[Federal Register Volume 89, Number 152 (Wednesday, August 7, 2024)]
[Rules and Regulations]
[Pages 64582-64675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16909]



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Vol. 89

Wednesday,

No. 152

August 7, 2024

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 412





Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective 
Payment System--Rate Update; Final Rule

  Federal Register / Vol. 89 , No. 152 / Wednesday, August 7, 2024 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1806-F]
RIN 0938-AV32


Medicare Program; FY 2025 Inpatient Psychiatric Facilities 
Prospective Payment System--Rate Update

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

ACTION: Final action.

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SUMMARY: This final action updates the prospective payment rates, the 
outlier threshold, and the wage index for Medicare inpatient hospital 
services provided by Inpatient Psychiatric Facilities (IPF), which 
include psychiatric hospitals and excluded psychiatric units of an 
acute care hospital or critical access hospital. This final action also 
revises the patient-level adjustment factors, the Emergency Department 
adjustment, and the payment amount for electroconvulsive therapy. These 
changes will be effective for IPF discharges occurring during the 
fiscal year (FY) beginning October 1, 2024 through September 30, 2025 
(FY 2025). In addition, this final action finalizes the adoption of a 
new quality measure. It does not finalize modifications to the 
reporting requirements under the IPF Quality Reporting Program 
beginning with the FY 2027 payment determination. Furthermore, this 
final action summarizes comments received through Requests for 
Information regarding potential future revisions to the IPF PPS 
facility-level adjustments and regarding the development of a 
standardized IPF Patient Assessment Instrument.

DATES: This final action is effective on October 1, 2024.

FOR FURTHER INFORMATION CONTACT: The IPF Payment Policy mailbox at 
[email protected] for general information.
    Nick Brock (410) 786-5148, for information regarding the inpatient 
psychiatric facilities prospective payment system (IPF PPS) and 
regulatory impact analysis.
    Kaleigh Emerson (470) 890-4141, for information regarding the 
inpatient psychiatric facilities quality reporting program (IPFQR).

SUPPLEMENTARY INFORMATION: 
    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/.

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Website

    Addendum A to this final rule summarizes the fiscal year (FY) 2025 
IPF PPS payment rates, outlier threshold, cost of living adjustment 
factors (COLA) for Alaska and Hawaii, national and upper limit cost-to-
charge ratios, and adjustment factors. In addition, Addendum B to this 
final rule shows the complete listing of ICD-10 Clinical Modification 
(CM) and Procedure Coding System (PCS) codes, the FY 2025 IPF PPS 
comorbidity adjustment, and electroconvulsive therapy (ECT) procedure 
codes. Addenda A and B to this final rule are available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html. Tables setting forth the FY 
2025 Wage Index for Urban Areas Based on Core Based Statistical Area 
(CBSA) Labor Market Areas, the FY 2025 Wage Index Based on CBSA Labor 
Market Areas for Rural Areas, and a county-level crosswalk of the FY 
2024 CBSA Labor Market Areas to the FY 2025 CBSA Labor Market Areas are 
available exclusively through the internet, on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.

I. Executive Summary

A. Purpose

    This final rule updates the prospective payment rates, the outlier 
threshold, and the wage index for Medicare inpatient hospital services 
provided by Inpatient Psychiatric Facilities (IPFs) for discharges 
occurring during fiscal year (FY) 2025 (beginning October 1, 2024, 
through September 30, 2025). This rule also adopts the Core-Based 
Statistical Area (CBSA) Labor Market Areas for the IPF PPS wage index 
as defined in the Office of Management and Budget (OMB) Bulletin 23-01. 
In addition, this rule refines the patient-level adjustment factors and 
increases the payment amount for electroconvulsive therapy (ECT) 
treatments. This final rule also clarifies the eligibility criteria for 
an IPF to be approved to file all-inclusive cost reports. This rule 
includes a summary of the public comments received to inform revisions 
to the payment adjustments for rural location and teaching status, 
along with a potential payment adjustment for safety net population. In 
addition, this final rule includes a summary of the public comments 
received in response to our request for information (RFI) regarding the 
creation of a patient assessment instrument (PAI), as mandated by 
section 4125 of the Consolidated Appropriations Act (CAA), 2023 
(hereafter referred to as CAA, 2023) (Pub. L. 117-328). Lastly, this 
final rule updates quality measures and discusses reporting 
requirements under the Inpatient Psychiatric Facilities Quality 
Reporting (IPFQR) Program.

B. Summary of the Major Provisions

1. Inpatient Psychiatric Facilities Prospective Payment System (IPF 
PPS)
    For the IPF PPS, we are finalizing our proposals to:
     Revise the patient-level IPF PPS adjustment factors and 
increase the ECT per treatment payment amount.
     Update the IPF PPS wage index to use the CBSAs defined 
within OMB Bulletin 23-01.
     Clarify the eligibility criteria for an IPF to be approved 
to file all-inclusive cost reports. Only a government-owned or tribally 
owned facility satisfies these criteria and is eligible to file its 
cost report using an all-inclusive rate or no charge structure.
     Make technical rate setting updates: The IPF PPS payment 
rates will be adjusted annually for input price inflation, as well as 
statutory and other policy factors.
    This rule updates:
    ++ The IPF PPS Federal per diem base rate from $895.63 to $876.53.
    ++ The IPF PPS Federal per diem base rate for providers who failed 
to report quality data to $859.48.
    ++ The ECT payment per treatment from $385.58 to $661.52.
    ++ The ECT payment per treatment for providers who failed to report 
quality data to $648.65.
    ++ The labor-related share from 78.7 percent to 78.8 percent.
    ++ The wage index budget neutrality factor to 0.9996. This rule 
applies a refinement standardization factor of 0.9524.
    ++ The fixed dollar loss threshold amount from $33,470 to $38,110, 
to maintain estimated outlier payments at 2 percent of total estimated 
aggregate IPF PPS payments.
2. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program
    For the IPFQR Program, we are finalizing our proposal to adopt the 
30-Day Risk- Standardized All-Cause Emergency Department (ED) Visit 
Following an IPF Discharge measure

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beginning with the FY 2027 payment determination. We are not finalizing 
our proposal to modify reporting requirements to require IPFs to submit 
patient-level data on a quarterly basis.
    We also refer readers to the summary of the comments to our RFI in 
which we solicited comments to inform elements to be included in the 
IPF PAI, which the CAA, 2023 requires the Centers for Medicare & 
Medicaid Services (CMS) to develop and implement for Rate Year (RY) 
2028.

C. Summary of Impacts
[GRAPHIC] [TIFF OMITTED] TR07AU24.000

II. Background

A. Overview of the Legislative Requirements of the IPF PPS

    Section 124 of the Medicare, Medicaid, and State Children's Health 
Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub. 
L. 106-113) required the establishment and implementation of an IPF 
PPS. Specifically, section 124 of the BBRA mandated that the Secretary 
of the Department of Health and Human Services (the Secretary) develop 
a per diem payment perspective system (PPS) for inpatient hospital 
services furnished in psychiatric hospitals and excluded psychiatric 
units including an adequate patient classification system that reflects 
the differences in patient resource use and costs among psychiatric 
hospitals and excluded psychiatric units. ``Excluded psychiatric unit'' 
means a psychiatric unit of an acute care hospital or of a Critical 
Access Hospital (CAH), which is excluded from payment under the 
Inpatient Prospective Payment System (IPPS) or CAH payment system, 
respectively. These excluded psychiatric units will be paid under the 
IPF PPS.
    Section 405(g)(2) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-17-3) extended the IPF 
PPS to psychiatric distinct part units of CAHs.
    Sections 3401(f) and 10322 of the Patient Protection and Affordable 
Care Act (Pub. L. 111-148) as amended by section 10319(e) of that Act 
and by section 1105(d) of the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152) (hereafter referred to jointly as ``the 
Affordable Care Act'') added subsection (s) to section 1886 of the Act.
    Section 1886(s)(1) of the Act titled ``Reference to Establishment 
and Implementation of System,'' refers to section 124 of the BBRA, 
which relates to the establishment of the IPF PPS.
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the rate year (RY) beginning in 2012 (that 
is, a RY that coincides with a FY) and each subsequent RY.
    Section 1886(s)(2)(A)(ii) of the Act required the application of an 
``other adjustment'' that reduced any update to an IPF PPS base rate by 
a percentage point amount specified in section 1886(s)(3) of the Act 
for the RY beginning in 2010 through the RY beginning in 2019. As noted 
in the FY 2020 Inpatient Psychiatric Facilities Prospective Payment 
System and Quality Reporting Updates for fiscal year Beginning October 
1, 2019 final rule, for the RY beginning in 2019, section 1886(s)(3)(E) 
of the Act required that the other adjustment reduction be equal to 
0.75 percentage point; that was the final year the statute required the 
application of this adjustment. Because FY 2021 was a RY beginning in 
2020, FY 2021 was the first year section 1886(s)(2)(A)(ii) of the Act 
did not apply since its enactment.
    Sections 1886(s)(4)(A) through (D) of the Act require that for RY 
2014 and each subsequent RY, IPFs that fail to report required quality 
data with respect to such a RY will have their annual update to a 
standard Federal rate for discharges reduced by 2.0 percentage points. 
This may result in an annual update being less than 0.0 for a RY, and 
may result in payment rates for the upcoming RY being less than such 
payment rates for the preceding RY. Any reduction for failure to report 
required quality data will apply only to the RY involved, and the 
Secretary will not consider such reduction in computing the payment 
amount for a subsequent RY. Additional information about the specifics 
of the current IPFQR Program is available in the FY 2020 Inpatient 
Psychiatric Facilities Prospective Payment System and Quality Reporting 
Updates for fiscal year beginning October 1, 2019 (FY 2020) final rule 
(84 FR 38459 through 38468).
    Section 4125 of the Consolidated Appropriations Act, 2023 (CAA, 
2023) (Pub. L. 117-328), which amended section 1886(s) of the Act, 
requires CMS to revise the Medicare prospective payment system for 
psychiatric hospitals and psychiatric units. Specifically, section 
4125(a) of the CAA, 2023 added section 1886(s)(5)(A) of the Act to 
require the Secretary to collect data and information, as the Secretary 
determines appropriate, to revise payments under the IPF PPS. CMS 
discussed this data collection last year in the FY 2024 Inpatient 
Psychiatric Facilities Prospective Payment System--Rate Update (FY 2024 
IPF PPS) final rule, as CMS was required to begin collecting this data 
and information not later than October 1, 2024. As discussed in that 
rule, the Agency has already been collecting data and information 
consistent with the types set forth in the CAA, 2023 as part of our 
extensive and years-long analyses and consideration of potential 
payment system refinements. We refer readers to the FY 2024 IPF PPS 
final rule (88 FR 51095 through 51098) where we discussed existing data 
collection and requested information to inform future IPF PPS 
revisions.
    In addition, section 1886(s)(5)(D) of the Act, as added by section 
4125(a) of the CAA, 2023 requires that the Secretary implement 
revisions to the methodology for determining the payment rates under 
the IPF PPS for psychiatric hospitals and psychiatric units, effective 
for RY 2025 (FY 2025). The revisions may be based on a review of the 
data and information collected under section 1886(s)(5)(A) of the Act.

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Sections IV.B, IV.C, and IV.D of this FY 2025 IPF PPS final rule 
discuss final decisions about our proposed revisions under section 
1886(s)(5)(D) of the Act for FY 2025.
    Section 4125(b) of the CAA, 2023 amended section 1886(s)(4) of the 
Act by inserting a new subparagraph (E), which requires IPFs 
participating in the IPFQR Program to collect and submit to the 
Secretary standardized patient assessment data, using a standardized 
patient assessment instrument, for RY 2028 (FY 2028) and each 
subsequent rate year. IPFs must submit such data with respect to at 
least the admission and discharge of an individual, or more frequently 
as the Secretary determines appropriate. For IPFs to meet this new data 
collection and reporting requirement for RY 2028 and each subsequent 
rate year, the Secretary must implement a standardized patient 
assessment instrument that collects data with respect to the following 
categories: functional status; cognitive function and mental status; 
special services, treatments, and interventions; medical conditions and 
comorbidities; impairments; and other categories as determined 
appropriate by the Secretary. This patient assessment instrument must 
enable comparison of such patient assessment data that IPFs submit 
across all such IPFs to which such data are applicable.
    Section 4125(b) of the CAA, 2023 further amended section 1886(s) of 
the Act by adding a new subparagraph (6) that requires the Secretary to 
implement revisions to the methodology for determining the payment 
rates for psychiatric hospitals and psychiatric units (that is, payment 
rates under the IPF PPS), effective for RY 2031 (FY 2031), as the 
Secretary determines to be appropriate, to take into account the 
patient assessment data described in paragraph (4)(E)(ii).
    To implement and periodically update the IPF PPS, we have published 
various proposed and final rules and notices in the Federal Register. 
For more information regarding these documents, we refer readers to the 
CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html?redirect=/
InpatientPsychFacilPPS/.

B. Overview of the IPF PPS

    We issued the RY 2005 IPF PPS final rule which appeared in the 
November 15, 2004 Federal Register (69 FR 66922). The RY 2005 IPF PPS 
final rule established the IPF PPS, as required by section 124 of the 
BBRA and codified at 42 CFR part 412, subpart N. The RY 2005 IPF PPS 
final rule set forth the Federal per diem base rate for the 
implementation year (the 18-month period from January 1, 2005 through 
June 30, 2006) and provided payment for the inpatient operating and 
capital costs to IPFs for covered psychiatric services they furnish 
(that is, routine, ancillary, and capital costs, but not costs of 
approved educational activities, bad debts, and other services or items 
that are outside the scope of the IPF PPS). Covered psychiatric 
services include services for which benefits are provided under the 
fee-for-service Part A (Hospital Insurance Program) of the Medicare 
program.
    The IPF PPS established the Federal per diem base rate for each 
patient day in an IPF derived from the national average daily routine 
operating, ancillary, and capital costs in IPFs in FY 2002. The average 
per diem cost was updated to the midpoint of the first year under the 
IPF PPS, standardized to account for the overall positive effects of 
the IPF PPS payment adjustments, and adjusted for budget neutrality.
    The Federal per diem payment under the IPF PPS is comprised of the 
Federal per diem base rate described previously and certain patient- 
and facility-level payment adjustments for characteristics that were 
found in the regression analysis to be associated with statistically 
significant per diem cost differences, with statistical significance 
defined as p less than 0.05. A complete discussion of the regression 
analysis that established the IPF PPS adjustment factors can be found 
in the RY 2005 IPF PPS final rule (69 FR 66933 through 66936).
    The patient-level adjustments include age, Diagnosis-Related Group 
(DRG) assignment, and comorbidities, as well as adjustments to reflect 
higher per diem costs at the beginning of a patient's IPF stay and 
lower costs for later days of the stay. Facility-level adjustments 
include adjustments for the IPF's wage index, rural location, teaching 
status, a cost-of-living adjustment for IPFs located in Alaska and 
Hawaii, and an adjustment for the presence of a qualifying emergency 
department (ED).
    The IPF PPS provides additional payment policies for outlier cases, 
interrupted stays, and a per treatment payment for patients who undergo 
ECT. During the IPF PPS mandatory 3-year transition period, stop-loss 
payments were also provided; however, since the transition ended as of 
January 1, 2008, these payments are no longer available.

C. Annual Requirements for Updating the IPF PPS

    Section 124 of the BBRA did not specify an annual rate update 
strategy for the IPF PPS and was broadly written to give the Secretary 
discretion in establishing an update methodology. Therefore, in the RY 
2005 IPF PPS final rule, we implemented the IPF PPS using the following 
update strategy:
     Calculate the final Federal per diem base rate to be 
budget neutral for the 18-month period of January 1, 2005 through June 
30, 2006.
     Use a July 1 through June 30 annual update cycle.
     Allow the IPF PPS first update to be effective for 
discharges on or after July 1, 2006 through June 30, 2007.
    The RY 2005 final rule (69 FR 66922) implemented the IPF PPS. In 
developing the IPF PPS, and to ensure that the IPF PPS can account 
adequately for each IPF's case-mix, we performed an extensive 
regression analysis of the relationship between the per diem costs and 
certain patient and facility characteristics to determine those 
characteristics associated with statistically significant cost 
differences on a per diem basis. That regression analysis is described 
in detail in our RY 2004 IPF proposed rule (68 FR 66923; 66928 through 
66933) and our RY 2005 IPF final rule (69 FR 66933 through 66960). For 
characteristics with statistically significant cost differences, we 
used the regression coefficients of those variables to determine the 
size of the corresponding payment adjustments.
    In the RY 2005 IPF final rule, we explained the reasons for 
delaying an update to the adjustment factors, derived from the 
regression analysis, including waiting until we have IPF PPS data that 
yields as much information as possible regarding the patient-level 
characteristics of the population that each IPF serves. We indicated 
that we did not intend to update the regression analysis and the 
patient-level and facility-level adjustments until we complete that 
analysis. Until that analysis is complete, we stated our intention to 
publish a notice in the Federal Register each spring to update the IPF 
PPS (69 FR 66966).
    We issued a final rule which appeared in the May 6, 2011 Federal 
Register titled, ``Inpatient Psychiatric Facilities Prospective Payment 
System--Update for Rate Year Beginning July 1, 2011 (RY 2012)'' (76 FR 
26432), which changed the payment rate update period to a RY that 
coincides with a FY update. Therefore, final rules are now published in 
the Federal Register in the summer

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to be effective on October 1st. When proposing changes in IPF payment 
policy, a proposed rule is issued in the spring, and the final rule in 
the summer to be effective on October 1st. For a detailed list of 
updates to the IPF PPS, we refer readers to our regulations at 42 CFR 
412.428. Beginning October 1, 2012, we finalized that we will refer to 
the 12-month period from October 1 through September 30 as a ``fiscal 
year'' (FY) rather than a RY (76 FR 26435). Therefore, in this final 
rule we refer to rules that took effect after RY 2012 by the FY, rather 
than the RY, in which they took effect.
    CMS issued the most recent IPF PPS annual update, which appeared in 
a final rule on August 2, 2023, in the Federal Register titled, 
``Medicare Program; FY 2024 Inpatient Psychiatric Facilities 
Prospective Payment System--Rate Update'' (88 FR 51054), which updated 
the IPF PPS payment rates for FY 2024. That final rule updated the IPF 
PPS Federal per diem base rates that were published in the FY 2023 IPF 
PPS Rate Update final rule (87 FR 46846) in accordance with our 
established policies.
    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary but shall not exceed 3 years after publication of the preceding 
proposed or interim final regulation except under exceptional 
circumstances.
    This final rule finalizes provisions set forth in the April 3, 2024 
Medicare Program; FY 2025 Inpatient Psychiatric Facilities Prospective 
Payment System--Rate Update; Proposed Rule (89 FR 23145). In addition, 
this final rule has been published within the 3-year time limit imposed 
by section 902 of the MMA. Therefore, we believe that the final rule is 
in accordance with the Congress' intent to ensure timely publication of 
final regulations.

III. Analysis of and Responses to Public Comments

    We received 69 public comments that pertain to proposed IPF PPS 
payment policies, requests for information, and the proposed updates to 
the IPFQR Program. Comments were from inpatient psychiatric facilities, 
health systems, national and state level provider and patient advocacy 
organizations, the Medicare Payment Advisory Commission (MedPAC), and 
individuals. We reviewed each comment and grouped related comments, 
after which we placed them in categories based on subject matter or 
section(s) of the regulation affected. Summaries of the public comments 
received and our responses to those comments are provided in the 
appropriate sections in the preamble of this final rule.
    In addition, we received a few comments that were out of the scope 
of the FY 2025 IPF PPS proposed rule. We appreciate these comments but 
note that, because they fall outside the scope of this rulemaking, we 
do not address them in this rule. We will consider these comments as we 
continue to develop policies for future rulemaking.

IV. Provisions of the FY 2025 IPF PPS Final Rule and Responses to 
Comments

A. FY 2025 Market Basket Update and Productivity Adjustment for the IPF 
PPS

1. Background
    Originally, the input price index used to develop the IPF PPS was 
the Excluded Hospital with Capital market basket. This market basket 
was based on 1997 Medicare cost reports for Medicare-participating 
inpatient rehabilitation facilities (IRFs), IPFs, long-term care 
hospitals (LTCHs), cancer hospitals, and children's hospitals. Although 
``market basket'' technically describes the mix of goods and services 
used in providing health care at a given point in time, this term is 
also commonly used to denote the input price index (that is, cost 
category weights and price proxies) derived from that market basket. 
Accordingly, the term ``market basket,'' as used in this document, 
refers to an input price index.
    Since the IPF PPS inception, the market basket used to update IPF 
PPS payments has been rebased and revised to reflect more recent data 
on IPF cost structures. We last rebased and revised the IPF market 
basket in the FY 2024 IPF PPS rule, where we adopted a 2021-based IPF 
market basket, using Medicare cost report data for both Medicare 
participating freestanding psychiatric hospitals and psychiatric units. 
We refer readers to the FY 2024 IPF PPS final rule for a detailed 
discussion of the 2021-based IPF PPS market basket and its development 
(88 FR 51057 through 51081). References to the historical market 
baskets used to update IPF PPS payments are listed in the FY 2016 IPF 
PPS final rule (80 FR 46656).
2. FY 2025 IPF Market Basket Update
    For FY 2025 (beginning October 1, 2024 and ending September 30, 
2025), we proposed to update the IPF PPS payments by a market basket 
increase factor with a productivity adjustment as required by section 
1886(s)(2)(A)(i) of the Act. Consistent with historical practice, we 
proposed to estimate the market basket update for the IPF PPS based on 
the most recent forecast available at the time of rulemaking from IHS 
Global Inc. (IGI). IGI is a nationally recognized economic and 
financial forecasting firm with which CMS contracts to forecast the 
components of the market baskets and productivity adjustment. For the 
proposed rule, based on IGI's fourth quarter 2023 forecast with 
historical data through the third quarter of 2023, the 2021-based IPF 
market basket increase factor for FY 2025 was 3.1 percent.
    Section 1886(s)(2)(A)(i) of the Act requires that, after 
establishing the increase factor for a FY, the Secretary shall reduce 
such increase factor for FY 2012 and each subsequent FY, by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. Section 1886(b)(3)(B)(xi)(II) of the Act sets forth the 
definition of this productivity adjustment. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide, private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable FY, year, cost reporting period, or 
other annual period) (the ``productivity adjustment''). The United 
States Department of Labor's Bureau of Labor Statistics (BLS) publishes 
the official measures of productivity for the United States economy. We 
note that previously the productivity measure referenced in section 
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private 
nonfarm business MFP. Beginning with the November 18, 2021 release of 
productivity data, BLS replaced the term ``multifactor productivity'' 
with ``total factor productivity'' (TFP). BLS noted that this is a 
change in terminology only and will not affect the data or methodology. 
As a result of the BLS name change, the productivity measure referenced 
in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as 
private nonfarm business TFP. However, as mentioned previously, the 
data and methods are unchanged. We refer readers to www.bls.gov for the 
BLS historical published TFP data. A complete description of IGI's TFP 
projection

[[Page 64586]]

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, in the 
FY 2022 IPF final rule (86 FR 42611), we noted that effective with FY 
2022 and forward, CMS changed the name of this adjustment to refer to 
it as the productivity adjustment rather than the MFP adjustment.
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the RY beginning in 2012 (a RY that 
coincides with a FY) and each subsequent RY. For the FY 2025 IPF PPS 
proposed rule, based on IGI's fourth quarter 2023 forecast, the 
proposed productivity adjustment for FY 2025 (the 10-year moving 
average of TFP for the period ending FY 2025) was projected to be 0.4 
percent. Accordingly, we proposed to reduce the 3.1 percent IPF market 
basket increase by this 0.4 percentage point productivity adjustment, 
as mandated by the Act. This resulted in a proposed FY 2025 IPF PPS 
payment rate update of 2.7 percent (3.1-0.4 = 2.7). We also proposed 
that if more recent data became available, we would use such data, if 
appropriate, to determine the FY 2025 IPF market basket increase and 
productivity adjustment for the final rule.
    We solicited comments on the proposed IPF market basket increase 
and productivity adjustment for FY 2025.
    Comment: Several commenters expressed concerns about the proposed 
2021-based IPF market basket increase factor for FY 2025 of 3.1 percent 
suggesting that the proposed rate increases might still be insufficient 
to meet the growing costs of healthcare provision. They stated that 
with the significant increase in the costs of labor, pharmaceuticals, 
and supplies, the payment update is inadequate. Commenters stated that 
labor-related inflation has been driven in large part by a severe 
workforce shortage. The commenters also stated that hospitals are 
turning to costlier contract labor to sustain operations; one commenter 
noted that they believed that contract labor costs increased 258 
percent from 2019 through 2023. The commenters stated these increased 
costs are felt acutely by IPFs as they struggle to maintain highly 
skilled technicians, clinical social workers, psychologists, and 
therapists. They requested that CMS provide a more robust payment 
update for FY 2025 and in the future, until a more accurate PPS 
methodology can be adopted. Commenters also stated that the cumulative 
effect of this inflationary pressure, coupled with the proposed 
Medicare payment increases for FY 2025, will continue to have negative 
effects on IPF operating margins. They cited the Medicare Payment 
Advisory Commission, which determined that Medicare has failed to cover 
the cost of caring for patients in hospital-based and freestanding 
nonprofit IPFs since at least 2016. They further stated that when 
looking at the 2022 Medicare cost reports for freestanding IPFs that 
included a full of year of data, over half of the hospitals had a 
negative operating margin. The commenter requested that CMS reassess 
the data and methodology used to determine the annual market basket 
update in light of continued inflationary pressures for hospitals.
    One commenter stated that the proposed 3.1 percent increase in the 
market basket is insufficient at this crucial time for many healthcare 
facilities, especially those in rural and underserved areas. One 
commenter recommended exploring all options to ensure that provider 
reimbursement is adequate to meet patient needs. They further stated 
that in the Medicare behavioral health arena, CMS has leverage to 
improve financial stability for providers and their patients because 
the IPF PPS authorizing statute did not specify an annual rate update, 
giving the Secretary discretion in establishing an update methodology. 
One commenter noted that in some instances, hospital beds go unused 
despite increasing demand due to the lack of sufficient staffing. The 
commenter suggested a 5-percent increase consistent with recently 
experienced inflation, which they stated would be compounded by the 
anticipated inflation during the coming year.
    One commenter stated that from 2019 to 2023, costs per adjusted 
discharge rose 25 percent; however, base payment rates for Medicare 
have failed to keep pace with input price inflation. They recommended 
CMS use data that better reflects the input price inflation that IPFs 
have experienced and are projected to experience in 2025.
    One commenter generally supported the proposed rate increase; 
however, they noted that this increase is likely still at a level 
insufficient to sustain capacity and improve access to high--quality 
care effectively. One commenter supported increasing the IPF PPS rate 
by 2.7 percent, noting that increased funding for IPFs would improve 
access to care and quality of services. One commenter suggested that 
CMS use more recent data, as proposed, that includes the recent 
inflationary increases in costs. In absence of such data, they 
requested that CMS consider an alternative approach to better align the 
market basket increases with the rising cost of treating patients.
    Response: We appreciate the commenters' concern regarding 
inflationary pressure facing IPFs and the proposed FY 2025 market 
basket update.
    As stated in the FY 2024 IPF final rule (88 FR 51057), the 2021-
based IPF market basket is a fixed-weight, Laspeyres-type index that 
measures price changes over time. Since the inception of the IPF PPS, 
the IPF payment rates (with the exception of statutorily mandated 
updates) have been updated by a projection of a market basket 
percentage increase, consistent with other CMS PPS updates (including 
for inpatient hospitals, skilled nursing facilities, and home health 
agencies). CMS established this practice in the RY 2004 IPF PPS final 
rule (69 FR 66928 through 66930), in accordance with section 
1886(b)(3)(B)(ii) of the Act. Because the market basket is designed to 
measure price inflation for IPF providers, it would not reflect 
increases in costs associated with changes in the volume or intensity 
of input goods and services (such as the quantity of labor used) or 
Medicare allowable costs per risk-adjusted discharge.
    As is our general practice, we proposed in the FY 2025 IPF proposed 
rule (89 FR 23150) that if more recent data became available, we would 
use such data, if appropriate, to derive the final FY 2025 IPF market 
basket update for the final rule. As noted in that rule and above, the 
projection of the 2021-based IPF market basket is based on the most 
recent forecast from IGI, a nationally recognized economic and 
financial forecasting firm with which CMS contracts to forecast the 
price proxies of the market baskets. We also note that when developing 
its forecast for labor prices, IGI considers overall labor market 
conditions (including rise in contract labor employment due to tight 
labor market conditions), as well as trends in contract labor wages, 
which both have an impact on wage pressures for workers employed 
directly by the hospital. For this final rule, based on the more recent 
IGI second quarter 2024 forecast with historical data through the first 
quarter of 2024, the projected 2021-based IPF market basket increase 
factor for FY 2025 is 3.3 percent, which is 0.2 percentage point higher 
than the projected FY 2025 market basket increase factor in the 
proposed rule, and reflects an increase in compensation prices of 3.7 
percent. We note that the 10-year historical average (2014 through

[[Page 64587]]

2023) growth rate of the 2021-based IPF market basket is 2.7 percent 
with compensation prices increasing 2.9 percent.
    Comment: One commenter recommended that CMS consider reconfiguring 
how it projects its annual payment updates. They stated that most 
years, CMS offers modest increases to the payment rates, largely driven 
by its analysis of cost data from prior years. The commenter stated 
that CMS payment updates have continued to lag, further expanding the 
gap between the cost of providing care and the reimbursement received 
from the public payers. They suggested that CMS work with its 
Congressional partners to raise awareness and address the underfunding 
of health care services. One commenter did not understand why the 
proposed FY 2025 market basket increase is lower than the FY 2024 
market basket increase or why the proposed FY 2025 productivity 
adjustment is higher than the FY 2024 productivity adjustment (88 FR 
51076 through 51077).
    Response: The projection of the 2021-based IPF market basket is 
based on the most recent forecast from IGI. The market basket 
percentage increase is a forecast of the price pressures that IPFs are 
expected to face in 2025. As projected by IGI and other independent 
forecasters, upward price pressures are expected to be less significant 
in 2025 relative to 2022 through 2024. IGI's latest forecast of prices 
facing hospitals in FY 2025 reflects overall economic and industry-
specific influences. We note that these projections do not reflect 
analysis of cost data from prior years, as stated by the commenter.
    Comment: One commenter requested that CMS ensure mechanisms are put 
in place to capture costs (that is, staffing, capital expense, 
pharmaceuticals, emerging evidence-based interventions) accurately now 
and in the future with as little administrative burden as possible.
    Response: We appreciate the commenter's suggestion on the topic of 
data collection. As stated in the FY 2024 IPF final rule, (88 FR 51057 
through 51081), the 2021-based IPF market basket major cost weights 
were derived using the 2021 Medicare cost reports (CMS Form 2552-10, 
OMB No. 0938-0050) for freestanding and hospital-based IPFs. The 
Medicare cost report data captures detailed expenses for IPFs 
(including but not limited to wages and salaries, employee benefits, 
contract labor, pharmaceuticals, and capital). We continue to encourage 
all providers to report complete and accurate cost data on the Medicare 
cost reports--particularly on Worksheet S3, part V, which in prior 
years has had limited reporting as discussed in the FY 2024 IPF PPS 
final rule (88 FR 51060), but importantly captures detailed 
compensation costs.
    Comment: One commenter opposed the proposal to reduce the federal 
per diem base rate from $895.63 to $874.93. They stated with the cost 
of labor, benefits, pharmacy, and other supplies increasing much 
greater than inflation, a 2.31 percent decrease is unacceptable. They 
stated that hospitals are already losing money at the current per diem 
rate, and anything less than a market basket increase of at least 3 
percent, which is comparable to other market basket increases, is 
insufficient. They stated that there is a shortage of valuable IPF 
beds, and that cutting reimbursement will exacerbate the issue.
    Response: We appreciate the commenter's concern, and we note that 
although we proposed a decrease to the federal per diem base rate, we 
estimated that payments under the IPF PPS would increase by 
approximately 2.6 percent overall after all payment adjustments are 
applied. As stated in the FY 2025 IPF PPS proposed rule (89 FR 23149), 
based on IGI's fourth quarter 2023 forecast with historical data 
through the third quarter of 2023, we proposed a 2021-based IPF market 
basket increase for FY 2025 of 3.1 percent. As mandated by the Act, we 
also proposed to reduce the 3.1 percent IPF market basket increase by 
the proposed 0.4 percentage point productivity adjustment, which was 
also based on IGI's fourth quarter 2023 forecast. As stated in the FY 
2025 IPF PPS proposed rule (89 FR 23153), for the proposed FY 2025 
Federal per diem base rate, we applied the payment rate update of 2.7 
percent to the FY 2024 Federal per diem base rate of $895.63. Then, we 
also applied the proposed wage index budget neutrality factor of 0.9998 
and a proposed refinement standardization factor of 0.9514 to yield a 
proposed Federal per diem base rate of $874.93 for FY 2025. As required 
by section 1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) 
of the CAA, 2023, proposed revisions to the IPF PPS adjustment factors 
must be budget neutral. Therefore, we proposed a refinement 
standardization factor to be applied to the FY 2024 IPF PPS payment 
rates to maintain budget neutrality for FY 2025. This proposed 
refinement standardization factor reduced the proposed Federal per diem 
base rate to account for the overall increase to payments 
(approximately 5.1 percent) that would otherwise occur under the 
revised IPF PPS adjustment factors. As indicated in the proposed rule, 
we note that for this final rule, we are updating the refinement 
standardization factor to 0.9524 based on more recent data. As proposed 
(89 FR 23149), we are also updating the projected 2021-based IPF market 
basket increase for FY 2025 to reflect IGI's more recent second quarter 
2024 forecast with historical data through the first quarter of 2024. 
For the final rule, the projected 2021-based IPF market basket increase 
for FY 2025 is 3.3 percent. We believe the 2021-based IPF market basket 
increase for FY 2025 adequately reflects the price increases IPFs are 
projected to face since the index reflects the mix of inputs used to 
provide IPF services.
    Comment: Several commenters expressed concern about the application 
of the productivity adjustment stating that the COVID-19 public health 
emergency (PHE) has had unimaginable impacts on U.S. productivity and 
that most estimates of labor productivity highlight uncharacteristic 
reductions. They stated that even before the PHE, the CMS Office of the 
Actuary (OACT) indicated that hospital productivity will be less than 
the general economy-wide productivity, though they note the general 
economy-wide measure is required by law to be used to derive the 
productivity adjustment. They requested that CMS use its ``special 
exceptions and adjustments'' authority to eliminate the productivity 
adjustment for FY 2025.
    One commenter stated that hospitals continue to encounter 
difficulties obtaining nurses and nursing assistants to care for 
patients, and these struggles could potentially be exacerbated by the 
recently finalized minimum staffing requirement at nursing facilities. 
They argued that these issues should be accounted for when determining 
a productivity factor. One commenter requested CMS lower the 
productivity adjustment factor to the rate used in FY 2024, which was 
0.2 percentage point.
    Response: Section 1886(s)(2)(A)(i) of the Act requires the 
application of the productivity adjustment described in section 
1886(b)(3)(xi)(II) of the Act. As required by statute, the FY 2025 
productivity adjustment is derived based on the 10-year moving average 
growth in economy-wide productivity for the period ending FY 2025. We 
acknowledge the concerns of the commenters regarding the 
appropriateness of the productivity adjustment and potential impacts of 
other rulemaking, including minimum nurse staffing requirements; 
however, we are required pursuant to section 1886(s)(2)(A)(i) of the 
Act to apply the

[[Page 64588]]

specific productivity adjustment. Because that provision specifically 
requires application of the productivity adjustment, we do not believe 
section 1886(s) of the Act permits the Secretary discretion to remove 
it from the calculation of the market basket update.
    As stated in the FY 2025 IPF proposed rule (89 FR 23149), the 
United States Department of Labor's Bureau of Labor Statistics (BLS) 
publishes the official measures of annual economy-wide, private nonfarm 
business total factor productivity (previously referred to as annual 
economy-wide, private nonfarm business multifactor productivity). IGI 
forecasts total factor productivity consistent with BLS methodology by 
forecasting the detailed components of TFP. 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.
    We believe our methodology for the productivity adjustment is 
consistent with the statute that states the productivity adjustment is 
equal to the 10-year moving average of changes in annual economy-wide 
private nonfarm business multi-factor productivity (as projected by the 
Secretary for the 10-year period ending with the applicable fiscal 
year, year, cost reporting period, or other annual period).
    The FY 2025 proposed productivity adjustment of 0.4 percent was 
based on IGI's forecast of the 10-year moving average of annual 
economy-wide private nonfarm business TFP, reflecting historical data 
through 2022 as published by BLS and forecasted TFP for 2023 through 
2025. The higher productivity adjustment for FY 2025 (0.4 percent 
proposed and 0.5 percent for the final rule) compared to FY 2024 (0.2 
percent) is primarily a result of incorporating BLS revised historical 
data through 2022 and preliminary historical growth in TFP for 2023, 
and an updated forecast for TFP growth for 2024 reflecting higher 
expected growth in economic output.
    Finally, we note that CMS appreciates the concerns that the 
commenter raised about challenges related to staffing. We remain 
focused on improving the health and safety of patients seeking care at 
IPFs, and ensuring access to care.
    Comment: Several commenters stated that in FYs 2022, 2023, and 
2024, CMS provided market basket updates of 2.7 percent, 4.1 percent, 
and 3.5 percent, respectively. They claimed that CMS's actual figures 
have demonstrated the deficiency in these figures, with recent 
estimates showing the market basket for these years to be 5.3 percent, 
4.8 percent, and 3.7 percent, respectively. The commenters argued that 
the ongoing shortcomings of the market basket perpetuate underpayments 
to IPFs since future payment adjustments continue to be based on these 
updates. They stated that given ongoing inflationary pressure, cost 
increases, and the inadequacy of the prior year market basket updates, 
they believe CMS's proposed update for FY 2025 will be insufficient to 
cover costs. They stated that while they appreciate that CMS will 
update the market basket in the final rule based on more recent data, 
they are concerned that it will still be inadequate. They noted that 
when CMS underestimates the market basket update under the Skilled 
Nursing Facility Prospective Payment System (PPS) and the capital input 
price index used in the Inpatient Prospective Payment System (IPPS), 
CMS makes a forecast error adjustment when the error exceeds a 
threshold. The commenters requested a consistent policy between these 
payment systems and implementation of a forecast error adjustment. 
Commenters, anticipating that CMS may respond that rulemaking 
procedures under section 1871 of the Act would not permit adoption of a 
forecast error adjustment for the FY 2023 IPF PPS update because such a 
policy was not proposed, argued that, because the IPF market basket 
update for FY 2025 has been made subject to public comment in the FY 
2025 IPF PPS proposed rule, CMS could finalize a forecast error 
adjustment.
    Several commenters stated that they believed the persistent gap 
between the forecasted market basket percentage increase and the actual 
market basket percentage increase is indefensible on policy grounds, 
particularly when considering what the commenters described as an 
overwhelming urgency of the behavioral health service shortages facing 
the United States. The commenters requested that CMS apply a 0.7 
percentage point increase to the per diem base rate for FY 2025 to 
account for the forecast error for FY 2023.
    Several commenters requested that CMS make a one-time 3.5 percent 
adjustment to the IPF market basket in FY 2025 to account for what the 
commenters consider to be underpayments from FYs 2022 through FY 2024. 
One commenter requested that CMS adopt a one-time forecast error 
adjustment to the FY 2025 IPF PPS update based on the 3.9 percentage 
points difference in the IPF PPS market basket in FYs 2021, 2022, and 
2023.
    Response: We appreciate the concerns of commenters; however, we did 
not propose and are not finalizing a forecast error adjustment for the 
IPF PPS for FY 2025. As we have noted in prior years, the IPF market 
basket updates are set prospectively, which means that the update 
relies on a mix of both historical data for part of the period for 
which the update is calculated and forecasted data for the remainder. 
For instance, the FY 2025 market basket update in this final rule 
reflects historical data through the first quarter of CY 2024 and 
forecasted data through the third quarter of CY 2025.
    While there is no precedent for adjusting for market basket 
forecast error in the IPF payment update, a forecast error can be 
calculated for a prior year by comparing the actual market basket 
increase for a given year less the forecasted market basket increase. 
Due to the uncertainty regarding future price trends, forecast errors 
can be both positive and negative. As of now, the cumulative forecast 
error since IPF PPS inception (rate year 2007 to FY 2023) is -0.2 
percent, which reflects that forecasted market basket updates for each 
payment year for IPFs were higher than the actual market basket updates 
from 2012 through 2020 (with the exception of 2018); the opposite was 
true for 2021 through 2023. Only considering the forecast error for 
years when the IPF market basket update was lower than the actual 
market basket update does not consider the full experience and impact 
of forecast error.
    Comment: One commenter stated that the increasing number of 
beneficiaries who are choosing Medicare Advantage (MA) over Medicare 
fee-for-service is causing additional strain on overall IPF margins. 
They stated that MA is increasing the overall cost to care for patients 
by unilaterally implementing overly restrictive medical necessity and 
prior authorization processes and increasing the administrative burden 
of obtaining payments. They stated that although MA plans are receiving 
higher increases in payment rates than providers, the rate increases 
paid to MA plans are not actually materializing in the form of higher 
payments to providers. The commenter recommended CMS adjust Medicare 
fee-for-service payments to compensate for MA losses incurred.
    Response: We appreciate the concerns regarding payment adequacy 
under the IPF PPS; however, we do not agree that it would be 
appropriate to adjust IPF PPS payments to compensate providers for 
losses that IPFs may incur under other payors. Section 124 of the BBRA 
mandated that the Secretary develop a per diem PPS for inpatient 
hospital

[[Page 64589]]

services furnished in psychiatric hospitals and psychiatric units. As 
required by Sec.  412.424(c)(6)(ii), the FY 2025 IPF PPS Federal per 
diem base rate is based on an increase factor to adjust for the most 
recent estimate of increases in the prices of an appropriate market 
basket of goods and services provided by inpatient psychiatric 
facilities. Specifically, we applied the 2021-based IPF market basket 
increase for FY 2025, reduced by the productivity adjustment, which as 
noted earlier in this final rule measures expected price inflation for 
IPF providers in FY 2025.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to update IPF PPS payment rates using the 
latest available productivity-adjusted market basket increase factor. 
Based on IGI's more recent second quarter 2024 forecast with historical 
data through the first quarter of 2024, the projected 2021-based IPF 
market basket increase for FY 2025 rule is 3.3 percent and the 
projected productivity adjustment is 0.5 percent.
3. FY 2025 IPF Labor-Related Share
    Due to variations in geographic wage levels and other labor-related 
costs, we believe that payment rates under the IPF PPS should continue 
to be adjusted by a geographic wage index, which will apply to the 
labor-related portion of the Federal per diem base rate (hereafter 
referred to as the labor-related share). The labor-related share is 
determined by identifying the national average proportion of total 
costs that are related to, influenced by, or vary with the local labor 
market. We proposed to continue to classify a cost category as labor-
related if the costs are labor-intensive and vary with the local labor 
market.
    Based on our definition of the labor-related share and the cost 
categories in the 2021-based IPF market basket, we proposed to continue 
to include in the labor-related share the sum of the relative 
importance of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services; and a portion of the Capital-Related relative 
importance from the 2021-based IPF market basket. For more details 
regarding the methodology for determining specific cost categories for 
inclusion in the labor-related share based on the 2021-based IPF market 
basket, we refer readers to the FY 2024 IPF PPS final rule (88 FR 51078 
through 51081).
    The relative importance reflects the different rates of price 
change for these cost categories between the base year (FY 2021) and FY 
2025. Based on IGI's fourth quarter 2023 forecast of the 2021-based IPF 
market basket, the sum of the FY 2025 relative importance moving 
average of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services was 75.7 percent. We proposed, consistent with prior 
rulemaking, that the portion of Capital-Related costs that are 
influenced by the local labor market is 46 percent. Since the relative 
importance for Capital-Related costs was 6.8 percent of the 2021-based 
IPF market basket for FY 2025, we proposed to take 46 percent of 6.8 
percent to determine a labor-related share of Capital-Related costs for 
FY 2025 of 3.1 percent. Therefore, we proposed a total labor-related 
share for FY 2025 of 78.8 percent (the sum of 75.7 percent for the 
labor-related share of operating costs and 3.1 percent for the labor-
related share of Capital-Related costs). We also proposed that if more 
recent data became available, we would use such data, if appropriate, 
to determine the FY 2025 labor-related share for the final rule. For 
more information on the labor-related share and its calculation, we 
refer readers to the FY 2024 IPF PPS final rule (88 FR 51078 through 
51081). We solicited comments on the proposed labor-related share for 
FY 2025.
    Comment: One commenter supported the proposed increase in the 
labor-related share of the IPF market basket for FY 2025. The commenter 
expected the increase in the labor-related share given their concerns 
about labor costs increasing at a higher rate than other hospital costs 
during the pandemic. They also requested that CMS consider a period 
less than 5 years for the next rebasing and revising of the IPF market 
basket, as they believe the current labor share based on FY 2021 cost 
reports may not fully reflect the increased weight for labor in the 
overall index that hospital experienced during the COVID-19 PHE.
    Response: We appreciate the commenter's request for CMS to consider 
a shorter period than 5 years for the next rebasing. We generally 
rebase the IPF market basket every 5 years, in part because the cost 
weights obtained from the Medicare cost reports generally do not 
indicate a significant change in the weights over shorter intervals. 
However, we acknowledge the commenter's concern and the possible impact 
of the PHE on the cost weights. We regularly monitor the Medicare cost 
report data to assess whether a rebasing is technically appropriate, 
and we will continue to do so in the future. Consistent with historical 
practice, a rebasing of the IPF market basket would be proposed in 
rulemaking and subject to public comments.
    Comment: One commenter encouraged CMS to consider collecting 
information on staffing. The commenter noted that CMS calculates a 
labor share for IPFs of 78.8 percent for FY 2025, which they note is 
higher than other institutional settings (e.g., labor costs comprise 
less than 70 percent of IPPS hospital costs, 74 percent of inpatient 
rehabilitation facility costs, and 71 percent of skilled nursing 
facility costs). However, they noted there was little available 
information on the mix (and quantity) of staff employed by IPFs and how 
staff spend their time across various IPF tasks (such as inpatient 
assessment, counseling, drug management, nursing care, and behavioral 
monitoring). They further stated that IPF staffing data would provide 
essential insights into the variation in costs and quality of care 
across providers, enabling CMS (and Medicare beneficiaries, if data 
were publicly available) to better understand the services they are 
purchasing and using. The commenter stated there is a precedent in 
Medicare for regularly collecting staffing information, as SNFs are 
required to submit detailed staffing data through the Payroll Based 
Journal. The commenter stated payroll data are considered the gold 
standard for measuring staffing; the data are submitted electronically 
and can be audited by other data sources.
    Response: We appreciate the commenter's suggestion to collect more 
information on staffing at IPFs. We will take these comments into 
consideration as we explore the possibility of collecting this 
information in the future.
    Final Decision: After consideration of the comments, we are 
finalizing a FY 2025 labor-related share based on the latest available 
data. Based on IGI's second quarter 2024 forecast of the 2021-based IPF 
market basket, the sum of the FY 2025 relative importance moving 
average of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
Related Services is 75.7 percent. Since the relative importance for 
Capital-Related costs is 6.7 percent of the 2021-based IPF market 
basket for FY 2025, we take 46 percent of 6.7 percent to determine a 
labor-related share of Capital-Related costs for FY 2025 of 3.1 
percent. Therefore, the total labor-related share for FY 2025 is 78.8

[[Page 64590]]

percent (the sum of 75.7 percent for the labor-related share of 
operating costs and 3.1 percent for the labor-related share of Capital-
Related costs).
    Table 1 shows the final FY 2025 labor-related share and the final 
FY 2024 labor-related share using the 2021-based IPF market basket 
relative importance.
[GRAPHIC] [TIFF OMITTED] TR07AU24.001

