 
staffed beds, number of magnetic resonance imaging machines, zip codes, 
and heating and cooling days, as specified in the ENERGY STAR Portfolio 
Manager.
    (B) Energy cost, to capture total energy costs, as specified in the 
ENERGY STAR Portfolio Manager.
    (C) Total, direct, and indirect GHG emissions and emissions 
intensity as specified in the ENERGY STAR Portfolio Manager.
    (3) Anesthetic gas metrics, which are a set of metrics related to 
measuring and managing emissions from anesthetic gas which include all 
of the following:
    (i) Total greenhouse gas emissions from inhaled anesthetics based 
on purchase records.
    (ii) Normalization factors that may include information on 
anesthetic hours.
    (iii) Assessment questions based on key actions recommended for 
reducing emissions for anesthetic gases.
    (4) Transportation metrics, which are a set metrics that focus on 
greenhouse gases related to leased or owned vehicles and may include 
any of the following:
    (i) Gallons for owned and leased vehicles.
    (ii) Normalization factors that may include patient encounter 
volume.
    (iii) Assessment questions on key actions to reduce transportation 
emissions.
    (A) If the TEAM Participant elects to report the metrics in 
paragraph (a) of this section to CMS, such information must be reported 
to CMS in a form and manner specified by CMS for each performance year, 
including the use of ENERGY STAR Portfolio Manager for the building 
energy metrics at paragraph (a)(2) of this section and a survey and 
questionnaire for questions and metrics at paragraphs (a)(1), (3), and 
(4) of this section. If the TEAM participant chooses to participate, 
the TEAM participant must report the information to CMS no later than 
120 days in the year following the performance year, or a later date as 
specified by CMS.
    (B) If a TEAM participant elects to report all the metrics 
specified in paragraph (a) of this section to CMS, in the manner 
specified in paragraph (b) of this section, CMS annually provides to 
the TEAM participant with the following:
    (1) Individualized feedback reports, which may summarize 
facilities' emissions metrics and would include benchmarks, as 
feasible, for normalized metrics to compare facilities, in aggregate, 
to other TEAM participants in the Decarbonization and Resilience 
Initiative.
    (2) Publicly reported hospital recognition for the TEAM 
participant's commitment to decarbonization through a hospital 
recognition badge publicly reported on a CMS website.

Xavier Becerra,
Secretary, Department of Health and Human Services.
    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, 2024, and Payment Rates for LTCHs Effective for 
Discharges Occurring on or After October 1, 2024

I. Summary and Background

    In this Addendum, we are setting forth a description of the 
methods and data we used to determine the proposed prospective 
payment rates for Medicare hospital inpatient operating costs and 
Medicare hospital inpatient capital-related costs for FY 2025 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 2025. We note that, because certain 
hospitals excluded from the IPPS are paid on a reasonable cost basis 
subject to a rate-of-increase ceiling (and not by the IPPS), these 
hospitals are not affected by the proposed figures for the 
standardized amounts, offsets, and budget neutrality factors. 
Therefore, in this proposed rule, we are setting forth the rate-of-
increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that would be effective for cost 
reporting periods beginning on or after October 1, 2024. 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 2025.
    In general, except for SCHs and MDHs, for FY 2025, 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.E. of the preamble of this proposed rule, uncompensated 
care payments under section 1886(r)(2) of the Act).
     The updated hospital-specific rate based on FY 1982 
costs per discharge.
     The updated hospital-specific rate based on FY 1987 
costs per discharge.
     The updated hospital-specific rate based on FY 1996 
costs per discharge.
     The updated hospital-specific rate based on FY 2006 
costs per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 50 percent of the difference between the Federal 
national rate and the updated hospital-specific rate based on FY 
1982 or FY 1987 costs per discharge, whichever was higher. However, 
section 5003(a)(1) of Public Law 109-171 extended and modified the 
MDH special payment provision that was previously set to expire on 
October 1, 2006, to include discharges occurring on or after October 
1, 2006, but before October 1, 2011. Under section 5003(b) of Public 
Law 109-171, if the change results in an increase to an MDH's target 
amount, we must rebase an MDH's hospital specific rates based on its 
FY 2002 cost report. Section 5003(c) of Public Law 109-171 further 
required that MDHs be paid based on the Federal national rate or, if 
higher, the Federal national rate plus 75 percent of the difference 
between the Federal national rate and the updated hospital specific 
rate. Further, based on the provisions of section 5003(d) of Public 
Law 109-171, MDHs are no longer subject to the 12-percent cap on 
their DSH payment adjustment factor. Section 4102 of the 
Consolidated Appropriations Act, 2023 (Pub. L. 117-328), enacted on 
December 29, 2022, extended the MDH program through FY 2024 (that 
is, for discharges occurring on or before September 30, 2024). 
Subsequently, section 307 of the Consolidated Appropriations Act, 
2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 9, 2024, further 
extended the MDH program for FY 2025 discharges occurring before 
January 1, 2025. Prior to enactment of the CAA, 2024, the MDH 
program was only to be in effect through the end of FY 2024. Under 
current law, the MDH program will expire for discharges on or after 
January 1, 2025. We refer readers to section V.F. of the preamble of 
this proposed rule for further discussion of the MDH program.
    As discussed in section V.B.2. of the preamble of this proposed 
rule, section 1886(n)(6)(B) of the Act was amended to specify that 
the adjustments to the applicable percentage increase under section 
1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico 
hospitals that are not meaningful EHR users, effective beginning FY 
2022. In general, Puerto Rico hospitals are paid 100 percent of the 
national standardized amount and are subject to the same national 
standardized amount as subsection (d) hospitals that receive the 
full update. Accordingly, our discussion later in this section does 
not include references to the Puerto Rico standardized amount or the 
Puerto Rico-specific wage index.
    As discussed in section II. of this Addendum, we are proposing 
to make changes in the determination of the prospective payment 
rates for Medicare inpatient operating costs for acute care 
hospitals for FY 2025. In section III. of this Addendum, we discuss 
our proposed policy changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs for FY 2025. In 
section IV. of this Addendum, we are setting forth the rate-

[[Page 36560]]

of-increase percentage for determining the rate-of-increase limits 
for certain hospitals excluded from the IPPS for FY 2025. In section 
V. of this Addendum, we discuss proposed policy changes for 
determining the LTCH PPS standard Federal rate for LTCHs paid under 
the LTCH PPS for FY 2025. The tables to which we refer in the 
preamble of this proposed rule are listed in section VI. of this 
Addendum and are available via the internet on the CMS website.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2025

    The basic methodology for determining prospective payment rates 
for hospital inpatient operating costs for acute care hospitals for 
FY 2005 and subsequent fiscal years is set forth under Sec.  412.64. 
The basic methodology for determining the prospective payment rates 
for hospital inpatient operating costs for hospitals located in 
Puerto Rico for FY 2005 and subsequent fiscal years is set forth 
under Sec. Sec.  412.211 and 412.212. In this section, we discuss 
the factors we are proposing to use for determining the proposed 
prospective payment rates for FY 2025.
    In summary, the proposed standardized amounts set forth in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of this Addendum (and available via the 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 2025, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), there are four possible 
applicable percentage increases that can be applied to the national 
standardized amount.
    We refer readers to section V.B. of the preamble of this 
proposed rule for a complete discussion on the FY 2025 inpatient 
hospital update. The table that follows shows these four scenarios:
[GRAPHIC] [TIFF OMITTED] TP02MY24.304

    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 2025 and subsequent fiscal years is 
adjusted by the proposed adjustment for failure to be a meaningful 
EHR user under section 1886(b)(3)(B)(ix) of the Act. The regulations 
at 42 CFR 412.64(d)(3)(ii) reflect the current law for the update 
for subsection (d) Puerto Rico hospitals for FY 2022 and subsequent 
fiscal years.
     An adjustment to the standardized amount to ensure 
budget neutrality for DRG recalibration and reclassification, as 
provided for under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to the standardized amount to ensure 
budget neutrality for the permanent 10 percent cap on the reduction 
in a MS-DRG's relative weight in a given fiscal year, as discussed 
in section II.D.2.c. of the preamble of this proposed 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 2024 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.5 of 
the preamble of this proposed rule).
     An adjustment to the standardized amount to implement 
in a budget neutral manner the wage index cap policy (as described 
in section III.G.6. of the preamble of this proposed rule).
     An adjustment to ensure the effects of the Rural 
Community Hospital Demonstration program required under section 410A 
of Public Law 108-173 (as amended by sections 3123 and 10313 of Pub. 
L. 111-148, which extended the demonstration program for an 
additional 5 years and section 15003 of Pub. L. 114-255), are budget 
neutral as required under section 410A(c)(2) of Public Law 108-173.
     An adjustment to remove the FY 2024 outlier offset and 
apply an offset for FY 2025, as provided for in section 
1886(d)(3)(B) of the Act.
    For FY 2025, consistent with current law, we are proposing to 
apply the rural floor budget neutrality adjustment to hospital wage 
indexes. Also, consistent with section 3141 of the Affordable Care 
Act, instead of

[[Page 36561]]

applying a State-level rural floor budget neutrality adjustment to 
the wage index, we are proposing to apply a uniform, national budget 
neutrality adjustment to the FY 2025 wage index for the rural floor.
    For FY 2025, we are proposing to continue to not remove the Stem 
Cell Acquisition Budget Neutrality Factor from the prior year's 
standardized amount and to not apply a new factor. If we removed the 
prior year's adjustment, we would not satisfy budget neutrality. We 
believe this approach ensures the effects of the reasonable cost-
based payment for allogeneic hematopoietic stem cell acquisition 
costs under section 108 of the Further Consolidated Appropriations 
Act, 2020 (Pub. L. 116-94) are budget neutral as required under 
section 108 of Public Law 116-94. For a discussion of Stem Cell 
Acquisition Budget Neutrality Factor, we refer the reader to the FY 
2021 IPPS/LTCH PPS final rule (85 FR 59032 and 59033).

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted 
in accordance with the provisions of section 1886(d) of the Act. The 
September 1, 1983 interim final rule (48 FR 39763) contained a 
detailed explanation of how base-year cost data (from cost reporting 
periods ending during FY 1981) were established for urban and rural 
hospitals in the initial development of standardized amounts for the 
IPPS.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us 
to update base-year per discharge costs for FY 1984 and then 
standardize the cost data in order to remove the effects of certain 
sources of cost variations among hospitals. These effects include 
case-mix, differences in area wage levels, cost-of-living 
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals 
serving a disproportionate share of low-income patients.
    For FY 2025, we are proposing to continue to use the national 
labor-related and nonlabor-related shares (which are based on the 
2018-based hospital IPPS market basket) that were used in FY 2024. 
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 2025, as discussed in section III.I. of the 
preamble of this proposed rule, we are proposing to use a labor-
related share of 67.6 percent for the national standardized amounts 
for all IPPS hospitals (including hospitals in Puerto Rico) that 
have a wage index value that is greater than 1.0000. Consistent with 
section 1886(d)(3)(E) of the Act, we are proposing to apply the wage 
index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 
1.0000.
    The proposed standardized amounts for operating costs appear in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of the Addendum to this proposed rule and are available 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 
increase. Accordingly, we are proposing to calculate the FY 2025 
national average standardized amount irrespective of whether a 
hospital is located in an urban or rural location.

3. Updating the National Average Standardized Amount

    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for 
payment for inpatient hospital operating costs. We note that, in 
compliance with section 404 of the MMA, we are proposing to use the 
2018-based IPPS operating and capital market baskets for FY 2025. As 
discussed in section IV.B. of the preamble of this proposed rule, in 
accordance with section 1886(b)(3)(B) of the Act, as amended by 
section 3401(a) of the Affordable Care Act, we are proposing to 
reduce the FY 2025 applicable percentage increase (which for this 
proposed rule is based on IGI's fourth quarter 2023 forecast of the 
2018-based IPPS market basket) by the productivity adjustment, as 
discussed elsewhere in this proposed rule.
    Based on IGI's fourth quarter 2023 forecast of the hospital 
market basket percentage increase (as discussed in appendix B of 
this proposed rule), the forecast of the hospital market basket 
percentage increase for FY 2025 for this proposed rule is 3.0 
percent and the forecast of the productivity adjustment for FY 2025 
for this proposed rule is 0.4 percent. As discussed earlier, for FY 
2025, depending on whether a hospital submits quality data under the 
rules established in accordance with section 1886(b)(3)(B)(viii) of 
the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) 
of the Act, there are four possible applicable percentage increases 
that can be applied to the standardized amount. We refer readers to 
section V.B. of the preamble of this proposed rule for a complete 
discussion on the FY 2025 inpatient hospital update to the 
standardized amount. We also refer readers to the previous table for 
the four possible applicable percentage increases that would be 
applied to update the national standardized amount. The proposed 
standardized amounts shown in Tables 1A through 1C that are 
published in section VI. of this Addendum and that are available via 
the internet on the CMS website reflect these differential amounts.
    Although the update factors for FY 2025 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 
2025 for both IPPS hospitals and hospitals and hospital units 
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires 
that we publish our recommendations in the Federal Register for 
public comment. Our recommendation on the proposed FY 2025 update 
factors is set forth in appendix B of this proposed rule.

4. Methodology for Calculation of the Average Standardized Amount

    The methodology we used to calculate the proposed FY 2025 
standardized amount is as follows:
     To ensure we are only including hospitals paid under 
the IPPS in the calculation of the standardized amount, we applied 
the following inclusion and exclusion criteria: include hospitals 
whose last four digits fall between 0001 and 0879 (section 2779A1 of 
Chapter 2 of the State Operations Manual on the CMS website at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this proposed 
rule; exclude hospitals in Maryland (because these hospitals are 
paid under an all payer model under section 1115A of the Act); and 
remove PPS excluded-cancer hospitals that have a ``V'' in the fifth 
position of their provider number or a ``E'' or ``F'' in the sixth 
position.
    Section 125 of Division CC (section 125) of the CAA 2021 
established a new rural Medicare provider type: Rural Emergency 
Hospitals (REHs). (We refer the reader to the CMS website at https://www.cms.gov/medicare/health-safety-standards/guidance-for-laws-regulations/hospitals/rural-emergency-hospitals for additional 
information on REHs.) In doing so, section 125 amended section 
1861(e) of the Act, which provides the definition of a hospital and 
states that the term ``hospital'' does not include, unless the 
context otherwise requires, a critical access hospital (as defined 
in subsection (mm)(1)) or a rural emergency hospital (as defined in 
subsection (kkk)(2)). Section 125 also added section 1861(kkk) to 
the Act, which sets forth the requirements for REHs. Per section 
1861(kkk)(2) of the Act, one of the requirements for an REH is that 
it does not provide any acute care inpatient services (other than 
post-hospital extended care services furnished in a distinct part 
unit licensed as a skilled nursing facility (SNF)). Therefore, we 
believe hospitals that have subsequently converted to REH status 
should be removed from the calculation of the standardized amount, 
because they are a separately certified Medicare provider type and 
are not comparable to other short-term, acute care hospitals as they 
do not provide inpatient hospital services. For FY 2025, we are 
proposing to exclude REHs from the calculation of the standardized 
amount, including hospitals that subsequently became REHs after the 
period from which the data were taken.
     As in the past, we are proposing to adjust the FY 2025 
standardized amount to remove the effects of the FY 2024 geographic 
reclassifications and outlier payments before applying the FY 2025 
updates. We then applied budget neutrality offsets for outliers

[[Page 36562]]

and geographic reclassifications to the standardized amount based on 
proposed FY 2025 payment policies.
     We do not remove the prior year's budget neutrality 
adjustments for reclassification and recalibration of the DRG 
relative weights and for updated wage data because, in accordance 
with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, 
estimated aggregate payments after updates in the DRG relative 
weights and wage index should equal estimated aggregate payments 
prior to the changes. If we removed the prior year's adjustment, we 
would not satisfy these conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be 
budget neutral (for example, changes to MS-DRG classifications, 
recalibration of the MS-DRG relative weights, updates to the wage 
index, and different geographic reclassifications). We include 
outlier payments in the simulations because they may be affected by 
changes in these parameters.
     Consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because 
IME Medicare Advantage payments are made to IPPS hospitals under 
section 1886(d) of the Act, we believe these payments must be part 
of these budget neutrality calculations. However, we note that it is 
not necessary to include Medicare Advantage IME payments in the 
outlier threshold calculation or the outlier offset to the 
standardized amount because the statute requires that outlier 
payments be not less than 5 percent nor more than 6 percent of total 
``operating DRG payments,'' which does not include IME and DSH 
payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule 
for a complete discussion on our methodology of identifying and 
adding the total Medicare Advantage IME payment amount to the budget 
neutrality adjustments.
     Consistent with the methodology in the FY 2012 IPPS/
LTCH PPS final rule, in order to ensure that we capture only fee-
for-service claims, we are only including claims with a ``Claim 
Type'' of 60 (which is a field on the MedPAR file that indicates a 
claim is an FFS claim).
     Consistent with our methodology established in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further 
ensure that we capture only FFS claims, we are excluding claims with 
a ``GHOPAID'' indicator of 1 (which is a field on the MedPAR file 
that indicates a claim is not an FFS claim and is paid by a Group 
Health Organization).
     Consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we 
examine the MedPAR file and remove pharmacy charges for anti-
hemophilic blood factor (which are paid separately under the IPPS) 
with an indicator of ``3'' for blood clotting with a revenue code of 
``0636'' from the covered charge field for the budget neutrality 
adjustments. We are proposing to remove organ acquisition charges, 
except for cases that group to MS-DRG 018, from the covered charge 
field for the budget neutrality adjustments because organ 
acquisition is a pass-through payment not paid under the IPPS. 
Revenue centers 081X-089X are typically excluded from ratesetting, 
however, we are proposing to not remove revenue center 891 charges 
from MS-DRG 018 claims during ratesetting because those revenue 891 
charges were included in the relative weight calculation for MS-DRG 
018, which is consistent with the policy finalized in the 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 2025, we are continuing to remove allogeneic 
hematopoietic stem cell acquisition charges from the covered charge 
field for budget neutrality adjustments. As discussed in the FY 2021 
IPPS/LTCH PPS final rule, payment for allogeneic hematopoietic stem 
cell acquisition costs is made on a reasonable cost basis for cost 
reporting periods beginning on or after October 1, 2020 (85 FR 58835 
through 58842).
     The participation of hospitals under the BPCI (Bundled 
Payments for Care Improvement) Advanced model started on October 1, 
2018. The BPCI Advanced model, tested under the authority of section 
3021 of the Affordable Care Act (codified at section 1115A of the 
Act), is comprised of a single payment and risk track, which bundles 
payments for multiple services beneficiaries receive during a 
Clinical Episode. Acute care hospitals may participate in the BPCI 
Advanced model in one of two capacities: as a model Participant or 
as a downstream Episode Initiator. Regardless of the capacity in 
which they participate in the BPCI Advanced model, participating 
acute care hospitals would continue to receive IPPS payments under 
section 1886(d) of the Act. Acute care hospitals that are 
participants also assume financial and quality performance 
accountability for Clinical Episodes in the form of a reconciliation 
payment. For additional information on the BPCI Advanced model, we 
refer readers to the BPCI Advanced web page on the CMS Center for 
Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/.
    For FY 2025, consistent with how we treated hospitals that 
participated in the BPCI Advanced Model in the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 59029 and 59030), we are proposing to include all 
applicable data from subsection (d) hospitals participating in the 
BPCI Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still receiving IPPS 
payments under section 1886(d) of the Act. For the same reasons, we 
are proposing to include all applicable data from subsection (d) 
hospitals participating in the Comprehensive Care for Joint 
Replacement (CJR) Model in our IPPS payment modeling and ratesetting 
calculations.
     Consistent with our methodology established in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we 
believe that it is appropriate to include adjustments for the 
Hospital Readmissions Reduction Program and the Hospital VBP Program 
(established under the Affordable Care Act) within our budget 
neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) 
and the hospital VBP payment adjustment (redistribution) are applied 
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d) 
hospitals, which affects the overall sum of aggregate payments on 
each side of the comparison within the budget neutrality 
calculations.
    In order to properly determine aggregate payments on each side 
of the comparison, consistent with the approach we have taken in 
prior years, for FY 2025, we are proposing to continue to apply a 
proxy based on the prior fiscal year hospital readmissions payment 
adjustment and a proxy based on the prior fiscal year hospital VBP 
payment adjustment on each side of the comparison, consistent with 
the methodology that we adopted in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53687 through 53688). Under this proposed policy for FY 
2025, we used the final FY 2024 readmissions adjustment factors from 
Table 15 of the FY 2024 IPPS/LTCH PPS final rule and the final FY 
2024 hospital VBP adjustment factors from Table 16B of the FY 2024 
IPPS/LTCH PPS final rule. These proxy factors are applied 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.K. of the preamble of 
this proposed rule for a complete discussion on the Hospital 
Readmissions Reduction Program and section V.L. of the preamble of 
this proposed rule for a complete discussion on the Hospital VBP 
Program.
     The Affordable Care Act also established section 
1886(r) of the Act, which modifies the methodology for computing the 
Medicare DSH payment adjustment beginning in FY 2014. Beginning in 
FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments 
receive an empirically justified Medicare DSH payment equal to 25 
percent of the amount that would previously have been received under 
the statutory formula set forth under section 1886(d)(5)(F) of the 
Act governing the Medicare DSH payment adjustment. In accordance 
with section 1886(r)(2) of the Act, the remaining amount, equal to 
an estimate of 75 percent of what otherwise would have been paid as 
Medicare DSH payments, reduced to reflect changes in the percentage 
of individuals who are uninsured and any additional statutory 
adjustment, is available to make additional payments to Medicare DSH 
hospitals based on their share of the total amount of uncompensated 
care reported by Medicare DSH hospitals for a given time period. In 
order to properly determine aggregate payments on each side of the 
comparison for budget neutrality, prior to FY 2014, we included 
estimated Medicare DSH payments on both sides of our comparison of 
aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum.

[[Page 36563]]

    To do this for FY 2025 (as we did for the last 11 fiscal years), 
we are proposing to include estimated empirically justified Medicare 
DSH payments that would be paid in accordance with section 
1886(r)(1) of the Act and estimates of the additional uncompensated 
care payments made to hospitals receiving Medicare DSH payment 
adjustments as described by section 1886(r)(2) of the Act. That is, 
we are proposing to consider estimated empirically justified 
Medicare DSH payments at 25 percent of what would otherwise have 
been paid, and also the estimated additional uncompensated care 
payments for hospitals receiving Medicare DSH payment adjustments on 
both sides of our comparison of aggregate payments when determining 
all budget neutrality factors described in section II.A.4. of this 
Addendum.
    We also are proposing to include the estimated supplemental 
payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals 
on both sides of our comparison of aggregate payments when 
determining all budget neutrality factors described in section 
II.A.4. of this Addendum.
     When calculating total payments for budget neutrality, 
to determine total payments for SCHs, we model total hospital-
specific rate payments and total Federal rate payments and then 
include whichever one of the total payments is greater. As discussed 
in section IV.G. of the preamble to this proposed rule and later in 
this section, we are proposing to continue to use the FY 2014 
finalized methodology under which we take into consideration 
uncompensated care payments in the comparison of payments under the 
Federal rate and the hospital-specific rate for SCHs. Therefore, we 
are proposing to include estimated uncompensated care payments in 
this comparison.
    As discussed elsewhere in this proposed rule, section 307 of the 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the MDH program for FY 2025 
discharges occurring before January 1, 2025. Prior to enactment of 
the CAA, 2024, the MDH program was only to be in effect through the 
end of FY 2024. Therefore, under current law, the MDH program will 
expire for discharges on or after January 1, 2025. As a result, MDHs 
that currently receive the higher of payments made based on the 
Federal rate or the payments made based on the Federal rate plus 75 
percent of the difference between payments based on the Federal rate 
and the hospital-specific rate will be paid based on the Federal 
rate starting January 1, 2025. Because of the timing of this 
legislation, the total payments for budget neutrality discussed in 
this section do not reflect the extension of the MDH program for the 
first quarter of FY 2025. This extension will be reflected in the 
total payments for budget neutrality for the final rule. We note, 
for the final rule, consistent with historical practice for MDHs, 
when computing payments under the Federal national rate plus 75 
percent of the difference between the payments under the Federal 
national rate and the payments under the updated hospital-specific 
rate, we are proposing to continue to take into consideration 
uncompensated care payments in the computation of payments under the 
Federal rate and the hospital-specific rate for MDHs under the 
extension.
     We are proposing to include an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality 
for FY 2025. Similar to FY 2024, we are including this adjustment 
based on data on the prior year's performance. Payments for 
hospitals would be estimated based on the proposed applicable 
standardized amount in Tables 1A and 1B for discharges occurring in 
FY 2025.
     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.
    We note that the wage index value is calculated and assigned to 
a hospital based on the hospital's labor market area. Under section 
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on the Core-Based Statistical 
Areas (CBSAs) established by the Office of Management and Budget 
(OMB). The current statistical areas used in FY 2024 are based on 
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, and 18-04. For purposes of determining 
all of the FY 2024 budget neutrality factors, we determined 
aggregate payments on each side of the comparison for our budget 
neutrality calculations using wage indexes based on the current 
CBSAs.
    On July 21, 2023, OMB released Bulletin No. 23-01. A copy of OMB 
Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, 
the delineations reflect the 2020 Standards for Delineating Core 
Based Statistical Areas (``the 2020 Standards''), which appeared in 
the Federal Register on July 16, 2021 (86 FR 37770 through 37778), 
and the application of those standards to Census Bureau population 
and journey-to-work data (e.g., 2020 Decennial Census, American 
Community Survey, and Census Population Estimates Program data). In 
order to implement these revised standards for the IPPS, it was 
necessary to identify the new OMB labor market area delineation for 
each county and hospital in the country. As stated in section III.B. 
of the preamble of this proposed rule, we believe that using the 
revised delineations based on OMB Bulletin No. 23-01 will increase 
the integrity of the IPPS wage index system by more accurately 
representing current geographic variations in wage levels. As 
discussed in section III. of the preamble of this proposed rule, we 
are proposing to adopt the new OMB labor market area delineations as 
described in the July 21, 2023 OMB Bulletin No. 23-01, effective for 
the FY 2025 IPPS wage index.
    Consistent with our policy to adopt the new OMB delineations, in 
order to properly determine aggregate payments on each side of the 
comparison for our budget neutrality calculations, we are proposing 
to use wage indexes based on the new OMB delineations in the 
determination of all of the budget neutrality factors discussed 
later in this section. We also note that, consistent with past 
practice as finalized in the FY 2005 IPPS final rule (69 FR 49034), 
we are not adopting the new OMB delineations themselves in a budget 
neutral manner. We continue to believe that the revision to the 
labor market areas in and of itself does not constitute an 
``adjustment or update'' to the adjustment for area wage 
differences, as provided under section 1886(d)(3)(E) of the Act.

a. Proposed 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 proposed 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 proposing to make a budget 
neutrality adjustment to ensure that the requirement of section 
1886(d)(4)(C)(iii) of the Act is met.
    For this FY 2025 proposed rule, to comply with the requirement 
that MS-DRG reclassification and recalibration of the relative 
weights be budget neutral for the standardized amount and the 
hospital-specific rates, we used FY 2023 discharge data to simulate 
payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the FY 2024 labor-related share 
percentages, the FY 2024 relative weights, and the FY 2024 pre-
reclassified wage data, and applied the proxy hospital readmissions 
payment adjustments and proxy hospital VBP payment adjustments (as 
described previously); and
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the FY 2024 labor-related share 
percentages, the proposed FY 2025 relative weights before applying 
the 10 percent cap, and the FY 2024 pre-reclassified wage data, and 
applied the same proxy hospital readmissions payment adjustments and 
proxy hospital VBP payment adjustments applied previously.

[[Page 36564]]

    Because this payment simulation uses the proposed FY 2025 
relative weights (before applying the 10 percent cap), consistent 
with our proposal in section V.I. of the preamble to this proposed 
rule, we applied the proposed adjustor for certain cases that group 
to MS-DRG 018 in our simulation of these payments. We note that 
because the simulations of payments for all of the budget neutrality 
factors discussed in this section also use the FY 2025 relative 
weights, we are proposing to apply the adjustor for certain MS-DRG 
018 (Chimeric Antigen Receptor (CAR) T-cell and other 
immunotherapies) cases in all simulations of payments for the budget 
neutrality factors discussed later in this section. We refer the 
reader to section V.I. of the preamble of this proposed rule for a 
complete discussion on the proposed adjustor for certain cases that 
group to MS-DRG 018 and to section II.D.2.b. of the preamble of this 
proposed rule, for a complete discussion of the proposed adjustment 
to the FY 2025 relative weights to account for certain cases that 
group to MS-DRG 018.
    Based on this comparison, we computed a proposed budget 
neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, 
we are proposing to apply the MS-DRG reclassification and 
recalibration budget neutrality factor to the hospital-specific 
rates that are effective for cost reporting periods beginning on or 
after October 1, 2024. Please see the table later in this section 
setting forth each of the proposed FY 2025 budget neutrality 
factors.

b. Proposed Budget Neutrality Adjustment for Reclassification and 
Recalibration of MS-DRG Relative Weights With Cap

    As discussed in section II.D.2.c of the preamble of this 
proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48897 
through 48900), we finalized a permanent 10-percent cap on the 
reduction in an MS-DRG's relative weight in a given fiscal year, 
beginning in FY 2023. As also discussed in section II.D.2.c of the 
preamble of this proposed rule, and consistent with our current 
methodology for implementing budget neutrality for MS-DRG 
reclassification and recalibration of the relative weights under 
section 1886(d)(4)(C)(iii) of the Act, we apply a budget neutrality 
adjustment to the standardized amount for all hospitals so that this 
10-percent cap on relative weight reductions does not increase 
estimated aggregate Medicare payments beyond the payments that would 
be made had we never applied this cap. We refer the reader to the FY 
2023 IPPS/LTCH PPS final rule for further discussion.
    To calculate this proposed budget neutrality adjustment factor 
for FY 2025, we used FY 2023 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the FY 2024 labor-related share 
percentages, the proposed FY 2025 relative weights before applying 
the 10-percent cap, and the FY 2024 pre-reclassified wage data, and 
applied the proposed proxy FY 2025 hospital readmissions payment 
adjustments and the proposed proxy FY 2025 hospital VBP payment 
adjustments; and
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the FY 2024 labor-related share 
percentages, the proposed FY 2025 relative weights after applying 
the 10-percent cap, and the FY 2024 pre-reclassified wage data, and 
applied the same proposed proxy FY 2025 hospital readmissions 
payment adjustments and proposed proxy FY 2025 hospital VBP payment 
adjustments applied previously.
    Because this payment simulation uses the FY 2025 relative 
weights, consistent with our proposal in section V.I. of the 
preamble to this proposed rule and our historical policy, and as 
discussed in the preceding section, we applied the proposed adjustor 
for certain cases that group to MS-DRG 018 in our simulation of 
these payments.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the cap 
(derived in the first step) to the payment rates that were used to 
simulate payments for this comparison of aggregate payments from FY 
2024 to FY 2025. Based on this comparison, we computed a proposed 
budget neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, 
as we are proposing to apply this budget neutrality factor to the 
hospital-specific rates that are effective for cost reporting 
periods beginning on or after October 1, 2024. Please see the table 
later in this section setting forth each of the proposed FY 2025 
budget neutrality factors.

c. Updated Wage Index--Proposed Budget Neutrality Adjustment

    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. 
This provision also requires us to make any updates or adjustments 
to the wage index in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. 
Section 1886(d)(3)(E)(i) of the Act requires that we implement the 
wage index adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 
percent for hospitals with a wage index less than or equal to 
1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the 
Secretary shall calculate the budget neutrality adjustment for the 
adjustments or updates made under that provision as if section 
1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, 
this section of the statute requires that we implement the updates 
to the wage index in a budget neutral manner, but that our budget 
neutrality adjustment should not take into account the requirement 
that we set the labor-related share for hospitals with wage indexes 
less than or equal to 1.0000 at the more advantageous level of 62 
percent. Therefore, for purposes of this budget neutrality 
adjustment, section 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 2025, we are 
proposing to adjust 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this proposed rule.
    To compute a proposed budget neutrality adjustment factor for 
wage index and labor-related share percentage changes, we used FY 
2023 discharge data to simulate payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 relative 
weights and the FY 2023 pre-reclassified wage indexes, applied the 
FY 2024 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 2025 hospital readmissions payment 
adjustment and the proxy FY 2025 hospital VBP payment adjustment.
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 relative 
weights and the proposed FY 2025 pre-reclassified wage indexes, 
applied the proposed labor-related share for FY 2025 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 2025 
hospital readmissions payment adjustments and proxy FY 2025 hospital 
VBP payment adjustments applied previously.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor before the 
proposed cap (derived in the first step) and the 10 percent cap on 
relative weight reductions adjustment factor (derived from the 
second step) to the payment rates that were used to simulate 
payments for this comparison of aggregate payments from FY 2024 to 
FY 2025. Based on this comparison, we computed a proposed budget 
neutrality adjustment factor and applied this factor to the 
standardized amount for changes to the wage index. Please see the 
table later in this section for a summary of the proposed FY 2025 
budget neutrality factors.

d. Reclassified Hospitals--Proposed Budget Neutrality Adjustment

    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the 
Act provides for the reclassification of hospitals based on 
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a 
hospital may be reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amount to ensure that aggregate 
payments under the IPPS after implementation of the provisions of 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal 
to the aggregate prospective payments that would have been made 
absent these provisions. We note, in the FY 2024 IPPS/LTCH final 
rule (88 FR 58971-77), we finalized a policy 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

[[Page 36565]]

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 
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.
    We refer the reader to the FY 2015 IPPS final rule (79 FR 50371 
and 50372) for a complete discussion regarding the requirement of 
section 1886(d)(8)(C)(iii) of the Act. We further note that the wage 
index adjustments provided for under section 1886(d)(13) of the Act 
are not budget neutral. Section 1886(d)(13)(H) of the Act provides 
that any increase in a wage index under section 1886(d)(13) of the 
Act shall not be taken into account in applying any budget 
neutrality adjustment with respect to such index under section 
1886(d)(8)(D) of the Act. To calculate the proposed budget 
neutrality adjustment factor for FY 2025, we used FY 2022 discharge 
data to simulate payments and compared the following:
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 labor-
related share percentage, the proposed FY 2025 relative weights, and 
the proposed FY 2025 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 2025 hospital readmissions payment adjustments 
and the proxy FY 2025 hospital VBP payment adjustments.
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 labor-
related share percentage, the proposed FY 2025 relative weights, and 
the proposed FY 2025 wage data after such reclassifications, and 
applied the same proxy FY 2025 hospital readmissions payment 
adjustments and the proxy FY 2025 hospital VBP payment adjustments 
applied previously.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated 
with this proposed rule, which is available via the internet on the 
CMS website. This table reflects reclassification crosswalks for FY 
2025 and applies the policies explained in section III. of the 
preamble of this proposed rule. Based on this comparison, we 
computed a proposed budget neutrality adjustment factor and applied 
this proposed factor to the standardized amount to ensure that the 
effects of these provisions are budget neutral, consistent with the 
statute. Please see the table later in this section for a summary of 
the proposed FY 2025 budget neutrality factors.
    The proposed FY 2025 budget neutrality adjustment factor was 
applied to the standardized amount after removing the effects of the 
FY 2024 budget neutrality adjustment factor. We note that the 
proposed FY 2025 budget neutrality adjustment reflects FY 2025 wage 
index reclassifications approved by the MGCRB or the Administrator 
at the time of development of this proposed rule.

e. Proposed 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 proposed rule and codified at Sec.  
412.64(e)(4)(ii), the budget neutrality adjustment for the rural 
floor is a national adjustment to the wage index.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50369 through 50370), for FY 2025, we are proposing to 
calculate a national rural Puerto Rico wage index. Because there are 
no rural Puerto Rico hospitals with established wage data, our 
calculation of the FY 2025 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 proposed FY 2025 rural 
Puerto Rico wage index is calculated based on the average of the 
proposed FY 2025 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, in the FY 2024 IPPS/LTCH final rule (88 FR 58971-77), 
we finalized a policy beginning with FY 2024 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 
include the data of all Sec.  412.103 hospitals (including those 
that have an MGCRB reclassification) in the calculation of the rural 
floor.
    To calculate the proposed national rural floor budget neutrality 
adjustment factor, we used FY 2023 discharge data to simulate 
payments, the new OMB labor market area delineations proposed for FY 
2025, and the post-reclassified national wage indexes and compared 
the following:
     National simulated payments without the rural floor.
     National simulated payments with the rural floor.
    Based on this comparison, we determined a proposed national 
rural floor budget neutrality adjustment factor. The proposed 
national adjustment was applied to the national wage indexes to 
produce proposed rural floor budget neutral wage indexes. Please see 
the table later in this section for a summary of the proposed FY 
2025 budget neutrality factors.
    As further discussed in section III.G.2. of this proposed rule, 
we note that section 9831 of the American Rescue Plan Act of 2021 
(Pub. L. 117-2), enacted on March 11, 2021 amended section 
1886(d)(3)(E)(i) of the Act (42 U.S.C. 1395ww(d)(3)(E)(i)) and added 
section 1886(d)(3)(E)(iv) of the Act to establish a minimum area 
wage index (or imputed floor) for hospitals in all-urban States for 
discharges occurring on or after October 1, 2022. Unlike the imputed 
floor that was in effect from FY 2005 through FY 2018, section 
1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor 
wage index shall not be applied in a budget neutral manner. 
Specifically, section 9831(b) of Public Law 117-2 amends section 
1886(d)(3)(E)(i) of the Act to exclude the imputed floor from the 
budget neutrality requirement under section 1886(d)(3)(E)(i) of the 
Act. In the past, we budget neutralized the estimated increase in 
payments each year resulting from the imputed floor that was in 
effect from FY 2005 through FY 2018. For FY 2022 and subsequent 
years, in applying the imputed floor required under section 
1886(d)(3)(E)(iv) of the Act, we are applying the imputed floor 
after the application of the rural floor and would apply no 
reductions to the standardized amount or to the wage index to fund 
the increase in payments to hospitals in all-urban States resulting 
from the application of the imputed floor. We refer the reader to 
section III.G.2. of the preamble of this proposed rule for a 
complete discussion regarding the imputed floor.

f. Proposed Continuation of the Low Wage Index Hospital Policy--
Proposed Budget Neutrality Adjustment

    As discussed in section III.G.5. of the preamble of this 
proposed rule, we are proposing to continue for FY 2025 the wage 
index policy finalized in the FY 2020 IPPS/LTCH PPS final rule to 
address wage index disparities by increasing the wage index values 
for hospitals with a wage index value below the 25th percentile wage 
index value across all hospitals (the low wage index hospital 
policy). As discussed in section III.G.3. of this proposed rule, 
consistent with our current methodology for implementing wage index 
budget neutrality under section 1886(d)(3)(E) of the Act, we are 
proposing to make a budget neutrality adjustment to the national 
standardized amount for all hospitals so that the increase in the 
wage index for hospitals with a wage index below the 25th percentile 
wage index, is implemented in a budget neutral manner.
    To calculate this proposed budget neutrality adjustment factor 
for FY 2025, we used FY 2023 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 labor-
related share percentage, the proposed FY 2025 relative weights, and 
the proposed FY 2025 wage index for each hospital before adjusting 
the wage indexes under the low wage index hospital policy, and 
applied the proposed proxy FY 2025 hospital readmissions

[[Page 36566]]

payment adjustments and the proposed proxy FY 2025 hospital VBP 
payment adjustments; and
     Aggregate payments using the new OMB labor market area 
delineations proposed for FY 2025, the proposed FY 2025 labor-
related share percentage, the proposed FY 2025 relative weights, and 
the proposed FY 2025 wage index for each hospital after adjusting 
the wage indexes under the low wage index hospital policy, and 
applied the same proxy FY 2025 hospital readmissions payment 
adjustments and the proposed proxy FY 2025 hospital VBP payment 
adjustments applied previously.
    This proposed FY 2025 budget neutrality adjustment factor was 
applied to the standardized amount.

g. Permanent Cap Policy for Wage Index--Proposed Budget Neutrality 
Adjustment

    As noted previously, in section III.G. 6. of the preamble to 
this proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49018 through 49021) we finalized a policy to apply a 5-percent 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 2025, we used FY 2023 discharge data to simulate 
payments and compared the following:
     Aggregate payments without the 5-percent cap using the 
proposed FY 2025 labor-related share percentages, the new OMB labor 
market area delineations proposed for FY 2025, the proposed FY 2025 
relative weights, the proposed FY 2025 wage index for each hospital 
after adjusting the wage indexes under the low wage index hospital 
policy, and applied the proposed proxy FY 2025 hospital readmissions 
payment adjustments and the proposed proxy FY 2025 hospital VBP 
payment adjustments.
     Aggregate payments with the 5-percent cap using the 
proposed FY 2025 labor-related share percentages, the new OMB labor 
market area delineations proposed for FY 2025, the proposed FY 2025 
relative weights, the proposed FY 2025 wage index for each hospital 
after adjusting the wage indexes under the low wage index hospital 
policy, and applied the same proxy FY 2025 hospital readmissions 
payment adjustments and the proposed proxy FY 2025 hospital VBP 
payment adjustments applied previously.
    We note, Table 2 associated with this proposed rule contains the 
wage index by provider before and after applying the low wage index 
hospital policy and the proposed cap.

h. Proposed Rural Community Hospital Demonstration Program Adjustment

    In section V.N. of the preamble of this proposed rule, we 
discuss the Rural Community Hospital (RCH) Demonstration program, 
which was originally authorized for a 5-year period by section 410A 
of the Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year 
period by sections 3123 and 10313 of the Affordable Care Act (Pub. 
L. 111-148). Subsequently, section 15003 of the 21st Century Cures 
Act (Pub. L. 114-255), enacted December 13, 2016, amended section 
410A of Public Law 108-173 to require a 10-year extension period (in 
place of the 5-year extension required by the Affordable Care Act, 
as further discussed later in this section). Finally, Division CC, 
section 128(a) of the Consolidated Appropriations Act of 2021 (Pub. 
L. 116-260) again amended section 410A to require a 15-year 
extension period in place of the 10-year period. We make an 
adjustment to the standardized amount to ensure the effects of the 
RCH Demonstration program are budget neutral as required under 
section 410A(c)(2) of Public Law 108-173. We refer readers to 
section V.N. of the preamble of this proposed rule for complete 
details regarding the Rural Community Hospital Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make 
an adjustment to the standardized amount to ensure the effects of 
the Rural Community Hospital Demonstration are budget neutral, as 
required under section 410A(c)(2) of Public Law 108-173. For FY 
2025, based on the latest data for this proposed rule, the total 
amount that we are applying to make an adjustment to the 
standardized amounts to ensure the effects of the Rural Community 
Hospital Demonstration program are budget neutral is $ 49,522,206. 
Accordingly, using the most recent data available to account for the 
estimated costs of the demonstration program, for FY 2025, 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 Proposed FY 2025 budget neutrality factors. We 
refer readers to section V.N. of the preamble of this proposed rule 
on complete details regarding the calculation of the amount we are 
applying to make an adjustment to the standardized amounts.
    The following table is a summary of the proposed FY 2025 budget 
neutrality factors, as discussed in the previous sections.
[GRAPHIC] [TIFF OMITTED] TP02MY24.305

i. Proposed Outlier Payments

    Section 1886(d)(5)(A) of the Act provides for payments in 
addition to the basic prospective payments for ``outlier'' cases 
involving extraordinarily high costs. To qualify for outlier 
payments, a case must have costs greater than the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
uncompensated care payments, supplemental payment for eligible IHS/
Tribal hospitals and Puerto Rico hospitals, any new technology add-
on payments, and the ``outlier threshold'' or ``fixed-loss'' amount 
(a dollar amount by which the costs of a case must exceed payments 
in order to qualify for an outlier payment). We refer to the sum of 
the prospective payment rate for the MS-DRG, any IME and DSH 
payments, uncompensated care payments, supplemental payment for 
eligible IHS/Tribal hospitals and Puerto 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

[[Page 36567]]

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 2025 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 projected operating outlier payments by the total 
projected operating DRG payments plus projected operating outlier 
payments. As discussed in the next section, for FY 2025, we are 
incorporating an estimate of the impact 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 total of outlier 
payments as a proportion of total DRG payments. 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.html.