B. Revisions to the IPF PPS Rates for FY 2025

    The IPF PPS is based on a standardized Federal per diem base rate 
calculated from the IPF average per diem costs and adjusted for budget 
neutrality in the implementation year. The Federal per diem base rate 
is used as the standard payment per day under the IPF PPS and is 
adjusted by the patient-level and facility-level adjustments that are 
applicable to the IPF stay. A detailed explanation of how we calculated 
the average per diem cost appears in the RY 2005 IPF PPS final rule (69 
FR 66926).
1. Determining the Standardized Budget Neutral Federal per Diem Base 
Rate
    Section 124(a)(1) of the BBRA requires that we implement the IPF 
PPS in a budget neutral manner. In other words, the amount of total 
payments under the IPF PPS, including any payment adjustments, must be 
projected to be equal to the amount of total payments that will have 
been made if the IPF PPS were not implemented. Therefore, we calculated 
the budget neutrality factor by setting the total estimated IPF PPS 
payments to be equal to the total estimated payments that will have 
been made under the Tax Equity and Fiscal Responsibility Act of 1982 
(TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been 
implemented. A step-by-step description of the methodology used to 
estimate payments under the TEFRA payment system appears in the RY 2005 
IPF PPS final rule (69 FR 66926).
    Under the IPF PPS methodology, we calculated the final Federal per 
diem base rate to be budget neutral during the IPF PPS implementation 
period (that is, the 18-month period from January 1, 2005, through June 
30, 2006) using a July 1 update cycle. We updated the average cost per 
day to the midpoint of the IPF PPS implementation period (October 1, 
2005), and this amount was used in the payment model to establish the 
budget neutrality adjustment.
    Next, we standardized the IPF PPS Federal per diem base rate to 
account for the overall positive effects of the IPF PPS payment 
adjustment factors by dividing total estimated payments under the TEFRA 
payment system by estimated payments under the IPF PPS. The information 
concerning this standardization can be found in the RY 2005 IPF PPS 
final rule (69 FR 66932) and the RY 2006 IPF PPS final rule (71 FR 
27045). We then reduced the standardized Federal per diem base rate to 
account for the outlier policy, the stop loss provision, and 
anticipated behavioral changes. A complete discussion of how we 
calculated each component of the budget neutrality adjustment appears 
in the RY 2005 IPF PPS final rule (69 FR 66932 through 66933) and in 
the RY 2007 IPF PPS final rule (71 FR 27044 through 27046). The final 
standardized budget neutral Federal per diem base rate established for 
cost reporting periods beginning on or after January 1, 2005 was 
calculated to be $575.95.
    The Federal per diem base rate has been updated in accordance with 
applicable statutory requirements and 42 CFR 412.428 through 
publication of annual notices or proposed and final rules. A detailed 
discussion on the standardized budget neutral Federal per diem base 
rate and the Electroconvulsive Therapy (ECT) payment per treatment 
appears in the FY 2014 IPF PPS update notice (78 FR 46738 through 
46740). These documents are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html.
    As discussed in section IV.B.2 of this final rule, we proposed to 
revise the patient-level adjustment factors and increase the ECT 
payment amount for FY 2025. Section 1866(s)(5)(D)(iii) of the Act, as 
added by section 4125(a) of the CAA, 2023, requires that revisions to 
the IPF PPS adjustment factors must be made budget-neutrally. 
Therefore, as discussed in section IV.F of this final rule, we proposed 
to apply a

[[Page 64591]]

standardization factor to the FY 2025 base rate that takes these 
refinements into account to keep total IPF PPS payments budget neutral.
2. Increase in the Electroconvulsive Therapy (ECT) Payment per 
Treatment
a. Background
    In the RY 2005 IPF PPS final rule (69 FR 66951), we analyzed the 
costs of IPF stays that included ECT treatment using the FY 2002 MedPAR 
data based on comments we received on the RY 2005 IPF PPS proposed 
rule. Consistent with the comments we received about ECT, our analysis 
and review indicated that cases with ECT treatment are substantially 
more costly than cases without ECT treatment. Based on this analysis, 
in that final rule we finalized an additional payment for each ECT 
treatment furnished during the IPF stay. This ECT payment per treatment 
is made in addition to the per diem and outlier payments under the IPF 
PPS. To receive the payment per ECT treatment, IPFs must indicate on 
their claims the revenue code and procedure code for ECT (Rev Code 901; 
procedure code 90870) and the number of units of ECT, that is, the 
number of ECT treatments the patient received during the IPF stay.
    To establish the ECT per treatment payment, we used the pre-scaled 
and pre-adjusted median cost for procedure code 90870 developed for the 
Hospital Outpatient Prospective Payment System (OPPS), based on 
hospital claims data. We explained in the RY 2005 IPF PPS final rule 
that we used OPPS data because after a careful review and analysis of 
IPF claims, we were unable to separate out the cost of a single ECT 
treatment (69 FR 66922). We used the unadjusted hospital claims data 
under the OPPS because we did not want the ECT payment under the IPF 
PPS to be affected by factors that are relevant to OPPS, but not 
specifically applicable to IPFs. The median cost was then standardized 
and adjusted for budget neutrality. We also adjusted the ECT rate for 
wage differences in the same manner that we adjust the per diem rate.
    Since the ECT payment rate was established in the RY 2005 IPF PPS 
rule, it has been updated annually by application of each year's market 
basket, productivity adjustment, and wage index budget neutrality 
factor to the previous year's ECT payment rate (referred to as our 
``standard methodology'' in this section). While the ECT payment rate 
has been updated each year by these factors, we have not recalculated 
the ECT payment per treatment based on more recent cost data since the 
establishment of the IPF PPS.
b. Increase to the Electroconvulsive Therapy Payment per Treatment
    For the FY 2025 IPF PPS proposed rule, we analyzed data in both the 
IPF PPS and the OPPS. In the IPF PPS setting, our analysis of recent 
IPF PPS data indicates that IPF costs have increased for stays that 
include ECT treatments. As discussed in the next paragraph, our 
analysis of these costs led us to consider whether the current payment 
per treatment for ECT is aligned with the additional costs associated 
with stays that include ECT treatments. We began by analyzing IPF stays 
with ECT treatment using the CY 2022 Medicare Provider and Analysis 
Review (MedPAR) data. IPF stays with ECT treatment comprised about 1.7 
percent of all stays, which is a decrease from the FY 2002 MedPAR data 
discussed in the RY 2005 IPF PPS final rule, where stays with ECT 
treatment were 6.0 percent of all IPF stays. A total of 288 IPF 
facilities had stays with ECT treatment in 2022, with an average 6.7 
units of ECT per stay. We compared the total cost for stays with and 
without ECT treatment, and found that IPF stays with ECT treatment were 
approximately three times more costly than IPF stays without ECT 
treatment ($44,687.50 per stay vs. $15,432.30 per stay). Most of the 
variance in cost was due to differences in the IPF length of stay (LOS) 
(28.00 days for stays with ECT treatment vs. 13.43 days for stays 
without ECT treatment). We note that the IPF PPS makes additional per 
diem payments for longer lengths of stay, which makes the total payment 
larger for a longer stay. However, we also observed that there are 
differences in the per-day cost for stays with and without ECT. We 
calculated the average cost per day for stays with and without ECT 
treatment and found that stays with ECT treatment have an average cost 
per day of $1,595.76, while stays without ECT treatment have an average 
cost per day of $1,149.51.
    Furthermore, as we discuss in section IV.C.3.d.(2) of this final 
rule, our latest regression analysis includes a control variable to 
account for the presence of ECT during an IPF stay. That control 
variable indicates that, holding all other patient-level and facility-
level factors constant, there is a statistically significant increase 
in cost per day for IPF stays that include ECT, further demonstrating 
that resource use is higher for IPF stays with ECT than those without 
ECT. As we previously noted in the RY 2005 IPF PPS final rule (69 FR 
66922), IPF claims and cost data are not sufficiently granular to 
identify the per-treatment cost of ECT. Therefore, we examined the 
difference in ancillary costs for IPF stays with and without ECT 
treatment. In the CY 2022 MedPAR data, the ancillary costs per IPF stay 
with ECT treatment were $7,116.85 higher than ancillary costs per IPF 
stay without ECT treatment. The ancillary costs were calculated as 
follows: for each ancillary department (for example, drugs or labs), 
the charges were multiplied by the department-level CCR, and those 
department-level costs were summed across departments for each stay. 
The average ancillary costs per stay were calculated accordingly for 
stays with and without ECT treatment, revealing that average ancillary 
costs per day are three times higher for stays with ECT treatment: 
$99.36 for stays without ECT treatment versus $301.77 for stays with 
ECT treatment. Accounting for differences in length of stay between 
stays with and without ECT, the average additional ancillary cost per 
ECT unit was approximately $849.72.
    We noted that the application of our standard methodology for 
updating the ECT payment would have resulted in an FY 2025 payment of 
$377.54. We note that for this final rule, that figure is $378.23 per 
ECT treatment, based on the FY 2024 ECT payment amount of $385.58, 
increased by the market basket update of 2.8 percent and reduced by the 
FY 2025 wage index budget neutrality factor of 0.9996 and a refinement 
standardization factor of 0.9546, which is the standardization factor 
that would account for all other proposed refinements without 
increasing the ECT per treatment. As we noted above, this ECT payment 
would be added to the per diem and any applicable outlier payments for 
the entire stay. CMS considered this rate in proposing to adjust the 
ECT per treatment rate. However, the analysis of ancillary costs for 
IPF stays with ECT treatment suggested that a further increase to the 
current ECT payment amount per treatment could better align IPF PPS 
payments with the increased costs of furnishing ECT. The ancillary cost 
data showed that costs for furnishing ECT have risen by a factor 
greater than the standard methodology for updating the rate will adjust 
for.
    It continues to be the case that, as we discussed in the RY 2005 
IPF PPS final rule, current IPF cost and claims data are not 
sufficiently granular to identify the per-treatment cost of ECT. We 
believe that using the costs in the OPPS setting are the most accurate 
for purposes of updating the ECT per treatment rate because we believe 
this treatment requires comparable resources

[[Page 64592]]

when performed in outpatient and inpatient settings. Thus, we analyzed 
the most recent OPPS cost information to consider changes to the ECT 
payment per treatment for FY 2025.
    The original methodology for determining the ECT payment per 
treatment was based on the median cost for procedure code 90870 
developed for the OPPS, as discussed in the RY 2005 IPF PPS final rule 
(69 FR 66951). Since that time, the OPPS has adopted certain changes to 
its methodology for calculating costs. In the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68259 through 68270), CMS finalized a 
methodology for developing the relative payment weights for Ambulatory 
Payment Classifications using geometric mean costs instead of median 
costs. We explained that geometric means better capture the range of 
costs associated with providing services, including those cases where 
very efficient hospitals have provided services at much lower costs. 
While medians and geometric means both capture the impact of uniform 
changes, that is, those changes that influence all providers, only 
geometric means capture cost changes that are introduced slowly into 
the system on a case-by-case or hospital-by-hospital basis, allowing us 
to detect changes in the cost of services earlier.
    We believe the rationale for using geometric mean cost in the OPPS 
setting as the underpinning methodology for establishing payments 
applies equally to the costs of providing ECT on a per treatment basis 
under the IPF PPS. Therefore, in considering changes for the IPF PPS 
ECT payment per treatment for FY 2025, we compared the costs observed 
in the IPF setting to the geometric mean cost for an ECT treatment 
posted as part of the CY 2024 OPPS/ASC update, which is based on CY 
2022 outpatient hospital claims. Although we proposed to increase the 
ECT payment with reference to the CY 2024 OPPS ECT geometric mean cost 
for FY 2025, we did not propose to adopt the OPPS rate (which is 
distinct from the geometric mean cost) for the ECT payment per 
treatment for FY 2025 because the final OPPS rates include policy 
decisions and payment rate updates that are specific to the OPPS. We 
intend to continue to monitor the costs associated with ECT treatment 
and may propose adjustments in the future as needed.
    The pre-scaled and pre-adjusted CY 2024 OPPS geometric mean cost 
for ECT is $675.93. Comparatively, the FY 2024 IPF ECT payment rate was 
$385.58 (88 FR 51054). As discussed in the prior paragraphs, our 
analysis of updated ancillary cost data indicates that the IPF PPS ECT 
payment rate per treatment, when updated according to the standard 
methodology alone, has not kept pace with the cost of furnishing the 
treatment in the IPF setting. As we stated previously, we believe this 
treatment requires comparable resources when performed in outpatient 
and inpatient settings. Therefore, we proposed to use the pre-scaled 
and pre-adjusted CY 2024 OPPS geometric mean cost of $675.93 as the 
basis for the IPF PPS ECT payment per treatment in FY 2025, as 
discussed below. We proposed to update $675.93 by the FY 2025 IPF PPS 
payment rate update of 2.7 percent (3.1 percent IPF market basket 
increase, reduced by the 0.4 percentage point productivity adjustment), 
and the wage index budget neutrality factor of 0.9998 for FY 2025, in 
alignment with our current standard methodology. We also proposed to 
update this amount based on more recent data of the market basket, 
productivity adjustment, and wage index budget neutrality factor.
    To account for budget neutrality, as discussed in section IV.F of 
this final rule, we proposed to apply a refinement standardization 
factor to the FY 2025 IPF PPS Federal per diem base rate and to the ECT 
payment amount per treatment to account for this proposed change to the 
ECT payment amount per treatment and all proposed changes to the 
patient-level adjustment factors and to the ED adjustment factor for FY 
2025. We noted that this proposed increase to the ECT per treatment 
amount would be associated with a minor decrease to the IPF Federal per 
diem base rate as a result of the refinement standardization factor 
(0.9514 instead of 0.9536). We estimated that this change would 
increase payments for IPFs that provide ECT, and would decrease 
payments for IPFs that do not provide ECT. However, we explained that 
the decrease in payments associated with this change would be no more 
than approximately 0.2 percent, which would be offset by various other 
proposed changes such as the proposed wage index changes, proposed 
revisions to the IPF PPS patient-level adjustments, and the proposed 
market basket increase for FY 2025.
    We noted that we have monitored the provision of ECT through 
analysis of claims data since the beginning of the IPF PPS and have not 
observed any indicators that payment is inappropriately incentivizing 
the provision of ECT to IPF patients. We stated that we intend to 
continue monitoring the provision of ECT through further analysis of 
IPF PPS claims data. In addition, we presented a detailed discussion of 
the distributional impacts of this proposed change and we welcomed 
comments regarding our analysis, including any comments that could 
inform our understanding of where ECT costs are allocated in cost 
reports in order to potentially inform improved collection of data on 
ECT treatment costs in the IPF setting. We also welcomed comments on 
whether it may be appropriate to collect additional ECT-specific costs 
on the hospital cost report. Lastly, we proposed that if more recent 
data became available, we would use such data, if appropriate, to 
determine the FY 2025 Federal per diem base rate and ECT payment per 
treatment for the FY 2025 IPF PPS final rule.
    Comment: The majority of commenters supported our proposal to 
increase the ECT payment per treatment, noting that the increased 
payment would help protect access to this treatment for patients who 
need it. A few commenters suggested that we could phase in the increase 
over several years, thus mitigating a reduction to the base rate 
through the refinement standardization. One of these commenters 
suggested tying each smaller increase to a quality measure, thus 
providing additional oversight measures to monitor for unintended 
consequences, while another advocated for phasing in the increase over 
three years or phasing in the resulting budget neutrality factor over 
multiple years. One commenter recommended implementing a smaller 
increase until more detailed data on ECT costs is available in IPF cost 
reports.
    Response: We appreciate the commenters' support for this proposal 
regarding the ECT payment per treatment. As we noted in the preamble to 
the FY 2025 proposed rule, the decrease in payments associated with 
this change would be no more than approximately 0.2 percent, or a 
reduction to the IPF federal per diem base rate of approximately $2.03, 
which we noted would be offset for particular providers by various 
other proposed changes such as the proposed wage index changes, 
proposed revisions to the IPF PPS patient-level adjustments, and the 
proposed market basket increase for FY 2025. We do not agree that the 
effect of the increase in the ECT payment per treatment on the base 
rate is substantial enough to warrant phasing in over time. In response 
to the commenter who suggested tying increases to a quality measure, we 
thank you for your comment and will consider your suggestion when 
developing future measures. We will also continue monitoring ECT costs 
as we receive

[[Page 64593]]

more data on ancillary costs in the future.
    Comment: One commenter noted that ECT costs are reported on cost 
report line 76, and requested that the outdated term ``Electroshock 
Therapy'' in the cost report instructions be changed to 
``Electroconvulsive Therapy'' or ECT.
    Response: We thank commenters for their suggestion and will 
consider revising the cost report terminology. We note that the 
Medicare Claims Processing Manual (CPM) 100-04; chapter 3, Sec.  
190.7.3, uses the suggested terminology.
    Comment: Two commenters were critical of the use of ECT out of 
concern for patient safety or concern that the treatment is not 
sufficiently regulated.
    Response: We appreciate commenters expressing their concerns; 
however, these comments are out of scope of this rule because our 
proposal did not relate to coverage of ECT or the practice of medicine. 
Rather, we proposed to refine the payment for a procedure paid for 
under the IPF PPS. We remind readers that CMS's coverage requirements 
for ECT can be found at: https://www.cms.gov/medicare-coverage-database/search-results.aspx?keyword=electroconvulsive+therapy&keywordType=starts&areaId=all&docType=NCA,CAL,NCD,MEDCAC,TA,MCD,6,3,5,1,F,P&contractOption=all.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to use the pre-scaled and preadjusted CY 
2024 OPPS geometric mean cost of $675.93 as the basis for the IPF PPS 
ECT payment per treatment in FY 2025. Accordingly, we will apply the 
final FY 2025 IPF PPS payment rate update of 2.8 percent (3.3 percent 
IPF market basket percentage increase, reduced by the 0.5 percentage 
point productivity adjustment), the final refinement standardization 
factor of 0.9524, and the final wage index budget neutrality factor of 
0.9996 for FY 2025, in alignment with our current standard methodology. 
A complete discussion of the final FY 2025 ECT payment per treatment 
and final refinement standardization factor is found in section II.B.3 
of this final rule. A detailed discussion of the distributional impacts 
of this proposed change is found in section VIII.C of this final rule.
    As we stated in the proposed rule, we intend to continue monitoring 
the provision of ECT through further analysis of IPF PPS claims data. 
(89 FR 23153)
    IPFs must include a valid procedure code for ECT services provided 
to IPF beneficiaries to bill for ECT services, as described in our 
Medicare Claims Processing Manual, Chapter 3, Section 190.7.3 
(available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf). There are no changes to the ECT 
procedure codes used on IPF claims in the final update to the ICD-10-
PCS code set for FY 2025. Addendum B to this proposed rule shows the 
ECT procedure codes for FY 2025 and is available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.
3. Update of the Federal per Diem Base Rate and Electroconvulsive 
Therapy Payment per Treatment
    The current (FY 2024) Federal per diem base rate is $895.63 and the 
ECT payment per treatment is $385.58. For the final FY 2025 Federal per 
diem base rate, we applied the payment rate update of 2.8 percent--that 
is, the final 2021-based IPF market basket percentage increase for FY 
2025 of 3.3 percent reduced by the final productivity adjustment of 0.5 
percentage point--the final wage index budget neutrality factor of 
0.9996 (as discussed in section IV.D.1 of this final rule), and a final 
refinement standardization factor of 0.9524 (as discussed in section 
IV.F of this final rule) to the FY 2024 Federal per diem base rate of 
$895.63, yielding a final Federal per diem base rate of $876.53 for FY 
2025. As discussed in section IV.B.2 of this final rule, we are 
finalizing our proposal to increase the ECT payment per treatment for 
FY 2025 in addition to our routine updates to the rate. We applied the 
2.8 percent IPF market basket update, the 0.9996 wage index budget 
neutrality factor, and the 0.9524 refinement standardization factor to 
the final payment per treatment based on the CY 2024 OPPS geometric 
mean cost of $675.93, yielding a final ECT payment per treatment of 
$661.52 for FY 2025.
    Section 1886(s)(4)(A)(i) of the Act requires that for RY 2014 and 
each subsequent RY, in the case of an IPF that fails to report required 
quality data with respect to such RY, the Secretary will reduce any 
annual update to a standard Federal rate for discharges during the RY 
by 2.0 percentage points. Therefore, we applied a 2.0 percentage point 
reduction to the annual update to the Federal per diem base rate and 
the proposed ECT payment per treatment as follows:
     For IPFs that fail to report required data under the IPFQR 
Program, we will apply a 0.8 percent payment rate update--that is, the 
final IPF market basket increase for FY 2025 of 3.3 percent reduced by 
the productivity adjustment of 0.5 percentage point for an update of 
2.8 percent, and further reduced by 2.0 percentage points in accordance 
with section 1886(s)(4)(A)(i) of the Act. We will also apply the 
refinement standardization factor of 0.9524 and the wage index budget 
neutrality factor of 0.9996 to the FY 2024 Federal per diem base rate 
of $895.63, yielding a Federal per diem base rate of $859.48 for FY 
2025.
     For IPFs that fail to report required data under the IPFQR 
Program, we will apply the 0.8 percent annual payment rate update, the 
0.9524 refinement standardization factor, and the 0.9996 wage index 
budget neutrality factor to the payment per treatment based on the CY 
2024 OPPS geometric mean cost of $675.93, yielding an ECT payment per 
treatment of $648.65 for FY 2025.

C. Updates and Revisions to the IPF PPS Patient-Level Adjustment 
Factors

1. Overview of the IPF PPS Adjustment Factors and Revisions
    The current (FY 2024) IPF PPS payment adjustment factors were 
derived from a regression analysis of 100 percent of the FY 2002 
Medicare Provider and Analysis Review (MedPAR) data file, which 
contained 483,038 cases. For a more detailed description of the data 
file used for the regression analysis, we refer readers to the RY 2005 
IPF PPS final rule (69 FR 66935 through 66936).
    For FY 2025, we proposed to implement revisions to the methodology 
for determining payment rates under the IPF PPS. As we noted earlier in 
this FY 2025 IPF PPS final rule, section 1886(s)(5)(D) of the Act, as 
added by section 4125(a) of the CAA, 2023 requires that the Secretary 
implement revisions to the methodology for determining the payment 
rates under the IPF PPS for psychiatric hospitals and psychiatric 
units, effective for FY 2025. The revisions may be based on a review of 
the data and information collected under section 1886(s)(5)(A) of the 
Act. Accordingly, we proposed to revise the patient-level IPF PPS 
payment adjustment factors as discussed in section IV.C.4. of this 
final rule, effective for FY 2025. We explained that we developed 
proposed adjustment factors based on a regression analysis of IPF cost 
and claims data, which is discussed in greater detail in the following 
sections of this final rule. The primary sources of this analysis are 
CY 2019 through 2021 MedPAR files and Medicare cost report data (CMS

[[Page 64594]]

Form 2552-10, OMB No. 0938-0050) \1\ from the FY 2019 through 2021 
Hospital Cost Report Information System (HCRIS). For each year (2019 
through 2021), if a provider did not have a Medicare cost report for 
that year, we used the provider's most recent available Medicare cost 
report prior to the year for which a Medicare cost report was missing, 
going back to as early as 2018. Section IV.C.3 of this final rule 
discusses the development of the proposed revised case-mix adjustment 
regression and the final case-mix regression analysis upon which we are 
basing our final revisions to the FY 2025 IPF PPS patient-level 
adjustment factors.
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    \1\ https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202206-0938-017.
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2. History of IPF PPS Cost and Claims Analyses
    In the FY 2023 IPF PPS proposed rule (87 FR 19428 through 19429), 
we briefly discussed past analyses and areas of interest for future 
refinement, about which we previously solicited comments. CMS also 
released a technical report posted to the CMS website \2\ accompanying 
the rule summarizing these analyses. In that same proposed rule, we 
described the results of the agency's latest analysis of the IPF PPS 
and solicited comments on certain topics from the report. We summarized 
the considerations and findings related to our analyses of the IPF PPS 
adjustment factors in the FY 2023 IPF PPS final rule (46864 through 
46865).
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    \2\ https://www.cms.gov/files/document/technical-report-medicare-program-inpatient-psychiatric-facilities-prospective-payment-system.pdf.
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    In the FY 2024 IPF PPS proposed rule (88 FR 21269 through 21272), 
we requested information from the public to inform revisions to the IPF 
PPS required by the CAA, 2023. Specifically, we sought information 
about which data and information will be most appropriate and useful 
for the purposes of refining IPF PPS payments. We requested information 
related to the specific types of data and information mentioned in the 
CAA, 2023. We also solicited comments on the reporting of ancillary 
charges, such as labs and drugs, on IPF claims. Lastly, we presented 
and solicited comments on the latest results of our analysis of Social 
Drivers of Health (SDOH).
    In response to the requests for information, commenters offered a 
number of suggestions for further analysis, including recommendations 
to consider adjusting payment for patients with sleep apnea, violent 
behavior, and patients that transfer from an acute care unit. We 
discuss the analysis conducted and our findings as related to patient-
level adjustment factors in section IV.C.3 of this final rule.
    In the FY 2025 IPF PPS proposed rule, we explained that the primary 
goal in refining the IPF PPS payment adjustment factors is to pay each 
IPF an appropriate amount for the efficient delivery of care to 
Medicare beneficiaries. We stated that the system must be able to 
account adequately for each IPF's case-mix to allow for both fair 
distribution of Medicare payments and access to adequate care for those 
beneficiaries who require more costly care. We also noted that as 
required by section 1886(s)(5)(D)(iii) of the Act, as added by section 
4125(a) of the CAA, 2023, proposed revisions to the IPF PPS adjustment 
factors must be budget neutral. We explained that we applied a 
refinement standardization factor to the proposed IPF PPS payment rates 
to maintain budget neutrality for FY 2025.
3. Development of the Revised Case-Mix Adjustment Regression
    In the proposed rule, we explained that to ensure that the IPF PPS 
continues to account adequately for each IPF's case-mix, we performed 
an extensive regression analysis of the relationship between the per 
diem costs and both patient and facility characteristics to identify 
those characteristics associated with statistically significant cost 
differences. We discuss the results of this regression analysis in 
section IV.C.3.e. of this final rule. We further discuss final policies 
related to the proposed revisions to the IPF PPS patient-level 
adjustment factors based on this regression analysis in section IV.C.4 
of this final rule.
    As we discussed in the proposed rule, we computed a per diem cost 
for each Medicare inpatient psychiatric stay, including routine 
operating, ancillary, and capital components using information from the 
CY 2019 through CY 2021 MedPAR files and data from the 2019 through 
2021 Medicare cost reports, backfilling with Medicare cost reports from 
the most recent prior year when necessary.
    We began with a 100-percent sample of the CY 2019 through CY 2021 
MedPAR data files, which contain a total of 1,111,459 stays from 1,684 
IPFs. We explained in the proposed rule that we applied several data 
restrictions and exclusions to obtain the set of data used for our 
regression analysis. The MedPAR data files used for this regression 
analysis contain a total of 806,611 stays from 1,643 IPFs, which 
reflect the removal of 41 providers and 304,848 stays with missing or 
erroneous data. To include as many IPFs as possible in the regression, 
we used the cost report information for each provider corresponding to 
the year of claims, when available, and substituted the most recent 
prior available cost report information for routine cost and ancillary 
cost to charge ratios if the corresponding year's data was not 
available.
a. Data Sources
    For the regression analysis, we stated in the proposed rule that we 
chose to use a combined set of CY 2019 through 2021 MedPAR data. Our 
analysis showed that using a combined set of data from multiple years 
yields the most stable and consistent result. We noted that when we 
looked at the results for each year individually, we found that some 
DRGs and comorbidity categories were not statistically significant due 
in part to small sample size. In addition, we noted that during FY 
2020, the U.S. healthcare system undertook an unprecedented response to 
the Public Health Emergency (PHE) declared by the Secretary of the 
Department of Health and Human Services on January 31, 2020 in response 
to the outbreak of respiratory disease caused by a novel (new) 
coronavirus that has been named ``SARS CoV 2'' and the disease it 
causes, which has been named ``coronavirus disease 2019'' (abbreviated 
``COVID-19''). We stated that we believe the aggregated three-year 
regression serves to smooth the impact of changes in utilization driven 
by the COVID-19 PHE, as well as significant changes in staffing and 
labor costs that commenters noted in response to the FY 2023 and FY 
2024 IPF PPS proposed rules. We also explained in the proposed rule 
that we used 2019 through 2021 Medicare cost report data to retain as 
many records as possible for analysis.
    In addition, we explained that we used several other data sources 
to identify the IPF population for analysis and to construct variables 
in the regression model:
     Provider of Services (POS) File: The POS file contains 
facility characteristics including name, address, and types of services 
provided.
     Provider Specific Data for Public Use Files for the IPF 
PPS: The Provider Specific File (PSF) contains data used to calculate 
COLA factors and identify the Core-Based Statistical Area (CBSA). CBSA 
is used to match providers with corresponding wage index data, which is 
used to adjust the calculation of the Federal per diem base rate to 
account for geographic differences in costs.
     Common Working File (CWF) Inpatient Claims Data: The CWF

[[Page 64595]]

contains data regarding ECT treatments provided during an IPF stay.
    In the proposed rule, we noted that among the 1,643 providers 
included in the regression analysis sample, the majority had their most 
recent Medicare cost report information corresponding to the year of 
the MedPAR data file. Specifically, for the CY 2019 MedPAR data file, 
99.5 percent (1,551 providers) used FY 2019 Medicare cost reports, and 
0.5 percent (8 providers) used FY 2018 Medicare cost reports. For CY 
2020, 99.7 percent (1,523 providers) used FY 2020 Medicare cost 
reports, and 0.3 percent (5 providers) used FY 2019 Medicare cost 
reports. For CY 2021, 97.6 percent (1,435 providers) used FY 2021 
Medicare cost reports, and 2.4 percent (35 providers) used FY 2020 
Medicare cost reports. We explained that this approach allowed us to 
use the most current and relevant cost report data, ensuring the 
robustness and accuracy of our analysis.
b. Trims and Assumptions
    In the proposed rule, we explained that to identify the IPF 
population for analysis, we matched MedPAR records to facility-level 
information from Medicare cost reports, the POS file, and the PSF. We 
further explained that we included MedPAR stays that met the following 
criteria:
     Hospital CMS Certification Number (CCN) contains ``40,'' 
``41,'' ``42,'' ``43,'' or ``44'' in the third and fourth position or a 
special unit code of ``S'' or ``M'' for psychiatric unit or psychiatric 
unit in a critical access hospital.
     Beneficiary primary payer code is equal to ``Z'' or blank, 
indicating Medicare is the primary payer.
     Group Health Organization (GHO) paid code is equal to zero 
or blank, indicating that a GHO has not paid the facility for the stay.
     National Claims History (NCH) claim type code is equal to 
``60,'' an inpatient claim.
     Number of utilization days was greater than zero.
    We noted in the proposed rule that we completed a series of 
trimming steps to remove missing and outlier data, to promote the 
accuracy and completeness of data included in the regression model. We 
stated that before any trims or exclusions were applied, there were 
1,684 providers in the MedPAR data file. We described these trimming 
steps in detail in the proposed rule.
    First, we matched facilities from the MedPAR dataset to the most 
recent Medicare cost report file available from CY 2018 to CY 2021, and 
excluded facilities that did not have a Medicare cost report available 
from 2018 to 2021. If facilities had more than one Medicare cost report 
in a given year, we used the Medicare cost report representing the 
longest time span. We identified 1 provider in CY 2019, 5 providers in 
CY 2020, and 4 providers in CY 2021 that had no available Medicare cost 
report information. In total, we excluded data from 5 unique providers 
that had no available Medicare cost report information from CY 2019 to 
CY 2021.
    Next, we trimmed facilities with extraordinarily high or low costs 
per day. We removed facilities with outlier routine per diem costs, 
defined as those falling outside of the range of the mean logarithm of 
routine costs per diem plus or minus 3.00 standard deviations. We also 
removed stays with outlier total per diem costs, defined as those 
falling outside the range of the mean per diem cost by facility type 
(psychiatric hospitals and psychiatric units) plus or minus 3.00 
standard deviations. The average and standard deviations of the total 
per diem cost (routine and ancillary costs) were computed separately 
for stays in psychiatric hospitals and psychiatric units because we did 
not want to systematically exclude a larger proportion of cases from 
one type of facility. In applying these trims across all three data 
years used in our regression model, there were 104 providers with 
routine per diem costs outside 3.00 standard deviations from the mean, 
and 47 providers with total per diem costs outside 3.00 standard 
deviations from the mean. Specifically, this includes 24 providers in 
CY 2019, 41 providers in CY 2020, and 39 providers in CY 2021 excluded 
for outlier routine per diem costs. We identified 25 providers in CY 
2019, 1 provider in CY 2020, and 21 providers in CY 2021 that we 
excluded for outlier total per diem costs. In total, we excluded data 
from 23 unique providers with outlier routine per diem costs and 8 
unique providers with outlier total per diem costs.
    We also removed stays at providers without a POS file or PSF. There 
were 5 providers without a POS file or PSF during the period CY 2019 to 
CY 2021; therefore, we excluded data from these 5 providers. Only 1 
unique provider was entirely excluded with no POS file or PSF from CY 
2019 to CY 2021. Additionally, 1 provider was excluded because no stays 
had one of the recognized IPF PPS DRGs assigned.
    In summary, the application of these data preparation steps 
resulted in excluding 5 providers because they did not have a cost 
report available from 2018 to 2021, 23 providers with routine per diem 
costs outside 3.00 standard deviations from the mean, and 8 providers 
with total per diem costs outside 3.00 standard deviations from the 
mean. We also excluded 1 provider without a POS file or PSF, 1 provider 
with no stays with IPF PPS DRGs, and 3 providers based on IPF stays 
restrictions. In total, the exclusion of these 41 providers resulted in 
the removal of 304,848 stays from our original total of 1,111,459 
stays.
    In the proposed rule, we explained that we considered trimming 
stays from facilities where 95 percent or more of stays had no 
ancillary charges because we assumed that the cost data from these 
facilities were inaccurate or incomplete. We noted that this is the 
trimming methodology that we applied to the analysis described in the 
technical report released along with the FY 2023 IPF PPS proposed rule. 
As previously discussed, the IPF PPS regression model uses the sum of 
routine and ancillary costs as the dependent variable, and we assumed 
that data from facilities without ancillary charge data will be 
inadequate to capture variation in costs. We explained that when we 
examined the claims from 2018, which we used for prior analysis, this 
trimming step resulted in removing almost one-quarter of total stays 
from the unrestricted 2018 MedPAR dataset (82,491 out of 364,080 total 
stays). We stated that this trimming step also resulted in 
disproportionate exclusion of certain types of facilities, particularly 
freestanding psychiatric hospitals that were for-profit or government-
operated, as well as all-inclusive rate providers. We noted that 
approximately 55 percent of stays from freestanding facilities would be 
removed, compared to just 0.3 percent of stays in psychiatric units. In 
the analysis described in the FY 2023 IPF PPS proposed rule (87 FR 
19429), we attempted to address this disproportionate removal of stays 
by facility type by applying weights by facility type and ownership in 
the regression model to account for excluded providers and to avoid 
biasing the sample towards stays from providers in psychiatric units.
    We explained that in response to the analysis described in the FY 
2023 IPF PPS proposed rule (87 FR 19429), commenters raised concerns 
about the large number of stays excluded from the regression analysis, 
and questioned whether the ancillary charge data were truly missing, as 
all-inclusive rate providers are not required to report separate 
ancillary charges. We stated that we agree that this trimming step 
reduces the representativeness of the IPF population used in the 
regression model and may increase the potential

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for bias of the regression coefficients used for payment adjustments. 
Furthermore, as discussed in section IV.E.4. of this final rule, we are 
clarifying cost reporting requirements and implementing operational 
changes that we believe will increase the accuracy of the cost 
information reported in the future. Specifically, we explain that CMS 
will issue instructions to the MACs and put in place edits for cost 
reporting periods beginning on or after October 1, 2024, ensuring that 
only government-owned or tribally owned IPF hospitals will be permitted 
to file an all-inclusive cost report. We further explain that all other 
IPF hospitals will be required to have a charge structure and to report 
ancillary costs and charges on their cost reports. We expect this 
change will support increased accuracy of future payment refinements to 
the IPF PPS.
    In this year's proposed rule, we explained that when we examined 
the claims from CY 2019 to CY 2021, we observed that this trimming step 
would have resulted in a loss of a significant number of providers (324 
providers in CY 2019, 330 providers in CY 2020, and 336 providers in CY 
2021). Due to the concerns that commenters previously raised (which we 
summarized in the FY 2024 IPF PPS final rule (88 FR 51097 through 
51098)), and to include as many claims as possible in the regression 
analysis, we explained that we did not trim stays from facilities with 
zero or minimal ancillary charges. As a result, we noted that we 
observed a significant reduction in data loss when comparing our latest 
regression model with the model described in the FY 2023 IPF PPS 
proposed rule. We further stated that by including, rather than 
trimming, facilities with low or no ancillary charge data, we prevented 
the loss of 288 providers across the three years, allowing for a more 
inclusive analysis. We noted that these providers accounted for 
approximately 194,673 stays included in our data set.
    We clarified that the regression results presented in the proposed 
rule did not include the application of any trimming or subsequent 
weighting to account for the removal of stays from facilities with zero 
or minimal ancillary charges.
c. Calculation of the Dependent Variable
    In the proposed rule, we explained that the IPF PPS regression 
model uses the natural logarithm of per diem total cost as the 
dependent variable. We stated that we computed a per diem cost for each 
Medicare inpatient psychiatric stay, including routine operating, 
ancillary, and capital components, using information from the combined 
CY 2019 through 2021 MedPAR file and data from the 2018 through 2021 
Medicare cost reports. We explained that for each MedPAR CY, we 
examined the corresponding Medicare cost report, and if a provider's 
cost-to-charge ratio was missing from the matching year's cost report, 
we looked at the provider's cost report from the prior year to obtain 
the most recent cost-to-charge value for the provider. We noted that we 
applied a prior-year cost-to-charge ratio to 8 providers from the CY 
2019 MedPAR claims, 5 providers from the CY 2020 MedPAR claims, and 35 
providers from the CY 2021 MedPAR claims.
    We further explained that to calculate the total cost per day for 
each inpatient psychiatric stay, routine costs were estimated by 
multiplying the routine cost per day from the IPF's Medicare cost 
report (Worksheet D-1, Part II, column 1, line 38) by the number of 
Medicare covered days in the MedPAR stay record. We explained that 
ancillary costs were estimated by multiplying each departmental cost-
to-charge ratio (calculated by dividing the amount obtained from 
Worksheet C, columns 5, by the sum of Worksheet C, columns 6 and 7) by 
the corresponding ancillary charges in the MedPAR stay record. We 
stated that the total cost per day was calculated by summing routine 
and ancillary costs for the stay and dividing it by the number of 
Medicare covered days for each day of the stay.
    As discussed in the proposed rule, we winsorized the distributions 
of the 17 ancillary cost centers from Worksheet C of the cost report at 
the 2nd and 98th percentiles to address extreme cost-to-charge ratios. 
That is, if the cost-to-charge ratio was missing and there was a charge 
on the claim, the cost-to-charge ratio was imputed to the calculated 
median value for each respective cost center.
    In addition, we explained that the total cost per day (also 
referred to as per diem cost) was adjusted for differences in cost 
across geographic areas using the FY 2019 through 2021 IPF wage indices 
and COLAs corresponding to each MedPAR data year. We stated that we 
adjusted the labor-related portion of the per diem cost using the IPF 
wage index to account for geographic differences in labor cost and 
adjusted the non-labor portion of the per diem cost by the COLA 
adjustment factors for IPFs in Alaska and Hawaii. We stated that we 
used IPF PPS labor-related share and non-labor-related share finalized 
for each year, FY 2019 through FY 2021, to determine the amount of the 
per diem cost that is adjusted by the wage index and the COLA, 
respectively. We explained that we calculated the adjusted cost using 
the following formula:

Wage adjusted per diem cost = per diem cost/(wage index * labor-related 
share + COLA * (1-labor-related share)).
d. Independent Variables
    In the proposed rule, we stated that the independent variables in 
the regression model are patient-level and facility-level 
characteristics that affect the dependent variable in the model, which 
is per diem cost. As discussed in the following sections, we noted that 
the updated regression model for the proposed rule included adjustment-
related variables and control variables. We explained that adjustment-
related variables are used for adjusting payment, and we proposed to 
revise the IPF PPS patient-level adjustment factors based on the 
regression results for many of the adjustment-related variables in the 
model. We further explained that control variables are used to account 
for variation in the dependent variable that is associated with factors 
outside the adjustment factors of the payment model.
(1) Adjustment-Related Variables
    Patient-level adjustment-related variables included in the 
regression model are variables for DRG assignment, comorbidity 
categories, age, and length of stay. We note that facility-level 
adjustment-related variables for rural status and teaching status are 
also included in the model; however, we did not propose revisions to 
the rural or teaching adjustments for FY 2025. We discuss the latest 
results of the regression analysis for facility-level adjustments in 
greater detail in section IV.A. of this final rule.
(2) Control Variables
    The regression model used to determine IPF PPS payment adjustments 
in the RY 2005 IPF PPS final rule (69 FR 66922) included control 
variables to account for facilities' occupancy rate, a control variable 
to indicate if the patient received ECT, and a control variable for 
IPFs that do not bill for ancillary charges. In the proposed rule, we 
explained that the updated regression model for the FY 2025 IPF PPS 
proposed rule removed the occupancy control variables and the control 
variable for IPFs that do not bill for ancillary charges. In addition, 
we explained that we retained the control variable for patients 
receiving ECT and added control variables for the data year. We also 
explained that we added a control variable for the presence of ED

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charges on the claim. We discuss considerations related to these 
control variables and others in the following paragraphs.
    The 2004 regression model included two control variables for 
occupancy rate. One was a continuous variable for the facility's 
logarithmic-transformed occupancy rate. The other was a categorical 
variable indicating a facility had an occupancy rate below 30 percent. 
Both of these variables were found to be associated with statistically 
significant increases in cost. In the RY 2005 IPF PPS final rule, we 
adopted the structural approach and included these control variables in 
the regression. We explained that it was appropriate to control for 
variations in the occupancy rate in estimating the effects of the 
payment variables on per diem cost to avoid compensating facilities for 
inefficiency associated with underutilized fixed costs (69 FR 66934). 
As we discussed in the FY 2023 IPF PPS proposed rule, our analysis 
found that the occupancy control variables were associated with rural 
status. We solicited comments on the potential removal of the occupancy 
control variables from the model (87 FR 19429). In response, we 
received several comments in support of removing the occupancy control 
variables, due to the relationship between these control variables and 
the rural adjustment (87 FR 46865). Commenters cited the importance of 
rural IPFs as the primary points of care and access for many Medicare 
beneficiaries who cannot travel to urban areas for mental health 
services. As we discussed in the FY 2025 IPF PPS proposed rule, we 
considered the potential negative impact to rural facilities of 
retaining the occupancy control variables in the regression model. We 
stated that we agree with the commenters who noted the importance of 
maintaining stability in payments for rural IPFs; therefore, we did not 
include any occupancy control variables in our regression model.
    In addition, we stated that we considered including a control 
variable for IPFs that do not bill for ancillary services. As we 
discussed in the RY 2005 IPF PPS final rule (69 FR 66936), we included 
variables in the regression to control for psychiatric hospitals that 
do not bill ancillary costs. However, at that time, the number of IPFs 
who did not bill for ancillary costs was relatively small and consisted 
mostly of government-operated facilities. As we discuss later in 
section IV.E.4 of this final rule, an increasing number of IPFs have 
stopped reporting ancillary charges on their claims, which means that 
ancillary cost information is not available for stays at these IPFs.
    We explained in the proposed rule that we considered whether to 
include a control variable for facilities that do not report ancillary 
charges. We stated that we considered that the inclusion of a control 
variable would only account for differences in the level of cost 
between IPFs with and without reported ancillary costs and would not 
facilitate comparison of costs between all IPFs in our sample. In 
addition, we noted that facilities that did not report ancillary 
charges also tended to have lower routine costs; that is, our analysis 
showed that these facilities will have overall lower costs per day, 
regardless of whether ancillary costs were considered in the cost 
variable. We explained that the inclusion of a control variable in the 
regression model would account for these differences in overall cost, 
which would impact the size of payment-related adjustment factors that 
are correlated with the prevalence of missing ancillary charge data. We 
stated that for this reason, in developing a regression model for 
proposing revisions to the IPF PPS, we did not include a control 
variable to account for facilities that report zero or minimal 
ancillary charges.
    As noted earlier, the original model also included a control 
variable for the presence of ECT. This is because ECT is paid on a per-
treatment basis under the IPF PPS. As discussed in more detail in 
section IV.B.2. of this FY 2025 IPF PPS final rule, we continue to 
observe that IPF stays with ECT have significantly higher costs per 
day. We proposed to continue paying for ECT on a per-treatment basis; 
therefore, we explained that we included a control variable to account 
for the additional costs associated with ECT, which will continue to be 
paid for outside the regression model.
    Similarly, we stated that we included a control variable for stays 
with emergency department (ED)-related charges. The original model did 
not include an ED control variable, because ED costs were excluded from 
the dependent variable of IPF per diem costs. We explained that our 
regression model for the FY 2025 IPF PPS proposed rule includes all 
costs associated with each IPF stay, including ED costs. As we 
explained in the proposed rule, we proposed to calculate the ED 
adjustment in accordance with our longstanding methodology, separate 
from the regression model. However, we included a control variable for 
stays with ED charges to control for the additional costs associated 
with ED admissions, which are paid under the ED adjustment outside the 
regression model.
    Lastly, we stated that we included control variables for the data 
year. We stated that because the model used a combined set of data from 
3 years, these control variables are included in the model to account 
for differences in cost levels between 2019, 2020, and 2021, which 
would be driven by economic inflation and other external factors 
unrelated to the independent variables in the regression model.
e. Regression Results
    In the proposed rule, we presented the results of our regression 
model, which we noted includes a total of 806,611 stays, and had an r-
squared value of 0.32340, meaning that the independent variables 
included in the regression model were able to explain approximately 
32.3 percent of the variation in per diem cost among IPF stays.
    In the proposed rule, we explained that except for the teaching 
variable, each of the adjustment factors we presented was the 
exponentiated regression coefficient of our regression model, which as 
we previously noted uses the natural logarithm of per diem total cost 
as the dependent variable. We stated that we presented the 
exponentiated regression results, as these most directly translate to 
the way that IPF PPS adjustment factors are calculated for payment 
purposes. That is, the exponentiated adjustment factors presented in 
the proposed rule represent a percentage increase or decrease in per 
diem cost for IPF stays with each characteristic. In the case of the 
teaching variable, we noted that the result presented in the proposed 
rule is the un-exponentiated regression coefficient. As discussed in 
section IV.D of this final rule, the current IPF PPS teaching 
adjustment is calculated as 1 + a facility's ratio of interns and 
residents to beds, raised to the power of 0.5150. We explained that the 
coefficient for teaching status presented in the proposed rule can be 
interpreted in the same way.
    We explained that for certain categorical variables, including DRG, 
age, length of stay, and the year control variables, results for the 
reference groups were not shown. We stated that the DRG reference group 
is DRG 885, because this DRG represents the majority of IPF PPS stays. 
In addition, we explained that the age reference group is the Under 45 
category, because this group is associated with the lowest costs after 
accounting for all other patient characteristics in the model. We 
further explained that the reference

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group for length of stay is 10 days, which corresponds to the reference 
group used in the original regression model from the RY 2005 IPF PPS 
final rule. Lastly, we stated that the year control reference group is 
CY 2021. We stated that each of these reference groups effectively has 
an adjustment factor of 1.00 in the regression model.
    Lastly, we stated that we considered the regression factors to be 
statistically significant when the p-value was less than or equal to 
the significance level of 0.05 (*), 0.01 (**), and 0.001 (***), as 
notated in the table presented in the proposed rule.
    We received several comments regarding the regression methodology 
discussed in the proposed rule.
    Comment: Two commenters expressed support for the regression 
methodology used to develop revised adjustment factors for the IPF PPS. 
In particular, MedPAC expressed support for the proposal to include 
stays at facilities with low or no ancillary charge information, as 
well as including multiple years of data, in the calculation of the 
updated patient-level adjustments for FY 2025. MedPAC further 
encouraged CMS to continue to monitor and update the weights as needed 
using the most recent data available.
    Response: We appreciate the support from these commenters, and we 
intend to continue to monitor IPF PPS payments and costs to consider 
potential future updates as appropriate.
    Comment: One commenter expressed concerns about CMS's piecemeal 
approach to implementing the updated coefficients. This commenter 
stated that CMS should update not only the patient-level adjustment 
factors as proposed but also the updated facility-level coefficients 
(i.e., the teaching and rural adjustments) that were derived from the 
same regression model. This commenter further stated that if CMS did 
not plan to use these updated facility-level adjustments, it should 
have run a constrained regression, which would have resulted in 
different patient-level adjustment factors. From a technical 
perspective, this commenter stated that it is inappropriate to use 
patient-level and facility-level adjustments that were derived from 
separate regression analyses.
    Response: We appreciate these methodological concerns from the 
commenter; however, we do not agree that the proposed approach is 
technically inappropriate. Although the commenter asserted that CMS 
would not be using the regression-derived facility-level adjustments, 
this is not an accurate assertion. As we discussed in the proposed 
rule, we proposed a number of revisions to the patient-level adjustment 
factors as well as changes to the CBSA delineations. We proposed to 
maintain the existing facility-level adjustment factors for FY 2025 
because we believe it is important to minimize the scope of changes 
that would impact payments to facilities in any single year. However, 
as we discussed in the proposed rule, CMS is considering using the 
regression-derived facility-level adjustment factors for payment in 
future years, and we solicited comments on potentially making such 
revisions in future rulemaking.
    Regarding the suggestion to apply a constrained regression 
analysis, we do not believe this methodology would be appropriate. We 
note that a constrained regression analysis of the type the commenter 
suggested would apply mathematical constraints such that the 
coefficients for rural status and teaching status would remain at their 
current levels. A constrained regression analysis would therefore 
calculate the patient-level and control variables that minimize the sum 
of squared errors, given the constraints on the rural and teaching 
coefficients. We agree with the commenter's assertion that a 
constrained regression analysis would yield different patient-level 
adjustment factors for FY 2025. As a result, if CMS were to propose 
revisions to the facility-level adjustment factors in a future year, a 
constrained regression methodology of the type that the commenter 
recommended could result in further changes to the patient-level 
adjustment factors, which would be contrary to the goal of minimizing 
the impact of revisions in a single year, which CMS articulated in the 
proposed rule. Rather, in the case of the application of the 
regression-derived adjustment factors to the IPF PPS, we have 
controlled for aggregate changes in spending by applying a refinement 
standardization factor to the IPF PPS Federal per diem base rate. We 
believe that our proposed regression analysis appropriately 
incorporates the relevant payment variables and control variables into 
the regression model and produces results that can be implemented in 
accordance with our stated goals. We will take the commenter's 
methodological suggestions into consideration to potentially inform 
future changes to the IPF PPS, if appropriate.
    Final Decision: After consideration of the comments, we are 
finalizing our proposed regression methodology as discussed in the 
proposed rule.
    We note that the regression results for this final rule have been 
updated based on more recent available data, as proposed. Specifically, 
we note that in reviewing the methodology used to calculate the IPF PPS 
regression model presented in the proposed rule, we discovered that the 
computer code incorrectly failed to assign several sleep apnea codes to 
the proposed Chronic Obstructive Pulmonary Disease and Sleep Apnea 
comorbidity category. As a result, our regression model underestimated 
the magnitude of the adjustment factor for this comorbidity category 
and slightly overestimated the magnitude of the adjustment factor for 
other independent variables in the model. We note that most of the 
changes in the adjustment factors in Table 2 are within the threshold 
of rounding, and therefore do not result in differences to the proposed 
adjustment factors for payment. We further discuss the impact of these 
changes to the adjustment factors in section IV.C.4 of this final rule.
    This revised final model has an r-squared value of 0.32490, meaning 
that the independent variables included in the regression model were 
able to explain approximately 32.5 percent of the variation in per diem 
cost among IPF stays. We discuss the results of these changes to the 
final adjustment factors in section IV.C.4 of this final rule, and we 
discuss the final refinement standardization factor in section IV.F of 
this final rule.
    Table 2 below shows the final calculated adjustment factors and 
significance level, as well as the number and percent of stays 
associated with each independent variable. Columns 6 and 7 of Table 2 
show the lower and upper bounds of the 95-percent confidence interval 
(CI). For this final rule, we continue to consider the regression 
factors to be statistically significant when the p-value was less than 
or equal to the significance level of 0.05 (*), 0.01 (**), and 0.001 
(***).
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4. Updates and Revisions to the IPF PPS Patient-Level Adjustments
    The IPF PPS includes payment adjustments for the following patient-
level characteristics: Medicare Severity Diagnosis Related Groups (MS-
DRGs) assignment of the patient's principal diagnosis, selected 
comorbidities, patient age, and the variable per diem adjustments. We 
proposed to derive updated IPF PPS adjustment factors for FY 2025 using 
a regression analysis of data from the CY 2019 through 2021 MedPAR data 
files and Medicare cost report data from the 2018 through FY 2021 
Hospital Cost Report Information System (HCRIS). In the proposed rule, 
however, we noted that we used more recent claims (specifically, the 
December 2023 update of the FY 2023 IPF PPS MedPAR claims) and cost 
data from the January 2024 update of the provider-specific file (PSF) 
to simulate payments to finalize the outlier fixed dollar loss 
threshold amount and to assess the impact of the IPF PPS updates. More 
information about the data used for the impact simulations is found in 
section VIII.C of this FY 2025 IPF PPS final rule. We explained that by 
adjusting for DRGs, comorbidities, age, and length of the stay, along 
with the facility-level variables and control variables in the model, 
we were able to explain approximately 32.3 percent of the variation in 
per diem cost among IPF stays.
    In addition, we proposed routine coding updates for FY 2025 for our 
longstanding code first and IPF PPS comorbidities. Furthermore, as 
discussed in section IV.C.4.a.(2) of this final rule, we proposed to 
adopt a sub-regulatory process for future routine coding updates.
a. Updates and Revisions to MS-DRG Assignment
(1) Background
    We believe it is important to maintain for IPFs the same diagnostic 
coding and DRG classification used under the IPPS for providing 
psychiatric care. For this reason, when the IPF PPS was implemented for 
cost reporting periods beginning on or after January 1, 2005, we 
adopted the same diagnostic code set (ICD-9-CM) and DRG patient 
classification system (MS-DRGs) that were utilized at the time under 
the IPPS. In the RY 2009 IPF PPS notice (73 FR 25709), we discussed 
CMS's effort to better recognize resource use and the severity of 
illness among patients. CMS adopted the new MS-DRGs for the IPPS in the 
FY 2008 IPPS final rule with comment period (72 FR 47130). In the RY 
2009 IPF PPS notice (73 FR 25716), we provided a crosswalk to reflect 
changes that were made under the IPF PPS to adopt the new MS-DRGs. For 
a detailed description of the mapping changes from the original DRG 
adjustment categories to the current MS-DRG adjustment categories, we 
refer readers to the RY 2009 IPF PPS notice (73 FR 25714).
    The IPF PPS includes payment adjustments for designated psychiatric 
DRGs assigned to the claim based on the patient's principal diagnosis. 
The DRG adjustment factors were expressed relative to the most 
frequently reported psychiatric DRG in FY 2002, that is, DRG 430 
(psychoses). The coefficient values and adjustment factors were derived 
from the regression analysis discussed in detail in the RY 2004 IPF 
proposed rule (68 FR 66923; 66928 through 66933) and the RY 2005 IPF 
final rule (69 FR 66933 through 66960). Mapping the DRGs to the MS-DRGs 
resulted in the current 17 IPF MS-DRGs, instead of the original 15 
DRGs, for which the IPF PPS provides an adjustment.
    In the FY 2015 IPF PPS final rule which appeared in the August 6, 
2014 Federal Register titled, ``Inpatient Psychiatric Facilities 
Prospective Payment System--Update for FY Beginning October 1, 2014 (FY 
2015)'' (79 FR 45945 through 45947), we finalized conversions of the 
ICD-9-CM-based MS-DRGs to ICD-10-CM/PCS-based MS-DRGs, which were 
implemented on October 1, 2015. Further information on the ICD-10-CM/
PCS MS-DRG conversion project can be found on the CMS ICD-10-CM website 
at https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-ms-drg-conversion-project.
(2) Adoption of Sub-Regulatory Process for Publication of Coding 
Changes
    As discussed in the FY 2015 IPF PPS proposed rule (79 FR 26047) 
every year, changes to the ICD-10-CM and the ICD-10-PCS coding system 
have been addressed in the IPPS proposed and final rules. The changes 
to the codes are effective October 1 of each year and must be used by 
acute care hospitals as well as other providers to report diagnostic 
and procedure information. In accordance with Sec.  412.428(e), we have 
historically described in the IPF PPS proposed and final rules the ICD-
10-CM coding changes and DRG classification changes that have been 
discussed in the annual proposed and final hospital IPPS regulations. 
This has typically involved a discussion in the proposed rule about 
coding updates to be effective October 1 of each year, with a summary 
of comments in the final rule along with a description of additional 
finalized codes for October.
    In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950 through 
44956), we adopted an April 1 implementation date for ICD-10-CM 
diagnosis and ICD-10-PCS procedure code updates in addition to the 
annual October 1 update of ICD-10-CM diagnosis and ICD-10-PCS procedure 
codes, beginning with April 1, 2022. In that rule, we noted the intent 
of this April 1 implementation date is to allow flexibility in the ICD-
10 code update process. Currently, as noted earlier in this final rule, 
the IPF PPS uses the IPPS DRG assignments, which are applied to IPF PPS 
claims; these DRG assignments reflect the change in process that the 
IPPS adopted for FY 2022. To maintain consistency with IPPS policy, we 
proposed to follow the same process beginning in FY 2025. This means 
that for routine coding updates that incorporate new or revised codes, 
we proposed to adopt these changes through a sub-regulatory process. 
Beginning in FY 2025, we will operationalize such coding changes in a 
Transmittal/Change Request, which would align with the way coding 
changes are announced under the IPPS.
    For example, we proposed that for April 2025, we would adopt 
routine coding updates for the IPF PPS comorbidity categories, code 
first policy, ECT code list, and DRG assignment via sub-regulatory 
guidance. We stated that these coding updates would take effect April 
1, 2025. We explained that in accordance with Sec.  412.428(e), we 
would describe these coding changes, along with any coding updates that 
would be effective for October 1, 2025, in the FY 2026 IPF PPS proposed 
rule. We noted we would summarize and respond to any comments on these 
April and October coding changes in the FY 2026 IPF PPS final rule.
    We further stated that this proposed update aims to allow 
flexibility in the ICD-10 code update process for the IPF PPS and 
reduce the lead time for making routine coding updates to the IPF PPS 
code first list, comorbidities, and ECT coding categories. In addition, 
we noted that the IPPS sub-regulatory process continues to manage DRG 
assignment changes which apply to the DRG assignments used in the IPF 
PPS. Finally, we clarified that we only anticipate applying this sub-
regulatory process for routine coding updates. Any future substantive 
revisions to the IPF PPS DRG adjustments, comorbidities, code first 
policy, or ECT payment policy would be proposed through notice and 
comment rulemaking. We solicited public comments on this proposed rule.

[[Page 64603]]

    We did not receive any comments on our proposal to adopt routine 
coding updates that incorporate new or revised codes through a sub-
regulatory process. We are finalizing the use of a sub-regulatory 
process, as proposed.
(3) Routine Coding Updates for DRG Assignments
    The diagnoses for each IPF MS-DRG will be updated as of October 1, 
2024, using the final IPPS FY 2025 ICD-10-CM/PCS code sets. The FY 2025 
IPPS/LTCH PPS final rule will include tables of the changes to the ICD-
10-CM/PCS code sets that underlie the proposed FY 2025 IPF MS-DRGs. 
Both the FY 2025 IPPS final rule and the tables of final changes to the 
ICD-10-CM/PCS code sets, which underlie the FY 2025 MS-DRGs, will be 
available on the CMS IPPS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.
(4) Code First
    As discussed in the ICD-10-CM Official Guidelines for Coding and 
Reporting, certain conditions have both an underlying etiology and 
multiple body system manifestations due to the underlying etiology. For 
such conditions, the ICD-10-CM has a coding convention that requires 
the underlying condition be sequenced first, followed by the 
manifestation. Wherever such a combination exists, there is a ``use 
additional code'' note at the etiology code, and a ``code first'' note 
at the manifestation code. These instructional notes indicate the 
proper sequencing order of the codes (etiology followed by 
manifestation). In accordance with the ICD-10-CM Official Guidelines 
for Coding and Reporting, when a primary (psychiatric) diagnosis code 
has a code first note, the provider will follow the instructions in the 
ICD-10-CM Tabular List. The submitted claim goes through the CMS 
processing system, which will identify the principal diagnosis code as 
non-psychiatric and search the secondary codes for a psychiatric code 
to assign a DRG code for adjustment. The system will continue to search 
the secondary codes for those that are appropriate for comorbidity 
adjustment. For more information on the code first policy, we refer 
readers to the RY 2005 IPF PPS final rule (69 FR 66945). We also refer 
readers to sections I.A.13 and I.B.7 of the FY 2020 ICD-10-CM Coding 
Guidelines, which is available at https://www.cdc.gov/nchs/data/icd/10cmguidelinesFY2020_final.pdf. In the FY 2015 IPF PPS final rule, we 
provided a code first table for reference that highlights the same or 
similar manifestation codes where the code first instructions apply in 
ICD-10-CM that were present in ICD-10-CM (79 FR 46009). In FY 2018, FY 
2019, and FY 2020, there were no changes to the final ICD-10-CM codes 
in the IPF Code First table. For FY 2021 and FY 2022, there were 18 
ICD-10-CM codes deleted from the final IPF Code First table. For FY 
2023, there were 2 ICD-10-CM codes deleted and 48 ICD-10-CM codes added 
to the IPF Code First table. For FY 2024, there were no proposed 
changes to the Code First Table.
    We proposed to continue our existing code first policy. We did not 
receive any comments on our proposal to continue the existing code-
first policy, and we are finalizing the policy as proposed. As 
discussed in section IV.C.4.a.(2) of this final rule, we are also 
finalizing our proposal to adopt a sub-regulatory approach to handle 
the coding updates, which will remove the requirement to discuss coding 
updates in the Federal Register during regulatory updates prior to 
implementation and which will mirror the approach taken by the IPPS. 
The final FY 2025 Code First table is shown in Addendum B on the CMS 
website at https://www.cms.gov/Medicare/Medicare-Fee-forServicePayment/InpatientPsychFacilPPS/tools.html.
(5) Revisions to MS-DRG Adjustment Factors
    For FY 2025, we proposed to revise the payment adjustments for 
designated psychiatric DRGs assigned to the claim based on the 
patient's principal diagnosis, following our longstanding policy of 
using the ICD-10-CM/PCS-based MS-DRG system. As discussed in the 
following paragraphs, we proposed to maintain DRG adjustments for 15 of 
the existing 17 IPF MS-DRGs for which we currently adjust payment in FY 
2024. We proposed to replace two existing DRGs with two new DRGs to 
reflect changes in coding practices over time and proposing to add two 
DRGs that are associated with poisoning. We also proposed to revise the 
adjustment factors for the DRG adjustments based on the results of the 
regression analysis described in the proposed rule. In accordance with 
our longstanding policy, we proposed that psychiatric principal 
diagnoses that do not group to one of the 19 proposed designated MS-
DRGs would still receive the Federal per diem base rate and all other 
applicable adjustments; however, the payment would not include an MS-
DRG adjustment.
    We proposed to implement all of these revisions to the DRG 
adjustments budget-neutrally, and we provided a detailed discussion of 
the distributional impacts of these proposed changes. Lastly, we 
proposed that if more recent data become available, we would use such 
data, if appropriate, to determine the FY 2025 DRG adjustment factors.
(a) Replacement of DRGs
    We proposed to remove DRGs 080 (Nontraumatic stupor & coma w MCC) 
and 081 (Nontraumatic stupor & coma w/o MCC), and to replace these with 
DRGs 947 (Signs and Symptoms w MCC) and 948 (Signs and Symptoms w/out 
MCC). As previously discussed, we observed that the number of cases in 
DRGs 080 and 081 have decreased significantly since 2004. We explained 
that we selected DRGs 947 and 948 as the most clinically appropriate 
replacements, because most of the ICD-10-CM codes that previously 
grouped to DRGs 080 or 081 now group to DRGs 947 or 948. We explained 
that the proposed adjustment factors for DRGs 947 and 948 would each be 
greater than the current DRG adjustment for DRGs 080 and 081. 
Therefore, we proposed that claims with DRGs 080 or 081 would still 
receive the Federal per diem base rate and all other applicable 
adjustments; however, the payment would not include an MS-DRG 
adjustment.
(b) Additions of DRGs
    We proposed to recognize DRG adjustments for two DRGs associated 
with poisoning; specifically, DRGs 917 (Poisoning and toxic effects of 
drugs w MCC) and 918 (Poisoning and toxic effects of drugs w/out MCC). 
As we discussed in the proposed rule, we identified that a small but 
increasing number of IPF stays contain these poisoning-related DRG 
assignments, and that stays with these DRGs have increased costs per 
day that are statistically significant.
(c) Revisions to Adjustment Factors for Existing DRG Adjustments
    We proposed to revise the adjustment factors for the remaining 15 
of the existing 17 DRGs that currently receive a DRG adjustment in FY 
2024. We stated that these revisions were based on the results of our 
latest regression analysis described in section IV.C.3 of the proposed 
rule.
    We also stated that our analysis found that some of the adjustment 
factors in the regression model for DRGs that currently receive an 
adjustment are no longer statistically significant. Specifically, we 
found that the adjustment factors for DRG 882 (Neuroses except 
depressive), DRG 887 (Other mental disorder diagnoses), and

[[Page 64604]]

DRG 896 (Alcohol, Drug Abuse or Dependence w/out rehab therapy w MCC) 
were not statistically significant. We explained that for each of these 
DRGs, we examined whether the current adjustment factor falls within 
the confidence interval for our latest regression analysis. We stated 
that the current adjustment for DRG 882 is 1.02, and this falls within 
the confidence interval of 0.96798 to 1.07811 for the regression model 
discussed in the proposed rule. We stated that we believe it would be 
appropriate to maintain the current adjustment factor of 1.02 for DRG 
882 because the latest regression results indicate that the current 
adjustment factor would be a reasonable approximation of the increased 
costs associated with DRG 882. However, we stated that for DRGs 887 and 
896, the current adjustment factors (0.92 and 0.88, respectively) did 
not fall within the confidence interval for each of these DRGs. 
Therefore, we proposed to apply an adjustment factor of 1.00 for IPF 
stays with these DRGs.
(d) Summary of Comments on the Proposed MS-DRG Updates for FY 2025
    We received comments regarding the proposed changes to the MS-DRG 
adjustments, which are summarized in the following paragraphs.
    Comment: Several commenters expressed support for revising the DRG 
adjustments as proposed; however, a number of these commenters urged 
CMS to consider developing separate adjustment factors for IPF stays 
that are currently all grouped into DRG 885. Specifically, commenters 
expressed concern that a single DRG that accounts for 74.79% of stays 
does not appropriately capture differences in patient resource 
utilization between patients being treated for Bipolar Disorders and 
Schizophrenias (ICD 20-F31 diagnoses) and those patients being treated 
for Depressive Disorders and Unspecified Mood disorders (ICD F32-F39 
diagnoses.
    Response: We appreciate the support that commenters expressed for 
the proposed DRG revisions. Likewise, we appreciate concerns that 
commenters raised regarding subcategories of conditions within DRG 885. 
We agree with commenters about the importance of adjusting IPF PPS 
payment to recognize differences in resource utilization between 
patients with different conditions. However, contrary to the 
commenters' suggestion, our analysis does not find that there are 
statistically significant differences in resources costs or cost per 
day when we compare different groups of principal diagnoses within DRG 
885.
    Using the same regression model described in section IV.C.3 of this 
final rule, we added the following categorical variables:
     Bipolar Disorders and Schizophrenia--Stays with principal 
diagnosis in the ICD-10-CM code family of F20, F21, F22, F23, F24, F25, 
F26, F27, F28, F29, F30, or F31
     Depression and Mood Disorders--Stays with principal 
diagnosis in the ICD-10-CM code family of F32, F33, or F39; or with 
principal diagnosis of F349 or F3489.
     Other--All other DRG 885 stays.
    For this analysis, we applied Bipolar Disorders and Schizophrenia 
as the reference group; therefore, there is no adjustment factor 
assigned in Table 3. The adjustment factors for other categories can be 
interpreted as the cost per day relative to the reference category. 
Table 3 also presents the significance level and confidence interval 
for each factor. We note than none of these factors is considered 
significant because the p-value was not less than or equal to the 
significance level of 0.05 (*), 0.01 (**), and 0.001 (***) for any of 
these factors.
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    Lastly, we acknowledge that even though there may be differences in 
total cost or differences in cost per day for treating patients with 
these conditions, other adjustment factors in the IPF PPS, such as the 
age adjustment or the variable per diem adjustment may account for 
these differences in cost for such patients.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to revise the DRG adjustments based on the 
latest regression analysis. A detailed discussion of the distributional 
impacts of this proposed change is found in section VIII.C of this 
final rule. Tables 4 through 6 summarize the final DRG changes based on 
the final regression analysis discussed in section IV.C.3.e of this FY 
2025 IPF PPS final rule.
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    These changes to the DRG adjustments will be included in Addendum 
A, which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets. The website includes the final DRG 
adjustment factors for FY 2025.
b. Payment for Comorbid Conditions
(1) Revisions to Comorbidity Adjustments
    The intent of the comorbidity adjustments is to recognize the 
increased costs associated with active comorbid conditions by providing 
additional payments for certain existing medical or psychiatric 
conditions that are expensive to treat.
    Comorbidities are specific patient conditions that are secondary to 
the patient's principal diagnosis and that require active treatment 
during the stay. Diagnoses that relate to an earlier episode of care 
and have no bearing on the current hospital stay are excluded and must 
not be reported on IPF claims. Comorbid conditions must exist at the 
time of admission or develop subsequently, and affect the treatment 
received, LOS, or both treatment and LOS.
    The current comorbidity adjustments were determined based on the 
regression analysis using the diagnoses reported by IPFs in FY 2002. 
The principal diagnoses were used to establish the DRG adjustments and 
were not accounted for in establishing the comorbidity category 
adjustments, except where ICD-9-CM code first instructions applied. In 
a code first situation, the submitted claim goes through the CMS 
processing system, which identifies the principal diagnosis code as 
non-psychiatric and searches the secondary codes for a psychiatric code 
to assign an MS-DRG code for adjustment. The system continues to search 
the secondary codes for those that are appropriate for a comorbidity 
adjustment.
    In our RY 2012 IPF PPS final rule (76 FR 26451 through 26452), we 
explained that the IPF PPS includes 17 comorbidity categories and 
identified the new, revised, and deleted ICD-9-CM diagnosis codes that 
generate a comorbid condition payment adjustment under the IPF PPS for 
RY 2012 (76 FR 26451).

[[Page 64607]]

    As discussed in section IV.C.4.a.(1) of this final rule, it is our 
policy to maintain the same diagnostic coding set for IPFs that is used 
under the IPPS for providing the same psychiatric care. The 17 
comorbidity categories formerly defined using ICD-9-CM codes were 
converted to ICD-10-CM/PCS in our FY 2015 IPF PPS final rule (79 FR 
45947 through 45955). The goal for converting the comorbidity 
categories is referred to as replication, meaning that the payment 
adjustment for a given patient encounter is the same after ICD-10-CM 
implementation as it would be if the same record had been coded in ICD-
9-CM and submitted prior to ICD-10-CM/PCS implementation on October 1, 
2015. All conversion efforts were made with the intent of achieving 
this goal.
    For each claim, an IPF may receive only one comorbidity adjustment 
within a comorbidity category, but it may receive an adjustment for 
more than one comorbidity category. Current billing instructions for 
discharge claims, on or after October 1, 2015, require IPFs to enter 
the complete ICD-10-CM codes for up to 24 additional diagnoses if they 
co-exist at the time of admission, or develop subsequently and impact 
the treatment provided.
    As previously discussed in section IV.C.4.a.(2) of this final rule, 
we proposed to adopt an April 1 implementation date for ICD-10-CM 
diagnosis and ICD-10-PCS procedure code updates, in addition to the 
annual October 1 update, beginning with April 1, 2025 for the IPF PPS. 
For FY 2025 and future years, coding updates related to the IPF PPS 
comorbidity categories would be adopted following a sub-regulatory 
process as discussed earlier in this final rule.
    For FY 2025, we proposed to revise the comorbidity adjustment 
factors based on the results of the 2019 through 2021 regression 
analysis described in section IV.C.3.e. of this final rule. We proposed 
additions and changes to the comorbidity categories for which we adjust 
payment based on our analysis of ICD-10-CM codes currently included in 
each category as well as public comments received in response to the FY 
2022 and FY 2023 IPF PPS proposed rules.
    Based on analysis of the ICD-10-CM codes, we considered the 
statistical significance of the adjustment factor and whether the 
current (FY 2024) adjustment factor fell within the confidence interval 
in the 2019 through 2021 regression to determine the FY 2025 IPF PPS 
proposed comorbidity categories and adjustment factors. As previously 
discussed for the DRG adjustment factors, when the regression factor is 
not statistically significant, but the current adjustment factor is 
within the confidence interval, we proposed to maintain the current 
adjustment factor. When a regression factor is not statistically 
significant and the current adjustment factor is not within the 
confidence interval, we proposed to remove the comorbidity category.
    Specifically, we proposed to increase the adjustment factors for 
the Gangrene, Severe Protein Malnutrition, Oncology Treatment, 
Poisoning, and Tracheostomy comorbidity categories based on the 
adjustment factors derived from the regression analysis discussed in 
section IV.C.3 of this final rule. For these comorbidity categories, 
the regression results produced a statistically significant increase in 
the adjustment factors.
    We did not receive any comments on our proposal to increase the 
adjustment factors for the Gangrene, Severe Protein Malnutrition, 
Oncology Treatment, Poisoning, and Tracheostomy comorbidity categories. 
We are finalizing the increased the adjustment factors for these 
comorbidity categories as proposed.
    We proposed to remove the comorbidity categories for the 
Coagulation Factor Deficit, Drug/Alcohol Induced Mental Disorders, and 
Infectious Diseases adjustment factors because the regression factor 
for the ICD-10-CM codes associated with Coagulation Factor Deficit and 
Infectious Diseases were not statistically significant, and the current 
adjustment factors did not fall within the confidence intervals in the 
2019 through 2021 regression.
    The current adjustment factor for Drug/Alcohol Induced Mental 
Disorders is 1.03; however, the adjustment factor derived from our 
latest regression results was statistically significant at 0.96084, 
meaning payments would be reduced if we applied the regression-derived 
adjustment factor as a comorbidity adjustment for this category. To 
understand the drivers of changing costs for the Drug/Alcohol Induced 
Mental Disorders comorbidity category, we examined a subset of ICD-10-
CM codes within the comorbidity category associated with opioid 
disorders which make up the majority of stays that qualify for the 
current Drug/Alcohol Induced Mental Disorders comorbidity adjustment. 
These opioid disorder codes are listed in Table 7. When we separately 
analyzed these codes associated with opioid disorder, the results 
suggested that patients with opioid disorder are significantly less 
expensive than patients without opioid disorder. Because stays with 
opioid disorders make up the majority of stays in the Drug/Alcohol 
Induced Mental Disorders comorbidity category, we observe a 
statistically significant negative adjustment factor for the 
comorbidity category overall. The application of a comorbidity 
adjustment derived from our latest regression analysis would result in 
reduced payments for all stays in this comorbidity category. We do not 
believe it is appropriate to apply negative adjustment factors (that 
is, adjustment factors less than 1.00) for comorbidities because that 
would result in reduced rather than increased payments. Although we 
apply adjustment factors less than 1.00 for DRGs, this is because the 
DRG adjustment reflects the cost of stays relative to stays with the 
baseline DRG 885. In contrast, comorbidity adjustments reflect the cost 
relative to a stay with no comorbidities. A negative payment adjustment 
would not be consistent with the intent of a comorbidity adjustment, 
which is intended to provide additional payments to providers to 
account for the costs of treating patients with comorbid conditions. 
Therefore, we have not historically included any negative adjustment 
factors for comorbid conditions.
    Therefore, we proposed to remove the Drug/Alcohol Induced Mental 
Disorders comorbidity category beginning in FY 2025. IPF stays that 
include these codes as a non-principal diagnosis would no longer 
receive the current Drug/Alcohol Induced Mental Disorders comorbidity 
category adjustment factor of 1.03; nor would they receive a reduction 
in payment. However, many IPF stays that include these ICD-10-CM 
diagnosis codes as a principal diagnosis would continue to receive a 
DRG adjustment. We refer readers to section IV.C.3.a of this final rule 
for a detailed discussion of proposed DRG adjustments under the IPF 
PPS.
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    We believe removal of the Drug/Alcohol Induced Mental Disorders 
comorbidity category under the IPF PPS more appropriately aligns 
payment with resource use, as reflected in the latest regression 
results. As previously discussed in section IV.F of this final rule, 
all of these proposed revisions would be applied budget-neutrally. 
Therefore, we believe the removal of the Drug/Alcohol Induced Mental 
Disorders comorbidity adjustment would appropriately increase the IPF 
PPS Federal per diem base rate and thereby increase payment for IPF 
stays that are costlier. However, we solicited comments on whether a 
lack of ancillary charge data may be contributing to the results of our 
regression analysis as it relates to opioid disorders. We note that our 
analysis of the ICD-10-CM codes associated with opioid disorder also 
indicates that there is significant overlap between facility 
characteristics and stays including opioid disorder diagnoses. In 
particular, for-profit freestanding IPFs were found to serve the 
majority of patients with opioid disorders. As discussed in section 
IV.E.4 of this final rule, our ongoing analysis has found an increase 
in the number of for-profit freestanding IPFs that are consistently 
reporting no ancillary charges or very minimal ancillary charges on 
their cost report. As a result, we noted that these IPFs do not report 
complete information on patient-level cost for the patients treated in 
these hospitals.
    As stated previously, the regression factor for Drug/Alcohol 
Induced Mental Disorders was statistically significant, but is less 
than 1, meaning payments would be reduced if we applied it as a 
comorbidity adjustment. We stated that we were interested in 
understanding whether there is data and information that could better 
inform our understanding of the costs of treating these conditions. In 
addition, we stated that we were interested in understanding whether 
commenters believe it may be more appropriate to maintain the existing 
Drug/Alcohol Induced Mental Disorders comorbidity category adjustment 
factor of 1.03, given that many providers that treat these patients 
also report minimal or no ancillary charges on their claims and cost 
reports. We noted that if we were to maintain the adjustment factor of 
1.03 for these IPF stays, we expected it would have a negative impact 
on the refinement standardization factor, thereby slightly reducing the 
IPF PPS Federal per diem base rate and ECT per treatment amount.
    Comment: Two commenters opposed the proposed removal of the 
Coagulation Factor Deficit and Infectious Disease comorbidity 
categories, stating that these comorbidities do result in increased 
resource use. Commenters explained that when patients test positive for 
infectious diseases after admission, the facility cannot discharge the 
patient due to the infectious disease. The commenters noted additional

[[Page 64609]]

resources are needed in these cases not only to treat the infected 
patient, but to prevent the spread of the infection to the rest of the 
patient population.
    Response: We thank commenters for their feedback. However, the 
results of our regression analysis do not support a payment adjustment 
for coagulation factor deficit or infectious disease. As shown in Table 
2, the adjustment factor derived from the regression is not 
statistically significant. This suggests that the cost of treating IPF 
patients with these conditions is not significantly different than 
treating IPF patients without these conditions. Therefore, removing 
these comorbidity categories more appropriately aligns payment with 
resource use.
    Comment: A few commenters opposed the proposed removal of the Drug/
Alcohol Induced Mental Disorders comorbidity category. The commenters 
stated that patients with drug- and alcohol-induced mental conditions 
are more complex to care for and therefore often require increased 
levels of care and medical management. One commenter expressed concern 
in regard to the proposed removal of the Drug/Alcohol Induced Mental 
Disorders comorbidity category, considering the prevalence of substance 
use disorders in society. Additionally, commenters expressed concern 
with CMS correlating a lack of ancillary cost data with lower cost 
associated with treating IPF patients with drug- and alcohol-induced 
mental disorders.
    Response: We understand the commenters' concern for the overall 
prevalence of substance abuse disorders, and how patients with 
substance use disorder may require increased levels of care. As shown 
in Table 2, the adjustment factor derived from the regression is 
statistically significant, but is less than 1. This suggests that the 
cost of treating IPF patients with these conditions is lower than 
treating patients without these conditions, and therefore, removing 
this comorbidity category more appropriately aligns payment with 
resource use.
    Additionally, we did not receive any public comments regarding data 
and information that could better inform our understanding of the costs 
of treating these conditions. We believe the best available data was 
used in the regression. We anticipate that CMS will gain additional 
cost information on the treatment of IPF patients with substance abuse 
disorders and we intend to analyze such data for consideration in 
future refinements of the IPF PPS.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal for FY 2025 to remove the Coagulation 
Factor Deficit, Infectious Disease, and Drug/Alcohol Induced Mental 
Disorders comorbidity categories. We note that we will continue to 
collect data on these comorbidity categories for consideration in 
future refinements of the IPF PPS. We encourage providers to report 
complete cost information for future analyses.
    We also proposed to modify the Eating and Conduct Disorders 
comorbidity category and redesignate it as the Eating Disorders 
comorbidity category. That is, we proposed to remove conduct disorders 
from the codes eligible for a comorbidity adjustment. When we 
separately analyzed the ICD-10-CM codes for eating disorders 
(specifically, F5000 Anorexia nervosa, unspecified, F5001 Anorexia 
nervosa, restricting type, F5002 Anorexia nervosa, binge eating/purging 
type, and F509 Eating disorder, unspecified) and conduct disorders 
(F631 Pyromania, F6381 Intermittent explosive disorder, and F911 
Conduct disorder, childhood-onset type), our regression results 
identified a positive, statistically significant adjustment factor 
associated with eating disorders. In contrast, conduct disorders had a 
negative and non-significant factor. These results suggest that eating 
disorders are associated with an increased level of resource, unlike 
conduct disorders, and that only eating disorders have an increase 
resource use at a level that is statistically significant. Based on 
these findings, we proposed to remove conduct disorders from the 
proposed newly designated Eating Disorders comorbidity category.
    We did not receive any comments on our proposal to remove conduct 
disorders from the current Eating and Conduct Disorders comorbidity 
category. We are finalizing the newly designated Eating Disorders 
comorbidity category as proposed.
    In addition, we proposed to modify the Chronic Obstructive 
Pulmonary Disease comorbidity category to include ICD-10-CM and ICD-10-
PCS codes associated with sleep apnea (specifically, G4733 Obstructive 
sleep apnea (adult) (pediatric), 5A09357 Assistance with Respiratory 
Ventilation, <24 Hrs, CPAP, Z9981 Dependence on supplemental oxygen, 
and Z9989 Dependence on other enabling machines and devices). In 
response to the FY 2023 and FY 2024 IPF PPS proposed rules, commenters 
requested that CMS analyze the additional cost associated with patients 
with sleep apnea. Patients with sleep apnea often need to use a 
continuous positive airway pressure (CPAP) machine with a cord to 
manage their condition. Based on the clinical expertise of CMS Medical 
Officers, we determined that patients with sleep apnea in the IPF 
setting would have increased ligature risk (that is, anything that 
could be used to attach a cord, rope, or other material for the purpose 
of hanging or strangulation), similar to the risk associated with 
patients in the IPF setting that have chronic obstructive pulmonary 
disease. We stated that we expect the additional staffing resources 
involved in treating IPF patients with sleep apnea would be similar to 
the resources involved in treating IPF patients with chronic 
obstructive pulmonary disease, as patients with chronic obstructive 
pulmonary disease may also require the presence of an additional device 
with a cord in the patient's room, such as a bilevel positive airway 
pressure (BiPAP) machine. We evaluated adding codes associated with 
sleep apnea to our regression model, on the basis of our expectation 
that we would observe higher costs associated with these codes that 
would be comparable to the costs associated with chronic obstructive 
pulmonary disease. The results of our 2019 through 2021 regression 
model suggest that sleep apnea is in fact associated with an increased 
level of resource use. Therefore, we proposed to redesignate the 
Chronic Obstructive Pulmonary Disease category as the Chronic 
Obstructive Pulmonary Disease and Sleep Apnea comorbidity category.
    Comment: One commenter supported redesignating the Chronic 
Obstructive Pulmonary Disease category as the Chronic Obstructive 
Pulmonary Disease and Sleep Apnea comorbidity category. The commenter 
noted that patients using a CPAP machine require increased care and 
medical management due to the need for 1:1 staffing to prevent ligature 
issues.
    Response: We appreciate the commenter's support for adding codes 
associated with sleep apnea to the Chronic Obstructive Pulmonary 
Disease comorbidity category. As discussed in section IV.C.4.b.(1), 
when including sleep apnea codes to the Chronic Pulmonary Disease 
comorbidity category, the adjustment factor was higher than the number 
published in the proposed rule. This further supports the commenters' 
assertion that the resource use for treating sleep apnea is higher than 
for patients without sleep apnea.
    Final Decision: After consideration of the comment received, we are 
finalizing our proposal for FY 2025 to redesignate the Chronic 
Obstructive Pulmonary Disease category as the Chronic Obstructive 
Pulmonary Disease and Sleep Apnea comorbidity category.

[[Page 64610]]

    Further, we analyzed costs associated with the ICD-10-CM codes in 
Table 8 that indicate high-risk behavior. In response to the FY 2023 
and FY 2024 IPF PPS proposed rules, commenters requested that CMS 
analyze the additional cost associated with patients exhibiting violent 
behavior during their stay in an IPF. We considered these comments in 
coordination with CMS Medical Officers, and determined that patients 
exhibiting violent behavior would require more intensive management 
during an IPF stay. We determined that certain ICD-10-CM codes could 
describe the types of high-risk behaviors that require intensive 
management during an IPF stay. These could include patients exhibiting 
violent behavior as well as other high-risk, non-violent behaviors. We 
examined ICD-10-CM codes in the R45 code family (Symptoms and Signs 
Related to Emotional State) that could indicate high-risk behavior 
during an IPF stay, which would lead to increased resource use. The 
regression analysis found that several codes, R451 Restlessness and 
agitation, R454 Irritability and anger, and R4584 Anhedonia codes are 
associated with a statistically significant adjustment factor. In other 
words, patients presenting with restlessness and agitation, 
irritability and anger, or anhedonia are more costly than patients who 
do not present these conditions. Therefore, we proposed to add a new 
comorbidity category recognizing the costs associated with Intensive 
Management for High-Risk Behavior.
    Comment: Two commenters supported the proposed addition of a new 
comorbidity category recognizing the costs associated with Intensive 
Management for High-Risk Behavior. One commenter recommended that CMS 
include codes for R456 Violent Behavior, R4585 Homicidal and suicidal 
ideations, R45850 Homicidal ideation, and R45851 Suicidal ideation into 
the proposed Intensive Management for High-Risk Behavior comorbidity 
category.
    Response: We appreciate the commenters' support regarding adding a 
new comorbidity category recognizing the costs associated with 
Intensive Management for High-Risk Behavior. As discussed in the 
proposed rule, we analyzed costs associated with the ICD-10-CM codes 
including R456 Violent Behavior, R4585 Homicidal and suicidal 
ideations, R45850 Homicidal ideation, and R45851 Suicidal ideation. The 
results of our regression analysis, as presented in the table below, 
found that these codes are not associated with a statistically 
significant positive adjustment factor, meaning, the cost of treating 
IPF patients with these conditions is not significantly higher than 
treating IPF patients without these conditions. Therefore, adding these 
codes to the Intensive Management for High-Risk Behavior comorbidity 
category would not align payment with resource use.
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    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to add a new comorbidity category 
recognizing the costs associated with Intensive Management for High-
Risk Behavior to include the codes indicated in Table 9.
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    Lastly, we proposed to maintain the adjustment factors for the 
Developmental Disabilities and Uncontrolled Diabetes comorbidity 
categories. Based on the regression analysis, the Developmental 
Disabilities comorbidity category adjustment factor was not 
statistically significant; however, the current adjustment factor is 
within the confidence interval. As discussed in section IV.C.3.a of 
this final rule, a non-statistically significant adjustment factor 
within the confidence interval indicates that the current adjustment 
factor would be a reasonable approximation of the increased costs. The 
Uncontrolled Diabetes comorbidity category adjustment factor did not 
change from the current adjustment factor based on the 2019 through 
2021 regression.
    We did not receive any comments on our proposal to maintain the 
adjustment factors for the Developmental Disabilities and Uncontrolled 
Diabetes comorbidity categories. We are finalizing maintaining these 
adjustment factors, as proposed.
    We also proposed to decrease the adjustment factors for the 
following comorbidity categories: Renal Failure--Acute, Artificial 
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, and Severe 
Musculoskeletal & Connective Tissue Diseases.
    The regression analysis found the Renal Failure--Acute, Artificial 
Openings--Digestive & Urinary, Cardiac conditions, Renal Failure--
Chronic, Chronic Obstructive Pulmonary Disease, and Severe 
Musculoskeletal & Connective Tissue Diseases comorbidity categories 
resulted in a statistically significant adjustment factor. While 
payment would still be increased when the claim includes one of these 
comorbidity categories, the proposed adjustment factors for FY 2025 
would be less than the current adjustment factors for these categories.
    We did not receive any comments on our proposal to decrease the 
adjustment factors for the following comorbidity categories: Renal 
Failure--Acute, Artificial Openings--Digestive & Urinary, Cardiac 
conditions, Renal Failure--Chronic, Chronic Obstructive Pulmonary 
Disease, and Severe Musculoskeletal & Connective Tissue Diseases. We 
are finalizing a decrease to these adjustment factors, as proposed.
    The FY 2025 comorbidity adjustment factors are displayed in Table 
10, and can be found in Addendum A, available on the CMS website at 
https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets.
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[GRAPHIC] [TIFF OMITTED] TR07AU24.012

BILLING CODE 4120-01-C
    As discussed in section IV.F of this final rule, we proposed to 
implement revisions to the comorbidity category adjustments budget-
neutrally. A detailed discussion of the distributional impacts of these 
changes is found in section VIII.C of this final rule.
(2) Coding Updates for FY 2025
    For FY 2025, we proposed to add 2 ICD-10-CM/PCS codes to the 
Oncology Treatment comorbidity category. The FY 2025 comorbidity codes 
are shown in Addenda B, available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets.
    In accordance with the policy established in the FY 2015 IPF PPS 
final rule (79 FR 45949 through 45952), we reviewed all new FY 2025 
ICD-10-CM codes to remove codes that were site ``unspecified'' in terms 
of laterality from the FY 2023 ICD-10-CM/PCS codes in instances where 
more specific codes are available. As we stated in the FY 2015 IPF PPS 
final rule, we believe that specific diagnosis codes that narrowly 
identify anatomical sites where disease, injury, or a condition exists 
should be used when coding patients' diagnoses whenever these codes are 
available. We finalized in the FY 2015 IPF PPS rule, that we would 
remove site ``unspecified'' codes from the IPF PPS ICD-10-CM/PCS codes 
in instances when laterality codes (site specified codes) are 
available, as the clinician should be able to identify a more specific 
diagnosis based on clinical assessment at the medical encounter. There 
were no proposed changes to the FY 2025 ICD-10-CM/PCS codes, therefore, 
we did not propose to remove any of the new codes.
c. Patient Age Adjustments
    As explained in the RY 2005 IPF PPS final rule (69 FR 66922), we 
analyzed the impact of age on per diem cost by examining the age 
variable (range of ages) for payment adjustments. In general, we found 
that the cost per day increases with age. The older age groups are 
costlier than the under 45 age group, the differences in per diem cost 
increase for each successive age group, and the differences are 
statistically significant. While our regression analysis of CY 2019 
through CY 2021 data supports maintaining a payment adjustment factor 
based on age as was established in the RY 2005 IPF PPS final rule, the 
results suggest that revisions to the adjustment factor for age are 
warranted.
    For FY 2025, we proposed to revise the patient age adjustments as 
shown in Addendum A of this final rule, which is available on the CMS 
website at (see https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets). 
We proposed to adopt the patient age adjustments derived from the 
regression model using a blended set of 2019 through 2021 data, as 
discussed in section IV.C.3 of this final rule. Table 11 summarizes the 
current and proposed patient age adjustment factors for FY 2025. As 
discussed in section IV.F of this final rule, we proposed to implement 
this revision to the patient age adjustments budget-neutrally. A 
detailed discussion of the distributional impacts of this change is 
found in section VIII.C of this final rule.

[[Page 64613]]

    We solicited comments on these proposed revisions to the patient 
age adjustment factors. Lastly, we proposed that if more recent data 
become available, we would use such data, if appropriate, to determine 
the final FY 2025 patient age adjustment factors.
    We did not receive any comments on our proposal. We are finalizing 
the revisions to the patient age adjustment factors as proposed.
[GRAPHIC] [TIFF OMITTED] TR07AU24.013

d. Variable per Diem Adjustments
    We explained in the RY 2005 IPF PPS final rule (69 FR 66946) that 
the regression analysis indicated that per diem cost declines as the 
LOS increases. The variable per diem adjustments to the Federal per 
diem base rate account for ancillary and administrative costs that 
occur disproportionately in the first days after admission to an IPF. 
As discussed in the RY 2005 IPF PPS final rule, where a complete 
discussion of the variable per diem adjustments can be found, we used a 
regression analysis to estimate the average differences in per diem 
cost among stays of different lengths (69 FR 66947 through 66950). As a 
result of this analysis, we established variable per diem adjustments 
that begin on day 1 and decline gradually until day 21 of a patient's 
stay. For day 22 and thereafter, the variable per diem adjustment 
remains the same each day for the remainder of the stay. However, the 
adjustment applied to day 1 depends upon whether the IPF has a 
qualifying ED. If an IPF has a qualifying ED, it receives a 1.31 
adjustment factor for day 1 of each stay. If an IPF does not have a 
qualifying ED, it receives a 1.19 adjustment factor for day 1 of the 
stay. The ED adjustment is explained in more detail in section IV.D.4 
of this final rule.
    For FY 2025, we proposed to revise the variable per diem adjustment 
factors as indicated in the table below, and shown in Addendum A to 
this rule, which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets. We proposed to increase the 
adjustment factors for days 1 through 9. As shown in Table 12, the 
results of the latest regression analysis indicate that there is not a 
statistically significant decrease in cost per day after day 10; 
therefore, we proposed that days 10 and above will receive a 1.00 
adjustment. Table 12 summarizes the current and proposed variable per 
diem adjustment factors for FY 2025. As discussed in section IV.F of 
this final rule, we proposed to implement this revision to the variable 
per diem adjustments budget-neutrally. A detailed discussion of the 
distributional impacts of this proposed change is found in section 
VIII.C of this final rule.
    We solicited comments on these proposed revisions to the variable 
per diem adjustment factors. Lastly, we proposed that if more recent 
data become available, we will use such data, if appropriate, to 
determine the final FY 2025 variable per diem adjustment factors.
    Comment: Two commenters supported the proposed revisions to the 
variable per diem adjustments, noting that these revisions reflect 
increased costs early in a stay.
    Response: We thank the commenters for their support. As discussed 
in section IV.C.4.b.(1) of this final rule, we have updated our 
regression analysis to account for a programming error that 
inadvertently excluded certain sleep apnea codes from the regression 
model. The results of the latest regression analysis increase the 
adjustment factor for the first day of the stay. This result further 
supports the commenters' assertion that there are increased costs early 
in an IPF stay.
    Final Decision: After consideration of the comments received, we 
are finalizing the revision of the IPF variable per diem adjustment 
factors as shown in Table 12.