(1) Proposed Methodology To Incorporate an Estimate of the Impact of 
Outlier Reconciliation in the FY 2025 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. Instructions for outlier reconciliation 
are in section 20.1.2.5 of chapter 3 of the Claims Processing Manual 
(on line at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf). The original instructions issued 
in July 2003 \853\ instruct MACs to identify for CMS any instances 
where: (1) a hospital's actual operating CCR for the cost reporting 
period fluctuates plus or minus 10 percentage points or more 
compared to the interim operating CCR used to calculate outlier 
payments when a bill is processed; and (2) the total operating and 
capital outlier payments for the hospital exceeded $500,000 for that 
cost reporting period. Cost reports that meet these criteria will 
have the hospital's outlier payments reconciled at the time of cost 
report final settlement if approved by the CMS Central Office. For 
the remainder of this discussion, we refer to these criteria as the 
original criteria for outlier reconciliation (or the original 
criteria).
---------------------------------------------------------------------------

    \853\ Change Request 2785 (Transmittal A-03-058; July 3, 2003) 
found at https://www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/a03058.pdf.
---------------------------------------------------------------------------

    On March 28, 2024, we issued Change Request (CR) 13566, which is 
available at https://www.cms.gov/medicare/regulations-guidance/transmittals/2024-transmittals/r12558cp. CR 13566 provides 
additional instructions to MACs that expand the criteria for 
identifying cost reports MACs are to refer to CMS for approval of 
outlier reconciliation. We anticipate that MACs will identify more 
cost reports to refer to CMS for outlier reconciliation approval. A 
report issued by the Office of the Inspector General (OIG) 
recommended that CMS require reconciliation of all hospital outlier 
payments during a cost-reporting period in its November 2019 report 
titled ``Hospitals Received Millions in Excessive Outlier Payments 
Because CMS Limits the Reconciliation Process'' (A-05-16-
00060).\854\ CMS concurs with the OIG's recommendation.
---------------------------------------------------------------------------

    \854\ This report is available on the OIG website at: https://oig.hhs.gov/oas/reports/region5/51600060.pdf.
---------------------------------------------------------------------------

    Consistent with the OIG recommendation, CMS modified the 
original criteria for identifying cost reports to refer to CMS for 
outlier reconciliation approval in instructions to MACs in CR 13566. 
Specifically, CR 13566 states that for cost reports beginning on or 
after October 1, 2024, MACs shall identify for CMS any instances 
where: (1) the actual operating CCR is found to be plus or minus 20 
percent or more from the operating CCR used during that time period 
to make outlier payments, and (2) the total operating and capital 
outlier payments for the hospital exceeded $500,000 for that cost 
reporting period. For the remainder of this discussion, we refer to 
these criteria as the new criteria for outlier reconciliation (or 
the new criteria). We believe the new criteria balance current 
administrative feasibility with the goal of expanding the scope of 
cost reports identified for outlier reconciliation approval to 
increase the accuracy of outlier payments. These new criteria for 
identifying hospital cost reports that MACs should identify for 
outlier reconciliation approval are in addition to the original 
criteria for reconciliation described previously. That is, under the 
new criteria, MACs identify hospitals for outlier reconciliation 
that would not have met the original criteria. For example, in an 
instance where a hospital was paid with an operating CCR of 0.09 and 
its actual operating CCR was 0.07, then the hospital would not have 
met the 10-percentage point criterion under the original criteria 
(the hospital's operating CCR would have to be a negative number, 
which is not possible). Under the new criteria, a hospital that had 
a change in their actual operating CCR that was greater than 20 
percent from the CCR used for payment during the cost reporting 
period would be referred to CMS. Using the same example, while the 
operating CCR changed by a difference of -0.02 percentage point 
(0.07 minus 0.09), the percentage change operating CCR is -22.2 
percent ((0.07/0.09)-1), which meets the new 20 percent criterion. 
In addition, CR 13566 instructs that for cost reporting periods that 
begin on or after October 1, 2024, a hospital in its first cost 
reporting period will be referred for reconciliation of outlier 
payments at the time of cost report final settlement. As such, new 
hospitals will be referred for outlier reconciliation regardless of 
the change to the operating CCR and no matter the amount of outlier 
payments during the 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 for complete instructions 
regarding outlier reconciliation, including the update to the 
outlier reconciliation criteria provided in CR 13566.
    The regulations at Sec.  412.84(m) further state 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 approved for outlier 
reconciliation is lower at cost report settlement compared to the 
operating CCR used for payment, the hospital would owe CMS money. 
Conversely, if the operating CCR increases at cost report settlement 
compared to the operating CCR used for payment, CMS would owe the 
hospital money.
    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 stakeholders' concerns about the impact of 
outlier reconciliation on the modeling of the outlier threshold. For 
a detailed discussion of additional background regarding the 
incorporation of outlier reconciliation into the outlier fixed loss 
cost threshold, we refer the reader to the FY 2020 IPPS/LTCH PPS 
final rule. Consistent with the instructions to MACs that added new 
criteria that identify additional cost reports for reconciliation 
beginning with FY 2025 cost reports, we are proposing changes to our 
methodology to reflect the estimated reconciled outlier payments of 
the additional hospital cost reports identified under the new 
criteria. Specifically, we are proposing to make modifications to 
the steps of our

[[Page 36568]]

methodology in section II.A.4.i.1.a. of this Addendum to reflect the 
estimated reconciled outlier payments under the new criteria in the 
projection of outlier reconciliations for the FY 2025 outlier fixed 
loss cost threshold.

(a) Incorporating a Proposed Projection of Outlier Reconciliations for 
the FY 2025 Outlier Threshold Calculation

    Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42623 through 42625), for FY 2025, we are 
proposing to continue to incorporate outlier reconciliation in the 
FY 2025 outlier fixed loss cost threshold, with modifications to 
reflect the expansion of outlier reconciliations under the new 
criteria in CR 13566 (described previously).
    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 reconciliations for the FY 2020 
outlier threshold calculation. For FY 2024, we applied the same 
methodology finalized in FY 2020, using the historical outlier 
reconciliation amounts from the FY 2018 cost reports (cost reports 
with a begin date on or after October 1, 2017, and on or before 
September 30, 2018).
    Similar to the FY 2024 methodology, we are proposing to 
determine a projection of outlier reconciliations for the FY 2025 
outlier threshold calculation by advancing the historical data used 
by 1 year. Specifically, we are proposing to use FY 2019 cost 
reports (cost reports with a begin date on or after October 1, 2018, 
and on or before September 30, 2019). For FY 2025, we are proposing 
to use the methodology from FY 2020 to incorporate a projection of 
operating outlier reconciliations for the FY 2025 outlier threshold 
calculation, modified to reflect additional cost reports that would 
be identified for reconciliation under the new criteria in CR 13566. 
Because the new criteria are not effective until FY 2025 cost 
reports, to estimate outlier reconciliation dollars under the new 
criteria, we are proposing to apply the new criteria to FY 2019 cost 
reports as if they had been in place at the time of final cost 
report settlement (as described in more detail later in this 
section).
    As described previously, under the expanded outlier 
reconciliation criteria in CR 13566, for cost reporting periods 
beginning on or after October 1, 2024, new hospitals will have their 
outlier payments referred for outlier reconciliation by the MAC to 
CMS in their first cost reporting period regardless of the change to 
the operating CCR and no matter the amount of outlier payments 
during the cost reporting period. For purposes of the methodology 
for incorporating a projection of operating outlier reconciliations 
for the FY 2025 outlier threshold calculation to reflect additional 
cost reports that would be identified for reconciliation under the 
criteria added by CR 13566, we are not proposing to include the 
first cost reporting periods of new hospitals because the lack of 
predictability of new hospitals' data may impact the reliability of 
our projection. We note we expect the proposed modifications to our 
methodology for incorporating a projection of operating outlier 
reconciliations into the outlier threshold calculation would be 
necessary for 6 years, at which point the additional FY 2025 cost 
reports with outlier payments reconciled under the new criteria will 
be reflected in the HCRIS data available to be used to set the 
threshold.
    For FY 2019 hospital cost reports that were reconciled using the 
original criteria for referral for outlier reconciliation, for this 
FY 2025 proposed rule, we used the December 2023 HCRIS extract of 
the cost report data to calculate the proposed percentage adjustment 
for outlier reconciliation. For the FY 2025 final rule, we propose 
to use the latest quarterly HCRIS extract that is publicly available 
at the time of the development of that rule which, for FY 2025, 
would be the March 2024 extract. As discussed in the FY 2024 IPPS/
LTCH final rule (88 FR 59346), we generally expect historical cost 
reports for the applicable fiscal year to be available by March, and 
we have worked with our MACs so that historical cost reports for the 
applicable fiscal year can be made available with the March HCRIS 
update for the final rule.
    To account for the additional hospital cost reports that would 
be reconciled as a result of the new criteria, we are proposing to 
use data from the Provider Specific File (PSF) and the cost report 
to identify the FY 2019 cost reports that would have met the new 
criteria if those criteria had been in effect. This is because the 
FY 2019 cost reports in HCRIS would not have been identified as 
meeting the new criteria for outlier reconciliation since those new 
criteria are not being used until cost reports beginning with FY 
2025. As such, these FY 2019 cost reports do not have an amount 
reported for operating or capital outlier reconciliation dollars. 
Therefore, we are proposing to modify our methodology to estimate 
the outlier reconciliation dollars based on the operating and 
capital outlier amounts reported on the FY 2019 cost reports and 
supplemental data collected from the MACs, as described further in 
this section.
    The following proposed steps are similar to those finalized in 
the FY 2020 final rule, with updated data for FY 2025 and additional 
steps to reflect the cost reports that would be identified with new 
criteria under the updated instructions:
    Step 1.--Identify hospital cost reports that meet the original 
criteria or the new criteria.
    Step 1a.--Identify hospitals that report on their cost report 
the operating outlier reconciliation dollars on Worksheet E, Part A, 
Line 2.01. We note, these were hospitals that were identified by the 
MACs that met the original criteria for outlier reconciliation and 
were approved by CMS for outlier reconciliation. We use the Federal 
FY 2019 cost reports for hospitals paid under the IPPS from the most 
recent publicly available quarterly HCRIS extract available at the 
time of development of the proposed and final rules, and exclude 
sole community hospitals (SCHs) that were paid under their hospital-
specific rate (that is, if Worksheet E, Part A, Line 48 is greater 
than Line 47). We note that when there are multiple columns 
available for the lines of the cost report described in the 
following steps and the provider was paid under the IPPS for that 
period(s) of the cost report, then we believe it is appropriate to 
use multiple columns to fully represent the relevant IPPS payment 
amounts, consistent with our methodology for the FY 2020 final rule.
    Step 1b.--For hospitals that were not included in Step 1a, to 
identify hospitals that would be referred for outlier reconciliation 
under the new criteria, we are proposing to use data from the latest 
PSF and cost report data from the most recent publicly available 
quarterly HCRIS extract. We identified hospitals with cost reports 
where the actual operating CCR for the cost reporting period 
fluctuates plus or minus 20 percent or more compared to the interim 
operating CCR used to calculate outlier payments when a bill is 
processed. To do this, we compared the operating CCR calculated from 
the FY 2019 cost report in the most recent publicly available 
quarterly HCRIS extract (the December 2023 HCRIS for this proposed 
rule) to the weighted operating CCR used for claim payment during 
the FY 2019 cost reporting period from the latest quarterly PSF 
update (December 2023 for this proposed rule). We then determined 
whether the hospital had total operating and capital outlier 
payments greater than $500,000 during the FY 2019 cost reporting 
period based on the most recent publicly available quarterly HCRIS 
(the December 2023 HCRIS for this proposed rule). If the hospital 
met both of these criteria, we included the operating outlier 
payments from the MAC using CCRs from the FY 2019 cost report (as 
described in Step 2b-2). For the final rule, to identify hospitals 
that would be referred for reconciliation, we propose to use the 
most recent HCRIS and PSF data available, which would be the March 
2024 update.
    Step 2.--Determine the aggregate amount of operating outlier 
reconciliation dollars (under both the original criteria and the new 
criteria).
    Step 2a.--Calculate the aggregate amount of historical total of 
operating outlier reconciliation dollars (Worksheet E, Part A, Line 
2.01) using the Federal FY 2019 cost reports from Step 1a.
    Step 2b.--For the hospitals that would have met the new criteria 
as identified in Step 1b, to determine the aggregate amount of 
operating outlier reconciliation dollars, we propose to use the 
following process:
    We collected supplemental estimated outlier payment data from 
the MACs for claims with discharges occurring during the hospital's 
FY 2019 cost reporting period to estimate the change in the 
hospital's outlier payments. Specifically, for each hospital 
identified in Step 1b, the MACs used the actual operating CCR 
calculated from the FY 2019 cost report and the utility in the 
claims system along with that CCR to determine total outlier 
payments for claims with discharges occurring during the hospital's 
FY

[[Page 36569]]

2019 cost report (this is the same process MACs would have used if 
the cost report had been identified for reconciliation had the new 
criteria been in place for FY 2019 cost reports). For those same 
claims with discharges occurring during the hospital's 2019 cost 
report, the MAC provided to CMS the outlier payment as reported on 
the claim (which was based on the hospital's CCR in the PSF at the 
time of claim payment).
    Using this supplemental estimated outlier payment data, we 
computed a ratio of the outlier payments based on the actual 
operating CCR for the FY 2019 cost reporting period and the CCR used 
at the time of claim payment. This ratio is then applied to the 
operating outlier payment reported on the FY 2019 cost report to 
impute an operating outlier payment for the FY 2019 cost report. We 
believe it is appropriate to impute the operating outlier payment 
for the cost report using the supplemental data from the MACs 
described previously rather than use the actual amount reported on 
the cost report because the claims data in the claims processing 
system may slightly differ from the cost report data in the HCRIS 
due to timing. This approach would also allow CMS to use more recent 
data (from the most recent publicly available quarterly HCRIS 
extract, which is December 2023 for this proposed rule) to estimate 
outlier reconciliation dollars as compared to estimating outlier 
reconciliation dollars using the supplemental outlier payment data 
from the MACs, which was submitted by the MACs to CMS beginning in 
November 2022 (as described in this section). This is also the same 
data used to determine the aggregate amount of operating outlier 
reconciliation dollars for hospitals from the FY 2019 cost report 
data using the December 2023 HCRIS extract in Step 2a.
    As presented in the table that follows, to calculate the imputed 
operating outlier payment for the FY 2019 cost report, we multiplied 
the operating outlier payment reported on the FY 2019 cost report by 
the following ratio (determined from the supplemental data collected 
from the MACs described previously): Operating Outlier Payments from 
MAC using the CCR from FY 2019 Cost Report divided by Operating 
Outlier Payments from MAC Based on Claim Payment. The general 
formula is the following: Operating Outlier Payments Reported on the 
Cost Report * (Operating Outlier Payments from MAC Using CCRs from 
FY 2019 Cost Report/Operating Outlier Payments from MAC Based on 
Claim Payment).
    To calculate the Estimated Operating Outlier Reconciliation 
Dollars, we then subtracted the Imputed Operating Outlier Amount for 
the FY 2019 Cost Report (Step 2b-5) from the Operating Outlier 
Payment Reported on the FY 2019 Cost Report (Step 2b-1).
    The following is an example to illustrate our proposed 
calculation to determine the estimated amount of operating outlier 
reconciliation dollars for the hospitals that would have met the new 
criteria:
[GRAPHIC] [TIFF OMITTED] TP02MY24.306

    We note the following, with regard to the data used in the 
calculation:
     Due to system limitations the MACs needed 13 months to 
process all providers' claims through the claims utility (for Steps 
2b-;2 and 2b-;3). The MACs used the operating and capital CCR from 
the FY 2019 cost reports based on the September 2022 HCRIS extract 
and began processing the supplemental data for FY 2019 outlier 
payments in November 2022. We propose to move this forward each 
year, using the September HCRIS for future fiscal years for the CCRs 
(for example, for FY 2026, MACs would use CCRs from the FY 2020 cost 
reports based on the September 2023 HCRIS).
     For FY 2025, for the ``Operating Outlier Payment 
Reported on the FY 2019 Cost Report'' (Step 2b-;1) we used operating 
outlier payments reported on Worksheet E, Part A, Lines 2.02, 2.03, 
and 2.04 from the FY 2019 cost report using the most recent publicly 
available quarterly HCRIS extract for this proposed rule (that is, 
the December 2023 HCRIS extract). We propose to move this forward 
each year and use the most recent publicly available quarterly HCRIS 
extract (for example, for FY 2026, we would use operating outlier 
payments reported on Worksheet E, Part A, Lines 2.02, 2.03, and 2.04 
from the FY 2020 cost reports using the most recent publicly 
available quarterly HCRIS extract).
     For the hospitals identified in Step 1b, we have posted 
a public use file that includes the operating CCR calculated from 
the FY 2019 cost report in the most recent publicly available 
quarterly HCRIS extract (the December 2023 HCRIS for this proposed 
rule), the weighted operating CCR used for claim payment during the 
FY 2019 cost reporting period from the latest quarterly PSF update 
(December 2023 for this proposed rule), supplemental data from the 
MACs and operating outlier payment reported on the FY 2019 cost 
report.
    Step 3.--Calculate the aggregate amount of total Federal 
operating payments across all applicable hospitals using the Federal 
FY 2019 cost reports. 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, Lines 2.02, 2.03, and 2.04), and the outlier reconciliation 
amounts from Steps 2a and 2b. We note that a negative amount on 
Worksheet E, Part A, Line 2.01 from Step 2a for outlier 
reconciliation indicates an amount that was owed by the hospital, 
and a positive amount indicates this amount was paid to the 
hospital. Similarly, a negative amount from Step 2b for outlier 
reconciliation indicates an amount that would have been owed by the 
hospital, and a positive amount indicates an amount that would have 
been paid to the hospital.
    Step 4.--Divide the aggregate amount from Step 2 (that is, the 
sum of the amounts from Steps 2a and 2b) 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 2019. For FY 2025, the proposed ratio is a 
negative 0.03979 percent ((-$34,513,755/$86,740,955,496) x 100), 
which, when rounded to the second digit, is -0.04 percent. This 
percentage amount would be used to adjust the outlier target for FY 
2025 as described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the Medicare claims data 
in the MedPAR file used to model the outlier threshold, we are 
proposing to target 5.1 percent minus the percentage determined in 
Step 4 in determining the outlier threshold. Using the FY 2019 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 2025 under our proposed 
methodology. Therefore, for FY 2025, we are proposing to incorporate 
a projection of outlier reconciliation dollars by targeting an 
outlier threshold at 5.14 percent [5.1 percent - (-0.04 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 2025 outlier threshold as 
calculated for this proposed rule both with and without including 
this proposed percentage estimate of operating outlier 
reconciliation.

[[Page 36570]]

    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 are inviting public comment on our proposed methodology for 
projecting an estimate of outlier reconciliation and incorporating 
that estimate into the modeling for the fixed-loss cost outlier 
threshold for FY 2025.

(b) Proposed Reduction to the FY 2025 Capital Standard Federal Rate by 
an Adjustment Factor To Account for the Projected Proportion of Capital 
IPPS Payments Paid as Outliers

    We establish an outlier threshold that is applicable to both 
hospital inpatient operating costs and hospital inpatient capital 
related costs (58 FR 46348). Similar to the calculation of the 
adjustment to the standardized amount to account for the projected 
proportion of operating payments paid as outlier payments, as 
discussed in greater detail in section III.A.2. of this Addendum, we 
are proposing to reduce the FY 2025 capital standard Federal rate by 
an adjustment factor to account for the projected proportion of 
capital IPPS payments paid as outliers. The regulations in 42 CFR 
412.84(i)(4) state that any outlier reconciliation at cost report 
settlement would be based on operating and capital CCRs calculated 
based on a ratio of costs to charges computed from the relevant cost 
report and charge data determined at the time the cost report 
coinciding with the discharge is settled. As such, any 
reconciliation also applies to capital outlier payments.
    For FY 2025, we are proposing to continue to use the methodology 
from FY 2020 to adjust the FY 2025 capital standard Federal rate by 
an adjustment factor to account for the projected proportion of 
capital IPPS payments paid as outliers, with modifications to 
reflect the expansion of outlier reconciliations under the new 
criteria in CR 13566 (described previously).
    For purposes of the methodology for incorporating a projection 
of capital outlier reconciliations for the FY 2025 outlier 
adjustment to the capital standard Federal rate to reflect 
additional cost reports that would be identified for reconciliation 
under the criteria added by CR 13566, as we discussed in section 
II.A.4.i.1.a. of the Addendum of this proposed rule regarding the 
projection of the operating outlier reconciliation, we are not 
proposing to include the first cost reporting periods of new 
hospitals because the lack of predictability of new hospitals' data 
may impact the reliability of our projection. As noted, we expect 
the proposed modifications to our methodology for incorporating a 
projection of capital outlier reconciliations into the outlier 
adjustment to the capital standard federal rate would be necessary 
for 6 years, at which point the additional FY 2025 cost reports with 
outlier payments reconciled under the new criteria will be reflected 
in the HCRIS data available to be used to determine this adjustment.
    For FY 2019 hospital cost reports that were reconciled using the 
original criteria for referral for outlier reconciliation, for this 
FY 2025 proposed rule, we used the December 2023 HCRIS extract of 
the cost report data to calculate the proposed percentage adjustment 
for outlier reconciliation. For the FY 2025 final rule, we propose 
to use the latest quarterly HCRIS extract that is publicly available 
at the time of the development of that rule which, for FY 2025, 
would be the March 2024 extract. As discussed in the FY 2024 IPPS/
LTCH final rule (88 FR 59347), we generally expect historical cost 
reports for the applicable fiscal year to be available by March, and 
we have worked with our MACs so that historical cost reports for the 
applicable fiscal year can be made available with the March HCRIS 
update for the final rule.
    To account for the additional hospital cost reports that would 
be reconciled as a result of the new criteria, we are proposing to 
use data from the PSF and the cost report to identify the FY 2019 
cost reports that would have met the new criteria if those criteria 
had been in effect. This is because the FY 2019 cost reports in 
HCRIS would not have been identified as meeting the new criteria for 
outlier reconciliation since those new criteria are not being used 
until cost reports beginning with FY 2025. As such, these FY 2019 
cost reports do not have an amount reported for operating or capital 
outlier reconciliation dollars. Therefore, we are proposing to 
modify our methodology to estimate the outlier reconciliation 
dollars based on the operating and capital outlier amounts reported 
on the FY 2019 cost reports and supplemental data collected from the 
MACs as described further in this section.
    Similar to FY 2020, as part of our proposal for FY 2025 to 
incorporate into the outlier model the total outlier reconciliation 
dollars from the most recent and most complete fiscal year cost 
report data, we also are proposing to adjust our estimate of FY 2025 
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 are proposing to use the following methodology, which 
generally parallels the proposed methodology to incorporate a 
projection of operating outlier reconciliation payments for the FY 
2025 outlier threshold calculation, including updated data for FY 
2025 and additional steps to reflect the cost reports that would be 
identified with new criteria under the updated instructions.
    Step 1.--Identify hospital cost reports that meet the original 
criteria or the new criteria.
    Step 1a.--Identify hospitals that report on their cost report 
the capital outlier reconciliation dollars on Worksheet E, Part A, 
Line 93, Column 1. We note, these were hospitals that were 
identified by the MACs that met the original criteria for outlier 
reconciliation and were approved by CMS for outlier reconciliation. 
We use the Federal FY 2019 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 1b.--For hospitals that were not included in Step 1a, to 
identify hospitals that would be referred for outlier reconciliation 
under the new criteria, we used the same hospitals that were 
identified in Step 1b of the operating methodology. We note, as 
discussed previously, the new criteria from CR 13566 is based on the 
change to the operating CCR (not the capital CCR) where the actual 
operating CCR for the cost reporting period fluctuates plus or minus 
20 percent or more compared to the interim operating CCR used to 
calculate outlier payments when a bill is processed and the hospital 
had total operating and capital outlier payments greater than 
$500,000 during the cost reporting period.
    Step 2.--Determine the aggregate amount of capital outlier 
reconciliation dollars (under both the original criteria and the new 
criteria).
    Step 2a.--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 2019 cost reports from Step 1.
    Step 2b.--For the hospitals that would have met the new criteria 
as identified in Step 1b, to determine the aggregate amount of 
capital outlier reconciliation dollars, we propose to use the 
following process (we note this process is the same as Step 2b of 
the operating methodology):
    We collected supplemental estimated outlier payment data from 
the MACs for claims with discharges occurring during the hospital's 
FY 2019 cost reporting period to estimate the change in the 
hospital's outlier payments. Specifically, for each hospital 
identified in Step 1b, the MACs used the actual capital CCR 
calculated from the FY 2019 cost report and the utility in the 
claims system along with that CCR to determine total outlier 
payments for claims with discharges occurring during the hospital's 
FY 2019 cost report (this is the same process MACs would have used 
if the cost report had been identified for reconciliation had the 
new criteria been in place for FY 2019 cost reports). For those same 
claims with discharges occurring during the hospital's 2019 cost 
report, the MAC provided to CMS the outlier payment as reported on 
the claim (which was based on the hospital's CCR in the PSF at the 
time of claim payment).
    Using this supplemental estimated outlier payment data, we 
computed a ratio of the outlier payments based on the actual capital 
CCR for the FY 2019 cost reporting period and the capital CCR used 
at the time of claim payment. This ratio is then applied to the 
capital outlier payment reported on the FY

[[Page 36571]]

2019 cost report to impute a capital outlier payment for the FY 2019 
cost report. We believe it is appropriate to impute the capital 
outlier payment for the cost report using the supplemental data from 
the MACs described previously rather than use the actual amount 
reported on the cost report because the claims data in the claims 
processing system may slightly differ from the cost report data in 
the HCRIS due to timing. This approach would also allow CMS to use 
more recent data (from the most recent publicly available quarterly 
HCRIS extract, which is December 2023 for this proposed rule) to 
estimate outlier reconciliation dollars as compared to estimating 
outlier reconciliation dollars using the supplemental data from the 
MACs which was submitted by the MACs to CMS beginning in November 
2022 (as described in this section). This is also the same data used 
to determine the aggregate amount of capital outlier reconciliation 
dollars for hospitals from the FY 2019 cost report data using the 
December 2023 HCRIS extract in Step 2a.
    As presented in the table that follows, to calculate the imputed 
capital outlier payment for the FY 2019 cost report, we multiplied 
the capital outlier payment reported on the FY 2019 cost report by 
the following ratio (determined from the supplemental data collected 
from the MACs described previously): Capital Outlier Payments from 
MAC using the CCR from FY 2019 Cost Report divided by Capital 
Outlier Payments from MAC Based on Claim Payment. The general 
formula is the following: Capital Outlier Payments Reported on the 
Cost Report * (Capital Outlier Payments from MAC Using CCRs from FY 
2019 Cost Report/Capital Outlier Payments from MAC Based on Claim 
Payment).
    To calculate the Estimated Capital Outlier Reconciliation 
Dollars, we then subtracted the Imputed Capital Outlier Amount for 
the FY 2019 Cost Report (Step 2b-5) from the Capital Outlier Payment 
Reported on the FY 2019 Cost Report (Step 2b-1).
    The following is an example to illustrate our proposed 
calculation to determine the estimated amount of capital outlier 
reconciliation dollars for the hospitals that would have met the new 
criteria:
[GRAPHIC] [TIFF OMITTED] TP02MY24.307

    We note the following, with regard to the data used in the 
calculation:
     Due to system limitations the MACs needed 13 months to 
process all providers' claims through the claims utility (for Steps 
2b-2 and 2b-3). The MACs used the operating and capital CCR from the 
FY 2019 cost reports based on the September 2022 HCRIS extract and 
began processing the supplemental data for FY 2019 outlier payments 
in November 2022. We propose to move this forward each year, using 
the September HCRIS for future fiscal years for the CCRs (for 
example, for FY 2026, MACs would use CCRs from the 2020 cost reports 
based on the September 2023 HCRIS).
     For FY 2025, for the ``Capital Outlier Payment Reported 
on the FY 2019 Cost Report'' (Step 2b-1) we used capital outlier 
payments reported on Worksheet L, Part I, Line 2 and Line 2.01 from 
the FY 2019 cost report using the most recent publicly available 
quarterly HCRIS extract for this proposed rule (that is, the 
December 2023 HCRIS extract). We propose to move this forward each 
year and use the most recent publicly available quarterly HCRIS 
extract (for example, for FY 2026, we would use operating capital 
payments reported on Worksheet L, Part I, Line 2 and Line 2.01 from 
the FY 2020 cost reports using the most recent publicly available 
quarterly HCRIS extract).
     For the hospitals identified in Step 1b, we have posted 
a public use file that includes the operating CCR calculated from 
the FY 2019 cost report in the most recent publicly available 
quarterly HCRIS extract (the December 2023 HCRIS for this proposed 
rule), the weighted operating CCR used for claim payment during the 
FY 2019 cost reporting period from the latest quarterly PSF update 
(December 2023 for this proposed rule), supplemental data from the 
MACs and capital outlier payments reported on the FY 2019 cost 
report.
    Step 3.--Calculate the aggregate amount of total capital Federal 
payments across all applicable hospitals using the Federal FY 2019 
cost reports. The total capital Federal payments consist of the 
capital DRG payments, including capital outlier payments, 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 amounts from Steps 2a and 2b. We 
note that a negative amount on Worksheet E, Part A, Line 93 from 
Step 2a 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. Similarly, a negative amount from 
Step 2b for capital outlier reconciliation indicates an amount that 
would have been owed by the hospital, and a positive amount 
indicates an amount that would have been paid to the hospital.
    Step 4.--Divide the aggregate amount from Step 2 (that is, the 
sum of the amounts from Steps 2a and 2b) 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 2019. This percentage amount would be used 
to adjust the estimate of capital outlier payments for FY 2025 as 
described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the specific Medicare 
claims data in the MedPAR file used to estimate outlier payments, we 
are proposing that the estimate of capital outlier payments for FY 
2025 would be determined by adding the percentage in Step 5 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 5 
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 Steps 2a 
and 2b are negative, the estimate of capital outlier payments for FY 
2025 under our proposed methodology would be lower than the 
percentage of capital outlier payments otherwise determined using 
the shared outlier threshold.
    For this FY 2025 proposed rule, the estimated percentage of FY 
2025 capital outlier payments otherwise determined using the shared 
outlier threshold is 4.26 percent (estimated capital outlier 
payments of $290,612,698 divided by (estimated capital outlier 
payments of $290,612,698 plus the estimated total capital Federal 
payment of

[[Page 36572]]

$6,532,600,813)). The proposed ratio in Step 5 is a negative -
0.026446 percent ((-$2,056,344/$7,775,606,401) x 100), which, when 
rounded to the second digit, is -0.03 percent. Therefore, for this 
FY 2025 proposed rule, taking into account projected capital outlier 
reconciliation under our proposed methodology would decrease the 
estimated percentage of FY 2025 aggregate capital outlier payments 
by 0.03 percent.
    As discussed in section III.A.2. of this Addendum, we are 
proposing to incorporate the capital outlier reconciliation dollars 
from Step 5 when applying the outlier adjustment factor in 
determining the capital Federal rate based on the estimated 
percentage of capital outlier payments to total capital Federal rate 
payments for FY 2025.
    We are inviting public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2025 capital outlier payments for purposes of determining the 
capital outlier adjustment factor.

(2) Proposed FY 2025 Outlier Fixed-Loss Cost Threshold

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to 
the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of 
the changes.
    As we have done in the past, to calculate the proposed FY 2025 
outlier threshold, we simulated payments by applying proposed FY 
2025 payment rates and policies using cases from the FY 2023 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).
    In order to determine the proposed FY 2025 outlier threshold, we 
inflated the charges on the MedPAR claims by 2 years, from FY 2023 
to FY 2025. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42626 and 42627), we are proposing to use the following 
methodology to calculate the charge inflation factor for FY 2025:
     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 and 
REHs 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 proposing to remove allogeneic 
hematopoietic stem cell acquisition charges from the covered charge 
field for budget neutrality adjustments. As discussed in the FY 2021 
IPPS/LTCH PPS final rule, payment for allogeneic hematopoietic stem 
cell acquisition costs is made on a reasonable cost basis for cost 
reporting periods beginning on or after October 1, 2020 (85 FR 58835 
through 58842).
     Because this payment simulation uses the proposed FY 
2025 relative weights, consistent with our proposal discussed in 
section IV.I. of the preamble to this final rule, we applied the 
proposed adjustor for certain cases that group to MS-DRG 018 in our 
simulation of these payments.
    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 2025, 
we are proposing to use the same methodology as FY 2020 to determine 
the charge inflation factor. That is, for FY 2025, we are proposing 
to use the MedPAR files for the two most recent available Federal 
fiscal year time periods to calculate the charge inflation factor, 
as we did for FY 2020. Specifically, for this proposed rule we used 
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) and the December 2023 MedPAR file of FY 2023 
(October 1, 2022 to September 30, 2023) charge data (released for 
this FY 2025 IPPS/LTCH PPS proposed rule) to compute the proposed 
charge inflation factor. We are proposing that for the FY 2025 final 
rule, we would use more recently updated data, that is the MedPAR 
files from March 2023 for the FY 2022 time period and March 2024 for 
the FY 2023 time period.
    For FY 2025, under this proposed methodology, to compute the 1-
year average annual rate-of-change in charges per case, we compared 
the average covered charge per case of $82,570.13 ($574,544,024,043/
6,958,255) from October 1, 2021 through September 30, 2022, to the 
average covered charge per case of $85,990.03 ($593,444,028,889/
6,901,312) from October 1, 2022 through September 30, 2023. This 
rate-of-change was 4.142 percent (1.04142) or 8.4555 percent 
(1.084555) 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 this FY 2025 IPPS/LTCH PPS 
proposed rule, we are proposing to establish the FY 2025 outlier 
threshold using hospital CCRs from the December 2023 update to the 
Provider-Specific File (PSF), the most recent available data at the 
time of the development of the proposed rule. We are proposing 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 2025, we are 
proposing to continue to apply an adjustment factor to the CCRs to 
account for cost and charge inflation (as explained later in this 
section). We also are proposing that, if more recent data become 
available, we would use that data to calculate the final FY 2025 
outlier threshold.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
adopted a new

[[Page 36573]]

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 are proposing to 
adjust the CCRs from the December 2023 update of the PSF by 
comparing the percentage change in the national average case 
weighted operating CCR and capital CCR from the December 2022 update 
of the PSF to the national average case weighted operating CCR and 
capital CCR from the December 2023 update of the PSF. We note that 
we used total transfer-adjusted cases from FY 2023 to determine the 
national average case weighted CCRs for both sides of the 
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50979), we believe that it is appropriate to use the same case count 
on both sides of the comparison because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from one year to the next without any effect from a change in 
case count on different sides of the comparison.
    Using the proposed methodology, for this proposed rule, we 
calculated a December 2022 operating national average case-weighted 
CCR of 0.246416 and a December 2023 operating national average case-
weighted CCR of 0.254624. We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the December 2022 operating national average case-weighted CCR from 
the December 2023 operating national average case-weighted CCR and 
then dividing the result by the December 2022 national operating 
average case-weighted CCR. This resulted in a proposed one-year 
national operating CCR adjustment factor of 1.03331.
    We used this same proposed methodology to adjust the capital 
CCRs. Specifically, we calculated a December 2022 capital national 
average case-weighted CCR of 0.018005 and a December 2023 capital 
national average case-weighted CCR of 0.017765. We then calculated 
the percentage change between the two national capital case-weighted 
CCRs by subtracting the December 2022 capital national average case-
weighted CCR from the December 2023 capital national average case-
weighted CCR and then dividing the result by the December 2022 
capital national average case-weighted CCR. This resulted in a 
proposed one-year national capital CCR adjustment factor of 0.98667.
    For purposes of estimating the proposed outlier threshold for FY 
2025, we used a wage index that reflects the policies discussed in 
this 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 2025 low wage index 
hospital policy (described in section III.G.5 of the preamble of 
this proposed rule) for hospitals with a wage index value below the 
25th percentile, where the increase in the wage index value for 
these hospitals would be equal to half the difference between the 
otherwise applicable final wage index value for a year for that 
hospital and the 25th percentile wage index value for that year 
across all hospitals.
     Incorporating our policy (described in section III.6. 
of the preamble of this proposed rule) to apply a 5-percent cap on 
any decrease to a hospital's wage index from its wage index in the 
prior FY, regardless of the circumstances causing the decline.
    If we did not take the aforementioned into account, our estimate 
of total FY 2025 payments would be too low, and, as a result, our 
proposed outlier threshold would be too high, such that estimated 
outlier payments would be less than our projected 5.1 percent of 
total payments (which includes outlier reconciliation).
    As described in sections V.K. and V.L., respectively, of the 
preamble of this proposed rule, sections 1886(q) and 1886(o) of the 
Act establish the Hospital Readmissions Reduction Program and the 
Hospital VBP Program, respectively. We do not believe that it is 
appropriate to include the proposed hospital VBP payment adjustments 
and the hospital readmissions payment adjustments in the proposed 
outlier threshold calculation or the proposed outlier offset to the 
standardized amount. Specifically, consistent with our definition of 
the base operating DRG payment amount for the Hospital Readmissions 
Reduction Program under Sec.  412.152 and the Hospital VBP Program 
under Sec.  412.160, outlier payments under section 1886(d)(5)(A) of 
the Act are not affected by these payment adjustments. Therefore, 
outlier payments would continue to be calculated based on the 
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment). 
Consequently, we are proposing to exclude the estimated hospital VBP 
payment adjustments and the estimated hospital readmissions payment 
adjustments from the calculation of the proposed outlier fixed-loss 
cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies 
the DSH payment methodology under section 1886(d)(5)(F) of the Act, 
the uncompensated care payment under section 1886(r)(2) of the Act, 
like the empirically justified Medicare DSH payment under section 
1886(r)(1) of the Act, may be considered an amount payable under 
section 1886(d)(5)(F) of the Act such that it would be reasonable to 
include the payment in the outlier determination under section 
1886(d)(5)(A) of the Act. As we have done since the implementation 
of uncompensated care payments in FY 2014, for FY 2025, we are 
proposing to allocate an estimated per-discharge uncompensated care 
payment amount to all cases for the hospitals eligible to receive 
the uncompensated care payment amount in the calculation of the 
outlier fixed-loss cost threshold methodology. We continue to 
believe that allocating an eligible hospital's estimated 
uncompensated care payment to all cases equally in the calculation 
of the outlier fixed-loss cost threshold would best approximate the 
amount we would pay in uncompensated care payments during the year 
because, when we make claim payments to a 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 2025, we are 
proposing to include estimated FY 2025 uncompensated care payments 
in the computation of the proposed outlier fixed-loss cost 
threshold. Specifically, we are proposing to use the estimated per-
discharge uncompensated care payments to hospitals eligible for the 
uncompensated care payment for all cases in the calculation of the 
proposed outlier fixed-loss cost threshold methodology.
    In addition, consistent with the methodology finalized in the FY 
2023 final rule, we are proposing to include the estimated 
supplemental payments for eligible IHS/Tribal hospitals and Puerto 
Rico hospitals in the computation of the FY 2025 proposed outlier 
fixed-loss cost threshold. Specifically, we are proposing to use the 
estimated per-discharge supplemental payments to hospitals eligible 
for the supplemental payment for all cases in the calculation of the 
proposed outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal 
payment rate and outlier payments for all claims. In addition, as 
described in the earlier section to this Addendum, we are proposing 
to incorporate an estimate of FY 2025 outlier reconciliation in the 
methodology for determining the outlier threshold. As noted 
previously, for the FY 2025 proposed rule, the ratio of outlier 
reconciliation dollars to total Federal Payments (Step 4) is a 
negative 0.039789 percent, which, when rounded to the second digit, 
is -0.04 percent. Therefore, for FY 2025, we are proposing to 
incorporate a projection of outlier reconciliation dollars by 
targeting an outlier threshold at 5.14 percent [5.1 percent -(-.04 
percent)]. Under this proposed approach, we determined a proposed 
threshold of $49,237 and calculated total outlier payments of 
$4,330,371,122 and total operating Federal payments of 
$79,917,085,666. We then divided total outlier payments by total 
operating Federal payments plus total outlier payments and 
determined that this threshold matched with the 5.14 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 note that, if calculated without applying

[[Page 36574]]

our proposed methodology for incorporating an estimate of outlier 
reconciliation in the determination of the outlier threshold, the 
proposed threshold would be $49,601. We are proposing an outlier 
fixed-loss cost threshold for FY 2025 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 $49,237.

(3) Other Proposed Changes Concerning Outliers

    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related 
costs. When we modeled the combined operating and capital outlier 
payments, we found that using a common threshold resulted in a 
higher percentage of outlier payments for capital-related costs than 
for operating costs. We project that the threshold for FY 2025 
(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 4.23 percent of 
capital payments based on the Federal rate (which reflects our 
methodology discussed previously to incorporate an estimate of 
capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we are proposing to reduce the FY 2025 
standardized amount by 5.1 percent to account for the projected 
proportion of payments paid as outliers.
    The proposed outlier adjustment factors that would be applied to 
the operating standardized amount and capital Federal rate based on 
the proposed FY 2025 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TP02MY24.308

    We are proposing to apply the outlier adjustment factors to the 
FY 2025 payment rates after removing the effects of the FY 2024 
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 1.288 or capital CCRs greater than 0.129 or hospitals 
for which the MAC is unable to calculate a CCR (as described under 
Sec.  412.84(i)(3) of our regulations), statewide average CCRs are 
used to determine whether a hospital qualifies for outlier payments. 
Table 8A listed in section VI. of this Addendum (and available via 
the internet on the CMS website) contains the proposed statewide 
average operating CCRs for urban hospitals and for rural hospitals 
for which the MAC is unable to compute a hospital-specific CCR 
within the range previously specified. These statewide average 
ratios would be effective for discharges occurring on or after 
October 1, 2024 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 proposed statewide average capital CCRs. As 
previously stated, the proposed CCRs in Tables 8A and 8B would be 
used during FY 2025 when hospital-specific CCRs based on the latest 
settled cost report either are not available or are outside the 
range noted previously. Table 8C listed in section VI. of this 
Addendum (and available via the internet on the CMS website) 
contains the proposed statewide average total CCRs used under the 
LTCH PPS as discussed in section V. of this Addendum.
    We finally note that section 20.1.2 of chapter three of the 
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers an array of topics, including CCRs, 
reconciliation, and the time value of money. We encourage hospitals 
that are assigned the statewide average operating and/or capital 
CCRs to work with their MAC on a possible alternative operating and/
or capital CCR as explained in the manual. Use of an alternative CCR 
developed by the hospital in conjunction with the MAC can avoid 
possible overpayments or underpayments at cost report settlement, 
thereby ensuring better accuracy when making outlier payments and 
negating the need for outlier reconciliation. We also note that a 
hospital may request an alternative operating or capital CCR at any 
time as long as the guidelines of the manual are followed. In 
addition, the manual outlines the outlier reconciliation process for 
hospitals and Medicare contractors. We refer hospitals to the manual 
instructions for complete details on outlier reconciliation.

(4) FY 2023 Outlier Payments

    Our current estimate, using available FY 2023 claims data, is 
that actual outlier payments for FY 2023 were approximately 5.23 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2023, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2023. 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 2023 are equal to 5.1 percent of 
total MS-DRG payments. As explained in the FY 2003 Outlier final 
rule (68 FR 34502), if we were to make retroactive adjustments to 
all outlier payments to ensure total payments are 5.1 percent of MS-
DRG payments (by retroactively adjusting outlier payments), we would 
be removing the important aspect of the prospective nature of the 
IPPS. Because such an across-the-board adjustment would either lead 
to more or less outlier payments for all hospitals, hospitals would 
no longer be able to reliably approximate their payment for a 
patient while the patient is still hospitalized. We believe it would 
be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment. Furthermore, we believe it is consistent 
with the statutory language at section 1886(d)(5)(A)(iv) of the Act 
not to make retroactive adjustments to outlier payments. This 
section states that outlier payments be equal to or greater than 5 
percent and less than or equal to 6 percent of projected or 
estimated (not actual) MS-DRG payments. We believe that an important 
goal of a PPS is predictability. Therefore, we believe that the 
fixed-loss outlier threshold should be projected based on the best 
available historical data and should not be adjusted retroactively. 
A retroactive change to the fixed-loss outlier threshold would 
affect all hospitals subject to the IPPS, thereby undercutting the 
predictability of the system as a whole.
    We note that, because the MedPAR claims data for the entire FY 
2024 period would not be available until after September 30, 2024, 
we are unable to provide an estimate of actual outlier payments for 
FY 2024 based on FY 2024 claims data in this proposed rule. We will 
provide an estimate of actual FY 2024 outlier payments in the FY 
2026 IPPS/LTCH PPS proposed rule.

5. Proposed FY 2025 Standardized Amount

    The adjusted standardized amount is divided into labor-related 
and nonlabor-related portions. Tables 1A and 1B listed and published 
in section VI. of this Addendum (and available via the internet on 
the CMS website) contain the national standardized amounts that we 
are proposing to apply to all

[[Page 36575]]

hospitals, except hospitals located in Puerto Rico, for FY 2025. The 
proposed standardized amount for hospitals in Puerto Rico is shown 
in Table 1C listed and published in section VI. of this Addendum 
(and available via the internet on the CMS website). The proposed 
amounts shown in Tables 1A and 1B differ only in that the labor-
related share applied to the standardized amounts in Table 1A is 
67.6 percent, and the labor-related share applied to the 
standardized amounts in Table 1B is 62 percent. In accordance with 
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are 
proposing to apply a labor-related share of 62 percent, unless 
application of that percentage would result in lower payments to a 
hospital than would otherwise be made. In effect, the statutory 
provision means that we would apply a labor-related share of 62 
percent for all hospitals whose wage indexes are less than or equal 
to 1.0000.
    In addition, Tables 1A and 1B include the proposed standardized 
amounts reflecting the proposed applicable percentage increases for 
FY 2025.
    The proposed labor-related and nonlabor-related portions of the 
national average standardized amounts for Puerto Rico hospitals for 
FY 2025 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 2024 
national standardized amounts to the proposed FY 2025 national 
standardized amounts. The second through fifth columns display the 
changes from the FY 2024 standardized amounts for each proposed 
applicable FY 2025 standardized amount. The first row of the table 
shows the updated (through FY 2024) average standardized amount 
after restoring the FY 2024 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 2024 adjustment factors have not 
been removed from the base rate in the following table. 
Additionally, for FY 2025 we have applied the proposed budget 
neutrality factors for the lowest quartile hospital policy, 
described previously.

[[Page 36576]]

[GRAPHIC] [TIFF OMITTED] TP02MY24.309

B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this 
Addendum (and available via the internet on the CMS website), 
contain the proposed labor-related and nonlabor-related shares that 
we are proposing to use to calculate the prospective payment rates 
for hospitals located in the 50 States, the District of Columbia, 
and Puerto Rico for FY 2025. This section addresses two types of 
adjustments to the standardized amounts that are made in determining 
the prospective payment rates as described in this Addendum.

1. Proposed Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
national prospective payment rate to account for area differences in 
hospital wage levels. This adjustment is made by multiplying the 
labor-related portion of the adjusted standardized amounts by the 
appropriate wage index for the area in which the hospital is 
located. For FY 2025, as discussed in section IV.B.3. of the 
preamble of this proposed rule, we are proposing to apply a labor-
related share of 67.6 percent for the national standardized amounts 
for all IPPS hospitals (including hospitals in Puerto Rico) that 
have a wage index value that is greater than 1.0000. Consistent with 
section 1886(d)(3)(E) of the Act, we are proposing to apply the wage 
index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 
1.0000. In section III. of the preamble of this proposed rule, we 
discuss

[[Page 36577]]

the data and methodology for the FY 2025 wage index.

2. Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act provides discretionary 
authority to the Secretary to make adjustments as the Secretary 
deems appropriate to take into account the unique circumstances of 
hospitals located in Alaska and Hawaii. Higher labor-related costs 
for these two States are taken into account in the adjustment for 
area wages described previously. To account for higher non-labor-
related costs for these two States, we multiply the nonlabor-related 
portion of the standardized amount for hospitals in Alaska and 
Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that 
were published by the U.S. Office of Personnel Management (OPM) 
every 4 years (coinciding with the update to the labor-related share 
of the IPPS market basket), beginning in FY 2014. We refer readers 
to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional 
background and a detailed description of this methodology (77 FR 
28145 through 28146 and 77 FR 53700 through 53701, respectively). 
For FY 2022, in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45546 
through 45547), we updated the COLA factors published by OPM for 
2009 (as these are the last COLA factors OPM published prior to 
transitioning from COLAs to locality pay) using the methodology that 
we finalized in the FY 2013 IPPS/LTCH PPS final rule. Based on the 
policy finalized in the FY 2013 IPPS/LTCH PPS final rule, we are 
continuing to use the same COLA factors in FY 2025 that were used in 
FY 2024 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 2025.
[GRAPHIC] [TIFF OMITTED] TP02MY24.310

    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 at the 
same time as the update to the labor-related share of the IPPS 
market basket.

C. Calculation of the Proposed Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for 
FY 2025

    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 2025 equals the Federal rate (which 
includes uncompensated care payments). As previously discussed, 
section 4102 of the Consolidated Appropriations Act, 2023 (Pub. L. 
117-328), enacted on December 29, 2022, extended the MDH program 
through FY 2024 (that is, for discharges occurring on or before 
September 30, 2024). Subsequently, section 307 of the Consolidated 
Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on 
March 9, 2024, further extended the MDH program for discharges 
occurring before January 1, 2025. Prior to enactment of the CAA, 
2024, the MDH program was only to be in effect through the end of FY 
2024. Under current law, the MDH program will expire for discharges 
on or after January 1, 2025.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment:
     The Federal national rate (which, as discussed in 
section IVE. of the preamble of this proposed rule, includes 
uncompensated care payments).
     The updated hospital-specific rate based on FY 1982 
costs per discharge.
     The updated hospital-specific rate based on FY 1987 
costs per discharge.
     The updated hospital-specific rate based on FY 1996 
costs per discharge.
     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 2025 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 2025 discharges occurring before January 1, 2025 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

[[Page 36578]]

x Applicable CBSA Wage Index) + (Nonlabor-Related Applicable 
Standardized Amount x Cost-of-Living Adjustment)] x (1 + IME + (DSH 
* 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x 
Federal Capital Rate x Geographic Adjustment Fact x (l + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + 
Capital CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-
Related Portion x CBSA Wage Index) + Nonlabor-Related portion)] x 
Operating CCR to Total CCR + Federal Payment with IME, DSH + 
Uncompensated Care Payment + supplemental payment for eligible IHS/
Tribal hospitals and Puerto Rico hospitals + New Technology Add-On 
Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital 
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic 
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with 
IME and DSH

    Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs--Operating Outlier 
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs-Capital Outlier 
Threshold) x Marginal Cost Factor

    The payment rate may then be further adjusted for hospitals that 
qualify for a low-volume payment adjustment under section 
1886(d)(12) of the Act and 42 CFR 412.101(b). The base-operating DRG 
payment amount may be further adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment as 
described under sections 1886(q) and 1886(o) of the Act, 
respectively. Payments also may be reduced by the 1-percent 
adjustment under the HAC Reduction Program as described in section 
1886(p) of the Act. We also make new technology add-on payments in 
accordance with section 1886(d)(5)(K) and (L) of the Act. Finally, 
we add the uncompensated care payment and supplemental payment for 
eligible IHS/Tribal hospitals and Puerto Rico hospitals to the total 
claim payment amount. As noted in the previous formula, we take 
uncompensated care payments, supplemental payments for eligible IHS/
Tribal hospitals and Puerto Rico hospitals, and new technology add-
on payments into consideration when calculating outlier payments.

3. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)

a. Calculation of Hospital-Specific Rate

    Section 1886(b)(3)(C) of the Act provides that SCHs are paid 
based on whichever of the following rates yields the greatest 
aggregate payment: the Federal rate; the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment. As 
discussed previously, currently MDHs are 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 
greater of the updated hospital-specific rates based on either FY 
1982, FY 1987, or FY 2002 costs per discharge. As noted, under 
current law, the MDH program is effective for FY 2025 discharges on 
or before December 31, 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 2025

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs and MDHs equals the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same 
update factor as for all other hospitals subject to the IPPS). 
Because the Act sets the update factor for SCHs and MDHs equal to 
the update factor for all other IPPS hospitals, the update to the 
hospital-specific rates for SCHs and MDHs is subject to the 
amendments to section 1886(b)(3)(B) of the Act made by sections 
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the 
proposed applicable percentage increases to the hospital-specific 
rates applicable to SCHs and MDHs are the following:
[GRAPHIC] [TIFF OMITTED] TP02MY24.311

    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.F. of the preamble of this proposed rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the 
hospital-specific rate, the hospital-specific rate is adjusted by a 
budget neutrality factor to ensure that changes to the MS-DRG 
classifications and the recalibration of the MS-DRG relative weights 
are made in a manner so that aggregate IPPS payments are unaffected. 
Therefore, the hospital specific-rate for an SCH or MDH is adjusted 
by the proposed MS-DRG reclassification and recalibration budget 
neutrality factor, as discussed in section III. of this Addendum and 
listed in the table in section II. of this Addendum. In addition, as 
discussed in section II.E.2.d. of the preamble this proposed rule 
and previously, we are applying a permanent 10-percent cap on the 
reduction in a MS-DRG's relative weight in a given fiscal year, as 
finalized in the FY 2023 IPPS/LTCH PPS final rule. Because SCHs and 
MDHs use the same MS-DRGs as other hospitals when they are paid 
based in whole or in part on the hospital-specific rate, consistent 
with the policy adopted in the FY 2023 IPPS/LTCH PPS final rule (87 
FR 48897 through 48900 and 49432 through 49433), the

[[Page 36579]]

hospital specific-rate for an SCH or MDH would be adjusted by the 
proposed MS-DRG 10-percent cap budget neutrality factor. The 
resulting rate is used in determining the payment rate that an SCH 
or MDH would receive for its discharges beginning on or after 
October 1, 2024.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2025

    The PPS for acute care hospital inpatient capital-related costs 
was implemented for cost reporting periods beginning on or after 
October 1, 1991. The basic methodology for determining Federal 
capital prospective rates is set forth in the regulations at 42 CFR 
412.308 through 412.352. In this section of this Addendum, we 
discuss the factors that we are proposing to use to determine the 
capital Federal rate for FY 2025, which would be effective for 
discharges occurring on or after October 1, 2024.
    All hospitals (except ``new'' hospitals under Sec.  
412.304(c)(2)) are paid based on the capital Federal rate. We 
annually update the capital standard Federal rate, as provided in 
Sec.  412.308(c)(1), to account for capital input price increases 
and other factors. The regulations at Sec.  412.308(c)(2) also 
provide that the capital Federal rate be adjusted annually by a 
factor equal to the estimated proportion of outlier payments under 
the capital Federal rate to total capital payments under the capital 
Federal rate. In addition, Sec.  412.308(c)(3) requires that the 
capital Federal rate be reduced by an adjustment factor equal to the 
estimated proportion of payments for exceptions under Sec.  412.348. 
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53705), there is generally no longer a need for an exceptions 
payment adjustment factor.) However, in limited circumstances, an 
additional payment exception for extraordinary circumstances is 
provided for under Sec.  412.348(f) for qualifying hospitals. 
Therefore, in accordance with Sec.  412.308(c)(3), an exceptions 
payment adjustment factor may need to be applied if such payments 
are made. Section 412.308(c)(4)(ii) requires that the capital 
standard Federal rate be adjusted so that the effects of the annual 
DRG reclassification and the recalibration of DRG weights and 
changes in the geographic adjustment factor (GAF) are budget 
neutral.
    Section 412.374 provides for payments to hospitals located in 
Puerto Rico under the IPPS for acute care hospital inpatient 
capital-related costs, which currently specifies capital IPPS 
payments to hospitals located in Puerto Rico are based on 100 
percent of the Federal rate.

A. Determination of the Proposed Federal Hospital Inpatient 
Capital-Related Prospective Payment Rate Update for FY 2025

    In the discussion that follows, we explain the factors that we 
are proposing to use to determine the capital Federal rate for FY 
2025. In particular, we explain why the proposed FY 2025 capital 
Federal rate would increase approximately 2.50 percent, compared to 
the FY 2024 capital Federal rate. As discussed in the impact 
analysis in Appendix A to this proposed rule, we estimate that 
capital payments per discharge would increase approximately 2.4 
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 proposed update factor for FY 2025 under that 
framework is 3.0 percent based on a projected 2.5 percent increase 
in the 2018-based CIPI, a proposed 0.0 percentage point adjustment 
for intensity, a proposed 0.0 percentage point adjustment for case-
mix, a proposed 0.0 percentage point adjustment for the DRG 
reclassification and recalibration, and a proposed forecast error 
correction of 0.5 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 
2025 CIPI projection in that same section of this Addendum. In this 
proposed rule, we describe the policy adjustments that we are 
proposing to apply in the update framework for FY 2025.
    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 2025, 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 2025. The net adjustment for change 
in case-mix is the difference between the projected real increases 
in case mix and the projected total increase in case mix. Therefore, 
the proposed net adjustment for case-mix change in FY 2025 is 0.0 
percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment 
is intended to remove the effect on total payments of prior year's 
changes to the DRG classifications and relative weights, to retain 
budget neutrality for all case-mix index-related changes other than 
those due to patient severity of illness. Due to the lag time in the 
availability of data, there is a 2-year lag in data used to 
determine the adjustment for the effects of DRG reclassification and 
recalibration. For example, for this proposed rule, we have the FY 
2023 MedPAR claims data available to evaluate the effects of the FY 
2023 DRG reclassification and recalibration as part of our update 
for FY 2025. We assume for purposes of this adjustment, that the 
estimate of FY 2023 DRG reclassification and recalibration would 
result in no change in the case-mix when compared with the case mix 
index that would have resulted if we had not made the 
reclassification and recalibration changes to the DRGs. Therefore, 
we are proposing to make a 0.0 percentage point adjustment for 
reclassification and recalibration in the update framework for FY 
2025.
    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 0.5 
percentage point was calculated for the FY 2023 update, for which 
there are historical data. That is, current historical data indicate 
that the forecasted FY 2023 CIPI increase (2.5 percent) used in 
calculating the FY 2023 update factor is 0.5 percentage point lower 
than actual realized price increases (3.0 percent). As this exceeds 
the 0.25 percentage point threshold, we are proposing an adjustment 
of 0.5 percentage point for the FY 2023 forecast error in the update 
for FY 2025.
    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

[[Page 36580]]

data that were used in the past under the framework for operating 
IPPS. The intensity factor for the operating update framework 
reflects how hospital services are utilized to produce the final 
product, that is, the discharge. This component accounts for changes 
in the use of quality-enhancing services, for changes within DRG 
severity, and for expected modification of practice patterns to 
remove noncost-effective services. Our intensity measure is based on 
a 5-year average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual 
intensity changes that are due, respectively, to ineffective 
practice patterns and the combination of quality-enhancing new 
technologies and complexity within the DRG system, we assume that 
one-half of the annual change is due to each of these factors. Thus, 
the capital update framework provides an add-on to the input price 
index rate of increase of one-half of the estimated annual increase 
in intensity, to allow for increases within DRG severity and the 
adoption of quality-enhancing technology.
    In this proposed rule, we are proposing to continue to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 2025 (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 2025, we are proposing to use an intensity 
measure that is based on an average of cost-per-discharge data from 
the 5-year period beginning with FY 2018 and extending through FY 
2022. Based on these data, we estimated that case-mix constant 
intensity declined during FYs 2018 through 2022. 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 declined during 
that 5-year period, we believe it is appropriate to continue to 
apply a zero-intensity adjustment for FY 2025. Therefore, we are 
proposing to make a 0.0 percentage point adjustment for intensity in 
the update for FY 2025.
    Earlier, we described the basis of the components we used to 
develop the proposed 3.0 percent capital update factor under the 
capital update framework for FY 2025, as shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP02MY24.312

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 2025, we are 
proposing to continue to incorporate the impact of estimated 
operating outlier reconciliation payment amounts into the outlier 
threshold model. (For more details on our proposal to incorporate an 
estimate of the impact of operating outlier reconciliation payment 
amounts into the outlier threshold model, including modifications we 
are proposing to our methodology to reflect the estimate of 
operating outlier reconciliation payment amounts under the new 
criteria which expands the scope of cost reports identified for 
outlier reconciliation approval in FY 2025, see section II.A.4.i. of 
this Addendum to this proposed rule.)
    For FY 2024, we estimated that outlier payments for capital-
related PPS payments would equal 4.02 percent of inpatient capital-
related payments based on the capital Federal rate. Based on the 
threshold discussed in section II.A. of this Addendum, we estimate 
that prior to taking into account projected capital outlier 
reconciliation payments, outlier payments for capital-related costs 
would equal 4.26 percent of inpatient capital-related payments based 
on the proposed capital Federal rate in FY 2025. Using the proposed 
methodology outlined in section II.A.4.i. of this Addendum, we 
estimate that taking into account projected capital outlier 
reconciliation payments would decrease the estimated percentage of 
FY 2025 capital outlier payments by 0.03 percent. Therefore, 
accounting for estimated capital outlier reconciliation, the 
estimated outlier payments for capital-related PPS payments would 
equal 4.23 percent (4.26 percent-0.03 percent) of inpatient capital-
related payments based on the proposed capital Federal rate in FY 
2025. Accordingly, we are proposing to apply an outlier adjustment 
factor of 0.9577 in determining the capital Federal rate for FY 
2025. Thus, we estimate that the percentage of capital outlier 
payments to total capital Federal rate payments for FY 2025 would be 
higher than the percentage we estimated for FY 2024. (For more 
details on our proposed methodology for incorporating the impact of 
estimated capital outlier reconciliation payment amounts into the 
calculation of the capital outlier adjustment factor for FY 2025, 
including modifications we are proposing to make to our methodology 
to reflect the estimate of capital outlier reconciliation payment 
amounts under the new criteria which expands the scope of cost 
reports identified for outlier reconciliation approval in FY 2025, 
see section II.A.4.i. of this Addendum to this proposed rule.)
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The proposed FY 2025 outlier 
adjustment of 0.9577 is a -0.21 percent change from the FY 2024 
outlier adjustment of 0.9598. Therefore, the proposed net change in 
the outlier adjustment to the capital Federal rate for FY 2024 is 
0.9979 (0.9577/0.9598) so that the proposed outlier adjustment would 
decrease the FY 2025 capital Federal rate by approximately -0.21 
percent compared to the FY 2024 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.5. of the preamble of this 
proposed rule, in the FY

[[Page 36581]]

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 would be effective 
for at least 4 years, beginning in FY 2020. This policy was applied 
in FYs 2020 through 2024, and we are proposing to continue to apply 
this policy for at least 3 more years, beginning in FY 2025. 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 proposing to 
continue in FY 2025, 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 2024 and are proposing 
to continue to apply in FY 2025, 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.
    The budget neutrality factors applied for changes to the GAFs 
due to the update to the wage data, wage index reclassifications and 
redesignations, and application of the rural floor policy are built 
permanently into the capital Federal rate; that is, they are applied 
cumulatively in determining the capital Federal rate. However, the 
budget neutrality factor for the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases policy is 
not permanently built into the capital Federal rate. This is because 
the GAFs with the lowest quartile hospital wage index adjustment and 
the 5-percent cap on wage index decreases policy applied from the 
previous year are not used in the budget neutrality factor 
calculations for the current year. Accordingly, and consistent with 
this approach, prior to calculating the proposed GAF budget 
neutrality factors for FY 2025, we removed from the capital Federal 
rate the budget neutrality factor applied in FY 2024 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 2024 budget neutrality factor of 0.9964 (88 
FR 59362). We refer the reader to the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45552) for additional discussion on our policy of 
removing the prior year budget neutrality factor for the lowest 
quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases from the capital Federal rate.
    In light of the proposed changes to the wage index and other 
proposed wage index policies for FY 2025 discussed previously, which 
directly affect the GAF, we are proposing to continue to compute a 
budget neutrality adjustment for changes in the GAFs in two steps. 
We discuss our proposed 2-step calculation of the proposed GAF 
budget neutrality factors for FY 2025 as follows.
    To determine the GAF budget neutrality factors for FY 2025, we 
first compared estimated aggregate capital Federal rate payments 
based on the FY 2024 MS-DRG classifications and relative weights and 
the FY 2024 GAFs to estimated aggregate capital Federal rate 
payments based on the FY 2024 MS-DRG classifications and relative 
weights and the proposed FY 2025 GAFs without incorporating the 
proposed lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy. To achieve budget 
neutrality for these proposed changes in the GAFs, we calculated an 
incremental GAF budget neutrality adjustment factor of 1.0029 for FY 
2025. Next, we compared estimated aggregate capital Federal rate 
payments based on the proposed FY 2025 GAFs with and without the 
proposed lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases policy. For this calculation, 
estimated aggregate capital Federal rate payments were calculated 
using the proposed FY 2025 MS-DRG classifications and relative 
weights (after application of the 10-percent cap discussed later in 
this section) and the proposed FY 2025 GAFs (both with and without 
the proposed lowest quartile hospital wage index adjustment and the 
5-percent cap on wage index decreases policy). (We note, for this 
calculation the proposed GAFs included the imputed floor, out-
migration, and Frontier State adjustments.) To achieve budget 
neutrality for the effects of the proposed lowest quartile hospital 
wage index adjustment and the 5-percent cap on wage index decreases 
policy on the proposed FY 2025 GAFs, we calculated an incremental 
GAF budget neutrality adjustment factor of 0.9943. As discussed 
earlier in this section, the budget neutrality factor for the lowest 
quartile hospital wage index adjustment factor and the 5-percent cap 
on wage index decreases policy is not permanently built into the 
capital Federal rate. Consistent with this, we present the proposed 
budget neutrality factor for the proposed lowest quartile hospital 
wage index adjustment and the 5-percent cap on wage index decreases 
policy calculated under the second step of this 2-step methodology 
separately from the other proposed budget neutrality factors in the 
discussion that follows, and this proposed factor is not included in 
the calculation of the proposed combined GAF/DRG adjustment factor 
described later in this section.
    In the FY 2023 IPPS/LTCH PPS final rule, we finalized a 
permanent 10-percent cap on the reduction in an MS-DRG's relative 
weight in a given fiscal year, beginning in FY 2023. Consistent with 
our historical methodology for adjusting the capital standard 
Federal rate to ensure that the effects of the annual DRG 
reclassification and the recalibration of DRG weights are budget 
neutral under Sec.  412.308(c)(4)(ii), we finalized to apply an 
additional budget neutrality factor to the capital standard Federal 
rate so that the 10-percent cap on decreases in an MS-DRG's relative 
weight is implemented in a budget neutral manner (87 FR 49436). 
Specifically, we augmented our historical methodology for computing 
the budget neutrality factor for the annual DRG reclassification and 
recalibration by computing a budget neutrality adjustment for the 
annual DRG reclassification and recalibration in two steps. We first 
calculate a budget neutrality factor to account for the annual DRG 
reclassification and recalibration prior to the application of the 
10-percent cap on MS-DRG relative weight decreases. Then we 
calculate an additional budget neutrality factor to account for the 
application of the 10-percent cap on MS-DRG relative weight 
decreases.
    To determine the proposed DRG budget neutrality factors for FY 
2025, we first compared estimated aggregate capital Federal rate 
payments based on the FY 2024 MS-DRG classifications and relative 
weights to estimated aggregate capital Federal rate payments based 
on the proposed FY 2025 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 proposed FY 2025 GAFs without the proposed 
lowest quartile hospital wage index adjustment and the 5-percent cap 
on wage index decreases policy. The proposed incremental adjustment 
factor for DRG classifications and changes in relative weights prior 
to the application of the 10-percent cap is 0.9969. Next, we 
compared estimated aggregate capital Federal rate payments based on 
the proposed FY 2025 MS-DRG classifications and relative weights 
prior to the application of the 10-percent cap to estimated 
aggregate capital Federal rate payments based on the proposed FY 
2025 MS-DRG classifications and relative weights after the 
application of the 10-percent cap. For these calculations, estimated 
aggregate capital Federal rate payments were also calculated using 
the proposed FY 2025 GAFs without the proposed lowest quartile 
hospital wage index adjustment and the 5-percent cap on wage index 
decreases policy. The proposed incremental adjustment factor for the 
application of the 10-percent cap on relative weight decreases is 
0.9996. Therefore, to achieve budget neutrality for the proposed FY 
2025 MS-DRG reclassification and recalibration (including

[[Page 36582]]

the 10-percent cap), based on the calculations described previously, 
we are proposing to apply an incremental budget neutrality 
adjustment factor of 0.9965 (0.9969 x 0.9996) for FY 2025 to the 
capital Federal rate. We note that all the values are calculated 
with unrounded numbers.
    The proposed incremental adjustment factor for the proposed FY 
2025 MS-DRG reclassification and recalibration (0.9965) and for 
proposed changes in the FY 2025 GAFs due to the proposed update to 
the wage data, wage index reclassifications and redesignations, and 
application of the rural floor policy (1.0029) is 0.9994 (0.9965 x 
1.0029). This incremental adjustment factor is built permanently 
into the capital Federal rates. To achieve budget neutrality for the 
effects of the proposal to continue the lowest quartile hospital 
wage index adjustment and the 5-percent cap on wage index decreases 
policy on the FY 2025 GAFs, as described previously, we calculated a 
proposed budget neutrality adjustment factor of 0.9943 for FY 2025. 
We refer to this budget neutrality factor for the remainder of this 
section as the lowest quartile/cap adjustment factor.
    We applied the budget neutrality adjustment factors described 
previously to the capital Federal rate. This follows the requirement 
under Sec.  412.308(c)(4)(ii) that estimated aggregate payments each 
year be no more or less than they would have been in the absence of 
the annual DRG reclassification and recalibration and changes in the 
GAFs.
    The methodology used to determine the recalibration and 
geographic adjustment factor (GAF/DRG) budget neutrality adjustment 
is similar to the methodology used in establishing budget neutrality 
adjustments under the IPPS for operating costs. One difference is 
that, under the operating IPPS, the budget neutrality adjustments 
for the effect of updates to the wage data, wage index 
reclassifications and redesignations, and application of the rural 
floor policy are determined separately. Under the capital IPPS, 
there is a single budget neutrality adjustment factor for changes in 
the GAF that result from updates to the wage data, wage index 
reclassifications and redesignations, and application of the rural 
floor policy. In addition, there is no adjustment for the effects 
that geographic reclassification, the proposed continuation of the 
lowest quartile hospital wage index adjustment, or the 5-percent cap 
on wage index decreases policy described previously have on the 
other payment parameters, such as the payments for DSH or IME.
    The proposed incremental GAF/DRG adjustment factor of 0.9994 
accounts for the proposed MS-DRG reclassifications and recalibration 
(including application of the 10-percent cap on relative weight 
decreases) and for proposed changes in the GAFs that result from 
proposed updates to the wage data, the effects on the GAFs of FY 
2025 geographic reclassification decisions made by the MGCRB 
compared to FY 2024 decisions, and the application of the rural 
floor policy. The proposed lowest quartile/cap adjustment factor of 
0.9943 accounts for changes in the GAFs that result from our 
proposal to continue the policy to increase the wage index values 
for hospitals with a wage index value below the 25th percentile wage 
index and the 5-percent cap on wage index decreases policy. However, 
these factors do not account for changes in payments due to changes 
in the DSH and IME adjustment factors.

4. Capital Federal Rate for FY 2025

    For FY 2024, we established a capital Federal rate of $503.83 
(88 FR 59363). We are proposing to establish an update of 3.0 
percent in determining the FY 2025 capital Federal rate for all 
hospitals. As a result of this proposed update and the proposed 
budget neutrality factors discussed earlier, we are proposing to 
establish a national capital Federal rate of $516.41 for FY 2025. 
The proposed national capital Federal rate for FY 2025 was 
calculated as follows:
     The proposed FY 2025 update factor is 1.03; that is, 
the proposed update is 3.0 percent.
     The proposed FY 2025 GAF/DRG budget neutrality 
adjustment factor that is applied to the capital Federal rate for 
proposed changes in the MS-DRG classifications and relative weights 
(including application of the 10-percent cap on relative weight 
decreases) and proposed changes in the GAFs that result from updates 
to the wage data, wage index reclassifications and redesignations, 
and application of the rural floor policy is 0.9994.
     The proposed FY 2025 lowest quartile/cap budget 
neutrality adjustment factor that is applied to the capital Federal 
rate for changes in the GAFs that result from our proposal to 
continue to increase the wage index values for hospitals with a wage 
index value below the 25th percentile wage index and the 5-percent 
cap on wage index decreases policy is 0.9943.
     The proposed FY 2025 outlier adjustment factor is 
0.9577.
    We are providing the following chart that shows how each of the 
proposed factors and adjustments for FY 2025 affects the computation 
of the proposed FY 2025 national capital Federal rate in comparison 
to the FY 2024 national capital Federal rate. The proposed FY 2025 
update factor has the effect of increasing the capital Federal rate 
by 3.0 percent compared to the FY 2024 capital Federal rate. The 
proposed GAF/DRG budget neutrality adjustment factor has the effect 
of decreasing the capital Federal rate by 0.06 percent. The proposed 
FY 2025 lowest quartile/cap budget neutrality adjustment factor has 
the effect of decreasing the capital Federal rate by 0.21 percent 
compared to the FY 2024 capital Federal rate. The proposed FY 2025 
outlier adjustment factor has the effect of decreasing the capital 
Federal rate by 0.21 percent compared to the FY 2024 capital Federal 
rate. The combined effect of all the proposed changes would increase 
the national capital Federal rate by approximately 2.5 percent, 
compared to the FY 2024 national capital Federal rate.
[GRAPHIC] [TIFF OMITTED] TP02MY24.313


[[Page 36583]]



B. Calculation of the Proposed Inpatient Capital-Related 
Prospective Payments for FY 2025

    For purposes of calculating payments for each discharge during 
FY 2025, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located 
in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the threshold established for each fiscal year. 
Section 412.312(c) provides for a shared threshold to identify 
outlier cases for both inpatient operating and inpatient capital-
related payments. The proposed outlier threshold for FY 2025 is in 
section II.A. of this Addendum. For FY 2025, a case will qualify as 
a cost outlier if the cost for the case is greater than the 
prospective payment rates for the MS-DRG plus IME and DSH payments 
(including the empirically justified Medicare DSH payment and the 
estimated uncompensated care payment), estimated supplemental 
payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, 
and any add-on payments for new technology, plus the proposed fixed-
loss amount of $49,237.
    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.
    For this proposed rule, we are proposing to use the IPPS 
operating and capital market baskets that reflect a 2018 base year. 
For a complete discussion of the 2018-based market baskets, 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 2025

    Based on IHS Global Inc.'s (IGI) fourth quarter 2023 forecast, 
for this proposed rule, we are forecasting the 2018-based CIPI to 
increase 2.5 percent in FY 2025. This reflects a projected 3.0 
percent increase in vintage-weighted depreciation prices (building 
and fixed equipment, and movable equipment), and a projected 3.9 
percent increase in other capital expense prices in FY 2025, 
partially offset by a projected 1.1 percent decline in vintage-
weighted interest expense prices in FY 2025. The weighted average of 
these three factors produces the forecasted 2.5 percent increase for 
the 2018-based CIPI in FY 2025.
    We are also proposing that if more recent data become available 
(for example, a more recent estimate of the percentage increase in 
the 2018-based CIPI), we would use such data, if appropriate, to 
determine the FY 2025 percentage increase in the 2018-based CIPI for 
the final rule.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2025

    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 rate-of-increase 
percentage specified in Sec.  413.40(c)(3). (We note that, in 
accordance with Sec.  403.752(a), religious nonmedical health care 
institutions (RNHCIs) are also subject to the rate-of-increase 
limits established under Sec.  413.40 of the regulations.)
    For this FY 2025 IPPS/LTCH PPS proposed rule, based on IGI's 
2023 fourth quarter forecast, we estimate that the 2018-based IPPS 
operating market basket rate-of-increase for FY 2025 is 3.0 percent. 
Based on this estimate, the proposed FY 2025 rate-of-increase 
percentage that will be applied to the FY 2024 target amounts in 
order to calculate the proposed FY 2025 target amounts for 
children's hospitals, the 11 cancer hospitals, RNCHIs, short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, and extended 
neoplastic disease care hospitals will be 3.0 percent, in accordance 
with the applicable regulations at 42 CFR 413.40. We are also 
proposing that if more recent data subsequently become available 
(for example, a more recent estimate of the market basket rate-of-
increase, we would use such data, if appropriate, to calculate the 
final IPPS operating market basket rate-of-increase for FY 2025.
    IRFs and rehabilitation distinct part units, IPFs and 
psychiatric units, and LTCHs are excluded from the IPPS and paid 
under their respective PPSs. The IRF PPS, the IPF PPS, and the LTCH 
PPS are updated annually. We refer readers to section VIII. of the 
preamble and section V. of the Addendum of this proposed rule for 
the changes to the Federal payment rates for LTCHs under the LTCH 
PPS for FY 2025. The annual updates for the IRF PPS and the IPF PPS 
are issued by the agency in separate Federal Register documents.

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2025

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2025

1. Overview

    In section VIII. of the preamble of this proposed rule, we 
discuss our annual updates to the payment rates, factors, and 
specific policies under the LTCH PPS for FY 2025.
    Under Sec.  412.523(c)(3) of the regulations, for FY 2012 and 
subsequent years, we updated the standard Federal payment rate by 
the most recent estimate of the LTCH PPS market basket at that time, 
including additional statutory adjustments required by sections 
1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II) and 1886(m)(4) of 
the Act as set forth in the regulations at Sec.  412.523(c)(3)(viii) 
through (xvii)). (For a summary of the payment rate development 
prior to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38310 through 38312) and references therein.)
    Section 1886(m)(3)(A) of the Act specifies that, for rate year 
2012 and each subsequent rate year, any annual update to the 
standard Federal payment rate shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act as 
discussed in section VIII.C.2. of the preamble of this proposed 
rule. This section of the Act further provides that the application 
of section 1886(m)(3)(B) of the Act may result in the annual update 
being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year. (As noted in section VIII.C.2. of the preamble 
of this proposed rule, the annual update to the LTCH PPS occurs on 
October 1 and we have adopted the term ``fiscal year'' (FY) rather 
than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010. Therefore, for purposes of clarity, when discussing the annual 
update for the LTCH PPS, including the provisions of the Affordable 
Care Act, we use the term ``fiscal year'' rather than ``rate year'' 
for 2011 and subsequent years.)
    For LTCHs that fail to submit the required quality reporting 
data in accordance with the LTCH QRP, the annual update is reduced 
by 2.0 percentage points as required by section 1886(m)(5) of the 
Act.

2. Development of the Proposed FY 2025 LTCH PPS Standard Federal 
Payment Rate

    Consistent with our historical practice and Sec.  
412.523(c)(3)(xvii), for FY 2025, we are proposing to apply the 
annual update to the LTCH PPS standard Federal payment rate from the 
previous year. Furthermore, in determining the proposed LTCH PPS 
standard Federal payment rate for FY 2025,

[[Page 36584]]

we also are proposing to make certain regulatory adjustments, 
consistent with past practices. Specifically, in determining the 
proposed FY 2025 LTCH PPS standard Federal payment rate, we are 
proposing to apply a budget neutrality adjustment factor for the 
changes related to the area wage level adjustment (that is, changes 
to the wage data and labor-related share) as discussed in section 
V.B.6. of this Addendum.
    In this proposed rule, we are proposing to establish an annual 
update to the LTCH PPS standard Federal payment rate of 2.8 percent 
(that is, the most recent estimate of the proposed 2022-based LTCH 
market basket increase of 3.2 percent less the proposed productivity 
adjustment of 0.4 percentage point). Therefore, in accordance with 
Sec.  412.523(c)(3)(xvii), we are proposing to apply an update 
factor of 1.028 to the FY 2024 LTCH PPS standard Federal payment 
rate of $48,116.62 to determine the proposed FY 2025 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 2025 as required under the LTCH QRP. 
Therefore, for LTCHs that fail to submit quality reporting data 
under the LTCH QRP, we are proposing to establish an annual update 
to the LTCH PPS standard Federal payment rate of 0.8 percent (or an 
update factor of 1.008). This proposed update reflects the proposed 
annual market basket update of 3.2 percent reduced by the proposed 
0.4 percentage point productivity adjustment, 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 proposing to apply an area wage level budget neutrality 
factor to the FY 2025 LTCH PPS standard Federal payment rate of 
0.9959347, based on the best available data at this time, to ensure 
that any proposed changes to the area wage level adjustment (that 
is, the proposed annual update of the wage index (including the 
proposed update to the CBSA labor market areas and the application 
of the 5-percent cap on wage index decreases, discussed later in 
this section), and proposed labor-related share) would not result in 
any change (increase or decrease) in estimated aggregate LTCH PPS 
standard Federal payment rate payments. Accordingly, we are 
proposing to establish an LTCH PPS standard Federal payment rate of 
$49,262.80 (calculated as $48,116.62 x 1.028 x 0.9959347) for FY 
2025. For LTCHs that fail to submit quality reporting data for FY 
2025, in accordance with the requirements of the LTCH QRP under 
section 1866(m)(5) of the Act, we are proposing to establish an LTCH 
PPS standard Federal payment rate of $48,304.38 (calculated as 
$48,116.62 x 1.008 x 0.9959347) for FY 2025.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for 
FY 2025

1. Background

    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal payment rate to account for differences in LTCH 
area wage levels under Sec.  412.525(c). The labor-related share of 
the LTCH PPS standard Federal payment rate is adjusted to account 
for geographic differences in area wage levels by applying the 
applicable LTCH PPS wage index. The applicable LTCH PPS wage index 
is computed using wage data from inpatient acute care hospitals 
without regard to reclassification under section 1886(d)(8) or 
section 1886(d)(10) of the Act.
    The proposed FY 2025 LTCH PPS standard Federal payment rate wage 
index values that would be applicable for LTCH PPS standard Federal 
payment rate discharges occurring on or after October 1, 2024, 
through September 30, 2025, 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. Proposed Geographic Classifications (Labor Market Areas) Under the 
LTCH PPS

    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;

[[Page 36585]]

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). Thus, most 
recently in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59366), we 
continued to use the CBSA-based labor market area delineations as 
established in OMB Bulletin 18-04 and OMB Bulletin 20-01.
    In the July 16, 2021 Federal Register (86 FR 37777), OMB 
finalized a schedule for future updates based on results of the 
decennial Census updates to commuting patterns from the American 
Community Survey. In accordance with that schedule, on July 21, 
2023, OMB released Bulletin No. 23-01, which superseded OMB Bulletin 
No. 20-01. A copy of OMB Bulletin No. 23-01 may be obtained at 
https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, the delineations reflect the 2020 
Standards for Delineating Core Based Statistical Areas (``the 2020 
Standards''), which appeared in the Federal Register on July 16, 
2021 (86 FR 37770 through 37778), and the application of those 
standards to Census Bureau population and journey-to-work data (that 
is, 2020 Decennial Census, American Community Survey, and Census 
Population Estimates Program data). In this proposed rule, under the 
authority of section 123 of the BBRA, as amended by section 307(b) 
of the BIPA, we are proposing to adopt the revised delineations 
announced in OMB Bulletin No. 23-01 effective for FY 2025 under the 
LTCH PPS. We believe that adopting the CBSA-based labor market area 
delineations established in OMB Bulletin 23-01 would 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). This proposal to 
adopt the revised delineations announced in OMB Bulletin No. 23-01 
is consistent with the changes proposed under the IPPS for FY 2025 
as discussed in section III.B. of the preamble of this proposed 
rule. A summary of these proposed changes is presented in the 
discussion that follows in this section. For complete details on the 
proposed changes, we refer readers to section III.B. of the preamble 
of this proposed rule.

a. Urban Counties That Would Become Rural Under the Revised OMB 
Delineations

    CBSAs are made up of one or more constituent counties. Analysis 
of the revised labor market area delineations (based upon OMB 
Bulletin No. 23-01) that we propose to implement, beginning in FY 
2025, shows that a total of 53 counties (and county equivalents) 
that were located in an urban CBSA pursuant to OMB Bulletin No. 20-
01 would be located in a rural area under the revised OMB 
delineations. The chart in section III.B.4. of the preamble of this 
proposed rule lists the 53 urban counties that would be rural under 
these revised OMB delineations.

b. Rural Counties That Would Become Urban Under the Revised OMB 
Delineations

    Analysis of the revised labor market area delineations (based 
upon OMB Bulletin No. 23-01) that we propose to implement, beginning 
in FY 2025, shows that a total of 54 counties (and county 
equivalents) that were located in a rural area pursuant to OMB 
Bulletin No. 20-01 would be located in an urban CBSA under the 
revised OMB delineations. The chart in section III.B.5. of the 
preamble of this proposed rule lists the 54 rural counties that 
would be urban under these revised OMB delineations.

c. Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations

    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA 
to another urban CBSA under our proposal to adopt the revised 
delineations announced in OMB Bulletin No. 23-01. In other cases, 
adopting the revised delineations announced in OMB Bulletin No. 23-
01 would involve a change only in CBSA name and/or number, while the 
CBSA continues to encompass the same constituent counties. For 
example, CBSA 23844 (Gary, IN) would experience both a change to its 
number and its name and become CBSA 29414 (Lake County-Porter 
County-Jasper County, IN), while all of its four constituent 
counties would remain the same. In other cases, only the name of the 
CBSA would be modified, and none of the currently assigned counties 
would be reassigned to a different urban CBSA. The chart in section 
III.B.6. of the preamble of this proposed rule lists the CBSAs where 
we are proposing to change the name and/or CBSA number only.
    There are also counties that would shift between existing and 
new CBSAs, changing the constituent makeup of the CBSAs, under our 
proposal to adopt the revisions to the OMB delineations based on OMB 
Bulletin No. 23-01. For example, some CBSAs would be split into 
multiple new CBSAs, or a CBSA would lose one or more counties to 
other urban CBSAs. The chart in section III.B.6 of the preamble of 
this proposed rule lists the urban counties that would move from one 
urban CBSA to a new or modified CBSA under our proposal to adopt 
these revisions to the OMB delineations.

d. Change to County-Equivalents in the State of Connecticut

    For FY 2025, we are continuing to use the Federal Information 
Processing Standard (FIPS) county codes, maintained by the U.S. 
Census Bureau, for purposes of cross walking counties to CBSAs. In a 
June 6, 2022 Federal Register notice (87 FR 34235 through 34240), 
the Census Bureau announced that it was implementing the State of 
Connecticut's request to replace the 8 counties in the State with 9 
new ``Planning Regions.'' Planning regions now serve as county-
equivalents within the CBSA system. OMB Bulletin No. 23-01 is the 
first set of revised delineations that referenced the new county-
equivalents for Connecticut. We have evaluated the change in 
hospital assignments for Connecticut LTCHs and are proposing to 
adopt the planning regions as county equivalents for wage index 
purposes. As all forthcoming county-based delineation data will 
utilize these new county-equivalent definitions for the Connecticut, 
we believe it is necessary to adopt this migration from counties to 
planning region county-equivalents in order to maintain consistency 
with OMB Bulletin No. 23-01 and future OMB updates. This proposal to 
adopt the planning regions as county equivalents for wage index 
purposes is consistent with the changes proposed under the IPPS for 
FY 2025 as discussed in section III.B.3. of the preamble of this 
proposed rule. We are providing the following crosswalk for each 
LTCH in Connecticut with the current and proposed FIPS county and 
county-equivalent codes and CBSA assignments.
[GRAPHIC] [TIFF OMITTED] TP02MY24.314

    As previously discussed, we are proposing to adopt the revisions 
announced in OMB Bulletin No. 23-01 to the CBSA-based labor market 
area delineations under the LTCH PPS, effective October 1, 2024. 
Accordingly, the proposed FY 2025 LTCH PPS wage index values in 
Tables 12A and 12B listed in section VI. of the Addendum to this 
proposed rule (which are available via the internet on the CMS 
website) reflect the proposed revisions to the CBSA-based labor 
market area delineations previously described. We also are including 
in a supplemental data file an updated county-to-CBSA crosswalk that 
reflects the proposed revisions to the CBSA-based labor market area 
delineations. This supplemental data file for public use will be 
posted on the CMS website for this proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

[[Page 36586]]

3. Proposed Labor-Related Share for the LTCH PPS Standard Federal 
Payment Rate

    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
standard Federal payment rate is adjusted by the applicable wage 
index for the labor market area in which the LTCH is located. The 
LTCH PPS labor-related share currently represents the sum of the 
labor-related portion of operating costs and a labor-related portion 
of capital costs using the applicable LTCH market basket. Additional 
background information on the historical development of the labor-
related share under the LTCH PPS can be found in the RY 2007 LTCH 
PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) 
and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 
and 51808).
    For FY 2013, we rebased and revised the market basket used under 
the LTCH PPS by adopting a 2009-based LTCH market basket. In 
addition, for FY 2013 through FY 2016, we determined the labor-
related share annually as the sum of the relative importance of each 
labor-related cost category of the 2009-based LTCH market basket for 
the respective fiscal year based on the best available data. (For 
more details, we refer readers to the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53477 through 53479).) For FY 2017, we rebased and 
revised the 2009-based LTCH market basket to reflect a 2013 base 
year. In addition, for FY 2017 through FY 2020, we determined the 
labor-related share annually as the sum of the relative importance 
of each labor-related cost category of the 2013-based LTCH market 
basket for the respective fiscal year based on the best available 
data. (For more details, we refer readers to the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57085 through 57096).) Then, effective for FY 
2021, we rebased and revised the 2013-based LTCH market basket to 
reflect a 2017 base year and determined the labor-related share 
annually as the sum of the relative importance of each labor-related 
cost category in the 2017-based LTCH market basket using the most 
recent available data. (For more details, we refer readers to the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58909 through 58926).)
    As discussed in section VIII.D of the preamble to this proposed 
rule, effective for FY 2025, we are proposing to rebase and revise 
the 2017-based LTCH market basket to reflect a 2022 base year. In 
conjunction with that proposal, as discussed in section VIII.D. of 
the preamble of this proposed rule, we are also proposing that the 
LTCH PPS labor-related share for FY 2025 would be the sum of the FY 
2025 relative importance of each labor-related cost category in the 
proposed 2022-based LTCH market basket using the most recent 
available data. Table VIII.D-09 in section VIII.D. of the preamble 
of this proposed rule shows the proposed FY 2025 labor-related share 
using the proposed 2022-based LTCH market basket and the FY 2024 
labor-related share using the 2017-based LTCH market basket. The 
proposed labor-related share for FY 2025 is the sum of the labor-
related portion of operating costs from the proposed 2022-based LTCH 
market basket (that is, the sum of the FY 2025 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 proposed 2022-based LTCH market 
basket. The relative importance reflects the different rates of 
price change for these cost categories between the base year (2022) 
and FY 2025. Based on IHS Global Inc.'s fourth quarter 2023 forecast 
of the proposed 2022-based LTCH market basket, the sum of the FY 
2025 relative importance for 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 was 68.9 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, 2013-based, and 2017-based LTCH market 
basket capital-related costs relative importance). Since the FY 2025 
relative importance for capital-related costs was 8.4 percent based 
on IHS Global Inc.'s fourth quarter 2023 forecast of the proposed 
2022-based LTCH market basket, we took 46 percent of 8.4 percent to 
determine the labor-related share of capital-related costs for FY 
2025 of 3.9 percent. Therefore, we are proposing a total labor-
related share for FY 2025 of 72.8 percent (the sum of 68.9 percent 
for the labor-related share of operating costs and 3.9 percent for 
the labor-related share of capital-related costs). The total 
difference between the FY 2025 labor-related share using the 
proposed 2022 based LTCH market basket (72.8 percent) and the FY 
2024 labor-related share using the 2017 based LTCH market basket 
(68.5 percent) is 4.3 percentage points. As discussed in greater 
detail in section VIII.D. of the preamble of this proposed rule, 
this difference is primarily attributable to the revision to the 
base year cost weights for those categories included in the labor-
related share. Consistent with our historical practice, we are 
proposing that if more recent data becomes 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 proposed 2022-
based LTCH market basket), we will use such data, if appropriate, to 
determine the FY 2025 LTCH PPS labor-related share.