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[GRAPHIC] [TIFF OMITTED] TR07AU24.014

D. Updates to the IPF PPS Facility-Level Adjustments

    The IPF PPS includes facility-level adjustments for the wage index, 
IPFs located in rural areas, teaching IPFs, cost of living adjustments 
for IPFs located in Alaska and Hawaii, and IPFs with a qualifying ED. 
We proposed to use the existing regression-derived facility-level 
adjustment factors established in the RY 2005 IPF final rule and did 
not propose changes to the facility-level adjustment factors for rural 
location and teaching status for FY 2025. As discussed in the following 
sections, we proposed updates to the FY 2025 IPF PPS wage index. In 
addition, we proposed to update the ED adjustment for FY 2025 to 
reflect more recent cost and claims data.
1. Wage Index Adjustment
a. Background
    As discussed in the RY 2007 IPF PPS final rule (71 FR 27061), and 
the RY 2009 IPF PPS (73 FR 25719) and RY 2010 IPF PPS notices (74 FR 
20373), to provide an adjustment for geographic wage levels, the labor-
related portion of an IPF's payment is adjusted using an appropriate 
wage index. Currently, an IPF's geographic wage index value is 
determined based on the actual location of the IPF in an urban or rural 
area, as defined in Sec.  412.64(b)(1)(ii)(A) and (C).
    Due to the variation in costs and because of the differences in 
geographic wage levels, in the RY 2005 IPF PPS final rule, we required 
that payment rates under the IPF PPS be adjusted by a geographic wage 
index. We proposed and finalized a policy to use the unadjusted, pre-
floor, pre-reclassified IPPS hospital wage index to account for 
geographic differences in IPF labor costs. We implemented use of the 
pre-floor, pre-reclassified IPPS hospital wage data to compute the IPF 
wage index since there was not an IPF-specific wage index available. We 
believe that IPFs generally compete in the same labor market as IPPS 
hospitals, and therefore, the pre-floor, pre-reclassified IPPS hospital 
wage data should be reflective of labor costs of IPFs. We believe this 
pre-floor, pre-reclassified IPPS hospital wage index to be the best 
available data to use as proxy for an IPF-specific wage index. As 
discussed in the RY 2007 IPF PPS final rule (71FR 27061 through 27067), 
under the IPF PPS, the wage index is calculated using the IPPS wage 
index for the labor market area in which the IPF is located, without 
considering geographic reclassifications, floors, and other adjustments 
made to the wage index under the IPPS. For a complete description of 
these IPPS wage index adjustments, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41362 through 41390). Our wage index 
policy at Sec.  412.424(a)(2) provides that we use the best Medicare 
data available to estimate costs per day, including an appropriate wage 
index to adjust for wage differences.
    When the IPF PPS was implemented in the RY 2005 IPF PPS final rule, 
with an effective date of January 1, 2005, the pre-floor, pre-
reclassified IPPS hospital wage index that was available at the time 
was the FY 2005 pre-floor, pre-reclassified IPPS hospital wage index. 
Historically, the IPF wage index for a given RY has used the pre-floor, 
pre-reclassified IPPS hospital wage index from the prior FY as its 
basis. This has been due in part to the pre-floor, pre-reclassified 
IPPS hospital wage index data that were available during the IPF 
rulemaking cycle, where an annual IPF notice or IPF final rule was 
usually published in early May. This publication timeframe was 
relatively early compared to other Medicare payment rules because the 
IPF PPS follows a RY, which was defined in the implementation of the 
IPF PPS as the 12-month period from July 1 to June 30 (69 FR 66927). 
Therefore, the best available data at the time the IPF PPS was 
implemented was the pre-floor, pre-reclassified IPPS hospital wage 
index from the prior FY (for example, the RY 2006 IPF wage index was 
based on the FY 2005 pre-floor, pre-reclassified IPPS hospital wage 
index).
    In the RY 2012 IPF PPS final rule, we changed the reporting year 
timeframe for IPFs from a RY to FY, which begins October 1 and ends 
September 30 (76 FR 26434 through 26435). In that FY 2012 IPF PPS final 
rule, we continued

[[Page 64615]]

our established policy of using the pre-floor, pre-reclassified IPPS 
hospital wage index from the prior year (that is, from FY 2011) as the 
basis for the FY 2012 IPF wage index. This policy of basing a wage 
index on the prior year's pre-floor, pre-reclassified IPPS hospital 
wage index has been followed by other Medicare payment systems, such as 
hospice and inpatient rehabilitation facilities. By continuing with our 
established policy, we remained consistent with other Medicare payment 
systems.
    In FY 2020, we finalized the IPF wage index methodology to align 
the IPF PPS wage index with the same wage data timeframe used by the 
IPPS for FY 2020 and subsequent years. Specifically, we finalized the 
use of the pre-floor, pre-reclassified IPPS hospital wage index from 
the FY concurrent with the IPF FY as the basis for the IPF wage index. 
For example, the FY 2020 IPF wage index was based on the FY 2020 pre-
floor, pre-reclassified IPPS hospital wage index rather than on the FY 
2019 pre-floor, pre-reclassified IPPS hospital wage index.
    We explained in the FY 2020 proposed rule (84 FR 16973), that using 
the concurrent pre-floor, pre-reclassified IPPS hospital wage index 
will result in the most up-to-date wage data being the basis for the 
IPF wage index. We noted that it would also result in more consistency 
and parity in the wage index methodology used by other Medicare payment 
systems. We indicated that the Medicare skilled nursing facility (SNF) 
PPS already used the concurrent IPPS hospital wage index data as the 
basis for the SNF PPS wage index. We proposed and finalized similar 
policies to use the concurrent pre-floor, pre-reclassified IPPS 
hospital wage index data in other Medicare payment systems, such as 
hospice and inpatient rehabilitation facilities. Thus, the wage 
adjusted Medicare payments of various provider types are based upon 
wage index data from the same timeframe. For FY 2025, we proposed to 
continue to use the concurrent pre-floor, pre-reclassified IPPS 
hospital wage index as the basis for the IPF wage index.
    In the FY 2023 IPF PPS final rule (87 FR 46856 through 46859), we 
finalized a permanent 5-percent cap on any decrease to a provider's 
wage index from its wage index in the prior year, and we stated that we 
will apply this cap in a budget neutral manner. In addition, we 
finalized a policy that a new IPF will be paid the wage index for the 
area in which it is geographically located for its first full or 
partial FY with no cap applied because a new IPF will not have a wage 
index in the prior FY. We amended the IPF PPS regulations at Sec.  
412.424(d)(1)(i) to reflect this permanent cap on wage index decreases. 
We refer readers to the FY 2023 IPF PPS final rule for a more detailed 
discussion about this policy.
    For FY 2025, we proposed to apply the IPF wage index adjustment to 
the labor-related share of the national IPF PPS base rate and ECT 
payment per treatment. The proposed labor-related share of the IPF PPS 
national base rate and ECT payment per treatment is 78.8 percent in FY 
2025. This percentage reflects the labor-related share of the 2021-
based IPF market basket for FY 2025 and is 0.1 percentage point higher 
than the FY 2024 labor-related share (see section IV.A.3 of this final 
rule). We received several comments on this proposal, which are 
discussed in the following paragraphs.
    Comment: Several commenters requested CMS revise the IPF wage index 
methodology. Specifically, a few commenters suggested CMS revise the 
policy so that the post-reclassification and post-floor hospital IPPS 
wage index is used to calculate the wage index for IPFs. The commenter 
believes that the continued use of the pre-reclassification and pre-
floor hospital inpatient wage index is unreasonable because it places 
IPFs at a disadvantage in the labor markets in which they operate 
relative to hospitals in the same markets. Other commenters suggested 
CMS exercise its authority to refine the IPF PPS by applying the pre-
floor, pre-reclassified IPPS hospital wage index for the CBSA in which 
the nearest IPPS hospital is located where the pre-floor, pre-
classified IPPS hospital wage index for the CBSA in which the IPF is 
located only includes data from a closed IPPS hospital. Commenters 
stated they believe the closed hospital data is more likely to be 
unreliable such that the application of the pre-floor, pre-reclassified 
IPPS hospital wage index would result in an inappropriately deflated 
wage index value. Commenters further noted that the closure of the only 
IPPS hospital in the CBSA would suggest that the community is currently 
underserved, and would make it particularly appropriate to ensure that 
aberrant wage index data does not serve as an impediment to new IPF 
services in a community. One commenter urged CMS to apply an out-
migration adjustment (OMA) to IPFs to account for the employment of 
hospital employees who reside in one county but commute to work in a 
county with a higher wage index.
    Response: We appreciate the commenters' recommendations. We did not 
propose the specific policies suggested by commenters, but we will take 
them into consideration to potentially inform future rulemaking. We do 
not believe that the continued use of the pre-reclassification and pre-
floor hospital inpatient wage index for FY 2024 is unreasonable or that 
this policy puts IPFs at a disadvantage relative to hospitals in the 
labor markets in which they operate. As we have previously discussed in 
the RY 2007 final rule (71 FR 27066), we believe that the actual 
location of an IPF (as opposed to the location of affiliated providers) 
is most appropriate for determining the wage adjustment because the 
prevailing wages in the area in which the IPF is located influence the 
cost of a case. In that same RY 2007 final rule (71 FR 27066), we also 
stated that we believe the ``rural floor'' is required only for the 
acute care hospital payment system because section 4410 of the Balanced 
Budget Act of 1997 (Pub. L. 105-33) applies specifically to acute care 
hospitals and not excluded hospitals and excluded units. As we have 
previously discussed, the IPF wage index is intended to be a relative 
measure of the value of labor in prescribed labor market areas (87 FR 
46857). There are a variety of reasons why our longstanding IPF wage 
index policy have not applied floors or reclassifications, which, as we 
previously noted, are not applied to the IPF wage index by statute. For 
example, applying floors and reclassifications to the IPF wage index 
would significantly increase administrative burden, both for IPFs and 
for CMS, associated with IPFs reclassifying from one CBSA to another, 
and it would significantly increase the complexity of the methodology. 
Furthermore, because floors and reclassifications would be applied 
budget-neutrally under the wage index, these policies would increase 
the wage index for some IPFs while reducing IPF PPS payments for all 
other IPFs, which would upset the long-settled expectations with which 
IPFs across the country have been operating. For these reasons, we 
believe using the pre-floor, pre-reclassified IPPS hospital wage index 
is the most appropriate data to use as a proxy for an IPF wage index.
    Regarding the suggestion to apply the wage index for the CBSA of 
the nearest IPPS hospital in cases when an IPF's CBSA includes only a 
closed IPPS hospital, we disagree with the commenter that wage data 
from a hospital that has closed is more likely to be unreliable and 
that such data would inappropriately deflate the wage index for that 
CBSA. Rather, following

[[Page 64616]]

the longstanding methodology for calculating the wage index, wage data 
from the period during which the hospital was open would be comparable 
to wage data from the same period for hospitals located in other 
geographical areas, and would provide an appropriate relative measure 
of the value of labor in that CBSA's labor market area compared to 
others. We do not believe that such wage data or the wage index of a 
CBSA in this situation would serve as an impediment for either new or 
existing IPF services in a community. In addition, we recognize that in 
some cases, the closure of the only IPPS hospital in the CBSA could 
suggest that the community is underserved; however, in other cases, the 
lack of an IPPS hospital could be due to other factors, such as when an 
area's only IPPS hospital converts to another hospital type such as a 
critical access hospital. We note that at this time, there is only one 
urban CBSA with no IPPS hospitals; however, there are also no IPFs 
located in this CBSA.
    Lastly, as discussed in the FY 2024 IPPS proposed rule (88 FR 
26966), in constructing the proposed FY 2024 wage index, wage data was 
included for facilities that were IPPS hospitals in FY 2020, inclusive 
of those facilities that have since terminated their participation in 
the Medicare program as hospitals, as long as those data did not fail 
any of our edits for reasonableness. These edits excluded providers 
with aberrant data that should not be included in the wage index. 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.
    We appreciate the commenter's suggestion to apply an out-migration 
adjustment to IPFs to account for employment of hospital staff who 
commute to work in counties with a higher wage index. However, we note 
that the out-migration adjustment is applied to the IPPS hospital wage 
index under section 1886(d)(13) of the Act, which is a statutory 
provision that specifically applies to subsection (d) hospitals paid 
under the IPPS. As discussed in the prior paragraph, CMS does not 
believe it is appropriate for the IPF PPS to apply an out-migration 
adjustment that is not statutorily required, because such a policy 
would increase administrative burden and have distributional impacts on 
IPFs.
    Comment: One commenter encouraged CMS to consider developing and 
applying a low wage index hospital policy for rural and low wage index 
IPFs similar to the policy in place for the IPPS wage index to ensure 
that IPFs in low wage index and rural areas, which typically draw from 
the same labor pool as IPPS hospitals, have adequate resources to 
continue to provide access to care.
    Response: We appreciate the suggestions from commenters; however, 
we did not propose to apply a low-wage index policy for the IPF PPS 
wage index and are not finalizing such a methodology. As we noted in 
the FY 2025 IPF PPS proposed rule, our longstanding methodology for the 
IPF wage index is derived from IPPS wage data, that is, the pre-
reclassified and pre-floor IPPS wage index. Thus, to the extent that 
increasing wage index values under the IPPS for low-wage index 
hospitals results in those hospitals increasing employee compensation, 
this increase would be reflected in the IPPS wage data upon which the 
IPF wage index is based and would be expected to result in higher wage 
indices for these areas under the IPF PPS. We further note that IPPS 
wage index values are based on historical data and typically lag by 
four years. As a result, the hospital cost report data for FY 2021 
would reflect any changes in employee compensation driven by the IPPS 
low-wage index hospital policy, and under our proposal, this data would 
become the basis for the IPF wage index in FY 2025. Therefore, any 
effects of these changes would be extended to the IPF setting.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal for FY 2025 to continue to use the 
concurrent pre-floor, pre-reclassified IPPS hospital wage index as the 
basis for the IPF wage index. We will apply the IPF wage index 
adjustment to the labor-related share of the national base rate and ECT 
payment per treatment. The labor-related share of the national rate and 
ECT payment per treatment will change from 78.7 percent in FY 2024 to 
78.8 percent in FY 2025. This percentage reflects the labor-related 
share of the 2021-based IPF market basket for FY 2025 (see section 
IV.A.5 of this final rule).
b. Office of Management and Budget (OMB) Bulletins
(1) Background
    The wage index used for the IPF PPS is calculated using the 
unadjusted, pre-reclassified and pre-floor IPPS wage index data and is 
assigned to the IPF based on the labor market area in which the IPF is 
geographically located. IPF labor market areas are delineated based on 
the Core-Based Statistical Area (CBSAs) established by the OMB.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. These 
bulletins contain information regarding CBSA changes, including changes 
to CBSA numbers and titles. OMB bulletins may be accessed online at 
https://www.whitehouse.gov/omb/information-for-agencies/bulletins/. In 
accordance with our established methodology, the IPF PPS has 
historically adopted any CBSA changes that are published in the OMB 
bulletin that corresponds with the IPPS hospital wage index used to 
determine the IPF wage index and, when necessary and appropriate, has 
proposed and finalized transition policies for these changes.
    In the RY 2007 IPF PPS final rule (71 FR 27061 through 27067), we 
adopted the changes discussed in the OMB Bulletin No. 03-04 (June 6, 
2003), which announced revised definitions for Metropolitan Statistical 
Areas (MSAs), and the creation of Micropolitan Statistical Areas and 
Combined Statistical Areas. In adopting the OMB CBSA geographic 
designations in RY 2007, we did not provide a separate transition for 
the CBSA-based wage index since the IPF PPS was already in a transition 
period from TEFRA payments to PPS payments.
    In the RY 2009 IPF PPS notice, we incorporated the CBSA 
nomenclature changes published in the most recent OMB bulletin that 
applied to the IPPS hospital wage index used to determine the current 
IPF wage index and stated that we expected to continue to do the same 
for all the OMB CBSA nomenclature changes in future IPF PPS rules and 
notices, as necessary (73 FR 25721).
    Subsequently, CMS adopted the changes that were published in past 
OMB bulletins in the FY 2016 IPF PPS final rule (80 FR 46682 through 
46689), the FY 2018 IPF PPS rate update (82 FR 36778 through 36779), 
the FY 2020 IPF PPS final rule (84 FR 38453 through 38454), and the FY 
2021 IPF PPS final rule (85 FR 47051 through 47059). We direct readers 
to each of these rules for more information about the changes that were 
adopted and any associated transition policies.

[[Page 64617]]

    As discussed in the FY 2023 IPF PPS final rule, we did not adopt 
OMB Bulletin 20-01, which was issued March 6, 2020, because we 
determined this bulletin had no material impact on the IPF PPS wage 
index. This bulletin creates only one Micropolitan statistical area, 
and Micropolitan areas are considered rural for the IPF PPS wage index. 
That is, the constituent county of the new Micropolitan area was 
considered rural effective as of FY 2021 and would continue to be 
considered rural if we adopted OMB Bulletin 20-01.
    Finally, on July 21, 2023, OMB issued Bulletin 23-01, which revises 
the CBSA delineations based on the latest available data from the 2020 
census. This bulletin contains information regarding updates of 
statistical area changes to CBSA titles, numbers, and county or county 
equivalents.
(2) Proposed Implementation of New Labor Market Area Delineations
    We believe it is important for the IPF PPS to use, as soon as is 
reasonably possible, the latest available labor market area 
delineations to maintain a more accurate and up-to-date payment system 
that reflects the reality of population shifts and labor market 
conditions. We believe that using the most current delineations will 
increase the integrity of the IPF PPS wage index system by creating a 
more accurate representation of geographic variations in wage levels. 
In the FY 2025 IPF PPS proposed rule, we explained that we have 
carefully analyzed the impacts of adopting the new OMB delineations and 
find no compelling reason to delay implementation. Therefore, we 
proposed to implement the new OMB delineations as described in the July 
21, 2023, OMB Bulletin No. 23-01, effective beginning with the FY 2025 
IPF PPS wage index. We proposed to adopt the updates to the OMB 
delineations announced in OMB Bulletin No. 23-01 effective for FY 2025 
under the IPF PPS.
    As previously discussed, we finalized a 5-percent permanent cap on 
any decrease to a provider's wage index from its wage index in the 
prior year. For more information on the permanent 5-percent cap policy, 
we refer readers to the FY 2023 IPF PPS final rule (87 FR 46856 through 
46859). In addition, we proposed to phase out the rural adjustment for 
IPFs that are transitioning from rural to urban based on these CBSA 
revisions, as discussed in section IV.D.1.c. of this final rule.
(a) Micropolitan Statistical Areas
    OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
associated with at least one urban cluster that has a population of at 
least 10,000, but less than 50,000 (75 FR 37252). We refer to these as 
Micropolitan Areas. After extensive impact analysis, consistent with 
the treatment of these areas under the IPPS as discussed in the FY 2005 
IPPS final rule (69 FR 49029 through 49032), we determined the best 
course of action was to treat Micropolitan Areas as ``rural'' and 
include them in the calculation of each state's IPF PPS rural wage 
index. We refer readers to the FY 2007 IPF PPS final rule (71 FR 27064 
through 27065) for a complete discussion regarding treating 
Micropolitan Areas as rural. We did not propose any changes to this 
policy for FY 2025.
(b) Change to County-Equivalents in the State of Connecticut
    The June 6, 2022, Census Bureau Notice (87 FR 34235 through 34240), 
OMB Bulletin No. 23-01 replaced the 8 counties in Connecticut with 9 
new ``Planning Regions.'' Planning regions now serve as county-
equivalents within the CBSA system. In the proposed rule, we explained 
that we have evaluated the changes and are proposed to adopt the 
planning regions as county equivalents for wage index purposes. We 
stated that we believe it is necessary to adopt this migration from 
counties to planning region county-equivalents to maintain consistency 
with OMB updates. We provided the following crosswalk for each county 
in Connecticut with the current and proposed FIPS county and county-
equivalent codes and CBSA assignments.

[[Page 64618]]

[GRAPHIC] [TIFF OMITTED] TR07AU24.015

(c) Urban Counties That Will Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the new OMB labor 
market area delineations (based upon OMB Bulletin No. 23-01) beginning 
in FY 2025. We stated that our analysis shows a total of 53 counties 
(and county equivalents) and 15 providers are located in areas that 
were previously considered part of an urban CBSA but would be 
considered rural beginning in FY 2025 under these revised OMB 
delineations. Table 14 lists the 53 urban counties that we noted would 
be rural if we finalized our proposal to implement the revised OMB 
delineations.
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[[Page 64620]]


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BILLING CODE 4120-01-C
    We proposed that the wage data for all providers located in the 
counties listed above would now be considered rural, beginning in FY 
2025, when calculating their respective state's rural wage index. This 
rural wage index value would also be used under the IPF PPS. We 
recognize that rural areas typically have lower area wage index values 
than urban areas, and providers located in these counties may 
experience a negative impact in their IPF payment due to the proposed 
adoption of the revised OMB delineations. However, we noted that 
providers located in these counties would receive a rural adjustment 
beginning in FY 2025, which would mitigate the impact of decreases to 
the wage index for these providers. In addition, we explained that the 
permanent 5-percent cap on wage index decreases under the IPF PPS would 
further mitigate large wage index decreases for providers in these 
areas.
(d) Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the new OMB labor 
market area delineations (based upon OMB Bulletin No. 23-01) beginning 
in FY 2025. We stated that analysis of these OMB labor market area 
delineations shows that a total of 54 counties (and county equivalents) 
and 10 providers are located in areas that were previously considered 
rural but will now be considered urban under the revised OMB 
delineations. Table 15 lists the 54 rural counties that we stated would 
be urban if we finalized our proposal to implement the revised OMB 
delineations.
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    We proposed that when calculating the area wage index, beginning 
with FY 2025, the wage data for providers located in these counties 
would be included in their new respective urban CBSAs. Typically, 
providers located in an urban area receive a wage index value higher 
than or equal to providers located in their state's rural area. We also 
noted that providers located in these areas would no longer be 
considered rural beginning in FY 2025. We refer readers to section 
IV.D.1.c of this final rule for a discussion of the proposed policy to 
phase out the payment of the rural adjustment for providers in these 
areas.
(e) Urban Counties That Would Move to a Different Urban CBSA Under the 
New OMB Delineations
    In the proposed rule, we noted that in certain cases adopting the 
new OMB delineations would involve a change only in CBSA name and/or 
number, while the CBSA continues to encompass the same constituent 
counties. For example, CBSA 10540 (Albany-Lebanon, OR) would experience 
a change to its name, and become CBSA 10540 (Albany, OR), while its one 
constituent county would remain the same. Table 16 shows the current 
CBSA code and our proposed CBSA code where we proposed to change either 
the name or CBSA number only. We did not further discuss these proposed 
changes in the proposed rule, because they are inconsequential changes 
with respect to the IPF PPS wage index.
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    We explained that in some cases, if we adopt the new OMB 
delineations, counties would shift between existing and new CBSAs, 
changing the constituent makeup of the CBSAs. We stated that we 
consider this type of change, where CBSAs are split into multiple new 
CBSAs, or a CBSA loses one or more counties to another urban CBSA to be 
significant modifications.
    Table 17 lists the urban counties that we stated would move from 
one urban CBSA to another newly proposed or modified CBSA if we adopted 
the new OMB delineations.
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    We stated in the proposed rule that we identified 68 IPF providers 
located in the affected counties listed in Table 17. We noted that if 
providers located in these counties move from one CBSA to another under 
the revised OMB delineations, there may be impacts, either negative or 
positive, upon their specific wage index values.
(f) Summary of Comments on the Proposed CBSA Updates for FY 2025
    We received mixed comments on the proposal to adopt the revised 
CBSA delineations. Several commenters recognized the impact of these 
delineation changes, and some commenters were supportive of this 
action, while others voiced concerns. In addition, we received comments 
regarding the permanent 5-percent cap on wage index decrease.
    Comment: MedPAC agreed with the 5-percent cap policy and 
additionally recommended applying a cap on wage index increases of more 
than 5-percent.
    Response: We thank MedPAC for their support and appreciate the 
suggestion to apply a cap on wage index changes of more than 5-percent 
to increases in the wage index. However, as we noted in

[[Page 64631]]

the FY 2023 IPF PPS proposed rule (87 FR 19424), we believe applying a 
5-percent cap on all wage index decreases would support increased 
predictability about IPF PPS payments for providers, enabling them to 
more effectively budget and plan their operations. That is, we proposed 
to cap decreases because we believe that a provider would be able to 
more effectively budget and plan when there is predictability about its 
expected minimum level of IPF PPS payments in the upcoming fiscal year. 
We did not propose to limit wage index increases because we do not 
believe such a policy is needed to enable IPFs to more effectively 
budget and plan their operations. Therefore, we believe it is 
appropriate for providers that experience an increase in their wage 
index value to receive that wage index value.
    Comment: One commenter stated that while they appreciate the 5-
percent cap, CMS should implement a 3-year transition period to updated 
OMB CBSA delineations as we have done in previous OMB CBSA updates.
    Response: We appreciate the commenter's feedback; however, we do 
not agree. In FY 2021 (85 FR 47059), we implemented a 2-year transition 
to mitigate any negative effects of wage index changes by applying a 5-
percent cap on any decrease in an IPF's wage index from the IPF's final 
wage index from FY 2020.
    In the FY 2022 IPF PPS final rule (86 FR 42616 through 42617), we 
stated that we continued to believe that applying the 5-percent cap 
transition policy in year one provided an adequate safeguard against 
any significant payment reductions associated with the adoption of the 
revised CBSA delineations in FY 2021, allowed for sufficient time to 
make operational changes for future FYs, and provided a reasonable 
balance between mitigating some short-term instability in IPF payments 
and improving the accuracy of the payment adjustment for differences in 
area wage levels.
    In FY 2023 (87 FR 46856 through 46859), we finalized a permanent 5-
percent cap on any decrease to a provider's wage index from its wage 
index in the prior year. Effective for FY 2025, the adoption of the 
updates to the OMB delineations announced in OMB Bulletin No. 23-01 
will be subject to the 5-percent cap on wage index decreases policy.
    As discussed in the FY 2023 IPF PPS final rule (87 FR 46856 through 
46859), we continue to believe this methodology will maintain the IPF 
PPS wage index as a relative measure of the value of labor in 
prescribed labor market areas, increase predictability of IPF PPS 
payments for providers, and mitigate instability and significant 
negative impacts to providers resulting from significant changes to the 
wage index. Therefore, we do not believe implementing a transition 
period to updated OMB CBSA delineations effective for FY 2025 is 
appropriate.
    Comment: One commenter recommended that CMS apply the wage index 5-
percent cap in a non-budget neutral manner.
    Response: CMS did not propose any new policies this year pertaining 
to the 5-percent cap, and accordingly, we are not finalizing any new 
policies in this final rule. In accordance with our longstanding policy 
under the IPF PPS, we updated the wage index in such a way that total 
estimated payments to IPFs for FY 2025 are the same with or without the 
changes (that is, in a budget-neutral manner) by applying a budget 
neutrality factor to the IPF PPS rates. We applied the wage index cap 
in a budget-neutral manner in accordance with this overall budget 
neutrality policy for the IPF PPS wage index so that wage index changes 
do not increase aggregate Medicare spending. In the FY 2023 IPF PPS 
proposed rule (87 FR 19423 through 19425), we noted that applying a 5-
percent cap on all wage index decreases would have a very small effect 
on the wage index budget neutrality factor for FY 2023. We explained 
that we anticipate that in the absence of proposed policy changes, most 
providers will not experience year to-year wage index declines greater 
than 5-percent in any given year and that we expect the impact to the 
wage index budget neutrality factor in future years will continue to be 
minimal.
    Comment: One commenter stated that both OMB guidance and the 
Metropolitan Areas Protection and Standardization (MAPS) Act (Pub. L. 
117-219) support that, if CMS chooses to adopt new OMB delineations, 
CMS must fully explain why reliance on the updated CBSAs as set forth 
by OMB is appropriate for purposes of the FY 2025 wage index 
adjustments. The commenter asserted that CMS has not provided rationale 
for why relying on the updated CBSAs is appropriate. Rather than simply 
adopting the OMB CBSAs by default, the commenter stated that CMS must 
make a fact-specific determination of those CBSAs' suitability for 
Medicare reimbursement purposes, including whether it would be 
appropriate to use additional data to modify OMB's delineation to 
ensure that such changes are appropriate for purposes of defining 
regional labor markets for IPF workers.
    Response: We acknowledge the commenter's concerns about adopting 
CBSA changes by default. We do not agree with the commenter's assertion 
that CMS has not provided rationale for the proposed adoption of the 
revised CBSA delineations for FY 2025. The MAPS Act specifically states 
that ``this act limits the automatic application of, and directs the 
Office of Management and Budget (OMB) to provide information about, 
changes to the standards for designating a core-based statistical area 
(CBSA) . . .'' We believe our proposed rule meets the requirements of 
the MAPS Act, because we have not automatically applied the revised 
CBSAs outlined in OMB Bulletin 23-01. Rather, as we noted in the 
proposed rule, we proposed the adoption of the revised CBSA 
delineations because we believe it is important for the IPF PPS to use, 
as soon as is reasonably possible, the latest available labor market 
area delineations to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions. We also stated that using the most current delineations 
would increase the integrity of the IPF PPS wage index system by 
creating a more accurate representation of geographic variations in 
wage levels.
    With respect to the suggestion that CMS consider whether it would 
be appropriate to use additional data to modify OMB's delineation to 
ensure that such changes are appropriate for purposes of defining 
regional labor markets for IPF workers, we do not believe use of such 
additional data is appropriate. As we have previously discussed in the 
RY 2007 final rule (71 FR 27066) and as we noted earlier in this final 
rule, we believe that the actual location of an IPF (as opposed to the 
location of affiliated providers) is most appropriate for determining 
the wage adjustment, because the prevailing wages in the area in which 
the IPF is located influence the cost of a case. Accordingly, we do not 
believe it would be appropriate to use additional data to modify OMB's 
delineations for the same reasons we previously stated with regard to 
floors or reclassifications. For example, using additional data to 
modify OMB's CBSA delineations would significantly increase 
administrative burden, both for IPFs and for CMS, associated with 
particular geographical areas or even individual IPFs moving from one 
CBSA to another, and it would significantly increase the complexity of 
the methodology.
    Furthermore, because all CBSA delineation changes would be applied 
budget-neutrally under the wage index,

[[Page 64632]]

these policies would increase the wage index for some IPFs while 
reducing IPF PPS payments for all other IPFs, which would be a 
departure from our longstanding policies that IPFs have relied on for 
many years. For these reasons, we continue to believe it is important 
for the IPF PPS to use the latest available labor market area 
delineations based on the latest available CBSA delineations 
established by OMB as soon as is reasonably possible in order to 
maintain a more accurate and up-to-date payment system that reflects 
the reality of population shifts and labor market conditions.
    Comment: One commenter requested that CMS provide a wage index 
table with the FY 2025 IPF final rule that provides the wage index for 
each hospital by the Hospital CMS Certification Number (CCN), similar 
to the Case-Mix Index and Wage Index Table by CCN published for the 
IPPS rule.
    Response: We appreciate the commenter's interest in requesting that 
CMS publish information about wage index changes at the provider level. 
However, if CMS were to include a provider-level wage index table for 
the IPF PPS in rulemaking, we would be concerned that it could create 
confusion if providers' details change after a file has been published 
alongside the IPF PPS proposed or final rule, as this information can 
change throughout the year.
    We note that the MACs maintain, on an ongoing basis, detailed 
information about the location, including the applicable wage index, 
for each IPF. The MACs also have information as to whether the 5-
percent cap is applicable for each individual IPF. IPFs can contact 
their MACs for provider specific wage index information and any related 
questions. We note that CMS has provided instructions to the MACs on 
applying the 5-percent cap policy (see publication 100-04 Medicare 
Claims Processing Manual, chapter 3).
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to update the IPF PPS wage index for FY 
2025 to reflect the CBSA delineations based on OMB Bulletin 23-01. As 
we did not propose any changes to our established 5-percent wage index 
cap policy, we are not finalizing any changes to that policy for FY 
2025. We refer readers to section IV.D.1.C of this final rule for a 
discussion about the proposed 3-year transition policy for providers 
affected by the loss of the IPF PPS rural adjustment in FY 2025.
c. Adjustment for Rural Location
    In the RY 2005 IPF PPS final rule, (69 FR 66954), we provided a 17-
percent payment adjustment for IPFs located in a rural area. This 
adjustment was based on the regression analysis, which indicated that 
the per diem cost of rural facilities was 17-percent higher than that 
of urban facilities after accounting for the influence of the other 
variables included in the regression. This 17-percent adjustment has 
been part of the IPF PPS each year since the inception of the IPF PPS. 
As discussed earlier in this rule, we proposed a number of revisions to 
the patient-level adjustment factors as well as changes to the CBSA 
delineations. In order to minimize the scope of changes that would 
impact providers in any single year, we proposed to use the existing 
regression-derived adjustment factor, which was established in RY 2005, 
for FY 2025 for IPFs located in a rural area as defined at Sec.  
412.64(b)(1)(ii)(C). See the RY 2005 IPF PPS final rule (69 FR 66954) 
for a complete discussion of the adjustment for rural locations. 
However, as discussed in the section IV.A of this FY 2025 IPF PPS final 
rule, we have completed analysis of more recent cost and claims and 
solicited comments on those results in the FY 2025 IPF PPS proposed 
rule.
    As we explained in the proposed rule, the adoption of OMB Bulletin 
No. 23-01 in accordance with our established methodology would 
determine whether a facility is classified as urban or rural for 
purposes of the rural payment adjustment in the IPF PPS. Overall, we 
stated that we believe implementing updated OMB delineations would 
result in the rural payment adjustment being applied where it is 
appropriate to adjust for higher costs incurred by IPFs in rural 
locations. However, we noted we recognize that implementing these 
changes would have distributional effects among IPF providers, and that 
some providers would experience a loss of the rural payment adjustment 
because of our proposals. Therefore, we explained that we believe it 
would be appropriate to consider, as we have in the past, whether a 
transition period should be used to implement these proposed changes.
    In the proposed rule, we explained that prior changes to the CBSA 
delineations have included a phase-out policy for the rural adjustment 
for IPFs transitioning from rural to urban status. On February 28, 
2013, OMB issued OMB Bulletin No. 13-01, which 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. We adopted these new OMB CBSA 
delineations in the FY 2016 IPF final rule (80 FR 46682 through 46689), 
and identified 105 counties and 37 IPFs that will move from rural to 
urban status due to the new CBSA delineations. To reduce the impact of 
the loss of the 17-percent rural adjustment, we adopted a budget-
neutral 3-year phase-out of the rural adjustment for existing FY 2015 
rural IPFs that became urban in FY 2016 and that experienced a loss in 
payments due to changes from the new CBSA delineations. These IPFs 
received two-thirds of the rural adjustment for FY 2016 and one-third 
of the rural adjustment in FY 2017. For FY 2018, these IPFs did not 
receive a rural adjustment.
    For subsequent adoptions of OMB Bulletin No. 15-01 for FY 2018 (82 
FR 36779 through 36780), OMB Bulletin 17-01 for FY 2020 (84 FR 38453 
through 38454), and OMB Bulletin 18-04 for FY 2021 (85 FR 47053 through 
47059), we identified that fewer providers were affected by these 
changes than by the changes relating to the adoption of OMB Bulletin 
13-01. We did not phase out the rural adjustment when adopting these 
delineation changes.
    In the FY 2025 IPF PPS proposed rule, we explained that for 
facilities located in a county that transitioned from rural to urban in 
Bulletin 23-01, we considered whether it will be appropriate to phase 
out the rural adjustment for affected providers consistent with our 
past practice of using transition policies to help mitigate negative 
impacts on hospitals of OMB Bulletin proposals that have a material 
effect on a number of IPFs. We noted that adoption of the updated CBSAs 
in Bulletin 23-01 would change the status of 10 IPF providers currently 
designated as ``rural'' to ``urban'' for FY 2025 and subsequent fiscal 
years. As such, we explained that these 10 newly urban providers would 
no longer receive the 17-percent rural adjustment. Consistent with the 
transition policy adopted for IPFs in FY 2016 (80 FR 46682 through 
4668980 FR 46682 through 46689), we proposed a 3-year budget neutral 
phase-out of the rural adjustment for IPFs located in the 54 rural 
counties that would become urban under the new OMB delineations, given 
the potentially significant payment impacts for these IPFs. We stated 
that we believe a phase-out of the rural adjustment transition period 
for these 10 IPFs specifically is appropriate because we expect these 
IPFs would experience a steeper and more abrupt reduction in their

[[Page 64633]]

payments compared to other IPFs. Therefore, we proposed to phase out 
the rural adjustment for these providers to reduce the impact of the 
loss of the FY 2024 rural adjustment of 17-percent over FYs 2025, 2026, 
and 2027. We explained that this policy would allow IPFs that are 
classified as rural in FY 2024 and would be classified as urban in FY 
2025 to receive two-thirds of the rural adjustment for FY 2025. For FY 
2026, these IPFs would receive one-third of the rural adjustment. For 
FY 2027, these IPFs would not receive a rural adjustment. We explained 
that we believe a 3-year budget-neutral phase-out of the rural 
adjustment for IPFs that transition from rural to urban status under 
the new CBSA delineations would best accomplish the goals of mitigating 
the loss of the rural adjustment for existing FY 2024 rural IPFs. We 
stated that the purpose of the gradual phase-out of the rural 
adjustment for these providers is to mitigate potential payment 
reductions and promote stability and predictability in payments for 
existing rural IPFs that may need time to adjust to the loss of their 
FY 2024 rural payment adjustment or that experience a reduction in 
payments solely because of this re-designation. We stated that this 
policy would be specifically for rural IPFs that become urban in FY 
2025. We did not propose a transition policy for urban IPFs that become 
rural in FY 2025 because these IPFs would receive the full rural 
adjustment of 17-percent beginning October 1, 2024. We solicited 
comments on this proposed policy.
    We received comments on the proposal to maintain the 17-percent 
rural adjustment for FY 2025, and the proposal to establish a 3-year 
budget-neutral transition policy for rural IPFs that become urban in FY 
2025. We discuss these comments below. In addition, we refer readers to 
section V.A of this final rule for a discussion of comments received in 
response to a request for information about potential future revisions 
to the IPF PPS facility-level adjustments.
    Comment: Several commenters expressed support for maintaining the 
existing 17-percent rural adjustment for FY 2025, with one commenter 
agreeing with the importance of mitigating the scope of changes in the 
payment system in one year. In contrast, one commenter suggested CMS 
update the rural adjustment for FY 2025 to use the regression-derived 
adjustment factor as discussed in section IV.C of this final rule. This 
commenter stated that the impact to facilities of revising the rural 
adjustment would be relatively small and recommended that CMS adopt a 
transition policy for all changes to mitigate the impact in a single 
year. This commenter recommended re-running the regression analysis 
with more current data before proposing a revision of the rural 
location adjustment in the future.
    Response: We appreciate the comments regarding the proposal to 
maintain the existing 17-percent rural adjustment for FY 2025. Based on 
the informational impact analysis discussed in section IV.A of the 
proposed rule, we have identified that potential changes to the rural 
adjustment for FY 2025 would have distributional impacts for individual 
providers, although the overall impact would be budget neutral (that 
is, 0 percent overall impact). We continue to believe that the most 
appropriate approach to maintain stability in payments for FY 2025 is 
to maintain the existing rural adjustment factor, as proposed. We 
appreciate the thoughtful recommendations for methodological 
considerations and will take them into consideration for potential 
future revisions to the rural adjustment.
    Comment: Two commenters expressed support for phasing in changes 
related to the revised CBSA delineations, including the proposal to 
phase out the rural adjustment for IPFs that would become urban in FY 
2025.
    Response: We appreciate the support from commenters.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposals to maintain the current 17-percent 
adjustment for IPFs located in rural areas, and to phase out the rural 
adjustment for IPFs that will become urban in FY 2025 because of the 
adoption of the revised CBSA delineations based on OMB Bulletin 23-01. 
We will apply two-thirds of the rural adjustment for these providers 
for FY 2025 and one-third of the rural adjustment for FY 2026. For FY 
2027, these IPFs will not receive a rural adjustment.
d. Wage Index Budget Neutrality Adjustment
    Changes to the wage index are made in a budget neutral manner so 
that updates do not increase expenditures. Therefore, for FY 2025, we 
proposed to continue to apply a budget neutrality adjustment in 
accordance with our existing budget neutrality policy. This policy 
requires us to update the wage index in such a way that total estimated 
payments to IPFs for FY 2025 are the same with or without the changes 
(that is, in a budget neutral manner) by applying a budget neutrality 
factor to the IPF PPS rates. We proposed a budget neutrality factor of 
0.9998 in to ensure that the rates reflect the FY 2025 update to the 
wage indexes (based on the FY 2021 hospital cost report data) and the 
labor-related share in a budget neutral manner.
    Finally, we note that in the April 3, 2024 IPF PPS proposed rule 
(89 FR 23188), there was a technical error in describing the 
calculation of the FY 2025 proposed wage index budget neutrality 
factor. We erroneously stated that on that page that the wage index 
budget neutrality factor was 0.9995; however, the correct wage index 
budget neutrality factor base rate was 0.9998, as discussed in section 
I.B of the same proposed rule (89 FR 23147) and in Addendum A to the 
proposed rule. To be clear, this error only affected the description of 
the wage index budget neutrality factor in section IV.D.1.d of the FY 
2025 IPF PPS proposed rule, and the calculations themselves, as well as 
the rates indicated in the proposed rule, were correct and consistent 
with our longstanding methodology for updating the IPF Federal per diem 
base rate and ECT payment per treatment.
    For this FY 2025 IPF PPS final rule, we use the following steps to 
ensure that the rates reflect the FY 2025 update to the wage indexes 
(based on FY 2021 hospital cost report data) and the labor-related 
share in a budget-neutral manner:
    Step 1: Simulate estimated IPF PPS payments, using the FY 2024 IPF 
wage index values (available on the CMS website) and labor-related 
share (as published in the FY 2024 IPF PPS final rule (88 FR 51054).
    Step 2: Simulate estimated IPF PPS payments using the FY 2025 IPF 
wage index values (available on the CMS website), and the FY 2025 
labor-related share (based on the latest available data as discussed 
previously).
    Step 3: Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the FY 2025 budget 
neutral wage adjustment factor of 0.9996.
    Step 4: Apply the FY 2025 budget neutral wage adjustment factor 
from step 3 to the FY 2024 IPF PPS Federal per diem base rate after the 
application of the IPF market basket increase reduced by the 
productivity adjustment described in section IV.A of this final rule to 
determine the FY 2025 IPF PPS Federal per diem base rate. As discussed 
in section IV.F of this final rule, we are also applying a refinement 
standardization factor to determine the FY 2025 IPF PPS Federal per 
diem base rate.