4. Proposed Wage Index for FY 2025 for the LTCH PPS Standard Federal 
Payment Rate

    Historically, we have established LTCH PPS area wage index 
values calculated from acute care IPPS hospital wage data without 
taking into account geographic reclassification under sections 
1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage 
level adjustment established under the LTCH PPS is based on an 
LTCH's actual location without regard to the ``urban'' or ``rural'' 
designation of any related or affiliated provider. As with the IPPS 
wage index, wage data for multicampus hospitals with campuses 
located in different labor market areas (CBSAs) are apportioned to 
each CBSA where the campus (or campuses) are located. We also employ 
a policy for determining area wage index values for areas where 
there are no IPPS wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2025 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of 
the BBRA, as amended by section 307(b) of the BIPA, we are proposing 
to continue to employ our historical practice of using the same data 
we used to compute the proposed FY 2025 acute care hospital 
inpatient wage index, as discussed in section III. of the preamble 
of this proposed rule (that is, wage data collected from cost 
reports submitted by IPPS hospitals for cost reporting periods 
beginning during FY 2021) because these data are the most recent 
complete data available.
    In addition, we are proposing to compute the FY 2025 LTCH PPS 
standard Federal payment rate area wage index values consistent with 
the ``urban'' and ``rural'' geographic classifications (that is, the 
proposed labor market area delineations as previously discussed in 
section V.B. of this Addendum) and our historical policy of not 
taking into account IPPS geographic reclassifications under sections 
1886(d)(8) and 1886(d)(10) of the Act in determining payments under 
the LTCH PPS. We are also proposing to continue to apportion the 
wage data for multicampus hospitals with campuses 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 2025, we are proposing to continue to 
use our existing policy for determining area wage index values for 
areas where there are no IPPS wage data. Under our existing 
methodology, the LTCH PPS wage index value for urban CBSAs with no 
IPPS wage data is determined by using an average of all of the urban 
areas within the State, and the LTCH PPS wage index value for rural 
areas with no IPPS wage data is determined by using the unweighted 
average of the wage indices from all of the CBSAs that are 
contiguous to the rural counties of the State.
    Based on the FY 2021 IPPS wage data that we are proposing to use 
to determine the proposed FY 2025 LTCH PPS area wage index values in 
this proposed rule, there are no IPPS wage data for the urban area 
of Hinesville, GA (CBSA 25980). Consistent with our existing 
methodology, we calculated the proposed FY 2025 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, proposed 
CBSAs 10500, 12020, 12054, 12260, 15260, 16860, 17980, 19140, 23580, 
31420, 31924, 40660, 42340, 46660, and 47580), as shown in Table 
12A, which is listed in section VI. of this Addendum.
    Based on the FY 2021 IPPS wage data that we are proposing to use 
to determine the proposed FY 2025 LTCH PPS area wage index values in 
this proposed rule, there are no IPPS wage data for rural North 
Dakota (CBSA 35). Consistent with our existing methodology, we 
calculated the proposed FY

[[Page 36587]]

2025 wage index value for CBSA 35 as the average of the wage index 
values for all proposed CBSAs that are contiguous to the rural 
counties of the State (that is, proposed CBSAs 13900, 22020, 24220, 
and 33500), as shown in Table 12B, which is listed in section VI. of 
this Addendum. We note that, as IPPS wage data are dynamic, it is 
possible that the number of urban and 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. However, for newly opened LTCHs that become operational on or 
after the first day of the fiscal year, these LTCHs will not be 
subject to the LTCH PPS wage index cap since they were not paid 
under the LTCH PPS in the prior year. For example, newly opened 
LTCHs that become operational during FY 2025 would not be eligible 
for the LTCH PPS wage index cap in FY 2025. These LTCHs would 
receive the calculated wage index for the area in which they are 
geographically located, even if other LTCHs in the same geographic 
area are receiving a wage index cap. The cap on wage index decreases 
policy is reflected at Sec.  412.525(c)(1).
    For each LTCH we identify in our rulemaking data, we are 
including in a supplemental data file the wage index values from 
both fiscal years used in determining its capped wage index. This 
includes the LTCH's final prior year wage index value, the LTCH's 
uncapped current year wage index value, and the LTCH's capped 
current year wage index value. Due to the lag in rulemaking data, a 
new LTCH may not be listed in this supplemental file for a few 
years. For this reason, a newly opened LTCH could contact their MAC 
to ensure that its wage index value is not less than 95 percent of 
the value paid to it for the prior Federal fiscal year. This 
supplemental data file for public use will be posted on the CMS 
website for this proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

b. Permanent Cap on IPPS Comparable Wage Index Decreases

    Determining LTCH PPS payments for short-stay-outlier cases 
(reflected in Sec.  412.529) and site neutral payment rate cases 
(reflected in Sec.  412.522(c)) requires calculating an ``IPPS 
comparable amount.'' For information on this ``IPPS comparable 
amount'' calculation, we refer the reader to the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49608 through 49610). Determining LTCH PPS 
payments for LTCHs that do not meet the applicable discharge payment 
percentage (reflected in Sec.  412.522(d)) requires calculating an 
``IPPS equivalent amount.'' For information on this ``IPPS 
equivalent amount'' calculation, we refer the reader to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42439 through 42445).
    Calculating both the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' requires adjusting the IPPS operating and 
capital standardized amounts by the applicable IPPS wage index for 
nonreclassified IPPS hospitals. That is, the standardized amounts 
are adjusted by the IPPS wage index for nonreclassified IPPS 
hospitals located in the same geographic area as the LTCH. In the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49442 through 49443), we 
finalized a policy that applies a permanent 5-percent cap on 
decreases in an LTCH's applicable IPPS comparable wage index from 
its applicable IPPS comparable wage index in the prior year. 
Historically, we have not budget neutralized changes to LTCH PPS 
payments that result from the annual update of the IPPS wage index 
for nonreclassified IPPS hospitals. Consistent with this approach, 
the cap on decreases in an LTCH's applicable IPPS comparable wage 
index is not applied in a budget neutral manner.
    Under this policy, an LTCH's applicable IPPS comparable wage 
index will not be less than 95 percent of its applicable IPPS 
comparable wage index for the prior fiscal year. An LTCH's 
applicable IPPS comparable wage index cap adjustment is determined 
based on the wage index value applicable to the LTCH on the last day 
of the prior Federal fiscal year. However, for newly opened LTCHs 
that become operational on or after the first day of the fiscal 
year, these LTCHs will not be subject to the applicable IPPS 
comparable wage index cap since they were not paid under the LTCH 
PPS in the prior year. For example, newly opened LTCHs that become 
operational during FY 2025 would not be eligible for the applicable 
IPPS comparable wage index cap in FY 2025. 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 proposed rule at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

6. Proposed Budget Neutrality Adjustments for Changes to the LTCH PPS 
Standard Federal Payment Rate Area Wage Level Adjustment

    Historically, the LTCH PPS wage index and labor-related share 
are updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will 
be neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. 
Under this policy, we determine an area wage level adjustment budget 
neutrality factor that is applied to the standard Federal payment 
rate to ensure that any changes to the area wage level adjustments 
are budget neutral such that any changes to the area wage index 
values or labor-related share would not result in any change 
(increase or decrease) in estimated aggregate LTCH PPS payments. 
Accordingly, under Sec.  412.523(d)(4), we have applied an area wage 
level adjustment budget neutrality factor in determining the 
standard Federal payment rate, and we also established a methodology 
for calculating an area wage level adjustment budget neutrality 
factor. (For additional information on the establishment of our 
budget neutrality policy for changes to the area wage level 
adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51771 through 51773 and 51809).)
    For FY 2025, in accordance with Sec.  412.523(d)(4), we are 
applying a proposed area wage level budget neutrality factor to 
adjust the LTCH PPS standard Federal payment rate to account for the 
estimated effect of the adjustments or updates to the area wage 
level adjustment under Sec.  412.525(c)(1) on estimated aggregate 
LTCH PPS payments, consistent with the methodology we established in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). As discussed in 
section V.B.6. of this Addendum, consistent with, Sec.  
412.525(c)(2), we include the application of the 5-percent cap on 
wage index decreases in the determination of the proposed area wage 
level budget neutrality factor. Specifically, we are proposing to 
determine an area wage level adjustment budget neutrality factor 
that is applied to the LTCH PPS standard Federal payment rate under 
Sec.  412.523(d)(4) for FY 2025 using the following methodology:
    Step 1--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2024 wage index values and the FY 
2024 labor-related share of 68.5 percent. We note that the FY 2024 
wage index values are based on the existing CBSA labor market areas 
used in the FY 2024 IPPS/LTCH PPS final rule.
    Step 2--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate

[[Page 36588]]

payments using the proposed FY 2025 wage index values (including the 
proposed update to the CBSA labor market areas and the application 
of the 5 percent cap on wage index decreases) and the proposed FY 
2025 labor-related share of 72.8 percent. (As noted previously, the 
proposed changes to the wage index values based on updated hospital 
wage data are discussed in section V.B.4. of this Addendum and the 
proposed 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 
2024 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the proposed FY 2025 updates to the area wage level adjustment 
(calculated in Step 2) to determine the proposed budget neutrality 
factor for updates to the area wage level adjustment for FY 2025 
LTCH PPS standard Federal payment rate payments.
    Step 4--Apply the proposed FY 2025 updates to the area wage 
level adjustment budget neutrality factor from Step 3 to determine 
the proposed FY 2025 LTCH PPS standard Federal payment rate after 
the application of the proposed FY 2025 annual update.
    We are proposing to use the most recent data available, 
including claims from the FY 2023 MedPAR file, in calculating the FY 
2025 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 2025 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 the abnormal charging practices of an LTCH (CCN 312024) in 
FY 2021 that led to the LTCH receiving an excessive amount of high-
cost outlier payments. In that rule, we stated our understanding 
that, based on information we received from the provider, 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. In the FY 2024 
IPPS/LTCH PPS final rule (88 FR 59376), we stated that the FY 2022 
MedPAR claims also reflect the abnormal charging practices of this 
LTCH. Therefore, we removed claims from CCN 312024 when determining 
the fixed-loss amount for LTCH PPS standard Federal payment rate 
cases for FY 2024 and all other FY 2024 ratesetting calculations, 
including the MS-LTC-DRG relative weights and the calculation of the 
area wage level adjustment budget neutrality factor. Given recent 
actions by the Department of Justice regarding CCN 312024 (see 
https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), we are 
proposing to again remove claims from CCN 312024 when determining 
the area wage level adjustment budget neutrality factor for FY 2025 
and all other FY 2025 ratesetting calculations, including the MS-
LTC-DRG relative weights and the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases.
    For this proposed rule, using the steps in the methodology 
previously described, we determined a proposed FY 2025 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor of 0.9959347. Accordingly, in section V.A. of this 
Addendum, we applied the proposed area wage level adjustment budget 
neutrality factor of 0.9959347 to determine the proposed FY 2025 
LTCH PPS standard Federal payment rate, in accordance with Sec.  
412.523(d)(4).

C. Proposed Cost-of-Living Adjustment (COLA) for LTCHs Located in 
Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii is based on a comparison of the growth in the Consumer Price 
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative 
to the growth in the CPI for the average U.S. city as published by 
the Bureau of Labor Statistics (BLS). It also includes a 25-percent 
cap on the CPI-updated COLA factors. Under our current policy, we 
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 proposed 
rule, for FY 2025, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA, as amended by section 307(b) 
of the BIPA, to determine appropriate payment adjustments under the 
LTCH PPS, we are proposing to continue to use the COLA factors based 
on the 2009 OPM COLA factors updated through 2020 by the comparison 
of the growth in the CPIs for Anchorage, Alaska, and Honolulu, 
Hawaii, relative to the growth in the CPI for the average U.S. city 
as established in the FY 2022 IPPS/LTCH PPS final rule. (For 
additional details on our current methodology for updating the COLA 
factors for Alaska and Hawaii and for a discussion on the FY 2022 
COLA factors, we refer readers to the FY 2022 IPPS/LTCH PPS final 
rule (86 FR 45559 through 45560).)

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D. Proposed Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background

    From the beginning of the LTCH PPS, we have included an 
adjustment to account for cases in which there are extraordinarily 
high costs relative to the costs of most discharges. Under this 
policy, additional payments are made based on the degree to which 
the estimated cost of a case (which is calculated by multiplying the 
Medicare allowable covered charge by the hospital's overall hospital 
CCR) exceeds a fixed-loss amount. This policy results in greater 
payment accuracy under the LTCH PPS and the Medicare program, and 
the LTCH sharing the financial risk for the treatment of 
extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when 
we implemented the dual rate LTCH PPS payment structure under 
section 1206 of Pub. L. 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 
ceiling. Under our established policy, an LTCH with a calculated CCR 
in excess of the applicable maximum CCR threshold (that is, the LTCH 
total CCR ceiling, which is calculated as 3 standard deviations from 
the national geometric average CCR) is generally assigned the 
applicable statewide CCR. This policy is premised on a belief that 
calculated CCRs in excess of the LTCH total CCR ceiling are most 
likely due to faulty data reporting or entry, and CCRs based on 
erroneous data should not be used to identify and make payments for 
outlier cases.

b. Proposed LTCH Total CCR Ceiling

    Consistent with our historical practice, we are proposing to use 
the best available data to determine the LTCH total CCR ceiling for 
FY 2025 in this proposed rule. Specifically, in this proposed rule, 
we are proposing to use our established methodology for determining 
the LTCH total CCR ceiling based on IPPS total CCR data from the 
December 2023 update of the Provider Specific File (PSF), which is 
the most recent data available. Accordingly, we are proposing an 
LTCH total CCR ceiling of 1.371 under the LTCH PPS for FY 2025 in 
accordance with Sec.  412.525(a)(4)(iv)(C)(2) for HCO cases under 
either payment rate and Sec.  412.522(c)(1)(ii) for the site neutral 
payment rate. Consistent with our historical practice, we are 
proposing to use the best available data, if applicable, to

[[Page 36590]]

determine the LTCH total CCR ceiling for FY 2025 in the final rule. 
(For additional information on our methodology for determining the 
LTCH total CCR ceiling, we refer readers to the FY 2007 IPPS final 
rule (71 FR 48117 through 48119).)

c. LTCH Statewide Average CCRs

    Our general methodology for determining the statewide average 
CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling because it is 
based on ``total'' IPPS CCR data. (For additional information on our 
methodology for determining statewide average CCRs under the LTCH 
PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 
through 48120).) Under the LTCH PPS HCO policy at Sec.  
412.525(a)(4)(iv)(C), the SSO policy at Sec.  412.529(f)(4)(iii), 
and the site neutral payment rate at Sec.  412.522(c)(1)(ii), the 
MAC may use a statewide average CCR, which is established annually 
by CMS, if it is unable to determine an accurate CCR for an LTCH in 
one of the following circumstances: (1) New LTCHs that have not yet 
submitted their first Medicare cost report (a new LTCH is defined as 
an entity that has not accepted assignment of an existing hospital's 
provider agreement in accordance with Sec.  489.18); (2) LTCHs whose 
calculated CCR is in excess of the LTCH total CCR ceiling; and (3) 
other LTCHs for whom data with which to calculate a CCR are not 
available (for example, missing or faulty data). (Other sources of 
data that the MAC may consider in determining an LTCH's CCR include 
data from a different cost reporting period for the LTCH, data from 
the cost reporting period preceding the period in which the hospital 
began to be paid as an LTCH (that is, the period of at least 6 
months that it was paid as a short-term, acute care hospital), or 
data from other comparable LTCHs, such as LTCHs in the same chain or 
in the same region.)
    Consistent with our historical practice of using the best 
available data, in this proposed rule, we are proposing to use our 
established methodology for determining the LTCH PPS statewide 
average CCRs, based on the most recent complete IPPS ``total CCR'' 
data from the December 2023 update of the PSF. We are proposing LTCH 
PPS statewide average total CCRs for urban and rural hospitals that 
would be effective for discharges occurring on or after October 1, 
2024, through September 30, 2025, in Table 8C listed in section VI. 
of this Addendum (and available via the internet on the CMS 
website). Consistent with our historical practice, we also are 
proposing to use the best available data, if applicable, to 
determine the LTCH PPS statewide average total CCRs for FY 2025 in 
the final rule.
    Under the proposed LTCH PPS labor market areas, all areas in 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, 
consistent with our existing methodology, in determining the urban 
and rural statewide average total CCRs for Maryland LTCHs paid under 
the LTCH PPS, we are proposing to continue to use, as a proxy, the 
national average total CCR for urban IPPS hospitals and the national 
average total CCR for rural IPPS hospitals, respectively. We are 
proposing to use this proxy because we believe that the CCR data in 
the PSF for Maryland hospitals may not be entirely accurate (as 
discussed in greater detail in the FY 2007 IPPS final rule (71 FR 
48120)).
    Furthermore, although Connecticut, Massachusetts, Nevada, and 
North Dakota have areas that are designated as rural under the 
proposed LTCH PPS labor market areas, in our calculation of the LTCH 
statewide average CCRs, there were no trimmed CCR data available 
from IPPS hospitals located in these rural areas as of December 
2023. We refer the reader to section II.A.4.i.(2). of this Addendum 
for details on the trims applied to the IPPS CCR data from the 
December 2023 update of the PSF, which are the same data used to 
calculate the LTCH statewide average total CCRs. Therefore, 
consistent with our existing methodology, we are proposing to use 
the national average total CCR for rural IPPS hospitals for rural 
Connecticut, Massachusetts, Nevada, and North Dakota in Table 8C. We 
note that there were no LTCHs located in these rural areas as of 
December 2023.

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), and most recently modified by Change Request 
13566 (Transmittal 12558; March 28, 2024) with an update to the 
outlier reconciliation criteria.

3. Proposed High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases

a. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases

    Under the regulations at Sec.  412.525(a)(2)(ii) and as required 
by section 1886(m)(7) of the Act, the fixed-loss amount for HCO 
payments is set each year so that the estimated aggregate HCO 
payments for LTCH PPS standard Federal payment rate cases are 
99.6875 percent of 8 percent (that is, 7.975 percent) of estimated 
aggregate LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. (For more details on the requirements for high-cost 
outlier payments in FY 2018 and subsequent years under section 
1886(m)(7) of the Act and additional information regarding high-cost 
outlier payments prior to FY 2018, we refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)

b. Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2025

    In this section of this Addendum, we discuss our proposed 
methodology for determining the proposed fixed-loss amount for LTCH 
PPS standard Federal payment rate cases for FY 2025. As we state 
later in this section, the proposed fixed-loss amount we determined 
for FY 2025 is significantly higher than the fixed-loss amount we 
finalized for FY 2024 (88 FR 59377). As we discuss later in this 
section, we are soliciting comments on our proposed fixed-loss 
amount as well as an alternative approach that we considered for 
determining the fixed-loss amount for FY 2025. We refer the reader 
to section I.O.4. of Appendix A of this proposed rule for our full 
discussion on the alternative approach.
    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 the abnormal charging practices of an LTCH (CCN 312024) in 
FY 2021 that 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. In the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 59376), we

[[Page 36591]]

stated that the FY 2022 MedPAR claims also reflect the abnormal 
charging practices of this LTCH. Therefore, we removed claims from 
CCN 312024 when determining the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2024 and all other FY 
2024 ratesetting calculations, including the MS-LTC-DRG relative 
weights and the calculation of the area wage level adjustment budget 
neutrality factor. Given recent actions by the Department of Justice 
regarding CCN 312024 (see https://www.justice.gov/opa/pr/new-jersey-hospital-and-investors-pay-united-states-306-million-alleged-false-claims-related), we are proposing to again remove claims from CCN 
312024 when determining the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2025 and all other FY 2025 
ratesetting calculations, including the MS-LTC-DRG relative weights 
and the calculation of the area wage level adjustment budget 
neutrality factor.

(1) Proposed Charge Inflation Factor for Use in Determining the 
Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate 
Cases for FY 2025

    Under the LTCH PPS, the cost of each claim is estimated by 
multiplying the charges on the claim by the provider's CCR. Due to 
the lag time in the availability of claims data, when estimating 
costs for the upcoming payment year we typically inflate the charges 
from the claims data by a uniform factor.
    For greater accuracy in calculating the fixed-loss amount, in 
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45562 through 45566), we 
finalized a technical change to our methodology for determining the 
charge inflation factor. Similar to the method used under the IPPS 
hospital payment methodology (as discussed in section II.A.4.i.(2). 
of 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 this section of this Addendum, we describe 
our charge inflation factor methodology.

Step 1--Identify LTCH PPS Standard Federal Payment Rate Cases

    The first step in our methodology is to identify LTCH PPS 
standard Federal payment rate cases from the MedPAR claim files for 
the two most recently available Federal fiscal year time periods. 
For both fiscal years, consistent with our historical methodology 
for determining payment rates for the LTCH PPS, we remove any claims 
submitted by LTCHs that were all-inclusive rate providers as well as 
any Medicare Advantage claims. For both fiscal years, we also remove 
claims from providers that only had claims in one of the fiscal 
years.

Step 2--Remove Statistical Outliers

    The next step in our methodology is to remove all claims from 
providers whose growth in average charges was a statistical outlier. 
We remove these statistical outliers prior to calculating the charge 
inflation factor because we believe they may represent aberrations 
in the data that would distort the measure of average charge growth. 
To perform this statistical trim, we first calculate each provider's 
average charge in both fiscal years. Then, we calculate a charge 
growth factor for each provider by dividing its average charge in 
the most recent fiscal year by its average charge in the prior 
fiscal year. Then we remove all claims for providers whose 
calculated charge growth factor was outside 3 standard deviations 
from the mean provider charge growth factor.

Step 3--Calculate the Charge Inflation Factor

    The final step in our methodology is to use the remaining claims 
to calculate a national charge inflation factor. We first calculate 
the average charge for those remaining claims in both fiscal years. 
Then we calculate the national charge inflation factor by dividing 
the average charge in the more recent fiscal year by the average 
charge in the prior fiscal year.
    Following the methodology described previously, we computed a 
proposed charge inflation factor based on the most recently 
available data. Specifically, we used the December 2023 update of 
the FY 2023 MedPAR file and the December 2022 update of the FY 2022 
MedPAR as the basis of the LTCH PPS standard Federal payment rate 
cases for the two most recently available Federal fiscal year time 
periods, as described previously in our methodology. Therefore, we 
trimmed the December 2023 update of the FY 2023 MedPAR file and the 
December 2022 update of the FY 2022 MedPAR file as described in 
steps 1 and 2 of our methodology. To compute the 1-year average 
annual rate-of-change in charges per case, we compared the average 
covered charge per case of $280,441 ($11,524,447,130/41,094 cases) 
from FY 2022 to the average covered charge per case of $301,155 
($12,627,438,548/41,930 cases) from FY 2023. This rate-of-change was 
7.3863 percent, which results in a 1-year charge inflation factor of 
1.073863, and a 2-year charge inflation factor of 1.153182 
(calculated by squaring the 1-year factor). We propose to inflate 
the billed charges obtained from the FY 2023 MedPAR file by this 2-
year charge inflation factor of 1.153182 when determining the 
proposed fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2025.

(2) CCRs for Use in Determining the Fixed-Loss Amount for LTCH PPS 
Standard Federal Payment Rate Cases for FY 2025

    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 this section of this Addendum, we 
describe our CCR adjustment factor methodology.

Step 1--Assign Providers Their Historical CCRs

    The first step in our methodology is to identify providers with 
LTCH PPS standard Federal payment rate cases in the most recent 
MedPAR claims file (excluding all-inclusive rate providers and 
providers with only Medicare Advantage claims). For each of these 
providers, we then identify the CCR from the most recently available 
PSF. For each of these providers we also identify the CCR from the 
PSF that was made available one year prior to the most recently 
available PSF.

Step 2--Trim Providers With Insufficient CCR Data

    The next step in our methodology is to remove from the CCR 
adjustment factor calculation any providers for which we cannot 
accurately measure changes to their CCR using the PSF data. We first 
remove any provider whose CCR was missing in the most recent PSF or 
prior year PSF. We next remove any provider assigned the statewide 
average CCR for their State in either the most recent PSF or prior 
year PSF. We lastly remove any provider whose CCR was not updated 
between the most recent PSF and prior year PSF (determined by 
comparing the effective date of the records).

Step 3--Remove Statistical Outliers

    The next step in our methodology is to remove providers whose 
change in their CCR is a statistical outlier. To perform this 
statistical trim, for those providers remaining after application of 
Step 2, we calculate a provider-level CCR growth factor by dividing 
the provider's CCR from the most recent PSF by its CCR in the prior 
year's PSF. We then remove any provider whose CCR growth factor was 
outside 3 standard deviations from the mean provider CCR growth 
factor. These statistical outliers are removed prior to calculating 
the CCR adjustment factor because we believe that they may represent 
aberrations in the data that would distort the measure of average 
annual CCR change.

Step 4--Calculate a CCR Adjustment Factor

    The final step in our methodology is to calculate, across all 
remaining providers after application of Step 3, an average case-
weighted CCR from both the most recent PSF and prior year PSF. The 
provider case counts that we use to calculate the case-weighted 
average are determined from claims for LTCH standard Federal rate 
cases from the most recent MedPAR claims file. We note when 
determining these case counts, consistent with our historical 
methodology for determining the MS-LTC-DRG relative weights, we do 
not count short stay outlier claims as full cases but instead as a 
fraction of a case based on the ratio of covered days to the 
geometric mean length of stay for the MS-LTC-DRG grouped to the 
case. We calculate the national CCR adjustment factor by dividing 
the case-weighted CCR from the most recent PSF by the case-weighted 
CCR from the prior year PSF.
    Following the methodology described previously, we computed a 
CCR adjustment factor based on the most recently available data. 
Specifically, we used the December 2023 PSF as the most recently 
available PSF

[[Page 36592]]

and the December 2022 PSF as the PSF that was made available one 
year prior to the most recently available PSF, as described in our 
methodology. In addition, we used claims from the December 2023 
update of the FY 2023 MedPAR file in our calculation of average 
case-weighted CCRs described in Step 4 of our methodology. 
Specifically, following the methodology described previously and, 
for providers with LTCH PPS standard Federal payment rate cases in 
the December 2023 update of the FY 2023 MedPAR file, we identified 
their CCRs from both the December 2022 PSF and December 2023 PSF. 
After performing the trims outlined in our methodology, we used the 
LTCH PPS standard Federal payment rate case counts from the FY 2023 
MedPAR file (classified using proposed Version 42 of the GROUPER) to 
calculate case-weighted average CCRs. Based on this data, we 
calculated a December 2022 national average case-weighted CCR of 
0.232841 and a December 2023 national average case-weighted CCR of 
0.238141. We then calculated the proposed national CCR adjustment 
factor by dividing the December 2023 national average case-weighted 
CCR by the December 2022 national average case-weighted CCR. This 
results in a proposed 1-year national CCR adjustment factor of 
1.02276. When calculating the proposed fixed-loss amount for FY 
2025, we assigned the statewide average CCR for the upcoming fiscal 
year to all providers who were assigned the statewide average in the 
December 2023 PSF or whose CCR was missing in the December 2023 PSF. 
For all other providers, we multiplied their CCR from the December 
2023 PSF by the proposed 1-year national CCR adjustment factor of 
1.02276.

(3) Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2025

    In this proposed rule, for FY 2025, using the best available 
data and the steps described previously, we calculated a proposed 
fixed-loss amount that would maintain estimated HCO payments at the 
projected 7.975 percent of total estimated LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases as required by section 
1886(m)(7) of the Act and in accordance with Sec.  412.525(a)(2)(ii) 
(based on the proposed payment rates and policies for these cases 
presented in this proposed rule). Consistent with our historical 
practice, we are proposing to use the best available LTCH claims 
data and CCR data, if applicable, when determining the fixed-loss 
amount for LTCH PPS standard Federal payment rate cases for FY 2025 
in the final rule. Therefore, based on LTCH claims data from the 
December 2023 update of the FY 2023 MedPAR file adjusted for charge 
inflation and adjusted CCRs from the December 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 proposing a fixed-loss amount 
for LTCH PPS standard Federal payment rate cases for FY 2025 of 
$90,921 that would result in estimated outlier payments projected to 
be equal to 7.975 percent of estimated FY 2025 payments for such 
cases. As such, we would make an additional HCO payment for the cost 
of an LTCH PPS standard Federal payment rate case that exceeds the 
HCO threshold amount that is equal to 80 percent of the difference 
between the estimated cost of the case and the outlier threshold 
(the sum of the proposed adjusted LTCH PPS standard Federal payment 
rate payment and the proposed fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $90,921).
    The proposed fixed-loss amount for FY 2025 ($90,921) is 
significantly higher than the fixed-loss amount for FY 2024 
($59,873). Each year the fixed-loss amount is determined 
prospectively based on the best available data at the time. Using 
the FY 2023 MedPAR file, we estimate that actual high-cost outlier 
payments accounted for 11.6 percent of total LTCH PPS standard 
Federal payment rate payments in FY 2023. This percentage is much 
higher than the budget neutral target of 7.975 percent that we 
modelled, using the best available data at the time, when 
determining the FY 2023 fixed-loss amount of $38,518 (87 FR 49449). 
We currently estimate that for actual high-cost outlier payments to 
have accounted for 7.975 percent of total LTCH PPS standard Federal 
payment rate payments in FY 2023, the fixed-loss amount would have 
needed to have been set at approximately $65,260. Furthermore, as 
discussed in Appendix A to this proposed rule, we currently model 
that high-cost outlier payments in FY 2024 will account for 9.3 
percent of total LTCH PPS standard Federal payment rate payments. 
This percentage is also much higher than the budget neutral target 
of 7.975 percent that we modelled, using the best available data at 
the time, when determining the FY 2024 fixed-loss amount of $59,873 
(88 FR 59377). Based on this model, we estimate that the FY 2024 
fixed-loss amount would have needed to have been set at 
approximately $72,275 to meet the requirement that high-cost outlier 
payments account for 7.975 percent of total LTCH PPS standard 
Federal payment rate payments in FY 2024.
    Based on this recent experience, we believe a large increase to 
the fixed-loss amount would be warranted to ensure that estimated 
outlier payments in FY 2025 return to our statutorily required 
budget neutral target of 7.975 percent. However, we acknowledge that 
the proposed increase to the fixed-loss amount is substantial. In 
section I.O.4. of Appendix A of this proposed rule, we discuss an 
alternative approach we considered for determining the proposed FY 
2025 fixed-loss amount that may have mitigated the magnitude of the 
increase in the proposed fixed-loss amount for FY 2025. As stated in 
that section, we are soliciting comments on both our proposed 
methodology for determining the FY 2025 fixed-loss amount and the 
alternative approach. We will consider these comments when 
finalizing the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2025 in the final rule.

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 2024, 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 2024, 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 2024 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 2024. In particular, in

[[Page 36593]]

FY 2024, we established the fixed-loss amount for site neutral 
payment rate cases as the FY 2024 IPPS fixed-loss amount of $42,750 
(88 FR 59378).
    For this proposed rule, we used FY 2023 data in the FY 2025 LTCH 
PPS proposed ratesetting. 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. Therefore, all LTCH PPS 
cases in FY 2023 with admission dates on or before the PHE 
expiration date were paid the LTCH PPS standard Federal rate 
regardless of whether the discharge met the statutory patient 
criteria. Because not all FY 2023 claims in the data used for this 
proposed rule were subject to the site neutral payment rate, we 
continue to rely on the same considerations and actuarial 
projections used in FYs 2016 through 2024 when developing a fixed-
loss amount for site neutral payment rate cases for FY 2025. Our 
actuaries continue to project that the costs and resource use for FY 
2025 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 2023 LTCH claims data used in 
the development of this final rule, if the provisions of the CARES 
Act had not been in effect, approximately 71 percent of LTCH cases 
would have been paid the LTCH PPS standard Federal payment rate and 
approximately 29 percent of LTCH cases would have been paid the site 
neutral payment rate for discharges occurring in FY 2023.)
    For these reasons, we continue to believe that the most 
appropriate fixed-loss amount for site neutral payment rate cases 
for FY 2025 is the IPPS fixed-loss amount for FY 2025. Therefore, 
for FY 2025, we are proposing that the applicable HCO threshold for 
site neutral payment rate cases is the sum of the site neutral 
payment rate for the case and the proposed IPPS fixed-loss amount. 
That is, we are proposing a fixed-loss amount for site neutral 
payment rate cases of $49,237, which is the same proposed FY 2025 
IPPS fixed-loss amount discussed in section II.A.4.i.(2). of this 
Addendum. Accordingly, under this policy, for FY 2025, we would 
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 proposed fixed-loss amount for site neutral payment 
rate cases of $49,237).
    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 2025 would not result in any increase in 
estimated aggregate FY 2025 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 2025. Consistent with our historical practice, we are proposing 
to continue this policy.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate the proposed fixed-loss threshold would 
result in FY 2025 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 2025 would not result in any increase in estimated aggregate 
FY 2025 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 2025. To achieve this, for 
FY 2025, we are proposing to apply a budget neutrality factor of 
0.949 (that is, the decimal equivalent of a 5.1 percent reduction, 
determined as 1.0--5.1/100 = 0.949) to the site neutral payment rate 
for those site neutral payment rate cases paid under Sec.  
412.522(c)(1)(i). We note that, consistent with our current policy, 
this proposed HCO budget neutrality adjustment would not be applied 
to the HCO portion of the site neutral payment rate amount (81 FR 
57309).

E. Proposed Update to the IPPS Comparable Amount To Reflect the 
Statutory Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made by section 3133 of the 
Affordable Care Act in the calculation of the ``IPPS comparable 
amount'' under the SSO policy at Sec.  412.529 and the ``IPPS 
equivalent amount'' under the site neutral payment rate at Sec.  
412.522. Historically, the determination of both the ``IPPS 
comparable amount'' and the ``IPPS equivalent amount'' includes an 
amount for inpatient operating costs ``for the costs of serving a 
disproportionate share of low-income patients.'' Under the statutory 
changes to the Medicare DSH payment adjustment methodology that 
began in FY 2014, in general, eligible IPPS hospitals receive an 
empirically justified Medicare DSH payment equal to 25 percent of 
the amount they otherwise would have received under the statutory 
formula for Medicare DSH payments prior to the amendments made by 
the Affordable Care Act. The remaining amount, equal to an estimate 
of 75 percent of the amount that otherwise would have been paid as 
Medicare DSH payments, reduced to reflect changes in the percentage 
of individuals under the age of 65 who are uninsured, 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 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).
    For FY 2025, as discussed in greater detail in section IV.E.2.b. 
of the preamble of this proposed rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted 
to 62.14 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 2025. 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 46.61 percent (the product of 75 percent and 62.14 percent) and 
the resulting amount is used to calculate the uncompensated care 
payments to eligible hospitals. As a result, for FY 2025, we project 
that the reduction in the amount of Medicare

[[Page 36594]]

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 71.61 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 + 46.61 percent = 71.61 percent).
    Therefore, for FY 2025, we are proposing to establish that the 
calculation of the ``IPPS comparable amount'' under Sec.  412.529 
would include an applicable operating Medicare DSH payment amount 
that is equal to 71.61 percent of the operating Medicare DSH payment 
amount that would have been paid based on the statutory Medicare DSH 
payment formula absent the amendments made by the Affordable Care 
Act. Furthermore, consistent with our historical practice, we are 
proposing that, if more recent data became available, we would use 
that data to determine the applicable operating Medicare DSH payment 
amount used to calculate the ``IPPS comparable amount'' in the final 
rule.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2025

    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; 
we make this adjustment by multiplying the labor-related share of 
the LTCH PPS standard Federal payment rate for a case by the 
applicable LTCH PPS wage index (the proposed FY 2025 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 proposed FY 2025 factors are shown in 
the chart in section V.C. of this Addendum) in accordance with Sec.  
412.525(b). In this proposed rule, we are proposing to establish an 
LTCH PPS standard Federal payment rate for FY 2025 of $49,262.80, as 
discussed in section V.A. of this Addendum. We illustrate the 
methodology to adjust the proposed LTCH PPS standard Federal payment 
rate for FY 2025, applying our proposed LTCH PPS amounts for the 
standard Federal payment rate, MS-LTC-DRG relative weights, and wage 
index in the following example:
    Example:
    During FY 2025, a Medicare discharge that meets the criteria to 
be excluded from the site neutral payment rate, that is, an LTCH PPS 
standard Federal payment rate case, is from an LTCH that is located 
in CBSA 16984, which has a proposed FY 2025 LTCH PPS wage index 
value of 1.0237 (as shown in Table 12A listed in section VI. of this 
Addendum). The Medicare patient case is classified into proposed MS-
LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a 
proposed relative weight for FY 2025 of 0.9791 (as shown in Table 11 
listed in section VI. of this Addendum). The LTCH submitted quality 
reporting data for FY 2025 in accordance with the LTCH QRP under 
section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted proposed Federal 
prospective payment for this Medicare patient case in FY 2025, we 
computed the wage-adjusted Federal prospective payment amount by 
multiplying the unadjusted proposed FY 2025 LTCH PPS standard 
Federal payment rate ($49,262.80) by the proposed labor-related 
share (72.8 percent) and the proposed wage index value (1.0237). 
This wage-adjusted amount was then added to the proposed nonlabor-
related portion of the unadjusted proposed LTCH PPS standard Federal 
payment rate (27.2 percent; adjusted for cost of living, if 
applicable) to determine the adjusted proposed LTCH PPS standard 
Federal payment rate, which is then multiplied by the proposed MS-
LTC-DRG relative weight (0.9791) to calculate the total adjusted 
proposed LTCH PPS standard Federal prospective payment for FY 2025 
($49,065.40). The table illustrates the components of the 
calculations in this example.
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VI. Tables Referenced in This Proposed Rule Generally Available Through 
the Internet on the CMS Website

    This section lists the tables referred to throughout the 
preamble of this proposed rule and in the Addendum. In the past, a 
majority of these tables were published in the Federal Register as 
part of the annual proposed and final rules. However, similar to FYs 
2012 through 2024, for the FY 2025 rulemaking cycle, the IPPS and 
LTCH PPS tables will not be published in the Federal Register in the 
annual IPPS/LTCH PPS proposed and final rules and will be on the CMS 
website. Specifically, all IPPS tables listed in the proposed rule, 
with the exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS 
Table 1E, will generally be available on the CMS website. IPPS 
Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed at 
the end of this section and will continue to be published in the 
Federal Register as part of the annual proposed and final rules.
    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 2025 IPPS 
proposed rule home page on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    After hospitals have been given an opportunity to review and 
correct their calculations for FY 2025, we will post Table 15 (which 
will be available via the CMS website) to display the final FY 2025 
readmissions payment adjustment factors that will be applicable to 
discharges occurring on or after October 1, 2024. We expect Table 15 
will be posted on the CMS website in the Fall 2024.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites identified in this proposed rule 
should contact Michael Treitel at (410) 786-4552.
    The following IPPS tables for this proposed rule are generally 
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click 
on the link on the left side of the screen titled ``FY 2025 IPPS 
Proposed Rule Home Page'' or ``Acute Inpatient -Files- for 
Download.''

Table 2.--Proposed Case-Mix Index and Wage Index Table by CCN--FY 
2025 Proposed Rule
Table 3.--Proposed Wage Index Table by CBSA--FY 2025 Proposed Rule
Table 4A.--Proposed List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2025 Proposed 
Rule
Table 4B.--Proposed Counties Redesignated under Section 
1886(d)(8)(B) of the Act (LUGAR Counties)--FY 2025 Proposed Rule
Table 5.--Proposed List of Medicare Severity Diagnosis-Related 
Groups (MS-DRGs), Relative Weighting Factors, and

[[Page 36595]]

Geometric and Arithmetic Mean Length of Stay--FY 2025 Proposed Rule
Table 6A.--New Diagnosis Codes--FY 2025
Table 6B.--New Procedure Codes--FY 2025
Table 6C.--Invalid Diagnosis Codes--FY 2025
Table 6D.--Invalid Procedure Codes--FY 2025
Table 6E.--Revised Diagnosis Code Titles--FY 2025
Table 6F.--Revised Procedure Code Titles--FY 2025
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2025
Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2025
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2025
Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2025
Table 6I.1.--Proposed Additions to the MCC List--FY 2025
Table 6J.1.--Proposed Additions to the CC List--FY 2025
Table 6J.2.--Proposed Deletions to the CC List--FY 2025
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG 
Changes--FY 2025 (Table 6P contains multiple tables, 6P.1a. through 
6P.2h that include the ICD-10-CM and ICD-10-PCS code lists relating 
to specific proposed MS-DRG changes or other analyses). These tables 
are referred to throughout section II.C. of the preamble of this 
proposed rule.
Table 8A.--Proposed FY 2025 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2025 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 16.--Proposed Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2025
Table 18.--Proposed FY 2025 Medicare DSH Uncompensated Care Payment 
Factor 3

    The following LTCH PPS tables for this FY 2025 proposed 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-1808-P:

Table 8C.--Proposed FY 2025 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring from October 1, 2024, through September 30, 
2025
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for 
Discharges Occurring from October 1, 2024, through September 30, 
2025
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for 
Discharges Occurring from October 1, 2024, through September 30, 
2025
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Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

    This proposed 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 
proposed rule also is necessary to make payment and policy changes 
for Medicare hospitals under the LTCH PPS. Also, as we note later in 
this Appendix, the primary objective of the IPPS and the LTCH PPS is 
to create incentives for hospitals to operate efficiently and 
minimize unnecessary costs, while at the same time ensuring that 
payments are sufficient to adequately compensate hospitals for their 
legitimate costs in delivering necessary care to Medicare 
beneficiaries. In addition, we share national goals of preserving 
the Medicare Hospital Insurance Trust Fund.
    We believe that the proposed changes in this proposed rule, such 
as the proposed updates to the IPPS and LTCH PPS rates, and the 
proposals and discussions relating to applications for new 
technology add-on payments, are needed to further each of these 
goals while maintaining the financial viability of the hospital 
industry and ensuring access to high quality health care for 
Medicare beneficiaries.
    We expect that these proposed changes would ensure that the 
outcomes of the prospective payment systems are reasonable and 
provide equitable payments, while avoiding or minimizing unintended 
adverse consequences.

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

a. Proposed Update to the IPPS Payment Rates

    In accordance with section 1886(b)(3)(B) of the Act and as 
described in section V.B. of the preamble to this proposed rule, we 
are proposing to update the national standardized amount for 
inpatient hospital operating costs by the proposed applicable 
percentage increase of 2.6 percent (that is, a proposed 3.0 percent 
market basket update with a proposed reduction of 0.4 percentage 
point for the productivity adjustment). We are also proposing to 
apply the proposed applicable percentage increase (including the 
market basket update and the proposed productivity adjustment) to 
the hospital-specific rates.
    Subsection (d) hospitals that do not submit quality information 
under rules established by the Secretary and that are meaningful EHR 
users under section 1886(b)(3)(B)(ix) of the Act would receive a 
proposed applicable percentage increase of 1.850 percent which 
reflects a one-quarter percent reduction of the market basket update 
for failure to submit quality data. Hospitals that are identified as 
not meaningful EHR users and do submit quality information under 
section 1886(b)(3)(B)(viii) of the Act would receive a proposed 
applicable percentage increase of 0.350 percent which reflects a 
three-quarter percent reduction of the market basket update for 
being identified as not a meaningful EHR user.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive a 
proposed applicable percentage increase of -0.4 percent, which 
reflects a one-quarter percent reduction of the market basket update 
for failure to submit quality data and a three-quarter percent 
reduction of the market basket update for being identified as not a 
meaningful EHR user.

b. Proposed Changes for the Add-On Payments for New Services and 
Technologies

    Consistent with sections 1886(d)(5)(K) and (L) of the Act, we 
review applications for new technology add-on payments based on the 
eligibility criteria at 42 CFR 412.87. As set forth in 42 CFR 
412.87(f)(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. New technology 
add-on payments are not budget neutral.
    As discussed in section II.E.7. of the preamble of this proposed 
rule, we are

[[Page 36597]]

proposing that beginning with new technology add-on payments for FY 
2026, in assessing whether to continue the new technology add-on 
payments for those technologies that are first approved for new 
technology add-on payments in FY 2025 or a subsequent year, we would 
extend new technology add-on payments for an additional fiscal year 
when the three-year anniversary date of the product's entry onto the 
U.S. market occurs on or after October 1 of the upcoming fiscal 
year. For technologies that were first approved for new technology 
add-on payments prior to FY 2025, including for technologies we 
determine to be substantially similar to those technologies, we 
would continue to use the midpoint of the upcoming fiscal year 
(April 1) when determining whether a technology would still be 
considered ``new'' for purposes of new technology add-on payments. 
Similarly, we are also proposing that beginning with applications 
for new technology add-on payments for FY 2026, we would use the 
start of the fiscal year (October 1) instead of April 1 to determine 
whether to approve new technology add-on payment for that fiscal 
year. We note that this proposal, if finalized, would be effective 
beginning with new technology add-on payments for FY 2026, and there 
would be no impact of this proposal in FY 2025. We note that it is 
premature to estimate the potential payment impact for this proposal 
because we have not yet determined whether any of the FY 2025 new 
technology add-on payment applications will meet the specified 
criteria for new technology add-on payments for FY 2025. However, 
for purposes of estimating the impact of our proposed changes to the 
calculation of the inpatient new technology add-on payment--if we 
determine that all 10 of the FY 2025 new technology add-on payment 
applications that have been FDA-approved or cleared since the start 
of FY 2024 (as discussed in section II.E.5. and section II.E.6. of 
the preamble of this proposed rule) meet the specified criteria for 
new technology add-on payments for FY 2025, FY 2026, and FY 2027, 
and if we determine that none of these technologies would be 
substantially similar to those technologies that were first approved 
for new technology add-on payments prior to FY 2025--based on 
preliminary information from the applicants at the time of this 
proposed rule, this proposal, if finalized, would increase IPPS 
spending by approximately $380 million in FY 2027.
    As discussed in section II.E.8. of the preamble of this proposed 
rule, we are proposing that beginning with new technology add-on 
payment applications for FY 2026, we would no longer consider a hold 
status to be an inactive status for the purposes of eligibility for 
the new technology add-on payment under our existing policy for 
technologies that are not already FDA market authorized for the 
indication that is the subject of the new technology add-on payment 
application. Under this existing policy, applicants must have a 
complete and active FDA market authorization request at the time of 
new technology add-on payment application submission and must 
provide documentation of FDA acceptance or filing to CMS at the time 
of application submission, consistent with the type of FDA marketing 
authorization application the applicant has submitted to FDA. We 
note that the cost impact of this proposal is not estimable. We 
expect that some applicants who were ineligible to apply in FY 2025 
may apply for new technology add-on payments for FY 2026.
    As discussed in section II.E.9. of the preamble of this proposed 
rule, we are proposing that, subject to our review of the new 
technology add-on payment eligibility criteria, for a gene therapy 
approved for new technology add-on payments in the FY 2025 IPPS/LTCH 
PPS final rule for the treatment of sickle cell disease (SCD), 
effective with discharges on or after October 1, 2024 and concluding 
at the end of the 2- to 3-year newness period for such therapy, if 
the costs of a discharge (determined by applying CCRs as described 
in Sec.  412.84(h)) involving the use of such therapy for the 
treatment of SCD exceed the full DRG payment (including payments for 
IME and DSH, but excluding outlier payments), Medicare would 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. We note that it is premature to estimate the potential 
payment impact for FY 2025 because we have not yet determined 
whether any gene therapy indicated and used specifically for the 
treatment of SCD will meet the specified criteria for new technology 
add-on payments for FY 2025.

c. Proposed Continuation of the Low Wage Index Hospital Policy

    To help mitigate wage index disparities between high wage and 
low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 
through 42332), we adopted a policy to increase the wage index 
values for certain hospitals with low wage index values (the low 
wage index hospital policy). This policy was adopted in a budget 
neutral manner through an adjustment applied to the standardized 
amounts for all hospitals. We 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. We also stated we intended to revisit the issue of the 
duration of this policy in future rulemaking as we gained experience 
under the policy. As discussed in section III.G.5. of the preamble 
of this proposed rule, while we are using the FY 2021 cost report 
data for the FY 2025 wage index, we are unable to comprehensively 
evaluate the effect, if any, the low wage index hospital policy had 
on hospitals' wage increases during the years the COVID-19 PHE was 
in effect. We believe it is necessary to wait until we have useable 
data from fiscal years after the PHE before reaching any conclusions 
about the efficacy of the policy. Therefore, we are proposing that 
the low wage index hospital policy and the related budget neutrality 
adjustment would be effective for at least 3 more years, beginning 
in FY 2025.

d. Proposed Implementation of Section 4122 of the Consolidated 
Appropriations Act, 2023 (CAA, 2023)

    As discussed in section V.G.2. of the preamble of this proposed 
rule, we are we are including a proposal to implement section 4122 
of the Consolidated Appropriations Act (CAA) of 2023. Section 
4122(a) of the CAA, 2023, amended section 1886(h) of the Act by 
adding a new section 1886(h)(10) of the Act requiring the 
distribution of additional residency positions (also referred to as 
slots) to hospitals. Section 4122 makes available 200 residency 
positions, to be distributed beginning in FY 2026, with priority 
given to hospital sin 4 statutorily specified categories. At least 
100 of the 200 residency positions made available under section 4122 
shall be distributed for psychiatry or psychiatry subspecialty 
residency training programs. We expect these changes will make 
appropriate Medicare GME payments to hospitals for Medicare's share 
of the direct costs to operate the hospital's approved medical 
residency program, and for IPPS hospitals the indirect costs 
associated with residency programs that may result in higher patient 
care costs, consistent with the law. We expect that these changes 
will ensure that the outcomes of these Medicare payment policies are 
reasonable and provide equitable payments, while avoiding or 
minimizing unintended adverse consequences.

e. Additional Payment for Uncompensated Care to Medicare 
Disproportionate Share Hospitals (DSHs) and Supplemental Payment

    In this proposed rule, as required by section 1886(r)(2) of the 
Act, we are updating our estimates of the 3 factors used to 
determine uncompensated care payments for FY 2025. Beginning with FY 
2023, we adopted a multiyear averaging methodology to determine 
Factor 3 of the uncompensated care payment methodology, which would 
help to mitigate against large fluctuations in uncompensated care 
payments from year to year. Under this methodology, for FY 2025 and 
subsequent fiscal years, we would 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 
would use a 3-year average of audited data on uncompensated care 
costs from Worksheet S-10 from the FY 2019, FY 2020, and FY 2021 
cost reports to calculate Factor 3 for FY 2025 for all eligible 
hospitals.
    Beginning with FY 2023 (87 FR 49047 through 49051), we also 
established a supplemental payment for IHS and Tribal hospitals and 
hospitals located in Puerto Rico. In section IV.D. of the preamble 
of this proposed rule, we summarize the ongoing methodology for 
supplemental payments.

f. Rural Community Hospital Demonstration Program

    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

[[Page 36598]]

(Pub. L. 111-148). Section 15003 of the 21st Century Cures Act 
(Cures Act) (Pub. L. 114-255) extended the demonstration for an 
additional 5-year period, and section 128 of the Consolidated 
Appropriations Act of 2021 (Pub. L. 116-159) included an additional 
5-year re-authorization. CMS has conducted the demonstration since 
2004, which allows enhanced, cost-based payment for Medicare 
inpatient services for up to 30 small rural hospitals.
    The authorizing legislation imposes a strict budget neutrality 
requirement. In this proposed rule, we summarize the status of the 
demonstration program, and the ongoing methodologies for 
implementation and budget neutrality.

2. Frontier Community Health Integration Project (FCHIP) Demonstration

    The Frontier Community Health Integration Project (FCHIP) 
demonstration was authorized under section 123 of the Medicare 
Improvements for Patients and Providers Act of 2008 (Pub. L. 110-
275), as amended by section 3126 of the Affordable Care Act of 2010 
(Pub. L. 114-158), and most recently re-authorized and extended by 
the Consolidated Appropriations Act of 2021 (Pub. L. 116-159). The 
legislation authorized a demonstration project to allow eligible 
entities to develop and test new models for the delivery of health 
care in order to improve access to and better integrate the delivery 
of acute care, extended care and other health care services to 
Medicare beneficiaries in certain rural areas. The FCHIP 
demonstration initial period was conducted in 10 critical access 
hospitals (CAHs) from August 1, 2016, to July 31, 2019, and the 
demonstration ``extension period'' began on January 1, 2022, to run 
through June 30, 2027.
    The authorizing legislation requires the FCHIP demonstration to 
be budget neutral. In this proposed rule, we propose to continue 
with the budget neutrality approach used in the demonstration 
initial period for the demonstration extension period--to offset 
payments across CAHs nationally--should the demonstration incur 
costs to Medicare.

3. Proposed Update to the LTCH PPS Payment Rates

    As discussed in section VIII.D. of the preamble of this proposed 
rule, we are proposing to rebase and revise the 2017-based LTCH 
market basket to reflect a 2022 base year. The proposed update to 
the LTCH PPS standard Federal payment rate for FY 2025 is discussed 
in section VIII.C.2. of the preamble of this proposed rule. For FY 
2025, we are proposing to update the LTCH PPS standard Federal 
payment rate by 2.8 percent (that is, a 3.2 percent proposed market 
basket update with a proposed reduction of 0.4 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 would receive a proposed update of 
0.80 percent for FY 2025, which reflects a 2.0 percentage point 
reduction for failure to submit quality data.

4. Hospital Quality Programs

    Section 1886(b)(3)(B)(viii) of the Act requires subsection (d) 
hospitals to report data in accordance with the requirements of the 
Hospital IQR Program for purposes of measuring and making publicly 
available information on health care quality and links the quality 
data submission to the annual applicable percentage increase. 
Sections 1886(b)(3)(B)(ix), 1886(n), and 1814(l) of the Act require 
eligible hospitals and CAHs to demonstrate they are meaningful users 
of certified EHR technology for purposes of electronic exchange of 
health information to improve the quality of health care and links 
the submission of information demonstrating meaningful use to the 
annual applicable percentage increase for eligible hospitals and the 
applicable percent for CAHs. Section 1886(m)(5) of the Act requires 
each LTCH to submit quality measure data in accordance with the 
requirements of the LTCH QRP for purposes of measuring and making 
publicly available information on health care quality, and in order 
to avoid a 2-percentage point reduction. Section 1886(o) of the Act 
requires the Secretary to establish a value-based purchasing program 
under which value-based incentive payments are made in a fiscal year 
to hospitals that meet the performance standards established on an 
announced set of quality and efficiency measures for the fiscal 
year. The purposes of the Hospital VBP Program include measuring the 
quality of hospital inpatient care, linking hospital measure 
performance to payment, and making publicly available information on 
hospital quality of care. Section 1886(p) of the Act requires a 
reduction in payment for subsection (d) hospitals that rank in the 
worst-performing 25 percent with respect to measures of hospital-
acquired conditions under the HAC Reduction Program for the purpose 
of measuring HACs, linking measure performance to payment, and 
making publicly available information on health care quality. 
Section 1886(q) of the Act requires a reduction in payment for 
subsection (d) hospitals for excess readmissions based on measures 
for applicable conditions under the Hospital Readmissions Reduction 
Program for the purpose of measuring readmissions, linking measure 
performance to payment, and making publicly available information on 
health care quality. Section 1866(k) of the Act applies to hospitals 
described in section 1886(d)(1)(B)(v) of the Act (referred to as 
``PPS-exempt cancer hospitals'' or ``PCHs'') and requires PCHs to 
report data in accordance with the requirements of the PCHQR Program 
for purposes of measuring and making publicly available information 
on the quality of care furnished by PCHs. However, there is no 
reduction in payment to a PCH that does not report data.

5. Other Proposed Provisions

a. Transforming Episode Accountability Model (TEAM)

    In section X.A. of the preamble of this proposed rule, we are 
proposing the creation and testing of a new alternative payment 
model called the Transforming Episode Accountability Model (TEAM). 
Section 1115A of the Act authorizes the testing of innovative 
payment and service delivery models that preserve or enhance the 
quality of care furnished to Medicare, Medicaid, and CHIP 
beneficiaries while reducing program expenditures. The underlying 
issue addressed by the proposed model is that under FFS, Medicare 
makes separate payments to providers and suppliers for items and 
services furnished to a beneficiary over the course of an episode. 
Because providers and suppliers are paid for each individual item or 
service delivered, this may lead to care that is fragmented, 
unnecessary or duplicative, while making it challenging to invest in 
quality improvement or care coordination that would maximize patient 
benefit. We anticipate the proposed model may reduce costs while 
maintaining or improving quality of care by bundling payment for 
items and services for a given episode and holding TEAM participants 
accountable for spending and quality performance, as well as by 
providing incentives to promote high quality and efficient care.
    We propose to create and test an episode-based payment model 
under the authority at section 1115A of the Act in which selected 
acute care hospitals would be required to participate. The model 
would build on and incorporate the most promising model features 
from other CMS Innovation Center episode-based payment models such 
as the BPCI Advanced Model and the CJR Model. Testing this new model 
would allow us to learn more about the patterns of potentially 
inefficient utilization of health care services, as well as how to 
improve the beneficiary care experience during care transitions and 
incentivize quality improvements for common surgical episodes. This 
information could inform future Medicare payment policy and 
potentially establish the framework for managing clinical episodes 
as a standard practice in Traditional Medicare.
    Under the proposed model, acute care hospitals in certain 
selected geographic areas, Core-Based Statistical Areas, would be 
accountable for five initial episode categories: coronary artery 
bypass graft, lower extremity joint replacement, major bowel 
procedure, surgical hip/femur fracture treatment excluding lower 
extremity joint replacement, and spinal fusion. We believe the model 
may benefit Medicare beneficiaries through improving the 
coordination of items and services paid for through Medicare FFS 
payments, encouraging provider investment in health care 
infrastructure and redesigned care processes, and incentivizing 
higher value care across the inpatient and post-acute care settings 
for the episode. The model will also provide an opportunity to 
evaluate the nature and extent of reductions in the cost of 
treatment by providing financial incentives for providers to 
coordinate their efforts to meet patient needs and prevent future 
costs. The proposed model may benefit beneficiaries by holding 
hospitals accountable for the quality and cost of care for 30 day 
episodes after a beneficiary is discharged from the inpatient stay 
or hospital outpatient procedure, which could encourage investment 
in infrastructure and redesigned care processes the promote high 
quality and efficient service delivery that focuses on patient-
centered care.

[[Page 36599]]

b. Provider Reimbursement Review Board (PRRB)

    Section 1878 of the Act (42 U.S.C. 1395oo) established by the 
Social Security Amendments of 1972, requires the Secretary to 
appoint individuals to the PRRB for a 3-year term of office. In 
regulations promulgated after the enactment of this provision, 42 
CFR 405.1845 stipulated that no member shall serve more than two 
consecutive 3-year terms of office. In section X.B. of the preamble 
of this proposed rule, we discuss our proposal to increase from two 
to three the number of consecutive terms that a PRRB Member is 
eligible to serve, while also permitting a Board Member who is 
designated as Chairperson in their second or third consecutive term 
to serve a fourth consecutive term as Chairperson. We believe that 
extending the length of service of Board Members could have an 
increased effect on the PRRB's productivity and efficiency as well 
as increase the number of individuals who seek a position on the 
PRRB.

c. Payment Error Rate Measurement (PERM)

    Section 202 of the Further Consolidated Appropriations Act of 
2020 (CAA; Pub. L. 116-94) amended Medicaid program integrity 
requirements in Puerto Rico. Puerto Rico was required to publish a 
plan, developed by Puerto Rico in coordination with CMS, and 
approved by the CMS Administrator, not later than 18 months after 
the CAA's enactment, for how Puerto Rico would develop measures to 
comply with the PERM requirements of 42 CFR part 431, subpart Q. 
Puerto Rico published this plan on June 20, 2021, that was approved 
by the CMS Administrator on June 22, 2021.
    In section X.E. of the preamble of this proposed rule, we 
discuss our proposal to remove the exclusion of Puerto Rico from the 
PERM program found at 42 CFR 431.954(b)(3). In compliance with 
section 202 of the CAA, Puerto Rico has developed measures to comply 
with the PERM requirements of 42 CFR part 431, subpart Q, and we 
therefore propose that the PERM program become applicable to Puerto 
Rico. We believe that including Puerto Rico in the PERM program 
would increase visibility into its Medicaid and CHIP operations and 
ought to improve its program integrity efforts, that protect 
taxpayer dollars from improper payments.

d. Hospital CoP Reporting Requirements

    Under sections 1861(e)(9) and 1820(e)(3) of the Act, hospitals 
and CAHs, respectively, under the Medicare and Medicaid programs 
must meet standards for the health and safety of patients receiving 
services in those facilities. Rules issued under that statutory 
authority require such facilities to engage in the surveillance, 
prevention, and control of health care-associated acute respiratory 
illnesses. In 2020, we published detailed reporting standards 
related specifically to COVID-19 for hospitals and CAHs. Those 
standards sunset on April 30, 2024. In section X.F. of the preamble 
of this proposed rule, we would establish streamlined standards that 
apply to a range of acute respiratory illnesses, not just to COVID-
19, and would contribute to the ability to combat potential future 
threats from either existing or potential future sources of such 
infections.

B. Overall Impact

    We have examined the impacts of this proposed rule as required 
by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), Executive Order 13563 on Improving Regulation 
and Regulatory Review (January 18, 2011), 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 any regulatory 
action that is likely to result in a rule that may: (1) have an 
annual effect on the economy of $200 million or more in any 1 year, 
or adversely affect in a material way the economy, productivity, 
competition, jobs, the environment, public health or safety, or 
state, local, territorial, or tribal governments or communities; (2) 
create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) materially alter the 
budgetary impacts of entitlement grants, user fees, or loan programs 
or the rights and obligations of recipients thereof; or (4) raise 
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 proposed changes for FY 2025 acute care 
hospital operating and capital payments would redistribute amounts 
in excess of $200 million to acute care hospitals. The proposed 
applicable percentage increase to the IPPS rates required by the 
statute, in conjunction with other proposed payment changes in this 
proposed rule, would result in an estimated $3.0 billion increase in 
FY 2025 payments, primarily driven by the changes in FY 2025 
operating payments, including uncompensated care payments, FY 2025 
capital payments, the expiration of the temporary changes in the 
low-volume hospital program and the expiration of the MDH program. 
These changes are relative to payments made in FY 2024. The impact 
analysis of the capital payments can be found in section I.I. of the 
Appendix in this proposed rule. In addition, as described in section 
I.J. of this Appendix, LTCHs are expected to experience an increase 
in payments by approximately $40 million in FY 2025 relative to FY 
2024.
    Our operating payment impact estimate includes the proposed 2.6 
percent hospital update to the standardized amount (reflecting the 
proposed 3.0 percent market basket update reduced by the proposed 
0.4 percentage point 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 
would also affect overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this proposed rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This proposed rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Office of Management and Budget has reviewed this proposed rule.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the changes in this proposed rule would further 
each of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these proposed changes 
would ensure that the outcomes of the prospective payment systems 
are reasonable and equitable, while avoiding or minimizing 
unintended adverse consequences.
    Because this proposed rule contains a range of policies, we 
refer readers to the section of the proposed rule where each policy 
is discussed. These sections include the rationale for our 
decisions, including the need for the proposed policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 2025, on various hospital groups. We estimate the 
effects of individual proposed policy changes by estimating payments 
per case, while holding all other

[[Page 36600]]

payment policies constant. We use the best data available, but, 
generally unless specifically indicated, we do not attempt to make 
adjustments for future changes in such variables as admissions, 
lengths of stay, case mix, changes to the Medicare population, or 
incentives. In addition, we discuss limitations of our analysis for 
specific proposed policies in the discussion of those policies as 
needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital related-costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 25 Indian Health Service hospitals in 
our database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short term, acute care hospitals, hospitals 
in Maryland are paid in accordance with the Maryland Total Cost of 
Care Model, and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico (that is, 6 short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling.
    As of March 2023, there were 3,090 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 1,376 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 proposed rule. The impact of the 
update and policy changes to the LTCH PPS for FY 2025 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 proposed rule, we are announcing proposed policy changes 
and payment rate updates for the IPPS for FY 2025 for operating 
costs of acute care hospitals. The proposed FY 2025 updates to the 
capital payments to acute care hospitals are discussed in section 
I.I. of the Appendix in this proposed rule.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2025 operating payments would increase by 2.4 percent, compared 
to FY 2024. The impacts do not reflect changes in the number of 
hospital admissions or real case-mix intensity, which would also 
affect overall payment changes.
    We have prepared separate impact analyses of the proposed 
changes to each system. This section deals with the proposed changes 
to the operating inpatient prospective payment system for acute care 
hospitals. Our payment simulation model relies on the best available 
claims data to enable us to estimate the impacts on payments per 
case of certain proposed changes in this proposed rule. However, 
there are other proposed changes for which we do not have data 
available that would allow us to estimate the payment impacts using 
this model. For those changes, we have attempted to predict the 
payment impacts based upon our experience and other more limited 
data.
    The data used in developing the quantitative analyses of 
proposed changes in payments per case presented in this section are 
taken from the FY 2023 MedPAR file and the most current Provider-
Specific File (PSF) that is used for payment purposes. Although the 
analyses of the proposed changes to the operating PPS do not 
incorporate cost data, data from the best available hospital cost 
reports were used to categorize hospitals. Our analysis has several 
qualifications. First, in this analysis, we do not adjust for future 
changes in such variables as admissions, lengths of stay, or 
underlying growth in real case-mix. Second, due to the 
interdependent nature of the IPPS payment components, it is very 
difficult to precisely quantify the impact associated with each 
proposed change. Third, we use various data sources to categorize 
hospitals in the tables. In some cases, particularly the number of 
beds, there is a fair degree of variation in the data from the 
different sources. We have attempted to construct these variables 
with the best available source overall. However, for individual 
hospitals, some miscategorizations are possible.
    Using cases from the FY 2023 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
impact of proposed payments under the capital IPPS, and the impact 
of proposed payments for costs other than inpatient operating costs, 
are not analyzed in this section. Estimated payment impacts of the 
capital IPPS for FY 2025 are discussed in section I.I. of this 
Appendix. We note, as discussed in section III. of the preamble of 
this proposed rule, we are proposing to adopt the new OMB labor 
market area delineations as described in the July 21, 2023 OMB 
Bulletin No. 23-01, effective for the FY 2025 IPPS wage index. We 
also note, as discussed in section II.A.4. of the Addendum of this 
proposed rule, we used wage indexes based on the new OMB 
delineations in determining aggregate payments on each side of the 
comparison for the changes discussed below, except where otherwise 
noted (for example, the FY 2024 baseline simulation model). This is 
consistent with our proposal discussed in section II.A.4. of the 
Appendix of this proposed rule, to use wage indexes based on the 
proposed new OMB delineations in the determination of all of the 
budget neutrality factors in order to properly determine aggregate 
payments on each side of the comparison for our budget neutrality 
calculations. We further note that as discussed in that same 
section, consistent with past practice as finalized in the FY 2005 
IPPS final rule (69 FR 49034), we are not adopting the new OMB 
delineations themselves in a budget neutral manner. We continue to 
believe that the revision to the labor market areas in and of itself 
does not constitute an ``adjustment or update'' to the adjustment 
for area wage differences, as provided under section 1886(d)(3)(E) 
of the Act.
    We discuss the following changes:
     The effects of the application of the proposed 
applicable percentage increase of 2.6 percent (that is, a proposed 
3.0 percent market basket update with a proposed reduction of 0.4 
percentage point for the productivity adjustment), and the proposed 
applicable percentage increase (including the proposed market basket 
update and the proposed productivity adjustment) to the hospital-
specific rates.
     The effects of the proposed changes to the relative 
weights and MS-DRG GROUPER.
     The effects of the proposed changes in hospitals' wage 
index values reflecting updated wage data from hospitals' cost 
reporting periods beginning during FY 2021, compared to the FY 2020 
wage data, to calculate the FY 2025 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that would be 
effective for FY 2025.
     The effects of the proposed rural floor with the 
application of the national budget neutrality factor to the wage 
index.
     The effects of the proposed imputed floor wage index 
adjustment. This provision is not budget neutral.
     The effects of the proposed frontier State wage index 
adjustment under the statutory provision that requires hospitals 
located in States that qualify as frontier States to not have a wage 
index less than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, which provides for an increase in a 
hospital's wage index if a threshold percentage of residents of the 
county where the hospital is located commute to work at hospitals in 
counties with higher wage indexes for FY 2025. This provision is not 
budget neutral.
     The effects of the expiration of the special payment 
status for MDHs beginning January 1, 2025 under current law. As 
discussed elsewhere in this proposed rule, section 307 of the 
Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), 
enacted on March 9, 2024, extended the MDH program for FY 2025 
discharges occurring before January 1, 2025. Prior to enactment of 
the CAA, 2024, the MDH program was only to be in effect through the 
end of FY 2024. Therefore, under current law, the MDH program will 
expire for

[[Page 36601]]

discharges on or after January 1, 2025. As a result, MDHs that 
currently receive the higher of payments made based on the Federal 
rate or the payments made based on the Federal rate plus 75 percent 
of the difference between payments based on the Federal rate and the 
hospital-specific rate will be paid based on the Federal rate 
starting January 1, 2025. As discussed later in this section, 
because of the timing of this legislation, the payment impacts set 
forth in Tables I and II of this section and discussed elsewhere in 
this regulatory impact analysis do not reflect extension of the MDH 
program for the first quarter of FY 2025. This extension will be 
reflected in the payment impacts for the final rule.
     The total estimated change in payments based on the 
proposed FY 2025 policies relative to payments based on FY 2024 
policies.
    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 2025, 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 
proposed applicable percentage increases that can be applied to the 
national standardized amount.
    We refer readers to section V.B. of the preamble of this 
proposed rule for a complete discussion on the FY 2025 inpatient 
hospital update. The table that follows shows these four scenarios:
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    To illustrate the impact of the proposed FY 2025 changes, our 
analysis begins with a FY 2024 baseline simulation model using: the 
FY 2024 applicable percentage increase of 2.6 percent; the FY 2024 
MS-DRG GROUPER (Version 41); the FY 2024 CBSA designations for 
hospitals based on the OMB definitions from the 2010 Census; the FY 
2024 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.
    We note the following at the time this impact analysis was 
prepared:
     91 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they failed the 
quality data submission process or did not choose to participate, 
but are meaningful EHR users. For purposes of the simulations shown 
later in this section, we modeled the proposed payment changes for 
FY 2025 using a reduced update for these hospitals.
     87 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they are 
identified as not meaningful EHR users that do submit quality 
information under section 1886(b)(3)(B)(viii) of the Act. For 
purposes of the simulations shown in this section, we modeled the 
proposed payment changes for FY 2025 using a reduced update for 
these hospitals.
     26 hospitals are estimated to not receive the full 
market basket rate-of-increase for FY 2025 because they are 
identified as not meaningful EHR users that do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act.
    Each proposed policy change, statutory or otherwise, is then 
added incrementally to this baseline, finally arriving at an FY 2025 
model incorporating all of the proposed changes. This simulation 
allows us to isolate the effects of each proposed change.
    Our comparison illustrates the proposed percent change in 
payments per case from FY 2024 to FY 2025. Two factors not discussed 
separately have significant impacts here. The first factor is the 
update to the standardized amount (see the table earlier in this 
section that shows the four proposed applicable percentage increases 
that can be applied to the national standardized amount for FY 
2025). We note, section 1886(b)(3)(B)(iv) of the Act provides that 
the applicable percentage increase applicable to the hospital-
specific rates for SCHs and MDHs equals the applicable percentage 
increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, 
the same update factor as for all other hospitals subject to the 
IPPS). Because the Act sets the update factor for SCHs and MDHs 
equal to the update factor for all other IPPS hospitals, the update 
to the hospital-specific rates for SCHs and MDHs is subject to the 
amendments to section 1886(b)(3)(B) of the Act made by sections 
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the 
proposed applicable percentage increases to the hospital-specific 
rates applicable to SCHs and MDHs for FY 2025 are the same as the 
four proposed applicable percentage increases in the table earlier 
in this section.
    A second significant factor that affects the changes in 
hospitals' payments per case from FY 2024 to FY 2025 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 2024 that are no longer reclassified in FY 2025. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2024 that are reclassified in FY 2025.

2. Analysis of Table I

    Table I displays the results of our analysis of the proposed 
changes for FY 2025. The table categorizes hospitals by various 
geographic and special payment consideration groups to illustrate 
the varying impacts on different types of hospitals. The

[[Page 36602]]

top row of the table shows the overall impact on the 3,090 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 
2,390 hospitals located in urban areas and 700 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 2025 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) are 1,705, and 
1,385, 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 1,843 nonteaching hospitals in our analysis, 959 teaching 
hospitals with fewer than 100 residents, and 288 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 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 142 RRCs, 249 SCHs, and 
120 hospitals that are both SCHs and RRCs. Of the hospitals that are 
reclassified from urban to rural, there are 586 RRCs, 38 SCHs, and 
43 hospitals that are both SCHs and RRCs. As previously noted, this 
analysis does not reflect the recent 3-month extension of the MDH 
program through December 31, 2024, under section 307 of the CAA, 
2024 (Pub. L. 118-42).
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare and Medicaid utilization expressed as a 
percent of total inpatient days. These data were taken from the most 
recent available Medicare cost reports.
    The next grouping concerns the geographic reclassification 
status of hospitals. The first subgrouping is based on whether a 
hospital is reclassified or not. The second and third subgroupings 
are based on whether urban and rural hospitals were reclassified by 
the MGCRB for FY 2025 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.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

a. Effects of the Proposed Hospital Update (Column 1)

    As discussed in section V.B. of the preamble of this proposed 
rule, this column includes the proposed hospital update, including 
the proposed 3.0 percent market basket rate-of-increase reduced by 
the 0.4 percentage point for the proposed productivity adjustment. 
As a result, we are proposing to make a 2.6 percent update to the 
national standardized amount. This column also includes the proposed 
update to the hospital-specific rates which includes the proposed 
3.0 percent market basket rate-of-increase reduced by 0.4 percentage 
point for the proposed productivity adjustment. As a result, we are 
proposing to make a 2.6 percent update to the hospital-specific 
rates.
    Overall, hospitals would experience a 2.6 percent increase in 
payments primarily due to the combined effects of the proposed 
hospital update to the national standardized amount and the proposed 
hospital update to the hospital-specific rate.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and 
Relative Cost-Based Weights With Recalibration Budget Neutrality 
(Column 2)

    Column 2 shows the effects of the proposed changes to the MS-
DRGs and relative weights with the application of the proposed 
recalibration budget neutrality factor to the standardized amounts. 
Section 1886(d)(4)(C)(i) of the Act requires us annually to make 
appropriate classification changes to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we calculated a proposed 
recalibration budget neutrality factor to account for the changes in 
MS-DRGs and relative weights to ensure that the overall payment 
impact is budget neutral. We also applied the permanent 10-percent 
cap on the reduction in a MS-DRG's relative weight in a given year 
and an associated recalibration cap budget neutrality factor to 
account for the 10-percent cap on relative weight reductions to 
ensure that the overall payment impact is budget neutral.
    As discussed in section II.D. of the preamble of this proposed 
rule, for FY 2025, we calculated the proposed MS-DRG relative 
weights using the FY 2023 MedPAR data grouped to the proposed 
Version 42 (FY 2025) MS-DRGs. The proposed reclassification changes 
to the GROUPER are described in more detail in section II.C. of the 
preamble of this proposed rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the proposed MS-DRGs and proposed relative weights would 
result in a 0.0 percent change in payments with the application of 
the proposed recalibration budget neutrality factor of 0.997055 and 
the proposed recalibration cap budget neutrality factor of 0.999617 
to the standardized amount.

c. Effects of the Proposed Wage Index Changes (Column 3)

    Column 3 shows the impact of the proposed updated wage data, 
with the application of the proposed wage budget neutrality factor. 
The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on the Core Based 
Statistical Areas (CBSAs) established by OMB. The current 
statistical standards (based on OMB standards) that we are proposing 
to use in FY 2025 are discussed in section III.A.2. of the preamble 
of this proposed rule. Specifically, we are proposing to implement 
the new OMB delineations as described in the July 21, 2023 OMB 
Bulletin No. 23-01, effective beginning with the FY 2025 IPPS wage 
index.
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the proposed 
wage index for acute care hospitals for FY 2025 is based on data 
submitted for hospital cost reporting periods, beginning on or after 
October 1, 2020 and before October 1, 2021. The estimated impact of 
the proposed updated wage data on hospital payments is isolated in 
Column 3 by holding the other payment parameters constant in this 
simulation. That is, Column 3 shows the proposed percentage change 
in payments when going from a model using the FY 2024 wage index, 
the labor-related share of 67.6 percent, and having a 100-percent 
proposed occupational mix adjustment applied, to a model using the 
proposed FY 2025 pre-reclassification wage index with the proposed 
labor-related share of 67.6 percent, also having a 100-percent 
proposed occupational mix adjustment applied, while holding other 
payment parameters, such as use of the proposed Version 42 MS-DRG 
GROUPER constant. As noted earlier and as discussed in section 
II.A.4. of the Addendum of this proposed rule, we used wage indexes 
based on the new OMB delineations in determining aggregate payments 
on each side of the comparison/model. The proposed FY 2025 
occupational mix adjustment is based on the CY 2022 occupational mix 
survey.
    In addition, the column shows the impact of the application of 
the proposed wage budget neutrality to the national standardized 
amount. In FY 2010, we began calculating separate wage budget 
neutrality and recalibration budget neutrality factors, in 
accordance with section 1886(d)(3)(E) of the Act, which specifies 
that budget neutrality to account for wage index changes or updates 
made under that subparagraph must be made without regard to the 62 
percent labor-related share guaranteed under section 
1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2025, we are 
proposing to calculate the wage budget neutrality factor to ensure 
that payments under the proposed updated wage data and the proposed 
labor-related share of 67.6 percent are budget neutral, without 
regard to the lower labor-related share of 62 percent applied to 
hospitals with a wage index less than or equal to 1.0. In other 
words, the proposed wage budget neutrality factor is calculated 
under the assumption that all hospitals receive the higher labor-
related share of the standardized amount. The proposed FY 2025 wage 
budget neutrality factor is 0.999957 and the overall payment change 
is 0 percent.
    Column 3 shows the impacts of updating the wage data. Overall, 
the proposed new wage data and the proposed labor-related share, 
combined with the proposed wage budget neutrality adjustment, would 
lead to no change for all hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 8.75 percent compared to FY 2024. Therefore, the 
only manner in which to maintain or exceed the previous year's wage 
index was to match or exceed the proposed 8.75 percent increase in 
the national average hourly wage.
    The following chart compares the shifts in wage index values for 
hospitals due to proposed changes in the average hourly wage data 
for FY 2025 relative to FY 2024. These figures reflect proposed 
changes in the ``pre-reclassified, occupational mix-adjusted wage 
index,'' that is, the wage index before the application of 
geographic reclassification, the rural floor, the out-migration 
adjustment, and other wage index exceptions and adjustments. We note 
that the ``post-reclassified wage index'' or ``payment wage index,'' 
which is the wage index that includes all such exceptions and 
adjustments (as reflected in Tables 2 and 3 associated with this 
proposed rule) is used to adjust the labor-related share of a 
hospital's standardized amount, either 67.6 percent (as proposed) or 
62 percent, depending upon whether a hospital's wage index is 
greater than 1.0 or less than or equal to 1.0. Therefore, the 
proposed pre-reclassified wage index figures in the following chart 
may illustrate a somewhat larger or smaller proposed change than 
would occur in a hospital's payment wage index and total payment.
    The following chart shows the projected impact of proposed 
changes in the area wage index values for urban and rural hospitals 
based on the wage data used for this proposed rule.

[[Page 36607]]

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d. Effects of MGCRB Reclassifications (Column 4)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located, such as hospitals with a Sec.  412.103 
reclassification or ``LUGAR'' status). 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 2025.
    By spring of each year, the MGCRB makes reclassification 
determinations that would 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.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we are proposing to apply an 
adjustment of 0.976773 to ensure that the effects of the 
reclassifications under sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act are budget neutral (section II.A. of the 
Addendum to this proposed rule).
    Geographic reclassification generally benefits hospitals in 
rural areas. We estimate that the geographic reclassification would 
increase payments to rural hospitals by an average of 2.4 percent. 
By region, most rural hospital categories would experience increases 
in payments due to MGCRB reclassifications.
    Table 2 listed in section VI. of the Addendum to this proposed 
rule and available via the internet on the CMS website reflects the 
reclassifications for FY 2025.

e. Effects of the Proposed Rural Floor, Including Application of 
National Budget Neutrality (Column 5)

    As discussed in section III.G.1. of the preamble of this 
proposed 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.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally. We have 
calculated a proposed FY 2025 rural floor budget neutrality factor 
to be applied to the wage index of 0.985868, which would reduce wage 
indexes by 1.4 percent compared to the rural floor provision not 
being in effect.
    Column 5 shows the projected impact of the rural floor with the 
proposed national rural floor budget neutrality factor applied to 
the wage index. The column compares the proposed post-
reclassification FY 2025 wage index of providers before the proposed 
rural floor adjustment to the proposed post-reclassification FY 2025 
wage index of providers with the proposed rural floor adjustment.
    We estimate that 492 hospitals would receive the rural floor in 
FY 2025. All IPPS hospitals in our model would have their wage 
indexes reduced by the proposed rural floor budget neutrality 
adjustment of 0.985868. We project that, in aggregate, rural 
hospitals would experience a 0.4 percent decrease in payments as a 
result of the application of the proposed 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 proposed 
rural floor budget neutrality factor. Urban hospitals in the Pacific 
region would experience a 2.6 percent increase in payments primarily 
due to the application of the rural floor in California.

f. Effects of the Application of the Proposed Imputed Floor, Proposed 
Frontier State Wage Index and Proposed Out-Migration Adjustment (Column 
6)

    This column shows the combined effects of the application of the 
following: (1) the imputed floor under section 1886(d)(3)(E)(iv)(I) 
and (II) of the Act, which provides that for discharges occurring on 
or after October 1, 2021, the area wage index applicable to any 
hospital in an all-urban State may not be less than the minimum area 
wage index for the fiscal year for hospitals in that State 
established using the methodology described in Sec.  
412.64(h)(4)(vi) as in effect for FY 2018; (2) section 10324(a) of 
the Affordable Care Act, which requires that we establish a minimum 
post-reclassified wage index of 1.00 for all hospitals located in 
``frontier States;'' and (3) the effects of section 1886(d)(13) of 
the Act, which provides for an increase in the wage index for 
hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county, but work 
in a different area with a higher wage index.
    These three wage index provisions are not budget neutral and 
would increase payments overall by 0.4 percent compared to the 
provisions not being in effect.
    Section 1886(d)(3)(E)(iv)(III) of the Act provides that the 
imputed floor wage index for all-urban States shall not be applied 
in a budget neutral manner. Therefore, the proposed imputed floor 
adjustment is estimated to increase IPPS operating payments by 
approximately $246 million. There are an estimated 99 providers in 
Connecticut, Washington DC, New Jersey, Puerto Rico, and Rhode 
Island that would 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 41 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 $52 
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

[[Page 36608]]

an estimated 196 providers that would receive the proposed out-
migration wage adjustment in FY 2025. This out-migration wage 
adjustment is not budget neutral, and we estimate the impact of 
these providers receiving the proposed out-migration increase would 
be approximately $55 million.

g. Effects of the Expiration of MDH Special Payment Status (Column 7)

    Column 7 shows our estimate of the changes in payments due to 
the expiration of MDH status, a nonbudget neutral payment provision. 
Section 102 of the Continuing Appropriations and Ukraine 
Supplemental Appropriations Act, 2023 (Pub. L. 117-180), extended 
the MDH program (which, under previous law, was to be in effect for 
discharges before October 1, 2022 only) through December 16, 2022. 
Section 102 of the Further Continuing Appropriations and Extensions 
Act, 2023 (Pub. L. 117-229) extended the MDH program through 
December 23, 2022. Section 4102 of the Consolidated Appropriations 
Act, 2023 (Pub. L. 117-328), extended the MDH program through FY 
2024 (that is for discharges occurring before October 1, 2024). As 
previously noted, section 307 of the CAA, 2024 (Pub. L. 118-42), 
enacted on March 9, 2024, further extended the MDH program for FY 
2025 discharges occurring before January 1, 2025. Prior to enactment 
of the CAA, 2024, the MDH program was only to be in effect through 
the end of FY 2024. Therefore, under current law, the MDH program 
will expire for discharges on or after January 1, 2025. Hospitals 
that qualify to be MDHs receive the higher of payments made based on 
the Federal rate or the payments made based on the Federal rate 
amount plus 75 percent of the difference between payments based on 
the Federal rate and payments based on the hospital-specific rate (a 
hospital-specific cost-based rate). Because this provision is not 
budget neutral, the expiration of this payment provision is 
estimated to result in a 0.2 percent decrease in payments overall, 
not taking into consideration the extension through the first 
quarter of FY 2025. There are currently 173 MDHs, of which we 
estimate 114 would be paid under the blended payment of the Federal 
rate and hospital-specific rate if the MDH program were not set to 
expire. Because those 114 MDHs will no longer receive the blended 
payment and will be paid only under the Federal rate for FY 2025 
discharges beginning on or after January 1, 2025, it is estimated 
that those hospitals would experience an overall decrease in 
payments of approximately $151 million. The $151 overall decrease 
reflects the 3-month extension of the MDH program through December 
31, 2024 under section 307 of the CAA, 2024. However, we note that 
because of the timing of this legislation, the payment impacts set 
forth in Tables I and II of this section and discussed elsewhere in 
this regulatory impact analysis do not reflect extension of the MDH 
program for the first quarter of FY 2025. This extension will be 
reflected in the payment impacts for the final rule.

h. Effects of All Proposed FY 2025 Changes (Column 8)

    Column 8 shows our estimate of the proposed changes in payments 
per discharge from FY 2024 and FY 2025, resulting from all changes 
reflected in this proposed rule for FY 2025. It includes combined 
effects of the year-to-year change of the factors described in 
previous columns in the table.
    The proposed average increase in payments under the IPPS for all 
hospitals is approximately 2.4 percent for FY 2025 relative to FY 
2024 and for this row is primarily driven by the proposed changes 
reflected in Column 1. Column 8 includes the proposed annual 
hospital update of 2.6 percent to the national standardized amount. 
This annual hospital update includes the proposed 3.0 percent market 
basket rate-of-increase reduced by the 0.4 percentage point proposed 
productivity adjustment. Hospitals paid under the hospital-specific 
rate would receive a 2.6 percent proposed hospital update. As 
described in Column 1, the proposed annual hospital update for 
hospitals paid under the national standardized amount, combined with 
the proposed annual hospital update for hospitals paid under the 
hospital-specific rates, combined with the proposed other 
adjustments described previously and shown in Table I, would result 
in a 2.4 percent increase in payments in FY 2025 relative to FY 
2024.
    This column also reflects the estimated effect of outlier 
payments returning to their targeted levels in FY 2025 as compared 
to the estimated outlier payments for FY 2024 produced from our 
payment simulation model. As discussed in section II.A.4.i. of the 
Addendum to this proposed rule, the statute requires that outlier 
payments for any year are projected to be not less than 5 percent 
nor more than 6 percent of total operating DRG payments plus outlier 
payments, and also requires that the average standardized amount be 
reduced by a factor to account for the estimated proportion of total 
DRG payments made to outlier cases. We 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 
2024. Therefore, our estimate of payments per discharge for FY 2025 
from our payment simulation model reflects this 5.1 percent outlier 
payment target. Our payment simulation model shows that estimated 
outlier payments for FY 2024 exceed that target by approximately 
0.01 percent. Therefore, our estimate of the changes in payments per 
discharge from FY 2024 to FY 2025 in Column 8 reflects the estimated 
-0.01 percent change in outlier payments produced by our payment 
simulation model when returning to the 5.1 percent outlier target 
for FY 2025. 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 2024 and FY 2025 in Column 8.
    Overall payments to hospitals paid under the IPPS due to the 
proposed applicable percentage increase and proposed changes to 
policies related to MS-DRGs, geographic adjustments, and outliers 
are estimated to increase by 2.4 percent for FY 2025. Hospitals in 
urban areas would experience a 2.4 percent increase in payments per 
discharge in FY 2025 compared to FY 2024. Hospital payments per 
discharge in rural areas are estimated to increase by 1.9 percent in 
FY 2025.

3. Impact Analysis of Table II

    Table II presents the projected impact of the proposed changes 
for FY 2025 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 2024 with the estimated 
average payments per discharge for FY 2025, as calculated under our 
models. Therefore, this table presents, in terms of the average 
dollar amounts paid per discharge, the combined effects of the 
proposed 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 8 
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.\855\ 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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    \855\ Available at: https://www.cms.gov/files/document/2022-cms-strategic-framework.pdf.
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    As noted in section I.C. of this Appendix, this proposed rule 
contains a range of proposed policies, and there is a section of the 
proposed rule where each policy is discussed. Each section includes 
the rationale for our proposals, including the need for the proposed 
policy. The information contained in Table III is provided solely to 
demonstrate the quantitative effects of our proposed policies across 
a number of health equity dimensions and does not form the basis or 
rationale for the proposed policies.
    Patient populations that have been disadvantaged or underserved 
by the healthcare system may include patients with the following 
characteristics, among others: members of racial and ethnic 
minorities; members of federally recognized Tribes, people with 
disabilities; members of the lesbian, gay, bisexual, transgender, 
and queer (LGBTQ+) community; individuals with limited English 
proficiency, members of rural communities, and persons otherwise 
adversely affected by persistent poverty or inequality. The CMS 
Framework for Health Equity was developed with particular attention 
to disparities in chronic and infectious diseases; as an example of 
a chronic disease associated with significant disparities, we 
therefore also detail providers in terms of the percentage of their 
claims for beneficiaries receiving ESRD Medicare coverage.
    Because we do not have data for all characteristics that may 
identify disadvantaged or underserved patient populations, we use 
several proxies to capture these characteristics, based on claims 
data from the FY 2023 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

[[Page 36611]]

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.\856\ 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 was 
expanded to include individuals currently eligible for the partial 
low-income subsidy.) Because Medicaid eligibility rules and benefits 
vary by state/territory, Medicare LIS enrollment identifies 
beneficiaries who are likely to have low income but may not be 
eligible for Medicaid. Not all beneficiaries who qualify for the 
duals or LIS programs actually enroll. Due to differences in the 
dual eligibility and LIS qualification criteria and less than 
complete participation in these programs, sometimes beneficiaries 
were flagged as dual but not LIS or vice versa. Hence this analysis 
also used a ``dual or LIS'' flag as a third proxy for low income. 
The dual and LIS flags were constructed based on enrollment/
eligibility status in the EDB during the month of the hospital 
discharge.
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    \856\ 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.\857\ 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 did not impact payment under the IPPS in FY 2023, we believe 
they may be underreported in the claims data from the FY 2023 MedPAR 
file used for this analysis and not reflect the actual rates of 
SDOH. In 2019, 0.11 percent of all Medicare FFS claims were Z code 
claims and 1.59 percent of continuously enrolled Medicare FFS 
beneficiaries had claims with Z codes.\858\ 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) (87 FR 
49201 through 49220). In the FY 2024 IPPS/LTCH PPS final rule (88 FR 
58755 through 58759), we also finalized a change to the severity 
designation of the following three ICD-10-CM diagnosis codes from 
non-CC to CC: Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered 
homelessness) and Z59.02 (Unsheltered homelessness). We also refer 
the reader to section II.C.12.c.1. of the preamble of this proposed 
rule, where we discuss our proposal to change the severity level 
designation of the following seven ICD-10-CM diagnosis codes from 
non-CC to CC for FY 2025: Z59.10 (Inadequate housing, unspecified), 
Z59.11 (Inadequate housing environmental temperature), Z59.12 
(Inadequate housing utilities), Z59.19 (Other inadequate housing), 
Z59.811 (Housing instability, housed, with risk of homelessness), 
Z59.812 (Housing instability, housed, homelessness in past 12 
months), and Z59.819 (Housing instability, housed unspecified).
---------------------------------------------------------------------------

    \857\ Available at: https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \858\ 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.
---------------------------------------------------------------------------

d. Behavioral Health

    Beneficiaries with behavioral health diagnoses often face co-
occurring physical illnesses, but often experience difficulty 
accessing care.\859\ The combination of physical and behavioral 
health conditions can exacerbate both conditions and result in 
poorer outcomes than one condition alone.\860\ Additionally, the 
intersection of behavioral health and health inequities is a core 
aspect of CMS' Behavioral Health Strategy.\861\ 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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    \859\ 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.
    \860\ 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.
    \861\ https://www.cms.gov/cms-behavioral-health-strategy.
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e. Disability

    Beneficiaries with disabilities are categorized as being 
disabled because of a 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.\862\ Beneficiaries with disabilities often have complex 
healthcare needs and difficulty accessing care. Beneficiaries with 
disabilities were classified as such persons for the purposes of 
this analysis if their original reason for qualifying for Medicare 
was disability; this information was obtained from Medicare's EDB. 
We note that this is likely an underestimation of disability because 
it does not account for beneficiaries who became disabled after 
becoming entitled to Medicare. This metric also does not capture all 
individuals who would be considered to have a disability under 29 
U.S.C. 705(9)(B).
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    \862\ https://www.ssa.gov/disability/professionals/bluebook/general-info.htm.
---------------------------------------------------------------------------

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.\863\ Beneficiaries 
were classified as ESRD for the purposes of this analysis if they 
were receiving Medicare ESRD coverage during the month of the 
discharge; this information was obtained from Medicare's EDB.
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    \863\ 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.864 865 For this impact analysis, beneficiaries were 
classified on two dimensions: from a rural area and from an area 
with an area deprivation index (ADI) greater than or equal to 85.
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    \864\ 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.
    \865\ 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

[[Page 36612]]

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.\866\ 
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.867 868 869 870 871 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.
---------------------------------------------------------------------------

    \866\ https://www.neighborhoodatlas.medicine.wisc.edu/.
    \867\ 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.
    \868\ 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.
    \869\ 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.
    \870\ 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.
    \871\ 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 2023 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.
     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 2024 and average estimated payments per 
discharge for FY 2025, 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 2024 and 
FY 2025, 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 2024 payment per discharge 
of $13,660.95, while providers with the highest decile of discharges 
for Dual (All) or LIS Enrolled beneficiaries have an average FY 2024 
payment per discharge of $21,150.86. This pattern is also seen in 
the proposed average FY 2025 payment per discharge.
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G. Effects of Other Policy Changes

    In addition to those proposed policy changes discussed 
previously that we are able to model using our IPPS payment 
simulation model, we are proposing to make various other changes in 
this proposed rule. As noted in section I.D. of this Appendix A, our 
payment simulation model uses the most recent available claims data 
to estimate the impacts on payments per case of certain proposed 
changes in this proposed rule. Generally, we have limited or no 
specific data available with which to estimate the impacts of these 
proposed changes using that payment simulation model. For those 
proposed changes, we have attempted to predict the payment impacts 
based upon our experience and other more limited data. Our estimates 
of the likely impacts associated with these other proposed changes 
are discussed in this section.