[[Page 64634]]

2. Teaching Adjustment
Background
    In the RY 2005 IPF PPS final rule, we implemented regulations at 
Sec.  412.424(d)(1)(iii) to establish a facility-level adjustment for 
IPFs that are, or are part of, teaching hospitals. The teaching 
adjustment accounts for the higher indirect operating costs experienced 
by hospitals that participate in graduate medical education (GME) 
programs. The payment adjustments are made based on the ratio of the 
number of fulltime equivalent (FTE) interns and residents training in 
the IPF and the IPF's average daily census.
    Medicare makes direct GME payments (for direct costs such as 
resident and teaching physician salaries, and other direct teaching 
costs) to all teaching hospitals including those paid under a PPS and 
those paid under the TEFRA rate-of-increase limits. These direct GME 
payments are made separately from payments for hospital operating costs 
and are not part of the IPF PPS. The direct GME payments do not address 
the estimated higher indirect operating costs teaching hospitals may 
face.
    The results of the regression analysis of FY 2002 IPF data 
established the basis for the payment adjustments included in the RY 
2005 IPF PPS final rule. The results showed that the indirect teaching 
cost variable is significant in explaining the higher costs of IPFs 
that have teaching programs. We calculated the teaching adjustment 
based on the IPF's ``teaching variable,'' which is (1 + [the number of 
FTE residents training in the IPF's average daily census]). The 
teaching variable is then raised to the 0.5150 power to result in the 
teaching adjustment. This formula is subject to the limitations on the 
number of FTE residents, which are described in this section of this 
final rule.
    We established the teaching adjustment in a manner that limited the 
incentives for IPFs to add FTE residents for the purpose of increasing 
their teaching adjustment. We imposed a cap on the number of FTE 
residents that may be counted for purposes of calculating the teaching 
adjustment. The cap limits the number of FTE residents that teaching 
IPFs may count for the purpose of calculating the IPF PPS teaching 
adjustment, not the number of residents teaching institutions can hire 
or train. We calculated the number of FTE residents that trained in the 
IPF during a ``base year'' and used that FTE resident number as the 
cap. An IPF's FTE resident cap is ultimately determined based on the 
final settlement of the IPF's most recent cost report filed before 
November 15, 2004 (69 FR 66955). A complete discussion of the temporary 
adjustment to the FTE cap to reflect residents due to hospital closure 
or residency program closure appears in the RY 2012 IPF PPS proposed 
rule (76 FR 5018 through 5020) and the RY 2012 IPF PPS final rule (76 
FR 26453 through 26456).
    In the regression analysis that informed the RY 2004 IPF PPS final 
rule, the logarithm of the teaching variable had a coefficient value of 
0.5150. We converted this cost effect to a teaching payment adjustment 
by treating the regression coefficient as an exponent and raising the 
teaching variable to a power equal to the coefficient value. We note 
that the coefficient value of 0.5150 was based on the regression 
analysis holding all other components of the payment system constant. A 
complete discussion of how the teaching adjustment was calculated 
appears in the RY 2005 IPF PPS final rule (69 FR 66954 through 66957) 
and the RY 2009 IPF PPS notice (73 FR 25721).
    We proposed to retain the coefficient value of 0.5150 for the 
teaching adjustment to the Federal per diem base rate as we did not 
propose refinements to the facility-level payment adjustments for rural 
location or teaching status for FY 2025. As noted earlier, given the 
scope of changes to the wage index and patient-level adjustment 
factors, we believe this will minimize the total impacts to providers 
in any given year. We refer readers to section V.A of this final rule 
for a discussion of comments received in response to a request for 
information about potential future revisions to the IPF PPS facility-
level adjustments.
    Comment: Several commenters expressed support for maintaining the 
existing teaching adjustment for FY 2025, with one commenter agreeing 
with the importance of mitigating the scope of changes in the payment 
system in one year. In contrast, one commenter recommended CMS update 
the rural adjustment for FY 2025 to use the regression-derived 
adjustment factor as discussed in section IV.C of this final rule. This 
commenter stated that the impact to facilities of revising the rural 
adjustment would be relatively small, and recommended that CMS adopt a 
transition policy for all changes to mitigate the impact in a single 
year. This commenter recommended re-running the regression analysis 
with more current data before proposing a revision of the teaching 
adjustment in the future.
    Response: We thank the commenters for their support. Based on the 
informational impact analysis discussed in section IV.A of the proposed 
rule, we have identified that potential changes to the teaching 
adjustment for FY 2025 would potentially have distributional impacts 
for individual providers, although the overall impact would be budget 
neutral (that is, 0 percent overall impact). We continue to believe 
that the most appropriate approach to maintain stability in payments 
for FY 2025 is to maintain the existing teaching adjustment factor, as 
proposed. We appreciate the thoughtful recommendations for 
methodological considerations and will take this into consideration for 
potential future revisions to the teaching adjustment.
    Comment: Two commenters requested that CMS allow affiliation 
agreements for IPFs, which would permit a facility to share its 
training cap with other facilities, or that CMS revise the definition 
of a new training program to allow an originating training facility 
that closes to transfer its existing program to a new facility. One 
commenter requested CMS provide teaching cap increases to IPFs who 
receive section 126 and section 4122 psychiatry residency under the 
CAA, 2021 and CAA, 2023, respectively. This commenter additionally 
stated that CMS should remove the teaching cap altogether, citing a 
national shortage of psychiatrists and their analysis of 2021 and 2022 
HCRIS data indicating that IPFs nationally are training 600 residents 
above their caps.
    Response: We appreciate the commenter's suggestion regarding 
potential changes to the IPF teaching adjustment to recognize new 
residency slots under the CAA, 2023 and the CAA, 2021. The CAA, 2021 
and CAA, 2023 established resident slots for direct medical education 
and indirect medical education, which are paid under the IPPS. Section 
126 of the CAA, 2021 and Section 4122 of the CAA, 2023 specifically 
pertain to section 1886(h) and section 1886(d)(5)(B) of the Act, which 
do not pertain to the IPF PPS. We will take this comment into 
consideration to potentially inform future rulemaking for the IPF PPS.
    Regarding the commenter's suggestion to recognize affiliation 
agreements, we did not propose to recognize affiliation agreements for 
the IPF PPS teaching adjustment and are not making a change to this 
policy. As we previously stated in the RY 2005 IPF PPS final rule (69 
FR 66956), our intent is not to affect affiliation agreements and 
rotational arrangements for hospitals that have residents that train in 
more than one

[[Page 64635]]

hospital. We have not implemented a provision concerning affiliation 
agreements specifically pertaining to the FTE caps used in the teaching 
adjustment under the IPF PPS.
    Final Decision: After consideration of the comments received, we 
are finalizing as proposed to calculate the teaching adjustment 
according to our existing methodology and to maintain the existing 
coefficient value for FY 2025.
3. Cost of Living Adjustment for IPFs Located in Alaska and Hawaii
    The IPF PPS includes a payment adjustment for IPFs located in 
Alaska and Hawaii based upon the area in which the IPF is located. As 
we explained in the RY 2005 IPF PPS final rule, the FY 2002 data 
demonstrated that IPFs in Alaska and Hawaii had per diem costs that 
were disproportionately higher than other IPFs. As a result of this 
analysis, we provided a COLA in the RY 2005 IPF PPS final rule. We 
refer readers to the FY 2024 IPF PPS final rule for a complete 
discussion of the currently applicable COLA factors (88 FR 51088 
through 51089).
    We adopted a new methodology to update the COLA factors for Alaska 
and Hawaii for the IPF PPS in the FY 2015 IPF PPS final rule (79 FR 
45958 through 45960). For a complete discussion, we refer readers to 
the FY 2015 IPF PPS final rule.
    We also specified that the COLA updates will be determined every 4 
years, in alignment with the IPPS market basket labor-related share 
update (79 FR 45958 through 45960). Because the labor-related share of 
the IPPS market basket was updated for FY 2022, the COLA factors were 
updated in FY 2022 IPPS/LTCH rulemaking (86 FR 45547). As such, we also 
finalized an update to the IPF PPS COLA factors to reflect the updated 
COLA factors finalized in the FY 2022 IPPS/LTCH rulemaking effective 
for FY 2022 through FY 2025 (86 FR 42621 through 42622). This is 
reflected in Table 18 below. We proposed to maintain the COLA factors 
in Table 18 for FY 2025 in alignment with the policy described in this 
paragraph.
    We did not receive any comments on our proposal; we are finalizing 
the COLA factors for IPFs located in Alaska and Hawaii as proposed.
[GRAPHIC] [TIFF OMITTED] TR07AU24.028

    The final IPF PPS COLA factors for FY 2025 are also shown in 
Addendum A to this rule, which is available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.
4. Adjustment for IPFs With a Qualifying ED
    The IPF PPS includes a facility-level adjustment for IPFs with 
qualifying EDs. As defined in Sec.  412.402, qualifying emergency 
department means an emergency department that is staffed and equipped 
to furnish a comprehensive array of emergency services and meets the 
requirements of 42 CFR 489.24(b) and Sec.  413.65.
    We provide an adjustment to the Federal per diem base rate to 
account for the costs associated with maintaining a full-service ED. 
The adjustment is intended to account for ED costs incurred by a 
psychiatric hospital with a qualifying ED, or an excluded psychiatric 
unit of an IPPS hospital or a critical access hospital (CAH), and the 
overhead cost of maintaining the ED. This payment applies to all IPF 
admissions (with one exception which we describe in this section), 
regardless of whether the patient was admitted through the ED. The ED 
adjustment is made on every qualifying claim except as described in 
this section of this final rule. As specified at Sec.  
412.424(d)(1)(v)(B), the ED adjustment is not made when a patient is 
discharged from an IPPS hospital or CAH, and admitted to the same IPPS 
hospital's or CAH's excluded psychiatric unit. We clarified in the RY 
2005 IPF PPS final rule (69 FR 66960) that an ED adjustment is not made 
in this case because the costs associated with ED services are 
reflected in the DRG payment to the IPPS hospital or through the 
reasonable cost payment made to the CAH.
    For FY 2025, we proposed to update the adjustment factor from 1.31 
to 1.53 for IPFs with qualifying EDs using the same methodology used to 
determine ED adjustments in prior years. We proposed that those IPFs 
with a qualifying ED would receive an adjustment factor of 1.53 as the 
variable per diem adjustment for day 1 of each patient stay. If an IPF 
does not have a qualifying ED, we proposed that it would receive an 
adjustment factor of 1.27 as the variable per diem adjustment for day 1 
of each patient stay. We proposed to apply this revision to the ED 
adjustment budget-neutrally by applying a refinement standardization 
factor, and we presented a detailed discussion of the distributional 
impacts

[[Page 64636]]

of this proposed change (89 FR 23154 through 23172).
    We solicited comment on this proposal. We also discussed 
alternative analysis of adjustment factors based on source of 
admission, which we did not propose to adopt. Lastly, we proposed that 
if more recent data become available, we would use such data, if 
appropriate, to determine the FY 2025 ED adjustment factor.
    Comment: One commenter erroneously stated that CMS proposed to 
maintain the existing adjustment factor for IPFs with a qualified ED, 
and expressed support for doing so, but did not provide a rationale.
    Response: We appreciate the comment, but we believe the commenter 
may have misunderstood the proposal. We proposed to increase the 
variable per diem adjustment factor for IPFs that have a qualified ED 
to 1.53, which we believe would appropriately adjust IPF PPS payments 
to account for differences in costs between IPFs without a qualified ED 
and those with a qualified ED.
    Final Decision: After consideration of the comments received, we 
are finalizing the proposed revision to the ED adjustment factor 
following the proposed methodology. Thus, we are finalizing our 
proposal to use the following steps, as used in prior years, to 
calculate the updated ED adjustment factor. (A complete discussion of 
the steps involved in the calculation of the ED adjustment factors can 
be found in the RY 2005 IPF PPS final rule (69 FR 66959 through 66960) 
and the RY 2007 IPF PPS final rule (71 FR 27070 through 27072).)
    Step 1: Estimate the proportion by which the ED costs of a stay 
will increase the cost of the first day of the stay. Using the IPFs 
with ED admissions in years 2019 through 2021, we divided the average 
ED cost per stay when admitted through the ED ($519.97) by the average 
cost per day ($1,338.93), which equals 0.39.
    Step 2: Adjust the factor estimated in step 1 to account for the 
fact that we will pay the higher first day adjustment for all cases in 
the qualifying IPFs, not just the cases admitted through the ED. Since 
on average, 66 percent of the cases in IPFs with ED admissions are 
admitted through the ED, we multiplied 0.39 by 0.66, which equals 0.26.
    Step 3: Add the adjusted factor calculated in the previous 2 steps 
to the variable per diem adjustment derived from the regression 
equation that we used to derive our other payment adjustment factors. 
As discussed in section IV.C.4.d. of this final rule, the first day 
payment factor for FY 2025 is 1.28. Adding 0.26, we obtained a first 
day variable per adjustment for IPFs with a qualifying ED equal to 
1.54.
    The ED adjustment is incorporated into the variable per diem 
adjustment for the first day of each stay for IPFs with a qualifying 
ED. A detailed discussion of the distributional impacts of this 
proposed change is found in section VIII.C of this final rule.

E. Other Payment Adjustments and Policies

1. Outlier Payment Overview
    The IPF PPS includes an outlier adjustment to promote access to IPF 
care for those patients who require expensive care and to limit the 
financial risk of IPFs treating unusually costly patients. In the RY 
2005 IPF PPS final rule, we implemented regulations at Sec.  
412.424(d)(3)(i) to provide a per case payment for IPF stays that are 
extraordinarily costly. Providing additional payments to IPFs for 
extremely costly cases strongly improves the accuracy of the IPF PPS in 
determining resource costs at the patient and facility level. These 
additional payments reduce the financial losses that would otherwise be 
incurred in treating patients who require costlier care; therefore, 
reduce the incentives for IPFs to under-serve these patients. We make 
outlier payments for discharges where an IPF's estimated total cost for 
a case exceeds a fixed dollar loss threshold amount (multiplied by the 
IPF's facility-level adjustments) plus the federal per diem payment 
amount for the case.
    In instances when the case qualifies for an outlier payment, we pay 
80 percent of the difference between the estimated cost for the case 
and the adjusted threshold amount for days 1 through 9 of the stay 
(consistent with the median LOS for IPFs in FY 2002), and 60 percent of 
the difference for day 10 and thereafter. The adjusted threshold amount 
is equal to the outlier threshold amount adjusted for wage area, 
teaching status, rural area, and the COLA adjustment (if applicable), 
plus the amount of the Medicare IPF payment for the case. We 
established the 80 percent and 60 percent loss sharing ratios because 
we were concerned that a single ratio established at 80 percent (like 
other Medicare PPSs) might provide an incentive under the IPF per diem 
payment system to increase LOS to receive additional payments.
    After establishing the loss sharing ratios, we determined the 
current fixed dollar loss threshold amount through payment simulations 
designed to compute a dollar loss beyond which payments are estimated 
to meet the 2 percent outlier spending target. Each year when we update 
the IPF PPS, we simulate payments using the latest available data to 
compute the fixed dollar loss threshold so that outlier payments 
represent 2 percent of total estimated IPF PPS payments.
2. Update to the Outlier Fixed Dollar Loss Threshold Amount
    In accordance with the update methodology described in Sec.  
412.428(d), we proposed to update the fixed dollar loss threshold 
amount used under the IPF PPS outlier policy. Based on the regression 
analysis and payment simulations used to develop the IPF PPS, we 
established a 2 percent outlier policy, which strikes an appropriate 
balance between protecting IPFs from extraordinarily costly cases while 
ensuring the adequacy of the federal per diem base rate for all other 
cases that are not outlier cases. We proposed to maintain the 
established 2 percent outlier policy for FY 2025.
    Our longstanding methodology for updating the outlier fixed dollar 
loss threshold involves using the best available data, which is 
typically the most recent available data. We note that for FY 2022 and 
FY 2023 only, we made certain methodological changes to our modeling of 
outlier payments, and we discussed the specific circumstances that led 
to those changes for those years (86 FR 42623 through 42624; 87 FR 
46862 through 46864). We direct readers to the FY 2022 and FY 2023 IPF 
PPS proposed and final rules for a more complete discussion.
    We proposed to update the IPF outlier threshold amount for FY 2025 
using FY 2023 claims data and the same methodology that we have used to 
set the initial outlier threshold amount each year beginning with the 
RY 2007 IPF PPS final rule (71 FR 27072 and 27073). Based on an 
analysis of the December 2023 update of FY 2023 IPF claims, we 
estimated that IPF outlier payments as a percentage of total estimated 
payments would be approximately 2.1 percent in FY 2024. Therefore, we 
proposed to update the outlier threshold amount to $35,590 to maintain 
estimated outlier payments at 2 percent of total estimated aggregate 
IPF payments for FY 2025. We noted that the proposed rule update would 
be an increase from the FY 2024 threshold of $33,470. Lastly, we 
proposed that if more recent data become available for the FY 2025 IPF 
PPS final rule, we would use such data as appropriate to determine the 
final outlier fixed dollar loss threshold amount for FY 2025.

[[Page 64637]]

    Comment: Three commenters wrote that CMS should seek alternatives 
to the calculation of the outlier fixed dollar loss threshold. Two 
commenters suggested that CMS remove IPFs with extremely high or low 
costs per day, as we did in FY 2022 and FY 2023. One commenter 
suggested that CMS establish a new outlier baseline that increases each 
year based on the market basket update or using three-year rolling 
average to calculate the fixed dollar loss threshold.
    Response: We appreciate the suggestions from commenters regarding 
the financial impact of the outlier threshold on IPFs and the use of 
alternative methodologies for estimating the outlier threshold. We are 
not finalizing any of the alternative methodologies that commenters 
suggested because we believe the proposed methodology, which follows 
our longstanding methodology, is the most technically appropriate for 
maintaining outlier payments at 2 percent of total IPF PPS payments in 
FY 2025.
    Regarding the suggestion to limit increases to the outlier 
threshold to no more than the market basket update, we are concerned 
that this methodology would not be technically appropriate for the IPF 
PPS outlier policy. As discussed earlier in this section, the 
longstanding IPF PPS 2-percent outlier policy was established based on 
the regression analysis and payment simulations used to develop the IPF 
PPS. We have previously explained that the 2-percent outlier policy 
strikes an appropriate balance between protecting IPFs from 
extraordinarily costly cases while ensuring the adequacy of the Federal 
per diem base rate for all other cases that are not outlier cases. Each 
year when we update the IPF PPS, we simulate payments using the latest 
available data to compute the fixed dollar loss threshold so that 
outlier payments represent 2 percent of total estimated IPF PPS 
payments. For this FY 2025 IPF PPS final rule, we have simulated 
payments using the latest available data, and these payment simulations 
indicate that an increase to the outlier fixed dollar loss threshold is 
necessary to maintain outlier payments at 2 percent of total payments. 
We are concerned that limiting increases to the outlier fixed dollar 
loss threshold to no more than the market basket update percentage 
would not appropriately target outlier payments such that they remain 
at 2 percent of total IPF PPS payments. Moreover, such a policy would 
increase outlier payments above the 2-percent target for FY 2025. 
Likewise, a methodology in which CMS would calculate the IPF PPS 
outlier threshold based on a three-year rolling average would not 
effectively target outlier payments at 2 percent of total IPF PPS 
payments. This is because the outlier threshold in FY 2023 and FY 2024 
are lower than the threshold level that our payment simulations suggest 
would most effectively target outlier payments at 2 percent. Therefore, 
if we were to use a rolling average to calculate the FY 2025 IPF PPS 
outlier threshold, such a methodology would likely result in outlier 
payments that exceed the target.
    Final Decision: After consideration of the comments received, we 
are finalizing our proposal to update the fixed dollar loss threshold 
amount used under the IPF PPS outlier policy. For this FY 2025 IPF PPS 
rulemaking, consistent with our longstanding practice, based on an 
analysis of the latest available data (the March 2024 update of FY 2023 
IPF claims) and rate increases, we believe it is necessary to update 
the fixed dollar loss threshold amount to maintain an outlier 
percentage that equals 2 percent of total estimated IPF PPS payments. 
Based on an analysis of these updated data, we estimate that IPF 
outlier payments as a percentage of total estimated payments are 
approximately 2.3 percent in FY 2024. Therefore, we are finalizing an 
update to the outlier threshold amount to $38,110 to maintain estimated 
outlier payments at 2 percent of total estimated aggregate IPF payments 
for FY 2025.
3. Update to IPF Cost-to-Charge Ratio Ceilings
    Under the IPF PPS, an outlier payment is made if an IPF's cost for 
a stay exceeds a fixed dollar loss threshold amount plus the IPF PPS 
amount. To establish an IPF's cost for a particular case, we multiply 
the IPF's reported charges on the discharge bill by its overall cost-
to-charge ratio (CCR). This approach to determining an IPF's cost is 
consistent with the approach used under the IPPS and other PPSs. In the 
RY 2004 IPPS final rule (68 FR 34494), we implemented changes to the 
IPPS policy used to determine CCRs for IPPS hospitals, because we 
became aware that payment vulnerabilities resulted in inappropriate 
outlier payments. Under the IPPS, we established a statistical measure 
of accuracy for CCRs to ensure that aberrant CCR data did not result in 
inappropriate outlier payments.
    As indicated in the RY 2005 IPF PPS final rule (69 FR 66961), we 
believe that the IPF outlier policy is susceptible to the same payment 
vulnerabilities as the IPPS; therefore, we adopted a method to ensure 
the statistical accuracy of CCRs under the IPF PPS. Specifically, we 
adopted the following procedure in the RY 2005 IPF PPS final rule:
     Calculated two national ceilings, one for IPFs located in 
rural areas and one for IPFs located in urban areas.
     Computed the ceilings by first calculating the national 
average and the standard deviation of the CCR for both urban and rural 
IPFs using the most recent CCRs entered in the most recent Provider 
Specific File (PSF) available.
    For FY 2025, we proposed to continue following this methodology to 
update the FY 2025 national median and ceiling CCRs for urban and rural 
IPFs based on the CCRs entered in the latest available IPF PPS PSF, and 
we proposed that if more recent data became available, we would use 
such data to calculate the rural and urban national median and ceiling 
CCRs for FY 2025. We did not receive any comments on this proposal, and 
we are finalizing it as proposed.
    To determine the final rural and urban ceilings, we multiplied each 
of the standard deviations by 3 and added the result to the appropriate 
national CCR average (either rural or urban). The final upper threshold 
CCR for IPFs in FY 2025 is 2.3181 for rural IPFs, and 1.8287 for urban 
IPFs, based on current CBSA-based geographic designations. If an IPF's 
CCR is above the applicable ceiling, the ratio is considered 
statistically inaccurate, and we assign the appropriate national 
(either rural or urban) median CCR to the IPF.
    We apply the national median CCRs to the following situations:
     New IPFs that have not yet submitted their first Medicare 
cost report. We continue to use these national median CCRs until the 
facility's actual CCR can be computed using the first tentatively or 
final settled cost report.
     IPFs whose overall CCR is in excess of three standard 
deviations above the corresponding national geometric mean (that is, 
above the ceiling).
     Other IPFs for which the Medicare Administrative 
Contractor (MAC) obtains inaccurate or incomplete data with which to 
calculate a CCR.
    Specifically, for FY 2025, for each of the three situations listed 
above, using the most recent CCRs entered in the CY 2023 PSF, we 
estimate a national median CCR of 0.5720 for rural IPFs and a national 
median CCR of 0.4200 for urban IPFs. These calculations are based on 
the IPF's location (either urban or rural) using the current CBSA-based 
geographic designations. A complete discussion regarding the national 
median CCRs appears in the RY 2005

[[Page 64638]]

IPF PPS final rule (69 FR 66961 through 66964).
4. Requirements for Reporting Ancillary Charges and All-Inclusive 
Status Eligibility Under the IPF PPS
a. Background
    As discussed in section IV.E.4.b of this final rule, to analyze 
variation in cost between patients with different characteristics, it 
is crucial for us to have complete cost information about each patient, 
including data on ancillary services provided. Currently, IPFs and 
psychiatric units are required to report ancillary charges on cost 
reports. As specified at 42 CFR 413.20, hospitals are required to file 
cost reports on an annual basis and maintain sufficient financial 
records and statistical data for proper determination of costs payable 
under the Medicare program.
    However, our ongoing analysis has found a notable increase in the 
number of IPFs, specifically for-profit freestanding IPFs, that appear 
to be erroneously identifying on form CMS-2552-10, Worksheet S-2, Part 
I, line 115, as eligible for filing all-inclusive cost reports. These 
hospitals identifying as eligible for filing all-inclusive cost reports 
(indicating that they have one charge covering all services) are 
consistently reporting no ancillary charges or very minimal ancillary 
charges and are not using charge information to apportion costs in 
their cost report. Generally, based on the nature of IPF services and 
the conditions of participation applicable to IPFs, we expect to see 
ancillary services and correlating charges, such as labs and drugs, on 
most IPF claims.\3\
---------------------------------------------------------------------------

    \3\ IPFs are subject to all hospital conditions of 
participation, including 42 CFR 482.25, which specifies that ``The 
hospital must have pharmaceutical services that meet the needs of 
the patients,'' and 482.27, which specifies that ``The hospital must 
maintain, or have available, adequate laboratory services to meet 
the needs of its patients.''
---------------------------------------------------------------------------

    In the FY 2016 IPF PPS final rule (80 FR 46693 through 46694), we 
discussed analysis conducted to better understand IPF industry 
practices for future IPF PPS refinements. This analysis revealed that 
in 2012 to 2013, over 20 percent of IPF stays show no reported 
ancillary charges, such as laboratory and drug charges, on claims. In 
the FY 2016 IPF PPS final rule (80 FR 46694), FY 2017 IPF PPS final 
rule (81 FR 50513), FY 2018 IPF PPS final rule (82 FR 36784), FY 2019 
IPF PPS final rule (83 FR 38588), and FY 2020 IPF PPS final rule (84 FR 
38458), we reminded providers that we only pay the IPF for services 
furnished to a Medicare beneficiary who is an inpatient of that IPF, 
except for certain professional services, and payments are considered 
to be payments in full for all inpatient hospital services provided 
directly or under arrangement (see 42 CFR 412.404(d)), as specified in 
42 CFR 409.10.
    On November 17, 2017, we issued Transmittal 12, which made changes 
to the hospital cost report form CMS-2552-10 (OMB No. 0938-0050) and 
included cost report level 1 edit 10710S, effective for cost reporting 
periods ending on or after August 31, 2017. Edit 10710S required that 
cost reports from psychiatric hospitals include certain ancillary costs 
or the cost report will be rejected. On January 30, 2018, we issued 
Transmittal 13, which changed the implementation date for Transmittal 
12 to be for cost reporting periods ending on or after September 30, 
2017. CMS suspended edit 10710S effective April 27, 2018, pending 
evaluation of the application of the edit to all-inclusive rate 
providers. We issued Transmittal 15 on October 19, 2018, reinstating 
the requirement that cost reports from psychiatric hospitals, except 
all-inclusive rate providers, include certain ancillary costs. This 
requirement is still currently in place. For details, we refer readers 
to see these Transmittals, which are available on the CMS website at 
https://www.cms.gov/medicare/regulations-guidance/transmittals.
    Under IPF PPS regulations at Sec.  412.404(e), all inpatient 
psychiatric facilities paid under the IPF PPS must meet the 
recordkeeping and cost reporting requirements as specified at Sec.  
413.24. Historically, in accordance with Sec.  413.24(a)(1), most 
hospitals that were approved to file all-inclusive cost reports were 
Indian Health Services (IHS) hospitals, government-owned psychiatric 
and acute care hospitals, and nominal charge hospitals. Although IPFs 
are no longer reimbursed on the basis of reasonable costs, we continue 
to expect that most IPFs, other than government-owned or tribally owned 
IPFs, should report cost data that is based on an approved method of 
cost finding and on the accrual basis of accounting. The option to 
elect to file an all-inclusive rate cost report is limited to providers 
that do not have a charge structure and that, therefore, must use an 
alternative statistic to apportion costs associated with services 
rendered to Medicare beneficiaries.
    Current cost reporting rules allow hospitals that do not have a 
charge structure to file an all-inclusive cost report using an 
alternative cost allocation method. We refer readers to the Provider 
Reimbursement Manual (PRM) 15-1; chapter 22, Sec.  2208 for detailed 
information on the requirements to file an alternative method.
b. Challenges Related to Missing IPF Ancillary Cost Data
    In general, most providers allocate their Medicare costs using 
costs and charges as described at Sec.  413.53(a)(1)(i) and referred to 
as the Departmental Method, which is the ratio of beneficiary charges 
to total patient charges for the services of each ancillary department. 
For cost reporting periods beginning on or after October 1, 1982, the 
cost report uses the Departmental Method to apportion the cost of the 
department to the Medicare program. Added to this amount is the cost of 
routine services for Medicare beneficiaries, determined based on a 
separate average cost per diem for all patients for general routine 
patient care areas as required at Sec.  413.53(a)(1)(i) and (e); and 
15-1, chapter 22, Sec.  2200.1.\4\
---------------------------------------------------------------------------

    \4\ IPFs are subject to all hospital conditions of 
participation, including 42 CFR 482.25, which specifies that ``The 
hospital must have pharmaceutical services that meet the needs of 
the patients,'' and 482.27, which specifies that ``The hospital must 
maintain, or have available, adequate laboratory services to meet 
the needs of its patients.''
---------------------------------------------------------------------------

    We use cost-to-charge ratios (CCRs) from Medicare cost reports as 
the method of establishing reasonable costs for hospital services and 
as the basis for ratesetting for several hospital prospective payment 
systems. In general, detailed ancillary cost and charge information is 
necessary for accurate Medicare ratesetting. When hospitals identify as 
all-inclusive, they are excluded from ratesetting because they do not 
have CCRs but use an alternative basis for apportioning costs. When 
hospitals erroneously identify as all-inclusive but have a charge 
structure, data that is necessary for accurate Medicare ratesetting is 
improperly excluded.
    Since the issuance of Transmittal 15, we have continued to identify 
an increase in the number of IPFs, specifically for-profit freestanding 
IPFs, that appear to be erroneously identifying on form CMS-2552-10, 
Worksheet S-2, Part I, line 115, as filing all-inclusive cost reports. 
In conjunction with the FY 2023 IPF PPS proposed rule (87 FR 19428 
through 19429), we posted a report on the CMS website that summarizes 
the results of the latest analysis of more recent IPF cost and claim 
information for potential IPF PPS adjustments and requested comments 
about the results summarized in the report. The report showed that 
approximately 23 percent of IPF stays were trimmed from the data set 
used in

[[Page 64639]]

that analysis because they were stays at facilities where fewer than 5-
percent of their stays had ancillary charges. The report is available 
on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/ipf-reports-and-educational-resources.
    Section 4125 of the CAA, 2023 authorizes the Secretary to collect 
data and information, specifically including charges related to 
ancillary services, as appropriate to inform revisions to the IPF PPS.
    In the FY 2024 IPF PPS proposed rule (88 FR 21270 through 21272), 
we included a request for information (RFI) related to the reporting of 
charges for ancillary services, such as labs and drugs, on IPF claims. 
We were interested in better understanding IPF industry practices 
pertaining to the billing and provision of ancillary services to inform 
statutorily mandated IPF PPS refinements. We stated that we were 
considering whether to require charges for ancillary services to be 
reported on claims and potentially reject claims if no ancillary 
services are reported, and whether to consider payment for such claims 
to be inappropriate or erroneous and subject to recoupment.
    In response to the comment solicitation, we received a comment from 
MedPAC regarding facilities that do not report ancillary charges on 
most or any of their claims. MedPAC stated that it is not known: 
whether IPFs fail to report ancillary charges separately because they 
were appropriately bundled with all other charges into an all-inclusive 
per diem rate; if no ancillary charges were incurred because the IPF 
cares for a patient mix with lower care needs or inappropriately fails 
to furnish the kinds of care reflected in ancillary charges when 
medically necessary; or if ancillary charges for services furnished 
during the IPF stay are inappropriately billed outside of the IPF base 
rate (unbundling). MedPAC recommended CMS conduct further investigation 
into the lack of certain ancillary charges and whether IPFs are 
providing necessary care and appropriately billing for inpatient 
psychiatric services under the IPF PPS.
    MedPAC also encouraged CMS to require the reporting of ancillary 
charges and clarify the requirements related to IPFs' ``all-inclusive-
rate'' hospital status. MedPAC noted that it observed in cost report 
data that IPFs that previously were not all-inclusive-rate hospitals 
have recently changed to an all-inclusive-rate status. MedPAC noted 
that the timing of many of these changes appears to correspond to CMS's 
transmittals requiring ancillary services to be reported on cost 
reports for IPFs that do not have an all-inclusive rate.
    Other commenters, including IPFs and hospital associations, 
responded to the RFI stating that the lack of ancillary charges on 
claims does not indicate a lack of services being provided. The 
commenters strongly opposed any claim-level editing and stated that 
reporting ancillary charges at the claim level would be inefficient and 
burdensome, particularly for government and IHS all-inclusive 
hospitals.
c. Clarification of Eligibility Criteria for the Option To Elect To 
File an All-Inclusive Cost Report
    After taking into consideration the feedback we received from both 
MedPAC and IPF providers, for FY 2025 (89 FR 23193 through 23194) we 
clarified the eligibility criteria to be approved to file all-inclusive 
cost reports. We explained that only government-owned or tribally owned 
facilities are able to satisfy these criteria, and thus only these 
facilities will be permitted to file an all-inclusive cost report for 
cost reporting periods beginning on or after October 1, 2024.
    We reminded readers that in order to be approved to file an all-
inclusive cost report, hospitals must either have an all-inclusive rate 
(one charge covering all services) or a no-charge structure.\5\ We 
clarified that this does not mean any hospital can elect to have an 
all-inclusive rate or no-charge structure. Our longstanding policy as 
discussed in the PRM 15-1, chapter 22, Sec.  2208.1, only allows a 
hospital to use an all-inclusive rate or no charge structure if it has 
never had a charge structure in place. In addition, we clarified that 
our expectation is that any new IPF would have the ability to have a 
charge structure under which it could allocate costs and charges. As 
previously stated, only a government-owned or tribally owned facility 
will be able to satisfy these criteria and will be eligible to file its 
cost report using an all-inclusive rate or no charge structure.
---------------------------------------------------------------------------

    \5\ PRM 15-1, chapter 22, Sec.  2208.1.
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    We stated that for cost reporting periods beginning on or after 
October 1, 2024, we will issue instructions to the MACs and put in 
place edits to operationalize our longstanding policy that only 
government-owned or tribally owned IPF hospitals are permitted to file 
an all-inclusive cost report. We explained that all other IPF hospitals 
must have a charge structure and must report ancillary costs and 
charges on their cost reports. IPFs that have previously filed an all--
inclusive cost report erroneously will no longer be able to do so. We 
further noted that to the extent government-owned or tribally owned 
hospitals can report ancillary charges on their cost reports, we 
strongly encourage them to do so to allow CMS to review and analyze 
complete and accurate data.
    We stated that we believe clarifying the current eligibility 
criteria to be approved to file all-inclusive cost reports and 
implementing these operational changes will appropriately require 
freestanding IPFs with the ability to have a charge structure, that is, 
all IPFs other than those which are government-owned or tribally owned, 
to track and report ancillary charge information. In addition, we 
stated that we expect that more IPFs reporting ancillary charge 
information will result in an increase of IPFs having a CCR, which will 
in turn result in an increased number of IPFs being included in 
ratesetting. Therefore, we explained that we believe these operational 
changes will improve the quality of data reported, which will result in 
increased accuracy of future payment refinements to the IPF PPS.
    Furthermore, we explained that we believe collecting charges of 
ancillary services from freestanding IPFs supports the directive for 
competition under the Executive Order on Promoting Competition in the 
American Economy as it facilitates accurate payment, cost efficiency, 
and transparency.\6\ We received several comments regarding this 
clarification and the operational changes discussed in the FY 2025 IPF 
PPS proposed rule.
---------------------------------------------------------------------------

    \6\ https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09executive-order-on-promoting-competition-in-the-american-economy/.
---------------------------------------------------------------------------

    Comment: Overall, commenters understood the clarification that only 
a government-owned or tribally owned facility will be able to satisfy 
these criteria and will be eligible to file its cost report using an 
all-inclusive rate or no charge structure. However, many commenters 
requested that CMS be lenient with facilities as they transition, and 
extend the date for compliance to October 1, 2026. A few commenters 
stated that reporting ancillary costs would require major changes to 
internal systems to efficiently track ancillary costs.
    Response: We appreciate commenters' understanding of the importance 
of reporting ancillary costs on cost reports. As discussed in the 
proposed rule, the requirement that cost reports from psychiatric 
hospitals, except all-inclusive rate providers, include certain

[[Page 64640]]

ancillary costs is currently in place. For a hospital to be eligible to 
file an all-inclusive cost report, they must require the use of an 
alternative statistic to apportion costs associated with services 
rendered to Medicare beneficiaries due to not having a charge 
structure. These requirements have been discussed through prior 
rulemaking, transmittals, a technical report, and MedPAC meetings and 
reports.
    We remind readers that implementing the proposed operational 
changes to limited all-inclusive cost reporting would, at the earliest, 
affect cost reports submitted after October 1, 2025. This means that 
affected IPFs would have at least one year to make operational changes. 
While we acknowledge the concerns from commenters regarding systems 
changes needed to track ancillary costs, we believe putting in place 
edits for cost reporting periods beginning on or after October 1, 2024, 
to operationalize our longstanding policy provides IPF hospitals 
sufficient time to generally track and submit the ancillary cost and 
charge information.
    Comment: Some commenters noted that the absence of ancillary costs 
on cost reports does not correlate to the assumption that ancillary 
services were not provided to the patient. The commenters stated that 
filing all-inclusive cost reports is a matter of efficiency to reduce 
administrative burden and cost. Commenters also expressed that they do 
not believe reporting ancillary costs has a direct influence on 
payment.
    Response: We understand the lack of reported ancillary costs may 
not necessarily correlate with the services not being provided; 
however, based on the nature of IPF services and the conditions of 
participation applicable to IPFs, we expect to see ancillary services 
and correlating charges, such as labs and drugs, on most IPF claims. We 
believe IPFs are providing these necessary services to patients; 
however, the information currently reported does not provide evidence 
to this effect. In regard to commenters who stated that filing all-
inclusive cost reports is a business decision for efficiency and to 
reduce administrative burden, filing correct cost reports should not be 
a new burden as this has always been required under Medicare. 
Furthermore, as mentioned above, we believe maintaining an accurate 
charge structure would be part of a business's accounting for 
reordering and restocking pharmaceuticals at a minimum, as well as more 
accurate payment for the purposes of outlier payments. As we mention 
above, these requirements have been discussed through prior rulemaking, 
transmittals, a technical report, and MedPAC meetings and reports.
    Further, we disagree with the commenters' assertion that reporting 
ancillary costs does not have a direct influence on payment. As 
discussed in section IV.C.3.c of this final rule, we analyzed ancillary 
cost and charge data to inform our proposed FY 2025 refinements to the 
IPF PPS. In addition, in section and III.C.4.b if this final rule, we 
solicited comments on whether a lack of ancillary charge data may be 
contributing to the results of our regression analysis as it relates to 
opioid use disorders. For future refinements of the IPF PPS, such as 
those related to the patient assessment instrument as discussed in 
section V.B. of this final rule, the quality of the analyses of 
patient-level costs that CMS performs will ultimately depend on the 
quality of data that IPFs report.
    Final Decision: After consideration of the comments received, we 
are putting in place operational edits to allow only those freestanding 
IPFs that are government-owned, IHS- or tribally owned facilities, to 
submit an all-inclusive cost report, effective for cost reporting 
periods beginning on or after October 1, 2024. Therefore, all other 
IPFs are required to have a charge structure and must report costs and 
charges for inpatient psychiatric services. We believe that collecting, 
and subsequently analyzing, detailed ancillary data from additional IPF 
hospitals will allow us to increase the accuracy of the IPF PPS.

F. Refinement Standardization Factor

    Section 1886(s)(5)(D)(iii) of the Act, as added by section 4125(a) 
of the CAA, 2023, states that revisions in payment implemented pursuant 
to section 1886(s)(5)(D)(i) for a rate year shall result in the same 
estimated amount of aggregate expenditures under this title for 
psychiatric hospitals and psychiatric units furnished in the rate year 
as would have been made under this title for such care in such rate 
year if such revisions had not been implemented. We interpret this to 
mean that revisions in payment adjustments implemented for FY 2025 (and 
for any subsequent fiscal year) must be budget neutral.
    Historically, we have maintained budget neutrality in the IPF PPS 
using the application of a standardization factor, which is codified in 
our regulations at Sec.  412.424(c)(5) to account for the overall 
positive effects resulting from the facility-level and patient-level 
adjustments. As discussed in section IV.B.1 of this final rule, section 
124(a)(1) of the BBRA required that we implement the IPF PPS in a 
budget neutral manner. In other words, the amount of total payments 
under the IPF PPS, including any payment adjustments, must be projected 
to be equal to the amount of total payments that would have been made 
if the IPF PPS were not implemented. Therefore, we calculated the 
standardization factor by setting the total estimated IPF PPS payments, 
taking into account all of the adjustment factors under the IPF PPS, to 
be equal to the total estimated payments that would have been made 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) methodology had the IPF PPS not been implemented. A 
step-by-step description of the methodology used to estimate payments 
under the TEFRA payment system appears in the RY 2005 IPF PPS final 
rule (69 FR 66926).
    We believe the budget neutrality requirement of section 4125(a) of 
the CAA, 2023 is consistent with our longstanding methodology for 
maintaining budget neutrality under the IPF PPS. Therefore, for FY 
2025, we proposed to apply a refinement standardization factor in 
accordance with our existing policy at Sec.  412.424(c)(5). This policy 
requires us to update IPF PPS patient-level adjustment factors, ED 
adjustment, and ECT per treatment amount as proposed in FY 2025 IPF PPS 
proposed rule, in such a way that total estimated payments to IPFs for 
FY 2025 are the same with or without the changes (that is, in a budget 
neutral manner) by applying a refinement standardization factor to the 
IPF PPS rates. We proposed to apply a refinement standardization factor 
of 0.9514 to the IPF PPS federal per diem base rate and ECT per 
treatment amount to maintain budget neutrality.
    We did not receive any comments on our proposed methodology for 
applying a refinement standardization factor. We are finalizing our 
proposal to use the following steps to ensure that the rates reflect 
the FY 2025 update to the patient-level adjustment factors (as 
previously discussed in section IV.C and IV.D of this final rule, and 
summarized in Addendum A) in a budget neutral manner:
    Step 1: Simulate estimated IPF PPS payments using the FY 2024 IPF 
patient-level and facility-level adjustment factor values and FY 2024 
ECT payment per treatment (available on the CMS website).
    Step 2: Simulate estimated IPF PPS payments using the FY 2025 IPF 
patient-level and facility-level adjustment factor values (see Addendum 
A of this final rule, which

[[Page 64641]]

is available on the CMS website) and ECT per treatment amount based on 
the CY 2022 geometric mean cost for ECT under the OPPS.
    Step 3: Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the final FY 2025 
refinement standardization factor of 0.9524.
    Step 4: Apply the FY 2025 refinement standardization factor from 
step 3 to the FY 2024 IPF PPS Federal per diem base rate and ECT per 
treatment amount (based on the CY 2022 geometric mean cost for ECT 
under the OPPS), after the application of the wage index budget 
neutrality factor and the IPF market basket increase reduced by the 
productivity adjustment described in section IV.A of this final rule to 
determine the FY 2025 IPF PPS Federal per diem base rate and FY 2025 
ECT payment amount per treatment.

V. Requests for Information (RFI) To Inform Future Revisions to the IPF 
PPS in Accordance With the CAA, 2023

    In the FY 2025 IPF PPS proposed rule, we requested information on 
two main topics to inform future revisions to the IPF PPS, in 
accordance with the CAA, 2023. First, we requested information 
regarding potential revisions to the IPF PPS facility-level 
adjustments. Second, we requested information regarding the development 
of a patient assessment instrument under the IPFQR program.

A. Request for Information Regarding Revisions to IPF PPS Facility-
Level Adjustments

    In section IV of the FY 2025 IPF PPS proposed rule (89 FR 23194 
through 23200), we described the results of our latest analysis and 
requested public comment on them. Specifically, we presented the latest 
results of our analysis of the adjustments for rural location and 
teaching status, as well as a potential new adjustment for safety net 
population. We explained that the potential inclusion of a safety net 
adjustment could affect the magnitude of the adjustment factors for 
rural and teaching status, and we noted that future additional data and 
analysis may produce results that differ from those presented in the 
proposed rule. Lastly, we presented informational data about the 
distributional impacts of adopting such adjustment factors for the IPF 
PPS. We refer readers to the proposed rule for detailed description and 
explanation of these regression analyses and results.
    In the proposed rule, we solicited comments on the following 
topics:
     Would it be appropriate to consider proposing revisions to 
the IPF PPS facility-level adjustments for rural location and teaching 
status in the future based on the results of our latest regression 
analysis?
     Should we consider adjusting payment using MedPAC's 
Medicare Safety Net Index (MSNI) formula with adaptations, as described 
in the proposed rule? What, if any, changes to the methodology should 
we consider for the IPF setting? For example, should we develop a 
separate payment adjustment for each component (that is, the low-income 
ratio, uncompensated care ratio, and Medicare dependency ratio)?
     We note that our construction of the MSNI did not scale or 
index facility-level variables to a national standard or median value. 
We anticipate that doing so would result in less of a change to the IPF 
Federal per diem base rate but would still result in comparable 
distributional impacts (that is, IPFs with lower MSNIs would receive 
lower payments, and IPFs with higher MSNIs would receive higher 
payments). Should we consider scaling or indexing the MSNI to a 
national average MSNI for all IPFs?
     Is MedPAC's MSNI formula, as adapted, an accurate and 
appropriate measure of the extent to which an IPF acts as a safety-net 
hospital for Medicare beneficiaries?
     Should additional data be collected through the cost 
report to improve the calculation of MSNI, such as collecting UCC and 
revenue at the IPF unit level?
     Is the current cost report data submitted by IPFs 
sufficiently valid and complete to support the implementation of an 
MSNI payment? We note our concerns about the low or non-existent 
amounts reported for uncompensated care for freestanding IPFs and the 
use of hospital-level UCC and revenue amounts to calculate the UCC 
ratio for IPF units.
     What administrative burden or challenges might providers 
face in reporting their UCC and low-income patient stays?
     Would IPFs have the information necessary to report their 
low-income patient stays to CMS for the purpose of the MSNI 
calculation? What challenges might IPFs face in gathering and reporting 
this information?
     In the FY 2023 IPPS proposed rule, CMS noted that, when 
calculating the MSNI, the following circumstances may be encountered: 
new hospitals (for example, hospitals that begin participation in the 
Medicare program after the available audited cost report data), 
hospital mergers, hospitals with multiple cost reports and/or cost 
reporting periods that are shorter or longer than 365 days, cost 
reporting periods that span fiscal years, and potentially aberrant 
data. How should CMS consider addressing these circumstances when 
calculating the MSNI for IPFs?
    Comment: Several commenters supported refinements to the rural 
location and teaching status adjustors as described in the RFI. Some 
commenters recommended CMS continue to analyze more recent data to 
ensure that the updated regression model will have similar outcomes.
    Response: We appreciate the information and feedback provided and 
will take these comments into consideration for future rulemaking.
    Comment: Several commenters supported the development of a payment 
adjustment for safety net population. Two of these commenters expressed 
concerns that the available data is insufficient for implementation of 
an adjustment for MSNI as described in the RFI.
    The majority of commenters who responded to the RFI about a payment 
adjustment for MSNI opposed the addition of this adjustment factor 
under the construction presented in the proposed rule because of 
insufficient data to support the adjustment because of the substantial 
decrease to the base rate or because of the redistribution of resources 
away from IPFs with a low MSNI. Several of these commenters, concerned 
that the adjustment would substantially decrease the base rate, noted 
that a decrease of this size would have unintended consequences such as 
further reducing access to care. Some commenters noted concerns that 
the inclusion of an MSNI adjustment would reduce the size of the rural 
adjustment, while other commenters noted that the adjustment would 
reduce the teaching adjustment. A couple of commenters recommended 
developing a DSH payment for IPFs as an alternative to MSNI. About half 
of these commenters advocated for an MSNI adjustment that is not budget 
neutral (i.e. that comes from an additional funding source), while one 
advocated for separate payment adjustments for each factor of MSNI (the 
low-income ratio, uncompensated care ratio, and Medicare dependency 
ratio). One of these commenters suggested a bonus value-based payment 
tied to quality measures for facilities serving high proportions of 
dually eligible beneficiaries.
    MedPAC supported CMS's efforts to develop an adjustment factor 
based on MSNI. They recommended that CMS analyze whether a facility's 
low-income subsidy (LIS) and Medicare share of days are correlated with 
higher costs and lower profit margins, noting that factors that are 
important for identifying

[[Page 64642]]

safety-net acute care hospitals may not be exactly the same for IPFs. 
They also recommend that CMS require IPFs to report uncompensated care 
before implementing an adjustment factor including uncompensated care. 
MedPAC further advocated for investigation of an appropriate cap on 
changes; they suggest normalizing MSNI and basing each IPF's adjustment 
on the difference between the IPF's MSNI and the national MSNI.
    Response: We appreciate the information and feedback provided and 
will take these comments into consideration for future rulemaking.

B. Request for Information (RFI)--Patient Assessment Instrument Under 
IPFQR Program (IPF PAI) To Improve the Accuracy of the PPS

    Section 4125(b)(1) of CAA, 2023 amended section 1886(s)(4) of the 
Act, by inserting a new paragraph (E), to require IPFs participating in 
the IPFQR Program to collect and submit to the Secretary certain 
standardized patient assessment data, using a standardized patient 
assessment instrument (PAI) developed by the Secretary, for RY 2028 (FY 
2028) and each subsequent rate year. IPFs must submit such data with 
respect to at least the admission to and discharge of an individual 
from the IPF, or more frequently as the Secretary determines 
appropriate. For IPFs to meet this new data collection and reporting 
requirement for RY 2028 and each subsequent rate year, the Secretary 
must implement a standardized PAI that collects data with respect to 
the following categories: functional status; cognitive function and 
mental status; special services, treatments, and interventions for 
psychiatric conditions; medical conditions and comorbidities; 
impairments; and other categories as determined appropriate by the 
Secretary. This IPF-PAI must enable comparison of the patient 
assessment data across all IPFs which submit these data. In other 
words, the data must be standardized such that data from IPFs 
participating in the IPFQR Program can be compared; the IPF-PAI each 
IPF administers must be made up of identical questions and identical 
sets of response options to which identical standards and definitions 
apply.
    As we develop the IPF-PAI, in accordance with these new statutory 
requirements, we seek to collect information that will help us achieve 
the following goals: (1) improve the quality of care in IPFs, (2) 
improve the accuracy of the IPF PPS in accordance with section 
4125(b)(2) of CAA, 2023, and (3) improve health equity.\7\ In the 
Request for Information (RFI) we included in the FY 2025 IPF PPS 
proposed rule (89 FR 23200 through 23204), we solicited comments for 
development of this IPF-PAI, in accordance with these new statutory 
requirements, and to achieve these goals.
---------------------------------------------------------------------------

    \7\ For more information on our strategic goals to improve 
health equity by expanding the collection, reporting, and analysis 
of standardized data, we refer readers to Priority 1 of our 
Framework for Health Equity at https://www.cms.gov/priorities/health-equity/minority-health/equity-programs/framework.
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    The RFI consisted of four sections. The first section discussed a 
general framework or set of principles for development of the IPF-PAI. 
The second section outlined potential approaches that could be used to 
develop the items or data elements that make up the PAI. This section 
also discussed patient assessment data elements in use in PAIs for 
skilled nursing facilities and other healthcare settings that could 
potentially be adapted for use in the IPF-PAI. The third section 
outlined potential approaches that could be used to collect patient 
assessment data. Finally, the fourth section solicited public comment 
on the principles and approaches listed in the first three sections and 
sought other input regarding the IPF-PAI.
1. Framework for Development of the IPF-PAI
    We considered similar legislatively derived PAIs previously 
implemented for certain post-acute care (PAC) providers to inform the 
goals and guiding principles for the IPF-PAI because of similarities of 
section 4125(b) of CAA, 2023 to the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185, October 6, 
2014), codified at section 1899B of the Act. Similar to section 4125(b) 
of CAA, 2023, section 1899B of the Act requires certain PAC providers, 
specifically home health agencies (HHAs), skilled nursing facilities 
(SNFs), inpatient rehabilitation facilities (IRFs), and long-term care 
hospitals (LTCHs), to submit certain standardized patient assessment 
data (as set forth at section 1899B(b)(1)(B)) using a standardized PAI 
under the PAC providers' respective quality reporting programs. While 
IPFs are acute care providers and not PAC providers, given the 
similarities between the CAA, 2023 and section 1899B of the Act, we 
considered the goals and guiding principles that we followed to 
implement section 1899B of the Act for certain PAC providers and 
examined their applicability and appropriateness for IPFs.
    We previously identified four key considerations when assessing 
Standardized Patient Assessment Data Elements for the PAC PAIs to 
collect: (1) Overall clinical relevance; (2) Interoperable exchange to 
facilitate care coordination during transitions in care; (3) Ability to 
capture medical complexity and risk factors that can inform both 
payment and quality; and (4) Scientific reliability and validity, 
general consensus agreement for its usability.\8\ For the reasons 
discussed in the following subsections, we believe that these 
considerations are also appropriate for the development of the IPF-PAI. 
In addition, we seek to balance the need to collect meaningful patient 
data to improve care with the need to minimize administrative burden. 
The remainder of this section describes each of these considerations in 
the context of the IPF-PAI. As we discuss in section V.B.4.a of this 
final rule, we solicited comment on these considerations.
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    \8\ We refer readers to the Prospective Payment System and 
Consolidated Billing for Skilled Nursing Facilities; Updates to the 
Quality Reporting Program and Value-Based Purchasing Program for 
Federal fiscal year 2020 final rule (84 FR 38767); the Medicare 
Program; Inpatient Rehabilitation Facility (IRF) Prospective Payment 
System for Federal fiscal year 2020 and Updates to the IRF Quality 
Reporting Program final rule (84 FR 39110), the Medicare and 
Medicaid Programs; CY 2020 Home Health Prospective Payment System 
Rate Update; Home Health Value-Based Purchasing Model; Home Health 
Quality Reporting Requirements; and Home Infusion Therapy 
Requirements CY 2020 final rule (84 FR 60567), and the 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 2020 Rates; Quality 
Reporting Requirements for Specific Providers; Medicare and Medicaid 
Promoting Interoperability Programs Requirements for Eligible 
Hospitals and Critical Access Hospitals final rule (84 FR 42537).
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a. Overall Clinical Relevance
    In each category of assessment required by section 
1886(s)(4)(E)(ii), as added by section 4125(b) of CAA, 2023, 
(functional status; cognitive function and mental status; special 
services, treatments, and interventions for psychiatric conditions; 
medical conditions and comorbidities; impairments, and other categories 
as determined appropriate by the Secretary), we seek to establish 
Standardized Patient Assessment Data Elements that providers can use to 
support high quality care and outcomes in the IPF setting. As we 
evaluate Standardized Patient Assessment Data Elements in PAIs designed 
for other care settings, we intend to work with CMS Medical Officers, 
including

[[Page 64643]]

psychiatrists, to consider the clinical relevance for IPF patients as a 
determining factor in whether an item merits inclusion in the IPF-PAI. 
For an example of a PAI in use in another setting, we refer readers to 
the IRF-PAI instrument available at https://www.cms.gov/files/document/irf-pai-version-40-eff-10012022-final.pdf. We are particularly 
interested in learning about specific instruments and tools in each 
area of assessment that have high clinical relevance in the IPF setting 
and welcomed comments regarding Standardized Patient Assessment Data 
Elements that may not be clinically relevant to the IPF setting.
    To ensure the clinical relevance of the instrument across a diverse 
group of IPF patients, we are considering structuring the assessment 
with conditional questions, so that certain sets of questions are only 
indicated if the questions are relevant to the patient. Furthermore, we 
note that some data elements may only be appropriate for collection at 
certain times during the patient's stay (for example, only at admission 
or only at discharge). We solicited comments regarding the most 
effective structure to employ in the development of the IPF-PAI.
b. Interoperability
    Interoperability is a key priority and initiative at CMS. Across 
the organization, we aim to promote the secure exchange, access, and 
use of electronic health information to support better informed 
decision making and a more efficient healthcare system. As a part of 
this effort, we make interoperability a priority for standardized data 
collection. We intend to ensure that the IPF-PAI meets Health Level 
7[supreg] (HL7[supreg]) Fast Healthcare Interoperability 
Resources[supreg] (FHIR[supreg]) standards.
    As part of our interoperability considerations, we are interested 
in whether Standardized Patient Assessment Data Elements already in use 
in the CMS Data Element Library (DEL) \9\ are appropriate and 
clinically relevant for the IPF setting. Based on our analysis of IPF 
PPS claims submitted in CY 2021, approximately 8,000 admissions to IPFs 
were individuals transferred from SNFs or IRFs. We are interested in 
whether Standardized Patient Assessment Data Elements already used in 
the DEL can be used to better support interoperability between 
providers, given the high number of transfers.
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    \9\ https://del.cms.gov/DELWeb/pubHome.
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c. Ability To Capture Medical Complexity and Risk Factors
    We intend to expand our efforts to refine the IPF PPS to increase 
the accuracy of the payment system by better identifying patient 
characteristics that best predict resource use during an IPF stay. To 
identify Standardized Patient Assessment Data Elements that would help 
predict resource use, we intend to evaluate Standardized Patient 
Assessment Data Elements for their ability to explain medical 
complexity, the need for special services and treatments, and to 
measure case-mix differences that impact costs. It is our expectation 
that an IPF-PAI that effectively differentiates treatment needs between 
patients will also help IPFs plan and distribute their resources. Our 
hope is that the IPF-PAI can therefore integrate with IPFs' business 
practices. In addition, Standardized Patient Assessment Data Elements 
that capture patient risk factors can contribute to quality of care and 
patient safety.
d. Scientific Reliability and Validity
    Standardized Patient Assessment Data Elements considered for 
inclusion in the IPF-PAI must be scientifically reliable and valid in 
IPF settings.\10\ We intend to draw on our significant experience in 
development of quality measures in the IPFQR Program and development of 
Standardized Patient Assessment Data Elements for other PAIs, such as 
the IRF-PAI and the Minimum Data Set (MDS) (the PAI for SNFs), in our 
development of Standardized Patient Assessment Data Elements for the 
IPF-PAI.\11\ It is important to note that the statutorily required 
timeframe for implementation of the IPF-PAI for RY 2028 limits our 
ability to develop and test a full battery of new Standardized Patient 
Assessment Data Elements for the launch of the IPF-PAI. We anticipate 
the need and opportunity for incremental revisions to the IPF-PAI in 
the future.
---------------------------------------------------------------------------

    \10\ CMS' guidelines for data element identification and 
evaluation, including definitions of scientific acceptability (i.e., 
reliability and validity) are described in the Blueprint Measure 
Lifecycle, available at: https://mmshub.cms.gov/measure-lifecycle/measure-testing/overview.
    \11\ For more information on other PAIs, we refer readers to 
https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-rehabilitation/pai (for the IRF-PAI), to https://www.cms.gov/medicare/quality/home-health/oasis-data-sets (for the 
OASIS data set for HHAs), to https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual (for the 
CARE data set for LTCHs), and to https://www.cms.gov/medicare/quality/nursing-home-improvement/resident-assessment-instrument-manual (for the Minimum Data Set (MDS) Resident Assessment 
Instrument (RAI)).
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    We anticipate that our development process for new Standardized 
Patient Assessment Data Elements will include working with teams of 
researchers for each category including a group of advisors made up of 
clinicians and academic researchers for each team with expertise in 
IPFs. We expect to convene a Technical Expert Panel (TEP) to provide 
expert input on new and existing Standardized Patient Assessment Data 
Elements that merit consideration for inclusion and testing, including 
environmental scans and reviews of scientific literature. In an ideal 
scenario, Standardized Patient Assessment Data Elements would be tested 
in a representative sample of IPFs for appropriateness in different IPF 
settings and across a range of patients. Standardized Patient 
Assessment Data Elements would be tested for inter-rater (that is, 
consistency in results regardless of who is administering the 
assessment) and inter-organizational reliability, for validity in all 
IPF settings, for internal consistency, and for breadth of application 
among a range of IPF patients. We anticipate that Standardized Patient 
Assessment Data Elements would also need to be tested for their ability 
to detect differences among patients and costs of treatment. Due to the 
constraints of the statutorily required implementation timeframe, it 
may not be possible to complete all testing before launching the IPF-
PAI.
    The process for scientifically testing each question and set of 
responses is lengthy and resource-intensive. This process is based on 
the steps for quality measure development described in the Blueprint 
Measure Lifecycle,\12\ developed by the CMS Measures Management System. 
These steps include literature review and environmental scanning; 
various levels of field testing to understand the ``real world'' 
performance of the data elements; and iterative expert and interested 
parties engagement to include broader perspectives on topics, candidate 
data elements, and interpretation of testing results. If appropriate, 
using data currently collected by IPFs or Standardized Patient 
Assessment Data Elements that have been tested and validated for use in 
other clinical settings can reduce these timeframes because test data 
are already available.
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    \12\ https://mmshub.cms.gov/blueprint-measure-lifecycle-overview.

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[[Page 64644]]

e. Administrative Burden
    In evaluating Standardized Patient Assessment Data Elements for 
inclusion in the IPF-PAI, we are considering the burden of data 
collection through the PAI and aiming to minimize additional burden by 
considering whether any data that is currently collected through IPFQR 
Program measures or on IPF claims could be collected as Standardized 
Patient Assessment Data Elements to avoid duplication of data that IPFs 
are already reporting. We are also considering how collecting some data 
for some IPFQR Program measures through the IPF-PAI and collecting 
other data through the Hospital Quality Reporting (HQR) system would 
affect the reporting burden for participating IPFs. Licensing, 
permissions costs, or copyright restrictions that would add to 
administrative costs and burdens are also a consideration as we 
evaluate existing PAIs and mechanisms or tools for submitting IPF-PAI 
data.
    As we develop the IPF-PAI, we are interested in receiving 
information about how to find a balance between collecting the most 
relevant and useful information and the administrative burden of 
administering the assessment and submitting the assessment data.
2. Elements of the IPF-PAI
    Section 1886(s)(4)(E)(ii) of the Act, added by section 
4125(b)(1)(C) of the CAA, 2023, requires that the standardized patient 
assessment data to be collected in the IPF-PAI must be with respect to 
six enumerated categories.
a. Functional Status
    The first enumerated category of data for the IPF-PAI is functional 
status. Section 1886(s)(4)(E)(ii)(I) of the Act provides that 
functional status may include mobility and self-care at admission to a 
psychiatric hospital or unit and before discharge from a psychiatric 
hospital or unit. We note that information in this category is 
generally found in a patient's discharge summary and are interested in 
learning about standardized elements that correspond to functional 
status as relevant to IPFs. In the FY 2025 IPF PPS proposed rule, we 
stated our interest in learning about assessments that may be currently 
in use in the IPF setting and meet criteria for inclusion in the IPF-
PAI (89 FR 23202).
b. Cognitive Function and Mental Status
    The second enumerated category of data for the IPF-PAI is cognitive 
function and mental status. Section 1886(s)(4)(E)(ii)(II) of the Act 
provides that cognitive function may include the ability to express 
ideas and to understand, and mental status may include depression and 
dementia. We note that in the IPF setting, a patient's diagnoses, which 
can be abstracted from their medical chart, provide some information 
related to this category. We are aware that IPFs may be currently 
assessing cognitive function using existing instruments. In the FY 2025 
IPF PPS proposed rule, we stated our interest in hearing from IPFs 
about which instruments are currently in use to measure cognitive 
function in IPFs and which have high clinical relevance for the IPF 
setting (89 FR 23202).
c. Special Services, Treatments, and Interventions
    The third enumerated category of data for the IPF-PAI is special 
services, treatments, and interventions for psychiatric conditions. 
Section 1886(s)(4)(E)(ii)(III) of the Act neither addresses what these 
terms mean nor provides any illustrative examples. As discussed in 
section VII.C. of this rule, the IPFQR Program already collects 
information about the use of restraint and seclusion through quality 
measures (Hospital Based Inpatient Psychiatric Services (HBIPS)-2, 
Hours of Physical Restraint, and HBIPS-3, Hours of Seclusion Use), 
while claims include information about ECT treatments provided. Other 
areas of interest in this category may include high-cost medications, 
use of chemical restraints, one-to-one observation, and high-cost 
technologies. In the FY 2025 IPF PPS proposed rule, we stated our 
interest in whether these or any other special services, treatments, or 
interventions should be considered for inclusion in the IPF-PAI (89 FR 
23202 through 23203).
d. Medical Conditions and Comorbidities
    The fourth enumerated category of data for the IPF-PAI is medical 
conditions and comorbidities. Section 1886(s)(4)(E)(ii)(IV) of the Act 
provides that medical conditions and comorbidities may include 
diabetes, congestive heart failure, and pressure ulcers. We note that 
IPF claims record a significant number of medical conditions and 
comorbidities to receive the payment adjustment for comorbidities in 
the IPF PPS and conditions that are relevant to the IPF stay. In 
reviewing Standardized Patient Assessment Data Elements listed in this 
category in PAIs in use in PAC settings, we observed that these PAIs 
include Standardized Patient Assessment Data Elements regarding pain 
interference in this category, such as the effect of pain on sleep, 
pain interference with therapy activities, and pain interference with 
day-to-day activities. In the FY 2025 IPF PPS proposed rule, we stated 
our interest in learning from commenters whether these existing data 
elements from the PAC settings would be clinically relevant for 
inclusion in this category for the IPF-PAI (89 FR 23203).
e. Impairments
    The fifth enumerated category of data for the IPF-PAI is 
impairments. Section 1886(s)(4)(E)(ii)(V) of the Act provides that 
impairments may include incontinence and an impaired ability to hear, 
see, or swallow. PAIs in use in other settings include Standardized 
Patient Assessment Data Elements regarding hearing and vision (for 
example, Section B, ``Hearing, Speech, and Vision'' of the IRF-PAI 
Version 4.2 (Effective October 1, 2024)).\13\ In the FY 2025 IPF PPS 
proposed rule, we stated our interest both in whether Standardized 
Patient Assessment Data Elements regarding additional impairments merit 
consideration for the IPF-PAI, and whether the Standardized Patient 
Assessment Data Elements regarding hearing and vision included in the 
IRF-PAI are appropriate for the IPF setting (89 FR 23203). We note that 
the Standardized Patient Assessment Data Element categories are not 
intended to be duplicative, so we would seek to avoid any overlap in 
measuring cognitive deficits in the Cognitive Function category with 
the Impairments category.
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    \13\ https://www.cms.gov/files/document/irf-pai-version-42-effective-10-01-24.pdf.
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f. Other Categories Deemed Appropriate
    The sixth enumerated category of data for the IPF-PAI is other 
categories as determined appropriate by the Secretary. We believe this 
provision allows for flexibility to include additional areas in the 
IPF-PAI.
    One of our strategic priorities, as laid out in the CMS Strategic 
Plan,\14\ reflects our deep commitment to improvements in health equity 
by addressing the health disparities that underlie our health system. 
In line with that strategic priority, in the FY 2025 IPF PPS proposed 
rule, we stated our interest in Standardized Patient Assessment Data 
Elements that would provide insight about any demographic factors (for 
example, race, national origin, primary language, ethnicity, sexual 
orientation, and gender identity) as well as Social Drivers of Health 
(SDOH) (for example, housing status and food security)

[[Page 64645]]

associated with underlying inequities (89 FR 23203). We also stated our 
interest in whether there are Standardized Patient Assessment Data 
Elements that would provide insight into special interventions that 
IPFs are providing to support patients after discharge which could 
serve to potentially reduce the incidence of readmissions (89 FR 
23203).
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    \14\ The CMS Strategic Plan. Available at https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan. Accessed February 20, 2024.
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    We note that, beginning with mandatory reporting of CY 2025 data 
for FY 2027 payment determination, the IPFQR Program includes the 
Screening for SDOH measure, which assesses the percentage of patients, 
aged 18 years and over at the time of admission, who are screened for 
five specific health-related social needs (HRSNs) (food insecurity, 
housing instability, transportation needs, utility difficulties, and 
interpersonal safety) but which does not require reporting of that 
information at the patient-level (88 FR 51117). Furthermore, we note 
that PAIs adopted for the PAC settings discussed previously include 
collection of SDOH data under section 1899B(b)(1)(B)(vi) of the Act, 
which contains a similar provision for other categories deemed 
appropriate by the Secretary.\15\
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    \15\ For further information detailing the rationale for 
adopting SDOH Standardized Patient Assessment Data Elements in these 
settings, we refer readers to the Prospective Payment System and 
Consolidated Billing for Skilled Nursing Facilities; Updates to the 
Quality Reporting Program and Value-Based Purchasing Program for 
Federal fiscal year 2020 final rule (84 FR 38805 through 38817); the 
Medicare Program; Inpatient Rehabilitation Facility (IRF) 
Prospective Payment System for Federal fiscal year 2020 and Updates 
to the IRF Quality Reporting Program final rule (84 FR 39149 through 
38161), the Medicare and Medicaid Programs; CY 2020 Home Health 
Prospective Payment System Rate Update; Home Health Value-Based 
Purchasing Model; Home Health Quality Reporting Requirements; and 
Home Infusion Therapy Requirements CY 2020 final rule (84 FR 60597 
through 60608), and the 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 2020 Rates; Quality Reporting Requirements for Specific 
Providers; Medicare and Medicaid Promoting Interoperability Programs 
Requirements for Eligible Hospitals and Critical Access Hospitals 
final rule (84 FR 42577 through 42588).
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    We note that, if we deem it appropriate to add a SDOH category for 
the IPF-PAI and these SDOH data are included as Standardized Patient 
Assessment Data Elements in the PAI, they could potentially be used to 
risk adjust or stratify measures collected for the IPFQR Program. In 
the FY 2025 IPF PPS proposed rule, we stated our interest in learning 
whether using some of these SDOH data adopted in other PAIs to risk 
adjust or stratify these measures would make the measures in the IPFQR 
Program more meaningful (89 FR 23203).
3. Implementation of the PAI--Data Submission
    We plan to develop flexible methods for providers to submit IPF-PAI 
data to CMS, including batch uploads in specified formats and a portal 
for submission of files. We welcomed public comment on tools and 
methods for submission of data that balance administrative burden and 
ease of use.
4. Request for Information on IPF-PAI
    In the FY 2025 IPF PPS proposed rule, we requested information from 
the public to inform the selection of Standardized Patient Assessment 
Data Elements to be collected on the IPF-PAI and the implementation 
process (89 FR 23203). We sought information about PAIs IPFs currently 
use upon admission and discharge, as well as information about how IPFs 
estimate resource needs to determine capacity before a patient is 
admitted. We also sought information about methods for IPFs to submit 
patient assessment data and the potential administrative burden on 
IPFs, Medicare Administrative Contractors (MACs), and CMS. Finally, we 
sought input on the relationship between the IPF-PAI and the measures 
within the IPFQR Program.
    We solicited comment on the following topics:
a. Principles for Selecting Standardized Patient Assessment Data 
Elements
     To what extent do you agree with the principles for 
selecting and developing Standardized Patient Assessment Data Elements 
for the IPF-PAI?
     What, if any, principles should CMS eliminate from the 
Standardized Patient Assessment Data Element selection criteria?
     What, if any, principles should CMS add to the 
Standardized Patient Assessment Data Element selection criteria?
    Comment: Several commenters were supportive of the idea of 
implementing a patient assessment for the IPF setting. They saw 
potential for an IPF-PAI to capture patient characteristics and costs 
more accurately through standardized assessment and believed that data 
from the IPF-PAI could support improvement in payment models, quality 
of care, and health equity. Some commenters expressed general concerns 
about the IPF-PAI, citing challenges with PAIs used in other provider 
types and the burden that a standardized patient assessment could place 
on providers.
    Several commenters recommended CMS include data elements that 
reflect resource use in the IPF-PAI, and a few commenters stated the 
belief that data elements in the IPF-PAI should be selected with 
consideration of their ability to capture quality of care or support 
quality improvement efforts. A commenter stated that CMS should not 
collect any additional information that would not ultimately impact IPF 
payments.
    Several commenters suggested ways that CMS should approach 
instrument development to minimize administrative burdens related to 
the PAI, such as leveraging or aligning with current IPFQR requirements 
and other common, existing IPF workflows, and focusing on data elements 
that are easy to collect and assessment instruments that are already in 
widespread use, rather than developing de novo tools. A commenter 
recommended that CMS compare the content of the IPF-PAI to other 
required data submissions in order to reduce duplicative data entry. A 
commenter recommended that CMS attempt to align data elements, data 
collection time periods, and measures between the IPFQR Program and The 
Joint Commission, a national accrediting body that establishes quality 
and safety standards for health care organizations.\16\ To mitigate 
burden, several commenters recommended that CMS to be judicious when 
selecting data elements for the IPF-PAI, prioritizing data elements 
that could be auto-populated from a facility's electronic health record 
(EHR). A commenter stated that it is important for CMS to only consider 
standardized tools that are in the public domain and that do not incur 
costs of utilization for inclusion in the IPF-PAI.
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    \16\ IPFs can receive accreditation from The Joint Commission, 
formerly known as on The Joint Commission on Accreditation of 
Healthcare Organizations (JCAHO), through an independent survey 
process and period reporting of quality measure data. Psychiatric 
hospitals participating in Medicare that are accredited under The 
Joint Commission's consolidated standards for adult psychiatric 
facilities are deemed to meet Medicare's requirements for hospitals 
(with the exception of the special medical record and staffing 
requirements). Accreditation by The Joint Commission is not a 
requirement for participating in Medicare, but many IPFs maintain 
accredited status and must submit quality measure data to The Joint 
Commission as well as to CMS. More information on the process of 
deeming IPFs to have met Medicare's requirements is available in 
Appendix AA of the State Operations Manual available at: https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/som107ap_aa_psyc_hospitals.pdf.
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    Several commenters agreed with CMS that data elements selected for 
the IPF-PAI should have demonstrated scientific acceptability, 
including testing that

[[Page 64646]]

shows them to be reliable and valid. A few commenters noted the 
importance of inter-rater reliability and suggested this could be 
bolstered during implementation by providing clear guidance to 
individuals administering the assessment. A commenter recommended 
ongoing monitoring of IPF-PAI data after the IPF-PAI is implemented, 
including an audit plan for ensuring accuracy of reported data and 
periodic reassessment of inter-rater reliability. Several commenters 
noted the importance of testing the IPF-PAI in IPFs, specifically in a 
diverse set of IPFs, to ensure relevance, validity, and reliability in 
this setting.
    Several commenters described unique characteristics of IPF patients 
and limitations of IPFs and recommended that CMS prioritize 
appropriateness for IPFs when developing the IPF-PAI. Several 
commenters noted concerns that leveraging data elements used in post-
acute care or with geriatric populations would not be appropriate for 
the majority of IPF patients. A few commenters recommended that CMS 
select data elements that would be applicable to diverse patient 
populations and facility types. A commenter noted the importance of 
using standardized data elements in the IPF-PAI that apply to the 
broadest range of patients, focusing, for example, on function rather 
than symptoms, as measures of function apply to all patients while 
measurement of specific symptomology would need to be tailored to 
patients' conditions.
    Some commenters noted that patients in IPFs may be unwilling or 
unable to complete any patient interviews to inform data elements. A 
commenter recommended that testing be conducted with IPFs to understand 
these dynamics and inform policies on acceptable completion rates.
    Several commenters stated concerns about the timeline for 
development and implementation of the IPF-PAI. To accomplish its goals 
while minimizing burden to providers, a few commenters recommended that 
CMS start with a basic tool that is limited in scope while meeting the 
statutory requirements, then expand the tool as additional data 
elements are tested for validity and reliability. A commenter suggested 
that CMS identify what is already being collected by IPFs and require 
reporting of these data elements, rather than developing a new tool.
    Many commenters noted the importance of engaging with experts and 
other interested parties in the development of the IPF-PAI. A few 
commenters suggested that CMS engage with specific interested parties, 
including mental health specialty societies, psychiatric mental health 
nurses, and software vendors. A commenter recommended that CMS engage 
with the provider community to solicit their comments before finalizing 
the IPF-PAI. A commenter suggested that CMS form a working group that 
meets quarterly in order to incorporate and respond to feedback from 
interested parties.
    Regarding CMS intention to design the IPF-PAI to be interoperable, 
a commenter recommended that CMS align the IPF-PAI with United States 
Core Data for Interoperability (USCDI), while another commenter stated 
support for CMS commitment to interoperability for the IPF-PAI, 
specifically for data on social risk factors and HRSNs. Several 
commenters noted that IPFs did not receive funding to adopt certified 
EHR technology and suggested that CMS consider how the implementation 
of the IPF-PAI would affect providers without EHRs.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
b. Patient Assessments Recommended for Use in the IPF-PAI
     Are there PAIs currently available for use, or that could 
be adapted or developed for use in the IPF-PAI, to assess patients': 
(1) functional status; (2) cognitive function and mental status; (3) 
special services, treatments, and interventions for psychiatric 
conditions; (4) medical conditions and comorbidities; (5) impairments; 
(6) health disparities; or (7) other areas not mentioned in this RFI?
    We summarize the comments we received regarding existing assessment 
instruments or data elements in current use with respect to each 
patient assessment topic in sections V.B.4.c through V.B.4.h of this 
rule. We include the names of the instruments that commenters 
identified in the summaries of comments that pertain to each topic area 
in sections V.B.4.c through V.B.4.h of this rule.
c. Functional Status Standardized Patient Assessment Data Elements
     What aspects of function are most predictive of medical 
complexity or increased resource needs to treat a patient in the IPF 
setting?
     Which of the Standardized Patient Assessment Data Elements 
related to mobility (that is, the ability to toilet transfer, walk 10 
feet, car transfer, walk 10 feet on an uneven surface, 1 step up (that 
is, a curb), 4 steps up, 12 steps up, and pick up an object) currently 
collected by PAC settings in their respective PAIs are clinically 
relevant in the IPF setting? Do they otherwise meet the principles for 
inclusion in the IPF-PAI?
    Comment: A few commenters described aspects of functional status 
that would be appropriate to capture using the IPF-PAI. These include 
being wheelchair bound, ability to toilet transfer, ability to walk 10 
feet, requiring assistance with walking, being designated as at risk of 
falls, and requiring 1-on-1 supervision for any reason. A commenter 
recommended assessing patients' abilities to complete activities of 
daily living (ADLs) and instrumental activities of daily living 
(IADLs). We note that ADLs typically refer to ambulating, feeding, 
dressing, personal hygiene, continence, and toileting and IADLs 
typically refer to transportation, managing finances, shopping and meal 
preparation, housekeeping, communication (for example, using the 
telephone), and managing medications.\17\ A commenter offered several 
examples of public domain measures of physical and social function from 
the National Institute of Health's Patient-Reported Outcomes 
Measurement Information System (PROMIS), including Physical Function, 
Ability to Participate in Social Roles and Activities, Companionship, 
Friendship, and Social Isolation.\18\ A commenter shared two 
assessments that capture a patient's risk for falls: the Edmonson Fall 
Risk Assessment Tool \19\ and the Morse Fall Scale.\20\
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    \17\ Mlinac, M.E., & Feng, M.C. (2016). Assessment of activities 
of daily living, self-care, and independence. Archives of Clinical 
Neuropsychology, 31(6), 506-516.
    \18\ For information about the PROMIS data elements, we refer 
readers to: https://www.healthmeasures.net/explore-measurement-systems/promis.
    \19\ Edmonson, D., Robinson, S., & Hughes, L. (2011). 
Development of the Edmonson psychiatric fall risk assessment tool. 
Journal of psychosocial nursing and mental health services, 49(2), 
29-36.
    \20\ Watson, B.J., Salmoni, A.W., & Zecevic, A.A. (2016). The 
use of the Morse Fall Scale in an acute care hospital. Clin Nurs 
Stud, 4(2), 32-40.
---------------------------------------------------------------------------

    A few commenters stated that the standardized patient assessment 
data elements on functional status that CMS presented for comment were 
not relevant to the IPF patient population. They stated that IPF 
patients are generally younger and have fewer functional impairments 
than the post-acute and geriatric populations for which these data 
elements were developed. A commenter suggested that these data elements 
would only be appropriate for geriatric psychiatry patients, and that 
the IPF-PAI could

[[Page 64647]]

skip these questions for non-geriatric patients.
    A commenter stated concerns about the accuracy of provider-assessed 
functional assessments, in the event that data on functional 
assessments would be used in payment models (that is, facilities would 
be paid more for patients with poor functional status), as providers 
would have an incentive to assess patients as more functionally 
impaired than they might be. Another commenter stated support for the 
standardized assessment of functional status, and stated their belief 
that functional status is the only topic appropriate for standardized 
patient assessment due to the clinical diversity of IPF patients.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
d. Cognitive Function and Mental Status Standardized Patient Assessment 
Data Elements
     What aspects of cognitive function and mental status are 
most predictive of medical complexity or increased resource needs to 
treat a patient in the IPF setting?
     What components or instruments are used to assess 
cognitive function, mental status, or a combination thereof upon 
admission? What, if any, differences are there between assessments 
administered at admission and at discharge? What are the components of 
the mental status assessments administered at admission and discharge?
    Comment: Several commenters stated that mental status examination 
is a typical practice in IPFs, with key aspects including appearance 
and behavior, speech, thought process and content, affect and mood, 
cognition, perception, judgement, insight, and suicidal ideation and 
suicide-related behaviors. Several commenters recommended that CMS 
ensure IPFs and treating clinicians have discretion over the approach 
to conducting mental status examinations, noting that the mental status 
examination should be tailored to the patient, and stated concerns 
about the IPF-PAI introducing a standardized approach to this typically 
individualized process. Several commenters recommended considering 
assessment of suicidal ideation and suicide-related behaviors, 
homicidality and homicidal ideation, aggression, agitation, and 
unpredictable behavior, as these are markers of patient acuity and 
predictive of resource use. Additionally, a commenter recommended 
assessing for psychosis and insomnia, sharing their belief that 
patients experiencing these states require more resources.
    Several commenters stated a belief that assessment of cognitive 
function is not appropriate for most IPF patients, specifically for 
patients who do not show signs of cognitive impairment. These 
commenters stated that cognitive impairment is most common in older 
adults and questioned the value of universal screening for cognitive 
impairment for the IPF population.
    Commenters shared the names of several assessments on the topics of 
cognitive function and mental status, including the St. Louis 
University Mental Status Exam,\21\ the Mini-Mental State Exam,\22\ the 
Montreal Cognitive Assessment,\23\ the Cohen-Mansfield Agitation 
Inventory,\24\ the Geriatric Depression Scale,\25\ the Patient Health 
Questionnaire (PHQ-9),\26\ and the Beck Depression Inventory.\27\ A 
commenter recommended that the IPF-PAI contain only a single item to 
address the Cognitive Function and Mental Status category, such as 
``Does the patient have a co-morbid neurocognitive disorder?'' A 
commenter recommended including a standardized suicide risk assessment 
in the IPF-PAI, recommending the Columbia-Suicide Severity Rating 
Scale.\28\
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    \21\ Shwartz, S.K., Morris, R.D., & Penna, S. (2019). 
Psychometric properties of the Saint Louis University mental status 
examination. Applied Neuropsychology: Adult, 26(2), 101-110.
    \22\ Tombaugh, T.N., McDowell, I., Kristjansson, B., & Hubley, 
A.M. (1996). Mini-Mental State Examination (MMSE) and the Modified 
MMSE (3MS): a psychometric comparison and normative data. 
Psychological Assessment, 8(1), 48.
    \23\ Freitas, S., Sim[otilde]es, M.R., Mar[ocirc]co, J., Alves, 
L., & Santana, I. (2012). Construct validity of the montreal 
cognitive assessment (MoCA). Journal of the International 
Neuropsychological Society, 18(2), 242-250.
    \24\ Cohen-Mansfield, J. (1986). Cohen-Mansfield Agitation 
Inventory. International Journal of Geriatric Psychiatry.
    \25\ Wancata, J., Alexandrowicz, R., Marquart, B., Weiss, M., & 
Friedrich, F. (2006). The criterion validity of the Geriatric 
Depression Scale: a systematic review. Acta Psychiatrica 
Scandinavica, 114(6), 398-410.
    \26\ L[ouml]we, B., Un[uuml]tzer, J., Callahan, C.M., Perkins, 
A.J., & Kroenke, K. (2004). Monitoring depression treatment outcomes 
with the Patient Health Questionnaire-9. Medical care, 42(12), 1194-
1201.
    \27\ Dozois, D.J., Dobson, K.S., & Ahnberg, J.L. (1998). A 
psychometric evaluation of the Beck Depression Inventory-II. 
Psychological assessment, 10(2), 83.
    \28\ Posner, K., Brown, G.K., Stanley, B., Brent, D.A., 
Yershova, K.V., Oquendo, M.A., . . . & Mann, J. J. (2011). The 
Columbia-Suicide Severity Rating Scale: initial validity and 
internal consistency findings from three multisite studies with 
adolescents and adults. American journal of psychiatry, 168(12), 
1266-1277.
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    A commenter stated concerns about the time required to collect 
standardized assessments of cognitive function and mental status. This 
commenter noted that, although individual assessments may be brief, 
when combined with other data elements, this could make the IPF-PAI 
very long.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
e. Special Services, Treatments, and Interventions for Psychiatric 
Conditions Standardized Patient Assessment Data Elements
     What special services, treatments, and interventions are 
most predictive of increased resource intensity during an IPF stay?
     Do data currently collected as part of the IPFQR Program 
related to special services and treatments (such as HBIPS-2 Hours of 
Physical Restraint Use and HBIPS-3 Hours of Seclusion Use) meet the 
criteria for inclusion in the IPF-PAI?
    Comment: Several commenters shared thoughts on the special 
services, treatments, and interventions that they have found to be most 
predictive of resource intensity. These include supervision or 
observation needs (for example, one-to-one observation and continuous 
visual observation), unit restrictions, restraint or seclusion 
episodes, features of medication (for example, polypharmacy, medication 
management needs, use of long-acting injectable medication or 
clozapine, high-cost medications, and emergency medications), fall risk 
management, the need for any treatments that occur outside of the IPF 
(for example, dialysis), and the patient being involuntarily 
hospitalized. Several commenters described the resource intensity 
impacts of patients who require higher than usual levels of observation 
at any point during their stay. Regarding medications, a few commenters 
described how long-acting injectable medications and clozapine are 
often reserved for patients for whom other medications are not 
effective or not acceptable, and their use often correlates with 
patients who are not attaining symptom control quickly, and therefore 
require more staff attention and supervision. Regarding involuntary 
hospitalization, a commenter noted the staffing resources required to 
comply with the administrative and legal processes, such as 
accompanying the patient to court proceedings. This commenter 
recommended that CMS include in the IPF-PAI a data element to capture 
when a patient requires legal hearing(s) related to involuntary 
hospitalization or treatment over

[[Page 64648]]

objection (for example, being administered medication).
    A commenter recommended that CMS include recreational therapy as a 
distinct and separate service to be collected in the IPF-PAI.
    A commenter noted concerns that treatments and interventions cannot 
be assessed in a standardized way in the IPF-PAI because they are 
different for every patient. Another commenter recommended that CMS not 
require that minutes of therapy time be tracked on the IPF-PAI, as they 
believe this would be resource intensive and have little value.
    A commenter noted that IPFs already collect and submit patient data 
relevant to this category through the IPFQR Program's Tobacco Use 
Treatment Provided or Offered at Discharge measure (TOB-3) \29\ and 
suggested that CMS consider existing data reporting to meet the 
requirement for patient assessment for this topic.
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    \29\ https://qualitynet.cms.gov/ipf/ipfqr/measures.
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    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
f. Medical Conditions and Comorbidities Standardized Patient Assessment 
Data Elements
     Is the Standardized Patient Assessment Data Element 
regarding pain interference (effect on sleep, interference with therapy 
activities, interference with day-to-day activities) currently 
collected by PAC settings in their respective PAIs clinically relevant 
in the IPF setting? Does it otherwise meet the criteria for inclusion 
in the IPF-PAI?
     Do the medical conditions and comorbidities coded on IPF 
claims meet the criteria for inclusion in the IPF-PAI?
    Comment: Commenters provided feedback on the types of medical 
conditions and comorbidities that would be appropriate to be assessed 
in the IPF setting.
    Commenters shared a list of common comorbidities that could be 
collected in the IPF-PAI, including chronic lower respiratory diseases, 
diseases of esophagus/stomach, metabolic disorders, hypertensive 
diseases, and episodic and paroxysmal disorders (for example, insomnia, 
migraine). A commenter agreed that the Standardized Patient Assessment 
Data Element regarding pain interference (effect on sleep, interference 
with therapy activities, interference with day-to-day activities) \30\ 
is clinically relevant in the IPF setting.
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    \30\ The Pain Interference standardized patient assessment data 
elements are currently collected in four other PAIs: the IRF-PAI for 
IRFs (https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-rehabilitation/pai), the OASIS data set for HHAs 
(https://www.cms.gov/medicare/quality/home-health/oasis-data-sets), 
the CARE data set for LTCHs (https://www.cms.gov/medicare/quality/long-term-care-hospital/ltch-care-data-set-ltch-qrp-manual), and the 
Minimum Data Set (MDS) Resident Assessment Instrument (RAI) for SNFs 
(https://www.cms.gov/medicare/quality/nursing-home-improvement/resident-assessment-instrument-manual).
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    A commenter recommended three topics to include in this domain: 
presence of medical conditions requiring standing medication, medical/
surgical consult required, and need for medical testing/procedure. This 
commenter described how the need for patients to leave the IPF to 
receive specialized care creates additional staffing demand. Another 
commenter recommended that the IPF-PAI include psychiatric diagnoses, 
medical comorbidities, and levels of intervention required, as these 
impact resources. Another commenter noted that allowing for the 
documentation of multiple psychiatric comorbidities would help to 
capture the resource costs to treat these complex patients.
    A few commenters stated concerns or challenges. A commenter noted 
concerns that standardizing assessment of comorbidities would be 
difficult, as assessment requires individualized consideration. Another 
commenter noted that IPFs already collect and submit patient data 
relevant to this category through the IPFQR Program's Screening for 
Metabolic Disorders measure \31\ and suggested that CMS consider 
existing data reporting to meet the requirement for patient assessment 
for this topic.
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    \31\ https://qualitynet.cms.gov/ipf/ipfqr/measures.
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    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
g. Impairments Standardized Patient Assessment Data Elements
     Are Standardized Patient Assessment Data Elements related 
to impairments (that is, the ability to hear and see in adequate light) 
currently collected PAC settings in their respective PAIs clinically 
relevant in the IPF setting? Do they otherwise meet the principles for 
inclusion in the IPF-PAI?
     What impairments are most predictive of increased resource 
intensity during an IPF stay?
    Comment: Several commenters stated agreement with CMS that hearing 
and vision impairments would be clinically relevant to the IPF setting 
and are a reason for increased resource use when caring for patients 
with these impairments. A commenter disagreed that hearing and vision 
impairments were relevant to the IPF population, arguing that these are 
conditions that primarily affect older adults. Another commenter, in 
the context of recommending that CMS minimize data collection burden, 
suggested a single ``yes/no'' item: Is the patient hard of hearing or 
visually impaired?
    Several commenters suggested assessing more global concepts of 
impairment, stating that the ability to participate in life and perform 
daily functions is clinically relevant for the IPF population.
    A commenter recommended that the IPF-PAI also assess functional 
neurologic impairments such as incontinence and dysphagia.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
h. Other Categories of Standardized Patient Assessment Data Elements
     What other assessment elements would contribute to the 
clinical utility of the IPF-PAI?
     What other assessment elements would best capture medical 
complexity in the interest of refining and improving the accuracy of 
the IPF PPS?
     What other assessment elements would inform CMS' 
understanding of health equity for IPF patients?
     Are there special interventions that IPFs provide which 
support patients after discharge, and which could serve to reduce the 
incidence of hospital readmissions for psychiatric conditions? What, if 
any, assessment elements would inform CMS' understanding of such 
interventions?
    Comment: Regarding assessment elements to inform CMS' understanding 
of health equity, several commenters suggested that CMS should consider 
collecting information about a patient's social risk factors in the 
IPF-PAI. Some commenters provided specific recommendations regarding 
which social risk factors would be most important to gather information 
on, or overarching principles to guide selection of social risk 
factors. However, several commenters cautioned against collecting 
information pertaining to SDOH through the IPF-PAI.

[[Page 64649]]

    Regarding other topics that could be included in the IPF-PAI, a 
commenter recommended that the assessment include data elements related 
to whether an individual has identified and is participating in 
activities that promote enjoyment, engagement, and social interaction 
with others. Another commenter recommended that CMS consider quality of 
life, such as measured by the World Health Organization's Quality-of-
Life Scale (WHOQOL-BREF).\32\ This commenter also recommended that CMS 
consider a global measure of psychiatric functioning, such as the 
Behavior and Symptom Identification Scale (BASIS),\33\ which assesses 
psychosocial symptoms and can be used to measure outcomes.
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    \32\ Whoqol Group. (1998). Development of the World Health 
Organization WHOQOL-BREF quality of life assessment. Psychological 
medicine, 28(3), 551-558.
    \33\ Eisen, S.V., Normand, S.L., Belanger, A.J., Spiro III, A., 
& Esch, D. (2004). The revised behavior and symptom identification 
scale (BASIS-R): reliability and validity. Medical care, 42(12), 
1230-1241.
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    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
i. Implementation
     We anticipate that IPFs will need to make changes to 
systems and processes and train staff in order to administer the 
assessment and submit assessment data by the implementation date. What 
operational or practical limitations would IPFs face in making those 
necessary changes? Are there particular categories of Standardized 
Patient Assessment Data Elements that would be more or less feasible 
for IPFs to operationalize? We are particularly interested in impacts 
to facilities of varying sizes and ownership characteristics.
     What forms of training and guidance would be most useful 
for CMS to provide to support IPFs in the implementation of the IPF-
PAI?
    Comment: Many commenters described challenges that they believe 
IPFs will face when implementing the IPF-PAI, focusing on workflow, 
staffing resources, and technological constraints.
    Several commenters recommended that CMS engage with the EHR and 
other software vendors that would be likely to support IPFs' 
implementation of the IPF-PAI. Two commenters recommended that CMS 
allow ample time for software vendors to develop data collection and 
reporting tools for IPFs; a commenter recommended at least 18 months 
between finalizing technical specifications and implementation, while 
another recommended 2 years. A commenter recommended that CMS commit to 
making updates to the IPF-PAI no more than once per year. A commenter 
recommended that CMS develop the IPF-PAI in such a way that it could be 
populated from the patient's record in the EHR at the time of 
discharge.
    Regarding implementation at the facility level, a few commenters 
recommended clarifying what training and guidance that would be 
provided to IPFs in advance of implementation and suggested that 
thorough training and clear instructions for completing the IPF-PAI 
will be important to support data quality.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.
j. Relationship to the IPFQR Program
     Would having some measures which require data submission 
through the HQR system and having other measures, which require data 
collection and submission through the IPF-PAI increase operational 
complexity or administrative burden? If so, how would you recommend 
mitigating this complexity or burden?
     Would any of the current chart-abstracted measures be 
easier to report through the IPF-PAI? If so, which measures?
     Would any of the current measures in the program be more 
meaningful if they were stratified or risk-adjusted using data from the 
required patient assessment categories or other categories not 
specified by the CAA, 2023 that should be added to the IPF-PAI?
     What new measure concepts, which would use data collected 
through Standardized Patient Assessment Data Elements in the IPF-PAI, 
should we consider?
    Comment: Several commenters stated concerns about the prospect of 
needing to submit patient data to two systems, if, for example, IPFs 
continue using the existing process for submitting patient-level data 
for the IPFQR Program's measures, but the IPF-PAI data submission is 
accomplished through a different process. They recommended that CMS 
incorporate the IPF-PAI into the existing patient level XML submission 
process. In addition, they recommended against moving current chart-
abstracted quality measures to the IPF-PAI, due to concerns that the 
IPF-PAI is intended to be collected for all patients, not just the 
sample that are currently the target of chart abstraction.
    Another commenter stated concerns about duplication of data 
collection or data entry between existing IPFQR Program measures and 
the IPF-PAI. However, that commenter suggested that it would be 
appropriate to move data reporting to the IPF-PAI for a few of the 
current IPFQR Program measures.
    Response: We thank commenters for their responses to this comment 
solicitation. We will take these comments into consideration in the 
development of the IPF-PAI.

VI. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

A. Background and Statutory Authority

    The Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program is authorized by section 1886(s)(4) of the Act, and it applies 
to psychiatric hospitals and psychiatric units paid by Medicare under 
the IPF PPS (see section II.A. of this final rule for a detailed 
discussion of entities covered under the IPF PPS). Section 
1886(s)(4)(A)(i) requires the Secretary to reduce by 2 percentage 
points the annual update to the standard Federal rate for discharges 
occurring during such rate year \34\ for any IPF that does not comply 
with quality data submission requirements under IPFQR program, set 
forth in section 1886(s)(4)(C) of the Act, with respect to an 
applicable rate year.
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    \34\ We note that the statute uses the term ``rate year'' (RY). 
However, beginning with the annual update of the inpatient 
psychiatric facility prospective payment system (IPF PPS) that took 
effect on July 1, 2011 (RY 2012), we aligned the IPF PPS update with 
the annual update of the ICD codes, effective on October 1 of each 
year. This change allowed for annual payment updates and the ICD 
coding update to occur on the same schedule and appear in the same 
Federal Register document, promoting administrative efficiency. To 
reflect the change to the annual payment rate update cycle, we 
revised the regulations at 42 CFR 412.402 to specify that, beginning 
October 1, 2012, the IPF PPS RY means the 12-month period from 
October 1 through September 30, which we refer to as a ``fiscal 
year'' (FY) (76 FR 26435). Therefore, with respect to the IPFQR 
Program, the terms ``rate year,'' as used in the statute, and 
``fiscal year'' as used in the regulation, both refer to the period 
from October 1 through September 30. For more information regarding 
this terminology change, we refer readers to section III of the RY 
2012 IPF PPS final rule (76 FR 26434 through 26435).
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    Section 1886(s)(4)(C) of the Act requires IPFs to submit to the 
Secretary data on quality measures specified by the Secretary under 
section 1886(s)(4)(D) of the Act. Except as provided in section 
1886(s)(4)(D)(ii) of the Act, section 1886(s)(4)(D)(i) of the Act 
requires that any measure specified by the Secretary must have been 
endorsed by the consensus-based entity (CBE) with a contract under 
section

[[Page 64650]]

1890(a) of the Act. Section 1886(s)(4)(D)(ii) of the Act provides 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 CBE 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.
    Section 4125(b)(1) of CAA, 2023 amended section 1886(s)(4) of the 
Act, by inserting a new paragraph (E), to require IPFs participating in 
the IPFQR Program to collect and submit to the Secretary certain 
standardized patient assessment data, using a standardized patient 
assessment instrument (PAI) developed by the Secretary, for RY 2028 (FY 
2028) and each subsequent rate year. We refer readers to section V.B of 
this final rule in which we discuss responses to our solicitation of 
public comment on the development of this PAI.
    We refer readers to the FY 2019 IPF PPS final rule (83 FR 38589) 
for a discussion of the background and statutory authority of the IPFQR 
Program. We have codified procedural requirements and reconsideration 
and appeals procedures for IPFQR Program decisions in our regulations 
at 42 CFR 412.433 and 412.434. Consistent with previous IPFQR Program 
regulations, we refer to both inpatient psychiatric hospitals and 
psychiatric units as ``facilities'' or ``IPFs.'' This usage follows the 
terminology in our IPF PPS regulations at Sec.  412.402.
    For additional information on procedural requirements related to 
statutory authority, participation and withdrawal, data submission, 
quality measure retention and removal, extraordinary circumstances 
exceptions, and public reporting we refer readers to 42 CFR 412.433 
Procedural requirements under the IPFQR Program.
    For the IPFQR Program, we refer to the year in which an IPF would 
receive the 2-percentage point reduction to the annual update to the 
standard Federal rate as the payment determination year. An IPF 
generally meets IPFQR Program requirements by submitting data on 
specified quality measures in a specified time and manner during a data 
submission period that occurs prior to the payment determination year. 
These data reflect a period prior to the data submission period during 
which the IPF furnished care to patients; this period is known as the 
performance period. For example, for a measure for which CY 2025 is the 
performance period which is required to be submitted in CY 2026 and 
affects FY 2027 payment determination, if an IPF did not submit the 
data for this measure as specified during CY 2026 we would reduce by 2-
percentage points that IPF's update for the FY 2027 payment 
determination year (even if the IPF meets all other IPFQR Program 
requirements for the FY 2027 payment determination).