1. Effects of the Proposed Policy Changes Relating to New Medical 
Service and Technology Add-On Payments

a. Proposed FY 2025 Status of Technologies Approved for FY 2024 New 
Technology Add-On Payments

    In section II.E.4. of the preamble of this proposed rule, we are 
proposing to continue to make new technology add-on payments for the 
24 technologies listed in the following table in FY 2025 because 
these technologies would still be considered new for purposes of new 
technology add-on payments. Under Sec.  412.88(a)(2), the new 
technology add-on payment for each case would be limited to the 
lesser of: (1) 65 percent of the costs of the new technology (or 75 
percent of the costs for technologies designated as Qualified 
Infectious Disease Products (QIDPs) or approved under the Limited 
Population Pathway for Antibacterial and Antifungal Drugs (LPAD) 
pathway); or (2) 65 percent of the amount by which the costs of the 
case exceed the standard MS-DRG payment for the case (or 75 percent 
of the amount for technologies designated as QIDPs or approved under 
the LPAD pathway). Because it is difficult to predict the actual new 
technology add-on payment for each case, our estimates in this 
proposed rule are based on the applicant's estimate at the time they 
submitted their original application and the increase in new 
technology add-on payments for FY 2025 as if every claim that would 
qualify for a new technology add-on payment would receive the 
maximum add-on payment.
    In the following table are estimates for the 24 new technology 
add-on payments which we are proposing to continue in FY 2025:
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b. Proposed FY 2025 Applications for New Technology Add-On Payments

    In sections II.E.5. and 6. of the preamble to this proposed rule 
are 27 discussions of technologies with respect to add-on payments 
for new medical services and technologies for FY 2024 (including 
Casgevy\TM\ (exagamglogene autotemcel) for which the applicant 
submitted a single application for two separate indications, each of 
which is discussed separately). We note that of the 39 applications 
(23 alternative and 16 traditional) we received, 8 applications were 
not eligible for consideration for new technology add-on payment (7 
alternative and 1 traditional), and 5 applicants withdrew their 
application (2 alternative and 3 traditional) prior to the issuance 
of this proposed rule (including the withdrawal of the application 
for DefenCathTM (taurolidine/heparin), which received 
conditional approval for new technology add-on payments for FY 2024, 
subsequently was eligible to receive new technology add-on payments 
beginning with discharges on or after January 1, 2024, and for which 
we are proposing to continue making new technology add-on payments 
for FY 2025). As explained in the preamble to this proposed rule, 
add-on payments for new medical services and technologies under

[[Page 36616]]

section 1886(d)(5)(K) of the Act are not required to be budget 
neutral. As discussed in section II.E.6. of the preamble of this 
proposed rule, under the alternative pathway for new technology add-
on payments, new technologies that are medical products with a QIDP 
designation, approved through the FDA LPAD pathway, or are 
designated under the Breakthrough Device program will be considered 
not substantially similar to an existing technology for purposes of 
the new technology add-on payment under the IPPS, and will not need 
to demonstrate that the technology represents a substantial clinical 
improvement. These technologies must still be within the 2- to 3-
year newness period, as discussed in section II.E.1.a.(1). of the 
preamble this proposed rule, and must also still meet the cost 
criterion.
    As also discussed in section II.E.6. of the preamble of this 
proposed rule, we are proposing to approve 15 new technology add-on 
payments for 14 alternative pathway applications submitted for FY 
2025 new technology add-on payments (including ZEVTERA\TM\ 
(ceftobiprole medocaril) for which the applicant submitted a single 
application for multiple indications, and for which we are proposing 
two separate new technology add-on payments).
    Based on preliminary information from the applicants at the time 
of this proposed rule, we estimate that total payments for the 14 
technologies that applied under the alternative pathway, if 
approved, would be approximately $172.7 million for FY 2025. Total 
estimated FY 2025 payments for new technologies that are designated 
as a QIDP are approximately $5.6 million, and the total estimated FY 
2025 payments for new technologies that are part of the Breakthrough 
Device program are approximately $167 million. Because cost or 
volume information has not yet been provided for 3 of the 14 
technologies under the alternative pathway, we have not included 
those technologies in the estimate. We did not receive any LPAD 
applications for add-on payments for new technologies for FY 2025. 
We note that the estimated payments may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule.
    We have not yet determined whether any of the technologies 
discussed in section II.E.5. of the preamble of this proposed rule 
will meet the criteria for new technology add-on payments for FY 
2025 under the traditional pathway. Consequently, it is premature to 
estimate the potential payment impact of these technologies for any 
potential new technology add-on payments for FY 2025. We note that, 
as in past years, if any of the technologies that applied under the 
traditional pathway are found to be eligible for new technology add-
on payments for FY 2025, we would discuss the estimated payment 
impact for FY 2025 in the FY 2025 IPPS/LTCH PPS final rule.

2. 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 proposed 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 
percent of what formerly would have been paid as Medicare DSH 
payments (Factor 1), reduced to reflect changes in the percentage of 
uninsured individuals (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 that is 
eligible for Medicare DSH payments will receive an additional 
payment based on its estimated share of the total amount of 
uncompensated care for all hospitals eligible for Medicare DSH 
payments. The uncompensated care payment methodology has 
redistributive effects based on the proportion of a hospital's 
amount of uncompensated care relative to the aggregate amount of 
uncompensated care of all hospitals eligible for Medicare DSH 
payments (Factor 3). The change to Medicare DSH payments under 
section 3133 of the Affordable Care Act is not budget neutral.
    In this proposed rule, we are proposing to establish the amount 
to be distributed as uncompensated care payments (UCP) to DSH-
eligible hospitals for FY 2025, which is $6,498,135,150.00. 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 62.14 percent. For FY 2024, the amount available to be 
distributed for uncompensated care was $5,938,006,756.87 or 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. In addition, eligible IHS/Tribal hospitals and hospitals 
located in Puerto Rico are estimated to receive approximately 
$91,084,288 million in supplemental payments in FY 2025, as 
determined based on the difference between each hospital's FY 2022 
UCP (increased by 9.43 percent, which is the projected change 
between the FY 2025 total uncompensated care payment amount and the 
total uncompensated care payment amount for FY 2022) and its FY 2025 
UCP as calculated using the methodology for FY 2025. If this 
difference is less than or equal to zero, the hospital will not 
receive a supplemental payment. For this proposed rule, the total 
proposed UCP and proposed supplemental payments equal approximately 
$6.589 billion. For FY 2025, we are proposing to use 3 years of data 
on uncompensated care costs from Worksheet S-10 of the FYs 2019, 
2020, and 2021 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 2025, we refer readers to section IV.E. 
of the preamble of this proposed rule. For a discussion regarding 
the methodology for calculating the supplemental payments, we refer 
readers to section IV.D. of the preamble of this proposed rule.
    To estimate the impact of the combined effect of the proposed 
changes in Factors 1 and 2, as well as the changes to the data used 
in determining Factor 3, on the calculation of Medicare UCP along 
with changes to supplemental payments for IHS/Tribal hospitals and 
hospitals located in Puerto Rico, we compared total UCP and 
supplemental payments estimated in the FY 2024 IPPS/LTCH PPS final 
rule correction notice (88 FR 68484) to the combined total of the 
proposed UCP and the proposed supplemental payments estimated in 
this FY 2025 IPPS/LTCH PPS proposed rule. For FY 2024, 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 59.29 percent and multiplied by a Factor 3 
calculated using the methodology described in the FY 2024 IPPS/LTCH 
PPS final rule. For FY 2025, we calculated 75 percent of the 
estimated amount that would be paid as Medicare DSH payments during 
FY 2025 absent section 3133 of the Affordable Care Act, adjusted by 
a Factor 2 of 62.14 percent and multiplied by a Factor 3 calculated 
using the methodology described previously. For this proposed rule, 
the supplemental payments for IHS/Tribal hospitals and Puerto Rico 
hospitals are calculated as the difference between the hospital's 
adjusted base year amount (as determined based on the hospital's FY 
2022 uncompensated care payment) and the hospital's FY 2025 
uncompensated care payment.
    Our analysis included 2,422 hospitals that are projected to be 
DSH-eligible in FY 2025. Our analysis did not include hospitals that 
had terminated their participation in the Medicare program as of 
February 2, 2024, Maryland hospitals, new hospitals, and SCHs that 
are expected to be paid based on their hospital-specific rates. The 
23 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 UCP and supplemental payments for eligible IHS/Tribal 
hospitals and Puerto Rico hospitals across all hospitals projected 
to be DSH-eligible in FY 2025, by hospital characteristic, is 
presented in the following table:
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BILLING CODE 4120-01-C
    The changes in projected FY 2025 UCP and supplemental payments 
compared to the total of UCP and supplemental payments in FY 2024 
are driven by increases in Factor 1 and Factor 2. The proposed 
Factor 1 has increased from the FY 2024 final rule's Factor 1 of 
$10.015 billion to this proposed rule's Factor 1 of $10.457 billion. 
The proposed Factor 2 has increased from FY 2024 final rule's Factor 
2 of 59.29 percent to this proposed rule's Factor 2 of 62.14 
percent. In addition, we note that there is a slight increase in the 
number of projected DSH-eligible hospitals to 2,422 at the time of 
the development for this proposed rule compared to the 2,384 DSHs in 
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58640). Based on the 
changes, the impact analysis found that, across all projected DSH-
eligible hospitals, FY 2025 UCP and supplemental payments are 
estimated at approximately $6.589 billion, or an increase of 
approximately 9.43 percent from FY 2024 UCP and supplemental 
payments (approximately $6.021 billion). While the changes result in 
a net increase in the total amount available to be distributed in 
UCP and supplemental payments, the projected payment increases 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 9.43 percent 
indicates that hospitals within the specified category are projected 
to experience a smaller increase in payments, on average, compared 
to the universe of projected FY 2025 DSH-eligible hospitals. 
Conversely, a percentage change greater than 9.43 percent indicates 
that a hospital type is projected to have a larger increase compared 
to the overall average. The variation in the distribution of overall 
payments by hospital characteristic is largely dependent on a given 
hospital's uncompensated care costs as reported on the Worksheet S-
10 and used in the 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 increase in UCP compared to the increase their urban 
counterparts are projected to experience. Overall, rural hospitals 
are projected to receive a 13.47 percent increase in payments, while 
urban hospitals are projected to receive a 9.20 percent increase in 
payments, which is slightly less than the overall hospital average.
    By bed size, rural hospitals with 0 to 99 beds and rural 
hospitals with 100 to 249 beds are projected to receive larger than 
average increases of a 12.33 percent and 16.89 percent, 
respectively, while rural hospitals with 250+ beds are projected to 
receive a smaller than average increase of 6.86 percent. Among urban 
hospitals, the smallest urban hospitals, those with 0 to 99 beds, 
are projected to receive an increase in payments that is greater 
than the overall hospital average, an increase of 16.33 percent. In 
contrast, larger urban hospitals with 100-249

[[Page 36619]]

beds and urban hospitals with 250+ beds are projected to receive 
9.23 and 8.79 percent increases in payments, respectively.
    By region, rural hospitals are projected to receive a varied 
range of payment changes. Rural hospitals in the New England and 
South Atlantic regions are projected to receive smaller than average 
increases in payments. Rural hospitals in all other regions are 
projected to receive larger than average increases in payments. 
Urban hospitals in the West South Central, Mountain, and Pacific 
regions are projected to receive larger than average increases in 
payments, while urban hospitals in all other regions are projected 
to receive smaller than average increases in payments.
    By payment classification, although hospitals in urban payment 
areas overall are expected to receive a 9.56 percent increase in UCP 
and supplemental payments, hospitals in large urban payment areas 
are projected to receive a larger than average increase in payments 
of 11.00 percent. In contrast, hospitals in other urban payment 
areas and hospitals in rural payment areas are projected to receive 
a smaller than average increase in payments of 7.47 and 9.29 
percent, respectively.
    Nonteaching hospitals and teaching hospitals with 100+ residents 
are projected to receive a larger than average payment increase of 
10.88 percent and 9.60 percent, respectively. Teaching hospitals 
with fewer than 100 residents are projected to receive smaller than 
average payment increases of 8.20 percent. Voluntary hospitals are 
projected to receive smaller than average increases of 8.85 percent, 
while government-owned hospitals and proprietary hospitals are 
expected to receive a larger than average payment increase of 10.60 
percent and 9.52 percent, respectively. Hospitals with less than 25 
percent Medicare utilization and those with greater than 65 percent 
Medicare utilization are projected to receive larger than average 
increases of 9.84 percent and 27.26 percent, respectively, while 
hospitals with Medicare utilization between 25-50 percent and 50-65 
percent are projected to receive smaller than average payment 
increases of 8.47 percent and 2.91 percent, respectively. Hospitals 
with 50-65 percent Medicaid utilization and those with greater than 
65 percent Medicaid utilization are projected to receive larger than 
average increases in payments of 13.58 and 12.66 percent, 
respectively, while hospitals with less than 25 percent Medicaid 
utilization and those with Medicaid utilization between 25-50 
percent are projected to receive smaller than average increases of 
9.17 percent and 8.61 percent, respectively.
    The impact table reflects the modeled FY 2025 UCP 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 $91.1 
million in FY 2025.

3. Effects of the Changes to Low-Volume Hospital Payment Adjustment 
Policy

    In section V.D. of the preamble of this proposed rule, we 
discuss the extension of the temporary changes to the low-volume 
hospital payment policy originally provided for by the Affordable 
Care Act and extended by subsequent legislation. Specifically, 
section 306 of the CAA, 2024 further extended the modified 
definition of low-volume hospital and the methodology for 
calculating the payment adjustment for low-volume hospitals under 
section 1886(d)(12) through December 31, 2024. Beginning January 1, 
2025, the low-volume hospital qualifying criteria and payment 
adjustment will revert to the statutory requirements that were in 
effect prior to FY 2011, and the preexisting low-volume hospital 
payment adjustment methodology and qualifying criteria, as 
implemented in FY 2005, will resume. Effective for FY 2025, 
discharges occurring on or after January 1, 2025 and subsequent 
years, in order to qualify as a low-volume hospital, a subsection 
(d) hospital must be more than 25 road miles from another subsection 
(d) hospital and have less than 200 discharges (that is, less than 
200 discharges total, including both Medicare and non-Medicare 
discharges) during the fiscal year. We recognize the importance of 
this extension with respect to the goal of advancing health equity 
by addressing the health disparities that underlie the health 
system, which is one of CMS' strategic pillars and a Biden-Harris 
Administration priority, as described in section I.A.2. of the 
preamble of this proposed rule. The provisions of section 306 of the 
CAA, 2024 are projected to increase payments to IPPS hospitals by 
approximately $87 million in FY 2025 relative to what the payments 
would have been in the absence of section 306.
    Based upon the best available data at this time, we estimate the 
expiration of the temporary changes to the low-volume hospital 
payment policy for FY 2025 discharges occurring on or after January 
1, 2025 would decrease aggregate low-volume hospital payments by 
$261 million in FY 2025 as compared to FY 2024. These payment 
estimates were determined based on the estimated payments for the 
608 providers that are expected to no longer qualify under the 
criteria that will apply beginning on January 1, 2025. These impacts 
were calculated using the same methodology used in developing the 
quantitative analyses of changes in payments per case discussed 
previously in section I.G. of this Appendix A of this proposed rule.

4. Effects of the Distribution of Additional Residency Positions Under 
the Provisions of Section 4122 of Subtitle C of the Consolidated 
Appropriations Act, 2023 (CAA, 2023)

    In section V.F.2. of this proposed rule we are proposing to 
implement section 4122 of the CAA, 2023, which requires that the 
Secretary initiate an application round to distribute 200 residency 
positions (also referred to as slots) with at least 100 of the 
positions being distributed for psychiatry or psychiatry 
subspecialty residency programs. The residency positions distributed 
under section 4122 are effective July 1, 2026.
    We are proposing to first distribute slots by prorating the 
available 200 positions among all qualifying hospitals such that 
each qualifying hospital receives up to 1.00 FTE--that is, 1.00 FTE 
or a fraction of 1.00 FTE. We are proposing that a qualifying 
hospital is a Category One, Category Two, Category Three, or 
Category Four hospital, or one that meets the definitions of more 
than one of these categories, as defined at section 
1886(h)(10)(F)(iii) of the Act.\872\ We are proposing that if any 
residency slots remain after distributing up to 1.00 FTE to each 
qualifying hospital, we will prioritize the distribution of the 
remaining slots based on the HPSA score associated with the program 
for which each qualifying hospital is applying using the methodology 
we finalized for purposes of implementing section 126 of the CAA, 
2021 (86 FR 73434 through 73440). Using this HPSA prioritization 
method, we are proposing to limit a qualifying hospital's total 
award under section 4122 of the CAA, 2023, to 10.00 additional FTEs 
consistent with section 1886(h)(10)(C)(i) of the Act. We believe 
including such a prioritization will further support the training of 
residents in underserved and rural areas thereby helping to address 
physician shortages and the larger issue of health inequities in 
these areas.
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    \872\ Category One consists of hospitals that are located in a 
rural area (as defined in section 1886(d)(2)(D) of the Act) or have 
been reclassified being located in a rural area (pursuant to section 
1886(d)(8)(E) of the Act). Category Two consists of hospitals in 
which the reference resident level of the hospital (as specified in 
section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit. Category Three consists of hospitals 
located in States with new medical schools that received `Candidate 
School' status from the Liaison Committee on Medical Education 
(LCME) or that received `Pre-Accreditation' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward `Full Accreditation' status 
(as such term is defined by the LCME) or toward `Accreditation' 
status (as such term is defined by the COCA); or additional 
locations and branch campuses established on or after January 1, 
2000, by medical schools with `Full Accreditation' status (as such 
term is defined by LCME) or `Accreditation' status (as such term is 
defined by the COCA). Category Four consists of hospitals that serve 
areas designated as HPSAs under section 332(a)(1)(A) of the Public 
Health Service Act (PHSA), as determined by the Secretary.
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    The Office of the Actuary estimates an increase of $10 million 
in Medicare payments to teaching hospitals for FY 2026, and an 
increase in Medicare payments to teaching hospitals of $280 million 
for FYs 2026 through 2030 (over 5 years). In total, for FYs 2026 
through 2036, Medicare payments to teaching hospitals are estimated 
to increase by $740 million.
    In addition, we are proposing a modification to our methodology 
for distributing slots under section 126 of the CAA, 2021. Section 
1886(h)(9)(B)(ii) of the Act requires the Secretary to distribute at 
least 10 percent of the aggregate number of total residency 
positions available to the same four categories of hospitals. 
Section 126 of the CAA, 2021, makes available 1,000 residency 
positions and therefore, at least 100 residency positions must be 
distributed to hospitals qualifying in each of the four categories. 
In the final rule implementing section 126 of the CAA, 2021, we 
stated we would track progress in meeting all statutory

[[Page 36620]]

requirements and evaluate the need to modify the distribution 
methodology in future rulemaking (86 FR 73441). To date, we have the 
completed the distribution of residency slots under rounds 1 and 2 
of the section 126 distributions and have determined that only 12.76 
DGME slots and 18.06 IME slots were distributed to hospitals 
qualifying under Category Four. We are proposing that in rounds 4 
and 5 we will prioritize the distribution of slots to hospitals that 
qualify under Category Four, regardless of HPSA score, to ensure 
that at least 100 residency slots are distributed to these 
hospitals. The remaining slots awarded under rounds 4 and 5 will be 
distributed using the existing methodology based on HPSA score (86 
FR 73434 through 73440). That is, the remaining slots will be 
distributed to hospitals qualifying under Category One, Category 
Two, or Category Three, or hospitals that meet the definition of 
more than one of these categories, based on the HPSA score 
associated with the program for which each hospital is applying. We 
believe there is a minimal impact associated with this proposed 
change in methodology as the number of total slots distributed will 
remain the same.

5. Effects of Proposed Changes to Additional Payment for Hospitals With 
a High Percentage of ESRD Beneficiary Discharges

    As discussed in section V.I. of the preamble of this proposed 
rule, we are proposing to update our payment methodology for 
determining the ESRD add-on payment for hospitals with a high 
percentage of ESRD beneficiary discharges. Under Sec.  412.104(b), 
the ESRD add-on is based on the average length of stay (in days) for 
ESRD beneficiaries in the hospital, expressed as a ratio to 1 week 
(7 days), multiplied by the estimated weekly cost of dialysis, then 
multiplied by the number of ESRD beneficiary discharges (Worksheet E 
Part A Column 1 line 41.01). We are proposing that effective for 
cost reporting periods beginning on or after October 1, 2024, the 
estimated weekly cost of dialysis would be calculated as the ESRD 
PPS base rate (as defined in 42 CFR 413.171) multiplied by three. As 
discussed in section V.I. of the preamble of this proposed rule, 
under our proposal, the CY 2025 ESRD PPS base rate would be used for 
all cost reports beginning during Federal FY 2025 (that is, for cost 
reporting periods starting on or after October 1, 2024, through 
September 30, 2025).
    Our impact analysis includes 91 hospitals that were eligible for 
the ESRD add-on payment based on the historical composite rate in 
the FY 2017 cost report data, which is a historical year that has a 
high percentage of final settled cost report data regarding ESRD 
add-on payments. To estimate the impact of the proposed change to 
the payment methodology, we compared total ESRD add-on payments from 
the December 2023 update of the FY 2017 cost report data to the 
estimated FY 2025 ESRD add-on payments using, for illustrative 
purposes, the CY 2024 ESRD PPS base rate published in the CY 2024 
ESRD PPS final rule (88 FR 76345), which is $271.02. (As previously 
noted, under our proposal, the CY 2025 ESRD PPS base rate would be 
used for all cost reports beginning during Federal FY 2025 (that is, 
for cost reporting periods starting on or after October 1, 2024, 
through September 30, 2025).) The total ESRD add-on payments based 
on the FY 2017 cost report data are approximately $22 million. The 
total estimated FY 2025 ESRD add-on payments under this proposal, as 
estimated using the CY 2024 ESRD PPS base rate, would be 
approximately $31.4 million. Therefore, we estimate the proposal 
would increase ESRD add-on payments by approximately $10 million.

6. Estimated Effects of the Proposed IPPS Payment Adjustment for 
Establishing and Maintaining Access to Essential Medicines

    As discussed in section V.K.1. of the preamble of this proposed 
rule, we propose IPPS payment adjustments for the additional 
resource costs that small, independent hospitals incur in 
establishing and maintaining access to a 6-month buffer stock of one 
or more essential medicine(s). We propose that the payment 
adjustments would commence for cost reporting periods beginning on 
or after October 1, 2024.
    We propose to make this payment adjustment under the IPPS for 
the additional resource costs of establishing and maintaining access 
to a buffer stock of essential medicines under section 1886(d)(5)(I) 
of the Act. We are not proposing to make the IPPS payment adjustment 
budget neutral under the IPPS.
    The data currently available to calculate a spending estimate 
for FY 2025 under the IPPS is limited. However, we believe the 
methodology described in this section to calculate this spending 
estimate under the IPPS for FY 2025 is reasonable based on the 
information available.
    To estimate total spending associated with this proposed policy 
under the IPPS, we used the following information for all eligible 
hospitals with completed 12-month or greater cost reporting periods 
concluding in CY 2021 (the most recent cost reporting period for 
which data was available):
     Estimated spend per eligible hospital on its applicable 
essential medicines, expressed as a percentage of the total Drugs 
Charged to Patients cost center, as found on Worksheet B, Part 1, 
line 73, column 26 on Form CMS-2552-2010. For purposes of this 
estimate, we believe it is reasonable to assume that the cost of a 
given hospital's essential medicines will be 1 percent of its total 
Drugs Charged to Patients costs.
     Multiplicative factor of 50 percent to estimate the 
total cost of the essential medicines that are in the 6-month buffer 
stock.
     Assumed cost of carrying essential medicines, expressed 
as a percentage of the total cost of the essential medicines that 
are in the buffer stock. Based on commenter feedback on the CY 2024 
OPPS/ASC proposed rule,\873\ we believe it is reasonable to assume 
for purposes of this spending estimate a cost of carrying essential 
medicines of 20 percent of the cost of the essential medicines 
themselves. This assumption of a 20 percent cost of carrying would 
apply to any size of buffer stock of essential medicine.
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    \873\ https://www.regulations.gov/comment/CMS-2023-0120-3326.
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     The provider-specific inpatient Medicare share 
percentage, expressed as the percentage of inpatient Medicare costs 
to total hospital costs.
    To calculate the estimated aggregate IPPS payments under this 
proposed policy, we multiplied together the four factors listed for 
each eligible hospital and summed across all eligible hospitals. 
Based on the latest hospital cost report data available, we 
identified 493 IPPS hospitals that would potentially be eligible for 
this proposed payment. These 493 IPPS hospitals are those providers 
that: (1) had 100 or fewer beds as defined in Sec.  412.105(b); and 
(2) answered ``N'' to line 140, column 1 and did not fill out any 
part of lines 141 through 143 on Worksheet S2 Part I on Form CMS-
2552-10. We estimate that the aggregate FY 2025 IPPS payments under 
this proposed policy, given the assumptions detailed previously, 
would be approximately $0.3 million, and the average IPPS payment 
per eligible hospital would be approximately $620. As noted 
previously and as stated in section V.K.2 of the preamble of this 
proposed rule, we are not proposing to make this policy budget 
neutral under the IPPS.
    We also estimated the total costs for eligible hospitals to 
establish and maintain buffer stocks of essential medicines in order 
to inform the public what portion of the total costs would be 
separately paid under the proposed policy. To calculate this, we 
multiplied together the first three factors listed previously for 
each eligible hospital, but not the fourth factor (i.e. we did not 
multiply by the provider specific inpatient Medicare share 
percentage) and summed across all eligible hospitals. We estimate 
that the total costs for eligible hospitals to establish and 
maintain buffer stocks of essential medicines would be approximately 
$2.8 million, and the average cost per eligible hospital would be 
approximately $5,610. The IPPS payments under this proposed policy 
represent approximately 11 percent of that amount, or $0.3 million.
    As discussed earlier, our estimate was calculated at the 
hospital level and then summed. However, for illustrative purposes 
the calculation can be described alternatively as starting with the 
aggregated total Drugs Charged to Patients across all 493 eligible 
hospitals of approximately $2.8 billion, assuming the annual cost of 
essential medicines to be 1 percent of that amount or $28 million (= 
$2.8 billion * .01), calculating the cost of 6 months of essential 
medicines as half that amount or $14 million (= $28 million * .50), 
assuming that the cost of carrying essential medicines is 20 percent 
of that amount or $2.8 million (= $14 million * .20), and then 
calculating the Medicare inpatient share of that amount at 11 
percent or $0.3 million (= $2.8 million * .11).
    We seek comment on these assumptions and estimates.

7. Effects Under the Hospital Readmissions Reduction Program for FY 
2025

    In section V.K. of the preamble of this proposed rule, we note 
that we are not proposing to add, modify, or remove any

[[Page 36621]]

policies for the FY 2025 Hospital Readmissions Reduction Program; 
the policies finalized in FY 2023 IPPS/LTCH PPS final rule (87 FR 
49081 through 49094) continue to apply. This program requires a 
reduction to a hospital's base operating DRG payment to account for 
excess readmissions of selected applicable conditions and 
procedures. Table I.G.7.-01 and the analysis in this proposed rule 
illustrate the estimated financial impact of the Hospital 
Readmissions Reduction Program payment adjustment methodology by 
hospital characteristic. Hospitals are sorted into quintiles based 
on the proportion of dual-eligible stays among Medicare fee-for-
service (FFS) and managed care stays between July 1, 2019 and June 
30, 2022 (that is, the FY 2024 Hospital Readmissions Reduction 
Program's applicable period, which is the most recently available 
data at the time of publication of this proposed rule).\874\ 
Hospitals' excess readmission ratios (ERRs) are assessed relative to 
their peer group median and a neutrality modifier is applied in the 
payment adjustment factor calculation to maintain budget neutrality. 
In the FY 2025 IPPS/LTCH PPS final rule, we will provide an updated 
estimate of the financial impact using the proportion of dually-
eligible beneficiaries, ERRs, and aggregate payments for each 
condition/procedure and all discharges for applicable hospitals from 
the FY 2025 Hospital Readmissions Reduction Program applicable 
period (that is, July 1, 2020 through June 30, 2023).
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    \874\ 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.
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    The results in Table I.G.7.-01 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 
between July 1, 2020 and June 30, 2023. The second column in Table 
I.G.7.-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.8.-01 indicates the estimated 
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.7.-01 estimates the 
financial impact on hospitals by hospital characteristic. Table 
I.G.7.-01 also 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.

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    The actual FY 2025 program year's TPSs would not be reviewed and 
corrected by hospitals until after the FY 2025 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2024 program 
year would be used for the updated impact analysis in the final 
rule, if the proposals, as previously described, for FY 2025 are not 
finalized.

7. Effects of Requirements Under the HAC Reduction Program for FY 2025

    We are presenting the estimated impact of the FY 2025 Hospital-
Acquired Condition (HAC) Reduction Program on hospitals by hospital 
characteristic based on previously adopted policies for the program. 
We are not proposing to add or remove any measures from the HAC 
Reduction Program in this proposed rule, nor are we proposing any 
changes to reporting or submission requirements which would have any 
significant economic impact for the FY 2025 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 January 1, 2021 through June 
30, 2022 and version 13.0 of the PSI software. Hospitals' measure 
results for Centers for Disease Control and Prevention (CDC) Central 
Line-Associated Bloodstream Infection (CLABSI), Catheter-Associated 
Urinary Tract Infection (CAUTI), Colon and Abdominal Hysterectomy 
Surgical Site Infection (SSI), Methicillin-resistant Staphylococcus 
aureus (MRSA) bacteremia, and Clostridium difficile Infection (CDI) 
are derived from standardized infection ratios (SIRs) calculated 
with hospital surveillance data reported to the CDC's National 
Healthcare Safety Network (NHSN) for infections occurring between 
January 1, 2022 and December 31, 2022. Hospital characteristics are 
based on the FY 2024 IPPS Final Rule Impact File.
    This table includes 2,945 non-Maryland hospitals with an 
estimated FY 2025 Total HAC Score based on the most recently 
available data at the time of publication of this proposed rule. 
Maryland hospitals and hospitals without a Total HAC Score are 
excluded from the table. Actual results for FY 2025 will be 
determined in the fall of 2024 after a 30-day review and corrections 
period for hospitals to review their program results. 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 estimated number of 
hospitals for each characteristic that would be in the worst-
performing quartile of Total HAC Scores. For example, with regard to 
teaching status, 448 hospitals out of 1,719 hospitals characterized 
as non-teaching hospitals would be subject to a payment reduction. 
Among teaching hospitals, 193 out of 933 hospitals with fewer than 
100 residents and 84 out of 279 hospitals with 100 or more residents 
would be subject to a payment reduction.
    The fourth column in the table indicates the estimated 
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 2025 HAC Reduction Program. For 
example, 26.1 percent of the 1,719 hospitals characterized as non-
teaching hospitals, 20.7 percent of the 933 teaching hospitals with 
fewer than 100 residents, and 30.1 percent of the 279 teaching 
hospitals with 100 or more residents would be subject to a payment 
reduction.

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[[Page 36627]]



10. Effects of the Implementation of the Rural Community Hospital 
Demonstration Program in FY 2025

    In section V.N.2 of the preamble of this proposed rule for FY 
2025, we discussed our budget neutrality methodology for section 
410A of Public Law 108-173, as amended by sections 3123 and 10313 of 
Public Law 111-148, by section 15003 of Public Law 114-255, and most 
recently, by section 128 of Public Law 116-260, which requires the 
Secretary to conduct a demonstration that would modify payments for 
inpatient services for up to 30 rural hospitals.
    Section 128 of Public Law 116-260 requires the Secretary to 
conduct the Rural Community Hospital Demonstration for a 15-year 
extension period (that is, for an additional 5 years beyond the 
previous extension period). In addition, the statute provides for 
continued participation for all hospitals participating in the 
demonstration program as of December 30, 2019.
    Section 410A(c)(2) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented (budget neutrality). We propose to adopt the general 
methodology used in previous years, whereby we estimated the 
additional payments made by the program for each of the 
participating hospitals as a result of the demonstration, and then 
adjusted the national IPPS rates by an amount sufficient to account 
for the added costs of this demonstration. In other words, we have 
applied budget neutrality across the payment system as a whole 
rather than across the participants of this demonstration. The 
language of the statutory budget neutrality requirement permits the 
agency to implement the budget neutrality provision in this manner. 
The statutory language requires that aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration was not implemented but does not identify 
the range across which aggregate payments must be held equal.
    For this proposed rule, the resulting amount applicable to FY 
2025 is $49,522,206, which we are proposing as the budget neutrality 
offset adjustment for FY 2025. 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 IPPS/LTCH PPS 
final 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 IPPS/LTCH PPS final 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 2018 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/LTCH PPS final 
rules for these years.
    With the extension of the demonstration for another 5-year 
period, as authorized by section 128 of Public Law 116-260, we will 
continue this general procedure. At this time, for the FY 2025 IPPS/
LTCH PPS proposed rule, not all of the finalized cost reports are 
available for the 26 hospitals that completed cost report periods 
beginning in FY 2019 under the demonstration payment methodology. If 
all of these cost reports are available, we will include in the 
budget neutrality offset amount in the FY 2025 IPPS/LTCH PPS final 
rule the amount by which the actual costs of the demonstration, as 
determined from these cost reports, differed from the estimated 
costs identified in the FY 2019 IPPS/LTCH PPS final rule.

11. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    As described in the FY 2024 IPPS/LTCH PPS final rule (88 FR 
59119 through 59122), 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 2024 
IPPS/LTCH PPS final rule (88 FR 59119 through 59122), section 129 of 
Public Law 116-159, stipulates that only the 10 CAHs that 
participated in the initial period of the FCHIP Demonstration are 
eligible to participate during the extension period. Among the 
eligible CAHs, five elected to participate in the extension period. 
The selected CAHs are located in two states--Montana and North 
Dakota--and are implementing the three intervention services.
    As explained in the FY 2024 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 2024 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 2024 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 2024 IPPS/LTCH PPS final rule (88 FR 
59119 through 59122), 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 2024 IPPS/LTCH PPS final 
rule, by reducing payments to all CAHs, not just those participating 
in the demonstration extension period.
    In the FY 2024 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 2024 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. In the FY 2024 IPPS/
LTCH PPS final rule, we finalized a policy to adopt the same budget 
neutrality methodology and analytical approach used during the 
demonstration initial period to be used for the demonstration 
extension period. As stated in the FY 2024 IPPS/LTCH PPS final rule 
(88 FR 59119 through 59122), 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

[[Page 36628]]

to assess the budget neutrality of the FCHIP Demonstration during 
initial period of the demonstration to assess the financial impact 
of the demonstration during this extension period, upon receiving 
data for the extension period, we may update and/or modify the FCHIP 
budget neutrality methodology and analytical approach to ensure that 
the full impact of the demonstration is appropriately captured. 
Therefore, we are not proposing to apply a budget neutrality payment 
offset to payments to CAHs in FY 2025. This policy will have no 
impact for any national payment system for FY 2025.

12. Effects of Proposed Implementation of the Transforming Episode 
Accountability Model (TEAM)

    In section X.A. of the preamble of this proposed rule, we are 
proposing to test a new mandatory episode-based payment model titled 
the Transforming Episode Accountability Model (TEAM) under the 
authority of the CMS Center for Medicare and Medicaid Innovation 
(CMS Innovation Center). Section 1115A of the Act authorizes the CMS 
Innovation Center to test innovative payment and service delivery 
models that preserve or enhance the quality of care furnished to 
Medicare, Medicaid, and Children's Health Insurance Program 
beneficiaries while reducing program expenditures. The intent of 
TEAM is to improve beneficiary care through financial accountability 
for episode categories that begin with one of the following 
procedures: coronary artery bypass graft, lower extremity joint 
replacement, major bowel procedure, surgical hip/femur fracture 
treatment, and spinal fusion. TEAM would test whether financial 
accountability for these episode categories reduces Medicare 
expenditures while preserving or enhancing the quality of care for 
Medicare beneficiaries. We anticipate that TEAM would benefit 
Medicare beneficiaries through improving the coordination of items 
and services paid for through Medicare fee-for-service (FFS) 
payments, encouraging provider investment in health care 
infrastructure and redesigned care processes, and incentivizing 
higher value care across the inpatient and post-acute care settings 
for the episode.
    As proposed, TEAM would be mandatory for acute care hospitals 
located within selected CBSAs. This episode-based payment model 
would begin on January 1, 2026, and end on December 31, 2030. 
Payment approaches that hold providers accountable for episode cost 
and performance can potentially create incentives for the 
implementation and coordination of care redesign between 
participants and other providers and suppliers such as physicians 
and post-acute care providers. TEAM could enable hospitals to 
consider the most appropriate strategies for care redesign, 
including (1) increasing post-hospitalization follow-up and medical 
management for patients; (2) coordinating care across the inpatient 
and post-acute care spectrum; (3) conducting appropriate discharge 
planning; (4) improving adherence to treatment or drug regimens; (5) 
reducing readmissions and complications during the post-discharge 
period; (6) managing chronic diseases and conditions that may be 
related to the proposed episodes; (7) choosing the most appropriate 
post-acute care setting; and (8) coordinating between providers and 
suppliers such as hospitals, physicians, and post-acute care 
providers.
    Under this proposed model, TEAM participants would continue to 
bill Medicare under the traditional FFS system for items and 
services furnished to Medicare FFS beneficiaries. The TEAM 
participant may receive a reconciliation payment from CMS if 
Medicare FFS expenditures for a performance year are less than the 
reconciliation target price, subject to a quality adjustment. TEAM 
would not have downside risk for Track 1 and TEAM participants would 
only be accountable for performance year spending below their 
reconciliation target price, subject to a quality adjustment, that 
would result in a reconciliation payment amount. For Track 2 and 
Track 3, TEAM would be a two-sided risk model that requires TEAM 
participants to be accountable for performance year spending above 
or below their reconciliation target price, subject to a quality 
adjustment, that would result in a reconciliation payment amount or 
a repayment amount.

a. Effects on the Medicare Program

    TEAM is a mandatory episode-based payment model which would have 
a direct effect on the Medicare program because TEAM participants 
would be incentivized to reduce Medicare spending. Additionally, 
TEAM participants could receive a reconciliation payment amount from 
CMS or have to pay CMS a repayment amount based on their spending 
and quality performance. Table I.G.12-01 shows the projected 
financial impacts of TEAM over the course of the five-year model 
test. The first performance year (2026) of TEAM is expected to cost 
the Medicare program $27 million because we assume most TEAM 
participants would elect participation in Track 1, which is not 
subject to downside risk. Therefore, the estimated $85 million 
represents the difference between reconciliation payment amounts and 
repayment amounts resulting in more TEAM participants earning 
reconciliation payment amounts in performance year 1 rather than 
paying CMS repayment amounts. In performance year 2 (2027), TEAM 
participants would be subject to both upside and downside risk, 
regardless of participation track, and we estimate TEAM participants 
on net (that is, repayment amounts less reconciliation payments) 
would pay $98 million to CMS, and that TEAM would save the Medicare 
program $157 million. To protect TEAM participants from significant 
financial risk, we have proposed a 10 percent stop-loss and stop-
gain limit for TEAM participants in Track 2 and a 20 percent stop-
loss and stop-gain limit for TEAM participants in Track 3. These 
limits would cap the total amount of repayments paid by TEAM 
participants to CMS or cap the total amount of reconciliation 
payment amounts paid by CMS to TEAM participants. In performance 
year 3 (2028), we estimate TEAM participants on net would pay $133 
million to CMS, and that TEAM would save the Medicare program $194 
million. We estimate that TEAM participants on net would pay CMS 
$136 million in performance year 4 and $121 million in performance 
year 5, and that TEAM would save the Medicare program $197 million 
and $184 million for these performance years, respectively. We 
estimate that on net, TEAM participants would pay CMS $403 million, 
and that TEAM would save the Medicare program approximately $705 
million over the 5 performance years (2026 through 2030).
[GRAPHIC] [TIFF OMITTED] TP02MY24.340

(1) Assumptions

    We assumed TEAM episode volume is estimated to grow at the same 
rate as projected Medicare FFS enrollment as indicated in the 2023 
Medicare Trustees Report.\875\ Further, an internal sample set of 
hospitals was used to estimate financial impacts and simulate TEAM 
participation. The amount of national episode spending

[[Page 36629]]

captured by the sample set of hospitals was 29 percent in 2023.
---------------------------------------------------------------------------

    \875\ https://www.cms.gov/oact/tr/2023.
---------------------------------------------------------------------------

    We note that TEAM participants are estimated to reduce episode 
spending by 1 percent as a result of participating in TEAM. The 
fifth annual evaluation report of the Comprehensive Care for Joint 
Replacement (CJR) model indicated that CJR resulted in roughly a 4 
percent reduction in lower extremity joint replacement (LEJR) 
spending (not including reconciliation payments) for participants 
over the course of the model.\876\ Since participation in CJR is 
mandatory in 34 metropolitan statistical areas, and LEJR episodes 
make up a significant portion of the episodes included in TEAM, the 
CJR evaluation results appear to be a reasonable proxy for what to 
expect in TEAM. However, the episode length in CJR is 90 days, 
whereas in TEAM the proposed length is 30 days. Internal analysis 
indicated that the 30-day episode is approximately 75 percent as 
costly as a 90-day episode for LEJR procedures. In addition, post-
acute care spending has been declining in recent years for episodes 
that we are proposing to include in TEAM, which could limit the 
potential for TEAM participants to achieve significant improvements 
in efficiency. Thus, we believe that the intervention effect of TEAM 
on episode spending will be a reduction of 0 to 3 percent (see Table 
I.G.12-02 for a sensitivity analysis for how the financial impact is 
affected by changes in this assumption).
---------------------------------------------------------------------------

    \876\ https://www.cms.gov/priorities/innovation/data-and-reports/2023/cjr-py5-annual-report.
---------------------------------------------------------------------------

    We also note that starting from actual episode spending that 
occurred in the first half 2023, average baseline spending per 
episode is estimated to increase by 1.5 percent every year. The 
national average per episode spending growth for all TEAM episode 
types in years 2018, 2019, 2022, and 2023 was approximately 1.3 
percent. Annual growth rates for each episode type were weighted by 
spending, and historical experience during 2020 and 2021 were 
excluded due to possible impacts from the peak of the COVID-19 
pandemic. Since some of the historical experience in these years 
includes Medicare policy changes for LEJR episodes that resulted in 
surgeries occurring in more efficient care settings, translating to 
spending decreases that may not be duplicated in future years, the 
assumed annual trend is slightly greater than the observed average 
trend from the historical experience.
    Additionally, our estimates do not include the impact of TEAM 
beneficiary overlap with total cost of care models, such as when a 
TEAM beneficiary is also assigned to a Medicare Shared Savings 
Program ACO. However, given the precision in the Shared Savings 
Program projections, we do not anticipate a practical difference in 
the ACO's shared savings estimates. Nor do we anticipate TEAM 
beneficiary overlap with total cost of care models having a 
meaningful effect to TEAM's projected financial impacts, described 
in Table I.G.12-01.
    Because the financial impact is based on projections of 
spending, the estimates implicitly assume that there will be no 
significant difference between the projected episode spending used 
to calculate the prospective target prices and actual episode 
spending. This assumption has a large degree of uncertainty, and the 
actual TEAM financial impacts will be highly sensitive to this 
difference. The direction, magnitude and timing of projection 
inaccuracies would all affect the overall financial impact estimate.