B. Measure Adoption

    We strive to put patients and caregivers first, ensuring they are 
empowered to partner with their clinicians in their healthcare decision 
making using information from data driven insights that are 
increasingly aligned with meaningful quality measures. 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, and 
affordability of care while paying particular attention to improving 
clinicians' and beneficiaries' experiences when interacting with our 
programs. In combination with other efforts across HHS, we believe the 
IPFQR Program helps to incentivize IPFs to improve healthcare quality 
and value while giving patients and providers the tools and information 
needed to make the best individualized decisions. Consistent with these 
goals, our objective in selecting quality measures for the IPFQR 
Program is to balance the need for information on the full spectrum of 
care delivery and the need to minimize the burden of data collection 
and reporting. We have primarily focused on measures that evaluate 
critical processes of care that have significant impact on patient 
outcomes and support CMS and HHS priorities for improved quality and 
efficiency of care provided by IPFs. When possible, we also propose to 
incorporate measures that directly evaluate patient outcomes and 
experience. We refer readers to the CMS National Quality Strategy,\35\ 
the Behavioral Health Strategy,\36\ the Framework for Health 
Equity,\37\ and the Meaningful Measures Framework \38\ for information 
related to our priorities in selecting quality measures.
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    \35\ Schreiber, M, Richards, A, et al. (2022). The CMS National 
Quality Strategy: A Person-Centered Approach to Improving Quality. 
Available at: https://www.cms.gov/blog/cms-national-quality-strategy-person-centered-approach-improving-quality.
    \36\ CMS. (2022). CMS Behavioral Health Strategy. Available at 
https://www.cms.gov/cms-behavioral-health-strategy.
    \37\ CMS. (2022). CMS Framework for Health Equity 2022-2032. 
Available at https://www.cms.gov/files/document/cms-framework-health-equity-2022.pdf.
    \38\ CMS. (2023). Meaningful Measures 2.0: Moving from Measure 
Reduction to Modernization. Available at https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20. Accessed on March 20, 2024.
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1. Measure Selection Process
    Section 1890A(a) of the Act requires that the Secretary establish 
and follow a pre-rulemaking process, in coordination with the CBE 
contracted under 1890(a) of the Act, to solicit input from multi-
stakeholder groups on the selection of quality and efficiency measures 
for the IPFQR Program. Before being proposed for inclusion in the IPFQR 
Program, measures are placed on a list of Measures Under Consideration 
(MUC list), which is published annually. Following publication on the 
MUC list, a multi-stakeholder group convened by the CBE reviews the 
measures under consideration for the IPFQR Program, among other federal 
programs, and provides input on those measures to the Secretary. Under 
the Partnership for Quality Measurement (PQM), which is convened by the 
entity which currently holds the contract under 1890(a) of the Act, 
this process is known as the Pre-Rulemaking Measure Review (PRMR). We 
consider the input and recommendations provided by this multi-
stakeholder group in selecting all measures for the IPFQR Program, 
including the 30-Day Risk-Standardized All-Cause Emergency Department 
(ED) Visit Following an IPF Discharge measure discussed in this final 
rule.
2. Adoption of the 30-Day Risk-Standardized All-Cause ED Visit 
Following an IPF Discharge Measure Beginning With the CY 2025 
Performance Period/FY 2027 Payment Determination
a. Background
    We have consistently stated our commitment to identifying measures 
that examine the care continuum for patients with mental health 
conditions and substance use disorders and to quantify outcomes 
following IPF-discharge (see for example, the adoption of the 
Medication Continuation Following Hospitalization in an IPF measure in 
the FY 2020 IPF PPS Final Rule, 84 FR 38460 through 38462). Post-
discharge outcomes are an important part of our measurement strategy 
because patient-centered discharge planning and coordination of care 
for patients with any combination of mental health conditions and 
substance use disorders improves long-term outcomes,

[[Page 64651]]

including reducing readmissions and other post-discharge acute care 
services.39 40
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    \39\ Nelson, E.A. Maruish, M.E., Axler, J.L. Effects of 
Discharge Planning with Outpatient Appointments on Readmission 
Rates. https://ps.psychiatryonline.org/doi/10.1176/appi.ps.51.7.885.
    \40\ Steffen S, K[ouml]sters M, Becker T, Puschner B. Discharge 
planning in mental health care: a systematic review of the recent 
literature. Acta Psychiatr Scand. 2009 Jul;120(1):1-9 doi: 10.1111/
j.1600-0447.2009.01373.x. Epub 2009 Apr 8. PMID: 19486329.
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    Although not all post-discharge acute care visits are preventable, 
there are actions that the IPF can take to maximize the chance for 
patients' successful community reintegration.\41\ For example, care 
transition models to reduce the need for additional acute care 
following an inpatient stay have been adapted to the inpatient 
psychiatric setting. To implement these models, IPFs may need to 
consider how to include the patient and their caregivers, including 
family, in discharge planning, how to communicate with post-discharge 
providers, and how to ensure whole-person care for patients during and 
following their discharge.\42\ Specifically, IPFs may need to assist 
patients in connecting with outpatient providers, such as coordinating 
with the patient and their caregiver to schedule the patient's first 
post-discharge follow-up appointment, arranging for the patient's 
intensive outpatient (IOP) care, or connecting to peer support 
services. Additionally, IPFs may need to identify and address barriers 
patients may face in accessing medications and adhering to scheduled 
post-discharge follow-up appointments. Barriers may include financial 
factors, transportation, and childcare, which may necessitate support 
from social services, beginning during hospitalization and continuing 
after discharge.43 44 Barriers may also include the 
patient's concerns regarding the stigmatization associated with seeking 
care post-discharge. This can be addressed through treatment provided 
during the IPF stay.45 46 Improvements in patient experience 
of care and patient-centeredness of care have been associated with 
improved follow-up post-discharge and a reduction in patients requiring 
post-discharge acute care.47 48 In summary, by proactively 
addressing potential barriers to post-charge care, improving patient 
experience of care and patient-centeredness of care, and implementing 
care transition models, IPFs can reduce the need for post-discharge 
acute care.
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    \41\ Haselden, M., Corbeil, T., Tang, F., Olfson, M., Dixon, 
L.B., Essock, S.M., Wall, M.M., Radigan, M., Frimpong, E., Wang, R., 
Lamberti, S., Schneider, M., & Smith, T.E. (2019). Family 
Involvement in Psychiatric Hospitalizations: Associations With 
Discharge Planning and Prompt Follow-Up Care. Psychiatric Services, 
70(10), 860-866. https://doi.org/10.1176/appi.ps.201900028.
    \42\ Pincus, Harold, Care Transition Interventions to Reduce 
Psychiatric Re-Hospitalizations. National Association of State 
Mental Health Program Directors. 2015. Available at https://nasmhpd.org/sites/default/files/Assessment%20%233_Care%20Transitions%20Interventions%20toReduce%20Psychiatric%20Rehospitalization.pdf. Accessed on January 23, 2024.
    \43\ Allen, E.M., Call, K.T., Beebe, T.J., McAlpine, D.D., & 
Johnson, P.J. (2017). Barriers to Care and Healthcare Utilization 
among the Publicly Insured. Medical Care, 55(3), 207-214. 
doi:10.1097/MLR.0000000000000644.
    \44\ Mutschler, C., Lichtenstein, S., Kidd, S.A., & Davidson, L. 
(2019). Transition experiences following psychiatric 
hospitalization: A systematic review of the literature. Community 
Mental Health Journal, 55(8), 1255-1274. doi:10.1007/s10597-019-
00413-9.
    \45\ Allen, E.M., Call, K.T., Beebe, T.J., McAlpine, D.D., & 
Johnson, P.J. (2017). Barriers to Care and Healthcare Utilization 
among the Publicly Insured. Medical Care, 55(3), 207-214. 
doi:10.1097/MLR.0000000000000644.
    \46\ Mutschler, C., Lichtenstein, S., Kidd, S.A., & Davidson, L. 
(2019). Transition experiences following psychiatric 
hospitalization: A systematic review of the literature. Community 
Mental Health Journal, 55(8), 1255-1274. doi:10.1007/s10597-019-
00413-9.
    \47\ Donisi V, Tedeschi F, Wahlbeck K, Haaramo P, Amaddeo F. 
Pre-discharge factors predicting readmissions of psychiatric 
patients: a systematic review of the literature. BMC Psychiatry. 
2016 Dec 16;16(1):449. doi: 10.1186/s12888-016-1114-0. PMID: 
27986079; PMCID: PMC5162092.
    \48\ Morgan C Shields, Mara A G Hollander, Alisa B Busch, Zohra 
Kantawala, Meredith B Rosenthal, Patient-centered inpatient 
psychiatry is associated with outcomes, ownership, and national 
quality measures, Health Affairs Scholar, Volume 1, Issue 1, July 
2023, qxad017, https://doi.org/10.1093/haschl/qxad017.
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    The IPFQR Program currently has three measures that assess post-
discharge outcomes: (1) Follow-up After Psychiatric Hospitalization 
(FAPH); (2) Medication Continuation Following Inpatient Psychiatric 
Discharge; and (3) Thirty Day All-Cause Unplanned Readmission Following 
Psychiatric Hospitalization (CBE #2860, the IPF Unplanned Readmission 
measure). Each of these measures serves a unique role in assessing care 
coordination and post-discharge outcomes.
    The FAPH measure, which we adopted in the FY 2022 IPF PPS Final 
Rule (86 FR 42640 through 42645), uses Medicare FFS claims to determine 
the percentage of inpatient discharges from an IPF stay for which the 
patient received a follow-up visit for treatment of mental illness. The 
FAPH measure represents an important component of post-discharge care 
coordination, specifically the transition of care to an outpatient 
provider. However, this measure does not quantify patient outcomes.
    The Medication Continuation Following Inpatient Psychiatric 
Discharge measure, which we adopted in FY 2020 IPF PPS Final Rule (84 
FR 38460 through 38465), assesses whether patients admitted to IPFs 
with diagnoses of Major Depressive Disorder (MDD), schizophrenia, or 
bipolar disorder filled at least one evidence-based medication prior to 
discharge or during the post-discharge period. Medication continuation 
is important for patients discharged from the IPF setting with these 
disorders because of significant negative outcomes associated with non-
adherence to medication regimes. However, this measure does not 
quantify patient outcomes with respect to the use of acute care 
services post-discharge.
    The IPF Unplanned Readmission measure, which we adopted in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57241 through 57246), assesses 
outcomes associated with worsening condition, potentially due to 
insufficient discharge planning and post-discharge care coordination, 
by assessing post-discharge use of acute care. The IPF Unplanned 
Readmission measure estimates the incidence of unplanned, all-cause 
readmissions to IPFs or short-stay acute care hospitals following 
discharge from an eligible IPF index admission. A readmission is 
defined as any admission that occurs within 3 to 30 days after the 
discharge date from an eligible index admission to an IPF, except those 
considered planned.\49\ However, this measure does not quantify the 
proportion of patients 18 and older with an ED visit, without 
subsequent admission, within 30 days of discharge from an IPF. Without 
collecting this information in a measure, we believe there is a gap in 
our understanding regarding patients' successful reintegration into 
their communities following their IPF discharge.
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    \49\ https://p4qm.org/measures/2860.
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    To further understand this gap, we analyzed post-discharge outcomes 
using claims data. In this analysis, we determined that, for patients 
discharged from IPFs, the risk-adjusted rate of ED visits after an IPF 
discharge between June 1, 2019 and July 31, 2021 (excluding the first 
two quarters of 2020 due to the COVID-19 public health emergency) was 
20.7 percent. The rate of readmissions captured under the IPF Unplanned 
Readmission measure for this same period was 20.1 percent.\50\ This 
means that approximately 40 percent of patients discharged from an IPF 
had either an ED visit or an

[[Page 64652]]

unplanned readmission within 30-days of IPF discharge, but only about 
half of those visits are being captured in the publicly reported IPF 
Unplanned Readmission measure. Visits to an ED within 30 days of 
discharge from an IPF (regardless of whether that visit results in a 
hospital readmission, observation stay, discharge, or patient leaving 
without being seen) often indicate deteriorating or heightened mental 
or physical health needs. That is, these visits often represent a 
patient seeking care for symptoms that were present during the 
patient's stay in the IPF, regardless of whether the symptom was the 
reason for the admission, that have become worse for the patient in the 
time since discharge. Therefore, we believe that IPFs and the public 
would benefit from having these data made publicly available to inform 
care decisions and quality improvement efforts. Specifically, members 
of the public could use these data to inform care decisions and IPFs 
could use these data to compare their performance to that of similar 
IPFs. For example, by having these data publicly reported, IPFs could 
compare their performance with that of other IPFs with similar patient 
populations, a comparison which is not possible without this measure. 
If IPFs identified that other IPFs with similar patient populations had 
better rates of post-discharge ED visits (that is, other IPFs had fewer 
patients seek care in an ED within 30 days of discharge from the IPF), 
the IPF could identify a need to evaluate discharge planning and post-
discharge care coordination to identify process changes which could 
improve outcomes.
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    \50\ As depicted in the April 2023 file available at https://data.cms.gov/provider-data/archived-data/hospitals.
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    To address this gap, we developed and proposed the inclusion of the 
new, claims-based 30-Day Risk-Standardized All-Cause ED Visit Following 
an IPF Discharge measure (the IPF ED Visit measure) in the IPFQR 
Program beginning with the CY 2025 performance period/FY 2027 payment 
determination. The IPF ED Visit measure aims to provide information to 
patients, caregivers, other members of the public, and IPFs about the 
proportion of patients who seek care in ED in the 30 days following 
discharge from an IPF but are not admitted as an inpatient to an acute 
care hospital or IPF. This measure would assess the proportion of 
patients 18 and older with an ED visit, including observation stays, 
for any cause, within 30 days of discharge from an IPF, without 
subsequent admission.
    We recognize that not all post-discharge ED visits are preventable, 
nor are all post-discharge ED visits associated with the initial IPF 
admission. However, we developed an all-cause ED visit rate, as opposed 
to a more narrowly focused measure of ED admissions for mental health 
or substance use concerns, for three primary reasons. First, such a 
measure aligns most closely with the IPF Unplanned Readmission measure 
as this measure is also an all-cause measure. Second, an all-cause 
measure emphasizes the importance of whole-person care for patients. 
Whole-person care, during the inpatient stay and through referral at 
discharge, includes addressing the conditions that may jeopardize a 
patient's health, but are not the reason for admission to the IPF, if 
the IPF has reason to identify these conditions during the course of 
treatment. For example, if an IPF were to identify through metabolic 
screening that a patient has diabetes, it would be appropriate for that 
IPF to recommend appropriate follow-up for that patient, such as with a 
primary care provider, endocrinologist, or dietician. Such post-
discharge coordination of care could prevent the patient from seeking 
acute care after discharge from the IPF for complications of diabetes, 
such as diabetic ketoacidosis. Third, this measure includes ED visits 
for all conditions because patients visiting the ED may do so for 
physical symptoms associated with a mental health condition or 
substance use disorder. An example is a patient with anxiety that 
presents to the ED with chest pain and shortness of breath. If the 
clinician documents the primary diagnosis as chest pain (R07.9) or 
shortness of breath (R06.02), the patient would not be included in a 
mental health and substance use-specific IPF ED Visit measure, despite 
their history of anxiety (F41.9), a potential contributor to their 
presenting symptoms at the ED. We recognize that it is possible that 
such a visit may not be related to the patient's anxiety. However, 
while not all acute care visits after discharge from an IPF are 
preventable or necessarily related to the quality of care provided by 
the IPF, there is evidence that improvements in the quality of care for 
patients in the IPF setting can reduce rates of patients seeking acute 
care after discharge from an IPF, representing an improved outcome for 
patients.\51\
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    \51\ See for instance Chung, D.T., Ryan, C.J., Hadzi-Pavlovic, 
D., Singh, S.P., Stanton, C., & Large, M.M. (2017). Suicide rates 
after discharge from psychiatric facilities: A systematic review and 
meta-analysis. JAMA Psychiatry, 74(7), 694-702. https://doi.org/10.1001/jamapsychiatry.2017.1044 or Durbin, J., Lin, E., Layne, C., 
et al. (2007). Is readmission a valid indicator of the quality of 
inpatient psychiatric care? Journal of Behavioral Health Services 
Research, 34, 137-150. doi:10.1007/s11414-007-9055-5.
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    Additionally, we considered whether 30 days was an appropriate 
timeframe for this measure. That is, we sought to identify whether a 
measure that assessed post-discharge ED visits over a period shorter or 
longer than 30 days would be more appropriate. Because IPFs are already 
familiar with interpreting data for the 30-day period in the IPF 
Unplanned Readmission measure, we determined that it would be 
appropriate to maintain the 30-day period for the IPF ED Visit measure. 
Additionally, by maintaining the same timeframe as the IPF Unplanned 
Readmission measure, we can provide IPFs and patients with a more 
complete picture of acute care among IPF patients after discharge from 
the IPF.
    Pursuant to the Meaningful Measures 2.0 Framework (a CMS initiative 
that identifies priority domains for measures within CMS Programs 
\52\), this measure addresses the ``Seamless Care Coordination'' and 
the ``Person-Centered Care'' quality domains by encouraging facilities 
to provide patient-centric discharge planning and support post-
discharge care transitions. The IPF ED Visit measure also aligns with 
the CMS National Quality Strategy Goals \53\ of ``Engagement'' and 
``Outcomes and Alignment.'' It supports outcomes and alignment because 
this measure provides a quantified estimate of one post-discharge 
outcome that patients may experience, that is, a post-discharge acute 
care visit that does not result in an admission. It also supports the 
Behavioral Health Strategy \54\ domains of ``Quality of Care'' and 
``Equity and Engagement'' because engaging patients to improve post-
discharge outcomes is an element of providing quality care. 
Furthermore, similar to the Meaningful Measures domain of ``Person-
Centered Care,'' this measure supports the Universal Foundation domain 
of ``Person-Centered Care.''
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    \52\ https://www.cms.gov/medicare/quality/meaningful-measures-initiative/meaningful-measures-20.
    \53\ Schreiber, M., Richards, A., et al. (2022). The CMS 
National Quality Strategy: A Person-Centered Approach to Improving 
Quality. Available at: https://www.cms.gov/blog/cms-national-quality-strategy-person-centered-approach-improving-quality.
    \54\ CMS. (2022). CMS Behavioral Health Strategy. Available at 
https://www.cms.gov/cms-behavioral-health-strategy.
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b. Overview of Measure
    The IPF ED Visit measure was developed with input from clinicians, 
patients, and policy experts; the measure was subject to the pre-
rulemaking process required by section 1890A of the Act, as discussed 
further in section VI.B.1 of this rule. Consistent

[[Page 64653]]

with the key elements of the CMS Measure Development Lifecycle,\55\ we 
began with measure conceptualization during which we performed a 
targeted literature review and solicited input from a behavioral health 
technical expert panel (TEP). This allowed us to ensure that this topic 
addresses a gap that is important to interested parties. After 
confirming this, we developed the measure specifications for the IPF ED 
Visit measure. With these specifications, we issued a 30-day call for 
public comment \56\ and performed empirical testing using claims data, 
including modeling for risk-adjustment. After refining the measure 
specifications based on testing and public comment, we performed an 
equity analysis in which we tested the risk-adjustment methodology to 
ensure that the measure does not reflect access issues related to 
patient demographics instead of quality of care. By following the 
Measure Development Lifecycle, we sought to ensure that this is a 
vetted, valid, reliable, and ready-to-implement claims-based measure 
which would assess the proportion of patients 18 and older with an ED 
visit, including observation stays, for any cause, within 30 days of 
discharge from an IPF, without subsequent admission. By using the same 
definitions of index admission and patient populations as those used in 
the IPF Unplanned Readmission measure, we have designed the IPF ED 
Visit measure to complement the IPF Unplanned Readmission measure to 
the extent possible. We have also sought to minimize administrative 
burden by developing this as a claims-based measure so that it adds no 
information collection burden to clinicians and staff working in the 
IPF setting.
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    \55\ https://mmshub.cms.gov/blueprint-measure-lifecycle-overview.
    \56\ We note that in the FY 2025 IPF PPS proposed rule we 
incorrectly stated that this call for comments was issued in the 
Federal Register. It was actually posted on the measure lifecycle's 
public comment page (available at: https://mmshub.cms.gov/get-involved/public-comments/overview) and communicated through 
subregulatory channels.
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(1) Measure Calculation
    The focus population for this measure is adult Medicare FFS 
patients with a discharge from an IPF. The measure is based on all 
eligible index admissions from the focus population. An eligible index 
admission is defined as any IPF admission for which the patient meets 
the following criteria: (1) age 18 or older at admission; (2) 
discharged alive from an IPF; (3) enrolled in Medicare FFS Parts A and 
B during the 12 months before the admission date, the month of 
admission, and at least one month after the month of discharge from the 
index admission (that is, the original stay in an IPF); and (4) 
discharged with a principal diagnosis that indicates a psychiatric 
disorder. Excluded from the measure are patients discharged against 
medical advice (AMA) from the IPF index admission (because the IPF may 
not have had the opportunity to conduct full discharge planning for 
these patients); patients with unreliable data regarding death, 
demographics, or a combination thereof in their claims record (because 
these data are unreliable, they may lead to inaccuracies in the measure 
calculation); patients who expired during the IPF stay (because post-
discharge care is not applicable to these patients); patients with a 
discharge resulting in a transfer to another care facility (because the 
receiving care facility would be responsible for discharge planning for 
these patients); and patients discharged but readmitted within 3 days 
of discharge, also known as an interrupted stay (because interrupted 
stays are often reflective of patient needs outside of the IPF, such as 
treatment for another condition).
    To calculate the measure, we proposed to use the following data 
sources which are all available from Medicare administrative records 
and data submitted by providers through the claims process: (1) 
Medicare beneficiary and coverage files, which provide information on 
patient demographic, enrollment, and vital status information to 
identify the measure population and certain risk factors; (2) Medicare 
FFS Part A records, which contain final action claims submitted by 
acute care and critical access hospitals, IPFs, home health agencies, 
and skilled nursing facilities to identify the measure population, 
readmissions, and certain risk factors; and (3) Medicare FFS Part B 
records, which contain final action claims submitted by physicians, 
physician assistants, clinical social workers, nurse practitioners, and 
other outpatient providers to identify certain risk factors. To ensure 
that diagnoses result from encounters with providers trained to 
establish diagnoses, we proposed that this measure will not use claims 
for services such as laboratory tests, medical supplies, or other 
ambulatory services. Index admissions and ED visits would be identified 
in the Medicare FFS Part A records. Comorbid conditions for risk-
adjustment would be identified in the Medicare Part A and Part B 
records in the 12 months prior to admission, including the index 
admission. Demographic and FFS enrollment data would be identified in 
the Medicare beneficiary and coverage files.
    To calculate the IPF ED Visit measure, we proposed that CMS would: 
(1) identify all IPF admissions in the one-year performance period; (2) 
apply inclusion and exclusion criteria to identify index admissions; 
(3) identify ED visits and observation stays within 30 days of 
discharge from each index admission; (4) identify risk factors in the 
12 months prior to index admission and during the index admission; and 
(5) run hierarchical logistic regression to compute the risk-
standardized ED visit rate for each IPF.\57\ This hierarchical logistic 
regression would allow us to apply the risk-adjustment factors 
developed in measure testing to ensure that measure results are 
comparable across IPFs regardless of the clinical complexity of each 
IPF's patient population.
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    \57\ For an example of the hierarchal logistic risk-adjustment 
algorithm, we refer readers to the algorithm for the IPF Unplanned 
Readmission measure at https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/hospitalqualityinits/downloads/inpatient-psychiatric-facility-readmission-measure.zip.
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(2) Pre-Rulemaking Measure Review and Measure Endorsement
    As required under section 1890A of the Act, the CBE established the 
Partnership for Quality Measurement (PQM) to convene 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, also called 
the Pre-Rulemaking Measure Review (PRMR), includes a review of measures 
published on the publicly available list of Measures Under 
Consideration (MUC List) 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 IPFQR Program. 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 five days of the close of the public comment 
period.\58\ More details regarding the PRMR process may be found in the 
CBE's Guidebook of Policies and Procedures

[[Page 64654]]

for Pre-Rulemaking Measure Review and Measure Set Review, including 
details of the measure review process in Chapter 3.\59\
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    \58\ These materials are available at the PRMR section of the 
PQM website: https://p4qm.org/PRMR.
    \59\ https://p4qm.org/sites/default/files/2023-09/Guidebook-of-Policies-and-Procedures-for-Pre-Rulemaking-Measure-Review-%28PRMR%29-and-Measure-Set-Review-%28MSR%29-Final_0.pdf.
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    The CBE-established PQM also conducts the measure endorsement and 
maintenance (E&M) process to ensure measures submitted for endorsement 
are 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 are 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 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 E&M Guidebook, including details of the measure 
endorsement process in the section titled, ``Endorsement and Review 
Process.'' \60\
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    \60\ The Partnership for Quality Measurement. (October 2023). 
Endorsement and Maintenance (E&M) Guidebook. Available at: https://p4qm.org/sites/default/files/2023-12/Del-3-6-Endorsement-and-Maintenance-Guidebook-Final_0_0.pdf.
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    As part of the PRMR process, the IPF ED Visit measure was reviewed 
during the PRMR Hospital Recommendation Group meeting on January 18, 
2024. For the voting procedures of the PRMR and E&M process, the PQM 
utilized 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 cast 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 
is considered not to have 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.\61\ More details 
regarding the E&M voting procedures may be found in the PQM Endorsement 
and Maintenance (E&M) Guidebook.\62\ The PRMR Hospital Recommendation 
Group \63\ reached consensus and recommended including this measure in 
the IPFQR Program with conditions.
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    \63\ We note that the PRMR Hospital Recommendation Group was 
previously the Measure Applications Partnership (MAP) Hospital 
Workgroup under the pre-rulemaking process followed by the previous 
CBE.
---------------------------------------------------------------------------

    Seven members of the group recommended adopting the measure into 
the IPFQR program without conditions; eleven members recommended 
adoption with conditions; and one committee member voted not to 
recommend the measure for adoption. Taken together, 94.73 percent of 
the votes were between recommend & recommend with conditions.
    The conditions specified by the PRMR Hospital Recommendation Group 
were: (1) that the measure be considered for endorsement by a 
consensus-based entity; and (2) further consideration of how the 
measure addresses 72-hour transfers to the ED. We have taken those 
considerations into account and proposed this measure for adoption 
because we believe we have adequately addressed the concerns raised by 
those considerations.
    To address the first condition, we have submitted the measure to 
the CBE for consideration. For more information on submission to and 
consideration by the CBE we refer readers to section VI.B.2.b.(3) of 
this rule.
    The second voting condition requested that we further consider how 
the measure addresses 72-hour transfers to the ED because of concerns 
that IPFs may appear to have worse performance if ``interrupted stays'' 
are not excluded from the measure. An ``interrupted stay'' occurs when 
a patient is discharged from an IPF and readmitted to the same IPF 
within 72 hours. This frequently occurs when a patient needs medical 
treatment that is beyond the scope of the IPF, such as care in an ED 
for an emergent health issue. We believe that this concern is 
sufficiently addressed in the ED Visit measure's specifications because 
these ``interrupted stays'' are excluded from the measure, as described 
in section VI.B.2.b.(1) of this rule. This exclusion is defined as an 
index admission with a readmission on Days 0, 1, or 2 post-discharge. 
In other words, patients transferred to the ED and subsequently 
readmitted to the IPF within 72 hours are excluded from the measure. 
Therefore ``interrupted stays'' are excluded from the measure as per 
the group's recommendation.
(3) CBE Endorsement
    Section 1886(s)(4)(D)(i) of the Act generally requires that 
measures specified by the Secretary shall be endorsed by the entity 
with a contract under section 1890(a) of the Act (that is, the CBE). 
After a measure has been submitted to the CBE, the committee 
responsible for reviewing the measure evaluates the measure on five 
domains: (1) Importance; (2) Feasibility; (3) Scientific Acceptability 
(that is, reliability and validity); (4) Equity; and (5) Use and 
Usability. Committee members evaluate whether the measure the domain is 
``Met'', ``Not Met but Addressable'' or ``Not Met'' for each measure 
using a set of criteria provided by the CBE.\64\ When a measure is 
submitted it is assigned to one of the CBE's projects based on where in 
the patient's healthcare experience the measure has the most relevance. 
The five projects are (1) Primary Prevention; (2) Initial Recognition 
and Management; (3) Management of Acute Events, Chronic Disease, 
Surgery, Behavioral Health; (4) Advanced Illness and Post-Acute Care; 
and (5) Cost and Efficiency.
---------------------------------------------------------------------------

    \64\ https://p4qm.org/EM.
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    The measure developer submitted the measure for CBE endorsement 
consideration in the Fall 2023 review cycle. The measure was assigned 
to the Cost and Efficiency Project. The CBE Cost and Efficiency 
Endorsement committee met on January 31, 2024 and did not reach 
consensus regarding the IPF ED Visit measure, with 60.6 percent voting 
in favor of endorsement or endorsement with conditions and the 
remaining members voting to not endorse, which is below the 75 percent 
threshold necessary for the endorsement of the measure, as described in 
VI.B.2.b. During the Cost and Efficiency Endorsement committee's 
meeting, members of the committee discussed whether an all-cause 
measure was appropriate and whether IPFs are able to

[[Page 64655]]

implement interventions to reduce post-discharge acute care.\65\
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    \65\ For information about the Cost and Efficiency endorsement 
review we refer readers to the meeting summary, available at https://p4qm.org/sites/default/files/Cost%20and%20Efficiency/material/EM-Cost-and-Efficiency-Fall2023-Endorsement-Meeting-Summary.pdf.
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    As discussed in section VI.B.2.a of this final rule, an all-cause 
measure complements the IPF Unplanned Readmission measure, emphasizes 
whole-person care, and captures visits to the ED for patients with 
physical symptoms associated with mental health conditions. 
Additionally, evidence shows that there are interventions that reduce 
post-discharge acute care. These include adopting care transition 
models, proactively connecting patients with post-discharge providers, 
identifying and addressing patients' barriers to post-discharge care, 
and focusing on providing patient-centered care and improving patient 
experience of care.
    Although section 1886(s)(4)(D)(i) of the Act generally requires 
that measures specified by the Secretary shall be endorsed by the 
entity with a contract under section 1890(a) of the Act, section 
1886(s)(4)(D)(ii) 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 a measure that has been endorsed or adopted by a consensus 
organization identified by the Secretary.
    We have determined that this is an appropriate topic for the 
adoption of a measure absent CBE endorsement because where possible we 
focus on measures that assess patient outcomes. Unplanned use of acute 
care after discharge from an IPF is often associated with worsening 
condition, potentially due to insufficient discharge planning and post-
discharge care coordination. While the IPFQR Program currently has a 
measure that assesses unplanned readmissions after discharge from an 
IPF, there is a gap in the measure set with respect to unplanned ED 
visits without a subsequent admission to an acute care hospital or IPF. 
The IPF ED Visit measure fills that gap. We also reviewed CBE-endorsed 
measures and were unable to identify any other CBE-endorsed measures 
that assess outcomes that solely result in a patient's ED visit after 
the patient's discharge from an IPF. The only endorsed measure that we 
identified that addresses an IPF patient seeking acute care after 
discharge is the IPF Unplanned Readmission measure. As we discussed 
previously, the IPF Unplanned Readmission measure does not assess ED 
visits that do not result in an admission. Therefore, we believe that 
the IPF ED Visit measure is an important complement to the IPF 
Unplanned Readmission measure. We did not find any other measures that 
assess post-discharge ED visits without a subsequent admission, and 
therefore the exception in section 1886(s)(4)(D)(ii) of the Act 
applies.
c. Data Collection, Submission, and Reporting
    Because all data used to calculate the IPF ED Visit measure are 
available on Medicare claims, this measure requires no additional data 
collection or submission by IPFs. We proposed to adopt the ED Visit 
Measure with a reporting period beginning with data from CY 2025 
performance period/FY 2027 payment determination year.
    We received public comments on this proposal. The following is a 
summary of the comments we received and our responses.
    Comment: Several commenters supported adoption of the IPF ED Visit 
measure. Some commenters stated that this measure would improve 
prioritization of discharge planning and provide a more comprehensive 
understanding of IPF patients' acute care needs following a discharge, 
which is a critical period for this patient population. Other 
commenters stated that this measure may serve as an important tool to 
assess the quality of care in IPFs for beneficiaries, policymakers, and 
other interested parties. A commenter also noted that these data are 
not available from the current readmission measure in the IPFQR Program 
(that is, the Thirty Day All-Cause Unplanned Readmission Following 
Psychiatric Hospitalization--the IPF Unplanned Readmission measure) 
because that measure does not capture ED visits. A commenter noted that 
this measure may promote improved discharge planning, patient 
engagement, and improved referrals to social services, which could help 
patients avoid relying on EDs for care for chronic conditions, which 
could, in turn, reduce overcrowding in EDs. This commenter also stated 
that this is particularly important for the IPF patient population 
because they are at high risk of experiencing gaps in the care 
continuum leading to readmissions and poor outcomes.
    Response: We thank these commenters for their support.
    Comment: Several commenters expressed concern that this measure 
does not account for patient characteristics that could affect the 
likelihood of the patient needing acute care following discharge from 
the IPF. These commenters were specifically concerned that IPFs that 
treat patients with high levels of unmet social needs (including 
inability to afford medication, lack of a home, lack of access to 
communications technology for accessing less acute care--such as a 
phone for calling emergency hotlines or other resources) may appear to 
perform worse on the measure (that is, have more patients seeking care 
in the ED within 30 days of discharge) than IPFs that treat patients 
with fewer unmet social needs. A commenter stated that patients who 
receive care in IPFs have an increased risk for violence and 
victimization, which may affect their use of EDs.
    Response: We agree with commenters that the prevalence of unmet 
social needs is high among patients receiving care in IPFs, and that 
the prevalence of these needs may be higher in some IPFs when compared 
to others. We further agree that patient factors, including unmet 
social needs and an increased risk for violence or victimization, 
increase a patient's risk of needing emergency care. We note that data 
on the Screen Positive Rate for SDOH measure (which includes 
information about the patient's risk of interpersonal violence), which 
we finalized in the FY 2024 IPF PPS final rule (88 FR 51117 through 
51121), will be publicly reported starting with the FY 2027 payment 
determination (the same period for which we are adopting the IPF ED 
Visit measure). With both measures being implemented and publicly 
reported at same time, IPFs and other interested parties will be able 
to compare performance on this IPF ED Visit measure across IPFs with 
similar rates of patients who screen positive for social needs under 
the Screen Positive Rate for SDOH measure.
    We reiterate that the goal of this measure is to reduce rates of 
30-day post-discharge ED visits in comparison to other similarly 
situated IPFs and that we seek to achieve this by publicly reporting 
IPF performance on this measure. We note that the IPF ED Visit measure 
is not intended to allow comparisons between post-discharge outcomes of 
patients discharged from IPFs and patients discharged from other 
facility types.
    We also note that, as part of the measure development and testing 
process, the measure developer performed an equity analysis in which

[[Page 64656]]

they tested the risk-adjustment methodology to ensure that the measure 
does not reflect access issues related to patient demographics instead 
of quality of care. The equity analysis involved comparing a model that 
included both SDOH and clinical risk-factors against a model that 
included only clinical risk factors. The model that included both SDOH 
and clinical risk-factors had only marginally better predictive 
accuracy than the model with only clinical risk-factors, suggesting 
that the impact of SDOH on the outcome is relatively small compared to 
the clinical risk-factors.\66\ Furthermore, we have concerns about 
holding IPFs to different standards for the outcomes of their patients 
of diverse sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. The measure developer's equity testing 
verified that the measure provides information about the quality of 
care provided in the IPF, even for IPFs that treat patients with 
different demographic characteristics.\67\ Therefore, we do not expect 
results on this measure to be driven by an IPF's patient case-mix or 
prevalence of unmet social needs within that IPF. However, we will 
continue to monitor measure results to ensure that they reflect IPF 
quality of care.
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    \66\ For more information regarding this equity testing, we 
refer readers to the ``Equity'' tab of the information submitted to 
the CBE for review and available during the pre-rulemaking review. 
This is available at: https://p4qm.org/measures/4190.
    \67\ For more information regarding this equity testing, we 
refer readers to the ``Equity'' tab of the information submitted to 
the CBE for review and available during the pre-rulemaking review. 
This is available at: https://p4qm.org/measures/4190.
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    Comment: Several commenters expressed concern that by including an 
all-cause measure we will not accurately represent the quality of care 
provided by IPFs. These commenters noted that there are reasons that 
patients seek emergency care that are unrelated to the care provided by 
the IPF, including accidents or physical health needs unrelated to the 
patient's behavioral health condition. Some commenters expressed 
concern that the use of an all-cause measure, instead of a more 
narrowly specified measure such as the potentially preventable 
admissions measures used in post-acute care settings (specifically, 
IRFs, SNFs, LTCHs, and HHAs) or the ED Visits Following Outpatient 
Chemotherapy measure in the Hospital Outpatient Quality Reporting 
Program), implies that IPFs have more accountability for patients than 
other care settings.
    Response: We recognize that not all post-discharge ED visits are 
preventable, nor are all post-discharge ED visits associated with the 
initial IPF admission. Therefore, we do not expect rates for the IPF ED 
Visit measure to be zero. However, because engaging patients to improve 
post-discharge outcomes is an important element of providing quality 
care, we seek to develop and implement measures that assess this post-
discharge outcome.
    While there are many circumstances that may cause a patient to seek 
emergency care that are unrelated to the IPF, approximately 40 percent 
of Medicare beneficiaries discharged from IPFs seek acute care 
treatment in hospitals within 30 days of their discharge from the IPF, 
with approximately half of those patients being admitted to an 
inpatient hospital and half of those patients receiving treatment in 
the emergency department without a subsequent admission.\68\ In 2021, 
approximately 4 percent of Medicare beneficiaries visited an ED each 
month with or without a subsequent admission,\69\ which is 
significantly lower than the percentage of discharged IPF patients 
vising an ED. While we recognize that many patients discharged from 
IPFs are more clinically complex than the general Medicare population, 
we also believe that there is opportunity to close the gap in ED 
utilization between IPF patients and the Medicare beneficiary 
population at-large.
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    \68\ We refer readers to the FY 2025 IPF PPS proposed rule for 
more information regarding these calculations (89 FR 23207).
    \69\ CDC, Emergency Department Visit Rates by Selected 
Characteristics: United States, 2021. Accessed at https://www.cdc.gov/nchs/data/databriefs/db478.pdf.
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    Furthermore, we developed an all-cause measure for the three 
reasons previously discussed: (1) to align with the IPF Unplanned 
Readmissions measure; (2) to emphasize whole-person care; and (3) to 
ensure that patients who visit the ED for symptoms related to their 
behavioral health condition or that could have been appropriately 
addressed by the IPF during the patient's stay or at discharge are 
included in the measure. These reasons continue to be important 
elements of assessing and reporting on post-discharge use of acute 
care.
    We recognize that other CMS quality reporting and value-based 
purchasing programs have developed measures that assess the use of 
acute care services for more narrowly defined groups of patients or 
that focus on ``potentially preventable'' use of acute care services. 
However, we note that other programs have developed measures that more 
broadly assess outcomes after discharge. For example, the Hospital 
Inpatient Quality Reporting Program (IQR) Program has two measures that 
broadly assess outcomes after discharge: (1) the Hybrid Hospital-Wide 
Unplanned Readmission (HWR) measure \70\ and (2) the Hybrid Hospital-
Wide Mortality (HWM) measure.\71\ The Hospital Outpatient Quality 
Reporting Program has one measure, the Surgery Measure (OP-36).\72\
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    \70\ This measure evaluates whether a patient has an unplanned 
readmission within 30 days of discharge. For more addition on this 
measure, we refer readers to the hybrid measures section of the 
QualityNet website: https://qualitynet.cms.gov/inpatient/measures/hybrid.
    \71\ This measure estimates a hospital-level 30-day risk-
standardized mortality rate, which is defined as death from any 
cause within 30 days after the index admission date. For more 
information on this measure, we refer readers to the hybrid measures 
section of the QualityNet website: https://qualitynet.cms.gov/inpatient/measures/hybrid.
    \72\ This measure estimates facility-specific risk-standardized 
hospital visits within seven days of hospital outpatient surgery. 
For more information on this measure, we refer readers to the 
surgery measure section of the QualityNet website: https://qualitynet.cms.gov/outpatient/measures/surgery.
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    We note that unmanaged behavioral health conditions can present in 
many ways including physical and mental symptoms. During an ED visit it 
is possible that the relationship between the presenting condition and 
the patient's behavioral health condition may not be assessed and 
documented. Therefore, we chose to develop a more broadly specified 
measure than some of the measures in use in other programs. This does 
not imply that IPFs have more control over or accountability for use of 
acute care than other care providers. It is a consequence of the 
complexity of the patients that seek care in IPFs. We reiterate we do 
not expect IPFs to achieve zero post-discharge acute care visits.
    We believe that commenters may have been concerned regarding 
financial accountability for patients seeking emergency care after 
discharge from an IPF. We note that the IPFQR Program is a pay-for-
reporting program. CMS only has the authority under section 
1886(s)(4)(A) to apply a financial penalty if an IPF fails to submit 
data on a quality measure in the form and manner, and at a time, 
specified by CMS. CMS does not otherwise adjust payments based on the 
IPF's performance on the measures adopted in the IPFQR Program.
    Comment: A commenter stated that IPFs do not have the appropriate 
health information technology (HIT) to electronically connect with 
local partners. These commenters stated that

[[Page 64657]]

this makes it more difficult for IPFs to engage in meaningful cross-
setting discharge and follow-up care coordination.
    Response: We understand that many IPFs have limited access to 
certified electronic health record technology (CEHRT) \73\ and that 
this impacts their access to interoperable communications with other 
healthcare providers. However, there are many strategies for 
comprehensive discharge planning that do not rely on interoperable 
electronic systems. For example, the Agency for Healthcare Research and 
Quality (AHRQ) has the Include-Discuss-Educate-Assess-Listen (IDEAL) 
discharge planning guide which does not require any use of HIT.\74\ We 
therefore believe that performance on this measure is not directly 
dependent on an IPF's technological capabilities.
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    \73\ We note that CEHRT refers to EHR technology that qualifies 
for use in the Medicare Promoting Interoperability Program, though 
it is used by a variety of health care providers that do not 
participate in that Program. For more information about CEHRT, we 
refer readers to: https://www.cms.gov/medicare/regulations-guidance/promoting-interoperability-programs/certified-ehr-technology.
    \74\ Agency for Healthcare Research and Quality (AHRQ) Accessed 
at https://www.ahrq.gov/sites/default/files/wysiwyg/professionals/systems/hospital/engagingfamilies/strategy4/Strat4_Tool_1_IDEAL_chklst_508.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concern that patients may not 
have access to post-discharge care other than through the ED. 
Commenters noted the following reasons for lack of access to lower 
acuity care: (1) underserved communities may not have lower acuity care 
available; (2) communal living settings may have policies that restrict 
access to lower acuity care settings; and (3) long wait times for 
outpatient appointments. A few commenters stated that utilization of 
the ED without subsequent admissions may demonstrate that patients are 
seeking medical care before their condition becomes so severe that 
inpatient care is required, and is therefore positive. A commenter 
stated that this measure may restrict patient access to EDs.
    Response: While we agree that patients seeking medical care before 
their condition becomes so severe that inpatient care is required is 
preferable to patients needing to be readmitted, we disagree that 
seeking that care in the ED is a positive indication. Receiving care in 
the ED without an admission indicates that either the patient's 
condition has become urgent, or the patient is receiving lower-acuity 
care in the ED. A preferable outcome would be for the patient to be 
able to receive care in the community setting without having to use 
emergency services for low acuity care and improved care management.
    Receiving lower acuity care in the ED can be time-consuming for the 
patient and can lead to increased spending and unnecessary testing and 
treatment,\75\ and patients receiving care in EDs are at particularly 
high risk for adverse events.\76\ Furthermore, patients receiving lower 
acuity care in the ED can lead to ED crowding, which can affect the 
ED's ability to provide care to higher acuity patients, and reduce the 
overall quality of care provided by the ED.\77\ To avoid the potential 
risks associated with lower acuity care provided in the ED, guiding 
patients to other available resources, to the extent possible, is part 
of high quality discharge planning and post-discharge care 
coordination.
---------------------------------------------------------------------------

    \75\ Uscher-Pines L, Pines J, Kellermann A, Gillen E, Mehrotra 
A. Emergency department visits for nonurgent conditions: systematic 
literature review. Am J Manag Care. 2013 Jan;19(1):47-59. PMID: 
23379744; PMCID: PMC4156292.
    \76\ Pini R, Ralli ML, Shanmugam S. Emergency Department 
Clinical Risk. 2020 Dec 15. In: Donaldson L, Ricciardi W, Sheridan 
S, et al., editors. Textbook of Patient Safety and Clinical Risk 
Management [internet]. Cham (CH): Springer; 2021. Chapter 15. 
Available from: https://www.ncbi.nlm.nih.gov/books/NBK585618/ doi: 
10.1007/978-3-030-59403-9_15.
    \77\ Sartini M, Carbone A, Demartini A, Giribone L, Oliva M, 
Spagnolo AM, Cremonesi P, Canale F, Cristina ML. Overcrowding in 
Emergency Department: Causes, Consequences, and Solutions-A 
Narrative Review. Healthcare (Basel). 2022 Aug 25;10(9):1625. doi: 
10.3390/healthcare10091625. PMID: 36141237; PMCID: PMC9498666.
---------------------------------------------------------------------------

    However, we recognize that EDs are valuable resources, which 
provide necessary care for urgent needs, and that there are areas in 
which EDs may be the only source of care available to patients. We also 
recognize that there are many situations in which care in an ED is 
clinically appropriate and not related to the care provided by the 
discharging IPF. We reiterate that the IPF ED Visit measure is designed 
to provide information regarding how IPFs perform relative to similar 
IPFs, including IPFs in the same geographic areas and shared community 
resources. The goal of this measure is to reduce rates of 30-day post-
discharge ED visits in comparison to other similarly situated IPFs, but 
there is no expectation that IPFs would reach zero 30-day post-
discharge ED visits.
    Regarding the concern that this measure may restrict access to EDs 
following discharge from an IPF, we note that the intention of this 
measure is not for IPFs to discourage patients from seeking care in EDs 
when appropriate. Rather, we believe that IPFs play an important role 
in helping patients understand purposes of, and how to access, all 
levels of care within their communities, and that it is also their 
responsibility to help patients understand when to seek treatment in an 
ED setting. We also reiterate that, while lower scores on this measure 
are better, we would not expect IPFs to reach zero ED visits following 
discharge because there are circumstances that require the use of the 
ED.
    Comment: A few commenters recommended that CMS develop a risk 
adjustment strategy for this measure. Another commenter stated that 
IPFs may refuse to admit patients who have complex medical needs 
because of the increased possibility that these patients would later 
seek emergency care and reflect poorly on the discharging IPF.
    Response: As described in the FY 2025 IPF PPS proposed rule, this 
measure is risk-adjusted (89 FR 23208). The steps to calculate this 
measure are: (1) identify all IPF admissions in the one-year 
performance period; (2) apply inclusion and exclusion criteria to 
identify index admissions; (3) identify ED visits and observation stays 
within 30 days of discharge from each index admission; (4) identify 
risk factors in the 12 months prior to index admission and during the 
index admission; and (5) run hierarchical logistic regression to 
compute the risk-standardized ED visit rate for each IPF. We developed 
the hierarchical logistic regression model to understand which clinical 
patient characteristics had effects on the patients' risk of needing 
care in the ED within 30 days of discharge from the IPF. This analysis 
allows us to ensure that the measure results are comparable across IPFs 
regardless of the clinical complexity of each IPF's patient population. 
The hierarchical logistic regression model was provided for CBE review 
and was available to the public at the time of publication of the FY 
2025 IPF PPS proposed rule. For more information on this model we refer 
readers to https://p4qm.org/sites/default/files/2023-10/Copy%20of%20Risk-modelspecifications.xlsx. Because this measure is risk 
adjusted for patient complexity, IPFs that admit patients with complex 
medical needs do not increase their risk of appearing to perform poorly 
on this measure.
    Comment: Some commenters were concerned that IPFs may be penalized 
for factors outside of their control.
    Response: We note that the IPFQR Program is a pay-for-reporting 
program. We only have the authority under section 1886(s)(4)(A) of the 
Act to apply a financial penalty if an IPF fails to submit data on a 
quality measure in the