(2) Sensitivity Analysis

    We also performed a sensitivity analysis to assess various 
intervention effects on TEAM. Overall financial impacts are 
sensitive to the intervention effect TEAM would have on TEAM 
participants' episode spending. Table I.G.12-02 includes financial 
impacts at various intervention effect assumptions (note that 
negative values indicate savings):
[GRAPHIC] [TIFF OMITTED] TP02MY24.341

    The sensitivity is due to the lack of the requirement that 
participants participate in downside risk during performance year 1 
and the effect that reductions in episode spending during 
performance years would have on target prices for future performance 
years.

b. Effects on the Medicare Beneficiaries

    We believe that episode-based payment models may have the 
potential to benefit beneficiaries because the intent of the models 
is to test whether providers are able to improve the coordination 
and transition of care, invest in infrastructure and redesigned care 
processes for high quality and efficient service delivery and 
incentivize higher value care across the inpatient and post-acute 
care spectrum. We believe that episode-based payment models have a 
patient-centered focus such that they incentivize improved 
healthcare delivery and communication based on the needs of the 
beneficiary, thus potentially benefitting beneficiaries. The 
proposed model would not affect beneficiary cost sharing for items 
and services that beneficiaries receive from TEAM participants or 
premiums paid by beneficiaries. If there is a shift in the 
utilization of items and services within each episode, then 
beneficiary cost sharing could be higher or lower than would 
otherwise be experienced.
    We are proposing to include a patient reported outcome measure, 
specific to LEJR episode categories, in the TEAM quality measures 
that would be tied to payment with the belief that doing so would 
encourage TEAM participants to focus on and deliver improved quality 
of care for Medicare beneficiaries. Additionally, TEAM participants 
must perform well on quality measure performance to achieve their 
maximum reconciliation payment. The accountability of TEAM 
participants for both quality and the cost of care that is furnished 
to TEAM beneficiaries within an episode provides TEAM participants 
with new incentives to improve the health and well-being of the 
Medicare beneficiaries they treat.
    Additionally, the proposed model does not affect the 
beneficiary's freedom of choice to obtain health services from any 
individual or organization qualified to participate in the Medicare 
program as guaranteed under section 1802 of the Act. Eligible 
beneficiaries who receive one of the five proposed surgical episode 
categories from a TEAM participant would not have the option to opt 
their episodes out of the model. TEAM participants may not prevent 
or restrict beneficiaries to any list of preferred or recommended 
providers.
    Many controls exist under Medicare to ensure beneficiary access 
and quality, and we have proposed to use our existing authority, if 
necessary, to audit TEAM participants if claims analysis indicates 
an inappropriate change in delivered services. Given that TEAM 
participants would receive a reconciliation payment, subject to a 
quality adjustment, when they are able to reduce spending below the 
reconciliation target price, they could have an incentive to avoid 
complex, high-cost cases by referring them to nearby facilities or 
specialty referral centers. We intend to monitor the claims data 
from TEAM participants--for example, to compare a hospital's case 
mix relative to a pre-model historical baseline to determine whether 
complex patients are being systematically excluded. Furthermore, we 
also proposed to require TEAM participants to supply beneficiaries 
with written information

[[Page 36630]]

regarding the hospital's participation in TEAM as well as their 
rights under Medicare, including their right to use their provider 
of choice.
    We have proposed to implement safeguards to ensure that Medicare 
beneficiaries do not experience a delay in services. Specifically, 
to avoid perverse incentives to withhold or delay medically 
necessary care until after an episode ends, we propose that TEAM 
participants remain responsible for episode spending in the 30-day 
period following completion of each episode for all services covered 
under Medicare Parts A and B, regardless of whether the services are 
included in the proposed episode definition.
    Importantly, approaches to savings will include taking steps 
that facilitate patient recovery, shorten recovery duration, and 
minimize post-operative problems that might lead to readmissions. 
Thus, the model itself rewards better patient care.
    Lastly, we note that the proposed TEAM Model would not change 
Medicare FFS payments, beneficiary copayments, deductibles, or 
coinsurance. Beneficiaries may benefit if TEAM participants are able 
to systematically improve the quality of care while reducing costs. 
We welcome public comments on our estimates of the impact of our 
proposals on Medicare beneficiaries.

c. Aggregate Effects on the Market

    There may be spillover effects in the non-Medicare market, or 
even in the Medicare market in other areas as a result of this 
model, if finalized. Testing changes in Medicare payment policy may 
have implications for non-Medicare payers. As an example, non-
Medicare patients may benefit if participating hospitals introduce 
system-wide changes that improve the coordination and quality of 
health care. Other payers may also be developing payment models and 
may align their payment structures with CMS or may be waiting to 
utilize results from CMS' evaluations of payment models. Because it 
is unclear whether and how this evidence applies to a test of these 
new payment models, our analyses assume that spillover effects on 
non-Medicare payers will not occur, although this assumption is 
subject to considerable uncertainty. We welcome comments on this 
assumption and evidence on how this rulemaking, if finalized, would 
impact non-Medicare payers and patients.

13. Effects of Proposed Changes the Provider Reimbursement Review Board 
(PRRB) Membership

    In section X.B of the preamble of this proposed rule, we are 
proposing changes to 42 CFR 405.1845 to permit individuals to serve 
one or two additional consecutive terms as PRRB Members, relative to 
the current regulations, which allow two consecutive 3-year terms (6 
consecutive years). Based on historical experience, PRRB Members 
generally serve 6 consecutive years as permitted by the current 
regulations; under the proposed rule, a PRRB Member would be 
eligible to serve for 9 years, or 12 years if they are designated as 
Chairperson in their second or third consecutive term. We anticipate 
achieving productivity gains and greater efficiencies from retaining 
experienced Board Members over a longer period, particularly since 
Board Members spend a portion of their initial term acclimating to 
the adjudicatory responsibilities and deepening their expertise in 
the wide scope of specialized matters that come before the Board. 
Accordingly, under this proposal, we anticipate that a Board Member 
could address increasingly complex and technical issues and a higher 
volume of cases as they gain additional seniority. Furthermore, 
providing an individual the opportunity to experience the day-to-day 
responsibilities of the PRRB before leading the Board as Chairperson 
could benefit the entire five-person Board. Finally, the possibility 
of having a 9-to-12-year tenure on the PRRB might make the position 
more attractive to prospective applicants, thereby increasing the 
size of the candidate pool. We believe for example that otherwise 
qualified individuals might refrain from applying, knowing that the 
position is limited to no more than 6 years. Therefore, these 
proposed changes will result in a no cost impact relative to the 
requirements of Executive Orders 12866, 13563, and 14094. There may 
be negligible government savings attributable to reducing human 
resource-related costs such as recruitment and hiring activity.

14. Effects of the Proposed Removal of the Puerto Rico Exclusion From 
Payment Error Rate Measurement (PERM) Review

    In section X.E. of the preamble of this proposed rule, we 
discuss in detail the changes to the administration of the existing 
PERM program. The Further Consolidated Appropriations Act of 2020 
(Pub. L. 116-94) required Puerto Rico to publish a plan, developed 
in coordination with CMS, and approved by the CMS Administrator, not 
later than 18 months after the FCAA's enactment, for how Puerto Rico 
would develop measures to comply with the PERM requirements of 42 
CFR part 431, subpart Q. Currently, Puerto Rico is excluded from 
PERM via regulation at 42 CFR 431.954(b)(3). Puerto Rico would be 
incorporated into the PERM program starting in reporting year 2027 
(Cycle 3), which covers the payment period between July 1, 2025 
through June 30, 2026.
    Including Puerto Rico in the PERM program would increase 
visibility into its Medicaid and CHIP operations and should improve 
program integrity efforts that protect taxpayer dollars from 
improper payments. A state \877\ in the PERM program will be 
reviewed only once every 3 years and it is not likely that a 
provider would be selected more than once per program cycle to 
provide supporting documentation, minimizing the annual burden on 
both the state and its providers. Therefore, we estimate the cost to 
Puerto Rico for participating in the PERM program would be 
approximately $3.5 million annually. More detail about the cost and 
burden hours associated with response to requests for information 
(approximately 6,000 hours annually) can be found in the program PRA 
package (CMS-10166, CMS-10178, CMS-10184). Therefore, we do not 
anticipate this to be a significant administrative cost.
---------------------------------------------------------------------------

    \877\ For PERM, a ``state'' represents an entity receiving 
Medicaid and CHIP funding that is measured for improper payments, 
which includes the 50 states, the District of Columbia, and now 
Puerto Rico.
---------------------------------------------------------------------------

    We are not preparing an analysis for this policy under the 
Regulatory Flexibility Act (RFA) because we have determined that the 
policy will not have a significant impact on a substantial number of 
small entities.
    We are not preparing an analysis for section 1102(b) of the Act 
because this policy will not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any one year of 
$100 million in 1995 dollars, updated annually for inflation. That 
threshold level is currently approximately $183 million. This policy 
will not result in an impact of $183 million or more on State, local 
or tribal governments, in the aggregate, or on the private sector.
    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. Because this policy does not impose 
substantial costs on State or local governments, the requirements of 
Executive Order 13132 are not applicable.

14. Effects of Hospital and CAH Reporting of Acute Respiratory 
Illnesses

    In section X.F. of the preamble of this proposed rule, we 
discuss our proposed requirements related to the reporting of acute 
respiratory illnesses that would have potentially major public 
health benefits. Proposed routine reporting of these illnesses 
absent any new emergency makes it possible to use the data to 
determine which hospitals faced unusually high or low reported 
levels of such illnesses. Such comparisons would allow individual 
hospitals, individual cities or states, or the federal government, 
to analyze outlier hospitals (either high or low rates of acute 
respiratory infections) to determine if there were any local factors 
that might suggest some form of intervention would be beneficial to 
redress problems or to export successes among the universe of 
hospitals and CAHs. For example, if hospitals in a particular 
geographic area were finding an unusually high rate of these 
illnesses among admitted patients from a particular geographic area, 
investigation of potential causes might lead to improvements in that 
area's immunization outreach efforts. It would not take many such 
interventions to have potentially substantial life-saving effects. 
Since the value of a ``statistical'' human life saved is generally 
estimated by HHS to have a value of about $10 million, even a dozen 
lives saved somewhere in the nation would exceed the cost of this 
reporting several times over.\878\ In the

[[Page 36631]]

hopefully unlikely case where an outbreak of acute respiratory 
illness was so substantial as to require the declaration of a public 
health emergency, the life-saving benefits could be many times 
higher. For example, an ``early warning'' signal could speed the 
development of a vaccine, effective use of particular medicines for 
treatments, or other interventions to prevent or ameliorate adverse 
outcomes ranging from a single instance of illness to a national 
epidemic.
---------------------------------------------------------------------------

    \878\ See the discussion of assessing benefits in the HHS 
Guidelines for Regulatory Impact Analysis at https://aspe.hhs.gov/reports/guidelines-regulatory-impact-analysis.
---------------------------------------------------------------------------

H. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of January 2024, 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 proposed 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 2025 percentage increase in 
the 2018-based IPPS operating market basket, consistent with section 
1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  403.752(a) and 413.40 
of the regulations. Consistent with current law, based on IGI's 
fourth quarter 2023 forecast of the 2018-based IPPS market basket 
increase, we are estimating the FY 2025 update to be 3.0 percent 
(that is, the estimate of the market basket rate-of-increase), as 
discussed in section V.A. of the preamble of this proposed rule. We 
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 2025. The Affordable Care 
Act requires a productivity adjustment (0.4 percentage point 
reduction proposed for FY 2025), resulting in a proposed 2.6 percent 
applicable percentage increase for IPPS hospitals that submit 
quality data and are meaningful EHR users, as discussed in section 
V.B. of the preamble of this proposed rule. Children's hospitals, 
cancer hospitals, short term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, the extended neoplastic disease care hospital, and RNHCIs 
that continue to be paid based on reasonable costs subject to rate-
of-increase limits under Sec.  413.40 of the regulations are not 
subject to the reductions in the applicable percentage increase 
required under the Affordable Care Act. Therefore, for those 
hospitals paid under Sec.  413.40 of the regulations, the update is 
the percentage increase in the 2018-based IPPS operating market 
basket for FY 2025, currently estimated at 3.0 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 
proposed rule, we used data from the December 2023 update of the FY 
2023 MedPAR file and the December 2023 update of the Provider-
Specific File (PSF) that was used for payment purposes. Although the 
analyses of the proposed changes to the capital prospective payment 
system do not incorporate cost data, we used the December 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 proposed rule.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
proposed change. In addition, we draw upon various sources for the 
data used to categorize hospitals in the tables. In some cases (for 
instance, the number of beds), there is a fair degree of variation 
in the data from different sources. We have attempted to construct 
these variables with the best available sources overall. However, it 
is possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the December 2023 update of the FY 2023 MedPAR 
file, we simulated payments under the capital IPPS for FY 2024 and 
the proposed payments for FY 2025 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 2025 is as follows:

(Standard Federal rate) x (DRG weight) x (GAF) x (COLA for hospitals 
located in Alaska and Hawaii) x (1 + DSH adjustment factor + IME 
adjustment factor, if applicable).

    In addition to the other adjustments, hospitals may receive 
outlier payments for those cases that qualify under the threshold 
established for each fiscal year. We modeled payments for each 
hospital by multiplying the capital Federal rate by the geographic 
adjustment factor (GAF) and the hospital's case-mix. Then we added 
estimated payments for indirect medical education, disproportionate 
share, and outliers, if applicable. For purposes of this impact 
analysis, the model includes the following assumptions:
     The capital Federal rate was updated, beginning in FY 
1996, by an analytical framework that considers changes in the 
prices associated with capital-related costs and adjustments to 
account for forecast error, changes in the case-mix index, allowable 
changes in intensity, and other factors. As discussed in section 
III.A.1. of the Addendum to this proposed rule, the proposed update 
to the capital Federal rate is 3.0 percent for FY 2025.
     In addition to the proposed FY 2025 update factor, the 
proposed FY 2025 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality adjustment factor of 0.9994, a 
proposed budget neutrality factor for the proposed continuation of 
the lowest quartile hospital wage index adjustment and the 5-percent 
cap on wage index decreases policy of 0.9943, and a proposed outlier 
adjustment factor of 0.9577.

2. Results

    We used the payment simulation model previously described in 
section I.I. of Appendix A of this proposed rule to estimate the 
potential impact of the proposed changes for FY 2025 on total 
capital payments per case, using a universe of 3,090 hospitals. As 
previously described, the individual hospital payment parameters are 
taken from the best available data, including the December 2023 
update of the FY 2023 MedPAR file, the December 2023 update to the 
PSF, and the most recent available cost report data from the 
December 2023 update of HCRIS. In Table III, we present a comparison 
of estimated total payments per case for FY 2024 and estimated 
proposed total payments per case for FY 2025 based on the proposed 
FY 2025 payment policies. Column 2 shows estimates of payments per 
case under our model for FY 2024. Column 3 shows estimates of 
proposed payments per case under our model for FY 2025. Column 4 
shows the total proposed percentage change in payments from FY 2024 
to FY 2025. The change represented in Column 4 includes the proposed 
3.0 percent update to the capital Federal rate and other proposed 
changes in the adjustments to the capital Federal rate. The 
comparisons are provided by: (1) geographic location; (2) region; 
and (3) payment classification.
    The simulation results show that, on average, capital payments 
per case in FY 2025 are expected to increase 2.4 percent compared to 
capital payments per case in FY 2024. This expected increase is 
primarily due

[[Page 36632]]

to the proposed 3.0 percent update to the capital Federal rate being 
partially offset by an expected decrease in capital outlier 
payments. In general, regional variations in estimated capital 
payments per case in FY 2025 as compared to capital payments per 
case in FY 2024 are primarily due to the proposed changes in GAFs, 
and are generally consistent with the projected changes in payments 
due to the proposed changes in the wage index (and proposed policies 
affecting the wage index), as shown in Table I in section I.F. of 
this appendix.
    The net impact of these proposed changes is an estimated 2.4 
percent increase in capital payments per case from FY 2024 to FY 
2025 for all hospitals (as shown in Table III). The geographic 
comparison shows that, on average, hospitals in both urban and rural 
classifications would experience an increase in capital IPPS 
payments per case in FY 2025 as compared to FY 2024. Capital IPPS 
payments per case would increase by an estimated 2.4 percent for 
hospitals in urban areas while payments to hospitals in rural areas 
would increase by 3.4 percent from FY 2024 to FY 2025. The primary 
factor contributing to the difference in the projected increase in 
capital IPPS payments per case for rural hospitals as compared to 
urban hospitals is the estimated increase in capital payments to 
rural hospitals due to the effect of proposed changes in the GAFs.
    The comparisons by region show that the change in capital 
payments per case from FY 2024 to FY 2025 for urban areas range from 
a 0.1 percent decrease for the New England urban region to a 5.2 
percent increase for the East South Central urban region. Meanwhile, 
the change in capital payments per case from FY 2024 to FY 2025 for 
rural areas range from a 1.0 percent increase for the Pacific rural 
region to a 5.4 percent increase for the East South Central rural 
region. Capital IPPS payments per case for hospitals located in 
Puerto Rico are projected to increase by an estimated 2.3 percent. 
These regional differences are primarily due to the proposed changes 
in the GAFs.
    The comparison by hospital type of ownership (Voluntary, 
Proprietary, and Government) shows that both proprietary and 
government hospitals are expected to experience an increase in 
capital payments per case from FY 2024 to FY 2025 of 2.6 percent. 
Meanwhile, voluntary hospitals are expected to experience an 
increase in capital payments per case from FY 2024 to FY 2025 of 2.4 
percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2025. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this proposed rule for FY 2025, we show the proposed 
average capital payments per case for reclassified hospitals for FY 
2025. Urban reclassified hospitals are expected to experience an 
increase in capital payments of 2.4 percent; urban nonreclassified 
hospitals are expected to experience an increase in capital payments 
of 2.3 percent. Rural reclassified hospitals are expected to 
experience an increase in capital payments of 3.9 percent; rural 
nonreclassified hospitals are expected to experience an increase in 
capital payments of 2.6 percent. The higher expected increase in 
payments for rural reclassified hospitals compared to rural 
nonreclassified hospitals is primarily due to the proposed changes 
in the GAFs.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP02MY24.342


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BILLING CODE 4120-01-C

J. Effects of Proposed Payment Rate Changes and Policy Changes 
Under the LTCH PPS

1. Introduction and General Considerations

    In section VIII. of the preamble of this proposed rule and 
section V. of the Addendum to this proposed rule, we set forth the 
proposed annual update to the payment rates for the LTCH PPS for FY 
2025. In the preamble of this proposed rule, we specify the 
statutory authority for the proposals that are presented, identify 
the proposed policies for FY 2025, and present rationales for our 
proposals as well as alternatives that were considered. In this 
section, we discuss the impact of the proposed changes to the 
payment rate, factors, and other payment rate policies related to 
the LTCH PPS that are presented in the preamble of this proposed 
rule in terms of their estimated fiscal impact on the Medicare 
budget and on LTCHs.
    There are 330 LTCHs included in this impact analysis. We note 
that, although there are currently approximately 338 LTCHs, for 
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the FY 
2025 MS-LTC-DRG relative weights (discussed in section VIII.B.3. of 
the preamble of this proposed rule). We have also excluded data for 
CCN 312024 from this impact analysis due to their abnormal charging 
practices. We note this is consistent with our proposals to remove 
this LTCH from the calculation of the FY 2025 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 VIII.B.3. of the preamble of this 
proposed rule). Moreover, another LTCH, only had one claim in the 
claims data used for this proposed rule. Because the number of 
covered days of care that are chargeable to Medicare utilization for 
the stay was reported as 0 on this claim, we excluded this claim and 
LTCH from our impact analysis. Lastly, in the claims data used for 
this proposed rule, one of the 330 LTCHs included in our impact 
analysis only had claims for site neutral payment rate cases and, 
therefore, does not affect our impact analysis for LTCH PPS standard 
Federal payment rate cases presented in Table IV (that is, the 
impact analysis presented in Table IV is based on the data for 329 
LTCHs).
    In the impact analysis, we used the proposed payment rate, 
factors, and policies presented in this proposed rule, the proposed 
2.8 percent annual update to the LTCH PPS standard Federal payment 
rate, the proposed update to the MS-LTC-DRG classifications and 
relative weights, the proposed update to the wage index values 
(including the proposed update to the CBSA labor market areas) and 
labor-related share, and the best available claims and CCR data to 
estimate the change in payments for FY 2025.
    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

[[Page 36635]]

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.
    Based on the best available data for the 330 LTCHs in our 
database that were considered in the analyses used for this proposed 
rule, we estimate that overall LTCH PPS payments in FY 2025 will 
increase by approximately 1.6 percent (or approximately $41 million) 
based on the proposed rates and factors presented in section VIII. 
of the preamble and section V. of the Addendum to this proposed 
rule.
    Based on the FY 2023 LTCH cases that were used for the analysis 
in this proposed rule, approximately 29 percent of those cases were 
classified as site neutral payment rate cases (that is, 29 percent 
of LTCH cases would not meet the statutory patient-level criteria 
for exclusion from the site neutral payment rate). 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. Therefore, all LTCH PPS cases in FY 2023 with admission dates 
on or before the PHE expiration date were paid the LTCH PPS standard 
Federal rate regardless of whether the discharge met the statutory 
patient criteria. Because not all FY 2023 cases were subject to the 
site neutral payment rate, for purposes of this impact analysis, we 
continue to rely on the same considerations and actuarial 
projections used in FYs 2016 through 2024. 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 2025 will not 
change significantly from the most recent historical data. To 
estimate FY 2025 LTCH PPS payments for site neutral payment rate 
cases, we calculated the IPPS comparable per diem amounts using the 
proposed FY 2025 IPPS rates and factors along with other changes 
that would apply to the site neutral payment rate cases in FY 2025. 
We estimate that aggregate LTCH PPS payments for these site neutral 
payment rate cases will increase by approximately 4.7 percent (or 
approximately $14 million). This projected increase in payments to 
LTCH PPS site neutral payment rate cases is primarily due to the 
proposed updates to the IPPS rates and factors reflected in our 
estimate of the IPPS comparable per diem amount, as well as an 
increase in estimated costs for these cases determined using the 
proposed charge and CCR adjustment factors described in section 
V.D.3.b. of the Addendum to this proposed rule. We note that we 
estimate payments to site neutral payment rate cases in FY 2025 will 
represent approximately 12 percent of estimated aggregate FY 2025 
LTCH PPS payments.
    Based on the FY 2023 LTCH cases that were used for the analysis 
in this proposed rule, approximately 71 percent of LTCH cases will 
meet the patient-level criteria for exclusion from the site neutral 
payment rate in FY 2025, and will be paid based on the LTCH PPS 
standard Federal payment rate. We estimate that total LTCH PPS 
payments for these LTCH PPS standard Federal payment rate cases in 
FY 2025 will increase approximately 1.2 percent (or approximately 
$26 million). This estimated increase in LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases in FY 2025 is primarily due 
to the proposed 2.8 percent annual update to the LTCH PPS standard 
Federal payment rate being partially offset by a projected 1.3 
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.
    Based on the 330 LTCHs that were represented in the FY 2023 LTCH 
cases that were used for the analyses in this proposed rule 
presented in this appendix, we estimate that aggregate FY 2024 LTCH 
PPS payments will be approximately $2.583 billion, as compared to 
estimated aggregate FY 2025 LTCH PPS payments of approximately 
$2.624 billion, resulting in an estimated overall increase in LTCH 
PPS payments of approximately $41 million. We note that the 
estimated $41 million increase in LTCH PPS payments in FY 2025 does 
not reflect changes in LTCH admissions or case-mix intensity, which 
will also affect the overall payment effects of the proposed 
policies in this proposed rule.
    The LTCH PPS standard Federal payment rate for FY 2024 is 
$48,116.62. For FY 2025, we are proposing to establish an LTCH PPS 
standard Federal payment rate of $49,262.80 which reflects the 
proposed 2.8 percent annual update to the LTCH PPS standard Federal 
payment rate and the proposed budget neutrality factor for updates 
to the area wage level adjustment of 0.9959347 (discussed in section 
V.B.6. of the Addendum to this proposed rule). For LTCHs that fail 
to submit data for the LTCH QRP, in accordance with section 
1886(m)(5)(C) of the Act, we are proposing to establish an LTCH PPS 
standard Federal payment rate of $48,304.38. This proposed LTCH PPS 
standard Federal payment rate reflects the proposed updates and 
factors previously described, as well as the required 2.0 percentage 
point reduction to the annual update for failure to submit data 
under the LTCH QRP.
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the proposed annual update of 2.8 percent to the LTCH PPS 
standard Federal payment rate is projected to result in an increase 
of 2.7 percent in payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2024 to FY 2025, on average, for 
all LTCHs (Column 6). The estimated increase of 2.7 percent shown in 
Column 6 of Table IV also includes estimated payments for short-stay 
outlier (SSO) cases, a portion of which are not affected by the 
annual update to the LTCH PPS standard Federal payment rate, as well 
as the reduction that is applied to the annual update for LTCHs that 
do not submit the required LTCH QRP data. For most hospital 
categories, the projected increase in payments based on the LTCH PPS 
standard Federal payment rate to LTCH PPS standard Federal payment 
rate cases also rounds to approximately 2.7 percent.
    For FY 2025, we are proposing to update the wage index values 
based on the most recent available data (data from cost reporting 
periods beginning during FY 2021 which is the same data used for the 
FY 2025 IPPS wage index) and the revised CBSA labor market areas 
delineations that we are proposing to adopt (as discussed in section 
V.B.2. of the Addendum to this proposed rule). In addition, we are 
proposing to establish a labor-related share of 72.8 percent for FY 
2025, based on the most recent available data (IGI's fourth quarter 
2023 forecast) of the relative importance of the labor-related share 
of operating and capital costs of the proposed 2022-based LTCH 
market basket. We also are proposing to apply an area wage level 
budget neutrality factor of 0.9959347 to ensure that the proposed 
changes to the area wage level adjustment would not result in any 
change in estimated aggregate LTCH PPS payments to LTCH PPS standard 
Federal payment rate cases.
    For LTCH PPS standard Federal payment rate cases, we currently 
estimate high-cost outlier payments as a percentage of total LTCH 
PPS standard Federal payment rate payments will decrease from FY 
2024 to FY 2025. Based on the FY 2023 LTCH cases that were used for 
the analyses in this proposed rule, we estimate that the FY 2024 
high-cost outlier threshold of $59,873 (as established in the FY 
2024 IPPS/LTCH PPS final rule) will result in estimated high cost 
outlier payments for LTCH PPS standard Federal payment rate cases in 
FY 2024 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 9.3 percent of the estimated total LTCH PPS standard 
Federal payment rate payments in FY 2024. Combined with our estimate 
that FY 2025 high-cost outlier payments for LTCH PPS standard 
Federal payment rate cases will be 7.975 percent of estimated total 
LTCH PPS standard Federal payment rate payments in FY 2025, 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 1.3 percent between FY 2024 and FY 2025. 
We note that, in calculating these estimated high cost outlier 
payments, we inflated charges reported on the FY 2023 claims by the 
proposed charge inflation factor described in section V.D.3.b. of 
the Addendum to this proposed rule. We also note that, in 
calculating these estimated high-cost outlier payments, we estimated 
the cost of each case by multiplying the inflated charges by the 
adjusted CCRs that we determined using our proposed methodology 
described in section V.D.3.b. of the Addendum to this proposed rule. 
We lastly note, we are soliciting comments on our proposed 
methodology for determining the fixed-loss amount for FY

[[Page 36636]]

2025 (described in section V.D.3.b. of the Addendum to this proposed 
rule) as well as on an alternative approach we considered (described 
in section I.O.4. of this appendix). We will consider these comments 
when finalizing the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2025 in the final rule.
    Table IV shows the estimated impact of the proposed payment rate 
and policy changes on LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases for FY 2025 by comparing estimated FY 
2024 LTCH PPS payments to estimated FY 2025 LTCH PPS payments. (As 
noted earlier, our analysis does not reflect changes in LTCH 
admissions or case-mix intensity.) We note that these impacts do not 
include LTCH PPS site neutral payment rate cases as discussed in 
section I.J.3. of this appendix.
    As we discuss in detail throughout this proposed rule, based on 
the best available data, we believe that the provisions of this 
proposed rule relating to the LTCH PPS, which are projected to 
result in an overall 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 2.3 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases for LTCHs located in a rural 
area. This increase is primarily due to the combination of the 
proposed 2.8 percent annual update to the LTCH PPS standard Federal 
payment rate for FY 2025, the proposed changes to the area wage 
level adjustment, and estimated changes in outlier payments. This 
estimated impact is based on the FY 2023 data for the 18 rural LTCHs 
(out of 329 LTCHs) that were used for the impact analyses shown in 
Table IV.

3. Anticipated Effects of the Proposed LTCH PPS Payment Rate Changes 
and Policy Changes

a. 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 2025 of approximately 
$41 million. This estimated increase in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $26 million and the projected increase 
in payments to site neutral payment rate cases of approximately $14 
million under the dual rate LTCH PPS payment rate structure required 
by the statute beginning in FY 2016.
    As discussed in section V.D. of the Addendum to this proposed 
rule, our actuaries project cost and resource changes for site 
neutral payment rate cases due to the site neutral payment rates 
required under the statute. Specifically, our actuaries project that 
the costs and resource use for cases paid at the site neutral 
payment rate will likely be lower, on average, than the costs and 
resource use for cases paid at the LTCH PPS standard Federal payment 
rate, and will likely mirror the costs and resource use for IPPS 
cases assigned to the same MS-DRG. While we are able to incorporate 
this projection at an aggregate level into our payment modeling, 
because the historical claims data that we are using in this 
proposed rule to project estimated FY 2025 LTCH PPS payments (that 
is, FY 2023 LTCH claims data) do not reflect this actuarial 
projection, we are unable to model the impact of the change in LTCH 
PPS payments for site neutral payment rate cases at the same level 
of detail with which we are able to model the impacts of the changes 
to LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases. Therefore, Table IV only reflects proposed changes in LTCH 
PPS payments for LTCH PPS standard Federal payment rate cases and, 
unless otherwise noted, the remaining discussion in section I.J.3. 
of this appendix refers only to the impact on LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases. In the following 
section, we present our provider impact analysis for the proposed 
changes that affect LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.

b. Impact on Providers

    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is currently set 
forth under Sec. Sec.  412.515 through 412.533 and 412.535. In 
addition to adjusting the LTCH PPS standard Federal payment rate by 
the MS-LTC-DRG relative weight, we make adjustments to account for 
area wage levels and SSOs. LTCHs located in Alaska and Hawaii also 
have their payments adjusted by a COLA. Under our application of the 
dual rate LTCH PPS payment structure, the LTCH PPS standard Federal 
payment rate is generally only used to determine payments for LTCH 
PPS standard Federal payment rate cases (that is, those LTCH PPS 
cases that meet the statutory criteria to be excluded from the site 
neutral payment rate). LTCH discharges that do not meet the patient-
level criteria for exclusion are paid the site neutral payment rate, 
which we are calculating as the lower of the IPPS comparable per 
diem amount as determined under Sec.  412.529(d)(4), reduced by 4.6 
percent for FYs 2018 through 2026, including any applicable outlier 
payments, or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). In addition, when 
certain thresholds are met, LTCHs also receive HCO payments for both 
LTCH PPS standard Federal payment rate cases and site neutral 
payment rate cases that are paid at the IPPS comparable per diem 
amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
proposed rule on different categories of LTCHs for FY 2025, it is 
necessary to estimate payments per discharge for FY 2024 using the 
rates, factors, and the policies established in the FY 2024 IPPS/
LTCH PPS final rule and estimate payments per discharge for FY 2025 
using the proposed rates, factors, and the policies in this proposed 
rule (as discussed in section VIII. of the preamble of this proposed 
rule and section V. of the Addendum to this proposed rule). As 
discussed elsewhere in this proposed rule, these estimates are based 
on the best available LTCH claims data and other factors, such as 
the application of inflation factors to estimate costs for HCO cases 
in each year. The resulting analyses can then be used to compare how 
our proposed policies applicable to LTCH PPS standard Federal 
payment rate cases affect different groups of LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in 
HCRIS, and PSF data. Hospital groups included the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Proposed Calculation of LTCH PPS Payments for LTCH PPS Standard 
Federal Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our policies on payments for LTCH PPS 
standard Federal payment rate cases, we simulated FY 2024 and 
proposed FY 2025 payments on a case-by-case basis using historical 
LTCH claims from the FY 2023 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 2023 MedPAR files. For 
modeling FY 2024 LTCH PPS payments, we used the 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

[[Page 36637]]

requirements of the LTCH QRP). Similarly, for modeling payments 
based on the proposed FY 2025 LTCH PPS standard Federal payment 
rate, we used the proposed FY 2025 standard Federal payment rate of 
$49,262.80 (or $48,304.38 for LTCHs that failed to submit quality 
data as required under the requirements of the LTCH QRP). In each 
case, we applied the applicable proposed adjustments for area wage 
levels and the COLA for LTCHs located in Alaska and Hawaii. 
Specifically, for modeling FY 2024 LTCH PPS payments, we used the 
current FY 2024 labor-related share (68.5 percent), the wage index 
values established in the Tables 12A and 12B listed in the Addendum 
to the FY 2024 IPPS/LTCH PPS 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 
reflected in the FY 2024 IPPS/LTCH PPS final rule), and the FY 2024 
COLA factors (shown in the table in section V.C. of the Addendum to 
that final rule) to adjust the FY 2024 nonlabor-related share (31.5 
percent) for LTCHs located in Alaska and Hawaii. Similarly, for 
modeling proposed FY 2025 LTCH PPS payments, we used the proposed FY 
2025 LTCH PPS labor-related share (72.8 percent), the proposed FY 
2025 wage index values from Tables 12A and 12B listed in section VI. 
of the Addendum to this proposed rule (which are available via the 
internet on the CMS website), the proposed FY 2025 HCO fixed-loss 
amount for LTCH PPS standard Federal payment rate cases of $90,921 
(as discussed in section V.D.3. of the Addendum to this proposed 
rule), and the proposed FY 2025 COLA factors (shown in the table in 
section V.C. of the Addendum to this proposed rule) to adjust the 
proposed FY 2025 nonlabor-related share (27.2 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 2023 claims by the proposed 
charge inflation factors in section V.D.3.b. of the Addendum to this 
proposed 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 proposed methodology 
described in section V.D.3.b. of the Addendum to this proposed rule.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2024 to 
FY 2025 based on the payment rates and policy changes applicable to 
LTCH PPS standard Federal payment rate cases presented in this 
proposed rule. Table IV illustrates the estimated aggregate impact 
of the change in LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases among various classifications of LTCHs. (As 
discussed previously, these impacts do not include LTCH PPS site 
neutral payment rate cases.)
     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 2024 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The fifth column shows the estimated proposed FY 2025 
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 2024 to FY 
2025 due to the proposed annual update to the standard Federal rate 
(as discussed in section V.A.2. of the Addendum to this proposed 
rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 due to the proposed 
changes to the area wage level adjustment (that is, the proposed 
updated hospital wage data, the proposed labor market areas, and the 
proposed labor-related share) and the application of the 
corresponding proposed budget neutrality factor (as discussed in 
section V.B.6. of the Addendum to this proposed rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 (Column 4) to FY 2025 (Column 5) due 
to all proposed changes.
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d. Results

    Based on the FY 2023 LTCH cases (from 329 LTCHs) that were used 
for the analyses in this proposed rule, we have prepared the 
following summary of the impact (as shown in Table IV) of the 
proposed LTCH PPS payment rate and policy changes for LTCH PPS 
standard Federal payment rate cases presented in this proposed rule. 
The impact analysis in Table IV shows that estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases are 
projected to increase 1.2 percent, on average, for all LTCHs from FY 
2024 to FY 2025 as

[[Page 36640]]

a result of the proposed payment rate and policy changes applicable 
to LTCH PPS standard Federal payment rate cases presented in this 
proposed rule. This estimated 1.2 percent increase in LTCH PPS 
payments per discharge was determined by comparing estimated FY 2025 
LTCH PPS payments (using the proposed payment rates and factors 
discussed in this proposed rule) to estimated FY 2024 LTCH PPS 
payments for LTCH discharges which will be LTCH PPS standard Federal 
payment rate cases if the dual rate LTCH PPS payment structure was 
or had been in effect at the time of the discharge (as described in 
section I.J.3. of this appendix).
    As stated previously, we are proposing an annual update to the 
LTCH PPS standard Federal payment rate for FY 2025 of 2.8 percent. 
For LTCHs that fail to submit quality data under the requirements of 
the LTCH QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 
percentage point reduction is applied to the annual update to the 
LTCH PPS standard Federal payment rate. Consistent with Sec.  
412.523(d)(4), we also are applying a proposed budget neutrality 
factor for changes to the area wage level adjustment of 0.9959347 
(discussed in section V.B.6. of the Addendum to this proposed rule), 
based on the best available data at this time, to ensure that any 
proposed changes to the area wage level adjustment 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 proposed rule, for most categories of LTCHs 
(as shown in Table IV, Column 6), the estimated payment increase due 
to the proposed 2.8 percent annual update to the LTCH PPS standard 
Federal payment rate is projected to result in approximately a 2.7 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases for all LTCHs from FY 2024 to FY 
2025. We note our estimate of the changes in payments due to the 
proposed update to the LTCH PPS standard Federal payment rate also 
includes estimated payments for short-stay outlier (SSO) cases, a 
portion of which are not affected by the annual update to the LTCH 
PPS standard Federal payment rate, as well as the reduction that is 
applied to the annual update for LTCHs that do not submit data under 
the requirements of the LTCH QRP.

(1) Location

    Based on the most recent available data, the vast majority of 
LTCHs are located in urban areas. Only approximately 5 percent of 
the LTCHs are identified as being located in a rural area, and 
approximately 4 percent of all LTCH PPS standard Federal payment 
rate cases are expected to be treated in these rural hospitals. The 
impact analysis presented in Table IV shows that the overall average 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2024 to FY 2025 for all 
hospitals is 1.2 percent. Urban LTCHs are projected to experience an 
increase of 1.1 percent. Meanwhile, rural LTCHs are projected to 
experience an increase of 2.3 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 an increase in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 of 1.3 percent and 1.1 
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 
2024 to FY 2025 of 1.3 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 2024 to FY 2025 of 1.4 percent, 
partially due to the proposed changes to the area wage level 
adjustment.

(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 1.3 percent. Voluntary LTCHs are expected to 
experience an increase in payments to LTCH PPS standard Federal 
payment rate cases from FY 2024 to FY 2025 of 0.2 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 2024 to FY 2025 of 0.3 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 2024 to FY 2025 are projected to range from a decrease 
of 0.2 percent in the New England region to an increase of 2.2 
percent in the Mountain region. These regional variations are 
primarily due to the proposed changes to the area wage adjustment 
and estimated changes in outlier payments.

(5) Bed Size

    LTCHs are grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds. We project that LTCHs with greater than 200 beds will 
experience no change in payments for LTCH PPS standard Federal 
payment rate cases. LTCHs with 25-49 beds are projected to 
experience the largest increase in payments, 1.6 percent. The 
remaining bed size categories are projected to experience an 
increase in payments in the range of 0.2 to 1.5 percent.

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
proposed rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2025 relative to FY 2024 of approximately $26 million (or 
approximately 1.2 percent) for the 330 LTCHs in our database. 
Although, as stated previously, the hospital-level impacts do not 
include LTCH PPS site neutral payment rate cases, we estimate that 
the provisions of this proposed rule will result in an increase in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2025 relative to FY 2024 of approximately $14 million 
(or approximately 4.7 percent) for the 330 LTCHs in our database. 
(As noted previously, we estimate payments to site neutral payment 
rate cases in FY 2025 will represent approximately 12 percent of 
total estimated FY 2025 LTCH PPS payments.) Therefore, we project 
that the provisions of this proposed rule will result in an increase 
in estimated aggregate LTCH PPS payments for all LTCH cases in FY 
2025 relative to FY 2024 of approximately $41 million (or 
approximately 1.6 percent) for the 330 LTCHs in our database.

5. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this proposed rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed 
previously, we do not expect the continued implementation of the 
site neutral payment system to have a negative impact on access to 
or quality of care, as demonstrated in areas where there is little 
or no LTCH presence, general short-term acute care hospitals are 
effectively providing treatment for the same types of patients that 
are treated in LTCHs.

K. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

    In section IX.C. of the preamble of this proposed rule, we 
discuss proposed requirements for hospitals reporting quality data 
under the Hospital IQR Program to receive the full annual percentage 
increase for the FY 2027 payment determination and subsequent years.
    In the preamble of this proposed rule, we are proposing: (1) to 
adopt the Age-Friendly Hospital measure beginning with the CY 2025 
reporting period/FY 2027 payment determination; (2) to adopt the 
Patient Safety Structural measure beginning with the CY 2025 
reporting period/FY 2027 payment determination; (3) to adopt the 
Catheter-Associated Urinary Tract Infection (CAUTI)

[[Page 36641]]

Standardized Infection Ratio Stratified for Oncology Locations 
measure beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (4) to adopt the Central Line-Associated Bloodstream 
Infection (CLABSI) Standardized Infection Ratio Stratified for 
Oncology Locations measure beginning with the CY 2026 reporting 
period/FY 2028 reporting period; (5) to adopt the Hospital Harm--
Falls with Injury electronic clinical quality measure (eCQM) 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (6) to adopt the Hospital Harm--Postoperative 
Respiratory Failure eCQM beginning with the CY 2026 reporting 
period/FY 2028 payment determination; (7) to adopt the Thirty-day 
Risk-Standardized Death Rate among Surgical Inpatients with 
Complications (Failure-to-Rescue) measure beginning with the July 1, 
2023-June 30, 2025 reporting period/FY 2027 payment determination; 
(8) to modify the Global Malnutrition Composite Score (GMCS) eCQM, 
beginning with the CY 2026 reporting period/FY 2028 payment 
determination; (9) to modify the HCAHPS Survey measure beginning 
with the CY 2025 reporting period/FY 2027 payment determination (10) 
to remove the Hospital-level, Risk-Standardized Payment Associated 
with a 30-Day Episode-of-Care for Acute Myocardial Infarction (AMI) 
measure beginning with the July 1, 2021-June 30, 2024 reporting 
period/FY 2026 payment determination; (11) to remove the Hospital-
level, Risk-Standardized Payment Associated with a 30-Day Episode-
of-Care for Heart Failure (HF) measure beginning with the July 1, 
2021-June 30, 2024 reporting period/FY 2026 payment determination; 
(12) to remove the Hospital-level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Pneumonia (PN) measure 
beginning with the July 1, 2021-June 30, 2024 reporting period/FY 
2026 payment determination; (13) to remove the Hospital-level, Risk-
Standardized Payment Associated with a 30-Day Episode-of-Care for 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) measure beginning with the April 1, 2021-March 
31, 2024 reporting period/FY 2026 payment determination; (14) to 
remove the Death Among Surgical Inpatients with Serious Treatable 
Complications (CMS PSI-04) measure beginning with the July 1, 2023-
June 30, 2025 reporting period/FY 2027 payment determination; (15) 
to increase the total number of eCQMs reported from six to nine for 
the CY 2026 reporting period/FY 2028 payment determination and then 
from nine to eleven beginning with the CY 2027 reporting period/FY 
2029 payment determination; (16) to update the scoring methodology 
for eCQM validation; (17) to remove the requirement that hospitals 
must submit 100 percent of eCQM records to pass validation beginning 
with CY 2025 eCQM data affecting the FY 2028 payment determination; 
and (18) to no longer require hospitals to resubmit medical records 
as part of their request for reconsideration of validation beginning 
with CY 2025 discharges affecting the FY 2028 payment determination.
    As shown in the summary tables in section XII.B.6.k. of the 
preamble of this proposed rule, we estimate a total information 
collection burden increase for 3,050 IPPS hospitals of 40,019 hours 
at a cost of $1,274,980 annually associated with the policies we are 
proposing across a 3-year period from the CY 2025 reporting period/
FY 2027 payment determination through the CY 2027 reporting period/
FY 2029 payment determination, compared to our currently approved 
information collection burden estimates.
    In sections IX.C.5.a. and IX.B.1 of the preamble of this 
proposed rule, we are proposing to adopt the Age-Friendly Hospital 
and Patient Safety Structural measures. In order for hospitals to 
receive a point for each of the domains in the measures, affirmative 
attestations are required for each of the statements within a 
domain. Similar to the FY 2023 IPPS/LTCH PPS final rule adoption of 
the Hospital Commitment to Health Equity measure, for hospitals that 
are unable to attest affirmatively for a statement and would like to 
earn additional points under the measure, there are likely to be 
additional costs associated with activities such as updating 
hospital policies, protocols, or processes; engaging senior 
leadership; conducting required analyses, surveys, and screenings; 
performing data analysis and collection; and training staff (87 FR 
49492). The extent of these costs would vary from hospital to 
hospital depending on what policies the hospital already has in 
place, what activities the hospital is already performing, hospital 
size, and the individual choices each hospital makes to meet the 
criteria necessary to attest affirmatively. There may also be some 
non-recurring costs associated with changes in workflow and 
information systems to collect patient screening data, however the 
extent of these costs is difficult to quantify as different 
hospitals may utilize different modes of data collection (for 
example paper-based, electronically patient-directed, clinician-
facilitated, etc.).
    For the Age-Friendly Hospital measure, there would be additional 
impacts incurred by patients admitted to hospitals that do not 
currently conduct patient screenings but would decide to do so. 
Hospitals would be able to conduct these screenings via multiple 
methods, however, we believe most hospitals would likely collect 
data through a screening tool incorporated into their electronic 
health record (EHR) or other patient intake process. For the Frailty 
Screening and Intervention domain, we assume patients would be 
screened using a combination of validated tools such as the Katz 
Index of Independence in Activities of Daily Living, the Lawton and 
Brody Instrumental Activities of Daily-Living Scale, the Mini-Cog 
screening for early dementia, and the Patient Health Questionnaire-2 
depression module.879 880 881 882 883 For the Social 
Vulnerability domain, we assume patients would be screened using a 
tool such as the Emergency Department Senior Abuse Identification 
(ED Senior AID) tool,\884\ which is currently undergoing validation. 
We estimate each patient would require no more than 20 minutes (0.33 
hours) to complete the screenings for both domains.
---------------------------------------------------------------------------

    \879\ Park, C., et al. (2022). ``Association Between 
Implementation of a Geriatric Trauma Clinical Pathway and Changes in 
Rates of Delirium in Older Adults With Traumatic Injury.'' JAMA Surg 
157(8): 676-683.
    \880\ https://mini-cog.com/
#:~:text=The%20Mini%2DCog%C2%A9%20is,cognitive%20impairment%20in%20ol
der%20patients.
    \881\ https://www.physio-pedia.com/
Katz_ADL#:~:text=The%20Katz%20ADL%2C%20is%20an,to%20perform%20and%20r
equires%20training.
    \882\ https://cde.nida.nih.gov/sites/nida_cde/files/PatientHealthQuestionnaire-2_v1.0_2014Jul2.pdf.
    \883\ https://geriatrictoolkit.missouri.edu/funct/Lawton_IADL.pdf.
    \884\ Platts-Mills TF, Dayaa JA, Reeve BB, et al. Development of 
the Emergency Department Senior Abuse Identification (ED Senior AID) 
tool. J Elder Abuse Negl. Aug-Oct 2018;30(4):247-270. doi:10.1080/
08946566.2018.1460285.
---------------------------------------------------------------------------

    We believe that the cost for beneficiaries undertaking 
administrative and other tasks on their own time is a post-tax wage 
of $24.04/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.\885\ To derive 
the costs for beneficiaries, a measurement of the usual weekly 
earnings of wage and salary workers of $1,118 was divided by 40 
hours to calculate an hourly pre-tax wage rate of $27.95/hr.\886\ 
This rate is adjusted downwards by an estimate of the effective tax 
rate for median income households of about 14 percent calculated by 
comparing pre- and post-tax income,\887\ resulting in the post-tax 
hourly wage rate of $24.04/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.
---------------------------------------------------------------------------

    \885\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \886\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 2, 2024.
    \887\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

    Based on information collected by the Agency for Healthcare 
Research and Quality for CY 2010 through CY 2019,\888\ we estimate 
approximately 7,600,000 patients would be screened annually across 
all participating IPPS hospitals (12,850,233 average annual 
admissions of patients aged 65 and over x (3,050 IPPS hospitals / 
5,157 total U.S. community hospitals \889\)) or an average of 2,492 
patients per IPPS hospital. For the CY 2025 reporting period and 
subsequent years, for each IPPS hospital that elects to perform 
these screenings, we estimate it would require patients an average 
of 831 hours (2,492 respondents x 0.33 hours) at a cost of $19,969 
(831 hours x $24.04) to complete the screenings.
---------------------------------------------------------------------------

    \888\ https://datatools.ahrq.gov/hcupnet/. Accessed January 3, 
2024.
    \889\ https://www.aha.org/statistics/fast-facts-us-hospitals. 
Accessed January 3, 2024.
---------------------------------------------------------------------------

    In sections IX.C.5.c. and IX.C.5.d. of the preamble of this 
proposed rule, we are proposing to adopt two new eCQMs. As noted in 
the FY 2019 IPPS/LTCH PPS final

[[Page 36642]]

rule regarding removal of eCQMs, while there is no change in 
information collection burden related to the proposed policies with 
regard to submission of measure data, we believe that costs 
associated with adopting two 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). We do not believe the remaining proposed 
policies would result in any additional economic impact beyond the 
additional collection of information burden discussed in section 
XII.B.6 of this proposed rule.
    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 Proposed New Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program

    In section IX.D. of the preamble of this proposed rule, we 
discuss proposed requirements for PPS-exempt cancer hospitals (PCHs) 
reporting quality data under the PCH 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 the preamble of this proposed rule, we are proposing: (1) to 
adopt the Patient Safety Structural measure beginning with the CY 
2025 reporting period/FY 2027 program year; (2) to modify the HCAHPS 
Survey beginning with the CY 2025 reporting period/FY 2027 program 
year; and (3) to move up the start date for public display of PCH 
performance on the Hospital Commitment to Health Equity measure.
    As shown in the summary table in section XII.B.7.d. of the 
preamble of this proposed rule, we estimate a total information 
collection burden increase for 11 PCHs of 166 hours at a cost of 
$4,047 annually associated with our proposed policies and updated 
burden estimates beginning with the CY 2025 reporting period/FY 2027 
program year compared with our currently approved information 
collection burden estimates. We refer readers to section XII.B.7. of 
this proposed rule (Collection of Information) for a detailed 
discussion of the calculations estimating the changes to the 
information collection burden for submitting data to the PCHQR 
Program.
    In section IX.B.1. of the preamble of this proposed rule, we are 
proposing to adopt the Patient Safety Structural measure. We are 
proposing that in order for a PCH to receive a point for a domain in 
the measure, the PCH would be required to affirmatively attest to 
each of the statements within that domain. We estimate that if a PCH 
is unable to attest affirmatively to all of the statements in a 
domain and, in a future program year, desires to earn a point for 
that domain, the PCH will likely incur costs associated with 
activities needed to be able to affirmatively attest, which could 
include updating policies, protocols, or processes; engaging senior 
leadership; conducting required analyses; or training staff (87 FR 
49492). The extent of these costs will vary from PCH to PCH 
depending on what policies the PCH already has in place, what 
activities the PCH is already performing, facility size, and the 
individual choices each PCH makes in order to meet the criteria 
necessary to attest affirmatively. We do not believe the remaining 
proposals to modify the HCAHPS Survey beginning with the CY 2025 
reporting period/FY 2027 program year and to move up the start date 
for public display of PCH performance on the Hospital Commitment to 
Health Equity measure 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.E. of the preamble of the proposed rule, we are 
proposing to adopt four new items as standardized patient assessment 
data elements under the SDOH category and to modify the current 
Transportation item on the LCDS beginning with the FY 2028 LTCH QRP. 
We are proposing to adopt items to be collected at admission using 
the LCDS for: Living Situation (one item), Food (two items), and 
Utilities (one item). We are proposing to modify the current 
Transportation item on the LCDS, which is currently collected at 
admission and discharge. We are proposing that the Transportation 
item would only be collected at admission beginning with the FY 2028 
LTCH QRP. We are also proposing to extend the admission assessment 
window for the LCDS from three to four days beginning with the FY 
2028 LTCH QRP. Finally, we are seeking information on two topics: 
future measure concepts for the LTCH QRP and a future LTCH Star 
Rating system.
    The effect of these proposals for the LTCH QRP would be an 
overall increase in burden for LTCHs participating in the LTCH QRP. 
As shown in summary table XII.B-06 in section XII.B.7. of the 
preamble of this proposed rule, we estimate a total information 
collection burden increase for 329 eligible LTCHs of 2,116.55 hours 
for a cost increase of $138,231.88 annually associated with our 
proposed policies and updated burden estimates for the FY 2028 
program year compared to our currently approved information 
collection burden estimates. We refer readers to section XII.B.8. of 
the preamble of this proposed rule, where CMS has provided an 
estimate of the burden and cost to LTCHs, and note that it will be 
included in a revised information collection request for 0938-1163.