[[Page 64658]]

form and manner, and at a time, CMS specifies. We do not otherwise 
adjust or penalize payments based on the IPF's performance on the 
measures adopted in the IPFQR Program.
    We understand commenters may be concerned about the impact of 
public reporting of IPFs performance on this measure as required by 
section 1886(s)(4)(F) of the Act, such as patients seeking care at 
higher performing IPFs. We reiterate that the goal of this measure is 
to reduce rates of 30-day post-discharge ED visits in comparison to 
other similarly situated IPFs and that we seek to achieve this by 
publicly reporting IPF performance on this measure. In addition, 
because the IPF ED Visit measure is risk standardized, it provides a 
tool for comparing IPFs that treat clinically different patient 
populations. Furthermore, by comparing IPFs which treat patients with 
similar levels of unmet social needs (by comparing IPFs which report 
similar rates on the Screen Positive for SDOH measure), patients would 
be able to use the IPF ED Visit measure as an element of their care 
decisions. We note that IPFs that experience extraordinary events, such 
as natural disasters, which affect their ability to submit required 
measure data under the IPFQR Program could request an extraordinary 
circumstances exception in accordance with our regulation at Sec.  
412.433(f).
    Comment: A few commenters recommended that, for the IPFQR Program, 
CMS should only develop and adopt quality measures specific to the 
provision of inpatient psychiatric care. A few commenters recommended 
that CMS develop quality measures that focus on factors within the 
IPF's control, such as a discharge planning measure or a follow-up 
after discharge measure to better assess discharge planning and care 
coordination. Some commenters recommended development of condition-
specific measures to assess post-discharge use of acute care. A 
commenter recommended assessing care coordination through use of a 
patient experience survey.
    Response: Regarding the recommendation that CMS should only develop 
and adopt quality measures specific to the provision of inpatient 
psychiatric care, we note that helping patients successfully 
reintegrate into their communities upon discharge is an important 
element of the provision of high-quality inpatient psychiatric care. 
However, we believe the commenter is recommending that we more narrowly 
focus measures on actions performed by the IPF while the patient is 
receiving care at the facility.
    Consistent with the CMS National Quality Strategy's Focus on a 
health care system that promotes quality outcomes,\78\ we focus on 
measures that assess outcomes where possible. We recognize that one 
limitation of measures that assess outcomes is that outcomes are the 
result of numerous factors, many beyond providers' control.\79\ We 
considered other ways of assessing discharge planning and care 
coordination. However, we chose to develop this measure instead of a 
discharge planning measure because it more directly assesses the 
outcome we wish to achieve (improved reintegration into communities 
after discharge) and can be calculated using data that IPFs already 
provide. We note that we already have the Follow-Up After Psychiatric 
Hospitalization (FAPH) measure \80\ in the IPFQR Program. For more 
information about the FAPH measure and how the IPF ED Visit measure 
complements we refer readers to our discussion in section VI.B.2.a. of 
this final rule.
---------------------------------------------------------------------------

    \78\ CMS, CMS Quality in Motion: Acting on the CMS National 
Quality Strategy. April 2024. Available at: https://www.cms.gov/files/document/quality-motion-cms-national-quality-strategy.pdf.
    \79\ Agency for Healthcare Research and Quality, Types of Health 
Care Quality Measures. Access May 30, 2024. Available at: https://
www.ahrq.gov/talkingquality/measures/
types.html#:~:text=Outcomemeasures%20may%20seemto,%20many%20beyond%20
providers'%20control.
    \80\ For more information about this measure, we refer readers 
to the codebook, available at: https://qualitynet.cms.gov/files/6675efeba629e067996f932d?filename=FY25_IPFQR_FAPH_Codebook.xlsx.
---------------------------------------------------------------------------

    Regarding the recommendation that we include care transition 
questions in a patient experience measure, we agree that the patient's 
experience of being prepared to successfully reintegrate into the 
community is an important element of discharge planning and care 
coordination. We note that the Psychiatric Inpatient Experience (PIX) 
survey measure, which we finalized in the FY 2024 IPF PPS final rule 
(88 FR 51121 through 51128), includes a treatment effectiveness domain, 
including questions related to the patient's perspective of whether 
their care experience has prepared them to transition back into the 
community. However, the patient's perspective at time of discharge is 
only one element of a complex set of elements that lead to a successful 
reintegration into the community, including, for example, the 
appropriateness and completeness of documentation and whether 
recommendations for outpatient care appropriately account for the 
patient's ability to access this care.
    Comment: Some commenters were concerned about the lack of CBE 
endorsement, specifically expressing the belief that the CBE's lack of 
consensus on whether to endorse the measure indicated that the measure 
was not reliable or valid. A commenter recommended the inclusion of 
experts in the measure development process, including individuals 
involved in providing care in IPFs. A commenter stated the belief that 
the measure developer misinterpreted the statistical significance of 
the measure in reliability and validity testing. Other commenters 
stated that the measure specifications do not provide a clear 
connection between evidence-based interventions and measure outcomes. A 
commenter stated the belief that adopting this measure, despite lack of 
CBE endorsement, with the sole justification that there is no endorsed 
measure that addresses this topic is an insufficient justification for 
adopting a measure that is not endorsed by the CBE.
    Response: We agree that it is important to adopt measures that are 
reliable and valid and have been reviewed by clinical experts. Through 
the development and testing of this measure, which we described in the 
FY 2025 IPF PPS proposed rule (89 FR 23208) and in more detail in the 
measure information submitted for CBE review \81\ as discussed in the 
FY 2025 IPF PPS proposed rule (89 FR 23209 through 23210), it meets 
these criteria.
---------------------------------------------------------------------------

    \81\ Available at Partnership for Quality Measurement. https://p4qm.org/measures/4190.
---------------------------------------------------------------------------

    Specifically, the measure developer tested the measure for 
reliability using a bootstrapped test-retest approach (which is a 
statistical method for testing using a single data set) \82\ and 
calculated the intra-class correlation coefficient (ICC) which reflects 
correlation and agreement between measurements. The mean ICC obtained 
by through this method was 0.690 with a range of 0.683 through 
0.756.\83\ Generally, ICC values between 0.5 and 0.75 are considered 
moderate and between 0.75 and 0.9 are considered good.\84\ Therefore 
this measure is in the high-moderate to low-good range of reliability, 
which is

[[Page 64659]]

sufficiently reliable for adoption into the IPFQR Program.
---------------------------------------------------------------------------

    \82\ PennState, Eberly College of Science, Applied Statistics. 
Available at https://online.stat.psu.edu/stat500/lesson/11/11.2/11.2.1.
    \83\ Information available on the Partnership for Quality 
Measurement measure page, available at https://p4qm.org/measures/4190.
    \84\ Koo TK, Li MY. A Guideline of Selecting and Reporting 
Intraclass Correlation Coefficients for Reliability Research. J 
Chiropr Med. 2016 Jun;15(2):155-63. doi: 10.1016/j.jcm.2016.02.012. 
Epub. 2016 Mar. 31. Erratum in: J. Chiropr. Med. 2017 Dec;16(4):346. 
PMID: 27330520; PMCID: PMC4913118.
---------------------------------------------------------------------------

    To test the validity, the measure developer assessed the 
relationship between the IPF ED Visit measure rate and the IPF 
Unplanned Readmission measure rate. The measure developer also 
performed hypothesis-driven validity testing to determine if 
performance rates among subgroups of patients (including based on sex, 
race/ethnicity, dual eligibility status, and patients with a longer 
length of stay) were consistent with empirical literature regarding ED 
usage among these patients. There was a positive relationship between 
facility rates on the IPF ED Visit measure and the IPF Unplanned 
Readmissions measure and there were small differences in the ED measure 
rate across the patient subgroups they evaluated in the direction 
consistent with expectations based on literature.\85\ These results 
demonstrate the validity of the measure. Furthermore, as part of the 
standard measure development process \86\ the measure developer 
convened a Technical Expert Panel (TEP) representing a diverse set of 
viewpoints (89 FR 23208) to ensure that the measure would addresses a 
gap that is important to interested parties. We further note that, 
while the measure did not meet the 75 percent threshold required for 
endorsement, the majority (60.6 percent) of the CBE committee did 
support endorsement, or endorsement with conditions.
---------------------------------------------------------------------------

    \85\ Information available on the Partnership for Quality 
Measurement measure page, available at https://p4qm.org/measures/4190.
    \86\ CMS. Blueprint Measure Lifecycle. Available at https://mmshub.cms.gov/blueprint-measure-lifecycle-overview.
---------------------------------------------------------------------------

    Regarding the concern that the measure developer misinterpreted the 
statistical data, we have assessed the results achieved in testing to 
be consistent with appropriate statistical methods.
    While there is limited research focused entirely on reducing ED 
visits without subsequent admission following discharge from an IPF, 
the literature that exists, as well as literature on reducing 
readmissions following IPF discharge, show clear links between steps 
IPFs can take and reduced use of acute care after discharge from the 
IPF. Additionally, IPFs can play a role in care coordination by 
arranging follow-up appointments for patients, ensuring medications are 
available at discharge, assisting patients with accessing medications 
from external providers, and engaging the patients' social support 
system. Patients who missed their first post-IPF discharge follow-up 
appointment had a 140 percent increased risk of readmission,\87\ which 
indicates the importance of providing sufficient patient education and 
post-discharge support to ensure the patient is able to keep their 
first post-IPF discharge follow-up appointment.
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    \87\ Hamilton, J.E., Rhoades, H., Galvez, J. et al. (2015). 
Factors differentially associated with early readmission at a 
university teaching psychiatric hospital. Journal of Evaluation in 
Clinical Practice, 21(4), 572-578.
---------------------------------------------------------------------------

    When we propose a measure that is not endorsed by the CBE, we must 
evaluate whether the exception in 1886(s)(4)(D)(ii) of the Act applies. 
This exception 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 a 
measure that has been endorsed or adopted by a consensus organization 
identified by the Secretary. We stated in the proposed rule that there 
are no measures that address this topic that have been adopted by the 
CBE to explain why the second part of this exception applies to this 
measure (89 FR 23210). We are adopting the IPF ED Visit measure because 
it is a measure that has been tested for feasibility, validity, and 
reliability, which was developed with input from a diverse set of 
experts, that will provide data that patients and their families can 
use to inform care decisions and IPFs can use to drive quality 
improvement activities. We gave due consideration to measures endorsed 
by the CBE and there were no measures that address this important 
outcome.
    Final Decision: After consideration of the comments we received, we 
are finalizing our proposal to adopt the IPF ED Visit measure beginning 
with the CY 2025 performance period/FY 2027 payment determination as 
proposed.

C. Summary of IPFQR Program Measures for the FY 2027 Payment 
Determination for the IPFQR Program

    We are adopting one new measure for the FY 2027 payment 
determination for the IPFQR Program. With the adoption of this measure, 
the FY 2027 IPFQR Program measure set includes 16 mandatory and one 
voluntary measure. Table 19 sets forth the measures in the FY 2027 
IPFQR Program.
BILLING CODE 4120-01-P

[[Page 64660]]

[GRAPHIC] [TIFF OMITTED] TR07AU24.029

BILLING CODE 4120-01-C

D. Retention of Data Submission Requirements for the FY 2027 Payment 
Determination and Subsequent Years

    Section 1886(s)(4)(C) of the Act requires the submission of quality 
data in a form and manner, and at a time, specified by the Secretary. 
In the Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Fiscal Year 2013 Rates; Hospitals' Resident Caps for 
Graduate Medical Education Payment Purposes; Quality Reporting 
Requirements for Specific Providers and for Ambulatory Surgical Centers 
(FY 2013 IPPS/LTCH PPS) final rule (77 FR 53655), we specified that 
data must be submitted between July 1 and August 15 of the calendar 
year preceding a given payment determination year (for example, data 
were required to be submitted between July 1, 2015 and August 15, 2015 
for the FY 2016 payment determination). In the Medicare Program; 
Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals 
and the Long-Term Care Hospital Prospective Payment System and Fiscal 
Year 2014 Rates; Quality Reporting Requirements for Specific Providers; 
Hospital Conditions of Participation; Payment Policies Related to 
Patient Status (FY 2014 IPPS/LTCH PPS) final rule (78 FR 50899), we 
clarified that this policy applied to all future years of data 
submission for the IPFQR Program unless we changed the policy through 
future rulemaking.

[[Page 64661]]

    In the FY 2018 IPF PPS final rule (82 FR 38472 through 38473) we 
updated this policy by stating that the data submission period will be 
a 45-day period beginning at least 30 days following the end of the 
data collection period and that we will provide notification of the 
exact dates through subregulatory means.
    In the FY 2022 IPF PPS Final Rule (86 FR 42658 through 42661), we 
finalized voluntary patient-level data reporting for the FY 2023 
payment determination and mandatory patient-level data reporting for 
chart-abstracted measures within the IPFQR Program beginning with FY 
2024 payment determination and subsequent years. The measures currently 
in the IPFQR Program affected by this requirement are set forth in 
Table 20.
[GRAPHIC] [TIFF OMITTED] TR07AU24.030

    As we have gained experience with patient-level data submission for 
the IPFQR program, during the voluntary data submission period for FY 
2023 (which occurred in CY 2022) and the first mandatory data 
submission period for FY 2024 (which occurred in CY 2023), we have 
observed that annual data submission periods require IPFs to store 
large volumes of patient data to prepare for transmission to CMS. 
Furthermore, the volume of data associated with all IPFs reporting a 
full year of patient-level data during one data submission period 
creates the risk that systems will be unable to handle the volume of 
data.
    We have reviewed how other quality reporting programs that require 
patient-level data submission address these concerns and determined 
that the Hospital Inpatient Quality Reporting (IQR) Program (78 FR 
50811) and the Hospital Outpatient Quality Reporting (OQR) Program (72 
FR 66872) both require quarterly submission of patient-level data. As 
we considered requiring quarterly reporting for the IPFQR Program, we 
also determined that increasing the frequency of data submission would 
allow additional analysis of measure trends over time. In the FY 2025 
IPF PPS proposed rule, we stated that having additional data points 
(from additional quarters of data) could allow for more nuanced 
analyses of the IPFQR Program's measures (89 FR 23212). We stated that 
specifically, we would be able to better identify quarterly highs or 
lows that may be less apparent when data are combined over a full year. 
We recognized that, if we updated data reporting requirements to 
require reporting four times per year instead of once per year, then 
IPFs would need to meet four incremental deadlines instead of one 
deadline, and that this increased the risk that an individual IPF may 
fail to submit data specified for the measures and not receive its full 
market basket update. However, we believe that this risk is low because 
IPFs already have experience submitting some data required by the IPFQR 
Program on a more frequent basis. Specifically, the COVID-19 Healthcare 
Personnel (HCP) Vaccination Measure is currently reported into the 
CDC's National Healthcare Safety Network (NHSN) for one week per month 
resulting in a quarterly measure result (as originally adopted in the 
FY 2022 IPF PPS final rule (86 FR 42636) and restated in the FY 2024 
IPF PPS final rule (88 FR 51131 through 51132). In addition, if this 
proposal for quarterly data submission were finalized, data submission 
for each calendar quarter would have been required during a

[[Page 64662]]

period of at least 45 days beginning three months after the end of the 
calendar quarter. Table 21 summarizes the deadlines we proposed for the 
CY 2025 and CY 2026 performance periods:
[GRAPHIC] [TIFF OMITTED] TR07AU24.031

    Furthermore, we proposed that all data which continue to be 
reported on an annual basis (that is, non-measure data, aggregate 
measures, and attestations) would have been required to be reported 
concurrently with the data from the fourth quarter of the applicable 
year. For example, data reflecting the entirety of CY 2025 (that is, 
non-measure data, aggregate measures, and attestations) would have been 
required by the Q4 2025 submission deadline (that is, May 15, 2026).
    We received public comments on this proposal. The following is a 
summary of the comments we received and our responses.
    Comment: A few commenters supported our proposal to transition to 
quarterly submission of patient-level data. A commenter agreed that 
this may reduce the risk that systems are unable to handle the data 
volume and increase the data available for trend analysis.
    Response: We thank these commenters for their support.
    Comment: Several commenters expressed concerns regarding the 
proposed timeline of requiring quarterly submission of patient level 
data beginning with the CY 2025 performance period. Some of these 
commenters expressed concern that IPFs would not be able to update 
processes and systems to meet the November 15, 2025 submission deadline 
for the first quarter of the CY 2025 performance period (January 1, 
2025-March 31, 2025). Other commenters stated that the CMS 
Specifications Manual releases are often delayed from discharge dates, 
which affects when IPFs can abstract data to prepare for submission. A 
commenter stated that transitioning to quarterly reporting may affect 
the ability of newly certified IPFs to successfully participate in the 
IPFQR Program due to the time it takes to receive notice of 
accreditation.
    Response: After reviewing the concerns raised by commenters 
regarding the challenges of transitioning to quarterly reporting, we 
agree with commenters that these challenges would affect some IPFs' 
ability to report data for the CY 2025 performance period (that is, the 
FY 2027 payment determination). Therefore, we are not finalizing this 
proposal at this time.
    If we propose to adopt quarterly reporting in the future, we will 
consider the transition time required for IPFs to update their 
submissions, evaluate the timing of the CMS Specifications Manual with 
respect to reporting deadlines, and ensure that newly certified 
facilities are able to participate in the IPFQR Program.
    Comment: Several commenters recommended that CMS delay adoption of 
this policy. Some of these commenters recommended a stepped approach in 
which CMS gradually transitions to quarterly reporting. A commenter 
recommended only requiring data submission twice annually. A few 
commenters recommended delaying adoption of this policy until CMS and 
IPFs have more experience with patient-level data submission and to 
decrease financial risk to IPFs.
    Response: We thank these commenters for their recommendations. We 
are not finalizing this proposal at this time. If we propose more 
frequent reporting in the future, we will consider these approaches to 
more frequent reporting in any future rulemaking.
    Comment: A few commenters expressed concern that this proposal 
would quadruple IPF's information collection burden.
    Response: We understand commenters' concerns that there would be an 
increase in reporting burden associated with increasing the required 
frequency of reporting patient-level data. We note that we are not 
finalizing this proposal at this time. However, we disagree that 
increasing from annual reporting to quarterly reporting would quadruple 
the information collection burden. We note that reviewing patient 
medical records to determine which patients are included in numerators 
and denominators for each measure is the portion of measure submission 
which entails the highest information collection burden, and that 
changing the

[[Page 64663]]

frequency with which data are to be reported would have no impact on 
the number of patients for whom IPFs are required medical records to 
calculate measure results.
    Comment: Several commenters expressed concern that the increase in 
staff time spent reporting would reduce staff availability for patient 
care duties. A commenter expressed that this data reporting frequency 
would be more burdensome for IPFs than quarterly reporting is for other 
healthcare providers because IPFs experience more challenges related to 
outdated HIT. Some commenters recommended that CMS provide financial 
support, potentially by increasing payment rates for IPFs, for the 
increased reporting frequency due to the increased burden it would 
require. Several commenters expressed concern that this increased 
reporting frequency would disproportionately increase IPF costs 
relative to benefits that more frequent reporting would provide.
    Response: We understand commenters' concerns that there would be an 
increase in reporting burden associated with increasing the required 
frequency of reporting patient-level data. We recognize that IPFs have 
faced more barriers in adopting and updating HIT than acute care 
hospitals, and that this may affect their ability to abstract, store, 
and submit quality measure data on a more frequent basis. We note that 
we are not finalizing this proposal at this time. However, we disagree 
with commenters regarding the impact this proposed increase in 
reporting frequency would have. As previously discussed, reporting the 
information to CMS is a small portion of the total information 
collection burden associated with participating in the IPFQR Program. 
Therefore, we believe that the increase in reporting frequency would 
have a relatively small impact on IPFs' reporting burden and that this 
impact would not meaningfully affect IPFs' ability to provide patient 
care. We also do not believe that the increase in reporting frequency 
would significantly increase the cost of reporting and therefore we do 
not believe that an increase in payment to account for this increase 
would be necessary or appropriate. However, we will consider the 
potential impact on reporting burden to ensure that the benefits of 
more frequent collection outweigh the increase in costs of 
participation if we propose quarterly reporting in future rulemaking.
    Comment: A commenter requested clarification regarding whether data 
submission for the PIX survey measure would be included in the 
transition to quarterly data submission.
    Response: We are not finalizing our proposal to transition to 
quarterly reporting. If we propose a transition to quarterly reporting 
in future rulemaking, we will state what data is included in that 
proposal at that time.
    Comment: A few commenters provided recommendations for actions to 
take prior to transitioning to quarterly data submission. These actions 
were: (1) ensure alignment of IPFQR submission deadlines with deadlines 
for other CMS quality reporting programs; (2) reduce the number of 
program measures; (3) reduce the number of measures which require 
manual abstraction or submission; and (4) align measures across 
programs, as feasible and appropriate.
    Response: We thank commenters for these recommendations. We will 
consider these recommendations as we evaluate the IPFQR Program for 
future transition to quarterly data submission.
    Comment: Some commenters expressed concern that the accuracy of the 
data submitted may be compromised unless non-measure data and aggregate 
measures were also submitted quarterly. These commenters stated that 
updates to billing and medical records could occur after the submission 
of quarterly patient-level data that could create inconsistencies 
between the data submitted on a quarterly basis and that submitted on 
an annual basis. These commenters provided an example of their concern, 
specifically that denominator for the Hours of Physical Restraint Use 
(Hospital-Based Inpatient Psychiatric Services--HBIPS-2) and Hours of 
Seclusion Use (HBIPS-3) measures \88\ is included in the non-measure 
data set and therefore these measures would be particularly susceptible 
to data inaccuracies. A few commenters stated that because of the 
relatively small number of patients served by IPFs (compared to 
patients served by acute care hospitals) quarterly sample sizes would 
likely be too small to perform improved trend analysis with the 
increased frequency of data submission.
---------------------------------------------------------------------------

    \88\ For more information on the HBIPS-2 and HBIPS-3 measures we 
refer readers to the IPF Specifications Manual available at: https://qualitynet.cms.gov/files/6675e252a629e067996f9205?filename=IPF_SpecMan_v1.3.pdf.
---------------------------------------------------------------------------

    Response: We agree with commenters that ensuring that the data we 
publicly report are accurate and complete is an important part of the 
IPFQR Program. We recognize commenters' concerns that, without 
additional guidance regarding timing of data abstraction and reporting 
with respect to billing and medical record updates, there is a 
potential to create discrepancies between data submitted on a quarterly 
basis and data submitted on an annual basis. We further agree with 
commenters that this could be particularly concerning regarding the 
HBIPS-2 and HBIPS-3 measures because the denominators for these 
measures would be included in the annually reported data set and the 
numerators would be included in the quarterly reported dated set. We 
understand commenters' concern that the relatively small sample sizes 
may be too small to perform improved trend analysis. We note that we 
are not finalizing this proposal at this time. We will consider these 
recommendations as we evaluate the IPFQR Program for future transition 
to quarterly data submission.
    Final Decision: After consideration of the comments we received, we 
are not finalizing our proposal to modify data submission requirements, 
beginning with the FY 2027 payment determination, to transition to 
quarterly data submission for patient-level data.

VII. Collection of Information Requirements

    Under the Paperwork Reduction Act 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 Paperwork Reduction Act 
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.
    This final rule refers to associated information collections that 
are not discussed in the regulation text contained in this document.
    The following changes will be submitted to OMB for review under 
control number 0938-1171 (CMS-10432). We did not propose changes that 
would change any of the data collection instruments that are currently 
approved under that control number.

[[Page 64664]]

A. Wage Estimates

    In the FY 2024 IPF 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 IPFQR Program (88 FR 51145). While the most recent data from the 
BLS reflects a mean hourly wage of $24.65 per hour for all medical 
records specialists, $26.06 is the mean hourly wage for ``general 
medical and surgical hospitals,'' which is an industry within medical 
records specialists.\89\ We believe the industry of ``general medical 
and surgical hospitals'' is more specific to the IPF setting for use in 
our calculations than other industries that fall under medical records 
specialists, such as ``office of physicians'' or ``nursing care 
facilities (skilled nursing facilities).'' We calculated the cost of 
indirect costs, 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 other indirect 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 IPFs using a wage plus 
benefits estimate of $52.12 per hour throughout the discussion in this 
section of this rule for the IPFQR Program.
---------------------------------------------------------------------------

    \89\ Medical Records Specialists (bls.gov).
---------------------------------------------------------------------------

    Some of the activities previously finalized for the IPFQR Program 
require beneficiaries to undertake tasks such as responding to survey 
questions on their own time. In the FY 2024 IPF PPS final rule, we 
estimated the hourly wage rate for these activities to be $20.71/hr (88 
FR 51145). We updated the estimate to 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.\90\ To derive the costs for beneficiaries, we used 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.\91\ The 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,\92\ resulting in the 
post-tax hourly wage rate of $24.04/hr. Unlike our State and private 
sector wage adjustments, we did not adjust beneficiary wages for fringe 
benefits and other indirect costs since the individuals' activities, if 
any, would occur outside the scope of their employment.
---------------------------------------------------------------------------

    \90\ https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \91\ https://www.bls.gov/news.release/pdf/wkyeng.pdf. Accessed 
January 1, 2024.
    \92\ https://www.census.gov/library/stories/2023/09/median-household-income.html. Accessed January 2, 2024.
---------------------------------------------------------------------------

B. Previously Finalized IPFQR Estimates

    We finalized provisions that impact policies beginning with the FY 
2027 payment determination. For the purposes of calculating burden, we 
attribute the costs to the year in which the costs begin. Under our 
previously finalized policies, data submission for the measures that 
affect the FY 2027 payment determination occurs during CY 2026 and 
generally reflects care provided during CY 2025. Our currently approved 
burden for CY 2025 is set forth in Table 22.
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C. Updates Due to More Recent Information

    In section VI.A of this final rule, we described our updated wage 
rates which increase from $44.86/hr to $52.12/hr (an increase of $7.26/
hr) for activities performed by Medical Records Specialists and from 
$20.71/hr to $24.04/hr (an increase of $3.33/hr) for activities 
performed by individuals. The effects of these updates are set forth in 
Table 23.

[[Page 64667]]

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D. Updates Due to Policies in This Final Rule

    In section VI.B.2 of this final rule, we are adopting the 30-Day 
Risk-Standardized All-Cause ED Visit Following an IPF Discharge (IPF ED 
Visit) measure beginning with the CY 2025 performance period/FY 2027 
payment determination. As described in section VI.B.2.c. of this final 
rule, we will calculate the IPF ED Visit measure using Medicare claims 
that IPFs and other providers submit for payment. Since this is a 
claims-based measure, there is no additional burden outside of 
submitting a claim. The claim submission is approved by OMB under 
control number 0938-0050 (CMS-2552-10). This rule does not warrant any 
changes under that control number.
    In Section VI.D. of this final rule, we are not finalizing our 
proposal to require IPFs to submit data on chart-abstracted measures 
quarterly. Because we are not finalizing this proposal it will have no 
effect on information collection burden.

E. Consideration of Burden Related to Clarification of Eligibility 
Criteria for the Option To Elect To File an All-Inclusive Cost Report

    As discussed in section IV.E.4 of this final rule, we clarified the 
eligibility criteria to be approved to file all-inclusive cost reports. 
Only government-owned, IHS, and tribally owned facilities are able to 
satisfy these criteria, and thus only these facilities will be 
permitted to file an all-inclusive cost report for cost reporting 
periods beginning on or after October 1, 2024.
    We do not estimate any change in the burden associated with the 
hospital cost report (CMS-2552-10) OMB control number 0938-0050. We 
anticipate that IPFs which are currently filing all-inclusive cost 
reports, but are not government-owned or tribally owned, will not incur 
additional burden related to the submission of the cost report. The 
approved burden estimate associated with the submission of the hospital 
cost report includes the same amount of burden for the submission of an 
all-inclusive cost report as for the submission of a cost report with a 
charge structure.
    We recognize that these IPFs will be required to track ancillary 
costs and charges using a charge structure; however, we expect that any 
burden associated with this tracking will be part of the normal course 
of a hospital's activities.

F. Submission of PRA-Related Comments

    We have submitted a copy of the final rule's information collection 
requirements to OMB for their review. The requirements are not 
effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit the CMS 
website at https://www.cms.gov/regulationsand-guidance/legislation/paperworkreductionactof1995/pra-listing, or call the Reports Clearance 
Office at 410-786-1326.
    We invited public comments on these potential information 
collection requirements.
    Comment: We summarized comments on the proposed information 
collection burden associated with the proposed transition to quarterly 
reporting in Section VI.D. of this final rule.
    Response: As noted in Section VI.D. of this final rule, we are not 
finalizing our proposal to require IPFs to submit data on chart-
abstracted measures quarterly. Because we are not finalizing this 
proposal it will have no effect on information collection burden.

VIII. Regulatory Impact Analysis

A. Statement of Need

    This rule finalizes updates to the prospective payment rates for 
Medicare inpatient hospital services provided by IPFs for discharges 
occurring during FY 2025 (October 1, 2024 through September 30, 2025). 
We are finalizing our proposal to apply the 2021-based IPF market 
basket increase for FY 2025 of 3.3 percent, reduced by the productivity 
adjustment of 0.5 percentage point as required by section 
1886(s)(2)(A)(i) of the Act for a final total FY 2025 payment rate 
update of 2.8 percent. In this final rule, we are finalizing our 
proposal to update the outlier fixed dollar loss threshold amount, 
update the IPF labor-related share, adopt new CBSA delineations based 
on OMB Bulletin 23-01, and update the IPF wage index to reflect the FY 
2025 hospital inpatient wage index. Section 1886(s)(4) of the Act 
requires IPFs to report data in accordance with the requirements of the 
IPFQR 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.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and

[[Page 64668]]

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 Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999), and the Congressional 
Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866, as amended by Executive Order 14094, 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule that may: (1) have an annual effect on the economy 
of $200 million or more (adjusted every 3 years by the Administrator of 
OIRA for changes in gross domestic product); or adversely affect in a 
material way the economy, a sector of 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 entitlements, 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 Executive Order 12866. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    A regulatory impact analysis (RIA) must be prepared for regulatory 
actions that are significant under section 3(f)(1) of Executive Order 
12866. We estimate that the total impact of these changes for FY 2025 
payments compared to FY 2024 payments will be a net increase of 
approximately $65 million. This reflects a $75 million increase from 
the update to the payment rates (+$90 million from the 2nd quarter 2024 
IGI forecast of the 2021-based IPF market basket of 3.3 percent, and -
$15 million for the productivity adjustment of 0.5 percentage point), 
as well as a $10 million decrease as a result of the update to the 
outlier threshold amount. Outlier payments are estimated to change from 
2.3 percent in FY 2024 to 2.0 percent of total estimated IPF payments 
in FY 2025.
    Based on our estimates, OMB's Office of Information and Regulatory 
Affairs has determined this rulemaking is not significant per section 
3(f)(1) as measured by the $200 million or more in any 1 year, but does 
meet the criteria under 5 U.S.C. 804(2) (Subtitle E of the Small 
Business Regulatory Enforcement Fairness Act of 1996, also known as the 
Congressional Review Act). Nevertheless, because of the potentially 
substantial impact to IPF providers, we have prepared a Regulatory 
Impact Analysis that to the best of our ability presents the costs and 
benefits of the rulemaking. Based on our estimates, OMB's Office of 
Information and Regulatory Affairs has determined that this rulemaking 
is ``significant.'' Therefore, OMB has reviewed the final regulations, 
and the Departments have provided the following assessment of their 
impact.

C. Detailed Economic Analysis

    In this section, we discussed the historical background of the IPF 
PPS and the impact of the final rule on the Federal Medicare budget and 
on IPFs.
1. Budgetary Impact
    As discussed in the RY 2005 and RY 2007 IPF PPS final rules, we 
applied a budget neutrality factor to the Federal per diem base rate 
and ECT payment per treatment to ensure that total estimated payments 
under the IPF PPS in the implementation period would equal the amount 
that would have been paid if the IPF PPS had not been implemented. This 
budget neutrality factor included the following components: outlier 
adjustment, stop-loss adjustment, and the behavioral offset. As 
discussed in the RY 2009 IPF PPS notice (73 FR 25711), the stop-loss 
adjustment is no longer applicable under the IPF PPS.
    As discussed in section IV.D.1.d of this final rule, we are 
updating the wage index and labor-related share, as well as update the 
CBSA delineations based on OMB Bulletin 23-01, in a budget neutral 
manner by applying a wage index budget neutrality factor to the Federal 
per diem base rate and ECT payment per treatment. In addition, as 
discussed in section IV.F of this final rule, we are applying a 
refinement standardization factor to the Federal per diem base rate and 
ECT payment per treatment to account for the proposed revisions to the 
ECT per treatment amount, ED adjustment, and patient-level adjustment 
factors (as previously discussed in sections IV.B, IV.C, and IV.D of 
this final rule, and summarized in Addendum A), which must be made 
budget-neutrally. Therefore, the budgetary impact to the Medicare 
program of the final rule will be due to the final market basket update 
for FY 2025 of 3.3 percent (see section IV.A.2 of this final rule) 
reduced by the productivity adjustment of 0.5 percentage point required 
by section 1886(s)(2)(A)(i) of the Act and the update to the outlier 
fixed dollar loss threshold amount.
    We estimate that the FY 2025 impact will be a net increase of $65 
million in payments to IPF providers. This reflects an estimated $75 
million increase from the update to the payment rates and a $10 million 
decrease due to the update to the outlier threshold amount to set total 
estimated outlier payments at 2.0 percent of total estimated payments 
in FY 2025. This estimate does not include the implementation of the 
required 2.0 percentage point reduction of the productivity-adjusted 
market basket update factor for any IPF that fails to meet the IPF 
quality reporting requirements (as discussed in section IV.B.2. of this 
final rule).
2. Impact on Providers
    To show the impact on providers of the changes to the IPF PPS 
discussed in this final rule, we compared estimated payments under the 
IPF PPS rates and factors for FY 2025 versus those under FY 2024. We 
determined the percent change in the estimated FY 2025 IPF PPS payments 
compared to the estimated FY 2024 IPF PPS payments for each category of 
IPFs. In addition, for each category of IPFs, we have included the 
estimated percent change in payments resulting from the update to the 
outlier fixed dollar loss threshold amount; the revisions to the 
patient-level adjustment factors, ED adjustment, and ECT per treatment 
amount; the updated wage index data including the labor-related share 
and the changes to the CBSA delineations; and the market basket 
increase for FY 2025, as reduced by the productivity adjustment 
according to section 1886(s)(2)(A)(i) of the Act.
    To illustrate the impacts of the final FY 2025 changes in this 
rule, our analysis begins with FY 2023 IPF PPS claims (based on the 
2023 MedPAR claims, March 2024 update). We estimated FY 2024 IPF PPS 
payments using these 2023 claims, the finalized FY 2024 IPF PPS Federal 
per diem base rate and ECT per treatment amount, and the finalized FY 
2024 IPF PPS patient and facility level adjustment factors (as 
published in the FY 2024 IPF PPS final

[[Page 64669]]

rule (88 FR 51054)). We then estimated the FY 2024 outlier payments 
based on these simulated FY 2024 IPF PPS payments using the same 
methodology as finalized in the FY 2024 IPF PPS final rule (88 FR 51090 
through 51092) where total outlier payments are maintained at 2 percent 
of total estimated FY 2024 IPF PPS payments.
    Each of the following changes is added incrementally to this 
baseline model in order for us to isolate the effects of each change:
     The update to the outlier fixed dollar loss threshold 
amount.
     The revisions to patient-level adjustment factors, ED 
adjustment, and the ECT per treatment amount.
     The FY 2025 IPF wage index, the changes to the CBSA 
delineations, and the FY 2025 labor-related share (LRS).
     The market basket increase for FY 2025 of 3.3 percent 
reduced by the productivity adjustment of 0.5 percentage point in 
accordance with section 1886(s)(2)(A)(i) of the Act for a payment rate 
update of 2.8 percent.
    Our column comparison in Table 24 illustrates the percent change in 
payments from FY 2024 (that is, October 1, 2023, to September 30, 2024) 
to FY 2025 (that is, October 1, 2024, to September 30, 2025) including 
all the final payment policy changes.
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[[Page 64671]]


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BILLING CODE 4120-01-C
3. Impact Results
    Table 24 displays the results of our analysis. The table groups 
IPFs into the categories listed here based on characteristics provided 
in the Provider of Services file, the IPF PSF, and cost report data 
from the Healthcare Cost Report Information System:
     Facility Type.
     Location.
     Teaching Status Adjustment.
     Census Region.
     Size.
    The top row of the table shows the overall impact on the 1,419 IPFs 
included in the analysis. In column 2, we present the number of 
facilities of each type that had information available in the PSF, had 
claims in the MedPAR dataset for FY 2023. We note that providers are 
assigned urban or rural status in Table 24 based on the current CBSA 
delineations for FY 2024.
    In column 3, we present the effects of the update to the outlier 
fixed dollar loss threshold amount. We estimate that IPF outlier 
payments as a percentage of total IPF payments are 2.3 percent in FY 
2024. Therefore, we adjusted the outlier threshold amount to set total 
estimated outlier payments equal to 2.0 percent of total payments in FY 
2025. The estimated change in total IPF payments for FY 2025, 
therefore, includes an approximate 0.3 percent decrease in payments 
because we would expect the outlier portion of total payments to 
decrease from approximately 2.3 percent to 2.0 percent.
    The overall impact of the estimated decrease to payments due to 
updating the outlier fixed dollar loss threshold (as shown in column 3 
of Table 24), across all hospital groups, is a 0.3 percent decrease. 
The largest decrease in payments due to this change is estimated to be 
0.8 percent for urban government-owned IPF units.
    In column 4, we present the effects of the revisions to the 
patient-level adjustment factors, ED adjustment, and ECT per treatment 
amount and the application of the refinement standardization factor 
that is discussed in section IV.F of this final rule. These revisions 
are budget neutral; therefore, there is no projected change in 
aggregate payments to IPFs, as indicated in the first row of column 4. 
We estimate the largest payment increases would be 1.6 percent for 
rural government-owned IPF hospitals. Conversely, we estimate that 
rural for-profit IPF hospitals would experience the largest payment 
decrease of -2.3 percent. Payments to IPF units in urban areas would 
increase by 0.5 percent, and payments to IPF units in rural areas would 
increase by 0.1 percent.
    In column 5, we presented the effects of the budget-neutral update 
to the IPF wage index, the LRS, and the changes to the CBSA 
delineations for FY 2025. In addition, this column includes the 
application of the 5-percent cap on any decrease to a provider's wage 
index from its wage index in the prior year as finalized in the FY 2023 
IPF PPS final rule (87 FR 46856 through 46859). The change in this 
column represents the effect of using the concurrent hospital wage data 
as discussed in section IV.D.1.a of this final rule. That is, the 
impact represented in this column reflects the update from the FY 2024 
IPF wage index to the FY 2025 IPF wage index, which includes basing the 
FY 2025 IPF wage index on the FY 2025

[[Page 64672]]

pre-floor, pre-reclassified IPPS hospital wage index data, applying a 
5-percent cap on any decrease to a provider's wage index from its wage 
index in the prior year, and updating the LRS from 78.7 percent in FY 
2024 to 78.8 percent in FY 2025. We note that there is no projected 
change in aggregate payments to IPFs, as indicated in the first row of 
column 5; however, there will be distributional effects among different 
categories of IPFs. For example, we estimate the largest increase in 
payments to be 3.7 percent for rural for-profit IPF hospitals, and the 
largest decrease in payments to be -1.8 percent for IPFs located in the 
Pacific region.
    Overall, IPFs are estimated to experience a net increase in 
payments of 2.5 percent as a result of the updates in this final rule. 
IPF payments are estimated to increase by 2.3 percent in urban areas 
and 3.8 percent in rural areas. The largest payment increase is 
estimated at 5.0 percent for IPFs located in the East South Central 
region.
4. Effect on Beneficiaries
    Under the FY 2025 IPF PPS, IPFs will continue to receive payment 
based on the average resources consumed by patients for each day. Our 
longstanding payment methodology reflects the differences in patient 
resource use and costs among IPFs, as required under section 124 of the 
BBRA. We expect that updating IPF PPS rates in this rule will improve 
or maintain beneficiary access to high quality care by ensuring that 
payment rates reflect the best available data on the resources involved 
in inpatient psychiatric care and the costs of these resources. We 
continue to expect that paying prospectively for IPF services under the 
FY 2025 IPF PPS will enhance the efficiency of the Medicare program.
    As discussed in sections V.B.2 of this final rule, we expect that 
the additional IPFQR Program measure will support improving discharge 
planning and care coordination to decrease the likelihood that a 
patient will need to seek emergency care within 30 days of discharge 
from an IPF.
5. Effects of the Updates to the IPFQR Program
    In section V.B.2. of the rule, we are adopting the 30-Day Risk-
Standardized All-Cause ED Visit Following an Inpatient Psychiatric 
Facility Discharge measure beginning with data from the CY 2025 
performance period for the FY 2027 payment determination.
    We do not believe this update will impact providers' workflows or 
information systems to collect or report the data because this measure 
is calculated by CMS using information that IPFs already submit as part 
of the claims process. There may be some effects of this measure on IPF 
workflows and clinical processes to improve care coordination and 
discharge planning to improve performance on the measure.
    We are not finalizing our proposal to adopt a quarterly data 
submission requirement for measures for which we require patient-level 
data. We do not believe there will be any effect of maintaining our 
previously finalized policy.
    In accordance with section 1886(s)(4)(A) of the Act, we will apply 
a 2-percentage point reduction to the FY 2025 market basket update for 
IPFs that have failed to comply with the IPFQR Program requirements for 
FY 2025, including reporting on the mandatory measures. For the FY 2024 
payment determination, of the 1,568 IPFs eligible for the IPFQR 
Program, 194 IPFs did not receive the full market basket update because 
of the IPFQR Program; 42 of these IPFs chose not to participate and 152 
did not meet the requirements of the program.
    We intended to closely monitor the effects of the IPFQR Program on 
IPFs and help facilitate successful reporting outcomes through ongoing 
education, national trainings, and a technical help desk.
6. Regulatory Review Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret the proposed rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will be directly impacted and will review this final rule, we 
assume that the total number of unique commenters on the most recent 
IPF proposed rule will be the number of reviewers of the final rule. 
For this FY 2025 IPF PPS final rule, the most recent IPF proposed rule 
was the FY 2025 IPF PPS proposed rule, and we received 67 unique 
comments on the proposed rule. We acknowledged that this assumption may 
understate or overstate the costs of reviewing the final rule. It is 
possible that not all commenters reviewed the FY 2025 IPF proposed rule 
in detail, and it is also possible that some reviewers chose not to 
comment on that proposed rule. For these reasons, we thought that the 
number of commenters would be a fair estimate of the number of 
reviewers who are directly impacted by this final rule. We solicited 
comments on this assumption.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final rule; 
therefore, for the purposes of our estimate, we assume that each 
reviewer reads approximately 50 percent of this final rule.
    Using the May, 2023 mean (average) wage information from the BLS 
for medical and health service managers (Code 11-9111), we estimated 
that the cost of reviewing this final rule is $129.28 per hour, 
including other indirect costs https://www.bls.gov/oes/current/oes119111.htm. Assuming an average reading speed of 250 words per 
minute, we estimate that it would take approximately 154 minutes (2.57 
hours) for the staff to review half of this final rule, which contains 
a total of approximately 77,000 words. For each IPF that reviews the 
final rule, the estimated cost is (2.57 x $129.28) or $332.25. 
Therefore, we estimate that the total cost of reviewing this final rule 
is $22,260.75 ($332.25 x 67 reviewers).

D. Alternatives Considered

    The statute gives the Secretary discretion in establishing an 
update methodology to the IPF PPS. We continued to believe it is 
appropriate to routinely update the IPF PPS so that it reflects the 
best available data about differences in patient resource use and costs 
among IPFs, as required by the statute. Therefore, we proposed and are 
finalizing updates to: the IPF PPS using the methodology published in 
the RY 2005 IPF PPS final rule (our ``standard methodology'') pre-
floor, pre-reclassified IPPS hospital wage index as its basis, along 
with the proposed changes to the CBSA delineations. Additionally, we 
apply a 5-percent cap on any decrease to a provider's wage index from 
its wage index in the prior year. Lastly, we are finalizing our 
proposal to revise the patient-level adjustment factors, ED adjustment, 
and to increase the ECT per treatment amount for FY 2025 (reflecting 
the pre-scaled and pre-adjusted CY 2024 OPPS geometric mean cost).

E. Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf), in Table 25, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the updates to the IPF wage index and 
payment rates in this final rule. Table 25 provides our best estimate 
of the increase in Medicare payments under the IPF PPS as a result of 
the changes presented in this final rule and is based on 1,419 IPFs 
that had

[[Page 64673]]

data available in the PSF and claims in our FY 2023 MedPAR claims 
dataset. Lastly, Table 25 also includes our best estimate of the costs 
of reviewing and understanding this final rule.
[GRAPHIC] [TIFF OMITTED] TR07AU24.037

F. Regulatory Flexibility Act

    The RFA requires agencies to analyze options for regulatory relief 
of small entities if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. 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 Small Business 
Administration (SBA) definition of a small business (having revenues of 
less than $47 million in any 1 year).
    According to the SBA's website at http://www.sba.gov/content/small-business-size-standards, IPFs falls into the North American Industrial 
Classification System (NAICS) code 622210, Psychiatric and Substance 
Abuse hospitals. The SBA defines small Psychiatric and Substance Abuse 
hospitals as businesses having less than $47 million.
    As discussed earlier in this final rule, the only costs imposed by 
this final rule are the regulatory review costs, which we estimate at 
$22,260.75 per IPF.
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    According to Table 26, 213 psychiatric and substance abuse 
hospitals can be considered small according to the SBA. As we stated 
earlier, the SBA defines small Psychiatric and Substance Abuse 
hospitals as businesses having less than $47 million. Note, Tables 26 
and 27 show revenue more than $49.9 million since the data does not 
provide the exact estimate for $47 million. Table 27 shows that there 
are 181 Psychiatric and Substance Abuse hospitals that earn revenue in 
excess of $49 million.
    The Department of Health and Human Services generally uses a 
revenue impact of 3 to 5 percent as a significance threshold under the 
RFA. For the purposes of the RFA, we estimate that only 0.1 percent of 
small Psychiatric and Substance Abuse hospitals are small entities as 
that term is used in the RFA.
    As its measure of significant economic impact on a substantial 
number of small entities, HHS uses a change in revenue of more than 3 
to 5 percent. According to Table 27, we believe that this threshold 
will not be reached, 0.1 percent, by the requirements in this final 
rule. Therefore, the Secretary has certified that this final rule will 
have a de minimis economic impact on the small entities.
    Since there is not a significant impact on a substantial number of 
small entities, the Secretary has certified that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. As discussed in section 
VIII.C.2 of this final rule, the rates and policies set forth in this 
final rule will not have an adverse impact on the rural hospitals based 
on the data of the 197 rural excluded psychiatric units and 60 rural 
psychiatric hospitals in our database of 1,419 IPFs for which data were 
available. Therefore, the Secretary has determined that this final rule 
will not have a significant impact on the operations of a substantial 
number of small rural hospitals.

G. Unfunded Mandate Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 is approximately $183 million. This final rule does not 
mandate any requirements for state, local, or tribal governments, or 
for the private sector. This final rule will not impose a mandate that 
will result in the expenditure by state, local, and tribal governments, 
in the aggregate, or by the private sector, of more than $183 million 
in any 1 year.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on July 24, 2024.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-16909 Filed 7-31-24; 4:15 pm]
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