N. Effects of Requirements Regarding the Medicare Promoting 
Interoperability Program

    In section IX.F. of the preamble of this proposed rule, we 
discuss proposed requirements for eligible hospitals and critical 
access hospitals (CAHs) to report objectives and measures, and 
report electronic clinical quality measures (eCQMs) under the 
Medicare Promoting Interoperability Program.
    In this proposed rule, we are proposing: (1) to adopt the 
Hospital Harm--Falls with Injury eCQM beginning with the CY 2026 
reporting period; (2) to adopt the Hospital Harm--Postoperative 
Respiratory Failure eCQM beginning with the CY 2026 reporting 
period; (3) to modify the Antimicrobial Use and Resistance (AUR) 
Surveillance measure by splitting it into an Antimicrobial Use 
Surveillance measure and an Antimicrobial Resistance Surveillance 
measure beginning with the electronic health record (EHR) reporting 
period in CY 2025; (4) to modify the Global Malnutrition Composite 
Score (GMCS) eCQM, beginning with the CY 2026 reporting period; (5) 
to increase the total number of eCQMs reported from six to nine for 
the CY 2026 reporting period and then from nine to eleven beginning 
with the CY 2027 reporting period; and (6) to increase the minimum 
scoring threshold from 60 points to 80 points beginning with the EHR 
reporting period in CY 2025.
    As shown in the summary table in section XII.B.9. of this 
proposed rule, we estimate a total information collection burden 
increase for 3,150 eligible hospitals and 1,400 CAHs of 5,038 hours 
at a cost of $262,581 annually associated with our proposed policies 
and updated burden estimates over the three-year period from the EHR 
reporting period in CY 2025 through the EHR reporting period in CY 
2027 compared to our currently approved information collection 
burden estimates. We refer readers to section XII.B.9.f. of the 
preamble of this proposed rule (Collection of Information) for a 
detailed discussion of the calculations estimating the changes to 
the information collection burden for submitting data to the 
Medicare Promoting Interoperability Program.
    In section IX.F.6.a. of the preamble of this proposed rule, we 
are proposing to adopt two new eCQMs and to modify one eCQM. 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 proposed policies with regard to submission of 
measure data, we believe that costs associated with adopting two new 
eCQMs and modifying one existing eCQM 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.5. of the preamble of this proposed rule, we are 
proposing to increase the performance-based scoring threshold for 
eligible hospitals and CAHs reporting under the Medicare Promoting 
Interoperability Program from 60 points to 80 points beginning with 
the EHR reporting period in CY 2025. Our review of the CY 2022 
Medicare Promoting Interoperability Program's performance results 
indicates 98.5% of eligible hospitals and CAHs currently 
successfully meet the threshold of 60 points while 81.5% of eligible 
hospitals and CAHs currently exceed a score of 80

[[Page 36643]]

points. If this proposal is finalized, the 17% of eligible hospitals 
and CAHs that meet the current threshold of 60 points but not the 
proposed threshold of 80 points would be required to better align 
their health information systems with evolving industry standards 
and/or increase data exchange to raise their performance score or be 
subject to a potential downward payment adjustment. We do not 
believe the remaining proposed policies would result in any 
additional economic impact beyond the additional collection of 
information burden discussed in section XII.B.9. of the preamble of 
this proposed rule.

O. Alternatives Considered

    This proposed rule contains a range of policies. It also 
provides descriptions of the statutory provisions that are 
addressed, identifies the proposed policies, and presents rationales 
for our decisions and, where relevant, alternatives that were 
considered.

1. Alternatives Considered for the Distribution of Additional Residency 
Positions Under the Provisions of Section 4122 of Subtitle C of the 
Consolidated Appropriations Act, 2023 (CAA, 2023)

    Section 4122(a) of the CAA, 2023 amended section 1886(h) of the 
Act by adding a new section 1886(h)(10) of the Act requiring the 
distribution of an additional 200 residency positions (also referred 
to as slots) to qualifying hospitals. Section 1886(h)(10)(B)(iii) of 
the Act further requires that each qualifying hospital that submits 
a timely application receive at least 1 (or a fraction of 1) of the 
slots made available under section 1886(h)(10) of the Act before any 
qualifying hospital receives more than 1 residency position.
    In section V.F.2. of this proposed rule we discuss our proposal 
to first distribute slots by prorating the available 200 positions 
among all qualifying hospitals such that each qualifying hospital 
receives up to 1.00 FTE--that is, 1.00 FTE or a fraction of 1.00 
FTE. We are proposing that a qualifying hospital is a Category One, 
Category Two, Category Three, or Category Four hospital, or one that 
meets the definitions of more than one of these categories, as 
defined at section 1886(h)(10)(F)(iii) of the Act.\890\ We are 
proposing that if any residency slots remain after distributing up 
to 1.00 FTE to each qualifying hospital, we will prioritize the 
distribution of the remaining slots based on the HPSA score 
associated with the program for which each qualifying hospital is 
applying using the methodology we finalized for purposes of 
implementing section 126 of the CAA, 2021 (86 FR 73434 through 
73440). Using this HPSA prioritization method, we are proposing to 
limit a qualifying hospital's total award under section 4122 of the 
CAA, 2023, to 10.00 additional FTEs, consistent with section 
1886(h)(10)(C)(i) of the Act.
---------------------------------------------------------------------------

    \890\ Category One consists of hospitals that are located in a 
rural area (as defined in section 1886(d)(2)(D) of the Act) or have 
been reclassified being located in a rural area (pursuant to section 
1886(d)(8)(E) of the Act). Category Two consists of hospitals in 
which the reference resident level of the hospital (as specified in 
section 1886(h)(10)(F)(iv) of the Act) is greater than the otherwise 
applicable resident limit. Category Three consists of hospitals 
located in States with new medical schools that received `Candidate 
School' status from the Liaison Committee on Medical Education 
(LCME) or that received `Pre-Accreditation' status from the American 
Osteopathic Association (AOA) Commission on Osteopathic College 
Accreditation (the COCA) on or after January 1, 2000, and that have 
achieved or continue to progress toward `Full Accreditation' status 
(as such term is defined by the LCME) or toward `Accreditation' 
status (as such term is defined by the COCA); or additional 
locations and branch campuses established on or after January 1, 
2000, by medical schools with `Full Accreditation' status (as such 
term is defined by LCME) or `Accreditation' status (as such term is 
defined by the COCA). Category Four consists of hospitals that serve 
areas designated as HPSAs under section 332(a)(1)(A) of the Public 
Health Service Act (PHSA), as determined by the Secretary.
---------------------------------------------------------------------------

    We are considering an alternative approach to distributing the 
200 residency slots under section 4122 of the CAA, 2023, which would 
place greater emphasis on the distribution of additional residency 
positions to hospitals that are training residents in geographic and 
population HPSAs. Under this approach, the statutory requirement 
that each qualifying hospital receive 1 slot or a fraction of 1 slot 
would be met by awarding each qualifying hospital 0.01 FTE. The 
remaining residency slots would be prioritized for distribution 
based on the HPSA score associated with the program for which each 
hospital is applying using the HPSA prioritization methodology we 
finalized for purposes of implementing section 126 of the CAA, 2021 
(86 FR 73434 through 73440). To illustrate, if 1,000 qualifying 
hospitals were to apply under section 4122 of the CAA, 2023, we 
would first award each qualifying hospital 0.01 FTEs, resulting in 
the distribution of 10.00 FTEs (1,000 x 0.01). We would then 
distribute the remaining 190 slots (200-10) based on the HPSA 
prioritization method we finalized for implementation of section 126 
of the CAA, 2021, such that applications associated with higher HPSA 
scores would receive priority. We believe that under this 
alternative distribution methodology we would further the work 
achieved by section 126 of the CAA, 2021, by distributing residency 
slots to underserved areas in greatest need of additional 
physicians. Using this alternative distribution methodology, we 
would limit a qualifying hospital's total award under section 4122 
of the CAA, 2023, to 10.00 additional FTEs consistent with section 
1886(h)(10)(C)(i) of the Act. Consistent with the methodology we use 
for implementation of section 126 of the CAA, 2021, as part of 
determining eligibility for additional slots, we would compare the 
hospital's FTE resident count to its adjusted FTE resident cap on 
the cost report worksheets submitted with its application. If the 
hospital's FTE count is below its adjusted FTE cap, the hospital 
would be ineligible for its full FTE request. We note that in 
calculating the adjusted FTE cap we do not consider adjustments for 
Medicare GME Affiliation Agreements, since these adjustments are 
temporary. We seek comment on this alternative proposal, including 
awarding each qualifying hospital 0.01 FTEs and use of HPSA scores 
to determine priority for remaining slots.

2. Alternative Considered for the Proposed Separate IPPS Payment for 
Establishing and Maintaining Access to Essential Medicines

    As discussed in section V.J. of the preamble of this proposed 
rule, we are proposing a separate payment to hospitals for the IPPS 
share of the additional costs of establishing and maintaining access 
to a 6-month buffer stock of one or more essential medicines, either 
directly or through contractual arrangement with pharmaceutical 
manufacturers, distributors, or intermediaries. Eligibility for 
payment under this proposed policy would be limited to small, 
independent hospitals with 100 or fewer beds that are not part of a 
chain organization. As also discussed in section V.J. of the 
preamble of this proposed rule, this proposal was informed by 
commenter feedback on the Request for Comment on a potential 
Medicare payment policy that would provide separate payment for 
Medicare's share of the inpatient costs of establishing and 
maintaining a 3-month buffer stock of one or more essential 
medicines for all IPPS hospitals, included in the CY 2024 OPPS/ASC 
proposed rule (88 FR 49867).
    As part of a broader HHS initiative to address the detrimental 
effects of drug shortages, our intention with this proposed payment 
policy is to help insulate small, independent hospitals, and the 
inpatient care they provide, from the negative effects of drug 
shortages and promote the overall resiliency of drug supply chains 
without exacerbating existing shortages or contributing to hoarding 
behaviors for essential medicines during active shortages. As 
discussed in section V.J. of the preamble of this proposed rule, the 
appropriate time to establish a buffer stock for a drug is before it 
goes into shortage or after a shortage period has ended. In order to 
further mitigate any potential for the proposed policy to exacerbate 
existing shortages or contribute to hoarding, if an essential 
medicine is listed as ``Currently in Shortage'' on the FDA Drug 
Shortages Database, we are proposing that no separate buffer stock 
payment for that medicine would be made unless the hospital had 
already established and was maintaining a buffer stock of that 
medicine prior to the shortage. We believe that this approach is 
necessary to avoid rewarding hoarding behaviors, which we believe 
are not consistent with resiliency goals. If an essential medicine 
is listed as ``Currently in Shortage'' on the FDA Drug Shortages 
Database, we are proposing that a hospital that newly establishes a 
buffer stock of that medicine while it is in shortage would not be 
eligible for separate buffer stock payment for that medicine for the 
duration of the shortage. However, if a hospital had already 
established and was maintaining a buffer stock of that medicine 
prior to the shortage, we are proposing that the hospital would 
continue to be eligible for separate buffer stock payment for that 
medicine for the duration of the shortage. We are proposing that 
hospital would continue to be eligible even if the number of months 
of supply of that medicine in the buffer stock were to drop to less 
than 6 months as the hospital draws down that buffer stock. Once an

[[Page 36644]]

essential medicine is no longer listed as ``Currently in Shortage'' 
in the FDA Drug Shortages Database, our proposed policy does not 
differentiate that essential medicine from other essential medicines 
and hospitals would be eligible to establish and maintain buffer 
stocks for the medicine as they would have before the shortage.
    We also considered an alternative to this policy whereby a 
hospital would no longer be eligible for separate payment for the 
buffer stock of an essential medicine beginning on the day the 
medicine is listed as ``Currently in Shortage'' on the FDA Drug 
Shortages Database, even if the hospital had already established and 
was maintaining a buffer stock of that medicine prior to the 
shortage. Under this alternative approach, the separate payment 
would not be available for the portion of the cost reporting period 
during which the medicine is listed on the FDA Drug Shortages 
Database. However, as this separate payment is proposed to be 
limited to small, independent hospitals, we do not believe such an 
approach is necessary, as we do not believe these hospitals would 
have the ability to continue to acquire essential medicines for 
their buffer stocks during an active shortage the way that larger 
hospitals and chain hospitals may be able to do. If we proposed 
different hospital eligibility requirements, including larger 
hospitals or chain hospitals that have greater ability to continue 
to acquire and potentially hoard an essential medicine in active 
shortage, we would likely have proposed to limit eligibility for 
separate payment for the buffer stock during a given cost reporting 
period in this alternative manner. We were also concerned about the 
potential administrative burden of record keeping and additional 
monitoring of the FDA Drug Shortages Database on these small, 
independent hospitals if this alternative policy was proposed.
    We also considered whether a certain period of time, 6 months 
for example, should elapse before an essential medicine that was 
listed as ``Currently in Shortage'' on the FDA Drug Shortages 
Database would become eligible for separate payment for the 
additional resource costs of establishing and maintaining a 6-month 
buffer stock. Had we proposed different hospital eligibility 
requirements for the separate payment, including larger hospitals or 
chain hospitals as mentioned previously, we may have proposed such a 
requirement to account for the ramp up time that manufacturers need 
to reestablish supply of a given drug in shortage and to not reward 
potential hoarding behaviors. Because the buffer stocks that small, 
independent hospitals would require are likely smaller compared to 
larger hospitals and hospital chains, we do not believe that these 
hospitals would induce substantial demand shocks in the 
pharmaceutical supply chain through establishing their respective 
buffer stocks of essential medicines immediately following an active 
shortage of an essential medicine. Therefore, we do not believe it 
is necessary to require that a certain period of time should elapse 
after an essential medicine is no longer listed as ``Currently in 
Shortage'' before that medicine becomes eligible for separate 
payment under our proposed policy.
    As discussed in section V.J. of the preamble of this proposed 
rule, we are proposing that for purposes of the proposed separate 
payment under the IPPS, the costs of buffer stocks that would be 
eligible for separate payment are the additional resource costs of 
establishing and maintaining access to a 6-month buffer stock for 
any eligible medicines on ARMI's List of 86 essential medicines, 
including any subsequent revisions to that list of medicines. We are 
proposing that if the ARMI List is updated to add or remove any 
essential medicines, all medicines on the updated list would be 
eligible for separate payment under this policy for the IPPS shares 
of the costs of establishing and maintaining access to 6-month 
buffer stocks as of the date the updated ARMI List is published. 
However, we recognize that the ARMI List does not include certain 
medicines that have recently been in shortage and that may be 
considered essential and are more prevalent in specific care 
settings other than an inpatient hospital, such as drugs used in 
oncology care on an outpatient basis. We considered providing 
separate payment under this proposal for establishing and 
maintaining access to a buffer stock of a broader list of medicines 
than just those on the ARMI List, for example, to include certain 
types of oncology drugs. To the extent that in the future other 
lists or medicines (such as buprenorphine-based medications or 
oncology drugs) are identified for eligibility in future iterations 
of this policy, we are seeking comment on the potential mechanism 
and timing for incorporating those updates.

3. Alternatives Considered to the LTCH QRP Reporting Requirements

    With regard to the proposal to add three assessment items to the 
LCDS and replace one assessment item on the LCDS, we believe these 
proposals will advance the CMS National Quality Strategy Goals of 
equity and engagement. We considered the alternative of delaying the 
proposal to collect these assessment items, but given the fact they 
will encourage meaningful collaboration between healthcare 
providers, caregivers, and community-based organizations to address 
HRSNs prior to discharge from the LTCH, we believe further delay is 
unwarranted. With regard to the proposal to extend the LCDS 
Admission assessment window, we considered the option of maintaining 
the current 3-day assessment period versus extending it to 4 days. 
However, this proposal is responsive to providers' feedback we 
received regarding the difficulty of collecting the required LCDS 
data elements within the 3-day assessment window when medically 
complex patients are admitted prior to and on weekends. 
Additionally, extending the assessment period would have no impact 
on the calculation of LTCH QRP measures, and would only require 
minimal revisions to the LCDS guidance manuals.

4. Alternatives Considered for the FY 2025 LTCH PPS Outlier Fixed-Loss 
Threshold

    As discussed in section V.D.3. of the Addendum of this proposed 
rule, we are proposing a fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2025 of $90,921 that would result 
in estimated outlier payments projected to be equal to 7.975 percent 
of estimated FY 2025 payments for such cases. We acknowledge that 
the proposed increase to the fixed-loss amount from the FY 2024 
fixed-loss amount ($59,873) is substantial. We also acknowledge that 
the FY 2024 fixed-loss amount was substantially higher than the FY 
2023 fixed-loss amount ($38,518). We recognize that such substantial 
increases to the fixed-loss amount in consecutive years could impact 
LTCH operations.
    For this reason, as an alternative to our proposed fixed-loss 
threshold, using the broad authority conferred upon the Secretary 
under section 307(b)(1) of the BIPA to make ``adjustment'' to 
``outliers'' under the LTCH prospective payment system, we 
considered proposing to establish the FY 2025 fixed-loss amount as 
an average of the FY 2024 fixed-amount ($59,873) and our modelled FY 
2025 fixed-loss amount ($90,921). Under this approach, the proposed 
fixed-loss amount would have been $75,397 (($59,873 + $90,921)/2). 
This alternative approach would provide a 1-year transition to the 
full increase to the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases that we project would result in estimated outlier 
payments projected to be equal to 7.975 percent of estimated 
payments for such cases.
    We estimate that this alternative fixed-loss amount would result 
in estimated outlier payments projected to be equal to 9.5 percent 
of estimated FY 2025 payments for such cases. Under this approach, 
the estimated difference between the 7.975 percent target and the 
estimated percentage of outlier payments under the alternative 
fixed-loss amount would be non-budget neutral. As we have previously 
stated in the RY 2007 LTCH PPS final rule (71 FR 27863 through 
27864) and most recently in the FY 2024 IPPS/LTCH PPS final rule (88 
FR 59426), we believe that the mandate in section 123(a)(1) of the 
BBRA for budget neutrality applies only to the first year of the 
implementation of the LTCH PPS (that is, FY 2003). We estimate that 
aggregate FY 2025 LTCH PPS payments would increase by $39 million 
under this alternative approach, based on the data used in this 
proposed rule. We are soliciting comments on both our proposed 
methodology for determining the FY 2025 fixed-loss amount discussed 
in section V.D.3. of the Addendum of this proposed rule and the 
alternative approach discussed in this section. We will consider 
these comments when finalizing the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2025 in the final rule.

5. Alternatives Considered for the Transforming Episode Accountability 
Model

    In section X.A. of the preamble of this proposed rule, we are 
proposing to test a new mandatory episode-based payment model called 
the Transforming Episode Accountability Model (TEAM). TEAM is 
designed to improve beneficiary care through financial 
accountability for episodes categories that begin with one of the 
following procedures: coronary artery bypass graft, lower extremity 
joint replacement, major bowel procedure, surgical hip/femur 
fracture treatment, and spinal fusion. TEAM would test whether 
financial accountability

[[Page 36645]]

for these episode categories reduces Medicare expenditures while 
preserving or enhancing the quality of care for Medicare 
beneficiaries. We anticipate that TEAM would benefit Medicare 
beneficiaries through improving the coordination of items and 
services paid for through Medicare FFS payments, encouraging 
provider investment in health care infrastructure and redesigned 
care processes, and incentivizing higher value care across the 
inpatient and post-acute care settings for the episode.
    Throughout this proposed rule, we have identified our proposed 
policies and alternatives that we have considered and provided 
information as to the effects of these alternatives and the 
rationale for each of the proposed policies. For example, we 
considered allowing physician group practices (PGPs) be TEAM 
participants, however, we are concerned that PGPs are generally 
smaller entities and care for a lower volume of Medicare 
beneficiaries which could make it challenging to take on the level 
of financial risk to participate in the model. We solicit and 
welcome comments on our proposals, on the alternatives we have 
identified, and on other alternatives that we should consider. We 
note that our estimates are limited to acute care hospitals that may 
be selected to participate in this proposed model. This proposed 
model would not directly affect hospitals that are not participating 
in the model. However, the model may encourage innovations in health 
care delivery in other areas or in care reimbursed through other 
payers. For example, a TEAM participant may choose to extend their 
arrangements to arrangements outside of the model for all surgical 
procedures they provide, as permitted by all applicable laws, not 
just those reimbursed by Medicare and tested in TEAM. We welcome 
comments on our proposals and the alternatives we have identified in 
the preamble.

P. Overall Conclusion

1. Acute Care Hospitals

    Acute care hospitals are estimated to experience an increase of 
approximately $3.2 billion in FY 2025, including operating, capital, 
and the combined effects of (1) the proposed changes to add-on 
payments for certain ESRD discharges, (2) the proposed payment 
adjustment for establishing and maintaining access to a buffer stock 
of essential medicines, (3) new technology add-on payment changes, 
and (4) the statutory expiration of the MDH program and the 
temporary changes to the low-volume hospital payment adjustment on 
January 1, 2025. The estimated change in operating payments is 
approximately $3.1 billion (discussed in sections I.F of this 
Appendix). The estimated change in capital payments is approximately 
$0.183 billion (discussed in section I.I. of this Appendix). The 
estimated change in the combined effects of (1) the proposed changes 
to add-on payments for certain ESRD discharges, (2) the proposed 
payment adjustment for establishing and maintaining access to a 
buffer stock of essential medicines, (3) new technology add-on 
payment changes, and (4) the statutory expiration of the temporary 
changes to the low-volume hospital payment adjustment on January 1, 
2025 is approximately -$0.158 billion as discussed in sections I.F 
and I.G. of this Appendix. Totals 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 proposed wage index 
changes, and for the wage index reclassifications under the MGCRB.
    We estimate that hospitals will experience a 2.4 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 $183 
million increase in capital payments in FY 2025 compared to FY 2024.
    The discussions presented in the previous pages, in combination 
with the remainder of this proposed rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments in FY 2025. In the impact analysis, we are using 
the rates, factors, and policies presented in this proposed rule 
based on the best available claims and CCR data to estimate the 
change in payments under the LTCH PPS for FY 2025. Accordingly, 
based on the best available data for the 330 LTCHs included in our 
analysis, we estimate that overall FY 2025 LTCH PPS payments would 
increase approximately $41 million relative to FY 2024, primarily 
due to the proposed annual update to the LTCH PPS standard Federal 
rate partially 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 will review the rule, we assume that the total number 
of unique commenters on last year's proposed rule will be the number 
of reviewers of this proposed rule. We acknowledge that this 
assumption may understate or overstate the costs of reviewing the 
rule. It is possible that not all commenters reviewed last year's 
rule in detail, and it is also possible that some reviewers chose 
not to comment on the proposed rule. For these reasons, we believe 
that the number of past commenters would be a fair estimate of the 
number of reviewers of this rule. We welcome any comments on the 
approach in estimating the number of entities which will review this 
proposed rule.
    We recognize that different types of entities are in many cases 
affected by mutually exclusive sections of the rule. Thus, for the 
purposes of our estimate we assume that each reviewer read 
approximately 50 percent of the proposed rule. Finally, in our 
estimates, we have used the 3,274 number of timely pieces of 
correspondence on the FY 2024 IPPS/LTCH proposed rule as our 
estimate for the number of reviewers of this rule. We continue to 
acknowledge the uncertainty involved with using this number, but we 
believe it is a fair estimate due to the variety of entities 
affected and the likelihood that some of them choose to rely (in 
full or in part) on press releases, newsletters, fact sheets, or 
other sources rather than the comprehensive review of preamble and 
regulatory text. We seek comments on this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of 
reviewing the proposed rule is $100.80 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 20.83 hours for the staff to review half of this 
proposed rule. For each IPPS hospital or LTCH that reviews this 
proposed rule, the estimated cost is $2,099.66 (20.83 hours x 
$100.80). Therefore, we estimate that the total cost of reviewing 
this proposed rule is $6,874,299.94 ($2,099.66 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 proposed rule as 
they relate to acute care hospitals. This table provides our best 
estimate of the change in Medicare payments to providers as a result 
of the proposed changes to the IPPS presented in this proposed rule. 
All expenditures are classified as transfers to Medicare providers.
    As shown in Table V. of this Appendix, the net costs to the 
Federal Government associated with the policies in this proposed 
rule are estimated at $3.2 billion.

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[GRAPHIC] [TIFF OMITTED] TP02MY24.346

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the payment rates and factors presented in this proposed 
rule under the LTCH PPS is projected to result in an increase in 
estimated aggregate LTCH PPS payments in FY 2025 relative to FY 2024 
of approximately $41 million based on the data for 330 LTCHs in our 
database that are subject to payment under the LTCH PPS. Therefore, 
as required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table VI. of this Appendix, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this proposed rule as 
they relate LTCHs. Table VI. of this Appendix provides our best 
estimate of the estimated change in Medicare payments under the LTCH 
PPS as a result of the payment rates and factors and other 
provisions presented in this proposed rule based on the data for the 
330 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 
proposed rule are estimated at $41 million.
[GRAPHIC] [TIFF OMITTED] TP02MY24.347

III. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $8.0 million to $41.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 38 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA website 
at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Because all hospitals 
are considered to be small entities for purposes of the RFA, the 
hospital impacts described in this proposed rule are impacts on 
small entities. Individuals and States are not included in the 
definition of a small entity. MACs are not considered to be small 
entities because they do not meet the SBA definition of a small 
business.
    HHS's practice in interpreting the RFA is to consider effects 
economically ''significant'' if greater than 5 percent of providers 
reach a threshold of 3 to 5 percent or more of total revenue or 
total costs. We believe that the provisions of this proposed rule 
relating to IPPS hospitals would have an economically significant 
impact on small entities as explained in this Appendix. Therefore, 
the Secretary has certified that this proposed rule would have a 
significant economic impact on a substantial number of small 
entities. For example, the majority of the 3,090 IPPS hospitals 
included in the impact analysis shown in ``Table I.--Impact Analysis 
of Proposed Changes to the IPPS for Operating Costs for FY 2025,'' 
on average are expected to see increases in the range of 2.4 
percent, primarily due to the proposed hospital rate update, as 
discussed in section I.F. of this Appendix. On average, the proposed 
rate update for these hospitals is estimated to be 2.4 percent.
    The 330 LTCH PPS hospitals included in the impact analysis shown 
in ``Table IV: Impact of Proposed Payment Rate and Policy Changes to 
LTCH PPS Payments for LTCH PPS Standard Federal Payment Rate Cases 
for FY 2025 (Estimated FY 2024 Payments Compared to Estimated 
Proposed FY 2025 Payments)'' on average are expected to see an 
increase of approximately 1.2 percent, primarily due to the proposed 
annual standard Federal rate update for FY 2025 (2.8 percent) being 
partially offset by a projected 1.3 percent decrease in high cost 
outlier payments as a percentage of total LTCH PPS standard Federal 
payment rate payments, as discussed in section I.J. of this 
Appendix.
    This proposed rule contains a range of proposals. It provides 
descriptions of the statutory provisions that are addressed, 
identifies the proposed policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered. 
The analyses discussed in this Appendix and throughout the preamble 
of this proposed rule constitutes our regulatory flexibility 
analysis. We are seeking 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 603 of the RFA. With the exception of hospitals located 
in certain New England counties, for purposes of section 1102(b) of 
the Act, we define a small rural hospital as a hospital that is 
located outside of an urban area and has fewer than 100 beds. 
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals.
    As shown in Table I. in section I.F. of this Appendix, rural 
IPPS hospitals with 0-49 beds (350 hospitals) are expected to 
experience an increase in payments from FY 2024 to FY 2025 of 0.7 
percent and rural IPPS hospitals with 50-99 beds (183 hospitals) are 
expected to experience no change in payments from FY 2024 to FY 
2025. These changes are primarily driven by the proposed hospital 
rate update offset by the statutory expiration of the MDH program. 
We refer readers to Table I. in section I.F. of this Appendix for 
additional information on the quantitative effects of the proposed 
policy changes under the IPPS for operating costs.
    All rural LTCHs (18 hospitals) shown in Table IV. in section 
I.J. of this Appendix have less than 100 beds. These hospitals are

[[Page 36647]]

expected to experience an increase in payments from FY 2024 to FY 
2025 of 2.3 percent. This increase is primarily due to the 
combination of the proposed 2.8 percent annual update to the LTCH 
PPS standard Federal payment rate for FY 2025, the proposed changes 
to the area wage level adjustment, and estimated changes in outlier 
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 2024, that threshold level is approximately $183 
million. This proposed rule would not mandate any requirements that 
meet the threshold for State, local, or tribal governments, nor 
would it affect private sector costs.

VI. Executive Order 13132

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on 
state and local governments, preempts state law, or otherwise has 
federalism implications. This proposed rule would not have a 
substantial direct effect on state or local governments, preempt 
states, or otherwise have a federalism implication.

VII. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having 
tribal implications. Section 1880(a) of the Act states that a 
hospital of the Indian Health Service, whether operated by such 
Service or by an Indian tribe or tribal organization, is eligible 
for Medicare payments so long as it meets all of the conditions and 
requirements for such payments which are applicable generally to 
hospitals. Consistent with section 1880(a) of the Act, this proposed 
rule contains general provisions also applicable to hospitals and 
facilities operated by the Indian Health Service or Tribes or Tribal 
organizations under the Indian Self-Determination and Education 
Assistance Act. We continue to engage in consultations with Tribal 
officials on IPPS issues of interest. We will use input received 
from these consultations, as well as the comments on 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 proposed rule.

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

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules. Accordingly, this Appendix provides 
the recommendations for the update factors for the IPPS national 
standardized amount, the hospital-specific rate for SCHs and MDHs, 
and the rate-of-increase limits for certain hospitals excluded from 
the IPPS, as well as LTCHs. In prior years, we made a recommendation 
in the IPPS proposed rule and final rule for the update factors for 
the payment rates for IRFs and IPFs. However, for FY 2025, 
consistent with our approach for FY 2024, 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 2025

A. Proposed FY 2025 Inpatient Hospital Update

    As discussed in section V.B. of the preamble to this proposed 
rule, for FY 2025, consistent with section 1886(b)(3)(B) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act, we are setting the applicable percentage increase by applying 
the following adjustments in the following sequence. Specifically, 
the applicable percentage increase under the IPPS is equal to the 
rate-of-increase in the hospital market basket for IPPS hospitals in 
all areas, subject to a reduction of one-quarter of the applicable 
percentage increase (prior to the application of other statutory 
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit 
quality information under rules established by the Secretary in 
accordance with section 1886(b)(3)(B)(viii) of the Act and a 
reduction of three-quarters of the applicable percentage increase 
(prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful 
electronic health record (EHR) users in accordance with section 
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the productivity 
adjustment). Section 1886(b)(3)(B)(xi) of the Act, as added by 
section 3401(a) of the Affordable Care Act, states that application 
of the productivity adjustment may result in the applicable 
percentage increase being less than zero.
    We note that, in compliance with section 404 of the MMA, in the 
FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45204), we 
replaced the 2014-based IPPS operating and capital market baskets 
with the rebased and revised 2018-based IPPS operating and capital 
market baskets beginning in FY 2022.
    In this FY 2025 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we are proposing to base the 
proposed FY 2025 market basket update used to determine the 
applicable percentage increase for the IPPS on IGI's fourth quarter 
2023 forecast of the 2018-based IPPS market basket rate-of-increase 
with historical data through third quarter 2023, which is estimated 
to be 3.0 percent. In accordance with section 1886(b)(3)(B) of the 
Act, as amended by section 3401(a) of the Affordable Care Act, in 
section IV.B. of the preamble of this FY 2025 IPPS/LTCH PPS proposed 
rule, based on IGI's fourth quarter 2023 forecast, we are proposing 
a productivity adjustment of 0.4 percentage point for FY 2025. We 
are also proposing that if more recent data subsequently become 
available, we would use such data, if appropriate, to determine the 
FY 2025 market basket update and productivity adjustment for the FY 
2025 IPPS/LTCH PPS final rule.
    Therefore, based on IGI's fourth quarter 2023 forecast of the 
2018-based IPPS market basket update and the productivity 
adjustment, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), we are proposing four 
possible applicable percentage increases that could be applied to 
the standardized amount, as shown in the following table.

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B. Proposed FY 2025 SCH and MDH Update

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2025 
applicable percentage increase in the hospital-specific rate for 
SCHs and MDHs equals the applicable percentage increase set forth in 
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor 
as for all other hospitals subject to the IPPS).
    Section 307 of the Consolidated Appropriations Act, 2024 (CAA, 
2024) (Pub. L. 118-42), enacted on March 9, 2024, extended the MDH 
program for FY 2025 discharges occurring before January 1, 2025. 
Prior to enactment of the CAA, 2024, the MDH program was only to be 
in effect through the end of FY 2024. Therefore, under current law, 
the MDH program will expire for discharges on or after January 1, 
2025. We refer readers to section V.E. of the preamble of this 
proposed rule for further discussion of the MDH program.
    As previously stated, the update to the hospital specific rate 
for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act. Accordingly, depending on whether a hospital submits quality 
data and is a meaningful EHR user, we are proposing the same four 
possible applicable percentage increases in the previous table for 
the hospital-specific rate applicable to SCHs and MDHs.

C. Proposed FY 2025 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 V.B.1. of the 
preamble of this proposed rule.
    In addition, as discussed in section V.B.2. of the preamble of 
this proposed rule, section 602 of Public Law 114-113 amended 
section 1886(n)(6)(B) of the Act to specify that subsection (d) 
Puerto Rico hospitals are eligible for incentive payments for the 
meaningful use of certified EHR technology, effective beginning FY 
2016. In addition, section 1886(n)(6)(B) of the Act was amended to 
specify that the adjustments to the applicable percentage increase 
under section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) 
Puerto Rico hospitals that are not meaningful EHR users, effective 
beginning FY 2022.
    Section 1886(b)(3)(B)(ix) of the Act in conjunction with section 
602(d) of Public Law 114-113 requires that for FY 2024 and 
subsequent fiscal years, any subsection (d) Puerto Rico hospital 
that is not a meaningful EHR user as defined in section 1886(n)(3) 
of the Act and not subject to an exception under section 
1886(b)(3)(B)(ix) of the Act will have a reduction of three-quarters 
of the applicable percentage increase (prior to the application of 
other statutory adjustments).
    Based on IGI's fourth quarter 2023 forecast of the 2018-based 
IPPS market basket update with historical data through third quarter 
2023, for this FY 2025 proposed rule, in accordance with section 
1886(b)(3)(B) of the Act, as previously discussed, for Puerto Rico 
hospitals, we are proposing a market basket update of 3.0 percent 
and a productivity adjustment of 0.4 percentage point. Therefore, 
for FY 2025, depending on whether a Puerto Rico hospital is a 
meaningful EHR user, there are two possible applicable percentage 
increases that can be applied to the standardized amount. Based on 
these data, we are proposing the following applicable percentage 
increases to the standardized amount for FY 2025 for Puerto Rico 
hospitals:
     For a Puerto Rico hospital that is a meaningful EHR 
user, we are proposing an applicable percentage increase to the 
operating standardized amount of 2.6 percent (that is, the FY 2025 
estimate of the proposed market basket rate-of-increase of 3.0 
percent less an adjustment of 0.4 percentage point for the proposed 
productivity adjustment).
     For a Puerto Rico hospital that is not a meaningful EHR 
user, we are proposing an applicable percentage increase to the 
operating standardized amount of 0.35 percent (that is, the FY 2025 
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 0.4 percentage 
point for the proposed productivity adjustment).
    As noted previously, we are proposing that if more recent data 
subsequently become available, we would use such data, if 
appropriate, to determine the FY 2025 market basket update and the 
productivity adjustment for the FY 2025 IPPS/LTCH PPS final rule.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2025

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and America Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the rate-of-increase 
limits equal to the market basket percentage increase. In accordance 
with Sec.  403.752(a) of the regulations, religious nonmedical 
health care institutions (RNHCIs) are paid under the provisions of 
Sec.  413.40, which also use section 1886(b)(3)(B)(ii) of the Act to 
update the percentage increase in the rate-of-increase limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa are among the remaining types of hospitals still paid under 
the reasonable cost methodology, subject to the rate-of-increase 
limits. In addition, in accordance with Sec.  412.526(c)(3) of the 
regulations, extended neoplastic disease care hospitals (described 
in Sec.  412.22(i) of the regulations) also are subject to the rate-
of-increase limits. As discussed in section VI. of the preamble of 
this proposed rule, we are proposing to use the percentage increase 
in the 2018-based IPPS operating market basket to update the target 
amounts for children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa, and 
extended neoplastic disease care hospitals for FY 2025 and 
subsequent fiscal years. Accordingly, for FY 2025, 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 2025 percentage increase in the 2018-based 
IPPS operating market basket. For this proposed rule, the current 
estimate of the IPPS operating market basket

[[Page 36649]]

percentage increase for FY 2025 is 3.0 percent. We are proposing 
that if more recent data subsequently become available, we would use 
such data, if appropriate, to determine the FY 2025 market basket 
update for the FY 2025 IPPS/LTCH PPS final rule.

E. Proposed Update for LTCHs for FY 2025

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Public Law 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS.
    As discussed in section V.A. of the Addendum to this proposed 
rule, we are proposing to update the LTCH PPS standard Federal 
payment rate for FY 2025 by 2.8 percent, consistent with section 
1886(m)(3) of the Act which provides that any annual update be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (that is, the productivity 
adjustment). Furthermore, in accordance with the LTCH QR Program 
under section 1886(m)(5) of the Act, we are proposing to reduce the 
annual update to the LTCH PPS standard Federal rate by 2.0 
percentage points for failure of a LTCH to submit the required 
quality data. Accordingly, we are proposing to establish an update 
factor of 1.028 in determining the LTCH PPS standard Federal rate 
for FY 2025. For LTCHs that fail to submit quality data for FY 2025, 
we are proposing to establish an annual update to the LTCH PPS 
standard Federal rate of 0.8 percent (that is, the proposed annual 
update for FY 2025 of 2.8 percent less 2.0 percentage points for 
failure to submit the required quality data in accordance with 
section 1886(m)(5)(C) of the Act and our rules) by applying a 
proposed update factor of 1.008 in determining the LTCH PPS standard 
Federal rate for FY 2025. (We note that, as discussed in section 
VII.D. of the preamble of this proposed rule, the proposed update to 
the LTCH PPS standard Federal payment rate of 2.8 percent for FY 
2025 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 1.5 percent. MedPAC's 
rationale for this update recommendation is described in more detail 
in this section. As previously stated, section 1886(e)(4)(A) of the 
Act requires that the Secretary, taking into consideration the 
recommendations of MedPAC, recommend update factors for inpatient 
hospital services for each fiscal year that take into account the 
amounts necessary for the efficient and effective delivery of 
medically appropriate and necessary care of high quality. Consistent 
with current law, depending on whether a hospital submits quality 
data and is a meaningful EHR user, we are recommending the four 
applicable percentage increases to the standardized amount listed in 
the table under section II. of this Appendix B. We are recommending 
that the same applicable percentage increases apply to SCHs and 
MDHs.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are 
recommending update factors for certain other types of hospitals 
excluded from the IPPS. Consistent with our policies for these 
facilities, we are recommending an update to the target amounts for 
children's hospitals, cancer hospitals, RNHCIs, short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa and extended neoplastic 
disease care hospitals of 3.0 percent.
    For FY 2025, consistent with policy set forth in section VII. of 
the preamble of this proposed rule, for LTCHs that submit quality 
data, we are recommending an update of 2.8 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2025, we are recommending an annual update to the LTCH PPS 
standard Federal rate of 0.8 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2024 Report to Congress, MedPAC assessed the 
adequacy of current payments and costs, and the relationship between 
payments and an appropriate cost base. MedPAC recommended an update 
to the hospital inpatient rates by the amount specified in current 
law plus 1.5 percent. MedPAC anticipates that their recommendation 
to update the IPPS payment rate by the amount specified under 
current law plus 1.5 percent in 2025 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 1.5 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 $4 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 2024 MedPAC report, which is 
available for download at www.medpac.gov, for a complete discussion 
on these recommendations.
    We are proposing an applicable percentage increase for FY 2025 
of 2.6 percent as described in section 1886(b)(3)(B) of the Act, 
provided the hospital submits quality data and is a meaningful EHR 
user consistent with these statutory requirements. We note that, 
because the operating and capital payments in the IPPS remain 
separate, we are continuing to use separate updates for operating 
and capital payments in the IPPS. The proposed update to the capital 
rate is discussed in section III. of the Addendum to this proposed 
rule.
    We note that section 1886(d)(5)(F) of the Act provides for 
additional Medicare payment adjustments, called Medicare 
disproportionate share hospital (DSH) payments, for 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 Medicare DSH 
payments an empirically justified DSH payment equal to 25 percent of 
the Medicare DSH adjustment they would have received under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply. The 
remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments if 
subsection (r) of the Act did not apply, 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. These additional 
payments are called uncompensated care payments. We refer readers to 
section IV. of this proposed rule for a further discussion of 
Medicare DSH and uncompensated care payments.

[FR Doc. 2024-07567 Filed 4-10-24; 4:15 pm]
BILLING CODE 4120-01-P